Opinion ID: 2207303
Heading Depth: 1
Heading Rank: 4

Heading: The Extraordinary Efficiency Bonus.

Text: Iowa Code section 476.52 provides: 476.52. Management efficiency It is the policy of this state that a public utility shall operate in an efficient manner. If the board determines in the course of a proceeding conducted under section 476.3 [complaints investigation] or 476.6 [charges in rates supply and cost review] that a utility is operating in an inefficient manner, or is not exercising ordinary, prudent management, or in comparison with other utilities in the state the board determines that the utility is performing in a less beneficial manner than other utilities, the board may reduce the level of profit or adjust the revenue requirement for the utility to the extent the board believes appropriate to provide incentives to the utility to correct its inefficient operation. If the board determines in the course of a proceeding conducted under section 476.3 or 476.6 that a utility is operating in such an extraordinarily efficient manner that tangible financial benefits result to the ratepayer, the board may increase the level of profit or adjust the revenue requirement for the utility. The board shall adopt rules for determining the level of profit or the revenue requirement adjustment that would be appropriate. The board shall also adopt rules establishing a methodology for an analysis of a utility's management efficiency. (Emphasis added.) OCA argues that the board may grant efficiency rewards only if the benefits are both tangible and financial, and this means that the benefits must be definable, measurable, or capable of being appraised at an actual or approximate value. For a benefit to be financial, it must be pecuniary in nature. Thus, it argues, tangible and financial benefits to ratepayers are those benefits which can be measured, or quantified, in terms of dollars and cents. The board argues that the plain language of section 476.52 does not require it to quantify a finding of efficiency. It argues that OCA adds an element that the legislature did not include in the statute. It cites our decisions on statutory construction for the proposition that the plain and ordinary meaning should be applied and that a court may not read into a statute an intent and meaning not expressed. The board contends OCA's argument that management efficiency rewards be reasonably related to the cost savings to consumers reads into the statute an intent not expressed therein and that the legislature left to it the task of promulgating rules to effectuate this determination. The rules it adopted relate to the degree of management efficiency rather than a relation to the cost savings resulting from management efficiency. We believe the board acted within its realm of statutory authority under section 476.52 by allowing the efficiency reward without quantifying it in dollars saved. Management practices being rewarded might well establish a practice, or a precedent for other utilities, which will bear financial rewards in the future, and there are, no doubt, other examples of management innovations or improvements which will benefit customers in ways other than immediate rate reductions. This is an area for the exercise of the board's expertise.