How long-ago power plays set ComEd's current woes in motion

The roots of the utility's entanglement in a wide-ranging federal probe of Illinois political corruption stretch back to a time when the company badly needed to turn Mike Madigan from a foe into an ally.

Alamy

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The roots of Commonwealth Edison's entanglement in the current wide-ranging federal investigation of Illinois political corruption stretch back to 2003, when the company's leaders discovered just how deeply they had fallen into disfavor with the powerful House speaker, Michael Madigan.

Madigan torpedoed a rate hike that John Rowe, then CEO of ComEd parent Exelon, said was needed to complete his plan to acquire troubled downstate utility Illinois Power. So ensued four years of cold and hot warfare between Madigan and Rowe, culminating in a fraught 2007 negotiation that led to a rate-hike compromise only because Emil Jones, the Senate president at the time, was a staunch ComEd backer and wouldn't allow Madigan to call all the shots.

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With Jones' retirement looming, the company's political playbook had to change fast. Rowe set in motion a sustained charm offensive to transform Madigan from an adversary into a solid supporter of a far more ambitious legislative agenda.

79彩票注册网址It would take years for the effort to bear fruit, but, starting in 2011, the campaign would help the Chicago-based power giant achieve two of its most remarkable Springfield victories. The first: elbowing aside state regulators and putting ComEd's delivery rate hikes on something resembling autopilot. The second, a $2 billion ratepayer-financed bailout of two struggling nuclear plants.

79彩票注册网址It would also lead to the kind of cozy relationship that would bring several top lobbyists for the utility under federal scrutiny and prompt the abrupt departure of Anne Pramaggiore, the former CEO of Exelon Utilities who had been viewed as a candidate for Exelon's top job in part because of the effective courtship of influential pols orchestrated under her watch.

79彩票注册网址Exelon and ComEd donated generously to Madigan's campaign committees over the years, yes. But Exelon and ComEd also hired connected lobbyists, paying them millions, money which was then distributed to individuals who worked for and were favored by the speaker's campaign apparatus.

Chief among those lobbyists was Michael McClain, a confidant of Madigan and until 2017 ComEd's most important outside lobbyist. McClain, now a central figure in the U.S. attorney's investigation, distributed money he received from ComEd to people close to the speaker, according to press reports and one source who was approached by McClain offering ComEd cash for unspecified advocacy work.

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As traditional patronage hiring by government agencies became harder to do—particularly because of the increasingly effective enforcement of the court order known as the Shakman decree—the door opened for utilities to assist.

79彩票注册网址"Ironically, what that did was to create opportunities for Commonwealth Edison, Exelon and other utilities," says Howard Learner, executive director of the Environmental Law & Policy Center, a frequent opponent of ComEd and Exelon. "ComEd and Exelon became a new form of patronage hiring tied to the political process."

But all of that was in the future in 2007, when Exelon's then-CEO Rowe finally secured a hard-fought compromise with Madigan to allow for the end of a decadelong rate freeze and permit electricity rates to rise. Madigan extracted $850 million in ratepayer rebates from Exelon and ComEd to ease the transition.

"The speaker is immensely powerful," Rowe says now in an email. "For the 22 years I have been in Chicago, the most powerful person in the state. He was a foe. Our work made him more neutral. He is never an ally for a utility because he really does not like them. But when he makes a deal, he keeps it. The deals he asked of me were designed to yield public benefit, in his view at least."

79彩票注册网址Exelon was only able to strike the deal in 2007—during which Madigan threatened to refreeze ComEd's rates even in the face of bankruptcy threats from the company—because of rock-solid backing from Emil Jones, the president of the state Senate at the time and a staunch supporter of the utility. When Jones retired the following year, ComEd's protector in Springfield was gone and with him much of the utility's clout.

79彩票注册网址Asked if Jones' departure made it a high priority to convince Madigan to give Exelon and ComEd a fair shake, Rowe says simply, "Yes."

79彩票注册网址He declines to talk about the years that ensued until his retirement as Exelon CEO in 2012.

A spokeswoman for Madigan declines to comment for this story.

79彩票注册网址Also declining to comment is Pramaggiore, whom Rowe tapped to spearhead the formula rate bill in 2011 and who later was named the first female CEO of ComEd. Pramaggiore, elevated in 2018 to run all of Exelon's utilities, retired abruptly in October after the federal investigation heated up.

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Bloomberg

Anne Pramaggiore

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Asked how ComEd is focusing its lobbying now in light of the controversy, a spokesman emails, "ComEd's performance is key to its relationships with stakeholders, and today, thanks to the work of ComEd's talented women and men, the company is among the best-performing energy companies in America, and our advocacy will continue to focus on what we can do to get even better."

79彩票注册网址The years between 2007, when Madigan was at war with Exelon, and 2011, when ComEd triumphed, are the key years in the wooing of the speaker, as well as other pols such as state Sen. Martin Sandoval, D-Cicero, the only lawmaker mentioned by name in the investor disclosures Exelon has issued regarding grand jury subpoenas it has received this year.

Sandoval was the only Senate Democrat to vote against the 2007 compromise over the end of the rate freeze. Four years later, he was a supporter of the 2011 formula rate for ComEd, and he remained a backer until his recent announcement that he was leaving the state Senate amid the federal investigation. ComEd hired his daughter Angie in 2013 soon after she graduated from college; she still works there, now as a senior account manager, according to her LinkedIn profile.

An October federal search warrant covering Sandoval's home and offices sought items related to ComEd or Exelon, four unnamed "Exelon officials," and "any issue supported by any of those businesses or individuals, including but not limited to rate increases."

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Bloomberg

John Rowe

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As for Madigan, there was no record in 2007—the year in which Rowe found himself at war with the speaker—of any contributions by ComEd or Exelon or their executives to his campaign funds. From 2008 to 2010, the companies and their executives gave at least $173,000 to Madigan-controlled campaign funds, according to state records.

Asked about the lack of donations in 2007, Rowe says he's not sure what happened. Madigan "may have turned us away."

79彩票注册网址Eventually, ComEd and Exelon made it a formality. Every autumn, they would host a fundraiser—considered by some company associates to be a command performance—for the speaker's political operation at either the Chicago Club or the Union League Club during which at least $100,000 would be raised. Exelon CEO Chris Crane's name appeared at least twice on the formal invite. Madigan and Pramaggiore stood side by side in the receiving line, according to one attendee.

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79彩票注册网址

79彩票注册网址At least as important as political donations was ComEd's lobbying budget each year. The war chest enables the utility to hire a dozen or more contract lobbyists each year, who in turn distribute money to "subcontractor" lobbyists. Spending on lobbying and political activities totaled more than $16 million in 2011, the year of the formula rate battle, more than three times the utility's typical budget of around $5 million, according to ComEd filings with the Federal Energy Regulatory Commission. Charitable contributions—another time-tested means of garnering support for ComEd—zoomed to $23 million in 2011. In 2018, by way of example, charitable donations were $12 million.

NO LONGER A FOE

By 2011, when ComEd was pushing hard for legislation authorizing $2.6 billion in spending over a decade on power grid updates and smart meter installation throughout its territory, Madigan clearly was no longer a foe and arguably something more than neutral. The measure would sideline state regulators in determining rates and instead would permit the utility to set them each year via a formula. Profits would be locked in; if ComEd didn't earn what it expected in a given year, rates would go up that much more in the succeeding year to make up the difference. It was and remains one of the most generous state rate regimes for any utility in the country.

Pat Quinn, then governor, adamantly opposed the bill, so ComEd needed veto-proof majorities in both chambers. The veto override never was in much doubt in the House.

Opponents quickly sized up the situation. Any chance to defeat the measure would lie in the Senate. "That's the bill the speaker wants," one prominent opponent says was the message when lobbying House sponsors on the issue. "It was clear this was cooked in the House."

79彩票注册网址Without Jones in the Senate to strong-arm the measure through that chamber, ComEd was compelled to strike deals with individual senators to garner the extra votes it needed to override Quinn's veto.

79彩票注册网址Five years later, Madigan took the lead in shepherding through what became the Future Energy Jobs Act, one of the few major initiatives Madigan and GOP Gov. Bruce Rauner agreed on during Rauner's tempestuous term. That 2016 law bailed out two Exelon nuclear plants to the tune of more than $200 million a year in extra ratepayer payments statewide and permitted ComEd for the first time to profit on energy efficiency programs, which were greatly expanded and financed via another surcharge on all ComEd bills.

Madigan's close friend McClain was at the forefront of that effort in his last year as an official ComEd lobbyist, and his efforts were publicly applauded at a late 2016 party to mark his retirement as a lobbyist and to celebrate the passage of the bill. Speaking to the gathering, Exelon Chief Strategy Officer William Von Hoene addressed McClain directly, according to one person who was there: "Mike, you saved us more than hundreds of millions."

Greg Hinz contributed.

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