Opinion ID: 1961826
Heading Depth: 1
Heading Rank: 2

Heading: The Rejection of the Rate Design

Text: The Intervenors and the utility contend that where, as here, no one at the public hearing, including the Commission staff, provides the Commission with an alternative to the utility's proposed rate design, the utility is entitled to a presumption in favor of its proposal. Otherwise stated, this contention is that where the utility presents expert witnesses who provide substantial evidence in support of its proposal, the Commission staff has the burden of proving that the utility has not complied with the mandates of 35 M.R.S.A. §§ 51 and 61, which sections impose on the utility the responsibility to prepare and file just and reasonable rate schedules. In any event, the Intervenors assert, the Commission never found the utility's proposed allocation to be unjust or unreasonable, and that the Commission has no power to exercise its authority under 35 M.R.S.A. § 294 to substitute its own allocation unless it first makes an explicit finding that the utility's proposal is unjust, unreasonable, insufficient or unjustly discriminatory, citing New England Telephone and Telegraph Company v. Public Utilities Commission, Me., 390 A.2d 8, 59 (1978). They maintain that the Commission's rejection of the Anderson Study and the one-hour coincident peak method of allocating costs did not constitute a finding that the actual allocations suggested by the utility were unlawful. They contend that the Commission's suggestion that a different method could have resulted in different demand allocations was insufficient to constitute a finding that the utility's proposed allocations were unjust or unreasonable. St. Regis maintains in its brief that it is, by definition, impossible to conclude that a particular allocation of a finite sum is unjust or unreasonable without finding that a different allocation produces fairer results. In this case, it is argued, the Commission in its Decree of October 13, 1978, conceded that it was without the aid of any competent cost evidence to support its substitute allocation method; therefore, the Commission could not possibly have found that the utility's proposal was unjust or unreasonable. Finally, the Intervenors urge that the Commission's rejection of the Anderson Study was completely arbitrary, in that the Commission disregarded unimpeachable evidence showing that the utility's proposal reduced cost discrimination. The contention is that this arbitrary and capricious disregard of facts showing the justness and reasonableness of the utility's proposed rate design is reversible error. See Maine Motor Rate Bureau, Me., 357 A.2d 518, 528 (1976); Central Maine Power Company v. Public Utilities Commission, 150 Me. 257, 262, 109 A.2d 512, 514 (1954). This argument amounts to a contention that the Commission's rejection of the utility's proposed rate design was not supported by substantial evidence. We conclude that the Commission acted properly in rejecting the rate design proposal submitted by Central Maine Power Company. First, we reject entirely the contention that the utility's proposal enjoyed a presumption of justness and reasonableness. The utility proposed a significant change in rate design. Pursuant to the powers conferred upon it by 35 M.R.S.A. § 69, the Commission held public hearings into the propriety of the proposed change. Section 69 specifically provides: At any such hearing involving any change or changes [proposed to be made in any schedule of rates filed with the commission], the burden of proof to show that such change is reasonable shall be upon the public utility. (emphasis added). See Continental Telephone Company v. Public Utilities Commission, Me., 397 A.2d 1001, 1007 (1979); Casco Bay Lines v. Public Utilities Commission, Me., 390 A.2d 483, 493 (1978); Maine Water Company v. Public Utilities Commission, Me., 388 A.2d 493, 496 (1978). The absence of an alternative new design with which the Commission might compare the utility's proposal did not relieve the utility of its burden to convince the Commission that its proposed allocation of the revenue increase was just and reasonable. We disposed of this contention in our discussion of the rate design issue the last time this case was before us: We may initially conclude that the Commission staff's failure to present a direct case on the proper allocation of the revenue increase among the rate classes does not constrict the Commission's freedom of decision. Even the uncontradicted evidence of the utility may be weighed, critically examined, and rejected if deemed necessary. Main [sic] Water Company v. Public Utilities Commission, Me., 388 A.2d 493, 496 (1978). Moreover, our decision in Maine Motor Rate Bureau, Me., 357 A.2d 518 (1976) does not require the Commission to accept an uncontroverted allocation study if the evidence supports its rejection. 357 A.2d at 528. Whether the Commission's rejection of the Anderson study and imposition of a uniform increase was reasonable and supported by substantial evidence is thus the sole basis of the alleged error. Central Power Company v. Public Utilities Commission, supra, 405 A.2d at 186. Secondly, we reject as without merit the Intervenors contention that the Commission made no finding concerning the justness and reasonableness of the utility's proposed realignment of the various rate classes. The Commissioner's express rejection of the allocation method employed in the Anderson Study as being so flawed . . . that we are unable to rely on the study as a basis for allocating the revenue increase among the various customer classes . ., made clear its finding that the utility had failed to sustain its burden of proving that the proposed change in rate design was reasonable. Finally, we conclude that the Commission's rejection of the utility's allocation was supported by substantial evidence. Very recently we have stated the scope of this Court's role in reviewing a decision of the Commission for sufficiency of the evidence: First, it is our duty to sustain whatever findings of fact underlie the Commission's ultimate determinations on the basis of all of the evidence of record, regardless of the source from which the evidence might have come, if the findings of fact are not clearly erroneous, i. e., are basically supported by the totality of the evidence of record. (citations omitted). Second, insofar as the Commissions' ultimate determinations involve the application of a legal standard to facts found, this Court's responsibility is to review whether the standard applied by the Commission was correctly conceived in accordance with law, and any judgmental aspects of the application will be upheld unless bounds of rationality are exceeded. Central Maine Power Company v. Public Utilities Commission, Me., 414 A.2d 1217 (1980). In the October 13, 1978, Decree, the Commission set forth at least four reasons for finding unfair and unrepresentative the allocation of costs to the seven customer classes based on their relative demand responsibility at the single peak hour: 1. The utility had submitted to the Commission as exhibits hourly load listings for each month in 1977, showing the demand on the system for every hour of every day. From these listings, the Commission determined that: During thirteen hours in 1977, the system load exceeded 95% of the single hour system peak. On only four of those occasions did the time of day coincide with the time of the annual peak . . . Any of the other nine hours . . . could easily have been the system peak hour with only minor shifts in load. In re Central Maine Power, supra, 26 P.U.R. 4th at 422. The Commission concluded that the system peak during the test year 1977 was not clear and well-defined, and was, therefore, not clearly representative of the relative demand responsibility among the classes at other hours which approached peak. 2. The Commission found that the demand responsibility for the GST class at the single peak hour was significantly lower than on a typical weekday, and that allocating costs to that class on the basis of its percentage of demand during that peak hour would not give a true and accurate picture of that class's overall responsibility for the utility's cost of producing electricity. The Commission based this finding partially on the testimony of two Scott Paper Company employees concerning that company's practice of drastically reducing its demand during kilowatt savings time (KST) hours. The KST program is implemented only when the demand for electricity approaches peak. Notwithstanding the KST program's value as a tool in keeping down the cost of electricity by reducing the utility's need to build new generation facilities, the Commission determined that the program affects the relative demand of the large and small classes at the system's peak hours. Illustratively, Scott Paper Company responds to direct telephone calls from the utility at KST requesting a reduction in demand, by switching to its own self-generation equipment. Smaller customers, who depend entirely on radio and television announcements to cut back on electrical demand, clearly cannot so reduce their demand responsibility during peak hours. Furthermore, Scott Paper Company is reimbursed by the utility for the cost of its self-generation at its S.D. Warren Plant during KST. The Commission noted that while that company should not be charged for the capacity which it supplies to itself, . . . the energy which in theory is purchased by Central Maine and resold to S.D. Warren never is metered. Therefore, the true cost to the utility of that GST customer is not reflected by the load listings showing that company's diminished demand at peak hours. In addition, the utility submitted a load listing for October 12, 1977, which was purported to be representative of a typical weekday. Comparing this day with hours in which the system approached peak, the Commission found that the GST customers consistently cut back on demand at peak and do not make reductions on a typical day. In fact, Fred J. Newhard, Jr., Chief Engineer at Scott Paper Company's Winslow, Maine plant testified that he was very much aware that the single peak hour is significant in determining rates of return, and that this fact was very definitely a factor in the decision to cut back demand during peak hours. 3. Corresponding to the diminished demand of the GST customers at peak hours, the Commission found that the demand responsibility of the residential class at the peak hour was disproportionately high. The Commission had before it a 1977 study conducted by the utility concerning residential customers who do not use electricity for space or water heating. The peak demand of these customers occurred at precisely the hour of system peak, and was 50% higher than their average demand during other hours when the system load exceeded 90% of the peak hour load. 4. The Commission rejected Frederick Anderson's suggestion that costs should be allocated according to percentage of peak hour demand because the utility must build new plant facilities to meet the peak hour load. The Commission noted that the utility builds new facilities to increase generation capacity in accordance with rules established as part of the New England Power Pool (NEPOOL) Agreement, and not solely on the basis of peak hour demand. For these reasons the Commission found unreliable the allocation of costs to the seven customer classes on the basis of the single peak hour demand. Unless we conclude that the Commission utterly misconstrued the evidence, it is our duty to sustain its rejection of the one-hour coincident peak allocation method. We find that the record supports the Commission. The vast difference of opinion among the witnesses at the hearing on the appropriateness of the one-hour peak method lends further support to the Commission's finding. We conclude, therefore, that the Commission's rejection of the Anderson Study was not clearly erroneous. Furthermore, we uphold the Commission's ultimate determination that the utility's proposed allocations were unjust and unreasonable. The proposed allocations were designed to reduce the disparity in the rates of return among the customer classes. However, as we have just seen, the utility's calculations of the various rates of return were based substantially upon an unacceptable method of cost allocation. The Commission decided, therefore, that the utility's proposed realignment of the customer classes on the basis of unreliable statistics was unreasonable. Far from exceeding the bounds of rationality, we conclude that once the Commission rejected the Anderson Study, it had no choice but to reject the utility's proposed rate design.