Most people in the industry agree the electric infrastructure is outdated and requires extensive upgrades. It’s when you get to the “How?” and “Who pays for it?” that the war begins in many jurisdictions. And if you think that having a law that supports the upgrades and implementation of the smart grid settles the matter, think again. Last year, Illinois passed the Energy Infrastructure Modernization Act (“EIMA”), yet implementation has been anything but routine. In a show of force between regulators and law makers, electric utilities in Illinois found themselves holding the cost recovery bag. Last May the Illinois Commerce Commission (“ICC”) found that Ameren’s Smart Grid Plan failed the customer cost benefit test. The ICC also disallowed key costs in ComEd’s first formula rate case under EIMA. According to ComEd, it will now face a reduction in funding of nearly $100 million per year in 2014 and beyond. These are dollars that cannot be recovered and subsequently reinvested into the system, jeopardizing the grid modernization programs and related customer benefits. ComEd has appealed the ruling in court, but that decision may take up to two years.
In a battle between regulators and law makers, on November 29, 2012 the Illinois Senate passed Senate Resolution 821 which states in part:
RESOLVED, BY THE SENATE OF THE NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that we express serious concerns that the Illinois Commerce Commission Order, entered on May 29, 2012 in Commission Docket No. 11-0721, fails to reflect the statutory directives and the intent of the Illinois General Assembly by: (1) not allowing Commonwealth Edison Company to earn a return on what is commonly referred to as, identified in the FERC Form 1 as, and what the General Assembly referred to as a pension asset in subparagraph (D) of paragraph (4) of subsection (c) of Section 16-108.5; (2) assessing interest on those amounts to be credited or charged to customers as set forth in subsection (d) of Section 16-108.5 of the Public Utilities Act at an amount that is not based on the utility’s weighted average cost of capital; and (3) determining rate base and capital structure using an average, rather than the year-end amounts as reflected in FERC Form 1…
Not sure if the resolution swayed regulators, but in true Chicago-style politics, the ICC issued an order on December 5, that allows ComEd to proceed with its revised smart grid deployment plan in 2015 but makes it clear it is not happy about the delay:
Allowing the Revised Plan to go forward is accepting, at least for now, that meters will not be installed until 2015. This is regrettable, because the benefits to ratepayers are greatly reduced with the delayed deployment. But because of the impossibility of implementing the Original AMI Plan and the shortcomings of the proposed Revised Plan, the Commission is left with only bad options. – ICC Order page 32
One thing is clear, the battle in Illinois will continue. The order requires ComEd to describe in detail their efforts accelerate implementation when the company files its April 2013 AMI Plan Progress Report.