Kelley v. Michigan Public Service Commission
| Citation | 316 N.W.2d 187,412 Mich. 385 |
| Decision Date | 27 January 1982 |
| Docket Number | 24 and 25,67944 and 67945,Nos. 23,Docket Nos. 67938,s. 23 |
| Parties | Attorney General Frank J. KELLEY and Michigan Citizens Lobby, Plaintiffs- Appellants, v. MICHIGAN PUBLIC SERVICE COMMISSION and Consumers Power Company, Defendants- Appellees. Attorney General Frank J. KELLEY and Michigan Citizens Lobby, Plaintiffs- Appellants, v. MICHIGAN PUBLIC SERVICE COMMISSION and the Detroit Edison Company, Defendants- Appellees. (two cases). Calendar412 Mich. 385, 316 N.W.2d 187 |
| Court | Supreme Court of Michigan |
Robert A. Derengoski, Hugh B. Anderson, Roderick S. Coy, Patrick J. Devlin, Lansing, for plaintiff-appellant Atty. Gen. Frank J. Kelley.
Deborah K. Canja, Lansing, for plaintiff-appellant Michigan Citizens Lobby.
Arthur E. D'Hondt, Lansing, Leo H. Friedman, West Bloomfield, for defendant-appellee Michigan Public Service Comn.
Leon S. Cohan, Thomas A. Hughes, Detroit, Theodore W. Swift, David W. McKeague, Charles E. Barbieri, Lansing, for defendant-appellee Detroit Edison Co.
Lawrence B. Lindemer, Allen B. Bass, Paula H. Mills, Jackson, George W. Loomis, William D. Parsley, Michael G. Oliva, Loomis, Ewert, Ederer, Parsley, Davis & Gotting, Lansing, for Consumers Power Co., defendant-appellee.
Pat D. Conner, Conner, Harbour & Dew, Ann Arbor, for The Dow Chemical Co.; Thomas Cresswell, Midland, of counsel.
Max Dean, Flint, for the Fusion Energy Foundation.
Donald J. Prebenda, Paul Jacobs, Southfield, for Greater Detroit Building and Construction Trades Council, AFL-CIO.
The question presented concerns the scope of inquiry by the Michigan Public Service Commission when a public utility requests authorization to issue securities. We are persuaded, upon examination of the language of this state's utility securities act, 1 Michigan cases construing the act, cases construing similar statutes in other jurisdictions, and Michigan's utility regulation scheme, that the scope of inquiry in a securities issue proceeding does not extend to the wisdom of the project which a utility seeks to fund through the issuance of long-term securities.
Three cases have been consolidated in this appeal, each presenting the same issue. 2
In No. 67944 ("Edison I"), the utility, in July 1979, sought approval pursuant to the act for the issuance of $625 million in securities, 3 part of which would finance the continued construction of the Enrico Fermi 2 nuclear generating plant and the Belle River coal-fired generating plants and part of which would retire maturing short-term and long-term debt. At the commission hearing, the Attorney General and Michigan Citizens Lobby (MCL) intervened, contending that the plants were unnecessary and unreasonably costly. Specifically, the intervenors criticized the utility's 15-year forecast of energy needs, termed the utility's planned "reserve margins" (capacity in excess of anticipated peak demand) unjustifiably large, asserted that a nuclear generating plant is considerably more expensive than a coal-fired unit of similar capacity, and argued that continual cost overruns indicated that Fermi 2, if completed, would prove far more expensive than the utility had originally calculated. On April 1, 1980, the commission authorized issuance of the securities. Declining to consider the evidence pertaining to ongoing plant construction presented to the hearing officer, the commission found construction of the plants a lawful purpose of the utility and found the issuance of securities reasonably required to provide funds for the construction of the plants. 4 On May 9, 1981, the Attorney General and MCL filed a delayed application for leave to appeal in the Court of Appeals, which was denied on June 11, 1980. On May 11, 1981, this Court remanded the cause to the Court of Appeals for consideration as on leave granted. 5
In No. 67945 ("Edison II"), the utility sought authorization in July 1980 to issue an additional $1.996 billion in securities, 6 primarily to finance continued construction of the power plants and to retire short-term and long-term debt already incurred. Again the Attorney General and MCL intervened, challenging the issuance of the securities insofar as the proceeds would be used in respect to the construction of the power plants, which the intervenors claimed was unreasonable. On July 7, 1981, the commission approved the issuance of the securities, and declared that "(e)vidence relating to electric load forecasting and generating plant alternatives is irrelevant and immaterial in carrying out the intent of 1909 PA 144 ()". 7 On August 6, 1981, the Court of Appeals stayed the Commission's order approving issuance of the securities. This Court denied an emergency application for leave to appeal the stay. 8
In No. 67938 ("Consumers Power"), the utility sought permission in December 1979 to issue $564 million in securities, 9 primarily to finance the continued construction of the Midland nuclear generating plant and to retire maturing short-term and long-term debt. The Attorney General and MCL intervened in this proceeding as well, arguing that the Midland nuclear plant had far exceeded original cost projections and that continued construction was unjustified. The Commission approved the issuance of the securities on August 4, 1981, and again declared that a securities issue proceeding was an inappropriate time to inquire into the utility's construction program. 10 On September 14, 1981, the Court of Appeals granted the intervenors' application for leave to appeal, but denied a request for a stay of the Commission's order authorizing issuance of the securities.
On September 15, this Court, in Consumers Power, granted a stay of the Commission's order and bypass of the Court of Appeals, granted bypass on its own initiative in Edison I and II, and ordered all three cases consolidated for argument. 11
Following oral argument, this Court, on October 16, 1981, lifted the stays in Edison II and Consumers Power. 12
The Attorney General and MCL contend that the utility securities act requires the commission to determine that projects to be funded by the issuance of securities are reasonable. The commission and the utilities contend that the act grants the commission broad discretion in determining the scope of inquiry in a securities issue proceeding and does not mandate an inquiry into the reasonableness of a project.
We conclude that the utility securities act does not provide for an inquiry into the reasonableness of a project. Because such an inquiry is not material in a proceeding under the utility securities act, the commission has no discretion in such a proceeding to inquire into the reasonableness of a project.
The Michigan cases cited by the Attorney General and MCL do not hold that the commission must investigate the wisdom of underlying projects; those cases indicate that the concern of the act is more limited. The cases from other jurisdictions cited by the Attorney General and MCL provide limited guidance.
We hold that, in a proceeding under the utility securities act, the inquiry is limited to whether there is need to issue securities to obtain funds for a lawful purpose of the utility and does not extend to whether, to accomplish that purpose, there is need for the project to which the funds will be devoted. The inquiry is whether funds are required to construct the project-the need for the funds, not the need for the project.
The utility securities act, as amended, is set forth in the margin. 13 Subsection (1) provides that a utility may issue long-term securities only if authorized by the commission. An order authorizing the issuance of securities must state that "in the opinion of the commission the use of the capital * * * to be secured by the issue of the (securities) is reasonably required for the purposes of the (utility)". (Emphasis supplied.) The Attorney General and MCL argue that this language requires the commission to determine that underlying projects are reasonably required, and not only, as the utilities contend and the commission found, whether the funds are reasonably required to construct the projects.
Subsection (3) provides that "the commission shall grant authority to make the issue" (emphasis added) if it is "satisfied that the funds derived from the issue of (the securities) are to be applied to lawful purposes and that the issue and amount is essential to the successful carrying out of the purposes". (Emphasis added.) The commission and utilities argue that this language indicates the commission is required to make only two determinations before authorizing the issuance of securities: (1) that the funds will be applied to lawful purposes; and (2) that the issue, and the size of the issue, are essential to carrying out those purposes.
The parties thus rely on different and seemingly dissimilar subsections of the statute. 14 There is, however, no difference in meaning. The conditions upon which a utility may issue securities are first described in subsection (1):
"(A utility may issue securities) if necessary for the acquisition of property, the construction, completion, extension, or improvement of facilities or for the improvement or maintenance of service or for the discharge or lawful refunding of obligations * * *." (Emphasis supplied.)
These three references to the need for the securities, twice in subsection (1) and once in subsection (3), are equivalent, as the alternative purpose stated in tandem which each of the three references further indicates. 15
The Attorney General and MCL concentrate on the second reference in isolation and ask this Court to construe that second reference, "reasonably required for the purposes", to mean that the use of the funds must be reasonable. If the second reference in subsection (1) were the only articulation in the act of the standard, the Attorney General and MCL might offer a reasonable...
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