holding that the “equity” language the Commission relied on within the preamble of the Act -8- was not a substantive part of the Act; though the preamble contained numerous goals and objectives for utility regulation, it did not confer powers
How later courts described this case
- holding that the “equity” language the Commission relied on within the preamble of the Act -8- was not a substantive part of the Act; though the preamble contained numerous goals and objectives for utility regulation, it did not confer powers
- holding the Commission’s past precedent of allowing full recovery of statutorily imposed operating expenses ‘is not controlling, because the Commission is a legislative and not a judicial body, and generally its decisions are not res judicata in later proceedings before it’
- providing that a reviewing court must reverse an ICC order if it violates state or federal law
- stating that the Commission’s decisions are entitled to less deference when they drastically depart from the Commission’s past practices
Written by the judges who cited it.
The opinion
JUSTICE HARRISON, dissenting:
Under the Public Utilities Act (220 ILCS 5/1 — 101 et seq. (West 1992)), ratepayers are not required to pay any costs incurred by the utility unless those costs directly benefit the ratepayers or the services that the utility renders. (Illinois Bell Telephone Co. v. Commerce Comm’n (1973), 55 Ill. 2d 461, 482-83 .) The burden of proving such direct benefits is on the utility. (See Candlewick Lake Utilities Co. v. Illinois Commerce Comm’n (1983), 122 Ill. App. 3d 219, 227 .) The affected utilities did not meet that burden here. To the contrary, the record established unequivocally that coal-tar cleanup costs will not yield any benefits to current ratepayers, nor will they in any way enhance the services the utilities provide. Forcing ratepayers to bear costs of that kind violates basic ratemaking principles established by the Public Utilities Act and cannot be permitted. See A. Finkl & Sons Co. v. Illinois Commerce Comm’n (1993), 250 Ill. App. 3d 317, 329 .
The majority cites Citizens Utilities Co. v. Illinois Commerce Comm’n (1988), 124 Ill. 2d 195, 201 , to support a contrary conclusion, but that case is inapposite. In Citizens Utilities Co., this court observed that Federal income taxes are an operating expense that can be recovered from ratepayers. Although the majority is correct that coal-tar cleanup costs are similar to such taxes in that they are both imposed by the government, there is an important distinction.
Income taxes are directly linked to provision of current utility services. It is the profit earned from the rates charged for current service that generates most of a utility’s income tax obligation. By contrast, the obligation to pay coal-tar cleanup costs is wholly independent of the services utilities provide or the fees they charge customers for those services. A utility’s responsibility for cleanup costs is based, instead, on whether or not it happens to own or have owned contaminated property. If a utility acquired a contaminated site after a manufactured gas plant ceased operations there, it could still be liable for cleanup costs even though it never utilized the facility itself to provide service to its customers. Thus, liability for cleanup costs is ultimately a function of land ownership, not power production. Accordingly, cleanup expenses can in no sense be considered a cost of operation.
The majority reasons that ratepayers benefit from cleanup costs because compliance with Federal and State environmental laws enables the utility to continue to operate. The implication is that if ratepayers do not bear the expense, their service will be jeopardized. Such a concern is wholly unfounded. There is no reason to believe that ratepayers would be in any real danger of losing their utility service if the shareholders rather than the ratepayers had to bear the cleanup costs.
If anyone in this case benefits from the expenditure of cleanup costs it is the owners of the property, the utilities’ shareholders. They profit because, all else being equal, the removal of the hazardous materials will increase the market value of the property. Under the scheme endorsed by the majority today, however, they contribute nothing. It is the ratepayers alone who will be required to finance the costs, and they stand to share in none of the appreciation in value. This may be a lucrative arrangement for those who happen to own utility stock, but it scarcely advances the goal of providing the "least-cost public utility services at prices which accurately reflect the long-term cost of such services and which are equitable to all citizens.” 220 ILCS 5/1 — 102 (West 1992).
The majority’s analysis is flawed for another reason as well. Manufactured gas was used because, at the time, it was more efficient to manufacture the product at local facilities than to have natural gas distributed by pipeline. Presumably, this efficiency enabled previous consumers to receive gas supplies at a lower cost than they would otherwise have been required to pay. The tradeoff was that the lower-cost gas generated hazardous waste. Had the hazards been known, the cleanup costs could have been factored into the rates the utilities were allowed to charge so that the rates would accurately reflect the true cost of providing service. Because the dangers were not known, however, this was not possible. As a result, previous consumers were, in effect, undercharged.
Under the majority’s scheme, today’s ratepayers are being required to compensate for this miscalculation. The courts of this State have consistently held, however, that where rates, once set, prove to be too low, the shortfall cannot be made up by means of a surcharge (Business & Professional People for the Public Interest v. Illinois Commerce Comm’n (1991), 146 Ill. 2d 175, 243 ) because such surcharges violate the rule against retroactive ratemaking (A. Finkl, 250 Ill. App. 3d at 329 ). There is no reason to deviate from that position here. To the contrary, the case against retroactive ratemaking is even stronger in the situation before us today. In a conventional surcharge situation, current ratepayers are at least actively benefiting from the lower rates. They are the ones getting the cheaper power. Here, any benefits from the lower rates were enjoyed by ratepayers long past. Current ratepayers receive nothing.
For the foregoing reasons, I would reverse the judgment of the appellate court, set aside the decision of the Commission and remand for entry of an order declaring that coal-tar cleanup costs cannot be passed on to current ratepayers. I therefore dissent.
JUSTICE FREEMAN joins in this dissent.