Entergy Arkansas v. Arkansas Public Serv.

Decision Date17 December 2008
Docket NumberNo. CA 07-949.,CA 07-949.
Citation289 S.W.3d 513
PartiesENTERGY ARKANSAS, INC., Appellant, v. ARKANSAS PUBLIC SERVICE COMMISSION, Appellees.
CourtArkansas Court of Appeals

Tucker Raney, Assistant General Counsel, Entergy Servs. Inc.; Perkins & Trotter, by: Scott C. Trotter; Williams & Anderson, PLC, by: Philip E. Kaplan and JoAnn C. Maxey; and Wright, Lindsey & Jennings, LLP, by: N.M. Norton, Little Rock, AR, for appellant.

Valerie F. Boyce, Staff General Counsel, and Lori L. Burrows, Staff Attorney, Arkansas Public Service Comm'n; and Dustin McDaniel, Att'y Gen., by: Sarah R. Tacker, Ass't Att'y Gen., for appellees.

ROBERT J. GLADWIN, Judge.

The Arkansas Public Service Commission (PSC) ordered a $5.67 million rate decrease for Entergy Arkansas, Inc., an electric utility that serves approximately 670,000 customers in the state. Entergy appeals on numerous grounds, one of which merits a partial reversal. In all other respects, we affirm the PSC's decision.

On August 15, 2006, Entergy petitioned the PSC for an increase in retail rates. The petition, as amended, sought approximately $106.5 million in additional revenue. A number of entities intervened in the case, including the Attorney General's Utilities Rate Advocacy Division. After the parties submitted voluminous pre-filed testimony, a hearing was conducted from April 25, 2007, through May 4, 2007. Thereafter, the PSC issued Order No. 10, finding that Entergy's revenue requirement was excessive and should be reduced by approximately $5.67 million, effective June 15, 2007.1 Entergy petitioned for rehearing, which the PSC's Order No. 16 denied in all pertinent respects. This appeal followed. Entergy asserts sixteen arguments (along with several sub-arguments) for reversal.

I. Standard of Review

The PSC has wide discretion in choosing its approach to rate regulation and we do not advise the Commission on how to make its findings or exercise its discretion. Consumers Utils. Rate Advocacy Div. v. Ark. Pub. Serv. Comm'n, 99 Ark.App. 228, 258 S.W.3d 758 (2007). Our review of PSC orders is limited by Ark. Code Ann. § 23-2-423(c) (Repl.2002), which provides in part:

(3) The finding of the commission as to the facts, if supported by substantial evidence, shall be conclusive.

(4) The review shall not be extended further than to determine whether the commission's findings are supported by substantial evidence and whether the commission has regularly pursued its authority, including a determination of whether the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or of the State of Arkansas.

If an order of the Commission is supported by substantial evidence and is neither unjust, arbitrary, unreasonable, unlawful, nor discriminatory, the appellate court must affirm the Commission's action. See Consumers Utils. Rate Advocacy Div., supra; Bryant v. Ark. Pub. Serv. Comm'n, 46 Ark.App. 88, 877 S.W.2d 594 (1994). To establish an absence of substantial evidence, the appellant must demonstrate that the proof before the Commission was so nearly undisputed that fair-minded persons could not reach its conclusion. Id. Administrative action may be regarded as arbitrary and capricious where it is not supportable on any rational basis, and something more than mere error is necessary to meet the test. See Consumer Utils. Rate Advocacy Div., supra. To set aside the Commission's action as arbitrary and capricious, the appellant must prove that the action was a willful and unreasoning action, made without consideration and with a disregard of the facts or circumstances of the case. Id.

II. Procedural Arguments

Entergy challenges three of the Commission's procedural rulings. It argues first that the PSC violated constitutional guarantees of due process by limiting the cross-examination of witnesses. A full and fair hearing is a fundamental requirement of due process in a utility rate case. See Ark. Pub. Serv. Comm'n v. Continental Tel. Co., 262 Ark. 821, 561 S.W.2d 645 (1978). In almost every setting, due process includes the right to confront and cross-examine witnesses. See Ark. Dep't of Human Servs. v. A.B., 374 Ark. 193, 286 S.W.3d 712 (2008).

Entergy does not argue in this case that it was wholly deprived of the opportunity to cross-examine witnesses. Rather, it contends that it was prohibited from further cross-examination once the Commissioners had questioned the witnesses. We find that Entergy waived this argument by not making a timely objection below.

Prior to the hearing, the Commission informed all parties of its long-standing rule that, once cross-examination of a witness by counsel was completed and the Commissioners began the independent questioning, further examination by counsel was foreclosed. Entergy did not object to this rule prior to the hearing, nor did it object on the first day of the hearing when the Chairman asked if there were any procedural matters to be addressed. Thereafter, the Commission applied the rule over two days of testimony with no objection by any party and no requests for additional cross-examination. It was not until the third day of the hearing that Entergy asked to cross-examine a witness after the Commissioners had questioned him, and, upon being denied permission to do so, objected to the rule for the first time. It is well established that a party waives an argument by not objecting below at the first opportunity. See Swink v. Lasiter Constr., Inc., 94 Ark.App. 262, 229 S.W.3d 553 (2006).

In any event, we cannot say that the Commission abused its discretion in enforcing the rule, which is clearly designed to bring an end to witness examination in these lengthy cases. The Commission has wide latitude in conducting and expediting its hearings. See Continental Tel. Co., supra. To that end, it may prescribe rules of procedure and use its discretion to facilitate its efforts to ascertain the facts. See Ark.Code Ann. § 23-2-403 (Repl.2002). Further, as the Commission observed, it would be unfair if Entergy were allowed to pursue additional cross-examination when all other parties had refrained from doing so in reliance on the rule. Given the circumstances, we decline to reverse on this point.

Next, Entergy argues that the Commission violated due process by restricting the subject matter of post-hearing briefs to two contested issues, and the length of post-hearing briefs to thirty pages for the initial brief and fifteen pages for the response. Entergy has not demonstrated that the Commission's action denied it a full and fair hearing. See Ark. Elec. Energy Consumers v. Ark. Pub. Serv. Comm'n, 35 Ark.App. 47, 813 S.W.2d 263 (1991) (holding that the appellant, in attacking a procedure as a denial of due process, has the burden of proving its invalidity). The briefs were filed at the conclusion of an eight-day proceeding, during which the issues were well defined and the parties' positions were made exceedingly clear. There is no indication that the Commission, having viewed the extensive pre-filed testimony and heard the live testimony and cross-examination of the witnesses, was not fully aware of Entergy's arguments for a rate increase. Moreover, the Commission gave due consideration to Entergy's desire to file a more extensive brief but chose to limit any post-hearing presentations, based on constraints of time and administrative necessity. In all, the Commission was in the best position to judge what additional arguments and information, if any, it needed to render a decision. See Pub. Serv. Comm'n Prac. & Pro. R. 3.14 (requiring the Chairman to set a briefing schedule "upon finding that the filing of briefs . . . is appropriate").

As a final procedural argument, Entergy contends that the Commission erred in failing to consider additional, post-hearing testimony, which Entergy submitted along with its petition for rehearing. The Commission's Practice and Procedure Rule 3.11 provides that, upon agreement of the parties, the Chairman may authorize the filing of specific documentary evidence within a fixed time after the hearing. Rule 3.16(b) provides that, if a party applies for rehearing based in whole or in part on "additional evidence which was not part of the original record," the party shall attach the evidence or state the subject of any testimony. Neither of these rules required the Commission to accept additional, post-hearing evidence in this case. There has been no showing that the parties agreed to the filing of post-hearing evidence, as required by Rule 3.11. Further, the Commission determined that the material submitted by Entergy was not "additional evidence which was not part of the original record" but was "essentially little more than a rehash of the pre-filed evidentiary testimonies. . . ." The Commission also made the following finding:

Further, the Commission could easily conclude that the [additional evidence is] more akin to a supplemental post-hearing brief in contravention of [the Commission's order]. Further, if the Commission now were to rely on said testimonies in whole or in part without allowing the other parties the opportunity to file responsive testimony, those parties could certainly assert a violation of their due process rights.

Upon reviewing the subject testimony, we cannot say that the Commission erred in reaching the above conclusions. The additional testimony differs in no material respect from the witnesses' hearing testimony and consists chiefly of the witnesses' disagreement with the Commission's ruling and their belief in its potential adverse effects. This lends credence to the Commission's finding that the "additional evidence" is in reality an overly-lengthy brief in support of the petition for rehearing. We therefore affirm the Commission's ruling.

III. Costs Disallowed

One of the primary objectives in a rate case is to set rates so the utility will be able to meet its legitimate operating expenses. See Walnut Hill...

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