Aggie Investments GP v. Public Service Com'n of North Dakota

• Decision Date: 28 May 1991
• Docket Number: 900327,Nos. 900319,s. 900319
• Parties: Util. L. Rep. P 26,076 AGGIE INVESTMENTS GP, Intervenor, Appellee and Cross-Appellant v. PUBLIC SERVICE COMMISSION OF NORTH DAKOTA, Respondent, Appellant and Cross-Appellee and Northern States Power Company, Respondent. AGGIE INVESTMENTS GP, Intervenor, Appellee and Cross-Appellant v. PUBLIC SERVICE COMMISSION OF NORTH DAKOTA, Respondent and Northern States Power Company, Respondent, Appellant and Cross-Appellee. Civ.
• Court: North Dakota Supreme Court

Page 805

470 N.W.2d 805

Util. L. Rep. P 26,076

AGGIE INVESTMENTS GP, Intervenor, Appellee and Cross-Appellant v. PUBLIC SERVICE COMMISSION OF NORTH DAKOTA, Respondent, Appellant and Cross-Appellee and Northern States Power Company, Respondent.

AGGIE INVESTMENTS GP, Intervenor, Appellee and Cross-Appellant v. PUBLIC SERVICE COMMISSION OF NORTH DAKOTA, Respondent and Northern States Power Company, Respondent, Appellant and Cross-Appellee.

Civ. Nos. 900319, 900327.

Supreme Court of North Dakota.

May 28, 1991.

Myer R. Shark (argued), and Ralph Maxwell (no appearance), of Maxwell Law Office, Fargo, for intervenor, appellee and cross-appellant.

Illona A. Jeffcoat-Sacco (argued), Asst. Atty. Gen., and William W. Binek (no appearance), Asst. Atty. Gen., Public Service Comm'n, Bismarck, for respondent, appellant and cross-appellee Public Service Comm'n of North Dakota.

Daniel S. Kuntz (argued), of Zuger, Kirmis, Bolinske & Smith, Bismarck, and

David Lawrence (no appearance), Legal Dept., Northern States Power Co., Minneapolis, for respondent, appellant and cross-appellee Northern States Power Co.

LEVINE, Justice.

Northern States Power Company [NSP] appeals from a district court judgment reversing an order by the North Dakota Public Service Commission [PSC] accepting an electric rate settlement offer submitted by NSP. Aggie Investment GP [Aggie] cross-appeals from that part of the judgment affirming the PSC's refusal to order NSP to issue a refund to reflect a reduction in NSP's income tax expenses because of the enactment of the Tax Reform Act of 1986. The PSC appeals from the district court's award of $48,022.86 in attorney's fees to Aggie. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

NSP is an investor-owned utility which provides retail electric service to Minnesota, South Dakota and North Dakota. On July 31, 1987, NSP filed an application with the PSC requesting a $6,075,000 increase in annual revenue for its retail electric rates for North Dakota. On August 4, 1987, the PSC suspended NSP's application for a rate increase pending investigation, formal hearing and issuance of a final order.

The PSC held public input hearings on September 22, 23, and 24, 1987, in Fargo, Grand Forks and Minot, respectively. On October 13, 1987, Aggie moved to intervene and the PSC granted Aggie's motion on October 20, 1987. The PSC held a technical hearing in Bismarck in January 1988.

At the technical hearing, evidence was presented on several methods of jurisdictional allocation of NSP's system-wide demand costs for its North Dakota electric rates. NSP presented evidence that all the jurisdictions served by NSP should use the same jurisdictional allocation method and that an average twelve-monthly coincident peak method (12 CP method) provided the best allocation of NSP's system-wide demand costs for North Dakota. An expert hired by the PSC testified that the peak and average method (P & A method) more accurately allocated NSP's system-wide demand costs for North Dakota. Aggie argued that the PSC should adopt the single coincident peak method (1 CP method).

On March 24, 1988, the PSC issued findings of fact, conclusions of law and an order denying NSP's application for a rate increase and directing NSP to file rates reflecting a $427,000 reduction in annual revenue. After noting that the Minnesota Public Utility Commission had recently rejected the 12 CP method in Minnesota, the PSC rejected the 12 CP method and adopted the P & A method for allocating NSP's system-wide demand costs for its North Dakota electric rates.

In response to the PSC's March 24, 1988 order, NSP filed rates which were to be effective on May 2, 1988. However, on April 26, 1988, the PSC issued an order to stay those rates pending a rehearing on three issues: (1) the effect of the 1986 Tax Reform Act on NSP's electric rates for the period of July 1, 1987 through May 2, 1988; (2) the choice of methods of jurisdictional allocation; and (3) the effect of jurisdictional allocation on cost of capital.

After a further evidentiary hearing and oral argument on rehearing, NSP requested the PSC to take administrative notice that, in an October 20, 1988 decision, the Minnesota Public Utilities Commission had adopted the 12 CP method for allocating NSP's system-wide demand related costs for its Minnesota electric rates. Aggie resisted that request. On November 15, 1988, the PSC determined that the Minnesota decision was the proper subject of judicial notice under Rule 201(b), N.D.R.Evid. and was therefore subject to administrative notice under Section 28-32-07, N.D.C.C.

NSP submitted an "offer of settlement" ¹ on December 5, 1988, which proposed adoption of the 12 CP method for North Dakota and authorized NSP to file rates increasing annual revenue by $1,910,000. The PSC staff recommended acceptance of NSP's offer of settlement, noting:

"Staff believes that the evidence still supports the peak and average formula. However, evidence introduced at the rehearing also supports the 12 CP method. The record does not support one method to the exclusion of the other. In addition, both economic experts at the rehearing advocated additional return for inconsistency among allocation methods."

Aggie filed a written objection to the offer of settlement.

On December 13, 1988, without further hearing, the PSC issued an order determining that "NSP's offer represents a just and reasonable resolution of the matter" and that "[t]he 12 [CP] method is supported by evidence on the record." The PSC adopted the 12 CP method, incorporated the offer of settlement into its March 24, 1988 order and directed NSP to file a schedule of rates consistent with the offer of settlement. NSP filed those rates on March 14, 1989, and they became effective April 1, 1989. The PSC order also concluded that Aggie's arguments on the Tax Reform Act of 1986 were not supported by the law or evidence.

Aggie appealed to the district court for Cass County, which dismissed for lack of subject matter jurisdiction. In Aggie Investments GP v. Public Service Commission, 451 N.W.2d 141 (N.D.1990), we reversed and remanded, holding that the public input hearing in Fargo constituted a "hearing or part thereof" under Section 28-32-15, N.D.C.C., and therefore the district court for Cass County had jurisdiction to hear Aggie's appeal.

On remand, the district court concluded that Aggie had been denied "fundamental due process" because the PSC failed to make findings of fact sufficient to justify its conclusion that the electric rates set by its March 24, 1988 order should be changed. The court determined that Aggie was "denied a fair hearing on the matter, and the Public Service Commission published an order which, in effect, was an order which changed its previous order, and it happened without the benefit of a hearing on it and findings of fact." The court concluded that the PSC's December 13, 1988 order was a nullity and remanded to the PSC to establish an appropriate method and schedule for refund of excess rates collected pursuant to that order. However, the court affirmed the PSC order on the effect of the Tax Reform Act of 1986 on NSP's rates. The court also awarded Aggie $48,022.86 in attorney's fees pursuant to Section 28-32-21.1, N.D.C.C.

Section 28-32-19, N.D.C.C., governs our review of PSC decisions and provides:

"... the court shall affirm the decision of the agency unless it shall find that any of the following are present:

"1. The decision or determination is not in accordance with the law.

"2. The decision is in violation of the constitutional rights of the appellant.

"3. Provisions of this chapter have not been complied with in the proceedings before the agency.

"4. The rules or procedure of the agency have not afforded the appellant a fair hearing.

"5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

"6. The conclusions and decision of the agency are not supported by its findings of fact.

"If the decision of the agency is not affirmed by the court, it shall be modified or reversed, and the case shall be remanded to the agency for disposition in accordance with the decision of the court."

Relying on O'Connor v. Northern States Power Co., 308 N.W.2d 365 (N.D.1981), and Transportation Division of the Fargo Chamber of Commerce v. Sandstrom, 337 N.W.2d 160 (N.D.1983), NSP argues that the district court erred in reversing the PSC order accepting NSP's offer of settlement. It says the PSC did not "establish" rates when it accepted the offer of settlement. Rather, the rates NSP filed on March 14, 1989, were "automatic" rates which became effective "thirty days from the time of filing ... or of such lesser time as the commission may grant" because they were not suspended by the PSC. Disregarding the offer of settlement and PSC's acceptance of the offer, and characterizing the rates filed on March 14, 1989, as an application for an increase in electric rates which went into effect automatically, NSP argues that under our statutes, the PSC was not required to hold a hearing or make findings of fact for those "automatic" rates.

Aggie argues that Section 49-02-02(5), N.D.C.C., required the PSC to hold a hearing before accepting the offer of settlement. We agree.

Section 49-02-02(5), N.D.C.C., says:

"Powers of public service commission with reference to public utilities. The commission shall have power to:

* * * * * *

"5. Hold hearings on good cause being shown therefor or on its own motion, and to provide notice thereof and to shorten the period for which notice shall be given prior to hearing, when good cause exists for such action. Such notice, however, shall be reasonable in view of the nature, scope, and importance of the hearing. Whenever it shall appear to the satisfaction of the commission that all of the interested parties have agreed concerning the matter at hand, the commission may...