Illinois Draft Procurement Order Would Decline to Address Authority to Order Retail Suppliers to Purchase from Clean Coal Plant

The Illinois Commerce Commission has issued a proposed order regarding the Illinois Power Agency's default service procurement plan which would defer ruling on whether the ICC, through the procurement plan, can compel alternative retail electric suppliers to purchase the output from a clean coal plant (Docket 12-0544).

As first reported by Matters, the Illinois Power Agency (IPA) had proposed requiring the utilities and alternative retail electric suppliers to enter into "sourcing agreements" with FutureGen 2.0, a clean-coal facility under development. The plant, however, is not a legislative-selected plant that would trigger the statutory obligation of retail suppliers to purchase output from the plant.

The proposed order would not approve the proposed FutureGen procurement in the instant proceeding for a variety of reasons, and given this denial, the draft would not see fit to rule on, had the procurement been approved, whether alternative retail electric suppliers could have been compelled to enter the sourcing agreements.

"Since the Commission is not approving the proposed FutureGen agreement in this proceeding, the Commission will not make any determinations on the issues noted immediately above [including the ability to compel ARES purchases from FutureGen]. The Commission does observe that the question of whether ARES can be required to sign a sourcing agreement for a retrofitted clean coal facility is a complicated one," the draft states.

The draft order would deny the procurement from FutureGen because such energy has not been shown to meet the statutory standard that the procurement plan, "ensure adequate, reliable, affordable, efficient, and environmentally sustainable electric service at the lowest total cost over time, taking into account any benefits of price stability."

"While the Commission is not suggesting that a project must satisfy all of those objectives or any particular one, the Commission does believe the project should contribute to such objectives on the whole," the draft states.

The draft also notes that the IPA's plan contemplates that the sourcing agreement be approved "once agreed upon by all affected parties," but that not all affected parties have agreed to the sourcing agreement. "To the contrary, there are still numerous unresolved issues -- many of them involving fundamental terms such as application of benchmarks, annual rate cap test, calculation and review of costs, changes in contract price, length of contract, and mandatory applicability to utilities and ARES -- identified and addressed by a large number and variety of parties," the draft notes.

The draft also addresses other procurement issues for default service at ComEd and Ameren. Due to previously procured energy, plus the migration of large amounts of default service load to competitive supply, the existing default supply portfolio exceeds forecast default service volumes in the near-term, and the draft would not require any procurements in 2013 for default service energy at ComEd or Ameren.

At ComEd, the current portfolio can meet forecast default service energy load through the 2013/2014 delivery year, with ComEd projected to be short starting in 2014/2015. At Ameren, the current portfolio is not forecast to be consistently short of supplies until the 2015/2016 delivery year.

While the current excess of supply makes the issue moot in the near term, the draft would, without making a formal finding, call the IPA's newly proposed hedging strategy reasonable. Under this hedging plan, for energy supply, fixed price hedge quantities would be procured for 75% of expected volumes for the current planning year; 50% for two years out, and 25% for three years out. This contrasts to the previously used hedging strategy of 100%/70%/30%.

The draft would meet capacity requirements for both ComEd and Ameren through the respective centralized capacity auction in use in each utility's RTO. This is a departure from the prior bilateral capacity procurements at Ameren.

The draft notes that ComEd and Ameren have agreed to release their prices-to-compare following the March 2013 update to their load forecast, in response to requests from retail suppliers for the information to be published in a more timely manner.

The draft finds that due to increased migration to competitive supply, ComEd should be authorized to curtail certain previously entered long-term renewable contracts. Ameren has not reached the point where such curtailment is required immediately, the draft finds.

With regard to the magnitude of ComEd's curtailment of existing long-term renewable contracts, the draft finds that it should be based upon the March 2013 load forecast update.