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Illinois Landowners Alliance, NFP v. The Illinois Commerce Commission

Court of Appeals of Illinois, Third District

August 10, 2016

ILLINOIS LANDOWNERS ALLIANCE, NFP, Petitioner,
v.
THE ILLINOIS COMMERCE COMMISSION; COMMONWEALTH EDISON COMPANY.; INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO LOCAL UNIONS 51, 9, 145 & 196; ILLINOIS AGRICULTURAL ASSOCIATION a/k/a Illinois Farm Bureau; WIND ON THE WIRES; ENVIRONMENTAL LAW AND POLICY CENTER; NATURAL RESOURCES DEFENSE COUNCIL; BUILDING OWNERS AND MANAGERS ASSOCIATION OF CHICAGO; DYNEGY MIDWEST GENERATION, LLC; DYNEGY KENDALL ENERGY, LLC; AMEREN TRANSMISSION COMPANY OF ILLINOIS; MIDWEST GENERATION, LLC; JOHN L. CANTLIN; and JOSEPH H. CANTLIN, Respondents. ILLINOIS AGRICULTURAL ASSOCIATION a/k/a Illinois Farm Bureau, Petitioner,
v.
THE ILLINOIS COMMERCE COMMISSION; ROCK ISLAND CLEAN LINE, LLC; COMMONWEALTH EDISON COMPANY; INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO LOCAL UNIONS 51, 9, 145 & 196; ILLINOIS LANDOWNERS ALLIANCE, NFP; WIND ON THE WIRES; ENVIRONMENTAL LAW AND POLICY CENTER; NATURAL RESOURCES DEFENSE COUNCIL; BUILDING OWNERS AND MANAGERS ASSOCIATION OF CHICAGO; DYNEGY MIDWEST GENERATION, LLC; DYNEGY KENDALL ENERGY, LLC; AMEREN TRANSMISSION COMPANY OF ILLINOIS; MIDWEST GENERATION, LLC; JOHN L. CANTLIN; JOSEPH H. CANTLIN; TIMOTHY B. CANTLIN; FRIESLAND FARMS, LLC; LARRY GERDES; STEVEN GERDES; JASON D. JAMES; JAMES BEDEKER; SALLY BEDEKER; and FIRST MIDWEST BANK TRUST #6243, Respondents. COMMONWEALTH EDISON COMPANY, Petitioner,
v.
THE ILLINOIS COMMERCE COMMISSION; ROCK ISLAND CLEAN LINE, LLC; INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO LOCAL UNIONS 51, 9, 145 & 196; ILLINOIS AGRICULTURAL ASSOCIATION a/k/a Illinois Farm Bureau; WIND ON THE WIRES; ENVIRONMENTAL LAW AND POLICY CENTER; NATURAL RESOURCES DEFENSE COUNCIL; BUILDING OWNERS AND MANAGERS ASSOCIATION OF CHICAGO; DYNEGY MIDWEST GENERATION, LLC; DYNEGY KENDALL ENERGY, LLC; AMEREN TRANSMISSION COMPANY OF ILLINOIS; MIDWEST GENERATION, LLC; ILLINOIS LAND OWNERS ALLIANCE, NFP; JOHN L. CANTLIN; JOSEPH H. CANTLIN; TIMOTHY B. CANTLIN; FRIESLAND FARMS, LLC; LARRY GERDES; STEVEN GERDES; JASON D. JAMES; JAMES BEDEKER; SALLY BEDEKER; AND FIRST MIDWEST BANK TRUST #6243, Respondents.

         Petitions for Review of Order of the Illinois Commerce Commission, No. 12-0560.

          JUSTICE LYTTON delivered the judgment of the court, with opinion. Justices Carter and Wright concurred in the judgment and opinion.

          OPINION

          LYTTON JUSTICE

         ¶ 1 Illinois Landowners Alliance (ILA), Illinois Agricultural Association also known as Illinois Farm Bureau (IAA), and Commonwealth Edison Company (Com Ed) petition this court for review of an order of the Illinois Commerce Commission (Commission) allowing Rock Island Clean Line, LLC (Rock Island) to operate as a public utility under the Public Utilities Act (Act) (220 ILCS 5/1-101 et seq. (West 2012)) and granting the company a certificate of public convenience and necessity to construct, operate, and maintain a high voltage electric transmission line across several counties in Illinois. On appeal, petitioners argue that (1) the application should have been dismissed as a matter of law because Rock Island is not a public utility and (2) the Commission's findings in favor of a certificate of public convenience and necessity (CPCN) were not supported by substantial evidence. We reverse the Commission's order granting the certificate and remand for further proceedings.

         ¶ 2 BACKGROUND

         ¶ 3 Rock Island is a subsidiary of Clean Line Energy Partners LLC (Clean Line), a transmission energy development company, with its principal offices in Houston, Texas. In addition to Rock Island, Clean Line owns four other companies that are developing long-distance transmission projects across the northern states. Clean Line is owned in part by Grid America Holdings, Inc., which is owned by National Grid USA, a business that owns and operates more than 8600 miles of high voltage transmission facilities in the United States.

         ¶ 4 Rock Island was formed to construct and manage an electric transmission line project that would run from O'Brien County in northwest Iowa to Grundy County in northeast Illinois. The primary purpose of the project is to connect wind generation facilities in northwest Iowa, South Dakota, Nebraska, and Minnesota with electricity markets on the PJM Interconnection grid. PJM is a regional transmission organization that coordinates the movement of wholesale electricity to markets in Illinois, Indiana, Michigan, Ohio, Kentucky, the District of Columbia, and eight other states in the northeast.

         ¶ 5 The proposed line would span 379 miles through Iowa to the Mississippi River, crossing the river in Princeton, Iowa, and entering Illinois near Cordova, Illinois. It would then extend approximately 121 miles in Illinois to a Com Ed substation in Grundy County (Collins substation).

         ¶ 6 In preparation for the project, Rock Island filed an application with the Commission for a certificate of public convenience and necessity under section 8-406 of the Act (220 ILCS 5/8-406(a), (b) (West 2012)) authorizing it to operate as a transmission-only public utility in Illinois and to construct, operate, and maintain an electric transmission line for wind energy. In its application, Rock Island stated that the development of additional transmission infrastructure is critical to our nation's ability to utilize its wind resources to meet the demand for electricity from renewable sources. Rock Island further claimed that although wind energy generates an alternating electrical current (AC), it is more cost effective to transmit the energy using a direct current (DC) transmission line.

         ¶ 7 According to the proposed plan, the Rock Island project would construct a high voltage direct current (HVDC) electric transmission line from Iowa to Illinois. The line would convert AC wind energy to DC electricity at a converter station in O'Brien County, Iowa. From there, the high voltage current would travel 500 miles to a DC-to-AC converter station in Grundy County, Illinois. The proposal stated that Rock Island would then run an AC transmission line a few miles to the Collins substation, where the electricity would be delivered into the PJM grid. The application set forth a proposed route for the line but did not seek the right of eminent domain.

         ¶ 8 Rock Island stated that the project has a capacity of 3500 megawatts and is able to connect up to 4000 megawatts of generating capacity in the resource area in Iowa to northern Illinois. At that rate, it will deliver 15 million megawatt-hours of electricity annually, enough to power 1.4 million homes.

         ¶ 9 Rock Island's application and supporting materials outlined a plan for raising the capital necessary to finance construction at an unspecified future date on a "project financing basis." Rock Island emphasized that it was a "merchant developer"-not a traditional utility with cost-based rates-and claimed that Illinois residents would not pay for the line through rate assessments. It does not plan to seek cost recovery through the electric rates paid by consumers in Illinois. Instead, it indicated that its rates will be regulated by the Federal Energy Regulatory Commission (FERC) and that the project will pay for itself through the revenues it receives from anticipated purchase agreements with wind generators. Rock Island stated that it plans to enter into long-term financing agreements with one or more wind generators, or "anchor tenants, " in the resource area (northwest Iowa) and then attract lenders using the anchor tenant agreements as collateral. The financing plan included in the application did not identify any current anchor tenants or lenders.

         ¶ 10 Numerous parties sought and were granted leave to intervene, including ILA, IAA, Com Ed, local unions of the International Brotherhood of Electrical Workers, Wind on the Wires, and various private landowners. Commission staff members also participated in the application process by presenting evaluations, reports, and recommendations to the Commission.

         ¶ 11 Initially, IAA and ILA filed motions to dismiss, arguing that Rock Island was not a public utility under section 3-105 of the Act because it did not own infrastructure for electric transmission in Illinois. The intervenors argued that only a public utility may obtain a section 8-406(a) certificate to transact business and only a public utility may obtain a section 8-406(b) certificate to construct facilities. They maintained that because Rock Island was not a public utility, it could not be granted a certificate of public convenience and necessity under the Act.

         ¶ 12 The Commission's administrative law judge (ALJ) denied both motions. The ALJ ruled that the application process under section 8-406 of the Act is not limited to entities that are already certified public utilities and concluded that Rock Island could apply for public utility status and seek certification to construct and manage a transmission facility at the same time.

         ¶ 13 At the evidentiary hearing on the application, witnesses for Rock Island testified that its objective in constructing the project is to provide a direct transmission link for wind generating plants that will be built in the Iowa resource area and to transport that output to electricity markets in Illinois. According to Rock Island, the demand for electricity from renewable resources in Illinois and surrounding states will remain high for years to come due to state renewable portfolio standards requirements imposed by recent legislation. These state-imposed mandates require utilities to replace energy generated by fossil fuels with renewable energy, and at least 75% of that renewable energy must come from wind power.

         ¶ 14 David Berry, vice president of strategy and finance for Clean Line, characterized the proposed transmission line as a "merchant project" because Rock Island is assuming the market risk of the project. Rock Island does not have a process to recover its costs from ratepayers and therefore must sell capacity through negotiated contracts. Berry testified that the FERC approved Rock Island's proposal to presubscribe up to 75% of its transmission capacity to anchor tenants and sell the remaining 25% of the line's capacity to other generators. Rock Island would market its excess capacity using a bidding process, otherwise known as "open season" bidding, in which Rock Island would offer services to other wind generator customers along the line. According to Berry's testimony, the FERC order requires Rock ...


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