Case Title: Pacific Power & Light Co. v. Public Service Com'n of Wyoming

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-02-07T00:00:00Z

Document:
Pacific Power & Light Co. v. Public Service Com'n of Wyoming1984 WY 19677 P.2d 799Case Number: 83-75, 83-76, 83-77, 83-78Decided: 02/07/1984PACIFIC POWER & LIGHT COMPANY, A CORPORATION, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE COMMISSION OF WYOMING, APPELLEE (RESPONDENT).

LOWER VALLEY POWER & LIGHT, INC., APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE COMMISSION OF WYOMING, APPELLEE (RESPONDENT). CHEMICAL BANK, A NEW YORK CORPORATION, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE COMMISSION OF WYOMING, APPELLEE (RESPONDENT). WASHINGTON PUBLIC POWER SUPPLY SYSTEM, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE COMMISSION OF WYOMING, APPELLEE (RESPONDENT).

Supreme Court of Wyoming
PACIFIC POWER & LIGHT 
COMPANY, A CORPORATION, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE 
COMMISSION OF WYOMING, APPELLEE 
(RESPONDENT).

LOWER VALLEY POWER & 
LIGHT, INC., APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE 
COMMISSION OF WYOMING, APPELLEE (RESPONDENT). CHEMICAL BANK, 
A NEW YORK CORPORATION, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE 
COMMISSION OF WYOMING, APPELLEE (RESPONDENT). WASHINGTON PUBLIC POWER 
SUPPLY SYSTEM, APPELLANT (PETITIONER),

v.

THE PUBLIC SERVICE 
COMMISSION OF WYOMING, APPELLEE 
(RESPONDENT).

Appeal from the District 
Court, LaramieCounty, Joseph F. Maier, 
J.

Houston G. 
Williams of Williams, Porter, Day & Neville, P.C., Casper, and Leonard A. 
Girard, Portland, Or., for appellant 
Pacific Power & Light Co.

Ted C. Frome, 
Afton, for appellant Lower Valley Power & 
Light, Inc.

Carl L. Lathrop 
and Richard P. Boley of Lathrop & Uchner, Cheyenne, for appellant Chemical 
Bank.

Thomas A. 
Nicholas and Alan B. Minier, of Hirst & Applegate, Cheyenne, and Michele 
Coad, Seattle, Wash., for appellant 
Washington Public Power Supply System.

A.G. McClintock, 
Atty. Gen., Steven R. Shanahan, Sr. Asst. Atty. Gen., and Dennis M. Boal, Asst. 
Atty. Gen., for appellee The Public 
Service Com'n of Wyoming.

Before ROONEY, C.J., and THOMAS, ROSE, BROWN and 
CARDINE, JJ.

ROONEY, Chief 
Justice.

[¶1.]     This is an appeal from 
a district court ruling affirming an order of the Wyoming Public Service 
Commission (PSC) which denied appellants the right to recover in rates any and 
all investments, expenses or obligations related to three abandoned nuclear 
power construction projects.

[¶2.]     We hold the matter to 
be moot as to all appellants except Pacific Power & Light Company (PP & 
L), and we affirm the decision of appellee insofar as it pertains to PP & 
L.

[¶3.]     There are four 
appellants. Appellant Lower Valley Power and Light, Inc. (LV) is a distribution 
level electric cooperative. Appellant PP & L is a publicly held corporation 
providing electric service as a regulated public utility. Both LV and PP & L are 
electric public utilities within the regulatory jurisdiction of the Wyoming PSC. 
Appellant Washington Public Power Supply System (WPPSS) is a joint operating 
agency which builds, owns and operates electric generation and transmission 
facilities and sells electric power to its members and others. Appellant 
Chemical Bank (CB) is a New 
York corporation which is a bond-fund 
trustee.

[¶4.]     LV and Fall River (FR), 
another distribution level electric cooperative which is not a party to this 
appeal, along with 86 other electric utility cooperatives, municipalities, and 
public utility districts, each signed, on July 14, 1976, identical Participants' 
Agreements (Agreements) which entitled them to a percentage share of power from 
two nuclear power projects (WNP-4 and WNP-5) which WPPSS was constructing in the 
state of Washington and which obligated them each to pay a proportion of the 
costs of said projects "whether or not" the projects were ever completed. PP 
& L was a 10% owner of WNP-5, and also was participating in another nuclear 
power project known as Pebble Springs. WPPSS financed its ownership shares of 
WNP-4 and WNP-5 through the sale of municipal tax exempt bonds. CB is the 
bond-fund trustee for said bonds.

[¶5.]     The Agreements executed 
by LV and FR 
were not submitted to the PSC for review or approval prior to their execution, 
or at any time subsequent.

[¶6.]     Construction of WNP-4 
and WNP-5 was begun in 1976 and abandoned in 1981, when WNP-4 was 16% complete 
and WNP-5 was 20% complete. The Pebble Springs project was terminated in 1982, 
with no construction ever being done, but with over $200 million invested in 
site preparation. No electric power will ever be generated by any of these three 
power plant projects.

[¶7.]     The controversy was 
initiated by the PSC under its investigative powers pursuant to § 37-2-117, W.S. 
19771 through a "Notice and Order Setting 
Hearing" made and entered on April 22, 1982 and directed to LV, PP & L and 
FR. The Commission Staff had previously petitioned the Commission to investigate 
the matter as to LV. Of course, the Commission could institute 
the investigation without such petition "summarily" and "of its own motion." It 
did so with its "Notice and Order Setting Hearing." The record amply reflects 
the waiver of any defect or objection in and to the investigation by PP & L. 
The scope of the investigation was also explored and understood by the parties, 
and the hearing proceeded on the issue of whether or not the investment, 
expenses and obligations incurred by PP & L and LV in the projects could be 
properly considered in fixing the rate base for their operation, and it did not 
proceed on the issue of what the rates should be, i.e., a rate 
case.

[¶8.]     The transcript reflects 
that all parties recognized the correct issue and that it would be pertinent to 
rates and the procedure and evidence would be similar to that of a rate case. 
The following occurred prior to the testimony of the first PP & L 
witness:

"MR. ROGERS [Representing 
PSC Staff]: * * * I do have one additional matter.

"CHAIRMAN SMYTH: 
Yes.

"MR. ROGERS: And that is 
concerning the filing by the company made on July 2, 1982, pursuant to the 
commission's order. The commission will recall that these matters were 
originally set for hearing on July 16th of 1982, pursuant to the commission 
order of April 22, 1982.

"Upon the motion of the 
staff the hearings were continued until this week, and that was made pursuant to 
the commission's order of May 28, 1982. And contained within that order was a 
provision that all testimony by all parties was to be filed on or before July 2, 
1982.

"Now, I don't know if the 
commission is aware, but as part of the company's filing on July 2, on or about 
July 2, they filed tariffs, and those tariffs contain a request for a change of 
rates in amounts variously set at $5,743,000, or $10,967,000. It was the staff's 
understanding at the beginning that this was to be a generic matter, that it was 
not to be a rate matter. The filing made by the company has changed that to a 
contested case.

"And the staff has 
concerns regarding the notice requirement of the Administrative Procedures Act, 
with regard to this matter. I am sure that the commission will recall its own 
rulings, that a rate making matter is a contested matter under the act, and the 
commission, or the act is very specific with regard to the notice 
required.

"And I think that this 
matter should be resolved by the commission in some way. I have broached the 
matter with Mr. Girard, and we are attempting to come up with some type of a 
solution to the problem, but I think that the commission should be made aware of 
it prior to the beginning of this testimony.

"CHAIRMAN SMYTH: Mr. 
Girard, do you wish to respond to that?

"MR. GIRARD: Very 
briefly. Mr. Rogers is correct, he made me aware of this matter, I think it was 
five or six minutes before the hearing commenced this afternoon, so he and I 
didn't really have time to have a calm lawyer-like discussion of the problem. He 
agreed to raise it to bring it to your attention. The only thing I will say is 
this: The purpose of the generic proceeding, I believe, was to determine how to 
deal with the costs of the nuclear plants at issue.

"And the question the 
company had was: The generic proceeding presumably will consider how much was 
spent, why was it spent, was it reasonable, who bears the risk of that and so 
forth. And let us assume just for discussion, that the commission considered all 
that, and after deliberating said, `We think the total costs that should be 
borne by ratepayers are, say, $10 million a year for five 
years.'

"Then the question would 
get to be, `What would then happen?' Presumably, if the company hadn't filed 
rates it could then file rates designed to achieve the level of revenues found 
appropriate by the commission. And we would then wonder, would we have a rate 
case in which every issue would be open again, and we would then retry the 
question of who should pay for the nuclear plants.

"We figured that the 
commission likely didn't want to do that, that this is the hearing to find out 
how that expenditure is going to be dealt with. There may be a question as to 
exactly how the - which particular ratepayer should pay for it, but we would 
think that there should be one time and one time only to decide, is that a 
stockholder responsibility, a ratepayer responsibility, or anywhere in 
between.

"That's all I have to 
say.

* * * * * 
*

"CHAIRMAN SMYTH: We will 
come back to order.

"The commission feels 
very strongly, not just a little bit, that this was wrong, that we cannot have a 
rate case without giving notice to the public, and that any issues as to asking 
ratepayers to pay for amounts in the future, will be taken care of in future 
rate cases and will not be taken care of in this generic hearing which is to 
determine whether or not any amount should be involved.

"And therefore, there 
being no notice to the public, and certainly in these cases significant 
intervention has been made by the public in the past, we will restrict the 
hearing to those matters that have previously been noticed and that as to what 
rates you are required in the future to pay for any amounts that might be found 
will be a matter to be determined in the future rate case.

"And perhaps, since you 
already have one filed before us, that it might be a more proper time to discuss 
those kinds of issues.

"So, if you will proceed 
on that basis, Mr. Girard.

"MR. GIRARD: Fine, thank 
you.

"I should have mentioned 
that when the revised rate schedules were filed, notice was posted, there was 
not a mailing made or I don't think a newspaper publication made. I wantd [sic] 
the record to show that, and I am not arguing it was adequate or what is 
not.

"We will present the case 
and the only question is, whether we should try and strike from it, if you will, 
before we ask our questions that material that might be 
offensive.

"One thing I think, Your 
Honor, Mr. Chairman, is that the testimony of witness Sloan, who is our rate 
witness, may be appropriate, and we will have to allow you of course to make the 
ruling when the time comes, to at least show for illustrative purposes the type 
of impact there would be on the ratepayers. 

"CHAIRMAN SMYTH: I might 
express to you that we will be restrictive and we are talking what is required 
rates of return at this time. That's matter for rate cases, and I am sure by the 
time we get down to that testimony, we will have had lots of testimony before 
this commission. I do not want to in any way impair your presentation of this 
case.

"However, the ground 
rules are those matters that are germane will be heard, those matters that are 
not presumably staff will object to them and they will not be heard, and if 
staff doesn't object to them, if I find they are not material I will certainly 
advise you, and as you well know I am not bashful in this 
manner.

"MR. GIRARD: I would 
stipulate that.

"(Laughter.)

"MR. ROGERS: So will 
staff."

[¶9.]     Again, before 
presenting the testimony of PP & L's witness Watson:

"MR. GIRARD: * * 
*

"This case, of course, 
based on the ruling of the Commission will not involve a contested rate case * * 
*.

* * * * * 
*

"I discussed this part 
with Staff Counsel because the concern, I'm sure, that Staff has and the 
Commission has is this isn't a general rate case. * * *

* * * * * 
*

"* * * It is the Staff's 
position and has been from the beginning that the issue in this case is whether 
or not the ratepayer should pay. * * *"

[¶10.]  The Commission's investigation had for 
its purpose the determination of whether or not the investment, expenses and 
obligations incurred by PP & L and LV in the 
projects could be considered in connection with rates later to be set for PP 
& L and LV in Wyoming.

"(a) The term `rate,' 
when used in this act, shall mean and include * * * every * * * charge or other 
compensation for service rendered or to be rendered * * * and every * * * 
practice, act, requirement or privilege in any way relating to such * * * charge 
or other compensation * * *." Section 37-1-102(a), W.S. 
1977.

Section 
37-2-117, W.S. 1977, supra, fn. 1, authorizes investigation of "any act * * * 
accomplished or proposed, or an investigation of any rate" which the Commission 
believes should be made "to secure compliance with the provisions of this act 
and orders of the commission."

[¶11.]  The association of PP & L and of LV 
with the projects are certainly acts and practices "in any way related" to the 
charges and compensation for services to be rendered by them. And the Commission 
could well believe that an investigation was proper to determine if the projects 
were or could be part of that subsequently to be considered in fixing rates 
pursuant to § 37-2-122(a), W.S. 1977, infra, fn. 5.

[¶12.]  The PSC concluded that the Agreements 
executed by LV and FR constituted a guarantee of securities as contemplated by § 
37-6-101 et seq., W.S. 1977, and that their failure to obtain PSC authorization 
rendered the Agreements void for rate making and other purposes within the 
regulatory jurisdiction of the PSC. Further, that the costs incurred by LV, FR 
and PP & L could not be lawfully passed on to their rate payers, as the 
projects were not and would not be "used and useful" for the convenience of the 
public.

[¶13.]  Appellants LV, PP & L, WPPSS and CB all filed 
petitions for review of the Commission Order, which were ultimately 
consolidated. The district court affirmed the Commission Order without 
independent review, whereupon appellants appealed to this 
court.

Lower 
Valley, Washington Public Power Supply 
System, and Chemical Bank

[¶14.]  While all of the litigation below was 
going on, litigation was also progressing in other states. The decisions reached 
in the state of Washington are particularly significant to the 
case before us presently.

[¶15.]  The Washington Supreme Court had before 
it the case of Chemical Bank, a New York 
corporation v. Washington Public Power Supply System, 99 Wn.2d 772, 666 P.2d 329 (1983). It involved WNP-4 and WNP-5, wherein CB brought a declaratory 
judgment action against WPPSS and the participants (those who had signed 
Participants' Agreements, including LV and FR) seeking a determination that the 
participants owe to WPPSS sufficient funds to pay the bonds, of which CB is 
trustee, with interest. The Washington Supreme Court held that the defendants 
who were Washington public utility districts or 
Washington 
municipalities lacked authority to enter into said agreement and as to them the 
agreement was ultra vires, void ab initio, invalid, ineffective and 
unenforceable.

[¶16.]  Subsequently, and pursuant to mandate 
from the Washington Supreme Court, the Superior Court of Washington for 
KingCounty, in its Order and 
Judgment, held that:

"2. Inasmuch as the 
Participants' Agreement is ultra 
vires, void ab initio, invalid, 
ineffective and unenforceable as to the defendants which are Washington public 
utility districts or Washington municipalities, and by reason thereof, the 
Participants' Agreement is also ineffective and unenforceable as to all other 
moving defendants and all participant defendants, on the grounds of (a) contract 
indivisibility and failure of the condition of substantially 100% participation, 
(b) mutual mistake as to the authority of Washington public utility districts 
and municipalities to enter into the Agreement, and (c) frustration of purpose 
and impracticability."2

[¶17.]  Further, the Superior Court held 
that:

"3. For the aforesaid 
reasons, none of the moving defendants or any other participant defendant is 
obligated, under or by virtue of the Participants' Agreement or WPPSS Board of 
Directors Resolution No. 890, as amended (the `Bond Resolution'), to make any 
payment to WPPSS, or to any other defendant, or to Chemical or any purchaser or 
holder of bonds issued by WPPSS in connection with the 
Projects."

[¶18.]  We agree with the Washington Superior 
Court that because the Participants' Agreement is void ab initio as to 68.275% 
of the participants3, it is also ineffective and 
unenforceable as to the other participants on the grounds quoted above. 
Therefore, we hold that the case at bar is moot as regards appellant LV. LV has 
no debt because of the projects' failure and the issue is not pertinent to any 
rate case now or hereafter filed by LV.

"* * * [W]hen no judgment 
rendered can be carried into effect the cause is moot * * *." Belondon v. State, Wyo., 379 P.2d 828, 829 
(1963).

[¶19.]  This being so, we also hold that this 
case is moot as to WPPSS and CB, as their interests were predicated on the 
validity of the Participants' Agreement.

Pacific Power & 
Light

[¶20.]  The above considerations do not control 
the disposition of appellant PP & L, as PP & L was not a participant 
under the Participants' Agreement, but rather a 10% owner of WNP-5, and 29.4% 
owner of Pebble Springs.

[¶21.]  PSC founded its decision, relative to PP 
& L, on an application of the provisions of § 37-2-119, W.S. 1977, which 
provides in part:

"In conducting any 
investigation pursuant to the provisions of this act the commission may 
investigate, consider and determine such matters as the cost or value, or both, 
of the property and business of any public utility, used and useful for the 
convenience of the public, and all matters affecting or influencing such cost or 
value * * *."

Emphasizing the 
"used and useful" language of this section, PSC found the investment, expenses 
and obligations incurred by PP & L could not properly be considered in 
fixing the rate base for PP & L's operation.

[¶22.]  If the projects had been successful and 
had gone on line for production of electricity for public convenience, the cost 
or value would have been properly considered in establishing a rate base. Since 
they were not successful and were only partially constructed, they could never 
become "property" of a "used and useful" nature. Although the project 
undertakings might conceivably be part of the "business" of PP & L,4 we need not determine such inasmuch 
as the business activity relating to the projects was not current so as to meet 
the "used and useful" requirement, as the "used and useful" status must be as of 
the time of rate consideration. Bluefield 
Waterworks & Improvement Co. v. Public Service Commission of West 
Virginia, 262 U.S. 679, 43 S. Ct. 675, 67 L. Ed. 1176 (1923); Boston Gas Company v. Department of Public 
Utilities, 367 Mass. 92, 324 N.E.2d 372 (1975); South Dakota Public Utilities Commission v. 
Otter Tail Power Company, S.D., 291 N.W.2d 291 (1980).

[¶23.]  Although the investment, expenses and 
obligations resulting from the projects do not conform to the "used and useful" 
concept, PP & L contends that they could still qualify for consideration in 
establishing a rate base if they are a prudent, reasonable and proper expense of 
operation.5 Other jurisdictions have dealt with 
the obligations herein considered as operating expenses and not as property 
under the "used and useful" principle.6

[¶24.]  We cannot accept the investment, 
expenses, and obligations incurred in construction, or intended construction of 
property which would normally qualify as "used and useful" for inclusion in a 
rate base as an operating expense. An operating expense 
includes:

"In general, various 
particular expenses of a public utility are properly chargeable to expense of 
operation, including any legitimate expense contributing to the better 
management or greater efficiency of the utility, a reduction of its investment, 
or an increase in its operating return. * * *" 73B C.J.S. Public Utilities, § 
36, p. 234.

Unified systems 
of accounts prescribed by most regulatory agencies usually specify that 
considered as operating expenses, i.e. taxes, advertising, salaries, commodity 
purchases and similar items. The PSC recognizes that it cannot ignore the 
necessary, fair and reasonable expenses of operation incurred by a utility in 
the rendition of service, and also that there are certain expenses which should 
be disallowed, such as the following:

"1. If the questioned 
outlays represent `inefficiency' or `improvidence', or 

"2. Managerial discretion 
has been abused, or

"3. The action taken has 
been `arbitrary' or `inimical' to the public interest, or

"4. There has been 
`economic waste', or

"5. Such outlays were not 
legitimate operating expenses because they were `in excess of just and 
reasonable charges.'"7

[¶25.]  In contending that the charges were 
"operating expenses," PP & L argues that a reasonable and prudent test 
should be allowed. We need not consider this test insofar as it applies to 
"operating expenses" since these charges were not "operating expenses" as that 
term is generally considered.

[¶26.]  It is probable that PP & L would not 
contend these expenses to be "operating" ones if the projects were completed. PP 
& L would then own a percentage of property; and it would expect to have the 
cost of the project included in the amount attributed to its "used and useful" 
property in establishing a rate base.

[¶27.]  The argument in this case results from 
the situation in which PP & L suffers financial loss due to failure of a 
project intended to become "used and useful" in the service of the public. PP 
& L wants to include the loss in its financial picture whereby an increase 
in rates will eventually pay for the loss, i.e., the loss will be borne by the 
consumers. PP & L believes this proper inasmuch as service rendered by an 
electric power utility is limited by the availability of the supply of the 
product it furnishes. The same can be said of some other utilities. A prudent 
and reasonable attempt to secure or preserve such supply could well be 
considered a service rendered on behalf of the consumers.8 When the life of a utility is 
limited by such supply, amortization of an entire plant investment has been 
allowed. Pennsylvania Power & Light 
Company v. Pennsylvania Public Utility Commission, 10 
Pa.Cmwlth. 328, 311 A.2d 151 (1973); Clarksburg Light & Heat Co. v. Public 
Service Commission, 84 W. Va. 638, 100 S.E. 551 (1919); East Ohio Gas Co. v. Public Utilities 
Commission, 137 Ohio 
St. 225, 28 N.E.2d 599 (1940). PP & L contends 
that successful effort in this endeavor would redound to the benefit of the 
consumers by furnishing a more abundant and cheaper supply of the product and, 
thus, the failure of the effort should be at the expense of the 
consumers.

[¶28.]  On the other hand, PSC considers the 
failure of the projects as one of the risks incurred by PP & L when it 
entered into them. PSC would have the stockholders of PP & L bear the loss 
since the decision to embark upon the project was made by their representatives 
who had an opportunity to calculate the risk and to be governed by such 
calculation. If PP & L gauged the risk with the intention that the loss 
would be borne by the consumers, there would be no risk at all for PP & L 
(the stockholders). This fact might encourage PP & L to venture into 
activities having a very small chance of economic success with the knowledge of 
no loss to it should the activity fail and of great gain should the small chance 
of success occur.

[¶29.]  If the consumers are to take the risk, it 
would seem that they should have some say as to whether or not the projects are 
to be undertaken. Only PSC is properly in a position to be concerned with the 
consumer interest in consideration of the propriety of the risk activity and to 
balance the interests of the consumer and the utility.

[¶30.]  In McCulloch Gas Transmission Company v. Public 
Service Commission of Wyoming, Wyo., 627 P.2d 173, 179 (1981), we 
said:

"As pointed out in Public Service Commission for the State of 
New York v. Federal Power Commission, D.C. Cir. 1972, 467 F.2d 361, the 
primary mission of a regulatory body is to protect the consumer, it must `strive 
to reach a balance between consumer, producer, and those whose interests fall in 
between.' The fixing of just and reasonable rates by the PSC involves a 
balancing of investor and consumer interests, but a fair return to investors is 
not necessarily fair to consumers. Petition of New England Tel. & Tel. 
Co., supra [115 Vt. 494] 66 A.2d [135] at 
147."

[¶31.]  PSC is not in a position to take on any 
aspect of utility management. It must restrict its position to "regulation" with 
management decisions being entirely that of the utility. The difficulty surfaces 
when it is necessary to distinguish between "regulation" and 
"management."

[¶32.]  Regulation by means of setting rates and 
determining the factors controlling such by necessity prescribes the 
"management" domain. Section 37-2-121, W.S. 1977, empowers the commission to act 
when it determines a rate to be "inadequate or unremunerative, or to be unjust, 
or unreasonable, or unjustly discriminatory, or unduly preferential" and it may 
"fix * * * such rate as it shall determine to be just and reasonable and in 
compliance with the provisions of this act." PSC has authority to "prescribe and 
order" changed "any service or service regulation" as it shall determine "to be 
unjustly discriminatory or unduly preferential," or "any service or facility" 
found "to be inadequate or unsafe," or "any facility or service regulation" 
found "to be unjust or unreasonable." Section 37-2-122(b), W.S. 
1977.

[¶33.]  "Regulation" also can be said to limit 
"management" aspects in connection with certain debt acquisitions by 
utilities.

"The right of every gas 
corporation and of every electrical corporation operating as a public utility in 
the state of Wyoming to issue, assume or guarantee securities and to create 
liens on its property situated within the state of Wyoming is a special 
privilege, hereby subjected to the supervision and control of the public service 
commission of the state of Wyoming, as hereinafter in this act [§§ 37-6-101 to 
37-6-107] set forth. Such public utility when authorized by order of the 
commission and not otherwise, may issue stocks and stock certificates and may 
issue, assume or guarantee other securities payable at periods of more than 
eighteen (18) months after the date thereof, for the following purposes: for the 
acquisition of property; for the construction, completion, extension or 
improvement of its facilities; for the improvement or maintenance of its 
service; for the discharge or lawful refunding of its obligations; for the 
reimbursement of monies actually expended for said purposes from income or from 
other monies in the treasury not secured by or obtained from the issue, 
assumption or guarantee of securities, within five (5) years next prior to the 
filing of an application with the commission for the required authorization; or 
for any other purpose approved by the commission." Section 37-6-101, W.S. 
1977.

[¶34.]  Section 37-6-102, W.S. 1977, provides 
that such securities may be issued only after application therefor is filed with 
the PSC and after a hearing from which the Commission does not find that 
such

"transactions are 
inconsistent with the public interest; or that the purpose or purposes thereof 
are not permitted by this act [§§ 37-6-101 to 37-6-107]; or that the aggregate 
amount of the securities outstanding and proposed to be outstanding would exceed 
the fair value of the properties and business of the public 
utility."

And § 37-6-106, 
W.S. 1977, provides that such securities shall be void if "issued, assumed or 
guaranteed without application to or approval of the 
commission."

[¶35.]  Section 37-3-111, W.S. 1977, provides in 
part that:

"Every public utility 
shall file with the commission copies of contracts, agreements or arrangements 
to which it may be a party, as the commission may designate. * * 
*"

Section 218 of 
PSC Rules (1979) requires the filing with it of a copy of all "special contracts 
which govern the sale by the utility of public utility service or the purchase 
by the utility of a utility commodity for resale."

[¶36.]  It is recognized that the foregoing 
statutes and rule do not require PSC approval for PP & L's part ownership of 
the terminated projects. The reference to the statutes and rule is only to 
exemplify the "management" control by PSC in utility operation. It is a 
necessary adjunct to "regulation."

[¶37.]  Black's Law Dictionary (5th Ed. 1979) 
defines "regulate" as:

"To fix, establish, or 
control; to adjust by rule, method or established mode; to direct by rule or 
restriction; to subject to governing principles or laws."

"* * * Regulation is an 
exercise of control while management is an exercise of conduct, in carrying on 
business. * * *"

Cloutier v. State Milk 
Control Board, 92 N.H. 199, 28 A.2d 554, 558 (1942).

"* * * `The word 
"regulate" is one of broad import. * * *'" Blumenthal v. City of Cheyenne, 64 Wyo. 
75, 186 P.2d 556, 566 (1947), quoting from City of Owensboro v. Cumberland Telephone 
& Telegraph Co., 230 U.S. 58, 33 S. Ct. 988, 992, 57 L. Ed. 1389 
(1913).

"* * * `The power * * * 
to "regulate" * * * implies the right to prescribe and enforce all such proper * 
* * rules and regulations as may be deemed necessary and wholesome in conducting 
such business in a proper and orderly manner. Ogden City v. Leo, 54 Utah 556, 182 P. 530, 5 A.L.R. 960.'" Jensen v. Town of Afton, 59 Wyo. 500, 143 P.2d 190, 201 
(1943).

"* * * prohibit[ing] an 
incident to or a particular method in connection with business. * * * is merely 
regulation. * * * regulation necessarily implies restriction in some respects 
and that that means nothing more or less than a partial prohibition. * * *" Steffey v. City of Casper, Wyo., 357 P.2d 456, 461 
(1960).

[¶38.]  The PSC is vitally concerned with fixing 
of rates. If an effort to obtain a new source of energy supply will affect rates 
- potentially lowering them if successful and potentially raising them if not 
successful, PSC has the power to control the effect such project will have on 
rates. This does not mean that it has the power to dictate whether or not the 
project should be undertaken or to concern itself with other aspects of the 
conduct relative to the project. The utility need not consult PSC before 
embarking on the project. However, if the utility wishes to involve the consumer 
in a loss or cost resulting from failure of the project, i.e., if it wishes to 
have such cost or loss considered in subsequent rates, PSC's prior approval is 
necessary.

[¶39.]  In briefs and arguments, the parties make 
reference to other instances in which PSC has authorized inclusion in the rate 
base of costs of wells for gas which could turn into dry holes, costs for early 
retirement of obsolete (for environmental reasons) mechanical flue gas stacks, 
costs for an abandoned hydro project as a result of federal legislation, etc. 
Usually the activity which subsequently failed was approved as an activity prior 
to its inception by the PSC or it consisted of property with a used and useful 
history.

[¶40.]  Although we cannot attribute a 
consideration by PSC in determining just and reasonable rates of an investment 
of questionable return in a potential product producing project to (1) the used 
and useful property or business of the utility, or (2) to an operating expense 
of it, we do recognize the authority of the PSC to consider such as a part of 
the "other values of the * * * system, business * * * of the public utility," § 
37-2-122(a), W.S. 1977 (see fn. 5), if the consideration, and only if the 
consideration is given before the investment is made or agreed to be made.9 The requirement for prior approval 
of the PSC is necessary so that the risk attributable to the consumers can be 
evaluated and be either rejected or accepted - or, perhaps, the proportion of 
the risk to be borne by the consumers, if unsuccessful, can be set. The 
conversion computations to a used and useful property, if successful, and the 
period of amortization, if unsuccessful and such becomes necessary, can be 
predetermined. The percentage of the investment attributable to the Wyoming operation can be 
ascertained. All to be done before the fact of success or failure is known. As 
noted, this consideration and resulting decision will affect a "management" 
aspect within "regulation," but it is a type of regulation necessary and proper 
for the exercise of the power and duties of the PSC.

[¶41.]  In this instance, the PSC was not 
consulted prior to the investment about it. It was not necessary to do so. But 
when the investment failed, the onus of the failure must rest on PP & L, the 
only one which considered the risk and, therefore, the only one accepting 
it.

[¶42.]  Affirmed as to PP & L and dismissed 
as moot as to the other appellants. LV's rate applications are to be processed 
without consideration of its involvement in the projects.

FOOTNOTES

1 Section 37-2-117, 
provides:

"Whenever the commission 
shall believe that an investigation of any act or omission to act, accomplished 
or proposed, or an investigation of any rate, service, facility or service 
regulation of any public utility should be made in order to secure compliance 
with the provisions of this act and orders of the commission, it may of its own 
motion summarily investigate the same."

2 Chemical Bank v. Washington Public Power 
Supply System, Case No. 82-2-06840-3, August 11, 1983.

3 Namely, the Washington public utility districts and Washington 
municipalities.

4 Business is "`the 
habitual or regular occupation that the party was engaged in with a view to 
winning a livelihood or some gain,'" In 
re Lamont, 48 Wyo. 56, 41 P.2d 497, 502 (1935). Business is 
"`[a]ny occupation connected with the operations and details of trade or 
industry,'" Zurich Insurance Company v. 
Friedlander, 261 Md. 612, 276 A.2d 658, 660 
(1971).

5 Section 37-2-122(a), 
W.S. 1977, provides:

"In determining what are 
just and reasonable rates the commission may take into consideration 
depreciation of plant, obsolescence of equipment, expense of operation, physical 
and other values of the plant, system, business and properties of the public 
utility whose rates are under consideration."

6 See Office of Consumers' Counsel v. Public 
Utilities Commission, 67 Ohio St.2d 153, 21 Ohio Op.3d 96, 423 N.E.2d 820 
(1981), dismissed Cleveland Electric 
Illuminating Company v. Office of Consumer's Counsel, 455 U.S. 914, 102 S. Ct. 1267, 71 L. Ed. 2d 455 (1982), where the court quoted the commission order 
as stating, "`* * * [t]hus, we now see the wisdom of the standard emerging from 
the cases from other jurisdictions; if the expenditures are prudent, 
amortization should be permitted.'" Id. 67 Ohio St.2d 153, 423 N.E.2d  at 825. 
The court also said: "[t]he core issue * * * is whether the commission lawfully 
and reasonably permitted CEI to treat its investment in the four cancelled 
nuclear generating stations as amortizable costs." Id. at 825. "There is no 
question but that the overwhelming weight of authority from other jurisdictions 
supports the position of the commission." Id. at 826. However, that court 
disallowed amortization, based on its interpretation of the Ohio statute 
relating to service-related costs that a utility may recover from its rate 
payers.

7 Brief of the Staff of 
the Wyoming Public Service Commission, before the Public Service Commission of 
the State of Wyoming, quoting from 1 A. Priest, Principles of Public Utility 
Regulation, p. 51 (1969).

8 It should also be noted 
that utilities are under a statutory duty to provide service that is adequate 
and safe. Section 37-3-112, W.S. 1977. This may carry with it the obligation to 
take some action to insure future supplies.

9 PP & L's project had 
a book value as part of its system or business when the investment was made. 
After it failed, it had no value at all.

ROSE, Justice, specially 
concurring.

[¶43.]  I concur with the result reached by the 
majority but do not join in that portion of the opinion which would allow the 
consumers to bear all costs associated with canceled construction projects so 
long as the Public Service Commission (PSC) had approved the projects prior to 
investment by the utility. As I interpret Wyoming's statutory scheme pertaining 
to the regulation of public utilities, the PSC is without authority to accept or 
veto proposed construction projects 
for the purpose of shifting their cost to ratepayers. Furthermore, even if the 
PSC possessed such authority, the ratemaking principles embodied in our statutes 
do not permit the recovery of costs associated with construction projects which 
are terminated before ever providing service to utility 
customers.

I

[¶44.]  This court has consistently held that the 
PSC possesses only that power and authority granted to it by the Wyoming 
Constitution and statutes. The enabling statutes must be strictly construed and 
any reasonable doubt as to the existence of any power must be resolved against 
its exercise. Public Service Commission 
v. Formal Complaint of WWZ Company, Wyo., 641 P.2d 183 (1982); Phillips Petroleum Company v. Public Service 
Commission, Wyo., 545 P.2d 1167 (1976); Tri-County Electric Association, Inc. v. 
City of Gillette, Wyo., 525 P.2d 3 (1974).

[¶45.]  The general powers of the PSC are set out 
in § 37-2-112, W.S. 1977:

"The commission shall 
have general and exclusive power to regulate and supervise every public utility 
within the state in accordance with the provisions of this 
act."

This statute, as 
the majority recognize, empowers the PSC to regulate and supervise utilities, 
not to manage1 them. Regulation and supervision, 
however, necessarily entail control over the effects of decisions made by those who 
manage public utilities.

[¶46.]  The position advocated by the majority 
would extend the PSC's sphere of control to cover not only the effects of 
managerial decisions but the decision-making process itself. In support of their 
position, the majority cite and discuss a number of provisions in our regulatory 
scheme as illustrative of the degree of control that the PSC exerts over 
management as a necessary adjunct to regulation. These statutes, in my judgment, 
emphasize the supervisory or watchdog function of the PSC in protecting the 
public interest. Section 37-2-122, W.S. 1977, authorizes the PSC to eliminate 
existing services, facilities, and regulations which are inadequate, unsafe, 
unjust, or unreasonable. Section 37-6-101, W.S. 1977, empowers the PSC to 
supervise the issuance of securities and the creation of liens, activities which 
are regulated in competitive as well as monopolistic enterprises in order to 
protect the public investor. Section 37-6-102, W.S. 1977, mandates PSC approval of proposed 
securities transactions unless such transactions are inconsistent with the 
public interest, unlawful, or exceed the assets of the utility. Finally, § 
37-3-111, W.S. 1977 and PSC Rule 218 require public utilities to file designated 
contracts in order to keep the PSC informed.

[¶47.]  Clearly, these statutes authorize the 
PSC, in obeying its charge to guard the public interest, to monitor the business 
decisions previously made by utility executives. Using these statutes as a 
foothold, however, the majority make what I consider to be a monumentally faulty 
and frighteningly unjustified logic-leap to the conclusion that the PSC has the 
authority to rule on the viability of proposed utility projects with respect to 
whether consumers will bear the risk of failure. To deny that such authority 
would encompass the power to dictate whether a particular project should be 
undertaken is to deny reality. Utility executives would be compelled to consult 
the PSC and obtain approval before embarking on any project, or face possible 
stockholder suits for mismanagement in the event the project fails. The PSC 
would, in effect, be making crucial decisions concerning utility proposals - all 
in the name of regulation and, with all due respect to our Public Service 
Commission and its able membership, the PSC is not required to be qualified and 
probably is not qualified to make such delicate and technical public utility 
management decisions.

[¶48.]  The function of the PSC is to protect the 
consumer through the regulation of public utilities, while taking into 
consideration the legitimate interests of the utilities. McCulloch Gas Transmission Company v. Public 
Service Commission of Wyoming, Wyo., 627 P.2d 173 (1981). In carrying out 
this function, the PSC is empowered to control the effect that new energy 
projects will have on rates - but only after the utility management has assessed 
the merits and drawbacks of the proposal and reached a final decision based on 
sound business judgment, and only after the project has become used and useful 
in providing energy. It is not the function of the PSC to provide an insurance 
policy under which the ratepayers will protect the investments of utility 
stockholders against all risks. This court recognized as much in McCulloch Gas Transmission Company v. Public 
Service Commission of Wyoming, supra, 627 P.2d  at 179, where we described 
the regulatory function of the PSC and said:

"* * * The public 
interest is to be given paramount consideration; desires of a utility are 
secondary. Big Horn Rural Electric Co. v. 
Pacific Power & Light Co., Wyo. 1964, 397 P.2d 455. The purpose of the 
PSC's authority is to protect the public from utilities affected with a public 
interest."

[¶49.]  Not only is the participation by a state 
agency in a utility's business decisions unnecessary to regulation, it is 
impermissible. The United States Supreme Court in State of Missouri ex rel. Southwestern Bell 
Telephone Company v. Public Service Commission of Missouri, 262 U.S. 276, 
289, 43 S. Ct. 544, 547, 67 L. Ed. 981, 985 (1923), said:

"* * * It must never be 
forgotten that while the State may regulate, with a view to enforcing reasonable 
rates and charges, it is not the owner of the property of public utility 
companies, and is not clothed with the general power of management incident to 
ownership. The applicable general rule is well expressed in State Public Utilities Commission ex rel. 
Springfield v. Springfield Gas and Electric Company, 291 Ill. 209, 234 [125 N.E. 891].

"`The commission is not the financial manager 
of the corporation, and it is not empowered to substitute its judgment for that 
of the directors of the corporation * * *.'" (Emphasis 
added.)

The proper 
relationship between regulators and regulated enterprises was described by 1 
Priest, Principles of Public Utility Regulation, p. 23:

"Where inefficiency or 
improvidence or economic waste or abuse of discretion or action inimical to the 
public interest have been demonstrated, the agency having jurisdiction may 
intervene. Business decisions are, however, the prerogative of management. 
Regulators are not the masters of public utility enterprises. They may, and 
often should, breathe down the executive's neck, but the basic responsibility is 
his, not theirs."

[¶50.]  The majority opinion would permit utility 
companies to recover their investments in terminated construction projects, 
ineligible for inclusion in rate base or operation expenses, if the proposal is 
first submitted to the PSC for approval. I conclude that the exercise of such 
power by the PSC would exceed the scope of the enabling statutes and implicate 
constitutional proscriptions concerning private property.

II

[¶51.]  The majority conclude, and I agree, that 
Pacific Power & Light Company's capital investment in the now terminated 
nuclear plants cannot properly be included in the rate base as used and useful 
property or be amortized as an operating expense. However, the majority would 
permit the PSC, in determining just and reasonable rates, to consider the costs 
associated with such investments under the "other values" language of § 
37-2-122(a), W.S. 1977. That statute provides:

"In determining what are 
just and reasonable rates the commission may take into consideration 
depreciation of plant, obsolescence of equipment, expense of operation, physical 
and other values of the plant, system, business and properties of the public 
utility whose rates are under consideration."

Under this 
statute, the decisive question is whether "an investment of questionable return 
in a potential product producing project" (majority opinion 677 P.2d at 808) is 
one of the "other values of the plant, system, business and properties of the 
public utility," which may properly be considered for ratemaking purposes. I 
conclude that it is not, because to allow the PSC to consider the value of a 
construction project which ultimately fails is to circumvent the used and useful 
principle of § 37-2-119, W.S. 1977.2 I would interpret the physical and 
other - presumably non-physical - values specified in § 37-2-122(a), supra, as 
encompassing only the values of those items properly includable in the rate 
base. That is, § 37-2-122(a) empowers the PSC to consider for ratemaking 
purposes only the property and business of the public utility which is used and 
useful in producing the product. I cannot attribute to the legislature the 
intent to embody in the ratemaking formula both the used and useful principle 
and the means to annihilate that principle.3 

[¶52.]  The majority cite several instances in 
which the PSC has considered for ratemaking purposes the costs of projects not 
currently useful in supplying the product. Such consideration was permissible, 
according to the majority, since the terminated activity had received the prior 
approval of the PSC or had a used and useful history. I would have held that our 
statutory scheme, including the used and useful principle, contemplates the 
consideration of the costs attributable to the cited projects, without expanding 
the meaning of the "other values" language of § 37-2-122(a) and notwithstanding 
a lack of prior approval by the PSC.

[¶53.]  Pursuant to § 37-2-122(a), supra, 
obsolescence of previously useful equipment is a proper factor to be considered 
in setting just and reasonable rates. The cost of drilling a dry gas well is 
properly categorized as an operating expense, since gas, unlike electricity, is 
a commodity for which the utility must search in order to provide service. The 
search for gas necessarily includes the drilling of a certain percentage of dry 
holes, whereas the production of electricity does not necessarily include the 
building of a certain percentage of defunct plants. I agree with the 
pronouncement of the Ohio Supreme Court in East Ohio Gas Co. v. Public Utilities 
Commission, 137 Ohio St. 225, 28 N.E.2d 599, 609 (1940), concerning the 
propriety of considering the cost of gas leaseholds which turn out to be 
unproductive:

"It must be apparent that 
the cost of acquiring, holding for a time during which delay rentals must be 
paid, testing and finally canceling unproductive acres is the only method by 
which productive gas acres can be found and developed, and it is equally 
apparent that this expense must be borne by the consumer who ultimately uses the 
gas from the productive acres."

It is not 
necessary to expand our existing statutory scheme in order to justify the 
recovery of these types of costs through rates.

[¶54.]  I conclude that the statutory formula for 
setting just and reasonable rates does not permit the consideration of utility 
investments which are not attributable to the rate base and which are not 
properly designated as costs of operation. I would adopt the position reiterated 
by the Ohio Supreme Court when faced with a question of statutory interpretation 
under circumstances similar to the instant case:

"* * * `* * * It is only 
proper that their [the investors] venture be found operational before they 
commence to recoup their capital outlays from the consumers.' * * *" Office of Consumers' Counsel v. Public 
Utilities Commission, 67 Ohio St.2d 153, 423 N.E.2d 820, 829 (1981), quoting 
from Office of Consumers' Counsel v. 
Public Utilities Commission, 58 Ohio St.2d 449, 456-457, 391 N.E.2d 311 
(1979).

FOOTNOTES

1 The American Heritage 
Dictionary defines "manage" to mean: "To direct or administer (the affairs of an 
organization, estate, household, or business)."

2 Section 37-2-119, W.S. 
1977, provides as follows:

"In conducting any 
investigation pursuant to the provisions of this act the commission may 
investigate, consider and determine such matters as the cost or value, or both, 
of the property and business of any public utility, used and useful for the 
convenience of the public, and all matters affecting or influencing such cost or 
value, the operating statistics for any public utility both as to revenues and 
expenses and as to the physical features of operation in such detail as the 
commission may deem advisable; the earnings, investment and expenditures of any 
such corporation as a whole within this state, and as to rates in local 
exchanges or plants of any telephone, telegraph, water, electrical or gas 
corporations, the geographical location thereof shall be considered as well as 
the population of the municipality in which such plant or exchange is 
located."

3 See Office of Consumers' Counsel v. Public 
Utilities Commission, 67 Ohio St.2d 153, 423 N.E.2d 820 (1981), where the 
Ohio Supreme Court refused to interpret a catch-all statute so as to permit the 
commission to consider the utility's investment in four terminated nuclear power 
plants as amortizable costs. The court said:

"* * * The commission 
views [the pertinent statute] as a virtual wild card to be played whenever the 
commission in its discretion sees fit. We interpret the statute less sweepingly, 
first because the provisions are linked inextricably with the ratemaking factors 
contained in [the statute specifying permissible considerations in ratesetting 
proceedings], and secondly because the General Assembly undoubtedly did not 
intend to build into its recently revised (1976) ratemaking formula a means by 
which the commission may effortlessly abrogate that very formula." 423 N.E.2d  at 
828.

THOMAS, Justice, 
dissenting.

[¶55.]  I must dissent in part from the decision 
reached by the majority of the court in this case. I am in accord that the case 
must be dismissed as to Lower Valley Power & Light, Inc., Chemical Bank and 
Washington Public Power Supply System because it is moot. With respect to 
Pacific Power & Light Company, however, I would hold that the Public Service 
Commission had no authority to enter the order which it entered, and I would 
remand the case with directions that it be dismissed.

[¶56.]  The remarkable thing in connection with 
the disposition of this case by this court is that the majority opinion and the 
concurring opinion refer to and discuss the correct legal propositions, but they 
apply them in an erroneous manner. In Justice Rose's special concurring opinion 
he very ably articulates the proposition that the Public Service Commission has 
only that power and authority granted to it by the Wyoming Constitution and 
statutes, and that the statutory powers must be strictly construed. There is no 
need to again cite the authorities which encompass those holdings. At of the 
majority slip opinion the court aptly says:

"It is recognized that 
the foregoing statutes and rule do not require PSC approval for PP & L's 
part ownership of the terminated projects."

[¶57.]  The document which initiated Pacific 
Power & Light Company's involvement in this proceeding was a notice and 
order setting hearing which was entered on April 22, 1982, and that document did 
not reflect the justification for the investigation by the Public Service 
Commission. It is clear, however, that the commission did proceed pursuant to § 
37-2-117, W.S. 1977, which provides:

"Whenever the commission 
shall believe that an investigation of any act or omission to act, accomplished 
or proposed, or an investigation of any rate, service, facility or service 
regulation of any public utility should 
be made in order to secure compliance with the provisions of this act and orders 
of the commission, it may of its own motion summarily investigate the same." 
(Emphasis added.)

[¶58.]  While I might rely simply upon the 
concession in the majority opinion to the effect that no investigation was 
needed to secure compliance with the provisions of the act or the orders of the 
commission, I will point out that this record and the arguments of counsel for 
the commission are devoid of any reference to any statute or order of the 
commission with which compliance by Pacific Power & Light Company needed to 
be secured. I am prepared to concede that the commission might investigate in 
order to determine if such a situation existed, but once it determined that 
there was no justification for the investigation I cannot perceive any authority 
which would permit the Public Service Commission to enter the order that it did 
in this instance.

[¶59.]  I recognize that it is popular to ride on 
the judicial steam roller which has flattened Washington Public Power Supply 
System. While I might be in sympathy with the result which the Public Service 
Commission and this court reaches, I find I have no empathy for what I believe 
to be an abuse of the commission's authority which this court has 
sustained.

[¶60.]  I understand that the Public Service 
Commission has told Pacific Power & Light Company that if Pacific Power 
& Light Company should wish to include its investment costs in these 
abandoned nuclear power plants in any future rate to be applied to Wyoming consumers that 
the Public Service Commission of Wyoming will not permit that. Purely and simply 
that is an advisory order from the Public Service Commission, and our statutory 
scheme does not justify such an approach. This court has said that it does not 
render advisory opinions, and we dismiss cases in which an advisory opinion is 
sought. Aetna Casualty and Surety Company 
v. Langdon, Wyo., 624 P.2d 240 (1981); Kwallek v. State, Wyo., 596 P.2d 1372 (1979); Police Protective Association of Casper v. City of 
Casper, Wyo., 575 P.2d 1146 
(1978); State v. Rosachi, Wyo., 549 P.2d 318 (1976); Knudson v. Hilzer, Wyo., 551 P.2d 680 (1976); and Tobin v. Pursel, Wyo., 
539 P.2d 361 (1975). In part the fact that this court does eschew advisory 
opinions is premised upon the proposition that there is no way in which the 
judgment which is rendered may be carried into effect. Perhaps the result is to 
make the case moot as discussed on of the majority slip opinion. The point, 
however, is that the Public Service Commission, without statutory authority, 
does not have any business entering an order such as this; and yet, by affirming 
what the Public Service Commission has done, this court has, in effect, and 
contrary to a longstanding jurisprudential discipline, joined in an advisory 
opinion. No matter how much the parties want an answer to this question we 
should not so casually abandon that rule of jurisprudence. 

[¶61.]  As indicated, I would reverse the order 
of the Public Service Commission because this court has the duty to hold 
unlawful and set aside agency action which is in excess of statutory authority. 
Section 16-3-114(c)(ii), W.S. 1977 (Oct. 1982 Rev.).