Opinion ID: 1435591
Heading Depth: 3
Heading Rank: 2

Heading: Whether the burden of proof was impermissibly shifted in the proceeding before the commission.

Text: The general rule is that in requesting rate increases, the burden of proof is on the utility to go forward with the evidence and justify its requested rate increases. In re Application of Kauai Electric Division, supra, 60 Haw. at ___, 590 P.2d at 538; In re Application of Hawaiian Electric Co., 56 Haw. 260, 270, 535 P.2d 1102, 1109 (1975). HELCO based its application for rate increases on the 8.95% rate of return previously authorized in 1974 and characterized its application as a make-whole [3] proceeding in that it was seeking only limited relief to enable it to earn what it had been authorized to earn. [4] On appeal, the Division argues that use of a previously authorized rate of return impermissibly shifted the burden of proof by creating a rebuttable presumption that the rate of return is reasonable and placed the burden on the Division to show substantive changes in condition to warrant a lower rate of return than previously authorized. Since a rate of return which is fair at one time may become unfair at a later time, there must be a finding by the Commission, supported by the record, that economic conditions have not changed to warrant a lower rate of return. Our review of the record indicates that the Commission's finding that HELCO was still entitled to an 8.95% rate of return is supported by substantial evidence and that the burden of proof was not shifted. The Commission put the burden on HELCO to establish that it was still entitled to a return of 8.95% on its rate base; the same rate of return authorized in 1974. HELCO showed that its cost of capital had increased from 8.95% in 1973 to 9.32% at the end of 1974 because of increases in its embedded cost of debt and preferred stock. However, because it was requesting to be made whole it was using the same pro forma capital structure of 56% long term debt, 12% preferred stock and 32% common stock that was used in the docket in which the 8.95% rate of return was authorized although the actual capitalization was 54% long term debt, 6.8% preferred stock and 39.2% common stock. HELCO also emphasized that in order for it to sell first mortgage bonds and to continue to attract funds, it had to earn at least an 8.95% rate of return. While some of the language in the commission's order is unfortunate [5] we take it to mean only that HELCO met its burden of proving that use of the previously authorized 8.95% rate of return was justified.