Detroit Edison Co. v. Public Service Com'n

• Decision Date: 19 October 1983
• Docket Number: 61962,Docket Nos. 61961
• Citation: 342 N.W.2d 273,127 Mich.App. 499
• Parties: The DETROIT EDISON COMPANY, a Michigan and New York corporation, Plaintiff- Appellant, v. PUBLIC SERVICE COMMISSION, Defendant-Appellee, and Attorney General, Intervening Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 273

342 N.W.2d 273

127 Mich.App. 499

The DETROIT EDISON COMPANY, a Michigan and New York corporation, Plaintiff- Appellant, v. PUBLIC SERVICE COMMISSION, Defendant-Appellee and Attorney General, Intervening Defendant-Appellee.

Docket Nos. 61961, 61962.

Court of Appeals of Michigan.

Submitted April 7, 1983.

Decided July 20, 1983.

Released for Publication Oct. 19, 1983.

Foster, Swift, Collins & Coey, P.C. by Theodore W. Swift, David W. McKeague and Charles E. Barbieri, Lansing, The Detroit Edison Company by Leon S. Cohan, Christopher C. Nern and John H. Flynn, Detroit, for The Detroit Edison Co.

Arthur E. D'Hondt and Don L. Keskey, Asst. Atty. Gen., for Public Service Comn.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Hugh B. Anderson, Asst. Atty. Gen., for intervening defendant-appellee Atty. Gen.

Before HOLBROOK, P.J., and HOOD and GREEN, ^* JJ.

PER CURIAM.

This is an appeal as of right by The Detroit Edison Company from a December 23, 1981, judgment of the Ingham County Circuit Court, which affirmed a March 30, 1976, order of the Michigan Public Service Commission, granting the utility a rate increase for electrical service in the amount of $62,425,000.

On April 10, 1975, Edison petitioned the commission for permission to increase its electric rates by $177,865,000. The petition was accompanied by the utility's motion for partial and immediate interim rate relief in the amount of $88,112,000. The petition became MPSC case U-4807.

Public hearings began July 14, 1976. In the months thereafter, the record spanned 51 days of hearings and included 6,087 pages of transcript and 108 exhibits. On July 24, 1975, Edison renewed its motion for interim relief, this time in the amount of $84,800,000. On September 5, 1975, the commission staff recommended that the utility be granted final rate relief in the amount of $105,900,000. A week later, the commission staff recommended that the utility be granted interim rate relief in the amount of $39,833,000.

On January 9, 1976, the commission reported to the Governor that it was unable to conclude the rate proceeding within nine months as required by then M.C.L. Sec. 460.6a(3); M.S.A. Sec. 22.13(6a)(3), most recently amended by 1982 P.A. 304 and now subsection 6a(4).

On February 9, 1976, the commission denied the utility's request for interim rate relief, principally because the commission's final decision was expected shortly. On February 27, 1976, the administrative hearing officer recommended that the utility be granted final rate relief in the amount of $88,334,000. On March 30, 1976, the commission entered its final order, granting the utility final rate relief in the amount of $62,425,000, effective March 31, 1976.

On April 28, 1976, Edison filed a petition in Ingham County Circuit Court for judicial review of the commission's final order, pursuant to Sec. 26(a) of the so-called railroad commission act, M.C.L. Sec. 462.26(a); M.S.A. Sec. 22.45(a). At the same time, the utility requested injunctive relief for a rate increase pending judicial review, pursuant to Sec. 26(b). After hearing, and by opinion filed May 19, 1976, and order entered May 28, 1976, then Circuit Judge Donald Reisig granted the utility's request for injunctive relief and permitted the utility to collect an interim rate increase in the amount of $13,846,000 under bond. The Attorney General, who had intervened in the case, and the commission sought leave to appeal that injunctive order, but this Court denied leave to appeal on September 30, 1976. See Detroit Edison Co. v. Michigan Public Service Comm., Docket Nos. 28871, 28872, 28091 and 28092. The Attorney General and the commission sought leave to appeal to the Supreme Court. The Supreme Court also denied leave to appeal. 398 Mich. 803 (1976). Edison collected the interim rate increase in its November and December, 1976, utility bills.

Meanwhile, back in circuit court, Judge Reisig had resigned and the case was assigned to Judge Michael Harrison. Judge Harrison conducted a nine-day trial in the summer of 1977 and, by order entered January 13, 1978, he remanded the case to the commission to consider additional evidence, as is permitted by Sec. 26(c) of the railroad commission act, M.C.L. Sec. 462.26(c); M.S.A. Sec. 22.45(c). The commission rendered its final decision on remand on July 19, 1979. The commission affirmed its previous final order.

On December 23, 1981, Judge Harrison filed an opinion and entered a judgment affirming the commission's decision. Edison appeals, raising several issues.

I

Edison argues that the commission and circuit court erred by failing to consider the "cumulative impact" of the commission's alleged failure to adopt an adequate test year, its refusal to award interim rate relief, its failure to reach a timely decision and its denial of an earnings erosion allowance. The failure to consider the overall impact of those rulings resulted in unreasonable, unjust and confiscatory ratemaking in this case, the utility argues. Nevertheless, Edison concedes that it is not appealing those claimed errors in and of themselves. In view of that concession, the "overall impact" argument, if valid at all, is valid only if the individual claims of error have some merit in and of themselves.

II

Edison argues that the commission chose an inappropriate test year on which to base the rates the utility could charge in 1976. The test year adopted by the commission was based on actual data showing the business experience of the company in the first six months of 1975 and data projected into the last six months of 1975. But, the company argues, by the time the commission entered its final order in March of 1976, the data and test year were already nine months out of date. So, the company says, in spite of the commission's protestations that it was using current or projected test year data, the test year was actually in historical one. Therefore, the argument goes, the test year was inadequate because it led to rates which did not adequately reflect changes in rate base, income and expenses and the effects of inflation on those factors. Edison argues that the commission should have adopted a test year that more accurately resembled the year in which the rates were to be collected and, failing that, the commission should have adopted some adjustment in rates (for example, interim relief or an earnings erosion allowance) to afford the company a reasonable opportunity to earn its authorized rate of return. Edison argues that the circuit court erred by failing to address the effects of adopting an inadequate historical test year and concludes that, "The Court's lack of consideration or understanding of such consequences is indicative of the Court's failure to consider the overall impact of its Order."

The scope of review and the burden of proof on appeal are prescribed by statute. Under Sec. 25 of the railroad commission act, rates set by the commission "shall be in force and shall be prima facie, lawful and reasonable until finally found otherwise * * * ". M.C.L. Sec. 462.25; M.S.A. Sec. 22.44. Michigan Bell Telephone Co. v. Public Service Comm., 332 Mich. 7, 50 N.W.2d 826 (1952); Attorney General v. Public Service Comm., 118 Mich.App. 311, 324 N.W.2d 628 (1982); Consumers Power Co. v. Public Service Comm., 78 Mich.App. 581, 261 N.W.2d 10 (1977); Attorney General v. Public Service Comm., 63 Mich.App. 69, 234 N.W.2d 407 (1975), lv. den. 395 Mich. 779 (1975). On appeal, the appellant has the burden "to show by clear and satisfactory evidence that the order of the commission complained of is unlawful or unreasonable, as the case may be". M.C.L. Sec. 462.26(e); M.S.A. Sec. 22.45(e). In any appeal, the appellant is required to show that findings of fact by the commission are not supported by competent, material and substantial evidence on the whole record. Const.1963, art. 6, Sec. 28; Great Lakes Steel Div. of Nat'l Steel Corp. v. Public Service Comm., 416 Mich. 166, 330 N.W.2d 380 (1982); Consumers Power Co. v. Public Service Comm., supra.

Under the facts of this case, Edison cannot show that the test year adopted by the commission is unlawful or unreasonable or unsupported by the evidence. Edison's application for a rate increase proposed a 1974 historical test year which used actual data for the year or, alternatively, a 1975 test year based upon projections. Edison did not object before the commission about its use of a 1975 test year. Nor did Edison, or any other party, advocate the use of a calendar 1976 test year when the case was before the commission.

Not only did Edison urge the adoption of a 1974 or 1975 test year, but the commission's adoption of a 1975 test year was a positive break from past practice. The commission had traditionally used only historical test years to set future rates, but in this case broke from that tradition in an attempt to get closer to recent experience in order to set prospective rates which would more nearly reflect past experience, increased by projected revenues and cost estimates.

III

Next, Edison contends that the commission erred by failing to reach a decision in the case within nine months, allegedly as required by M.C.L. Sec. 460.6a(2); M.S.A. Sec. 22.13(6a)(2), which provides:

"The commission shall adopt such rules and procedures for the filing, investigation and hearing of petitions or applications to increase or decrease utility rates and charges as the commission finds necessary or appropriate to enable it to reach a final decision with respect to such petitions or applications within a period of 9 months from the filing thereof. * * *."

Edison does not persuade by clear and satisfactory evidence that the commission erred by not completing the hearing within nine months. The nine-month provision of the statute is not a requirement; it is only a goal. The sanction imposed by the statute for noncompliance with the nine-month period is merely that the...