Title: Va. Elec. & Power Co. v. State Corp. Comm'n

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Kinser, C.J., Lemons, Millette, McClanahan, and 
Powell, JJ., and Lacy and Koontz, S.JJ. 
 
VIRGINIA ELECTRIC AND POWER COMPANY 
 
 
 
OPINION BY 
v.  Record Nos. 120519 
SENIOR JUSTICE LAWRENCE L. KOONTZ, JR. 
 
 
    & 120520 
November 1, 2012 
 
STATE CORPORATION COMMISSION, ET AL. 
 
FROM THE STATE CORPORATION COMMISSION 
 
 
These consolidated appeals arise from a final 
determination of the State Corporation Commission 
("Commission") in a mandated biennial review of "the rates, 
terms and conditions for the provision of generation, 
distribution and transmission services [of an] investor-owned 
incumbent electric utility" pursuant to the provisions of the 
Virginia Electric Utility Regulation Act.  Code §§ 56-576 et 
seq.  As amended by the General Assembly in 2007, the Act 
significantly altered the procedures and authority of the 
Commission with respect to electric utility ratemaking.1 
As pertinent here, commencing in 2011, the Act requires 
the Commission to conduct biennial reviews of an electric 
utility's performance during the two successive 12-month 
periods immediately prior to such reviews.  Code § 56-
                     
1 For a more detailed discussion of the legislative 
history of the regulatory scheme now incorporated in the Act 
and the intended goals of the Act see Appalachian Power Co. v. 
State Corporation Commission, 284 Va. ___, ___, ___ S.E.2d 
___, ___ (2012) (this day decided). 
 
2 
585.1(A).  In doing so, the Commission is required to 
determine, among other things, "fair rates of return on common 
equity" ("ROE") and "the rates that the utility may charge 
until such rates are adjusted."  Id. 
These appeals present the first opportunity for this 
Court to consider the Commission's application of Code § 56-
585.1 in a biennial review.  The principal focus of these 
appeals is whether in the 2011 biennial review of the 
performance of Virginia Electric and Power Company ("VEPCO") 
in the 2009-2010 test period, the Commission erred in 
determining that the utility's authorized ROE of 10.9% would 
apply to the entire 2011-2012 test period in the next biennial 
review in 2013. 
BACKGROUND 
VEPCO is an investor-owned electric utility providing 
generation, distribution, and transmission services within 
Virginia.  As such, the rates it charges for these services 
are subject to regulation under the Act. 
In accord with the requirements of Code § 56-585.1(A), on 
March 31, 2009 VEPCO filed an application for the Commission 
to review VEPCO's prevailing rates, terms and conditions for 
generation, distribution, and transmission services and to 
determine VEPCO's authorized base rate.  This rate case, 
frequently referred to as a "going-in" review, served as a 
 
3 
transition to the new biennial review process commencing in 
2011.  After completing its initial case, in an order entered 
March 11, 2010, the Commission adopted an agreed stipulation, 
made among VEPCO, the Office of the Attorney General Division 
of Consumer Counsel, and various other interested parties, 
that VEPCO's rates in the 2009-2010 biennial period would 
reflect an ROE of 11.9% "unless and until reset in the 
biennial review process" in 2011.  Application of Virginia 
Electric and Power Co., Case No. PUE-2009-00081 (March 11, 
2010).  In an addendum to the agreed stipulation, the parties 
clarified that VEPCO's ROE "shall be utilized for purposes of 
the Earnings Test prescribed for the Company's first biennial 
review."  Id.  Accordingly, although the order was entered in 
2010, under the agreed stipulation and addendum the 11.9% ROE 
would serve as the fair rate of return for the entire 2009-
2010 period to be reviewed in 2011. 
Thereafter, on March 31, 2011, VEPCO filed an application 
with the Commission for the first biennial review as required 
by Code § 56-585.1(A)(3).  In its application, VEPCO requested 
that the Commission approve a new ROE of 12.5% "to be applied 
. . . prospectively upon the effective date of the final order 
in this proceeding."  Application of Virginia Electric and 
Power Co., Case No. PUE-2011-00027 (March 31, 2011). 
 
4 
The biennial review process prescribed by Code § 56-585.1 
includes many different elements, including a determination of 
whether the ROE from the prior biennial period permitted the 
utility to fully recover the costs of providing the utility's 
services and to earn a fair rate of return and, if not, to 
determine what recoupment or rebate would be applied to rates 
going forward.  The Commission also must set the ROE for the 
current biennial period, as well as determine whether the 
individual rates allowed for the utility's generation, 
distribution, and transmission of electric power should be 
altered.  Accordingly, the ratemaking process is necessarily 
fact driven, lengthy, and complex, generating a voluminous 
record. 
In these appeals, VEPCO has not challenged any of the 
factual determinations of the Commission with regard to the 
rates applied in the 2009-2010 biennium and which continued to 
be charged while the review process was ongoing, or with 
regard to the rates to be charged going forward in the 2011-
2012 biennium and the ROE which will be used to evaluate 
VEPCO's performance for the 2011-2012 biennium in the 2013 
biennial review.  Rather, VEPCO has challenged only the 
Commission's determination, as detailed below, that the ROE 
set for the 2011-2012 biennial review would serve as the fair 
rate of return for the entire 2011-2012 biennium rather than 
 
5 
for only the period following the date of the final order in 
the 2011 review.  Accordingly, we need only briefly summarize 
the relevant rulings made by the Commission that relate to 
this issue. 
On November 30, 2011, the Commission entered a final 
order on VEPCO's application, noting that it was "a first-of-
its-kind" proceeding.  Application of Virginia Electric and 
Power Co., Case No. PUE-2011-00027 (Nov. 30, 2007).  After 
reviewing the evidence and assertions of VEPCO, the Office of 
the Attorney General Division of Consumer Affairs, other 
interested parties, and the report and recommendations of its 
staff, the Commission set a 10.9% ROE for the biennial period.  
The order further stated that "[t]he 10.9% ROE determined in 
this proceeding . . . will serve as the fair combined rate of 
return against which [VEPCO]'s earned return will be compared 
in its next biennial review proceeding" in 2013. 
VEPCO filed a timely petition for reconsideration of the 
November 30, 2011 final order.  5 VAC § 5-20-220.  VEPCO 
maintained in the petition that the Commission had "adopted" 
the view expressed by VEPCO in the proceeding that the ROE 
determined in the proceeding would apply prospectively only, 
but wanted "confirmation" of this point.  The Commission 
granted VEPCO's petition in an order dated December 16, 2011, 
 
6 
stating that "[r]econsideration is granted for the purpose of 
continuing the Commission's jurisdiction over these matters." 
After setting a briefing schedule, the Commission 
received briefs from its staff counsel, the Office of the 
Attorney General Division of Consumer Counsel, and other 
interested parties.  VEPCO filed a response that, for all 
intents and purposes, mirrors the positions it has taken in 
these appeals.  These arguments will be detailed in the 
discussion below. 
The Commission entered an order and opinion addressing 
VEPCO's petition for reconsideration on March 29, 2012.  The 
Commission first opined that Code § 56-585.1(A) "is not 
prescriptive but, rather, is discretionary as to when the ROE 
- as determined by the Commission - becomes applicable for any 
particular two-year biennial review period."  The Commission 
noted that the General Assembly had made express provision for 
many aspects of determining ROE which limited the Commission's 
discretion, but had not made any express provision for melding 
two different ROEs in the same biennial period, as VEPCO had 
requested the Commission to do.  The Commission further noted 
that the stipulation from 2010, which set the ROE to be used 
for review of VEPCO's 2009-2010 earnings, had been advocated 
by VEPCO as an appropriate exercise of the Commission's 
authority. 
 
7 
The Commission rejected the position maintained by VEPCO 
that "unless and until reset in the biennial review process" 
language of the stipulation was intended to carry the 2009-
2010 ROE forward into 2011.  To the contrary, the Commission 
was of opinion that the language did no more than recognize 
that the Commission would reset the ROE for the new biennial 
period. 
Finally, the Commission noted that the ROE for a given 
biennial period does not "result in a rate change and is not 
the same as setting rates."  This is so, because the ROE for a 
biennial period does not alter the rates to be charged during 
that period but, rather, is only used to adjust the rates, if 
necessary, in the next biennial review to allow the utility to 
recoup a shortfall in revenue or rebate any excess revenue to 
customers as determined by applying the ROE for that biennium.  
Thus, the Commission concluded that utilizing the ROE set in 
2011 for the entire 2011-2012 biennium was consistent with its 
function within the ratemaking process because "[f]or purposes 
of the biennial review, the relevant ROE interrogative is not 
'when,' but 'what.'  The proper question is not 'when' did the 
Commission make such finding but, rather, 'what' is the ROE" 
for the new biennial period. 
The Commission concluded that Code § 56-585.1 "does not 
mandate the specific time period of any ROE application in any 
 
8 
biennial review," and thus, the General Assembly intended for 
this determination to be committed to the Commission's sound 
discretion.  Accordingly, the Commission ruled that in the 
2013 biennial review the 10.9% ROE would serve as the fair 
rate of return for the entire 2011-2012 biennium.  These 
appeals followed. 
DISCUSSION 
VEPCO noted appeals from both the Commission's November 
30, 2011 order and its March 29, 2012 order, but assigned 
identical errors in each appeal: 
1. The State Corporation Commission ("Commission") 
erred in its November 30, 2011 Final Order in Case 
No. PUE-2011-00027 ("Final Order"), as clarified in 
its March 29, 2012 Order on Reconsideration and 
Opinion ("Order on Reconsideration"), when, in 
determining the Company's authorized fair rate of 
return on common equity ("ROE") pursuant to the 
biennial review process mandated by Va. Code § 56-
585.1, it held that it will apply the 10.9% ROE 
authorized in the Final Order retroactively to 
January 1, 2011, rather than prospectively from the 
date of the Final Order, contrary to Va. Code § 56-
585.1. 
 
2. The Commission erred in its Final Order, as 
clarified in its Order on Reconsideration, when it 
held that the determination of the effective date of 
the Company's authorized ROE pursuant to Va. Code 
§ 56-585.1 falls within the discretion of the 
Commission, and thus erroneously held that it may 
apply the 10.9% ROE authorized in the Final Order 
retroactively to January 1, 2011, rather than 
prospectively from the date of the Final Order. 
 
3. The Commission erred in its Final Order, as 
clarified in its Order on Reconsideration, when, in 
determining the Company's authorized ROE pursuant to 
 
9 
the biennial review process mandated by Va. Code 
§ 56-585.1, it held that it will apply the 10.9% ROE 
authorized in the Final Order retroactively to 
January 1, 2011, rather than prospectively from the 
date of the Final Order, implicating an unlawful 
retroactive change in rates of service authorized by 
the Commission to be charged by the Company in 
contravention of Virginia common law and the 
Constitutions of the Commonwealth of Virginia and 
the United States.  
 
4. The Commission erred in its Final Order, as 
clarified in its Order on Reconsideration, when, in 
determining the Company's authorized ROE pursuant to 
the biennial review process mandated by Va. Code 
§ 56-585.1, it held that its retroactive application 
of the 10.9% ROE authorized in the Final Order is 
consistent with its March 11, 2010 Order Approving 
Stipulation and Addendum in Case No. PUE-2009-00019, 
and that the parties to the Stipulation and 
Addendum, including the Company, agreed that the 
Company's 11.9% ROE authorized thereunder would not 
apply to earnings for the period January 1, 2011 
through the effective date of the Commission's Final 
Order in the 2011 biennial review. 
VEPCO and the appellees2 agree as to the standard of 
review we are to apply, each having cited Appalachian Voices 
v. State Corporation Commission, 277 Va. 509, 515-16, 675 
S.E.2d 458, 460-61 (2009), in which we quoted the following 
passage from Northern Virginia Electric Cooperative v. 
                     
2 In addition to the Commission, represented by its staff 
counsel, the Office of the Attorney General Division of 
Consumer Counsel, the Virginia Committee for Fair Utility 
Rates, and the Fairfax County Board of Supervisors have 
appeared in these appeals as appellees in support of the 
Commission's ruling.  With respect to the dispositive issues 
of these appeals, the appellees are mostly in accord in their 
positions supporting the Commission's decision.  Accordingly, 
we will summarize their arguments jointly. 
 
 
10 
Virginia Electric & Power Co., 265 Va. 363, 368, 576 S.E.2d 
741, 743-44 (2003): 
It is firmly established that a decision by the 
Commission  
 
comes to this court with a presumption of 
correctness.  The Constitution of Virginia and 
statutes enacted by the General Assembly 
thereunder give the Commission broad, general 
and extensive powers in the control and 
regulation of a public service corporation.  
The Commission is charged with the 
responsibility of finding the facts and making 
a judgment.  This court is neither at liberty 
to substitute its judgment in matters within 
the province of the Commission nor to overrule 
the Commission's finding of fact unless we can 
say its determination is contrary to the 
evidence or without evidence to support it. 
 
Campbell County v. Appalachian Pow. Co., 216 Va. 93, 
105, 215 S.E.2d 918, 927 (1975).  Additionally, the 
Commission's decision "is entitled to the respect 
due judgments of a tribunal informed by experience," 
and we will not disturb the Commission's analysis 
when it is " 'based upon the application of correct 
principles of law.' "  Lawyers Title Insurance Corp. 
v. Norwest Corp., 254 Va. 388, 390-91, 493 S.E.2d 
114, 115 (1997) (quoting Swiss Re Life Co. Am. v. 
Gross, 253 Va. 139, 144, 479 S.E.2d 857, 860 
(1997)). However, the Commission's decision, if 
based upon a mistake of law, will be reversed.  
First Virginia Bank v. Commonwealth, 213 Va. 349, 
351, 193 S.E.2d 4, 5 (1972). 
 
At the outset of our discussion, it is important to make 
clear, as did the Commission, the distinction between the 
"rates" which are allowed to be charged by an electric utility 
as determined by the Commission for a biennial period, and the 
"ROE" set in the same biennial review process.  As the 
 
11 
Commission explained in its March 29, 2012 order, the setting 
of the ROE does not "result in a rate change and is not the 
same as setting rates" for the biennial period in which the 
review is conducted.  Rather, the ROE is used as a benchmark 
in the next biennial review for determining whether the 
utility has received a fair rate of return during the 
preceding biennium, neither reaping a windfall if market 
conditions, such as cost of fuel, consumer demand, and other 
variables, are more favorable than anticipated, nor suffering 
an undue loss if these variables are less favorable than the 
projections used to set the rates in the preceding biennial 
review.3 
During VEPCO's 2011 biennial review the determination 
whether VEPCO's revenues from 2009 through 2010 had allowed it 
an appropriate rate of return was controlled by the 11.9% ROE 
established in the Commission's March 11, 2010 order.  The 
10.9% ROE established in the 2011 review process will be used 
in the 2013 biennial review to determine what adjustment may 
be necessary for VEPCO's revenue from 2011 through 2012.  In 
this sense, an ROE is "prospective" at the time it is 
established in one biennial review, and it is not utilized by 
                     
3 The ROE is used by the Commission in setting rates when 
circumstances require rate adjustments under Code § 56-
585.1(A)(8).  This aspect of that statutory provision is not 
at issue in these appeals. 
 
12 
the Commission until the Commission conducts its retrospective 
review of prior earnings in the next biennial review.  VEPCO 
does not challenge the Commission's 10.9% ROE determination.  
Where the parties differ is whether the Commission has the 
discretion to apply that ROE to revenue that was earned before 
that ROE was established by the Commission's order of November 
30, 2011.  Thus, the crux of these appeals is whether during 
the 2013 biennial review VEPCO's revenues will be subject to 
an 11.9% ROE for the first 11 months of 2011, and a 10.9% ROE 
thereafter, as it maintains, or whether the Commission 
correctly determined that it has the discretion to apply the 
10.9% ROE to the entire 2011-2012 biennium. 
VEPCO first contends that the Commission erred in holding 
that it would apply the 10.9% ROE "retroactively" to January 
1, 2011 in the 2013 biennial review because, in VEPCO's view, 
the plain language of Code § 56-585.1 mandates prospective 
application of a newly determined ROE.  To support this 
assertion, VEPCO relies on four selected statements gleaned 
from the statute. 
First, VEPCO notes that with regard to the initial 
"going-in" review, Code § 56-585.1(A) provides that "the 
Commission shall determine the rates that the utility may 
charge until such rates are adjusted."  (Emphasis added.)  
VEPCO contends that this language shows that the legislature 
 
13 
intended for the rates set initially to continue, and be 
subject to the ROE set for that period, until the rates were 
adjusted in the first biennial review.  In this regard, VEPCO 
maintains that because it was required to charge the base 
rates set by the "going-in" review and authorized to collect 
the revenues generated thereby into the next biennium while 
the 2011 review was taking place, it should be allowed "to 
retain those revenues based on the 11.9% rate of return," 
subject to any adjustment in the next, that is the 2013, 
biennial review. 
VEPCO further notes that a similar provision is found in 
Code § 56-585.1(A)(8), which provides that in subsequent 
biennial reviews after the "going-in" review, "any revisions 
in rates or credits . . . shall take effect not more than 60 
days after the date of the order."  (Emphasis added.)  VEPCO 
contends that this language shows that the legislature 
intended for the effect of all actions taken by the Commission 
in a biennial review to be prospective only, limiting its 
discretion to when during the 60 day period the Commission's 
order will take effect. 
The appellees respond that when Code § 56-585.1 is read 
as a whole, it is clear that the General Assembly understood 
the distinction between "rates," any change in which must be 
approved by the Commission, and the ROE, which is a benchmark 
 
14 
used to determine at a future date whether the approved rates 
have provided the utility with a fair rate of return on 
equity.  Thus, they contend that VEPCO's reliance on these two 
provisions within the statute is misplaced, as they clearly 
speak to when a change may be affected in "rates," and have no 
application to the ROE that is to be applied to revenue 
derived from those rates at a future date.  We agree. 
When construing a statute, our " 'primary objective . . . 
is to ascertain and give effect to legislative intent.' "  
Conger v. Barrett, 280 Va. 627, 630, 702 S.E.2d 117, 118 
(2010) (quoting Turner v. Commonwealth, 226 Va. 456, 459, 309 
S.E.2d 337, 338 (1983)).  "When the language of a statute is 
unambiguous, we are bound by the plain meaning of that 
language."  Conyers v. Martial Arts World of Richmond, Inc., 
273 Va. 96, 104, 639 S.E.2d 174, 178 (2007).  And if the 
language of the statute "is subject to more than one 
interpretation, we must apply the interpretation that will 
carry out the legislative intent behind the statute."  Id.  
Moreover, in evaluating a statute in this way, we have said 
that "consideration of the entire statute . . . to place its 
terms in context to ascertain their plain meaning does not 
offend the rule because 'it is our duty to interpret the 
several parts of a statute as a consistent and harmonious 
whole so as to effectuate the legislative goal.'"  Eberhardt 
 
15 
v. Fairfax Cnty. Emps. Ret. Sys. Bd. of Trs., 283 Va. 190, 
194-95, 721 S.E.2d 524, 526 (2012) (quoting VEPCO v. Board of 
Cnty. Supervisors, 226 Va. 382, 387-88, 309 S.E.2d 308, 311 
(1983)).  Thus, "[a] statute is not to be construed by 
singling out a particular phrase."  VEPCO, 226 Va. at 388, 309 
S.E.2d at 311. 
Code § 56-585.1 is a comprehensive statute detailing a 
complex and cohesive regulatory scheme.  The two phrases that 
VEPCO has singled out plainly do not support the proposition 
being advanced because, as the appellees observe, these 
provisions apply to rates not rate of return, which under the 
statute are distinct, separate concepts. 
VEPCO, however, points to two additional provisions in 
Code § 56-585.1 to support its contention that all decisions 
made by the Commission in a biennial review are to be 
prospectively applied.  First, VEPCO notes that in subsection 
(A)(2), the statute provides that an ROE "shall be determined 
by the Commission during each such biennial review."  VEPCO 
reasons that it would be harmonious to interpret this 
provision as meaning that an ROE should be applied 
prospectively in the same way as the rates, as both are 
determined in the biennial review. 
VEPCO asserts that there is further support for this view 
in subsection (A)(2)(c), which provides that if the Commission 
 
16 
adopts a "Performance Incentive" increasing a utility's base 
ROE, the incentive "shall remain in effect without change 
until the next biennial review for such utility is concluded."  
VEPCO contends that this language plainly evinces a 
legislative intent that both the incentive and the ROE to 
which it is added can only be changed prospectively.4 
According to VEPCO, these provisions demonstrate that 
"[i]f the General Assembly had intended the [ROE] to apply 
retroactively . . . then the 2007 Act would have said so.  In 
fact, it explicitly provides to the contrary." 
The appellees respond that VEPCO's assertion in this 
regard is contrary to the overall scheme of the statute.  They 
contend, as did the Commission in its March 29, 2012 opinion, 
that when read as a whole it is clear that where the General 
Assembly wished to limit the discretion of the Commission, it 
did so expressly.  See, e.g., Code §§ 56-585.1(A)(2)(a) 
(requiring a set floor and ceiling for the ROE); -585.1(A)(10) 
(prescribing what capital structure and cost to use in 
measuring return on equity); -585.1(A)(6) (prescribing 
additional ROE for different generation technology).  By 
contrast, the legislature did not dictate that a new ROE would 
                     
4 Whether a performance incentive can only be changed 
prospectively is not before us in these appeals.  Accordingly, 
we express no opinion on that issue. 
 
 
17 
serve as the fair rate of return for the entire biennium 
because the ROE would not be utilized until the next biennial 
review in any case.  Thus, the absence of such language, far 
from indicating an intent that the ROE not be applicable to 
the entire biennium, must be interpreted as a recognition that 
the General Assembly did not wish to alter the manner in which 
an ROE would be utilized, leaving it to the Commission to make 
such adjustments in its discretion if it deemed proper and 
necessary. 
We agree with the Commission's observation in its March 
29, 2012 opinion that the directive that the ROE for a 
biennium "shall be determined by the Commission during each 
such biennial review" means exactly what it says and nothing 
more.  That is, this language directs that a new ROE is to be 
determined by the Commission during the biennial review based 
on the most recently available criteria, but it says nothing 
about limiting the application of an ROE to less than the full 
biennium in the subsequent review.  It plainly does not 
mandate that an ROE must be applied to less than the full 
biennium. 
In short, the better reading of VEPCO's four selections 
from Code § 56-585.1 is to place them in context within the 
entire statute.  In doing so, it is entirely consistent with 
the overall legislative intent expressed therein that the 
 
18 
General Assembly would expressly dictate that the "rates" 
which already have been assessed while a biennial review was 
pending could only be modified prospectively, but would make 
no such provision for an ROE, which is used as a benchmark to 
evaluate performance after the biennium which is under review 
has ended.  Accordingly, we hold that the Commission did not 
err in concluding that Code § 56-585.1 does not mandate 
prospective application of an ROE from the date it is set by 
the Commission's final order at the conclusion of a biennial 
review. 
VEPCO next contends that even if Code § 56-585.1 does not 
expressly mandate that the Commission must apply the ROE 
determined in a biennial review prospectively from the date of 
its final order, the Commission nonetheless erred in 
concluding that it had the discretion to utilize the ROE for 
the entire 2011-2012 biennium because of statutory, 
procedural, and due process constraints as well as policy 
considerations.5  We will address each aspect of VEPCO's 
contentions in turn. 
Initially, VEPCO maintains that the same statutory 
provisions that it relied upon in asserting that prospective 
application of an ROE is mandatory also in this case limit the 
                     
5 On brief, VEPCO combined the issues of its second and 
third assignments of error in this argument. 
 
19 
Commission's discretion to apply the 10.9% ROE to the entire 
2011-2012 biennium.  VEPCO notes that the Commission itself 
recognized that many of the provisions of Code § 56-585.1 
place express limits on the Commission's discretion as to the 
determination of an ROE.  VEPCO contends that if the 
Commission were also not limited in its discretion as to when 
an ROE would be applied, this would "swallow up or 'end-run' 
many of the stated limitations on its authority." 
The appellees respond that the General Assembly expressly 
set specific limitations on the Commission's authority to 
determine the ROE, but was silent as to when the ROE should be 
applied.  They contend that because the nature of the biennial 
review process makes it self-evident that the ROE would not be 
determined until sometime during the first year of the 
biennium to which it would apply, the legislature must have 
been aware that the Commission would have been required to 
determine when the ROE was to be applied.  Having given no 
express direction on this matter, they assert that the 
legislative intent was to leave the matter to the Commission's 
sound discretion.  We agree. 
"The Commission is a specialized body with broad 
discretion in regulating public utilities."  Level 3 Commcn's 
of Virginia v. State Corp. Comm'n, 268 Va. 471, 474, 604 
S.E.2d 71, 72 (2004); Central Tel. Co. of Va. v. State Corp. 
 
20 
Comm'n, 219 Va. 863, 874, 252 S.E.2d 575, 581 (1979).  
Moreover, when the Commission is conducting a ratemaking 
procedure, it is exercising a legislative function delegated 
to it by the General Assembly.  Potomac Edison Co. v. State 
Corp. Comm'n, 276 Va. 577, 587, 667 S.E.2d 772, 777 (2008).  
Thus, when a statute delegates such authority to the 
Commission, we presume that any limitation on the Commission's 
discretionary authority by the General Assembly will be 
clearly expressed in the language of the statute.  In the 
absence of an express limitation, we will not add language to 
the statute by inference.  See Jackson v. Fidelity & Deposit 
Co., 269 Va. 303, 313, 608 S.E.2d 901, 906 (2005) ("Courts 
cannot 'add language to the statute the General Assembly has 
not seen fit to include.' ") (quoting Holsapple v. 
Commonwealth, 266 Va. 593, 599, 587 S.E.2d 561, 564-65 
(2003)).  Rather, we presume that where the General Assembly 
has not placed an express limitation in a statutory grant of 
authority, it intended for the Commission, as an expert body, 
to exercise sound discretion.  Accordingly, we hold that there 
is no statutory prohibition of the Commission's exercising its 
discretion to determine when an ROE for a given biennium will 
be applied. 
VEPCO next contends that permitting the Commission to 
utilize the newly set ROE for the entire 2011-2012 biennium 
 
21 
violates Rule 1:1 because this would permit the Commission to 
modify its March 11, 2010 order "authorizing the 11.9% rate of 
return that was in effect during" the period of January 1, 
2011 to November 30, 2011.  However, the Commission made an 
express finding in the March 29, 2012 order that the 
stipulation adopted in the March 11, 2010 order "does not 
apply the 11.9% ROE determined therein to the second biennial 
review."  VEPCO has not assigned error to this finding by the 
Commission.  Therefore, under the facts as determined by the 
Commission, the 11.9% ROE never applied to the 2011-2012 
biennial period, and, accordingly, the November 30, 2011 order 
did not modify the March 11, 2010 order. 
VEPCO next contends that by applying the 10.9% ROE to the 
entire 2011-2012 biennium, the Commission has effectively 
instituted a retroactive rate change for the period of January 
1, 2011 to November 30, 2011 in violation of due process 
guarantees of the Virginia and federal constitutions.  This 
argument is premised on VEPCO's assertion that the March 11, 
2010 order "authorized the Company to charge rates designed to 
provide it with the opportunity to earn an 11.9% rate of 
return."  However, as the Commission expressly found that the 
11.9% rate did not apply after December 31, 2010, VEPCO's 
assertion must fail. 
 
22 
Moreover, as appellees note in responding to this issue, 
and as we have already explained in addressing VEPCO's first 
assignment of error, the term "rates" as used in this statute 
refers to the rates that a utility is authorized to charge.  
It does not refer to the ROE which is used to measure whether 
the rates allowed the utility a fair rate of return.  While 
VEPCO was required to continue charging the rates set in 2010 
until the 2011 biennial review was complete, it is simply not 
correct to say that those "rates [were] designed to provide it 
with the opportunity to earn an 11.9% rate of return" in the 
2011-2012 biennium.  The 11.9% ROE was "designed" in the 
"going-in" review process that was limited to the time period 
applicable to that review process.  Likewise, it was the 2011 
biennial review that would determine the appropriate ROE for 
the 2011-2012 biennium.  Accordingly, we hold that there has 
been no due process violation of VEPCO's rights under the 
facts of this case. 
VEPCO next contends that the General Assembly could not 
have intended for the Commission to have discretion to set an 
ROE during the period to which it will be applied because this 
would create "significant operational concerns and risks 
. . . . with respect to the ability of the Company to manage 
its business and comply with its financial reporting 
obligations, as well the ability for investors to evaluate 
 
23 
their investment options in the Company."  VEPCO contends that 
such uncertainty "would run directly contrary to the goals of 
promoting healthy and stable electric utility returns and 
investor perceptions that are an evident purpose of the 2007 
Act."   
Even if we assume that VEPCO's contentions accurately 
reflect public policy concerns that the Act is intended to 
facilitate, this Court is not the appropriate forum for 
addressing VEPCO's asserted deficiencies of the Act regarding 
those concerns.  The legislature is the "author of public 
policy."  Campbell v. Commonwealth, 246 Va. 174, 184 n.8, 431 
S.E.2d 648, 654 n.8 (1993).  The courts "can only administer 
the law as it is written."  Coalter v. Bargamin, 99 Va. 65, 
71, 37 S.E. 779, 781 (1901).  For the courts, then, the "best 
indications of public policy are to be found in the enactments 
of the Legislature."  City of Charlottesville v. DeHaan, 228 
Va. 578, 583, 323 S.E.2d 131, 133 (1984) (quoting City of 
Danville v. Hatcher, 101 Va. 523, 532, 44 S.E. 723, 726 
(1903)). 
Having found that Code § 56-585.1 does not expressly 
limit the discretion of the Commission to set an ROE during 
the biennium to which it will apply, we must presume that the 
General Assembly found such discretion to be consistent with 
the policy objectives of the statute.  Accordingly, we will 
 
24 
not consider VEPCO's policy-based arguments, but presume that 
if they have merit they will find redress in the appropriate 
forum of the legislature. 
Finally, VEPCO contends that the Commission erred in 
relying on the stipulation agreed to by VEPCO and adopted by 
the Commission in the March 11, 2010 order as demonstrating 
that VEPCO had effectively agreed that utilization of the ROE 
determined during the "going-in" review was appropriate, and, 
thus, that utilization of the ROE determined in the 2011 
biennial review was permissible.  Appellees Fairfax County and 
the Virginia Committee for Fair Utility Rates respond that the 
Commission's prior action is merely consistent with and 
provides a rational basis for its action in the present case. 
Because we have already determined that the Commission 
has the discretion to utilize the 10.9% ROE for the entire 
2011-2012 biennium, any reliance that the Commission may have 
placed on VEPCO's prior stipulation to the retrospective 
application of the ROE from the "going-in" review, even if 
misplaced, would not impugn the Commission's action in this 
case.  Moreover, the March 29, 2012 order is clear that the 
Commission principally relied upon its interpretation of Code 
§ 56-585.1 as the basis for finding that it could apply the 
10.9% ROE to the entire 2011-2012 biennium.  The references to 
the 2010 stipulation in the order relied upon by VEPCO to 
 
25 
support its argument principally set the background of the 
case, and to the extent they may be viewed as justification 
for the Commission's action, this would only serve as an 
alternative basis for a ruling that was, in any case, correct. 
CONCLUSION 
In summary, we find no merit to VEPCO's contentions that 
the Commission is not permitted to utilize the 10.9% ROE set 
in the November 30, 2011 order for the entire 2011-2012 
biennial period in the 2013 biennial review of the rates, 
terms, and conditions for the provision of generation, 
distribution, and transmission services by VEPCO.  The 
Commission's construction of Code § 56-585.1 was based upon 
the proper application of legal principles, and we hold that 
the Commission did not abuse the discretion afforded to it 
under that statute.  For these reasons, the judgment of the 
Commission will be affirmed. 
Affirmed.