Institutional and Regulatory Issues and Challenges

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Institutional and Regulatory Issues and Challenges

• Chairman Charles E. Box
• Illinois Commerce Commission
• October 27, 2008

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Illinois
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Illinois Facts

• 12.9 mill. people, 5th largest state.
• 56,400 square miles, 24th largest state.
• Land of Lincoln
• Borders the Mississippi River and Lake Michigan.
• Springfield is the state capitol.
• Chicago is the largest city, 2.9 mill. within
  city limits, 9 mil. metro area.

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Three Branches Of Illinois Government
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Regulatory Agency
Created by the Legislature
Part of the Executive Branch
Subject to Judicial Review
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Legislature General Assembly

• Passes laws governing utility organization,
  business conduct, land condemnation, etc.
• Establishes overall public policies on market
  structure, environmental standards, etc.
• Empowers regulatory agencies to implement these
  laws and provides budgetary funding.
• Confirms the Executive-branch appointments of
  Commissioners.

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Executive - Governor

• Signs regulatory laws passed by the legislature.
• Appoints Commissioners.
• Participates in regulatory proceedings through
  the Attorney General.

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Judiciary

• Hears appeals of decisions made by the regulatory
  agency provides a check on the process.
• Hears challenges to and interprets laws passed by
  the legislature and signed by the governor.

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Regulatory Agency Purpose 1

• Oversees the operation of a given industry to
  ensure safe, reliable, and adequate service at
  the lowest reasonable cost to consumers.
• Provides utilities the opportunity to recover
  costs plus a reasonable return.
• Balances ratepayer and utility interests.
• Ensures utility services are provided within
  federal and state environmental requirements.

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Regulatory Agency Purpose 2

• Implements laws and public policies established
  by the legislature.
• Establishes public policy in those areas not
  mandated by the legislature.
• Decides cases based on the law and the facts
  presented in each case in an objective,
  non-partisan manner, adhering to due process.
• Adjudicates disputes.

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Regulatory Agency Embodies Three Branches

• Legislative Role
• Adopts rules implementing legislative priorities,
  e.g., electricity net metering, electricity
  procurement, telecommunications restructuring,
  towing restrictions.
• Establishes public policies in those areas where
  the legislature is silent.
• Creates generic policies applicable in a
  nondiscriminatory basis to all parties.

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Regulatory Agency Embodies Three Branches

• Executive Role
• Oversees industries ensuring the provision of
  safe, adequate, and reliable services at the
  lowest reasonable cost.
• Collects assessments on utility and
  transportation revenues.
• Enforces rules and orders.

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Regulatory Agency Embodies Three Branches

• Judicial Role
• Conducts fact-based proceedings on utility rate
  requests.
• Rules on disputes between utilities and
  customers.
• Hires Administrative Law Judges.

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Regulatory Agency Autonomy

• Allows the agency the freedom to render decisions
  based on
• The law and policy established by the
  legislature,
• Regulatory and ratemaking policy established by
  the agency,
• An impartial reading of the facts of each case,
  free from prevailing political whims.
• Can be difficult in practice!

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Due Process Preserves Fairness

• Agency procedures ensure all voices are heard.
• Rules governing rulemakings, rate cases, and
  disputes to ensure fairness.
• Restrictions on ex-parte communications prevent
  undue influence and secret correspondence.
• Discovery allows all parties to evaluate the
  evidence and provides sufficient time to counter
  it in the proceedings.

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Regulatory Agency AccountabilityIllinois

• State courts hear appeals of agency rules, rate
  case orders, and enforcement measures.
• Legislature provides general oversight, and the
  Joint Committee on Administrative Rules (JCAR)
  reviews all proposed rules.
• Governor weighs in on important matters affecting
  the citizenry.

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Regulatory Agency AccountabilityFederal

• State agencies must adhere to and implement the
  US constitution, federal utility laws, federal
  agency policies, and federal environmental
  regulations.
• US law and constitution grant great leeway to
  states to regulate locally, but once the
  transaction crosses state lines, US authority
  prevails.

• Federal appeals process
• differs from State process.

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Illinois Commerce CommissionTransportation
Moving Companies
Towtruck Operators
Railroad Crossings and Railway Safety
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Illinois Commerce Commission - Transportation

• Oversees and funds projects to improve safety at
  railroad crossings.
• Grade Crossing Protection Fund helps defray the
  costs.
• Most other railroad regulation is done by federal
  government.
• Grants licenses and receives complaints about tow
  truck and moving companies.

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Illinois Commerce CommissionInvestor-Owned
Public Utilities
Natural Gas
Electricity
Water and Wastewater
Telecommunications
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Electricity
Illinois Commerce Commission

• Retail services and distribution rates.
• Siting of most facilities and transmission lines.
• Certifying retail competitive suppliers.
• Competitive, unbundled industry structure.

Federal Energy Regulatory Commission (FERC)

• Wholesale sales.
• Unbundled Transmission.
• Some Transmission Siting.
• Regional Markets.
• Comparable, open access.

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Changes To Illinois Electricity Policies

• New procurement procedures.
• New Illinois Power Agency.
• Smart Grid Collaborative.
• Encouraging renewables.
• Renewable portfolio standards.
• Interconnection standards.
• Net metering.
• Encouraging greater energy efficiency and demand
  response.

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FERC Electricity Policies

• Encourages regional, wholesale markets through
  Regional Transmission Organizations (RTO),
  Independent System Operators (ISO), and regional
  reliability organizations.
• - Illinois utilities are part of PJM and MISO.
• Comparable, non-discriminatory, transmission
  access.
• Generation interconnection.
• Transmission pricing.
• Market-based wholesale
• rates.
• Some transmission siting.

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Current ISO-RTOs in US and Canada

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PJM Independent System Operator (ISO)


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Midwest Independent System Operator-MISO
Note that MISO encompasses an international bounda
ry
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Natural GasIllinois Commerce Commission

• Local distribution rates and service.
• Siting distribution facilities.
• Competitive, unbundled industry structure.
• Certifying retail competitive suppliers.

FERC

• Wholesale sales.
• Interstate pipelines.
• Siting Interstate Pipelines.
• Comparable open access.

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TelecommunicationsIllinois Commerce Commission

• Non-competitive, local services from traditional
  phone companies, not wireless, cable, or voice
  over internet protocol (VOIP).
• Certifying competitive suppliers.
• Emergency 9-1-1 services.

Federal Communications Commission (FCC)

• Interstate long distance.
• Spectrum allocations.
• Comparable, open access to interconnection
  facilities.
• Payphones.

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Illinois Commerce Commission Water And Wastewater

• Applies to investor-owned water and wastewater
  companies.
• Regulates rates.
• Oversees utility expansion and upgrades of
  facilities.
• Works within federal and state environmental laws.

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Acronyms
ICC FERC RTO PJM MISO
NERO PUC JCAR PSC FCC EPA
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Acronyms

• ICC Illinois Commerce Commission
• FERC Federal Energy Regulatory Commission
• RTO Regional Transmission Organization
• PJM RTO running from northern Illinois to the
  Atlantic
• MISO RTO serving the upper Midwest
• NERO National Electric Reliability Organization
• PUC State Public Utility Commission
• PSC State Public Service Commission
• FCC Federal Communications Commission
• EPA Environmental Protection Agency
• JCAR Illinois Joint Committee on Administrative
  Rules