Mountain Fuel Supply Co. v. Public Service Com'n of Wyoming

• Decision Date: 18 April 1983
• Docket Number: No. 5723,5723
• Citation: 662 P.2d 878
• Parties: MOUNTAIN FUEL SUPPLY COMPANY, Appellant (Petitioner), v. PUBLIC SERVICE COMMISSION OF WYOMING, Appellee (Respondent).
• Court: Wyoming Supreme Court

Page 878

662 P.2d 878

MOUNTAIN FUEL SUPPLY COMPANY, Appellant (Petitioner), v. PUBLIC SERVICE COMMISSION OF WYOMING, Appellee (Respondent).

No. 5723.

Supreme Court of Wyoming.

April 18, 1983.

John A. Sundahl of Godfrey & Sundahl, Cheyenne, and Gary L. Sackett, Associate Gen. Counsel, Salt Lake City, Utah, for appellant.

Steven F. Freudenthal, Atty. Gen., Steven R. Shanahan and Walter Perry III, Senior Asst. Attys. Gen., Cheyenne, for appellee.

Before ROONEY, C.J., ^* and RAPER, THOMAS, ROSE ^** and BROWN, JJ.

THOMAS, Justice.

This appeal is taken from a rate-increase order entered by the Public Service Commission of Wyoming (PSC) which was affirmed by the district court. Mountain Fuel Supply Company (Mountain Fuel) complains that the PSC should not have included revenue from an off-system sale of gas in determining revenue for the selected test year; that the PSC should not have adopted an adjusted historic year as a test year, but instead should have adopted a hypothetical projected year as a test year; and that the PSC unlawfully delegated to its staff the determination of a just and reasonable rate. We conclude that there is no error with respect to the inclusion of the off-system sale and the selection of the test year, and we shall affirm the PSC as to those contentions. We cannot discern from the findings of fact by the PSC the rationale for its finding as to a just and reasonable rate. The expert who testified on behalf of the PSC stated in his testimony the rates which are included in the finding by the PSC, but we must reverse and remand that aspect of the case to the PSC for an articulation of its reason for adopting the finding that it entered of a just and reasonable rate. That explanation is essential to any meaningful review of the lawfulness of the rate determination by the PSC.

This case was instituted on April 22, 1981, by the filing by Mountain Fuel of simultaneous applications with the PSC seeking permanent relief in the form of a general increase in its rates in the amount of $2,633,000 (Docket No. 9192 Sub 68) and interim rate relief in the amount of $2,278,000 (Docket No. 9192 Sub 69) pending PSC action with respect to the application for a permanent rate increase. On May 7, 1981, the PSC summarily denied the request for interim rate relief. On May 22, 1981, the PSC, in accordance with § 37-3-106(c), W.S.1977, suspended the proposed permanent rates for six months pending its investigation and hearing on the lawfulness of the application by Mountain Fuel. Mountain Fuel then requested a rehearing or reconsideration of the order denying interim relief, and in response the PSC scheduled simultaneous hearings on both applications beginning July 8, 1981.

Additional parties were added by motions to intervene and participate in hearings. These included the Staff of the PSC, Stauffer Chemical Company of Wyoming, FMC Corporation and the Western Wyoming Utility Consumer Action Group. The Staff of the PSC appeared and participated as an independent party separate and apart from the PSC. A stipulation was entered into by the parties and approved by the PSC pursuant to which the requests of Mountain Fuel were adjusted downward to $2,201,000 in permanent rate relief and $1,891,000 in interim rate relief.

At the conclusion of the hearings a schedule for the submission of briefs and proposed findings of fact and conclusions of law was established. The PSC then entered its final order on October 28, 1981, granting permanent rate-increase relief in the amount of $893,000 to Mountain Fuel and denying Mountain Fuel's request for interim relief. The permanent rate increase authorized by the PSC went into effect on January 1, 1982.

In accordance with § 37-2-219, W.S.1977, ¹ Mountain Fuel appealed the order of the PSC to the district court by filing a petition for review on November 25, 1981. ² No appeal was taken by Mountain Fuel from the denial by the PSC of interim relief. On April 28, 1982, the district court issued an opinion letter affirming the order of the PSC. The court's final order affirming the PSC then was entered on May 26, 1982. This appeal is taken from that final order. Additional pertinent facts will be adduced whenever appropriate in the discussion leading to our holdings.

In its brief Mountain Fuel states the issues for review as follows:

"1. Is the Commission's order arbitrary and capricious and violative of Appellant's due process rights because it is not supported by adequate findings of fact? In particular, are there adequate findings to support the Commission's determination that 14.1% represents a lawful return on shareholders' equity investment?

"2. Does the Commission's order comport with the 'just and reasonable' standard for setting utility rates as required by Wyoming Statutes § 37-3-101?

"3. Does the Commission's order violate the proscription of confiscation of property set forth in the Wyoming and United States Constitutions?

"4. Has the Commission abused its discretion and unlawfully delegated certain of its ratemaking responsibilities by summarily adopting its staff's recommendations concerning an appropriate rate of return on shareholders' equity capital without the support of substantial evidence?

"5. Has the Commission unlawfully based its determination of utility rates on assumptions and circumstances that do not adequately reflect the conditions under which the utility will be operating during the period when rates are to be effective?

"6. Has the Commission engaged in unlawful 'retroactive ratemaking' by considering early-1980 revenues from the sale to El Paso Natural Gas Company in determining just and reasonable rates for a period following October 28, 1981?"

The PSC made its own statement of the issues in the following language:

"I. ARE THE COMMISSION'S FINDINGS CONCERNING THE USE OF AN HISTORICAL TEST YEAR, RATE OF RETURN, AND OFF-SYSTEM GAS SALES REVENUES SUPPORTED BY SUBSTANTIAL EVIDENCE IN THE RECORD?

"II. DID THE COMMISSION MAKE FINDINGS CONCERNING THE USE OF AN HISTORICAL TEST YEAR AND RATE OF RETURN WHICH INDICATE WHAT UNDERLYING EVIDENTIARY FACTS THE COMMISSION RELIED UPON FOR A FINDING OR CONCLUSION OF ULTIMATE FACTS?

"III. SHOULD THE COURT REQUIRE THE COMMISSION TO USE A PROJECTED OR FUTURE TEST YEAR IN ESTABLISHING RATES?

"IV. SHOULD THE COURT REQUIRE THE COMMISSION TO ALWAYS ESTABLISH THE RATE OF RETURN ON EQUITY ABOVE THE UTILITY COMPANY'S CURRENT LONG-TERM DEBT COST?"

While Mountain Fuel and the PSC have articulated the issues in several different contexts, we conclude that the major points which are in contention in this case revolve around three focal points:

(1) The failure of the PSC to exclude from its test-year revenues certain revenues derived from an off-system sale of gas to the El Paso Natural Gas Company.

(2) The refusal of the PSC to adopt a projected future test year for rate-making purposes, and its adherence to an adjusted historical year.

(3) The finding by the PSC that a 14.1 percent rate of return on the common stock equity was fair and reasonable.

The first four issues as stated by Mountain Fuel and the fourth issue stated by the PSC relate to the third point described. The fifth issue stated by Mountain Fuel and in part the first two issues and the third issue stated by the PSC relate to the second point. The sixth issue as stated by Mountain Fuel and in part the first and second issues stated by the PSC relate to the third area. We shall proceed to dispose of the contentions of the parties in accordance with the order of the areas of dispute which we have identified. It is perhaps helpful to reiterate an overview of our appellate rules dealing with appeals from administrative action.

Specifically applicable to the PSC, § 37-2-130, W.S.1977 (Cum.Supp.1982), explicitly provides that the Wyoming Administrative Procedure Act, §§ 9-4-101 to 9-4-115, W.S.1977 (now found at §§ 16-3-101 to 16-3-115, W.S.1977, Oct. 1982 Rev.), governs appeals from the Public Service Commission. The scope of our review of an order of an administrative agency is stated in § 9-4-114(c), W.S.1977 (Cum.Supp.1982) (now found at § 16-3-114(c), W.S.1977, Oct. 1982 Rev.), which provides:

"(c) To the extent necessary to make a decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. In making the following determinations, the court shall review the whole record or those parts of it cited by a party and due account shall be taken of the rule of prejudicial error. The reviewing court shall:

"(i) Compel agency action unlawfully withheld or unreasonably delayed; and

"(ii) Hold unlawful and set aside agency action, findings and conclusions found to be:

"(A) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law "(B) Contrary to constitutional right, power, privilege or immunity;

"(C) In excess of statutory jurisdiction, authority or limitations, or lacking statutory right;

"(D) Without observance of procedure required by law; or

"(E) Unsupported by substantial evidence in a case reviewed on the record of an agency hearing provided by statute."

In conducting our review of administrative action, we are not bound to accept any of the conclusions reached in the district court, but we are obligated to review the appeal as if it came directly to this court from the agency. Wyoming State Department of Education v. Barber, Wyo., 649 P.2d 681 (1982); Spivey v. Lucky Mc Uranium Corporation, Wyo., 636 P.2d 518 (1981); and Board of Trustees of School District No. 4, Big Horn County v. Colwell, Wyo., 611 P.2d 427 (1980). We are charged by statute with an examination of the whole record to determine if there is substantial evidence to support the findings of the agency. Section 9-4-114(c), W.S.1977 (Cum.Supp.1982) (now found at § 16-3-114(c), W.S.1977, Oct. 1982 Rev.)....