Rate Case Roundup: Illinois

The Illinois Commerce Commission released two rate case decisions in May, one for an electric utility and one for a natural gas local distribution company (LDC). In the electric rate docket, Mt. Carmel Public Utility Company had petitioned for $1.9 million in additional revenues, representing an overall increase of 16.75%. Although the commission assented to the entirety of the request, it did not agree to allocate the increase to all customer classes on a uniform across-the-board basis. 

The commission explained that a cost-of-service study accompanying the utility's rate application indicated that some classes were yielding far greater rates of return than other classes. The company admitted that its returns varied significantly from class to class, but it reasoned that a uniform percentage increase to all ratepayers would mitigate extremely large increases to any individual class that might otherwise be needed. 

However, after input and assistance from commission staff, the utility redesigned its rate schedules to begin a gradual move toward cost-based rates. Under the plan, the utility's customer charges will be maintained at or very near their current levels, in the interest of mitigating bill impacts. However, the company instead will increase its energy delivery charges, realigning the proportionate share for which each customer class is responsible. 

The commission deemed the new structure reasonable and appropriate, inclusive of the 10.03% ROE reflected therein. Re Mt. Carmel Public Utility Co., 16-0428, May 3, 2017 (Ill.C.C.).

In the natural gas rate proceeding, the commission addressed what the LDC, Liberty Utilities, described as a "disconnect" between its rates and its costs of service. The company told the commission that although a previously approved rate increase had helped rectify its deficit situation, it still has been achieving only a little more than half of its authorized return. The LDC claimed that it has realized an overall return of only around 3.80%, compared to the 7.05% overall return approved in its last rate proceeding. 

According to the LDC, it has been investing in infrastructure projects at a far faster pace than first anticipated. For instance, it said, while it had projected expending about $7 million a year on such efforts, its actual capital spending for the 2014-2015 program year came closer to $12.1 million. Because it is engaged in a number of capital-intensive pipeline replacement initiatives, the LDC averred a need for its rates to keep up with its capital requirements. 

Taking the company's pipeline project costs under advisement, but disallowing certain operating expenses related to incentive compensation, affiliate service arrangements, and rate case costs, the commission concluded that the LDC should be permitted to raise its rates by a little more than $2.18 million. The company had initially proposed an increase of $2.98 million. 

As to rate of return, the commission actually slightly reduced the LDC's overall return, from 7.05% to 6.99%. However, it noted that it was doing so in accordance with a stipulation submitted by the parties. That same settlement provided for a 9.40% ROE, which the commission found to be just, reasonable, and consistent with current market conditions. Re Liberty Utilities (Midstates Natural Gas) Corp. d/b/a Liberty Utilities, 16-0401, May 24, 2017 (Ill.C.C.).