Attorney General v. Public Service Com'n, Docket No. 101981

• Decision Date: 24 February 1989
• Docket Number: Docket No. 101981
• Citation: 174 Mich.App. 161,435 N.W.2d 752
• Parties: ATTORNEY GENERAL, Appellant, v. PUBLIC SERVICE COMMISSION and Consumers Power Company, Appellees, and RRC and Abate, Intervenors.
• Court: Court of Appeal of Michigan — District of US

Page 752

435 N.W.2d 752

174 Mich.App. 161

ATTORNEY GENERAL, Appellant, v. PUBLIC SERVICE COMMISSION and Consumers Power Company, Appellees and RRC and Abate, Intervenors.

Docket No. 101981.

Court of Appeals of Michigan.

Submitted June 8, 1988.

Decided Aug. 12, 1988.

Released for Publication Feb. 24, 1989.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Hugh B. Anderson and Margaret A. Nelson, Asst. Attys. Gen., for Atty. Gen.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Don L. Keskey and Philip J. Rosewarne, Asst. Attys. Gen., for Public Service Com'n.

Loomis, Ewert, Ederer, Parsley, Davis & Gotting by George W. Loomis, Michael G. Oliva, Lansing, and Ronald W. Bloomberg, and David A. Mikelonis and Frank R. Knox, Jackson, for Consumers Power Co.

Before DANHOF, C.J., and SAWYER and FREEMAN, ^* JJ.

PER CURIAM.

The Attorney General appeals from a June 16, 1987, opinion and order of the Michigan Public Service Commission which allowed Consumers Power Company to recover $25,924,462, including interest, to compensate the utility for underrecovery of its power supply costs during 1984. The appeal as of right is authorized by 1987 P.A. 12, M.C.L. Sec. 462.26; M.S.A. Sec. 22.45.

On March 15, 1985, Consumers Power Company initiated a power supply cost recovery (PSCR) reconciliation proceeding for the twelve-month period ending December 31, 1984, pursuant to Sec. 6j(12) of the public service commission act, M.C.L. Sec. 460.6j; M.S.A. Sec. 22.13(6j). The utility alleged that it had underrecovered over $15,000,000 worth of power supply costs during 1984. The underrecovery resulted primarily from a planned refueling outage and four forced outages at Consumers' Palisades nuclear power plant and outages at its Campbell Unit No. 1, Cobb No. 5 and Karn No. 4 fossil-fuel plants. Consumers was required to purchase replacement power to compensate for the power which these plants would have otherwise generated.

Following a hearing, a hearing officer concluded that the utility's underrecovery for 1984 was $20,082,049. Numerous parties filed exceptions to the proposed decision. On June 16, 1987, the PSC filed a forty-one-page opinion and order, allowing the utility to recover $25,924,462 (including interest in the amount of $7,963,756) by means of a uniform surcharge of .97 mills per kilowatt hour during the billing months of July 1987 through June 1988.

I

The Attorney General first argues that the hearing officer violated the standard of Sec. 6j(13)(c) and shifted the burden of proof from the utility when he said "RRC [Residential Rate Consortium] did not demonstrate that Westinghouse failed to devote adequate resources of personnel to either the preparation phase or the tube removal." The PSC compounded the error, the Attorney General says, by adopting the hearing officer's analysis and by allowing Consumers Power to recover its net replacement costs for this outage contrary to Sec. 6j(13).

The issue is without merit.

The statute in controversy provides in pertinent part:

"In its order in a power supply cost reconciliation, the commission shall:

* * *

* * *

"(c) Disallow net increased costs attributable to a generating plant outage of more than 90 days in duration unless the utility demonstrates by clear and satisfactory evidence that the outage, or any part of the outage, was not caused or prolonged by the utility's negligence or by unreasonable or imprudent management." M.C.L. Sec. 460.6j(13)(c); M.S.A. Sec. 22.13(6j)(13)(c).

Initially, the issue is not properly before the Court because the Attorney General did not raise it before the PSC by timely exception to the hearing officer's proposal for decision. Failure to file exceptions to a proposal for decision in a timely manner constitutes a waiver of the objection. "By not timely raising any objections, the appellant did not give the commission an opportunity to correct any alleged errors. Therefore, these issues have not been preserved for appeal." Attorney General v. Public Service Comm # 1, 136 Mich.App. 52, 56, 355 N.W.2d 640 (1984) (quoting approvingly from circuit court opinion).

Second, the Attorney General's argument is premised on alleged error by the hearing officer, but we do not review these decisions. Rather, the binding, reviewable decision is made by the PSC. The Attorney General has not raised a specific objection to the PSC's opinion except to state, without support, that the PSC adopted the hearing officer's analysis "thus compounding the error, and allowing CPCO [Consumers Power Company] to recover its net replacement costs for this period of the outage, contrary to Sec. 6j(13)."

Finally, on the merits, it does not appear that the PSC adopted the hearing officer's analysis. Rather, the PSC's analysis is an independent one.

II

A sparger is a safety device in the Palisades nuclear power plant required by the Nuclear Regulatory Commission (NRC). It disperses feedwater inside the steam generators to prevent water hammer damage to the feedwater nozzles. Inspection revealed that the sparger in the auxiliary feedwater system was broken. Replacement of the sparger took twenty-two days. Electric cables in the plant rest on metal trays. The NRC required Consumers to add fire barriers to many of the trays. Inspection revealed that insulation on some of the cables had deteriorated. Replacing cables and installing fire barriers took eight days.

The question below was whether the utility had an inspection program that could have led to the discovery of the problems with the feedwater sparger and cable tray system earlier and thus saved unnecessary and unreasonable extension of the outage.

The Attorney General argues that the hearing officer erred by considering only whether Consumers' failure to inspect the sparger was negligent and ignoring the equally critical test of subsection 6j, whether the utility exercised unreasonable or imprudent management. The Attorney General says that the PSC did not cure this defect in its order because it adopted the findings and recommendations of the hearing officer. In addition, the Attorney General argues that the hearing officer placed on RRC the obligation of showing whether or not it was industry practice to perform a heat-up analysis of cable trays. By adopting the hearing officer's discussion, the Attorney General argues that the PSC improperly limited the utility's burden under subsection 6j(13)(c) to require only a showing that there was no negligence.

The issue was not preserved for appeal because the Attorney General did not file an exception to the hearing officer's proposed finding on these aspects of plant management. Besides, the claims are not meritorious. Although the hearing officer may have considered the feedwater sparger question only from the aspect of negligence, the PSC did not. The PSC viewed the problem from a broader perspective, whether any industry-accepted practice would have led to the discovery of the broken safety device by regular inspections. The PSC concluded:

"The basis for RRC's recommendation that the Commission disallow the net replacement cost for 22 days of preparation time is the fact that the preparations would have been performed earlier had Consumers discovered the damage to the sparger earlier in the outage. However, RRC's witness admitted that there is no specific regulatory requirement making it a standard practice for Consumers to inspect the spargers earlier during the outage. Mr. Bridenbaugh did testify that the spargers were safety-related items, the inspection of which would fall under the jurisdiction of ASME Code Section 11, which calls for periodic in-service inspections. However, Mr. Bridenbaugh admitted that ASME Code Section 11 does not specify when the required inspections have to be made. Therefore, even if the spargers were covered by ASME Code Section 11, there is no requirement that the inspection of the spargers should have taken place earlier in the outage.

"Further, the Commission believes the rebuttal testimony of Mr. Joos establishes that inspection of the spargers was not required by ASME Code Section 11 because they are not pressure-retaining components but, instead, are internal components of the steam generators. Given these circumstances, the Commission concludes that the [hearing officer] properly rejected RRC's proposed disallowance on this issue."

Similarly, with regard to the cable trays, the Attorney General did not preserve the issue for appeal because he did not file exceptions on the point. In addition, there is no merit to his contention because the PSC found that the utility acted reasonably and prudently in maintaining the fire barriers.

"The Commission finds that the [hearing officer]...