Opinion ID: 1993160
Heading Depth: 2
Heading Rank: 1

Heading: training-labor costs

Text: The company asserts that the commission erred by disallowing training-labor costs from the total CIS cost to be capitalized, giving three reasons: (1) the commission's disallowance constitutes retroactive rate making, (2) the commission applied the wrong evidentiary standard, and (3) the assumption of double recovery is inconsistent with the factual record. Retroactive rate making occurs when the commission or party attempts to use current rates to recover current expenses while also adjusting for over- or underrecoveries in past periods. There is a ban on retroactive rate making to prevent such corrections from occurring. See Narragansett Electric Co. v. Burke, 119 R.I. 559, 570, 381 A.2d 1358, 1364 (1977) (rates must be prospective). The company seeks to persuade this court that the double recovery that the commission has prevented in disallowing training labor associated with the CIS's costs, relying on the division's assumption that operational expense was reduced when the company decided to capitalize these costs, constitutes retroactive rate making. We are of the opinion that the commission clearly based its decision on Effron's testimony that inclusion of these costs would result in double recovery for the company, a proposition to which the company failed to object or respond through rebuttal evidence. Preventing double recovery is not the same as retroactive rate making. The double-recovery argument is to prevent the company from recovering certain amounts for capitalized training labor, those same amounts that it expensed as operational labor costs in the prior rate case, docket No. 1914. This action then does not constitute retroactive rate making but instead is a prohibition on requiring paying customers to pay twice for amounts incurred once by the company. The company contends that the commission's exclusion of $859,000 in training-labor costs from the rate base constitutes error as retroactive rate making. Rates must be prospective in nature, not designed to recoup past losses or adjust for underestimating expenses. Providence Gas Co. v. Burke, 475 A.2d 193, 197 (R.I. 1984); Narragansett Electric Co. v. Burke, 122 R.I. 13, 22, 404 A.2d 821, 827 (1979). The company's argument is without merit because the commission's rationale for disallowing training-labor costs is its reliance on Effron's characterization that allowing this amount into the rate base would result in double recovery of the same costs. Absent any evidence from the company that its training-labor amount was, in fact, not part of the labor expensed in the prior rate case, the company's retroactive rate-making argument is erroneous. Mere disallowance of the costs does not indicate that the commission made its disallowance from the rate base to adjust a prior surplus. The company next asserts that the commission applied an incorrect evidentiary standard, maintaining that the proponent of a claim, the division in this case, has the burden of proving that claim. In this case the company states that the commission relied on the erroneous assumption that labor costs included in the CIS cost reduced operational-labor expenses dollar for dollar. The company charges that the commission erred below in placing the burden on the company to disprove the assumption, stating that it is incumbent upon the Division to prove its assertion. In Providence Gas Co. v. Burke, 475 A.2d at 199, the court found that because the expert witness was knowledgeable and well qualified, and there was no contradictory evidence presented to the expert's testimony, the commission's ruling was justified. As the party seeking rate relief, the company has the burden of establishing its entitlement to such relief. Interstate Navigation Co. v. Burke, 465 A.2d 750, 758 (R.I. 1983); see Providence Gas Co. v. Burke, 419 A.2d 263, 268 (R.I. 1980). Section 39-3-12 mandates that the burden of proof to show that the increase is necessary in order to obtain a reasonable compensation for the service rendered shall be upon the public utility. This court has noted that the Legislature adopted the general principle that a moving party must prove its case. United States v. Public Utilities Comm'n, 120 R.I. 959, 963, 393 A.2d 1092, 1094 (1978). In the present case, the division's expert, Effron, testified that to allow expenses to be capitalized now and added to the rate base would constitute double recovery. The company did not object to this characterization, nor did it offer any rebuttal testimony. The commission expressly relied upon and adopted Effron's testimony, finding it competent legal evidence upon which it could rely in making its determination regarding inclusion or exclusion of these labor costs in the total amount capitalized and computed into the rate base. We find this to be a reasonable basis for the commission's decision, fairly supporting the order. We are therefore compelled to affirm the commission's finding. The company next asserts that the commission erred by its disallowing capitalization of training-labor costs associated with the CIS because the assumption of double recovery is inconsistent with the factual record. It contends that the labor expense, which was included in the prior rate case, and the training labor associated with the CIS are not the same. Further, it claims that if there was double recovery, profit should have increased, which did not actually occur. These issues are presented now, on appeal. As stated previously, the burden of proof rests with the company to support its proposed rate increase with substantial evidence. The company failed to raise the aforementioned issues during the hearing before the commission and failed to sustain its burden of proof. For the court now to consider the merits of these arguments on appeal would require it to engage in factfinding, a function it is statutorily prohibited from doing. We are of the opinion that the commission did not err in disallowing capitalized training-labor costs, considering them to constitute double recovery. The inconsistencies in facts to which the company refers are mere conjecture on its part, unsupported by any evidence in its part, unsupported by any evidence in the record of the hearings before the commission. To examine these arguments now is beyond the scope of our review, and we decline to do so. We are of the opinion that the commission's decision regarding training labor is supported by the facts of the case, by the opinion of the division's expert witness, and by the failure of the company to object to or present any contrary testimony.