Opinion ID: 2125013
Heading Depth: 1
Heading Rank: 8

Heading: Consumers Power

Text: Consumers Power seems to argue even more strongly that the Midland plant had been considered in several rate cases. Implicitly, under its analysis, the fact that construction work in progress related to Midland was included in the rate base after being objected to by the Attorney General supports the notion that a re-examination does not have to be undertaken every time a securities request is made. Edison made similar arguments. IV. A REVIEW OF THE SECURITIES AND RATE ORDERS DURING THE ONGOING CONSTRUCTION OF THE MIDLAND PLANT Although the MPSC maintains that it has considered the feasibility of the construction program of the utility in several securities and rate orders which would have included the Midland plant, a review of these cases indicates, however, that on the record the commission has neither examined nor established the need, reasonableness and economic feasibility of this plant before or during construction. As Commissioner Anderson pointed out in her dissent in case no U-6360, the MPSC has not really addressed the problems of the Midland plant. What the majority [of the MPSC] fails to note is that this commission does not address these serious concerns at any time. Instead the majority states that the securities act does not bind it to include the total plant cost in the company's rate base. It thus implies that Consumers is proceeding at its own risk. (Emphasis in original.) Moreover, the MPSC denies that it has followed a routine approval of reasonableness during the construction of the Midland plant. Our review of the past orders, however, indicates that the MPSC has, without adequate specific findings of fact to support the conclusions reached, approved the reasonableness of the utility's construction program every time that it has applied for the authorization to issue securities. 1. Securities Order Cases On March 8, 1968, after the plans for the Midland plant were announced in 1967, Consumers Power filed an application for authority to issue first mortgage bonds. In MPSC case no U-3050 (April 11, 1968), the commission granted the utility's $55,000,000 request. No specific statement that such funds were to be used for beginning construction of the Midland plant appears either in the application or in the order. At best a logical inference can be drawn from the timing of the request and order to indicate that a portion of the funds was to be used for the construction of the new Midland plant. The MPSC made the following findings of facts in its order: (1) The utility proposed to make capital expenditures in the year 1968 amounting to approximately $194,394,100. Included in this total was the amount of $958,000 relating to the Ludington Pumped Storage Generating Plant. (2) The expenditures set forth [by Consumers in its application] were and are necessary for the acquisition of property, the construction, completion, extension or improvement of facilities, or for the improvement or maintenance of service. (3) The funds were for the above purpose and also for the discharge or lawful refunding of obligations. (4) The funds are to be applied to a lawful corporate purpose, the issue is essential for such purpose and is reasonably required for the purposes of the company. From these conclusory findings developed solely from data Consumers supplied in its application, the MPSC authorized the issuance of these bonds without an indication for what specific projects the funds would be used. In addition, MPSC authorized this security issuance without considering on the record the need and cost-effectiveness of the Midland plant or any other proposed or existing construction project: 2. The proceeds from the sale of said first mortgage bonds authorized by this order shall be used for the acquisition of property, the construction, completion, extension or improvement of facilities, or for the improvement or maintenance of service, or for the discharge or lawful refunding of obligations, including short-term bank loans, which may be made for such purposes.    4. Our action herein approving the issuance of $55,000,000 of first mortgage bonds shall not be construed as passing upon the necessity for or feasibility of the Ludington Pumped Storage Generating Plant project. Later in 1968, a similar application for first mortgage bonds resulted in the same litany of conclusions and the authorization to issue another $55,000,000 of bonds. MPSC securities case no U-3229 (September 12, 1968). From 1969 to 1977, as the commission authorized every securities request without requiring the utility to specify on the record for what projects the funds were to be used and without examining on the record the need and cost-effectiveness of any new or existing construction program. During this period, there were at least 23 securities requests by Consumers which resulted in the authorization to issue various types of securities without any record of evaluation by the MPSC other than its litany that the utility's expenditures were economically necessary for the acquisition of property, the construction, completion, extension, or improvement of facilities, or for the improvement or maintenance of service and were lawful, essential and reasonably required for the purposes of the utility. It was not until 1977 that the MPSC in a securities case addressed the general needs of Consumers' ongoing construction program as it related to energy production. In MPSC case no U-5388 (May 16, 1977), in an application hearing for authority to issue and sell securities, the utility presented evidence of future energy production and sales forecasting. The MPSC implicitly adopted this evidence as justification for the order to issue the securities even though need of the Midland plant was not considered by name. However, the staff of the MPSC requested that in all future applications the utility should present evidence supported with testimony, [which gives] a full summary of the extent of its construction program relating that program in a precise way to its estimate of future energy sales and load for both electric and gas operations. The commission thereafter continued to require the utility in securities requests to present evidence on energy and sales forecasting. It was not, however, until 1978 that the MPSC started to question the testimony and data presented by Consumers Power. In MPSC case no U-5836 (August 21, 1978), the commission stated in its findings of fact that: The staff, through its counsel, supported the proposal of Consumers Power Company, but expressed concern over the possibility that applicant would have excess generating capacity, over and above reasonable reserve capacity, in the early 1980s. The staff requested that in its next security issue application Consumers Power Company present proofs regarding the likelihood and extent of capacity in excess of reasonable reserve requirements and plans or studies for the utilization of such excess capacity if it materializes. Yet, it still did not require the utility to specify what projects the funds would be used for, or determine the need and cost-effectiveness of its ongoing construction program. In MPSC case no U-6068 (October 9, 1979), the Michigan Citizens Lobby (MCL), Public Interest Research Group in Michigan, and the Great Lakes Energy Alliance intervened, challenging the Midland plant in a securities request where the MPSC authorized the utility to sell various types of stock to finance its construction program. The intervenors presented evidence that a delay in the construction of the Midland plant for one year would benefit ratepayers by $110.2 million. In addition, they argued, through their introduction of evidence, that the funds to be generated by the requested securities were not reasonably required for the utility's ongoing construction of the Midland plant as there were less expensive ways to produce electric energy. Id. The commission rejected these contentions, ruling that the requirements of the securities statute were met as the funds were for the purpose of constructing nuclear plants. As is evident from the statute, the purpose need not be reasonable; the purpose [of construction] need only be lawful. The use of the funds, however, must be reasonable. [4] Thus, the position of the commission was to implicitly accept that the purpose of construction was reasonable by using a limited and erroneous construction of lawful to find a lawful purpose and then only requiring that the use of the funds be reasonably related to accomplishing the construction. In MPSC case no U-6360 (August 4, 1981), the instant matter, the utility requested authority to issue various securities so that it could continue its construction program which included the Midland plant. The Attorney General and the MCL once again intervened, presenting evidence that the Midland plant was not cost-effective and that the applicant's energy and sales forecasting was inaccurate. The position of the intervenors was that the MPSC had never approved the Midland project by investigating its economics. They believed that the utility had to prove: (1) that the applicant's long-range energy forecasts and generation planning are reasonable and require construction of the Midland plant; (2) that the proceeds of the issuance are reasonably required for Midland, as opposed to an alternative; (3) that the amount of the proceeds requested for the plant is reasonable; (4) that issuing securities for the amount requested is essential for successfully meeting the applicant's generation needs. The commission, however, ruled that the evidence of forecasting and cost-effectiveness was not at that point relevant in making a determination regarding the issuance of securities needed to finance ongoing construction of the plant. Under its interpretation of the securities statute, the MPSC stated that it is not reasonable in the context of securities proceedings to examine the need for, and the cost-effectiveness of the power plant once actual construction has commenced and that such examination does not further the purpose of the securities act to protect against overcapitalization and serve the interests of customers in efficient and uninterrupted service at a reasonable rate (emphasis in original). In security case no U-6360, the MPSC had changed its position established in security case no U-6068 where it had maintained that a determination of the legislative standard reasonably required need not include a determination of need and cost-effectiveness. Thus, in the later security case no U-6360 its position seemed to be implicitly that such a determination was necessary and had been made in the earlier proceedings but once actual construction was commenced such an examination does not achieve the purpose of the act which is to protect against overcapitalization and to serve the interest of ratepayers. Furthermore, the MPSC recognized that the securities act concerned not only overcapitalization but the interests of customers in efficient and uninterrupted service at a reasonable rate. In short, a review of the important security order cases during the various phases of construction of the Midland plant indicates the following: (1) That throughout the years the proceedings under the MPSC have become more adversarial and complex, but the issues have only recently been better defined on the record. (2) The MPSC has never on the record indicated specifically the project's inclusion in the utility request for the securities approval nor has an MPSC order specified for what project the funds from the authorized securities would be used. (3) The commission has never on the record conducted an analysis of whether the Midland plant was needed and cost-effective, but has entered orders requesting such information from the utility. (4) The MPSC has changed its position on whether a determination of need and cost-effectiveness ever has to be made under the securities act from denying such a determination had to be made to stating such a determination had to be made but only in connection with approval of the first securities application. (5) The MPSC has recognized that a securities act proceeding concerns not only overcapitalization but also service at reasonable rates. 2. Rate Order Cases The MPSC and the utility, in response to the Attorney General's demand for an examination of need and cost-effectiveness, argue that the Midland plant has been considered in seven rate cases since 1970. An extensive review of these orders, however, initially indicates more concern by the MPSC with the utility's decline in earnings as it relates to the rate base than in the feasibility of the financing of new and ongoing construction of energy plants. In MPSC rate case no U-4174 (November 24, 1972), the utility requested a rate increase of $29,012,000. Because of the utility's declining earnings and lack of ability to finance its construction program, the MPSC required the utility to file a proposed financing plan for the next five years and to file a semi-annual report on the progress of its construction program including the status of each project, an estimate of percentage completion, expected in-service date, slippage from initially projected in-service date,    current estimated cost and initially estimated cost and other significant data. In MPSC rate case no U-4576 (January 23, 1975), the commission, without identifying the Midland plant, rejected the Attorney General's argument that the costs of Consumers' new generating plants were irrelevant as it related to inclusion in the rate base. Thus, the MPSC was concerned with the utility's erosion of earnings and not with the need and cost-effectiveness of any energy plants. The MPSC, however, showed some movement in considering the Midland plant in MPSC rate case no U-5331 (July 31, 1978). The Public Interest Research Group in Michigan (PIRGIM) intervened and requested that all construction work in progress related to the Midland plant be excluded from the utility's rate base. The issue arose because PIRGIM believed that Consumers' load forecasting techniques were inaccurate. The commission, without addressing whether the specific forecasting was accurate, ruled that the construction work in progress associated with the Midland plant should be included in the rate base because sale and demand forecasting is inexact; some growth in demand was expected; the commission believed that the plant would provide power at a comparable price; and the cost of absorbing the Midland plant would be less than the cost of terminating construction. Although the commission in this rate case included the costs of the construction work in progress of the Midland plant in the rate base, there was no examination of need and cost-effectiveness of the plant. In MPSC rate case no U-5281 (March 14, 1980), the commission, on its own motion, addressed the appropriate treatment for ratemaking purposes of the direct and indirect costs of construction. By following its past practice, the commission included construction work in progress in the rate base but listed the allowance of funds used during construction as an increase in the utility's net operating income. In rate case no U-5979 (August 8, 1980), although the MPSC included the construction work in progress associated with the Midland plant, it refused to include a transmission plant used with the Midland plant because the Midland plant was not yet operational. Once again the commission refused to consider that the utility's load forecasting was unreliable as it related to the Midland plant. In addition, MPSC recognized that the utility had to develop a plan which would employ cost-effective load management and conservation tools as an alternative to power plant construction. After millions of dollars had already been spent on the Midland plant, the MPSC finally recognized that some sort of cost-effectiveness analysis had to be made of energy plants in future rate cases. In summary, we find that there has been a steadily increasing depth of consideration of the Midland plant in the rate cases. Our question, therefore, is whether the limited and fragmented inquiry in the rate cases is sufficient to fulfill the legislative requirements of the securities act. Incidentally, we review only the Consumers Power record in depth as it is for a longer period and fuller and presents the problems we must consider. V. SECURITIES ACT The basic issue in these cases, we have said, is the amount of protection the Legislature intended in the securities act to provide both utility investors and ratepayers through the MPSC. We have observed that there are essentially three types of protection in question: complete feasibility investigations, first, at the original financing application; second, at subsequent financing applications; and third, at rate proceedings. In these cases there is no issue that such investigation is not required at the third or rate hearing. Our basic issue then is whether a complete feasibility examination is required first, at the original financing application, and second, at subsequent financing applications. The Attorney General contends the answer is yes as to both. The utilities contend there was such an examination at the original financing whether required or not and that no such examination is required at subsequent applications. The MPSC contends the answer is yes in the first instance but no in the second. Our brother LEVIN holds no such examination is required either time. We hold such an examination is required at the original financing application but normally not at subsequent ones. Let us for convenience set forth the pertinent statutory language again: Sec. 1(1) [Certain public utilities]    may issue [more than 12-month securities] if necessary for the acquisition of property, the construction, completion, extension, or improvement of facilities or for the improvement or maintenance of service or for the discharge or lawful refunding of obligations    if the public service commission issues an order authorizing the issue and the amount of the issue, and states that in the opinion of the commission the use of the capital or property to be acquired to be secured by the issue of the [securities] is reasonably required for the purposes of the    corporation   . Approval of securities does not presume that the projects to be constructed or property to be acquired will be included in the company's rate base.    (3) If from the application filed and other information obtained from the investigation authorized in this act the commission is satisfied that the funds derived from the issue of stocks, bonds, or notes are to be applied to lawful purposes and that the issue and amount is essential to the successful carrying out of the purposes    the commission shall grant authority to make the issue   . The most significant and important consideration in these cases, and more broadly in the kind of protection both utility investors and ratepayers will receive in Michigan, is how this Court reads the Legislature's intention in the securities act. In order to make an informed judgment, it is well to study the analyses of the parties in these cases.
The Attorney General's brief instead of making its own analysis of the pertinent statutory language sets forth the colorful opinion of the hearing officer in the Consumers Power case. This opinion finds that the Legislature in the securities act intended the MPSC to make a complete feasibility investigation at both the original and subsequent financing applications. The hearing officer's opinion states in part: [D]o the provisions of the securities act permit an inquiry into the cost-effectiveness of Midland versus other generating or construction alternatives? Is this a relevant issue in this proceeding? This administrative law judge finds and concludes that it is. First, the plain language and structure of the securities act must be examined. Section 3 requires a finding that the commission is satisfied that the funds derived from the issue of stocks, bonds, or notes, are to be applied to lawful purposes and that the issue and amount is essential to the successful carrying out of the purposes. Section 1 requires the commission to state in its opinion that the funds (from the securities issuance) are reasonably required for the purposes of the corporation. As such, this applicant must show not only that the funds are for a lawful purpose but that they are reasonably required. The requirements in section 1 are separate and distinct from the requirements of section 3. Neither section depends upon an interpretation of the other section to ascertain its meaning. Each may be read separately without resort to the other. In section 3, the word `purposes' appears twice in the first sentence. The first time it is used it is modified by the word `lawful'. The second usage of the word `purpose' in the same sentence must carry the same modification. That means that that part of the sentence should read as though it says    and that the issue and amount is essential to the successful carrying out of that lawful purpose. No such modification of the word `purposes' appears in section 1. Its omission must be considered to be intentional and done for a reason. That reason is that the Legislature did not intend to tie the commission down to looking at only whether the purpose was lawful, and then examining whether the funds were essential to carrying out that specific lawful purpose, and whether they were reasonably required for that specific lawful purpose. If the legislative intent were different, it would have included the above requirements in the same section under the same modification to the word `purpose'.  Is this interpretation practical? Everybody agrees that at the least the statute is designed to prevent overcapitalization. Only the above interpretation will serve that interest. Assume, in an admitted absurdity, that XYZ Electric Company desires to reproduce a `Taj Mahal' for its general offices. Under the interpretation of the applicant and the staff, we first look to see if it is a lawful purpose. Yes, XYZ Electric Company has a perfect legal right to construct such a building. Then we would look at subsequent security issues to determine only whether they were essential to complete that project and whether they were reasonably required to complete that project. Under the applicant's and staff's interpretation, those security issues would be approved with no further inquiry and examination than that. When the cost of the `Taj Mahal', or part of it, is later rejected for inclusion into the rate base, overcapitalization will have automatically occurred, and the commission will have been powerless to stop it under the applicant's and staff's interpretation of the securities act. [Attorney General's emphasis.] But the securities act was designed for just the opposite purpose ÔÇö to give, not deny, the commission an opportunity to take a look at the possibility that overcapitalization might occur if a certain securities issuance is approved. Under the applicant's and staff's interpretation of the securities act, overcapitalization in the above example could only be prevented by including the project in the rate base. The investor would then be protected, but only at the expense of the ratepayers. The defendant utilities did not directly interpret the language of subsections (1) and (3) establishing the criteria for MPSC judgment in allowing a securities issue. Consumers Power concentrated on the alleged discretionary power of the MPSC in making an investigation rather than concentrating on what the Legislature obliged the MPSC to find before authorizing a securities issue. It is true subsection (2) does give the MPSC discretion as to the depth of investigation it will undertake. But subsections (1) and (3) establish what the MPSC must find, and the Consumers Power brief does not come to complete grips with analyzing those subsections. The Detroit Edison brief likewise does no basic analysis of the language of subsections (1) and (3), although it extensively reviews MPSC interpretation of the statute. While the Detroit Edison brief refers to the discretionary limits of the commission's investigation, it relies mostly on the idea that the transmission act is the, and in its mind the only, appropriate time and place for extensive review of the need for a power plant, and also on the idea that the utilities can finance construction projects with short-term debt without commission approval. The MPSC brief makes a thorough and specific analysis of the language of subsections (1) and (3), more particularly in its Consumers Power case brief. After quoting the statutory language with emphasis on the appropriate words, the brief refers to and quotes from Michigan case law. Among the pertinent quotations are the following extracts. The commission is concerned with the stock, or bond, issue, the foundation, security and necessity therefor, and the purposes to which the fund acquired by sales thereof are to be devoted. Venner v Michigan Railroad Comm, 205 Mich 573, 582; 172 NW 567 (1919). Proper securities regulation serves the interest of the ratepayers in assuring continued service without interruption from utilities and in receiving that service at reasonable rates. Michigan Gas Storage Co v Public Service Comm, 405 Mich 376, 391; 275 NW2d 457 (1979). Briefly, we are convinced that securities regulation was intended to, and does, protect interests which rate regulation alone could not effectively control. It serves the interests of both the investors in, and creditors of, a company organized and operating and issuing securities under the laws of this state and those of ratepayers in efficient and uninterrupted service at reasonable rates. People v County Transportation Co, 303 NY 391; 103 NE2d 421 (1952), app dis 343 US 961 (1952). There is no reason to believe that the Legislature intended to reserve use of this valuable tool for serving the public interest to cases where rates are also being regulated while leaving some companies free to issue securities without public participation. The statutory language gives no indication of any such intent and we will not read limiting language into it. Indiana & Michigan Power Co v Public Service Comm, 405 Mich 400, 410-411; 275 NW2d 450 (1979). With that general introduction, the MPSC brief directs its attention to the interpretation of subsections (1) and (3) of MCL 460.301; MSA 22.101 directly as follows: 1909 PA 144,  1, supra, is clear and unambiguous with respect to the purposes for which securities may be issued by an electric utility. An electric utility may only issue securities for the acquisition, construction, or improvement or capital assets used in its business of providing utility service or for the refunding or discharge of obligations previously issued for that purpose. 1909 PA 144,  1, supra, is also clear and unambiguous with respect to the commission's duty to authorize the issuance of securities when the proceeds are to be applied to a lawful purpose of an electric utility and the issue and amount is essential to the successful carrying out of the purpose of an electric utility. Electric generating facilities are capital assets and security for debt and stock. The acquisition or construction of electric generating facilities is a lawful corporate purpose of an electric utility and necessary for the utility to provide service. Thus, if there were no other requirements in 1909 PA 144,  1, supra, the commission would have to authorize an electric utility to issue securities in the amount necessary to construct an electric generating facility. However, 1909 PA 144,  1, supra, requires that securities may only be issued if the commission authorized the issuance in an order stating the use of the capital secured by the debt or stock is reasonably required for the purposes of the electric utility, and the meaning of the term `reasonably required' is what this Court must determine. The Court's determination of the legislative intent in requiring the commission to state that the capital to be acquired by the issuance of securities for the continued construction of electric generating facilities is reasonably required for the purposes of an electric utility in an order authorizing the issuance of such securities will decide this case and affect pending security cases and future security cases under 1909 PA 144,  1, supra.  The MPSC brief then concluded as follows: A thorough and complete inquiry by the commission into the necessity of the initial issue of securities for the construction of generating facilities is appropriate. However, once construction of a legitimate utility project is commenced, and particularly where construction is well-progressed toward completion following previous commission security and rate case determinations, as in this case, the continued construction of generating facilities need not be subject to a securities inquiry equally as extensive as the initial inquiry, because of the time involved and the resulting uncertainty upon the investment community as to whether the commission would, year after year, authorize additional securities for a project. Thorough and repeated inquiries before the commission relative to the need or cost-effectiveness of plants under construction or nearing completion also unreasonably focuses upon the same or similar issues, are duplicative, and cause unreasonable delays in both the construction itself and the financing thereof.
Again for convenience, let us set out the pertinent language of subsections (1) and (3) of MCL 460.301; MSA 22.101, because it is the guide to our proper interpretation of the Legislature's intentions as to the protection it wished to provide: Sec. 1(1) [Certain public utilities]    may issue [more than 12-month securities] if necessary for the acquisition of property, the construction, completion, extension, or improvement of facilities or for the improvement or maintenance of service or for the discharge or lawful refunding of obligations    if the public service commission issues an order authorizing the issue and the amount of the issue, and states that in the opinion of the commission the use of the capital or property to be acquired to be secured by the issue of the [securities] is reasonably required for the purposes of the    corporation    Approval of securities does not presume that the projects to be constructed or property to be acquired will be included in the company's rate base. [5]    (3) If from the application filed and other information obtained from the investigation authorized in this act the commission is satisfied that the funds derived from the issue of stocks, bonds, or notes are to be applied to lawful purposes and that the issue and amount is essential to the successful carrying out of the purposes    the commission shall grant authority to make the issue   . [6] The following criteria clearly express the Legislature's intentions as to what protections it had in mind. [C]orporation    may issue [securities] (1) if necessary for the acquisition of property, the construction, completion, extension, or improvement of facilities    or for the discharge or lawful refunding of obligations (2) if the public service commission issues an order authorizing the issue and the amount of the issue    (3) [if the commission] states that in the opinion of the commission the use of the    property    is reasonably required for the purposes of the    corporation (4) there is no presumption that approval of securities means inclusion in rate base (5) if    the commission is satisfied the funds derived from [the securities] are to be applied to a lawful purpose (6) if    the commission is satisfied    that the issue and amount is essential to the successful carrying out of the purposes (1) Necessary for Acquisition of Property, etc. This criterion obviously limits the purposes for which the funds from a security issue may be used. It appears to cover a fairly broad spectrum of projects. Whether it is intended to be inclusive or exclusive, we need not here decide, as the projects at issue in these cases appear to fall well within the spectrum. The major project is the completion of a nuclear reactor. There is also some refunding. (2) Authorization of Issue and Amount of Issue This criterion is important in that in addition to approving an issue, the commission must authorize the amount of the issue. This point ties in with the same point made in succeeding criteria when the significance of the point becomes more apparent. (3) Reasonably Required for the Purposes of the Corporation This criterion is a crucial one in our consideration as to the depth of protection the securities act provides. No securities may issue unless the capital or property [is]    reasonably required for the purposes of the    corporation (emphasis added). As noted in this case we are principally concerned with property, completing a nuclear reactor. The phrase purposes of the    corporation is pregnant. It embodies the whole utility regulatory scheme, because the purposes of the utility corporation must be consonant with the aims of regulation. The aims of regulation envision economically healthy corporations providing adequate services at reasonable rates and earning reasonable profits. As a consequence, the project to be financed by the securities issue is impregnated with that purpose. The project must be devoted to providing adequate service at a reasonable rate and earning a reasonable profit. The phrase reasonably required indicates that the MPSC may not authorize the issue of securities unless in its opinion the use of the capital or property to be acquired to be secured by the issue of [securities] is reasonably required for the purposes of the    corporation. In other words, the commission must have satisfied itself that the project to be undertaken is reasonably required to further a corporation purpose such as we have described. Obviously this charge upon the MPSC is a heavy one. It must determine and state that in its opinion the project is reasonably required in the context of the aims of the regulatory system, i.e., a healthy utility rendering adequate service at a reasonable rate and earning a reasonable return. It is impossible to visualize this determination except after a complete feasibility examination. (4) No Presumption Securities Approval Means Automatic Rate Base Inclusion This provision is sometimes cited to argue that subsection (1) does not require a complete feasibility examination. In our opinion the correct interpretation of this subsection is quite the opposite. Consideration of the exact language is significant: Approval of securities does not presume that the projects to be constructed or property to be acquired will be included in the company's rate base. This language was not originally a part of  1(1). It therefore was presumably an afterthought because of conduct reactive to the original section. That conduct must have been the presumption that securities approval was equivalent to inclusion in the rate base. Inclusion in the rate base, however, cannot be presumed without some kind of feasibility examination, showing that the addition of the property to the base would be consonant with reasonable consumer rates and a reasonable rate of return to the utility. Obviously no such determination could be made without a feasibility study to some degree. What then is the significance of the no presumption provision? Does it mean, as some believe, that feasibility examinations should cease or does it mean, as the language implies, that approval of securities creates no presumption of inclusion in the rate base? It is submitted that the latter interpretation is the correct one. On the one hand, if the Legislature had intended to ban feasibility examinations, it certainly would have used words to directly indicate that, which, of course, it has not. On the other hand, the no presumption proviso is perfectly compatible with the requirement of a feasibility study, in fact the only reason for having one. The occurrence of unforeseen factors or change in the economic situation or change in technology, engineering or management over the course of completing a project might very well mandate a new feasibility examination, for example. In short, we believe the no-presumption proviso in no way prohibits feasibility studies but rather is perfectly compatible with them, in fact, implies that they are required. (5) Funds Derived Applied to Lawful Purpose The first thing to note is that this provision is in subsection (3) and the prior ones were in subsection (1). Subsection (1) concerns the propriety of the use of capital or property. Subsection (3) concerns funds derived rather than use of capital or property. This provision calls upon the MPSC to determine that the funds derived from the securities issue are not to be applied in violation of state or federal law. This, of course, was a significant factor in the construction of the Midland reactor where the federal government was constantly changing safety regulations and requirements. (6) Issue and Amount Essential This provision ties in with provision 2. The commission must determine that the security issue will raise funds appropriate to carrying out the purposes, as approved in (3) and (5). Our analysis of the pertinent provisions of MCL 460.301; MSA 22.101 makes clear that the MPSC, at least before approval of the original securities application, must make a complete feasibility examination to satisfy the statutory mandates. Construing all these provisions together, we perceive that the Legislature had different although somewhat overlapping aims in subsections (1) and (3). In subsection (1) the Legislature mainly sets up objectives for the security issue. In subsection (3) the Legislature sets up tests for the funds derived from the securities. In subsection (1), the Legislature set up two objectives. They both relate to capital or property. The first objective is that the securities must be for either the acquisition or improvement of property or the discharge or refunding of obligations. The second objective is that the use of capital or property be reasonably required for the use of the corporation. In subsection (3) the Legislature sets up two tests for the funds derived from the securities. First, the funds had to be applied to a lawful purpose. Second, the funds must be essential for the carrying out of the purposes of the corporation. In these cases, the application of the objectives of subsection (1) shows first the nuclear reactor falls within the completion    of facilities test and second (2) the nuclear reactor must be found by the MPSC to be reasonably required for the purposes of the corporation. In subsection (3), the MPSC must find that the funds derived from the security issue are first, to be applied to a lawful purpose, and second, essential to the successful carrying out the purposes of the corporation. The same kind of analysis could be made of that portion of the security issue devoted to the discharge or lawful refunding of obligations. In short, we believe that the Legislature, by requiring securities to be reasonably required for the purpose of the applying utility, expected the MPSC to balance the interests of investors and ratepayers along with the interests of the utility before the original securities are issued to finance the construction of electric plants. In fact, the Legislature has given the MPSC broad powers in determining whether the commission should grant authority to issue securities. For the purpose of enabling it to determine whether or not it should issue such an order, the MPSC may make an inquiry or investigation, hold hearings, and examine witnesses, books, papers, documents, or contracts the commission considers of importance in enabling it to reach a determination. MCL 460.301(2); MSA 22.101(2). This balance will be achieved if the MPSC makes a complete feasibility examination at the time of the original application for financing and later evaluates the costs of the project when the utility requests inclusion in the rate base. Thus, we do not believe that the legislative intent was to allow a utility's investors to invest billions of dollars in a facility that the MPSC claims will be evaluated for viability at the time a company requests inclusion of the costs of such facility in its rate base. Such a result would be inherently unfair to investors, the utility and its ratepayers. Moreover, this approach implies that a utility can proceed at its own risk even though the costs of construction may ultimately leave the utility impoverished and the ratepayers with an unwontedly swollen rate base. The commission has been forced to address this dilemma. It now recognizes that some type of determination or thorough inquiry should be made before the initial issuance of securities for the construction of an energy plant. We agree with the commission, however, that in these particular cases it is too late in the day to make a post hoc examination about the need and cost-effectiveness of the plants. Therefore, we hold that the legislative standards of the act require the MPSC to make a thorough and complete inquiry into the necessity and cost-effectiveness at the time the commission is considering the initial issuance of securities for the construction of an energy plant. [7] Once construction of a lawful project is commenced after the initial issue is authorized, a redetermination should not be necessary under our statutory interpretation. B. Case Law Our interpretation of the securities act is supported by the relevant case law. We recognize that the interpretation of this statute by this Court has not remained static. Initially, we perceived the legislative purpose of the statute as protecting investors against the evils of overcapitalization. See Peninsular Power Co v Secretary of State, 169 Mich 595, 600; 135 NW 656 (1912). The early concern was not so much with the consuming public or ratepayers but with the equity or future equity owners of the utility companies. E.g., Hillsdale Light & Fuel Co v Michigan Public Utilities Comm, 220 Mich 101, 105; 189 NW 893 (1922); but see Venner v Michigan Railroad Comm, 205 Mich 573, 583; 172 NW 567 (1919). Recently, this Court has broadened its interpretation of the apparent purpose of MCL 460.301; MSA 22.101. See Indiana & Michigan Power Co v PSC, 405 Mich 400; 275 NW2d 450 (1979); Michigan Gas Storage v PSC, 405 Mich 376; 275 NW2d 457 (1979). By recognizing that securities regulation and a utility's financial structure will impact on rates, we stated that securities regulation achieved important legislative objectives by protecting investors of a utility, creditors, and equally important, protecting ratepayers by assuring efficient and uninterrupted service at reasonable rates. Indiana & Michigan Power, supra, 410. See also Roach & Reiss, Administrative Law, 1979 Ann Survey of Mich Law, 26 Wayne L Rev 359, 364 (1980). In both cases, the utility companies filed applications with the MPSC for a disclaimer of jurisdiction or, alternatively, application under protest for authorization to issue securities. The MPSC denied the request for disclaimer of jurisdiction and authorized the proposed securities. It also required both companies to pay fees based on the face value of the securities, which the utilities paid under protest. In addressing the basis under which the MPSC could assert jurisdiction over the utilities in a securities request, we unanimously stated that the apparent intent of the Legislature was not to protect only investors: Briefly, we are convinced that securities regulation was intended to, and does, protect interests which rate regulation alone could not effectively control. It serves the interests of both the investors in, and creditors of, a company organized and operating and issuing securities under the laws of this state and those of ratepayers in efficient and uninterrupted service at reasonable rates. Indiana & Michigan Power, supra, 410. Although the Michigan courts until Indiana & Michigan Power seemed more concerned with the effects of overcapitalization on investors than on ratepayers, it was not so with the state of New York which has always had a similar statute. [8] In fact, this Court has stated that the Michigan statute may fairly be construed as though it read as the New York act reads. Venner, supra, 583. In People ex rel New York Edison Co v Willcox, 207 NY 86, 93-95; 100 NE 705, 706-707 (1912), the New York court laid down the standard by which the New York Public Service Commission (NYPSC) had to fulfill in regulating utilities under the New York statute. In that case, the New York Court of Appeals reversed an order of the NYPSC which authorized the issuance of securities to be used in the acquisition of property upon which to construct power houses and substations. The court indicated that before a utility could issue securities to finance a new project under the New York statute the NYPSC had to protect the rights of the public by determining whether the new issuance, and implicitly the projects such securities would finance, were needed and would not lead to oppressive charges or rates: [The] law was enacted in response to a pronounced and insistent public opinion and was a radical and important modification of the relations and policy of the people toward the corporations which are its subjects. Its paramount purpose was to protect and enforce the rights of the public. It made the commissions the guardians of the public by enabling them to prevent the issue of stock and bonds for other than statutory purposes, or in appreciable and unfair excess of the value of the assets securing them, and to prevent also unneeded or extortionate competition, or indifferent and unaccommodating methods of operation or oppressive or discriminating charges or rates. Willcox, supra, 93-94. [9] Moreover, in People v Liberty Light & Power Co, 121 Misc 424, 426; 201 NYS 302 (1923), the court, in an action brought to recover a penalty imposed by the public service commission law of New York because the defendant failed to comply with the provisions in relation to the issuance of stock, stated that: The objects sought by the legislature in the regulation of public utilities by the law here in question were, the prevention of corporate abuses and the protection of the public against excessive rates for services, the over-capitalization and the watering of securities, the establishment of a reasonable basis in operating expenditure, and the maintenance of investment security. The law places upon such corporations the burden of proving the need and security in its ventures for financial and corporate extension and provides that it must establish before the commission the facts of the proposals for expansion as being for the best interest of the public. Thus, our over-all reading of the case law which has interpreted the legislative purpose behind the two similar statutes indicates that there is a clear statutory duty under which the MPSC should operate. The recent case law in Michigan and elsewhere stands for the proposition that the Michigan statute should be read as broadly as possible so that this state's regulatory system can accommodate not only the interests of equity owners but also the interests of ratepayers when securities are requested. VI. MPSC COMPLIANCE WITH LEGISLATIVE CRITERIA We have developed the criteria that the Legislature intended for MPSC use in determining whether securities should issue. There remains consideration of how the MPSC has met these criteria. The securities act contemplates judicial review by certiorari. MCL 460.301(6); MSA 22.101(6). This means that in addition to conclusions of law there must be findings of fact that support such conclusions of law. The courts can then determine whether there are any errors of law and whether the findings of fact support the conclusions of law and whether there are facts in the record to support the findings of fact. Our review of the security and rate orders indicates a distressing repetition of the language of the statute as legal conclusions without discernible findings of fact supporting such conclusory language.
In 1967 Consumers Power announced plans to construct a nuclear generating plant at the estimated cost of $256,000,000. Between April 11, 1968 and October 9, 1980 the MPSC issued 30 security orders for Consumers Power construction programs, including Midland. It is to these security orders that MPSC and the defendant Consumers Power refer in claiming that the commission made a complete feasibility examination. The first securities orders after the Midland plant announcement was case no U-3050, April 11, 1968. There is another 1968 order, case no U-3229, September 12, which is practically a mirror copy. Whether either of these is the first case authorizing the Midland plant cannot be definitively ascertained from the record, because it was not until 1976 that the MPSC made a specific reference to Midland by name. Case no U-3050, April 11, 1968, is set out in Appendix A attached hereto. Only by perusal of the entire order is it possible to understand the vague and conclusory nature of the document. Commentworthy, however, is:
2. The statutory language of the criteria is quoted in the findings of fact, without any quoted factual basis whatsoever. For example, finding E states in part in the opinion of the commission the use of the capital to be acquired by the issuance of said bonds is reasonably required for the purposes of the company. That is all there is. There is no reference either to what the use of the capital is to be or for what purpose of the company would require that use. In short, the MPSC orders of this date in no way satisfy the requirements of MCL 460.301; MSA 22.101 nor the kind of record needed for judicial review.
During the oral arguments, Justice KAVANAGH several times asked, Was there any determination made before the plant was started that it was necessary? Mr. D'Hondt for the MPSC replied that the MPSC eventually answered the question as to whether the plant was necessary in 1978 in Re Consumers Power Co, 25 PUR 4th 167 (case no U-5331, July 31, 1978). This case appears to be the first time that the Midland plant was specifically considered by name. This case was a rate hearing case, and the question considered, which is of importance to us, is whether the construction work in progress costs of the Midland plant should be included in the rate base. The Public Interest Research Group in Michigan (PIRGIM) contended that Consumers Power power needs forecasting was so faulty that it could not be relied on and that there was no evidence that the Midland plant would be needed. The MPSC opinion and order's principal comment on PIRGIM's contention follows: Sales and demand forecasting is inexact at best, requiring subjective judgments in the adoption of assumptions and the choice of methods. Although improvements might be made in applicant's methods, the commission finds that on this record applicant's forecast of annual sales growth, the projected load factor, and the projected range of demand are not unreasonable. It is true that applicant's past forecasts have often been too high. However, forecasts are constantly being revised in response to changing conditions. It does not necessarily follow that because previous forecasts were too high that the present forecasts are likewise too high. Perhaps more important, even assuming applicant's forecasts are somewhat high, it does not follow that the Midland project is unneeded and therefore an imprudent investment to be totally excluded from the rate base. The record shows that some growth in demand is to be reasonably expected, in the absence of a drastic shift in usage patterns which cannot be reasonably assumed at this time. The Midland project is designed to be a major baseload plant and if it runs properly it should provide power at a price which is comparable to many other units. A temporary minor overcapacity would not be a justification for excluding the plant from the rate base. In a period of increasing construction costs, it may be cheaper to construct new plant now than to delay construction for a significant period. In addition, applicant may have the opportunity to sell temporarily excess power. In any event, the costs of abandoning the Midland plant, as recommended by PIRGIM, have to be weighed against the benefits. Assuming applicant is close on its sales and demand predictions, abandoning the Midland plant, as PIRGIM contends should be done, would have serious and possibly catastrophic results for the supply of electricity in the 1980's and 1990's not only for applicant's retail customers but also for the whole state of Michigan. Moreover, the forced abandonment of all the Midland plant would be a financial disaster for applicant and would seriously compromise applicant's ability to finance any additional construction, including coal-fired and cogeneration facilities. Finally, to the extent that the financial community perceived the commission as acting irresponsibly by enforcing the abandonment of the total Midland project, all other utilities in Michigan would have increased difficulty in financing their construction projects. For these reasons the commission finds that the construction work in progress (CWIP) associated with the Midland plant should not be excluded from the rate base. 25 PUR 4th 179-180. Obviously the MPSC has come closer to answering the criteria set forth in the securities act in 1978 than in 1968, although, of course, this is a rate, not a securities, case. However, even this much more specific treatment does not completely answer the question whether the property was reasonably required for the purposes of the corporation. Furthermore, this MPSC opinion illustrates the jeopardy in not making a feasibility study at the beginning. The MPSC reaches its conclusion in part by relying on the in terrorem argument that even if not cost effective the forced abandonment of all the Midland plant would be a financial disaster for applicant [Consumers Power Co.]. Further, all other utilities in Michigan would have increased difficulty in financing. VII. PROPOSED FINDINGS STANDARD On the record before us, it would be difficult to attempt to definitively indicate those specific findings appropriate to support a conclusion that expenditure of funds was reasonably required for the purposes of the    corporation. For a new generating plant for an electric utility, however, these are some of the specific findings that should be made: 1. the name and detailed description of the project for which funding is requested; 2. the amount of funding requested; 3. the estimated costs of the project and the bases for the estimates; 4. the amount of power the plant would generate by a particular time plus the amount of power from other sources of the corporation; 5. the amount of demand for that power and the source of such estimates; 6. the amount of reserve power appropriate and the sources for that conclusion; 7. whether there are other more efficient power sources and, if there are, why they are not to be used; 8. what effect the project will have on rates and why. Such a determination should create no strain in the securities regulatory system in Michigan as the MPSC has acknowledged under the existing statute that [a] thorough and complete inquiry by the commission into the necessity of the initial issue of securities for the construction of generating facilities is appropriate. As has been discussed, the paramount purpose of the securities statute is protection of the public which includes both investors and ratepayers. By addressing itself to the legislative standard as we view it before the financing of new energy plant construction commences, the MPSC ensures that the apparent legislative purpose of the statute will be fulfilled. It also ensures that all the citizens of this state shall have sufficient energy at the most reasonable rates. VIII. CONCLUSION The issue before us is what is the extent of protection the Legislature intended to provide utility investors and ratepayers. We hold that the Legislature intended that (1) a complete feasibility examination should be made by the MPSC in connection with approval of the original application for securities, (2) upon subsequent applications it would suffice that the MPSC consider whether the statutory requirements were met with respect to the work to be next undertaken, and (3) a complete feasibility examination should be undertaken in connection with inclusion of the project in the rate base. We further hold that the MPSC in connection with its determinations must make specific, not conclusory, findings of fact.