Draft Illinois Order Would Require Long-Term Renewable Supply Contracts in Default Service Plan

Email This Story
November 24, 2010

A proposed order from an Illinois ALJ would require the Illinois Power Agency to procure long-term contracts for physical renewable energy to serve Commonwealth Edison and Ameren customers under the IPA's 2011 procurement plan (10-0563, see 9/30).

Specifically, the proposed order would adopt a proposal from Iberdrola Renewables, Inc. to include in the IPA's 2011 plan the following components for procuring the required renewable energy: (1) 20% one-year REC contracts; (2) 30% three- to five-year REC contracts divided into 10% tranches for three, four, and five years, respectively; and (3) a 20-year contract for physical renewable energy resources commencing in 2012 representing the remaining 50%.

The ALJ concluded that the Illinois Power Agency Act requires the procurement of physical renewable energy supply, and not just RECs.  

Per the Act, "[t]he procurement plans shall be updated on an annual basis and shall include electricity generated from renewable resources sufficient to achieve the standards specified in this Act" (emphasis by ALJ), the ALJ noted, who said that the term "electricity" as used here cannot mean simply a REC.

Accordingly, the ALJ's order would interpret the IPA Act as requiring the procurement of actual renewable energy, not just RECs.

The ALJ further supported this conclusion by noting Section 1-75(c) of the IPA Act corroborates this interpretation by stating, "[a] minimum percentage of each utility's total supply ... procured for each of the following years shall be generated from cost-effective renewable energy resources ..." (emphasis by ALJ)

"RECs do not directly provide supply to serve a load, nor do RECs directly generate supply," the ALJ said.

Additionally, the ALJ held that such renewable energy should be acquired through long-term contracts when possible, in compliance with Section 1-56 of the IPA Act.

While critics of Iberdrola's proposal argued that it is not the lowest cost option and therefore conflicts with the requirements of the IPA Act and Public Utilities Act, the ALJ said that such critics, "fail to recognize the underlying requirement for renewable energy in the Plan as well as the other competing interests identified in the IPA Act and PUA: adequacy, reliability, affordability, efficiency, sustainability, as well as low cost."

"In addition, in balancing the cost factor, the statutes provide that it must be 'the lowest total cost over time,'" (emphasis by ALJ), the ALJ added.

The ALJ recommended that the Commission not interject itself into the long-term renewables contract development process, while also stating that the IPA and Procurement Administrator(s) should institute the maximum degree of transparency in the contract development process.

Additional Provisions
The ALJ recommended denying the IPA's proposal to again over-subscribe default service supply needs for July and August by 10%, citing data from Commonwealth Edison that this practice has cost customers $1.6 million in excess costs in the past.  While the ALJ noted occasional losses and wins are expected with hedging, the IPA has not supported continued oversubscription with any analysis, and the ALJ thus recommended denying such over-procurements.

Furthermore, the ALJ recommended that the IPA not be permitted to conduct optional procurements, apart from its regular schedule, when market prices are favorable and the IPA has unsubscribed load.  The ALJ noted that it is unclear how such optional procurements would work in practice, "as it takes months to run a fair and transparent RFP process."  

Additionally, the ALJ noted that the IPA has yet to fully implement all facets of the prior procurement plan, including a lengthy delay in a long-term contract solicitation for renewable energy.  The ALJ was thus hesitant to allow the IPA to take on additional responsibility, such as market-timed procurements.

The ALJ recommended denying carve-out procurements for demand response at ComEd and Ameren separate from the main all-source procurements for standard wholesale products.  While the Act calls for the procurement of demand response, the ALJ was unconvinced that a separate carve-out is mandated, and did not find supporting evidence justifying such a carve-out as beneficial to customers.

"As a practical matter and perhaps most importantly, it also does not appear likely that the IPA could successfully reduce capacity costs by procuring supplemental demand response measures," the ALJ said.

Similarly, the ALJ recommended denying the IPA's proposal to procure energy efficiency resources.

"In addition to the lack of clear language authorizing the procurement of energy efficiency as a resource [in the Act]," the ALJ noted that the IPA has not specified the quantity and term of energy efficiency it intends to seek.

"Setting aside this obstacle for the moment, the Commission observes that obtaining any level of energy efficiency as part of the Plan may result in too much power and electricity being procured given the other procurement efforts described in the Plan.  The IPA also neglects to describe how it would ensure that any energy efficiency procured under the Plan would not overlap or be double counted with energy efficiency acquired under the EEPS programs," the ALJ said.

The ALJ declined to adopt suggestions from competitive suppliers for more frequent procurements or the use of full requirements products.

The ALJ would not modify the backbone of the procurement plan, which is a continued three-year laddering of energy supply procurements under the following schedule:

• 35% of projected energy needs procured two years in advance of the year of delivery
• 35% of projected energy needs procured one year in advance of delivery
• 30% of projected energy needs procured in the year in which power is to be delivered

Email This Story

HOME

Copyright 2010 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

 

 

 

 

 

Energy Choice
                            

Matters