Montana-Dakota Utilities Co. v. Wyoming Public Service Com'n

• Decision Date: 18 December 1987
• Docket Number: MONTANA-DAKOTA,No. 87-35,87-35
• Citation: 746 P.2d 1272
• Parties: UTILITIES CO., Petitioner, v. The WYOMING PUBLIC SERVICE COMMISSION; Charles E. Johnson; John R. Smyth; and Nels J. Smith, in their official capacities as Commissioners of the Wyoming Public Service Commission, Respondents.
• Court: Wyoming Supreme Court

Page 1272

746 P.2d 1272

MONTANA-DAKOTA UTILITIES CO., Petitioner, v. The WYOMING PUBLIC SERVICE COMMISSION; Charles E. Johnson; John R. Smyth; and Nels J. Smith, in their official capacities as Commissioners of the Wyoming Public Service Commission, Respondents.

No. 87-35.

Supreme Court of Wyoming.

Dec. 18, 1987.

Bruce S. Asay of Kline, Buck & Asay, Cheyenne, and Steven G. Gerhart, Lester H. Loble II, and Cynthia J. Norland of Montana-Dakota Utilities Co., Bismarck, N.D., for petitioner.

Joseph B. Meyer, Atty. Gen., Mary B. Guthrie, Sr. Asst. Atty. Gen., Roger C. Fransen, and Robert A. Nicholas, Asst. Attys. Gen., for respondents.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT, and MACY, JJ.

MACY, Justice.

This case comes before us on a certification from the district court. We are asked to review an order of the Wyoming Public Service Commission (Commission) granting a pass-on rate increase and reducing an incentive award which previously had been granted.

We affirm.

On November 29, 1985, the Federal Energy Regulatory Commission (FERC) approved a rate increase for Williston Basin Interstate Pipeline Company (Williston). Williston is the sole supplier for petitioner Montana-Dakota Utilities Co. (MDU). On April 30, 1986, MDU filed an application with the Commission for authority to pass on this increase in gas costs.

The Commission's order granted MDU the rate increase for the supply cost increase from Williston which was authorized by FERC. The order also reduced an incentive award, which previously had been granted to MDU, by the amount of the current rate increase.

The primary issue for determination in this case relates to the Commission's interpretation of the incentive award statute, § 37-3-115, W.S.1977. In particular, the question is whether the Commission can reduce an incentive award after the award has been granted.

The incentive award statute, § 37-3-115, states:

"In the case of a utility furnishing natural gas, if the utility decreases its cost of natural gas, not less than ninety percent (90%) of the decrease in the cost shall be passed on to the consumer and in addition to other factors allowed by the commission in setting rates the commission may allow the utility to add to its rate not more than ten percent (10%) of the difference between its previous cost for natural gas and its new cost for natural gas."

Read by itself, the statute makes no provision for a reduction in the incentive award after one has been granted. However, when the statute is interpreted in conjunction with the other enabling statutes, the Commission has the authority to reduce an incentive award. The following statutes give an outline of the Commission's authority:

Section 37-2-112, W.S.1977.

"The commission shall have general and exclusive power to regulate and supervise every public utility within the state in accordance with the provisions of this act."

Section 37-2-121, W.S.1977.

"If upon hearing and investigation, any rate shall be found by the commission to be inadequate or unremunerative, or to be unjust, or unreasonable, or unjustly discriminatory, or unduly preferential or otherwise in any respect in violation of any provision of this act, the commission may fix and order substituted therefor such rate as it shall determine to be just and reasonable and in compliance with the provisions of this act. Such rate so ascertained, determined and fixed by the commission shall be charged, enforced, collected and observed by the public utility for the period of time fixed by the commission."

Section 37-2-127, W.S.1977, in pertinent part.

"In addition to the powers herein specifically granted, the commission shall have such implied or incidental powers as may be necessary and proper, effectually to carry out, perform and execute all the powers so granted."

Section 37-2-205(d), W.S.1977.

"Commission may investigate, fix rates, etc.--Upon its own motion, or on complaint of any person the commission shall have power to investigate and determine whether the competitive rates, charges and service existing between any public utilities are fair, just and reasonable, after hearing thereon to determine, fix and order such rates, charges, regulations and remedies as will establish reasonable and just rates, between said competing public utilities, and between said public utilities and their customers and patrons."

We previously have held that the Commission has continuing jurisdiction to maintain rates which are just and reasonable. Big Horn Rural Electric Company v. Pacific Power & Light Company, Wyo., 397 P.2d 455 (1964). In line with continuing jurisdiction and the statutory duty to maintain rates which are just and reasonable, the Commission necessarily has the "implied or incidental" authority to reduce a previously granted incentive award. Although statutes creating and empowering the Commission must be strictly construed and any reasonable doubt of the existence of any power must be resolved against the exercise thereof, Public Service Commission v. Formal Complaint of WWZ Company, Wyo., 641 P.2d 183 (1982), the statute empowering the Commission to award an incentive cannot be read in isolation. We uniformly have held that, in ascertaining the meaning of a statute, "we should look at all statutes which relate to the same subject or which have the same general purpose." Kamp v. Kamp, Wyo., 640 P.2d 48, 51 (1982).

Further, it has been stated that:

"The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by the executive department or other agency charged with its administration or enforcement is entitled to consideration and the highest respect from the courts, and must be accorded appropriate weight in determining the meaning of the law, especially when the construction or interpretation is * * * contemporaneous with the first workings of the statute * * *." 2 Am.Jur.2d, Administrative Law § 241 at 66-67 (1962).

See also WYMO Fuels, Inc. v. Edwards, Wyo., 723 P.2d 1230 (1986).

Section 37-3-115 states that the Commission may allow not more than ten percent of the savings. Therefore, the Commission's continuing jurisdiction gives it the authority to adjust an incentive award, either up or down, after the original grant, so long as the incentive award remains between zero and ten percent of the savings and it is just and reasonable. The harmonious interpretation of the incentive statute gives the Commission the limited discretionary authority to reduce the incentive award along with the limited discretionary authority to award it originally.

The second issue raised in this case is whether the Commission can adjust an incentive award in a pass-on proceeding instead of during a full-rate case proceeding. Originally, pass-on proceedings were created to quickly approve the cost adjustments which previously were determined, in large part, in FERC hearings. Spence v. Smyth, Wyo., 686 P.2d 597 (1984). Likewise, an incentive award is determined primarily by the costs passed on and is tied to the savings the utility can achieve by reducing its costs. Due to the fact that an incentive is cost based, it is appropriate to award and reduce the incentive in the same proceeding when the costs are passed on. If the incentive award cannot be adjusted in a pass-on proceeding, the incentive award, both up and down, will lag behind the costs upon which it is based. Incentive awards, therefore, do not require full-rate case proceedings in order to be adjusted fairly.

MDU's third argument that the Commission has improperly used adjudicative proceedings to promulgate a rule is without merit. "Ever since the Chenery case of 1947, the law has been clear that an agency may make law either through rulemaking or through adjudication." 2 Davis, Administrative Law Treatise § 7:25 at 122 (2d ed.1979); see also Securities and Exchange Commission v. Chenery Corporation, 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995, reh. denied 332 U.S. 747, 68 S.Ct. 26, 92 L.Ed. 367 (1947). While § 16-3-101(b)(ix)(D), W.S.1977, clearly excludes agency decisions in contested cases from the definition of a rule, it is beyond dispute that an agency can use prior contested case decisions as precedent. Squaw Transit Company v. United States, 574 F.2d 492 (10th Cir.1978). Particularly when setting rates, using adjudicative proceedings allows a flexibility which is not available in rule making. The Commission has not abused its discretion by adopting that approach. Each rate adjustment, whether cost or incentive, requires a finding that the rate will be just and reasonable. Such a discretionary finding may not adequately be addressed by a set of rules. This desired flexibility is reflected by previous notices and orders of the Commission in instances where incentive awards were not adjusted when the cost increases were minimal.

The final issue raised by MDU is whether a portion of the Commission's conclusions is supported by substantial evidence. The language at issue is as follows:

"17. The substantial evidence of this case shows that the exclusion of incentive awards from the statutory mandated review process may result in eventual unjust, unfair and unsupported rates and rate increases.

"The evidence of this case shows that subsequent to Montana-Dakota's efforts that supported the incentive award granted to it by the Commission, Montana-Dakota on its own motion acted before the FERC to transfer to its sister corporation, Williston Basin, Montana-Dakota's gas purchase contracts and its own low-cost gas production properties (a portion of its own, low-cost gas supply paid for by ratepayers through rate increases designated by this Commission for gas discovery activity, for the purpose of lowering gas supply costs.) Although the interventions of the state commission before the FERC in that case resulted in the FERC granting substantial rate savings to the intrastate utility customers over that plan proposed...