In re Petition of Conservation Law Foundation
No. 2017-162
Supreme Court of Vermont
2018 VT 42
October Term, 2017
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.
On Appeal from Public Utility Commission
James Volz, Chair
Sandra Levine, Vermont Advocacy Center, Montpelier, for Appellant.
Craig S. Nolan and Owen J. McClain of Sheehey Furlong & Behm P.C., Burlington, for Appellee Vermont Gas Systems, Inc.
Daniel C. Burke, Department of Public Service, Montpelier, for Appellee Vermont Department of Public Service.
PRESENT: Reiber, C.J., Skoglund, Robinson, Eaton and Carroll, JJ.
Construction, operation, and maintenance of the proposed Project shall be in accordance with plans and evidence submitted in this proceeding. Any material deviation from these plans or a substantial change to the Project must be approved by the [Commission].
¶ 3. In July 2014, while an appeal of the CPG was pending before this Court, VGS, pursuant to Commission Rule 5.409, filed an updated capital cost estimate with the Commission. The updated estimate reflected a 41% net change in estimated cost, from $86.6 million at the time of the CPG award to $121,655,000. In September 2014, this Court granted the Commission‘s request for a remand of the CPG proceeding so that it could determine whether to reopen the CPG proceedings under
¶ 4. On remand, the Commission held a hearing and CLF filed a post-hearing brief arguing that the Commission should reopen the CPG proceedings. In a thirty-page decision released in October 2014, the Commission ruled that the Project cost estimate increase was “not of such a material and controlling nature so as to change [the Commission‘s] previous determination that approval of the Project pursuant to the criteria of
¶ 5. In December 2014, VGS filed a second update of the estimated capital costs of the project. By that time, estimated project costs had risen to $153.6 million, representing a 78% increase over the original estimate at the time of the CPG award. In February 2015, this Court granted the Commission‘s request for a second remand in docket 7970 to enable the Commission to again consider whether to reopen the CPG proceedings under
¶ 6. After an opportunity for discovery, the Commission held evidentiary hearings. The Commission considered the revised cost estimates as well as arguments that the CPG did not serve the public good in light of changes in energy markets. CLF filed a post-hearing brief. On January 8, 2016, the Commission held that the new evidence—“the most significant of which” being “the much higher estimated cost of the Project“—did not alter its previous conclusion that the Project “promot[ed] the general good and is in the best interest of the state” under
¶ 7. Meanwhile, in July 2014, during the pendency of proceedings in docket 7970, CLF filed a separate petition (docket 8330) seeking a declaratory ruling from the Commission that the Project cost increases and changes in energy markets represented a “substantial change” under Commission Rule 5.408, thus requiring an amended CPG. Commission Rule 5.408 states:
An amendment to a certificate of public good for construction of generation or transmission facilities, issued under
30 , shall be required for a substantial change in the approved proposal. For the purpose of this subsection, a substantial change is a change in the approved proposal that has the potential for significant impact with respect to any of the criteria of Section 248(b) or on the general good of the state under Section 248(a).V.S.A. § 248
Requirements for Petitions to Construct Electric and Gas Facilities § 5.408, Code of Vt. Rules 30 000 5400, http://www.lexisnexis.com/hottopics/codeofvtrules [hereinafter Rule 5.408]. After the Commission decided not to reopen the CPG proceedings on the first remand in docket 7970, VGS moved to close docket 8330 because, it argued, the Commission had already ruled on the issues raised by CLF—i.e., that the Commission should reopen the CPG proceedings due to the increased Project costs and changes in energy markets. The Commission denied this motion and set a schedule for the proceedings that included briefing and a hearing with oral argument.
¶ 8. In March 2017, the Commission denied CLF‘s request for declaratory relief. The Commission explained that whether increased project costs and changes in energy markets are a “substantial change” under Rule 5.408 was a matter of first impression. It began by reading Rule 5.408 together with Rule 5.409. The Commission noted that when it promulgated Rule 5.408 in 2006, it simultaneously promulgated Rule 5.409, which specifically addresses reporting for cost increases. Commission Rule 5.409 states:
Where a Vermont utility is the petitioner, or the costs of a project or a portion thereof are eligible to be recovered from ratepayers, the petitioner shall regularly monitor and update the estimated capital costs of any project it has proposed for or received approval under Section 248. When the estimated capital costs of a such a project increase by 20 percent, and the increase is at least $25,000, or such other amount as the Commission may order in a given proceeding or prescribe in a Procedure, prior cost estimates submitted by the petitioner to the Commission, the petitioner shall notify the Commission and parties of the new capital cost estimates for the project and the reasons for the increase. This requirement to monitor, update, and report shall continue until construction of the project has been completed.
Id. § 5.409 [hereinafter Rule 5.409]. Rule 5.409, the Commission concluded, “is directed at protecting ratepayers from escalations of project costs by expressly requiring utilities to monitor the estimated capital costs of projects and imposing a duty to report cost-estimate increases of more than 20%.” The Commission noted that under Rule 5.409, when cost estimates increase, the company must provide an explanation. However, the Commission noted, “by its terms, Rule 5.409 does not require any additional review of reported cost increases,” but rather, “presents an opportunity for the [Commission] and affected parties to consider whether any additional review is warranted and, if so, what type of review, whether pursuant to Rule 5.408, Rule 60, or any other type of review that appears appropriate under the circumstances.” In “[r]eading Rules 5.408 and 5.409 together,” the Commission explained, “an increased cost estimate by itself does not, as a matter of law, constitute a substantial change that requires a Rule 5.408 amendment review.” The Commission concluded that “[a] cost increase without attendant physical changes does not alter the proposal itself because the [Commission] does not approve the estimated cost of a project in a Section 248 [CPG] proceeding.” But a cost increase
¶ 9. Applying this construction, the Commission held that, in this case, Rule 5.408 did not require a CPG amendment because the cost overruns and changes in energy markets do not represent “cognizable changes” to the Project‘s approved CPG proposal. The Commission emphasized that its narrow conclusion that review under 5.408 is not required on account of increased cost estimates did not signal that such cost overrides are irrelevant or immune from review. It explained that in instances where a cost estimate increases or market fluctuations raise doubt about the continued validity of its previous finding of public good in an issued CPG, Rule 5.409 provides the Commission an opportunity to review and decide whether to reopen the proceedings under
¶ 10. On appeal from the Commission‘s ruling, CLF makes several arguments. First, CLF contends that under the plain language of Rule 5.408, a significant increase in a project cost estimate is a change to the CPG “approved proposal.” Cost estimates, CLF argues, are “a necessary and indispensable part of the proposal,” and are essential to the Commission‘s review under the
¶ 11. Second, CLF contends that by eliminating consideration of non-physical changes to the Project in Rule 5.408—such as cost estimate increases or changes in energy markets—the Commission disregarded statutory criteria in
¶ 12. Finally, CLF argues that the Commission‘s failure to require a CPG amendment infringed its procedural due process rights under the
¶ 13. Rule 5.408 requires an amendment to a CPG “for a substantial change in the approved proposal,” defined as “a change in the approved proposal that has the potential for significant impact with respect to any of the criteria of Section 248(b) or on the general good of the state under Section 248(a).”
¶ 14. This case presents a narrow issue: do significant increases in the Project‘s estimated costs, coupled with evolution in energy markets, amount to a “substantial change” under Rule 5.408 requiring an amendment to the CPG? We conclude that on this record it does not. Our conclusion is based primarily upon the deference we owe to the Commission‘s reasonable interpretation of its own promulgated regulation in the face of two competing reasonable interpretations. The rulemaking history of Rule 5.408 lends further support to the Commission‘s interpretation. The availability of review through
¶ 15. Our primary goal in interpreting an administrative rule is to discern the intent of the drafters, and we so do by examining the plain meaning of the regulatory language, with “other tools of construction . . . should the plain meaning rule prove unavailing.” In re Williston Inn Grp., 2008 VT 47, ¶ 14, 183 Vt. 621, 949 A.2d 1073; see also In re Vitale, 151 Vt. 580, 584, 563 A.2d 613, 616 (1989) (“The primary rule when reviewing the construction of an administrative rule is to give the language its plain, ordinary meaning.“). Out of respect for the expertise and informed judgement of agencies, and in recognition of this Court‘s proper role in the separation of powers, we accord agency decisions substantial deference. Williston Inn Grp., 2008 VT 47, ¶ 11. As long as an agency decision is “directed at proper regulatory objectives,” it is presumed valid. In re Citizens Util. Co., 171 Vt. 447, 450, 769 A.2d 19, 23 (2000). This deference extends to an agency‘s—here, the Commission‘s—interpretation of its own promulgated regulation. See, e.g., In re Verburg, 159 Vt. 161, 165, 616 A.2d 237, 239 (1992) (explaining that “we employ a deferential standard of review for an agency‘s interpretations of its own regulations“).
¶ 16. An agency does not have carte blanche in interpreting a regulation, however. See In re Wal-Mart Stores, Inc., 167 Vt. 75, 80, 702 A.2d 397, 400 (1997) (“Our deferential level of review . . . does not equate with mere judicial passivity in determining the propriety of Board ‘interpretations’ of its own rules.” (quotation omitted)). We still conduct an independent review and will overturn an agency‘s interpretation of its own promulgated regulation that exceeds the authority granted under the state enabling statute, In re Stowe Cady Hill Solar, 2018 VT 3, ¶ 21, ___ Vt. ___, ___ A.3d ___; that conflicts with past agency interpretations of the same rule, id.; that results in “unjust, unreasonable or absurd consequences,” Verburg, 159 Vt. at 165, 616 A.2d at 239 (quotation omitted); or that demonstrates “compelling indications of errors.” Conservation Law Found. v. Burke, 162 Vt. 115, 121, 645 A.2d 495, 499 (1993).
¶ 18. Deference to the Commission is particularly appropriate in this context, given the specialized expertise involved in awarding CPGs for gas and electric facilities, see, e.g., In re VTel Wireless, Inc., 2015 VT 135, ¶ 10, 201 Vt. 1, 134 A.3d 1227 (noting “particular expertise and informed judgment” required to issue CPG (quotation omitted)), and the Commission‘s thorough adjudicative process. See
¶ 19. The regulatory history behind the promulgation of Rules 5.408 and 5.409 further supports the Commission‘s interpretation. The Commission proposed these rules shortly after its 2005 decision in In re Vermont Electric Power Co., No. 6860, 2005 WL 2757324 (Vt. Pub. Serv. Bd. Sept. 23, 2005). In that case, the Commission
¶ 20. Subsequently, and simultaneously, the Commission promulgated Rules 5.408 and 5.409. As noted above, Rule 5.408 requires an amendment to a CPG for a “substantial change to the approved proposal,” while Rule 5.409 requires reporting of project cost overruns. Compare Rule 5.408 (“An amendment to a certificate of public good for construction of generation or transmission facilities, issued under
¶ 21. The Commission‘s initial draft rule created one rule requiring notice for “material changes” that may have the “potential to significantly impact the substantive [§ 248] criteria.” Memorandum on Draft Rules for Sec. 248 from J. Whitney, Deputy Clerk of the Vt. Pub. Serv. Bd. to Service List 4 (Oct. 5, 2005). The Vermont Department of Public Service submitted a comment and suggested two rules similar to the current versions of Rules 5.408 and 5.409 in order to “differentiate the treatment of cost increases in
¶ 22. The Commission accepted the Department‘s recommendation to separate its initial proposed rule into what are now Rules 5.408 and 5.409, and explicitly adopted the Department‘s recommendation that it “codify the [Commission‘s] precedent regarding when an amendment to an approved certificate of public good is required.” Vt. Pub. Serv. Bd. Response to Substantive Comments Received Regarding Rule 5.400.
¶ 24. Although not dispositive, this rulemaking history lends support to the Commission‘s interpretation in several ways. First, nothing in the history suggests that the rules were intended to upend the law applied by the Commission in the Northwest Reliability Project case. If anything, this history suggests that the rules as promulgated were intended to codify existing Commission case law. Second, the Commission‘s position here is consistent with its adoption of the Department‘s recommendation while saying nothing in its responsive comments questioning the Department‘s distinction between “a cost increase [which] calls into question the original approval because evidence on which the approval was based is no longer correct,” and “a change in design or use of a construction project [which] does not call into question the original approval, which would still be valid for the originally approved design or use.” And finally, the fact that during this rulemaking process the Commission‘s discussion of cost overruns focused on when and whether to reopen proceedings, and referenced the rules of civil procedure rather than the rules for amending certificates, reinforces its current position that the rules contemplate that cost overruns will be addressed through a
¶ 25. The availability of other remedies is critical to our holding. CLF had the opportunity to seek review of the CPG approval pursuant to
¶ 26. We acknowledge CLF‘s argument that a
¶ 27. We are not fully persuaded by CLF‘s argument. On the one hand, CLF is correct that the difference in burdens of proof could make it more difficult for a party opposing an approved project to halt its progress through
¶ 29. New Cingular Wireless PCS, LLC does not support CLF‘s constitutional claims. In that case, this Court considered a procedural due process challenge by neighbors to the proposed site of a telecommunications tower to the Commission‘s CPG award under
¶ 30. Here, just as in New Cingular Wireless PCS, LLC, CLF does not claim an individual property interest and, as such, its due process claim fails. As noted above, a
Affirmed.
FOR THE COURT:
Associate Justice
