Opinion ID: 2207303
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Heading: The Acquisition Adjustment Issue.

Text: In April 1984, Interstate acquired an additional twenty-five megawatts ownership interest in Neal No. 4 generating station from Northwest Iowa Power Cooperative (NIPCO) at a price of $16,875,000. The price included an acquisition adjustment of $3,439,321, representing the amount Interstate paid over and above NIPCO's original cost, less depreciation. According to prior board precedent, the acquisition amount may be included in the rate base if actual benefits to customers are established by the utility. In re Davenport Water Co., 76 P.U.R.3d 209, 228-29 (1976). Generally, inclusion of an acquisition adjustment places the burden of proof upon the utility to show that the asset acquired is of value to consumers and has neither been adequately covered in the rate base nor recognized from prior earnings of the business, Federal Power Comm'n v. Natural Gas Pipeline Co., 315 U.S. 575, 589, 62 S.Ct. 736, 744, 86 L.Ed. 1037, 1051 (1942). An acquisition adjustment such as the one granted Interstate will be allowed in the rate base if the excess price produced consumer benefits in the form of reduced rates, improved service, or otherwise, and is not shown to relate to benefits conferred on consumers which are not proximate in time, United Gas Pipe Line Co., 25 F.P.C. 26 (1961). Regulatory agencies, including the Iowa board, have generally recognized that acquisition adjustments may be permitted in an original cost rate base if a showing of countervailing equities can be demonstrated pursuant to the so-called `consumer benefits test.' Peoples Natural Gas Co., Docket No. U-546 (ISCC 11/16/76) and Peoples Natural Gas Co., Docket Nos. RPU-76-34 and RPU-77-17 (ISCC 10/25/78). Under these authorities, an acquired interest in such a facility should be valued no higher than it was valued on the books of the seller; however, if the purchase is made for less than it would cost the utility to provide other means of acquiring the necessary power, the adjustment may be allowed. In this case, the board found that the utility had met its burden of showing this to be true. Interstate has proven facts in the subject rate proceeding which are substantially similar to the hypothetical facts which it presented in declaratory proceeding Docket ARU-83-1. The twenty-five megawatt ownership interest which Interstate proposed to purchase from NIPCO in Docket ARU-83-1 at a price of $16,875,000 was in fact purchased from NIPCO at that price on April 4, 1984. The acquisition adjustment amount which Interstate estimated in Docket ARU-83-1 at approximately $3,270,500 was in fact $3,439,221 (the difference being due in part to additional accrued depreciation by NIPCO during the pendency of the Docket ARU-83-1 proceedings). The annual fuel savings attributed to this acquisition, estimated at approximately $1,783,000 in Docket ARU-83-1 were in fact only $1,522,000 (the difference being due in part to reduced system-wide fuel costs) and the annual savings in avoided alternative capacity costs estimated at $1.2 to $1.3 million in Docket ARU-83-1 were in fact shown to be between $1.13 and $1.17 million. Based in part on the discrepancies in these statistics, OCA disputes the board's findings on the issue of the acquisition assessment. However, the possibility of drawing two inconsistent conclusions from the evidence does not prevent an agency's finding from being supported by substantial evidence. Gordon v. Iowa Dep't of Transp., 389 N.W.2d 390, 392 (Iowa 1986). The question is not whether there is sufficient evidence to warrant a decision the agency did not make, but rather whether there is substantial evidence to warrant the decision it did make. Peoples Memorial Hosp. v. Iowa Civil Rights Comm'n, 322 N.W.2d 87, 91 (Iowa 1982). A finding of fact made by an agency is conclusive when facts are in dispute or when reasonable minds may differ on the inferences to be drawn from the evidence. Harlan v. Iowa Dep't of Job Serv., 350 N.W.2d 192, 193 (Iowa 1984). OCA contends that the board in this case simply adopted its findings from earlier proceedings in this case in which the benefits were only estimated. The board, however, apparently made only a drafting error in the present order by referring to the estimated benefit figures rather than the actual figures submitted by Interstate in these proceedings. We do not agree with OCA that the board failed to consider the evidence presented to it in reaching its final decision. OCA also argues that the board misallocated the burden of proof. The underlying argument is that the board did not require Interstate to make adequate proof that the acquisition benefited customers. The words burden of proof may refer to the burden of producing evidence or the burden of persuading the fact finder. While the burden of persuasion does not shift, the burden of producing evidence can shift. McDowell v. Town of Clarksville, 241 N.W.2d 904, 908 (Iowa 1976). Interstate had the burden to show that the acquisition adjustment was justified. When the party having the burden has made its prima facie case, the burden or duty rests upon the opposing party to go forward with its proof to meet the prima facie case. Gipson v. Iowa Dep't of Job Serv., 315 N.W.2d 834, 836 (Iowa App. 1981). Here, OCA was assigned the burden of going forward with the evidence to rebut Interstate's prima facie showing, but OCA was not required to assume the burden of proof. We conclude that the acquisition adjustment allowance by the board was based on proper procedure and was amply supported in the record.