Opinion ID: 2332011
Heading Depth: 2
Heading Rank: 2

Heading: Base Year for Determining Income Growth

Text: In order to calculate Casco's 1975 income for ratemaking purposes, the Commission was required to examine Casco's past income history and to make a projection for 1975. In a 1974 Casco rate case, the Commission had examined Casco's income for the years 1970, 1971, 1972, and 1973 to project Casco's income for 1974. Both the Commission Staff and Casco claimed to follow the 1974 rate case method in calculating the income growth projections, which they presented during the proceedings before the Commission below. However, they differed as to their interpretations of the 1974 method, and, consequently, in the results reached. The Commission Staff claimed to follow the 1974 case by using 1970 as a base year and examining Casco's income for the years 1970, 1971, 1972, 1973, and 1974. Accordingly, the Staff calculated 1975 income due to growth to be $11,917.46. On the other hand, Casco claimed to follow the 1974 case by using the  fourth previous year  (1971) as a base year and examining Casco's income for 1971, 1972, 1973, and 1974. Casco's use of more recent years produced a lower calculation of 1975 income due to growth of $6,238.28, because of recent inflationary trends. Faced with these conflicting interpretations and results, the Commission found as follows: While both are correct, it is apparent if the commission were going to be consistent, it would use 1970 as a base year since the base year is the crucial factor in determining growth. Nevertheless, no testimony was presented in this case by the company or by the staff as to which year would be the more appropriate base year. In the absence of such testimony and in recognition that growth income may never be predicted exactly, we find that a reasonable prediction for growth [sic] income is $9,077.87, which is the average of CBL's and the staff's prediction. Re Casco Bay Lines, supra at 175. We sustain the Commission on this issue. The Commission's  Solomonic  solution which involved  splitting the difference  is dependent upon two considerations: first, whether its finding, that no testimony was presented in this case as to which year would be the more appropriate base year, was supported by  substantial evidence ; and, second, whether the final resolution reached by the Commission was  reasonable . New England Telephone & Telegraph Co. v. Public Utilities Commission, Me., 390 A.2d 8 (1978). Our search of the record fails to disclose any significant testimony as to which year, 1970 or 1971, would be the more appropriate base year. Both the Commission Staff and Casco claimed to be following the method used by the Commission in Casco's 1974 rate case, but neither attempted to affirmatively demonstrate why its base year was more appropriate. The isolated statement of Casco's witness, that 1972 might be a more appropriate base year than either 1970 or 1971, does not constitute the testimony required to place the base year issue before the Commission. As we stated with respect to the expense averaging issue, a utility cannot raise an issue upon appeal when it has not afforded the Commission adequate opportunity to consider the matter during the proceedings below. We are now confronted with the question of the reasonableness of the Commission's approach in this case. The calculation of the projected growth in income for a future period is a process of estimation and, as the Commission stated,  may never be predicted exactly , Re Casco Bay Lines, supra at 175. In fact, both Casco's and the Staff's approaches involved the averaging of income over a number of years. Under such circumstances, we cannot find unreasonable the Commission's averaging of their resulting figures, both of which presumably were based upon reasonable methods. We caution the Commission that our decision in the case does not constitute approval of a practice of  splitting the difference  in general. The Commission has the duty to exercise its expertise and judgment in ratemaking proceedings. It may not abdicate that responsibility by splitting the difference whenever its Staff and a utility disagree. When a legitimate issue is appropriately raised before the Commission it must discharge its responsibility and resolve that issue.