REPORT DIGEST

THE ILLINOIS POWER AGENCY – FUTURE ENERGY
JOBS ACT

PERFORMANCE AUDIT

Release Date:  May 11, 2021

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are
also available on the worldwide web at
www.auditor.illinois.gov

Background:

On July 21, 2020, the Legislative Audit
Commission adopted Resolution Number 153
(see Appendix A), which directed the
Office of the Auditor General to conduct
a performance audit of the Illinois
renewable portfolio standard (RPS) and
the Illinois Power Agency’s (IPA)
management of the Renewable Energy Credit
(REC) procurement process and Adjustable
Block Program.
The Illinois Power Agency was established
in 2007 by Public Act 95-481.  The IPA is
required to ensure that the procurement
of power in Illinois is conducted in an
ethical and transparent manner to ensure
that its mission to secure power at the
best prices the market will bear is not
impeded.  The IPA was established to
serve the people of Illinois by
administering electricity and renewable
resources planning and procurement
processes for Ameren Illinois Company
(Ameren), Commonwealth Edison Company
(ComEd), and MidAmerican Energy Company
(MidAmerican).

Key Findings:

• Illinois has not met the percentage-
based renewable energy goals identified
in the Illinois Power Agency Act (Act).
IPA officials stated that procured
renewable energy as a percentage of the
overall energy produced would be about 10
percent for 2019.  However, Section
1-75(c)(1)(B) of the Illinois Power
Agency Act requires the procurement of
renewable energy credits to be at least
16 percent of the overall electricity
produced by June 1, 2019, which suggests
that the dollars may not have been
maximized.  According to IPA officials,
the IPA had proposed in the 2018 Long-
Term Renewable Resources Procurement Plan
annual procurements designed to meet the
percentage-based goals; however, the ICC
in approving that Plan did not approve
those annual procurements. That decision
shifted the focus of the IPA’s authorized
procurements away from meeting the
percentage goals and focused only on
meeting the quantitative targets for new
wind and solar.  However, since the
percentage-based goals are not being met,
it likely means that future renewable
energy goals will not be able to be met
timely.

• There are two ways in which renewable
energy projects are procured: (1)
competitively and (2) through the
Adjustable Block Program.  Auditors
concluded the process in place was both
efficient and maximized the dollars spent
to increase the renewable portfolio
standard in Illinois for the competitive
procurement process.  However, auditors
could not find criteria to use to
determine whether funds were maximized or
whether they were spent efficiently for
the Adjustable Block Program.

Key Recommendations:

The audit report contains one
recommendation directed to the Illinois
Power Agency:
• The Illinois Power Agency should
continue to work to meet the renewable
energy percentage-based procurement goals
required by 20 ILCS 3855/1-75(c)(1)(B).


REPORT DIGEST

On July 21, 2020, the Legislative Audit
Commission adopted Resolution Number 153
(see Appendix A), which directed the
Office of the Auditor General to conduct
a performance audit of the Illinois
renewable portfolio standard (RPS) and
the Illinois Power Agency’s (IPA)
management of the Renewable Energy Credit
(REC) procurement process and Adjustable
Block Program.  The Resolution contained
several determinations.  Our assessment
of these determinations is shown in
Digest Exhibit 1. (pages 1-2) (Please see
PDF version of this document or full
report for Exhibit 1.)

Background

The Illinois Power Agency was established
in 2007 by Public Act 95-481.  The IPA is
required to ensure that the procurement
of power in Illinois is conducted in an
ethical and transparent manner to ensure
that its mission to secure power at the
best prices the market will bear is not
impeded.  The IPA was established to
serve the people of Illinois by
administering electricity and renewable
resources planning and procurement
processes for Ameren Illinois Company
(Ameren), Commonwealth Edison Company
(ComEd), and MidAmerican Energy Company
(MidAmerican).

During the audit period, the IPA was
comprised of 10 employees.  The Director
has been in the position since March
2013.  The IPA also contracts with
multiple vendors (NERA, Levitan, InClime,
Elevate, and Apprise) who help with
administrating the programs and
procurements. (page 3)

State Agencies Involved in Electricity
and Renewable Resources Procurement in
Illinois

The IPA prepares electricity procurement
plans on an annual basis.  For renewable
energy resources, the IPA developed a
Long-Term Renewable Resources Procurement
Plan in 2017-2018; that plan is required
to be updated on a biennial basis, with
initial planning and stakeholder feedback
activities.  The Illinois Commerce
Commission (ICC) is the State agency
tasked by law with regulating Illinois
electric utilities and approving the
IPA’s Long-Term Renewable Resources
Procurement Plan. (pages 4-7)

Energy in Illinois

According to the U.S. Energy Information
Administration, Illinois is the fifth-
largest energy-consuming state in the
nation.  The State's largest energy-
consuming end-use sector is industry.  It
also notes that Illinois is the 3rd
largest “net electricity exporter,” with
about one-fifth of the power generated
being sent to other states.  Since 2001,
nuclear and coal together have produced
as much as 97 percent of the total
electricity generated in the mid-2000s
dropping to 79 percent in 2019.  While
nuclear electricity generated in Illinois
has increased since 2001, electricity
generation from coal has declined as a
percent of the total energy output by
more than 50 percent, from 45 percent in
2001 to 22 percent in 2019. (pages 7-8)

Types of Renewable Energy Projects

There are two ways in which renewable
energy projects are procured: (1)
competitively and (2) through the
Adjustable Block Program.  Competitive
procurements are processes where many
sellers offer RECs from their proposed
wind and solar projects at competitive
prices in sealed-bid, pay-as-bid
procurement processes with bids selected
on the basis of price.  These projects
include utility-scale wind, solar, and
Brownfield solar.  Adjustable Block
projects are based on transparent,
administratively set prices and on open
enrollment and include community and
distributed solar.  Digest Exhibit 2
lists the type of project, the
procurement method, the annual cost, and
the weighted average price per REC.
(pages 16-17)  (Please see PDF version of
this document or full report for Exhibit
2.)

Managing and Administering the Renewable
Energy Credit Procurement Process

Section 16-111.5 Subsections (e) through
(i) of the Public Utilities Act (220 ILCS
5) outlines the requirements for the
competitive procurement of renewable
energy credits (the IPA is exempt from
the Illinois Procurement Code when
conducting these procurements).  This
process is where sellers offer renewable
energy credits from their proposed wind
and solar projects at competitive prices
in sealed-bid, pay-as-bid procurement
processes with bids selected on the basis
of price.  No issues were identified with
the procurements or the procurement
process. (pages 18-23)

Prices for Renewable Energy Credits

The prices per renewable energy credit
for utility-scale wind, utility-scale
solar, and Brownfield solar projects were
competitively procured following the
guidelines delineated in the Long-Term
Renewable Resources Procurement Plan.
The prices per renewable energy credit
for community solar and distributive
generation solar projects were
administratively determined through the
Adjustable Block Program.

Since the passage of the Future Energy
Jobs Act, the IPA has competitively
procured 21 contracts for utility-scale
wind, utility-scale solar, and Brownfield
solar.  The annual cost of these
contracts was approximately $28 million.
These contracts are 15 years in length.
According to the data provided by the
IPA, there have been 18,281 contracts
processed through the Adjustable Block
Program for an annual total cost of $54
million for 1,069,960 renewable energy
credits.  These contracts are also for 15
years. (pages 23-27)

Managing and Administering the Adjustable
Block Program

The IPA’s Long-Term Renewable Resources
Procurement Plan described in detail how
the prices for each block in the
Adjustable Block Program were determined.
The base contract price for each
applicant project was determined by the
project’s group, project type, project
size, and the block that the project was
in.  The IPA worked with its procurement
planning consultant (Levitan and
Associates) to adapt the CREST (Cost of
Renewable Energy Spreadsheet Tool) model
for use in determining REC prices for
community solar and distributed
generation projects.  The CREST model is
an economic cash flow model developed by
the U.S. Department of Energy National
Renewable Energy Laboratory.  It takes
various inputs for solar projects such as
hard costs, tax policies, depreciation
rates, expected rate of return, etc., and
uses those inputs to determine a
levelized cost of energy over a period of
time.

In order to participate in the program,
vendor applications were first subjected
to the review and approval of the program
administrator (InClime, Inc.), and only
approved vendors could have projects in
the program.  Vendor approval was based
on various legal and regulatory
requirements regarding both the vendor
itself and its owners.  Along with the
requirements that needed to be met by the
vendor, the vendor also had to provide
support showing that the installer it
intended to use met legal and regulatory
requirements.  In addition, technical
specifications and documentation
supporting that the vendor/developer was
contractually bound to the project were
required for each individual project.
(pages 24-31)

Community Solar Project Developers

Developers of community solar facilities
are located both within and outside of
Illinois; however, the projects
themselves must be located in Illinois.
Of the 406 total approved vendors, 67
have renewable energy credit delivery
contracts for community solar projects.

Based on data provided by the IPA,
auditors concluded that the IPA tracked
changes in community solar facility
ownership.  At the time of ICC approval,
there were 34 approved vendors with a
renewable energy credit delivery contract
developing 111 community solar projects
in Illinois.  For these 34 approved
vendors, auditors found that five (15%)
were headquartered in Illinois.  The
remaining 29 approved vendors were
headquartered in 14 other states.
Information from IPA showed the original
34 vendors sold projects to other
vendors, and as of October 2020, there
were now 67 vendors with a renewable
energy credit delivery contract
developing the 111 community solar
projects in Illinois.  For these 67
approved vendors, auditors found that 10
(15%) were headquartered in Illinois.
The remaining 57 approved vendors were
headquartered in 11 other states. (pages
32-34)

Diverse Solar Development Companies

There are rules and provisions designed
to ensure that small, downstate vendors,
as well as minority and women-owned
businesses are not discriminated against
when being selected for projects.
Additionally, Section 1-75(c)(7) of the
Illinois Power Agency Act contains a
requirement that REC procurements
conducted by the IPA shall provide
employment opportunities for all segments
of the population and workforce,
including minority and female-owned
business enterprises.  This provision
also prohibits discrimination based on
race or socioeconomic status, consistent
with State and federal law. (pages 35-37)

Efficiency and Maximization of Funds
Awarded and Vendor Vetting

Auditors found that the IPA, the ICC, and
their contractual program administrators
and monitors operate the program in
accordance with the Illinois Power Agency
Act and the Long-Term Renewable Resources
Procurement Plan.  Auditors concluded the
process in place was both efficient and
maximized the dollars spent to increase
the renewable portfolio standard in
Illinois for the competitive procurement
process.  However, auditors could not
find criteria to use to determine whether
funds were maximized or whether they were
spent efficiently for the Adjustable
Block Program.  While criteria could not
be identified, the process of determining
renewable energy credit prices for the
Adjustable Block Program was subject to a
public comment process and litigated
proceeding before the ICC as required by
the law, and the IPA’s prices utilized
were consistent with the Illinois
Commerce Commission’s Order.  Therefore,
prices for RECs were determined through
extensive regulatory proceedings.

Illinois has not met the percentage-based
renewable energy goals identified in the
Illinois Power Agency Act.  IPA officials
stated that procured renewable energy as
a percentage of the overall energy
produced would be about 10 percent for
2019.  However, Section 1-75(c)(1)(B)
requires the procurement of renewable
energy credits to be at least 16 percent
of the overall electricity produced by
June 1, 2019, which suggests that the
dollars may not have been maximized.
According to IPA officials, the IPA had
proposed in the 2018 Long-Term Renewable
Resources Procurement Plan annual
procurements designed to meet the
percentage-based goals; however, the ICC
in approving that Plan did not approve
those annual procurements. That decision
shifted the focus of the IPA’s authorized
procurements away from meeting the
percentage goals and focused only on
meeting the quantitative targets for new
wind and solar.  However, since the
percentage-based goals are not being met,
it likely means that future renewable
energy goals will not be able to be met
timely.  Auditors recommended that the
Illinois Power Agency should continue to
work to meet the renewable energy
percentage-based procurement goals
required by 20 ILCS 3855/1-75(c)(1)(B).

IPA has an extensive vendor approval
process.  Vendors are required to renew
their certification once a year.  The
process used to approve vendors include
the same factors used when selecting
vendors for community and rooftop solar.
During the annual financial audits of the
IPA, auditors reviewed this process and
found no issues. (pages 38-47)

Audit Recommendations

The audit report contains one
recommendation directed to the Illinois
Power Agency.  The IPA agreed with the
recommendation.  The complete response
from the IPA is included in this report
as Appendix C.

This performance audit was conducted by
the staff of the Office of the Auditor
General.

___________________________________
JOE BUTCHER
Division Director

This report is transmitted in accordance
with Sections 3-14 and 3-15 of the
Illinois State Auditing Act.

___________________________________
FRANK J. MAUTINO
Auditor General

FJM:SAW