PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 70 West Madison Street, Suite 5000 Chicago, Illinois 60602
MEMORANDUM
FROM: David Stanton, Lead Associate, and Michelle Tsao, Working Associate
TO: Patricia Dunmore, Responsible Partner, Energy & Infrastructure Practice
DATE: February 27, 2023
RE: ICC Filing Strategy — MTDC Electrification Infrastructure and Interconnection Application; C&H Matter No. 1031-00002
CLIENT: Metropolitan Transit Development Corporation ("MTDC")
REGULATORY BODY: Illinois Commerce Commission ("ICC")
ANTICIPATED DOCKET NO.: To be assigned upon filing (target filing date: March 1, 2023)
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I. Executive Summary
This memorandum analyzes the regulatory requirements, procedural steps, and risk factors associated with MTDC's proposed filing before the Illinois Commerce Commission seeking approval to interconnect new high-capacity battery-electric bus charging infrastructure to the regional electric grid and to enter into a long-term power-purchase arrangement with Prairie Shore Electric Company ("Prairie Shore"), an investor-owned electric utility operating in northeastern Illinois. The purpose of this memorandum is to provide strategic guidance to the responsible partner and, through her, to the client team at MTDC, in advance of the anticipated March 1, 2023 filing date.
MTDC is an Illinois municipal corporation and public transit authority created under the Metropolitan Transit Development Act, 70 ILCS 3615, headquartered at 200 West Adams Street, Suite 2400, Chicago, Illinois 60606. MTDC's Executive Director is Harold J. Greenway, and its General Counsel is Constance M. Adler. MTDC operates one of the largest public transit systems in the Midwest, serving a six-county area in northeastern Illinois.
The filing arises in connection with MTDC's Phase 1 fleet electrification initiative, which is funded primarily by FTA Grant No. IL-2023-0067-00, a $78,500,000 award under the Low- and No-Emission Vehicle Program authorized by 49 U.S.C. § 5339(c), issued on January 9, 2023, by FTA Regional Administrator (Region V) Karen L. Osterman. The total project cost is $98,125,000, of which the federal grant constitutes eighty percent (80%) and MTDC's local match of $19,625,000 constitutes twenty percent (20%). The Phase 1 scope encompasses the procurement of 225 battery-electric buses at an estimated cost of $71,800,000 (approximately $319,111 per unit) and the installation of depot charging infrastructure at three bus garages at an estimated cost of $26,325,000. The combined new electrical load across the three depot locations is 45 MW.
Our recommended approach is to file a Verified Petition for Approval of Electrification Infrastructure and Interconnection with the ICC on March 1, 2023. The Verified Petition should be accompanied by the simultaneously-submitted pre-filed direct testimony of Raymond K. Mosley, MTDC's Director of Capital Programs, and should attach as exhibits the draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore, the proposed Schedule EV-T term sheet reflecting a new time-of-use rate schedule for battery-electric transit charging, the Creston Engineering Group interconnection study, the Dralvecen Reade rate-impact analysis, MTDC's audited financial statements, and the FTA Notice of Award.
The target timeline for this proceeding is ICC approval by late summer or early fall of 2023 — ideally no later than September 2023 — in order to meet FTA grant disbursement milestones and enable MTDC to commence construction of the charging infrastructure and place initial bus orders on schedule. As discussed in greater detail in Section VI below, the most significant risk factor to the overall project is the continued availability of the $78,500,000 FTA grant, which is subject to congressional appropriations and could be affected by a continuing resolution or rescission scenario.
The sections that follow provide a detailed background of the project, an analysis of the ICC's jurisdictional basis and filing requirements, an identification of anticipated parties and intervenors, a projected procedural timeline, a substantive assessment of the key issues and risks, and our recommended filing strategy.
II. Background and Project Description
A. MTDC's Strategic Sustainability Plan and Fleet Electrification Goals
In 2021, MTDC's Board of Directors unanimously adopted the MTDC Strategic Sustainability Plan (the "Plan"), a comprehensive initiative establishing long-term goals for environmental sustainability across MTDC's operations. The Plan committed MTDC to converting at least forty percent (40%) of its bus fleet from diesel and compressed natural gas ("CNG") propulsion to battery-electric propulsion by the year 2030. The Plan identified fleet electrification as the single most impactful measure MTDC could undertake to reduce its greenhouse gas emissions, improve air quality in the communities it serves, and align its operations with the State of Illinois's broader clean energy and climate goals, including the objectives set forth in the Climate and Equitable Jobs Act (Public Act 102-0662).
MTDC currently operates an active fleet of 1,840 buses — a mixture of diesel and CNG vehicles — and 312 heavy-rail cars across a six-county service area in northeastern Illinois encompassing Cook, DuPage, Kane, Lake, McHenry, and Will counties. The bus fleet is the primary target of the electrification initiative, as buses account for the largest share of MTDC's direct tailpipe emissions and operate on fixed routes that are well-suited to depot-based overnight charging.
Phase 1 of the electrification initiative, which is the subject of the proposed ICC filing, targets the procurement and deployment of 225 battery-electric buses, representing approximately 12.2% of the total bus fleet. These vehicles will be assigned to routes originating from three of MTDC's bus depots — the North Garage, the West Garage, and the South Garage — each of which will be equipped with new high-capacity depot charging infrastructure. Phase 1 is intended to serve as a proof-of-concept for subsequent phases that will incrementally increase the share of battery-electric buses in the fleet through 2030 and beyond.
MTDC's fiscal year 2023 operating budget is $1,420,000,000, funded through a combination of farebox revenue, state and local sales tax allocations, and federal formula grants. The capital budget for FY 2023, exclusive of the Phase 1 electrification initiative, is approximately $310,000,000. The addition of the Phase 1 project represents a significant but manageable incremental capital commitment, particularly given the substantial federal cost-sharing provided by the FTA grant.
B. FTA Grant Award
The federal funding for the Phase 1 electrification initiative was secured through a competitive application under the FTA's Low- and No-Emission Vehicle Program, authorized by 49 U.S.C. § 5339(c). The Low-No Program provides discretionary capital grants to state and local governmental authorities for the purchase or lease of zero-emission and low-emission transit buses and related infrastructure, including charging equipment and facility modifications.
The key terms of the FTA grant are as follows:
• Grant Award Number: IL-2023-0067-00
• Program Authority: 49 U.S.C. § 5339(c), Low- and No-Emission Vehicle Program
• Award Amount: $78,500,000
• Award Date: January 9, 2023
• Issuing Official: Karen L. Osterman, FTA Regional Administrator, Region V
• Federal Share: 80%
• Local Match Required: 20% ($19,625,000)
• Total Project Cost: $98,125,000
The Notice of Award issued by FTA Regional Administrator Osterman on January 9, 2023 establishes disbursement milestones tied to the achievement of specific project benchmarks, including the execution of charging infrastructure construction contracts, the placement of bus procurement orders, and the commencement of revenue service on electrified routes. MTDC's ability to meet these milestones is contingent, in part, on the timely receipt of ICC approval for the proposed interconnection and rate arrangement. A copy of the FTA Notice of Award will be attached to the Verified Petition as Exhibit F.
The local match of $19,625,000 will be funded from MTDC's capital reserves and from a dedicated allocation in the FY 2023 capital budget approved by the MTDC Board of Directors in November 2022. MTDC CFO Sandra R. Pellegrino has confirmed that the local match funds are available and have been appropriated for this purpose.
C. Charging Infrastructure and Grid Interconnection Requirements
The Phase 1 electrification initiative requires the installation of new high-capacity depot charging infrastructure at three existing MTDC bus garages. Each garage will be equipped with plug-in depot chargers capable of charging multiple battery-electric buses simultaneously during overnight and mid-day layover periods. The chargers will be supplied with electricity through new service connections to the distribution system of Prairie Shore Electric Company, the investor-owned electric utility that provides service in the areas where the three garages are located.
The three depot locations, their proposed electrical capacities, and related details are as follows:
1. North Garage — Located at 4501 West Lawrence Avenue, Chicago, Illinois 60630. This facility is MTDC's largest bus depot and will serve as the primary hub for the initial deployment of battery-electric buses on routes in the northern portions of the service area. The proposed new electrical capacity at the North Garage is 18 MW, reflecting the installation of approximately 90 plug-in depot chargers rated at 200 kW each.
2. West Garage — Located at 1200 South Cicero Avenue, Chicago, Illinois 60804. The West Garage serves routes in the western suburbs and portions of the west side of Chicago. The proposed new electrical capacity at the West Garage is 15 MW, reflecting the installation of approximately 75 plug-in depot chargers rated at 200 kW each.
3. South Garage — Located at 7800 South Vincennes Avenue, Chicago, Illinois 60620. The South Garage serves routes on the south side of Chicago and portions of the southern suburbs. The proposed new electrical capacity at the South Garage is 12 MW, reflecting the installation of approximately 60 plug-in depot chargers rated at 200 kW each.
The combined new electrical load across the three depot locations is 45 MW (18 MW + 15 MW + 12 MW). This represents a substantial new load on Prairie Shore's distribution system. Interconnection of this magnitude requires new or upgraded distribution feeders, transformers, switchgear, and protective equipment at each depot location, as well as potential upgrades to upstream distribution substations and circuits.
Prairie Shore Electric Company is an investor-owned electric utility organized under the laws of the State of Illinois, headquartered at 500 North Michigan Avenue, Chicago, Illinois 60611. Prairie Shore's President and Chief Executive Officer is Thomas D. Waverly. Prairie Shore serves approximately 3.2 million electric customers in northeastern Illinois and is regulated by the ICC. As the incumbent distribution utility serving the three depot locations, Prairie Shore is the only available interconnecting utility for MTDC's charging infrastructure.
MTDC has retained Creston Engineering Group, Inc. ("Creston") to conduct an interconnection study and to design the charging infrastructure at each depot location. Creston is an engineering consulting firm headquartered at 8700 Bryn Mawr Avenue, Suite 600, Rosemont, Illinois 60018, with extensive experience in electric vehicle charging infrastructure and utility interconnection. The lead engineer on the MTDC engagement is Martin J. Sadowski, P.E.
Creston's preliminary interconnection study, which will be attached to the Verified Petition as Exhibit A, identifies the distribution-system upgrades required to accommodate the 45 MW of new load across the three depot locations. The estimated cost of these distribution-system upgrades is $12,300,000. This estimate encompasses new feeder circuits, transformer installations and upgrades, switchgear, metering equipment, and related civil and electrical construction at each of the three depot locations, as well as upstream distribution-system reinforcements.
MTDC and Prairie Shore have been engaged in preliminary negotiations regarding the allocation of these distribution-system upgrade costs. The proposed cost-sharing arrangement, reflected in the draft Infrastructure Cost-Sharing Agreement to be filed as Exhibit C, allocates sixty percent (60%) of the upgrade costs to MTDC ($7,380,000) and forty percent (40%) to Prairie Shore ($4,920,000). This allocation is based on Creston's engineering analysis, which attributes approximately sixty percent of the required distribution-system upgrades to the incremental load from MTDC's charging infrastructure and approximately forty percent to system improvements that will yield broader benefits to Prairie Shore's distribution network and its existing and future customers. The rationale and methodology underlying this allocation are discussed further in Section VI.A below.
D. Proposed Rate Arrangement — Schedule EV-T
As part of the proposed interconnection, Prairie Shore would file a new tariff with the ICC designated as Schedule EV-T (Electric Vehicle — Transit). Schedule EV-T would establish a time-of-use rate schedule specifically designed for large-scale battery-electric transit fleet charging operations. The rate is structured to incentivize off-peak charging — primarily overnight — in order to minimize the impact on Prairie Shore's system peak demand while providing MTDC with a competitive and predictable energy cost.
The key terms of the proposed Schedule EV-T are as follows:
• Applicability: Available to public transit authorities operating battery-electric bus fleets with a minimum connected load of 5 MW at a single depot location, served at primary voltage.
• Rate Structure: Blended time-of-use rate.
• Proposed Blended Rate: $0.062 per kWh.
• Time-of-Use Periods: On-peak (weekdays 7:00 AM – 9:00 PM); off-peak (weekdays 9:00 PM – 7:00 AM and all day on weekends and designated holidays).
• Demand Charge: Included in the blended rate; no separate demand charge component.
• Contract Term: Ten (10) years, with automatic renewal for successive five-year terms unless terminated by either party upon two (2) years' prior written notice.
Based on Creston's engineering analysis of the energy requirements for 225 battery-electric buses operating across the three depot locations, the estimated annual energy consumption under Schedule EV-T is approximately 39,420 MWh per year (39,420,000 kWh per year). At the proposed blended rate of $0.062 per kWh, MTDC's estimated annual energy cost for Phase 1 would be approximately $2,444,040 per year (39,420,000 kWh × $0.062/kWh = $2,444,040). This represents a significant cost savings compared to MTDC's current diesel fuel expenditures for the equivalent number of buses, which are estimated at approximately $4,800,000 per year based on current diesel prices and average fuel consumption rates, yielding an estimated annual savings of approximately $2,356,000.
A comprehensive rate-impact analysis has been prepared by Dralvecen Reade & Co. ("Dralvecen Reade"), a financial advisory firm headquartered at 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606. The engagement partner on the MTDC rate-impact analysis is Lisa M. Quayle, CFA. The Dralvecen Reade analysis demonstrates that the proposed blended rate of $0.062 per kWh recovers Prairie Shore's full incremental cost of service for the new 45 MW load, including generation, transmission, distribution, and administrative costs, and does not result in cross-subsidization by other ratepayer classes. The Dralvecen Reade rate-impact analysis will be attached to the Verified Petition as Exhibit B, and the proposed Schedule EV-T term sheet will be attached as Exhibit D.
E. Advisors and Consultants
MTDC has assembled a team of outside advisors and consultants to support the Phase 1 electrification initiative and the ICC filing. The key members of the advisory team are as follows:
• Outside Regulatory Counsel: Calderwood & Harkness LLP (this firm), 70 West Madison Street, Suite 5000, Chicago, Illinois 60602. Our engagement was opened on February 20, 2023, pursuant to an engagement letter executed by MTDC General Counsel Constance M. Adler. The scope of our engagement encompasses all aspects of the ICC regulatory proceeding, including preparation and filing of the Verified Petition, representation of MTDC in discovery, negotiations with intervenors, and advocacy at the evidentiary hearing and before the full Commission.
• Engineering Consultant: Creston Engineering Group, Inc. (EIN 36-7892104), 8700 Bryn Mawr Avenue, Suite 600, Rosemont, Illinois 60018. Lead engineer: Martin J. Sadowski, P.E. Creston has been retained by MTDC to conduct the interconnection study, design the charging infrastructure at each depot location, and provide technical support throughout the ICC proceeding.
• Financial Advisor: Dralvecen Reade & Co. (EIN 36-6543298), 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606. Engagement partner: Lisa M. Quayle, CFA. Dralvecen Reade has been retained to prepare grant compliance modeling, rate-impact analysis, and financial projections in support of the ICC filing.
• Independent Auditor: Fielding & Calloway CPAs, LLC, 155 North Wacker Drive, Suite 1800, Chicago, Illinois 60606. Engagement partner: Douglas H. Fielding, CPA. Fielding & Calloway serves as MTDC's independent auditor and has prepared the audited financial statements that will be referenced in the ICC filing and attached to the Verified Petition as Exhibit E.
III. ICC Jurisdictional Basis and Filing Requirements
A. Statutory Authority — 70 ILCS 3615 and the Public Utilities Act
MTDC is organized and operates under the Metropolitan Transit Development Act, 70 ILCS 3615 (the "Transit Act"), which establishes the framework for the creation and operation of regional public transit authorities in Illinois. As a municipal corporation created under the Transit Act, MTDC possesses the statutory authority to own, operate, and maintain transit facilities and equipment, and to enter into contracts and agreements necessary or convenient for the exercise of its powers, including agreements with public utilities for the provision of electric service.
The ICC derives its jurisdiction over the proposed interconnection and rate arrangement from the Illinois Public Utilities Act, 220 ILCS 5/ (the "PUA"). The PUA grants the ICC broad regulatory authority over the rates, terms, and conditions of service provided by public utilities operating in Illinois, including investor-owned electric utilities such as Prairie Shore. The ICC's jurisdiction in this matter is grounded in several overlapping provisions of the PUA.
First, ICC approval is required for the interconnection of new load exceeding specified thresholds to the distribution system of an investor-owned utility. Under Section 8-406 of the PUA (220 ILCS 5/8-406) and the ICC's implementing regulations, the addition of 45 MW of new load to Prairie Shore's distribution system at the three depot locations triggers a requirement for ICC review and approval of the interconnection. The ICC must determine that the proposed interconnection is consistent with the utility's obligation to provide adequate, reliable, and efficient service to all of its customers, and that the costs associated with the interconnection are fairly allocated.
Second, the PUA requires ICC approval for new or amended utility rate schedules. The proposed Schedule EV-T represents a new tariff offering by Prairie Shore that must be filed with and approved by the ICC before it can take effect. Under Section 9-201 of the PUA (220 ILCS 5/9-201), any new rate schedule filed by a public utility is subject to ICC review to determine whether the proposed rates are just and reasonable, are not discriminatory, and do not result in undue preference to any customer or class of customers.
Third, the ICC has jurisdiction to review the proposed Infrastructure Cost-Sharing Agreement to the extent that the agreement allocates costs associated with Prairie Shore's distribution system among MTDC, Prairie Shore, and, ultimately, Prairie Shore's other ratepayers. Under Section 16-108 of the PUA (220 ILCS 5/16-108), the ICC reviews the prudence and reasonableness of utility infrastructure investments and the allocation of associated costs.
In addition to the PUA, the ICC's procedural rules governing petitions by public entities are codified in Title 83 of the Illinois Administrative Code, Part 200 (83 Ill. Admin. Code 200). These rules establish the form, content, filing, and service requirements for petitions filed with the ICC, as well as the procedures governing discovery, evidentiary hearings, and the issuance of ICC orders. The ICC's rules also incorporate the provisions of the Illinois Administrative Procedure Act, 5 ILCS 100/, to the extent not inconsistent with the PUA or the ICC's own procedural rules.
We note that while MTDC is a public entity and not itself a "public utility" subject to ICC rate regulation, the ICC's jurisdiction in this proceeding derives from its regulatory authority over Prairie Shore as the interconnecting utility and the filer of the proposed Schedule EV-T tariff. MTDC appears before the ICC as a petitioner requesting approval of the interconnection arrangement and the associated rate and cost-sharing agreements, rather than as a regulated entity. This distinction is important for framing the Verified Petition and for defining the scope of MTDC's obligations in the proceeding.
B. Form and Content of the Verified Petition
The Verified Petition must comply with the ICC's requirements for form and content as set forth in 83 Ill. Admin. Code 200.100 et seq. Based on our review of the applicable rules and our experience with similar filings before the ICC, the Verified Petition should include the following elements:
Verification. The Petition must be verified by an authorized officer of MTDC under penalty of perjury, attesting that the facts set forth therein are true and correct to the best of the officer's knowledge, information, and belief. We recommend that Harold J. Greenway, Executive Director of MTDC, serve as the verifying officer, as he is the chief executive officer of the organization and has personal knowledge of the material facts underlying the filing.
Required Content. The body of the Verified Petition should include the following substantive components:
(a) Description of the Petitioner. A full description of MTDC, including its statutory authority, organizational structure, principal offices, and the identity of its Executive Director and General Counsel.
(b) Statutory Authority. A citation of the statutory provisions conferring jurisdiction on the ICC and authorizing MTDC to seek the requested relief, including references to the Transit Act (70 ILCS 3615), the PUA (220 ILCS 5/), and applicable ICC procedural rules.
(c) Factual Basis for the Requested Relief. A detailed narrative of the Phase 1 electrification initiative, including the FTA grant award, the scope of the charging infrastructure project, the need for grid interconnection, the proposed cost-sharing arrangement, and the proposed rate schedule.
(d) Identification of Affected Utility. Prairie Shore Electric Company should be identified as the investor-owned utility whose distribution system will be affected by the proposed interconnection and which will be the filer of the proposed Schedule EV-T tariff.
(e) Detailed Technical Specifications. A summary of the technical specifications of the proposed interconnection at each depot location, including the proposed electrical capacity, the type and number of chargers, the distribution-system upgrades required, and the engineering basis for the proposed interconnection, as detailed in the Creston interconnection study.
(f) Proposed Rate Arrangement. A description of the proposed Schedule EV-T tariff, including the proposed blended rate, the time-of-use periods, the contract term, and the basis for the proposed rate, as supported by the Dralvecen Reade rate-impact analysis.
(g) Supporting Financial Data. A summary of the project costs, funding sources, and financial projections, including references to the FTA grant award and MTDC's audited financial statements.
(h) Identification of Interested Parties. Identification of all known interested parties, including Prairie Shore Electric Company and any other entities that may be affected by the proposed interconnection and rate arrangement.
Exhibits. The following exhibits should be filed concurrently with the Verified Petition:
• Exhibit A: Creston Engineering Group Interconnection Study, prepared by Martin J. Sadowski, P.E. This exhibit will contain the full technical specifications of the proposed interconnection at each depot location, including load calculations, distribution-system upgrade scope, single-line diagrams, equipment specifications, and the engineering basis for the proposed 60/40 cost-sharing allocation.
• Exhibit B: Dralvecen Reade Rate-Impact Analysis, prepared by Lisa M. Quayle, CFA. This exhibit will present the financial analysis supporting the proposed Schedule EV-T blended rate of $0.062/kWh, including Prairie Shore's incremental cost of service, rate-impact on other customer classes, and comparison to alternative rate structures.
• Exhibit C: Draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore Electric Company. This exhibit will contain the full text of the proposed agreement, including the 60/40 cost allocation, construction responsibility provisions, timeline, and conditions precedent (including the FTA grant condition discussed in Section VI.D below).
• Exhibit D: Draft Schedule EV-T Term Sheet. This exhibit will set forth the proposed terms of the new tariff, including applicability, rate structure, time-of-use periods, demand charges (if any), contract term, and renewal and termination provisions.
• Exhibit E: MTDC Audited Financial Statements for FY 2022, prepared by Fielding & Calloway CPAs, LLC, engagement partner Douglas H. Fielding, CPA. These statements will demonstrate MTDC's financial capacity to fund its share of the project costs and to sustain the ongoing energy expenditures under Schedule EV-T.
• Exhibit F: FTA Notice of Award for Grant No. IL-2023-0067-00, issued January 9, 2023, by FTA Regional Administrator Karen L. Osterman.
• Exhibit G: Pre-Filed Direct Testimony of Raymond K. Mosley, Director of Capital Programs, MTDC. Mr. Mosley's testimony will provide a detailed narrative of the Phase 1 electrification initiative, the technical and operational basis for the project, the projected environmental benefits, and the alignment of the project with MTDC's 2021 Strategic Sustainability Plan.
Filing Fee. A filing fee of $500 is payable to the Illinois Commerce Commission at the time of filing. The fee should be submitted by check or money order made payable to the ICC, or by such other method of payment as the ICC may accept.
C. Service Requirements
Upon filing the Verified Petition with the ICC, MTDC must serve copies of the Petition and all exhibits on the following parties in accordance with the ICC's rules of service:
(a) Prairie Shore Electric Company. As the affected utility and anticipated party of interest, Prairie Shore must receive a complete copy of the Verified Petition and all exhibits. Service should be made upon Prairie Shore's Vice President of Regulatory Affairs, Judith A. Engstrom, at Prairie Shore's principal office at 500 North Michigan Avenue, Chicago, Illinois 60611, and upon Prairie Shore's outside regulatory counsel at Hargrove, Peck & Tillotson LLP, Attention: Andrew S. Peck, 120 South LaSalle Street, Suite 3100, Chicago, Illinois 60603.
(b) ICC Staff Counsel. A copy of the Verified Petition and all exhibits must be served on ICC Staff Counsel, currently anticipated to be Ellen R. Dempsey, at the ICC's Office of General Counsel, 160 North LaSalle Street, Suite C-800, Chicago, Illinois 60601.
(c) Publication Requirements. Under the ICC's procedural rules, certain types of petitions may require publication of a notice in a newspaper of general circulation in the area affected by the proposed action. We will review the specific publication requirements applicable to this type of filing and ensure compliance. To the extent publication is required, we will coordinate with MTDC's communications staff to arrange for timely publication in an appropriate newspaper.
In addition to mandatory service, we recommend providing courtesy copies of the Verified Petition to any additional parties that we anticipate may seek to intervene in the proceeding, including the Clean Air Transit Alliance (discussed in Section IV.B below), in order to promote transparency and facilitate the efficient administration of the docket.
IV. Anticipated Parties and Intervenors
A. Prairie Shore Electric Company — Expected Intervenor
Prairie Shore Electric Company is the incumbent investor-owned utility directly affected by the proposed interconnection and the proposed Schedule EV-T tariff. As the entity that will be required to construct and fund a portion of the distribution-system upgrades and to offer service under the new tariff, Prairie Shore has a direct and substantial interest in the outcome of the ICC proceeding. We anticipate that Prairie Shore will file a Petition to Intervene as a party to the docket shortly after the Verified Petition is filed — most likely within the first seven to ten days following the filing.
Prairie Shore's regulatory affairs function is led by Vice President of Regulatory Affairs Judith A. Engstrom, who has extensive experience appearing before the ICC in rate cases and infrastructure proceedings. Prairie Shore's outside regulatory counsel is the firm of Hargrove, Peck & Tillotson LLP, located at 120 South LaSalle Street, Suite 3100, Chicago, Illinois 60603. The lead attorney for Prairie Shore on regulatory matters is Andrew S. Peck, a senior partner at Hargrove, Peck & Tillotson with a well-established practice before the ICC. The associate assigned to this matter is expected to be Natalie C. Forrest.
Based on our preliminary conversations with Prairie Shore's regulatory team and our analysis of Prairie Shore's likely interests, we anticipate that Prairie Shore will take the following positions in the proceeding:
(a) General Support for Electrification. Prairie Shore is likely to express support for fleet electrification in principle. The addition of 45 MW of new load represents significant new revenue for Prairie Shore and is consistent with the utility's own public commitments to support the clean energy transition. Prairie Shore will not oppose the interconnection itself.
(b) Potential Dispute over Cost-Sharing Allocation. Prairie Shore may contest the proposed 60/40 split for the $12,300,000 in distribution-system upgrade costs, arguing that a higher percentage of those costs should be borne by MTDC as the "cost-causer" — the entity whose new load is driving the need for the upgrades. Prairie Shore may seek to shift the allocation to 70/30 or even 80/20, which would reduce Prairie Shore's share from $4,920,000 to $3,690,000 (at 70/30) or $2,460,000 (at 80/20) and correspondingly increase MTDC's share.
(c) Potential Dispute over Schedule EV-T Rate. Prairie Shore may argue that the proposed blended rate of $0.062 per kWh does not adequately recover the full cost of service for the incremental 45 MW load, or that the rate structure (a blended time-of-use rate without a separate demand charge) does not appropriately reflect the cost characteristics of the service being provided. Prairie Shore may advocate for a higher blended rate or for a rate design that includes a separate demand charge component in addition to an energy charge.
(d) Timeline and Construction Responsibility. Prairie Shore may raise concerns about the proposed construction timeline for the distribution-system upgrades, particularly if the timeline is aggressive relative to Prairie Shore's capital planning and workforce availability. Prairie Shore may also seek to ensure that the Infrastructure Cost-Sharing Agreement clearly delineates construction responsibility, warranty obligations, and ongoing maintenance responsibilities for the upgraded infrastructure.
Strategy. We recommend engaging with Andrew S. Peck at Hargrove, Peck & Tillotson LLP at the earliest opportunity — ideally before the March 1 filing or contemporaneously with it — to negotiate the terms of the Infrastructure Cost-Sharing Agreement and Schedule EV-T. If MTDC and Prairie Shore can reach agreement on the key contested issues before or during the early stages of the ICC proceeding, the likelihood of a contested evidentiary hearing is significantly reduced, and the proceeding is more likely to be resolved on an expedited basis through a stipulated settlement or joint motion. We have already circulated a draft of the Infrastructure Cost-Sharing Agreement to Hargrove, Peck & Tillotson for preliminary review, as discussed further in Section VII.A below.
B. Environmental and Advocacy Organizations
We anticipate potential intervention in the ICC proceeding by the Clean Air Transit Alliance ("CATA"), a 501(c)(3) nonprofit advocacy organization headquartered in Chicago that advocates for the adoption of zero-emission technologies in public transit systems. CATA's Executive Director is Nathan B. Hartwell. CATA is represented by the law firm of Rosenberg & Dietrich LLP, located at 33 North Dearborn Street, Suite 2200, Chicago, Illinois 60602, with lead attorney Diane L. Rosenberg.
CATA is expected to be a supportive intervenor in this proceeding. CATA has publicly advocated for the electrification of public transit fleets in Illinois and has participated in prior ICC proceedings involving electric vehicle charging infrastructure and rate design. CATA's intervention would strengthen the public-interest case for the proposed interconnection and Schedule EV-T, as CATA can provide testimony and briefing on the environmental and public health benefits of fleet electrification, the alignment of the project with state clean energy policy, and the importance of establishing favorable rate structures to encourage transit electrification.
Strategy. We recommend informal coordination with CATA and its counsel, Diane L. Rosenberg at Rosenberg & Dietrich LLP, to ensure that CATA's intervention and any testimony or briefing it provides are aligned with MTDC's positions and messaging. This coordination should take the form of periodic informational calls and the sharing of non-privileged information regarding the project's environmental benefits and policy rationale. We should be careful to preserve MTDC's attorney-client privilege and work product protections in any communications with CATA or its counsel.
We should also remain alert to the possibility of intervention by other parties, including consumer advocacy groups, industrial intervenors, or other ratepayer groups that may have an interest in the proposed rate structure or cost allocation. While we do not currently anticipate opposition from such groups, we will monitor the docket for any unexpected interventions and will advise MTDC promptly if additional parties seek to participate.
C. ICC Staff
The ICC's professional Staff, including engineers, economists, accountants, and attorneys, plays an integral role in the Commission's review of filings such as the one contemplated here. ICC Staff participates in the proceeding as a party, conducts independent review of the Petition and supporting materials, serves data requests on the petitioner and intervenors, and prepares a Staff Report setting forth its findings and recommendations for the Administrative Law Judge and the full Commission.
Staff Counsel for this proceeding is anticipated to be Ellen R. Dempsey of the ICC's Office of General Counsel, based on current staff assignments and the subject matter of the filing. Ms. Dempsey has handled similar interconnection and rate proceedings before the ICC and is known for thorough and diligent review of filings.
Upon assignment of a docket number, ICC Staff will initiate its review of the Verified Petition and supporting exhibits. Staff will typically issue an initial set of data requests to MTDC within approximately 30 to 45 days of the filing, seeking additional information on technical, financial, and rate-related matters. The Staff Report, which represents Staff's independent assessment of the merits of the Petition and its recommendations to the ALJ, is typically due approximately 75 days after the filing date.
Strategy. We recommend proactive engagement with ICC Staff throughout the proceeding. This includes prompt and complete responses to all data requests, informal communications with Staff analysts and engineers to address any questions or concerns as they arise, and early identification of any deficiencies in the filing that could cause delays. Our experience is that a cooperative and transparent approach to ICC Staff review significantly reduces the risk of adverse findings in the Staff Report and facilitates a smoother path to approval.
V. Procedural Timeline and Key Milestones
A. Projected Sequence of Events
Based on the ICC's procedural rules, its customary case-management practices, and our experience with similar proceedings, we project the following procedural timeline for the MTDC interconnection and rate proceeding. We emphasize that this timeline is subject to change depending on the complexity of contested issues, the number and activity of intervenors, and the scheduling preferences of the assigned Administrative Law Judge.
If the proceeding is uncontested or largely resolved through stipulation, the timeline may be compressed. Conversely, if significant issues are contested, the evidentiary hearing and briefing phases could extend the timeline by several weeks to several months.
B. Critical Path Items
Several critical path items must be completed in advance of or concurrently with the ICC filing to ensure that the proceeding remains on schedule:
1. Finalization of the Creston Interconnection Study. The Creston interconnection study (Exhibit A) must be finalized and reviewed by the MTDC engagement team and this firm prior to the March 1 filing. As of the date of this memorandum, Creston has delivered a near-final draft that is under review by Martin J. Sadowski, P.E. We anticipate receipt of the final version no later than February 28, 2023. Any material changes to the study's conclusions — particularly the $12,300,000 distribution-upgrade cost estimate or the proposed 60/40 cost allocation — could affect the filing strategy and should be communicated to this firm immediately.
2. Execution or Near-Final Draft of the Infrastructure Cost-Sharing Agreement. The draft Infrastructure Cost-Sharing Agreement (Exhibit C) should be in substantially final form prior to filing. While it is acceptable to file a draft agreement (and common practice in ICC proceedings of this type), the closer the agreement is to final form, the more credibility it will carry with the ICC Staff and the ALJ. We have circulated the current draft to Hargrove, Peck & Tillotson LLP for Prairie Shore's review and are awaiting comments.
3. MTDC Board Authorization. The MTDC Board of Directors must authorize the filing of the Verified Petition and approve the key terms of the proposed Infrastructure Cost-Sharing Agreement and Schedule EV-T. The MTDC Board Chair is Alderman Vivian Ochoa-Brennan. We understand from General Counsel Adler that a special meeting of the Board is scheduled for February 28, 2023, at which the necessary authorizing resolution will be presented for approval.
4. Coordination with FTA Grant Disbursement Schedule. The FTA grant disbursement milestones require MTDC to demonstrate progress on the charging infrastructure construction within specified timeframes. ICC approval is a prerequisite to commencing construction of the interconnection facilities. Any delay in the ICC proceeding beyond September 2023 could jeopardize MTDC's ability to meet the FTA milestones and could result in the loss or deferral of grant funds. MTDC CFO Sandra R. Pellegrino and General Counsel Constance M. Adler should be kept apprised of the ICC timeline and any developments that may affect the grant disbursement schedule.
VI. Substantive Issues and Risk Assessment
This section identifies and analyzes the key substantive issues that are likely to arise in the ICC proceeding and assesses the associated risks and mitigation strategies.
A. Cost-Sharing Allocation
The proposed 60/40 split for the $12,300,000 in distribution-system upgrade costs ($7,380,000 to MTDC / $4,920,000 to Prairie Shore) is one of the most significant substantive issues in the proceeding and is the issue most likely to be contested by Prairie Shore.
The proposed allocation is based on the engineering analysis conducted by Creston Engineering Group, which attributes approximately sixty percent (60%) of the required distribution-system upgrades to the incremental new load from MTDC's charging infrastructure — that is, upgrades that would not be necessary but for the addition of 45 MW of new load at the three depot locations. The remaining forty percent (40%) of the upgrades are attributed to system improvements that will benefit Prairie Shore's broader distribution network and its existing and future customers, including enhanced capacity, reliability improvements, and infrastructure modernization at upstream substations and distribution circuits.
Risk. Prairie Shore may contest this allocation, arguing that a higher percentage of the upgrade costs should be borne by MTDC as the primary cost-causer. Prairie Shore's position is likely to be that the vast majority of the $12,300,000 in distribution-system upgrades are directly attributable to the new 45 MW load, and that the broader system benefits identified by Creston are incidental rather than substantial. Prairie Shore may propose an alternative cost allocation of 70/30 or 80/20, which would increase MTDC's share to $8,610,000 (at 70/30) or $9,840,000 (at 80/20).
Mitigation. The Creston interconnection study provides strong technical justification for the proposed 60/40 allocation. The study includes a detailed engineering analysis of each component of the distribution-system upgrades, identifies which components are directly attributable to MTDC's incremental load and which components provide broader system benefits, and quantifies the value of those broader benefits. In addition, the Dralvecen Reade rate-impact analysis demonstrates that the impact on Prairie Shore's other ratepayers under the 60/40 allocation is minimal — Dralvecen Reade estimates that Prairie Shore's share of the distribution-system upgrade costs would result in a rate increase of less than $0.0003 per kWh for Prairie Shore's residential and commercial customers, an amount that is well within the range of de minimis rate impacts that the ICC has historically approved without objection.
We recommend that MTDC be prepared to negotiate the cost-sharing allocation with Prairie Shore, but that MTDC resist any allocation that exceeds 65/35 in MTDC's direction. A 65/35 allocation would increase MTDC's share by approximately $615,000 (to $7,995,000) — an amount that, while not negligible, is manageable within the project budget. Any allocation more heavily weighted toward MTDC could undermine the economic case for the project and could set an unfavorable precedent for future phases of fleet electrification.
B. Schedule EV-T Rate Structure
The proposed blended rate of $0.062 per kWh under Schedule EV-T is designed to be competitive with current diesel fuel costs on a per-mile basis while recovering Prairie Shore's full cost of service for the incremental 45 MW load. The blended time-of-use structure — which averages on-peak and off-peak rates into a single per-kWh charge — is intended to provide MTDC with cost predictability and administrative simplicity while incentivizing off-peak charging through the rate structure's implicit cost advantage for overnight depot charging.
Risk — Adequacy of Cost Recovery. ICC Staff or Prairie Shore may argue that the proposed blended rate of $0.062 per kWh does not adequately recover the full cost of service for the incremental load, particularly if the off-peak rate component of the blended rate is set below marginal cost. If the ICC determines that the proposed rate results in under-recovery of costs, it may require a higher rate or an alternative rate structure. Prairie Shore, in particular, may advocate for a higher blended rate or for additional revenue-recovery mechanisms.
Risk — Cross-Subsidization. ICC Staff or intervenors may raise concerns that the proposed rate results in cross-subsidization by other ratepayer classes — that is, that the cost of serving MTDC under Schedule EV-T would be partially borne by Prairie Shore's residential, commercial, or industrial customers rather than being fully recovered through the Schedule EV-T rate. The ICC has historically been vigilant in preventing cross-subsidization and may scrutinize the proposed rate closely on this ground.
Risk — Alternative Rate Design. The ICC may require or recommend a different rate design than the one proposed. For example, the ICC may prefer a rate structure that includes a separate demand charge component (reflecting the cost of maintaining the distribution capacity required to serve MTDC's peak demand) in addition to an energy charge. Alternatively, the ICC may favor a real-time pricing mechanism that more precisely aligns the rate with the actual cost of generation and delivery at the time of consumption. Either alternative would increase the complexity of MTDC's energy cost management and could reduce the cost predictability that is a key objective of the proposed Schedule EV-T.
Mitigation. The Dralvecen Reade rate-impact analysis provides a robust analytical foundation for the proposed rate. The analysis demonstrates that the blended rate of $0.062 per kWh fully recovers Prairie Shore's incremental cost of service for the 45 MW load, including generation costs, transmission charges, distribution costs (including a proportionate share of the distribution-system upgrade costs), and administrative overhead. The analysis further demonstrates that the proposed rate does not shift costs to other ratepayer classes and, in fact, generates a modest positive contribution to Prairie Shore's fixed-cost recovery, thereby benefiting all ratepayers. We will prepare Mr. Mosley's pre-filed testimony to address the rate-design rationale and to emphasize the policy benefits of a predictable, blended time-of-use rate structure for transit electrification.
C. Environmental and Public Interest Considerations
The environmental and public interest benefits of MTDC's fleet electrification initiative are a significant factor in the ICC's evaluation of the Verified Petition. The ICC is directed by statute to consider the public interest in its decision-making, and the Illinois General Assembly has, through legislation such as the Climate and Equitable Jobs Act and the Future Energy Jobs Act, expressed a strong policy preference for the reduction of greenhouse gas emissions and the promotion of clean energy technologies.
MTDC should emphasize the following environmental and public interest considerations in the Verified Petition and in Mr. Mosley's pre-filed testimony:
• Emissions Reductions. The replacement of 225 diesel buses with battery-electric buses is projected to reduce MTDC's annual tailpipe carbon dioxide (CO₂) emissions by approximately 22,500 metric tons per year, based on Creston's analysis of average fleet fuel consumption and emissions factors. The electrification will also eliminate local emissions of nitrogen oxides (NOₓ), particulate matter (PM₂.₅), and sulfur oxides (SOₓ) from the 225 buses, contributing to improved air quality in the communities served by the affected routes, many of which are environmental justice communities with disproportionately high rates of asthma and other respiratory illnesses.
• Noise Reduction. Battery-electric buses operate significantly more quietly than diesel buses, reducing noise pollution on transit routes and at depot locations, benefiting both transit riders and residents of surrounding neighborhoods.
• Alignment with State Clean Energy Policy. The Phase 1 electrification initiative is consistent with and advances the objectives of the Climate and Equitable Jobs Act (Public Act 102-0662) and the State of Illinois's broader clean energy goals, including the goal of achieving a 100% clean energy economy by 2050.
• MTDC's 2021 Strategic Sustainability Plan. The project directly implements the Plan's goal of converting 40% of the bus fleet to battery-electric by 2030, with Phase 1 representing the essential first step toward that target.
CATA's expected supportive intervention will reinforce these public-interest arguments and provide an independent voice in the proceeding advocating for the environmental benefits of fleet electrification. We anticipate that CATA may submit testimony from environmental scientists or public health experts quantifying the health benefits of reduced tailpipe emissions in the affected communities.
D. Federal Funding Contingencies — KEY RISK FACTOR
The single most significant risk factor affecting the overall viability of the Phase 1 electrification initiative and, consequently, the ICC proceeding is the continued availability of the $78,500,000 FTA grant (IL-2023-0067-00). This grant constitutes eighty percent (80%) of the total project cost of $98,125,000 and is the primary funding source for both the bus procurement and the charging infrastructure installation. Without the FTA grant, MTDC does not have the financial resources to fund the Phase 1 project, and the ICC application would become moot.
Risk. The FTA grant was awarded under the Low- and No-Emission Vehicle Program, 49 U.S.C. § 5339(c), which is funded through discretionary appropriations. The availability of funds for the program is contingent on annual congressional appropriations and, more broadly, on the continued authorization of the program through the federal surface transportation authorization legislation (currently the Bipartisan Infrastructure Law, Public Law 117-58). While the Bipartisan Infrastructure Law authorized the Low-No Program through FY 2026, program funding is subject to annual appropriations and could be affected by several scenarios:
• Continuing Resolution. If Congress fails to enact full-year appropriations for FY 2024 and instead operates under a continuing resolution, the FTA's ability to obligate new grant funds and to process disbursements on existing grants could be constrained or delayed. While a continuing resolution would not automatically rescind a grant that has already been awarded, it could delay the disbursement of funds and create uncertainty regarding the FTA's authority to approve expenditures under the grant.
• Rescission or Sequestration. In a scenario involving congressional rescission of previously appropriated funds or sequestration under the Budget Control Act, the FTA could be required to reduce or rescind grant awards, potentially including Grant No. IL-2023-0067-00. While this scenario is considered unlikely at present, it cannot be ruled out given the current political dynamics in Congress.
• Grant Withdrawal or Modification. In the event that MTDC fails to meet the disbursement milestones specified in the Notice of Award, the FTA has the authority to withdraw, reduce, or modify the grant award. Delays in the ICC proceeding that prevent MTDC from commencing charging infrastructure construction on schedule could trigger milestone failures and jeopardize the grant.
The current fiscal year appropriation for the Low-No Program expires on September 30, 2023. The status of FY 2024 appropriations remains uncertain, and there is significant congressional uncertainty regarding discretionary transit capital funding levels.
Impact on the ICC Proceeding. If the FTA grant funding lapses, is rescinded, or is materially reduced, MTDC would likely need to withdraw the Verified Petition or request a stay of proceedings before the ICC. A withdrawal or stay would be necessary because the factual predicate for the filing — including the project scope, the total project cost, the funding sources, and the economic justification for the proposed rate and cost-sharing arrangements — is premised on the availability of the FTA grant.
Mitigation Strategies. We recommend the following measures to mitigate the risk of FTA grant funding disruptions:
1. Condition Precedent in the Infrastructure Cost-Sharing Agreement. The Infrastructure Cost-Sharing Agreement (Exhibit C) should include a condition precedent requiring the continued availability of the FTA grant as a condition to the obligations of both MTDC and Prairie Shore under the agreement. The condition precedent should provide that if the FTA grant is rescinded, materially reduced, or otherwise becomes unavailable, either party may terminate the agreement without liability.
2. Withdrawal-Without-Prejudice Provision. The ICC filing strategy should include a provision allowing MTDC to withdraw the Verified Petition without prejudice if the FTA grant funding becomes unavailable. A withdrawal without prejudice would preserve MTDC's right to refile the Petition if funding is subsequently restored, without the adverse implications of a dismissal on the merits or a voluntary withdrawal that might otherwise preclude refiling.
3. Monitoring Congressional Appropriations Developments. The Calderwood & Harkness engagement team should monitor congressional appropriations developments throughout the ICC proceeding, including tracking the status of FY 2024 appropriations legislation, continuing resolution negotiations, and any legislative proposals that could affect the Low-No Program or FTA's discretionary grant authority. We should advise MTDC promptly of any developments that could affect the grant.
4. Notification to MTDC Leadership. MTDC General Counsel Constance M. Adler and Chief Financial Officer Sandra R. Pellegrino should be formally advised of this risk and should be prepared to take prompt action — including potentially requesting a stay of the ICC proceeding — if the FTA grant status changes materially. Executive Director Harold J. Greenway should likewise be informed in his capacity as the verifying officer of the Petition.
5. Scope Limitation. We note that our engagement scope, as defined in the February 20, 2023 engagement letter between Calderwood & Harkness LLP and MTDC, is limited to the ICC regulatory proceeding and does not extend to FTA grant compliance, federal funding advocacy, or congressional relations. MTDC should retain or rely on separate counsel or advisors for federal grant matters, including monitoring FTA requirements, ensuring compliance with federal grant conditions, and managing any issues that arise with respect to the grant award or disbursement schedule.
E. Technical and Engineering Risks
In addition to the regulatory and financial risks discussed above, the project is subject to several technical and engineering risks that could affect the ICC proceeding and the overall project timeline.
Distribution-System Conditions. Creston's interconnection study is based on certain assumptions regarding the current condition and capacity of Prairie Shore's distribution system at and near the three depot locations. If actual conditions differ from the assumptions — for example, if existing infrastructure is in poorer condition than expected, if there are unforeseen capacity constraints at upstream substations, or if other new load additions in the same service territory reduce available capacity — the scope and cost of the required distribution-system upgrades could increase beyond the current estimate of $12,300,000. Any material increase in upgrade costs would affect the cost-sharing allocation, the economic case for the project, and potentially the proposed Schedule EV-T rate.
Regional Transmission Coordination. The combined 45 MW load across the three depot locations is substantial and may require coordination with regional transmission planning processes administered by PJM Interconnection, L.L.C. (or the relevant regional transmission organization) if the new load triggers the need for transmission-level upgrades in addition to distribution-system upgrades. While Creston's preliminary analysis does not indicate that transmission-level upgrades will be required, this determination is subject to confirmation through the formal interconnection process.
Construction Timeline. Distribution-system upgrades of the magnitude contemplated here have significant lead times, including procurement of major equipment (transformers, switchgear), civil construction, and utility coordination. Delays in the ICC approval process could compress the construction timeline and create a risk of delay in the deployment of the battery-electric buses. MTDC should work with Creston and Prairie Shore to develop a detailed construction schedule and to identify critical-path procurement items as early as possible.
F. Procedural Risks
Several procedural risks could affect the timeline and outcome of the ICC proceeding:
• Contested Hearings. If the proceeding becomes contested — particularly on the cost-sharing allocation or the Schedule EV-T rate — the timeline could extend significantly beyond the projected September 2023 target for the ICC Final Order. Contested hearings involve extensive discovery, preparation and submission of testimony and exhibits, cross-examination of witnesses, post-hearing briefing, and potentially multiple rounds of briefing on exceptions to the ALJ's Proposed Order.
• Multiple Intervenors. While we currently anticipate only two intervenors (Prairie Shore and CATA), additional intervenors could emerge, particularly if the proposed rate structure attracts the attention of consumer advocacy groups, industrial ratepayer organizations, or other interested parties. Each additional intervenor adds complexity to the proceeding, increases the volume of discovery, and may raise new contested issues that further extend the timeline.
• ALJ Scheduling Constraints. The assigned Administrative Law Judge's docket and scheduling preferences will significantly influence the pace of the proceeding. If the ALJ has a heavy caseload or is assigned to other priority matters, hearings could be delayed. We will request an early prehearing conference to establish a firm scheduling order and to communicate the time-sensitivity of the proceeding in light of the FTA grant disbursement milestones.
VII. Recommended Filing Strategy
A. Pre-Filing Actions (Before March 1, 2023)
The following actions must be completed prior to the March 1, 2023 filing date:
1. Finalize and Review Creston Interconnection Study. The near-final draft of the Creston interconnection study is currently under review. Martin J. Sadowski, P.E. is expected to deliver the final version no later than February 28, 2023. Upon receipt of the final version, David Stanton and Michelle Tsao will conduct a final review for consistency with the Verified Petition and the pre-filed testimony of Raymond K. Mosley.
2. Finalize Dralvecen Reade Rate-Impact Analysis.