HB0014ham001 97TH GENERAL ASSEMBLY

Rep. Kevin A. McCarthy

Filed: 2/18/2011

09700HB0014ham001 LRB097 05207 ASK 47288 a

AMENDMENT TO HOUSE BILL 14

AMENDMENT NO. ______. Amend House Bill 14 by replacing everything after the enacting clause with the following:

"Section 5. The Public Utilities Act is amended by adding Sections 16-108.5 and 19-150 as follows:

(220 ILCS 5/16-108.5 new)

Sec. 16-108.5. Infrastructure investment and modernization; regulatory reform.

(a) The General Assembly recognizes that for well over a century Illinois residents and businesses have been well-served by and have benefitted from a comprehensive electric utility system. The General Assembly finds that electric utilities are now entering a new construction cycle that is needed to refurbish, rebuild, modernize, and expand systems to continue to provide safe, reliable, and affordable service to the State's current and future utility customers in this newly digitized age. In particular, the General Assembly finds that it is the policy of this State that significant investments must be made in the State's electric grid over the next decade to modernize and upgrade transmission and distribution facilities in the State. These investments will ensure that the State's electric utility infrastructure will promote future economic development in the State and that the State's electric utilities will be able to continue to provide quality electric service to their customers, including innovative technological offerings that will enhance customer experience and choice such as smart meters that are dependent on a modernized or smart grid. These investments, including programs to reinforce the safety and security of high voltage transmission lines, will also ensure that the State's electric utility infrastructure continues to be safe and reliable. The introduction of performance metrics will further ensure that safety and reliability and other indicators are not just maintained but improved by more than 15% over the next decade.

The General Assembly further recognizes that, in addition to attracting capital and businesses to the State, these investments will create training opportunities for the citizens of this State, all of which will create new employment opportunities for Illinoisans at a time when they are most needed, especially for minority-owned and female-owned business enterprises. The General Assembly further finds that regulatory reform measures that increase predictability, stability, and transparency in the ratemaking process are needed to promote prudent, long-term infrastructure investment and to mutually benefit the State's electric utilities and their customers, regulators, and investors.

(b) For purposes of this Section, "participating utility" means an electric utility that voluntarily elects and commits to undertake the infrastructure investment program consisting of the commitments and obligations described in paragraphs (1) and (2) of this subsection (b), notwithstanding any other provisions of this Act and without obtaining any approvals from the Commission or any other agency other than as set forth in this Section, regardless of whether any such approval would otherwise be required, provided further that Illinois electric utilities that are affiliated by virtue of a common parent company may, at such utilities' election, be considered a single electric utility. The utility shall recover the expenditures made under the infrastructure investment program through the ratemaking process, including, but not limited to, the formula rate and process set forth in this Section.

During the infrastructure investment program's peak program year, it shall create approximately 2000 full-time equivalent jobs, including direct jobs, contractor positions, positions that would otherwise be eliminated, and induced jobs. For purposes of this Section, "peak program year" means the consecutive 12-month period with the highest number of full-time equivalent jobs that occurs between the beginning of investment year 2 and the end of investment year 4.

Beginning on the date that the initial rates take effect pursuant to subsection (c) of this Section, a participating utility shall:

(1) over a 5-year period, invest at least $1.1 billion in electric system upgrades, modernization projects, and training facilities, including, but not limited to:

(A) distribution infrastructure improvements totaling at least $1 billion, including underground residential distribution cable injection and replacement and mainline cable system refurbishment and replacement projects;

(B) training facility construction or upgrade projects totaling at least $5 million; any such new facility must be designed for the purpose of obtaining, and the owner of the facility shall apply for, certification under the United States Green Building Council's Leadership in Energy Efficiency Design Green Building Rating System; and

(C) wood pole inspection, treatment, and replacement programs; and

(2) over a 10-year period, invest at least $1.5 billion to upgrade and modernize its transmission and distribution infrastructure and in smart grid electric system upgrades, including, but not limited to:

(A) additional smart meters;

(B) distribution automation;

(C) associated cyber secure data communication network; and

(D) substation micro-processor relay upgrades.

The investment amounts and job figures set forth in this subsection (b) are applicable to a participating utility that serves 3 million or more electric distribution customers in Illinois. If a participating utility serves less than 3 million electric distribution customers in Illinois, then the infrastructure investment program commitments and obligations described in this subsection (b) shall be reduced proportionately, based on the number of customers, for the utility.

The investments in the infrastructure investment program described in this subsection (b) shall be incremental to the participating utility's annual capital investment program, as defined by, for purposes of this subsection (b), the participating utility's average capital spend for calendar years 2008, 2009, and 2010 as reported in the applicable Federal Energy Regulatory Commission (FERC) Form 1.

Within 60 days after filing a tariff under subsection (c) of this Section, a participating utility shall submit to the Commission its plan, including scope, schedule, and staffing, for satisfying its infrastructure investment program commitments pursuant to this subsection (b). The submitted plan shall include a schedule and staffing plan for the current year. The plan need not allocate the work equally over the respective periods, but should allocate material increments throughout such periods commensurate with the work to be undertaken. No later than September 1 of each subsequent year, the utility shall submit to the Commission a report that includes any update to the plan, a schedule for the current year, the expenditures made for the prior year and cumulatively, and the number of full-time equivalent jobs for the prior year and cumulatively. If the utility is materially deficient in satisfying a schedule or staffing plan, then the plan must also include a corrective action plan to address the deficiency. The fact that the plan or a schedule changes shall not imply the imprudence or unreasonableness of the infrastructure investment program, plan, or schedule.

If, subsequent to completion of a corrective action plan, the Commission enters an order finding, after notice and hearing, that a participating utility did not satisfy its peak job commitment described in this subsection (b) for reasons that are reasonably within its control, then the Commission shall also determine, after consideration of the evidence, including, but not limited to, evidence submitted by the Department of Commerce and Economic Opportunity and the utility, the reduction in the number of full-time equivalent jobs during the peak program year due to such failure. The Commission shall notify the Department of any proceeding that is initiated pursuant to this paragraph. For each full-time equivalent job deficiency during the peak program year that the Commission finds as set forth in this paragraph, the participating utility shall, within 30 days after the entry of the Commission's order, pay $1,500 to a fund for training grants administered under Section 605-800 of The Department of Commerce and Economic Opportunity Law.

If the Commission finds, after notice and hearing, that a participating utility is not satisfying its investment amount commitments described in this subsection (b), then the utility shall no longer be eligible for a formula rate tariff under subsection (c) of this Section.

The fact that a participating utility invests more than the minimum amounts specified in this subsection (b) shall not imply imprudence or unreasonableness.

If a participating utility ceases to have in effect a formula rate under subsection (c) of this Section, then the participating utility's voluntary commitments and obligations under this subsection (b) shall immediately terminate, except for the utility's obligation to pay an amount already owed to the fund for training grants pursuant to a Commission order.

In meeting the obligations of paragraphs (1) and (2) of this subsection (b), to the extent feasible and consistent with State and federal law, the investments under the infrastructure investment program should provide employment opportunities for all segments of the population and workforce, including minority-owned and female-owned business enterprises.

(c) A participating utility may elect to recover its delivery services costs through a formula rate approved by the Commission, which shall specify the cost components that form the basis of the rate charged to customers with sufficient specificity to operate in a standardized manner and be updated annually with transparent information included in the utility's most recent FERC Form 1 that reflects the utility's actual costs for the applicable 12-month period. In the event the utility recovers a portion of its costs through automatic adjustment clause tariffs on the effective date of this amendatory Act of the 97th General Assembly, the utility may elect to continue to recover these costs through such tariffs, but then these costs shall not be recovered through the formula rate.

The formula rate shall be implemented through a tariff filed with the Commission consistent with the provisions of this subsection (c) that shall be applicable to all delivery service customers. The Commission shall initiate and conduct an investigation of the tariff in a manner consistent with the provisions of this subsection (c) and the provisions of Article IX of this Act to the extent they do not conflict with this subsection (c). The formula rate shall remain in effect at the discretion of the utility. The formula rate approved by the Commission shall do the following:

(1) Provide for the recovery of the utility's actual costs of service for the applicable 12-month period that are prudently incurred and reasonable in amount consistent with Commission practice and law. The fact that a cost differs from that incurred in a prior 12-month period or that an investment is different from that made in a prior 12-month period shall not imply the imprudence or unreasonableness of that cost or investment.

(2) Reflect the utility's actual capital structure for the applicable 12-month period, excluding goodwill, subject to a determination of prudence and reasonableness consistent with Commission practice and law.

(3) Include a cost of equity, which shall be calculated as the sum of the following:

(A) the average for the applicable 12-month period 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; and

(B) 650 basis points.

At such time as the Board of Governors of the Federal Reserve System ceases to include the monthly average yields of 30-year U.S. Treasury bonds in its weekly H.15 Statistical Release or successor publication, the monthly average yields of the U.S. Treasury bonds then having the longest duration published by the Board of Governors in its weekly H.15 Statistical Release or successor publication shall instead be used for purposes of this paragraph (3) as deemed appropriate by the Commission.

(4) Permit and set forth protocols, subject to a determination of prudence and reasonableness consistent with Commission practice and law, for the following:

(A) recovery of incentive compensation expense that is based on the achievement of operational metrics, including, but not limited to, metrics related to budget controls, outage duration and frequency, safety, customer service, efficiency and productivity, and environmental compliance. Incentive compensation expense that is based on net income or an affiliate's earnings per share shall not be recoverable under the formula rate;

(B) recovery of pension and other post-employment benefits expense based on actual costs incurred for the applicable 12-month period, provided that such costs are supported by an actuarial study;

(C) recovery of severance costs amortized over a period that is consistent with savings resulting from the severance;

(D) investment return on pension assets net of deferred tax benefits equal to the utility's long-term debt cost of capital as of the end of the applicable 12-month period;

(E) recovery of the expenses incurred related to the Commission proceeding under this subsection (c) to approve this formula rate and initial rates or to subsequent proceedings related to the formula, provided that the recovery shall be amortized over a three year period; recovery of expenses incurred related to the annual Commission proceedings under subsection (d) of this Section to review the inputs to the formula rate shall be recoverable as expenses in the 12-month period incurred;

(F) recovery of existing regulatory assets over the periods previously authorized by the Commission;

(G) historical weather normalized billing determinants; and

(H) allocation methods for common costs.

The Commission's review and order with respect to these protocols shall otherwise be consistent with Commission practice and law.

The utility shall file, together with its tariff, data based on its most recent FERC Form 1, plus projected plant additions and correspondingly updated depreciation reserve and expense for the current 12-month period, that shall populate the formula rate and set the initial delivery services rates under the formula. These initial rates shall take effect 30 days after the filing, provided, however, that the initial rates shall be subject to retroactive rate adjustments by the Commission, including, but not limited to, refunds or surcharges, that are designed to incorporate the provisions of the Commission's final order approving the formula rate structure and protocols and to give effect to the initial rates as therein approved such that the refunds or surcharges that are applied for the remainder of the period until the first rate update will take effect under subsection (d) shall enable the utility to recover the same amount of revenues the utility otherwise would have recovered had the Commission-approved initial rates been in effect as of the date the tariff was filed.

After the utility files its proposed formula rate structure and protocols and initial rates, the Commission shall initiate a docket to review and by order approve, or approve as modified, the formula rate, including the initial rates, as just and reasonable within 180 days after the date on which the tariff was filed, or, if the tariff is filed within 30 days after the effective date of this amendatory Act of the 97th General Assembly, then by December 31, 2011. Such review shall be based on the same evidentiary standards, including, but not limited to, those concerning the prudence and reasonableness of the costs incurred by the utility, the Commission applies in a hearing to review a filing for a general increase in rates under Article IX of this Act.

Subsequent changes to the formula rate, including changes to the structure or protocols, shall be made as tariff amendments and filed with the Commission as set forth in Section 9-201 of this Act, provided that any such changes shall be consistent with paragraphs (1) through (4) of this subsection (c).

After 11 years following the effective date of this amendatory Act of the 97th General Assembly, the Commission may upon petition or its own initiative, but with reasonable notice, enter upon a hearing concerning proposed changes to the formula rate, including those protocols established under paragraph (4) of this subsection (c), provided that there shall be a rebuttable presumption that the protocols are just and reasonable. These proposed changes shall be stated with particularity and accompanied by clear and convincing evidence that the changes are just and reasonable. No such change adopted by the Commission shall be applied to the calculation of the utility's rates until the next calendar year, with the rates to become effective on June 1 of the year following that calendar year, provided that the next calendar year begins no less than 90 days following the date on which the Commission issues an order adopting the change.

A participating utility that files a tariff pursuant to this subsection (c) must submit a one-time $200,000 filing fee at the time the Chief Clerk of the Commission accepts the filing, which shall be a recoverable expense.

(d) Subsequent to the Commission's issuance of an order approving the utility's formula rate and initial rates under subsection (c) of this Section, the utility shall make an annual informational filing with the Chief Clerk of the Commission setting forth its updated cost inputs to the formula rate for the applicable 12-month period and the corresponding new charges. Consistent with this subsection (d), the utility shall submit information as set forth in the Commission's rules applicable to a filing for a general increase in rates. Specifically, for each such filing, the utility shall comply with the following requirements and include the following information:

(1) File on or before May 1, with the new charges to take effect beginning with the June billing period of the current year. These charges shall take effect on the first billing day of the June billing period and remain in effect through the last billing day of the following May billing period regardless of whether the Commission enters upon a hearing pursuant to this subsection (d).

(2) The inputs to the formula rate for the applicable 12-month period shall be based on historical data from the utility's most recent annual FERC Form 1 plus projected plant additions and correspondingly updated depreciation reserve and expense for the current 12-month period. In addition, the utility shall also present, for the prior applicable 12-month period, a reconciliation of the inputs for the prior applicable period (FERC Form 1 historical data and projected plant additions) with the actual costs incurred in the prior applicable period, and set forth the applicable charge or credit, if any, resulting from the reconciliation that is incorporated in the current formula rate.

(3) The utility shall include, together with the filing of the update of cost inputs to the formula rate, supporting data and documentation for the applicable 12-month period that is consistent with the Commission's rules applicable to a filing for a general increase in rates and any rules adopted by the Commission to implement this Section. Normalization adjustments shall not be required. Provided, however, that the utility shall amortize extraordinary charges or credits that are beyond its control and non-recurring in nature, including those related to storms, if the charges or credits exceed $10,000,000 in the applicable 12-month period.

Within 45 days after the utility files its annual update of cost inputs to the formula rate, the Commission shall have the authority, either upon complaint or its own initiative, but with reasonable notice, to enter upon a hearing concerning the prudence and reasonableness of the costs incurred by the utility during the applicable 12-month period that are reflected in the inputs to the formula rate derived from the utility's FERC Form 1. The complaining party or Commission, to the extent it is acting on its own initiative, shall state each objection with particularity and provide substantial evidence in support thereof, after which the utility shall have the opportunity to rebut the evidence. The Commission shall apply the same evidentiary standards, including, but not limited to, those concerning the prudence and reasonableness of the costs incurred by the utility, in the hearing as it would apply in a hearing to review a filing for a general increase in rates under Article IX of this Act. The Commission shall not, however, have the authority in a proceeding under this subsection (d) to consider or order any changes to the structure or protocols of the formula rate approved pursuant to subsection (c) of this Section. In a proceeding under this subsection (d), the Commission shall enter its order no later than 180 days after the utility's filing of its annual update of cost inputs to the formula rate, provided that the Commission may, in its discretion, extend the period for a further period not to exceed 75 days. If, in the order, the Commission approves an adjustment to the inputs of the formula rate, then the adjustment, whether in the form of a charge or credit, with interest, shall be applied prospectively through the formula rate. The Commission's determinations of the prudence and reasonableness of the costs incurred for the applicable 12-month period shall be final upon entry of the Commission's order and shall not be subject to reopening, reexamination, or collateral attack in any other proceeding, case, docket, order, rule or regulation, provided, however, that nothing in this subsection (d) shall prohibit a party from petitioning the Commission to rehear or appeal to the courts the order pursuant to the provisions this Act.

In the event the Commission does not, either upon complaint or its own initiative, enter upon a hearing within 45 days after the utility files the annual update of cost inputs to its formula rate, then the costs incurred for the applicable 12-month period shall be deemed prudent and reasonable, and the filed charges shall not be subject to reopening, reexamination, or collateral attack in any other proceeding, case, docket, order, rule, or regulation.

(e) Nothing in subsections (c) or (d) of this Section shall prohibit the Commission from investigating, or an electric utility from filing, revenue-neutral tariff changes related to rate design of a formula rate that has been placed into effect for the utility. Following approval of an electric utility's formula rate pursuant to subsection (c) of this Section, the utility shall make a filing with the Commission during each subsequent 3-year period that either proposes revenue-neutral tariff changes or re-files the existing tariffs without change, which shall present the Commission with an opportunity to suspend the tariffs and consider revenue-neutral tariff changes related to rate design.

(f) Within 30 days after the filing of a tariff pursuant to subsection (c) of this Section, each participating utility shall develop and file with the Commission a multi-year plan that has the goal of cumulatively improving performance in each of the following categories by 15% over a 10-year period: (1) reliability, (2) safety, (3) providing opportunities for minority-owned and female-owned business enterprises consistent with State and federal law, and (4) customer service. The plan may include financial incentives. If the plan does include financial incentives, then it must also include symmetrical financial penalties and is subject to Commission review and modification following notice and hearing. The Commission shall enter an order in the proceeding within 120 days after the plan is filed. If the Commission modifies the plan, then the participating utility may elect to proceed with the plan as modified or to proceed with the plan without financial incentives.

On October 1 of each subsequent year, each participating utility shall file a report with the Commission that includes performance under each metric, a discussion of performance under the plan, and any updates to the plan. If the Commission finds in any annual period that the achieved metrics do not show material movement such that the goal is likely to be achieved and then maintained in any or all categories, then the Commission may require the participating utility to devise a corrective action plan, subject to Commission approval and oversight, to bring performance back on track toward reaching and maintaining the 15% goal.

(g) Nothing in this Section is intended to legislatively overturn the opinion issued in Commonwealth Edison Co. v. Ill. Commerce Comm'n, Nos. 2-08-0959, 2-08-1037, 2-08-1137, 1-08-3008, 1-08-3030, 1-08-3054, 1-08-3313 cons. (Ill. App. Ct. 2d Dist. Sept. 30, 2010) or impact any subsequent review by the Illinois Supreme Court of that opinion.

(220 ILCS 5/19-150 new)

Sec. 19-150. Infrastructure investment and modernization; regulatory reform.

(a) The General Assembly recognizes that for well over a century, Illinois residents and businesses have been well-served by and have benefitted from a comprehensive gas utility system. The General Assembly finds that gas utilities are now entering a new construction cycle that is needed to refurbish, modernize, and expand systems to continue to provide safe, reliable, and affordable service to the State's current and future gas customers in this newly digitized age. In particular, the General Assembly finds that it is the policy of this State that significant investments need to be made over the next decade to modernize and upgrade gas distribution systems in the State. These investments will ensure that the State's gas infrastructure will promote future economic development in the State and that the State's utilities will be able to continue to provide quality gas service to their customers, including innovative technological offerings that will enhance customer experience and choice. These investments will also ensure that the State's gas utility infrastructure continues to be safe and reliable. The introduction of performance metrics will further ensure that safety and reliability and other indicators are not just maintained but improved by more than 15% over the next decade.

The General Assembly further recognizes that, in addition to attracting capital and businesses to the State, these investments will create training opportunities for the citizens of this State, all of which will create new employment opportunities for Illinoisans at a time when they are most needed, especially for female-owned and minority-owned business enterprises. The General Assembly further finds that regulatory reform measures that increase predictability, stability, and transparency in the ratemaking process are needed to promote prudent, long-term infrastructure investment and to mutually benefit the State's gas utilities and their customers, regulators and investors.

(b) For purposes of this Section, "participating utility" means a gas utility that voluntarily elects and commits to undertake the infrastructure investment program consisting of the commitments and obligations described in this subsection (b), notwithstanding any other provisions of this Act and without obtaining any approvals from the Commission or any other agency other than as set forth in this Section, regardless of whether any such approval would otherwise be required, provided further that Illinois gas utilities that are affiliated by virtue of a common parent company may, at such utilities' election, be considered a single gas utility. The utility shall recover the expenditures made under the infrastructure investment program through the ratemaking process, including, but not limited to, the formula rate and process set forth in this Section.

During the infrastructure investment program's peak program year, it shall create approximately 400 full-time equivalent jobs, including direct jobs, contractor positions, positions that would otherwise be eliminated, and induced jobs. For purposes of this Section, "peak program year" means the consecutive 12-month period with the highest number of full-time equivalent jobs that occurs between the beginning of investment year 2 and the end of investment year 4. Beginning on the date the initial rates take effect pursuant to subsection (c) of this Section, a participating utility shall invest over a 10-year period at least $500,000,000.00 in distribution and transmission upgrades, modernization and compliance projects, and training facilities.

The investment amounts and job figures set forth in this subsection (b) are applicable to a participating utility that serves 2 million or more customers in Illinois. If a participating utility serves less than 2 million customers in Illinois, then the infrastructure investment program commitments and obligations described in this subsection (b) shall be reduced proportionately, based on the number of customers, for the utility.

The investments in the infrastructure investment program described in this subsection (b) shall be incremental to the participating utility's annual capital investment program, as defined by, for purposes of this subsection (b), the participating utility's average capital spend for calendar years 2008, 2009, and 2010 as reported in the applicable Federal Energy Regulatory Commission (FERC) Form 2 or, if the FERC Form 2 was not filed, in the applicable Form 21 ILCC.

Within 60 days after filing a tariff under subsection (c) of this Section, a participating utility shall submit to the Commission its plan, including scope, schedule, and staffing, for satisfying its infrastructure investment program commitments pursuant to this subsection (b). The submitted plan shall include a schedule and staffing plan for the current year. The plan need not allocate the work equally over the respective periods, but should allocate material increments throughout these periods commensurate with the work to be undertaken. No later than September 1 of each subsequent year, the utility shall submit to the Commission a report that includes any update to the plan, a schedule for the current year, the expenditures made for the prior year and cumulatively, and the number of full-time equivalent jobs for the prior year and cumulatively. If the utility is materially deficient in satisfying a schedule or staffing plan, then the plan must also include a corrective action plan to address the deficiency. The fact that the plan or a schedule changes shall not imply the imprudence or unreasonableness of the infrastructure investment program, plan, or schedule.

If, subsequent to completion of a corrective action plan, the Commission enters an order finding, after notice and hearing, that a participating utility did not satisfy its peak job commitment described in this subsection (b) for reasons that are reasonably within its control, then the Commission shall also determine, after consideration of the evidence, including, but not limited to, evidence submitted by the Department of Commerce and Economic Opportunity and the utility, the reduction in the number of full-time equivalent jobs during the peak program year due to the failure. The Commission shall notify the Department of any proceeding that is initiated pursuant to this paragraph. For each full-time equivalent job deficiency during the peak program year that the Commission finds as set forth in this paragraph, the participating utility shall, within 30 days after the entry of the Commission's order, pay $1,500 to a fund for training grants administered under Section 605-800 of The Department of Commerce and Economic Opportunity Law.

If the Commission finds, after notice and hearing, that a participating utility is not satisfying its investment amount commitments described in this subsection (b), then the utility shall no longer be eligible for a formula rate tariff under subsection (c) of this Section.

The fact that a participating utility invests more than the minimum amounts specified in this subsection (b) shall not imply imprudence or unreasonableness.

If a participating utility ceases to have in effect a formula rate under subsection (c) of this Section, then the participating utility's voluntary commitments and obligations under this subsection (b) shall immediately terminate, except for the utility's obligation to pay an amount already owed to the fund for training grants pursuant to a Commission order.

In meeting the obligations of this subsection (b), to the extent feasible and consistent with State and federal law, the investments under the infrastructure investment program should provide employment opportunities for all segments of the population and workforce, including minority-owned and female-owned business enterprises.

(c) A participating utility may elect to recover its costs of service through a formula rate approved by the Commission, which shall specify the cost components that form the basis of the rate charged to customers with sufficient specificity to operate in a standardized manner and be updated annually with transparent information included in the utility's most recent FERC Form 2 or, if the FERC Form 2 was not filed, Form 21 ILCC, that reflects the utility's actual costs for the applicable 12-month period. In the event the utility recovers a portion of its costs through automatic adjustment clause tariffs on the effective date of this amendatory Act of the 97th General Assembly, the utility may elect to continue to recover these costs through the tariffs, but then these costs shall not be recovered through the formula rate.

The formula rate shall be implemented through a tariff filed with the Commission consistent with the provisions of this subsection (c) that shall be applicable to all of the utility's customers. The Commission shall initiate and conduct an investigation of the tariff in a manner consistent with the provisions of this subsection (c) and the provisions of Article IX of this Act to the extent they do not conflict with this subsection (c). The formula rate shall remain in effect at the discretion of the utility. The formula rate approved by the Commission shall do the following:

(1) Provide for the recovery of the utility's actual costs of service for the applicable 12-month period that are prudently incurred and reasonable in amount consistent with Commission practice and law. The fact that a cost differs from that incurred in a prior 12-month period or that an investment is different from that made in a prior 12-month period shall not imply the imprudence or unreasonableness of that cost or investment.

(2) Reflect the utility's actual capital structure for the applicable 12-month period, excluding goodwill, subject to a determination of prudence and reasonableness consistent with Commission practice and law.

(3) Include a cost of equity, which shall be calculated as the sum of the following:

(A) the average for the applicable 12-month period 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; and

(B) 650 basis points.

At such time as the Board of Governors of the Federal Reserve System ceases to include the monthly average yields of 30-year U.S. Treasury bonds in its weekly H.15 Statistical Release or successor publication, the monthly average yields of the U.S. Treasury bonds then having the longest duration published by the Board of Governors in its weekly H.15 Statistical Release or successor publication shall instead be used for purposes of this paragraph (3) as deemed appropriate by the Commission.

(4) Permit and set forth protocols, subject to a determination of prudence and reasonableness consistent with Commission practice and law, for the following:

(A) recovery of incentive compensation expense that is based on the achievement of operational metrics, including, but not limited to, metrics related to budget controls, safety, customer service, efficiency and productivity, and environmental compliance. Incentive compensation expense that is based on net income or an affiliate's earnings per share shall not be recoverable under the formula rate;

(B) recovery of pension and other post-employment benefits expense based on actual costs incurred for the applicable 12-month period, provided that these costs are supported by an actuarial study;

(C) recovery of severance costs amortized over a period that is consistent with savings resulting from the severance;

(D) investment return on pension assets net of deferred tax benefits equal to the utility's long-term debt cost of capital as of the end of the applicable 12-month period;

(E) recovery of the expenses incurred related to the Commission proceeding under this subsection (c) to approve this formula rate and initial rates or to subsequent proceedings related to the formula, provided that the recovery shall be amortized over a 3-year period; recovery of expenses incurred related to the annual Commission proceedings under subsection (d) of this Section to review the inputs to the formula rate shall be recoverable as expenses in the 12-month period incurred;

(F) recovery of existing regulatory assets over the periods previously authorized by the Commission;

(G) historical weather normalized billing determinants; and

(H) allocation methods for common costs.

The Commission's review and order with respect to these protocols shall otherwise be consistent with Commission practice and law.

The utility shall file, together with its tariff, data based on its most recent FERC Form 2 or, if the FERC Form 2 was not filed, Form 21 ILCC, plus projected plant additions and correspondingly updated depreciation reserve and expense for the current 12-month period, that shall populate the formula rate and set the initial rates under the formula. These initial rates shall take effect 30 days after the filing, provided, however, that the initial rates shall be subject to retroactive rate adjustments by the Commission, including, but not limited to, refunds or surcharges, that are designed to incorporate the provisions of the Commission's final order approving the formula rate structure and protocols and to give effect to the initial rates as therein approved such that the refunds or surcharges that are applied for the remainder of the period until the first rate update will take effect under subsection (d), shall enable the utility to recover the same amount of revenues the utility otherwise would have recovered had the Commission-approved initial rates been in effect as of the date the tariff was filed.

After the utility files its proposed formula rate structure and protocols and initial rates, the Commission shall initiate a docket to review and by order approve, or approve as modified, the formula rate, including the initial rates, as just and reasonable within 180 days after the date on which the tariff was filed, or, if the tariff is filed within 30 days after the effective date of this amendatory Act of the 97th General Assembly, then by December 31, 2011. This review shall be based on the same evidentiary standards, including, but not limited to, those concerning the prudence and reasonableness of the costs incurred by the utility, the Commission applies in a hearing to review a filing for a general increase in rates under Article IX of this Act.

Subsequent changes to the formula rate, including changes to the structure or protocols, shall be made as tariff amendments and filed with the Commission as set forth in Section 9-201 of this Act, provided that any such changes shall be consistent with paragraphs (1) through (4) of this subsection (c).

After 11 years following the effective date of this amendatory Act of the 97th General Assembly, the Commission may upon petition or its own initiative, but with reasonable notice, enter upon a hearing concerning proposed changes to the formula rate, including those protocols established under paragraph (4) of this subsection (c), provided that there shall be a rebuttable presumption that the protocols are just and reasonable. The proposed changes shall be stated with particularity and accompanied by clear and convincing evidence that the changes are just and reasonable. No such change adopted by the Commission shall be applied to the calculation of the utility's rates until the next calendar year, with the rates to become effective on June 1 of the year following that calendar year, provided that the next calendar year begins no less than 90 days following the date on which the Commission issues an order adopting the change.

A participating utility that files a tariff pursuant to this subsection (c) must submit a one-time $200,000 filing fee at the time the Chief Clerk of the Commission accepts the filing, which shall be a recoverable expense.

(d) Subsequent to the Commission's issuance of an order approving the utility's formula rate and initial rates under subsection (c) of this Section, the utility shall make an annual informational filing with the Chief Clerk of the Commission setting forth its updated cost inputs to the formula rate for the applicable 12-month period and the corresponding new charges. Consistent with this subsection (d), the utility shall submit information as set forth in the Commission's rules applicable to a filing for a general increase in rates. Specifically, for each such filing, the utility shall comply with the following requirements and include the following information:

(1) File on or before May 1, with the new charges to take effect beginning with the June billing period of the current year. These charges shall take effect on the first billing day of the June billing period and remain in effect through the last billing day of the following May billing period regardless of whether the Commission enters upon a hearing pursuant to this subsection (d).

(2) The inputs to the formula rate for the applicable 12-month period shall be based on historical data from the utility's most recent annual FERC Form 2 or, if the FERC Form 2 was not filed, Form 21 ILCC, plus projected plant additions and correspondingly updated depreciation reserve and expense for the current 12-month period. In addition, the utility shall also present, for the prior applicable 12-month period, a reconciliation of the inputs for the prior applicable period (FERC Form 2 or Form 21 ILCC, as applicable, historical data and projected plant additions) with the actual costs incurred in the prior applicable period, and set forth the applicable charge or credit, if any, resulting from the reconciliation that is incorporated in the current formula rate.

(3) The utility shall include, together with the filing of the update of cost inputs to the formula rate, supporting data and documentation for the applicable 12-month period that is consistent with the Commission's rules applicable to a filing for a general increase in rates and any rules adopted by the Commission to implement this Section.

Within 45 days after the utility files its annual update of cost inputs to the formula rate, the Commission shall have the authority, either upon complaint or its own initiative, but with reasonable notice, to enter upon a hearing concerning the prudence and reasonableness of the costs incurred by the utility during the applicable 12-month period that are reflected in the inputs to the formula rate derived from the utility's FERC Form 2 or Form 21 ILCC, as applicable. The complaining party or Commission, to the extent it is acting on its own initiative, shall state each objection with particularity and provide substantial evidence in support thereof, after which the utility shall have the opportunity to rebut the evidence. The Commission shall apply the same evidentiary standards, including, but not limited to, those concerning the prudence and reasonableness of the costs incurred by the utility, in the hearing as it would apply in a hearing to review a filing for a general increase in rates under Article IX of this Act. The Commission shall not, however, have the authority in a proceeding under this subsection (d) to consider or order any changes to the structure or protocols of the formula rate approved pursuant to subsection (c) of this Section. In a proceeding under this subsection (d), the Commission shall enter its order no later than 180 days after the utility's filing of its annual update of cost inputs to the formula rate, provided that the Commission may, in its discretion, extend the period for a further period not to exceed 75 days. If, in the order, the Commission approves an adjustment to the inputs of the formula rate, then the adjustment, whether in the form of a charge or credit, with interest, shall be applied prospectively through the formula rate. The Commission's determinations of the prudence and reasonableness of the costs incurred for the applicable 12-month period shall be final upon entry of the Commission's order and shall not be subject to reopening, reexamination, or collateral attack in any other proceeding, case, docket, order, rule, or regulation, provided, however, that nothing in this subsection (d) shall prohibit a party from petitioning the Commission to rehear or appeal to the courts the order pursuant to the provisions this Act.

In the event the Commission does not, either upon complaint or its own initiative, enter upon a hearing within 45 days after the utility files the annual update of cost inputs to its formula rate, then the costs incurred for the applicable 12-month period shall be deemed prudent and reasonable, and the filed charges shall not be subject to reopening, reexamination, or collateral attack in any other proceeding, case, docket, order, rule, or regulation.

(e) Nothing in subsections (c) or (d) of this Section shall prohibit the Commission from investigating, or a gas utility from filing, revenue-neutral tariff changes related to rate design of a formula rate that has been placed into effect for the utility. Following approval of a gas utility's formula rate pursuant to subsection (c) of this Section, the utility shall make a filing with the Commission during each subsequent 3-year period that either proposes revenue-neutral tariff changes or re-files the existing tariffs without change, which shall present the Commission with an opportunity to suspend these tariffs and consider revenue-neutral tariff changes related to rate design.

(f) Within 30 days after the filing of a tariff pursuant to subsection (c) of this Section, each participating utility shall develop and file with the Commission a multi-year plan that has the goal of cumulatively improving performance in each of the following categories by 15% over a 10-year period: (1) reliability, (2) safety, (3) providing opportunities for minority-owned and female-owned business enterprises consistent with State and federal law, and (4) customer service. The plan may include financial incentives. If the plan does include financial incentives, then it must also include symmetrical financial penalties and is subject to Commission review and modification following notice and hearing. The Commission shall enter an order in the proceeding within 120 days after the plan is filed. If the Commission modifies the plan, then the participating utility may elect to proceed with the plan as modified or to proceed with the plan without financial incentives.

On October 1 of each subsequent year, each participating utility shall file a report with the Commission that includes performance under each metric, a discussion of performance under the plan, and any updates to the plan. If the Commission finds in any annual period that the achieved metrics do not show material movement such that the goal is likely to be achieved and then maintained in any or all categories, then the Commission may require the participating utility to devise a corrective action plan, subject to Commission approval and oversight, to bring performance back on track toward reaching and maintaining the 15% goal.

(g) Nothing in this Section is intended to legislatively overturn the opinion issued in Commonwealth Edison Co. v. Ill. Commerce Comm'n, Nos. 2-08-0959, 2-08-1037, 2-08-1137, 1-08-3008, 1-08-3030, 1-08-3054, 1-08-3313 cons. (Ill. App. Ct. 2d Dist. Sept. 30, 2010) or impact any subsequent review by the Illinois Supreme Court of that opinion.

Section 99. Effective date. This Act takes effect upon becoming law.".