Posts Tagged ‘Illinois Commerce Commission’

Redheaded stepchild: Exelon's Byron nuclear plant

Redheaded stepchild: Exelon’s Byron nuclear plant

Listening to Exelon CEO Chris Crane extol the virtues of the free market and claim that his nuclear plant bailout bill is “market-based” is like listening to heavy metal/punk rock music performed by Pat Boone. The inauthenticity and cognitive dissonance are so fundamental as to cause revulsion at the cellular level.

Exelon introduced its bail-out legislation in the Illinois House of Representatives (HB3293) a few weeks ago. When we say Exelon introduced it, we mean exactly that. The notion that any of the bill’s sponsors in the House could understand the legislation, much less write it, is something only employees of Exelon and its public relations firm could say with a straight face.

The fiction that the Exelon bailout bill provides a “market-based” remedy is embarrassingly unconvincing, but, as Illinois’ long history shows, embarrassment is an emotion unknown to either Exelon or Springfield.

The key to HB3293 is Exelon’s Newspeak definition of “low carbon energy resources.” The Exelon lawyers who drafted HB3293 have cleverly sought to superimpose the imagery of the free market on a mechanism engineered to ensure that Exelon will have a monopolistic stranglehold on the sale of LCE credits. Exelon has tailored the term “low carbon energy resources” like a bespoke suit: it includes its own nuclear plants but excludes virtually all other generation that the average ratepayer might reasonably consider “low carbon.”

Exelon modeled HB3293 after the Illinois renewable portfolio standard. The bill amends the Illinois Power Agency Act by establishing a new “low carbon energy (LCE) credit” portfolio standard.

Beginning January 1, 2016 all electric utilities (such as ComEd, which, like the General Assembly, is one of Exelon’s wholly-owned subsidiaries) must purchase sufficient LCE credits to satisfy the LCE credit standard. The trick, of course, is that the bill authorizes electric utilities to recover all costs of purchasing the LCE credits from ratepayers. Thus, ComEd would once again serve as the tube through which Exelon hoovers up cash from ratepayers’ wallets for the benefit of its corporate treasury. (Headline: “Illinois legislation frees Exelon shareholders from fear of dividend cut.”)

Exelon’s definition of “low carbon” generation stipulates that no low carbon generation resource may have a power purchase agreement longer than 5 years. The effect of this unassuming little statutory quirk is to exclude virtually all wind, and much solar energy from the “low carbon” category. It would also exclude solar energy participating in the IPA’s supplemental procurement, which requires purchase contracts of at least five years.

The quantity of LCE credits that each utility must obtain is set at 70% of annual retail electricity sales. Taking 2012 as a sample year, total retail sales of electricity were approximately 143,540,000 megawatt-hours. http://www.eia.gov/electricity/state/illinois/ . (This figure would need to be adjusted by subtracting sales by electric cooperatives and municipalities that run their own systems, but it’s a serviceable proxy for our purposes.) This means that if HB3293 had been in effect for 2012, utilities would have had to acquire roughly 100,000,000 megawatt-hours of LCE credits. That’s a lot of LCE credits.

Exelon’s bailout bill then provides that the LCE credits must be procured from generating resources that are consistent with the “Minimum Internal Resource Requirements” (sic) for capacity established by the applicable regional transmission organization. HB3293 does not define this capitalized term, and a search of PJM (including the PJM manual on capacity markets) and MISO websites did not yield any defined term to match it. However, the term is likely another way to exclude wind, solar and perhaps other renewables from the LCE credit market because the concept of a minimum internal generation resource requirement applies in the context of assessing reliability across a given territory based on generation within it. Reliability, in turn, depends on dispatchable resources. Wind and solar are generation resources, not dispatch resources. Thus, if a particular wind or solar generator made it past HB3293’s first trench because it had a PPA with a term less than five years, it would still get caught on the barbed wire of Exelon’s “Minimum Internal Resource Requirements” criterion. Drafting a statute with a term that is both capitalized and in quotation marks without defining it may strike one as odd, but it’s not so by Exelon’s standards. Like Humpty Dumpty, when Exelon uses a term, it means exactly what Exelon wants it to mean, neither more nor less.

The first procurement of LCE credits will be under a five-year contract beginning January 1, 2016 to May 31, 2021. Just like Exelon’s Electric Infrastructure Modernization Act of 2011, the Exelon bailout bill gives the Illinois Commerce Commission a ridiculously short time period to review the LCE credit procurement plan: it must either approve the plan or approve it with modifications by November 1, 2015. The ICC has no power to disapprove the plan. Exelon wants to make sure that no one has a realistic opportunity to derail its bailout by asking annoying questions during pesky public hearings.

Although Exelon’s bailout bill will ensure that it can use ratepayer wallets as its own private ATM, it tries to camouflage this by providing that the LCE credit procurements must be “cost effective,” meaning that the incremental costs to consumers may not exceed certain limits (an annual average net increase in total costs per kilowatt-hour of no more than 2.015% of the amount paid by eligible retail customers for the planning year ending May 31, 2009).

Then, in a true Newspeak flourish, the Exelon bailout bill provides that “to ensure benefit to consumers,” winning LCE suppliers (note the plural noun; let’s pretend along with everyone in Springfield that there might be more than one) must commit to reimburse the cost of LCE credits for each planning year that the “forecasted average revenue” of the LCE resource that produced those LCE credits exceeds a set price per megawatt-hour. Note that this limitation applies only to the specific nuclear plant that generated the LCE credits in question. That means that if Exelon as a whole is doing just fine revenue-wise, but the three redheaded stepchildren (Byron, Clinton and Quad Cities) aren’t, ratepayers would still have to pay into Exelon’s corporate treasury. This is single-issue ratemaking writ large; that is, allowing a utility to single out specific cost or revenue components in order to recover them separately from ratepayers, without regard to the utility’s costs or revenues as a whole.

Yep, the Illinois Commerce Commission will hardly need any time to review Exelon’s procurement plan.


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On Thursday, October 10, 2013, we argued ComEd’s motion to dismiss the smart meter class action lawsuit before Judge Mary L. Mikva. The court focused on the issue of whether it had jurisdiction over the plaintiffs’ claim that ComEd damaged consumers in the amount of $182 million by delaying smart meter deployment in violation of a June 2012 ICC order.

ComEd claimed that the ICC had exclusive jurisdiction of the matter. Paul Neilan and co-counsel Stuart Chanen, attorneys for the plaintiff class, argued that the ICC already exercised its jurisdiction when it ordered ComEd to start smart meter installations in September 2012, and that the circuit court now has jurisdiction to award damages caused by ComEd’s violation of the June 2012 order. Plaintiffs’ attorneys stressed that ComEd had requested the ICC to stay enforcement of that order, a request the ICC denied. The plaintiffs therefore urged the Court to retain jurisdiction and move on to the issue of the substantive damage that ComEd had caused through its smart meter delay. Mr. Neilan added that ComEd’s customers can’t recover these damages at the ICC.

Judge Mikva took the case under advisement and stated that she would issue a written ruling prior to a November 6 status.

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rain_storm_by_horrormoveThe Illinois Commerce Commission today held ComEd responsible for damages suffered by some customers due to service interruptions caused by storms that occurred on July 11, 2011. The July 11 storm was one of six major storms that passed through ComEd’s service territory (a/k/a ComEdistan) in June and July 2011, but the ICC did not hold ComEd liable for damages from service interruptions from these other storms.

Under Section 16-125(e) of the Illinois Public Utilities Act, if more than 30,000 electric utility customers are subjected to a continuous power interruption of four hours or more, that utility is responsible for compensating the affected customers for actual, but not consequential, damages suffered as a result of the power interruption. The electric utility is also required to reimburse affected municipalities for the costs of all emergency and contingency expenses incurred as a result of the power interruption. 220 ILCS 5/16-125(e). While there is a carve-out if the service interruption is due to unpreventable storm damage from extreme weather, ComEd still has to maintain a distribution network that can withstand weather events of a type reasonably to be expected in the Upper Midwest.

The ICC’s decision is bigger news than it might seem at first sight, but it has to be viewed through the culture of ComEdistan. 16-125(e) was passed to incentivize ComEd to maintain its distribution system, and it’s been on the books for sixteen years. But until now the law has been an abject failure because ComEd has never paid a nickel to any affected ratepayer despite its historical underinvestment in its system.

During the June and July 2011 outages, hundreds of thousands of ComEd customers were without power for periods ranging from several hours to several days. Shortly after these storms, ComEd filed a petition with the ICC seeking to absolve itself of all liability for damages suffered by customers and municipalities for any of the 2011 storms (Ill. C.C. Docket No. 11-0588). Despite the hundreds of thousands of customers without power during these events, in its petition ComEd argued that no single interruption affected more than 30,000 people. As ComEd reads the statute, the numbers of affected customers cannot be aggregated – and ComEd therefore has no liability under Section 16-125(e) – unless the interruption is caused by the same damage to the same equipment at the same location, and starts and ends at the same time.

ComEdistan has an unmistakable through-the-looking-glass atmosphere. Even a modest vivisection of ComEd’s argument reveals its absurdity.

Assume for example, that 20,000 electric utility customers are affected by a storm in Town A, and that 25,000 are affected by the same storm in the adjacent Town B. Assume further that Town A’s power is restored after five hours and Town B’s after six. One might think that 45,000 customers could be entitled to compensation because they had been subjected to a continuous power interruption of more than four hours. Under ComEd’s interpretation one would be quite wrong: Because these outages began and ended at different times, ComEd argues that the affected customers cannot be aggregated in order to reach the 30,000-customer threshhold that triggers liability under 16-125(e).

Moreover, in ComEd’s system each of Town A and Town B is likely to have several distribution circuits (electric distribution lines that loop in and around neighborhoods to serve various houses, businesses, etc.), so that even if one rejects ComEd’s argument that the interruptions must begin and end simultaneously, in ComEdistan even residents of the same town may not be aggregated if they are on different distribution circuits.

In short, ComEd’s reading of Section 16-125(e) renders the statute meaningless and absurd. In ComEdistan, there is virtually no circumstance in which ComEd would ever be liable to customers and municipalities under this law.

Despite its reliability issues in 2011, in that year ComEd was pushing the initial version of its Smart Grid and rate increase legislation, known then as Senate Bill 1652, which is now law. That law supposedly imposed on ComEd new reliability metrics to be used to determine whether ComEd’s automatic rate increases may go into effect. However, there’s a hole in the law through which an 18-wheeler and two cavalry regiments can plow through side by side with ease: The law allows ComEd to exclude from its reliability metrics every year up to nine “extreme weather event days” such as those seen in June and July. There were six storm systems that passed through ComEdistan in 2011. Had current law been in effect in 2011, not one of the outages suffered by Illinois ratepayers would have impeded ComEd’s ability to increase its rates.

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The Illinois General Assembly overrode Governor Quinn’s veto of Senate Bill 9 last week, and the News-Gazette (East Central Illinois) editorial identifies the critical issues that this action raises for all Illinois ratepayers. The magnitude of the danger posed by SB9 and this override have gone largely unremarked in the media. But Illinois ratepayers will be paying the price for the General Assembly’s kow-tow to ComEd and Ameren for years to come. Read the rest of the editorial by the Illinois News-Gazette here

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