Providence Gas Co. v. Burman, s. 76-57-M

• Decision Date: 02 August 1977
• Docket Number: Nos. 76-57-M,s. 76-57-M
• Citation: 119 R.I. 78,376 A.2d 687
• Parties: , 22 P.U.R.4th 103 PROVIDENCE GAS COMPANY v. Edward BURMAN et al. and Members of the Public Utilities Commission. RHODE ISLAND CONSUMERS' COUNCIL v. William W. HARSCH, Chairman of the Public Utilities Commission, et al. P., 76-76-M.P., 76-73-M.P. and 76-74-M.P.
• Court: Rhode Island Supreme Court

Page 687

376 A.2d 687

119 R.I. 78, 22 P.U.R.4th 103

PROVIDENCE GAS COMPANY v. Edward BURMAN et al. and Members of the Public Utilities Commission.

RHODE ISLAND CONSUMERS' COUNCIL v. William W. HARSCH, Chairman of the Public Utilities Commission, et al.

Nos. 76-57-M.P., 76-76-M.P., 76-73-M.P. and 76-74-M.P.

Supreme Court of Rhode Island.

Aug. 2, 1977.

[119 R.I. 107] Hinckley, Allen, Salisbury & Parsons, Michael DeFanti and Robert J. Ferranty, Providence, for Providence Gas Co.

Roberts & Willey Incorporated, Dennis J. Roberts II, Providence, for Rhode Island Consumers' Council.

Julius C. Michaelson, Atty.Gen., R. Daniel Prentiss, Sp.Asst.Atty.Gen., for respondents.

OPINION

KELLEHER, Justice.

In mid-June 1975, the Providence Gas Company (the company) filed a revised schedule of tariffs with the Public Utilities Commission (the commission) which was designed to increase the company's annual revenues by an additional $6.3 million. The commission, acting pursuant to G.L. 1956 (1969 Reenactment) § 39-3-11, as amended by P.L. 1969, ch. 240, § 5, suspended the proposed effective date of the new schedule and thereafter held a series of hearings on the company's proposal. The hearings began on October 22, 1975 and ended in mid-January 1976. The commission heard the testimony of several witnesses, some of whom appeared on behalf of the company, others were presented by the Division of Public Utilities (the division), and one who testified at the request of the Rhode Island Consumers' Council (the council). As the hearings neared their conclusion, the commission determined that the company's steadily deteriorating financial condition made it mandatory that whatever rate relief was to be granted should be awarded at the earliest possible time. Consequently, on February 13, 1976, the commission entered an order which rejected the company's proposal but authorized the filing of a revised schedule, which would increase the company's annual revenue by approximately $2.8 million. This order contained a proviso which stated that the commission's full report and order would be filed on February 23, 1976. A report and order detailing the factual and legal conclusions for the commission's February 13 order was filed on February 23.

The company and the council then filed with us a variety of petitions for certiorari. The petitions, which we have consolidated in this proceeding, raise issues that relate to the timeliness of the appeal taken by the council, the commission's findings as to a proper rate base and rate of return, and the role played by the Attorney General's Department during the administrative phase of this controversy.

I. The Timeliness of the Council's Appeal

The commission's February 13 order contained a stipulation which stated that for the purposes of claiming an appeal the order should be considered as being entered as of February 23, the day upon which the decision was to be filed. Section 39-5-1, as amended, provides that the "exclusive" vehicle for seeking judicial review of any decision or order of the commission shall be a petition for certiorari to this court, which is to be filed within 7 days from the date of such decision or order. The bifurcated approach taken by the commission casts a cloud of uncertainty as to when the 7-day appeal period begins to run.

The company filed two statutory petitions for certiorari, one filed February 20 and the other on March 1. The council took a somewhat different tack. On February 27 it filed two petitions. One was a statutory petition for certiorari, and the other was a petition asking that we issue our common law writ of certiorari.

The company, in seeking to excise the council's appeal from this controversy, claims that the commission had no power to provide in its February 13 order for the postponing of the 7-day appeal period until February 23. Thus, the company reasons that the February 13 order triggered § 39-5-1's 7-day period, and as a result the council's February 27 statutory petition was filed out of time. The company also argues that since the General Assembly has described § 39-5-1 as the "exclusive" appellate remedy, the council's common law petition must also go by the boards because of the oft-cited proposition that this court will not issue common law certiorari where the petitioner has failed to utilize another available adequate remedy. As will be seen, there is no necessity that we consider the commission's power to postpone the running of § 39-5-1 or the availability of common law certiorari in the circumstances presented by this record. ¹

Assuming arguendo that the February 13 order triggered the appeal statute, the fact remains that the commission reissued that order on February 23 by incorporating it within its report and decision of that date. Section 39-5-1 by its terms applies to any "decision or order" of the commission, and the February 23, document constitutes just such a decision or order. Consequently, the council's February 27 statutory petition was timely filed, and its objections to the findings made by the commission are properly before us.

II. Rate Base

A utility's rate base represents the total investment in or the fair value of the used or useful property which it necessarily devotes to the rendering of the regulated service; usually the largest item in a utility's rate base is its investment in plant. This investment is valued either by averaging it at the beginning and at the end of the test year ² or by determining the value as of the end of the test period. Rhode Island Consumers' Council v. Smith, 111 R.I. 271, 286, 302 A.2d 757, 767 (1973).

The company, in measuring the value of its rate base, claimed it was worth about $49.9 million. However, the commission set a value of this item at approximately $45.5 million, and the council proposes a further reduction in the commission's valuation of another.$1.2 million.

As noted earlier, there is a difference of opinion as to the formula that should be utilized in computing a company's investment in its plant. In considering this facet of the controversy, one should be aware that there is not only a difference of opinion as to the formula that should be utilized in computing the company's investment in its plant, but also as to what items are properly included in the rate base.

A. Average or end-of-the-period rate base

In considering the company's application for a rate increase, the commission has continued to adhere to its recent practice of establishing the rate base by the averaging system rather than measuring value as of the end of the test period. The company finds no fault with the averaging approach so long as the utility has experienced a period of growth. It points out that during a growth economy, a utility is constantly expanding its capital assets in order to serve new customers. Accordingly, its rate base is greater at the end of the test period than at the beginning, and the utility's revenue-producing capacity is not fully reflected during the test period because the additional plant was not in use throughout the period. Consequently, the company concedes that the averaging techniques must be used if one is to obtain a meaningful match between the test period revenues and the capital assets that will produce that revenue. Having acknowledged that the averaging approach has a place in the ratemaking process, the company now asserts that it should not be employed in this particular proceeding because the company is not experiencing anything close to a growth spurt. According to the company, it cannot expand because its gas supplies have been curtailed, and any additions to plant have been made solely for the purpose of replacing wornout equipment so that the status quo can be maintained so far as its present services and revenues are concerned. After painting such a dismal picture, the company concludes that its stagnant status bars the use of averaging because any increase in the value of its capital assets in no way reflects any increase in its income producing capacity. In such circumstances, it contends, the rationale for using an average test period rate base simply vanishes into thin air.

The commission, on the other hand, takes the position that the use of the averaging technique is necessary to avoid overstating the amount of plant actually used and useful during the test period. The commission also observed that the use of the end-of-the-period technique would force the ratepayer to contribute what amounts to a full test period of support for a plant that was actually in service for only part of that period.

In its simplest form, the company's argument boils down to one of attrition. ³ The problem is not a novel one before this court. New England Tel. & Tel. Co. v. Public Util. Comm'n, 116 R.I. 356, 358 A.2d 1 (1976); Rhode Island Consumers' Council v. Smith, 111 R.I. 271, 302 A.2d 757 (1973). Nor is our answer. The commission is not bound to utilize one formula over another in determining the proper rate base for the company. The attrition factor would be remedied by various adjustments the commission could make to the rate base, the rate of return, or both. Id. at 279-80, 302 A.2d at 763-64. Here the only concern of this court is whether the measurement approach employed by the commission is just and reasonable. If so, our inquiry is at an end. We cannot fault the commission for its use of the averaging rather than the end-of- the-period technique in determining the company's rate base.

Having made this observation, we would add but one comment. The company has argued that some $160,000 representing construction work in progress (CWIP) at the end of the test year should have been included within the rate base. The commission properly excluded this amount, as it did not represent used and useful property that was presently being devoted to providing the regulated service. New England Tel. & Tel. Co. v. Public Util. Comm'n, supr...