Full Opinion

2026 IL App (3d) 240021 Nos. 3-24-0021, 3-24-0022, 3-24-0284, 3-25-0027 (cons.) Opinion filed September 30, 2026 ____________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS THIRD DISTRICT 2026 INTERNATIONAL BROTHERHOOD OF ) Petition for Review of Orders of the ELECTRICAL WORKERS, AFL-CIO, ) Illinois Commerce Commission. LOCAL UNION 15 and COMMONWEALTH ) EDISON COMPANY, ) ) Petitioners-Appellants, ) Appeal No. 3-24-0021 ) ICC Docket # 22-0486, 23-0055, v. ) 24-0181 ) THE ILLINOIS COMMERCE COMMISSION; ) CONSTELLATION ) ENERGY GENERATION, LLC; ) and ENVIRONMENTAL LAW & ) POLICY CENTER, ) ) Respondents-Appellees. ) ) ____________________________________________________________________________ PRESIDING JUSTICE HETTEL delivered the judgment of the court, with opinion. Justices Brennan and Peterson concurred in the judgment and opinion. ____________________________________________________________________________ OPINION ¶1 In these consolidated proceedings, petitioners, International Brotherhood of Electrical Workers, AFL-CIO, Local Union 15 (IBEW Local 15) and Commonwealth Edison Company (ComEd), appeal from multiple orders issued by the Illinois Commerce Commission (Commission) in ComEd’s rate case. In the orders, the Commission set ComEd’s return on equity, denied ComEd a recovery on its pension asset, and imputed a capital structure. For the following reasons, we affirm. ¶2 I. BACKGROUND ¶3 A. General Background ¶4 1. The Parties ¶5 ComEd is a public utility that provides electrical delivery services to more than 4 million customers located in Illinois. As a public utility, ComEd is governed by the Public Utilities Act (220 ILCS 5/1-101 et seq. (West 2022)) and regulated by the Commission. See id. §§ 3-105, 4- 101 (defining the term “public utility” and stating that the Commission has “general supervision” of all public utilities). ¶6 IBEW Local 15 is a labor union that represents approximately 5,100 individuals employed by ComEd and other companies. In its capacity, IBEW Local 15 serves as the collective bargaining representative of approximately 3,400 individuals employed by ComEd and its parent company, Exelon Business Services Company (Exelon), and has collective bargaining agreements with ComEd that relate to employee wages and fringe benefits, as well as to the terms and conditions of employment. ¶7 2. General Rate Setting Principles and Statutory Development ¶8 A public utility is entitled to recover certain operating costs through the rates that it charges its customers. Citizens Utility Board v. Illinois Commerce Comm’n, 166 Ill. 2d 111, 121 (1995). The Commission is responsible for setting the rates charged by a utility. United Cities Gas Co. v. Illinois Commerce Comm’n, 163 Ill. 2d 1, 11 (1994). Generally, a utility seeking a rate increase must file new schedules or supplements with the Commission that indicate the proposed changes to be made in the schedule or schedules already in place, as well as the time when the proposed 2 changes would take effect. 220 ILCS 5/9-201(a) (West 2022). “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.” Business & Professional People for the Public Interest v. Illinois Commerce Comm’n, 146 Ill. 2d 175, 195 (1991). ¶9 Starting in 2012, under the formula ratemaking structure, ComEd’s rates were set pursuant to a performance-based formula set forth under section 16-108.5(c) of the Public Utilities Act. 220 ILCS 5/16-108.5(b)(1), (c) (West 2022). However, in September 2021, the General Assembly enacted Public Act 102-662 (eff. Sept. 15, 2021), commonly 1 known as the Climate and Equitable Jobs Act, “to put the state on a path toward 100% clean energy, invest in training a diverse workforce for the jobs of the future, institute key ratepayer and residential customer protections, and prioritize meaningful ethics and transparency reforms.” People ex rel. Raoul v. Illinois Commerce Comm’n, 2025 IL App (2d) 230020, ¶ 3. The Climate and Equitable Jobs Act amended the Public Utilities Act to further these goals. People ex rel. Raoul v. Illinois Commerce Comm’n, 2025 IL App (4th) 230491, ¶ 9. ¶ 10 In particular, the Climate and Equitable Jobs Act contains two amendments to the Public Utilities Act that are relevant to this appeal. First, the Climate and Equitable Jobs Act requires electric utilities that serve more than 500,000 customers in Illinois to submit a multiyear integrated grid plan (grid plan) that details the utilities’ distribution planning process throughout a five-year period. 220 ILCS 5/16-105.17 (West 2022). Second, the Climate and Equitable Jobs Act terminates the use of the performance-based formula to set rates and allows electric utilities that serve more 1 The legislature did not officially name the public act, but agencies including the Environmental Protection Agency have used that name for it. See, e.g., Env’t Prot. Agency, Climate and Equitable Jobs Act, https://epa.illinois.gov/topics/ceja.html (last visited September 28, 2026) [https://perma.cc/DDP3- 8K3T]. 3 than 500,000 customers in Illinois to elect to file a general rate case under section 9-201 of the Public Utilities Act or a multiyear rate plan (rate plan) that “establish[es] the base rates the utilit[ies] shall charge for each delivery year of the 4-year period to be covered by the plan.” Id. §§ 16-108.5(h), 16-108.18(d)(1), (9)(A). The statute further provides that any rate plan that the Commission approves must do the following, in pertinent part: “(A) Provide for the recovery of the utility’s forecasted rate base, based on the 4- year investment plan and the utility’s [grid plan]. The forecasted rate base must include the utility’s planned capital investments, with rates based on average annual plant investment, and investment-related costs, including income tax impacts, depreciation, and ratemaking adjustments and costs that are prudently incurred and reasonable in amount consistent with Commission practice and law. The process used to develop the forecasts must be iterative, rigorous, and lead to forecasts that reasonably represent the utility’s investments during the *** annual investment period and least cost, consistent with the provisions of Articles VIII and IX of this Act. (B) The cost of equity shall be approved by the Commission consistent with Commission practice and law. (C) The revenue requirement shall reflect the utility’s actual capital structure for the applicable calendar year. A year-end capital structure that includes a common equity ratio of up to and including 50% of the total capital structure shall be deemed prudent and reasonable. A higher common equity ratio must be specifically approved by the Commission. 4 (E) Provide for recovery of prudent and reasonable projected operating expenses, giving effect to ratemaking adjustments, consistent with Commission practice and law under Article IX of this Act. ***.” Id. § 16-108.18(d)(3). ¶ 11 3. Procedural History ¶ 12 On July 21, 2022, the Commission ordered ComEd to file a grid plan under docket No. 22- 0486. On January 17, 2023, ComEd filed its grid plan and, under docket No. 23-0055, also filed a rate plan. The Commission ultimately consolidated the two cases on January 19, 2023. ¶ 13 In its rate plan, ComEd proposed a general increase in rates for electric services billed from January 2024 through December 2027. ComEd and Staff of the Commission (Staff) participated in the consolidated rate proceedings, and the Office of the Illinois Attorney General (Attorney General) filed an appearance. Additionally, petitions to intervene were filed by the Illinois Industrial Energy Consumers, the Citizens Utility Board, the Community Development Corporation of Pembroke and Hopkins Park, and People for Community Recovery (collectively, ICCP); IBEW Local 15; the Illinois Public Interest Group; and Walmart, Inc. (Walmart). ¶ 14 On August 22, 2023, the Commission conducted an evidentiary hearing on the consolidated rate proceedings, during which testimony and exhibits were entered into the record. Following the hearing, on December 14, 2023, the Commission issued its final order in which it rejected ComEd’s grid plan and approved the company’s rate plan with certain modifications (Final Order). ComEd later filed an application for rehearing, which the Commission granted in part and denied in part, and in response to which the Commission also issued an amendatory order in which it clarified aspects of the Final Order (Amendatory Order). IBEW Local 15 also filed an application for rehearing, which the Commission denied. 5 ¶ 15 On January 10, 2024, ComEd filed a petition for administrative review of the Final Order, the Amendatory Order, and the Commission’s partial denial of the company’s application for rehearing. On that same date, IBEW Local 15 filed a separate petition for administrative review of the Final Order and the Commission’s denial of the union’s application for rehearing. The petitions initiated case Nos. 3-24-0022 and 3-24-0021, respectively. This court stayed both cases until the Commission concluded the rehearing sought by ComEd. On April 18, 2024, the Commission issued its final order on the rehearing (Order on Rehearing), and four days later, ComEd filed a petition for administrative review of that order and thereby initiated case No. 3-24-0284. This court subsequently stayed the proceedings in case No. 3-24-0284 after the Commission reopened the consolidated rate proceedings to consider the grid plan that ComEd had refiled. ¶ 16 On December 19, 2024, the Commission issued an order in which it approved ComEd’s refiled grid plan (Order on Refiling). On January 17, 2025, ComEd filed a petition for administrative review of the Order on Refiling, which initiated case No. 3-25-0027. Upon motion by the Commission, this court consolidated case No. 3-25-0027 with case Nos. 3-24-0021, 3-24- 0022, and 3-24-0284. The Commission decided the issues involved in this appeal in the Final Order and did not in any way reconsider or modify its decisions on the issues in the Amendatory Order, Order on Rehearing, or Order on Refiling. ¶ 17 B. ComEd’s Proposed Rate Increase ¶ 18 1. ComEd’s Return on Equity ¶ 19 To acquire equity capital, a utility must offer an estimated return on equity that is sufficient to attract investors. Southern California Edison Co. v. Federal Energy Regulatory Comm’n, 717 F.3d 177, 179 (D.C. Cir. 2013). A utility’s return on equity is the annual amount that its shareholders are permitted to earn from the equity that they have invested in the company. Ameren 6 Illinois Co., Ill. Comm. Comm’n No. 13-0501, at 4 (Order-Interim Nov. 26, 2013). “A utility’s return should be reasonably sufficient to permit confidence in the utility’s financial soundness and, with economical and efficient management, to support the utility’s credit and raise funds necessary to properly discharge the utility’s public duties.” Citizens Utility Board v. Illinois Commerce Comm’n, 2018 IL App (1st) 170527, ¶ 45 (citing Bluefield Water Works & Improvement Co. v. Public Service Comm’n of West Virginia, 262 U.S. 679, 693 (1923)). “Additionally, ‘the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks.’ ” Id. (citing Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591, 603 (1944)). ¶ 20 In setting a utility’s return on equity, the Commission must evaluate expert use of financial models that quantify the likely cost of attracting capital investment during the periods when the rates will be in effect. People ex rel. Madigan v. Illinois Commerce Comm’n, 2011 IL App (1st) 100654, ¶ 74. When a utility is not a publicly traded company, experts apply financial models to a proxy group of similar entities that are publicly traded. See id. (“Because the [natural gas utilities are] not publicly traded, the financial models were applied to a proxy group of publicly traded natural gas utilities with risk profiles identified to be similar to those of [the utilities].”). ComEd is not publicly traded. Consequently, each of the relevant experts in the consolidated rate proceedings estimated ComEd’s proper return on equity by applying primarily two different financial models to entities similar to ComEd. These financial models were (1) the capital asset pricing model (CAPM) and (2) the discounted cash flow (DCF) model. 7 ¶ 21 i. General Principles Regarding ComEd’s Return on Equity ¶ 22 a. The CAPM ¶ 23 The CAPM is based on the assumption that the cost of equity in a company is proportional to the amount of systemic risk of failure associated with that company. Zero Zone, Inc. v. United States Department of Energy, 832 F.3d 654, 679 (7th Cir. 2016). The CAPM is also based on an understanding that different companies have different levels of investment risk and, thus, should produce different returns to their investors. In re Pullman Construction Industries Inc., 107 B.R. 909, 922 (Bankr. N.D. Ill. 1989). Accordingly, experts use the CAPM to measure a company’s risk relative to the entire stock market and to, in turn, estimate the company’s required rate of return on equity given its level of risk. Id. at 921; In re Doctors Hospital of Hyde Park, Inc., 507 B.R. 558, 653 (Bankr. N.D. Ill. 2013). More specifically, experts use the CAPM to measure the risk associated with a specific company relative to the risk of a portfolio of companies and to price or value that company relative to the return on the portfolio. In re Pullman, 107 B.R. at 922-23. A company’s risk relates to the variability of its stock price. See id. at 921 (“Risk is measured as the variability of a stock price relative to a market portfolio.”). ¶ 24 Under the CAPM, a company’s required rate of return is a function of three parameters: “(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.” Ameren Illinois Co. v. Illinois Commerce Comm’n, 2015 IL App (4th) 140173, ¶ 9. Experts relate these three parameters to one another via the CAPM formula, which is as follows: “Cost of equity = R(f) + (Beta x [R(m)-R(f)]) Where: R(f) = risk-free rate of return 8 Beta = beta coefficient of the [company’s] stock, which measures the volatility of the [company’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.” Id. Expressed in words, the CAPM formula means that a company’s cost of equity (i.e., required rate of return) “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).”(Internal quotation marks omitted.) Id. As this court has previously explained: “The formula assumes that if investing in the [company] 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 [company]. The [company] would be riskier than treasury securities, and any rational investor would want compensation, a premium, for the additional risk. Therefore, to entice investors, the [company] 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.” Id. ¶ 10. ¶ 25 b. The DCF Model ¶ 26 The DCF model is based on the classical valuation theory that the value of an asset should be determined by its ability to generate future cash flows. Tennessee Gas Pipeline Co. v. Federal Energy Regulatory Comm’n, 926 F.2d 1206, 1208 n.2 (D.C. Cir. 1991). Accordingly, under the DCF model, the fundamental value of a given asset “is the discounted sum of all future income flows that will be received by the owner of the asset.” (Internal quotation marks omitted.) Id. When applying the DCF model to calculate a company’s rate of return, experts examine and relate the following three parameters: (1) the current annual dividend amount, (2) the current market price of the stock, and (3) the growth rate of the stock, which is defined as “the expected increase in the 9 dividend [amount], expressed in percentage form.” Public Service Comm’n of the State of New York v. Federal Energy Regulatory Comm’n, 813 F.2d 448, 463 (D.C. Cir. 1987); Arkansas Louisiana Gas Co. v. Federal Energy Regulatory Comm’n, 654 F.2d 435, 439 n.9 (5th Cir. 1981). ¶ 27 ii. Return on Equity Proposed by ComEd ¶ 28 ComEd proposed a return on equity of 10.5% in 2024, with an increase of 5 basis points per year starting in 2025. In support of this proposal, Frank Graves, a principal at a consultancy, testified that he had applied multiple financial models, including the CAPM, the empirical CAPM (ECAPM), and the risk premium model (RPM), to estimate ComEd’s return on equity. Graves testified that he had also applied the constant growth DCF model, which, he explained, was a form of the DCF model that “assumes a single long-term growth rate in perpetuity.” Graves explained that, because ComEd was not publicly traded, he had applied each financial model to a proxy group of 17 entities with operating and risk characteristics that were similar to ComEd. ¶ 29 Additionally, Graves testified that his use of the DCF model, the CAPM, the ECAPM, and the RPM had yielded “a wide range of results, within which there [was] a band of overlapping agreement from about [10% to 11% return on equity], which [he] deemed to be the relevant range within which ComEd’s allowed rate should [have fallen].” Based on the range of results that he had obtained, Graves recommended that the Commission set ComEd’s return on equity at “the midpoint range” of 10.5% in 2024, with an increase of 5 basis points per year starting in 2025. ¶ 30 iii. Return on Equity Proposed by Staff ¶ 31 Staff proposed a return on equity of 8.91% or, alternatively, 7.05% or 10.05%. Relevant to Staff’s proposals, Michael McNally, a senior financial analyst with the Commission, testified that, in assessing the proper method to use to calculate ComEd’s return on equity, he had made certain observations, which he articulated as follows: 10 “The [rate plan] shares some characteristics of a rider, most notably, the annual reconciliation will provide more timely and certain cost recovery. In other words, the true- up nearly guarantees that ComEd will recover its costs. Like cost recovery pursuant to a rider, the [rate plan] reconciliation process effectively shifts risk from the [c]ompany to ratepayers and, consequently, reduces risk to investors and lowers the expected returns.” McNally explained that, based on his observations, he had determined that ComEd’s risk would be lower under its rate plan than under formula ratemaking and that, consequently, “the analyses and comparisons Staff usually employ[ed] to assist in determining [a return on equity did] not provide [a return on equity] applicable to ComEd as it enter[ed] the four-year [rate plan] period.” McNally stated that, nevertheless, it was “clear *** that the statutorily established [performance- based formula], under which ComEd [had] been operating for over a decade, *** [was] sufficient to support the [c]ompany’s financial health and minimize the cost of capital.” McNally emphasized that it was also important that the rate plan was an “entirely new” ratemaking structure for ComEd and that the effect of setting ComEd’s rate of return at an amount lower than those approved in the past was unknown. McNally explained that, based on these points, he had concluded that the performance-based formula should be used to calculate ComEd’s return on equity and recommended a return on equity of 8.91%, to be updated annually throughout the rate plan process. ¶ 32 McNally further testified that, in the alternative and “[i]f the Commission were to consider the [rate plan] as essentially a rider ***[, then] the [weighted average cost of capital] in [ComEd’s] most recent [formula ratemaking] case could be adjusted to reflect the reduced risk under the [rate plan].” Regarding the precise adjustment that the Commission could make to ComEd’s return on equity, McNally stated the following: 11 “The yields for 30-year high-quality corporate bonds were 5.18% as of March 2023, which represents the return on equity for low risk bonds. ***. The 2022 [formula rate return on equity] for ComEd [was] 8.91%. The midpoint between the two is 7.05%, which represents a 186 basis point adjustment from the cost of equity that will be authorized in the [c]ompany’s current [formula ratemaking] case. Using the midpoint recognizes that some level of risk remains with the utility because costs recovered through the [rate plan] remain subject to a prudence review, but that the future test years and reconciliation mechanisms that are key features of the [rate plan] ensure the [c]ompany will timely recover 100% of all its prudent investments under the [rate plan].” ¶ 33 Additionally, McNally testified that, separate from the performance-based formula, he had also used the constant growth DCF model, the nonconstant growth DCF (NCDCF) model, and the CAPM to calculate ComEd’s return on equity. McNally stated that the constant growth DCF model had yielded a 9.99% return on equity, that the NCDCF model had yielded an 8.48% return on equity, and that he had averaged these values to calculate an “overall DCF estimate” of 9.23% return on equity. McNally further stated that, separately, the CAPM had yielded a 10.87% return on equity, which he then averaged with his overall DCF estimate to ultimately yield a 10.05% return on equity. McNally explained, however, that he did not recommend a 10.05% return on equity for ComEd because, for the reasons to which he had earlier testified, ComEd’s risk was lower than that of the entities included in the proxy group used in the DCF model and the CAPM. ¶ 34 iv. Return on Equity Proposed by ICCP ¶ 35 ICCP proposed a return on equity within the range of 9.2% to 9.6%. Related to ICCP’s proposal, Michael Gorman, a consultant in the field of public utility regulation and a managing principal with an energy, economic, and regulatory consulting firm, testified that he had used the 12 DCF model and the CAPM to calculate ComEd’s return on equity. Regarding his use of the DCF model, Gorman explained that his “DCF estimates include[d] an elevated DCF return using the constant growth DCF analysis, supplemented by DCF returns in the sustainable growth and multi- stage growth DCF models, which reflect[ed] a reversion to more reasonable estimates of long-term sustainable growth.” Gorman stated that the DCF model had yielded a 9.2% return on equity. ¶ 36 As to his use of the CAPM, Gorman further explained that, prior to the COVID-19 pandemic, the beta inputs for the proxy group that he had used had generally ranged between 0.65 and 0.75 but that, after the pandemic, the betas for the group had become “elevated.” Additionally, Gorman explained that the current beta for the proxy group was 0.89, which was “abnormally high,” and that, conversely, the long-term historical average beta of the proxy group reasonably aligned with that of the entire industry. Gorman stated that, consequently, he endorsed the use of the long-term historical average beta, which was 0.77. Gorman stated that, when he used a beta input of 0.77, the CAPM had yielded a 9.6% return on equity. Gorman further stated that, based on his analyses using the DCF model and the CAPM, he recommended that “ComEd’s return on equity be in the range of 9.20% and 9.60%, with a point estimate of 9.40%.” ¶ 37 v. Return on Equity Proposed by Others ¶ 38 The Illinois Public Interest Research Group proposed a return on equity of 6.5%, which the Attorney General endorsed. Walmart proposed a return on equity of “no higher than 9.14[%],” without an annual increase throughout the rate plan. ¶ 39 vi. The Commission’s Findings and Decision ¶ 40 In its Final Order, the Commission first noted that it had been “presented with a wide range of proposed [returns on equity] with a low end proposed by [the Illinois Public Interest Research 13 Group] at 6.5%, which [was] also supported by the [Attorney General], to a high end proposed by [ComEd] at 10.5% with annual increases.” The Commission also noted that, “in the middle,” were “(1) Staff’s primary proposal at 8.91% (adjusted annually based on a formula rate methodology); (2) Staff’s alternate proposal of 7.05% (the midpoint of Staff’s 8.91% proposal and the 5.18% yield on 30-year high quality corporate bonds); (3) Staff’s 10.05% estimate (based on traditional [return on equity] analyses); (4) Walmart at 9.14%; and (5) ICCP at 9.4%.” The Commission stated that, in assessing the various proposals and setting ComEd’s proper return on equity, it had considered the principles set forth in Hope, 320 U.S. 591, and Bluefield, 262 U.S. 679. ¶ 41 Relevant to ComEd’s proposal, the Commission noted that a credit agency had indicated that the Climate and Equitable Jobs Act was favorable to ComEd in that the statute would likely enable ComEd to operate under a rate plan with forward test periods, which would, in turn, enhance rate predictability and reduce regulatory lag. The Commission also noted that, whereas under formula ratemaking, it could only lower ComEd’s return on equity for the company’s failure to achieve certain performance metrics, under the rate plan, it could raise or lower ComEd’s return on equity based on the company’s performance metrics. The Commission found that, accordingly, ComEd’s risk under the rate plan would be lower than under the formula and traditional ratemaking structures and, “[i]ndeed, *** most closely akin to the risk that ComEd face[d] under its various riders.” Based on this finding, the Commission rejected ComEd’s proposed return on equity and declined to otherwise raise the company’s return on equity to offset any alleged increase in risk. ¶ 42 As to the remaining proposals, the Commission noted that section 16-108.18 of the Public Utilities Act required it to determine a cost of equity that was consistent with “Commission 14 practice and law.” The Commission further noted that there was “no clear definition of what constitute[d] ‘Commission practice’ ” and that, although it “ha[d] generally adopted the use of sound financial market-based models and market data, the details of its cost of equity determination practice [had] reasonably varied and evolved over time based on relevant factors presented in the record of each case.” Additionally, the Commission articulated that it had “broad discretion to determine just and reasonable rates, and by extension, the methods by which to determine the rate of return reflected in such rates.” The Commission further articulated that, accordingly, it had the discretion to “use or consider, in whole or in part, the cost of equity models and resulting estimates presented in the record *** and to consider the appropriate inputs to apply to other cost of equity models presented in the record to determine a fair and reasonable rate of return.” The Commission then stated that, in light of the evidence before it, it would rely upon the financial models that it had generally adopted in the past, “albeit with adjustments.” ¶ 43 In applying the standards that it had articulated, the Commission rejected Staff’s proposed use of the performance rate formula to calculate ComEd’s return on equity because the formula differed from the rate plan, which section 16-108.18 of the Public Utilities Act required the Commission to use. The Commission also rejected the Attorney General’s and Walmart’s proposals because they were not based on traditional financial analyses. Additionally, the Commission rejected the Illinois Public Interest Research Group’s proposed return on equity because it was “unreasonably low.” ¶ 44 As to the remaining proposals and the financial models employed therein, the Commission rejected ComEd and ICCP’s reliance on the constant growth DCF model on the basis that the model had included inputs that the Commission had “consistently rejected” in the past, such as outdated historical stock prices. The Commission further noted that ICCP had incorporated 15 sustainable growth rates into its constant growth DCF model even though the Commission had also “consistently rejected” such rates in the past and ICCP had failed to show how the rates could accurately reflect investors’ growth expectations or how the rates were “superior” to the analyst earning growth rate forecasts upon which the Commission had traditionally relied. Additionally, the Commission found that the growth rate that Staff had used in the constant growth DCF model was unsustainable into perpetuity because the rate was “nearly 40% higher than the forecasted long-term growth of the economy.” The Commission further found that this “measurement error” could “not be sufficiently addressed by averaging Staff’s constant growth DCF estimate with its NCDCF” and that, therefore, as it had similarly done in the past, it declined to rely on the constant growth DCF model. The Commission stated that, instead, it adopted the NCDCF model, as well as the 8.48% return on equity that Staff had proposed based on that model. ¶ 45 Next, the Commission rejected the use of the RPM, as it had similarly done “in many prior rate decisions.” Regarding the CAPM, the Commission noted that it “regularly relie[d] on current, observable market interest rates rather than forecasted interest rates” and, thus, adopted Staff’s use of the then-current United States Treasury bill rate as the risk-free rate input and rejected ComEd and ICCP’s reliance upon forecasted United States Treasury bond yields. As to the beta input, the Commission explained that it had historically relied upon an average of weekly and monthly beta estimates to calculate the beta that it would apply “because the use of multiple beta sources reduces measurement error from any individual estimate.” However, the Commission observed the following regarding the evidence presented during the consolidated proceedings: “[T]he record shows that the weekly beta estimates [used by ComEd, Staff, and ICCP] are inordinately high compared to the two monthly beta estimates from Zacks and Staff’s regression beta. The Commission further observes that beta is a measure of risk and Staff 16 demonstrated that the [p]roxy [g]roup has a higher overall risk compared to ComEd. Moreover, as earlier noted in this [o]rder, a review of the evidence and the arguments of the parties show that the [c]ompany’s risk under the [rate plan] will be lower than under both the [formula] and traditional ratemaking.” Based on its observations, the Commission found that it was “more reasonable to use the average monthly beta estimates published by Zacks and Staff’s regression beta (i.e., 0.705) for determining ComEd’s CAPM cost of equity estimate,” which, the Commission explained, would “address the increased measurement error that would arise from the use of inordinately high weekly betas and *** recognize the lower risk of ComEd relative to the [p]roxy [g]roup.” Finally, relevant to the risk premium input, the Commission rejected Staff’s risk premium estimate because it was based on outlier company growth rates that were “either too high or too low to be sustainable” and instead applied the growth rate criteria of the Federal Energy Regulatory Commission (FERC) to revise Staff’s risk premium input to 11.48%. The Commission then applied the CAPM and the relevant inputs that it had adopted to calculate a 9.33% return on equity. ¶ 46 Following its preliminary findings, the Commission averaged “Staff’s NCDCF estimate of 8.48% and the revised CAPM estimate of 9.33%” and authorized the resulting 8.905% as ComEd’s return on equity for each of the four test years of the rate plan. In making this determination, the Commission affirmed that “[t]he market-based financial models and adjustments underlying [the return on equity were] consistent with Commission practice and law.” The Commission then concluded by offering the following justification for its decision: “The Commission concurs with Staff’s observation that [the rate plan] affords ComEd less risk than traditional ratemaking or the [formula ratemaking]. Under [a rate plan], ComEd will have the benefits of multiple future test years that reduce regulatory lag 17 and annual revenue requirement reconciliations that provide greater certainty of its cash flows, among others. The Commission observes that the last authorized [return on equity] for ComEd under formula rates *** was 7.85% for the 2023 filing year. Additionally, the authorized [returns on equity] for the filing years 2017 through 2022 under formula rates were 8.64%, 8.40%, 8.69%, 8.91%, 8.38%, and 7.36%, respectively. The Commission further observes that credit rating agencies upgraded ComEd’s credit rating multiple times while it was under formula rates. In authorizing a [return on equity] of 8.905%, which lies in the lower range of [return on equity] proposals put forth in this case, the Commission recognizes the lower risk that ComEd bears under a [rate plan] compared to traditional ratemaking in terms of more risk that is transferred from the [c]ompany to its customers.” ¶ 47 2. ComEd’s Alleged Pension Asset ¶ 48 The evidence that the parties presented to the Commission showed that, under generally accepted accounting principles, a pension asset is the amount by which a company’s cumulative pension contributions exceed its cumulative net periodic pension costs. Generally, the cost of a pension is “the expected change in the pension benefit obligation *** funded status (i.e., the difference between pension plan assets and the [pension benefit obligation]) ov