Miss. Power Co. v. Miss. Pub. Serv. Comm'n

• Decision Date: 11 June 2015
• Docket Number: Nos. 2012–UR–01108–SCT,2013–UR–00477–SCT.,s. 2012–UR–01108–SCT
• Parties: MISSISSIPPI POWER COMPANY, INC. v. MISSISSIPPI PUBLIC SERVICE COMMISSION and Thomas A. Blanton on Motions for Rehearing. Thomas A. Blanton v. Mississippi Power Company, Inc. and Mississippi Public Service Commission.
• Court: Mississippi Supreme Court

168 So.3d 905

MISSISSIPPI POWER COMPANY, INC.

v.MISSISSIPPI PUBLIC SERVICE COMMISSION and Thomas A. Blanton on Motions for Rehearing.

Thomas A. Blanton

v.Mississippi Power Company, Inc. and Mississippi Public Service Commission.

Nos. 2012–UR–01108–SCT

2013–UR–00477–SCT.

Supreme Court of Mississippi.

June 11, 2015.

Ben Harry Stone, Ricky J. Cox, Leo Ernest Manuel, Timothy Alan Ford, Ronald Wade Robertson, Jr., attorneys for appellant (No. 2012–UR–01108–SCT).

Office of the Attorney General by Justin L. Matheny, Shawn Stephen Shurden, Michael Adelman, attorneys for appellees (No. 2012–UR–01108–SCT).

Michael Adelman, attorney for appellant (No. 2013–UR–00477–SCT).

Ben Harry Stone, Ricky J. Cox, Leo Ernest Manuel, Ronald Wade Robertson, Timothy Alan Ford, Office of the Attorney General by Justin L. Matheny, Shawn Stephen Shurden, attorneys for appellees (No. 2013–UR–00477–SCT).

EN BANC.

Opinion

RANDOLPH, Presiding Justice, for the Court:

¶ 1. The motions for rehearing filed by the Mississippi Power Company and the Public Service Commission are denied. The original opinions are withdrawn and these opinions are substituted therefor.

¶ 2. Thomas Blanton asks this Court to invalidate rate increases approved by the Public Service Commission (“Commission”) for Mississippi Power Company (“MPC”). An examination of controlling law and statutes, the Constitutions of the United States and Mississippi, and a comprehensive review of the proceedings before us reveals that the Commission failed to comply with the language of the Base Load Act,¹ inter alia, and exceeded its authority granted by the Act. The increased rates were achieved by including “mirror CWIP” in the rate base and rates. Following the inclusion of “mirror CWIP,” the Commission “approve[d] the retail revenue adjustment over 2013 and 2014 ... allow[ing] the Company an annual rate designed to collect $125,000,000 for 2013, escalating to $156,000,000 in 2014. This represents a 15% and 3% increase, respectively.” Commission's Final Order, p. 24 (Mar. 5, 2013).² The increased rates for 186,000 South Mississippi ratepayers fail to comport with the Act or, otherwise, with our law. Accordingly, the order granting rate increases is reversed, and this matter is remanded to the Commission for proceedings consistent with this opinion.

I. BACKGROUND

¶ 3. In State ex rel. Pittman v. Mississippi Public Service Commission, 520 So.2d 1355 (Miss.1987), this Court declared no authority existed for the Commission to “grant a rate increase for power never delivered.” Pittman, 520 So.2d at 1363. Twenty-one years later, the Legislature passed the Base Load Act as an alternative method of cost recovery for base load generation, “eff [ective] from and after passage (approved May 9, 2008).” See Miss.Code Ann. §§ 77–3–101 to 77–3–109. Section 77–3–105(1)(a) reads:

The commission is fully empowered and authorized to include in an electric public utility's rate base and rates, as used and useful components of furnishing electric service, all expenditures determined to be prudently-incurred pre-construction, construction, operating and related costs that the utility incurs in connection with a generating facility (including but not limited to all such costs contained in the utility's “Construction Work in Progress” or “CWIP” accounts), whether or not the construction of any generating facility is ever commenced or completed, or the generating facility is placed into commercial operation. However, all costs incurred before May 9, 2008 may be reflected in rates only upon an order of the Public Service Commission after a finding of prudency.

Miss.Code Ann. § 77–3–105(1)(a) (Rev.2009) (emphasis added). Section 77–3–105(1)(b) reads:

The commission is further empowered and authorized to allow a public utility to accrue a just and reasonable rate of return to be determined by the commission on the unrecovered balance of any pre-construction or construction costs which shall include all costs incurred before May 9, 2008 and such costs may be reflected in rates only upon an order of the Public Service Commission after a finding of prudency.

Miss.Code Ann. § 77–3–105(1)(b) (emphasis added). The Act permits recovery of prudently incurred “preconstruction” costs, even if construction never “commence[s]”; permits recovery of prudently incurred “construction” costs, even if the plant is never “completed”; and permits recovery of prudently incurred “operating and related costs,” even if the facility is never “placed into commercial operation.” The Act further permits a “just and reasonable rate of return,” only upon a determination of prudency. Whether it be costs incurred or a rate of return, the Commission is required to make a determination of prudency.

¶ 4. Following its enactment, MPC, whose assets then totaled approximately $2 billion ($2,000,0000,000), petitioned the Commission to approve the Kemper Project, projecting a net cost of $2.2 billion ($2,200,000,000) and a completion date of May 2014. In its most recent “Monthly Status Report” to the Commission in Docket No. 2009–UA–0014, dated February 3, 2015, MPC now projects the costs at more than $6.172 billion ($6,172,200,000), a 281% increase from the original net cost. There has been an increase of $68 million ($68,000,000) since MPC's monthly status report filed on October 2, 2014—a $25 million ($25,000,000) increase reported on January 2, 2015, and a $43 million ($43,000,000) increase reported on February 3, 2015.³ The original certification for $2.88 billion ($2,880,0000,000) is less than one half of the now-projected costs.

¶ 5. MPC requested approval of its Certified New Plant, Rate Schedule CNP–A, a rate mechanism designed to provide recovery of the construction financing costs during the construction period.⁴ The Commission denied MPC's CNP–A rate schedule, and MPC appealed the denial to this Court, arguing that the Commission acted arbitrarily and capriciously when it denied MPC CWIP recovery. Blanton intervened in the appeal and also filed a separate appeal. By agreement, MPC and the Commission dismissed MPC's appeal. However, Blanton's appeal is properly before this Court.

II. ISSUES

¶ 6. Blanton's arguments, inter alia, are stated verbatim as follows:

1. Do CWIP assessments under the Mississippi “Base Load Act” (Section 77–3–101 et seq., of the Mississippi Code of 1972, as amended) constitute an unauthorized illegal tax?

2. Is Section 77–3–101 et seq. (The Base Load Act) in violation of the Mississippi Constitution and the Constitution of the United States?

3. Do CWIP assessments under the Mississippi “Base Load Act” constitute substantive confiscatory takings in violation of the Due Process Clause of the Fourteenth Amendment to the United States Constitution and/or the Due Process Clause of the Mississippi Constitution (Art. 3, § 14 )?

4. Whether the “Settlement Agreement” is an invalid instrument and should be vacated.

III. STANDARD OF REVIEW

¶ 7. “When reviewing the constitutionality of a legislative enactment, there is a strong presumption of validity....” City of Starkville v. 4–Cnty. Elec. Power Ass'n, 909 So.2d 1094, 1112 (Miss.2005) (citing Richmond v. City of Corinth, 816 So.2d 373, 375 (Miss.2002) ). However, it is well-settled that “a constitutional question will be passed on where the issues involved in a particular case are such that the case may be decided on other grounds.” Warner–Lambert Co. v. Potts, 909 So.2d 1092, 1093 (Miss.2005) (citing Broadhead v. Monaghan, 238 Miss. 239, 255, 117 So.2d 881, 888 (1960) ).⁵

¶ 8. Pursuant to Section 77–3–72 of the Mississippi Code, the Commission's Order

shall not be vacated or set aside either in whole or in part, except for errors of law, unless the court finds that the order of the commission is not supported by substantial evidence, is contrary to the manifest weight of the evidence, is in excess of the statutory authority or jurisdiction of the commission, or violates constitutional rights.

Miss.Code Ann. § 77–3–72(4) (Rev.2009).

While broad authority and discretion has been promulgated in favor of the Commission that power is not unbridled and the rules and regulations which it has promulgated to aid in the fulfillment of its duties under the chapter must not be utilized in an arbitrary or capricious manner, “It is clear under Mississippi law that an administrative agency cannot exceed the scope of authority which was granted to it by the legislature. (citations omitted).” Mississippi Board of Nursing v. Belk, 481 So.2d 826, 829 (Miss.1985). Further, the Commission's authority to interpret the statutes under which it operates may not supersede the requirements thereof, nor may it conflict with pertinent rules of law. Capital Electric Power Association v. Mississippi Power & Light Co., 240 Miss. 139, 153, 125 So.2d 739, 744 (1961).

Pittman, 520 So.2d at 1357–58.

VI. ANALYSIS

A. Tax

¶ 9. Blanton first asks this Court to declare CWIP assessment an illegal tax. The “essential feature of any tax [is that] it produces at least some revenue for the Government[,]” and that revenue is intended “for the use and benefit of that government.” Nat'l Fed'n of Indep. Business v. Sebelius, ––– U.S. ––––, 132 S.Ct. 2566, 2594, 183 L.Ed.2d 450 (2012) ; Austin v. Centerpoint Energy Arkla, 365 Ark. 138, 226 S.W.3d 814, 820 (2006). A tax is paid to the government, not a “privately-owned corporate entit[y]” which is “not [an] arm[ ] of the State.” Austin, 226 S.W.3d at 820. These essential elements are not present in the case sub judice.

¶ 10. The assessment is not paid to the government—it is paid by the ratepayers to MPC. The exaction imposed is not used for the support of our government. “Mirror CWIP” is not an illegal tax, for it is not a tax at all.

B. Commission's Application of the Statute

¶ 11. Assuming the presumptive validity of the Act, see City of Starkville, 909 So.2d at 1112, and following our precedent to pass on constitutional challenges when cases may be decided on other grounds, see Warner–Lambert, 909 So.2d at...