Consolidated Rate Appeals of Green Mountain Power Corp., In re, s. 280-81

• Decision Date: 05 January 1983
• Docket Number: 311-81,478-81 and 82-045,Nos. 280-81,421-81,s. 280-81
• Citation: 142 Vt. 373,455 A.2d 823
• Court: Vermont Supreme Court
• Parties: In re CONSOLIDATED RATE APPEALS OF GREEN MOUNTAIN POWER CORPORATION.

Page 823

455 A.2d 823

142 Vt. 373

In re CONSOLIDATED RATE APPEALS OF GREEN MOUNTAIN POWER CORPORATION.

Nos. 280-81, 311-81, 421-81, 478-81 and 82-045.

Supreme Court of Vermont.

Jan. 5, 1983.

Douglas G. Hyde and Sheehey, Brue & Gray, Burlington, and Mudge, Rose, Guthrie & Alexander, New York City, for petitioner-appellant.

Michael L. Burak, Robert Steinfeld and Jon Anderson, Montpelier, for respondent-appellee.

Before BARNEY, C.J., BILLINGS, HILL and UNDERWOOD, JJ., and LARROW, J. (Ret.), Specially Assigned.

BARNEY, Chief Justice.

There are five rate orders of the Public Service Board involved in this appeal. Two are final dispositions of requests for rate increases, one is a recoupment order issued in connection with a rate change authorized by one of those final dispositions and two are interim orders issued pending final adjudication of later rate increase requests. By stipulation, the Green Mountain Power Corporation as appellant and cross-appellee, and the Department of Public Service as appellee and cross-appellant agreed to consolidation under V.R.A.P. 3(c).

The utility seeks a broad review of the propriety and effectiveness of rate review procedures as practiced by the Public Service Board when periods of rapid and substantial inflation are outdating cost figures for power production and purchase almost as soon as they are arrived at. The Department not only undertakes to meet the issues relevant to that situation, but goes on to argue that, in fact, the Board was overgenerous to the corporation in the relief it did grant.

These proceedings commenced with the filing by the utility of an annual rate increase of 21% over test period revenues, to be effective November 10, 1979. The request included a proposed power adjustment tariff applicable only to commercial and industrial users. Test period revenues refer to a selected one year time period in which both operational costs and receipts are taken as an appropriate standard or measuring device against which proposed rate increases can be measured as to return. These test years are subject to adjustment for closer approximation to standard conditions. A power adjustment tariff or clause is a rate setting device designed to authorize rate changes accordingly as the price of purchased power or production may change because of costs affected by such variables as oil price changes, or other costs presumably beyond the control of the utility. Their purpose is to allow a more rapid adjustment to swift changes in costs.

Two months later a second rate increase proposal was filed, seeking 7.9% over test year revenues. The test year was the same as that of the first request, the twelve month period ending June 30, 1979, and a power adjustment tariff for commercial and industrial users was again included. These proposals were suspended by the Board under the authority of 30 V.S.A. § 227.

After extensive hearings in which these two requests were consolidated, the Board allowed a 23.8% increase. This was appealed and became Docket No. 311-81. In connection with that decision the Board made a separate order relating to recoupment authorized to the power corporation and to refunds granted to the public. This order, on appeal, became Docket No. 421-81.

About ten months later the power corporation filed for a third rate increase. This filing sought a 9.47% increase based on a test year ending July 31, 1980. In three months another request, amounting to an additional 3.8% increase over revenues for the same test year, was filed. A power adjustment tariff for nonresidential customers was originally included, but later withdrawn.

The Board consolidated these requests for hearing and suspended their immediate operation, as before. A temporary rate increase was granted, however, amounting to a minimum allowance very slightly higher than the first of these two requests, but not significantly invading the range of the second request. This temporary order of increase was appealed, becoming Docket No. 280-81.

These two requests then proceeded through public and Board hearings and a final order in these cases was issued. It made permanent the temporary increase with a slight addition of about $100,000 additional annual revenue. This order was appealed by both the power corporation and the Department, becoming Docket No. 82-045. About two months later the power corporation was granted a recoupment order by the Board based on the permanent rate increase decision.

During this same period, in May, 1981, the power corporation filed a fifth request for a rate increase, using a test year ending December 31, 1980, and amounting to an increase of 18.3% over the revenues of that year. This request, which was suspended by the Board, also included a power adjustment tariff. The Board, in suspending the projected increase, issued an interim order allowing a temporary rate increase amounting to a little less than one-third the requested amount. This decision was likewise appealed, becoming Docket No. 478-81. At the time this appeal was brought the issues of a final rate order and recoupment were still pending.

A moment's reflection will bring to the fore the complexities all these proceedings give to the rate reviewing process and the functioning of the Board. Requests are filed before earlier requests are resolved. Test years are proposed which are themselves subject to projected rate increases not yet final. Each filing represents not only a commitment of time and resources on the part of the Board, but a very substantial investment of funds of the utilities that may represent increased rate increases to consumers without being part of the return to investors or available to improve service. The problem is, indeed, a troubling one, and it is no wonder that some sort of reexamination of procedures is requested.

However, the range of relief and change suggested far outdistances the reviewing function assigned by law to this Court, and more properly belongs to policy-determining procedures to be considered internally by the Board or, if necessary, encompassed in legislative action. The judicial duty is to review the specific actions of the Board in the cases before us, testing the rulings for compliance with present statutory standards and insuring that legal limitations, including constitutional concerns, are not overstepped. See Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 287, 88 L.Ed. 333 (1944).

Indeed, it is already stated policy in our law that this Court will not undertake to prescribe the many varieties of approach to rate regulation that the Board must use, but restricts itself to evaluating the Board's order against the appropriate standards provided by the law, including that of adequate evidentiary support. In re Central Vermont Public Service Corp., 141 Vt. 284, 288, 449 A.2d 904, 907 (1982).

The statutory basis of the Board's regulatory authority is extremely broad and unconfining with respect to means and methods available to that body to achieve the stated goal of adequate service at just and reasonable rates. In re Green Mountain Power Corp., 136 Vt. 170, 173, 385 A.2d 1110, 1112 (1978). 30 V.S.A. § 218 authorizes the Board to set rates, tolls, charges or schedules or to change regulations, measurements, practices or acts of the utility relating to its service in order to insure those reasonable rates and adequate service. The choices the Board makes in this area are subject to great deference in this Court so long as it can be shown they are directed at proper regulatory objectives. In re Green Mountain Power Corp., 131 Vt. 284, 303, 305 A.2d 571, 583 (1973).

The very breadth of this grant of authority, however, imposes a duty on this Court, in examining the Board's decisions, to require as part of the order that there be full disclosure of the criteria underlying the decision and the methodology employed to evaluate the facts and integrate them into the result. We have already so held. In re New England Tel. & Tel. Co., 135 Vt. 527, 543, 382 A.2d 826, 837 (1977). See also Washington Gas Light Co. v. Public Service Commission, 450 A.2d 1187, 1194 (D.C.1982).

Turning from the testing of rate establishment theory to the more prosaic but essential testing of this rate order for constitutional and statutory propriety, we must first look at the specific challenges raised by the utility as defects in the order made. The alleged defects fall under two general headings.

The first is a contention that the manner of establishing a historic test year is so deficient as to deny the utility due process in that reliance on historic data understates current operating expenses, misstates the cost of equity and is compounded as error by the refusal of the Board to hear updated evidence. The second is so closely related that consideration of it is intertwined with the basics of the first contention. Fundamentally, the second point states that the actions of the Board understate operating expenses, do not allow for foreseeable attrition of earnings and thereby reduce the return on equity to the point of being confiscatory.

All of this is again an attack on the methodology of using a historic test year to establish future rates. As we have already noted, it is the responsibility of this Court to examine the validity of the result of its application, leaving the theoretical debate to academic and legislative forums, or to the Board itself. Other applicable standards favor the orders of the Board on appeal before this Court, Wendland v. Green Mountain Power Corp., 132 Vt. 320, 322, 318 A.2d 668, 670 (1974), and place the burden of proving such orders "clearly erroneous" under 30 V.S.A. § 11(b) on the appealing party. In re New England Tel. & Tel. Co., 139 Vt. 578, 587, 433 A.2d 263, 268 (1981). The Board has the same function of evaluating the weight of the testimony and the credibility of the witness as other triers of...