Introduction to the Illinois Commerce Commission and the Certificate Process

1. Introduction to the Illinois Commerce Commission and the Certificate Process Eric Lounsberry – Gas Engineering Supervisor May 1, 2009

2. Necessary Caveat The opinions expressed here are my own and do not necessarily represent the opinions of the Commission.

3. Presentation Summary • Introduction to the Illinois Commerce Commission • Types of certificates • Information reviewed in certificate cases • Route selection process used by certain utilities • Case summary and timeline

4. ICC Mission Statement The ICC’s mission is to pursue an appropriate balance between the interest of consumers and existing and emerging service providers to ensure the provision of adequate, efficient, reliable, safe and least-cost public utility services.

5. What is the Illinois Commerce Commission Regulatory Agency that has oversight over two primary areas: • Transportation • Public Utilities

6. Transportation Oversight • Motor Carriers/Trucking • Household Goods Movers - Intrastate • Railroad Safety • Crossings • Derailments • Hazardous waste movement • Towing • Private Property Removal – 6 NE Counties • Damaged/Disabled Removal – 5 NE Counties

7. Public Utility Oversight Primarily Rate Regulation, Certification, and Service Reliability • Electricity • No oversight over price of electricity, just cost to deliver it • Natural Gas • Includes Federal DOT Pipeline Safety Program • Water • Sewer • Telephone • 911 • Common Carriers • Primarily Certification and Eminent Domain • JULIE Enforcement

8. Public Utility Oversight continued No or limited authority over • Cooperatives • Municipalities • Cable TV or Cellular Phone Providers

9. Commission Legal Authority Illinois Public Utilities Act Legal reference is 220 ILCS 5 Contains ICC’s legal authority for majority of its regulatory authority over the public utilities. Certification authority is contained in the PUA.

10. Who makes up the Commission Commission decisions are determined by a board of 5 Commissioners, appointed to staggered terms, by the Governor and approved by the Senate. The Commission (Public Utility side only) consists of nearly 200 technical and support Staff. Technical staff consists of accountants, rate analysts, financial analysts, economists, engineers, and attorneys.

11. Technical Staff’s Role • Technical Staff on certificate cases includes lawyers, engineers, and perhaps financial analysts. • Technical Staff provide unbiased recommendation to ALJ based upon information in the record and the merits of the case via testimony and legal briefs.

12. Natural Gas Engineering Responsibilities • Certification of utility pipeline and storage facilities • Certification of common carrier pipelines • Certification of alternative gas suppliers • Prudence determinations for gas purchase decisions • Review natural gas rate base additions • Natural gas measurement accuracy

13. Basic Outline – Contested Case • Company files a petition and testimony • Staff/Intervenors file direct testimony • Company files rebuttal testimony • Two more testimony rounds, if needed • Evidentiary hearing – Cross examination • Simultaneous Initial and Reply Briefs • Proposed Order by ALJ • Final Order Voted by Commissioners

14. Certificates types • Certificate of Public Convenience and Necessity • Water/Sewer • Electricity • Natural Gas • Certificate in Good Standing • Common Carrier Pipelines • Certificate of Service Authority • Telephone • Alterative Retail Electric Suppliers • Alternative Gas Suppliers

15. Legal Authority for Certificates • Certificate of Public Convenience and Necessity • Section 8-406 of Public Utilities Act • Certificate in Good Standing • Section 15-401(b) of Public Utilities Act • Both Certificates could also obtain Section 8-503 (construction authorization) and 8-509 (eminent domain) • All certificate request must follow Code Part 300 ROW Acquisition Rules

16. Certificate of Public Convenience and Necessity Requirements • Proposed construction is necessary to provide adequate, reliable, and efficient service and is least-cost means of satisfying the service needs • Equitable to all customers • Utility is capable of efficiently managing and supervising the construction process • Utility is capable of financing the proposed construction without significant adverse financial consequences

17. Necessary Electric Line Construction • Need to alleviate existing or projected voltage concerns • Capacity requirement to account for first contingency (loss of one line) • Power plant construction

18. Necessary Natural Gas Construction • New high demand load (power plant, ethanol facility, etc.) • Pipeline replacement due to federal pipeline safety integrity management requirements • Pressure concerns due to system growth • Storage field capacity upgrade

19. Equitable to all customers • If facility for specific purpose, such as line ran to new customers, are other customer subsidizing construction • Revenue test – customer load repays for construction/operating maintenance costs within reasonable time • Residential – usually 10 year test • Commercial – usually 5 year test

20. Managing and Financing Project • Management • Small projects normally done with internal resources • Larger project may require outside services – verification of competence of outside services • Financing • Larger projects can impact upon credit rating of some utilities – confirm ability to finance project in manner selected with minimal impact on existing customers

21. Requirements for Certificate in Good Standing • Application properly filed • Public need for the service exists • Applicant is fit, willing, and able to provide service • Public convenience and necessity requires issuance of the certificate

22. Properly Filed Follow Commission requirements

23. Public Need • Applicant has contracts in place for the service being provided • Applicant provides studies showing need for the product in the area

24. Fit, Willing, and Able • Following other Federal, State, and local regulations and permitting processes • Financial and technical ability of the company to build and operate the pipeline safely

25. Public Convenience and Necessity • Public benefits from project • Jobs created • Products produced directly/indirectly • Best route selected • Discussed in more detail below

26. Process for Route Selection • No specific requirements for route selection process • Two largest electric utilities and one of the larger gas utilities are using the following process

27. Route Selection continued • Prior to determining final route • Meet with stakeholders along likely routes regarding project • City/Local officials • Regional groups – airport authority, water utility, etc. • Use stakeholders meeting to identify sensitive areas along potential routes and possible areas of opportunity for siting project • Maintain records of meetings and list of stakeholders concerns for support of selected route

28. Route Selection continued • Significant items considered in route selection • Environmental impact (i.e. wetlands) • Number of impacted landowners • Proximity to landowners • Proximity to schools/public buildings • Construction considerations (i.e. river/stream crossings) • Route distance • Use of existing easements/ability to parallel easements • Minimize placement in areas of proposed development

29. Route Selection Conclusion • Prior to official filing hold public forums along potential routes • Send letter to each potentially impacted landowner • Public notices – newspaper, etc. • Website for project • Official filing include summary of stakeholder and public forum meetings • Official filing include selected route, methodology used to select route, and alternative routes considered

30. Code Part 300 – ROW Guidelines Legal Title – 83 Illinois Administrative Code 300 • Information packet to Commission • List of guidelines • Timing of contacts • Form of contact • Record keeping • Minimum information to provide • Commission required statement • Variances to requirements

31. Commission’s Role with Eminent Domain • Eminent Domain can be requested in conjunction with certificate request. • Commission only provides authorization to pursue eminent domain. • Commission recently revised notice language in certificate cases. • Commission does not value property or resolve conflicts with easement language.

32. Typical Certificate Case Timeline • The pipeline company files its petition and supporting evidence via Direct Testimony. • All parties have several months to issue discovery questions and then submit their own Direct Testimony. • Additional testimony is subsequently filed (Company Rebuttal, Staff and Intervener Rebuttal, and Company Surrebuttal), usually at one month intervals, but that can vary. All parties are subject to discovery questions from other interested parties.

33. Timeline continued… • A formal hearing is held before the ALJ where the parties can cross examine each other’s witnesses regarding the pre-filed testimony. • All parties simultaneously write Initial Briefs, detailing their legal arguments as well as why the facts support their position, usually within a month after the hearing. All parties file Reply Briefs, several weeks later in response to viewpoints contrary to their position.

34. Timeline Conclusion • ALJ issues a proposed order to the parties with his findings and rulings. • All parties have several weeks to file “Briefs on Exceptions” and later “Reply Briefs on Exceptions” that agree or disagree with the ALJ’s findings. • The ALJ issues his final proposed order to the Commissioners who then consider it, can require alterations to it, and vote on it at a public hearing. • Commission orders are appealable to Appellate Court • No time limit on certificate cases – most contested cases completed within 12 months

35. Questions • Thank you for your time and if you have any further questions you can contact me via phone or email • Phone 217-785-5436 • Email elounsbe@icc.illinois.gov