Opinion ID: 1961826
Heading Depth: 1
Heading Rank: 3

Heading: The Uniform Percentage Increase in Rates

Text: We now reach the issue of whether the Commission's order approving the allocation of the revenue increase on a uniform basis to all customer classes was supported by substantial evidence. The Intervenors maintain that the order must be overruled because (a) the Commission made no finding as to the justness and reasonableness of that allocation, (b) the record is completely void of any evidence to support the Commission's action, and (c) the uniform percentage allocation is unjustly discriminatory in that it exacerbates the existing imbalance in the rates of return among the customer classes. The argument of the Intervenors on this issue appears to be grounded in the view that the Commission, after rejecting the utility's proposed rate allocation, was required to develop an alternative rate design different from the design already in existence, and was required to place evidence in the record in support of a new design. We agree with the Intervenors that, were the Commission to substitute a new rate design for the existing one, the Commission staff would have an affirmative duty to develop evidence in the record to support the justness and reasonableness of that new design. Only in this way would the new proposal be subject to review under our standard, i. e., supported by substantial evidence on the record. We are not persuaded, however, that the Commission had an affirmative duty in this case to develop a new rate design. Although we find that the evidence adduced at the hearings before the Commission clearly demonstrates the need for improvement in the method of allocating revenues among the utility's customer classes so as to more closely and fairly reflect cost of service, we conclude that under the circumstances of this case the Commission's imposition of a uniform percentage increase onto the existing rate structure was just and reasonable. We find our reasoning in Central Maine Power Company v. Public Utilities Commission, Me., 382 A.2d 302 (1978), dispositive on the question of the propriety of the Commission's action in relation to rate design on remand from our August 6, 1979, decision. In the 1978 opinion, we defined the Commission's role in rate design, and how that role relates to the Commission's duties in a rate investigation pursuant to 35 M.R.S.A. § 64 and § 69. There we held that the Commission committed error when it conducted an investigation into rate design after the utility had filed substitute rates in accordance with the revenue level previously found by the Commission to be just and reasonable, and thereby delayed, beyond the maximum suspension period permitted by § 69, ordering into effect those substitute rates. We decided that the Commission has two primary duties : (1) to determine whether or not the rates proposed in a filing under § 64 are just and reasonable, and, if they are not, to fix substitute rates which are just and reasonable; and (2) where the Commission fixes substitute rates, to approve the substitute rates as placed on file and, upon approval, to order the filed substitute rates into effect. Id., 382 A.2d at 323. In carrying out these primary duties, the Commission is concerned solely with fixing a total revenue level which is just and reasonable. In regard to the Commission's role in determining how the revenues are to be allocated, we there declared: That the Commission properly has such a role appears, at least by inference, from the numerous statutory references to schedules and the statutory authorization in § 69 for the Commission to investigate the propriety of changes proposed to be made in any schedule of rates. (emphasis supplied). This language indicates legislative intendment that the rate design among rates, as well as the revenue level they will generate, must be given Commission attention as a facet of ratemaking. ..... [T]he Commission prevents proposed rates from ever becoming effective by operation of law if the Commission, prior to the expiration of the period during which the effectiveness of proposed rates has been suspended, comes forth with a basic or principal decree determining that the total revenue level which will be produced by proposed rates on file is neither just nor reasonable and fixing a total revenue level just and reasonable for substitute rates to generate. Of course, the Commission, should it have the time, may see fit to deal in such principal decree also with the matter of the design among rates as they are to be embodied in schedules, either indicating the formal outlines of such design or addressing it more in detail. Rate design is, however, an optional rather than necessary facet of the principal decree, as it functions to prevent proposed rates from ever becoming effective by operation of law. This being so, the Commission's primary responsibility is to deal on a high priority basis with that which is the necessary aspect of its principal decree. The Commission therefore must not delay, pending further investigation of rate design, approving and ordering into effect substitute rates filed by the utility which are found to conform to the total revenue level prescribed by the principal decree as just and reasonable. Id. at 324 (some emphasis in original; footnote omitted) In the case now before us, the Commission was confronted with a not dissimilar problem. The utility filed a revised schedule of rates, pursuant to § 64, on January 28, 1978. Pursuant to § 69, the Commission, by orders dated February 13, 1978, and May 12, 1978, suspended the proposed rates for the maximum eight-month period [8] until October 15, 1978, in order to conduct public hearings. The hearings did not conclude until August 9, 1978. Preparation of final briefs and oral argument took until September 7, 1978. The Commission entered its decision on October 13, 1978, two days before the end of the suspension period. It was not until September 7, 1978, that the Commission had before it all of the evidence and final arguments in regard to the utility's proposed revenue increase and rate design. The Commission thereafter had just slightly over a month in which to digest the mass of highly technical testimony and exhibits submitted over the 27 days of hearings. During this time period, the Commission's primary obligation was to fix a just and reasonable revenue level for the utility by either approving the utility's proposed rules, or, as happened here, ordering substitute rates. The Commission's secondary obligation was to consider the propriety of the utility's proposed rate design, and, were it to find the utility's proposal unacceptable, as it did, to itself allocate the additional revenues. Of course, in determining how the additional revenues were to be allocated, the Commission was required to see that the allocation was just and reasonable. The burden of proving that a Public Utilities Commission order is unreasonable, unjust or unlawful is on the party seeking to set aside the order. 35 M.R.S.A. § 307, Central Maine Power Company v. Public Utilities Commission, Me., 395 A.2d 414, 431 (1978). We conclude here that the Intervenors have not sustained their burden of proving that the imposition of a uniform increase on the existing rate structure was unjust and unreasonable. The Intervenors contend that the existing rate structure is discriminatory. We acknowledge that the record does contain some evidence to support this claim. However, the actual figures in the record which purport to show the disparity in the rates of return among the customer classes are based on cost allocations derived from the one hour coincident peak method, which method, we have observed, the Commission reasonably found to be unreliable. We must agree, therefore, with the Commission that the record does not accurately reflect whatever discrimination in the rate structure which may exist. Without this information, the Commission was quite simply unable to make any change in the existing rate structure within the time limits in which it had to investigate, approve and order into effect the additional revenues which it had found to be just and reasonable. We are not unmindful that the Intervenors here and others have been urging the Commission to implement rate design reform for some time. We are not persuaded, however, that the Commission has ignored the issue of rate allocation or neglected its duty to investigate this area of ratemaking. The record before us demonstrates that the Commission gave much time and attention to the consideration of the utility's rate design proposal and to the issue of rate design in general. Neither are we unmindful of the affirmative duty which both the state and federal legislatures have imposed upon the Public Utilities Commission to investigate and implement reform in the area of electric utility rate design. Since Maine's Electric Rate Reform Act (P.L.1977, c. 521; enacted in Title 35 M.R. S.A. §§ 91 et seq. ) became effective on October 24, 1977, the Public Utilities Commission has been required to make improvements in electric utility rate design in order to relate electric rates more closely to the costs of providing electric service. 35 M.R. S.A. § 92. Section 93 of the Act (as amended by P.L.1979, c. 399) provides in part that: The commission, as it determines appropriate, shall order electric public utilities to submit specific rate design proposals and related programs for implementing energy conservation techniques and innovations, either in conjunction with or independently of any rate-making proceeding pending before the commission. Such proposals shall, as the commission determines, be designed to encourage energy conservation, minimize the need for new electrical generating capacity, and minimize costs of electricity to consumers, and shall include, but not be limited to, proposals which provide for the development and implementation of: ..... 2. Marginal costs of service. Rates which reflect marginal costs of services at different voltages, times of day or seasons of the year and including long run marginal costs associated with the construction of new electric generating facilities;. . . Section 94 (as amended by P.L.1979, chapters 399 and 541) provides further that: The Public Utilities Commission shall mandate, after notice and hearing on the proposed schedule, a scheduled phasing-in of the improvements in electric utility rate design and related regulatory programs approved under section 93 and is authorized to order utilities to develop and implement electric utility rate design improvements approved by the commission on temporary, pilot and experimental basis, affecting either a portion or all of any class of consumers of any utility as the commission may determine is appropriate to carry out the purposes of this Act, and order other energy conservation techniques, programs and innovations relating to electric public utility service that, in the commission's judgment, are practicable, just and reasonably related to fulfilling the purposes of this chapter. In ordering any rate design improvements, the commission shall consider and assure the revenue requirements of the utility. On its own initiative or during a rate proceeding, and to the extent that is feasible, the commission shall consider and adopt the federal rate-making standards established in the United States Public Utility Regulatory Policies Act of 1978, Public Law 95-617 [16 U.S.C.A. § 2601 et seq. ] If, and to the extent that, the commission should decide not to adopt any of the federal standards referred to in this section, it shall set forth fully and adequately the facts and the rationale supporting the rejection of the standards. The federal act mentioned in section 94 is generally referred to as PURPA. One of the stated purposes of PURPA is to encourage equitable rates to electric customers. 16 U.S.C.A. § 2611(3). Section 2621(d) of PURPA provides a comprehensive body of ratemaking standards embodying the most recent scientific developments in electric ratemaking, as guides for State regulatory authorities. 16 U.S.C.A. § 2621(d). Section 2621(a) provides that [e]ach State regulatory authority . . . shall consider each standard established by subsection (d) of this section and make a determination concerning whether or not it is appropriate to implement such standard to carry out the purposes of this chapter. Each State regulatory authority must commence consideration of the standards, or set a hearing date for such commencement not later than November 9, 1980; and the final determination on the appropriateness of the standards must be completed by November 9, 1981. We fully recognize that the customers of this utility may feel frustrated by the long and laborious process of affecting reform in the area of electric utility rate design. We must, however, give the Commission full opportunity to investigate and implement standards which it finds appropriate in this highly complex area. Contrary to the Intervenors' contention that this Court's reluctance to interfere with the Commission's ratemaking duties has lulled the Commission into neglecting the area of rate design, the record before us demonstrates that the Commission is fully aware of the need for improvement in electric utility rate design and appears to have resolved to make these improvements as soon as possible. As the Commissioner who dissented from the Commission's rejection of the utility's rate design proposal, stated, [t]he Commission [has already] devoted long and sometimes arduous hours in public session on rate design, issue by issue. In re Central Maine Power, supra, 26 P.U.R. 4th at 438. Furthermore, in its final Supplemental Order No. 4, the Commission stated, We do not, however, take lightly the requests for hearing on the allocation issue raised by St. Regis, Keyes and Scott. Therefore, we will keep Docket F.C. 2332 open and will plan to hold hearings as soon as the Commission Staff can prepare its affirmative case on the allocation issue. The Commission has applied for funding under the Federal Public Utility Regulatory Policies Act of 1978 to investigate the cost of service and electrical rate design issues. We intend to initiate these further hearings as soon as possible and our sincere hope is that this issue will receive attention during this forthcoming fall. We, in turn, do not take lightly the Commission's promise to initiate this reform as soon as possible. Under the circumstances of this case, however, we conclude that the Commission acted in conformity with the duties imposed upon it by sections 69 and 294, when, without delaying for further investigation into rate design, the Commission ordered the allocation of the revenue increase to be effected on a uniform percentage basis to all customer classes, and thereby maintained within reasonable limits for the time being, the existing rate structure. The entry is: Each Section 303 appeal denied. The August 22, 1979, Order of the Commission affirmed. All concurring.