Illinois Commerce Commission

Commissioner Sherina Edwards just completed her term on the Illinois Commerce Commission (“ICC” or “Commission”). I am honored to catch up with her this month to discuss NextGrid and the future of the electric industry. This is a must-read for utilities and anyone interested in the utility of the future.

Q. Commissioner Edwards, thank you for taking the time to provide me with this interview. Let’s just dive right in. Why is it important for the Illinois Commerce Commission to do a “NextGrid” Modernization Study?

One thing that all parties in the electricity industry agree on is that with new and ever-changing technologies, the industry will evolve more in the next ten years than it has in the past one hundred. What we don’t necessarily know is how these changes will affect the system and what part the key players – consumers, regulators, utilities, policy advocates – will play in this evolution.

NextGrid is a statewide collaborative that will bring those key stakeholders together to address these critical issues by examining the use of new technologies to improve the state’s electric grid while also minimizing costs to consumers.

Illinois is not new to progressive and trailblazing leadership from customer choice laws in 1997 to the Energy Infrastructure Modernization Act in 2011 and, lastly, to the most recent Future Energy Jobs Act at the end of 2016. Illinois, and the ICC, as the energy leaders in the state, would be remiss if it did not address these coming changes that will face the utilities and ultimately every citizen in the state of Illinois. At the end of the 18-month process, NextGrid should serve as a guiding tool for all key stakeholders in how we can continue to work together to implement some of these significant changes.

Q. What do you think is currently the biggest challenge facing the utility industry?

I think the biggest challenges currently facing the utility industry are the silos built up between all of the key stakeholders. There so often seems to be a hard wall between industry, the regulators and the consumer advocates. In a day when the conversation regarding the utility of the future is based on the evolving and changing consumer, from passive to active, having all relevant players at the table is something that is required if we truly are going to make the massive improvements on all fronts in the industry from grid modernization to consumer education and understanding.

Q. It is an exciting time as more and more nontraditional companies are becoming involved in the utility industry. What advice do you have for these entities regarding their need to understand the existing regulatory framework and the ICC’s concern for customers?

My advice to non-traditional players is to work with both the traditional players (e.g. utilities, consumer advocates, etc.) and the Commission early and often so that their strategic goals and products can be integrated into Illinois’ energy landscape more seamlessly.

The ICC’s official mission is to balance the interests of consumers and utilities to ensure adequate, efficient, reliable, safe and least-cost public utility services, while promoting the development of an effectively competitive energy supplier market. You’ll notice that both consumers and the development of a competitive energy market are included there. Ultimately the Commission’s job is to balance these sometimes-competing interests, but I fear the perception often is that regulators are “against” the non-traditional companies and favor the status quo. In reality, there are so many experts throughout Illinois, particularly at the Commission, who can guide new entrants through the process of integrating their products and services. My experience has shown that Commissioners view their role as a unique opportunity to unite stakeholders and encourage dialogue, not create difficulties for non-traditional stakeholders. However, the onus is on these types of stakeholder to engage in coordination and discussion via formal initiatives, such as NextGrid, and informal conversations; when companies operate in silos, they are ultimately doing themselves a disservice.

Q. Do you envision a need for legislative changes to fully address the rate design challenges utilities face regarding DER and Micro-grids?

Because the goals and vision of each Commission can be different, I think updates to legislation are the surest way to guarantee that the current Commission’s emphasis on increased technology and innovation continue in perpetuity. A change to legislation also gives utilities and other stakeholders the certainty they need to make investments and plans for the future. However, I also think that market transformations and shifting customer expectations will continue driving the demand for increased DER, micro-grids, battery storage, etc., regardless of if/when laws and regulations change.

I personally believe that it is important for Commission regulations and State legislation to keep pace with these kinds of changes, but I also recognize that not all stakeholders can afford to wait for “regulatory lag” to catch up with in real-time innovation. I think the NextGrid process is a big step in the right direction for regulators in Illinois. While the long-term goal may be legislative certainty, I think we are on the right track for the short-term by engaging with stakeholders and investigating how processes like rate design will be impacted by the integration of new technology.

Q. There is a concern nationwide about the aging utility workforce. What are utilities in Illinois doing to respond to the challenge of the aging workforce … to ensure that the next generation of employees are adequately trained before there is a mass exodus of institutional knowledge?

More than one-half of the current utility workforce will be eligible to retire in the next six to eight years which has the potential to greatly impact utilities’ ability to continue to innovate and solve the electrical transmission challenges of tomorrow. In Illinois, utilities have shown that they understand how the aging workforce could potentially negatively affect their operations and have taken measures to address it head on. Mainly, the utilities have developed strategic plans to retain and develop employees to fill these critical roles, hopefully before any such mass exodus will occur. Additionally, these measures include aggressive recruiting programs in an effort to fill the gaps that may be left in a few short years or less. One positive of this demographic shift is an increased focus on diversity and a much-needed emphasis on the recruitment/retention of a more representative work force and supplier base. Of course, many utilities have also incorporated technology solutions that will allow utilities to break down internal silos and address significant issues using less people than they historically have had to (i.e. convergence of information and operational technology and customer service and distribution operations).

Commissioner Edwards, this was an incredible interview. Thank you for providing us with such an honest, insightful and fresh perspective. You may no longer be on the ICC but your knowledge and wisdom will continue to shape the industry. I appreciate your time. 

This week, the Illinois Commerce Commission (ICC or Commission) launched NextGrid, an initiative to explore the utility of the future. It will be an 18-month statewide collaborative aimed at transforming Illinois’ energy landscape and economy. The study will focus on finding new technologies, utility business models and regulatory strategies to transform the state’s grid into a more flexible and efficient resource. NextGrid will be managed by the Commission. An independent third-party facilitator will assist the Commission in engaging electric utilities, communities and stakeholders such as industry, academia, ratepayer advocates and environmental advocates as they examine the following areas:

  1. Consumers, Communities and Economic Development
  2. Grid Design, Digital Networks and Markets 
  3. Regulation and Encouraging Innovation
  4. Climate Change and the Environment

Anne Pramaggiore, ComEd President and CEO, addressed this development:

“We commend the Commission for taking a leadership role in establishing a forum for designing the future-oriented business model and joining ComEd’s effort to maximize the smart grid and deliver new value to customers. We see NextGrid as an opportunity to find common ground on critical issues facing our industry and as a driver of the clean, lean, ultra-resilient energy future our customers want.”

All members of the energy stakeholder community are encouraged and invited to provide input and suggestions regarding the selection of a facilitator and topics to be considered as a part of NextGrid by filing comments in response to the Resolution by April 30, 2017. Comments can be emailed to nextgrid@icc.illinois.gov

The Citizens Utility Board (“CUB”) and the Environmental Defense Fund (“EDF”) recently filed a joint petition asking the Illinois Commerce Commission (“ICC” or “the Commission”) to initiate a proceeding to adopt the Illinois Open Data Access Framework (“Framework”). They hope the Framework will become the governing standards for access to customer usage data by customers, utilities and third parties. One interesting point about the proposed Framework is that the utilities are guardians of the data (sounds like a movie my son would like) but not owners of it. Below is the paragraph discussing ownership:

Customer is principal owner of retail electric consumption data. The customer has the ability to authorize third parties to access individual customer data, and the customer can revoke that access at the customer’s discretion. The utility serves as the guardian of retail electric consumption data, and must allow access to third parties where the customer has authorized it.

You can read CUB’s and EDF’s prefiled testimony and other pleadings by going to the ICC’s website. The case number is 14-0507. Com-Ed and Ameren Illinois have intervened in the case.

Although it was not the primary focus, a recent Seventh Circuit Decision about allocation of transmission project costs could be a game changer for renewable energy. The main purpose of the appeal by the Illinois Commerce Commission (“ICC”), Michigan Public Service Commission (“MPSC”) and others was to contest FERC’s approval of the Midwest Independent Transmission System Operator, Inc.’s (MISO) tariff on its members to fund the construction of new high-voltage power lines that MISO calls “multi-value projects” (MVPs). Designed to finance the construction of transmission lines for electricity generated by remote wind farms, the tariff allocates MVP costs among all utilities drawing power from the grid according to the amount of electrical energy used, placing most of those costs on urban centers, where demand for energy is greatest.

The court addressed six major issues, including RTO departure fees. But what got my attention was the bench’s response to the Michigan Public Service Commission’s argument that its benefit from the MVP’s is limited because the law in Michigan prohibits its utilities from using out-of-state renewable energy to meet their renewable energy requirements.

Michigan’s first argument—that its law forbids it to credit wind power from out of state against the state’s required use of renewable energy by its utilities — trips over an insurmountable constitutional objection. Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy.

Order 15

Many states have geographical limitations on what qualifies to meet their renewable energy standards. And while the Seventh Circuit is not the US Supreme Court, this statement is a nice volley for renewable energy companies looking to expand their business. Regardless of your position, the beautifully written 26-page decision is a must read. I am impressed with the bench’s understanding of complex energy issues that many long timers in the business don’t know. In addition to a nice review of the RTO structure, you will learn what the 1810 German novella Michael Kohlhaas has to do with rate pancaking.

In the past, customer education typically meant nothing more than a bill insert and perhaps an additional public notice. Then came the smart grid and suddenly more is required… much more. Ameren Illinois conducted a quantitative study to measure its customers’ baseline awareness about AMI. Key findings revealed:

  • 63% of customers have heard the term “smart grid.”
    Among the 63% hearing the term:
    • 40% don’t know much about what it means
    • 34% have a favorable impression
    • 29% are neutral
    • 16% have an unfavorable impression
    • 21% don’t know
  • 45% of customers have heard the term “smart meter.”
    Among the 45% hearing the term:
    • 25% of those who have heard the term don’t know much about what it means
    • 35% have a favorable impression
    • 28% are neutral
    • 23% have an unfavorable impression
    • 14% don’t know
  • 46% of all customers feel that smart meters would be “mostly an advantage,”
  • 40% seeing the meters as “having no impact,” and
  • 8% as “mostly a disadvantage.”

Customers indicated that improving reliability, bill accuracy and customer service and providing them with more control of home energy usage as the top smart meter benefits. The study will help guide the development of Ameren’s stakeholder and customer education plan. You can learn more about Ameren’s plan and ComEd’s plan by reading their Annual AMI Reports filed with the Illinois Commerce Commission on April 1, 2013. Ameren and ComEd also filed jobs creation reports as a result of the Energy Infrastructure Modernization Act.

Not far from the City of Naperville, where smart meter opposition is in full force, customers in Chicago have filed a class action suit against ComEd due to smart meter delay! No, this is not a tardy April Fool’s joke. Several ComEd customers allege the Company violated an Illinois Commerce Commission (ICC) order that called for smart meter installation to begin by fall 2012, yet ComEd unilaterally pushed back deployment until 2015.

To cover the Smart Grid upgrades, in 2011 ComEd filed for a formula rate increase of $1.915 billion with the ICC. When the ICC reduced that amount by $168 million, ComEd filed an Application for Rehearing (Docket No. 12-0298) to delay installation of smart meters due to financial constraints caused by the Formula Rate Order. ComEd’s original smart meter plan included the installation of 500,000 new smart meters on Chicago’s South and West sides by 2013. The suit says ComEd’s decision to not install the smart meters while the Application for Rehearing was pending cost customers about $182 million in savings and other benefits they would have received had deployment occurred according to the original schedule. (Attention utilities: This figure was taken from ComEd’s testimony regarding lost benefits due to delayed deployment.) In December of 2012, the ICC approved ComEd’s revised schedule allowing smart meter deloyment to be delayed until 2015.

The suit is an interesting change of pace from those cases around the country and even in ComEd’s own backyard (Naperville) where customers are rejecting smart meters and seeking to ban smart meter deployment. I guess ComEd customers were listening during the debate to get the Energy Infrastructure Modernization Act enacted.

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.

Through a recent press release, the Illinois Commerce Commission stated that Ameren Illinois’ AMI plan could not be approved because it would have to rely on either including gas meters or a compliance period longer than ten years, neither of which is allowed in the statute. Additionally, the Commission determined that the cost-benefit analysis presented by the company relied on incomplete or speculative calculations, referring to the plan as

vague and incomplete and bordered on not being a plan at all, but rather more of a general statement of intention to install smart meters in some parts of its service territory.

ICC Chairman Doug Scott said, “When and where the company meets its legal obligation it provided scant information. I am troubled by the inadequacy of the plan.” Commissioner John Colgan noted that while there are benefits to customers from a smart grid system, Ameren witnesses did not demonstrate any, leaving commissioners nothing to work with or modify. “I wish we had better information,” he said.