Opinion ID: 1863469
Heading Depth: 2
Heading Rank: 1

Heading: Calculation of Refund on Remand

Text: Of the $13.7 million refund ordered to be paid, Gulf States paid $13.1 million. In the district court and again here, Gulf States contests the Commission's calculation of the remaining $.6 million, claiming that Order No. U-20647 improperly denies recovery of the full amount of expenses Gulf States incurred to accomplish the NISCO transaction, and also that the Order denies Gulf States any recovery of its investment in certain facilities transferred to NISCO in 1992. Our review of the record indicates that Gulf States' arguments are without merit. At the hearings for Order No. U-20647, experts for both sides testified as to the proper amount of the refund by virtue of Order No. U-17282-H. The Commission's expert calculated the overcollection for the period being reviewed (March 1, 1990 through May, 1994) at $11,348,000; with interest his recommended refund was $14,636,000. Gulf States' expert calculated the overcollection during the same period at $10,207,334 and the total refund, with interest, at $13,137,196. The difference in the recommendations (approximately $1.131 million) stemmed not from the amount of the asset fee paid by Gulf States to NISCO, which was undisputedly $6.35 million annually during the review period from March 1, 1990 to May 5, 1994, but rather from the amount of offsets to that fee included in each expert's calculations. The Commission ordered a refund of $13.7 million, an amount the Commission contends is calculated to ensure that ratepayers pay no more than they would have paid for the Nelson units and the common facilities had the NISCO transaction not occurred. The Commission allowed Gulf States a setoff for the pro rata portions of the depreciation that had not been paid for by ratepayers through the base rates at the time of the sale in 1986 (approximately $9 million out of the original $38 million cost of construction). The Commission contends that it also partially setoff the expenses of the NISCO transaction by allowing their full recovery but denying Gulf States' shareholders any rate of return on them. The Commission wrote: The expense incurred by Gulf States in connection with the transaction is a different story. If the sale had never occurred, ratepayers would not have been required to pay the expense. Nevertheless, an argument can be made that Gulf States should be entitled to some recovery of the expense, since the NISCO transaction was assertedly undertaken partly for the ratepayers' benefit. The transaction also was undertaken to benefit shareholders, however, and they should bear a fair proportion of the cost. Mr. Kollen's methodology of allowing a recovery of, but not on, the expense will be used for this category of cost, as it fairly apportions the cost between the company and the shareholders. Order No. U-20647 at 21 (emphasis supplied). The Commission denied any setoff for Gulf States' investments in certain common facilities transferred to the NISCO project on January 1, 1992. The Commission denied this setoff despite the fact that experts for both sides allowed some setoff for the investment in that plant. At the time the Commission issued Order No. U-20647, the plant had not been removed from base rates because no base rate proceeding had been conducted since the January 1, 1992 transfer of the additional common facilities to non-utility plant. By Order No. U-19904-C, dated December 29, 1994, the investment was eliminated from base rates. However, because the refund at issue was calculated only through May, 1994, Order No. U-20647 at 19, an impermissible double recovery would take place if Gulf States were allowed to recover its investment in the common facilities through the fuel clause by setting it off against the gain from the NISCO transaction, when it was at the same time recovering that investment through the base rates. Gulf States argues that the Commission's denial of any setoff for the transferred common facilities permanently forecloses recovery of its investment in those facilities, since the Commission has now disallowed that recovery through the fuel clause in addition to removing the plant from base rates. This argument is meritless. On the issue of recovery of these investment costs, the instant Commission order, No. U-20647, addresses only the time period from April, 1990 to May, 1994. During that time period, the investment was still being charged to the ratepayers through base rates. The Commission was thereby correct to deny any recovery of that same investment through the fuel clause for the same period. However, nothing in Order No. U-20647 precludes the future recovery of any remaining unrecovered investment costs through the fuel adjustment clause. In fact, the Commission stated, The Commission will disallow any credit against the fuel clause reduction for the common facilities transferred January 1, 1992, at least until a base rate proceeding in which these facilities are excluded from rate base. This action is necessary to avoid the requirement that ratepayers pay twice for the same plant. Order No. U-20647 at 22 (emphasis supplied). The base rate proceeding referred to by the Commission took place on December 29, 1994. Therefore, the Commission will logically not disallow any setoff, in calculating fuel recoveries, for these common facilities after December 29, 1994, the date of the plant's removal from base rates. We find that the Commission's disallowance of any setoff for Gulf States' investment in the common facilities assigned to the NISCO project on January 1, 1992 was reasonableduring the period addressed by the refund on remand, Gulf States was already recovering its investment in those facilities through base rates. We further find that the Commission's denial to Gulf States' shareholders of any recovery on, rather than of, the expenses incurred in the NISCO transaction was reasonable. Gulf States shared in the benefits of the NISCO transaction to the extent that it gained 1% equity ownership in the two converted generation units, and because it contracted to operate the units for compensation from the NISCO partnership. Gulf States' shareholders should thereby share in the NISCO transaction expenses. The Commission's method of accomplishing that sharing, by denying any recovery on the expenses, was reasonable. For these reasons, we find that the Commission's calculation of the NISCO refund for the period from April, 1990 through May, 1994 at $13.7 million was not arbitrary, capricious, abusive of its authority, clearly erroneous or unsupported by the evidence. Central Louisiana Electric Co. v. Louisiana Public Service Commission, 437 So.2d 278 (La.1983); see also CTS Enterprises v. Louisiana Public Service Commission, 540 So.2d 275 (La.1989) ([A] court will not upset the agency's finding unless it is based on an error of law or is one which the Commission could not have found reasonably from the evidence.); Louisiana Power & Light v. Louisiana Public Service Commission, 523 So.2d 850 (La.1988) (holding that the inquiry is whether the commission acted unreasonably or arbitrarily in setting rates for the utility). Gulf States will be ordered to refund the additional $.6 million, with interest to date, as directed by Order No. U-20647.