Opinion ID: 2261107
Heading Depth: 1
Heading Rank: 4

Heading: The Commission's Use of Supply Line Analysis to Set Actual Minimum Prices for Milk

Text: After the Commission settled on its theoretically lowest achievable prices, it purported to adjust those prices upward to bring them in line with what the Commission believed were the realities of the Maine market. The Commission made general findings concerning the factors it had to consider under 7 M.R.S.A. § 2954(2) and concluded that even on its own computation of the theoretically lowest achievable prices, those prices could not reasonably be made the actual minimum prices. In setting what it believed were the appropriate actual minimum prices for milk, the Commission endorsed a supply line analysis, in which the dealers were ranked in inverse order of the amount of their unit costs for milk sold in the various sizes and types of containers. A line was drawn just below the putatively most efficient top third, who also represented about 50 percent of the milk processed in Maine; then the actual minimum prices were computed so as to ensure a dealer on that supply line a 3.1 percent return on his sales. [7] Supply line analysis, properly used, may be unobjectionable as one method among many for coming to an ultimate decision fixing the actual minimum prices for milk. However, it may not be used purely as a substitute for the analysis plainly required by the statute as construed in Cumberland Farms, 1977. In that case we interpreted 7 M.R.S.A. § 2954(2) as requiring the Commission to set actual minimum prices which reflect the theoretically lowest achievable prices for milk. Although we excused the Commission from attempting to assign to each factor in 7 M.R.S.A. § 2954(2) a precise value in dollars and cents, we made clear that the theoretically lowest achievable prices must form the baseline from which necessary adjustments to comply with other mandates of the statute are to be made. 377 A.2d at 92. In Order 80-6, after stating that it was proceeding to consider the adjustment to the theoretically lowest achievable prices necessary to meet the other statutory criteria, the Commission essentially ignored the theoretically lowest achievable prices as it pursued its supply line analysis. The Commission did not assess the varying impacts of the factors listed in the statute, but instead cited the existence of cost-elevating factors as a rationale for, in effect, disregarding the baseline prices completely. Although the supply line may be a legitimate means of ensuring a fair return for dealers operating at existing levels of efficiency, it does not reflect, as the statutes requires, the theoretically lowest achievable prices. We should not be understood as implying that the actual minimum prices may not reflect supply-line prices as well as the baseline prices; the Commission must be sensitive to the costs presently being incurred by actual Maine dealers. However, in order to serve the public need to obtain milk at the lowest practicable prices, the Commission must not be inhibited by the dealers' current standards of efficiency. Under the governing statute the Commission may not assume, in complete disregard of the theoretically lowest achievable prices, that the actual lowest-cost dealers in Maine are operating at the limits of possible efficiency, or even that the actual dealer on the supply line represents a model of reasonable cost effectiveness. Rather, the Commission must begin with the theoretically lowest achievable prices and adjust them upward only if, and to the extent that, each of the considerations listed in 7 M.R.S.A. § 2954(2) individually compels such an adjustment.