Business & Professional People for the Public Interest v. Illinois Commerce Commission (146 Ill. 2d 175, 1991)

JUSTICE CLARK

delivered the opinion of the court:

This is the second time that the propriety of orders issued by the Illinois Commerce Commission (Commission) regarding the costs of Commonwealth Edison’s (Edison’s) newest nuclear electrical generating facilities and a corresponding increase in rates has been before this court.

In December 1989, this court issued an opinion overturning the Commission’s Sixth Interim Order which had granted Edison a two-step rate increase. That rate increase was due primarily to the costs incurred in constructing the Byron Unit 2, Braidwood Unit 1 and Braid-wood Unit 2 nuclear plants (Business & Professional People for the Public Interest v. Illinois Commerce Comm’n (1989), 136 Ill. 2d 192) (Business & Professional People I). On April 12, 1990, Edison filed new tariffs, thereby initiating a new rate case with the Commission.

On March 8, 1991, the Commission entered two orders which attempted to comply with the instructions of this court’s opinion in Business & Professional People I (Remand Order) and set rates in accord with Edison’s 1990 tariff filing (Rate Order) respectively. Several intervenors representing various ratepayer groups filed petitions with this court for direct appeal pursuant to Rule 302(b) (134 Ill. 2d R. 302(b)). We allowed the petitions.

In this case, the parties are challenging the propriety of several of the Commission’s findings contained within the Remand and Rate Orders. The parties to this appeal are as follows: 12 consumer and governmental groups that we will collectively refer to as the intervenors, the People of the State of Illinois ex rel. Roland W. Burris (Attorney General), Edison, the Commission, and the Illinois Industrial Electrical Consumers.

On appeal, the intervenors argue that the Commission has allowed the consumers to bear rate increases for nonprudent plant construction and various unreasonable costs associated with that construction. Further, the intervenors allege that the plants are not used and useful as defined by the Public Utilities Act (the Act) (Ill. Rev. Stat. 1987, ch. 111⅔, par. 1—101 et seq.) and that the Commission violated various ratemaking principles and this court’s mandate in Business & Professional People I by allowing Edison to record and recover deferred charges. The Attorney General argues only that the Commission erred in determining that Edison’s plants were fully used and useful. In its cross-appeal, Edison alleges that the Commission’s orders make disallowances from the rate base which are arbitrary and unsupported by the evidence. Edison contends that the dis-allowances effectively resulted in a confiscation of its property.

PROCEEDINGS BEFORE THE COMMISSION

On August 21, 1987, Edison filed tariffs with the Commission requesting a $1,414 billion annual increase in rates for electric service. (See Ill. Rev. Stat. 1987, ch. 111⅔, par. 1—101 et seq.) The requested increase, approximately 26.9% over the then-existing rates, was to cover costs associated with bringing Byron Unit 2, Braidwood Unit 1 and Braidwood Unit 2 nuclear electrical generating units into service. (Byron Unit 2 began commercial operation on April 11, 1987. Braidwood Unit 1 and Unit 2 began operating on November 19, 1987, and August 5, 1988, respectively.) The Commission suspended Edison’s proposed tariffs and set this rate case for hearing.

In accord with the Act, the Commission ordered that audits be conducted to ascertain the reasonableness of construction costs for the three units. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213.) Arthur Young and Company, now known as Ernst and Young (Ernst & Young), was selected to conduct the audit of Byron Unit 2 and O’Brien-Kreitzberg and Associates (O’Brien-Kreitzberg) was selected to conduct the audit of the Braidwood units. The auditors’ reports for Byron Unit 2 and Braid-wood Unit 1 were completed in 1988.

Pending completion of the construction audits, the Commission held evidentiary hearings, beginning January 6, 1988, and extending over several months, on the nonaudit portions of the case. Without the benefit of the audit report for Braidwood Unit 2, the Commission’s staff (staff) subsequently filed a “Motion for the Commission to Defer the Resolution of the Rate Case and to Pursue an Alternative Resolution.” Staff attached to this motion a settlement proposal. The proposal provided for a $235 million rate increase effective January 1, 1989, and an additional $245 million rate increase effective January 1, 1990. The proposal also provided for a moratorium on further rate increases through December 31, 1991. Based on this proposal, on December 30, 1988, the Commission entered an order memorializing the above settlement agreement (Sixth Interim Order). The Commission subsequently amended the order on January 25, 1989, and again on February 8,1989.

In Business & Professional People I this court held that the Sixth Interim Order was illegal and void. Specifically, this court found that the Commission exceeded its authority by entering the Order without the agreement of the intervenors; that the Commission decided several issues outside of the context of a traditional rate case; and that the Commission did not have the authority to unilaterally impose retroactive refunds and the rate moratorium. Upon denial of rehearing this court modified the Business & Professional People I decision on May 31, 1990, and ordered Edison to comply with its differential refund offer contained in the Sixth Interim Order. (Business & Professional People I, 136 Ill. 2d at 247.) The cause was remanded to the Commission for reconsideration of the entire rate decision. (Business & Professional People I, 136 Ill. 2d at 248.) In accord with this court’s decision, the Commission entered interim orders providing for a refund to ratepayers and rolling back Edison’s rates to the revenue level last authorized by the Commission.

On April 12, 1990, prior to this court’s issuance of our modified ruling in Business & Professional People I, Edison initiated a new rate case by filing revised tariffs with the Commission. The new tariff schedules proposed to increase annual rates for electrical services by 17.7%, or $1,231 billion. The Commission suspended the new tariffs and initiated investigatory proceedings. Various parties were permitted to intervene, and hearings were held intermittently between May 4, 1990, and October 22, 1990. Evidentiary hearings were held between October 22 and November 9, 1990. The Commission’s hearing examiners subsequently filed proposed orders with the Commission and oral arguments were presented to the full Commission on February 11 and February 13, 1991.

On March 8, 1991, the Commission entered orders addressing the remanded proceeding and Edison’s April 1990 rate request. In the Remand Order the Commission determined what Edison’s approximate revenue requirement would have been based on that record. Those revenue requirements were not placed in effect but were instead replaced by the revenue requirements determined in the simultaneously issued Rate Order.

The Remand Order provided in part that the units were prudently constructed within the meaning of section 9 — 212 of the Act (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212) and that each of the units was fully used and useful, premised on an application of pre-1986 law.

The Remand Order also provided that completion of the plants was unreasonably delayed by a total of 32.1 months and that unreasonable costs of over $700 million were incurred during the construction of the units. The Commission’s conclusions setting forth these findings and the reasonable costs of the units are as follows:

Amt. Spent Unreasonable Unreasonable Reasonable

Units by Edison Delay Costs Cost

Byron 2 $1,884,250,796 23.4 mos. $296,605,000 $1,587,645,796

Bdwd. 1 3,268,000,000 6.0 mos. 333,883,000 2,934,117,000

Bdwd. 2 1,863,000,000 2.7 mos. 103,271,000 1,759,729,000

Furthermore, based on the reasonable values established for each of these units, in the Remand Order the Commission determined that deferred charges of $1,728,957,300 should be added to Edison’s rate base and recovered over the lives of the units.

The Commission’s findings in the Remand Order regarding prudency of construction, used and usefulness of the units, reasonable costs of the units and treatment of deferred charges were subsumed in the simultaneously issued Rate Order. Additionally, the Rate Order allowed Edison to include in its rate base approximately $480 million of unaudited capital additions to electrical generating facilities. After making numerous other adjustments to the rate base and conclusions regarding- Edison’s operating income and expenses, the Commission granted Edison a rate increase of over $750 million. The Commission further determined that it would be fair and reasonable to phase in the revenue increase over three years and to allocate it evenly among all customer classes.

THE COMMISSION AND THE COURT

The Commission is an administrative agency whose power is derived from the legislature. (Union Electric Co. v. Illinois Commerce Comm’n (1979), 77 Ill. 2d 364.) Pursuant to the Act, the Commission has “general supervision of all public utilities.” (Ill. Rev. Stat. 1989, ch. 111⅔, par. 4—101.) When a utility files a request for a rate increase in the form of a new tariff schedule, the Commission has the authority upon complaint or its own initiative to hear evidence, hold hearings and determine the propriety of the requested increase. (Ill. Rev. Stat. 1989, ch. 111⅔, par. 9—201(b).) The Commission must determine whether the proposed rates are just and reasonable and do so within the regulatory parameters which prohibit retroactive and single issue ratemaking.

In establishing the rates that a public utility is permitted to charge its customers, the Commission must first determine the utility’s revenue requirement. The components of the revenue requirement have frequently been expressed in the formula “R (revenue requirement) = C (operating costs) + Ir (invested capital or rate base times rate of return on capital).” (Citizens Utilities Co. v. Illinois Commerce Comm’n (1988), 124 Ill. 2d 195, citing City of Charlottesville v. Federal Energy Regulatory Comm’n (D.C. Cir. 1985), 774 F.2d 1205, 1217.) The Act requires that the Commission make several critical findings regarding a utility’s investments before the costs of a new plant are included in the utility’s rate base.

Initially, the Commission must determine that a plant is prudent as well as used and useful in providing utility service to the utility’s customers. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.) Further, the Commission must determine that the costs of the new plant, or significant additions to an existing plant, are reasonable. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213; Business & Professional People I, 136 Ill. 2d at 201-02.) Throughout the rate proceedings, the utility has- the burden of proving that its investments meet these requirements.

It is important to reiterate that setting utility rates is a legislative rather than a judicial function. In the rate-making scheme, the Commission and not the court is the fact-finding body (People ex rel. Hartigan v. Illinois Commerce Comm’n (1987), 117 Ill. 2d 120, 142) (Hartigan I). Its findings of fact are to be accepted as prima facie true and cannot be set aside on appeal unless they are against the manifest weight of the evidence. (City of Chicago v. Illinois Commerce Comm’n (1985), 133 Ill. App. 3d 435, 439.) Accordingly, our review of the Commission’s orders is limited to determining whether the Commission: acted within the scope of its statutory authority; set out findings of fact adequate to support its decisions; issued findings which were supported by the manifest weight of the evidence; and rendered decisions which do not infringe upon a constitutional right. City of Chicago, 133 Ill. App. 3d at 439. See Ill. Rev. Stat. 1989, ch. 111⅔, par. 10—201(e)(iv).

PRUDENCY OF CONSTRUCTING THE BYRON AND BRAIDWOOD UNITS

In the early 1970s, Edison petitioned the Commission to approve the construction of four nuclear electrical generating units. After holding hearings to determine whether the construction of the units was necessary to meet future demand, the Commission found that additional electrical generating capacity would be needed and approved construction of the units. Certificates of public convenience and necessity for the Byron and Braidwood facilities were issued on July 11, 1973, and March 27, 1974, respectively. See ICC Docket Nos. 57941, 58339.

After construction of the units had commenced, the demand for electricity fell and the costs of construction escalated. These factors caused the Commission, on its own accord, to investigate whether completion of the Byron and Braidwood units was in the public’s interest. On October 15, 1980, after conducting numerous hearings and considering briefs submitted by the interveners and staff, the Commission concluded that substantial economic benefit would accrue to the ratepayers and Edison if the Byron and Braidwood units were completed “in as timely and economic [a] manner as possible.” (ICC Docket No. 78—0646.) These findings were made in light of the fact that completion of the plants would significantly increase Edison’s excess reserve margins. Specifically, the Commission found “that a forecasted increase in reserve margins does not indicate that delay in construction is economically advantageous when new generating units are approximately half constructed and their completion and use will displace the use of higher cost fuel.” (ICC Docket No. 78—0646.) The Commission approved continued construction of the Byron and Braid-wood units pursuant to further monitoring.

In its order addressing Edison’s 1980-81 rate filing (ICC Docket No. 80— 546) and again in the fllowing year as part of Edison’s 1982 rate case, the Commission reexamined economic and engineering studies for the Byron and Braidwood units. Based on these studies, the Commission again directed Edison to complete these units in a timely and economic manner. (ICC Docket No. 82—0026.) However, in the latter order the Commission invited a consumer group and other interested parties to file a proposal describing conservation measures which may have eliminated the need for the construction of additional generating capacity. This invitation gave rise to a new Commission proceeding.

On December 17, 1982, several intervenors filed a petition requesting that the Commission initiate an investigation of energy conservation alternatives for Edison. (ICC Docket No. 82—0855.) Subsequently, one of the intervenors filed a motion seeking to schedule hearings to consider the cancellation of the Braidwood units. Between April 8 and September 30, 1985, approximately 27 hearings were held. The evidence presented at the hearings compared the anticipated cost of the completion of the Braidwood units with the savings due to cancellation of the units. Based on this evidence the Commission determined that the units should not be cancelled. However, in so finding, the Commission stated:

“The parties have framed their evidence in terms of revenue requirements analyses. By its nature a revenue requirements analysis assesses the issue of completion [versus] cancellation in terms of assigning specific dollar values to the major issues impacting costs.

* * *

The Commission emphasizes again that such dollar estimates are by no means absolute and can be considered only in a relative sense. The Commission declines to ascribe a certainty to these dollar estimates which does not exist. Given the imprecision and uncertainties of the long term forecasts and projections which the parties used as the basis for their analyses, such dollar amounts, either in favor of completion or cancellation, cannot be determinative. This is especially true when the far greater total costs of building and operating these plants over their useful lives is considered. The Commission, therefore, cannot reasonably conclude from this evidence that the two Braidwood Units as a single economic entity should be cancelled, especially considering that construction of Unit 1 is more than 90% complete.

On the other hand, it is evident that Petitioners have raised substantial questions concerning the value of completing both units of Braidwood. There are a number of uncertainties which impact the decision to cancel or complete the facility as a whole. All of the evidence in this case, however, has been addressed to cancelling or completing all of Braidwood, both Units 1 and 2, and the parties agree that this evidence does not permit separate evaluation of these units. There is sufficient evidence in the record, however, for the Commission to seriously question whether both Braidwood units should be completed. The evidence clearly justifies a decision by the Commission to issue a rule to show cause why Braidwood Unit 2 should not be withdrawn or altered. Specifically, the Commission has found that the benefits to ratepayers of completing Braidwood versus the benefits of cancellation are too close to make a definitive determination as to cancellation/completion on the basis of a difference in revenue requirements alone. Indeed, the relative differences between cancellation and completion benefits are so slight that an error in any of the projections by either party could lead to significant and dramatic cost variations. The Commission cautions the Company that the Order in this docket does not imply approval or disapproval of construction of Braidwood Unit 1.” (Emphasis added.) (ICC Docket No. 82—0855.)

The Commission concluded that:

“(1) the evidence, while extensive, is nonetheless unpersuasive on the proposition that both units of the Braidwood station should be either cancelled or completed; and

(2) a comprehensive evaluation of each unit individually will result in a Commission decision which better serves the ratepayers, the shareholders, and the economy of northern Illinois.” ICC Docket No. 82—0855.

The Commission then issued an order requiring Edison to show cause why Braidwood Unit 2 should not be cancelled and the certificate of public convenience and necessity be withdrawn or altered. The Commission opened a new docket, but this docket was later suspended when'the issues were subsumed into this case. ICC Docket No. 86—0249.

In the Remand Order the Commission concluded that its prior orders are prima facie evidence of the prudency of constructing the Braidwood units. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.) In addition to its prior orders, the Commission based its prudency findings on the testimony of Edison’s witness George Rifakes, as well as the auditors’ findings that Edison’s initial commitment to and continued investment in the units was reasonable. The Commission also adopted these prudency findings in the Rate Order.

On appeal, the interveners allege that, in reaching its conclusion that construction of the Braidwood units was prudent, the Commission commingled and misapplied the statutory tests for determining the prudency and reasonableness of continued construction. Specifically, the interveners contend that the Commission’s orders do not establish the prudency of continued construction of the Braidwood units after 1980 and that the Commission failed to determine the prudency of continued construction after that date.

The prudency provision of section 9—212 of the Act (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212) addresses whether a utility’s initial decision to construct a new facility or significant addition and any subsequent reevaluations of those decisions were sound. Prudency is to be determined by the Commission based on evidence and information which was known or should have been known at the time of certification, initiation of construction and on each subsequent evaluation. Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.

Section 9 — 212 further provides:

“If the Commission has issued a certificate of public convenience and necessity for the completed facility and, to the extent that the Commission approves continued construction upon reevaluation subsequent to certification, such actions shall constitute prima facie evidence of the prudency of construction. If the Commission determines as a result of reevaluation during construction that the facility should not be completed, such determination shall constitute prima facie evidence that subsequent construction expenditures were imprudent.” (Emphasis added.) Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.

Prior to its prudency determination in the Remand Order, the Commission had not specifically approved the continued construction of the Braidwood units since December of 1982. (See ICC Docket No. 82—0026.) When confronted with the issue of completion versus cancellation of the Braidwood units in Docket No. 82—0855, the Commission found the evidence in that record caused it to seriously question whether both Braidwood units should be completed. In that docket the Commission specifically held that its order does not imply approval or disapproval of the continued construction of Braidwood Unit 1. Furthermore, the Commission entered an order requiring Edison to show cause why Braidwood Unit 2 should not be cancelled.

Edison argues that because the Commission’s order in Docket No. 82—0855 did not cancel Braidwood, the Commission’s prior orders which required it to complete the units remained in effect. The Commission argues that none of the orders dealing with any of the units found that construction should not be completed. Edison’s and the Commission’s arguments ignore the specific language of the latter order.

The Remand Order also ignores the specific findings of the 1986 orders (ICC Docket Nos. 82—0855, 86—0249) and makes only a passing reference to them. Instead, the Commission uses its prior orders to substantiate its conclusion that “Issuance of the certificate and the final orders of the Commission ordering completion established a prima facie case.” We believe the Commission’s reliance on orders which predate the order to show cause is insufficient to establish that the Braidwood plants were prudent. Because the Remand Order fails to set forth the conclusions of the 1986 orders, the evidence Edison presented, if any, to comply with the Commission’s rule to show cause, or an analysis of the facts and findings sufficient to permit an informed judicial review, we remand for a proper determination of the prudency of the continued construction of the Braidwood units. Ill. Rev. Stat. 1987, ch. 111⅔, par. 10—201(e)(iii).

We note that the standards for prudency and reasonableness set forth in the Act are separate and distinct. The prudency test set forth in section 9—212 concerns only a utility’s decision to construct and continue to build a new electric utility generating plant, gas production facility or significant additions thereto. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.) Conversely, section 9—213, which defines the reasonableness standard, addresses only whether the costs of constructing plants found to be prudent are in fact reasonable. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213.) The interveners contend that the Commission’s prudency finding is premised largely on evidence of the reasonableness of construetion. Because of our decision above we need not rule on this issue.

Nonetheless, because the issue may arise again on remand, we note that the purpose of the reasonableness requirement set forth in section 9—213 focuses on a quantitative analysis of the cost of constructing the plant, not whether the decision to construct was prudent. (See People ex rel. Hartigan v. Illinois Commerce Comm’n (1990), 202 Ill. App. 3d 917 (Hartigan II).) A quantitative analysis of specific cost figures may be helpful in making a prudency determination, but it is only one of various factors that enter into that equation.

REASONABLENESS

Under the Act, the amount of a utility’s investment in new electrical generating units deemed prudent by the Commission which may be included in the rate base is limited to costs which are proved reasonable. (Ill. Rev. Stat. 1989, ch. 111⅔, par. 9—213.) The interveners assert that the Commission misapprehended the statutory reasonableness standard and related audit requirements and, thus, allowed plant costs into the rate base without requiring Edison to satisfy central protections afforded consumers by the Act. Specifically, the intervenors allege that the Commission failed to: (1) properly apply the statutory reasonableness test; (2) disallow certain “time related indirect costs” as unreasonable; and (3) require that “significant additions” to electrical generating facilities be audited.

Edison disagrees with these contentions and on cross-appeal contends that the Commission imposed a standard more stringent than the statutory reasonableness test, and without adequate findings or record support failed to apply the appropriate methodology for calculating delay costs. We will consider each of these claims separately.

REASONABLENESS TEST

The audit of Byron Unit 2, conducted by Ernst & Young, concluded that $180,578,796 of the $1,884,250,796 spent by Edison on the construction of that unit was unreasonable. Further, Ernst & Young recognized seven unreasonable delay periods associated with the switch of steam generator models, regulatory impact, inadequate manning, late acceptance and delay in power ascension. The audit attributed all of the 23.4 months of unreasonable delay to Edison’s inadequate manning of the project during construction. The Commission adopted Ernst & Young’s finding of unreasonable delay but determined that the total unreasonable cost associated with Byron Unit 2 was $296,605 million.

The audit of the Braidwood units conducted by O’Brien-Kreitzberg concluded that $146,294 million of the $3,268 billion of costs associated with the construction of Braidwood Unit 1 and $46,044 million of the $1,863 billion of costs associated with construction of Braidwood Unit 2 were unreasonable. O’Brien-Kreitzberg also determined that the Braidwood Unit 1 in-service date was unreasonably delayed by 36 months, while Edison’s unreasonable actions caused the commercial operation date of Braidwood Unit 2 to be delayed by 26.2 months.

The Commission determined that of the delays found by O’Brien-Kreitzberg with respect to Braidwood Unit 1, only five months due to Edison’s licensing actions and one month due to project construction and quality management were unreasonable. The Commission also found that Braidwood Unit 2 was unreasonably delayed by only 2.7 months attributable to unreasonable project construction and quality management. The Commission determined that $333,883 million and $103,271 million of the construction costs for Braidwood Units 1 and 2, respectively, were unreasonable.

With the exception of the costs of unreasonable delays, the intervenors do not attack the specific reasonableness findings of the Commission. Rather, the intervenors contend that the methodology used by the Commission in determining the reasonableness of the costs for Byron Unit 2 and the Braidwood units was flawed. The Act requires that the Commission conduct a construction audit of all new electrical utility generating plants, and significant additions to existing plants, to ascertain whether the costs associated with those plants are reasonable. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213.) This court has determined that the audit is the primary means by which the Commission is to determine the reasonableness of new plant costs. Hartigan I, 117 Ill. 2d at 133.

Reasonableness is defined in section 9—213 of the Act (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213). Section 9—213 provides in part:

“ ‘Reasonable’, as used in this Section, means that a utility’s decisions, construction, and supervision of construction, underlying the costs of new electric utility generating plants and significant additions to electric utility generating plants resulted in efficient, economical and timely construction. In determining the reasonableness of plant costs, the Commission shall consider the knowledge and circumstances prevailing at the time of each relevant utility decision or action.” (Emphasis added.) Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213.

The intervenors first contend that section 9—213 establishes a two-part test for determining whether plant costs are reasonable. The first prong of the intervenors’ test requires the Commission to consider whether the utility’s actions “resulted in efficient, economical and timely construction,” and the second prong requires a consideration of the “knowledge and circumstances prevailing at the time” the utility’s decisions were made. The intervenors allege that the Commission erred in applying the reasonableness test of section 9 — 213 because the Commission and the auditors only considered the knowledge and circumstances test. The intervenors further argue that as a result of the Commission’s failure to consider the first prong of the test, millions of dollars of unreasonable costs were included in Edison’s ratebase.

In interpreting section 9 — 213, the Commission stated the Act “requires only that the cost be reasonable, and that in applying the definition of reasonable, the Commission ‘shall’ consider the knowledge and circumstances prevailing at the time of each relevant decision or action.” The Commission determined that the first sentence of the section states the definition of “reasonable” and the second sentence mandates how that definition is to be applied. Specifically, the Commission found that “the second sentence modifies the first by stating how the reasonableness shall be evaluated. The second sentence is a limitation on how the Commission makes its determination of reasonableness, not a separate test.”

The Commission’s interpretation of a statutory standard is entitled to deference. (Business & Professional People for the Public Interest v. Illinois Commerce Comm’n (1988), 171 Ill. App. 3d 948, 956-57 (Business & Professional People II).) Although this court is not bound by the Commission’s interpretation of a statute, we find the Commission’s interpretation of section 9 — 213 persuasive for the following reasons.

The parties’ allegations are apparently supported by conflicting rules of statutory construction. The intervenors argue that in construing a statute all statutory language should be given effect. (Business & Professional People I, 132 Ill. 2d at 64.) The intervenors further allege that the Commission’s interpretation renders the “resulted in” language of section 9—213 superfluous. On the other hand, Edison and the Commission contend that the provisions of a statute are to be construed so as to produce a consistent unified whole rather than inconsistent and contradictory parts. (Miller v. Department of Registration & Education (1979), 75 Ill. 2d 76, 81.) These parties argue that the interveners’ two-prong test renders the statutory definition inconsistent by dictating that a utility’s actions must be reasonable under the prevailing circumstances at the time when made as well as in hindsight.

When interpreting a statute the primary function of this court is to ascertain and give effect to the intent of the legislature. (People v. Beam (1979), 74 Ill. 2d 240; see MCI Telephone Corp. v. Illinois Commerce Comm’n (1988), 168 Ill. App. 3d 1008.) The language used in the statute is the primary source for determining legislative intent. (People ex rel. Gibson v. Cannon (1976), 65 Ill. 2d 366.) If the language is certain and unambiguous this court need not refer to the legislative history, but must enforce the statute as enacted. Gibson, 65 Ill. 2d 366.

In the present case, it is evident that the literal meaning of the words used to define reasonableness in the statute are inconsistent. The first sentence mandates that a hindsight test be used while the second sentence prohibits such a test.

The interveners attempt to reconcile the clearly inconsistent standards by alleging that the Act creates a presumption that costs associated with inefficient, uneconomical or untimely construction are unreasonable. Under the interveners’ interpretation, a finding that costs associated with a utility’s new facility are unreasonable may be rebutted by evidence that the costs were reasonable based on the knowledge and circumstances prevailing at the time incurred. The Act fails on its face to make such a presumption and this court will not make hypothetical indulgences into legislative intent.

We noted in Hartigan I that “the legislative history of section 30.1 [now section 9—213] suggests that an affirmative showing of the reasonableness of a utility’s construction-related costs is necessary if a sense of confidence in the ratemaking process is to be instilled in those consumers who are required to pay the increased rates resulting from those costs.” (Hartigan I, 117 Ill. 2d at 133.) Section 9—213 did not strengthen a preexisting reasonableness standard as the intervenors contend, but rather changed the Commission’s methodology for determining whether costs incurred by a utility in the construction of a new electrical generating facility were in fact reasonable. Prior to the enactment of section 30.1, the predecessor to section 9—213, the construction costs incurred by a utility were presumed to be reasonable. (City of Chicago v. Illinois Commerce Comm’n (1985), 133 Ill. App. 3d 435, 442-43; see also Hartigan I, 117 Ill. 2d at 120.) This court has previously held that the “audit required by section [9—213] has replaced the presumption of reasonableness” and that “the audit now provides the primary means by which the Commission is to determine the reasonableness of the costs associated with the construction of power plants.” (Hartigan I, 117 Ill. 2d at 133.) Our courts have not, however, squarely addressed the issue presented here today and our review of the legislative history provides us with little guidance. Hartigan II, 202 Ill. App. 3d 917.

Where the statutory language is ambiguous and the legislative history is not determinative, this court must attempt to resolve the conflict by reference to the entire statute.

The Commission is charged by the legislature with setting rates which are “just and reasonable” not only to the ratepayers but to the utility and its stockholders. (Ill. Rev. Stat. 1987, 111⅔, pars. 1—102, 9—201.) Prior to the enactment of section 9—213 and its predecessor, section 30.1, the use of hindsight in determining the reasonableness of costs to be included in a utility’s rate base was unprecedented. (See Peoples Gas v. Illinois Commerce Comm’n (1939), 373 Ill. 31, 61-62.) Although the addition of section 30.1 shifted the burden of proof to the utility, we cannot conclude, based on a reading of the entire Act, that the legislature intended to place an additional burden on a utility to prove that its actions were reasonable using hindsight. Such a conclusion would be fundamentally unfair.

The Commission disallowed over $700 million of costs associated with the construction of Byron Unit 2 and the Braidwood units from inclusion in Edison’s rate base. The Commission made its cost determinations in light of knowledge and prevailing circumstances at the time of each relevant utility decision or action. In making its determinations, the Commission applied the proper definition of reasonable as the term is used in section 9 — 213 of the Act.

In its cross-appeal Edison argues that even though it sustained its burden of proving the reasonableness of its constructioii costs under section 9 — 213, the Commission applied a “better than reasonable” standard to Edison’s conduct and disallowed millions of dollars of costs. We disagree. As an example of the alleged Commission error, Edison points to the Commission’s selection of Ernst & Young’s proposed construction schedule used to determine the period of unreasonable delay for Byron Unit 2. The Commission determined that unreasonable delays occurred during the construction of Byron Unit 2 due specifically to inadequate manning of the construction site. In so doing, the Commission made a determination based on the evidence presented by the parties.

Under the auditor’s proposed construction schedule, if the site was properly manned, Byron Unit 2 could have been completed in November 1984, 23.4 months prior to its actual completion date. Conversely, according to the manpower analysis performed by Edison’s witness, Byron Unit 2 could not have been completed prior to September of 1985. The parties’ conclusions were based on different analyses of the actual construction of the plant, which analyses involved numerous assumptions. Edison argues that the auditor’s witness stated that the assumptions used by Edison in its analysis of the construction schedule for Byron Unit 2 were within a reasonable range. Therefore, Edison contends the Commission could have found that Edison’s schedule position was reasonable. Further, Edison contends that the Commission’s finding that Edison had not proven the auditor’s proposed schedule was unattainable imposed a more than reasonable standard on Edison.

Edison’s argument relates to the Commission’s resolution of a disputed question of fact based on conflicting evidence of proposed construction schedules. Edison argues that it met its burden of proof because it presented evidence to show its schedule position was equally reasonable to that of the auditors. We disagree.

The Commission is the trier of fact and, as such, its findings and conclusions on such questions shall be held to be prima facie true. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 10—201(d).) The Commission determined, based on conflicting evidence presented, that Edison’s proposed schedule “suffered from substantial defects” and that the auditor’s schedule “provide[d] the Commission with the most reliable means of determining when Edison reasonably should have completed construction of Byron 2.” This court will not substitute its judgment for that of the Commission where, as here, it has made an evidentiary determination supported by the record. Our review of the record reveals that the Commission properly applied the definition of reasonableness set forth in section 9 — 213 of the Act while considering the knowledge and circumstances that prevailed at the time of the utility’s actions or decisions.

QUANTIFICATION METHODOLOGY

We next consider whether the Commission employed the proper quantification methodology for determining the cost disallowance due to Edison’s unreasonable delays in completing the plants. As . previously stated, based on the construction audit, the Commission determined that due to Edison’s unreasonable actions compleof Byron Unit 2 was delayed by 23.4 months, Braid-wood Unit 1 by 6 months and Braidwood Unit 2 by 2.7 months. At issue here is the proper method to compute the dollar amount to be disallowed as a result of these unreasonable schedule delays. The Commission adopted a modified form of the method proposed by the intervenors, and found that approximately $463 million dollars of expenses were attributable to delays caused by Edison’s unreasonable actions. Edison argues that the Commission erred in rejecting the method proposed by the auditors and that had the Commission applied the proper method, the disallowance would have been about $214 million. The intervenors allege the Commission should not have modified the method proposed by the intervenors and, therefore, the disallowance should be approximately $659 million.

Before addressing the merits of this issue, it will be helpful to have an understanding of the concepts involved. A schedule delay may impact costs in several ways, depending on the nature of each particular expense. A delay may require the utility to incur expenses which could have been completely avoided but for the delay. An example of such an expense is the preoperational warranty extension Edison purchased for its Nuclear Steam Supply System (NSSS) at Byron Unit 2. But for the delay in completion of the plant, this warranty extension would not have been necessary. A second category of expenses would have been incurred at the same level regardless of the delay, but the accounting treatment for such expenses varies due to the unreasonable delay. For example, although the delay does not increase the amount of overhead and property taxes the utility incurs, the delay causes an increase in the rate base because these amounts are capitalized rather than ex-pensed in the period incurred. A third category of expense would have been incurred under a reasonable schedule, but due to the delay the expense is increased. For example, a schedule delay may increase the construction costs due to an increase in the per unit costs of labor and materials, as well as an increase in the quantity of labor and materials needed to complete the project. The impact the delay has on this latter category of expense may be referred to as escalation. In addition, a project delay may also impact system-wide costs such as the costs of fuel and capital.

Time-related costs are those costs which are dependent upon the time duration of the project rather than upon any specific activity or the general level of construction activity. Indirect costs are those which are not specifically associated with any particular construction activity, but which affect the overall cost of the plant. An example of indirect costs is overhead charged to a project.

There is no dispute that the costs directly associated with Edison’s unreasonable actions must be disallowed along with the related financial carrying costs recorded in the “Allowance for Funds Used During Construction” (AFUDC) account. The controversy is in how to measure the impact the schedule delays, which were caused by those unreasonable actions, had on expenditures which were otherwise reasonable. Due to the speculative nature of the calculation, the parties agree that it is impossible to determine with certainty the amount by which the costs of the projects increased due to unreasonable delays. Nevertheless, the parties presented evidence and argued in support of or opposition to various methods for figuring the costs of the delays.

parties presented evidence on two different methodologies for quantifying the cost increases caused by the unreasonable delays. The auditors and Edison presented evidence on the “Present Value Revenue Requirements” (PVRR) method. This method purports to place the ratepayers in the same position they would have been in if there had not been an unreasonable delay. This method defines the cost of the unreasonable delay in terms of its impact on the company’s revenue requirements. Under this method, a disallowance is made only for those unreasonable actions which increased the present value of Edison’s revenue requirement, as opposed to those which increased the nominal cost of the plant. Thus, even though an expense may have been increased due to Edison’s unreasonable action, no disallowance is made unless the present value of Edison’s revenue requirements is also increaséd by the unreasonable delay. Under this method, time value of money concepts may be used to offset increases in the nominal cost of a plant.

The auditor’s PVRR method consisted of three steps. In step A, the auditors determined the increase in the nominal cost of the plant due to the unreasonable delay. This was accomplished by removing time-related indirect costs incurred during the delay period, shifting direct costs incurred after the delay back in time to correspond with the “should-have-been-built” schedule, deflating the direct costs using the Handy-Whitman Index (HWI) to account for the effects of escalation, and finally computing a new AFUDC for the recomputed direct costs up until the “should-have-been built” date. In step B of their PVRR analysis, the auditors computed the AFUDC for the reasonable plant costs determined in step A between the “should-have-been” built date and the actual in-service date. Finally, in step C, the auditors determined the consequential costs associated with the unreasonable delay. In step C, the auditors considered the impact the delays had on system-wide costs such as fuel savings, avoided nuclear operating and maintenance expense, and “end effects” which measures the cost savings to ratepayers based on the delay in retiring the plants in the future. Under the PVRR method, no disallowance is made for delays which did not “harm” ratepayers. “Harm” to ratepayers is determined by the present value of Edison's revenue requirement.

The intervenors proposed to determine the cost of schedule delay using the end-of-period AFUDC method. Under this approach, all unreasonable direct and time-related indirect costs are removed as well as the AFUDC associated with these costs. Then, rather than attempt to recast the actual cash expenditures, the escalation cost of the schedule delay is measured by the amount of AFUDC accrued between the date the plant should have been completed and the date the plant was actually completed. For example, if completion of the plant was unreasonably delayed by 10 months, then the amount of AFUDC recorded during the last 10 months of construction is deemed to be the escalation cost of the unreasonable schedule delay. Admittedly, this method does not determine the actual cost of delay, but rather uses AFUDC as a proxy for the increases in cost.

Based on the evidence presented, the Commission adopted a modified form of the end-of-period AFUDC method proposed by the intervenors. The Commission disallowed unreasonable direct costs and the amount of AFUDC accumulated between the should-have-been in-service date and the actual in-service date. However, the Commission did not make a separate disallowance for time-related indirect costs. Instead, the Commission found that the time-related indirect costs were subsumed by the AFUDC disallowance.

On appeal, Edison contends that the Commission erred by not adopting the auditor’s methodology for determining the cost of the unreasonable delay and, therefore, the Commission disallowed too much for the delays. On the other hand, the intervenors argue that because the Commission did not make a separate disallowance for time-related indirect expenses, some unreasonable delay expenses were included in Edison’s rate base. We will address each of these arguments separately.

The question of how much construction costs increased due to unreasonable delays is a question of fact. The Commission is in the best position to determine the impact delays had on the cost of the plants. Therefore, we will not disturb the Commission’s findings unless unsupported by evidence in the record.

The Commission rejected the PVRR method because it found that as applied by the auditors in this case, the PVRR method is in contravention of section 9 — 213. Specifically, the Commission interpreted section 9 — 213 to require a determination of reasonableness based solely ■ on the utility’s actions, without regard to the effect of the actions on ratepayers. The Commission pointed out that the auditor’s PVRR method makes no disallowance for unreasonable costs that do not “harm” ratepayers. Thus the Commission found that as applied in this case, the PVRR method does not comport with section 9 — 213. In addition, the Commission found that the PVRR method was prone to manipulation because it uses “numerous subjective assumptions employed over an extended period of time.”

Edison argues that the Commission was incorrect when it found that the auditor’s PVRR method does not conform to section 9 — 213. Edison argues that the auditors first identified each of Edison’s unreasonable actions and then determined whether each unreasonable action increased the costs of the plant. Edison argues that, consistent with section 9 — 213, under the PVRR method the entire cost increase due to an unreasonable delay was disallowed. Edison also argues that no disallowance was made for those unreasonable actions which did not increase costs because section 9 — 213 does not require such a disallowance.

Edison’s argument is based on the contention that under section 9 — 213 the reasonableness of costs must be examined in light of present value of money concepts. Edison argues that while some costs increased due to unreasonable delays, these increases in costs were offset by decreases in the financing costs associated with these expenses. That is, because the expenses were incurred later in time, the corresponding AFUDC is less and, therefore, the aggregate cost to the ratepayer is decreased. According to Edison and the auditors, some of the delays which were caused by Edison’s unreasonable actions actually benefited the ratepayers.

As previously stated, section 9 — 213 provides in pertinent part:

“ ‘Reasonable’, as used in this Section, means that a utility’s decisions, construction, and supervision of construction, underlying the costs of new electric utility generating plants *** resulted in efficient, economical and timely construction.” (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—213.)

The Commission stated that “[a] reasonableness finding, as defined in [section 9 — 213], does not include a determination of whether unreasonable actions harmed ratepayers.” We agree with the Commission’s interpretation of this statute. As the Commission stated, a reasonableness determination must be based solely on the utility’s actions. Because the PVRR method improperly considers harm to ratepayers, it does not comport with section 9— 213. Therefore, we need not consider Edison’s argument that the Commission erred in finding the PVRR method was prone to manipulation.

With respect to the modifications made to the end-of-period AFUDC method, the Commission provided two reasons for not making a separate disallowance for time-related indirect costs. First, the Commission found that a separate disallowance “incorporates the very same type of assumptions and judgment calls which tarnish the PVRR method.” While this reasoning may support a finding that some time-related indirect costs are too speculative to accurately determine, this rationale does not support a finding that all time-related indirect costs are too speculative. At least some of the time-related indirect costs may be determined without making any assumptions. For example, the amount charged to overhead expenses (i.e., administrative and general office expenses) during the unreasonable delay period may be accurately determined based on the historical costs already recorded on Edison’s books. If a project is unreasonably delayed, then the overhead capitalized for that project during the delay period is unreasonable and must not be included in Edison’s rate base. To the extent possible, the Commission should determine those time-related indirect costs which are calculable.

The Commission and Edison claim that all unreasonable delay expenses, including time-related indirect costs, have already been disallowed. The Commission’s second rationale for not making a separate disallowance was its finding “that the AFUDC rate is a reasonable approximation of the rate at which costs increased due to delay. Those cost increases included both escalation and time related indirect costs (as the Auditors defined those terms).” Edison and the Commission now argue that making a separate disallowance for time-related indirect costs would have the effect of disallowing those costs twice. These parties rely on the appellate court opinion in People ex rel. Hartigan v. Illinois Commerce Comm’n (1990), 202 Ill. App. 3d 917, for support for this proposition. However, because this is a determination of fact which is specific to this case, we do not believe that the appellate court decision in that case is controlling.

The Commission never made a specific finding regarding the amount of escalation or time-related indirect expense. Thus it is unclear how much of the amount disallowed is attributable to each component of delay expense. The intervenors claim that approximately $196 million in time-related indirect expenses were improperly included in the rate base. This number is apparently based on the calculation of time-related indirect costs found in the audit report.

Because we are presented with only a summary finding that all unreasonable delay costs are subsumed by AFUDC, we are unable to make an informed judicial review of the Commission’s finding that AFUDC subsumes all the time-related indirect costs. We note once again that Edison has the burden of proving its expenses are reasonable. While we recognize the difficulty involved in measuring these costs, we believe that the amount involved justifies a more specific finding by the Commission. Therefore, with respect to a separate disallowance for time-related indirect costs, we hold that the Commission’s findings of fact are insufficient to allow informed judicial review (see Ill. Rev. Stat. 1987, ch. 111⅔, par. 10—201(e)(iii)), and we remand the cause to the Commission for more specific findings on this issue.

A UDIT OF SIGNIFICANT ADDITIONS

The intervenors next contend that the Commission failed to enforce the statutory audit requirement to establish the reasonableness of the costs associated with Edison’s forecasted capital additions to its electrical generating plants.

The record establishes that Edison’s capital additions forecasted for 1990 and 1991 will cost over $1.5 billion. This amount is spread over hundreds of projects. Almost $480 million of those costs represent capital additions to nuclear and fossil fuel production plants. Twenty-nine projects, each costing over $5 million, comprised over one-half of this amount.

The staff and several intervenors proposed adjustments to the cost of Edison’s capital additions prior to including them in the rate base. Although the Commission did not conduct an audit of any of the forecasted capital additions, it found that Edison presented enough evidence to establish the reasonableness of the forecasted additions. The Commission adopted the staff’s proposed adjustment of $22,172 million, adjusted the amount of forecasted capital additions to reflect a decrease in Edison’s proposed escalation rate, and allowed the remainder into the rate base.

The intervenors now argue that the Commission should have conducted an audit of the substantial plant additions prior to including the costs of those additions in the rate base. In the proceedings below, the Commission noted that the intervenors first raised the issue in their reply brief. Because the intervenors’ failure to raise the issue in their initial brief deprived all other parties of the opportunity to respond, the Commission struck that portion of the intervenors’ reply brief addressing this issue. Nevertheless, the Commission addressed the merits of this issue in the Rate Order.

Initially, we note that the issue regarding the audit of significant capital additions was addressed by several interveners in their opening briefs before the Commission. Therefore, the Commission’s contention that several parties did not have an opportunity to address this issue is inaccurate. Accordingly, we do not consider the issue waived.

In the Rate Order, the Commission held that the costs of the forecasted projects were not subject to the audit requirement of section 9—213. The Commission stated:

“Of those projects which relate to generating stations, many are not ‘additions’ at all within the meaning of section 9 — 213 ***. Moreover, none of these projects can be considered a ‘significant’ addition, either in physical or in dollar terms, in comparison to the size, complexity and cost of the generating stations to which they relate.”

The parties agree that, in addition to requiring an audit of the cost of new electrical generating plants, section 9 — 213 requires that the costs associated with all significant additions to those facilities be audited. The parties disagree over whether the forecasted capital additions are significant and therefore must be audited before the costs are included in the rate base.

The legislature did not codify a definition of the term “significant additions” but left the determination of whether an addition is significant and whether an audit of those projects should be conducted to the sound discretion of the Commission. The Commission’s interpretation of the statutory language is to be given deference by Illinois courts. (Business & Professional People II, 171 Ill. App. 3d 948.) However in making its determination in the instant case, the Commission has failed to articulate the standard that it applied. In addition, the Commission did not address whether even the larger projects, the cost of which approach $300 million, should be considered significant additions. In the Rate Order, the Commission makes the blanket statement that some of the capital additions “are not even additions” and that based on physical size and comparative cost evaluations none of these projects can be considered “significant.”

The Commission’s conclusions make it difficult for this court to determine which projects the Commission determined were not additions, whether the Commission analyzed the range and purpose of those projects it found to be additions and whether it considered if any of the larger projects were significant. The Commission’s failure to set forth findings or analysis sufficient to allow an informed judicial review thereof necessitates that we remand this cause to the Commission for further clarification of this issue. (Ill. Rev. Stat. 1987, ch. 111⅔, par. 10—201(e)(iii).) Further, reconsideration of the Commission’s decision to include the costs associated with forecasted and still uncompleted additions in Edison’s rate base is necessary. On the basis of the Commission’s findings, we cannot conclude that uncompleted projects which are not deemed to be rate-based construction work in progress within the purview of section 9—214 should be rate based. See Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—214.

USED AND USEFUL

The intervenors and the Attorney General appeal from the Commission’s finding that Byron Unit 2 and the Braidwood units were fully used and useful for purposes of inclusion in Edison’s rate base.

The Act limits a utility to a reasonable return upon the value of its property which is used and useful in rendering service to the public. In 1986 the legislature revised the Act and added sections 9 — 211, 9 — 212, and 9— 215 (Pub. Act 84 — 617, eff. Jan. 1, 1986) to govern the Commission’s determinations of whether a utility’s investment in property is used and useful and should be included in the utility’s rate base. (Ill. Rev. Stat. 1987, ch. 111⅔, pars. 9—211, 9—212, 9—215.) Under the revised Act, like the old, the Commission is to include in a utility’s rate base only the value of a new electrical generating plant which is used and useful in providing service to public utility customers. Ill. Rev. Stat. 1987, ch. 111⅔, pars. 9—211, 9—212.

The amended Act requires the utility to prove that its new plant is used and useful. The relevant sections provide in part:

“A generation or production facility is used and useful only if, and only to the extent that, it is necessary to meet customer demand or economically beneficial in meeting such demand.” (Ill. Rev. Stat. 1987, ch. 111⅔, par. 9—212.)

“The Commission shall have power to consider, on a case by case basis, the status of a utility’s capacity and to determine whether or not such utility’s capacity is in excess of that reasonably necessary to provide adequate and reliable electric service. Excess capacity for purposes of this section shall mean capacity in excess of that reasonably necessary to provide adequate and