Opinion ID: 2355085
Heading Depth: 3
Heading Rank: 2

Heading: Rate case expense

Text: The Commission allowed the Company to recover from its customers in its five divisions rate case expenses incurred by the Company before the Commission in this current case in a total amount of $96,871, to be amortized in part over two years and in part over five years. [8] Thus, the Company's total annual revenue entitlement as found by the Commission included about $20,000 for rate case expense. The Commission based its allowance upon the findings that the Company did not act unreasonably in filing its rate increase request and that the rate case expense, although large, was reasonable in amount in view of the substantial number of parties involved and the myriad of issues, many complex, that were put in litigation. Contrary to the cross-appellants' contentions on appeal, we find no error in those findings. [9] Of course, a public utility may not force rate increases upon its customers solely as a result of expenses incurred in abortive or frivolous rate cases. Stratton Water Co. v. Maine Public Utilities Commission, 397 A.2d 188, 192 (Me.1979) (quoting Re Carolina Water Company, 32 P.U.R.3d 462, 470 (N.C.U.C.1960)). But the Commission rightly did not classify this rate case as abortive or frivolous. The allowance for ratemaking purposes of rate case expenses depends, as does the allowability of any other operating expense, upon whether those expenses were prudently incurred. The prudence of any utility expenditure is tested in regard to both its purpose and its amount. See generally Pennsylvania Public Utilities Commission v. Philadelphia Electric Co., 501 Pa. 153, 460 A.2d 734, 738 (1983) (commission should disallow only expenditures that are imprudently made or are abuses of managerial discretion). [I]t would be proper for a public utility company to be allowed rate case expenses when `the public service company has reasonably and fairly employed outside help in connection with ... (the) case'. Lone Star Gas Co. v. Corporation Commission, 648 P.2d 36, 41 (Okla.1982) (quoting Carey v. Corporation Commission, 168 Okla. 487, 491-92, 33 P.2d 788, 794 (1934) (ellipsis in original)); cf. Washington Gas Light Co. v. Public Service Commission, 450 A.2d 1187, 1240-41 (D.C.App.1982) (costs of defending breach of contract suit should be borne by ratepayers). The Commission acted well within its discretion in finding that the Company's rate filing was not imprudent. But for the Newport/Wilton issue, the Company would have been granted a rate increase. Given the novelty and difficulty of that issue, the Company acted prudently in seeking a rate increase notwithstanding the gain it had received from the Newport and Wilton sales. We also will not interfere with the Commission's conclusion that the sum expended by the Company in prosecuting the rate case was reasonable and prudent in amount; the Commission was in a much better position than we to pass judgment on that question.