Central Maine Power Co. v. Public Utilities Commission

• Decision Date: 30 May 1980
• Citation: 414 A.2d 1217
• Parties: CENTRAL MAINE POWER COMPANY et al. v. PUBLIC UTILITIES COMMISSION et al.
• Court: Maine Supreme Court

Page 1217

414 A.2d 1217

CENTRAL MAINE POWER COMPANY et al. v. PUBLIC UTILITIES COMMISSION et al.

Supreme Judicial Court of Maine.

Argued March 7, 1980.

Decided May 30, 1980.

Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Gerald M. Amero (orally), Charles Einsiedler, Jr., Portland, Seward B. Brewster, Augusta, for Central Maine Power Co.

Robert S. Briggs, Bangor, for Bangor Hydro-Electric Co.

Verrill & Dana, Roger A. Putnam, Portland, for Maine Public Service Co.

Joseph G. Donahue (orally), Horace S. Libby, Public Utilities Commission, Charles F. Dingman, David H. Moskovitz, Augusta, Paul A. Fritzsche (orally), Pine Tree Legal Assistance, Inc., Lewiston, Harvey Salgo, Boston, Mass., for Maine Committee for Utility Rate Reform.

Before WERNICK, GODFREY, NICHOLS, GLASSMAN and ROBERTS, JJ.

WERNICK, Justice.

Consolidated before us are appeals under 35 M.R.S.A. § 303 (Section 303 appeals) and a proceeding by "complaint" under 35 M.R.S.A. § 305 (Section 305 complaint) brought by Central Maine Power Company (Central Maine), Bangor Hydro-Electric Company (Bangor Hydro), and Maine Public Service Company (Maine Public Service) (hereinafter, collectively, "the utilities") seeking judicial review of December 28 and 31, 1979 orders of the Public Utilities Commission (the Commission). ¹

The Commission's December 28th order required the utilities to spread out by an additional five months the period within which they could charge for rate "adjustments" arising from increases in their fuel costs for supplying electricity, the increases having been caused by the shutdown of the Maine Yankee Nuclear Generating Plant (Maine Yankee) from March 15 to June 9, 1979. The Commission's December 31st order set out the formula by which collection would proceed during the extended period.

The utilities contend that the Commission violated due process of law, exceeded its statutory authority, and committed other errors of law not only in extending, but also by the particular manner it acted to extend, the period within which the utilities could charge for the adjustments as to their increased fuel costs.

We deny the Section 303 appeals. On the Section 305 complaint we order entry of judgment for the defendants.

1. Facts, Procedural History, and Issues.

By complaints filed on March 22, April 3, and April 9, 1979, pursuant to 35 M.R.S.A. § 291, ² the Maine Committee for Utility Rate Reform (the "Maine Committee") and other named individuals challenged the "justness and reasonableness" of passing through to the ratepayers adjustments reflecting the increased fuel costs the utilities sustained in supplying electricity because Maine Yankee had been shut down on March 15, 1979 for a period then undetermined but which turned out to be until June 9, 1979. The Nuclear Regulatory Commission (NRC) had ordered the shutdown pending its re-evaluation of whether a particular safety system within the Maine Yankee plant would withstand earthquakes of calculated intensities. Doubts as to the adequacy of the system were prompted by the NRC's reconsideration of the appropriateness of various computer analyses used in designing the system's earthquake tolerance.

The (Maine) Commission issued a Notice of Investigation on April 13, 1979, announcing its intention to conduct a formal investigation of the complaints filed by the Maine Committee and to consolidate with that investigation its own investigation of the matter. The subjects to be investigated were: (1) the reasonableness of passing on to ratepayers charges regarding the fuel adjustments occasioned by Maine Yankee's shutdown; (2) the reasonableness of the manner in which costs associated with the shutdown should be borne by the ratepayers; and (3) the advisability of establishing temporary rates pursuant to 35 M.R.S.A. § 311.

At the time Maine Yankee was shut down the utilities' schedules of permanent rates included a "fuel adjustment" provision, so-called, pursuant to 35 M.R.S.A. § 131, ³ and approved by the Commission. Its purpose and function may be explained, generally, as follows. Like other public utilities, electric utilities are permitted to charge, for the services they provide, a base rate the justness and reasonableness of which is assessed by reference to a "test year." Costs of fuel are an important factor in the determination of the rates of electric utilities. Since fuel costs have a tendency to fluctuate rather than to be relatively stable, the "test year" methodology for projecting fuel costs over the indefinite future period for which a permanent rate is to be effective is likely to be an inadequate gauge of justness and reasonableness. It would therefore become necessary for the Commission to conduct frequent reviews of the justness and reasonableness of the permanent rates of electric utilities in light of fuel cost fluctuations. To avoid this, the legislature, in Section 131, prescribed a methodology by which adjustments in the permanent rates of electric utilities can be achieved in a routinely regularized manner to accommodate to the fluctuating costs of the fuel used in generating and supplying electricity. The exact nature of this adjustment methodology is a key point in our decision and will be discussed more fully in the course of this opinion.

During the period of the shutdown of Maine Yankee the fuel adjustment clause in the filed rate schedules of the utilities provided that the adjustments regarding fuel costs be based on the use of a "three months rolling average" (which we shall also discuss in more detail later in the opinion). Had the Commission not taken the further actions here at issue, under the three months rolling average provision in their tariffs the utilities would have collected by the end of the summer of 1979 the entire amount of fuel adjustments reflecting the increased fuel costs arising from the shutdown on Maine Yankee. Confronting this prospect, the Commission, on April 19, 1979, scheduled a pre-hearing conference for May 4 and 5, 1979 to consider, among other matters, the Maine Committee's request for relief (one of several made by it) that the Commission investigate the justness and reasonableness of passing through to the ratepayers any, some, or all of the fuel cost adjustments of the utilities attributable to the shutdown of Maine Yankee.

As a result of the pre-hearing conference of May 4 and 5, at which evidence was presented and argument heard on issues of preliminary relief, the Commission ruled that:

"(o)n the evidence presented to the Commission on May 4 and May 5, the Commission finds that under currently effective fuel adjustment tariffs of the three relevant utilities, ratepayers would be subject to substantial injuries to their interests in the form of significantly increased electric bills resulting from the unrestricted pass-through of fuel replacement costs due to the shutdown of the Maine Yankee Atomic Power Station."

So finding, and purporting to act pursuant to powers conferred by 35 M.R.S.A. § 311, ⁴ the Commission ordered that the tariffs of the utilities be altered to provide for charging over a twelve month period, ending July 31, 1980, the adjustments as to the energy rendered unavailable to the utilities by the shutdown of Maine Yankee. The utilities did not seek judicial review of this May 5th order.

Subsequently, the Maine Committee twice moved to amend the May 5th order for enlargement of the collection period, to avoid what the Maine Committee perceived to be the strong likelihood that the ratepayers would have paid a substantial portion, if not all, of the charges for the fuel adjustments before the time of a Commission decision in its underlying investigation.

In regard to the first of the Committee's two motions the Commission held a pre- hearing conference, on September 17, 1979, at which no new evidence was presented. On November 2, 1979, the Commission denied this first motion. On December 3, 1979 the Commission commenced a pre-hearing conference directed to the Committee's second motion to amend the May 5th order. Incident to this conference, the Commission, on December 10, 1979, received additional evidence presented by the Hearing Examiner. This evidence was in the form of an exhibit showing the total cost to the utilities of their purchase of electric energy to replace that lost when Maine Yankee was shut down, the percentage reflected in the billings as of December 31, 1979, and the remaining percentage yet to be billed. ⁵

On the basis of that evidence supplementing the evidence of record by virtue of the May proceedings, and of the schedule the Commission had recently fixed for the hearings in the underlying investigation (the schedule projecting a Commission decision no earlier than mid-April 1980), the Commission issued its December 28, 1979 order extending the period for the collection of fuel cost adjustments another five months: from its previous termination date of July 31, 1980 to a new termination date of December 31, 1980. In making this order, the Commission again purported to act pursuant to Section 311, having concluded that the additional extension of time was "necessary in order to prevent injury to the interest of the people." In its Supplemental Order of December 31, 1979, the Commission set forth the formula for the billing by which the utilities would collect the fuel cost adjustments.

Seeking judicial review of these two December 1979 orders of the Commission, the utilities filed a Section 305 complaint in this Court alleging that the Commission's action involved errors of law resulting in confiscation of the property of the utilities. Also pursuant to Section 305, the utilities filed a motion for a stay of the December orders pending this Court's decision on the Section 305 complaint. Later, the utilities took appeals to this Court, in accordance with 35 M.R.S.A. § 303, asserting errors of law in the action taken by the Commission, as embodied in its December...