Illinois Official Reports 

Appellate Court

Ameren Illinois Co. v. Illinois Commerce Comm’n,

2015 IL App (4th) 140173

Appellate Court 

Caption

AMEREN ILLINOIS COMPANY, Petitioner, v. THE ILLINOIS 

COMMERCE COMMISSION; THE CITIZENS UTILITY BOARD; 

THE ILLINOIS INDUSTRIAL ENERGY CONSUMERS 

(Archer-Daniels-Midland Company, Caterpillar, Inc., Air Products 

and Chemical Company, and United States Steel Corporation-Granite 

City Works); and THE OFFICE OF THE ATTORNEY GENERAL, 

Respondents.–DOMINION RETAIL, INC., and INTERSTATE GAS 

SUPPLY OF ILLINOIS, INC., Petitioners, v. THE ILLINOIS 

COMMERCE COMMISSION; AMEREN ILLINOIS COMPANY, 

d/b/a AMEREN ILLINOIS; THE CITIZENS UTILITY BOARD; 

THE PEOPLE OF THE STATE OF ILLINOIS; THE ILLINOIS 

INDUSTRIAL ENERGY CONSUMERS; THE ILLINOIS 

COMPETITIVE ENERGY ASSOCIATION; and THE RETAIL 

ENERGY SUPPLY ASSOCIATION, Respondents.

District & No. Fourth District

Docket Nos. 4-14-0173, 4-14-0182 cons.

Filed June 2, 2015

Decision Under 

Review

Petition for review of order of Illinois Commerce Commission, No. 

13-0192.

Judgment Affirmed.
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Counsel on

Appeal

Albert D. Sturtevant (argued), of Whitt Sturtevant LLP, of Chicago, 

Edward C. Fitzhenry, of Ameren Services Company, and Andrew J. 

Campbell, of Whitt Sturtevant LLP, of Columbus, Ohio, for petitioner 

Ameren Illinois Company.

Stephen J. Moore (argued), Thomas H. Rowland, and Kevin D. 

Rhoda, all of Rowland & Moore LLP, of Chicago, for petitioners 

Dominion Retail, Inc., and Interstate Gas Supply of Illinois, Inc.

James E. Weging (argued), Special Assistant Attorney General, of 

Chicago, for respondent Illinois Commerce Commission.

Julie L. Soderna, Christie Redd Hicks, and Kristin Munsch, of 

Chicago, for respondent Citizens Utility Board.

Panel JUSTICE APPLETON delivered the judgment of the court, with 

opinion.

Justice Harris concurred in the judgment and opinion.

Justice Steigmann concurred in part and dissented in part, with 

opinion.

 OPINION 

¶ 1 In tariffs it filed with the Illinois Commerce Commission (Commission), Ameren Illinois 

Company (Ameren) proposed increasing its rates for natural gas. The Commission suspended 

the tariffs and held an evidentiary hearing on them. The hearing culminated in a lengthy 

written decision by the Commission. Ameren appeals from one aspect of that decision, 

namely, the rate of return the Commission allowed Ameren on its equity. We are unable to say 

that, in setting the rate of return, the Commission made a decision that was against the manifest 

weight of the evidence. Therefore, in Ameren’s appeal, case No. 4-14-0173, we affirm the 

Commission’s decision. 

¶ 2 The other appeal, case No. 4-14-0182, which we have consolidated with Ameren’s appeal, 

arises from the same administrative case but concerns different tariffs. After filing its tariffs 

proposing an increase in gas rates, Ameren filed “rider” tariffs proposing the establishment of a 

small volume transportation program, a program that would allow retail gas suppliers to use 

Ameren’s infrastructure to deliver natural gas to customers who chose to enter into contracts 

with the retail gas suppliers. The Commission approved the small volume transportation 

program but required retail gas suppliers to abide by three consumer protections, over and 

above those that statutory law already provided. Two interveners, Dominion Retail, Inc., and 

Interstate Gas Supply of Illinois, Inc. (which we will call, collectively, “the retail gas 
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suppliers,” “the alternative gas suppliers,” or simply “the suppliers”), challenge the three 

consumer protections. They contend the Commission lacked statutory authority to require 

these protections, and they also contend there was no evidence that the protections were even 

necessary. We conclude the Commission had statutory authority to require the inclusion of the 

new consumer protections in the small volume transportation tariffs. The suppliers insist that 

little or no historical evidence justified these protections. But that is no reason to overturn 

them. A protection can serve the legitimate function of preventing an injury from ever 

happening. Viewing the new consumer protections that way, we defer to the Commission’s 

judgment that they would be just and reasonable conditions in Ameren’s small volume 

transportation tariffs. Therefore, we affirm the Commission’s decision in the suppliers’ appeal 

as well. 

¶ 3 I. BACKGROUND 

¶ 4 A. Ameren’s Revenue Requirement 

¶ 5 1. The Capital Asset Pricing Model

¶ 6 a. An Introduction to This Model 

¶ 7 To determine the rates a public utility may charge its customers, the Commission must 

determine the utility’s revenue requirement. Business & Professional People for the Public 

Interest v. Illinois Commerce Comm’n, 146 Ill. 2d 175, 195 (1991). The revenue requirement 

equals the utility’s operating costs plus the rate base multiplied by an allowed rate of return. 

People ex rel. Madigan v. Illinois Commerce Comm’n, 2011 IL App (1st) 100654, ¶ 26. In the 

rates a regulated utility charges its customers, it not only deserves to be compensated for its 

operating costs, but it also deserves a return on its investment: a return on the rate base. Id.

(The “rate base” is “the total value of all invested capital.” Commonwealth Edison Co. v. 

Illinois Commerce Comm’n, 2014 IL App (1st) 130302, ¶ 10.) 

¶ 8 In setting rates, the Commission has to decide what, in the mind of a reasonable investor, 

would be an attractive enough return on the present value of the utility’s property. Id. ¶ 11. For 

several years, the Commission has used the capital asset pricing model (CAPM) to determine 

the minimum rate of return needed to entice a reasonable investor to invest in a public utility. 

(As we will discuss later, the Commission also uses the discounted cash flow (DCF) model. 

But Ameren does not appeal any aspect of the Commission’s application of the DCF model in 

this case.) 

¶ 9 According to the CAPM, the required rate of return is a function of three things: (1) a 

risk-free rate of return; (2) the premium that average-risk stocks must pay over the risk-free 

rate to entice investors; and (3) the riskiness of the utility’s equity in comparison to 

average-risk stocks. Peter V. Pantaleo & Barry W. Ridings, Reorganization Value, 51 Bus. 

Law. 419, 433 (1996). The CAPM formula regards these three things as having the following 

relationship: 

Cost of equity = R(f) + (Beta x [R(m) – R(f)]) 

Where: R(f) = risk-free rate of return 

 Beta = beta coefficient of the utility’s stock, which measures the volatility of the 

utility’s stock in comparison to the volatility of the market as a whole 

 R(m) = expected rate of return on a market portfolio comprised of a large number 

of diversified stocks, i.e., the expected rate of return on average-risk stocks. See id.
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¶ 10 Expressed in words, the formula means this. The cost of the utility’s equity–the required 

rate of return for the utility–”is equal to the sum of the risk-free rate of return plus a risk 

premium (i.e., a return above the risk[-]free rate).” Id. The formula assumes that if investing in 

the utility would yield a rate of return no greater than that of Treasury securities, which are the 

prototypical risk-free investment, no sensible person would invest in the utility. The utility 

would be riskier than Treasury securities, and any rational investor would want compensation, 

a premium, for the additional risk. Therefore, to entice investors, the utility has to offer a risk 

premium, some amount above the risk-free rate. In the formula above, the symbols to the right 

of the plus sign determine that risk premium. 

¶ 11 The risk premium the utility must offer is determined by multiplying the volatility of the 

utility’s equity by the market premium, the premium that investors expect the market as a 

whole (the average-risk stocks) to pay above a risk-free investment (Treasury securities). 

Pantaleo and Ridings explain it this way–and for our purposes, the “target company” is the 

utility: 

“As noted, the yield on treasury securities is generally the best measure of the 

risk-free rate. The difference between the expected return on a ‘market portfolio,’ like 

the Standard & Poor’s 500, and the risk-free rate is a measure of the premium the 

market is expected to pay above a risk-free investment. This market premium is 

commonly determined by reference to published data that tracks the average return on a 

given market portfolio and the average return on treasury securities over the same 

extended period of time (usually from 1926 or 1945 to the present). *** A beta 

coefficient greater than one means that a stock is more volatile than the market 

generally, as represented by a portfolio of a large number of stocks. *** A beta 

coefficient equal to one means that a particular stock is no more or less risky than the 

risk of the market itself. *** As the formula shows, a beta greater than one magnifies 

the cost of equity for a target firm. This makes sense because greater risk requires a 

greater return. Therefore, if the equity investment in a target company is riskier than the 

‘average risk’ of stocks represented by a market portfolio, the premium above a 

risk-free investment the target would have to pay in order to attract equity investors 

should be some multiple (higher than one) of the premium payable by the less risky 

‘average risk’ stocks. A target’s beta is that multiple.” Id. at 434-35. 

¶ 12 If the target company is publicly traded, its beta can be found in financial publications, 

such as Value Line and Zacks. But what if the target company is not publicly traded? Because 

Ameren is not publicly traded and hence there is no market data available for Ameren stock, 

the only way to estimate Ameren’s beta is to use the betas of a proxy group of publicly traded 

gas companies that appear to pose about the same amount of risk as Ameren. 

¶ 13 b. The Controversy Over Measurement Periods for the Beta 

¶ 14 i. The Staff’s Use of Five-Year Measurement Periods

¶ 15 The Commission’s staff (Staff) entered its appearance in the administrative hearing, and a 

member of the Staff, Rochelle Phipps, presented her CAPM analysis. To determine the beta 

coefficient, she used the same proxy group of gas companies that Ameren used in its CAPM 

analysis (except that she excluded one company). She obtained the betas of these proxy 

companies from Value Line and Zacks, and she also performed a regression analysis to 

estimate the beta. See Samuel C. Thompson, Jr., Demystifying the Use of Beta in the 
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Determination of the Cost of Capital and an Illustration of Its Use in Lazard’s Valuation of 

Conrail, 25 J. Corp. L. 241, 266 (2000) (discussing the derivation of beta through regression 

analysis). As the Commission noted, all three of these sources–Value Line, Zacks, and the 

regression analysis–used a measurement period of 5 years (i.e., 260 weeks or 60 months): 

“Ms. Phipps used Value Line’s betas, Zack betas, and regression analysis to 

estimate beta for the gas sample. She explained that Value Line employs 260 weekly 

observations of stock price data, and then adjusts its beta. [Citation.] The regression 

analysis beta estimate for the gas sample employs 60 monthly observations of stock 

and the U.S. Treasury bill return data, and then the beta is adjusted. Like Staff’s 

regression data, Zacks employs 60 monthly observations in its beta estimation; 

however, the beta estimates Zacks publishes are not adjusted; that is, they are ‘raw’

beta estimates. Thus, Ms. Phipps adjusted them using the same formula she used to 

adjust the regression beta. [Citation.] Ms. Phipps explained that adjusting raw beta 

estimates towards the market mean of 1.0 results in a linear relationship between the 

beta estimate and realized return that more closely conforms to the CAPM prediction. 

[Citation.]” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 142 (Order Dec. 

18, 2013).

Perhaps the order means that the “raw beta estimates” had to be “adjusted” to fit into the 

CAPM equation, whereby the number one signified the same level of risk posed by the market 

as a whole, any number greater than one signified a greater risk than the market, and any 

number less than one signified a lesser risk than the market. 

¶ 16 In any event, the order continues: 

“Since both the Zacks beta estimate and the regression beta estimate are calculated 

using monthly returns (as Value Line uses), Ms. Phipps averaged the Zacks and 

regression betas to avoid over-weighting the monthly return-based betas. [Citation.] 

Then, she averaged that result with the Value Line beta to obtain a single estimate of 

beta for the sample. For the gas sample, the regression beta estimate is 0.54 and the 

Value Line beta and Zacks beta average 0.68 and 0.57, respectively. [Citation.] The 

average of the Zacks and regression betas is 0.56. Averaging this monthly beta with the 

weekly Value Line beta (0.68) produces a beta for the gas sample as 0.62. [Citation.] If 

Laclede Group is included in the gas sample, the regression beta equals 0.52, the 

average of the Zacks and regression betas equals 0.54 and the average of the Value 

Line beta with the monthly beta equals 0.60. [Citation.]” Id. at 142-43. 

¶ 17 Thus, Phipps combined betas from Value Line, Zacks, and a regression analysis to estimate 

Ameren’s beta. Also, to avoid giving too much weight to monthly returns, she averaged 

together the two monthly sources (Zacks and the regression analysis) before averaging that 

result with the weekly source (Value Line).

¶ 18 ii. Ameren’s Use of an 18-Month Measurement Period,

 a 24-Month Measurement Period, and 

 a 5-Year Measurement Period

¶ 19 Ameren retained an expert, Robert Hevert, to perform a CAPM analysis. To determine 

Ameren’s beta, he relied on published financial data regarding a proxy group of comparable 

gas companies which, for the most part, were the same proxies the Staff used. The Staff 
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objected to Hevert’s analysis, however, because he “relie[d] on beta estimates that [were] 

measured over 18 to 24 months.” Id. at 147. (We are quoting from the Commission’s order of 

December 18, 2013, in which, for each issue, the Commission painstakingly summarized the 

parties’ arguments and counterarguments before stating its own conclusions.) The Staff argued 

that “[b]etas measured over shorter time periods,” such as 18 or 24 months, were “more prone 

to measurement error arising from short-term changes in risk and investor risk preferences, 

which [could] bias the beta estimate.” Id. By contrast, the Staff relied on betas calculated with 

five years of data. Id. at 142, 164. 

¶ 20 In part because Hevert used 18-month and 24-month measurement periods to determine 

the beta coefficient–measurement periods that the Commission regarded as too short–the 

Commission found the Staff’s CAPM analysis to be more reliable than Hevert’s CAPM 

analysis, and the Commission declined to average Hevert’s CAPM analysis with the Staff’s 

CAPM analysis and the parties’ DCF results. The Commission stated: 

“In its Order in [Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282 (Order Jan. 

10, 2012)], the Commission expressed ‘serious concerns’ with the betas used by Mr. 

Hevert. The Commission noted that it has traditionally relied upon betas calculated 

with five years of data. In the instant case, Staff again used a period of five years. Staff 

again takes issue with the beta measurement period used by Mr. Hevert, which in the 

current proceeding was 18 to 24 months. Staff explained why betas measured over 

shorter time periods, such as those used by Mr. Hevert, are more prone to measurement 

error arising from short-term changes in risk and investor preferences, which can bias 

the beta estimate. Having reviewed the record, the Commission again finds that the 

beta estimates provided by Staff are more reliable.” Id. at 164. 

¶ 21 In Ameren’s application for rehearing, which it filed on January 16, 2014, Ameren pointed 

out to the Commission: “But Mr. Hevert used three different beta sources–one with an 

18-month measurement period, one with a 24-month measurement period, and a Value Line 

beta coefficient source that is based on five years of data (same as Staff).” (Emphasis in 

original.) See 220 ILCS 5/10-113(a) (West 2012) (“No person or corporation in any appeal 

shall urge or rely upon any grounds not set forth in [an] application for a rehearing before the 

Commission.”). Evidently, by the parenthetical remark “same as Staff,” Ameren did not mean 

that the Staff, like Hevert, used an 18-month measurement period and a 24-month 

measurement but, rather, that Value Line was one of the sources the Staff used for its betas. He 

used Value Line, and the Staff used Value Line. Consequently, Ameren argued, the 

Commission erred by rejecting Hevert’s CAPM analysis. Instead, according to Ameren, if 18 

months and 24 months were too short as measuring periods, the Commission should have 

accepted Hevert’s CAPM based only on Value Line betas and averaged his CAPM result with 

the Staff’s CAPM result and the parties’ DCF results. Ameren recalculated the rate of return 

that would result from excluding the 18-month and 24-month betas: 

“If the Commission wished to exclude the beta sources based on a shorter measurement 

period, and instead just use Mr. Hevert’s Value-Line based CAPM model (with the 

5-year measurement period), [Ameren’s] CAPM result would be 10.11%. When 

averaged with the Staff’s CAPM result and the Order’s DCF result, this produces a 

return on equity of 9.35%, a full 27 basis points higher than the Order’s authorized 

return on equity. Had the Commission followed [this] same [averaging] method it 
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approved in [North Shore Gas Co., Ill. Com. Comm’n No. 12-0511, at 207 (Order June 

18, 2013)], this 9.35% return on equity is the result that would have been reached.”

¶ 22 On February 6, 2014, in a “Notice of Commission Action,” the Commission denied 

Ameren’s application for rehearing without specifically responding to Ameren’s beta 

argument–or, for that matter, any other argument Ameren made in its application for rehearing. 

The ruling was simply a denial. 

¶ 23 2. The Controversy Over Non-Dividend-Paying Companies 

 in the Parameter for the Overall Market Return

¶ 24 a. The Staff’s Exclusion of Non-Dividend-Paying Companies 

¶ 25 Again, the CAPM has three parameters: the risk-free rate of return, the expected rate of 

return on the market, and the beta. 

¶ 26 To estimate the expected rate of return on the market, the Staff, specifically Phipps, 

performed a DCF analysis on the firms in the Standard & Poor’s 500 Index, excluding 

non-dividend-paying firms. A DCF model “is premised on the assumption that a stock’s price 

is the sum of the expected value of future dividends, discounted to present value by the rate of 

return investors require.” Citizens Utility Board v. Illinois Commerce Comm’n, 276 Ill. App. 

3d 730, 747 (1995). Therefore, the model uses “three variables: price, future dividends, and the 

rate of return.” Id. Because dividends were a required variable in a DCF model, the Staff 

considered only companies that paid dividends. 

¶ 27 Let us pause for a moment and, for clarity, restate what we said in the preceding paragraph. 

To calculate a parameter of the CAPM model, namely, the overall market return, the Staff used 

another model, the DCF model, but because of the way the DCF model worked, the Staff 

excluded non-dividend-paying companies, using only dividend-paying companies. As the 

Commission said: 

“[The Staff estimated] [t]he expected rate of return on the market *** by 

conducting a DCF analysis on the firms composing the S&P 500 Index (‘S&P 500’) as 

of June 30, 2013. [Citation.] Firms not paying a dividend as of June 30, 2013, or for 

which neither Zacks nor Reuters growth rates were available, were eliminated from the 

analysis. That analysis estimated that the expected rate of return on the market equals 

12.33%. [Citation.]” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 142 

(Order Dec. 18, 2013). 

¶ 28 In defending its exclusion of non-dividend-paying companies when estimating the market 

return, the Staff explained to the Commission: “A DCF analysis assumes that the market value 

of common stock equals the present value of the expected stream of future dividend payments 

to the holders of that stock. [Citation.] Since a DCF model incorporates time-sensitive 

valuation factors, it must correctly reflect the timing of the dividend payments that stock prices 

embody. [Citation.]” Id. at 140. (We are quoting the Commission’s paraphrase of the Staff’s 

argument.) Unless dividends were paid, it was impossible to know the timing of the dividend 

payments, and knowing the timing of the dividend payments was essential to doing a DCF 

analysis. See In re Connect America Fund, 28 FCC Rcd. 7123, 7159 n.156 (2013) (“The

general DCF model cannot be used to calculate the cost of equity for a firm that does not pay 

dividends.”); In re Represcribing the Authorized Rate of Return for Interstate Services of Local 

Exchange Carriers, 5 FCC Rcd. 7507, 7511 (1990) (before “DCF cost of equity calculations”
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were made, “[t]he S & P 400 group and the electric group were to be screened to remove *** 

companies that did not pay quarterly dividends”).

¶ 29 b. Ameren’s Inclusion of Non-Dividend-Paying Companies 

¶ 30 In his calculation of the expected overall market return, Ameren’s expert, Hevert, used a 

constant-growth DCF model. Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 134 

(Order Dec. 18, 2013). As Ameren explained to the Commission, a constant-growth DCF 

model “assumes constant unchanging growth as a component of the return an investor 

expects.” Id. at 131. According to an apparently uncontested description by an intervenor in the 

administrative proceeding, the Illinois Industrial Energy Consumers, “the constant growth 

version of the [DCF] model is sometimes expressed as K = D1/P0 + G, where K = Investor’s 

required return, D1 = Dividend in the first year, P0 = Current stock price and G = Expected 

constant dividend growth rate.” Id. at 162. See Midwest Independent Transmission System 

Operator, Inc., 141 FERC ¶ 63014, at 771 (2012) (setting forth the same formula). 

¶ 31 In his use of the constant-growth DCF model to calculate the market return parameter of 

the CAPM, Hevert included the non-dividend-paying companies of the Standard and Poor’s 

500 Index. The Staff objected for the following reason: 

“Staff witness Phipps explained that Mr. Hevert’s inclusion of the non-dividend paying 

companies in a constant growth DCF analysis upwardly biases his estimate of market 

return. [Citation.] That is, the dividend growth rate of non-dividend paying companies 

cannot be both constant and equal to the earnings growth rate as Mr. Hevert’s 

estimation process assumes. If the dividend growth rate is constant, it must remain 0%. 

In contrast, the average dividend growth rates of the non-dividend paying companies in 

Mr. Hevert’s analysis equal approximately 14%. [Citation.]” Ameren Illinois Co., Ill. 

Com. Comm’n No. 13-0192, at 148 (Order Dec. 18, 2013). 

¶ 32 Ameren responded: “Ms. Phipps’[s] criticism is unfounded as investors do view 

investments in the context of the entire market; dividend paying and non-dividend paying 

investments alike.” (Internal quotation marks omitted.) Id. at 135. 

¶ 33 The Commission agreed with the Staff that the inclusion of non-dividend-paying 

companies was inconsistent with the constant-growth DCF model that Hevert used to estimate 

the average market return in the CAPM. The Commission said: 

“In [Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282], the Commission also 

expressed ‘serious concerns’ with the market risk premium relied upon by Mr. Hevert. 

There, as in the current case, Staff objected to Mr. Hevert’s inclusion of non-dividend 

paying companies in the DCF analysis used in the calculation of the expected market 

return, from which the risk-free rate is subtracted in the calculation of the market risk 

premium. Staff contends that inclusion of non-dividend paying companies upwardly 

biases the estimate of the market return, as does [the Illinois Industrial Energy 

Consumers]. The Commission again shares this concern, and agrees with Staff that the 

market risk premium calculated by Staff is more reliable.” Id. at 165. 

¶ 34 In its application for a rehearing, Ameren made essentially three points. First, Ameren 

argued it made no sense to exclude non-dividend-paying companies from an estimate of the 

market return, considering that non-dividend-paying companies were part of the overall 

market. Second, “Hevert’s model *** include[d] non-dividend paying stocks in the market risk 
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premium simply by recognizing the price appreciation of the stock over time.” Third, the betas 

from Zacks, on which the Staff relied, “include[d] non-dividend paying companies,” and thus, 

in Ameren’s view, the Commission’s “criticism of Mr. Hevert’s use of the S & P 500 for his 

market risk premium [was] plainly arbitrary.”

¶ 35 As we said, the Commission denied Ameren’s application for a rehearing. 

¶ 36 In summary, then, the Commission regarded Ameren’s CAPM analysis as suffering from 

two flaws: (1) the use of short measuring periods for the beta and (2) the inclusion of 

non-dividend-paying companies in the constant-growth DCF analysis that Ameren used to 

calculate the market return in the CAPM. 

¶ 37 B. Newly Created Consumer Protections in a 

 Proposed Small Volume Transportation Program 

¶ 38 In 2011, in a previous gas rate case (Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282, 

at 185 (Order Jan. 10, 2012)), retail gas suppliers recommended that Ameren establish a small 

volume transportation program that would allow residential customers and small commercial 

customers to buy gas from “alternative gas suppliers.”

¶ 39 Under section 19-110(a) of the Alternative Gas Supplier Law, the Commission may license 

“alternative gas suppliers” to supply natural gas to “residential or small commercial 

customers.” 220 ILCS 5/19-110(a) (West 2012). “Alternative gas suppliers”–another name for 

“retail gas suppliers”–basically are suppliers other than public utilities. 220 ILCS 5/19-105 

(West 2012). The idea, apparently, is that alternative gas suppliers will supply natural gas to 

customers via the gas utility’s infrastructure or delivery system. “Transportation services” are 

“services provided by the gas utility that are necessary in order for the storage, transmission 

and distribution systems to function so that customers located in the gas utility’s service area 

can receive gas from suppliers other than the gas utility and shall include, without limitation, 

standard metering and billing services.” Id.

¶ 40 At the conclusion of the 2011 case, the Commission ordered Ameren and interested 

stakeholders to participate in workshops, hosted by the Staff, to determine whether a small 

volume transportation program would be beneficial and feasible in Ameren’s service 

territories. Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282, at 194 (Order Jan. 10, 2012). 

To the extent the workshops did not end in a consensus, the Staff was to report to the 

Commission the issues that remained in dispute. Id. On January 10, 2013, the Staff gave the 

Commission a report, which described the unresolved issues. 

¶ 41 On January 25, 2013, pursuant to section 9-201(a) of the Public Utilities Act (220 ILCS 

5/9-201(a) (West 2012)), Ameren filed new or revised tariff sheets, which proposed a general 

increase in gas delivery charges. 

¶ 42 On March 6, 2013, pursuant to section 9-201(b) (220 ILCS 5/9-201(b) (West 2012)), the 

Commission entered an order suspending the tariffs, thereby initiating the present gas rate 

case. 

¶ 43 A couple of weeks after filing its tariffs proposing a general increase in gas rates, Ameren 

filed “supplemental direct testimony” by Venda K. Seckler, its managing executive of gas 

supply, in which she stated that Ameren was “neutral with regard to the adoption of [small 

volume transportation (SVT),] consider[ing] the matter of question of policy to be determined 

by the Commission.” Attached to her “supplemental direct testimony” were two exhibits: 
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Ameren exhibit Nos. 13.1 and 13.2. She described these two exhibits as two versions of a tariff 

pertaining to the proposed small volume transportation program. She testified: “Ameren 

Exhibit 13.1 is a copy of the last version of draft tariffs circulated to the workshop participants. 

Ameren Exhibit 13.2 is an updated version, including refinements [Ameren] added after the 

conclusion of the SVT workshop.” (One might think a “tariff” is simply a list of prices, but 

actually, in the jargon of public-utilities regulation, “tariff” has a more expansive meaning, to 

include not only prices but also terms, conditions, rules, practices, and other descriptive text. 

See Sheffler v. Commonwealth Edison Co., 2011 IL 110166, ¶ 28 (“A tariff is a public 

document setting forth services being offered, the rates and charges with respect to services, 

and the governing rules, regulations, and practices relating to those services.”).) 

¶ 44 Thus, the administrative hearing was not only on the tariffs proposing a general increase in 

gas rates but also on the “rider” tariffs proposing a small volume transportation program. 

¶ 45 The Citizens Utility Board called its former executive director, Martin Cohen, to testify 

regarding the small volume transportation program. In his direct testimony, Cohen 

recommended that if the Commission approved such a program, it should order Ameren to 

include consumer protections that went beyond those in the Public Utilities Act. He did not as 

of yet specify what the additional consumer protections should be, but he suggested that 

additional consumer protections were necessary, given the complaints consumers had made 

about small volume transportation programs in northern Illinois. He cited two such complaints: 

one from 2002, Citizens Utility Board, Ill. Com. Comm’n No. 02-0425, and Citizens Utility 

Board v. Illinois Energy Savings Corp., Ill. Com. Comm’n No. 08-0175. 

¶ 46 It was not until later, in his rebuttal testimony, that Cohen proposed any specific consumer 

protections. He proposed the following three protections: 

“1. A customer shall be absolved from paying any termination fees if, prior to the 

due date of their first bill, they notify the supplier that they are terminating the contract. 

 2. When a customer has accepted service from a supplier after solicitation by a 

door-to-door salesperson, there shall be no termination fees assessed if the customer 

terminates during the first 6 billing cycles. 

 3. If a supplier’s marketing materials include a price comparison of the supplier rate 

and the gas utility rate, the depiction of such comparison shall display at least three 

years of data in no greater than quarterly increments and shall also display the 

supplier’s offered price for the same or equivalent product(s) or service(s) for each of 

the same increments.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 225 

(Order Dec. 18, 2013). 

¶ 47 In their initial brief to the Commission, the retail gas suppliers objected to these proposed 

consumer protections for three reasons. First, they argued the consumer protections were 

“unnecessary in light of provisions in the [Public Utilities] Act that protect consumers and [in 

light of] the alleged decrease in customer complaints regarding existing SVT programs in 

Illinois.” Second, the retail gas suppliers argued that “any customer protections should have 

been a part of the workshop process and need not be considered in this proceeding.” Third, the 

retail gas suppliers complained that the Citizens Utility Board “did not offer its specific 

recommendations [(that is, these three proposals for consumer protection)] until rebuttal 

testimony.” (In its brief, the Commission informs us that the rebuttal testimony of the 

intervenors–the Citizens Utility Board, the retail gas suppliers, and others–”was scheduled 
- 11 - 

simultaneously” and that “only Ameren was provided for surrebuttal in the established 

schedule.”) 

¶ 48 The Commission disagreed that the scope of the workshop discussions restricted the 

Commission’s consideration of any small volume transportation issue. Id. at 247. The 

Commission also disagreed that the retail gas suppliers had been deprived of an opportunity to 

contest the proposed consumer protections. Id. at 248. The Commission noted that although 

Cohen first proposed these consumer protections in his surrebuttal testimony, the retail gas 

suppliers could have cross-examined him, but they did not do so. Id. The Commission agreed, 

however, “that the three measures at issue [were] not supported by the record.” Id.

Therefore–initially–the Commission decided the measures would “not be adopted at this 

time.” Id.

¶ 49 Later, in an amendatory order of January 23, 2014, the Commission revised the order of 

December 18, 2013, so as to state: “[T]he Commission finds that the three measures at issue 

are supported by the record and will be adopted at this time.” (This is the only change the 

amendatory order made.) Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 1 (Order Jan. 

23, 2014). 

¶ 50 Part IX of the order of December 18, 2013, the part pertaining to the small volume 

transportation program, concludes with the following paragraph: 

“One of the ‘resolved issues’ is identified as ‘SVT Program Separate Proceeding,’

sometimes referred to as a tariff proceeding. [Ameren] shall file tariffs consistent with 

the findings of this Order. As indicated above, [Ameren] is directed to hold a workshop 

following the issuance of this Order, focusing on the issues that are not resolved by this 

Order, and to file a petition, tariffs and testimony in support of the SVT program within 

45 days of the date of this Order. The separate proceeding shall be for the purpose of 

improving and editing the tariffs submitted in the instant proceeding, and to resolve the 

remaining issues not decided in this Order, to the extent a resolution of them is not 

reached in the workshop. All issues decided in the instant proceeding will be 

considered resolved for purposes of the second proceeding.” Ameren Illinois Co., Ill. 

Com. Comm’n No. 13-0192, at 251 (Order Dec. 18, 2013). 

¶ 51 In their application for a rehearing, the retail gas suppliers argued to the Commission that 

the three consumer protections not only were unauthorized by statutory law but they lacked 

any evidentiary support in the record. In addition, the suppliers made a procedural objection. 

They argued that “cross-examination of a witness without pertinent experience [was] no 

substitute for alternative gas suppliers being able to sponsor knowledgeable witnesses who 

could have testified as to whether [the Citizen Utility Board’s] proposals [were] burdensome, 

costly, difficult or ineffective.”

¶ 52 The Commission denied the retail gas suppliers’ application for a rehearing. 

¶ 53 II. ANALYSIS 

¶ 54 A. The Commission’s Rejection of Ameren’s CAPM Analysis 

¶ 55 1. North Shore

¶ 56 Ameren argues that in North Shore Gas Co., Ill. Com. Comm’n No. 12-0511, at 205 (Order 

June 18, 2013) (hereinafter North Shore), the Commission established a “practice” of 

“averaging the parties’ model results” together and that, in the present case, the Commission 
- 12 - 

arbitrarily and enigmatically departed from that “practice” by rejecting Ameren’s CAPM 

analysis even though, in North Shore, the utilities used betas from Value Line, as Ameren did 

in the present case, and even though, in North Shore, the utilities included 

non-dividend-paying companies in their calculation of the market return in the CAPM, as 

Ameren did in the present case. 

¶ 57 North Shore is distinguishable for three reasons. First, in North Shore, the utilities’ expert, 

Paul R. Moul, consulted only one source for the beta parameter: Value Line. “For the beta 

measurement of systematic risk, he used the average Value Line for the Gas Group ***.” Id. at 

199. Value Line had a five-year measurement period. Id. at 200 (“259 weekly observations of 

stock return data”). In his expert testimony in North Shore, Moul gave his opinion of what the 

CAPM result should be (id. at 186), and for purposes of the beta, he based his opinion on that 

single five-year source, Value Line (id. at 199). In the present case, by contrast, when Hevert 

testified to what the CAPM result should be, he based his opinion on 3 measurement periods 

for the beta, the first 2 of which the Commission rejected as too short: 18 months, 24 months, 

and 5 years. As Ameren told the Commission in Ameren’s application for rehearing, “[f]or the 

beta measurement, [Hevert] used coefficients from three sources, including Bloomberg and 

Value Line.” It does not appear that Hevert ever offered a CAPM result premised on Value 

Line as the sole source for the beta. Instead, it appears that Ameren first did that on page five of 

its application for rehearing–which, of course, was not expert testimony. The Commission 

could have reasonably regarded CAPM analysis as a matter for expert testimony. 

¶ 58 Second, it appears that, in North Shore, none of the parties objected to the inclusion of 

non-dividend-paying companies in a constant-growth DCF analysis. In fact, far from 

objecting, the Staff in North Shore included non-divided-paying companies in its own 

constant-growth DCF analysis. “[F]or the expected rate of return on the market parameter, Mr. 

McNally,” a member of the Staff, “conducted a DCF analysis on the firms composing the S&P 

500 Index”–which, as the parties agree in the present case, includes non-divided-paying 

companies. Id. at 201. And both McNally and Moul used a “constant growth DCF.” Id. It 

would be unreasonable to count on the Commission to sua sponte raise any and all problems, 

such as including non-dividend-paying companies in a constant-growth DCF. The issue was 

forfeited in North Shore. See 83 Ill. Adm. Code 200.610(b) (2000) (“Objections must be made 

at hearing to preserve them on appeal.”). The issue is preserved in the present case. 

¶ 59 Third, the Commission stated in North Shore that it “[did] not endorse every input to or 

every aspect of the CAPM analyses performed by the Utilities or by Staff.” North Shore Gas 

Co., Ill. Com. Comm’n No. 12-0511, at 207 (Order June 18, 2013). Because the Commission 

did not specify, however, which of the CAPM inputs by the Staff the Commission found to be 

debatable, North Shore cannot be understood as establishing an across-the-board “practice” of 

averaging parties’ CAPM results together. In other words, the “practice” of averaging could 

depend on the presence of the defective inputs, whatever they were. Perhaps that is why North 

Shore says: “[F]or purposes of this proceeding, the Commission finds that each provides 

useful input in estimating the market required return on common equity.” (Emphasis added.) 

Id.

¶ 60 In sum, we disagree with Ameren’s argument that the Commission arbitrarily departed 

from its decision in North Shore. Rather, for the reasons we have stated, North Shore is 

distinguishable. 
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¶ 61 2. Findings That Ameren Claims Are Inconsistent With the Evidence

¶ 62 a. Measurement Periods 

¶ 63 Ameren says: “In the Order, the Commission rejected Mr. Hevert’s CAPM analysis 

because of its apparent misunderstanding of what Mr. Hevert did. The Commission contended 

that Mr. Hevert’s analysis should be disqualified because he used only 18- and 24-month betas, 

when in fact he also used 60-month betas.”

¶ 64 The following sentence of the Commission’s order could indeed be understood as 

assuming, incorrectly, that Hevert used only 18- and 24-month betas: “Staff again takes issue 

with the beta measurement period used by Mr. Hevert, which in the current proceeding was 18 

to 24 months.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 164 (Order Dec. 18, 

2013). Actually, the third source that Hevert consulted for his beta calculation, Value Line, 

measured betas over a five-year period. The order elsewhere acknowledges that “[t]o calculate 

his beta coefficients, Mr. Hevert utilized reported beta coefficients from Bloomberg and Value 

Line for each of the proxy group companies.” (Emphasis added.) Id. at 134. And evidently the 

Commission was aware that Value Line used five-year measurement periods, for the order 

says: “[Phipps] explained that Value Line employs 260 weekly observations of stock price 

data ***.” Id. at 142. It is as if, when summarizing the Staff’s argument, the Commission 

overlooked what it had written only a few pages earlier. 

¶ 65 Even after Ameren, in its application for a rehearing, disabused the Commission of its 

apparent misconception that Hevert had used only 18- and 24-month measurement periods for 

his beta, the Commission still rejected his CAPM analysis. The Commission still declined to 

average his CAPM result (as modified by Ameren in its application for rehearing) with the 

results of the other parties’ experts to determine the rate of return. But the Commission 

included Phipps’s CAPM result in the average. The question for us is whether, with the 

misconception dispelled, it is clearly evident that Hevert’s modified CAPM result deserves as 

much weight as Phipps’s CAPM result. See Apple Canyon Lake Property Owners’ Ass’n v. 

Illinois Commerce Comm’n, 2013 IL App (3d) 100832, ¶ 20. 

¶ 66 The answer is no–it is not clearly evident. When the 18- and 24-month sources were 

disqualified, Hevert was left with a single five-year source (Value Line) compared to Phipps, 

who relied on multiple five-year sources (Value Line, Zacks, and the regression analysis). 

Consequently, the Commission could reasonably regard her beta estimation as more reliable 

than his. Multiple beta sources could inspire more confidence than a single beta source. Indeed, 

the Commission had said in a previous case: “We agree that, in the same way we rely on 

multiple models to determine the cost of equity, Staff’s well-considered use of multiple beta 

sources is beneficial to reduce measurement error from any individual estimate.” North Shore 

Gas Co., Ill. Com. Comm’n No. 09-0166, at 126-27 (Order Jan. 21, 2010). Also, Hevert never 

offered an opinion based on Value Line as a single beta source. 

¶ 67 b. Non-Dividend-Paying Companies in a Diversified Portfolio 

¶ 68 Another concern the Commission had with Hevert’s CAPM analysis was his “inclusion of 

non-dividend[-]paying companies in the DCF analysis used in the calculation of the expected 

market return, from which the risk-free rate [was] subtracted in the calculation of the market 

risk premium.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 165 (Order Dec. 18, 

2013). 
- 14 - 

¶ 69 For two reasons, Ameren regards this concern about non-dividend-paying companies as 

being against the manifest weight of the evidence: (1) non-dividend-paying companies are part 

of the overall market, which the market-return parameter should reflect; and (2) Zacks, from 

which the Staff obtained its own beta estimates, used the Standard & Poor’s 500 Index, which 

included non-dividend-paying companies. We will discuss each of those two points. 

¶ 70 i. Non-Dividend-Paying Companies 

 as Part of the Overall Market

¶ 71 Systematic risk is the risk posed by the market. Furman v. Commissioner, 75 T.C.M. 

(CCH) 2206, at 11 n.10 (1998). Unsystematic risk is the risk unique to a particular asset. Id.

¶ 72 The CAPM assumes that someone who is considering investing in a public utility has “the 

ability to hold[ ] diversified portfolios that eliminate, on a portfolio basis, the effects of 

unsystematic risk.” Id. Because the CAPM assumes that an investor holding a diversified 

portfolio will encounter only systematic risk, the CAPM determines compensation only for 

systematic risk. Id.

¶ 73 The diversification of a stock portfolio eliminates unsystematic risk (Thompson, supra, at 

247-48), and it is true, as Ameren says, that a diversified portfolio might well include stocks in 

non-dividend-paying companies. Even so, non-dividend-paying companies are not the sine 

qua non of a diversified portfolio. “[O]nce you have a portfolio of 20 or more stocks, 

diversification has done the bulk of its work.” Id. at 248. (We need not regard this number 20 

as magical; maybe the minimum number is 25 or 30 stocks.) Some of these 20 or more stocks 

could be in non-dividend-paying companies, or they all could be in dividend-paying 

companies. Diversification does not fail with the exclusion of companies that pay no 

dividends. 

¶ 74 Because owning stock in non-dividend-paying companies is not absolutely essential to 

having a diversified stock portfolio that eliminates unsystematic (or unique) risk, the 

Commission could have reasonably decided that if a party chose to estimate the market return 

by using a constant-growth DCF model, it was preferable to exclude non-dividend-paying 

companies so as to avoid contradicting the constant-growth DCF model. Again, the 

Commission is the regulatory expert, and it is not “clearly evident” that including 

non-dividend-paying companies would be necessary or even logical, given the choice of a 

constant-growth DCF model, which presupposes growing dividends. Abbott Laboratories, Inc. 

v. Illinois Commerce Comm’n, 289 Ill. App. 3d 705, 714 (1997). 

¶ 75 We realize that Ameren argued to the Commission: “Hevert’s model *** include[d] 

non-dividend paying stocks in the market risk premium simply by recognizing the price 

appreciation of the stock over time.” But it is unclear how growth in the stock price could 

substitute for dividends, considering that the current stock price (P0) and the dividend in the 

first year (D1) are two separate variables in the equation. 

¶ 76 ii. The Staff’s Inclusion of Non-Dividend-Paying Companies 

 in Its Estimation of the Beta

¶ 77 Ameren accuses the Commission of having a double standard in that the Commission 

allowed the Staff to include non-dividend-paying companies in its estimation of the beta but 
- 15 - 

forbade Ameren to include non-dividend-paying companies in its estimation of the market 

return. Ameren argues: 

“Not only did Staff admit that non-dividend-paying companies are part of the 

market intended to be measured by CAPM, the record also shows Staff relied on 

market information (Zacks betas) that included non-dividend paying companies. Since 

the record shows Zacks uses the S&P 500 for its beta calculations, and the S&P 500 

includes companies that do and do not pay dividends, criticism of Mr. Hevert’s use of 

the S&P 500 for his market risk premium was plainly arbitrary and contrary to the 

record.”

¶ 78 Ameren seems to argue, in effect: “Look, the Staff did the same thing and received a pass.”

But Ameren has not convinced us that the Staff really did the same thing. The Commission’s 

order specifically says that when Phipps used a DCF model to calculate the market return, she 

excluded non-dividend-paying companies and that when Hevert used a constant-growth DCF 

model to calculate the market return, he included non-dividend-paying companies. 

¶ 79 Ameren points out, however, that Zacks includes non-dividend-paying companies in its 

beta estimates and that by obtaining betas from Zacks, Phipps included non-dividend-paying 

companies. The problem, though, was not with non-dividend-paying companies per se. It was 

not that they were unsuitable for all purposes. Rather, as we understand the Commission’s 

decision, the problem was it made no sense to apply a DCF model to non-dividend-paying 

companies. We do not see how Phipps did that by using Zacks for purposes of the beta 

parameter. 

¶ 80 Granted, there is a certain lack of symmetry in including non-dividend-paying companies 

in the beta parameter while excluding them from the market-return parameter, but those two 

parameters are concerned with different things–the beta coefficient is concerned with the 

volatility of the utility compared to the volatility of the market as a whole, whereas the market 

return is concerned with the expected return from the market–and it is unclear to us what effect, 

if any, followed from this lack of symmetry. The Commission had a reason for excluding 

non-dividend-paying companies from the market-return parameter: to avoid a conflict with the 

constant-growth DCF model. In short, we are not financial analysts, and when we defer to the 

Commission’s expertise and experience (Commonwealth Edison Co. v. Illinois Commerce 

Comm’n, 2013 IL App (2d) 120334, ¶ 36), we are unable to say it is “clearly evident” that the 

inclusion of non-dividend-paying companies in the beta parameter (via Zacks) demanded their 

inclusion in the market-return parameter if a constant-growth DCF model were used to 

calculate the market return. Abbott, 289 Ill. App. 3d at 714. 

¶ 81 B. The Sufficiency of the Commission’s Findings and Analysis 

¶ 82 Ameren argues that, “at a minimum,” we should “remand this case with instructions to the 

Commission to explain itself.” We deem a remand to be unnecessary. The Commission wrote a 

decision 254 pages long, 38 pages of which were devoted to the cost of equity. For each issue 

and subissue, the Commission diligently summarized the parties’ arguments and chose among 

the arguments. Its decision “contain[s] findings [and] analysis sufficient to allow an informed 

judicial review.” 220 ILCS 5/10-201(e)(iii) (West 2012). 

¶ 83 We realize the Commission denied Ameren’s application for a rehearing without providing 

any explanation for doing so. Nevertheless, we assume that, by the denial, the Commission 
- 16 - 

adhered to its finding that “the beta estimates provided by [the] Staff [were] more reliable.”

Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 164 (Order Dec. 18, 2013). The 

Commission’s order has enough substance that we can tell whether the “opposite conclusion is 

clearly evident.” (Internal quotation marks omitted.) Apple Canyon, 2013 IL App (3d) 100832, 

¶ 20. It is not “clearly evident” that Hevert’s CAPM analysis is as reliable as Phipps’s CAPM 

analysis, considering that he used only one valid source for his beta, whereas she used multiple 

sources, and considering that he included non-dividend-paying companies in his 

constant-growth DCF analysis, whereas she excluded them from her DCF analysis. Id.

¶ 84 Ameren purports to be mystified as to why the Commission required the exclusion of 

non-dividend-paying companies from the market-return parameter, and Ameren complains of 

the lack of an explanation. Actually, though, as far as we can see, Ameren never has squarely 

responded to the Commission’s stated rationale: that it is impossible to apply a 

constant-growth DCF model to companies that pay no dividends. See Connect America Fund, 

28 FCC Rcd. at 7159 n.156 (“The general DCF model cannot be used to calculate the cost of 

equity for a firm that does not pay dividends.”); Represcribing the Authorized Rate, 5 FCC

Rcd. at 7511 (before “DCF cost of equity calculations” were made, “[t]he S & P 400 group and 

the electric group were screened to remove *** companies that did not pay quarterly 

dividends”). Ameren never has explained how the constant-growth DCF formula works when 

applied to non-dividend-paying companies. 

¶ 85 C. Consumer Protections in the Small Volume Transportation Program 

¶ 86 1. Ripeness

¶ 87 The retail gas suppliers argue that the three consumer protections the Commission required 

them to provide in the small volume transportation program violate the Public Utilities Act and 

lack any evidentiary justification. 

¶ 88 The Commission responds, initially, that this issue is unripe. According to the 

Commission, only after it approves the small volume transportation tariffs that Ameren filed in 

a separate proceeding before the Commission, Ameren Illinois Co., No. 14-0097, will the 

legitimacy of the consumer protections be ripe for review. Without approved tariffs, there can 

be no small volume transportation program. The Commission raises the possibility that the 

program might end up being too expensive to implement. In case No. 14-0097, Ameren 

disclosed that the costs of the program would be triple the estimate Ameren made previously, 

in the present case. In light of that disclosure, Ameren requested the Commission, in case No. 

14-0097, to enter an “Interim Order and provide further direction confirming whether 

[Ameren] should proceed with the SVT program.”

¶ 89 The retail gas suppliers say, however, that if the Commission decides not to go forward 

with the small volume transportation program, this will be a change of mind by the 

Commission, because the Commission already has approved the program. The final order in 

the present case states: “The Commission concludes that it is in the public interest to approve 

an SVT program at this time, but with the additional consumer protections ***.” Ameren 

Illinois Co., Ill. Com. Comm’n No. 13-0192, at 246 (Order Dec. 18, 2013). The order also 

states that the Commission is “approving the implementation of an SVT program for 

[Ameren].” Id. at 249. Thus, according to the suppliers, the small volume transportation 

program is more than a theoretical idea or proposal; it is an approved program. Even though 

further details need to be worked out in the tariffs, that does not detract from the Commission’s 
- 17 - 

approval of the program, which, by the terms of the order in this case, shall include the 

consumer protections. The suppliers see a danger that these newfangled consumer protections 

will be set in concrete, since the order says that “[a]ll issues decided in the instant proceeding 

will be considered resolved for purposes of the second proceeding.” Id. at 251. The suppliers 

are concerned that if we declare their issue to be unripe, the opportunity to challenge the 

consumer protections will pass and never return: the issue “will be considered resolved.” Id. 

¶ 90 The question of ripeness “is best seen in a twofold aspect, requiring us to evaluate both the 

fitness of the issues for judicial decision and the hardship to the parties of withholding court 

consideration.” (Internal quotation marks omitted.) Alternate Fuels, Inc. v. Director of the 

Illinois Environmental Protection Agency, 215 Ill. 2d 219, 231 (2004). 

¶ 91 The legality of the additional consumer protections is an issue fit for judicial decision. 

Also, courts commonly determine whether an agency’s decision has any support in the 

evidentiary record. 

¶ 92 As for the hardship to the parties of withholding court consideration, the consumer 

protections could have economic implications for the retail gas suppliers and therefore could 

affect their decision whether to participate in the small volume transportation program–and 

could affect their decision whether to participate further in fashioning the program. Because 

the suppliers presumably will have to make financial commitments in order to fulfill contracts, 

lengthening the grace periods during which customers could terminate contracts might hurt the 

bottom line. Keeping track of price data will be time-consuming, and companies do not 

necessarily want to reveal their pricing strategies to competitors. The suppliers argued to the 

Commission: 

“Requiring the reporting of the prices and terms of supplier contract offers will be 

extremely burdensome and provide ambiguous data. Market prices change daily and 

depending on the business model of an alternative gas supplier, its prices and terms of 

supplier contract offers may vary daily and may vary for different customers. Tracking 

this data would entail a huge amount of work for retail gas suppliers and assembling it 

in a useful format would be a monumental task for [the Citizen Utility Board’s Office 

of Retail Market Development.] *** Additionally, certain supplier contract offers to 

customers may be sensitive or confidential and in a competitive marketplace a supplier 

should not be required to expose their pricing strategy to their competitors.”

¶ 93 Even at this time, before the small volume transportation program has been implemented, 

the effects of the additional consumer protections are tangible enough to the retail gas suppliers 

that the issue is ripe for review. See id.

¶ 94 2. The Commission’s Authority 

 To Require the Consumer Protections

¶ 95 The retail gas suppliers challenge the Commission’s authority to require them to provide 

the three consumer protections proposed by the Citizens Utility Board. 

¶ 96 Because an administrative agency, such as the Commission, is a creation of the legislature, 

it has only the powers the legislature gives it in statutory law. Illinois Bell Telephone Co. v. 

Illinois Commerce Comm’n, 203 Ill. App. 3d 424, 438 (1990). An act by an agency can be 

unauthorized in either of two circumstances. One circumstance is the absence of a statute. “The 

fact that no statute precludes an agency from taking a particular action does not mean that the 
- 18 - 

authority to do so has been given by the legislature.” Id. There must be a statute expressly 

granting the agency the power to do the act in question (id.) (and an express grant of power to 

do the act is interpreted as including the “power to do all that is reasonably necessary to 

execute the power *** specifically conferred” (Illinois Federation of Teachers v. Board of 

Trustees, 191 Ill. App. 3d 769, 774 (1989))). The other circumstance is the existence of a 

statute with which the administrative act conflicts. See 220 ILCS 5/10-201(e)(iv)(C) (West 

2012) (“The court shall reverse a Commission *** decision, in whole or in part, if it finds that 

*** [t]he *** decision is in violation of the State *** laws[.]”).

¶ 97 a. Is There an Empowering Statute? 

¶ 98 The first question, then, is whether any statute expressly empowers the Commission to 

require the observance of administratively created consumer protections as a condition of 

participating in a small volume transportation program. See Illinois Bell, 203 Ill. App. 3d at

438. The answer is yes. The statutory authority comes from sections 9-201 and 19-120(b)(3) of 

the Public Utilities Act (220 ILCS 5/9-201, 19-120(b)(3) (West 2012)). 

¶ 99 Under section 9-201(a) (220 ILCS 5/9-201(a) (West 2012)), whenever a public utility 

wants to make a significant change, it has to file a “schedule,” or tariff, with the Commission. 

If the utility wants to change “any rate or other charge,” it has to file a tariff. Id. If the utility 

wants to change “any rule, regulation, practice[,] or contract relating to or affecting any rate or 

other charge, classification[,] or service,” it has to file a tariff. Id. If the utility wants to change 

“any privilege or facility,” it has to file a tariff. Id.

¶ 100 Section 9-201(b) says that whenever a utility files a tariff, “the Commission shall have the 

power, and it is hereby given authority, *** to enter upon a hearing concerning the propriety of 

such rate or other charge, classification, contract, practice, rule[,] or regulation, and pending 

the hearing and decision thereon, such rate or other charge, classification, contract, practice, 

rule[,] or regulation shall not go into effect.” 220 ILCS 5/9-201(b) (West 2012). 

¶ 101 Section 9-201(c) says that “[i]f the Commission enters upon a hearing concerning the 

propriety of any proposed rate or other charge, classification, contract, practice, rule[,] or 

regulation, the Commission shall establish the rates or other charges, classifications, contracts, 

practices, rules[,] or regulations proposed, in whole or in part, or others in lieu thereof, which it 

shall find to be just and reasonable.” 220 ILCS 5/9-201(c) (West 2012). Once the Commission 

approves a tariff, it “is a law, not a contract, and [it] has the force and effect of a statute.”

(Internal quotation marks omitted.) Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 55 

(2004). 

¶ 102 In this case, Ameren filed not only tariffs proposing a general increase in its gas rates but 

also “rider” or supplemental tariffs proposing the establishment of a small volume 

transportation program. See 220 ILCS 5/9-201(a) (West 2012) (“new schedules or 

supplements” (emphasis added)). The Commission had the statutory authority to scrutinize the 

“practices” and “rules” proposed in the small volume transportation tariffs and to find those 

“practices” and “rules” to be “just and reasonable” only if they included a provision whereby 

Ameren required retail gas suppliers, as a condition of their participation in the program, to 

observe certain consumer protections. 220 ILCS 5/9-201(c) (West 2012). 

¶ 103 Section 19-120(b)(3) provides: “The Commission shall have jurisdiction *** to investigate 

*** whether *** the alternative gas supplier has violated or is in nonconformance with the 
- 19 - 

transportation services tariff of, or any of its agreements relating to transportation services 

with, the gas utility *** providing transportation services ***.” 220 ILCS 5/19-120(b)(3) 

(West 2012). 

¶ 104 We conclude, therefore, that statutory law (1) authorizes the Commission to require the 

inclusion of consumer protections in a small volume transportation tariff and (2) gives the 

Commission “jurisdiction” over retail gas suppliers to investigate their compliance with these 

consumer protections. 

¶ 105 The retail gas suppliers point out that the three consumer protections are not actually in any 

of the proposed small volume transportation tariffs that Ameren has filed. Nevertheless, the 

import of the Commission’s order is that the three consumer protections shall be in Ameren’s 

small volume transportation tariff. After all, this administrative case was a hearing on tariffs. 

The Illinois Competitive Energy Association (ICEA) and the Retail Energy Supply 

Association (RESA) must have contemplated that if the Commission adopted the consumer 

protections proposed by the Citizens Utility Board, the protections would be in the small 

volume transportation tariff. They argued to the Commission: “ICEA/RESA says [the Citizens 

Utility Board] is under the misunderstanding that the tariffs of Illinois gas utilities are the only 

source of consumer protections. *** ICEA/RESA states that protections for residential and 

small-volume non-residential natural gas customers are set forth in Section 19-115 of the Act 

[(220 ILCS 5/19-115 (West 2012))].” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 

245 (Order Dec. 18, 2013). 

¶ 106 b. Do the Three Consumer Protections Violate Statutory Law? 

¶ 107 i. The First Consumer Protection

¶ 108 The first consumer protection that the Commission approved in this case provides as 

follows: 

“(1) A customer shall be absolved from paying any termination fees if, prior to the 

due date of their first bill, they notify the supplier that they are terminating the 

contract.” Id. at 247. 

¶ 109 The retail gas suppliers argue that because this consumer protection requires a grace period 

“different from” the grace period in section 19-115(g)(5)(B) of the Public Utilities Act (220 

ILCS 5/19-115(g)(5)(B) (West 2012)), it “directly conflict[s] with” that statute. Section 

19-115(g)(5)(B) reads as follows: 

“(g) An alternative gas supplier shall comply with the following requirements with 

respect to the marketing, offering, and provision of products or services: 

 * * * 

 (5) Early Termination. 

 *** 

 (B) In any agreement that contains an early termination clause, an 

alternative gas supplier shall provide the customer the opportunity to terminate 

the agreement without any termination fee or penalty within 10 business days 

after the date of the first bill issued to the customer for products or services 

provided by the alternative gas supplier. The agreement shall disclose the 

opportunity and provide a toll-free phone number that the customer may call in 

order to terminate the agreement.” 220 ILCS 5/19-115(g)(5)(B) (West 2012). 
- 20 - 

Thus, if a contract between an alternative gas supplier and a customer includes a provision 

governing an early termination of the contract, the contract must inform the customer that the 

customer has the right to terminate the contract, without penalty, within 10 business days after 

the first bill is issued to the customer. Also, the contract has to provide a toll-free telephone 

number the customer may call to exercise this right of early termination. 

¶ 110 The alternative gas suppliers complain that the grace period the Commission ordered in the 

first consumer protection is longer than the grace period that section 19-115(g)(5)(B) 

“allow[s].” Again, the first consumer protection provides that a customer may terminate the 

contract, without penalty, before the due date of the first bill. Under the Commission’s rules, 

“[b]ills for residential customers shall be due a minimum of 21 days after the date they are sent 

to the customer, and bills for non-residential customers shall be due a minimum of 14 days 

after the date they are sent to the customer.” 83 Ill. Adm. Code 280.50(e)(1), adopted at 38 Ill. 

Reg. 21331 (eff. Nov. 1, 2014). Thus, the first consumer protection lengthens the grace period 

from 10 days after the issuance of the first bill to a minimum of 21 days after the issuance of the 

first bill for residential customers and a minimum of 14 days after the issuance of the first bill 

for nonresidential customers. 

¶ 111 According to the retail gas suppliers, this substitution of a longer grace period for the 

shorter grace period in the statute is an unauthorized act, like the Commission’s violation of 

section 9-230 (220 ILCS 5/9-230 (West 1994)) in Illinois Bell Telephone Co. v. Illinois 

Commerce Comm’n, 283 Ill. App. 3d 188 (1996). Section 9-230 provided: 

“ ‘In determining a reasonable rate of return upon investment for any public utility 

in any proceeding to establish rates or charges, the Commission shall not include any

incremental risk or increased cost of capital which is the direct or indirect result of the 

public utility’s affiliation with unregulated or nonutility companies.’ ” (Emphases in 

original.) Illinois Bell, 283 Ill. App. 3d at 205 (quoting 220 ILCS 5/9-230 (West 1994)). 

Illinois Bell Telephone Company (Illinois Bell) was affiliated with Ameritech Corporation 

(Ameritech), and “[instead of] determining whether [Illinois] Bell’s risk or capital costs were 

greater because of its affiliation with Ameritech, the Commission merely determined [that 

Illinois] Bell’s capital structure was reasonable.” Id. at 207. If, however, the affiliation with 

Ameritech caused Illinois Bell to be a riskier investment than it otherwise would have been, the 

supposed reasonableness of the affiliation was irrelevant; the statute flatly forbade using the 

added risk as a justification for allowing Illinois Bell a higher rate of return. The appellate court 

said: 

“In section 9-230, the legislature used the word ‘any’ to modify its prohibition of 

considering incremental risk or increased cost of capital in determining a reasonable 

[rate of return]. This usage removes all discretion from the Commission. Section 9-230 

does not allow the Commission to consider what portion of a utility’s increased risk or 

cost of capital caused by affiliation is ‘reasonable’ and therefore should be borne by the 

utility’s ratepayers; the legislature has determined that any increase whatsoever must 

be excluded from the [rate-of-return] determination. It is impermissible for the 

Commission to substitute its reasonableness standard for the legislature’s absolute 

standard.” Id.

The statutory phrase “shall not include any incremental risk” was an absolute prohibition. 

¶ 112 The statute before us, section 19-115(g)(5)(B) of the Public Utilities Act (220 ILCS 

5/19-115(g)(5)(B) (West 2012)), would be more comparable to the statute in Illinois Bell if it 
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said something to the effect of: “The agreement shall not include any grace period other than a 

period of 10 business days after the issuance of the first bill.” But that is not what section 

19-115(g)(5)(B) says. Instead, it says that the alternative gas supplier “shall provide the 

customer the opportunity to terminate the agreement without any termination fee or penalty 

within 10 business days after the [issuance] of the first bill.” Id. If the supplier provides the 

customer the opportunity to terminate the agreement within, say, 14 business days after the 

issuance of the first bill, then, ipso facto, the supplier would provide the customer the 

opportunity to do so within 10 business days after the issuance of the first bill. A longer period 

encompasses a shorter period. If the deadline for early termination is the fourteenth day and the 

customer calls on the tenth day, the supplier surely will not regard the call as ineffectual and 

require the customer to call back in four days. By giving the customer the opportunity to 

terminate the contract within 14 days, the supplier gives the customer the opportunity to do so 

on the first day, the second day, the third day, etc., all the way up to day 14. 

¶ 113 The alternative gas suppliers argue, however, that if the legislature really intended to allow 

a grace period of longer than 10 business days, the legislature could have used a modifier such 

as “no less than” or “at least”: “An alternative gas supplier shall provide the customer the 

opportunity to terminate the agreement without any termination fee or penalty within no less 

than 10 business days after the date the first bill was issued to the customer.” True–or the 

legislature could have spoken in terms of an “opportunity” to terminate the contract. The best 

evidence of legislative intent is the plain and ordinary sense of the words the legislature used 

(Paris v. Feder, 179 Ill. 2d 173, 177 (1997)), and in the plain and ordinary sense of words, 

when someone is given an “opportunity” to do something within a period of longer than 10 

days, the person necessarily is given the “opportunity” to do it within 10 days. Hence, in our 

de novo interpretation (see Quad Cities Open, Inc. v. City of Silvis, 208 Ill. 2d 498, 508 

(2004)), we conclude that section 19-115(g)(5)(B) of the Public Utilities Act (220 ILCS 

5/19-115(g)(5)(B) (West 2012)) does not forbid the Commission to prescribe a grace period 

longer than 10 business days after the issuance of the first bill. 

¶ 114 ii. The Second Consumer Protection

¶ 115 The second consumer protection likewise lengthens the grace period for the early 

termination of a contract, making the grace period especially long if the contract was preceded 

by a door-to door solicitation: 

“2. When a customer has accepted service from a supplier after solicitation by a 

door-to-door salesperson, there shall be no termination fees assessed if the customer 

terminates during the first 6 billing cycles.” Ameren Illinois Co., Ill. Com. Comm’n No. 

13-0192, at 247 (Order Dec. 18, 2013). 

¶ 116 The retail gas suppliers make essentially the same argument against the second consumer 

protection that they make against the first consumer protection: under section 19-115(g)(5)(B) 

(220 ILCS 5/19-115(g)(5)(B) (West 2012)), “ten days means ten days, regardless of how a 

customer was solicited.” In our discussion of the first consumer protection, we explained why 

we disagree with that argument. For the same reason, we disagree with the suppliers’ argument 

against the second consumer protection. 
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¶ 117 iii. The Third Consumer Protection

¶ 118 The third consumer protection provides as follows: 

“3. If a supplier’s marketing materials include a price comparison of the supplier 

rate and the gas utility rate, the depiction of such comparison shall display at least three 

years of data in no greater than quarterly increments and shall also display the 

supplier’s offered price for the same or equivalent product(s) or service(s) for each of 

the same increments.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 247 

(Order Dec. 18, 2013). 

¶ 119 The retail gas suppliers make essentially two arguments against this consumer protection. 

First, nothing in the Public Utilities Act authorizes the Commission to order this consumer 

protection. Second, this consumer protection “directly conflicts with” sections 19-115(g) and 

19-125(c) of the Public Utilities Act (220 ILCS 5/19-115(g), 19-125(c) (West 2012)), in the 

sense that “the expression of one thing in an enactment excludes any other, even if there are no 

negative words prohibiting it.” Illinois Bell, 203 Ill. App. 3d at 438. We will address each of 

those arguments in turn. 

¶ 120 (a) Statutory Authorization 

¶ 121 As we have discussed, when the Commission holds an administrative hearing on a tariff 

filed by a utility, section 9-201(c) empowers the Commission to “establish” “just and 

reasonable” “practices, rules[,] or regulations” “in lieu” of those the utility has proposed in the 

tariff. 220 ILCS 5/9-201(c) (West 2012). Thus, if the third consumer protection is just and 

reasonable, the Commission has the power to establish it as a practice, rule, or regulation in 

Ameren’s small-volume transportation tariff. 

¶ 122 (b) The Argument of Implied Exclusion 

¶ 123 The retail gas suppliers argue that the third consumer protection “directly conflicts with 

provisions in the [Public Utilities Act] that address marketing practices and price 

comparisons.” The only such provisions the suppliers cite are sections 19-115(g) and 

19-125(c) (220 ILCS 5/19-115(g), 19-125(c) (West 2012)). The suppliers do not explain how 

the third consumer protection requires them to do anything that sections 19-115(g) and 

19-125(c) forbid. 

¶ 124 Perhaps the suppliers mean that sections 19-115(g) and 19-125(c) impliedly exclude the 

third consumer protection. Expressing one thing in a statute can impliedly exclude another 

thing, but it does not always do so. If the statement “the expression of one thing in an 

enactment excludes any other” were taken at face value, there could be only one enactment. 

Illinois Bell, 203 Ill. App. 3d at 438. Actually, the exclusionary implication is heavily 

dependent on context and common sense. In Illinois Bell, for example, the only reasonable 

inference from section 9-244 of the Public Utilities Act (Ill. Rev. Stat. 1989, ch. 1112/3, 

¶ 9-244) was that the legislature did not intend the Commission to unilaterally implement 

incentives to improve utility performance, because the statute authorized the Commission to 

do a study on the necessity and desirability of an incentive program and then to report its 

findings to the legislature, “ ‘with appropriate legislative recommendations.’ ” (Emphasis 

omitted.) Illinois Bell, 203 Ill. App. 3d at 437-38 (quoting Ill. Rev. Stat. 1989, ch. 1112/3, 

¶ 9-244). Because the legislature wanted the Commission to study the question and then make 
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its recommendations to the legislature, the clear implication was that the legislature had 

reserved to itself the decision of whether to have an incentive program for utilities. 

¶ 125 We find no comparable exclusionary implication in either section 19-115(g) (220 ILCS 

5/19-115(g) (West 2012)) or section 19-125(c) (220 ILCS 5/19-125(c) (West 2012)). Section 

19-115(g) says only this about marketing materials: “Any marketing materials which make 

statements concerning prices, terms, and conditions of service shall contain information that 

adequately discloses the prices, terms[,] and conditions of the products or services.” 220 ILCS 

5/19-115(g)(1) (West 2012). We do not understand by what logic this statute impliedly 

excludes the third consumer protection, which governs marketing materials that purport to 

make “a price comparison of the supplier rate and the gas utility rate.”

¶ 126 As for section 19-125(c) (220 ILCS 5/19-125(c) (West 2012)), it has nothing to do with 

marketing. Rather, it requires alternative gas suppliers to provide the Commission their pricing 

information, which the Commission then will post on the Internet so that customers can 

compare the prices of the various suppliers. It is unclear how this statute could be interpreted as 

impliedly saying no to something quite different: a regulation governing marketing materials 

that purport to compare the supplier’s rate to the gas utility’s rate. 

¶ 127 3. The Lack of an Opportunity To Present Rebuttal Evidence

¶ 128 The retail gas suppliers complain that “[b]ecause [the Citizens Utility Board proposed the 

three consumer protections] in the rebuttal phase of the case, there was no additional round of 

testimony during which [the suppliers] could have addressed those issues.”

¶ 129 Nevertheless, as the Commission notes, the suppliers did not object when, during the 

rebuttal phase, Cohen proposed the three consumer protections. According to the 

Commission’s brief, “his evidence was admitted into the administrative record without 

objection.” The suppliers could have objected during Cohen’s testimony. They could have 

objected that by waiting until the rebuttal phase to propose these new rules, the Citizens Utility 

Board deprived them of the opportunity to respond with evidence that the proposed new rules 

would be too burdensome or too costly. Then the administrative law judge could have 

sustained their objection or, alternatively, could have modified the schedule so as to allow 

them to present surrebuttal evidence. But the suppliers made no contemporaneous objection. 

¶ 130 A rule of the Commission provides: “Objections must be made at hearing to preserve them 

on appeal.” 83 Ill. Adm. Code 200.610(b) (2000). Pursuant to that rule, we conclude that the 

suppliers have forfeited their procedural objection to the proposal of new rules during rebuttal. 

¶ 131 4. The Argument That the Three Consumer Protections 

 Lack Evidentiary Support in the Record

¶ 132 The Commission found that “in light of the experience in [n]orthern Illinois, the three 

requirements proposed by [the Citizens Utility Board were] reasonable and appropriate 

supplements to the existing statutory protections,” and therefore the Commission “adopted”

them. The suppliers argue that, for all that appears in the record, “the experience in [n]orthern 

Illinois” consists merely of two cases, one from 2002 and the other from 2008, and that these 

two isolated cases from years ago, which did not even occur in Ameren’s service territory, 

cannot reasonably serve as a basis for the three consumer protections. Thus, the suppliers 

argue, “[t]he findings of the Commission are not supported by substantial evidence based on 
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the entire record of evidence presented to or before the Commission for and against such rule, 

regulation, order[,] or decision.” 220 ILCS 5/10-201(e)(iv)(A) (West 2012). 

¶ 133 Let us assume, for the sake of argument, that the suppliers are correct: if the aim is to 

respond to historical abuses, the two cases from northern Illinois cannot reasonably serve as a 

justification for the three consumer protections. Let us say these cases are too few and too stale 

to be the basis for any decision. 

¶ 134 It does not necessarily follow that the three consumer protections are “[un]just and 

[un]reasonable.” 220 ILCS 5/9-201(c) (West 2012). The suppliers cite no case holding that the 

Commission must be purely reactive, and never proactive, in the practices, rules, and 

regulations it requires in tariffs. They cite no case holding that consumers must be exploited in 

sufficient numbers before measures can be taken to protect them. To borrow an analogy from 

the Commission’s brief, the Commission should not have to wait until someone is run over by 

a train before it declares a railroad crossing to be dangerous. See Galt v. Illinois Commerce 

Comm’n, 28 Ill. 2d 501, 504 (1963). 

¶ 135 Section 9-201(c) requires that the “practices, rules[,] or regulations” in tariffs be “just and 

reasonable,” not that they be validated by a compelling history of abuses. 220 ILCS 5/9-201(c) 

(West 2012). The Commission could reasonably foresee the potential for unfairness, 

deception, or exploitation and, by the insertion of a rule or regulation into the tariff, try to 

prevent the wrong from ever happening. 

¶ 136 III. CONCLUSION 

¶ 137 For the foregoing reasons, we affirm the Commission’s decision. 

¶ 138 Affirmed. 

¶ 139 JUSTICE STEIGMANN, concurring in part and dissenting in part. 

¶ 140 With one small exception, I agree completely with the sound majority opinion. That small 

exception pertains to one of the three additional consumer protections the Commission added, 

providing that a customer shall be absolved from paying any termination fees if, prior to the 

due date of the customer’s first bill, the customer notifies the supplier that the customer is 

terminating the contract. The retail gas suppliers argue that because this consumer protection 

requires a grace period that is different from the one provided in section 19-115(g)(5)(B) of the 

Public Utilities Act (220 ILCS 5/19-115(g)(5)(B) (West 2012)), it directly conflicts with that 

statute. I agree with that analysis and respectfully dissent from that portion of the majority’s 

opinion. 

¶ 141 The majority opinion sets forth section 19-115(g)(5)(B) of the Public Utilities Act in its 

entirety (see supra ¶ 109), so I will not repeat that section here. In my judgment, that section 

constitutes a legislative determination regarding the time in which any agreement that contains 

an early termination clause may be subject to an early termination. The legislature has decided 

that the customer may terminate the agreement without any termination fee or penalty within 

10 business days after the date of the first bill issued to the customer for products or services 

provided. Contrary to the majority opinion, I view this language as constituting a definitive 

legislative judgment that is binding upon the Commission. Accordingly, the Commission 
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exceeded its lawful authority by purporting to extend the time for early termination beyond 

that contained in section 19-115(g)(5)(B) of the Public Utilities Act.