Mxenergy Inc. v. Ga. Pub. Serv. Comm'n

• Decision Date: 07 July 2011
• Docket Number: No. A11A0200.,A11A0200.
• Citation: 310 Ga.App. 630,11 FCDR 2337,714 S.E.2d 132
• Parties: MXENERGY INC.v.GEORGIA PUBLIC SERVICE COMMISSION et al.
• Court: Georgia Court of Appeals

310 Ga.App. 630

714 S.E.2d 132

11 FCDR 2337

MXENERGY INC.

v.GEORGIA PUBLIC SERVICE COMMISSION et al.

No. A11A0200.

Court of Appeals of Georgia.

July 7, 2011.

Sutherland, Benjamin C. Morgan, Atlanta, for appellant.Thurbert E. Baker, Attorney General, Isaac Byrd, Deputy Attorney General, Sidney R. Barrett Jr., Senior Assistant Attorney General, Daniel Stephen Walsh, Assistant Attorney General, for appellees.SMITH, Presiding Judge.

MXenergy Inc. appeals from a superior court judgment affirming a decision of the Georgia Public Service Commission(“the commission”).¹It did not err in so doing, and we therefore affirm the judgment of the superior court.

The dispute in this action arises from the “true up settlement process” applied to natural gas marketers by the commission, as discussed in our earlier decision of Infinite Energy v. Georgia Public Svc. Comm.,257 Ga.App. 757, 572 S.E.2d 91(2002):

Atlanta Gas Light Company is an electing distribution company under the Natural Gas Competition and Deregulation Act[OCGA § 46–4–150 et seq.].As a distribution company, Atlanta Gas Light does not sell natural gas directly to customers, but provides the distribution system used by certified marketers to deliver gas to their customers.

The marketers estimate how much gas their respective customers will use and then supply Atlanta Gas Light with gas for delivery to the customers.But because marketers cannot predict exactly how much gas their customers will use, they sometimes supply less gas than their customers actually consume.Their customers then end up using gas that was delivered by another marketer.But regardless of who supplied the gas, the marketers charge their customers for the gas they actually use.This means that some marketers sell gas they did not tender to Atlanta Gas Light, while others tender gas that they did not sell.

Consequently, there must be a process in place to reconcile, or “true up,” the amount of gas a marketer delivers to Atlanta Gas Light with the actual amount of gas used by that marketer's customers.Without such a process, some marketers would end up subsidizing the sales of—providing free gas to—other marketers.

(Footnote omitted.)Id. at 757, 572 S.E.2d 91.In Infinite Energy,we affirmed the superior court's decision to affirm the commission's adoption of a true up process that was proposed by Atlanta Gas Light and marketers in 1999.Id. at 758, 572 S.E.2d 91.²In the case before us, we address the application of that true up process to a shortfall created by the bankruptcy of a marketer.

In 2008, Catalyst Natural Gas, LLC filed for bankruptcy, at a time when it had supplied less gas than its customers actually consumed, and thus, as we discussed in Infinite Energy,supra, 257 Ga.App. at 757, 572 S.E.2d 91, had sold gas to its customers that it had not tendered to Atlanta Gas Light.The superior court and the parties refer to this as a “short” position on the part of the marketer.Catalyst's “short” position meant that, ordinarily, it would pay other marketers in a “long” position for the gas imbalance, but “[a]lthough many of the long marketers have filed proof of claims against Catalyst in bankruptcy court, as unsecured creditors it is unlikely that there will be any appreciable distribution of funds to them.”

Atlanta Gas Light and eight marketers filed with the commission a “ Joint Petition of Marketers for Recovery of the Catalyst Shortfall.”In that petition, the marketers asserted that Catalyst's “abrupt exit from the Georgia natural gas market left it owing the True–Up participants for several months' worth of gas imbalances” and that “long” marketers were “left without any means through the approved process to recover their respective losses short of raising prices to their customers or absorbing the loss.”Arguing that other methods would impose costs directly on customers or on only some marketers, they requested that, in the exercise of the commission's discretion, certain penalties assessed against marketers and certain profit-sharing monies be redirected from the universal service fund or USF ³“to resolve the Catalyst shortfall recovery issue” by paying the marketers for Catalyst's outstanding shortfall.

After considering various responses to the petition in administrative session, the commission determined that it would temporarily divert discretionary funds from the universal service fund to Atlanta Gas Light and the marketers, to the extent of sixty percent of the Catalyst shortfall.Upon motion for reconsideration by MXenergy and one other marketer, asserting for the first time that a constitutional “takings” issue was implicated, the commission declined to reconsider its order, noting:

The true-up process was approved by the Commission, however, it was designed and implemented by agreement between the marketers and AGLC [Atlanta Gas Light].The record in this case is clear that the marketers chose to enter the free market gas industry established in Georgia.The marketers, along with AGLC, designed and implemented a reconciliation process for nomination and delivery of natural gas.The Catalyst shortfall is the result of the competitive business decisions in a free market-based economy not the taking of private property for public use.

MXenergy appealed to the superior court, contending that the commission's failure to compensate it for one hundred percent of its share of the Catalyst shortfall amounted to a “taking” in violation of the Georgia and United States Constitutions.U.S. Const. amend. V;Ga. Const. of 1983, Art. I, Sec. III, Par. I.After receiving briefs and conducting a hearing, the superior court concluded that the true up of the shortfall caused by the Catalyst bankruptcy was a consequence of that bankruptcy rather than a taking of MXenergy's property, and further concluded that the regulatory policy decision of the commission to override its staff recommendation and allocate some funds to MXenergy from the universal service fund was supported by the evidence, was within the discretion of the commission, and was not arbitrary or capricious.We agree, for the reasons stated below.

1.We first consider MXenergy's contention that the trial court applied an incorrect standard of review.As we noted in Infinite Energy,supra, in response to the same contention:

The appropriate standards for judicial review of agency decisions are set forth in OCGA § 50–13–19(h), which provides:

The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact.The court may affirm the decision of the agency or remand the case for further proceedings.The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) In excess of the statutory authority of the agency; (3) Made upon unlawful procedure; (4) Affected by other error of law; (5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Pursuant to this Code section, courts review agency findings of fact to determine whether they are supported by any evidence.And in considering agency conclusions of law, courts conduct a de novo review.

(Citations, punctuation and footnotes omitted.)Infinite Energy,supra, 257 Ga.App. at 758(1), 572 S.E.2d 91.Here, as in Infinite Energy,we presume that the trial court knows the law and faithfully performs its duties, and we do not presume that the trial court erred in its application of the appropriate standard simply because its order does not contain the words “de novo review.”Id. at 759(1), 572 S.E.2d 91.

The record contains no showing that the trial court applied an incorrect standard to any legal conclusions made by the commission.Infinite Energy,supra, 257 Ga.App. at 758(1), 572 S.E.2d 91 Both at the hearing and in its order, the trial court correctly framed the issue—whether the commission's decision violated the “takings clause” of the Georgia or United States Constitution—and explicitly considered it at length, ultimately rejecting MXenergy's contention that a constitutional violation occurred.“ Because there is no evidence in the record affirmatively showing that the court applied the wrong standard of review, we will not presume error.”(Citation and footnote omitted.)Id.

2.We next consider whether the application of the true up process to the shortfall caused by Catalyst's bankruptcy violated the takings clauses of the United States and Georgia Constitutions.We agree with the trial court that it did not.

As the superior court noted, the concept of taking private property for public use “has always been understood as referring only to a direct appropriation, and not to consequential injuries resulting from the exercise of lawful power.It has never been supposed to have any bearing upon or to inhibit laws that indirectly work harm and loss to individuals.”(Citation and punctuation omitted.)Louisville & Nashville R. Co. v. Mottley,219 U.S. 467, 484, 31 S.Ct. 265, 55 L.Ed. 297(1911).

MXenergy argues that Louisville & Nashville does not apply here because it involved the cancellation of a private contract between two parties by subsequent statute, not the “forced appropriation of physical property by the government for its own purposes.”But this description is inapposite.The commission did not forcibly appropriate MXenergy's property; MXenergy, as part of its voluntary participation in a regulatory scheme to which it had consented through its certification as a natural gas provider, nominated and delivered a specified amount of natural gas to the common system of Atlanta Gas Light.When another marketer later failed to fulfill its ...