Public Act 90-0563 of the 90th General Assembly
Public Act 90-0563
SB56 Enrolled LRB9001051JSgc
AN ACT concerning the generation of electricity, amending
a named Act.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Public Utilities Act is amended, if and
only if the provisions of House Bill 362 of the 90th General
Assembly that are changed by this amendatory Act of 1997
become law, by changing Section 16-111 as follows:
(220 ILCS 5/16-111)
Sec. 16-111. Rates and restructuring transactions during
mandatory transition period.
(a) During the mandatory transition period,
notwithstanding any provision of Article IX of this Act, and
except as provided in subsections (b), (d), (e), and (f) of
this Section, the Commission shall not (i) initiate,
authorize or order any change by way of increase (other than
in connection with a request for rate increase which was
filed after September 1, 1997 but prior to October 15, 1997,
by an electric utility serving less than 12,500 customers in
this state), (ii) initiate or, unless requested by the
electric utility, authorize or order any change by way of
decrease, restructuring or unbundling (except as provided in
Section 16-109A), in the rates of any electric utility that
were in effect on October 1, 1996, or (iii) in any order
approving any application for a merger pursuant to Section
7-204 that was pending as of May 16, 1997, impose any
condition requiring any filing for an increase, decrease, or
change in, or other review of, an electric utility's rates or
enforce any such condition of any such order; provided,
however, that this subsection shall not prohibit the
Commission from:
(1) approving the application of an electric
utility to implement an alternative to rate of return
regulation or a regulatory mechanism that rewards or
penalizes the electric utility through adjustment of
rates based on utility performance, pursuant to Section
9-244;
(2) authorizing an electric utility to eliminate
its fuel adjustment clause and adjust its base rate
tariffs in accordance with subsection (b), (d), or (f) of
Section 9-220 of this Act, to fix its fuel adjustment
factor in accordance with subsection (c) of Section 9-220
of this Act, or to eliminate its fuel adjustment clause
in accordance with subsection (e) of Section 9-220 of
this Act;
(3) ordering into effect tariffs for delivery
services and transition charges in accordance with
Sections 16-104 and 16-108, for real-time pricing in
accordance with Section 16-107, or the options required
by Section 16-110 and subsection (n) of 16-112, allowing
a billing experiment in accordance with Section 16-106,
or modifying delivery services tariffs in accordance with
Section 16-109; or
(4) ordering or allowing into effect any tariff to
recover charges pursuant to Sections 9-201.5, 9-220.1,
9-221, 9-222 (except as provided in Section 9-222.1),
16-108, and 16-114 of this Act, Section 5-5 of the
Electricity Infrastructure Maintenance Fee Law, Section
6-5 of the Renewable Energy, Energy Efficiency, and Coal
Resources Development Law of 1997, and Section 13 of the
Energy Assistance Act of 1989.
(b) Notwithstanding the provisions of subsection (a),
each Illinois electric utility serving more than 12,500
customers in Illinois shall file tariffs (i) reducing,
effective August 1, 1998, each component of its base rates to
residential retail customers by 15% from the base rates in
effect immediately prior to January 1, 1998 and (ii) if the
public utility provides electric service to more than 500,000
customers in this State on the effective date of this
amendatory Act of 1997, reducing, effective May 1, 2002, each
component of its base rates to residential retail customers
by an additional 5% from the base rates in effect immediately
prior to January 1, 1998. Provided, however, that (A) if an
electric utility's average residential retail rate is less
than or equal to the average residential retail rate for a
group of Midwest Utilities (consisting of all investor-owned
electric utilities with annual system peaks in excess of 1000
megawatts in the States of Illinois, Indiana, Iowa, Kentucky,
Michigan, Missouri, Ohio, and Wisconsin), based on data
reported on Form 1 to the Federal Energy Regulatory
Commission for calendar year 1995, then it shall only be
required to file tariffs (i) reducing, effective August 1,
1998, each component of its base rates to residential retail
customers by 5% from the base rates in effect immediately
prior to January 1, 1998, (ii) reducing, effective October 1,
2000, each component of its base rates to residential retail
customers by the lesser of 5% of the base rates in effect
immediately prior to January 1, 1998 or the percentage by
which the electric utility's average residential retail rate
exceeds the average residential retail rate of the Midwest
Utilities, based on data reported on Form 1 to the Federal
Energy Regulatory Commission for calendar year 1999, and
(iii) reducing, effective October 1, 2002, each component of
its base rates to residential retail customers by an
additional amount equal to the lesser of 5% of the base rates
in effect immediately prior to January 1, 1998 or the
percentage by which the electric utility's average
residential retail rate exceeds the average residential
retail rate of the Midwest Utilities, based on data reported
on Form 1 to the Federal Energy Regulatory Commission for
calendar year 2001; and (B) if the average residential retail
rate of an electric utility serving between 150,000 and
250,000 retail customers in this State on January 1, 1995 is
less than or equal to 90% of the average residential retail
rate for the Midwest Utilities, based on data reported on
Form 1 to the Federal Energy Regulatory Commission for
calendar year 1995, then it shall only be required to file
tariffs (i) reducing, effective August 1, 1998, each
component of its base rates to residential retail customers
by 2% from the base rates in effect immediately prior to
January 1, 1998; (ii) reducing, effective October 1, 2000,
each component of its base rates to residential retail
customers by 2% from the base rate in effect immediately
prior to January 1, 1998; and (iii) reducing, effective
October 1, 2002, each component of its base rates to
residential retail customers by 1% from the base rates in
effect immediately prior to January 1, 1998. Provided,
further, that any electric utility for which a decrease in
base rates has been or is placed into effect between October
1, 1996 and the dates specified in the preceding sentences of
this subsection, other than pursuant to the requirements of
this subsection, shall be entitled to reduce the amount of
any reduction or reductions in its base rates required by
this subsection by the amount of such other decrease. The
tariffs required under this subsection shall be filed 45 days
in advance of the effective date. Notwithstanding anything to
the contrary in Section 9-220 of this Act, no restatement of
base rates in conjunction with the elimination of a fuel
adjustment clause under that Section shall result in a lesser
decrease in base rates than customers would otherwise receive
under this subsection had the electric utility's fuel
adjustment clause not been eliminated.
(c) Any utility reducing its base rates by 15% on August
1, 1998 pursuant to subsection (b) shall include the
following statement on its bills for residential customers
from August 1 through December 31, 1998: "Effective August 1,
1998, your rates have been reduced by 15% by the Electric
Service Customer Choice and Rate Relief Law of 1997 passed by
the Illinois General Assembly.". Any utility reducing its
base rates by 5% on August 1, 1998, pursuant to subsection
(b) shall include the following statement on its bills for
residential customers from August 1 through December 31,
1998: "Effective August 1, 1998, your rates have been
reduced by 5% by the Electric Service Customer Choice and
Rate Relief Law of 1997 passed by the Illinois General
Assembly.".
Any utility reducing its base rates by 2% on August 1,
1998 pursuant to subsection (b) shall include the following
statement on its bills for residential customers from August
1 through December 31, 1998: "Effective August 1, 1998, your
rates have been reduced by 2% by the Electric Service
Customer Choice and Rate Relief Law of 1997 passed by the
Illinois General Assembly.".
(d) During the mandatory transition period, but not
before January 1, 2000, and notwithstanding the provisions
of subsection (a), an electric utility may request an
increase in its base rates if the electric utility
demonstrates that the 2-year average of its earned rate of
return on common equity, calculated as its net income
applicable to common stock divided by the average of its
beginning and ending balances of common equity using data
reported in the electric utility's Form 1 report to the
Federal Energy Regulatory Commission but adjusted to remove
the effects of accelerated depreciation or amortization or
other transition or mitigation measures implemented by the
electric utility pursuant to subsection (g) of this Section
and the effect of any refund paid pursuant to subsection (e)
of this Section, is below the 2-year average for the same 2
years of the monthly average yields of 30-year U.S. Treasury
bonds published by the Board of Governors of the Federal
Reserve System in its weekly H.15 Statistical Release or
successor publication. The Commission shall review the
electric utility's request, and may review the justness and
reasonableness of all rates for tariffed services, in
accordance with the provisions of Article IX of this Act,
provided that the Commission shall consider any special or
negotiated adjustments to the revenue requirement agreed to
between the electric utility and the other parties to the
proceeding. In setting rates under this Section, the
Commission shall exclude the costs and revenues that are
associated with competitive services and any billing or
pricing experiments conducted under Section 16-106.
(e) For the purposes of this subsection (e) all
calculations and comparisons comparisions shall be performed
for the Illinois operations of multijurisdictional utilities.
During the mandatory transition period, notwithstanding the
provisions of subsection (a), if the 2-year average of an
electric utility's earned rate of return on common equity,
calculated as its net income applicable to common stock
divided by the average of its beginning and ending balances
of common equity using data reported in the electric
utility's Form 1 report to the Federal Energy Regulatory
Commission but adjusted to remove the effect of any refund
paid under this subsection (e), and further adjusted to
include the annual amortization of any difference between the
consideration received by an affiliated interest of the
electric utility in the sale of an asset which had been sold
or transferred by the electric utility to the affiliated
interest subsequent to the effective date of this amendatory
Act of 1997 and the consideration for which such asset had
been sold or transferred to the affiliated interest, with
such difference to be amortized ratably from the date of the
sale by the affiliated interest to December 31, 2006, exceeds
the 2-year average of the Index for the same 2 years by 1.5
or more percentage points, the electric utility shall make
refunds to customers beginning the first billing day of April
in the following year in the manner described in paragraph
(3) of this subsection. For purposes of this subsection (e),
the "Index" shall be the sum of (A) the average for the 12
months ended September 30 of the monthly average yields of
30-year U.S. Treasury bonds published by the Board of
Governors of the Federal Reserve System in its weekly H.15
Statistical Release or successor publication for each year
1998 through 2004, and (B) (i) 4.00 percentage points for
each of the 12-month periods ending September 30, 1998
through September 30, 1999 or 8.00 percentage points if the
electric utility's average residential retail rate is less
than or equal to 90% of the average residential retail rate
for the "Midwest Utilities", as that term is defined in
subsection (b) of this Section, based on data reported on
Form 1 to the Federal Energy Regulatory Commission for
calendar year 1995, and the electric utility served between
150,000 and 250,000 retail customers on January 1, 1995, or
(ii) 5.00 percentage points for each of the 12-month periods
ending September 30, 2000 through September 30, 2004 or 9.00
percentage points if the electric utility's average
residential retail rate is less than or equal to 90% of the
average residential retail rate for the "Midwest Utilities",
as that term is defined in subsection (b) of this Section,
based on data reported on Form 1 to the Federal Energy
Regulatory Commission for calendar year 1995 and the electric
utility served between 150,000 and 250,000 retail customers
in this State on January 1, 1995.
(1) For purposes of this subsection (e), "excess
earnings" means the difference between (A) the 2-year
average of the electric utility's earned rate of return
on common equity, less (B) the 2-year average of the sum
of (i) the Index applicable to each of the 2 years and
(ii) 1.5 percentage points; provided, that "excess
earnings" shall never be less than zero.
(2) On or before March 31 of each year 2000 through
2005 each electric utility shall file a report with the
Commission showing its earned rate of return on common
equity, calculated in accordance with this subsection,
for the preceding calendar year and the average for the
preceding 2 calendar years.
(3) If an electric utility has excess earnings,
determined in accordance with paragraphs (1) and (2) of
this subsection, the refunds which the electric utility
shall pay to its customers beginning the first billing
day of April in the following year shall be calculated
and applied as follows:
(i) The electric utility's excess earnings
shall be multiplied by the average of the beginning
and ending balances of the electric utility's common
equity for the 2-year period in which excess
earnings occurred.
(ii) The result of the calculation in (i)
shall be multiplied by 0.50 and then divided by a
number equal to 1 minus the electric utility's
composite federal and State income tax rate.
(iii) The result of the calculation in (ii)
shall be divided by the sum of the electric
utility's projected total kilowatt-hour sales to
retail customers plus projected kilowatt-hours to be
delivered to delivery services customers over a one
year period beginning with the first billing date in
April in the succeeding year to determine a cents
per kilowatt-hour refund factor.
(iv) The cents per kilowatt-hour refund factor
calculated in (iii) shall be credited to the
electric utility's customers by applying the factor
on the customer's monthly bills to each
kilowatt-hour sold or delivered until the total
amount calculated in (ii) has been paid to
customers.
(f) During the mandatory transition period, an electric
utility may file revised tariffs reducing the price of any
tariffed service offered by the electric utility for all
customers taking that tariffed service, which shall be
effective 7 days after filing.
(g) During the mandatory transition period, an electric
utility may, without obtaining any approval of the Commission
other than that provided for in this subsection and
notwithstanding any other provision of this Act or any rule
or regulation of the Commission that would require such
approval:
(1) implement a reorganization, other than a merger
of 2 or more public utilities as defined in Section 3-105
or their holding companies;
(2) retire generating plants from service;
(3) sell, assign, lease or otherwise transfer
assets to an affiliated or unaffiliated entity and as
part of such transaction enter into service agreements,
power purchase agreements, or other agreements with the
transferee; provided, however, that the prices, terms and
conditions of any power purchase agreement must be
approved or allowed into effect by the Federal Energy
Regulatory Commission; or
(4) use any accelerated cost recovery method
including accelerated depreciation, accelerated
amortization or other capital recovery methods, or record
reductions to the original cost of its assets.
In order to implement a reorganization, retire generating
plants from service, or sell, assign, lease or otherwise
transfer assets pursuant to this Section, the electric
utility shall comply with subsections (c) and (d) of Section
16-128, if applicable, and provide the Commission with at
least 30 days notice of the proposed reorganization or
transaction, which notice shall include the following
information:
(i) a complete statement of the entries that
the electric utility will make on its books and
records of account to implement the proposed
reorganization or transaction together with a
certification from an independent certified public
accountant that such entries are in accord with
generally accepted accounting principles and, if the
Commission has previously approved guidelines for
cost allocations between the utility and its
affiliates, a certification from the chief
accounting officer of the utility that such entries
are in accord with those cost allocation guidelines;
(ii) a description of how the electric utility
will use proceeds of any sale, assignment, lease or
transfer to retire debt or otherwise reduce or
recover the costs of services provided by such
electric utility;
(iii) a list of all federal approvals or
approvals required from departments and agencies of
this State, other than the Commission, that the
electric utility has or will obtain before
implementing the reorganization or transaction;
(iv) an irrevocable commitment by the electric
utility that it will not, as a result of the
transaction, impose any stranded cost charges that
it might otherwise be allowed to charge retail
customers under federal law or increase the
transition charges that it is otherwise entitled to
collect under this Article XVI; and
(v) if the electric utility proposes to sell,
assign, lease or otherwise transfer a generating
plant that brings the amount of net dependable
generating capacity transferred pursuant to this
subsection to an amount equal to or greater than 15%
of the electric utility's net dependable capacity as
of the effective date of this amendatory Act of
1997, and enters into a power purchase agreement
with the entity to which such generating plant is
sold, assigned, leased, or otherwise transferred,
the electric utility also agrees, if its fuel
adjustment clause has not already been eliminated,
to eliminate its fuel adjustment clause in
accordance with subsection (b) of Section 9-220 for
a period of time equal to the length of any such
power purchase agreement or successor agreement, or
until January 1, 2005, whichever is longer; if the
capacity of the generating plant so transferred and
related power purchase agreement does not result in
the elimination of the fuel adjustment clause under
this subsection, and the fuel adjustment clause has
not already been eliminated, the electric utility
shall agree that the costs associated with the
transferred plant that are included in the
calculation of the rate per kilowatt-hour to be
applied pursuant to the electric utility's fuel
adjustment clause during such period shall not
exceed the per kilowatt-hour cost associated with
such generating plant included in the electric
utility's fuel adjustment clause during the full
calendar year preceding the transfer, with such
limit to be adjusted each year thereafter by the
Gross Domestic Product Implicit Price Deflator.
(vi) In addition, if the electric utility
proposes to sell, assign, or lease, (A) either (1)
an amount of generating plant that brings the amount
of net dependable generating capacity transferred
pursuant to this subsection to an amount equal to or
greater than 15% of its net dependable capacity on
the effective date of this amendatory Act of 1997,
or (2) one or more generating plants with a total
net dependable capacity of 1100 megawatts, or (B)
transmission and distribution facilities that either
(1) bring the amount of transmission and
distribution facilities transferred pursuant to this
subsection to an amount equal to or greater than 15%
of the electric utility's total depreciated original
cost investment in such facilities, or (2) represent
an investment of $25,000,000 in terms of total
depreciated original cost, the electric utility
shall provide, in addition to the information listed
in subparagraphs (i) through (v), the following
information: (A) a description of how the electric
utility will meet its service obligations under this
Act in a safe and reliable manner and (B) the
electric utility's projected earned rate of return
on common equity, calculated in accordance with
subsection (d) of this Section, for each year from
the date of the notice through December 31, 2004
both with and without the proposed transaction. If
the Commission has not issued an order initiating a
hearing on the proposed transaction within 30 days
after the date the electric utility's notice is
filed, the transaction shall be deemed approved.
The Commission may, after notice and hearing,
prohibit the proposed transaction if it makes either
or both of the following findings: (1) that the
proposed transaction will render the electric
utility unable to provide its tariffed services in a
safe and reliable manner, or (2) that there is a
strong likelihood that consummation of the proposed
transaction will result in the electric utility
being entitled to request an increase in its base
rates during the mandatory transition period
pursuant to subsection (d) of this Section. Any
hearing initiated by the Commission into the
proposed transaction shall be completed, and the
Commission's final order approving or prohibiting
the proposed transaction shall be entered, within 90
days after the date the electric utility's notice
was filed. Provided, however, that a sale,
assignment, or lease of transmission facilities to
an independent system operator that meets the
requirements of Section 16-126 shall not be subject
to Commission approval under this Section.
In any proceeding conducted by the Commission
pursuant to this subparagraph (vi), intervention
shall be limited to parties with a direct interest
in the transaction which is the subject of the
hearing and any statutory consumer protection agency
as defined in subsection (d) of Section 9-102.1.
Notwithstanding the provisions of Section 10-113 of
this Act, any application seeking rehearing of an
order issued under this subparagraph (vi), whether
filed by the electric utility or by an intervening
party, shall be filed within 10 days after service
of the order.
The Commission shall not in any subsequent proceeding or
otherwise, review such a reorganization or other transaction
authorized by this Section, but shall retain the authority to
allocate costs as stated in Section 16-111(i). An entity to
which an electric utility sells, assigns, leases or transfers
assets pursuant to this subsection (g) shall not, as a result
of the transactions specified in this subsection (g), be
deemed a public utility as defined in Section 3-105. Nothing
in this subsection (g) shall change any requirement under the
jurisdiction of the Illinois Department of Nuclear Safety
including, but not limited to, the payment of fees. Nothing
in this subsection (g) shall exempt a utility from obtaining
a certificate pursuant to Section 8-406 of this Act for the
construction of a new electric generating facility. Nothing
in this subsection (g) is intended to exempt the transactions
hereunder from the operation of the federal or State
antitrust laws. Nothing in this subsection (g) shall require
an electric utility to use the procedures specified in this
subsection for any of the transactions specified herein. Any
other procedure available under this Act may, at the electric
utility's election, be used for any such transaction.
(h) During the mandatory transition period, the
Commission shall not establish or use any rates of
depreciation, which for purposes of this subsection shall
include amortization, for any electric utility other than
those established pursuant to subsection (c) of Section 5-104
of this Act or utilized pursuant to subsection (g) of this
Section. Provided, however, that in any proceeding to review
an electric utility's rates for tariffed services pursuant to
Section 9-201, 9-202, 9-250 or 16-111(d) of this Act, the
Commission may establish new rates of depreciation for the
electric utility in the same manner provided in subsection
(d) of Section 5-104 of this Act. An electric utility
implementing an accelerated cost recovery method including
accelerated depreciation, accelerated amortization or other
capital recovery methods, or recording reductions to the
original cost of its assets, pursuant to subsection (g) of
this Section, shall file a statement with the Commission
describing the accelerated cost recovery method to be
implemented or the reduction in the original cost of its
assets to be recorded. Upon the filing of such statement,
the accelerated cost recovery method or the reduction in the
original cost of assets shall be deemed to be approved by the
Commission as though an order had been entered by the
Commission.
(i) Subsequent to the mandatory transition period, the
Commission, in any proceeding to establish rates and charges
for tariffed services offered by an electric utility, shall
consider only (1) the then current or projected revenues,
costs, investments and cost of capital directly or indirectly
associated with the provision of such tariffed services; (2)
collection of transition charges in accordance with Sections
16-102 and 16-108 of this Act; (3) recovery of any employee
transition costs as described in Section 16-128 which the
electric utility is continuing to incur, including recovery
of any unamortized portion of such costs previously incurred
or committed, with such costs to be equitably allocated among
bundled services, delivery services, and contracts with
alternative retail electric suppliers; and (4) recovery of
the costs associated with the electric utility's compliance
with decommissioning funding requirements; and shall not
consider any other revenues, costs, investments or cost of
capital of either the electric utility or of any affiliate of
the electric utility that are not associated with the
provision of tariffed services. In setting rates for
tariffed services, the Commission shall equitably allocate
joint and common costs and investments between the electric
utility's competitive and tariffed services. In determining
the justness and reasonableness of the electric power and
energy component of an electric utility's rates for tariffed
services subsequent to the mandatory transition period and
prior to the time that the provision of such electric power
and energy is declared competitive, the Commission shall
consider the extent to which the electric utility's tariffed
rates for such component for each customer class exceed the
market value determined pursuant to Section 16-112, and, if
the electric power and energy component of such tariffed rate
exceeds the market value by more than 10% for any customer
class, may establish such electric power and energy component
at a rate equal to the market value plus 10%. In any such
case, the Commission may also elect to extend the provisions
of Section 16-111(e) for any period in which the electric
utility is collecting transition charges, using information
applicable to such period.
(j) During the mandatory transition period, an electric
utility may elect to transfer to a non-operating income
account under the Commission's Uniform System of Accounts
either or both of (i) an amount of unamortized investment tax
credit that is in addition to the ratable amount which is
credited to the electric utility's operating income account
for the year in accordance with Section 46(f)(2) of the
federal Internal Revenue Code of 1986, as in effect prior to
P.L. 101-508, or (ii) "excess tax reserves", as that term is
defined in Section 203(e)(2)(A) of the federal Tax Reform Act
of 1986, provided that (A) the amount transferred may not
exceed the amount of the electric utility's assets that were
created pursuant to Statement of Financial Accounting
Standards No. 71 which the electric utility has written off
during the mandatory transition period, and (B) the transfer
shall not be effective until approved by the Internal Revenue
Service. An electric utility electing to make such a
transfer shall file a statement with the Commission stating
the amount and timing of the transfer for which it intends to
request approval of the Internal Revenue Service, along with
a copy of its proposed request to the Internal Revenue
Service for a ruling. The Commission shall issue an order
within 14 days after the electric utility's filing approving,
subject to receipt of approval from the Internal Revenue
Service, the proposed transfer.
(Source: 90HB0362sam02.)
Section 99. Effective date. This Act takes effect upon
becoming law.