CUB’s ‘Conflict’: How A Utility Watchdog Got Millions From The Utilities It Watches

Under a 1983 state law, the Citizens Utility Board can’t accept power company money. But WBEZ has found it took in $11.5 million from ComEd-funded foundations.

FEJA signing
Former Illinois Gov. Bruce Rauner, center, celebrates after signing the Future Energy Jobs Act in 2016. Also at the bill-signing ceremony were Citizens Utility Board Executive Director David Kolata, second from left, and former ComEd CEO Anne Pramaggiore, third from right. Todd Mizener / Courtesy of the Dispatch-Argus/QCOnline.com
FEJA signing
Former Illinois Gov. Bruce Rauner, center, celebrates after signing the Future Energy Jobs Act in 2016. Also at the bill-signing ceremony were Citizens Utility Board Executive Director David Kolata, second from left, and former ComEd CEO Anne Pramaggiore, third from right. Todd Mizener / Courtesy of the Dispatch-Argus/QCOnline.com

CUB’s ‘Conflict’: How A Utility Watchdog Got Millions From The Utilities It Watches

Under a 1983 state law, the Citizens Utility Board can’t accept power company money. But WBEZ has found it took in $11.5 million from ComEd-funded foundations.

After winning Springfield’s support for a multibillion-dollar piece of legislation in 2016, Commonwealth Edison decided to celebrate with a pair of invitation-only events at a Gatsby-esque River North nightspot once known as the Montgomery Club.

The first party featured cocktails and hors d’oeuvres and was to last two to three hours. At the second, more exclusive soiree, ComEd’s retiring top lobbyist was being toasted for getting the bill passed and for a long career in and around state government.

The guest list included more than two dozen executives from ComEd and its parent, Exelon. There were also company lobbyists and the bluest of blue-chip political luminaries: Democratic House Speaker Michael Madigan, whose son was also invited.

But there was another invitee who stood out.

David Kolata and the organization he has led for 15 years, the Citizens Utility Board, are supposed to be thorns in the sides of ComEd and Exelon. But in 2016, Kolata’s consumer advocacy group instead sided with the power companies, enabling them to boost ratepayers’ electricity bills by billions of dollars over a decade to subsidize underperforming nuclear plants.

Kolata says he made only a brief appearance at the party.

“I don’t recall if I even had a drink, to be honest,” he said in a recent interview with WBEZ. “I don’t recall that much about the party, other than it was a celebration of a legislative victory, and we think consumers reaped the rewards from the bill.”

In addition to hiking rates, CUB says the bill also required new energy efficiency standards for ComEd that could “potentially” lead to billions of dollars in savings.

But CUB has reaped its own rewards with millions of dollars in funding from a pair of ComEd-funded foundations over the past 20 years, and some are questioning whether that compromises the consumer organization, a WBEZ investigation has found.

In July, ComEd admitted it engaged in a Springfield bribery scheme that lasted eight years, and court documents even mentioned the 2016 legislation along with another measure from 2011. During the scheme, federal prosecutors say ComEd offered monetary payments and no-work utility company jobs and contracts to Madigan associates, all to win favor with the speaker and put ComEd on golden paper at the statehouse.

While Madigan has not been charged and adamantly denies wrongdoing, some want to repeal the legislative trophies that have funneled big money to ComEd. And the still-evolving federal corruption investigation centering on ComEd patronage benefitting Madigan is raising new questions about where the Citizens Utility Board was during all of this.

Neither Kolata nor his organization have been implicated in the probe. But CUB was getting those millions of public utility dollars through side channels as ComEd was greasing the legislative skids. That’s despite a 1983 state law that says the group can’t accept utility company largesse, a WBEZ investigation has found.

This arrangement has gone on for at least two decades, and it’s clear evidence CUB has “fed at the utility trough just like the rest of them,” according to one Springfield advocate for the elderly who has frequently locked horns with ComEd.

Increasingly, CUB has been out of step with other advocacy groups who’ve been highly critical of ComEd. For much of the past year, CUB has stayed largely silent about the utility’s high-profile corruption scandal — even after ComEd first disclosed it was under federal investigation in July 2019. More recently, the group has been slower than others to enter the legal arena to help consumers claw back the company’s ill-gotten gains.

Kolata does not believe CUB’s independence is compromised, pointing to its opposition to the utility on five pieces of legislation since 2011 and a string of rate cases before ComEd’s state regulators.

“I think our track record speaks for itself, and most of the time we are fighting with ComEd,” Kolata said. “But there are circumstances when it turns out that it’s in the best interests of consumers to work out a deal.”

McClain invitation
In 2017, ComEd celebrated the passage of a major Springfield bill it had backed and marked the retirement of its most influential lobbyist, Michael McClain. He’s since emerged as a key figure in the federal corruption probe into ComEd. Courtesy

How utility money was funneled to a utility watchdog

Democrat Pat Quinn, who would later serve as Illinois governor, helped found CUB through a petition drive in 1982. After a series of rate hikes by ComEd, Chicago and more than 100 other communities voted to form the group in a series of advisory referenda. By 1983, state lawmakers formally created the organization through a state law called the Citizens Utility Board Act.

The legislature defined CUB as a “nonprofit public body” whose purpose was to “represent and protect the interests of the residential utility consumers of this state.” CUB recruits paying members from the general public via solicitations that go out in state mailings.

The organization’s founding law explicitly states that CUB “may not accept gifts, loans or other aid from any public utility.” The statute also bars anyone from giving CUB gifts or money “if the offer or gift influences, or is intended to influence” the organization. Violations carry fines of up to $1,000 and imprisonment for up to six months.

But beginning in 2000, through an act of the state legislature one year earlier, a pathway was established for CUB to begin getting money indirectly from utility companies. Since then, WBEZ found the organization received at least $11.55 million in funding that originated mostly from ComEd.

As part of a 1999 law, ComEd pledged a $225 million endowment to create a not-for-profit known as the Illinois Clean Energy Community Foundation. Written into the law establishing the foundation was a requirement that it grant CUB $7 million over seven years.

In 2011, state lawmakers approved another big piece of legislation sought by ComEd that eventually authorized the company to update electricity meters across its system. The so-called “smart grid” law also abolished a process by which ComEd had to justify rate hikes each year to state utility regulators. The new system codified a process called “formula rates” that weakened the Illinois Commerce Commission’s oversight of utility rates and essentially guaranteed ComEd would always turn a profit.

CUB went on record opposing the smart-grid legislation. Quinn vetoed the bill, but state lawmakers overrode it later in the year.

“We worked with the governor on trying to uphold the veto, and ultimately it wasn’t successful,” Kolata said.

It was a law cited by federal prosecutors in their settlement agreement with ComEd because it was shaped at the same time ComEd carried out its Springfield lobbying scheme.

As part of the legislation, another utility-funded foundation was set up to enable ComEd and the downstate power provider, Ameren, to engage in “consumer education initiatives” about energy efficiency and the new meters. The new Illinois Science and Energy Innovation Foundation also could funnel utility money to CUB.

Between 2013 and 2018, the foundation awarded $4.55 million in grants to a non-profit controlled by CUB and Kolata. That nonprofit helps fund CUB’s operations, federal records show.

The Illinois Science and Energy Innovation Foundation board includes a current ComEd executive, a former Exelon executive and Chicago Ald. Brendan Reilly, 42nd Ward — an ex-Madigan aide who has received nearly $11,000 from Kolata, state campaign records show. Also on that board, at least until 2018, was CUB’s former deputy director.

Reilly said he has never been on the foundation board’s committees that score and vet grant applications from CUB and others. At least three other people employed by ComEd contractors sit on a peer-review committee that has a hand in awarding grants.

“The state’s regulated electricity utilities, ComEd and Ameren, are mandated by statute to fund our activities and do not either direct the level of funding to our organization or direct the grants we award,” the foundation’s program director, Uzma Noormohamed, said in a statement last week.

Critics: CUB’s mission is “compromised”

Several experts in the fields of public utility law and advocacy said CUB’s relationship with utility-funded foundations raises serious questions about its independence. One said that funding spigot should be turned off by the General Assembly.

“Unfortunately for ratepayers, CUB has been taking money from Commonwealth Edison for at least 20 years now that I think that most people aren’t aware of,” said Janice Dale, who headed the public utilities bureau in the Illinois attorney general’s office between 2000 and 2019. “And I don’t see how you can take money from an entity that you’re supposed to be having oversight over and not have that compromise you in some way.

“Given CUB’s mission as laid out in the law, creating loopholes and ways for consumer advocates to receive utility money is wrong and contrary to other laws that the legislature has passed that say CUB is supposed to be a consumer advocate,” she said. “And that kind of conflict should be stopped.”

Some advocates on the ground here in Illinois are also critical of the funding model, particularly given the allegations of money and contracts being spread around by ComEd to buy influence.

“[CUB] should explain why they would take those funds when they knew it was coming from a utility company that in the deferred prosecution agreement has admitted to favors and bribes to elected officials and others in order to get favorable legislation passed,” said Robert Gallo, president of Illinois AARP, which opposed ComEd’s 2011 and 2016 legislation.

“[As] anyone who’s been around Springfield or Chicago and has seen the largesse of ComEd on how they create favors wherever they go and influence using ratepayer money, you would think that CUB would have run in the opposite direction,” Gallo said. “They fed at the utility trough, just like the rest of them did.”

A nationally recognized critic of the utility industry said a utility watchdog can’t be accepting funding that traces back to utility companies.

“If a consumer advocate is obtaining its finances from a utility-controlled entity or if they are working in close collaboration with a utility, then the consumer advocate is no longer a consumer advocate,” said Tyson Slocum, who directs the energy program for Washington, D.C.-based Public Citizen, which was founded by consumer activist Ralph Nader.

“Essential to their success is to be a watchdog and sometimes an attack dog against the utility to ensure that households have a champion, have an advocate,” Slocum said of CUB. “And when the consumer advocate is getting millions of dollars from a utility or otherwise being unduly influenced, then its mission is compromised.”

CUB: “There’s certainly no conflict of interest”

Brushing off such criticism, CUB’s Kolata said money his organization has gotten that originated from utilities was deserved.

“It was a competitive process,” he said. “It is independent. It’s metrics-driven. And ComEd and Ameren have no control over it. So at the end of the day … I think you’ll find out that we’re the top performer. We have been for quite some time. We’re very good at it. And at the end of the day, consumer education to help consumers save money on their bills is the core responsibility and function of CUB, and we’ve won national awards for it.”

The Illinois Science and Energy Innovation Foundation gave the not-for-profit that handles all of CUB’s charitable donations about $378,000 in 2014. That funding rose to a high of $1.2 million in 2018 — a figure that represents 45% of all the money that the CUB-controlled money operation took in that year, tax records show.

Kolata has seen his salary at CUB grow more than 30% between 2013 and 2018, when he made $145,511.

A ComEd spokesman said it is proud of the work of the legislatively-mandated foundations it funds and that specific grants to CUB have helped educate consumers about their electricity bills and save them money.

“While it’s not ComEd’s job to judge CUB, we recognize the important role they and other advocates play in the process that has allowed ComEd to deliver the most affordable, reliable and clean energy progress in the nation,” company spokesman Paul Elsberg said.

Most important of all, Kolata said, is that there’s no proof CUB’s work has been swayed by the money it has gotten from the ComEd-funded foundations.

“There’s certainly no conflict of interest, and to anyone who thinks that there might be a perception issue, well, what’s the evidence?” Kolata asked. “The Future Energy Jobs Act?,” he said, referring to the 2016 law to bail out Exelon’s nuclear power plants. “That’s a good bill.”

A legislative bid to hold CUB “accountable”

The 2016 legislation authorized annual rate hikes of up to $235 million for 10 years to support plants in downstate Cordova and Clinton that Exelon had threatened to close because they weren’t profitable.

And CUB appeared ready to support Exelon’s position once again this year in a new push for additional ratepayer subsidies to support its underperforming nuclear plants. That’s when a Senate panel weighing new energy legislation conducted a virtual hearing, where Exelon made its case.

At that hearing, CUB justified Exelon’s stance for new nuclear subsidies. When pressed by lawmakers about the basis for his support, he said Exelon had shown him its books. But he declined to share details of the financial data he had seen because he had signed a non-disclosure agreement with Exelon.

That news blindsided the committee’s chairman, state Sen. Michael Hastings, D-Frankfort, who had not seen the financial data Exelon was using to justify more ratepayer subsidies.

“Groups and organizations which are signing non-disclosure agreements or whatever it may be with utility companies, they should be disclosing what information they’re receiving and taking in if they really, truly, are acting on behalf of the ratepayer,” Hastings told WBEZ.

After the hearing, Hastings filed legislation to subject Kolata’s organization to the state Freedom of Information Act. There’s debate about whether the law already applies to CUB since it is defined in state law as a “public body.”

“When you represent the interests of residential utility customers across the state and you were a creation of the General Assembly … and don’t want to disclose your information, I find that problematic,” Hastings said.

Dale, the former state public utilities enforcement official, said the larger point is that Kolata appeared to be taking Exelon’s representation about its finances at face value while advocating the company’s position before the committee.

“It certainly sounds like they’re part of the Commonwealth Edison or Exelon team,” she said. “It doesn’t sound like they have any kind of independence anymore. It makes you wonder whose side they’re on.”

Kolata defended his arrangement with Exelon, saying confidentiality agreements are commonplace with utilities in regulatory proceedings. In this case, one was necessary to confirm that Exelon wasn’t “bulls******” about the financial impact on the company from underperforming nuclear plants, he said.

“There’s nothing nefarious about it,” he said.

Kolata urged the General Assembly to ask for its own look at Exelon’s balance sheets.

“What needs to happen here is that the governor, the leaders, legislators, they need to feel confident that Exelon is telling the truth and that they’re being transparent and open with their finances. And we support that,” Kolata said. “We support as much transparency and as much openness as possible.”

Except, it seems, when it comes to CUB’s own internal affairs.

CUB denies WBEZ open-records requests

In August, WBEZ filed state open-records requests to examine financial records CUB is required to maintain under state law. The news outlet also sought access to any emails between CUB and ComEd officials, repeating a request made last November with which CUB did not comply.

CUB made board meeting minutes available, as it’s explicitly required to do upon request, under state law. But it did not produce financial statements or audits that WBEZ asked for. And Kolata also would not provide other records requested under the Illinois Freedom of Information Act.

Kolata said CUB is not subject to that law, which applies to all public bodies. CUB’s lawyers told WBEZ it has rejected another request from the public for its records.

“If we were subject to FOIA, our opponents will do nothing but hit us with that constantly,” Kolata said. “We have nothing to hide. It’s just that we’re an independent, non-profit. We’re not a government agency, and I think we have strong legal grounds for that.”

WBEZ has appealed the matter to the public access counselor’s office under Democratic Attorney General Kwame Raoul. That office has authority to settle open-records disputes like this one, which one press-freedom advocate said should tilt in the news outlet’s favor.

“My opinion is that CUB is being disingenuous when it says it’s only a nonprofit and not a public body, especially when its enabling statute literally refers to it as a ‘public body,’” said Gunita Singh, a lawyer with the Washington, D.C.-based Reporters Committee For Freedom of the Press, which has helped WBEZ on other open-records cases unrelated to CUB.

CUB hires Quinn for legal work related to ComEd scandal

After U.S. Attorney John Lausch’s office and ComEd reached a settlement to defer a bribery charge, Chicago’s City Council and the Illinois Commerce Commission convened hearings where ComEd executives appeared and were blasted for the scandal. CUB and Kolata did not speak at those meetings, though Kolata says they did submit a written statement to the council. In both venues, representatives for the Illinois chapter of AARP and the Illinois Public Interest Research Group testified about the need for ratepayer refunds and for ethical reforms targeting ComEd and Exelon.

Additionally, there have been at least four lawsuits filed in federal court as a result of ComEd’s admissions, seeking damages for residential and commercial customers. There also has been an effort by another private legal team to persuade a federal judge that the $200 million fine ComEd has agreed to pay the U.S. government instead should be reallocated to ratepayers.

But CUB has been slow to enter the legal arena.

Kolata said the organization retained a law firm last month — with former Gov. Quinn as co-counsel — as CUB explores whether it can win restitution for consumers. CUB didn’t reveal those steps until this past week upon questioning from WBEZ.

“We have to figure out the best strategy involved here,” Kolata said. “There are some complicated legal questions. Ultimately, we are taking this extraordinarily seriously. But it’s easy to grandstand. It’s a little bit tougher to figure out the best way to get restitution for consumers, and that’s what we’re focused on.”

WBEZ and the Better Government Association were the first to reveal the federal probe into ComEd in July 2019, when the company acknowledged receiving a federal subpoena seeking information about “its lobbying activities in the State of Illinois.” CUB has been largely quiet about the scandal until the past six weeks — after ComEd publicly copped to the federal bribery scheme.

Kolata said his board talked about the federal investigation into ComEd, dating as far back as a September 2019 board meeting and during later board meetings in December and March. But CUB’s meeting minutes show no record of those discussions.

“We had extensive board discussions on the federal investigation that ultimately led to the [deferred prosecution agreement],” Kolata said, but did not reply when pressed about why there are no notations of those discussions in board minutes.

CUB’s retention of Quinn and the Chicago law firm, Edelson PC, is evidence those talks took place, he said.

“Join Us For Dinner And A Toast”

In promoting CUB’s positions over the years in Springfield, Kolata routinely crossed paths with Commonwealth Edison’s lobbying team. One ComEd lobbyist, among all others, had the most influence at the Capitol: Michael McClain. He was the one feted by ComEd in the private party at the Montgomery Club in January 2017 after passage of the Future Energy Jobs Act.

“We’ve always had a professional relationship with Mike McClain, and we take the approach that ultimately there are times when you need to talk to your adversaries and you get to know them,” Kolata said.

McClain is now a pivotal figure in the ongoing federal corruption investigation that appears to have Madigan in its crosshairs. A trusted advisor to the speaker, McClain helped Madigan draft his inaugural speeches, and McClain says federal agents had sought his cooperation in the ComEd probe after raiding his home in Quincy, Ill., last year.

McClain invitation 2
An invitation to ComEd’s party celebrating the utility’s big legislative win, and the retirement of its top lobbyist. Provided

In 2017, though, there were plenty of Madigan allies who were invited to the Montgomery Club party honoring McClain for his work on the Future Energy Jobs Act and his retirement. Besides a full contingent of ComEd and Exelon brass, other invitees included labor leaders and representatives of the Illinois Clean Jobs Coalition, of which Kolata was a part.

ComEd’s invitation to the private party said: “Join Us For Dinner And A Toast.”

The day after, then-ComEd CEO Anne Pramaggiore sent around an email thanking the revelers for attending. She gushed about the “great send-off” for McClain.

“It was a special evening and you all made it so,” Pramaggiore wrote. “We will miss our friend dearly, but we know he won’t be too far away.”

To critics like Dale, there have been many red flags in the relationship between CUB and ComEd — from accepting utility-funded foundation money to embracing the utility’s legislative agenda to something as simple as being seen rubbing elbows with company executives at the McClain party.

Dale said it’s time for a reassessment of CUB and its leadership.

“It doesn’t sound like they’re much of a watchdog if they’re attending cocktail parties and celebrating the bill that’s going to add $235 million [a year] to utility bills,” she said. “And I think that if the public were aware of that, they would have perhaps second thoughts about what CUB is doing and maybe talking to their legislators about looking into that.”

Editor’s note: In the interest of full disclosure, ComEd is a WBEZ underwriter.

Dave McKinney covers Illinois politics and government for WBEZ, and Dan Mihalopoulos is an investigative reporter. Tony Arnold contributed to this report. Follow them on Twitter @davemckinney, @dmihalopoulos and @tonyjarnold.