Illinois Power Agency fights through opposition on FutureGen

The Illinois Power Agency is running into opposition at the Illinois Commerce Commission over a power procurement plan filed Sept. 28 that contemplates it getting other parties to buy power from the FutureGen 2.0 coal plant for re-sale to Illinois ratepayers.

On Sept. 28, IPA filed its Procurement Plan for the five-year procurement planning period from June 2013 through May 2018. Toward the end of that period, FutureGen 2.0 is scheduled to come on-line. The commission has set a Dec. 27, 2012, deadline to act on the IPA petition.

As an example of the opposition that has turned up, the Illinois Competitive Energy Association (ICEA) and Illinois Industrial Energy Consumers (IIEC) said in an Oct. 22 brief that the commission may have the authority under state law to compel Alternative Retail Electric Suppliers (ARES) to enter into a sourcing agreement with the original version of the PowerGen project, which the U.S. Department of Energy dropped support for years ago, but may not have the authority to do so for the current version of the project. The new version of the project is at a different location than the original one and uses a different clean coal technology.

Ameren Illinois noted in an Oct. 22 filing that IPA has during this case responded to an alternative proposal presented by the staff of the commission, which would allow FutureGen to contract with only Ameren Illinois and Commonwealth Edison, and then each utility would recover costs on a pro-rata basis from retail suppliers in its territory. “Ameren Illinois disagrees with the alternative proposal of Staff and the IPA’s conditional support,” the utility added. “The proposal is not contemplated under the statute which states that each utility and ARES would purchase a pro-rata quantity equal to its retail supply divided by the total retail supply. Nowhere in the statute is it articulated that Ameren Illinois and ComEd would purchase the entirety of a clean coal facility and then recover costs from delivery service rates. The proposal is clearly inconsistent with the statute, and should therefore be rejected by the Commission.”

The IPA is correct that an additional administrative burden would be placed on the utilities, Ameren Illinois added. “What the Staff and the IPA has not offered, in any meaningful detail, is the nature and extent of this burden and the tariff, rate-making and rate design mechanisms by which the utility would recover the costs from delivery customers are not specified,” it said. “In addition, it is unclear how any amounts to be collected would be treated. Would the amounts to be collected be treated as an accounting reserve or debt? And how would the Commission view these collections for ratemaking purposes? Would there be a reconciliation process to verify that the amounts collected are accurate? Are there billing system enhancements required and at what cost? Frankly, the notion that the utilities become a collection agent is unfair, not clearly defined, and a detriment to the utilities on several fronts. It therefore should be firmly rejected by the Commission.”

ICC staff says the commission has the authority in this matter

Commission staff said in its own Oct. 22 brief about the current situation: “FutureGen argues that since the IPA, pursuant to its statutory mandate, has acted to approve the sourcing agreement, the Commission should defer to the IPA on the exercise of that discretion by the IPA in interpreting the Illinois Power Agency Act (‘IPA Act’). While Staff concurs that a reviewing court should defer to an administrative agency regarding the interpretation of a statute the agency is charged with enforcing, the issue here is which agency is charged with enforcement of the statute in question, which in this case is Section 16-111.5 of the Public Utilities Act (‘PUA’). The Commission is that agency; it is ultimately bound by Section 16-111.5 of PUA, and is charged by statute to be the arbiter of the Procurement Plan and the energy procurement process in this state. Moreover, the Commission certainly has significant expertise in ‘complicated energy procurement issues,’ as FutureGen calls them. Staff recognizes that the Commission is presented, for the first time in a procurement proceeding, with the duty to reconcile several public policies (as embodied in statute) that exist in a state of significant tension. However, that role is exclusively the Commission’s, since approval of the Plan is within the Commission’s purview alone.”

The only new argument made by the ARES parties on the issue of whether they must sign a sourcing agreement with FutureGen 2.0 is an argument raised jointly by ICEA and IIEC, commission staff added. “ICEA/IIEC argue that the Commission has no authority to require ARES to enter into sourcing agreements with FutureGen,” staff noted. “Further, even if the Commission determines it does have authority, ICEA/IIEC contend it should ‘decline to exercise this discretionary authority based on public policy grounds.’ Specifically, ICEA/IIEC assert that ARES should be free to contract with power producers of their choosing in order to promote a competitive electric market which is ultimately best for consumers. ICEA/IIEC state that they ‘cannot envision any structure under which private entities can legally be mandated to purchase wholesale electricity from a specified in-state generator.’ This requirement, ICEA/IIEC claims, violates the Interstate Commerce Clause of the US Constitution as well as the dormant Commerce Clause because Section 16-111.5 is facially discriminatory to the extent it requires ARES to enter into sourcing agreements with an in-state facility.”

ComEd said in its own Oct. 22 brief about the commission staff proposal that it buy power from FutureGen 2.0: “Section 16-111.5 of the PUA authorizes utilities to procure power pursuant to a procurement plan only for its ‘eligible retail customers.’ The IPA Act authorizes the IPA to develop that procurement plan for the utilities, and in support of this authorization provides for the establishment of a Planning and Procurement Bureau within the IPA whose responsibilities include the development of the procurement plan for ‘the eligible retail customers of electric utilities.’ Similarly, the IPA Act provides for the procurement of renewable energy resources and clean coal electricity, in each instance ‘to serve the load of eligible retail customers.’ There is simply no authorization in either the IPA Act or Section 16-111.5 of the PUA for either a utility or the IPA on behalf of a utility to procure energy for any customer group other than eligible retail customers. Since there is no support or authorization for Staff’s alternate proposal, it should be rejected.”

IPA supports commission staff idea about power purchasing

IPA said in an Oct. 22 brief that it continues to support the commission staff proposal. “First, the IPA would support Staff’s proposal with the clarification that ComEd and Ameren will have the ability to fully recover their reasonable and prudent administrative costs, or any other reasonable and prudently-incurred costs,” the agency said. “When the IPA attempted to develop a similar mechanism in discussions with parties before the docket was initiated, it envisioned that Rider PE would be the source of recovery. However, the IPA does not oppose use of a new tariff, rider, or other mechanism as appropriate to effectuate Staff’s alternative proposal if adopted by the Commission. The IPA also notes [Retail Energy Supply Association’s] apparent support for Staff’s alternative proposal.”

IPA added: “Second, Staff’s proposal is not inconsistent with the PUA, and recognizes the need to spread the costs of the procurement of energy from FutureGen equally across all retail customers in light of the increasingly competitive market.”

FutureGen says act fast, or lose the project

The FutureGen Industrial Alliance, made up of utilities and coal companies backing the FutureGen project, said in an Oct. 22 brief that the IPA’s proposal must be approved quickly by the commission or there is a risk of losing $1bn in federal project funding, putting thousands of potential jobs and the entire project at risk. The alliance responded to the various critics, saying that the commission does have the authority under state statute to order both ARES and the utilities to take power from the project.

FutureGen 2.0 consists of the proposed repowering of one unit at the Meredosia power plant of Ameren Energy Resources, which is located in Morgan County. FutureGen 2.0 is to be developed as 166-MWe (gross) of near-zero emissions coal-fueled generation, with a targeted commercial operation date in 2017, and a 30-year life. It is anticipated to operate as a baseload plant to be dispatched by the Midwest ISO in the coal stack of the dispatch order.

FutureGen 2.0, supported by the U.S. Department of Energy, is designed to validate the cost and performance of commercial-scale, near zero emissions oxy-combustion coal-fueled power generation with carbon capture and sequestration. The plant would receive $1bn in federal stimulus funds and additional state-level grant funding.

Ameren Illinois and Ameren Energy Resources are units of Ameren (NYSE: AEE). ComEd is part of Exelon (NYSE: EXC).

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.