Illinois Commerce Commission Recommends Maintaining RPS Cost Cap

July 1, 2011
Email This Story

The Illinois Commerce Commission reported to the General Assembly that a statutory restriction on how much is spent for renewable energy resources (above and beyond the least-cost portfolio of resources) is appropriate and necessary to protect the best interests of the vast majority of Illinois consumers of electricity.

The existing spending cap in subsection 1-75(c) of the Illinois Power Agency Act is aimed at ensuring retail rates will not rise by more than about 2% of the average customer's total bill due to the renewable compliance procurements undertaken by the utilities. To date, the required purchases of renewable energy resources have not been constrained by the IPA Act's limitation on resulting retail electric price increases. All required purchases have been made without exceeding the statutory spending caps.

"While 2% may seem small in the abstract, when it is applied to an element of the Illinois economy as large and crucial as the electric utility sector, it amounts to over $100 million per year," the ICC said.

Further, the actual amount of money in question is likely to be about twice the above-stated level (i.e., more like $200 million per year), when incorporating the effect on alternative retail electric suppliers.

While the statute's spending limitation only applies directly to the utilities' eligible retail customers, it also applies indirectly to the customers of alternative retail electric suppliers, who are subject to a parallel renewable portfolio standard, with alternative compliance payment requirements that are dependent upon the amounts spent by the utilities, the ICC said.

"With such sums at stake, it is the Commission's opinion that increases in (or the abolition of) the renewable spending limit should be avoided, lest the resulting increase in subsidies result in reductions both in consumer spending and in business investment (especially by energy-intensive industries), negatively affecting economic development in the State," the ICC said.

The ICC did recommended several refinements to subsection 1-75(c) as it pertains to the cost cap. In particular, the Commission recommended that any procurement plan with provisions for procurement events that would contractually obligate a utility to purchase less than 100% of the required quantity of renewable energy resources for one or more future planning years be required to describe: (A) how the annual spending limitation will be distributed between procurement events; and (B) how the statute's requirements concerning both the type and location of renewable energy resources will be distributed between procurement events.

Additionally, the Commission recommended a slight rewording of the statute to make it clearer that the spending limitation applies to expected expenditures at the time that contracts are entered into, not necessarily to actual expenditures. "Without these modifications, it is more difficult for the Commission to approve long-term renewable contracts within procurement plans," the ICC said.

The ICC also reported to lawmakers its judgment that, in the early years of the renewable compliance purchases, the locational preferences for Illinois-based resources, "may have enabled a small handful of bidders to exercise market power."

"That is, some bidders were able to charge more than they would have been able to had there been more competitors," the ICC said.

Since the third year, however, as the number of competitors and the amount of renewable generating capacity has continuously expanded, actual expenditures have been well under the spending limits, the ICC said.

The Commission expects that renewable energy resource capacity will continue to grow and that the primary RPS requirements will continue to be satisfied without increasing the spending limits of subsection 1-75(c). This conclusion is based on: (A) increases in renewable energy resource capacity; (B) expected increases in fossil fuel prices; (C) expected maintenance of federal renewable energy incentives; and (D) possible strengthening of greenhouse gas reduction policies.

Email This Story

HOME

Copyright 2010-11 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

 

 

 

 

 

Energy Choice
                            

Matters