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Illinois Commerce Commission "Not Inclined" to Consider Full Requirements Contracts Absent Quantification of Benefits
The Illinois Commerce Commission rejected the use of full requirements contracts in the 2015 Illinois Power Agency procurement plan for default service, and said that it was "not inclined" to consider the use of full requirements contracts in the future absent a quantification of the benefits of such contracts.
"The information relied upon by ICEA, RESA, and Exelon as support for the ICEA proposal [for use of full requirements contracts] is the exact information relied upon in Docket No. 13-0546 (last year's IPA procurement review)," the ICC said.
Meanwhile, the ICC said that the IPA's opposition to the use of full requirements contracts, "is further bolstered by the additional information it provided in this proceeding."
"Having considered all arguments and information presented by the parties, the Commission concludes that ICEA proposal to include a FPFR [fixed price full requirements] procurement in the Plan is not supported by the record and it is rejected," the ICC said.
"While the Commission was hopeful that its directive in Docket No. 13-0546 would allow the parties adequate time and information to more fully consider this issue in the current proceeding, the Commission is somewhat disappointed. The Commission notes there was limited useful information regarding the benefits of a FPFR procurement. The IPA suggests this may speak to the challenges inherent in attaining such information. While the Commission recognizes that it cannot reach a truly final disposition of this issue, the Commission wishes to make clear that it is not inclined to consider future years' full requirements procurement proposals absent new arguments supported by an analysis quantifying benefits to eligible retail customers. Nevertheless, the Commission appreciates the input of the parties," the ICC said.
The ICC noted that the estimated cost to implement a FPFR procurement is estimated to be between $595,000 and $637,500 for ComEd and as much as $850,000 for both ComEd and Ameren. "While most parties agree that the benefit of procuring a FPFR product would be reduced price risk for eligible retail customers, no party has attempted to quantify that benefit," the ICC said.
The ICC approved the IPA's continued reliance on block energy purchases, and 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 will conduct two procurements per year, in April and September.
The IPA will 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 ICC approved 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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December 22, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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