PacifiCorp v. Public Service Com'n of Wyo., 03-211.

• Decision Date: 13 December 2004
• Docket Number: No. 03-211.,03-211.
• Parties: PACIFICORP, Appellant (Petitioner), v. The PUBLIC SERVICE COMMISSION OF WYOMING, Steve Ellenbecker, Steve Furtney and Kristin H. Lee, in their Official Capacities as Commissioners of the Public Service Commission, Appellees (Respondents), and Wyoming Retail Merchants Association; Wyoming Lodging and Restaurant Association; Wyoming Hospital Association; Wyoming Automobile Dealers Association, Inc.; AARP; The Wyoming Industrial Energy Consumers; Kinder Morgan Interstate Gas Transmission, LLC; Canyon Creek Compression Company; and The Office of Consumer Advocate, Appellees (Intervenors).
• Court: Wyoming Supreme Court

103 P.3d 862

2004 WY 164

PACIFICORP, Appellant (Petitioner), v. The PUBLIC SERVICE COMMISSION OF WYOMING, Steve Ellenbecker, Steve Furtney and Kristin H. Lee, in their Official Capacities as Commissioners of the Public Service Commission, Appellees (Respondents), and Wyoming Retail Merchants Association; Wyoming Lodging and Restaurant Association; Wyoming Hospital Association; Wyoming Automobile Dealers Association, Inc.; AARP; The Wyoming Industrial Energy Consumers; Kinder Morgan Interstate Gas Transmission, LLC; Canyon Creek Compression Company; and The Office of Consumer Advocate, Appellees (Intervenors).

No. 03-211.

Supreme Court of Wyoming.

December 13, 2004.

Representing Appellant PacifiCorp: Paul J. Hickey and Roger C. Fransen of Hickey & Mackey, Cheyenne, Wyoming; James M. Van Nostrand and Sean E. O'Day, Portland, Oregon. Argument by Mr. Hickey.

Representing Appellee (Respondent) Public Service Commission of Wyoming: Patrick J. Crank, Wyoming Attorney General; Michael L. Hubbard, Deputy Attorney General; Harry D. Ivey, Assistant Attorney General; Douglas J. Moench, Senior Assistant Attorney General, Cheyenne, Wyoming. Argument by Mr. Moench.

Representing Appellee (Intervenor) Wyoming Industrial Energy Consumers: Robert M. Pomeroy, Jr., and Thorvald A. Nelson of Holland & Hart, LLP, Greenwood Village, Colorado; Marcy G. Glenn of Holland & Hart, LLP, Denver, Colorado; Walter F. Eggers III of Holland & Hart, LLP, Cheyenne, Wyoming. Argument by Mr. Pomeroy.

Representing Appellee (Intervenor) AARP: Dale W. Cottam of Hirst & Applegate, P.C., Cheyenne, Wyoming.

Representing Appellees (Intervenors) Wyoming Retail Merchants Association, Wyoming Lodging and Restaurant Association, Wyoming Hospital Association, and Wyoming Automobile Dealers Association, Inc.: Steven F. Freudenthal of Freudenthal, Salzburg & Bonds, PC, Cheyenne, Wyoming.

Representing Appellee (Intervenor) The Office of Consumer Advocate: Alexander K. Davison and Wendy Curtis Palen of Patton & Davison, Cheyenne, Wyoming. Argument by Mr. Davison.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

GOLDEN, Justice.

[¶ 1] PacifiCorp appeals the denial by the Public Service Commission of Wyoming (the Commission) of its request for the recovery from Wyoming ratepayers of certain extraordinary and unanticipated net excess power costs incurred by PacifiCorp during what has become commonly referred to as the Western power crisis of 2000-01. We affirm.

ISSUES

[¶ 2] PacifiCorp presents the following issues:

1. Did the Public Service Commission err when it relied upon a "financial harm" standard, which was not limited to PacifiCorp's Wyoming costs and revenues, to deny PacifiCorp's entire request to recover $91 million of wholesale power costs?

2. Did the Public Service Commission err when it based its decision on a "regulatory compact" theory that is inconsistent with both its cost pass-through rules and its statutory duty to determine just and reasonable rates?

3. Did the Public Service Commission err when it declared that granting PacifiCorp's request to include certain extraordinary wholesale power costs in rates would constitute retroactive ratemaking?

4. Did the Public Service Commission err when it based its decision on the application of appellate "end results" and "substantial evidence" standards?

5. Did the Public Service Commission err when it failed to make adequate findings of fact and conclusions of law and failed to explain its departure from agency precedent in making its decision?

[¶ 3] The appellees submitted three separate briefs. Each brief focuses on the issues raised by PacifiCorp in slightly different terms. The Public Service Commission simplifies the issue to: whether the Public Service Commission decision increasing PacifiCorp's rates was in accordance with the law and facts when the approved rate base did not include past losses PacifiCorp incurred purchasing power on the wholesale market?

[¶ 4] The Office of Consumer Advocate responds to PacifiCorp's issues with the following:

A. The Commission correctly applied the standards found in Wyoming statutes when determining PacifiCorp's application for Hunter outage costs and excess power costs.

B. There is substantial evidence to support the Commission's determination of just and reasonable rates which are in the public interest.

C. If the Commission applied a lower burden of proof upon the applicant, it is harmless error.

D. The Commission's order meets the requirements of Wyo. Stat. § 16-3-110.

[¶ 5] The Wyoming Industrial Energy Consumers along with the various other associations involved in this case, in a joint brief, phrase the issues as:

A. Was the Commission's decision to exercise its discretion to follow traditional regulatory practices rather than grant PacifiCorp's extraordinary requests for cost recovery supported by substantial evidence?

B. Was the Commission correct in concluding that raising rates due to the Hunter Outage would constitute impermissible retroactive ratemaking?

C. Was the Commission correct in concluding that recovering the deferred costs in rates would not be just and reasonable?

D. Did the Commission properly consider whether its decision would unduly harm PacifiCorp financially?

E. Did the Commission apply the appropriate legal standards to reach its decisions?

FACTS

[¶ 6] The background facts are not contested. PacifiCorp is a public utility operating in Wyoming. PacifiCorp supplies power to its retail customers through means of its own power generation facilities as well as purchasing power on the wholesale market. During the timeframe in issue, PacifiCorp also engaged in wholesale power market trading activities. During 2000-2001, PacifiCorp's generation capacity diminished, in part for reasons determined to be beyond its control. Most significantly for this appeal, one of PacifiCorp's electric generation plants, known as the Hunter No. 1 (hereinafter referred to simply as "Hunter"), suffered a catastrophic failure. The Hunter plant was offline for repairs between November 2000 and May 2001. In addition, because of an ongoing drought, power generated from PacifiCorp's hydroelectric plants also was below normal.

[¶ 7] During the same timeframe, between the spring of 2000 and the spring of 2001, wholesale prices in the western power markets increased dramatically.¹ In order to meet its supply commitments, PacifiCorp was forced to purchase increased amounts of power from the volatile wholesale power market at unforeseeably high prices. The wholesale price PacifiCorp paid for power far exceeded the costs PacifiCorp would have incurred producing the same power from its Hunter plant. The wholesale price also far exceeded Wyoming retail rates. PacifiCorp covered these excess purchased power costs from May 2000 until the end of October 2000.

[¶ 8] On November 1, 2000, PacifiCorp filed an application, which the Commission granted, to begin a "deferred account." The deferred account allowed PacifiCorp to track costs that PacifiCorp wanted to preserve for later recovery. The costs PacifiCorp listed in the deferred account were the general net excess wholesale power costs PacifiCorp alleged it incurred in supplying Wyoming ratepayers. In granting PacifiCorp's application, the Commission expressly noted that the costs PacifiCorp would be allowed to list in the deferred account were for accounting purposes only. The determination of whether those costs would be recoverable would be determined at a later proceeding.

[¶ 9] On October 3, 2001, the Commission denied an application filed by PacifiCorp seeking permission to immediately begin to pass the deferred increased power costs on to its Wyoming retail ratepayers. PacifiCorp also attempted to include in the deferred account net excess power costs it alleged it incurred in purchasing power on the wholesale market to replace the power lost when the Hunter plant failed. The Commission determined that PacifiCorp had not given sufficient notice of its intent to include costs incurred as a result of the Hunter failure and denied PacifiCorp's attempt to include the Hunter costs in the deferred account. The Commission also determined that there was no present need justifying an immediate pass-on of the excess power costs in the deferred account to PacifiCorp Wyoming's retail customers. The Commission ordered a full hearing regarding PacifiCorp's requested rate increase to cover its excess power costs. Because the Commission did not allow the inclusion of the Hunter costs, PacifiCorp, wanting all issues to be brought before the Commission together, dismissed its then pending application.

[¶ 10] On May 7, 2002, PacifiCorp filed the application for a rate increase that gives rise to the instant appeal. PacifiCorp sought a rate increase totaling approximately $122 million. PacifiCorp broke the application down into three interrelated parts: 1) an increase of $30.7 million in base rates; 2) an energy surcharge to recover $60.3 million in net power costs that were listed in the deferred account (excess power costs); and 3) an energy surcharge to recover $30.705 million in net power costs triggered by the outage of the Hunter generation plant ("Hunter costs"). PacifiCorp structured its application as an application for a general rate increase and two distinct riders, one for the general excess power costs and one for the Hunter costs. Ultimately, after a full hearing on all issues, the Commission granted PacifiCorp a general rate increase of approximately $8.8 million. The Commission did not allow any surcharge for the recovery of past extraordinary costs.

[¶ 11] PacifiCorp appealed to the district court. The district court certified this appeal to this Court pursuant to W.R.A.P. 12.09(b). PacifiCorp specifically is not appealing the amount of the general rate increase approved by the Commission. PacifiCorp is only appealing the Commission's decision to deny relief on the requested...