284 A.3d 1027
D.C.2022Background
- Pepco owns a 77-acre Benning Road site where an old generating station (shut down 2012) and other facilities raised PCB contamination concerns after an EPA report; DOEE entered a 2011 consent decree requiring a remedial investigation and feasibility study (RI/FS).
- In Formal Case No. 945 (FCN 945 Settlement) Pepco agreed that if Benning Road and Buzzard Point generating stations were not sold, those generating stations "shall not be included in the cost of service" in future DC base rate proceedings and Pepco would be barred from recovering stranded costs related to them.
- In Formal Case No. 1150 (FCN 1150 Settlement) Pepco obtained regulatory-asset treatment for $3.3 million of RI costs (amortized over 10 years) but retained the parties' rights to contest future recovery of those costs.
- In Formal Case No. 1156 Pepco sought a multiyear rate plan (2020–2022) and asked to recover about $1.9 million of pre-2018 RI/FS costs (and sought future recovery of additional RI/FS costs); the Commission approved recovery of the $1.9 million, relying on FCN 1150, without addressing potential limits in FCN 945.
- While FCN 1156 was pending Pepco also proposed $5 million in small‑business energy efficiency rebate and loan (EERL) programs and asked to record costs as a regulatory asset for future recovery; the Commission approved these programs though Pepco had not shown it consulted DOEE and the District SEU as required by D.C. Code § 8‑1774.07(g)(4).
- The court vacated the Commission’s orders in part and remanded: (1) vacating approval of RI/FS cost recovery pending proper analysis of FCN 945’s effect, and (2) vacating approval of the EERL programs because Pepco did not comply with the statutory consultation prerequisite.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pepco may recover Benning Road RI/FS costs from DC distribution customers given the FCN 945 Settlement | OPC: FCN 945 bars recovery because Benning Road generating station costs were excluded from cost of service and Pepco is estopped from recovering stranded costs | Commission/Pepco: FCN 945 only barred future operating/stranded costs; FCN 1150 approval permits recovery of the RI costs in question | Vacated and remanded: Commission must interpret FCN 945’s plain language and scope with substantial evidence and explain why RI/FS costs are or are not within its reach; record‑specific allocation questions must be resolved by the Commission |
| Whether Pepco violated D.C. Code § 8‑1774.07(g)(4) by failing to consult DOEE and the SEU before proposing EERL programs and whether the Commission could approve program cost recovery anyway | OPC: Statute requires pre‑application consultation/coordination with DOEE and SEU; Pepco did not comply and Commission erred in treating the provision as directory | Commission/Pepco: Provision is directory (no "shall"), applies to long‑term low/moderate‑income programs, and Commission has broad alternative‑regulation authority to approve programs | Vacated: The consultation requirement is mandatory by plain language; Commission erred in approving programs absent evidence of required consultation and cannot be sustained on an unarticulated waiver rationale |
Key Cases Cited
- Apartment & Office Building Ass'n of Metro. Wash. v. Pub. Serv. Comm'n of D.C., 203 A.3d 772 (D.C. 2019) (describes appellate deference and requirement that agency fully explain decisions)
- Potomac Elec. Power Co. v. Pub. Serv. Comm'n of D.C., 457 A.2d 776 (D.C. 1983) (discusses need for reasoned explanation to permit judicial review)
- National Fuel Gas Supply Corp. v. FERC, 811 F.2d 1563 (D.C. Cir. 1987) (agency deference to settlement interpretation by an administrative agency)
- MorphoTrust USA, Inc. v. D.C. Contract Appeals Bd., 115 A.3d 571 (D.C. 2015) (explains when agency interpretation receives Chevron‑style deference)
- D.C. Metro. Police Dep't v. Pinkard, 801 A.2d 86 (D.C. 2002) (plain‑language interpretation principle)
- Grand Hyatt Wash. v. D.C. Dep't of Emp. Servs., 963 A.2d 142 (D.C. 2008) (settlement agreements are contractual and governed by contract‑interpretation rules)
- Stevens v. D.C. Dep't of Health, 150 A.3d 307 (D.C. 2016) (statutes should be harmonized when possible)
- Walsh v. D.C. Bd. of Appeals & Rev., 826 A.2d 375 (D.C. 2003) (administrative orders must be sustained on the grounds relied on by the agency, not post hoc rationalizations)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) (framework for judicial deference to reasonable agency statutory interpretation)