June 2015 First Notice Rules

Fee Assessment and Collection for Regular Procurement Events, Special Procurement Events and Other Services 
(Amendment Proposed)

To comply with Section 1-55 of the Illinois Power Agency Act [20 ILCS 3855/1-55], the Illinois Power Agency ("Agency") previously adopted "rules regarding charges and fees it is expressly authorized to collect in order to fund the operations of the Agency" through Title 83, Part 1200 of the Illinois Administrative Code. The minor change proposed by the Agency through these amendments is intended to address the following issue: while bidder fees are collected with the submission of bids and supplier fees are recovered through a supplier fee agreement approved prior to the procurement, the Agency's actual total number of winning procurement blocks are not known until after procurement event concludes. As a result, the IPA cannot set these fees so as to recover its actual costs; it must instead set fees in a manner designed to recover its estimated or expected costs. Through this rule change, the IPA is merely seeking to modify its administrative rules to reflect this timeline reality and adopt minor technical changes allowing it to recover estimated, and not actual, costs through its bidder and supplier fees.

Interested persons may comment on this proposed rulemaking by sending comments to:
Brian P. Granahan
Chief Legal Counsel
Illinois Power Agency
160 N. LaSalle St., Suite C-504
Chicago IL 60601
312/814-4635
Brian.Granahan@Illinois.gov

 The deadline for comments is August 10, 2015.

Monitoring of Contracts Administered by the Illinois Power Agency
(Under Development)

To comply with Section1-35(1) of the Illinois Power Agency Act [20 ILCS 3855/1-35(1)], the Illinois Power Agency ("IPA") is submitting the following Proposed Rules. The Proposed Rules will focus on the statutory mandate that the IPA shall:

Establish procedures for monitoring the administration of any contract administered directly or indirectly by the Agency; except that the procedures shall not extend to executed contracts between electric utilities and their suppliers." [20 ILCS 3855/1-35(1)].

In developing draft rules, the Agency was informed by the following considerations:

First, the Agency enters into contracts of vastly different types. For instance, a contract calling on the Agency to purchase renewable energy credits for a 5 year period from a solar photovoltaic site owner is very different than its contract with its procurement planning consultant for consulting services. A contract administration approach too prescriptive in nature would not allow the Agency the flexibility necessary to adapt its procedures as needed to effectively monitor the administration of all its contracts.

Second, the Agency is young and still growing. Founded in 2007 through the enactment of the Illinois Power Agency Act, the IPA had one employee at its inception and for its first few years of existence. The IPA currently has five full-time employees and one part-time employee, and is considering hiring a full-time dedicated contract administrator. Further, multiple legislative proposals this spring called on it to expand its statutory responsibilities (likely necessitating growth in its staff). Uncertainty surrounding future responsibilities and internal resources underscore the Agency's need for flexibility and the ability to responsively adapt.

Third, the Agency already maintains internal guidelines for the monitoring and administration of contracts. These are manifest in its internal policies and Fiscal Operations Manual, both of which are updated on an annual basis by the Agency.

Operational controls established through internal policies allow the Agency's significantly more adaptability than controls established through administrative rules, and can more easily be updated to reflect the Agency's needs, capacity, and experiences.

With these considerations in mind, the IPA has drafted contract administration rules that allow it to meet the statutory requirement for contract administration rule development while offering the flexibility necessary to handle the variety in contracts administered and adjust to any changes in its responsibilities.

Interested persons may comment on this proposed rulemaking by sending comments to:
Brian P. Granahan
Chief Legal Counsel
Illinois Power Agency
160 N. LaSalle St., Suite C-504
Chicago IL 60601
312/814-4635
Brian.Granahan@Illinois.gov

 The deadline for comments is August 10, 2015.

Uniform System of Accounts
(Amendment Proposed)

To comply with Section 1-35(1) of the Illinois Power Agency Act [20 ILCS 3855/1-5(1)], the Illinois Power Agency ("Agency") had previous adopted rules to implement "accounting rules and a system of accounts, in accordance with State law, permitting all reporting (i) required by the State, (ii) required under this Act, (iii) required by the Authority, or (iv) required under the Public Utilities Act." [20 ILCS 3855/1-35(3)].

The IPA is not seeking changes to the substantive or operative aspects of these rules. Instead, the Agency is seeking to make two very minor revisions to Part 1220 to correct errors embodied in Part 1220's adoption.

First, the Illinois Administrative Code cites the incorrect portion of the Illinois Power Agency Act as authority for Title 83, Part 1220. While the Code cites Section 1-35(1) of the IPA Act, the actual authority stems from Section 1-35(3) of the Act (as cited and quoted above). Section 1-35(1) contains authority for adopting rules related to contract administration, and not for a uniform system of accounts. The IPA thus seeks a change to ensure that the Code and associated online references contain the appropriate citation.

Second, Section 1220.110 contains a definition of "GAAP" (generally accepted accounting principles) that references those principles published by the Financial Standards Accounting Board. However, for a government agency such as the IPA, the applicable generally accepted accounting principles are actually published by the Governmental Accounting Standards Board (also known as "GASB").

Interested persons may comment on this proposed rulemaking by sending comments to:
Brian P. Granahan
Chief Legal Counsel
Illinois Power Agency
160 N. LaSalle St., Suite C-504
Chicago IL 60601
312/814-4635
Brian.Granahan@Illinois.gov

 The deadline for comments is August 10, 2015.

Prequalified Supplier Lists for Construction and Construction-Related Professional Services
(Under Development)

The IPA's authority for these rules extends from the following provision of the Illinois Procurement Code.

Sec. 30-20. Prequalification (b)

The Illinois Power Agency shall promulgate rules for the development of prequalified supplier lists for construction and construction-related professional services and the periodic updating of those lists. Construction and construction related professional services contracts over $25,000 may be awarded to any qualified suppliers, pursuant to a competitive bidding process.

[30 ILCS 500/30-20(b)].

Rules, the Agency was informed by the following considerations:

First, the Agency is not facing an urgent operational need to develop a list of prequalified construction firms. When the Agency was created in 2007, it was anticipated that there could be a need for new power plant construction to serve municipal utilities and rural electric cooperatives. A role was carved out for the IPA to potentially develop such projects. However, changes in electric prices, the electric power development industry, and the economy have all resulted in that function being unnecessary. As a result, the IPA does not anticipate developing any power plants in the short and medium term, and has no construction projects on the horizon. Indeed, because the development of such projects appears very remote, the Agency has refrained from establishing a Resource Development Bureau and is seeking statutory changes to make the establishment of this bureau optional.

First, the Agency is not facing an urgent operational need to develop a list of prequalified construction firms. When the Agency was created in 2007, it was anticipated that there could be a need for new power plant construction to serve municipal utilities and rural electric cooperatives. A role was carved out for the IPA to potentially develop such projects. However, changes in electric prices, the electric power development industry, and the economy have all resulted in that function being unnecessary. As a result, the IPA does not anticipate developing any power plants in the short and medium term, and has no construction projects on the horizon. Indeed, because the development of such projects appears very remote, the Agency has refrained from establishing a Resource Development Bureau and is seeking statutory changes to make the establishment of this bureau optional.

Second, the Agency's capacity to review individual construction firm qualifications is very limited. This is because, unlike entities such as the Capitol Development Board or the Department of Transportation, the Agency's statutorily prescribed involvement with construction firms is likewise limited-contained only to the unlikely possibility that a request is made for specific type of project (an "electric generation or co-generation facility"-a power plant) to serve a narrow segment of the market (Illinois municipal utilities, government aggregators, and rural electric cooperatives) upon those entities' request. The vast majority of the Agency's work involves the procurement of contracts for the delivery of energy, renewable resources, or similar products; these are fundamentally financial transactions. The Agency thus maintains no engineers on Staff and has limited technical expertise in other key areas. As a result, leveraging the work of entities that do have this expertise offers more efficient and reliable work than independent efforts.

Third, even if the Agency should rely on more qualified entities' work in actually vetting construction firms, it still must have safeguards built into its rules to protect its interest and the State's interest. Specifically, the Agency should still be able to exercise discretion over any list it develops and maintains, including the disqualification of firms should the Agency come across information demonstrating that a construction firm is illsuited for prequalification.

With these considerations in mind, the IPA has drafted the following rules for the development of prequalified supplier lists for construction and construction-related professional services and the periodic updating of those lists. The Agency believes that these draft rules allow it to meet statutory requirements while minimizing administrative burdens given the remote likelihood that it may need to call upon such a list.

Interested persons may comment on this proposed rulemaking by sending comments to:
Brian P. Granahan
Chief Legal Counsel
Illinois Power Agency
160 N. LaSalle St., Suite C-504
Chicago IL 60601
312/814-4635
Brian.Granahan@Illinois.gov

 The deadline for comments is August 10, 2015.

Recovery of Costs Incurred in Connection with the Cancellation of Facility Development and Construction 
(Under Development)

The IPA's primary authority for these rules extends from the following provision of the Illinois Power

Agency Act:

Sec. 1-35. Agency rules. The Agency shall adopt rules as may be necessary and appropriate for the operation of the Agency. In addition to other rules relevant to the operation of the Agency, the Agency shall adopt rules that accomplish each of the following:

Establish procedures for the recovery of costs incurred in connection with the development and construction of a facility should the Agency cancel a project, provided that no such costs shall be passed on to public utilities or their customers or paid from the Illinois Power Agency Operations Fund.

(20 ILCS 3855/1-35(2)).

Additional authority related to these rules can also be found in Section 1-80 of the Illinois Power Agency Act [20 ILCS 3855/1-80], as that Section describes at length why, when, and how the Agency would actually undertake the development and construction of a facility.

In developing draft rules, the Agency was informed by the following considerations:

First, there is a very low likelihood of the Agency developing an electric generation or co-generation facility in the foreseeable future. When the Agency was created in 2007, it was anticipated that there could be a need for new power plant construction to serve municipal utilities and rural electric cooperatives. A role was carved out for the IPA to potentially develop such projects. However, changes in electric prices, the electric power development industry, and the economy have all resulted in that function being unnecessary. Additionally, the law requires that the first facility developed by the Agency "shall be a facility that uses coal produced in Illinois" and "must be a clean coal facility . . . constructed in a location where the geology is suitable for carbon sequestration" [20 ILCS 3855/1-80(c)], presenting unattractive economics for potential counterparties.

As a result, the IPA does not anticipate developing any power plants in the short and medium term. As any project must first begin development before being cancelled, the likelihood of the Agency calling upon these rules is both very remote and prescribed to a very prescriptive and predictable path should it occur.

Second, the Agency would not choose to develop a facility at its own discretion. While the law does not expressly prohibit it from doing so (assuming other legal requirements of the project were satisfied, such as those concerning the initial facility), the law only envisions such projects serving "municipal electric systems, governmental aggregators, or rural electric cooperatives" [20 ILCS 3855/1-80(d)] with allowance only for selling "excess energy and excess capacity into the wholesale market" [20 ILCS 3855/1-80(f)].

As a result, any IPA electric generation or co-generation facility development would only occur should an Illinois municipal utility, governmental aggregator, or rural electric cooperative (or some combination thereof) do the following:

Identify a significant long-term electric supply need;

1. Determine that despite the strictures of the IPA Act (especially with respect to the type of facilities that can be developed), an IPA-developed project is the preferred way to meet that supply need
2. Be willing to enter into long-term power purchase agreements for the facility's output sufficient to allow the facility to be financed.

Third, parties should still retain remedies that would otherwise available to them at law. Simple fairness and good policy dictates that the rule should not preempt recovery from a party directly responsible for the cancellation of an otherwise viable project. For instance, if a project's failure stems from faulty or untimely work from a contractor or sub-contractor, then the IPA's administrative rules should not preclude recovery from those parties.

Fourth, individual projects and counterparties may require different cancelled project cost recovery procedures for successful development. The IPA Act envisions projects under $100 million in cost, projects between $100 million and $1 billion in cost, and projects over $1 billion and specifies different requirements for each. Similarly, the IPA Act envisions both clean coal facilities (which are likely to be large, expensive projects given the associated infrastructure) and renewable energy projects (which could be large and expensive, but may be small and less expensive) both potentially being developed. As the risk and consequences of project cancellation varies considerably by project type, flexibility is desirable.

With these considerations in mind, the IPA has drafted the following rules related to procedures for the recovery of costs incurred in connection with the development and construction of a facility should the Agency cancel a project. The Agency believes that these draft rules allow it to meet statutory requirements while allowing it the necessary.

Interested persons may comment on this proposed rulemaking by sending comments to:
Brian P. Granahan
Chief Legal Counsel
Illinois Power Agency
160 N. LaSalle St., Suite C-504
Chicago IL 60601
312/814-4635
Brian.Granahan@Illinois.gov

 The deadline for comments is August 10, 2015.