Citizens Utilities Co. of Illinois v. O'Connor

• Decision Date: 01 February 1984
• Docket Number: No. 83-679,83-679
• Citation: 459 N.E.2d 682,76 Ill.Dec. 767,121 Ill.App.3d 533
• Parties: , 76 Ill.Dec. 767 CITIZENS UTILITIES COMPANY OF ILLINOIS, an Illinois Corporation, Plaintiff- Appellant, v. Philip R. O'CONNOR, Helen Schmid, Charles Stalon, Andrew Barrett and Daniel Rosenblum, being the persons constituting the Illinois Commerce Commission of the State of Illinois, and Neil F. Hartigan, being the person who is Attorney General of the State of Illinois, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 682

459 N.E.2d 682

121 Ill.App.3d 533, 76 Ill.Dec. 767

CITIZENS UTILITIES COMPANY OF ILLINOIS, an Illinois Corporation, Plaintiff- Appellant, v. Philip R. O'CONNOR, Helen Schmid, Charles Stalon, Andrew Barrett and Daniel Rosenblum, being the persons constituting the Illinois Commerce Commission of the State of Illinois and Neil F. Hartigan, being the person who is Attorney General of the State of Illinois, Defendants-Appellees.

No. 83-679.

Appellate Court of Illinois Second District.

Feb. 1, 1984.

Chapman & Cutler, Daniel J. Kucera, Chicago, for plaintiff-appellant.

Neil F. Hartigan, Atty. Gen., Chicago, Hercules F. Bolos, Sp. Asst. Atty. Gen., Edw. P. O'Brien, Steven G. Revethis, Asst. Attys. Gen., Chicago, Moss & Bloomberg, George A. Marchetti, Bolingbrook, for defendants-appellees.

SEIDENFELD, Presiding Justice:

Citizens Utilities Company of Illinois (Citizens) appeals from an interlocutory order denying its second motion for a temporary restraining order (TRO), which was entered on remand after this court found that the first appeal was premature. Citizens Utilities Co. v. O'Connor (1983), 116 Ill.App.3d 369, 71 Ill.Dec. 792, 451 N.E.2d 946.

Citizens' complaint, filed with notice, seeks to enjoin the defendants, the members of the Illinois Commerce Commission (Commission) and the Attorney General, from enforcing an order entered on April 6, 1983, and from interfering with Citizens' charging and collecting the proposed increased rates. The order cancelled the suspended proposed rates, thereby denying any rate increase and leaving the existing rates in force. The village of Bolingbrook, defendant, was permitted to intervene in the trial court.

No pleadings were filed by the defendants in response to the complaint or the second motion for a temporary restraining order. No evidence was taken. After hearing arguments the circuit court denied the motion, finding that Citizens would suffer irreparable harm "if the injunction is not granted, provided that plaintiff is otherwise entitled." The court, however, also found that Citizens had an adequate remedy at law, it had not shown a clear right requiring protection by pendente lite relief, it had not shown a reasonable likelihood of success on the merits, and the TRO would change the status quo.

Citizens contends that all of the criteria for the granting of a TRO have been satisfied and that it is entitled to relief on its showing that the Commission's order is confiscatory and unauthorized by law.

The standards for the granting of a TRO filed with notice are well established and will not be repeated here. (See Citizens Utilities Co. v. O'Connor (1983), 116 Ill.App.3d 369, 378-79, 71 Ill.Dec. 792, 451 N.E.2d 946.) It has also been established in particular that injunctive relief against Commission rate orders is proper when the rate in force is confiscatory and unauthorized by law and that because of the delay in the administrative review process it is inadequate to prevent irreparable harm. See Peoples Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 31, 44, 25 N.E.2d 482; Sprague v. Biggs (1945), 390 Ill. 537, 546, 62 N.E.2d 420; Iowa-Illinois Gas & Electric Co. v. Fisher (1953), 351 Ill.App. 215, 223-24, 114 N.E.2d 581.

The generally stated purpose of a TRO is to allow the trial court to preserve the status quo until it can hold a hearing to determine whether it should grant a preliminary injunction or until the cause can be decided on the merits. (Stocker Hinge Manufacturing Co. v. Darnel Industries Inc. (1983), 94 Ill.2d 535, 541-42, 69 Ill.Dec. 71, 447 N.E.2d 288; Citizens Utilities Co. v. O'Connor (1983), 116 Ill.App.3d 369, 378, 71 Ill.Dec. 792, 451 N.E.2d 946.) The status quo to be preserved is the last, actual, peaceable and uncontested status which preceded the pending controversy. (People ex rel. Edgar v. Miller (1982), 110 Ill.App.3d 264, 270, 65 Ill.Dec. 814, 441 N.E.2d 1328.) Since the new rates proposed by Citizens did not go into effect, the status quo is the rate schedule previously in effect. The issuance of the TRO would, in effect, change the status quo by allowing Citizens' proposed rates to go into effect immediately. As such, Citizens must first establish the probability of its ultimate success on the merits. See Keystone Chevrolet Co. v. Kirk (1978), 69 Ill.2d 483, 486, 14 Ill.Dec. 455, 372 N.E.2d 651.

The case which must be made by the party who seeks a TRO, insofar as it relates to the probability of ultimate success on the merits, is not the same as the issue before the Commission or on judicial review in a rate proceeding. On judicial review of a rate order the issue is whether the rate allowed is just and reasonable. In the injunction case the issue is solely whether the rate sought to be enjoined is confiscatory. (Peoples Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 31, 68, 25 N.E.2d 482.) The question of confiscation is a judicial one. 373 Ill. at 46, 25 N.E.2d 482.

Thus, this appeal essentially turns on whether a showing has been made that the present rate of return, acknowledged to be 6.5% for the purposes of this appeal, is confiscatory and whether the Commission refused the rate increase, not because of any finding that the existing rate was fair and reasonable, but as a penalty for alleged lack of compliance with previous orders of the Commission and thus unauthorized by law.

1.

Citizens contends that the Commission order shows clearly on its face that the present rate of return is confiscatory. Since, on the present posture of the case, there has been no evidentiary hearing we must resolve this question purely under the complaint, which includes the Commission's order. As relevant, the findings in the order include:

"(8) the net original cost of Respondent's utility plant in service, used and useful in providing water and sewage service to the public as of December 31, 1982, is $25,449,400; to this should be added $119,500 for cash working capital, $79,800 for common plant, and $179,300 for materials and supplies; and as best as can be determined from the evidence in this record, $6,739,000 should be subtracted for accumulated deferred taxes resulting in an original cost rate base of $19,089,000;

(9) for the reasons set forth in the prefatory portion of this order, for purposes of this proceeding, Respondent's original cost rate base is the best available evidence of the fair value of its plant in service;

(10) Respondent's net operating income for the [1982] test year as adjusted for changes described above, is $1,243,800, which is the amount available to Respondent for return under its present rates; as best as can be determined from the evidence in this record, this operating income provides Respondent a return of 6.5% under its present rates;

(11) the management of Respondent has failed to improve Respondent's service in matters that are clearly within its control, such as, ensuring that meter readers have proper identification, that meters are read regularly, that excavations are properly repaired, that customer complaints are handled in a timely manner, and that adequate water pressure is maintained in its system;

(12) severe sewage backup problems exist and have existed for up to ten years in certain of Respondent's service areas; the provision of such service presents a danger to its customers' health and safety in violation of Section 32 of the Public Utilities Act; the management of Respondent has failed to aggressively pursue eliminating these severe sewage backup problems;

(13) the management of Respondent has failed to comply with repeated directions from this Commission to record all its deferred income taxes on its books and records; as a result, ambiguity continues to exist as to Respondent's proper rate base, and proper amortization amounts of deferred taxes, thereby making calculation of expense and income imprecise;

(14) the failures of Respondent's management, as found in Findings (11), (12) and (13) herein, should not be rewarded with an increase in its authorized rate of return and an increase in rates;"

The Commission's order reflects that it considered operating revenue, expenses and income. Operating revenue as found by the Commission amounted to $8,684,700. Operating revenue deductions included salaries, material supplies, rents, insurance, utility expenses, legal and regulatory expenses, depreciation and taxes, including federal income taxes, totaling $7,440,900. This resulted in a net operating revenue of $1,243,800. Citizens argues that these figures reflect that the Commission took the worst possible view of their evidence. However, we do not have a sufficient record before us to determine whether in fact this is true, and we are not required to determine in this proceeding whether the computations of the Commission are against the manifest weight of the evidence. We conclude from the record before us that Citizens has not proved confiscation as a matter of law for the purpose of supporting its motion for a TRO.

Citizens argues that there is not any difference between a rate that is confiscatory and one that is "unreasonably low" so as to result in an unfair rate of return for the utility. We cannot agree. Our supreme court recognized the distinction in Peoples Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 31, 68, 25 N.E.2d 482.

"It has been held that a reasonable rate is something other or higher than one not strictly confiscatory, the difference, if any, being determined with finality by the appointed officers of the State. * * * [T]here is a difference between a rate which is merely nonconfiscatory and one which is just and reasonable, * * *."

While a rate of return that is unreasonably low may in some instances be the same as a rate which is confiscatory, it does not necessarily follow that a failure to return an amount consistent with other investments proves confiscation as a matter of law. Contrary to the argument of Citizens, this...