Bill Text: IL SB1608 | 2011-2012 | 97th General Assembly | Amended

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Bill Title: Amends the Public Utilities Act. Provides that the required procurement plan for an electric utility shall include proposed bidding rules, bid documents, standard form contracts, and credit documents and policies. Changes provisions concerning the draft and final procurement plans by the Illinois Power Agency, including the role of the Illinois Commerce Commission. Effective immediately.

Sponsorship: Bipartisan Bill

Status: (Failed) 2013-01-08 - Session Sine Die [SB1608 Detail]

Download: Illinois-2011-SB1608-Amended.html

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Sen. Mike Jacobs

Filed: 3/15/2011

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AMENDMENT TO SENATE BILL 1608
AMENDMENT NO. ______. Amend Senate Bill 1608 by replacing
everything after the enacting clause with the following:
"Section 5. The Public Utilities Act is amended by changing
Section 16-111.5 as follows:
(220 ILCS 5/16-111.5)
Sec. 16-111.5. Provisions relating to procurement.
(a) An electric utility that on December 31, 2005 served at
least 100,000 customers in Illinois shall procure power and
energy for its eligible retail customers in accordance with the
applicable provisions set forth in Section 1-75 of the Illinois
Power Agency Act and this Section. "Eligible retail customers"
for the purposes of this Section means those retail customers
that purchase power and energy from the electric utility under
fixed-price bundled service tariffs, other than those retail
customers whose service is declared or deemed competitive under

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Section 16-113 and those other customer groups specified in
this Section, including self-generating customers, customers
electing hourly pricing, or those customers who are otherwise
ineligible for fixed-price bundled tariff service. Those
customers that are excluded from the definition of "eligible
retail customers" shall not be included in the procurement plan
load requirements, and the utility shall procure any supply
requirements, including capacity, ancillary services, and
hourly priced energy, in the applicable markets as needed to
serve those customers, provided that the utility may include in
its procurement plan load requirements for the load that is
associated with those retail customers whose service has been
declared or deemed competitive pursuant to Section 16-113 of
this Act to the extent that those customers are purchasing
power and energy during one of the transition periods
identified in subsection (b) of Section 16-113 of this Act.
(b) A procurement plan shall be prepared for each electric
utility consistent with the applicable requirements of the
Illinois Power Agency Act and this Section. For purposes of
this Section, Illinois electric utilities that are affiliated
by virtue of a common parent company are considered to be a
single electric utility. Each procurement plan shall analyze
the projected balance of supply and demand for eligible retail
customers over a 5-year period with the first planning year
beginning on June 1 of the year following the year in which the
plan is filed. The plan shall specifically identify the

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wholesale products to be procured following plan approval, and
shall follow all the requirements set forth in the Public
Utilities Act and all applicable State and federal laws,
statutes, rules, or regulations, as well as Commission orders.
Nothing in this Section precludes consideration of contracts
longer than 5 years and related forecast data. Unless specified
otherwise in this Section, in the procurement plan or in the
implementing tariff, any procurement occurring in accordance
with this plan shall be competitively bid through a request for
proposals process. Approval and implementation of the
procurement plan shall be subject to review and approval by the
Commission according to the provisions set forth in this
Section. A procurement plan shall include each of the following
components:
(1) Hourly load analysis. This analysis shall include:
(i) multi-year historical analysis of hourly
loads;
(ii) switching trends and competitive retail
market analysis;
(iii) known or projected changes to future loads;
and
(iv) growth forecasts by customer class.
(2) Analysis of the impact of any demand side and
renewable energy initiatives. This analysis shall include:
(i) the impact of demand response programs, both
current and projected;

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(ii) supply side needs that are projected to be
offset by purchases of renewable energy resources, if
any; and
(iii) the impact of energy efficiency programs,
both current and projected.
(3) A plan for meeting the expected load requirements
that will not be met through preexisting contracts. This
plan shall include:
(i) definitions of the different retail customer
classes for which supply is being purchased;
(ii) the proposed mix of demand-response products
for which contracts will be executed during the next
year. The cost-effective demand-response measures
shall be procured whenever the cost is lower than
procuring comparable capacity products, provided that
such products shall:
(A) be procured by a demand-response provider
from eligible retail customers;
(B) at least satisfy the demand-response
requirements of the regional transmission
organization market in which the utility's service
territory is located, including, but not limited
to, any applicable capacity or dispatch
requirements;
(C) provide for customers' participation in
the stream of benefits produced by the

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demand-response products;
(D) provide for reimbursement by the
demand-response provider of the utility for any
costs incurred as a result of the failure of the
supplier of such products to perform its
obligations thereunder; and
(E) meet the same credit requirements as apply
to suppliers of capacity, in the applicable
regional transmission organization market;
(iii) monthly forecasted system supply
requirements, including expected minimum, maximum, and
average values for the planning period;
(iv) the proposed mix and selection of standard
wholesale products for which contracts will be
executed during the next year, separately or in
combination, to meet that portion of its load
requirements not met through pre-existing contracts,
including but not limited to monthly 5 x 16 peak period
block energy, monthly off-peak wrap energy, monthly 7 x
24 energy, annual 5 x 16 energy, annual off-peak wrap
energy, annual 7 x 24 energy, monthly capacity, annual
capacity, peak load capacity obligations, capacity
purchase plan, and ancillary services;
(v) proposed term structures for each wholesale
product type included in the proposed procurement plan
portfolio of products; and

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(vi) an assessment of the price risk, load
uncertainty, and other factors that are associated
with the proposed procurement plan; this assessment,
to the extent possible, shall include an analysis of
the following factors: contract terms, time frames for
securing products or services, fuel costs, weather
patterns, transmission costs, market conditions, and
the governmental regulatory environment; the proposed
procurement plan shall also identify alternatives for
those portfolio measures that are identified as having
significant price risk.
(4) Proposed procedures for balancing loads. The
procurement plan shall include, for load requirements
included in the procurement plan, the process for (i)
hourly balancing of supply and demand and (ii) the criteria
for portfolio re-balancing in the event of significant
shifts in load.
(c) The procurement process set forth in Section 1-75 of
the Illinois Power Agency Act and subsection (e) of this
Section shall be administered by a procurement administrator
and monitored by a procurement monitor.
(1) The procurement administrator shall:
(i) design the final procurement process in
accordance with Section 1-75 of the Illinois Power
Agency Act and subsection (e) of this Section following
Commission approval of the procurement plan;

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(ii) develop benchmarks in accordance with
subsection (e)(3) to be used to evaluate bids; these
benchmarks shall be submitted to the Commission for
review and approval on a confidential basis prior to
the procurement event;
(iii) serve as the interface between the electric
utility and suppliers;
(iv) manage the bidder pre-qualification and
registration process;
(v) obtain the electric utilities' agreement to
the final form of all supply contracts and credit
collateral agreements;
(vi) administer the request for proposals process;
(vii) have the discretion to negotiate to
determine whether bidders are willing to lower the
price of bids that meet the benchmarks approved by the
Commission; any post-bid negotiations with bidders
shall be limited to price only and shall be completed
within 24 hours after opening the sealed bids and shall
be conducted in a fair and unbiased manner; in
conducting the negotiations, there shall be no
disclosure of any information derived from proposals
submitted by competing bidders; if information is
disclosed to any bidder, it shall be provided to all
competing bidders;
(viii) maintain confidentiality of supplier and

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bidding information in a manner consistent with all
applicable laws, rules, regulations, and tariffs;
(ix) submit a confidential report to the
Commission recommending acceptance or rejection of
bids;
(x) notify the utility of contract counterparties
and contract specifics; and
(xi) administer related contingency procurement
events.
(2) The procurement monitor, who shall be retained by
the Commission, shall:
(i) monitor interactions among the procurement
administrator, suppliers, and utility;
(ii) monitor and report to the Commission on the
progress of the procurement process;
(iii) provide an independent confidential report
to the Commission regarding the results of the
procurement event;
(iv) assess compliance with the procurement plans
approved by the Commission for each utility that on
December 31, 2005 provided electric service to a least
100,000 customers in Illinois;
(v) preserve the confidentiality of supplier and
bidding information in a manner consistent with all
applicable laws, rules, regulations, and tariffs;
(vi) provide expert advice to the Commission and

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consult with the procurement administrator regarding
issues related to procurement process design, rules,
protocols, and policy-related matters; and
(vii) consult with the procurement administrator
regarding the development and use of benchmark
criteria, standard form contracts, credit policies,
and bid documents.
(d) Except as provided in subsection (j), the planning
process shall be conducted as follows:
(1) Beginning in 2008, each Illinois utility procuring
power pursuant to this Section shall annually provide a
range of load forecasts to the Illinois Power Agency by
July 15 of each year, or such other date as may be required
by the Commission or Agency. The load forecasts shall cover
the 5-year procurement planning period for the next
procurement plan and shall include hourly data
representing a high-load, low-load and expected-load
scenario for the load of the eligible retail customers. The
utility shall provide supporting data and assumptions for
each of the scenarios.
(2) Beginning in 2011 2008, the Illinois Power Agency
shall prepare a draft procurement plan by August 15th of
each year, or such other date as may be required by the
Commission. The procurement plan shall identify the
portfolio of demand-response and power and energy products
to be procured. The draft procurement plan shall also

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indicate, in legislative style, the specific changes to the
most recent Commission-approved procurement plan.
Cost-effective demand-response measures shall be procured
as set forth in item (iii) of subsection (b) of this
Section. Copies of the draft procurement plan shall be
posted and made publicly available on the Agency's and
Commission's websites, and copies shall also be provided to
each affected electric utility. An affected utility shall
have 30 days following the date of posting to provide
comment to the Agency on the draft procurement plan. Other
interested entities also may comment on the procurement
plan within the timeframe outlined in this Section. All
comments submitted to the Agency shall be specific,
supported by data or other detailed analyses, and, if
objecting to all or a portion of the draft procurement
plan, accompanied by specific alternative wording or
proposals. All comments shall be posted on the Agency's and
Commission's websites. During this 30-day comment period,
the Agency shall hold at least one public hearing within
each utility's service area for the purpose of receiving
public comment on the draft procurement plan. Within 14
days following the end of the 30-day review period, the
Agency shall revise the draft procurement plan as necessary
based on the comments received and file the agency's final
version of the procurement plan with the Commission and
post the Agency's final version of the procurement plan on

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the websites. The Agency shall identify any revisions to
the draft procurement plan by documenting such revisions in
legislative style.
(3) Within 10 5 days after the filing of the Agency's
final version of the procurement plan, any person objecting
to the procurement plan shall file an objection with the
Commission. Within 15 10 days after the filing, the
Commission shall determine whether a hearing is necessary.
The Commission shall enter its order confirming or
modifying the final procurement plan within 90 days after
the filing of the final procurement plan, including all
modifications and additions, by the Illinois Power Agency.
(4) The Commission shall approve the procurement plan,
including expressly the forecast used in the procurement
plan, if the Commission determines that it will ensure
adequate, reliable, affordable, efficient, and
environmentally sustainable electric service at the lowest
total cost over time, taking into account any benefits of
price stability.
(e) The procurement process shall include each of the
following components:
(1) Solicitation, pre-qualification, and registration
of bidders. The procurement administrator shall
disseminate information to potential bidders to promote a
procurement event, notify potential bidders that the
procurement administrator may enter into a post-bid price

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negotiation with bidders that meet the applicable
benchmarks, provide supply requirements, and otherwise
explain the competitive procurement process. In addition
to such other publication as the procurement administrator
determines is appropriate, this information shall be
posted on the Illinois Power Agency's and the Commission's
websites. The procurement administrator shall also
administer the prequalification process, including
evaluation of credit worthiness, compliance with
procurement rules, and agreement to the standard form
contract developed pursuant to paragraph (2) of this
subsection (e). The procurement administrator shall then
identify and register bidders to participate in the
procurement event.
(2) Standard contract forms and credit terms and
instruments. The procurement administrator, in
consultation with the utilities, the Commission, and other
interested parties and subject to Commission oversight,
shall develop and provide standard contract forms for the
supplier contracts that meet generally accepted industry
practices. Standard credit terms and instruments that meet
generally accepted industry practices shall be similarly
developed. The procurement administrator shall make
available to the Commission all written comments it
receives on the contract forms, credit terms, or
instruments. If the procurement administrator cannot reach

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agreement with the applicable electric utility as to the
contract terms and conditions, the procurement
administrator must notify the Commission of any disputed
terms and the Commission shall resolve the dispute. The
terms of the contracts shall not be subject to negotiation
by winning bidders, and the bidders must agree to the terms
of the contract in advance so that winning bids are
selected solely on the basis of price.
(3) Establishment of a market-based price benchmark.
As part of the development of the procurement process, the
procurement administrator, in consultation with the
Commission staff, Agency staff, and the procurement
monitor, shall establish benchmarks for evaluating the
final prices in the contracts for each of the products that
will be procured through the procurement process. The
benchmarks shall be based on price data for similar
products for the same delivery period and same delivery
hub, or other delivery hubs after adjusting for that
difference. The price benchmarks may also be adjusted to
take into account differences between the information
reflected in the underlying data sources and the specific
products and procurement process being used to procure
power for the Illinois utilities. The benchmarks shall be
confidential but shall be provided to, and will be subject
to Commission review and approval, prior to a procurement
event.

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(4) Request for proposals competitive procurement
process. The procurement administrator shall design and
issue a request for proposals to supply electricity in
accordance with each utility's procurement plan, as
approved by the Commission. The request for proposals shall
set forth a procedure for sealed, binding commitment
bidding with pay-as-bid settlement, and provision for
selection of bids on the basis of price.
(5) A plan for implementing contingencies in the event
of supplier default or failure of the procurement process
to fully meet the expected load requirement due to
insufficient supplier participation, Commission rejection
of results, or any other cause.
(i) Event of supplier default: In the event of
supplier default, the utility shall review the
contract of the defaulting supplier to determine if the
amount of supply is 200 megawatts or greater, and if
there are more than 60 days remaining of the contract
term. If both of these conditions are met, and the
default results in termination of the contract, the
utility shall immediately notify the Illinois Power
Agency that a request for proposals must be issued to
procure replacement power, and the procurement
administrator shall run an additional procurement
event. If the contracted supply of the defaulting
supplier is less than 200 megawatts or there are less

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than 60 days remaining of the contract term, the
utility shall procure power and energy from the
applicable regional transmission organization market,
including ancillary services, capacity, and day-ahead
or real time energy, or both, for the duration of the
contract term to replace the contracted supply;
provided, however, that if a needed product is not
available through the regional transmission
organization market it shall be purchased from the
wholesale market.
(ii) Failure of the procurement process to fully
meet the expected load requirement: If the procurement
process fails to fully meet the expected load
requirement due to insufficient supplier participation
or due to a Commission rejection of the procurement
results, the procurement administrator, the
procurement monitor, and the Commission staff shall
meet within 10 days to analyze potential causes of low
supplier interest or causes for the Commission
decision. If changes are identified that would likely
result in increased supplier participation, or that
would address concerns causing the Commission to
reject the results of the prior procurement event, the
procurement administrator may implement those changes
and rerun the request for proposals process according
to a schedule determined by those parties and

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consistent with Section 1-75 of the Illinois Power
Agency Act and this subsection. In any event, a new
request for proposals process shall be implemented by
the procurement administrator within 90 days after the
determination that the procurement process has failed
to fully meet the expected load requirement.
(iii) In all cases where there is insufficient
supply provided under contracts awarded through the
procurement process to fully meet the electric
utility's load requirement, the utility shall meet the
load requirement by procuring power and energy from the
applicable regional transmission organization market,
including ancillary services, capacity, and day-ahead
or real time energy or both; provided, however, that if
a needed product is not available through the regional
transmission organization market it shall be purchased
from the wholesale market.
(6) The procurement process described in this
subsection is exempt from the requirements of the Illinois
Procurement Code, pursuant to Section 20-10 of that Code.
(f) Within 2 business days after opening the sealed bids,
the procurement administrator shall submit a confidential
report to the Commission. The report shall contain the results
of the bidding for each of the products along with the
procurement administrator's recommendation for the acceptance
and rejection of bids based on the price benchmark criteria and

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other factors observed in the process. The procurement monitor
also shall submit a confidential report to the Commission
within 2 business days after opening the sealed bids. The
report shall contain the procurement monitor's assessment of
bidder behavior in the process as well as an assessment of the
procurement administrator's compliance with the procurement
process and rules. The Commission shall review the confidential
reports submitted by the procurement administrator and
procurement monitor, and shall accept or reject the
recommendations of the procurement administrator within 2
business days after receipt of the reports.
(g) Within 3 business days after the Commission decision
approving the results of a procurement event, the utility shall
enter into binding contractual arrangements with the winning
suppliers using the standard form contracts; except that the
utility shall not be required either directly or indirectly to
execute the contracts if a tariff that is consistent with
subsection (l) of this Section has not been approved and placed
into effect for that utility.
(h) The names of the successful bidders and the load
weighted average of the winning bid prices for each contract
type and for each contract term shall be made available to the
public at the time of Commission approval of a procurement
event. The Commission, the procurement monitor, the
procurement administrator, the Illinois Power Agency, and all
participants in the procurement process shall maintain the

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confidentiality of all other supplier and bidding information
in a manner consistent with all applicable laws, rules,
regulations, and tariffs. Confidential information, including
the confidential reports submitted by the procurement
administrator and procurement monitor pursuant to subsection
(f) of this Section, shall not be made publicly available and
shall not be discoverable by any party in any proceeding,
absent a compelling demonstration of need, nor shall those
reports be admissible in any proceeding other than one for law
enforcement purposes.
(i) Within 2 business days after a Commission decision
approving the results of a procurement event or such other date
as may be required by the Commission from time to time, the
utility shall file for informational purposes with the
Commission its actual or estimated retail supply charges, as
applicable, by customer supply group reflecting the costs
associated with the procurement and computed in accordance with
the tariffs filed pursuant to subsection (l) of this Section
and approved by the Commission.
(j) Within 60 days following the effective date of this
amendatory Act, each electric utility that on December 31, 2005
provided electric service to at least 100,000 customers in
Illinois shall prepare and file with the Commission an initial
procurement plan, which shall conform in all material respects
to the requirements of the procurement plan set forth in
subsection (b); provided, however, that the Illinois Power

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Agency Act shall not apply to the initial procurement plan
prepared pursuant to this subsection. The initial procurement
plan shall identify the portfolio of power and energy products
to be procured and delivered for the period June 2008 through
May 2009, and shall identify the proposed procurement
administrator, who shall have the same experience and expertise
as is required of a procurement administrator hired pursuant to
Section 1-75 of the Illinois Power Agency Act. Copies of the
procurement plan shall be posted and made publicly available on
the Commission's website. The initial procurement plan may
include contracts for renewable resources that extend beyond
May 2009.
(i) Within 14 days following filing of the initial
procurement plan, any person may file a detailed objection
with the Commission contesting the procurement plan
submitted by the electric utility. All objections to the
electric utility's plan shall be specific, supported by
data or other detailed analyses. The electric utility may
file a response to any objections to its procurement plan
within 7 days after the date objections are due to be
filed. Within 7 days after the date the utility's response
is due, the Commission shall determine whether a hearing is
necessary. If it determines that a hearing is necessary, it
shall require the hearing to be completed and issue an
order on the procurement plan within 60 days after the
filing of the procurement plan by the electric utility.

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(ii) The order shall approve or modify the procurement
plan, approve an independent procurement administrator,
and approve or modify the electric utility's tariffs that
are proposed with the initial procurement plan. The
Commission shall approve the procurement plan if the
Commission determines that it will ensure adequate,
reliable, affordable, efficient, and environmentally
sustainable electric service at the lowest total cost over
time, taking into account any benefits of price stability.
(k) In order to promote price stability for residential and
small commercial customers during the transition to
competition in Illinois, and notwithstanding any other
provision of this Act, each electric utility subject to this
Section shall enter into one or more multi-year financial swap
contracts that become effective on the effective date of this
amendatory Act. These contracts may be executed with generators
and power marketers, including affiliated interests of the
electric utility. These contracts shall be for a term of no
more than 5 years and shall, for each respective utility or for
any Illinois electric utilities that are affiliated by virtue
of a common parent company and that are thereby considered a
single electric utility for purposes of this subsection (k),
not exceed in the aggregate 3,000 megawatts for any hour of the
year. The contracts shall be financial contracts and not energy
sales contracts. The contracts shall be executed as
transactions under a negotiated master agreement based on the

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form of master agreement for financial swap contracts sponsored
by the International Swaps and Derivatives Association, Inc.
and shall be considered pre-existing contracts in the
utilities' procurement plans for residential and small
commercial customers. Costs incurred pursuant to a contract
authorized by this subsection (k) shall be deemed prudently
incurred and reasonable in amount and the electric utility
shall be entitled to full cost recovery pursuant to the tariffs
filed with the Commission.
(l) An electric utility shall recover its costs incurred
under this Section, including, but not limited to, the costs of
procuring power and energy demand-response resources under
this Section. The utility shall file with the initial
procurement plan its proposed tariffs through which its costs
of procuring power that are incurred pursuant to a
Commission-approved procurement plan and those other costs
identified in this subsection (l), will be recovered. The
tariffs shall include a formula rate or charge designed to pass
through both the costs incurred by the utility in procuring a
supply of electric power and energy for the applicable customer
classes with no mark-up or return on the price paid by the
utility for that supply, plus any just and reasonable costs
that the utility incurs in arranging and providing for the
supply of electric power and energy. The formula rate or charge
shall also contain provisions that ensure that its application
does not result in over or under recovery due to changes in

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customer usage and demand patterns, and that provide for the
correction, on at least an annual basis, of any accounting
errors that may occur. A utility shall recover through the
tariff all reasonable costs incurred to implement or comply
with any procurement plan that is developed and put into effect
pursuant to Section 1-75 of the Illinois Power Agency Act and
this Section, including any fees assessed by the Illinois Power
Agency, costs associated with load balancing, and contingency
plan costs. The electric utility shall also recover its full
costs of procuring electric supply for which it contracted
before the effective date of this Section in conjunction with
the provision of full requirements service under fixed-price
bundled service tariffs subsequent to December 31, 2006. All
such costs shall be deemed to have been prudently incurred. The
pass-through tariffs that are filed and approved pursuant to
this Section shall not be subject to review under, or in any
way limited by, Section 16-111(i) of this Act.
(m) The Commission has the authority to adopt rules to
carry out the provisions of this Section. For the public
interest, safety, and welfare, the Commission also has
authority to adopt rules to carry out the provisions of this
Section on an emergency basis immediately following the
effective date of this amendatory Act.
(n) Notwithstanding any other provision of this Act, any
affiliated electric utilities that submit a single procurement
plan covering their combined needs may procure for those

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combined needs in conjunction with that plan, and may enter
jointly into power supply contracts, purchases, and other
procurement arrangements, and allocate capacity and energy and
cost responsibility therefor among themselves in proportion to
their requirements.
(o) On or before June 1 of each year, the Commission shall
hold an informal hearing for the purpose of receiving comments
on the prior year's procurement process and any recommendations
for change.
(p) An electric utility subject to this Section may propose
to invest, lease, own, or operate an electric generation
facility as part of its procurement plan, provided the utility
demonstrates that such facility is the least-cost option to
provide electric service to eligible retail customers. If the
facility is shown to be the least-cost option and is included
in a procurement plan prepared in accordance with Section 1-75
of the Illinois Power Agency Act and this Section, then the
electric utility shall make a filing pursuant to Section 8-406
of the Act, and may request of the Commission any statutory
relief required thereunder. If the Commission grants all of the
necessary approvals for the proposed facility, such supply
shall thereafter be considered as a pre-existing contract under
subsection (b) of this Section. The Commission shall in any
order approving a proposal under this subsection specify how
the utility will recover the prudently incurred costs of
investing in, leasing, owning, or operating such generation

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facility through just and reasonable rates charged to eligible
retail customers. Cost recovery for facilities included in the
utility's procurement plan pursuant to this subsection shall
not be subject to review under or in any way limited by the
provisions of Section 16-111(i) of this Act. Nothing in this
Section is intended to prohibit a utility from filing for a
fuel adjustment clause as is otherwise permitted under Section
9-220 of this Act.
(Source: P.A. 95-481, eff. 8-28-07; 95-1027, eff. 6-1-09.)
Section 99. Effective date. This Act takes effect upon
becoming law.".