ML20058N530

Forwards Transcript of Jj Oconnor Video Being Shown to All Util Employees on 930927 Re Rate Settlement & Joint Press Release on Edison Consumer Rate Settlement

ML20058N530
Person / Time
Site:	Dresden, Byron, Braidwood, Quad Cities, Zion, LaSalle
Issue date:	09/27/1993
From:	Wallace M COMMONWEALTH EDISON CO.
To:	Zwolinski J Office of Nuclear Reactor Regulation
References
NUDOCS 9310180280
Download: ML20058N530 (13)

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. Commonwrith Edison -

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/ Downers Grove, lilinois 60515

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September 27,1993 a..

q Mr. John Zwolinski Asst. Director - Division of Reactor Projects Nuclear Reactor Regulation 11555 Rockville Pike t

Mail Stop 13H22 - White Flint

. Washington D.C. 20555

Dear Mr. Zwolinski:

I am providing the following documents as a follow-up to our telephone conversation on September 26,1993:

1)

Transcript of Mr. O'Connor's video, being shown to all CECO employees today, and 2)

Copy of a Joint Press Release on Edison Consumer Rate Settlement.

Please call if you have any additional comments or questions.

Sincerely,

1. fn Michael J. Wallace Vice President Chief Nuclear Officer i

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THE-FOLLOWING STATEMENT IS NOT TO BE RELEASED UNTIL 8 A.M.,

MONDAY, SEPTWRER 27, 1993:

Transcript of Chairman James J. O'Connor's address to employes of Commonwealth Edison, September 27,1993.

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l appreciate this opportunity to speak with you today on a matter of great importance to commonwealth Edison. Many of you will be seeing this video just about the same time that I will be participating in a press conference in Chicago.

me press conference is being called to announce a landmark settlement. Now this is a major story, with both good and bad news.

The bad news is that the settlement will call for a refund of close to

$1,340,000,000 to our customers to be paid over the next twelve months. me good news is that this settlement w!Il result in the removal of six rate matters and appeals that are presently pending before the ll!!nols courts and the commerce Commission. Some of these matters have been under litigation for as long as ten years.

r NOW the natural question 15: Why would we decide to enter into an agreement which provides for one of the largest refunds in electric utility history? You need to know the answer because I am certain that our friends, our relatives, our customers and yes our competitors will be Monday morning quarterbacking this decision for many weeks to come.

In short, there are a number of reasons we decided to settle these cases. First,

- the greatest enemy that we have in conducting our business is uncertainty. In our case, this uncertainty has been aggravated by the repeated disagreements between the courts and the Commission on matters which have a profound Impact on us. For example, the F

largest part of the settlement, over two-thirds or $1 billion, relates to our efforts to get fair rate treatment on both Byron Unit number 2 and the two units at Braldwood, plants that have been operating for over five years and which have produced huge fuel savings to our customers. You may recall that two and one-half years ago, the Illinois Commission awarded us an increase of $750 militon which would be phased in over a two-year period.

This case went to the tillnols supreme Court and then back to the Illinois Commission, which earlier this year, reduced that eartior award by over $s00 million. That same case is now waiting to be heard in the Appellate Court, and beyond that, in all likelihood will go to the Supreme Court of Illinois and, ultimately, it would probably retum once again to the ll!!nols commission for still further review.; The prospect of being tied up on this case alone for another year, or two, or perhaps tnree is simply an unacceptable option. It's impossible to i

plan in such an environment. It becomes the major distraction in deliberations involving l

our Board and senior management. Falling to get this behind us continues to place our

- destiny in other people's hands. What we are trading through the settlement is some very i

real short-term pain for what I am confident will be long-term gains for our Company.

Beyond the rate case, the other matters being settled include the following:

j First, the court appea!s of the !!!!nols Commerce Commission's 1985 and 1993 rate order involving the cost of Byron Unit number 1.

second, the court appeal involving the appropriate Interest rate to be apptled to a large refund that was ordered by the Commission In 1990.

Third, the court appeals of the Commission's 1988 rate order involving changes to the companys summer /non-summer rate differential.

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' Fourth, the Commission's consideration of a potential refund to customers as a result of the lowering of the federal corporate income tax rate in 1986, and Fifth,' and very importantly, the resolution of fuel reconcillation matters for the period 1985 through 1988 and an agreement on the methodology to be applied in determining the prudency of the Company's coal purchases for the period of 1989 through 1992.

All taken together, this we believe pretty much wipes the state clean of matters pending before the courts and the Commission.

i What does this mean to our customers?

It means that their rates will drop about six percent from their present levels.

It further means that for the next twelve months, our customers will see roughly an additional twenty percent reduction on top of these lower rates because "Jf the refunds E

they will be receiving.

What does this mean to our stockholders?

initially, it means that we will be reducing net income this year by $1.64 a share. However, the settlement removes the single biggest cloud that has been hanging

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over our Company in the financial markets by eliminating the regulatory and judicial uncertainty. It is my expectation that our Company will have a reasonable opportunity to continue to earn our current dividend. And shortly, we will undoubtedly be back before the Commission with a fresh case and updated numbers which I am confident will justify higher rates in the years beyond 1994.

One of the ironies of our situation is that the cost paid by our customers is lower today than it was seven years ago - 3.38 cents in 1986 compared with 8.13 cents tocay. And if you adjust these numbers for inflation, the cost of our product has dropped to 6.15 cents per kilowatthour - and that is before any refunds or ro!! backs.

What does this settlement mean to our employes?

. Most importantly, it signals the end of an era of uncertainty. In the final analysis, even though I believe we were entirely right in pursuing these matters before the Commission and the courts, the prospect of continued controversy well out into the future simply would sap the energy and enthusiasm of our 19,000 emp! Oyes.

Now we can be the masters of our own fate. We are putting an end to a most contentious rate case and the pot shots that our crltlCS would most certainly continue to take at us. Now we can move fo! Ward with confidence in our future and in our ability to put our Company on the road to becoming a world-class, truly competitive supp!!er of energy and energy services.

Now the task will not be easy, but I have never known the employes of Commonwealth Edison to shrink from a challenge. Relleved of this massive regulatory burden, we can now focus our attention on those things which will make the difference between us being just a good Company and the opportunity to become a great Company.

Now the future is in our hands. Thank you very much.

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Attactant 2 '

..FOk IMMEDIATE RELEASE, 8:45 A.M.,

MONDAY, SEPTEMBER 27, 1993 i

Contact:

Commonwealth Edison:

BPI:

Sam.Falcona - 312/394-3004 Howard Learner - 312/641-5570

. John Hogan

- 312/394-5774 June Rosner

- 312/641-5570 t

Illinois Attorney General:

Citizens Utility Board:

Al-Manning - 312/814-2518 Pat Clark --312/263-4282 F

Charles Cleveland-312/814-2442 V

i City o,f Chicago:

Cook County State's Attorney:

Andrea Brands - 312/744-1575 Andy Knott - 312/443-3423 i

e JOINT PRESS RELEASE ON EDISON CONSUMER RATE SETTLEMENT I

Electricity customers in northern Illinois will have their charges reduced by more than 25 percent over the next year as the result of a $1.34 billion refund and a $339 million annual rate reduction announced Monday by Commonwea'tth Edison and about a l

dozen' consumer groups and governmental agencies.

i The landmark settlement was reached after the company, 7

consumer representatives and government agencies agreed to settle

.six. rate cases pending before the~ Illinois courts and the

~ Illinois' Commerce Commission.

Participants in the settlement include Business and Professional People for the Public Interest (BPI), the Illinois Industrial Energy Consumers (IIEC), the Citizens Utility Board (CUB), the City of Chicago, the Illinois Attorney General, the Cook County States. Attorney, the South Austin Coalition Community Council and the Labor _ Coalition on Public Utilities.

The average residential single family customer will get approximately $272 in savings over the 12 months. The average 1

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Lsmalliconsercial-or industrial' customer.will see savings totaling E

about.$1,700; Theisettlementjis' believed to be the largest of its kind Jinvolving an electriceutility in the United States..

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" Commonwealth, Edison believes this proposal is in the best sint'erest._oftall concerned," declared James J.

O'Connor, the utility's1 Chairman and; Chief. Executive Officer. "For too long, these1 controversies-have required too much of our company's r

- r e s o u r c e s.~"

"This is a fair. settlement and the consumers are winners,"

r said-Howard A.

Learner',- BPI's General Counsel who led the negotiations for_ consumers. "To paraphrase Mark Twain, 'We have done the right thing because the $1.34 billion refund and the

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.$339 ndllionirate. reduction will certainly please consumers, and I

the'. settlement ~should_ astonish-any skeptics.'"

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O'Connor said the: settlement. allows the utility to focus on

-the future. "We'need to focus our total attention on our primary' i

-responsibility --Lproviding the best service possible to our l

customers, and' stimulating _the vitality of our service area, j

result'ing in more jobs."

Learner concurred'with C'Connor that the settlement bodes l

L wellEfor the region's economy, adding, "The refund will boost the L

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-Northern Illinois economy.by holding down electricity rates.

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Consumers have achieved a fair conclusion in the long and winding l

' road ofs.litigationJover Edison's nuclear plants in the last j

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.O'Connor,)while' relieved that his company can put the rate Ecases behird it', made it clear-he believed the utility had acted in good' faith in pursuing the rate increases

" Edison strongly

. believed-at all-times-that it was acting in accordance with

/ Illinois Commerce:Commi~ssion direction and in the interests of hh its customers'andishareholders."

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Susan' Stewart, Executive Director, Citizens Utility Board:

' " Consumers have been waiting years for the refunds com Ed owes.

' This agreement will.end those delavs once and for all and guarantee Edison customers immediate reductions in their bills.

L That's a great deal for consumers."

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Mayor Richard M.f Daley:

"This fair and reasonable settlement is a victory for Northern i:

Illinois electrical consumers. On~their behalf, I commend all parties concerned for working in good faith to bring this settlement;about and resolve this matter once and for all."

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' Attorney General Roland Burris:

'"This is indeed a rare occasion: a win-win situation in which everybody gains.

Customers are now assured of a sizable refund, for-the average homeowner the equivalent of two months electrical

- service, plus lower rates next year.

We all stand to gain with h.

.an improved economic climate throughout Northern Illinois."

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) Cook County States / Attorney: Jack O'Malley -

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1"This. settlement, by sheer ~ size, reflects'the determination and l

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' cooperation of notionly government attorneys but some of the I

leading: consumer advocate groups in the state.

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i a priceLreduction that everyone agrees is fair ~and reasonable."

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Eric Robertson, of Lueders, Robertson & Konzen, Granite City, f.i l

Illinois, attorneys for the Illinois Industrial Energy Consumers:-

l "IIEC' industrials are pleased to have had a part in the j

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accomplishment of a fair settlement. This provides credits and i

rate reductions.of millions of dollars to Edison's ratepayers. It ends litigation, begun in 1983, which has required four trips to the-Illinois. Supreme Court. The settlement should allow Edison to l

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I devote more'of its corporate time and talents to the service of i

its customers."-(IIEC is a coalition of 20 of' Edison's largest l

industrial users, including Amoco Chemicals Company, Caterpillar u

Inc.,.~ Ford-Motor Company,: General Motors Corporation, Nabisco i

i Brands'Inc., and Reynolds Metals Corpany.)

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_ Otto McMath, South Austin Coalition Community Council:

"As we speak, thousands of low-income' Chicagoans are trying to

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survive without lights or gas. All of us here today need to j

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rededicate ourselves to restoring a. permanent energy assistance j

program for the poor that will make basic utility service f

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affordable. The South Austin Coalition pledges to our l

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constituents to achieve that goal during the coming year."

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Gambino, president Labor Coalition on Public Utilities:

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r "This settlement-is a major victory for all who live or work in n

5 the Edison service area. LCPU has long called for lower electric rates to make Northern Illinois once again attractive to business and~ industry.and create more jobs."

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The refund will be paid in the form of utility bill credits to consumers over a 12-month period, and a five (5) percent interest rate will be applied to the declining balance in the overall refund payment. Average refunds wich rate reductions are f

as follows:

Single-family residential

$22,68 per month E

Multi-family residential

$11.02 per month Small Business

$146.43 per month The settlement brings to a close six legal actions involving

. Edison's rates, which have been pending since 1983. The six cases are (see attachment for detailed description):

B The court appeals of the ICC's 1993 rate orders involving i

the appropriate costs of Edison's Byron 2, Braidwood 1 and f

Braidwood'2 nuclear power plants and the extent to which they are t

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z needed, the amount of deferred-charges awarded to Edison, and refund related issues.

h a The court appeals of the ICC's 1985, 1989 and 1993 rate I'

I orders involving the costs of Edison-'s Byron 1 nuclear power plant.

i a The court appeal involving the appropriate interest rate to be applied to a large refund ordered by the ICC'in 1990 i

following'an Illinois Supreme Court decision declaring a previous l

rate increase order to be void.

I s The court appeals of the ICC's 1988 rate order involving i

changes to Edison's summer /non-summer rate differential.

j s The ICC's tax investigation involving a potential refund to consumers as a result of the lowering of the federal corporate income tax rate applicable to Edison starting.in July 1987, a Litigation between Edison and the settling parties over Edison's western coal contracts and costs.

Implementation of the settlement requires various actions by the Illinois courts and the ICC.

Edison, the. governmental parties and the consumer organizations will be jointly requesting that the necessary implementation actions be promptly l

effectuated.

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COMMONWEALTH EDISON COMPANY JAVERAGE MONTHLY REDUCTION IN CUSTOMER BILLS

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RATE REFUND AND RATE ROLLBACK q

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-i Rate Refund Rate Rollback-Total

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1R::sidential (Dwelling) l

- Single Family

$ 18.41

$ 4.27

$22.68 ($272.16 annually)

- Multi-Family 8.94

$ 2.08

$11.02 ($132.24 annually) l I

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and Industrial

$ 113.45

$32.98

$ 146.43

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Post refund period 7.83 5.76

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