Town of New Shoreham v. Burke
| Decision Date | 15 January 1987 |
| Docket Number | Nos. 85-358-M,s. 85-358-M |
| Citation | 519 A.2d 1127 |
| Parties | TOWN OF NEW SHOREHAM v. Edward F. BURKE. BLOCK ISLAND POWER COMPANY v. Edward F. BURKE. TOWN OF NEW SHOREHAM v. PUBLIC UTILITIES COMMISSION et al. P., 85-378-M.P. and 85-382-M.P. |
| Court | Rhode Island Supreme Court |
These cases, having been argued on a consolidated basis, 1 are before the court on a petition for a statutory writ of certiorari filed by Block Island Power Company (the company) from the Public Utilities Commission's Twelfth Compliance Report and Order (twelfth order), dated August 13, 1985. This matter is also before the court on a petition for a statutory writ of certiorari filed by the town of New Shoreham (the town), claiming error regarding two incidental aspects of said order. The company seeks reversal of the twelfth order, which requires the company to purchase fuel from suppliers other than its affiliate Island Services, Inc. (Island Services). The company was also directed to refinance some of its existing debt in order to obtain a $300,000 line of credit to finance its fuel purchases.
Block Island Power Company is a public utility located in the town of New Shoreham which sells, at retail, electric power on Block Island. Block Island is located approximately ten miles off the southern coast of Rhode Island. The company obtains fuel oil used to run its generators from its affiliate Island Services. Franklin W. Renz, the president, treasurer, and majority stockholder of the company, owns 99 percent of its stock. He is also the sole owner of Island Services.
On March 30, 1984, the Public Utilities Commission (the commission) issued its report and order in which it found that the company was paying 12 percent more for fuel obtained from Island Services, than it would have been paying if it had purchased its fuel directly from independent wholesale fuel suppliers. After determining that the company was capable of procuring its own fuel oil directly, the commission proposed three alternatives from which the company could choose in order to reduce fuel costs. 2
Thereafter, the company informed the commission that Island Services would no longer sell fuel to the company on the terms outlined by the commission. The company represented to the commission that it was seeking to purchase fuel through third parties. Accordingly, the company then solicited bids for 100,000 gallons of fuel oil from six potential bidders. One bid was received, and pursuant to that bid of $1.1501 per gallon, the company purchased 100,000 gallons of fuel. The Division of Public Utilities (the division) objected to the bidding procedure and hearings were held in June 1984, to investigate.
Based on those hearings, the commission found that the bid fuel specifications were beyond industry standards, resulting in fuel costs which were unreasonably high. The commission concluded that the company's actions discouraged the making of bids and had the effect of inflating fuel costs. The commission then approved a fuel cost of $0.989 per gallon. In addition, after finding that the company had failed to comply with the March 30, 1984 order to reprice the Island Services-Block Island Power fuel-pricing mechanism, the commission ordered the company to pay a $4,600 refund to its ratepayers for the fuel-adjustment rates charged by the company for May 1984.
In June 1984, the company again solicited bids for 100,000 gallons of fuel oil pursuant to the commission's revised bid specifications. The company received a low bid of $0.91 per gallon. The company did not purchase the fuel from the low bidder, a New Jersey corporation. Instead it purchased the fuel from Island Services at that cost. At that time, the commission expressed concern that the purchase of fuel from sources other than the low bidder could have the effect of subverting the bidding process, making future bids more difficult to obtain.
By September 1984, the company's fuel supply was nearly exhausted. The company did not rebid for October fuel supplies, instead it continued to purchase fuel from Island Services for $0.91 per gallon. The commission approved this fuel charge as a basis for a fuel-adjustment charge to the ratepayers for October 1984. The commission viewed the company's failure to make a timely application for an October fuel-adjustment charge as another instance of the company's noncompliance with the March 30, 1984 order.
On November 21, 1984, the commission issued its Seventh Compliance Report and Order which approved the purchase of 200,000 gallons of fuel from Island Services at a price of $0.89 per gallon. In January 1985, the town moved to modify the order, claiming that it was unfair to ratepayers because it set an inflexible financing-cost charge. The commission declined to modify the order.
The commission issued its Ninth Compliance Report and Order on April 19, 1985. This order rejected the company's fuel-financing plan to purchase fuel from Island Services at a markup of $0.065 per gallon, plus fuel financing at the prime rate plus 2 percent. Also, the commission directed the company to solicit proposals from at least five financial institutions in order to liquidate its long-term debt held by the Home Life Insurance Co. and to provide a maximum line of credit of $300,000 for the purchase of fuel.
The company received three firm financing proposals which were reviewed by the commission in its Twelfth Compliance Report and Order. The commission determined that the cost of refinancing the long-term debt would be de minimus and would allow the company to obtain a $300,000 line of credit for fuel purchases. Accordingly, the commission then ordered the company to refinance its long-term debt in order to obtain a $300,000 line of credit to be used for fuel purchases only. The commission further ordered the company to purchase fuel directly from wholesale suppliers, commencing on or before September 30, 1985.
Since issuing the report and order of March 30, 1984, the commission has promulgated numerous orders to ensure its implementation. In its twelfth order, the commission ordered the company to obtain a loan from a financial institution of its choice in order to refinance the Home Life debt at a cost no higher than 1 percent over the prime interest rate, as well as to provide a line of credit not to exceed $300,000 for fuel purchasing, at interest not higher than 0.5 percent over prime. Furthermore, the company was ordered to commence purchasing its own fuel no later than September 30, 1985, and that fuel used prior to that date should be priced in a manner similar to that used in July and August 1985.
On August 22, 1985, the company applied to this court for a stay of the twelfth order. The stay was denied. The town then moved to consolidate these cases on appeal.
The company raises two issues on appeal:
1. Whether the commission erred in its analysis of the cost of refinancing its debt structure?
2. Whether the commission's restrictions on the amount and use of the new line of credit, and use of the fuel-adjustment-clause revenues, infringe upon management prerogatives?
At the outset, we wish to make clear that it is within our power to quash the company's petition for certiorari on the theory of res judicata because the company failed to appeal from prior compliance orders concerning the same issues. However, we choose to address these issues on their merits.
In reviewing public utilities cases, the Supreme Court will not engage in factfinding; that is the function of the Public Utilities Commission. Interstate Navigation Co. v. Burke, 465 A.2d 750, 755 (R.I.1983); G.L.1956 (1984 Reenactment) § 39-5-3. The standard for review of decisions and orders of the commission is whether the "commission's findings are lawful and reasonable, are fairly and substantially supported by legal evidence, and are sufficiently specific to enable us to ascertain if the evidence upon which the commission based its findings...
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