Multiple Intervenors v. Public Service Com'n of State

• Citation: 166 A.D.2d 140,569 N.Y.S.2d 522
• Parties: , 122 P.U.R.4th 600, Util. L. Rep. P 26,072, 21 Envtl. L. Rep. 21,399 In the Matter of MULTIPLE INTERVENORS, Appellant, v. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, Respondent, and Orange and Rockland Utilities, Inc., et al., Intervenors-Respondents.
• Decision Date: 09 May 1991
• Court: New York Supreme Court Appellate Division

Page 522

569 N.Y.S.2d 522

166 A.D.2d 140, 122 P.U.R.4th 600, Util.

L. Rep. P 26,072,

21 Envtl. L. Rep. 21,399

In the Matter of MULTIPLE INTERVENORS, Appellant, v. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, Respondent and Orange and Rockland Utilities, Inc., et al., Intervenors-Respondents.

Supreme Court, Appellate Division,

Third Department.

May 9, 1991.

Couch, White, Brenner, Howard & Feigenbaum (Algird F. White Jr., Barbara S. Brenner and Leonard H. Singer, of counsel), Albany, for appellant.

William J. Cowan (Lawrence G. Malone and James W. Brew, of counsel), Albany, for respondent.

Nixon, Hargrave, Devans & Doyle (Stanley W. Widger, Jr., Andrew Gansberg and Kevin G. Martin, of counsel), Rochester, for Orange and Rockland Utilities, Inc., intervenor-respondent.

Peter Garam and Larry Carbone, New York City, for Consol. Edison Co. of New York, Inc., intervenor-respondent.

Andrew B. Stegemoeller, Albany, for William B. Hoyt, amicus curiae.

David R. Wooley, White Plains, for Center for Environmental Legal Studies and another, amici curiae.

Before MAHONEY, P.J., and MIKOLL, LEVINE, CREW and HARVEY, JJ.

LEVINE, Justice.

In this CPLR article 78 proceeding, petitioner, an unincorporated association of large-scale electricity customers of, among others, Niagara Mohawk Power Corporation (hereinafter NiMo) and intervenor Orange and Rockland Utilities, Inc. (hereinafter O & R) challenged the validity of Opinion No. 89-29, rendered by respondent, Public Service Commission (hereinafter the PSC), which authorizes certain recoveries to NiMo and O & R in subsequent rate proceedings related to their respective demand side management (hereinafter DSM) programs. DSM programs are campaigns and other measures which utilities undertake to encourage energy conservation by their customers, either by overall reductions in consumption of electricity or by reducing such consumption during peak demand hours. The PSC has been actively promoting adoption and implementation of DSM programs in various opinions and orders since 1984. In a July 1988 opinion and order, the PSC acknowledged the legitimate concerns of utilities that successful DSM programs, albeit beneficial to utility customers and society at large, will serve to reduce their revenues and profits. The PSC concluded that "the way to resolve [this dilemma] is through revised ratemaking, not through de-emphasis of conservation". To that end, the 1988 opinion and order directed electric utilities to submit rate-making proposals to the PSC with their DSM plans which, in effect, would reward utilities for achieving energy savings through their DSM programs.

The opinion of the PSC under review in this proceeding was rendered in response to the submission of proposals by NiMo and O & R pursuant to the previous PSC order, after interested parties were given an opportunity to appear and comment. The opinion permits NiMo and O & R to recover in rates (1) the prudently incurred direct costs of their DSM programs, (2) their net lost revenues attributable to the energy conservation achieved through the DSM programs, and (3) incentive payments consisting of a portion (20% for O & R, 10% for NiMo) of the dollar savings in reduced consumption of electricity caused by the DSM programs. Petitioner appeals from Supreme Court's dismissal of the petition (147 Misc.2d 757, 557 N.Y.S.2d 250).

Petitioner's first ground for reversal and invalidating Opinion No. 89-29 is that, in granting NiMo and O & R rate recovery for lost profits and incentive payments based upon reduced consumption of electricity, the PSC engaged in social policymaking without legislative authorization under the Public Service Law (citing Boreali v. Axelrod, 71 N.Y.2d 1, 523 N.Y.S.2d 464, 517 N.E.2d 1350). Petitioner's essential argument is that, under the Public Service Law, electric utility customers may only be charged and the PSC may only set rates for electrical services rendered (citing Public Service Law § 65[1]; § 66[16]. Moreover, a utility's expenditures are only recoverable if undertaken prudently to provide electric service. It follows, according to petitioner, that the PSC cannot authorize charges or base rates on the non-provision of electrical service, merely on the agency's own social policy favoring energy conservation. We disagree.

First, petitioner's narrow view of the PSC's rate-setting authority as being restricted to imposing only charges directly related to the provision of electrical service is simply not supported by the case law. Petitioner's contention that rate recovery must be based upon the production, sale or distribution of electricity is, for example, inconsistent with Matter of Abrams v. Public Serv. Commn. of State of N.Y., 67 N.Y.2d 205, 501 N.Y.S.2d 777, 492 N.E.2d 1193, where the Court of Appeals upheld rate recovery of the cost of a utility's pump storage facility despite the facility having been abandoned before ever contributing to the production of electricity. The courts have permitted rate charges and rate differentials that were based upon a wide variety of factors not directly related to the provision of utility services or the quantity or quality thereof (see, e.g., Matter of New York State Council of Retail Merchants v. Public Serv. Commn. of State of N.Y., 45 N.Y.2d 661, 665, 412 N.Y.S.2d 358, 384 N.E.2d 1282 [for energy conservation]; Matter of MCI Telecommunications Corp. v. Public Serv. Commn. of State of N.Y., 108 A.D.2d 289, 297, 488 N.Y.S.2d 840 [for preservation of competition among telephone utilities]; Matter of Burstein v. Public Serv. Commn. of State of N.Y., 97 A.D.2d 900, 901-902, 470 N.Y.S.2d 698 [incentive rate for avoidance of plant construction cost overruns]; Matter of Cohalan v. Gioia, 88 AD2d 722, 723, 451 N.Y.S.2d 275 [rates partially based upon economic impact on the service area].

Similarly unavailing is petitioner's contention that the PSC, in providing for recovery of lost profits and incentive payments for DSM programs, adopted its own social policy vision without the benefit of any legislative direction. The most notable legislative charge for the PSC to promote energy conservation is Public Service Law § 5(2), directing the PSC to "encourage all persons and corporations subject to its jurisdiction to formulate and carry out long-range programs * * * for the performance of their public service responsibilities with economy, efficiency,...