Case Title: In re Twenty Four VT Utilities

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1992-02-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No.  91-154


 In re Petition of Twenty-Four Vermont              Supreme Court
 Utilities, Pursuant to 30 V.S.A. { 248,
 for a Certificate of Public Good                   On Appeal from
 Authorizing Execution and Performance              Public Service Board
 of a Firm Power and Energy Contract
 with Hydro-Quebec and a Hydro-Quebec               February Term, 1992
 Participation Agreement (New England
 Coalition for Energy Efficiency and
 the Environment and the Grand Council
 of the Cree (Quebec), Appellants)


 Richard H. Cowart, Chair

 John H. Marshall and Holly Ernst Groschner of Downs Rachlin & Martin,
   St. Johnsbury, for petitioners-appellees

 Bonnie Barnes, William K. Sessions, III, James Allen Dumont, and Chris
   McAnany, Law Clerk (On the Brief) of Sessions, Keiner, Dumont, Barnes
   & Everitt, Middlebury, for intervenors-appellants

 James Volz, Director for Public Advocacy, and Robert V. Simpson, Jr.
   and John L. Hodge, Special Counsel, Montpelier, for appellee
   Department of Public Service


 PRESENT:  Allen, C.J., Gibson, Dooley and Morse, JJ., and Bryan, Super. J.,
           Specially Assigned


      DOOLEY, J.,  On October 12, 1990 and January 7, 1991, the Public
 Service Board granted petitioners, twenty-four Vermont Utilities, interim
 and then conditional approval, pursuant to 30 V.S.A. { 248, to purchase
 more than four billion dollars worth of electricity over a thirty-year
 period from Hydro-Quebec (HQ), a Canadian producer of electricity.  The New
 England Coalition for Energy Efficiency and the Environment (NECEE) and the
 Grand Council of the Cree (the Cree) intervened before the Board to oppose
 the purchase, and now appeal the Board's approval.  They argue that (1) the
 Board erred in basing its own detailed analysis of statewide need for the
 purchase on evidence not properly before it; (2) the Board's finding that
 the purchase of 340 megawatts of electricity on an annual basis from HQ
 would not require the construction of new production facilities in Quebec,
 and therefore would not threaten Vermont wildlife, was clearly erroneous;
 (3) the Board erred in refusing to allow intervenors to present evidence on
 the impact of a Canadian agency ruling offered after the close of evidence
 on the implications of the reliability of HQ as an energy source, while
 requesting an affidavit from HQ as a condition of its approval; (4) the
 Board erred in conditionally approving the purchase on the basis of a
 determination of statewide need, allowing for a subsequent showing of need
 by the individual utilities; (5) the Board's finding of economic benefit to
 the State from the purchase failed to account for external economic
 implications of importing energy, such as the loss of jobs and tax revenue,
 and therefore was clearly erroneous; and (6) the Board erred in refusing to
 consider evidence of human rights deprivations of the Cree, a Native
 American population in Quebec, that would result from HQ's construction of
 electricity production facilities.  We affirm.
                                     I.
      On April 1, 1988, all of Vermont's electric utilities (petitioners)
 signed a participation agreement with HQ under which they would purchase
 between 340 and 450 megawatts (MW) of firm power annually pursuant to
 schedules that cover thirty years. (FN1) At a minimum, they would begin to
 purchase 57 MW in November 1990, and the purchase obligation would grow to
 340 MW in the year 2000, declining to zero by the year 2020.  The minimum
 purchase component was crafted to replace current contract amounts with HQ
 that total approximately 323 MW at present and decline over the next few
 years.  At their option, the Vermont utilities could purchase an additional
 110 MW.  The participation agreement was subject to approval of the Public
 Service Board under 30 V.S.A. { 248(a)(1)(A) because each of the utilities
 will purchase "electric capacity or energy from outside the state, for a
 period exceeding five years, that represents more than one percent of its
 historic peak demand."
      After thirty-four days of evidentiary hearings, the Board approved the
 minimum purchase amount in the aggregate, subject to a specific showing of
 need for the amount to be distributed to each utility.  There were twelve
 conditions attached to the approval, including that:  (1) all amounts above
 the minimum be cancelled or the petitioners make a separate showing that the
 additional purchases will promote the general good of the state and will be
 supplied by existing HQ facilities; (2) petitioners file an affidavit from
 HQ stating that HQ is obligated to provide the power under the agreement
 irrespective of regulatory action on licensing and construction of specific
 facilities, that any shortfalls in power or energy caused by delay or
 cancellation of generating facilities would be distributed equitably among
 all purchasers, and that damage and compensation provisions would apply if
 the National Energy Board of Canada took certain adverse action; (3) each
 utility would file within sixty days statements supporting its allocation of
 power; (4) each utility must "develop and implement measures to acquire all
 resources available from cost-effective acquisition of energy efficiency";
 and (5) each utility must file a statement of efforts to sell back to HQ
 power and energy not needed in the short term.  Overall, the Board found
 that the HQ contract "will provide a source of economic and reliable power"
 that would save Vermont ratepayers $500 to $700 million over the life of the
 contract.
      The conditions ordered by the Board are similar to those sought by the
 Vermont Public Service Department, which urged the Board to approve the
 basic contract but not the additional 110 megawatts.  The department argued
 for greater specificity in the utilities' obligation to pursue energy
 efficiency measures.  Before the board, the main opponents of the purchase
 were the Cree and NECEE [hereinafter intervenors], and they were joined by
 the Conservation Law Foundation, Vermont Natural Resources Council and
 Vermont Public Interest Research Group.  Generally, the opponents argued
 that the purchase did not meet the standards of { 248(b) and thus did not
 promote the general good of the state.  The Cree emphasized the adverse
 environmental consequences in both Quebec and Vermont, and the effect on
 their way of life.  Many of the opponents argued that the energy needs of
 the state could be met by demand-side management (DSM) -- that is, invest-
 ments in energy efficiency measures that would reduce demand at a cost less
 than that of increased supply.  They were joined in that position by the
 Vermont Independent Power Producers Association (VIPPA), who also argued
 that the state's needs could be met by in-state renewable resources and
 cogeneration.  Only the Cree and NECEE appealed the Board's order. (FN2)
                                     II.
      Intervenors first argue that the Board erred in relying on its own
 technical analysis of the need for the HQ power.  The circumstances con-
 nected with this argument are somewhat complicated and require a detailed
 explanation.
      To address one of the statutory approval criteria, see 30 V.S.A. {
 248(b)(2), the Department of Public Service (DPS) retained Energy Systems
 Research Group, Inc., (ESRG), to do a detailed analysis of the monetary
 savings to Vermont ratepayers from the HQ contract, as opposed to alter-
 native sources of supply or demand-side management (DSM) actions.  The
 analysis was based in part on research done by the staff of DPS and a
 Vermont electric utility dispatch-and-revenue-requirements computer model
 called "UPLAN."  The results of the analysis were contained in a long report
 which concluded that approximately $134 million in present value (1989
 dollars) benefits would accrue to Vermont ratepayers in the form of reduced
 electric rates from the HQ contract over the period from 1990 to 2018.
      ESRG analyzed two levels of demand-side management that they called
 moderate DSM and strong DSM.  Intervenors and others attacked the ESRG
 report on a number of grounds, but the strongest attack focused on its
 treatment of DSM.  In intervenors' view, more intense DSM would eliminate
 the need for the HQ contract.  Responding in part to that criticism, ESRG
 did further analysis while the case was progressing and, in rebuttal,
 presented new conclusions based on an increased level of DSM that would
 reduce Vermont's peak load by 27% and its energy demand by 20% in the year
 2000.  ESRG concluded that even at this "intensified" level of DSM (IDSM),
 the HQ contract would provide significant financial benefits to the rate-
 payers of Vermont.
      During the course of the hearings, a staff member of the Board asked
 the parties to "hand over any Lotus 1-2-3 worksheets they relied on in
 analyzing the Hydro Quebec purchase."  The main subjects of this request
 were the worksheets underlying the ESRG analysis.  The request led to an on
 the record discussion between the parties and the Chairman of the Board
 about the Board's power to make independent computer runs from the programs
 used by the witnesses.  The Chairman took the view that the Board had the
 power to make such runs but had to rely on record evidence in developing the
 computer run, and also needed to state explicitly in its findings how the
 run was made so that "anybody can understand how the conclusion was arrived
 at."  Intervenors did not object to the Board's request or position on
 computer runs.  Following the close of the evidence, a Board staff member
 wrote DPS specifying the ESRG information the Board wanted and requesting
 that this information be provided on floppy disks in computer-readable
 files.  The request included ten categories of items.  DPS complied with it.
      The Board's decision indicates that it did independent analysis based
 on the ESRG methodology and programs.  After first summarizing the results
 of the ESRG analysis based on "strong" and "intensified" DSM, the Board went
 on to say in its findings:
         In order to test this argument [that higher levels of
         DSM were feasible and would preclude the need for the HQ
         contract], the Board conducted an independent analysis
         of the record evidence in order to determine just what
         level of efficiency achievements would be necessary in
         order to replace the Contract with a more cost-effective
         combination of supply and efficiency resources.  The
         analysis indicated that efficiency measures would have
         to reduce Vermont's otherwise-expected total electric
         requirements by at least 30 percent before efficiency
         improvements would conflict with the long-term economic
         benefits of the Contract.  Even that conflict depended
         upon assumptions that alternative fuel prices would not
         rise rapidly.  In any case, no economic conflict with
         the Contract would emerge at any level of efficiency
         achievements, if Contract power could be resold without
         a loss.

 The Board also analyzed each of the potential sources of conflict, and found
 it unlikely that any of the three sources -- the 30% decrease in demand, the
 small rise in alternative fuel prices and the lack of market for resale of
 HQ power -- would occur.
      Later findings detail how the Board used the DPS-supplied computer
 files and programs.  They primarily were used for the individual data
 elements supporting the ESRG analysis.  The Board did, however, use
 spreadsheet programs to analyze the cost savings when DSM was further
 increased to reduce demand by 30%.  The data on which this analysis was
 conducted comes from other DPS computer files used in creating the ESRG
 report and identified in the Board's findings.
      It is helpful to our determination to set forth the positions of the
 parties in detail.  Intervenors' position is that the Board relied upon
 computer programs and data not part of the record to create evidence, on
 which it then relied to reach its decision.  They argue that the Board's
 procedure violated a number of provisions of the Administrative Procedures
 Act, most notably 3 V.S.A. { 809(g), which requires that findings be based
 exclusively on evidence in the record and matters officially noted. (FN3)
      Intervenors argue that the situation here is similar to that present in
 In re Green Mountain Power Corp., 131 Vt. 284,