Monarch Gas Co. v. Illinois Commerce Com'n
Decision Date | 08 April 1994 |
Docket Number | No. 5-93-0283,5-93-0283 |
Citation | 261 Ill.App.3d 94,633 N.E.2d 1260 |
Parties | , 199 Ill.Dec. 269, 151 P.U.R.4th 280, Util. L. Rep. P 26,406 MONARCH GAS COMPANY, Appellant, v. The ILLINOIS COMMERCE COMMISSION, Appellee. |
Court | United States Appellate Court of Illinois |
Richard J. Day, Sheafor & Day, St. Elmo, for appellant.
Ana Cusack Marcyan, Sp. Asst. Atty. Gen., Illinois Commerce Com'n, Chicago, for appellee.
Monarch Gas Company ("Monarch") appeals a decision of the Illinois Commerce Commission ("ICC") ordering it to refund $21,390.00 in "unauthorized overtake charges" to its customers. These "unauthorized overtake charges" were incurred by Monarch in December 1989 when record-breaking cold temperatures forced Monarch to purchase additional gas from the Natural Gas Pipeline Company of America ("NGPCA"). On December 12, 1990, pursuant to section 9-220 of the Public Utilities Act (Ill.Rev.Stat.1989, ch. 111 2/3, par. 9-220), the ICC initiated annual "reconciliation proceedings" of Monarch's 1989 Purchased Gas Adjustment Clause ("PGAC") revenues. Under section 9-220, the ICC is required to conduct annual public hearings "to determine whether the clauses reflect actual costs of fuel, gas or power purchased[,] to determine whether such purchases were prudent, and to reconcile any amounts collected with the actual costs of fuel, power or gas prudently purchased." (Ill.Rev.Stat.1989, ch. 111 2/3, par. 2-220.) Hearings were conducted on April 10, August 29, and December 10, 1991.
Monarch's general manager, Charles Lowe, testified, inter alia, that: (1) Monarch was located near only one major pipeline company, the NGPCA; (2) the next closest pipeline was approximately 25 miles from Monarch's service area; (3) Monarch was a customer of NGPCA under a G-1 tariff for small users; (4) as a G-1 customer, Monarch only paid for gas actually used; (5) Monarch purchased 86.6% of its gas from the "spot market" in 1989; (6) competitive bids were taken each month to ensure that the lowest-cost gas was being purchased; (7) on December 21, 22, and 23, 1989, Monarch's service area experienced record-breaking cold temperatures; (8) NGPCA curtailed delivery of spot gas to Monarch and denied Monarch's request for authorized overrun gas; (9) because of NGPCA's actions, Monarch purchased system supply gas from NGPCA in excess of the amount authorized for Monarch as a G-1 customer; and (10) Monarch therefore incurred "unauthorized overtake charges in the amount of $21,390.00" in December 1989.
Monarch took the position that it should be permitted to recover the $21,390.00 from its customers "because it was prudent to incur such charges and there was no other prudent alternative to the purchase of that gas in order to assure the adequate supply of gas to Monarch's customers." On the other hand, Michael Luth, an accountant with the ICC, testified that the $21,390.00 constituted an unauthorized overtake charge which was not recoverable under section 525.10(c) of the Illinois Administrative Code (83 Ill.Adm.Code § 525.10(c) (1983)) because such charges are classified as "penalties" under the PGAC. In relevant part, section 525.10 provides:
"b) Costs recoverable through the Gas Charge * * * and annual reconciliation * * * shall include the cost of the following 1) any solid, liquid or gaseous hydrocarbons purchased for injection into the gas stream, purchased as feedstock or fuel for the manufacture of gas, or delivered to the company under an exchange agreement,
2) storage service purchased under any rate, tariff or contract subject to regulation by a federal or state agency, and
3) transportation costs related to such solid, liquid or gaseous hydrocarbons and storage service.
c) The cost of the foregoing items shall exclude demurrage charges and penalty charges including but not limited to charges for late payment and unauthorized overruns and lost discounts." 83 Ill.Adm.Code § 525.10(b)(c) (1983).
Luth recommended that Monarch be required to refund the $21,390.00 to its customers. On February 24, 1993, the ICC issued an order concluding: The ICC therefore ordered Monarch to refund the $21,390 to its customers. In a concurring opinion, one of the commissioners eloquently summarized the nature of this case:
"I agree * * * that under § 525.10(c) of the Uniform [PGAC], 83 Ill.Adm.Code 525 () Monarch Gas Co. ("the Company") cannot recover the $21,390 in unauthorized overtake charges. However, I believe that the Statute is unfair and will discourage utilities from pursuing their least cost options in the future.
Under the Statute, the Company can only recover gas costs excluding penalty charges--included but not limited to charges for unauthorized overruns. Thus, given the language of the Statute and the fact that none of the parties contest that the $21,390 are unauthorized overtake charges, the Commission cannot allow Monarch to recover these costs. * * * During record-breaking cold temperatures and after curtailment of * * * gas by [NGPCA], Monarch had to exceed the maximum daily quantity authorized * * * in order to provide gas for residential space heating and other customer energy demands. * * * Only by electing to become a Daily Maximum Quantity (DMQ) customer of [NGPCA][ ] could Monarch have avoided the unauthorized overtake charges. However, becoming a DMQ customer would have resulted in a 100% increase in gas costs to customers according to Monarch. Thus Monarch chose the prudent least cost option.
In denying Monarch recovery * * *, the Commission is punishing the utility for acting prudently. As the Company noted, this sends the illogical message that utilities should avoid these charges at all cost--even if incurring them would be the least cost option. As a result the utility will pursue more expensive options, and the increased costs will simply be passed on to ratepayers. In short, ratepayers will ultimately pay for a statute that punishes prudent utility actions. Only by amending the statute to allow utilities that choose least cost strategies recovery of prudently incurred expenses will ratepayers avoid such a fiasco."
Monarch now appeals and raises the following issues: (1) whether the decision of the ICC violates the due process clauses of the United States Constitution and the Illinois Constitution by taking the utility's property without due process of law; (2) whether the ICC applied its regulations contrary to statutory intent and in such a manner as to violate Monarch's due process rights; and (3) whether the order of the ICC violates public policy.
Before turning to the merits of this case, it is necessary to review the applicable standards of review. First, the "rules, regulations, orders or decisions of the [ICC] shall be held to be prima facie reasonable, and the burden of proof upon all issues raised by the appeal shall be upon the [party] appealing * * *." (Ill.Rev.Stat.1989, ch. 111 2/3, par. 10-201(d).) Second, reviewing courts are limited to a determination of whether: (1) the ICC acted within the scope of its authority; (2) the ICC made findings in support of its decision; (3) the findings have substantial support in the record; and (4) constitutional rights have been violated. (Ill.Rev.Stat.1989, ch. 111 2/3, par. 10-201(e)(iv)(A)- "(D); Monarch Gas Co. v. Illinois Commerce Comm'n (1977), 51 Ill.App.3d 892, 894-95, 9 Ill.Dec. 434, 437, 366 N.E.2d 945, 947.) Third, it is well settled that great weight and deference should be accorded to the decisions of the ICC. (See, e.g., Iowa-Illinois Gas & Electric Co. v. Illinois Commerce Comm'n (1960), 19 Ill.2d 436, 442, 167 N.E.2d 414, 417; State Public Utilities Comm'n ex rel. City of Springfield v. Springfield Gas & Electric Co. (1919), 291 Ill. 209, 216, 125 N.E. 891, 895.) Fourth, administrative rules and regulations "must be construed under the same standards which govern construction of statutes," and like a statute, administrative rules and regulations "enjoy a presumption of validity." (Northern Illinois Auto Wreckers & Rebuilders Association v. Dixon (1979), 75 Ill.2d 53, 58, 25 Ill.Dec. 664, 667, 387 N.E.2d 320, 323.) Fifth, a reviewing court "may set aside administrative regulations only if they are clearly arbitrary, capricious or unreasonable." (Midwest Petroleum Marketers Association v. City of Chicago (1980), 82 Ill.App.3d 494, 501, 37 Ill.Dec. 707, 713, 402 N.E.2d 709, 715; see also Rend Lake College Federation of Teachers v. Board of Community College (1980), 84 Ill.App.3d 308, 311, 39 Ill.Dec. 611, 615, 405 N.E.2d 364, 368 ( ).) Lastly, the Public Utilities Act ( ) "does not authorize a court to put itself in place of the [ICC] and * * * substitute its judgment for that of the [ICC]." Illinois Bell Telephone Co. v. Illinois Commerce Comm'n (1973), 55 Ill.2d 461, 469, 303 N.E.2d 364, 369 (quoting Produce Terminal Corp. v. Illinois Commerce Comm'n ex rel. Peoples Gas Light & Coke Co. (1953), 414 Ill. 582, 589, 112 N.E.2d 141, 144); see also Village of Apple River v. Illinois Commerce Comm'n (1960), 18 Ill.2d 518, 523, 165 N.E.2d 329, 331 ().
Monarch is correct in its observation that this is a case "where blind adherence to a regulation by its bureaucratic administrators works a great injustice." This case boils down to the fact that Monarch, in an effort to provide gas to its customers during a record-breaking cold spell, opted to pursue the least costly route in order to...
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