Metro. Wash. Bd., Etc. v. Public Serv. Com'n, 79-1195.

• Decision Date: 20 May 1981
• Docket Number: No. 79-1254.,No. 79-1195.,79-1195.,79-1254.
• Citation: 432 A.2d 343
• Court: D.C. Court of Appeals
• Parties: The METROPOLITAN WASHINGTON BOARD OF TRADE, Petitioner, v. PUBLIC SERVICE COMMISSION OF the DISTRICT OF COLUMBIA, Respondent. Potomac Electric Power Company, Apartment & Office Building Association, People's Counsel, Intervenors. APARTMENT & OFFICE BUILDING ASSOCIATION OF METROPOLITAN WASHINGTON, INC., Petitioner, v. PUBLIC SERVICE COMMISSION OF the DISTRICT OF COLUMBIA, Respondent. Potomac Electric Power Company, People's Counsel, Intervenors.

Page 343

432 A.2d 343

The METROPOLITAN WASHINGTON BOARD OF TRADE, Petitioner, v. PUBLIC SERVICE COMMISSION OF the DISTRICT OF COLUMBIA, Respondent.

Potomac Electric Power Company, Apartment & Office Building Association, People's Counsel, Intervenors.

APARTMENT & OFFICE BUILDING ASSOCIATION OF METROPOLITAN WASHINGTON, INC., Petitioner, v. PUBLIC SERVICE COMMISSION OF the DISTRICT OF COLUMBIA, Respondent.

Potomac Electric Power Company, People's Counsel, Intervenors.

No. 79-1195.

No. 79-1254.

District of Columbia Court of Appeals.

Argued September 3, 1980.

Decided May 20, 1981.

COPYRIGHT MATERIAL OMITTED

Jerry A. Moore III, Washington, D.C., with whom Raymond R. Dickey, Washington, D.C., was on the briefs, for Metropolitan Washington Board of Trade.

Frann G. Francis, Washington, D.C., for Apartment and Office Building Association of Metropolitan Washington, Inc.

Melvin J. Washington, Asst. Corp. Counsel, Washington, D.C., with whom Judith W. Rogers, Corp. Counsel, and Richard W. Barton, Deputy Corp. Counsel, Washington, D.C., at the time the brief was filed, were on the brief, for respondent.

William Dana Shapiro, Washington, D.C., with whom Edward A. Caine, Washington, D.C., was on the briefs, for Potomac Electric Power Co.

John T. Schell, Washington, D.C., with whom Brian Lederer, Elizabeth A. Noel, and Ralph A. Simmons, Washington D.C., were on the briefs, for People's Counsel.

Onkar N. Sharma, Washington, D.C., filed briefs on behalf of the Washington Metropolitan Area Transit Authority.

Before FERREN and PRYOR, Associate Judges, and GALLAGHER^*, Associate Judge, Retired.

GALLAGHER, Associate Judge, Retired:

The Apartment and Office Building Association of Metropolitan Washington AOBA) and the Metropolitan Washington Board of Trade (Board of Trade) bring consolidated petitions for review of the Final Opinion and Order issued by the Public Service Commission in Formal Case No. 680. In Formal Case No. 680, the Commission considered and adopted marginal cost based, time-of-day (TOD) pricing¹ for large demand customers of Potomac Electric Power Company (PEPCO).

The marginal cost based, TOD pricing system adopted by the Commission reflects a recognition that demand for electricity varies from hour to hour and from season to season and that capital costs and fuel costs generally vary with the level of demand. Marginal cost based, TOD pricing attempts to allocate costs to customers who consume electricity during peak periods, when the cost of providing electricity is high, by charging higher prices per unit of electricity during these peak periods. In theory, marginal cost based, TOD pricing should discourage consumers from using electricity during peak periods and, in so doing, should result in the conservation of energy and in the reduction of capital and fuel expenditures. The Commission, then, adopted the marginal cost based, TOD pricing system, which is challenged by petitioners in this case, in order to promote three goals: (1) rate equity, (2) maximization of efficiency in facility and resource use by electric utilities, and (3) conservation of energy. See Part IV infra.

The arguments of the Board of Trade and AOBA are essentially the same and address three basic questions: (1) whether the marginal cost based, TOD ratemaking principles approved by the Commission are supported by evidence in the record sufficient to allow the Commission to consider adequately the interests of PEPCO and its customers; (2) whether the application of TOD rates at this time only to PEPCO's largest commercial customers is unjustly discriminatory; and (3) whether, during the course of the Commission's exceptions procedure, the Commission properly could consider and adopt a suggested refinement in the methodology originally adopted in the Commission's Proposed Opinion without taking additional evidence. We reject petitioners' arguments that the TOD ratemaking principles approved by the Commission are unjust, discriminatory, and without sufficient record support. We uphold the decision of the Commission.

I. Facts and Procedural Background

This appeal arises from Order No. 7034 of the Public Service Commission of the District of Columbia (PSC or Commission), the Final Opinion and Order in Formal Case No. 680. In the course of the proceedings in Formal Case No. 680, the Commission issued Order No. 7002, the Proposed Opinion and Order of the Commission, and Order No. 7034, the Final Opinion and Order.² These orders establish the acceptability of adopting time-of-day rates for the large commercial customers served by PEPCO. The Commission stated that their most important decision in Case No. 680 was that the "TOD rates (particularly energy charges) should generally track PEPCO's marginal costs — that is, PEPCO's cost of producing each additional kilowatt hour³ of electricity." 31 PUR4th 219, 221 (footnote added). Orders Nos. 7002 and 7034 go on to determine on-peak and off-peak periods⁴ and to establish the basic methodology to be used in designing specific TOD rates. These orders, however, did not implement the TOD ratemaking principles by establishing specific TOD rates. The Commission formulated specific TOD rates in another proceeding — Formal Case No. 715.

The Commission ordered PEPCO to install TOD meters for its large commercial customers on November 12, 1975 and allowed PEPCO until July 16, 1977 to complete a study relating to TOD pricing for large commercial customers. PEPCO installed all meters and data processing equipment required to implement TOD pricing for this class of customers. PEPCO also filed tariff proposals and supporting studies relating to the methodology for establishing TOD rates. On August 12, 1977, the Commission issued a Public Notice establishing a prehearing conference for September 15, 1977 and specifying that the tariffs filed by PEPCO would apply to customers whose maximum demand for electricity equaled or exceeded 1,000 kilowatts (kw) during at least two months of the year. The Commission then issued Order No. 5933 on October 19, 1977 specifying the parties to the case, the issues to be litigated and the procedural ground rules. The parties prefiled testimony concerning TOD ratemaking principles and specific methodologies for formulating TOD rates. Hearings for cross-examination of this testimony began on October 24, 1978 and concluded on March 27, 1979.

The Commission issued its Proposed Opinion on June 28, 1979. AOBA, the Board of Trade, and PEPCO filed exceptions to the Proposed Opinion. In response to a problem concerning the application of the TOD rate principles set forth in the Proposed Opinion raised by PEPCO during the oral argument on exceptions, interested parties held a conference on August 8, 1979 to formulate a solution to the problem identified by PEPCO.⁵ On the basis of their discussions and the evidence of record before the Commission, the parties submitted a report containing a proposed modification to the Commission's TOD rate design.

On September 7, 1979, the Commission issued its Final Opinion, which essentially adopted the Proposed Opinion. 31 PUR4th 249, 251. There were some modifications including the adoption of the proposal which had emerged from the conference. AOBA and the Board of Trade filed applications for reconsideration of Order No. 7034 which the Commission denied on October 16, 1979. These petitions for review were then timely filed. See D.C.Code 1973, § 43-705.

II. Ripeness and Finality

For jurisdictional purposes we will proceed to discuss the procedural posture of this case in order to determine whether judicial review is appropriate at this time. See D.C.Code 1973, § 43-705;⁶ Goodman v. Public Service Commission, 151 U.S.App. D.C. 321, 467 F.2d 375 (1972). See also Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Specifically, we must analyze the relationship between Formal Case No. 680, which adopted basic TOD ratemaking principles, and Formal Case No. 715, which formulated the actual TOD rates, in order to determine whether judicial review of basic TOD principles, without considering specific TOD rates, would impermissibly interfere with the administrative decision-making process. See Abbott Laboratories, supra at 148, 87 S.Ct. at 1515. We conclude that judicial review is appropriate at this time.

In the context of protracted administrative proceedings, it is particularly difficult to determine precisely when an agency has issued a "final order" and when an administrative action is ripe for review.⁷ Many courts do not address the problem at all, but intuitively seem to accept the order before them as final and proceed directly to the merits. See, e. g., New York State Council of Retail Merchants, Inc. v. Public Service Commission, 45 N.Y.2d 661, 384 N.E.2d 1282, 412 N.Y.S.2d 358 (1978) (TOD ratemaking case). In Abbott Laboratories v. Gardner, supra, the Supreme Court adopted a flexible approach to determine finality and ripeness and articulated the basic rationale of the ripeness doctrine:

[I]t is fair to say that its basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. [Id. 387 U.S. at 148, 87 S.Ct. at 1515.]

The Court went on to formulate a two-pronged test that requires courts "to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Id. at 149, 87 S.Ct. at 1515.

Courts have applied the Abbott Laboratories test in a number of ratemaking cases. See, e. g., American Airlines, Inc. v. CAB, 161 U.S.App.D.C. 430, 495 F.2d 1010 (1974); Continental Air Lines v. CAB, 173 U.S.App.D.C. 1, 522 F.2d 107 (1974);⁸ Goodman v. Public Service...