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Executive Director Energy Council
217-522-5512 ext. 234
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September 4, 2020
Good afternoon! I hope everyone is doing well, and able to truly enjoy the long weekend. It's been a very busy week, with three meetings of the Governor's Energy Working Group, that included a great deal of interesting discussion, as well as plenty of other general developments that are detailed below. If you have any questions at all, please don't hesitate to reach out to me at amessina@ilchamber.org.
I've also included some attachments with this newsletter, one that may be new to you and other documents - given the continued reference to them in this week's newsletter - that were included last week. The new document, a calendar of the remaining meetings with the topics to be covered, was disseminated by the Governor's Office on August 27, 2020. As you can see, the participants will be very busy through the middle of October! I have again included the Governor's Eight Principles for a Clean & Renewable Illinois Economy, which was released on August 21, 2020, and all of the handouts provided to participants thus far.
On to the newsletter!
Resumption of the Senate Energy Working Group
On Thursday, September 2, 2020, the Senate announced its intention to stay heavily engaged in energy discussions. In an email disseminated to stakeholders yesterday, the Senate Energy Working Group scheduled three meetings next week to drill down into issues regarding formula rates. The meetings are "private," which I take to mean they are invitation only, and will be held via Zoom. Before the meetings begin, the Working Group has asked invitees for a summary of the invited participants' position on formula rates, and to respond to several of the Governor's objectives taken from the Eight Principles, including : (1) Sunset formula rates immediately; (2) Authorize the ICC to begin a process on Performance Incentive Mechanisms to ensure that utilities' rates match their performance; (3) Require a third-party, independent audit of utility infrastructure expenditures; (4) Implement an integrated distribution planning (IDP) requirement through the ICC; and (5) Require reporting on grid-related innovation. I have responded that the Chamber will be participating in these meetings, and asked for some additional information on process. I will share this information with the Council membership once I get a response.
Governor's Energy Working Group
This week, the Administration continued its Energy Working Group meetings, with virtual meetings held on Tuesday, Wednesday, and Thursday, each from 2:00 - 3:30. Each meeting had 100 or more participants. As you can see from the calendar mentioned above, and linked below, the three meetings this week were scheduled to focus on the Governor's first energy principle, Utility Company Transparency & Ethics, and to begin discussing his second principle, Expand Consumer Affordability Protections. For ease of reference, I included a link to the Eight Principles below.
As you likely recall, nearly the entirety of last Thursday's meeting focused on formula rates. Before Tuesday's meeting could move on to item #2 contained in the first principle, recovery of charitable contributions, several legislators wanted to go back for further discussion on formula rates. There was an extensive back and forth between the administration and legislators, sometimes teetering on contentious, about the need for more elaborate discussion on formula rates. This additional discussion didn't happen, which likely led in part to the scheduling of the Senate meetings referenced above. Following that exchange, the stakeholders spent the next hour on charitable contributions. The Governor's position is clearly articulated in the attached "Principles" document, but Deputy Governor Mitchell further questioned the "charitable" nature of contributions that are charged back to ratepayers, and also expressed doubt that ICC staff time should be spent delving into which contributions are appropriately included in the rate base, and which are not. Utility representatives did not suggest that implementing this recommendation would eliminate or hamper charitable giving, but did note it would likely be a consideration. The Governor's Office requested more information from the utilities regarding what contributions are rate-based and which are not, and other participants suggested that we should move very carefully on this item as it might result in some unintended, damaging consequences.
The working group then moved on to item #3, regarding the disclosure of revenues and expenses related to Zero Emission Credits. Again, the Administration's position is well laid out in the "Principles" document, and the Deputy Governor's introduction to this item again focused on questioning the need for this "subsidy," and indicating the need for a proper, independent audit to justify such a payment from ratepayers. This led to a spirited exchange among a number of the participants questioning the effectiveness of financial disclosures to the ICC, whether this policy would lead to the elimination of ZECs and the closure of certain nuclear plants, and both support and criticism over the 3d party audit concept.
The pace of Wednesday's meeting was a little more brisk than previous meetings, allowing for a bit more progress to be made through the Governor's principles. After Deputy Governor Mitchell provided a recap of the last several meetings, including a request for parties to submit ideas on how formula rates could be tweaked to address some of the earlier stated concerns, the group moved through item #4 (communications with regulators), item #5 (spending related to specified funds), item #6 (tying rates to performance incentive mechanisms), and item #10 (integrated distribution planning) of the first principle. The discussion began with a presentation from Exelon's newly hired Executive Vice President of Compliance and Audit walking the participants through the review he conducted of internal policies related to legislator interaction and compliance with lobbying and ethics rules, and started to articulate some concerns voiced by some on the hiring of an independent auditor. A representative of the Environmental Defense Fund then walked through the Clean Jobs Coalition ethics handout, attached below, focusing on pages 2 and 3 of that document, and suggesting that the ICC should hire staff to be embedded within each utility to monitor compliance and to review hiring, contracting, and lobbying efforts. There was a very detailed discussion on performance based metrics - including what you measure, what are the targets, and how do you attach utility compensation to those targets - and proponents of this policy argued that it was necessary to enable utility compensation to be better aligned with state goals. Doug Scott referenced the Great Plains Institute's work in Minnesota as a example of how this could work in practice. There seemed to be varying degrees of interest and/or support in performance incentive mechanisms and integrated distribution planning, but there was also a clear desire from many to get into the implementation details, and how these policies might affect the timely and fair recovery of investments in infrastructure, before committing anything more than mere interest.
Finally, this week's third meeting, on Thursday, wrapped up the remaining items within the first principle and moved on to the Governor's second principle, Expand Consumer Affordability Protections. The first half four moved through item #8 (demand response), item #9 (expanded ethics filings for legislators and lobbyists), item #11 (cybersecurity), and item #12 (grid-related innovation). These discussions were relatively unsurprising, but with regards to cybersecurity, Deputy Governor Mitchell did note that this was less of a fully formed concept, but more of a placeholder for stakeholders to provide thoughts on how cybersecurity efforts could be bolstered.
Moving to the second principle, Deputy Governor Mitchell noted that protecting ratepayers that are the most vulnerable is at the top of the Governor's mind. Dave Kolata, on behalf of the Clean Jobs Coalition, spoke in support of all of the policies within this principle, but also indicated that they are looking at whether it was possible to include or create a new, discounted electricity rate for low income ratepayers, to further protect the working poor. The subsequent discussions generally tracked the seven items contained within the "Principles" document under the second principle, but there as a lot of discussion about how the PIPP program could be enhanced, what some of the hurdles are to expanding the program effectively, and how some of these proposed changes will ultimately be funded by shifting the burden on to other customer classes. Generally, the discussion was a bit short on details concerning where this additional funding would come from or how much funding was necessary, but the administration and other advocates were uniform in their desire to do more.
In general, while these three meetings moved a bit faster than last Thursday's meeting on formula rates, they still crawled through the Governor's Principles at a fairly slow pace. With that pace, as well as the push from many participants to spend more time digging into the important details that will shape how each of these principles would be implemented, assuming they are implemented at all, I continue to believe that it will be exceptionally difficult to put together a large, comprehensive energy proposal together for consideration by veto session. And that says nothing about whether the General Assembly will want to consider such a comprehensive proposal, given some of the other legislative priorities that are out there, as well as the impact of investigations and the like.
Other Items of News and Note
Chicago, Citing Feasibility Study, Declines to Cut Ties with ComEd
The Mayor's press office announced that the city government will not pursue a municipal electric utility (MEU) plan that would have severed the city from Commonwealth Edison Company's (ComEd) distribution system. The city commissioned NewGen Strategies and Solutions, LLC in the Fall of 2019 to investigate whether creating an MEU would be financially viable. The recently-released report indicated the average electric delivery rate for a Chicago-owned MEU would be 43% higher in the first year than ComEd's service rate, and would require substantial capital investment in substation and equipment costs. The city is currently negotiating its franchise agreement with ComEd, which expires at the end of 2020.
Illinois Utilities Extend Disconnection Moratorium to September 30
The Illinois Commerce Commission announced on Wednesday that several Illinois-regulated utilities, including Nicor Gas, Northshore/Peoples Gas, Illinois American Water, Aqua Illinois, and Utility Services of Illinois, have voluntarily agreed to extend the moratorium on service disconnections for residential customers through the end of September. Ameren Illinois and ComEd have agreed to extend the moratorium through September 10, 2020. The utility service shutoff moratorium was announced in June as a response to the COVID-19 crisis and the severe economic impacts to Illinois residents and ratepayers.
Press Release and Coverage
USEPA Rule Eases Obama-Era Coal Ash Requirements
On Monday, the U.S. Environmental Protection Agency finalized a rule revising the requirements for waste streams produced by coal-fired power plants, including flue gas desulfurization wastewater and bottom ash transport water that is transported to coal ash ponds. The more stringent 2015 rule limited coal ash releases and was projected to impose compliance costs on 12% of power plants. The rule received multiple challenges, and in 2017 the Utility Water Act Group petitioned for reconsideration, with then-EPA Administrator Scott Pruitt initiating a rulemaking in 2019 to potentially revise the rule. A like challenge could come from environmental groups, with Earthjustice already planning legal action.
USEPA 2020 Rule and Announcement, USEPA 2015 Rule and Coverage
Information:
In Closing
As is evidence by the summary above, it has been a very busy week for the Governor's Energy Working Group, and next week looks like much the same. With so much ground to cover, it is hard to see these meetings resulting in a legislative proposal for consideration during veto session this fall but that remains the goal. If you have questions, thoughts, or concerns about anything contained in this newsletter, or simply want to drill down into the energy working group or discuss the Chamber's role as we move forward, please don't hesitate to reach out to me. Until then, enjoy your Labor Day weekend, and be well!
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