Rate Case Roundup: Illinois

The Illinois Commerce Commission issued a pair of rate decisions on the same day in which one of the electric utility applicants was ordered to reduce its rates while the other electric utility petitioner was allowed to raise its rates. For Ameren Illinois Company, the commission found that a decrease of some $17.3 million was called for, but that an increase of $95.58 million was justified for the other utility, Commonwealth Edison Company (ComEd).

Both of the utilities participate in formula rate programs that tie revenue levels to performance vis-à-vis infrastructure modernization initiatives. In the case of Ameren, the utility operates pursuant to a modernization action plan (MAP) and has specific MAPrelated pricing tariffs. In the spring of 2017, Ameren filed its seventh update of its progress under the MAP, in which it recognized that a rate decrease was necessary under the terms of the MAP. The utility pegged that reduction at $16.3 million.

However, after reconciling the company’s actual 2016 revenue results and evaluating Ameren’s projected total plant additions for 2017, the commission ruled that a somewhat greater rate decrease was warranted. The commission thus told the utility to lower its delivery service rates by $17.3 million. According to the commission’s estimates, the reduction will offer the typical residential customer about $20 a year in rate relief.

In finding that Ameren should lower its rates by a million dollars more than the company had originally recommended, the commission said that the further reductions were due to disallowances made by the commission with regard to certain lobbying expenses, affiliate costs, and cash working capital claims. The commission also pointed out that there were a couple of inconsistencies in the utility’s assessment of year-end plant additions.

More specifically, the commission stated that certain projects were not complete and in service by the end of 2017 as had been anticipated by Ameren. But, the commission said, certain other projects had been finished and placed in service by yearend 2017 that had not been listed in the company’s initial application. Thus, the utility proposed that the category of plant additions be treated as a wash, since the same number of projects ultimately were added.

The commission, however, drew attention to the fact that even though the number of plant additions may have been identical, the replacement projects had different depreciable lives. As a consequence, the commission found that adjustments to the company’s depreciation expense were required.

The commission remarked that the overall return and the rate of return on equity (ROE) the company had proposed met with no resistance from any party to the proceeding. The commission therefore declared those values reasonable and appropriate. The overall return was set at 7.04% and the ROE at 8.399%. Re Ameren Illinois Co. d/b/a Ameren Illinois, 17-0197, Dec. 6, 2017 (Ill.C.C.).

In the ComEd case, the utility requested a rate increase of $96.28 million under its approved formula rate plan. According to the company, the increase was necessary to enable it to stay current with its system modernization and replacement plans and continue to invest in infrastructure improvements.

The commission and most participants in the proceeding largely concurred with the utility’s evaluation. However, the commission made several minor downward adjustments to certain of ComEd’s cost claims, including expenses associated with travel, outside service fees, industry association dues, and cash working capital. The commission thus shaved about $700,000 off the utility’s initial request.

As to cost-of-capital matters, the commission reported that although the last ROE authorized ComEd was 8.4%, a slight reduction in its ROE value was appropriate in the instant proceeding given the utility’s failure to achieve its annual service reliability target for 2016. The commission said it agreed with the company’s suggested penalty of six basis points, bringing its new ROE down to 8.34%. Re Commonwealth Edison Co., 17-0196, Dec. 6, 2017 (Ill.C.C.).