Ameren Ill. Co. v. Ill. Commerce Comm'n

• Decision Date: 28 January 2014
• Docket Number: Nos. 4–12–1008,4–13–0029.,s. 4–12–1008
• Citation: 2 N.E.3d 1087,377 Ill.Dec. 806,2013 IL App (4th) 121008
• Parties: AMEREN ILLINOIS COMPANY, Petitioner, v. ILLINOIS COMMERCE COMMISSION; The Citizens Utility Board; AARP; The Commercial Group (Best Buy Company Inc., J.C. Penney Corporation, Inc., Macy's, Inc., Sam's West, Inc., and Wal–Mart Stores, Inc.); The Industrial Energy Consumers (Air Products and Chemicals Company, Archer–Daniels–Midland Company, Caterpillar, Inc., CCPS Transportation, LLC, GBC Metals, LLC, Keystone Consolidated Industries, Inc., Marathon Petroleum Company, LP, Olin Corporation, Tate and Lyle Ingredients Americas, Inc., University of Illinois, Viscofan USA, Inc., and Washington Mills Hennepin, Inc.); The Office of the Attorney General; and the People of the State of Illinois, Respondents. Ameren Illinois Company, Petitioner, v. Illinois Commerce Commission, The Citizens Utility Board, AARP, The Office of the Attorney General, and The People of the State of Illinois, Respondents.
• Court: United States Appellate Court of Illinois

2013 IL App (4th) 121008

2 N.E.3d 1087

377 Ill.Dec. 806

AMEREN ILLINOIS COMPANY, Petitioner,

v.ILLINOIS COMMERCE COMMISSION; The Citizens Utility Board; AARP; The Commercial Group (Best Buy Company Inc., J.C. Penney Corporation, Inc., Macy's, Inc., Sam's West, Inc., and Wal–Mart Stores, Inc.); The Industrial Energy Consumers (Air Products and Chemicals Company, Archer–Daniels–Midland Company, Caterpillar, Inc., CCPS Transportation, LLC, GBC Metals, LLC, Keystone Consolidated Industries, Inc., Marathon Petroleum Company, LP, Olin Corporation, Tate and Lyle Ingredients Americas, Inc., University of Illinois, Viscofan USA, Inc., and Washington Mills Hennepin, Inc.); The Office of the Attorney General; and the People of the State of Illinois, Respondents.

Ameren Illinois Company, Petitioner,

v.Illinois Commerce Commission, The Citizens Utility Board, AARP, The Office of the Attorney General, and The People of the State of Illinois, Respondents.

Nos. 4–12–1008, 4–13–0029.

Appellate Court of Illinois,

Fourth District.

Dec. 11, 2013.

Modified Upon Denial of Rehearing Jan. 28, 2014.

Albert D. Sturtevant, of Whitt Sturtevant LLP, of Chicago, Edward C. Fitzhenry, of Ameren Services Company, of St. Louis, Missouri, and Mark A. Whitt (argued) and Andrew J. Campbell, both of Whitt Sturtevant LLP, of Columbus, Ohio, for petitioner.

John P. Kelliher and James E. Weging (argued), Special Assistant Attorneys General, of Chicago, for respondent Illinois Commerce Commission.

Julie L. Soderna, Kristin Munsch, Christie Redd Hicks, and Orijit Ghoshal, all of Citizens Utility Board, of Chicago, for respondent Citizens Utility Board.

Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro, Solicitor General, and Jane Elinor Notz, Janice A. Dale, Karen L. Lusson, Susan L. Satter, Timothy O'Brien, and Brian F. Barov, Assistant Attorneys General, of counsel), for respondents Office of the Attorney General and the People.

Eric Robertson and Andrew Rankin, both of Lueders, Robertson & Konzen, LLC, of Granite City, and Conrad R. Reddick, of Wheaton, for other respondents.

OPINION

Justice HOLDER WHITE delivered the judgment of the court, with opinion.

¶ 1 In January 2012, Ameren Illinois Company (Ameren) filed its initial application with the Illinois Commerce Commission (Commission) to establish a performance-based rate tariff under the authority of section 16–108.5 of the Public Utilities Act (Utilities Act), commonly referred to as the Energy Infrastructure Modernization Act (Modernization Act) (220 ILCS 5/16–108.5 (West 2012)), enacted by Public Act 97–616 (Pub. Act 97–616, § 10 (eff. Oct. 26, 2011)). Following a September 2012 evidentiary hearing, the Commission issued a written decision in which, among other things, it (1) rejected and subsequently reduced Ameren's proposed rate of common equity so that it was more consistent with the common equity of Ameren's holding company, Ameren Company (holding company); (2) considered Ameren's accumulated deferred income taxes (ADIT) for projected plant additions in calculating Ameren's rate base; and (3) decreased Ameren's rate base by unused vacation pay accrued by Ameren employees.

¶ 2 In April 2012, Ameren filed its first annual update with the Commission. In December 2012, the Commission reaffirmed the aforementioned findings.

¶ 3 On appeal, Ameren asserts the Commission made three reversible errors in reaching its decision, including (1) considering the capital structure of Ameren's holding company rather than the actual capital structure of Ameren when determining rate base; (2) reducing Ameren's rate base by ADIT for projected plant additions; and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees.

¶ 4 We affirm.

¶ 5 I. BACKGROUND

¶ 6 Ameren is a public utility that distributes electricity and gas to customers in Illinois. As a public utility, Ameren's rates are subject to regulation by the State of Illinois pursuant to the Utilities Act (220 ILCS 5/9–101 to 22–503 (West 2012)), through which the General Assembly has delegated to the Commission the authority to review the rates suggested by public utilities to determine whether those rates are “just and reasonable.” 220 ILCS 5/9–201(c) (West 2012).

¶ 7 A. Modernization Act

¶ 8 In 2011, the General Assembly passed the Modernization Act (220 ILCS 5/16–108.5 (West 2012)) as a provision of the Utilities Act (220 ILCS 5/1–101 to 22–503 (West 2012)). The Modernization Act applies to electric utilities or combination gas and electric utilities serving more than 1 million customers in Illinois that voluntarily undertake to create customer assistance programs and invest in an infrastructure program that creates Illinois jobs. 220 ILCS 5/16–108.5(b) (West 2012). To participate, a utility company must commit to one of the following investment plans. The first option requires the utility company, within 5 years, to invest $1.3 billion “in electric system upgrades, modernization projects, and training facilities” and, within 10 years, to invest $1.3 billion “to upgrade and modernize its transmission and distribution infrastructure.” 220 ILCS 5/16–108.5(b)(1)(A), (b)(1)(B) (West 2012). The second option requires the utility company, over a 10–year period, to invest $265 million “in electric system upgrades, modernization projects, and training facilities” and to invest $360 million “to upgrade and modernize its transmission and distribution infrastructure.” 220 ILCS 5/16–108.5(b)(2)(A), (b)(2)(B) (West 2012). The incentive for utility companies to participate in this program is that the statute allows the company to recover its expenditures through the ratemaking process. 220 ILCS 5/16–108.5(b) (West 2012).

¶ 9 B. Ameren's Initial Application Under the Modernization Act

¶ 10 In January 2012, Ameren filed with the Commission a petition for approval of its “Modernization Action Plan–Pricing Tariff” pursuant to the Modernization Act (Illinois Commerce Commission case No. 12–0001 (No. 12–0001)). Several parties intervened, including (1) the Attorney General on behalf of the People of the State of Illinois, (2) the Citizens Utility Board, (3) the American Association of Retired Persons (AARP), (4) the Illinois Industrial Energy Consumers, and (5) the Commercial Group. In September 2012, following an evidentiary hearing and briefing by all parties, including Commission staff, the Commission approved Ameren's application with several modifications, including (1) rejecting and subsequently reducing Ameren's proposed rate of common equity so that it was more consistent with the common equity of Ameren's holding company, Ameren Company; (2) considering ADIT on projected plant additions in calculating Ameren's rate base; and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees. Ameren filed an application for rehearing, which the Commission denied in October 2012. Ameren then filed a timely notice of appeal challenging, among other issues, the Commission's findings with regard to Ameren's (1) rate of common equity in calculating actual capital structure and (2) ADIT on projected plant additions. This court docketed Ameren's appeal as No. 4–12–1008.

¶ 11 C. Ameren's Annual Update Filing

¶ 12 In April 2012, while Ameren's application in No. 12–0001 was still pending, Ameren filed its first annual update with the Commission as required by the Modernization Act (Illinois Commerce Commission case No. 12–0293 (No. 12–0293)). In December 2012, the Commission issued its written findings consistent with No. 12–0001. The Commission then denied Ameren's January 2013 motion requesting a rehearing. Ameren filed a timely notice of appeal challenging, among others issues, the Commission's decisions with regard to (1) reducing Ameren's common equity as more consistent with Ameren's holding company, (2) considering ADIT on projected plant additions in calculating rate base, and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees. Ameren then filed a timely notice of appeal, which this court docketed as No. 4–13–0029. We have consolidated both cases for review.

¶ 13 D. May 2013 Amendment to the Modernization Act

¶ 14 In May 2013, Public Act 98–15 (Pub. Act 98–15, § 5 (eff. May 22, 2013)) amended the Modernization Act, and those amendments applied retroactively to the proceedings at issue in the present cases. 220 ILCS 5/16–108.5 (West 2012) (enacted by Public Act 98–15 (Pub. Act 98–15, § 5 (eff. May 22, 2013))). Ameren subsequently filed motions in both cases to have several issues declared moot, and the appellees did not object. Thus, this court will address only the remaining issues.

¶ 15 II. ANALYSIS

¶ 16 On appeal, Ameren asserts the Commission erred by (1) considering the capital structure of Ameren's holding company rather than the actual capital structure of Ameren when determining rate base; (2) reducing Ameren's rate base by ADIT for projected plant additions; and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees. We address each of these contentions in turn.

¶ 17 A. Standard of Review

¶ 18 This is a case of first impression, requiring this court to review and interpret the statutory provisions of the Modernization Act in the context of the Utilities Act. Issues of statutory interpretation are reviewed de novo. People ex rel. Madigan v. Illinois Commerce Comm'n, 231 Ill.2d 370, 380, 326 Ill.Dec. 10, 899 N.E.2d 227, 232 (2008). However, the Utilities Act provides that the Commission's findings of fact are considered prima facie reasonable and the burden of proof on all issues raised upon appeal is on the challenging party. 220 ILCS 5/10–201(d) (West 2012). Review of the Commission's factual findings is generally limited to whether (1) the Commission acted within its authority, (2) the Commission made adequate findings to support its position, (3) the decision is supported by substantial evidence, and (4) constitutional rights...