Energy Regulatory Commission v. Kentucky Power Co., 79-CI-0493

• Decision Date: 29 August 1980
• Docket Number: No. 79-CI-0493,79-CI-0493
• Citation: 605 S.W.2d 46
• Parties: ENERGY REGULATORY COMMISSION of Kentucky and Commonwealth of Kentucky ex rel. Robert F. Stephens, Attorney General, Appellants, v. KENTUCKY POWER COMPANY, Appellee.
• Court: Kentucky Court of Appeals

Page 46

605 S.W.2d 46

ENERGY REGULATORY COMMISSION of Kentucky and Commonwealth of Kentucky ex rel. Robert F. Stephens Attorney General, Appellants, v. KENTUCKY POWER COMPANY, Appellee.

No. 79-CI-0493

Court of Appeals of Kentucky.

Aug. 29, 1980.

William M. Sawyer, Frankfort, for appellant, Energy Regulatory Commission of Kentucky.

Steven L. Beshear, Atty. Gen., Hanson Williams, Asst. Atty. Gen., Frankfort, for Commonwealth.

E. Gaines Davis, Frankfort, Edward J. Brady, Bruce V. Miller, New York City, for appellee.

Before HAYES, C. J., and WHITE and WINTERSHEIMER, JJ.

WINTERSHEIMER, Judge.

This appeal is from a judgment entered August 7, 1979, reversing an order of the Energy Regulatory Commission which had denied to the Kentucky Power Company a certificate of public convenience and necessity and authority to borrow funds to purchase an interest in an Indiana electric stream generating plant.

The Kentucky Power Company, a member of the AEP system, owns a generating plant at Louisa, Kentucky, consisting of two units serving approximately 132,000 customers located throughout a 5,700 square mile service area in Eastern Kentucky. On July 19, 1978, the Company filed an application with the Commission to purchase additional generating capacity in a plant then being constructed near Rockport Indiana. The Company proposed to purchase fifteen percent of the Indiana plant for $187,000,000, $100,000,000 of which the Company planned to borrow. At Commission hearings, the Kentucky Attorney General intervened in opposition to the requested certificate.

The substance of this case involves an electric utility's concern that it may have inadequate electrical generating capacity from its present Kentucky plant for a three-year period beginning in late 1981. The Regulatory Commission found that the utility could remedy any potential shortage by simply purchasing power from another affiliated utility in its own network, rather than by buying a new interest in a different plant. The circuit court reversed this decision because the agency failed to rebut certain allegations regarding the need for and the cost of the new generating facility.

The appellant, Energy Regulatory Commission, argues as follows:

1) There is substantial evidence in the record to support the Commission's decision to deny the Company request to purchase an interest in a new generating plant.

2) An administrative agency has no duty to refute evidence submitted to it by an applicant having the burden of proof.

3) The evidence in the record is such that reasonable minds could disagree as to whether the Company's customers would be best served by the purchase of new generating capacity at this time.

The appellant, Attorney General, argues that the failure to name the Consumer Protection Agency as a party to the reviewing process and to provide adequate notice of appeal to it are grounds for reversal.

This Court reverses the judgment of the circuit court and remands this matter to the Energy Regulatory Commission because the Commission has made only conclusions of law and has failed to make findings of specific evidentiary facts as required by Marshall County v. So. Central Bell Tel. Co., Ky., 519 S.W.2d 616 (1975). In order to sustain or reverse an order of the Commission it is necessary that there be a finding of specific evidentiary facts. Furthermore, it has been repeatedly held that where the validity of an order of an administrative body depends on a determination of fact, the absence of findings of basic evidentiary facts is fatal to such an order. Marshall, supra.

In reversing and remanding for the above reasons, we choose to decide also other issues raised in this appeal to clarify the law and thereby prevent, if possible, the necessity of further review after remand.

We first note that the circuit court substituted its judgment for that of the trier of fact. There was no clear and convincing evidence that the original determination by the Commission was unreasonable or unlawful.

KRS 278.430 provides the standard of review of the Commission order by the circuit court. Under that statute the party seeking to set aside any determination by the Commission has the burden of proof to show by clear and convincing evidence that the determination is unreasonable or unlawful.

The case of Lexington Tel. Co. v. Public Service Comm'n, 311 Ky. 584, 224 S.W.2d 423 (1949), overruled on other grounds in Stephens v. Kentucky Utilities Co., Ky., 569 S.W.2d 155 (1978), points out that the statutes authorizing an appeal from the rulings of the Public Service Commission (here the Energy Regulatory Commission) are materially different from those authorizing appeals from other administrative or quasi-judicial agencies. While Kentucky State Racing Comm'n v. Fuller, Ky., 481 S.W.2d 298 (1972), stated that where an agency acts as a trier of fact the findings are conclusive if supported by substantial evidence, Lexington Tel. Co. and KRS 278.430 state that in a public utility regulatory case the complaining party must show by clear and convincing proof that the ruling was unlawful or unreasonable. Hence, the scope of judicial review of administrative action here is very limited.

The circuit court erred in holding that no substantial evidence supported the Commission's decision to deny the utility the requested certification. The basis for adherence to administrative findings was announced in Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 86 S.Ct. 1018, 16 L.Ed.2d 131 (1966), where it was stated that it gives proper respect to the expertise of the administrative tribunal and helps promote the uniform application of the statute. Kentucky has followed these administrative principles. In Kentucky State Racing Comm'n v. Fuller, supra, it was said that, regardless of the fact that a contrary result might be reached if the case were heard de novo, the reviewing body was obliged to affirm the administrative determination. The administrative trier of fact has the exclusive province to pass on the credibility of the witnesses and the weight of the evidence. Fuller, supra ; K. Davis, Administrative Law Text § 29.01 (3d Ed. 1975).

In the instant proceeding the Commission functioned as a quasi-judicial body hearing and weighing evidence in order to make the required finding that a grant or denial of the certification would best serve the public interest. Applicants before an administrative agency have the burden of proof. Lee v. International Harvester Co., Ky., 373 S.W.2d 418 (1963). The reviewing process is governed by KRS 278.430 which provides that the petitioner must carry the burden of proof under a clearly convincing evidence standard. In a review of a Social Security ruling, the court in Dawson v. Driver, Ky., 420 S.W.2d 553 (1967), stated that the question before the circuit court was whether, under the whole body of the evidence, it was unreasonable and thus an abuse of discretion for the board to deny the claim. Here, the circuit court violates the burden of proof principle set out in KRS 278.430 and in Dawson, supra.

The term unreasonable can be applied to an administrative agency's decision only when it is determined that the evidence presented leaves no room for difference of opinion among reasonable minds. Thurman v. Meridian Mutual Ins. Co., Ky., 345 S.W.2d 635 (1961). The circuit court made no such finding in its review of the evidence.

Repeated references are made to uncontradicted evidence and to the fact that no evidence to...