Attorney General v. Public Service Com'n, Docket Nos. 95494

• Decision Date: 05 February 1988
• Docket Number: Docket Nos. 95494,95495
• Citation: 165 Mich.App. 230,418 N.W.2d 660
• Parties: ATTORNEY GENERAL and Association of Businesses Advocating Tariff Equity (ABATE), Plaintiffs-Appellees, v. PUBLIC SERVICE COMMISSION, Defendant-Appellee, and The Detroit Edison Company, Intervening Defendant-Appellant. The DETROIT EDISON COMPANY, Plaintiff-Appellant, v. PUBLIC SERVICE COMMISSION, Attorney General and Association of Businesses Advocating Tariff Equity (ABATE), Defendants-Appellees. 165 Mich.App. 230, 418 N.W.2d 660
• Court: Court of Appeal of Michigan — District of US

Page 660

418 N.W.2d 660

ATTORNEY GENERAL and Association of Businesses Advocating

Tariff Equity (ABATE), Plaintiffs-Appellees, v. PUBLIC SERVICE COMMISSION, Defendant-Appellee, and The Detroit Edison Company, Intervening

Defendant-Appellant.

The DETROIT EDISON COMPANY, Plaintiff-Appellant, v. PUBLIC SERVICE COMMISSION, Attorney General and Association

of Businesses Advocating Tariff Equity (ABATE),

Defendants-Appellees.

Docket Nos. 95494, 95495.

165 Mich.App. 230, 418 N.W.2d 660

Court of Appeals of Michigan.

Submitted July 21, 1987.

Decided Sept. 24, 1987.

Released for Publication Feb. 5, 1988.

[165 MICHAPP 232] Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Hugh B. Anderson, Asst. Atty. Gen., for Attorney General.

A. Robert Pierce, Jr., and Solomon Bienenfeld, Detroit, for Detroit Edison Co.

Hill, Lewis, Adams, Goodrich & Tait by Roderick S. Coy and Timothy M. Perrone, Lansing, for the Ass'n of Businesses Advocating Tariff Equity.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Don L. Keskey and James A. Ault, Asst. Attys. Gen., for the Michigan Public Service Comn.

Before DANHOF, C.J., and McDONALD and THOMAS, ^* JJ.

PER CURIAM.

The Detroit Edison Company appeals as of right from the Ingham Circuit Court's order affirming an order of the Michigan Public Service Commission. Although Detroit Edison raises eight issues on appeal, the basis of most of [165 MICHAPP 233] its arguments is that the interest it must pay on customer refunds is excessive. We affirm the order of the PSC.

This case began in 1975 when the PSC ordered that Detroit Edison could not impose a surcharge upon its customers to recover fuel costs. The order was eventually upheld. Detroit Edison Co. v. P.S.C., 82 Mich.App. 59, 266 N.W.2d 665 (1978), lv. den. 403 Mich. 823 (1978), lv. gtd. on motion for reconsideration 403 Mich. 853 (1978), aff'd. by equally divided court 416 Mich. 510, 331 N.W.2d 159 (1982), reh. den. 417 Mich. 1133 (1983). However, Detroit Edison had already surcharged its customers, so the dispute began again over the issue of the proper interest rate Detroit Edison should pay when refunding the money.

Hearings before the PSC began on September 7, 1983. Detroit Edison argued for several different interest rates, all with quarterly compounding. The PSC recommended use of the authorized rate of return on common equity, with interest compounded quarterly. Both the Attorney General and the Association of Businesses Advocating Tariff Equity (ABATE) recommended use of the average monthly prime rate in effect from time to time, as published in the Federal Reserve Bulletin, with interest compounded monthly. On June 13, 1984, the PSC ordered that interest should be calculated on the basis of the authorized rate of return on common equity, without compounding. Detroit Edison was satisfied with this order because it resulted in having the money it had already refunded exceed the amount of its obligation.

The Attorney General and ABATE sought a rehearing on the issue of the method of compounding interest. Rehearing was denied and the Attorney General and ABATE filed suit in Ingham Circuit Court. After hearing testimony, the circuit [165 MICHAPP 234] court ordered that the case be stayed while the PSC considered different or additional evidence according to M.C.L. Sec. 462.26(c); M.S.A. Sec. 22.45(c). On remand before the PSC, the Attorney General and ABATE argued for use of the average prime rate compounded monthly. In the alternative, the Attorney General argued for use of the prime rate compounded quarterly or the rate of return on common equity compounded daily, monthly, or quarterly. Detroit Edison argued that the use of simple interest was appropriate.

On March 11, 1986, the PSC ordered, as it ordered in 1984, that interest should be calculated on the basis of the authorized rate of return on common equity, but that interest should be compounded quarterly. This would result in Detroit Edison owing its customers money in addition to that already refunded. Detroit Edison filed suit in Ingham Circuit Court. Finding that most of Detroit Edison's arguments had been previously waived, the Ingham Circuit Court affirmed the order of the PSC because it was not unlawful or unreasonable.

The first issue raised by Detroit Edison is whether it is estopped from challenging the interest rate set by the PSC's 1984 order. The circuit court ruled that most of the arguments raised by Detroit Edison were waived because it did not appeal from the 1984 order. We disagree. Under M.C.L. Sec. 462.26(c); M.S.A. Sec. 22.45(c) an altered, modified, or amended order of the PSC takes the place of its original order. Under Sec. 26(a), an interested party may appeal from "any order" of the PSC. Therefore, the 1986 order took the place of the 1984 order and became an order from which Detroit Edison could appeal. Although the rate of interest ordered did not change from 1984 to 1986, and Detroit Edison did not appeal from the interest [165 MICHAPP 235] rate ordered in 1984, we will consider the issues raised by Detroit Edison insofar as they pertain to the 1986 order.

Detroit Edison's next argument is that the circuit court has plenary power to order equitable relief. Detroit Edison makes no argument as to what would be the consequence of acceptance of this statement. However, we will consider it along with Detroit Edison's other arguments regarding whether the PSC has the authority to order payment of interest in excess of five percent, compounded quarterly.

The PSC has complete power to regulate public utilities and their rates or other charges. M.C.L. Sec. 460.6; M.S.A. Sec. 22.13(6). Accordingly, M.C.L. Sec. 462.26(e); M.S.A. Sec. 22.45(e) provides that a party aggrieved by an order of the PSC bears the burden of proving by clear and satisfactory evidence that the order is unlawful or unreasonable. Const.1963, art. 6, Sec. 28 is also applicable and it provides that final agency orders must be authorized by law and supported by competent, material and substantial evidence. "Unlawful" has been defined as an erroneous interpretation or...