Peoples Natural Gas Co., a Div. of InterNorth, Inc. v. Minnesota Public Utilities Com'n

• Decision Date: 24 April 1984
• Docket Number: No. C6-83-1684,C6-83-1684
• Citation: 348 N.W.2d 347
• Parties: PEOPLES NATURAL GAS COMPANY, a Division of InterNorth, Inc. v. MINNESOTA PUBLIC UTILITIES COMMISSION, Respondent.
• Court: Minnesota Court of Appeals

Page 347

348 N.W.2d 347

PEOPLES NATURAL GAS COMPANY, a Division of InterNorth, Inc. v. MINNESOTA PUBLIC UTILITIES COMMISSION, Respondent.

No. C6-83-1684.

Court of Appeals of Minnesota.

April 24, 1984.

Review Granted November 30, 1984.

Syllabus by the Court

1. Under the circumstances of this case, the PUC had implied authority to order a refund of rates not placed under bond.

2. A public utility has no protectible property interest in revenues collected in contravention of Minn.Stat. § 216B (1980).

Elmer B. Trousdale, Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Phillip Crowley, Omaha, Neb., for Peoples Natural Gas Co., a Div. of InterNorth, Inc., petitioner.

Hubert H. Humphrey, III, Atty. Gen., Karl Sonneman, Allen E. Giles, Sp. Asst. Attys. Gen., St. Paul, for Minnesota Public Utilities Com'n, respondent.

Paul W. Fox, Lawrence C. Acker, Washington, D.C., for intervenor The Hanna Mining Co.

Robert S. Lee, Minneapolis, for intervenors Erie Mining Co. and Hibbing Taconite Co.

Heard, considered and decided by the Court en banc.

OPINION

POPOVICH, Chief Judge.

This is an appeal by Peoples Natural Gas Company (Peoples) from the August 23, 1983 order of the Minnesota Public Utilities Commission (PUC). The order required Peoples to refund $829,917.17, plus interest and taxes, to Hanna Mining Company (Hanna), Erie Mining Company (Erie), and Hibbing Taconite Company (Hibbing), three of Peoples' large-volume customers. The refund was a rebate from the rates these taconite companies paid during the 1980 Peoples' rate case. The amount of the refund was the difference between the rate actually paid and the rate ultimately approved by the PUC.

Peoples' request for reconsideration of the refund order was denied by the PUC on October 24, 1983. On appeal, Peoples challenges the authority of the PUC to order such a refund and alleges that the refund order was an unconstitutional taking without due process of law. We affirm.

FACTS

Erie, Hibbing and Hanna are three taconite companies that purchase natural gas from Peoples. Historically the rates Peoples charged its various taconite customers depended on individually negotiated contracts. With the passage of the Minnesota Public Utility Act in 1974, however, the Minnesota Public Service Commission (PSC or Commission) was empowered to regulate the rates of public utilities. The utilities submitted their existing rate schedules to the commission and those rates became the lawful rates. Any changes or modification of the rates after January 1, 1975, however, required Commission approval.

In 1976 Erie learned that the rates Peoples charged various taconite companies varied substantially. Erie filed an informal and then formal complaint with the commission. An investigative proceeding was conducted and on August 17, 1978 the commission issued findings of fact, conclusions of law and order in In the Matter of Certain Charges and Practices of Peoples Natural Gas Division of Northern Natural Gas Company, Imposed on Certain Large Power (Volume Gas) Customers, Docket No. G-0-11/M-77-42 (Minn.P.S.C. August 17, 1978). (Erie complaint case.) The Commission declared the differing rates Peoples charged various taconite companies unlawful and stated:

1. (a) Because the Commission has jurisdiction to govern rates for Peoples direct-sale customers; (b) the present rates are discriminatory within and between customer classes; and (c) the demand rate is unreasonable during periods of curtailment; (d) Peoples is hereby ordered to submit a rate schedule to be considered when Peoples petitions the Commission for a general rate increase which will eliminate the inequities, including all demand charges during periods of curtailment.

Id.

A motion for reconsideration was made and on December 6, 1978 the Commission issued its order after reconsideration. The original order was modified to require Peoples to submit a new rate schedule for the taconite companies and other similarly situated direct sale customers.

Peoples submitted three alternative rate schedule proposals on January 19, 1979 and the PSC selected one of the proposed schedules on August 10, 1979.

The rate schedule selected should have become effective 60 days later. Implementation of the new rate schedule was stayed, however, pending the outcome of Peoples' appeal to the Minnesota Supreme Court. On appeal, Peoples claimed that the Commission lacked the authority to regulate Peoples' direct sales to the taconite companies. The Supreme Court disagreed. See Northern Natural Gas Company v. Minnesota Public Service Commission, 292 N.W.2d 759 (Minn.1980).

Following the Supreme Court's decision, the Public Utilities Commission (PUC) ¹ issued a final order in the Erie complaint case. The order affirmed its previous decisions and required Peoples to file a general rate case by August 21, 1980. The order states:

By its Findings of Fact, Conclusions of Law and Order dated August 17, 1978, the Commission asserted that [sic] jurisdiction, found Peoples' direct-sale contract rates to be discriminatory, and ordered Peoples to submit new rates at the time of a general rate case filing.

* * *

* * * Therefore, the Commission will order Peoples to submit a general rate case filing under M.S. § 216B.16 and in accordance with Minn.Reg. PUC 400 et seq. As part of that filing, Peoples shall propose a rate for its large volume direct-sale customers consistent with the class cost-of-service study ordered on March 4, 1980.

The Commission will not now order the rates for those large volume customers changed. Thus, the Commission's October 11, 1979, Order retaining Peoples' existing contractual rates will remain in effect until Peoples institutes new rates under bond pursuant to M.S. § 216B.16.

The amended final order extended the deadline for filing a rate case to November 31, 1980.

Peoples filed a general rate case petition on December 1, 1980. Ninety days later Peoples placed the rates proposed for its general service customers under bond pursuant to Minn.Stat. § 216B.16 (1980). The rates proposed for the taconite companies were not placed under bond. Peoples continued charging the taconite companies the contract rates previously adjudged discriminatory.

On November 25, 1981, the PUC issued its findings of fact, conclusions of law and order in In the Matter of the Petition of Peoples Natural Gas Company, Division of InterNorth, Inc., for Authority to Increase Rates for Sales of Natural Gas in the State of Minnesota, Docket No. G-011/GR-80-850 (Minn. P.U.C. November 25, 1981) (the rate case). Stating that the Erie complaint case played a large role in bringing about the rate case, the PUC adopted a demand-commodity rate for Peoples' direct sale taconite companies.

The PUC issued its order approving rates and directing refunds in the rate case on February 22, 1982. Even though the contract rates Erie, Hibbing and Hanna paid during the rate case exceeded the taconite rate ultimately authorized, the PUC denied the taconite companies' request for a refund. The PUC's order stated:

Erie and Hibbing, as well as Hanna, argued that they were entitled to refunds for gas volumes taken since March 1, 1981, the date that Peoples put rates under bond in this docket for general service customers. These three Taconite customers were charged at a contract rate during the rate case proceeding in excess of the rate approved herein for Taconite Service. In support of their argument, Erie and Hibbing cited the Commission's Order, In the Matter of Certain Charges and Practices of Peoples Natural Gas Division of Northern Natural Gas Company, Imposed on Certain Large Power (Volume Gas) Customers, Docket No. G-011/M-77-42 (July 10, 1980) at 3 as follows.

* * *

* * *

The Commission will not now order the rates for those large volume customers changed. Thus, the Commission's October 11, 1979 Order retaining Peoples existing contractual rates will remain in effect until Peoples institutes new rates under bond pursuant to M.S. § 216B.16. (emphasis added)

* * *

* * *

The Commission finds that no refund is due to the taconite customer class in general nor to Erie, Hibbing, and Hanna specifically. * * * The Commission concludes that the contractual rates for the taconite companies were intended to remain legally in effect until Peoples' instituted new rates under bond for the taconite class in the instant rate case. Peoples' elected to continue to charge the legal contractual rate throughout this case rather than institute new rates under bond for the taconite class. Therefore, no refund is legally required, nor permitted, for Erie, Hibbing and Hanna. To do otherwise under these circumstances would amount to retroactive ratemaking by the Commission which is prohibited by M.S. § 216B.16, Sub. 5 and M.S. § 216B.23.

The taconite companies' motions for reconsideration by the PUC were denied as untimely but the St. Louis County District Court reversed this decision and remanded the case to the PUC for reconsideration. On August 23, 1983, the PUC issued its order on remand after reconsideration in the rate case. Stating that it had not adequately considered the history of the legal status of the taconite rates, the PUC reversed its decision regarding a refund for Erie, Hibbing and Hanna. Peoples was ordered to file a plan of refund for these three companies within 15 days of service of the order.

On October 24, 1983, the PUC issued an order directing Peoples to immediately issue refund checks to Erie, Hibbing and Hanna. The refund ordered covered the period from March 1, 1981 to February 9, 1982, the period for which Peoples could have placed the taconite rates under bond. The amount of each refund check was to be the difference between the contract rate paid and the rate ultimately authorized plus interest at the average prime rate. A petition and writ of certiorari were filed on October 27, 1983.

On November 4, 1983, the PUC commenced a new...