Goodman v. Public Service Commission

• Decision Date: 04 September 1973
• Docket Number: No. 6854.,6854.
• Citation: 309 A.2d 97
• Parties: Leonard S. GOODMAN, Petitioner, v. PUBLIC SERVICE COMMISSION of the District of Columbia, Respondent, Potomac Electric Power Company, Intervenor.
• Court: D.C. Court of Appeals

309 A.2d 97

Leonard S. GOODMAN, Petitioner, v. PUBLIC SERVICE COMMISSION of the District of Columbia, Respondent Potomac Electric Power Company, Intervenor.

No. 6854.

District of Columbia Court of Appeals.

Argued February 26, 1973.

Decided September 4, 1973.

COPYRIGHT MATERIAL OMITTED

Leonard S. Goodman pro se.

C. Belden White, II, Asst. Corp. Counsel, Washington, D.C., with whom C. Francis Murphy, Corp. Counsel, and Linus H. Deeny, Asst. Corp. Counsel, Washington, D.C., were on the brief, for respondent.

Cameron F. MacRae, Washington, D.C., with whom Stephen A. Trimble, Washington, D. C., Richard W. Emory, and George W. Warlick, Washington, D. C., were on the brief, for intervenor.

Before FICKLING, YEAGLEY and HARRIS, Associate Judges.

HARRIS, Associate Judge:

On July 28, 1972, the Public Service Commission of the District of Columbia issued an order granting Potomac Electric Power Company (Pepco) rate increases totaling $12,516,000 annually for its retail sales of electric energy within the District of Columbia. Petitioner, a residential customer of Pepco, sought reconsideration of that order. His petition was denied, following which he sought review in this court pursuant to D.C.Code 1972 Supp., § 43-705.¹ We affirm the actions of the Commission.

I

The procedural history of the case and petitioner's relationship to it should be described briefly. Pepco filed its rate increase application with the Commission on July 12, 1971. The application sought an increase of approximately $24.7 million in gross operating revenues annually, which theoretically would have resulted in an 8.5 percent rate of return. Public notice of the filing and content of the application was given on August 11, 1971, with all interested parties being afforded an opportunity to make representations concerning it by September 3, 1971. Numerous parties sought and were granted intervention; petitioner to that point was silent.

A two-phase proceeding was begun. Phase I dealt with Pepco's overall operating results, revenue requirements, and rate of return. A test year ended October 31, 1971, was utilized. Extensive hearings were conducted, briefs were filed, and oral argument was conducted. On May 9, 1972, the Commission issued its Proposed Findings, Opinion and Order (Order No. 5509). It contemplated gross revenue increases for Pepco of approximately $12.5 million annually, which would provide a 7.84 percent rate of return. The Commission directed the submission of appropriate revised rate schedules to achieve such a result, which were to be considered in Phase II of the proceeding.

Eight days later, petitioner was heard from for the first time. He filed a petition to intervene on May 17, 1972; it was denied as untimely. After the Commission's final Findings, Opinion and Order (Order No. 5521) was issued on July 28, 1972, petitioner sought reconsideration thereof. Notwithstanding the glaring tardiness of the expression of petitioner's views, their merits were considered carefully by the Commission. They were denied by Order No. 5530 on September 8, 1972. None of the parties who participated in the hearing sought either reconsideration by the Commission or appellate review of the agency's actions; petitioner stands alone.²

II

The scope of our review of actions of the Commission is delineated by D.C. Code 1967, § 43-706. Review is limited to questions of law; the Commission's findings of fact are to be deemed conclusive unless found to be unreasonable, arbitrary, or capricious. Essentially, petitioner presents to us the same challenges to the Commission's rate increase order which he raised unsuccessfully in his petition for reconsideration.³ We consider each in turn.

(i) Utilization of a test year provides an indispensable frame of reference for the submission and consideration of relevant data in a rate case. Any test year is inherently imperfect, and reasonable efforts must be made to normalize manifestly atypical data.

Petitioner's first argument is that the summer included in Pepco's test year was abnormally cool, resulting in lower revenues for the company due to reduced demand for energy for air conditioning. He contends that gross test year revenues accordingly should be normalized by the addition of $18 million (less the theoretical costs of producing such theoretical revenues) to reflect this circumstance.

There was no probative evidence as to what constitutes a "normal" Washington summer nor as to the extent to which the summer of 1971 deviated therefrom. No party to the proceeding urged any such adjustment of test year data, although the record reflects an awareness that the summer was not one of the city's worst. The Commission's unwillingness to accept petitioner's argument on this point, in light of the state of the record to which petitioner made no contribution, was not unreasonable, arbitrary, or capricious.

(ii) Pepco has a generating station on the Potomac River near Morgantown, Maryland. It is a comparatively low-cost producer of energy which has been involved in the sale of power by Pepco to other members of the Pennsylvania-New Jersey-Maryland Interconnection (PJM).⁴ Generator Unit No. 1 at Morgantown was out of service during a major portion of the test year.⁵ That unusually extended outage necessitated normalizing adjustments. The Commission's Staff sought to adjust test year data to put Pepco in the position in which it would have been if the outage had not occurred.

Additional data entered into the Commission's resolution of this problem. During another portion of the test year (June through October of 1971), Pepco sold energy from its Morgantown station directly to Baltimore Gas & Electric Company (BG&E). The Commission's Staff also sought to reduce certain Morgantown expense items to reflect the sales to BG&E. Pepco opposed the Staff's related positions, arguing in part that other unusual circumstance made a complete normalization of the PJM sales unwarranted and in part that the same capacity could not have been sold simultaneously to both PJM and BG&E. With expressed regret, the Commission accepted Pepco's argument that an adjustment for the BG&E sales must be accompanied by a reduction in the adjustment for the Unit No. 1 outage.

Petitioner now replows the ground thus covered by Staff in the proceeding below. There is evidence to support his argument; the Commission's Chief Accountant testified that Staff's requested adjustments were not duplicative. However, there was substantial evidence to the contrary which supports the Commission's conclusion.

This court has an obligation to analyze the record to determine the possible presence of arbitrary action. Arbitrary action, however, is action not based on facts or reason. Mississippi River Fuel Corp. v. Federal Power Commission, 82 U.S.App.D.C. 208, 163 F.2d 433 (1947). The burden upon petitioner is not merely to put forth an acceptable alternative but rather to demonstrate clearly and convincingly a fatal flaw in the action taken. See Capital Transit Company v. Public Utilities Commission, 93 U.S.App.D.C. 194, 213 F.2d 176 (1953), cert denied, 348 U.S. 816, 75 S.Ct. 25, 99 L.Ed. 643 (1954). Petitioner has not met that burden. He simply asserts a difference of opinion with the Commission. There has been no meaningful showing that the Commission was erroneous in its conclusion.

(iii) As would be expected, the record demonstrates that in future years Pepco will need significant additions to its plant to enable it to meet the needs of its customers. Petitioner argued to the Commission that the additional net operating revenues which could be expected to be generated by such future plant would obviate the need for a present rate increase. In advancing such views, petitioner goes well beyond the framework of the test year. The record contains no projected revenues or expenses for the operation of post-test year facilities, so no meaningful determination of projected incremental net operating revenues attributable thereto would be possible even if it were appropriate.

The argument thus advanced in this case is but a repetition of a similar argument which petitioner presented in challenging Pepco's 1970 rate increase. It was carefully considered by the Commission in both cases. The Commission's rejection of it certainly was not unreasonable, arbitrary, or capricious.

(iv) At any given time, a utility is almost certain to have a significant amount of money which has been expended on plant still under construction. Such funds are spent for the ultimate benefit of the utility's customers. In a rate case, some method must be utilized to handle such expenditures. There are two generally accepted alternatives. Either the interest on funds so committed may be capitalized, or the actual cost of construction work in progress may be included in the utility's rate base.

Pepco's cost of plant under construction for the test year was $29.9 million. Consistent with its prior policy, the Commission included this amount in the rate base. Petitioner argues that the Commission should have capitalized interest expense instead. We reiterate that it is not our responsibility to choose among acceptable alternatives, but rather to determine whether the technique utilized is just and reasonable. Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944). The Commission, like various other regulatory bodies, consistently has included construction work in progress within rate base in the past.⁶ In no sense could that exercise of informed judgment be considered...