Default Service Procurement Agency Seeks Feedback On Potential Changes In Light Of "Extreme Market Volatility" -- EnergyChoiceMatters.com

Default Service Procurement Agency Seeks Feedback On Potential Changes In Light Of "Extreme Market Volatility"

Seeks Feedback On Creation Of Single-State RTO, Or Migrating All Of The State's Utilities To Same RTO

June 27, 2022

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The Illinois Power Agency has issued a request for stakeholder feedback in advance of creation of its next draft electricity default service procurement plan, "in light of recent extreme energy market volatility that has had an impact on the results of the Agency’s procurement and the resulting prices available to eligible retail customers."

Among other things, the IPA is seeking feedback on the identification of any other products, other than its current block energy procurements, that would, "help mitigate the impacts of high and volatile electricity prices."

The IPA is also seeking feedback on changes in hedging and procurement frequency and timing.

Furthermore, noting that the Midcontinent ISO has a mix of vertically integrated utilities and competitive retail markets, the IPA asks whether having Ameren Illinois join PJM, or creating a single-state Illinois RTO (with ComEd) would provide benefits to the competitive market. Several questions seek feedback concerning "volatile capacity prices" in MISO

Specifically, the IPA is soliciting comments regarding its procurement process and products based on the following primary questions:

1. What additional products beyond the block energy products that are currently procured should the IPA consider for inclusion in the procurement plans that would help mitigate the impacts of high and volatile electricity prices on eligible retail customers which would meet the product definitions set by statutory requirements and the ICC?
2. Should the IPA establish a market analysis process outside of the annual electricity procurement plan that would formally review market conditions in order to identify potential challenges that changing market conditions could pose to the procurement process?
3. How will current market conditions impact the near- and longer-term eligible retail customer switching patterns?
4. Given the mix of competitive wholesale markets and traditional regulated markets in MISO that creates disconnects with the Illinois market structure, would having Ameren Illinois and the Illinois portions of MidAmerican either join PJM, or join ComEd in the establishment of a single state RTO for Illinois be beneficial to serving eligible retail customers, provide benefits to the competitive market, and/or provide better options for resource adequacy? While the IPA cannot make such a change through its procurement plans, consideration of these options could help inform future policy decisions for the State.
5. What changes should the IPA consider making to the energy hedging strategy that would be consistent with the Illinois Power Agency Act, Public Utilities Act, and relevant orders issued by the ICC which would improve the ability to deal with extremely volatile energy prices?
6. Should the frequency and timing of energy procurements be modified?
7. Should the IPA consider procuring energy in block sizes other than 25 MW or in different sized blocks within the same procurement?
8. Is it reasonable to consider modifications to the hedging strategy, if the recent high and volatile energy prices may be a short-lived phenomenon?
9. Should the current approach to summer hedging percentage targets and target procurement volumes for the months of June, July and August be changed to increase or decrease these targets and to reduce the volumes procured in the Spring procurement event that is held immediately prior to these delivery months?
10. What are the implications for the IPA’s hedging strategy for ComEd eligible retail customers given that the procurement of CMCs [Carbon Mitigation Credit] includes the consumer protection methodology [set forth in statute and ICC order]?
11. Do CMCs represent a viable hedging approach over the five-year horizon of the CMC program that can be matched with the energy hedging strategy?
12. Should the hedging benefits of CMCs, if any, be considered in the IPA’s hedging strategy for energy?
13. Will timing differences in the adjustment of the level of payments or credits for CMCs versus the month-to-month changes in the Purchased Electricity Adjustment that are driven in part by the results of the hedging for energy conducted by the IPA, negate any of these benefits?
14. Are there changes to the capacity procurement approach for Ameren Illinois eligible retail customers that could improve the ability to mitigate volatile capacity prices?
15. With the PRA clearing at the cost of new entry for Zone 4 due to a regional shortage of capacity for Zones 1-7, what changes should the IPA make to the current hedging strategy in order to protect Illinois customers from the volatility of the PRA?
16. Should the IPA consider procuring up to 100 percent of the capacity needs of Ameren Illinois eligible retail customers through the bilateral capacity procurements (rather than 50%), and treat the MISO PRA only as the source of last resort for capacity that is not obtained through the IPA procurements?
17. While the IPA does not exert any control over the design of MISO’s Resource Adequacy Construct or the structure of the PRA, the Agency is interested in hearing comments from stakeholders regarding capacity market issues that would be important from the IPA’s perspective in terms of the procurement and hedging of capacity products including:

a. Are there structural changes that could be made to the PRA to lower the volatility in capacity prices?
b. Are there any structural deficiencies in the current construct of the PRA that go beyond volatility in capacity prices?
c. What alternatives to the PRA, if any, should the IPA encourage MISO to consider?

18. If FERC approves the proposed Seasonal Resource Adequacy Construct, what changes should the IPA make to the current bilateral procurement approach to accommodate that change?

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