Auction Format : Illinois Auction

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The Illinois Auction is a simultaneous, multiple round, descending clock auction.

The Illinois Auction is called simultaneous because all products within the Illinois Auction 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 Supplier Forward Contract) 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.