Ameren Illinois Company v. The Illinois Commerce Commission

Illinois Official Reports

Appellate Court

Ameren Illinois Co. v. Illinois Commerce Comm’n,
2015 IL App (4th) 140173

Appellate Court AMEREN ILLINOIS COMPANY, Petitioner, v. THE ILLINOIS
Caption COMMERCE COMMISSION; THE CITIZENS UTILITY BOARD;
THE ILLINOIS INDUSTRIAL ENERGY CONSUMERS
(Archer-Daniels-Midland Company, Caterpillar, Inc., Air Products
and Chemical Company, and United States Steel Corporation-Granite
City Works); and THE OFFICE OF THE ATTORNEY GENERAL,
Respondents.–DOMINION RETAIL, INC., and INTERSTATE GAS
SUPPLY OF ILLINOIS, INC., Petitioners, v. THE ILLINOIS
COMMERCE COMMISSION; AMEREN ILLINOIS COMPANY,
d/b/a AMEREN ILLINOIS; THE CITIZENS UTILITY BOARD;
THE PEOPLE OF THE STATE OF ILLINOIS; THE ILLINOIS
INDUSTRIAL ENERGY CONSUMERS; THE ILLINOIS
COMPETITIVE ENERGY ASSOCIATION; and THE RETAIL
ENERGY SUPPLY ASSOCIATION, Respondents.

District & No. Fourth District
Docket Nos. 4-14-0173, 4-14-0182 cons.

Filed June 2, 2015

Decision Under Petition for review of order of Illinois Commerce Commission, No.
Review 13-0192.

Judgment Affirmed.
 Counsel on Albert D. Sturtevant (argued), of Whitt Sturtevant LLP, of Chicago,
Appeal Edward C. Fitzhenry, of Ameren Services Company, and Andrew J.
Campbell, of Whitt Sturtevant LLP, of Columbus, Ohio, for petitioner
Ameren Illinois Company.

Stephen J. Moore (argued), Thomas H. Rowland, and Kevin D.
Rhoda, all of Rowland & Moore LLP, of Chicago, for petitioners
Dominion Retail, Inc., and Interstate Gas Supply of Illinois, Inc.

James E. Weging (argued), Special Assistant Attorney General, of
Chicago, for respondent Illinois Commerce Commission.

Julie L. Soderna, Christie Redd Hicks, and Kristin Munsch, of
Chicago, for respondent Citizens Utility Board.

Panel JUSTICE APPLETON delivered the judgment of the court, with
opinion.
Justice Harris concurred in the judgment and opinion.
Justice Steigmann concurred in part and dissented in part, with
opinion.

OPINION

¶1 In tariffs it filed with the Illinois Commerce Commission (Commission), Ameren Illinois
Company (Ameren) proposed increasing its rates for natural gas. The Commission suspended
the tariffs and held an evidentiary hearing on them. The hearing culminated in a lengthy
written decision by the Commission. Ameren appeals from one aspect of that decision,
namely, the rate of return the Commission allowed Ameren on its equity. We are unable to say
that, in setting the rate of return, the Commission made a decision that was against the manifest
weight of the evidence. Therefore, in Ameren’s appeal, case No. 4-14-0173, we affirm the
Commission’s decision.
¶2 The other appeal, case No. 4-14-0182, which we have consolidated with Ameren’s appeal,
arises from the same administrative case but concerns different tariffs. After filing its tariffs
proposing an increase in gas rates, Ameren filed “rider” tariffs proposing the establishment of a
small volume transportation program, a program that would allow retail gas suppliers to use
Ameren’s infrastructure to deliver natural gas to customers who chose to enter into contracts
with the retail gas suppliers. The Commission approved the small volume transportation
program but required retail gas suppliers to abide by three consumer protections, over and
above those that statutory law already provided. Two interveners, Dominion Retail, Inc., and
Interstate Gas Supply of Illinois, Inc. (which we will call, collectively, “the retail gas

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 suppliers,” “the alternative gas suppliers,” or simply “the suppliers”), challenge the three
consumer protections. They contend the Commission lacked statutory authority to require
these protections, and they also contend there was no evidence that the protections were even
necessary. We conclude the Commission had statutory authority to require the inclusion of the
new consumer protections in the small volume transportation tariffs. The suppliers insist that
little or no historical evidence justified these protections. But that is no reason to overturn
them. A protection can serve the legitimate function of preventing an injury from ever
happening. Viewing the new consumer protections that way, we defer to the Commission’s
judgment that they would be just and reasonable conditions in Ameren’s small volume
transportation tariffs. Therefore, we affirm the Commission’s decision in the suppliers’ appeal
as well.

¶3 I. BACKGROUND
¶4 A. Ameren’s Revenue Requirement
¶5 1. The Capital Asset Pricing Model
¶6 a. An Introduction to This Model
¶7 To determine the rates a public utility may charge its customers, the Commission must
determine the utility’s revenue requirement. Business & Professional People for the Public
Interest v. Illinois Commerce Comm’n, 146 Ill. 2d 175, 195 (1991). The revenue requirement
equals the utility’s operating costs plus the rate base multiplied by an allowed rate of return.
People ex rel. Madigan v. Illinois Commerce Comm’n, 2011 IL App (1st) 100654, ¶ 26. In the
rates a regulated utility charges its customers, it not only deserves to be compensated for its
operating costs, but it also deserves a return on its investment: a return on the rate base. Id.
(The “rate base” is “the total value of all invested capital.” Commonwealth Edison Co. v.
Illinois Commerce Comm’n, 2014 IL App (1st) 130302, ¶ 10.)
¶8 In setting rates, the Commission has to decide what, in the mind of a reasonable investor,
would be an attractive enough return on the present value of the utility’s property. Id. ¶ 11. For
several years, the Commission has used the capital asset pricing model (CAPM) to determine
the minimum rate of return needed to entice a reasonable investor to invest in a public utility.
(As we will discuss later, the Commission also uses the discounted cash flow (DCF) model.
But Ameren does not appeal any aspect of the Commission’s application of the DCF model in
this case.)
¶9 According to the CAPM, the required rate of return is a function of three things: (1) a
risk-free rate of return; (2) the premium that average-risk stocks must pay over the risk-free
rate to entice investors; and (3) the riskiness of the utility’s equity in comparison to
average-risk stocks. Peter V. Pantaleo & Barry W. Ridings, Reorganization Value, 51 Bus.
Law. 419, 433 (1996). The CAPM formula regards these three things as having the following
relationship:
Cost of equity = R(f) + (Beta x [R(m) – R(f)])
Where: R(f) = risk-free rate of return
Beta = beta coefficient of the utility’s stock, which measures the volatility of the
utility’s stock in comparison to the volatility of the market as a whole
R(m) = expected rate of return on a market portfolio comprised of a large number
of diversified stocks, i.e., the expected rate of return on average-risk stocks. See id.

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¶ 10 Expressed in words, the formula means this. The cost of the utility’s equity–the required
rate of return for the utility–”is equal to the sum of the risk-free rate of return plus a risk
premium (i.e., a return above the risk[-]free rate).” Id. The formula assumes that if investing in
the utility would yield a rate of return no greater than that of Treasury securities, which are the
prototypical risk-free investment, no sensible person would invest in the utility. The utility
would be riskier than Treasury securities, and any rational investor would want compensation,
a premium, for the additional risk. Therefore, to entice investors, the utility has to offer a risk
premium, some amount above the risk-free rate. In the formula above, the symbols to the right
of the plus sign determine that risk premium.
¶ 11 The risk premium the utility must offer is determined by multiplying the volatility of the
utility’s equity by the market premium, the premium that investors expect the market as a
whole (the average-risk stocks) to pay above a risk-free investment (Treasury securities).
Pantaleo and Ridings explain it this way–and for our purposes, the “target company” is the
utility:
“As noted, the yield on treasury securities is generally the best measure of the
risk-free rate. The difference between the expected return on a ‘market portfolio,’ like
the Standard & Poor’s 500, and the risk-free rate is a measure of the premium the
market is expected to pay above a risk-free investment. This market premium is
commonly determined by reference to published data that tracks the average return on a
given market portfolio and the average return on treasury securities over the same
extended period of time (usually from 1926 or 1945 to the present). *** A beta
coefficient greater than one means that a stock is more volatile than the market
generally, as represented by a portfolio of a large number of stocks. *** A beta
coefficient equal to one means that a particular stock is no more or less risky than the
risk of the market itself. *** As the formula shows, a beta greater than one magnifies
the cost of equity for a target firm. This makes sense because greater risk requires a
greater return. Therefore, if the equity investment in a target company is riskier than the
‘average risk’ of stocks represented by a market portfolio, the premium above a
risk-free investment the target would have to pay in order to attract equity investors
should be some multiple (higher than one) of the premium payable by the less risky
‘average risk’ stocks. A target’s beta is that multiple.” Id. at 434-35.
¶ 12 If the target company is publicly traded, its beta can be found in financial publications,
such as Value Line and Zacks. But what if the target company is not publicly traded? Because
Ameren is not publicly traded and hence there is no market data available for Ameren stock,
the only way to estimate Ameren’s beta is to use the betas of a proxy group of publicly traded
gas companies that appear to pose about the same amount of risk as Ameren.

¶ 13 b. The Controversy Over Measurement Periods for the Beta
¶ 14 i. The Staff’s Use of Five-Year Measurement Periods
¶ 15 The Commission’s staff (Staff) entered its appearance in the administrative hearing, and a
member of the Staff, Rochelle Phipps, presented her CAPM analysis. To determine the beta
coefficient, she used the same proxy group of gas companies that Ameren used in its CAPM
analysis (except that she excluded one company). She obtained the betas of these proxy
companies from Value Line and Zacks, and she also performed a regression analysis to
estimate the beta. See Samuel C. Thompson, Jr., Demystifying the Use of Beta in the

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 Determination of the Cost of Capital and an Illustration of Its Use in Lazard’s Valuation of
Conrail, 25 J. Corp. L. 241, 266 (2000) (discussing the derivation of beta through regression
analysis). As the Commission noted, all three of these sources–Value Line, Zacks, and the
regression analysis–used a measurement period of 5 years (i.e., 260 weeks or 60 months):
“Ms. Phipps used Value Line’s betas, Zack betas, and regression analysis to
estimate beta for the gas sample. She explained that Value Line employs 260 weekly
observations of stock price data, and then adjusts its beta. [Citation.] The regression
analysis beta estimate for the gas sample employs 60 monthly observations of stock
and the U.S. Treasury bill return data, and then the beta is adjusted. Like Staff’s
regression data, Zacks employs 60 monthly observations in its beta estimation;
however, the beta estimates Zacks publishes are not adjusted; that is, they are ‘raw’
beta estimates. Thus, Ms. Phipps adjusted them using the same formula she used to
adjust the regression beta. [Citation.] Ms. Phipps explained that adjusting raw beta
estimates towards the market mean of 1.0 results in a linear relationship between the
beta estimate and realized return that more closely conforms to the CAPM prediction.
[Citation.]” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 142 (Order Dec.
18, 2013).
Perhaps the order means that the “raw beta estimates” had to be “adjusted” to fit into the
CAPM equation, whereby the number one signified the same level of risk posed by the market
as a whole, any number greater than one signified a greater risk than the market, and any
number less than one signified a lesser risk than the market.
¶ 16 In any event, the order continues:
“Since both the Zacks beta estimate and the regression beta estimate are calculated
using monthly returns (as Value Line uses), Ms. Phipps averaged the Zacks and
regression betas to avoid over-weighting the monthly return-based betas. [Citation.]
Then, she averaged that result with the Value Line beta to obtain a single estimate of
beta for the sample. For the gas sample, the regression beta estimate is 0.54 and the
Value Line beta and Zacks beta average 0.68 and 0.57, respectively. [Citation.] The
average of the Zacks and regression betas is 0.56. Averaging this monthly beta with the
weekly Value Line beta (0.68) produces a beta for the gas sample as 0.62. [Citation.] If
Laclede Group is included in the gas sample, the regression beta equals 0.52, the
average of the Zacks and regression betas equals 0.54 and the average of the Value
Line beta with the monthly beta equals 0.60. [Citation.]” Id. at 142-43.
¶ 17 Thus, Phipps combined betas from Value Line, Zacks, and a regression analysis to estimate
Ameren’s beta. Also, to avoid giving too much weight to monthly returns, she averaged
together the two monthly sources (Zacks and the regression analysis) before averaging that
result with the weekly source (Value Line).

¶ 18 ii. Ameren’s Use of an 18-Month Measurement Period,
a 24-Month Measurement Period, and
a 5-Year Measurement Period
¶ 19 Ameren retained an expert, Robert Hevert, to perform a CAPM analysis. To determine
Ameren’s beta, he relied on published financial data regarding a proxy group of comparable
gas companies which, for the most part, were the same proxies the Staff used. The Staff

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 objected to Hevert’s analysis, however, because he “relie[d] on beta estimates that [were]
measured over 18 to 24 months.” Id. at 147. (We are quoting from the Commission’s order of
December 18, 2013, in which, for each issue, the Commission painstakingly summarized the
parties’ arguments and counterarguments before stating its own conclusions.) The Staff argued
that “[b]etas measured over shorter time periods,” such as 18 or 24 months, were “more prone
to measurement error arising from short-term changes in risk and investor risk preferences,
which [could] bias the beta estimate.” Id. By contrast, the Staff relied on betas calculated with
five years of data. Id. at 142, 164.
¶ 20 In part because Hevert used 18-month and 24-month measurement periods to determine
the beta coefficient–measurement periods that the Commission regarded as too short–the
Commission found the Staff’s CAPM analysis to be more reliable than Hevert’s CAPM
analysis, and the Commission declined to average Hevert’s CAPM analysis with the Staff’s
CAPM analysis and the parties’ DCF results. The Commission stated:
“In its Order in [Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282 (Order Jan.
10, 2012)], the Commission expressed ‘serious concerns’ with the betas used by Mr.
Hevert. The Commission noted that it has traditionally relied upon betas calculated
with five years of data. In the instant case, Staff again used a period of five years. Staff
again takes issue with the beta measurement period used by Mr. Hevert, which in the
current proceeding was 18 to 24 months. Staff explained why betas measured over
shorter time periods, such as those used by Mr. Hevert, are more prone to measurement
error arising from short-term changes in risk and investor preferences, which can bias
the beta estimate. Having reviewed the record, the Commission again finds that the
beta estimates provided by Staff are more reliable.” Id. at 164.
¶ 21 In Ameren’s application for rehearing, which it filed on January 16, 2014, Ameren pointed
out to the Commission: “But Mr. Hevert used three different beta sources–one with an
18-month measurement period, one with a 24-month measurement period, and a Value Line
beta coefficient source that is based on five years of data (same as Staff).” (Emphasis in
original.) See 220 ILCS 5/10-113(a) (West 2012) (“No person or corporation in any appeal
shall urge or rely upon any grounds not set forth in [an] application for a rehearing before the
Commission.”). Evidently, by the parenthetical remark “same as Staff,” Ameren did not mean
that the Staff, like Hevert, used an 18-month measurement period and a 24-month
measurement but, rather, that Value Line was one of the sources the Staff used for its betas. He
used Value Line, and the Staff used Value Line. Consequently, Ameren argued, the
Commission erred by rejecting Hevert’s CAPM analysis. Instead, according to Ameren, if 18
months and 24 months were too short as measuring periods, the Commission should have
accepted Hevert’s CAPM based only on Value Line betas and averaged his CAPM result with
the Staff’s CAPM result and the parties’ DCF results. Ameren recalculated the rate of return
that would result from excluding the 18-month and 24-month betas:
“If the Commission wished to exclude the beta sources based on a shorter measurement
period, and instead just use Mr. Hevert’s Value-Line based CAPM model (with the
5-year measurement period), [Ameren’s] CAPM result would be 10.11%. When
averaged with the Staff’s CAPM result and the Order’s DCF result, this produces a
return on equity of 9.35%, a full 27 basis points higher than the Order’s authorized
return on equity. Had the Commission followed [this] same [averaging] method it

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 approved in [North Shore Gas Co., Ill. Com. Comm’n No. 12-0511, at 207 (Order June
18, 2013)], this 9.35% return on equity is the result that would have been reached.”
¶ 22 On February 6, 2014, in a “Notice of Commission Action,” the Commission denied
Ameren’s application for rehearing without specifically responding to Ameren’s beta
argument–or, for that matter, any other argument Ameren made in its application for rehearing.
The ruling was simply a denial.

¶ 23 2. The Controversy Over Non-Dividend-Paying Companies
in the Parameter for the Overall Market Return
¶ 24 a. The Staff’s Exclusion of Non-Dividend-Paying Companies
¶ 25 Again, the CAPM has three parameters: the risk-free rate of return, the expected rate of
return on the market, and the beta.
¶ 26 To estimate the expected rate of return on the market, the Staff, specifically Phipps,
performed a DCF analysis on the firms in the Standard & Poor’s 500 Index, excluding
non-dividend-paying firms. A DCF model “is premised on the assumption that a stock’s price
is the sum of the expected value of future dividends, discounted to present value by the rate of
return investors require.” Citizens Utility Board v. Illinois Commerce Comm’n, 276 Ill. App.
3d 730, 747 (1995). Therefore, the model uses “three variables: price, future dividends, and the
rate of return.” Id. Because dividends were a required variable in a DCF model, the Staff
considered only companies that paid dividends.
¶ 27 Let us pause for a moment and, for clarity, restate what we said in the preceding paragraph.
To calculate a parameter of the CAPM model, namely, the overall market return, the Staff used
another model, the DCF model, but because of the way the DCF model worked, the Staff
excluded non-dividend-paying companies, using only dividend-paying companies. As the
Commission said:
“[The Staff estimated] [t]he expected rate of return on the market *** by
conducting a DCF analysis on the firms composing the S&P 500 Index (‘S&P 500’) as
of June 30, 2013. [Citation.] Firms not paying a dividend as of June 30, 2013, or for
which neither Zacks nor Reuters growth rates were available, were eliminated from the
analysis. That analysis estimated that the expected rate of return on the market equals
12.33%. [Citation.]” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 142
(Order Dec. 18, 2013).
¶ 28 In defending its exclusion of non-dividend-paying companies when estimating the market
return, the Staff explained to the Commission: “A DCF analysis assumes that the market value
of common stock equals the present value of the expected stream of future dividend payments
to the holders of that stock. [Citation.] Since a DCF model incorporates time-sensitive
valuation factors, it must correctly reflect the timing of the dividend payments that stock prices
embody. [Citation.]” Id. at 140. (We are quoting the Commission’s paraphrase of the Staff’s
argument.) Unless dividends were paid, it was impossible to know the timing of the dividend
payments, and knowing the timing of the dividend payments was essential to doing a DCF
analysis. See In re Connect America Fund, 28 FCC Rcd. 7123, 7159 n.156 (2013) (“The
general DCF model cannot be used to calculate the cost of equity for a firm that does not pay
dividends.”); In re Represcribing the Authorized Rate of Return for Interstate Services of Local
Exchange Carriers, 5 FCC Rcd. 7507, 7511 (1990) (before “DCF cost of equity calculations”

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 were made, “[t]he S & P 400 group and the electric group were to be screened to remove ***
companies that did not pay quarterly dividends”).

¶ 29 b. Ameren’s Inclusion of Non-Dividend-Paying Companies
¶ 30 In his calculation of the expected overall market return, Ameren’s expert, Hevert, used a
constant-growth DCF model. Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 134
(Order Dec. 18, 2013). As Ameren explained to the Commission, a constant-growth DCF
model “assumes constant unchanging growth as a component of the return an investor
expects.” Id. at 131. According to an apparently uncontested description by an intervenor in the
administrative proceeding, the Illinois Industrial Energy Consumers, “the constant growth
version of the [DCF] model is sometimes expressed as K = D1/P0 + G, where K = Investor’s
required return, D1 = Dividend in the first year, P0 = Current stock price and G = Expected
constant dividend growth rate.” Id. at 162. See Midwest Independent Transmission System
Operator, Inc., 141 FERC ¶ 63014, at 771 (2012) (setting forth the same formula).
¶ 31 In his use of the constant-growth DCF model to calculate the market return parameter of
the CAPM, Hevert included the non-dividend-paying companies of the Standard and Poor’s
500 Index. The Staff objected for the following reason:
“Staff witness Phipps explained that Mr. Hevert’s inclusion of the non-dividend paying
companies in a constant growth DCF analysis upwardly biases his estimate of market
return. [Citation.] That is, the dividend growth rate of non-dividend paying companies
cannot be both constant and equal to the earnings growth rate as Mr. Hevert’s
estimation process assumes. If the dividend growth rate is constant, it must remain 0%.
In contrast, the average dividend growth rates of the non-dividend paying companies in
Mr. Hevert’s analysis equal approximately 14%. [Citation.]” Ameren Illinois Co., Ill.
Com. Comm’n No. 13-0192, at 148 (Order Dec. 18, 2013).
¶ 32 Ameren responded: “Ms. Phipps’[s] criticism is unfounded as investors do view
investments in the context of the entire market; dividend paying and non-dividend paying
investments alike.” (Internal quotation marks omitted.) Id. at 135.
¶ 33 The Commission agreed with the Staff that the inclusion of non-dividend-paying
companies was inconsistent with the constant-growth DCF model that Hevert used to estimate
the average market return in the CAPM. The Commission said:
“In [Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282], the Commission also
expressed ‘serious concerns’ with the market risk premium relied upon by Mr. Hevert.
There, as in the current case, Staff objected to Mr. Hevert’s inclusion of non-dividend
paying companies in the DCF analysis used in the calculation of the expected market
return, from which the risk-free rate is subtracted in the calculation of the market risk
premium. Staff contends that inclusion of non-dividend paying companies upwardly
biases the estimate of the market return, as does [the Illinois Industrial Energy
Consumers]. The Commission again shares this concern, and agrees with Staff that the
market risk premium calculated by Staff is more reliable.” Id. at 165.
¶ 34 In its application for a rehearing, Ameren made essentially three points. First, Ameren
argued it made no sense to exclude non-dividend-paying companies from an estimate of the
market return, considering that non-dividend-paying companies were part of the overall
market. Second, “Hevert’s model *** include[d] non-dividend paying stocks in the market risk

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 premium simply by recognizing the price appreciation of the stock over time.” Third, the betas
from Zacks, on which the Staff relied, “include[d] non-dividend paying companies,” and thus,
in Ameren’s view, the Commission’s “criticism of Mr. Hevert’s use of the S & P 500 for his
market risk premium [was] plainly arbitrary.”
¶ 35 As we said, the Commission denied Ameren’s application for a rehearing.
¶ 36 In summary, then, the Commission regarded Ameren’s CAPM analysis as suffering from
two flaws: (1) the use of short measuring periods for the beta and (2) the inclusion of
non-dividend-paying companies in the constant-growth DCF analysis that Ameren used to
calculate the market return in the CAPM.

¶ 37 B. Newly Created Consumer Protections in a
Proposed Small Volume Transportation Program
¶ 38 In 2011, in a previous gas rate case (Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282,
at 185 (Order Jan. 10, 2012)), retail gas suppliers recommended that Ameren establish a small
volume transportation program that would allow residential customers and small commercial
customers to buy gas from “alternative gas suppliers.”
¶ 39 Under section 19-110(a) of the Alternative Gas Supplier Law, the Commission may license
“alternative gas suppliers” to supply natural gas to “residential or small commercial
customers.” 220 ILCS 5/19-110(a) (West 2012). “Alternative gas suppliers”–another name for
“retail gas suppliers”–basically are suppliers other than public utilities. 220 ILCS 5/19-105
(West 2012). The idea, apparently, is that alternative gas suppliers will supply natural gas to
customers via the gas utility’s infrastructure or delivery system. “Transportation services” are
“services provided by the gas utility that are necessary in order for the storage, transmission
and distribution systems to function so that customers located in the gas utility’s service area
can receive gas from suppliers other than the gas utility and shall include, without limitation,
standard metering and billing services.” Id.
¶ 40 At the conclusion of the 2011 case, the Commission ordered Ameren and interested
stakeholders to participate in workshops, hosted by the Staff, to determine whether a small
volume transportation program would be beneficial and feasible in Ameren’s service
territories. Ameren Illinois Co., Ill. Com. Comm’n No. 11-0282, at 194 (Order Jan. 10, 2012).
To the extent the workshops did not end in a consensus, the Staff was to report to the
Commission the issues that remained in dispute. Id. On January 10, 2013, the Staff gave the
Commission a report, which described the unresolved issues.
¶ 41 On January 25, 2013, pursuant to section 9-201(a) of the Public Utilities Act (220 ILCS
5/9-201(a) (West 2012)), Ameren filed new or revised tariff sheets, which proposed a general
increase in gas delivery charges.
¶ 42 On March 6, 2013, pursuant to section 9-201(b) (220 ILCS 5/9-201(b) (West 2012)), the
Commission entered an order suspending the tariffs, thereby initiating the present gas rate
case.
¶ 43 A couple of weeks after filing its tariffs proposing a general increase in gas rates, Ameren
filed “supplemental direct testimony” by Venda K. Seckler, its managing executive of gas
supply, in which she stated that Ameren was “neutral with regard to the adoption of [small
volume transportation (SVT),] consider[ing] the matter of question of policy to be determined
by the Commission.” Attached to her “supplemental direct testimony” were two exhibits:

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 Ameren exhibit Nos. 13.1 and 13.2. She described these two exhibits as two versions of a tariff
pertaining to the proposed small volume transportation program. She testified: “Ameren
Exhibit 13.1 is a copy of the last version of draft tariffs circulated to the workshop participants.
Ameren Exhibit 13.2 is an updated version, including refinements [Ameren] added after the
conclusion of the SVT workshop.” (One might think a “tariff” is simply a list of prices, but
actually, in the jargon of public-utilities regulation, “tariff” has a more expansive meaning, to
include not only prices but also terms, conditions, rules, practices, and other descriptive text.
See Sheffler v. Commonwealth Edison Co., 2011 IL 110166, ¶ 28 (“A tariff is a public
document setting forth services being offered, the rates and charges with respect to services,
and the governing rules, regulations, and practices relating to those services.”).)
¶ 44 Thus, the administrative hearing was not only on the tariffs proposing a general increase in
gas rates but also on the “rider” tariffs proposing a small volume transportation program.
¶ 45 The Citizens Utility Board called its former executive director, Martin Cohen, to testify
regarding the small volume transportation program. In his direct testimony, Cohen
recommended that if the Commission approved such a program, it should order Ameren to
include consumer protections that went beyond those in the Public Utilities Act. He did not as
of yet specify what the additional consumer protections should be, but he suggested that
additional consumer protections were necessary, given the complaints consumers had made
about small volume transportation programs in northern Illinois. He cited two such complaints:
one from 2002, Citizens Utility Board, Ill. Com. Comm’n No. 02-0425, and Citizens Utility
Board v. Illinois Energy Savings Corp., Ill. Com. Comm’n No. 08-0175.
¶ 46 It was not until later, in his rebuttal testimony, that Cohen proposed any specific consumer
protections. He proposed the following three protections:
“1. A customer shall be absolved from paying any termination fees if, prior to the
due date of their first bill, they notify the supplier that they are terminating the contract.
2. When a customer has accepted service from a supplier after solicitation by a
door-to-door salesperson, there shall be no termination fees assessed if the customer
terminates during the first 6 billing cycles.
3. If a supplier’s marketing materials include a price comparison of the supplier rate
and the gas utility rate, the depiction of such comparison shall display at least three
years of data in no greater than quarterly increments and shall also display the
supplier’s offered price for the same or equivalent product(s) or service(s) for each of
the same increments.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 225
(Order Dec. 18, 2013).
¶ 47 In their initial brief to the Commission, the retail gas suppliers objected to these proposed
consumer protections for three reasons. First, they argued the consumer protections were
“unnecessary in light of provisions in the [Public Utilities] Act that protect consumers and [in
light of] the alleged decrease in customer complaints regarding existing SVT programs in
Illinois.” Second, the retail gas suppliers argued that “any customer protections should have
been a part of the workshop process and need not be considered in this proceeding.” Third, the
retail gas suppliers complained that the Citizens Utility Board “did not offer its specific
recommendations [(that is, these three proposals for consumer protection)] until rebuttal
testimony.” (In its brief, the Commission informs us that the rebuttal testimony of the
intervenors–the Citizens Utility Board, the retail gas suppliers, and others–”was scheduled

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 simultaneously” and that “only Ameren was provided for surrebuttal in the established
schedule.”)
¶ 48 The Commission disagreed that the scope of the workshop discussions restricted the
Commission’s consideration of any small volume transportation issue. Id. at 247. The
Commission also disagreed that the retail gas suppliers had been deprived of an opportunity to
contest the proposed consumer protections. Id. at 248. The Commission noted that although
Cohen first proposed these consumer protections in his surrebuttal testimony, the retail gas
suppliers could have cross-examined him, but they did not do so. Id. The Commission agreed,
however, “that the three measures at issue [were] not supported by the record.” Id.
Therefore–initially–the Commission decided the measures would “not be adopted at this
time.” Id.
¶ 49 Later, in an amendatory order of January 23, 2014, the Commission revised the order of
December 18, 2013, so as to state: “[T]he Commission finds that the three measures at issue
are supported by the record and will be adopted at this time.” (This is the only change the
amendatory order made.) Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 1 (Order Jan.
23, 2014).
¶ 50 Part IX of the order of December 18, 2013, the part pertaining to the small volume
transportation program, concludes with the following paragraph:
“One of the ‘resolved issues’ is identified as ‘SVT Program Separate Proceeding,’
sometimes referred to as a tariff proceeding. [Ameren] shall file tariffs consistent with
the findings of this Order. As indicated above, [Ameren] is directed to hold a workshop
following the issuance of this Order, focusing on the issues that are not resolved by this
Order, and to file a petition, tariffs and testimony in support of the SVT program within
45 days of the date of this Order. The separate proceeding shall be for the purpose of
improving and editing the tariffs submitted in the instant proceeding, and to resolve the
remaining issues not decided in this Order, to the extent a resolution of them is not
reached in the workshop. All issues decided in the instant proceeding will be
considered resolved for purposes of the second proceeding.” Ameren Illinois Co., Ill.
Com. Comm’n No. 13-0192, at 251 (Order Dec. 18, 2013).
¶ 51 In their application for a rehearing, the retail gas suppliers argued to the Commission that
the three consumer protections not only were unauthorized by statutory law but they lacked
any evidentiary support in the record. In addition, the suppliers made a procedural objection.
They argued that “cross-examination of a witness without pertinent experience [was] no
substitute for alternative gas suppliers being able to sponsor knowledgeable witnesses who
could have testified as to whether [the Citizen Utility Board’s] proposals [were] burdensome,
costly, difficult or ineffective.”
¶ 52 The Commission denied the retail gas suppliers’ application for a rehearing.

¶ 53 II. ANALYSIS
¶ 54 A. The Commission’s Rejection of Ameren’s CAPM Analysis
¶ 55 1. North Shore
¶ 56 Ameren argues that in North Shore Gas Co., Ill. Com. Comm’n No. 12-0511, at 205 (Order
June 18, 2013) (hereinafter North Shore), the Commission established a “practice” of
“averaging the parties’ model results” together and that, in the present case, the Commission

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 arbitrarily and enigmatically departed from that “practice” by rejecting Ameren’s CAPM
analysis even though, in North Shore, the utilities used betas from Value Line, as Ameren did
in the present case, and even though, in North Shore, the utilities included
non-dividend-paying companies in their calculation of the market return in the CAPM, as
Ameren did in the present case.
¶ 57 North Shore is distinguishable for three reasons. First, in North Shore, the utilities’ expert,
Paul R. Moul, consulted only one source for the beta parameter: Value Line. “For the beta
measurement of systematic risk, he used the average Value Line for the Gas Group ***.” Id. at
199. Value Line had a five-year measurement period. Id. at 200 (“259 weekly observations of
stock return data”). In his expert testimony in North Shore, Moul gave his opinion of what the
CAPM result should be (id. at 186), and for purposes of the beta, he based his opinion on that
single five-year source, Value Line (id. at 199). In the present case, by contrast, when Hevert
testified to what the CAPM result should be, he based his opinion on 3 measurement periods
for the beta, the first 2 of which the Commission rejected as too short: 18 months, 24 months,
and 5 years. As Ameren told the Commission in Ameren’s application for rehearing, “[f]or the
beta measurement, [Hevert] used coefficients from three sources, including Bloomberg and
Value Line.” It does not appear that Hevert ever offered a CAPM result premised on Value
Line as the sole source for the beta. Instead, it appears that Ameren first did that on page five of
its application for rehearing–which, of course, was not expert testimony. The Commission
could have reasonably regarded CAPM analysis as a matter for expert testimony.
¶ 58 Second, it appears that, in North Shore, none of the parties objected to the inclusion of
non-dividend-paying companies in a constant-growth DCF analysis. In fact, far from
objecting, the Staff in North Shore included non-divided-paying companies in its own
constant-growth DCF analysis. “[F]or the expected rate of return on the market parameter, Mr.
McNally,” a member of the Staff, “conducted a DCF analysis on the firms composing the S&P
500 Index”–which, as the parties agree in the present case, includes non-divided-paying
companies. Id. at 201. And both McNally and Moul used a “constant growth DCF.” Id. It
would be unreasonable to count on the Commission to sua sponte raise any and all problems,
such as including non-dividend-paying companies in a constant-growth DCF. The issue was
forfeited in North Shore. See 83 Ill. Adm. Code 200.610(b) (2000) (“Objections must be made
at hearing to preserve them on appeal.”). The issue is preserved in the present case.
¶ 59 Third, the Commission stated in North Shore that it “[did] not endorse every input to or
every aspect of the CAPM analyses performed by the Utilities or by Staff.” North Shore Gas
Co., Ill. Com. Comm’n No. 12-0511, at 207 (Order June 18, 2013). Because the Commission
did not specify, however, which of the CAPM inputs by the Staff the Commission found to be
debatable, North Shore cannot be understood as establishing an across-the-board “practice” of
averaging parties’ CAPM results together. In other words, the “practice” of averaging could
depend on the presence of the defective inputs, whatever they were. Perhaps that is why North
Shore says: “[F]or purposes of this proceeding, the Commission finds that each provides
useful input in estimating the market required return on common equity.” (Emphasis added.)
Id.
¶ 60 In sum, we disagree with Ameren’s argument that the Commission arbitrarily departed
from its decision in North Shore. Rather, for the reasons we have stated, North Shore is
distinguishable.

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¶ 61 2. Findings That Ameren Claims Are Inconsistent With the Evidence
¶ 62 a. Measurement Periods
¶ 63 Ameren says: “In the Order, the Commission rejected Mr. Hevert’s CAPM analysis
because of its apparent misunderstanding of what Mr. Hevert did. The Commission contended
that Mr. Hevert’s analysis should be disqualified because he used only 18- and 24-month betas,
when in fact he also used 60-month betas.”
¶ 64 The following sentence of the Commission’s order could indeed be understood as
assuming, incorrectly, that Hevert used only 18- and 24-month betas: “Staff again takes issue
with the beta measurement period used by Mr. Hevert, which in the current proceeding was 18
to 24 months.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 164 (Order Dec. 18,
2013). Actually, the third source that Hevert consulted for his beta calculation, Value Line,
measured betas over a five-year period. The order elsewhere acknowledges that “[t]o calculate
his beta coefficients, Mr. Hevert utilized reported beta coefficients from Bloomberg and Value
Line for each of the proxy group companies.” (Emphasis added.) Id. at 134. And evidently the
Commission was aware that Value Line used five-year measurement periods, for the order
says: “[Phipps] explained that Value Line employs 260 weekly observations of stock price
data ***.” Id. at 142. It is as if, when summarizing the Staff’s argument, the Commission
overlooked what it had written only a few pages earlier.
¶ 65 Even after Ameren, in its application for a rehearing, disabused the Commission of its
apparent misconception that Hevert had used only 18- and 24-month measurement periods for
his beta, the Commission still rejected his CAPM analysis. The Commission still declined to
average his CAPM result (as modified by Ameren in its application for rehearing) with the
results of the other parties’ experts to determine the rate of return. But the Commission
included Phipps’s CAPM result in the average. The question for us is whether, with the
misconception dispelled, it is clearly evident that Hevert’s modified CAPM result deserves as
much weight as Phipps’s CAPM result. See Apple Canyon Lake Property Owners’ Ass’n v.
Illinois Commerce Comm’n, 2013 IL App (3d) 100832, ¶ 20.
¶ 66 The answer is no–it is not clearly evident. When the 18- and 24-month sources were
disqualified, Hevert was left with a single five-year source (Value Line) compared to Phipps,
who relied on multiple five-year sources (Value Line, Zacks, and the regression analysis).
Consequently, the Commission could reasonably regard her beta estimation as more reliable
than his. Multiple beta sources could inspire more confidence than a single beta source. Indeed,
the Commission had said in a previous case: “We agree that, in the same way we rely on
multiple models to determine the cost of equity, Staff’s well-considered use of multiple beta
sources is beneficial to reduce measurement error from any individual estimate.” North Shore
Gas Co., Ill. Com. Comm’n No. 09-0166, at 126-27 (Order Jan. 21, 2010). Also, Hevert never
offered an opinion based on Value Line as a single beta source.

¶ 67 b. Non-Dividend-Paying Companies in a Diversified Portfolio
¶ 68 Another concern the Commission had with Hevert’s CAPM analysis was his “inclusion of
non-dividend[-]paying companies in the DCF analysis used in the calculation of the expected
market return, from which the risk-free rate [was] subtracted in the calculation of the market
risk premium.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 165 (Order Dec. 18,
2013).

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¶ 69 For two reasons, Ameren regards this concern about non-dividend-paying companies as
being against the manifest weight of the evidence: (1) non-dividend-paying companies are part
of the overall market, which the market-return parameter should reflect; and (2) Zacks, from
which the Staff obtained its own beta estimates, used the Standard & Poor’s 500 Index, which
included non-dividend-paying companies. We will discuss each of those two points.

¶ 70 i. Non-Dividend-Paying Companies
as Part of the Overall Market
¶ 71 Systematic risk is the risk posed by the market. Furman v. Commissioner, 75 T.C.M.
(CCH) 2206, at 11 n.10 (1998). Unsystematic risk is the risk unique to a particular asset. Id.
¶ 72 The CAPM assumes that someone who is considering investing in a public utility has “the
ability to hold[ ] diversified portfolios that eliminate, on a portfolio basis, the effects of
unsystematic risk.” Id. Because the CAPM assumes that an investor holding a diversified
portfolio will encounter only systematic risk, the CAPM determines compensation only for
systematic risk. Id.
¶ 73 The diversification of a stock portfolio eliminates unsystematic risk (Thompson, supra, at
247-48), and it is true, as Ameren says, that a diversified portfolio might well include stocks in
non-dividend-paying companies. Even so, non-dividend-paying companies are not the sine
qua non of a diversified portfolio. “[O]nce you have a portfolio of 20 or more stocks,
diversification has done the bulk of its work.” Id. at 248. (We need not regard this number 20
as magical; maybe the minimum number is 25 or 30 stocks.) Some of these 20 or more stocks
could be in non-dividend-paying companies, or they all could be in dividend-paying
companies. Diversification does not fail with the exclusion of companies that pay no
dividends.
¶ 74 Because owning stock in non-dividend-paying companies is not absolutely essential to
having a diversified stock portfolio that eliminates unsystematic (or unique) risk, the
Commission could have reasonably decided that if a party chose to estimate the market return
by using a constant-growth DCF model, it was preferable to exclude non-dividend-paying
companies so as to avoid contradicting the constant-growth DCF model. Again, the
Commission is the regulatory expert, and it is not “clearly evident” that including
non-dividend-paying companies would be necessary or even logical, given the choice of a
constant-growth DCF model, which presupposes growing dividends. Abbott Laboratories, Inc.
v. Illinois Commerce Comm’n, 289 Ill. App. 3d 705, 714 (1997).
¶ 75 We realize that Ameren argued to the Commission: “Hevert’s model *** include[d]
non-dividend paying stocks in the market risk premium simply by recognizing the price
appreciation of the stock over time.” But it is unclear how growth in the stock price could
substitute for dividends, considering that the current stock price (P0) and the dividend in the
first year (D1) are two separate variables in the equation.

¶ 76 ii. The Staff’s Inclusion of Non-Dividend-Paying Companies
in Its Estimation of the Beta
¶ 77 Ameren accuses the Commission of having a double standard in that the Commission
allowed the Staff to include non-dividend-paying companies in its estimation of the beta but

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 forbade Ameren to include non-dividend-paying companies in its estimation of the market
return. Ameren argues:
“Not only did Staff admit that non-dividend-paying companies are part of the
market intended to be measured by CAPM, the record also shows Staff relied on
market information (Zacks betas) that included non-dividend paying companies. Since
the record shows Zacks uses the S&P 500 for its beta calculations, and the S&P 500
includes companies that do and do not pay dividends, criticism of Mr. Hevert’s use of
the S&P 500 for his market risk premium was plainly arbitrary and contrary to the
record.”
¶ 78 Ameren seems to argue, in effect: “Look, the Staff did the same thing and received a pass.”
But Ameren has not convinced us that the Staff really did the same thing. The Commission’s
order specifically says that when Phipps used a DCF model to calculate the market return, she
excluded non-dividend-paying companies and that when Hevert used a constant-growth DCF
model to calculate the market return, he included non-dividend-paying companies.
¶ 79 Ameren points out, however, that Zacks includes non-dividend-paying companies in its
beta estimates and that by obtaining betas from Zacks, Phipps included non-dividend-paying
companies. The problem, though, was not with non-dividend-paying companies per se. It was
not that they were unsuitable for all purposes. Rather, as we understand the Commission’s
decision, the problem was it made no sense to apply a DCF model to non-dividend-paying
companies. We do not see how Phipps did that by using Zacks for purposes of the beta
parameter.
¶ 80 Granted, there is a certain lack of symmetry in including non-dividend-paying companies
in the beta parameter while excluding them from the market-return parameter, but those two
parameters are concerned with different things–the beta coefficient is concerned with the
volatility of the utility compared to the volatility of the market as a whole, whereas the market
return is concerned with the expected return from the market–and it is unclear to us what effect,
if any, followed from this lack of symmetry. The Commission had a reason for excluding
non-dividend-paying companies from the market-return parameter: to avoid a conflict with the
constant-growth DCF model. In short, we are not financial analysts, and when we defer to the
Commission’s expertise and experience (Commonwealth Edison Co. v. Illinois Commerce
Comm’n, 2013 IL App (2d) 120334, ¶ 36), we are unable to say it is “clearly evident” that the
inclusion of non-dividend-paying companies in the beta parameter (via Zacks) demanded their
inclusion in the market-return parameter if a constant-growth DCF model were used to
calculate the market return. Abbott, 289 Ill. App. 3d at 714.

¶ 81 B. The Sufficiency of the Commission’s Findings and Analysis
¶ 82 Ameren argues that, “at a minimum,” we should “remand this case with instructions to the
Commission to explain itself.” We deem a remand to be unnecessary. The Commission wrote a
decision 254 pages long, 38 pages of which were devoted to the cost of equity. For each issue
and subissue, the Commission diligently summarized the parties’ arguments and chose among
the arguments. Its decision “contain[s] findings [and] analysis sufficient to allow an informed
judicial review.” 220 ILCS 5/10-201(e)(iii) (West 2012).
¶ 83 We realize the Commission denied Ameren’s application for a rehearing without providing
any explanation for doing so. Nevertheless, we assume that, by the denial, the Commission

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 adhered to its finding that “the beta estimates provided by [the] Staff [were] more reliable.”
Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 164 (Order Dec. 18, 2013). The
Commission’s order has enough substance that we can tell whether the “opposite conclusion is
clearly evident.” (Internal quotation marks omitted.) Apple Canyon, 2013 IL App (3d) 100832,
¶ 20. It is not “clearly evident” that Hevert’s CAPM analysis is as reliable as Phipps’s CAPM
analysis, considering that he used only one valid source for his beta, whereas she used multiple
sources, and considering that he included non-dividend-paying companies in his
constant-growth DCF analysis, whereas she excluded them from her DCF analysis. Id.
¶ 84 Ameren purports to be mystified as to why the Commission required the exclusion of
non-dividend-paying companies from the market-return parameter, and Ameren complains of
the lack of an explanation. Actually, though, as far as we can see, Ameren never has squarely
responded to the Commission’s stated rationale: that it is impossible to apply a
constant-growth DCF model to companies that pay no dividends. See Connect America Fund,
28 FCC Rcd. at 7159 n.156 (“The general DCF model cannot be used to calculate the cost of
equity for a firm that does not pay dividends.”); Represcribing the Authorized Rate, 5 FCC
Rcd. at 7511 (before “DCF cost of equity calculations” were made, “[t]he S & P 400 group and
the electric group were screened to remove *** companies that did not pay quarterly
dividends”). Ameren never has explained how the constant-growth DCF formula works when
applied to non-dividend-paying companies.

¶ 85 C. Consumer Protections in the Small Volume Transportation Program
¶ 86 1. Ripeness
¶ 87 The retail gas suppliers argue that the three consumer protections the Commission required
them to provide in the small volume transportation program violate the Public Utilities Act and
lack any evidentiary justification.
¶ 88 The Commission responds, initially, that this issue is unripe. According to the
Commission, only after it approves the small volume transportation tariffs that Ameren filed in
a separate proceeding before the Commission, Ameren Illinois Co., No. 14-0097, will the
legitimacy of the consumer protections be ripe for review. Without approved tariffs, there can
be no small volume transportation program. The Commission raises the possibility that the
program might end up being too expensive to implement. In case No. 14-0097, Ameren
disclosed that the costs of the program would be triple the estimate Ameren made previously,
in the present case. In light of that disclosure, Ameren requested the Commission, in case No.
14-0097, to enter an “Interim Order and provide further direction confirming whether
[Ameren] should proceed with the SVT program.”
¶ 89 The retail gas suppliers say, however, that if the Commission decides not to go forward
with the small volume transportation program, this will be a change of mind by the
Commission, because the Commission already has approved the program. The final order in
the present case states: “The Commission concludes that it is in the public interest to approve
an SVT program at this time, but with the additional consumer protections ***.” Ameren
Illinois Co., Ill. Com. Comm’n No. 13-0192, at 246 (Order Dec. 18, 2013). The order also
states that the Commission is “approving the implementation of an SVT program for
[Ameren].” Id. at 249. Thus, according to the suppliers, the small volume transportation
program is more than a theoretical idea or proposal; it is an approved program. Even though
further details need to be worked out in the tariffs, that does not detract from the Commission’s

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 approval of the program, which, by the terms of the order in this case, shall include the
consumer protections. The suppliers see a danger that these newfangled consumer protections
will be set in concrete, since the order says that “[a]ll issues decided in the instant proceeding
will be considered resolved for purposes of the second proceeding.” Id. at 251. The suppliers
are concerned that if we declare their issue to be unripe, the opportunity to challenge the
consumer protections will pass and never return: the issue “will be considered resolved.” Id.
¶ 90 The question of ripeness “is best seen in a twofold aspect, requiring us to evaluate both the
fitness of the issues for judicial decision and the hardship to the parties of withholding court
consideration.” (Internal quotation marks omitted.) Alternate Fuels, Inc. v. Director of the
Illinois Environmental Protection Agency, 215 Ill. 2d 219, 231 (2004).
¶ 91 The legality of the additional consumer protections is an issue fit for judicial decision.
Also, courts commonly determine whether an agency’s decision has any support in the
evidentiary record.
¶ 92 As for the hardship to the parties of withholding court consideration, the consumer
protections could have economic implications for the retail gas suppliers and therefore could
affect their decision whether to participate in the small volume transportation program–and
could affect their decision whether to participate further in fashioning the program. Because
the suppliers presumably will have to make financial commitments in order to fulfill contracts,
lengthening the grace periods during which customers could terminate contracts might hurt the
bottom line. Keeping track of price data will be time-consuming, and companies do not
necessarily want to reveal their pricing strategies to competitors. The suppliers argued to the
Commission:
“Requiring the reporting of the prices and terms of supplier contract offers will be
extremely burdensome and provide ambiguous data. Market prices change daily and
depending on the business model of an alternative gas supplier, its prices and terms of
supplier contract offers may vary daily and may vary for different customers. Tracking
this data would entail a huge amount of work for retail gas suppliers and assembling it
in a useful format would be a monumental task for [the Citizen Utility Board’s Office
of Retail Market Development.] *** Additionally, certain supplier contract offers to
customers may be sensitive or confidential and in a competitive marketplace a supplier
should not be required to expose their pricing strategy to their competitors.”
¶ 93 Even at this time, before the small volume transportation program has been implemented,
the effects of the additional consumer protections are tangible enough to the retail gas suppliers
that the issue is ripe for review. See id.

¶ 94 2. The Commission’s Authority
To Require the Consumer Protections
¶ 95 The retail gas suppliers challenge the Commission’s authority to require them to provide
the three consumer protections proposed by the Citizens Utility Board.
¶ 96 Because an administrative agency, such as the Commission, is a creation of the legislature,
it has only the powers the legislature gives it in statutory law. Illinois Bell Telephone Co. v.
Illinois Commerce Comm’n, 203 Ill. App. 3d 424, 438 (1990). An act by an agency can be
unauthorized in either of two circumstances. One circumstance is the absence of a statute. “The
fact that no statute precludes an agency from taking a particular action does not mean that the

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 authority to do so has been given by the legislature.” Id. There must be a statute expressly
granting the agency the power to do the act in question (id.) (and an express grant of power to
do the act is interpreted as including the “power to do all that is reasonably necessary to
execute the power *** specifically conferred” (Illinois Federation of Teachers v. Board of
Trustees, 191 Ill. App. 3d 769, 774 (1989))). The other circumstance is the existence of a
statute with which the administrative act conflicts. See 220 ILCS 5/10-201(e)(iv)(C) (West
2012) (“The court shall reverse a Commission *** decision, in whole or in part, if it finds that
*** [t]he *** decision is in violation of the State *** laws[.]”).

¶ 97 a. Is There an Empowering Statute?
¶ 98 The first question, then, is whether any statute expressly empowers the Commission to
require the observance of administratively created consumer protections as a condition of
participating in a small volume transportation program. See Illinois Bell, 203 Ill. App. 3d at
438. The answer is yes. The statutory authority comes from sections 9-201 and 19-120(b)(3) of
the Public Utilities Act (220 ILCS 5/9-201, 19-120(b)(3) (West 2012)).
¶ 99 Under section 9-201(a) (220 ILCS 5/9-201(a) (West 2012)), whenever a public utility
wants to make a significant change, it has to file a “schedule,” or tariff, with the Commission.
If the utility wants to change “any rate or other charge,” it has to file a tariff. Id. If the utility
wants to change “any rule, regulation, practice[,] or contract relating to or affecting any rate or
other charge, classification[,] or service,” it has to file a tariff. Id. If the utility wants to change
“any privilege or facility,” it has to file a tariff. Id.
¶ 100 Section 9-201(b) says that whenever a utility files a tariff, “the Commission shall have the
power, and it is hereby given authority, *** to enter upon a hearing concerning the propriety of
such rate or other charge, classification, contract, practice, rule[,] or regulation, and pending
the hearing and decision thereon, such rate or other charge, classification, contract, practice,
rule[,] or regulation shall not go into effect.” 220 ILCS 5/9-201(b) (West 2012).
¶ 101 Section 9-201(c) says that “[i]f the Commission enters upon a hearing concerning the
propriety of any proposed rate or other charge, classification, contract, practice, rule[,] or
regulation, the Commission shall establish the rates or other charges, classifications, contracts,
practices, rules[,] or regulations proposed, in whole or in part, or others in lieu thereof, which it
shall find to be just and reasonable.” 220 ILCS 5/9-201(c) (West 2012). Once the Commission
approves a tariff, it “is a law, not a contract, and [it] has the force and effect of a statute.”
(Internal quotation marks omitted.) Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 55
(2004).
¶ 102 In this case, Ameren filed not only tariffs proposing a general increase in its gas rates but
also “rider” or supplemental tariffs proposing the establishment of a small volume
transportation program. See 220 ILCS 5/9-201(a) (West 2012) (“new schedules or
supplements” (emphasis added)). The Commission had the statutory authority to scrutinize the
“practices” and “rules” proposed in the small volume transportation tariffs and to find those
“practices” and “rules” to be “just and reasonable” only if they included a provision whereby
Ameren required retail gas suppliers, as a condition of their participation in the program, to
observe certain consumer protections. 220 ILCS 5/9-201(c) (West 2012).
¶ 103 Section 19-120(b)(3) provides: “The Commission shall have jurisdiction *** to investigate
*** whether *** the alternative gas supplier has violated or is in nonconformance with the

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 transportation services tariff of, or any of its agreements relating to transportation services
with, the gas utility *** providing transportation services ***.” 220 ILCS 5/19-120(b)(3)
(West 2012).
¶ 104 We conclude, therefore, that statutory law (1) authorizes the Commission to require the
inclusion of consumer protections in a small volume transportation tariff and (2) gives the
Commission “jurisdiction” over retail gas suppliers to investigate their compliance with these
consumer protections.
¶ 105 The retail gas suppliers point out that the three consumer protections are not actually in any
of the proposed small volume transportation tariffs that Ameren has filed. Nevertheless, the
import of the Commission’s order is that the three consumer protections shall be in Ameren’s
small volume transportation tariff. After all, this administrative case was a hearing on tariffs.
The Illinois Competitive Energy Association (ICEA) and the Retail Energy Supply
Association (RESA) must have contemplated that if the Commission adopted the consumer
protections proposed by the Citizens Utility Board, the protections would be in the small
volume transportation tariff. They argued to the Commission: “ICEA/RESA says [the Citizens
Utility Board] is under the misunderstanding that the tariffs of Illinois gas utilities are the only
source of consumer protections. *** ICEA/RESA states that protections for residential and
small-volume non-residential natural gas customers are set forth in Section 19-115 of the Act
[(220 ILCS 5/19-115 (West 2012))].” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at
245 (Order Dec. 18, 2013).

¶ 106 b. Do the Three Consumer Protections Violate Statutory Law?
¶ 107 i. The First Consumer Protection
¶ 108 The first consumer protection that the Commission approved in this case provides as
follows:
“(1) A customer shall be absolved from paying any termination fees if, prior to the
due date of their first bill, they notify the supplier that they are terminating the
contract.” Id. at 247.
¶ 109 The retail gas suppliers argue that because this consumer protection requires a grace period
“different from” the grace period in section 19-115(g)(5)(B) of the Public Utilities Act (220
ILCS 5/19-115(g)(5)(B) (West 2012)), it “directly conflict[s] with” that statute. Section
19-115(g)(5)(B) reads as follows:
“(g) An alternative gas supplier shall comply with the following requirements with
respect to the marketing, offering, and provision of products or services:
***
(5) Early Termination.
***
(B) In any agreement that contains an early termination clause, an
alternative gas supplier shall provide the customer the opportunity to terminate
the agreement without any termination fee or penalty within 10 business days
after the date of the first bill issued to the customer for products or services
provided by the alternative gas supplier. The agreement shall disclose the
opportunity and provide a toll-free phone number that the customer may call in
order to terminate the agreement.” 220 ILCS 5/19-115(g)(5)(B) (West 2012).

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 Thus, if a contract between an alternative gas supplier and a customer includes a provision
governing an early termination of the contract, the contract must inform the customer that the
customer has the right to terminate the contract, without penalty, within 10 business days after
the first bill is issued to the customer. Also, the contract has to provide a toll-free telephone
number the customer may call to exercise this right of early termination.
¶ 110 The alternative gas suppliers complain that the grace period the Commission ordered in the
first consumer protection is longer than the grace period that section 19-115(g)(5)(B)
“allow[s].” Again, the first consumer protection provides that a customer may terminate the
contract, without penalty, before the due date of the first bill. Under the Commission’s rules,
“[b]ills for residential customers shall be due a minimum of 21 days after the date they are sent
to the customer, and bills for non-residential customers shall be due a minimum of 14 days
after the date they are sent to the customer.” 83 Ill. Adm. Code 280.50(e)(1), adopted at 38 Ill.
Reg. 21331 (eff. Nov. 1, 2014). Thus, the first consumer protection lengthens the grace period
from 10 days after the issuance of the first bill to a minimum of 21 days after the issuance of the
first bill for residential customers and a minimum of 14 days after the issuance of the first bill
for nonresidential customers.
¶ 111 According to the retail gas suppliers, this substitution of a longer grace period for the
shorter grace period in the statute is an unauthorized act, like the Commission’s violation of
section 9-230 (220 ILCS 5/9-230 (West 1994)) in Illinois Bell Telephone Co. v. Illinois
Commerce Comm’n, 283 Ill. App. 3d 188 (1996). Section 9-230 provided:
“ ‘In determining a reasonable rate of return upon investment for any public utility
in any proceeding to establish rates or charges, the Commission shall not include any
incremental risk or increased cost of capital which is the direct or indirect result of the
public utility’s affiliation with unregulated or nonutility companies.’ ” (Emphases in
original.) Illinois Bell, 283 Ill. App. 3d at 205 (quoting 220 ILCS 5/9-230 (West 1994)).
Illinois Bell Telephone Company (Illinois Bell) was affiliated with Ameritech Corporation
(Ameritech), and “[instead of] determining whether [Illinois] Bell’s risk or capital costs were
greater because of its affiliation with Ameritech, the Commission merely determined [that
Illinois] Bell’s capital structure was reasonable.” Id. at 207. If, however, the affiliation with
Ameritech caused Illinois Bell to be a riskier investment than it otherwise would have been, the
supposed reasonableness of the affiliation was irrelevant; the statute flatly forbade using the
added risk as a justification for allowing Illinois Bell a higher rate of return. The appellate court
said:
“In section 9-230, the legislature used the word ‘any’ to modify its prohibition of
considering incremental risk or increased cost of capital in determining a reasonable
[rate of return]. This usage removes all discretion from the Commission. Section 9-230
does not allow the Commission to consider what portion of a utility’s increased risk or
cost of capital caused by affiliation is ‘reasonable’ and therefore should be borne by the
utility’s ratepayers; the legislature has determined that any increase whatsoever must
be excluded from the [rate-of-return] determination. It is impermissible for the
Commission to substitute its reasonableness standard for the legislature’s absolute
standard.” Id.
The statutory phrase “shall not include any incremental risk” was an absolute prohibition.
¶ 112 The statute before us, section 19-115(g)(5)(B) of the Public Utilities Act (220 ILCS
5/19-115(g)(5)(B) (West 2012)), would be more comparable to the statute in Illinois Bell if it

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 said something to the effect of: “The agreement shall not include any grace period other than a
period of 10 business days after the issuance of the first bill.” But that is not what section
19-115(g)(5)(B) says. Instead, it says that the alternative gas supplier “shall provide the
customer the opportunity to terminate the agreement without any termination fee or penalty
within 10 business days after the [issuance] of the first bill.” Id. If the supplier provides the
customer the opportunity to terminate the agreement within, say, 14 business days after the
issuance of the first bill, then, ipso facto, the supplier would provide the customer the
opportunity to do so within 10 business days after the issuance of the first bill. A longer period
encompasses a shorter period. If the deadline for early termination is the fourteenth day and the
customer calls on the tenth day, the supplier surely will not regard the call as ineffectual and
require the customer to call back in four days. By giving the customer the opportunity to
terminate the contract within 14 days, the supplier gives the customer the opportunity to do so
on the first day, the second day, the third day, etc., all the way up to day 14.
¶ 113 The alternative gas suppliers argue, however, that if the legislature really intended to allow
a grace period of longer than 10 business days, the legislature could have used a modifier such
as “no less than” or “at least”: “An alternative gas supplier shall provide the customer the
opportunity to terminate the agreement without any termination fee or penalty within no less
than 10 business days after the date the first bill was issued to the customer.” True–or the
legislature could have spoken in terms of an “opportunity” to terminate the contract. The best
evidence of legislative intent is the plain and ordinary sense of the words the legislature used
(Paris v. Feder, 179 Ill. 2d 173, 177 (1997)), and in the plain and ordinary sense of words,
when someone is given an “opportunity” to do something within a period of longer than 10
days, the person necessarily is given the “opportunity” to do it within 10 days. Hence, in our
de novo interpretation (see Quad Cities Open, Inc. v. City of Silvis, 208 Ill. 2d 498, 508
(2004)), we conclude that section 19-115(g)(5)(B) of the Public Utilities Act (220 ILCS
5/19-115(g)(5)(B) (West 2012)) does not forbid the Commission to prescribe a grace period
longer than 10 business days after the issuance of the first bill.

¶ 114 ii. The Second Consumer Protection
¶ 115 The second consumer protection likewise lengthens the grace period for the early
termination of a contract, making the grace period especially long if the contract was preceded
by a door-to door solicitation:
“2. When a customer has accepted service from a supplier after solicitation by a
door-to-door salesperson, there shall be no termination fees assessed if the customer
terminates during the first 6 billing cycles.” Ameren Illinois Co., Ill. Com. Comm’n No.
13-0192, at 247 (Order Dec. 18, 2013).
¶ 116 The retail gas suppliers make essentially the same argument against the second consumer
protection that they make against the first consumer protection: under section 19-115(g)(5)(B)
(220 ILCS 5/19-115(g)(5)(B) (West 2012)), “ten days means ten days, regardless of how a
customer was solicited.” In our discussion of the first consumer protection, we explained why
we disagree with that argument. For the same reason, we disagree with the suppliers’ argument
against the second consumer protection.

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¶ 117 iii. The Third Consumer Protection
¶ 118 The third consumer protection provides as follows:
“3. If a supplier’s marketing materials include a price comparison of the supplier
rate and the gas utility rate, the depiction of such comparison shall display at least three
years of data in no greater than quarterly increments and shall also display the
supplier’s offered price for the same or equivalent product(s) or service(s) for each of
the same increments.” Ameren Illinois Co., Ill. Com. Comm’n No. 13-0192, at 247
(Order Dec. 18, 2013).
¶ 119 The retail gas suppliers make essentially two arguments against this consumer protection.
First, nothing in the Public Utilities Act authorizes the Commission to order this consumer
protection. Second, this consumer protection “directly conflicts with” sections 19-115(g) and
19-125(c) of the Public Utilities Act (220 ILCS 5/19-115(g), 19-125(c) (West 2012)), in the
sense that “the expression of one thing in an enactment excludes any other, even if there are no
negative words prohibiting it.” Illinois Bell, 203 Ill. App. 3d at 438. We will address each of
those arguments in turn.

¶ 120 (a) Statutory Authorization
¶ 121 As we have discussed, when the Commission holds an administrative hearing on a tariff
filed by a utility, section 9-201(c) empowers the Commission to “establish” “just and
reasonable” “practices, rules[,] or regulations” “in lieu” of those the utility has proposed in the
tariff. 220 ILCS 5/9-201(c) (West 2012). Thus, if the third consumer protection is just and
reasonable, the Commission has the power to establish it as a practice, rule, or regulation in
Ameren’s small-volume transportation tariff.

¶ 122 (b) The Argument of Implied Exclusion
¶ 123 The retail gas suppliers argue that the third consumer protection “directly conflicts with
provisions in the [Public Utilities Act] that address marketing practices and price
comparisons.” The only such provisions the suppliers cite are sections 19-115(g) and
19-125(c) (220 ILCS 5/19-115(g), 19-125(c) (West 2012)). The suppliers do not explain how
the third consumer protection requires them to do anything that sections 19-115(g) and
19-125(c) forbid.
¶ 124 Perhaps the suppliers mean that sections 19-115(g) and 19-125(c) impliedly exclude the
third consumer protection. Expressing one thing in a statute can impliedly exclude another
thing, but it does not always do so. If the statement “the expression of one thing in an
enactment excludes any other” were taken at face value, there could be only one enactment.
Illinois Bell, 203 Ill. App. 3d at 438. Actually, the exclusionary implication is heavily
dependent on context and common sense. In Illinois Bell, for example, the only reasonable
inference from section 9-244 of the Public Utilities Act (Ill. Rev. Stat. 1989, ch. 1112/3,
¶ 9-244) was that the legislature did not intend the Commission to unilaterally implement
incentives to improve utility performance, because the statute authorized the Commission to
do a study on the necessity and desirability of an incentive program and then to report its
findings to the legislature, “ ‘with appropriate legislative recommendations.’ ” (Emphasis
omitted.) Illinois Bell, 203 Ill. App. 3d at 437-38 (quoting Ill. Rev. Stat. 1989, ch. 1112/3,
¶ 9-244). Because the legislature wanted the Commission to study the question and then make

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 its recommendations to the legislature, the clear implication was that the legislature had
reserved to itself the decision of whether to have an incentive program for utilities.
¶ 125 We find no comparable exclusionary implication in either section 19-115(g) (220 ILCS
5/19-115(g) (West 2012)) or section 19-125(c) (220 ILCS 5/19-125(c) (West 2012)). Section
19-115(g) says only this about marketing materials: “Any marketing materials which make
statements concerning prices, terms, and conditions of service shall contain information that
adequately discloses the prices, terms[,] and conditions of the products or services.” 220 ILCS
5/19-115(g)(1) (West 2012). We do not understand by what logic this statute impliedly
excludes the third consumer protection, which governs marketing materials that purport to
make “a price comparison of the supplier rate and the gas utility rate.”
¶ 126 As for section 19-125(c) (220 ILCS 5/19-125(c) (West 2012)), it has nothing to do with
marketing. Rather, it requires alternative gas suppliers to provide the Commission their pricing
information, which the Commission then will post on the Internet so that customers can
compare the prices of the various suppliers. It is unclear how this statute could be interpreted as
impliedly saying no to something quite different: a regulation governing marketing materials
that purport to compare the supplier’s rate to the gas utility’s rate.

¶ 127 3. The Lack of an Opportunity To Present Rebuttal Evidence
¶ 128 The retail gas suppliers complain that “[b]ecause [the Citizens Utility Board proposed the
three consumer protections] in the rebuttal phase of the case, there was no additional round of
testimony during which [the suppliers] could have addressed those issues.”
¶ 129 Nevertheless, as the Commission notes, the suppliers did not object when, during the
rebuttal phase, Cohen proposed the three consumer protections. According to the
Commission’s brief, “his evidence was admitted into the administrative record without
objection.” The suppliers could have objected during Cohen’s testimony. They could have
objected that by waiting until the rebuttal phase to propose these new rules, the Citizens Utility
Board deprived them of the opportunity to respond with evidence that the proposed new rules
would be too burdensome or too costly. Then the administrative law judge could have
sustained their objection or, alternatively, could have modified the schedule so as to allow
them to present surrebuttal evidence. But the suppliers made no contemporaneous objection.
¶ 130 A rule of the Commission provides: “Objections must be made at hearing to preserve them
on appeal.” 83 Ill. Adm. Code 200.610(b) (2000). Pursuant to that rule, we conclude that the
suppliers have forfeited their procedural objection to the proposal of new rules during rebuttal.

¶ 131 4. The Argument That the Three Consumer Protections
Lack Evidentiary Support in the Record
¶ 132 The Commission found that “in light of the experience in [n]orthern Illinois, the three
requirements proposed by [the Citizens Utility Board were] reasonable and appropriate
supplements to the existing statutory protections,” and therefore the Commission “adopted”
them. The suppliers argue that, for all that appears in the record, “the experience in [n]orthern
Illinois” consists merely of two cases, one from 2002 and the other from 2008, and that these
two isolated cases from years ago, which did not even occur in Ameren’s service territory,
cannot reasonably serve as a basis for the three consumer protections. Thus, the suppliers
argue, “[t]he findings of the Commission are not supported by substantial evidence based on

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 the entire record of evidence presented to or before the Commission for and against such rule,
regulation, order[,] or decision.” 220 ILCS 5/10-201(e)(iv)(A) (West 2012).
¶ 133 Let us assume, for the sake of argument, that the suppliers are correct: if the aim is to
respond to historical abuses, the two cases from northern Illinois cannot reasonably serve as a
justification for the three consumer protections. Let us say these cases are too few and too stale
to be the basis for any decision.
¶ 134 It does not necessarily follow that the three consumer protections are “[un]just and
[un]reasonable.” 220 ILCS 5/9-201(c) (West 2012). The suppliers cite no case holding that the
Commission must be purely reactive, and never proactive, in the practices, rules, and
regulations it requires in tariffs. They cite no case holding that consumers must be exploited in
sufficient numbers before measures can be taken to protect them. To borrow an analogy from
the Commission’s brief, the Commission should not have to wait until someone is run over by
a train before it declares a railroad crossing to be dangerous. See Galt v. Illinois Commerce
Comm’n, 28 Ill. 2d 501, 504 (1963).
¶ 135 Section 9-201(c) requires that the “practices, rules[,] or regulations” in tariffs be “just and
reasonable,” not that they be validated by a compelling history of abuses. 220 ILCS 5/9-201(c)
(West 2012). The Commission could reasonably foresee the potential for unfairness,
deception, or exploitation and, by the insertion of a rule or regulation into the tariff, try to
prevent the wrong from ever happening.

¶ 136 III. CONCLUSION
¶ 137 For the foregoing reasons, we affirm the Commission’s decision.

¶ 138 Affirmed.

¶ 139 JUSTICE STEIGMANN, concurring in part and dissenting in part.
¶ 140 With one small exception, I agree completely with the sound majority opinion. That small
exception pertains to one of the three additional consumer protections the Commission added,
providing that a customer shall be absolved from paying any termination fees if, prior to the
due date of the customer’s first bill, the customer notifies the supplier that the customer is
terminating the contract. The retail gas suppliers argue that because this consumer protection
requires a grace period that is different from the one provided in section 19-115(g)(5)(B) of the
Public Utilities Act (220 ILCS 5/19-115(g)(5)(B) (West 2012)), it directly conflicts with that
statute. I agree with that analysis and respectfully dissent from that portion of the majority’s
opinion.
¶ 141 The majority opinion sets forth section 19-115(g)(5)(B) of the Public Utilities Act in its
entirety (see supra ¶ 109), so I will not repeat that section here. In my judgment, that section
constitutes a legislative determination regarding the time in which any agreement that contains
an early termination clause may be subject to an early termination. The legislature has decided
that the customer may terminate the agreement without any termination fee or penalty within
10 business days after the date of the first bill issued to the customer for products or services
provided. Contrary to the majority opinion, I view this language as constituting a definitive
legislative judgment that is binding upon the Commission. Accordingly, the Commission

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exceeded its lawful authority by purporting to extend the time for early termination beyond
that contained in section 19-115(g)(5)(B) of the Public Utilities Act.

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