Appeal of Pennichuck Water Works

• Decision Date: 10 September 1980
• Docket Number: No. 79-143,79-143
• Citation: 120 N.H. 562,419 A.2d 1080
• Parties: Appeal of PENNICHUCK WATER WORKS (New Hampshire Public Utilities Commission).
• Court: New Hampshire Supreme Court

Page 1080

419 A.2d 1080

120 N.H. 562

Appeal of PENNICHUCK WATER WORKS (New Hampshire Public Utilities Commission).

No. 79-143.

Supreme Court of New Hampshire.

Sept. 10, 1980.

Gallagher, Callahan & Gartrell, Concord, by brief (Edward E. Shumaker, III, Concord, orally), for plaintiff, Pennichuck Water Works.

H. Phillip Howorth, Nashua, and Gerald L. Lynch, Concord, appearing jointly by brief and orally, for intervenors, City of Nashua and Legislative Utility Consumers' Council.

Sulloway, Hollis & Soden, Concord (Franklin Hollis, Concord, orally), for amicus curiae, Concord Elec. Co. and Exeter & Hampton Elec. Co.

BROCK, Justice.

This is an appeal brought by the Pennichuck Water Works pursuant to RSA 541:6 from an order of the Public Utilities Commission (PUC). The order granted Pennichuck's request to establish temporary rates but made them effective on a date later than that requested by Pennichuck.

Pennichuck is a public utility engaged in gathering and distributing water to the public in Nashua and Merrimack. On December 29, 1978, Pennichuck, proposing increased permanent rates, filed new rate schedules to become effective on all bills rendered on or after January 31, 1979. Because Pennichuck bills its customers on a staggered quarterly basis, this would have resulted in many of the utility's customers paying higher rates for water which they had already used before December 29, 1978, the date on which Pennichuck initially filed its request for a rate increase. In accordance with RSA 378:3 and the rules of the PUC, public notice of the filing was given in a local newspaper on January 17 and 24, 1979. The notice set January 31, 1979, as the effective date for the proposed rate increases but did not indicate that this referred to a billing date or that the proposal would in fact result in a retroactive rate increase for services rendered to some customers as far back as November 1, 1978. On January 8, 1979, pursuant to RSA 378:6, the PUC prevented the proposed new rates from going into effect by suspending their effective date pending its investigation.

In response to the suspension order, Pennichuck, on February 12, 1979, filed a petition pursuant to RSA 378:27, :29, requesting approval of its proposed permanent rates as temporary rates, to be effective on "all bills rendered by Pennichuck on or after January 31, 1979, for services theretofore and thereafter rendered." In the event that the PUC ultimately gave the utility a permanent rate increase, the granting of this request would also have resulted in many of the utility's customers paying higher rates for water which they used before December 29, 1978, the date when Pennichuck first filed for a rate increase. RSA 378:29.

The PUC issued its order relating to Pennichuck's petition for a temporary rate request on April 30, 1979. It denied Pennichuck's request to have its proposed permanent rates established as temporary rates and declined to make the temporary rates effective on all bills rendered on or after January 31, 1979, as requested by Pennichuck. The PUC did, however, allow temporary rates to be established at the same level as the permanent rates which were in effect at the time Pennichuck filed its request for a permanent rate increase, December 29, 1978, and directed that the temporary rates were to take effect on all bills issued on or after April 30, 1979. Because the effective date of temporary rates fixes and preserves the period during which the rates allowed in the underlying permanent rate proceeding may apply, RSA 378:27, :29; see State v. New England Tel. & Tel. Co., 103 N.H. 394, 395, 173 A.2d 728, 729 (1961), this order would allow Pennichuck to apply its new permanent rates on all bills rendered on or after April 30, 1979, thus raising the prospect that the newly approved permanent rates would be effective on different dates for different customers.

The issue before us, under RSA ch. 541, is whether the PUC has committed any error of law or whether its order is unjust or unreasonable, and Pennichuck has the burden of proving that the PUC's order is clearly unreasonable or unlawful. Appeal of McKenney, 120 N.H. ---, 412 A.2d 116 (1980). While the PUC determined that the temporary rates should become effective on all bills rendered on or after April 30, 1979, Pennichuck seeks to have the rates made effective on all bills rendered on or after January 31, 1979. In so doing, Pennichuck in essence seeks to have its permanent rate increase apply to services it has rendered for up to three months prior to January 31, 1979.

Pennichuck argues that the PUC's decision to allow the temporary rates to be effective only on bills rendered on or after April 30, 1979, rather than January 31, 1979, was erroneous as a matter of law. For the reasons set forth below, we conclude that the PUC could not lawfully have established temporary rates to be effective on all bills rendered on or after January 31, 1979, as requested by Pennichuck.

The difficulty which we have with Pennichuck's position is that because it bills its customers on a quarterly basis, should temporary rates be effective on all bills rendered on or after January 31, 1979, all or many of its customers could be charged higher rates for water used by them before Pennichuck had even filed for a rate increase. This squarely raises the question of whether retroactive increases are permissible.

Pennichuck, understandably, relies on a twenty-year-old decision of this court in support of its argument that public utility rate increases may be applied retroactively. Pennichuck Water Works v. State, 103 N.H. 49, 164 A.2d 669 (1960). In that case, which ironically involved the same utility, this court did indeed rule that rate increases could be applied retroactively. Recently, we cited Pennichuck Water Works in Nelson v. Public Serv. Co., 119 N.H. 327, 330, 402 A.2d 623, 625 (1979), and alluded to the validity of the PUC approving rate increases retroactively. Even more recently, however, we have had occasion to reexamine the continuing validity of the retroactive application of legislative acts to the extent that they affect the rights and obligations of parties who have previously formed a contractual relationship. Geldhof v. Penwood Associates, 119 N.H. ---, 407 A.2d 822 (1979). In Geldhof, we focused on part I, article 23 of our State Constitution which states: "(R)etrospective laws are highly injurious, oppressive and unjust. No such laws, therefore, should be made, either for the decision of civil causes, or the punishment of offenses." After examining part I, article 23, we held in Geldhof that the State may not create "a new obligation in respect to a transaction already past." Id. We therefore must consider whether the PUC's approval of temporary rates to be effective on all bills rendered on or after January 31, 1979, would have such a result for any of Pennichuck's customers.

The PUC, when it determines rates to be charged by public utilities, is performing essentially a legislative function and accordingly cannot exceed the limitations imposed upon the exercise of...