VIRGINIA ELECTRIC AND POWER COMPANY v. STATE CORPORATION COMMISSION, ET AL.
Record Nos. 120519 & 120520
Supreme Court of Virginia
November 1, 2012
SENIOR JUSTICE LAWRENCE L. KOONTZ, JR.
Present: Kinser, C.J., Lemons, Millette, McClanahan, and Powell, JJ., and Lacy and Koontz, S.JJ. FROM THE STATE CORPORATION COMMISSION
These consolidated appeals arise from a final determination of the State Corporation Commission ( Commission ) in a mandated biennial review of the rates, terms and conditions for the provision of generation, distribution and transmission services [of an] investor-owned incumbent electric utility pursuant to the provisions of the Virginia Electric Utility Regulation Act.
As pertinent here, commencing in 2011, the Act requires the Commission to conduct biennial reviews of an electric utility s performance during the two successive 12-month periods immediately prior to such reviews.
These appeals present the first opportunity for this Court to consider the Commission s application of
BACKGROUND
VEPCO is an investor-owned electric utility providing generation, distribution, and transmission services within Virginia. As such, the rates it charges for these services are subject to regulation under the Act.
In accord with the requirements of
Thereafter, on March 31, 2011, VEPCO filed an application with the Commission for the first biennial review as required by
The biennial review process prescribed by
In these appeals, VEPCO has not challenged any of the factual determinations of the Commission with regard to the rates applied in the 2009-2010 biennium and which continued to be charged while the review process was ongoing, or with regard to the rates to be charged going forward in the 2011-2012 biennium and the ROE which will be used to evaluate VEPCO s performance for the 2011-2012 biennium in the 2013 biennial review. Rather, VEPCO has challenged only the Commission s determination, as detailed below, that the ROE set for the 2011-2012 biennial review would serve as the fair rate of return for the entire 2011-2012 biennium rather than
On November 30, 2011, the Commission entered a final order on VEPCO s application, noting that it was a first-of-its-kind proceeding. Application of Virginia Electric and Power Co., Case No. PUE-2011-00027 (Nov. 30, 2007). After reviewing the evidence and assertions of VEPCO, the Office of the Attorney General Division of Consumer Affairs, other interested parties, and the report and recommendations of its staff, the Commission set a 10.9% ROE for the biennial period. The order further stated that [t]he 10.9% ROE determined in this proceeding . . . will serve as the fair сombined rate of return against which [VEPCO] s earned return will be compared in its next biennial review proceeding in 2013.
VEPCO filed a timely petition for reconsideration of the November 30, 2011 final order.
After setting a briefing schedule, the Commission received briefs from its staff counsel, the Office of the Attorney General Division of Consumer Counsel, and other interested parties. VEPCO filed a response that, for all intents and purposes, mirrors the positions it has taken in these appeals. These arguments will be detailed in the discussion below.
The Commission entered an order and opinion addressing VEPCO s petition for reconsideration on March 29, 2012. The Commission first opined that
The Commission rejected the position maintained by VEPCO that unless and until reset in the biennial review process language of the stipulation was intended to carry the 2009-2010 ROE forward into 2011. To the contrary, the Commission was of opinion that the language did no more than recognize that the Commission would reset the ROE for the new biennial period.
Finally, the Commission noted that the ROE for a given biennial period does not result in a rate change and is not the same as setting rates. This is so, because the ROE for a biennial period does not alter the rates to be charged during that period but, rather, is only used to adjust the rates, if necessary, in the next biennial review to allow the utility to recoup a shortfall in revenue or rebate any excess revenue to customers as determined by applying the ROE for that biennium. Thus, the Commission concluded that utilizing the ROE set in 2011 for the entire 2011-2012 biennium was consistent with its function within the ratemaking process because [f]or purposes of the biennial review, the relevant ROE interrogative is not when, but what. The proper question is not when did the Commission make such finding but, rather, what is the ROE for the new biennial period.
The Commission concluded that
DISCUSSION
VEPCO noted appeals from both the Commission s November 30, 2011 order and its March 29, 2012 order, but assigned identical errors in each appeal:
- The State Corporation Commission ( Commission ) erred in its November 30, 2011 Final Order in Case No. PUE-2011-00027 ( Final Order ), as clarified in its March 29, 2012 Order on Reconsideration and Opinion ( Order on Reconsideration ), when, in determining the Company s authorized fair rate of return on common equity ( ROE ) pursuant to the biennial review process mandated by
Va. Code § 56-585.1 , it held that it will apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from the date of the Final Order, contrary toVa. Code § 56-585.1 . - The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when it held that the determination of the effective date of the Company s authorized ROE pursuant to
Va. Code § 56-585.1 falls within the discretion of the Commission, and thus erroneously held that it may apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from thе date of the Final Order. - The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when, in determining the Company s authorized ROE pursuant to
the biennial review process mandated by Va. Code § 56-585.1 , it held that it will apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from the date of the Final Order, implicating an unlawful retroactive change in rates of service authorized by the Commission to be charged by the Company in contravention of Virginia common law and the Constitutions of the Commonwealth of Virginia and the United States. - The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when, in determining the Company s authorized ROE pursuant to the biennial review process mandated by
Va. Code § 56-585.1 , it held that its retroactive application of the 10.9% ROE authorized in the Final Order is consistent with its March 11, 2010 Order Approving Stipulation and Addendum in Case No. PUE-2009-00019, and that the parties to the Stipulation and Addendum, including the Company, agreed that the Company s 11.9% ROE authorized thereunder would not apply to earnings for the period January 1, 2011 through the effective date of the Commission s Final Order in the 2011 biennial review.
VEPCO and the appellees2 agree as to the standard of review we are to apply, each having cited Appalachian Voices v. State Corporation Commission, 277 Va. 509, 515-16, 675 S.E.2d 458, 460-61 (2009), in which we quoted the following passage from Northern Virginia Electric Cooperative v.
It is firmly establishеd that a decision by the Commission comes to this court with a presumption of correctness. The Constitution of Virginia and statutes enacted by the General Assembly thereunder give the Commission broad, general and extensive powers in the control and regulation of a public service corporation. The Commission is charged with the responsibility of finding the facts and making a judgment. This court is neither at liberty to substitute its judgment in matters within the province of the Commission nor to overrule the Commission s finding of fact unless we can say its determination is contrary to the evidence or without evidence to support it.
Campbell County v. Appalachian Pow. Co., 216 Va. 93, 105, 215 S.E.2d 918, 927 (1975). Additionally, the Commission s decision is entitled to the respect due judgments of a tribunal informed by experience, and we will not disturb the Commission s analysis when it is based upon the application of correct principles of law. Lawyers Title Insurance Corp. v. Norwest Corp., 254 Va. 388, 390-91, 493 S.E.2d 114, 115 (1997) (quoting Swiss Re Life Co. Am. v. Gross, 253 Va. 139, 144, 479 S.E.2d 857, 860 (1997)). However, the Commission s decision, if based upon a mistake of law, will be reversed. First Virginia Bank v. Commonwealth, 213 Va. 349, 351, 193 S.E.2d 4, 5 (1972).
At the outset of our discussion, it is important to make clear, as did the Commission, the distinction between the rates which are allowed to be charged by an electric utility as determined by the Commission for a biennial period, and the ROE set in the same biennial review prоcess. As the
During VEPCO s 2011 biennial review the determination whether VEPCO s revenues from 2009 through 2010 had allowed it an appropriate rate of return was controlled by the 11.9% ROE established in the Commission s March 11, 2010 order. The 10.9% ROE established in the 2011 review process will be used in the 2013 biennial review to determine what adjustment may be necessary for VEPCO s revenue from 2011 through 2012. In this sense, an ROE is prospective at the time it is established in one biennial review, and it is not utilized by
VEPCO first contends that the Commission erred in holding that it would apply the 10.9% ROE retroactively to January 1, 2011 in the 2013 biennial review beсause, in VEPCO s view, the plain language of
First, VEPCO notes that with regard to the initial going-in review,
VEPCO further notes that a similar provision is found in
The appellees respond that when
When construing a statute, our primary objective . . . is to ascertain and give effect to legislative intent. Conger v. Barrett, 280 Va. 627, 630, 702 S.E.2d 117, 118 (2010) (quoting Turner v. Commonwealth, 226 Va. 456, 459, 309 S.E.2d 337, 338 (1983)). When the language of a statute is unambiguous, we are bound by the plain meaning of that language. Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174, 178 (2007). And if the language of the statute is subject to more than one interpretation, we must apply the interpretation that will carry out the legislative intent behind the statute. Id. Moreover, in evaluating a statute in this way, we have said that consideration of the entire statute . . . to place its terms in context to ascertain their plain meaning does not offend the rule because it is our duty to interpret the several parts of a statute as a consistent and harmonious whole so as to effectuate the legislative goal. Eberhardt
VEPCO, however, points to two additional provisions in
VEPCO asserts that there is further support for this view in subsection (A)(2)(c), which provides that if the Commission
According to VEPCO, these provisions demonstrate that [i]f the General Assembly had intended the [ROE] to apply retroactively . . . then the 2007 Act would have said so. In fact, it explicitly provides to the contrary.
The appellees respond that VEPCO s assertion in this regard is contrary to the overall scheme of the statute. They contend, as did the Commission in its March 29, 2012 opinion, that when read as a whole it is clear that where the General Assembly wished to limit the discretion of the Commission, it did so expressly. See, e.g.,
We agree with the Commission s observation in its March 29, 2012 opinion that the directive that the ROE for a biennium shall be determined by the Commission during eаch such biennial review means exactly what it says and nothing more. That is, this language directs that a new ROE is to be determined by the Commission during the biennial review based on the most recently available criteria, but it says nothing about limiting the application of an ROE to less than the full biennium in the subsequent review. It plainly does not mandate that an ROE must be applied to less than the full biennium.
In short, the better reading of VEPCO s four selections from
VEPCO next contends that even if
Initially, VEPCO maintains that the same statutory provisions that it relied upon in asserting that prospective application of an ROE is mandatory also in this case limit the
The appellees respond that the General Assembly expressly set specific limitations on the Commission s authority to determine the ROE, but was silent as to when the ROE should be applied. They contend that because the nature of the biennial review process makes it self-evident that the ROE would not be determined until sometime during the first year of the biennium tо which it would apply, the legislature must have been aware that the Commission would have been required to determine when the ROE was to be applied. Having given no express direction on this matter, they assert that the legislative intent was to leave the matter to the Commission s sound discretion. We agree.
The Commission is a specialized body with broad discretion in regulating public utilities. Level 3 Commcn‘s of Virginia v. State Corp. Comm‘n, 268 Va. 471, 474, 604 S.E.2d 71, 72 (2004); Central Tel. Co. of Va. v. State Corp. Comm‘n, 219 Va. 863, 874, 252 S.E.2d 575, 581 (1979). Moreover, when the Commission is conducting a ratemaking procedure, it is exercising a legislative function delegated to it by the General Assembly. Potomac Edison Co. v. State Corp. Comm‘n, 276 Va. 577, 587, 667 S.E.2d 772, 777 (2008). Thus, when a statute delegates such authority to the Commission, we presume that any limitation on the Commission s discretionary authority by the General Assembly will be clearly expressed in the language of the statute. In the absence of an express limitation, we will not add language to the statute by inference. See Jackson v. Fidelity & Deposit Co., 269 Va. 303, 313, 608 S.E.2d 901, 906 (2005) ( Courts cannot add language to the statute the General Assembly has not seen fit to include. ) (quoting Holsapple v. Commonwealth, 266 Va. 593, 599, 587 S.E.2d 561, 564-65 (2003)). Rather, we presume that where the General Assembly has not placed an express limitation in a statutory grant of authority, it intended for the Commission, as an expert body, to exercise sound discretion. Accordingly, we hold that there is no statutory prohibition of the Commission s exercising its discretion to determine when an ROE for a given biennium will be applied.
VEPCO next contends that permitting the Commission to utilize the newly set ROE for the entire 2011-2012 biennium
VEPCO next contends that by applying the 10.9% ROE to the entire 2011-2012 biennium, the Commission has effectively instituted a retroactive rate change for the period of January 1, 2011 to November 30, 2011 in violation of due process guarantees of the Virginia and federal constitutions. This argument is premised on VEPCO s assertion that the March 11, 2010 order authorized the Company to charge rates designed to provide it with the opportunity to earn an 11.9% rate of return. However, as the Commission expressly found that the 11.9% rate did not apply after December 31, 2010, VEPCO s assertion must fail.
Moreover, as appellees note in responding to this issue, and as we have already explained in addressing VEPCO s first assignment of error, the term rates as used in this statute refers to the rates that a utility is authorized to charge. It does not refer to the ROE which is used to measure whether the rates allowed the utility a fair rate of return. While VEPCO was required to continue charging the rates set in 2010 until the 2011 biennial review was complete, it is simply not correct to say that thоse rates [were] designed to provide it with the opportunity to earn an 11.9% rate of return in the 2011-2012 biennium. The 11.9% ROE was designed in the going-in review process that was limited to the time period applicable to that review process. Likewise, it was the 2011 biennial review that would determine the appropriate ROE for the 2011-2012 biennium. Accordingly, we hold that there has been no due process violation of VEPCO s rights under the facts of this case.
VEPCO next contends that the General Assembly could not have intended for the Commission to have discretion to set an ROE during the period to which it will be applied bеcause this would create significant operational concerns and risks . . . . with respect to the ability of the Company to manage its business and comply with its financial reporting obligations, as well the ability for investors to evaluate
Even if we assume that VEPCO s contentions accurately reflect public policy concerns that the Aсt is intended to facilitate, this Court is not the appropriate forum for addressing VEPCO s asserted deficiencies of the Act regarding those concerns. The legislature is the author of public policy. Campbell v. Commonwealth, 246 Va. 174, 184 n.8, 431 S.E.2d 648, 654 n.8 (1993). The courts can only administer the law as it is written. Coalter v. Bargamin, 99 Va. 65, 71, 37 S.E. 779, 781 (1901). For the courts, then, the best indications of public policy are to be found in the enactments of the Legislature. City of Charlottesville v. DeHaan, 228 Va. 578, 583, 323 S.E.2d 131, 133 (1984) (quoting City of Danville v. Hatcher, 101 Va. 523, 532, 44 S.E. 723, 726 (1903)).
Having found that
Finally, VEPCO contends that the Commission erred in relying on the stipulation agreed to by VEPCO and adopted by the Commission in the March 11, 2010 order as demonstrating that VEPCO had effectively agreed that utilization of the ROE determined during the going-in review was appropriate, and, thus, that utilization of the ROE determined in the 2011 biennial review was permissible. Appellees Fairfax County and the Virginia Committee for Fair Utility Rates respond that the Commission s prior action is merely consistent with and provides a rational basis for its action in the present case.
Because we have already determined that the Commission has the discretion to utilize the 10.9% ROE for the entire 2011-2012 biennium, any reliance that the Commission may have placed on VEPCO s prior stipulation to the retrospective application of the ROE from the going-in review, even if misplaced, would not impugn the Commission s action in this case. Moreover, the March 29, 2012 order is clear that the Commission principally relied upon its interpretation of
CONCLUSION
In summary, we find no merit to VEPCO s contentions that the Commission is not permitted to utilize the 10.9% ROE set in the November 30, 2011 order for the entire 2011-2012 biennial period in the 2013 biennial review of the rates, terms, and conditions for the provision of generation, distribution, and transmission services by VEPCO. The Commission s construction of
Affirmed.