A Grand Jury investigation, FBI raids on Illinois legislators and utility lobbyists, and sudden resignations by top utility executives could turn the state's emerging energy transition into a missed opportunity.
Illinois lawmakers, utility leaders and other stakeholders have been working toward a 21st century power system, including a more ambitious clean energy mandate, and a smart delivery system. Their proposed Clean Energy Jobs Act (CEJA) offers all that, but allegations of misuse of ratepayer money could compromise its passage.
"The U.S. attorney and the FBI tend not to proceed frivolously with search warrants or a grand jury investigation," Executive Director of Illinois advocacy group Environmental Law and Policy Center (ELPC) Howard Learner told Utility Dive. Bills backed by the utilities may be problematic due to the "black cloud of the serious federal investigation" into the misuse of ratepayer monies for improper lobbying practices involving Commonwealth Edison and Exelon executives and prominent Illinois polticians.
But stopping Illinois from moving toward clean energy "is not going to happen," CEJA chief sponsor Rep. Ann Williams, D, told Utility Dive. "Any inappropriate, unethical or even illegal behavior will not impact our efforts. The utilities' role may be less, due to these ongoing headline issues, but the Clean Jobs Coalition and other groups pushing for renewables will drive this."
There are three reasons Williams may be right, stakeholders told Utility Dive.
First, clean energy advocates see in the CEJA an important opportunity to grow renewables. Second, utilities see revenue in the Act's broad electrification plan, power market revisions and energy efficiency funding. Third, consumer advocates believe the CEJA can reduce customer bills. None want to see these opportunities missed.
The House version of the CEJA was adopted by Rep. Williams' Energy Committee but stopped in the Rules Committee during the 2019 session. The Senate version remains in its Rules Committee. Sponsors and supporters promise to persist toward 2020 passage, despite the hurdles.
The black cloud
The unfolding investigations into allegations of possible legal or ethical violations by utility lobbyists and their political associates have multiple tangled strands.
The FBI served two subpoenas in a Grand Jury investigation into lobbying practices by Exelon, according to its most recent quarterly filing with the Securities and Exchange Commission (SEC). The investigation includes Commonwealth Edison (ComEd), one of Exelon's six investor-owned utility (IOU) subsidiaries and the dominant electricity supplier to Chicago and northern Illinois.
The U.S. Attorney for the Northern District of Illinois is reportedly pursuing evidence pertaining to interactions between multiple ComEd and Exelon lobbyists and executives, and a range of Chicago and state level public officials.
One subpoena sought information "including, but not limited to, rate increases," according to the Chicago Tribune.
After the subpoenas were served, Exelon Utilities CEO Anne Pramaggiore retired unexpectedly and prematurely resigned as Chair of Chicago's Federal Reserve Bank without explanation.
No charges have been brought so far in what is one of Illinois' "most aggressive anti-corruption efforts," according to WBEZ radio, National Public Radio's Chicago affiliate. Tens of millions of dollars in ComEd payments to lobbyists, and comparable amounts in political contributions to allegedly involved state and local representatives were identified in a WBEZ search of available federal records on utility and political officials involved in the investigations.
Exelon and ComEd lobbying practices are also being investigated by the SEC, Exelon's Q3 2019 report disclosed.
In response to the investigations, Exelon attorneys initiated an independent effort to put its lobbying practices "beyond ethical reproach," Exelon CEO Chris Crane said Oct. 31.
The allegations have already impacted the CEJA debate.
Clean Jobs Coalition (CJC) members recently agreed to stop negotiating with Exelon and ComEd, which raises doubts about the bill's passage. And state lawmakers seem to be stepping back from utility-related issues, according to local reports. Multiple legislators did not respond to repeated Utility Dive requests for comment.
"It's hard to imagine a scenario where the General Assembly advances a bill supported by Commonwealth Edison and Exelon until we know what's going on," Sen. Don Harmon, D, told Crain's Chicago Business Oct. 24.
This makes the spring legislative session a test for Gov. J.B. Pritzker, D, who ran in part in 2018 on bringing the state to 100% renewables by 2050. To fulfill those promises, he must "ensure that the public has confidence in any energy proposals," his spokesperson Jordan Abudayyeh emailed Utility Dive. The governor's goal is still "moving legislation in the next regular legislative session."
Will clean energy survive?
In 2016, southern Illinois' dominant IOUs — Exelon, ComEd and Ameren — successfully negotiated with consumer advocates and environmental groups under the CJC, leading to the state's landmark Future Energy Jobs Act (FEJA).
To extend FEJA's economic and energy sector benefits, clean energy and consumer advocate members of the coalition followed the 2016 template and engaged with the utilities on CEJA, until the seriousness of the investigations became clear.
CEJA would move Illinois to zero emissions by 2030 and 100% renewables by 2050. Its 80-plus provisions would also accelerate transportation and building electrification in Illinois, fund energy efficiency and focus on economic justice for underserved communities.
The legislation could lead to "$39 billion of direct private investment into Illinois by 2030" and see "$1.5 billion per year invested directly into workforce and labor expenditures," according to an October study by The Accelerate Group. "The net gain of local and state income tax, sales tax, and property tax revenue exceeds $6 billion over the next 20 years."
The CJC's work to get the bill enacted will proceed, but "utilities' needs will no longer drive the conversation," Rep. Williams said. "They will be included because they deliver power, but the environmental organizations and the clean and renewable energy advocates will now lead a conversation about what our communities need."
CJC's leverage without utility support was demonstrated in its success at blocking a ComEd-Ameren bill to extend formula rates, which would have kept the utilities' spending away from rate case scrutiny for 10 years, Accelerate Group President and CEJA spokesperson Andrew Barbeau told Utility Dive.
The renewables-backed Path to 100 Act has also created tension between environmental and renewables groups, according to some observers. Path to 100 advocates believe the CEJA's broad scope could undermine their goals.
Path to 100 targets the same zero emissions and 100% renewables goals as CEJA, but also focuses entirely on renewables procurement and incentives, "critical to preventing a boom and bust cycle" for renewables companies, Solar Energy Industries Association (SEIA) Midwest Regional Director Nakhia Morrissette emailed Utility Dive.
CEJA doesn't clearly define how renewables growth will be funded into and through the 2020s, Path to 100 advocates told Utility Dive.
But CEJA covers most of Path to 100's priorities, Natural Resources Defense Council (NRDC) Illinois Clean Energy Advocate J.C. Kibbey told Utility Dive and advocates "share many of the same objectives."
"CEJA will most likely be the frame for energy and climate legislation," he said.
Both bills would increase the 2.67% cap on the FEJA-initiated bill charge to pay for accelerated renewables growth.
"The existing cap is raised to 4.88% by the July amendment to the CEJA, which is slightly more than the Path to 100 increase," Kibbey said.
At its present pace, Illinois will get to only 8% renewables by 2025, Accelerate's Barbeau said. To "ramp up faster," CEJA would provide $700 million per year by 2023 instead of Path to 100's $568 million per year by 2026, he said.
The state's environmental and renewables advocates are not "naïve" enough to let bill differences or corruption scandals block legislation, Union of Concerned Scientists (UCS) lead Midwest policy analyst Jessica Collingsworth told Utility Dive.
A major reform, proposed under CEJA, to the way Illinois electricity providers procure energy to meet unexpected demand spikes is the "critical difference" between it and Path to 100, Collingsworth said.
That reform could offer common ground because most stakeholders, including utilities, see it as urgently needed.
"There is an urgent need to protect Illinois consumers from a proposed change in the PJM Interconnection capacity market," Illinois Citizens Utility Board Executive Director Dave Kolata told Utility Dive. ComEd buys power in advance in PJM's capacity market, and Exelon and ComEd resources are sold into it to meet unexpected demand spikes.
The Federal Energy Regulatory Commission is expected to soon issue an order making resources that receive state credits for emissions-free generation, like nuclear's zero emissions credits and renewable energy credits, non-competitive in the PJM capacity market, Kolata said.
The anticipated changes are part of a "major policy shift" at FERC, according to an August paper by power market consulting firm Grid Strategies. The commission is moving toward accepting fossil fuel advocates' argument that "state support distorts the wholesale market, making rates unjust and unreasonably low."
The increased cost to Illinois electricity customers could be $864 million per year, according to a November report by Grid Strategies.
CEJA proposes the Illinois Power Agency "take over capacity procurement for the state" and "prioritize procurement of lower-priced clean energy and zero carbon resources," NRDC's Kibbey said. "It would procure fossil fuel generation only if other resources are unavailable to meet demand spikes."
A 5% "consumer protection adjustment" to power provider compensation guarantees the Illinois capacity market would reduce current capacity costs $250 million annually in the state, Accelerate's Barbeau added.
Though renewables industries remain focused on the "immediate" need to fund renewables deployment, the market reform might be "workable" and worthy of "careful consideration," Morrissette said.
Such market reform could, however, raise capacity prices "by a very significant amount," PJM Market Monitor President Joseph Bowring told Utility Dive. It will depend on the market's capacity price, and the CEJA proposal "gives Exelon market leverage in Illinois because it owns half the state capacity."
Oversight will be "hugely important," Rep. Williams responded. "The state capacity market can be designed with the oversight needed to prioritize procurement of renewables and clean energy with an eye toward phasing out nuclear energy."
Ameren Illinois declined Utility Dive's interview request and ComEd declined to directly address the CEJA capacity market proposal. But Exelon sees "an urgent need for the state to take control of the capacity procurement of zero-carbon energy resources," its senior VP for state government relations, David Fein, told E&E News in March.
Consumer advocates support capacity market reform to lower bills. Renewables and environmental groups support it to grow renewables. And utilities support it to increase revenues. Political leaders believe oversight can be exerted.
This common ground could help drive the CEJA forward, they agreed.
Will opportunities be missed?
Legislation to accelerate renewables "should not be held hostage" while the federal investigation of Exelon and ComEd goes on, ELPC's Learner said. But progress can wait until "the overhanging legal and investigation issues are resolved."
CJC is not inclined to wait and is working for CEJA become law in the 2020 legislative session that opens in January, UCS's Collingsworth said.
"CEJA has 32 sponsors in the Senate, which is more than enough votes to pass it, it has 56 sponsors in the House, which is only 4 votes short of a majority, and the Governor has clearly expressed support for moving clean energy legislation in the spring session," she said.
This is a very different political environment than when FEJA required utility support for passage, NRDC's Kibbey said. "Energy policy in Illinois no longer needs to be centered on what's best for the utilities, and the chance of good, clean energy legislation moving in the 2020 session is very good."
Correction: The following statement was misattributed: A 5% "consumer protection adjustment" to power provider compensation guarantees the Illinois capacity market would reduce current capacity costs $250 million annually in the state. The story has been updated with the correct attribution.