Dive Brief:

• Chicago nixed considerations for municipalization after a preliminary analysis showed the average electric delivery rate for a city-owned system would be 43% higher in its first year than Commonwealth Edison's service.
• According to an analysis published on Friday by NewGen Strategies and Solutions, it would cost around $8.8 billion for Chicago to cut ties with ComEd. Mayor Lori Lightfoot, D, said the results of the study indicated municipalization "appears not to be feasible," adding negotiations with ComEd will "focus on getting the best deal for our residents and ratepayers through a transparent process."
• The city is in the midst of negotiating its franchise agreement with ComEd, which expires at the end of 2020. The city is focused on "utility affordability, energy and sustainability, equitable economic development, and transparency," Commissioner David Reynolds from the Chicago Department of Assets, Information and Services said in a press release.

Dive Insight:

Chicago had been considering a break away from the Exelon subsidiary since last summer, initiating the preliminary study for municipal utility feasibility in the fall of 2019.

The considerations are part of a larger trend of cities seeking greater control over their energy costs and emissions, but such efforts have been complicated by high cost projections. Boulder, Colorado, announced a proposed settlement agreement with Xcel Energy in July to end a decade-long fight for municipalization. In Pueblo, Colorado, voters shut down similar efforts to form a city utility this year. And San Francisco in 2019 threatened to exit Pacific Gas and Electric.

A Chicago municipal electric utility could require more than $300 million annually in additional revenue for the first three years, compared to ComEd's rates, according to the analysis. From 2020 to 2039, the municipal utility's revenue requirement was never forecast as lower than ComEd.

The NewGen study determined a spike in customer rates, largely driven by the price of severing the city's distribution infrastructure from ComEd. Further engineering assessments would be needed to identify a more precise figure, according to NewGen, but the study estimated approximately $3.9 billion severance costs for these systems.

That is in addition to the approximately $4.9 billion cost for acquiring municipal assets. NewGen found this cost could be as high as $5.7 billion.

ComEd "invested significantly" in Chicago's distribution infrastructure according to the report, including approximately $1.9 billion over the past 20 years to improve reliability, upgrade facilities and address other issues within the system.

It would also take many years for Chicago to acquire the necessary electric distribution facilities from ComEd and to separate a municipal utility system from the investor-owned utility, which serves much of the surrounding region.

The report emphasized that Chicago could still meet its energy policy objectives without establishing a municipally-owned utility, due to retail choice in the state and the city's existing relationship with ComEd. 

In addition to her policy goals with the renegotiation, Lightfoot committed to holding off on a new franchise agreement with ComEd until the company issues a satisfactory ethics reform plan, to rebuild the trust of the city and its customers. The utility continues to face criticisms from bribery charges leveled this year.

ComEd did not respond to requests for comment.