Opinion ID: 2331279
Heading Depth: 1
Heading Rank: 2

Heading: PSC's Legislative Authority

Text: Gas Consumers claims, as its primary point, that the PSC did not have the authority from the General Assembly to establish the Policy. It asserts that the PSC's general authority to supervise and regulate public utilities does not include the authority to make public policy regarding low-income assistance or authority to provide funds for such assistance by assessing all ratepayers for the bad-debt expense. Gas Consumers maintains that mandating and implementing such a social program is the responsibility of the legislature and other state agencies. It further contends that the PSC cannot use the natural gas ratepayers as a supplemental source of funds for low-income assistance despite the PSC's good intentions. Gas Consumers also argues that Act 310 of 1981, codified in part at Ark.Code Ann. §§ 23-4-501 and 502 (Repl.2002), which authorizes temporary surcharges, does not authorize the PSC to assess a surcharge against all ratepayers to provide funds for a low-income program like the Policy. The PSC responds that because payments from Policy participants are credited back to all customers through the Purchased Gas Adjustment and Gas Supply Rate mechanisms, the reconnection of Policy participants benefits all ratepayers by reducing the overall level of system bad-debt expense and by recovering contributions to fixed costs that would otherwise be lost if customers remained disconnected. It further maintains that securing the well-being of many Arkansans who would otherwise likely be without heat, hot water, or cooking fuel during the winter months is within the statutory authority granted the PSC. Arkla, AWG, and the Attorney General agree that the Policy was well within the PSC's authority to protect the public's interest with regard to gas utility service. They further assert that the PSC had the authority to provide the gas utilities with the ability to recover arrearages from Policy participants through the Purchased Gas Adjustment and Gas Supply Rate credits. In Ozark Gas Pipeline Corp. v. Arkansas Pub. Serv. Comm'n, 342 Ark. 591, 29 S.W.3d 730 (2000), this court referred to the Public Utility Code for the appropriate standard of review: The General Assembly has provided the applicable standard of review of an APSC order by an appellate court: (3) The finding of the commission as to the facts, if supported by substantial evidence, shall be conclusive. (4) The review shall not be extended further than to determine whether the commission's findings are supported by substantial evidence and whether the commission has regularly pursued its authority, including a determination of whether the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or of the State of Arkansas. Ark.Code Ann. § 23-2-423(c)(3) and (4) (Repl.1997). 342 Ark. at 596-97, 29 S.W.3d at 732-33. Using these legislative standards, we first examine the PSC's status. This court has held that the PSC is a creature of the General Assembly with its power and authority limited to that which the legislature confers upon it. See Arkansas County v. Desha County, 342 Ark. 135, 27 S.W.3d 379 (2000). Where the only issue is one of law which this court must answer, the court does not pass upon the wisdom of the PSC's actions or say whether the PSC has appropriately exercised its discretion. See Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 267 Ark. 550, 593 S.W.2d 434 (1980). In addition, the judicial branch of government defers to the expertise of the PSC. See id. Judicial review is not, however, merely a formality; it is for the courts to decide whether the PSC has abused its discretion in an arbitrary or unwarranted fashion, even though considerable judicial restraint should be exercised in finding such an abuse. See id. At issue in the case at hand is whether the PSC had the legislative authority to establish the Policy. When examining an issue of statutory construction, our cardinal rule is to give effect to the intent of the legislature. See Hapney v. Rheem Mfg. Co., 341 Ark. 548, 26 S.W.3d 771 (2000). Where the language of a statute is clear and unambiguous, this court determines legislative intent from the ordinary meaning of the language used. See Ozark Gas Pipeline Corp. v. Arkansas Pub. Serv. Comm'n, supra . Where the meaning is unclear, this court looks to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropriate means that shed light on the subject. See Montgomery v. Bolton, 349 Ark. 460, 79 S.W.3d 354 (2002). We turn then to the legislative authority granted to the PSC in the Public Utility Code. The General Assembly has established the general jurisdiction and power of the PSC: The commission [defined as the Arkansas Public Service Commission ... with respect to the particular public utilities... over which each commission has jurisdiction] is vested with the power and jurisdiction, and it is made its duty, to supervise and regulate every public utility defined in § 23-1-101 and to do all things, whether specifically designated in this act, that may be necessary or expedient in the exercise of such power and jurisdiction, or in the discharge of its duty. Ark.Code Ann. § 23-2-301 (Repl.2002). See also Ark.Code Ann. § 23-1-101 (Repl. 2002). The specific powers of the PSC are enumerated in a subsequent section of the Code: (a) The commission, upon complaint or upon its own motion and upon reasonable notice and after a hearing, shall have the power to: (1) Find and fix just, reasonable, and sufficient rates to be thereafter observed, enforced, and demanded by any public utility; (2) Determine the reasonable, safe, adequate, and sufficient service to be observed, furnished, enforced, or employed by any public utility and to fix this service by its order, rule, or regulation; (3) Ascertain and fix adequate and reasonable standards, classifications, regulations, practices, and services to be furnished, imposed, observed, and followed by any or all public utilities[.] Ark.Code Ann. § 23-2-304(a)(1-3) (Repl. 2002). [2] In addition, the Code empowers the PSC to make changes to its reasonable rules pertaining to the operation, accounting, service, and rates of public utilities following a hearing and upon notice, both of which occurred here. Ark.Code Ann. § 23-2-305 (Repl.2002). The term rate is broadly defined by the General Assembly to include every compensation, charge, fare, toll, rental, and classification, or any of them, demanded, observed, charged, or collected by any public utility for any service, products, or commodity offered by it as a public utility to the public and means and includes any rules, regulations, practices, or contracts affecting any compensation, charge, fare, toll, rental, or classification[.] Ark.Code Ann. § 23-1-101(10) (Repl.2002). The PSC premises its argument for implementing the Policy on this general ratemaking authority and its power to set standards and regulate utilities. We disagree that this ratemaking authority grants the PSC power to initiate the Policy. Other states have been disinclined to hinge such authority of their regulatory commissions on general ratemaking and regulatory authority. See, e.g., Mountain States Tel. & Tel. Co. v. Public Serv. Comm'n, 754 P.2d 928 (Utah 1988). In Mountain States Tel ., the Utah Supreme Court struck down the pooling of a telephone carrier surcharge as a means of funding a program to make telephone service available to customers on state assistance. In doing so, the court said: While we agree that the public policy supporting the Commission's rules and orders establishing pooling is a valid concern, we find that this pooling procedure cannot be justified as part of the Commission's broad rate-making authority. Although the pooling of surcharges is connected to the supervision of rates as an attempt to maintain lower rates for non-Lifeline customers of independent companies, it is nevertheless an attempt to interrelate the rates of several otherwise unconnected companies, something not contemplated by the statutory language. 754 P.2d at 932. See also Colorado Mun. League v. Public Utils. Comm'n, 197 Colo. 106, 591 P.2d 577 (1979) (commission lacked authority to effect social legislation by ordering that pay phone rates be reduced according to age and indigency classification); Mountain States Legal Found. v. New Mexico State Corp. Comm'n, 101 N.M. 657, 687 P.2d 92 (1984) (commission lacked authority to effect social policy through preferential ratemaking for telephone service for elderly and indigent); Process Gas Consumers Group v. Pennsylvania Pub. Util. Comm'n, 511 Pa. 88, 511 A.2d 1315 (1986) (commission's requirement that excess gas rate revenues be used for residential conservation programs exceeded commission's ratemaking authority). But see Consumer Power Co. v. Assoc. of Bus. Advocating Tariff Equity, 205 Mich.App. 571, 518 N.W.2d 514 (1994) (where power company applied for rate surcharge on all customers to pay energy costs for poor persons, PSC had authority to approve rate surcharge); American Hoechest Corp. v. Dept. of Pub. Utils., 379 Mass. 408, 399 N.E.2d 1 (1980) (where public utility requested a reduced electricity rate for the elderly poor, court held commission's jurisdiction over entire rate structure includes authority to implement reduced-rate electricity service for elderly poor as an experiment, with all customers bearing the cost). In both the American Hoechest Corp . case and the Consumers Power Co. case, it was the public utility that requested the rate reduction. The PSC next maintains that its statutory authority relating to surcharges specifically authorizes programs like the Policy. Again, we disagree. The Public Utility Code contains two statutes that deal with the PSC's authority to implement surcharges without filing a general rate case. Act 310 of 1981, now codified in part at Ark.Code Ann. § 23-4-501 (Repl. 2002), provides: (a) It is recognized that legislative or administrative regulations impose certain legal requirements upon public utilities relating to the protection of the public health, safety, or the environment, and that: (1) In order to comply with such legislative or regulatory requirements, utilities are required to make substantial additional investments or incur additional expenses with respect to existing facilities used and useful in providing service to the utility's customers; and (2) Although such additional investments and expenses are necessary in order to provide service to the utility's customers, such additional investments and expenses are not included in the utility's rates and cannot be recovered in a prompt and timely fashion under existing regulatory procedures. (b) It is intended by the General Assembly that utilities be permitted to recover in a prompt and timely manner all such costs incurred by utilities in order to comply with such legislative or regulatory requirements through an interim surcharge which, if approved, shall be effective until the implementation of new rate schedules in connection with the next general rate filing of the utility wherein such additional investments or expenses can be included in the utility's base rate schedules. However, the costs to be recovered through such an interim surcharge shall not include increases in the cost for employment compensation or benefits as a result of legislative or regulatory action. Ark.Code Ann. § 23-4-501 (Repl.2002) (emphasis added). The second surcharge reference is also provided in Act 310 of 1981: Any public utility as defined in § 23-1-101 may recover all costs and expenses reasonably incurred by such a utility as a direct result of legislative or regulatory requirements relating to the protection of the public health, safety, and the environment by filing with the Arkansas Public Service Commission, no more frequently than once every six (6) months, an interim rate schedule which would impose a separate surcharge in addition to its currently effective rates until the implementation of new rate schedules in connection with the next general rate filing of the utility wherein such additional expenditures can be included in the utility's base rate schedules. Ark.Code Ann. § 23-4-502 (Repl.2002) (emphasis added). Two concerns immediately surface in using these two surcharge statutes as authority for the PSC's Policy program. The first is that the statutes contemplate the utility's request to recover the additional expenses under both § 23-4-501 and § 23-4-502. In the instant case, it was the PSC that developed the Policy, mandated it, and implemented it. The Policy and its surcharge on all ratepayers were not the result of a utility request for a surcharge, as the statutes contemplate. Secondly, § 23-4-501 speaks in terms of additional expenses with respect to existing facilities and recovery through an interim surcharge of such costs. The Policy does not fall within the ken of expenses associated with an existing facility. Nor does the Policy fall into the category of expenses reasonably incurred by such a utility as a direct result of legislative or regulatory requirements relating to the protection of the public health, safety, and the environment under § 23-4-502. According to the PSC and other appellees, this language in § 23-4-502 gives the PSC carte blanche authority to adopt and implement any public health or safety program of its choosing and assess the ratepayers for the cost. We do not read the statute that broadly. In fact, the PSC's authority is narrowly defined in the two surcharge statutes. An asbestos removal case, Arkansas Oklahoma Gas Corp. v. Arkansas Public Service Comm'n, 301 Ark. 259, 783 S.W.2d 350 (1990), is a prime example of a proper surcharge and appears to be the only case decided by this court under § 23-4-502. Asbestos removal was mandated by a federal regulation and related to existing facilities. The facts of Arkansas Oklahoma Gas Corp . clearly fit within the explicit parameters of § 23-4-502, and we held that the ensuing surcharge was appropriate. The whole focus of Act 310 of 1981 is to authorize surcharge authority in the PSC for increased costs relating to existing facilities caused by compliance with legislative or regulatory requirements. This is not only spelled out by the legislative intent of Act 310 codified in § 23-4-501, but also appears in the Act's Emergency Clause, which reads in part: Existing statutes of this State do not provide for a procedure to permit immediate recovery of additional expenditures with respect to existing utility facilities incurred by public utilities as a result of legislative or regulatory requirements without the filing of a general rate case with the Public Service Commission. These circumstances result in a gross inequity in that utilities must make expenditures to provide facilities which are clearly in the public interest which costs cannot be recovered in a prompt and timely manner by the utility. Therefore, an emergency is declared to exist, and this Act being necessary for the preservation of the public peace, health, and safety, shall take effect and be in force from and after the date of its passage and approval. Again, this establishes the legislative intent for both § 23-4-501 and § 23-4-502. Aside from the fact that the utilities did not seek a surcharge, the Policy is not the result of a legislative or regulatory requirement relating to an existing facility. Accordingly, the appellees' reliance on these sections is misplaced. Bolstering our interpretation that existing statutes do not give the PSC authority to mandate the Policy is the fact that the PSC has previously recognized it has no authority to provide low-income assistance by virtue of its Order No. 17 in Docket No. 97-451-U. Order 17 discusses whether a utility should provide assistance to economically-disadvantaged persons in paying their bills or in reducing the bills through weatherization measures in the PSC's Draft Report on Restructuring the Arkansas Electric Utility Industry. See Order No. 17, Docket No. 97-451-U, Arkansas Pub. Serv. Comm'n. That situation is somewhat different from the situation at hand in that here, each participant in the Policy is fully responsible for any past-due bill, as well as the reconnection service fee. Moreover, no discount was given to Policy participants, and all persons, Policy participants and non-participants, were to pay the same amount for any gas consumed. Regardless of these distinctions, in 1997, the PSC clearly recognized by virtue of Order No. 17 that its authority was limited as far as establishing a low-income assistance program. See Order No. 17, supra (Nevertheless, whether utilities should provide [such assistance] or whether they should come from direct tax revenues is a question of state and federal legislation.). We are further influenced by the fact that with Act 204 of 2003, the General Assembly amended § 23-2-304, which lists the PSC's powers, specifically investing the PSC with new authority to assure that retail customers have electricity, including protection against service disconnections in bad weather. No comparable power is given to the PSC regarding natural gas. It is important to note that rather than clarifying an existing power, the General Assembly added a new power to Ark.Code Ann. § 23-2-304. The General Assembly is presumed to have intended a change in the law where it has been made by a substantive statutory amendment rather than a mere clarification of existing law. See 1A Norman J. Singer, Sutherland Statutory Construction § 22:30 (6th ed.2002). The addition of a new power in the PSC is clearly a change in the law. We view this new act by the General Assembly as recognition of the fact that no such power previously was vested in the PSC for the provision of electricity in inclement weather, and, of course, no such power presently exists relating to natural gas. We further note that several states provide for low-income assistance programs by statute, including California's statute which expressly provides for a surcharge on natural gas: (a) On and after January 1, 2001, there shall be imposed a surcharge on all natural gas consumed in this state. The commission shall establish a surcharge to fund low-income assistance programs required by Sections 739.1, 739.2, and 2790 and cost-effective energy efficiency and conservation activities and public interest research and development authorized by Section 740 and not adequately provided by the competitive and regulated markets. Upon implementation of this article, funding for those programs shall be removed from the rates of gas utilities. Cal. Pub. Util.Code § 890(a) (2002). See also Idaho Code § 56-904 (2002) (surcharge for telephone assistance program in Idaho); N.M. Stat. Ann. § 63-9H-6 (Repl.1999) (surcharge for low-income telephone assistance in New Mexico); R.I. Gen. Laws § 39-1-27.5 (Reenact.1997) (surcharge on ratepayers to assist electric utilities in earning six percent return on common equity not assessed against low-income customers in Rhode Island); Tex. Util.Code Ann. § 56.155 (Supp.2003) (surcharge for telecommunications assistance program in Texas). Comparable surcharge authority to implement the Policy is lacking in Arkansas. We hold that the PSC did not have the statutory authority to develop and mandate the Policy.