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Illinois ALJ Questions If Information on Benefits of Full Requirements Default Service Contracts Is Attainable

December 1, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

A proposed order from an Illinois ALJ would reject the use of full requirements contracts as part of the Illinois Power Agency's default service procurements (Docket 14-0588).

The ALJ bemoans the lack of evidence regarding the impacts from a transition from block products to full requirements contracts, given the explicit direction from the ICC in prior procurement proceedings to develop such evidence.

"There was essentially no useful information regarding the benefits of a FPFR [full requirements] procurement. The Commission is left wondering if such information is attainable. While the Commission was hopeful it might be able to reach a final disposition of this issue in this proceeding, the Commission is no longer optimistic that will ever be possible," the proposed order states.

The proposed order would generally adopt the procurement plan as proposed.

This includes 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 procured a year in advance, and 25% of requirements are procured two years in advance.

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

The IPA would procure 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.

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 draft order recommends the procurement of half of these volumes in the April 2015 procurement event and the balance in the September 2015 procurement event

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