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By David O'Brien
The total investment over 10 years is expected to top $3 billion, and will attract significant ancillary business investment as numerous vendors based in Illinois and new major players such as Silver Spring Networks establish operations in the state. And, most importantly, the legislation mandates the creation of more than 2,500 jobs.
A negative vibe
Yet, there was a palpable negative vibe throughout the event because both utilities face a very uncertain road to cost recovery for their projects, which could delay or entirely derail the whole effort.
The setting of the symposium was appropriate since IIT is a center of advanced technology learning and recently added its own micro grid on site. The young people at IIT represent the pivotal workforce that is needed to make the grid of tomorrow a reality. For many Illinois legislators, it was the prospect of igniting economic development that drew their support for last year's legislation. For others, including the utilities, it was the prospect of transforming the way utility customers are served and of increasing grid intelligence.
(The legislation was not without the kind of drama all too common in the political realm. The EIMA bill never enjoyed the support of the Governor, the Attorney General, the Chair of the Illinois Commerce Commission or the AARP. Throughout the process, all of them made their opposition known. In fact, the bill became law only after surviving a gubernatorial veto last fall.)
Politics seeps in
People who follow utility regulation understand that politics can seep into the process
As envisioned by legislators, the EIMA was to emulate the best tensions of the competitive marketplace. The goal was to make customers and communities the beneficiaries. As ComEd CEO Anne Pramaggiore put it this week, there is “an unassailable logic, a symmetry” to the new regulatory regime proposed by the EIMA. She went on to describe how utility transparency and accountability is front and center. And to say that they are moving away “from a least-cost model to a value-driven proposition.”
Unfortunately, some in Illinois want to remain in the old world. The bone of contention is a new “formula performance rate” that will determine the cost recovery the utilities are allowed. In both the ComEd and Ameren cases, opponents have thus far prevailed with novel arguments and interpretations of what the legislation had intended.
Those new interpretations dramatically reduce what the legislators intended and the utilities expected. The reductions were to key elements such as the interest rate and the amount of capital investment that will be measured in annual reconciliations. The resulting formula rate translates to drastic reductions in the amount of revenue the utilities will collect over the course of the 10-year program.
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