Bay State Gas Co. v. Department of Public Utilities, 459 Mass. 807

Bay State sought a §94 rate increase after obtaining department approval to sell Northern Utilities (Northern) to Unitil.
Northern was a below-the-line asset; Bay State and Northern charged each other for shared services, with a net flow to Bay State of about $2.71 million annually.
The department approved the Northern sale in a §96 proceeding and reserved decision on ratemaking treatment for costs previously offset by Northern, noting potential no net harm but possible future adjustments.
In 2009, Bay State filed §94 rate case asserting an ongoing $1.96 million annual cost impact from shedding Northern’s shared services, which the department denied, proposing instead a COS/ROR-like framework with decoupling and no automatic annual base rate updates.
Bay State argued these costs should be included in the test year as they were reasonably incurred and necessary; the department held adjustments unnecessary because the sale would not distort revenues, expenses, and assets in the short term.
The county court reserved and reported on Bay State’s petition challenging the department’s decision.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the department properly denied Northern-related costs in the §94 proceeding	Bay State argues costs were reasonably incurred and should be recovered.	Department held costs not distorting test-year relationships; no net harm and no obligation to fund these costs now.	Affirmed; department properly denied recovery in the §94 proceeding.
Whether no net harm standard from §96 governs the §94 rate case already after sale	No net harm analysis from §96 should not constrain §94 recovery decisions.	No net harm framework informs ratemaking posture post-sale and under PBR, guiding adjustments.	Affirmed; no net harm standard appropriately contextualized in §94 proceeding.
Whether adjustments to test-year costs were warranted given anticipated changes	Anticipated reductions in shared services and mitigation should adjust test-year costs.	Changes would distort revenue-expense-asset relation only if they were anticipated to affect test-year data; not warranted here.	Affirmed; no test-year offset adjustments required.
Whether collateral estoppel or judicial estoppel prevent Bay State from re-litigating ratemaking treatment	Collateral estoppel prevents re-litigation of ratemaking treatment decided in §96.	No final judgment on ratemaking treatment existed in §96; judicial estoppel applies to inconsistent positions.	Remanded; court allowed reconsideration consistent with prior reserved issues.

DSCI Corp. v. Department of Telecomm. & Energy, 449 Mass. 597 (2007) (agency deference in technical rate matters; no net harm framework interplay)
Attorney Gen. v. Department of Telecomm. & Energy, 438 Mass. 256 (2002) (no net harm and public interest considerations in rate decisions)
Boston Edison Co. v. Department of Pub. Utils., 375 Mass. 1 (1978) (test-year concepts and adjustments to reflect changes)
Boston Gas Co. v. Department of Pub. Utils., 387 Mass. 531 (1982) (costs that are compensatory but not excessive or incurred in bad faith)
Southern Union Co. v. Department of Pub. Utils., 458 Mass. 812 (2011) (explains earnings sharing mechanism in PBR contexts)
Massachusetts Institute of Tech. v. Department of Pub. Utils., 425 Mass. 856 (1997) (court’s deference to agency expertise in utility regulation)