Fitchburg Gas and Elec. Light Co. v. Department of Public Utilities

• Decision Date: 12 September 1985
• Citation: 483 N.E.2d 76,395 Mass. 836
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: FITCHBURG GAS AND ELECTRIC LIGHT COMPANY v. DEPARTMENT OF PUBLIC UTILITIES, et al. (and four companion cases 1 ).

Page 76

483 N.E.2d 76

395 Mass. 836

FITCHBURG GAS AND ELECTRIC LIGHT COMPANY

v.

DEPARTMENT OF PUBLIC UTILITIES, et al. (and four companion cases ¹).

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued May 9, 1985.

Sept. 12, 1985.

Nicholas J. Scobbo, Jr., Boston, for Mass. Mun. Wholesale Elec. co.

Paul K. Connolly, Jr., Boston, for Fitchburg Gas & Elec. Light Co.

Michael F. Donlan, Boston, (James M. Avery and Eric J. Krathwohl, Boston, with him), for Canal Elec. Co.

Thomas G. Robinson, Westboro (Frederic E. Greenman and John F. Sherman, III, Westboro, with him), for New England Power Co.

Thomas A. Barnico, Asst. Atty. Gen., for Dept. of Public Utilities.

Jeffrey M. Bernstein, Boston (Charles Harak, Boston, with him), for Coalition for Mun. Ratepayers' Rights, intervener.

Douglas I. Foy, Boston, for Conservation Law Foundation of New England, Inc., intervener.

David A. Tibbetts, Boston, for Executive Office of Energy Resources, intervener, submitted a brief.

David B. Broughel, Boston, C. Duane Blinn, Hartford, Conn., Allan B. Taylor, Boston, and Robert J. Yamin, Hartford, Conn., for New England Power Pool Executive Committee, amicus curiae, submitted a brief.

Before HENNESSEY, C.J., and LIACOS, ABRAMS, NOLAN and LYNCH, JJ.

HENNESSEY, Chief Justice.

We review, on reservation and report by a single justice of this court, consolidated appeals by Fitchburg Gas and Electric Light Company (Fitchburg), New England Power Company (New England), Canal Electric Company (Canal), and Massachusetts Municipal Wholesale Electric Company (MMWEC) from an order by the Department of Public Utilities (department). ² In that April 4, 1985, order (D.P.U. 84-152) the department announced it would deny the financing application of each investor-owned utility (Fitchburg, New England, and Canal) unless it received "adequate enforceable assurances and binding obligations" committing each investor-owned utility to three conditions (reproduced in the margin ³). Each investor-owned utility declined to provide the assurances, and appeals from the effective denial of its individual application for financing. The department, unconditionally and without reference to any "assurances," also denied MMWEC's financing request ⁴ and stated that it would "permit MMWEC to issue only such bonds as ... [it finds] are reasonably necessary to mitigate the adverse consequences of ... rate shock associated with its investment to date," but would not permit it "to issue bonds to pay for further construction costs" of the Seabrook Nuclear Project Unit I (Seabrook I). We affirm the department's decision and orders in so far as they concern the Seabrook I financing applications. We remand to the department for further consideration the applications of the investor-owned utilities for approval of non-Seabrook financing.

The three investor-owned utilities are private corporations which supply electric power. MMWEC is a public corporation formed under c. 775 of the Acts of 1975 to develop a bulk power supply program for Massachusetts municipal electric systems, with authority to acquire, construct, and finance ownership interests in electric generating units to serve the municipalities who are members. Neither the investor-owned utilities nor MMWEC must get permission of the department to invest in power sources, but all must get approval of the department for bond or stock issue. G.L. c. 164, § 14 (1984 ed.) (investor-owned utilities). St.1975, c. 775, § 17 (MMWEC). Each petitioner had at least one financing case pending before the department when, on July 13, 1984, they filed a joint petition requesting that the department conduct a single investigation of the cost and schedule for the completion of Seabrook I. The petitioners sought findings of fact on those issues and requested that the findings be incorporated into the pending individual applications by which each sought authorization and approval of stock and bond issuances related, at least in part, to Seabrook I construction costs. ⁵ In response, the department decided that it would investigate: "(1) the estimated cost of completing Seabrook I, including construction and financing costs; (2) the estimated completion date and commercial on-line date of Seabrook I; and (3) the estimated operating characteristics of Seabrook I."

The department's findings in this, the "generic case," include: that "serious questions remain" as to whether Seabrook I will be completed; "that the [petitioners'] failure to present a reasonable range of possible cost estimates supported by reviewable and more realistic construction schedules" was fatal; and that they had "failed to meet their burden of providing ... a credible analysis of the potential costs of the project." It also found that the issuances proposed in the individual financing cases could not be determined to be reasonably necessary based on an economic analysis of the project; that in the absence of assurances that the public interest would be protected it found that the requests could not be approved "consistent with the requirements of G.L. c. 164, § 14," and St.1975, c. 775; and that "the degree of risk associated with increased costs and potential future abandonment ... precludes a finding that the plant is reasonably necessary." However, the department also found that the statutory standard would permit approval of the financing applications of the three investor-owned companies without such an economic analysis if it were assured that the risks were fully disclosed to investors and were not being borne by the ratepayers. Hence, it announced the requirements set out in the margin (note 3). The department considered itself to be unable to similarly insulate MMWEC's ratepayers from the high level of risk associated with the project, ⁶ could not find its proposed bond issue to be reasonably necessary, and unconditionally denied MMWEC's financing application.

The investor-owned utilities and MMWEC argue that the department inappropriately exercised its statutory authority in denying the requests, deprived them of particular protections of G.L. c. 30A (1984 ed.), and violated certain constitutional rights. We now consider these challenges. ⁷

I. DEPARTMENT'S AUTHORITY.

We first examine the nature and scope of the department's authority. Gas and electric companies are permitted to issue "only such ... stock and bonds ... as the department may ... vote is reasonably necessary for the purpose for which such issue ... has been authorized." G.L. c. 164, § 14. In Fitchburg Gas and Elec. Light Co. v. Department of Pub. Utils., 394 Mass. 671, 678, 477 N.E.2d 372 (1985) (Fitchburg I ), we reiterated our determination that the statute's purposes include the vesting "in public officers [of] the right to determine the general question of the reasonable necessity of the issue"; and repeated our statement that "the department must inquire whether the declared purpose of the proposed issue is ... in the circumstances a reasonably necessary purpose.... '[R]easonably necessary' means reasonably necessary for the accomplishment of some purpose having to do with the obligations of the company to the public and its ability to carry out those obligations with the greatest possible efficiency...." Id., quoting Lowell Gas Light Co. v. Department of Pub. Utils., 319 Mass. 46, 52, 64 N.E.2d 640 (1946). Thus, the department's authority is not limited to "a perfunctory review" of the proposed financing. ⁸ Id.

The department's authority regarding MMWEC is expressed in substantially similar terms: "The corporation shall issue only such amount of bonds as the department may from time to time vote is reasonably necessary for the proposed purpose of such issue...." St.1975, c. 775, § 17. In addition, the opinions on which we relied in construing G.L. c. 164, § 14, in Fitchburg I, were issued long before the Legislature adopted the phrasing of § 17. See Lowell Gas Light Co. v. Department of Pub. Utils., 319 Mass. 46, 52, 64 N.E.2d 640 (1946); Fall River Gas Works v. Gas & Elec. Light Comm'rs, 214 Mass. 529, 538, 109 N.E. 475 (1913). Moreover, the language at issue in Lowell Gas, supra 319 Mass. at 52, 64 N.E.2d 640, and in Fitchburg I, supra 394 Mass. at 678, 477 N.E.2d 372, is identical, and that construed in the Fall River case, supra 214 Mass. at 532, 109 N.E. 475, contains language similar to that in St.1975, c. 775, § 17. Therefore, we conclude that in selecting the phrasing for § 17 the Legislature was aware of those earlier interpretations and intended that § 17 be similarly construed. There is no indication that the Legislature intended that a less demanding standard be applied to an application from a public instrumentality than from a private corporation. Hence, we conclude that with respect to the application of MMWEC, as well as on those of the investor-owned utilities, the department's authority was that defined in Fitchburg I.

With the Fitchburg I decision as background, the investor-owned utilities and MMWEC turn to arguing that the department is obligated to consider whether the risks regarding noncompletion and further increased costs are reasonably necessary to meeting their obligation to serve the public interest. They contend that under Fitchburg I the department is required to consider all factors, especially those of power need and alternative sources of supply, that bear on the public interest.

In affirming substantial segments of the department's order we do not diminish the significance of our statements defining reasonably necessary. Although in Fitchburg I we referred to the obligations which companies have to the public and to their ability to meet them efficiently, we also restated that the burden of proving reasonable necessity is on the companies, noted that the department has a range of discretion, and repeated our statement that the determination whether an issue is reasonably necessary is a question for the department, not...