Opinion ID: 1778943
Heading Depth: 1
Heading Rank: 3

Heading: failure to upgrade the capacity at river bend

Text: The Commission ordered a $1.459 million imprudence disallowance refund based on the Company's failure to upgrade the capacity of River Bend, which the district court reversed, saying this is an unreasonable decision based on the evidence and this court will overrule the Commission's decision on the uprate. In his written reasons for judgment, the trial judge gave no further explanation and simply reversed the disallowance of $1.459 million associated with the Company's decision regarding an uprate of the capacity of River Bend. For the reasons that follow, we determine that the trial court erred in finding the Commission's order unreasonable and therefore, also reverse this portion of the trial court's ruling. Because ratepayers have only one power supplier, they are dependent on that supplier's management to make reasonable attempts to minimize costs through prudent decision-making. Gulf States Util.Co., 96-2046 p. 13, 689 So.2d at 1346. If a utility identifies potential savings to the ratepayer, the utility is obligated to make the expenditures to accomplish those savings because the utility operates under a regulatory obligation to provide service at a reasonable cost. Order U-19904-D at p. 15. The Commission reasoned that because the Company recognized the benefits of upgrading the capacity of River Bend, in both megawatt hour output and megawatt capacity, in the late 1980's and identified the amount of savings that ratepayers would realize from such a project, the Company should have instituted the planned uprate. All savings realized from the uprating of the capacity of River Bend, which the Company acknowledged would have been significant with respect to fuel costs, would have benefitted the ratepayers. This is so because the Commission in two prior orders ruled that the entire uprate of River Bend would be allocated to the regulated portion of River Bend. Id. (citing Orders No. U-172820-J and U-17282-K). The Company fully recognized that the savings through the uprate of River Bend's capacity would have been significant for the ratepayer, as the Company's records dating to the late 1980's document this conclusion. Other Company documents dating to 1991 estimated that a 47 MW uprate would cost between $5.185 to $10 million, and would provide about $17.42 million in savings from 1994 through 1999, and one document even projected up to $6 million in annual savings. The Commission found that the Company did not provide a rationale for its decision not to go forward with the uprate, could not provide any contemporaneous documentation of its decision-making process, nor provide any studies indicating that a five percent uprate would not be economic. Order U-19904-D at p. 15. The Company's witnesses did no more to illuminate the Company's decision-making process to not take advantage of such fuel savings through an uprate. The Commission concluded that the Company did not carry its burden with regard to this issue, and decided to reject the hearing officer's recommendation and to adopt the recommendation of the Commission's Staff expert witness, Lane Kollen of Kennedy and Associates, and disallow the $1.459 in excessive fuel costs associated with the Company's failure to uprate River Bend. [26] We find the Commission's imprudence determination to be supported by the evidence in the record demonstrating that the Company failed to uprate River Bend's capacity after having proven that ratepayers would realize significant savings from such a venture and the project overall would have been economically advantageous. This reasoning applies the proper prudence standard and the disallowance is not arbitrary, capricious, and was fully supported by the record. Therefore, the trial court erred in reversing the Commission's Order. Hence, the ruling of the district court is reversed and set aside.