OPINION ORDER
KARL FORESTER, Senior Judge
This matter is before the Court upon the Motion of the Defendant, Herbie Q. Booker, pursuant to 28 U.S.C. § 2255, to vacate, set aside, or correct a sentence [DE #88] and the responsive Motion to Dismiss filed by the United States. [DE #92]. Consistent with local practice, this matter was referred to the United States Magistrate Judge for consideration.
The Magistrate Judge filed her proposed findings of fact and recommendation on May 13, 2010. [DE #99]. Although Booker pled guilty to conspiring to distribute five or more kilograms of cocaine, in his Motion, Booker argues that he agreed to plead guilty to a charge of conspiring to distribute less than five kilograms. Booker also argues that a laboratory report shows that the amount of drugs attributable to him weighed less than five kilograms. According to Booker, his counsel's failure to address the discrepancy between the drug weight listed in the Plea Agreement and the amount stated in the laboratory report, as well as his counsel's failure to challenge the presentence investigation, constitute ineffective assistance of counsel in violation of his Fifth and Sixth Amendment rights.
The Magistrate Judge considered Booker's argument that his counsel was ineffective for failing to address issues regarding the weight of the drugs found on Booker's person at the time of his arrest, as well as for failing to challenge the presentence investigation or to alert the sentencing court to purported errors and facts regarding the weight of the drugs. The Magistrate Judge also considered the supplemental authority submitted by Booker in further support of his § 2255 Motion. [DE #94].
Reviewing the record, the Magistrate Judge determined that Booker made a knowing and voluntary waiver of his right to appeal or collaterally attack his sentence. According to the Sixth Circuit in Hunter v. United States, 160 F.3d 1109, 1113 (6th Cir. 1998), a defendant may waive his right to appeal in a plea agreement so long as the waiver is made knowingly and voluntarily. Moreover, in Watson v. United States, 165 F.3d 486, 489 (6th Cir. 1999), the Sixth Circuit held that a defendant may waive the right to collaterally attack a sentence in a plea agreement. Finally, in Davila v. United States, 258 F.3d 448, 451 (6th Cir. 2001), the Sixth Circuit held that the waiver of § 2255 relief in a plea agreement bars a collateral attack based upon ineffective assistance of counsel.
Although an exception to the general rule regarding waiver exists if the collateral attack concerns the validity of the waiver itself, see In re Acosta, 480 F.3d 421, 422 (6th Cir. 2007), the Magistrate Judge found that Booker's claims regarding counsel's failure to object to the weight of the drugs as set forth in the Plea Agreement concern the issue of sentencing, not the validity of the plea or waiver. As a result, because Booker waived the right to collaterally attack the terms of the Plea Agreement, including his sentence, the Magistrate Judge determined that Booker's claims must fail. The Magistrate Judge further found that, even if Booker's claims are viewed as an attack on the validity of the Plea Agreement, Booker's plea and the waiver within were knowing and voluntary, thus, Booker's claims of ineffective assistance of counsel must fail.
Although these grounds alone are sufficient to deny Booker's Motion, the Magistrate Judge alternatively considered the merits of Booker's ineffective assistance of counsel claims. In Dando v. Yukins, 461 F.3d 791, 798 (6th Cir. 2006), the Sixth Circuit recognized that the two-part test for ineffective assistance of counsel claims established in Strickland v. Washington, 466 U.S. 668 (1984), also applies when such claims are raised in challenges to guilty pleas. Applying the Strickland test, the Magistrate Judge found that Booker's motion must also be dismissed on its merits because Booker does not demonstrate that his counsel's conduct fell below an objective standard of reasonableness.
Booker filed objections to the Magistrate Judge's proposed findings of fact and recommendation on June 16, 2010. [DE #103]. This Court must make a de novo determination of those portions of the Magistrate Judge's proposed findings of fact and recommendation to which objection is made. 28 U.S.C. § 636(b)(1)(c). Here, the Court agrees with the Magistrate Judge that the record reveals that Booker made a knowing and voluntary waiver of his right to appeal and, in view of Hunter, Watson, and Davila, Booker has waived his right to raise the collateral attacks that form the basis of his Motion and objections. For these reasons alone, Booker's Motion must be denied. However, even considering the merits of Booker's claims, Booker's ineffective assistance of counsel claim fails because Booker fails to demonstrate that his counsel's conduct fell below an objective standard of reasonableness. Thus, for the reasons set forth more fully by the Magistrate Judge in her proposed findings of fact and recommendation, Booker's § 2255 Motion must fail.
Moreover, the additional arguments raised by Booker in his objections to the Magistrate Judge's proposed findings and fact and recommendation are unavailing. In his objections, Booker argues that the government improperly calculated the weight of the drugs forming the basis of the charges against him. Booker also argues that the Court relied on false information in sentencing him, as the laboratory report shows that he was responsible for less than five kilograms of cocaine. However, during the Court's Rule 11 discussion with Booker, Booker admitted under oath that he and others conspired together to knowingly and intentionally distribute more than five kilograms or more of cocaine. [DE #91]. In his objections, Booker also argues that his guilty plea was the result of coercion and threats made by the government. However, during the Court's Rule 11 discussion with Booker, he denied that anyone had forced him to plead guilty. [DE #91]. Finally, Booker reasserts that his counsel was ineffective for failing to raise issues regarding the weight of the drugs found on Booker's person at the time of his arrest. Booker also argues that his counsel relied on facts provided by the government rather than undertaking his own investigation and that his counsel should have known that the United States could not prove a charge of possessing a firearm in connection with drug trafficking, an additional charge that the United States indicated that it was considering bringing against Booker. Once again, Booker's current arguments that his counsel was ineffective directly contrast with his prior statements made to the Court under oath that he was satisfied with his counsel. [DE #91]. Thus, the additional arguments raised by Booker in his objections are without merit.
For all of these reasons, the Magistrate Judge's proposed findings of fact and recommendation will be adopted as and for the opinion of this Court.
In determining whether a certificate of appealability should issue as to Booker's claim, the Court turns to Slack v. McDaniel, 529 U.S. 473 (2000), for guidance. In that case, the United States Supreme Court held that
[w]here a district court has rejected the constitutional claims on the merits, the showing required to satisfy § 2253(c) [governing the issuance of certificates of appealability] is straightforward: The petitioner must demonstrate that reasonable jurists would find the district court's assessment of the constitutional claims debatable or wrong.
Id. at 484. The Court determines that Booker has not presented a close call or one which is "debatable" and, therefore, a certificate of appealability will not issue.
After having considered Booker's objections, which the Court finds to be without merit, and having made a de novo determination, the Court is in agreement with the Magistrate Judge's proposed findings of fact and recommendation. Accordingly, the Court, being otherwise fully and sufficiently advised, HEREBY ORDERS that
(1) the Magistrate Judge's proposed findings of fact and recommendation [DE #99] is ADOPTED as and for the opinion of the Court;
(2) the Defendant's objections to the Magistrate Judge's proposed findings of fact and recommendation [DE #103] are OVERRULED;
(3) the Defendant's motion pursuant to
28 U.S.C. § 2255 to vacate, set aside, or correct sentence [DE #88] is DENIED;
(4) the Defendant's Motion for Order [DE #94] is DENIED as moot;
(5) the Government's Motion to Dismiss [DE #92] is GRANTED;
(6) judgment will be entered contemporaneously with this opinion and order in favor of the United States; and
(7) that this is a final Order and, pursuant to
28 U.S.C. § 2253(c), the Court finds that the Defendant has not made a substantial showing of
the denial of a constitutional right and thus no certificate of appealability shall issue.
This September 30, 2010.
ragraph GC Petitioners (AG/CUB) Appeal Nos. 1-08-3008 1-08-3030 GC Petitioners argue that the Commission erred in increasing ComEd's rate base. First, GC Petitioners echo IIEC's argument that the Commission violated its rules by failing to account for accumulated depreciation, resulting in unjust and unreasonable rates and an overvalued rate base, in violation of the Act. Second, GC Petitioners argue that a provision known as Rider SMP is contrary to settled ratemaking principles and is not justified by the evidence. We addressed the accumulated depreciation issue in the context of IIEC's appeal.
ComEd proposed Rider SMP, a "system modernization project" charge to customers, to immediately recoup the costs of modernizing its delivery system toward a "smart grid." According to ComEd, the rider was new and innovative and created a mechanism for funding discretionary projects that are not necessary for the distribution service. One of the building blocks of the technology is advanced metering infrastructure (AMI), which consists of a communication system, advanced meters, and computer software and hardware to process the information collected from the new meters. The first step toward an AMI system is a pilot program called "Phase 0," which involves installing 200,000 advanced meters. AMI would allow ComEd to achieve cost savings and improved efficiency by phasing out 675 full-time meter reader and supervisor positions, eliminating meter reading equipment, improving bill collections, reducing billing errors, and disconnecting nonpaying customers more efficiently. ComEd argued that Rider SMP would give customers the benefits of the technology earlier than might otherwise occur, because ComEd could not afford the project without the rider. As proposed, ComEd would provide the Commission with an annual list of projects for Rider SMP treatment. The Commission would have an opportunity to approve or deny recovery for each project, but the Commission could not alter the list.
The Commission approved Rider SMP for the limited purpose of implementing Phase 0, commending ComEd for its initiative in pursuing a smart grid but criticizing ComEd for taking a project-by-project approach without a clear goal. The Commission noted that "[t]he estimates of cost in the record have varied greatly and the estimates of benefits have been sporadic at best." The Commission further found that "[t]he lack of a consistent, thorough analytic approach to estimating [smart grid] benefits simply highlights another shortcoming: ComEd is asking for special recovery for these projects that — whatever their level, all parties agree — could have long-term economic benefits, but as proposed, ratepayers do not share the economic benefits." The Commission ruled that, after the completion of Phase 0, ComEd may file Rider SMP again to seek recovery for additional smart grid investments.
GC Petitioners argue that we must reverse the approval of Rider SMP because (1) Rider SMP violates the rule against single-issue ratemaking; (2) Rider SMP violates the rule against retroactive ratemaking; (3) Rider SMP violates test-year principles; and (4) ComEd did not prove that Rider SMP is necessary. We conclude that the Commission committed reversible error because Rider SMP is not supported by substantial evidence. Rider SMP is a classic example of improper single-issue ratemaking because AMI is the type of cost that should be addressed through normal ratemaking procedures. Because we conclude that Rider SMP amounts to improper single-issue ratemaking, we need not consider GC Petitioners' alternative arguments for invalidating it.
The rule against single-issue ratemaking makes it improper to consider in isolation changes in particular portions of a utility's revenue requirement. BPI II, 146 Ill. 2d at 244. The rule ensures that the utility's revenue requirement is based on the utility's aggregate costs and the demand on the utility, rather than on certain specific costs related to a component of its operation. BPI II, 146 Ill. 2d at 244. Often a change in one item of the revenue-requirement formula is offset by a corresponding change in another component of the formula. For instance, certain expenses for one aspect of a utility's business may be offset by savings in another area, thus removing the need for greater revenue. BPI II, 146 Ill. 2d at 244; Finkl, 250 Ill. App. 3d at 325. If rates are increased based solely on one factor, the ratemaking structure becomes distorted because there is no consideration of the changes to the other elements of the revenue formula, such as the operational savings from the improvements. BPI II, 146 Ill. 2d at 244.
Single-issue ratemaking is prohibited because it considers changes in isolation, thereby ignoring potentially offsetting considerations and risking understatement or overstatement of the overall revenue requirement. Citizens Utility Board v. Illinois Commerce Comm'n, 166 Ill. 2d 111, 137 (1995). However, a rider, or automatic adjustment, can change a rate without requiring a utility to delay recovery until it files a general rate case. Citizens Utility Board, 166 Ill. 2d at 133. In its most recent pronouncement on the issue, the supreme court described riders as follows:
"[A] rider mechanism merely facilitates direct recovery of a particular cost, without direct impact on the utility's rate of return. The prohibition against single-issue ratemaking requires that, in a general base rate proceeding, the Commission must examine all elements of the revenue requirement formula to determine the interaction and overall impact any change will have on the utility's revenue requirement, including its return on investment. The rule does not circumscribe the Commission's ability to approve direct recovery of unique costs through a rider when circumstances warrant such treatment."
Citizens Utility Board, 166 Ill. 2d at 138.
Because a rider is a method of single-issue ratemaking, by nature, it is not allowed absent a showing of exceptional circumstances. Finkl, 250 Ill. App. 3d at 326. The risk of single-issue ratemaking requires that all riders be closely scrutinized to prevent understatement or overstatement of the overall revenue requirement. City of Chicago II, 281 Ill. App. 3d at 627. However, the Commission has the power to authorize a rider in a proper case and such authorization will not be reversed absent an abuse of discretion. City of Chicago v. Illinois Commerce Comm'n, 13 Ill. 2d 607, 614 (1958) ( City of Chicago I).
1. City of Chicago I
In City of Chicago I, the supreme court highlighted the Commission's discretion in selecting the means by which rates are set and costs are recovered and determining the appropriateness of the rider mechanism in certain circumstances. In that case, the intervenors contested an order approving the utility's tariff revision providing for a rider to reflect changes in its wholesale cost of natural gas. In approving the rider, the supreme court noted that the Act, taken as a whole, contemplates that the Commission's power is not limited to determining a mere charge or a particular rate; rather, the Commission has the power to change, under certain conditions, any part of a rate schedule, rule, or regulation that in any manner affects the rates charged. City of Chicago I, 13 Ill. 2d at 611. The intervenors challenged the rider on the basis that the gas pipeline company, which purchased or produced the gas, was a subsidiary of the distributing company, and thus the distributing company had indirect control over the gas prices it paid. City of Chicago I, 13 Ill. 2d at 614. The supreme court rejected the argument, noting that wholesale gas prices were regulated by federal law that granted the Federal Power Commission authority to fix rates. City of Chicago I, 13 Ill. 2d at 614.
2. Finkl
In Finkl, the Commission approved a rider so the utility could recover costs associated with certain demand-side management programs. Finkl, 250 Ill. App. 3d at 319. The Commission concluded that the rider was the most appropriate method of recovery of the costs because "`the actual expenses are difficult to predict in advance, especially given the fact that neither the Commission nor [the utility] has extensive experience in the implementation of [demand-side] analysis and programs, and may fluctuate from year to year and from month to month.'" Finkl, 250 Ill. App. 3d at 322. The Appellate Court, First District, reversed, concluding that the rider violated the prohibition against single-issue ratemaking because the Commission had authorized the utility to charge customers for the demand-side management program costs without considering whether other factors offset the need for additional charges. Finkl, 250 Ill. App. 3d at 326. The order was an abuse of discretion because it isolated one operating expense for full recovery without considering whether changes in other expenses or increased sales and income obviated the need for increased charges to consumers. Failing to account for such an offset might have resulted in impermissibly charging ratepayers more to cover the utility's expenses and pay a return to its investors. Finkl, 250 Ill. App. 3d at 326.
The costs covered by the rider in Finkl involved payroll for specifically identified planning and similar positions; personnel training, education, and travel; contractors' and consultants' costs; out-of-pocket promotion and computer costs; and conducting workshops. Finkl, 250 Ill. App. 3d at 327. The First District concluded that "[s]uch costs reveal no greater potential for unexpected, volatile or fluctuating expenses which [the utility] cannot control, than costs incurred in estimating base ratemaking." Finkl, 250 Ill. App. 3d at 327.
3. CILCO
In Central Illinois Light Co. v. Illinois Commerce Comm'n, 255 Ill. App. 3d 876 (1993) ( CILCO), the First District found that the Commission had not abused its discretion in allowing a rider mechanism for the utility to recover certain coal tar remediation costs. CILCO, 255 Ill. App. 3d at 885. The court noted that the costs were expected to vary widely from year to year, depending on the type of remediation activities: from a few thousand dollars for investigation costs to millions of dollars for cleanup costs. The court viewed the costs as the type of unexpected, volatile, and fluctuating costs that are more efficiently addressed through a rider mechanism. CILCO, 255 Ill. App. 3d at 885.
The CILCO court interpreted Finkl as holding simply that the Commission had abused its discretion in allowing a rider recovery mechanism for the demand-side management costs at issue. The CILCO court did not read Finkl broadly "as holding that the Commission does not have the authority to allow recovery of costs through riders." CILCO, 255 Ill. App. 3d at 885.
4. City of Chicago II
In City of Chicago II, the city charged the utility a franchise fee for customers living within the municipality, and the utility recovered the expense through the general rates it charged all its customers. Finding the recovery unfair, the Commission ordered the utility to remove local franchise fees and other franchise costs from base rates for all its customers and to localize recovery of those costs by adding a separate line-item charge on the bills of customers who reside in the city. Under the order, residents of the city were to pay a pro rata share of the franchise fee that the city charged the utility, while residents of other municipalities were to pay their share of franchise costs imposed by their own municipalities. City of Chicago II, 281 Ill. App. 3d at 619.
The First District affirmed the Commission's proposed restructuring of the rates, again noting that Finkl did not limit the use of a rider to only those cases where expenses are unexpected, volatile, or fluctuating. City of Chicago II, 281 Ill. App. 3d at 628. The court concluded that the rider was "a reallocation which did not have any impact whatsoever on [the utility's] overall revenue requirement." City of Chicago II, 281 Ill. App. 3d at 629. The court emphasized that the franchise fee already was included in the utility's overall rate structure and, therefore, the rider merely facilitated direct recovery of a particular cost, without direct impact on the utility's rate of return. City of Chicago II, 281 Ill. App. 3d at 629.
5. Citizens Utility Board
In Citizens Utility Board, the Commission approved a rider allowing electric utilities to recover expenses created by their liability under federal and state environmental law. The costs at issue were incurred to remediate environmental damage from coal tar residue found at former manufactured-gas-plant sites. Citizens Utility Board, 166 Ill. 2d at 116. Noting that a rider mechanism is effective and appropriate for cost recovery when a utility is faced with unexpected, volatile, or fluctuating expenses, the supreme court concluded that using the rider mechanism, outside the context of a traditional rate proceeding, did not violate the prohibition against single-issue ratemaking. Citizens Utility Board, 166 Ill. 2d at 139. The court emphasized the Commission's finding that there were wide variations and difficulties in forecasting the costs of investigation and remediation activities. Citizens Utility Board, 166 Ill. 2d at 138. Thus, the court held that "riders can generally be expected to provide a more accurate and efficient means of tracking costs and matching such costs with recoveries than would base rate recovery methods." Citizens Utility Board, 166 Ill. 2d at 138-39.
From this line of cases, we glean a guiding principle for testing a rider's validity: the Commission has discretion to approve a utility's proposed rider mechanism to recover a particular cost if (1) the cost is imposed upon the utility by an external circumstance over which the utility has no control and (2) the cost does not affect the utility's revenue requirement. In other words, a rider is appropriate only if the utility cannot influence the cost ( Citizen's Utility Board, 166 Ill. 2d at 138 ("a rider mechanism is effective and appropriate for cost recovery when a utility is faced with unexpected, volatile, or fluctuating expenses")) and the expense is a pass-through item that does not change other expenses or increase income ( Citizen's Utility Board, 166 Ill. 2d at 138 (a valid rider has no "direct impact on the utility's rate of return")).
Our test reconciles the approval of diverse riders, including (1) a rider to recoup increases in the wholesale cost of natural gas, where the cost was set by a federal agency ( City of Chicago I, 13 Ill. 2d at 614); (2) a rider to recoup expenses for government-mandated environmental remediation ( Citizens Utility Board, 166 Ill. 2d at 138-39; CILCO, 255 Ill. App. 3d at 885); and (3) a rider to recoup a franchise fee that a municipality charges the utility ( City of Chicago II, 281 Ill. App. 3d at 628-29). In each instance, the expense was an externality imposed on the utility, and the expense was passed directly on to the consumer without affecting the utility's return on investment.
Our test also explains the rejection of the rider for payroll expenses of demand-side management programs ( Finkl, 250 Ill. App. 3d at 327). In Finkl, the rider was declared invalid because the proposed recovery was for expenses that were completely within the utility's control. Furthermore, the Commission had not considered whether changes in other expenses or increased sales and income obviated the need for the added charges to customers. Finkl, 250 Ill. App. 3d at 326.
Rider SMP does not meet the criteria to warrant single-issue ratemaking. The expenses related to AMI and the smart grid technologies, including Phase 0, are not unexpected, volatile, or fluctuating, as ComEd alone dictates the program's scope and, therefore, its costs. The capital costs associated with AMI and the smart grid technologies are not the result of legislative mandate, but rather are the result of ComEd's decision to innovate to reduce other costs. ComEd can cover the expenses by a fiscal and operational plan that is completely within the utility's control. The Commission heard no evidence that the system modernization costs might produce unacceptable financial outcomes if not afforded special treatment.
In fact, ComEd proposed Rider SMP precisely because the improvements are expected to reduce other expenses and increase income in the long term, which affects the utility's revenue requirement. To allow Rider SMP would be to improperly consider in isolation changes in a particular portion of a utility's revenue requirement. See BPI II, 146 Ill. 2d at 244. The system modernization program is desirable precisely because the increased costs would be more than offset by a positive, corresponding change in another component of the revenue requirement formula. Increasing the rates based solely on the costs of the program would distort the ratemaking structure. See BPI II, 146 Ill. 2d at 244. The evidence showed that ComEd historically has invested in capital distribution improvements and recouped those costs through traditional ratemaking procedures, and the system modernization program should be treated no differently. We conclude that the Commission abused its discretion, and we reverse Rider SMP because it constitutes improper single-issue ratemaking that is not justified by any special circumstances. See Finkl, 250 Ill. App. 3d at 327 (the Commission erred as a matter of law in allowing rider costs normally recovered through the usual ratemaking procedure).
D. Rider 25: Nonresidential Space-heating Customers: BOMA Appeal No. 1-08-3054
In 2006, the Commission allowed the termination of a provision known as Rider 25, and BOMA appealed to this court. ComEd, 398 Ill. App. 3d at 522. Rider 25 had established a preferential rate for certain nonresidential space-heating customers, including BOMA's members. Instituted at a time when ComEd generated electricity, Rider 25 was created to encourage the use of electricity during the off-peak, winter months to balance usage with the peak summer months when air conditioning is widely used. The goal was for ComEd's power plants to operate at peak efficiency throughout the year.
When the Commission eliminated Rider 25, the rates charged to BOMA members were increased to match those paid by other customers. Pointing out that numerous building owners had equipped their buildings with electric space heaters in reliance on Rider 25, BOMA argued that paying the new rates would result in "rate shock" and that the alternative of replacing the current heating systems with nonelectrical systems would be prohibitively expensive. ComEd, 398 Ill. App. 3d at 522.
We affirmed the Commission's decision to do away with Rider 25. ComEd, 398 Ill. App. 3d at 527. We emphasized the undisputed evidence that, because ComEd no longer generates electricity, ComEd's costs to deliver electricity are the same at all times during the year. The end-use characteristics of ComEd's customers do not affect its costs of providing delivery service. ComEd, 398 Ill. App. 3d at 526.
In this rate case, BOMA proposed that the Commission reinstate Rider 25, thereby creating a rate structure that differentiates between nonresidential customers depending on whether they use electricity for space heating. ComEd responded that doing so would give space-heating customers an unwarranted rate subsidy that would not reflect the cost of service.
The Commission approved rates that differentiate residential customer classes based on their use of electric space heating. BOMA requested and was denied similar treatment for nonresidential customers. The Commission rejected BOMA's proposal to establish a separate class or distribution charge for nonresidential electric space-heating customers, finding that Rider 25 was not cost justified and should not be reinstated. The Commission concluded as follows:
"ComEd no longer has generating capacity and Rider 25 has been eliminated. Supply charges are not the subject of this proceeding. There is no evidence that delivery service costs vary seasonally. The record shows that distribution facilities must be planned and built to meet customers' maximum loads, regardless of when those may occur. There is no basis in this record to conclude that it costs ComEd less to serve nonresidential customers who use some of their electric service for space heating. Nor is there a public policy issue which would justify a deviation from a cost causing allocation."
BOMA revisits Rider 25 in this appeal. BOMA argues that the Commission's order violates the Act by increasing the rates ComEd charges to BOMA's nonresidential electric space-heating members. First, BOMA argues that the change amounts to unreasonable discrimination between classes of service. Second, BOMA argues that the change is not justified on the basis of cost. Third, BOMA argues that the nonresidential space-heating customers are improperly subsidizing nonspace-heating customers within the same customer class. Finally, BOMA contends that the Commission failed to consider BOMA's substantial evidence to support these theories.
The Commission's evidentiary conclusion is prima facie true (see 220 ILCS 5/10-201(d) (West 2006)), and we defer to its factual findings. To obtain a reversal of the Commission's findings on this issue, BOMA must prove that the opposite conclusion is clearly evident. Continental Mobile Telephone Co. v. Illinois Commerce Comm'n, 269 Ill. App. 3d 161, 171 (1994). For the following reasons, we conclude that BOMA has failed to meet this burden.
1. Sufficiency of the Evidence
We first address BOMA's last issue: whether the Commission's rejection of Rider 25 is supported by substantial evidence. The Commission placed nonresidential space-heating and nonspace-heating customers in the same rate class based on the factual finding that there is no evidence that it costs ComEd less to deliver electricity to nonresidential space-heating customers than to nonresidential nonspace-heating customers.
Paul Crumrine, ComEd's then-director of regulatory strategies and services, testified regarding the history and purpose of Rider 25, why it is no longer necessary, and how reinstating it would create an unfair subsidy for BOMA's members. Crumrine stated that Rider 25 is a relic from the prerestructuring era when electricity came from generators owned by ComEd, when electricity supply costs at those plants were significantly lower in the winter, and when both supply and delivery costs were recovered under a single, "bundled" charge. Supply and delivery rates are now priced and regulated separately, or "unbundled," and any seasonal differences in energy costs should be reflected only in supply charges, not in the delivery rates set by the Commission in this case. He also opined that space-heating customers' higher winter use does not affect their delivery costs. Distribution facilities must be planned and built to meet customers' maximum use, regardless of the season in which it occurs or whether that energy is being used for space heat or for some other purpose. As a result, the costs of distribution service are not lower for nonresidential space-heating customers. Crumrine concluded that, whatever sense Rider 25 might have made before deregulation, when ComEd owned generation facilities and the costs of power production varied seasonally, Rider 25 is no longer justified by cost. Reinstating Rider 25 would, therefore, create an unjustified subsidy of nonresidential space-heating customers. The Commission was free to base its factual finding on Crumrine's testimony, the Commission's finding deserves deference, and we conclude that the decision is supported by substantial evidence.
2. Discrimination Claim
Section 9-241 of the Act provides that no public utility shall, as to rates or other charges, services, facilities, or any other respect, make or grant any preference or advantage to any corporation or person or subject any corporation or person to any prejudice or disadvantage; and no public utility shall establish or maintain any unreasonable difference as to rates or other charges, services, facilities, or any other respect, either as between localities or as between classes of service. 220 ILCS 5/9-241 (West 2006).
BOMA argues that, by not differentiating the nonresidential customer classes based on space-heating use, the Commission approves discriminatory treatment between rates and classes of customers, in violation of section 9-241 of the Act. In support of this position, BOMA points to evidence that, as to residential customers, it costs less to deliver electricity to space-heating customers than to nonspace-heating customers. The difference in the delivery cost results in different rates for the two classes of residential customers: the space-heating customers pay less than the nonspace-heating customers. BOMA argues that Rider 25 is necessary to carry over the same rate differential to nonresidential customers so that the space-heating customers pay less than the nonspace-heating customers.
The Commission responds that BOMA did not demonstrate that residential and nonresidential space-heating customers share characteristics that affect the cost of delivery. Simply because certain residential and nonresidential customers may use some of their electricity for space heat does not establish that the other uses by the two groups are sufficiently alike that the rate differential should apply to both. The Commission emphasizes evidence that the facilities charge for a residential space-heating customer is less than for a residential nonspace-heating customer, which creates two different revenue requirements for ComEd. The difference in the revenue requirements for the two classes of residential customers is rooted in the number of customers and their usage. The Commission stated in its order that the record is devoid of evidence that it costs ComEd less to supply electricity to nonresidential space-heating customers than to nonresidential nonspace-heating customers, and we defer to that factual finding.
3. Cost Justification
BOMA argues that the rate increases for nonresidential space-heating customers are not justified on the basis of cost. BOMA again cites the reduced cost to supply electricity to residential space-heating customers as a reason for charging less to nonresidential space-heating customers, including BOMA's members. BOMA states that it "submitted uncontroverted evidence that parallels are apparent for the nonresidential customers, and nonresidential customers that heat with electric space heat pay more for electricity on a per unit basis than customers that heat with some other fuel source." However, BOMA's citation to the record for this proposition is not to evidence at all; it is to the argument portion of a pleading, presented to the Commission, that a cost differential for the two classes of nonresidential customers may be inferred from the data available for the two classes of residential customers.
BOMA has never presented empirical data that the cost of delivering electricity to a nonresidential customer varies based on the customer's use of some of that electricity for space heat. Apparently, such data is available to show the cost differential for residential customers, and BOMA does not assert that data for nonresidential customers cannot also be collected. Rather than focusing on measurable delivery costs, BOMA relies on evidence that its nonresidential space-heating members have incurred a steep increase in energy costs since the elimination of Rider 25. However, it is undisputed that Rider 25 established a subsidy for BOMA's members such that the rates charged were not based on the costs of delivery. Thus, the evidence of the rate increase is consistent with the elimination of Rider 25, in that rates were brought in line with actual delivery costs. The rate increase is not proof that the former treatment of nonresidential space-heating customers was based on the costs of delivery and the current treatment is not.
The Commission asserts that the new rates are based on costs, and the Commission stated in its order that delivery costs no longer vary seasonally. The record shows that delivery facilities must be planned and built to meet customers' maximum loads whenever they occur, and there is no basis to conclude that it costs ComEd less to deliver electricity to nonresidential customers if they use some of the electricity for space heat. ComEd witnesses Alongi and Jones testified that there was "absolutely no cost based justification" to set nonresidential distribution facilities charges as BOMA had proposed. Thus, when the rates are the same for all nonresidential customers — regardless of whether they use space heat — the rates are based on costs.
4. Subsidization Claim
BOMA also argues that the elimination of Rider 25 has resulted in nonresidential space-heating customers improperly subsidizing other nonresidential customers who do not use space heat. The Commission determined that it costs the same to deliver electricity to all nonresidential customers and, therefore, the nonresidential customers all pay the same rate. The Commission heard substantial evidence from which to draw this conclusion. The space-heating customers pay more for electricity simply because they use more electricity than nonspace-heating customers. Therefore, there is no improper subsidy. The Commission could rely on ComEd's testimony that, since ComEd no longer generates electricity, there is no longer a reason to charge nonresidential space-heating customers less than nonresidential nonspace-heating customers, and to do so would actually amount to an improper subsidy in itself. Also, the Commission could rely on ComEd's testimony that it did not analyze BOMA's proposed discount because it was based on an outdated cost of service study.
CONCLUSION
We hold that (1) the Commission heard substantial evidence to support excluding from the operating costs 25% of the challenged labor costs for ComEd employees who worked on both utility-delivery services and merger work; (2) the Commission abused its discretion in excluding from the rate base the increase in accumulated depreciation of existing plant during the post-test-year period; (3) the Commission abused its discretion in approving Rider SMP, because the rider amounts to improper single-issue ratemaking; and (4) the Commission did not abuse its discretion in rejecting Rider 25, because the rider was not cost justified and would have improperly subsidized nonresidential customers who use space heat. We remand the cause for the Commission to revisit the accumulated depreciation issue, including allowing ComEd to request recovery of the aggregate cost of the third-quarter 2008 plant additions. We express no opinion as to whether the Commission should include in the rate base those costs, but we note that ComEd has the burden of proof on remand.
For the preceding reasons, the decision of the Commission is affirmed in part and reversed in part, and the cause is remanded for further proceedings consistent with this opinion.
Affirmed in part and reversed in part; cause remanded.
HUTCHINSON and HUDSON, JJ., concur.