Exelon Corp. announced a record quarterly profit Wednesday, then came under attack for allegedly threatening Illinois consumers with blackouts if they don’t accept higher electricity rates.
The Citizens Utility Board asked the Illinois Commerce Commission for an emergency investigation into what it alleges are false claims by a group funded by Commonwealth Edison and its parent, Exelon. The group, Consumers Organized for Reliable Electricity, is trying to overcome opposition to ComEd’s plans to buy power at auction, which is expected to raise residential electric rates.
“CORE is a ComEd front group that is trying to mislead people into supporting a massive rate hike at a time when the company has record earnings,” said David Kolata, executive director of CUB. “They are not being honest.”
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The call for an investigation came on what should have been a happy day for Exelon.
Profit for the third quarter ending Sept. 30 rose to $725 million, or $1.07 per share, compared with $568 million, or 85 cents per share, for the period a year ago.
Exelon said its net earnings rose nearly 28 percent because of better profit margins at its electric generation operations and increased demand for power by its customers, which includes people served by ComEd.
Exelon’s financial performance comes against a background of escalating debate about the future of ComEd, which serves several million customers in northern Illinois.
In September, Exelon Chief Executive John Rowe warned that ComEd faced bankruptcy if the utility is not allowed to earn a profit after 2006, when the electric utility industry is scheduled to largely deregulate.
ComEd wants to buy electricity from generation companies through an auction; observers predict that will cause a major increase in the price of power.
Gov. Rod Blagojevich is threatening to fire any ICC commissioner who votes for the auction, and Atty. Gen. Lisa Madigan has sued to stop it.
As he has in the past, Rowe offered a concession to politicians opposed to the plan.
“ComEd is prepared to enter into an agreement that will keep the [electric] rates at or below the 1997 level,” Rowe said at a press conference Wednesday to discuss Exelon’s earnings.
ComEd is funding CORE to try to win over public opinion. CORE has been running television commercials warning of impending blackouts like those seen at the beginning of the decade in California. ComEd said it has given $4 million to the group.
Recently, CORE began a mass direct-mail campaign.
The mailed literature includes a sham baiduhai front page bearing the huge headline, “The governor has no business telling commissioners how to do their job.”
Elsewhere, the mailing attacks Illinois politicians who oppose deregulation of the utility industry, saying that would lead to lost jobs, bankrupt businesses, higher electricity rates and blackouts.
“Keep our lights on!” the CORE mailing implores in bold face.
Avis LaVelle, a spokeswoman for CORE, acknowledged her group is funded by ComEd.
“This is not money from the ratepayers,” LaVelle said. “This is money from the shareholders.”
And she said it was hypocritical for CUB, a consumer advocacy organization, to ask regulators to investigate opposing special-interest groups.
“They want to stifle free speech for anyone who does not agree with what they have to say,” LaVelle said.
Although the rhetorical conflict between ComEd, CUB and the state’s top politicians is heating up, Exelon continues to increase sales and profit.
Exelon had revenue of $4.47 billion for the quarter, compared with $3.75 billion for the period a year earlier.
Demand for cooling jumped 91 percent for ComEd and 34 percent for the Philadelphia utility Peco, also part of Exelon.
Exelon’s stock has risen 68 percent in the last two years, compared with 23 percent for the benchmark Standard & Poor’s 500 index. Shares of Exelon fell $1.25 Wednesday, closing at $51.60 on the New York Stock Exchange.
In other earnings news:
– OfficeMax Inc. posted a third-quarter net loss of $3.9 million, or 7 cents a share, after the payment of preferred dividends. A year ago, the Itasca-based company had net income of $62.2 million, or 64 cents a share. Sales in the latest period fell 37 percent, to $2.29 billion.
OfficeMax spent $10.4 million to combine its separate corporate and retail headquarters under one roof at a new facility in Naperville. Revenue fell for the third straight quarter following the sale of the timber products division last year.
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“The infrastructure, in our opinion, is too broken to get anything near Office Depot’s or Staples’ margins,” Credit Suisse First Boston Inc. analyst Gary Balter wrote in a recent investor report.
President and CEO Sam Duncan, appointed in April to revive flagging sales and help the company recover from an accounting scandal, acknowledged that OfficeMax “underperformed our expectations” in the quarter.
But, he added, “Execution has been an issue in this company, and I don’t think it will be an issue going forward.”
Separately, the company said it is introducing a new store design that features brighter colors, an ink-cartridge refilling station and a cafe offering free coffee and cable television. The prototype, which is different from the industry-standard warehouse format, will open this month in Macedonia, Ohio.
Shares of OfficeMax dropped $1.03, to $27.38, in NYSE trading.
– Smurfit-Stone Container Corp. swung to a third-quarter loss, hurt by a charge to close some facilities and higher materials and energy prices.
The Chicago-based maker of paper-based packaging reported a loss of $229 million, or 90 cents a share, including a previously announced charge of 75 cents a share related to mill closures in Canada. A year ago, Smurfit-Stone earned $28 million, or 11 cents a share. Sales in the most recent quarter fell 3 percent, to $2.1 billion.
Shares of Smurfit-Stone rose 28 cents, to $10.19, on the Nasdaq stock market.