Opinion ID: 1863469
Heading Depth: 2
Heading Rank: 4

Heading: Cajun Buy-Back Refund Interest

Text: Finally, Gulf States contests that part of Order No. U-20647 directing it to refund $446,000 in interest stemming from an accounting error in its favor. In February of 1989, the company reviewed its prior fuel charge costs and discovered that it had failed to recover certain non-fuel purchased power costs, but also that it had improperly double-recovered other non-fuel operation and maintenance expenses associated with its Cajun River Bend buybacks, see footnote 10 hereinabove, by recovering them once through base rates and again through the fuel clause. The two errors were partially offsetting, and the company refunded the net overrecovery. Gulf States did not, however, include any amount of interest in its refund of that overrecovery, since its fuel clause mechanism contained no interest factor at the time. The Commission's expert, Mr. Kollen, recommended that the Commission order the company to refund the interest associated with the net overcollection, as the overrecovery was the result of multiple company errors, despite the lack of an interest factor in the fuel clause. The Commission ordered the company to refund that interest, and was upheld by the district court. Fuel clause over- and under-recoveries typically result from lags in fuel costs, which are billed two months after they are incurred. To compensate for over- and under-recoveries, Gulf States utilizes an over-and-under collection mechanism that was implemented in connection with the Commission's grant of permission to Gulf States to employ deferred fuel cost accounting by Order Nos. U-13644 and U-13535 (La.P.S.C., 1978). In 1990, the Commission issued Order No. U-17282-H, in which it modified Gulf States' fuel clause mechanism to provide for the recovery of interest on over- and under-recoveries: The Commission's expert consultant, Mr. Lane Kollen has recommended a modification to the Commission's fuel clause ... to permit interest to be recovered from ratepayers on under-recoveries and paid to ratepayers on over-recoveries.... The interest rate would be set at the existing overall rate of return authorized by the Commission. We believe that this proposal will more accurately permit recovery of the actual costs incurred for fuel and it will, therefore, be adopted. Order No. U-17282-H at 34 (emphasis supplied). The parties do not dispute that, prior to this order (No. U-17282-H), no interest was recoverable by either the ratepayers or Gulf States on fuel clause over- and under-recoveries resulting from fluctuating fuel costs. The Commission nevertheless contends that Gulf States must pay interest on the Cajun over-recoveries, because such were not the result of any imbalance due to lags in tracking fluctuating fuel costs, but rather were the result of company error. According to the Commission, When the Commission requires refunds of improper collections, it routinely requires the payment of interest on the refunds. The Commission cites no authority for that proposition. It also fails to provide authority that would support a general proposition that, even without regard to the Commission's past practices relative to interest recovery by Gulf States' ratepayers, interest is due on overrecoveries by a utility. [17] In contrast, Gulf States points to three specific instances of past fuel clause corrections of errors unrelated to fuel-cost lags in which no interest was refunded to the consumer or credited to the company. [18] It is apparent that the Commission has not traditionally required Gulf States to make its refunds with interest, at least when those refunds are flowed through the fuel clause. And while the 1990 modification to Gulf States' fuel clause mechanism now imposes an interest obligation for both over-and under-recoveries, the Commission cites no authority for such an obligation prior to that modification. In its post-argument brief, the Commission argues that the over-and-under collection mechanism that Gulf States implemented in connection with the Commission's approval of deferred fuel cost accounting in Order Nos. U-13644 and U-13535 (La.P.S.C., 1978), was intended for imbalances due to lags, however, and not for refunds relating to improper recoveries. Be that as it may, the fact remains that Gulf States' over-and-under recovery mechanism is one facet of Gulf States' overall fuel clause mechanism, through which Gulf States flowed the refunds at issue. If the Commission thought that such refunds were not proper for inclusion in the fuel clause, it should have required them to be considered in the calculation of base rates instead. It did not do so, and the refunds were passed through the fuel clause at a time when it did not contain any mechanism for the recovery of interest on refunds. Accordingly, we find that the Commission erred in ordering Gulf States to refund $446,000 in interest arising from Gulf States' admittedly improper double recovery, through the fuel clause, of the costs of the Cajun buy-backs.