CommonWealth Edision v. Illinois Commerce Commission

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State: Illinois

Court: 2nd District Appellate

Docket No: 2-06-1284, 2-06-1285, 2-06-1286, 2-07-

Case Date: 09/17/2009

Preview:Nos. 2--06--1284, 2--06--1285, 2--06--1286, 2--07--0066, 2--07--0078, 2--07--0104 cons. Filed: 9-17-09

IN THE APPELLATE COURT OF ILLINOIS SECOND DISTRICT

COMMONWEALTH EDISON COMPANY,

) ) Petitioner, ) ) v. ) ) ILLINOIS COMMERCE COMMISSION; THE ) PEOPLE OF THE STATE OF ILLINOIS ex rel. ) LISA MADIGAN, ATTORNEY GENERAL; ) BLUESTAR ENERGY SERVICES, INC.; THE ) BOARD OF EDUCATION OF THE CITY OF ) CHICAGO; BUILDING OWNERS AND ) MANAGERS ASSOCIATION OF CHICAGO; ) CASTWELL PRODUCTS, INC.; CHICAGO ) TRANSIT AUTHORITY; CITIZENS UTILITY ) BOARD; THE CITY OF CHICAGO; ) COALITION OF ENERGY SUPPLIERS; ) COMMUNITY ACTION FOR FAIR UTILITIES ) PRACTICE; CONSTELLATION ENERGY ) COMMODITIES GROUP, INC.; ) CONSTELLATION NEW ENERGY, INC.; THE ) COOK COUNTY STATE'S ATTORNEY'S ) OFFICE; THE UNITED STATES ) DEPARTMENT OF ENERGY; DIRECT ) ENERGY SERVICES, L.L.C.; DOWNERS ) GROVE SANITARY DISTRICT; DYNEGY, ) INC.; ILLINOIS ASSOCIATION OF ) WASTEWATER AGENCIES; ILLINOIS ) INDUSTRIAL ENERGY CONSUMERS ) (styled as such collectively from the following ) petitioners: Abbott Laboratories, Inc., Caterpillar, ) Inc.; Daimler Chrysler Corporation; CITGO ) Petroleum Corporation; Corn Products ) International, Inc.; Ford Motor Company; )

On Petition for Administrative Review from the Illinois Commerce Commission ICC Case No. 05--0597

Merchandise Mart Properties, Inc.; Sterling Steel Company, L.L.C.; and Thermal Chicago Corporation); ISG RIVERDALE, INC.; MIDAMERICAN ENERGY COMPANY; MIDWEST GENERATION EME, L.L.C.; NORTHEAST ILLINOIS REGIONAL COMMUTER RAILROAD CORPORATION, d/b/a Metra; PEOPLE'S ENERGY SERVICES CORPORATION; UNIVERSITY OF ILLINOIS; and U.S. ENERGY SAVINGS CORPORATION, Respondents.

) ) ) ) ) ) ) ) ) ) ) )

CHICAGO TRANSIT AUTHORITY,

) ) ) Petitioner, ) ) v. ) ) ILLINOIS COMMERCE COMMISSION; ) COMMONWEALTH EDISON COMPANY; THE ) PEOPLE OF THE STATE OF ILLINOIS ex rel. ) LISA MADIGAN, ATTORNEY GENERAL; ) BLUESTAR ENERGY SERVICES, INC.; THE ) BOARD OF EDUCATION OF THE CITY OF ) CHICAGO; BUILDING OWNERS AND ) MANAGERS ASSOCIATION OF CHICAGO; ) CASTWELL PRODUCTS, INC.; CITIZENS ) UTILITY BOARD; THE CITY OF CHICAGO; ) COALITION OF ENERGY SUPPLIERS; ) COMMUNITY ACTION FOR FAIR UTILITIES ) PRACTICE; CONSTELLATION ENERGY ) COMMODITIES GROUP, INC.; ) CONSTELLATION NEW ENERGY, INC.; THE ) COOK COUNTY STATE'S ATTORNEY'S ) OFFICE; THE UNITED STATES ) DEPARTMENT OF ENERGY; DIRECT ) ENERGY SERVICES, L.L.C.; DOWNERS ) GROVE SANITARY DISTRICT; DYNEGY, ) INC.; ILLINOIS ASSOCIATION OF ) WASTEWATER AGENCIES; ILLINOIS ) INDUSTRIAL ENERGY CONSUMERS ) (styled as such collectively from the following ) petitioners: Abbott Laboratories, Inc., Caterpillar, ) Inc.; Daimler Chrysler Corporation; CITGO ) -2-

On Petition for Administrative Review from the Illinois Commerce Commission ICC Case No. 05--0597

Petroleum Corporation; Corn Products International, Inc.; Ford Motor Company; Merchandise Mart Properties, Inc.; Sterling Steel Company, L.L.C.; and Thermal Chicago Corporation); ISG RIVERDALE, INC.; MIDAMERICAN ENERGY COMPANY; MIDWEST GENERATION EME, L.L.C.; NORTHEAST ILLINOIS REGIONAL COMMUTER RAILROAD CORPORATION, d/b/a Metra; PEOPLE'S ENERGY SERVICES CORPORATION; UNIVERSITY OF ILLINOIS; and U.S. ENERGY SAVINGS CORPORATION, Respondents.

) ) ) ) ) ) ) ) ) ) ) ) ) )

NORTHEAST ILLINOIS REGIONAL COMMUTER RAILROAD CORPORATION, d/b/a Metra,

) ) ) ) Petitioner, ) ) v. ) ) ILLINOIS COMMERCE COMMISSION; ) COMMONWEALTH EDISON COMPANY; THE ) PEOPLE OF THE STATE OF ILLINOIS ex rel. ) LISA MADIGAN, ATTORNEY GENERAL; ) BLUESTAR ENERGY SERVICES, INC.; THE ) BOARD OF EDUCATION OF THE CITY OF ) CHICAGO; BUILDING OWNERS AND ) MANAGERS ASSOCIATION OF CHICAGO; ) CASTWELL PRODUCTS, INC.; CHICAGO ) TRANSIT AUTHORITY; CITIZENS ) UTILITY BOARD; THE CITY OF CHICAGO; ) COALITION OF ENERGY SUPPLIERS; ) COMMUNITY ACTION FOR FAIR UTILITIES ) PRACTICE; CONSTELLATION ENERGY ) COMMODITIES GROUP, INC.; ) CONSTELLATION NEW ENERGY, INC.; THE ) COOK COUNTY STATE'S ATTORNEY'S ) OFFICE; THE UNITED STATES ) DEPARTMENT OF ENERGY; DIRECT ) ENERGY SERVICES, L.L.C.; DOWNERS ) GROVE SANITARY DISTRICT; DYNEGY, ) INC.; ILLINOIS ASSOCIATION OF ) WASTEWATER AGENCIES; ILLINOIS ) -3-

On Petition for Administrative Review from the Illinois Commerce Commission Case No. 05--0597

INDUSTRIAL ENERGY CONSUMERS (styled as such collectively from the following petitioners: Abbott Laboratories, Inc., Caterpillar, Inc.; Daimler Chrysler Corporation; CITGO Petroleum Corporation; Corn Products International, Inc.; Ford Motor Company; Merchandise Mart Properties, Inc.; Sterling Steel Company, L.L.C.; and Thermal Chicago Corporation); ISG RIVERDALE, INC.; MIDAMERICAN ENERGY COMPANY; MIDWEST GENERATION EME, L.L.C.; PEOPLE'S ENERGY SERVICES CORPORATION; UNIVERSITY OF ILLINOIS; and U.S. ENERGY SAVINGS CORPORATION, Respondents.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

BUILDING OWNERS AND MANAGERS ASSOCIATION OF CHICAGO,

) ) ) Petitioner, ) ) v. ) ) ILLINOIS COMMERCE COMMISSION; ) COMMONWEALTH EDISON COMPANY; THE ) PEOPLE OF THE STATE OF ILLINOIS ex rel. ) LISA MADIGAN, ATTORNEY GENERAL; ) BLUESTAR ENERGY SERVICES, INC.; THE ) BOARD OF EDUCATION OF THE CITY OF ) CHICAGO; CASTWELL PRODUCTS, INC.; ) CHICAGO TRANSIT AUTHORITY; CITIZENS ) UTILITY BOARD; THE CITY OF CHICAGO; ) COALITION OF ENERGY SUPPLIERS; ) COMMUNITY ACTION FOR FAIR UTILITIES ) PRACTICE; CONSTELLATION ENERGY ) COMMODITIES GROUP, INC.; ) CONSTELLATION NEW ENERGY, INC.; THE ) COOK COUNTY STATE'S ATTORNEY'S ) OFFICE; THE UNITED STATES ) DEPARTMENT OF ENERGY; DIRECT ) ENERGY SERVICES, L.L.C.; DOWNERS ) GROVE SANITARY DISTRICT; DYNERGY, ) INC.; ILLINOIS ASSOCIATION OF ) WASTEWATER AGENCIES; ILLINOIS ) INDUSTRIAL ENERGY CONSUMERS ) -4-

On Petition for Administrative Review from the Illinois Commerce Commission Case No. 05--0597

(styled as such collectively from the following petitioners: Abbott Laboratories, Inc., Caterpillar, Inc.; Daimler Chrysler Corporation; CITGO Petroleum Corporation; Corn Products International, Inc.; Ford Motor Company; Merchandise Mart Properties, Inc.; Sterling Steel Company, L.L.C.; and Thermal Chicago Corporation); ISG RIVERDALE, INC.; MIDAMERICAN ENERGY COMPANY; MIDWEST GENERATION EME, L.L.C.; PEOPLE'S ENERGY SERVICES CORPORATION; UNIVERSITY OF ILLINOIS; and U.S. ENERGY SAVINGS CORPORATION, Respondents.

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

JUSTICE HUDSON delivered the opinion of the court: These consolidated appeals arise out of the filing by Commonwealth Edison (ComEd) of an action with the Illinois Commerce Commission (Commission) in which ComEd sought to restructure and alter the rates it charged certain customers. The Commission entered an initial order on July 26, 2006, and a subsequent order on rehearing on December 20, 2006. Numerous parties are involved. Several of them object to various aspects of the Commission's order, and several appeals were filed, which are now consolidated here. The record is voluminous, and extensive briefs were filed. However, the issues raised are, for the most part, relatively discrete. Thus, we will treat the issues separately, discussing the pertinent facts as they are relevant to each issue we address. I. BACKGROUND ComEd's filing came in the wake of certain changes in Illinois's electric industry that occurred beginning in the late 1990s. In 1997, the General Assembly amended the Public Utilities Act (Act) (220 ILCS 5/1--101 et seq. (West 2004)) by enacting the Electric Service Customer Choice and Rate Relief Law of 1997 (Rate Relief Law) (220 ILCS 5/16--101 et seq. (West 2004)). This law required electric utilities to open their formerly legislatively approved monopoly. See 220 ILCS 5/16--103

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Nos. 2--06--1284, 2--06--1285, 2--06--1286, 2--07--0066, 2--07--0078, 2--07--0104 cons. (West 2004). Utilities were required to offer delivery services in addition to existing services, at least until an existing service was either abandoned or declared competitive. 220 ILCS 5/16--103 (West 2004). Delivery services are "those services provided by the electric utility that are necessary in order for the transmission and distribution systems to function so that retail customers located in the electric utility's service area can receive electric power and energy from suppliers other than the electric utility." 220 ILCS 5/16--102 (West 2004). The Rate Relief Law brought about a number of changes on both the retail and wholesale levels. Relevant here, utilities were required to offer delivery services in a nondiscriminatory manner to all customers. In response to the new law, ComEd divested itself of its electricity generating assets. See 220 ILCS 5/16--111(g) (West 2004). ComEd became an "integrated distribution company," which the parties refer to as a "wires company." As a "wires company," ComEd's costs are now driven by the requirement that it meet the needs of a maximum number of customers, "regardless of the nature of the usage of customers." Generation of electricity is no longer a consideration. ComEd's costs as a "wires company" do not vary appreciably over time, as they did when costs were driven by generating electricity. During a transition period that ended on January 1, 2007, residential rates were reduced by 20% and nonresidential rates were frozen. ComEd proposed to restructure its rates for the post-transition period, in which it will serve two types of customers--those that purchase a bundled electrical service product and those that purchase an unbundled product by which they can purchase electricity from suppliers other than ComEd and pay ComEd for delivery services. One goal was to "harmonize" customer class definitions between customers of unbundled service and customers of bundled service (customers who elected to continue under the scheme that preexisted the Rate Relief Law).

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Nos. 2--06--1284, 2--06--1285, 2--06--1286, 2--07--0066, 2--07--0078, 2--07--0104 cons.

II. STANDARD OF REVIEW Under well-settled legal principles, we are required to give substantial deference to the decisions of the Commission, in light of its expertise and experience in this area. Alhambra-Grantfork Telephone Co. v. Illinois Commerce Comm'n, 358 Ill. App. 3d 818, 821 (2005). Accordingly, on appeal from an order of the Commission, its findings of fact are to be considered prima facie true; its orders are considered prima facie reasonable; and the burden of proof on all issues raised in an appeal is on the appellant. United Cities Gas Co. v. Illinois Commerce Comm'n, 163 Ill. 2d 1, 11 (1994). Though we are not bound by the Commission on questions of law (Business & Professional People for the Public Interest v. Illinois Commerce Comm'n, 136 Ill. 2d 192, 204 (1989)), we "will give substantial weight and deference to an interpretation of an ambiguous statute by the agency charged with the administration and enforcement of the statute" (Illinois Consolidated Telephone Co. v. Illinois Commerce Comm'n, 95 Ill. 2d 142, 152 (1983)), which in this case is the Commission. Our review is limited to the following matters: (1) whether the Commission acted within its authority; (2) whether it made adequate findings to support its decision; (3) whether the decision was supported by substantial evidence; and (4) whether state or federal constitutional rights were infringed. Commonwealth Edison Co. v. Illinois Commerce Comm'n, 322 Ill. App. 3d 846, 849 (2001). "Substantial evidence" means more than a mere scintilla; however, it does not have to rise to the level of a preponderance of the evidence. Citizens Utility Board v. Illinois Commerce Comm'n, 291 Ill. App. 3d 300, 304 (1997). It is evidence that a "reasoning mind would accept as sufficient to support a particular conclusion." Citizens Utility Board, 291 Ill. App. 3d at 304. Our supreme court has held that deference to the Commission is "especially appropriate in the area of fixing rates." Iowa-Illinois Gas & Electric Co. v. Illinois Commerce Comm'n, 19 Ill. 2d 436, 442 (1960). On review, this court

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Nos. 2--06--1284, 2--06--1285, 2--06--1286, 2--07--0066, 2--07--0078, 2--07--0104 cons.

can neither reevaluate the credibility or weight of the evidence nor substitute its judgment for that of the Commission. Illinois Bell Telephone Co. v. Illinois Commerce Comm'n, 283 Ill. App. 3d 188, 200-01 (1996). With these principles in mind, we now turn to the issues raised by the parties. III. ANALYSIS This appeal can be divided into two types of issues, revenue and rate structure. Only ComEd raises issues pertaining to its revenue requirement (essentially ComEd's operating expenses plus profit (see Commonwealth Edison Co. v. Illinois Commerce Comm'n, 322 Ill. App. 3d 846, 849 (2001))-three of them, in fact. Generally speaking, a utility determines its revenue requirement by adding operating costs to invested capital multiplied by the rate of return. See Business & Professional People for Public Interest v. Illinois Commerce Comm'n, 146 Ill. 2d 175, 195 (1991) ("The components of the revenue requirement have frequently been expressed in the formula 'R (revenue requirement) = C (operating costs) + Ir (invested capital or rate base times rate of return on capital)' "), quoting Citizens Utilities Co. v. Illinois Commerce Comm'n, 124 Ill. 2d 195, 200-01 (1988). The rate of return is typically established with reference to what would be a reasonable return on the present value of a utility's property. Village of Milford v. Illinois Commerce Comm'n, 20 Ill. 2d 556, 562 (1960). Any increase to the rate base (or invested capital) results in an increased revenue requirement. ComEd's arguments focus upon three items that it contends should have been included in its rate base. Specifically, ComEd argues: (1) it is entitled to full recovery of costs it incurred complying with the Public Company Accounting Reform and Corporate Responsibility Act of 2002 (Sarbanes-Oxley Act) (15 U.S.C.

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