Opinion ID: 2237187
Heading Depth: 1
Heading Rank: 11

Heading: Calculation of the Refund Amount: Actual or Projected Revenues

Text: In its refund order, the circuit court determined that the calculation of the refund amount should be based on the actual revenue collected by Edison during the refund period rather than the projected revenues estimated in the Commission's Rate Order I. In this regard, the circuit court reasoned: At the time of the May 16, 1986 Order there was understandable uncertainty as to the actual dollars which would be produced by the various customer classes being compelled to pay the illegal rate during the stay periodthe duration of the stay was also unknowable. The reporting provisions of the May 16 Order (paragraph 2 and 3) were aimed at replacing uncertainty with hard data. Edison's Twentieth Status Report, filed October 3, 1989, states that `amounts accumulated in these accounts through August 31, 1989' total $1,887,765,000. Experience gained over the past 3½ years has demonstrated that the projections contained in [Rate Order I] as the income-generating-potential of the Order were low-application of the October 24, 1985 rates during the refund period has generated considerably greater returns to Edison than estimated. There is no reason, logic or justification for continued reliance on the Commission's 1985 projections in the face of hard evidence that they are flawed. The refund must be calculated based on the actual revenues collected by Edison from each of the customer classes since this Court's Order of April 29, 1986. The measure of excess payments is now known in terms of actual dollars and not by hypothetical dollars. People ex rel. Hartigan v. Illinois Commerce Comm'n (Cir.Ct. Cook Co. Oct. 31, 1989), No. 85-CH-10970 (refund methodology order). The circuit court's determination to calculate the refund principal based on the actual revenues collected by Edison was a decision lying within its equitable discretion. We note that the circuit court made provision in its stay order for Edison to set up an account for the proceeds collected under Rate Order I and to submit to the circuit court bimonthly reports of this account so that it could track the actual amount of revenues collected under Rate Order I. Because we find that the circuit court's determination to calculate the refund amount based on the actual revenues collected under Rate Order I to be just, we affirm this term of the circuit court's refund order. The appellate court, however, remanded this issue to the Commission because it failed to address this issue when the parties' petitions for rehearing were denied by operation of law. ( Hartigan II, 202 Ill. App.3d at 956-57, 149 Ill.Dec. 341, 561 N.E.2d 711.) The appellate court further instructed the Commission that, if it based the refund amount on the actual revenues collected under Rate Order I, it must offset the refund amount by any increase in actual operating costs experienced by Edison. Edison and the Commission urge that we affirm the appellate court on this issue and require that the refund principal be offset by actual cost increases. Intervenors and the amicus, Illinois Industrial Energy Consumers, oppose offsetting the refund amount by any increase in Edison's actual operating costs. In addressing this issue, we note that the amount of money to be refunded consists of the difference between the rates collected pursuant to Rate Order I and the rates that should have been collected which were established in Rate Order II. ( Independent Voters, 117 Ill.2d at 105, 109 Ill.Dec. 782, 510 N.E.2d 850.) In establishing these rates, the Commission applies a ratemaking formula known as the revenue requirement formula. ( Citizens Utilities Co., 124 Ill.2d at 200-01, 124 Ill.Dec. 529, 529 N.E.2d 510.) Operating costs is a component of the revenue requirement formula. ( Citizens Utilities Co., 124 Ill.2d at 200-01, 124 Ill.Dec. 529, 529 N.E.2d 510.) Therefore, operating costs should already have been taken into account by the Commission at the time it determined what the rates should have been in Rate Order II. Accordingly, we reverse the appellate court on this issue and hold that any increase in actual operating costs experienced by Edison has already been considered by the Commission and, therefore, may not be used to offset the amount of money to be refunded. C