MOUNTAIN STATES LEGAL FOUNDATION, Plaintiff, v. UTAH PUBLIC SERVICE COMMISSION; Milly Bernard, Olof Zundel, and Kenneth Rigtrup, as Commissioners thereof, Defendants.
No. 16162.
Supreme Court of Utah.
Sept. 4, 1981.
637 P.2d 635
STEWART, Justice
In the instant case, there was reasonable cause for Officer Parker to arrest the juvenile. Upon approaching the truck and speaking with the juvenile, Officer Parker noticed that he was under the age of 21, appeared sleepy, had very bloodshot eyes, and was slow to respond to the officer‘s queries. The officer had an unobstructed view of two bottles of beer on the truck seat between the juvenile and his companion. The above facts constitute reasonable cause for the officer to believe that the juvenile was in possession of alcohol in violation of
In light of the discussion above, we need not discuss whether the search would be justified under the “automobile exception” to the warrant requirement.
For the reasons set out above, the search in question was not a violation of the juvenile‘s constitutional rights and the denial of his motion to suppress was not error.
The order of the juvenile court is affirmed.
David L. Wilkinson, Frank V. Nelson, F. Robert Reeder, James M. Elegante, Sidney G. Baucom, Salt Lake City, for defendants.
STEWART, Justice:
The Utah Public Service Commission (“PSC,” or “Commission“) granted a general rate increase to Utah Power & Light Co. (“UP&L“). The increase was spread over all customers except heads of households over 65 years of age. They were exempted from the increase as to the first block of 400 kwh per month, except for that part of the increase attributable to a fuel increase pass-through. The reduced revenues resulting from the “senior citizen rate” are made up by other residential customers, and not all remaining customers. Mountain States Legal Foundation (“MSLF“) challenges the “senior citizen” rate on the ground that it is an unlawful preference under
On March 30, 1978, UP&L filed an application to increase its rates and charges to consumers in Utah. The application sought authority to increase its rates by $64,778,000 annually. UP&L also sought, through a separate application, an additional rate increase of $9,207,000. These two applications were consolidated and heard together. As part of the $64,778,000, UP&L requested (1) $8,750,000 to implement prior Commission orders placing the cost of construction work in progress in the rate base, and (2) $8,359,000 to implement prior Commission orders allowing UP&L to account for tax timing differences resulting from the use of accelerated depreciation methods by adopting “normalized accounting” in place of “flow-through accounting.” UP&L represented that the increase in revenues would allow a reasonable return on equity which UP&L had theretofore been unable to earn and that authorization of the increased revenue requested was necessary for UP&L to maintain a financially stable condition and to continue to render reliable service to its customers.
The Commission subsequently entered an order granting, on an interim basis, the request for a fuel pass-through increase and authorizing UP&L to increase its rates to recover additional revenue in the amount of $9,207,000. That amount was to be collected proportionately from all customers.
After a hearing on a stipulated revenue increase which had been proposed by UP&L and the Division of Public Utilities, the Commission ruled that a revenue increase of $33,785,000 was justified. In a two-to-one decision, the Commission ruled that the increase in rates should be spread uniformly among all rate classes, except for the “senior citizen rate” which was to go into effect on an interim basis. The Commission ordered that the revenue deficiency created by that rate be spread only among the remaining residential customers and not among all customers.
Thereafter, MSLF was permitted to intervene in UP&L‘s general rate case on behalf of those of its members who were nonelderly residential customers of UP&L. MSLF petitioned for a rehearing of the Commission‘s order establishing the senior citizen rate, and the petition was granted. After a further hearing, the Commission, on a two-to-one vote, issued its final “Report and Order” which made permanent the “senior citizen head of household” rate category.
Mountain States argues that the senior citizen rate constitutes a required subsidization of senior citizens by other residential customers and that it is not the function of the Public Service Commission to engage in social welfare programs. Specifically, MSLF asserts that senior citizens are not a legitimate class or subclass separate from other residential customers and that the rate extended senior citizens is illegal under
This Court‘s scope of review of Commission orders which are attacked for establishing unreasonable or discriminatory rates is narrow. Basic responsibility for rate making policy is vested in the Commission, not the courts. Particularly with respect to reasonableness of rates and discrimination in rate structures is judicial review limited.
The findings and conclusions of the commission on questions of fact shall be final and shall not be subject to review. Such questions of fact shall include ultimate facts and the findings and conclusions of the commission on reasonableness and discrimination.
Deference to the Commission‘s findings, as required by
It is, therefore, the responsibility of this Court to determine whether the Commission acted outside its jurisdiction, in excess of its lawful powers, or in a manner which is arbitrary and capricious and therefore without legal justification. Lake Shore Motor Coach Lines, Inc. v. Welling, 9 Utah 2d 114, 339 P.2d 1011 (1959). See also Williams v. Public Service Commission of Utah, 29 Utah 2d 9, 504 P.2d 34 (1972). To enable this Court to determine whether an order is arbitrary and capricious, the Commission must make findings of fact which are sufficiently detailed to apprise the parties and the Court of the basis for the Commission‘s decision, e. g., Nader v. Nuclear Regulatory Commission, 513 F.2d 1045 (D.C.Cir.1975); Blue Cross of Kansas, Inc. v. Bell, 227 Kan. 426, 607 P.2d 498 (1980); Continental Oil Co. v. Oil Conservation Commission, 70 N.M. 310, 373 P.2d 809 (1962).
For this Court to sustain an order, the findings must be sufficiently detailed to demonstrate that the Commission has properly arrived at the ultimate factual findings and has properly applied the governing rules of law to those findings. Ultimate findings as to reasonableness and discrimination must be sustained if there are adequate subordinate findings to support them, and there is substantial evidence to support the findings. Mulcahy v. Public Service Commission, supra. It is not the prerogative of this Court to search the record to determine whether findings could have been made by the Commission to support its order, for to do so would be to usurp the function with which the Commission is charged.
It is axiomatic in rate making that utilities are barred from treating persons similarly situated in a dissimilar fashion. State ex rel. Utilities Commission v. The Mead Corp., 238 N.C. 451, 78 S.E.2d 290 (1953); Postal Telegraph-Cable Co. v. Associated Press, 228 N.Y. 370, 127 N.E. 256 (1920). Reasonable classifications between consumers may be made, but there must be adequate findings of fact, supported by evidence, which demonstrate a rational basis for the classification.
No public utility shall, as to rates, charges, service, facilities or in any other respect, make or grant any preference or advantage to any person, or subject any person to any prejudice or disadvantage. No public utility shall establish or maintain any unreasonable difference as to rates, charges, service or facilities, or in any other respect, either as between localities or as between classes of service. The Commission shall have power to determine any question of fact arising under this section. [Emphasis added].
Thus, as between persons, public utilities are prohibited from granting any preference or advantage or subjecting any person to “any prejudice or disadvantage.” As between localities or classes of service, public utilities are prohibited from establishing or maintaining “any unreasonable difference.”
MSLF contends that senior citizens are indistinguishable from the other residential customers and that the lower rate granted senior citizens constitutes a preference which is per se unlawful.
We begin with the general proposition that the power to classify customers according to common characteristics is essential to rational rate making. Appropriate classification of customers, if for no other reason, is necessary to maximize the efficient utilization of plant and equipment and thereby provide the lowest possible rates on an equitable basis. Although
Classification of customers must necessarily be accomplished by reference to general characteristics having some rational nexus with the criteria used for determin-
Despite the difficulties inherent in making classifications, the distinction in
In the instant case, the Commission did not purport to establish senior citizens as a separate class; rather it designated them a subclass of the general consumer class.1 But whether designated a separate class or a subclass, the result is that senior citizens receive favored treatment compared with other residential customers. In this case, therefore, we scrutinize the basis for the preferential treatment with greater care than we would if the question were the reasonableness of a preference between classes.
The Commission did not base the rate difference on a cost of service analysis. There is no finding that the cost of providing electricity to senior citizens is less than other residential customers. But neither is cost of service the only basis for determining that a group of consumers constitute a valid class for rate making purposes. Although that standard provides a well-recognized basis for classifying customers, it need not be, and often is not, the sole criterion. American Hoechest Corp. v. Department of Public Utilities, 379 Mass. 408, 399 N.E.2d 1 (1980).2 See Jones, Judicial
The Commission‘s opinion asserts a legal basis for its ruling in the 1977 amendment to
All charges made, demanded, or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished, or for any service rendered or to be rendered, shall be just and reasonable. Every unjust or unreasonable charge made, demanded or received for such product or commodity or service is hereby prohibited and declared unlawful. Every public utility shall furnish, provide and maintain such service, instrumentalities, equipment and facilities as will promote the safety, health, comfort and convenience of its patrons, employees and the public, and as will be in all respects adequate, efficient, just and reasonable. All rules and regulations made by a public utility affecting or pertaining to its charges or service to the public shall be just and reasonable. The scope of definition “just and reasonable” may include, but shall not be limited to, the cost of providing service to each category of customer, economic impact of charges on each category of customer, and on the well-being of the State of Utah; methods of reducing wide periodic variations in demand of such products, commodities or services, and means of encouraging conservation of resources and energy.
Thus, the Legislature has specifically rejected cost of service as the sole criterion for determining whether a rate is just and reasonable as “to each category of customer,” although that standard is recognized as one among several others to be evaluated. Also to be considered are such standards as
Although the Legislature did not amend the preference statute,
MSLF resists this conclusion with the argument that
It is true, of course, as MSLF points out, that “[a]ll discrimination cases are based upon the relationship of one rate to another.” Mountain States Telephone & Telegraph Co. v. Public Service Commission, 105 Utah 266, 268, 145 P.2d 790, 791 (1940). But that is only a starting point. If preferences were determined solely on the basis of such a test, industrial, commercial, residential, and all other types of rates would have to be the same, irrespective of all other considerations, including cost of service, market conditions, and the various factors that should be, and generally are, considered in rational pricing decisions. It is discriminations with no rational basis, and discriminations based on factors foreign to the regulatory scheme, which are aimed at by the preference statute.
The criteria set out in
We recognize that several public utility commissions, including Utah, have held that discriminatory rates based solely on age or income of residential customers are invalid preferences. Re Potomac Electric Power Co., 84 P.U.R.3d 250 (D.C.1970); Re Utah Power and Light Co., 29 P.U.R.4th 399 (Idaho 1979); Re Rate Concessions to Poor Persons and Senior Citizens, 14 P.U.R.4th 87 (Ore.1976); Pennsylvania Public Utility Commission v. Philadelphia Electric Co., 91 P.U.R.3d 321 (Pa.1971); Re Mountain States Telephone & Telegraph Co., 2 P.U.R.3d 123 (Utah 1954).4 However, insofar as we have been able to determine, only one appellate court has held a senior citizen electric rate invalid as a preference. Mountain States Legal Foundation v. Public Utilities Commission, 197 Colo. 56, 590 P.2d 495 (1979). See also Colorado Municipal League v. Public Utilities Commission, 197 Colo. 106, 591 P.2d 577 (1979).
At least one court, however, has reached an opposite conclusion. American Hoechest Corp. v. Department of Public Utilities, 379 Mass. 408, 399 N.E.2d 1 (1980), approved on an experimental basis a special rate for low income heads of households over 65. In addition, at least two public utility commissions have approved favorable rate structures for the poor or elderly on an experimental basis. Re Narragansett Electric Co., 23 P.U.R.4th 516 (R.I.1978), approved a
Several courts have also approved a flattening of rates in a declining block rate structure based on volume, with the effect of lessening the burden on low income customers. City of New York v. Public Service Commission, 17 A.D.2d 581, 237 N.Y.S.2d 617 (1963); United States Steel Corp. v. Pennsylvania Public Utility Commission, 37 Pa.Cmwlth. 173, 390 A.2d 865 (1978); General Motors Corp. v. Public Utilities Commission, 47 Ohio St.2d 58, 351 N.E.2d 183 (1976).5 See also Re Pacific Telephone and Telegraph Co., 32 P.U.R.4th 121 (Cal.1979), authorized a telephone company to institute a lifeline service for residential customers; Re Montana Power Co., 33 P.U.R.4th 256 (Mont.1979) authorized lifeline rates on a cost justification basis for natural gas service. Compare Rhode Island Consumer‘s Council v. Smith, 111 R.I. 271, 302 A.2d 757 (1973), where the court stated that a commission-compelled senior citizens rate was unlawful, but intimated that such a rate initiated by the power company would be lawful. See also cases collected in Toubman & Ranch, Recent Decisions On Rate Structure Reform: A Survey With Emphasis On Lifeline Rates,
The national impact of the Arab oil boycott, the international oil cartel, and the increasing scarcity of cheap fuels have resulted in dramatically increased fuel costs. These increased costs, combined with high inflation in the cost of constructing new generating plants, have resulted in substantially escalated prices for electricity, although more so in some parts of the country than in others. The steep escalation in the price of electricity has highlighted the plain fact that electricity, for most people, is indispensable for maintaining health and life. As a consequence, historical methods of rate making are being reevaluated by legislatures and scholars. Thus, the Utah Legislature passed the 1977 amendment to the Public Utilities Act, and the Federal Congress enacted the
It has been contended, for example, that lower rates should be accorded low usage residential customers on what is basically a modified traditional cost of service analysis. The necessary generating capacity of an electric utility is determined by peak load demand. As peak demand grows, new plant and equipment may be required.6 In some situations, high usage customers may be more responsible for contributing to the need for additional generating capacity, and, conversely, low usage customers may add little, if anything, to the need for additional generating capacity. See generally, Lifeline Electric Rates, supra. Thus, depending on the method adopted by the Commission for allocating costs, some low usage customers could properly be burdened with something less than all of a rate in-
Nevertheless, it is not for this Court to set basic rate making policy. We can no more rule as a matter of law that the senior citizen rate is per se an unlawful preference than we could rule that it is not a preference. The issue must, therefore, turn on the findings and reasoning of the Commission, for it is the Commission which must make the basic factual determinations.
Necessarily the utility company also has a role to play in rate making. To a large extent the statutory scheme places responsibility for proposing rates with the utility. Within the limitations imposed by the Public Utility Act and the general policies of the Commission, management decisions are generally accorded some deference, since management is most intimately involved in operating the utility and looking after the interests of customers, creditors, and owners. See New England Tel. & Tel. Co. v. Department of Public Utilities, 371 Mass. 67, 354 N.E.2d 860 (1976); Rhode Island Consumers’ Council v. Smith, 111 R.I. 271, 302 A.2d 757 (1973). In this regard, we note that UP&L proposed a senior citizen rate essentially in the same form as the rate adopted by the Commission. Nonetheless, the exercise of management prerogatives is still subject to the limitations of the Public Utilities Act, and the Commission must, in all events, provide the necessary findings of fact and conclusions of law.
In the instant case, the Commission sustained the senior citizen rate solely on the ground that, as a general proposition, senior citizens on the average receive less gross income and consume less power. The critical issue is whether, compared with other residential users, less income and consumption provide a lawful basis for lower rates. As noted, MSLF and the amici contend that public service commissions are not empowered to act on the basis of social policy, and in particular, of subsidizing one group of consumers at the expense of other consumers. They contend that such policies are solely for the Legislature to make.
MSLF supports this argument by reference to Senate Concurrent Resolution No. 1, adopted March 10, 1977, which states that “[e]nergy prices should be determined by total costs and market place conditions” and that the “state effort to minimize the social problems resulting from energy costs, as in the case of food costs, is the responsibility of social services and not of energy pricing policies.”
This Resolution, however, does not settle the issue. In the first place, the term “total cost” is not self-defining, but depends on which of several accounting theories is used to define “total costs.” Furthermore, to the extent that a duly enacted statute conflicts with a legislative resolution, the courts are obliged to give effect to the statute as the governing law. Although we would not lightly disregard a legislative resolution dealing with an issue not controlled by law, a resolution is, nevertheless, not law but only a consensus as to a particular policy. The 1977 amendments to
Nevertheless, we are compelled to conclude that the Commission‘s findings in support of the senior citizens rate are inadequate as a matter of law. The Commission must articulate a rational connection between the facts found and the conclusions reached, and the Commission has not done that.
The whole basis for the senior citizen subclass rests on findings of lower consump-
In the only case known to us which has sustained a somewhat similar rate, the class was limited to heads of household over 65 years of age who received supplemental security income benefits, a class characterized by the court as the neediest of the needy. American Hoechest Corp. v. Dept. of Public Utilities, 379 Mass. 408, 399 N.E.2d 1 (1980). Although it is clear that senior citizens generally have been adversely affected by inflation, it does not follow that all, or even the majority of, heads of household over 65, even though they have lower incomes than the average citizen, are less well off financially. The Commission simply made no finding on the point. It may be that for some senior citizens expenses have also decreased along with income. Nor is there any explanation of the relationship between the need for a senior citizen rate and the Commission‘s rate making policies.
In addition, there are others, not senior citizens, in similar economic conditions. However, the Commission has not explained why it defined the class in the manner it did. It is arguable that the classification is underbroad in that sense, but overbroad in the sense that not all senior citizens have lower incomes or consume less energy than the average population. Perhaps a senior citizen class could be justified on grounds of efficiency in dealing with what may be, for example, a more stable group of customers with fewer credit risks, but the Commission has not supplied us with any such reasons, and it would be nothing less than a speculative enterprise for us to attempt to do so.
Although the Commission exercises a form of legislative power in rate making, it is not the same as the Legislature. The legality and the legitimacy of its orders rest on well-articulated findings and reasons which are in accord with governing law. In administrative matters such as this, there must be findings on all material issues. Colorado Wyoming Gas Co. v. Federal Power Commission, 324 U.S. 626, 65 S.Ct. 850, 89 L.Ed. 1235 (1945); Pan American Petroleum Corp. v. Wyoming Oil and Gas Conservation Commission, Wyo., 446 P.2d 550 (1968). Only then can the interests of the public, the ratepayers, and the utility be protected. Furthermore, it is not possible for this Court, without such a foundation, to perform its assigned task of judicial review. Application of Hawaii Electric Light Co., Inc., Hawaii, 594 P.2d 612 (1979); American Can Co. v. Davis, 28 Or.App. 207, 559 P.2d 898 (1977).
Perhaps a senior citizen class can be sustained; however, it is not for this Court to “supply a reasoned basis for the agency‘s action that the agency has not given ....” Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86, 95 S.Ct. 438, 441-42, 42 L.Ed.2d 447 (1974); nor are we authorized to make findings not made by the Commission. We are compelled to conclude, therefore, that the order is unlawful because there are inadequate findings of fact to support it.
Under the circumstances, it is not necessary to address the equal protection arguments based on the Utah and United States Constitutions or the contention that the difference in rates between the senior citizen class and the general residential class is unreasonably discriminatory.
We are aware that the Commission has under consideration a broad review of rate making policies pursuant to the
The order of the Public Service Commission establishing the senior citizen rate is accordingly set aside.
HALL, C. J., and HOWE, J., concur.
MAUGHAN, J., heard the arguments but died before the opinion was filed.
CROCKETT, Retired Justice (concurring with added comments)*.
I concur with the main opinion and note my appreciation of the thorough and scholarly treatment of the problem involved. In supplementation thereof, I make some separate observations.
The first and foundational one is that although the defendant utility is a monopoly, subject to regulation by the Public Service Commission, it is nevertheless a private enterprise, and all aspects of its operation should be left primarily to the judgment of its management; subject secondarily to disapproval or control by the Public Service Commission; and only thirdly, and thus somewhat remotely, to interference with or correction by this Court.
The objectives of the utility include the providing of efficient and economical service to the public; and also the long-range plan of so continuing, and of making a profit for itself and those who supply its capital. This involves consideration of a complexity of factors in the formulation of a rate structure that in the judgment of management will best serve those objectives.
According to my view, it is to be conceded that the differing rates charged to customers should not be fixed on the basis of compelling some rate payers to provide charity for others. However, because of the differences in rendering service to and deriving income from different classes of customers, there is justification for charg-1ing different rates to various classes of industrial, commercial and residential users. So long as there is a rational basis for the classification, which the management thinks will help in carrying out the above-stated objectives, and all within the class are treated equally, there is no impermissible discrimination.
As the main opinion suggests, there are a number of factors to which may be given consideration by management in exercising its judgment. This includes that users over 65, who are heads of households, are for the most part, more stable than other users and less apt to be moving about; and that they are therefore to some degree more constant in their patronage, less trouble and expense in billings, and more certain in their payments, resulting in a lower percentage of debt losses. Further, that it may be well to give some recognition to long-time customers, both as a reward to them and as an encouragement to others. This would tend to insure that all of such elderly persons are individual patrons of its service, so that the utility is providing such service to the highest possible percentage of customers in the community. This would serve the purpose of meeting competition with suppliers of other forms of energy, and perhaps of greater importance, of promoting good will for the utility. This is something for which many utilities expend substantial sums.
It also should be stated that the principle of charging lower rates for one class of users as here involved could be overreached to the point of unreasonableness and therefore constitute impermissible discrimination. But as has been observed above, there are the safeguards against such abuses in that the rates are proposed by the utility and are subject to the approval of the Public Service Commission.
Under the standard rule of review of administrative actions, this Court should not invalidate the decisions of management, approved by the Commission, unless it
On the basis of what has been said in the main opinion, and in these comments, I do not believe it is shown that the rate under attack here reaches the point of being so entirely without a basis in reason that it must be deemed capricious and arbitrary and thus subject to invalidation. Because of the involvement of the public interest, both as to the principles generally, and as applied to this case, I agree with the remand for further proceedings.
Notes
It is “axiomatic in ratemaking” that “different treatment for different classes of customers, reasonably classified, is not unlawful discrimination.” Boston Real Estate Bd. v. Department of Pub. Utils., 334 Mass. 477, 495, 136 N.E.2d 243, 254 (1956). While cost of service is a well-recognized basis for utility rate structures, it need not be the sole criterion. Monsanto Co. v. Department of Pub. Utils., 379 Mass. 317, 397 N.E.2d 1110 (1979), and cases cited. See Jones, Judicial Determination of Public Utility Rates: A Critique,
“However, analyses of costs and studies of market-demand characteristics can take one just so far; ultimately, the setting of rates requires the exercise of experienced judgment.” Garfield and Lovejoy, Public Utility Economics, 138 (Prentice-Hall, Inc. 1964).
“It is a generally accepted principle of public utility rate making that differences in the conditions of demand, as among the respective customer classes, indicate that each class has a different capacity and willingness to bear charges. Accordingly, with reference to value-of-service factors, rates are made so as to distribute the approved company-wide cost of service in relation to the capacity and willingness of the customer groups to bear such costs. More specifically each class bears the identifiable costs that can be associated with its service plus the portion of the joint costs that its demand characteristics indicate it can bear, while continuing to consume a satisfactory quantity of service. In addition, the operation of the value-of-service principle in utility rate making extends to the earning of different rates of profit from different classes of customers or service, within the framework of the over-all return approved under regulation.” Id. at 143. See generally, id, Ch. 10.
These principles are discussed in Bonbright, Principles of Public Utility Rates, ch. VII, Social Principles of Rate Making (Columbia U.Press, 1961); Phillips, The Economics of Regulation, Chs. 10 and 11 (Rev. ed. 1972).