An Illinois Perspective

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1 Other State Models: An Illinois Perspective SADZI M. OLIVA, ACTING COMMISSIONER ILLINOIS COMMERCE COMMISSION JULY 21, 2017

2 Disclaimers Any views, statements, and opinions expressed in this presentation do not necessarily represent the views, official policy or positions of the Illinois Commerce Commission ( ICC ), its Commissioners, or other ICC employees. Ex-parte rules Please do not discuss any information related to a docketed proceeding pending before the ICC. Thank you for your understanding.

3 The Illinois Commerce Commission The ICC's mission is to balance the interests of consumers and utilities to ensure adequate, efficient, reliable, safe, and least-cost public utility services.

4 An Illinois Snapshot Deregulated / Retail-Choice State Electric Service Customer Choice and Rate Relief Law of 1997 Customers are allowed to buy electricity from competing retail electric providers, called alternative retail electric suppliers (ARES), that are approved to do business in the state. Two RTOs: PJM (Northern MISO (Southern)

5 Principles for Model Change Efficiency Innovation Collaboration

6 Performance Based Regulation ( PBR ) in Illinois Energy Infrastructure Modernization Act (EIMA) Enacted in October 2011 Public Act PBR structure directly related to utility investments in smart grid. Benefits & risks are shared between utilities & customers, while modernizing the grid When a utility files a tariff, it must develop and file multi-year metrics designed to achieve improvement over certain baseline performance values. Financial penalties are imposed on a utility that fails to meet statutorily-set metrics and performance goals, for the 12-month period in which the deficiency occurred through a separate tariff mechanism, which shall be filed by the utility together with its metrics. Source: 220 ILCS 5/

7 Comparison of Two Ratemaking Proceedings 7 Traditional Rate Case Formula Rate Case Rates set for an indefinite period. Rates are set to recover representative costs on a going forward basis. Test year. Utility files new rate case when its earnings are deemed insufficient. 11 month process. No reconciliation or true-up to actual costs. Rates set annually and takes effect the following January. Rates set to recover actual costs for the next year using estimates based on prior year. Utility files updated formula rate inputs annually by May 1 to set next year s rates. 240 day process. Annual reconciliation filed with annual update to formula.

8 Value Provided by PBR: Infrastructure upgrades Reduction and frequency of outages Renewable resources integration Smart Grid upgrades AMI deployment Customer Benefits Electric bill savings Job creation

9 Renewables in Illinois Future Energy Jobs Act (FEJA) Enacted November 2016, Effective June 2017 Public Act Strengthened Renewable Portfolio Standard Percentage-based targets remain: 25% by 2025 New pathway toward targets Renewables Wind & Utility-Scale Solar Development Community Solar Workforce Development

10 Supplier Diversity in Illinois Supplier Diversity Goals (220 ILCS 5/5-117) Annual Report PBR Included in Filing Annual Supplier Diversity Workshop

11 NextGrid Illinois Utility of the Future Study

12 What is NextGrid? Illinois consumer-focused, utility of the future initiative that will be: I nclusive C omprehensive C ollaborative Spearheaded by the Illinois Commerce Commission, under the leadership of Chairman Sheahan.

13 What will NextGrid Yield? A collaborative forum in which the electric utility industry and other stakeholders can develop a shared base of information and work towards building consensus on critical issues facing the utility industry now, and as it continues to rapidly transform. A report by stakeholders for stakeholders that outlines relevant issues, opportunities and challenges, and provides recommendations aimed at, but not limited to, empowering customers and communities, driving economic development, and optimizing the utility industry, in order to achieve a 21st Century regulatory model that supports innovation. Sources: ICC Press Release June 30, 2017; ICC Resolution, Regarding Illinois Consideration of the Utility of the Future: NextGrid Grid Modernization Study, March 22, 2017.

14 How will NextGrid work? Led and overseen by the ICC Assisted by an outside facilitator Individual and/or organization: TBD Targeted completion time: Approximately 18 months

Starting Point Stakeholder Initial Feedback March 2017 NextGrid Announcement ICC Resolution Citizens Utility Board ( CUB ) Illinois Attorney General s Office CUB looks forward to participating in

This is an excellent opportunity to help lay the regulatory groundwork for an energy future that gives consumers the tools they need to take advantage of a more reliable and affordable electricity

15 Starting Point Stakeholder Initial Feedback March 2017 NextGrid Announcement ICC Resolution Citizens Utility Board ( CUB ) Illinois Attorney General s Office CUB looks forward to participating in NextGrid, and we thank the ICC for launching this effort. The energy industry is undergoing dramatic changes, and we need to make sure that consumer value is maximized. This is an excellent opportunity to help lay the regulatory groundwork for an energy future that gives consumers the tools they need to take advantage of a more reliable and affordable electricity system. Dave Kolata, Executive Director We are pleased to participate in this discussion to ensure any new energy proposals are affordable and focused on the consumer s best interest. With energy efficiency and solar options increasingly available, reduced electricity grid usage should be reflected in customers' bills. Attorney General Lisa Madigan

16 NextGrid Timeline March 2017 NextGrid Announcement ICC Resolution Comment Collection May 2017 NextGrid Comments Released

17 Stakeholder Comments Great Plains Institute & the Center for Energy and the Environment: GPI and CEE commend the Commission for initiating the NextGrid process With respect to many states beginning this process to address customer choice, distributed generation penetration, and others pertinent issues, the environmental organizations added that there is no one size fits all method to address these matters, and states are right to initiate a process that suites their unique circumstances. Midwest Energy Efficiency Alliance: This effort will help ensure Illinois ratepayers benefit from innovation in the fields, of technology, finance, and ratemaking. In addition to other recommendations, MEEA proposes that the study address programs that assist the economically disadvantaged customers to identify how can the ICC work with other state and local agencies to improve the coordination of program delivery and what metrics might be adopted to better measure the impacts of these programs. ComEd: Amidst this accelerating change, driving value to the customer and facilitating economic growth has never been more critical and constant. Once again, Illinois stands at the center of the intersection between customer, commerce, and innovation. With respect to the ICC s collaborative endeavor, ComEd further adds that all these views should and need to be raised, heard and thoughtfully and respectfully discussed in the NextGrid initiative.

18 NextGrid Timeline March 2017 NextGrid Announcement May 2017 Stakeholder Comments Released June 2017 Request for Independent Facilitator Criteria July 2017 Recommended Criteria for Independent Facilitator Due

19 NextGrid Next Steps: Select a facilitator Establish working groups Interim Reports Final Report Source: ICC Resolution, Regarding Illinois Consideration of the Utility of the Future: NextGrid Grid Modernization Study, March 22, 2017.

20 Notice of Inquiry ( NOI ) on Cloud-Computing As utilities adopt various cloud computing services, regulators will have to determine how the costs of those services will be accounted for and treated in the ratemaking process. Led by Chairman Brien J. Sheahan, the NOI is a fact gathering tool for the ICC to seek comments from the public and industry to help determine whether utility investment in cloud computing is prudent and whether leveling the playing field between cloud and on-premises solutions would encourage utilities to make the most cost-effective investments. NOI Conclusion & Recommendation: [c]urrent regulatory accounting rules have not kept pace with technological innovation. Utilities should be encouraged to make decisions based on business and ratepayer needs. Accounting rules should be technology agnostic and based on the function that the technology serves. ICC will consider initiating a rulemaking to clarify the regulatory accounting rules to provide comparable accounting treatment of on-premise and cloud-based computing systems. Sources: ICC Press Release February 10, 2016; Report to the Commission on Notice of Inquiry Regarding the Regulatory Treatment of Cloud-Based Solutions, April 7, 2017.

21 Thank You!

NATIONAL GOVERNORS ASSOCIATION ENERGY INNOVATION SUMMIT ACTING COMMISSIONER SADZI M. OLIVA ILLINOIS COMMERCE COMMISSION

NextGrid NATIONAL GOVERNORS ASSOCIATION ENERGY INNOVATION SUMMIT ACTING COMMISSIONER SADZI M. OLIVA ILLINOIS COMMERCE COMMISSION Questions to answer about NextGrid: What is it? Why is it important? How