22-0067

This docket concerns the Illinois Commerce Commission's (ICC) implementation of new performance-based ratemaking frameworks for electric utilities, as mandated by the Climate and Equitable Jobs Act (CEJA). Specifically, it involves the review and approval of performance and tracking metrics for Commonwealth Edison Company (ComEd) under section 16-108.18 of the Public Utilities Act.

Key elements include:
- Establishment of new performance metrics and tracking metrics for ComEd as part of its multi-year rate plan for 2024-2027, with a focus on aligning utility incentives with state clean energy and equity goals 1.
- Intense scrutiny and debate over whether proposed metrics by ComEd are cost-effective, provide meaningful customer benefits, and sufficiently advance CEJA objectives, particularly around distributed energy resource (DER) integration, reliability, and equity 1, 2.
- The statutory requirement that performance metrics must result in customer benefits exceeding the costs of utility incentives, with detailed evaluation of the financial and societal impacts of each metric 3, 3.
- Disputes regarding the structure and amount of incentives (measured in basis points), the legality of penalty-only metrics, and whether certain metrics proposed by ComEd or intervenors should be adopted, modified, or rejected 3, 4.
- The integration of performance metrics with other regulatory processes such as grid planning and DER valuation to ensure coordinated advancement toward state policy goals 5.

The outcome of this docket sets the baseline and targets for ComEd's performance over the next multi-year rate period and determines the incentives or penalties tied to those outcomes. It is regarded as a foundational step in Illinois’ transition to performance-based utility regulation under CEJA 3.

The docket identifies several areas of growth, primarily driven by new regulatory requirements, utility performance metrics, and evolving grid needs. Key areas and considerations include:

Distributed Energy Resources (DER) Integration and Value

- Growth Area: Expansion and integration of DERs, including distributed generation, storage, and related grid services.
- Key Considerations:
- The timing and coordination between DER value investigations, integrated grid planning, and multi-year rate plans are crucial. Utilities must file plans and metrics before DER value investigations are complete, so ongoing adjustments and integration of findings are expected.
- The value that DERs bring to the grid should be quantified and linked to performance metrics, rewarding utilities for exceeding baseline benefits. Implementation details will evolve through future grid planning and tariff updates 1, 1.

Performance Metrics Development

- Growth Area: Establishment of new performance metrics covering reliability, affordability, equitable grid planning, and DER integration.
- Key Considerations:
- Many metrics are being set for the first time, so quantifying future costs and benefits is inherently challenging. The commission is required to rely on best available information and judgment rather than precise quantification at this stage.
- There is a focus on aligning utility incentives with state energy goals and ensuring metrics are reasonably expected to provide net benefits, even if full quantification is not possible until after implementation 2, 3, 2.

Affordability and Customer Benefits

- Growth Area: Increased focus on metrics that deliver affordability, especially for environmental justice and equity investment eligible communities.
- Key Considerations:
- Adjustments to affordability metrics (such as increasing the allocated basis points for incentives/penalties) are seen as providing significant customer benefits, but are contingent on commission approval and must be carefully scoped to avoid overlap with unrelated utility practices 4.

Peak Load Reduction and Demand Response

- Growth Area: Increased targets for annual peak load reduction through utility demand response programs.
- Key Considerations:
- Targets (such as 60 MW or 150 MW annual incremental reductions) are set based on existing program data, aiming to balance achievability with meaningful customer benefits (e.g., reduced capacity costs). There is debate over what constitutes practical and aggressive yet achievable targets 5, 6.

Data Availability and Measurement Challenges

- Growth Area: Improved tracking of investments and impacts across communities, especially for equitable grid planning.
- Key Considerations:
- There are practical limits to tracking investments at the community level due to the interconnected nature of the grid. Metrics must be designed to seek information within the utility's control to ensure feasibility and accuracy 7.

In summary, the docket highlights growth in DER integration, performance metric development, affordability, peak load reduction, and data-driven planning. Each area faces challenges related to timing, data availability, quantification of benefits and costs, and statutory or jurisdictional boundaries.

Stakeholders in this docket include:

- Commonwealth Edison Company (ComEd): The main utility whose performance metrics are under review.
- Illinois Commerce Commission (ICC): The regulatory agency overseeing and deciding the case.
- Community Organizing and Family Issues (COFI): A community-based nonprofit representing low-income and working families, and an intervener in the proceeding 1.
- Staff of the Illinois Commerce Commission: Provides recommendations, analysis, and testimony during the proceedings.
- Environmental Law & Policy Center (ELPC), Joint Solar Parties (JSP), Vote Solar (VS): Advocacy organizations involved as stakeholders, particularly in DER (Distributed Energy Resources) and interconnection metrics.
- Citizens Utility Board (CUB) and Environmental Defense Fund (EDF): Consumer and environmental advocacy groups participating in metric proposals.
- Intervenors such as the Illinois Industrial Energy Consumers (IIEC): Representing large energy users and raising concerns about metric impacts.

Stakeholder positions:

- ComEd: Has proposed a suite of performance metrics and has sought consensus with other parties. Some of its proposals have evolved based on feedback from staff and intervenors, such as lowering the suggested peak load reduction (PLR) target from 150 MW to 60 MW annually 2, 3.
- ICC Staff: Generally supports metrics that are achievable and realistic, and has recommended penalty-only reliability performance incentive mechanisms. Staff also advocated for a lower, more achievable PLR target 4, 2, 3.
- COFI: Focuses on affordability and equity metrics for low-income customers. COFI has reached agreements with ComEd on some issues but has also raised concerns about discriminatory impacts and affordability metric implementation 5, 5.
- ELPC/JSP/VS: Proposed combined metrics relating to DER interconnection and utilization for value (DERIUV/DUV metrics). Their proposals were opposed by ComEd and rejected by the Commission for not being fully formed or for merging distinct metrics into one 5, 5.
- CUB/EDF: Supported the ELPC/JSP/VS proposals regarding DER value and interconnection, but these proposals were ultimately not adopted 5.
- IIEC: Expressed concerns about how ComEd might achieve certain affordability metrics, such as letting arrearages rise without disconnection, but these concerns were resolved or deemed unnecessary for further docket action 5.

In summary:
- ComEd, ICC Staff, and intervenors like COFI, ELPC, JSP, VS, CUB, EDF, and IIEC are stakeholders.
- There is general consensus or compromise on some metrics (such as a lower PLR target), but opposition or rejection of others (like the combined DERIUV/DUV metric proposed by ELPC/JSP/VS and CUB/EDF) 2, 3, 5, 5.

The docket discusses several financial and timeline risks and concerns:

Financial Risks and Concerns:
- Difficulty in accurately calculating costs and benefits due to the newness of the material and lack of quantifiable societal benefits. Staff used proxies (e.g., value of a basis point for ComEd as $820,000/year) but acknowledged these are only estimates and that both costs and benefits are not precisely known, posing a challenge for cost-benefit analysis 1, 1.
- Risk that incentives set without proper cost-benefit analysis could allow utilities to propose shareholder incentives that do not relate to actual customer benefits, potentially undermining statutory customer protections and leading to incentives that do not ensure net benefits to customers 1.
- Concern that approving performance metrics without fully quantifying incremental costs could result in misalignment between incentives and actual financial outcomes, as precision in cost estimation is not feasible for all metrics at this stage 2.
- The need for future proceedings (such as grid plans or rate plans) to address and ensure that cost recovery mechanisms prevent issues like double recovery of costs by utilities 1.

Timeline Risks and Concerns:
- The metrics and associated programs are not fully developed; this docket is only the first step in a broader implementation process. Many details (such as specific costs, benefits, and implementation plans) will be addressed in future dockets and proceedings, creating uncertainty about the timelines for realizing benefits or incurring costs 1, 3.
- The performance period for the new metrics does not begin until January 1, 2024, with multiple overlapping proceedings (e.g., grid plan, multi-year rate plan) scheduled before then. This staged approach means that operational and financial outcomes will be further clarified over time, but also extends uncertainty about when benefits and risks will materialize 3.
- There is an inherent challenge in setting performance goals and incentives before all implementation details and program designs are finalized, increasing the risk of misalignment between projected and actual outcomes during the early years of the new framework 1, 2.

In summary, key risks include uncertainty in cost-benefit estimation, potential for misaligned incentives, risk of double cost recovery, and the need for further proceedings to resolve implementation and cost recovery details, all of which extend the timeline for achieving clarity and certainty in financial outcomes.

A timeline of key events and submissions in this proceeding includes the following:

- During the initial case, ComEd and other parties engaged in workshops and data requests related to the development of interconnection performance metrics. These included feedback rounds and publication of summary reports, such as the Performance and Tracking Metrics Workshop Summary Report to the Commission on December 1, 2021 1.
- There was a direct case phase, after which a compliance filing was ordered. ComEd submitted a compliance filing and shared a draft of its revised final metrics plan with Staff and intervenors for comment approximately three weeks before the compliance filing due date, with comments or corrections due 12 days before the filing 2.
- In the event of a rehearing and a new final order, ComEd proposed to submit an updated plan and Rider PIM within approximately two months of the rehearing order, following the same process as before (draft sharing, comments, and final submission) 2.

This approach and timeline have been consistent with previous agreements made between ComEd and Staff.