People v. Illinois Commerce Commission
2015 IL 116005
| Ill. | 2015Background
- Peoples Gas and North Shore Gas (Chicago-area utilities) sought permanent approval of Rider VBA, a volume-balancing-adjustment rider implementing revenue decoupling for distribution-cost recovery.
- Rider VBA had been approved as a four-year pilot in 2008 (monthly true-ups); in 2012 the Illinois Commerce Commission (ICC) approved it permanently after hearings.
- Revenue decoupling separates (decouples) recovery of fixed distribution revenue from gas volumetric sales by true-ups: surcharges when revenues fall short and credits when revenues exceed the Commission-approved revenue requirement.
- Petitioners (Illinois Attorney General and Citizens Utility Board) challenged the permanent approval, arguing Rider VBA violated rate-of-return principles, constituted unlawful single-issue ratemaking, and amounted to retroactive ratemaking.
- The appellate court affirmed the ICC; the Illinois Supreme Court granted review and affirmed the appellate court (vacating the appellate court’s consideration of retroactive-ratemaking on the ground of forfeiture).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rider VBA conflicts with rate-of-return principles | Rider VBA guarantees revenue/profit and removes incentives to operate efficiently | Rider VBA merely implements the Commission’s revenue requirement and only changes the mechanism to collect it; it does not increase the allowed revenue or guaranteed profit | Court: No abuse of discretion — rider recovers the Commission-approved revenue requirement and does not guarantee more than that |
| Whether Rider VBA is impermissible single-issue ratemaking | Riders are single-issue ratemaking and unlawful absent exceptional circumstances; Rider VBA improperly alters ratemaking | Rider VBA does not change the revenue requirement or rate of return; it only stabilizes collection of amounts the Commission already approved | Court: Not single-issue ratemaking — rider does not alter revenue requirement or rate of return and is within Commission discretion |
| Whether Rider VBA constitutes retroactive ratemaking | Approval allows retroactive adjustments/true-ups that impermissibly change rates after the fact | ICC relied on procedural record that Rider VBA was prospective true-up mechanism; parties forfeited this argument below | Court: Argument forfeited for failure to raise in rehearing; appellate court’s on-the-merits discussion vacated for lack of preservation |
Key Cases Cited
- Business & Professional People for the Public Interest v. Illinois Commerce Comm’n, 136 Ill. 2d 192 (1989) (principles on review of Commission rate decisions and limits on Commission departures from rule-based decisionmaking)
- Citizens Utility Board v. Illinois Commerce Comm’n, 166 Ill. 2d 111 (1995) (discusses riders, single-issue ratemaking exception, and revenue-requirement framework)
- Business & Professional People for the Public Interest v. Illinois Commerce Comm’n (BPI II), 146 Ill. 2d 175 (1991) (revenue-formula and interaction of cost components)
- Commonwealth Edison Co. v. Illinois Commerce Comm’n, 405 Ill. App. 3d 389 (2010) (appellate discussion treating riders as single-issue ratemaking and requiring heightened justification)
- People ex rel. Hartigan v. Illinois Commerce Comm’n, 148 Ill. 2d 348 (1992) (rates operate prospectively; role of Commission)
- Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944) (rate-of-return principles: rates provide opportunity for return, not a guaranteed profit)