Boston Edison Co. v. Department of Public Utilities

• Decision Date: 19 April 1978
• Citation: 375 Mass. 1,375 N.E.2d 305
• Parties: BOSTON EDISON COMPANY v. DEPARTMENT OF PUBLIC UTILITIES.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 305

375 N.E.2d 305 375 Mass. 1 BOSTON EDISON COMPANY
v.
DEPARTMENT OF PUBLIC UTILITIES. Supreme Judicial Court of Massachusetts,Suffolk. Argued April 6, 1977.
Decided April 19, 1978.

Page 310

[375 Mass. 4] William G. Meserve and Edward B. Hanify, Boston, for Boston edison co.

Laurence M. Johnson, Boston, for General Motors Corp., intervener.

Margot Botsford and S. Stephen Rosenfeld, Asst. Attys. Gen., for Dept. of Public Utilities.

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Stanley U. Robinson, III, intervener, pro se.

John L. Matson, Walter P. Muther, and Andrew J. Newman, Boston, for Associated Industries of Mass., Inc., amicus curiae, submitted a brief.

Torgeir K. Kvale, pro se, submitted a brief.

Before [375 Mass. 1] HENNESSEY, C. J., and QUIRICO, BRAUCHER, WILKINS and ABRAMS, JJ.

[375 Mass. 5] HENNESSEY, Chief Justice.

These are five consolidated appeals from final decisions, orders, and rulings of the Department of Public Utilities (Department) in two separate rate proceedings involving Boston Edison Company (Company). In the first proceeding, D.P.U. 18200/18200-A (hereafter 18200/18200-A), the Department granted a rate increase based on 1974 as the test year. In the second, D.P.U. 18515 (hereafter 18515), the Department granted an increase based on 1975 as the test year. The appeals were filed in the Supreme Judicial Court for the county of Suffolk (county court) under G.L. c. 25, § 5. A single justice ordered the appeals consolidated, and he reserved and reported them without decision to this court. He similarly reserved and reported the Company's motion for a stay, which the Company has renewed, and several motions to dismiss filed by the Department. Because of the length of this opinion, a table of contents is appended at the conclusion.

We consider first those issues relating to the more recent rate decision, 18515. In so doing, we dispose of two appeals filed by the Company and by an intervener Stanley U. Robinson, III (Robinson), alleging various claims of confiscation and challenging the propriety of various adjustments to the Company's rate base and cost-of-service calculations. We next consider the three appeals challenging the Department's earlier decision in 18200/18200-A. These appeals were filed by Boston Edison, Robinson, and General Motors Corporation (General Motors), an intervener in the proceedings below. Boston Edison and Robinson have limited their appeals in 18200/18200-A primarily to the issues also raised by General Motors, and these relate solely to rate structure. Specifically, the issues in 18200/18200-A concern the propriety of the Department's partially exempting certain residential customers from the rate increase. Finally, we consider two motions to dismiss, made in the county court, which were reported to us by the single justice.

On May 11, 1977, shortly after oral argument on these appeals, the full court ordered interim relief for the Company by way of a $6,619,000 cost-of-service adjustment to [375 Mass. 6] cover increased property taxes. ¹ We find no error in the Department's decision in 18200/18200-A. We conclude that the Department's decision in 18515 was erroneous not only with respect to the property tax issue mentioned above but also with respect to certain lobbying expenses and the disallowed adjustment for "AFUDC not normalized." Some of these errors are in the Company's favor, and one goes in favor of the ratepayers.

We take notice of the Department's recent decision in D.P.U. 19300 (19300), granting Boston Edison additional rate relief based on 1976 figures. Although that decision moots a number of the issues involved in these appeals, we nevertheless reach the merits of all the issues before us. Wellesley College v. Attorney Gen., 313 Mass. 722, 731, 49 N.E.2d 220 (1943). See Potomac Elec. Power Co. v. Public Serv. Comm'n, 380 A.2d 126, 149 n.33 (D.C.App.1977). We do so because the parties have fully briefed the issues, and because the questions raised are likely to arise again in the reasonably near future, evading judicial review again at that time. See Potomac Elec. Power Co. v. Public Serv. Comm'n, supra.

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The net amount of items allowed and disallowed on appeal exceeds the amount of interim relief granted, but we conclude that a prospective rate adjustment is now impossible, since new rates have superseded those set in 18515, and since a rate increase may not be awarded retroactively as matter of law. See Newton v. Department of Pub. Utils., 367 Mass. 667, 679-680, 328 N.E.2d 885 (1975); New England Tel. & Tel. Co. v. Pub. Utils. Comm'n, R.I., 358 A.2d 1, 20 (1976). We further conclude that a refund to Boston Edison customers also is not in order at this time. See id.; Fryer v. Department of Pub. Utils., --- Mass. ---, --- ^a, 373 N.E.2d 977 (1978). We remand the cases to the single justice for the entry of judgment.

[375 Mass. 7] I. HISTORY OF THE PROCEEDINGS.

On November 12, 1974, Boston Edison filed with the Department a proposed schedule of rates and charges designed to raise its 1975 revenues by about $70,000,000. The Department docketed this request as D.P.U. 18200 and held extensive public hearings. The Company had presented its direct case by May, 1975, but because interested parties had intervened in the proceedings, it appeared that a final decision would be unlikely until September, 1975. The Company, therefore, filed a petition for interim rate relief requesting an immediate rate increase of $47,700,000, pending a final decision by the Department on its full request. The interim request was separately docketed as D.P.U. 18200-A but, on the Company's motion, the two proceedings were thereafter consolidated. The Department evaluated these rate proposals using calendar year 1974 as the test year, and on September 30, 1975, it issued a decision and order which, as subsequently amended, authorized new rate schedules designed to increase Boston Edison's annual revenues by $29,538,000. The appeals from that decision relate primarily to the problem of rate structure. The Department found that residential users as a class had not contributed significantly to the growth in peak load demand for electricity. Consequently, the Department exempted the first 384 kilowatt hours (KWH) of monthly residential usage from the general rate increase.

Two and one-half weeks after the Department's decision in 18200/18200-A, Boston Edison made a second rate filing seeking $49,500,000 in additional annual revenues. The Department docketed this case as D.P.U. 18515, and again numerous parties intervened in the proceedings. This time, using calendar year 1975 as the test year, the Department determined on August 12, 1976, that the Company was entitled to $10,960,000 in rate relief. The Company and intervener Robinson who argues that the increase is too generous challenge that decision on numerous grounds relating [375 Mass. 8] to cost of service, rate base, and rate of return. The rate structure portion of 18515 is under advisement by the Department until the issues raised by the Company's request for increased revenues have been resolved. ² In the meantime, the Department has permitted Boston Edison to collect a rate increase of $10,960,000 under the rate structure established in 18200/18200-A. Residential users remained exempt from the increase, to the extent of the first 384 KWH consumed each month, until the Department's superseding decision in 19300.

In connection with its motion for a stay in the county court, Boston Edison submitted two affidavits, one by Ralph M. Kelmon, the Company's treasurer (Kelmon affidavit), and the other by Robert D. Saunders, senior rate engineer in Boston Edison's rate research and forecasting department

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(Saunders affidavit). The Kelmon affidavit presented updated financial results for calendar year 1976 based on eight months' actual data and a four-month forecast. It also provided information with respect to the increase in the property tax rate in the city of Boston for the fiscal year that commenced on July 1, 1976. The Saunders affidavit presented updated information with respect to growth in 1976 sales over 1975 sales, also based on eight months' actual data and a four-month forecast.

When these consolidated appeals were reserved and reported by the single justice to the full court, the two affidavits were included in the record on appeal, but "without prejudice to the rights of the parties to argue to the Full Court . . . the question of whether or not said evidence is [375 Mass. 9] relevant, material, necessary, or otherwise properly includible in the record on appeal." No evidentiary objections were made at oral argument by any party, and we have admitted both affidavits in order "to bring the proof as nearly as reasonably possible down to the date of final decision." Opinion of Justices, 328 Mass. 679, 687, 106 N.E.2d 259, 264 (1952); New England Tel. & Tel. Co. v. Department of Pub. Utils., --- Mass. ---, --- ^b, 354 N.E.2d 860 (1976); New England Tel. & Tel. Co. v. Department of Pub. Utils., 360 Mass. 443, 448, 275 N.E.2d 493 (1971); Boston Gas Co. v. Department of Pub. Utils., 359 Mass. 292, 300-301, 269 N.E.2d 248 (1971).

II. NATURE AND SCOPE OF JUDICIAL REVIEW.

Boston Edison alleges that the Department's decision in 18515 deprived the Company of the opportunity to earn a fair return on its investment. The Company contends, and properly so, that, to the extent that it asserts a claim of confiscation, it is entitled to an independent review as to both law and fact. New England Tel. & Tel. Co. v. Department of Pub. Utils., --- Mass. ---, --- ^c, 354 N.E.2d 860 (1976); Boston Gas Co. v. Department of Pub. Utils., 368 Mass. 51, 54, 329 N.E.2d 712 (1975); New Eng. Tel. & Tel. Co. v. Department of Pub. Utils., 360 Mass. 443, 449, 275 N.E.2d 493 (1971); Mystic Valley Gas Co. v. Department of Pub. Utils., 359 Mass. 420, 424, 269 N.E.2d 233 (1971). In so far as any of the challenged rulings do not independently or in...