Court Opinion

ID: 9738663
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:00:04.296035+00
Date Added: 2024-06-11T07:24:07.755685
License: Public Domain

DUNN, Justice
(concurring in part, dissenting in part).
First of all, I would concur generally in the standard of review used in the majority opinion. Under this standard, the majority upholds the PUC as to disallowance of CWIP, determination of AFUDC, determination of ad valorem taxes on CWIP, and deduction of negative working capital. Un*472der this same standard, this court should affirm the PUC and the trial court as to determination of power supply costs, and the disallowances of increased payroll and pension expenses. As to both of these issues, the PUC was faced with competent, but conflicting evidence and conflicting expert opinions, and under the standard set up, was justified in reaching its decision on each of these issues. I do not feel that our standard of review permits this court to “pick and choose” between determinations made by the PUC on the basis of competent evidence.
As to power supply costs, the Commission’s findings were based on the presentation made by SDEC. It rejected both the .Staff recommendation as well as the recommendation of NWPS. The SDEC witness testified that his figures and calculations regarding power supply costs were based upon information contained in what is referred to as the Johnson Letter. The Johnson Letter was a letter written by the superintendent of the Big Stone Plant to Montana-Dakota Utilities, one of the owners of the plant, prior to the time that the plant was operating. In the letter, he estimates the plant’s future power output in order to ascertain operating and maintenance costs. The output estimate is based upon the assumption that the plant was to operate for the full year in 1975 at an unrestricted load. Based on this type of operation, the annual generation at the plant was expected to be 3,202,800 MWHs. The SDEC witness went on to compute NWPS’s ownership share of the generation and broke down that share to the amount of excess energy to be sold to other electric utilities. This amount of excess energy was then multiplied by eleven mills per KWH to determine the revenue amount to be rolled into NWPS’s operating income figures. This price was purportedly the price reflecting the average price to MAPP pool members at which NWPS was selling surplus power during 1975.
The basic attack on the Commission’s adoption of the SDEC method of calculating power supply costs is that the Johnson Letter power output assumptions are totally unsubstantiated in facts. NWPS offered the testimony of the vice-president of production of Ottertail Power Company regarding actual operating experience of the plant. The evidence revealed numerous unexpected difficulties in the operation of the plant which were neither normal nor representative.
Whether there was evidence to uphold the PUC finding on this issue would depend on the relevance and probative value of the Johnson Letter. The utility as well as staff would follow the established custom and usage of considering only the evidence produced by the utilities for a rate increase, and the testimony of experts in the field interpreting and giving their informed opinion on this evidence.
The Johnson Letter was apparently a routine report made by the utility in its ordinary course of business estimating the future power output for an unrestricted load for the year 1975 in order to ascertain operating and maintenance costs. It was not submitted in connection with any rate hearing. Yet from this repórt evidence can be gleaned that is directly related to the operation of the plant for an unrestricted load during the test period. Based upon the assumption that the power output was for a full year in 1975 at an unrestricted load, the annual generation of the plant was estimated at 3,202,800 MWHs.
I find no logical reason for foreclosing consideration of the Johnson Letter because it was not submitted in connection with a rate increase. The evidence is relevant and probative on the output of the plant during normal operation.
Ordinarily, great deference should be given to staff recommendations, with their admitted expertise, but they too are inclined to discount any information received from a collateral source. Their expertise is in dealing with the information “submitted for a rate increase” and the expert testimony concerning that evidence.
In my opinion, it was not only proper for the PUC to consider this Johnson report in this decision, it was also justified in finding *473this evidence which came in a routine report more credible than the volumes of testimony and documents submitted by the utility to justify a rate increase.
This leaves the real argument of whether the actual operating experience of the plant should be utilized as opposed to the estimated output at unrestricted load capacity. The estimation was based upon a reasonable and proper determination of the normal and representative operation of the plant, whereas the actual operating experience during the first year was representative of abnormal conditions involving difficulties in operation and plant shutdowns. There was no evidence to show that NWPS was unable to attain the normal level of generation. The actual level of generation was lower than the estimate due to operating problems and nothing else. The adjustment to operating income should represent normal operating conditions of the plant and no abnormal conditions. It was not unreasonable for the PUC to conclude that rates cannot be based upon abnormalities which are neither indicative nor representative of normal operating conditions. Although there is conflicting evidence as to output, it would appear that there is substantial evidence from the Johnson Letter to support the finding of the Commission as to power supply costs.
The Commission concluded that increased payroll and pension expenses were excluded from cost of service because the Commission found that the increased salary expense resulted in increased productivity. Such an exclusion is allowable where it is shown to be offset by increased productivity. N. W. Pub. Serv. v. Cities of Chamberlain, Etc., 265 N.W.2d 867 (S.D.1978).
The evidence shows that the per-unit cost of wages and salaries of producing power increased .36 mills per KWH over a nine-year period. On the basis of this increase, the cost of labor did not increase despite increased wages and related expenses. The conclusion follows that increased productivity has offset increases in payroll and related expenses. A staff witness testified that according to his study based on the years 1965 through 1974 the rate of energy sold increased 5.60% annually while the rate of wage and salary increased 0.73% annually. The Commission further noted that part of the adjustment that NWPS wanted to make to test-year wages and pension costs was actually incurred beyond the test period. The Commission found that it was improper to increase test-year costs on the basis of non-test-year increases in costs without at the same time taking into account the revenue side of the equation, i. e., sales and revenue might have gone up just as costs went up. The Commission found that the test period would be improperly distorted without such a matching up of costs and revenues. There would appear to be sufficient evidence to support the Commission’s finding. Here again, the Commission was forced to decide between conflicting experts and such a decision should not be disturbed.
I am hereby authorized to state that Justice Henderson joins in this concurrence in part and dissent in part.