People ex rel. Raoul v. Ill. Commerce Comm'n

2021 IL App 200105-U

THE PEOPLE OF THE STATE OF ILLINOIS ex rel. KWAME RAOUL, Attorney General of the State of Illinois, Petitioner, v. THE ILLINOIS COMMERCE COMMISSION; AMEREN ILLINOIS COMPANY; CITIZENS UTILITY BOARD; UNIVERSITY OF ILLINOIS; LIBERTY STEEL AND WIRE; AIR PRODUCTS & CHEMICALS COMPANY; MARATHON PETROLEUM COMPANY; PHILLIPS 66; ARCHER-DANIELS-MIDLAND COMPANY; TATE & LYLE INGREDIENTS AMERICAS, INC.; VISCOFAN USA, INC.; AND CCPS TRANSPORTATION LLC, as Members of the Illinois Industrial Energy Consumers, Respondents.

No. 4-20-0105

Court of Appeals of Illinois, Fourth District

August 19, 2021

This Order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

Direct Review of Order of the Illinois Commerce Commission No 19-0436

JUSTICE HOLDER WHITE delivered the judgment of the court. Justices DeArmond and Steigmann concurred in the judgment.

ORDER

HOLDER WHITE JUSTICE

¶ 1 Held: The appellate court affirmed, concluding the Commission's final order was supported by substantial evidence where it (1) adopted a 35-year amortization period for returning unprotected property-related EDIT to Ameren's ratepayers and (2) excluded from rate base CWIP-related ADIT where the corresponding CWIP costs were not yet in rate base.

¶ 2 On April 18, 2019, Ameren Illinois Company (Ameren) filed with the Illinois Commerce Commission (Commission) its eighth annual update of cost inputs to its performance-based formula pursuant to section 16-108.5(d) of the Public Utilities Act (Utilities Act), commonly referred to as the Energy Infrastructure Modernization Act (Modernization Act) (220 ILCS 5/16-108.5(d) (West 2018)). Ameren proposed a net revenue requirement of $1, 009, 912, 000, to be recovered in rates effective in 2020. The Commission opened a docketed proceeding to investigate the "prudence and reasonableness" of Ameren's updated cost inputs and the corresponding charges to be recovered during 2020. The Attorney General of the State of Illinois (Attorney General) appeared on behalf of the People of the State of Illinois, and the Citizens Utility Board (CUB) and the Illinois Industrial Energy Consumers (IIEC) (jointly, IIEC/CUB), both intervened in the matter. Commission Staff (Staff) also participated in the proceedings.

¶ 3 On December 16, 2019, following an evidentiary hearing, briefing by all parties, and oral argument, the Commission issued its final administrative order. In its final order, the Commission made numerous ratemaking determinations that resulted in the approval of Ameren's revenue requirement to be recovered in rates in 2020.

¶ 4 On January 3, 2020, the Attorney General filed a verified application for rehearing on two issues: (1) the amortization of excess deferred income taxes (EDIT) and (2) the treatment of construction work in progress (CWIP) related to accumulated deferred income taxes (ADIT). On January 21, 2020, the Commission denied the verified petition for rehearing.

¶ 5 On appeal, the Attorney General challenges two of the Commission's decisions in its final order. Specifically, the Attorney General argues the Commission erred by (1) approving a 35-year amortization period for returning unprotected property-related EDIT to Ameren's ratepayers and (2) failing to deduct CWIP-related ADIT from rate base. We affirm the Commission's order.

¶ 6 I. BACKGROUND

¶ 7 A. Modernization Act

¶ 8 1. Participating Utilities

¶ 9 "In 2011, the General Assembly passed the Modernization Act (220 ILCS 5/16-108.5 (West 2012)), as a provision of the Utilities Act (220 ILCS 5/1-101 to 22-503 (West 2012))." Ameren Illinois Co. v. Illinois Commerce Com'n., 2013 IL App (4th) 121008, ¶ 8 2 N.E.3d 1087. "The Modernization Act applies to electric utilities or combination gas and electric utilities serving more than 1 million customers in Illinois that voluntarily undertake to create customer assistance programs and invest in an infrastructure program that creates Illinois jobs." Id. (citing 220 ILCS 5/16-108.5(b) (West 2012)). "The incentive for utility companies to participate in this program is that the statute allows the company to recover its expenditures through the ratemaking process[, including, but not limited to, the performance-based formula rate]." Id. (citing 220 ILCS 5/16-108.5(b) (West 2012)). Ameren is a "participating utility" under section 16-108.5(b) of the Modernization Act (220 ILCS 5/16-108.5(b) (West 2018)). See Ameren Illinois Co., 2013 IL App (4th) 121008, ¶¶ 8-10.

¶ 10 2. Performance-Based Formula Rate

¶ 11 Under section 16-108.5(c) of the Modernization Act,

"A participating utility may elect to recover its delivery services costs through a performance-based formula rate approved by the Commission, which shall specify the costs components that form the basis of the rate charged to customers with sufficient specificity to operate in a standardized manner and be updated annually with transparent information that reflects the utility's actual costs to be recovered during the applicable rate year, which is the period beginning with the first billing day of January and extending through to the last billing day of the following December." 220 ILCS 5/16-108.5(c) (West 2018).

"The performance-based formula rate shall be implemented through a tariff filed with the Commission consistent with the provisions of this subsection (c) that shall be applicable to delivery services customers." 220 ILCS 5/16-108.5(c) (West 2018). The performance-based formula rate approved by the Commission shall "provide for the recovery of the utility's actual costs of delivery services that are prudently incurred and reasonable in amount consistent with Commission practice and law." 220 ILCS 5/16-108.5(c)(1) (West 2018). On January 3, 2012, Ameren filed with the Commission its performance-based formula rate tariff "Rate MAP-P Modernization Action Plan-Pricing Tariff (Rate MAP-P), initiating Docket No. 12-0001. The docket established the terms of the formula." See Ameren Illinois Co., 2013 IL App (4th) 121008, ¶¶ 8-10.

¶ 12 3. Annual Rate Updates and Reconciliations

¶ 13 "Subsequent to the Commission's issuance of an order approving the utility's performance-based formula rate structure and protocols, and initial rates under subsection (c) of this Section, the utility shall file, on or before May 1 of each year, with the Chief Clerk of the Commission its updated costs inputs to the performance-based formula rate for the applicable rate year and the corresponding new charges." 220 ILCS 5/16-108.5(d) (West 2018).

"The inputs to the performance-based formula rate for the applicable rate year shall be based on final historical data reflected in the utility's most recently filed annual [Federal Energy Regulatory Commission] FERC Form 1 plus projected plant additions and correspondingly updated depreciation reserve and expense for the calendar year in which the inputs are filed. The filing shall also include a reconciliation of the revenue requirement that was in effect for the prior rate year (as set by the cost inputs from the prior rate year) with the actual revenue requirement for the prior rate year (determined using a year-end rate base) that uses amounts reflected in the applicable FERC Form 1 that reports the actual costs for the prior rate year." 220 ILCS 5/16-108.5(d) (1) (West 2018).

¶ 14 Section 16-108.5(d) of the Modernization Act further states, "Within 45 days after the utility files its annual update of cost inputs to the performance-based formula rate, the Commission shall have the authority, either upon complaint or its own initiative, but with reasonable notice to enter upon a hearing concerning the prudence and reasonableness of the costs incurred by the utility to be recovered during the applicable rate year that are reflected in the inputs to the performance-based formula rate derived from the utility's FERC Form 1. During the course of the hearing, each objection shall be stated with particularity and evidence provided in support thereof, after which the utility shall have the opportunity to rebut the evidence. Discovery shall be allowed consistent with the Commission's Rules of Practice, which Rules shall be enforced by the Commission or the assigned administrative law judge." 220 ILCS 5/16-108.5(d) (West 2018).

"In a proceeding under this subsection (d), the Commission shall enter its order no later than the earlier 240 days after the utility's filing of its annual update of cost inputs to the performance-based formula rate or December 31." 220 ILCS 5/16-108.5(d) (West 2018). ¶ 15 B. Procedural History

¶ 16 1. Ameren s 2020 Formula Rate Update and Revenue Requirement

¶ 17 On April 18, 2019, Ameren filed with the Commission its eighth annual update of cost inputs to its performance-based formula pursuant to section 16-108.5(d) of the Modernization Act (220 ILCS 5/16-108.5(d) (West 2018)). Ameren proposed a net revenue requirement of $1, 009, 912, 000, to be recovered in rates effective in 2020. Subsequently, the Commission opened a docketed proceeding to investigate the "prudence and reasonableness" of Ameren's updated cost inputs and the corresponding charges to be recovered during 2020. The Attorney General appeared on behalf of the People of the State of Illinois, and IIEC/CUB both intervened in the matter. Staff also participated in the proceedings.

¶ 18 At a September 4, 2019, evidentiary hearing before duly appointed Administrative Law Judges (ALJ), the parties submitted testimony and other evidence on the issues. Following the evidentiary hearing, Ameren, Staff, the Attorney General, and IIEC/CUB filed briefs on the contested issues. On October 4, 2019, the parties had the option of filing Statements of Position and...