FOURTH DIVISION August 11, 2016

No. 1-15-0425

COMMONWEALTH EDISON COMPANY, ) ) Petitioner-Appellant, ) On Petition for ) Administrative Review v. ) from the Illinois Commerce ) Commission THE ILLINOIS COMMERCE COMMISSION, THE ) PEOPLE OF THE STATE OF ILLINOIS ex rel. THE ) ATTORNEY GENERAL OF THE STATE OF ILLINOIS, ) ICC Docket No. 14-0316 and THE CITIZENS UTILITY BOARD, ) ) Respondents, ) ) (The Illinois Commerce Commission, ) ) Respondent-Appellee). )

PRESIDING JUSTICE McBRIDE delivered the judgment of the court, with opinion. Justices Howse and Cobbs concurred in the judgment and opinion.

OPINION

¶1 Commonwealth Edison Company (ComEd) seeks direct appellate review of the final

order of the Illinois Commerce Commission (Commission) which defined the term “formula rate

structure” for purposes of sections 16-108.5(c) and (d) of the Public Utilities Act (Act) (220

ILCS 5/16-108.5(c), (d) (West 2012)). This definition essentially determines which changes to

the formula rate may be made in annual formula rate update (FRU) proceedings and which

changes must be made in separate proceedings under section 9-201 of the Act (220 ILCS 5/9-201

(West 2012)). In the proceedings below, ComEd and the Commission staff posed competing 1-15-0425

definitions of the term “formula rate structure.” Specifically, ComEd argued that the term should

be defined to mean all of the schedules and appendices that it uses to calculate its revenue

requirement, whereas the Commission staff argued that it should include only two specific

schedules—Schedules FR A-1 and FR A-1 REC—which reflect the format and organization of

major elements of ComEd’s revenue requirement. The Commission agreed with its staff, and

ComEd appeals that decision, claiming that it is contrary to law, not supported by substantial

evidence, contrary to the manifest weight of the evidence, and arbitrary, capricious, and

unreasonable.

¶2 This action began on April 16, 2014, when ComEd, a “participating utility” under section

16-108.5 of the Act, filed a petition pursuant to sections 16-108.5(c) and 9-201 of the Act

requesting that the Commission “approve a housekeeping revision and a compliance change to

its delivery service rate formula.” ComEd alleged that the housekeeping change would “make the

formula more readily understood” and the compliance change was necessary to “effectuate a rate

formula ruling in the Commission’s *** 13-0318 [order].” On August 19, 2014, the Commission

entered an interim order approving the housekeeping change, but denying the compliance change

as unnecessary. The interim order also initiated a “Phase 2” to the proceedings, during which the

Commission was to determine, among other things that are not the subject of this appeal, what

constitutes the formula rate’s structure and protocols, and whether changes to the schedules,

appendices, and work papers that support Schedules FR A-1 and FR A-1 REC could be changed

only in section 9-201 proceedings.

¶3 An evidentiary hearing was conducted on September 29, 2014, during which the parties

presented competing written testimony. Theresa Ebrey testified that she is a certified public

accountant (CPA) in the accounting department of the financial analysis division of the Illinois

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Commerce Commission. Ms. Ebrey recommended that the Commission define “formula rate

structure” to mean “the Commission approved tariff set forth in [ComEd] tariffs as Rate DSPP,

Tariff Sheet Nos. 417-437 which contain Schedules FR A-1 and FR A-1 REC.” She further

recommended that the Commission find that “only changes to Schedules FR A-1 and FR A-1

REC require Commission approval through a Section 9-201 filing.”

¶4 Ms. Ebrey testified that it was her “opinion that by approving only Schedules FR A-1 and

FR A-1 REC for Rate [Delivery Service Pricing and Performance (DSPP)] as the formula rate

tariff in its Order in Docket No. 11-0721, the Commission effectively defined the ‘formula rate

structure’ to be limited to those two formula rate schedules.” She understood that:

“ComEd’s formula rate structure approved by the Commission to

be set forth in the Rate DSPP tariff as Tariff Sheet Nos. 417–437

that were approved by the Commission in Docket No. 1100721

and later revised in Docket No. 13-0386, the filing implementing

the requirements of SB-9 (P.A. 98-0015). The formats for only two

schedules are included within those tariff sheets, Schedules FR A-1

(Net Revenue Requirement Computation on Sheet Nos. 423–424)

and FR A-1 REC (Revenue Requirement Reconciliation

Computation on Sheet No. 425). Additional schedules, appendices

and workpapers are listed by number and name on Sheet Nos. 426

and 427, but no specific information regarding what is to be

included on those ancillary documents is presented in the Rate

DSPP tariff, outside of titles for those documents.”

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Ms. Ebrey further stated that it was her understanding “that the Commission does not consider

the other supporting schedules not specifically set forth in the approved formula rate tariffs” to

be “an ‘approved’ document for purposes of the formula rate update cases.”

¶5 Ms. Ebrey also testified that “ComEd’s position that any change to any spreadsheet

included in ‘the full set of Schedules and Appendices set forth and listed in Rate DSPP’ must be

approved in a separate Section 9-201 proceeding substantially impairs the Commission’s ‘ability

to approve’ just and reasonable rates in every formula rate proceeding.” (Emphasis in original.)

She further testified that

“[i]f [ComEd’s] definition of formula rate structure is adopted, ***

the Commission would need to annually initiate Section 9-201

proceedings to approve every minor formatting change to a

supporting formula rate schedule or appendix in order to effectuate

adjustments the Commission found to be just and reasonable in

every annual update proceeding prior to issuing a final order in the

annual formula rate proceeding. In other words, in addition to

limiting the Commission’s authority, [ComEd’s] recommendation

would also result in unnecessarily burdening the Commission with

numerous additional Section 9-201 proceedings.”

¶6 Christine Brinkman testified that she is a CPA employed by ComEd in the position of

director, rates and revenue policy. Ms. Brinkman explained that as a participating utility under

what is commonly known as the energy infrastructure and modernization act (modernization

act), “ComEd’s delivery services charges are updated each year using a formula established

under [modernization act] and referenced in ComEd’s formula rate tariff, which incorporates

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specifically defined inputs including ComEd’s actual costs to provide delivery services from the

prior year and historical weather normalized billing determinants.” She explained that ComEd’s

actual costs could not be known in advance, and as a result, “the formula rate mechanism relies

on after-the-fact reconciliation once actual costs are known.” Ms. Brinkman testified that the

schedules and appendices “are necessary for the standardization and transparency called for by

[modernization act]” and that “[t]his detail and transparency cannot be seen on Sch A-1 and Sch

A-1 REC alone.” She explained that Schedule FR A-1 and FR A-1 REC “do not contain specific

cost inputs, but rather provide a high level summary of ComEd’s Initial Rate Year,

Reconciliation Year, and Rate Year Net Revenue Requirements.” She thus concluded that

“ComEd’s rate formula consists of Sch A-1 and Sch A-1 REC, along with supporting Schedules

and Appendices, which collectively provide the certainty, standardization, and transparency

required by [modernization act].”

¶7 Ms. Brinkman further testified that defining the rate formula as including the full set of

schedules and appendices would not “impair the Commission’s ability to review ComEd’s

costs.” She claimed that:

“by taking complex arguments about the formula structure and

protocols out of the annual debate, the detail in the tariff serves to

preserve resources and reduce the workload of the parties and the

Commission. The debate that should occur in annual update

proceedings should center on the specific inputs; there should not

be inefficient costly, and uncertain re-litigation of the formula

structure and protocols themselves year-after-year, which defeats

the express language of [modernization act].”

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¶8 The Commission subsequently heard oral arguments from ComEd, which contended that

“formula rate structure” should be defined as the full set of schedules and appendices, and the

Commission staff, the Attorney General’s office and the Citizen’s Utility Board (CUB), all of

which argued that the term should be defined to refer only to Schedules FR A-1 and FR A-1

REC.

¶9 In its order, the Commission outlined a brief history of prior orders relating to the issue of

defining the formula rate structure. It noted that:

“[a]lthough various statements have been made by the Commission

regarding the scope of FRU dockets and the definition of formula

rate structure, the Commission has not decisively ruled on the

definition of formula rate structure as it applies to ComEd. In

Docket No. 11-0721, the Commission first considered the issue of

how to define the formula rate structure for ComEd. While the

Commission ruled on what schedules to attach to the Order itself

and which formula rate Schedules and Appendices to set forth in

full in Rate DSPP and which to include as part of the compliance

filing, the Commission did not rule on which Schedules and

Appendices constitute the formula rate structure. The Commission

ultimately directed that a rulemaking should commence, because it

would ‘add clarity to the reconciliations that will take place

pursuant to this statute, which should provide greater clarity for

utilities, ratepayers and Commission Staff.’ Docket No. 11-0721,

Order at 153. In doing so, the Commission stated ‘that the sooner

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the rulemaking takes place, the sooner all involved in the

rulemaking will familiarize themselves with what formula rates

will entail.’

In ComEd’s first formula rate update proceeding, similar

questions were raised, but the Commission indicated that ‘there

will be a rulemaking in which ComEd and other interested parties

are encouraged to address this and other relevant issues regarding

future formula rate filings.’ Commonwealth Edison Co., Docket

No. 12-0321, Order at 105 (Dec. 19, 2012). At this point in time, a

rulemaking is no longer appropriate and, in the Interim Order in

this proceeding, the Commission stated that in the second phase it

would consider the definition of ‘formula rate structure’ as it

applies to ComEd. The Commission takes a fresh look at the

definition of ‘formula rate structure’ as it applies to ComEd.”

¶ 10 After citing sections 16-108.5(c) and (d)(3)—which generally provide that changes to the

“formula rate structure” may only be made in separate section 9-201 proceedings—the

Commission found that the statute itself “does not define ‘formula rate structure,’ and because

the Commission has not initiated a rulemaking to determine an industry-wide definition of

‘formula rate structure,’ the Commission must look at each utility individually.”

¶ 11 The Commission then adopted its staff’s proposed definition,

“for several reasons. First, as noted by Staff witness Ebrey, the

Commission has not specified how information should appear on

the supporting schedules, appendices, and workpapers that are

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merely listed in ComEd’s Commission-approved tariff. In contrast,

the Commission has approved the information and formatting that

is to appear on Schedules FR A-1 and FR A-1 REC. The

Commission cannot declare the supporting schedules, etc. to be

part of the formula rate structure without having specifically

approved them.”

¶ 12 The Commission disagreed with ComEd’s argument that its proposed definition would

result in “ ‘specificity, standardization, or transparency’ in the FRU process.” It noted that

“[a]lthough ComEd’s proposal may lessen the number of issues in the FRU, it will not lessen the

number of issues that must be decided by the Commission. ComEd’s proposal results in formula

rate issues being decided in two dockets instead of one.”

¶ 13 The Commission continued:

“One apparent reason for requiring two separate dockets with two

separate timelines is that it could result in a year-long delay in

implementing any changes. CUB points out that separating out

proposed adjustments into a separate 9-201 proceeding could

prevent reasonable adjustments from being made in a timely

manner. Assuming Staff or an intervenor discovered an issue

requiring an adjustment to a schedule or appendix immediately

upon the Company’s May 1, FRU filing, the 11-month 9-201

proceeding would conclude after rates for the next year have

already been set. See 220 ILCS 5/9-201(b); 220 ILCS 5/16-

108.5(d)(3). Thus, it could take almost two years from the time

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issues are discovered until they are actually reflected in rates.

ComEd’s proposal could allow it to collect unreasonable rates for

over a year, simply because of the technicality that a Section 9-201

proceeding and a Section 16-108.5 proceeding function on

different statutory deadlines. Historically, the Commission has

expedited the separate Section 9-201 proceedings and entered an

order in those Section 9-201 proceedings thirty-days prior to the

effective date of the new rates approved un [sic] the final orders in

the associated FRUs. This is not an efficient use of resources for

the parties or the Commission and needlessly increases costs borne

by ratepayers. The Commission cannot support this outcome.

Thus, for the reasons stated herein, only changes to

Schedules FR A-1 and FR A-1 REC require Commission approval

through a Section 9-201 filing because those are the only schedules

included in the Company’s formula rate tariffs, which set forth the

Commission-approved formula rate structure. Staff’s position is

adopted.”

¶ 14 ComEd’s verified application for rehearing was denied on January 14, 2015, and ComEd

now seeks review of the Commission’s decision in this court pursuant to Illinois Supreme Court

Rule 335 (eff. Feb. 1, 1994) and section 10-201 of the Act.

¶ 15 In this appeal, ComEd argues that the Commission erroneously defined the “formula rate

structure” as only Schedules FR A-1 and FR A-1 REC. ComEd asserts that:

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“[t]he law and the evidence only support the conclusion that

ComEd’s formula rate’s ‘structure’ should and must be defined as

the two summary Schedules [referring to Schedules FR A-1 and

FR A-1 REC] along with the other Schedules and Appendices

expressly incorporated and referenced within the summary

Schedules and in the tariff pages, as this group of Schedules and

Appendices together actually contain the formula that determines

ComEd’s revenue requirement.”

¶ 16 As stated previously, the significance of this issue is that it determines which changes to

the formula rate may be made in annual rate update proceedings, and which changes must be

made in separate proceedings under section 9-201 of the Act. Under section 16-108.5(c) of the

Act, “[s]ubsequent changes to the performance-based formula rate structure or protocols shall be

made as set forth in Section 9-201 of this Act.” 220 ILCS 5/16-108.5 (West 2012). Section 16-

108.5(d) provides that, “[t]he Commission shall not, however, have the authority in a proceeding

under this subsection (d) [(annual formula rate updates)] to consider or order any changes to the

structure or protocols of the performance-based formula rate approved pursuant to subsection (c)

of this Section.” 220 ILCS 5/16-5(d) (West 2012). The parties dispute what constitutes the

“formula rate structure,” and thus, which changes to the formula rate are required to be made in

separate proceedings under section 9-201 of the Act.

¶ 17 Under section 10-201 of the Act, Commission orders are deemed prima facie reasonable

and the burden is on the party appealing the order to overcome that presumption. 220 ILCS 5/10-

201(d) (West 2012); People ex rel. Madigan v. Illinois Commerce Comm’n,

(quoting Commonwealth Edison Co. v. Illinois Commerce Comm’n,

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510, 514 (2009)). Commission orders are subject to reversal when the Commission’s findings are

not supported by substantial evidence. 220 ILCS 5/10-201(e)(iv)(A) (West 2012). However, the

Commission’s factual findings must be upheld unless they are contrary to the manifest weight of

the evidence. People ex rel. Hartigan v. Illinois Commerce Comm’n,

(1992);

see also Commonwealth Edison Co. v. Illinois Commerce Comm’n,

(applying manifest weight of the evidence standard). Findings of fact are deemed contrary

to the manifest weight of the evidence only when an opposite conclusion is clearly evident from

the record. Continental Mobile Telephone Co. v. Illinois Commerce Comm’n,

(1994). The appellate court may neither reevaluate the credibility or weight of the

evidence nor substitute its judgment for that of the Commission. Commonwealth Edison Co. v.

Illinois Commerce Comm’n,

(2009). As the parties challenging the

Commission’s order, ComEd must affirmatively demonstrate that the conclusion opposite to that

adopted by the Commission is clearly evident. Continental Mobile Telephone Co.,

.

¶ 18 In light of its expertise and experience in the complex field of utility regulation, we

accord deference to decisions of the Commission. Archer-Daniels-Midland Co. v. Illinois

Commerce Comm’n,

(1998); Commonwealth Edison Co. v. Illinois

Commerce Comm’n,

(2009).

¶ 19 Where the Commission’s decision involves construction of a statute, the extent of that

deference depends on whether the statute is ambiguous. When the Commission construes an

unambiguous statute, the agency’s interpretation is not binding on the court (People ex rel.

Madigan,

) and the court need not defer to the agency’s

interpretation. Although agency interpretations of ambiguous statutory provisions are also not

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binding, we give “substantial weight and deference to an interpretation of an ambiguous statute

by the agency charged with the administration and enforcement of the statute.” (Internal

quotation marks omitted.)

This is particularly true when the interpretation draws on the

agency’s expertise and experience and we will not substitute our own construction of an

ambiguous statute for a reasonable interpretation adopted by the agency charged with its

administration. Quality Saw & Seal, Inc. v. Illinois Commerce Comm’n,

(2007) (“if reasonable readers of a statute could differ over the extent of the regulatory

authority it confers, we defer to the agency’s interpretation if the interpretation is defensible”).

¶ 20 ComEd, however, argues that such a deferential standard of review is not appropriate,

and, instead, we should review this issue de novo as a question of law. It contends that courts

“will not defer to an agency’s construction of a statute when the statute is clear and unambiguous

because ‘an interpretation placed upon a statute by an administrative official cannot alter its plain

language.’ ” Apple Canyon Lake Property Owners’ Ass’n v. Illinois Commerce Comm’n,

(quoting Burlington Northern, Inc. v. Department of Revenue,

(1975)). Although ComEd attempts to avoid the deference generally afforded

to decisions of the Commission by shaping this case as one of plain language, we are

unpersuaded. There is nothing inherent in the language of “formula rate structure” that

conclusively indicates whether the provision refers to Schedules FR A-1 and FR A-1 REC, or to

the more expansive set of schedules and appendices proposed by ComEd. Looking up the words

“formula,” “rate,” and “structure,” in the dictionary to determine their plain and ordinary

meanings, does little to assist us in determining whether the term applies only to the two specific

schedules, or the broader set of schedules and appendices. Instead, the term “formula rate

structure” is open to more than one reasonable interpretation, and it is only by resort to

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interpretative aids other than the language of the provision itself that the intent of the legislature

can be discerned. See People ex rel. Madigan v. Illinois Commerce Comm’n,

. In light of the foregoing, we conclude that the term “formula rate structure” is

ambiguous, and we give “substantial weight and deference” to the Commission’s interpretation.

(Internal quotation marks omitted.) People ex rel. Madigan,

.

¶ 21 The Commission chose to define “formula rate structure” as only Schedules FR A-1 and

FR A-1 REC for three specific reasons. First, the Commission noted that it had approved the

“information and formatting that is to appear on Schedules FR A-1 and FR A-1 REC” but it had

not specified how information should appear on the supporting schedules, appendices, and work

papers. The Commission concluded that it could not “declare the supporting schedules, etc. to be

part of the formula rate structure without having specifically approved them.”

¶ 22 ComEd contends that this reasoning is “wrong” because “the two summary Schedules

and the tariff pages refer to specific lines of the other Schedules and Appendices.” ComEd

claims that this “disproves the ruling’s premise that the ICC did not approve what is in the other

Schedules and Appendices.” However, unlike Schedules FR A-1 and FR A-1 REC, the other

schedules and appendices are listed in the Rate DSPP by number and title only, and provide no

description of how information is arranged or what information is included in those documents.

Moreover, even assuming that mere reference to the documents could indicate the Commission’s

specific approval, Schedules FR A-1 and FR A-1 REC refer to fewer than all of the other

schedules, and to only one of the listed appendices. Thus, it is unclear how the reference to a

portion of the schedules and appendices would indicate Commission approval of all of the

schedules and appendices which ComEd proposes to include in the “formula rate structure”

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definition. We find nothing sufficient to overcome the prima facie reasonableness of the

Commission’s order on this basis. 220 ILCS 5/10-201(d) (West 2012).

¶ 23 Next, the Commission believed that ComEd’s proposal would result “in formula rate

issues being decided in two dockets instead of one,” and would not add “specificity,

standardization, or transparency” to the FRU process. ComEd claims that this reasoning is

erroneous because it is “not relevant. Any point about the total number of issues to be decided is

a red herring, for it is an argument against the law itself, which mandates that formula rate

structure and protocols changes not be handled in formula rate updates and instead be addressed

in separate Article IX dockets.” We disagree. Although the Act provides for two separate types

of proceedings, the Commission here was tasked with interpreting the term “formula rate

structure,” and determining which types of changes are to be made in each type of proceeding.

The Commission’s acknowledgment that an expanded definition of “formula rate structure”

would cause more changes to be brought in the separate section 9-201 proceedings is not “an

argument against the law itself,” but is merely a consideration of the potential results of the

proposed interpretation, which is an appropriate way to discern the legislative intent. See

Fumarolo v. Chicago Board of Education,

(1990) (“Legislative intent can be

ascertained from a consideration of the entire Act, its nature, its object and the consequences that

would result from construing it one way or the other.”).

¶ 24 Finally, the Commission also believed that ComEd’s proposal could result in substantial

delays in implementing changes, and prevent reasonable adjustments from being made in a

timely manner. The Commission reasoned that if the staff or an intervenor discovered an issue

requiring an adjustment to a schedule or appendix immediately upon the company’s May 1 FRU

filing, it could take almost two years until the adjustment is reflected in rates. The Commission

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acknowledged that the section 9-201 proceedings had been expedited in the past, but determined

that doing so was “not an efficient use of resources for the parties or the Commission and

needlessly increases costs borne by ratepayers.” ComEd claims that this reasoning is not

persuasive because it is mere “speculation.” It claims that it “attributes to ComEd motives that it

does not have,” and further notes that the Commission has substantial leeway to accelerate an

article IX proceeding.

¶ 25 Although ComEd contends that speculation is not a lawful basis for a Commission

decision, citing Ameropan Oil Corp. v. Illinois Commerce Comm’n,

(1998), and Allied Delivery System, Inc. v. Illinois Commerce Comm’n,

(1981), we find its reliance on those cases unconvincing. First, and most importantly, neither

case concerns the Commission’s interpretation of an ambiguous statutory provision, in which the

Commission is entitled to examine the potential results of various interpretations to discern the

legislative intent. See Fumarolo v. Chicago Board of Education,

(1990).

Moreover, in Ameropan Oil Corp., the Commission noted that the petitioner speculated “about

‘the unexpected’ occurring and ma[de] irrelevant references to downed electrical lines in

Canada, the Space Shuttle disaster, and the Titanic.” Ameropan Oil Corp.,

. In those circumstances, this court found that “Such speculation has no place in the ICC’s

decision or in our review of it.”

Considering the natural and probable consequences of the

interpretation of a term, as the Commission did here, is a far cry from irrelevant speculation

regarding “the Space Shuttle disaster, and the Titanic,” which was at issue in Ameropan Oil

Corp.

In these circumstances, we find no fault in the Commission’s consideration of the

potential consequences of the various proposed interpretations.

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¶ 26 Although ComEd further claimed that the Commission has substantial leeway to

accelerate an article IX proceeding, and has exercised such authority in the past, we note that the

Commission explicitly determined that doing so was “not an efficient use of resources for the

parties or the Commission and needlessly increases costs borne by ratepayers.” ComEd has not

provided this court with anything that would overcome the presumption of prima facie

reasonableness of the Commission’s rationale. 220 ILCS 5/10-201(d) (West 2012).

¶ 27 Finally, we also note that the definition adopted by the Commission is consistent with its

recent decision interpreting the same term, formula rate structure, as it applied to Ameren. In that

proceeding, the Commission held that the phrase “formula rate structure” referred only to

Schedules FR A-1 and FR A-1 REC. While that order stated that it should not automatically be

applied to ComEd, and while Commission decisions are not res judicata in later proceedings

(Business & Professional People for the Public Interest v. Illinois Commerce Comm’n,

(1989)), we find no reasonable rationale to interpret the phrase differently as it

relates to ComEd.

¶ 28 In sum, although ComEd faults the Commission’s interpretation on a number of points,

we find nothing sufficient to overcome the prima facie reasonableness of the Commission’s

order. 220 ILCS 5/10-201(d) (West 2012); Continental Mobile Telephone Co. v. Illinois

Commerce Comm’n,

(1994). The Commission had the authority to

interpret the ambiguous term “formula rate structure” contained in the Act, and ComEd has

provided nothing to show that the opposite interpretation is the only possible interpretation of

that term. We therefore affirm the Commission’s order.

¶ 29 Affirmed.

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