City of Richmond v. Public Service Commission

• Citation: 406 N.E.2d 1269
• Decision Date: 21 July 1980
• Docket Number: No. 2-179A18,2-179A18
• Parties: The CITY OF RICHMOND, Indiana d/b/a Richmond Power & Light, Appellant (Respondent below), v. PUBLIC SERVICE COMMISSION of Indiana, Appellee.
• Court: Court of Appeals of Indiana

Page 1269

406 N.E.2d 1269

The CITY OF RICHMOND, Indiana d/b/a Richmond Power & Light Appellant (Respondent below), v. PUBLIC SERVICE COMMISSION of Indiana, Appellee.

No. 2-179A18.

Court of Appeals of Indiana, Fourth District.

July 21, 1980.

Paul Hirsch, Haymaker, Hirsch & Fink, Indianapolis, for appellant.

Theodore L. Sendak, Atty. Gen., Jeff G. Fihn, Deputy Atty. Gen., Indianapolis, for appellee.

CHIPMAN, Judge.

The appellant City of Richmond, doing business as Richmond Power & Light (RP& L) was ordered by the Public Service Commission (the Commission) to refund approximately 2.3 million dollars to its customers. On appeal RP&L challenges the order of the Commission. We reverse.

The following issues have been raised by RP&L:

I. Whether the Commission had jurisdiction and the authority to order RP&L to refund monies to its customers.

II. Whether the order was contrary to or not supported by the evidence.

III. Whether the order contained specific findings on all the factual determinations material to its ultimate conclusions.

FACTS

On July 16, 1974, RP&L filed an emergency petition (pursuant to IC 8-1-2-113) with the Commission requesting approval of a revised schedule of rates. ¹ The petition cited the tremendous increase in the cost of power purchased by RP&L from Indiana and Michigan Electric Company (I&M) as justification for the emergency rate increase. The petition further alleged the utility, at that time, was being operated at a deficit in violation of IC 8-1-2-96 which requires a municipal utility to charge a rate sufficient to generate enough revenue to allow the utility to meet its obligations. An accompanying petition filed by RP&L noted the increased rate charged by I&M was conditionally approved by the Federal Power Commission (FPC) and therefore potentially subject to refund. RP&L proposed the Commission retain continuing jurisdiction over the subject matter for the possibility of overseeing RP&L's refund procedure in the event it received a refund from I&M.

A hearing was held on RP&L's petition by the Commission and the latter issued its temporary rate increase order on October 10, 1974. The order noted the confusing and unclear status of the "emergency statute" (IC 8-1-2-113) but nevertheless concluded the Commission did have jurisdiction over the subject matter.

In addition the order found:

1. Pursuant to an FPC order dated October 1, 1973, RP&L was being required to pay an additional $911,000 per year to purchase wholesale electric power from I&M.

2. RP&L proposed to increase its rates 10% across the board, on an emergency basis and subject to a possible refund, to cover these increased costs.

3. Neither the Commission nor RP&L could accurately predict whether the FPC would order I&M to refund any money to RP&L. In light of this fact it was impossible for RP&L to sensibly manage its operations and an emergency existed, within the meaning of the statute.

4. If the increase requested by RP&L was not granted the utility would not have sufficient income to maintain its property.

5. The "(C)ommission should not ignore the obligation imposed upon it by the Emergency Statute in the case of an emergency, such as we have found here to exist per se by reason of the FPC interim order, to '. . . prevent injury to the business or interests of the people.' "

6. RP&L shall refund or credit to its customers any amount of excess revenues received by RP&L.

No appeal was taken from the order entered by the Commission.

On December 3, 1974, RP&L petitioned the Commission for a permanent rate increase necessitated by the impact of inflation on its operating costs. In the petition RP&L stated it had:

"no objection to any provision that the Commission may desire with respect to (RP&L) being required to refund any excess rates and charges collected from (RP&L's) customers as a result of a PSCI rate order in the event a subsequent FPC order . . . may prove that said rates and charges may have been excessive."

A hearing was held on RP&L's petition and on August 8, 1975, the Commission issued its order granting RP&L a permanent rate increase, which included the $911,000 temporary rate increase.

The order stated:

"that the rates approved herein shall be subject to refund or credit in the event of a final Federal Power Commission order reducing the cost of electric power to Petitioner from that awarded on an interim basis, and that Petitioner shall be obligated to refund or credit to its customers any amount of excess revenues received by Petitioner as may be determined by the Commission, and under such conditions as this Commission, within its power and continuing jurisdiction over this cause and the parties hereto, deems just and proper."

No appeal was taken from this Commission order.

In 1978 RP&L received a $3,125,802 refund from I&M and on October 31, 1978, RP&L filed a Supplemental Petition for Approval of Refund and Refund Procedure. The following facts were undisputed at the hearing on the petition. RP&L received a total refund from I&M of $3,125,802. One million dollars of this refund was attributable to the period from October 1973 to December 1976 and the remaining $2,125,802 was attributable to the period from January 1977 to July 1978. From October 1973 to July 1978, RP&L incurred four rate increases from I&M but only part of one of the rate increases was passed on to RP&L's customers. The remaining increases were absorbed by RP&L. The total expenses incurred by RP&L in securing the refund amounted to $545,819.66 for attorney's, economist's and engineer's fees.

RP&L and the Public Counselor disagreed on how the refund should be calculated, causing their final amounts to differ. Their disagreement centered around whether or not RP&L should be allowed to retain that portion of the refund attributable to the portions of the rate increases that were absorbed by it and not passed on to its customers. The Public Counselor argued RP&L chose not to petition the Commission for further rate increases based on its increased cost of purchased power and therefore it should not be allowed to retain the portion of the refund attributable to the absorbed increases.

RP&L figured its customer's refund by dealing with the two refund periods separately. As to the $1,000,000 1973-1976 refund, it first subtracted $367,016.67, which represented a pro rata portion of the allowable expenses. From the remaining $632,983.33, RP&L argued it should be allowed to retain $210,994.44 for the increased costs absorbed during the thirteen months prior to the granting of its emergency increase, and $130,574.04 for the portion of the cost increase not passed on to its customers subsequent to the emergency increase. The remaining $291,414.85, representing the increase RP&L passed on to its customers, was to be refunded to them.

From the $2,125,802 refund for the second period (1977-1978), RP&L deducted the remaining expenses $178,802.99, and argued it should be allowed to retain $1,650,665.76 for cost increases absorbed by it and refund the difference, $296,333.25, to its customers.

In summary, out of the $3,125,802, RP&L contended that its customers were entitled to a refund of $587,748.10. Rather than refund this amount RP&L proposed to credit its customers for one month's billing which would amount to approximately $1,500,000.

The Public Counselor figured the refund by multiplying the amount granted in the emergency order subject to refund, $911,000 per year, times the period covered by the refund, 3.75 years, in arriving at his figure of $3,416,250. Since this amount was greater than the I&M refund, he used the $3,125,802 figure. From this he subtracted the $545,819.66 in allowable expenses and $282,051.28 for cost increases absorbed by RP&L over an eleven month period, leaving a refund due RP&L's customers in the amount of $2,297,931.06.

The Public Counselor also disagreed with the refund procedure suggested by RP& L. His position was the refunds should be given to those who were customers during the period subject to the refund.

In its Order Authorizing Refund, the Commission made these findings of fact:

"1. That the Public Service Commission of Indiana has jurisdiction of the subject matter of this proceeding and of all parties thereto; further, that requisite and proper legal notice was duly given as provided by law.

2. That this Commission, on August 14, 1975, issued its order approving permanent rates for Petitioner herein and further providing for a refund or credit to Petitioner's customers in the event a refund or credit was received by Petitioner reducing the cost of the electric power to Petitioner as a result of a final order of the Federal Power Commission, now Federal Energy Regulatory Commission, all as more fully set out on page 6 of said order.

3. That on September 6, 1978, Petitioner received a refund and credit from the Indiana & Michigan Electric Company in the amount of $3,125,802. The refund covered the cost of electric power to Petitioner from I & M E for the period of October 1973 to July 1978. There were two time frames involved in the refund reflecting the various tariffs of I & M E to Petitioner that were effective for the refund period. From October 1973 through December 1976, during the period when the IP Tariff, at various rate levels, was in effect, Petitioner received the sum of $1,000,000. For the period January 1977 to July 1978, during the period of time when the WS Tariff was in effect for Petitioner's purchases of power from I & M E, the refund amounted to $2,125,802.

4. That in the temporary rate increase allowed by this Commission on October 10, 1974, total annual revenues of $911,000 were allowed for the increase of purchased power purchased by Petitioner from I & M under rates set by the Federal Power Commission; that such order was issued subject to refund in the event any portion of the increase allowed for purchased power costs were ultimately refunded to...