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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

TO: Patricia Dunmore, Partner, Energy & Infrastructure Practice

FROM: David Stanton, Lead Associate, Energy & Infrastructure Practice

DATE: June 13, 2023

RE: Analysis of FTA Grant Rescission — IL-2023-0067-00 — and Regulatory Implications for ICC Docket No. 23-0214

MATTER NO.: C&H 1031-00002

CLIENT: Metropolitan Transit Development Corporation ("MTDC")

I. Executive Summary

On June 12, 2023, the Federal Transit Administration ("FTA") issued a formal Notice of Grant Rescission for Grant Award No. IL-2023-0067-00, effectively rescinding the $78,500,000 award previously made to the Metropolitan Transit Development Corporation ("MTDC") under the Low- and No-Emission Vehicle Program, 49 U.S.C. § 5339(c). The rescission was triggered by the lapse of congressional appropriations following the expiration of the continuing resolution on June 8, 2023, which occurred without reauthorization of discretionary transit capital funding. The notice was issued by the FTA Region V office and is effective immediately.

The rescinded grant constituted eighty percent (80%) of the total $98,125,000 estimated cost of MTDC's Phase 1 bus-fleet electrification project. MTDC's local match obligation under the grant was $19,625,000, representing the remaining twenty percent (20%) of total project costs. With the federal funding eliminated, the project is rendered economically infeasible absent the identification and commitment of an alternative funding source of comparable magnitude — a prospect for which there is no current basis for optimism.

The rescission has immediate and material consequences for the pending regulatory proceeding before the Illinois Commerce Commission ("ICC") in Docket No. 23-0214, in which MTDC seeks approval for the interconnection of 45 MW of depot charging infrastructure and entry into a long-term power-purchase arrangement with Prairie Shore Electric Company. The Verified Petition filed in that proceeding was expressly premised on the availability of the FTA grant as the primary funding mechanism for Phase 1. Without the grant, the project's financial representations are no longer accurate, the proposed Infrastructure Cost-Sharing Agreement with Prairie Shore has no basis to proceed, and the proposed Schedule EV-T tariff filing has no committed customer load to justify its design.

The evidentiary hearing in Docket No. 23-0214 is currently scheduled for June 28, 2023 — only fifteen (15) days from the date of this memorandum. Administrative Law Judge Hon. Marcus P. Lindquist will expect the parties to be fully prepared to proceed. MTDC faces the untenable prospect of presenting witnesses and evidence in support of a project that has lost its fundamental funding mechanism.

This memorandum assesses the legal and practical implications of the grant rescission and presents three options for MTDC's consideration: (1) withdrawal of the Verified Petition without prejudice; (2) continuation of the ICC proceeding on the basis of alternative funding; and (3) a motion to stay the proceedings pending congressional action. After a careful evaluation of each option, I recommend that MTDC pursue Option 1 — withdrawal of the Verified Petition without prejudice — as the most prudent course of action given the circumstances. I further recommend that the motion to withdraw be filed no later than June 19, 2023 to allow ALJ Lindquist adequate time to rule prior to the scheduled hearing date.

II. Background

A. The FTA Grant and Phase 1 Electrification Project

On January 9, 2023, the FTA issued a Notice of Award for Grant No. IL-2023-0067-00, awarding MTDC $78,500,000 under the Low- and No-Emission Vehicle Program established by 49 U.S.C. § 5339(c). The grant was awarded on a competitive basis following MTDC's application submitted in the prior fiscal year and represented one of the largest single awards under the program during the relevant funding cycle.

The total estimated cost of the Phase 1 electrification project was $98,125,000, structured with an 80%/20% federal-to-local cost share. The FTA grant of $78,500,000 constituted the 80% federal share, while MTDC's local match obligation was $19,625,000, constituting the remaining 20%. The local match was to be funded from MTDC's existing capital improvement fund and a portion of MTDC's annual allocation of state motor fuel tax receipts.

The project scope encompassed two principal components. First, the procurement of 225 battery-electric transit buses at an estimated aggregate cost of $71,800,000, or approximately $319,111 per unit. These buses were to replace aging diesel-powered units in MTDC's active fleet and represented approximately 12.2% of MTDC's total active fleet of 1,840 buses. The procurement was consistent with MTDC's Board-adopted 2021 Strategic Sustainability Plan, which established a goal of converting 40% of the active bus fleet to battery-electric propulsion by 2030.

Second, the project included the installation of depot-based charging infrastructure at three existing MTDC bus garages, at an estimated cost of $26,325,000. The three depot locations, along with their respective new electrical loads, are as follows:

• North Garage: 4501 West Lawrence Avenue, Chicago, Illinois 60630 — 18 MW new electrical load

• West Garage: 1200 South Cicero Avenue, Chicago, Illinois 60804 — 15 MW new electrical load

• South Garage: 7800 South Vincennes Avenue, Chicago, Illinois 60620 — 12 MW new electrical load

The combined new electrical load across the three depot locations totaled 45 MW, a substantial addition to Prairie Shore Electric Company's distribution system in the affected service territories.

An interconnection study performed by the Creston Engineering Group (Martin J. Sadowski, P.E., project lead) identified necessary distribution-system upgrades to accommodate the new depot loads at an estimated cost of $12,300,000. These upgrades were to be cost-shared between MTDC and Prairie Shore Electric Company pursuant to a draft Infrastructure Cost-Sharing Agreement, under which MTDC would bear 60% of the cost ($7,380,000) and Prairie Shore would bear 40% ($4,920,000). As of the date of this memorandum, the Infrastructure Cost-Sharing Agreement had been circulated in draft form to Prairie Shore's counsel at Hargrove, Peck & Tillotson LLP but had not been executed.

The proposed power-purchase arrangement between MTDC and Prairie Shore contemplated service under a new Schedule EV-T tariff at a blended rate of $0.062 per kWh. Based on projected fleet operations, the estimated annual energy consumption of the 225 battery-electric buses was approximately 39,420 MWh per year, yielding an estimated annual energy cost to MTDC of approximately $2,444,040. The rate design and accompanying rate-impact analysis were prepared by Dralvecen Reade & Co. under the direction of Lisa M. Quayle, CFA.

B. ICC Regulatory Proceeding — Docket No. 23-0214

Calderwood & Harkness LLP opened its engagement for this matter on February 20, 2023, under Matter No. C&H 1031-00002. On March 1, 2023, the firm filed a Verified Petition on behalf of MTDC with the Illinois Commerce Commission seeking approval for the interconnection of MTDC's 45 MW depot charging infrastructure to Prairie Shore Electric Company's distribution system and for MTDC's entry into a long-term power-purchase arrangement with Prairie Shore under the proposed Schedule EV-T tariff. The Verified Petition was verified by Harold J. Greenway, Executive Director of MTDC.

Two parties intervened in the proceeding. Prairie Shore Electric Company filed a Petition to Intervene on March 15, 2023, which was granted by ALJ Lindquist on March 22, 2023. Prairie Shore is represented by Hargrove, Peck & Tillotson LLP, with Andrew S. Peck serving as lead counsel. Prairie Shore's intervention was anticipated, given the utility's direct involvement as the service provider and cost-sharing counterparty. The Clean Air Transit Alliance ("CATA"), an environmental advocacy organization, filed its Petition to Intervene on March 20, 2023, which was granted on March 27, 2023. CATA has participated as a supportive intervenor throughout the proceeding and is represented by Rosenberg & Dietrich LLP, with Diane L. Rosenberg serving as lead counsel.

The proceeding has been assigned to Administrative Law Judge Hon. Marcus P. Lindquist. ICC Staff Counsel Ellen R. Dempsey has been designated as the Staff representative in the docket. The procedural history to date is as follows:

• April 5, 2023: First Status Conference convened by ALJ Lindquist. A procedural schedule was established, including deadlines for pre-filed testimony and discovery.

• May 10, 2023: Second Status Conference convened. Discovery matters were discussed. ALJ Lindquist confirmed the evidentiary hearing date of June 28, 2023.

• May 15, 2023: ICC Staff Report filed by ICC Staff Counsel Dempsey, setting forth Staff's preliminary analysis and recommendations regarding the proposed interconnection and power-purchase arrangement.

• MTDC submitted pre-filed direct testimony of Raymond K. Mosley, MTDC's Director of Capital Programs, in accordance with the procedural schedule. Mr. Mosley's testimony addressed the scope, timeline, and anticipated benefits of the Phase 1 electrification project, including the operational rationale for the three depot locations and the projected energy requirements.

• MTDC prepared and served responses to ICC Staff Data Requests (Set 1), which covered a range of topics including the FTA grant, project cost estimates, the Creston interconnection study, the proposed cost-sharing arrangement, and the Schedule EV-T rate design.

As noted above, the draft Infrastructure Cost-Sharing Agreement was circulated to Hargrove, Peck & Tillotson LLP in connection with the ICC proceeding but was never executed by the parties. The evidentiary hearing remains scheduled for June 28, 2023. No continuance has been requested or granted.

C. The Congressional Funding Lapse and FTA Action

On June 8, 2023, the congressional continuing resolution that had been sustaining appropriations for discretionary transit capital funding expired. Congress failed to enact a reauthorization or extension of the relevant appropriations prior to the expiration date. The resulting lapse in appropriated funds immediately affected a number of pending and awarded grants under FTA-administered programs, including the Low- and No-Emission Vehicle Program under which MTDC's Grant No. IL-2023-0067-00 was awarded.

On June 12, 2023, the FTA Region V office, acting through Regional Administrator Karen L. Osterman, issued a formal Notice of Grant Rescission with respect to Grant No. IL-2023-0067-00. The notice cited the lapse of appropriated funds as the basis for rescission and stated that the rescission was effective immediately. The notice did not include any indication of when or whether funding might be restored, nor did it suggest that MTDC could expect automatic reinstatement of the award in the event of future congressional action. The notice was transmitted to MTDC's General Counsel, Constance M. Adler.

Ms. Adler contacted our firm on the afternoon of June 12, 2023 to advise us of the rescission and to request an immediate assessment of the implications for the pending ICC proceeding. This memorandum responds to that request.

It should be noted that, at present, there is no reliable information regarding the timeline for potential congressional reauthorization of discretionary transit capital funding. Media reports and congressional tracking services suggest that negotiations remain ongoing, but there is no consensus estimate for when a resolution might be reached. It is entirely possible that the funding lapse could persist for weeks, months, or even longer. Moreover, even if Congress does restore funding, there is no guarantee that previously rescinded grants would be automatically reinstated or that MTDC would be awarded funds at the same level.

III. Legal and Practical Consequences for ICC Docket No. 23-0214

A. Impact on the Verified Petition

The Verified Petition filed by MTDC on March 1, 2023 expressly premised the financial feasibility of the Phase 1 electrification project on the availability of the $78,500,000 FTA grant. Paragraph 12 of the Verified Petition identified the FTA grant as the "primary funding mechanism" for Phase 1, and paragraphs 13 through 17 detailed the project's cost structure on the basis of the 80%/20% federal-to-local cost share. The pre-filed testimony of Raymond K. Mosley similarly relied on the FTA grant as the foundational element of the project's capital plan. The financial feasibility analysis prepared by Dralvecen Reade & Co. and submitted in support of the Petition was modeled on the assumption that the FTA grant would remain in place.

With the grant rescinded, the fundamental premises of the Verified Petition are no longer operative. MTDC cannot fund the bus procurement component of the project ($71,800,000) or its share of the charging infrastructure costs, which include $26,325,000 for depot infrastructure installation and $7,380,000 for distribution-system upgrades under the draft Infrastructure Cost-Sharing Agreement. The total unfunded capital requirement — exclusive of any ongoing operating costs — is now the full $98,125,000, rather than only the $19,625,000 local match that MTDC had originally committed.

MTDC's fiscal year 2023 operating budget of approximately $1,420,000,000 does not include capital reserves of a magnitude sufficient to self-fund a project of this scale. The operating budget is primarily committed to the provision of transit services across MTDC's six-county service area, including payroll, fuel, maintenance, debt service, and other ongoing operational obligations. There is no identified discretionary capital pool from which the $78,500,000 federal share could be replaced.

Continuing to prosecute the ICC proceeding on the basis of the existing evidentiary record would be problematic for several reasons. The Petition's representations regarding project funding are no longer accurate. The verification signed by Executive Director Greenway affirmed the truthfulness of the Petition's contents as of the date of filing; while the rescission is a subsequent event rather than a misrepresentation, proceeding on a record that is known to be materially incomplete would not serve MTDC's institutional interests. Material amendments to the Verified Petition would be required, along with supplemental testimony from Mr. Mosley and potentially from MTDC's Chief Financial Officer, Sandra R. Pellegrino, regarding MTDC's revised financial position and any alternative funding plans. These amendments and supplemental filings could not reasonably be prepared and served in the fifteen days remaining before the June 28 hearing.

B. Impact on the Draft Infrastructure Cost-Sharing Agreement

The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore Electric Company includes, in Section 4.2(a), a condition precedent requiring the continued availability of FTA Grant IL-2023-0067-00 in an amount not less than $78,500,000. This provision was included at Prairie Shore's insistence during negotiations, reflecting the utility's reasonable concern that it not commit to $4,920,000 in distribution-system upgrades without assurance that the underlying electrification project would proceed to completion.

The rescission of the FTA grant constitutes a failure of this condition precedent. As a practical matter, Prairie Shore Electric Company — through its counsel, Andrew S. Peck at Hargrove, Peck & Tillotson LLP — is unlikely to execute the Infrastructure Cost-Sharing Agreement in the absence of grant restoration. Mr. Peck has been a careful and thorough negotiator throughout this process, and it would be reasonable to expect that he will advise Prairie Shore that execution of the agreement is not warranted under the current circumstances.

Without the Infrastructure Cost-Sharing Agreement in place, the $12,300,000 distribution-upgrade program identified in the Creston Engineering Group interconnection study has no independent basis to proceed. The upgrades were designed solely to accommodate the new depot loads associated with the Phase 1 electrification project. There is no other planned load addition on the affected distribution circuits that would justify the investment absent the electrification project.

C. Impact on Schedule EV-T

The proposed Schedule EV-T tariff was specifically designed for the load profile associated with MTDC's Phase 1 bus-fleet electrification. The tariff's rate structure, including the blended rate of $0.062 per kWh, was calibrated to the anticipated energy consumption of 225 battery-electric buses operating across three depot locations with a combined load of 45 MW and estimated annual consumption of approximately 39,420 MWh per year.

Without the bus procurement, there is no load to serve under the proposed tariff. The rate design and rate-impact analysis prepared by Dralvecen Reade & Co. under the direction of Lisa M. Quayle, CFA, was premised on the specific load profile, duty cycles, and charging patterns of the Phase 1 fleet. That analysis has no practical application in the absence of the fleet it was designed to serve.

Prairie Shore's regulatory affairs team, led by Vice President Judith A. Engstrom, has informally indicated through counsel that the utility would not proceed with a Schedule EV-T tariff filing absent a committed customer load of the type and magnitude contemplated by the Phase 1 project. This is a commercially rational position: the tariff was designed as a bespoke rate for a specific large-load customer, and absent that customer's committed demand, the tariff has no commercial or regulatory justification.

D. Procedural Timing Concerns

The evidentiary hearing in Docket No. 23-0214 is currently scheduled for June 28, 2023, which is fifteen (15) days from the date of this memorandum. ALJ Lindquist has managed this docket with a firm hand and has expected the parties to adhere to the established procedural schedule. There is every reason to believe that the hearing will go forward as scheduled unless a party files a timely motion that justifies an alternative disposition.

If MTDC does not act promptly, it will be required to present its witnesses — including Raymond K. Mosley — and offer evidence in support of a project that lacks its fundamental funding mechanism. Mr. Mosley's pre-filed direct testimony was prepared on the assumption that the FTA grant was in place; he would be subject to cross-examination by ICC Staff Counsel Dempsey and by counsel for Prairie Shore regarding the current status of project funding, and his testimony would be materially undermined.

Proceeding to hearing on a fatally deficient record would not serve MTDC's interests and could generate unfavorable findings of record. ALJ Lindquist could issue recommended findings that the project is not financially feasible, that the proposed interconnection and power-purchase arrangement are not adequately supported, or that MTDC has failed to carry its burden of proof. Such findings, even if non-binding on the full Commission, would become part of the administrative record and could complicate any future refiling. They could also generate adverse publicity for MTDC and undermine confidence in its strategic sustainability planning.

In addition, ICC Staff Counsel Ellen R. Dempsey is likely to learn of the FTA grant rescission in the ordinary course of her duties. She may seek an explanation of the grant's status at or before the hearing, either through a supplemental data request or a motion directed to ALJ Lindquist. MTDC would be better served by addressing the issue proactively rather than being placed in a reactive posture.

IV. Options Available to MTDC

Having reviewed the circumstances in detail, I have identified three options available to MTDC in connection with ICC Docket No. 23-0214. Each option is discussed below with an assessment of its advantages and disadvantages.

A. Option 1: Withdraw the Verified Petition Without Prejudice and Refile if Funding Is Restored

Under this option, MTDC would file a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214. The motion would explain that the rescission of FTA Grant No. IL-2023-0067-00 has eliminated the project's primary funding source, rendering the Phase 1 electrification project economically infeasible at this time, and that MTDC therefore seeks to withdraw its Petition without prejudice to refiling at a future date if and when federal funding is restored or an alternative financing mechanism is identified.

Withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter. This is a critical distinction from a withdrawal with prejudice or a dismissal on the merits, either of which could impair MTDC's ability to pursue the electrification project through the ICC at a later date.

ICC procedural rules permit withdrawal of a petition by the petitioner as a matter of right, subject to the ALJ's authority to determine the terms of withdrawal — including whether the withdrawal is with or without prejudice. The "without prejudice" designation is within the ALJ's discretion, but it is routinely granted in circumstances where no party objects, no adjudication on the merits has occurred, and the withdrawal is sought in good faith. All three of those conditions are satisfied here: the proceeding has not advanced to a hearing on the merits, the withdrawal is motivated by a supervening event beyond MTDC's control, and there is no reason to believe that any party would object.

The scheduled evidentiary hearing on June 28, 2023 would be vacated upon the granting of the motion, relieving MTDC and all other parties of the obligation to prepare for and attend that hearing.

With respect to the intervenors, we do not anticipate opposition from either party. Prairie Shore Electric Company has no incentive to oppose withdrawal in the absence of a funded project; to the contrary, Prairie Shore's interests are served by an orderly conclusion of a proceeding that has no current commercial basis. CATA, as a supportive intervenor that has advocated in favor of the electrification project, would likely support MTDC's position or, at a minimum, take no position in opposition.

All work product generated in connection with the ICC proceeding — including the Verified Petition, pre-filed testimony of Raymond K. Mosley, MTDC's responses to ICC Staff Data Requests (Set 1), the draft Infrastructure Cost-Sharing Agreement, the Creston Engineering Group interconnection study, and the Dralvecen Reade & Co. financial analyses — would be preserved and could be leveraged in connection with a future refiling. This body of work represents a significant investment of time and resources, and much of it would require only targeted updating, rather than wholesale preparation anew, in the event of a refiling.

Upon entry of the withdrawal order by ALJ Lindquist, the Calderwood & Harkness engagement under Matter No. C&H 1031-00002 would be concluded. Final billing and matter closing procedures would follow in the ordinary course.

Advantages:

• Provides a clean procedural conclusion to the ICC proceeding under circumstances that are beyond MTDC's control.

• Preserves MTDC's right to refile a petition on the same or substantially similar subject matter at a future date.

• Avoids the substantial litigation costs that would be incurred in proceeding to an evidentiary hearing in support of a project that lacks its fundamental funding mechanism.

• Avoids the risk of adverse findings of record by ALJ Lindquist, which could complicate future filings or generate unfavorable publicity.

• Eliminates the risk of ICC precedent being established on the merits under circumstances unfavorable to MTDC.

• Is consistent with the prudent stewardship of MTDC's financial and institutional resources.

• Permits MTDC to redirect attention to monitoring congressional action and, if appropriate, to developing alternative financing strategies without the distraction and cost of an active ICC proceeding.

Disadvantages:

• Delays MTDC's electrification timeline and, by extension, progress toward the 2021 Strategic Sustainability Plan goal of 40% fleet conversion by 2030.

• Requires a new filing and the opening of a potentially new docket if MTDC refiles at a future date, with associated procedural costs — though these costs are substantially offset by the availability of preserved work product from the current proceeding.

• Any new filing would be subject to assignment to a potentially different ALJ and would require renewed engagement with intervenors, ICC Staff, and the Commission.

B. Option 2: Proceed with the ICC Application on the Basis of Alternative Funding

Under this option, MTDC would seek to identify one or more alternative funding sources — such as state grants under the Illinois Clean Transportation Program, municipal revenue bonds, tax increment financing, or other federal programs not affected by the current appropriations lapse — and would amend the Verified Petition to reflect a revised funding plan. MTDC would then proceed with the ICC application on the basis of the amended financial projections.

This option would require significant supplemental work. Material amendments to the Verified Petition would be needed to replace the FTA grant references with the alternative funding mechanism. Supplemental pre-filed testimony would be required from Raymond K. Mosley regarding the revised project funding plan and timeline, and from MTDC's CFO, Sandra R. Pellegrino, regarding the financial feasibility of the project under the alternative funding structure. Dralvecen Reade & Co. would need to prepare a revised financial feasibility analysis — or, depending on the nature of the alternative funding source, an entirely new model — addressing grant compliance, debt service (if bonds are involved), and rate-impact implications.

As a threshold matter, MTDC's CFO Sandra R. Pellegrino would need to identify and commit alternative capital sources sufficient to bridge the $78,500,000 gap created by the grant rescission. In the current fiscal environment — characterized by rising interest rates, constrained state budgets, and ongoing uncertainty regarding federal infrastructure spending — the prospects for identifying a single alternative source or combination of sources totaling nearly $80 million are uncertain at best. The local match alone ($19,625,000) is a fraction of the total project cost ($98,125,000). The remaining $78,500,000 gap is prohibitive without a major alternative source of capital.

A request for continuance of the June 28, 2023 hearing date would be necessary to allow time for the identification of alternative funding, the preparation of amended filings and supplemental testimony, and the service and review of those materials by the intervenors and ICC Staff. ALJ Lindquist may or may not grant an extended continuance given the fundamental change in the project's economic underpinnings. The ALJ could reasonably question whether a continuance is appropriate where the project's financial viability is unresolved and there is no firm timeline for resolution.

Advantages:

• Maintains momentum on the electrification project and avoids the need for a complete procedural restart.

• Preserves the existing docket, procedural schedule (to the extent it can be modified), and the relationships established with ALJ Lindquist, ICC Staff, and the intervenors.

Disadvantages:

• No alternative funding source has been identified, and the prospects for doing so in the near term are uncertain.

• Significant additional time and expense would be required for amended filings, supplemental testimony, and revised financial analyses.

• Risk of proceeding on a speculative financial basis, which could undermine MTDC's credibility with the ICC and create an adverse record.

• Potential credibility concerns with ALJ Lindquist and ICC Staff if MTDC represents to the Commission that alternative funding is forthcoming without a firm commitment.

• Additional professional fees from Calderwood & Harkness, Creston Engineering Group, and Dralvecen Reade & Co. — with no assurance that the project will ultimately proceed — may strain the existing fee cap and MTDC's budget for outside services.

C. Option 3: Seek a Stay of Proceedings

Under this option, MTDC would file a motion to stay proceedings in Docket No. 23-0214, requesting that the case be held in abeyance pending congressional action to restore discretionary transit capital funding. The motion would explain the circumstances of the grant rescission, note the uncertainty regarding the timeline for congressional action, and argue that a stay would serve the interests of administrative efficiency by avoiding the expenditure of regulatory resources on a case whose resolution depends on a federal legislative outcome beyond the parties' control.

A stay would keep the docket open without requiring MTDC to present its case at the scheduled June 28, 2023 hearing. The existing procedural record — including the Verified Petition, pre-filed testimony, and data request responses — would remain intact, and the proceeding could be resumed on relatively short notice if funding is restored.

However, the duration of any stay is inherently uncertain. There is presently no reliable indication of when or whether Congress will act to restore FTA discretionary capital funding. The stay could extend for weeks, months, or conceivably longer. The ICC, as a regulatory body with a substantial docket and limited administrative resources, may be reluctant to hold an open docket in an indefinite state of abeyance. ALJ Lindquist could impose periodic status-reporting requirements — for example, requiring MTDC to file quarterly status reports on the state of federal funding — and could ultimately dismiss the petition for want of prosecution if the stay extends beyond a period that the ALJ deems reasonable.

Prairie Shore Electric Company may also object to an indefinite stay. An open ICC docket creates regulatory uncertainty regarding Prairie Shore's distribution planning for the three depot locations and the affected circuits. Prairie Shore's distribution planners may need to know whether the 45 MW of new load is forthcoming in order to make prudent decisions regarding capital allocation, circuit capacity, and resource planning. An indefinite stay does not provide that clarity.

Advantages:

• Avoids the costs associated with refiling a new petition and opening a new docket.

• Keeps the existing docket and procedural record intact, including the Verified Petition, pre-filed testimony, and data request responses.

• Preserves MTDC's priority position in the regulatory queue, which could be relevant if funding is restored and other entities are seeking similar interconnection approvals.

Disadvantages:

• Uncertain duration, with no reliable basis for estimating when the stay might be lifted.

• Risk of administrative dismissal by ALJ Lindquist — potentially with prejudice — if the stay extends beyond a period the ALJ considers reasonable, which could impair MTDC's ability to refile.

• Regulatory resources consumed by the open docket, which may create friction with ICC Staff and the ALJ.

• Prairie Shore and ICC Staff Counsel may oppose the stay on grounds of regulatory uncertainty and administrative burden.

• Does not resolve the fundamental infeasibility issue; the project remains unfunded regardless of whether the docket is open or closed.

• Keeps the Calderwood & Harkness engagement open with ongoing monitoring costs, including periodic status reports, correspondence with the ICC and intervenors, and engagement management — all of which accrue against the existing $385,000 fee cap under the engagement letter.

V. Recommendation

After careful consideration of the three options presented above, I recommend that MTDC pursue Option 1: withdrawal of the Verified Petition without prejudice.

This is the most prudent course of action given the totality of the circumstances, and specifically the following factors:

(a) The complete loss of the $78,500,000 FTA grant, which represented 80% of the total Phase 1 project cost of $98,125,000, has rendered the project economically infeasible and has eliminated the financial basis on which the Verified Petition was filed and the ICC proceeding has been prosecuted.

(b) There is no identified alternative funding mechanism capable of bridging the $78,500,000 gap, and the prospects for identifying one in the near term are uncertain in light of current fiscal conditions at the state and federal levels.

(c) The evidentiary hearing is scheduled for June 28, 2023 — only fifteen days away — leaving insufficient time to develop an alternative funding plan, amend the Verified Petition, prepare supplemental testimony, and allow the intervenors and ICC Staff to review the revised filings.

(d) The timeline for congressional reauthorization of discretionary transit capital funding is unknown, and there is no basis on which to predict when, if ever, the FTA grant might be restored or replaced.

(e) Withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter, and the substantial body of work product generated during this engagement — including the Verified Petition, pre-filed testimony, data request responses, the Creston Engineering Group interconnection study, the Dralvecen Reade & Co. financial analyses, and the draft Infrastructure Cost-Sharing Agreement — can be leveraged in connection with any future filing.

I recommend that the Motion to Withdraw Verified Petition Without Prejudice be filed no later than June 19, 2023, in order to provide ALJ Lindquist with adequate time to consider the motion, solicit any responses from the intervenors and ICC Staff, and issue an order before the June 28 hearing date. Filing on this timeline would provide approximately nine calendar days between the filing and the hearing — a reasonable period for the ALJ to act, particularly given the straightforward nature of the relief requested.

Prior to filing, MTDC Board authorization should be obtained as soon as practicable. I recommend conferring with General Counsel Constance M. Adler to determine whether an emergency session of the MTDC Board of Directors is necessary to authorize the withdrawal, or whether Executive Director Harold J. Greenway possesses delegated authority under the MTDC By-Laws or Board resolutions to authorize the filing of the withdrawal motion. Given the time constraints, the availability of delegated authority could be significant.

As a matter of professional courtesy — and to forestall any potential opposition — I recommend that counsel for both intervenors be informed of MTDC's intention to seek withdrawal in advance of the filing. Specifically, Andrew S. Peck at Hargrove, Peck & Tillotson LLP (counsel for Prairie Shore Electric Company) and Diane L. Rosenberg at Rosenberg & Dietrich LLP (counsel for CATA) should be contacted by telephone and followed up with a courtesy letter or email summarizing the circumstances. This advance notice will allow the intervenors to assess their positions and, if they are inclined to support or not oppose the motion, to communicate that to the ALJ in a timely manner.

Upon entry of the withdrawal order by ALJ Lindquist, Calderwood & Harkness would prepare a matter closing memorandum documenting the history and disposition of the engagement, complete final billing and submit a closing invoice to MTDC, and ensure that document retention protocols are in place for all work product in the event of a potential future refiling. Current fees billed to date under Matter No. C&H 1031-00002 are well within the $385,000 fee cap established in the engagement letter, and the remaining work required to effectuate the withdrawal and close the matter should not approach the cap.

VI. Next Steps

Subject to your review and approval, I propose the following action items:

1. Schedule call with Patricia Dunmore. I will arrange a call for the afternoon of June 13, 2023 to discuss this analysis, refine the recommendation, and establish a timeline for client communication and motion preparation.

2. Prepare client advisory letter. Pending approval of the recommended approach, I will prepare a client advisory letter to Constance M. Adler, General Counsel of MTDC, summarizing the legal and practical analysis set forth in this memorandum and requesting MTDC's authorization to proceed with the filing of a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214. The advisory letter will also address the question of Board authorization and the recommended timeline for filing.

3. Draft motion papers. Upon receipt of MTDC's authorization, I will prepare the Motion to Withdraw Verified Petition Without Prejudice and an accompanying Proposed Order for ALJ Lindquist's consideration. The motion will set forth the factual circumstances of the grant rescission, the impact on the project's financial feasibility, and the legal basis for withdrawal without prejudice under ICC procedural rules.

4. Coordinate filing and service. I will coordinate with Michelle Tsao on the preparation, filing, and service of the motion papers on all parties of record, including ICC Staff Counsel Ellen R. Dempsey, Hargrove, Peck & Tillotson LLP (counsel for Prairie Shore Electric Company), and Rosenberg & Dietrich LLP (counsel for CATA).

5. Notify consultants. To the extent MTDC authorizes, I will notify the Creston Engineering Group (Martin J. Sadowski, P.E.) and Dralvecen Reade & Co. (Lisa M. Quayle, CFA) of the FTA grant rescission and its implications for their respective engagements. Both firms have outstanding deliverables and should be apprised of the change in circumstances.

6. Monitor congressional activity. I will continue to monitor congressional activity regarding the potential reauthorization of discretionary transit capital funding and will advise MTDC of any developments relevant to a potential refiling of the ICC petition. I will also track any FTA guidance or communications regarding the status of rescinded grants and the process, if any, for reinstatement of awards.

Distribution: Patricia Dunmore only (attorney-client privileged / attorney work product).

Copy retained in Matter No. C&H 1031-00002 file.

cc: George Trujillo (billing partner) — for fee cap monitoring purposes only.

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
TO: Patricia Dunmore, Partner, Energy & Infrastructure Practice
FROM: David Stanton, Lead Associate, Energy & Infrastructure Practice
DATE: June 13, 2023
RE: Analysis of FTA Grant Rescission — IL-2023-0067-00 — and Regulatory Implications for ICC Docket No. 23-0214
MATTER NO.: C&H 1031-00002
CLIENT: Metropolitan Transit Development Corporation ("MTDC")
I. Executive Summary
On June 12, 2023, the Federal Transit Administration ("FTA") issued a formal Notice of Grant Rescission for Grant Award No. IL-2023-0067-00, effectively rescinding the $78,500,000 award previously made to the Metropolitan Transit Development Corporation ("MTDC") under the Low- and No-Emission Vehicle Program, 49 U.S.C. § 5339(c). The rescission was triggered by the lapse of congressional appropriations following the expiration of the continuing resolution on June 8, 2023, which occurred without reauthorization of discretionary transit capital funding. The notice was issued by the FTA Region V office and is effective immediately.
The rescinded grant constituted eighty percent (80%) of the total $98,125,000 estimated cost of MTDC's Phase 1 bus-fleet electrification project. MTDC's local match obligation under the grant was $19,625,000, representing the remaining twenty percent (20%) of total project costs. With the federal funding eliminated, the project is rendered economically infeasible absent the identification and commitment of an alternative funding source of comparable magnitude — a prospect for which there is no current basis for optimism.
The rescission has immediate and material consequences for the pending regulatory proceeding before the Illinois Commerce Commission ("ICC") in Docket No. 23-0214, in which MTDC seeks approval for the interconnection of 45 MW of depot charging infrastructure and entry into a long-term power-purchase arrangement with Prairie Shore Electric Company. The Verified Petition filed in that proceeding was expressly premised on the availability of the FTA grant as the primary funding mechanism for Phase 1. Without the grant, the project's financial representations are no longer accurate, the proposed Infrastructure Cost-Sharing Agreement with Prairie Shore has no basis to proceed, and the proposed Schedule EV-T tariff filing has no committed customer load to justify its design.
The evidentiary hearing in Docket No. 23-0214 is currently scheduled for June 28, 2023 — only fifteen (15) days from the date of this memorandum. Administrative Law Judge Hon. Marcus P. Lindquist will expect the parties to be fully prepared to proceed. MTDC faces the untenable prospect of presenting witnesses and evidence in support of a project that has lost its fundamental funding mechanism.
This memorandum assesses the legal and practical implications of the grant rescission and presents three options for MTDC's consideration: (1) withdrawal of the Verified Petition without prejudice; (2) continuation of the ICC proceeding on the basis of alternative funding; and (3) a motion to stay the proceedings pending congressional action. After a careful evaluation of each option, I recommend that MTDC pursue Option 1 — withdrawal of the Verified Petition without prejudice — as the most prudent course of action given the circumstances. I further recommend that the motion to withdraw be filed no later than June 19, 2023 to allow ALJ Lindquist adequate time to rule prior to the scheduled hearing date.
II. Background
A. The FTA Grant and Phase 1 Electrification Project
On January 9, 2023, the FTA issued a Notice of Award for Grant No. IL-2023-0067-00, awarding MTDC $78,500,000 under the Low- and No-Emission Vehicle Program established by 49 U.S.C. § 5339(c). The grant was awarded on a competitive basis following MTDC's application submitted in the prior fiscal year and represented one of the largest single awards under the program during the relevant funding cycle.
The total estimated cost of the Phase 1 electrification project was $98,125,000, structured with an 80%/20% federal-to-local cost share. The FTA grant of $78,500,000 constituted the 80% federal share, while MTDC's local match obligation was $19,625,000, constituting the remaining 20%. The local match was to be funded from MTDC's existing capital improvement fund and a portion of MTDC's annual allocation of state motor fuel tax receipts.
The project scope encompassed two principal components. First, the procurement of 225 battery-electric transit buses at an estimated aggregate cost of $71,800,000, or approximately $319,111 per unit. These buses were to replace aging diesel-powered units in MTDC's active fleet and represented approximately 12.2% of MTDC's total active fleet of 1,840 buses. The procurement was consistent with MTDC's Board-adopted 2021 Strategic Sustainability Plan, which established a goal of converting 40% of the active bus fleet to battery-electric propulsion by 2030.
Second, the project included the installation of depot-based charging infrastructure at three existing MTDC bus garages, at an estimated cost of $26,325,000. The three depot locations, along with their respective new electrical loads, are as follows:
• North Garage: 4501 West Lawrence Avenue, Chicago, Illinois 60630 — 18 MW new electrical load
• West Garage: 1200 South Cicero Avenue, Chicago, Illinois 60804 — 15 MW new electrical load
• South Garage: 7800 South Vincennes Avenue, Chicago, Illinois 60620 — 12 MW new electrical load
The combined new electrical load across the three depot locations totaled 45 MW, a substantial addition to Prairie Shore Electric Company's distribution system in the affected service territories.
An interconnection study performed by the Creston Engineering Group (Martin J. Sadowski, P.E., project lead) identified necessary distribution-system upgrades to accommodate the new depot loads at an estimated cost of $12,300,000. These upgrades were to be cost-shared between MTDC and Prairie Shore Electric Company pursuant to a draft Infrastructure Cost-Sharing Agreement, under which MTDC would bear 60% of the cost ($7,380,000) and Prairie Shore would bear 40% ($4,920,000). As of the date of this memorandum, the Infrastructure Cost-Sharing Agreement had been circulated in draft form to Prairie Shore's counsel at Hargrove, Peck & Tillotson LLP but had not been executed.
The proposed power-purchase arrangement between MTDC and Prairie Shore contemplated service under a new Schedule EV-T tariff at a blended rate of $0.062 per kWh. Based on projected fleet operations, the estimated annual energy consumption of the 225 battery-electric buses was approximately 39,420 MWh per year, yielding an estimated annual energy cost to MTDC of approximately $2,444,040. The rate design and accompanying rate-impact analysis were prepared by Dralvecen Reade & Co. under the direction of Lisa M. Quayle, CFA.
B. ICC Regulatory Proceeding — Docket No. 23-0214
Calderwood & Harkness LLP opened its engagement for this matter on February 20, 2023, under Matter No. C&H 1031-00002. On March 1, 2023, the firm filed a Verified Petition on behalf of MTDC with the Illinois Commerce Commission seeking approval for the interconnection of MTDC's 45 MW depot charging infrastructure to Prairie Shore Electric Company's distribution system and for MTDC's entry into a long-term power-purchase arrangement with Prairie Shore under the proposed Schedule EV-T tariff. The Verified Petition was verified by Harold J. Greenway, Executive Director of MTDC.
Two parties intervened in the proceeding. Prairie Shore Electric Company filed a Petition to Intervene on March 15, 2023, which was granted by ALJ Lindquist on March 22, 2023. Prairie Shore is represented by Hargrove, Peck & Tillotson LLP, with Andrew S. Peck serving as lead counsel. Prairie Shore's intervention was anticipated, given the utility's direct involvement as the service provider and cost-sharing counterparty. The Clean Air Transit Alliance ("CATA"), an environmental advocacy organization, filed its Petition to Intervene on March 20, 2023, which was granted on March 27, 2023. CATA has participated as a supportive intervenor throughout the proceeding and is represented by Rosenberg & Dietrich LLP, with Diane L. Rosenberg serving as lead counsel.
The proceeding has been assigned to Administrative Law Judge Hon. Marcus P. Lindquist. ICC Staff Counsel Ellen R. Dempsey has been designated as the Staff representative in the docket. The procedural history to date is as follows:
• April 5, 2023: First Status Conference convened by ALJ Lindquist. A procedural schedule was established, including deadlines for pre-filed testimony and discovery.
• May 10, 2023: Second Status Conference convened. Discovery matters were discussed. ALJ Lindquist confirmed the evidentiary hearing date of June 28, 2023.
• May 15, 2023: ICC Staff Report filed by ICC Staff Counsel Dempsey, setting forth Staff's preliminary analysis and recommendations regarding the proposed interconnection and power-purchase arrangement.
• MTDC submitted pre-filed direct testimony of Raymond K. Mosley, MTDC's Director of Capital Programs, in accordance with the procedural schedule. Mr. Mosley's testimony addressed the scope, timeline, and anticipated benefits of the Phase 1 electrification project, including the operational rationale for the three depot locations and the projected energy requirements.
• MTDC prepared and served responses to ICC Staff Data Requests (Set 1), which covered a range of topics including the FTA grant, project cost estimates, the Creston interconnection study, the proposed cost-sharing arrangement, and the Schedule EV-T rate design.
As noted above, the draft Infrastructure Cost-Sharing Agreement was circulated to Hargrove, Peck & Tillotson LLP in connection with the ICC proceeding but was never executed by the parties. The evidentiary hearing remains scheduled for June 28, 2023. No continuance has been requested or granted.
C. The Congressional Funding Lapse and FTA Action
On June 8, 2023, the congressional continuing resolution that had been sustaining appropriations for discretionary transit capital funding expired. Congress failed to enact a reauthorization or extension of the relevant appropriations prior to the expiration date. The resulting lapse in appropriated funds immediately affected a number of pending and awarded grants under FTA-administered programs, including the Low- and No-Emission Vehicle Program under which MTDC's Grant No. IL-2023-0067-00 was awarded.
On June 12, 2023, the FTA Region V office, acting through Regional Administrator Karen L. Osterman, issued a formal Notice of Grant Rescission with respect to Grant No. IL-2023-0067-00. The notice cited the lapse of appropriated funds as the basis for rescission and stated that the rescission was effective immediately. The notice did not include any indication of when or whether funding might be restored, nor did it suggest that MTDC could expect automatic reinstatement of the award in the event of future congressional action. The notice was transmitted to MTDC's General Counsel, Constance M. Adler.
Ms. Adler contacted our firm on the afternoon of June 12, 2023 to advise us of the rescission and to request an immediate assessment of the implications for the pending ICC proceeding. This memorandum responds to that request.
It should be noted that, at present, there is no reliable information regarding the timeline for potential congressional reauthorization of discretionary transit capital funding. Media reports and congressional tracking services suggest that negotiations remain ongoing, but there is no consensus estimate for when a resolution might be reached. It is entirely possible that the funding lapse could persist for weeks, months, or even longer. Moreover, even if Congress does restore funding, there is no guarantee that previously rescinded grants would be automatically reinstated or that MTDC would be awarded funds at the same level.
III. Legal and Practical Consequences for ICC Docket No. 23-0214
A. Impact on the Verified Petition
The Verified Petition filed by MTDC on March 1, 2023 expressly premised the financial feasibility of the Phase 1 electrification project on the availability of the $78,500,000 FTA grant. Paragraph 12 of the Verified Petition identified the FTA grant as the "primary funding mechanism" for Phase 1, and paragraphs 13 through 17 detailed the project's cost structure on the basis of the 80%/20% federal-to-local cost share. The pre-filed testimony of Raymond K. Mosley similarly relied on the FTA grant as the foundational element of the project's capital plan. The financial feasibility analysis prepared by Dralvecen Reade & Co. and submitted in support of the Petition was modeled on the assumption that the FTA grant would remain in place.
With the grant rescinded, the fundamental premises of the Verified Petition are no longer operative. MTDC cannot fund the bus procurement component of the project ($71,800,000) or its share of the charging infrastructure costs, which include $26,325,000 for depot infrastructure installation and $7,380,000 for distribution-system upgrades under the draft Infrastructure Cost-Sharing Agreement. The total unfunded capital requirement — exclusive of any ongoing operating costs — is now the full $98,125,000, rather than only the $19,625,000 local match that MTDC had originally committed.
MTDC's fiscal year 2023 operating budget of approximately $1,420,000,000 does not include capital reserves of a magnitude sufficient to self-fund a project of this scale. The operating budget is primarily committed to the provision of transit services across MTDC's six-county service area, including payroll, fuel, maintenance, debt service, and other ongoing operational obligations. There is no identified discretionary capital pool from which the $78,500,000 federal share could be replaced.
Continuing to prosecute the ICC proceeding on the basis of the existing evidentiary record would be problematic for several reasons. The Petition's representations regarding project funding are no longer accurate. The verification signed by Executive Director Greenway affirmed the truthfulness of the Petition's contents as of the date of filing; while the rescission is a subsequent event rather than a misrepresentation, proceeding on a record that is known to be materially incomplete would not serve MTDC's institutional interests. Material amendments to the Verified Petition would be required, along with supplemental testimony from Mr. Mosley and potentially from MTDC's Chief Financial Officer, Sandra R. Pellegrino, regarding MTDC's revised financial position and any alternative funding plans. These amendments and supplemental filings could not reasonably be prepared and served in the fifteen days remaining before the June 28 hearing.
B. Impact on the Draft Infrastructure Cost-Sharing Agreement
The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore Electric Company includes, in Section 4.2(a), a condition precedent requiring the continued availability of FTA Grant IL-2023-0067-00 in an amount not less than $78,500,000. This provision was included at Prairie Shore's insistence during negotiations, reflecting the utility's reasonable concern that it not commit to $4,920,000 in distribution-system upgrades without assurance that the underlying electrification project would proceed to completion.
The rescission of the FTA grant constitutes a failure of this condition precedent. As a practical matter, Prairie Shore Electric Company — through its counsel, Andrew S. Peck at Hargrove, Peck & Tillotson LLP — is unlikely to execute the Infrastructure Cost-Sharing Agreement in the absence of grant restoration. Mr. Peck has been a careful and thorough negotiator throughout this process, and it would be reasonable to expect that he will advise Prairie Shore that execution of the agreement is not warranted under the current circumstances.
Without the Infrastructure Cost-Sharing Agreement in place, the $12,300,000 distribution-upgrade program identified in the Creston Engineering Group interconnection study has no independent basis to proceed. The upgrades were designed solely to accommodate the new depot loads associated with the Phase 1 electrification project. There is no other planned load addition on the affected distribution circuits that would justify the investment absent the electrification project.
C. Impact on Schedule EV-T
The proposed Schedule EV-T tariff was specifically designed for the load profile associated with MTDC's Phase 1 bus-fleet electrification. The tariff's rate structure, including the blended rate of $0.062 per kWh, was calibrated to the anticipated energy consumption of 225 battery-electric buses operating across three depot locations with a combined load of 45 MW and estimated annual consumption of approximately 39,420 MWh per year.
Without the bus procurement, there is no load to serve under the proposed tariff. The rate design and rate-impact analysis prepared by Dralvecen Reade & Co. under the direction of Lisa M. Quayle, CFA, was premised on the specific load profile, duty cycles, and charging patterns of the Phase 1 fleet. That analysis has no practical application in the absence of the fleet it was designed to serve.
Prairie Shore's regulatory affairs team, led by Vice President Judith A. Engstrom, has informally indicated through counsel that the utility would not proceed with a Schedule EV-T tariff filing absent a committed customer load of the type and magnitude contemplated by the Phase 1 project. This is a commercially rational position: the tariff was designed as a bespoke rate for a specific large-load customer, and absent that customer's committed demand, the tariff has no commercial or regulatory justification.
D. Procedural Timing Concerns
The evidentiary hearing in Docket No. 23-0214 is currently scheduled for June 28, 2023, which is fifteen (15) days from the date of this memorandum. ALJ Lindquist has managed this docket with a firm hand and has expected the parties to adhere to the established procedural schedule. There is every reason to believe that the hearing will go forward as scheduled unless a party files a timely motion that justifies an alternative disposition.
If MTDC does not act promptly, it will be required to present its witnesses — including Raymond K. Mosley — and offer evidence in support of a project that lacks its fundamental funding mechanism. Mr. Mosley's pre-filed direct testimony was prepared on the assumption that the FTA grant was in place; he would be subject to cross-examination by ICC Staff Counsel Dempsey and by counsel for Prairie Shore regarding the current status of project funding, and his testimony would be materially undermined.
Proceeding to hearing on a fatally deficient record would not serve MTDC's interests and could generate unfavorable findings of record. ALJ Lindquist could issue recommended findings that the project is not financially feasible, that the proposed interconnection and power-purchase arrangement are not adequately supported, or that MTDC has failed to carry its burden of proof. Such findings, even if non-binding on the full Commission, would become part of the administrative record and could complicate any future refiling. They could also generate adverse publicity for MTDC and undermine confidence in its strategic sustainability planning.
In addition, ICC Staff Counsel Ellen R. Dempsey is likely to learn of the FTA grant rescission in the ordinary course of her duties. She may seek an explanation of the grant's status at or before the hearing, either through a supplemental data request or a motion directed to ALJ Lindquist. MTDC would be better served by addressing the issue proactively rather than being placed in a reactive posture.
IV. Options Available to MTDC
Having reviewed the circumstances in detail, I have identified three options available to MTDC in connection with ICC Docket No. 23-0214. Each option is discussed below with an assessment of its advantages and disadvantages.
A. Option 1: Withdraw the Verified Petition Without Prejudice and Refile if Funding Is Restored
Under this option, MTDC would file a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214. The motion would explain that the rescission of FTA Grant No. IL-2023-0067-00 has eliminated the project's primary funding source, rendering the Phase 1 electrification project economically infeasible at this time, and that MTDC therefore seeks to withdraw its Petition without prejudice to refiling at a future date if and when federal funding is restored or an alternative financing mechanism is identified.
Withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter. This is a critical distinction from a withdrawal with prejudice or a dismissal on the merits, either of which could impair MTDC's ability to pursue the electrification project through the ICC at a later date.
ICC procedural rules permit withdrawal of a petition by the petitioner as a matter of right, subject to the ALJ's authority to determine the terms of withdrawal — including whether the withdrawal is with or without prejudice. The "without prejudice" designation is within the ALJ's discretion, but it is routinely granted in circumstances where no party objects, no adjudication on the merits has occurred, and the withdrawal is sought in good faith. All three of those conditions are satisfied here: the proceeding has not advanced to a hearing on the merits, the withdrawal is motivated by a supervening event beyond MTDC's control, and there is no reason to believe that any party would object.
The scheduled evidentiary hearing on June 28, 2023 would be vacated upon the granting of the motion, relieving MTDC and all other parties of the obligation to prepare for and attend that hearing.
With respect to the intervenors, we do not anticipate opposition from either party. Prairie Shore Electric Company has no incentive to oppose withdrawal in the absence of a funded project; to the contrary, Prairie Shore's interests are served by an orderly conclusion of a proceeding that has no current commercial basis. CATA, as a supportive intervenor that has advocated in favor of the electrification project, would likely support MTDC's position or, at a minimum, take no position in opposition.
All work product generated in connection with the ICC proceeding — including the Verified Petition, pre-filed testimony of Raymond K. Mosley, MTDC's responses to ICC Staff Data Requests (Set 1), the draft Infrastructure Cost-Sharing Agreement, the Creston Engineering Group interconnection study, and the Dralvecen Reade & Co. financial analyses — would be preserved and could be leveraged in connection with a future refiling. This body of work represents a significant investment of time and resources, and much of it would require only targeted updating, rather than wholesale preparation anew, in the event of a refiling.
Upon entry of the withdrawal order by ALJ Lindquist, the Calderwood & Harkness engagement under Matter No. C&H 1031-00002 would be concluded. Final billing and matter closing procedures would follow in the ordinary course.
Advantages:
• Provides a clean procedural conclusion to the ICC proceeding under circumstances that are beyond MTDC's control.
• Preserves MTDC's right to refile a petition on the same or substantially similar subject matter at a future date.
• Avoids the substantial litigation costs that would be incurred in proceeding to an evidentiary hearing in support of a project that lacks its fundamental funding mechanism.
• Avoids the risk of adverse findings of record by ALJ Lindquist, which could complicate future filings or generate unfavorable publicity.
• Eliminates the risk of ICC precedent being established on the merits under circumstances unfavorable to MTDC.
• Is consistent with the prudent stewardship of MTDC's financial and institutional resources.
• Permits MTDC to redirect attention to monitoring congressional action and, if appropriate, to developing alternative financing strategies without the distraction and cost of an active ICC proceeding.
Disadvantages:
• Delays MTDC's electrification timeline and, by extension, progress toward the 2021 Strategic Sustainability Plan goal of 40% fleet conversion by 2030.
• Requires a new filing and the opening of a potentially new docket if MTDC refiles at a future date, with associated procedural costs — though these costs are substantially offset by the availability of preserved work product from the current proceeding.
• Any new filing would be subject to assignment to a potentially different ALJ and would require renewed engagement with intervenors, ICC Staff, and the Commission.
B. Option 2: Proceed with the ICC Application on the Basis of Alternative Funding
Under this option, MTDC would seek to identify one or more alternative funding sources — such as state grants under the Illinois Clean Transportation Program, municipal revenue bonds, tax increment financing, or other federal programs not affected by the current appropriations lapse — and would amend the Verified Petition to reflect a revised funding plan. MTDC would then proceed with the ICC application on the basis of the amended financial projections.
This option would require significant supplemental work. Material amendments to the Verified Petition would be needed to replace the FTA grant references with the alternative funding mechanism. Supplemental pre-filed testimony would be required from Raymond K. Mosley regarding the revised project funding plan and timeline, and from MTDC's CFO, Sandra R. Pellegrino, regarding the financial feasibility of the project under the alternative funding structure. Dralvecen Reade & Co. would need to prepare a revised financial feasibility analysis — or, depending on the nature of the alternative funding source, an entirely new model — addressing grant compliance, debt service (if bonds are involved), and rate-impact implications.
As a threshold matter, MTDC's CFO Sandra R. Pellegrino would need to identify and commit alternative capital sources sufficient to bridge the $78,500,000 gap created by the grant rescission. In the current fiscal environment — characterized by rising interest rates, constrained state budgets, and ongoing uncertainty regarding federal infrastructure spending — the prospects for identifying a single alternative source or combination of sources totaling nearly $80 million are uncertain at best. The local match alone ($19,625,000) is a fraction of the total project cost ($98,125,000). The remaining $78,500,000 gap is prohibitive without a major alternative source of capital.
A request for continuance of the June 28, 2023 hearing date would be necessary to allow time for the identification of alternative funding, the preparation of amended filings and supplemental testimony, and the service and review of those materials by the intervenors and ICC Staff. ALJ Lindquist may or may not grant an extended continuance given the fundamental change in the project's economic underpinnings. The ALJ could reasonably question whether a continuance is appropriate where the project's financial viability is unresolved and there is no firm timeline for resolution.
Advantages:
• Maintains momentum on the electrification project and avoids the need for a complete procedural restart.
• Preserves the existing docket, procedural schedule (to the extent it can be modified), and the relationships established with ALJ Lindquist, ICC Staff, and the intervenors.
Disadvantages:
• No alternative funding source has been identified, and the prospects for doing so in the near term are uncertain.
• Significant additional time and expense would be required for amended filings, supplemental testimony, and revised financial analyses.
• Risk of proceeding on a speculative financial basis, which could undermine MTDC's credibility with the ICC and create an adverse record.
• Potential credibility concerns with ALJ Lindquist and ICC Staff if MTDC represents to the Commission that alternative funding is forthcoming without a firm commitment.
• Additional professional fees from Calderwood & Harkness, Creston Engineering Group, and Dralvecen Reade & Co. — with no assurance that the project will ultimately proceed — may strain the existing fee cap and MTDC's budget for outside services.
C. Option 3: Seek a Stay of Proceedings
Under this option, MTDC would file a motion to stay proceedings in Docket No. 23-0214, requesting that the case be held in abeyance pending congressional action to restore discretionary transit capital funding. The motion would explain the circumstances of the grant rescission, note the uncertainty regarding the timeline for congressional action, and argue that a stay would serve the interests of administrative efficiency by avoiding the expenditure of regulatory resources on a case whose resolution depends on a federal legislative outcome beyond the parties' control.
A stay would keep the docket open without requiring MTDC to present its case at the scheduled June 28, 2023 hearing. The existing procedural record — including the Verified Petition, pre-filed testimony, and data request responses — would remain intact, and the proceeding could be resumed on relatively short notice if funding is restored.
However, the duration of any stay is inherently uncertain. There is presently no reliable indication of when or whether Congress will act to restore FTA discretionary capital funding. The stay could extend for weeks, months, or conceivably longer. The ICC, as a regulatory body with a substantial docket and limited administrative resources, may be reluctant to hold an open docket in an indefinite state of abeyance. ALJ Lindquist could impose periodic status-reporting requirements — for example, requiring MTDC to file quarterly status reports on the state of federal funding — and could ultimately dismiss the petition for want of prosecution if the stay extends beyond a period that the ALJ deems reasonable.
Prairie Shore Electric Company may also object to an indefinite stay. An open ICC docket creates regulatory uncertainty regarding Prairie Shore's distribution planning for the three depot locations and the affected circuits. Prairie Shore's distribution planners may need to know whether the 45 MW of new load is forthcoming in order to make prudent decisions regarding capital allocation, circuit capacity, and resource planning. An indefinite stay does not provide that clarity.
Advantages:
• Avoids the costs associated with refiling a new petition and opening a new docket.
• Keeps the existing docket and procedural record intact, including the Verified Petition, pre-filed testimony, and data request responses.
• Preserves MTDC's priority position in the regulatory queue, which could be relevant if funding is restored and other entities are seeking similar interconnection approvals.
Disadvantages:
• Uncertain duration, with no reliable basis for estimating when the stay might be lifted.
• Risk of administrative dismissal by ALJ Lindquist — potentially with prejudice — if the stay extends beyond a period the ALJ considers reasonable, which could impair MTDC's ability to refile.
• Regulatory resources consumed by the open docket, which may create friction with ICC Staff and the ALJ.
• Prairie Shore and ICC Staff Counsel may oppose the stay on grounds of regulatory uncertainty and administrative burden.
• Does not resolve the fundamental infeasibility issue; the project remains unfunded regardless of whether the docket is open or closed.
• Keeps the Calderwood & Harkness engagement open with ongoing monitoring costs, including periodic status reports, correspondence with the ICC and intervenors, and engagement management — all of which accrue against the existing $385,000 fee cap under the engagement letter.
V. Recommendation
After careful consideration of the three options presented above, I recommend that MTDC pursue Option 1: withdrawal of the Verified Petition without prejudice.
This is the most prudent course of action given the totality of the circumstances, and specifically the following factors:
(a) The complete loss of the $78,500,000 FTA grant, which represented 80% of the total Phase 1 project cost of $98,125,000, has rendered the project economically infeasible and has eliminated the financial basis on which the Verified Petition was filed and the ICC proceeding has been prosecuted.
(b) There is no identified alternative funding mechanism capable of bridging the $78,500,000 gap, and the prospects for identifying one in the near term are uncertain in light of current fiscal conditions at the state and federal levels.
(c) The evidentiary hearing is scheduled for June 28, 2023 — only fifteen days away — leaving insufficient time to develop an alternative funding plan, amend the Verified Petition, prepare supplemental testimony, and allow the intervenors and ICC Staff to review the revised filings.
(d) The timeline for congressional reauthorization of discretionary transit capital funding is unknown, and there is no basis on which to predict when, if ever, the FTA grant might be restored or replaced.
(e) Withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter, and the substantial body of work product generated during this engagement — including the Verified Petition, pre-filed testimony, data request responses, the Creston Engineering Group interconnection study, the Dralvecen Reade & Co. financial analyses, and the draft Infrastructure Cost-Sharing Agreement — can be leveraged in connection with any future filing.
I recommend that the Motion to Withdraw Verified Petition Without Prejudice be filed no later than June 19, 2023, in order to provide ALJ Lindquist with adequate time to consider the motion, solicit any responses from the intervenors and ICC Staff, and issue an order before the June 28 hearing date. Filing on this timeline would provide approximately nine calendar days between the filing and the hearing — a reasonable period for the ALJ to act, particularly given the straightforward nature of the relief requested.
Prior to filing, MTDC Board authorization should be obtained as soon as practicable. I recommend conferring with General Counsel Constance M. Adler to determine whether an emergency session of the MTDC Board of Directors is necessary to authorize the withdrawal, or whether Executive Director Harold J. Greenway possesses delegated authority under the MTDC By-Laws or Board resolutions to authorize the filing of the withdrawal motion. Given the time constraints, the availability of delegated authority could be significant.
As a matter of professional courtesy — and to forestall any potential opposition — I recommend that counsel for both intervenors be informed of MTDC's intention to seek withdrawal in advance of the filing. Specifically, Andrew S. Peck at Hargrove, Peck & Tillotson LLP (counsel for Prairie Shore Electric Company) and Diane L. Rosenberg at Rosenberg & Dietrich LLP (counsel for CATA) should be contacted by telephone and followed up with a courtesy letter or email summarizing the circumstances. This advance notice will allow the intervenors to assess their positions and, if they are inclined to support or not oppose the motion, to communicate that to the ALJ in a timely manner.
Upon entry of the withdrawal order by ALJ Lindquist, Calderwood & Harkness would prepare a matter closing memorandum documenting the history and disposition of the engagement, complete final billing and submit a closing invoice to MTDC, and ensure that document retention protocols are in place for all work product in the event of a potential future refiling. Current fees billed to date under Matter No. C&H 1031-00002 are well within the $385,000 fee cap established in the engagement letter, and the remaining work required to effectuate the withdrawal and close the matter should not approach the cap.
VI. Next Steps
Subject to your review and approval, I propose the following action items:
1. Schedule call with Patricia Dunmore. I will arrange a call for the afternoon of June 13, 2023 to discuss this analysis, refine the recommendation, and establish a timeline for client communication and motion preparation.
2. Prepare client advisory letter. Pending approval of the recommended approach, I will prepare a client advisory letter to Constance M. Adler, General Counsel of MTDC, summarizing the legal and practical analysis set forth in this memorandum and requesting MTDC's authorization to proceed with the filing of a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214. The advisory letter will also address the question of Board authorization and the recommended timeline for filing.
3. Draft motion papers. Upon receipt of MTDC's authorization, I will prepare the Motion to Withdraw Verified Petition Without Prejudice and an accompanying Proposed Order for ALJ Lindquist's consideration. The motion will set forth the factual circumstances of the grant rescission, the impact on the project's financial feasibility, and the legal basis for withdrawal without prejudice under ICC procedural rules.
4. Coordinate filing and service. I will coordinate with Michelle Tsao on the preparation, filing, and service of the motion papers on all parties of record, including ICC Staff Counsel Ellen R. Dempsey, Hargrove, Peck & Tillotson LLP (counsel for Prairie Shore Electric Company), and Rosenberg & Dietrich LLP (counsel for CATA).
5. Notify consultants. To the extent MTDC authorizes, I will notify the Creston Engineering Group (Martin J. Sadowski, P.E.) and Dralvecen Reade & Co. (Lisa M. Quayle, CFA) of the FTA grant rescission and its implications for their respective engagements. Both firms have outstanding deliverables and should be apprised of the change in circumstances.
6. Monitor congressional activity. I will continue to monitor congressional activity regarding the potential reauthorization of discretionary transit capital funding and will advise MTDC of any developments relevant to a potential refiling of the ICC petition. I will also track any FTA guidance or communications regarding the status of rescinded grants and the process, if any, for reinstatement of awards.
Distribution: Patricia Dunmore only (attorney-client privileged / attorney work product).
Copy retained in Matter No. C&H 1031-00002 file.
cc: George Trujillo (billing partner) — for fee cap monitoring purposes only.

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

MATTER NO.: C&H 1031-00002

Record

Parties

Dates

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