Occidental Chemical Co. v. Mayo, 47928

• Decision Date: 14 July 1977
• Docket Number: No. 47928,47928
• Citation: 351 So.2d 336
• Parties: OCCIDENTAL CHEMICAL COMPANY, Petitioner, v. William T. MAYO, William H. Bevis, and Paula Hawkins, as and constituting the Florida Public Service Commission, Respondents.
• Court: Florida Supreme Court

Page 336

351 So.2d 336

OCCIDENTAL CHEMICAL COMPANY, Petitioner, v. William T. MAYO, William H. Bevis, and Paula Hawkins, as and constituting the Florida Public Service Commission, Respondents.

No. 47928.

Supreme Court of Florida.

July 14, 1977.

Rehearing Denied Nov. 21, 1977.

Robert R. Feagin, III and George L. Varnadoe, of Holland & Knight, Tampa, for petitioner.

William L. Weeks, Prentice P. Pruitt and Donald R. Alexander, Tallahassee, for the Florida Public Service Commission, respondents.

S. A. Brandimore, R. W. Neiser, H. A. Evertz, III and J. A. McGee, St. Petersburg, and B. Kenneth Gatlin and John W. Costigan, of Madigan, Parker, Gatlin, Truett & Swedmark, Tallahassee, for Florida Power Corp., intervenor-respondent.

Woodie A. Liles, Donald W. Weidner and C. Earl Henderson, Tallahassee, for the Citizens of the State of Florida, intervenors.

ENGLAND, Justice.

Occidental Chemical Company purchases electric power from Florida Power Corporation. When Florida Power sought a general rate increase from the Public Service Commission early in 1974, Occidental intervened in the rate proceeding. Eventually, the Commission granted Florida Power a rate increase of approximately $45,000,000, and Occidental now asks us to review that portion of the Commission's award order which allocates the rate increase among Florida Power's classes of customers. ¹ Occidental asks, alternatively, that we invalidate the Commission's entire decision because it was made in violation of Florida's so-called "Sunshine Law", Section 286.011, Florida Statutes (1975). In this Occidental is joined by public counsel for the citizens of Florida.

Occidental's major concern as to its share of the new rates is that the Commission rejected a predominant "cost of service" basis for allocating the company's new rates among customers, and chose instead to allocate the additional revenues among Florida Power's customers mainly by a proportional increase of rates previously paid by Florida Power's several classes of customers.

A limited review of the development of this controversy will place it in perspective. The Commission held several days of public hearings on the proposed rate increase, in which Occidental actively participated. During these hearings the Commission received considerable evidence regarding the amount of Florida Power's proposed rate increase, and the fairness of its rate structure. Occidental attempted to convince the Commission to use a "cost of service" method for allocating any rate increase among customers, believing its consumption costs Florida Power less to generate and distribute than other customer classes, such as residential. There was general agreement among the witnesses who appeared before the Commission as to the fairness of a "cost of service" rate structure but there was little agreement as to how to determine the costs of serving various users. ²

At the close of all testimony, some of the hearing participants, including intervenors, requested that they be provided copies of the Commission staff's recommendations prior to the submission of their briefs. The requests were denied. Counsel for the Commission stated, however, that copies of the staff's recommendations would be provided to the parties at the same time they were received by the Commission, or two or three days earlier, if possible.

On July 21, 1975, the Commission held a scheduled, public "agenda conference" at which it considered Florida Power's rate request, and on that date the commissioners and all parties were given a copy of the staff's 22 1/2 page proposed partial order. (The recommendations of the rate department staff had been filed with the clerk of the Commission three days earlier, on a Friday. These included a recommendation that the increase in rates be spread proportionally among the company's classes of customers.) The proposed partial order approved the rate design of the company during the period that an interim rate increase had been in effect, but it made no recommendation for permanent rate design other than rejecting Occidental's position on "cost of service".

Florida Power's portion of the agenda conference lasted for approximately 90 minutes. During that time the only mention of rate design came as staff counsel concluded an oral recitation of recommendations:

"Finally, the overall increase 19.9 percent. This compares with about 15 and a half to 15.9 per cent granted on an interim basis. These increases we are recommending be spread in a proportional manner to that proposed by the company originally." (emphasis supplied)

The Commission made no inquiry and there was no other discussion on this recommendation, which, of course, implicitly rejected Occidental's major concern throughout the entire proceeding. After the discussion the commissioners recorded on a vote sheet their individual votes on the staff's overall recommendation and some minor evidentiary matters.

The following day Order No. 6794 was issued, consisting of 27 1/2 pages and containing the staff's 22 1/2 page proposal essentially verbatim. ³ Discussion in the extra five pages was confined to "General Tariff Design" and "Distribution of Revenues", the latter section expressly rejecting intervenors' attempt to use cost of service as the sole or dominant criterion for allocating rates. The balance of these pages contained the Commission's confirmation of facts discussed in the first 22 1/2 pages, a set of formal "findings of fact" essentially repeating matters set out in the first 22 1/2 pages, directive orders and two partial dissents not relevant here. Among the formal findings were statements

"12. That there is no legal requirement that rates for different classes of service must be either uniform or equal or that they generate an equal amount of return.

13. That in designing rates many factors must be considered, including but not limited to such factors as history of the tariff, rate continuity, public acceptance, value of service, cost of service, conservation, competition, and consumption and load characteristics, and that no single factor is controlling and susceptible of precise quantification but rather each must be viewed collectively in designing said rates."

Occidental contends that the Commission's decision regarding cost of service is neither supported by adequate findings of fact nor competent and substantial evidence. The Commission, joined by Florida Power, contests this assertion and further argues that cost of service need not be the sole or dominant factor in structuring rates anyhow. ⁴

Three interrelated issues presented for our review are the choice of allocation criterion, the sufficiency of the evidence, and the adequacy of the Commission's findings. Treating the first, we note that no statute mandates a pure "cost of service" rate structure. In the past, we have recognized that other criteria may be used by the Commission in setting fair and reasonable rates. State v. Bevis, 283 So.2d 348 (Fla.1973) (value of service). See also Market Street Railway v. Railroad Commission of California, 324 U.S. 548, 65 S.Ct. 770, 89 L.Ed. 1171 (1945). In Idaho Power Co. v. Thompson, 19 F.2d 547, 579-80 (S.D.Idaho 1927), the complexity of the problem and the need for a deference to agency expertise were described as follows:

"Rate schedules involve a complexity of considerations. As a whole, they must yield a reasonable return on the investment. A relatively low rate may yield a larger aggregate net return than one that is relatively high. Rates need not be uniform, but, with rare exceptions, each should be above the cost of the particular service. A particular rate may be reasonable from the standpoint merely of cost (including investment); but, if it is prohibitive, because in excess of what the consumer can afford to pay that is, in excess of its value to the consumer it may be unreasonable. If it is the duty of the commission to see to it that the rates, both as a whole and for each particular service, are just to the utility and reasonable for the consumer, and nondiscriminatory as between consumers, it must have the power, not only to fix the rates for each class, but to classify."

It may be, as Occidental contends, that "cost of service" is an ideally fair basis for structuring utility rates between various classes of users. Actually, we do not read Order No. 6794 as deciding otherwise. The Commission simply found on this record that there was no present means to implement a pure "cost of service" rate structure. Given the multiplicity of methods suggested by the experts to allocate expenses between various users, we cannot say that the Commission departed from the essential requirements of law in relying on a range of criteria for this purpose. It is immaterial whether we would agree or disagree with Occidental as to the weight to be given a particular "cost of service" formula. The Commission sets rates; not this Court. Florida Retail Federation, Inc. v. Mayo, 331 So.2d 308 (Fla.1976).

An entirely separate issue is whether the Commission's rate structure selection is supported by competent, substantial evidence. An examination of the relevant portions of Order No. 6794 discloses that, except for a few unexplained re-classifications of customers, the Commission retained the basic rate structure previously approved for Florida Power as being fair and reasonable. It is difficult for us to overturn a decision of the Commission to continue a rate structure previously found to be fair and reasonable, absent a clear showing in the record that the earlier structure was arbitrary or that changed circumstances have made it unreasonable. In this case, Florida Power fully explained why its proposal for new rates was based generally on its previous rate design, and why it proposed to make some modifications. The record contains adequate evidence to support the Commission's decision.

The third issue is whether the order contains a...