394 Mass. 671 | Mass. | 1985
The Fitchburg Gas and Electric Light Company ( Fitchburg or company) asserts that the Department of Public Utilities (DPU or department) has improperly denied the company’s requests for long term financing pending the department’s completion of its investigation, pursuant to G. L. c. 164, § 14,
We summarize the facts. Seabrook I is a 1,150 megawatt power plant under construction by Public Service Company of New Hampshire in Seabrook, New Hampshire. Fitchburg is a retail electric company serving approximately 23,000 customers in the city of Fitchburg and surrounding communities, and owning 0.86519 per cent of Seabrook I. Fitchburg did not
On February 21, 1984, Fitchburg filed a petition with the DPU pursuant to G. L. c. 164, § 14, for the approval of the issue of up to $5 million of preferred stock and of up to $13 million of long term notes. The Attorney General intervened under G. L. c. 12, § 11E. The company filed its testimony in support of the petition on March 12,1984. Discovery proceeded through April, and the DPU held hearings on May 16, 18, 22, 25 and 30. On May 30, 1984, Fitchburg obtained a six-week suspension of hearings on its financing proposal to flesh out the record “in order for the company, the intervenor, the Attorney General, and the Department to better evaluate . . . the prime concern of the Department, and that is the viability of the Seabrook project.”
On July 9, 1984, Fitchburg moved to recommence hearings and for expedited approval of its petition, subject to the condition that proceeds from the proposed financings would be used only to repay short-term debt outstanding and pre-Newbrook
On August 21, 1984, Fitchburg requested approval to issue only the $5 million of preferred stock, suggesting that approval of the issuance of $13 million of long term notes could be
On October 26, 1984, the department denied the company’s motion for immediate approval of the $5 million issue of preferred stock. The department found that “Fitchburg [had] not demonstrated that a financial emergency exist[ed], or that such an emergency, if it did exist, would justify a departure from the Department’s previously established standards in this area.” With respect to the alleged financial danger, the department found that, on the basis of “pessimistic” assumptions, the company projected cash requirements which would “exceed its present short-term debt levels only slightly and for a very short period.” That forecast, moreover, assumed “no increase in the Company’s present level of short-term credit lines, even though the Company has pending requests with two banks for approximately $5,000,000 of additional short-term credit.”
The DPU’s order cited the department’s “clear obligation under G. L. c. 164, § 14, to make a determination as to the reasonableness both of the Seabrook construction program and the Company’s continued participation in that project” before approving any “financings which will be used to support it.” Fitchburg, the department found, was unable to ensure segregation of funds because of its corporate structure. Thus, “[o]nly if the Company ceased making [Seabrook-related] payments could the Department be assured that the proceeds of any financing which it might authorize would not be used for a purpose, the reasonableness of which is a matter of pending litigation before the Department.”
Although the DPU issued an opinion and findings in conjunction with its October 26, 1984, order, the company took no immediate appeal. On November 7, 1984, the company moved for reconsideration of the DPU’s order of October 26. Fitchburg offered to place the $5 million preferred stock proceeds in escrow, so that they could not be used to finance the Seabrook project. The DPU rejected Fitchburg’s proposal and denied the
In compliance with the department’s order, the company submitted further testimony regarding Seabrook I. On January 18, 1985, the Attorney General moved to extend the schedule of the generic proceeding. Fitchburg opposed the motion and reinstituted its request for expedited approval of financing. On January 25, 1985, the department approved a delay in the procedural schedule without mention of Fitchburg’s financing request. During an evidentiary hearing on January 31, 1985, the hearing examiner informed the parties that the company’s motion for immediate approval of financing had been implicitly denied in the department’s January 25,1985, scheduling order.
The company then appealed to a single justice of this court under G. L. c. 25, § 5, claiming that the DPU’s orders had placed it in a financial crisis. The company introduced an affidavit showing that its level of short term debt had exceeded $17 million by the end of 1984, and thus lay perilously close to the limit the company asserts the banks had imposed; that the company had omitted a common stock dividend for the first quarter of 1985; and that the market value of its common stock had dropped from “nearly $18 per share on October 17, 1984 to $9,375 per share in February, 1985, as compared to a book value per share of $21.60.” The single justice, after hearing, reserved and reported the appeal to the full court without decision, at the parties’ request.
On March 7, 1985, we issued an order stating that the denial by the DPU on January 31, 1985, of the company’s application for approval of an issue of preferred stock was “a final order under G. L. c. 25, § 5.”
On appeal, Fitchburg claims error only in the DPU’s decisions, orders, and rulings of October 26, 1984, November 9, 1984, January 25, 1985, and January 31, 1985, denying the company authority to issue long term financing. No issue regarding the propriety of the generic proceeding is before us.
General Laws c. 25, § 5, as amended through St. 1977, c. 621, provides in pertinent part that “[a]n appeal as to matters of law from any final decision, order or ruling of the commission may be taken to the supreme judicial court by an aggrieved party in interest by the filing of a written petition praying that the order of the commission be modified or set aside in whole or in part” (emphasis supplied). The finality of an order is to be determined “on the footing of its substance and not of its name.” Cheeky. Kaplan, 280 Mass. 170, 176 (1932). Despite the DPU’s styling of its denial of financing as interlocutory, we believe that the denial of the company’s request for immediate financing should be considered final within the meaning of G. L. c. 25, § 5.
The department’s ruling, the company claims, places the company between the Scylla of suspending its contractual payments on the Seabrook project in order to obtain interim financing, thus subjecting the company to liability for breach of its contractual obligations; and the Charybdis of forgoing interim financing and bearing the risk of exceeding the limit on its short term credit. The company urges that the disputed orders of the department: (1) are an error of law under G. L. c. 164, § 14; (2) either constituted an abuse of discretion or were arbitrary or capricious under G. L. c. 30A, § 14 (7)(g); (3) denied the company due process; (4) have resulted in an impermissible confiscation; and (5) denied the company equal protection under the law. We address each challenge in turn.
The company contends that G. L. c. 164, § 14, while authorizing the department to investigate a public utility’s construction project, does not permit the DPU to deny long term financing needed for capitalizing utility plant in service unrelated to that construction program. Fitchburg asserts that, since the company’s last stock issuance in October, 1983, it has
The manifest purpose in enacting G. L. c. 164, § 14, was “to change the whole method of the issue of stock by the public service corporations therein named, and to take away from such corporations and to vest in public officers the right to determine the general question of the reasonable necessity of the issue. And the decision of the [department] is final unless based upon some error of law.” Fall River Gas Works v. Gas & Elec. Light Comm’rs, 214 Mass. 529, 538 (1913). We have held, moreover, that the department’s duty under G. L. c. 164, § 14, goes well beyond a perfunctory review of á company’s proposed financing. “[T]he department must inquire whether the declared purpose of the proposed issue is in fact in the circumstances a reasonably necessary purpose. And having in mind that the function of the department is the protection of public interests and not the promotion of private interests, we think that ‘reasonably necessary’ means reasonably necessary for the accomplishment of some purpose having to do with the obligations of the company to the public and its ability to carry out those obligations with the greatest possible efficiency. . . . [T]he burden of proof [is] upon the [company] to establish a reasonable necessity of this kind.” Lowell Gas Light Co., supra. A proceeding pursuant to G. L. c. 164, § 14, is meant to serve as a screening mechanism “to shield the public from the effects of management’s unchecked discretion in the limited realm of capital spending projects that are so large in relation
Other features of the statute support the conclusion that the Legislature meant the department to exercise considerable influence in utility securities issuance. The department may hold hearings on an issuance application. See. G. L. c. 164, § 14. It may specify the amounts of financing authorized for each approved purpose. Id. If the department finds the price of the proposed stock to be “so low as to be inconsistent with the public interest ... it may fix the price at which such shares may be issued.” G. L. c. 164, § 18, as appearing in St. 1977, c. 259, § 3. See Cambridge Elec. Light Co. v. Department of Pub. Utils., 333 Mass. 536 (1956). Absent department approval, an issue is void. Attorney Gen. v. Massachusetts Pipe Line Gas Co., 179 Mass. 15, 21 (1901).
These powers are merely representative of the department’s broader investigative and supervisory authority over gas and electric companies. “The department shall have the general supervision of all gas and electric companies and shall make all necessary examination and inquiries and keep itself informed as to the condition of the respective properties owned by such corporations and the manner in which they are conducted with reference to the safety and convenience of the public . . . .” G. L. c. 164, § 76, as amended by St. 1982, c. 120, § 6. This grant of authority subtends the department’s power to supervise a utility’s dealings with its affiliates, see G. L. c. 164, § 76A; to examine company records, G. L. c. 164, § 85; to investigate and adjust prices and to order improvement in service, G. L. c. 164, § 93; and to investigate the propriety of rate increase requests, G. L. c. 164, § 94.
Having established that the department had discretion to deny Fitchburg’s interim requests, we conclude that the denials were not an abuse of that discretion. The department consistently found no financial emergency requiring agency action before completion of the generic proceeding. The company’s cash flow chart demonstrated that at no time through the end of 1984 did the company’s short term debt level exceed the limit of $18 million imposed on the company by the banks, nor
“We will not substitute our judgment for that of the department on disputed questions of fact.” Costello v. Department of Pub. Utils., 391 Mass. 527, 533 (1984). The department found each time that it would be impossible to restrict the proceeds of the proposed financing to uses unrelated to Sea-brook. “Deference is owed the department’s expertise and experience in the areas of decision-making delegated to it by the Legislature.” Attorney Gen. v. Department of Pub. Utils., 392 Mass. 262, 263-264 (1984). While the company may have presented “logical reasons, with supporting evidence, for arriving at conclusions contrary to the department’s conclusions on particular issues,” Attorney Gen. v. Department of Pub. Utils., 390 Mass. at 228, it simply did not meet its burden to convince the department of the necessity of immediate financing.
The company’s three allegations of constitutional error fare no better. First, in light of the legitimacy of the Seabrook inquiry pursuant to G. L. c. 164, § 14, there is no basis for the company’s claim that the department’s denial of interim financing and insistence on an extended investigation were based on so unheralded a “change in legal standards” as to implicate the due process clause. We add that Fitchburg, along with other joint owners in the Seabrook project, requested that the DPU initiate the generic proceeding. Second, the company’s claim of confiscation devolves to a prediction that “[i]f . . . financial deterioration continues, it could . . . render the Company unable to attract capital on favorable terms.” “But the forecast is a speculative and unqualified one; against it are to be set the beneficial objects of [G. L. c. 164, § 14] as the department might see them.” Cambridge Elec. Light Co. v. Department of Pub. Utils., 363 Mass. 474, 498-499 (1973). “[I]t is not enough ... to allege confiscation in the hope that
We are not unsympathetic to the company’s situation. “Long delays are inappropriate in a securities issue proceeding. The utility’s decision to issue securities, its determination of the
Judgment should be entered in the county court affirming the department’s denials of interim financing to Fitchburg through January 31, 1985.
So ordered.
General Laws c. 164, § 14, as amended through St. 1977, c. 258, § 2, provides in pertinent part: “Gas and electric companies shall issue only such amount of stock and bonds, and of coupon notes and other evidences of indebtedness payable at periods of more than one year after the date thereof, as the department may from time to time vote is reasonably necessary for the purpose for which such issue of stock, bonds, coupon notes or other evidences of indebtedness has been authorized. The department may take into consideration any resources of the companies available or which might have been available for said purpose. The department shall render a decision upon an application for such issue within thirty days after the final hearing thereon. The decision shall be in writing, shall assign the reasons therefor, shall, if approving such issue, specify the respective amounts of stock, bonds, coupon notes or other evidences of indebtedness which are approved to be issued for the respective purposes to which the proceeds thereof are to be applied, and shall, within seven days after it has been rendered, be filed in the office of the department.”
Newbrook is a plan approved on May 14, 1984, by the joint owners of the Seabrook project which established new financing mechanisms through which joint owners can satisfy their Seabrook obligations.
The DPU regarded its order of January 31, 1985, as an interim order and therefore did not file a statement of its reasons for that decision as required by G. L. c. 164, § 14. The company asked us to treat the order as a final order. We did so and gave the department the opportunity to submit a statement of reasons in compliance with the statute.
The department rendered its decision in the generic proceeding on April 4, 1985. We express no view regarding that decision, but rather confine ourselves to the issues raised only with respect to the department’s denials of Fitchburg’s requests for interim financing.
Because we hold that this appeal is properly before us under G. L. c. 25, § 5, we do not reach the company’s claims of jurisdiction under G. L. c. 211, § 3, and G. L. c. 231A.
Agency review of utility securities issues has been restricted in other jurisdictions. See, e.g., Attorney Gen. v. Michigan Pub. Serv. Comm’n, 412 Mich. 385 (1982); Appeal of Pub. Serv. Co., 122 N.H. 1062 (1982); Public Serv. Co. v. State, 645 P.2d 465 (Okla. 1982). But neither the language of G. L. c. 164, § 14, nor our earlier interpretations of that provision are consistent with a limited view of the power of the department to intercede with respect to a utility’s capital spending programs when these are of such magnitude as to require special securities financing. See Attorney Gen. v. Michigan Pub. Serv. Comm’n, supra at 406-407.
The department describes the contours of its authority as follows: “Ordinarily, if a company establishes a reasonable utility purpose for the proposed financing and there is no issue whether a reasonable decision-making process underlies the management decisions that have prompted the requested financing, then the Department has a sufficient basis to approve it as being reasonably necessary without scrutinizing the economics or prudence of the underlying purpose of the financing. . . . Except in extraordinary circumstances, the Department will defer to the management decisions of the utility.
“Where extraordinary circumstances raise serious questions regarding the efficacy of the purpose for the financing or the adequacy of management’s decision-making process, however, the Department’s level of review must be more detailed. . . . Specifically, such a review must be undertaken when the extraordinary circumstances have the potential to bring about a substantial adverse impact on the public interest.”
We are unpersuaded that the three department decisions cited by Fitchburg demonstrate a violation of equal protection. In Eastern Edison Co., D.P.U. 84-123 (August 22, 1984), the department approved the financing request of Eastern Edison Company. But Eastern Edison Company, unlike its subsidiary, Montaup Electric Company, had no investment in the Sea-brook program. The department was able to restrict the proceeds of the financing to uses unrelated to Montaup. Hence, there was no possibility that the proceeds would be applied to Seabrook. In Massachusetts Mun. Wholesale Elec. Co. (MMWEC), D.P.U. 1627-Phase I (January 11,1985), the DPU partially granted MMWEC’s bonding request in order to avoid “rate shock” were MMWEC to begin billing participants in the Seabrook project for interest payments on outstanding obligations associated with the project. MMWEC, unlike Fitchburg, “is a public power corporation with no stockholders to bear the risks associated with power plant construction.” Id. at 29. Last, the department, in Canal Elec. Co., D.P.U. 1657 (December 9, 1983), found “exigent circumstances” demanding approval of the company’s proposed financings. The department balanced the “substantial risk of loss of savings” against “substantial questions raised by the state of the record and the Attorney General’s arguments which require further inquiry.” Id. at 12. The company’s use of the proceeds from the equity sale was restricted “to be initially available only to meet the minimum debt/equity ratio requirements of the company’s bond indenture.” Id.
We stress that it would behoove the parties to file with the court copies of DPU decisions on which they rely. Cf. Massachusetts Elec. Co. v. Department of Pub. Utils., 376 Mass. 294, 305 n.5 (1978).