Expanded Opportunities Under Clean Coal, Coal, and Renewable Energy Project Financing Bill  

July 29, 2009, Illinois Governor Pat Quinn signed into law the Clean Coal, Coal, and Renewable Energy Project Financing Bill (Public Act 96-0130 or “Bill”). The Bill amends the Illinois Finance Authority Act (“Act”) to expand the state’s bonding authority for certain projects from $2.7 billion to $3 billion and to expand the types of projects eligible for funding to include renewable energy projects.

Increased Funding

The Bill provides the Illinois Finance Authority with $300 million in new bonds, in addition to any remaining funds from the initial $2.7 billion, to offer to “Clean Coal, Coal, and Renewable Energy projects.”

Previously Eligible Projects Remain Eligible

Projects that were eligible for funding under the previous version of the Act were “Clean Coal and Energy projects.” These projects remain eligible for funding under the Bill, but have been reclassified as “Coal projects.”

“Coal projects” include:

  • New electrical generating facilities or new gasification facilities, which may include mine-mouth power plants;
  • Projects that employ clean coal technology;
  • Projects that provide scrubber technology for existing energy generating plants; or
  • Projects to provide electric transmission facilities or new gasification facilities.

Renewable Energy Projects Now Eligible for Funding

The Bill also expands the types of projects eligible for funding to include “Clean Coal projects” (different from Coal projects) and “Renewable Energy projects.”

“Clean Coal projects” include:

  • A clean coal facility or a clean coal synthetic natural gas facility as defined by the Illinois Power Agency Act;
  • Transmission lines and associated equipment that transfer electricity from points of supply to points of delivery for any eligible;
  • Pipelines or other methods to transfer carbon dioxide from the point of production to the point of storage or sequestration for eligible projects; or
  • Projects to provide carbon abatement technology for existing generating facilities. “Renewable Energy projects” include:
  • Projects that use renewable energy resources as defined by the Illinois Power Agency Act;
  • Projects that use environmentally preferable technologies and practices that result in improvements to the production of renewable fuels, such as cellulosic conversion, water and energy conservation, fractionation, alternative feed stocks, or reduced green house gas emissions;
  • Transmission lines and associated equipment that transfer electricity from points of supply to points of delivery for any eligible project;
  • Projects that use technology for the storage of renewable energy, including, without limitation, the use of battery or electrochemical storage technology for mobile or stationary applications.

Companies planning any Clean Coal or Renewable Energy projects should consult the Act to determine if they are eligible for funding.

Natural Gas Utilities now subject to Energy Efficiency Requirements

Public Act 96-033 amended the Illinois Power Agency Act to, among other things, create an Energy Efficiency Portfolio Standard (EEPS) for regulated natural gas utilities. The program, similar to one currently in place for electric utilities, requires natural gas utilities to develop efficiency programs. The program also allows the natural gas utilities to recover the costs of reasonable and cost-effective energy efficiency measures.

The program’s goal is to reduce natural gas use by specified percentages each year beginning after May 31, 2011. In the first year, the goal is to reduce natural gas use by 0.2%; by May 31, 2020, the goal is to reduce natural gas use by 8.6%.

Each year thereafter, natural gas use is required to be reduced by an additional 1.5% per year. If the costs to retail customers increase by greater than certain amounts, however, the increasingly stringent energy efficiency targets will be modified.

Natural gas utilities are responsible for the design, development, and filing of their energy efficiency programs. By certain dates, energy efficiency plans must be submitted to the Illinois Commerce Commission. The utilities must utilize 75% of the available funds associated with approved energy efficiency programs, and may outsource various aspects of program development and implementation. The remaining 25% of available funds must be used by the Department of Commerce and Economic Opportunity (DCEO) to implement energy efficiency measures. A minimum of 10% of the entire portfolio of costeffective energy efficiency measures must be procured from local government, municipal corporations, school districts, and community college districts.

The energy efficiency program is not intended to apply to large industrial users of natural gas. Specifically exempted are:

customers of a natural gas utility that have a North American Industry Classification System code number that is 22111 or any such code number beginning with the digits 31, 32, or 33 and (i) annual usage in the aggregate of 4 million therms or more within the service territory of the affected gas utility or with aggregate usage of 8 million therms or more in this State and complying with the provisions of item (l) of this subsection (m); or (ii) using natural gas as feedstock and meeting the usage requirements described in item (i) of this subsection (m), to the extent such annual feedstock usage is greater that 60% of the customer’s total annual usage of natural gas.

Subsection (m)(1) requires the natural gas utility to file an application with DCEO.

Public Act 96-033 also sets up a program for low-income families. This Percentage of Income Payment Plan option is designed to complement the existing Low-Income Heating and Energy Assistance Program (LIHEAP). These programs do not need to be included in the utility’s demonstration regarding the cost-effectiveness of energy efficiency measures.

Illinois Expands the Renewable Energy Portfolio Standard

In August 2007, Illinois adopted one of the most aggressive Renewable Energy Portfolio Standards in the country, requiring utilities to provide a steadily increasing percentage of their energy from renewable energy sources each year. On August 9, 2009, Governor Pat Quinn signed new legislation (Public Act 96-0159) that now requires alternative retail electric suppliers (i.e., entities other than Illinois jurisdictional utilities that sell electricity and are certified by the state) to meet the same standards. Accordingly, both utilities and alternative retail electric suppliers must now generate at least 5% of their energy from renewable energy sources by 2010 and 25% by 2025.

The new legislation also sets minimum amounts of energy that both utilities and alternative retail electric suppliers must obtain from specific energy sources. Since 2007, utilities have been required to obtain 75% of their renewable energy from wind. Under the new legislation, alternative retail electric suppliers must now meet a similar requirement and ensure that 60% of the renewable energy they supply is wind generated. Provisions in the new legislation also provide that alternative retail electric suppliers comply with legislation passed earlier this year and “source” some of their energy from clean-coal providers. Finally, the new legislation requires that by June 1, 2015, both utilities and alternative retail electric suppliers obtain 6% of their renewable energy supply from photovoltaics. If an alternative retail electric supplier fails to meet its obligations under the new legislation, the Illinois Commerce Commission can levy a fine or, if the supplier fails to meet its targets more than once in five years, revoke the supplier’s license.

Alternative retail electric suppliers are also limited under the new legislation in how they can meet their renewable energy portfolio obligations. Half of an alternative retail electric supplier’s renewable energy obligations must be met with payments to the Illinois Power Agency Renewable Energy Resource Fund. Illinois then uses that Fund to purchase, to the extent available, renewable energy from generators located in Illinois or adjoining states. An alternative retail electric supplier may then meet the remaining half of its obligations by any combination of self-owned generation, power purchases, or renewable energy credits.

The new legislation further expands a utility’s obligation to reduce its customers’ peak demand. Previously, electric utilities were obligated to implement measures to reduce peak demand by .1% a year for many of their customers that purchase energy under fixed-price bundled tariff services. Now, utilities are required to reduce demand by the same amount for many customers that purchase energy under real-time pricing plans.

Under the new law, utilities, in coordination with the Department of Commerce and Economic opportunity, are obligated to develop energy efficiency measures targeted at families with incomes 80% or less of the area’s median income. The amount that a utility spends on these measures should be “proportionate” to the utility’s annual revenue generated from households at or below 150% of the poverty line.

Finally, provisions in the new legislation also work to ensure that Tenaska Inc.’s proposed Taylorville coal gasification plant effectively captures carbon emissions. As proposed, the Taylorville plant will be capable of capturing 60% of its carbon emissions. Under the new law, the Taylorville plant must buy carbon offsets if it fails to capture at least 50% of its carbon emissions in a given year.