Court Opinion

ID: 8482854
Source: CourtListenerOpinion
Date Created: 2022-11-10 15:01:47.426393+00
Date Added: 2024-06-11T16:49:42.183165
License: Public Domain

Notice: This opinion is subject to formal revision before publication in the Atlantic
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             DISTRICT OF COLUMBIA COURT OF APPEALS

                          Nos. 21-AA-0684, 21-AA-0869

 OFFICE OF THE PEOPLE’S COUNSEL FOR THE DISTRICT OF COLUMBIA, PETITIONER,

                                         v.

                 D.C. PUBLIC SERVICE COMMISSION, RESPONDENT,

                                        and

               POTOMAC ELECTRIC POWER COMPANY, INTERVENOR.

                               On Petition for Review
               of a Decision of the D.C. Public Service Commission
                              (Formal Case No. 1156)

(Argued September 15, 2022                            Decided November 10, 2022)

     Scott H. Strauss, with whom Sandra Mattavous-Frye, Karen R. Sistrunk,
Laurence C. Daniels, and Amanda C. Drennen were on the brief, for petitioner.

      Kimberly Lincoln-Stewart, with whom Christopher G. Lipscombe, Angela L.
Lee, Richard S. Herskovitz, Emil Hirsch, Emily Green, Frederick A. Douglas, Curtis
A. Boykin, and Nausheen Gaznabi were on the brief, for respondent.

       Nicholas S. Penn, with whom Anne Bancroft, Kimberly A. Curry, Andrea H.
Harper, Dennis P. Jamouneau, Taylor W. Beckham, and Sherry F. Bellamy were on
the brief, for intervenor.

      Before EASTERLY, MCLEESE, and HOWARD, Associate Judges.
                                            2

      EASTERLY, Associate Judge: The Office of the People’s Counsel for the

District of Columbia (“OPC”) brings this challenge to two orders of the D.C. Public

Service Commission (“the Commission”) in Formal Case No. 1156, in which the

Commission approved a multiyear rate plan for the Potomac Electric Power

Company (“Pepco”)’s electricity distribution services from 2020 to 2022.

Specifically, OPC argues that the Commission should not have permitted Pepco to

recover costs from its distribution customers that it incurred in conducting a remedial

investigation and feasibility study regarding possible environmental damage at or

from its facilities at 3400 Benning Road NE, Washington, D.C. (“the Benning Road

site”). OPC also contests the inclusion of two energy efficiency rebate and loan

programs targeting small businesses in Pepco’s rate plan, which would permit Pepco

to recover the costs of those programs from its customers in a future rate case.

      We vacate the Commission’s orders as to both issues and remand for further

proceedings consistent with this opinion.
                                           3

 I.    OPC’s Challenge to Pepco’s Recovery of Remedial Investigation Costs

                       A.     Facts and Procedural History

      Pepco’s Benning Road site is a 77-acre lot bordered by the Anacostia River

on its western side. The site contains a service center used to support its transmission

and distribution operations. The site also contains a power plant that began operating

in or around 1906, consisting of structures including a generating station, cooling

towers, and storage facilities. The generating station shut down in 2012.

      In 1999, attempting to step back from its then-active energy production

business, Pepco applied to the Commission in Formal Case No. 945 for

authorization to divest its generating assets according to its proposed plan. The D.C.

Council, however, had “concerns”—the exact nature of which is not clear from the

record—about the proposed sale of two generating stations, including the one at

Benning Road, and thus it requested that the Commission hold the divestiture in

abeyance. In order to move its divestiture application forward, and after engaging

in “comprehensive negotiations,” Pepco agreed to comply with specific conditions

regarding those stations. These conditions were memorialized in Section 1.05 of the

resulting settlement agreement, hereinafter the “FCN 945 Settlement,” which

provided:
                                          4

             Nothing in this Settlement Agreement shall be construed
             as requiring Pepco to include in the sale of the [generating
             a]ssets, the Company’s generating stations located at
             Benning Road and Buzzard Point in the District of
             Columbia; provided, however, that if the Benning Road
             and Buzzard Point generating stations are not included in
             the sale of the [generating a]ssets, the Company shall be
             thereafter barred and estopped from asserting or exercising
             any legal right that it might otherwise have to recover from
             customers located in the District of Columbia any stranded
             costs associated with those generating stations. In
             connection with any Pepco base rate proceeding in the
             District of Columbia instituted after June 30, 2000, the
             Benning Road and Buzzard Point generating stations shall
             not be included in the cost of service for purposes of
             determining the Company’s District of Columbia
             jurisdictional revenue requirement.

The Commission approved this settlement agreement pursuant to its rules and

procedures. See 15 D.C.M.R. § 130.13-.17 (2022).

      Ten years later, the United States Environmental Protection Agency (“EPA”)

released a report detailing environmental toxins found on and around the Benning

Road site. The report concluded that chemical contaminants known as PCBs 1 “have

      1
        “PCBs” refers to polychlorinated biphenyls, a solid waste that persists in the
environment without degrading; if a person consumes fish or other organisms that
have been contaminated with PCBs from their environment, the PCBs can cause “a
variety of adverse health effects, including cancer.” Consent Decree at 2, District of
Columbia v. Potomac Elec. Power Co., No. 1:11-cv-00282-BAH (D.D.C. Aug. 17,
2011) [hereinafter “DOEE Consent Decree”], https://benningservicecenter.com/
library/documents/BenningConsentDecree.pdf; https://perma.cc/WC6U-27WW.
                                         5

been released from the site to the Anacostia River,” tracing one release of PCBs to

“the generating station’s cooling tower basins,” which discharge into the river. It

further concluded that “[t]he only potential uncontained potential source [of PCBs]

identified on the site” was a sludge dewatering area previously used in association

with the cooling towers.

      In response to the report, the District Department of Energy and Environment

(“DOEE”) 2 notified Pepco that it intended to sue the company for abatement of

hazardous conditions resulting from the Benning Road site. To settle the intended

suit, Pepco entered into a consent decree in 2011 with the DOEE, which in part

bound Pepco to conduct a remedial investigation and feasibility study (“RI/FS”) that

would inform any future remedial actions. 3 As of the time of Pepco’s application in

this case, the company’s work on the RI/FS was ongoing.

      In 2018, Pepco entered into a settlement agreement to resolve its 2017 rate

application, Formal Case No. 1150, before the Commission (hereinafter the “FCN

      2
       At the time, the DOEE was known as the District Department of the
Environment.
      3
          DOEE Consent Decree at 6.
                                          6

1150 Settlement”).     OPC was also a party to the settlement.               Pepco had

unsuccessfully sought to place its RI/FS costs in a “regulatory asset” in previous rate

cases, but finally secured it in this settlement. 4 In relevant part, the FCN 1150

Settlement provided:

             The Parties agree that Pepco will receive regulatory asset
             treatment in the total amount of $3.3 million in actual costs
             incurred to conduct a remedial investigation (“RI”) at the
             Benning facility. Pepco will begin to recover the $3.3
             million over a 10-year amortization period, with carrying
             costs based on the Company’s Commission-authorized
             rate of return. This recovery relates only to the RI costs
             that have already been incurred as a result of the [DOEE]
             Consent Decree . . . and does not relate to, or have any
             precedential effect on, the recovery of additional RI costs
             incurred as a result of the [DOEE] Consent Decree. . . .
             Notwithstanding the foregoing provision, the Parties agree
             that all Parties retain the right to challenge in future rate
             cases Pepco’s entitlement to any further recovery from
             ratepayers of this $3.3 million regulatory asset.

The Commission approved this settlement pursuant to its rules and procedures. See

15 D.C.M.R. § 130 (2022).

      4
        As the Commission explained at oral argument, a “regulatory asset” is a
“tracking mechanism” that enables examination of which of the company’s costs
were associated with a given item—here, the Benning Road RI/FS. As OPC
explained in its reply brief, expenses recorded in a regulatory asset “are recognized
as deferrals instead of period expenses” and are “deferred for potential future rate
recovery.”
                                           7

      In 2019, Pepco applied to the Commission for authority to establish its

distribution rates for 2020 to 2022 through a multiyear rate plan, initiating Formal

Case No. 1156. A multiyear rate plan is an alternative form of regulation that permits

the utility to avoid the traditional annual rate application process. In its application,

Pepco requested that the Commission approve recovery of a portion of its amortized

RI/FS costs that were included in the regulatory asset established in the FCN 1150

Settlement. Specifically, Pepco asked for permission to include approximately $1.9

million of its actual RI/FS costs incurred through December 31, 2017, in its

calculation of the rates it would charge its distribution customers under the plan. It

also requested similar recovery of its actual RI/FS costs incurred from January 1,

2018, through June 30, 2019, approximately totaling an additional $3 million.

      The Commission received testimony and briefing from the various parties,

including argument from OPC that Section 1.05 of the FCN 945 Settlement barred

recovery of any RI/FS costs from the Benning Road site.              The Commission

subsequently issued an order approving a modified version of Pepco’s multiyear rate

plan that reflected some concessions to objections raised by OPC and others, but

granted Pepco’s request to include in its rates the $1.9 million in pre-2018 RI/FS

costs. After restating the relevant language from the FCN 1150 Settlement, the

Commission noted that “[a] review of the Company’s request raises concerns about
                                          8

the past uses of the site and how costs for the RI/FS . . . should be allocated among

generation, transmission, and distribution, and ultimately the amount that should be

recovered from District distribution customers.” But the Commission went on to

conclude that it was “persuaded by Pepco that the [RI/FS] costs were prudently

incurred and are recoverable consistent with Commission precedent.” Without

further explanation or any reference to the FCN 945 Settlement, the Commission

stated that it would permit the recovery “as the costs were approved in Formal Case

No. 1150.” It then deferred Pepco’s related request for recovery of RI/FS costs

“incurred after those approved in Formal Case No. 1150” (referring to the post-

December 31, 2017, costs), to be considered in a future rate case “once the Benning

Road environmental costs and future use of the property [are] determined.”

      OPC filed a request for reconsideration of the Commission’s order,

challenging among other decisions the Commission’s approval of the RI/FS cost

recovery from distribution customers. The Commission issued a second order

declining to reconsider its initial order, but stating it would provide “clarification”

of aspects of that order. In this clarifying order, the Commission engaged for the

first time with OPC’s assertion that the FCN 945 Settlement barred recovery of the

RI/FS costs captured in the regulatory asset. It stated that it was “not persuaded by

OPC’s argument concerning the legal effect of [the FCN 945] Settlement
                                             9

Agreement,” which “on its face . . . did not bar recovery of Pepco’s costs for future

environmental remediation, only stranded costs and future operating costs.”

Because in its view the “plain language” of the FCN 945 settlement agreement did

not bar recovery, the Commission reaffirmed that it would allow recovery “because

the costs were approved in Formal Case No. 1150.”

      This petition for review followed. 5

      5
         OPC filed two petitions for review, now consolidated: one of the initial
order, filed after OPC requested reconsideration but before the Commission ruled
on that request, and one of the subsequently issued clarifying order. The
Commission asserts that this court lacks jurisdiction over the first petition because
the initial order was not final at the time of filing, while OPC asserts that the
Commission’s failure to grant or deny reconsideration within 30 days rendered its
order final by statute. See D.C. Code § 34-604(b). The Commission had instead
issued a series of orders “tolling” its time to act on the request.

      We need not decide whether the Commission, by its own orders, had the
power to toll the 30-day deadline under D.C. Code § 34-604(b) to grant or deny
reconsideration of its initial order. Even assuming that OPC’s first petition was
technically premature when filed, we have jurisdiction over both its petition for
review of the Commission’s initial order and its petition for review of the
Commission’s clarifying order because the former was final by the time this case
was submitted for our consideration. See West v. Morris, 711 A.2d 1269, 1271 (D.C.
1998).
                                         10

                                   B.    Analysis

      The Commission did not engage with the possible effects of the FCN 945

Settlement in its initial order, instead stating merely that the “costs were approved”

already in the FCN 1150 Settlement, and it repeated this rationale in its clarifying

order. Before this court, the Commission rightly concedes that the FCN 1150

Settlement did not, as its orders indicated, guarantee full recovery of the costs

allocated to the regulatory asset approved therein and instead permitted OPC to

challenge recovery.     We therefore focus our analysis here on whether the

Commission erred in concluding that the FCN 945 Settlement posed no bar to

recovery of the RI/FS costs because, by its “plain language,” the FCN 945

Settlement agreement applied only to stranded costs and “future operating costs.”

      Before we engage in this analysis, we address our standard of review.

Broadly, our review of the Commission’s orders is limited. We defer to the

Commission’s “findings of fact . . . unless it shall appear that such findings are

unreasonable, arbitrary, or capricious.” Apartment & Off. Bldg. Ass’n of Metro.

Wash. v. Pub. Serv. Comm’n of D.C., 203 A.3d 772, 777 (D.C. 2019) (ellipsis

omitted) (quoting D.C. Code § 34-606). And we will affirm the Commission’s

orders “if there is substantial evidence to support [its] findings and conclusions and
                                        11

the Commission has given reasoned consideration to each of the pertinent factors”

under the circumstances. Id. (brackets and internal quotation marks omitted). In

short, our deference is contingent on the Commission “fully and clearly explain[ing]

what it does and why it does it.” Id. (quoting Potomac Elec. Power Co. v. Pub. Serv.

Comm’n of D.C., 457 A.2d 776, 783-84 (D.C. 1983)); accord Off. of the People’s

Couns. v. Pub. Serv. Comm’n of D.C., 163 A.3d 735, 739 (D.C. 2017) (“To permit

meaningful judicial review, we require the Commission to explain its actions fully

and clearly.” (brackets omitted)).

      Focusing more particularly on the FCN 945 Settlement—the basis for OPC’s

challenge to the Commission’s initial and clarifying orders—the Commission argues

that we are obligated to defer to its reading of this agreement. The Commission

relies on a decision from the United States Court of Appeals for the D.C. Circuit,

National Fuel Gas Supply Corp. v. Federal Energy Regulatory Commission, which

states that the D.C. Circuit will “give deference to an agency’s reading of a

settlement agreement even where the issue simply involves the proper construction

of language.” 811 F.2d 1563, 1569 (D.C. Cir. 1987). But this decision is not binding
                                           12

on our court, 6 and under our case law, it is far from clear that this court defers to any

degree to the Commission’s interpretations of settlement agreements. See Grand

Hyatt Wash. v. D.C. Dep’t of Emp. Servs., 963 A.2d 142, 146-47 (D.C. 2008)

(“Settlement agreements . . . are contractual in nature and are interpreted under the

same rules as contracts[,]” meaning “the written language will govern the parties’

rights . . . .”); Dyer v. Bilaal, 983 A.2d 349, 355 (D.C. 2009) (“[W]e review de novo

a trial court’s interpretation of a settlement agreement.”); cf. D.C. Off. of Hum. Rts.

v. D.C. Dep’t of Corr., 40 A.3d 917, 923 (D.C. 2012) (noting that our standard

deference to agency interpretation is “based on the agency’s presumed expertise in

construing the statute[s] it administers” (internal quotation marks omitted)). Even

accepting for the sake of argument that deference to agency interpretation were

warranted in this context, it would only be appropriate where there was ambiguous

language and the agency’s interpretation of that language was reasonable. See

MorphoTrust USA, Inc. v. D.C. Cont. Appeals Bd., 115 A.3d 571, 583 (D.C. 2015)

(“In accordance with the Supreme Court’s decision in Chevron, U.S.A., Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), before we afford some

deference to an agency’s interpretation of the statute that it administers at least two

      6
        Although accorded respect, the decisions of the D.C. Circuit are only binding
on this court up to February 1, 1971. M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C.
1971).
                                          13

conditions must be met: (1) the statutory language in question must be ambiguous,

and (2) the agency’s interpretation must be reasonable.” (internal parallel citation

omitted)). We thus turn to the plain language of the settlement to see if we discern

ambiguity in its terms. See D.C. Metro. Police Dep’t v. Pinkard, 801 A.2d 86, 90

(D.C. 2002).

      The FCN 945 Settlement states that in future base rate proceedings “the

Benning Road and Buzzard Point generating stations shall not be included in the cost

of service” to be passed on to its customers. The Commission read this to mean that

“the Benning Road and Buzzard Point generating stations[’ future operating costs]

shall not be included in the cost of service.” But this provision of the settlement

agreement contains no language limiting its application as to time (i.e., costs

incurred in the past, present, or future) or as to types of costs that can be attributed

to the generating station (i.e., only operating costs). The Commission simply read

in language that is not there. At oral argument before this court, the Commission

conceded that the plain language of the FCN 945 Settlement did not support its

determination that the agreement only applied to future operating costs.           The

Commission is bound by the plain language of the agreement that the parties signed

and it approved.
                                        14

      Even so, interpretive questions remain regarding the scope of the application

of the FCN 945 Settlement to the RI/FS costs at the Benning Road site. To the extent

that the Commission is asking this court to conclude in the first instance that no

RI/FS costs are actually attributable to the Benning Road generating station and

thereby to uphold its determination that Pepco could pass on these costs to its

distribution customers, we cannot do so. The exact scope of what costs may be

attributed to the generating station is a complex and fact-intensive inquiry that

cannot be answered on the record before us. For example, the basic question of how

much of the 77-acre parcel of land at Benning Road was used for the generating

station has yet to be addressed. The Commission seemed to acknowledge the

complexity of these questions when it denied for the time being recovery of RI/FS

costs incurred after the FCN 1150 Settlement and expressed “concerns about the

past uses of the site and how costs for the RI/FS . . . should be allocated among

generation, transmission, and distribution, and ultimately the amount that should be

recovered from District distribution customers.”       Now that the Commission

concedes that the FCN 1150 Settlement did not guarantee full recovery of the RI/FS

costs discussed therein, see supra, the same concerns would presumably pertain.

      We therefore vacate the Commission’s order as to its approval of recovery of

the Benning Road RI/FS costs and remand for the Commission to consider whether
                                           15

the FCN 945 Settlement bars recovery of some or all of those costs. On remand, the

Commission must provide a reasoned interpretation of the scope of the agreement

based on substantial evidence and set out why under its interpretation the RI/FS costs

are or are not within the settlement’s reach.

II.    OPC’s Challenge to Inclusion of Energy Efficiency Programs in Pepco’s
                      Rate Plan for Future Recovery

                        A.     Facts and Procedural History

      While Pepco’s application in Formal Case No. 1156 for a multiyear rate plan

including the recovery of RI/FI costs discussed above was still pending, the Covid-

19 pandemic broke out. In response, the Commission requested further testimony

from the parties to FCN 1156 reflecting the impact of the pandemic. Pepco

submitted an “enhanced” plan that featured various revisions and, in pertinent part,

proposed new energy efficiency rebate and loan (“EERL”) programs primarily

targeting its small commercial customers. Pepco asked the Commission to approve

the programs, the $5 million cost of which Pepco could later recover, along with a

return at the associated cost of capital, 7 via a regulatory asset in a future rate case.

      7
       Pepco’s proposed asset treatment included an additional return on the carried
balance of the assets at a rate authorized by the Commission. In other words, if
                                         16

      The Commission’s initial order approved Pepco’s proposed EERL programs,

stating that it was “persuaded [the programs] are reasonable and will provide needed

relief to customers during the Covid-19 pandemic.” In its request for reconsideration

of the initial order, OPC challenged this decision, arguing that Pepco had failed to

comply with a provision of the CleanEnergy DC Omnibus Amendment Act of 2018,

which provides:

             As of October 1, 2019, the electric company . . . , after
             consultation and coordination with the Department of
             Energy and the Environment and the District [Sustainable
             Energy Utility (“SEU”)] and its advisory board, may apply
             to the Commission to offer energy efficiency and demand
             reduction programs in the District that the company can
             demonstrate are not substantially similar to programs
             offered or in development by the SEU, unless the SEU
             supports such programs.

D.C. Code § 8-1774.07(g)(4).

      In its clarifying order, the Commission rejected this argument on two primary

grounds: (1) because “§ 8-1774.07(g)(4) does not contain the words ‘shall’ or

‘must’” and “does not contain any sanctions or consequences for failing to

granted recovery of the asset, Pepco would recover an additional set percentage of
the asset value from its customers on top of the base recovery. That additional profit
is referred to as the cost of capital.
                                           17

coordinate with the SEU,” the statute was “directory” and not mandatory in nature,

and (2) “Pepco made the determination that its program did not fall within the

purview of this statute,” which the Commission deemed “reasonable” because the

“overall intent of these statutory provisions” was to apply to “long-term [energy

efficiency] programs primarily aimed at low-to-moderate-income customers,” not

the short-term commercial programs proposed. 8

      This petition for review followed.

                                   B.      Analysis

      Where, as here, we are confronted with questions of statutory interpretation,

we look first to the plain language of the statute and, if that language is ambiguous,

then and only then do we defer to the Commission’s interpretation if reasonable.

Pinkard, 801 A.2d at 90; MorphoTrust USA, Inc., 115 A.3d at 583. Section

      8
         The Commission further concluded that it saw “no basis to conclude that
Pepco violated the statute” absent a showing by OPC that the EERL program was
duplicative of an SEU initiative, because the “overall intent” of § 8-1774.07 is “to
prevent the duplication of [energy efficiency] and demand reduction programs that
the SEU may be developing.” Finally, the Commission stated it was “reasonable
and consistent with Commission precedent” for Pepco to place the costs of these
programs in a recoverable regulatory asset because the programs were “in the public
interest” and “help[] to address the District’s climate change commitments.”
                                          18

8-1774.07(g)(4) of the D.C. Code provides that, “after consultation and coordination

with” the DOEE and the DC SEU, an energy company like Pepco “may apply to the

Commission to offer energy efficiency and demand reduction programs in the

District.” We conclude that the Commission erred in determining both that this

statute did not apply to the EERL programs included in Pepco’s multiyear rate plan

and, even if it did apply, it did not require predicate steps by Pepco before including

these programs in its application to the Commission.

      We first address what programs fall within the scope of D.C. Code

§ 8-1774.07(g)(4).    By its plain language, the statute applies broadly and

unambiguously to “energy efficiency and demand reduction programs in the

District.” D.C. Code § 8-1774.07(g)(4). This unquestionably describes Pepco’s

proposed programs. The Commission’s determination to the contrary appears to rely

on language in § 8-1774.07(g)(5) suggesting that the Commission must consider

whether an application will primarily benefit low- and moderate-income residential

ratepayers. 9 But this language does not qualify the scope of § 8-1774.07(g)(4).

      9
         D.C. Code § 8-1774.07(g)(5) provides that “[a]n application submitted by
the electric company . . . pursuant to this subsection shall meet [1] the long-term and
annual energy savings metrics, which shall primarily benefit low- and moderate-
income residential ratepayers to the extent possible, [2] quantitative performance
indicators, and [3] cost-effective standards established by the Commission.”
                                         19

Section 8-1774.07(g)(5) discusses what factors the Commission should consider

when evaluating the merits of an application it has already received.            The

consultation-with-the-DOEE-and-SEU provision in § 8-1774.07(g)(4) outlines a

step the company must take before submitting an application.

      Moreover, the Commission’s interpretation of D.C. § 8-1774.07(g)(4) is at

odds with the District’s broader energy goals that underlie the statute and the

administrative structure the District has established to pursue those goals. The

Council for the District of Columbia created the SEU in the Clean and Affordable

Energy Act of 2008, D.C. Act 17-497, 55 D.C. Reg. 9225 (Oct. 22, 2008). The

SEU’s express purpose is “to develop, coordinate, and provide programs for the

purpose of promoting the sustainable use of energy in the District of Columbia.”

D.C. Code § 8-1773.01(19) (emphasis added). Indeed, the legislative history of the

SEU’s establishment reveals that the Council was motivated to create such a utility

because Pepco and the Commission’s collective efforts to coordinate energy

programs without further oversight were “not adequate” and “plainly [did] not

work.” Report on Bill No. 17-492 before the Committee on Public Services and

Consumer Affairs, Council of the District of Columbia, at 8-9, 12-13 (June 2, 2008).

And the District added the specific language in subsection (g) to “clarif[y] that any

energy efficiency or demand reduction program must be created in consultation with
                                          20

the Department of Energy and the Environment and the Sustainable Energy Utility

and its advisory board.” Amendment No. 1 to Bill No. 22-0904, D.C. Council, at 2

(Nov. 27, 2018) (emphasis added). It would be irrational and counterproductive to

carve out short-term programs targeting small business consumers from this

administrative structure when District-wide coordination of “any” energy efficiency

program is the statute’s manifest goal.

      Having determined that the proposed programs fall within the statute’s ambit,

we further conclude that the consultation-with-the-DOEE-and-SEU provision in

§ 8-1774.07(g)(4) is mandatory by its plain language. Contrary to the Commission’s

reasoning in its clarifying order, a statute need not contain the exact words “shall”

or “must” in order to be mandatory. Here, the grammatical construction of the

sentence leaves no room for Pepco to act at its discretion. To say an “electric

company . . . , after consultation and coordination with the Department of Energy

and the Environment and the District SEU and its advisory board, may apply to the

Commission” means that that electric company “may not before such consultation

apply to the Commission.” The Commission’s focus on the lack of express penalty

was also misguided; as OPC correctly pointed out, the denial of any application

submitted without the required consultation and coordination is sufficient

consequence in itself.
                                          21

      In its brief to this court, the Commission takes a new approach and appears to

argue that pursuant to its broad ratemaking authority under D.C. Code

§ 34-1504(d)(1) (“Notwithstanding any other provision of law, the Commission may

regulate the regulated services of the electric company through alternative forms of

regulation” (emphasis added)), it has the power to waive the consultation-with-the-

DOEE-and-SEU requirement. We cannot agree.

      We note at the outset that, because the Commission did not articulate the

ability to grant such waivers as one of its stated grounds for granting Pepco’s request,

we cannot affirm on this basis. Walsh v. D.C. Bd. of Appeals & Rev., 826 A.2d 375,

380 (D.C. 2003) (“An administrative order can only be sustained on the grounds

relied on by the agency, and not on agency counsel’s post hoc rationalizations.”

(cleaned up)). Furthermore, taking this argument at face value would yield absurd

results. 10 Whatever the exact boundaries of the Commission’s authority under

§ 34-1504(d)(1), we need not define them in this case because §§ 8-1774.07(g)(4)

and 34-1504(d)(1) “can be harmonized and deemed to have concurrent operation,”

Stevens v. D.C. Dep’t of Health, 150 A.3d 307, 316 (D.C. 2016) (internal quotation

      10
        As the Commission conceded at oral argument, the Commission could not,
for example, discriminate freely in disregard of the Human Rights Act so long as it
did so while establishing an alternative form of regulation.
                                         22

marks omitted), alleviating any need to curb one for the benefit of the other. Section

8-1774.07(g)(4) imposes a consultation requirement on Pepco prior to its application

to the Commission; once an application has been properly presented to the

Commission, the Commission retains its full regulatory authority over that

application.

      Because Pepco was required by § 8-1774.07(g)(4) to consult with the DOEE

and DC SEU prior to its application but the Commission granted its application in

the absence of any evidence that Pepco complied with this prerequisite, we vacate

the Commission’s order as to its approval of Pepco’s EERL programs. 11

                                 III.   Conclusion

      For the foregoing reasons, we vacate the Commission’s orders in relevant part

and remand for further proceedings consistent with this opinion.

                                                           So ordered.

      11
         We therefore do not reach the parties’ arguments regarding the
Commission’s substantive assessment, see supra note 8, of whether the EERL
programs would be duplicative of other SEU initiatives, or whether the programs
meet the District’s climate change goals and serve the public interest.