Smart Bet? Illinois Courts and Smart Meters -

Smart Bet? Illinois Courts and Smart Meters
Orijit Ghoshal
Energy Law 2010
Illinois Courts and Smart Meters
Presentation Overview
1. The Commission
2. The Program
3. The Study
4. The Court
5. The Future
1. The Commission
Authority
“[T]he Commission shall establish
the rates or other charges,
classifications, contracts,
practices, rules or regulations
proposed, in whole or in part, or
others in lieu thereof, which it
shall find to be just and
reasonable.” [Public Utilities Act,
Section 9-201(c)]
1. The Commission
Proposal
• ComEd filed tariffs for $360 Million rate
increase
– Average consumer bill raised by 8%
• ComEd used an 18 month base-year
• ComEd proposed a Rider for a “system
modernization project”
– Pilot program called “Phase 0”
1. The Commission
Order
• ICC approved “Phase 0”
“ComEd is asking for special recovery for these projects that
whatever their level, all parties agree – could have long-term
economic benefits, but as proposed, ratepayers do not share
the economic benefits.”
• BUT, ComEd has to come back for further
approval
1. The Commission
Fallout
Smart Grid Ratings, President of Center for Smart Energy
Tier 1
California (stimulus, regulators,
utilities)
Texas (3 utilities)
Tier 2
Florida (load control,
communications)
Illinois (collaboration)
Pennsylvania (installation leader
25%)
West Virginia (comprehensive)
Ohio (policy education)
Tier 3
New Jersey (standards and best
practices)
Connecticut (distributed
generation and demand
response)
Colorado (private labs and
research)
2. The Program
Location
2. The Program
Technology
3. The Study
Authority
• Illinois Statewide Smart Grid Collaborative
• ICC Order
“[T]o develop a strategic plan to guide development of smart
grid in Illinois … and to recommend policies that the
Commission can consider for adoption.”
3. The Study
Findings
3. The Study
Findings
3. The Study
Arguments
Arguments in Favor of Rider
1. Smart grid investments strain cash flow and could deny
recovery due to regulatory lag.
2. Smart grid investment must compete with other
priorities.
3. Utilities face more risk, which could raise cost of capital
faced by the utilities.
4. Some smart grid benefits may not flow to utilities.
5. Unless a smart grid investment is needed to provide safe,
adequate and reliable service, it may occur more slowly,
if at all.
3. The Study
Arguments
Arguments in Favor of Rate Case
1. Base rate recovery promotes efficiency and may reduce the
likelihood of future costs.
2. Routine technology upgrades could be presented as
warranting rider treatment.
3. Test year matching of expenses and income is needed to
prevent excessive rates.
4. A rider allows excessive earnings and rates until the next
general rate case.
5. Smart grid investment does not pass the “big, volatile, and
beyond utility control” tests.
4. The Court
Procedure
• ICC Order challenged by ComEd in Commonwealth
Edison v. ICC
• Attorney General and Citizens’ Utility Board
intervened
I don’t think so,
ComEd!
4. The Court
Authority
• “Just and reasonable rates”
– [Public Utilities Act Section 1-101]
• “Prudent and reasonable costs of service”
– [Electric Service Customer Choice and Rate Relief
Law Section 16-108]
4. The Court
Analysis
• Riders are approved if
1. The cost is imposed on the utility
2. The cost does not affect the utility’s revenue
requirement
“We conclude that the Commission committed
reversible error because Rider SMP is not supported by
substantial evidence.”
4. The Court
Reasoning
• Expenses not unexpected, volatile, fluctuating
• Legislative mandate / ComEd’s decision
• Traditional ratemaking
5. The Future
Illinois
• ComEd petitioned for rehearing
• Current rate case
I got some
money… who
wants to build a
smart grid??
• Smart Grid Innovation Corridor
5. The Future
Stakeholders
“If the wrong decisions are
made in the regulatory
arena and the courts for
things like this, it really
could leave Illinois behind.”
– Vice President of
Regulatory Policy
“The smart grid pilot is
going well. We think it’s
important, and we
wouldn’t want to see it
jeopardized.” – Executive
Director
5. The Future
Other States
• Maryland
• Hawaii
• Michigan
• California
• Texas