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The People Ex Rel. Lisa Madigan, State of Illinois v. Illinois Commerce Commission; North Shore Gas Company; Peoples Gas

March 29, 2013

THE PEOPLE EX REL. LISA MADIGAN, STATE OF ILLINOIS,
PETITIONER,
v.
ILLINOIS COMMERCE COMMISSION; NORTH SHORE GAS COMPANY; PEOPLES GAS LIGHT AND COKE COMPANY; VANGUARD ENERGY SERVICES, LLC; INTEGRYS ENERGY GROUP, INC.; INTEGRYS ENERGY SERVICES, INC.; PRAIRIE POINT ENERGY, LLC, D/B/A INTERSTATE GAS SUPPLY OF ILLINOIS, INC.; ILLINOIS INDUSTRIAL ENERGY CONSUMERS; CITIZENS UTILITY BOARD; AND THE CITY OF CHICAGO, RESPONDENTS. CITIZENS UTILITY BOARD,
PETITIONER,
v.
ILLINOIS COMMERCE COMMISSION; NORTH SHORE GAS COMPANY; PEOPLES GAS LIGHT AND COKE COMPANY; VANGUARD ENERGY SERVICES, LLC; INTEGRYS ENERGY GROUP, INC.; INTEGRYS ENERGY SERVICES, INC.; PRAIRIE POINT ENERGY, LLC, STATE OF ILLINOIS; D/B/A INTERSTATE GAS SUPPLY OF ILLINOIS, INC.; ILLINOIS INDUSTRIAL ENERGY CONSUMERS; THE PEOPLE EX REL. LISA MADIGAN, AND THE CITY OF CHICAGO, RESPONDENTS.



On Direct Review of an Order of the Attorney General of the Illinois Commerce Commission. No. 11-280 On Direct Review of an Order of the Attorney General of the Illinois Commerce Commission. No. 11-281

The opinion of the court was delivered by: Justice Hutchinson

JUSTICE HUTCHINSON delivered the judgment of the court, with opinion. Justices Birkett and Spence concurred in the judgment and opinion.

OPINION

¶ 1 In this consolidated appeal, petitioners, Attorney General Lisa Madigan and the Citizens Utility Board (CUB), challenge the decision of the Illinois Commerce Commission (the Commission) approving a volume-balancing-adjustment rider with respect to the delivery of natural gas to residences and businesses in and around Chicago by respondents Peoples Gas Light & Coke Company (Peoples Gas) and North Shore Gas Company (North Shore) (collectively, the Utilities). Specifically, petitioners challenge the Commission's authority to impose revenue decoupling on the consumers of respondents' product, natural gas.

¶ 2 In March 2007, the Utilities petitioned the Commission to approve a new "tracker" rider, the volume-balancing-adjustment rider, called "Rider VBA." See In re North Shore Gas Co., Nos. 07-0241, 07-0242, 2008 WL 631214, at *1. The Commission stated, "[i]n simplest form, Rider VBA would adjust customer prices *** in a way that the Utilities['] revenues are held constant despite changes in customer consumption." Id. at *127. The Commission reasoned:

"Such changes in consumption are brought about by rising natural gas prices, the call for conservation measures, warming weather trends, the involvement of the Utilities in gas efficiency programs, and other events. The proposed monthly adjustments under Rider VBA are symmetrical meaning that they are based on both the over-recovery as well as the under-recovery of target revenues. Implementing Rider VBA imposes some additional administrative expenses and, among other things called for by Staff, there would be annual internal audits." Id.

Following an evidentiary hearing and a review of the materials, in 2008 the Commission approved Rider VBA as a four-year pilot program. Id. at *141.

¶ 3 The Attorney General appealed the Commission's decision; however, the Appellate Court, First District, determined that it lacked jurisdiction to consider the appeal and transferred the case to the Second District. See People ex rel. Madigan v. Illinois Commerce Comm'n, 407 Ill. App. 3d 207, 224 (2010). On January 10, 2012, and during the pendency of the appeal in the Second District, the Commission issued an order approving Rider VBA on a permanent basis. Thereafter, the parties moved to dismiss the appeal as moot, and this court allowed the motion. See People ex rel. Madigan v. Illinois Commerce Comm'n, No. 2-11-0380 (2012) (minute order).

¶ 4 In its January 2012 decision, the Commission set out the positions of the Utilities, the Commission's staff, and the Attorney General, and the response of the Utilities to the Attorney General's position. It then set out its analysis and conclusions. The Commission reflected that among the problems that Rider VBA was originally intended to protect the Utilities from were the revenue losses attributable to a diminishing customer base and to the implementation of aggressive energy efficiency programs. The Commission next expounded on the reasons to continue Rider VBA: it was "a symmetrical and transparent formula for collecting the approved distribution revenue requirement"; it would reduce reliance on forecasting, which was predictive and "inevitably incorrect"; and it would influence the Utilities to pursue fewer rate cases, because Rider VBA would make underrecovery of their revenue requirement less likely. The Commission addressed the criticism that questioned whether decoupling would prompt the Utilities to spend more on energy efficiency programs. It responded that its original approval of Rider VBA as a pilot program was not centered on energy efficiency factors and that energy efficiency was not the only reason it approved the decoupling mechanism. The Commission explained:

"[O]ur rationale then and now is appropriately multi-faceted to address the many components that such a mechanism seeks to resolve. For example, weather affects customer usage and decoupling means that customers do not overpay when weather is colder than normal or underpay when weather is warmer than normal. Decoupling also addresses load changes, including declining load attributable to energy efficiency. Whether Rider VBA prompts the [Utilities] to spend more on energy efficiency is immaterial. The [Utilities'] forecast showed declining load on their systems. Section 8-104 of the Act requires them to offer energy efficiency programs to meet ever-increasing load reductions through energy efficiency measures. Decoupling will take the effects of efficiency into account together with other factors, notably weather, that affects load and promote distribution rate stability for customers and the [Utilities]."

¶ 5 The Commission concluded that the benefits of "distribution rate stability for customers and the [Utilities]" justified approving the Rider VBA on a permanent basis. The Attorney General and CUB timely filed their notices of appeal.

¶ 6 Petitioners challenge the validity of Rider VBA and the Commission's discretion in authorizing it. Petitioners argue that the deferential standard that generally applies to the Commission's exercise of its discretion does not apply here because it "expressly departed from past practice" and it "necessarily abused its discretion if it made an error of law by approving a rider absent 'exceptional circumstances.' " In support of their argument, petitioners assert that (1) Rider VBA violates fundamental ratemaking principles by retroactively modifying consumer charges to meet revenue forecasts, and (2) Rider VBA violates the prohibition against single-issue ratemaking.

¶ 7 Contrary to petitioners' request for a more stringent review, our scope of review is governed by section 10-201 of the Public Utilities Act (the Act) (see 220 ILCS 5/10-201 (West 2010)). Section 10-201 provides in relevant part that a reviewing court shall reverse a Commission's order or decision, in whole or in part, if it finds that (a) the findings of the Commission were not supported by substantial evidence based on the entire record of evidence presented to or before the Commission for and against such order or decision; (b) the order or decision was without the jurisdiction of the Commission; (c) the order or decision was in violation of the state or federal constitution or laws; or (d) the proceedings or manner by which the Commission considered and entered its order or decision were in violation of the state or federal constitution or laws, to the prejudice of the appellant. 220 ILCS 5/10-201(e)(iv) (West 2010). This court gives "substantial deference to the decisions of the Commission, in light of its expertise and experience in this area." Commonwealth Edison Co. v. Illinois Commerce Comm'n, 405 Ill. App. 3d 389, 397 (2010) (ComEd). "Accordingly, on appeal, the Commission's findings of fact are considered prima facie true; its orders are considered prima facie reasonable; and the appellant bears the burden of proof on all issues raised." ComEd, 405 Ill. App. 3d at 397.

¶ 8 " 'In making adequate findings, the Commission is not required to provide findings on each evidentiary claim; its findings are sufficient if they are specific enough to enable the court to make an informed and intelligent review of its order.' " People ex rel. Madigan v. Illinois Commerce Comm'n, 2012 IL App (2d) 100024, ¶ 39 (quoting ComEd, 405 Ill. App. 3d at 398). " 'In other words, it must state the facts essential to its ruling so that the court can properly review the basis for the decision.' " Id. (quoting ComEd, 405 Ill. App. 3d at 398). "On review, this court can neither reevaluate ...


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