People ex rel. Madigan v. Ill. Commerce Comm'n
Decision Date | 23 January 2015 |
Docket Number | No. 116005.,116005. |
Citation | 25 N.E.3d 587 |
Parties | The PEOPLE ex rel. Lisa MADIGAN et al., Appellants, v. ILLINOIS COMMERCE COMMISSION et al., Appellees. |
Court | Illinois Supreme Court |
Lisa Madigan, Attorney General, of Springfield (Carolyn E. Shapiro, Solicitor General, and Brett E. Legner and Karen L. Lusson, Assistant Attorneys General, of Chicago, of counsel), for the People.
Julie Soderna, of Citizens Utility Board, of Chicago, for appellantCitizens Utility Board.
Foley & Lardner LLP(Theodore T. Eidukas, of Chicago, and Bradley D. Jackson, of Madison, Wisconsin), John P. Ratnaswamy and Carla Scarsella, of Rooney Rippie & Ratnaswamy LLP, and M. Gavin McCarty and Mary Klyasheff, all of Chicago, for appelleesPeoples Gas Light and Coke Company and North Shore Gas Company.
John P. Kelliher, Special Assistant Attorney General, of Chicago, for appelleeIllinois Commerce Commission.
John E. Rooney and Anne W. Mitchell, of Rooney Rippie & Ratnaswamy LLP, of Chicago, for amicus curiaeNorthern Illinois Gas Company.
John E. Rooney and Anne W. Mitchell, of Rooney Rippie & Ratnaswamy LLP, of Chicago, for amicus curiaeNorthern Illinois Gas Company.
Whitt Sturtevant LLP(Albert D. Sturtevant, of Chicago, Andrew J. Campbell, of Columbus, Ohio) and Edward C. Fitzhenry, of St. Louis, Missouri, for amicus curiaeAmeren Illinois Company.
Gerard T. Fox, of Chicago, and Kevin Belford and Michael Murray, of Washington, D.C., for amicus curiaeAmerican Gas Association.
¶ 1 Peoples Gas Light and Coke Company (Peoples Gas) and North Shore Gas Company(North Shore Gas) serve millions of residential and commercial customers in the Chicagoland area.The companies not only sell natural gas, but also deliver it through their lines.Thus, the companies' operating costs include the costs of the gas itself and the costs of the gas distribution.This case involves distribution costs, and a ratemaking proceeding that resulted in a change as to how the companies recover those costs.
¶ 2 The central issue is whether the Illinois Commerce Commission(Commission) abused its discretion when it approved a volume-balancing-adjustment rider, or Rider VBA, which imposed so-called “revenue decoupling” on the companies' customers.In 2008, the Commission approved a similar rider as a four-year pilot program.In 2012, the Commission approved the rider on a permanent basis.The Attorney General and the Citizens Utility Board(CUB) challenged that decision, and the appellate court affirmed it.2013 IL App (2d) 120243, 370 Ill.Dec. 370, 988 N.E.2d 146.
¶ 3 For the reasons that follow, we agree with the appellate court and likewise affirm the Commission's decision.
¶ 5 The Public Utilities Act (Act) opens with a statement of intent:
220 ILCS 5/1–102(West 2010).
One of the stated goals of such regulation is efficiency, or “the provision of reliable energy services at the least possible cost to the citizens of the State.”220 ILCS 5/1–102(a)(West 2010).
¶ 6The Act creates the Illinois Commerce Commission, the administrative agency responsible for setting rates that public utilities may charge their customers.220 ILCS 5/2–101(West 2010);People ex rel. Hartigan v. Illinois Commerce Comm'n,148 Ill.2d 348, 366, 170 Ill.Dec. 386, 592 N.E.2d 1066(1992).Under the Act, all rates and charges by public utilities, as well as all rules and regulations pertaining to those charges, must be “just and reasonable.”220 ILCS 5/9–101(West 2010).A public utility may not alter its rates and charges, unless it provides notice to the Commission and the public by, inter alia, filing with the Commission a new “schedule” describing any proposed changes.220 ILCS 5/9–201(a)(West 2010).When the Commission receives a new schedule, it may conduct “a hearing concerning the propriety” of the changes, and the changes are suspended for some time pending the outcome of that hearing.220 ILCS 5/9–201(b)(West 2010).The Act further provides:
220 ILCS 5/9–201(c)(West 2010).
¶ 7 In establishing rates, the Commission initially must determine the utility's “revenue requirement.”Business & Professional People for the Public Interest v. Illinois Commerce Comm'n (BPI II),146 Ill.2d 175, 195, 166 Ill.Dec. 10, 585 N.E.2d 1032(1991).The Act acknowledges “utilities are allowed a sufficient return on investment so as to enable them to attract capital in financial markets at competitive rates,” and it authorizes public utility rates for various services that “accurately reflect the cost of delivering those services and allow utilities to recover the total costs prudently and reasonably incurred.”220 ILCS 5/1–102(a)(iii), (iv)(West 2010).As we have explained:
Citizens Utilities Co. of Illinois v. Illinois Commerce Comm'n,124 Ill.2d 195, 200–01, 124 Ill.Dec. 529, 529 N.E.2d 510(1988).
¶ 8 In the context of natural gas, the “C” in that equation, operating costs, includes distribution costs.To some extent, those costs are fixed.Utility companies incur them regardless of the volume of gas that they deliver because they must be prepared to provide adequate, reliable, and safe service.Traditionally, however, volume has played a major role in setting gas rates, and companies have recovered part of their distribution costs through “volumetric distribution charges” based on statistical forecasts of the amount of gas their customers will use.The forecasts, in turn, rest upon several variables, some of which are wildly unpredictable like the weather.Consequently, gas companies have recovered more than their fixed distribution costs when demand for gas has been high, and less than that when it has been low.
¶ 9 In 2007, Peoples Gas and North Shore Gas petitioned the Commission to approve Rider VBA.Citizens Utility Board v. Illinois Commerce Comm'n,166 Ill.2d 111, 133, 209 Ill.Dec. 641, 651 N.E.2d 1089(1995);seeCentral Illinois Light Co. v. Illinois Commerce Comm'n,255 Ill.App.3d 876, 883, 193 Ill.Dec. 418, 626 N.E.2d 728(1993).Rider VBA was designed with not only revenue recovery, but also revenue disgorgement, in mind.That is, Rider VBA prevents under-recovery of fixed distribution costs, as well as over-recovery of them, by “decoupling” the revenue for those costs that the companies receive from the volume of gas that they deliver.Revenue decoupling essentially maintains a utility company's revenue at or around the revenue requirement.If actual revenues dip below a level set by the Commission due to decreased delivery volume, the company issues customers a surcharge for the difference.If revenues tick above that level due to increased delivery volume, the company issues customers a credit.See Sandy Glatt & Myka Dunkle, Natural Gas Revenue Decoupling Regulation: Impacts on Industry(U.S. Dep't of EnergyJuly 2010).That approach removes forecasts, and the inevitable inaccuracies that accompany them, from the calculation of costs and ensures that the company recovers its revenue requirement.Revenue decoupling is not a new approach to ratemaking, but it has garnered increased attention from utilities and regulators, particularly in states concerned with greenhouse gas emissions, because it removes incentives for utilities to deemphasize energy efficiency and to spur demand.Id.
¶ 10 The Commission held a hearing on the companies' petition and issued a 320–page order on February 5, 2008, in which it approved Rider VBA as a four-year pilot program with monthly adjustments.SeeIn re North Shore Gas Co.,2008 WL 631214.The Attorney General filed an appeal from the Commission's decision.1While that appeal was pending, and time on the pilot program was waning, the companies petitioned to make Rider VBA permanent.The Commission held another hearing and issued...
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