Mississippi Public Service Com'n v. Mississippi Power Co., 54059

• Decision Date: 23 March 1983
• Docket Number: No. 54059,54059
• Citation: 429 So.2d 883
• Parties: MISSISSIPPI PUBLIC SERVICE COMMISSION, et al. v. MISSISSIPPI POWER COMPANY.
• Court: Mississippi Supreme Court

Page 883

429 So.2d 883

MISSISSIPPI PUBLIC SERVICE COMMISSION, et al. v. MISSISSIPPI POWER COMPANY.

No. 54059.

Supreme Court of Mississippi.

March 23, 1983.

Rehearing Denied April 27, 1983.

Hall, Callender & Dantin, Maurice Dantin, Columbia, Bennett E. Smith, Cupit & Maxey, John L. Maxey, II, Jackson, Stanley L. Taylor, Jr., Biloxi, Martha Bergmark, Hattiesburg, for appellant.

Eaton, Cottrell, Galloway & Lang, James S. Eaton, Ben H. Stone, Gulfport, Watkins & Eager, Hassell H. Whitworth, Jackson, for appellee.

En banc.

BROOM, Presiding Justice, for the Court: ¹

Electric power rate increases pursuant to Mississippi Code Annotated Secs. 77-3-37, -39 (1972) were sought by Mississippi Power Company (MPC) before the Public Service Commission (PSC) which, by order dated April 16, 1981, in part denied the increases. MPC had filed a refunding bond pursuant to Sec. 77-3-39, supra, thereby placing the rates in effect. MPC appealed to the Chancery Court of the First Judicial District of Hinds County, the Honorable Joe Moss, Chancellor. From the March 19, 1982, chancellor's decree largely favorable to MPC, direct appeal to this Court was taken by PSC, and cross-appeal was taken by MPC. Pertinent facts will be stated in this opinion as appropriate to the issues argued.

MPC, in seeking the proposed rate increase, contended that its total rate base to be utilized in determining the net operating income requirements was approximately $554,000,000. Included in MPC's calculation of the rate base was over $40,000,000 attributable to contract adjustments between MPC and Gulf Power Company with respect to the acquisition of 1/2 interest by each Company in the Jackson County steam generation plant (Plant Daniel), and for the purchase of certain railroad cars to be used in transporting coal to Plant Daniel.

PSC determined that, of this approximately $40,000,000 which MPC had included in the rate base, $19,000,000 associated with Plant Daniel adjustment payments to Gulf Power Company, and over $1,000,000 associated with coal car payments to Gulf Power Company, were not to be included in MPC's rate base because the transaction between MPC and Gulf Power had resulted in no additional electric generating capacity for the benefit of MPC's customers.

PART I

DAN M. LEE, Justice, for the majority:

THE PLANT DANIEL TRANSACTION

Mississippi Code Annotated section 77-3-39 (1972) authorizes the PSC to establish rates that are just and reasonable to the taxpayers and which will yield a fair rate of return to the utility for its services. Because public utilities are monopolies engaged in the business of furnishing necessary services to the public, the PSC is, in effect, the counterpart of the marketplace by which other businesses are measured. The intent of the legislature in creating the PSC was an effort to impose an authoritative body between the ratepayers of the utility and the investors in the utility so that their respective interests, necessarily antagonistic, might be equitably served.

The PSC's rate-making decisions are never final due to the fluctuation of prices, inflation, business movement and other factors affecting their operations. Such variables necessitate applications for rate adjustments by the utilities for their very existence which necessarily impinge upon the pocketbooks of the utilities' ratepayers. To preserve a balance of the equities and lend stability to this ever present factor between investors and consumers, the legislature has established a standard of just return to the utility and reasonable rates to the consumer. Accord State of Mississippi, et al v. Mississippi Public Service Comm'n., --- So.2d ----, No. 53,709, decided March 9, 1983, not yet reported.

In Southern Bell Tel. & Tel. Co. v. Mississippi Public Service Comm'n., 237 Miss. 157, 113 So.2d 622 (1959), this well-established principle was construed:

The reasonableness or unreasonableness of the rates charged, or to be charged, by a public utility for its service or produce is not to be determined by any definite rule or legal formula, and is not measurable with any great degree of exactness, but is a question of fact calling for the exercise of sound discretion, good sense, and a fair, enlightened, and independent judgment. In determining whether a rate is reasonable, each case must rest on its special facts. 73 C.J.S., 1032, Public Utilities, par. 25 a, and cases cited.

* * *

What appellant in this case is entitled to is "just and reasonable" rates which will yield "a fair rate of return" to the appellant upon the reasonable value of the property used or useful in furnishing service. A fair return is one which, under prudent and economical management, is just and reasonable to both the public and the utility. From the standpoint of the Company it is important that there be enough revenue not only for operating expenses but also for the capital cost of the business, which includes service on the debt and dividends on the stock. By that standard the return to the equity owner should be commensurate with returns on investments and other enterprises having corresponding risks and sufficient to assure confidence in the financial integrity of the business. What the public is entitled to demand is that no more be exacted from the rate payers than the services are reasonably worth. (237 Miss. at 238, 241, 113 So.2d at 654, 656) (emphasis ours).

The legal principles relating to the PSC's authority in establishing rates are well settled and have not been subject to any substantial change. They are:

1. The burden of proof rests on the public utility to establish the reasonableness of new rates. Southern Bell T. & T. Co. v. Mississippi Pub. Serv. Com'n., 237 Miss. 157, 113 So.2d 622 (1959).

2. The commission, with its expertise, is the trier of facts and within this province it has the right to determine the weight of the evidence, the reliability of estimates and the credibility of witnesses. Capital Electric Power Ass'n v. Mississippi Power & Light Co., 216 So.2d 428 (Miss.1968); and Southern Bell T. & T. Co. v. Mississippi Pub. Serv. Com'n., 237 Miss. 157, 113 So.2d 622 (1959).

3. The order of the commission is presumptively valid. Loden v. Mississippi Pub. Serv. Com'n., 279 So.2d 636 (Miss.1973).

4. The reasonableness of rates charged, or to be charged, by a public utility is not determined by definite rule or legal formula, but is a fact question requiring the exercise of sound discretion and independent judgment in each case. Southern Bell T. & T. Co. v. Mississippi Pub. Serv. Com'n, 237 Miss. 157, 113 So.2d 622 (1959).

5a. The chancery court's authority on review is limited by Mississippi Code Annotated section 77-3-67(4) (1972) to: The order shall not be set aside in whole or part except for errors of law, unless the court finds it is not supported by substantial evidence, is contrary to the manifest weight of the evidence, is in excess of statutory authority or violates constitutional rights.

5b. The authority of 5a has been construed at times as follows: The sole question presented for decision is whether or not the action of the commission was arbitrary, not supported by substantial evidence, or was manifestly against the evidence. Tri-State Transit Co. of La. v. Dixie Greyhound Lines, 197 Miss. 37, 19 So.2d 441 (1944). ²

With these principles in mind, we turn to the facts presented in the instant case.

MPC is a corporate public utility as defined in the Public Utility Act of 1956 as amended. It is incorporated under the laws MPC is engaged in the generation, transmission, distribution and sale of electric energy to the public in 23 counties in southeast Mississippi. It serves 52 municipalities and 70 nonincorporated communities. MPC serves at wholesale all of the requirements above that are supplied by the Southern Company system, including one REA distributing cooperative and part of the requirements of two other such rural electric cooperatives.

of the State of Mississippi. All of MPC's common stock is owned by the Southern Company, an investor-owned public utility company, organized and existing by and through the laws of the State of Delaware. The Southern Company also owns the common stock of Georgia Power Company, Alabama Power Company and Gulf Power Company. These four operating companies of the Southern Company system are interconnected by a transmission grid and the generating facilities of the operating companies are operated as a fully integrated power system, which MPC contends has many advantages.

In Mississippi Power Co. v. Mississippi Public Service Comm'n., 291 So.2d 541 (Miss.1974), we said:

The Court also cited with approval Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944), and quoted from it as follows:

"The rate-making process under the Act, i.e., the fixing of 'just and reasonable' rates, involves a balancing of the investor and the consumer interests. Thus we stated in the Natural Gas Pipeline Co. case [Federal Power Commission v. Natural Gas Pipeline Co.] that 'regulation does not insure that the business shall produce net revenues.' 315 U.S. 575 p. 590, 62 S.Ct. 736 , 86 L.Ed. 1037.... (291 So.2d at 556) (emphasis ours).

On October 20, 1980, MPC filed with the PSC a notice of change in rates to become effective on November 20, 1980. The proposed rate increase was designed to produce $39,306,000 additional revenue. On November 10, 1980, MPC filed a refunding bond as provided by law, said bond was approved by the order of the commission, and the rates were placed into effect subject to refund on November 20, 1980. After hearings were held from time to time, they were finally concluded on April 16, 1981, and consisted of 16 volumes encompassing 2470 pages. The PSC made an extensive 30-page finding of facts and order that granted MPC a rate increase of $10,877,000 even though it had allowed a rate increase to MPC on March 7, 1980, in the...