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06/27/97 ABBOTT LABORATORIES v. ILLINOIS COMMERCE

June 27, 1997

ABBOTT LABORATORIES, INC., OUTBOARD MARINE CORPORATION, VICTORY MEMORIAL HOSPITAL, NATIONAL GYPSUM COMPANY; SCHULLER INTERNATIONAL, AND PPG INDUSTRIES, INC., PETITIONERS,
v.
THE ILLINOIS COMMERCE COMMISSION, NORTH SHORE GAS COMPANY, CITIZENS UTILITY BOARD, PEOPLE OF COOK COUNTY BY JACK O'MALLEY, COOK COUNTY STATE'S ATTORNEY, ENRON CAPITAL AND TRADE RESOURCES, INC., THE PEOPLE OF THE STATE OF ILLINOIS BY THE ATTORNEY GENERAL JIM RYAN, CHEVRON USA, INC., AND MIDCON GAS SERVICES CORP., RESPONDENTS. A. FINKL & SONS, PRECOAT METALS COMPANY, LTV STEEL COMPANY, FORD MOTOR COMPANY, ARCHOR-DANIELS-MIDLAND COMPANY, NABISCO BRANDS, INC., 115TH STREET CORPORATION, ACME STEEL COMPANY, ART INSTITUTE OF CHICAGO, BEST FOODS, A DIVISION OF CIP INTERNATIONAL, GENERAL MILLS, INC., GUTMANN LEATHER CO., INC., HELENE CURTIS, INC., MIDWEST ZINC COMPANY, SIPI METALS CORPORATION, SOUTH CHICAGO PACKING CO., SWEETHEART CUP COMPANY, INC., TOOTSIE ROLL INDUSTRIES, INC., AND WHITE CAP, INC., PETITIONERS, V. THE ILLINOIS COMMERCE COMMISSION, THE PEOPLES GAS LIGHT AND COKE COMPANY, CITIZENS UTILITY BOARD, PEOPLE OF COOK COUNTY BY JACK O'MALLEY, COOK COUNTY STATE'S ATTORNEY, ENRON CAPITAL AND TRADE RESOURCES, INC., THE PEOPLE OF THE STATE OF ILLINOIS BY THE ATTORNEY GENERAL, JIM RYAN, CHEVRON, USA, INC., BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, CITY OF CHICAGO, COMMONWEALTH EDISON COMPANY, AND MIDCON GAS SERVICES CORP., RESPONDENTS.



Petition for Review of the Illinois Commerce Commission Order of November 8, 1995, in ICC Docket No. 95-0031. Petition for Review of the Illinois Commerce Commission Order of November 8, 1995, in ICC Docket No. 95-0032.

Released for Publication August 5, 1997.

The Honorable Justice Hourihane delivered the opinion of the court. Cousins, P.j., and Mcnulty, J., concur.

The opinion of the court was delivered by: Hourihane

JUSTICE HOURIHANE delivered the opinion of the court:

In this consolidated appeal, various transportation customers of Peoples Gas Light and Coke Company (Peoples) and North Shore Gas Company (North Shore) appeal from two final orders entered by the Illinois Commerce Commission (Commission) approving a general rate increase for gas service and other ratemaking adjustments. For the reasons discussed below, we affirm the orders of the Commission.

BACKGROUND

On December 16, 1994, Peoples and North Shore filed requests with the Commission for a general increase in their gas rates of $41 million and $6.6 million, respectively, and proposed various other changes. The Commission conducted hearings over a six-month period at which the Illinois Industrial Energy Consumers and the Chicago Area Transportation Customer Coalition (petitioners here) participated. Also participating in the proceedings were the Commission's Staff, the Citizens Utility Board (CUB), the Illinois Attorney General, the Cook County State's Attorney, and Midcon Gas Services Corp. (Midcon), among others. In two separate orders entered November 8, 1995, the Commission granted Peoples a $30.8 million rate increase and North Shore a $5.5 million rate increase. The Commission denied petitioners' applications for rehearing and this appeal followed. 220 ILCS 5/10-201 (West 1994); 155 Ill. 2d R. 335.

The Commission decided a number of issues common to both proceedings which petitioners challenge on review. First, the Commission approved an unauthorized use penalty of $6 per therm on critical days, and 50 cents per therm on non-critical days. The unauthorized use charge had previously been set at $1 per therm, with no distinction for critical versus non-critical days. Petitioners challenge the statutory authority of the Commission to establish a non-cost-based penalty, and assert that the adoption of the higher penalty is not supported by substantial evidence.

Second, the Commission adopted the "average and peak" method for allocating transmission and distribution costs among customer classes, rather than the "coincident peak" method, and rejected the use of a "pressure differential" factor. Petitioners contend that the Commission's decision is not supported by substantial evidence.

Finally, the Commission approved a one-third allowable bank monthly withdrawal restriction for transportation customers during the winter months. Petitioners again assert that the Commission's decision is not supported by substantial evidence.

ANALYSIS

I. Unauthorized Use Penalty

The purpose behind an unauthorized use penalty is to minimize unauthorized gas use by encouraging transportation customers to contract for a prudent level of standby service. Large volume transportation customers, such as petitioners, procure their own gas supply. This customer-owned gas is transported via interstate pipelines to the Peoples and North Shore systems which, in turn, deliver the gas to the customers' premises. When a customer's own gas supply is insufficient to meet its requirements, Peoples and North Shore are obligated to provide company-owned gas to the extent of the standby service for which the customer has contracted. Transportation customers who take gas in excess of their contractual limit are subject to an unauthorized use charge. Provision of gas service beyond a customer's contractual limits requires the utility companies to use additional "no-notice" services, i.e., contracts with other pipelines to provide gas up to specified entitlements without incurring penalties.

By its orders of November 8, 1995, the Commission approved an unauthorized use charge of $6 per therm on critical days *fn1 and 50 cents per therm on non-critical days, replacing the then prevailing unauthorized use charge of $1 per therm. The Commission's orders state that "the unauthorized use charge is a penalty and, thus, should not be cost-based." Petitioners argue that the Commission lacks the jurisdiction or authority under the Act to create and impose such a penalty and thus, under well settled law, its orders are void. See Business & Professional People v. ICC, 136 Ill. 2d 192, 244, 555 N.E.2d 693, 144 Ill. Dec. 334 (1990). The Commission counters that petitioners waived this issue on appeal by failing to raise it in their petitions for rehearing before the Commission (see 220 ILCS 5/10-113 (West 1994)), and that, in any event, the unauthorized use penalty was a valid exercise of the Commission's authority.

Section 10-201(e) of the Public Utilities Act (Act) (220 ILCS 5/1-101 et seq. (West 1994 and Supp. 1995)) sets forth the powers and duties of a reviewing court and specifically provides that the court shall reverse an order of the Commission if, among other things, "the order or decision is without the jurisdiction of the Commission". 220 ILCS 5/10-201(e)(iv)(B) (West 1994). The "jurisdiction" of the Commission includes three aspects:

"(1) personal jurisdiction--the agency's authority over the parties and intervenors involved in the proceedings, (2) subject matter jurisdiction--the agency's power 'to hear and determine causes of the general class of cases to which the particular case belongs' [citation], and (3) an agency's scope of authority under the statutes." Business & Professional People v. ICC, 136 Ill. 2d at 243.

Here, it is the third aspect of the Commission's jurisdiction which petitioners challenge.

Significantly, section 10-113 of the Act expressly limits the scope of this court's review to those issues raised in the petition for rehearing. 220 ILCS 5/10-113 (West 1994). Generalized contentions that a decision of the Commission is unlawful will not preserve particular issues for review. Rather, section 10-113 of the Act requires express mention of grounds for review in the petition for rehearing. Citizens Utility Board v. ICC, 166 Ill. 2d 111, 136, 651 N.E.2d 1089, 209 Ill. Dec. 641 (1995). Thus, where a petitioner, in its application for rehearing, asserts only that the Commission erred as a matter of law, but does not expressly challenge the ...


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