{ "id": 5545200, "name": "THE PEOPLE ex rel. NEIL F. HARTIGAN, Attorney General, et al., Appellees, v. THE ILLINOIS COMMERCE COMMISSION et al., Appellants", "name_abbreviation": "People ex rel. Hartigan v. Illinois Commerce Commission", "decision_date": "1987-06-16", "docket_number": "No. 63747", "first_page": "120", "last_page": "149", "citations": [ { "type": "official", "cite": "117 Ill. 2d 120" } ], "court": { "name_abbreviation": "Ill.", "id": 8772, "name": "Illinois Supreme Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "43 P.U.R.4th 27", "category": "reporters:specialty", "reporter": "P.U.R.4th", "year": 1985, "opinion_index": 0 }, { "cite": "117 Ill. 2d 90", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5545521 ], "opinion_index": 0, "case_paths": [ "/ill-2d/117/0090-01" ] }, { "cite": "332 Ill. 243", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5212640 ], "opinion_index": 0, "case_paths": [ "/ill/332/0243-01" ] }, { "cite": "69 P.U.R.4th 375", "category": "reporters:specialty", "reporter": "P.U.R.4th", "opinion_index": 0 }, { "cite": "60 P.U.R.4th 188", "category": "reporters:specialty", "reporter": "P.U.R.4th", "year": 1981, "opinion_index": 0 }, { "cite": "343 Ill. 117", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5254280 ], "opinion_index": 0, "case_paths": [ "/ill/343/0117-01" ] }, { "cite": "93 Ill. App. 3d 656", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3137231 ], "pin_cites": [ { "page": "669" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/93/0656-01" ] }, { "cite": "1 Ill. 2d 350", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5315594 ], "weight": 2, "pin_cites": [ { "page": "358-59" }, { "page": "358-59" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/1/0350-01" ] }, { "cite": "83 Ill. 2d 364", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5472639 ], "year": 1944, "opinion_index": 0, "case_paths": [ "/ill-2d/83/0364-01" ] }, { "cite": "398 Ill. 11", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2460360 ], "pin_cites": [ { "page": "16" } ], "opinion_index": 0, "case_paths": [ "/ill/398/0011-01" ] }, { "cite": "387 Ill. 256", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2497514 ], "weight": 2, "pin_cites": [ { "page": "275" }, { "page": "276" } ], "opinion_index": 0, "case_paths": [ "/ill/387/0256-01" ] }, { "cite": "55 Ill. 2d 461", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2938113 ], "weight": 3, "year": 1944, "opinion_index": 0, "case_paths": [ "/ill-2d/55/0461-01" ] }, { "cite": "84 Ill. 2d 57", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3046783 ], "opinion_index": 0, "case_paths": [ "/ill-2d/84/0057-01" ] }, { "cite": "409 Ill. 236", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5311099 ], "pin_cites": [ { "page": "248" } ], "opinion_index": 0, "case_paths": [ "/ill/409/0236-01" ] }, { "cite": "19 Ill. 2d 436", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2742815 ], "pin_cites": [ { "page": "442" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/19/0436-01" ] }, { "cite": "111 Ill. 2d 505", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3167110 ], "opinion_index": 0, "case_paths": [ "/ill-2d/111/0505-01" ] }, { "cite": "449 F.2d 1109", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 799038 ], "pin_cites": [ { "page": "1118" } ], "opinion_index": 0, "case_paths": [ "/f2d/449/1109-01" ] }, { "cite": "133 Ill. App. 3d 435", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3529059 ], "pin_cites": [ { "page": "442-43" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/133/0435-01" ] }, { "cite": "95 Ill. 2d 541", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3111376 ], "opinion_index": 0, "case_paths": [ "/ill-2d/95/0541-01" ] } ], "analysis": { "cardinality": 1281, "char_count": 43641, "ocr_confidence": 0.763, "pagerank": { "raw": 4.678074153002858e-07, "percentile": 0.928072833589912 }, "sha256": "25dca69e7e99ccf18981edbb45f81d0683743de4d1d82d23465ce34f370792e6", "simhash": "1:ad8ba13d6843e26d", "word_count": 6899 }, "last_updated": "2023-07-14T21:36:23.540155+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "THE PEOPLE ex rel. NEIL F. HARTIGAN, Attorney General, et al., Appellees, v. THE ILLINOIS COMMERCE COMMISSION et al., Appellants." ], "opinions": [ { "text": "JUSTICE MILLER\ndelivered the opinion of the court:\nIn October 1985 Commonwealth Edison Company (Edison) was granted a rate increase by the Illinois Commerce Commission (the Commission). The Commission\u2019s order, with three Commissioners dissenting, disallowed a relatively small percentage of the rate increase requested by Edison. A number of intervenors opposing the rate increase appealed the Commission\u2019s order to the circuit court of Cook County, which consolidated the intervenors\u2019 appeals. Finding that the audit relied upon by the Commission in evaluating the rate increase did not comply with section 30.1 of the Public Utilities Act (Ill. Rev. Stat., 1985 Supp., ch. 111\u2154, par. 30.1), the circuit court ordered the Commission to conduct a new rate-making proceeding. The court also instructed the Commission to disallow all or part of certain expenses that Edison sought to include in its new rate base. The Commission and Edison appealed the circuit court\u2019s order to the appellate court. The intervenors, however, petitioned for leave to appeal directly to this court, pursuant to Rule 302(b) (103 Ill. 2d R. 302(b)), and we allowed the request for a direct appeal.\nEdison filed a two-stage rate increase request with the Commission in October 1983. In the rate request, Edison sought to include in its rate base the costs of construction of Unit 1 of Edison\u2019s nuclear power plant near Byron, Illinois (Byron 1), which was approaching completion. Seventeen organizations and associations filed briefs with the Commission as intervenors. Following the Atomic Safety Licensing Board\u2019s denial of an operating license for Byron 1 in January 1984, the Commission appointed a committee to recommend an auditor to conduct an audit of the costs associated with the construction of Byron 1. The Commission subsequently approved the hiring of Arthur D. Little, Inc. (ADL), to conduct the audit. The Commission determined that the audit should comply with House Bill 2615 (codified as Ill. Rev. Stat., 1985 Supp., ch. 111\u2154, par. 30.1, effective January 22, 1985), which had recently passed both houses of the General Assembly and was then awaiting the Governor\u2019s signature; the Commission ordered its staff to supervise the performance of the audit.\nADL submitted its audit report to the Commission during March 1985, and the authors of the report were cross-examined at Commission hearings on the report during late April and early May 1985. Although the intervenors claimed that ADL\u2019s audit was deficient under section 30.1, the Commission\u2019s hearing officer denied intervenors\u2019 motion to suspend the hearings to improve the audit.\nDuring July 1985, the Commission held trial-type hearings on the rate request. Both Edison and the intervenors presented the testimony of a number of experts concerning the audit and the proposed increase. On October 24, 1985, the Commission issued its order granting Edison an annual rate increase of $494.8 million; this amount reflects Edison\u2019s costs of over $2 billion incurred in the construction of Byron 1, minus $101.5 million that the Commission excluded from the rate base. The Commission excluded the $101.5 million from the utility\u2019s new rate base because the Commission found that Edison was responsible for one-half of the costs of the delay-in obtaining an operating license from the Atomic Safety Licensing Board. Two Commissioners joined in a written dissent criticizing the audit report and the majority\u2019s finding that virtually all Byron 1 costs were reasonable. A third Commissioner dissented without opinion.\nTwelve of the interveners appealed the Commission\u2019s order to the circuit court of Cook County. The circuit court consolidated the appeals. After considering the record, the briefs, and extended oral argument, the circuit court reversed the Commission order and remanded the cause to the Commission for a new ratemaking proceeding. In a lengthy written opinion, the court found, as a matter of law, that the ADL audit report of Byron 1 had not been conducted under \u201cgenerally accepted auditing standards\u201d as required by section 30.1 of the Public Utilities Act (Ill. Rev. Stat., 1985 Supp., ch. 111\u2154, par. 30.1) and that the Commission\u2019s interpretation of the term \u201cgenerally accepted auditing standards\u201d was clearly erroneous. The court also ruled that the Commission had improperly placed the burden of proof with the interveners to show that Edison\u2019s costs were unreasonable, rather than requiring Edison to prove that the costs were reasonable. The court declared that section 30.1, rather than allowing the exclusion of costs from rate base when the costs were proved unreasonable, prohibited the Commission from including costs in a utility\u2019s rate base until the utility established that the costs were reasonable. The court also found that the Commission\u2019s allowance of one-half of the costs related to the delay in obtaining an operating license into the rate base of Byron 1, and the allowance of 100% of the costs of the physical plant common to Byron Units 1 and 2, was contrary textile manifest weight of the evidence. The court ordered the. Commission to exclude from the rate base all the costs of the licensing delay and ordered the Commission to exclude some portion of the costs of the plant common to Byron 1 and 2 from the costs of Byron 1. The court instructed the Commission to roll back the $494.8 million annual rate increase ordered by the Commission in October 1985 and to set revised rates for Edison within 30 days. The court ruled that none of the costs incurred in the construction of Byron 1 could be included in the revised rates; apparently, the revised rates were to remain in effect until the Commission considered, in further proceedings, which of Byron l\u2019s costs could be included in Edison's rate base.\nSection 30.1 of the Public Utilities Act provides in part:\n\u201cThe cost of new electric utility generating plants and significant additions to electric utility generating plants shall not be included in the rate base of any utility unless such cost is reasonable. Prior to including the cost of plants or additions to utility plants in the rate base, the Commission shall conduct an audit of such costs in order to ascertain whether the cost associated with the new generating plant *** is reasonable. If the Commission is unable to conduct such an audit, the Commission shall arrange for it to be conducted by persons independent of the utility and selected by the Commission. *** Any such audit shall be conducted in accordance with generally accepted auditing standards and shall include but not be limited to costs associated with materials, labor, equipment, professional services and other direct and interest costs.\u201d (Ill. Rev. Stat., 1985 Supp., ch. 111\u2154, par. 30.1.)\nSection 30.1 also defines \u201creasonable,\u201d and it provides that in determining the reasonableness of costs the Commission is to consider \u201cthe knowledge and circumstances prevailing at the time of each relevant utility decision or action.\u201d\nEffective January 1, 1986, subsequent to the date of the Commission order in the case before us, Public Acts 84 \u2014 617 and 84 \u2014 1025 substantially revised and restructured the Public Utilities Act (Ill. Rev. Stat. 1985, ch. 111\u2154, pars. 1 \u2014 101 through 11 \u2014 302). The statute as amended expressly provides, however, that it does not affect actions pending at the time the amendments took effect. (Ill. Rev. Stat. 1985, ch. 111\u2154, par. 4 \u2014 402.) Although section 30.1 of the former statute has been renumbered as section 9 \u2014 213 of the amended act, its language has not been altered except in referring to another similarly renumbered section. For purposes of this appeal, we shall refer to the statute as section 30.1.\nThe Commission and Edison now suggest that section 30.1 does not apply to the present case because it became effective January 22, 1985, after the audit had begun and some evidence of construction costs had been presented. The circuit court noted the question, but found that it was not presented \u2014 no party had raised the issue, and the parties had briefed and argued the case in that court as if section 30.1 applied.\nBy not contesting the applicability of section 30.1 in the circuit court, the Commission and Edison waived any challenge in this court to the application of the statute. Failure to raise an issue in the trial court waives the issue for purposes of appeal. (See, e.g., Shell Oil Co. v. Department of Revenue (1983), 95 Ill. 2d 541.) We note further that it is not unfair to apply section 30.1 to the instant proceeding, since the proceedings were conducted with section 30.1 in mind and the Commission had advised the parties and ADL that the audit was to comport with the requirements of House Bill 2615 (subsequently codified as section 30.1). We conclude that section 30.1 governs the instant case.\nI. Burden of Proof Under Section 30.1\nNoting that intervening events caused drastic increases in Edison\u2019s 1972 estimates of the time required to complete Byron and the project\u2019s total cost, the Commission identified the principal issue in the case as \u201cwhether any part of the cost of Byron 1 should be excluded from Edison\u2019s rate base.\u201d The Commission dissenters, however, submitted that the majority had adopted the wrong approach in setting Edison\u2019s rate base under section 30.1; they contended that, rather than excluding from the total amount submitted by Edison only those costs proved to be unreasonable, the Commission could allow costs to be included in rate base under section 30.1 only when the costs were proved to be reasonable. The circuit court agreed with the Commission dissenters and ruled that the majority had improperly presumed the reasonableness of Edison\u2019s costs.\nEdison points out that before section 30.1 was enacted, costs incurred by a utility were presumed to be reasonable (see, e.g., City of Chicago v. Illinois Commerce Com. (1985), 133 Ill. App. 3d 435, 442-43), and Edison argues that the enactment of section 30.1 did not eliminate that presumption. The Commission majority agreed with Edison that the historic presumption of reasonableness had survived the enactment of section 30.1. The majority believed that once a utility demonstrated the amounts that it had actually invested in the construction of- a power plant, the investment was presumed to have been reasonable and the Commission was powerless to deny recovery of those costs unless there was some showing that they were unreasonably incurred.\nSection 30.1 provides that the costs associated with the construction of a power plant may not be included in a utility\u2019s rate base unless they are reasonable; under the statute, an audit is to form the basis for that determination. The audit is to be conducted by the Commission or, if the Commission is unable to do so, by persons independent of the utility who are selected by the Commission. The cost of the audit is to be borne initially by the utility but may later be recovered through normal ratemaking procedures. By providing a scheme by which the reasonableness of construction costs may be determined, the legislature has removed any need for the presumption of reasonableness that may have existed when the Commission had no comprehensive vehicle for examining costs.\nMoreover, we note that the legislative history of section 30.1 suggests that an affirmative showing of the reasonableness of a utility\u2019s construction-related costs is necessary if a sense of confidence in the ratemaking process is to be instilled in those consumers who are required to pay the increased rates resulting from those costs. (83d Ill. Gen. Assem., House Proceedings, May 10, 1984, at 154-55 (Statement of Representative Richard H. Brummer, House sponsor).) The mere presentation by a utility of the costs it incurred in building a power plant, potentially an overwhelming sum, does not engender in others a sense of confidence that the costs were reasonable. Nor would consumers\u2019 concerns about the costs involved in the construction of a power plant be overcome if the Commission presumed that the amounts expended by a utility on the new facility were reasonable.\nWe therefore conclude that the audit required by section 30.1 has replaced the presumption of reasonableness. Under the statute, the audit now provides the primary means by which the Commission is to determine the reasonableness of the costs associated with the construction of power plants.\nThe audit need not be the only means, however, by which the Commission determines the reasonableness of construction costs. If the audit is deficient in some respect, or if the Commission, its staff, or interveners throw into doubt the reasonableness of the costs incurred in the construction of the plant, the Commission may order a supplemental audit, take affirmative evidence concerning the reasonableness of the costs, or deny the costs altogether if they are not shown to be reasonable. The fundamental, underlying value is that all costs incurred by a utility in the construction of a plant shown to be reasonable are to be included in the utility\u2019s rate base and that all costs not shown to be reasonable by the audit report or by affirmative evidence from other sources are not to be included in the rate base. Only when the Commission is satisfied by the audit report or by other affirmative evidence that the costs incurred by a utility in the construction of a plant are reasonable may those costs be included in the utility\u2019s rate base.\nIn the case before us, numerous questions were raised by the audit and by the intervenors concerning the reasonableness of the costs associated with the construction of Byron 1. In most instances, the Commission allowed the questioned costs into the rate base because they had not been proved to be unreasonable. For example, the Commission order recites that certain costs, such as architectural and engineering fees and certain expenses related to productivity, were not excluded from the rate base because the intervenors had not proved that those costs were unreasonable. Also, the Commission apparently allowed substantial costs of preoperational testing and rework into the rate base without first determining from the audit report or other affirmative evidence whether the costs incurred were reasonable.\nFurthermore, the audit report was critical of the size of Edison\u2019s workforce and of the company\u2019s oversight of productivity; the intervenors also questioned whether Edison had overextended its workforce. Yet the Commission said that Edison responded to the audit\u2019s concerns and that the intervenors had failed to prove that Edison had managed its workforce imprudently. The Commission determined that the specific questions of unreasonableness had been rebutted but made no finding that Edison had presented affirmative evidence to show that the costs were reasonable. The Commission found \u201cno basis in this record to disallow any part of Byron\u2019s cost based on these issues\u201d and included the costs in the rate base.\nThe Commission\u2019s approach of excluding costs from the rate base only if they were proved to be unreasonable is suggested by its statement that \u201c[t]he audit report was prompted by the desire to determine whether any of these increases should be disallowed.\u201d The purpose of the audit, however, is to assist the Commission in determining whether the costs of constructing a plant were reasonable and should therefore be allowed into the utility\u2019s rate base.\nFurthermore, under the comprehensive scheme set out in the Public Utilities Act, the Commission is to be an active participant. The Commission is not merely an arbitrator between a utility seeking a rate increase and any parties who happen to oppose it. Rather, the Commission is an investigator and regulator of the utilities, and under section 30.1 it may not rely on intervening parties to contest a rate increase or to challenge the evidence offered by the utility.\nNothing in the Public Utilities Act requires any party other than the Commission and the utility seeking a rate increase to participate in a ratemaking proceeding. Thus, any participation by persons or groups opposing an increase is voluntary and purely fortuitous. It is possible that no person or entity will seek to intervene when a rate increase is sought; in other cases, those who intervene may lack the financial resources or the incentive to launch a vigorous challenge to all aspects of the increase. (See Calvert Cliffs\u2019 Coordinating Committee, Inc. v. Atomic Energy Com. (D.C. Cir. 1971), 449 F.2d 1109, 1118.) Requiring interveners to establish unreasonableness is therefore no substitute for requiring proof of reasonableness. The difference is significant. In the case before us, in determining the reasonableness of the costs associated with the construction of Byron 1, it is apparent that in many instances the Commission relied on the now impermissible practice that costs are presumed to b\u00e9 reasonable once the utility has established the amount.\nBecause the Commission relied on the presumption of reasonableness, rather than an affirmative showing of reasonableness through the audit performed by ADL and specific evidence of reasonableness, the cause must be remanded to the Commission. Although it is possible for this court to examine the record to independently determine whether sufficient evidence of the reasonableness of the costs associated with the construction of Byron 1 has been presented through the audit report or otherwise, the Commission has been charged by the legislature with making that determination in the first instance. (See Illinois Power Co. v. Illinois Commerce Com. (1986), 111 Ill. 2d 505.) In determining on remand whether sufficient evidence of reasonableness has been presented, the Commission may consider the present record in the light of the requirements of section 30.1 as expressed in this opinion, or require the presentation of such further evidence as may be necessary for it to make a proper determination.\nII. Generally Accepted Auditing Standards Under Section 30.1\nThe requirement that the Commission either conduct, or arrange to have conducted, an audit of the costs of new utility generating plants is central to ascertaining reasonableness under section 30.1. The audit is to be conducted in accordance with generally accepted auditing standards. (Ill. Rev. Stat., 1985 Supp., ch. 111\u2154, par. 30.1.) After considering evidence presented as to appropriate auditing standards in the present case, the Commission ruled that no specific set of written standards directly governed the type of audit mandated by section 30.1. The Commission stated that it was \u201cof the opinion that the reference to \u2018generally accepted auditing standards\u2019 in the statute is simply a spelling out of the implicit requirement of professional competence in the auditor, both in its abilities and its performance.\u201d The circuit court ruled that the Commission\u2019s interpretation of section 30.1 was incorrect as a matter of law.\nEdison and the Commission contend that the Commission\u2019s interpretation of the phrase \u201cgenerally accepted auditing standards\u201d is a question of fact that cannot be reversed unless contrary to the manifest weight of the evidence. (See Iowa-Illinois Gas & Electric Co. v. Illinois Commerce Com. (1960), 19 Ill. 2d 436, 442; Ill. Rev. Stat. 1983, ch. 111\u2154, par. 72.) The intervenors maintain that the Commission\u2019s interpretation is a question of law which is not binding upon the courts. (See Winakor v. Annunzio (1951), 409 Ill. 236, 248.) We find that, regardless of whether the meaning of \u201cgenerally accepted auditing standards\u201d is identified as a legal or a factual question, the Commission\u2019s interpretation of the generally accepted auditing standards requirement in section 30.1 is erroneous under the evidence presented.\nAfter receiving a great deal of evidence as to what comprised generally accepted auditing standards, the Commission formulated its own interpretation of the generally accepted auditing standards requirement in section 30.1 as an implicit requirement of professional competence in the ability and performance of the auditor. The Commission\u2019s interpretation fails to acknowledge the evidence introduced by the parties. The expert witnesses agreed that no single written set of generally accepted auditing standards exists which apply specifically to the type of audits mandated by section 30.1. Edison and the interveners presented complementary evidence, however, of a number of similar standards which applied to the audit conducted by ADL. At least two witnesses, one of them presented by Edison, testified that Standards For Audit of Government Organizations, Programs, Activities and Functions (rev. ed. 1981) (commonly known as the Yellow Book), published by the United States Comptroller General, generally applied to the ADL audit.\nElmer Staats, Comptroller General at the time the Yellow Book was published, testified in behalf of Edison that applicable Yellow Book standards include the proficiency of the auditors and due care in conducting the audit. These standards mirror those identified by the Commission. Staats further testified, however, that other Yellow Book standards applicable to the type of audit conducted by ADL include auditor independence, lack of impairment of the audit effort, adequate planning, sufficient and competent evidence to support the auditor\u2019s judgment and conclusions, and auditor inquiry into a number of specified areas. The Commission\u2019s interpretation ignored these additional requirements. No party presented evidence or argued that Staats\u2019 statement of applicable standards was incorrect.\nEdison\u2019s other audit witness submitted that a general consensus exists as to standards governing audits of the type conducted by ADL, and that the Yellow Book reflects these standards. This witness indicated that Yellow Book standards that apply to the ADL audit include requirements of integrity and consistency in the audit, as well as auditor expertise; these standards are similar to the Commission\u2019s interpretation of \u201cgenerally accepted auditing standards.\u201d Also necessary in the opinion of this witness, however, were auditor independence, proper scope and planning of the audit, adequate evidence to support conclusions reached, and proper communication among the audit team, the entity being audited, and the regulatory body requesting the audit.\nThe intervenors\u2019 witnesses identified standards applicable to the ADL audit similar to those cited by Edison\u2019s witnesses; this testimony is consistent with the intervenors\u2019 position that the Yellow Book standards apply here. Witnesses from ADL, the audit firm in the present case, were unfamiliar with the Yellow Book. The ADL witnesses therefore did not state that the Yellow Book standards did not apply, nor did they testify that any other standards offered by Edison or the intervenors did not apply; they stated instead that they had been influenced by standards promulgated by the New York Public Services Commission.\nBecause the Commission\u2019s interpretation of the generally accepted auditing standards requirement included only two of the factors identified by the audit witnesses of Edison and the intervenors and ignores other standards the witnesses identified as applicable, we find that the Commission\u2019s interpretation of \u201cgenerally accepted auditing standards\u201d is against the manifest weight of the evidence.\nFurthermore, professional competence in ability and performance would be required of an auditor even if the requirement of generally accepted auditing standards was not in section 30.1. Certainly an audit would be inadequate if conducted with less than professional competence in either the auditor\u2019s overall ability or his performance with respect to that particular audit. The reference to generally accepted auditing standards, then, must require something more than professional competence; otherwise, the language regarding \u201cgenerally accepted auditing standards\u201d would be rendered superfluous. There is a strong presumption against finding statutory language to be mere surplusage (Arnold v. Board of Trustees (1981), 84 Ill. 2d 57), and nothing suggests that we should do so here.\nIt is not important that the auditor, here ADL, was unaware of one set of standards or another. It is possible that an audit could be conducted properly without the auditor\u2019s identifying any specific set of standards under which it operates. It is important, however, that the Commission review the audit in light of some identifiable, generally accepted auditing standards. This assures that the audit was sufficient, measured against a generally accepted standard, and that the Commission properly performed its review function. The result is an audit that enables the. Commission to determine whether a utility\u2019s costs are reasonable and can be included in its rate base. In addition, by identifying generally accepted auditing standards applicable to the audit, the Commission facilitates review of its decision by providing an objective and identifiable benchmark against which the court can measure the audit. Although it is within the Commission\u2019s province to accept evidence and to determine appropriate standards against which to measure the audit, it is within the power of the court to determine from the evidence on review whether the audit complies with the standards identified.\nBecause the Commission, in its order, defined an improper standard against which to measure the audit, neither the Commission nor the circuit court here could properly determine whether the auditors sufficiently performed their audit function when measured against a proper standard.\nThe expert witnesses presented by the litigants disagreed about the sufficiency of the audit under the generally accepted auditing standards that the witnesses identified. Our examination of. the audit report reveals some areas in which the audit might have been improved. But, the expertise and evidence-taking function of the Commission is necessary to determine whether these deficiencies \u2014 if, indeed, they are deficiencies \u2014 render the audit insufficient under generally accepted auditing standards. It is for the Commission to determine proper standards against which to measure the audit and to then determine whether these standards were met in the present case.\nThe record on appeal contains extensive evidence concerning the audit standards that apply to the type of audit required by section 30.1. On remand, the Commission may determine from the evidence presented which, if any, of those standards meet the generally accepted auditing standards requirement contained in section 30.1, or the Commission may require further evidence of standards in order to make that determination. Once the proper standards are identified, the Commission must determine from the evidence that has been presented, or from further evidence, whether the ADL audit met those standards.\nIII. Validity of Circuit Court Instructions\nIn reversing the Commission\u2019s order and remanding the cause, the circuit court instructed the Commission to promulgate new rates for Edison within 30 days, with the $494.8 million increase \u201crolled back\u201d and the cost of the new Byron 1 plant excluded from the rate base; apparently the Commission was then to conduct a full and proper ratemaking proceeding to arrive at a new rate base. Also, the court instructed the Commission not to allow into the rate base any cost attributable to delays from quality control or quality assurance deficiencies at Byron 1, the court having concluded that Edison was responsible either directly or indirectly for all the delay costs resulting from those deficiencies. Finally, the court ordered the Commission not to attribute to Byron 1 the entire cost of the physical plant common to units 1 and 2. The Commission and Edison challenge these instructions as improper judicial ratemaking and as usurping the Commission\u2019s fact-finding function.\nSetting utility rates is a legislative rather than a judicial function. (Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill. 2d 461; Illinois Central R.R. Co. v. Illinois Commerce Com. (1944), 387 Ill. 256, 275.) In the ratemaking scheme, the Commission and not the court is the fact-finding body. (Illinois Commerce Com. v. New York Central R.R. Co. (1947), 398 Ill. 11, 16.) Apart from examining whether the Commission acted within the scope of its authority or infringed upon a constitutional right, a court is limited to reviewing whether the Commission set out findings of fact supporting its decision and whether the findings are against the manifest weight of the evidence. (See Cerro Copper Products v. Illinois Commerce Com. (1980), 83 Ill. 2d 364.) Even when a court holds that rates authorized by the Commission are illegal, the court cannot make new rates. Illinois Central R.R. Co. v. Illinois Commerce Com. (1944), 387 Ill. 256, 276.\nUnder the Public Utilities Act, a court reviewing a Commission order has three options: the court may affirm the Commission\u2019s order, it may reverse the order, or it may remand the cause to the Commission to receive new or additional evidence. (See Thompson v. Illinois Commerce Com. (1953), 1 Ill. 2d 350, 358-59; Ill. Rev. Stat. 1983, ch. 111\u2154, par. 72.) The reviewing court does not have the power to direct the Commission to take specific action. (Thompson v. Illinois Commerce Com. (1953), 1 Ill. 2d 350, 358-59; Allied Delivery System, Inc. v. Illinois Commerce Com. (1981), 93 Ill. App. 3d 656, 669.) If the evidence does not support the Commission\u2019s order, the court is limited to setting aside the,order as against the manifest weight of the evidence or remanding for additional evidence. When the Commission\u2019s order is set aside or remanded, the Commission may accept additional evidence, reevaluate the evidence already presented, or simply reverse its original determination. A revised rate order may then again be subject to judicial review to ascertain whether the Commission\u2019s new conclusions are supported by sufficient evidence.\nThe interveners note that remanding a cause for further Commission proceedings consistent with the court\u2019s order is permissible. (Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill. 2d 461; Chicago & Eastern Illinois Ry. Co. v. Commerce Com. (1931), 343 Ill. 117.) The court\u2019s authority to remand for further action consistent with the court\u2019s opinion is not unlimited, however. The test is whether the court, through its opinion or order, limits or encroaches on the Commission\u2019s discretion in its rate making function. If the court\u2019s directive prohibits the Commission from considering or taking certain action in setting rates otherwise within the lawful scope of the Commission\u2019s authority, the court has engaged in judicial ratemaking and has acted improperly.\nIn its order, the Commission found that defects in the quality assurance/quality control program at Byron 1 resulted in a nine-month delay in the completion of the plant, at a cost of $203 million. The Commission found that the delay occasioned by two of the contractors at the Byron project was reasonably avoidable by Edison and that the cost of this delay should not be included in the rate base. The Commission stated that, at its best estimate, the two contractors under Edison\u2019s control were responsible for one-half of the nine-month delay; the Commission found that the remaining aspects of the quality assurance reinspection program and resulting delay costs were normal and reasonable costs of construction and not the result of imprudence or mismanagement on Edison\u2019s part. The Commission concluded that one-half of the delay costs, or $101.5 million, should be excluded from the rate base.\nThe circuit court believed that all the delay costs should have been excluded and that allowing into the rate base half the costs of the quality control delay was contrary to the manifest weight of the evidence. The court concluded that Edison and the contractors were indistinguishable for purposes of plant costs analysis and found that Edison was responsible for the entire cost of the delay. The court instructed the Commission not to allow any costs of Byron 1 resulting from the delay into the rate base.\nThe circuit court was within its authority in concluding that the evidence did not support the Commission\u2019s ' finding that one-half of the delay expense was reasonable; the court went beyond its authority, however, in directing the Commission not to allow any delay costs in the rate base.\nWhile it appears certain, as the Commission found, that a part of the delay costs was attributable to two of Edison\u2019s contractors, Hatfield Electric Company and Systems Control Corporation, and that Edison through imprudence shared in the responsibility for the failure of their quality assurance/quality control (QA/QC) programs, it is equally certain that some parts of the delay costs were attributable to the failure of the QA/QC programs of other contractors. Though Edison had the responsibility of ensuring that each of its contractors complied with the QA/QC requirements of the Nuclear Regulatory Commission, it does not follow, as the circuit court found, that Edison\u2019s imprudence in supervising the QA/QC programs of two of its contractors necessarily meant that Edison was imprudent in supervising the others, even though others besides Hatfield and Systems Control might have encountered problems with their separate programs. The Commission found that Edison was imprudent in its supervision of Hatfield and Systems Control but not in the supervision of the others, and we cannot say from the evidence presented that the Commission finding in this respect was against the manifest weight of the evidence.\nThe Commission, however, found in its order that \u201cas its best estimate\u201d Hatfield and Systems Control were responsible for half the total costs and therefore excluded half the delay costs from Edison\u2019s rate base, allowing the remaining half to be included. Because the exclusion of half the delay costs from the rate base and the inclusion of the remaining half were based on the Commission\u2019s \u201cbest estimate\u201d of the delay costs attributable to each and not on the audit report or other evidence, we find that the Commission\u2019s conclusion in this regard is arbitrary and not supported by the evidence.\nIn doing so we are mindful that it may be difficult to determine with any certainty which of the delay costs are attributable to Hatfield and Systems Control, the two contractors for whom the Commission held Edison responsible, and which of the costs are attributable to the others. While the Commission has broad discretion in ratemaking cases and its findings will not be disturbed unless they are against the manifest weight of the evidence, its factual findings must still be based on the evidence.\nBecause the Commission on remand has the discretion to accept additional evidence on the question of apportioning costs between that part of the delay the Commission found to have been caused by Edison\u2019s imprudence and that part of the delay the Commission found not to have been caused by Edison\u2019s imprudence, the circuit court\u2019s instruction not to allow any delay costs in the rate base proscribes the Commission\u2019s discretion in the ratemaking field and impermissibly usurps the Commission\u2019s rate making function. The circuit court\u2019s instruction to the Commission not to allow any delay costs in the rate base was therefore beyond the court\u2019s authority.\nWe have previously determined that the Commission included costs of Byron 1 in Edison\u2019s rate base when the costs were not proved unreasonable, rather than, as section 30.1 requires, after a showing of reasonableness; we find it appropriate, therefore, for the Commission to consider, on remand, whether the record contains sufficient evidence to establish that any delay costs allowed by the Commission are reasonable.\nIn finding No. 10 of its order, the Commission said that the entire physical plant common to Byron 1 and 2 was used and useful because all the common plant facilities were used by unit 1 in generating electricity. The Commission therefore concluded that all the costs of the plant common to both units should be included in the rate base. The circuit court disagreed, finding instead that the inclusion of the entire cost of the common plant in the rate base attributable to Byron 1 was arbitrary and unreasonable. The court therefore directed the Commission to allow less than 100% of the costs of the common plant in Edison\u2019s rate base.\nWhether all or only a part of the cost of the common plant should be charged as an expense of Byron 1, however, is a matter properly within the Commission\u2019s rate-making discretion, and one that requires the Commission\u2019s expertise. Although some public utility commissions considering the issue have refused to allow all the common plant costs into the rate base when the first generating unit of a multiple-unit plant begins operation (see Washington Utilities & Transportation Com. v. Pacific Power & Light Co. (Wash. U.T.C. 1984), 60 P.U.R.4th 188; Pennsylvania Public Utility Com. v. Duquesne Light Co. (Pa. P.U.C. 1981), 43 P.U.R.4th 27), we find persuasive the authority that supports the Commission\u2019s inclusion of all the common plant costs into the costs of the first generating unit (Re Duke Power Co. (N.C.U.C. 1985), 69 P.U.R.4th 375). It is for the Commission to determine whether the particular facts of each case warrant immediate inclusion in the rate base of all the costs of the common plant.\nIn the present case, the parties presented conflicting evidence regarding whether all the common plant costs should be included in the rate base of Byron 1. The intervenors\u2019 witness supported attributing the costs equally to units 1 and 2; Edison\u2019s witness was of the opinion that, because unit 1 has used all the common facilities in generating power, the entire common plant should be included in the rate base. In including all the common plant costs in the rate base, the Commission considered and rejected the recommendation made by the intervenors\u2019 witness to divide the costs between the units. The circuit court, however, did not rely upon evidence in the record in reversing the Commission\u2019s determination but rather substituted its own judgment whether all common plant costs should be included in the rate base of the first generating unit. Ratemaking is within the province of the Commission and not the court, and the court may not substitute its interpretation of the evidence for that of the Commission (see Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill. 2d 461). But because of our determination that the Commission did not in each instance require an affirmative showing of reasonableness before allowing costs into the rate base, the Commission must reexamine the evidence to determine whether the costs of the common plant have been shown to be reasonable before the costs of the common plant may be included in Edison\u2019s rate base.\nThe Commission and Edison contend that the circuit court\u2019s first instruction, which directed the Commission to order new rates \u201crolling back\u201d the $494.8 million increase within 30 days, was beyond the court\u2019s power. We agree. As stated above, a circuit court reviewing an order of the Commission may only affirm or reverse the order or remand the cause for further evidence. Directing the Commission to establish a specific rate is judicial ratemaking, a function that the legislature has charged to the Commission exclusively. The court had no authority to order a rollback, or return, to the prior rates. (Illinois Commerce Com. v. Chicago & Eastern Illinois Ry. Co. (1928), 332 Ill. 243.) Moreover, the court may not impose a time limit within which the Commission, an agency created by the legislature, must perform its rate-making function.\nWe must next determine what rate the utility should charge while the Commission conducts a new ratemaking proceeding and establishes a new rate schedule. In Independent Voters of Illinois v. Illinois Commerce Com. (1987), 117 Ill. 2d 90, this court stated that, following the reversal of rates ordered by the Commission, the utility could continue to charge the rate approved by the Commission. The utility, however, is subject to ratepayers\u2019 claims for reparations for excessive rates collected from the time of this court\u2019s reversal through the time new rates are approved by the Commission.\nIn the present case, the trial judge, upon Edison\u2019s motion, allowed Edison to collect the rate ordered by the Commission in its October 1985 order but ordered the amount collected over and above the rate previously charged by the utility to be held in escrow, subject to ratepayers\u2019 refund claims. As discussed, refunds dating from the circuit court\u2019s reversal are allowable under our decision in Independent Voters, if the Commission on remand determines that the rate base established by the Commission in its October 1985 rate order was based upon costs that were unreasonable.\nFor the reasons stated, the order of the circuit court of Cook County setting aside the Commission\u2019s October 1985 order is affirmed in part, reversed in part, and remanded to the Commission to conduct further ratemaking proceedings consistent with our opinion.\nAffirmed in part, and reversed in part, and remanded.\nGOLDENHERSH and SIMON, JJ., took no part in the consideration or decision of this case.", "type": "majority", "author": "JUSTICE MILLER" } ], "attorneys": [ "Neil F. Hartigan, Attorney General, of Springfield (Hercules F. Bolos, Thomas J. Russell and Allen C. Wesolowski, Special Assistant Attorneys General, of Chicago), for appellant Illinois Commerce Commission.", "Isham, Lincoln & Beale (Richard G. Ferguson, Michael I. Miller and Paul F. Hanzlik, of counsel), and Kevin M. Forde, Ltd. (Kevin M. Forde and Katrina Veerhusen, of counsel), of Chicago, for appellant Commonwealth Edison Company. \u2022", "Neil F. Hartigan, Attorney General of Springfield, and Richard M. Daley, State\u2019s Attorney, of Chicago (John W. McCaffrey, Mark N. Jason, Rosalyn B. Kaplan, William J. Herrmann, David A. Gilbert and James S. Montana, Jr., Assistant Attorneys General, of Chicago, and Patrick N. Giordano, Assistant State\u2019s Attorney, of counsel), for the People.", "Judson H. Minor and Dodge Wells, Corporation Counsel, of Chicago, for appellee City of Chicago.", "Allen W. Cherry, of Chicago, for appellee Community Action for Fair Utility Practice.", "Randall Robertson and Edward C. Fitzhenry, of Lueders, Robertson & Konzen, of Granite City, for appellee Illinois Industrial Energy Consumers.", "Jenner & Block, of Chicago (Alexander Polikoff, Howard A. Learner, Robert L. Graham, Norman M. Hirsch, Howard A. Simon, Stuart Gimbel, and Deborah A. Dobish, of counsel), for appellees Business and Professional People for the Public Interest et al.", "Jeffrey C. Paulson and Stefan H. Krieger, of Chicago, for appellee South Austin Coalition Community Council.", "Morris I. Leibman, Howard J. Trienens, David W. Carpenter and Laura L. Leonard, of Sidley & Austin, of Chicago, for amicus curiae General Employees\u2019 Retirement Trust of the YMCA of Metropolitan Chicago et al.", "William G. Shepherd, of Chicago, for amicus curiae Small Business Utility Advocate.", "Stephen J. Moore, Nicala R. Carter and Thomas H. Rowland, of Chicago, for amicus curiae Office of Public Counsel." ], "corrections": "", "head_matter": "(No. 63747. \u2014\nTHE PEOPLE ex rel. NEIL F. HARTIGAN, Attorney General, et al., Appellees, v. THE ILLINOIS COMMERCE COMMISSION et al., Appellants.\nOpinion filed June 16, 1987.\nGOLDENHERSH and SIMON, JJ., took no part.\nNeil F. Hartigan, Attorney General, of Springfield (Hercules F. Bolos, Thomas J. Russell and Allen C. Wesolowski, Special Assistant Attorneys General, of Chicago), for appellant Illinois Commerce Commission.\nIsham, Lincoln & Beale (Richard G. Ferguson, Michael I. Miller and Paul F. Hanzlik, of counsel), and Kevin M. Forde, Ltd. (Kevin M. Forde and Katrina Veerhusen, of counsel), of Chicago, for appellant Commonwealth Edison Company. \u2022\nNeil F. Hartigan, Attorney General of Springfield, and Richard M. Daley, State\u2019s Attorney, of Chicago (John W. McCaffrey, Mark N. Jason, Rosalyn B. Kaplan, William J. Herrmann, David A. Gilbert and James S. Montana, Jr., Assistant Attorneys General, of Chicago, and Patrick N. Giordano, Assistant State\u2019s Attorney, of counsel), for the People.\nJudson H. Minor and Dodge Wells, Corporation Counsel, of Chicago, for appellee City of Chicago.\nAllen W. Cherry, of Chicago, for appellee Community Action for Fair Utility Practice.\nRandall Robertson and Edward C. Fitzhenry, of Lueders, Robertson & Konzen, of Granite City, for appellee Illinois Industrial Energy Consumers.\nJenner & Block, of Chicago (Alexander Polikoff, Howard A. Learner, Robert L. Graham, Norman M. Hirsch, Howard A. Simon, Stuart Gimbel, and Deborah A. Dobish, of counsel), for appellees Business and Professional People for the Public Interest et al.\nJeffrey C. Paulson and Stefan H. Krieger, of Chicago, for appellee South Austin Coalition Community Council.\nMorris I. Leibman, Howard J. Trienens, David W. Carpenter and Laura L. Leonard, of Sidley & Austin, of Chicago, for amicus curiae General Employees\u2019 Retirement Trust of the YMCA of Metropolitan Chicago et al.\nWilliam G. Shepherd, of Chicago, for amicus curiae Small Business Utility Advocate.\nStephen J. Moore, Nicala R. Carter and Thomas H. Rowland, of Chicago, for amicus curiae Office of Public Counsel." }, "file_name": "0120-01", "first_page_order": 130, "last_page_order": 159 }