When Standard & Poor’s affirmed Commonwealth Edison’s BBB debt rating before Thanksgiving, it gave the struggling utility nothing to be happy about this holiday season.
The rating, S&P said, reflects “a below-average business position, as evidenced by nuclear woes, high rates and strict Illinois regulation.” The company’s financial picture is so bad, S&P said, that Edison deserves less than its current rating.
“Nonetheless, S&P will provide management with the time and opportunity to demonstrate a credible plan for more rapid and dramatic financial improvement,” S&P said.
Edison’s financial woes are nothing new, but this year the utility has taken major steps to put its difficulties behind it. After losing a battle over the heating and cooling of McCormick Place to a partnership of Peoples Energy and Trigen Energy Corp., Edison formed its own subsidiary to offer customers what is known as district heating and cooling.
This means generating cold and hot water at a central location and piping it to buildings within a limited district, a growing option as deregulation has swept the energy field.
In its first major undertaking, the subsidiary, called Northwind, plans to convert the old Baskin department-store building on the southeast corner of State and Adams Streets into a power plant, it has been learned.
The plant initially would deliver chilled water to nearby commercial buildings. That could save building owners the expense of changing their air-conditioning systems to meet 1995 federal standards strictly limiting the use of chlorofluorocarbons, known as CFCs or commercially as Freon, which is used in most air-conditioning systems. CFCs are blamed for depleting the ozone layer in the stratosphere. Eventually, the plant also might deliver hot water.
This enterprise may cause visions of an ungainly industrial complex, complete with belching chimneys and hissing pipes, in the middle of the Loop. Some in the vicinity of the project, next door to the Palmer House, have expressed concern.
But Northwind representative Sam Falcona says the building wouldn’t look or sound like a traditional power plant.
Falcona said it would be three or four stories high and would contain retail stores and restaurants on the first floor. It would be powered by electricity rather than having its own generators, so it should be quiet. It would make ice at night, when rates and demand are low, and send chilled water to customers during the day as the ice melts.
Because Northwind hasn’t bought the building yet, Falcona said, it had hoped to conduct its initial planning and marketing outside the glare of media coverage. The company hoped to make an announcement in January, when everything was to have been in place.
Perhaps that explains why the request for a zoning variance was handled by parties with names other than Northwind. John J. George, a law partner of Michael Daley, the mayor’s brother, wrote a letter Oct. 6 to neighbors of the project informing them a zoning amendment application was going to be filed.
The application, received Oct. 8 by the city, was signed by John P. Sweeney, a developer and contributor to Richard Daley’s mayoral campaign. Sweeney could not be reached for comment.
There’s nothing apparently wrong with what’s happening. Northwind is trying to put together a commercial project without the entire world knowing about it and is using people with good political connections to do the work.
There’s a reason James J. O’Connor, chairman and chief executive of Edison, has been listed by the Relational Directory of Who Knows Whom in Chicago as the area’s “best-connected executive.”
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But there are concerns.
Trigen Energy, for example, is worried that Edison may use the $170 million in ratepayer funds it has as starter money for Northwind to seize an unfair competitive advantage. The Illinois General Assembly authorized that amount when it allowed Edison this year to set up Northwind to compete with Trigen and other independent energy producers.
Trigen, too, would like to sell chilled water to Loop buildings, using the city’s network of tunnels to run its piping. It, too, is calling on building owners and managers.
“I hope they (Edison) spend the money on ways to enhance conservation of energy and don’t unnecessarily constrain competition,” said Louis Overstreet of Trigen Peoples District Energy Co., the name of the partnership.
Ed Joyce of Peoples Energy said it would be inconsistent for Peoples to complain about Northwind at this point, considering that Peoples and Trigen are setting up their own district energy plant at McCormick Place.
“This is the whole idea of McCormick Place,” Joyce said.
But some Peoples executives share Trigen’s worries and are considering asking for a blue-ribbon commission to set up guidelines as Northwind, Trigen and others increasingly offer the region a district energy option.
Business and Professional People for the Public Interest, which played a major role in the recent $1.3 billion rate refund by Edison, says Chicago should use this occasion to develop a clear energy policy.
“(The organization) neither supports nor opposes the proposed facility at State and Adams,” Robert L. Jones Jr., staff counsel, said in a letter to the city’s zoning department. “Too little has been made public about the details and implications.”
But Jones did say the zoning department should consider the scale of the project, the type of technology proposed, the effect on the city’s tunnels if they are used and other such matters.
It will be at least Dec. 9, and probably later, before a zoning hearing begins, considering the number of questions being raised among the many Edison watchdog groups.
This project, even if successful, likely is too small to itself impress S&P. But it is the kind of thing Edison must start doing. And, with its political connections and implications for Loop energy service, the project likely will get attention in Chicago.