Opinion ID: 1952965
Heading Depth: 2
Heading Rank: 2

Heading: The Commission's Interpretation of Section 3206-A(2)

Text: Section 3206-A(2) provides in pertinent part: 2. Prohibition; divestiture. If, after the effective date of this section, 10% or more of the stock of an investor-owned transmission and distribution utility is purchased by an entity: A. The purchasing entity and any related entity may not sell or offer for sale generation service to any retail consumer of electric energy in this State; and B. If, in an adjudicatory proceeding, the commission determines that an affiliated competitive provider obtains an unfair market advantage as a result of the purchase, the commission shall order the investor-owned transmission and distribution utility to divest the affiliated competitive provider. [¶ 13] Competitive Energy and the Public Advocate contend that the Commission misconstrued section 3206-A(2) when it found ambiguity in the statute's plain language and then interpreted the section as permitting Bangor Hydro's reorganization such that it would be affiliated with EES. Specifically, they assert that the Commission erred when it concluded that the term related entity in subsection (A) of section 3206-A(2) only bars marketing affiliates associated with a purchasing entity at the time of the purchasing entity's acquisition of a Maine T & D utility. They contend that a related entity is prohibited by subsection (A) from selling electricity in Maine even if it is created after the completion of a purchasing entity's acquisition of a T & D utility. [¶ 14] The Commission counters that section 3206-A(2) is ambiguous largely because the Restructuring Act's definitions do not offer clear guidance as to when a T & D utility purchased by a purchasing entity and governed by subsection (A) at the time of the purchase, becomes an investor-owned transmission and distribution utility governed by subsection (B) following the purchase. Both Bangor Hydro and the Commission contend that the Commission reasonably concluded that once Emera had completed its acquisition of Bangor Hydro, Emera was, in fact, no longer a purchasing entity. Under this view, EES does not constitute a related entity of Bangor Hydro subject to subsection (A) because EES did not exist at the time of Emera's purchase of Bangor Hydro. In support of its construction of section 3206-A(2), the Commission cited the following legislative purpose in its January 8 order: [T]he Legislature could have had a rational concern regarding corporations with an established marketing affiliate presence in Maine seeking to gain a competitive advantage through the purchase of a Maine T & D utility. To avoid the potential negative impact on Maine's retail electricity market, the Legislature could have logically decided to prohibit a pre-existing marketing affiliate of a purchasing entity from continuing retail electricity sales in Maine after the acquisition. .... The Restructuring Act does not have an outright prohibition against T & D utility marketing affiliates; rather, the Act specifically allows T & D utilities to have marketing affiliates in some circumstances subject to strict oversight by the Commission. This reveals a legislative view that the Commission has adequate authority to police and remedy market abuses or unfair advantages that might result from T & D utility affiliation. Thus, we find it appropriate to interpret the Act as not prohibiting the creation of an additional competitor when, as here, the language of the Act does not clearly mandate such a result. [¶ 15] When reviewing an agency's interpretation of a statute that is both administered by the agency and within the agency's expertise, we apply a two-part inquiry. Guilford Transp. Indus. v. Pub. Utils. Comm'n, 2000 ME 31, ¶ 11, 746 A.2d 910, 913. First, we determine de novo whether the statute is ambiguous or unambiguous. Id. ¶¶ 11, 13, 746 A.2d at 913, 914. Ambiguous language is described as language that is reasonably susceptible of different interpretations. Id. ¶ 14, 746 A.2d at 914 (quoting Portland Valve, Inc. v. Rockwood Sys. Corp., 460 A.2d 1383, 1387 (Me.1983)). Then, we either review the Commission's construction of the ambiguous statute for reasonableness or plainly construe the unambiguous statute. Guilford, 2000 ME 31, ¶¶ 11, 13, 746 A.2d at 913, 914. An agency's interpretation of an ambiguous statute it administers is reviewed with great deference and will be upheld unless the statute plainly compels a contrary result. Mar. Energy v. Fund Ins. Review Bd., 2001 ME 45, ¶ 7, 767 A.2d 812, 814 (internal quotations omitted). Generally, decisions of the Commission are reviewed only to `determin[e] whether the agency's conclusions are unreasonable, unjust or unlawful in light of the record.' Guilford, 2000 ME 31, ¶ 6, 746 A.2d at 912 (quoting Pine Tree Tel. & Tel. Co. v. Pub. Utils. Comm'n, 634 A.2d 1302, 1304 (Me. 1993)). [¶ 16] The first step of our inquiry is to determine whether section 3206-A(2) is ambiguous; that is, reasonably susceptible of different interpretations, without deferring to the Commission's conclusion that the statutory language is ambiguous. Competitive Energy and the Public Advocate interpret subsection (A) of section 3206-A(2) as being a flat prohibition of the selling of electricity in Maine by any entity that purchases a T & D utility or any affiliated company that meets the definition of related entity pursuant to section 3205(1)(D) (Pamph.2002), [8] whether the entity was created before, during, or after the purchase of the T & D utility. This construction is reasonable because the Restructuring Act's definition of the term purchasing entity as a person that purchases 10% or more of the stock of a distribution utility on or after the effective date of this section does not address the question of whether an entity should continue to be viewed as a purchasing entity, 35-A M.R.S.A. 3205(1)(C) (Pamph. 2002), subject to subsection (A) once the purchase is completed. It follows from this construction that subsection (B) would only apply in situations in which a T & D utility had an existing competitive electricity provider marketing affiliate at the time the utility was acquired by a purchasing entity. [¶ 17] The Commission and Bangor Hydro's interpretation that subsection (A) of section 3206-A(2) does not apply to a competitive electricity provider affiliated with a previously acquired T & D utility is also reasonable if one views the term related entity, as used in subsection (A), as an entity that had to exist and be related to the purchasing entity at the time of the purchase. Under this view, subsection (A) does not apply to a competitive electricity provider that becomes affiliated with a previously acquired T & D utility, and subsection (B) provides a divestiture remedy if such a competitive electricity provider gains an unfair market advantage as a result of the earlier purchase. [¶ 18] Because the language of section 3206-A(2) is reasonably susceptible to two different interpretations, it is ambiguous. We therefore review the Commission's construction of the statute for reasonableness, affording great deference to the Commission's construction. In addition, [w]e avoid statutory constructions that create absurd, illogical or inconsistent results. Darling's v. Ford Motor Co., 1998 ME 232, ¶ 5, 719 A.2d 111, 114. [¶ 19] The Commission's construction of this provision finds support in the Restructuring Act's employment of the terms related entity in subsection (A) and affiliated competitive provider in subsection (B). EES did not exist and, therefore, did not constitute a related entity of a purchasing entity subject to subsection (A) at the time of Emera's purchase of Bangor Hydro. Because EES was formed subsequent to Emera's purchase of Bangor Hydro, EES does qualify as an affiliated competitive provider of a T & D utility at the time of EES's formation, subject to subsection (B). The Restructuring Act defines an affiliated competitive provider as a competitive electricity provider whose relationship with a large investor-owned transmission and distribution utility qualifies it as an affiliated interest. 35-A M.R.S.A. § 3205(1)(A) (Pamph.2002). [9] Therefore, at the time of Bangor Hydro's December 2001 petition seeking approval for reorganization arising out of the formation of EES, both Bangor Hydro, as a T & D utility, and EES, as an affiliated competitive provider, met the Restructuring Act's organizational terms subjecting them to subsection (B), and not to subsection (A). [¶ 20] Accordingly, the Commission's construction of section 3206-A(2) is both reasonable and logical: A purchasing entity is an entity in the process of purchasing 10% or more of the stock of a T & D utility, and the purchasing entity and any related entities are subject to subsection (A); but once the stock is acquired, the purchasing entity and any related entities become affiliated interests of a T & D utility subject to regulation under subsection (B). [10] This construction of the prohibition established in subsection (A) is consistent with the view that a preexisting marketing affiliate of a purchasing entity would be more likely to gain an unfair advantage as a result of the acquisition of a T & D utility than would a marketing affiliate created after a purchase. A preexisting marketing affiliate would have an established market share, and its established operations would not have been subject to scrutiny and prior approval by the Commission. In contrast, a marketing affiliate created subsequent to the acquisition of a T & D utility by a purchasing entity begins operation with no market share at the time of its licensure by the Commission. Limiting subsection (A)'s prohibition to competitive electricity providers affiliated with a purchasing entity at the time of a purchase of a T & D utility, and subjecting subsection (B)'s divestiture provision to competitive electricity providers created after a purchase, is consistent with the Restructuring Act's overall purpose of fostering effective competition in the market for the generation and sale of electricity in the State and [providing] an orderly transition from the current form of regulation to retail access.... 35-A M.R.S.A. § 3203(1) (Pamph.2002). [¶ 21] We conclude that the Commission's construction of section 3206-A(2)(A) is reasonable and entitled to deference. Subsection (A) prohibits a competitive electricity provider from selling or offering for sale generation service to retail consumers of electric energy in Maine if the competitive electricity provider was a related entity to a purchasing entity at the time of the latter's purchase of a T & D utility. Because EES was not in existence at the time Emera acquired Bangor Hydro, EES was not a related entity and is not barred from selling electricity in Maine pursuant to subsection (A). We therefore affirm that part of the Commission's March 21 order approving, with conditions, Bangor Hydro's petition for reorganization arising out of the creation of an affiliate, EES.