ILLINOIS POLLUTION CONTROL BOARD
IN THE MATTER OF:
NATURAL GAS-FIRED, PEAK-LOAD
ELECTRICAL POWER GENERATING
FACILITIES (PEAKER PLANTS)
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R01-10
Testimony on Behalf of
Commonwealth Edison Company
Arlene A. Juracek, P.E.
Vice President, Regulatory and Legislative Services
Commonwealth Edison Company
Steven T. Naumann, P.E.
Transmission Services Vice President
Commonwealth Edison Company
August 16, 2000
Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
1
Commonwealth Edison Company
This testimony is submitted on behalf of Commonwealth Edison Company
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(“ComEd”) by Arlene A. Juracek and Steven T. Naumann.
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I, Arlene A. Juracek, am ComEd’s Vice President, Regulatory and Legislative
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Services. I hold a Bachelor of Science in Mechanics/Mechanical and Aerospace
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Engineering from Illinois Institute of Technology and a Masters of Management
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from Northwestern University. I am a Registered Professional Engineer in the State
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of Illinois. I have been employed by ComEd since 1972. During my employment, I
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have held positions in nuclear station engineering, sales, division administration,
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rates, market research, load forecasting and analysis and strategic analysis. I am
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an officer of both ComEd and Unicom Corporation, ComEd’s parent company, and
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I serve on the Unicom executive strategic advisory team.
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My major duties are to provide executive oversight and direction of the
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Distribution Pricing Department and the development and implementation of retail
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open access in ComEd’s service territory, as well as state regulatory and legislative
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activity. I am responsible for the development of ComEd’s retail regulated prices
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and tariffs, including its delivery services tariffs, and for the development of the
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business processes required to make open access work, including ComEd’s open
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access implementation plan.
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Apart from my ComEd duties, I serve as Chairperson of the Mount Prospect
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Zoning Board of Appeals.
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I, Steven T. Naumann, am Transmission Services Vice President of ComEd. I
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hold a Bachelor of Science degree in Electric Power Engineering and a Master of
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Engineering degree in Electric Power Engineering, both from Rensselaer
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Polytechnic Institute in Troy, New York, and a J.D. degree from Chicago-Kent
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
2
Commonwealth Edison Company
College of Law. I am a Registered Professional Engineer in the State of Illinois. I
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am also an attorney licensed to practice law in the State of Illinois.
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After I received my Master’s degree in 1972, I served as an engineering
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officer in the United States Air Force, assigned as the Base Electrical Engineer at
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Reese Air Force Base, Texas. Upon leaving active duty in 1975, I joined ComEd
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and have been continuously employed by ComEd since that time. At ComEd, I
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have held positions in the System Planning Department, Interconnection Planning
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Section, Wholesale Marketing Department, and Transmission and Distribution
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(T&D) Regulatory Services Department. I have held temporary assignments with
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the Mid-America Interconnected Network (MAIN), the regional reliability council
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responsible for much of the Midwest, first as Assistant Systems Power Coordinator
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and later as Systems Power Coordinator.
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My responsibilities include managing the Transmission Services Group, as
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well as serving on industry committees and task forces such as the Market
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Interface Committee of the North American Electric Reliability Council and the
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MAIN Dispute Resolution Committee. My area is responsible for all filings with the
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Federal Energy Regulatory Commission, or FERC, administration of ComEd’s Open
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Access Transmission Tariff, interfacing with independent power producers
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regarding interconnection with ComEd’s system, training of ComEd personnel on
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the Standards of Conduct implementing FERC Order No. 889 and implementation
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of restructuring at the federal level, such as the implementation of a multi-utility
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regional transmission organization.
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We are submitting this testimony jointly as a panel. While we are both
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knowledgeable about many of the details of ComEd’s role in the restructured
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electric industry, appearing together allows us to pool our knowledge of the issues
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
3
Commonwealth Edison Company
and efficiently respond to any questions that might be raised. We appreciate the
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opportunity to present this background information on how peaking plants fit into
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the restructured electric industry.
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Background on Electric Power and ComEd
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Electric power is not readily stored, and is transmitted through the network
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of wires from generator to end user essentially instantaneously. When a customer
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turns on an electric light or appliance, sufficient power for that device must be
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generated somewhere on the grid at that moment. Electric power, whether the
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amount needed to run one appliance, or the total amount of power demanded by
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ComEd’s customers at a given moment, is measured in watts. Where the quantity
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is large, we use the term megawatts, or millions of watts. We refer to the aggregate
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demand of all of ComEd’s customers at a particular moment as the load at that
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time.
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The aggregate load of customers in ComEd’s service territory varies
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considerably over the course of a day and over the course of a year. The lowest
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continuous load observed over the course a year is known as the base load; the
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highest load observed during a period of time is the peak load for that period. In
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ComEd’s service territory in modern times, the peak load for a year is always
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during the summer, due to heavy air conditioning use. ComEd’s all-time summer
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peak load was 21,243 megawatts on July 30, 1999 between 2:00 p.m. and 3:00
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p.m. central time. By contrast, ComEd’s all-time peak load during a winter month
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was 14,484 megawatts on December 20, 1999 between 5:00 p.m. and 6:00 p.m.
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central time.
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Base load generating plants are designed to operate more or less year round,
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supplying an amount of electricity that is used even during periods of relatively
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
4
Commonwealth Edison Company
light load. Base load plants typically have high fixed costs and low operating costs
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relative to other plants. It would be costly and inefficient to install base load
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capacity able to produce 21,243 megawatts of electricity throughout the year in
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ComEd’s territory, because in fact that peak amount of demand is only present for
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one hour of the year. A peak load plant, or peaker, can be started relatively
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quickly, and is designed to produce power only during times of heavy demand,
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ranging from seasonal to hourly. Peakers have high hourly operating costs, but
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low capital costs compared to base load plants. Because of this cost structure, it is
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economical to supply peak load, in the relatively few hours required, using this
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type of plant. To meet summer peak demand levels ComEd uses a combination of
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power produced by base load plants and peakers, some owned and operated by
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ComEd, some by merchant generators within ComEd’s territory, and some outside
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ComEd’s territory, but connected to the interstate transmission grid.
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ComEd is a public utility regulated by the Illinois Commerce Commission
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under the Public Utilities Act. It is responsible for providing adequate, reliable, and
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efficient electric service to nearly 3.5 million customers throughout northern
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Illinois. ComEd currently owns and operates a fleet of five nuclear base load power
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plants that are capable of producing, altogether, about 9,500 megawatts of power
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at any one time. ComEd also owns and operates a network of high voltage
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transmission lines and substations, which transfer power from generating stations
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or from other networks to local areas of load and to other networks. ComEd also
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owns and operates a system of local distribution lines and substations that carry
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power to ComEd’s customers. Attachment A to our testimony is a map of ComEd’s
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transmission system, along with the major power plants located in ComEd’s area.
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Attachment B is a map produced by the Illinois Commerce Commission showing
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
5
Commonwealth Edison Company
the major transmission lines, power plants, and utility service territories in Illinois.
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Attachment C is a map showing the major transmission lines, substations, and
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power plants in the neighboring area that interconnects with ComEd’s system.
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Restructuring of the Electric Industry
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We will refer throughout our testimony to the “restructuring” of the electric
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industry. In the traditional electric industry, before this restructuring, electric
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power was generated, transmitted, and distributed to customers as a single
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bundled product by a regulated, vertically integrated monopoly, at rates approved
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by a state commission based on the utility’s cost of providing the service. In the
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restructured industry, a customer’s generation, transmission and distribution may
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be supplied by different companies. Generation, in particular, is becoming a
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competitive industry, and market forces — supply and demand — will set energy
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rates. Companies other than utilities may sell power at retail to customers, who
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will be able to choose among several suppliers. In almost all cases, however,
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ComEd will continue to deliver the electricity to the customers in its territory, using
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its network of transmission lines and distribution facilities.
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Federal Aspects of Restructuring
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The federal aspects of restructuring have, of course, focussed on the
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interstate aspects of the new power markets. In its landmark Order No. 888, the
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FERC required transmission owners to open their networks on a nondiscriminatory
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basis to wholesale transactions using the transmission system. Promoting
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Wholesale Competition Through Open Access Non-discriminatory Transmission
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Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and
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Transmitting Utilities, Order No. 888 (“Order 888”), FERC Statutes and
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Regulations, Regulations Preambles January 1991 – June 1996 ¶ 31,036 (1996),
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
6
Commonwealth Edison Company
order on reh’g
, Order No. 888-A, III FERC Statutes and Regulations, Regulations,
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Preambles ¶ 31,048 (1997),
order on reh’g
, Order No. 888-B, 81 F.E.R.C. ¶ 61,248
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(1997),
order on
reh’g,
Order No. 888-C, 82 F.E.R.C. ¶ 61,046 (1998).
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Transmission owners like ComEd have filed open-access transmission tariffs that
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allow interstate transmission of power by wholesale sellers, including operators of
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merchant power plants. FERC has held that interconnection service is a type of
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transmission service covered by Order 888 and thus, ComEd is required to make
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reasonable efforts to interconnect its transmission and distribution systems with
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new generation sources.
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Accordingly, ComEd has pursued a policy of nondiscriminatory cooperation
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with independent power producers wishing to locate in Northern Illinois and
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interconnect with ComEd’s system. Because one project may, if successfully
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brought on line, affect the plans of future projects, ComEd maintains a queue
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primarily based on the date of the developer’s initial interconnection request to
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ComEd.
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ComEd works with each interested developer to design an efficient and
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reliable interconnection with ComEd’s grid.
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Once the generation plant is interconnected and operational, ComEd’s
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OASIS electronic bulletin board allows market participants to request the delivery
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component of transmission service on ComEd’s network, which, if available,
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enables the generator’s electric power to move onto the regional grid.
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1
These rules are set forth in ComEd’s Open Access Transmission Tariff, Attachment K, and
are regulated by the FERC under federal law. ComEd’s current queue of independent
power producer projects is published at http://www.comedtransmission.com/ipp.services/
ipp.queue.html.
Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
7
Commonwealth Edison Company
Illinois Restructuring
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In 1997, the Illinois General Assembly recognized that restructuring could
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benefit Illinois’ electric customers, saying:
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Competitive forces are affecting the market for electricity as a result of
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recent federal regulatory and statutory changes and the activities of
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other states. Competition in the electric services market may create
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opportunities for new products and services for customers and lower
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costs for users of electricity. Long standing regulatory relationships
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need to be altered to accommodate the competition that could
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fundamentally alter the structure of the electric services market.
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(HB 362, p. 2, lines 108-116). The legislature passed the Electric Service Customer
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Choice and Rate Relief Law of 1997 (the “Illinois Restructuring Legislation”), which
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set the course for electric restructuring in Illinois. By May 2002, all customers will
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be free to select the vendor of their electricity. The transition to customer choice is
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already under way; some non-residential customers have been able to choose their
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electric provider since October 1 of last year. The electric utilities, however, must
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continue to offer to deliver the power, from whatever source and whatever vendor,
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to retail customers in their service territories. This delivery service and the rates
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charged for it continue to be regulated by the Illinois Commerce Commission.
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ComEd, like other Illinois utilities, has established, with Commerce Commission
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approval, tariffs and rates for electric delivery service.
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Under the Illinois Restructuring Legislation, it is not incumbent on public
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utilities to build new generating plants. In fact, the legislature took away from the
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Commerce Commission the authority to order a utility to build a new plant. As
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electric load in Illinois grows, market forces — that is, increased prices for
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wholesale power — will encourage the new generation necessary to provide
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sufficient energy to all that need it. By the same token, abundant generation will
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cause lower prices, ultimately signaling the market that there is enough
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
8
Commonwealth Edison Company
generation. In the restructured industry, the financial risk of new generation
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projects is on private investors, not public utilities and their customers. ComEd’s
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role with respect to new independent plants is to work with the developers to
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interconnect them with ComEd’s grid, making the power available to customers in
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the region. Since the effective date of the Illinois Restructuring Legislation, ComEd
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has worked with numerous developers to design interconnections with ComEd’s
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grid.
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Before restructuring, there were two primary regulatory schemes affecting
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the construction of a new plant. The first was at the Commerce Commission,
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which would decide whether the new plant was necessary to providing adequate,
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efficient, and reliable service at the least cost. The second was the environmental
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agencies, such as the Illinois Environmental Protection Agency, which would
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decide whether to issue the necessary permits covering issues such as air
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pollution. (In the case of nuclear plants, the federal Nuclear Regulatory
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Commission also played an important role.) Local input was limited, because a
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state Certificate of Public Convenience and Necessity generally preempts local
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ordinances such as zoning, and regional public utility power plants and
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transmission lines are considered matters of statewide, not local interest.
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In the restructured industry, in which generation is built by private
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companies based on market factors and ratepayers do not bear the cost or risk of
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new plants, the Commerce Commission does not examine the need for the project.
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It can be assumed that the project would not be proposed if electrical demand was
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not sufficient to make the expensive new plant profitable. The environmental
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regulation is unchanged, and private companies must meet the same standards as
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a public utility would. However, the local counties and municipalities now have a
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
9
Commonwealth Edison Company
significant role to play, using zoning and other land use regulation to direct new
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plants to suitable locations. As Ms. Juracek is aware based on her zoning board
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experience in Mount Prospect, local municipalities are acutely interested in the
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location of new privately owned facilities.
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ComEd’s Position on Restructuring and New Generation
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ComEd fully supports electric restructuring and believes that the
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installation of new generation in response to market forces will increase
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competition, while maintaining system reliability. ComEd believes that the optimal
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situation is for Northern Illinois to have a local generation portfolio owned by a
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number of different electric suppliers with market incentives to construct new
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generating capacity, which together with resources from other utilities, would meet
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the area’s increasing needs over time. All customers in the ComEd service
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territory, whether they continue to purchase their electricity from ComEd or choose
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an alternate supplier, will benefit from this new generation. New generation in the
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ComEd service territory will increase the reliability of service overall, especially
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during times of high demand for electricity, by having more generation available.
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Having this new generation be within ComEd’s transmission “control area” — the
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portion of the Midwestern electrical grid operated by ComEd — is particularly
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advantageous because delivery of the energy from these plants does not depend on
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the availability of transmission from others. The further away from a load a
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generating source is located, the more transmission systems are impacted by flows
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from the plant and the more chance there is of flow from the plant to the load being
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restricted by constraints on the transmission system. For example, transmission
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constraints have occurred nearly daily this summer between generation in the
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northern states and loads in the southeast and southwest.
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
10
Commonwealth Edison Company
To help promote an efficient generation market, ComEd has taken two steps
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that would have seemed radical or even unthinkable in the electric industry of only
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a few years ago. First, ComEd sold its own fossil-fuel powered generating stations
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to a private company, Midwest Generation EME. ComEd has agreed to purchase
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power from Midwest Generation EME for several years to supply ComEd’s
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customers. Second, ComEd has encouraged independent power producers to
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locate in Northern Illinois. Independent power producers typically are not building
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the coal-fired or nuclear generating plants of past decades, but rather gas-fired,
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often smaller, peak load units. Encouragement of new independent power
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producers means that the electric supply of this region will become more diversified
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and more geographically dispersed.
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One of the principal ways in which ComEd has sought to encourage power
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production by independent producers is by studying its transmission system to
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determine the most convenient and, from an electrical system standpoint,
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beneficial locations for new generation. ComEd did this because ComEd’s
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transmission system has developed over many decades to move power from
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ComEd’s own generating units to customers in Northern Illinois, and to
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interconnect ComEd’s facilities with those of its neighbors. As with any such
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system, there are sites where interconnection with new generation is comparatively
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more beneficial from the standpoint of the electrical operation of the transmission
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system. ComEd analyzed the intricate network of its transmission system and
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identified locations where a new generating facility could connect to the system in a
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manner that maximized power delivery from the facility while minimizing
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modifications that would have to be made to the existing transmission network to
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accommodate that generation.
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
11
Commonwealth Edison Company
In June 1998, ComEd published a list of 14 preferred sites for the
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interconnection of new facilities. A copy is attached as Attachment D to this
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testimony. This list was based solely on electrical requirements and the ability of
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the electrical system in a particular area to accept the inflow of power from a
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generator without major new upgrades or expansions. It does not reflect any
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judgment about land use issues or the availability of fuel at a particular location.
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Effect of Stringent New Regulation of Peaking Plants
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With the federal and Illinois laws currently in effect, there is strong interest
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among new merchant generators to locate in Illinois. Even so, not all of the
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proposed plants have been successfully completed. Some projects have failed to
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obtain the requisite financial backing. Others have failed to obtain local siting
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approval. There is no indication that the current regulatory scheme is thrusting
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too much generation on Illinois.
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Heightened legal restrictions, such as new siting or environmental standards
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stricter than those applicable in other states, or new layers of regulation of non-
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utility generation projects, could reduce interest in building new generation in
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Illinois. A reduction in new generation could fundamentally alter the wholesale
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market for electricity. A critical concern would be that the wholesale price of
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electricity could rise dramatically. In Illinois and elsewhere, there have been
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wholesale price “spikes” in recent years when electrical energy has cost utilities in
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excess of $5 per kilowatt-hour. (Last year, ComEd sold electric power to end users
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for, on average, $0.074 per kilowatt-hour.) These skyrocketing prices have
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occurred when very high demand was coupled with constrained generation and
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transmission supply.
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
12
Commonwealth Edison Company
Similarly, other states — notably California — have been facing shortages of
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electricity this summer, because the demand levels are approaching the total local
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generation capacity plus the transmission import capacity. Unlike Illinois, in
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which the market for electric energy is a primary factor in determining whether
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more generation will be built, in California, the state retains a pervasive regulatory
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role in evaluating and approving new generation. California also regulates the
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wholesale prices of power, rather than allowing the free market to set the price. As
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a result, California has seen very little new generation built since it began its
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restructuring, and the existing generation may not be sufficient to meet growing
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demand. This summer California customers have experienced high prices and
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curtailments as demand has approached capacity. Illinois currently stands ahead
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of many other states in protecting its electric customers from this sort of
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instability. The availability of sufficient peaker plants should smooth out price
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spikes, to the benefit of all.
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Additional Environmental Regulation
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The Governor’s inquiry to this Board questioned whether additional air
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pollution regulation of peaker plants is necessary. As the Board is aware, Illinois
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law requires the Illinois Environmental Protection Agency (“IEPA”) to assure that
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any proposed source of air pollution will meet or exceed all applicable federal and
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state air pollution control requirements before IEPA may issue an air pollution
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permit to the source. These requirements include all applicable emission
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standards, the stringent federal New Source Review and Prevention of Significant
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Deterioration requirements and New Source Performance Standards.
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In its June 15, 2000 letter to IEPA, USEPA confirmed that the IEPA is
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appropriately applying federal air pollution control requirements during IEPA’s
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
13
Commonwealth Edison Company
review of proposed peaker plants. Further, USEPA emphasized that IEPA’s
297
permitting of peaker projects assures protection of health based National Ambient
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Air Quality Standards through the imposition of suitable short term, including
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hourly, emission limits. IEPA was commended for requiring dispersion modeling
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for even those proposed peaker plants that qualify as “minor sources.” This
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practice is even more stringent that that applied for other types of non-major
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sources of air pollution.
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As confirmed by USEPA and IEPA, under existing laws, regulations and
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procedures, plans for proposed peaker plants are already being carefully
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scrutinized. Through its air permitting process, IEPA assures that neither local,
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state nor national air quality is being threatened or compromised by the addition of
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any peaker plants. And, like other generating facilities, peaker plants of significant
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size will be subject to the evolving air pollution standards set by the Board through
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Illinois’ State Implementation Plan.
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Further, as the owners and operators of any existing or proposed peaker
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plant can well describe, there is extensive analysis of potential noise and water
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impacts during the planning stages of any peaker plant. These plants have been
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designed to meet and, in many cases, exceed the applicable noise standards so as
314
to prevent any potential disturbance to surrounding neighbors. Water impacts,
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including with regard to any potential contamination and water supply, are also
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carefully assessed during the planning and development of any peaker plant.
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Stringent state requirements regulate the discharge of contaminants while local
318
authorities often directly oversee issues of water supply. In addition, the impact of
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peaker plants and other facilities on water resources and usage will be closely
320
examined by Governor Ryan's newly appointed Water Resources Advisory
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Testimony of Arlene A. Juracek and
PCB Docket R01-10
Steven T. Naumann on behalf of
14
Commonwealth Edison Company
Committee, which will present its recommendations to the Governor by December
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2000.
323
Conclusion
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ComEd supports the restructuring of the electric industry as crafted by the
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Illinois Legislature and the Federal Energy Regulatory Commission. A critical
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feature of restructuring is the availability of new privately developed electric
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generation to meet the State’s increasing demand for power. The regulatory
328
scheme currently in effect applies established state and federal standards for air,
329
water, and noise pollution, while local governments control the siting process using
330
traditional zoning authority. New or more stringent regulation is not warranted,
331
and would likely have a negative effect on the State’s generation capacity.
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