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03/09/89 the Village of Buffalo, v. the Illinois Commerce

March 9, 1989





536 N.E.2d 438, 180 Ill. App. 3d 591, 129 Ill. Dec. 598 1989.IL.292

Petition for review of order of Illinois Commerce Commission.


JUSTICE SPITZ delivered the opinion of the court. McCULLOUGH, P.J., and KNECHT, J., concur.


In 1976, intervenor, Illinois Power Company (Illinois Power), Soyland Power Cooperative, Inc., and Western Illinois Power Cooperative, Inc. (Cooperatives), entered into the Clinton Power Station ownership participation agreement . The OPA, together with certain subsequent amendments thereto, provided, inter alia, that Illinois Power and the Cooperatives would jointly own and be jointly responsible for the construction and operating costs of the Clinton Power Station (Clinton). The OPA originally provided for the Cooperatives to own approximately 14% of Clinton. As subsequently amended, it provided that the Cooperatives' ownership share of Clinton would be 20%. Under the OPA, Illinois Power is responsible for the design, construction, licensing, testing, and operation of Clinton and pays all related direct costs to contractors and suppliers engaged on the project. The Cooperatives are billed periodically for their share of the cost and reimburse Illinois Power accordingly.

For many years, Illinois Power had provided bulk electric power to the Cooperatives at wholesale for resale to the Cooperative members. By 1983, Illinois Power and the Cooperatives began negotiating for Illinois Power to provide the Cooperatives with electric energy and power under a long-term agreement by which the prices to the Cooperatives would be similar to the cost the Cooperatives would incur if they owned their own generating facilities. Additionally, in 1983, the Cooperatives sought to limit their investment in the construction costs of Clinton. As a result of these negotiations, in March 1984, Illinois Power and the Cooperatives entered into a letter of intent which expressed the intent of the parties to reach certain definitive agreements relating to electrical service by Illinois Power to the Cooperatives and limiting the Cooperatives' direct investment in Clinton to $450 million.

On October 3, 1984, the Governor's Office of Consumer Services filed a verified petition on behalf of the Village of Buffalo (Village), requesting the Illinois Commerce Commission (Commission) to institute a proceeding to investigate and review the terms of the March 1984 letter of intent. On October 5, 1984, five agreements were executed by Illinois Power and the Cooperatives to finalize and implement the letter of intent. These agreements included: (1) a power coordination agreement; (2) amendment No. 6 to the OPA; (3) amendment No. 2 to the Clinton Station operating agreement; (4) a loan agreement; and (5) a mutual release and satisfaction agreement. This appeal concerns only amendment No. 6. Under this amendment, the Cooperatives' investment in the direct cost of Clinton would be capped at $450 million and the parties' ownership shares in Clinton would be adjusted in accordance with the ratios of their respective investments in the direct costs to the total direct costs.

On December 5, 1984, the Commission granted the Village's petition and instituted a proceeding to investigate the aforementioned agreements. A number of prehearing conferences and hearings were held before a hearing examiner. One of the Village's assertions throughout the proceedings was that amendment No. 6 violated section 7-102(c) of the Public Utilities Act (Act) (Ill. Rev. Stat. 1987, ch. 111 2/3, par. 7-102(c)), which prohibits a public utility from encumbering the whole or any part of its business or property without prior approval or consent of the Commission. It was the Village's position that amendment No. 6 was an unlawful encumbrance on the property or business of Illinois Power, which required prior Commission approval pursuant to section 7-102(c) of the Act. Illinois Power argued that the purpose of section 7-102(c) was to protect a public utility from disposing of property it needs to serve the public. Illinois Power asserted that amendment No. 6 did not provide for the disposal of utility property used to serve the public and did not require prior Commission approval.

In an order dated April 29, 1988, the Commission denied the Village's requested relief and dismissed the petition. The order stated:

"The Commission . . . does not accept the Village's position that Amendment No. 6 constitutes an encumbrance upon the business or property of [Illinois Power] undertaken without Commission approval in violation of Section 7 -- 102(c) of the Act. . . . While [Illinois Power] takes on additional obligations under Amendment No. 6 . . . the assumption of these obligations does not constitute an encumbrance on [Illinois Power's] property."

The Commission concluded that amendment No. 6 did not require Commission approval under the Act, and therefore, was not subject to the Commission's jurisdiction. The Village's subsequent application for reconsideration was denied on June 15, 1988. On July 18, 1988, the Village filed a petition for review in this court. (107 Ill. 2d R. 335; Ill. Rev. Stat. 1987, ch. 111 2/3, par. 10-201(a).) On September 2, 1988, Illinois Power was granted leave to intervene.

The sole issue before the court is whether the Commission's interpretation of section 7 -- 102(c), that the obligation created by amendment No. 6 did not ...

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