ML20215L505
| ML20215L505 | |
| Person / Time | |
|---|---|
| Site: | Byron, Braidwood, 05000000 |
| Issue date: | 06/23/1987 |
| From: | Cassel D BUSINESS & PROFESSIONAL PEOPLE FOR THE PUBLIC INTERES |
| To: | Murley T Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20215L489 | List: |
| References | |
| NUDOCS 8706260076 | |
| Download: ML20215L505 (89) | |
Text
3
(
w BPI M
Business and Professional People for the Public Interest
(
109 North
Dearborn Street,
Suite 1300 Chicago, Illinois 60602 Telephone: (312) 6415570 y
+
BY FEDERAL EXPRESS June 23, 1987 Thomas E. Murley, Director Office of Nuclear Reactor Regulation U.S.
Nuclear Regulatory Commission Washington, D.C.
20555 Re:
Byron 2 Operating License Amendment NRC docket no. 50-455 i
Dear Mr. Murley:
This letter provides a brief updated report on the status of Comnanwealth Edison's proposal before the Illinois Commerce Commission (ICC) to restructure the ownership and other financial arrangements concerning the Byron 2 and Braidwood 1 and 2 nuclear units.
In brief, the proposal is still pending before the ICC, with no decision on regulatory approval now expected before July 6,
'1987.
In the meantime, the proposal is a moving target.
- First, on June 1, 1987, the ICC Staff recommended a number of amendments to the proposal, some of which bear on the financial qualifications (FQ) of Edison and the proposed subsidiary for NRC purposes.
Second, on June 8, Edison agreed to adopt some but not all of the ICC Staff recommendations.
Third, on June 12, the ICC Hearing Examiners recommended adoption of most of the ICC Staff recommendations, and also added further recommended changes of their own.
Fourth, on June 16, the Illinois Supreme Court reversed an earler $495 million Edison rate increase for Byron 1, and remanded for further proceedings.
Most recently, during public meetings and oral argument during June 15-18, the members of the ICC discussed a number of potential additional amendments to the proposal, even more stringent than those recommended by the Examiners.
Some Commissioners expressed considerable concern about Edison's proposal.
It remains unclear whether the proposal will be approved and, if so, subject to what changes and additional conditions.
Further ICC meetings to discuss the proposal have been scheduled for June 25 and 26, July 1 and July 6.
(
3 Wau ""
I==,== "
en"..='.,
i'.'::"A*"M M'"J el;;..
ll~;:"u?"*".n
": :,2 2" M o '9 " :"0" < n' 'ANla'""*"
N2~
D0L"c"A*l, n
" '*3%ff.N c"J'Jv7/%;"'
s"M U"*' "
^"."J."t"lin.,
2"l'.*cflA'll a"%'DE E*2"oM:2"En Z'a"a"""o",;
'71?n'o'o.,
%"'.^4* lino.
EO"'",'o, ma a a
" '"" **'" "'* $;E"- Eo'si"
,,,";"n,",'*,',".',. 23.M 22"i.. R: JeJ "'"
2"L"E
".:..::.a.fr,oo'~.... :=.,,,o=c. u*.x.. moo"- 2,."o:.ts",=r' o-*'"-"-
s--
" ~, -
cg.;.,e.;o.
co u
o
. u.ic.n,
$0$D0$ h 5
P
)
1 1.
ICC Staff Recommendations.
A copy of the specific changes to the Edison proposal recommended by the ICC Staff is attached as Attachment A.
Among-others, they include:
1 Several recommended changes to the bonus-and-penalty provisions that would reduce the likelihood and amount of any bonuses, while increasing the likelihood and amount of any penalties.
A recommendation that if the subsidiary is to receive any j
bonuues, then it must also pay any penalties; otherwise, both the bonuses and the penalties should be paid by or to Edison.
That a $70 million refund recommended by the Examiner in another case, due to poor performance by LaSalle unit 1, not be waived, as part of Edison's " settlement", and that additional potential refunds of up to $106 million in pending cases also be preserved.
A requirement that the subsidiary establish an external fund for decommissioning.
Retention of the ICC's unrestricted right to reduce Edison's rates during the next 5 years, with no " statement of intent" not to do so, as Edison had requested.
2.
Edison Reply.
l On June 4, Edison filed a reply to Staff suggestions.
A copy of Edison's reply is enclosed as Attachment B.
Edison opposed some of the changes on the ground that " Staff's proposal expands those risks well beyond those Edison bargained for, thereby changing the balance of the Agreement."
(Att.
B,
- p. 1.)
Edison agreed to other changes.
3.
Hearing Examiner's Recommendations.
On June 12, the ICC Hearing Examiners issued a 177-page proposed Order on the Edison proposal.
A copy of pages 148-64, in which the Examiners adopted most of Staff's suggested changes and added some of their own, is enclosed herewith as Attachment C.
Perhaps the most significant additional change involves i
Edison's right to terminate the agreement in the event the ICC reduces rates in the nex 5 years, or for other reasons.
The 2
l I
Examiners recommend that prior ICC approval be required for any such termination.
This would appear to give the ICC greater flexibility to reduce Edison's rates, among other effects.
In oral argument of June 17, Edison stated that it cannot accept this propopsed change.
4.
Illinois Supreme Court Decision.
On June 16 the Illinois Supreme Court decided People ex rel Hartigan v. ICC, docket no. 63747 (copy enclosed as Attachment "D"
hereto).
The Court reversed a $495 million rate increase received by Edison for Byron 1 in October 1985, and remanded for further proceedings before the ICC to determine the appropriate level of rate increase.
If a lower increase is granted (as is likely, in my opinion), Edison's future revenues will of course be lower and, in addition, ratepayers will be entitled to seek reparations for the excessive rates collected after the date of the Supreme Court decision.
At oral argument on June 17, Edison indicated that it will still supprt its proposed " settlement" for Byron 2 and Braidwood, thereby assuming the risk of lower rates for Byron 1.
While Edison professes confidence that its rates will not be reduced on remand, substantial reductions and reparations are possible, since the issue involves the reasonableness of contruction expenditures at Byron 1.
5.
ICC Discussions.
The seven members of the ICC have not yet taken definitive positions on the Edison proposal.
During their discussions of June 15-1G, however, considerable interest was expressed in the various changes recommended by their Staff and by the Examiners.
In addition, there was discussion of adding still tighter restrictions, such as strengthening the provision requiring ICC j
approval for Edison's termination.
It remains, of course, too soon to predict how the ICC will rule.
CONCLUSION J
Even in its original form, Edison's proposal raised serious l
FQ issues, as set forth in my letter of April 29.
The numerous amendments now under consideration by the ICC raise further FQ issues.
As of now, the proposal is a " moving target".
No definitive NRC assessment can be made until after the final version is approved by the ICC and then, within 10 days as 3
required by the Examiners' draf t order, agreed to by Edison - if, indeed, such approval and subsequent agreement occur at all.
For these reasons and those set forth in my April 29 letter, we urge the NRC not to make a finding of no signficant hazard prior to an adjudicatory hearing on FQ.
At such hearing BPI and SAFE stand ready to present the testimony of qualified experts on the Illinois legal and financial ramifications of Edison's proposal on the FQ of Edison and its proposed subsidiary.
Expert' witnesses who have agreed to testify include Stephen Moore, Public Counsel of the State of Illinois, on the meaning of the agreement and its effect under Illinois law; and Charles Komanoff and James Rothschild on its financial effects.
Vitae of Mr.
I Komanoff and Mr. Rothschild are attached. hereto as Attachments E and F, respectively.
Sincerely, Douglass W.
Cassel, Jr./
One of the Attorneys for BPI and SAFE Encl.
cc:
Leonard N. Olshan U.S. Nuclear Regulatory Commission 7920 Norfolk Avenue Bethesda, MD. 20814 i
I 4
to-r c.
Conclusions 1
I A review of the other PVRR analyses has-not caused Staff to i
}
u change 'its opinion.
The PVRR's are simply too close to enable the j
i Commission to ma'ke a clear cut decision accepting or rejecting the settlement based ' solely on. a-comparison of anticipated revenue requirements.
.The" other advantages and disadvantages of the Settlement need to be closely considered.
2.-
An Analysis Of The Other Advantages And
. Disadvantages Of The Settlement Agreement Reveal Such Serious Deficiencies That Staff Cannot. Recommend That It Be Approved By The Commission In Its Present Form a.
Accounting Issues Several Staff witnesses addressed other. advantages and disadvantages of the Settlement Agreement.
Ms.
Marshall testified concerning> the primary accounting issues related. to the MOU (Staff ex.,
ICC 10.0).
A major concern of Ms. Marshall was the allocation of costs b
and resources to the Subsidiary in such a way that no subsidy flows from l
g Edison to the Subsidiary or from the Subsidiary to Edison (Staff ex., ICC q j 1
i 10.0, p.
5).
The Memorandum of Understanding addressed this issue ' by j
stating: "In all aspects of operating the Units, Edison will allocate costs and resources on a basis consistent with its general utility l
operations so as to insure that no subsidy flows from or to the b
1 Subsidiary."
The Memorandum of Understanding also provided that the Subsidiary will' be subject to the affiliated interest provisions of the Public Utilities Act. Section 7-101(2) of the Act provides that the Commission
.l l
l-
.has jurisdiction over affiliated interests having transactions with public f
as
\\
utilities under the jurisdiction of the Commission to the extent of access to all accounts and records relating to such transactions.
Section 7-205 of-the Act also provides the Commission wf'k access to books, records, accounts, documents and other data of an a Liated interest.
Section 7-206 provides that "The Commission may require every public utility l
engaged directly or indirectly in any other than a public utility business to keep separately in like manner and form the accounts of all such other business, and the Commission may provide for the examination and inspection of the books, accounts, papers and records of such other business in so far as may be necessary to enforce any provisions of the 1
Act.
The Commission shall have the power to inquire as to and prescribe the apportionment of capitalization, earnings, debts and expenses' fairly f
and justly to be awarded to or borne by the ownership... of such public
)
. utility as distinguished from such other business."'
s a -
a In Ms. Marshall's cpinion these provisions provide adequate a
protection from cross subsidization.
In addition, Edison has stated that the accounts and records of the Subsidiary will conform with Generally Accepted Accounting Principles (GAAP).
This would facilitate any audit that may be done in the future (Staff ex., ICC 10.0, p. 5).
Ms. Marshall also expressed some concern about the annual reports 6f which Edison had agreed to file.
The purpose of these reports was to verify that Edison was not deferring operating and maintenance expenses
- j and capital additions costs during the Rate Muratorium Period.
Theseg
]
l reports will include an explanation of variances between budgeted and
!q actual activities.
In her opinion, the budget used for these reports I
should be the most recent five year budget in effect on July 1, 1987.
w This reporting mechanism would be less effective if revised or final I
1 86
l 3
l f
budget amounts were allowed to be used.
Abs'ent comparison to original l
- I h
budgets, deferral of expenses or costs would be difficult to detect (ICC y
J u
ex. 10.0, pp. 5-6).
Edison agreed to work with the Staff to develop H
adequate annual reports (Edison ex. 11, p. 4).
b.
The Congnission's Statutory Ratemaking l
Authority l
l Ms. Marshall also expressed some concern about the rate change provisions of the MOU during the Rate Moratorium Period.
Those provisions permit Edison to request an increase in rates if conditions beyond l
Edison's control result in a financial emergency, to recover losses caused by changes in law or regulation, or to recover any federal 6cid-rain tax, l
surcharge or fee.
The Commission will determine whether an appropriate -
I emergency exists to warrant the granting of a rate increase. Any party to the Memorandum of Understanding may seek a rate reduction where a l
relaxation of governmentally imposed costs creates a significant windfall l
for Edison.
A "significant windfall" exists only if Edison's reported consolidated net income before interest expense produces a rate of return on Edison's total book assets (including those of the Subsidiary) which is 1
in excess of a rate of return which would be just and reasonable if l
(l applied to Edison's utility rate base.
In Ms. Marshall's opinion, the provisions made for granting l
L Edison an increase in rates appeared to be adequate.
However, the l
provision for a reduction in rates is limited to a relaxation of governmentally imposed costs which results in a "significant windfall" to Edison.
These provisions for initiating changes to rates are only one part of a negotiated agreement by the parties and as such, can be accepted by the Commission.
However, Ms. Marshall expressed reservations about the 87
desirability of the Commission binding itself to these provisions (Staff ex. ICC 10.0, pp. 6-7).
- First, it was Ms.
Marshall's opinion that no deregulated activities or assets should be considered in determining Edison's revenue The Company, through Mr. Delisy, responded to this concern requirement.
l.
by stating that (Edison ex. 11, p. 15):
...it wouldn't make any sense to approve the Settlement Agreement, thereby approving the rates Commonwealth Edison can charge its customers and the amount it will pay the 3
subsidiary, and later question the revenue levels of one aJ of the consolidated whole while ignoring the j
component other component.
However, Ms. Marshall's concern makes a great deal -of sense.
In this case, it is Edison's position that its existing rates and revenue levels The sole rate issue concerns the reasonableness of the are not at issue.
4369-71).
If these two f
$660 million payment to the subsidiary (Tr. pp.
revenue sources can be split and considered separately in this proceeding, there is no reason why they cannot be split and considered separately in future proceedings.
Second, Ms. Marshall believed that Section 9-202(a) of the Public l
Utilities Act set the appropriate limits on the authority of the Commission to reduce a utili ty's rates.
That section provides that whenever the Commission is of the opinion or finds that the net income of required for a reasonable a public utility is in excess of the amount return upon the value of said utility's property used and useful in rendering service to the public, the Commission shall have the power to 1
enter an order temporarily reducing rates. Ms. Marshall believed that the Commission should retain this s9-202 authority, and neither bind itself to E
88
l f
y o
- d.."
the MOU's rate reduction language, nor issue 'a statement of intention to i
refrain from reducing Edison's rates (Staff ex. ICC 10.0, pp. 8-9).
Edison once again responded to this concern through Mr. Dellsy.
In his testimony, Mr. Dellsy sought to reassure the Commission by l
asserting that the Commission "will not relinquish its authority under the j
t
.Public Utilities A'ct" and that "the Commission is not a party to the i:
Memorandum and does retain' its statutory authority" (Edison ex. 11, pp.
2-3) - However, _ during cross-examination, Mr. Dellsy stated that should the Commission exercise its statutory authority and set rates inconsistent with the Memorandum, Edison would simply walk away from the Settlement L
(Tr. pp. 4351-4357).
Mr. Dellsy further pointed-to paragraph 10 of the J
1 Memorandum as the support for his statement (Tr. pp. 4434-4436).
That i
]
paragraph provides:
[
The obligations of-the signatories to this Memorandum are also conditioned upon the establishment and continued effectiveness of rates consistent with this Memorandum throughout the Initial Rate Period.
Ms. Marshall's concerns are legitimate.
At the federal level, i
the approval of contested settlements operates as a resolution on the merits.
As such, it is ainding as a contract upon -the FERC and all
! f parties to the proceedirg, including those objecting to it.
Texas Gas Transmission Corp. v. FPC., (D.C. Cir. 1974), 504 F2d 199; Chicago v. FPC, (D.C. Cir. 1967), 385 F2d 629, cert, den. 390 U.S. 945 (1968).
On ~the i
other hand, consider the following holding of the Court in Texas Gas Transmission Corp. v. FPC, (6th Cir. 1971) 441 F2d 1392:
(
There is no denying that the Commission had the power to require the refunds here at issue, apart from the settlement agreement.
Texas Gas does not argue otherwise.
- J We hold that the Commission did not, in the settlement agreement, renounce this
- right, in light of the administrative background of this case.
A contrary ruling would inhibit the power of the regulatory agency to perform the functions Congress intended it to perform and k
we will not interpret the settlement agreement as tying
.(
89 i
1
the hands of the Commission unless - as is not the case
]
the language of that agreement compels the here conclusion that that is what the parties clearly intended 5
to accomplish.
"[The] overriding purpose of the Natural J
Gas Act [is] to protect consumers in their purchase of gas to -the end of keeping rates as low as possible.
This purpose appears expressly in the. Act, 04(a), [ footnote
[ Citations omitted))"and in the Supreme Court decisions. Texas Eastern Tran I
omitted.
at 347. We decline to read into this settlement agreement at the behest of Texas Gas " things which are simply not I
expresced or not there", Texas Gas Transmission Corp. v.
FPC, 306 F.2d 345, 348 (5th Cir. 1962), ' when to do s3 would tend to frustrate the Commission's ability to carry 1
out the mandate of Congress.
Cf. Restatement of, Contracts 0 236(f) (1932).
Settlements in Illinois could very well be subject to these same Thus, the Commission should be well aware that if it interpretations.
approves the MOU in its present form, the Commission could be legally f
Even prohibited from changing rates other than as is set out in the MOU.
if it retains its legal authority to change rates, should it do so in a manner inconsistent with the MOU, Edison could very well walk away from the Settlement.
Therefore, in any Order approving the Settlement, the Commission should ~be very clear about what authority it-is retaining. and what authority it is giving up.
This will prevent the Commission from being inadvertently bound in the future, and will give the parties notice at the outset what ratemaking authority the Commission intends to assert during the Initial Rate Period.
Furthermore, the Con 11ssion should direct that the language in the M00 be amended to prohibit Edison from abandoning the Settlement should the Commission exercise its statutorily retained ratemaking authority.
Ms. Marshall also detected an apparent inconsistency between the MOV and the PSA.
The MOU provides options whereby Edison may purchase power from the Subsidiary at rates determined using traditional rate base / rate of return regulation and accounting for fuel and all other costs of production, subject to FERC jurisdiction.
If FERC declines to make the
,O 90
1 determinations required under the options, then the ICC will be requested c
to make such determinations.
It was Ms. Marshall's opinion that the i
h parties to the Memorandum of Understanding intended that the ICC would i
then set rates using traditional rate making procedures.
1
. The PSA provides that if FERC declines to make such a net original cost rate base / rate of return determination, such determination as made by Edison and the Subsidiary shall be submitted to the ICC for-review --under Section 7-101 o f-the Public Utilities. Act,. and the determination of the parties, as it may be modified by the ICC upon such
)-
review, shall te the basis upon which Edison shall pay the Subsidiary.
Section 7-101 of the Public Utilities Act deals with affiliated interest transactions.
It provides, in 'part, that-the Commission shall
[
l-not require a public utility to make purchases at prices exceeding. the prices offered by an affiliated interest, and the Commissicn : hall not be i
u required to cisapprove or disallow, solely on the ground that such j
I payments yield the affiliated interest a return or rate of return in excess of that allowed the public utility,. any portion of payments' for j'
purchases from an affiliated interest.
To Ms. Marshall's knowledge, the Commission has not required an adjustment of the prices determined by the j
a l
parties to an affiliated interest contract unless those prices were in 1
excess of market value.
In her opinion, obtaining the Commission's I
consent under Section 7-101 is not equivalent to the Commission g
determining rates using traditional methods (Staff ex. ICC 10.0, pp.
11-13).
k Mr. Dellsy explained that should the FERC decline to make the predetermination cs set out in the MOU, some mechanism is needed to confer jurisdiction on thi Commission to make the decision.97-101 provides that i
mechanism. As such, the PSA simply provides more detailed mechanics for 91
p c
accomplishing that which is specified in the MOU (Edison ex. 11, pp. 5-6).
During cross-examination, Mr. Delisy made clear that any contract between Edison and the subsidiary which is presented to this Commission under (Tr. pp.57-101 must be based upon rate base / rate of return regulation The language of the PSA should be changed to make this intent l
.l.
4367-4368).
. clear and to conform to the MOU.
Decommissioning Costs c.
Ms. Marshall also discussed the issue of decommissioning costs.
The Construction and Operating Agreement. oblig3tes Edison to retire and t
decommission the Units upon the expiration of their useful lives (par. 4, While the Agreement further provides that the, subsidiary shall pp. 4-5).
reimburse Edison for all costs advanced (par. 5), the Construction and Operating Agreement does not specifically require the subsidiary to pay Mr. Rifakes testified that the $660 million annual payment l'
these costs.
to the subsidiary included an amount to provide a payment for the decommissioning costs of the units (Tr.
- p. 768).
Mr. Rifakes further testified that the subsidiary would be responsible for all decommissioning
^
costs (Tr. p. 771). Mr. Bachert stated that this was correct as a general
.j' principle, but that to the extent that the. Subsidiary did not have sufficient funds, Edison would pay the costs (Tr. pp.
1710-1711).
Moreover, the Construction and Operating Agreement further recognizes that Edison is to remain the licensed operator of the Units, and as such may be legally responsible for decommissioning the Units (par.12, p.11).
It is important to note that this Commission will have no l
In the jurisdiction over the Subsidiary in regard to decommissioning.
event that the Subsidiary is unable to pay, Edison may ultimately become liable for the costs of decommissioning the units.
Under these I
circumstances, the Commission should require that a determination of 4
92
r
=
"i decommissioning method and funding mechanism be considered in this docket.
The contracts between Edison and' the Subsidiary would have to be revised to reflect this resolution of the decommissioning issue (ICC ex.10.0, pp.
113-14).
Ms. Marshall's specific recommendations were that an external i
L fund should be established to provide the amounts Edison has estimated (see Staff ex. ICC 10.02).
Ms. Marshall testified that the Commission l
should consider the following criteria in its determination of the funding method to be used for decommissioning the Units (Staff ex. ICC 10.0, pp.
14-15):
3 1.
Assurance that funds will be available at the time 3
of decommissioning.
1 2.
Current revenue required.
4 1
3.
Total cost which is usually measured by present value.
4.
Intergenerational equity for customers.
5.
Flexibility or the ability to adapt to changes in I-the estimated cost of decommissioning, changes in cost rates, changes in life of the plant, changes in criteria ranking, and changes in method with a l
minimum disruption in application of the other considerations.
The current trend, as shown in Staff ex. ICC 10.01, is to give a high weight to the assurance that funds will be available at decommissioning, j
l Ms. Marshall testified that this is particularly appropriate where the subsidiary will not be subject to ICC jurisdiction, the principal assets I
of the subsidiary consist of the three nuclear units, and there is a c
possibility that Edison may become liable for the costs of decommissioning h
the units (Staff ex. ICC 10.0, pp. 17-20).
l The rebuttal testimony of Edison witness Bachert (Edison Ex.10) argued that the use of an external trust fund is a costlier method than Edison's current treatment of decommissioning costs. Although Edison has 93 J
i not performed any cost comparisons, Mr. Bachert testified that from a cost point of view,- the current treatment of decommissioning costs is L
appropriate and should be continued.
Mr. Bachert noted that the NRC is currently studying whether
. internal funding of decommissioning provides adequate assurance to the public that funds will be available
- when plants must be decommissioned.
For this reason, he argued that it is premature for the Illinois Commerce j
f Commission to require external funding.
(Edison Ex. 10, pp. 16-17).
Staff believes that the very fact that the NRC has undertaken such a study indicates the NRC's concern that the use of internal funds may not provide 8
sufficient assurance that funds will be available when needed.
Since it t
is possible that the Units will not be regulated by this Commission in the l
future, it cannot be premature for the Commission to act at this time.
]
There is little data available on the decommissioning costs of actual nuclear plants.
Moreover, the cost estimates are likely to change with 9
added experience.
For this
- reason, the costs and methods of j
decommissioning the Units should be reevaluated frequently (ICC ex. 10.0, t
p.20).
i d.
Prudency Audits c
Final (.
Ms. Marshall had some recommendations concerning the 1;
prudency audits of *.he three plants.
The Memorandum of Understanding provides that Edison's obligations are dependent upon satisfactory i
resolution of pending audits pertaining to Byron II and Braidwood I so t :
that Edison can charge the rates provided for in the Memorandum and l
l i
(
consummate the transactions described therein.
The Memorandum of n
Understanding does not address the audit of Byron I or Braidwood II.
In h
1 Ms. Marshall's opinion, a satisfactory resolution of these audits would a
d 1
94
)
1 be to complete the audits of the three plants so that the results would be available to the Commission for any possible. future use.
Since rates under the Memorandum of Understanding are based on a contract amount rather than a rate base determination, there would be no need to hold public hearings or become involved in litigation involving the reasonable cost of the Units (Staff ex. ICC 10.0, pp. 20-26).
Ms. Marshall testified that in order to evaluate the knowledge and circumstancis prevailing at the time of utility decisions or actions an auditor would review iriternal memoranda, minutes of meetings, i
correspondence files, ijnternal audit reports, public records, and reports to government agencies and interview utility personnel and other knowledgeable parties.
Neither-the Uniform System of Accounts. for Electric Utilities nor Edison's formal procedures would require the j
retfintion of all of these types of data.
She further testified that data
[
requests issued in the " audits currently underway would tend to jeopardize j
any future audit by, putting parties "on notice" as to the information of l
E 5
to the audito$*s.
There is also the possibility that persons
~
interest familiar with tha construction projects would no longer be available for interview at some time (Staff ex. ICC 10.0, pp. 21-22).
Edison's position is that completion of these audits is costly, I
unrecessary, and not -in the public interest.
According to the rebuttal 4
testimony of Mr. Dellsy, the risk of the inability to complete an audit of l
Byron and Braidwood in the future is entirely on Edison (Edison Ex.11, 1
e-
/
pp.6-8).
s
)gy It is Staff's belief that t6e Units could revert to or be reacquired by Edison, or could otherwise.' become subject to traditional rate base / rate of return regulation by the Illinois Commerce Commission, This view is supported by Mr. Bachert'sfrebuttal testimony which states, g
95
"As Mr. Lindsay points out, under certain options it is possible that these units may once again be subject to traditional utility regulation."
(Edison Ex. 10, p. 15).
There is also the possibility that audits could be mandated in the future through the courts or by legislation.
A considerable amount of audit work has been done and significant costs have been incurred.
If no report is issued, it is unlikely that this work would be relied upon by any future auditor.
In any event, some duplication of effort would be required.
Under these circumstances, Staff strongly recommends that the construction audits of the Units be completed.
e.
The Power Supply Agreement Mr. Duann presented some testimony in which he discussed the economic aspects of the power supply arrangements between Edison and the Subsidiary.
In his judgment, the power supply arrangements between Edison and the Subsidiary have several serious deficiencies which are detrimental g
=
g L
to the interest of Edison's ratepayers.
Specifically, the output targets 5
for the Byron II, Braidwood I and Braidwood II (the " Units") are too low, the ratepayers have little assurance that all units will be completed, the f
Subsidiary can reap substantial bonuses with average operating efficiency, and the proposed mechanism for determining cost of replacement power is I
susceptible to manipulations or the part of Edison (ICC ex.12, p. 3).
[
Based on the data compiled by the United States Nuclear
[
Regulatory Commission, the average cumulative capacity factor of 21 t
pressurized water reactors nationwide with less than eight years operating experiencc is 67.3%.
In comparison, the capacity factor corresponding to I
the output targets of the Units as contained in the Memorandum is 53.3%
over the five year period.
This is based on the net generation capacit/
3 h
j 96
1-
)
.of 120,000 kilowatts for each of the three units and Edison's projected in-service dates of July 1987 for Byron II and Braidwood I and October 1988 for Braidwood II.
So the capacity factor of the Units is less than 80'l of the natimial average of similarly situated nuclear power plants.
I.
(See Licensed Operating Reactors:
Status Summary
- Report, Nuclear Regulatory Commission, March 19087).
Given Edison's substantial experience in nuclear power generation, there is no apparent basis to Q
i justify the below-average output targets proposed in the Memorandum and f
t Supply Agreement (ICC ex. 12.0, pp. 5-6).
{
Mr. Duann also identified other problems with the output targets in the PSA.
In his opinicn, it is inappropriate to use a combined output f
target for the Units.
Since Edison pays $660 million annually to the g
Subsidiary to reserve the right to purchase power at the cost of fuel from the three units, it can be expected that they all should be completed as s
scheduled, be operated efficiently, and each 'should contribute its fair i
share of electricity service to Edison's customers.
With a combined i
output target, the construction delay and operational inefficiency in one
'l plant can be trasked by the electricity generation from other plants.
The h
i I
p establishment of an individual output target for each plant will eliminate j
the possibility of cross " subsidization" in electricity generation among the Units, and will provide incentives and disciplines which are more
/
g conductive to the completion and efficient operation of all three plants.
The use of cumulative output targets poses another serious deficiency - the transfer of fuel cost savings. The electricity generated f
above 110% of the output target levels in earlier years will not only result in a bonus for the Subsidiary in that year, but also "make up" the shortfall in electricity generation in later years.
As a result, Edison can avoid the credit payment associated with the output guarantee even if i
I A
97 q
n
I]
the Units fail to meet the output targets in later years (ICC ex. 12.0, hi pp. 7-8).
Edison recognized that they had a problem with the output guarantee.
In supplemental testimony, Mr. Rifakes introduced exhibit 1A.
d This exhibit displayed five different scenarios of potential outcomes j
under the output guarantee.
In it, EGison identified circumstances where j
the guarantee did not work as intended.
Therefore, Mr. Rifakes clarified f
or amended the guarantee to provide as follows (Tr. pp. 2326-2327):
If at any time the actual output on a cumulative basis is less than the anticipated output, Edison is not entitled to hold any bonus dollars.
That's Rule No.
1.
That's what the parties have intended.
Edison only earns bonus dollars for output in excess of anticipated.
Secondly, to the extent that Edison has raceived credit for bonus energy, it can only receive credit to the extent that a like amount of energy has been credited to ratepayers.
So if there's two killowatt-hours of bonus energy, ratepayers should have received credit for one killowatt-hours, Edison retains credit for the other.
Whenever there's an imbalance, and there's one set of circumstances where this imbalance can
- occur, it's Edison's intention to make refunds to ratepayers so that the savings retained by Edison never exceed 50 percent of savings due to bonus energy.
Mr. Rifakes then proceeded to explain how the intent which he had l'
just expressed could be manifested.
He stated-(Tr. pp. 2327-2328):
Well, first, nc bonuses will be retained by Edison when cutput is less than, on a cumulative basis, is less than 111.1 percent of target levels. That's No. 1.
Secondly, I have to back up a second.
This phenomenon happens when Edison has received a bonus for energy and then there'* an energy shortfall that's less than the energy average.
That's the only time this can happen, so you receive a bonus for 500 kil10 watt-hours, then you have l
a short fall of 400 killowatt-hours, you pay ratepayers for 400, and Edison is still sitting with a hundred, and it should not be sitting with a hundred.
It should be sitting with 50, and ratepayers should get credit for 50, so we're back on a 50/50 basis.
98 l
t 1
i Now, in that event, when compensation for bonus energy L
i which is kept by the company exceeds the amount of any L
shortfall that's calculated at the end of a calendar year, the excess that results should be shared equally between j
the company and ratepayers, and that will result in a
(.
further refund to ratepayers.
The credit should be determined on an energy basis in that I
we.'re looking at energy, and times the price that Edison is paying for any short falls times the avoided cost i
during that timo period.
So Edison is always taking the l
risk of energy prices.
The effect of the change is to make both the penalties and the bonus operate on a cumulative basis (Tr. pp. 2330-2331). This change does satisfy some of the concerns expressed by Mr. Duann.
However, it also underscores the confusion and complexity inherent in the use of cumulative
.l output targets.
Individual, annual ouput targets are far more straightforward and understandable.
They should be required by this Commission.
Mr. Duann also noted some problems regarding the capacity guarantee.
In his opinion, the capacity guarantee is.of little value to g
the ratepayers. It only gives the appearance of assuring that the Units j
will be completed and operated as scheduled.
First of all, there is no capacity guarantee for Braidwood II.
Edison does not have to refund any capacity guarantee credit to the ratepayers no matter when or whether j
Braidwood II is ever completed and becomes operable.
Second, the requirements for a capacity guarantee credit are so f
restrictive that it is almost impossible for the ratepayers to get any credit out of this capacity guarantee.
Specifically, three conditions must be satisfied before the ratepayers can ever start receiving any j
credit under the proposed capacity guarantee.
First, either Byron II or Braidwood I must generate less than 5,055 gigawatt-hours of electricity, i.e., operate with a capacity factor of less than 10.4%, during the five j
year period. The calculation of the output targets for the capacity i
1
_ guarantee is demonstrated on Exhibit ICC 12.03.
Second, either one of them or l'oth are inoperable on June 1, 1992. Third, it is determined that it reasonably appears that the individual plant will not operate in the foreseeable future.
I However, it is left. unanswered.in the Memorandu:a and in the Supply Agreement just what time period constitutes "the foreseeable future", who will certify the operability of the plants, and how to define the meani.ng_ of " reasonably appears".
It is possible, that the rate payers will be required to pay for the Units now,,with an_ extremely slim chance I
of ever collecting any capacity guarantee credit, even if one or more of the plants should become inoperable and ucontribute nothing to serving Edison's customers for an extended period into the. future (ICC ex.12.0, pp. 11-12).
During the cross-examination of Mr. Scholz, he stated that while g
i 81 the Company would make the initial determination of the applicability of the capacity. guarantee, this decision would be subject to Commission t
review.
He further stated the Company's int :' to accept Commission j
jurisdiction over this issue (Tr. pp. 1937-1938).
The Commission must retain its power to resolve the issue of the applicability of the capacity
{
guarantee.
The PSA in its current form does not allow this.
- Thus, without modification it is unacceptable.
Mr. Duann was also of the opinion that the proposed mechanism for deciding the cost of replacement power for the purpose of calculating a bonus and credit associated with the output guarantee was unacceptable.
There is no explicit methodologies, equations, or formulas specified in the Memorandum or in the Supply Agreement regarding the determination of the cost of replacement power.
There is only a proposed process in which i
the method of calculating the cost of replacement power will be decided.
}
100 i
i According to the Memorandum and Supply Agreement, Edison shall determine the cost of replacement power.
The other parties to the Memorandum, not any rther parties, will have an opportunity to comment on the methods chosen by Edison.
Only when the parties to the liemorandum can not work out a mutually agreeable method, will the matter be submitted to the a
Illinois Commerce Commission for resolution.
i The cost of replacement power is a crucial element of the bonus j
and credit calculation and ultimately the electricity bills facing the ratepayers.
The method should be clearly spelled out in the Memorandum I
~;
and Supply Agreement so that the Commission-can determine its reasonableness and fairness.
If it is to be decided,at a.later date, the t
method of calculating the cost of replacement power must be reviewed and l
approved by the Commission when it is proposed.
Otherwise, since Edison can choose the method of replacement M
l t~j power without the oversight of the Commission and there is no requirement that a consistent methodology be applied throughout the five year period:
f-the possibilities of manipulation on the part of Edison are many.
For example, in a year when the Units fail to meet the output targets and an i
output credit will be awarded to compensate for the excess cost of replacement power, Edison can propose the use of the fuel cost of Edison's most efficient coal-fired power plants as the cost of replacement power.
f This method, compared to the cost of outside purchased power, may result
~
l1"]
k in a lower cost of replacement power and subsequently a lower output W
i l
cradit payment to the ratcpayers.
On the other hand, in a year when the bonus will be awarded to the Subsidiary for electricity generation above L10% of the output targets, Edison can utilize another calculation to produce a higher figure for the cost of replacement power which can E"
increase the bonus received by the Subsidiary. As a result, the purposes Lj; 101 w
I' of bonuses and credits as incentives and disciplines for efficiency are seriously undermined in the absence of a fair method to determine the cost h
h I
of replacement power (ICC ex. 12.0, pp. 13-15).
Mr. Scholz testified that it was not the intent of the parties to the Memorandum to preclude Commission review of these methods and procedures (Tr. p. 1934).
The Commission should require that the initial development of these methods and procedures, as well as all subsequent j
applications of them be submitted to it for approval, j
The bonus / penalty provisions of the Power Supply Agreemeint present a further inequity which should be remedied by the Commission if the Memorandum of Understanding is accepted.
Edison witness Rifakes l
testified that all bonuses would be paid to the subsidiary, but that the subsidiary will not pay for or reimburse Edison for any penalties or refunds it makes due to failure of the units to operate at target levels (Tr. p. 773-4 and Tr. pp. 1195-6).
If the subsidiary as a passive owner
'of the Units is entitled to bonuses based on Edison's operation of the Units, then it should also bear the penalties if the Units do not operate at acceptable levels.
Since Edison is responsible for both the l
construction and the operation and maintenance of the Units and must pay l
penalties based on the production of the Units, it would be logical for Edison to retain any bonuses based on production.
The current provisions E
of the Power Supply Agreement allow a one way flow of cash to the subsidiary by providing for the payment of bonuses to the subsidiary with Staff no assumption of production risks or the liability for penalties.
believes that the same party that receives the bonuses should be responsible for the payment of any penalties.
A satisfactory resolution of this issue would be to not allow the pass through of bonuses to the subsidiary. This solution would mitigate the effects of any possible 102
F manipulation of the bonus provisions by Edison at least to the extent that tI if Edison's income is excessive the Commission has the authority to initiate a rate reduction.
Acceptance of this modification has no effect upon the Memorandum of Understanding.
In the alternative, the Commission could require the subsidiary to reimburse Edison for any penalties.
f.
Rate Design g
Staff witnesses Bodine and Corbin provided testimony regarding Edison's rate design contained in the Memorandum of Understanding (MOV)
(Staff's ex. RD 1.00 and ICC 13.0).
Staff's concerns with Edison's proposed rate design can be grouped within the following three areas: 1)
)
j important rate design objectives may be lost for at least five years if this Commission is judged a party to the MOU; 2) the proposed rates and revenue allocations for all classes are not cost-based; and, 3) there are h
additional problems with the specific proposed rate design for the residential rate (i.e. R1).
Each of these concerns will be dealt with in turn.
Mr. Corbin testified regarding the language contained in the Settlement proposal that pertained to rate design.
As was the case with Ms. Marshall, Mr. Corbin was concerned about the results if the Commission were bound to follow.the language in the MOV (ICC ex. 13.0, pp. 3-5).
Since the Cora1ssion could very well indeed be legally bound by the terms of the sectlement (see discussion above), the Conrnission should, once again, be very clear about what it will agree to do and what it will agree to forebear from doing in the area of rate design.
Should the Commission agree to be bound by the terms of the MOU, i
Mr. Corbin expressed a concern that rate design modifications desired by the Commission in various areas may be forfeited.
Examples of the areas 103
't affected include:
1). interclass revenue allocation; 2) time-of-day and seasonal revenue allocation; 3) economic incentive rates; and 4) franchise r
fees.
j c
j l
In the order. in Docket Nos. 83-0537/84-0555, the Commission
]
ordered Edison to submit a study that provided a review of its customer-
[
related costs and prices (Staff ex. 13.0. p. 6).
Specifically, Edison was
(
directed to:
j
... file, not later than its next general rate filing, a discussion of possible revisions to the calculation of its customer-related costs and charges, y
{
which will take into account all of the issues de-l scribed in the preambles as relating to the. proposal to separate the costs of adding a new customer from 1
the determination of continuing customer costs and
- i 4
charges..."
(Emphasis added; ICC Order in-Docket Nos.
83-0537/84-0555, item (21),pp.61-62).
Edison did not submit this study in its filing accompanying the MOU (ICC i
Exhibit 13.0,pp.6-7).
In addition, Edison has proposed an across-the-board increase of 12.89% to its rates (other than R1) in the MOV (Edison Ex. 3.0, p. 3).
.i This proposed method of interclass revenue allocation makes no progress e
towards ~ improving marginal cost recovery from those rate classes.that currently under-recover their respective marginal costs.
In fact, j
customer classes that are below their relative cost recovery at current
~
rates (e.g. residential) move to a position further below cost recovery g
l 11 after the across-the-board allocation (IIEC Ex. 1.0, p. 22).
I It should be noted that the Commission has expressed its concern, in.past orders, that Edison's rates move toward the point where Edison's J
percentage of recovery of the cost of serving each class is about the same as that of each other class (ICC Order in Docket No. 83-0537, p. 33).
~
l Edison has also chosen to affect the seasonal revenue allocation l
on its residential R1. Specifically, Edison has proposed to eliminate the
. j
}
104 J
l l
l sunner/non-summer differential for R1 customers using 400 Kwh, or less, per month (Edison Ex.
3.0, p.
4).
Staff believed that there was no l
cost-basis for this shift; that the shift represented a movement away from Edison's marginal costs; and that the significant increase in non-summer bills is unwarranted at this time (i.e. see discussion on proposed R1 below).
- Finally, Edison is also operating under an ICC directive regarding its collection of the franchise fee paid by the Company to the City of Chicago. The franchise fee in question provides for an assessment of.4% of electric revenues.from sales within Chicago.
Edison currently accounts for its payment to the City of Chicago as a. general operating expense.
This accounting treatment results in an increase in the rates of l
all of Edison's ratepayers, not just those living or working in Chicago (Staff ex. ICC 13.0, p. 7).
Specifically, the Commission directed Edison to:
... file, no later than its next general rate filing, I
tariff sheets to phase out, over two years, all of its free and reduced-rate municipal rates and services, and to charge any franchise fee of any municipality to I-the customers taking service in'that municipality, including so far as it is feasible, franchise fees which are not calculated as a percentage of sales; I
(Emphasis added; ICC Order in Dockt No. 83-0537, 4
item (38),p.57).
Edison chose not to address the franchise fee problem in its filing and will not address this problem during the Rate Moratorium period (Tr. p. 2211).
Approval of the M00 in its current form could cost the Commission the opportunity to require action by Edison to address the i
above-mentioned concerns within the next five years.
One factual deficiency in Edison's case was the Company's lack of support for its proposed rate design.
Edison did not initially file a marginal cost study in support of its proposed rate design (ICC ex. 13.0, 105
l l
- p. 17).
However, a cost of ~ service study was provided to Staff and other parties through a data request by Edison.
In addition, in response to a direction from the Hearing Examiners, Edison did file its cost study at I
the time Mr.. Kraatz testified (Edison ex. 30).
Due to the expedited nature of these proceedings and the overall workload of Staff, the cost study was not analyzed in sufficient detail.
Thus, Staff had to rely upon I
an " unproven" cost study and the one approved in Edison's last rate case (Docket Nos. 83-0537/84-0555).
The areas which would be involved in a Staff investigation of marginal costs would include but would not be limited to: 1) a review of Edison's customer-related - costs and prices that corisiders the costs of j
adding a, new customer.versus the costs of continuing a~ ~ customer on the system; 2) a review to determine whether the major changes incorporated in Edison's last approved marginal cost of service study (i.e. Docket No.
83-0537) are still appropriate and were made by Edison in this study; 3) a review of Edison's determination of marginal capacity costs including an opinion as to the current appropriateness of the NERA methodology and Edison's marginal capacity costs if a different p' ricing option is selected I
l after the Rate Moratorium Period; and, 4) a determination as to why revenues at full marginal costs under the new study are substantially lower than full marginal cost revenue under Edison's last approved study.
l Edison could have requested approval of the MOU without any proposed rates. At the conclusion of the proceeding, the Commission could l
j' have ordered Edison to file new tariffs implementing the settlement. This procedure would have eliminated any rate design issue from this docket.
Edison chose not to follow this procedure.
Edison could also have proposed an across-the-board increase in g
its rates in implementation of the settlement.
In such a case, the 106
utility has no burden to justify its existing rate s tructure (City of Chicago v.
Illinois Commerce Commission, (1958) 15 Ill. 2d 11; Antioch Milling Co. v. Public Service ' Co., (1954) 4 Ill. 2d 200).
Rate design would not then have been an issue, unless some other party had raised it and had assumed the burden of proof.
Edison chose not to follow this procedure, either.
Instead, Edison chose to propose changes in the design of its Residential R1.
By so doing, Edison made the design of Residential R1 an issue in this docket.
As the proponent of the M00, Edison bore the burden of producing evidence supporting the factual premiscs underlying the MOU.
As mentioned above, Edison filed no marginal cost study in l
support of RI.
Edison's basis for the proposed R1 war that it incorporated a number of proposals made by consumer intervenor groups in past dockets (Edison Ex.
3.0, p.
5, lines 12-15).
Furthermore, Edison witness Kraatz has stated in the past that the proposed "... changes are primarily to generate a better public relations image.and are not based upon costs."
(ICC Docket No. 86-0128, Tr.
p.
121, lines 5-10).
While l
cost-of-service is not the only criterion of a reasonable rate structure, public understanding and acceptability are not and should not be used as the sole basis for setting rates (ICC Docket No. '86-0128, Ex. RD 1.00, p.
4). In short, better public relations is an insufficient basis as a sole reason to revise a utility's rates.
g Staff believes that Edison's proposed residential R1 suffers from several deficiericles.
Staff's concerns include: a) the movement of charges away from marginal costs; b) the elimination of the summer /non-summer differential; c) the wider block differential between the first and j
second block of the on-summer energy rate; and, d) the lack of support for 107
the inverted blocks in the summer energy charges.
Each of these concerns will be dealt with in turn.
The customer charges contained in the M00 (i.e. '87 '88) for both one-and two-unit dwellings, and multi-family dwellings, represent a movement away from the marginal costs shown in Edison's latest study (Ex.
RD 1.00, p. 4, lines 21-22).
Edison based its proposed customer charges on the recommendation of Mr. Makul in ICC Docket No. 86-0128 (Tr.
p.
l.
2183).. Edison chose this position on the basis of CUB's. complaints about the customer charge (Tr. p. 2185).
The summer and non-summer energy charges for the first 400 Kwh that are contained in the MOU (i.e.
'87 '88) for one-and two-unit dwellings represent a movement away from Edison's marginal costs as well (Ex. RD 1.00, p. 5, lines 20-22).
As noted ' previously, this Commtssion has supported a general policy of moving rate components closer to a particular utility's marginal costs of providing each individual component.
Edison's proposed departure from this Commission practice is not justified (Ex. RD 1.00, p. 7,1.7-9).
Edison's proposal to eliminate the differential between the summer /non-summer energy charges for the first 400 Kwh was not shown to be
> cost-based.
Edison's proposal is based on the assumption that;the summer /
non-summer differential contributed to the problem of needle-peaking. The proposed elimination of the differential was thought to help reduce the tendency towards needle-peaking (ICC Docket No. 86-0128 Edison Exhibit 1,
- p. 4-6).
Edison did not show that the summer /non-summer differential caused needle-peaking (ICC Docket No. 86-0128, Exhibit RD 1.00, p. 10, 1.
1-3).
Edison did show that Edison's customers suppressed demand more on moderately hot days than on very hot days.
No proof was provided that the l
108
I k
summer /non-sur:mer differential caused this phenomenon (ICC Docket No.
86-0128, Exhibit. RD 1.00, p. 10. 1. 5-7.
Furthermore, Edison offered no proof to back the Company's assertion that eliminating the summer /non-summer differential will l
i I
alleviate the problem of needle-peaking (ICC Docket No. 86-0128, Exhibit RD 1.00, p. 10, 1. 20-22).
As noted previously, the elimination of the summer /non-summer differential also creates a movement away from marginal costs.
The proposed summer and non-summer energy charges fur the first 400 Kwh, for one-and two-unit dwellings, move away from Edison's latest marginal costs.
Finally, the substantial increase in non-summer bills is not justified by the evidence in this proceeding.
The proposed increase in the first block energy charges for non-summer is approximately 57% (i.e.
'87 '88 rates) (Tr. p. 2218).
Edison does not contend that this increase is cost-justified (Tr. p. 2203).
In the order in Docket Nos. 83-0537/84-0555, the Commission j
ordered Edison to submit either a proposal to continue reducing the block differential in the non-summer residential energy rate, or its reasons for continuing that differential based on Edi s o n.'s cost-of-service ((CC Exhibit 13.0, p. 6).
Edison is not contending that the proposed increase in the block differential is cost-justified (Tr. p. 2203).
The Company does not intend to address this issue during the Rate Moratorium Period (Tr. p. 2205).
Edison's proposed inverted summer energy provision was incorporated from Mr. Oliver's proposal in ICC Dockt No. 86-0128 (Tr. p.
2198).
The basis for Mr. Oliver's proposal in the above-mentioned docket was some regression studies. Oddly, Edison did not agree with the 109
Q-I conclusions of Mr. Oliver's statistical studies upon which the inverted j
rate structure was based (Tr.
p.
2198).
Edison provided no further
]
support for this new type of rate structure, either.
Edison witness Kraatz admitted during cross-examination the rarity of this type of rate L
form (Tr.
p.
2201).
Staff witness Bodine maintained that this type of rate structure still has not received adequate analysis (Exhibit RD 1.00,
- p. 8),
g furthermore, Edison believes that the proposed inverted summer energy provision could actually have a harmful effect on its ratepayers in that " needle-peaking" would be encouraged.
In its Initial Brief in Docket flo 86-0128, Edison stated that:
I
"... An excessive price for usage in the 2927 non-peak hours of the summer can have the undesirable effect of a
substantially reducing sales at time when system loads are far below peak..." (p.12).
!g Previously, the Commission, in its Order in Docket fio. 83-0537,
- g had also noted Edison's concern regarding
" needle-yeaking".
The j
Commission noted that Edison:
...showed that there were serious risks to all customers in any proposal to make a dramatic in-I crease in high usage summer or non-summer rates, because the usage in near-peak conditions might Lg be reduced substantially; this is called " needle-
- g peaking" and would result in higher capacity costs for all custcmers as the ratio of peak demand to l
total energy sales increased."
(p.43)
Edison witness Kraatz agreed witn the reasoning imparted in the quote cited above (Tr. p. 2212). Mr. Kraatz then noted that the proposed increase of 18.4% in the second blNk of the summer was "...a large l
' ncrease and may contribute to the needle-peaking..."
(Tr. p. 2212).
i For all these reasons, Staff recommends that the proposed changes to Residential R1 be rejected.
The existing design of that rate should be maintained.
The 12.87% rate increase should be allocated to each l
110
component in a manner consistent with the allocation performed for all other rates.
g.
The Options i
There are several other aspects of the Settlement which bear further comment.
One of these is the Options.
Several witnesses did attempt to place some specific value on these options (Government Consumers' ex. 3, pp. 8-11; Edison ex. 17, pp. 41-46).' While Staff has no basis to place a specific value on the options, Staff does believe that 5
the options have value, and thus enhance the benefits which are to be i
received under the Settlement (Tr. pp. 2560-2562).
h.
The Uniform Fuel Adjustment Clause Another issue is the Uniform Fuel Adjustment Clause (UFAC).
Section 9-220 requires. that the Commission "shall" jnitiate public hearings annually to determine whether the. clauses. reflect actual. costs of fuel purchased and to determine whether such purchases were prudent.
-Although the MOU is not specific, it implies that there shall be no such hearings (Par. 6A(x), pp. 15-16).
This is unacceptable.
The Commission has a statutory obligation to conduct such hearings.
Moreover, the Commission can make no guarantees, at this time, that based upon the facts and positions developed in the record in those proceedings it will not order refunds.
The Conmission should direct that the MOV be modified, c,
i%j accordingly.
Similarly, the Commission has a statutory obligation to complete the UFAC proceedings which are pending.
The Commission can not, and q
should not, make any determination or guarantee in this proceeding LJ fl concerning the possibility of refunds in those dockets.
u_J 111
I}
i.
The Satisfactory Resolution of Pending d
Conmission Proceedings The MOV also requests the satisfactory resolution of a number of Commission proceedings. Those cases should proceed to resolution.
Should the deficiencies discussed above be corrected, however, Staff makes the j
following recommendations as to each of those cases.
The Braidwood construction case, upon proper motion a.
l made in that docket, should be dismissed as moot; b.
The Staff investigation into Edison's future rates should be terminated; The Staff investigation into the effect of the c.
1986 tax reform act as to Edison should be terminated; I
The pending Rate 1 restructuring has already d.
been dismissed; The notice of inquiry into excess capacity e.
should continue since it is a fact-finding proceeding only, and cannot and will not have any binding effect on Edison or any other party; f.
The pending fuel reconciliation proceedings should be brought to resolution based on the record developed in each proceeding independent I
of any determination made in this docket; g.
The pending audits of Byron II and Braidwood I should be completed; I
h.
The UFAC proceedings should be brought to reso-lution based on the records developed in those g
dockets with no determinations concerning those proceedings being made in this docket.
gggg-c.,
S.
r
\\'
Appendix A Staff's objections to the Settlement are. summarized
.at pp. 5-9 of.its Initial Brief.
Edison's responses to each-objection follow.
Where Edison has committed to changes in-the Agreements or to accept a provision in the Commission's Order, it will supply suggested language within seven" days.
l.a. Bonuses and penalties.should be calculated.on -
an annual basis for sach unit.
As part of the bargain Edison has guaranteed to provide ratepayers a minimum number of.kilowatthours at the low fuel; costs of the Units during each of five years.
. Edison agreed to accept certain'significant risks as a conse-
.quence;of.its guarantee.
Staff's proposal expands.those risks well beyond.those Edison bargained for, thereby chang-ing the balance _of the-Agreement. LIn fact, under Staff's prc'iosal Edison could be subjected to penalties even though rat payers'are receiving the total benefit of the output Gua.Intees.
A,s explained in the testimony of Mr.
- Rifakes, ann tl. bonus / penalty calculations for each unit could lead to ove 11, uneconomic decisions regarding the operation of each uni-
.in'an effort to avoid penalties.
(Rifakes, Tr.
232' 28.)
1.b. Levels at which bonuses are earned'should be set at 125% cf target levels.
l
This' proposal of Staff also changes the balance of the bargain.
Setting the levels for bonus calculations at 125% of target levels means bonuses can be earned only if the Units operate at capacity factors in excess of 70%.
This virtually assures that there will be no bonus payments to Edison.
While Edison believes this unfairly removes the opportunity to compensate stockholders adequately for the added risk the Agreement places upon them,.if this proposal c
is adopted, the asymmetry in the bonus / penalty provision should'be eliminated. allowing Edison to retain the full benefits associated-with output in excess of.125% of target levels as is the case in other jurisdictions.
(See Schlissel, Tr. 2945-51.)
Any change in the Settlement Agree-ment would, of course, require the approval of all the signa-tories to the Agreement, since their interests could be affected.
1.c. Lack of an explicit formula in the PSA for
. computing the cost of replacement power.
Edison has no objection to working with Staff to determine the basis for determining the-replacement power costs pursuant to the output guartntee provision.
Any agreed upon basis could then be noticed in the nature of a rule-making _or made the subject of a hearing and' decision by the commission if necessary.
Any such hearing would be limited f
to determination.of the aforementioned issue and would not be an occasion for reexamination of other aspects of the Agree-ment.
Review and approval of applications of the amounts :
daterminod for rofund or collection would, of courno, take place annually.
1.d.
Leck of specificity in the Power supply Agree-ment regarding the manner in which rates under the options are set absent FERC determina-tion.
Edison is willing to modify the Power Supply Agree-ment to make clear.the-Commission's power in such circum-stances.
1.e., Lack of Commission involvement in a determina-tion of the application of the capacity Guar-antee.
The capacity Guarantee is found at page 10 of the j
Memorandum of Understanding.
Paragraph.11 of the Memorandum of Understanding at page 21 states "Any disputes over the interpretation of this Memorandum will be committed to the respective regulatory agency having jurisdiction pver the subject matter."
Since the capacity Guarantee involves o-adjustments in Edison's retail rates,-Edison has always j
assumed that the Commission would resolve any disputes re-i'
,garding the interpretation of that provision.
Therefore, Edison has no objection to an explicit provision in the 1
Commission's order reserving jurisddction to itself to' deter-aine whether the Capacity Guarantee provision has been prop-arly applied by Edison.
1.f. Bonuses received by the Subsidiary but penal-l ties paid by Edison.
l 3_
1
9 It should be observed that the bonus / penalty provi-sion operates for only the five-year rate moratorium period under the Memorandum of Understanding.
Since rates are fixed during this period, the beneficiary of bonuses is a matter of indifference to ratepayers.
To flow bonuses through the fuel clauseuns a cost of purchased power, they must be paid to the subsidiary.
Insofar as penalties are concerned, it is impor-tant to ramenber that during the moratorium period, the Subsidiary is wholly dependent upon Edison for its income and financing.
2.a. Uniform fuel adjustment clause not subject to i
annual audit and reconciliation by the Commis-sion.
i It has never been Edison's intention to attempt to withhold from the commission its right to annually audit And reconcile the application of the uniform fuel adjustmen:
clause.
Accordingly, Edison has no objection to the entry of-an order approving the Settlement which makes that matter explicit.
2.b.
Satisfactory resolution of the existing annual uniform fuCA adjustment clause proceedings.
3 Edison's position with respect to these matters is
'~
set forth in its initial brief at pages 68-70.
It agrees with the formulation of the issue at page 8 of the Staff's i
i brief and has no objection to public hearings in which the j
issue is whether "the clauses reflect actual costs of fuel purchased... (and) whether such purchases were prudent".
It-g l
l
ic Edison'a position, however, that thsse proceedings should not and cannot lawfully be used as an occasion for reviewing (j) the operation of Edison's nuclear stations.
Any refund contemplated by the proposed final order in Docket No.
84-0395 would be contrary to the conditions in the Memorandum of Understanding.
The reason for this is that the amounts could be large enough to affect the economics of the Settle-ment.
Finally, it should be noted that the Commission and Staff remain free in uniform fuel clause adjustment reconcil-intion proceedings subdequent to the 1985 case to reassert their position regarding the consideration of operating experience of Edison's generating facilities in such proceed-ings.
(See'Dellsy, Tr.
4361).
3.
provision for an external fund for decommis-sioning of the Units.
The Staff correctly points out that this issue'is not explicitly addressed in the Settlement Agreement or in the subsidiary agreements implementing it.
While Edison considers external funding of decommissioning uneconomic, Edison is sympathetic to Staff's concerns related to the Subsidiary's ability to fulfill its obligation to decommis-sion the Units without added financial assistance from Edison.
Edis'en would hope that these concerns can be addressed in a manner that does not result in negative economic consequences.
If the only way to address those concerns is through the establishment of an external fund, however, Edison would not consider a requirement to do so to (A
%/
4 be inconsistent with the. Memorandum of Understanding, pro-vided the requirement is to establish an external fund for decommissioning which:
(i) provides that the funds are to be' invested so as to earn as much income as legally permis-sible; (ii) that any contributions.to the fund would be tax deductible; and.(iii) that payments to the fund will be based J
on Edison's current estimates of decommissioning costs (approximately $150'million per unit in 1987 dollars).
4.
Edison's remedies in the event the Commission establishes rates inconsistent with the Memo-randum of Understanding.
The Memorandum of Understanding in paragraph 10 at j
page.21 states that Edison's obligations are " conditioned.
upon the establishment and continued effectiveness of rates
- consistent with this Memoranclum throughout the initial rate period."
The St;0f believes this is an attempt by Edison.to somehow restrict the Commission's authority with respect to Edison's rates and revenues.
This is not' Edison's intent.
This prevision in the Settlement Agreement does no more than assure basic-fairness in the implementation of the Settle--
ment by giving Edison an "out", if the Commission exercises its statutory power over rates during the moratorium.
For a i
given level of revenues over a five-year period, Edison has agreed to provide ratepayers a menu of benefits.
If the j
i above provision in the Settlement Agreement is altered as
]
Staff would have it, Edison would be obligated to a five-year
]
I l
1 )
o
rate moratorium, the Options at the end of the rate morato-rium, a $550 million write-off and the output and capacity guarantees, even if the Commission were to arbitrarily enter j
immediate orders eliminating the rate increase called for by the Settlement Agreement.
The Settlement Agreement carries with it obligations of Edison which provide benefits to ratepayers for given. rate levels.
Fairness dictates that if j
those rate levels are lowered to a level inconsistent with the Agreement, Edison should be relieved of its obligations under the Settlement Agreement as well.
5.
Continuation of the audits.
Staff has simply not provided any basis for contin-untion of the audits.
Edison recognizes that it.is at risk should it wish to have the Units be a part of its jurisdic-I tional rate base.
There is no such present intention and continuation of the audits will simply be productive of more expense, controversy and likely litigation.
An and to liti-gation was one of the benefits Edison bargained for and which Dr. Resek cited as a benefit to Northern Illinois.
(Resek, People Ex. 1 at 15-16.)
I 6.
Proposed residential rates are not cost based.
l Any departure from cost based pricing in the rates established pursuant to the Settlement Agreement is a reflec-
)
tion of concerns of residential ratepayers, other signatories to the settlement Agreement and Edison.
Those concerns led, -
1
e among other. things, to Docket 86-0128 in which.the continua-tion of the winter / summer differential was explored.
The record in that docket has been incorporated into this docket.
The residential rates, like all the elements of the Settle-ment Agreement, should be viewed as part of an overall settlement package and not in isolation.
1 i
4 i
- )
kW)[d.YMfMW C p
c.:
HEARING EXAMINER'S
' PROPOSED ORDER 87-0043/87 0044/-
87-0057/87-0096 Consol.
I 3
from. the -' base ' case in a traditional rate.. proceeding.
.The.de -
~
Jscription.of that analysis heretofore (described and the results
-therein provide a proper basis for the ' Commission 's conclusion-that > the rates resulting from the Settlement Proposal are 'just
.and reasonable..
One of~.the.most significant " aspects of..the Settlement
. Proposal' is the availability of ' Options with regard to the y
capacity represented by the Units.
The Settlement Proposal-
- permits the' Commission to direct Edison five or.eight: years from now, to sign up for.some or'all of the capacity from.the Units',
or to disengage dtself-from these-Units entirely.
Decisions-'such as?. predictability; of, the level of' Edison's ' peak. load,, thei condition'of:the bulk pow'er market, and level.of' fuel costs,;can.
be made-in the" light'of' conditions current'at the time and not on-4 4
aL" forecast"' basis >made-at this time.
The Commission will. have the. opportunity,. thro gh.' hearings
+
in' which :both Edison. and ratepayers will 2 participate, to deter '
+
- mine which of the Options are-most beneficial on:the basis of a-
' balancing of the interests of both ratepayers and. shareholders.
. IIEC's witness, Mr. Brubaker, ' characterized the ' importance
- of.these Options. as providing both a : " string"-andLa " scissors"
'with. regard'to these Unito, explaining :. that, as-a result.. of' the
" string," the.ratepayers (through the Commission) hold the.right to elect _to take power from any or'all of the Units.
At the.same
- time,. the - ratepayers (also throughL the Commission) have the
" scissors" with which.to cut loose any or all'of the capacity of the Units.
All of this, according to IIEC, can be done'under.the Settlement: Proposal without the necessity of the protracted litigation that would surely follow if. the Commission attempted to impose such-requirements on Edison in a traditional ratemaking scenario.
Under the rate design adopted herein, the< residential class would continue to be assessed rates which are significantly below-cost, while: all of the firm and interruptible industrial' and commercial classes would continue to be charged. rates in excess of - cost.
This-outcome is a
direct benefit to residential-ratepayers.
The Commission concludes that it is a proper exercise of its regulatory judgment to determine the value and likelihood of these benefits.
Based on the record before us, the Commission finds that such benefits as rate certainty and stability during the. rate moratorium period, the flexibility and timing of the choices of Options, the favorable impact of these factors on the
- 147 -
l HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
State's
- economy, and the Commission's ability to maintain t
effective regulatory oversight and minimization of litigation, l
l will benefit both ratepayers and shareholders, and consequently, require approval of the Bettlement Proposal, as modified herein.
f r
y DIFICATIONS AND CONDITIONS Approval of the Settlement Proposal is predicated and conditioned upon certain modifications thereto which must be implemented'by Edison in accordance'with our specific directions as set forth below.
Staff, in its initial brief, identified numerous flaws in the Settlement Proposal, which it' determined are "too serious for.
I Staf f - to, recommend acceptance to the Commission in its c_urrent form."
(See Appendix C to this Or_ der. ). Edison, in its Appendix A to its reply brief, responded to the flaws identified by Staff and has committed to certain changes in the documenta-tion intended to cure same or acceptance of curative provisions to be set forth in this Order.
Edison, however, continues to l
object to certain other Sta ff ~ proposals for modifications.
We will deal with each of these matters.
Additional matters raised by Staff and other parties require Commission action which will be directed herein.
Power Supply Agreement staf f, in its initisl brief, identified six areas within the context of the Power Supply Agreement which, it believes, require modification.
With respect to the bonus / penalty provisions, Staff takes exception to the cumulative target provision '(i.e., a computation-based on cumulative target levels for all-three Units over the fivs-year period) because such a provision allows' bonuses to be collec.ed in certain years where target levels are not reached, t
or even if certain of the Units are non-operational.
Similarly, the Subsidiary can avoid paying penalties for not achieving target levels in certain years.
Staff believes that this creates a situation where the risk of poor performance is assymetrical, in effect, relieving the Subsidiary from penalty for poor perfor-mance.
- Staff, es did certain Consumer Intervenor witnesses, recommends.that the formula for determining bonuses or penalties be established at annual output target levels for each Unit.
Edison's response is that its bargain is that Edison has j
guaranteed to provide ratepayers a minimum number of KWHs at the 148 -
i
)
i r
I f
.. m HEARING EXAMINbrS j
s PROPOSED ORDER j
87-0043/87-0044/
j 87-0057/87-0096 l
^
Consol.
j s.
q 1
i fow fuel costs of'the Units during each of five years, a bargain which it represents contains certain significant risks.
Edison contends that CEnff's proposal e nands those risks well beyond
'those Edison bargained for,,thereby changing the balance of the l
Edison points out that under-Settlement Proposal..
In fact,. be subjected to penalties even Staff's proposal, edison could though ' ratepayers are receiving the total benefit of the output guarantees.
Edison relies, in part, on the testimony of Mr.
Rifakes, who stated tha't. annuaP bonus / pena.lty calculations for each unit could-lead to overall, > uneconomic decisions - regarding the operation of each Unir,'in an effort to avoid penalties.
4 1
l s
We believe that 'the record-clearly supports bonus / penalty calculations on an annual basis.
We do not believe that the record is r m rly ao compelling with. regard to individual calcula-tions for eec h Unit and do not direct such a. change to the Power Supply Agreement. '
Additionally,sdu2ing 'the course of the hearings, it became apparent 4 hat the bonus / penalty provisions did not operate as intenddd under certain* hypothetical conditions where-a bonus is creditGd and in.a succeeding year there is a shortfall that is less than the bonus previously earned.
Edison's stated intent is that under any set-of-circuustances,,ratepayers and Edison will share equally in any bonus on a cumulative basis.
Edison points out that this intent can be effectuated by adding provisions to the Order which require:
(1) that-Edison not retain any. bonus when cumulative output is less than 111.1% of target levels; and
-(2) when. compensation for bonus energy exceeds the amount of any shortfall calculated at the end of a calendar year, any excess shall be shared equally between Edison and ratepayers.
We believe that. the apparently unintended confusion occa-sioned by the bonus / penalty provisions is obviated by our direc-l tion that-bonus / penalty calculations be done on an annual rather than cumulative basisa if our understanding is incorrect, how-
- ever, Edison should. be directed to implement any necessary changes as set forth above.
Staff also takes exception to the target levels themselves, pointing out that the Subsidiary will receive bonuses once 111.1%
of the output targets are reached.
Given that the output targets themselves are significantly below the industry average for similarly situated Pressurized Water Reactors
("PWRs"),
Staff contends that the Subsidiary would be earning bonuses for output which is far below average performance.
Staff believes that, at a minimum, the Subsidiary should not be able to begin to earn bonuses until 125% of the annual output targets fbr each unit is
- 149 -
______________________j
l HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
reached.
Output at 125% would be roughly at.the industry average for similarly situated PWRs.
Edison argues that Staff's proposal changes the balance of the bargain.
Setting the levels for bonus calculations at 125%
of target levels-means bonuses can be earned only if the Units operate at capacity factors in excess of 70%, which, Edison suggests, virtually assures that there will be no bonus payments to Edison.
Edison helieves this unfairly removes the opportunity j
to compensate stockholders adequately for the added risk. the Settlement Proposal places upon them.
In any event, Edison asserts that if such a proposal is adopted, the assymetry in the bonus / penalty provision should be eliminated, allowing Edison to retain the full benefits associated with output in excess of 125%
l of target levels as is the case in other jurisdictions.
We believe that the 111.1% level is not unreasonable in the context of.the entire Settlement
- Proposal and that,' moreover, as Edison
-l implicitly points out, there is " symmetry" in the current agree-ment because ratepayers and shareholders split the benefits when target levels are exceeded, which is not generally the case in other jurisdictions where the 125% level applies.
'Accordingly, we direct no change-to.the Power Supply Agreement in this regard.
Next, Staff points out that there is no explicit formula in the Power Supply Agreement for computing the cost of replacement l
power.
Further, the Power Supply Agreement calls for Edison and l
i the other signatories to determine this formula in a manner unspecified.
Only if such a determination cannot be reached does the Power Supply Agreement call.for submitting the matter to the Commission for disposition.
Staff believes that this is clearly j
unacceptable for it precludes the Commission from exercising its statutory oversight role.
At a minimum,.it believes that the
' Power. Supply Agreement should explicitly provide that the Commis.
sion,-after hearing, make the determination as to the appropriate formula for computing'the cost of replacement power.
Edison states that it has no objection to working with Staff to determine the basis for determining the replacement power j
costs pursuant to the output guarantee provision.
Edison sug-gests th&t any agreed upon basis could then be noticed in the nature of a rulemaking or made the subject of a hearing and decision.by the Commission if necessary.
Any such hearing would be limited to determination of the aforementioned issue and would not be an occasion for reexamination of other aspects of the l
Settlement Proposal.
Review and approval of applications of the amounts determined for refund or collection would thereafter take place annually.
- 150 -
t.-
HEARING EXAMINcR'S -
PROPOSED ORDEH 87-0043/87-0044/
j 87-0057/87-0096 Consol.
l.
L We believe -Edison 's suggestion responsive to Staff's con-c e r n s.. in this ' regard is entirely ' appropriate and direct the implementati'on of same.
Staff. next' addreuses its concerns regarding the non-specificity of the Power Supply Agreement as to how rates under the' Options will be. set absent an explicit determination by
- FERC, Staf f believes ' that the Power Supply-Agreement should be modified to make it' explicit that, absent a FERC determination, rates' will be set by this Commission.using traditional rate cbase/ rate of return methods.
The MOU already provides for this and Staff contends. 'that the ' Power Supply Agreement should be
' amended to' conform to"the MOU.-
Edison states'that it is willing to make this modification to the Power ' Supply.' Agreement, and is
~
directed to do so.
Staff ~ regards as inappropriate.the fact that the, Power Supply. Agreement grants Edison the < sol 6, discretion. to determine when the capacity. guarantee will apply.
Thus, Ediso,n could avoid penalty payments for two of the Units if.they fail to operate during the five-year ' period simply.by as serting.. that it "rea-sonably appears" that the plants will be
" operable" in the i
" foreseeable future."
Staff believes.that the Power. Supply Agreement should' be amended to. explicitly provide that ' the Commission snall make all determinations regarding the appli-l cability of the capacity guarantee.
Since. the capacity guarantee involves adjustments in Edison's retail rates, Edison states that it has always assumed that ' the Commission would resolve any disputes regarding the interpretation' of that provision.
Therefore, Edison has stated that it has no objection'to an explicit provision in this Order
^
reserving jurisdiction to the Commission to determine whether the capacity guarantee provision has been properly applied by Edison.
j i
This recital is to be considered such a reservation.
Finally, Staff objects to the language in the Power Supply j
Agreement which provides for bonuses to be received by the Subsidiary, and for penalties to be paid by Edison.
This is I
inappropriate, according to' Staff, because the entity receiving bonuses should also be responsible for paying penalties.
i Edison observes that the bonus / penalty provision operates for only the five-year rate moratorium period under the MOU, and that since rates are fixed during this period, the beneficiary of bonuses should be a matter of indifference to ratepayers.
Edison contends that to flow bonuses through the fuel clause as a cost of purchased ~ power, they must be paid to the Subsidiary.
Insofar l
- 151 -
l
1 HEARING EXAMINER'S PROPOSED ORDER 87,-0043/87-0044/-
87-0057/87-0096 Consol..
as. penal' ties are concerned, Edison points out that it is impor-tant ~ to l remember that during the rate. moratorium' period, the.
Subsidiary is wholly dependent upon Edison. for its, income-and financing.
We - believe. Edison is basically ' correct in this regard and y
direct no modification with respect to same'.-
1 Additionally,.it has' been pointed out by certain.of the Consumer Intervenors that under the Settlement. Proposal,, the Subsidiary's off-system sales are factored into-both the,guaran.
tee and bonus levels 'even. though Consumer Intervenors contend that ratepayers will receive no benefit from off-system sales'and-should not;be required.to pay higher revenues when such sales are made.. Consumer Intervenors urge that of f-system sales should be eliminated from' production, credited towards both the guarantees
.and, bonuses.
It is our understanding that bonus / penalty provisions..are.
' subject to all generation of the Units, including. of f-system sales,.and the Commission, frankly, do'es,not understand Consumer
-Intervenors' argume,nt'and. directs no change.in this' regard.:
. Fuel Reconciliation Prcceedings_
.Staf f contends that the provisions of the MOU respecting the.
UFAC are unacceptable.
First, Staff contends that the MOU. implies that the UFAC-will not,be subject to annual audi-t and reconciliation by the.
j Commission, contrary to the Commission's statutory obligation to review and reconcile the UFAC on an' annual basis, as. set forth in Section 9-220.
Staff. argues that the Commission should not and cannot' relieve itself~of this obligation.
Thus, Staff believes that the MOU should be ' revised ~to make it explicit that review and adjustment of the UFAC will be performed by the Commission on an annual basis.
Second, Staff Nelieves that satisfactory _ resolution of the existing UFAC proceedings requires that hearings be conducted to determine'.whether the clauses reflect actual costs of fuel purchased, and to determine whether such purchases were prudent.
To the extent such proceedings are pending, Staff believes that l
they should be brought to a conclusion by a determination by the Commission based on the facts, law and positions presented in each proceeding and that the Commission should not take a posi-tion in these proceedings that refunds will not be ordered as a result of its resolution of the existing UFAC proceedings.
152 -
)
l
r HEARING EXAMINErrs '
(
PROPOSED ORDER
,87-0043/87-0044/
87-0057/87-0096 Consol.
1 Edison-states that it has never been its ' intention to attempt to. withhold from; the Commission its right to annually audit - and reconcile the application-of. the UFAC.
-Accordingly, Edison's position is that it, has no 1 objection to this Order explicitly providing for same.
o Additionally, Edison generally agrees with Staff's analysis as.to.the resolution of the existing.UFAC proceedings.and has no 4
objection to hearings in which the issue-is whether "the clauses I:
reflect actual' costs of fuel purchased...
[and) w h e t h e r..
s u c h purchases;were: prudent."
It is Edison's position, however, that these proceedings should not and cannot lawfully be used as an occasion for reviewing the operation.of the Units.
Edison's position is-that.any refund -contemplated by the : Examiner's.
Proposed ~ Order in Docket 84-0395-would be contrary to the con-lditions-in the MOU because any such refund finally ordered by the Commission' could affect the economics of the Settlement Proposal.
Finally, Edison' notes that the.Commissionr and Staf f' remain free.
~ in uniform fuel' clause adjustment reconcilation proceedings.
subsequent,to thes 1985 case to reassert. their position regarding the o consideration of.the operating experience of, Edison's gen-erating facilities in such proceedings.
The Commission. acknowledges Edison 's stated intention with respect to prudency _ audits.of fuel. purchases and -concurs that subsequent to this Order such proceedings, which will proceed as provided _- by law, should not, be used to review the operation of the. Units.
With. respect 'to Docket. 84-0395,. however, it is intended by ' this Order that said proceeding, now suspended, go.
forward to its resolution;' provided, however, that should the Settlement Proposal.be consummated in accordance with this Order, l
' the Settlement Proposal'and its overall impact on Edison will be a ' consideration in the Commission's disposition of Docket i
84-0395.
l
- 153 -
' HEARING EXAMINER'S FROPOSED ORDER 87-0043/87-0044/-
87-0057/87-0096 Consol.
Decommissioning Staff points out that the Settlement Proposal is silent as to the' issue of decommissioning of the Units.
Staff's position is that Edison _ should be '~ required to establish an external fund for decommissioning.
' Staff believes that this would best.be accomplished by modifying the Construction. and ' Operating Agree-ment to require that such a fund be established and maintained by the Subsidiary.
Staff's position and its reasons for same are set ~
forth in detail in the description of Staff witness
. Marshall's testimony previously set forth in the subsection entitled." Decommissioning Costs," which appears under. " Staff's Analysis" in:this Order.
Edison's current position on this issue is that while Edison considers external funding of decommissioning uneconomic, Edison is sympathetic to ' Staff's. concerns related to the Subsidiary's ability' to fulfill its obligation to decommission the Units without added financial assistance from Edison.
Edison asks'that these' concerns be addressed in a manner that does not' result in negative economic consequences', but suggests that if.the only way
-to address these concerns is through the establishment of-an external fund, Edison would not consider a requirement to do'so to.be inconsistent with the MOU, provided the requirement is to establish an external fun.d for~ decommissioning which:
(i). pro-vides that the ~ funds are.to be invested so as to earn as much income as legally permissible; (ii) any contributions.to the fund would be thx deductible; a.nd (iii) payments"to the fund will be bassd on Edison's current ' estimates of decommissioning costs, which are approximately $150 million per unit in 1987 dollars.
The Commission believes tihat establishment of an external fund for decommissioning 1is"nece'ssary and proper, particularly in the context of the Settlement Proposal, and directs Edison to establish such an external fund reasonably coincident to the implementation of the Settlement Proposal, through transfer of the Units to the Subsidiary.
While Edison is free to establish such an external fund consistent with its three stated goals, it must provide for the specific concerns addressed by Ms. Marshall, namely:
assurance that the funds will be available at the time of decommissioning; current revenue to be required; total costs measured by present value; intergenerational equity for rate-payers; and reasonable flexibility, consistent with the foregoing to meet changes in future conditions.
- 154 -
p
=
HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
Audits Staff believes that Commission approval of the Settlement Proposal implies that the prudency.' audits of the Units, currently under way, would be terminated, at least until the end of the five-year rate moratorium period.
Staff contends ' that this is inappropriate and that the audits should be completed, par-ticularly in consideration of the effects a delay might have on
-the quality and value of the audits.
. Staff's principal argument in favor of completion of the audits is its recognition of a
-possibility that certain events might result in the Units being reacquired by Edison or some other scenario wherein they would be
. subject to traditional regulation,-thus necessitating. commission
.j~
inquiries which would be enhaaced by the existence of such I
completed audits.
Edison responds that Staff has simply not.provided any sound basis for-continuation of the audits.
Edison recognizes that it is at risk should it subsequently be in a position where the Units would be a part of its jurisdictional rate base.
Edison contends that since there is no such present intention, continua-tion of the audits will simply be. productive of more expense, controversy and likely litigation, something Edison and the other signatories intended to terminate.
Moreover, if the Units are not to be ratebased, the legality of the audits may be at issue.
With the explicit and absolute understanding that any future audits resulting from the unwinding of the Settlement Proposal transactions will be paid for by Edison's shareholders, it is our opinion that the present audits should be terminated.
Statement of Intent; Rate Reduction l
' Staff (and the Consumer Intervenors) take strong exception to certain implications and specific language within the Settle-(
ment Proposal which implies that the Commission must relinquish some of its authority and/or ability to initiate rate hearings i
and rate reductions under Sections 9-202 and 9-250 of the Act.
Staff does not believe that the Commission should bind itself to refrain from exercising the full extent of its obligations and I
authority under the Act.
Moreover, Staff contends that Edison l
should be prohibited from abandoning the MOU should the Commis-
[
sion exercise its statutory powers and establish rates inconsis-
[
tent with the MOU.
A complete exposition of Staff's position is set forth in a description of Ms. Marshall's testimony which is j
contained in the subsection entitled "The Commission's Statutory Ratemaking Authority," which appears under " Staff's Analysis" in this Order.
Specifically, Ms. Marshall recommends that the
- 155 -
t l
HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
Commission retain (or at least not relinquish) its Section 9-202 authority, and neither bind itself to the MOU rate reduction language, nor issue any statement of intention to refrain from reducing Edison's rates.
Edison contends that while the MOU states that Edison's obligations are " conditioned upon the establishment and continued i
effectiveness of rates consistent with this Memorandum throughout.
l i
the initial rate period," Staff has misconstrued this language to be an attempt by Edison to somehow restrict the Commission's-authority with respect to Edison's rates and revenues.
Edison repeatedly has stated that this is not its intent, and that this provision is intended to do no more than assure basic fairness in.
the implementation of the Settlement Proposal by giving Edison an 4
"out," if the Commission exercises its statutory power over rates during the rate moratorium period.
Edison's contention is that for 'a given level of revenues-over a five-year period, Edison has
- 4 agreed to provide ratepayers very specific benefits.
If the.
described provision in the MOU is altered as Staff suggests, Edison would be obligated to a five-year rate moratorium, the l
Options at the end of the rate moratorium, a
$550 million j
write-off and the - output and capacity guarantees, even if the Commission were to enter-orders, for whatever reasons, eliminat-J ing the rate increase called for by the Settlement Proposal.
l Edison-submits that the Settlement Proposal carries with it i
obligations of Edison which provide benefits to ratepayers for given rate levels and that fairness dictates that if those rate levels are lowered to a level inconsistent with the Settlement i
Proposal, Edison should be relieved of its obligations as well.
Other parties have also expressed concern with certain termination rights of Edison and in certain circumstances certain of the other Settlement Proposal signatories, most specifically under Section 9 of the MOU, which conditions certain of those termination rights on events to be evaluated "in Edison's reason-able judgment," and Section 6D relating to the ultimate judicial disposition of Edison's last rate case, The Commission will direct no specific language modifica-tions in the Settlement Proposal documentation with respect to Edison's termination rights, nor will we, at this time, preclude prospectively Edison's taking any action regarding termination of the Settlement Proposal it believes is consistent with same.
In the
- event, however, subsequent to the implementation of the Settlement
- Proposal, Edison, for any
- reason, determines to terminate any or all of its agreements thereunder during the rate moratorium period, it shall first file for and obtain, after notice and hearing, the approval of this Commission.
In the
- 156 -
HEARING EXAMINER'S PHOPOSTDORDFR I
87-0043/87-0044/
i 87-0057/87-0096 Consol.
event. Edison, after hearing, establishes that an event appropri-ate for termination, including, among other things, a so-called
" rate reduction">under.the Settlement Proposal has occurred, it
-may. terminate the. Settlement Proposal upon proper order of.the plan of termination, Commission.
Said filing should include a
' setting forth, with specificity, what actions are necessary and will be taken in respect of said proposed termination.
Finally, and this bears no elaboration, the Commission is not-a party _ to the Settlement Proposal, does.not consider itself bound under the so-called regulatory freedom clause, and can only act consistent with the law with respect thereto.
Further, we will issue' no statement of intent other than is set.forth in the
'"Afterword" section of this Order.
l
' Rate Design and Summer /Non-Summer Differential Staf f and certain of the Consumer Intervenors contend that
- the proposed rates contained.in the Settlement Proposal are not cost-based.
Nothwithstanding ' this contention, the Commission believes l
that the across-the-board ' rate increase and the. changes; in the j
rat s-provided for in the Settlement l
design of. residential e
-Proposal are suppbrted by the evidence in these proceedings and
-in Cocket 86-0128.
Base. rates for each customer class will be i
^
increased uniformly, i.e.,
interclass.
An across-the-board j
increase in rates previously found by this Commission (in cons.
l Dockets 83-0537 and 84-0555) to be just and reasonable would be presumptively reasonable without further evidence.
While there is ample precedent supporting this proposition, there has been additional evidence ' presented in these proceedings and Docket The relative cost recoveries that will result under the 86-0128.
Settlement Proposal rates are substantially the ' same an those i
that.resulted from the rates approved in Edison's last Inte case, and we find that those relative cost. recoveries continue to be j
4 reasonable.
Thus we find the across-the-board increase method-
~
ology and the resulting interclass allocations reasonable for purposes of these proceedings.
Within the ' rate classes, all billing components will be increased by a uniform 12.89%, with the exception of the rates for residential customers, P. ate 1.
As to Rate 1,
the proposed rate design incorporates, to a substantial degree, proposals previously sponsored by consumer
- groups, many of which are Intervenors in these proceedings.
i
- 157 -
a
- J
r HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/ (
87-0057/87-0096-t Consol.
Present. residential
- rates, as well as residential rates under the Settlement Proposal,;are as shown in the table below:
)
1987-88 Rates 1987 Rates 7
Current Settlement Current Sett fement Customer Charges l
1-2. unit building
$11.24
$9.10
$11.00
$ 8.86 f
3-4 unit building
$ 5.65
$3.90
$ 5.60',
S 3.45
-i Kilowatthour~ Charges Summer First 400.
14.165c 11.'964c 13i500c 11.695c
'Over 400
.14.165c 16.7.70c-13.500c 16.102c Non-Summer First 400 7.633c 11.964c 7.568c 11.695c Over ~400 4.786c 5.392c 4.700c 5.306c o
table' illustrates' that rates under the Settlement The
- Proposal,dif fer f from current rates, besides t'e level of charges,
- in that
- (1)Jmonthly customer charges hr /e bwn reduced 7 and (2) the. seasonaldif ferential in charges for service up to 400 KWH has been. eliminated.
Both - of these design changes have been proposed.to. address concerns frequently, voiced by, residential customers.
We find both of these. changes in rate design reason-able.
The reduction in monthly customer charges is a reasonable response to concerns expressed by many customers regarding the level of those charges in present rates.
The reduction in revenue attributable to this design change is to be made up by increasing KWH. charges for the initial. 400 KWH of usage year round and. charges for usage in excess of 400 KWH in the summer.
This approach, which was previously recommended by representa -
tives of certain consumer groups, c'auses the increase in bills under the, Settlement Propos'l for small users -(under 400 KWH monthly) to be somewhat less than for larger users.
The elimination of the seasonal differential in KWH charges for usage up to'400 KWH monthly has. received considerable atten-tionin proceedings'before the Commission.
A similar proposal by
. Edison was the subject of Docket 86-0128.
Because under Edison's
(
present rates charges for summer usage far exceed charges for similar levels of usage in non-summer months, customers who do 158 -
J HEARING EXAMINER'S 4
PROPOSED ORDER v
87-0043/87-0044/
l 87-0057/87-0096 Consol.
4 I
not increase their usage in. summer months nevertheless see a laige increase in their bills in the summer.
As set forth in
.itness' Kraatz' testimony in Docket 86-0128, Edison Edison w
initiated those' proceedings to enhance public acceptance of its rates by reducing the seasonal differential in charges-for relatively low usage.
Historically,' the seasonal differential in residential rates has reflected the tendency of summer usage to cause Edison to incur capacity costs.
Capacity costs attributable to residential
. usage, however, are most attributable to. peak.
All usage at the L
single hour that is the system peak contributes in the same fashion to the need for. capacity, whether that usage is'attribut-able - to fans :or air-conditioning 'or otherwise.
. Residential customers do not have' metering that permits. billing them directly 1;
for capacity costs through a rate with a demand charge component.
,It has been and continues to be necessary to spread'the recovery of capacity costs over charges for usage in other pe.riods as well.
This was another component of Mr. Kraatz' testimony in j
Docket 86-0128.
The decision as to what portion of those costs j
i should be recovered in non-summer KWH charges is a matter of
~
judgment, taking,into account. factors such as price signals and a
i-customer 1 acceptance.
This Commission > previously concluded, in j
L
' Edison's last rate case, that a rate that spread.all the capacity 4
L costs'over just summer usage would be unacceptable.
(Order, Oct.
J 24, 1985,.consol. Dockets 83-0537 and'84-0555, at 53.)
A eignif-H icant' portion of the investment costs'of new base load generating units is. attributable to the fuel-savings ~.that result from the operation of' those
- units, and those fuel-savings occur year-round.
Some of the capacity costs attributable to residen-l tial usage,. therefore,- should be recovered in charges for
)
'non-summer usage.
We believe that the KWH charges for residen-
{
tialc customers under the Settlement Proposal rates present a 1
l' reasonable pattern for the recovery of capacity costs.
KWH j
charges 'for larger summer users, whose usage is likely to include H
air-conditioning, will signal the increased costs of that usage
.at the time of peak.
Smaller users, whose summer usage may be somewhat'less discretionary, will continue to pay their share of 1
i:
system costs, but with recovery of those costs apread over the j
l
(.
full year.
An alternative proposal for the redesign of KWH charges in Rate 1 was presented in Docket 86-0128 by Bruce J.
Oliver on behalf of certain consumer intervenors, including Cook County and i
L the Attorney General.
In Docket 86-0128, the focus of the
{
proceeding was simply the design of the residential rates and no j
rate increase was then under consideration.
Mr. Oliver's pro-posal nevertheless called for a sharp increase in summer rates
- 159 -
i-
HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/ (
87-0057/87-0096
{
Consol.
t for usage over 400 KWH, coupled with an offsetting reduction in summer rates for usage up to 400 KWH.
The premise of Mr. Oliver's proposal was that large users have greater respon-sibility, on a per KWH basis, for capacity costs than do smaller users.
Both Cook County and the Attorney General, proponents of the ~ Oliver proposal in Docket 86-0128, now support the rate design presented in the Settlement Proposal.
1 J
While the Oliver proposal has not -been adopted in Edison's proposed Rate 1 design in these proceedings, the Oliver sugges-tions for recovery of the 0-400 KWH summer shortfall through a higher KWH price for over 400 KWH usage (an approximate 2.7c/KWH increase in the tail block) has been adopted by Edison and etfects an inverted block structure in summer intended to reduce i
peak demand, a concept not only urged by Mr.
Oliver but one deemed an appropriate objective in rate design by Staff witness J
Bodine in Docket 86-0128.
]
While understanding Staff's general concerns regarding
' marginal cost pricing, neither Staff nor any party has presented j
any evidence which adequately supports rejection of Edison's rate j
design.
- Moreover, while certain Intervenors, particularly V
CAFFUP-SACCC contend that Edison has not provided cost study evidence supporting its proposed rate design, IIEC points out vividly that Edison's across-the-board allocation of the base rate increase favors the residential class who already bear a m
smaller proportion of costs than do firm and interruptible i
commercial and industrial customers, and who will continue to j
benefit (c.nder marginal cost analyses) from rates s,ignificantly n
below costs under the Settlement Proposal rate design.
The rate design provided for in the Settlement Proposal is supported by both the record and precedent and will be adopted.
, Byron Common Plant Costs Consumer Intervenors have clearly established that the entire
$675 million of Byron - common plant costs are already included in Edison's rate base as a result of its last rate Order.
Consumer Intervenors are also correct in asserting that notwithstanding the Circuit Court of Cook County's reversal of Edison's last rate Order, including, among other things, said inclusion of 100% of common plant costs in rate base, ratepayers have continued to pay rates based on such 100% inclusion since October 24, 1985.
I Consumer Intervenors' contention is that the inclusion of an allocation of 50% of the Byron common plant costs to Byron 2 l
- 160 -
1 1
i i
yo HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
under the racilities Transfer Agreement is necessarily reflected in the ' Subsidiary's financial obligations to Edison which can only be funded from the S660 million annual payment from Edison to~ the subsidiary.
Accordingly, ratepayers appear to be paying twice (represented by Consumer Intervenors to be an additional
$75 million annually) for certain Byron common plant costs.
Other than contending that the $660 million annual payment is a negotiated figure predicated on numerous
- factors, Edison has failed to explain or otherwise justify this apparent " double counting."
We are aware, of course, that the propriety of the 100%
allocation of Byron common plant costs to rate base in Edison's last rate case is the subject of pending judicial action.
We are also aware that ultimate judicial resolution of thht entire 3
matter as well as other factors may-very well impact the imple-l
-mentation and continuation of the Settlement Proposal.
Accord-ingly, we will order no change to the Settlement Proposal at this
. time with respect to Byron common plant costs, but direct that at
-such time as Edison's last rate case, including the issue of the allocation of. Byron common plant costs, is finally resolved judicially, Edison must file its
- petition, upon notice and
- hearing, for reconciliation (and refunds or reductions, if appropriate) of rates collected since October 24, 1985, which reflect collection of 100% of Byron common' plant costs and the increased rates to be collected under the Settlement Proposal.
i Additional Reporting Requirements In addition to all other reporting requirements to this Commission imposed by statute, rule, regulation or order, Edison is directed to file additional annual reports reflecting its operations with the. Subsidiary, intended to verify that Edison is not deferring operating and maintenance expenses and capital additions costs during the rate moratorium period, in which reports, as per the recommendation of Staff witness Marshall', are to be included explanations of any variances between budgeted and actual activities based on the most recent five year budget in effect on July 1, 1987.
Edison's annual reports should
- present, in addition to consolidated financial statements, financial presentations, prepared in conformity with sound accounting principles, of its operations without the Subsidiary and the separate operations of the Subsidiary.
Edison should file with the Commission, within thirty deys of the effective date of the transfer of the Units to the
- 161 -
HEARING EXAMINER'S PROPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Y
Consol.
Subsidiary, a report containing detailed information regarding its proposed accounting for said transaction, including appropri-ate account numbers.
Other Regulatory' Approvals Consumer Intervenors have urged the Commission to stay or at least slow these proceedings to await action 'by the FERC with recpect'to the Subsidiary's rates contained il the Power Supply 1
Agreement and the-NRC with respect to an amendment of Edison's I
licenses for the Units.
Edison has filed for such license amendments, but has not made any filing with the FERC.
Edison states that until the subsidiary is formed and the Units are transferred to it, there is no utility under federal law on whose behalf the rates can'be filed.
Edison also~ states that because l
the rate set by the Power Supply Agreement'will be regarded as an initial rate of a new utility, the FERC has no power to suspend the rate,'and all that will be needed from the FERC is a waiver of a sixty-day filing requirement contained in its regulations.
~
We conclude that it is unnecessary for the Commission to await I
FERC and'NRC action in these proceedings.
Most of the signifi-cant issues arising out of the Settlement Proposal are within the l
jurisdiction of the Commission.
We recognize that if these other agencies have not acted by July 1,
- 1987, there may be some i
technical impediments to closing the transfer of the Units to the Subsidiary and the Subsidiary beginning performance under the Power Supply Agreement.
However, those impediments should not be i
permitted ~to bar implementation of the Settlement Proposal in a timely manner.
Therefore, we will order Edison to place the Settlement Proposal rates in effect as of the date of its rate filing pursuant to this Order, and for purposes of the output and guarantee provisions' of the Settlement Proposal and the Power Supply Agreement,'all electricity generated by the Units from and after that date shall be treated as though generated by the Subsidiary.
It must be expressly understood, however, that this Com-missit1's approval of the Settlement Proposal, as modified and conditioned herein, is expressly subject to Edison's receipt of all necessary regulatory approvals, including, without limita-tion, appropriate orders, from the FERC and the NRC.
Miscellaneous Proceedings The Commission notes that Docket 86-0128 was previously dismissed and its record was incorporated herein.
Those pending residential Rate 1 matters, specifically, the summer /non-summer differential, are addressed and disposed of in this Order.
- 162 -
(c, s
y n
HEARING EXAMNFES PHOPOSED ORDER 87-0043/87-0044/
87-0057/87-0096 Consol.
The. Staff investigations into Edison's future rates and the effect of _ the. 1986 Tax Reform Act, respectively, should be terminated.
O t
'The Notice of Inquiry proceedings, Docket 86-NOI-1, regard-ing excess capacity, which is a fact-finding inquiry without 3
binding effect on Edison or any'other_ party, should continue.. No 1
order 'in said proceedings should upset the. Settlement ' Proposal.
during the rate moratorium period.
j Certificates i
Upon the transfer, if such occurs, of any of the Units from Edison to.the Subsidiary pursuant to the. Settlement Proposal, the certificates-of Convenience and Necessity, previously issued to Edison for the respective Units,-shall, without further action by this Commission, be deemed suspended, pending a final deter-mination, by judicial' review or otherwise, that any such transfer of the Units from Edison-to the Subsidiary is not subject: to reversal..
Upon such a
determination having been made, and without further' action by this' Commission, Edison ~shall~ surrender such Certificates to the Commission for cancellation.
. Affiliated Interest Transactions
'Under the terms of-the Financing. Agreement, Edison is to provide funding to the Subsidiary in the event that the Subsid-iary's expenditures in reimbursing the costs incurred by Edison
.in operating - the Units, constructing any needed retrofits or modifications on the Units, or completing the construction of Braidwood 2,-
exceed the Subsidiary's - income from the sale' of power.
The Commission emphasizes that, except for the specif-ically' denominated amounts described in the Settlement Proposal, the Commission interprets this arrangement as requiring a filing and Commission approval under Sections 7-101 and 7-102 of any future advances or loans by Edison to the Subsidiary.
Our i
approval of the Settlement Proposal as set forth herein should not be construed as open-ended or blanket authorization of future loans, centributions, or advances.
The Commission.is of the opinion that Section 7-204 is not applicable to the Settlement Proposal as submitted in these proceedings.
However, the Commission considers that any transfer of assets to or from the Subsidiary as it is presently proposed to be formed, will constitute a reorganization in that such transfer would have the effect of terminating the affiliated interest status of the Subsidiary as has been described in the Settlement Proposal.
The Commission therefore requires, as a
- 163 -
J
HEARfNG EXAMINER'S
'HOPOSED ORDUH 87-0043/87-0044/
f 9
87-0057/87-0096 Consol.
condition of the acceptance of the Settlement Proposal, recogni-I tion by Edison that any such transfers are subject to our juris-dictional approval prior to the implementation of same.
1 Rider 19 l
Without notice to the parties herein, Edison filed a re-vision to its Industrial Development Rider 19 on May 26, 1987.
The revision provided for certain changes which were not re-flected in the version of Rider 19, provided as an exhibit in these proceedings, and considered as part of the " package" in the
' Settlement Proposal.
Because of the May 26, 1987 filing, the Commission has determined that it is appropriate to exclude any changes contemplated to the currently effective Rider 19.
Assuming that the Settlement Proposal is implemented, such implementation shall be based on the terms of Rider 19, as it is currently in force, until further Commission action as to same.
DISPOSITION OF CONSOLIDATED AND SUSPENDED DOCKETS Docket 87-0044 The Governor, the Attorney General, Cook County and the SBUA petitioned the Commission, pursuant to Section 9-250 of the Act, to investigate the reasonableness of Edison's rates in consid-i eration of the Settlement Proposal.
Alternatively, the Govern-mental Proponents requested an investigation into the reasonable-ness of Edison's existing rates should the Settlement Proposal be rejected.
l Since the Settlement Proposal has been
- approved, with modifications and conditions, the subject' matter of'the Petition in Docket 87-0044, has become moot.
If, for any reason, includ-ing, but not limited to, an Edison determination not to accept such modifications and conditions, the Settlement Proposal is not consummated, Edison can be expected to file shortly thereafter for a traditional rate increase.
At such time, Edison will be j
required to file new tariffs and testimony and schedules in l
support of its filing.
In that proceeding, Edison will have the clear burden of proof under Section 9-201, which we believe is the appropriate vehicle for traditiona] ratemaking.
For these reasons, Docket 87-0044 should be dismissed.
1
- 164 -
b l
/) r /~ O L N m /1 N 7' D l
a Doc' et No. 63747-Agenda 13-January 1987.
l k
J THE PEOPLE ex rel. NEIL E HARTIGAN, Attorney General, et al., Appellees, v. THE ILLINOIS COM-MERCE COMMISSION et al., Appellants.
j JUSTICE MILLER delivered the opinion of the court:
j In October 1985 Commonwealth Edison Company
{
(Edison) was granted a rate increase by the Illinois Com-merce Commission (the Commission). The Commission's q
order, with three Commissioners dissenting, disallowed a q
relatively.small percentage of the rate increase re.
J L
quested by Edison. A number of intervenors opposing i
the rate increase appealed the Commission's order to the
{
circuit court of Cook County, which consolidated the in-l tervenors' appeals. Finding that the audit relied upon by j
l the Commission in evaluating the rate increase did not L
comply.with section 30.1 of the Public Utilities Act (Ill.
Rev. Stat.,1985 Supp., ch.1112/s, par. 30.1), the circuit 1
court ordered the Commission to conduct a new rate-l l
making proceeding. The court also instructed the Com-l mission to disallcw all or part of certain expenses that l-Edison sought to include in its new rate base. The Com-I l
mission and Edison appealed the circuit court's order to j
the appellate court. The intervenors, however, petitioned i
for leave to appeal directly to this court, pursuant to Rule 302(b)(103 Ill. 2d R. 302(b)), and we allowed the re-quest for a direct appeal.
Edison filed a two-stage rate increase request with j
the Commission in October 1983. In the rate request, i
Edison sought to include in its rate base the costs of j
construction of Unit 1 of Edison's nuclear power plant near Byron, Illinois (Byron 1), which was approaching completion. Seventeen organizations and asso'iations c
filed briefs with the Commission as intervenors. Fol-lowing the Atomic Safety Licensing Board's denial of an operating license for Byron 1 in January 1984, the Com-mission appointed a committee to recommend an auditor to conduct an audit of the costs associated with the con-struction of Byron 1. The Commission subsequently ap-i proved the hiring of Arthur D. Little, Inc. (ADL), to con-i duct the audit. The Commission determined that the audit should comply with House Bill 2615 (codified as Ill.
l j
Rev. Stat.,1985 Supp., ch.1112/s, par. 30.1, effective January 22, 1985), which had recently passed both 1
l j
1 1
1 i
I houses of the General Assembly and was then awaiting l
the Governor's signature; the Commission ordered its staff to supervise the performance of the audit.
]
ADL submitted its audit report to the Commission during March 1985, and the authors of the report were cross-examined at Commission hearings on the report
{
during late April and early May 1985. Although tne in-1 tervenors claimed that ADL's audit was deficient under section 30.1, the Commission's hearing officer denied in-tervenors' motion to suspend the. hearings to improve the audit.
During _ July 1985, the Commission held trial type hearings on the rate request Both Edison and the inter-venors presented the testimony of a number of experts concerning the audit and the proposed increase. On Oc-tober 24,1985, the Commission issued its order granting Edison an annual rate increase of $494.8 million; this amount reflects Edison's costs of over $2 billion incurred in the construction of Byron 1, minus $101.5 million that the Commisson excluded from the rate base. The Com-mission r,cluded the $101.5 million from the utility's new rcie base because the Commission found that Edi-son was responsible for one-half of the costs of the delay in obtaining an operating license from the Atomic Safety Licensing Board. Two Commissioners joined in a written dissent criticizing the audit report and the majority's finding that virtually all Byron 1 costs were reasonable.
A third Commissioner dissented without opinion.
Twelve of the intervenors appealed the Commission's order to the circuit court of Cook County. The circuit court consolidated the appeals, After considering the ree-ord, the briefs, and extended oral argument, the circuit court reversed the Commission order and remanded the cause to the Commission for a new ratemaking proceed-ing. In a lengthy written opinion, the court found, as a matter of hw, that the ADL audit report of Byron 1 had not been conducted under " generally accepted auditing standards" as required by section 30.1 of the Public Util-ities Act (Ill. Rev. Stat.,1985 Supp., ch.1112/s, par 30.1) and that the Commission's interpretation of the term
" generally accepted auditing standards" was clearly er-roneous. The court also ruled that the Commission had improperly placed the burden of proof with the interve-nors to show that Edison's costs were unreasonable, rather than requiring Edison to prove that the costs t
2-
.4' were reasonable. The court declared that section 30.1,'
. rather than allowing the exclusion of costs from rate
- base when the costs were proved unreasonable, prohib-ited the Commission from including costs in a utility's rate base until the utility established that the costs were reasonable. The court also fonnd that the Commission's allowance of one-half of the costs related to the delay in obtaining an operating license into the rate base of Byron 1, and the allowance of.100% of the costs of the physical plant common to Byron Units 1 and 2, was con-trary to the manifest weight of the evidence. The court ordered the Commission to exclude from the rrtte base -
all the costs of the licensing delay and ordered the Com-mission to exclude some portion of the costs of the plant common to Byron 1 and 2 from the~ costs of Byron 1.
The. court instructed the Commission to roll 'back the
$494.8 million annual rate increase ordered by the Com-mission in October 1985 and to set revised rates for Ed-son within 30 days. The court ruled that none of the i
costs incurred in the construction of Byron 1 could be in-l cluded in the revised rates; apparently, the revised rates were to-remain in effect until the Commission consid-ered, in further proceedings, which of Byron l's costs could be included in Edison's rate base.
Section 30.I' of the Public ' Utilities Act provides in i
part:
"The cost of new electric utility generating plants and significant additions to electric utility generating plants shall not be included in the rate base of any utility unless l
such cost is reasonable. Prior to including' the cost of i
plants or additions to utility plants in the rate base, the i
Commission shall conduct an audit of such costs in order to ascertain whether the cost associated with the new generating plant "* is reasonable. If the Commission is unable to conduct such an audit, the Commission shall ar-range.for it to be conducted by persons independent of the utility and selected by the Commission. "* Any such audit shall be conducted in accordance with generally ac-1 cepted auditing standards and shall include but not be j
limited to costs associated with materials, labor, equip-i ment, professional services and other direct and interest
)
costs." (Ill. Rev. Stat.,1985 Supp., eh.1112/s, par. 30.1.)
Section 30.1 also defines " reasonable," and it provides
]
that in determining the reasonableness of costs the Com-i mission is to consider "the knowledge and circumstances prevailing at the time of each relevant utility decision or 1
)
3
4 s
action."
Effective January 1,1986, subsequent to the date of the Commission order in the case before us, Public Acts84-617 and 84-1025 substantially revised and restruc-tured the Public Utilities Act (Ill. Rev. Stat.1985, ch.
1112/a, pars.1-101 through 11-302). The statute as amended expressly provides, however, that it does not affect actions pending at the time the amendments.took effect. (Ill ' Rev. Stat.1985, ch.1112/a, par. 4-402.) Al-though section 30.1 of the former statute has been re-numbered as section 9-213 of the amended act, its lan-guage has not been altered except in' referring to r
another similarly renumbered section. For purposes of this appeal, we shall refer to th'e statute as section 30.1.
The Commission and Edison now suggest that section 30.1 does not apply to the present case because it be-came effective January 22,1985, after the audit had be-gun and some evidence of construction costs had been presented. The circuit ' court noted the question, but found that it was not presented-no party had raised the issue, and the parties had briefed and argued the case in that court as if section 30.1 applied.
By not contesting the app'licability of section 30.1 in the circuit court, the Commission and Edison waived any challenge in this court to the_ application of the statute.
Failure to raise an issue in the trial court waives the is-sue for purposes of appeal. (See, e.g., Shell Oil Co. v.
i Department of Revenue (1983), 95111. 2d 511.) We note i
further that it is not unfair to apply section 30.1 to the instant proceeding, since the proceedings were con-I ducted with section' 30.1 in mind and the Commission had advised the parties'and ADL that the audit wu to comport with the requirements of House Bill 2615 (sub-sequently codified as section 30.1). We conclude that sec-tion 30.1 governs the instant case.
I. Burden of Proof Under Section 30.1 i
Noting that intervening events caused drastic in-creases in Edison's 1972 estimates of the time required to complete Byron and the project's total cost, the Com-mission identified the principal issue in the case as 1
"whether any part of the cost of Byron 1 should be ex-cluded from Edison's rate base." The Commission dis-senters, however, submitted that the majority had adopted the wrong approach in setting Edison's rate i
4 l
L.
'b.
/ ',
base.under. section 30.1; they contended that, rather
,than excluding from the total amount submitted by Edi-son :only those costs proved to be unreasonable, the.
Commission could allow costs to be included in rate base under section 30.1 only when the costs were proved to be reasonable. The circuit court agreed with the Com-mission dissenters and ruled that the majority had im-
- properly presumed the reasonableness of Edison's costs.
Edison points out that before section 30.1 was en-acted, costs incurred ~ by a utility were presumed to be reasonable (see, e.g., City of Chicago v. Illinois Com-merce Com (1985),133 Ill.. App. 3d 435, 442 43), and Edison argues that the enactment of section 30.1 did not eliminate that presumption. The Com' mission majority agreed with Edison that the historic presumption of rea-sonableness had survived the enactment of section 30.1.
The majority believed that once a utility demonstrated the amounts that it had actually invested in the construc-tion of a power plant, the investment was presumed to hav'e been reasonable and the Commission was powerless
.to deny recovery of those costs unless there was some showing that they~were unreasonably incurred.
Section 30.1 provides that the costs associated with the construction of a power plant may not be included in a utility's rate base unless they are reasonable; under the statute,' an audit is to form the basis for that deter-mination. The audit is to be conducted by the Commis-sion or, if the Commission is unable to do so,' by persons independent of the utility who are selected by the Com-j mission. The cost of the audit is to be borne initially by the utility but may later be recovered through normal ra-temaking procedures. By providing a scheme by which s
the reasonableness of construction costs may be deter-I mined, the legislature has removed any need for the pre-l sumption of reasonabi.eness that may have existed when the Commission had no comprehensive vehicle for exam-
- 1 ining costs.
Moreover, we note that the legislative history of see-tion 30.1 suggests that an affirmative showing of the y
reasonableness of a utility's construction related costs is i
necessary if a sense of confidence in the ratemaking pro-cess is to be instilled in those consumers who are re-i quired to pay the increased rates resulting from those costs. (83d Ill. Gen. Assem., House Proceedings, May 10, 1984, at 154 55 (Statement of Representative Richard H.
i.
f I
Brummer, House sponsor).) The mere presentation by a 1
1 utility of the costs.it incurred in building a power plant, potentially an' overwhelming sum, does not engender in others a sense of confidence that the costs were reason-able. Nor would consumers' concerns about the costs in-volved in the construction of a power plant be overcome if the Com' ission presumed that the amounts expended m
by a utility on the new facility were reasonable.
'We therefore conclude that the audit required by sec-tion 80.1 has replaced the presumption of reasonable-ness. Under the statute, the audit now provides the pri-mary means by which the Commission is to determine
- the reasonableness of the costs associated with the con-struction of power plants.
The audit need not be the only means, however, by which the Commission determines the reasonableness of construction costs. If the audit is deficient in some re-spect; or if the Commission, its staff, or intervenors
- throw into doubt the reasonableness of the costs in-curred in the construction of the plant, the Commission may order a supplemental audit, take affirmative evi-dence concerning the reasonableness of the costs, or deny the costs altogether if they are not shown to be reasonable. The fundamental, underlying value is that all costs incurred by a utility in the construction of a plant-shown to be reasonable are to be included in the utility's rate base and that all costs not shown to be reasonable by the audit report or by affirmative ' evidence from other sources are not to be included in the~ rate base.
Only when the Commission is satisfied by the audit re-port or by other affirmative evidence that the costs in-curred by a utility in the construction of a plant are rea-sonable may those costs be included in the utility's rate base.
In the case before us, numerous questions were raised b'y the audit and by the intervenors concerning the reasonableness of the costs associated with the con-struction of Byron I. In most instances, the Commission allowed the questiened costs into the rate base because they had not been proved to be unreasonable. For exam-pie, the Commission order recites that certain costs,
- such as architectural and engineering fees and certain expenses related to productivity, were not excluded from the rate base because the intervenors had not proved that those costs were unreasonable. Also, the Commis-l !
j
sion apparently allowed substantial costs of preopera-tional testing and rework 'into the rate base without first determining from the audit report or other affirmative evidence whether the costs incurred were reasonable.
Furthermore, the audit report was critical of the size l
of Edison's workforce and of the company's oversight of productivity; the intervenors also questioned whether i
Edison had overextended its workforce. Yet the Commis-sien said that Edison responded to the audit's concerns and that the intervenors had failed to prove that Edison had managed its workforce imprudently. The Commis-sion determined that the specific questions of unreason-ableness had.been rebutted but made no. finding that Edison had presented affirmative evidence to show that the costs were reasonable. The Commission found "no l
basis in this record to disallow any part of Byron's cost l
based on these issues" and included the costs in the rate base.
l The Commission's apprcach of excluding costs from the rate base only if they were proved to be unreasona-ble is suggested by its statement that "[t]he audit report was prompted by the desire to determine whether any of these increases should be disallowed." The purpose of i
the audit, however, is to assist the Commission in deter-i mining whether the costs of constructing a plant were reasonable and should therefore be allowed into the utili-ty's rate base.
Furthermore, under the comprehensive scheme set out in the Public Utilities Act, the Commission is to be
}
an active participant. The Commission is not merely an d
arbitrator between a utility seeking a rate increase and any parties who happen to oppose it. Rather, the Com-mission is an investigator and regulator of the utilities, i
and under section 30.1 it may not rely on intervening i
parties to contest a rate increase or to challenge the evi-i dence offered by the utility.
i Nothing in the Public Utilities Act requires any party other than the Commission and the utility seeking a rate
)
increase to participate in a ratemaking proceedir_g. Thus, q
any participation by persons or groups opposing an in-crease is voluntary and purely fortuitous. It is possible that no person or entity will seek to intervene when a rate increase is sought; in other cases, those who inter-vene may lack the financial resources or the incentive to launch a vigorous challenge to all aspects of the in. s
i
. crease. (See Calrert Cliffs' Coordinating Committee, Inc. v. Atomic Energy Com. (D.C. Cir. 1971), 449 F.2d 1109,1118.) Requiring intervenors to establish unreason-ableness is therefore no substitute for requiring proof of reasonableness. The difference is significant. In the case before us, in determining the reasonableness of the costs associated with the construction of Byron I, it is appar-ent that in many instances the Commission relied on the now impermissible practice that costs are presumed to i
be reasonable once the utility has established the amount.
Because the Commission relied on the presumption of reasonableness, rather than an affirmative showing of reasonableness through the audit performed by ADL and specific evidence of reasonableness, the cause must be remanded to the Commission. Although it is possible for this court to examine the record to independently deter-mine whether sufficient evidence of the reasonableness of the costs associated with the construction of Byron 1 has been presented through the audit report or other-wise,'the Commission has been charged by the legisla-ture with making that determination in the first in-stance. (See Illinois Power Co. v. Illinois Commerce Com. (1986),111 Ill. 2d 505.) In determining on remand j
whether sufficient evidence of reasonableness has been presented, the Commission may consider the present l
record in the light of the requirements of section 30.1 as q
expressed in this opinion, or require the presentation of j
1 such further evidence as may be necessary for it to make a proper determination.
a II. Generally Accepted Auditing Standards Under Section 30.1 The requirement that the Commission either conduct, or arrange to have conducted, an audit of the costs of new utility generating plants is central to ascertaining reasonableness under section 30.1. The audit is to be conducted in accordance with generally accepted audit-ing standards. (Ill. Rev. Stat.,1985 Supp., ch.1112/3, par. 30.1.) After considering evidence presented as to ap-propriate auditing stcndards in the present case, the Commission ruled that no specific set of written stand-ards directly governed the type of audit mandated by section 30.1. The Commission stated that it was "of the opinion that the reference to ' generally accepted audit-
.g.
4-
, ing standards' in the statute is simply a spelling out of the implicit requirement of professional competence in the auditor, both in its abilities and its performance."
The circuit court ruled that the Commission's interpreta-tion of section 30.1 was incorrect as a matter of law.
Edison and the Commission contend that the Com-mission's interpretation of the phrase " generally ac-cepted auditing standards" is a question of fact that can-not be reversed unless contrary to the manifest weight of the evidence. (See Iowa Illinois Gas & Electric Co. v.
Illinois' Commerce Com. (1960),19 Ill. 2d 436, 442; 111.
Rev. Stat.1983, ch.111%, par. 72.) The intervenors maintain that the Commission's interpretation is a ques-tion of law which is not binding upon the courts. (See Winakor v. Annunzio (1951), 409 Ill. 236, 248.) We find that, regardless of whether the meaning of " generally accepted auditing standards" is identified as a legal or a factual question, the Commission's interpretation of the
. generally accepted auditing standards requirement in section 30.1 is erroneous under the evidence presented.
After receiving a great deal of evidence as to what comprised generally accepted auditing standards, the Commission formulated its own interpretation of the generally accepted auditing standards requirement in section 30.1 as an implicit requirement of ptofessional competence in the ability and performance of the audi-tor. The Commission's interpretation fails to acknowl-edge the evidence introduced by the parties. The expert witnesses agreed that no single written set of generally accepted auditing standards exist which apply specifi-cally to the type of audits mandated by section 30.1. Edi-son and the intervenors presented complementary evi-dence, however, of a number of similar standards which applied to the audit conducted by ADL. At least two wit-nesses, one of them presented by Edison, testified that l
Standards For Audit of Government Organization:,
Programs, Activities and Functions (rev. ed.1981)
(commonly known as the Yellow Book), published by the United States Comptroller General, generally applied to the ADL audit.
1 Elmer Staats, Comptroller General at the time the Yellow Book was published, testified in behalf of Edison that applicable Yellow Book standards include the profi-ciency of the auditors and due care in conducting the au-dit. These standards mirror those identified by the Com-9
s w mission. Staats further testified, however, that other Yel-fow Book standards applicable to the type of audit con-ducted by ADL include auditor independence, lack of im-pairment of the audit effort, adequate planning, sufficient and. competent evidence to support the audi-tor's judgment and conclusions, and auditor inquiry into a number of specified areas. The Commission's interpre-tation ignored these additional requirements. No party presented evidence or argued that Staats's statement of applicable standards was incorrect.
Edison's other c.udit witness submitted that a general consensus exists as to standards governing audits of the '
type conducted by ADL, and that the Yellow Book re-
. flects these standards. This witness indicated that Yellow.
Book standards that apply to the ADL audit include re-quirements of integrity and consistency in the audit, as well as' auditor expertise; these standards are similar to the Commission's interpretation'of " generally accepted auditing standards." Also necessary in the opinion of
-this witness, however, were auditor independence, proper scope and planning of the audit, ' adequate evi-dence to support conclusions reached, and proper com-munication among the audit team, the entity being au-i dited, and the regulatory body requesting the audit.
. The intervenors' witnesses identified standards appli-cable to the ADL audit similar to those cited by Edison's
' witnesses; this testimony is consistent with the interve-
)
nors' position that the. Yellow Book standards apply.
'j here. Witnesses from ADL, the audit firm in the present l
case, were unfamiliar with the Yellow Book. The ADL witnesses therefore did not state that the Yellow Book standards did not apply, nor did they testify that any other standards offered by Edison or the intervenors did not apply; they stated instead that they had been influ-enced by standards promulgated by the New York Public Services Commission.
Because the Commission's interpretation of the gen-erally accepted auditing standards requirement included only two of the factors identified by the audit witnesses of Edison and the intervenors and ignores other stand-ards the witnesses identified as applicable, we find that the Commission's interpretation of " generally accepted auditing standards" is against the manifest weight of the evidence.
Furthermore, professional competence in ability and 10-I
\\
~
l performance would be required of an auditor even if the l
requirement of generally accepted auditing standards l
was-not in section 30.1. Certainly an audit would be in-adequate if conJucted with less than professional compe-tence in either the auditor's overall ability or his per-formance with respect to that particular audit. The reference to generally accepted auditing standards, then, must require something more than professional compe-tence; otherwise, the language regarding " generally ac-cepted auditing standards" would be rendered super-fis;:s. There is a strong presumption against finding statutory lutg.iage to be mere surplusage (Art:old v.
Board of Trustees (1981),84 Ill. 2d 5'i), and nothing sug-gests that we should do so here.
/
It is not important that the auditor, here ADL, was unaware of one set of standards or another. It is possible that an audit could be conducted properly without the auditor's identifying any specific set of standards under which it operates. It is important, however, that the Commission review the audit in light of some identifi-able, generally accepted auditing standards. This assures that the audit was sufficient, measured against a gener-ally accepted standard, and that the Commission prop-j I
erly performed its review function. The result is an audit that enables the Commission to determine whether a utility's costs are reasonable and can be included in its rate base. In addition, by identifying generally accepted auditing standards applicable to the audit, the Commis-sion facilitates review of its decision by providing an ob-jective and identifiable benchmark against which the court can measure the audit. Although it is within the Commission's province to accept evidence and to deter-mine appropriate standards against which to measure the audit, it is within the power of the court to deter-mine from the evidence on review whether the audit complies with the standards identified.
Because the Ccmmission, in its order, defined an im-proper standard against which to measure the audit, nei-ther the Commission nor the circuit court here could properly determine whether the auditors sufficiently per-formed their audit function when measured against a proper standard.
]
The expert witnesses presented by the litigants dis-agreed about the sufficiency of the audit under the gen-erally accepted auditing standards that the witnesses i 3
j
y_
\\f e
1 t<
" identifieo. Our examination of the audit report reveals some areas in which the audit might ' have been im-proved.' But, the expertise and evidence taking function
' of the Commission is necessary to determine whether these deficiencies-if, indeed, they are deficiencies-ren-der the' audit insufficient under generally accepted audit-1 ing standards. It 'is for the Commission to oetermine proper standards against which to measure the audit and to then determine whether these standards were met in m
the present case.
The record on appeal contains extensive evidence con-cerning the audit standards that apply to the type of au-dit required by section 30.1. On remand, the Commission may. determine from the evidence presented which, if any, of those standards meet the generally accepted au-diting standards requirement contained in section 30.1, or the Commission may require further evidence of standards in order to make that determination. Once the proper standards are identified, the Commission must determine from the evidence that has been presented, or j
from further evidence, whether the ADL audit met those l
standards.
[
Ill. Validity of Circuit Court Instructions
.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; ap-parently 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 j
from quality control or qualhy assurance deficiencies at Byron 1, the court having concluded that Edison was re-sponsible'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 instruc-tions as improper judicial ratemaking and as usurping the Commission's fact-finding function.
Setting utility rates is a legislative rather than a judi-cial function. (Illinois Bell Telephone Co. v. Illinois Com-1 merce Com. (1973), 55 Ill. 2d 461; Illinois Central R.R.
j q--
a
+
4
~
4
. n s
Co. v. Illinois Commerce Com. (1944), 387 Ill. 256,2",5.)
j In the ratemaking scheme, the Commission and not the
)
court is the fact finding body. Ullinois Commerce Com.'
{
- v. New Brk Central R.R. Co. (1947), 398 Ill.11,j6.)
Apart from examining whether the Commission acid within the scope of its authority or infringed upon a con-
~
stitutional rig'ht, a court is limited to reviewing whether 4
the Commission set out findings of fact supportings its j
decision and whether the findings are against thimani-j fest weight of the evidence. (See Cefw; Copper Pr. ducts
{
i
- v. Illinois Commerce Com. (1980),'83 Ill. 2d 364.) Even when a court holds that rates authcrized by the Commis-f sion are illegal, the court cannot make new rates. Illi-nois Central R.R. Co. v. filinois Commerce Com. (1944),
387 Ill. 256,276.
Under the Publie ' Utilities Actl a court reviewing a Commission 5rder has three options: the court may af-firm the Commission's order, it may reverse the order,
~
w or it may remand the cause to the Cemmission to receive i
new or additional evidence. (See Thompson v. Illinois s
Commerce Com. (1953),1 Ill. 2d 350, 358-59; 111. Rev.
Stat.1983, ch.1112/a, par. 72.) The reviewing court does not have the power to direct the Commission to take f'
specific action. (Thompson v. Illinois Commerce Com.
(1953).1 Ill. 2d 350, 358-59; Allied Delivery System, Inc.
- v. Illinois Commerce Com. (1981), 9311. App. 3d 656, 669.) If the evidence does not support thriC,ommission's order, the court is limited to setting aside the order as against the manifest weight of the evidence or remand.
ing for additional evidence. When the Commission's or-der is set aside or remanded, the Commission may ac-cept additional evidence, reevaluate the evidence already presentd, or simply reverse its oiiginal determination.
A reviled rate order may then again be subject to judi-cial review to ascertain whether the Commission's'new conclusions are supported by sufficient evidence.
The intervenors note that remanding a cause for fur-ther Commission proceed.n'gs consistent with the court's order is permissible. (Illinois Bell Telephone Co. v. fili-nois Commerce Com. (1973), 55 Ill. 2d 461; Chicago &
Eastern Illinois Ry. Co. v. Commerce Com. (1931), M3 Ill.117.) The court's authority to romand for further action consistent with the court's opinion is not unlim-ited, however. The test is whether the court, through its opir. ion or order, limits or encroaches on the Commis-s 06 13-s h-9 ) 's s
w w w-O
m
~'
sion's discretion in its ratemaking function. If the court's directiva prohibits the Commission from considering or takihg 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 im-
- properly, In its order, the Commission found that defects in the quality assurance / quality control program at Byron 1 re-sulted in a nine-month delay in the completion of the o
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 e
and that the cost of this delay should not be included in the rate base. The Commission stated th'at, at its best es-timate, the two contractors under Edison's control were responsihte for one-half of the nine-month delay; the Commission. Bund that the remaining aspects' of the quality assurance reirspection program and resulting de-lay' costs were normal and reasonable costs of construc-tion and not the result 'of imprudence or mismanagement on Ed: son's part. The Commission concluded that one.
. half of the delay costs, or $101.5 million, should be ex-cluded 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 coneluded that Edison and the contractors were in-distinguishable'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 al-low any. costs of Byron 1 resulting from the delay into the rate base.
The circuit court was within its authority in conclud-ing that the evidence did not support the Commission's finding that one half of the delay expense was reason-able; the court went beyond its authority, however, in di-recting the Commission not to allow any delay costs in the rate base.
While it appears certain, as the Commission found, 4
that a part of the delay costs were attributable to two of Edison's contractors, Hatfield Electric Company and Systems Control Corporation, and that Edison thrcqh imprudence shared in the responsibility for the failure of their quality assurance / quality control (QA/QC) pro-
-14
x,.
e
. grams, it is equally certain that some parts of the delay
. costs were attributable to the failure of the QA/QC pro-grams of other contractors. Though Edison had the re.
sponsibility.of ensuring that each of its contractors com-plied 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 oth-ers, even though others besides Hatfield and Systems Control might have encountered problems with their sep-j arate 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 Com-mission 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 re-sponsible 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 inclu-sion of the remaining half were based on the Commis-sion'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 hdd 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 evi-dence, its factual findings must still be based on the evi-dence.
Because the Commission on remand has the discre-t tion to accept additional evidence on the question of ap-f portioning costs between that part of the delay the Com-
{
mission found to have been caused by Edison's j
imprudence and that part of the delay the Commission y
found not to have been caused by Edison's imprudence, j
the circuit court's instruction not to allow any delay J
i 15-i l
costs in the rate base proscribes the Commission's dis-cretion 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 sec-tion 30.1 requires, after a showing of reasonableness; we find it appropriate, therefore, for the Commission to con-sider, 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 facili-ties were used by unit 1 in generating electricity. The -
j 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 I was arbitrary and unreasonable. The court therefore directed the Com-mission to allow less than 100% of the costs of the com-mon 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, how-ever, is a matter properly within the Commission's rate-making discretion, and one that requires the Commis-sion'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 oper-ation (see Washington Utilities & Transportation Com.
- v. Pacific Power & Light Co. (Wash. U.T.C. 1984), 60 EU.R.4th 188; Pennsylvania Public Utility Com. v. Du-quesne Light Co. (Pa. RU.C. 1981),43 RU.R.4th 27), we find persuasive the authority that supports the Commis-sion'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 Commis-sion to determine whether the particular facts of each case warrant immediate inclusion in the rate base of all the costs of the common plant.
j 4
i 16-
L a
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 in-
.tervenors' witness supported. attributing the costs.
equally to units 1 and 2; Edison's witness was of the opinion that, because unit I has used all the common fa.
cilities 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 evi-dence in the record in reversing the Commission's deter-mination 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 Com-mission 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 Com. mission and Edison contend that the circuit court's first instruction, which directed the Commission to order new rates " rolling back" the $494.8 million in-crease within 30 days, was beyond the court's power. We agree. As stated above, a circuit court reviewing an or-der of the Commission may only affirm or reverse the order or remand the cause for further evidence. Direct-ing the, Commission to establish a specific rate is judicial ratemaldng, a function that the legislature has charged to the Commission exclusively. The court had no author-ity to order a rollback, or return, to the prior rates. (Illi-I nois Commerce Com. v. Chicago & Eastern Illinois Ry.
Co. (1928), 332 Ill. 243.) Moreover, the court may not im-pose a time limit within which -the Commission, an agency created by the legislature, must perform its rate-making function.
We must next determine what rate the utility should charge while the Commission conducts a new ratemaking 17-I t.
... j
proceeding and establishes a new rate schedule. In Inde-11endent Voters of Illinois v. filinois Commerce Com.
(June 16,1987), No. 62850, this court stated that, fol-lowing 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 rate-payers' claims for reparations for excessive rates col-lected 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 t,e held in escrow, subject to ra-tepayers' refund claims. As discussed, refunds dating from the circuit court's reversal are allowable under our decision in Independent Voters, if the Commission on re-mand 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 re-manded to the Commission to conduct further ratemak-t ing 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.
e 18-l l
W-hfhWNW&['
Exhibit CK-1 i
Page 1 of 6 f
Charles Komanoff, Professional Experience (5/87)
{
1 I
Charles Komanoff is a consultant, analyst and author on the economics l
of the electric utility, nuclear power and coal sectors of the United and director of Komanoff Energy Associates, an energy States economy, i
and economic consulting firm at 270 Lafayette Street, NY New York, l
10012.
Komanoff has written three books concerning the economic and societal l
costs of nuclear and coal electric generation; two.o.f the books were and all three published by distinguished scientific publishing houses,He has l
broke considerable new ground in their subject-areas.
4 the U.S.
l consulted for two agencies of the United States Congress, and governmental agencies of 15 States with a Department of Energy, combined population of half the total population of the United States.
Komanoff is widely credited with having anticipated many of the key 1
electric power industry ever the past decade and I
problems of the U.S.
coal-fired generating plant emissions including acid rain; a half:
declining operational performance and economies of scale for large particularly nuclear units; and, most prominently, generating units, sharply rising real capital and operating costs for nuclear plants.
Komanoff's professional involvement in the U.S.
electric power, nuclear and coal sectors dates from September, 1971.
He has worked for the Council on Economic Priorities (1971-72 as a research fellow, 1974-76.as energy projecto director); and for the New York City
' ~
Environmental ~ Protection Administration (1972-73 as quantitative analyst, 1973-74 as senior quantitative analyst).
He founded Komanoff Energy Associates in January 1977.
and l
Komanoff has consulted for governmental clients and environmental l
citizens organizations since 1975, first through.the Council on and since 1977 under the auspices of Komanoff Economic Priorities, Energy Associates.
He has presented expert testimony on electric utility economic matters before the U.S.
Nuclear Regulatory
[
four NRC Atomic Safety & Licensing Boards, and Public l
Commission, Komanoff has been an invited Utility Commissions of twelve States.
l witness on nuclear and coal power economic issues before four
)
He was also one of three American witnesses Committees of Congress.
to testify in the inquiry on nuclear power economics before the Select Committee on Energy of the House of Commons (U.K.).
Each of Komanoff's books defined and anticipated emerging aspects of that electric utility costs -- both monetary and societal ultimately grew into critical areas of electric power policy.
The Electric Utilities and the Environment (published by Price of Power:
CEP in 1972, republished by the M.I.T.
Press in 1974) documented the environmental impacts of the electric power sector, particularly by and described the rising conflicts between coal-fired generators, utility growth and the drive for environmental quality.
Power Plant Performance: Nuclear and Coal Capacity _Fac_t_ ors and Economics L
O Exhibit CK-1 l' age 2 of 6 Charles Komanoff, Professional Experience, cont'd. (5/87)
(published by CEP in 1976) analyzed the operational performance and comparative economics of nuclear and coal generating plants and described Power Plant Cost the constraints on improving reactor reliability.
Escalation: Nuclear and Coal Capital Costs, Regulation and Economics (published by Komanoff Energy Associates in 1981, republished by Van i
Nostrand Reinhold in 1982) quantified the extent and itemized the causes-of and, especially, the nuclear power _
rising real capital costs in the coal All sectors and predicted the economic' distress from new nuclear units.
three-books are distinguished by their attention to detailed, empirical data on power plant monetary and societal costs.
Komanoff's' work on nuclear and coal capital costs is considered by For many knowledgable analysts to be the' definitive work in that area.
the-discussion of cost growth in nuclear plant construction
- example,
" Nuclear Power In An Age of Uncertainty,"
in the February 1984 report, Office of Technology Assessment is based almost entirely by the U.S.
on Power Plant Cost Escalat. ion and later material that Komanoff
~
provided to OTA as a consultant.
In addition to the books described above, Komanoff has published articles in diverse industry, scientific and scholarly journals including Nuclear Safety (published at. Oak Ridge National Laboratory by the U.S. Department of Energy), Journal of the Air Pollution Control Association, Bulletin of the Atomic Scientists, and Public Utilities Fortnightly.
He has also published articles in major Street ~ Journal, The New York Times, and newspapers including The WallHis work is cited frequently and prominently The Los Angeles Times.
in those periodicals and others ranging from Science to Barron's.
Komanoff graduated with honors from Harvard College in 1968, with a B.A. degree in Applied Mathematics.
A chronological list of major KEA governmental clients is provided on the following pages, i
l
Exhibit CK-1 i
Page'3 of 6 KEA Governmental' Clients
'l 198" i
.PA Office of'Connumer Advocate TX Off. of Public Utility Counsel
-IL Citizens-Utility Board.
City-of.New Orleans
.LA Public: Service' Commission.
IL Office of. Consumer Services-CA Public Utilities Commission WA Utilities.G Transp. Commission lIL Commerce. Commission DC Office of.the Peoples'-Counsel.
i 1986 iCT Division of Consumer. Counsel TX,0ff. of Pub'lic Utility Counsel' PA' Office of. Consumer Advocate City of New. Orleans ILLCitizens Utility--Board CT DPUC, Prosecutorial Staff i
I LA Public Service Commission.
IL: Office of Consumer Services CA:Public Utilities Commission WA Utilities & Transp. Commission.
1985 l
\\
CT Division of-Consumer Counsel U.S. Department.ofLEnergy, PA Office.of Consumer Advocate Montgomery County (sDayton, OH)
FL Office of Public Counsel City of Cincinnati NY Consumer: Protection Board 1984 ID Public Utilities Commission NY Consumer Protection Board OH Consumers' Counsel WA (State) Public Counsel PA Office ~of Consumer Advocate Montgomery County (Dayton, OH)
AZ. Residential-Utility Consumers Off.
1983 OH Consumers' Counsel Office'of Technology Assessment Montgomery County (Dayton, OH)
Public Utility. Distr 1 cts (var.,"WA) 1982 WA (State) Attorney General j
IL Attorney General 1981
'ID Public Utilities Commission NY Consumer Protection Board FL Office of Public Counsel City'of New York
~
1980 FL Office of Public Counsel NJ Public Advocate i
6^
7 4
Exhibit CK-1 Page 4 of 6' KEA Governmental Clients (Cont'd.)
1979 FL Office of Public Counsel NY Consumer Protection Board NJ Public Advocate 1978 NJ Public Advocate NY Consumer Protection Board Suffolk County (NY) 1977 i
NJ Public Advocate MI Attorney General City of New York KY Department of Natural Resources Suffolk County (NY)
NY Consumer Protection Board Genera 1' Accounting Office (U.S. Congress) 1976 CA Energy Commission CT Public Utilities Control Auth.
NM Attorney General NJ Public Advocate (business and citizens group clients not shown)
'M Exhibit CK-1 Page 5 of 6 Charles Komanoff l
Publications Spring 1987 1,
BOOKS' I
Nuclear and Coal Capital Costs,_
J P"ower Plant Cost Escalation:
1
- 1981, I
Regulation and Economics _-(Komanoff Energy. Associates, 1982).
republished by Van Nostrand'Reinhold, J
Nuclear and'Coai' Capacity Factors and w.
Power Plant Performance:
1976).
Economics (Council-on Economic Priorities, Electric Utilities and the Environment'(Council'
'I The Price of Power:
1972, republished by M.I.T.
Press,.1974.),
on Economic Priorities, co-authored with Sandy Noyes and Holly Miller.
l REPORTS
' Nuclear Power'at-the Turning Point" (Cambridge-
" Prometheus' Bound:
Energy Research Associates, 1983), co-authored with I.C. Bupp.
i A Critique of the Atomic' Industrial-Forum s
- " Power Propaganda
Nuclear and Coal Cost Data for 1978" (Environmental Action Foundation,
.1980),
1978).
" Nuclear Plant; Performance ~ Update 2" (KEA,
" Nuclear-Plant Performance Update" (Council on Economic Priorities, 1976).
An Analysis of the 1974 Costs.of Indian
" Responding.to Con Edison:
1975).
Point-and Alternatives" (Council on Economic Priorities,-
JOURNAL' ARTICLES
" Dismal Science Meets Dismal-New England Journal'of Public Policy, 1985.
The - (Mal) practice of Nuclear Power Economics," Fall
Subject:
" Assessing the High Costs of New Nuclear Public Utilities Fortnightly, Power. Plants, Vol. 114, No.-8, 11-October 1984.
I One of two contributions to "Two Views Public Utilities Fortnightly, of the Comparative Escalation of Nuclear and Coal-Fired Power Plant Costs," Vol. 109, No. 11, 27 May 1982.
" Nuclear Costs Spiral Above Coal," Vol. 39, No.
5, Public Power, September-October, 1981.
22,
" Sources of Nuclear Regulatory Requirements," Vol.
'Nuc1'esr Safety, No.
4, July-August., 1981.
7,K-Exhibit CK-l' Page.6 of 6 JOURNAL ARTICLES'(Continued)
Bulletin of'the Atomic Scientists,."U.S._ Nuclear Plant Performance,"
November 1980..
" Pollution Journal of the'American Pollution-Control ~ Association, What Control Improvements in Coal-Fired Electric Generating' Plants:
They Accomplish, What They Cost," Vol. 30, No.
9, September 1980.
'New' York Review of Books, "Doing Without Nuclear. Power," Vol. 26, No.
8, 17 May 1979.
What Utilities Must
" Electric Utility" Demand in.the Coming Decades:
Do About It -
What Consumer Advocates and' Regulators should.D'o Now,"
' Electric Potential, Winter, 1985-86 f
NEWSPAPER ARTICLES'(O[7 Ed pieces)-
~
)
Tie New York Times, Sunday. Financial Section, "The Power? Shortage Is A
^
Mirage," 28. April 1985.
Wall Street Journal, " Nuclear Crews Stretch Work, Up Costs", 19. March 1984.
January-1983.
Newsday,-"Lilco,'s Owners Should Share The Burden," 11 "Let's-Halt Shoreham Work While Seeking True Costs," 19. June
- Newsday, I!80.
N wsday,. "Shor eham:
Time For A Reappraisal," 26 June 1979.
"A Coal'-Fired Future," 3' September 1981.
_L s Angeles Times, S1 Louis Post-Dispatch, " Nuclear Vs. Coal:
Rising Costs Are.
Ur :ermining The Economics of Atomic Power," 8 July 1981.
W( -KS 1N PROGRESS e Economic Impact of Three Mile Island " presented to the American May 1986 (in aciation for the Advancement of Scienca symposium, At rc lsion).
t I
}lj Included Here' Cc ultant Reports s
E-rt Testimony ressional Testimony Ci rous articles in environmental / citizens periodicals Ni 1
hTT6Ltmt= wit 'F g
q 1
I.
STATEME;;T OF QUALIFICATIG::S OF JAMES A.
ROTHSC!!ILD I
2 0
Please state your name and business address.
i 3
A.
!!y name is James A.
Rothschild.
My address is 11 E:
4 Scarlet Oak Drive, Wilton, Connecticut 06897.
951 5
O.
What is your occupation?
6 A.
I am a financial consultant specializing in utility
'l regulation.
I have experience in providing expert; i
8 testimony regarding the rate treatment for
- electric, gas, 1
9 telephone, sewer, and water utilities throughout theUnitc6]
-1 l
10 States.
I have testified in well over 100 utility rate i'
11 cases and in twenty different jurisdictions.
12 Q.
Please summarize your professional. affiliations.
13 A.
I am president of Rothschild Financial Consul *_ing and M
14 have been a
consultant since 1972.
From 1979 through) 15
- January, 1985 I
was president of Georgetown Consulting l 16
- Group, Inc.
Prior to that, from 1976 to 1979 I was the 17 president of J. Rothschild Associates.
Both of these firms 18-specialized in utility regulation.
From 1972 through 1976 19 I
was employed as a consultant at Touche Ross & Co.
Much
.Jit 2
sa
N 1
of my consulting work done while at Touche noss related to 2
utility regulation.
While associated with all of the above 3
firms, I have worked for various state Utility Coaraissions, 4
Attorneys General, and Public Advocates on matters relating S
to regulatory and financial issues.
These included rate of 6
- return, financial
- issues, and accounting issues.
(See 7
Appendix.)
8 Q.
Pleace describe your educational experience.
l 9
A.
I graduated from the University of Pittsburgh in 1967 10 with a B.S.
degree in Chemical Engineering, and from Case 11 Western Reserve University in 1971 with an MBA in banking p'~a 12 and finance.
[)
13 Q.
Plec ce describe your non-utility experience.
rW i
c 14 A.
See the Appendix for a complete resume.
The statements l
15 and description in the resume are true and correct and were 16 prepared under my direction and control.
l l
4 k
4 i
i l
n e
APPENDIX s-Testifying _ Experience of James A. Enthschild j
)
ALABAMA Continental Telephone of the South; Dccket No. 17968, Rate o.
of Return, January, 1981.
l ARIZONA Sun Ci ty. Wes t Utilities; A c c o u n t i n ;;, January, 1955-CONNECTICUT j
Connecticut American Water Company; Docket No. S2061'., Rate of Return, September, 1980 t
Connecticut Light & Power Company; Docket No.
85-10-22, I-
_k Accounting and Rate of Return, February, 1986 Connecticut Natural Gas:
Docket No. 780812., Accounting and i
Rate of' Return, March, 1979 Connecticut Natural Gas: Docket No. 830101, Rate of Return, i
March, 1983 i
i DELAWARE Artesian Water
- Company, Inc.;
Overall Cost of
- Capital, December, 1986 Diamond State Telephone _ Company; Docket No. 82-32, Rate of Return, November, 1982 Diamond State Telephone Company; Docket No. 83-12, Rate of Return, October, 1983 Wilmington Suburban Water Company; Rate of Return Ps e p o r t,
September, 1986 FLORIDA y
i i
7 I
L Alltel of Florida; Docket No.
850064-TL, Accounting,
{
September, 1985 Florida Power & Light Company; Docket No.
810002-EU, Rate of Return, July, 1981 Florida Power & Light Company; Docket No. 52007-EU, Rate of Return, June, 1982 Florida Power & Light Company; Docket No.
830265-EI, Rate o f R e t u r n a n d C','I P, Ma r c h, 1984 l
)
Florida Power Corporation; Docket
'! o.
530470
'.:I, Ra:e Phase-In, June, 1984 Florida Progress Corp.; Rate of Return, August, 19S6 Gulf Power Company; Docket No.
810136-EU, Rate of Return,
,0ctober, 1981 Gulf Power Company; Docket No.
840086-EI, P. ate of Return, August, 1984 i
Rolling Oaks Utilitics, Inc.;
Docket No.
8 5 0 9 41 -b'S,
Accounting, October, 1986 Tampa Electric Company; Docket No.
820007-EU, Rate of Return, June, 1982 Tampa Electric Company; Docket No.
830012-E'J, Rate of Return, June, 1983 GEORGIA Geor.ia Power Company; Docket No. 3397-U, Accounting, July, i
1983 i
ILLINOIS 1
i Contral Illinois Public Servita Company; ICC Docket No. 86-0256, Financial and Rate of Return, October, 1986 I
Commonwealth Edison Company; Docket No.
8 5Ci:109 70, Financial Testimony, Hay, 1986 Commonwealth Edison Company; Docket No. 86-0249, Financial Testimony, October, 1986 i
i
~g, y
i i
i Northern Illinois Gas
- Company, Financial
.i f f i d a v i t,,
l i
February, 1987 j
KENTUCKY 1
Kentucky Power Company.;
Case No.
- 8429, Rate of R e :. u r n,
April, 1982 Kentucky Power Company:
Case No.
2734, Rata of Return a: d CWIP, June, 1983 Kentucky Power Company; Case No.
9051, Rate of Ruturn and Rate Base Issues,. September, 1984 West Kentucky Gas Company, Case No.
8227, Rate of Retarn, l
e August,-1981 g.
MAINE Bangor Ilydro-Elec tric Company; Docket No.61-136, Rate of Return, January, 1982
- I HARYLAND C
P Telephone Company; Case No.
'7591, Fair
- Value, December, 1981 i
HASSACHUSETTS Boston Edison Company; Docket No. DPU 906, Race of Return, December, 1981 Fitchburr, Gas & Electric; Accounting and Finance, October, 1984 Southbridge Water Company; M.D.P.U.,
Rate of Return.
September, 1982 MINNESOTA Minnesota Power & Light Company:
Docket No. E0lS/GR-80-76, Rate of Return, July, 1980
~
h I
l i
3:
!l
\\
i r
1
+
4 O?
HEW JERSEY Atlantic! City Sewage:
Docket No.
774-315, Rate of Return, Hay, 1977-i l
Elizabethtown Water Company; Docket No.
781-6, Accounting, April, 1978 Eliaabethtown Water Company; Docket No.
802-76, Rate of Return, January, 1979 i
Hackensack Water Company;-Docket No. 776-455, October, 1977 and Accounting, February, 1979 Hackensack Water Company; Docket No.
787-847, Accounting and Interim Rate Relief, September, 1978 Hackensack Water Company; AFUDC &.CWIP, June, 1979 i
Hackensack Water Company; Docket No.
804-275, Rate of gg Return, September, 1980 Hackensack Water Company; Docket No.
8011-870,-
- CWIP, January, 1981 Middlesex Water Company; Docket No. 793-254, Tariff Design, September, 1978 Hiddlesex Vater Company; Docket No.
-793-269, Rate of Return, June, 1979 Mount Holly Water Coopany; Docket No.
805-314, Rate of Return,-August, 1980 National Association of Water Companies; Tariff
- Design, 1977 New Jersey Bell Telephone; Docket No.
7711-1047, Tariff Pesign, September. 1978 i
New Jersey Land Title Insurance Companies, Rate of Return and Accounting, August and November, 1985 New Jersey Natural Gas:
Docket No.
7812-1681, Rate of Return, April, 1979 Rockland Electric Company; Docket No.
795-413, Rate of q'
i
---~#--
~ ~
.b
n 7
, jr~V hJ.
J s
Return, Oc t o be r, 1979 South Jersey Gas Company:
Docket No.
769-988, Accounting, rsbruary, 1977 United Artists Cablevision; Docket No. CTV-9924-83, Rate of Return, April, 1984 i
West Iconsburg Water Company; Docket No.
838-737, Rate of Return, December, 1983 NEW YORK s
Consolidated Edison Company; Case.No.27353, Accounting and I
Rate of Return, October, 1978 Consolidated Edison Company; Case No. 27744, Accour. ting' and Rate of Return, August 1980 Generic Financing Case for Electric & Gas Companies; Case No. 27679, Hay, 1981 N
Long Island Lighting Company:
Case No.
- 27136, Accounting and Rate of Return, June, 1977 4
f Long Island Lighting Company; Case No.
27774, ' Rate of
..R e t u r n, November, 1980 Long Island Lighting Company; Case No.
28176 and
- 28177, Rate of~ Return and Revenue Forecasting, June, 1982 Long Island Lighting Company, Case No.
- 28553, Rate of Return and Finance, March, 1984 1
New York Telephone, Case No. 27469, April, 1979 New York Telephone, Case No. 27710, Accounting, Septecber, j
1981 j
)
OHIO h
Columbia Gas Company of Ohio; Case No.
77-1428-GA-AIR, March, 1979 r~l Columbia Gas Company of Ohio:
Case No.
78-1118-CA-AIR,
)
y)
Accounting and Rate of Return, May, 1979 0
.....-mmm.--..-+