People ex rel. Madigan v. Illinois Commerce Commission ( 2012 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
People ex rel. Madigan v. Illinois Commerce Comm’n, 2012 IL App (2d) 100024
Appellate Court THE PEOPLE ex rel. LISA MADIGAN, Attorney General of the State
Caption of Illinois, Petitioner, v. ILLINOIS COMMERCE COMMISSION,
COMMONWEALTH EDISON COMPANY, et al., Respondents.
District & No. Second District
Docket No. 2-10-0024
Filed March 19, 2012
Held In a ratemaking case seeking to recoup the costs of modernizing
(Note: This syllabus respondent’s electrical delivery system toward a “smart grid,” the
constitutes no part of decision of the Illinois Commerce Commission approving riders allowing
the opinion of the court the recovery of the cost of installing new meters that would eliminate the
but has been prepared need for meter readers was reversed on the ground that the riders
by the Reporter of amounted to improper single-issue ratemaking barred by collateral
Decisions for the estoppel and the law of the case.
convenience of the
reader.)
Decision Under Petition for review of order of Illinois Commerce Commission.
Review
Judgment Reversed.
Counsel on Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Appeal Solicitor General, and Paul Berks, Assistant Attorney General, of
counsel), for petitioner.
John P. Kelliher, of Illinois Commerce Commission, of Chicago, for
respondent Illinois Commerce Commission.
E. Glenn Rippie, John P. Ratnaswamy, and Carla Scarsella, all of Rooney
Rippie & Ratnaswamy LLP, and Barry Levenstam and Irina Y.
Dmitrieva, both of Jenner & Block LLP, both of Chicago, for respondent
Commonwealth Edison Company.
Panel JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices McLaren and Schostok concurred in the judgment and opinion.
OPINION
¶1 Commonwealth Edison Company (ComEd) is a public utility company that distributes
electricity to consumers in northern Illinois. In October 2007, ComEd petitioned the Illinois
Commerce Commission (Commission) to restructure and alter the rates ComEd charges,
seeking a $360 million increase. ComEd calculated its revenue requirement using 2006 as
an historical “test year” and included certain new distribution assets, referred to as “plant.”
The Commission ultimately granted ComEd a rate increase of about $274 million.
¶2 As part of the rate case, the Commission approved “Rider SMP,” which ComEd had
proposed to immediately recoup the costs of modernizing its delivery system toward a “smart
grid,” including a new technology called advanced metering infrastructure (AMI) that would
allow meter reader and supervisor positions to be phased out. On appeal, the Attorney
General (AG) and the Citizens Utility Board (CUB) challenged Rider SMP, having
intervened separately to protect the rights of consumers to “just and reasonable” rates as
prescribed by the Public Utilities Act (Act) (220 ILCS 5/1-101 et seq. (West 2006)). See
Commonwealth Edison Co. v. Illinois Commerce Comm’n, 405 Ill. App. 3d 389, 409-15
(2010) (ComEd).
¶3 While the appeal in ComEd was pending, ComEd petitioned the Commission to
implement the order that had authorized Rider SMP. Specifically, ComEd sought approval
to recover through the rider the costs of installing 141,000 AMI meters and implementing
a “Customer Application Program” (CAP) designed to measure how customers respond to
the new technology. The Commission ruled that ComEd could recoup through the rider the
costs of 131,000 AMI meters and the CAP. The AG filed a notice of appeal from the
Commission’s implementation order, and we stayed the appeal while ComEd was pending.
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¶4 On September 30, 2010, we reversed the authorization order. We held that the
Commission erred in approving Rider SMP, because the rider violates the rule against single-
issue ratemaking. ComEd, 405 Ill. App. 3d at 415. On April 12, 2011, after we denied
ComEd’s petition for rehearing and the supreme court denied ComEd’s petitions for leave
to appeal, we lifted the stay on this appeal of the implementation order.
¶5 On appeal, the AG argues that (1) principles of collateral estoppel and the law of the case
bar ComEd and the Commission from relitigating whether Rider SMP, now renamed Rider
AMP and Rider AMP-CA, is improper single-issue ratemaking; and (2) even if we were to
address the issue, Rider AMP and Rider AMP-CA qualify as improper single-issue
ratemaking under the test we set forth in ComEd. We agree with both of the AG’s arguments
and reverse the Commission’s implementation order as an abuse of discretion.
¶6 THE RATE CASE
¶7 On October 17, 2007, ComEd filed tariffs that incorporated a general increase in rates
for delivering electricity and revised other terms and conditions of service. See 220 ILCS
5/9-201 (West 2006). ComEd proposed no change in the price of the electricity itself.
ComEd asserted that a $360 million increase in its delivery rates was necessary because the
existing rates were based on costs that were years out of date.
¶8 ComEd used the 2006 calendar year as an historical test year and included certain pro
forma adjustments. ComEd proposed to increase its 2006 rate base investment amount by
$1,498,317,000 based on new plant that had been or would be implemented over a 21-month
period from January 2007 through September 2008.
¶9 On November 28, 2007, the Commission suspended ComEd’s proposed tariffs and
initiated the underlying rate case. The Commission assigned two administrative law judges
(ALJs) to take evidence and issue a proposed order. To protect their interests, the AG and
other parties intervened. Testimony and documentary exhibits were submitted, and
evidentiary hearings were held from April 28, 2008, to May 5, 2008.
¶ 10 DOCKET 07-0566: RIDER SMP
¶ 11 As part of the rate case, ComEd proposed Rider SMP, a “system modernization project”
charge to customers, to immediately recoup the costs of modernizing its delivery system
toward a “smart grid.” According to ComEd, the rider was new and innovative and created
a mechanism for funding discretionary projects that are not necessary for the distribution
service. One of the building blocks of the new technology is AMI, which consists of a
communication system, advanced meters, and computer software and hardware to process
the information collected from the new meters. The first step toward an AMI system is a pilot
program called “Phase 0,” which involves installing 200,000 advanced meters. AMI would
allow ComEd to save costs and improve efficiency by phasing out 675 full-time meter reader
and supervisor positions, eliminating meter reading equipment, improving bill collections,
reducing billing errors, and disconnecting nonpaying customers more efficiently. ComEd
argued that Rider SMP would give customers the benefits of the technology earlier than
might otherwise occur, because ComEd could not afford the project without the rider. As
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proposed, ComEd would provide the Commission with an annual list of projects for Rider
SMP recovery. The Commission would have an opportunity to approve or deny recovery for
each project, but the Commission could not alter the list.
¶ 12 The Commission approved Rider SMP for the limited purpose of implementing Phase
0, commending ComEd for its initiative in pursuing a smart grid but criticizing ComEd for
taking a project-by-project approach without a clear goal. The Commission noted that “[t]he
estimates of cost in the record have varied greatly and the estimates of benefits have been
sporadic at best.” The Commission further found that “[t]he lack of a consistent, thorough
analytic approach to estimating [smart grid] benefits simply highlights another shortcoming:
ComEd is asking for special recovery for these projects that–whatever their level, all parties
agree–could have long-term economic benefits, but as proposed, ratepayers do not share the
economic benefits.” The Commission ruled that, after the completion of Phase 0, ComEd
may file Rider SMP again to seek recovery for additional smart grid investments.
¶ 13 On September 10, 2008, the Commission issued its order authorizing ComEd to file new
tariffs to implement a $273,573,000 rate increase. The authorization order allowed recovery
through a rider for Phase 0 but required ComEd to first “engage in a workshop process with
interested stakeholders in order ‘to develop project goals, timelines, evaluation criteria and
Phase 0 technology selection criteria.’ ” Because the order required ComEd to define the
exact scope of Phase 0 by engaging in discussions with interested parties, the Commission
did not “approv[e] a recovery of specific costs” but, rather, required ComEd to file “a request
for approval of the AMI pilot after completion of the workshop process.” A series of AMI
workshops held from December 2008 to May 2009 helped define the parameters of Phase 0
and guide the associated AMI procurement process.
¶ 14 DOCKET 09-0263: RIDERS AMP & AMP-CA
¶ 15 Pursuant to the Commission’s September 10, 2008, authorization order, the next step
would be for the Commission to open a new smart grid policy docket in which the
Commission and all interested parties would define Illinois policy on the smart grid.
Accordingly, on June 1, 2009, after completing the workshop process, ComEd filed a
verified petition describing and seeking approval for Phase 0 and the CAP. As contemplated
by the authorization order, ComEd sought to recover the costs of these programs through the
rider, which already had been approved in the authorization order.
¶ 16 ComEd sought to recover through the rider the Phase 0 costs of installing 141,000 AMI
meters and related infrastructure. ComEd proposed placing 100,000 meters in “a
demographically varied, yet operationally manageable, footprint” that included nine suburbs
west of Chicago. ComEd proposed placing 30,000 more meters in Chicago and 10,000
meters in Elgin. ComEd estimated the costs of those capital investments to be $49.1 million,
which it sought to recover through the rider. The CAP was proposed to examine whether and
how customers changed their behavior in response to the AMI technology. ComEd estimated
the costs of the CAP to be $12.6 million. ComEd proposed amending the rider to allow
recovery of the CAP costs in addition to the costs of installing the AMI meters. The rider that
had been approved in the rate case was called “Rider SMP” (ComEd, 405 Ill. App. 3d at
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409), but ComEd subsequently gave it two new names–“Rider AMP” and “Rider AMP-
CA”–to represent Phase 0 and the CAP, respectively.
¶ 17 The Commission reduced Phase 0 by 10,000 meters but otherwise approved ComEd’s
request to recover the costs of Phase 0 and the CAP through the rider that had been approved
in the rate case. In doing so, the Commission specifically reaffirmed and relied on its
conclusion in the authorization order that the Phase 0 costs could be properly recouped
through a rider. The Commission stated, “[w]e find that Rider recovery of the pilot program
in this instance is legal and should be adopted as was found in Docket 07-0566.”
¶ 18 The AG appealed both the Commission’s authorization order, which approved Rider
SMP to recover Phase 0 costs, and the implementation order, which approved Riders AMP
and AMP-CA for recovery of costs for the specific Phase 0 proposal of 131,000 AMI meters
and the CAP. The AG asked this court to stay the appeal of the implementation order
pending the outcome of the appeal of the authorization order, because “the same issue the
[AG] seeks to raise in this appeal [was] fully briefed and awaiting decision in [the appeal of
the authorization order].” We granted the stay.
¶ 19 On September 30, 2010, we issued ComEd, in which we reversed the Commission’s
decision to approve Rider SMP to recover the costs of Phase 0. We held that the rider
constituted improper single-issue ratemaking. ComEd, 405 Ill. App. 3d at 409-15. After our
supreme court denied the Commission and ComEd leave to appeal, we lifted the stay on this
appeal of the implementation order.
¶ 20 ANALYSIS
¶ 21 On appeal, the AG argues that principles of collateral estoppel and the law of the case bar
ComEd and the Commission from relitigating whether Riders AMP and AMP-CA are
improper single-issue ratemaking. The AG alternatively contends that, even if we decide to
revisit the issue, these riders qualify as improper single-issue ratemaking under the test we
set forth in ComEd. ComEd and the Commission respond that neither collateral estoppel nor
the law of the case applies and that the Commission exercised its discretion properly in
approving the implementation riders. We agree with the AG on both counts.
¶ 22 A. Collateral Estoppel
¶ 23 Whether the doctrine of collateral estoppel applies in this case presents a question of law.
Accordingly, our review of the issue is de novo. In re A.W., 231 Ill. 2d 92, 99 (2008). “The
doctrine of collateral estoppel bars relitigation of an issue that was already decided in a prior
case.” (Internal quotation marks omitted.) A.W., 231 Ill. 2d at 99. The three requirements for
the application of collateral estoppel are “(1) the issue decided in the prior adjudication is
identical with the one presented in the suit in question, (2) there was a final judgment on the
merits in the prior adjudication, and (3) the party against whom estoppel is asserted was a
party or in privity with a party to the prior adjudication.” Gumma v. White, 216 Ill. 2d 23, 38
(2005). Collateral estoppel applies to both legal and factual issues determined in a prior
proceeding. Du Page Forklift Service, Inc. v. Material Handling Services, Inc., 195 Ill. 2d
71, 79-80 (2001).
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¶ 24 The AG argues that all three elements of collateral estoppel are met such that the
Commission and ComEd are barred from relitigating the propriety of ComEd recouping the
costs of Phase 0 and the CAP through riders. Neither ComEd nor the Commission disputes
that there was a final judgment on the merits in the prior adjudication or that the party against
whom estoppel is asserted was a party or in privity with a party to the prior adjudication.
Rather, ComEd and the Commission argue that the issue decided in ComEd is not identical
to the one presented here. Specifically, they argue that the two appeals involve materially
different facts and legal issues and that it would be unfair to invalidate Riders AMP and
AMP-CA. We disagree.
¶ 25 The tariffs for Riders AMP and AMP-CA that the Commission approved in the
implementation order confirm that these riders are identical to Rider SMP, because the tariffs
specifically define the “Advanced Metering Program” (AMP) subject to the riders as “the
scaled deployment of advanced metering infrastructure pursuant to the [Commission’s] final
order in Docket No. 07-0566,” but amended to include “AMP customer applications.” In
fact, ComEd argued before the Commission that Riders AMP and AMP-CA should be
approved precisely because they were entirely within the scope of Rider SMP, which had
been approved already.
¶ 26 The identical issue presented in ComEd and in this appeal is whether the Commission
had discretion to authorize rider recovery for ComEd’s system modernization pilot program.
In approving Riders AMP and AMP-CA, the Commission stated, “We find that Rider
recovery of the pilot program in [Docket 09-0263] is legal and should be adopted as was
found in Docket 07-0566.” (Emphasis added.) Thus, the Commission recognized that, for the
purpose of determining the riders’ validity, the system modernization pilot program
addressed in the authorization and implementation orders was the same.
¶ 27 In ComEd, we held that the Commission abused its discretion by authorizing Rider SMP
for recovery of the costs of implementing Phase 0 of ComEd’s system modernization project.
ComEd, 405 Ill. App. 3d at 409-10. We concluded that, “[b]ecause a rider is a method of
single-issue ratemaking, by nature, it is not allowed absent a showing of exceptional
circumstances.” ComEd, 405 Ill. App. 3d at 411. ComEd and the Commission do not dispute
that, like Rider SMP, Riders AMP and AMP-CA are intended to immediately recoup the
costs of modernizing ComEd’s delivery system toward a smart grid. Renaming and amending
the rider to include the CAP for monitoring customers’ behavior does not change the nature
of the program or create novel legal or factual issues regarding the riders’ validity.
¶ 28 ComEd argues that the implementation order should be affirmed because applying the
doctrine of collateral estoppel would be “unfair” under these circumstances, but the utility
cites no authority for the proposition. In light of our previous invalidation of Rider SMP in
ComEd, the utility suffers no prejudice from being collaterally estopped from advocating the
validity of Riders AMP and AMP-CA in this appeal.
¶ 29 In ComEd, we held that AMI costs could not be recovered through a rider because it is
single-issue ratemaking, and the identical issue is presented here. Therefore, ComEd and the
Commission are barred from rearguing the issue of whether rider recovery is proper.
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¶ 30 B. Law of the Case
¶ 31 Like collateral estoppel, the law-of-the-case doctrine generally bars relitigation of an
issue previously decided in the same case. People v. Tenner, 206 Ill. 2d 381, 395 (2002). The
law-of-the-case doctrine provides that questions of law decided on a previous appeal are
binding on the trial court on remand as well as on the appellate court on a subsequent appeal.
Norris v. National Union Fire Insurance Co. of Pittsburgh, 368 Ill. App. 3d 576, 580 (2006).
“However, the doctrine ‘merely expresses the practice of courts generally to refuse to reopen
what has been decided; it is not a limit on their power.’ ” Norris, 368 Ill. App. 3d at 580
(quoting People v. Patterson, 154 Ill. 2d 414, 468-69 (1992)).
¶ 32 The purpose of the law-of-the-case doctrine is to protect settled expectations of the
parties, ensure uniformity of decisions, maintain consistency during the course of a single
case, effect proper administration of justice, and bring litigation to an end. Norris, 368 Ill.
App. 3d at 581. The doctrine is also intended to maintain the prestige of the courts, because,
if an appellate court issues contrary opinions on the same issue in the same case, its prestige
is undercut. Norris, 368 Ill. App. 3d at 581. Thus, when an appellate court reverses a
judgment and remands the cause with a specific mandate, the only proper issue on a second
appeal is whether the trial court’s order on remand is in accord with the mandate. Norris, 368
Ill. App. 3d at 581.
¶ 33 In this case, the Commission bifurcated into two proceedings ComEd’s request for rider
recovery of the costs of AMI. First, the Commission determined the legality of the rider.
Second, the Commission enumerated the specific costs recoverable under the rider. We agree
with the AG that, notwithstanding this procedural posture, the doctrine of the law of the case
applies because the implementation order is part of the same proceedings as those we ruled
upon in ComEd.
¶ 34 After entering the authorization order, the Commission directed ComEd “to engage in
a workshop process with interested stakeholders in order ‘to develop project goals,
timeliness, evaluation criteria, and Phase 0 technology selection criteria.’ ” The
implementation order at issue in this appeal was entered only because ComEd had not
ascertained the size, scope, and other details of Phase 0 when it sought authorization for
Rider SMP. ComEd, 405 Ill. App. 3d at 409. The Commission’s use of two docket numbers
in entering the authorization and implementation orders does not transform the rider recovery
proceedings into two distinct cases. In fact, while ComEd was pending we stayed this appeal
because we wished to protect the settled expectations of the parties, ensure uniformity of the
decisions, maintain consistency during the course of a single case, effect proper
administration of justice, and bring the litigation to an end. See Norris, 368 Ill. App. 3d at
581. The additional details that ComEd provided following the workshops does not change
the nature of the proceedings.
¶ 35 We note that there are two recognized exceptions to the law-of-the-case doctrine: (1)
when a higher reviewing court, subsequent to the lower court’s decision, makes a contrary
ruling on the same issue; and (2) when a reviewing court finds that its prior decision was
palpably erroneous. Norris, 368 Ill. App. 3d at 581. Neither exception applies here. We
conclude that the law-of-the-case doctrine binds ComEd and the Commission on the
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questions of law decided in ComEd, including the legality of rider recovery for Phase 0 and
the CAP.
¶ 36 C. Single-Issue Ratemaking
¶ 37 Even if we were to conclude that collateral estoppel and the law of the case do not bar
ComEd from seeking approval of Riders AMP and AMP-CA, we would conclude that the
Commission abused its discretion in approving the riders, because they amount to improper
single-issue ratemaking. “We give substantial deference to the decisions of the Commission,
in light of its expertise and experience in this area.” ComEd, 405 Ill. App. 3d at 397.
“Accordingly, on appeal, the Commission’s findings of fact are considered prima facie true;
its orders are considered prima facie reasonable; and the appellant bears the burden of proof
on all issues raised.” ComEd, 405 Ill. App. 3d at 397.
¶ 38 “Though we are not bound by the Commission on questions of law, we will give
substantial weight and deference to an interpretation of an ambiguous statute by the agency
charged with the administration and enforcement of the statute, which in this case is the
Commission.” (Internal quotation marks omitted.) ComEd, 405 Ill. App. 3d at 397. “Our
review is limited to the following matters: (1) whether the Commission acted within its
authority; (2) whether it made adequate findings to support its decision; (3) whether the
decision was supported by substantial evidence; and (4) whether state or federal
constitutional rights were infringed.” ComEd, 405 Ill. App. 3d at 397-98.
¶ 39 “In making adequate findings, the Commission is not required to provide findings on
each evidentiary claim; its findings are sufficient if they are specific enough to enable the
court to make an informed and intelligent review of its order.” ComEd, 405 Ill. App. 3d at
398; see 220 ILCS 5/10-201(e)(iii) (West 2006). “In other words, it must state the facts
essential to its ruling so that the court can properly review the basis for the decision.”
ComEd, 405 Ill. App. 3d at 398.
¶ 40 Moreover, “substantial evidence” means more than a mere scintilla; however, it need not
rise to the level of a preponderance of the evidence. ComEd, 405 Ill. App. 3d at 398. It is
evidence that a “ ‘reasoning mind would accept as sufficient to support a particular
conclusion.’ ” (Internal quotation marks omitted.) ComEd, 405 Ill. App. 3d at 398 (quoting
Citizens Utility Board v. Illinois Commerce Comm’n, 291 Ill. App. 3d 300, 304 (1997)). “Our
supreme court has held that deference to the Commission is ‘especially appropriate in the
area of fixing rates.’ ” (Internal quotation marks omitted.) ComEd, 405 Ill. App. 3d at 398
(quoting Iowa-Illinois Gas & Electric Co. v. Illinois Commerce Comm’n, 19 Ill. 2d 436, 442
(1960)). “On review, this court can neither reevaluate the credibility or weight of the
evidence nor substitute its judgment for that of the Commission.” ComEd, 405 Ill. App. 3d
at 398.
¶ 41 In ComEd, the AG argued that the Commission erred in approving Rider SMP, in part
because the approval was contrary to settled ratemaking principles and was not justified by
the evidence. We concluded that the Commission committed reversible error because Rider
SMP was not supported by substantial evidence. “Rider SMP is a classic example of
improper single-issue ratemaking because AMI is the type of cost that should be addressed
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through normal ratemaking procedures.” ComEd, 405 Ill. App. 3d at 410.
¶ 42 “The rule against single-issue ratemaking makes it improper to consider in isolation
changes in particular portions of a utility’s revenue requirement.” ComEd, 405 Ill. App. 3d
at 410. “The rule ensures that the utility’s revenue requirement is based on the utility’s
aggregate costs and the demand on the utility, rather than on certain specific costs related
to a component of its operation.” (Emphasis in original.) ComEd, 405 Ill. App. 3d at 410.
“Often a change in one item of the revenue-requirement formula is offset by a corresponding
change in another component of the formula.” ComEd, 405 Ill. App. 3d at 410. “For instance,
certain expenses for one aspect of a utility’s business may be offset by savings in another
area, thus removing the need for greater revenue.” ComEd, 405 Ill. App. 3d at 410. “If rates
are increased based solely on one factor, the ratemaking structure becomes distorted because
there is no consideration of the changes to the other elements of the revenue formula, such
as the operational savings from the improvements.” ComEd, 405 Ill. App. 3d at 410.
¶ 43 “Single-issue ratemaking is prohibited because it considers changes in isolation, thereby
ignoring potentially offsetting considerations and risking understatement or overstatement
of the overall revenue requirement.” ComEd, 405 Ill. App. 3d at 411. “However, a rider, or
automatic adjustment, can change a rate without requiring a utility to delay recovery until it
files a general rate case.” ComEd, 405 Ill. App. 3d at 411. In its most recent pronouncement
on the issue, the supreme court described riders as follows:
“ ‘[A] rider mechanism merely facilitates direct recovery of a particular cost, without
direct impact on the utility’s rate of return. The prohibition against single-issue
ratemaking requires that, in a general base rate proceeding, the Commission must
examine all elements of the revenue requirement formula to determine the interaction and
overall impact any change will have on the utility’s revenue requirement, including its
return on investment. The rule does not circumscribe the Commission’s ability to
approve direct recovery of unique costs through a rider when circumstances warrant such
treatment.’ ” ComEd, 405 Ill. App. 3d at 411 (quoting Citizens Utility Board v. Illinois
Commerce Comm’n, 166 Ill. 2d 111, 138 (1995)).
¶ 44 “Because a rider is a method of single-issue ratemaking, by nature, it is not allowed
absent a showing of exceptional circumstances.” ComEd, 405 Ill. App. 3d at 411. “The risk
of single-issue ratemaking requires that all riders be closely scrutinized to prevent
understatement or overstatement of the overall revenue requirement.” ComEd, 405 Ill. App.
3d at 411. “However, the Commission has the power to authorize a rider in a proper case and
such authorization will not be reversed absent an abuse of discretion.” ComEd, 405 Ill. App.
3d at 411.
¶ 45 In ComEd, we comprehensively reviewed cases involving single-issue ratemaking
through riders and fashioned the following test for rider validity:
“[T]he Commission has discretion to approve a utility’s proposed rider mechanism to
recover a particular cost if (1) the cost is imposed upon the utility by an external
circumstance over which the utility has no control and (2) the cost does not affect the
utility’s revenue requirement. In other words, a rider is appropriate only if the utility
cannot influence the cost (Citizen’s Utility Board, 166 Ill. 2d at 138 (‘a rider mechanism
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is effective and appropriate for cost recovery when a utility is faced with unexpected,
volatile, or fluctuating expenses’)) and the expense is a pass-through item that does not
change other expenses or increase income (Citizen’s Utility Board, 166 Ill. 2d at 138 (a
valid rider has no ‘direct impact on the utility’s rate of return’)).” ComEd, 405 Ill. App.
3d at 414.
¶ 46 Applying the test, we held that Rider SMP did not meet the criteria to warrant single-
issue ratemaking. ComEd, 405 Ill. App. 3d at 414. We concluded that the expenses relating
to AMI and the smart grid technologies, including Phase 0, were not unexpected, volatile,
or fluctuating, as ComEd alone dictated the program’s scope and, therefore, its costs.
ComEd, 405 Ill. App. 3d at 414-15. “The capital costs associated with AMI and the smart
grid technologies are not the result of legislative mandate, but rather are the result of
ComEd’s decision to innovate to reduce other costs.” ComEd, 405 Ill. App. 3d at 415.
“ComEd can cover the expenses by a fiscal and operational plan that is completely within
the utility’s control.” ComEd, 405 Ill. App. 3d at 415. We noted that the “Commission heard
no evidence that the system modernization costs might produce unacceptable financial
outcomes if not afforded special treatment.” ComEd, 405 Ill. App. 3d at 415.
¶ 47 In this appeal, the Commission and ComEd suggest that rider recovery of the costs of
Phase 0 and the CAP is justified by state and federal policies that encourage the
modernization of the nation’s electricity transmission and distribution system. However,
neither the Commission nor ComEd points to any law that requires ComEd to implement
such a project, which arguably would take the expense out of ComEd’s control.
¶ 48 For purposes of testing their validity under ratemaking principles, Rider SMP and Rider
AMP are indistinguishable. ComEd proposed Rider SMP, and later Rider AMP, precisely
because the improvements were expected to reduce other expenses and increase income in
the long term, which are factors that affect the utility’s revenue requirement. To allow Rider
SMP or Rider AMP would be to improperly consider in isolation changes in a particular
portion of a utility’s revenue requirement. See ComEd, 405 Ill. App. 3d at 415. “The system
modernization program is desirable precisely because the increased costs would be more than
offset by a positive, corresponding change in another component of the revenue requirement
formula. Increasing the rates based solely on the costs of the program would distort the
ratemaking structure.” ComEd, 405 Ill. App. 3d at 415. “The evidence showed that ComEd
historically has invested in capital distribution improvements and recouped those costs
through traditional ratemaking procedures, and the system modernization program should
be treated no differently,” regardless of the name that ComEd gives the rider. ComEd, 405
Ill. App. 3d at 415. We conclude that the Commission abused its discretion, and we reverse
the approval of Rider AMP, because it constitutes improper single-issue ratemaking that is
not justified by any special circumstances. See ComEd, 405 Ill. App. 3d at 415.
¶ 49 Similarly, Rider AMP-CA does not meet the criteria to warrant single-issue ratemaking.
In the authorization order, the Commission required ComEd to complete the workshop
process. After doing so, ComEd sought to include another component, the CAP, represented
by Rider AMP-CA. Before the Commission, the parties disputed whether recoupment of the
CAP costs exceeded the scope of the authorization order, and the Commission concluded
that it did not. The Commission concluded that studying customer behavior in response to
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AMI technology was part of developing the AMI program, which is what the authorization
order compelled ComEd to do. Accordingly, the Commission’s implementation order
allowed recoupment of the CAP costs.
¶ 50 The Commission’s decision to allow the CAP costs to be recovered through a rider must
be reversed for the same reason we disallowed recovery for Phase 0: rider recovery for the
CAP is prohibited as improper single-issue ratemaking. The CAP does not satisfy the first
criterion for rider recovery, because it is a discretionary expense at least partially within the
utility’s control. ComEd participated in the workshops to work out the details of the program,
but in the end, the program was not mandated by any outside authority or imposed upon
ComEd. Because the expenses ComEd will incur studying customer responses to AMI
technology are entirely within its control, ComEd “can cover the expenses by a fiscal and
operational plan that is completely within the utility’s control.” ComEd, 405 Ill. App. 3d at
415. ComEd can incorporate the expenses into test-year ratemaking and address them
through normal ratemaking procedures. See ComEd, 405 Ill. App. 3d at 410. The expenses,
regardless of their alleged uncertainty, are not external factors imposed on the utility that
would be passed directly on to the consumer without affecting the utility’s return on
investment. See ComEd, 405 Ill. App. 3d at 414. ComEd and the Commission alternatively
argue that ComEd was wrongly decided, but we decline their invitation to depart from our
analysis in that opinion.
¶ 51 CONCLUSION
¶ 52 In ComEd, we held that the Commission abused its discretion in approving Rider SMP,
because the rider amounts to improper single-issue ratemaking. Consistent with ComEd and
the procedural background of this appeal, we hold that (1) collateral estoppel and the law of
the case bar recovery through Riders AMP and AMP-CA and (2) the Commission abused
its discretion in approving Riders AMP and AMP-CA, because, like Rider SMP, they amount
to improper single-issue ratemaking.
¶ 53 For the preceding reasons, the decision of the Commission to allow ComEd to recover
the costs of Phase 0 and the CAP through Riders AMP and AMP-CA is reversed.
¶ 54 Reversed.
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