Colorado Energy Advocacy Office v. Public Service Co. of Colorado
| Decision Date | 24 June 1985 |
| Docket Number | No. 83SA476,83SA476 |
| Citation | 704 P.2d 298 |
| Parties | COLORADO ENERGY ADVOCACY OFFICE, and Ann Caldwell, Plaintiffs-Appellants, v. PUBLIC SERVICE COMPANY OF COLORADO; Public Utilities Commission of the State of Colorado; and Commissioners Edythe S. Miller, Daniel E. Muse and Andra Schmidt, Defendants-Appellees. |
| Court | Colorado Supreme Court |
Fish & Kogovsek, D. Bruce Coles, Denver, for plaintiffs-appellants.
Duane Woodard, Atty. Gen., Charles B. Howe, Deputy Atty. Gen., Richard H. Forman, Sol. Gen., John E. Archibold, Asst. Atty. Gen., Denver, for defendants-appellees Public Utilities Com'n, Miller, Muse and Schmidt.
Kelly, Stansfield & O'Donnell, James K. Tarpey, Denver, for defendant-appellee Public Service Co.
The Colorado Energy Advocacy Office and Ann Caldwell (plaintiffs) appeal a decision of the District Court for the City and County of Denver affirming a decision of the Public Utilities Commission (PUC) that a gas cost tariff for the Public Service Company of Colorado (PSCo) was adopted legally despite questionable ex parte communications and did not constitute retroactive ratemaking or an unlawful delegation of PUC powers. We affirm the judgment of the district court.
In 1974, PSCo responded to rising natural gas costs by filing a tariff that included a gas cost adjustment (GCA). The GCA adjusted monthly the base rate charged for gas by adding to the rate an increment derived from the actual cost of gas during the most recent test year for which data was available. The test year was the year ending two months before a given GCA went into effect; thus, the GCA for March would be based on actual gas costs over the twelve months ending the previous January.
In practice, PSCo discovered that gas prices rose so quickly that the test year did not reflect accurately actual gas costs for the month in which the GCA was effective, and PSCo was failing to recover its actual gas costs each month. Although the company might recover too much or too little in a given month, PSCo studies predicted a large overall loss due to the impreciseness of the GCA. Therefore, in May 1979 PSCo filed a new proposed tariff with the PUC. The new tariff required a two-step calculation of the GCA. First, the base rate gas cost was subtracted from the actual purchased gas cost expected for the month, based on suppliers' invoices and "any appropriate adjustments." The resulting purchased gas adjustment added to the base rate 1 would predict PSCo's expected gas cost for the month and therefore should reimburse PSCo for gas costs incurred. The second step added to or subtracted from the GCA the under or over recovery of actual gas costs incurred two months previously. Thus, a tariff filed in February for the month of March would take into account the under or over recovery of gas costs actually incurred in January. By the end of March, PSCo would recover an amount very close to the actual gas costs incurred in January. 2 The PUC approved the new PSCo tariff in June 1979 after a public hearing. The PUC required that PSCo submit to quarterly hearings and audits on the GCA, reserving the right to require a refund of the GCA if the PUC discovered "any inaccuracies or improprieties."
The plaintiffs filed a complaint with the PUC in April 1980, alleging certain flaws in the procedure by which PSCo's tariff was adopted, and also that the tariff constituted retroactive ratemaking and an unlawful delegation of PUC authority in violation of the state constitution. The PUC referred the matter to Hearing Examiner Trumbull, who issued a recommended decision to the PUC in April 1981. Examiner Trumbull upheld the legality of the GCA tariff; however, he recommended two major revisions. First, the hearing examiner recommended that the provision of the tariff allowing "any appropriate adjustments" to the calculation of purchased gas costs should itemize the adjustments that might be made to the estimate. The examiner listed eight factors requiring appropriate adjustments in the purchased gas cost estimate, based on PSCo's experience in making adjustments since June 1979. The second change proposed by the hearing examiner completely revised the method by which under or over recovered gas costs were charged to customers. Because the GCA required customers in a given month to pay for under recovery that occurred two months previously, customers joining the system were charged in their first two months for gas costs incurred before they bought any gas from PSCo. Similarly, those who went on vacation for a month or used less than their proportionate amount of gas for some other reason would be charged two months later for the unrecovered costs of gas they did not use. In order to remove this inequity, Examiner Trumbull recommended that the under or over recovered gas costs be calculated and charged in a given month according to the amount of gas actually used by each customer two months earlier, rather than according to the amount of gas used by the customer in the given month. The examiner also recommended that PSCo be required to refund net overcharges to customers whose gas consumption had differed significantly from the average consumption in the system since June 1979 because these customers might have been significantly overcharged for unrecovered costs on gas they did not use.
The plaintiffs and PSCo filed exceptions to the examiner's proposed decision. PSCo asserted that the specific list of appropriate adjustments for the purchased gas cost estimate was too restrictive and the reimbursement order for calculating amounts owed to customers was too burdensome. PSCo also maintained that the prospective change in the tariff to charge unrecovered gas costs according to customers' actual usage two months earlier would be impractical, requiring massive reprogramming of PSCo's computers to keep track of new and terminated customers and to maintain active files of past gas consumption. The plaintiffs' exceptions reiterated the allegations made in their original complaint. In addition, the plaintiffs requested a clarification of the reimbursement order, arguing that most PSCo customers would have significant mismatches between their gas consumption and the system's consumption each month, so PSCo should be required to reimburse all overcharged customers.
The PUC denied the plaintiffs' exceptions and granted PSCo's exceptions in part. The PUC concluded that requiring PSCo to calculate the unrecovered gas charge according to customers' actual usage two months previously would be an undue burden on the company, and therefore rejected Examiner Trumbull's proposals that the method of calculating the GCA be revised and reparations be required. However, the PUC did revise the tariff to limit "appropriate adjustments" to the purchased gas cost to ten itemized factors. 3
In finding that the examiner's proposal would not be cost-effective, the PUC quoted potential costs for PSCo customer account reviews and amounts for potential PSCo customer refunds that could not have been derived from the pleadings or hearing record. 4 The plaintiffs asserted that the information must have been obtained from ex parte contacts and requested that the PUC reconsider its decision without relying on the ex parte information. The PUC granted reconsideration and remanded the case to Examiner Trumbull to reopen the record "to ensure the right of all parties to fully cross-examine cost data, and explore the cost effectiveness" of the proposed refund procedure.
Because Examiner Trumbull had left his position with the PUC, the remanded case was heard by Examiner Temmer in December 1981. Testimony at the hearing indicated that a PUC staff member obtained the ex parte data and presented it to one of the commissioners in private and to all the commissioners at an open meeting about which the plaintiffs were not notified. The staff member calculated the potential refund amounts for the refunds required under the hearing examiner's proposed decision from information in his possession. His estimate of the cost of customer account reviews was verified by a financial analyst at the Public Service Company. Testimony by the staff member and the PSCo analyst at the hearing revealed that their estimates of the cost of customer account reviews evaluated completely different costs, although the PSCo analyst's result had confirmed the staff member's result; the staff member estimated the cost of calculating customer refunds based on known customer data and the PSCo analyst estimated the cost of retrieving individual customer data from PSCo records.
Examiner Temmer received evidence from the PUC staff analyst, a Colorado Energy Advocate Office analyst and a PSCo analyst about the amount of overcharges that might be refunded to customers under Examiner Trumbull's proposed decision. The plaintiffs' analyst assessed the costs of recovering customer billing information from PSCo files. The plaintiffs cross-examined PSCo representatives about the costs of recovering such data and the costs of reprogramming PSCo computers prospectively to calculate unrecovered gas cost charges as would be required under Examiner Trumbull's proposed decision.
In April 1982, Examiner Temmer determined that Examiner Trumbull's proposed refund would not be cost-effective and therefore the PUC's first decision was justified. The PUC adopted Examiner Temmer's recommended decision in June 1982. The plaintiffs sought review of the PUC decisions in Denver district court. The district court issued a brief decision affirming the PUC decisions, and the plaintiffs appeal, asserting that the PUC decision denying refund of overcharges was fatally flawed by ex parte communications with the PUC staff and PSCo, that the GCA tariff constituted retroactive ratemaking in violation of the constitutional prohibition against retroactive legislation, and that the tariff provision...
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