People's Organization For Washington Energy Resources (Power) v. State of Wash. Utilities and Transp. Com'n

• Decision Date: 05 April 1984
• Docket Number: No. 49591-2,49591-2
• Citation: 101 Wn.2d 425,679 P.2d 922
• Parties: PEOPLE'S ORGANIZATION FOR WASHINGTON ENERGY RESOURCES (POWER), Northeast Washington Rural Resources Development Association (Rural Resources), Citizens For Fair Rates (CFFR), and Rosa Anna Coats, Appellants, v. STATE OF WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION and The Washington Water Power Company, Respondents.
• Court: Washington Supreme Court

Page 425

101 Wn.2d 425

679 P.2d 922

PEOPLE'S ORGANIZATION FOR WASHINGTON ENERGY RESOURCES (POWER), Northeast Washington Rural Resources Development Association (Rural Resources), Citizens For Fair Rates (CFFR), and Rosa Anna Coats, Appellants, v.STATE OF WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION and The Washington Water Power Company, Respondents.

No. 49591-2.

Supreme Court of Washington En Banc.

April 5, 1984.

Spokane Legal Services Center, James Bamberger, Terrence V. Sawyer, Norman McNulty, Spokane, for appellants.

Kenneth Eikenberry, Atty. Gen., Robert Simpson, Robert Cedarbaum, Asst. Attys.Gen., Olympia, for respondentState of Wash.

Paine, Hamblen, Coffin & Brooke, David Meyer, Spokane, for respondent Washington Water Power.

Perkins, Coie, Stone, Olsen & Williams, Douglas Little, Priscilla Derick, Seattle, amicus for respondent.

BRACHTENBACH, Justice.

This case is a challenge to a Washington Utilities and Transportation Commission(Commission) decision to grant the Washington Water Power Company(WWP) a rate increase of $20,174,000 for its electric operations.Three organizations representing low income and senior citizen ratepayers residing in WWP's service area, together with a low income, senior citizen ratepayer (appellants), contend that the Commission erred by including construction work in progress (CWIP) in WWP's rate base.The trial court upheld the Commission's decision.We reverse on the ground that RCW 80.04.250 precludes inclusion of CWIP in rate base.

On March 6, 1981, WWP filed tariff revisions designed to effect a rate increase of $21,115,000 for its electric operations.Pursuant to RCW 80.04.130, the Commission suspended the proposed revisions and ordered public hearings, in which appellants were permitted to intervene.

In its presentation before the Commission, WWP argued that $48,427,000 of CWIP should be included in its rate base.This figure represented 50 percent of WWP's projected 1981 investment in Colstrip Units 3 and 4, coal-fired generating plants under construction near Colstrip, Montana, and in Washington Public Power Supply System (WPPSS)No. 3, a nuclear plant under construction in Grays Harbor County, Washington.Generally, "rate base" represents the total investment in, or fair value of, the facilities of a utility employed in providing its service.The rate base is multiplied by a percentage, called "rate of return," to arrive at the revenue which the utility may earn.1 A. Priest, Principles of Public Utility Regulation 139(1969).Thus, inclusion of CWIP in rate base permits a utility to earn a current cash return upon capital invested in new facilities, even though the facilities are not yet producing energy for the consumer.

The Commission, however, adopted its staff's recommendation that only $15,627,000 of CWIP, representing 100 percent of WWP's investment in Colstrip Units 3 and 4 during 1980, be included in WWP's rate base.WWP was permitted to accrue an allowance for funds used during construction (AFUDC)¹ on the remaining CWIP excluded from rate base.In support of its decision, the Commission cited its conviction that "because of the magnitude of the company's present and future construction programs, the company will not be able to finance its construction projects on reasonable terms without including a portion of CWIP in rate base."

CWIP was included in WWP's rate base in yet another respect.To determine WWP's new rates, the Commission had adopted the calendar year 1980 as the "test period" during which WWP's rate base, revenues, and expenses would be evaluated.However, increased expenses and inflation can erode a rate of return established on the basis of a historic test year.The Commission's expert witness analyzed probable changes in rate base, revenue, and expenses from December 31, 1980 to November 30, 1982, and recommended an "attrition allowance"(i.e., additional rate increase) of $13,361,000.Of this amount, $10,829,000 was directly attributable to $59,722,000 of CWIP expected to be incurred on the Colstrip Units from December 31, 1980 to November 30, 1982.

The Commission adopted the recommended attrition allowance, stating that such action was necessary "in order to preserve and maintain the company's financial integrity and allow it to generate sufficient cash flow consistent with its needs for construction projects, and to attract investors at a reasonable cost".

In the hearings before the Commission, appellants insisted that any inclusion of CWIP in WWP's rate base was prohibited by RCW 80.04.250, which, they argued, limited rate base to property "used and useful" for service in Washington.The Commission rejected this argument, stating:

We have determined that the propriety of including CWIP in rate base is a matter that lies within the discretion of the Commission and is to be determined on a case-by-case basis.In effect POWER argues that RCW 80.04.250 forecloses the Commission from including any property of a regulated utility in rate base for ratemaking purposes until that property either is capable of or actively rendering service to the customers of the utility.We are of the opinion that counsel's argument is not a valid interpretation of the statute and is without merit.SeeState ex rel. Pacific Telephone & Telegraph Company v. Department of Public Service, 19 Wash.2d 200, 142 P.2d 498(1943) wherein the court held that property held by a regulated utility for future use could properly be included in the company's rate base for ratemaking purposes.

On November 25, 1981, the Commission issued its decision allowing WWP a rate increase of $20,174,000 for electric operations.Appellants filed a petition for judicial review of the Commission's decision in the Superior Court for Thurston County, naming WWP and the Commission as respondents.The trial court entered a decree upholding the Commission.We accepted direct review.

RCW 80.04.250 provides in relevant part:

Valuation of public service property.The commission shall have power upon complaint or upon its own motion to ascertain and determine the fair value for rate making purposes of the property of any public service company used and useful for service in this state and shall exercise such power whenever it shall deem such valuation or determination necessary or proper under any of the provisions of this title.

(Emphasis added.)

The issue which appellants pose is this: is CWIP "used and useful" for service within the meaning of RCW 80.04.250?If not, appellants contend the Commission exceeded its statutory authority by including the CWIP associated with Colstrip Units 3 and 4 in WWP's rate base.

The primary objective of statutory construction is to carry out the intent of the Legislature.The intent of the Legislature must be determined primarily from the language of the statute itself.Department of Transp. v. State Employees' Ins. Bd., 97 Wash.2d 454, 458, 645 P.2d 1076(1982).Where the language of a statute is plain, free from ambiguity, and devoid of uncertainty, there is no room for construction because the meaning will be discovered from the wording of the statute itself.State v. Houck, 32 Wash.2d 681, 684, 203 P.2d 693(1949).

Relying on these principles, we turn to the statutory language at issue here."Used" is defined as "employed in accomplishing something"; "useful" is defined as "capable of being put to use: having utility: advantageous: producing or having the power to produce good: serviceable for a beneficial end or object."Webster's Third New International Dictionary 2524 (1976).Thus, RCW 80.04.250 empowers the Commission to determine, for rate making purposes, the fair value of property which is employed for service in Washington and capable of being put to use for service in Washington.Obviously, an uncompleted utility plant is neither employed for service nor capable of being put to use for service; therefore, such a plant is not "used and useful" for service as required by RCW 80.04.250, and the Commission exceeded its statutory authority by including CWIP in WWP's rate base.

Our interpretation of RCW 80.04.250 is consistent with recent legislative events.In 1975, the Legislature passed Substitute House Bill 435, which would have amended RCW 80.04.250 to require the Commission to include CWIP in rate base to the extent requested by the affected utility, unless the Commission found that such inclusion was not in the public interest.The bill would also have changed the phrase "used and useful for service" to read "used or useful for service."Substitute House Bill 435, 44th Legislature(1975).However, then Governor Evans vetoed the bill as unnecessary:

From the broader perspective, however, I believe it to be very important, whenever the commission has a question before it, for the commission to have the necessary discretion to adapt and accommodate the delicate balance between utility interests and consumer interests.I also believe that all the key elements sought by proponents of the bill are within the present discretion of the commission.I have been in contact with the commission, and am certain that the commission will consider those specific elements on the appropriate occasions.

(Emphasis added.)Evans' Veto Message, Substitute House Bill 435, 44th Legislature, July 2, 1975.

The Governor's veto message does not persuade us.Although the message claims that inclusion of CWIP in rate base is already within the Commission's discretion, the source of this alleged discretion is not identified or otherwise explained.We are more impressed by the fact that the Legislature thought it necessary to amend RCW 80.04.250 to expressly permit inclusion of CWIP in rate base.An amendment of an unambiguous statute indicates a purpose to change the law.In the Matter of Allen v. Department of Employment Sec., 83 Wash.2d 145, 150, 516 P.2d 1032(1973).RCW 80.04.250 is, and was in 1975, unambiguous with respect...