Opinion ID: 2612293
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Heading: Effect of a Void Order: Propriety of Refunds

Text: Given the invalidity of the PSC order for the reasons stated, there is still a question concerning the effect of the order between the time it was entered and the time it was vacated by judgment of the district court. We hold that because of improper notice the PSC order was void and was of no effect at any time; consequently the granting of refunds for payments made under the void order was proper. The PSC is a creature of the legislature; rate making is a legislative process. The power to prescribe rates for a common carrier or a public utility company is a legislative function as distinguished from judicial power ... which the legislature has really exercised in the first instance by prescribing that all rates shall be just and reasonable. Garson v. Steamboat Canal Co., 43 Nev. 298, 312, 185 P. 801, 805 (1919). The legislature has decreed that [a]ll rates ... [prescribed by the PSC] shall be prima facie lawful, from the date of the order until changed or modified by the commission, or in pursuance of NRS 704.540 to 704.580, inclusive. [3] NRS 704.130(1). This court has held that the PSC may establish procedures as may be required to carry into effect the legislative intention expressed in the [NRS] ... so long as such procedures comply with the requirements of due notice and hearing on such factual issues... . Southwest Gas Corp. v. Public Serv. Comm'n, 92 Nev. 48, 61, 546 P.2d 219, 227 (1976). The statutory presumption of validity of the agency's order assumes that the order was promulgated in accordance with law and in abidance with the requirements of due notice and hearing. The legislature and this court have insisted that procedural safeguards be observed. For example, NRS 233B.060(6) requires: No regulation adopted after July 1, 1965, is valid unless adopted in substantial compliance with this chapter but no objection to any regulation on the ground of noncompliance with the procedural requirements of this section may be made more than 2 years after its effective date. [4] This court has held as invalid PSC orders adopted without compliance with the procedural safeguards of the Administrative Procedure Act. In Checker, Inc. v. Public Serv. Comm'n, 84 Nev. 623, 446 P.2d 981 (1968), this court invalidated a commission order because the order had been issued ex parte and without notice and hearing. The court ruled that [t]he Commission cannot act without notice and a reasonable opportunity to be heard and must act within constitutional limits. 84 Nev. at 634, 446 P.2d 981. The court found the Commission to be without jurisdiction because it had not complied with the notice and hearing requirements imposed by the legislature. In Gibbens Co. v. Archie, 92 Nev. 234, 548 P.2d 1366 (1976), the court held an agency regulation invalid and therefore without force as to those parties who had entered a timely objection to a regulation promulgated in violation of the Administrative Procedure Act. The court held: By enacting the Nevada Administrative Procedure Act, it is clear our legislature intended to establish minimum procedural requirements governing the regulation-making process of state agencies. NRS 233B.020. Those procedural requirements mandate that, prior to the adoption, amendment, or repeal of any regulation, an agency first must give at least thirty days' notice of its intended action and the time, place, and manner in which interested persons may present their views. NRS 233B.060(1) and (2). Further, the agency must afford interested persons an opportunity to submit, orally or in writing, data, views or arguments. NRS 233B.060(3). Where required, such minimum procedural requirements may not be ignored. 92 Nev. at 235, 548 P.2d 1366 (emphasis added). As recently as 1981, in State Bd. Equal. v. Sierra Pac. Power, 97 Nev. 461, 634 P.2d 461 (1981), this court affirmed the policy whereby a state agency's failure to follow the Administrative Procedure Act will invalidate any regulation issued in violation of the notice and hearing requirements. The court stated that the Commission is free to amend its regulations; it need only follow the provisions of NRS 233B.060 which are meant `to establish minimum procedural requirements governing the regulation-making process of state agencies.' Gibbens Co. v. Archie, supra [92 Nev.], 235 [548 P.2d 1366]. 97 Nev. at 465, 634 P.2d 461. The remaining question is whether the trial court acted properly, in administrative review, when it ordered refunds for monies paid under the void orders. The limitations and duties of the courts to review PSC decisions are delineated in NRS 233B.140(5) of the Administrative Procedure Act: 5. The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are: (a) In violation of constitutional or statutory provisions; (b) In excess of the statutory authority of the agency; (c) Made upon unlawful procedure; (d) Affected by other error of law; . . . . In State Bd. Equal., above, this court sustained a district court order which required the refund of certain monies collected pursuant to a regulation later determined to be invalid. As said before, the presumption of validity attaches only to lawfully promulgated orders. Courts in other jurisdictions, after invalidating a commission decision, regulation, or order, have issued commands requiring refunds or surcharges. See Application of Hawaii Elec. Light Co., 60 Hawaii 625, 594 P.2d 612, 627 (Hawaii 1979) (In the interim pending the outcome of the Commission's further consideration of the reasonableness of the residential rate structure, the [previously approved] structure is to be maintained.); California Mfrs. Ass'n v. P.U.C., 24 Cal.3d 251, 155 Cal. Rptr. 664, 595 P.2d 98, 103 (Cal. 1979) ([T]he commission shall order refunds and surcharges, if appropriate ...). The Texas Court of Civil Appeals, dealing with a problem similar to the one before us, held that an order directing refunds or surcharges was within a court's or a commission's power and stated: In the context of the present case, [5] no person can have a vested right in any rate other than the last legal or official rate promulgated by the Commission... . In the present case, the Commission directed that such new rates be implemented effective February 28, 1981. If these new official or legal rates are finally adjudged valid, the judgment pronouncing their validity relates back to February 28, 1981, and they are valid ab initio. No one ever had a right thereafter to charge or pay for the utility's services according to any other system of rates. If these new official or legal rates are finally adjudged invalid, they were never effective at all to vest a right in anyone .... Southwestern Bell Tel. Co. v. Public Util. Comm'n, 615 S.W.2d 947, 957 (Tex.Civ.App. 1981), aff'd, 622 S.W.2d 82 (Tex. 1981) (emphasis added). Under the Nevada statutes and authorities cited above the district court was within its authority when it ordered that certain refunds and surcharges be made upon invalidation of the PSC's rate design order.