Application Process
There is a single application process for the Illinois Auction.
The single application process for the Illinois Auction is in two parts: Part 1 Application and Part 2 Application.
Part 1 Application requires applicants:
- To pay a Bid Participation Fee of $7,500;
- To indicate their interest in participating in the Fixed Price Section, or the Hourly Price Section, or both;
- To show that if they intend to bid on CPP products, they are, or have no impediments to become, PJM members in good standing by the start of the supply period;
- To show that if they intend to bid on BGS products, they are, or have no impediments to become, Market Participants in MISO by December 1, 2006;
- To certify that they have no impediments to meeting other requirements or authorizations required by the Supplier Forward Contracts ("SFCs");
- To certify that the submission of any bid creates a binding and irrevocable offer to provide service under the terms set forth in the applicable SFC;
- To provide financial information for an assessment of creditworthiness;
- To agree to comply with the Illinois Auction Rules;
- To accept the terms of the applicable SFCs corresponding to the Section for which they are applying;
- To agree that if they win at the Illinois Auction, they will execute all applicable SFCs and demonstrate compliance with the creditworthiness requirements set forth therein within three business days of the Date of Declaration of a Successful Result for that Section.
- To certify that if they qualify to participate in a Section, they will not disclose information regarding the list of Qualified Bidders for that Section; and
- To certify that if they qualify to participate in a Section, they will not substitute another entity in their place, transfer their rights to another entity, or otherwise assign their status as Qualified Bidders to another entity.
A prospective bidder that has qualified for a Section through the Part 1 Application Process becomes a Qualified Bidder for that Section. Qualified Bidders for a Section must successfully submit to a Part 2 Application process to participate in the bidding for that Section.
In the Part 2 Application, each Qualified Bidder is required:
- To make a number of certifications regarding associations, to ensure that it is bidding independently of other parties in each Section for which it is applying and to ensure the confidentiality of information regarding the Illinois Auction;
- To submit an indicative offer for each Section for which it is applying;
- To provide its preliminary interest in each product of each Section for which it is applying;
- To post a letter of credit proportional to its indicative offer for each of the Sections for which it is applying; and
- To submit, as required, a Letter of Intent to Provide a Guaranty or a Letter of Reference, or both, if required for the Fixed Price Section.
A Qualified Bidder who has a successful Part 2 Application becomes a registered bidder for that Section.
Auction Format
The Illinois Auction is conducted as a simultaneous, multiple round, descending clock auction.
It is called simultaneous because all products are put on offer at the same time.
The products in the Illinois Auction are divided into Sections and Groups. There are two Sections of products: the Fixed Price Section and the Hourly Price Section. Each Section contains two Groups, one for the products of the three Ameren Utilities, namely Central Illinois Light Company d/b/a AmerenCILCO, Central Illinois Public Service Company d/b/a AmerenCIPS, and Illinois Power Company d/b/a AmerenIP (collectively "Ameren") (the Basic Generation Service ("BGS") Group) and one for the products of the Commonwealth Edison Company ("ComEd") (the Competitive Procurement Process ("CPP") Group). A product is a specific category of load for a specific supply period; for example, Ameren’s BGS-FP load for a period of 29 months is a product in the Illinois Auction. The diagram below shows all products in the Illinois Auction, separated into their respective Sections and Groups.
Bidders register for the Fixed Price Section, the Hourly Price Section, or both. A bidder registered for both Sections may bid on all products; a bidder registered for only one Section may bid only on the products in the Section for which it is registered. Bidding is conducted simultaneously for both Sections, but each Section is evaluated separately, and bidding may end in one Section before the other.
The Illinois Auction proceeds in rounds. In a round, the Auction Manager announces a price for each product. Bidders bid by providing the number of tranches (a tranche is a fixed percentage of load) that they are willing to serve for each of these products at the prices announced by the Auction Manager. If the number of tranches bid is greater than the number of tranches needed for a product (i.e., there is excess supply), the price for that product is reduced for the next round. In the next round, bidders are given information on the general progress of the Illinois Auction, and an opportunity to bid again.
The Illinois Auction is called a descending clock auction because prices “tick down” throughout the Illinois Auction, starting high and being reduced gradually until there is no more excess supply left. Prices that tick down in a round decrease by a decrement; a decrement is a given percentage of the previous price. A bidder bids by providing the number of tranches it is willing to serve for each product at the prices announced by the Auction Manager. The bidders holding the final bids when the Illinois Auction closes are the winners.
Example for the Fixed Price Section
In this example, there are 12 bidders in the Fixed Price Section.
* Prices are illustrative only and may not reflect actual prices.
| . |
Price $/MWh |
Number of tranches bid |
Tranche targets |
Excess supply |
Oversupply
ratio |
| Round 1 |
. |
. |
. |
. |
. |
| CPP-A 17-months |
95.00 |
175 |
88 |
87 |
0.2719 |
| CPP-B 17-months |
85.00 |
148 |
92 |
56 |
0.1750 |
| CPP-B 29-months |
85.00 |
120 |
93 |
27 |
0.0844 |
| CPP-B 41-months |
85.00 |
120 |
93 |
27 |
0.0844 |
| BGS-LFP 17-months |
88.00 |
112 |
37 |
75 |
0.2344 |
| BGS-FP 17-months |
82.00 |
70 |
35 |
35 |
0.1094 |
| BGS-FP 29-months |
82.00 |
47 |
36 |
11 |
0.0344 |
| BGS-FP 41-months |
82.00 |
36 |
36 |
0 |
0.0000 |
| The Auction Manager reduces the price of product if the number of tranches bid is greater than the tranche target, which is the number of tranches desired. The amount of the price reduction depends on the oversupply ratio, which is the ratio of the excess supply for that product to an estimate of the maximum possible excess supply for that product, taking into account the excess supply for the Section. Roughly speaking, the larger the oversupply ratio for a product, the larger is the portion of maximum excess supply that is actually on that product, and the larger is the price decrease.
In round 1, all bidders combined stand ready to supply 175 tranches of CPP-A 17-months at a price of $95.00/MWh. The number of tranches bid (175) exceeds the number of tranches desired (88) by 87 tranches. The price for CPP-A 17-months will tick down.
The Auction Manager will lower the price in round 2 for every product except BGS-FP 41-months, since for every product except BGS-FP 41-months the number of tranches bid exceeds the number of tranches needed. The largest decrement will be for CPP-A 17-months, which has the largest oversupply ratio, and the smallest decrement will be for BGS-FP 29-months, which has the smallest oversupply ratio.
In round 2 below, prices have fallen from round 1 for all but BGS-FP 41-months. The price for CPP-A 17-months, which had the largest decrement from round 1, fell the most; the price for BGS-FP 29-months, which had the smallest decrement from round 1, fell the least. Bidders submit new bids at these prices. The excess supply range reported to bidders is 256-280 (so that 280 is used as the measure of excess supply for calculating the oversupply ratio).
|
| . |
Price $/MWh |
Number of tranches bid |
Tranche targets |
Excess supply |
Oversupply
ratio |
| Round 2 |
. |
. |
. |
. |
. |
| CPP-A 17-months |
90.25 |
160 |
88 |
72 |
0.2571 |
|
CPP-B 17-months |
82.89 |
120 |
92 |
28 |
0.1000 |
| CPP-B 29-months |
83.94 |
133 |
93 |
40 |
0.1429 |
| CPP-B 41-months |
83.94 |
103 |
93 |
10 |
0.0357 |
| BGS-LFP 17-months |
83.60 |
107 |
37 |
70 |
0.2500 |
| BGS-FP 17-months |
79.12 |
75 |
35 |
40 |
0.1429 |
| BGS-FP 29-months |
81.36 |
42 |
36 |
6 |
0.0214 |
| BGS-FP 41-months |
82.00 |
38 |
36 |
2 |
0.0071 |
The Illinois Auction ends when bidding has ended for both Sections. Bidding ends for each Section separately. At that point, all prices have stopped ticking down any further and no bidder could change its bid. At the end of the bidding in a Section, tranches are tentatively awarded to the winners (pending execution of the applicable SFC) and all the winners for a product receive the same price for that product. For any product where bidders bid tranches that were equal to or greater than the tranche target at any point, this price is the lowest price bid that still allows supply just sufficient to fill the tranche target.
