Opinion ID: 2217179
Heading Depth: 1
Heading Rank: 6

Heading: exclusion of increase of annual payroll and pension expenses

Text: The PUC excluded $355,017 of increased payroll and pension expenses from company's cost of service, having found that the increased salary expense resulted in increased productivity. It is settled that the PUC is allowed to exclude increased payroll expense where it is shown to be offset by increased productivity. N. W. Pub. Serv. v. Cities of Chamberlain, Etc., supra. At the first hearing the testimony of members of the PUC's staff indicated their beliefs that such would be the case here. The report upon which staff relied showed that between 1965 and 1974 company's per-unit cost of producing power went only from 5.36 mills per KWH in 1965 to 5.72 mills per KWH in 1974, with fluctuations in between. Company does not dispute the report, they simply argue that this increase of .36 mills for KWH over a nine-year period is a huge increase and that the PUC's finding is without basis. On rehearing staff apparently completely changed its position, as summarized in the findings of fact proposed to the PUC on the rehearing, as indicated by the following: We have reviewed the record of this proceeding and are inclined to modify our decision and order in this respect.... Initially our review of staff exhibit No. 9 does not conclusively indicate a trend of decreasing wage and salary costs per KWH sold and upon reconsideration, we conclude that this expense appears to be justified on record. And further these expenses appear on the record to be somewhat justified, and since the commission recently approved a comparable adjustment in Northern States Power, F-3062, October 6, 1976, where the factual allegations were similar, we conclude in the sound exercise of our discretion in this matter, that it is proper to recognize a pro forma wage and salary adjustment of $355,017. In spite of this stance of their own staff, in the rehearing decision the PUC stated: The evidence before the commission fully supports this finding that increased productivity has, in fact, offset payroll and related increases. They make no reference whatever to their own staff's change of posture, nor do they suggest any distinction between this case and the Northern States Power case cited by staff. On appeal counsel for the PUC states in his brief that the staff witnesses' testimony is fully supported on the record. Company's witness attempted to controvert portions of staff witnesses' testimony but was unsuccessful. On the basis of staff witnesses' testimony and detailed study, the PUC was fully justified in finding that increased productivity would offset the payroll and related expenses claimed by NWPS in this proceeding. But nowhere does he allude to or explain the impact of the change of the posture of staff as indicated above. We hold, therefore, that upon the face of the record the determination by the PUC on rehearing was wholly unsupported by substantial evidence and was arbitrary and capricious.