Democratize ComEd campaign hosts press conference for the release of its independent feasibility study
On April 6,2021, Democratize ComEd hosted a virtual press conference regarding the release of their independent feasibility study. Their study comes after ComEd own feasibility study, which they claim wasn’t fully accurate.
Photo by Chinyere Ibeh
Chicago Democratic Socialists of America’s campaign, Democratize ComEd (DemComEd), hosted a press conference in regards to their independent feasibility study, as their latest move to municipalize and democratize energy in Chicago.
“The city’s original feasibility study basically said that municipalization is not feasible for Chicago,” says Lauren LaBorde, communications coordinator for Democratize ComEd. “This report [Democratize ComEd’s independent feasibility study] proves that it is and we really can’t afford not to municipalize.”
LaBorde explains that the report is important to the city of Chicago as it describes what can be considered “harder-to-quantify” benefits, such as improved accountability, local control, and resilience. Residents will have democratic control, the money ComEd makes will go back to the communities of Chicago instead of shareholders, and there will be more resilience against the effects of climate change.
DemComEd began in 2018 as a response to the city’s contract with the utility company, ComEd, expiring. The campaign aims for public control and municipalization of the company, while also tackling racial justice in Chicago and curbing climate change.
What exactly is a feasibility study? According to Investopedia, it’s an analysis that takes all of a project’s relevant factors into account to ascertain the likelihood of completing the project successfully. Those factors include economic, technical, technical legal and scheduling considerations.
Investopedia explains that project managers tend to use feasibility studies to sort out the pros and cons of a project before they officially invest time and money into it. The City of Chicago had done its own feasibility study on the costs and benefits of municipalizing ComEd. The study outlines several advantages of municipalization, but the Democratize ComEd campaign feels that it doesn’t highlight the long-term financial benefits of municipalization.
The study from NewGen Strategies focuses on the costs of municipalization. It wasn’t able to conduct its own independent engineering assessment and relied on ComEd’s numbers associated with projected cost. The management consulting firms recommended a second phase of the study in order to make an unbiased assessment.
Matthew Cason, a campaign coordinator for DemComEd, explains what the city’s feasibility study excluded.
“According to the new study, Chicago has missed out on nearly $7 billion in income by not municipalizing in 1990, the last time the city’s franchise agreement with ComEd expired,” says Cason.
The Rhodes Environment and Climate Hub (REACH) performed DemComEd’s independent feasibility study, which not only mentions the $7 billion but shows that there could be a net savings of at least $1.2 billion and up to $5.9 billion over a period of 50 years.
In other words, Chicagoans could save up to $6 billion over 5o years if ComEd was municipalized and democratically owned. The citizens of Chicago would experience rates equal or lower than those of ComEd; those rates could average 12 percent lower than those of ComEd.
“I hope the thing people take from this is the enormous missed opportunity of not municipalizing,” says LaBorde.
Mentioning the $7 billion in lost money, LaBorde believes that Chicagoans may be used to being told that the city is broke, while the city approves developments like Lincoln Yards.
Despite its messy finances, the city wanted to spend a good amount of money to fund the Lincoln Yards. It’s a controversial $6 billion development and many residents and activists fought against the project. According to Block Club Chicago, the City Council voted to approve $1.3 billion subsidies for the project in April 2019.
That $1.3 billion in subsidies came from almost $2.4 billion in TIF subsidies, which
were given to pay for infrastructure in both Lincoln Yards and another project.
Many activists didn’t exactly approve of the funding process behind the project. Chicago United for Equity (CUE), a group focused on racial equity, says that the tax increment financing (TIF) will disproportionately burden communities of color.
According to the National Housing Conference, TIFs are used by local governments to stimulate economic development in a certain geographical area. They’re used to finance redevelopment projects using the anticipation of future tax revenue resulting from new development.
Paired with that loss of $7 billion, the multi-billion dollar investment in a real estate property seems to exemplify the mess of the city’s finances. Rather than save money by allowing Chicagoans to have a more hands-on approach to their utility, it appears they’d rather lose money with the contract they have with ComEd and their investments in real estate.
LaBorde says the explanation behind these billion-dollar projects is that they’re an investment into the city. LaBorde argues that municipalization is no different.
ComEd hasn’t responded to the request for an interview.
“We’ve never said that creating a municipalization utility won’t be an expensive and huge undertaking, but it’ll be worth it because it’s a huge upfront investment that will pay in dividends over time,” says LaBorde.
DemComEd’s independent feasibility study mentions in its Financial Cost Analysis section that the net earnings could add up to $4oo million a year. That’s assuming the revenue earned from electricity distribution remains at $2.2 million a year with a profit margin of 18.3 percent. The study expects the revenue to exceed the cost of debt repayment.
DemComEd released a list of demands for the utility company along with a summary of the 15-page feasibility study. One can read a shortened list of the key demands for the utility company as well.