Opinion ID: 1918402
Heading Depth: 1
Heading Rank: 10

Heading: Retroactive Adjustments Based Upon New Company Proposals

Text: In addition to the above adjustments premised on Order No. U-19904-C, the Commission ordered that three new Company proposals totaling $15.53 million be excluded retroactively from the Company's May 31, 1995 filing. In the rate order sub judice, the Commission retroactively adjusted the Company's filing by excluding $7.486 million in depreciation expense. The Company had updated its depreciation expense by filing a new depreciation study. Because the Commission did not have adequate time to review the study, and because the Commission thought it would be appropriate to defer an increase in depreciation rates until the end of the River Bend phase-in plan, the Commission deferred consideration of the Company's request. L.P.S.C. Order No. U-21485 at 11-12. The Company does not challenge the Commission's deferral, but rather argues that the Company had a right to include in its filing updated depreciation expense, and thus the Commission unjustifiably disallowed this adjustment retroactively. The Commission's order further requires the Company to remove retroactively from its filing a $4.321 million increase in nuclear decommissioning expense. Similar to depreciation expense, the Company argues that decommissioning expense should be reflected on a current basis in the Company's filing. In ordering that these two adjustments be made retroactive to the date of filing, the Commission reasoned that the Company should not be free to unilaterally inflate its cost of service study by deciding to include significant changes to major categories such as depreciation and decommissioning expense. Id. at 18. To prevent this, the Commission concluded that if such are to be considered under the annual revenue requirement review, arrangements should be made so that review of such matters is completed prior to their inclusion in an annual review. Id. We find the Commission's retroactive adjustment of decommissioning and depreciation expenses reasonable and supported by the Proposal, and agree with the Commission's order that the Company should submit decommissioning and depreciation studies well in advance of filing so that a review can be completed by the Commission staff prior to the May 31 filing date. The Proposal provides that [t]he Company shall provide data to the Commission's consultants and special counsel (or Staff, if the Commission so designates) prior to the filing, as it becomes available.  L.P.S.C. Order No. U-19904, Appendix 1, at 2 (emphasis added). Thus, the Proposal imposes an affirmative duty on the Company to supply data in advance of its May 31 filing if the data is available. The Company has presented no evidence to this Court suggesting that the decommissioning and depreciation data was not available until May 31, 1995. The Company's delay in studying and analyzing that data should not enable the Company to delay or avoid rate reductions, especially when the annual reviews set forth in the Proposal are intended to promptly pass on savings to ratepayers. Accordingly, we find that retroactive application of this adjustment comports with the terms of the Proposal, and does not violate the rule against retroactive ratemaking for reasons already stated. The Commission also retroactively adjusted the Company's filing to exclude CWIP not accruing AFUDC, adding $3.723 million to the ordered refund. [28] According to the Company's own brief to the district court, exclusion of CWIP not accruing AFUDC  is consistent with the Commission's traditional policy regarding this issue, because during the [R]iver Bend phase in period, the Company has not requested the inclusion of short-term CWIP in ratebase. Brief on the Merits on Behalf of Entergy Gulf States, Inc., at 110 (4/16/97) (emphasis added). In fact, the Company in the previous ten years had never been authorized to include CWIP in its rate base. Nonetheless, the Company asserts that the Proposal does not preclude such an adjustment, and that it is consistent with sound ratemaking principles and practices. [29] In our view, however, the exclusion of CWIP not accruing AFUDC is consistent with the Commission's traditional policy, which the Company has not appealed, and thus is consistent with sound ratemaking policies and practices. Accordingly, we find that retroactive application of this adjustment comports with the terms of the Proposal, and does not violate the rule against retroactive ratemaking. We recognize that rate orders are generally not res judicata, see generally Gulf States Utilities Co. v. Louisiana Pub. Serv. Comm'n, No. 92-1185 (La.3/17/94), 633 So.2d 1258, 1267-68 (Dennis, J. concurring), and that a utility has a right to propose new ratemaking treatment of certain costs. In order for the Company to advocate new treatments or reraise issues to obtain treatments different from those in previous rate orders, the Company may need to reflect those treatments in its May 31 filings. Otherwise, the Company may waive its right to litigate or appeal the issue. Nonetheless, when the Commission later determines that the Company's filing did not comply with GAAP or sound regulatory practices and procedures, or that the Company intended to inflate its cost of service to avoid a rate decrease, the Commission is within its constitutional and legislative power to order a refund to bring the filing into compliance with the Merger Order and Proposal. The refund effectively returns to customers rates which the Commission later determined to be unlawfully collected rates. If the Company could include any new cost in its filing that it deemed reasonable in an attempt to reverse the Commission's regulatory policies and practices and avoid the terms of the Merger Order and Proposal, it could delay rate decreases based solely on its own judgment. Such an approach is unfair to ratepayers and frustrates the purpose of the Merger Order and Proposal. Accordingly, the refund is affirmed in full except for the $3.643 million related to the retroactive revenue annualization adjustment. The Company is ordered to implement the remaining portion of the refund without delay.