Business and Professional People for Public Interest v. Illinois Commerce Com'n

• Decision Date: 16 December 1991
• Docket Number: 71681 and 71719,71669,Nos. 71602,71629,s. 71602
• Citation: 146 Ill.2d 175,166 Ill.Dec. 10,585 N.E.2d 1032
• Parties: , 166 Ill.Dec. 10, Util. L. Rep. P 26,154 BUSINESS AND PROFESSIONAL PEOPLE FOR THE PUBLIC INTEREST et al., Appellants, v. The ILLINOIS COMMERCE COMMISSION et al., Appellees.
• Court: Illinois Supreme Court

Page 1032

585 N.E.2d 1032

146 Ill.2d 175, 166 Ill.Dec. 10, Util. L.

Rep. P 26,154

BUSINESS AND PROFESSIONAL PEOPLE FOR THE PUBLIC INTEREST et al., Appellants, v. The ILLINOIS COMMERCE COMMISSION et al., Appellees.

Nos. 71602, 71629, 71669, 71681 and 71719.

Supreme Court of Illinois Dec. 16, 1991.

Douglass W. Cassel, Jr., Howard A. Learner and Patricia M. Logue, Chicago, for appellant Business & Professional People for the Public Interest.

Roland W. Burris, Atty. Gen., Springfield, and Robert W. Cushing and G. Darryl Reed, Asst. Attys. Gen., Chicago, for the People of the State of Illinois, appellant.

Stephen J. Moore, Stephen Fogel, and Robert R. Neumann, Chicago, for the Office of Public Counsel, appellant.

Jack O'Malley, State's Atty., and Thomas H. Rowland, Supervisor, Public Utilities Division, Chicago, for the People of Cook County, appellant.

Kelly R. Welsh, Corp. Counsel, and Ruth Moscovitch, Chief Asst. Corp. Counsel, and Patrick N. Giordano, Special Asst. Corp. Counsel, of Foley & Lardner, Chicago, for appellant City of Chicago.

Susan L. Satter, Chicago, for appellant Citizens Utility Board.

Gilbert A. Cornfield, of Cornfield & Feldman, Chicago, for appellant Labor Coalition on Public Utilities.

Allen W. Cherry, Chicago, for appellants Community Action for Fair Utility Practice et al.

Eric Robertson and Randall Robertson, of Lueders, Robertson & Konzen, Granite City, and William Price, Chicago, for appellants Illinois Industrial Energy Consumers et al.

Edward P. O'Brien, Eva-Maria Wohn and David W. McGann, Special Asst. Attys. Gen., Chicago, for appellee Illinois Commerce Commission.

Howard J. Trienens, Michael I. Miller, R. Eden Martin, Dale E. Thomas, and David F. Graham, of Sidley & Austin, and Kevin M. Forde, Chicago, for appellee and cross-appellant Commonwealth Edison Co.

Justice CLARK delivered the opinion of the court:

This is the second time that the propriety of orders issued by the Illinois Commerce Commission (Commission) regarding the costs of Commonwealth Edison's (Edison's) newest nuclear electrical generating facilities and a corresponding increase in rates has been before this court.

In December 1989, this court issued an opinion overturning the Commission's Sixth Interim Order which had granted Edison a two-step rate increase. That rate increase was due primarily to the costs incurred in constructing the Byron Unit 2, Braidwood Unit 1 and Braidwood Unit 2 nuclear plants On March 8, 1991, the Commission entered two orders which attempted to comply with the instructions of this court's opinion in Business & Professional People I (Remand Order) and set rates in accord with Edison's 1990 tariff filing (Rate Order) respectively. Several intervenors representing various ratepayer groups filed petitions with this court for direct appeal pursuant to Rule 302(b) (134 Ill.2d R. 302(b)). We allowed the petitions.

                [166 Ill.Dec. 15] (Business & Professional People for the Public Interest v. Illinois Commerce Comm'n (1989), 136 Ill.2d 192, 144 Ill.Dec. 334, 555 N.E.2d 693) (Business & Professional People I ).   On April 12, 1990, Edison filed new tariffs, thereby initiating a new rate case with the Commission
                

In this case, the parties are challenging the propriety of several of the Commission's findings contained within the Remand and Rate Orders. The parties to this appeal are as follows: 12 consumer and governmental groups that we will collectively refer to as the intervenors, the People of the State of Illinois ex rel. Roland W. Burris (Attorney General), Edison, the Commission, and the Illinois Industrial Electrical Consumers.

On appeal, the intervenors argue that the Commission has allowed the consumers to bear rate increases for nonprudent plant construction and various unreasonable costs associated with that construction. Further, the intervenors allege that the plants are not used and useful as defined by the Public Utilities Act (the Act) (Ill.Rev.Stat.1987, ch. 111 2/3, par. 1-101 et seq.) and that the Commission violated various ratemaking principles and this court's mandate in Business & Professional People I by allowing Edison to record and recover deferred charges. The Attorney General argues only that the Commission erred in determining that Edison's plants were fully used and useful. In its cross-appeal, Edison alleges that the Commission's orders make disallowances from the rate base which are arbitrary and unsupported by the evidence. Edison contends that the disallowances effectively resulted in a confiscation of its property.

PROCEEDINGS BEFORE THE COMMISSION

On August 21, 1987, Edison filed tariffs with the Commission requesting a $1.414 billion annual increase in rates for electric service. (See Ill.Rev.Stat.1987, ch. 111 2/3, par. 1-101 et seq.) The requested increase, approximately 26.9% over the then-existing rates, was to cover costs associated with bringing Byron Unit 2, Braidwood Unit 1 and Braidwood Unit 2 nuclear electrical generating units into service. (Byron Unit 2 began commercial operation on April 11, 1987. Braidwood Unit 1 and Unit 2 began operating on November 19, 1987, and August 5, 1988, respectively.) The Commission suspended Edison's proposed tariffs and set this rate case for hearing.

In accord with the Act, the Commission ordered that audits be conducted to ascertain the reasonableness of construction costs for the three units. (Ill.Rev.Stat.1987, ch. 111 2/3, par. 9-213.) Arthur Young and Company, now known as Ernst and Young (Ernst & Young), was selected to conduct the audit of Byron Unit 2 and O'Brien-Kreitzberg and Associates (O'Brien-Kreitzberg) was selected to conduct the audit of the Braidwood units. The auditors' reports for Byron Unit 2 and Braidwood Unit 1 were completed in 1988.

Pending completion of the construction audits, the Commission held evidentiary hearings, beginning January 6, 1988, and extending over several months, on the nonaudit portions of the case. Without the benefit of the audit report for Braidwood Unit 2, the Commission's staff (staff) subsequently filed a "Motion for the Commission to Defer the Resolution of the Rate Case and to Pursue an Alternative Resolution." Staff attached to this motion a settlement proposal. The proposal provided for a $235 million rate increase effective January 1, 1989, and an additional $245 million rate increase effective January 1, 1990. The proposal also provided for a moratorium on further rate increases through December 31, 1991. Based on this proposal, on December 30, 1988, the Commission entered an order memorializing the In Business & Professional People I this court held that the Sixth Interim Order was illegal and void. Specifically, this court found that the Commission exceeded its authority by entering the Order without the agreement of the intervenors; that the Commission decided several issues outside of the context of a traditional rate case; and that the Commission did not have the authority to unilaterally impose retroactive refunds and the rate moratorium. Upon denial of rehearing this court modified the Business & Professional People I decision on May 31, 1990, and ordered Edison to comply with its differential refund offer contained in the Sixth Interim Order. (Business & Professional People I, 136 Ill.2d at 247, 144 Ill.Dec. 334, 555 N.E.2d 693.) The cause was remanded to the Commission for reconsideration of the entire rate decision. (Business & Professional People I, 136 Ill.2d at 248, 144 Ill.Dec. 334, 555 N.E.2d 693.) In accord with this court's decision, the Commission entered interim orders providing for a refund to ratepayers and rolling back Edison's rates to the revenue level last authorized by the Commission.

[166 Ill.Dec. 16] above settlement agreement (Sixth Interim Order). The Commission subsequently amended the order on January 25, 1989, and again on February 8, 1989.

On April 12, 1990, prior to this court's issuance of our modified ruling in Business & Professional People I, Edison initiated a new rate case by filing revised tariffs with the Commission. The new tariff schedules proposed to increase annual rates for electrical services by 17.7%, or $1.231 billion. The Commission suspended the new tariffs and initiated investigatory proceedings. Various parties were permitted to intervene, and hearings were held intermittently between May 4, 1990, and October 22, 1990. Evidentiary hearings were held between October 22 and November 9, 1990. The Commission's hearing examiners subsequently filed proposed orders with the Commission and oral arguments were presented to the full Commission on February 11 and February 13, 1991.

On March 8, 1991, the Commission entered orders addressing the remanded proceeding and Edison's April 1990 rate request. In the Remand Order the Commission determined what Edison's approximate revenue requirement would have been based on that record. Those revenue requirements were not placed in effect but were instead replaced by the revenue requirements determined in the simultaneously issued Rate Order.

The Remand Order provided in part that the units were prudently constructed within the meaning of section 9-212 of the Act (Ill.Rev.Stat.1987, ch. 111 2/3, par. 9-212) and that each of the units was fully used and useful, premised on an application of pre-1986 law.

The Remand Order also provided that completion of the plants was unreasonably delayed by a total of 32.1 months and that unreasonable costs of over $700 million were incurred during the construction of the units. The Commission's conclusions setting forth these findings and the reasonable costs of the units are as follows:

                 Units      Amt.  Spent by      Unreasonable     Unreasonable    Reasonable Cost
                               Edison             Delay            Costs
                Byron 2       $1,884,250,796       23.4 mos.      $296,605,000   $1,587,645,796
                Bdwd. 1        3,268,000,000        6.0 mos.       333,883,000    2,934,117,000
                Bdwd. 2

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