People Ex Rel. Hartigan v. Illinois Commerce Commission

(Nos. 71155 cons. rel. NEIL F. PEOPLE ex HARTIGAN,

THE Attorney al., et General, v. Appellants Cross-Appellees, al., et THE ILLINOIS COMMERCE COMMISSION Appellees Cross-Appellants.

Opinion April 16, 1992. Rehearing filed — 1, 1992. denied June FREEMAN, J., dissenting concurring part part. and Burris, W. Attorneys Neil F. Roland Hartigan Cushing, Darryl G. General, (Robert W. Springfield Foster, of Chicago, Dale and U. Reed, MaryNic Janice for counsel), People. Jones, Jr., L. of Chi-

Howard A. Learner and Robert & Profes- Business cago, appellant cross-appellee Interest. sional for the Public People L. Graham, Hirsch,

Robert and Norman M. of Jenner Block, & Satter, and Susan L. all of Chicago, for appel- lant and Citizens cross-appellee Board. Utility Welsh, Counsel, R. of

Kelly Corporation Chicago (Pat- rick Giordano, Counsel, Special Assistant of Corporation Gardner, Foley Dobrer, & and Jean of counsel), ap- for pellant and of cross-appellee City Chicago.

Allen W. of Cherry, Chicago, for and cross- appellants Action for Fair appellees Community Practice et Utility al. Gilbert,

David of for and Chicago, appellant cross-ap- pellee Governor’s Office of Consumer Services. Danville,

John of Meyer, P. for and appellant cross-ap- pellee of Department Transportation. Cornfield,

Gilbert A. of Chi- Feldman, Cornfield & of cago, for and Labor on appellant cross-appellee Coalition Public Utilities. Partee

Cecil A. and Jack O’Malley, Attorneys, State’s of (Thomas Macmanus, H. Chicago and Sheila Rowland Assistant State’s of for the Attorneys, counsel), People of Cook County. J. Moore and M.

Stephen Nolan, Kathleen Public Counsel, Counsel, Stephen Fogel, and E. Public Deputy ,rel. of for the ex of Chicago, Office Public Coun- People sel. Martin, J. R. I. Trienens,

Howard Eden Michael Thomas, Miller Austin, and Dale E. of & and Sidley Forde, Kevin M. all of for and cross- Chicago, appellant Edison appellee Commonwealth Co. Kelliher, As- Special P. and John O’Brien

Edward P. for General, Chicago, appellee of Attorneys sistant Commission. Illinois Commerce cross-appellant Fitzhenry, Edward C. Randall Robertson appel- Konzen, City, of Granite & Lueders, Robertson Con- Energy Industrial Illinois cross-appellant lee and sumers. the opinion delivered BILANDIC

JUSTICE court: Act of the Public Utilities section 9—201

Pursuant in the an increase sought Edison (Act), Commonwealth the Illinois Com to its customers before charged rates autho the statutorily (Commission), merce Commission lll2/3, 1985, ch. Rev. Stat. ratemaking (111. rized agency. rate increase Edison this sought 1—101 et

par. seq.) constructing in costs it incurred billion recoup $2.55 I). I generating facility (Byron its Unit nuclear Byron and ad several judicial This involves appeal consolidated flowed from Edi subsequently ministrative orders which increase. son this rate seeking case has before time that this been

This is the second Com v. Illinois Hartigan ex rel. (See People this court. The I).) Ill. 120 (Hartigan 2d (1987),

merce Comm’n (Edi Edison are Commonwealth to this parties appeal and Commission, governmen 11 consumer son), of the are: the People The tal interveners. interveners Pro Burris; Business and Illinois ex rel. Roland State of Interest; Utility Citizens for the fessional Public People for Fair Util Action Board; Chicago; Community of City La Practice; Transportation; Department Illinois ity Utilities; Peoples National Coalition on Public bor O’Malley; Jack ex rel. County of Cook Action; People of Public ex rel. Office of the of Illinois State People Council Community Counsel; Austin Coalition and South addition, (collectively, intervenors). we have accepted an amicus curiae brief from Illinois Industrial Energy Consumers. Because the instant appeal involves several different orders entered by various courts and the Com- mission, it to is set necessary forth as- procedural in this pects case some detail.

PROCEDURAL FRAMEWORK In October an following audit and proceed- rate the Commission ings, issued a rate order allowing Edi- son an rate annual increase of mil- approximately $495 lion (Rate I). Order This rate increase what represented the Commission determined to be costs in- reasonable curred in by Edison I. The constructing Byron Commis- sion disallowed as unreasonable a total of million $101.5 of costs that Edison had incurred in constructing Byron I. Since Order I, Rate of litigation have ensued years among Edison, Commission, intervenors.

The instant is the latest of this appeal aspect ongoing lit- igation. I,

Following Commission’s decision Rate Order intervenors appealed that decision the circuit court pursuant to section 68 of the Act (111.Rev. Stat. lll2/3, 29, 1986,

ch. On par. 72). April the circuit court reversed Commission order and remanded cause to the Commission for further proceedings. circuit court found that the Commission had an incor applied rect standard in determining which costs were reason able and therefore includable the new rate base. The circuit court that only held costs Edison affirma which proved to have were tively been includable in reasonable court, therefore, the new rate base. The ordered the Commission “roll back” the million rate annual $495 increase Order I. The also established Rate court or dered Edison to establish rates revised within days which were to remain in pending proceed effect further not to include any and were the Commission before ings further court I construction. of Byron of the costs related various costs to exclude the ordered Commission on re determination rate base I from its final to Byron mand. Edison, motion by

Thereafter, emergency upon on May of its judgment enforcement stayed circuit court (134 Rule 305(b) Court to pursuant Supreme However, since order). 1986 stay Ill. 305(b)) (May 2d collect, to continue to Edison order would enable stay million an process, throughout appellate $495 found to the circuit had nual rate increase which its order stay upon court predicated circuit illegal, be to create a sepa Edison was (1) conditions: following be the difference reflecting rate account on its books 29, 1986 date of (the collected after April tween rates and I), Rate Order reversing the circuit court’s judgment I collected without Byron the rates that would have been file base; in the rate Edison was to bi (2) costs included of this account of the status with monthly reports if the cir (3) them on the parties; circuit court serve re should affirmed judgment part cuit court’s be to refunds to its pay versed in Edison was part, required (4) the extent (to practicable); historical customers interest the appropriate circuit court would determine I; and from Rate Order emanating rate for refund any to enforce the circuit court was to retain (5) jurisdiction order on these its stay these conditions. predicating for the re court made conditions, provision the circuit I in the event Rate Order fund of collected under money on the its 1986 decision this court affirmed April merits.

Thereafter, petition allowed the intervenors’ we to Su this court pursuant appeal directly leave All 2d R. (134 302(b)). par Rule Ill. 302(b) Court preme on 1986 decision the circuit court’s April ties appealed 362 however,

the merits. No the party, appealed circuit May court’s order. stay

In People ex rel. v. Hartigan Illinois Commerce (1987), Comm’n 117 Ill. 2d 120 I), this court (Hartigan the circuit affirmed court’s reversal of the Commission’s agreed Rate Order I. The circuit court with the court the had an holding Commission applied improper in standard which I costs of were determining Byron reasonable includable the new rate base. The reversed, as however, its beyond statutory author of the court’s ity, circuit which part holding ordered the Commission to set certain rates within limited amount time of and to exclude certain from costs its ulti mate rate determination. We also the noted that remedy of a as set forth the refund circuit court was “allowa ble,” the leaving open as to the question body, which court, or the Commission circuit was authorized to dic tate the terms and of the refund. The implementation court then remanded cause to the the Commission for further with ratemaking proceedings consistent its deci sion. remand,

On the Commission enlisted Arthur Young & (Arthur to conduct a audit Company Young) second I the costs and conducted Byron exhaustive evidentiary 23, 1989, On the hearings. August Commission issued a new order in it rate which determined that mil- $291.1 lion of the I billion costs were unreasonable Byron $2.55 and disallowed them from Edison’s rate The Com- base. mission also ordered Edison refund to its customers it had I collected under Rate Order money during 1986, 1, 31, period May through December 1989. The Commission set the interest rate of the refund at 5% to be compounded annually.

On Commission issued a September sup- order plemental which set forth the terms for following is (1) refund: interest rate 5% com- applicable is total refund payment annually; (2) $194.6 pounded installments; refunds (3) million to two paid be their crediting customers by to current are to be paid hereinafter refer these bills. We will monthly current Rate on remand as collectively two orders Commission Order II. rehearing question reserved for

The Commission ac- should based on amount of whether the refund be I or on to Rate Order pursuant projected collected tually I. The for re- petition estimated in Rate Order revenues denied, however, of law when was hearing by operation act the time allot- the Commission failed to on it within ted statute. by

Simultaneous with the Commission’s consideration II, and issuance of Rate the circuit court received Order briefs and heard from the arguments parties concerning its retained the refund and the jurisdiction process over various terms to and a necessary implement administer refund which it had outlined in its 1986 order. May stay 12, 1989, On the court entered an October circuit order entitled in “Jurisdictional Statement” which the court 1986 emphasized grant its order May stay alia, inter was conditioned its retained expressly upon, to refund and jurisdiction potential set terms any and administer said refund. The circuit implement court noted that the Commission was not au- statutorily thorized to refund collected to a rate or- money pursuant Thus, der it entered but later set aside on by appeal.

circuit court found that the refund terms of the Commis- dicta. The court noted sion’s Rate Order II were pure that no had order or of its party appealed stay any conditions and that Edison had received a substantial benefit from order. however,

More the circuit court deter- importantly, mined that its based review au- statutorily jurisdiction HP/s, thorized the Act (111. par. Rev. Stat. ch.

364 entered

72) terminated when it its April order which reversed and remanded the Commission’s Rate Order I. The circuit insisted court that its May stay order its conditions resulted from an act of discre tion from emanating judicial inherent authority pursu ant to Ill. 305(b) Court Rule 2d R. Supreme (134 305(b)). Therefore, the circuit found, court its refund jurisdiction its survived until order and conditions were stay accom plished. statement,

Pursuant its jurisdictional circuit court issued series of refund-related orders (collec- circuit court’s it tively, order) refund which set forth the terms and of the methodology refund. The circuit (1) ruled that: the interest rate will be 9% com- pounded annually; (2) the refund will based on the be ac- tual collected under the amount discredited Rate Order I; (3) 30, 1986, the refund will run from period April 1989; December through (4) the refund will be paid to historical had customers who rates to paid illegal (5) extent the refund was to practicable; begin March The court, however, 1990. later appellate stayed the circuit court’s refund order pending appeal. forth in refund terms set the circuit court’s re-

fund order conflict with directly the Commission’s re- Thus, fund set forth in Rate terms Order II. one of the issues court this must decide is which is body authorized the dictate terms of and to of implement any refund I collected under Rate Order money may which be due to Edison’s customers.

In the interim of these the proceedings, legislature Act, 1, 1986, amended the effective January directing that Commission rate are orders to be reviewed the by appellate court rather the than circuit court. Because amendment, this the to the parties appealed directly ap- pellate II, court the Commission’s Rate Order contesting the order, circuit court’s circuit refund and the court’s Commission, re- the than it, rather determination im- the terms and over matter jurisdiction tained subject I. from Rate Order of the refund plementation the Commis court affirmed the appellate On appeal, in II regard Rate Order and conclusions findings sion’s in Edison’s I costs allowable Byron the reasonable ing that, court, however, held based rate appellate base. over the had Act, jurisdiction

on the the Commission the Ill. (202 App. refund. terms and implementation Therefore, 917, II).) appellate 959-61 (Hartigan 3d II and Rate Order the Commission’s only court reviewed court therein. The appellate the refund terms set forth in II which set the of Rate Order affirmed portion and its de annually rate at compounded terest 5% be to Edison’s current go termination that should payment however, court, customers. The reversed appellate in II included 1989 revenues of Rate Order which part that, since refund. The court found appellate instant the rates set for 1989 had been reversed previously the Pub People this court Business & Professional 136 Ill. (1989), lic Interest v. Illinois Commerce Comm’n People I), proper 2d 192 & (Business Professional and, therefore, 1989 rates were as undetermined yet refund amount for 1989 was unascertaina appropriate court held that the refund Therefore, ble. appellate runs from March at issue the instant case period appellate December 1988. through Finally, of whether to the Commission issue court remanded on actual dol the total refund amount should be based I or the projected lars collected under Rate Order on I. The appellate revenues estimated in Rate Order if, remand, on the Commission de further directed that on actual dol termines that the refund should be based collected, it offset these revenues with lars must also in actual operating increase that Edison any experienced expenses.

366

The have parties appealed appellate court’s judg ment in to this Hartigan II court to pursuant Supreme Court 315 Ill. 2d R. (134 315). Rule The issues in the in (1) stant concern: various appeal findings Commission in Rate II Order reasonable and regarding unreasonable de in the I lays operation Byron and the methodology by Commission to the costs employed asso quantify ciated with unreasonable delay; (2) whether Commis sion or the circuit has jurisdiction over the terms and of the refund implementation associated with Rate Order I; (3) the terms and conditions of the refund associated with Rate I. Order

OPINION On take issue with various appeal, parties Com findings mission of fact. The is the Commission adminis trative agency responsible setting rates public may utilities their charge (111. customers. Rev. Stat. 1985, lll2/3, 202; ch. 9—102 pars. through Hartigan 9— I, 117 Ill. 2d at 142.) The Commission is the fact-finding I, 117 body ratemaking process. (Hartigan Ill. 2d at It is 142.) governed Public Utilities Act by (Act) 1985, (111. HP/s, Rev. Stat. ch. 1—101 et par. seq.) the Illinois Procedure (111. Administrative Act Rev. Stat. 1985, 127, ch. 1001 et par. seq.). Commission’s powers are limited to those granted legislature in I, Business Act. & Ill. 2d at People Professional 201.

Because the is an Commission administrative agency, judicial review of its orders is limited. & Pro (Business I, 2d People 136 Ill. at the Com 204.) Although fessional mission is not make required findings regarding every its must step, findings fact be sufficient allow for if judicial informed review and will be affirmed are they based (See on substantial evidence the record. Ill. lll2/3, 201(e)(iii) Rev. Stat. ch. pars. through 10— Cleveland, Cincinnati, (e)(iv); Yowell v. & St. Chicago Louis Co. 360 Ill. Ry. (1935), 275-76.) The Commis sion’s of fact findings are correct and prima will facie not be overturned a court unless are reviewing they the against manifest of weight evidence, beyond Commission’s statutory or violative of consti authority, tutional rights. (Citizens Utilities v. Co. Illinois Com merce Comm’n (1988), 195, 206; 124 Ill. 2d Independent Voters v. Illinois Commerce Comm’n 117 Ill. (1987), 2d 90, 95.) Moreover, the burden of is proof on the party appealing the Commission’s order. Ill. Rev. 1985, Stat. llP/s,

ch. par. 201(d). 10— The Commission’s interpretation law, of a of question however, is not on binding a court. reviewing (Business & I, People 136 Ill. 2d at 204.) review Upon Professional of a order, Commission the court in whole or in may, part, reverse and set order, aside the order, affirm the or remand the cause to the Commission for further pro ceedings. I, (Hartigan 117 Ill. 142.) 2d at Although the reviewing court cannot direct the Commission to take a action specific I, (Hartigan 117 Ill. 2d at 142) or judi set cially rates utility (Hartigan I, 117 Ill. 2d at 142), rates may suspend which it has found to be illegal (Ill. Rev. Stat. ch. lll2/3, par. 204(a)). 10—

I. RATE ORDER II Edison and the intervenors challenge the of propriety several Commission determinations Rate regarding Or- der II. Both Edison and the intervenors contend that several of the Commission of findings reasonable/unrea- sonable delays costs incurred in corresponding the construction of I are Byron unsupported by evi- dence. The intervenors also challenge methodology by the employed Commission in the costs as- quantifying sociated with the of periods unreasonable delay.

Commission that its argues findings reasonable/unrea- sonable and associated costs are delay supported by sub- stantial evidence in the record. The Commission also ar- gues the method it used quantify unreasonable costs incurred due to unreasonable periods was the evidence. delay proper supported by

A. Reasonable Costs Includable in Rate Base Act, Under costs which the Commission has found to are be reasonable included Edison’s new rate base, while costs found to be are unreasonable disal (111. lll2/s, 213; lowed. Rev. Stat. ch. par. 9— Hartigan I, 117 Ill. 2d at 132-33.) The determination of whether cost is includable in or disallowable from the rate is the essence of the utility’s base Commission’s ratemaking duties. to add the costs of a proceedings new utility’s generating electrical its rate facility alia, inter base, the Commission is section governed by, 1985, lll2/3, 9—213 of Act (111. Rev. Stat. ch. par. 213). Section 9—213 in provides pertinent part: 9—

“The of utility generating plants cost new electric and significant utility generating plants additions to electric any utility shall not be included in the rate base of unless including such cost is reasonable. Prior the cost of base, plants utility or additions to in the rate plants shall an Commission conduct audit of such costs order to ascertain whether the cost associated with the new gener- or generating plant utility the addition to electric *** ating shall plant Any is reasonable. such audits be auditing with generally accepted conducted in accordance to costs as- standards and shall include but not be limited materials, labor, equipment, professional sociated with other and services and direct indirect costs.

‘Reasonable’, Section, as used this means that a decisions, construction, utility’s supervision and con of struction, underlying utility gen the costs of new electric erating plants significant additions to electric utility generating plants efficient, resulted in economical and timely determining construction. In of reasonableness costs, plant the Commissionshall consider the knowledge prevailing circumstances at the time of each relevant utility decision or (Emphasis added.) action.” Ill. Rev. 1985, lll2/s, par.

Stat. ch. 9—213. Under section the costs related to the con 9— struction of a new shall generating facility not be in cluded in the rate unless utility’s base are found to they be reasonable costs. I, 117 Ill. (Hartigan 132.) 2d at The must utility affirmatively establish reasonableness of construction-related costs before such costs in may be cluded in the rate utility’s I, base. (Hartigan Ill. 2d at A 133.) determination of reasonableness is a question (Illinois fact Bell Telephone Co. v. Illinois Commerce Comm’n (1973), 55 Ill. 2d 461, and will 470), not be over turned unless it is against the manifest weight the ev (see idence Peoples Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 48-49). audit is the statutorily required means “primary

by which the Commission is to determine the reasonable ness of the costs associated with construction of power plants.” I, 117 (Hartigan 133.) If, Ill. 2d at how ever, the audit is or deficient there is doubt concerning of costs, reasonableness the Commission hear may other affirmative evidence or the costs alto may “deny gether if are not they shown to be reasonable.” (Harti gan I, 117 Ill. 2d at 133-34.) when the “Only Commission is satisfied the audit by or other report by affirmative evidence” that the construction-related costs are reason able may they be included the utility’s rate base. I,

Hartigan 117 Ill.2d at 134. In II, its Rate Order the Commission adopted the auditor, of the finding Arthur that Young, million $291.1 in costs attributable to the construction and of licensing I were Byron unreasonable. The Commission determined that million of approximately these costs in were $289.6 curred aas result of 15.9 months of I’s delay Byron construction and operating schedules which the Commis sion found to be Therefore, unreasonable. pursuant statute, the Commission disallowed the costs associated with this 15.9 months of unreasonable from Edi delay son’s rate (See lll2/3, base. Ill. Rev. Stat. ch. par. I, 213; Hartigan 117 Ill. 2d at 134.) The Commis 9— sion’s finding Edison unreasonably delayed Byron I’s construction and operating schedule of period 15.9 months forms the basis of the parties’ arguments with respect to Rate Order II.

The Arthur YoungAudit In conducting remand, its audit on Arthur di- Young vided I’s Byron construction schedule into five major construction periods (milestones). Milestones are the “critical paths”-or major stages construction which must be before further construction completed phases can begin. Within each Arthur milestone, deter- Young mined what it considered to be a time proper (miti- table gated for schedule) of that milestone. Arthur completion then this Young compared mitigated schedule with Edi- son’s actual time (as-built table for that mile- schedule) stone and determined the amount of delay elapsed each milestone during period. Young Arthur then deter- mined whether the each milestone resulting delay during was or reasonable unreasonable delay. milestone, the first first concrete to nuclear steam set the auditor found a

supply system (NSSS), delay 8.5 months due to problems welding supports Byron I’s steam generators. auditor found that this was reasonable. delay 8.5:month milestone, the second NSSS to hydrostatic testing,

the auditor 12.1 delay found of months. Arthur Young determined that 10 months of was delay reasonable.

However, the auditor found that 2.1 months of delay during this milestone was unreasonable. The 2.1 months of unreasonable resulted delay from an electrical stop work order issued Edison of because continuing qual- ity control assurance/quality (QA/QC) problems Edison had been experiencing with one of its subcontractors, Hatfield Electric Company (Hatfield).

In the third milestone, hydrostatic testing to hot functional testing, Arthur Young found 11.8 months of delay. The auditor attributed 8.0 months of this delay regulatory and structural/safety changes required throughout the nuclear power industry following Three Mile Island nuclear accident 1979. It found this 8.0-month to be delay reasonable. The auditor found that the remaining 3.8 months of delay during this milestone was due to internal delay on Edison’s part. The auditor determined that the internal from delay resulted multi- ple causes, some of which were reasonable and some of which were unreasonable. concluded, Arthur Young how- ever, that, because the reasonable causes would have re- sulted in the same 3.8-month delay, reasonable causes “masked” the unreasonable Therefore, causes.

Arthur Young found this 3.8-month to be delay reason- able.

In the fourth milestone, hot functional to fuel testing load, the auditor found 15.5 months of Arthur delay.

Young found 1.7 months of was delay reasonable. Arthur Young found that the remaining 13.8 months of consisted of delay overlapping periods delay: 11.4 months of delay caused by Edison’s slow to fire response protection issues; 11.6 months of delay completing

preoperational testing; and 9.6 months due delay the Nuclear Regulatory Commission (NRC) Licensing Board’s denial of an operating license for I in Byron 1984. Arthur January found the Young 13.8-month delay to be unreasonable.

In the fifth milestone, fuel load to commercial opera- tion, Arthur Young found a 0.8-month to be rea- delay sonable.

Based on schedule, its mitigated Arthur Young deter- mined that I should Byron have been to load ready fuel 7, by July fuel-load (mitigated date). The fuel-load date is the date which the nuclear by should power plant be licensed and I’s operational. Byron as-built fuel-load date in occurred early November 1984. Consequently, Arthur Young found that Edison was for a responsible total of 15.9 of months unreasonable delay opera- tion of I. Byron II, Rate Order the Commission the audi- accepted

tor’s determination that Edison was responsible four separate of periods unreasonable delay which totalled 15.9 months. These four of periods unreasonable delay occurred as follows:

Since there were overlapping de- periods unreasonable Arthur lay, Young found, and the Commission agreed, these delays unreasonably deferred the operation I Byron a total of 15.9 months. The Commission the auditor’s adopted of 15.9 findings months of unrea- sonable and the delay July mitigated fuel-load date and disallowed costs related to the unreasonable de- lay.

Edison As a matter, preliminary we note that the construc- tion and operation of nuclear-generating facility pro- ceeds along two distinct but concurrent schedules of events: (1) construction schedule for the physical plant, (2) the licensing schedule the utili- involving ty’s application for an operating license from the NEC.

On Edison appeal, does not challenge Commission’s findings of unreasonable I’s delay Byron construction schedule. does, however, Edison contest the Commis- sion’s determinations regarding licensing schedule.

Edison takes issue with the Commission of a finding total of 15.9 months of unreasonable and the delay Com- mission’s 7, 1983, July mitigated fuel-load date. Edison asserts that the Commission found that its conduct dur- ing the licensing litigation before the NEC was reason- able. Edison that, reasons therefore, which re- any delay sulted the during licensing litigation was reasonable.

Edison that argues the reasonable in the delay licensing schedule “masks” simultaneous, any unreasonable delay in Byron I’s construction schedule. Therefore, Edison ar- gues due to the “reasonable” from delay resulting the licensing litigation, the earliest date on which it could have loaded fuel at I would have Byron been April 1984 rather than the mitigated fuel-load date of July 1983.

The Commission contends its determination con- Edison’s cerning conduct before the Licensing Board 374

was on the based facts as existed when Edison they was in the already embroiled contested It ar- proceedings. however, that, gues, had Edison to originally responded NRC notices of li- deficiency differently, subsequent censing events would have occurred or differently may not have occurred at all. 1984, for the first time January in its history, Board denied Edison an

Licensing operating license for I. This license denial Byron resulted 9.6 months of liti- gation before the and Licensing Appeal Boards of the NRC’s branch. The Commission licensing found that entire 9.6 months of which licensing ensued after delay 1984 January was unreasonable. in the Commis- Implicit date, however, sion’s mitigated fuel-load is the agency’s determination that Edison an should have received NRC for I operating 7,1983. license before Byron July law, Under Federal must utility provide reasonable it receive an may assurances operating safety before license. In order to assurances provide reasonable NRC safety, regulations require owner of a nuclear power facility establish and out an effective carry assurance and control quality quality (QA/QC) program. B,

(10 §50, C.F.R. I appendix (1991).) Although criterion others, the owner delegate QA/QC function may compliance with each NRC remains requirement Commonwealth Edison Co. owner’s responsibility. (1984), 1163, 1170. NRC I litigation surrounding licensing Byron began before 1980 concerned “unresolved safety problems assurance and control issues quality (Commonwealth thought to the pertinent Byron facility.” Edison Co. (1982), 1419.) NRC assur- Quality ance and control Edison problems plagued throughout Licensing construction of I. The Board found Byron that Edison had:

375 of its “freely prerogative delegate, availed itself but responsibility failed in its to assure that its contractors delegated out quality carried their assurance tasks.” (1984), 36, Commonwealth Edison Co. 19 NRC 43. as 1977, inspectors

As NRC III issued a early Region notice of violation to Edison and informed Edison of de- in (Commonwealth Edison QA/QC ficiencies its program.

Co. (1984), NRC In a March 1980 1171.) Region III inspection, NRC found: inspectors spite three-year history in the “[I]n of deficiencies of [Systems Corporation] QA

SCC Control Program and in SCC, equipment fabricated Station Byron Construc- Department waived, QA tion personnel without concur- rence, inspection final of twenty safety-related local in- *** ,strument panels plant at SCC ***. The panels inspected were then receipt Byron at the Site by [Edi- Station Department, Construction with no signifi- son’s] noted, cant placed deficiencies in I containment, the Unit found, and were later on reinspection place, to require repairs.” extensive (Emphasis added.) Commonwealth Co., Edison 19 NRC at 133. III spring Region conducted a con-

struction assessment team to assess the inspection QA/ QC program inter alia: found, at I. It Byron

“Based on a review of training qualification and certifica- tion records of a percent QA/QC minimum of ten of the personnel working for performing contractors safety-re- it lated work is apparent program that an effective does not exist to ensure that suitable evaluation initial ca- pabilities performed, is that written pro- certification is form, vided an appropriate qualification and that crite- is ria established. [sic] QA/QC

Certain contractor supervisors and'inspectors were not qualified adequately perform and/or trained safety-related inspection (Commonwealth functions.” Edi- Co., 1171.) son 19 NRC at

The special team found that QA/QC in- problems volved several I Byron contractors performing safety-re- Metal, work, Hatfield, Reliable Sheet including

lated Brothers and others. It Hunter Blount Corporation, QA/QC found that there was wide variation inspector contractors and training by Byron’s certification Federal that failed meet qualification many inspectors criteria. The assessment team attributed construction Edison’s failure to a formal- variations to establish for contractors to follow. Commonwealth ized program Co., Edison 19 NRC at 196. addition,

In the construction assessment team found that existed with noncon- problems respect serious of non- tracking control and the forming documentation The during inspections. conditions discovered conforming maintain a re- failure of some of Edison’s contractors to control of documentation nonconforming liable system III as as 1978. Com- Region early was first observed by Co., Edison 19 NRC at 200. monwealth the construction assessment team inspec- Following tion, that, III in order to rea- provide determined Region I, of Edison had Byron assurance of the safety sonable of work and an to conduct a reinspection safety-related The reinspection pro- recertification inspector program. program “a extensive and gram very comprehensive was the work that been that at almost all ha[d] look[ed] (Empha- is safety-related.” at that completed plant [the] Co., 206.) 19 NRC at Edison added.) (Commonwealth sis team was report the construction assessment Although 1982, did not an propose accept- in June Edison issued In 1983. Au- until program February able reinspection its con- III met with Edison over 1983, staff gust Region maintaining rigorous was “not cern that Edison effort.” Common- the reinspection dedicated control over Co., 19 NRC at 201. wealth Edison activ- and reinspection to the inspection

Simultaneous be- licensing litigation I facility, ongoing at the ity Byron 1978, In Edi- Licensing transpired. Board fore the NRC an license. operating parties son Several applied alia, intervened, QA/QC inter issues. raising, sanctions, June due to Board discovery Appeal limited the could raise to those issues intervenors that it can “Licensing Board concludes comfortably on the unjustifiably delaying op- decide merits without eration facility.” (Emphasis added.) (Com- Byron monwealth Edison Co. 15 NRC (1982), 1420.) Board stated: Appeal

“It understanding is our the fa- expects [Edison] cility ready loading to be for fuel towards end of 1983. To the extent serious [intervenors have] contentions to raise be litigated that cannot within this *** anticipated frame, time we repeat [citation]:

‘As to those aspects operation of reactor not consid ered in an one adjudicatory proceeding (if is con ducted), it is the to duty staff’s insure the existence of an adequate basis for each of the requisite Section ” added.) (Common 50.57 (Emphasis determinations.’ Co., wealth Edison at 1420 n.36.) NRC Appeal The Board further stated:

“The of choice which contentions the [intervenors] may still litigate is for the decide the [intervenors] instance, first subject to the time we have constraint iden- words, In other the to rank [intervenors are] tified. contentions individually Licensing the Board [their] and the Board will then limit them based its upon under- standing litigate the time (We needed to those issues. of would surprised not be if than ten fewer contentions can timely ***.)” be heard (Emphasis added.) Commonwealth Co., Edison 15 NRC at 1420 n.37.

The Board noted its was in Appeal that decision con- with formity statement, the NEC’s which pro- policy vides, in part:

“If [licensing] are not proceedings prior concluded construction, the completion the cost such delay could reach billions of dollars. The Commission will seek to avoid or delays reduce such whenever measures are compromise not the Commission’s fun

available do thorough hearing process.” and damental commitment to a fair (St Pro Policy Licensing on on Conduct of atement (1981), 13 NRC ceedings 452, 452-53.) 1982, its decision in June the Board released Appeal team inspec- same month as the construction assessment tion Ill’s determination Edison Region report to conduct and recertifi- reinspection would be required license issue for Byron cation before a would programs I. 1983, 1982 and January pursuant December

During decision, the Board de- Licensing to the Board’s Appeal alia, could inter litigate, termined that intervenors 1983, QA/QC issues. In Edison submitted February March to May an From reinspection program. acceptable 1983, hearings Board conducted Licensing In QA/QC hearings issues were litigated. May had closed. Since Edison sub- ended and the record was staff one only mitted its to NRC reinspection proposal results no hearings began, preliminary month before the Board when it was decid- were to the Licensing available it conducted could or when litigated what issues be ing from the record Moreover, it hearing. appears the initial Board was not even that, time, Licensing at this Edi- Commonwealth aware of the reinspection program. Co., at 208. son 19 NRC inter Board granted the Licensing June record to take additional

venors’ motion to reopen of the aspects quality to “certain regard evidence with ‘to present the parties assurance issue” and “directed of the pertinent showing explanation full evidentiary assurance Electric’s quality of Hatfield investigations ” (Common and the subsequent reinspections.’ program OL, 1, STN 50—454 1983), Edison Nos. (July wealth Co. the hearings, At the OL, 1.) reopened STN 50—455 at at the very “troubled and puzzled Board was Licensing

379 Edison’s low information content” the of testimony Co., 19 204), witnesses Edison NEC at (Commonwealth *** its done “concern has expressed [Edison] significance of to address the issue and has nothing any of imparted general sense disinterest the Board.” (Commonwealth Co., Edison 19 at The Li- 206.) NRC censing Board concluded that Edison’s re- “evidentiary sponse to the issue in the reopened hearing has been Co., weak and borders default.” Commonwealth Edison 206. NRC at It not until was October 1983 that Edison first sub- mitted the results of its pro- preliminary reinspection gram. Of significance, these results indicated that great did not reinspection program identify noncon- any work had safety signifi- formance Hatfield’s 1984, cance. On January 13, over nine months from date the reinspection program Edison began, submitted the final results on the eve of the of release the Licens- ing 1984, Board’s 14, decision. On January Licensing Board denied Edison’s I, application Byron stating:

“The Board withholds authorization for an li- operating cense for the Byron Nuclear Station because of inadequa- cies in quality program.” (Common- assurance [Edison’s] Co., wealth Edison 19 NRC at 278.)

The Licensing Board came to its decision to Edi- deny son’s license for operating Byron I without benefit the final results the reinspection program. 1984, January Edison appealed decision

Appeal Board. In April re- Appeal Board manded the cause to the Board for further Licensing From proceedings. to November Li- May censing Board conducted further proceedings, including litigation of the results. In reinspection program Novem- ber 1984, the Board I Licensing granted Edison a Byron license. operating issue, the Commission licensing to the respect

With the submission unreasonably delayed Edison found that months. six by reinspection program of an acceptable the reinspection program determined The agency 1982, that the by August been submitted should have submitted Jan- have been results should preliminary have been submit- the final results should 1983, and uary responsible It therefore found Edison in 1983. ted July and which delay of litigation entire 9.6 months for the of an oper- initial denial the Board’s Licensing followed on the based Additionally, 1984. license in ating January schedule, the Com- construction mitigated Commission’s li- have been that Edison should mission determined miti- 7, 1983, on the July to load fuel ready censed and found, Therefore, the Commission date. fuel-load gated months for 15.9 was essence, responsible in that Edison of unreasonable delay. 7, 1983, fuel-load date a July counters that

Edison 1983, the because, August from June impossible was hearings reopened the conducting Board was Licensing program reinspection final results of the the and because Licensing the litigated before also would have been two that, periods these given asserts Board. Edison is April have loaded fuel it could the soonest litigation, (1) to: Edison points its argument, 1984. To support delegate refusal Boards’ and Licensing Appeal informal reso- staff for the Commission QA/QC issue to that, the ex- with findings the Commission (2) lution and in submit- delay unreasonable of the six-month ception during conduct Edison’s reinspection program, ting rea- was the reinspection licensing proceedings litiga- licensing Therefore, argues, Edison sonable. mask which would of delay cause tion was a reasonable schedule. the construction in delay unreasonable any Edi- on focus the Commission The intervenors submitting in delay six-month son’s unreasonable and the which flowed reinspection program consequences had that, from this initial assert Edison be- delay. They all the li- gun reinspection program August that followed would been censing events have different. is

Essentially, argue these that Edison parties responsi- for the from ini- ble which flowed Edison’s consequences tial, unreasonably response submitting slow rein- to the NRC. spection program review, it must

Upon be borne in mind that the Com i.e., fact, mission’s findings of the operation I was Byron months, 15.9 are unreasonably delayed by prima correct and are great entitled to deference. facie 1985, Ill. Rev. (See HP/s, Stat. ch. par. 201(d).) We 10— on the rely Commission’s technical in this expertise area.

A affirm reviewing court will the Commission’s findings of fact if these are findings supported substantial evi by in dence the 1985, record. Ill. Rev. Stat. ch. (See lll2/3, The par. 201(e)(iv)(A).) burden in this case is on Edi 10— son to: (1) forth evidence put and the (2) persuade trier Commission, of fact. The law, by must disallow costs that Edison fails prove (111. reasonable. Rev. Stat. I,

1985, lll2/s, 213; ch. Hartigan 117 Ill. par. 2d at 9— As the 134.) appellate stated: properly

“The is qualified experience Commission through special study to the workings reg evaluate nuclear ulatory process. must rely We on the exper Commission’s tise regard. in this The Commission has determined that the licensing procedure proceeded would have differently *** had Edison made a timely response to the NRC. inference, Commission has made a fair based on the

[T]he record, and with supported analysis.” (Em a reasoned phasis II, added.) Hartigan at App. Ill. 3d 943.

Having undertaken an exhaustive review of the rec- ord, we find substantial evidence therein to support Commission’s I should have been finding Byron ready and licensed to load fuel 1983. The rec- July that,

ord inference had Edison reasonable supports six submitted its months earlier reinspection program did, than it schedule would have licensing litigation been different. vastly in of the Board’s its June light Appeal language statement,

1982 decision and the NRC’s it is a policy reasonable inference from the evidence that the Licens- issue to the delegated QA/QC Board would have ing its Commission staff had Edison submitted reinspection in 1982 and the results in program August preliminary 1983. The Boards’ refusal January Licensing Appeal this issue came after the issue was ex- delegate only the reopened both the initial and tensively litigated QA/QC issue Licensing Board included the hearings. formulated Edison even licensing litigation before ini- Moreover, an at the acceptable reinspection proposal. tial conducted from March to Edison hearings May had when it otherwise should begun reinspecting only have results available as evidence preliminary had for the Board to Licensing consider. the Commis-

The record also substantially supports that, sion’s inference had Edison begun reinspection in earlier and the results program submitted preliminary reo- 1983, the Board would not have January Licensing order, the record in June 1983. In its pened reopening Board stated that it was Licensing expressly reopen- QA/QC to evidence related to ing gather record It reinspection with Hatfield and the problems program. no that, is since the results showed preliminary obvious work, Hatfield’s safety-related problems concerning if there no to the record would have been reason reopen Board. Licensing these results had available to the been months of unrea- Moreover, into account the 2.1 taking milestone, even the final in the second delay sonable results, confirmed the reinspection preliminary which of the mo- results, at the time should have been available evidence there also is addition, ample tion to reopen. that, inference the Commission

in the record to support earlier, it would begun the reinspection program had than the actual rein- in less time completed have been it not have interfered would because spection program Therefore, the Commission’s testing. with hot functional reo- not have Licensing inference that Board would substantially supported. the record is pened statement,

Furthermore, policy in of the NEC’s light that, the final results been submitted it is had apparent of 2.1 than (rather July delay by by May informal concerning or resolution months), any litigation if I was have expedited Byron these results would been 7, 1983. Fi- construction-wise, July to load fuel by ready, from III on notice Region we note that Edison was nally, its QA/QC with significant problems that there were responsible contractors as as 1978. Edison is Byron early it it reasonable QA/QC provide knew had If dealt with assurance of I’s Edison had Byron safety. manner, in a we have no QA/QC issue responsible tran- licensing litigation

doubt that much could have been avoided. spired of a finding July conclude that the Commission’s

We 7, 1983, fuel-load date is substan- mitigated supported tial in the record and we affirm appellate evidence the licensing litigation, court on this issue. We find extent, Edison’s unreasonable to a resulted from large initiating reinspection program. six-month delay Ill’s construc- Region Edison’s tardy response Absent the reo- tion assessment team report, very.least, and the necessary would not have been pened hearings not denial would Board’s 1984 license Licensing January to per- have occurred. Edison failed to meet its burden causes, it that, suade the due to reasonable Commission 1983. could not have loaded fuel in July

In issue, the court on this affirming appellate we re- ject Edison’s that the argument licensing litigation, reasonable, which the Commission found to be masked unreasonable construction schedule The any delays. find- Edison’s ing that conduct the during licensing proceed- the ings and was reinspection program reasonable is a that the made in of finding Commission light actual circumstances as the events unfolded. This finding is en- different from the tirely Commission’s determination I that should have been Byron licensed and to load ready fuel 1983 absent by July unreasonable delays which occurred. is responsible Edison for consequences which flow from or its unreasonable actions inaction. case,

the instant as a of its result unreasonable in delay beginning its is reinspection program, responsible Edison for the I delay Byron operation which occurred be- 7,1983. yond July

Intervenors In their cross-appeal, dispute intervenors certain findings auditor, Commission reasonableness.

analyzing schedule, construction determined there a first was of 8.5 months in the milestone delay This resulted from period. delay Edison’s inability weld steam properly lower lateral generator supports which (supports) generators. steam support Byron had Edison weld and other experienced cracking prob- lems with the in 1977. Edison inter- supports employed nal investigators outside firms to discover cause of the It welding procedural failures. evaluated possible The root changes might problem. alleviate cause of the however, weld was determined de- cracking, never spite Edison’s extensive efforts to it. Nor could discover Edison find to eliminate the After way sev- problem. effort, eral months Edison change sup- decided from ports’ design welded to bolted connections. Edison modification. the fabricator the back supports sent returned and were modified supports the time the By delay of construction 8.5 months into place, bolted elapsed. was delay that 8.5 months found this auditor knowledge considered Young Arthur

reasonable. Edi- and concluded that in 1977 prevailing circumstances months of delay resulted in the 8.5 son’s conduct which the auditor’s The Commission adopted was reasonable. and the 8.5 welding to the

findings regard problems months delay. however, that the Commission’s contend,

Intervenors reasonable is delay that the 8.5 months of was finding They argue the evidence. unsupported by arbitrary testi- extensive, expert that unrebutted they presented failures were welding demonstrated that which mony ar- Thus, in the first instance. intervenors unreasonable to correct should resulting problem gue, delay To their ar- support have been found be unreasonable. assert that this welded

gument, particular intervenors at that time and installation was common design and had industry the nuclear been throughout power facili- nuclear-generating installed at successfully many ties, some of Edison’s facilities. Intervenors including with the problems claim that the fact that Edison had and, therefore, is, itself, unreasonable welding should delay associated with this 8.5 months costs the Commission. by have been disallowed the fact that

Intervenors, however, have overlooked is testimony “primary the audit and the auditor’s the rea is to determine means which the Commission by I, 117 Ill. 2d at of the costs.” (Hartigan sonableness is such, Young’s testimony the audit and Arthur 133.) As its find which the Commission base upon may evidence is no merit in intervenors’ Therefore, of fact. there ings testi- expert unrebutted assertions they presented and that the mony Commission’s determination is unsup- ported the evidence. The record reveals that Arthur Young thoroughly reviewed Edison’s conduct with re- to the spect It found supports. the cause of the failure welding was never determined and that Edison’s investigation and decision to subsequent modify de- sign were reasonable at the time in question.

The Commission adopted Arthur Young’s findings, that the noting standard to proper be is applied “reason ableness” rather than “perfection.” The Commission that, found in large-scale construction unfore projects, seeable events are bound to occur and that related costs should not be automatically disallowed simply because one such event to occur. happened Applying proper standard under section of 9—213 the Act (111.Rev. Stat. lll2/3, ch. par. 213), the Commission deter 9— that, mined based on the knowledge circumstances time, at the prevailing the 8.5 months of delay was rea sonable. conclude We that this of is finding fact substan tially supported the record affirm by the appellate court on this issue.

Interveners also dispute Commission’s finding that 3.8 months of internal in the third milestone delay was reasonable. The auditor determined that this 3.8 months of resulted delay causes, from multiple some of which were reasonable and some of which were unrea- sonable. Arthur Young found that concurrent reasonable causes of “masked” delay unreasonable causes and con- that, cluded causes, absent the unreasonable the 3.8 months of delay would have occurred Reason- anyway. able causes of this which were delay by cited Arthur Young included broken equipment, procurement delays, and final load checks of structural steel. Consequently, Arthur Young found that this 3.8-month of period delay was reasonable, and the Commission this find- adopted ing. is finding unsupported that this assert

Intervenors internal contemporaneous that They argue the evidence. “predomi- that demonstrate documents

scheduling Edison’s un- was delay of the 3.8 months cause of nant” from construc- turnovers rate of system slow reasonably that note Intervenors testing. tion to preoperational re- it had not auditor testified lead Young’s Arthur it made the when documents scheduling these viewed Therefore, inter- was reasonable. delay finding arbitrary. is finding the Commission venors argue, the Commis- however, challenge do not Intervenors, un- to “mask” delays of reasonable allowing sion’s policy the auditor masking requires ones. The policy reasonable rea- any if there were to determine and the Commission even have occurred of which would delay causes sonable and would causes of unreasonable any in the absence the construc- delay amount have caused same not a determina- require does “Masking” tion schedule. causes. over other any

tion of cause predominated which any of whether All that is is a determination required existed concurrent with causes of delay reasonable have had the which would delay cause unreasonable the unrea- as on the construction schedule same impact cause concurrent, reasonable If a cause of delay. sonable will be delay construction existed, resulting then the found to reasonable. be found that several case, Young Arthur

In the instant con- with the slow existed concurrent causes reasonable fact the construction rate. The struction turnover cause of was, arguendo, the predominant turnover rate nonex- causes not the other reasonable does render delay re- the auditor Therefore, it is irrelevant whether istent. Moreover, the internal documents. scheduling

viewed the documents as evidence consider these Commission did and stated: arguments

“Intervenors’ that contemporaneous sched- uling documentation to slow points construction turn- overs as the being problem delaying critical path con- struction confuses cause and effect ***. Intervenors have not the considered causes for slow construction turnovers in period. this time The Auditors’ testimony recited above shows that concurrent to delays procure- occurred due ment (Rate II, and other reasonable causes ***.” Order 81.) at

We conclude that there is substantial evidence the rec- ord support Commission’s the 3.8 finding of months internal affirm was reasonable and delay court on this appellate issue.

B. AFUDC Methodology Intervenors dispute Commission’s method of quantifying costs related to 15.9 months of un- reasonable which were disallowed from Edison’s delay rate base in Rate the Commission’s Order II. particu- lar, argue intervenors that the Commission failed to dis- allow million in “time-related indirect costs.” In $80.6 issue, order this address we first set forth some basic concepts related to of unreasonable de- quantification costs incurred Edison in the of its lay construction fa- cility.

Unreasonable costs which are disallowed from a utili- rate base ty’s are classified into two basic categories: (1) direct costs and Direct are (2) delay costs. costs costs which are related: are costs which are di- activity they related, or a rectly indirectly related consequence spe- cific issues, activities or of which expenditure was determined to Direct are be unreasonable. costs static costs, hand, on easily calculable. the other are Delay costs which are time-related been in- and would not have curred in the opera- absence unreasonable delay increase the passage with costs facility. Delay tion of the time-value-of- involves their calculation of time and also incur costs delay Both direct and money concepts. Construc- During for Funds Used “Allowance

related cost of the represents costs. tion” (AFUDC) AFUDC. it is in- incurred until it is an once

carrying expenditure the AFUDC utility’s represents cluded in the rate base. case, the In the the cost instant money.

time-value or of costs unreasonable direct finding of Commission’s However, not their is issue. AFUDC corresponding of the delay the calculation unreasonable Commission’s is delay costs to the of unreasonable related 15.9 months Therefore, on costs. only delay issue. we will focus (1) subcategories: costs are divided into several Delay costs, which include the cost of la- escalation increased the ex- from fact bor and materials resulting later than it have oc- occurs in time would penditure time-related, schedule; mitigated curred in the (2) costs, which include costs that are dependent indirect upon the duration rather than project’s any particular construction or the level of construction activity general such charged as home-office overhead to a project; AFUDC (3) related to these costs. delay

In determining how to the unreasonable quantify costs related to the 15.9 months of the parties pre- delay, methodologies sented different of quantification several a presented methodology the Commission. The auditor known the “Present Revenue Requirements” as Value . Commission, however, method. The

(PVRR) rejected included as- subjective PVRR method because it several related to which sumptions concepts time-value-of-money the evi- unsupported Commission found to be has determi- dence. No Commission party appealed therefore, and, nation to method we reject PVRR will this not discuss method further.

Intervenors also offered method to quantify unrea- as delay sonable costs known the end-of-period AFUDC method, method. Under this which AFUDC accrued is beyond point used as a reasonable delay approx- or imation for the rate of or the proxy escalation rate costs increased because unreasonable Inter- delay. venors argued before the Commission and before this that, in the using end-of-period AFUDC method to costs, unreasonable the quantify delay Commission must not the AFUDC which only disallow accrued after the date, fuel-load also July mitigated but mil- $80.6 lion in time-related indirect costs. The million fig- $80.6 ure is derived from the of auditor’s million finding $4.8 month of per unreasonable time-related indirect costs. Intervenors maintain that million should be added $80.6 to the Commission’s to determination disallow $291.1 million for a total disallowance of million in un- $371.7 costs. reasonable Intervenors contend that failure to dis- allow time-related costs indirect over and above the dis- of allowed AFUDC violates section 9—213 the Act by in unreasonable costs Edison’s rate base. including Commission, however, The rejected intervenors’ end- of-period (1) because: it involved some of methodology the same subjective assumptions related to time-value-of- as the auditor’s method and money concepts (2) PVRR to include for separate disallowance time-related indi- rect costs would constitute of counting double these costs in the Instead, disallowance. the Commission a different of the adopted version AFUDC end-of-period methodology which it disallowed from the rate base the beyond mitigated AFUDC which accrued the fuel- load separate date but did not include a disallowance for the time-related indirect costs. the court correctly end-of-per- discussed appellate

iod and we its quote AFUDC from methodology opinion: end-of-period the do contend parties “The not cost of time-related the actual method measures AFUDC Rather, impact the way assessing one of AFUDC is delay. in a com- engaging delay on a without project

of schedule does not AFUDC Concededly, end-of-period plex analysis. or unreasona- AFUDC on reasonable

distinguish between the measures the AFUDC merely but expense, ble of time in which regardless stage last of construction application In a or cost occurred. conventional delay the au- by as analysis, explained end-of-period of AFUDC witness, escala- the rate ditor and a Joint Interveners’ of tion, equivalent is considered to be expense, or increased AFTJDC, money. point Up cost to to the rate or of of be a trade are considered to delay, escalation and AFUDC delay is point The AFUDC which accrues after off. consumer, costs to the as represent used to increased is considered to be rate at which AFUDC increases to the According escalate. expenses same rate which if meet ex- is called report, ratepayer upon audit delay any incurred due without traded benefit penses cost of he If fact escala- money, due to the is harmed. rates, are below the end-of- employing

tion rates AFUDC to the rate- period AFUDC method overstates harm he not experiencing is some from payer because benefit expenses for until a later having pay to the increased date. one

The to boil to whether controversy seems down the the actual escalation to lower than considers rate be of case, the then the be rate AFUDC. that is If difference of costs, including delay the rates the tween acts to absorb costs, actually cal having time-related indirect without to If to them. one considers actual escalation rates be culate rates, using to AFUDC greater or than then equivalent represent delay to costs falls short of ac AFUDC counting (Empha for all the delay.” costs associated with II, added.) (Hartigan App. 952.) sis 202 Ill. 3d at that also determined appellate properly of rate of and the classification escalation appropriate for the time-related indirect are of fact costs questions 392 II,

Commission to determine. 202 Ill. 3d Hartigan App. at 952.

However, in Business & People Professional for Public Interest v. Illinois Commerce Comm’n (1991), Ill. 2d 175 & (Business People re II), we Professional manded the Commission to the issue of whether end- its of-period AFUDC in methodology subsumes time-related costs, direct stating: a specific

“The Commission never made re- finding of or garding the amount escalation time-related indirect it expense. Thus is unclear of how much the amount dis- allowed is to component attributable each of ex- delay *** pense. we are presented only

Because with find summary ing that all unreasonable costs are delay subsumed AFUDC, we are an re judicial unable make informed view of the Commission’s finding AFUDC subsumes *** all Therefore, the time-related indirect re costs. with spect to a separate disallowance time-related indirect costs, findings we hold the Commission’s of are fact insufficient to allow judicial [citation], informed review and we remand the cause to the more Commission for specific findings on this (Business issue.” & Professional II, People 218.) 146 Ill. 2d at our accord with decision in Business & Professional II,

People we remand this instant case to issue Commission direct it to make more specific findings related to during the escalation rate period relevant time, of AFUDC, time-related rate indirect If rate expense. exceeds the escalation AFUDC rate and the calculable time-related indirect expenses (see II, Business 2d at People & Ill. Professional 218), then we find the Commission’s end-of-period methodology “recognized AFUDC be a form of quan at II, tification 202 Ill. 3d analysis” (Hartigan App. 953), and to in the be substantial evidence supported by record.

393 II. JURISDICTION

REFUND court the circuit turn to the issue whether nowWe matter lawfully possesses subject or the Commission re of the the and implementation over terms jurisdiction to the collected fund the rates illegal pursuant from above, the appel As stated Rate Order I. Commission’s court held that the circuit late in the instant case court the re to exercise over jurisdiction had no basis legal II, 202 3d at The (Hartigan 956.) ap Ill. App. fund. 305 Court Rule

pellate Supreme court determined trial en (134 305) stay Ill. 2d R. authorizes the court to II, appeal. (Hartigan judgment forcement its pending concluded, at Ill. 3d The court App. 955.) appellate in Harti however, this court’s mandate that issuance of I, gan which remanded the cause to the Commission the ratemaking appel further terminated proceedings, and, late the court’s juris circuit process consequently, II, Hartigan the 202 Ill. 3d at App. diction over case.

955. remandment of court found the appellate the decision in case to Commission pursuant I revested Hartigan the Commission jurisdiction II, (Hartigan 956), Ill. 3d at and that the Com App.

mission had over refund jurisdiction based statutorily II, 3d (Hartigan to the Act 202 Ill. at pursuant App. Therefore, court

960). only reviewed appellate refund in the Commission’s Rate terms of the set forth follow, For the which we reverse Order II. reasons on this appellate issue. Act, set just

Under the Commission must rates that a its customers. may charge reasonable utility HP/s, Once the (111. par. 101.) Rev. Stat. ch. 9— must rates, Commission sets the utility’s utility 394

charge that rate. (111. lll2/3, 1985, Rev. Stat. ch. par. 9— 240.) That rate must remain in effect throughout ap pellate process unless the reviewing court or stays sus (111. lll2/3, it. pends Rev. 1985, Stat. ch. par. 204.) 10— If no stay obtained, is and the rate is reversed on appeal, continue to utility may collect the challenged rates while the is appeal pending, but must refund that por tion of the rate order which the reviewing court holds to be improper. Independent Voters v. Illinois Commerce 117 Ill. 2d Comm’n (1987), 90,103.

In the case, instant court appellate determined that the present refund from Rate I Order fell within the ambit of section 9—252 of the Act and deter apparently mined that the Commission had jurisdiction over the re fund Ill. to this II, pursuant section. (See Hartigan 3d at App. 959-61.) Section 9—252 in provides pertinent part:

“When complaint is made to the Commission concern- ing rate or any charge other of any public utility and the finds, Commission after a hearing, the public utility charged has an excessive or unjustly discriminatory amount for its product, service, commodity or the Com- mission may order that the public utility repa- make due ration to the complainant therefor, with interest at the le- gal rate from the date of payment of such excessive or unjustly 1985, discriminatory (111. amount.” Rev. Stat. ch. 111%, par. 9-252.)

As for its support conclusion that refund present is based on 252, section court appellate that, noted 9— I, this court in Hartigan referred to the refund as the claims for “ratepayers’ reparations excessive rates” 117 Ill. 2d at 148). Hartigan II, 202 Ill. I, (Hartigan 3d at 959. App. find,

We however, court has appellate mis- construed the decision in Hartigan I. this Although court did refer the ratepayers’ claims for a refund as I, in it clarified that Hartigan “claims for reparations” when it stated: statement motion, Edi judge, upon trial Edison’s allowed

“[T]he by collect the rate ordered the Commission son to the amount collected over Order but ordered I] [Rate utility to be previously charged the rate above escrow, claims. ratepayers’ As subject held refund discussed, from the circuit court’s reversal dating refunds Independent under decision in Voters are allowable our 117 Ill.at 148. (Emphasis added.) Hartigan ***.” 2d 90, this reaf Voters, 117 Ill. 2d Independent Brothers, firmed decision in Mandel Inc. v. Chicago its that, Tunnel Terminal Co. 2 Ill. 2d (1954), holding in a situation where the Commission has rates approved later as and reasonable but those rates are reversed just on section 9—252 Act apply. (In of the does not appeal, Voters, Brothers, 117 Ill. 2d at In Mandel dependent 96.) this court determined that rates the Com approved by mission as and reasonable rates could not be “exces just sive or for the unjustly discriminatory” purposes if awarding even those rates are later re reparations Brothers, versed court. Ill. 2d by reviewing (Mandel at The on Mandel Brothers was based 209.) holding scheme of the Act which statutory requires utility rates the Commission charge throughout approved by reviewing stays unless the court or appellate process Brothers, the new 2 Ill. 2d at suspends (Mandel rates. that, The Mandel Brothers court reasoned because

211.) set the Commis charge by is rates utility required sion, rates these rates cannot deemed to be excessive be Brothers, 2 as a basis of a claim for Mandel reparations.

Ill. 2d at 212.

The reaffirmed this holding Mandel Brothers was in both Voters and Citizens Utilities Independent v. 124 Ill. 2d 195. (1988), Co. Illinois Commerce Comm’n for a reaffirm the Mandel Brothers holding We now third time. Commission, The once it approved rates in Rate Order I as just rates, and reasonable cannot now require Edison to pay reparations rates, those even Rate Order I though was reversed on appeal Com mission’s function is in legislative nature and the rates it sets are prospective operation. (See Mandel Brothers, 2 Ill. 2d at 210.) To allow the Commission to now order “reparations” from rates that it set originally would violate the well-established rule against retroac tive ratemaking. Citizens Co., Utilities 124 Ill. 2d at 207, 209.

This court’s holding Independent Voters, however, went beyond scope of Mandel Brothers. In Indepen Voters, dent the Commission rates approved which this court later set aside. The court then remanded cause to the Commission to conduct further ratemaking pro Thereafter, ceedings. intervenors in Independent Voters this petitioned court for a refund of overcharges col lected to the pursuant of the rate portions order which the court had determined to be invalid. in addressing tervenors’ petition, the court noted that no initially pro vision in the Act purports to take a court’s away equita ble jurisdiction (Independent Voters, 117 Ill. 2d at 100), nor could the legislature do so (Peoples Gas Light & Coke Co. v. Slattery (1939), 373 Ill. 42). The court that, determined once a rate order has been set aside on review, the not utility continue to benefit from may invalid portions the rate order. Voters, (Independent 117 Ill. 2d at under 104.) Although, Brothers, Mandel the Commission could not award reparations exces sive pursuant rates to the in situation, Act this factual this court decided:

“Peoples Light Gas Slattery & Coke Co. v. [citation] equitable made clear that this may exercise its powers when an appropriate remedy provided is not in the Act The Act does not specificallyprovide a [citation]. situation, although it for a court provides this remedy for and reasonableness Commis to review the lawfulness Too, re unavailability of a proceedings sion [citation]. a rate that has pay force the consumer to

fund would proper in of that under been held to be excess established process questions. raise due criteria and would [Cita Voters, 117 Ill. 2d added.) (Independent (Emphasis tion.]” 104.) at Vot- Independent in situation,

To alleviate this this court ers an its inherent to fashion equitable exercised powers time, for the first ordered a refund of over- and, remedy to the invalid of the portions collected charges pursuant rate the court stated: order. this regard, holding expenses court’s decision that certain

“[T]his order was improper deductions allowed the rate were final. That of the rate order was invalid from the portion judgment. portion time this court entered its of the erroneously rates that held to set the Commis was be paid sion should be refunded to customers who them collecting To hold otherwise would allow Bell continue such, unlawfully benefiting increased rate and from customer, until remedy without a to the the Commission hearings conducts and determines a new rate base.” In Voters, dependent 117 Ill. 2d at 102-03. case,

In the instant rates which ICC-approved I were established in Rate Order were set aside on ap the circuit court. court affirmed the circuit This

peal by I, I. (Hartigan court’s reversal of Rate Order 117 Ill. 2d to that of These facts a situation similar 120.) present in Inde situation that this court encountered factual Voters, 117 Ill. 2d pendent Voters. Independent (See 90.) Voters controls the Independent This court’s decision rates col Therefore, instant case. the refund of illegal Order I an equita lected under the Commission’s Rate is to this ble made remedy ratepayers pursuant available in its decision in In- powers court’s delineated equitable 398 Voters and is not

dependent a based statutorily remedy, as the appellate concluded.

The that remains is whether the question circuit court matter lawfully possesses subject jurisdiction over the terms and of the refund implementation from Rate Or der I. In statement, its jurisdictional circuit court held that its over the jurisdiction refund was based on its inherent from judicial power flowing Court Supreme Rule Ill. 2d R. 305(b) (134 305(b)). this the cir regard, cuit court stated: May

“The pursuant 1986 Order was entered to Su- preme Court Rule judicial was an exercise of dis- cretion unrelated to the Public Utilities Act and well be- yond scope anything of which the could [Commission] have done itself. At the time the Stay Order there was law, caselaw, simply statutory no or in Illinois which au- thorized a refund to consumers once a rate was declared illegal. to be 16th May permitted Order Edison to charge continue to the illegal promulgated by rate Commission’s in exchange Order Edison’s ac- [Rate I] quiescence in a to if refund consumers this Court’s decla- ration of was not illegality upon appeal. reversed On this issue the Circuit Court was affirmed by Supreme Court. The benefits of the 16th May Order both the utility and to consumers were eminent and the assur- . anees of a refund were unprecedented.

* * * Having promulgated illegal an rate the [Commission] was powerless process by grant- correct or unwind the ing refunds because the is to en- powerless [Commission] gage in ratemaking. retroactive It is thus clear that with- May out the 1986 Order there never could simply have been a refund The Refund is the possibility. product which was and was not de- activity exclusively judicial pendent in the upon anything contained Public Utilities Act [Commission], nor therein to the Retained reserved utilized jurisdiction commonplace prerogative [sic] courts to their is it is used in enforce orders—that how the Stay/Refund Order. obtained originally which this Court

The jurisdiction 68 of the Pub- on Section case was based in the captioned statutory juris- that time. That Act in force at lic Utilities entered its Order this Court exhausted when diction was under- May 16 were 29, 1986. The activities of of April Act, authorized were of the Public Utilities taken outside the exercise clearly and were Court Rule 305 by Supreme in- within this Court’s discretionary authority well of a Stay/Refund the Jurisdiction for judicial powers. herent judicial which are concepts in legal Order is based That statutory grant. jurisdic- any and not on character order is com- under the performance tion until survives in origi- finality.” (Emphasis with pleted accomplished or Illinois Commerce nal.) People Hartigan ex rel. v. 12, 1989), No. 85-CH-

Comm’n (Cir. Ct. Cook Co. Oct. 10970. the circuit court’s May In order to determine whether over the jurisdiction 1986 order retained stay properly to Su- pursuant terms of the refund implementation and to the 305(b), Rule it is discuss preme necessary Court 1986 April circuit court’s “rollback” instruction in its de- briefs, In their and the Commission have cision. Edison the circuit court’s “rollback” order was intimated Therefore, suggest an order. these illegal parties amounted to a the circuit court’s 1986 order May stay the of the cir- of a void order which cannot be basis stay the refund from cuit court’s retained over jurisdiction Rate I. Order merits, circuit

In on the its decision April increase rate estab- reversed Commission’s I, the Commission to lished in Rate Order instructed rates within 30 instructed days, new revised promulgate from these re- to exclude certain costs Commission in- million annual rates, vised and “rolled back” $495 crease set in Rate Order I. I, Hartigan chal- Edison and the Commission Order decision to reverse Rate circuit court’s

lenged I, its instructions to the Commission, its “roll back” of rates. This court affirmed the circuit court’s decision to reverse Rate determined, Order I. It however, that many of the circuit court’s instructions to the Commis sion regarding further ratemaking proceedings were be its yond authority constituted judicial ratemaking. (Hartigan 117 Ill.2d at The court 141-48.) stated: circuit court reviewing an order of the Commission

“[A] may affirm only or reverse the order or remand the cause for further Directing evidence. the Commission to estab lish specific rate judicial is ratemaking, a function that legislature has charged to the exclusively. Commission The court had no authority rollback, return, to order a or to the prior Moreover, rates. the court may not [Citation.] impose Commission, a time limit within which the an agency legislature, created must perform its rate- making Hartigan I, function.” 117 Ill. 2d at 148.

We take this opportunity this court’s earlier clarify statement concerning circuit court’s lack of authority “to rollback, order a return, or rates.” The prior Commission is responsible for setting rates utili public ties may charge its customers. (111. 1985, Rev. Stat. ch. lll2/3, pars. 9—102 through 202.) Under the statu 9— scheme, tory when rates are Commission-approved re versed court, the reviewing invalid rates remain in effect throughout the appellate process unless those rates are or suspended a court of stayed by (111. review. 1985, Rev. lll2/3, Stat. ch. 10—204 par. (formerly 111. 1983, lll2/3, Rev. Stat. ch. Section par. 75).) 10—204 of the Act authorizes the reviewing court to or sus stay the pend invalidated rates while the parties appeal its decision with to the rate order. respect (111.Rev. Stat. 1985, lll2/3, ch. par. 204.) Section 10—204 provides 10— in pertinent part: pendency appeal of an shall not of itself or stay

“[T]he rule, the suspend operation regulation, of the or order de- Commission, cision of the during but the pendency the stay or in its discretion appeal reviewing may the court the part, operation in wholeor in the Commis suspend, sion’s order rule, (Emphasis or decision.” regulation, 1985, lll2/s, 10-204(a). added.) par. Ill. Rev. Stat. ch. “rollback, the circuit court cannot order a

Although return, rates” Illinois Commerce (see or to prior (1928), v. Eastern Illinois Co. Chicago Ry. Comm’n & operation 332 Ill. the the 243), reviewing may stay 1985, order Rev. Stat. new, (111. of the invalidated rate or lll2/3, ch. If the new rates are par. 204). stayed 10— must determine it is the Commission which suspended, what rates will be in effect during appellate process. 373 Ill. at The Commission is statuto

(See Slattery, 48.) to set rates under certain con rily temporary authorized 1985, lll2/s, (111. (formerly ditions. Rev. Stat. ch. 9—202 par. lll2/3, l. Rev. Stat. ch. If par. 36).) a court

Il order, the Commission’s rate the Commission suspends must determine whether rates will remain in effect prior or whether it set during appeal will rates temporary in Therefore, be effect during appeal process. circuit court in the instant case it erred when instructed Commission “rollback” the million annual $495 rate increase and restore or return to the rates. prior Furthermore, the circuit court no has to “roll authority back” or rates to the date suspend retroactively of the Commission’s rate order. case, however,

In the instant the circuit court acted well within its in or statutory authority staying suspend from the ing, date of its decision throughout appel late million annual rate increase estab process, $495 lll2/3, in Rate ch. lished Order I. Rev. Stat. (111. 204;

par. I, 148.) see 117 Ill. 2d at There Hartigan 10— fore, that, decision, we find its circuit April court, effect, the opera or properly stayed suspended tion of the rate in Rate I pur increase established Order 1985, suant to section 10—204 of the Act Rev. Stat. (111.

402 llP/s,

eh. par. 204). court, however, The circuit im 10— ordered the properly Commission to set revised rates which all excluded the costs of I from Edison’s Byron rate base, the effect of which was to order the Commis sion to return to addition, Edison’s rates. In prior as the circuit noted, properly its 1986 entry April decision on the merits was a final judgment (Independent Voters, 117 Ill. 2d at 102), which terminated its statutory to jurisdiction review Commission orders (Illinois Con solidated Telephone Communications, Co. v. Aircall Inc. (1981), 101 Ill. 3d App. 769). 1986, however,

In May the circuit court exercised its judicial under authority Supreme Court Rule and 305(b) Edison’s granted motion to stay enforcement of its 1986 decision to April suspend Rate Order I’s mil- $495 lion annual rate increase. Supreme Court Rule 305(b) provides in relevant part: ***

«(b) (1) motion, On notice and and opportunity an heard, opposing parties court, to be the trial or the reviewing thereof, court or judge may stay a pending *** appeal enforcement, any force effect of *** final or interlocutory judgment or or judicial ad- ministrative order.

[***] (3) The whether stay, granted by the trial or re court, viewing upon shall be conditioned such terms as just." (Emphasis added.) are 305(b). Ill. 2d R. its granting May stay order to Su pursuant

preme 305(b), court, Court Rule the circuit as it cor determined, rectly was acting judicial capacity inherent exercising equitable orders powers. Stay to granted Court Rule are pursuant Supreme 305(b) treated as Allied preliminary injunctions. (See Contract Co. v. ing Bennett 110 Ill. 3d A (1982), App. 311.) court’s power grant a is an stay equitable power

403 Inc. Sportservice, enforce Cahokia principles. equitable 32 (1975), v. Illinois Comm’n Ill. Liquor App. Control 3d 806. to 305(b)

The circuit court was authorized Rule by grant its “conditioned such terms as stay upon arejust.” Ill. In (Emphasis added.) (134 305(b).) 2d R. the instant case, stated, as the en circuit court its decision stay forcement of its Edison to April judgment 1986 allowed collect invalidated of throughout rates several years ap peals Therefore, court, and remand. the circuit pursuant to Rule conditioned its order on retention of 305(b), stay jurisdiction over the terms and implementation any refund from potential collected to the money pursuant invalidated Rate I. Order

Under Court Rule the trial court Supreme 305(b), condition terms. may stay upon just determining whether the circuit court’s retained was a jurisdiction just condition to motion Edison’s for the granting stay order, we note that all parties benefitted from stay order and its refund-related conditions. The circuit court expressly stated that it would not granted have Edison’s motion to enforcement of its stay April 1986 decision unless that was conditioned its stay upon juris- retained diction to dictate the terms of and implement any poten- tial refund. By the enforcement of its 1986 staying April rate suspension, circuit court allowed Edison to con- tinue to collect the invalidated rate increase in Or- Rate der I for several Had the circuit court refused to years. its

stay rates, of the invalidated and this suspension court later reversed the circuit court and reinstated Rate I, Order Edison could not have recovered lost any money during of the appellate process against because rule retroactive ratemaking.

Intervenors, on the hand, other benefitted from the refund-related conditions of the order. The circuit stay court that, observed at the time it its properly granted order,

May there was no stay or case statutory law for the precedence of a equitable remedy refund. With- out the circuit court’s condition retaining jurisdiction refund, over a potential consumers may have been re- quired pay improper rates throughout appellate process without a If the remedy. circuit court had not re- tained jurisdiction refund, to establish a either it would not have or granted stay consumers have been may an charged rate for improper without recourse. In years addition, that, we note order, its the circuit stay laid the groundwork for the type equitable refund which we later validated this court’s decision Inde- pendent Voters, Voters. As in stated this Independent of type nature, is the remedy equitable and circuit court in this case was acting its equitable capacity. Therefore, we conclude that the order’s condition stay that the circuit court retain over the terms jurisdiction and of implementation a refund is a and just equitable condition to pursuant Supreme Court Rule 305(b).

Furthermore, the court con appellate erroneously cluded that the issuance of this court’s decision in Harti I gan terminated the appellate and process any possible jurisdiction over the refund that the court circuit may have obtained. II, 202 Ill. 3d at (Hartigan App. 955.) On the the decision in I contrary, remanded the Hartigan cause to the Commission for further ratemaking pro ceedings. Remandment involves the of the continuation same case rather than the of beginning a new and dis Therefore, tinct case. the decision in I not Hartigan did terminate the circuit court’s retained over jurisdiction the terms and of a implementation pur refund acquired reasons, suant to Court Rule these Supreme 305(b). For we reverse the court on issue this and hold appellate that the circuit court and retained lawfully acquired equi table the of jurisdiction over terms and implementation the 305(b). refund to Court Rule pursuant Supreme

III. TERMS REFUND AND METHODOLOGY terms that circuit court Turning estab- retained, lished to its pursuant equitable jurisdiction refund, we over note that court failed appellate However, to review them. in the of judicial interest we address each them in economy, will turn.

Pursuant of the order provisions and stay the circuit court’s jurisdiction, retained the circuit issued its refund order forth the terms setting and of the from methodology refund the Rate Order I rates. all argue Interveners of the circuit court’s terms are equitable lying terms within the circuit court’s discretion. Edison Commission argue, in effect, the appellate court affirmed properly the terms of the refund set forth by Commission in Rate Order II. refund, the terms of setting the circuit court

was in its acting equitable and, therefore, capacity had *** in “considerable discretion affixing appropriate conditions to (Henderson v. Graham order.” stay [its] (1988), 167 Ill. 3d App. 256, 259.) Review of the refund order’s terms governed is equitable principles the goal of is equity to make the aggrieved party In re Estate Wernick (See whole. 127 Ill. 2d (1989), 61, 86.) These terms will be affirmed unless the circuit Wernick, court has abused its (See discretion. 127 Ill.

2d at 87.) Pursuant to 305(b), Court Rule Supreme these terms must be Ill. 2d “just.” 134 R. 305(b).

A Interest Rate

In order, its refund circuit set the interest rate for the refund at 9% to be compounded annually. argue

Intervenors that the 9% interest rate is reason- equitable, able, and within the circuit court’s discre- tionary authority. Commission, Edison and the on the argue legal hand, other that the rate of interest is the pursuant rate Act, or 5% to section 9—252 of the as appellate regard, court so concluded. this circuit court stated: patently would be inequitable permit Edison to

“[I]t approximately amass three hundred million dollars of il- legal years rates over three and then it repay back at less than passbook rates. No rate of interest which as- sures a from profit delay compatible is with this Court’s April Opinion Memorandum dictates —‘fairness utility not simply by be enriched the time de- Peo- lays inherent in the appellate process.’ [Citation.]” ple ex rel. Hartigan v. Illinois Commerce Comm’n (Cir. 12, 1989), (inter- Ct. Cook Co. Oct. No. 85—CH—10970 order). est rate equitable lying

An award of interest is a matter gov within the circuit court’s sound discretion and is by equity’s goal making erned the customers whole. (Wernick, 87.) equitable 127 Ill. 2d at Awards of inter subject concept equity est are to the of fairness and against interpreted penalty and are not to be as a (Wernick, 87.) (Edison). They debtor 127 Ill. 2d at are compensate made the consumer for the "use of his (Wernick, 87.) Thus, funds. 127 Ill. at 2d the consumer compensated any will be economic loss associated inability money. Wernick, with the to use his 127 Ill. 2d at 87. principles quote mind,

With these we the circuit reasoning court’s which led it to determine that the 9% equitable: interest rate was just

“—it is not fair and for the Court to be oblivious to sug- of the interest rate present day inadequacy 5% gested by [Commission], Edison and the just —it is not fair and to simply award Edison a wind- fall of the interest rate differential between 5% and 9%.

—it is fair just surcharge not and the consumers an interest rate well below years market after five of ‘ille- gal payment. rate’

—it is not fair just and for Edison to be relieved of pay- ment into segregated escrow fund and then advocate an interest rate far less than any escrow account would generated.” have court,

The circuit therefore, rejected 5% interest rate urged by Edison and the Commission.

The circuit continued, stating:

“A 9% interest rate is commensurate with the range within which prime rate has fluctuated during the period refund from May 1986 to date and it is a rate which reasonably could have been secured had the col- lections segregated been placed in an escrow out- side of Edison’s Further, control. it seems unlikely that these amounts, enormous in the hands of Edison for so long a period, would not have a real value of at least 9% to that utility.

The selection of equitable an interest rate is an ex- judicial ercise of guided by discretion judgment— sound it is not a matter pin-point precision. An interest rate of 9% is fair just; it accomplishes the goal of making the ratepayer whole; it does not unfairly penal- ize Edison and it works to potential eliminate the for profit due to appellate delay. The appropriate interest rate is hereby declared to be 9%.”

Because we agree with the circuit court and find that the 9% interest rate is an equitable and term “just” ly- ing within its discretion, we affirm the circuit court’s interest rate determination up to the date of its Octo- ber 1989 interest rate order. In addition, we note that the circuit court retains jurisdiction to set a different interest rate, if appropriate, any period subsequent to the date of its 1989 order.

B Calculation of the Refund Amount: Actual

or Projected Revenues In its order, refund the circuit court determined that the calculation of the refund amount should be based on the actual revenue collected by Edison during the refund period rather than the projected revenues estimated in the Commission’s Rate Order InI. this re- gard, the circuit court reasoned: 16,

“At the time of May 1986 Order there was uncertainty understandable as the actual dollars which produced would be by various customer being classes compelled to pay illegal rate during the stay period duration of the stay was also un- —the knowable. The reporting provisions of May 16 Or- 3) der 2 (paragraph and were aimed at replacing uncer-

tainty with hard data. Edison’s Twentieth Status 3, Report, 1989, filed October states that ‘amounts ac- in cumulated these accounts through August 1989’ $1,887,765,000. total Experience gained over the past years has 3V2

demonstrated projections contained in [Rate Order as the income-generating-potential of the Or- I] der low-application were of the October 1985 rates during the period generated refund has considerably greater returns to Edison than There estimated. is no reason, or logic justification for continued reliance on the Commission’s projections in the face of hard evidence that are they flawed.

The refund must be calculated based on the actual revenues collected Edison by from each of the customer April 29, classes since this Court’s Order of 1986. The measure of excess payments is now known terms of People actual by hypothetical dollars and not dollars.” Hartigan ex rel. v. Illinois Commerce Comm’n (Cir. Ct. 31, 1989), Cook (refund Co. Oct. No. 85—CH—10970 methodology order).

The circuit court’s determination to calculate the re- fund on the actual collected principal based revenues Edison was a decision within its dis- by lying equitable cretion. We note made provision circuit court an its order for Edison to set account for stay up I collected under Rate Order and to proceeds sub- tomit the circuit court of this ac- bimonthly reports so that it track count could the actual amount of reve- nues collected under Rate Order I. Because we find the circuit court’s determination calculate refund on amount based the actual revenues collected under Rate Order I to be we affirm this term of the “just,” circuit court’s refund order. court,

The appellate however, remanded this issue to the Commission it because failed to address this is sue when the were parties’ petitions rehearing de II, nied of law. 202 Ill. operation (Hartigan 3d App.

at 956-57.) appellate further instructed the that, Commission if it based the amount refund on the actual revenues I, collected under Rate it Order must offset the refund amount in by any increase actual op costs erating experienced by Edison. Edison and the Commission that we affirm urge court on appellate issue this require the refund be off principal set by actual cost increases. and the Interveners ami cus, Consumers, Illinois Industrial Energy oppose off setting the refund amount in by increase Edison’s any actual operating costs. issue,

In addressing this we note that amount of to be consists of difference money refunded be tween the rates Order I pursuant collected to Rate the rates that have which were should been collected Voters, in Rate II. established Order 117 (Independent rates, Ill. 2d at 105.) these Commis establishing sion applies ratemaking formula known as the reve-

410 requirement (Citizens nue formula. Co., Utilities 200-01.) Operating component Ill. 2d at costs is a requirement (Citizens the revenue formula. Utilities 200-01.) operating Co., 124 Ill. 2d at Therefore, costs already by should have been taken into account Commission at the time it determined what the rates Accordingly, should have been in Rate Order II. re we appellate verse the court on this issue and hold that any operating experienced by increase in actual costs already by Edison has been considered the Commission may and, therefore, not be used to offset the amount money to be refunded.

C Refund Period In its order, refund the circuit court held period began April (the refund 29, on date of its judgment reversing I), through Rate Order and ran De- urge 31, cember 1989. Intervenors this court to affirm the circuit court’s determination that the revenues col- present lected in 1989 are to be included in the refund from Rate I Order rates. Edison and the Commission, argue money however, that the collected 1989 should present appellate not be included in the refund. The agreed with Edison and the Commission and held period that the refund in the instant runs case from April through 29,1986, December 1988. proper

In order to address the issue of the refund period, necessary it is set forth relevant Commission ratemaking history. January On 1989, rates set the Commission in its Sixth Interim Order the Busi People ness & (Business I case became effective. Professional People 192.) & I, 136 Ill. 2d Professional court, however, This held that the Sixth Interim Order illegal was and void and remanded the Business &

411 People (Busi to the Commission. cause Professional I, ness People & Ill. 192.) 136 2d Thereaf Professional ter, this court ordered Edison to with its re comply fund offer contained in the Interim Sixth Order.

(Business I, & People 247.) 136 Ill. 2d at Professional mandate, Pursuant to this court’s the Commission en tered an interim order for a providing refund of money (Business & collected under the Sixth Interim Order. II, People 146 Ill. 2d at 193 (Business &

Professional People order).) refund The Commission Professional also entered an interim order rolling back rates to the 1985 rates Rate Order I. Business & authorized II, 146 People Ill. 2d at 193 (Business & Professional People rollback order). Professional

On remand in the Business & People Professional case, the Commission set new (Business rates 1989.

& II, People Ill. 2d at 191 (Business Professional & People remand court, This order).) how Professional ever, has reversed the Commission’s Business recently & People remand order and has remanded Professional the cause to the Commission for a second time. (Busi ness & II, People Ill. 2d 175.) There Professional fore, the proper rates for 1989 are as undeter yet mined. The net effect of these that have proceedings ensued in the Business & People case is Professional the rates set in Rate I Order were the actual rates in effect from 1991, October 1985 to March when new rates became effective.

In the instant Edison and appeal, the Commission urge this court to affirm the appellate court’s holding the instant refund runs from period April 1986, through December 1988. reason that They the amount of money to refund in subject any given case is the difference between the illegal rates col- lected under an invalid rate order and the and rea- just sonable rates that should have been collected during

412 that particular Thus, time. they argue, since the Com- mission’s rate determination which was to into go ef- fect in 1989 January has been reversed and remanded twice, the reasonable and rates for just 1989 have not yet been Therefore, determined. they contend that any refund collected in if in money fact exists, one cannot be determined until the Commission sets the proper 1989 rates. amicus,

Intervenors and the on the hand, other ar- gue rate set any Commission in the Busi- by ness & People case on remand can only Professional operate prospectively and to these as apply unde- yet termined rates to the 1989 would period violate the prohibition against retroactive These ratemaking. par- that, ties argue since Rate Order I’s rates were in ef- fect throughout 1989, the instant refund should include 1989 because rates in Business & any hereafter set People cannot be back to applied 1989. Professional Act, Under once the rate, Commission sets a the utility not may its surcharge customers retroac if that tively rate is later found to have too been low. (Business II, & People Ill. 2d at 243.) Professional This is so because of the prospective, legislative nature of the Commission’s ratemaking function. (Business & II, People 146 Ill. 2d at 243.) instant Professional case, however, involves a judicially established refund of money collected to an pursuant invalid rate order. As Edison and the note, Commission properly a refund encompasses the difference between the col money lected pursuant to the invalid rate and the money that would have been collected to a pursuant just and rea Voters, sonable rate. Independent 117 Ill. 2d at 105.

Although reversed and voided on appeal this by court, the rates set in the Sixth Interim Order which were in be effect supposed beginning January 1989 constituted a rate increase to recoup costs in- curred in three new nuclear constructing generating II, & (Business People 146 Ill. facilities. Professional However, 190.) 2d at since these rates had not been Commission, Rate Order I established properly rates were Edison’s customers charged throughout remand, If, 1989. on the second the Commission prop sets the 1989 rates rates higher and those are erly I than the Rate Order rates Edison charged cannot recover the difference from because ratepayers of the rule against ratemaking. retroactive terms of 1989, a however, refund for is refund amount cal culated as the I difference between Rate Order illegal rates rates should proper have been If the charged. Commission determines that the proper 1989 rates are higher than the Rate Order I rates 1989, as it charged determine might conceivably due to the facilities, of three rate-basing new then a higher rate base could reduce the amount, refund if any, of 1989. year if the 1989 Conversely, rates proper are lower than the Rate I rates, Order the refund amount for 1989 could increase.

Therefore, we reverse the circuit court’s determina- tion to include the collected in 1989 in the in- money stant refund and hold that the instant refund period 29, 1986, runs from April December through 1988. refund for if must await the Commis- any,

sion’s determination what 1989 rates proper should have been.

D Refund Historical Recipients: v. Current Customers We next consider portion May stay order which Edison to refunds to the cus- required pay tomers who I actually Rate Order rates paid illegal (historical customers) "to the extent We practicable.” unique present that,

conclude in view of the facts here, ordering the trial court abused its discretion in Edison pay to the refund to historical customers. The evidence persuasively in the record demonstrates that it is nei- pay ther economical nor efficient to to refunds his- torical customers.

Before Edison could issue refund monies to histori- required cal customers, it would be to determine which actually paid overcharges, customers the amount which should be refunded to customer, each and the mailing last known address of each customer. Accord- ing any given ap- evidence, to the at time Edison has proximately ap- 3 million mid-1986, customers. Since proximately half of the historical customers have moved, some more than once and some to locations outside of its service area. Edison would therefore be required process approximately 378 million records necessary to ascertain the information award re- fund to historical customers. Edison would then be re- quired approximately to issue and mail 2 million refund checks to historical customers at their last known ad- Many, may dress. however, not live at their last known and, therefore, address would not even receive the re- awarding Thus, fund checks. refunds to historical cus- time-consuming tomers would inefficient, be and ex- tremely costly, provide guarantee and would no that many paid of the customers who the Rate I Order portion rates will receive their of the refund. Further- administering more, the cost of a refund in this man- ner would have to be taken out of the amount, refund thereby reducing the amount available for refund to ratepayers. light agree appellate above,

In of the we with the illegal overcharges court that the should be refunded current, historical, to rather than customers in the Awarding form of a credit. refunds to current cus- tomers would entail minimal expense administrative and would ensure that refunds are made as as In of this promptly possible. balancing equities case, we conclude that of the order portion stay which to Edison refunds to historical cus- required pay Edison, tomers is not to also to inequitable only but and will not ratepayers necessarily protect ratepayer Accordingly, interests. we reverse that of the portion order and remand to the circuit court with directions to order the refunds to be to current customers in paid the form of a credit.

SUMMARY we affirm that of the summary, portion appellate court’s judgment the Commission’s concerning findings of reasonable/unreasonable that delays. We reverse por- tion of the appellate court’s which judgment affirmed the Commission’s use of its end-of-period AFUDC method and remand this issue to the circuit court and direct that it order the Commission to make more spe- cific findings consistent with our We also re- opinion.

verse the appellate court’s holding the Commis- sion has subject matter jurisdiction over the terms and of the implementation refund from Rate I Order rates and hold that the circuit court retained properly juris- diction over refund pursuant Court Supreme Rule affirm 305(b). We the circuit court’s refund order insofar as that order established 9% interest rate and determined that the refund amount shall be calcu- lated based on actual revenues collected pursuant Rate Order I. reverse, however, We those portions the circuit court’s refund order which established the refund period who refund shall recipients be.

In this we hold regard, instant refund period runs 29, 1986, from April 31, 1988, through December and that the refund shall be to current paid customers

in the form of a credit. remand We this cause to the circuit court with directions to enter an order consist- ent with this opinion and to implement instant re- fund.

Appellate in part affirmed and reversed in part; circuit court in part affirmed and reversed in part;

cause remanded with directions.

JUSTICE FREEMAN concurring part and dis- senting part:

I concur in all III-D but of the part opin- majority’s I ion. do not agree with the majority’s assumptions with to the respect which Edison would methodology have to in order to employ make refunds to historical customers. I do not Specifically, agree ordering Edison to issue refunds to the customers who actually paid excessive rates at issue rather than current customers would it to necessarily require hun- process dreds of millions of customer records or to mail mil- lions of refund checks without whether knowing those checks would even reach such individual customers.

Rather, I believe that Edison could be or- properly dered to issue refunds to historical and, customers at time, the same be allowed make refunds only such customers who to notice respond by publication their right to a refund.

In the analogous actions, case of class it is well es that, tablished as a matter of due individual process, notice to class every member is not in all circumstances. required (Fr v. Teachers Insurance & Annuity ank Association America (1978), 71 Ill. 2d 594.) of question Rather, notice the cir depends upon cumstances of the individual action. Miner v. Gillette Co. (1981), 87 Ill. 2d 15. per se require-

Inasmuch as is individual notice not a ment in class action I litigation, see no reason why of the composition “refund class” in this case must turn on an is, all-or-none determination. That must the why refund class consist of all historical or at customers none all? There is no legal reason that must be the case. why As such, I find it more reasonable and eminently equita- ble that the “refund class” consist of as historical many customers notified, as could be through reasonable means and efforts.

Notice in at least by publication one of the major in the newspapers 10 largest areas in the metropolitan instance, country, should be More- fairly inexpensive.

over, to the extent that historical customers would re- spond to such notice refunds, and claim a windfall to current customers would be avoided.

I believe notice is a by publication reasonable of the compromise all-or-none proposition which the ma- assumes jority Therefore, this case. I applies respect- dissent from III-D fully of the part majority opinion.

(No. 71564. WOJDYLA, EVELYN Indiv. and as Adm’x of the Es tate of Eugene Wojdyla, Deceased, Appellant, v.

THE CITY OF PARK RIDGE al., et Appellees.

Opinion April 16, 1992. Rehearing filed — 1, 1992. denied June

Case Details

Case Name: People Ex Rel. Hartigan v. Illinois Commerce Commission

Court Name: Illinois Supreme Court

Date Published: Apr 16, 1992

Citation: 592 N.E.2d 1066

Docket Number: 71154, 71155 cons.

Court Abbreviation: Ill.