Citizens of State v. Fla. Pub. Serv. Comm'n, 1D17-4425
| Decision Date | 13 March 2019 |
| Docket Number | No. 1D17-4425,1D17-4425 |
| Citation | 294 So.3d 961 |
| Parties | The CITIZENS OF the STATE of Florida, THROUGH the FLORIDA OFFICE OF PUBLIC COUNSEL, Appellant, v. FLORIDA PUBLIC SERVICE COMMISSION; Utilities, Inc. of Florida; Summertree Water Alliance; Anne Marie Ryan; and Seminole County, Florida, Appellees. |
| Court | Florida District Court of Appeals |
James R. Kelly, Public Counsel, and Patricia Christensen and Virginia Ponder, Associate Public Counsels, Tallahassee, for Appellant.
Kathryn G.W. Cowdery, Senior Attorney, Keith C. Hetrick, General Counsel, and Samantha M. Cibula, Attorney Supervisor, Florida Public Service Commission, Tallahassee, and Martin S. Friedman of Friedman & Friedman, P.A., Orlando, for Appellees.
This appeal involves a challenge to the Florida Public Service Commission's approval, in part, of requested increases in water and wastewater rates sought by Utilities, Inc. of Florida (UIF) for its consolidated operations in Florida, which consist of twenty-seven individual merged systems.
I.
The Office of Public Counsel (OPC), which provides legal representation on behalf of the citizens of the State of Florida in utility cases before the Florida Public Service Commission,1 raises three issues: (a) whether the Commission violated due process by amending UIF's requested utility plant additions in the rebuttal stage of the proceeding and admitting exhibits offered by its staff over OPC's objection; (b) whether the Commission's analysis of the Sandalhaven and Lusi wastewater systems departed from the standards for "used and useful" analysis set forth in section 367.081(2)(a) 2. a., b., c., Florida Statutes; and (c) whether the Commission erred by imposing quality of service penalties on individual systems within UIF's consolidated system despite establishing uniform rates for the twenty-seven systems under UIF's control.
The gravamen of OPC's due process claim is that allowing UIF to modify the parameters of its requested pro forma plant additions, thereby increasing the overall cost of the total project, was improper during the rebuttal phase of the proceedings. UIF counters that its expert, Patrick C. Flynn, testified in response to matters raised by an OPC witness, and that updated cost estimates are to be expected during the rate-setting process.
A review of the voluminous record reveals no due process violation involving consideration of the pro formas. Adequate notice and opportunity to contest UIF's evidence and its expert as to the pro forma adjustments were afforded, including discovery, depositions, and cross-examination at the hearing. OPC's motion to strike Flynn's testimony and its reconsideration motion were denied via written orders containing reasonable grounds for each ruling. And no claim is made alleging that inadequate time was allocated (OPC did not seek a continuance). The fact that plant additions exceeded the estimates of those initially sought via the pro formas can be explained by updated forecasting estimates, which are continually subject to revision based on current and expected market conditions. The Commission says its practice is to consider updated pro forma cost information that utilities provide, even during rebuttal, which is acceptable if OPC and other participants in the hearing are given a reasonable opportunity to object and be heard. Our review of the record leads us to conclude that due process was afforded as to the pro formas.
OPC also claims a denial of due process because Commission staff failed to act in a neutral manner when it entered evidence provided by its staff that favored UIF over OPC's objection. OPC correctly points out that it is not the Commission's or its staff's responsibility to assist a utility in meeting the utility's burden of proof. That said, the Commission notes that its staff routinely cross-examines utility witnesses as part of the rate-making process to ensure completeness and accuracy, and that none of its staff, who were involved as witnesses in the case, were allowed to advise commissioners or participate in writing recommendations for the Commission to consider.
Members of a regulatory body's staff can have direct involvement in an adversarial proceeding so long as sufficient safeguards are in place to ensure compliance with due process standards. Substantial reliance on and deference to staff is commonplace in the regulatory world and is generally lawful in rate-making proceedings. See S. Fla. Nat. Gas Co. v. Pub. Serv. Comm'n , 534 So.2d 695, 698 (Fla. 1988) (); Legal Envtl. Assistance Found., Inc. v. Clark , 668 So.2d 982, 986 (Fla. 1996) (). In Clark , for example, the Commission's staff "participated during the hearings by cross-examining witnesses and entering items into evidence," which was held to be permissible under due process principles. 668 So.2d at 984.
The "Commission's discretion in its use of staff is not absolute," id. at 985, and has its limits limited under the state due process clause. Art. I, § 9, Fla. Const. (). For example, in Cherry Communications, Inc. v. Deason , 652 So.2d 803, 805 (Fla. 1995), as revised on denial of reh'g , (Apr. 20, 1995), our supreme court held that it was a due process violation where a Commission staff attorney who prosecuted a license revocation proceeding was allowed to meet with the Commission during deliberations and provide post-hearing legal advice. The same staff attorney who played the "role of prosecutor" by cross-examining witnesses, raising legal objections, and arguing against the interests of the telecommunications company "assumed the role of advisor to the Commission, which was now supposedly deliberating as an ‘impartial’ adjudicatory body." Id. This dual role caused the adjudicatory process to be compromised, such that "the playing field appears to have been tilted when the prosecutor was invited into the deliberations and his advice was acted upon." Id. at 805. The revocation order was vacated and a new hearing ordered. Id.
With these cases in mind, our review of the record fails to show that the involvement of the Commission's staff in the rate-making process in this proceeding amounted to a due process violation. From OPC's vantage point, it may have appeared that staff was exceeding their role, but the caselaw just discussed gives the Commission much leeway in rate-making cases to use its staff in the evidentiary process as was done here. Moreover, a distinction is made between rate-making proceedings and adjudicatory proceedings involving revocation of licenses. See Cherry , 652 So.2d at 804 (). We recognize that great solicitude is paid to due process in the adjudicatory setting where the Commission plays a quasi-judicial role, but that doesn't mean the Commission's discretion is unlimited in rate-making proceedings, only that it is given broader latitude. We are not confronted with a situation where a regulatory body has abdicated its responsibility to, or been "captured" by, its staff to such an extent that its regulatory role has been compromised. Thomas O. McGarity, The Internal Structure of EPA Rulemaking , 54 LAW & CONTEMP. PROBS. 57, 111 n. 133 (1991) (). Rather, the record in this case shows that the staff's involvement falls within acceptable constitutional limits such that the requirement of due process was met.
Next, OPC claims that the Commission erred in its "used and useful" methodology by including pre-paid connections for future potential development as part of the rate-making process. Developers pre-pay for the right to connect to the systems at some unspecified future date, if ever. The specific question is whether pre-paid connections are statutorily permitted such that they become "used and useful" for inclusion in a utility's rate base. Secondarily, OPC says that the Commission has not adequately explained its decision to include pre-paid connections in this case.
As this Court has stated, a "regulated utility is entitled to an opportunity to earn a fair rate of return on its ‘rate base’—the capital prudently invested in the utility's facilities that ‘are used and useful in the public service.’ " Palm Coast Util. Corp. v. State, Fla. Pub. Serv. Com'n , 742 So.2d 482, 484 (Fla. 1st DCA 1999) (quoting section 367.081(2)(a), Fla. Stat. 1995 ). The Commission has much discretion is deciding the factors upon which it relies in determining whether a component of a water/wastewater system is deemed "used and useful" under the statutory framework. Id. (). And it is entitled to modify its "used and useful" policy so long as it is "supported by expert testimony, documentary evidence or other evidence appropriate to the nature of the issue involved." Id. at 485.
The Commission's discretion is limited, however, by the language of statutory text and now by the constitutional amendment that prohibits courts from deferring to an agency's interpretation of a statute. Art. V, § 21, Fla. Const. (...
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