Commonwealth Edison Co. v. Ill. Commerce Comm'n

• Decision Date: 11 August 2016
• Docket Number: No. 1–15–0425.,1–15–0425.
• Citation: 62 N.E.3d 302,407 Ill.Dec. 57
• Parties: COMMONWEALTH EDISON COMPANY, Petitioner–Appellant, v. The ILLINOIS COMMERCE COMMISSION, The People of the State of Illinois ex rel. The Attorney General of the State of Illinois, and The Citizens Utility Board, Respondents (The Illinois Commerce Commission, Respondent–Appellee).
• Court: United States Appellate Court of Illinois

62 N.E.3d 302

407 Ill.Dec. 57

COMMONWEALTH EDISON COMPANY, Petitioner–Appellant,

v.The ILLINOIS COMMERCE COMMISSION, The People of the State of Illinois ex rel. The Attorney General of the State of Illinois, and The Citizens Utility Board, Respondents (The Illinois Commerce Commission, Respondent–Appellee).

No. 1–15–0425.

Appellate Court of Illinois, First District, Fourth Division.

Aug. 11, 2016.

E. Glenn Rippie, John P. Ratnaswamy, and Maris J. Jager, of Rooney Rippie & Ratnaswamy LLP, and Thomas S. O'Neill, of Commonwealth Edison Company, and Clark M. Stalker and Bradley R. Perkins, all of Chicago, for petitioner.

Thomas R. Stanton, Special Assistant Attorney General, of Chicago, for respondent Illinois Commerce Commission.

OPINION

Presiding Justice McBRIDE

delivered the judgment of the court, with opinion.

¶ 1 Commonwealth Edison Company (ComEd) seeks direct appellate review of the final order of the Illinois Commerce Commission (Commission) which defined the term “formula rate structure” for purposes of sections 16–108.5(c) and (d) of the Public Utilities Act (Act) (220 ILCS 5/16–108.5(c)

, (d) (West 2012)). This definition essentially determines which changes to the formula rate may be made in annual formula rate update (FRU) proceedings and which changes must be made in separate proceedings under section 9–201 of the Act (220 ILCS 5/9–201 (West 2012) ). In the proceedings below, ComEd and the Commission staff posed competing definitions of the term “formula rate structure.” Specifically, ComEd argued that the term should be defined to mean all of the schedules and appendices that it uses to calculate its revenue requirement, whereas the Commission staff argued that it should include only two specific schedules—Schedules FR A–1 and FR A–1 REC—which reflect the format and organization of major elements of ComEd's revenue requirement. The Commission agreed with its staff, and ComEd appeals that decision, claiming that it is contrary to law, not supported by substantial evidence, contrary to the manifest weight of the evidence, and arbitrary, capricious, and unreasonable.

¶ 2 This action began on April 16, 2014, when ComEd, a “participating utility” under section 16–108.5 of the Act, filed a petition pursuant to sections 16–108.5(c) and 9–201 of the Act requesting that the Commission “approve a housekeeping revision and a compliance change to its delivery service rate formula.” ComEd alleged that the housekeeping change would “make the formula more readily understood” and the compliance change was necessary to “effectuate a rate formula ruling in the Commission's * * * 13–0318 [order].” On August 19, 2014, the Commission entered an interim order approving the housekeeping change, but denying the compliance change as unnecessary. The interim order also initiated a “Phase 2” to the proceedings, during which the Commission was to determine, among other things that are not the subject of this appeal, what constitutes the formula rate's structure and protocols, and whether changes to the schedules, appendices, and work papers that support Schedules FR A–1 and FR A–1 REC could be changed only in section 9–201

proceedings.

¶ 3 An evidentiary hearing was conducted on September 29, 2014, during which the parties presented competing written testimony. Theresa Ebrey testified that she is a certified public accountant (CPA) in the accounting department of the financial analysis division of the Illinois Commerce Commission. Ms. Ebrey recommended that the Commission define “formula rate structure” to mean “the Commission approved tariff set forth in [ComEd] tariffs as Rate DSPP, Tariff Sheet Nos. 417–437 which contain Schedules FR A–1 and FR A–1 REC.” She further recommended that the Commission find that “only changes to Schedules FR A–1 and FR A–1 REC require Commission approval through a Section 9–201

filing.”

¶ 4 Ms. Ebrey testified that it was her “opinion that by approving only Schedules FR A–1 and FR A–1 REC for Rate [Delivery Service Pricing and Performance (DSPP) ] as the formula rate tariff in its Order in Docket No. 11–0721, the Commission effectively defined the ‘formula rate structure’ to be limited to those two formula rate schedules.” She understood that:

“ComEd's formula rate structure approved by the Commission to be set forth in the Rate DSPP tariff as Tariff Sheet Nos. 417–437 that were approved by the Commission in Docket No. 1100721 and later revised in Docket No. 13–0386, the filing implementing the requirements of SB–9 (P.A. 98–0015). The formats for only two schedules are included within those tariff sheets, Schedules FR A–1 (Net Revenue Requirement Computation on Sheet Nos. 423–424) and FR A–1 REC (Revenue Requirement Reconciliation Computation on Sheet No. 425). Additional schedules, appendices and workpapers are listed by number and name on Sheet Nos. 426 and 427, but no specific information regarding what is to be included on those ancillary documents is presented in the Rate DSPP tariff, outside of titles for those documents.”

Ms. Ebrey further stated that it was her understanding “that the Commission does not consider the other supporting schedules not specifically set forth in the approved formula rate tariffs” to be “an ‘approved’ document for purposes of the formula rate update cases.”

¶ 5 Ms. Ebrey also testified that “ComEd's position that any change to any spreadsheet included in ‘the full set of Schedules and Appendices set forth and listed in Rate DSPP’ must be approved in a separate Section 9–201

proceeding substantially impairs the Commission's ‘ability to approve ’ just and reasonable rates in every formula rate proceeding.” (Emphasis in original.) She further testified that

“[i]f [ComEd's] definition of formula rate structure is adopted, * * * the Commission would need to annually initiate Section 9–201

proceedings to approve every minor formatting change to a supporting formula rate schedule or appendix in order to effectuate adjustments the Commission found to be just and reasonable in every annual update proceeding prior to issuing a final order in the annual formula rate proceeding. In other words, in addition to limiting the Commission's authority, [ComEd's] recommendation would also result in unnecessarily burdening the Commission with numerous additional Section 9–201 proceedings.”

¶ 6 Christine Brinkman testified that she is a CPA employed by ComEd in the position of director, rates and revenue policy. Ms. Brinkman explained that as a participating utility under what is commonly known as the energy infrastructure and modernization act (modernization act), “ComEd's delivery services charges are updated each year using a formula established under [modernization act] and referenced in ComEd's formula rate tariff, which incorporates specifically defined inputs including ComEd's actual costs to provide delivery services from the prior year and historical weather normalized billing determinants.” She explained that ComEd's actual costs could not be known in advance, and as a result, “the formula rate mechanism relies on after-the-fact reconciliation once actual costs are known.” Ms. Brinkman testified that the schedules and appendices “are necessary for the standardization and transparency called for by [modernization act]” and that “[t]his detail and transparency cannot be seen on Sch. A–1 and Sch. A–1 REC alone.” She explained that Schedule FR A–1 and FR A–1 REC “do not contain specific cost inputs, but rather provide a high level summary of ComEd's Initial Rate Year, Reconciliation Year, and Rate Year Net Revenue Requirements.” She thus concluded that “ComEd's rate formula consists of Sch. A–1 and Sch. A–1 REC, along with supporting Schedules and Appendices, which collectively provide the certainty, standardization, and transparency required by [modernization act].”

¶ 7 Ms. Brinkman further testified that defining the rate formula as including the full set of schedules and appendices would not “impair the Commission's ability to review ComEd's costs.” She claimed that:

“by taking complex arguments about the formula structure and protocols out of the annual debate, the detail in the tariff serves to preserve resources and reduce the workload of the parties and the Commission. The debate that should occur in annual update proceedings should center on the specific inputs; there should not be inefficient costly, and uncertain re-litigation of the formula structure and protocols themselves year-after-year, which defeats the express language of [modernization act].”

¶ 8 The Commission subsequently heard oral arguments from ComEd, which contended that “formula rate structure” should be defined as the full set of schedules and appendices, and the Commission staff, the Attorney General's office and the Citizen's Utility Board (CUB), all of which argued that the term should be defined to refer only to Schedules FR A–1 and FR A–1 REC.

¶ 9 In its order, the Commission outlined a brief history of prior orders relating to the issue of defining the formula rate structure. It noted that:

“[a]lthough various statements have been made by the Commission regarding the scope of FRU dockets and the definition of formula rate structure, the Commission has not decisively ruled on the definition of formula rate structure as it applies to ComEd. In Docket No. 11–0721, the Commission first considered the issue of how to define the formula rate structure for ComEd. While the Commission ruled on what schedules to attach to the Order itself and which formula rate Schedules and Appendices to set forth in full in Rate DSPP and which to include as part of the compliance filing, the Commission did not rule on which Schedules and Appendices constitute the formula rate structure. The Commission ultimately directed that a rulemaking should commence, because it would ‘add clarity to the reconciliations that will take place pursuant to this statute, which should provide greater clarity for utilities, ratepayers and Commission

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