Office of Consumer Advocate, Consumer Advocate Div., Dept. of Justice, State of Iowa v. Utilities Bd., Utilities Div., Dept. of Commerce, State of Iowa
| Decision Date | 21 February 1990 |
| Docket Number | No. 89-229,89-229 |
| Citation | 452 N.W.2d 588 |
| Parties | OFFICE OF CONSUMER ADVOCATE, CONSUMER ADVOCATE DIVISION, DEPARTMENT OF JUSTICE, STATE OF IOWA, Appellant, v. UTILITIES BOARD, UTILITIES DIVISION, DEPARTMENT OF COMMERCE, STATE OF IOWA, Appellee, v. UNION ELECTRIC COMPANY, Amsted Industries, Inc., et al., and City of Keokuk, Appellees. |
| Court | Iowa Supreme Court |
James R. Maret, Consumer Advocate, Alexis K. Wodtke, and William A. Haas, Dept. of Justice, for appellant.
Susan Allender and Diane Munns, Utilities Div., Dept. of Commerce, for appellee Utilities Bd.
Paul Agathen, St. Louis, Mo., and Sheila K. Tipton and David J. Lynch, of Bradshaw, Fowler, Proctor & Fairgrave, Des Moines, for appellee Union Elec. Co.
John E. Kultala, of Dickey, Smith, Kultala & McDonald, Keokuk, for appellees Amsted Industries Inc., et al.
Considered by McGIVERIN, C.J., and HARRIS, SCHULTZ, NEUMAN and ANDREASEN, JJ.
Union Electric Company (Union) is a public utility furnishing electricity in Missouri, Illinois, and Iowa. In this appeal, we review a decision of the Utilities Board (board) granting Union's request for an increase in its Iowa electrical rates. Union sought the increase in rates to recover investments made in two nuclear power plants--one which was completed and one which was cancelled.
Both plants were based on a standardized plan drawn up on behalf of Union and four other utilities in the early-1970's. Construction of "Callaway I" nuclear power plant began in 1976, and it was completed in December 1984. There were numerous construction delays. Construction of "Callaway II" never began. Rather, planning was suspended in February 1977, and the project was cancelled in October 1981.
Union filed its application for an electric rate increase with the board (then the Iowa State Commerce Commission) in April 1985. Union already had undertaken rate proceedings in other states. See In re Union Elec. Co., 67 P.U.R.4th 218 (Ill. Commerce Comm'n 1985); In re Union Elec. Co., 66 P.U.R.4th 202 (Mo. Pub. Serv. Comm'n 1985). Union's notice to its Iowa customers showed it was asking for a rate increase to be phased-in over five years, or, in the alternative, a single, full rate increase.
The Office of Consumer Advocate, the City of Keokuk, Amsted Industries, Inc., and others intervened. To resolve a number of contested issues, they entered into stipulations with Union. One stipulation provided that the board approve an extension of the ten-month deadline it operates under so that additional actual data could be collected on the operation of Callaway I. The board, however, refused to approve an extension of the deadline.
Another stipulation provided that the detailed report of the Missouri commission constituted a prima facie case for the disallowance of $284 million from the rate base and shifted to Union the burden of establishing the prudence of those expenditures. The board approved the stipulation, but later used a different method of determining the rate base. In a broad outline, the board determined (1) Union's notice to its customers was adequate; (2) the stipulation did not bind it to apply any particular method in arriving at a rate base; (3) the appropriate method resulted in a disallowance of the last ten months of the allowance for funds used during construction (AFUDC) from the rate base; (4) Union did not delay its Iowa application unreasonably, entitling it to AFUDC after Callaway I was placed in service; (5) common costs for Callaway I and II should be included in the rate base as costs for Callaway I; (6) Union could recover the costs of Callaway II up to its cancellation in 1982; and (7) Iowa's share of the rate base should be determined according to a twelve-month coincident peak (12-CP) method.
On judicial review of agency action in the district court, the board's decision was upheld, with the following exceptions: (1) Union was not entitled to AFUDC after Callaway I was placed in service, (2) common costs for Callaway I and II could not be treated solely as costs of Callaway I, (3) Union could not recover costs of Callaway II after planning was suspended in 1977, and (4) the board should have used a four-month coincident peak method (4-CP) in determining Iowa's share of the rate base.
The Office of Consumer Advocate appealed the decision of the district court upholding the board's decision on the notice issue, the effect of the stipulation approved by the board, the extension of the ten-month deadline, and recovery of the costs of Callaway II. The board appealed the court's decision reversing the board on the allowance of AFUDC after Callaway I's in-service date, the transfer of common costs to Callaway I, the recovery of Callaway II costs after 1977, and the jurisdictional allocation method. Union appealed the court's decision upholding the board's disallowance of the last ten months of AFUDC.
Having reviewed all issues presented by the parties, we are inclined to uphold the board's decision in all respects except where it departed from the stipulation it approved. The decision of the district court is affirmed in part and reversed in part, and the matter is remanded to the board.
When we review a rate-making decision of the utilities board, we review an agency adjudication based on "the unique individual circumstances surrounding each utility." Iowa Power & Light Co. v. Iowa State Commerce Comm'n, 410 N.W.2d 236, 241 (Iowa 1987). See Iowa Code § 17A.2(2) (1989) (). We review for errors of law or conclusions by the board unsupported by substantial evidence in the record made before the board when that record is viewed as a whole. Office of Consumer Advocate v. Iowa State Commerce Comm'n, 428 N.W.2d 302, 304 (Iowa 1988). See Office of Consumer Advocate v. Iowa State Commerce Comm'n, 419 N.W.2d 373, 374 (Iowa 1988). Our "hands-off" policy on judicial review recognizes "that final agency determinations must be undisturbed when based on accurate application of legal principles, and when they are within the scope of expertise assigned to the agency." Office of Consumer Advocate v. Utilities Board, 449 N.W.2d 383, 385 (Iowa 1989).
We note the utilities board is not required by statute to follow any particular formula in computing the rate base, determining a reasonable rate of return, or allocating costs among jurisdictions or customer classes. See Davenport Water Co. v. Iowa State Commerce Comm'n, 190 N.W.2d 583, 594-99 (Iowa 1971). Where, as here, the legislature fails to provide a formula for the board to follow, courts cannot reject the one the board employs unless it "plainly contravenes the statutory scheme of regulation," or violates a rule of the board. See Colorado Interstate Co. v. FPC, 324 U.S. 581, 589, 65 S.Ct. 829, 833, 89 L.Ed. 1206, 1216 (1945). The board's choice of methods involves judgment of a myriad of facts and has no claim to an exact science. See id.
Accordingly, the appropriateness of the formula applied by the board in a given case raises questions of fact, not questions of law. Id. at 590, 65 S.Ct. at 833, 89 L.Ed. at 1216. If the board's choice of a method is supported by substantial evidence in the record when viewed as a whole, that choice must remain undisturbed on appeal. We have no authority to determine whether the board acted "wisely" in adopting a particular policy. Iowa-Ill. Gas & Elec. Co. v. Iowa State Commerce Comm'n, 412 N.W.2d 600, 604 (Iowa 1987). Rather, we will defer to the board's decisions in this highly technical area if they are within the zone of reasonableness. Office of Consumer Advocate v. Iowa State Commerce Comm'n, 432 N.W.2d 148, 152 (1988).
By statute, all public utilities must give "written notice of a proposed increase of any rate or charge to all affected customers." Iowa Code § 476.6(5). This is the initial step in seeking a rate increase and unless notice is given, the board has no jurisdiction to permit rates proposed by a utility to be put into effect. See 73B C.J.S. Public Utilities § 45 at 259 (1983). When the adequacy of the statutorily required notice is questioned, the jurisdiction of the board also is questioned. Thus, the board should promptly determine whether adequate notice has been given before proceeding further since notice inadequacies, if any, may be more easily corrected at earlier stages of the proceedings.
If the public utility is subject to rate regulation, the statute requires the notice to state "that the customer has a right to file a written objection to the rate increase and that the affected customers may request the board to hold a public hearing to determine if the rate increase should be allowed." Iowa Code § 476.6(5). Therefore, the minimum notice established by statute must alert affected customers of the proposed rate increase, the right to object, and the right to request a hearing before the board.
Further notice requirements are established by rules promulgated by the board. See Iowa Code § 476.6(5) (). To the extent these rules are within the statutory authority of the board, they have the force and effect of law. See Sommers v. Iowa Civil Rights Comm'n, 337 N.W.2d 470, 475 (Iowa 1983). If the utility company uses the board's notification forms, prior approval of the notice is unnecessary. 199 Iowa Admin. Code § 7.4(1)(c)(1). If the notification is not in substantial compliance with the prescribed forms, the utility must seek prior approval of the notice from the board. 199 Iowa Admin. Code § 7.4(1)(d)(1). By rule, notice found deficient by the board does not constitute adequate notice under Iowa Code section 476.6(5). 199 Iowa Admin. Code § 7.4(1)(d)(4).
The notification forms prescribed by the board for use by rate-regulated utilities attempt to...
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