Opinion ID: 2779143
Heading Depth: 2
Heading Rank: 2

Heading: Commission’s Application of the Statute

Text: ¶10. Assuming the presumptive validity of the Act, see City of Starkville, 909 So. 2d at 1112, and following our precedent to pass on constitutional challenges when cases may be decided on other grounds, see Warner-Lambert, 909 So. 2d at 1093, we choose the narrower path to resolve the issues presented today. Thus, we examine whether the Commission 7 applied the Act in a statutorily permissible manner. If the Commission’s putative application of the Act follows the directives and its application comports with due-process principles, Blanton’s arguments are doomed to fail. ¶11. While the Court gives great deference to state agencies, “[t]he ultimate authority and responsibility to interpret the law, including statutes, rests with this Court.” Queen City Nursing Ctr., Inc. v. Miss. State Dep’t of Health, 80 So. 3d 73, 84 (Miss. 2011). The Legislature had authority to enact a law; however, the Commission does not have the right to amend or modify such act. No legitimate argument can overcome the legal principle that the Commission is bound to comply with legislative acts. See Pittman, 520 So. 2d at 1357-58. See also Howell v. State, 300 So. 2d 774, 779 (Miss. 1974) (“an administrative agency cannot be vested with arbitrary and uncontrolled discretion.”). ¶12. The Act permits the Commission to include CWIP only if the costs are determined to be “prudently incurred.” See Miss. Code Ann. § 77-3-105 (Rev. 2009).6 MPC and the Commission argue that the Act was followed when the Commission authorized MPC to increase rates by fifteen percent for 2013 and three percent for 2014. Yet the record is devoid of a “finding of prudency” or that MPC’s expenditures were “prudently incurred,” and for good reason – no prudency hearings have been held. In the absence of prudency hearings, 6 In its May 26, 2010, Order, the Commission specifically authorized “one hundred percent (100%) of all construction costs (subject to prudence reviews as provided herein)” to be recovered for 2012, 2013, and 2014. Commission’s Order, p. 17 (May 26, 2010) (emphasis added). Additionally, on April 24, 2012, the Commission issued its Final Order on Remand Granting a Certificate of Public Convenience and Necessity, Authorizing Application of Baseload Act, and Approving Prudent Pre-Construction Costs. (Emphasis added.) 8 we fail to discern how a rate can be arbitrarily declared as “fair, just, and reasonable” and/or “just and reasonable.” See Miss. Code Ann. §§ 77-3-33 and 77-3-105(b) (Rev. 2009). ¶13. Paragraph 22 of MPC’s original petition for certification reads: “. . . the Company is proposing and requesting . . . a prudence review process for already incurred and to-beincurred preconstruction and construction costs [and] a rate mechanism. . . . [A]pproval of each and every one of these measures is necessary.” By stipulation, the Commission improperly deferred prudency hearings, which are a prerequisite to granting an increase in rates. See Miss. Code Ann. §§ 77-3-105(1)(a) and (1)(b).7 By not conducting prudency hearings, the Commission ignored the dictates of the Act and thus acted arbitrarily without lawful authority. ¶14. One component of the Act is to allow utility companies to collect prudently incurred preconstruction costs, construction costs, and finance costs as incurred to reduce the finance costs, which are capitalized in the utility’s allowance for funds used during construction (“AFUDC”) upon commercial operation. “AFUDC represents interest on borrowed funds, dividends on preferred stock, and the imputed return on common stock.” Miss. Pub. Serv. Comm’n v. Miss. Power Co., 429 So. 2d 883, 897 n.7 (Miss. 1983). The Act contemplates 7 By stipulation, MPC “agreed to defer a prudence review until a later date. Consistent with the stipulation, this Commission hereby declines to address the prudence of the Kemper Project costs in this proceeding, but this decision shall not disclose MPC from requesting a prudence review at a later time or this Commission conducting prudence reviews, sue sponte.” Commission’s Final Order, p. 25 (Mar. 5, 2013) (emphasis added and in original). Certainly, the Commission intended to state that the decision would not “foreclose” MPC from requesting reviews, not that such prudence hearings would not be disclosed. The Commission further ordered that “nothing contained in this Order shall be construed as a finding of prudence of any of the Kemper Project costs, which shall be subject to a separate prudence review as subsequently determined by this Commission.” Id. at 26. 9 increasing rates to pay AFUDC as incurred, which, if done, would mitigate the effect of compounding interest.8 However, this appeal concerns “mirror CWIP,” 9 resulting in MPC charging increased rates. But the ratepayers’ property (money) is placed into a regulatory liability account controlled by the Commission. Thus, the money exacted is not being used to pay for funds used during construction as expenses are incurred. The ratepayers’ property (money) is being confiscated 10 through governmental decree, by a rate increase imposed by a privately owned corporation that cannot spend it. There is no authorization to impose “mirror CWIP” in the statute. ¶15. The Commission has exhibited a pattern of conduct throughout these proceedings that exceeds its authority. The Commission’s tasks remain undone and its duties unfulfilled. The Commission does not have unbridled authority to adopt recovery mechanisms which are not authorized by existing law. While the Act permits the Commission to include CWIP in the utility’s rate base and rates, the Act did not authorize the Commission to adopt an entirely new mechanism, i.e., “mirror CWIP”(a concept not previously recognized in Mississippi rate-making practices). An affirmance of the Commission’s order can only perpetuate these transgressions. 8 MPC maintained in its original brief that it was seeking to recover costs during construction to avoid compounding those costs upon completion of the plant. 9 “Mirror CWIP” provides that the “funds collected during the construction period . . . be recorded to a regulatory liability account and held for the sole benefit of customers for the purpose of partially or fully offsetting future rate increases that would otherwise occur after commercial operation.” Commission’s Final Order, p. 10 (Mar. 5, 2013). 10 Confiscatory taking is discussed further in Section IV(C)(1). 10 ¶16. Absent compliance with the Act, no legal authority existed to increase the rates. See Miss. Code Ann. § 77-3-105(1)(a) (Rev. 2009). Ratepayers should not be bound by decisions made by the Commission which do not comport with the laws of our State. This Court will not condone the forced payments for rate increases not authorized by the Act or existing law. On remand, the Commission is hereby instructed to (1) fix by order the rates in existence prior to its order of March 5, 2013; (2) fix no rate increases until the Commission is in compliance with this Court’s opinion; and (3) enter an order refunding the monies attributable to the rate increases allowed by the March 5, 2013, Order. The Commission is further instructed to meet its obligations as set forth in the Act regarding all future proceedings. The decision of this Court does not foreclose MPC from seeking recovery of its financing costs through a rate increase, as long as the laws of our state are adhered to by the Commission. At the same time, as the Commission states in its briefs, the Act does not provide MPC an “entitlement” to CWIP recovery. If MPC never recovers CWIP, it still may seek to recover construction financing costs included in MPC’s AFUDC accounts, as traditionally has been done.