making principle set forth in the public utilities act two under the principle that prohibit retroactive rate making and three under the principle that prohibit single issue rate meeting under illinois utility  i've not chosen to go that route but it's also important point that of the states that do have writers p p a generally those are pursuing your statutory amendments the rate regulation here case either based on a historic year or projected future job and rates are set going forward perspective if in the end those rates are inadequate there's some problem with that something changes the public utilities that provides the answer there too and that's section nine  two one which has come in and open up a new rate case it doesn't say you get to go back and charge consumers more because  and that's exactly right or v p how does the average consumer how it how is that he he or she affected by the writer the average consumer is affected by the writer is in this sense if at the end of the year the utilities did no achieve their revenue requirement from the consumer from the residential class in the small business class they are alive then over the next year of between april december to impose a monthly surcharge on those utilities that requires that places efficiency requirements on killing it to be sure there's other things to consider rather than practicalities but should we be influenced at all by the fed for utilities want to consume or seem to be benefiting from an environmental groups or in favor of an now that the mere fact that utilities watch it certainly isn't enough to required and it's not necessarily true that costumers like right or there are years where when customers don't use much gas when they're a mile winners then customers are going to have to pay surcharges the following year you know they didn't use ask you about process in which cases we should be looking at before i ask that specific question help me understand if i'm if it's correct what the issues in this case in other words has been argued this that rate making as astu two step process the first step is to determine the revenue requirement and the second step is to fashion a rate to collect that revenue requirement and then  here what's going on is that second prong where there was a de coupling of revenue from usage and it has been argued that you are not debating that first step determining with revenue requirement is your arguments are and that specifically the second aspect of rate making that been designing rates to collect what has been determined to be an appropriate revenue requirement sec rock rock ok now we cite you cited a lot of cases and many of them seem to be about the first determining revenue requirements and what has to go into that so i'm going to ask you what specific cases should we be looking at that can guide this court's decision in terms of that second step out of whether or not this to two to solve the problem of what happens when revenue falls short as the first answer the second answer then is on the retroactive rate making charge this cour prospective rate it's argued that those cases are really focused on the first prong that is that the original determination of the revenue requirement was wrong and so therefore to right the ship later ron have to be these is surcharge or refunds that if the problem wasn't the first time the revenue the determination was the appropriate revenue requirement and you say in this case you're not debating whether or not the original determination of revenue management was correct and there is no but there's no reason distinction between the two circumstances in other words whether the record great meeting in aus is a place to work out the overall revenue theory behind the prohibition for effective remaking a place equally to both situations there's no meaningful distinction between the two they're at their rate making cor the same pay because they both have the effect of changing rat instead of what normally happens under under the guidelines set forth by traditional rate which is if customer revenues fall short then the company needs to  other business determinations to make up for that so that it can still achieve its profit love up that's what happens in the free market that which is specifically what is supposed to be approximated in this case police don't get to go back and say well i think if you know we didn't make enough money  inconsistent with the basic principles underlying the rate the procedure that the general assembly has chosen requiring perspective for prohibiting retroactive raise requiring the companies to bear the risk fall short then it's incumbent upon the companies if you change something change the other variables to make up for that shortfall here however and in fact because of the risk because there is a respect and sume or usage may fall short that is factored in built into the entirely on the consumer classes that are subject to the ri review revenue recovery mechanism delivery service they guy in the prior turning to the single issue rate meeting prohibition briefly writers or single issue rate there's notice there's no dispute about that but generally the prohibition against english rate making recognizes that when something falls short perhaps something else also brings costs up if customers usage drops them have to our operating costs draw or alternatively they can change something to make up their revenue  how the commission is supposed to set rates or case that relate to the revenue requirement no one's taking issue with revenue requirement in this case all the kinds of decisions i was not simples decisions that occur to do th the accountancy engineers financial people decide what the operating revenues are supposed to be and then side with the capital structures most of the and then figure out what the appropriate rates of return for long short term debt and all that that's all been that the commission probably could it didn't decide to do it in this case but it probably could take off fixed costs and recover them through fixed charges secure take the revenue from that class divide it by the number of customers that would tend to drive small use customers off the system and that has to shrinks the pool of customers that rates can be recovered it would also tend to lower the incentive to conserve because that's what  recover everything this way and so based on the testimony testimony of sappho witness dr bright well they decided to go with a combination of fixed cost of the the customer charges or close to one hundred percent recovering fixed cost but none of the distribution costs are being recovered in fixed cost they're being recovered by measure and that's the solution now my point is that the main complaint the attorney general seems to have is that the rate design chosen by the commission guarantees revenue if the commission had chosen for whatever reason to recover fixed cost  charges and and the testimony of staff is that customers don't vary very much for your year you're in effect doing so so the act doesn't prohibit assuring the recovery robins as they are say the commission decided not to do that in that way but it can assure the recovery of revenues is as long as there's a true up one other thing argument that for most consumers who want to be frugal who want it why is who want the energy conserving they would be shocked to know that if they do all those things they will pay more and if that's the argument that it is making so so i think the customers can understand that i don't think that there's been a hue and cry against this rate based on understandability on how does the consumer know it's come it's published  done quickly with regard to retrofit rate making they did waive the argument they had made before they made it explicitly they made it in one fortune of the case on something else they just put all their eggs in one basket of that court's decision  what it is a written rate that is published as a tariff publicly can be looked at by the public every year these adjustments which attorney general's counselor said keep referring to them  still been every year coming in below what has been authorized by the commission as that approved return level and just pointing out in fact can bring out that there's been more adjustments returning over recovery prevented those over that over recovery and the actual return earned was below the authorized rate of return so i hope that the publication of this information he charted the adjustments underwriter principles of rate of return regulation as suggested by ons it does not change how that revenue requirement are set for the utilities and rate case revenue permits still sat in the full rate case by the commission examining all the components of cost the rate base and reasonable rate of return it does and once the revenue requirements are sat right if you be does not change the revenue requirements it doesn't provide for recovery of any cost of separate ways and as i was just discussing right or v b a does not taking a snapshot of that test year and seeing what the utilities costs are that are approved for recovery examine them all in the context of those costs the investments and the rate of return to be applied to those investments so if the concept of  actually would be in line with the fact that there should be lease cost service because it's preventing a windfall the least from recovering a windfall because of the happenstance of weather and likewise turning to their single issue a cost of capital so it's already built into the process this reduced risk and i would also point out to the point that he customers don't have any incentive to conserve well that's just not true not only because conservation were customer save the money and they haven't sent out the largest portion of a gas coasters bill is the cost of gas which is a pass through that's the largest portion that yes bill and if they want to really save money they use less gas at a later date doesn't make your rate understandable it doesn't let you know what your rate is going to be when you use the gas and avail yourself of the utilities yes a delivery service you don't know it's not understandable the fact that knowing that it's going to change in the future this means that it's uncertain and that is contrary to the notion of perspective rates and published rates and publicly and the citizens utility board are both telling you the other standard i think that's probably the most effective human right you can get that these rates don't make sense to the consumer at the time they're using ga it's not a correction that is the same type of analysis that right or v b a permits in fact requires about you over you over recovered you under recovered go back and fix it that's exactly the same of revenue requirement that is not supposed to be guaranteed there is supposed to be an element of risk for which they are compensated through profits there is supposed to be a recall obligations to manage business responsibly so if customer usage does go down then you make other changes in your business just like any free market business was right if you gave does change does not change the revenue requirement but it does actually we don't know i it is it is yes in subsequent rate cases once the fact of right or he came certain it is true that the amount of risk factor that that that there's any kind of corresponding record you know or equality in terms of the reduction of the rez basically in other words it's not clear that there are a lot of profit is lowered in direct response to a lower risk they have because they are very few requirements guaranteed and in any case in any case the basic point is that still customers are so suddenly bearing this responsibility that they achieve ratings than otherwise were initially alive when determining how to view the beverage because because of the surcharges but if i understood counsel's argument because the element of risk some of the element that is that is theoretically possible though the evidence also shows that the rate of return the companies get with right of the v a is higher than the rate of return they get without writers and that's permitted now it's true they say that they'd be funded that much money going through as a result of a had historically epically bad winter whereas in other years that preceded it when they had mild winters they're imposing rather it for for this last winter it's you know it i would offer that it's improper to draw conclusions from that it's because it's too variable and the sample sizes too small instead the important factors are returning to whether does this change rates later is this not publicly understandable does this violate east cost and is this a permissible sink a single issue rate we think is a permissible writer and you heard him argue environmental cleanup you posed by a government this is there is nothing external there's nothing external that is out of their control that they're recovering through this in so far as they are good things like whether they can setting mechanism that they're being compensated for thank you think you