2011 IL App (1st) 100654
Ill. App. Ct.2011Background
- This case consolidates appeals from a January 2010 Final Order and June 2010 rehearing order by the Illinois Commerce Commission (ICC) approving rate restructuring for North Shore and Peoples Gas and approving Rider ICR.
- Riders sought include an Infrastructure Cost Recovery Rider (Rider ICR) to accelerate mains replacement funded through a pass-through mechanism.
- The People (Illinois) and Citizens Utility Board (CUB) challenged Rider ICR as improper single-issue ratemaking and not supported by substantial evidence.
- The ICC upheld Rider ICR but with oversight provisions, and the appellate court reviews for authority, findings, and substantial evidence.
- The Utilities appeal on base-rate issues includes incentives costs, pension asset treatment, and ROE adjustments, challenging the ICC’s determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rider ICR constitutes improper single-issue ratemaking? | People/CUB argue rider isolates costs and bypasses full rate-case review. | Commission/Peoples Gas contend rider fits exceptions permitting direct cost recovery. | Rider ICR abuse of discretion; remanded for further proceedings. |
| Are incentive compensation costs recoverable? | Utilities assert reasonable and prudent nexus to customers; evidence uncontroverted. | ICC applied direct customer-benefit standard restricting recovery. | Direct customer-benefit standard appropriate; incentive costs largely disallowed. |
| Should pension asset be included in rate base? | Asset funded by ratepayers; includes in rate base would allow return. | No evidentiary support for pension asset as customer-funded; exclude from rate base. | Commission’s exclusion of pension asset from rate base not clearly against weight of evidence. |
| Did ICC properly adjust market-based ROE for riders and risk? | Adjustments overstate or mischaracterize risk and rider effects. | Staff-supported adjustments reflect lower risk and rider-related risk differentials. | ROE adjustments supported by substantial evidence; not clearly erroneous. |
Key Cases Cited
- Commonwealth Edison Co. v. Illinois Commerce Comm'n, 398 Ill.App.3d 510 (2009) (upholds direct-benefit nexus standard for incentive compensation?)
- City of Chicago v. Illinois Commerce Comm'n, 281 Ill.App.3d 617 (1996) (riders may be used for cost recovery; not per se improper)
- Citizens Utility Board v. Illinois Commerce Comm'n, 166 Ill.2d 111 (1995) (riders may recover certain costs; single-issue ratemaking caution)
- Finkl v. Illinois Commerce Comm'n, 250 Ill.App.3d 317 (1993) (illustrates limits of single-issue ratemaking for volatile costs)
- Commonwealth Edison Co. v. Illinois Commerce Comm'n, assorted, 398 Ill.App.3d 510 (2009) (reaffirmed framework for evaluating rider legitimacy)