Opinion ID: 2000132
Heading Depth: 1
Heading Rank: 3

Heading: Validity of Circuit Court Instructions

Text: In reversing the Commission's order and remanding the cause, the circuit court instructed the Commission to promulgate new rates for Edison within 30 days, with the $494.8 million increase rolled back and the cost of the new Byron 1 plant excluded from the rate base; apparently the Commission was then to conduct a full and proper ratemaking proceeding to arrive at a new rate base. Also, the court instructed the Commission not to allow into the rate base any cost attributable to delays from quality control or quality assurance deficiencies at Byron 1, the court having concluded that Edison was responsible either directly or indirectly for all the delay costs resulting from those deficiencies. Finally, the court ordered the Commission not to attribute to Byron 1 the entire cost of the physical plant common to units 1 and 2. The Commission and Edison challenge these instructions as improper judicial ratemaking and as usurping the Commission's fact-finding function. Setting utility rates is a legislative rather than a judicial function. ( Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill.2d 461; Illinois Central R.R. Co. v. Illinois Commerce Com. (1944), 387 Ill. 256, 275.) In the ratemaking scheme, the Commission and not the court is the fact-finding body. ( Illinois Commerce Com. v. New York Central R.R. Co. (1947), 398 Ill. 11, 16.) Apart from examining whether the Commission acted within the scope of its authority or infringed upon a constitutional right, a court is limited to reviewing whether the Commission set out findings of fact supporting its decision and whether the findings are against the manifest weight of the evidence. (See Cerro Copper Products v. Illinois Commerce Com. (1980), 83 Ill.2d 364.) Even when a court holds that rates authorized by the Commission are illegal, the court cannot make new rates. Illinois Central R.R. Co. v. Illinois Commerce Com. (1944), 387 Ill. 256, 276. Under the Public Utilities Act, a court reviewing a Commission order has three options: the court may affirm the Commission's order, it may reverse the order, or it may remand the cause to the Commission to receive new or additional evidence. (See Thompson v. Illinois Commerce Com. (1953), 1 Ill.2d 350, 358-59; Ill. Rev. Stat. 1983, ch. 111 2/3, par. 72.) The reviewing court does not have the power to direct the Commission to take specific action. ( Thompson v. Illinois Commerce Com. (1953), 1 Ill.2d 350, 358-59; Allied Delivery System, Inc. v. Illinois Commerce Com. (1981), 93 Ill. App.3d 656, 669.) If the evidence does not support the Commission's order, the court is limited to setting aside the order as against the manifest weight of the evidence or remanding for additional evidence. When the Commission's order is set aside or remanded, the Commission may accept additional evidence, reevaluate the evidence already presented, or simply reverse its original determination. A revised rate order may then again be subject to judicial review to ascertain whether the Commission's new conclusions are supported by sufficient evidence. The intervenors note that remanding a cause for further Commission proceedings consistent with the court's order is permissible. ( Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill.2d 461; Chicago & Eastern Illinois Ry. Co. v. Commerce Com. (1931), 343 Ill. 117.) The court's authority to remand for further action consistent with the court's opinion is not unlimited, however. The test is whether the court, through its opinion or order, limits or encroaches on the Commission's discretion in its ratemaking function. If the court's directive prohibits the Commission from considering or taking certain action in setting rates otherwise within the lawful scope of the Commission's authority, the court has engaged in judicial ratemaking and has acted improperly. In its order, the Commission found that defects in the quality assurance/quality control program at Byron 1 resulted in a nine-month delay in the completion of the plant, at a cost of $203 million. The Commission found that the delay occasioned by two of the contractors at the Byron project was reasonably avoidable by Edison and that the cost of this delay should not be included in the rate base. The Commission stated that, at its best estimate, the two contractors under Edison's control were responsible for one-half of the nine-month delay; the Commission found that the remaining aspects of the quality assurance reinspection program and resulting delay costs were normal and reasonable costs of construction and not the result of imprudence or mismanagement on Edison's part. The Commission concluded that one-half of the delay costs, or $101.5 million, should be excluded from the rate base. The circuit court believed that all the delay costs should have been excluded and that allowing into the rate base half the costs of the quality control delay was contrary to the manifest weight of the evidence. The court concluded that Edison and the contractors were indistinguishable for purposes of plant costs analysis and found that Edison was responsible for the entire cost of the delay. The court instructed the Commission not to allow any costs of Byron 1 resulting from the delay into the rate base. The circuit court was within its authority in concluding that the evidence did not support the Commission's finding that one-half of the delay expense was reasonable; the court went beyond its authority, however, in directing the Commission not to allow any delay costs in the rate base. While it appears certain, as the Commission found, that a part of the delay costs was attributable to two of Edison's contractors, Hatfield Electric Company and Systems Control Corporation, and that Edison through imprudence shared in the responsibility for the failure of their quality assurance/quality control (QA/QC) programs, it is equally certain that some parts of the delay costs were attributable to the failure of the QA/QC programs of other contractors. Though Edison had the responsibility of ensuring that each of its contractors complied with the QA/QC requirements of the Nuclear Regulatory Commission, it does not follow, as the circuit court found, that Edison's imprudence in supervising the QA/QC programs of two of its contractors necessarily meant that Edison was imprudent in supervising the others, even though others besides Hatfield and Systems Control might have encountered problems with their separate programs. The Commission found that Edison was imprudent in its supervision of Hatfield and Systems Control but not in the supervision of the others, and we cannot say from the evidence presented that the Commission finding in this respect was against the manifest weight of the evidence. The Commission, however, found in its order that as its best estimate Hatfield and Systems Control were responsible for half the total costs and therefore excluded half the delay costs from Edison's rate base, allowing the remaining half to be included. Because the exclusion of half the delay costs from the rate base and the inclusion of the remaining half were based on the Commission's best estimate of the delay costs attributable to each and not on the audit report or other evidence, we find that the Commission's conclusion in this regard is arbitrary and not supported by the evidence. In doing so we are mindful that it may be difficult to determine with any certainty which of the delay costs are attributable to Hatfield and Systems Control, the two contractors for whom the Commission held Edison responsible, and which of the costs are attributable to the others. While the Commission has broad discretion in ratemaking cases and its findings will not be disturbed unless they are against the manifest weight of the evidence, its factual findings must still be based on the evidence. Because the Commission on remand has the discretion to accept additional evidence on the question of apportioning costs between that part of the delay the Commission found to have been caused by Edison's imprudence and that part of the delay the Commission found not to have been caused by Edison's imprudence, the circuit court's instruction not to allow any delay costs in the rate base proscribes the Commission's discretion in the ratemaking field and impermissibly usurps the Commission's ratemaking function. The circuit court's instruction to the Commission not to allow any delay costs in the rate base was therefore beyond the court's authority. We have previously determined that the Commission included costs of Byron 1 in Edison's rate base when the costs were not proved unreasonable, rather than, as section 30.1 requires, after a showing of reasonableness; we find it appropriate, therefore, for the Commission to consider, on remand, whether the record contains sufficient evidence to establish that any delay costs allowed by the Commission are reasonable. In finding No. 10 of its order, the Commission said that the entire physical plant common to Byron 1 and 2 was used and useful because all the common plant facilities were used by unit 1 in generating electricity. The Commission therefore concluded that all the costs of the plant common to both units should be included in the rate base. The circuit court disagreed, finding instead that the inclusion of the entire cost of the common plant in the rate base attributable to Byron 1 was arbitrary and unreasonable. The court therefore directed the Commission to allow less than 100% of the costs of the common plant in Edison's rate base. Whether all or only a part of the cost of the common plant should be charged as an expense of Byron 1, however, is a matter properly within the Commission's ratemaking discretion, and one that requires the Commission's expertise. Although some public utility commissions considering the issue have refused to allow all the common plant costs into the rate base when the first generating unit of a multiple-unit plant begins operation (see Washington Utilities & Transportation Com. v. Pacific Power & Light Co. (Wash. U.T.C. 1984), 60 P.U.R.4th 188; Pennsylvania Public Utility Com. v. Duquesne Light Co. (Pa. P.U.C. 1981), 43 P.U.R.4th 27), we find persuasive the authority that supports the Commission's inclusion of all the common plant costs into the costs of the first generating unit ( Re Duke Power Co. (N.C.U.C. 1985), 69 P.U.R.4th 375). It is for the Commission to determine whether the particular facts of each case warrant immediate inclusion in the rate base of all the costs of the common plant. In the present case, the parties presented conflicting evidence regarding whether all the common plant costs should be included in the rate base of Byron 1. The intervenors' witness supported attributing the costs equally to units 1 and 2; Edison's witness was of the opinion that, because unit 1 has used all the common facilities in generating power, the entire common plant should be included in the rate base. In including all the common plant costs in the rate base, the Commission considered and rejected the recommendation made by the intervenors' witness to divide the costs between the units. The circuit court, however, did not rely upon evidence in the record in reversing the Commission's determination but rather substituted its own judgment whether all common plant costs should be included in the rate base of the first generating unit. Ratemaking is within the province of the Commission and not the court, and the court may not substitute its interpretation of the evidence for that of the Commission (see Illinois Bell Telephone Co. v. Illinois Commerce Com. (1973), 55 Ill.2d 461). But because of our determination that the Commission did not in each instance require an affirmative showing of reasonableness before allowing costs into the rate base, the Commission must reexamine the evidence to determine whether the costs of the common plant have been shown to be reasonable before the costs of the common plant may be included in Edison's rate base. The Commission and Edison contend that the circuit court's first instruction, which directed the Commission to order new rates rolling back the $494.8 million increase within 30 days, was beyond the court's power. We agree. As stated above, a circuit court reviewing an order of the Commission may only affirm or reverse the order or remand the cause for further evidence. Directing the Commission to establish a specific rate is judicial ratemaking, a function that the legislature has charged to the Commission exclusively. The court had no authority to order a rollback, or return, to the prior rates. ( Illinois Commerce Com. v. Chicago & Eastern Illinois Ry. Co. (1928), 332 Ill. 243.) Moreover, the court may not impose a time limit within which the Commission, an agency created by the legislature, must perform its ratemaking function. We must next determine what rate the utility should charge while the Commission conducts a new ratemaking proceeding and establishes a new rate schedule. In Independent Voters of Illinois v. Illinois Commerce Com. (1987), 117 Ill.2d 90, this court stated that, following the reversal of rates ordered by the Commission, the utility could continue to charge the rate approved by the Commission. The utility, however, is subject to ratepayers' claims for reparations for excessive rates collected from the time of this court's reversal through the time new rates are approved by the Commission. In the present case, the trial judge, upon Edison's motion, allowed Edison to collect the rate ordered by the Commission in its October 1985 order but ordered the amount collected over and above the rate previously charged by the utility to be held in escrow, subject to ratepayers' refund claims. As discussed, refunds dating from the circuit court's reversal are allowable under our decision in Independent Voters, if the Commission on remand determines that the rate base established by the Commission in its October 1985 rate order was based upon costs that were unreasonable. For the reasons stated, the order of the circuit court of Cook County setting aside the Commission's October 1985 order is affirmed in part, reversed in part, and remanded to the Commission to conduct further ratemaking proceedings consistent with our opinion. Affirmed in part, and reversed in part, and remanded. GOLDENHERSH and SIMON, JJ., took no part in the consideration or decision of this case.