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

• Citation: 394 Mass. 671,477 N.E.2d 372
• Parties: FITCHBURG GAS AND ELECTRIC LIGHT COMPANY v. DEPARTMENT OF PUBLIC UTILITIES.
• Decision Date: 03 May 1985
• Court: United States State Supreme Judicial Court of Massachusetts

Page 372

477 N.E.2d 372

394 Mass. 671

FITCHBURG GAS AND ELECTRIC LIGHT COMPANY v. DEPARTMENT OF PUBLIC UTILITIES.

Supreme Judicial Court of Massachusetts Suffolk.

Argued March 6, 1985.

Decided May 3, 1985.

Paul K. Connolly, Jr., Boston (Adrienne Markham and Elias G. Farrah, Boston, with him), for plaintiff.

Thomas A. Barnico, Asst. Atty. Gen., for defendant.

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

ABRAMS, Justice.

The Fitchburg Gas and Electric Company (Fitchburg or company) asserts that the Department of Public Utilities (DPU or department) has improperly denied the company's requests for long term financing pending the department's completion of its investigation, pursuant to G.L. c. 164, § 14, ¹ of Fitchburg's role as a joint owner in the Seabrook Nuclear Project, Unit I (Seabrook I). The company seeks an order requiring immediate approval of its proposed interim financing. We conclude that the decision of the department to deny financing pending the outcome of the department's "generic" proceeding should be affirmed.

We summarize the facts. Seabrook I is a 1,150 megawatt power plant under construction by Public Service Company of New Hampshire in Seabrook, New Hampshire. Fitchburg is a retail electric company serving approximately 23,000 customers in the city of Fitchburg and surrounding communities, and owning 0.86519 per cent of Seabrook I. Fitchburg did not seek, nor was it required to seek, department approval to become a joint owner in the Seabrook project.

On February 21, 1984, Fitchburg filed a petition with the DPU pursuant to G.L. c. 164, § 14, for the approval of the issue of up to $5 million of preferred stock and of up to $13 million of long term notes. The Attorney General intervened under G.L. c. 12, § 11E. The company filed its testimony in support of the petition on March 12, 1984. Discovery proceeded through April, and the DPU held hearings on May 16, 18, 22, 25 and 30. On May 30, 1984, Fitchburg obtained a six-week suspension of hearings on its financing proposal to flesh out the record "in order for the company, the intervenor, the Attorney General, and the Department to better evaluate ... the prime concern of the Department, and that is the viability of the Seabrook project."

On July 9, 1984, Fitchburg moved to recommence hearings and for expedited approval of its petition, subject to the condition that proceeds from the proposed financings would be used only to repay short-term debt outstanding and pre-Newbrook ² commitments. The department ordered the recommencement of hearings, but denied the motion for immediate approval of financing. On July 13, 1984, Fitchburg, together with the Massachusetts Municipal Wholesale Electric Company, Canal Electric Company, and New England Power Company jointly requested that the department initiate a generic proceeding to examine the cost and schedule of Seabrook I. The department approved the companies' petition on August 7, 1984, and established a new docket to investigate the Seabrook I project. The findings from the generic proceeding were to be incorporated into the pending and prospective financing proceedings of the petitioning companies, including Fitchburg.

On August 21, 1984, Fitchburg requested approval to issue only the $5 million of preferred stock, suggesting that approval of the issuance of $13 million of long term notes could be deferred pending a decision in the Seabrook generic proceeding. On October 11, 1984, the president of Fitchburg wrote a letter to the chairman of the DPU, stressing the seriousness of the company's cash situation. In response, the department scheduled a hearing on October 17, 1984.

On October 26, 1984, the department denied the company's motion for immediate approval of the $5 million issue of preferred stock. The department found that "Fitchburg [had] not demonstrated that a financial emergency exist[ed], or that such an emergency, if it did exist, would justify a departure from the Department's previously established standards in this area." With respect to the alleged financial danger, the department found that, on the basis of "pessimistic" assumptions, the company projected cash requirements which would "exceed its present short-term debt levels only slightly and for a very short period." That forecast, moreover, assumed "no increase in the Company's present level of short-term credit lines, even though the Company has pending requests with two banks for approximately $5,000,000 of additional short-term credit."

The DPU's order cited the department's "clear obligation under G.L. c. 164, § 14, to make a determination as to the reasonableness both of the Seabrook construction program and the Company's continued participation in that project" before approving any "financings which will be used to support it." Fitchburg, the department found, was unable to ensure segregation of funds because of its corporate structure. Thus, "[o]nly if the Company ceased making [Seabrook-related] payments could the Department be assured that the proceeds of any financing which it might authorize would not be used for a purpose, the reasonableness of which is a matter of pending litigation before the Department."

Although the DPU issued an opinion and findings in conjunction with its October 26, 1984, order, the company took no immediate appeal. On November 7, 1984, the company moved for reconsideration of the DPU's order of October 26. Fitchburg offered to place the $5 million preferred stock proceeds in escrow, so that they could not be used to finance the Seabrook project. The DPU rejected Fitchburg's proposal and denied the motion, stating that "[w]hat is critical is that whatever financial benefit that will accrue to the Company because of the presence of the escrow account could, in part, be used to support the Seabrook project as long as the Company continues to make such payments."

In compliance with the department's order, the company submitted further testimony regarding Seabrook I. On January 18, 1985, the Attorney General moved to extend the schedule of the generic proceeding. Fitchburg opposed the motion and reinstituted its request for expedited approval of financing. On January 25, 1985, the department approved a delay in the procedural schedule without mention of Fitchburg's financing request. During an evidentiary hearing on January 31, 1985, the hearing examiner informed the parties that the company's motion for immediate approval of financing had been implicitly denied in the department's January 25, 1985, scheduling order.

The company then appealed to a single justice of this court under G.L. c. 25, § 5, claiming that the DPU's orders had placed it in a financial crisis. The company introduced an affidavit showing that its level of short term debt had exceeded $17 million by the end of 1984, and thus lay perilously close to the limit the company asserts the banks had imposed; that the company had omitted a common stock dividend for the first quarter of 1985; and that the market value of its common stock had dropped from "nearly $18 per share on October 17, 1984 to $9.375 per share in February, 1985, as compared to a book value per share of $21.60." The single justice, after hearing, reserved and reported the appeal to the full court without decision, at the parties' request.

On March 7, 1985, we issued an order stating that the denial by the DPU on January 31, 1985, of the company's application for approval of an issue of preferred stock was "a final order under G.L. c. 25, § 5." ³ The DPU was to "submit in writing to this Court by March 15, 1985: (1) a statement of the reasons for its denial on January 31, 1985, of the plaintiff's application for approval to issue up to $5,000,000 of preferred stock, see G.L. c. 164, § 14; and (2) an explanation of how the DPU's decision in the generic proceeding regarding the Seabrook project might relieve the plaintiff of its contractual obligations with respect to the Seabrook project." In its response, the department stated that "Fitchburg's motion of January 25, 1985, was denied because the Company failed to demonstrate that it is facing a financial emergency and that approval of its financing request is warranted before the Department finds, in accordance with G.L. c. 164, § 14, that ... continued participation in the Seabrook project is at this time and under current circumstances reasonably necessary." The department specifically found that Fitchburg's cash flow situation had improved since the DPU had last rejected its claim of financial emergency on October 26, 1984. By eliminating a common stock dividend, the company had preserved $460,000 with which to meet short term debt. The company had further benefited from the department's grant of early rate relief: On November 29, 1984, the department approved a $3 million rate increase for Fitchburg, effective December 1, 1984. Fitchburg Gas and Elec. Light Co., D.P.U. 84-185 (November 29, 1984). In short, the DPU found that "the Company's cash flow calculations demonstrate that Fitchburg's claims of impending disaster because of the lack of credit have no basis in fact."

On appeal, Fitchburg claims error only in the DPU's decisions, orders, and rulings of October 26, 1984, November 9, 1984, January 25, 1985, and January 31, 1985, denying the company authority to issue long term financing. No issue regarding the propriety of the generic proceeding is before us. ⁴ The threshold question is whether we have jurisdiction over the claims of Fitchburg presented in the reservation and report. We conclude that we have such jurisdiction and that its exercise is appropriate in the instant circumstances.

General Laws c. 25, § 5, as amended through St.1977, c. 621, provides in pertinent part that "[a]n appeal as to matters of law from any final decision, order or ruling of the commission may be taken to the supreme judicial court by an aggrieved party in interest by...