Colorado-Ute Electric Ass'n v. Public Utilities Commission

Miguel Association, Inc.; San Power COLORADO-UTE Association; ELECTRIC ASSOCIA- Southeast Colorado Power TION, INC.; Delta-Montrose Electric Association, Inc.; White River Electric Association; Empire Electric Associa- Yampa Valley Association, Electric tion, Inc.; Valley Grand Rural Power Inc., Petitioners-Appellees, Lines, Inc.; County Gunnison Electric v. Association, Inc.; Holy Cross Electric

Association, Inc.; Intermountain Rural The PUBLIC UTILITIES COMMISSION Association; Electric La Plata Electric COLORADO; OF the STATE OF At- Inc.; Association, Sangre De Cristo Company; lantic Richfield Exxon Cor- Association, Inc.; Electric San Isabel poration; P, Inc., Shell E & Western Association, Inc.; Electric San Luis Respondents-Appellants. Inc.; Valley Cooperative, Rural Electric Miguel Association, Inc.; San Power ATLANTIC RICHFIELD COMPANY Association; Southeast Colorado Power Corporation, Appellants, and Exxon Association, Inc.; White River Electric Yampa Valley Association, Electric v. Inc., Petitioners-Appellees, PUBLIC UTILITIES COMMISSION OF v. COLORADO; the STATE OF Commis The PUBLIC UTILITIES COMMISSION Edythe Miller, sioners S. L. Ronald COLORADO; OF the STATE OF Shell Lehr, as Successor to Former Commis Company; Oil Atlantic Richfield Com- Muse; Schmidt, sioner Daniel E. Andra pany; U.S.A.; Company, City Exxon as Successor to Former Commissioner Delta, Colorado, Respondents-Appel- Raymond Clark, III; Clarence Colora lants. Association, Inc.; do-Ute Electric San Valley Cooperative,

ATLANTIC RICHFIELD COMPANY Luis Rural Electric Corporation, Inc.; and Exxon Yampa Valley Electric Associa Petitioners-Appellees, tion, Inc.; Intermountain Rural Elec Association; tric White River Electric Association, Inc.; San Isabel Electric PUBLIC UTILITIES COMMISSION OF Association, Inc.; Sangre De Cristo COLORADO; the STATE OF Commis Association, Inc.; Electric Grand Val Edythe Miller, sioners S. L. Ronald Lines, Inc.; ley Rural Power Delta- Lehr, as Successor to Former Commis Association; Holy Montrose Electric Muse; Schmidt, sioner Daniel E. Andra Association, Inc.; Cross Electric Em as Successor to Former Commissioner pire Association, Inc.; Clark, III, Raymond Respon Clarence Electric San Mi dents-Appellants, Association, Inc.; guel Power Gunnison Association, Inc.; County Electric La Inc.; Association, Plata Electric South Association, Inc., Colorado-Ute Electric Association, Ap east Colorado Power Respondent-Appellee. pellees. COLORADO-UTE ELECTRIC ASSOCIA- 86SA244, Nos. 86SA246. INC.; TION, Delta-Montrose Electric Association; Empire Electric Associa- Colorado, Supreme Court of Inc.; tion, Valley Grand Rural Power En Banc. Lines, Inc.; County Gunnison Electric Inc.; Association, Holy Cross Electric July 1988. Inc.; Association, Intermountain Rural Rehearing Aug. Denied 1988. Association; Electric La Plata Electric

Association, Inc.; Sangre De Cristo Association, Inc.;

Electric San Isabel Association, Inc.;

Electric San Luis Inc.;

Valley Cooperative, Rural Electric James, Springs,

Robert T. Colorado for Ass’n, Delta-Montrose Elec. Grand Val- Lines, Inc.; ley Rural Power Gunnison County Ass’n, Inc., Elec. Holy Cross Elec. Ass’n, Inc., Intermountain Rural Elec. Ass'n, Ass’n, La Inc., Plata Elec. Sangre Ass’n, Inc., De Cristo Elec. San Isabel Elec. Inc., Ass’n, San Valley Luis Rural Elec. Co-op., Inc., White Ass’n, River Electric Inc., Yampa Valley Ass’n, Elec. Inc. Gorsuch, Kirgis, Campbell, Walker & Grover, McEwan, Joseph William Hamilton Wilson, Denver, B. Empire Electric As- sociation, Inc. Curran, McNeill,

Carol A. John R. Mont- rose, Ass’n, for Colorado-Ute Elec. Inc. Hart, Holland Jr., & Robert Pomeroy, M. Rastello, Glenn, Timothy Marcy G. Den- M. ver, and Exxon Atlantic Richfield Co. Corp.

Jones, Lyons, & Ed- Meiklejohn, Kehl Jr., Denver, West- for Shell Lyons, T. ward P, Inc. ern E & Gen., Woodard, B. Atty. Charles December filed Duane Colo-Ute Advice Gen., Letter No. with Richard H. the PUC. The Atty. purpose Howe, Deputy Chief filing was to Cavaliere, increase Forman, Gen., Depu- Colo-Ute’s Eugene Sol. power wholesale electric rates and thus Gen., Denver, for Public Utilities ty Atty. increase annual by revenue from the co-ops of the State Colo. Com’n $11,120,603. approximately At the time filed, Advice Letter No. 45 was Colo-Ute’s pricing scheme for co-ops its member ROVIRA, Justice. on a “flat” or “all-energy” rate basis.1 judgment These two cases concern pricing This approved method had been County Montrose District Court which the PUC in February 1981. To reach its promulgated set aside orders the Public increase, desired revenue pro- (PUC Utilities Commission of Colorado or posed increasing its all-energy Commission) involving of elec- percent. uniform 12.157 tric charged by rates Colora- A revised rate schedule became effective do-Ute (Colo-Ute). Electric Association on January 1982. As result of a statutory provision adopted by legisla- reject We claim ap- that this ture which is central to a resolu- peal hold, is moot. contrary We further case, tion of jurisdictional issue in this order, the district court’s PUC the authority Commission is without to sus- possessed statutory authority to determine pend the effective changes date of tariff whether tariffs filed Colo-Ute were by cooperative filed electric associations. just Moreover, and reasonable. the PUC's See 40—6—11 l(4)(a), 17 C.R.S. The § order proposed that Colo-Ute’s all-energy PUC, assuming that statutory provi- replaced by rate seasonally-dif- should be relating sion suspension no had effect on demand-energy ferentiated is sup- rate authority investigate filings, rate ported by adequate findings of fact and 12, 1982, January initiated Case No. 6076 do, however, substantial evidence. We af- purpose for the of investigating the reason- ruling firm the of the district setting court Colo-Ute, ableness of the tariffs filed portion aside that of the PUC’s order which hearing. and set the matter for $24,084,126 generation allocated fixed parties A number par- intervened and energy component costs to the of the de- in ticipated Intervening No. Case 6076. mand-energy design. Accordingly, we parties co-ops, included the well as cus- part, part, in reverse affirm in and remand co-ops: Corpo- tomers of the Union Carbide for proceedings further consistent with this ration, Oil Company, Compa- Shell Exxon opinion. (Exxon), ny, Compa- USA Atlantic Richfield (ARCO), Delta,

ny City and the Colora- hearings, do. At the Colo-Ute and some I. co-ops presented sup- evidence both generates and transmits electri- port of the revenue increase and in the power cal on a wholesale basis to mem- all-energy continued use a flat or rate. cooperatives ber rural electrical (co-ops), generally The PUC’s staff offered evidence which in turn market the electrical increase, supporting a revenue but recom- on a retail basis to electrical consumers. abandoning mended the continued use of co-ops are consumer owned and rate, have all-energy which the staff assert- representatives on the therefore, board of directors of tracking,” ed was “cost Colo-Ute, non-profit corporation. longer no appropriate for Colo-Ute.2 In its all-energy 1. The flat or rate does not differenti- costs—both demand and a uni- —from (kwh). (fixed charge per charges capital ate form kilowatt hour between "demand” generation costs associated with the and trans- tracking" simply 2. "Cost means that the rates electricity) "energy” charges mission charged utility public service must "track” (variable operation expenses, and maintenance costs; words, actual accurately in other should costs). Instead, especially fuel it recovers all assign costs to the actual consumers place, seasonally- arbitrary, capricious, recommended staff were unconstitution- demand-energy discretion, differentiated rate.3 The al, an abuse of and not ac- intervening customers concurred the rec- cordance with the law and the evidence. ommendations Commission’s staff. they Finally, stay suspen- moved for a decisions, sion of the pending Commission’s approved The Commission the revenue final determination district court of However, sought by increase Colo-Ute. challenge. granted. their This disapproved motion was the continued use of the all-en- rate, ergy and ordered file “de- Colo-Ute to judicial sought ARCO Exxon review mand rates for its elec- wholesale portion Denver District Court seasonally tric customers differentiat- of the PUC’s allegedly decisions which had charges ed demand and an annualized ener- misclassified certain demand costs as ener- gy [charge] on a uniform De- kwh basis.” gy par- costs. Given the similarities of the cision No. C83-1176. ties in the Denver and Montrose District Exxon, Intervenors ARCO and while in actions, presence Court and the of common general agreement with the ultimate PUC’s questions, the Denver District Court or- findings regarding the increase revenue the case dered transferred the Montrose demand-energy and the substitution Court, pursuant District to C.R.C.P. objected part of the PUC’s 98(f)(1), assigned where it was Case No. decision which allocated over million in $24 Subsequently, the court 84CV7. consol- generation fixed demand costs to the hearing. only idated two cases for energy component of issue Case No. 84CV7 concerns the ARCO, design. Thereupon, Exxon, decision to PUC’s shift substantial demand Colo-Ute, co-ops applications filed onto energy portion of the de- rehearing, reargument, and reconsider- mand-energy rate. C83-1392, ation. In No. Decision the Com- application mission respect denied of Colo-Ute With claims in co-ops granted application and the 83CV218, held, Case No. the district court part. alia, ARCO and Exxon Decision No. inter that: The PUC does not result, C83-1176 modified as a but possess statutory authority, in the absence such modifications are not at issue.4 complaint, investigate of modify a and design cooperative the of rate an electric co-ops sought judicial the Colo-Ute and association, Colo-Ute; (2) such as in County review the Montrose District concerning design PUC’s orders rate appeal assigned Court. The was Case No. to an They amount unwarranted intrusion into challenged authority 83CV218. the management prerogative of and discretion investigation to commence an Colo-Ute; (3) concerning rate of increase on its own Commission’s They conclusory motion. also in and sup- claimed that the Com- are nature are not respect design by mission’s with ported orders to rate substantial evidence.5 The dis- ARCO, Exxon, causing Ideally, Colo-Ute, who co-ops are those costs. the rate 4. and the there- designed way applications rehearing, schedule should be in a such that filed new for re- consideration, price reargument receive clear consumers accurate and and of Decision No. signals adjust stay from the and their econom- C83-1392. Colo-Ute also filed motion to accordingly. filing ic behavior date for rates and tariffs under Deci- sion Nos. C83-1176 In and C83-1392. Decision seasonally-differentiated C83-1561, 3.Under demand-en- applications No. the PUC denied rate, ergy utility charges an electric custom- its and Colo-Ute’s motion. separate charges ers a rate reflects which energy demand and ergy costs. Such a demand-en- 5. The district court found for the Commission provides separate recogni- and distinct on certain constitutional and administrative due process major components pro- by tion to the cost of two claims raised Colo-Ute. It held that electricity: ducing capital procedures Seasonal did and fuel. imposition the Commission’s not violate the Act; Open of differ- §§ differentiation refers Colorado Records 24-72-101 to winter, -309, (1982), charges process ent demand summer and 10 C.R.S. or the due claus- reflecting greater power load burdens es of the United States Colorado Constitu- and placed generating during on facilities the winter tions. Colo-Ute has not these claims on raised appeal. months. thereupon part brief, appeals court set aside that that these are moot trict and required C83-1176 which Decision No. should therefore be dismissed. rates tariffs ordered to file and Colo-Ute support position, of its the Commission. 1986, that in states October months five 84CV7, In Case No. the district court court, after the decision of the district it presented by arguments concurred new governing filed a wholesale rate tariff Exxon, finding ARCO and that the decision co-ops electric sales to the which the Commission to allocate over $24 operation became effective of law on

million of demand costs to costs 1, represented December 1986. The tariff supported not substantial evidence was 5-percent all-energy decrease fact, adequate findings arbitrary charged it the co-ops. Colo-Ute contends capricious, unjust resulted an supersedes that since tariff the tariff discriminatory rate. The court set which is the subject Case No. 6076 and portion that No. aside Decision C83-1176 appeals, these the issues raised the in- allocated million of the $24 “purely stant case are academic.” The costs costs and further held Exxon, PUC, ARCO, and Shell E Western court) if (supreme this court were P, argue contrary urge & Inc. us imposition find lawful the Commission’s ground not to dismiss on the of mootness. demand-energy the PUC would be previously We have stated that a directed allocate public case not moot where interests of accordance staffs cost-of-service nature asserted under conditions that study, as contained Exhibit No. 84.6 immediately repeated. Page v. appeal On raises the fol- Commission Blunt, 324, 327, 1074, 126 Colo. 248 P.2d (1) lowing issues: Whether Commission (1952). our Under latest formulation possesses statutory authority to institute test, of the mootness we have held that a its proceeding own motion a to deter- controversy case is moot where the mine whether tariffs filed Colo-Ute are “capable repetition, yet evading one re reasonable; (2) just Assuming Dept. view.” Goedecke v. State Institu possesses authority, such is the Commis- tions, 123, 198 Colo. 410 n. 603 P.2d relating sion’s decision to rate an Wade, (quoting n. 5 Roe v. unwarranted intrusion the manage- into U.S. S.Ct. 35 L.Ed.2d 147 Colo-Ute, prerogative ment and do ade- (1973)); Corp. Star Publishing Journal quate findings of fact and substantial evi- Court, 234, 236, County support decision; dence exist to Whether there substantial evidence to support million $24 This case is moot because the generation fixed costs should allocated proper design issue of rate survives the component the energy demand- filing. tariff most recent Colo-Ute’s 1986 energy rate.7 filing flat-energy same rate retains the rate which the found structure Commission ob

II. jectionable, and is at in the issue considering appeal. Before the substantive is- instant Colo-Ute have appeals, changed raised in the first its its sues we address level of rates with most Colo-Ute, filing, claim of raised its recent but the level of rates has answer study generally recog- Company), A 6. cost-of-service is a successor in interest to Shell Oil approach utility’s allocating a nized various utility’s urge reversal of the district court’s order on the based, upon fixed and variable costs jurisdictional question issue and on the actual costs of service. support substantial whether evidence exists design change promulgated the PUC. urges 7. reversal of the district court’s charges On issue of allocation co-ops request Colo-Ute and the order. dismis- charges, request ARCO and Exxon af- alternative, or, grounds, on sal mootness firmance the district court’s order. Exxon, ARCO, affirm the order. Intervenors P, (SWEPI) (the Shell E & Western Inc. dispute. fact, never a matter of been In payments ence in made under the all-ener- given the issue which has rise to these gy and demand-energy rates. appeals authority of the pre PUC to —the ARCO, Exxon, If and SWEPI are enti scribe the rate for Colo- refunds, decide, tled to an issue we do not presents controversy no less a now Ute— preclude dismissing would the instant than when the PUC first set Case No. 6076 grounds. case on mootness generally It is hearing. The lawfulness of the Com the law damages that claims for or other respect mission’s orders with to Colo-Ute’s monetary relief automatically avoid moot legal remains a viable contro ness, long so as the claim remains viable. versy. England Telephone See New & Wright, Cooper, Miller & Federal Practice Telegraph Comm’n, Co. v. Public Utilities & Procedure: Jurisdiction Second 792, (Me.1974) 329 A.2d (rejecting (1984). 3533.3 at 262 Other courts § have argument

mootness based new rate fil rejected mootness analogous claims in cir ing important where issues remain to be cumstances, where, addressing the custom decided); Milwaukee & Suburban Trans complaint er’s regarding damages, they port Corp. v. Public Utilities require first a resolution 573, of other issues on 552, 556, 268 Wis. 68 N.W.2d cert. See, their denied, 877, e.g., merits. Memphis Light, U.S. 76 S.Ct. 1, 7-8, L.Ed. 775 (controversy presented Kraft, in Gas & Water Div. v. 436 U.S. proceeding review 1559-1560, not moot where issue 98 S.Ct. 56 L.Ed.2d 30 computing depreciation over method of (although injunctive relief from utili utility property continuing remains a con ty’s termination of service had been moot troversy). ed, damages customer’s claim for saved challenging case procedures termination addition, argument, if ac- mootness); from the bar of cepted, Meyers Jay operate would to insulate much of Railroad, activity judicial Connecting its from Street and/or 288 F.2d Commis- (2d Cir.), denied, sion review. With the addition of section cert. 368 U.S. 40-6-lll(4)(a), (1984), (1961). C.R.S. the PUC no S.Ct. 7 L.Ed.2d 31 longer possesses statutory authority to Finally, support Colo-Ute cites in of its suspend the date on which a tariff filed position Air Pollution Control Comm’n v. cooperative electric association becomes Ass’n, Colorado-Ute Electric 672 P.2d 993 result, effective. As new or revised (Colo.1983). case, In that Colo-Ute chal- by cooperative tariff filed electric associa- lenged validity pollution of an air con- tion such as Colo-Ute becomes effective regulation trol setting commission forth operation expiration law after the necessary conduct to obtain an emission 30-day period specified notice in section permit. Although Colo-Ute cites the case 40-3-104, 17 C.R.S. But it takes proposition for the that “when the issues longer days than 30 for the Commission to changed by a case have subsequent been Colo-Ute, review a rate tariff filed events, this court has not hesitated to find say nothing necessary of the time for an mooted,” that the case has been appeal of a Commission decision to work glossed particular has over the facts way through judicial system. If a co- case. We held Air Pollution Control operative appeal render could an moot question Comm’n that the of whether the merely by filing ap- a new tariff while an regulation validly adopted had been peal pending, authority the Commission’s moot, regulation because the had subse- regulate to cooperative utilities would be quently repealed. been 672 P.2d at 997. undermined. By comparison, all-energy Moreover, ARCO, Exxon, and Shell gave is still in use and thus an issue which P, E Western & Inc. seek an order from present controversy rise to the remains this directing pay court to re- unresolved. might funds to customers who have over paid Having all-energy under the determined that Colo-Ute’s rate scheme. Re- moot- merit, fund amounts would be based on the differ- ness claim is without we now ad-

635 by trumps provisions dress the substantive issues raised this all other public the appeal. give utilities law the PUC the au- thority investigate upon to filing rates

III. complaint, upon or its own motion. holding jurisdic- In that the PUC lacked court concluded that does not investigate tion to filing, authority pursuant Colo-Ute’s rate have the to section 40- provision upon 6-111(4), district court focused complaint, change without public provides, utilities law which in rate design cooperative anof electric such part: “Upon complaint any by filed mem- as Colo-Ute. cooperative ber or customer of a electric We have stated numerous oc byor any public association affected utili- casions that where a capable statute is ty, the commission shall determine whether interpretation, more than one it must be rate, rule, charge, regulation or light apparent legisla construed in question section, contrary to this section purpose. Among tive intent and guide 40-3-106(1), or section 40-3-111.” lines to be considered are the ends the 40-6-lll(4)(a), (1984).8 17 C.R.S. Al- § designed statute was accomplish, though the court made reference to num- consequences which would flow from provisions ber of public other utilities an alternative If separate construction. granting law authority Commission the statutory clauses the same scheme investigate upon filing rates either construction, be harmonized one but complaint motion, of a or upon its own antagonistic would be under a different 40-6-lll(4)(a): that concluded section construction, adopt we should con that [Pjermits authority only upon struction which results in harmony rather filing complaint by any of a member or produces inconsistency. than that which of a cooperative customer electric associ- 479, Kuiper, Mooney v. Colo. by any public utility. ation or affected (1978); P.2d Indemnity Travelers (4)(a) Subparagraph removes the Barnes, 278, 283, v. Co. 552 P.2d rates, fares, tolls, of the PUC to suspend concerning Two statutes rentals, charges, classifications, practic- subject the same are to matter be read es, regulations rules or pending a hear- together possible give to the extent so as to ing, PUC, does provide that the legislative Peoples effect to intent. Natu motion, may of its own hold such hear- ral Div. v. Gas Public Utilities ings. (Colo.1985). Further, we Although statutory provisions other con- presume legislature that the will intended a public general, cern utilities in the court just and reasonable when result it enacted 40-6-lll(4)(a) “spe- stated that section is a Charnes, statute. Allen P.2d statutory provision relating cooper- cific (Colo.1984). 2-4-201(l)(b), See also § associations, ative electric be fol- must (“the IB C.R.S. is in entire statute

lowed.” The district court relied on a max- effective”). tended statutory im of construction “where conflict, . specific general statutory statutes The maxim of construc is, provisions specific prevail.” statute tion relied the district court words, 40-6-lll(4)(a) however, wholly spe- other where section irrelevant law, entirety, ll(4)(a), cooperative 8. In its section 40-6-1 17 C.R. no electric association establish, (1984), charge, S. reads as follows: shall or collect a discrimina- rate, rule, tory preferential charge, regu- or or relating provisions section lation which would be violative of section rates, fares, rentals, tolls, suspension of 40-3-106(1) Upon or section 40-3-111. com- classifications, contracts, practices, charges, plaint any or of a rules, filed member customer regulations hearing pending cooperative electric association or af- coopera- apply decision thereon shall not public utility, associations, fected the commission shall de- tive electric but this subsection rule, charge, exempt termine whether the shall not be construed to such regulation question contrary to sec- any provision of this associations from other tion, 40-3-106(1), Notwithstanding any provision or section section 40-3-111. section. other 636 40-3-104, (1984). Therefore,

cific statute itself—section 40-6-111—ex- any C.R.S. with pressly authority vests PUC to hearing PUC, commenced whether rates, therefore, investigate and raises no motion, on own upon complaint its or made provisions public other conflict with of PUC, pursuant to sections 40-6- If ap- the district had utilities law. court 101(1) 40-6-111, or does not have the effect principles statutory of plied proper con- suspending the effective date such struction, ignored would not have case, however, tariffs. This is not the 40-6-111, particularly remainder of section respect to subject other utilities in Colorado (1), pertinent provi- other subsection to jurisdiction. respect the PUC’s With to law, public sions of the utilities all which utilities, those still retains the power duty confirm the Commission’s power suspend to the effective date of such changes investigate involving tariff to utili- 40-6-lll(l)(a), (b).9 tariffs. See § such ties as Colo-Ute. district court statutory suspension power— It was the 40-6-lll(4)(a), read should have section power not the investigate PUC’s (1984), together C.R.S. with other relevant hearings hold was abolished sec- statutory provisions, including sections 40- —which 40-6-lll(4)(a) tion coop- for the benefit 6-111(1), 40-6-108(l)(b), 40-3-102, orga- erative electric associations. (1984),in These light the apparent legis- C.R.S. “regula- nizations had purpose. lative intent and contended that the lag” tory accompanied investiga- Assembly The General added subsection hearing process tion and made it difficult 40-6-111 in to section 1981. “An See them, intervening because of the sus- Concerning the Public Act Utilities Com- pension period, to adequately compen- be mission,” 40-6-111(4), ch. sec. § sated if inflation even 1981 Colo.Sess.Laws 1922-1923 at [codified proposed rate ultimately ap- increase was 40-6-lll(4)(a), (1981 Supp.)]. C.R.S. § proved in full. See The effect of the 1981 amendment was to Colorado-Ute Electric grant cooperative electric associations Ass’n Public Utilities power suspend relief from the PUC’s Colo. up days pending investiga- rates for to 120 cooperative The efforts of electric associa- hearing, 40-6-lll(l)(b), tion and see with- persuade § tions to Assembly General diminishing out the PUC’s under grant some form of relief achieved fruition existing investigate statutes and hold 40-6-lll(4)(a) passage with the of section

hearings, upon complaint whether or on its in 1981. No. See also Advice Letter motion, own and to enter remedial orders (“Under provisions 40-6- [section carry purposes public out the lll(4)(a) ], filing this rate becomes effective utilities law. thirty days thereby on elimi- notice— nating any regulatory lag obtaining nec- amendment, As a result of the 1981 relief.”). essary only cooperative when a electric statute eas- association files PUC, cooperative es a tariff with the such tariff the burden on be- electric asso- expiration resulting suspensions comes effective at the ciations from during period 30-day provided by hearing process. notice section exempt It does not (b), l(l)(a), (1984), (b) 9. Pending hearing Section 40-4-11 17 C.R.S. and decision there- on, reads as follows: public utility in the of a case other than a carrier, rate, fare, toll, Hearing suspension—new rental, such rail charge, schedules — rejection classification, contract, of tariffs. rule, practice, rates — (l)(a) Whenever there filed with the com- effect; regulation go or shall not into but the stating any tariff mission or schedule new fare, rate, toll, period suspension of such rate, fare, toll, changed joint or individual beyond shall ... not extend one hundred power, upon ... the commission has either twenty days beyond the time when such initiative, complaint upon its own ... but fare, toll, go would ... otherwise into effect notice, hearing reasonable have commission, discretion, unless the rate, fare, concerning toll, propriety of such order, separate period extends the of sus- hearing ... if it believes that such a pension period exceeding for a further rate, fare, toll, required such ... ninety days. improper. cooperative power from electric associations PUC the to a hearing concerning have the changes. review tariff propriety newly filed changed a rate or upon complaint “either upon or wrongly The court below concluded that ...”; own initiative and section 40-6- by removing suspension power, leg- the the lll(2)(a). When the in statute is read this islature also intended to Commis- limit the way cooperative powers investigate changes, sion’s tariff electric to associations —that hearings, hold and enter exempted only remedial orders. are from provision re- previously rejected assump- We have lating power to suspension— the PUC’s power investigate tion that the to and hold interpretation is gives an achieved which to, hearings inseparably depend- is tied harmonious and consistent effect to its var- upon, suspension ent power, such that provisions. ious removing power suspend pre- also fact, when last sentence of section investigation. See, cludes e.g., an Public 40-6-lll(4)(a) read in conjunction Service Co. Public Utilities 40-6-108(l)(a) (b) section section (Colo.1982) (“we de- 40-6-111(1), possible it becomes to discern nothing’ cline an impose require- ‘all or only provisions that not these consist- upon commission”). Moreover, ment other, ent with each but also that the last 40-6-lll(2)(a), (1984), section 17 C.R.S. 40-6-lll(4)(a) sentence of section lessens a changes states suspend- that tariff “not so requirement 40-6-108(l)(b)— in section ed” go 30-day shall into effect after the thereby legislative promoting intent be- period “subject notice power to the of the easing hind subsection commission, regulatory hearing after a on its own cooperative complaint, provided motion or burden electric upon associations. as article, this modify to alter or the same.” 40-6-108(l)(b) prohibits Section the PUC Traditionally, enjoyed the PUC has broad entertaining complaints from as to the rea- in determining discretion whether sus- any charges any sonableness of rates or pend rates, date of newly effective filed motion,” public “except upon utility its own investigation, while under or rates to allow upon signed complaint by: or (after become statutory effective notice mayor president or the or chairman period), part, fully pending or the out- of the majority board of trustees or investigation. come of an council, commission, legisla- or other 40-6-lll(4)(a), In enacting section body county, tive city county, of the Assembly General was careful to structure town, city, any, or if within which the amendment such as a fashion alleged occurred, violation not less or suspension powers inapplicable make the twenty-five prospec- than customers or cooperative associations, electric leav- while public utility. tive customers such ing subject provi- such entities to the other hand, 40-6-lll(4)(a) On the other section public sions of that section and utilities authorizes the PUC determine whether a law. The expressly provides statute charged prefer- discriminatory or “this subsection shall not construed complaint any “[u]pon ential filed mem- exempt such associations from other cooperative or customer of a electric provision ber Among of this section.” those by any public or utili- provisions “other association affected this section:” section 40-6-111(1), grants ty....” which the Commission (1984), ll(2)(a),

10. Section 40-6-1 pro- public case of a other than a rail carri- C.R.S. er, part: pertinent thirty days vides in from the shall not be less than commission, thereon, filing time of same with the hearing If held whether com- or of time as the pleted such lesser commission expiration or before after the grant, go period suspension, shall into effect and be estab- the commission shall rates, tolls, fares, rates, fares, tolls, proposed ... sub- lished and effective establish the ... commission, thereof, ject after a part, whole or lieu others in hearing complaint, just which on its own motion or it finds reasonable.... All article, rates, fares, tolls, modify suspended, provided to alter such not so ... thereof, on the date in the same. effective sense, In complaint provision a the incor- findings and no in Decision No. C83-1176 porated 40-6-lll(4)(a) order, in section a in is coun- vitiated the 1981 the absence terweight given cooperative to the of evidence or freedom of abuse associated scheme, existing with all-energy electric Colo-Ute’s associations to increase their rates only “the Court can suspension. conclude that the Although legisla- without Com- the mission substituting personal is ture, its own by adding 40-6-lll(4)(a), section ter- preference managerial in matters and has authority minated the of the sus- statutory authority.” exceeded its pend the effective of a filed by date tariff cooperative, an electric the members or The adequacy of the Commission’s find- cooperative of a customers electric associa- ings will be in opinion. discussed later this public utility given tion or affected were Considering solely managerial the issue protection added in the form of an eased discretion, it is clear that the district court requirement challenging utility’s for the concluding erred in Commission, that the rate increases. prescribing proper design rate Colo-Ute, overstepped the bounds of its The last sentence of subsection states proper authority. setting “just “[u]pon that complaint ... the commission rates,” reasonable both as to level and de- determine_” shall 40-6-lll(4)(a) (em- § sign, goes very essence of the Com- added). words, phasis In other cer- under public mission’s duties under the utilities tain circumstances the Commission is re- 40-3-102, law. See (1984). 17 It C.R.S. § quired investigate change. tariff But d’ precisely the Commission’s raison nothing interpreted can subsection etre prescribe just, determine and rea- diminishing any of the Commission’s sonable, non-discriminatory, and non-pref- powers existing investigate under law to every public erential “rates of utility in this changes and, tariff necessary, pre- if statutory state.” Both and case law dem- just scribe and reasonable rates.11 rate-making, onstrate that both as to Having concluded that the PUC was charge design, part is a vital of the properly acting the scope within of its au- responsibility. Commission’s area of thority, we now consider whether that au- Rate-making legislative thority was exercised in a lawful manner. Telephone Mountain States & function. Telegraph Comm’n, v. Public Utilities 176 IV. 457, 464, 582, (1971). 491 Colo. P.2d The district court found “that Constitution, XXV, Under the Colorado art. changing action Commission’s Colorado- legislative authority public utility Ute’s flat-energy from a rate to delegated matters has been the PUC. seasonally adjusted demand-energy rate Telephone Mountain Telegraph States & is an unwarranted intrusion into the Comm’n, 130, v. Public Utilities 195 Colo. management prerogatives and discretion of 134, 544, (1978). such, 576 P.2d As Among given Colorado-Ute.” PUC, reasons utility regulation, in the area in by the court were cluding rate-making, that 1981 the PUC broadly has based au approved a flat-energy thority rate for necessary Colo-Ute to do whatever it deems 11. In its answer brief, provides complaint concerning us reasonableness 1441, legislative history occur, with the H.B. stipulates an increase H.B. 1444 eventually 1981 amendment section codified at only complainant necessary require one ll(4)(a). sup- 40-6-1 This information does the PUC to review the Under new rate: exist- fact, port position. of the some law, ing prospective customers or custom- legislative history actually supports position complain ers must cede_ before PUC can inter- of the PUC. Governor Richard D. Lamm's mes- streamlining the While bureaucrat- sage accompanying H.B. 1444 is instructive on process cooperatives ic the rural electric point: this setting, legislation in rate does not elimi- It go REA [H.B. 1444] will allow rate increases to facility development nate PUC control of days they into effect after 30 from the time protections. other consumer PUC, thereby eliminating filed Sess., Leg., 1st H.R.J. 53rd Colorado costly delays presently incurred because added). (emphasis lengthy hearing procedure. Should legislative accomplish It generally accept or convenient is of course Bros, management ed Id.; utility be delegated functions to it. Miller longs to the company. Public Service Co. Comm’n, v. Public Utilities v. Public Utilities 431, 525 P.2d (Colo.1982). not, The PUC under C.R.S., legis- has Nowhere title guise of regulation, take over the specifically authority lature restricted management company. As to mat in designing coopera- PUC rates for of the specifically ters to management, entrusted contrary, electric To the tive associations. the PUC not itself assert absent an imposes upon public utilities law of managerial abuse discretion. Id. But it imperative duty no PUC more than to has never in been the law Colorado that “adopt necessary all regulate rates ... and rate-making solely is matter within the every public ... of all rates of this management, domain of such that PUC in exception 40-3-102. pro- state.” No is triggered only volvement is following § an cooperative for abuse of that Rate-making, vided electric associations. discretion. in cluding rates, designing long has Assembly changes the General Until province been exclusive of the Commis law, possesses only the Commission fact, sion. In previous in a case where this power authority, duty but also the to recognized “[cjourts court and Com prescribe subject the rates of all utilities to general, mission should ... not succumb jurisdiction. its that the fact instant temptation assuming to the role of design, opposed involves rate as case to management,” on to we went hold that increase, purposes is rate irrelevant “our regulatory commissions duty have a all, analysis. design, just After rate as declare the abuse make such orders levels, produce much as rate unjust, could give will ratepayers advantage as unreasonable, discriminatory, prefer- management those economies in which has ential results.12 failed to avail itself.” Colorado Munici The district court held that the Commis- pal League Comm’n, v. Public Utilities only can set sion aside a rate where 203-04, “there 188, 960, 172 Colo. 473 P.2d 967 showing payers is a substantial that rate prejudiced materially are ...” and that The district when court erred it conclud- rate is “the so as to be detri- unreasonable ed that the action in ordering Commission’s ...”; public

mental interest in all Colo-Ute to shift to a rate circumstances, design other rate with- “[is] “is an unwarranted intrusion into the management in the realm of sound discre- management prerogatives and discretion of public tion of the utility.” Colorado-Ute.”13 holding findings jurisdictions previously 12. For decisions of by other vitiates these [sic] made C81-373, possesses their state’s PUC Commission in which [in approved the Com- see, authority regulate design, e.g., all-energy mission rate Rhode in 1981 an scheme Burke, adequacy Island Chamber Fed’n v. of the Colo-Ute].’’ Commerce Commis- discussed, 1236, (R.I.1982) (commission findings sion’s A.2d are To 1237 had the ex- infra. authority design imposing upon tent is modify that the court below rate submitted decision-making utility); applicability of stare Power decisis electric Central Maine Co. v. Pub- principles, (Me.1980) it is in error. We have held that: lic Util 416 A.2d (commission properly regulating acted legislative Because of the character of rate- design proposal utility); making, submitted Cascade is not the Commission bound Davis, Corp. Ore.App. prior any Gas Natural decisions doctrine similar to Moreover, (1977) (authority impose consistency P.2d stare while decisis. design essential, proposed by rulings different from that the utili- administrative considered ty encompassed statutory authority agency rulings great and while are com- entitled to weight subsequent proceedings ap- missioner look after the interest of the utili- ... customers, ty’s pearance dispelled to obtain a fair and reasonable arbitrariness when made, here, guard against discriminatory findings they rate tions). exac- new as were the basis of and a new evidence new record. Colorado Comm’n, Ass’n v. Ute Electric Public Util 540-41, The district court that it 13. also held could dis- omitted). (1979) (citation cover "no See Decision C83-1176 which also B & M concerning turn to issues We now vant statutory constitutional and provi- adequacy findings, of the Commission’s sions. The review shall not extend fur- sufficiency and the of the sup- evidence to ther than to determine whether the com- port findings. mission regularly pursued has its author- ity, including a determination of whether

V. the decision under review violates right petitioner under the Consti- A. tution of the United States or the State Adequacy Findings Commission Colorado, and whether the decision of The district court held that the “whole just Commission is and reasonable tenor of Decision No. C83-1176 as it relates and whether its conclusions are in ac- personal preference to rate is one of cordance with the evidence. part opposed on the Commission We have statutory held that this provi- specific findings of fact which would sion limits the court’s review PUC deci- support design.” a new rate In the court’s sions to a determination of whether the words: PUC has regularly pursued authority, its The commission has made no such find- whether its supported by conclusions are ings in any regarding of its decisions findings of fact adequate based evi- 6076, Case No. and a review of the dence, and whether the Commission has record findings indicates that no such reached its applying decisions appro- reasonably can be made. The bootstrap priate legislative constitutional and stan- attempt in do so Decision No. C83- dards. Colorado, Ram Broadcasting of 1392 findings makes no additional than Comm’n, v. Inc. Public Utilities 702 P.2d original those in contained Decision 746, (Colo.1985); 750 Public Utilities No. Nothing in the C83-1176. record Comm’n v. Northwest Corp., Water 168 supports the bold faced conclusion stated 154, 169, 266, (1969). Colo. 451 P.2d 273-74 page in commission on 3 Decision No. C83-1392 that the flat long We have held that the fac currently charged by Colorado-Ute is tual determinations of an administrative discriminatory, preferential, creates an body such as the PUC are entitled to con advantage, or otherwise violates 40-3- siderable deference. Trucking G & G Co. 106(1) or 40-3-111. Comm’n, 211, Public Utilities 745 P.2d Any findings ultimate the district court (Colo.1987). all, 216 After reviewing decisions, able to discern in the PUC’s court, since is without the assistance of a implied stated, whether critiqued were staff, Commission, expertise and the as “conclusive in nature and ... not [sic] duplicate should not undertake to the eval supported by any findings factual based on judgment uation and processes followed the record.” arriving PUC in at its decisions. Mor judicial The standard for review of ey Comm’n, v. Public Utilities 629 P.2d governed by Commission’s decisions is (Colo.1981);Atchinson, 1068 Topeka 40-6-115(3), (1984), section 17 C.R.S. Railway & Santa Fe v.Co. Public Utili provides: Comm’n, 263, 267, ties 194 Colo. 572 P.2d review, Upon court district peculiarly It is within the shall judgment enter affirming, province either weight of the PUC to decide what setting aside, modifying the decision should be accorded the evidence and to necessary among commission. So far as choose conflicting inferences that to the presented, decision and may reasonably where be drawn from that evi district court shall decide all 216; relevant dence. G Trucking, & G 745 P.2d at questions interpret of law and all rele- Delivery Cargo Acme Freight Service v. Service, Comm’n, generally Inc. apply v. Public Util. held not to to the determination 228, 232, (1967) (doctrines tribunals). P.2d of administrative equitable estoppel stare decisis as well as are (Colo.1985). Systems, per output Colo-Ute’s “total cost unit courses of equally monthly,” contrary two reasonable has varied When Colo- Commission, open position all-energy action Ute’s rate and reviewing court should not substitute its management its plan resource have result- judgment for that the Commission per in a output ed uniform cost unit of on a selecting appropriate City alternative. basis; monthly and that sys- the Colo-Ute Public Montrose v. Utilities surplus tem characterized a “definite of 629 P.2d (Colo.1981). reviewing A base capacity load at certain times which determining court’s function limited to indicates that Colo-Ute not has achieved whether substantial evidence exists loading capacity throughout uniform record to support PUC’s determina day. This condition results in an uneco- not, tions. If order the Commission’s must nomic capacity.” under-utilization of so, judicial inquiry set aside. If is at respect With to Colo-Ute’s resource end, reviewing per is not an court management plan, the found that it judgment mitted to its substitute was not effective that it contributed to Trucking, of the Commission. G & G Further, growth peak demands. Colo- P.2d at 216. flat; Ute’s load curve Colo-Ute has

Findings by the Commission not been able to make non-member sales to particular presented need not be load; in the valleys fill its load factor form, necessary finding and a be im years; given has deteriorated recent plied from other made. Caldwell likely prospects economic in the near and Comm’n, 134, Colo. v. Public Utilities 200 long-term, expected it is not that Colo-Ute 138, (1980); Aspen 613 P.2d Air energy bewill better able “to sell to non- Comm’n, ways, Inc. v. Public Utilities plants members so as to use its more effi- 56, 62, Colo. 453 P.2d Also, ciently.” significantly increased ex- purports the Where Commission make penses purchase associated with Colo-Ute’s findings, they such must be discernible to power peak of from other utilities to meet Caldwell, reviewing demand, court. and the fact that is “un- Colo-Ute Further, findings at 332. at P.2d valleys system, able to meet its on its indi- fact of the Commission must show plan management cate that its resource accepts competent which evidence it as and flat-energy are and associated rate not worthy belief, rejects. of and that it working ratepayers.” to the benefit of its Id.; Aspen Airways, 169 Colo. at 453 The PUC then found that since Colo-Ute’s upon P.2d at 792. Based these standards generating of a hour is total cost kilowatt arewe satisfied that the con Commission’s not uniform time “it follows that a over supported adequate clusions are find energy is not flat uniform rate cost ings of fact. tracking,” provides all-energy and the rate signal systems. price distorted to member

Examination of Decision Nos. support adoption of the demand- C83-1176 and C83-1392 reveals that of rate, findings energy PUC found that a demand- adequate sup Commission’s are energy appropriate for a port its conclusion the all-en rate is ultimate that ergy longer high exhibit a coincidence appropriate rate is no for Colo- whose members peak; replaced peak system with the that Ute and should in favor of the of demand be found, of demand-energy upon rate. It as much as two-thirds based related; capital demand-energy that the presented, the evidence that Colo-Ute’s are rate, separate cooperatives premised it is member exhibit a as distribution high recognition major of two peak with the distinct coincidence demand;14 electricity, peak components producing system that cost expresses peak a rela- "peak to the maxi- "coincidence of demands" 14. The term demands" refers consumption system’s electricity tionship mum rate of customer between customer’s (in kilowatts) occurring during a 15 or 20-min- particular point peak in time. demands for any given The term ute interval for month. fuel, capital provides 40-3-106(1) a more accurate violative of sections or 40-3-1 prehending a fixed customer mand-energy rate for the Colo-Ute. more customers of price signal gy to the directly cost a demand and than the causer”; rate Colo-Ute are wholesale tracks costs than an all-ener- “assigns charge; the most cost all-energy that costs more power and that the de- capable charges wholesale rate, rate with tracking directly com- adequate whether be made. that “these factual in nature The court below erred when it concluded contrary, statutory requirements findings explicitly findings Moreover, support the Commission’s are based stated not ... are conclusive [sic] these supported by Commission’s the record.” To implied, that findings, findings comply ulti- regarding mate conclusions Colo-Ute’s rate One principles fundamental design. electric rate rates that charged accurately should reflect the utili- B. ty’s providing service, actual cost includ- Substantial Evidence ing both capital operating costs and ex- penses. We held have must “PUC The district court held that protect therefore set rates which both: support does record not the conclu “[t]he right public utility company and its applica sions reached the PUC as to the investors to earn a of return rate reason- bility of rate ably utility’s sufficient maintain the fi- Further, system.” Colorado-Ute “[i]n integrity; right nancial of con- short, appear there does suffi pay accurately sumers to a rate which re- competent cient evidence for the Commis service rendered.” Pub- flects cost sion to conclude that either the demand-en lic Service Co. v. Public Utilities ergy rate is most appropriate for Colorado- (Colo.1982). high degree Ute because of the of coin peaks, cidence of nor that the demand- [sic] Here, inasmuch as the Commission has tracking cost most specific findings establishing made available Colorado-Ute.” all-energy currently place is less able to track the cost of service than a The of standard substantial evidence re- quires has merely Commission more than “some evidence in complied statutory requirement with the particulars” support some the Commis- determining charged whether the rate sion’s decision. Home Builders Ass’n of 40-3-106(l)(a), (1984), served, pro- charged, any 15. Section public 17 C.R.S. or collected service, rules, as any vides follows: for ... or that the regulations, practices, affecting or contracts Advantages prohibited gradu- 4C-3-106. — fares, rates, tolls, unjust, such ... are unrea- (l)(a) Except operat- ated schedules. when sonable, discriminatory, preferential, or or in ing (b) (1), paragraph under of this subsection law, any way any provision violate ... rates, service, public utility, charges, no as to just, commission shall determine the able, reason- facilities, any respect, or or other shall rates, fares, tolls, or sufficient ... to be grant any preference advantage make or or thereafter observed and in force shall fix and any corporation person subject any or or cor- making the same order. such determi- poration prejudice person any or disad- or nation, may the commission consider ... vantage. public utility No shall establish or may sufficiency factors which insufficiency affect the any maintain unreasonable difference as to rates, fares, tolls, rates, service, facilities, of such ... charges, any or in during period may the same respect, effect either between localities or as be- any and any consider factors which influence tween class service. commission adequate supply energy an any question factors has determine encourage energy arising which fact under section. conservation. (2) 40-3-111(1), (2), (1984), power, pro- The commission has the Section C.R.S. after a hearig pertinent part: upon vides in its own motion or com- upon rate, fare, toll, plaint, investigate single hearing. 40-3-111. Rates determined after commission, rates, fares, tolls, (1) hearing Whenever the after a ... or the entire schedule of upon upon complaint, any public utility; its own motion or finds ... of and to establish new rates, tolls, fares, demanded, rates, tolls, fares, that the ... ob- in lieu ... thereof. Metropolitan Denver v. Public An sponsored Utilities exhibit president (Colo.1986); Colo-Ute, example, revealed that “[of] Ass’n, Ross Fire & Police Pension 713 the total costs that must be recovered (Colo.1986). P.2d Review of the [Colo-Ute], approximately two-thirds are record satisfies us that there is substantial associated capital with the cost of and one- support evidence to the Commission’s ulti- third with the purchase cost of fuel and (1) mate conclusions that the demand-ener- effect, power.” In Colo-Ute has “incurred gy tracking rate is the most cost rate for high capital cost genera- of coal-fired power charges; wholesale “Colora- tion units to advantage take of low fuel do-Ute file demand-energy rates [should] costs.” for its wholesale electric customers with The Commission staffs cost-of-service seasonally differentiated demand charges study, uncontroverted, and an annualized on a uniform which was the only study cost-of-service kilowatt basis as hereinafter ordered.” offered, also demonstrates that Colo-Ute discussing Without all of the evidence in incurs types costs, these two detail, demand significant we will refer to the most energy, in supplying presentations put electricity. before the Commission. study cost-of-service also ap- indicates that The Commission testimony heard from proximately percent of Colo-Ute’s costs Loehr, professor Dr. William of economics capital (demand) costs, are fixed and the expert in the area of rate design. remaining 44 percent are fuel and similar Loehr testified that “rates should track (energy) variable costs. closely possible.” Further, costs as properly costs, reflect “rates should be Loehr capital testified that since is the based theoretically upon marginal costs,” predominant costs, element in Colo-Ute’s i.e., the social costs of increasing or de- should be reflected in Colo-Ute’s rates. creasing supply commodity. reason, For this charge a demand should be Since the marginal calculation of costs for part of Colo-Ute’s rate structure. This difficult, however, utilities is Loehr testi- charge designed would be fied that application direct utili- “[t]he [to “track,” recover, proportion of total marginal pricing cost is often not ties] representing cost capital cost. According- practical.” ly, Colo-Ute’s rates must include both de- Rates separate charges based charges, mand capital to recover fixed costs, demand and or demand-ener- costs, energy charges, to recover the rates, gy recognize that there are two ma- cost of fuel and expenses. other variable jor components to producing the cost of Further, position it was Loehr’s that these energy: capital expenses fixed associat- segregated, two costs should be and billed generation ed with the and transmission of separately not, to each customer. If (demand electricity costs); (2) variable utility’s customers price receive a distorted operating and expenses maintenance con- signal, pay and do not a rate that tracks sisting primarily of (energy fuel costs providing the actual cost of electric service. costs). Colorado, utilities, In particularly The charge, rationale behind the demand Colo-Ute, predominantly use coal-fired explained by Loehr, through as is that such plants. Therefore, represent fuel costs uie customers, charge, i.e., a mem- coal, cost of comparison which is low in systems, charged ber directly can be gas. costs, however, with oil or Capital their share of the use of the Colo-Ute relatively high, tend to be since it is more system’s system facilities. costly “[A]s to build coal-fired facilities than oil grows, members must choose whether or gas-fired ones. All utilities face trade- place increasing upon not to among offs demands that costs. Loehr testified that is, system. system Increased demands on run, “the trick for utilities long over the imply capital to choose that additional commitments of capital combination of re- ... together and fuel costs imply which mini- sources. should members face [Colo-Ute] mum total cost.” a rate structure which reflects the cost of capital they resources that will only force a part costs, small of total a flat system] they Colo-Ute to incur should energy rate conveys sig-

[the price distorted choose to increase demand.” before, nal. As I mentioned main capital. costs are the costs of A flat witnesses, including Other Warren L. energy charge conveys signal Wendling, public engineering utilities an- members and their ultimate customers to alyst, testimony in they offered which rec- energy. conveys signal conserve It no adopt ommended that a seasonal- they related to how conserve If energy. ly-differentiated demand-energy rate. energy during conservation occurs off advantages Among the cited were: De- peak periods, but use remains provide mand-energy rates an incentive to high during peak periods, system will adjust consumption their pat- customers still have to capacity incur the costs of tern so total that costs to them are provide power peak, yet on use that ca- marginal system lowest costs pacity during peak periods. less off lowest; (2) system be would defer- result be capacity would that ring capital generation investments in spread costs would be have to over fewer plants; transmission other benefits average kwh and the price per kwh capacity purchases lie in peak reduced would have to rise. or for requirements, reserve and in reduced operation and maintenance costs. Wendling, when asked whether Colo- flat-energy “just Ute’s rate is a and reason- Moreover, the witnesses testified that rate,” responded able that flat-energy charges demand seasonally should be rate “does not reflect how a differentiated, system since the Colo-Ute planned, operated. nor constructed time, peaks in the winter not in the summer rate does not costs track to cost causers. analysis time. The staffs based on an just.” Therefore the rate is not adjusted sig- total cost-of-service shows a nificant disparity system’s between the The record indicates additional evidence (the summer and winter season sum- regarding system’s the Colo-Ute load figure kwh; mer per is 34.545 mills factor and peak coincidence de- member figure kwh). winter is 42.625 per mills system demands, mands with peak both of peak Growth in demand in is the winter failings which underscore the of Colo-Ute’s type growth system which causes the structure, all-energy rate and the beneficial incur capital expenditures. additional “A accompany results would the intro- higher charge than in winter duction rate struc- summer should used signal be [Colo- ture. members their peak winter con- Ute] Colo-Ute witness Krumins contended sumption places constraints the ca- “the combination of a flat energy rate pacity system.”16 management Colorado-Ute’s resource When opinions asked their of the all-en- plan per have resulted in a uniform cost ergy Colo-Ute, proposed by basis, output monthly on a operation specialists such attacked generation capacity units at full and a flat costs, failing scheme as to track and there- fact, curve.” load In an sponsored exhibit fore, failing properly reflect costs of Krumins, during “makes clear that service. Loehr’s words: year the test total costs from varied

I do not October, 4.3$/kwh believe flat rate to in January 30/kwh principles (or based sound and there- percent); by difference 1.30/kwh fore I cannot recommend The flat it. the total cost varied from in 30/kwh energy only January June, rate is constructed as if the a difference 4.50/kwh generating (or cost of electric- of supplying percent).” On the basis 1.50/kwh ity figures, were fuel costs. costs Since fuel are of these the Commission concluded is, therefore, required keeping prin- 16. Additional fuel is as additional elec- costs also with the tric component is consumed. A of the ciple that rates should track costs. reflecting electric rates additional fuel coincident, highly “from Colo-Ute’s own evidence that tend to be a demand-en- output per ergy appropriate.” cost unit of has varied rate is total Further, monthly.” since Colo-Ute’s total regarding peak This evidence demands is generating are not uniform kwh more than sufficient support the Com- time, that a over “it follows flat [or all] findings mission’s ignor- on this issue. In tracking.” rate is not cost ing casting aside Exhibit the court Finally, testimony heard proper Commission below exceeded the judi- standard of regarding peak the coincidence of demands cial review. system. noting the Colo-Üte After

within put The evidence forth Colo-Ute and heavily upon commission that relied “[t]he the Commission staff to support or chal- attempt high Exhibit 94 in an to show a lenge propriety all-energy of the system’s peaks coincidence between the dispute. was in Given the conflict- peaks,” and the members’ the court below ing evidence, nature of the alternate con- ap- remarked that “that exhibit does not clusions could have been reached. All this accurately pear to track all of the data establishes is that per- Commission available determine coincidence of duty by resolving formed its disputed these Further, peaks.” the exhibit “shows that issues of fact favor of the demand-ener- peaks nearly are not as coincident as gy disagreed rate. The court have believed the commission.” The Commis- findings with these disputed questions issue, however, sion’s on this fact, but it is not within province supported also substantial evidence. the district court to judgment substitute its for disputed questions that of the PUC on information, Among pieces other Ex- Answerphone, of fact. Inc. v. Public Utili- dates, times, hibit 94 documents the 175, 178, ties monthly peak demands for Colo-Ute and co-op during period members from through November 1980 October 1981. supports Substantial evidence the Com- data, Mitchell, Working with this a staff adoption mission’s seasonally-differ- witness, during testified February that demand-energy entiated rate. The district highest peak which is the load month rejection court’s of the Commission’s find- system during year, the test ings impermissible constitutes an intrusion peaked 10 members documented rate-making process. into the PUC’s Ac- during top percent peak hours of cordingly, the order of the district court system. the entire Colo-Ute The exhibit Case No. 83CV218 is reversed. February further demonstrates that VI. peak the 14r-membercoincidence as a

percentage of the maximum demand for Finally, we consider the issue system percent, as a 96.18 whole was case, raised in Case No. 84CV7. and, fact, year, in only the entire test co-ops, two customers of the ARCO and figure drop two months did this below 90 (ARCO/Exxon), sought Exxon review of percent. Moreover, for all months of the portion of the Commission’s decision year test the Colo-Ute members had indi- genera allocated which over million of $24 peaks highly vidual which were coincident (demand costs) tion fixed costs to the ener system peak. Further, with the Colo-Ute component gy rate. Colo-Ute, another submitted exhibit evidentiary basis for allocation indicates that 9 of the members provided by Wendling who testified per- exhibited a coincidence in excess of 90 utilities, operate that electric in an effort to cent, similarly high demonstrates the coin- manner, in the most economical construct a sys- cidence of member demands with the intermediate, base-load, mixture of peak. tem peaking power plants. plants Base-load significance nuclear) (usually all this rate de- either coal or are de- sign signed day is that the Commission heard to run 24 hours a and are char- testimo- ny high that peak capital cases where demands acterized costs and low “[i]n costs,

operating peaking plants “average whereas the (AED)” and excess demand (usually gas-fired) designed oil-fired allocation.18 operated time, periods to be for short of Wendling testified that average since the costs, capital and are characterized low component demand the of AED allocation high operating but costs. analogous to portion the base-load of Wendling of the opinion generating was capacity costs of which —the respect generating only, through costs there are recovered energy charge the recognition great- be a utility’s should of a under time-of-day average rates —the de- plant a generating component should, therefore, er investment in able to mand be re- coal: burn energy charge. covered in the As the Com- mission described this utility modification: “Mr. A can minimize investment in a its Wendling testified that for the generation by constructing Colorado- plant oil or system, Ute the However, ap- amount so gas generators. fired a calculated fuel proximated very closely the of penalty On the dollars base- cost is increased. other generation load a that would expend capital hand more have been spread to all aby and build a coal fired unit and burn hours time of rate.” a use Therefore, price average For compo- lower fuel. this Colo-Ute this addi- demand nent, i.e., the tional investment should be recovered in million in $24 demand-related charge. costs, energy surrogate ais for the cost base- generation. load He testified one method used problems effect, utilities to address capacity re- the allocation of million in $24 sulting utility’s greater generated from a investment fixed (capital) costs to be recov- higher capital generation cost is the ered under (operating) variable costs is adoption time-of-day rate, of a recog- recognition which Colo-Ute, of the fact that capacity nizes the use of at time it it had because constructed only coal-fired occurs.17 He noted that number plants, using plants ob- base-load such the way therefore, stacles stood in peak, Colo-Ute’s meet its was substitut- adoption of time-of-day including ing capital operating costs for costs its complexity metering operations. the increased allocation, As a result this billing, perform and the cooperatives charged need cost alloca- member would be tion studies coopera- if originally distribution same rates as Colo-Ute had Wendling tives. conceded that constructed the “correct” mixture of request plants. staff had failed to the data neces- sary to or propose formulate such a rate Relying exclusively on time-of-day

for Colorado-Ute. surrogate approach, the con- Commission surrogate time-of-day

As requirement rate cluded that the revenue associ- appropriate he believed for the ated generation Colo- with base-load should be system, compensate Ute for the transferred to charge, only recognized regarding portion insufficiences time- the excess of the AED allocation data, of-day Wendling proposed a charge.' mod- should be collected in the demand ification of the placing basic rate. The Commission determined that surrogate only portion This would created shift- the excess of the AED alloca- ing energy component charge provide the de- tion in demand would an mand-energy $24,084,126 of demand automatic incentive for Colo-Ute to im- representing “average” portion prove system factor, costs load since: “The time-of-day price portion 17. A rate varies the It demand related costs. allocates a of the de- day. over the hours of the “average" and/or a rate Such mand-related costs on basis of attempts signal (kilowatt customers vari- usage throughout hour generating electricity ous costs associated with year) remainder the demand-related throughout periods day. various (the the basis of "excess" demand dif- utility's peak average ference between demands). (AED)" "average 18. The and excess demand allo- allocating cation is a method used for demand- becomes, higher higher findings the load factor sion’s upon of fact are based sub- generation proportion is the costs col- stantial evidence. Ram Broadcasting of energy charge in the lected the lower Colorado, 702 P.2d at 750. Our review of charge. provides is the demand This the record indicates that the Commission’s improve sys- incentive to maintain and decision to shift million in $24 demand cost tem load factor that was absent the flat to the energy component of the demand-en- energy rate.” ergy supported by rate is not substantial Because the court found that “there was evidence. support no technical literature this clas- concluded, After the Commission based sification and that the witness had conduct- upon the study, cost-of-service that the sea- sup- ed no research or studies which would sonally-differentiated demand-energy rate misclassification,” port it concluded necessary appropriate Colo-Ute, that the Commission’s decision was not disregarded the rates dictated supported by substantial evidence and was study same cost-of-service and classified arbitrary capricious. certain energy demand costs as Next, the district court concluded that rates finally adopted. Although the cost- the Commission failed to adequate make study of-service revealed percent that 56 support fact its classification Colo-Ute’s costs were demand related and energy certain demand costs as costs. percent related, energy the Commission finding was no nor evidence which “[T]here adopted Wendling’s then recommendation suggested how the shift of the [$24 million] to transfer a substantial amount of Colo- corresponded premise,” i.e., to the Colo- Ute’s energy compo- demand costs to the needing greater capi- Ute’s investment of nent of the thereby assigning ulti- generally gas tal than that needed for oil or mately percent utility’s costs to plants. component, percent demand and 68 Finally, the court held that the PUC rate energy component. change repre- This discriminatory prefer- and establishes a sents a shift energy from demand to requires high-load ence because it cus- approximately percent utility’s customer,

tomer to subsidize low-load actual costs. summer users to subsidize winter users. During hearing, Wendling It reasoned testified shift of demand cost to cost, contrary time-of-day which is that a proper- Com- rate could not be study, mission’s own cost-of-service ly data, results calculated without further and that unjust discriminatory an rate in vio- he had off-peak not asked Colo-Ute for lation of section 40-3-106. billing data so that he could actual- ly prepare seasonally-differ- a time use portion

The district court set aside that entiated rate. He also stated that the sur- of the Commission’s order which allocated rogate-time-of-day adopted by him was over million in demand cost to $24 Further, support without in the Commission staff’s cost. the court ruled that if the supreme studies, research, court were to set aside the district own or in the outside 83CV218, and, court’s order No. in ef- following technical literature. The ex- fect, uphold adoption Commission’s change during which occurred his cross-ex- design, then amination is instructive: adopt Commission would directed QUESTION: again, your And what is rates based staff’s cost-of-service authority, any authority if there is study as set forth in the record. assumption? such an I I an au- ANSWER: don’t believe have A. thority. above, 40-6-115(2) As noted section QUESTION: Okay. you Have done (3) limits the district court to a narrow any— scope of review. Part of in- this review myself. determining Other than cludes whether the Commis- ANSWER: QUESTION: Montrose v. Public develop- —research on the Utilities 123, the AED allocation factor 119, ment of Colo. 590 P.2d 505-06 supports this? (commission’s arbitrary capri order and cious, study ANSWER: No. where no commissioned re garding breakdown, cost-of-service al QUESTION: you give any Can me refer- though feasible, study was and no discus you ence in technical literature that are sion in that, disparate commission’s order of ser familiar which indicates where cost; therefore, vice solely the AED is order method characterized as be- issued ing convenience). proxy peaking for base-load and matter of administrative generation? Further, of orders the Commission which arbitrary capricious and Well, must my be set previously ANSWER: referred Peoples Natural Gas Div. v. aside. Public papers time-of-day design to work Comm’n, Utilities (Colo. 698 P.2d did that. 1985); Municipal Colorado League v. QUESTION: But as far as technical lit- Public Utilities might support ap- erature which (Colo.1984). also See Federal Trade proach, you can refer me to anything Crowther, Comm’n v. 430 F.2d parallels your recommendation? (D.C.Cir.1970)(adoption significant poli of I can’t. ANSWER: cy change study without sufficient ex and Wendling When was asked whether the planation arbitrary and capricious). approach recommending he was has ever been advocated Commission other The same factors which cause us cases, responded: “Well, might rate he to conclude that the Commission’s conclu have been but I am not familiar with them supported by sions are not evi substantial was, pur- or what \or for their intent what dence, portion also lead us to find this poses they were advocated.”19 arbitrary Commission’s decision ca and whole, Viewing the record as and in a pricious. proposed shift to demand light Commission, most to the G favorable represents little more than an hoc ad Trucking, & G 216; Home 745 P.2d at unsupported analytical shortcut invent Ass’n, Builders 720 P.2d at we con- ed adopted simply because the neces Wendling’s unsupported opinion clude that sary per studies not had been does not constitute substantial evidence formed the Commission staff. The evi necessary uphold the decision clearly dence shows that such a study was Ass’n, Commission.20 Home Builders feasible, entirely had the staff collected the P.2d at 562-63. necessary court, data. The district there fore, justified was fully holding that this B. portion of the Commission’sorder was arbi held have that where an order We trary capricious. solely Commission issued as a convenience, matter of administrative or in C. investigation absence sufficient into pertinent considerations, above, order arbi As noted section 40-6- trary, capricious, City 109(3) imposes invalid. on the Commission re- Moreover, Pearson, Gary (FERC) supervi- ergy Regulatory 19. Commission rate- analysis, sor of cost testified that he making effectively modification which shifted "any concerning could think articles uti- energy component demand costs to the type lization of rate in other whole- question. electric rate in The court held that further, proceeding"; knowledge, sale rate "this rate to his the evidence failed to show that modifica- concept been [has used Colo- never] tion would result in a rate which was cost rado before.” tracking. In the words that court: "[T]he appears charge to treat the demand commission like Electricity See 20. also Consumers Resource clay modeling applica- in order to force the Comm'n, Energy Regulatory Council v. Federal marginal pricing tion of cost com- case, (D.C.Cir.1984). 747 F.2d 1511 In that ponent." F.2d at 1515. adoption by court reversed the En- Federal reported that a shall be factor quirement decision low-load customers ex- at the by findings More- accompanied pense of fact. high-load customers, factor who over, 40-6-lll(4)(a) obliges the section pay would then excessive rates to subsidize to determine the rate Commission whether preferred customers. charge 40-3- issue violates sections claims, We not resolve need these how- 106(1) -111. The factors relied ever, as the Commission’s errors mandate sufficiently the Commission must be portion that this of Decision No. C83-1176 engage enable clear to the court be set aside. meaningful review of the Commission’s de- In summary, reject we Colo-Ute’s claim cision. Caldwell v. Public Utilities appeal that this is moot. the We hold that P.2d possessed statutory authority to insti- tute, motion, on its own to Case No. justified The its deci Commission by determine the whether tariffs filed grounds sion demand costs on to shift just Colo-Ute and The were reasonable. pow that makes use of coal-fired Colo-Ute order that a adopt Commission’s Colo-Ute plants require greater which a invest er seasonally-differentiated demand-energy capital gas oil or ment of than is needed for by supported adequate findings rate is of find, The Commission to facilities. failed fact and substantial evidence. We affirm however, specific that of de amount ruling of the district setting court aside charge shifted mand costs to the portion that of PUC’s order clas- accurately corresponds to the incremental sified million over of demand $24 costs capital plants additional costs of coal energy costs. comparison gas with oil or In facilities. Accordingly, part, we reverse in affirm deed, the Commission could not have made part, proceed- and remand for further finding such a since no was evidence ings with opinion. consistent this

presented point. this hold that the failed We Commission ERICKSON, J., in part concurs to the statutory requirements conform that part. dissents in reported accompanied by its decisions be adequate of fact. VOLLACK, JJ., join LOHR and concurrence dissent.

D. ERICKSON, Justice, Finally, concurring in imposes section 40-3-102 part dissenting in part: prevent the Commission duty a Further, unjust discrimination in rates. I would affirm decision of the Public 40-3-106(1) recognizes such section that (PUC). I Utilities of Colorado Commission discrimination manifest itself agree majority appeal with the that ways. of previously number We held have statutory that moot and the PUC had primary of the of the purposes that one sponte to determine sua authority whether regulatory Commission’s is “to in scheme the tariffs filed Electric Colorado-Ute charged the rates exces sure that are not (Colo-Ute) just were rea- Association Cottrell unjustly discriminatory.” sive or agree majority sonable. I also with Denver, City County & P.2d supports substantial evidence (Colo.1981). proposed PUC’s order that Colo-Ute’s alleged replaced seasonally and Exxon have that the differentiated ARCO view, ultimately approved by my rate. In how- PUC, ever, accompanying competent supports in de- shift evidence costs, $24,084,126, unlawfully represent- mand discriminates in PUC’s allocation ing part capital It fixed costs of ways: preference two establishes a Colo- and, effect, requires plants, users Ute’s coal-fired com- winter ponent users formula used to summer to subsidize custom- determine winter ers; re- Accordingly, in rates I preference creates a new rate. would

verse the court and remand trial with di- “cost service” used to set the rections order. demand-energy' to affirm PUC’s rates for each of Colo-

Ute’s study customers.4 The allocates costs dividing to each customer Colo- I. categories. Ute’s into numerous supported by order is The PUC’s costs distributed to category each are ad- Wendling (Wen- testimony of Warren L. justed provide Colo-Ute with a reason- dling),1 Engineering Utilities Public Ana- able rate return then allocated lyst Generally, employed PUC. util- part each customer based in on the custom- employ types power plants ities three consumption Wendling’s electricity. er’s fluctuating meet electricity. demands for study only study cost-of-service typically plants operate Coal-fired continu- presented to the PUC. ously. expensive construct, They coal, but cheap because of low cost study, Wendling the cost-of-service operate. generating The combined ca- generally accepted followed cost allocation operates pacity plants con- methods, such as that contained in the load tinuously capacity” called the “base is NARUC Electric Cost Utility Allocation utility.2 When the demand elec- accepted Generally Manual. allocation tricity capacity, exceeds base load utility methods assume that a uses either gas-fired uses or typically either oil- oil- gas-powered plants to peaks meet in satisfy in plants “peaks” to demand.3 Accordingly, Wendling demand. concluded build, plants cheap These to but be- study that the results to had be modified to high gas, cause of cost of oil expen- and reflect Colo-Ute’s investment in coal-pow- operate. Contrary industry prac- sive to to plants ered peaks meet in demand. tice, only employs coal-fired plants, use of coal-fired rather plants all of to meet its commitments to gas-powered plants, than oil- or to meet power users. surges in in demand excess of base load part integral As an of PUC’s capacity results in fuel lower costs but determination, Wendling performed higher plant a cost- construction costs (capital costs). (study) compute of-service study strictly the util- To follow the unmodified service,” ity’s study “cost of the total purpose revenues results would defeat the of required itself; utility’s opera- is, cost of the study study’s cover that results plus accurately tion a fair return on its investment. would not track Colo-Ute’s actu- qualifications experience Wendling period typical peak 1. The of The demand for utilities were Wendling winter, admitted as evidence. during has a energy is when demand far degree engineering, in bachelors masters electrical during year. exceeds demand other times of the science, degree degree and a masters During non-peak periods, typically demand is registered is business administration. He units, generally met base which are coal professional engineer in Colorado with over powered plants. coopera- When the demand eight years’ experience engineering. in electrical capacity, tive members less than base load previously expert He has before the PUC in other cases testified as an witness capacity Colo-Ute sells the unused to non-mem- involving bers. determinations. component 2. "Base 4.The load" units are those units that are in demand variable is a used operation capacity” demand-energy continuous is the and “base load determine the rate and is the Mississippi generating capacity units. those components, including genera- sum of several Energy Regulatory dus. v. Federal generation component component. tion The In Comm'n, (D.C.Cir.), 808 F.2d 1525 vacated in (also average based on total and excess demand reinstated, part, (D.C.Cir.), opinion 814 F.2d 773 "Average Demand”), called Excess — (D.C.Cir.), denied, 822 F.2d 1103 cert. U.S. average the sum the demand excess de- -, 108 S.Ct. 98 L.Ed.2d figures. mand Demand-related costs are allo- “generating power plant capacity” of a refers to generation component cated based electricity the maximum amount of that it can (annual "average usage) demand" kilowatt hour generate. (difference demand" between "excess demands). utility’s peak average 3. Peak refers to demand demand excess of capacity. plants base load peaks used to meet "peaking plants." are called appropriate cost of been al service.5 Without units capi- substituted for with low adjustments, rates high running tal costs and costs in meet- non-peak cause of electricity would users ing Colorado Ute’s Al- [electrical needs]. peak Accordingly, users. subsidize based though such capital substitutions may analysis operations his of Colo-Ute’s accord energy with the policy, national Wendling modified the results of his study nevertheless an artificially creates high allocating $24,086,126, plant capital demand charge artificially and an low required peak demand, to supply costs Moreover, charge. no recogni- component the demand from the de- given tion is off-peak use base mand-energy rate to compo- load capacity. nent. The caused modification customers The PUC Wendling’s examined modifica- pay electricity more for satisfy used to study tion results and concluded that peak demands than the unadjusted under the allocation would more enable accurate rates.6 tracking of Colo-Ute’s costs.7 Based on the testimony Wendling, the II. made following findings: Atlantic Company (ARCO) Richfield Wendling that testified ... there Corporation (Exxon), Exxon two customers recognition

should be a of the utilities’ pay higher power of Colo-Ute who will investment thermal coal-fired [sic] Wendling’s costs as a result of generation plants. modifica- Investment in such tion, contend plants minimizes the PUC’s decision the cost fuel relative plants modify the peaking study supported to investment results is not with its capital capacity They argue attendant low substantial evidence. high and fuel fuels capital costs for such as oil coal-powered plants costs of the gas. only are “fixed costs” and can be recovered in demand of the portions ... Substantial of variable demand-ener- [Colo-Ute’s being gy rate peak- $24,084,- coal-fired are used and that the of for allocation units] ing effect, purposes. component In units 126 to the high energy with of the rate capital running arbitrary costs and low costs capricious. Finally, have was and they Wendling 5. testified: nent. He stated that a similar formula was used prior in two PUC rate determinations. Accord- energy charge computed The was [after ing Wendling, to his rate tracked costs charge]. proposing demand Here Staff is time-of-day better than and was rates much eas- only generation recognize to costs the in- implement. Wendling ier to PUC and The use investment in demand related crease[d] dol- "time-of-day the terms and rate” "time-of-use” generating lars made Colorado-Ute in its interchangeably. plant they so coal. can bum A can generation plant minimize its investment pertinent parts the PUC 7.Other order stated: by constructing gas generators. oil fired However, penalty way a fuel cost is One [incurred]. to address investment in [Colo-Ute’s utility may expend plants peaks On the other hand a more coal fired to meet is demand] capital and build a coal fired unit and bum a the use of a time-of-use rate which would Therefore, priced recognize capacity lower fuel. this additional the use of at the time it investment should be recovered charge. occurs. rate, accomplish disadvantages a To this consistent time-of-use course, complexity methodology average is the cost of the increased of meter- service ing billing perform portion average and and the need to of the and excess cost demand coopera- allocation studies for the split.... allocation factor was distribution rate, surrogate tives. As a for such a Mr. Wendling way Wendling testified another to accu- proposed 6. a modification of the de- rately through is mand-energy track Colo-Ute’s costs a time- this modified rate. In of-day portion generation rate. He stated that of the dollars of associated costs with the average component average average portion [average of the and of the excess spread into excess demand allocation for Colo-Ute should allocation were the ener- demand] energy charge gy charge. Wendling testified that be recovered in the since that Mr. for the component analogous por- system, the base Colorado-Ute amount so to load calculat- closely generating capacity. time-of-day approximated very In ed the dollars of tion rates, generating capacity generation the costs of base load that would have been base load spread through energy compo- by a recovered to all hours time-of-use rate. are the rate’s prescribed energy

claim that the PUC’s Ry. Comm’n, v. Public Util. 194 Colo. discriminatory in violation of sec- 572 rates are P.2d 138 -106, (1984 tions 40-3-102 and 17 C.R.S. & view, In my modify the decision to Supp.). demand-energy rate formula was not an found, abuse of discretion. based

A. evidence, on competent that the cost-of-ser reviewing propriety study PUC’s vice did accurately not track Colo- demand-energy rate, modification to the we Ute’s costs the study’s because cost alloca consider issues: must two whether the tions gas-powered assumed that oil- and modify plants decision rate formula consti peaks would be used meet tuted an abuse of discretion and wheth demand. The assumption of the sup er the amount of the modification was study inappropriate in this case since ported by Concerning the record. employed only first plants coal-fired issue, the broad discretion in peaks PUC has de meet demand. The un termining rates, provided rates just modified rates also policy failed realize a Ass’n, goal and reasonable. Elec. rates, Colorado Ute charg PUC. The not Comm’n, ing Inc. v. Public Util. Colo. electricity increased used to (1979); 602 P.2d 861 League demand, Consumers’ supply peaks would not encour Ry., age Colorado & S. P. 577 Colo-Ute’s customers to conserve ener (1912); 40-3-102. It is the gy encourage result improve § Colo-Ute to reached, employed, not the method Although which load ability factor.8 determines just whether rate is policy through rea PUC to effect social rate- City limited, making sonable. Montrose v. Public Util. Legal Mountain States (Colo.1981). Orders Foundation v. Public Utilities Commis presumed just sion, the PUC are (1979), Colo. 590 P.2d 495 Rate-making reasonable. 623. duty Id. at protect PUC has the public from legislative an exact science but a unjust func unreasonable and pre rates involving questions judgment tion many vent rate-making destructive that could ad upon myriad discretion versely based affect the availability of service to facts, including evidentiary factors public. calcula Consolidated Freightways tions, factors, adjustments known and Corp. Comm’n, v. Public 158 Util. Colo. may 239, relationship (1965); affect the between known 406 P.2d 83 see Consolidated Montrose, City factors. 629 P.2d at Supply Corp. Gas v. Federal Power of 623; Ass’n, Comm’n, Colorado 198 (D.C.Cir.1975) Ute Elec. Colo. F.2d reviewing at 864. A (holding P.2d at court federal adop commission’s expertise formula, has neither the greater nor resources of tion of new rate shifting a and, the proportion capital absent a clear of dis of abuse the from de cretion, judgment component should not its commodity substitute mand compo the Atchison, formula, for that of the just PUC. T. nent & S. F. of the rate to be per- 8. A customer’s charge pro- annual "load factor” is the AED allocation in the demand centage relationship average daily of its demand vides an automatic incentive to Colorado-Ute (annual use/365) daily improve system to its maximum de- its load factor since the becomes, mand. Northern Co. v. higher higher Ind. Pub. Serv. Federal the load factor the is Comm’n, (7th Regulatory Energy 782 F.2d proportion generation the of costs collected in Cir.1986). Concerning of the modification energy charge and the lower the de- rate, demand-energy stated: the PUC order charge. provides mand This the incentive to improve system maintain and load factor particular For ... Colorado-Ute’s load that was absent the flat shape seasonality, rate.... portion the excess of should, applied conjunction This if [average with an the AED proxy and excess demand] is a management plan, produce peaking portion generat- effective resource essentially of ing very peaking capacity facilities. flat rate Colorado This was allo- employ. peak cated on the Ute seeks This rate has basis coincident form that, recognizing advantage present ap- high that the members exhibit a additional in the system plication, comports regulatory coincidence with Colorado-Ute ob- peak. Placing only stability. portion jective excess evidence, sup competent the modification was reasonable are final and must where ported by upheld See, neither technical research nor on judicial review.9 e.g., Mel studies); commission Fuels Research low Yellow Taxi Co. v. Publib Util. Council, Comm’n, Inc. v. Federal Power Comm’n, (Colo.1982); 644 P.2d 18 Con Cir.1967) (7th (recognizing 374 F.2d 842 Springs, tact-Colorado v. Inc. Mobile Ra power commission’s federal broad discre Serv., Inc., dio Tel. 191 Colo. using poli tion rate formulas to achieve (1976). findings While the factual cy goals); Corp. State Comm’n Federal presented PUC need not be (8th Power 206 F.2d 690 Cir. particular form and implied, even be 1953) (affirming power adop commission’s must be discernible to the re sup tion new rate formula that was viewing court. Caldwell v. Public Util. ported neither technical literature nor Comm’n, 613 P.2d 328 research), by commission studies or cert. denied, 346 U.S. 74 S.Ct. 98 L.Ed. view, my the amount of the modifica (1954). Considering the innumerable tion is supported competent evidence quanti factors that must be identified and upheld and must be on review. Based rates, fied precision to determine scientific upon his analysis operation of Colo-Ute’s rate-making always possible is not calculations, and his Wendling stated that a the PUC must be accorded discretion broad modification of the rate formula in the setting Accordingly, rates. since the $24,084,126 amount necessary impact of the modified rate on Colo-Ute permit tracking accurate of Colo-Ute’s reasonable, just and its customers is Although costs.10 time-of-day rate would modification the rate was not an tracking also have enabled accurate abuse of discretion. costs, Wendling testified that that rate much would be more difficult to B. implement provide and would less accurate The second issue raised ARCO and results. Accordingly, the modification of Exxon is whether the amount of the modifi demand-energy upheld rate must be cation, $24,084,126, supported by review. 40-6-115(3), record. Section 17 C.R.S. (1984), scope judicial limits the review to III. determinations whether a PUC decision is unconstitutional, Finally, “whether the decision and Exxon contend ... ARCO reasonable,” just prescribed energy “whether PUC’s rates are dis- conclusions are in criminatory accordance with the evi in violation of sections 40-3- -106, (1984 dence.” It is well established that the find 102 and 17 C.R.S. & 1987 ings Supp.). and conclusions of the They PUC on dis claim that the PUC’s modifi- puted questions fact, on cations to the rate do not when based findings We have also held that the PUC’s and National Labor Relations Bd. v. Columbian E. & 9. Co., Inc., 292, 300, 501, 505, S. S.Ct. conclusions be set 306 U.S. aside or modified if not (1939) See, (quoting 83 L.Ed. 660 Consolidated Edi supported by e.g., substantial evidence. Bd., Montrose, son Co. v. Labor Relations U.S. 622; National City 629 P.2d at Public Util. 197, 229, 206, 216, (1938)). 59 S.Ct. 83 L.Ed. 126 Loveland, City P. Comm’n v. 87 Colo. Davis, generally See 5 K. Administrative Law The substantial evidence standard (2d 1984) (discussing Treatise ed. sub § 29:5 requires party challenging findings a and standard). view, my stantial evidence carry heavy conclusions of the PUC to a burden. conclusions in this case are PUC’s scintilla, Substantial evidence more than a supported by evidence. substantial suspicion do must more than create of the fact to be established. "It existence Wendling’s opinion 10. that a modification in the $24,084,126 means such relevant evidence as a reasonable necessary amount of was was based might accept adequate support mind conclusion,” as separation on the staffs of demand functional- enough and it must be supra ... ized See note 5. The costs and revenues. $24,084,126 justify, jury, if trial were to a a refusal to sum of the total of the aver- sought age portion when the conclusion as set forth in Exhibit 60 in direct verdict demand jury. hearing. from it is one of fact for the the PUC be drawn accurately track actual costs I dis- am to say authorized that Justice criminatory they because cause some users LOHR and join Justice VOLLACK rates other dissent. They subsidize users. argue that the modified rates favor against

winter users and discriminate sum-

mer users and favor customers with

fluctuating electricity during year against and discriminate those relatively

customers with constant demand year.

each provides

Section 40-3-102 that the PUC unjust discrimi- authority prevent has “to Eugene MORRISON, Petitioner, R. rates, charges, nations” and tariffs. added.) (Emphasis 40-3-106(1) Section public utility states that “no ... shall make The INDUSTRIAL CLAIM APPEALS grant any preference or advantage or OFFICE OF THE STATE OF COLO- any person corporation subject RADO, or or any Trailways, Liberty Inc. and Mu- corporation person any or prejudice Company, Respondents. tual Insurance disadvantage” and that no “shall No. 87CA1471. unreasonable any establish maintain any respect, difference ... either be- Colorado of Appeals, Court tween localities or between class of Div. 1. added.) (Emphasis service.” In Mountain April 1988. Legal States Foundation v. Public Utili- Commission, ties (1979), we found violation of section

40-3-106(1) when the PUC ordered utility

companies provide a lower rate to low-in- elderly

come per- low-income disabled “unrelated to the cost or

sons type provided.’’ service Id. at (emphasis added).

P.2d at 498 case,

In this modification the de-

mand-energy formula related to the actu-

al supply Colo-Ute to users and

violates neither section 40-3-102 nor -106. contrary, prevents

On the the modification

non-peak subsidizing peak users from type

users avoids unjust discrim-

ination raised ARCO and Exxon. The

unadjusted demand-energy rates endorsed against ARCO Exxon discriminate

certain users since the rates do not accu-

rately Competent reflect Colo-Ute’s costs. in the supports

evidence record the PUC’s

conclusion that the modified rates accurate-

ly reflect Colo-Ute’s costs and therefore

charge fairly. Colo-Ute’s customers

Accordingly, I would reverse the district

court and remand with directions affirm

the PUC.

Case Details

Case Name: Colorado-Ute Electric Ass'n v. Public Utilities Commission

Court Name: Supreme Court of Colorado

Date Published: Jul 11, 1988

Citation: 760 P.2d 627

Docket Number: 86SA244, 86SA246

Court Abbreviation: Colo.