In the closing days of its November term, the Illinois Supreme Court agreed to decide an issue of potentially enormous consequence to a major Illinois utility, agreeing to review an order of the Illinois Commerce Commission requiring a major utility to enter into sourcing agreements with FutureGen 2.0, a non-profit corporation organized to create a coal-fueled near-zero emissions electric power plant. In Commonwealth Edison Co. v. Illinois Commerce Commission, Division 2 of the First District Appellate Court affirmed an order of the Commerce Commission.

In 1997, the Illinois legislature sought to restructure the electric industry in order to promote competition and customer choice in the supply of electricity by separating the sectors of electric generation and electricity delivery. Before an Alternative Retail Electric Supplier (“ARES”) can get a certificate of service authority from the Illinois Commerce Commission, it must demonstrate that it sources some of its electricity from clean coal facility. The petitioner utility is required to supply electricity to residential and small commercial customers within its service territory who have not chosen an ARES.

The Illinois Power Agency Act provides that the Illinois Power Agency Act is tasked with procuring electricity for the petitioner utilities. The Act further provides that by 2025, one quarter of the electricity used in the State shall be generated by cost-effective clean coal facilities. In late 2013, the Agency filed a proposed procurement plan with the Commission requiring the petitioner utilities to source electricity from FutureGen. The Commission concluded that requiring all seventy ARES to enter into sourcing agreements with FutureGen would represent an unwarranted administrative burden. Accordingly, the Commission ultimately entered an order requiring only the petitioner utilities to enter into the sourcing agreements in an amount sufficient to serve both their own eligible retail customers and the retail customers of the ARES.  The utilities would recover the additional costs through a competitively neutral charge added to ARES’ customers’ bills. The utilities sought administrative appeal of the Commission’s order.

On appeal, the petitioner utilities agreed that the Act permits the Illinois Power Agency to develop a procurement plan requiring the utilities to enter into sourcing agreements with a retrofitted clean coal facility. However, they argued that the Agency’s authority was limited to the utilities’ own customers; the Agency, they insisted, had no authority to compel them to acquire electricity for the ARES customers. The Court of Appeal disagreed, holding that since the Commission had the authority to compel both the utilities and ARES separately to enter into such agreements, it followed that the Commission had the power to compel the utilities to enter into such agreements on behalf of the ARES customers.

Next, two of the petitioners argued that the Commission’s order violated the dormant commerce clause, arguing that by requiring the utilities to enter into a sourcing agreement with FutureGen, the Commission had effectively excluded from consideration out-of-state clean electric sources. The petitioners also argued that seventy percent of the utility’s rate cap for clean coal electricity was devoted to FutureGen’s output, effectively excluding others from competing in the Illinois market. The Appellate Court disagreed, holding that because neither of the petitioners expressed any interest in producing clean coal electricity or were otherwise adversely impacted by the Commission’s order, they lacked standing to make their constitutional challenge.

Justice Pucinski dissented, finding that the order exceeded the Commission’s authority.

We expect Commonwealth Edison to be decided in eight to ten months.

Image courtesy of Flickr by epsos (no changes).