Opinion ID: 2448440
Heading Depth: 2
Heading Rank: 2

Heading: Is the Line Installation Allowance Supported by Substantial and Competent Evidence?

Text: Building Contractors contends that there is not substantial and competent evidence to support the new tariff. It argues that the Commission did not address the factors mentioned in Homebuilders and Boise Water. In Homebuilders, we stated, Any such difference (discrimination) in a utility's rates and charges must be justified by a corresponding classification of customers that is based upon factors such as cost of service, quantity of electricity used, differences in conditions of service, or the time, nature and pattern of the use. 107 Idaho at 420, 690 P.2d at 355. In Boise Water we similarly stated, Any such difference in rates and charges must be justified by a corresponding classification of customers that is based on such factors as cost of service, quantity of resource use, differences in the condition of service or in the time, nature or pattern of the customers' use. 128 Idaho at 539, 916 P.2d at 1264. Building Contractors alleges that there are no findings as to these factors and no evidence in the record supporting other statements in the Commission's orders. Whether there is substantial evidence supporting the Commission's findings depends upon what factual findings are necessary to decide the issues in the proceeding. The Commission performs legislative as well as judicial functions in its proceedings. Rosebud Enters., Inc. v. Idaho Public Utilities Comm'n, 128 Idaho 609, 618, 917 P.2d 766, 775 (1996). When exercising its legislative function, the Commission is not bound to decide future cases in the same way it had decided similar cases in the past. Intermountain Gas Co. v. Idaho Public Utilities Comm'n, 97 Idaho 113, 119, 540 P.2d 775, 781 (1975). There need not be facts in the record supporting the Commission's policy determinations made in exercising its legislative function. See Moon v. North Idaho Farmers Ass'n, 140 Idaho 536, 545, 96 P.3d 637, 646 (2004) (The existence of facts supporting the legislative judgment is to be presumed. (quoting United States v. Carolene Prods. Co., 304 U.S. 144, 152, 58 S.Ct. 778, 784, 82 L.Ed. 1234, 1241 (1938))). This proceeding did not involve a difference in rates or charges between or among classes of customers. Therefore, the factors listed above in Homebuilders and Boise Water were not relevant. Rather, the Commission made a policy change. Allowances and refunds are sums that the Commission requires the Company to invest in distribution systems for new customers. [2] The Commission had previously set the allowances and refunds so that the Company would pay to connect a new customer an amount approximating the average amount it paid to connect an electricity customer in the past. In a 1995 order, the Commission stated, We find that new customers are entitled to have the Company provide a level of investment equal to that made to serve existing customers in the same class. However, in this proceeding, the Commission changed that policy. So long as regulatory bodies adequately explain their departure from prior rulings so that a reviewing court can determine that their decisions are not arbitrary or capricious, orders based upon positions substantially different than those taken in previous proceedings can be upheld. Intermountain Gas Co. v. Idaho Public Utilities Comm'n, 97 Idaho 113, 119, 540 P.2d 775, 781 (1975). In making the policy change, the Commission stated that it is addressing a fundamental principle of utility regulation: To the extent practicable, utility costs should be paid by those that cause the utility to incur the costs. If the `cost-causers' do not pay, the electric rates for other customers will be higher. Building Contractors states that its appeal is not premised simply on the fact that the [new line extension] allowance is smaller than previously required, or that new customers may pay more to extend service than existing customers who accessed service when facilities costs were lower. It concedes that there will be a cost difference between what new customers pay for line extensions as compared to old customers. It argues that the new tariff results in new customers overpaying for distribution facilities, in Idaho Power over-earning on its investment to serve those new customers, and in existing customers necessarily being subsidized in the rates they pay. (Emphases in original.) Thus, it contends that the new tariff violates this Court's opinions in Boise Water and Homebuilders. In both Boise Water and Homebuilders, the charges at issue were not based solely upon the cost of extending distribution facilities to new customers. Building Contractors's argument that new customers are overpaying for distribution facilities is not that they are paying more than those facilities cost the Company to construct. The overpaying argument is simply that with the lower amount of Company investment in distribution facilities resulting from the elimination of per-lot refunds, the Company will receive from rates charged new electricity customers more than it invested in constructing the distribution facilities necessary to connect those customers to electrical service. Building Contractors asserts that under the former tariff the allowances and refunds resulted in Company investment that was quite close to the per customer embedded cost of distribution, but the line extension allowances under the new tariff no longer swing around any objective anchor that future customers, Commissions, or this Court can hold to. (Emphasis in original.) There is no statutory requirement that it do so. All charges made, demanded or received by any public utility . . . for . . . any service rendered or to be rendered shall be just and reasonable. I.C. § 61-301. The Commission has the authority to determine charges that are just and reasonable. I.C. § 61-502. In these proceedings, the Commission determined what would be a fair and reasonable allocation between the Company and new customers of the cost of constructing the distribution facilities necessary to connect those customers to electrical service. The Commission found that Idaho Power's proposed fixed allowance of $1,780 for single-phase service and $3,803 for three-phase service represents a fair, just and reasonable allocation of line extension costs. Determining what is fair and reasonable is a discretionary determination. See Quick v. Crane, 111 Idaho 759, 772, 727 P.2d 1187, 1200 (1986) ([J]udicial discretion `requires an actual exercise of judgment and a consideration of the facts and circumstances which are necessary to make a sound, fair, and just determination, and a knowledge of the facts upon which the discretion may properly operate.'). Idaho Code § 61-629 provides, The review on appeal shall not be extended further than to determine whether the commission has regularly pursued its authority, including a determination of whether the order appealed from violates any right of the appellant under the constitution of the United States or of the state of Idaho. [I]n regularly pursuing its authority the Commission must enter adequate findings of fact based upon competent and substantial evidence and it must set forth its reasoning in a rational manner. Washington Water Power Co. v. Idaho Public Utilities Comm'n, 101 Idaho 567, 575, 617 P.2d 1242, 1250 (1980). Here, the Commission's findings as to the Company's costs to construct distribution facilities to connect new electricity customers were supported by substantial and competent evidence. There is no contention that the sums that will be charged to developers for distribution facilities exceed the Company's costs in providing those facilities. The evidence supports the Commission's finding that it is addressing distribution costs not resource costs. The Commission also set forth its reasoning in a rational manner for changing the allocation of those costs between the Company and developers. With respect to the change in line extension allowances and refunds, the Commission stated, These changes relieve one area of upward pressure on rates. Moreover, the Company's proposal is impartial to customer class, minimizes subsidization of terminal facilities costs, and carries the added benefit of administrative simplicity. As explained by Commission staff: Each new customer that is added requires an investment in distribution plant and terminal facilities. The new investment is undepreciated, while the investment upon which the Company's revenue requirement (and rates) is calculated was both lower on a per customer basis when originally made and is now partially depreciated. Therefore, when the new plant investment is booked by the Company, the resulting revenue requirement is higher per customer than it was before the new customers were connected. The Company then has two alternatives: increase rates to all customers to cover the increased revenue requirement, or decrease the revenue requirement by shifting more of the investment in new distribution/terminal facilities to the customer for whose benefit those facilities are built. The Commission regularly pursued its authority, and there is no contention that the order appealed from violates any of Building Contractors's constitutional rights. We affirm the Commission's order adopting the new tariff.