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Illinois Power Agency Files Default Service Procurement Plan for Period Beginning 2015-16

September 30, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Illinois Power Agency has filed its default service procurement plan for the five-year period beginning with the 2015-16 delivery year.

The plan continues to eschew full requirements load following products in favor of block energy purchases.

Similar to prior plans, the IPA continues to recommend a hedging strategy in which 100% of energy requirements (with some variability by month) are procured just prior to the start of the delivery year, 50% of requirements are a year in advance, and 25% of requirements are procured two years in advance.

Following the new procedure started in 2014, the IPA recommends two procurements per year, in April and September.

The IPA also recommends procurement of energy in blocks of 25 MW. The risk management strategy will continue to bifurcate the first delivery year into periods with different hedging levels -- with June hedged at 100% of average load, July and August hedged to 106% of average on-peak load and 100% of average off-peak load, September and October hedged to 100% of average load and the balance of the year hedged to 75% of average load at the time of the April procurement event.

The IPA recommends that the Commission pre-approve a September procurement event, which would bring the hedging level for the balance of the first delivery year (November through May) to the fully hedged level (100% of load).

For the hedges of 50% of the expected load for the second delivery year and 25% of the expected load for the third delivery year, the IPA recommends the procurement of half of these volumes in the April 2015 procurement event and the balance in the September 2015 procurement event

The IPA continues to recommend that capacity, ancillary services, load balancing services, and transmission services be purchased, as they are now, by Ameren Illinois from the MISO marketplace and by ComEd from PJM’s.

Additionally, the IPA recommends purchasing capacity to satisfy a portion of the capacity requirement for Ameren Illinois for the second delivery year. The IPA recommends a September 2015 capacity procurement event for at least 50% of the forecast requirement for the second delivery year and potentially, subject to the consensus among the IPA, ICC Staff, and Procurement Monitor, at least 25% of the forecast requirement for the third delivery year.

The Agency also recommends the procurement of energy efficiency as a supply resource for delivery starting in June 2016. This proposed procurement is intended to reduce the overall cost of procuring supply for eligible retail customers, the IPA said.

The IPA sought approval for a spring 2015 procurement of SRECs for the prompt delivery year to allow the utilities to meet their photovoltaic RPS requirement. The IPA also sought approval for a September 2015 procurement of distributed generation RECs using already collected hourly ACP funds.

Regarding full requirements products, the IPA said that, "Based on the comments received and the IPA’s knowledge of the Illinois retail market, the IPA feels that there is no clear evidence that, as a class, retail customers who chose to take bundled service from the utilities desire to pay a premium to mitigate the residual price fluctuations associated with the current [block] procurement strategy."

"Without strong majorities seeking [price] protection [from full requirements service], the IPA does not believe these surveys provide support for increased costs to ensure some price protection via full requirements procurement. Additionally, the IPA is not aware of any level of customer dissatisfaction in the ComEd service territory with the current and proposed IPA procurement approach that results in having rates that can fluctuate slightly month-to-month due to the Purchased Electricity Adjustment. (The IPA presumes that the fairly consistent and sizable PEA credits in the Ameren Illinois service territory are even less likely to spur customer complaints because they result in savings for eligible retail customers.) While the lack of consumer outcry does not in itself validate the IPA’s procurement approach, it does not support a policy goal to provide full price insurance at a cost premium either," the IPA said.

"The IPA acknowledges that the current procurement strategy can lead to fluctuations in the PEA. The IPA expects the volatility of the PEAs for ComEd and Ameren Illinois to decline as a result of various improvements to the IPA procurement design (and for ComEd customers, ComEd’s improvement to its PEA). The mere existence of the PEA (and its month to month fluctuation) makes it slightly more difficult to compare the utility rate to an offer from an ARES. But given the premia [associated with full requirements contracts], the IPA does not believe that adding costs to the price paid by eligible retail customers to ease comparison shopping by customers who have left utility service is an appropriate policy goal for it to pursue under its mandates in the IPA Act," the IPA said.

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