Nos. 2--00--0375 & 2--00--0275 cons.

	IN THE 

	APPELLATE COURT OF ILLINOIS

	SECOND DISTRICT

COMMONWEALTH EDISON COMPANY,	)	Petition for review of order

						)	of Illinois Commerce

	Petitioner-Appellant,	)	Commission.

						)	

v.						)	ICC No. 99--0117		

						)	

ILLINOIS COMMERCE COMMISSION,	)	

						)

	Respondent-Appellee.	)

						)

(The People of the State of	)	

Illinois; Alliant Energy		)	

Resources; Interstate Power	)

Company; Amerencips; Amerenue;	)

ANR Pipeline Company;		)

Association of Illinois		)

Electric Cooperatives; Blackhawk	)

Energy Services, L.L.C.;		)

Building Owners and	Managers	)

Association of	Chicago; Central	)

Illinois Light	Company; Citizens	)

Utility Board;	the City of	)

Chicago; the Cook County State’s	)

Attorney's Office; the United	)

States Department of Energy;	)

Enron Energy Services, Inc.;	)

Illinois Industrial	Energy	)

Consumers; Illinois	Municipal	)

Electric Agency; Illinois Power	)

Company; MidAmerican Energy	)

Company; NevEV Midwest, L.L.C.;	)

Nicor, Inc.; Nicor Energy, L.L.C.;)

Northern Illinois Gas Company;	)

and Peoples Energy Service	) 

Corporation, Intervenors.)	)			

	JUSTICE CALLUM delivered the opinion of the court:

	Petitioner, Commonwealth Edison Company (ComEd), appeals

directly to this court from an order of respondent, the Illinois Commerce Commission (the Commission).  This order approves, with

modification, ComEd’s proposed open-access implementation plan and

delivery service tariffs.  On appeal, ComEd argues that the order

unlawfully prevents ComEd from fully recovering its open-access

implementation costs and delivery services costs.  We affirm in

part, reverse in part, and remand.

	BACKGROUND

	This appeal arises under Article XVI of the Public Utilities

Act (220 ILCS 5/1--101, et seq. (West 1998)). Titled the "Electric Service Customer Choice and Rate Relief Law of 1997" (Customer

Choice Law) (220 ILCS 5/16--101 et seq. (West 1998)), it introduced competition for the first time into the Illinois electricity

market.  The parties refer to this competitive market structure as

"open access."

	Under the traditional model of the retail electricity market,

a retail customer purchases several different services from its

local electric utility as a single "bundled" service.  Bundled

service includes the electricity itself, as well as all services

related to the distribution and delivery of electricity.  Under the

Customer Choice Law, by contrast, a retail customer eligible for

open access may choose either to continue purchasing bundled

service from its local electric utility or to purchase electricity

as a separate "unbundled" service from one of three new types of

suppliers.  Unbundled service is available for purchase from (1)

alternative retail electric suppliers, which are nonutilities

licensed to sell retail electricity; (2) an Illinois electric

utility other than the customer’s local electric utility; or (3) the customer’s local electric utility, which may sell electricity

on both a bundled and unbundled basis.  Any supplier other than the

customer’s local electric utility is known as a "retail electric

supplier" (RES).  However, even if a retail customer chooses to

purchase its electricity on an unbundled basis from a supplier

other than its local electric utility, the local electric utility

continues to supply that customer’s "delivery services," which the

Customer Choice Law defines as:

		"those services provided by the electric utility that are

necessary in order for the transmission and distribution

systems to function so that retail customers located in the

electric utility’s service area can receive electric power and

energy from suppliers other than the electric utility, and

shall include, without limitation, standard metering and

billing services."  220 ILCS 5/16--102 (West 1998).

	Under section 16--108 of the Customer Choice Law, a utility is

required to file a delivery services tariff (DST) with the

Commission at least 210 days prior to the date on which the utility

is to begin supplying such services.  220 ILCS 5/16--108(a) (West

1998).  A tariff specifies both the customers that are eligible for

a particular regulated service and the terms and conditions,

including the price, under which a utility is to provide such

service.  The Commission is then required to enter an order

approving or approving as modified the utility’s DST no later than

30 days prior to the date on which the utility is to begin

supplying such services.  220 ILCS 5/16--108(b) (West 1998). 

Charges for delivery services are to be "cost based, and shall allow the electric utility to recover the costs of providing

delivery services."  220 ILCS 5/16--108(c) (West 1998). In

addition, such charges are to be "just and reasonable and shall

take into account customer impacts."  220 ILCS 5/16--108(d) (West

1998).  In establishing the rates that a public utility is to charge its customers, the Commission considers the company's

operating costs, rate base, and allowed rate of return.  Citizens Utility Co. v. Illinois Commerce Comm’n, 124 Ill. 2d 195, 200 (1988).  A public utility is entitled both to recover in its rates certain operating costs and to earn a return on its rate base

(i.e., the amount of its invested capital).  Citizens Utility Co., 124 Ill. 2d at 200. The return is the product of the allowed rate of return and the rate base.  Citizens Utility Co., 124 Ill. 2d at 200.  The sum of those amounts--operating costs and return on rate base--is known as the company's revenue requirement.  Citizens Utility Co., 124 Ill. 2d at 200. 

	This action relates to ComEd’s DST for the first phase of open

access, which began on October 1, 1999.  As required by section 16-

-108, ComEd filed its DST with the Commission on March 1, 1999.  On

August 26, 1999, the Commission issued its order approving, as

modified, ComEd’s DST.  The Commission later amended that order on

September 9, 1999.  ComEd filed a petition for rehearing, and the

Commission allowed that petition in part and issued an order on

rehearing on March 9, 2000.  On March 23, 2000, ComEd filed a

second petition for rehearing, which the Commission denied on April

4, 2000.  This timely appeal followed.

	ANALYSIS

	1. Standard of Review

	Our courts give great deference to the Commission's decisions as they are " 'judgment[s] of a tribunal appointed by law and

informed by experience.' "  United Cities Gas Co. v. Illinois Commerce Comm'n, 163 Ill. 2d 1, 12 (1994), quoting Village of Apple River v. Illinois Commerce Comm'n, 18 Ill. 2d 518, 523 (1960).  When reviewing the Commission's orders, we are limited to

considering whether (1) the Commission acted within its authority;

(2) adequate findings were made to support the decision; (3) the

decision was supported by substantial evidence; and (4) state or

federal constitutional rights were infringed.  Citizens United For Responsible Energy Development, Inc. v. Illinois Commerce Comm'n, 285 Ill. App. 3d 82, 89 (1996).  The Commission's factual findings

are considered prima facie correct and may be reversed only upon a demonstration that the findings are not supported by substantial

evidence.  220 ILCS 5/10--201(d), (e)(iv)(A) (West 19968); People ex rel. Hartigan v. Illinois Commerce Comm'n, 148 Ill. 2d 348, 367 (1992).  When an interpretation of the Commission's own rules is at

issue, the Commission's interpretation is held prima facie reasonable (220 ILCS 5/10--201(d) (West 19968); United Cities Gas Co., 163 Ill. 2d at 11), and this court may not interfere unless the administrative construction is clearly erroneous, arbitrary, or

unreasonable (Central Illinois Public Service Co. v. Illinois Commerce Comm'n, 243 Ill. App. 3d 421, 428 (1993)).

	2. Pro Forma Adjustments

	The first issue on appeal is relatively straightforward: did

the Commission follow its own rules when rejecting nine pro forma adjustments to ComEd’s rate base and revenue requirement? We hold

that it did not.

	The focus of the controversy is section DST.160 of the

Commission’s "Minimum Information Requirements" (the MIR).  Adopted

in a separate but related Commission proceeding, the MIR establish

the filing requirements for DSTs relating to the first phase of

open access.  The MIR contemplate the use of a test year in the

establishment of appropriate rates and, for the most part, mirror

the traditional standard filing requirements established under

section 285 of the Illinois Administrative Code (83 Ill. Admin. Code

§285 (1985)).

	Here, ComEd determined its delivery services rate base and

revenue requirement using 1997 as its historical test year.  As

permitted by section DST.160, ComEd made certain pro forma adjustments to its rate base and revenue requirement. Section

DST.160 provides as follows:

		""A utility may propose pro forma adjustments (estimated or calculated adjustments made in the same context and format

the affected information was provided) to the selected

historical test year for all known and measurable changes in

the operating results of the test year.  These adjustments

shall reflect significant changes (changes affecting the

ratepayers) in plant investment, operating revenues, expenses

and capital structure where such changes occurred during the

historical test year or are reasonably certain to occur subsequent to	 the selected test year but prior to January 1, 2001 and the amount of the changes are determinable. 

Attrition or inflation factors shall not substitute for a

particularized study of individual capital, revenue and

expense components.  These adjustments shall be supported by actual expenditures, written contracts, purchase orders, job

orders, invoices or other similar evidence of reasonable

certainty. Changes shall not be considered known and measurable simply by virtue of their inclusion in a budget.

Any proposed and measurable adjustment to the test year shall

be individually identified and individually supported in the

direct testimony of the utility.  Each adjustment shall be

submitted in accordance with these General Information

Requirements' Schedules." (Emphasis added.)  Illinois Commerce Comm’n, On Its Own Motion v. Central Illinois Light Co., Interim Order No. 98--0454, app. A at 6-7 (October 21, 1998).

However, with respect to nine of its pro forma adjustments, rather than relying upon actual expenditures, written contracts, purchase

orders, job orders, or invoices, ComEd relied almost exclusively

upon sworn testimony.  Three of these pro forma adjustments related to ComEd’s delivery services rate base, including (1) $31,446,000

for open-access information systems costs, (2) $1,614,000 for open-

access lottery costs, and (3) $120,860,000 for distribution

reliability improvement costs.  The six remaining pro forma adjustments related to ComEd’s delivery services revenue

requirement, including (1) $7,289,000 for open-access information

systems costs, (2) $1,340,000 for open-access lottery costs amortization, (3) $6,886,000 for transmission and distribution

business unit costs, (4) $1,984,000 for open-access implementation

department costs, (5) $3,859,000 for customer education for open-

access costs, and (6) $879,000 for employee training for open-

access costs. 

	In its order approving, as modified, ComEd’s DST, the Commission rejected all of the nine pro forma adjustments identified above.  In rejecting these nine pro forma adjustments, the Commission relied heavily--and in most instances exclusively--

upon the fact that "ComEd did not provide the support required by

DST.160."  Specifically, with respect to the three pro forma adjustments to ComEd’s delivery services rate base, the Commission held that section DST.160 requires all pro forma adjustments to be supported by "actual expenditures, written contracts, purchase orders, job orders, invoices or other similar evidence of

reasonable certainty."   Because "sworn testimony is distinguishable

from the preceding language," the Commission concluded that ComEd failed to carry its burden.  Similarly, in rejecting the six pro forma adjustments to ComEd’s delivery services revenue requirement, the Commission accepted the Commission staff’s argument that,

although ComEd presented sworn testimony in support of all six

adjustments, "the support in Edison’s case did not meet the

requirements of DST.160" and that ComEd therefore "was unable to

provide tangible support" for those adjustments.

	On appeal, ComEd argues, and we agree, that the Commission

erroneously applied section DST.160.  A fair reading of the

Commission’s order clearly reveals that the Commission treated sworn testimony as legally incompetent evidence under DST.160. 

Indeed, the order contains no indication that the Commission

weighed or in any way considered the substance of ComEd’s sworn

testimony.  On the contrary, the Commission simply rejected that

testimony outright because it was not in the nature of "actual expenditures, written contracts, purchase orders, job orders,

invoices or other similar evidence of reasonable certainty."  This

was error.

	Whether sworn testimony constitutes "actual expenditures, written contracts, purchase orders, job orders, invoices or other

similar evidence of reasonable certainty" is not the point. 

Rather, the point is that the MIR explicitly allow the Commission

to consider any and all evidence in support of a pro forma adjustment.  Indeed, although section DST.160 states that pro forma adjustments "shall be supported by actual expenditures, written

contracts, purchase orders, job orders, invoices or other similar

evidence of reasonable certainty," (Illinois Commerce Comm'n, On Its Own Motion v. Central Illinois Light Co. , app. A at 7) , section DST.110(b), which sets forth the MIR’s purpose, provides:

		"These standard information requirements do not bind the

Illinois Commerce Commission *** to a decision based solely on

data provided pursuant to this Part. The inclusion of

particular information or methodologies in these filing

requirements is indicative of the Commission’s desire that

this information be provided by the time that a utility files

its tariffs and implementation plan.  It shall not give rise to a presumption or predetermination that such information or methodologies are more suitable than other information or

methodologies.  Nothing in these filing requirements shall be

construed to mean or imply that the Commission must or will

base any determination on, or solely on, the information or

methodologies required in these requirements. Neither the utility nor any party to a Commission proceeding is limited by

the methodologies or information described in these

information requirements in making any request or

recommendation to the Commission; and nothing in these

information requirements shall be construed to require a

utility to base its delivery services tariffs or

implementation plan, in whole or in part, on the methodologies

or information described in these information requirements and

the Schedules referenced herein. Compliance with these information requirements does not excuse a party from

discovery, and parties and Commission Staff may seek

additional information through discovery." (Emphasis added.) Illinois Commerce Comm’n, On Its Own Motion v. Central Illinois Light Co., §DST.110(b), app. A at 1.

Thus, section DST.110 explicitly states not only that a utility may

utilize any information or methodology to support its filing but also that the Commission may base its decision upon any information

or methodology, regardless of whether that information or methodology complies with the MIR.  Nevertheless, in its order, the Commission held that it would not consider any evidence that did

not comply with section DST.160, for no other reason than that such

evidence did not comply with section DST.160. 

	The Commission’s categorical rejection of ComEd’s sworn

testimony was clearly erroneous. Although DST.160 plainly establishes a preference for "actual expenditures, written contracts, purchase orders, job orders, invoices or other similar

evidence of reasonable certainty," DST.110 just as plainly permits

ComEd to present, and the Commission to consider substantively, sworn testimony as a basis for pro forma adjustments.  Accordingly, we have no choice but to reverse those portions of the Commission’s

order rejecting the nine pro forma adjustments identified above and to remand this cause to the Commission for the substantive

consideration of ComEd’s evidence in support of those adjustments.

In so ruling, we offer no opinion as to whether ComEd’s evidence,

when substantively considered, supports any or all of the nine pro forma adjustments at issue.

	3. Single Billing Option Credit

	The second issue on appeal relates to the Commission’s

calculation of the single billing option credit.

	Under the Customer Choice Law, the local electric utility

directly bills the delivery services customer for the utility’s

charges unless that customer purchases its electricity from a RES

and the RES elects the "single billing option" (SBO).  See 220 ILCS

5/16--118(b) (West 1998).  Under the SBO, the RES sends a single

bill to the customer that includes both the RES’s charges and the

local electric utility’s delivery services charges.  220 ILCS 5/16-

-118(b) (West 1998).  As part of its SBO tariff, ComEd proposed a

credit of 20 cents per month for each customer whose RES elects the

SBO. ComEd arrived at this credit through the use of an "avoided cost" methodology, which, according to ComEd, yields the average

cost per customer that ComEd will actually avoid when an RES elects

the SBO.  In its order, the Commission rejected both ComEd’s 20-

cents-per-customer SBO credit and ComEd’s "avoided cost"

methodology, opting instead for an "embedded cost" methodology. 

According to the Commission, under the "embedded cost" approach,

the SBO credit is calculated by dividing the total dollar amount

that ComEd included in its revenue requirement for providing

billing services to bundled service customers during a given year

by the total number of bills actually sent by ComEd during that

same year, less any amounts related to ComEd’s continuous billing

obligation to SBO customers.  The Commission’s "embedded cost"

methodology yields a monthly SBO credit of approximately 55 cents

per customer.

	On appeal, ComEd argues that the Commission’s use of the

"embedded cost" methodology for calculating the SBO credit is

illegal because it contravenes section 16--108(c)’s mandate that

all delivery service charges be "cost based" (220 ILCS 5/16--108(c)

(West 1998)).  According to ComEd, the only methodology that yields

a truly "cost based" credit is ComEd’s "avoided cost" methodology.

The Commission’s "embedded cost" methodology, by contrast, "results

in a credit that exceeds the costs that ComEd actually will avoid

when a RES elects the SBO, at least in the short term, and that

provides for no recovery of the denied costs in the long term."

	The problem with ComEd’s argument is that section 16--108(c)

does not define the phrase "cost based."  Nor is this a phrase

whose meaning is plain on its face.  Consequently, the issue becomes one of statutory construction, and, although we are not

bound by the Commission’s interpretation of a statutory standard,

that interpretation is entitled to deference.  Citizens Utility Board v. Illinois Commerce Comm’n, 291 Ill. App. 3d 300, 304 (1997).  Moreover, given the broad delegation of authority to the

Commission, this Court must rely on the Commission’s interpretation

of the statute if there is a reasonable debate as to its meaning. 

Lakehead Pipeline Co. v. Illinois Commerce Comm’n, 296 Ill. App. 3d 942, 953 (1998). 

	Here, there is considerable debate as to the meaning of "cost

based," and we therefore have no problem deferring to the

Commission’s conclusion that the "embedded cost" methodology yields

an SBO credit that is both "cost based" and compliant with section

16--108(c).  Indeed, the issue of whether an "avoided cost" or

"embedded cost" methodology generates the truly "cost based" SBO

credit was hotly litigated, with expert testimony coming down on

both sides. And while ComEd correctly notes that the "embedded

cost" methodology fails to account fully for ComEd’s short-term

costs, the Commission accepted its staff’s conclusion that the

"embedded cost" methodology is "cost based" in that it reflects ComEd’s costs over the long run.  Given both the breadth of the

phrase "cost based" and the abundant expert testimony supporting

the Commission’s interpretation of that phrase, we simply cannot

say that the Commission’s construction of the phrase "cost based"

as compatible with an "embedded cost" methodology is erroneous.

	Accordingly, we must affirm the Commission’s calculation of

the SBO credit.

CONCLUSION

	For the foregoing reasons, the order of the Commission is affirmed

in part and reversed in part, and this cause is remanded for

further proceedings consistent with this opinion.

	Agffirmed in part and reversed in part; cause remanded.

	GEIGER and BYRNE, JJ., concur.