Illinois

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 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 Act 095-1027 that were later replaced with Public Act 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. HB 1865, enacted in August 2011, allows multi-jurisdictional utilities with less than 100,000 Illinois customers to request a procurement plan from the IPA. Such utilities will be subject to the renewable portfolio standard (RPS) requirements.

The required percentages of each category and the total renewables percentage required (the overall standard) are listed in the tables below. The term EY refers to compliance period or “energy year” for the standard, which runs from June - May and is defined by the year in which an energy year ends.

Table 1: RPS schedule for EUs**

Table 2: RPS schedule for ARES

Per the statute, an EU’s renewable obligation "shall be measured as a percentage of the actual amount of electricity (megawatt-hours) supplied by the electric utility to eligible retail customers in the planning year ending immediately prior to the procurement." As an example of how this has been interpreted in practice,  a utility's obligation for the compliance period starting June 1, 2008, (2%) was 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 submits 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 IPA's procurement plan for June 1, 2010 to May 31, 2015 is available in ICC Docket 09-0373 (see the Order issued December 28, 2009).*** The 2013 draft procurement plan, covering EY 2014-EY 2018, is available on the program web site above.

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 ICC has dedicated a web page to the Renewable Portfolio Standards For ARES.

The money derived from ACPs submitted by ARES is remitted directly to ICC. The ICC forwards that money 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. The estimated ACP rate for 2010-2011 is $0.211/MWh for ARES operating in Ameren territory and $0.256/MWh for ARES operating in ComEd territory. Additional information on the ACP rate is found on the ICC web site.

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 (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. HB 1458 added anaerobic digestion to the list of eligible resources, effective August 22, 2011. 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. For EUs, the solar requirement begins EY 2013 and ramps up to 6% of the standard by EY 2016, as summarized in the table. EUs must meet interim solar requirement percentages, but ARES are not subject to this requirement. Lastly, SB 1652 implemented a distributed generation requirement for EUs beginning in EY 2014. The requirement increases to 1% by EY 2016 and thereafter. To the extent possible, at least half of the resources procured from renewable energy generation must come from systems less than 25 kW in capacity.

In order for a system to qualify under the distributed generation requirement, systems must be 2 MW or less and powered by wind, solar thermal, PV, biodiesel, biomass, tree waste, or hydropower. The systems must also be interconnected on the customer side of the electric meter at the distribution system level of an EU, an ARES, a municipal utility, or a rural electric cooperative. The IPA will contract with third-party aggregators that will purchase the resources from individual distributed generators through contracts of at least 5 years and in groups of no less than 1 MW of capacity. Resources that are counted toward the distributed generation requirement may also count toward the wind and solar requirements.

Renewable energy may be procured either through energy bundled with RECs, or through the purchase of tradable RECs on their own. However, the IPA procurements for the distributed generation requirement will involve only RECs and not the associated energy. 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 IPA has contracted two "Procurement Administrators" that support procurement of electricity supply and renewable energy, and these administrators maintain web sites for ComEd and Ameren with additional information about requests for proposals. Compliance reports are due by September 1 to the ICC.

The Illinois Power Agency Act also requires utilities to establish annual energy-savings goals, through which utilities 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 ICC approved utility implementation plans for these requirements, available in Dockets 07-0539 (Ameren) and 07-0540 (ComEd).

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 June 2009 - May 2010 procurement plan (ICC Docket 08-0519), eligible retail sales comprised roughly 47% of total electricity usage by ComEd customers and 45% of Ameren customers' total electricity usage in June 2008.

**With regard to distributed generation requirements, the table below presents one possible interpretation of the language in SB 1652. An alternative interpretation could be that each of the individual resource tiers (solar, wind, and other renewables) are required to have a 1% distributed generation component.

*** The June 2010 - May 2015 procurement plan includes provisions for long-term contracts for 1,400,000 MWh per year (ComEd) and 600,000 MWh per year (Ameren), which represent approximately 3.5% of each utility's eligible retail load.