Opinion ID: 1526377
Heading Depth: 1
Heading Rank: 8

Heading: Uniform Percentage Increase

Text: The design among rates, as well as the revenue level they will generate, is a facet of Commission ratemaking. Central Maine Power v. Public Utilities Commission, Me., 382 A.2d 302, 324 (1978). In the present case rate design issues occupied a substantial portion of the proceedings below. All of the intervenors were primarily concerned with rate design, and Central Maine's proposed increase envisioned not only increased revenues but a realignment of the relative positions of the rate classes such as would increase the rates of some classes more than others. It is the Commission's action in rejecting this proposed realignment which serves as the basis for appeal with respect to the Commission's rate design decisions challenged here. Central Maine Power, on the basis of a cost-of-service study produced by its Director of Rates, Mr. Frederick Anderson ( the Anderson study ), filed proposed rates designed to increase overall revenues by approximately 12.5 percent, with increases in individual rate classes ranging from 3.7 percent to 17 percent. The Company argued that such disparate increases were necessary to decrease the existing differential among those customer groups producing a rate of return close to or above the overall return, and those producing a return below the overall average. The Anderson study was based on a 1977 test year using eight months actual and four months estimated data, later recomputed on the basis of actual 1977 test year data. The study used a coincident peak method for allocating to the various customer classes certain demand costs associated with power supply. Under this method, costs were allocated to each class based upon its contributions to the single one hour annual system peak. The Commission rejected the Anderson study, however, and, finding no evidence in support of a realignment of classes not based on that study, determined to make no change: We find that the use of the one hour coincident peak method for allocating demand costs is so flawed and yet is so significant in the overall result of the cost of service study that we are unable to rely on the study as a basis for allocating the revenue increase among the various rate classes. Were the 90% of peak method we have found to be fairer to be used, it is conceivable that the returns earned from the various classes would be very different from the figures the Company has presented to us. But we have no way of knowing what they would be. Having rejected the cost of service study as a basis for allocation of the revenue increase, we are left in the position of having to make allocations without the aid of any competent cost evidence. Under these circumstances, we find that the only reasonable and fair result is to require that rates be designed so as to give all classes of service the same percentage increase over total test year revenues. Intervenor-appellant St. Regis Paper Company (St. Regis) contends that this uniform percentage increase was arbitrary and capricious, not supported by substantial evidence, and erroneous as a matter of law. In particular, it attacks the Commission's rejection of the Anderson study in the absence of an alternative proposal. Central Maine Power, nominally an appellee as to this issue, concurs with St. Regis. 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 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. Faced with a similar challenge to the Commission's rejection of a utility's proposed rate design, we concluded in New England Telephone, supra, that the issue need not be decided in view of our disposition of other issues presented by the appeal. We reach the same conclusion here. Our decisions respecting the Commission's treatment of taxes deferred by accelerated depreciation and its exclusion from allowed operating expenses of the employee discount will substantially affect the ultimate revenue level allowed Central Maine, which will be required to file proposed rate schedules to generate this new level. Central Maine may choose to seek a uniform percentage increase, or to present revised studies supporting realignment; the Commission may find such studies persuasive, or may otherwise accept some form of realignment. We cannot know now the outcome of such contingencies. Nothing we might say now respecting the Commission's action as to this issue would necessarily have force in light of future events. Accordingly, we decline to express any opinion as to the propriety of the Commission's action on this issue.