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Ameren Illinois Co. v. Illinois Commerce Commission

Court of Appeals of Illinois, Fourth District

December 11, 2013

AMEREN ILLINOIS COMPANY, Petitioner,
v.
ILLINOIS COMMERCE COMMISSION; THE CITIZENS UTILITY BOARD; AARP; THE COMMERCIAL GROUP (Best Buy Company Inc., J.C. Penney Corporation, Inc., Macy's, Inc., Sam's West, Inc., and Wal-Mart Stores, Inc.); THE INDUSTRIAL ENERGY CONSUMERS (Air Products and Chemicals Company, Archer-Daniels-Midland Company, Caterpillar, Inc., CCPS Transportation, LLC, GBC Metals, LLC, Keystone Consolidated Industries, Inc., Marathon Petroleum Company, LP, Olin Corporation, Tate and Lyle Ingredients Americas, Inc., University of Illinois, Viscofan USA, Inc., and Washington Mills Hennepin, Inc.); THE OFFICE OF THE ATTORNEY GENERAL; and THE PEOPLE OF THE STATE OF ILLINOIS, Respondents. AMEREN ILLINOIS COMPANY, Petitioner,
v.
ILLINOIS COMMERCE COMMISSION, THE CITIZENS UTILITY BOARD, AARP, THE OFFICE OF THE ATTORNEY GENERAL, and THE PEOPLE OF THE STATE OF ILLINOIS, Respondents.

Direct Review of Order of the Illinois Commerce Commission

Justices Appleton and Pope concurred in the judgment and opinion.

OPINION

HOLDER WHITE, JUSTICE

¶ 1 In January 2012, Ameren Illinois Company (Ameren) filed its initial application with the Illinois Commerce Commission (Commission) to establish a performance-based rate tariff under the authority of section 16-108.5 of the Public Utilities Act (Utilities Act), commonly referred to as the Energy Infrastructure Modernization Act (Modernization Act) (220 ILCS 5/16-108.5 (West 2012)), enacted by Public Act 97-616 (Pub. Act 97-616, § 10 (eff. Oct. 26, 2011)). Following a September 2012 evidentiary hearing, the Commission issued a written decision in which, among other things, it (1) rejected and subsequently reduced Ameren's proposed rate of common equity so that it was more consistent with the common equity of Ameren's holding company, Ameren Company (holding company); (2) considered Ameren's accumulated deferred income taxes (ADIT) for projected plant additions in calculating Ameren's rate base; and (3) decreased Ameren's rate base by unused vacation pay accrued by Ameren employees.

¶ 2 In April 2012, Ameren filed its first annual update with the Commission. In December 2012, the Commission reaffirmed the aforementioned findings.

¶ 3 On appeal, Ameren asserts the Commission made three reversible errors in reaching its decision, including (1) considering the capital structure of Ameren's holding company rather than the actual capital structure of Ameren when determining rate base; (2) reducing Ameren's rate base by ADIT for projected plant additions; and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees.

¶ 4 We affirm.

¶ 5 I. BACKGROUND

¶ 6 Ameren is a public utility that distributes electricity and gas to customers in Illinois. As a public utility, Ameren's rates are subject to regulation by the State of Illinois pursuant to the Utilities Act (220 ILCS 5/9-101 to 22-503 (West 2012)), through which the General Assembly has delegated to the Commission the authority to review the rates suggested by public utilities to determine whether those rates are "just and reasonable." 220 ILCS 5/9-201(c) (West 2012).

¶ 7 A. Modernization Act

¶ 8 In 2011, the General Assembly passed the Modernization Act (220 ILCS 5/16-108.5 (West 2012)) as a provision of the Utilities Act (220 ILCS 5/1-101 to 22-503) (West 2012)). The Modernization Act applies to electric utilities or combination gas and electric utilities serving more than 1 million customers in Illinois that voluntarily undertake to create customer assistance programs and invest in an infrastructure program that creates Illinois jobs. 220 ILCS 5/16-108.5(b) (West 2012). To participate, a utility company must commit to one of the following investment plans. The first option requires the utility company, within 5 years, to invest $1.3 billion "in electric system upgrades, modernization projects, and training facilities" and, within 10 years, to invest $1.3 billion "to upgrade and modernize its transmission and distribution infrastructure." 220 ILCS 5/16-108.5(b)(1)(A), (b)(1)(B) (West 2012). The second option requires the utility company, over a 10-year period, to invest $265 million "in electric system upgrades, modernization projects, and training facilities" and to invest $360 million "to upgrade and modernize its transmission and distribution infrastructure." 220 ILCS 5/16-108.5(b)(2)(A), (b)(2)(B) (West 2012). The incentive for utility companies to participate in this program is that the statute allows the company to recover its expenditures through the ratemaking process. 220 ILCS 5/16-108.5(b) (West 2012).

¶ 9 B. Ameren's Initial Application Under the Modernization Act

¶ 10 In January 2012, Ameren filed with the Commission a petition for approval of its "Modernization Action Plan-Pricing Tariff" pursuant to the Modernization Act (Illinois Commerce Commission case No. 12-1001 (No. 12-1001)). Several parties intervened, including (1) the Attorney General on behalf of the People of the State of Illinois, (2) the Citizens Utility Board, (3) the American Association of Retired Persons (AARP), (4) the Illinois Industrial Energy Consumers, and (5) the Commercial Group. In September 2012, following an evidentiary hearing and briefing by all parties, including Commission staff, the Commission approved Ameren's application with several modifications, including (1) rejecting and subsequently reducing Ameren's proposed rate of common equity so that it was more consistent with the common equity of Ameren's holding company, Ameren Company; (2) considering ADIT on projected plant additions in calculating Ameren's rate base; and (3) decreasing Ameren's rate base by unused vacation pay accrued by Ameren employees. Ameren filed an application for rehearing, which the Commission denied in October 2012. Ameren then filed a timely notice of appeal challenging, among other issues, the Commission's findings with regard to Ameren's (1) rate of common equity in calculating actual capital structure and (2) ADIT on projected plant additions. This court docketed Ameren's appeal as No. 4-12-1008.

¶ 11 C. Ameren's Annual Update Filing

ΒΆ 12 In April 2012, while Ameren's application in No. 12-1001 was still pending, Ameren filed its first annual update with the Commission as required by the Modernization Act (Illinois Commerce Commission case No. 12-0293 (No. 12-0293)). In December 2012, the Commission issued its written findings consistent with No. 12-1001. The Commission then denied Ameren's January 2013 motion requesting a rehearing. Ameren filed a timely notice of appeal challenging, among others issues, the Commission's decisions with regard to (1) reducing Ameren's common equity as more consistent with Ameren's holding company, (2) considering ADIT on projected plant additions in calculating rate base, and (3) decreasing Ameren's rate base ...


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