The Appellate Court of Illinois, Fifth District, recently construed the scope of the reciprocity provision of the Illinois Electric Service Customer Choice and Rate Relief Law of 1997, 220 ILCS 5/16-101 et seq. ("Customer Choice Law"). See Local Union Nos. 15, 51, and 702, International Brotherhood of Electrical Workers v. The Illinois Commerce Commission and WPS Energy Services, Inc., and Blackhawk Energy Services, L.L.C., No. 5-01-0416 (Ill. App. Ct., 5th District, June 20, 2002). Generally, in this context, "reciprocity" is the concept under which an entity may market competitive power in the state if the entity is based in a state that also allows such sales. As construed by the court, the Customer Choice Law prevents the competitive retail sale of electricity in Illinois by electricity suppliers that are themselves, or are affiliated with, or obtain their electricity primarily from, utilities located in jurisdictions that do not allow competition in the sale of electricity, or to which Illinois utilities are not otherwise physically or economically able to sell electricity. The Illinois Commerce Commission ("ICC") and WPS Energy Services, Inc. ("WPS") have each filed separate petitions for leave to appeal the lower court’s decision to the Illinois Supreme Court.
The case arose from an application by WPS for a certificate of service authority to operate as an alternative retail electric supplier ("ARES") in Illinois. The application sought to establish that WPS was in compliance with the reciprocity requirements of Section 16-115(d)(5), which states in pertinent part as follows:
(d) The [ICC] shall grant the application for a certificate of service authority if it makes the findings set forth in this subsection . . . :
. . . .
(5) That if the applicant, its corporate affiliates or the applicant’s principal source of electricity (to the extent such source is known at the time of the application) owns or controls facilities, for public use, for the transmission or distribution of electricity to end-users within a defined geographic area to which electric power and energy can be physically and economically delivered by the electric utility or utilities in whose service area or areas the proposed service will be offered, the applicant, its corporate affiliates or principal source of electricity, as the case may be, provides delivery services to the electric utility or utilities in whose service area or areas the proposed service will be offered that are reasonably comparable to those offered by the electric utility, and provided further, that the applicant agrees to certify annually to the Commission that it is continuing to provide such delivery services and that it has not knowingly assisted any person or entity to avoid the requirements of this Section . . .
As stated in the court’s opinion, WPS acknowledged that the purpose of the reciprocity provision "was to ensure that those Illinois utilities that have opened their service areas to competition have comparable rights to compete in the service areas controlled by utility affiliates of an ARES applicant." The service areas of WPS’s affiliates in Wisconsin and Michigan were not open to competition at the time of the application. WPS argued, however, that under the plain language of the reciprocity provision, the reciprocity requirement did not apply because the affected Illinois utilities could not "economically and physically deliver" electricity to the service areas of WPS’s affiliates.
Local Union Nos. 15, 51, and 702, International Brotherhood of Electrical Workers intervened in the proceedings before the ICC and argued to the contrary, claiming that the reciprocity provision actually requires the applicant to affirmatively establish both that electricity can be "physically and economically delivered" by affected Illinois utilities and that "the necessary political and administrative actions have been taken in the applicant’s or its affiliates’ jurisdiction to physically permit the delivery of such electricity by Illinois utilities to end-users in the applicant’s or its affiliates’ service areas." Under the intervenors’ interpretation, WPS was non-compliant with the reciprocity provision in both respects – the affected Illinois utilities could not physically or economically deliver power to the applicable states, nor had the necessary political or administrative action been taken to allow the Illinois utilities to compete in those jurisdictions.
The ICC rejected the intervenors’ argument and granted WPS’s application. The intervenors then appealed to the Appellate Court of Illinois, Fifth District. The court ruled in favor of the intervenors. The court found that the Statute was facially ambiguous, and therefore considered evidence of the underlying legislative intent. The court concluded that the intervenors’ interpretation was more consistent with the legislative intent to prevent new market entrants from taking unreasonable advantage of existing utilities than was the interpretation advanced by the ICC and WPS.
Based on the court’s decision, it appears that a prospective retail supplier of electricity to customers in Illinois may have to demonstrate that any affected Illinois utility is physically, economically and politically able to sell electricity in any applicable service area of the prospective supplier, its affiliates and its principal source of electricity. The ICC and WPS filed their petitions for leave to appeal to the Illinois Supreme Court on July 25, 2002.