Montana Dakota Utilities Co. v. Public Service Com'n of Wyoming
| Decision Date | 19 February 1993 |
| Docket Number | No. 92-61,92-61 |
| Citation | 847 P.2d 978 |
| Parties | Util. L. Rep. P 26,293 MONTANA DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., Petitioner, v. The PUBLIC SERVICE COMMISSION OF WYOMING, Bil Tucker, Chairman, John R. Smyth, and Stephen N. Ellenbecker, Commissioners, Respondents. |
| Court | Wyoming Supreme Court |
Bruce S. Asay, Cheyenne, Douglas W. Schulz, Bismarck, ND, for petitioner.
Joseph B. Meyer, Atty. Gen., Michael L. Hubbard, Sr. Asst. Atty. Gen., Kristin H. Lee, Asst. Atty. Gen., Cheyenne, for respondents.
Before MACY, C.J., and THOMAS, CARDINE, URBIGKIT and GOLDEN, JJ.
In this appeal, on certification from the district court pursuant to Wyo.R.App.P. 12.09, we are asked to answer the principal questions whether in a pass-on rate increase procedure the Wyoming Public Service Commission (PSC) may adjust a gas utility's proposed apportionment of a refund ordered by the Federal Energy Regulatory Commission (FERC) and a non-gas component of the retail rate sought to be recovered by the gas utility from its customers. Underlying issues include whether PSC's adjustment actions violate the so-called filed rate doctrine, whether PSC's refund apportionment action is based on substantial evidence, whether Section 249(b) of the Rules of the Public Service Commission authorizes PSC's non-gas component adjustment action, and whether PSC's notice of the pass-on rate increase hearing was adequate under WYO.STAT. § 16-3-107(b) (1990).
We hold that in a pass-on rate increase procedure PSC may adjust the apportionment among utility-service customers of a FERC-ordered refund and may adjust a non-gas component of the retail rate to be charged utility-served customers. We hold that PSC's refund apportionment action is supported by substantial evidence, and we further hold that PSC's general statutory authority, but not Section 249(b), authorizes PSC's non-gas component adjustment action. However, in this particular instance, we hold that PSC's notice of the pass-on rate increase hearing was inadequate in regard to PSC's non-gas component adjustment action. Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
Appellant Montana-Dakota Utilities Co. (MDU) states the issues:
1. Did the Wyoming Public Service Commission err as a matter of Law in reducing natural gas rates to Montana-Dakota Utilities Co.
A. Commission regulations must yield if contrary to Federal Law.
B. It is not permissible for the Commission to do indirectly what it cannot do directly.
2. Is it permissible for the Wyoming Public Service Commission to reduce natural gas rates absent an investigation as required by Statute.
3. Is the allocation of natural gas rates as ordered by the Wyoming Public Service Commission supported by substantial evidence.
4. Did the Commission unduly restrict the Petitioner's presentation.
Appellee PSC's statement of the issues is:
1. Did the Public Service Commission act in accordance with the filed rate doctrine?
2. Did the Public Service Commission act in accordance with Wyoming law?
A) Did the Public Service Commission act in accordance with its statutory authority?
B) Did the Public Service Commission hold an investigation in accordance with Wyoming law?
C) Did the Public Service Commission violate Wyoming law when it reduced MDU's rates in a pass-on hearing and not a general rate case?
3. Are the rates set by the Public Service Commission just and reasonable?
A) Was the Commission's determination of the Williston Basin refund based on substantial evidence?
B) Was the Commission's determination of the overearnings issue based on substantial evidence?
4. Is MDU precluded from raising the issue that it had been unduly restricted from presenting its case in its entirety?
FERC has exclusive jurisdiction over interstate wholesale natural gas rates. 16 U.S.C. § 824(b). See Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986). PSC has jurisdiction over intrastate retail natural gas rates. PSC exercises statutory powers to regulate and supervise public utilities in the State of Wyoming. WYO.STAT. § 37-2-112 (1977). Appellant MDU is authorized by PSC to provide natural gas service to residential, commercial, and industrial customers in specified certificated areas in Wyoming. MDU also serves customers in North Dakota, South Dakota, and Montana. MDU receives approximately seventy percent of its total system gas supply from Williston Basin Interstate Pipeline Company (WBI), a wholesale supplier.
FERC set the wheels of this controversy in motion by two separate actions. In the first action, FERC ordered WBI to refund to its customers $18,901,593.50. In its order, FERC did not specify the manner in which the refund was to be apportioned among the customers. In turn, WBI did not specify a refund apportionment method. Thus, MDU was left to decide in what manner it would apportion the refund among its multi-state customers. In the second action, FERC authorized WBI to increase the cost of the wholesale gas it supplied to distributors like MDU. In response to this FERC-authorized increase in the cost of gas it purchases from WBI, MDU submitted on July 26, 1991, to PSC an application to increase its retail rates pursuant to PSC's rules governing the pass-on procedure. These rules are Sections 249 and 250 and MDU's commodity pass-on Rate 88, which is PSC-authorized balancing account tariff. The gas balancing account system may be described in this way:
[It] is a rate adjustment mechanism which allows gas distributors to obtain expedited rate changes based solely on fluctuations in the commodity cost of gas purchased by the utility. The advantage of the system is that it avoids the regulatory lag which accompanies general rate proceedings and thereby contributes to the financial stability of utilities. The Commission describes the operation of the balancing account system in the following terms:
[The] system accounts for both over and underrecoveries of gas costs in future gas commodity rate applications. The actual cost of gas experienced and the recovery of those costs in rates for the past gas balancing account period are compared with the prior estimates for that period to determine whether there should be an upward or downward adjustment to the current balancing account application. In this way a dollar for dollar recovery of gas costs is assured for the utility and consumers are not overcharged.
MGTC, Inc. v. Pub. Serv. Comm'n of Wyoming, 735 P.2d 103, 104 (Wyo.1987).
In preparing its pass-on rate increase application MDU factored in FERC-ordered refund, the effect of which was to decrease the overall amount of the retail rate increase sought. When factoring in the refund, MDU apportioned the refund amount based on total sales volume in each state during the refund period. Under this method, all of MDU's customers, including industrial customers, received the benefit of the refund. Thus, in MDU's original application dated July 26, 1991, MDU requested PSC's approval of a rate increase of $0.363 per dekatherm. The rate sought consisted of these factors:
1. Wholesale natural gas rate............. $3.854/dk
2. Wyoming balancing account surcharge.... $0.335/dk
3. FERC-ordered WBI refund................ ( $0.690/dk )
4. PSC-approved non-gas component......... $0.802/dk
---------
Total resulting authorized rate $4.301/dk
After filing this original application, MDU determined it had erred in its refund apportionment. MDU concluded that no
refund had been received for gas purchased from MDU under the particular rate schedule under which MDU purchased gas for resale to industrial customers in its multi-state service area. MDU reasoned that the error, therefore, gave industrial customers a refund when they actually were not entitled to one. To correct the perceived error, MDU filed a revised application on August 13, 1991, in which MDU excluded industrial customers from the refund, resulting in a larger net increase in residential gas rates of $0.438 per dekatherm. The following components comprised the revised rate sought:
1. Wholesale natural gas rate......... $3.854/dk
2. Wyoming balancing account surcharge $0.335/dk
3. FERC-ordered WBI refund............ ( $0.615/dk )
4. PSC-approved non-gas component..... $0.802/dk
---------
Total resulting authorized rate $4.376/dk
On August 28, 1991, PSC issued its order granting MDU interim rate relief subject to a final order. In this interim order, PSC authorized MDU to increase its Wyoming natural gas rates by $0.363 per dekatherm subject to possible refund and hearing as established in a final order. Thus, instead of authorizing the amount sought in MDU's revised application, PSC's interim order authorized the amount requested by MDU in its original application. PSC wanted to take a closer look at the refund apportionment matter.
On August 29, 1991, PSC issued its notice and order setting MDU's pass-on application for public hearing on October 29, 1991. In its notice and order, PSC asked MDU to address its pass-on application and the matter of the refund apportionment. Noticeably absent, from the notice listing the issues to be addressed, was the issue of an adjustment in the non-gas component of the authorized rate.
By letter dated September 4, 1991, PSC Secretary Alex Eliopulos informed MDU that PSC was concerned that MDU's annual report showed its gas operations had earned an 18.69 percent rate of return in 1990, thus exceeding the last authorized rate of return of 11.05 percent. PSC had authorized the rate of return at 11.05 percent in 1984 in a general rate case which included a full cost of service analysis which used 1982 as the test year. In this September 4 letter, Secretary...
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