Why is the 5% Utility-Held Collateral Required for All SREC Incentive Applications submitted to the ABP?
Why is the 5% Utility-Held Collateral Required for All SREC Incentive Applications submitted to the ABP?

Why is the 5% Utility-Held Collateral Required for All SREC Incentive Applications submitted to the ABP?

The Illinois Power Agency (IPA) published a revision to the Long-Term Renewable Resources Procurement Plan (LTRRPP) on April 20th, 2020. The LTRRPP is the legislative plan that created the Adjustable Block Program (ABP) and its corresponding rules, and is updated periodically as legally required. Prior to this change, Approved Vendors submitting projects to the ABP were allowed to request withholding of the 5% collateral from the first payment of energized projects. With the April 2020 update to the ABP Master REC Agreement, this exception was removed as the IPA felt Approved Vendors were waiting to submit projects until energized, limiting program oversight. This rule change is expected to better protect consumers.

A natural next questions is, since this change was effectively published over 18 months ago, why is it coming into effect now? While the REC Contract update created this change, the program was nearing the end of its capacity for all blocks, and did not begin using the new contract. To minimize disruption to the program the new contract was formally adopted when the program re-opened on December 14th, 2021.

The specific language is posted on page 156 of the LTRRPP revision published here. The relevant language is quoted below:

In the Initial Plan, the Agency provided an option to allow an Approved Vendor to be able to forgo
posting collateral for a system that was already energized and instead have that collateral withheld
from the REC payment. The intent of that provision was to allow systems that had been developed
prior to the program launch to have a simplified process, recognizing of those systems’ absence of
development risk. However, the Agency has observed that this process has had an unintended
consequence of encouraging some Approved Vendors to submit projects only after their energization
as a way of avoiding any collateral obligation. If the project does not apply until after it is built,
enforcing and ensuring consumer protections (and other program requirements) becomes more
challenging. Ultimately, consumers are better served if their project can be reviewed and approved
by the program (and then submitted to the ICC for approval) prior to being built. For this reason, the
Agency will require upfront collateral in all cases, including for energized systems.