Cass County Elec. Co-op., Inc. v. Northern States Power Co., s. 930333

• Decision Date: 20 June 1994
• Docket Number: 930356,Nos. 930333,s. 930333
• Citation: 518 N.W.2d 216
• Parties: Util. L. Rep. P 26,408 CASS COUNTY ELECTRIC COOPERATIVE, INC., Appellant, v. NORTHERN STATES POWER COMPANY and North Dakota Public Service Commission, Appellees. Civ.
• Court: North Dakota Supreme Court

Page 216

518 N.W.2d 216

Util. L. Rep. P 26,408

CASS COUNTY ELECTRIC COOPERATIVE, INC., Appellant, v. NORTHERN STATES POWER COMPANY and North Dakota Public

Service Commission, Appellees.

Civ. Nos. 930333, 930356.

Supreme Court of North Dakota.

June 20, 1994.

Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for appellant; argued John D. Kelly; appearance by Pamela J. Hermes.

Zuger Kirmis & Smith, Bismarck, for appellee Northern States Power Co.; argued by Daniel S. Kuntz; appearance by James P. Johnson.

Charles E. Johnson (argued), Asst. Atty. Gen., Public Service Com'n, State Capitol, Bismarck, for appellee ND Public Service Com'n.

MESCHKE, Acting Chief Justice.

In these consolidated appeals by Cass County Electric Cooperative, Inc. (CCEC), from district court judgments affirming Public Service Commission (PSC) orders, we consider the validity of flexible tariffs with minimum/maximum rate ranges approved by the PSC that permit actual charges to be negotiated between Northern States Power Company (NSP) and its customers. We conclude that the flexible tariffs are valid, and we affirm the judgments.

NSP is a utility regulated by the PSC. NSP owns and operates natural gas distribution systems in Grand Forks and Fargo, and also delivers electricity to customers in Fargo. CCEC is a rural electric cooperative that furnishes electricity to its members in eight North Dakota counties, including Cass County around Fargo.

In April 1992, NSP filed changes to its natural gas transportation tariff. NSP sought approval to negotiate actual charges for natural gas transportation service to its interruptible customers ¹ at Grand Forks and Fargo who purchase their gas from others, under a flexible tariff within a range of minimum and maximum rates. The PSC allowed CCEC to intervene. In its decision, the PSC found: (1) the maximum rate is the approved rate otherwise available to large volume gas customers with interruptible service and is a reasonable rate; (2) the minimum rate exceeds NSP's direct incremental costs of providing the gas transportation service and is a reasonable rate; (3) CCEC's witness did not object to either the proposed minimum or the proposed maximum; (4) because the minimum and maximum rates are both reasonable, every rate between them is reasonable; ² (5) NSP must compete with coal and fuel oil, and NSP customers use alternate fuels when it is economically favorable; (6) NSP credits part of its gas transportation profits to firm service customers; (7) "NSP prices its transportation service to each customer based on publicly available pricing indexes for the alternative fuel the customer is capable of using;" (8) "Flexible pricing of interruptible transportation service is common throughout the industry" and "does not constitute unreasonable discrimination;" and (9) prices set by competition benefit all NSP customers. The PSC concluded that NSP's proposed tariff changes were "lawful, just, reasonable, sufficient and are not unreasonably discriminatory," and, in March 1993, approved NSP's flexible tariff.

CCEC appealed. The district court affirmed the PSC order, reasoning:

The statutory authority for establishing rates are found in Sections 49-02-03 and 49-05-06 of the NDCC. Essentially the Commission is empowered to supervise and establish rates that it finds just and reasonable. Section 49-04-07 of the code appears to allow the filing of flexible rate tariffs.

CCEC appealed to this court.

In May 1992, NSP applied to the PSC for an increase in its electric service rates in North Dakota. NSP included a proposed economic development tariff for flexible rates to be negotiated between NSP and customers engaged in economic development. The PSC allowed CCEC to intervene to oppose the flexible economic-development tariff. In its December 1992 order approving certain electric rate increases, the PSC found that NSP's proposed flexible economic-development tariff needed revision. NSP revised the flexible tariff and the PSC approved it promptly. The approved flexible tariff authorizes negotiated rate incentives to new customers in NSP's service area who meet certain minimum energy use requirements or to existing customers who increase their energy use to those amounts, but only as to the increased usage. The minimum rate is NSP's incremental cost of providing service to the customer. The maximum rate is the PSC-approved full retail rate paid by other customers. The discounts are phased out over a period of five years. CCEC objected to the range, but not to either the minimum or the maximum. CCEC appealed. The district court adopted its opinion in the gas transportation case and affirmed the PSC order. CCEC appealed to this court.

The two appeals were consolidated. NSP contends that CCEC lacks standing to appeal the PSC's decisions because CCEC has not shown how it is factually aggrieved. In rejecting a standing challenge, the court in Webster Groves Trust Co. v. Saxon, 370 F.2d 381, 388 (8th Cir.1966), said:

The Comptroller is also asserting that a competitor has no standing to object to lawful competition. With this rule we find no fault, but the banks surely have the standing to object to illegal competition. (Citations omitted.) Therefore, when a competitor believes he is being subjected to illegal competition owing to impropriety by the Comptroller, the courts should be open to hear and decide the alleged wrong. The trial court was vested with jurisdiction over the subject matter of this litigation.

CCEC intervened in these proceedings under NDCC 28-32-08.2, that authorizes an administrative agency to grant intervention to one who demonstrates that its "legal rights, duties, privileges, immunities, or other legal interests may be substantially affected by the proceeding." We believe that CCEC meets the three-part test formulated in Application of Bank of Rhame, 231 N.W.2d 801 (N.D.1975), for determining who is a "party" for taking an appeal from an agency decision: CCEC was directly interested in the proceedings, it might be factually aggrieved by the agency's decision, and it participated in the proceedings. NDCC 28-32-15(1) says: "Any party to any proceeding heard by an administrative agency, ..., may appeal from the order." We conclude that CCEC had standing to appeal these PSC orders.

CCEC contends that the PSC's orders approving the flexible tariffs are "not in accordance with the law" and are beyond the PSC's scope of authority. See NDCC 28-32-19(1). "The Public Service Commission has only such powers as have been conferred upon it by the Legislature." Grafton v. Otter Tail Power Co., 86 N.W.2d 197, 202 (N.D.1957). NDCC 49-02-03 authorizes the PSC to supervise the rates of public utilities, and says that the PSC has the power to establish, adjust, and modify tariffs, rates and charges. This statute says that, if the PSC finds existing rates are "unjust, unreasonable, insufficient, unjustly discriminatory, or otherwise in violation of any of the provisions of this title," the PSC "shall fix reasonable rates." When a utility gives notice of a rate change, NDCC 49-05-06 authorizes the PSC to suspend the rate change. This section also authorizes the PSC to order a hearing where the PSC shall establish the rates "which it shall find to be just and reasonable." NDCC 49-04-07 directs:

No public utility shall make or give any undue or unreasonable preference or advantage to any particular person ... in any respect whatsoever, nor subject any particular person ... to any undue or unreasonable prejudice or disadvantage in any respect. No public utility ... shall charge ... any person a greater or less compensation for any service ... than it charges ... any other person ... for doing a like and contemporaneous service under the same or substantially similar circumstances and conditions. Nothing in this chapter shall prohibit a public utility from entering into any reasonable agreement with its customers, consumers, or employees or from providing for a sliding scale of charges, unless the same is prohibited by the terms of the franchise or permit under which such public utility is operated. No such agreement or sliding scale shall be lawful unless and until the same shall be filed with and approved by the commission.

These statutes, enacted in S.L.1919, Ch. 192 and changed very little since, govern the agency's decision in this case.

Leaving the manner and means of exercising an administrative agency's powers to the discretion of the agency, comparable to a municipality's exercise of its legislated powers, "implies a range of reasonableness within which [an administrative agency's] exercise of discretion will not be interfered with or upset by the judiciary." Haugland v. Bismarck, 429 N.W.2d 449, 454 (N.D.1988). We normally defer to a reasonable interpretation of a statute by the agency responsible for enforcing it, "especially when that interpretation does not contradict the statutory language." Turnbow v. Job Service North Dakota, 479 N.W.2d 827, 830 (N.D.1992). Agency expertise is entitled to appreciable deference if the subject matter is highly technical. True v. Heitkamp, 470 N.W.2d 582 (N.D.1991). As Western Gas Resources, Inc. v. Heitkamp, 489 N.W.2d 869, 872 (N.D.1992), explained, deference to an agency's interpretation of a statute "is an important consideration when an agency interprets and implements a law that is complex and technical."

The technical provisions codified in NDCC 49-04-07 are intended to "protect the public both collectively and individually against discrimination by a utility, whether it be unfair to the public by giving an individual preferred treatment or whether it be unfair to the individual by demanding and securing exorbitant fees as a condition of furnishing service." Lyons v. Otter Tail Power Co., 70 N.D. 681, 297 N.W. 691, 693 (1941). Still, this statute authorizes "a public utility to enter into a 'reasonable agreement' concerning rates with its...