People ex rel. Madigan v. Illinois Commerce Comm'n, 1–10–1776.
| Decision Date | 11 April 2012 |
| Docket Number | No. 1–10–1776.,1–10–1776. |
| Citation | 964 N.E.2d 510,2011 IL App (1st) 101776,357 Ill.Dec. 831 |
| Parties | The PEOPLE ex rel. Lisa MADIGAN, Attorney General of the State of Illinois, Petitioner, v. ILLINOIS COMMERCE COMMISSION, Illinois–American Water Company, Citizens Utility Board, Melody Fliss, Harold C. Menger, Rosemary Katona, Eileen and Tim Nelson, The City of Champaign, The Village of Prairie Grove, The Village of Mount Prospect, The Village of Homer Glen, The City of Des Plaines, The Village of Tinley Park, The City of Peoria, The City of Pekin, The Village of Bolingbrook, The Illinois Industrial Water Consumers, The Village of Woodridge, The Village of Lemont, The City of Elmhurst, The City of Urbana, and The Village of St. Joseph, The Village of Savoy and The Village of Sidney, Respondents (Illinois–American Water Company, Cross–Petitioner, v. Illinois Commerce Commission; The People ex rel. Lisa Madigan, Attorney General of the State of Illinois; Citizens Utility Board; Melody Fliss; Harold C. Menger; Rosemary Katona; Eileen and Tim Nelson; The City of Champaign; The Village of Prairie Grove; The Village of Mount Prospect; The Village of Homer Glen; The City of Des Plaines; The Village of Tinley Park; The City of Peoria; The City of Pekin; The Village of Bolingbrook; The Illinois Industrial Water Consumers; The Village of Woodridge; The Village of Lemont; The City of Elmhurst; The City of Urbana; The Village of St. Joseph; The Village of Savoy; and The Village of Sidney, Cross–Respondents). |
| Court | United States Appellate Court of Illinois |
OPINION TEXT STARTS HERE
Lisa Madigan, Attorney General of Chicago (Michael A. Scodro, Solicitor General, Carl J. Elitz, Assistant Attorney General, of counsel), for petitioner.
James E. Weging, Special Assistant Attorney General, for respondent Illinois Commerce Commission.
John J. Reichart, Albert D. Sturtevant, Anne M. Zehr, Carpenter Lipps & Leland LLP, Chicago, for respondent Illinois–American Water Company.Richard C. Balough, Cheryl Dancey Balough, Balough Law Offices, LLC, Chicago, for respondent Village of Homer Glen.Jeffrey M. Alperin, Tressler LLP, Chicago, for respondent Village of Bolingbrook.
¶ 1 This is an appeal from a decision of the Illinois Commerce Commission (Commission) setting new rates for customers of Illinois–American Water Company (IAWC). Several parties intervened, including the People of the State of Illinois (the Attorney General) and numerous municipalities affected by the proposed increases.
¶ 2 The Attorney General appeals, arguing that (1) the Commission erred in allowing IAWC to include the unamortized portion of $657,530 from a prior rate case expense in its present costs because the inclusion of prior rate case expense violates certain rate setting rules, more specifically, the test-year rule, retroactive ratemaking and single-issue ratemaking; and (2) the Commission failed to properly assess and address IAWC's expenditures for attorney and expert fees in its written order, pursuant to section 9–229 of the Public Utilities Act (220 ILCS 5/9–229 (West 2010)). Additionally, IAWC filed a cross-appeal, arguing that the Commission erred in its findings related to the management fee expense for its affiliate, American Water Works Service Company, Inc. (Service Company), by failing to award the full amount requested and supported by evidence on the record. The Village of Homer Glen and the Village of Bolingbrook submitted response briefs related only to the issue raised in the cross-appeal.
¶ 3 IAWC is a wholly owned subsidiary of American Water and is a public utility that provides water and wastewater distribution service to over 300,000 customers in Illinois. IAWC provides commercial, industrial, fire protection, and sale-for-resale water to numerous communities in various rate areas in Illinois. IAWC also provides public utility wastewater service in the Chicago area. In May 2009, IAWC filed proposed tariffs with the Commission seeking to increase its revenue by approximately $59 million through increases in customers' water and sewer bills.
[357 Ill.Dec. 836] ¶ 4 During the course of the proceedings before the Commission, the parties submitted written direct and responsive testimony, exhibits, and briefs. The Commission held evidentiary hearings in December 2009. In February 2010, the administrative law judge issued a proposed order. In April 2010, the Commission entered its final order and amended order was entered in May 2010. The Commission's decision raised IAWC's revenue by $42 million and set new rates accordingly. We will discuss any additional facts as necessary in the analysis of the issues.
¶ 5 The Attorney General has appealed the Commission's decision. First, the Attorney General argues that the Commission erred in allowing IAWC to recover the $657,530 unamortized portion of the prior rate case expense with the current rate case expense because it violated the test-year rule and constituted retroactive ratemaking and single-issue ratemaking. We will discuss these rate case concepts below.
¶ 6 The setting of utility rates is a legislative function, not judicial, with the Commission acting as the fact-finding body. Business & Professional People for the Public Interest v. Illinois Commerce Comm'n (BPI II), 146 Ill.2d 175, 196, 166 Ill.Dec. 10, 585 N.E.2d 1032 (1991). “Administrative regulations have the force and effect of law, are presumed valid, and will be construed under the same standards that apply in construing statutes.” City of Chicago v. Illinois Labor Relations Board, Local Panel, 396 Ill.App.3d 61, 73, 335 Ill.Dec. 290, 918 N.E.2d 1103 (2009) (citing Granite City Division of National Steel Co. v. Illinois Pollution Control Board, 155 Ill.2d 149, 162, 184 Ill.Dec. 402, 613 N.E.2d 719 (1993)). When reviewing an order from the Commission, we give deference to the Commission's decision, in light of its expertise and experience in this area. Commonwealth Edison Co. v. Illinois Commerce Comm'n, 398 Ill.App.3d 510, 514, 338 Ill.Dec. 539, 924 N.E.2d 1065 (2009). The Commission's factual findings are to be “considered prima facie true; its orders are considered prima facie reasonable; and the burden of proof on all issues raised in an appeal is on the appellant.” Commonwealth Edison, 398 Ill.App.3d at 514, 338 Ill.Dec. 539, 924 N.E.2d 1065; see also 220 ILCS 5/10–201(d) (West 2010). While we are not bound by the Commission's conclusion on questions of law, we “ ‘will give substantial weight and deference to an interpretation of an ambiguous statute by the agency charged with the administration and enforcement of the statute.’ ” Commonwealth Edison, 398 Ill.App.3d at 514, 338 Ill.Dec. 539, 924 N.E.2d 1065 (quoting Illinois Consolidated Telephone Co. v. Illinois Commerce Comm'n, 95 Ill.2d 142, 152, 69 Ill.Dec. 78, 447 N.E.2d 295 (1983)). The Commission's interpretation of “its own standards and regulations is accorded deference as ‘ “courts appreciate that agencies can make informed judgments upon the issues, based upon their experience and expertise” ’ and this policy is consistent with the principle that administrative agencies must have wide latitude to adopt regulations reasonably necessary to effectuate their statutory functions.” City of Chicago, 396 Ill.App.3d at 73–74, 335 Ill.Dec. 290, 918 N.E.2d 1103 ().
¶ 7 “The standard of review, ‘which determines the degree of deference given to the agency's decision,’ turns on whether the issue presented is a question of fact, a question of law, or a mixed question of law and fact.” Comprehensive Community Solutions, Inc. v. Rockford School District No. 205, 216 Ill.2d 455, 471, 297 Ill.Dec. 221, 837 N.E.2d 1 (2005) (quoting AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill.2d 380, 390, 261 Ill.Dec. 302, 763 N.E.2d 272 (2001)).
¶ 8 “A mixed question of law and fact asks the legal effect of a given set of facts.” Comprehensive Community, 216 Ill.2d at 472, 297 Ill.Dec. 221, 837 N.E.2d 1. Stated another way, a mixed question is one in which the historical facts are admitted or established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory standard, or whether the rule of law as applied to the established facts is or is not violated. AFM Messenger, 198 Ill.2d at 391, 261 Ill.Dec. 302, 763 N.E.2d 272. A mixed question of law and fact is reviewed under the clearly erroneous standard. Comprehensive Community, 216 Ill.2d at 472, 297 Ill.Dec. 221, 837 N.E.2d 1.
¶ 9 The clearly erroneous standard of review lies between the manifest weight of the evidence standard and the de novo standard, and as such, it grants some deference to the agency's decision. AFM Messenger, 198 Ill.2d at 392, 261 Ill.Dec. 302, 763 N.E.2d 272. “[W]hen the decision of an administrative agency presents a mixed question of law and fact, the agency decision will be deemed ‘clearly erroneous' only where the reviewing court, on the entire record, is ‘left with the definite and firm conviction that a mistake has been committed.’ ” AFM Messenger, 198 Ill.2d at 395, 261 Ill.Dec. 302, 763 N.E.2d 272 (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). Nonetheless, that the clearly erroneous standard is largely deferential does not mean, however, that a reviewing court must blindly defer to the agency's decision. AFM Messenger, 198 Ill.2d at 395, 261 Ill.Dec. 302, 763 N.E.2d 272.
¶ 10 Under section 10–201(e)(iv) of the Public Utilities Act, we will reverse the Commission's order only if: (1) the Commission's findings are not...
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