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12/05/96 CITIZENS UNITED FOR RESPONSIBLE ENERGY

December 5, 1996

CITIZENS UNITED FOR RESPONSIBLE ENERGY DEVELOPMENT, INC. (CURED), PETITIONER,
v.
ILLINOIS COMMERCE COMMISSION, ILLINOIS MUNICIPAL ELECTRIC AGENCY, ILLINOIS POWER COMPANY, ET AL., RESPONDENTS.



Petition for Review of Orders of the Illinois Commerce Commission. No. 93-0385.

The Honorable Justice Goldenhersh delivered the opinion of the court: Kuehn, P.j., concurs. Justice Welch, dissenting.

The opinion of the court was delivered by: Goldenhersh

JUSTICE GOLDENHERSH delivered the opinion of the court:

Petitioner, Citizens United for Responsible Energy Development, Inc. (CURED), appeals to this court for statutory direct review pursuant to Supreme Court Rule 335 (155 Ill. 2d R. 335) and section 3-113 of the Code of Civil Procedure (735 ILCS 5/3-113 (West 1994)) of an order of respondent, Illinois Commerce Commission (Commission), issuing a certificate of public convenience and necessity to respondent, Illinois Municipal Electric Agency (Agency), for the construction of a 138-kilovolt electric transmission line near Aviston, commonly referred to as the Aviston-Highland line, and related substation facilities, as well as the interconnection of the transmission line with an electric substation owned by Illinois Power Company (Illinois Power), and CURED also appeals for review of an order denying CURED's petition for rehearing. CURED also filed this appeal pursuant to section 10-201 of the Public Utilities Act (Act) (220 ILCS 5/10-201 (West 1994)). In this cause, CURED contends that: (1) the Commission's staff was derelict by not investigating or testifying about the issue of least-cost means, which caused the proceedings in this case to be in violation of section 8-406(b) of the Act (220 ILCS 5/8-406(b) (West 1994)) and the Commission's own policy and rules and practice; (2) the Commission's finding that "construction of the Aviston-Highland line and new substation is the least-cost means of satisfying the service needs of Highland" is not supported by substantial evidence based on the entire record; (3) section 4-7(b) of the Agency's contract with Illinois Power, in which the Agency obtained Illinois Power's silence at the certificate proceeding, was against public policy and so tainted the certificate proceedings as to require that the provision be voided and a new certificate proceeding be held; (4) because the use of Illinois Power's existing Collinsville-Highland right-of-way as a potential route for a new 138-kilovolt line was not studied by the Commission's staff, the Agency, or Illinois Power, insufficient evidence existed in the record to permit the Commission to decide whether the use of that right-of-way would be both feasible and preferable to the proposed Aviston-Highland line; and (5) the Commission, pursuant to section 8-502 of the Act (220 ILCS 5/8-502 (West 1994)), has the authority to require Illinois Power to share its East Collinsville-Highland right-of-way with the Agency. We reverse and remand with directions.

FACTS

On October 18, 1993, the Agency filed a verified petition with the Commission, seeking approval under section 11.119.1-10 of the Illinois Joint Municipal Electric Power Act (65 ILCS 5/11-119.1-10 (West 1994)) for the construction of approximately 13 miles of 138-kilovolt line from Illinois Power's Aviston substation in Clinton County to a new substation south of Highland to be built by the Agency. The new substation would transform power from 138 kilovolt to 34.5 kilovolt. The petition named Illinois Power as a respondent, since the proposed transmission line requires interconnection with Illinois Power's Aviston substation. Petitions to intervene in this proceeding were filed by CURED, a not-for-profit corporation whose members are landowners who would be affected by the proposed transmission line, along with the Illinois Department of Agriculture, the Village of Aviston, and numerous potentially affected landowners. CURED is the only intervenor taking part in this appeal.

The Agency's petition was an extension of its June 1, 1990, power-sales contract with the City of Highland. The contract requires the Agency to provide all electricity needed for the operation of Highland's electric utility during the 15-year term of the contract. On October 15, 1990, the Agency and Highland entered into an addendum to that contract in which the Agency agreed to construct facilities rated at 138 kilovolt to serve Highland within five years of the effective date of the contract, subject to obtaining regulatory approval. The Agency and Highland agreed that the Agency would own the transmission facilities to be constructed. The Agency also agreed to provide the funds for the total cost of the project, with reimbursement in part by Highland. The agreement specifically provides that the Agency's unreimbursed cost for the project is one-half the total cost, but in no event more than $3,000,000. The balance of the total cost is to be repaid by Highland to the Agency through rates over the 15-year life of the power-sales contract.

In order to satisfy the agreement and meet Highland's need for additional transmission capacity, the Agency proposed construction of the Aviston-Highland line. Estimated cost of the 138-kilovolt transmission line over the Agency's proposed route was $3,280,651. Estimated cost of the new Agency substation was $2,684,500. In order to connect the substation with the existing delivery point, Highland will have to construct, at its own expense, 1 3/4 miles of 34.5-kilovolt electric transmission line. This added expense was not taken into account in the Agency's estimated cost of the project.

As stated, the Agency named Illinois Power as a respondent in its petition. Illinois Power filed an answer to the petition on November 9, 1993. On January 10, 1994, the Agency and Illinois Power entered into a coordination-and-interchange agreement. Section 4.7 of that agreement sets forth the responsibilities of the Agency and Illinois Power with respect to the initial transmission facilities required to provide full transmission from the Aviston-Highland line and provides, inter alia, as follows: (1) the Agency and Highland shall complete the 138-kilovolt line from Illinois Power's Aviston substation to Highland at the Agency's and Highland's costs; (2) Illinois Power will not intervene in support or opposition at the certificate proceeding before the Commission relating to the line to be built for the City of Highland, nor shall Illinois Power initiate any other action or proceeding with the purpose or effect of interfering with the Agency's and Highland's construction of the Aviston-Highland 138-kilovolt line; (3) the parties shall cooperate fully with each other in planning and constructing the proposed 138-kilovolt line and associated substation facilities; (4) Illinois Power shall be responsible for the operation of the Aviston-Highland 138-kilovolt line; (5) the Agency shall be responsible for the cost of maintenance of the line, provided that in the event that Illinois Power taps the line in order to service its own load, Illinois Power shall subsequently assume responsibility for the cost of maintaining the entire line; and (6) Illinois Power shall meet Highland's full firm transmission requirements once the Aviston-Highland 138-kilovolt line is completed by the Agency/Highland. Pursuant to provision (2) recited above, Illinois Power neither supported nor opposed the Agency's petition but remained neutral throughout the proceedings.

This matter was initially called for hearing on March 4, 1994, in front of a hearing examiner. Eight additional days of testimony were taken between April 1994 and August 1994. During the hearings, no one disputed Highland's need for additional power. The Agency prepared a long-term forecast for peak demand and energy consumption, which was not challenged by any party. The parties that participated in the hearings before the Commission were the Agency, the Commission's staff, the Department of Agriculture, Illinois Power, the Village of Aviston, CURED, and the individual property owners.

Testimony from those hearings shows that the Agency considered two alternative transmission lines but chose the Aviston-Highland route as the best route. The Commission's staff supported construction of the Aviston-Highland line but recommended a revision to the Agency's proposed final route. The staff took the position that the Agency was not required to prove that its proposed Aviston-Highland transmission line represented the least-cost means of satisfying the service needs of customers. In fact, the staff did not consider the issue of least-cost means in evaluating the Agency's proposal. The staff attorney instructed the staff economist, Gunnard Kluck, not to consider the issue of least-cost means in evaluating the Agency's proposal. Kluck followed that order.

CURED took the position that while there was a need to transmit additional electrical power to Highland, construction of the transmission line as proposed by the Agency is not convenient, not necessary, and not the least-cost means. CURED proposed two alternative routes: first, a line from Lebanon Horner Park to Highland, and second, a line from the East Collinsville substation to Highland over Illinois Power's existing right-of-way. The individual landowners who presented evidence supported CURED's position. CURED also contended that the Agency vastly underestimated the cost of the Aviston-Highland line for two reasons: (1) the Agency's estimated cost of land acquisition at $225,000 was ridiculously low, and (2) the Agency's estimate was outdated, since it was estimated in 1990 and never updated.

The Commission agreed with CURED that before it could approve construction of the proposed transmission line, the Agency must demonstrate, inter alia, that the proposed construction is the least-cost means of satisfying the service needs of its customers. The Commission then concluded that the Agency's proposed plan to construct a 138-kilovolt line from Aviston to Highland constituted the least-cost means of satisfying the service needs of Highland. The Commission added, "While the final costs of the [Agency's] proposed project may turn out to be higher than the [Agency's] latest cost estimate, there is no evidence indicating that there is a better solution to Highland's power needs at a lesser cost."

On November 14, 1994, CURED filed a motion to reopen evidentiary hearings. Responses to the motion were filed by Illinois Power and the Agency on November 22, 1994, and November 23, 1994, respectively. On December 1, 1994, CURED filed a reply to the Agency's response. On December 14, 1994, the hearing examiner, on his own motion, reopened the record in this proceeding pursuant to the Commission's rules of practice (83 Ill. Admin. Code ยง 200.870 (1994)) for the purpose of scheduling a hearing to discuss the motion to reopen evidentiary hearings. The motion requested additional hearings on issues pertaining to offers to landowners made by the Agency subsequent to the close of the record. Hearings were subsequently held on December 21, 1994, January 9, 1995, and January 18, 1995. An exhibit prepared by the Agency, which summarized offers made to landowners between September 20, 1994, and October 28, 1994, for easements required on the Agency's proposed route for the 138-kilovolt transmission line, was admitted into evidence, and Kevin L. Wagner, the Agency's manager of engineering, was recalled as a witness to answer questions ...


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