Illinois Affirms Reduction in Fixed Customer Charge Liability

On rehearing, the Illinois Commerce Commission has declined to modify an order from earlier this year in which it rejected an electric utility's recommendation that demand-related costs be recovered through the fixed customer charge. Under the plan submitted by the utility, Ameren Illinois, a greater percentage of the company's embedded costs would be collected through the fixed customer charge. 

More specifically, Ameren had alleged that there was a significant mismatch between the nonvariable costs incurred on behalf of domestic service customers and the revenue received by the utility via the fixed customer charge, which is designed to capture those costs. The utility's solution was to increase the proportion of its revenue requirement covered by the domestic fixed customer charge, from 36.4% to 40%. 

The commission, however, had come to an opposite conclusion, finding that residential fixed-cost charges should account for only 30% of Ameren's revenue requirement. The commission said that its decision was consistent with the notion that the cost-causer should be the cost-payer. Invoking that same principle, the commission also had maintained the small commercial customer allocation at 28% of the overall revenue requirement. 

The issue of fixed-cost recovery had arisen in the course of Ameren's rate design review proceeding. According to the utility, its demand-related costs too often were being relegated to its variable energy charges. Consequently, it argued, larger-volume consumers were contributing more than their fair share toward the company's demand costs. 

The utility alleged that it actually faces a similar level of demand costs for many smaller customers, even if their consumption is not as high. And, it stated, energy usage is more likely to change on a month-to-month basis than is demand. To that end, it also cited data indicating that billed energy charges vary too much from customer to customer to be properly reflective of their respective demand. 

But the commission held that the record did not support shifting recovery of demand-related costs to the fixed customer charge. The commission stated that not only would such a move be inconsistent with costcausation principles, but it would create a disincentive for energy conservation. It elaborated that lowerusage customers who participate in energy-saving programs would be confused and frustrated when, despite reducing their consumption, they receive bills with a higher charge. 

The commission's ruling notwithstanding, Ameren sought rehearing and renewed its prior arguments. Although the commission granted the utility a second bite at the apple, it ultimately again denied the company's demand charge proposal. In doing so, it reiterated its previously enunciated reasoning, adding that the company had presented no new analysis to convince it that there was a disconnect between the utility's demand costs and the revenues received from residential and small commercial customers. 

At the same time, though, the commission commented that should the utility in the future be able to document a change in its demand costs versus revenues, it could return to the commission with a new fixed charge plan. In particular, the commission said, it agreed with Ameren that recent state legislation promoting greater deployment of distributed energy resources, especially solar applications, could have implications for the utility down the road as more customers opt to pursue their own solar systems. 

The commission informed the utility that if customer investments in solar facilities affect its costs of service to such an extent that costcausation principles would warrant an increase in the fixed charge contribution to its revenue requirement, the commission would take a fresh look at Ameren's current rate design. But the commission stressed that the utility was nowhere near that point yet. Re Ameren Illinois Co. d/b/a Ameren Illinois, 16-0387, Aug. 25, 2017 (Ill.C.C.).