Opinion ID: 2331279
Heading Depth: 1
Heading Rank: 3

Heading: Sliding-Scale Rates

Text: If the Policy surcharge is unauthorized under the surcharge statutes, §§ 23-4-501 and 502, the next question is whether the Policy constitutes part of a lawful sliding-scale rate as contemplated under Ark.Code Ann. § 23-4-108 (Repl. 2002). We believe it does not. Gas Consumers claims that the Policy constitutes a general rate increase which must be addressed in a general rate case, as set out under Ark.Code Ann. § 23-4-401. Gas Consumers submits that a traditional rate case permits a utility to recover its legitimate expenses, both ordinary and extraordinary. It asserts that once the door is opened for interim ratemaking relief, the resulting precedent would generate numerous requests for any unanticipated expenses that a utility perceives as worthy of special recovery. It further contends that the PSC's approach to recovering utility bad-debt expenses is prohibited by statute and regulation, even if the PSC had the authority to fashion public-assistance programs. The PSC responds that Gas Consumers cites no statute or regulation from which it could be concluded that prohibited single-issue ratemaking occurred in its treatment of utility bad-debt expenses. Arkla and AWG further respond that Gas Consumers' argument ignores the fact that § 23-4-108, which authorizes the PSC to fix a reasonable and just sliding scale of rates for public utilities, applies. Section 23-4-108, the utilities claim, permits an automatic adjustment of charges for utility service in relation to the expenses of the operation to be incurred. The Attorney General responds that the statute relating to a general rate case does not apply in the instant case, because that procedure only applies when a utility requests a change or modification to its rates or charges. The Attorney General submits that in this case the Policy was mandated by the PSC and not requested by a utility. Thus, the Policy did not emanate from a petition by the utilities, and Gas Consumers' contention must be rejected. This issue calls into play the sliding-scale or escalator-clause statute, which reads: (a)(1) Nothing in this act shall be taken to prohibit a public utility from establishing or entering into an agreement for a fixed period for a sliding scale or automatic adjustment of charges for public utility service in relation to the dividends to be paid to stockholders of the public utility, or the profit to be realized, or its expenses of operation to be incurred, or other equitable or reasonable basis for the scale or adjustment if a schedule showing the rates under the arrangement is first filed with and approved by the commission. (2) Nothing in this section shall prevent the commission from revoking its approval at any time and fixing other rates and charges for the product or commodity or service if, after reasonable notice and hearing, the commission finds the existing rates or charges unjust, unreasonable, insufficient, or discriminatory. (b) The commission shall have the power to fix a reasonable and just sliding scale of rates for public utilities. Ark.Code Ann. § 23-4-108 (Repl.2002) (emphasis added). This court has held that § 23-4-108 appeared to be an abbreviated procedure whereby the utility rates can be raised or lowered depending on one item (or at least a very few items) affecting income or expenses of the utility, such as in the present case where an increase in the utility rate depends on the price the Company is required to pay for the purchased gas for distribution. City of El Dorado v. Arkansas Pub. Serv. Comm'n, 235 Ark. 812, 834, 362 S.W.2d 680, 693 (1962). In City of El Dorado , this court observed that apparently it was the desire of the legislature to avoid such a lengthy and expensive hearing to make what might be termed minor adjustments by virtue of the General Assembly's enactment of Act 324 of 1935, set out in Ark. Stat. Ann. § 73-219, the predecessor statute to § 23-4-108. Id., 362 S.W.2d at 693. See also Aluminum Co. of America v. Arkansas Pub. Serv. Comm'n, 226 Ark. 343, 289 S.W.2d 889 (1956) (adjustment in rates due to gas prices properly included in proposed rate increase under sliding scale statute). The court ultimately affirmed the PSC's approval of an escalator clause in City of El Dorado , where the gas company would receive a rate increase or decrease depending on the rise or fall of the price of gas incurred by the utility. In reading § 23-4-108, the City of El Dorado case which discusses the escalator clause, and the Aluminum Co. of America case, it is clear that the sliding scale relates to adjustments to rates and charges to product or commodity or service. The focal point, accordingly, is on gas production and delivery of gas service to the ratepayers and not on rate adjustments to fund new social programs like the Policy. This is confirmed by the Emergency Clause for Act 324 which reads in part: It is found that the statutes of this state for the regulation of public utilities are insufficient, inadequate, and do not afford to the public, or the public utilities, of the state, speedy and adequate relief from excessive or insufficient rates, and that many of the rates of public utilities operating in this state are not what they should be, thereby entailing a grave injustice on the public or the utilities[.] Indeed, the El Dorado case and the Aluminum Co. of America case both dealt with rate adjustments to customers caused by the increased cost of gas. That is not what is involved in the case at hand. Here, we are not confronted with increased costs due to gas production but with an independent social program crafted by the PSC to pay customer bad debt to the utilities and allow disconnected customers to reconnect in time for the next winter. We conclude that the Policy cannot be salvaged under § 23-4-108.