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Illinois Power Company v. Illinois Commerce Commission

September 06, 2000

ILLINOIS POWER COMPANY, AMEREN CORPORATION, CENTRAL ILLINOIS PUBLIC SERVICE COMPANY, AND UNION ELECTRIC COMPANY, PETITIONERS,
V.
THE ILLINOIS COMMERCE COMMISSION; THE STATE OF ILLINOIS; THE COUNTY OF COOK; ILLINOIS INDUSTRIAL ENERGY CONSUMERS; ENRON ENERGY SERVICES, INC.; NORTHERN ILLINOIS GAS COMPANY, D/B/A NICOR GAS; INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, LOCAL UNIONS 15 & 51; MT. CARMEL PUBLIC UTILITY COMPANY; NATIONAL ENERGY MARKETERS ASSOCIATION; CITIZENS UTILITY BOARD; BLACKHAWK ENERGY SERVICES, INC.; AND PEOPLES ENERGY SERVICES CORPORATION, RESPONDENTS



Appeal from an Order of the Illinois Commerce Commission. Nos. 98-0013 & 98-0035

The opinion of the court was delivered by: Justice Chapman

This appeal is from a final order and the adoption of final rules by the Illinois Commerce Commission (ICC), which adopted regulations implementing section 16-121 of the Electric Service Customer Choice and Rate Relief Law of 1997 (the Customer Choice Law) (220 ILCS 5/16-121 (West 1998)). Petitioners complain that certain of these rules violate the right to commercial free speech, are in conflict with the Customer Choice Law, and are arbitrary and capricious. We note that petitioner Commonwealth Edison Company's appeal has been dismissed. We affirm.

BACKGROUND

Before the Customer Choice Law, Illinois electric customers received virtually all their electricity from their local utility companies. Each local utility company was vertically integrated, meaning that each one produced electric energy, transmitted it to the general vicinity of the consumer, and distributed it to the customers' businesses and homes. These utilities were traditionally very heavily regulated, due largely to the fact that they faced virtually no competition for the sale of electricity in their respective service areas.

The enactment of the Customer Choice Law moved the Illinois electric industry from this heavily regulated world toward a competitive marketplace. The Customer Choice Law pursues the competitive market through the deregulation of certain products and services called "competitive services." The Customer Choice Law allows an electric utility to offer any competitive service to customers without ICC approval.

The Customer Choice Law also opened the electricity market to participants other than the existing, vertically integrated utilities. The Customer Choice Law allows the creation of entities called "alternative retail electric suppliers" (ARES), which are authorized to sell and market electricity to customers. ARES may or may not be affiliated with an existing utility company. Therefore, the Customer Choice Law contemplates three sources from which customers may purchase electricity in this competitive market: traditional electric utilities, ARES that are affiliated with a utility company, or an ARES that are unaffiliated with an existing utility company.

Because facilities that transmit and distribute electricity are not easily replicated, the Customer Choice Law provides that the existing utility companies will continue to control the transmission and distribution of electricity in their service areas, even after the introduction of competition to the market. There is a fear, however, that the utilities will use their control of the delivery services to give competitive advantages to ARES that are affiliated with the utilities, to the detriment of unaffiliated ARES and, ultimately, to the detriment of the successful creation of a competitive market. Therefore, the Customer Choice Law provides for the establishment of regulations that are to prevent a utility from using its control of the transmission and distribution (the "delivery services") to discriminate against electricity service providers. These regulations, which were intended to implement section 16-121 of the Customer Choice Law, were adopted by the ICC in the form of final rules. Petitioners appeal, complaining that some of these rules are unconstitutional and/or that they are invalid for other reasons.

STANDARD OF REVIEW

Under the Public Utilities Act (220 ILCS 5/10-201(d) (West 1998)), any party who appeals an order of the ICC bears the burden of proving all issues raised on appeal and must overcome the presumption of reasonableness accorded to ICC orders. In analyzing ICC orders, Illinois courts have held that decisions of the ICC are entitled to great deference, because they are the judgment of an administrative body that is "informed by experience." United Cities Gas Co. v. Illinois Commerce Comm'n, 163 Ill. 2d 1, 12 (1994), quoting Village of Apple River v. Illinois Commerce Comm'n, 18 Ill. 2d 518, 523 (1960).

The ICC is an administrative agency, and judicial review of its orders is limited. See People ex rel. Hartigan v. Illinois Commerce Comm'n, 148 Ill. 2d 348, 366 (1992). Although the ICC is not required to make findings regarding every step, its findings of fact must be sufficient to allow for informed judicial review, and they will be affirmed if they are based on substantial evidence in the record. See Hartigan, 148 Ill. 2d at 366. The ICC's findings of fact are prima facie correct and will not be overturned by a reviewing court unless they are against the manifest weight of the evidence, beyond the statutory authority of the ICC, or violative of constitutional rights. See Hartigan, 148 Ill. 2d at 367.

DISCUSSION

Petitioners assert that certain sections of the final order of the ICC are constitutionally invalid and should be struck down. First, petitioners assert that section 450.25 of the final rules (83 Ill. Adm. Code §450.25 (eff. November 7, 1998)) interferes with constitutionally protected commercial speech because it bans joint advertising and marketing by a utility and its affiliated interests. Petitioners also allege that section 450.20(b) and (g) and section 450.140(d) of the final rules (83 Ill. Adm. Code §§450.20(b), 450.20(g), 450.140(d) (eff. November 7, 1998)) are inconsistent with section 16-102 of the Customer Choice Law because they reregulate services which that law deregulated and are therefore beyond the ICC's authority. Finally, petitioners assert that several other sections of the final rules are arbitrary and capricious and are unsupported by substantial evidence. Petitioners seek the reversal of these sections of the final rules or a reversal and remand to the ICC for further proceedings.

Free Speech Issue

Petitioners assert that section 450.25 of the final rules violates the free speech guarantee of the United States Constitution. Section 450.25 prohibits an electric utility from jointly advertising or jointly marketing its services or products with those of an affiliated interest in competition with ARES. Joint advertising refers to advertising that covers two or more firms, while joint marketing refers ...


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