JUSTICE KARMEIER delivered the judgment of the court, with
opinion. Justices Freeman, Thomas, Kilbride, Garman, Burke,
and Theis concurred in the judgment and opinion.
KARMEIER CHIEF JUSTICE
1 This matter is before the court on administrative review of
an order by the Illinois Commerce Commission (Commission)
granting a certificate of public convenience and necessity to
Rock Island Clean Line, LLC (Rock Island), for construction
of a high voltage electric transmission line between
O'Brien County, Iowa, and a converter station adjacent to
a Commonwealth Edison Company (ComEd) substation in Grundy
County, Illinois. The appellate court reversed the
Commission's order on the grounds that the Commission had
no authority under the Public Utilities Act (Act) (220 ILCS
5/1-101 et seq. (West 2012)) to consider Rock
Island's application for a certificate of public
convenience and necessity because the company did not qualify
as a public utility under Illinois law. The Commission and
various entities involved in the Commission proceedings
sought further review by our court through separate petitions
for leave to appeal (Ill. S.Ct. R. 315 (eff. Mar. 15, 2016)).
We granted those petitions and consolidated the proceedings
for briefing, argument, and disposition. For the reasons that
follow, we agree with the appellate court that the
Commission's order must be reversed.
3 Rock Island is a Delaware limited liability company with
its principal offices in Houston, Texas. It is a wholly owned
subsidiary of Rock Island Wind Line, LLC, which is, in turn,
a wholly owned subsidiary of Clean Line Energy Partners, LLC
(Clean Line). Clean Line is owned in part by Grid America
Holdings, Inc. Grid America is a subsidiary of 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 plans to construct and manage a high voltage
direct current (DC) electric transmission line running from
an alternating current (AC)-to-DC current converter station
in O'Brien County, Iowa, to a planned DC-to-AC current
converter station in Grundy County, Illinois. An additional
four-mile segment of AC lines would run from the planned
converter station to ComEd's existing transmission system
at or near its Collins substation, which is also in Grundy
5 The purpose of the proposed transmission line is to connect
wind generation facilities in northwest Iowa, South Dakota,
Nebraska, and Minnesota with electrical markets that utilize
an electrical grid operated by PJM Interconnection, LLC
(PJM), the regional transmission organization (RTO)
responsible for coordinating the movement of wholesale
electricity to markets in Illinois, Indiana, Michigan, Ohio,
Kentucky, the District of Columbia, and eight states in the
Northeast. Once completed, the line will extend for a total
of 500 miles. Less than one-fourth of that distance, 121
miles, will be in Illinois. The remainder will be in Iowa.
6 Rock Island has never constructed a high voltage
transmission line and does not yet own, control, operate, or
manage any plants, equipment, or property in Illinois or
elsewhere used or to be used in the transmission of
electricity or for any other purpose related to utilities.
Rather, it has an option to purchase certain real property in
Grundy County. The property subject to the option is the
proposed site for the DC-to-AC converter station at which the
transmission line would terminate.
7 Witnesses for Rock Island testified that the project will
cost approximately $1.8 billion to construct, operate, and
maintain. As of December 2013, shareholders had committed
approximately $95 million of equity to Clean Line, one of
Rock Island's parent companies. Only about $21.6 million
of this sum, however, was specifically invested in the Rock
8 Under the system currently in place in the United States,
new transmission lines are typically constructed after an RTO
such as PJM has conducted a transmission study and concluded
the new line is necessary for the reliability of the system
or to relieve transmission congestion. When the necessity for
the new line has been established by the RTO, the developer
who constructs the line is entitled to recoup its costs and
receive a regulated rate of return on its investment through
cost-based rates billed to the customers who benefit from the
improved service. Rock Island, however, is not a member of
PJM or any RTO, and its proposed project is outside the RTO
approval process. Because of that, it will not be eligible to
recover any of its construction costs through cost-based
electrical rates paid by ratepayers in Illinois. Rather, this
is to be a "merchant transmission" project. See
Transmission Planning & Cost Allocation by Transmission
Owning & Operating Public Utilities, 76 Fed. Reg. 49, 842
(Aug. 11, 2011).
9 Merchant transmission projects are a relatively new
development in the electricity transmission business and have
arisen with the development of wind and other variable energy
resources. In contrast to traditional public utilities, which
are allowed to recover a regulated, cost-based rate of return
from electricity customers on transmission line projects and
other investments, merchant transmission developers obtain
revenue to cover the costs of constructing and operating
transmission facilities exclusively from power-generating
customers who purchase transmission capacity and utilize the
transmission service pursuant to negotiated contracts.
Alexandra B. Klass & Jim Rossi, Reconstituting the
Federalism Battle in Energy Transportation, 41 Harv.
Envtl. L. Rev. 423, 440 n.73 (2017). Merchant transmission
providers also differ from traditional public utilities in
that they assume all of a project's market risks.
Alexandra B. Klass, Takings and Transmission, 91
N.C. L. Rev. 1079, 1096 n.99 (2013). They have no obligation
to undertake transmission projects and will do so only when
such projects are financially viable. Heidi Werntz,
Let's Make a Deal: Negotiated Rates for Merchant
Transmission, 28 Pace Envtl. L. Rev. 421, 425 (2010).
10 Rock Island's project is currently still at the
developmental stage, and its prospects are uncertain. As part
of its initial planning, the company secured three
interconnection queue positions with PJM to allow it to
deliver 3500 megawatts of power to the grid PJM operates. The
assignment of queue positions ensures that the existing grid
system is capable of accepting the additional power, and
obtaining a queue position is necessary before an entity may
connect to PJM's grid. Since first obtaining its three
queue positions, however, Rock Island has surrendered two of
the positions and reduced the capacity it would add under the
third to 1600 megawatts. It did so because it was unwilling
or unable at this stage of the process to under take the
additional engineering and design work necessary before an
interconnection agreement with PJM could be executed. The
surrender of the positions does not foreclose Rock Island
from requesting additional queue positions in the future.
11 Testimony established that the company cannot and will not
move forward with the project unless and until a sufficient
number of customers contract for power transmitted by the
line to enable the company to attract the requisite
financing. At the present time, no potential customers have
obtained rights to buy service on the transmission line.
Indeed, the wind generators that might use the transmission
line and that serve as the basis for Rock Island's energy
and financial simulation models do not yet exist.
12 Although there are not yet any customers for Rock
Island's planned transmission service, the company plans
to offer that service to any "eligible customers"
under an open access transmission tariff (OATT) pursuant to
Federal Energy Regulatory Commission (FERC) regulations. The
FERC defines "eligible customers" broadly to
include any buyer of transmission service, subject only to
limitations contained in section 824k of the Federal Power
Act (16 U.S.C. § 824k(h) (2012)).
13 The FERC has approved a proposal from Rock Island to
"pre-subscribe" up to 75% of the proposed
line's transmission capacity to anchor customers. Those
customers will consist largely, if not entirely, of
yet-to-be-built wind generators in the resource area of
northwest Iowa, South Dakota, Nebraska, and Minnesota who
seek to deliver the power they generate to the PJM grid. The
remaining 25% of capacity will be sold at auction through a
process known as "open season bidding." The FERC
has not mandated that Illinois entities participate in the
bidding process, and the project does not designate any part
of the energy transmitted along the proposed line for public
use in Illinois.
14 If any transmission capacity remains available after the
open season bidding process concludes, any eligible customer
may request service under the OATT. In handling such
requests, Rock Island must comply with the FERC's open
access requirements. The company will be prohibited from
discriminating or showing undue preference in selling its
15 The reason that the FERC is involved in the project is
that under the Federal Power Act (16 U.S.C. § 791a
et seq. (2012)), the FERC has exclusive authority to
regulate "the sale of electric energy at wholesale in
interstate commerce." 16 U.S.C. § 824(b) (2012).
Hughes v. Talen Energy Marketing, LLC, __U.S.__, __,
136 S.Ct. 1288, 1292 (2016). The FERC's jurisdiction also
extends to all facilities for transmission of electric energy
in interstate commerce, authority that is not limited to the
wholesale market. 16 U.S.C. § 824(b) (2012); New
York v. Federal Energy Regulatory Comm'n, 535 U.S.
1, 17 (2002) (New York v. FERC).
16 Although Rock Island's proposed transmission services
are subject to the FERC's jurisdiction, the existence of
FERC jurisdiction does not mean that state regulatory
authorities have no say in the project. To the contrary, the
Federal Power Act makes federal and state powers
"complementary" and "comprehensive, " so
that there will be "no 'gaps' for private
interests to subvert the public welfare." (Internal
quotation marks omitted.) Federal Energy Regulatory
Comm'n v. Electric Power Supply Ass'n, __U.S.__,
__, 136 S.Ct. 760, 780 (2016) (quoting Federal Power
Comm'n v. Louisiana Power & Light Co., 406 U.S.
621, 631 (1972)). Identifying the precise contours of state
and local authority under such collaborative programs can be
difficult and delicate. See Allco Finance Ltd. v.
Klee, 861 F.3d 82, 101-02 (2nd Cir. 2017). Controlling
federal precedent makes clear, however, that the siting of
new transmission lines is generally not a matter within the
jurisdiction of the FERC. James J. Hoecker & Douglas W.
Smith, Regulatory Federalism and Development of Electric
Transmission: A Brewing Storm?, 35 Energy L.J. 71, 82
(2014). Rather, Congress left to the states significant
authority to regulate the siting of transmission lines.
New York v. FERC, 535 U.S. at 24. Accordingly, any
company wishing to construct an interstate transmission line
must normally obtain siting permission and eminent domain
authority from every state through which the line will pass,
in accordance with the states' permitting processes and
standards. Klass, Takings and Transmission,
supra, at 1101.
17 As noted earlier, the bulk of Rock Island's proposed
transmission line will be located in the state of Iowa. In
November 2014, Rock Island filed with the Iowa State
Department of Commerce Utilities Board 16 petitions for
electric transmission line franchises for the 16 different
Iowa counties through which the proposed line would run. The
Iowa Utilities Board established a procedural schedule to
govern that state's regulatory review of the project.
Under that schedule, Rock Island was required to file certain
documents beginning in January 2017. On December 22, 2016,
however, Rock Island asked the Iowa Utilities Board for leave
to withdraw all 16 petitions it had filed in connection with
the project. The Iowa Utilities Board granted that request
the following day. Although Rock Island advised Iowa
authorities that it might submit new filings in that state
depending on how judicial review of the regulatory
proceedings in our state was ...