{ "id": 5164163, "name": "THE PEOPLE OF COOK COUNTY ex rel. JACK O'MALLEY, State's Attorney of Cook County, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION et al., Respondents-Appellees", "name_abbreviation": "People ex rel. O'Malley v. Illinois Commerce Commission", "decision_date": "1992-09-25", "docket_number": "Nos. 1\u201491\u20140046, 1\u201491\u20140172, 1-91-0501 cons.", "first_page": "1022", "last_page": "1031", "citations": [ { "type": "official", "cite": "237 Ill. App. 3d 1022" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "466 N.E.2d 1045", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "125 Ill. App. 3d 1031", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3632515 ], "pin_cites": [ { "page": "1033" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/125/1031-01" ] }, { "cite": "123 N.E.2d 302", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1984, "opinion_index": 0 }, { "cite": "4 Ill. 2d 200", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2700145 ], "year": 1984, "pin_cites": [ { "page": "210" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/4/0200-01" ] }, { "cite": "510 N.E.2d 865", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "117 Ill. 2d 120", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5545200 ], "opinion_index": 0, "case_paths": [ "/ill-2d/117/0120-01" ] }, { "cite": "165 N.E.2d 329", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "18 Ill. 2d 518", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5328012 ], "weight": 2, "pin_cites": [ { "page": "523" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/18/0518-01" ] }, { "cite": "571 N.E.2d 1004", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "212 Ill. App. 3d 1046", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2598587 ], "pin_cites": [ { "page": "1051-52" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/212/1046-01" ] }, { "cite": "45 Pub. Util. Rep. 4th 1", "category": "reporters:specialty", "reporter": "P.U.R.4th", "weight": 2, "pin_cites": [ { "page": "3-4" }, { "page": "18" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 835, "char_count": 19426, "ocr_confidence": 0.793, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.1559106341721081 }, "sha256": "57241b72ffbbe8b29ec4c752448f11e9f8c0a797e126ff284d976b66c8bd9765", "simhash": "1:8ca2afb568da56e9", "word_count": 3160 }, "last_updated": "2023-07-14T20:32:17.971536+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "THE PEOPLE OF COOK COUNTY ex rel. JACK O\u2019MALLEY, State\u2019s Attorney of Cook County, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION et al., Respondents-Appellees." ], "opinions": [ { "text": "JUSTICE RAKOWSKI\ndelivered the opinion of the court:.\nPetitioner-appellant, the People of Cook County ex rel. Jack O\u2019Malley, State\u2019s Attorney of Cook County (Cook County), appeals an order of respondent-appellee Illinois Commerce Commission (the ICC), which held that respondent-appellee Commonwealth Edison Company (Edison) did not violate the law in the dispatch of its western coal fired plants. The order appealed from was entered in a fuel adjustment proceeding, as required by statute (see Ill. Rev. Stat. 1985, ch. 111\u2154, par. 9\u2014220). At issue in such a proceeding is whether a utility collected authorized amounts under its fuel adjustment clause during a given year when compared to the actual costs of fuel and power purchased by the utility. After considering Cook County\u2019s arguments, we affirm.\nThe relevant facts are as follows. The electronic service rates Edison charges to its customers are subject to advance approval by the ICC under the statutory authority of the Illinois Public Utilities Act (the Act) (Ill. Rev. Stat. 1985, ch. 111\u2154, par. 1 et seq.). Edison may only charge its customers the rates it has on file with the Commission. Generally, once rates are established with the ICC they are fixed. Section 9\u2014220 of the Act, however, also provides in pertinent part:\n\u201cNotwithstanding the provisions of [this Article], the Commission may authorize the increase or decrease of rates and charges based upon changes in the cost of fuel used in the generation or production of electronic power *** through the application of fuel adjustment clauses.\u201d (Ill. Rev. Stat. 1985, ch. 111\u2154, par. 9\u2014220.)\nThis exception exists for the purpose of allowing fuel costs or savings to be passed through to customers promptly, absent the need for frequent rate case proceedings. Re Uniform Fuel Adjustment Clauses (Ill. Com. Comm\u2019n 1981), 45 Pub. Util. Rep. 4th 1, 3-4.\nA uniform fuel adjustment clause (FAC) the ICC adopted in 1981 (see Commission General Order 211, reported at 83 Ill. Adm. Code \u00a7425 (1991)) (the Code) contains a mathematical formula by which fuel charges to customers change each month to reflect changing costs of fuel and purchased power, and allows for current recovery of such costs by the utility. Under section 425.20 of the Code, fuel costs which are passed through this section of the Code are required to represent either actual, historical costs or estimates of actual costs as they become available.\nSection 9\u2014220 also provides that the ICC monitor the application of a utility\u2019s FAC. Utilities file with the ICC monthly calculations of FAC charges and submit to annual audits of FAC charges and costs. (Re Uniform Fuel Adjustment Clauses, 45 Pub. Util. Rep. 4th at 18.) Additionally, section 9\u2014220 provides that the ICC conduct annual public hearings to determine the prudence of costs passed on to consumers and to reconcile the costs collected under the FAC with the actual costs incurred. The ICC will order refunds if it determines that the charges passed on through the FAC do not represent actual costs of prudently purchased fuel. It was via the authority of section 9\u2014220 that the ICC ordered Edison sub judice to present a reconciliation and to demonstrate prudence of its purchases of fuel and power during the relevant periods.\nSection 425.40(a) of the Code requires that electrical utilities adhere to economic dispatch in the operation of their generating units. That section defines \u201ceconomic dispatch\u201d as:\n\u201cthe operation of the electric utility\u2019s system, utilizing the sources of available power to achieve minimum overall costs, taking into consideration the utility\u2019s voltage, frequency, reliability, environmental, safety and service quality requirements, as well as the utility\u2019s existing contractual obligations.\u201d 83 Ill. Adm. Code \u00a7425.40(a) (1991).\nWilliam Gould, the ICC\u2019s senior economic analyst in the planning and operations section of the engineering department of the public utilities division, testified that the principles of economic dispatch require that incremental and fixed costs be distinguished. Fixed costs are those costs which are incurred regardless of the amount of generation or operation of a generating unit \u2014 or whether energy is produced at all. Incremental costs, on the other hand, are those costs which vary with production and are proportional to the amount of energy produced. A utility satisfies the economic dispatch requirement when units with lower incremental costs are operated ahead of those with higher incremental costs. In order to minimize total system costs, the utility must dispatch its generating units based upon incremental costs, and not based on total costs or other costs.\nIn the mid-1970\u2019s, Edison entered into long-term coal contracts with three coal companies \u2014 Black Butte, Big Horn and Decker. These contracts shall hereinafter be referred to as the \u201cwestern coal contracts.\u201d The long-term nature of the western coal contracts was insisted upon by the contracting coal companies, and the original contracts required that Edison accept delivery of and pay for a designated minimum quantity of coal each year. At the time the western coal contracts were entered into, Edison\u2019s needs were based upon forecasts which projected that demand for electricity would increase at least 5% per year. The western coal contracts provided coal to suit about 60% of Edison\u2019s needs at the time. As it turned out, electrical demand did not increase as expected, and consequently, the western coal contracts provided for the delivery of more coal than Edison needed to generate electricity.\nIn response, Edison negotiated a number of amendments to the western coal contracts in the years 1982, 1983, 1986 and 1988. Under the amendments, Edison paid about 75% of the contracts\u2019 cost of a ton of coal as \u201cmineral rights\u201d or \u201creserve charge\u201d when it could not take the costs as scheduled. Upon this payment, Edison was entitled to defer delivery of the paid-for coal to a later date, and Edison would be obligated to pay the remaining 25% when it accepted delivery of the deferred coal.\nTestimony before the ICC established that minimum overall costs are realized when generating units are dispatched on the basis of incremental costs. ICC staff witness William Gould testified that as fixed costs are always present, only variable or incremental costs should effect the dispatch of the utility\u2019s generating system. Staff witness Kenneth Costello testified that \u201cdispatching on the basis of incremental costs minimizes a utility\u2019s total operating costs.\u201d Robert Beckwith, Edison\u2019s manager of fuel, stated that as Edison was obliged to pay for mineral rights, they should be considered as fixed costs and not used for dispatching purposes. Costello agreed that Edison\u2019s calculation of incremental costs for the dispatch of its western coal fired units properly excluded the 75% reserve charge.\nThe ICC found that Edison\u2019s dispatch methodology should be upheld, and that the evidence established that Edison\u2019s system is operated to achieve minimum overall cost and satisfied the requirement of economic dispatch.\nOn June 21, 1989, the ICC staff filed a motion to amend the hearing schedule with respect to the issue of Edison\u2019s prudence in its western coal contracts in 1985 and 1986. The ICC hearing examiners granted the staff\u2019s motion and consolidated consideration of the prudence of Edison\u2019s western coal contracts for 1985 and 1986 with Edison\u2019s FAC proceeding for 1987. Eventually, upon the motion of a governmental intervenor not a party to this appeal, consideration of Edison\u2019s prudence in the western coal contracts in 1985, 1986 and 1987 was consolidated into the docket for the FAC proceeding for the year 1988. Cook County is a party to those hearings.\nThe first issue we address is whether the ICC\u2019s finding that Edison complied with its statutory regulations in the operation of its generating units in 1985 and 1986 was error.\nAs the ICC stated in its order, the gravamen of Cook County\u2019s appeal is:\n\u201cThe basis of the Intervenors\u2019 argument that Edison violated economic dispatch in dispatching its western coal plants is Edison\u2019s use of incremental or mining charge of reserve coal as the dispatch cost for all western coal, despite the fact that most of the coal consumed in 1985 and virtually all of the coal consumed in 1986 was base coal and the original contracts under which such coal was provided do not provide for the division or procurement into explicit reserve and mining charges. The mining charge equals only about one-fourth of the total fuel cost of western coal. Thus, western coal is dispatched at approximately 25% of the cost passed on through the FAC to ratepayers.\u201d\nAs we recently stated in Moneada v. Illinois Commerce Comm\u2019n (1991), 212 Ill. App. 3d 1046, 1051-52, 571 N.E.2d 1004:\n\u201cThe Commission\u2019s findings on questions of fact are prima facie true, and its orders are prima facie reasonable. A reviewing court can only reverse a Commission rule, regulation, order or decision if the Commission is without jurisdiction, its order is not supported by substantial evidence or the order or manner in which it was decided violates Federal or State constitutional laws to the prejudice of the appellant. Furthermore, the party challenging the order has the burden of proof. [Citations.] The Commission\u2019s determination of a question of law, however, is not binding on review. [Citation.]\u201d\nCook County makes several arguments that the ICC\u2019s order in the case sub judice should be reversed. Cook County points out that in addition to complying with section 9\u2014220 of the Act, Edison was governed by other provisions of the Act which require that its fuel procurement and energy dispatch practices in 1985 and 1986 constituted the \u201cleast cost means of meeting the utility\u2019s service obligations,\u201d and that the rates and charges which resulted were just and reasonable. (See Ill. Rev. Stat. 1985, ch. 111\u2154, pars. 8\u2014401, 8\u2014501, 9\u2014101.) The goal of the Act, Cook County notes, is to regulate utility rates so as to ensure reliable service at the least possible cost to citizens.\nAccording to Cook County, Edison failed to meet the requirements of economic dispatch in its western coal plants by using the incremental cost, which represented only 25% of the cost passed to ratepayers, when Edison was allowed to recover 100% of the cost. This was not a method of providing electricity at the least and minimum cost, and was not a just and reasonable imposition on Edison\u2019s ratepayers through the FAC. We disagree.\nDecisions of the ICC are entitled to substantial deference because they are judgments of a tribunal appointed by law and informed by experience. (See Village of Apple River v. Illinois Commerce Comm\u2019n (1960), 18 Ill. 2d 518, 165 N.E.2d 329.) A reviewing court may not try a case de novo, put itself in the place of the ICC, or substitute its judgment for the ICC\u2019s. Village of Apple River, 18 Ill. 2d at 523.\nThere was testimony before the ICC that Edison was contractually obligated to purchase an amount of coal \u2014 base coal \u2014 and given that Edison was obligated to pay for the base coal, whether it was used or not, it was a fixed cost. Fixed costs are not to be included in incremental costs for the purpose of dispatching. Even Cook County\u2019s witness, Dr. Pflaum, acknowledged that a portion of the total cost of the western coal was \u201csunk.\u201d Pflaum, as well as several other witnesses, testified that Edison would be required to pay substantial amounts to terminate its contractual obligations. Further, there was uncontroverted testimony before the ICC that the fixed component of the western coal was to be paid whether Edison took delivery or not. Witnesses also testified that the alternative approaches suggested by Cook County would wind up costing Edison\u2019s customers even more.\nSection 425.40 requires that the utility must operate its system to achieve minimum overall cost. Upon reviewing the record, we find that the evidence below supports the conclusion that while the western coal itself was more expensive than other coal which Edison could have burned, 75% of the costs for the western coal were fixed pursuant to contract. Using the incremental, nonfixed cost of the western coal for purposes of economic dispatch, as witnesses testified was proper, yielded a lower cost being passed through the FAC than using other available coal, which was more expensive than the incremental, nonfixed portion of the western coal.\nIn sum, we cannot say that the ICC, the expert body of this State in utility issues, ruled contrary to substantial evidence before it. As Edison properly dispatched its plants on the basis of incremental costs, economic dispatch was satisfied, and economic dispatch being satisfied, following Cook County\u2019s logic and the requirements of section 425.40(a) of the Code, Edison operated at minimum overall costs. Section 425.40(a), after all, provides that the operation of the utility system take into account the utility\u2019s existing contractual obligations. Section 425.20 of the Code allows for the passing through the FAC of Edison\u2019s recovery of \u201cactual, historical costs,\u201d which Cook County does not contend are incremental costs. The statutory and Code scheme manifestly allow for a greater recovery through the FAC than that which is used in dispatch.\nCook County also argues that the ICC erred in placing the burden of proof in the proceedings sub judice upon the governmental interveners. In support of this assertion, Cook County cites a portion of the ICC order which states: the governmental interveners\u2019 evidence is \u201cinsufficient to establish that Edison operated its plants in violation of economic dispatch.\u201d While it is true, as Cook County notes, that the supreme court\u2019s holding in People ex rel. Hartigan v. Illinois Commerce Comm\u2019n (1987), 117 Ill. 2d 120, 510 N.E.2d 865, would require that allocation of the burden of proof on the interveners would be error, it is not clear that the ICC actually placed the burden of proof upon Cook County and the other governmental interveners. The order and the record demonstrate that Edison introduced substantial evidence in its direct case, and the order is more properly read as a suggestion that the intervenors failed to introduce sufficient evidence to rebut Edison\u2019s showing that economic dispatch was complied with.\nThe next issue we address is whether it was error for the ICC to consolidate consideration of the prudence of certain 1985 and 1986 Edison coal purchases with the 1988 FAC proceeding.\nCook County makes two different and alternative arguments with respect to the issue of the determination of the pruden'ey of Edison\u2019s procurement of western coal in 1985 and 1986. First, Cook County argues that it was error for the ICC not to determine prudency in the underlying proceeding. This argument takes issue with the ICC\u2019s decision to defer the issue to a later (and presently litigated) docket. Cook County argues that the Act was violated in the deferment, as a prudency determination need be conducted annually. (See Ill. Rev. Stat. 1985, ch. 111\u2154, par. 9\u2014220.) Cook County again argues that the burden of proof on this issue was shifted, noting that the trial court stated in its order of deferment: \u201cAdequate safeguards can be placed in the orders [in the dockets] to ensure that overcollection for fuel proven for years 1985 and thereafter will be credited to customers through the fuel adjustment clause mechanism.\u201d (Emphasis added by Cook County.) Cook County argues that deferral was unfair, as customers who have left Edison\u2019s system will be difficult to locate. Finally, Cook County argues that deferral was a denial of its and other governmental interveners\u2019 due process rights.\nNext, Cook County makes an inconsistent argument, namely: that the ICC actually did make a prudency determination for the years 1985 and 1986, and that this determination (which found prudency) was violative of the law or contrary to the manifest weight of the evidence. Obviously, Cook County cannot be correct in both arguments, and a review of the record reveals that the latter argument, that the ICC did specifically rule on prudency, is untenable. This is so because it ignores plain language in other parts of the order, which specifically states that the prudence of the western coal purchases is set on a later, different docket, and that supplemental orders could.be entered in the event that refunds or credits are ordered in the future due to overcollection. The finding in paragraph 9 of the order which Cook County refers to is obviously either mistaken boilerplate language or refers, as Edison suggests, to fuels other than the western coal purchased in those years. Significantly, Cook County has not denied that the other docket proceeds during this appeal, that it is a party to the other docket, or that the prudence of the 1985 and 1986 western coal purchases is being litigated in the other docket.\nWe further reject Cook County\u2019s argument that it was error for the ICC to defer that issue to a later docket. Edison is correct that section 9\u2014220 only requires the ICC to \u201cinitiate\u201d hearings to determine prudence of fuel purchases. It does not say that such issues must be disposed of during each year. As Edison points out, an administrative body has wide discretion in shaping and conducting proceedings and hearings. (See Antioch Milling Co. v. Public Service Co. (1954), 4 Ill. 2d 200, 210, 123 N.E.2d 302; Desai v. Metropolitan Sanitary District of Greater Chicago (1984), 125 Ill. App. 3d 1031, 1033, 466 N.E.2d 1045.) Other prudence issues with respect to contracts for the same coal from the same companies are at issue in the pending docket, and doubtless common questions of fact and law abound in relation to the prudency determinations. Further, Cook County has not advanced any specific arguments or authority to suggest that the ICC will not be able to adequately determine prudency in 1985 and 1986 in the other docket, or that the ICC will not be able to make appropriate refunds. For this same reason, there is no merit to Cook County\u2019s assertion that due process rights were violated. For the foregoing reasons, we hold that it was not error for the trial court to consolidate the original prudency determinations to the later docket.\nFor the foregoing reasons, we affirm the decision of the ICC.\nAffirmed.\nMcNAMARA and JIGANTI, JJ., concur.\nJustice Rosemary LaPorta participated in oral argument prior to her death. Justice Mel R. Jiganti was substituted on the panel and has listened to the oral argument tape and has read the briefs.", "type": "majority", "author": "JUSTICE RAKOWSKI" } ], "attorneys": [ "Jack O\u2019Malley, State\u2019s Attorney, of Chicago (Thomas H. Rowland and Sheila Maemanus, Assistant State\u2019s Attorneys, of counsel), for petitioner.", "Roland W. Burris, Attorney General, of Springfield (David L. Nixon, Special Assistant Attorney General, of Chicago, of counsel), for respondent Illinois Commerce Commission.", "Kevin M. Forde and Hopkins & Sutter, both of Chicago (Paul F. Hanzlik, John Gavin, David Goroff, and Steven A. Levy, of counsel), for respondent Commonwealth Edison Company." ], "corrections": "", "head_matter": "THE PEOPLE OF COOK COUNTY ex rel. JACK O\u2019MALLEY, State\u2019s Attorney of Cook County, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION et al., Respondents-Appellees.\nFirst District (6th Division)\nNos. 1\u201491\u20140046, 1\u201491\u20140172, 1-91-0501 cons.\nOpinion filed September 25, 1992.\nModified on denial of rehearing December 4, 1992.\nJack O\u2019Malley, State\u2019s Attorney, of Chicago (Thomas H. Rowland and Sheila Maemanus, Assistant State\u2019s Attorneys, of counsel), for petitioner.\nRoland W. Burris, Attorney General, of Springfield (David L. Nixon, Special Assistant Attorney General, of Chicago, of counsel), for respondent Illinois Commerce Commission.\nKevin M. Forde and Hopkins & Sutter, both of Chicago (Paul F. Hanzlik, John Gavin, David Goroff, and Steven A. Levy, of counsel), for respondent Commonwealth Edison Company." }, "file_name": "1022-01", "first_page_order": 1042, "last_page_order": 1051 }