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Resource Technology Corp. v. Commonwealth Edison Company

August 06, 2003


Petition for Review of Order of the Illinois Commerce Commission No. 02-0455

The opinion of the court was delivered by: Justice Wolfson


Resource Technology Corporation (RTC) is in the business of collecting methane gas generated by landfills and converting the gas into usable energy. In 1997, the Illinois Commerce Commission (Commission) determined that 15 of RTC's facilities, including one in Pontiac, Illinois, qualified as "qualified solid waste energy facilities" (QSWEFs) under the Illinois Retail Rate Law. As a result, Commonwealth Edison (ComEd) was required to purchase electricity from RTC at a favorable retail rate. In 2002, ComEd requested a declaratory ruling from the Commission, asking for a determination that it was not required to pay the retail rate for electricity at the Pontiac facility beyond the "configured capacity" of 10 megawatts (MW). The Commission entered a declaratory ruling in ComEd's favor. RTC now appeals. We reverse the Commission's order.


On January 9, 1997, RTC filed verified petitions with the Commission, seeking qualification of 15 proposed landfill-methane- gas-to-electric facilities as QSWEFs under the Retail Rate Law. The section of the Illinois Public Utilities Act commonly referred to as the "Retail Rate Law" was enacted in 1987 to encourage the development of alternate energy production facilities in order to conserve energy resources and provide for their most efficient use. 220 ILCS 5/8-403.1(a) (West 2000). The Retail Rate Law is administered solely by the Commission. Under the Law, if a company is qualified by the Commission as a QSWEF, it is entitled to a long-term contract of at least 10 years with an electric utility company. The utility company must purchase electricity from the QSWEF at a favorable "retail rate," equal to the average cost per kilowatt-hour paid from time to time by the unit of local government in which the electricity generating facilities are located. 220 ILCS 5/8-403.1(c) (West 2000).

The "retail rate" is substantially higher than the wholesale rate the utilities would otherwise pay for electricity bought from private generators of electricity. CGE Ford Heights v. Miller, 306 Ill. App. 3d 431, 433, 714 N.E.2d 35 (1999). The utility receives tax credits from the State in an amount equal to the difference between the "retail rate" paid to the QSWEF and the "avoided cost" were the utility to generate such electricity itself. The QSWEF must reimburse the State for the value of the issued tax credits after retirement of the debt incurred to finance its construction. 220 ILCS 5/8-403.1(d) (West 2000).

On October 8, 1997, the Commission issued an order determining that all 15 of RTC's proposed facilities were qualified as QSWEFs, with "a total gross generating capacity of 65 megawatts located in fifteen Illinois locations." In the Summary of Evidence portion of the Order, the Pontiac facility was described as: "Docket 97-0034 landfill, located at 14732 East 2100 North Road, Pontiac, Illinois, will have a capacity of 10 MW, with a projected commercial operation date in the 1st quarter of 1998. The facility is located in ComEd's service territory."

According to RTC, shortly after the 1997 order it began constructing and activating the proposed facilities. Among the capital costs incurred at the Pontiac facility, RTC expended in excess of $700,000 in the construction of an "interconnect" tying the electric plant to ComEd's electrical transmission grid. The effect of the interconnect was to enable RTC to exceed 10 MW of electrical production capacity at the Pontiac facility. RTC says ComEd consented to the construction of this interconnect.

In November 1999, RTC filed for bankruptcy under Chapter 7 in the United States Bankruptcy Court for the Northern District of Illinois. The bankruptcy case was converted to Chapter 11 in February 2000 and still is going on.

On October 6, 2000, RTC and ComEd executed a "Rate 18 Standby Electric Service Contract," under which ComEd was to pay RTC "Rider 3 retail rates" in accord with the requirements imposed by the Retail Rate Law. ComEd purchases electricity from generating facilities under two Commission-approved rates: Rider 4, which applies to any customer operating an electric production facility, and Rider 3, which applies only if the facility is qualified by the Commission as a QSWEF. In December 2000, the ten-year period during which ComEd was to pay the Rider 3 retail rate began. The initial phase of construction of the Pontiac facility was completed in March 2001.

On June 14, 2002, ComEd sent a letter to RTC, informing RTC that it would no longer pay the Rider 3 retail rate for its purchase of electricity in excess of 10 MW. In the letter, ComEd said the Commission's QSWEF determination applied to RTC's Pontiac facility "as configured" at the time of the Order, which referenced a 10 MW capacity for that location.

ComEd said it had sent a letter to the Pontiac facility requesting information regarding its compliance with the QSWEF regulatory obligations. In response to its inquiry, ComEd received a copy of RTC's "application for re-self certification under FERC Commission Regulation No. 292-207," dated June 10, 2002. According to RTC's Federal Energy Regulatory Commission (FERC) Form 556, "[t]he maximum gross electric power production capacity of the facility on a stand alone basis is 35,000 kilowatts [35 MW] based on actual capacity of the generators at the site." ComEd stated in the letter to RTC that it would utilize the 10 MW value to determine the amount of electricity eligible for Rider 3 pricing until such time as it received clarification of the Pontiac facility's QSWEF status for up to 35 MW. The remaining capacity in excess of 10 MW would be reimbursed under Rider 4, at a lower rate than required by Rider 3.

RTC then filed an Emergency Petition seeking a temporary and preliminary injunction against ComEd in bankruptcy court. The bankruptcy court issued a temporary restraining order on July 3, 2002, requiring ComEd to compensate RTC for all electricity provided to it from the Plant on or before July 12, 2002, at Rider 3 retail rates. The order further provided:

"To the extent necessary, the automatic stay is hereby modified to permit Edison or RTC to file pleadings with, and otherwise proceed before, the ICC. Either Edison or RTC may request that the ICC interpret its [1997 order], in which the ICC granted QSWEF status to the Plant, as configured in RTC's petition. Either Edison or RTC may also request that the ICC determine the existence and extent of the Plant's present QSWEF status and RTC's entitlement to be compensated for all electricity produced at the Plant at Rider 3 rates."

On July 5, 2002, ComEd filed its Verified Emergency Petition for Declaratory Ruling and accompanying motion with the Commission. In the petition, ComEd requested that the Commission issue a declaratory ruling "determining ComEd's obligations under the provisions of the Public Utilities Act, including 220 ILCS 5/9-102, 103, 104, 201, 240, and 241," to pay the Retail Rate for purchases of energy from the Pontiac facility in excess of that facility's 10 MW configured capacity specified in the 1997 order, or for such other relief as the Commission deemed appropriate. ComEd was seeking relief on an emergency basis so that the Commission's determination would be available to the bankruptcy court at a preliminary injunction hearing scheduled for July 9, 2002.

On July 9, 2002, the bankruptcy court granted a preliminary injunction to RTC, reaffirming the lift of the automatic stay to allow the parties to "file pleadings with, and otherwise proceed before, the ICC to determine the existence and extent of the Plant's QSWEF certification."

On July 15, 2002, the Commission Staff filed a response to ComEd's emergency petition. In the response, the Staff contended that the 1997 order, read in light of the testimony of George Calvert, RTC President, supported the conclusion that the Pontiac facility's output was configured at 10 MW. ComEd's obligation thus was limited to the purchase at the retail rate of 10 MW. The Staff supported the entry of an order by the Commission to that effect. The Staff also recommended that the Commission act on the petition as quickly as possible to provide guidance to the bankruptcy court and suggested an expedited briefing schedule.

On July 16, 2002, the Commission granted Staff's request to approve the following schedule: receipt deadline of July 19, 2002, for responses to ComEd's petition; and receipt deadline of July 22, 2002, for replies to any responses.

On July 18, 2002, RTC filed a response in opposition to ComEd's petition and the Commission Staff's response, including objections to the expedited schedule. RTC also filed an appearance. The Commission later allowed petitions to intervene in the proceeding filed by RTC and three of RTC's creditors--Banco Panamericano, Inc., Chiplease, Inc., and Leon Greenblatt.

Following the filing of replies by ComEd and the Staff, the Commission hearing officer issued a Proposed Order on July 29, 2002. On September 4, 2002, the Commission issued its Order, finding ComEd was not obligated to pay the Rider 3 retail rate for energy generated at the Pontiac facility in excess of 10 MW. RTC moved for a rehearing and an emergency stay, which were denied on September 11, 2002. On September 13, 2002, RTC filed this appeal.

On October 7, 2002, the Commission filed a motion to dismiss the appeal. The Commission contended the September 4, 2002, order is not appealable because it is a declaratory ruling under section 200.220 of the Commission's Rules of Practice. 83 Ill. Adm. Code 200.220 (West 2000). Section 200.220 provides that declaratory rulings are not appealable. ComEd filed a response in support of the motion. RTC filed a response opposing the motion, ...

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