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Municipality of Princeton v. Ill. Comm. Com.

MARCH 8, 1974.

MUNICIPALITY OF PRINCETON, ET AL., PLAINTIFFS-APPELLANTS,

v.

THE ILLINOIS COMMERCE COMMISSION, DEFENDANT-APPELLEE — (NORTHERN ILLINOIS GAS COMPANY, INTERVENOR-APPELLEE.)



APPEAL from the Circuit Court of Bureau County; the Hon. JOHN S. MASSIEON, Judge, presiding.

MR. JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

This is an appeal from an order of the Circuit Court of Bureau County affirming an order of the Illinois Commerce Commission.

In this appeal we are asked to review an order of the Illinois Commerce Commission, subsequently affirmed by the Circuit Court of Bureau County, which granted to Northern Illinois Gas Company the authority to curtail its "off-peak" sales of natural gas to some two hundred customers. Three of such customers, viz., the municipalities of Princeton, Rantoul and Farmer City, are the appellants and, for the most part, the issues on appeal center around that part of section 49a of the Illinois Public Utilities Act (Ill. Rev. Stat. 1971, ch. 111 2/3, par. 49a), which provides:

"The commission, after a hearing upon its own motion or upon petition of any public utility, shall have power by order to authorize or require any public utility to curtail or discontinue service to individual customers or classes thereof, * * * whenever and to the extent such action is required by the convenience and necessitiy of the public during time of * * * shortage of fuel, * * *." (Emphasis added.)

"Off-peak" sales of gas, also sometimes referred to as "summer valley" or "dump" sales, had their origin in a bygone era when distributors such as Northern could obtain unlimited supplies of natural gas, and when the sophisticated underground storage facilities of the present day were lacking. As a general rule, rates for the gas were such that it was advantageous for the distributor utility, and ultimately for its customers, to take natural gas each day as close to their maximum demand as possible so as to reduce the average cost of gas. In warm weather, when the use of gas was down and storage facilities were filled to capacity, the distributors found themselves with an excess of gas over and above that needed to provide service to their firm, year-round customers. As one solution for the disposal of such excess, the distributors, as described by the court in Produce Terminal Corp. v. Commerce Com., 414 Ill. 582, at page 587: "* * * hit upon the plan of selling this excess gas at `off-peak' rates for customers who would be willing to use gas as an alternate to their regular fuel during the warm periods of the year when the general customers' demands were low. Since these off-peak customers would be required to maintain both their regular equipment for their customary fuel, and also alternate equipment to burn off-peak gas, and because this gas must necessarily meet the competition of other available fuels, it was necessary to set the off-peak rates lower than the rate to general customers."

So far as the present appeal is concerned, the municipalities of Princeton, Rantoul and Farmer City, which use the gas to fuel municipal electric generating facilities, were, on January 25, 1971, among the customers to whom Northern was under contract to sell off-peak gas. At that time, and for several years prior thereto, each municipality was using gas exclusively as its fuel, and gas purchased under the off-peak contracts represented about 15% of their total annual needs. This is the gas supply affected by this proceeding. In addition, and under separate contracts, each of the municipalities was purchasing the remaining 85% of their annual gas needs from Northern as a firm, year-round customer. The latter contracts and the gas supplied thereunder are not affected by this proceeding. Each of the municipalities also has equipment which permits oil to be used as an alternate fuel, and there is evidence in the record that the municipalities' annual expenses for fuel and maintenance will increase, the full amount dependent in part on load growth, if they suffer the loss of their supplies of off-peak gas.

Proceeding under section 49a, Northern, on January 25, 1971, filed a petition with the Commission seeking authority to make curtailments in its sales of off-peak gas, and to put into effect certain rate schedules filed in connection therewith. Notices were given to all off-peak customers as required by the Act; many of such customers were permitted to intervene; orders were entered suspending the proposed rate schedules pending the Commission's determination pursuant to the petition; and extensive hearings were held at which both sides introduced evidence and were permitted to cross-examine witnesses. The proceeding culminated with an order of the Commission entered December 22, 1971. By the terms of the order Northern was given authority to curtail its sales of gas to off-peak customers, the orders suspending the proposed rate schedules were rescinded, and the schedules were approved with effect from December 28, 1971.

Due to the length of the proceeding the first curtailments occurred in 1972, and it appears that none of the municipalities received off-peak gas. Northern's curtailment plan was received into evidence and in light of the municipalities' claim that the plan will cause an abandonment of off-peak service, rather than a curtailment thereof, it is noteworthy that the Commission: (1) made a finding that it had continuing authority to review the matter and to require Northern to amend its tariff provisions with respect to off-peak service, and (2) directed in its order that Northern file reports with the Commission on March 31 in each year, setting forth its anticipated deliveries from each of its pipeline suppliers for the ensuing years and the actual deliveries from such suppliers for the year ending.

The 3 municipalities here involved filed a petition for rehearing, as did some 32 of the other intervenors, but such petitions were denied. Thereafter, so far as we are able to determine, only the municipalities sought judicial review in the circuit court, and, as noted, before, they here appeal from a judgment affirming the order of the Commission.

Evidence in the record pertinent to the issues on appeal disclose that Northern distributes natural gas to some 1,150,000 customers in 35 counties located in northern Illinois. Of this number, more than 1,060,000 are firm year-round residential customers. It was estimated that Northern would be called upon to provide service to approximately 17,000 new residential customers in 1971 and in each of several years thereafter, and to approximately 20,000 new apartment buildings and other multi-family unit customers, which are classified as commercial customers. Based upon such estimates, service will be sought in each year for about 140,000 additional persons. Briefly, it is the proposal of Northern to sell part of its gas supply to new customers in apparent preference to continuing its sales to off-peak customers which gives rise to one of the issues in the case. With regard thereto, and based on the record, it is Northern's position that it no longer has an off-peak season in which there is an excess of gas due: (1) to summer curtailments imposed upon it by its principal supplier of gas; (2) to its present inability to increase its gas supply from other sources; (3) to the increasing demand for gas by firm year-round customers; and (4) to the growth of its storage capacity in recent years. Based upon these factors, witnesses for Northern testified to the effect that all gas received from its suppliers throughout the year is now needed, either directly or by means of injection into and withdrawal from storage reservoirs, to serve firm year-round customers. Viewed in the context of the issues on appeal, the conclusion to be reasonably drawn from all the proof is that Northern could continue to fulfill its contracts with its off-peak customers, if it would deny service to new customers. At the same time, however, it also appears that even if curtailment of off-peak customers is permitted, Northern will not realize a saving of gas in an amount to satisfy the needs of the estimated load growth of firm, year-round customers.

There was proof, and we know of common knowledge, that there is a critical shortage of natural gas on a national level, one effect of which has been a fluctuation in the gas supply available to distributors and users in Illinois. Northern's principal supplier (77%) is Natural Gas Pipeline Company of America and the latter, in 1970, petitioned the Federal Power Commission (FPC) for authority to make curtailments in the flow of gas to its customers beginning in 1970. As a result of the proceeding, Natural was authorized to make curtailments in 1971, and, so far as Northern is concerned, its yearly contract demand entitlement was reduced by approximately 10%. Based upon estimates that available gas would increasingly diminish during the years 1972, 1973 and 1974, Natural also proposed to seek further curtailments for each of those years in the same proceeding; however, because the supply of natural gas is in a constant state of fluidity and uncertainty, an agreement was negotiated, subject to the approval of the FPC, that the exact amount of future curtailments would depend on Natural's supply situation from time to time. During 1971, while the present proceeding was being heard, still another supplier of Northern (8%) filed a petition with the FPC seeking to curtail sales of gas to its distribution company customers.

Although Natural was given authority to reduce Northern's yearly contract demand entitlement by 10%, such reduction did not have the immediate effect of reducing the amount of gas actually received by Northern. The existing contract between Natural and Northern was entered into in 1970, and the proof shows that the latter did not receive its full contract demand entitlement in 1970, and that it would not do so in the years 1971, 1972 and 1973. But, at the same time, the proof also shows that the amount of gas received by Northern in 1971, and to be received in 1972 and 1973, exceeded the amount it had received in 1970. Due to the length of the proceedings before the Commission there were no curtailments of service to off-peak customers in 1971, thus, in actuality, the supply situation in 1972 becomes our point of focus.

Considering the task of the Commission in a proceeding to curtail under section 49a, we believe it pertinent to note that curtailment of off-peak sales was but one of several steps taken by Northern when confronted with the national shortage and the efforts of its suppliers to obtain reductions in their contract obligations. Since 1970, pursuant to Commission orders, sales to customers wishing new or additional service have been restricted to those whose daily demands would not exceed a fixed limit per day, the limit being of a nature that new service can be extended only to residential and small commercial and industrial users. Even then not all applicants could be accommodated, and Northern had a substantial waiting list at the time of the hearing. Additionally, Northern has virtually ceased all sales of interruptible gas; has cut back its sales promotion and advertising practices; has terminated multi-family space heating allowances; and has been active and financially involved in exploring for and developing new reserves and sources of gas. By a Commission order entered subsequent to this proceeding, of which we may take judicial notice, Northern has been authorized to expend $50,000,000 for the construction of a plant to manufacture gas from liquid hydrocarbons. Despite these activities, witnesses expressed the opinion that a complete solution of Northern's gas needs was not yet in sight.

• 1-3 As is true in all cases involving judicial review of Commission orders, we are without authority to try the case anew upon the record, to substitute our judgment for that of the Commission, or in any manner to revise or modify its order. Rather, the only issue presented for review is the reasonableness and lawfulness of the order and, in consideration thereof, our inquiry is confined to the jurisdiction of the Commission, to the questions of whether its order and findings are against the manifest weight of the evidence, whether the Commission has acted beyond its authority, and whether it has infringed upon substantial constitutional rights (see Sunset Trails Water Co. v. Commerce Com., 7 Ill. App.3d 449; Gardner v. Commerce Com., 400 Ill. 123; Brotherhood of Railroad Trainmen v. Elgin, J. & E. Ry., 374 Ill. 60). As stated by the court in O'Keefe v. Chicago Railways Co., 354 Ill. 645, 650: "Unless manifestly against the ...


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