Utah Power & Light Co. v. Idaho Public Utilities Commission

he agreement had an with counsel that a

default notice would be sent in order to center,

move a case off dead but it was agreed taken,

also that no default would be

the court in its unbridled discretion is free relief, is,

to withhold unless the other

attorney admits having had the same

understanding. is an unenjoyable pros- It

pect and unfortunately evolves out of a case

where neither the facts and circumstances

nor long established law offer any support. COMPANY, POWER &

UTAH LIGHT

Appellant,

v.

IDAHO UTILITIES PUBLIC COMMISSION, Respondent. Application

In of the Matter UTAH Ap-

POWER & LIGHT COMPANY

proval Proposed Electric Rate Regula-

Schedules and Electric Service

tions. 12838,

Nos. 12922 and 12956. of Idaho.

Supreme Court

5,May 1981. 23, 1981.

Rehearing Denied June seriously jeopardize inventory July then such beer and or hand 1978. by inventory liquor was counted and valued license held business. “Therefore, day February, parties on the 26th as TWENTY-FIVE HUNDRED DOL- ($2500.00), premises paid by LARS Defendant entered the which was a termination of the Plaintiffs to the Defendant. discuss and effectuate prior day agreement “The to the 5th of March. Defendant was notified the Plain- 8, 1979, February heated words were ex- tiffs on or about “At this time Plaintiff, changed agreement Plaintiffs Ben Reeves wished to terminate the between Wisenor, Defendant, business, they operating Joe were and the Jimmie being exchanged be- as of March in blows which resulted persons. “The It is the Defendants Defendant felt that it would not be tween Plaintiff, prudent management understanding Alberta business to allow the time, operate struck at this however Plaintiffs to continue to was also the business Reeves intentionally strike the after had notified him of their intention Defendant did not Plaintiff, agreement. do Reeves and would not to terminate their This is be- Alberta lascera- suffered facial cause the Defendant felt the Plaintiffs would The Defendant so. law, likely injury result of the blows then be more to violate a rule or as a tions Plaintiff, regarding upon regulation Ben of the State of Idaho him inflicted beverages, sale of alcoholic which would Reeves.” Jr., Pocatello, Joe

Jr., Huntley, W. Robert Falls, Anderson, respondent. Idaho SHEPARD, Justice. Power & appeal by

This is an Utah an order of the Public Utili- Company from charged rates to setting ties Commission deliv- power for electric Idaho customers set aside Power. We ered Utah order of the Commission. utility providing public Power is a

Utah Utah, Ida- to consumers energy electrical consumers Wyoming. ho and Idaho 19% of Utah approximately account Commission Power’s total sales. The Idaho Utah Power a rate increase granted had and an increase of 29.5% 32% in 1975 December, ap- In Utah Power 26.58% increase plied for an additional necessary the basis that it was Idaho on a inflationary pressures and to finance meet program dollar for the construc- 1.6 billion In Utah tion of additional facilities. and dividends earnings per Power’s share and their bond high rose to record levels from “A” to “AA”. rating improved flood, low Dam At that time the Teton drought had made Utah prices, farm service area ec- Power’s southeastern Idaho hearings held onomically depressed and at re- application, public Power’s on Utah Following decidedly adverse. sponse submitted evi- hearings and other those an electric dence, issued the Commission had been formulated schedule which allegedly adjusted a 1976 test using changes. The and measurable for known base to be determined the rate Commission Power was $129,023,655, which Utah upon of 9.67%. Utah a rate of return allocated methods used challenges numerous Power result. to reach that Commission by the Commission The Public Utilities regu jurisdiction statutorily vested fur utilities charged by public rates late Merrill, Wesley F. Merrill of Merrill & services, commodities nishing products Pocatello, for appellant. When I.C. 61-501. Idaho. § State pro Gen., Michael the rates Leroy, Atty. David H. S. finds that Commission Gilmore, Gen., for such services Larry Rip- posed by public utility D. Deputy Atty. Ennis, Boise, Racine, must establish unjust, Robert J. Louis F. ley, are just, Light presented Power & evidence of the reasonable or sufficient rates. I.C. 61-502. This scope revenues, Court’s of review on any, expenses § if connected appeal in cases of this type proceedings is to determine properties. with those only if the Commission regularly pursued August into of 1977 and the order continued its authority and whether the constitutional was not entered until rights of the utility by were violated 29, 1977. It could not be said September fixing of rates which unjust, were unrea- or un- adjustments that were “future” sonable and confiscatory. thus I.C. 61- § holding known. The Commission’s 629; Sugar Utah-Idaho v. Intermountain in Huntington inclusion of the unit the rate Co., 368, Gas 100 Idaho sup- is not solely conjectural base would be (1979); Intermountain Gas Co. v. Idaho evidence and is set aside. ported by the Comm’n, 113, Public Utilities 97 Idaho 540 that holding of the Commission (1975); P.2d 775 Federal Power Comm’n v. not be includ- Deer Coal Mine should Creek Co., 591, Hope Natural Gas 320 64 U.S. unsupported is likewise ed in the rate base 281, (1944). 88 L.Ed. S.Ct. 333 evidence, and is set aside. by the erroneous

Utah Power first contends that Power next asserts that Com- Utah Commission erred to make cer by failing over- computing mission erred in 9.67% adjustments tain year 1976 test data in on an al- part all rate of return based for changes” “known and measurable and 13.5% return to common leged inadequate that such data resulted in the determination Although aspects other of the Com- equity. of an agree. low rate base. We artificially of the overall rate mission’s determination adjusted Test data should be for error, we consider return are asserted as changes known and measurable where the by relating contention Utah Power only the changes are shown to be reliable and cer equity on common and within to the return g., Utility tain. E. Co. v. Idaho adjustment “regula- Citizens category, an for that Comm’n, 164, 579 Public Utilities 99 Idaho lag or attrition has lag.” Regulatory tory v. (1978); Agricultural P.2d 110 Products in rate of as a “decline been defined * * * 23, Co., 98 Idaho 557 Utah Power & when the [occurring] return earned (1976). The should P.2d 617 the revenue expands faster than rate base which are include in the rate base all items inflation and ex- is caused both and jus to be certainty with reasonable proven programs construction which do pansionists providing tifiably comparable used reve- generate additional Utility Burman, to its customers. Citizens services Co. v. nue.” Providence Gas Comm’n, supra. (R.I.1977) v. Idaho Public Utilities from Public (quoting Co. A.2d Elec- v. Baltimore Gas & Comm’n Service the addi Power asserts Utah Co., (1974). 273 Md. 329 A.2d 691 tric acqui Plant and tion to the argues that the Commission Mining prop Utah Power Deer Coal sition of the Creek previous year awarded 14.5% changes had in known and measurable erties were return, allowing Power the data, Utah should have been to the 1976 test equi- on common base, to earn 13.5% opportunity Power’s rate included in Utah essence, an being 1% Al “with the extra agree. ty We erroneously were excluded. lag.” In the in- regulatory Hunting adjustment Power’s new unit at though Utah case, or- 1977,” ton, stant “Huntington described as the elimination of 1% dered it was scheduled to not in use in no evidence to lag. We find regulatory 1977. As to the go did on line in June of other ruling of the Commission support con Power Mining properties, Coal Utah Power the bare assertion Utah than properties of those purchase tracted for the in 1976 posture its financial improved had actually was not possession but rose and earnings dividends that its due to the necessi early until obtained rating improved. also On bond their securing purchase ty approval hand, their argues Power Utah Trade Commission. Utah other from the Federal program common tion past equi- actual rates of return on continue to exist and appar- ty have never risen to the level of the rates ently were not considered the Commis- permitted by the Commission. A rate of Hence, sion. portion of the Commis- return authorized by a Commission is not a ruling sion’s eliminating previously the 1% guarantee of level of revenues. 1 A. regulatory lag allowed or attrition is with- Priest, Principles Utility Regula- of Public out foundation in the evidence is set (1969). tion Conflicting 203-06 views exist aside. as to whether a utility’s failure to earn an We have examined Utah Power’s other is, itself, authorized rate in and of the final assertions of error and find them to be See, g., test of attrition. e. Public Service without merit. The order of the Commis- Maryland Commission of v. Baltimore Gas sion appellant. is set aside. Costs to & Electric supra; Narragansett Re The (R.I., Electric 23 4th P.U.R. 516 P.U.C. BAKES, J., McFADDEN, J., C. con- 1978); Chesapeake Re & Potomac Tele- cur. phone Virginia, Co. of West 18 P.U.R. 4th (W.Va., P.S.C.1976). Nevertheless, it is DONALDSON, Justice, specially concur- clear continuing high rates inflation ring. are especially damaging power to electric I concur with the inso- majority utilities. The impact great of inflation is far its holding concerning year. the test on public all utilities because their endeav- I Huntington believe that the Plant and the ors are normally capital intensive and in- Mining Deer Creek Coal properties should volve assets relatively long with useful have been included in the rate base since Adams, lives. See Public Utility Regula- they were known and changes Demand, tion: A Public Baylor L.Rev. for the test certainty. reasonable (1976). Inflation is particularly painful If they had been included in the rate base to electric-power utilities since are the the rate base would have adequately dem- capital-intensive most in the industry Unit- onstrated real revenue needs and thus Note, ed States. See Efficiency and Com- likely would most obviate the need for any petition in the Electric-Power Industry, 88 adjustment for “regulatory lag.” However, Yale (1979). L.J. 1511 request Commission also denied the This Court has stated that adjustment an extra 1% for “regulatory “questions of ‘cost of equity’ and ‘rate of lag.” The granted Commission should have return’ are matters which extremely raise one or the If other. the Commission was complicated issues. Deciding ques these not going to include the Plant tions is a function of the Idaho Public Utili and Deer Creek Mining properties Coal ties Commission and questions are the rate base then it granted should have within the expertise.” Commission’s area of the extra “regulatory 1% Citizens Utility Co. v. Idaho Public Utilities lag.” It was error to deny both and an Comm’n, 579 P.2d (1978). at 119 The Com abuse of discretion which resulted in a rate mission has the power and the duty to set just that was not and reasonable. rates of return within a “broad zone of reasonableness.” Intermountain v. Gas Co. BISTLINE, Justice, dissenting. Comm’n, Idaho Public Utilities supra. Here, however, the Commission eliminated I.

from Utah Power’s allowable return on eq it is uity necessary reempha- a 1% attrition At the outset allowance. It is undis puted that a rate size the limited role of this in review- of return Court incorporating such attrition or decisions of regulatory lag ing was within the Public Utilities Commis- the zone of “reasonableness” in sion. The extent of review is limited in I.C. prior 61-629, year and was so provides pertinent part ordered the Commission. § appears It also undisputed that the appeal factors review on shall not be “[t]he of inflation expansionistic and an construc- extended further than to determine wheth- quiry under the regularly pursued

er the has its Act is at an end. The authority, including a determination that the method to reach employed fact whether the order from violates appealed may that result contain infirmities ” ’ * * * any right appellant under the Consti- important. not then 540 P.2d tution of the United States or of State 557 P.2d at 621. 782.” Id. at of Idaho.” granting reasons for this broad au- Commission, hand, on the other has thority limiting to the Commission and jurisdiction been granted “power this are obvious— scope of review Court supervise regulate every public utility Commission, group staffed with a things necessary the state and to do all advisers, necessary exper- has the technical carry spirit provi- out the and intent of the of utilities. regulation tise to deal with the 61-501; act,” sions of this I.C. to deter- § to util- solely devotes itself The Commission “just, mine the reasonable or sufficient posi- in a much better ity regulation and is rates” where the rates are insufficient or and deal to understand tion than Court unreasonable, unjust, discriminatory, pref- intricacies of util- implications with the 61-502; unlawful, and to erential or I.C. § appeal question Thus the ity regulation. rates, fares, investigate and establish “new disagree with agree we or is not whether classifications, rules, tolls, rentals, charges, done, has but whether what the Commission sched- regulations, practices contracts or regularly pursued utility. ule or I.C. public schedules” return is and whether the allowed authority 61-503. The limitation on the Com- only § just and reasonable. set rates is one of authority mission’s to Further, obliged is to as- the Commission reasonableness; the end result of the meth- public of the broad requirements sess the must a produce ods used the Commission just when it sets and reasonable interest just” “reasonable and Idaho Power return. Co. v. Idaho Intermountain Gas rates. See Commission, 99 Co. v. Idaho Public Utilities 113, Commission, 97 Idaho Public Utilities 374, (1978); Idaho 582 P.2d 720 Citizens 775, 127, (1975). The Commis- 540 P.2d 789 Utilities v. Idaho Public Utilities Com- Co. capital to the responsive solely sion is not mission, 164, (1978). 99 Idaho 579 P.2d 110 may utility; it earnings of needs v. Corp. As in Products Agricultural stated utility’s of consider the conditions also Co., 23, 98 Idaho Utah Power & true, noted may be as While it customers. (1976): P.2d 617 inflation is opinion, the Court’s in appel- applied “The standard to be utilities, the Commis- to electric “painful” cases was articulat- utility late review of in this case also observed: sion Idaho ed in Intermountain Gas Co. v. case, in this reaching our decision “In 113, Comm’n, 97 Idaho Public Utilities duty our to set we are not guided (1975): op- an utility will allow the rates which step each purpose analyze ‘Our is not to return on a reasonable portunity to earn to rate-setting process of the determine our concern for the capital, but also its agency was regulatory whether Compa- on the rates affect of increased decision, in its but to look at the correct acknowledge readily customers. We ny’s overall effect of the rate fixed to deter- economic depressed the evidence to the mine whether the return area Applicant’s service in the conditions just. As the is reasonable and Su- matter, decision in this our has influenced of the United States stat- preme Court to not unreasonable believe it is but we v. ed in Federal Power Commission to share Company’s shareholders ask the 591, Natural 320 U.S. Hope Gas inasmuch as years lean in the area’s 281, (1944): “It is S.Ct. 88 L.Ed. 333 years.” the fat during prospered have of the rate theory impact not but the brief: in the Commission’s As stated If the total order which counts. effect may advocate that rate be said to be order cannot “[T]o consider no circumstances unreasonable, unjust judicial in- under drought- eco- A. temporary and flood-caused customer straights nomic of this class of The is first issue whether the Commission well-being compared relative excluding erred in the Huntington plant nor make a accommo- temporary UP&L and the Deer Creek coal mining properties for the between these dation interests base. question from the rate The is governed period particular adopting whether the Commission erred in irriga- increase which would benefit year a or in an choosing as test to use peri- customers for only tion that limited projected historical than a year. rather test argue od of time is to the Commis- has Court’s found no merit sion no to consider authority is only question such contentions. The interest, instead public broad and should regularly whether the Commission was not to group be reduced of investment ana- when pursuing authority it held above lysts eyes whose cannot be lifted should not be included these two items earnings the horizons of the comparable way The best to show the rate base. capital attraction test to consider justified holding was as public broad interest.” simply quote it did is the Commission. that, opposed It also should be noted discussing In order no. depressed of the economic conditions 1976 test adoption Commis- area, Power condi- Light’s Utah & financial following: sion stated the improved tion had Com- dramatically. is Light’s application “Utah Power & improvement: mission noted this proposed premised September “In Power & Utah adjusted as a characterizes 1976 test Light’s selling common stock was on the for known and measurable This changes. open market at eighty-two percent of disingenu- characterization somewhat value. In early book the market application ous. At time its price twenty climbed to approximately filed, Company had nine months percent utility’s above book value. The for 1976 three plus actual results months & rating improved Standard Poor’s bond its projections. Applicant began of The “A” in from 1975 to “AA" in Earn- 1976. a of a test year adopting construction per 31st, ings share as of December rate It then projected year-end base. $4.75, were estimated at Company a rec- adding rate cost adjusted base the $28,000,000 The gross paid ord. dividend Creek in acquired of the Deer Coal Mine in 1976 was also a record.” 1977, March, and the cost of the second Huntington generating unit which was presi- The Commission also the noted that June, to go scheduled on line in 1977. dent of Utah Power & indicated that rev- Applicant The also reviewed its 1976 its construction program, largest one the expense enue data ‘the and to reflect and aggressive country, most in will management result decisions’ about annual require substantially rate increases as the in projected growth such matters similar in amount increase re- 26% anticipated demand and inflation rates. quested in this is in case. This Court a Tr. at 727, 786-87. This revised data position its of the judgment substitute computer then a which simulated fed to public interest that of the Commission company’s operations year for one by noting the effect on the of inflation conditions. The given computer with the and the utili- ignoring plight turn, simulation, in furnished new test ty’s customers. expense figures, and which year revenue plugged II. test as year were then into the adjustments.’ ‘known only two The Court’s with deals Staff, of the issues raised on this For the appeal. “The in person Holbert, sake of I discuss expediency, too will of Mr. Archie ob- strenuously those two issues. jects proposed to this test which Moreover, applications. or future rate

regards projected, as ‘a test 1976 was a 31, Tr. at year ending December 1977.’ year banner for the Applicant, instead, urges, 1773. The Staff finding relevant support data will not a adoption period of a test based on the necessary is projected year that a test average of and end- beginning the actual Appli- avoid attrition of the confiscatory ing balances in each of the 12 months of earnings. cant’s its test adjusted 1976. The Staff also prac- perhaps important “But the most changes year projected include certain an using tical reason for historical rather in regarded 1977 which it as known and projected than in this case is year a test adjustments measurable. include These questionable Company’s nature of the an annualization of the rate increase Applicant projected a projections. The granted wage in an increase in May, approximate- total Idaho sales increase of expenses due to a new union contract during the next ly percent per year 6.5 an in- effective January, magni- years, alleged five property crease in taxes to reflect known attrib- request directly of its rate is tude not, however, changes. The did Staff growth. Tr. at utable to this forecasted include either the unit second appears, It or the Deer test Creek Coal Mine are little Applicant’s growth projections year rate base. Appli- guesses. more than educated question, arguments “Without valid investiga- independent cant conducted no may support advanced in of the Com- concerning population tion or studies pany’s projected projected A year. test area, but instead growth for its service test folds the effect of year automatically for the upon growth projections relied growth continued inflation and in the of Idaho a whole and interviews State basic rate-mak- utility’s base into the weight customers. unspecified data, ing resulting representa- thus in the suggests that probative evidence tion existing during of conditions increase in de- Company’s projected time be in ef- proposed rates are to commercial, residential, indus- mand Presumably, projected fect. test seriously is irrigation trial and customers adequate results rates which remain overstated. The interventors submitted time, longer period mitigat- thus Eyre, John testimony by credible Messrs. ing the of further rate necessity increases Walker, L. M. and Richard Schermerhorn Moreover, proposed the future. population indicates projected substantially identi- service area growth Applicant’s in the cal to year adopted by the test the Com- per- two to three approximately will be Light in Power and mission the last Utah cent, percent the four to five rather than proceeding, Application rate increase of addition, Company. In envisioned the Light Company, Utah Power and IPUC hearings testified night witnesses at the (1976), use Order No. 12467 and its demand growth future in electrical expressly been sanctioned the Idaho of conservation would decrease as a result Supreme Agricultural Court in Products irriga- of increased costs efforts and the Corporation Power and v. Utah tion pumping. Company, 98 Idaho (1976). from this “We several inferences draw Company’s pro- concerning evidence the

“There are practical several jections. Applicant’s The first is that the reasons for an historical rather adopting in expenses projections of revenues and projected year than a test in this case. faulty on its Idaho service area are based Company’s president The has testified unreliable. and therefore empirical data that annual increases in rates will be projected Company’s Consequently, the required regardless of the outcome of this ex- with an regarded test must be proceeding. year the use of a Consequently, evidence also skeptical eye. The projected year delay tremely test will not future suggests proposed construction “The inclusion the Hunt- Company’s of plans may be more grandiose than neces- ington second unit as a known and mea- sary the ratepayers. to meet needs of its adjustment require surable does ex- not Applicant failed to demonstrate that tended discussion. The Staff contends given it had adequate consideration to of generating that the inclusion the unit either the effects of conservation or the change as a known and measurable would possibility of encouraging conservation as negate concept the essentially year test an alternative construction. increased generator pro- because the is a revenue reasons, For these the Company’s we find and it ducing item would therefore be projected test year unacceptable to be in adjustments make necessary to this case. year corresponding test revenues level, “On a more this fundamental base. difficulties addition to rate Commission has a preference for strong adjust- in an making encountered such an historical projected rather than a test particularly present ment in the case are year. An year historical test allows the came ostensibly parties severe because unit data, to work with actual while still recognizing projected changes which on months after approximately line six are reasonably certain to occur. This Although the close test year. of the methodology offers pic- an undistorted on impact generating of the unit rate ture of the Company’s posture financial known, year base is its effect on test during the course of its recent most revenues is definite to sufficiently and it accurately matches revenuew require its inclusion as a known and mea- against expenses given within a time Moreover, the adjustment. prac- surable If, cases, in particular frame. the histori- including tice of in generating units rate year cal test is inadequate to allow the base which come line near conclu- return, Company proper proceedings sion of before Commis- appropriate remedy adjustment is an sion of an obviously deprives parties year the test to reflect known and mea- challenge the acceptable opportunity changes, surable rather than substitu- expenditure reasonableness projected tion of a year test which the the inclu- reject therefore Company. We basic is totally data control generating sion of the second Company. unit in as a measur- rate base known and reasons,

“For these find we adjustment. able proposed Staff’s an use of actual 1976 test year reasonable should be mining property “The Deer Creek coal adopted (Footnote this case.” omit- rebuttal, question. is a much closer On ted.) Applicant pointed out coal On the exact issue question, the Commis- proper- mine revenue generating is not a sion stated the following: such, ty as a known inclusion as “2. The Huntington Unit Second to rate base the Deer Creek Coai Mine. would in a of test not result mismatch Applicant’s “The projected addition, expenses. revenue and In major included two additions to points the cost Applicant out that plant in service —the Deer Creek Coal the ex- property readily is measurable acquired Mine 1977 and January, the of amination of the written contract sale Huntington generating second unit which on file with the Commission. June, ostensibly brought line in on been “On the other hand there has no adoption 1977. of Our the Staff’s histori- the showing on this record that Deer cal test excludes definition Creek Coal is used and presently Mine rate The Applicant items from base. useful in Applicant’s the service of the suggests, should is ratepayers, nor there evidence con-

nevertheless be included known and rate adjustments measurable to base. cerning impact of the on acquisition the 290

purchased Compa- coal costs. the would nothing Unless more attempt, than an ny can show that the is current- property guarantee with no of accuracy, predict to use, inly it is for and purposes all intents and expenses income for plant indistinguishable Held from Plant for Fu- yet has operated year. not for half a ture traditionally Use which been ex- has Further, the extent to which the Hunt- cluded from this rate base Commis- ington Unit is used to Second and useful sion. We do not think it unreasonable the of ratepayers ques- Idaho is in serious put the burden proof upon Appli- of the in- testimony tion. The Petitioner’s own cant to show that a known and proposed ‘the company dicates that contracted adjustment measurable to rate base is of up the sale to 110 MW of capacity’ reasonable in cost and and used useful at Huntington plant the to the Idaho Second the time the is made. No 170,196. Tr., Company p. Power 1977. record, such evidence appearing on added). (Emphasis The amount of reve- we accept cannot Company’s rebuttal an power nue from unknown amount of argument that the Deer Coal Creek Mine can hardly for 1977 be called a known should be included in rate base as a change. and measurable If such specula- known and adjustment.” measurable tion is to cause rate allowed additions to In denying petition rehearing, base, an integrity adoption of the following: Commission stated the year adjusted historic test for known and alleges “Petitioner exclusion changes measurable would be cast in seri- of the Huntington Unit and Deer Second ous doubt. This Commission chooses Creek Company’s Mine from the accounting avoid the creation of a hybrid base is in this erroneous. The record case fig- system partially based historic upon clearly shows Creek proper- that the Deer ures, and value of which is certainty, ties were not even until after acquired upon partially speculative measurements. adopted by the end of question “On the of the inclusion Tr., p. Commission. 2512. rec- Mine, Colby testified Deer Creek Mr. ord also the Hunt- clearly indicates ‘are Huntington and Mine Deer Creek ington operation Second Unit was not for- computed, pro on this intertwined Tr., until the middle p. of 1977. 170. there, ma with basis that unit in Therefore, the Huntington Second Unit there, coal mines to be to the benefit constituted progress construction work in Tr., Again, ratepayer.’ p. Idaho at the end of would not be and expenses income attributable to these and appropriately included in the rate base two could not be or accu- readily items any more than any other construction and therefore could rately ascertainable work in progress (CWIP). Whether to mea- not be considered to be known and include CWIP in rate base is matter of particularly surable. This is so because has, reasons, discretion which for policy using upon insisted continually Petitioner been consistently exercised this Com- figures upon 1977 and ‘back- year-end mission to exclude rate base. CWIP from the known ing into’ and measurable Re Light Accord: Black Hills Power and figures. change Co., (S.Dak.1976); 16 PUR4th 369 Re

Niagra Mohawk 16 Corp., Power PUR4th takes issue with the Com- “Petitioner (N.Y.1976); Light Re is finding Connecticut that Deer Creek Mine mission’s Co., (Conn.1976); and Power PUR4th presently used and useful to the Com- and Re Kansas City Power and making than pany’s ratepayers. Other (Kan.1976). 15 PUR4th 153 the assertion the mine is used pointing ratepayers useful to “Petitioner contends that inclusion testimony page of Mr. proper Colby Deer Creek no Transcript, the makes Company as these are known being changes. clearly actually As the indicates offer to that coal is prove record the inclusion of Unit Deer Creek and the effect Huntington Second mined from adjustments mining upon purchased such coal costs. are known measurable. Company open The was extended an invi- utility produce The must still evidence of prove tation to used that Deer Creek is must figures, the actual and this evidence and useful when the Commission said be a known sufficient to show that there is page 10 of its Order: change. purpose and measurable The of a

Unless the Company year approach provide can show historical test is to use, property currently is it is for all setting. known for rate Here the figures intents and purposes indistinguishable specifically adopt Commission declined to from plant held for future use which projected and the Court has not from traditionally been excluded does improper. said that was Yet the Court base this Commission. We do adjustments state that these are known and not think it is unreasonable put have been in exist- measurable because proof burden of upon Applicant to utility ence for a short time and because the show that a proposed known and mea- projected introduced estimates of the reve- adjustment surable to rate base is rea- holding nues sub- expenses. Such a sonable cost and used and at useful year approach verts both the test and the the time the is made. authority of the Commission. The record clearly indicates that even if An examination of the record in the the Deer Creek Mine was used and use- present case shows that the did ful, it acquired was even until 1977 not abuse its in holding discretion and therefore would be excluded properly utility had failed to show these from the 1976 test unless income changes were known and measurable. The and expenses therefrom were known and utility testimony cites places at five Again, measurable. no such evidence refers to support argu- two exhibits to was adduced or offered.” exhibits, ment. These testimony and the Court, however, The apparently believes thereon, based were prepared before adjust- cannot be said that Huntington unit went operation. into “ ments were ‘future’ or unknown” because made projections simulated properties acquired pro- were before the revenues, expenses and and the testi- ceedings ended, before the Commission and mony given after Huntington went into because Light “presented Utah Power & operation plant stated that the general- revenues, evidence of the any, if and ex- ly operation in June 1977. The Commis- penses connected with properties.” those sion in its brief more than adequately deals The Court concludes that the Commission’s citations, with these and in the interest of finding on this issue unsupported by I expediency simply quote will that brief: evidence and therefore must be set aside. nothing cited evidence shows “[T]he The burden of showing adjust- that these First, Ex. 15 the kind. was identified at ments were known and rests on I., p. According Tr. Vol. 163. to the the utility. The determination of whether court reporter statement found at or not that burden has been met rests ini- II., 330., p. Tr. Vol. testimony tially with the Commission as the finder of giv- which the exhibit was identified was liberty fact. The Commission is at to be- Therefore, February en on 1 or lieve proffered or disbelieve contradicted possibly the exhibit could not have shown evidence, e., /. the Commission can hold that Unit was on Second projections simulated are too uncertain to being line June fired Deer given there is testimo- binding weight if Mine that exhibit was Creek Coal because ny to indicate that such is the case. approximately introduced four months goes Next, plant mere fact that a into re- testimony before June 1. operation V., a few months before the Commis- corded Tr. Vol. 777 was taken p. at sion’s final order does not automatically (according held hearings from satisfy utility’s showing burden reporter’s appearing court authentication stated on of this previously p. As 49-50 p. 854 of that vol- page following on the 29, 30, brief, (Tr. opinion Mr. Holbert transcript) gave ume of the on March his XII, 31,1977. 1773) projections could Again, testimony p. and this Vol. the have shown that the Hunt- not possibly upon changes not were which could based line on ington Unit had come on of the adequately Second be measured because the being by June and that it was fired projec- and that the numerous variables Mines, because June 1 Deer Creek Coal light not be valid in of the may tions in the future. Fi- was still two months on the drought possible conservation 2507-2508, XV., p. at Tr. Vol. the nally, certainly This is part of the customers. gave Mr. the Company’s Colby witness projections the were an indication that of the Com- following testimony part as reliable; fact, as finders of the Com- not rebuttal case: pany’s testimony or rely upon mission could the coal mine assessment of the independent A. ... We’ve cited its own Plant, Huntington prop- projec- the the properties, projections to conclude per- the books at end as erty on not reliable.” tions were items. These are haps principal the the Thus, testimony before there was service, generally speaking, each in might projections particular of this date. of the valid, light especially not be resulting conservation drought possible Q. When did the we—as also testimo- the customers. There was it, have called the 1977 plant go— projected by ny growth of the area service? Finally, the high. the was much utility too A. June 1977. capacity MW of up stated that to 111 utility con- “Thus, testimony Huntington plant already cited does not was be sold to Idaho Power. Based Huntington’s Second Unit tracted to state that this, 1, 1977, as the finder of beginning line June but was on had failed service in fact determined that merely states that it went into The Commis- testimony proof. does not to meet its burden June of 1977. revenues were projected the Deer felt that being state that it was fired sion portion actual speculative, Mines nor does it state that too Creek Coal which would Huntington plant plant were dedicated to the mine and had not been ratepayers Idaho used for the ratepayers the State service to UP&L’s was substantial Instead, sufficiently shown. There testimony merely of Idaho. the decision support cbmpetent mine were ‘in evidence and coal says plant Commission, be af- it should service, par- as of this speaking, generally the result to achieve only way court re- firmed. The According to the ticular date.’ hold that is to of that vol- arrived at the Court p. certificate at porter’s inappropriate. method was Au- historical ume, testimony the date of the This, however, question with a gave deals testimony The cited gust generating discussed the Court. no indication whether being oper- were the coal mine plant and customers or serve UP&L’s own

ated to B. discussed contract previously satisfy Court’s discussed in the The second issue Power, Idaho nor whether erred in is whether the Commission to meet the necessary operate them per- one previously allowed eliminating the demands of own customers. UP&L’s apparently The Court regulatory lag. cent allowed Brief, such was it is believes that because p. Appellant’s “On 46 of the it in to eliminate the decision prior year, at no in Mr. Holbert’s place stated that is without foundation. following year or indica- give any did he facts testimony matter as on this found the fact that the The Commission prove tions that would follows: projections were not reliable. Company’s evidence,

“After due consideration of the rate of return has never been held to we just find that a return of 13.5%is a guarantee against every be eventuali- figure reasonable in this case. This ty. can Regulatory commissions identical to the cost of equity adopted discharge obligation utility their to cus- case, the last but we have eliminated by examining tomers known data and for regulatory lag. Our re- applying measurable correction factors view jurisdic- of recent decisions in other data, quantifia- to that as derived from tions suggests this result is not un- ble events or When circumstances. improvement reasonable. The continued broken, logical regula- chain is in the utility during securities market tory process loses essential rationali- last has prompted some commissions Michigan Telephone Re Bell ty. to lower the return equity previously (Mich. 1976) PUR4th PSC granted regulated See, g., utilities. e. Re concurring part Ralls [Commissioner National Fuel Gas Distribution Corp., 17 dissenting part].’ PUR4th 156 (N.Y.P.S.C.1976). complete agreement We find ourselves in 3. Attrition Allowance. Ralls, with Commissioner and we note “The Company proposes a .57% return that an allowance for attrition fur- adds on equity allowance, attrition which is ther impetus inflationary pressures, apparently designed to compensate for becoming self-fulfilling thus prophecy. regulatory lag and attrition. Both Mr. Moreover, 61-622, Idaho Code section Epperson and Mr. oppose Seeds prevents the sort of regulatory lag which adoption of this attrition allowance on in the adoption resulted of an attri- the ground that it is a thinly veiled at- jurisdictions.” tion allowance in other tempt to obtain a equity. 16% return on We find proposed attrition allowance denying petition In for rehearing, to be unsupported on the record and ob- following: Commission stated the jectionable as a matter of regulatory poli- allegation “The fourth of error con- cy. We note approval the statement cerning rate of return stems from the of Commissioner Ralls of the Michigan recognize Commission’s refusal to and al- Commission, Public Service in a recent lag adjustment low a to the return on rate proceeding: equity particular, Appli- of .57%. In ‘If, hand, on the other the “earnings complains existing findings cant erosion allowance” is not in fact what inadequate. on this issue are We believe it is purported is, to be—that an allow- findings original in the order ade- past ance for failures to earn the au- quately explain refusing the reasons for thorized rate of return —but is instead adjustment. to allow laga an ad- Such an added correction factor for adverse justment constitutes either retroactive circumstances, future then it is a dis- making, speculation about un- tinctive and costly response unquan- quantifiable future events which is incon- potential tified negative developments sistent with the test year method of rate affecting the Company’s operations. Moreover, setting. proposed allow- The nature of negative those factors ance would eliminate efficiency incen- remains mere speculation. by guarantying tives rate of ‘Such an unquantifiable allowance for return. These denying reasons for unspecified future events or circum- proposed attrition allowance were set is contrary stances to sound public poli- original forth in the order and we believe cy. It stretches a safety net under the they are more than sufficient to support Company’s earnings, denying while the ultimate conclusions.” Company’s customers the same protec-

tion. agree I cannot with the Court ‘The regulator’s obligation to allow a Commission was bound to allow such an reasonable opportunity to earn a fair simply attrition allowance because it had use historical data will prior year inadequately

done in the because it did so needs, how the factors of specifically state demonstrate real revenue and where program and the construction af shown future-year projections inflation are prior finding. only ques fected that applicant utility relia- reasonably 25, tion this is properly before Court whether at 619 ble and certain.” Id. at 557 P.2d just the is added). overall rate return and reason (footnote omitted) (emphasis improved able. the financial condi Given impose methodology this Court did not tion Light, of Utah Power & I cannot find the or this was the Commission hold that any error in the decision in Commission’s methodology. acceptable Furthermore, this I matter. cannot believe v. Idaho Public In Citizens Utilities Co. the that a determination Commission to 164, Commission, P.2d 99 Idaho 579 Utilities year allow one an attrition allowance in Court, citing only (1978), this such binds the Commission to an allowance Products, stated that Agricultural “[t]his in all As in Inter years. future stated data year has stated before test Court Idaho mountain Gas Co. v. Public Utilities and adjusted anticipated for should be 113, Commission, 97 Idaho changes are where the changes known (1975): Id. at certain.” shown to be reliable and “[Bjecause regulatory perform bodies held The Court then 579 P.2d at 116. judicial well as legislative both as func- including erred not are not proceedings, they in these so tions year billing the test the cost of a machine bound the doctrine of stare rigorously certainty proved as it with reasonable must decide all future they decisis that services. justifiably providing used in to be as have decid- way cases in the same two upon seizes Today the Court past. long ed as similar cases in So data holding cases for its that “[t]est explain regulatory adequately bodies known and measura- adjusted should be for so departure prior rulings their from to changes are shown changes ble where the reviewing a can court determine that .... The Commis- be reliable and certain capri- or arbitrary their decisions are not rate all times include in the base sion should cious, upon positions orders based sub- certainty which with reasonable proven are than stantially different those taken in pro- justifiably to be used previous proceedings upheld.” can be Id. my To viding to its customers.” services at 540 P.2d at 781. mind, authority of the Com- usurps the this allowing considering Without whether an methodology of mission to determine prior ruling poli- allowance is a attrition setting. rate binding, be considered cy that could ever explained Court in Citizens Although the explained sufficiently Commission has justifications adjusting test its not to this sum decision allow additional changes, data for known and said is so that it cannot be its decision would how the Commission did discuss capricious. arbitrary and if authority” its pursuing “regularly not be

III. a method. to follow such it chose not extremely ratemaking are methodologies bootstrap argument Finally, controversy diverse, much complex and and opinion for used to substitute its Court has best. So is question surrounds noted. In should be that of the Commission just a and produces long as the final result Agricultural Corp. v. Utah Power Products is Com- return, question for the fair (1976), & 98 Idaho P. the Com- mission, Although not this Court. an historical the Commission utilized approved approach following an mission is anticipated adjusted prospectively nonetheless, should Court, the Court this was chal- changes. methodology This recognize proper temper opinions “is lenged, and the held that Court between the relationship need for proper method establish increase, is the Court. change where it shown

IV. votes. Yet the stay during decision to is, appeal opinion, my more far reach- It has been public said that utilities ing consequence than will be the system legislature, as acts an arm of the itself, eventually upon which may pass and that the actions of the Commission are the appeal assuming merits of those legislature, those of the with the same force — moot, and effect In issues have not become been days as law. earlier both the has legislature Meanwhile, and the Commission without or often the case. so were we virtually leg- told, without Today staff. in a logical manner most staffed, reasonable, islature well can at its will the function of the Commission increase It its staff. has also seen fit undermined, severely been if not entire- appropriate staffing funds to increase ly eroded. Commission, thereby removing the Court, comprised five mem- but handicap under which the Commission used bers, sowho far as known to me are learned to operate in its dealings with the utilities in the have the only, simply law does not Court, doing business in Idaho. The authority ability supplant to the Public course, staff, no such and if it be Utilities the regular pursuit Commission in thought there are members Rate-making of its duties. decisions are possessing Court the requisite expertise to properly legisla- by be made either knowledgeably second-guess the -Commis- legis- ture or by Commission which the sion, I being confess one. It is hope- lature very purpose. created for that To fully my within realm to consider whether those are who dissatisfied with Commis- the Commission has regularly pursued the decision, sion’s 61— other than under I.C. § authority granted by legislature, it petition me seems to allegations consider of constitutional vio- legislature redress should be made to the lations. In earlier times the Court’s appel- itself. late opinion appears to ordinarily have been sought only those usually nar- issues — rowed to a down claim that a given utility

rate set the Commission was confiscato-

ry in nature.

In present times, the restrictive

provisions of I.C. 61-629 seem to be for- § gotten. The is being Court asked to rede- ratemaking termine and classification issues Shirley CHISLETT, E. Cox which are properly the business of only the Plaintiff-Respondent, legislature or its lawful agency, the Public Utilities Commission. Recently we were v. customer, asked a utilities albeit a sub- COX, Roger Defendant-Appellant. D. one, stantial to stay indefinitely a rate in- No. 13580. crease allowed the Commission. FMC Corporation v. Idaho Public Utilities Com- Supreme Court of Idaho. mission, 13991, stay No. order issued Febru- ary 1981. The Court May minutes should reflect single vote which would have re-

fused the stay order and would have re-

quired the Court’s written disclos-

ing parties involved and the consum-

ing public how the to stay decision determination,

reached. That documented an order granting stay, awas

landmark decision public field, in the

but accomplished with only a casting of

Case Details

Case Name: Utah Power & Light Co. v. Idaho Public Utilities Commission

Court Name: Idaho Supreme Court

Date Published: May 5, 1981

Citation: 629 P.2d 678

Docket Number: 12838, 12922 and 12956

Court Abbreviation: Idaho