Case Name: STATE of Mississippi, ex rel. Edwin Lloyd PITTMAN, Attorney General, et al., v. MISSISSIPPI PUBLIC SERVICE COMMISSION and Mississippi Power Company
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1989-01-04
Citations: 538 So. 2d 367
Docket Number: No. 57740
Parties: STATE of Mississippi, ex rel. Edwin Lloyd PITTMAN, Attorney General, et al., v. MISSISSIPPI PUBLIC SERVICE COMMISSION and Mississippi Power Company.
Judges: ROY NOBLE LEE, C.J., HAWKINS and DAN M. LEE, PJ. and ANDERSON and ZUCCARO, JJ., concur.
Reporter: Southern Reporter, Second Series
Volume: 538
Pages: 367–387

Head Matter:
STATE of Mississippi, ex rel. Edwin Lloyd PITTMAN, Attorney General, et al., v. MISSISSIPPI PUBLIC SERVICE COMMISSION and Mississippi Power Company.
No. 57740.
Supreme Court of Mississippi.
Jan. 4, 1989.
Rehearing Denied March 8, 1989.
Edwin Lloyd Pittman and Mike Moore, Attys. Gen. by Frank Spencer, Asst. Atty. Gen., and W. Glenn Watts, Sp. Asst. Atty. Gen., Jackson, Martha Bergmark, Hatties-burg, Jesse C. Pennington, John H. Hollo-man, III, Robert M. Arentson, Jr., Watkins, Ludlam & Stennis, Jackson, for appellants.
Richard Wise, Jackson, Ben H. Stone, James S. Eaton, Eaton & Cottrell, Gulfport, for appellees.

Opinion:
SULLIVAN, Justice,
for the Court:
On June 17 and 18, 1986, a hearing was held pursuant to an Order of the Mississippi Public Service Commission to Mississippi Power Company to file a performance evaluation plan or show cause why it could not comply. The State of Mississippi, Ex rel. Edwin Lloyd Pittman, Attorney General, Southeast Mississippi Legal Services Corporation, Mississippi Legal Services Coalition, General Motors Corporation, and Peavey Electronics Corporation intervened. On September 18, 1986, the Mississippi Public Service Commission issued its final order adopting and implementing, as a new rate, the Performance Evaluation Plan submitted by Mississippi Power Company. The intervenors/appellants appeal this order, assigning a total of seven errors. The Mississippi Public Service Commission and Mississippi Power Company, appellees, cross-appeal that the appeal should be dismissed, as this Court lacks subject matter jurisdiction over the direct appeal. In light of our disposition of this case, we address only one of the appellants' assignments and the appellees' cross-appeal.
FACTS
Shortly before November 5, 1985, Mississippi Power Company (MPC) filed with the Mississippi Public Service Commission (MPSC or Commission) a notice of intent to increase rates. On November 5, 1985, the Commission issued an order to MPC to file a Performance Evaluation Plan (PEP or plan) or to show cause why it could not comply. That order, in pertinent part, states:
>je * # * # *
3. Under the law rates are not conditioned upon the operating efficiencies and performance of the company although such performance directly affects the revenues of the company and therefore the need for additional rates. This Commission has studied and intends to adopt some new method which will allow it to consider and monitor performance and efficiency of a company and to set rates accordingly.
4. MPC has recently filed a notice to increase rates, and it is timely and reasonable to begin the study and establishment of a new Performance Evaluation Plan with that company.
5. MPC should . develop . a plan which permits this commission to estab lish rates based upon a consideration of the company's performance.
IT IS, THEREFORE, ORDERED that MPC . submit . a procedure or plan whereby this Commission can, if adopted, evaluate the performance of MPC's utility responsibility and obligations, from time to time, and based upon those performance evaluations to determine the reasonableness of MPC's rates .
On March 17, 1986, MPC filed its version of the plan at issue here. On April 4,1986, the Commission gave notice to intervenors and to the public directing them to file comments by May 6, 1986. By the end of April, 1986, the Attorney General (AG), General Motors Corporation (GMC), Mississippi Legal Services Coalition and Southeast Mississippi Legal Services (collectively, Legal Services), had filed their notices of intervention. This cause was set for public hearing on June 17 and 18, 1986. On June 13, 1986, GMC filed a motion to dismiss the proceeding based on the Commission's lack of subject matter jurisdiction or statutory authority.
As scheduled, the hearing on the show cause order was held on June 17 and 18, 1986. The first major item on the agenda was GMC's motion to dismiss. Chairman Cochran, in denying the motion, stated that he was "of the opinion that this Commission does have the authority to review" the PEP Plan. Counsel for the AG, in response to the denial of the motion to dismiss, stated that he agreed that the Commission had the authority to review new ratemaking techniques, but that if MPSC wanted to implement the plan, the appropriate course of action would be to go to the legislature for a change in the law. Chairman Cochran then stated that he did not think that they were here to "necessarily adopt a plan" but rather to review it. Then, he stated, "If we think it has merit in some form, then certainly we'll take the appropriate action, be it going to the legislature, if we need to, to have some adjustments in the existing laws to adopt a new type of rate setting process." The record next reflects much confusion about the nature of the proceeding and the burden of proof. Counsel for Legal Services expressed concern about the possibility of this proceeding merging into a rate filing. Chairman Cochran responded:
I'm not prepared for a rate filing either . I'm prepared to review this proposed evaluation program and see if it has merit and if there might be some alternatives or some other source of efforts to set rates other than what we commonly refer to if somebody files a rate case.
The AG's representative then requested a ruling by the Commission that this proceeding was purely investigative and would not result in a rate change. That request was denied. Extensive examination and cross-examination of all witnesses on various aspects of the PEP Plan followed. On August 7, 1986, MPSC issued an order adopting and implementing PEP with some modifications, with Commissioner Snyder dissenting.
THE PEP PLAN
The plan operates by comparing, on a quarterly basis, MPC's actual earned return on equity for the preceding twelve months with the returns of utilities with similar risks. The utilities chosen for comparison are those with the same bond rating as MPC and the plan excludes any utilities that have suspended dividends. The average cost of common equity capital of this group of utilities is calculated using a Discounted Cash Flow (DCF) model contained in the PEP Plan. This average is called the Benchmark Return on Equity (BROE or Benchmark) and represents the percentage return on equity which MPC should have received by comparison to similar companies for the past twelve months. MPC's actual Retail Return on Equity (RROE) for the preceding twelve months is calculated by using data from the utility's books. If, in any quarter, MPC's RROE is above or below the Benchmark, an adjustment in revenues might be made depending on how well the utility has performed. However, the plan places a two percent (2%) cap on any increase or decrease in revenues per quarter.
MPC's performance rating is determined through the use of seven indicators. All of these indicators were determined by formu-lae developed by MPC. Each of these indicators is given a percentage, so that the total weight is one (1). The weight given each indicator was decided by MPC with "fairness to all concerned in mind" but without any formula because no such formula exists.
Construction performance, measures how well the company has estimated the cost of completing any construction projects which will be included in the retail rate base and which will require three years or less to complete. The plan pror vides that, if a project should "substantially" increase or decrease in scope, the company may petition the Commission for approval to change the certificated estimate. Construction performance is weighted at .11.
The second indicator of MPC's performance is contribution to load factor. This indicator "measures the effectiveness and contributions of the company's efforts to utilize its facilities." Contribution to load factor is weighted at .11. The third indicator is customer satisfaction. This indicator is based on a survey conducted twice a year by a "nationally recognized survey firm" in which the firm asks three questions and then asks the customer to respond to three statements by indicating to what degree they agree or disagree with the statement. This indicator is weighted at .15.
The fourth indicator is equivalent availability which measures the "average percentage of time the fossil steam electric generating units operated by the company were ready and available to produce electricity" during the preceding twelve months. Outages beyond MPC's control are not included in the calculations. Equivalent availability is weighted at .16.
The fifth indicator is residential cost which measures how MPC's charges compare with the rates charged by other utilities in the Southeastern Electric Exchange. The rates charged by other companies are provided by NARUC Residential Electric Bills studies which are prepared twice a year. This indicator is weighted at .20.
The sixth indicator is safety and measures MPC's safety performance over the last twelve months based on the number of: employee accidents; lost time cases; days lost; and, fleet accidents. Safety is weighted at .11.
The seventh indicator is service reliability which measures reliability based on customer interruptions. Some interruptions are excluded. Reliability is weighted at .16.
When MPC's performance under these indicators is tallied, MPC's total performance rating combined with the return on equity comparison described above provide the basis for determining whether an increase/decrease in revenues is appropriate or whether MPC's revenues should remain the same. In other words, if MPC is performing well, but is also above the Benchmark Return on Equity, it will not suffer a decrease in revenues if it is within the range of no change. Conversely, if MPC is performing poorly and its actual return on equity is below the Benchmark, but within the range of no change, it will not be allowed an increase in revenues. On the other hand, if MPC's actual return on equity falls outside the range of no change, either above or below the Benchmark, then a decrease or increase in revenues would be mandated, as long as any decrease or increase did not result in more than a two percent (2%) change in annual revenues.
I.
DOES THIS COURT HAVE JURISDICTION OVER THIS DIRECT APPEAL?
The appellees, MPC and MPSC, argue that, under the public utilities statute governing appeals procedures, aggrieved parties may appeal directly to this Court, only those final Commission orders resulting from proceedings instituted by a utility, involving a filing for a rate change. The argument continues that, since the instant cause was not instituted by a utility, it cannot be one involving a filing for a rate change, and, therefore, this Court lacks subject matter jurisdiction to hear a direct appeal.
In applying a statute, we look first to that statute's own words. Pinkton v. State, 481 So.2d 306, 309 (Miss.1985); Back-Acres Country Club, Inc. v. Mississippi State Tax Commission, 216 So.2d 531, 534 (Miss.1968); Russell v. State, 231 Miss. 176, 181, 94 So.2d 916, 917 (1957). Rules of construction are inappropriate, and, parenthetically, unnecessary, where the words of the statute are plain and unambiguous. Pinkton, 481 So.2d at 309; MISS CAL 204, Ltd. v. Upchurch, 465 So.2d 326, 329 (Miss.1985); Clark v. State ex. rel. MS. State Med. Ass'n, 381 So.2d 1046, 1048 (Miss.1980); Mississippi Power Co. v. Jones, 369 So.2d 1381, 1388 (Miss.1979). The statutory language, with which we are faced in the instant case, falls into this category.
In 1983 the legislature amended Article VI, Section 146 of the Mississippi Constitution, such that it now provides:
The Supreme Court shall have such jurisdiction as properly belongs to a court of appeals and shall exercise no jurisdiction on matters other than those specifically provided by this Constitution or by general law. The legislature may by general law provide for the Supreme Court to have original and appellate jurisdiction as to any appeal directly from an administrative agency charged by law with the responsibility for approval or disapproval of rates sought to be charged the public by any public utility. The Supreme Court shall consider cases and proceedings for modification of public utility rates in an expeditious manner regardless of their position on the court docket.
After ratification by the electorate, this amendment became part of the constitution in January, 1984.
Section 77-3-72(1), Miss.Code Ann. (Supp.1988), in pertinent part provides:
Any party aggrieved by any final finding, order or judgment of the Commission in any utility rate proceedings involving a filing for a rate change of any public utility . shall have the right, regardless of the amount involved, of direct appeal to the Mississippi Supreme Court.
This section has been in effect since public adoption of the 1983 Amendment to Section 146 (Mississippi Constitution of 1890) in January, 1984.
The "partpes] aggrieved" are the Attorney General, Legal Services, GMC, and Peavey. They satisfy the requirement of "any party." The Commission entered its order adopting and implementing the PEP Plan, thereby satisfying the second requirement of the statute. The PEP Plan was filed by MPC at the Commission's request after MPC had filed its notice of intent to change rates, and, as shall be more fully developed below, the PEP Plan was "a filing for a rate change of" MPC.
We are of the opinion, and therefore hold, that this appeal satisfies the requirements of Miss.Code Ann., § 77-3-72(1) (Supp.1988). This Court properly has jurisdiction over this direct appeal.
II.
THE ADOPTION OF PEP
Under this assignment we are called upon to resolve two questions. First, whether PEP is a rate or, simply, a rate-making tool. Second, whether adoption of PEP as a rate exceeds the Commission's statutory authority.
As is well established, this Court's review of an administrative agency order is limited. A Commission order shall not be set aside in whole or in part except for errors of law, unless the court finds it is not supported by substantial evidence, is contrary to the manifest weight of the evidence, is in excess of statutory authority or violates constitutional rights. Miss.Code Ann., § 77-3-72(4) (Supp.1988); Miss. Public Service Commission v. So. Central Bell Tel., 464 So.2d 1133, 1135 (Miss.1984); Miss. Public Service Commission v. Miss. Power Co., 429 So.2d 883, 891 (Miss.1983); Miss. Public Service Commission v. Miss. Power Co., 337 So.2d 936, 939 (Miss.1976); Miss. State Tax Commission v. Miss.-Ala. State Fair, 222 So.2d 664, 665 (Miss.1969). Furthermore, an order of the Public Service Commission comes to this Court with the presumption of validity. Miss. Public Service Commission v. So. Central Bell Tel, 464 So.2d at 1135.
Collectively the appellants argue that the Commission's statutory power is limited to determining just and reasonable rates and does not extend to adopting new rate setting methods. Second, they argue that the method adopted, PEP, directly contravenes certain statutory procedures and generally circumvents the utilities regulation statutes.
MPC and the Commission counter that the Commission has full statutory authority to adopt PEP. Their position is that the appellants' failure to understand that PEP is the rate, rather than a ratemaking method, leads the appellants to their mistaken belief that the Commission acted outside its statutory authority. Appellees rely on cases standing for the proposition that the objective of rate regulation is the result, just and reasonable rates, and not the methods employed to reach that result and that no particular formula is necessarily binding on the Commission. See Southern Bell Tel. v. Miss. Public Service Commission, 237 Miss. 157, 113 So.2d 622, 647 (1959), quoting Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942), and quoting Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944).
The appellees also rely heavily on the Alabama Supreme Court's decision in Ala. Metallurgical Corp. v. Ala. Public Serv. Com'n., 441 So.2d 565 (Ala.1983). They quote the following:
The appellants' mistaken characterization of the nature of Rates RSE and CNP has led to several erroneous conclusions regarding the operation of the rates within the traditional rate making structure. RSE and CNP are fixed rate formulae. Courts throughout the United States have recognized the distinction between a fixed formula and the mathematical factors or adjustments, which are the mathematical products of the operation of that formula. These Courts have held that the formula is the rate as opposed to the mathematical computations under the formula.
Ala. Metallurgical, 441 So.2d at 571-72.
The Alabama Court went on to hold that the rates in question were statutorily authorized formulary rates. Finally, the ap-pellees note that in 1988 the legislature amended the. definition of "rate" found in Miss.Code Ann., § 77-3-3(e) (Supp.1988), to include as a rate "the formula or method by which such may be determined."
A.
IS PEP THE RATE?
We have no difficulty accepting MPC and MPSC's position that the formula is the rate. In Southern Bell Tel. v. Miss. Public Service Commission, 237 Miss. 157, 113 So.2d 622 (1959), we held that the Commission is not bound to the use of any particular formula in reaching the statutorily required result of "just and reasonable" rates such as will yield a fair rate of return to the utility furnishing service. Southern Bell, 113 So.2d at 647-49.
This rule has been consistently applied. The reasonableness of rates charged, or to be charged, by a public utility is not determined by definite rules and legal formulae, but is a fact question requiring the exercise of sound discretion and independent judgment in each case. Miss. Public Service Commission v. So. Central Bell Tel., 464 So.2d 1133, 1135 (Miss.1984); Miss. Public Service Commission v. Miss. Power Co., 337 So.2d 936, 938 (Miss.1976); Miss. Power Co. v. Miss. Public Service Commission, 291 So.2d 541, 556 (Miss.1974).
We are further assisted in our determination of this issue by the legislature's 1988 clarification of Miss.Code Ann., § 77-3-3(e). In construing a statute, we may consider later acts of the legislature to ascertain the correct meaning of a prior statute. Grant Center Hosp. v. Health Group, etc., 528 So.2d 804, 810 (Miss.1988). On the above authority, we hold that, under the public utilities regulations statutes, this formula, PEP, is the rate.
B.
DOES ADOPTION OF RATE PEP EXCEED THE COMMISSION'S STATUTORY AUTHORITY?
Miss.Code Ann., § 77-3-5 (1972), provides that the Public Service Commission shall have exclusive original jurisdiction over the intrastate business and property of public utilities subject to the limitations imposed in, and the provisions of Miss.Code Ann., § 77-3-1, et seq. This legislative grant of authority places those limitations on the Commission's power and authority that this Court has uniformly placed on administrative agencies. We have stated that administrative agencies have only such powers as are expressly granted to them, or necessarily implied in their grant of authority. State ex. rel. Pittman v. Miss. Public Service Commission, 520 So.2d 1355, 1358 (Miss.1987); Farrish Gravel v. Miss. Highway Commission, 458 So.2d 1066, 1068 (Miss.1984); Strong v. Bostick, 420 So.2d 1356, 1361 (Miss.1982); Golding v. Salter, 234 Miss. 567, 107 So.2d 348 (1958). Furthermore, any such power exercised must be found within the four corners of the statute under which the agency operates. Bostick, 420 So.2d at 1361; Miss. Milk Com'n. v. Winn-Dixie, 235 So.2d 684, 688 (Miss.1970). If this authority is not found to be expressly granted or necessarily implied, then the administrative agency's decision is void. Farrish Gravel, 458 So.2d at 1068.
In defining "necessary implication" in Bostick, we stated:
"The term is more restrictive than mere 'implication;' it refers to a logical, not a physical, necessity, and implies that no other interpretation is permitted by the words of the instrument construed; and so it has been defined as meaning an implication which results from so strong a probability of intention that an intention contrary to that imputed cannot be supposed; that which leaves no room to doubt; ."
Bostick, 420 So.2d at 1361, quoting 42 C.J. S. Implication at 405 (1944).
In further delineating an administrative agency's authority we have held that it cannot operate to supersede or circumvent the statutes under which the agency operates or be inconsistent with the statutes. State ex rel. Pittman v. Miss. Public Service Commission, 520 So.2d at 1358, citing Capital Electric Power Ass'n. v. Miss. Power & Light Co., 240 Miss. 139, 153, 125 So.2d 739, 744 (1961); Miss. State Tax Commission v. Reynolds, 351 So.2d 326, 327 (Miss.1977).
It is this Court's opinion that in adopting Rate PEP the Commission has acted outside its statutory authority. First and foremost, Rate PEP is an utter abrogation by the Commission of its statutory responsibilities and a relinquishment of control to the very entity the Commission is charged by law to regulate.
Miss.Code Ann., § 77-3-2 (Supp.1988), outlines the purposes of and policy behind the legislature's grant of regulatory power to the Commission. This section in part provides that the public policy is:
(a) To provide fair regulation of public utilities in the interest of the public;
(b) To promote the inherent advantage of regulated public utilities;
(c) To promote adequate, reliable and economical service to all citizens and residents of this State;
(d) To provide just and reasonable rates and charges for public utility services without unjust discrimination, undue preferences or advantages, or unfair or destructive competitive practices and consistent with long-term management and conservation of energy resources by avoiding wasteful, uneconomic and inefficient uses of energy;
The necessity for such a policy was well articulated in State ex. rel. Allain v. Miss. Public Service Commission, 435 So.2d 608 (Miss.1983):
The duties of the Commission are awesome and their responsibilities great in a most difficult, ongoing situation. Mississippi Code Annotated, § 77-3-39 (1972), authorizes the Commission to establish rates that are just and reasonable to the ratepayers and which will yield a fair rate of return to the utility for its servic es. In effect the Commission is the counterpart of the market place by which other businesses are measured. This is so because public utilities are monopolies engaged in the business of furnishing necessary services to the public. Obviously, the legislative intent in creating the Public Service Commission was to interpose an authoritative body between the rate payers of the utility and the investors in the utility so that their respective interests, necessarily antagonistic, might be equitably served. The crucible of the competitive market place to which business concerns, other than monopolies, are necessarily exposed is thus avoided so that economic waste by overlapping and duplicating services will not occur.
State ex rel. Attain, 435 So.2d at 612. The result of Rate PEP is to return MPC to its position as a virtually "pure" monopoly with the attendant "great potential for the abuse of economic power" and, perhaps, inefficiency. Miss. Public Service Commission v. Miss. Power Co., 429 So.2d 883, 909 (Miss.1983) (Justice Broom dissenting).
Without resort to differentiations between Rates RSE/CNP and Rate PEP or differentiations between Alabama's statutory scheme and ours, we decline to follow Ala. Metallurgical Corp., 441 So.2d 565 (Ala.1983). We are convinced that the public interest is not protected by a rate that is subject to quarterly adjustments of the costs of utility services, which adjustments are determined by revenue and expense figures supplied by the utility. The fact that MPC's books are regularly audited does not bring Rate PEP into conformity with the purposes of the statute because many business practices and decisions which might be acceptable in the free market may not adequately protect the public interest when engaged in by a monopoly. Nor does the fact that the Commission reviews each adjustment give PEP the necessary legitimation. We have accepted the Commission's argument that PEP results in the mechanical application of numbers to a formula. This established, the Commission's review appears to be a mere rubber stamp.
Something akin to MPC's Performance Evaluation Plan might well be a useful tool for the Commission to utilize in the context of the traditional ratemaking process, but as a rate it vests unbridled discretion in the utility. Having determined that Rate PEP violates this State's public policy and the statutes delineating that policy, we turn to consideration of several specific statutory provisions circumvented by PEP.
MPC and MPSC take the position that Rate PEP does not circumvent the statute because Rate PEP was adopted following a Commission initiated request for a rate change and, therefore, the procedures dictated by the statutes governing utility initiated rate changes do not apply. We do not agree. Such an interpretation has allowed the appellees to circumvent the requirements of the statutes and to establish a rate which acts inconsistently with those statutes.
Miss.Code Ann., § 77-3-41 (Supp.1988), in pertinent part provides, "whenever the Commission, after hearing had pursuant to the procedure set forth in Section 77-3-39 and Section 77-3-47 ." (Emphasis added). Section 77-3-47 in turn includes no procedures for Commission initiated rate changes. It does include a requirement of and procedures for a prehearing conference which must be held prior to any hearings held after a utility initiated request for a rate change. In contrast, § 77-3-39 and 77-3-37 provide extensive procedures and evidentiary prerequisites for hearings on utility initiated rate changes.
The plain and unambiguous meaning of the above quoted language in Miss.Code Ann., § 77-3-41 (Supp.1988), is that the requirements of both § 77-3-39 and § 77-3-47 must be satisfied whenever there is a request for a rate change, regardless of who initiates it. In other words, "and" is conjunctive and means what its says. This is also the most reasonable reading of § 77-3-41 in light of the fact that, otherwise, the statutes would not provide any procedures for hearings on Commission initiated rate changes. This being the case, Rate PEP must satisfy the statutes in spite of the fact that it grew out of a Commission initiated proceeding.
Miss.Code Ann., § 77-3-39(1) in part provides, "the commission shall hold such hearing in every case in which the change in rates constitutes a major change in rates, as defined in Section 77-3-37(10)." Miss.Code Ann., § 77-3-37(10), in turn provides:
"Major changes" means (a) an increase in rates which would increase the annual revenues of such public utility more than the greater of One Hundred Thousand Dollars ($100,000.00) or two percent (2%)
Rate PEP provides that no quarterly adjustment shall result in more than a two percent (2%) change in annual revenues. This provision has the potential of allowing MPC to enjoy up to an eight percent (8%) increase in revenues per year or to be subjected to an eight percent (8%) decrease in revenues. Thus, Rate PEP circumvents the public hearing requirement for all cases involving any rate increase which would result in greater than a two percent (2%) increase in annual revenues. We would also point out that such an arbitrary cap could act to deprive the public of a just and reasonable rate or to deprive the utility of a fair return.
Second, Rate PEP establishes that only 75 percent of firm capacity sales will be credited to ratepayers. In its order implementing PEP the Commission stated:
In prior proceedings, this Commission has required MPC to credit all revenues derived from firm capacity sales to operating revenues. The effect of this has been to reduce the amount of revenues that are required from retail customers and thereby to reduce rates. This has been a substantial benefit to MPC's customers in the past.
We fail to understand how a 25 percent windfall to MPC's shareholders furthers the statutory mandate of Miss.Code Ann., § 77-3-33(1) that rate charges be just and reasonable. Ratepayers provide the necessary economic resources which enable MPC to produce the energy for sale to interstate customers. Furthermore, the lure of this 25 percent profit could lead MPC to increase firm capacity sales, at least up to the point where the 75 percent which is credited to ratepayers reaches the two percent (2%) annual revenues increase cap. In the long run, the utility might resort to offsetting the increase in revenues with new costs, such as new construction. Ultimately, the ratepayer will bear those costs.
Finally, Rate PEP relegates to cost-of-service 50 percent of all charitable contributions made by MPC. Miss.Code Ann., § 77-3-79 (Supp.1988), provides that, "[rjeasonable, charitable or civil contributions shall be allowed as costs of service not to exceed amounts established by regulations adopted by the Commission." Section 77-3-79 includes a reasonableness requirement. Such an arbitrary allocation of this percentage of charitable contributions to cost-of-service cannot be categorized as reasonable. This is particularly true, where the 50 percent is an ever changing amount of real dollars. Furthermore, this cost, up to 50 percent of the amount allowed by the IRS, could conceivably be used to offset the increase in firm capacity sales revenue. We have addressed only a few of the numerous statutory deficiencies pointed out by the appellants.
In short, PEP violates the general public policy of utilities regulation in this State and circumvents specific statutory provisions. Therefore, the Commission's order adopting and implementing PEP is void and of no effect. This cause is remanded for consideration of the effect of this ruling on any revenue adjustments obtained by MPC under the plan.
REVERSED AND REMANDED.
ROY NOBLE LEE, C.J., HAWKINS and DAN M. LEE, PJ. and ANDERSON and ZUCCARO, JJ., concur.
ROBERTSON, J., dissents.
PRATHER, J., not participating.
. We are not unmindful of the fact that as of the time of this appeal the Commission had challenged one quarterly adjustment. However, the resulting rate increase was subsequently accepted by the Commission without any significant changes. Furthermore, we are totally ignorant of any factual basis for the Commission's challenge to that adjustment for the simple reason that the Commission did not offer any rationale.