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ICC Staff Seeks Greater Flexibility For Ameren Default Service Capacity Procurement, To Take Advantage Of Lower Prices

October 10, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

In comments on the Illinois Power Agency's 2018 default service procurement plan, Staff of the Illinois Commerce Commission have recommended granting the IPA additional flexibility to procure more than the targeted amount of capacity at Ameren in a spring procurement event if lower prices would make such additional purchases beneficial

In a change from last year's plan, the IPA proposes, for the 2019‐2020 delivery year, that the IPA procure 50% of Ameren forecasted capacity requirements in bilateral transactions and the remaining balance through the MISO Planning Resource Auction (PRA). Specifically, the IPA proposes to procure 25% of its capacity requirements in bilateral transactions in the Spring of 2018, 25% in the Fall of 2018, and the remaining balance through the MISO Planning Resource Auction. The IPA will defer a decision for capacity at Ameren for the 2020-2021 planning year until next year’s procurement plan

For comparison, in last year's plan, the IPA procured 75% of Ameren forecasted capacity requirements for the equivalent year (2018‐2019) in bilateral transactions, with 25% via the PRA

ICC Staff did not object to the IPA's revised approach to Ameren capacity procurement, nor did Staff object to the 50% level for bilateral transactions, but Staff recommended that the Commission, "grant the IPA additional flexibility when it comes to Ameren Illinois capacity procurements."

"Given the recent price volatility in the MISO PRA prices as well as the prices of the IPA capacity procurements, it would be beneficial to be able to take advantage of lower capacity prices when possible. While Staff agrees that it is reasonable to procure up to 50% of Ameren Illinois’ capacity requirements prior to the 2019 MISO PRA, the Plan should allow flexibility to procure more than 25% of the capacity requirements in the spring 2018 procurement event," Staff said

Staff recommends that the plan allow the Commission to approve a benchmark price for the spring 2018 capacity procurement, and should allow the IPA to procure more than 25% of the required capacity if the received bids are relatively low.

If the Commission adopts Staff’s recommendation, anywhere from zero to 50% of the 2019-2020 Ameren Illinois capacity requirements could be procured in the spring of 2018 and the remainder, if any, (up to 50%) could be procured in the fall 2018 capacity procurement event.

Other than the revisions to Ameren capacity procurements, the IPA's plan generally follows last year's plan with respect to energy and capacity purchases for default service.

The IPA proposes to continue using the risk management and procurement strategy that the IPA has historically utilized: hedging load by procuring on- and off-peak blocks of forward energy in a three-year laddered approach.

The IPA’s hedging strategy for the 2018 Procurement Plan is consistent with the strategy used for the 2017 Plan. The IPA continues to recommend the procurement of standard energy in blocks of 25 MW. The risk management strategy also continues 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, fall hedged to 100% of average load, and the balance of the year hedged to 75% of average load at the time of the spring procurement event.

The IPA also recommends that the Commission approve a fall energy procurement event to bring the hedging level for the balance of the first delivery year (October through May) to the fully hedged level (100% of load).

Consistent with other recent procurement plans, the IPA also recommends hedging 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 Spring 2018 procurement event and the balance in the Fall 2019 procurement event.

In other words, the spring 2018 procurement (combined with prior procurements) would result in all utilities having hedged via block energy purchases the following amount of their forecast load:

• June 2018: 100% peak and off peak

• July-Aug. 2018: 106% peak, 100% off-peak

• Sept. 2018: 100% peak and off peak

• Oct. 2018-May 2019: 75% peak and off-peak

• Upcoming Delivery Year+1: 37.5%

• Upcoming Delivery Year+2: 12.5%

The fall 2018 procurement (combined with prior procurements) would result in all utilities having hedged via block energy purchases the following amount of their forecast load:

• October 2018-May 2019: 100%

• Upcoming Delivery Year+1: 50%

• Upcoming Delivery Year+2: 25%

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