Court Opinion

ID: 9790983
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:02:32.806923+00
Date Added: 2024-06-11T07:35:41.884545
License: Public Domain

ROSE, Justice,
dissenting.
The crux of this appeal concerns the degree of scrutiny which the Public Service Commission of Wyoming (PSC) must exercise over a utility’s request to increase its retail rates in order to pass through to consumers a federally approved increase in the cost of wholesale electricity. The majority hold that the PSC must accept a pass-through rate increase as just and reasonable since federal law preempts the state regulatory agency from reviewing the reasonableness of the underlying wholesale rate approved by the Federal Energy Regulatory Commission (FERC). This holding depends upon the proposition that FERC approval of the wholesale supplier’s rate automatically confers reasonableness upon the local utility’s decision to pay that rate and obtain reimbursement from its customers. In my judgment, the majority decision, which permits the PSC to assume the reasonableness of a pass-through rate increase, conflicts with our statutory requirement that any rate increase — pass-through or otherwise — be proven just and reasonable before approval by the PSC.
Under § 37-2-120, W.S.1977, the PSC is required to conduct a public hearing prior to any change in rates. Only “just and reasonable” rates may be approved, § 37-3-101, W.S.1977, 1984 Cum.Supp., and the utility bears the burden of establishing the propriety of its proposed rate increase:
*602“(a) At any hearing as provided in this act involving an increase in rates or charges sought by a public utility, the burden of proof to show that the increased rate or charge is just and reasonable shall be upon the utility.” Section 37-3-106(a), W.S.1977.
We examined these statutory provisions in McCulloch Gas Transmission Company v. Public Service Commission of Wyoming, Wyo., 627 P.2d 173 (1981), and concluded that a natural gas utility’s actual payment for fuel was not enough to entitle it to pass the cost on to its consumers. Rather, the utility “had the additional burden of establishing [before the PSC] that the expenditure was a just and reasonable cost of purchasing gas.” 627 P.2d at 177. Similarly, in the case at bar the PSC had a statutory obligation to ascertain whether the applicant, Lower Valley Power & Light Company (Lower Valley), acted reasonably in paying the increased rate for wholesale electricity, in light of all of the available management alternatives.
The Commonwealth Court of Pennsylvania recently reviewed a factual situation similar to the instant case in Pike County Light and Power Company — Electric Division v. Pennsylvania Public Utility Commission, 77 Pa.Cmwlth. 265, 465 A.2d 735 (1983). In that case, Pike County Light and Power sought a retail rate increase to cover a wholesale rate increase imposed by its federally regulated supplier. The Pennsylvania Public Utility Commission denied the increase. Pike County Light and Power argued that the commission lacked authority to deny the requested retail rate increase since, under federal law, FERC possessed exclusive jurisdiction to set the underlying wholesale interstate rate. In rejecting that argument, the Pennsylvania court reasoned that FERC’s examination of the data of the interstate supplier did not include consideration of the local utility’s cost-of-service data or the availability of alternative sources of wholesale energy. These latter concerns fell within the exclusive jurisdiction of the state commission. Since the spheres of control of the two regulatory agencies did not overlap, the state agency properly reviewed the reasonableness of Pike County Light and Power’s claimed costs. The reasoning of the Pennsylvania court bears repeating in full:
“In carrying out its regulatory function, the FERC examines the cost of service data of Orange & Rockland [the wholesale supplier] to determine that its wholesale rates provide a fair return to the utility’s stockholders without being unfair to Orange & Rockland’s purchasers. The FERC does not analyze Pike’s cost of service data or purchased power alternatives in making its determination. The FERC focuses on Orange & Rockland to determine whether it is just and reasonable for that company to charge a particular rate, but makes no determination of whether it is just and reasonable for Pike to incur such a rate as an expense. The PUC, on the other hand, has no jurisdiction to analyze Orange & Rockland’s cost of service data and makes no determination as to the reasonableness for Orange & Rockland to charge its rates. The PUC focuses on Pike and its cost of service data to determine whether it is reasonable for Pike to incur such costs in light of available alternatives. So while the FERC determines whether it is against the public interest for Orange & Rockland to charge a particular rate in light of its cost, the PUC determines whether it is against the public interest for Pike to pay a particular price in light of its alternatives. The regulatory functions of the FERC and the PUC thus do not overlap, and there is nothing in the federal legislation which preempts the PUC’s authority to determine the reasonableness of a utility company’s claimed expenses. In fact, we read the Federal Power Act to expressly preserve that important state authority.” 1 (Emphasis omitted.) 465 A.2d at 738.
*603In similar fashion, PERC’s approval of wholesale electricity rates in the present case included no determination that Lower Valley acted in the public interest in paying such rates in light of available alternatives. Unlike the Pennsylvania court, however, a majority of this court conclude that the state agency also lacks responsibility for reviewing the reasonableness of Lower Valley’s pass-through rate increase. Accordingly, consumers in this state must pay for their electricity at a rate which has not been scrutinized by any regulatory agency for reasonableness in light of the utility’s particular circumstances.
The majority rely on Northern States Power Company v. Hagen, N.D., 314 N.W.2d 32 (1981), in holding that the PSC cannot inquire into the reasonableness of a utility’s retail rate increase which stems from a federally approved wholesale rate hike. In that case, however, the state regulatory commission considered and determined the propriety of a utility’s expense for wholesale electricity, which expense the FERC had previously allowed incident to its jurisdiction over the applicant/utility. That is, the state agency in Northern States Power Company attempted to rule on the identical question previously decided by the federal authority. Given that situation, the Supreme Court of North Dakota properly ruled that the appropriate place to determine the reasonableness and prudence of a particular expense as it affects wholesale charges is in the proceeding before the FERC. 314 N.W.2d at 38. Conversely, in the case at bar, no regulatory agency has ever reviewed the reasonableness of Lower Valley’s expenditures for wholesale energy in light of alternative sources. Such a determination by the PSC would not duplicate the efforts of the FERC.
The majority say that the availability to Lower Valley of a more advantageous source of energy must be determined in connection with a full rate hearing, not a pass-through case. However, as noted above, our regulatory statutes do not exempt from review pass-through rate increases. Rather, any increased charge must be proven just and reasonable at a public hearing. Sections 37-2-120, 37-3-101, and 37-3-106(a), supra.
The PSC functions in place of the forces of competition to protect the consumer from unreasonable and unjust charges, whether they arise as a result of pass-through increases or other factors. As we said in McCulloch Gas Transmission Company v. Public Service Commission of Wyoming, supra,
“ * * ⅜ what is just and reasonable is to be decided on a case-by-case basis. The public interest is to be given paramount consideration; desires of a utility are secondary. Big Horn Rural Electric Co. v. Pacific Power & Light Co., Wyo.1964, 397 P.2d 455. The purpose of the PSC’s authority is to protect the public from utilities affected with a public interest.” 627 P.2d at 179.
I conclude that PSC’s present summary procedure for reviewing a pass-through rate increase violates Wyoming’s regulatory scheme, with the result that electricity customers fail to receive that protection, authorized by the legislature, which mini*604mizes the possibility of unjust and unreasonable rates.
I would have reversed.

. The Federal Power Act provides in pertinent part:
"(a) It is declared that the business of transmitting and selling electric energy for ultimate distribution to the public is affected *603with a public interest, and that Federal regulation of * * * that part of such business which consists of the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce is necessary in the public interest, such Federal regulation, however, to extend only to those matters which are not subject to regulation by the States.
"(b) The provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but shall not apply to any other sale of elec-trie energy * * *. The Commission shall have jurisdiction over all facilities for such transmission or sale of electric energy, but shall not have jurisdiction, except as specifically provided in this subchapter and sub-chapter III of this chapter, over facilities used for the generation of electric energy or over facilities used in local distribution or only for the transmission of electric energy in intrastate commerce, or over facilities for the transmission of electric energy consumed wholly by the transmitter.” 16 U.S.C. § 824(a) and (b).