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04/08/94 MONARCH GAS COMPANY v. ILLINOIS COMMERCE

April 8, 1994

MONARCH GAS COMPANY, APPELLANT,
v.
THE ILLINOIS COMMERCE COMMISSION, APPELLEE.



Review of Order of the Illinois Commerce Commission. No. 90-0454

Petition for Leave to Appeal Denied October 6, 1994.

Welch, Maag, Lewis

The opinion of the court was delivered by: Welch

JUSTICE WELCH delivered the opinion of the court:

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] unauthorized overtake charges in the amount of $21,390 are not recoverable under the Uniform . Section 525.10(c) precludes the recovery of penalty charges for unauthorized overruns." 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 ยง 525.10(c) of the Uniform , 83 Ill. Adm. Code 525 ("the Statute") Monarch Gas Co. ("the Company") cannot recover the $21,390 in unauthorized overtake charges. However, I believe that the Statute is unfair and will ...


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