Idaho State Homebuilders v. Washington Water Power

• Decision Date: 31 October 1984
• Docket Number: No. 13622,13622
• Citation: 107 Idaho 415,690 P.2d 350
• Parties: IDAHO STATE HOMEBUILDERS, Appellant, v. WASHINGTON WATER POWER, and Idaho Public Utilities Commission, Respondents.
• Court: Idaho Supreme Court

Page 350

690 P.2d 350

107 Idaho 415

IDAHO STATE HOMEBUILDERS, Appellant, v. WASHINGTON WATER POWER, and Idaho Public Utilities Commission, Respondents.

No. 13622.

Supreme Court of Idaho.

Oct. 31, 1984.

Richard H. Greener, Fredric V. Shoemaker, of Clemons, Cosho & Humphrey, Boise, for appellant.

Charles W. Hosack of Smith, Hosack & Potter, Coeur d'Alene, for respondent Washington Water Power Co.

David Leroy, Atty. Gen., Lynn E. Thomas, Sol. Gen., and Michael S. Gilmore, Deputy Atty. Gen., Boise, for respondent Idaho Public Utilities Com'n.

Tom Ambrose and Morgan W. Richards, Jr., of Moffatt, Thomas, Barrett & Blanton, Chartered, Boise, for amicus curiae Intermountain Gas Co.

Racine, Huntley, Olson, Nye & Cooper, Pocatello, for amicus curiae Idaho Irr. Pumpers Ass'n, Inc.

Robert M. Tyler, Jr., of Elam, Burke, Evans, Boyd & Koontz, Boise, for amicus curiae Idaho Power.

Michael F. Peacock of Brown, Peacock, Keene & Boyd, Kellogg, for Bunker Hill.

SHEPARD, Justice.

This is an appeal from an order of the Public Utilities Commission requiring the imposition of a non-recurring charge of $50 per kilowatt on the installation of or conversion to electric space heating after March 1, 1980. The charge was only imposed upon those customers who had the option of choosing natural gas for space heating purposes. There are no material facts in dispute and the sole issue is whether the Commission's imposition of said contribution charge was an act in excess of its authority. We earlier held that the Commission did exceed its authority, and we therefore set aside the order. See Idaho State Home Builders v. Washington Water Power, 1982 Opinion No. 21 (April 15, 1982).

The Commission filed a petition for rehearing, which was granted, and upon that rehearing Idaho Power Company, Idaho Irrigation Pumpers and Intermountain Gas Company were Amicus Curiae. The previous Opinion of the Court dated April 15, 1982 is withdrawn and this opinion is substituted therefor.

Washington Water Power is a public utility operating in parts of eastern Washington and northern Idaho and is primarily engaged in the generation, transmission and distribution of electricity and the distribution of natural gas. In March of 1979, Water Power filed simultaneous applications, seeking rate increases in electrical and gas service to its northern Idaho customers. Although those applications were consolidated, this appeal relates only to the electrical service application.

After hearings on the applications, the Commission found that "[t]he combined effect of Washington Water Power's low electric rates and the rapid growth in customer usage has become Water Power's most critical problem." That conclusion, in turn, was based in large part on undisputed facts, thosebeing that space heating with electricity is the largest single end use of energy in a residence or small commercial business; that the utility thus has a problem of concentrating load requirements in the four to six coldest months of the year, and because electric heat systems are weather sensitive, the utility cannot spread the load created by those systems; that the coldest weather period coincides with Water Power's peak demand, and consequently, electric heating systems contribute more than any other use of electricity to Water Power's need for new generating facilities; that approximately 93% of Washington Water Power's new residential customers choose electricity for space heating; that between 1969 and 1978, Water Power experienced a 35.3% increase in kilowatt hours of consumption per residential customer, and a 85.2% increase in total kilowatt hours consumed by the residential class; that such growth in demand for electricity occurred notwithstanding Water Power's termination in 1972, of advertising practices aimed at promoting the use of electricity for space heating; that Water Power experienced a similar, though less dramatic, increase in consumption among its commercial customers; that Water Power estimated the demand for its electricity service would increase at an annual rate of 4% during the next few years; that part of the large demand for electricity results from Water Power's rates being the lowest in the nation for an investor-owned utility; that Water Power's rates are approximately one-fifth those charged by utilities in New York City; that the price of natural gas historically has been higher than the price of electricity, so that Water Power's customers are discouraged from choosing natural gas as an alternative to electric space heating; that Water Power projected no growth in demand for its natural gas service in 1979; that the ability of Water Power to provide electricity has been jeopardized, particularly in the winter months, when its load requirements peak; that Water Power will be unable to meet demands unless new generating facilities are completed and placed in service as scheduled; and that, as a further complication, the generating units planned by Water Power have been or currently are delayed in their construction.

Water Power's low electrical rates are the result of a historical abundance of cheap hydroelectric power, most of which is generated by federally financed dams. The rates which an electric utility is allowed to charge are based largely upon the cost of providing service generation, transmission, and distribution plants valued at their historic costs. The imbedded cost of Water Power's generating facilities, i.e., the capital costs upon which its current electrical rates are based, is approximately $220 per kilowatt. By contrast, marginal cost of its new thermal generating facilities is approximately $800 per kilowatt, and estimates for future generating facilities range from $1500 to $2000 per kilowatt. On the other hand, imported and domestic prices for alternative energy sources, such as oil and natural gas, are not tied to the imbedded cost of service, or to the historic imbedded cost of fuel production, but are priced at or near their marginal costs.

As a means of moderating the demand for electricity during the winter months, Water Power proposed the imposition of seasonal rates for residential customers, i.e., a lower rate for the six summer months, and a higher rate for the six winter months. Thus, Water Power sought to reflect in its rate structure the cost differences that exist in supplying electricity in capacity during seasonal peak periods as compared to non-peak periods. Through that proposal for increased pricing, Water Power also sought to advise its customers to minimize their usage during the winter peak period. That proposal was rejected by the Commission and the Commission required Water Power to impose upon all of its customers, whether residential, commercial or industrial, who installed or converted to electric space heating, the contribution charge which is the subject of this appeal.

The Commission found that the known regional natural gas reserves are projected to be adequate for the balance of this century, while regionally, electricity is becoming an increasingly scarce form of energy. The Commission further found that the use of natural gas is purchasable as a commodity and does not increase incrementally the cost of all other electrical power through additional loads on the entire electrical system. In contrast, the construction and firing of new electrical generating capacity is subject to escalating capital costs and time lags. The Commission reasoned that Washington Water Power's low electrical rates were misleading and had caused, and would continue to cause, Water Power's customers to make their space heating choices on the basis of very short term considerations. The Commission determined that it was necessary to send to Water Power's customers a price "signal" which would more accurately reflect the cost and availability of electricity.

The Commission indicated that it doubted that rate design changes as such would sufficiently deter the installation of new electric space heating, and thus the Commission required Water Power to impose the nonrecurring charge of $50 per installed kilowatt of capacity on all customers who installed electric space heating, or converted to electric space heating following March 1, 1980. The Commission further ordered that those contribution charges be credited to a specific account and used by Water Power to offset the cost of its construction work in progress for new generating facilities.

Thereafter, the Commission granted Water Power's request for additional hearings on the space heating contribution charge and a suspension of the effective date. Appellant, a non-profit trade association comprised of homebuilders and allied industries, was granted leave to intervene. Additional hearings were conducted and indicated that residential electric heating furnaces range in capacity from 20 to 40 kilowatts and thus the contribution charge for a typical residence would range from $1000 to $2000. Those hearings also indicated that the charge would not effectively discourage customer dependence upon electricity for space heating purposes in areas where natural gas was not available. Hence, the Commission altered its prior order by excepting from the contribution charge, those customers who did not have access to natural gas for space heating purposes. The charge was made effective March 1, 1980.

On appeal, appellant-intervenor asserts that the contribution charge must be struck down because the Commission acted in excess of its statutory authority in imposing a charge that unlawfully discriminates as between geographically adjacent communities and as between customers who utilized electricity for space heating prior to March 1, 1980, as contrasted with customers who sought to use electricity for space heating following March 1, 1980. We do not find it necessary to address the issue of geographic discrimination since we hold that the contribution charge unlawfully...