General Motors Corp. v. Public Service Com'n No. 2

• Citation: 175 Mich.App. 584,438 N.W.2d 616
• Decision Date: 28 April 1989
• Docket Number: Docket Nos. 99752,99753
• Parties: GENERAL MOTORS CORPORATION and Attorney General, Plaintiffs-Appellants, v. PUBLIC SERVICE COMMISSION # 2 and Consumers Power Company, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 616

438 N.W.2d 616

175 Mich.App. 584

GENERAL MOTORS CORPORATION and Attorney General, Plaintiffs-Appellants, v. PUBLIC SERVICE COMMISSION # 2 and Consumers Power Company Defendants-Appellees.

Docket Nos. 99752, 99753.

Court of Appeals of Michigan.

Submitted June 7, 1988.

Decided Sept. 21, 1988.

Released for Publication April 28, 1989.

Hill, Lewis, Adams, Goodrich & Tait by Roderick S. Coy and Timothy P. Collins, Lansing, for Gen. Motors Corp. in no. 99752.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen. and Hugh B. Anderson, Don L. Keskey, Henry J. Boynton, Elizabeth R. Schwartz, and James A. Ault, Asst. Attys. Gen., for Public Service Com n and Atty. Gen. in nos. 99752, 99753.

David A. Mikelonis, and Loomis, Ewert, Ederer, Parsley, Davis & Gotting, Jackson by George W. Loomis, Michael G. Oliva, and Ronald W. Bloomberg, Lansing, for Consumers Power Co. in nos. 99752, 99753.

Before DANHOF, C.J., and SAWYER and FREEMAN, ^* JJ.

PER CURIAM.

Plaintiffs, General Motors Corporation and the Attorney General, appeal as of right from a March 17, 1987, order of Ingham Circuit Judge Michael G. Harrison. That order affirmed defendant Public Service Commission's October 2, 1979, order in case No. U-5732. The PSC's order reduced defendant Consumers Power Company's gas rates to reflect the closing of Consumers' synthetic natural gas plant in Marysville. We affirm.

Consumers provides natural gas service to customers in Michigan. Consumers' Marysville plant produced synthetic natural gas from feedstocks (light hydrocarbon liquids). See Consumers Power Co. v. Federal Energy Administration, 413 F.Supp. 1007, 1015 (E.D.Mich.1976), modified 413 F.Supp. 1024 (E.D.Mich.1976). Consumers built the plant in the early 1970s when natural gas was scarce and deliveries of it were unpredictable. The plant was controversial because the synthetic natural gas which it produced was more expensive than gas which was obtained from other sources.

On March 13, 1978, Consumers applied for a gas rate increase. On July 10, 1978, the PSC issued an order granting partial and immediate rate relief. That order authorized Consumers to increase its rates by $19,885,000 annually and required Consumers to file a bond to secure refunds to customers in the event that the rate increase exceeded Consumers' revenue deficiency.

On June 27, 1979, the PSC issued an order which concluded that Consumers had a $29,162,000 revenue deficiency and granted Consumers a corresponding annual rate increase. On September 5, 1979, Consumers notified the PSC that it was mothballing the Marysville plant. The next day, the PSC reopened the rate-making proceedings to determine the effect of the plant closing on Consumers' rates. On September 7, 1979, Ingham Circuit Judge James R. Giddings issued an order which prevented Consumers from charging its customers for the Marysville plant's operating and maintenance costs. On October 2, 1979, the PSC ordered an immediate rate reduction of $23,914,000 per year. This amount included the $11,244,000 rate reduction ordered by Judge Giddings. The PSC's October 2, 1979, order adjusted the PSC's June 27, 1979, order to reflect the effect mothballing the Marysville plant had on Consumer's rates by reducing the rate increase from $29,162,000 to $5,248,000. On March 17, 1987, the lower court issued an opinion and order affirming the PSC's October 2, 1979, order.

General Motors' first claim is that the lower court erred in affirming the PSC's October 2, 1979, order because the PSC issued that order without giving General Motors notice and an opportunity to be heard. This claim is meritless. The PSC may reduce rates without any notice or hearing. M.C.L. Sec. 460.6a; M.S.A. Sec. 22.13(6a).

General Motors' second claim is that the lower court erred in affirming the PSC's October 2, 1979, order because that order discriminated against industrial and commercial customers. The order reduced rates for all customer classes. General Motors argues that only commercial and industrial customers' rates should have been reduced because they paid most of the Marysville costs.

The PSC is given broad discretionary power to set just and reasonable rates for privately owned public utilities. It is specifically vested with authority to regulate the rates of gas utilities. Attorney General v. PSC, 118 Mich.App. 311, 315-316, 324 N.W.2d 628 (1982), lv. den. 417 Mich. 1003 (1983). All rates fixed by the commission are deemed prima facie lawful and reasonable. M.C.L. Sec. 462.25; M.S.A. Sec. 22.44; Attorney General v. PSC, # 1, 133 Mich.App . 719, 725, 349 N.W.2d 539 (1984), lv. den. 422 Mich. 910 (1985).

The party attacking a PSC order has the burden of showing by clear and satisfactory evidence that the order complained of is unlawful or unreasonable. M.C.L. 462.26; M.S.A. Sec. 22.45; Attorney General v. PSC, # 1, supra, at p. 725, 349 N.W.2d 539; The Detroit Edison Co. v. PSC, 127 Mich.App. 499, 507, 342 N.W.2d 273 (1983), lv. den. 419 Mich. 867 (1984). The standard of judicial review of a PSC decision is whether the decision is lawful and supported by competent, material, and substantial evidence on the whole record. Const 1963, art. 6, Sec. 28. Building Owners & Managers Ass'n of Metropolitan Detroit v. PSC, 131 Mich.App. 504, 516, 346 N.W.2d 581 (1984), aff'd 424 Mich. 494, 383 N.W.2d 72 (1986). The reviewing court is to give due deference to the PSC's administrative expertise and is not to substitute its judgment for that of the commission. Id., at p. 517, 346 N.W.2d 581.

" 'On matters involving the exercise of good common sense and judgment only, the determination of the commission must be held to be final unless such determination in its application results in the establishment by "clear and convincing" proof of a rate so low as to be confiscatory or so high as to be oppressive. What return a public utility shall be entitled to earn upon its invested capital, and what items shall be considered as properly going to make up the sum total of that invested capital, are questions of fact for the determination of the commission, and their conclusions thereon, upon which the rate is based, are unassailable unless, as a necessary result, it can be affirmatively asserted that the resultant rate is unreasonable and unlawful.

" 'Between the point where a rate may be said to be so low as to be confiscatory and the point where it must be said to be so high as to be oppressive upon the public, there is a "twilight zone" within which the judgment of the commission may operate without judicial interference. Assume that the commission, in determining the amount of the capital invested, allows as an element of the sum an amount which the court, if charged with the initial duty of determination, might find to be excessive or inadequate; or, assume that the...