Washington Gas Light Company v. Maryland Public Service Commission, et al.
No. 81
IN THE COURT OF APPEALS OF MARYLAND
August 14, 2018
Getty, J.
September Term, 2017. Argued: May 7, 2018. Filed: August 14, 2018. Circuit Court for Montgomery County, Case No. 407503V.
Washington Gas Light Company v. Maryland Public Service Commission, et al., No. 81, September Term, 2017. Opinion by Getty, J.
PUBLIC UTILITIES – MARYLAND CODE, PUBLIC UTILITY ARTICLE § 4-210 – STATUTORY INTERPRETATION
In a case of first impression, the Court of Appeals concluded that Public Utility Article § 4-210 of the Maryland Code, known also as the STRIDE statute, is unambiguous and requires that “gas infrastructure improvements” be located “in the State” in order to promptly recover investment costs separate from base rate proceedings. Additionally, the Court of Appeals‘s independent examination of the applicable legislative history supported its plain language interpretation. As such, the Court of Appeals affirmed the judgment of the Court of Special Appeals.
Barbera, C.J. Greene, Adkins, McDonald, Watts, Hotten, Getty, JJ.
Opinion by Getty, J.
Legislative intent (b) It is the intent of the General Assembly that the purpose of this section is to accelerate gas infrastructure improvements in the State by establishing a mechanism for gas companies to promptly recover reasonable and prudent costs of investments in eligible infrastructure replacement projects separate from base rate proceedings.
—Statement of “Legislative Intent,” Senate Bill 8, 2013 Md. Laws, ch. 161, § 1.
In this appeal, we are asked to interpret Public Utility Article (“PU“) § 4-210 of the Maryland Code, known also as the STRIDE statute.1 In short, the STRIDE statute allows Maryland gas companies more timely cost recovery if they submit plans that increase the pace of natural gas infrastructure improvements.
The General Assembly passed the STRIDE statute (Senate Bill 8) in response to increasing concerns about threats to public safety posed by aging and deteriorating gas infrastructure throughout the state.2 The Fiscal and Policy Note
injuries.” Dep‘t Leg. Servs., Fiscal and Policy Note, Senate Bill 8, at 6 (2013 Session) (hereinafter cited as “Senate Bill 8 Fiscal Note“). To underscore the importance of providing Maryland residents with a safe and reliable gas distribution infrastructure throughout the State, the legislature codified a rarely used express statement of legislative intent. See
Petitioner Washington Gas Light Company (“Washington Gas“) asserts that the Maryland Public Service Commission (“the Commission“), the Circuit Court for Montgomery County, and the Court of Special Appeals each erred in their statutory analysis, from which they ultimately concluded that the STRIDE statute provides accelerated cost recovery only for gas infrastructure projects located in the State of Maryland. Respondents Maryland Office of People‘s Counsel (“OPC“)3 and the Commission argue that the prior tribunals’ interpretation of
For the following reasons, we conclude that
the STRIDE statute‘s legislative history supports this interpretation. Accordingly, we affirm the judgment of the Court of Special Appeals.
BACKGROUND
A. The Parties
Washington Gas is a public service company that provides natural gas and delivery services to customers in the Maryland counties of Montgomery, Prince George‘s, Charles, Calvert, St. Mary‘s, and Frederick, as well as customers in Washington, D.C. and jurisdictions in Virginia. To transport natural gas to its customers, Washington Gas operates a system of distribution pipelines spanning its geographic service area throughout Maryland, Virginia, and Washington, D.C.
The Commission is tasked with regulating Maryland public service companies, including Washington Gas, and its duties are summarized in Maryland Off. of People‘s Counsel v. Md. Pub. Serv. Comm‘n:
The Maryland Public Service Commission is an independent unit in the executive branch of State government (
PU[] § 2–101(b) ), with jurisdiction over public service companies that operate utility businesses within the State.PU[] § 2–112(a) . The Commission‘s primary duties are to “supervise and regulate” the companies subject to its jurisdiction[,] to “ensure their operation in the interest of the public[,]” and to “promote adequate,economical, and efficient delivery of utility services in the State without unjust discrimination [.]” PU[] § 2–113(a)(1)(i) .
226 Md. App. at 488. The statutory authority for the Commission‘s regulation of public service companies is provided in Title Four of the Public Utilities Article.
Washington Gas has a duty to “charge just and reasonable rates for the regulated services that it renders,”
and reasonable rate of a public service company[.]”
B. The STRIDE statute – PU § 4-210
Beginning in 2011, the General Assembly considered legislation to accelerate replacement of aging gas infrastructure and allow cost recovery separate from base rate proceedings. See S.B. 8, 2013 Reg. Sess. (cross-filed as H.B. 89); S.B. 541, 2012 Reg. Sess. (cross-filed as H.B. 662); S.B. 332, 2011 Reg. Sess. (cross-filed as H.B. 856). On February 22, 2013, the General Assembly enacted a bill titled “An Act Concerning Gas Companies—Rate Regulation—Infrastructure Replacement Surcharge,” the STRIDE
statute, creating an exception to the normal ratemaking process. The law took effect on June 1, 2013. 2013 Md. Laws, ch. 161, § 2.
The STRIDE statute created
Further, an “eligible infrastructure replacement” project: “(i) is made on or after June 1, 2013; (ii) is designed to improve public safety or infrastructure reliability; (iii) does not increase the revenue of a gas company by connecting an improvement directly to new customers; (iv) reduces or has the potential to reduce greenhouse gas
of customer benefits under the plan; and (iv) any other information the Commission considers necessary to evaluate the plan.”
Unlike most legislation, the STRIDE statute included a statement of legislative intent: “It is the intent of the General Assembly that the purpose of this section is to accelerate gas infrastructure improvements in the State by establishing a mechanism for gas companies to promptly recover reasonable and prudent costs of investments in eligible infrastructure replacement projects separate from base rate proceedings.”
C. Legal Proceedings
Washington Gas filed a STRIDE plan with the Commission on November 7, 2013, that was approved by the Commission.
The Commission was required to approve or deny the amended application within 150 days of the amendment‘s filing.
An evidentiary hearing was held on April 29, 2015, and initial and reply briefs were filed on May 14 and May 21, 2015, respectively. The parties mainly disputed whether Washington Gas could recover costs for infrastructure replacement projects located outside of Maryland through the STRIDE statute. Washington Gas contended that since Maryland customers would benefit from the improvements located outside of Maryland,
arguing that the company should be entitled to accelerated recovery of costs for parts of the projects not located in the State of Maryland.
In a July 2, 2015 order, the full Commission affirmed Chief Judge Romine‘s legal analysis, determining that Washington Gas may not recover costs associated with out-of-state projects under the STRIDE statute and that recovery was limited to improvements physically located in Maryland. The full Commission found that ”
[t]he Company may include the appropriate Maryland-allocated share of out-of-state projects in the rate base in its next rate case, as has been the Company‘s practice, but there is no basis to accelerate cost recovery for improvements that the General Assembly did not intend to make eligible under the STRIDE [statute].
Washington Gas then petitioned for judicial review of the Commission‘s decision to the Circuit Court for Montgomery County on July 30, 2015.
utility could show that the utility company actions had any bearing on Maryland‘s overall infrastructure safety.” (Emphasis in original).
Washington Gas appealed to the Court of Special Appeals. The Court of Special Appeals examined both the plain text and legislative history of
the Court of Special Appeals agreed with the Commission‘s interpretation and affirmed the circuit court‘s judgment. Id. at 388.
Washington Gas then petitioned this Court for a writ of certiorari, which we granted on February 5, 2018. Washington Gas Light Co. v. Md. Pub. Serv. Comm‘n, 457 Md. 400 (2018). Focusing on statutory interpretation of
STANDARD OF REVIEW
Consistent with our review of decisions by other administrative agencies, we review the Commission‘s decision rather than the decisions of the circuit court or the Court of Special Appeals. Md. Off. of People‘s Counsel, 226 Md. App. at 500. The Public Utilities Article of the Maryland Code specifically includes the standard of review applicable to a decision by the Commission:
Every final decision, order, or regulation of the Commission is prima facie correct and shall be affirmed unless clearly shown to be: (1) unconstitutional; (2) outside the statutory authority or jurisdiction of the Commission; (3) made on unlawful procedure; (4) arbitrary or capricious; (5) affected by other error of law; or (6) if the subject of review is an order entered in a contested proceeding after a hearing, unsupported by substantial evidence on the record considered as a whole.
will not be disturbed on the basis of a factual question except upon clear and satisfactory evidence that it was unlawful and unreasonable. Such a decision is accorded the respect due an informed agency that is aided by a competent and experienced staff. Questions of law, however, are “completely subject
to review by the courts.” This is consistent with the standard of review applicable to administrative agencies generally.
Town of Easton v. Pub. Serv. Comm‘n of Maryland, 379 Md. 21, 30 (2003) (quoting Cambridge v. Eastern Shore Pub. Serv. Co., 192 Md. 333, 339 (1949)) (internal citations omitted).
“Even when reviewing questions of law, ‘the agency‘s interpretation of a statute may be entitled to some deference.’ However, ‘that deference is, by no means, dispositive, nor anywise as great as that applicable to factual findings or mixed questions of law and fact.‘” Commc‘ns Workers of Am. v. Pub. Serv. Comm‘n of Maryland, 424 Md. 418, 434 (2012) (quoting People‘s Counsel v. Pub. Serv. Comm‘n, 355 Md. 1, 14 (1999)). Appellate courts consider several factors when evaluating an agency‘s interpretation of a statute. These factors include:
Although never binding upon the courts, the contemporaneous interpretation of a statute by the agency charged with its administration is entitled to great deference,
especially when the interpretation has been applied consistently and for a long period of time. Another important consideration is the extent to which the agency engaged in a process of reasoned elaboration in formulating its interpretation of the statute. When an agency clearly demonstrates that it has focused its attention on the statutory provisions in question, thoroughly addressed the relevant issues, and reached its interpretation through a sound reasoning process, the agency‘s interpretation will be accorded the persuasiveness due a well-considered opinion of an expert body.
Baltimore Gas & Elec. Co. v. Pub. Serv. Comm‘n of Maryland, 305 Md. 145, 161–62 (1986).
As statutory interpretation is a question of law, we may review the Commission‘s decision de novo. In doing so, this Court will conduct an independent legislative intent analysis.
DISCUSSION
A. Parties’ Contentions
Washington Gas argues that the Commission, the circuit court, and the Court of Special Appeals incorrectly interpreted the STRIDE statute for three principal reasons. First, Washington Gas asserts that the Commission‘s interpretation of the STRIDE statute violated rules of statutory construction because the Commission did not apply the statutorily defined and unambiguous term “eligible infrastructure replacement.” Washington Gas asserts that there is no dispute among the parties and the tribunals that Washington Gas met the STRIDE statute‘s five criteria found in
should have applied the interpretation of the legislative intent provision that is most consistent with the other, unambiguous provisions of [the] STRIDE [statute].” Washington Gas asserts that the legislative intent provision should reflect the General Assembly‘s desire to “accelerate projects that would result in safety and reliability improvements for Maryland gas customers” instead of imposing a geographic limitation.
Regarding legislative intent, Washington Gas concedes that STRIDE projects located outside of Maryland were not discussed or debated during the STRIDE statute‘s legislative hearing and floor proceedings. Further, Washington Gas notes that it assisted in the drafting of the statute and that if out-of-state projects had been broached during debate, the company‘s representatives would have addressed the importance of not limiting STRIDE projects based upon geographic location since Maryland customers benefit from these out-of-state projects. In summary, Washington Gas asserts that there is nothing in the legislative history which proves the Commission‘s interpretation that the law applies solely to projects physically located in Maryland.
legislative intent section is considered a preamble, a preamble is still allowed to confine the breadth of a statute if there is no conflict between the preamble and an express statutory provision. Consolidated Real Estate and Fire Ins. Co. of Baltimore v. Cashow, 41 Md. 59, 70–71 (1874) (holding that a preamble may “not control any express provision of the enacting part of the Statute clearly evidencing the legislative intent to give [the statute] a more extended operation” only if the intent of the enacting part of the statute is “apparent and expressed in plain language“).
The Commission responds to Washington Gas‘s legislative intent arguments by stating that there is no evidence that the General Assembly considered infrastructure investment outside of Maryland when it passed the STRIDE statute. OPC counters Washington Gas‘s argument, stating that since Washington Gas helped draft the STRIDE statute, one would expect the statute to clearly support Washington Gas‘s current position. OPC argues that, instead, the presence of the “in the State” phrase in the STRIDE statute contradicts the legislative argument Washington Gas advances.
B. Overview of Statutory Analysis
“We provide judicial deference to the policy decisions enacted into law by the General Assembly.” Phillips v. State, 451 Md. 180, 196 (2017). In addition, this Court “assume[s] that the legislature‘s intent is expressed in the statutory language and thus our statutory interpretation focuses primarily on the language of the statute to determine the purpose and intent of the General Assembly.” Id. This Court recently had the opportunity to reiterate the statutory interpretation process:
When conducting a statutory construction analysis, this Court‘s principal goal is to determine the legislative intent underlying the relevant statutes. See Downes v. Downes, 388 Md. 561, 571 (2005). “We begin our analysis by looking to the normal, plain meaning of the language of the statute, reading the statute as a whole to ensure that no word, clause, sentence or phrase is rendered surplusage, superfluous, meaningless or nugatory.” Brown v. State, 454 Md. 546, 551 (2017).
Shealer v. Straka, 459 Md. 68, 84 (2018). We will not “read a statute in a way that is inconsistent with, or ignores, common sense or logic.” Md. Pub. Serv. Comm‘n, 355 Md. at 23 (citing Frost v. State, 336 Md. 125, 137 (1994)). Continuing our discussion of statutory interpretation in Shealer, we stated that:
In some instances, a reviewing court will be able to discern the legislative intent from the clear and unambiguous statutory language; nevertheless, “[o]ccasionally we see fit to examine extrinsic sources of legislative intent merely as a check of our reading of a statute‘s plain language.” Reger [v. Washington Ctny. Bd. of Ed.], 455 Md. [68,] 96 [(2017)] (quoting Phillips [v. State], 451 Md. [180,] 196 [(2017)]). The key extrinsic source for purposes of confirming the legislative intent is often the legislative history of the pertinent statutes. See State v. Roshchin, 446 Md. 128, 140 (2016) (“But even when the language is unambiguous, it is useful to review legislative history of the statute to confirm that interpretation and to eliminate another version of legislative intent alleged to be latent in the language.“).
C. Plain Language Analysis
The plain language of the
recover reasonable and prudent costs of investments in eligible infrastructure replacement projects separate from base rate proceedings.” (Emphasis added).
First, we must determine whether
As an alternative to a preamble, a codified section stating the legislature‘s intent, purpose, or findings may be included in the body of a bill. Such a statement may have more legal formality than one that is not codified; it is not, however, drafted with heading “Preamble.” Instead, the statement should begin with the words, “It is the intent of the General Assembly that . . .”
Id. at 152–53 (emphasis added).
The Manual distinguishes a “preamble” from “an alternative to a preamble.” While
Further supporting this conclusion, a recent Commission case examined whether
its intent in enacting
It is the Court‘s responsibility to ascertain and effectuate the intent of the legislature in a statutory interpretation analysis. See State v. Bey, 452 Md. 255, 265 (2017). Here, the General Assembly expressly stated the intent of the statute in
D. Legislative Intent Analysis
Although we have found the plain language of
The General Assembly first considered the issue of replacing aging gas infrastructure during the 2011 and 2012 Sessions. In the 2011 Session, Senate Bill 332,
and the cross-filed House Bill 856, had hearings in their respective committees, Senate Finance Committee and House Economic Matters Committee, but were subsequently withdrawn. Of note, the unsuccessful 2011 legislation contained this statement of legislative intent: “The General Assembly finds and declares that the purpose of this section is to promote gas infrastructure improvements in the State by establishing a mechanism for gas companies to promptly
In the 2012 Session, Senate Bill 541, cross-filed as House Bill 662, received a favorable report with amendments from the Senate Finance Committee but failed on a rare procedural second reading vote on the Senate floor. After the Senate floor defeat, House Bill 662 passed the House with amendments but then received an unfavorable report from the Senate Finance Committee because the Senate bill had already failed on the procedural second reader vote. The 2012 legislation modified the statement of legislative intent: “It is the intent of the General Assembly that the purpose of this section is to accelerate gas infrastructure improvements in the State by establishing a mechanism for gas companies to promptly recover reasonable and prudent costs of investments in eligible infrastructure replacement projects separate from base rate proceedings.”
The following year, Senate Bill 8, cross-filed as House Bill 89, was passed into law. Senate Bill 8 contained the exact legislative intent language as well as the eligible infrastructure replacement definition found in the 2012 legislation. See 2013 Md. Laws, ch. 161. Interestingly, Senate Bill 8 Fiscal Note highlighted accidents occurring ”in Maryland from 2002 through 2011, totaling $12 million in property damage and causing
one fatality and 16 injuries.” Senate Bill 8 Fiscal Note, at 6 (emphasis added). Nothing in Senate Bill 8 Fiscal Note suggested that legislators contemplated out-of-state projects.
During deliberations for Senate Bill 8, organizations, including Washington Gas, submitted position statements. In its position statement‘s introduction, Washington Gas commented that many individuals and entities “have spent the past two years discussing . . . the need to speed up the replacement of aging natural gas infrastructure in Maryland.” Washington Gas stated that the replacement of gas infrastructure was necessary because “Maryland ranks ninth (1,422 miles) in the U.S. of states with the largest amount of cast iron gas pipes. . . . Of the eight states with larger amounts of cast iron pipe, seven of them have accelerated pipeline replacement programs similar to what this bill would establish.” Additionally, Washington Gas‘s position statement asserted that in total “30 states and the District of Columbia [] have passed legislation, or regulation to do what S[enate] B[ill] 8 seeks to do.” Of note, Washington Gas observed that “Maryland residents support this surcharge mechanism as a way of paying for the replacement of older pipeline systems.” Supporting this argument, Washington Gas references letters of support, including those from “seven mayors representing older, predominantly African-American communities in Prince George‘s County that have aging pipe in service.” (Emphasis added). Washington Gas concluded by commenting that a “significant portion of the entire nation‘s energy infrastructure is old and Maryland is no exception.” (Emphasis added). Clearly, Washington Gas did not discuss using the STRIDE statute with regard to out-of-state infrastructure projects. Washington Gas‘s argument focused on the benefits to Maryland customers but only in reference to problems with infrastructure located in Maryland.
Another public service company, Baltimore Gas and Electric (“BGE“), submitted a position statement in support of Senate Bill 8, “arguing that “[s]ignificant and sustained investment is needed to replace outdated gas infrastructure in Maryland.” BGE detailed that its “650,000 natural gas customers [are] served by 7,000 miles of gas mains covering approximately 800 square miles across Central Maryland.” BGE also stressed that “Maryland has the
The U.S. Department of Transportation‘s Pipeline and Hazardous Materials Safety Administration (“PHMSA“) submitted a position statement supporting the passage of Senate Bill 8. In its statement, PHMSA emphasized that:
3019 miles of gas distribution pipeline in Maryland were installed prior to 1960 which equates to one out of every five miles. These pipelines have been in the ground for over 50 years. Cast iron, which can be prone to failure, made up nearly 10 percent of Maryland‘s natural gas distribution mains. Only five States have more cast iron pipe than Maryland and according to a 2011 survey by the National Association of Pipeline Safety Representatives, Maryland is the only state in the top 10 that does not have cost recovery mechanisms for cast iron replacement programs.
In its position statement, the Commission did not support or oppose the legislation but rather suggested informational comments and recommended technical amendments.
The Commission reiterated its duty “to ensure a safe and reliable distribution infrastructure throughout the State” and recognized “the importance of upgrading the State‘s gas pipeline infrastructure.”
OPC opposed the STRIDE statute and in its position statement argued that “a surcharge mechanism, in addition to base rates,” was not “needed to ensure the delivery of safe and reliable service by natural gas companies.” Later in its position statement, OPC stated that “[e]ven if a gas utility faces a major and sudden need for reliability or safety improvements (and there is no evidence of such a problem in Maryland), utility regulatory accounting requires that these rising expenses be normalized, that is, the rates should reflect only capital expenditures that are in excess of the Company‘s normal capital spending.”
In response to opposition to the STRIDE statute, the bill file contains two pieces of literature sponsored by the gas distribution industry. First, a document entitled “Pass Strategic Infrastructure Development and Enhancement (STRIDE) and STRIDE FORWARD to accelerate upgrades to Maryland‘s natural gas infrastructure” noted that “Maryland lags behind other states in driving accelerated upgrades of its natural gas pipes.” The document stressed that a majority of states have already already adopted measures for accelerated natural gas pipeline replacement programs and that the PHMSA applauded Maryland‘s efforts to explore similar acceleration measures such as Senate Bill 8. Similarly, the second document is entitled “STRIDE: In Step with AARP‘s Consumer Safeguards.” In the introductory paragraph, the document stated that “STRIDE (Maryland Senate Bill 8 and House Bill 89) is a proposal to replace Maryland‘s outmoded, leak-prone
gas pipes at much faster rates and at the least possible cost to utility customers.” (Emphasis added).
The resounding theme of the proponents’ testimony emphasized that Maryland was one of few states between 2011
Finally, at oral argument, Washington Gas argued that the STRIDE statute should be viewed as analogous to Virginia‘s cost-allocation statute, the Steps to Advance Virginia‘s Energy Plan (“SAVE“) Act, which allows for accelerated cost recovery for out-of-state projects.5 While the SAVE Act is similar to the STRIDE statute,6 the SAVE Act
does not reference geography anywhere in its text. See
CONCLUSION
In summary, we conclude that
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS TO BE PAID BY PETITIONER.