SUBMITTER 14

[SUBMITTER 14] Comments on

Ameren Illinois Utilities and

Commonwealth Edison Company’s

Long Term Master Agreements

for the Procurement of Long-Term Renewable Energy

and Renewable Energy Credits (RECs”)

[SUBMITTER 14] appreciates the ability to provide a second round of comments on this Agreement. [SUBMITTER 14] is a not for profit, collaborative organization that advocates for the fair treatment of wind development in the Midwest. Our members represent a significant portion of the wind energy that would bid into this RFP. They include eleven companies that own/operate over 1,400 MW of wind energy in IL, 76% of wind energy generated in IL, all of the utility-scale wind projects under construction in Illinois, and over 4,181 MW of wind energy in the adjacent states, which is over 70% of wind energy generated in those states.

The last round of workshops resulted in some changes to the agreement but there is room for improvement. First, changes are needed to the workshop process in terms of how comments are processed and feedback provided by the procurement administrators. More specifically, the procurement administrator needs to clearly convey in the workshop or some post-workshop written notice how the suggestions of the workshop participants are being addressed and why they were not accepted. Second, we question the effectiveness of this second round of workshops since it is unclear what part of the evaluation has changed since the last round of comments. It is unlikely that new comments will be presented by suppliers and there is no indication that the procurement administrators will do anything different than what it did in the first round of workshops. Finally, the budget for the long term renewable products needs to be increased to effectively accomplish the purpose of the renewable portfolio standard.

the Budget allocated to the long term renewable products should be markedly increased so as to more effectively use the total renewable energy resource budget

An incredibly low amount of money from the utilities total annual Renewable Energy Resource Budget for 2012-2013 has been set aside for these long term products which will not allow for robust competition from new build projects. Based on our analysis below there is still room to spare in the Total RRB for 2012-2013 if the budgets for this procurement were increased by 60%. [SUBMITTER 14] recommends that the budget for ComEd and Ameren be increased to approximately $15 million for Ameren and $38 million for ComEd.

The RFPs state that approximately $9 million of Ameren’s $30.180 million budget[1] and only $22.87 million of ComEd’s $77.176 million budget1 will be used to procure long term renewable products. It is unclear what is being done with the remaining $75.486 million of the budget. It appears that over 65% of what the General Assembly is allowing to be used to procure renewables is being left unused.

The statute allows for annual procurements up to the budget pursuant to 220 ILCS3855/1-75(C)(2). Therefore, these procurements should allocate a larger portion of the budget to this procurement.

The Total Renewable Resource Budget for 2012-2013 has not yet been set, however, Section 3855/1-75(c)(2)(E) states that the budget for 2012 is only a little larger than what was approved in the 2011-2012 period.[2] Therefore, for purposes of this analysis we will just use the budget amounts from the Draft Procurement Plan submitted for the 2011-2012 Procurement -- $30,180,309 for Ameren and $77,176,270 for ComEd.

Estimated RPS Volume Targets

In the 2012-2013 period, it is likely that ComEd and Ameren will have a renewable portfolio that includes these long term contracts, and one year RECs and solar RECs. Currently, the ICC is conducting a hearing to review the 2011-2012 procurement plan [Docket 10-0563]. In that proceeding, proposals have been submitted for 5 year RECs commencing in 2011-2012 which would be subject to the Renewable Resources Budget.

To determine how much of the budget will likely be available for the long term products in 2012-2013, we should start with the Total Renewable Resource Budget and subtract out the cost of the other products being procured. Since 5 year RECs will likely be more expensive than 1 year RECs the more conservative approach is to assume that the 2012-2013 procurement will include long term renewable products from this procurement, solar RECS, 5 year RECs and 1 year RECs.

The table below forecasts the renewable energy resources to be procured for 2012 as being 3,284,272 MWHs based on data supplied by the utilities for the 2011-2012 procurement plan. This amount would be divided between Ameren and ComEd as 2,198,208 for ComEd and 1,086,064 for Ameren. The long term contracts would represent approximately 60% of the total RECs to be procured in 2012-2013.

TABLE A: Estimated Total RECs for Ameren and ComEd 2008/2009 – 2019-2020

Ameren RPS Volume Targets / ComEd RPS Volume Targets
Planning Year / Reference Year / Planning Year RPS % Target / Reference Year Delivered Volume (MWh) / Planning Year RPS Volume Target (MWh) / Reference Year Delivered Volume (MWh) / Planning Year RPS Volume Target (MWh)
2008-2009 / 2006-2007 / 2.00% / 20,719,607 / 414,392 / 39,802,463 / 796,742
2009-2010 / 2007-2008 / 4.00% / 17,984,564 / 719,383 / 39,109,145 / 1,576,899
2010-2011 / 2008-2009 / 5.00% / 17,217,197 / 860,860 / 37,740,282 / 1,804,795 / Total RECs
2011-2012 / 2009-2010 / 6.00% / 15,869,084 / 952,145 / 35,284,241 / 2,117,054 / 3,069,199
2012-2013 / 2010-2011 / 7.00% / 15,515,203 / 1,086,064 / 31,402,974 / 2,198,208 / 3,284,272
2013-2014 / 2011-2012 / 8.00% / 14,966,120 / 1,197,290 / 31,183,782 / 2,494,703 / 3,691,993
2014-2015 / 2012-2013 / 9.00% / 14,849,085 / 1,336,418 / 31,435,435 / 2,829,189 / 4,165,607
2015-2016 / 2013-2014 / 10.00% / 14,493,895 / 1,449,390 / 31,537,286 / 3,153,729 / 4,603,119
2016-2017 / 2014-2015 / 11.50% / 14,042,845 / 1,614,927 / 31,647,351 / 3,639,445 / 5,254,372
2017-2018 / 2015-2016 / 13.00% / 13,584,768 / 1,766,020 / 31,734,381 / 4,125,470 / 5,891,490
2018-2019 / 2016-2017 / 14.50% / 13,679,657 / 1,983,550 / 31,956,046 / 4,633,627 / 6,617,177
2019-2020 / 2017-2018 / 16.00% / 13,775,210 / 2,204,034 / 32,179,259 / 5,148,681 / 7,352,715

Estimated REC Quantities

For this procurement, the RFP for ComEd indicates that it will forego the ramp-up percentages for solar REC procurement, as recently prescribed by the General Assembly.[3] Instead, the RFP indicates the intent to allocate 6% of the long term renewable energy and RECs that were approved by the Commission in Docket No. 09-0373 to solar renewable energy resources. Therefore, [SUBMITTER 14] has made the following three assumptions: [a] that 6% of the 2,000,000 Long Term RFP RECs will be procured as solar RECs and allocated to ComEd and Ameren in proportion to the amount of RECs each is procuring; [b] that 6% of the total RECs procured in 2015 will come from solar renewable energy resources; and [c] that the IPA will procure solar RECs in equal amounts between 2012 and 2015. In doing so, we forecast the SREC Volume Target to be (key numbers are highlighted in orange):

TABLE B: SREC Calculation

Ameren RPS Volume Targets / ComEd RPS Volume Targets
Planning Year / Reference Year / Planning Year RPS % Target / SREC % of RPS % Target per Statute / SREC % of RPS % Target as Proposed in 2010 LT RFP / Planning Year RPS Volume Target (MWh) / Planning Year SREC Volume Target (MWh) / Reference Year Delivered Volume (MWh) / Planning Year RPS Volume Target (MWh) / Total SRECs
2011-2012 / 2009-2010 / 6.00% / 0.00% / 0.00% / 952,145 / 0 / 2,117,054 / 0 / 0
2012-2013 / 2010-2011 / 7.00% / 0.50% / 6.00% / 1,086,064 / 36,000 / 2,198,208 / 84,000 / 120,000
2013-2014 / 2011-2012 / 8.00% / 1.50% / NA / 1,197,290 / 52,988 / 2,494,703 / 119,075 / 172,062
2014-2015 / 2012-2013 / 9.00% / 3.00% / NA / 1,336,418 / 69,976 / 2,829,189 / 154,149 / 224,125
2015-2016 / 2013-2014 / 10.00% / 6.00% / NA / 1,449,390 / 86,963 / 3,153,729 / 189,224 / 276,187
2016-2017 / 2014-2015 / 11.50% / 6.00% / NA / 1,614,927 / 96,896 / 3,639,445 / 218,367 / 315,262
2017-2018 / 2015-2016 / 13.00% / 6.00% / NA / 1,766,020 / 105,961 / 4,125,470 / 247,528 / 353,489
2018-2019 / 2016-2017 / 14.50% / 6.00% / NA / 1,983,550 / 119,013 / 4,633,627 / 278,018 / 397,031
2019-2020 / 2017-2018 / 16.00% / 6.00% / NA / 2,204,034 / 132,242 / 5,148,681 / 308,921 / 441,163

The next step is to estimate the quantity and cost of the one year and five year RECs. The tables below account for the SRECs, the 20 year product in this procurement and the proposed five year RECs for Ameren and ComEd. The residual column on the far right reflects the 1 year RECs that would be procured under the foregoing assumptions. [SUBMITTER 14] has recommended that 550,000 – 5 year RECs be procured for ComEd in 2012-2013, that 200,000 – 5 year RECs be procured for Ameren and that the residual be procured as 1 year RECs for both utilities. The tables below reflect those quantities for Ameren and ComEd:

Table C:The Renewable Energy Portfolio for Ameren in 2012-2013

Planning Year / Planning Year RPS Volume Target (MWh) / Planning Year SREC Volume Target (MWh) / Residual Volume Adjusted for SRECs (MWh) / Multi-Year REC Volumes Procured in 2010 (MWh) / Residual Volume Adjusted for Multi-Yr RECs (MWh) / PROPOSED -- 5 Year RECs (MWh) / Residual Volume in RPS Volume Target -- Adjusted for 5 Yr RECs (MWh)
2011-2012 / 952,145 / 0 / 952,145 / 0 / 952,145 / 200,000 / 752,145
2012-2013 / 1,086,064 / NA[4] / 1,086,064 / 600,000 / 486,064 / 200,000 / 286,064
2013-2014 / 1,197,290 / 52,988 / 1,144,302 / 600,000 / 544,302 / 200,000 / 344,302
2014-2015 / 1,336,418 / 69,976 / 1,266,442 / 600,000 / 666,442 / 200,000 / 466,442
2015-2016 / 1,449,390 / 86,963 / 1,362,427 / 600,000 / 762,427 / 200,000 / 562,427
2016-2017 / 1,614,927 / 96,896 / 1,518,031 / 600,000 / 918,031 / 0 / 918,031

Table D:The Renewable Energy Portfolio for ComEd in 2012-2013

Planning Year / Planning Year RPS Volume Target (MWh) / Planning Year SREC Volume Target (MWh) / Residual Volume Adjusted for SRECs (MWh) / Multi-Year REC Volumes Procured in 2010 (MWh) / Residual Volume Adjusted for Multi-Yr RECs (MWh) / PROPOSED -- 5 Year RECs (MWh) / Residual Volume in RPS Volume Target -- Adjusted for 5 Yr RECs (MWh)
2011-2012 / 2,117,054 / 0 / 2,117,054 / 0 / 2,117,054 / 550,000 / 1,567,054
2012-2013 / 2,198,208 / NA3 / 2,198,208 / 1,400,000 / 798,208 / 550,000 / 248,208
2013-2014 / 2,494,703 / 119,075 / 2,375,628 / 1,400,000 / 975,628 / 550,000 / 425,628
2014-2015 / 2,829,189 / 154,149 / 2,675,040 / 1,400,000 / 1,275,040 / 550,000 / 725,040
2015-2016 / 3,153,729 / 189,224 / 2,964,505 / 1,400,000 / 1,564,505 / 550,000 / 1,014,505
2016-2017 / 3,639,445 / 218,367 / 3,421,078 / 1,400,000 / 2,021,078 / 0 / 2,021,078

Estimated REC Prices

The price for 1 year RECs should be less than what ComEd and Ameren received in the 2010-2011 procurement, since the pool of eligible renewable resources has been expanded to included Illinois and its adjacent states. The average price for 1 year RECs in the 2010-2011 procurement was $4.50, so the 2012-2013 price may be approximately $3.50.

Illinois has not procured 5 year RECs so there is no history to reflect upon. In the 2011-2012 procurement hearing, ICC Staff suggested that a percentage of the budget needed to be assigned to the 5 year RECs if the Commission approved their procurement. Staff recommended that either 10% or 15% of the budget be used. Using 10% and 15% of the budget, the price range for Ameren and ComEd is $14.03 to $22.63. For ease of calculation, let’s use $20 for the 5 year REC average price.

To calculate the Renewable Resources Budget after the procurement of 1 year and 5 year RECs we’ll use the following formula:

Total RRB – 5 year RECs – 1 year RECs = Estimated Remaining RRB

Ameren:

$30,180,309 - [ 200,000($20) + 286,064($3.50) ] = $25,179,085

ComEd:

$77,176,270 - [ 550,000($20) + 248,208($3.50) ] =$65,307,542

There is plenty of room to increase the $9 million Ameren budget and the $22.87 ComEd budget. To not increase the budget to use the available funds is contrary to the statute. If ComEd or Ameren think that there are options other than what was described above, they should make that known in the workshops so that a proper budget can be agreed upon by the parties.

In addition, the REC price for the long term renewable products from this procurement will be changing over the life of the contract. However, we anticipate that the forward curve will be structured such that the implicit REC price that the RRB pays for will decrease over time as the energy price at the utilities’ load zone increases and would potentially be impacted by additional surcharges if carbon dioxide emissions control legislation is enacted. The RPS target volumes will be growing in the years between now and 2025 and the 2 million RECs procured in this procurement will be a smaller portion of subsequent years but will also use less funds from the RRB up to a point where the long term contracts could be giving money back to the RRB or utility customers as the ICC would rule appropriate when the year comes when the contract prices are below the load zone prices. Therefore, there should be little to no concern that the RRB will be eroded over time by the long term products from this RFP.

Conclusion

Therefore, [SUBMITTER 14] recommends that a budget close to 50% or 55% of the Estimated Remaining RRB be used. This will provide a buffer for market changes and differences between bid prices and the estimates and will leave room within the RRB, in future years, for similar long term contracts. Thus, [SUBMITTER 14] recommends that Ameren’s budget be in the range of $15 to $16.5 million and that ComEd’s budget be in the range of $38 to $42 million.

DATED: October 22, 2010

Respectfully submitted,

[SUBMITTER 14]

1

[1] Assuming the budgets for Ameren and ComEd will either remain fixed or will change very little from the 2011-2012 period to the 2012-2013 period.

[2] The difference between the two is approximately .015% of the amount paid per kilowatthour by those customers during the year ending May 31, 2007 or the difference between the incremental amount per kilowatthour paid for these resources in 2011 and the incremental amount per kilowatthour paid for these resources in 2010. (Cf Section 3855/1-75(c)(2)(E) to Section 3855/1-75(c)(2)(D)).

[3] See ComEd Long-Term Renewable Energy and RECs RFP, Appendix 5, section 3, stating that 6% of the 2,000,000 RECs that are to be procured will come from solar photovoltaic renewable energy resources.

[4] The 36,000 SRECs procured for Ameren are included within the 600,000 total RECs. Similarly, the 84,000 SRECs to be procured for ComEd are included within the 1,400,000 total RECs being procured.