On several occasions, we have argued that Illinois leaders should act swiftly to adopt the Clean Energy Jobs Act. Now, we see renewed evidence that the legislation needs to be adopted quickly to defend Illinois customers from skyrocketing electricity prices and protect the environment from dangerous pollution. Indeed, the clock is ticking if Illinois leaders want to prevent such an outcome.
After more than a year awaiting a decision, the Federal Energy Regulatory Commission today issued an order that pertains to PJM Interconnection’s capacity market. This market was created to ensure there is enough power reserves in the region spanning portions of Illinois, 12 other states and the District of Columbia to maintain reliability during extreme weather or other unplanned events.
Illinoisans may not realize it, but in addition paying for the energy they use, they also pay for power to be on standby for extreme events, like a polar vortex or heat wave. But they’re about to pay a lot more under this new ruling from FERC — both in electricity bills and environmental health costs.
A big cost hike for customers
While actual electricity prices have been relatively low in recent years, “capacity” has steadily grown as part of peoples’ bills. According to the Illinois Commerce Commission, capacity now accounts for approximately one-fifth of the supply charge on a customer’s bill. In Northern Illinois, these capacity payments total $1.8 billion per year, in exchange for the promise that power plants will be available for the top five to 10 highest-use hours in a year.
At an ICC hearing earlier this year, a representative of PJM admitted that the grid operator’s market design leads to far more capacity than they need — almost 75% more, an amount he called “clowny.”
This decision will stunt new renewable growth, instead rewarding existing resources including fossil fuel plants in Illinois. Carbon-free resources that are deemed to benefit from state policies would have a hard time competing in this market.
That’s why this ruling was sought by big out-of-state corporations that own fossil fuel power plants. As the market stands now, it has become more difficult for these outdated plants to compete in the face of new technologies like solar and wind, which are becoming cheaper to build and operate.
By prioritizing the capacity reserve of polluting energy, FERC’s decision is expected to increase customer costs by $864 million, according to a report from Grid Strategies, LLC. This is believed to be the largest electricity cost increase in state history.
Why is CEJA the right response?
Under the Clean Energy Jobs Act, the Illinois Power Agency — instead of PJM — would be empowered to conduct the state’s capacity market auction.
The IPA is well-positioned to carry out this role, as it already manages the power purchases of the state’s biggest utilities and its mission includes protecting customers from unnecessary cost hikes. Reforming Illinois’ capacity market in this way would give the state unprecedented control to decide which types of resources — including those that are carbon-free — best meet the needs of the state and ensure that northern Illinois customers save money.
Action needs to be taken quickly. The next PJM auction is set for early 2020, making it essential that Illinois act immediately to avoid cost spikes and damage to our clean energy future.
We are encouraged by Gov. Pritzker’s recent comments suggesting that energy legislation will be part of the coming year’s agenda. We hope that he and lawmakers take note of the PJM decision and act without any further delay.