                                   2015 IL App (1st) 140275
                                                                            THIRD DIVISION
                                                                                July 29, 2015

Nos. 1-14-0275 & 1-14-0403 (cons.)


THE PEOPLE OF THE STATE OF ILLINOIS, ex rel.               )
LISA MADIGAN, ATTORNEY GENERAL OF                          )
THE STATE OF ILLINOIS, and CITIZENS                        )
UTILITY BOARD,                                             )
                                                           )
      Petitioners,                                         )
                                                           )
v.                                                         )       Petition for Review of
                                                           )       Orders of the Illinois
ILLINOIS COMMERCE COMMISSION;                              )       Commerce Commission
COMMONWEALTH EDISON COMPANY; ILLINOIS                      )       in ICC Docket No. 13-0533
INDUSTRIAL ENERGY CONSUMERS;                               )
EXXONMOBIL POWER & GAS SERVICES, INC.;                     )
STERLING STEEL COMPANY; and CITY OF                        )
CHICAGO,                                                   )
                                                           )
      Respondents.                                         )


      JUSTICE MASON delivered the judgment of the court with opinion. 1
      Presiding Justice Pucinski and Justice Lavin concurred in the judgment and opinion.

                                           OPINION

¶1           In these consolidated appeals, petitioners, the State of Illinois, ex rel. Lisa

      Madigan, Attorney General of the State of Illinois (People), and the Citizens Utility

      Board (CUB) (collectively petitioners), appeal from an order of the Illinois Commerce

      Commission (Commission) determining that respondent, Commonwealth Edison

      (ComEd), was entitled to calculate interest on the full amount of under collected revenues

      pursuant to the annual reconciliation provisions of the Energy Infrastructure

      Modernization Act (220 ILCS 5/16-108.5(d)(1) (Act) (West 2012)). Petitioners contend

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                 This matter was recently assigned to Justice Mason.
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      that the Commission erred in not requiring that the interest calculation be net of

      Accumulated Deferred Income Taxes (ADIT) attributable to the under-collected

      revenues. Finding no error in the Commission's order, we affirm.

¶2                                      BACKGROUND

¶3                       A. Energy Infrastructure Modernization Act

¶4           In Commonwealth Edison Co. v. Illinois Commerce Comm'n, 2014 IL App (1st)

      130302, we recently addressed the history and purpose of the Act:

                     "In 2011, the legislature enacted the Energy Infrastructure Modernization

             Act, which is section 16-108.5 of the Public Utilities Act (220 ILCS 5/16-108.5

             (West 2012)), to stimulate new investments by utilities in the State's energy

             infrastructure. The Act provides for guaranteed payment of utilities' costs and a

             rate of return for its investments in infrastructure. 'A public utility is entitled both

             to recover in its rates certain operating costs and to earn a return on its rate base

             (i.e., the amount of its invested capital).' [Citation.]

                     In exchange for this legislative guarantee of payment, the utility must

             commit to making very substantial investments in updating and improving its

             facilities, and in hiring new employees. 220 ILCS 5/16-108.5(b) (West 2012). A

             public utility's participation in the Act is voluntary. 220 ILCS 5/16-108.5(b)

             (West 2012). ComEd is a participating utility and committed to invest an

             estimated $2.6 billion in infrastructure on top of its normal annual capital

             investment program over the next ten years. 220 ILCS 5/16-108.5(b)(2) (West

             2012). Under the Act the formula to establish rates enables ComEd to make

             planned substantial investment increases in its capital commitment by providing it


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             with greater certainty of timely cost recovery than it would have received under

             previous [ratemaking procedures]." Id. ¶¶ 4-5.

¶5           The "performance-based" formula rate is designed to operate in a standardized

      manner and is "updated annually with transparent information that reflects the utility's

      actual costs to be recovered during the applicable rate year." 220 ILCS 5/16-108.5(c)

      (West 2012).    The Act generally requires that the formula rate approved by the

      Commission "[p]rovide for the recovery of the utility's actual costs of delivery services

      that are prudently incurred and reasonable in amount consistent with Commission

      practice and law." 220 ILCS 5/16-108.5(c)(1) (West 2012). In order to place the issue

      raised here in context, we describe the ratemaking process envisioned by the Act.

¶6           Public utilities like ComEd are subject to both federal and state regulation. The

      Commission sets rates for power distributed in Illinois, while the Federal Energy

      Regulatory Commission (FERC) regulates interstate transmission of energy. See 220

      ILCS 5/16-101A(d) (West 2012); 16 U.S.C. § 824(a), (b)(1) (2012). Under federal law,

      ComEd is required to file annually a FERC Form 1, which sets out comprehensive

      financial and operating data for the previous year. Commonwealth Edison, 2014 IL App

      (1st) 130302, ¶ 15. Under the Act, the Commission sets rates for any given rate year on a

      preliminary basis using cost data for the prior year reflected in ComEd's most recently

      filed FERC Form 1, plus projected plant additions and updated depreciation and expense

      corresponding to those expected additions, resulting in ComEd's anticipated reasonable

      and prudent costs of service during the upcoming rate year. 220 ILCS 5/16-108.5(c)

      (West 2012). Following the calendar year for which rates were projected and once actual

      figures for that rate year are known, the Act contemplates that ComEd will compare its


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      anticipated and actual revenue requirement and calculate the difference, which, if the

      projection underestimated actual costs of service, ComEd will recover from ratepayers or,

      if the projection exceeded actual costs of service, ComEd will refund to its customers.

      220 ILCS 5/16-108.5(d)(1) (West 2012).          We refer to the difference—positive or

      negative—as the reconciliation balance.

¶7           Thus, for example, ComEd's 2014 projected rate requirement was based, in part,

      on cost data from its 2013 FERC Form 1. In 2015, once ComEd's actual costs of service

      for 2014 were known, ComEd calculated the reconciliation balance and will either collect

      or refund that amount in 2016. This process repeats each year.

¶8           The Act recites the purpose of the reconciliation:

                     "Notwithstanding anything that may be to the contrary, the intent of the

             reconciliation is to ultimately reconcile the revenue requirement reflected in rates

             for each calendar year *** with what the revenue requirement would have been

             had the actual cost information for the applicable calendar year been available at

             the filing date." Id.

¶9           At the time of the rate proceedings at issue here, subsection 16-108.5(d)(1)

      provided:

             "Any over-collection or under-collection indicated by such reconciliation shall be

             reflected as a credit against, or recovered as an additional charge to, respectively,

             with interest, the charges for the applicable rate year." Id.

      This provision was amended in 2013 to specify that interest should be "calculated at a

      rate equal to the utility's weighted average cost of capital approved by the Commission

      for the prior rate year." 220 ILCS 5/16-108.5(d)(1) (West Supp. 2013). We discuss


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       below the circumstances and significance of this amendment.

¶ 10           The issue here focuses on whether interest should be calculated on the entire

       reconciliation balance or whether ADIT should be deducted from the balance prior to the

       calculation of interest. ADIT reflects the temporary timing difference between when an

       expense (or revenue) item is recognized on the company's books versus when the

       company recognizes that expense (or revenue) on its tax return. As we observed in

       Ameren Illinois Co. v. Illinois Commerce Comm'n, 2013 IL App (4th) 121008, ¶ 34,

       ADIT "quantifies the income taxes that are deferred when the tax law provides for

       deductions with respect to an item in a year other than the year that the item is treated as

       an expense for financial reporting purposes." (Internal quotation marks omitted.) As

       applied here, the timing difference means that although ComEd can recognize or "book"

       the reconciliation balance (and the associated ADIT liability) in 2015 because, due to the

       Act's provisions, it is probable that ComEd will realize that revenue in 2016, ComEd's

       obligation to pay income tax on that revenue is postponed until it is actually received in

       2016.

¶ 11           Finally, the Act imposes limits on ComEd's calculated return on equity. To the

       extent that collecting or refunding the reconciliation balance produces a higher or lower

       rate of return than the limits specified in the Act, the rate of return is adjusted to keep the

       prior rate year's actual return within statutory limits. 220 ILCS 5/16-108.5(c)(5) (West

       2012). These limits are commonly referred to as the Return on Equity (ROE) Collar.

¶ 12                                   B. Procedural History

¶ 13           Following the 2013 amendments to the Act, on May 13, 2013, ComEd filed

       proposed tariff pages and revised revenue requirements to implement the amendments.


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       On June 5, 2013, the Commission approved ComEd's revised revenue requirements after

       finding that the proposed tariff changes complied with the amendments.

¶ 14          On September 4, 2013, the People filed a complaint with the Commission alleging

       that certain changes approved by the Commission produced excessive, unjust,

       unreasonable and unlawful rates in violation of the Act. Ultimately, the Commission

       initiated its own investigation into the matter and identified three issues to be addressed:

       whether ComEd's May 30 tariff filing correctly calculated (1) interest on the

       reconciliation balance by "grossing up" the weighted average cost of capital to account

       for the income tax effect of the portion of interest attributable to equity financing (2) the

       ROE Collar and (3) interest on the full reconciliation balance as opposed to the

       reconciliation balance net of ADIT. The order initiating the investigation designated

       ComEd as the respondent. In addition to the People and CUB, the City of Chicago and

       the Illinois Industrial Energy Consumers appeared or intervened as parties.

¶ 15          After discovery and exchange of information, the Commission conducted an

       evidentiary hearing on October 24, 2013. Written testimony of various experts and

       exhibits were admitted into evidence. We further discuss below the substance of the

       expert testimony. Following the hearing, the parties submitted briefs.

¶ 16          As relevant to the issue on appeal, petitioners argued that ComEd realized a cash

       benefit from its deferred obligation to pay income tax on the reconciliation balance and

       that allowing ComEd to calculate interest on the full reconciliation balance, without

       deducting ADIT, allowed the recovery of excessive rates.           ComEd challenged this

       assertion contending that to the extent in any given rate year, the revenues it received

       were less than its actual revenue requirement, it incurred a carrying cost for the entire


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       shortfall and that netting ADIT from the interest calculation on the reconciliation balance

       would under compensate ComEd for this expense.

¶ 17          On November 13, 2013, the administrative law judge (ALJ) issued a proposed

       order for the Commission's review. After considering exceptions to the ALJ's proposed

       findings, the Commission entered its order on November 26, 2013.

¶ 18          As it relates to this appeal, the Commission found that the interest provision in

       subsection (d)(1) of the Act was ambiguous given that it did not specify one way or the

       other whether interest should be calculated on the entire reconciliation balance or on the

       net balance after deduction of ADIT. Resorting to principles of statutory construction,

       the Commission concluded that ComEd was entitled to calculate interest on the full

       reconciliation balance utilizing a rate equal to ComEd's weighted average cost of capital

       for the prior year. The Commission first reasoned that because the legislature had

       specified in one section of the Act that certain calculations be made on a "net" basis and

       had also referred in another provision to a calculation "adjusted for taxes," an

       interpretation that required ADIT to be deducted from the reconciliation balance prior to

       the calculation of interest under subsection (d)(1) would read into the Act "exceptions,

       limitations, or conditions the legislature did not express." The Commission also noted

       that issues regarding subsection (d)(1)'s clarity, including the method of computing

       interest on reconciliation balances, had been raised in a prior proceeding. Although the

       legislature later amended the subsection to legislatively overrule the result reached by the

       Commission on another issue, it did not change or clarify the method of computing

       interest on the reconciliation balance. Given that the legislature had an opportunity to

       clarify the issue, the Commission viewed its failure to do so as supporting the


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       interpretation the Commission adopted here. The Commission concluded its findings on

       this issue with the observation that if, "[i]n the future, [ ] further arguments from the

       parties are presented or clarity from the legislature is provided on this topic, the

       Commission will revisit the issue."

¶ 19          The Commission further ruled against ComEd on the first issue of whether the

       weighted average cost of capital rate used to calculate interest on the reconciliation

       balance was appropriately "grossed up" for the income tax effect of that portion of the

       rate attributable to equity financing. The Commission found, as it did in connection with

       the ADIT issue, that the legislature had specified a rate of return in the Act and that

       ComEd's position would impose conditions on that calculation not expressed in the Act.

       Finally, the Commission rejected petitioners' proposal that an average rate base, as

       opposed to a year-end rate base, be used for purposes of calculating the ROE Collar.

¶ 20          The People, CUB and ComEd each sought rehearing before the Commission.

       Those applications were denied on January 15, 2014. The People, CUB and ComEd then

       timely initiated this action for administrative review pursuant to Illinois Supreme Court

       Rule 335 (eff. Feb. 1, 1994) and section 10-201 of the Public Utilities Act (220 ILCS

       5/10-201 (West 2012)). The parties' respective appeals were consolidated. On June 9,

       2014, ComEd voluntarily dismissed its appeal (No. 1-14-0114), leaving the appeals filed

       by the People (No. 1-14-0275) and CUB (No. 1-14-0403), both of which concern only

       the third issue addressed by the Commission.




¶ 21                                         ANALYSIS



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¶ 22           The scope of review of a Commission order is set out in section 10-201 of the

        Public Utilities Act. Id. Under this provision, Commission orders are deemed prima

        facie reasonable and the burden is on the party appealing the order to overcome that

        presumption. 220 ILCS 5/10-201(d) (West 2012); People ex rel. Madigan v. Illinois

        Commerce Comm'n, 2011 IL App (1st) 101776, ¶ 6 (quoting Commonwealth Edison Co.

        v. Illinois Commerce Comm'n, 398 Ill. App. 3d 510, 514 (2009)). Commission orders are

        subject to reversal when the Commission's findings are not supported by substantial

        evidence. 220 ILCS 5/10-201(e)(iv)(A) (West 2012). Notwithstanding the statute's

        reference to "substantial evidence," our supreme court has held that the Commission's

        factual findings must be upheld unless they are contrary to the manifest weight of the

        evidence. People ex rel. Hartigan v. Illinois Commerce Comm'n, 148 Ill. 2d 348, 367

        (1992); see also Commonwealth Edison Co. v. Illinois Commerce Comm'n, 2014 IL App

        (1st) 122860, ¶ 58 (applying manifest weight standard). Findings of fact are deemed

        contrary to the manifest weight of the evidence only when an opposite conclusion is

        clearly evident from the record. Continental Mobile Telephone Co. v. Illinois Commerce

        Comm'n, 269 Ill. App. 3d 161, 171 (1994). As the parties challenging the Commission's

        order, petitioners must affirmatively demonstrate that the conclusion opposite to that

        adopted by the Commission is clearly evident. Id.

¶ 23	          We accord deference to decisions of the Commission in light of its expertise and

        experience in the complex field of utility regulation. Archer-Daniels-Midland Co. v.

        Illinois Commerce Comm'n, 184 Ill. 2d 391, 397 (1998); Commonwealth Edison Co. v.

        Illinois Commerce Comm'n, 398 Ill. App. 3d 510, 514 (2009). Where the Commission's




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       decision involves construction of a statute, the extent of that deference depends on

       whether the statute is ambiguous.

¶ 24          When the Commission construes an unambiguous statute, the agency's

       interpretation is not binding on the court (People ex rel. Madigan, 2011 IL App (1st)

       101776, ¶ 6) and the court need not defer to the agency's interpretation. But although

       agency interpretations of ambiguous statutory provisions are likewise not binding, we

       give "substantial weight and deference to an interpretation of an ambiguous statute by the

       agency charged with the administration and enforcement of the statute."             (Internal

       quotation marks omitted.) Id. This is particularly true when the interpretation draws on

       the agency's expertise and experience and we will not substitute our own construction of

       an ambiguous statute for a reasonable interpretation adopted by the agency charged with

       its administration. Quality Saw & Seal, Inc. v. Illinois Commerce Comm'n, 374 Ill. App.

       3d 776, 781 (2007) ("if reasonable readers of a statute could differ over the extent of the

       regulatory authority it confers, we defer to the agency's interpretation if the interpretation

       is defensible").

¶ 25          As in any other case involving the construction of a statute, our review is de novo.

       Ameren, 2013 IL App (4th) 121008, ¶ 18.              We will not reverse a Commission

       interpretation of law unless it is erroneous.      Illinois Bell Telephone Co. v. Illinois

       Commerce Comm'n, 282 Ill. App. 3d 672, 676 (1996).

¶ 26          Although ComEd argues that subsection (d)(1) is not ambiguous, we conclude the

       Commission correctly determined that the provision was open to more than one

       reasonable interpretation and was thus ambiguous.          As the Commission noted, this

       provision fails to address the method of computing interest on the reconciliation balance


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       and so it is only by resort to interpretative aids other than the language of the provision

       itself that the intent of the legislature can be discerned.

¶ 27           Normally, the language of a statute is the best indicator of its meaning. Solon v.

       Midwest Medical Records Ass'n, 236 Ill. 2d 433, 440 (2010) (citing Blum v. Koster, 235

       Ill. 2d 21, 29 (2009)). But when statutory language is ambiguous and susceptible to more

       than one interpretation, both of which are reasonable, it is appropriate to resort to other

       aids to construction to determine legislative intent. Id. (citing Landis v. Marc Realty,

       L.L.C., 235 Ill. 2d 1, 11 (2009)).

¶ 28           The Commission further found, and we agree, that there is support for both

       interpretations advocated by the parties. 2 Experts for petitioners opined that allowing

       interest to be calculated on the full reconciliation balance fails to take into account the

       cash benefit realized by ComEd as a result of its delayed obligation to pay income tax on

       the revenue shortfall. Because, during the current rate year, ComEd records revenue

       expected to be received in the following year, it likewise records a deferred income tax

       expense related to that revenue. According to petitioners' experts, the net impact is that

       ComEd records higher earnings due to the reconciliation revenue, but delays payment of

       the income tax associated with those higher earnings until the revenue is actually

       received from customers, a result they assert provides a cash benefit to the utility.

       Consequently, they reason that the out-of-pocket cost to ComEd as a result of the

       reconciliation balance is the after-tax amount of the balance and that interest should be

       calculated only on that amount.


               2
                Indeed, before the Commission, CUB took the position that because subsection
       (d)(1) did not specifically address the issue, the proper interpretation was up to the
       Commission.

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¶ 29           Petitioners' experts further observed that netting ADIT from interest calculations

       was consistent with generally accepted accounting principles (GAAP) and standard

       regulatory practice that matches ADIT to the associated assets included in rate base, thus

       recognizing the cash benefit to the utility of the accounting treatment.

¶ 30           ComEd counters that petitioners' experts failed to take into account the carrying

       costs incurred by the utility on the revenue shortfall, which ComEd must finance for two

       years prior to its recovery. Thus, although ComEd is able to defer payment of income tax

       associated with the reconciliation balance, it must finance the entire shortfall, including

       the deferred tax amount, and a formula rate that computes interest only on the balance net

       of ADIT would not allow ComEd to recover the full cost associated with the

       reconciliation balance.

¶ 31           ComEd's expert, Christine Brinkman, further articulated why ADIT in the context

       of rate base and ADIT in the context of a reconciliation balance are different. ADIT is

       deducted from rate base (comprised of investor funds on which the utility is allowed to

       earn a return) to recognize the cash benefit realized from the excess of tax over book

       depreciation. Brinkman explained that assets may, for book purposes, depreciate over 30

       years, but for income tax purposes, those same assets depreciate over 5 years. Given the

       larger depreciation deduction for tax purposes, ComEd's taxes payable are reduced in the

       current rate year, resulting in cash available (from ratepayers) to fund rate base

       investments. In contrast, the reconciliation balance provides no cash to ComEd until it is

       collected. Thus, in this context, ADIT provides no benefit to the utility in the current rate

       year and the entirety of the shortfall must be financed by ComEd through investor

       supplied funds until it is collected.


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              A simple hypothetical illustrates the difference in outcomes. If we assume an

       under-collection of revenues of $100,000, a 10% interest rate and an effective tax rate of

       40%, the two approaches produce the following results:

       Calculation of Interest before ADIT              Calculation of Interest after ADIT

       Undercollection:               $100,000          Undercollection:             $100,000

       Plus Interest at 10%:           +10,000          Less ADIT:                   - 40,000

       Less ADIT on balance:           - 44,000         Plus Interest at 10%:        + 6,000

                                                        Tax on Balance ($106,000):      42,000

       Net of tax recovery:            $ 66,000         Net of tax recovery:          $ 64,000

       Hypothesizing an over recovery of revenues in the same amount, requiring a refund of

       the reconciliation balance plus interest to ratepayers, produces the same result, i.e.,

       calculating interest without netting ADIT results in a greater net of tax recovery to

       ComEd's customers.

¶ 32          As noted, the Commission did not expressly address the question from an

       accounting standpoint or determine, as a factual matter, whether ComEd realized a cash

       benefit from ADIT on the reconciliation balance. Rather, the Commission determined

       legislative intent regarding the alternative approaches by examining other provisions of

       the Act as well as legislative action following a previous rate proceeding, which involved

       the application of subsection (d)(1). Both of these approaches are acceptable aids to

       statutory construction in the case of an ambiguous statute. See State Bank of Cherry v.

       CGB Enterprises, Inc., 2013 IL 113836, ¶ 56 (" '[w]hen the legislature uses certain

       language in one part of a statute and different language in another, we may assume

       different meanings were intended' " (quoting People v. Hudson, 228 Ill. 2d 181, 193


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       (2008))); People v. Marshall, 242 Ill. 2d 285, 292-93 (2011) (court will not view

       language of ambiguous statute in isolation, but will consider other relevant provisions of

       the statute (citing People v. Beachem, 229 Ill. 2d 237, 243 (2008))); In re Marriage of

       O'Neill, 138 Ill. 2d 487, 496 (1990) (" '[w]here the legislature chooses not to amend a

       statute after a judicial construction, it will be presumed that it has acquiesced in the

       court's statement of the legislative intent' " (quoting Miller v. Lockett, 98 Ill. 2d 478, 483

       (1983))); Stevens v. Lou's Lemon Tree, Ltd., 187 Ill. App. 3d 458, 464 (1989)

       ("Amendments to a statute *** are assumed to be enacted with the legislature's

       knowledge of judicial construction of the law."). We cannot say that the Commission's

       approach was unreasonable or that the resulting interpretation was erroneous.

¶ 33          The Commission first identified other provisions of the Act in which the

       legislature specifically directed adjustments to an amount or a balance. Specifically,

       section 108.5(c) of the Act (220 ILCS 5/16-108.5(c) (West 2012)) directs that amounts

       related to projected plant additions are included in rate base on a net basis considering

       "updated depreciation reserve and expense." Also, the Act's formula for the ROE Collar

       calculation in section 108.5(c)(5) expressly requires that the calculation be "adjusted for

       taxes." 220 ILCS 5/16-108.5(c)(5) (West 2012). The Commission reasoned that because

       in other provisions of the Act, the legislature imposed "exceptions, limitations or

       conditions" on required calculations, its failure to likewise condition or otherwise limit

       the calculation of interest on the reconciliation balance meant that the entire balance

       should bear interest, not the "net" balance or the balance "adjusted for" ADIT.

¶ 34          Although petitioners fault the Commission's reasoning on this point, we find it

       persuasive. The legislature easily could have defined the manner in which "interest"


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       should be calculated on the "balance," but unlike other provisions of the Act, chose not

       to. We view this as a reliable indicator that no further limitations were intended. See

       Davis v. Toshiba Machine Co., America, 186 Ill. 2d 181, 186 (1999) (had legislature

       intended to restrict application of statute of repose in product liability cases to latent

       injuries, "it would have inserted that limitation").

¶ 35           The Commission also found it significant that the legislature failed to amend the

       language regarding the interest calculation following the Commission's decision in a prior

       proceeding before the Commission to consider the Act's interest provision. In ICC

       Docket No. 11-0721, the first proceeding following the Act's effective date, the

       Commission addressed issues regarding the rate to be used in calculating interest on the

       reconciliation balance under subsection (d)(1). Commonwealth Edison Co., Ill. Com.

       Comm'n No. 11-0721, at 33-36 (Order on Rehearing Oct. 3, 2012). Specifically, ComEd

       contended that the rate should be equal to its weighted average cost of capital.

       Commission staff advocated utilizing a rate equal to an AAA-rated bond for two years

       (the period of time during which the balance—positive or negative—is carried by

       ComEd). The Commission ultimately adopted a hybrid approach that calculated the rate

       taking into account ComEd's cost of capital, the nature of the obligation and the

       applicable borrowing period, resulting in a lower rate than ComEd's weighted average

       cost of capital.

¶ 36           In the course of the prior proceedings, although it did not resolve the issue, the

       Commission also addressed the People's contention—identical to the argument advanced

       here—that interest should be calculated on the reconciliation balance after the deduction

       of ADIT to assure that consumers receive the benefit of income tax deferrals. ComEd


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       contended that the deferred income tax liability provided no source of cash to offset the

       revenue shortfall. The Commission "declined to adopt" the People's position, stating:

                      "ComEd contends that this recommendation does not provide ComEd with

                      cash.   [The People] provide little information establishing that this

                      procedure is within generally accepted accounting procedures or that it

                      would of benefit to ComEd or to ratepayers." Commonwealth Edison Co.,

                      Ill. Com. Comm'n No. 11-0721, at 167 (Final Order, May 29, 2012).

¶ 37          As noted above, following the Commission's decision, the legislature amended

       subsection (d)(1) to overrule the Commission's determination as to the appropriate rate of

       interest, specifically directing that the rate to be used in calculating interest on the

       reconciliation balance is the utility's weighted average cost of capital. At the same time,

       although the legislature was undoubtedly aware of the People's contention that the same

       subsection should be interpreted to require the deduction of ADIT prior to the calculation

       of interest, the legislature neither adopted that position via amendment nor did it

       otherwise clarify subsection (d)(1).

¶ 38          Petitioners discount the significance of the legislature's failure to further define

       the "balance" on which interest is calculated. They argue that since the Commission did

       not actually decide the issue in the prior proceedings, but rather declined to address it for

       lack of evidence, the legislature's inaction should not be interpreted as approving

       ComEd's position. While we agree that the Commission's act in declining to adopt the

       People's position for lack of evidence is not the functional equivalent of a decision on the

       merits, the salient point is that when it amended subsection (d)(1), the legislature would

       have been aware of the dispute. Since it was amending this very subsection, it would


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       have been logical, therefore, to clarify the issue if, in fact, the legislature agreed that

       interest should be calculated on the "net" reconciliation balance or the balance "adjusted

       for taxes." Consequently, we believe the Commission's properly found the legislature's

       failure to act to be indicative of the legislature's view that the "balance, with interest"

       means the whole balance and not some derivative thereof.

¶ 39             Petitioners contend that the Commission acknowledged that petitioners' position

       on this issue had "merit" in that it was consistent with GAAP and standard regulatory

       practice, but declined to adopt it because the Commission believed it lacked authority to

       do so. We disagree, as does the Commission, with this explanation for the Commission's

       ruling.

¶ 40             First, the Commission points out, it has not been "standard regulatory practice" to

       deduct ADIT from reconciliation balances for purposes of calculating interest. While

       longstanding practice has been to deduct ADIT from rate base, there is no similar history

       with respect to reconciliation balances given the Act's recent vintage. And we find

       persuasive Brinkman's explanation of the difference that context makes in assessing

       whether ADIT results in a cash benefit to the utility given that, in the reconciliation

       balance context, both the revenue and the corresponding tax liability will be received and

       paid, respectively, in the future.      Thus, petitioner's emphasis on the Commission's

       reference to standard regulatory practice is misplaced.

¶ 41             For the same reason, Ameren, 2013 IL App (4th) 121008, is inapposite. Ameren

       dealt with the "standard regulatory practice" of deducting ADIT from rate base, a concept

       with which ComEd does not disagree. Because, as explained above, ADIT resulting from

       the difference between book and tax depreciation provides a source of cash to the utility,


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Nos. 1-14-0275 & 1-14-0403 (cons.)

       Ameren determined that failing to net ADIT from rate base would "allow [the utility]

       what amounts to an interest -free loan at ratepayers' expense." Id. ¶ 39. Here, in contrast,

       ComEd presented credible arguments that ADIT associated with a reconciliation balance

       provides no cash benefit to a utility given that the revenues associated with the deferred

       tax liability will not be realized until future rate years. Thus, unlike ADIT in the context

       of rate base, ADIT associated with a reconciliation balance does not reduce the utility's

       current tax liability nor does it afford the utility a source of funds at its customers'

       expense.

¶ 42          Further, while GAAP dictates the methodology for recording revenue and

       expense items for accounting purposes, it does not purport to predict whether the

       accounting treatment results in a "cash benefit" to the business, which was the focus of

       the parties' arguments before the Commission.         For this reason, the Commission's

       comment that the "concept" of netting ADIT against the reconciliation balance is

       consistent with GAAP is not the same as a finding that ADIT must be deducted under the

       language of the statute or that the failure to deduct ADIT prior to calculating interest on

       the balance is inconsistent with GAAP.

¶ 43          Petitioners contend that the tentative nature of the Commission's ruling evidenced

       by its stated willingness to revisit the issue should circumstances warrant indicates that

       the Commission is intimidated by recent legislative overrides of its rulings and has thus

       abdicated its statutory directive to establish rates, "which it shall find to be just and

       reasonable."   220 ILCS 5/9-201(c) (West 2012).            We disagree.     We view the

       Commission's statement in this regard as an acknowledgement that this is the first

       definitive resolution of this issue. As noted, although the People raised this issue in a


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Nos. 1-14-0275 & 1-14-0403 (cons.)

       prior proceeding, the Commission did not address the issue on its merits, instead

       declining to adopt the People's position for lack of supporting evidence.               The

       Commission has now considered additional evidence and arguments advanced by all

       parties and has reaffirmed its prior decision not to adopt the People's proposal. We view

       the Commission's further statement of its willingness to consider this issue in future

       proceedings as nothing more than a recognition that the legislature may opt to consider

       further amendments to the Act.

¶ 44          As the Commission notes, its observation that there "may be merit" to petitioners'

       proposal is not an indication that ComEd's position lacks merit or that the Commission

       believes petitioners' interpretation of subsection (d)(1) is the correct one. Indeed, for the

       reasons we have articulated above, the Commission found, we believe correctly, that the

       interpretation advocated by ComEd was consistent with legislative intent.              Once

       legislative intent is determined, the Commission is not free to make findings inconsistent

       with that intent, even if the Commission might have ruled otherwise had the matter been

       committed to its discretion.     See Illinois Bell Telephone Co. v. Illinois Commerce

       Comm'n, 283 Ill. App. 3d 188, 207 (1996) ("It is impermissible for the Commission to

       substitute its reasonableness standard for the legislature's absolute standard."). Certainly

       petitioners have not sustained their burden to identify anything in the language of

       subsection (d)(1) or its legislative history that compels a finding that ADIT must be

       deducted from a reconciliation balance prior to the calculation of interest. Thus, we

       cannot say that the conclusion opposite to the one reached by the Commission is "clearly

       evident." Continental Mobile Telephone Co., 269 Ill. App. 3d at 171.




                                              - 19 ­
Nos. 1-14-0275 & 1-14-0403 (cons.)

¶ 45            Finally, contrary to petitioners' contention, nothing in the record before the

       Commission leads us to conclude that the adoption of ComEd's position results in the

       recovery of unjust or unreasonable rates. Fundamentally, this argument overlooks the

       fact that the benefit flowing from the higher interest calculation inures to the utility in

       some years and ratepayers in others.       Specifically, in years where ComEd recovers

       revenues in excess of its actual revenue needs and must refund the excess to its

       customers, the method of calculating interest on the reconciliation balance adopted by the

       Commission results in a higher refund to ratepayers. Under these circumstances, it

       cannot be said that the interest rate calculation approved by the Commission produces

       rates that unjust and unreasonable.

¶ 46                                     CONCLUSION

¶ 47            The Commission had the power to interpret the provisions of the Act relating to

       the calculation of interest on the reconciliation balance, which it exercised in accordance

       with well-established principles of statutory construction. Nothing in the Act or its

       legislative history compels the finding that the only possible interpretation of the interest

       provision is that advocated by petitioners and we therefore we affirm the Commission's

       order.

¶ 48            Affirmed.




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