In August 2007, Illinois enacted legislation (Public Act 095-0481) that created the Illinois Power Agency (IPA). The agency’s purpose is to develop electricity procurement plans for investor-owned electric utilities (EUs) supplying over 100,000 Illinois customers to ensure “adequate, reliable, affordable, efficient, and environmentally sustainable electric service at the lowest total cost.” The only EUs that meet these criteria and are therefore subject to the IPA procurement process are Commonwealth Edison (ComEd) and the Ameren Corporation companies (AmerenCILCO, AmerenIPL, and AmerenCIPCO). The IPA plans and administers the competitive procurement processes that result in bilateral agreements between the utilities and wholesale electric suppliers. The procurement plans must include procurement of cost-effective renewable energy resources—per the renewable portfolio standard (RPS) schedule outlined below. Originally, the RPS applied only to electricity sold retail under the bundled, fixed-price tariff for the above mentioned utilities.* However, amendments within Public Acts 095-1027 that were later replaced with 096-0159 extended the scope of the RPS by requiring alternative retail electric suppliers (ARES) and EUs that sell outside their service territories to comply with the RPS starting June 1, 2009. (These entities are hereafter referred to collectively as ARES.) Municipal and cooperative utilities are exempt from the RPS.
Minimum percentage to come from renewable resources:
- 2% by June 1, 2008
- 4% by June 1, 2009
- 5% by June 1, 2010
- 6% by June 1, 2011
- 7% by June 1, 2012
- 8% by June 1, 2013
- 9% by June 1, 2014
- 10% by June 1, 2015 (0.60% solar PV)
- 11.5% by June 1, 2016 (0.69% solar PV)
- 13% by June 1, 2017 (0.78% solar PV)
- 14.5% by June 1, 2018 (0.87% solar PV)
- 16% by June 1, 2019 (0.96% solar PV)
- 17.5% by June 1, 2020 (1.05% solar PV)
- 19% by June 1, 2021 (1.14% solar PV)
- 20.5% by June 1, 2022 (1.23% solar PV)
- 22% by June 1, 2023 (1.32% solar PV)
- 23.5% by June 1, 2024 (1.41% solar PV)
- 25% by June 1, 2025 (1.5% solar PV)
An EU’s renewable obligation is determined by the applicable renewable percentage for a given year and the eligible retail sales from the immediately prior planning year. Thus, a utility's obligation for the compliance period starting June 1, 2008, (2%) is based on eligible sales from June 1, 2006, to May 31, 2007. The utilities conducted their own procurement for the first compliance period (approved by the Illinois Commerce Commission), but the IPA will submit plans for and manage subsequent procurements. The IPA's first procurement plan, for the June 1, 2009, to May 31, 2010, period, is available in
ICC Docket 08-0519.
The renewable obligation for ARES is measured as a percentage of the actual amount of metered electricity (megawatt-hours) supplied by the ARES in the compliance year, as reported for that year to the Commission. ARES must meet at least 50% of their renewable quota through alternative compliance payments (ACPs). The remaining 50% of the obligation may be met with ACP payments, or by procuring renewable energy or renewable energy credits (RECs). They must utilize the PJM Environmental System Generation Attribute Tracking System (PJM-GATS) or the Midwest Renewable Energy Tracking System (M-RETS) to independently verify the quantity and source of renewable energy resources procured.
The money derived from ACPs submitted by ARES is remitted to the IPA's Renewable Energy Resources Fund to be used for the purchase of RECs at a price not to exceed the winning bid prices for like resources under the IPA's procurements for electric utilities. Thus the IPA central procurement model used for bundled sales from electric utilities effectively extends to at least 50% (and possibly more) of the load served by ARES. The ACP rate fluctuates from year to year based on the results of IPA procurement events. For the first compliance year (June 1, 2009, to May 31, 2010) the ACP is $0.645/MWh for ARES operating in Ameren territory and $0.764/MWh for ARES operating in ComEd territory.
For EUs, minimum of 75% of the renewable energy must come from wind power, and the remaining amount (25%) can come from other eligible renewables. For ARES, a minimum of 60% of the renewable energy must come from wind power, and the remaining amounts (40%) can come from other eligible renewables. These resources include solar thermal (both heat and electricity), photovoltaics (PV), dedicated crops grown for energy production, untreated and unadulterated organic waste biomass, trees and tree waste, in-state landfill gas, biodiesel, hydropower that does not involve the construction of new dams or significant expansion of existing dams, and "other such alternative sources of environmentally preferable energy," which may include (among other resources) waste heat from industrial processes. Several means of energy production are specifically excluded from standard eligibility: the incineration of tires; garbage; general household, institutional and commercial waste; industrial or office waste; railroad ties; utility poles; landscape waste other than trees and tree waste; and construction or demolition debris other than untreated and unadulterated waste wood. Starting June 1, 2015, at least 6% of the renewable energy resources used to meet the standard must come from solar PV.
Renewable energy may be procured either through energy bundled with renewable energy credits, or through the purchase of tradable renewable energy credits on their own. Utilities must retire credits that they use for compliance.
Renewable energy procurement is limited to “cost-effective” resources. There are two tests to determine cost-effectiveness. First, the increase in cost to retail customers from the RPS in 2008 cannot exceed 0.5% of the amount paid per kilowatt-hour (kWh) during the year ending May 31, 2007. The cost cap changes each year through 2011, when it is the greater of an additional 0.5% of the amount paid per kWh during the year ending in 2010, or 2% of the amount paid per kWh during the year ending May, 2007. Thereafter, the cost is limited to the greater of 2.015% of the amount per kWh paid in 2007, or the incremental amount paid in 2011. The Illinois Commerce Commission (ICC) is to review the cap in 2011 and report to the General Assembly if it “unduly constrains the procurement of cost-effective renewable energy resources.” The second test of cost-effectiveness (established in the Public Act 095-1027) is that cost of procuring renewable resources must not exceed benchmarks based on market prices for renewable energy resources in the region, where the IPA procurement administrator will determine the benchmarks.
For EUs, through 2011, eligible resources must be located in-state. If there are insufficient cost-effective in-state resources, resources can be procured from adjoining states. If these also fail the cost-effectiveness tests, resources can be procured from other regions of the country. After 2011, equal preference is given to resources within IL and adjoining states. If neither is cost-effective, resources from other regions can be considered eligible.
The Illinois Power Agency Act also contains a requirement that utilities establish annual energy savings goals, through which they must meet 0.2% of energy delivered through cost-effective energy efficiency in 2008, rising to 2% of energy delivered in 2015 and thereafter. In February 2008, the Illinois Commerce Commission (ICC) approved utility implementation plans for these requirements, available in Dockets 07-0539 (Ameren) and 07-0540 (Commonwealth Edison) respectively on the
ICC website.
Background
In 2001, the state passed the
Illinois Resource Development and Energy Security Act, which included a voluntary renewable-energy goal of 5% by 2010 and 15% by 2020. The 2001 act did not include an implementation schedule, compliance rules, credit-trading provisions, or an energy-efficiency portfolio goal. In July 2005, the ICC adopted a
resolution encouraging utilities to commit to a voluntary renewable portfolio goal of 8% by 2013, and an energy efficiency portfolio goal that utilities should reduce load growth by of 25% during 2015-2017.
* According to the IPA June 1, 2009, to May 31, 2010, procurement plan (ICC Docket 08-0519), in June 2008, eligible retail sales comprised roughly 47% of total electricity usage by ComEd customers and 45% of Ameren customers' total electricity usage.
