Frost-Benco Elec. Ass'n v. Minnesota Public Utilities Com'n, FROST-BENCO

CourtSupreme Court of Minnesota (US)
Writing for the CourtKELLEY
Citation358 N.W.2d 639
PartiesELECTRIC ASSOCIATION, Respondent, v. MINNESOTA PUBLIC UTILITIES COMMISSION, Petitioner, Minnesota Department of Public Service, intervenor, Petitioner.
Decision Date30 November 1984
Docket NumberFROST-BENCO,No. CX-83-1591

Page 639

358 N.W.2d 639
FROST-BENCO ELECTRIC ASSOCIATION, Respondent,
v.
MINNESOTA PUBLIC UTILITIES COMMISSION, Petitioner,
Minnesota Department of Public Service, intervenor,
Petitioner.
No. CX-83-1591.
Supreme Court of Minnesota.
Nov. 30, 1984.

Page 640

Syllabus by the Court

The Minnesota Public Utilities Commission lacks jurisdiction and authority to retrospectively regulate rates an unregulated cooperative electric utility charged its customers during a period it was not subject to Minnesota Public Utilities Commission regulations under Minn.Stat. 216B, et seq.

Hubert H. Humphrey, III, Atty. Gen., Craig R. Anderson, Asst. Atty. Gen., St. Paul, for Dept. of Public Service.

Karl W. Sonneman, Asst. Atty. Gen., St. Paul, for Minn. Public Utilities Com'n.

John C. Hottinger, M. John Gustavson, Mankato, for Frost-Benco Elec. Ass'n.

Harold LeVander, Jr., So. St. Paul, for amicus curiae Rural Elec. Ass'n.

Clayton L. LeFevere, Minneapolis, for amicus curiae Co-op. Power Ass'n.

Heard, considered and decided by the court en banc.

KELLEY, Justice.

Appellant Frost-Benco Electric Association (Frost-Benco), an electric cooperative, made application to the Minnesota Public Utilities Commission (MPUC) for approval of increased electrical rates. Following evidentiary hearings a hearing examiner issued his report. 1 The MPUC subsequently issued its order which required, inter alia, that Frost-Benco refund to its membership the difference between purchased power revenues collected by Frost-Benco during the test year (July 1, 1980 through June 30, 1981), at which time Frost-Benco was not subject to MPUC regulation, and the actual purchased power expenses paid by Frost-Benco to its power suppliers during the same period. On appeal to the Blue Earth County District Court, the MPUC's order was affirmed. The basic issue on this appeal is whether the MPUC has jurisdiction to regulate a utility by ordering refunds of amounts collected by a utility during the period of non-regulation. We hold that it does not and reverse.

Frost-Benco is a cooperative electric association organized under the provisions of Minn.Stat. ch. 308 (1982). The cooperative provides retail electrical service to approximately 8,000 customers in south-central Minnesota. The company was formed on January 1, 1980 through a consolidation of the Blue Earth-Nicollet Cooperative Electric Association and the Faribault County Electric Association.

Frost-Benco generates no electricity of its own. Instead, it purchases all of its energy requirements at wholesale from Cooperative Power Association, a generation and transmission cooperative owned collectively by 18 cooperative associations including Frost-Benco. Thus, Frost-Benco operates solely to distribute electricity.

Page 641

As a cooperative, Frost-Benco does not engage in the traditional method of raising capital through public offerings of common stock. Rather, Frost-Benco raises a small portion of its equity capital through a nominal, one-time membership charge to each member-ratepayer. The majority of Frost-Benco's equity capital is raised through the retention of monies paid for electricity by members in excess of the cost of providing such electricity. These excess "margins" are rotated, or returned to the members in a fixed cycle of 15 years.

Like most retail cooperatives, Frost-Benco accounts separately for the cost of energy it must purchase. These wholesale power costs are further broken down into a base component and a fluctuating adjustment known as a power cost adjustment (PCA). The latter adjustment, which is directly involved in this case, represents the degree to which energy costs have changed since the base component was originally set. During the evidentiary hearing in this case a witness described the purpose of the PCA as follows:

[T]he function of the PCA is to match the cost of purchased power with the revenue from consumers so the changes in the cost of purchased power are adequately and promptly reflected in the rates. The function of the PCA is not to adjust margin based on previous losses or even target margins.

The original intention for use of a PCA was to allow utilities to pass on to consumers additional power costs without having to file a general rate case.

When Frost-Benco was formed, it prepared rate schedules for electric sales including base rates designed to recover the current cost of purchased power. In spite of a wholesale rate increase from Cooperative Power in January 1980, Frost-Benco did not add a PCA to the base rates just established. Thus, Frost-Benco absorbed the January increase as well as a second increase in May 1980. Frost-Benco did not add a PCA to its base rates until July 1, 1980. On that date, Frost-Benco implemented an annual PCA increase of 1.47 cents per kwh. Frost-Benco determined this figure would recoup the costs absorbed and would recover the cost of power for the next 6 months. Accordingly, Frost-Benco designed the new PCA with the aim of breaking even by the end of the year.

Figured into the projected costs was an anticipated wholesale cost increase due to Cooperative Power's contemplated start-up of a new power plant known as Coal Creek Unit No. 2. Notices of the new PCA stated that, "[t]he reason for this increase is that we must begin paying for Unit No. 2 of the Coal Creek generating station." Coal Creek Unit No. 2, however, did not begin generating electricity until July 1981. Despite this fact, Frost-Benco's PCA still collected $50,000 less than the actual cost of purchased power for the calendar year 1980.

Frost-Benco continued, in 1981, to charge its members the 1.47 PCA, even though the company recognized that that figure was too high. Frost-Benco's management decided that the current figure was justified because Cooperative Power was due to change its wholesale rates in May 1981. Moreover, neither Frost-Benco nor its members desired electric bills that fluctuated widely from month to month.

The PCA remained in force until June 1, 1981. On June 1, 1981, Frost-Benco became subject to MPUC regulation following an election pursuant to Minn.Stat. Sec. 216B.02, subd. 4 (1982). 2 Upon becoming regulated, Frost-Benco reduced its PCA to 0.5 cents per kwh in conformance with the 2-month moving average formula required by the MPUC's rules. As a result of the earlier PCA miscalculation, however, Frost-Benco's revenue collections for...

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532 practice notes
  • Sylvester Bros. Development Co. v. Great Cent. Ins. Co., No. C0-91-1080
    • United States
    • Court of Appeals of Minnesota
    • January 28, 1992
    ...party, and do not defer to a trial court's application of the law. See Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). The interpretation and construction of an insurance policy is a matter of law that the trial court could properly determine on sum......
  • Northern States Power Co. v. City of Oakdale, No. C3-98-867
    • United States
    • Court of Appeals of Minnesota
    • February 2, 1999
    ...No deference need be given to the district court's application of the law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). Statutory interpretation presents a question of law that an appellate court reviews de novo. Hibbing Educ. Ass'n v. Public Emp......
  • State v. Crims, Nos. C6-95-41
    • United States
    • Court of Appeals of Minnesota
    • November 28, 1995
    ...of law), review denied (Minn. May 11, 1990). We review questions of law de novo. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). In this case, we are asked to decide whether the Rape Shield Act infringes upon Crims's fundamental In response to a jur......
  • U.S. Bank N. A. v. Cold Spring Granite Co., No. A10–0252.
    • United States
    • Supreme Court of Minnesota (US)
    • September 7, 2011
    ...96, 101 (Minn.1999). We do not defer to the district court on questions of law. Frost–Benco Electric Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984).I. The first issue before us is the Moores' challenge to the Board's determination of the value of the Moores' shares. The ......
  • Request a trial to view additional results
532 cases
  • Sylvester Bros. Development Co. v. Great Cent. Ins. Co., No. C0-91-1080
    • United States
    • Court of Appeals of Minnesota
    • January 28, 1992
    ...party, and do not defer to a trial court's application of the law. See Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). The interpretation and construction of an insurance policy is a matter of law that the trial court could properly determine on sum......
  • Northern States Power Co. v. City of Oakdale, No. C3-98-867
    • United States
    • Court of Appeals of Minnesota
    • February 2, 1999
    ...No deference need be given to the district court's application of the law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). Statutory interpretation presents a question of law that an appellate court reviews de novo. Hibbing Educ. Ass'n v. Public Emp......
  • State v. Crims, Nos. C6-95-41
    • United States
    • Court of Appeals of Minnesota
    • November 28, 1995
    ...of law), review denied (Minn. May 11, 1990). We review questions of law de novo. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984). In this case, we are asked to decide whether the Rape Shield Act infringes upon Crims's fundamental In response to a jur......
  • U.S. Bank N. A. v. Cold Spring Granite Co., No. A10–0252.
    • United States
    • Supreme Court of Minnesota (US)
    • September 7, 2011
    ...96, 101 (Minn.1999). We do not defer to the district court on questions of law. Frost–Benco Electric Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984).I. The first issue before us is the Moores' challenge to the Board's determination of the value of the Moores' shares. The ......
  • Request a trial to view additional results

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