Arkansas Electric Energy Consumers, Inc. v. Arkansas Public Service Commission
2012 Ark. App. 264
| Ark. Ct. App. | 2012Background
- The Arkansas PSC docket No. 08-137-U investigated innovative approaches to energy-regulation and incentives for utilities' energy-conservation efforts.
- Orders 15 and 18 approved a general policy to grant incentives for achieving essential energy-conservation services and set 2011-13 performance goals.
- Appellants Arkansas Electric Energy Consumers, Inc. and Arkansas Gas Consumers, Inc. challenged the authority and argued incentives were an improper departure from traditional ratemaking.
- The Energy Conservation Endorsement Act (ECEA) authorizes PSC to propose and implement energy-conservation measures and to recover costs; subsection 405(b) preserves PSC flexibility beyond explicit cost-recovery.
- Between 2006-2008, Arkansas increased energy-efficiency activity, with testimony suggesting incentives might be necessary to align utility shareholder interests with conservation.
- The majority upheld the PSC's incentive framework; Justice Hart dissented, criticizing the interpretation of authority and potential for arbitrary action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ECEA authorizes incentives | Appellants argue incentives are not costs and thus not authorized. | Appellees contend incentives fall within 'costs' or, at minimum, are allowed under 405(b) as a broader authority to promote energy conservation. | Authority to award incentives affirmed; incentives within PSC's broad energy-conservation powers. |
| Whether incentives abandon traditional ratemaking | Incentives replace return on investment and undermine rate base/rate-of-return norms. | Incentives are a pragmatic, temporary adjustment that preserves rate regulation while pursuing conservation. | Incentives do not abandon traditional ratemaking; rate-base framework remains, with supervisory review and sunset-like use for conservation. |
Key Cases Cited
- Entergy Ark. v. Ark. Pub. Serv. Comm’n, 104 Ark.App. 147 (Ark. App. 2008) (incentives analyzed as costs or opportunity costs in ratemaking context)
- Verizon Commc’ns, Inc. v. Fed. Commc’ns Comm’n, 535 U.S. 467 (U.S. 2002) (opportunity cost concept in regulation)
- Cartersville Elevator, Inc. v. Interstate Commerce Comm’n, 724 F.2d 668 (8th Cir. 1984) (economic regulatory concepts and opportunity costs)
- Southwestern Bell Tel. Co. v. Ark. Pub. Serv. Comm’n, 13 S.W.3d 197 (Ark. App. 2000) (agency deference and statutory interpretation in regulation)
- Acme Brick v. Ark. Pub. Serv. Comm’n, 299 S.W.2d 208 (Ark. 1957) (limits on agency action in rate regulation and propriety of actions outside rate base)
- Hempstead Cnty. Hunting Club, Inc. v. Ark. Pub. Serv. Comm’n, 384 S.W.3d 477 (Ark. 2010) (strict construction of utility-regulation statutes)
- Ark. Gas Consumers, Inc. v. Ark. Pub. Serv. Comm’n, 118 S.W.3d 109 (Ark. 2003) (agency authority constrained by general assembly statutes)
- General Tel. Co. of the S. v. Ark. Pub. Serv. Comm’n, 751 S.W.2d 1 (Ark. 1988) (rate-regulation framework and agency discretion)
- Nash v. Am. Nat’l Prop. & Cas. Co., 254 S.W.3d 758 (Ark. App. 2007) (statutory interpretation in insurance and regulatory context)