On September 11, 2018, the Illinois First District appellate court issued an opinion (Case No. 1-17-0527 cons.) affirming the Illinois Commerce Commission’s 9.79% return on equity award to Illinois-American Water Company in its 2016 rate case (ICC Docket 16-0093).

The opinion is significant because it holds that the  averaging of quantified recommendations is within the Commission’s authority to fashion solutions that produce reasonable results. In the underlying rate case, the Commission had determined the approved utility ROE by averaging the ROE recommendations of the utility and industrial intervener experts.  The court held that sufficient findings and substantial evidence supported both the ROE authorized by the Commission, and the averaging method used to derive that ROE.  Although appellant interveners had argued that no witness testified to the average result or methodology, the court found that establishing just and reasonable rates is a question of sound business judgment, not legal formula. Averaging results was entirely within the ICC’s function of “devising pragmatic solutions”.

A copy of the opinion can be found at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2018/1stDistrict/1170527.pdf