Commonwealth Edison v. ILL. COMMERCE COM'N

• Decision Date: 06 June 2001
• Docket Number: No. 2-00-0275., No. 2-00-0375
• Citation: 751 N.E.2d 196,256 Ill.Dec. 143,322 Ill. App.3d 846
• Parties: COMMONWEALTH EDISON COMPANY, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION, Respondent-Appellee (The People of the State of Illinois; Alliant Energy Resources; Interstate Power Company; Amerencips; Amerenue; ANR Pipeline Company; Association of Illinois Electric Cooperatives; Blackhawk Energy Services, L.L.C.; Building Owners and Managers Association of Chicago; Central Illinois Light Company; Citizens Utility Board; the City of Chicago; the Cook County State's Attorney's Office; the United States Department of Energy; Enron Energy Services, Inc.; Illinois Industrial Energy Consumers; Illinois Municipal Electric Agency; Illinois Power Company; MidAmerican Energy Company; NEV Midwest, L.L.C.; Nicor, Inc.; Nicor Energy, L.L.C.; Northern Illinois Gas Company; and Peoples Energy Service Corporation, Intervenors.)
• Court: United States Appellate Court of Illinois

751 N.E.2d 196

322 Ill. App.3d 846

256 Ill.Dec. 143

COMMONWEALTH EDISON COMPANY, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION, Respondent-Appellee (The People of the State of Illinois; Alliant Energy Resources; Interstate Power Company; Amerencips; Amerenue; ANR Pipeline Company; Association of Illinois Electric Cooperatives; Blackhawk Energy Services, L.L.C.; Building Owners and Managers Association of Chicago; Central Illinois Light Company; Citizens Utility Board; the City of Chicago; the Cook County State's Attorney's Office; the United States Department of Energy; Enron Energy Services, Inc.; Illinois Industrial Energy Consumers; Illinois Municipal Electric Agency; Illinois Power Company; MidAmerican Energy Company; NEV Midwest, L.L.C.; Nicor, Inc.; Nicor Energy, L.L.C.; Northern Illinois Gas Company; and Peoples Energy Service Corporation, Intervenors.)

Nos. 2-00-0375, 2-00-0275.

Appellate Court of Illinois, Second District.

June 6, 2001.

Paul F. Hanzlik, John L. Rogers, John P. Ratnaswamy, E. Glenn Rippie, Foley & Lardner, Rebecca J. Lauer, Deputy General Counsel/Commonwealth Edison Co., Thomas J. Russell, Senior Regulatory Counsel/Commonwealth Edison Co., Chicago, for Commonwealth Edison Co. in No. 2-00-0375.

Illinois Commerce Commission, Office of General Counsel, John P. Kelliher, Special Assistant Attorney General, Chicago, for Illinois Commerce Commission.

David I. Fein, Christopher J. Townsend, Piper, Marbury, Rudnick & Wolfe, Chicago, for Enron Energy Services, Inc.

James Hinchliff, Gerard T. Fox, Mary Klyasheff, Timothy P. Walsh, Peoples Energy Services Corp., Chicago, for Peoples Energy Services Corp., Alliant Energy Resources, Amerencips, Amerenue, ANR Pipeline Co., Association of Illinois Electric Cooperatives, Blackhawk Energy Services, L.L.C., Building Owners and Managers Association of Chicago, Central Illinois Light Co., Citizens Utility Board, Cook County State's Attorneys Office, Illinois Industrial Energy Consumers, Illinois Municipal Electric Agency, Illinois Power Co., Interstate Power Co., MidAmerican Energy Co., NEV Midwest, L.L.C., Nicor Energy, L.L.C., Nicor, Inc., Northern Illinois Gas Co., the People, South Beloit Water, Gas & Electric Co., United States Department of Energy.

Paul F. Hanzlik, John L. Rogers, John P. Ratnaswamy, Foley & Lardner, John E. Rooney, Hopkins & Sutter, E. Glenn Rippie, Foley & Lardner, Rebecca J. Lauer, Deputy General Counsel/Commonwealth Edison Co., Thomas J. Russell, Senior Regulatory Counsel/Commonwealth Edison Co., Chicago, for Commonwealth Edison Co. in No. 2-00-0275.

Justice CALLUM delivered the opinion of the court:

Petitioner, Commonwealth Edison Company (ComEd), appeals directly to this court from an order of respondent, the Illinois Commerce Commission (the Commission). This order approves, with modification, ComEd's proposed open-access implementation plan and delivery service tariffs. On appeal, ComEd argues that the order unlawfully prevents ComEd from fully recovering its open-access implementation costs and delivery services costs. We affirm in part, reverse in part, and remand.

BACKGROUND

This appeal arises under Article XVI of the Public Utilities Act (220 ILCS 5/1-101, et seq. (West 1998)). Titled the "Electric Service Customer Choice and Rate Relief Law of 1997" (Customer Choice Law) (220 ILCS 5/16-101 et seq. (West 1998)), it introduced competition for the first time into the Illinois electricity market. The parties refer to this competitive market structure as "open access."

Under the traditional model of the retail electricity market, a retail customer purchases several different services from its local electric utility as a single "bundled" service. Bundled service includes the electricity itself, as well as all services related to the distribution and delivery of electricity. Under the Customer Choice Law, by contrast, a retail customer eligible for open access may choose either to continue purchasing bundled service from its local electric utility or to purchase electricity as a separate "unbundled" service from one of three new types of suppliers. Unbundled service is available for purchase from (1) alternative retail electric suppliers, which are nonutilities licensed to sell retail electricity; (2) an Illinois electric utility other than the customer's local electric utility; or (3) the customer's local electric utility, which may sell electricity on both a bundled and unbundled basis. Any supplier other than the customer's local electric utility is known as a "retail electric supplier" (RES). However, even if a retail customer chooses to purchase its electricity on an unbundled basis from a supplier other than its local electric utility, the local electric utility continues to supply that customer's "delivery services," which the Customer Choice Law defines as:

"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, and shall include, without limitation, standard metering and billing services." 220 ILCS 5/16-102 (West 1998).

Under section 16-108 of the Customer Choice Law, a utility is required to file a delivery services tariff (DST) with the Commission at least 210 days prior to the date on which the utility is to begin supplying such services. 220 ILCS 5/16-108(a) (West 1998). A tariff specifies both the customers that are eligible for a particular regulated service and the terms and conditions, including the price, under which a utility is to provide such service. The Commission is then required to enter an order approving or approving as modified the utility's DST no later than 30 days prior to the date on which the utility is to begin supplying such services. 220 ILCS 5/16-108(b) (West 1998). Charges for delivery services are to be "cost based, and shall allow the electric utility to recover the costs of providing delivery services." 220 ILCS 5/16-108(c) (West 1998). In addition, such charges are to be "just and reasonable and shall take into account customer impacts." 220 ILCS 5/16-108(d) (West 1998). In establishing the rates that a public utility is to charge its customers, the Commission considers the company's operating costs, rate base, and allowed rate of return. Citizens Utilities Co. v. Illinois Commerce Comm'n, 124 Ill.2d 195, 200, 124 Ill.Dec. 529, 529 N.E.2d 510 (1988). A public utility is entitled both to recover in its rates certain operating costs and to earn a return on its rate base (i.e., the amount of its invested capital). Citizens Utilities Co., 124 Ill.2d at 200, 124 Ill.Dec. 529, 529 N.E.2d 510. The return is the product of the allowed rate of return and the rate base. Citizens Utilities Co., 124 Ill.2d at 200, 124 Ill.Dec. 529, 529 N.E.2d 510. The sum of those amounts— operating costs and return on rate base— is known as the company's revenue requirement. Citizens Utilities Co., 124 Ill.2d at 200, 124 Ill.Dec. 529, 529 N.E.2d 510.

This action relates to ComEd's DST for the first phase of open access, which began on October 1, 1999. As required by section 16-108, ComEd filed its DST with the Commission on March 1, 1999. On August 26, 1999, the Commission issued its order approving, as modified, ComEd's DST. The Commission later amended that order on September 9, 1999. ComEd filed a petition for rehearing, and the Commission allowed that petition in part and issued an order on rehearing on March 9, 2000. On March 23, 2000, ComEd filed a second petition for rehearing, which the Commission denied on April 4, 2000. This timely appeal followed.

ANALYSIS

1. Standard of Review

Our courts give great deference to the Commission's decisions as they are "`judgment[s] of a tribunal appointed by law and informed by experience.'" United Cities Gas Co. v. Illinois Commerce Comm'n, 163 Ill.2d 1, 12, 205 Ill.Dec. 428, 643 N.E.2d 719 (1994), quoting Village of Apple River v. Illinois Commerce Comm'n, 18 Ill.2d 518, 523, 165 N.E.2d 329 (1960). When reviewing the Commission's orders, we are limited to considering whether (1) the Commission acted within its authority; (2) adequate findings were made to support the decision; (3) the decision was supported by substantial evidence; and (4) state or federal constitutional rights were infringed. Citizens United For Responsible Energy Development, Inc. v. Illinois Commerce Comm'n, 285 Ill.App.3d 82, 89, 220 Ill.Dec. 738, 673 N.E.2d 1159 (1996). The Commission's factual findings are considered prima facie correct and may be reversed only upon a demonstration that the findings are not supported by substantial evidence. 220 ILCS 5/10-201(d), (e)(iv)(A) (West 1998); People ex rel. Hartigan v. Illinois Commerce Comm'n, 148 Ill.2d 348, 367, 170 Ill.Dec. 386, 592 N.E.2d 1066 (1992). When an interpretation of the Commission's own rules is at issue, the Commission's interpretation is held prima facie reasonable (220 ILCS 5/10-201(d) (West 1998); United Cities Gas Co., 163 Ill.2d at 11, 205 Ill.Dec. 428, 643 N.E.2d 719), and this court may not interfere unless the administrative construction is clearly erroneous, arbitrary, or unreasonable (Central Illinois Public Service Co. v. Illinois Commerce Comm'n, 243 Ill.App.3d 421, 428, 183 Ill.Dec. 112, 610 N.E.2d 1356 (1993)).

2. Pro Forma Adjustments

The first issue on appeal is relatively straightforward: did the Commission follow its own rules when rejecting nine pro forma adjustments to ComEd's rate base and revenue requirement? We hold that it did not.

The focus of the controversy is section DST.160 of the Commission's "Minimum Information Requirements" (the MIR). Adopted in a separate but related Commission proceeding, the MIR establish the filing requirements for DSTs relating to the first phase of open access. The MIR contemplate the use of a test year in the...