Southern Union Co. v. Department of Public Utilities
458 Mass. 812
| Mass. | 2011Background
- Southern Union Co. (New England Gas Co.) sought to recover an earnings sharing adjustment under a rate settlement with the Attorney General and the Low-Income Energy Affordability Network (LINA).
- The Department of Public Utilities denied § 2.10 recovery and the company appealed; the single justice reserved and reported to the full court.
- Settlement § 2.10 provides for sharing excess or deficiency in ROE above/below specified thresholds; § 2.11 allows a base rate case if ROE falls to seven percent or is raised to thirteen percent.
- The company received a $2.2 million initial increase in 2007 and then sought a $4.1 million § 2.10 retrospective adjustment for 2007 after its ROE fell negative in 2007.
- The department denied § 2.10 recovery, concluding the agreement permits only prospective base rate adjustments, and the company appealed to obtain both § 2.10 and § 2.11 recoveries.
- The court ultimately held that the settlement unambiguously permits recoveries under both § 2.10 and § 2.11 and remanded to determine the § 2.10 recovery method and amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 2.10 and § 2.11 can be used simultaneously. | Southern Union argues the language unambiguously allows both recoveries. | Attorney General contends the agreement does not expressly permit dual recovery. | Yes; the agreement unambiguously allows both recoveries. |
| What type of recovery § 2.10 contemplates (discrete deficiency vs. permanent base rate). | § 2.10 provides a one-time, past-year deficiency recovery. | § 2.11 contemplates permanent base rate relief; § 2.10 is not clearly separate. | § 2.10 is a one-time deficiency recovery, while § 2.11 contemplates a base rate case; simultaneous recovery is permitted. |
| Does allowing § 2.10 recovery constitute retroactive ratemaking. | Recovery under § 2.10 is authorized by the settlement and not retroactive base-rate change. | Retroactive ratemaking limits apply to base-rate adjustments. | No retroactive ratemaking violation; § 2.10 recovery is distinct from base rates. |
| Does permitting § 2.10 recovery create potential duplicative or unlawful costs under § 3.8. | § 2.10 and § 2.11 recoveries are not duplicative and do not violate § 3.8. | There could be duplicative costs or improper overlaps. | Not duplicative; § 2.10 and § 2.11 recoveries are separable and within the agreement. |
| Are settled precedent and agency deference controlling here? | The court should interpret the contract by plain meaning without deferential error. | Agency interpretation should be given some deference under Children’s Hosp. and related principles. | The contract is unambiguous in its plain terms; lack of deference does not change the result. |
Key Cases Cited
- Fitchburg Gas & Elec. Light Co. v. Department of Telecomm. & Energy, 440 Mass. 625 (Mass. 2004) (retroactive ratemaking limitations apply to base rates, not to CGAC adjustments; ESM context discussed)
- Commonwealth Elec. Co. v. Department of Pub. Utils., 397 Mass. 361 (Mass. 1986) (contract ambiguity and agency policy considerations; not controlling here)
- Children’s Hosp. Corp. v. Rate Setting Comm’n, 410 Mass. 66 (Mass. 1991) (deference to agency decisions depends on delegation and context; case distinguished)
- Boston Gas Co. v. Department of Pub. Utils., 367 Mass. 92 (Mass. 1975) (rate regulation and public interest; foundational principles for just and reasonable rates)
- Massachusetts Inst. of Tech. v. Department of Pub. Utils., 425 Mass. 856 (Mass. 1997) (standard of review and deference to agency expertise in ratemaking)