In Re Kent County Water Authority Change Rate Schedules., 2009-41-M.P.

Citation996 A.2d 123
Decision Date17 June 2010
Docket NumberNo. 2009-41-M.P.,2009-41-M.P.
PartiesIn re KENT COUNTY WATER AUTHORITY CHANGE RATE SCHEDULES.
CourtUnited States State Supreme Court of Rhode Island

COPYRIGHT MATERIAL OMITTED

Joseph J. McGair, Esq., Warwick, for Kent County Water Authority.

Leo J. Wold, Department of Attorney General, for The Division of Public Utilities and Carriers.

Peter D. Ruggiero, Esq., for Intervenor City of Warwick.

Present: SUTTELL, C.J., GOLDBERG, and ROBINSON, JJ.

OPINION

Justice GOLDBERG, for the Court.

This case came before the Supreme Court on March 10, 2010, as a statutory petition for certiorari filed by the petitioner, the Kent County Water Authority (KCWA or petitioner), pursuant to G.L.1956 § 39-5-1. 1 The petitioner is seeking review of a decision by the Rhode Island Public Utilities Commission (PUC) denying a rate increase to KCWA for several discrete expenses: a salary increase that was less than initially requested, full funding for its infrastructure-replacement program (IFR), and the PUC's determination that KCWA employees should pay a portion of their health-insurance expenses. The City of Warwick (city) intervened before the PUC and is a party to this appeal. The petitioner seeks review of the report and order that the PUC issued in docket No. 3942. After careful review of the record in this case, we affirm.

Regulatory Structure

We begin by noting the distinction between the Division of Public Utilities and Carriers (division) and the PUC. The division is legally and functionally separate from the PUC. As set forth in G.L.1956 § 39-1-3, the General Assembly established the PUC and the division, designating the PUC as a quasi-judicial tribunal and the division, which exercises powers not specifically assigned to the PUC. Specifically, those powers include implementing the policies of the state in regulating the public utilities to achieve the “ultimate policy goals of providing for adequate, efficient, and economical energy, communication, and transportation services and water supplies at just and reasonable rates.” Providence Gas Co. v. Burke, 419 A.2d 263, 269 (R.I.1980). We further have elaborated on the distinction between the PUC and the division in Narragansett Electric Co. v. Harsch, 117 R.I. 395, 402, 368 A.2d 1194, 1199-1200 (1977):

[T]he General Assembly intended by its enactment to segregate the judicial and administrative attributes of ratemaking and utilities regulation and to vest them separately and respectively in the [PUC] and the [division]. Other provisions in title 39 support this interpretation. For instance, the [PUC] is clothed with the ‘powers of a court of record’ in determining and adjudicating matters within its jurisdiction * * *. It is further empowered to make orders and render judgments and to enforce the same by suitable process * * *.”

This Court has noted these differences in a number of subsequent cases. See, e.g., In re Island Hi-Speed Ferry, LLC, 746 A.2d 1240, 1244 n. 6 (R.I.2000) (“The [d]ivision, which is represented by the Department of the Attorney General in all administrative and legal proceedings, is statutorily charged with representing the interests of the public, as its advocate, in rate proceedings before the [PUC].”); Town of New Shoreham v. Rhode Island Public Utilities Commission, 464 A.2d 730, 737 n. 5 (R.I.1983) (noting that although the administrator of the division had approved an agreement, the PUC has “exclusive jurisdiction to determine the rates of public utilities”).

Facts and Travel

On March 31, 2008, KCWA filed a rate application with the PUC seeking an overall rate increase of $5,464,556, or 35 percent; if approved, this would have resulted in a rate increase of 16.5 percent for private customers. Included in its rate application, were the following proposed items: a 4 percent wage increase for employees' salaries; $6 million for the IFR plan; and a salary and benefit structure that continued to relieve their employees of any contribution toward their health-care premiums. It is the PUC's determination of these items that is the subject of this appeal.

Before the public hearings, as is customary in rate cases, the parties submitted prefiled testimony. The division presented evidence from its utility rate consultant, Thomas Catlin (Catlin), who recommended a salary increase of 3.2 percent, as opposed to the requested 4 percent.2 With regard to the health-insurance contribution, Catlin testified that 90 percent of the cost of health insurance should be paid through water rates and that employees should contribute 10 percent of the cost of their health-care premiums. Finally, Catlin indicated that the IFR plan should be funded at $5.4 million, rather than the $6 million that had been requested. According to Catlin, the $5.4 million still would suffice to cover the KCWA's IFR plans.

There was also prefiled testimony from Timothy Brown (Brown), the general manager of KCWA. With respect to the salary increase, Brown averred that KCWA was understaffed and that to retain the utility's current employees, an adequate salary increase was necessary. Brown rejected the division's suggestion that the KCWA employees pay for a portion of their health-insurance premiums because, he argued, doing so would hinder petitioner's ability to attract and retain qualified employees. Finally, with respect to the IFR, Brown suggested that funding the IFR plan at a reduced amount of $5.4 million was irresponsible. Additionally, Christopher Woodcock (Woodcock), a rate consultant for KCWA, also in prefiled testimony, addressed the IFR and declared that the safety of the water supply for its users, as well as infrastructure concerns, should outweigh the economic considerations that the division suggested.

The PUC conducted hearings on July 10, 2008, and September 24, 2008. Brown testified and expanded upon his prefiled testimony that the Department of Health (DOH) had approved the IFR plan and that KCWA anticipated a rate increase to pay for that plan. Brown testified that IFR plans are funded through a cash account, as opposed to capital programs, which are financed through bonds. He also explained that it was petitioner's policy that KCWA will not undertake an IFR project until the full amount is available in the account. In response, Catlin, testifying for the division, stated that the KCWA funding for IFR projects was conservative and that other utilities in Rhode Island tend not to accrue that much cash for IFR projects. Catlin recommended that the IFR funding be increased to $5.4 million rather than the $6 million. He noted that even at $5.4 million for IFR funding, KCWA would still have $18.1 million in IFR funds and $21 million in capital improvement funds for FY 2009 and FY 2010, which coincided with KCWA's spending plan.

On October 17, 2008, the parties filed post-hearing memoranda. When addressing the health-care costs, KCWA argued that it should not be penalized because its work force was not unionized. The petitioner contended that it would be unfair to require its employees to pay for health care at the same time the employee salary increase was limited to 3.2 percent.

On January 23, 2009, the PUC issued its report and order and allowed a revenue increase of $3,423,233 or 20.91 percent. The PUC granted a rate increase for IFR funding to a level of $5.4 million, as opposed to the $6 million level that the utility requested. Further, the PUC accepted the division's recommendation that a 10 percent employee contribution toward health-care premiums should be instituted by KCWA. However, should KCWA elect to continue to fund 100 percent of its employee health care, the PUC ordered that the additional amount be derived from the operating-revenue-allowance account. The PUC also admonished petitioner that “reducing health care costs is becoming more prevalent throughout the public sector” and further, that the PUC's “policy has been made clear [to KCWA] for almost four years and the time has come for all regulated utilities to implement the policy.” 3

Respecting the proposed salary increase, a majority of the PUC limited rate funding to a 2 percent raise for KCWA employees however, the PUC noted that its decision does not preclude KCWA from granting a higher salary increase. Although KCWA initially sought a 4 percent salary increase, it agreed to the 3.2 percent raise that the division recommended. The order provided that should KCWA provide a 3.2 percent increase, the money would come from petitioner's operating-revenue-allowance account. In explaining its decision, the PUC referenced the current malaise in Rhode Island's economy, including the state's high unemployment. The PUC cited Harsch, 117 R.I. at 416, 368 A.2d at 1206-07, in which this Court declared that, in determining whether utility rates are just and reasonable, the PUC may consider local economic conditions.

PUC Chairman Elia Germani (Germani) dissented from the portion of the majority opinion just referred to on the ground that he considered the majority's view to be a misreading of Harsch as it pertains to economic conditions. Mr. Germani also emphasized that KCWA is the only utility in Rhode Island that is not unionized; it was his opinion that this should be factored into the salary increase at issue in the rate filing.4

Standard of Review

The General Assembly has established the standard of review for cases brought before us in accordance with title 39 of the General Laws, entitled “Public Utilities and Carriers.” Specifically, the Legislature declared:

“The findings of the commission on questions of fact shall be held to be prima facie true, and as found by the commission and the [S]upreme [C]ourt, shall not exercise its independent judgment nor weigh conflicting evidence. An order or judgment of the commission made in the exercise of administrative discretion shall not be reversed unless the commission exceeded its authority or acted illegally, arbitrarily, or unreasonably.” Section 39-5-3.

When assessing a decision of...

To continue reading

Request your trial
28 cases
  • In re Review of Proposed Town of New Shoreham Project., 2010–273–M.P.
    • United States
    • United States State Supreme Court of Rhode Island
    • 1 Julio 2011
    ...to the Division of Public Utilities and Carriers (the division).2 Section 39–1–3(a); see also In re Kent County Water Authority Change Rate Schedules, 996 A.2d 123, 126 (R.I.2010) (explaining that the General Assembly “segregate[d] the judicial and administrative attributes of ratemaking an......
  • Narragansett Elec. Co. v. Rhode Island Pub. Utilities Comm'n
    • United States
    • United States State Supreme Court of Rhode Island
    • 23 Enero 2012
    ...evidence,” the presumption that the ruling of the commission on this issue was reasonable. See In re Kent County Water Authority Change Rate Schedules, 996 A.2d 123, 133 (R.I.2010). Accordingly, we will not substitute our judgment for that of the commission on the issue of the use of proxy ......
  • Providence Water Supply Board of City of Providence v. Division of Public Utilities and Carriers of State
    • United States
    • Superior Court of Rhode Island
    • 28 Diciembre 2010
    ...and must give the words of the statute their plain and ordinary meanings." In re Kent County Water Authority Change Rate Schedules, 996 A.2d 123, 130 (R.I. 2010) (quoting Waterman v. Caprio, 983 A.2d 841, 844 (R.I. 2009)). Section 39-4-10 provides: "[i]f, upon a hearing and investigation ha......
  • Providence Water Supply Board of City of Providence v. Division of Public Utilities and Carriers of State, C.A. PC 09-5913
    • United States
    • Superior Court of Rhode Island
    • 28 Diciembre 2010
    ...and must give the words of the statute their plain and ordinary meanings." In re Kent County Water Authority Change Rate Schedules, 996 A.2d 123, 130 (R.I. 2010) (quoting Waterman v. Caprio, 983 A.2d 841, 844 (R.I. 2009)). Section 39-4-10 provides: "[i]f, upon a hearing and investigation ha......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT