were all those who are going to participate in the identifier sols of for the record and if there are any other councils of record that wish to formalize their appearance here you may also step up american water company expenses should be included in the current rate set for the water company on the public utilities act requires the commission to set rates that are just and reasonable by rule the commission has something called the test your role which the illinois supreme court a legally mandated expanse that same test your rule apply in next a man or in general yes sure although there's been exceptions carved out by the commission for things like water tank painting or with that are required i suppose or tax tax obligations that the company has and there are times where the commission has allowed the company to treat the assets or give special charges as i trust the rationale behind allowing it the rationale i believe your honor is that the costs are required the company has to incur them you don't really need to do a lot of thinking about that they're entitled to recover them because they're necessarily going to be costs but in a test year l when you say they're not allowed for by any particular rule i thought that in and out nine hundred seventy one this idea that an expense the expense for actually putting on this rate case was something that hundred seventy one supreme court decision i don't recall the name but you're correct i remember the year that talks about that says that rate case expense is a case is a response the company is entitled to include as opposed to the and you simply at this point attempt to say that that's a risk a back to shareholders tank whenever they file a rate case there's a period of expenses i think you if it's summed up exactly what i was going to present here the the test year i'm sorry that the rate case expense is different than most other expenses because it always or almost always goes over a year so the commission rightly says this has to be divided up and you can't collect all of it in every year going forward because that would over compensate the company if the rates are expected to be three year rates for example that will allow the company to collect a third every year going forward the interesting thing here is that it does it keep going and it's because of the test year we're under it walks the company up the whole point in the commission of the people to but their point of it is to match the cost the company incurs with the benefits and estimate is made in the test year and the rates are set with that estimate and we don't go back and jigger those rates once they're established as long as no one comes to the commission and says the rates have to be changed the company can keep charging the rates they charge last year and the rates they charge last year happen to include this component and so no one really can complain because that's sort of the deal now now actually how do you if it were amortize only an amortized until the them file so that let's say if the if it was one hundred thousand dollars it would be amortize to allow the entire hundred thousand dollars to be collected would you be contesting it now and the next question would be the commission says this is a reasonable bill but it's going to provide value for years and so we're not going to let you put this in the annual rate because it's it's not going to be recovered in that one year we think you should be you're covered over a period of years in the going on here and that's partly why it's confusing i think to people because amortization in a normal circumstance has a meaning that's different here it's just in our with this call that normalization in here what's happening here is there's an amount allocated for the test  the rates are set for the company and after the rates are set the statute says to the company that's your those are your rates and if the company can figure out a way of lowering its costs nobody gets to come back and say you know well we should have a regular they don't anyway and the company can take all the savings it has as profit and that's fair and that's that's just the way the system is designed to make the company operate efficiently the problem comes in a case like this one where the were the company  we have knew about a rate case expense we're going to use this money for the current rates please allow us that and we never really got the money back from the old one and we have that too and what's really going on here is there's double counting because the current rates and under the test year will everything else forward how much is the company going to need next year in the year after the year for that we don't look back in time the fact that the company hasn't recovered everything that part of the recovery is not a function that is not something that should be allowed to them the old rates really are not the thing the commission looks to in setting the new rates that's why rape cases are so expensive because what we don't look to is it with the ovaries we looked with test like do they do they have to accept the fact that the let's let's shift now from my hundred thousand to two and a half million let's say which is a little more substantial i do they does the does the commission have to treat  recalculate until we have a new rate case that rates in the if the company has problems in a given year with one of its expenses that's tough luck it has to deal with the rate structure it has and the rate structure is not going to change because they have a  writers because they'll get they'll get all the money that they need for the current rate case and they'll get the recover anything that is left for the older a case there's no incentive for the company to sue to be official and to live with the raids if the commission is going to use in that sense why would you say that this is a good idea first instance because the rates are locked in place so they stay locked in place until there's a new rate case it creates predictability in rates we know what the company's going to be able to charge consumers and summers know what they're going to have to pay and the fact that there happens to be one cost that the company can improve over and make money on is is not a bad thing and the other side is that when the company has costs that there are you know beyond its means the consumers benefit there because that's the company's problem they have to live with the rate structure if they ask for a new rate structure they can have it but what they can't have if they ask for a new ra structure is a collection of the old costs from the old past years because that's what the the whole idea of the test here is what i mean is would you say yes or it's this notion why you're i apologize i to multiple millions of dollars they actually a fact which people are paying on their bills and that's why the people are upset about this particular practice it's it's it's a longstanding on the commission as hard as this  out there was different components to it and yes admit it gets more and more complicated but we're talking about this principle is the same no matter what the numbers are and i don't know that the numbers in this particular case are large but it is  commission to assess and specifically address attorney's fees in this case there was one witness who testified in favor of the fees on behalf of the staff that with this review documents and said he had based on his review it was fair that was attorney general put it into into the record it's some it's exhibit but they may have been but those answers do not meet the requirements of illinois law that would allow the the commission to specifically address of the size of this  but actually my p c p the hourly rates were only a small component of your objection because you're basically saying it should have been of a should have followed the review you know my argument is commission could not have done it because the record in this case doesn't show anything like the materials that would need to be done to sas and they couldn't have left their employee to do it because if you look at what the employee actually reviewed you'll see that these are just names and hours and billing rates a lot of this has been redacted what we think should be in this record are the types of things a trial judge would see in any fish shifting case along with a finding by the commission that they've looked at it or considered it and that just wasn't done here and we think it should be reversed on that ground as well i'm sure i've got over my time your honor if i could just bring up one final point the other issues in my brief the management fee question the public comment question i would urge the court not to get to those issues because it's my contention as the commission argues as well that the company is not in time in its of its optician the statute requires them to have filed it within thirty five days of the denial of reconsideration and they were ten days late well first of all i got a couple of questions about back and some some of which you may prefer to answer now but certainly i want your your colleagues from moments to thinking about it  to file on the very last day assault so any fact the court certainly wouldn't receive the best set of the three or three determination in that appeal with you call it cross or grog which is what you would like to see but the question is whether the legislature she said that way and whether the quite so will see it that way since there are different honors my name is robert sort of an attorney for i want to american water under the agreed schedule i have five minutes at the conclusion of this argument during which time i would address any response on the but one is zero earlier in time that's correct your honor they're both part of the direct appeal process and i think the distinction is that the jurisdiction passed with the appellate court at the time  the filing of the petition for review as the second district noted in the kreutzer case at that point then the appellate court's rules control including possibile rules as the first district recognizes in the city of chicago case when it allowed cross will continue even though the original deal had been dismissed but it's well established that the legislature in the courts have concurrent jurisdiction to probably get procedural rules but the legislature mu the direct administrative review such that a commerce commission decision may be appealed directly to the appellate court however the constitution does permit the supreme court to establish rules allowing expeditious and so with the concurrent jurisdiction the supreme court rules would control the event of a conflict and they under the concurrent jurisdiction the and that would make rule three a three day political i don't think that we even need to reach the separation of powers issue because i don't see a conflict between three o three a and ten to a one and two a one permits the initial appeal service company fees the appealing possibile newest case arise from one rape case order but i think this is really a tale of two wars and balance the commission got it right reaching reasonable brief at some length only american submitted extensive evidence on management fees and i will not repeat that extensive description here i'll just point out that no witness contested the need for any service from service company no witness claimed that the projected test your cost of any service was inaccurate or disputed that the service company was worth a service provider with just disputed that the water company would save seven million dollars in a test year by taking services from a service company just kind of a hypothetical competitive bidding situation rather than an actual competitive bidding situation is it your position that the commission is basically well i think you're ari that you're correct that the order said that the competitive bidding information or the cost of services would be set are are a step list had they been a painter competitive bidding and not actually requiring actual competitive bids so you are also correct that the commission has the ability to weigh the evidence but with respect to the evidence submitted in response to the two thousand and seven order and the evidence including the evidence of possible harrisons that evidence was was uncontested no witness said that they should have done something differently they should have used a different it's the bulk of it was a market comparison not competitive well you're out of commission maybe free to say that but the commission did not say that in a sort of the commission did not explain why it nor the uncontested the study that was requested and demanded was not complied with the order to do that well i think two things one is the record supports the conclusion that there was competitive in from getting information in the studies and the commission admits in its brief that at least one of the studies was complying with the order so the order doesn't explain why it if one study was compliant why that was or was not sufficient in the absence of that explanation alone i think it is enough to warrant a reman but i would go on to say that even if we were to take the question that it is not necessarily want to compliance even if we were to take all of the studies and information that the company submitted in response to the two thousand seven hundred her oh there's still the question of what is a just and reasonable level currently incurred management fee expense and the  and even with out all the evidence submitted and what was that actual management fee in the test year i was actually twenty one point five million dollars and that was how much of an increase from the two years before it was an increase of approximately twenty percent over what was allowed in the prior case although i believe the increase was some of last with respect to what was actually heard in prior years but my point that i think it is key to understand is that even without the evidence submitted in response to the tooth out seven order and one general contributed to this twenty well that's the best that in a nutshell that's that's exactly what i'm getting to your honor's the company submitted evidence not under spons conclusion for example could ask for only nobel laureates to give testimony i asked to what the give a proper rate making expenses should be and then does the commission have authority to answer orders requiring that companies utilities provide certain information not certain information but certain types of information what other information base simply  be adequate towards the determination of the issue that it wants to look consider well i think the commission would consider and to consider in this order the question of if they require information if they require studies what is the cost of that going to be what is the cough that you know pose on the great bear and on the utility to obtain that information and i think that's something that the commission was i'm not exactly sure all hypothetical competitive  work i think that that's correct your honor that the there were significant practical difficulties with actual bidding and so there was some actual been information but the company developed this methodology of market comparison to requirement is to establish a market cost of compared to service companies cost so the market comparison looks at hourly rates for different services and determines based on those hourly rates what a market cost would be to compare the assumption the methodology is designed to approximate what you would get it was very would be hypothetical competitive bidding that is not already included in your market costs time here but i guess i'd like to return to to two points one is that as i was saying before even without the two thousand and seven evidence the company still submitted evidence explain the reasons for the increase and supporting it to resolve the issue through that finance that is insufficient maybe it can but that's something that i certainly would like to hear more about what if anybody thinks that it can and if the five and a half percent resolution was something pulled out of the hat simply because it was the adjustment was based strictly on the finding of noncompliance it is not appropriate to sanction the company by imposing an arbitrary bigger thing i don't i don't see where you  there is perhaps an element of sanction there but not the full fledge implication of what you might sanction which is a penalty based on punishment  from the commission's appellate review attempt to explain and say this finding is strictly based on noncompliance which hasn't an element of sanction particularly given the uncontested other evidence even if they reject the commission rejects the evidence submitted in response to a prior order it still has a responsibility to weigh the evidence submitted and as i said there's an attire another set of evidence supporting the test your level of already implement the be preferable proof from there that then how would that be enforced if they had to take what you gave them in its place then that puts  frame of legal reference do we determine that well i think you need to look at whether the commission enter did order that it explained and was consistent with the substantial weight of the evidence and didn't act arbitrarily and i think that's the key here is that the five percent number comes out of thin air is an arbitrary application applied for what reason the order doesn't say therefore it should be remanded for a determination of service company that these five and a half percent case to some average price well again that's the problem the five and a half percent number came from the briefs of the attorney general there's no witness testimony explaining that that's appropriate or even if the math is correct so but the point we're making in our brief is that we can and dr mathematical equation and come up with a different number but again he returned to the question of the arbitrariness of the five percent and the lack of explanation as to why the the only thing is the s the court kind of recognized rick expenses a unique it only comes up when they filed a case expenses and the company only has it because they're regulated under the public until the act of ordinary business does not have break a sixpence that they just at their own rates without having to get regulatory approval then undermines the people's argument about single issue rate making because if this was simply making you couldn't amortize or normalize it you'd have to give them one hundred recovery of the test your mounts of the price previously approved break the suspense was retroactively should be denied here in the witnesses for all american and the commission staff supported the recovery of the tester amount of the previously approved rate case expense seek such a retroactive attempt to alter the prior commission decision  e writer and the rake a sixpence here and is not recovered through a writer it's just one of the many expenses the utility has that is covered through the black customer charging biometric charge just like every other expense recovered in the test year by this should solely the aggregate of the cost and demands of its only ob the people have made the relevant argument that the only american control just rates case expenses are relevant to can't change your mind so they or will in a generic case that was issued just to address all the issues for all it's early do you know illinois that we couldn't change what we did on two cases that were decided a much weaker records about the same time as we reopen we don't true it's never been reviewed before so the court is not bound to any prior decision on america but nonetheless the court the courts have sustained the commission if we do the same thing and have we have certainly been reversed when we change something the court didn't think are sufficient grounds  so true that's one of done in the past where the reason that this is a test you're amounts to has been recognized and has been imposed on you totally yes so that and you're right there has not been a court case prior to that right getting at is that the court cases that permit us to give you deference in reviewing and any particular tool that the commission has really ever relied upon in granting this expense that occurred in a previous rate to the when it first got to say oh now it's legal you've been doing it all this time in the court recognizes that we try to do what is just and reasonable and you're talking in terms of deference i'm liking what the commission does is it is the only solution on this record no one came basis would the court interfere with discretionary authority in the commission decided to do this now the question is if you get rid of you know singlish and retroactive rate what is your what is your is that the the billing and has been that it was presented in discovery to the station staff and probably to all the other major parties since they all asked for the same documents and still the major players always asked for everybody else's answer are wise generally speaking when there's been a piece shifting process where someone is given fees or whatever work the court does the same that was used to determine whether they're reasonable and the way they usually do that the way stack is is there any evidence that the commission can simply odd except without any kind of scrutiny isn't so that in in that event without the statute the fees will be subject to the same prerequisite so the question again becomes law does the statute and that it's there should require that we have a nice paragraph that's in this case after all you need that for i would hope the statute just based that on the requirement that the commission explain the basis of or it's really in the absence of evidence or a challenge couldn't one say there was a major change in the rate case expense from two thousand and seven to two thousand and i think that's and there's no obligation to even look at why that increase was what it was an old wall your honor i think the argument commission couldn't couldn't set their rates for this test year and this rate case expenses by saying gee we have only given your million dollars previously we don't hear t the case by the pirates yes so all of the fact that something is on challenge is not a complete yet response system well except that courts have never sustained us if we do something that has no eviden differences loss can tell you you got to do it irrespective of what you want to do or what what's happened may overcome it and i've been a champion but there's no right of the commission to say no you don't get more money you have to look at the case and the company presented this testimony supporting it supreme court to alter that time we say being is is is this issue fairly represented in your characterization because the preliminary issue is whether we're dealing if you cannot have that extra time to file your crops he'll then you're at the mercy of the director the talent as to whether you will ever have a choice  consequently to protect their own flanks everyone will have to make sure that they file a direct appeal without regard to whether they're out there without being able to consider whether idea that necessarily every possibility is strategically placing itself i think this is wrong now the now is then a private judgment between two parties in a divorce as talking about what may appeals are taken from the commission and when no one else appeals they the party moves to the specific he'll i'm not sure this cross appeal option gives anybody much of anything else that they don't have already  statute says was the appeal shall be taken directly to the appellate court under the mystery real why did not provide any time period for taking it and that's why the court said it wasn't a direct conflict this case is a direct conflict with the thirty five service the service fees issue the commission directed in a prior warning that only american conduct the study comparing the cost of each service obtain on a service company to the cost of such services had to be entertained by in the open market there was no appeal by own american challenging that there was abuse so in that we didn't understand it or anything they said oh yeah we'll do it and as a matter of fact they did comply in a minor study they did for bell bill whips but when it the commission have discretion to impose requirements of that boutique type of requirements that are not  the service oh a commission direction in a commission order which they did not do and yet the third district cases they did give you some evidence there that well you of that alternative evidence that the utility priest well i mean if the committee if the commission is a rubber stamp that the company puts in the number we must give it to them and we have no right to require them to give us evidence so argue with the commission come out you don't want to do this and mislead all of these would be competitors to submit bid said they had no hope of ever getting well except they were able to get it when they did the lead study th there's no basis you don't know that that's what they'd actually charge this company for doing it you know the act if they actually set down and did they would actually decide whether cost would be how much they need to make a profit sometimes if it would be lower than what they publish is the rate we've ordered utilities do studies and the studies because they were outside test year and up you look at them but you can't use them for any it doesn't matter if they show their overpaying or do something wrong in a year or two years before the test year you have to show that it's happening in the  fact would between the conflicting evidence well in this case this condition was created by the commission by the commissioners themselves the argument that there are conditions are only good if someone steps up  and says that that it is i find somewhat disturbing what we're not a judicial body where we just sit here and cover says those in some cases there are some i said nothing and go rubber stamp that's the number this is all dealing with accounting  the unfairness or the attacks will disband if someone has one of these appeals when they when they are one of the across talent but we have to recall that under the administrative review law all respondents are named by the petitioner so agency and you decide i can live with this book i'm not going to do anything and then somebody files a petition and you need to respond that and your position then is i'm defending the decision i can live with you can't complain about that decision but you can show up and defend it so there's no one fairness or tackle problem my argument is is that petitions direct positions for you are just different than than anything that the law would otherwise we cry with part across appeals this is not right it is allowing a double recovery and going forward it shouldn't be allowed by the commission and our argument to the commission was mr smith our witness has touched on the problem he's explained it but he's he's he said something that's legally not correct or if i never touched case expense by law if the test year rule which he just said it does and it can't be awarded in this case the company and the commission take issue with the fact that we didn't object in two thousand and seven we limitation on the parties not the court this is a good case for the court to reach this question it's never come up to an appellate court before and it has the potential to be a lot of money in cases going forward with regard to the service company fee let's forget that mr smith said he's an expert he didn't say a lot but he did say that five five five a half percent was a reasonable amount for what was done that's evidence that if the commission wants to weigh that evidence they have to have some foundation it might be your honor but he's they're subject to cross examination which you don't have an affidavit in and so i think that changes everything they could have it i mean he was this was all done on paper but that's because the parties did it pursuant to the commission's rule that's what they agreed to they wanted to cross exam that takes care of the whole public comment question i know it's not been raised but there is evidence in this case about that five percent i would argue it's sufficient to uphold the commission lastly with regard to attorney's fees nine two two nine the burden is always on the company to establish the reasonable of this of the fees the general assembly here suggested that it's not that happy with the way that these records have been pared in the past i would suggest to your honor's that any record awarding fees has to show you the reviewing court but the fees are just that your your honour's understand that the best of my ability to test your level of rate case expenses it's really what the exercise is to try and establish what a representative level of a fluctuating expense that may or may not occur in the test or some of the make or if that's fair some i make are outside the test here the question is how do you then establish a representative level of that expense and what the commission has done in decisions going back decades i they've balanced established a careful balancing of factors so they've set the amortization period to try and wade over recovery where it twelve month period up to twenty four months after the case is filed i see so it's not it's prospect it has of the filing date but it's not prospect to pass through the hearing date i would still typically be prospectivity hearing  example in the well in the prior case i guess the test here had started by the time we got to see the briefing stage of the case the case concluded in two thousand and ten which was a tester so some break his expenses incurred in the test year some was not but there is a balancing here the amortization period is set in order to avoid over recovery if the period is too short but there are other balancing factors as well be a name or title balance of the prior case expense is not included in ra the other point i would like to to making in conclusion relates to the service company fees and the discussion with with counsel for the commission and the question has come up what is the commission to do if it if requested evidence that evidence was not what was required where the commissions where commissions teeth on this and at the answer i think is that the commission's response is it's to pursue to redress that however where the utility has incurred a reasonable and prudent level of expense the commission's response to not receiving information that it requested or taking the position that it hasn't received information from rest of the commission's response should not be to arbitrarily dock that reasonable and prove them out because utilities in title by larger recover that reasonable for him out of commission has other avenues which to pursue it feels that it's order