Court Opinion

ID: 8049707
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:10:36.941175+00
Date Added: 2024-06-11T16:37:39.120870
License: Public Domain

King, C.J.,
dissenting in Part I: RSA 369:1, :4, requiring PUC approval for the issuance of securities by regulated utilities, have been in force since 1911. The purpose of the statute is clearly set forth in Petition of the New Hampshire Gas & Electric Co., 88 N.H. 50, 184 A. 602 (1936), where this court stated:
“The primary concern of the commission in ascertaining the public interest for purposes of capitalization is the protection of the consuming public. An undercapitalization desired by the utility will probably not adversely affect the public interest in the usual case. But if it appears, upon all the evidence, that the capitalization sought is so high that the utility, because of inability to earn operating costs, depreciation and other charges, will not be able to give its consumers at reasonable rates the service to which they are entitled, then the primary public interest may be found to be affected injuriously.”
Id. at 57, 184 A. at 607 (emphasis added). Therefore, the court held that, “[t]here is no question that the object of the statute is to avoid *724overcapitalization contrary to the public interest.” Id. at 55, 184 A. at 605.
In order to determine whether the overcapitalization was detrimental to the public, the court added:
“A prime test is not to permit the capital issues to exceed, at least so much as to affect the public interest materially, the fair cost of the property reasonably requisite for present and future use, plus necessary working capital and any other authorized requirements.”
Id. at 55, 184 A. at 605.
In Appeal of Easton, 125 N.H. 205, 480 A.2d 88 (1984), this court reaffirmed the basic holding of the New Hampshire Gas & Electric case. We “. . . endorsed a searching role for the commission in scrutinizing company submissions . . . .”, pursuant to RSA chapter 369. Appeal of Easton, supra at 211, 480 A.2d at 90. We repeated the language of the Petition of the New Hampshire Gas & Electric Co., 88 N.H. 50, 184 A. 602 (1936), that “‘[a] prime test is not to permit the capital issue to exceed, at least so much as to affect the public interest materially, the fair cost of the property reasonably requisite for present and future use .. . .’’’Appeal of Easton, supra at 211, 480 A.2d at 90. Under RSA chapter 369 and this court’s decisions, financing authorization must be preceded by a judgment concerning its impact on the public interest as determined by examining the effects of the proposed capitalization.
Public Service Company of New Hampshire does not claim that the money borrowed is needed to meet present needs. Further, it proposes to invest the pre-financed proceeds in order to obtain earnings which will be less than the cost of the borrowing. The majority of the PUC defends the authorization by asserting that the financing is necessary to restore Public Service Company of New Hampshire’s financial liquidity. The majority found that the resolution of the liquidity crisis through this unprecedented indebtedness was in the public interest. This conclusion was not evidentially supported either by qualified experts, or by reliable statistical data.
The majority of the PUC, through the testimony of the utility’s two witnesses, found that the Public Service Company of New Hampshire financing, totalling 425 million dollars, was “in the public good”. Considering the terms, conditions and amount of the proposed financing, the commission found that the public good was served because there was a need to restore the liquidity of the utility in order to protect the investment in Seabrook.
The long-range implications of authorizing a borrowing of up to 425 million dollars by Public Service Company of New Hampshire *725at an annual cost of more than 21% (including brokerage fees), where the amount to be borrowed almost equals the 1984 rate base of 455 million dollars, are staggering. This borrowing is more than four times the amount of the largest financing in the history of Public Service Company of New Hampshire. Nevertheless, the commission held that its initial inquiry would review this financing solely in light of its short-term capital effects on the company, without regard to the ultimate demands that such a financing would make on the company’s customers. The amount of revenue necessary to support this financing was not determined. Such a limited inquiry prior to authorization is contrary to the purpose of RSA chapter 369.
The commission decided to defer the consideration of long-term issues of financial feasibility, capital structure and rate effect, to its pending docket DF 84-200. Admittedly, this PUC financing authorization in itself creates no immediate impact on rates; however, rates will be affected when the capitalization represented by this financing is actually included in the company’s capital structure. Inclusion of this capitalization will most likely occur in a subsequent rate case.
The issues of financing Seabrook should have been considered in this case and not deferred to another docket, DF 84-200, to be heard later. As important as the survival of the utility may be, the effect of the financing on the ratepayers is equally important. The protection of the ratepayers is the basis for the requirement of an inquiry into the public interest prior to financing authorization, pursuant to RSA 369:1, :4.
Lack of concern for the ratepayers was expressed by one of the two witnesses who testified for the utility in support of the need for the 425 million dollar financing, when he stated that he was not testifying as to “what the effects of the financing in any way will be on rates for the people of New Hampshire.” Such effects should be considered at this time by the commission.
In New England Telephone & Telegraph Co. v. State, 104 N.H. 229, 183 A.2d 237 (1962), this court held:
“In fixing such rate of return the cost of capital is an important factor to be determined and considered by the Commission in ‘the exercise of a fair and enlightened judgment, having regard to all relevant facts’ .... [In addition, the interest] of the investor [is] to be considered by the Commission together with the interest of the consumer in arriving at just and reasonable rates.”
Id. at 234, 236, 183 A.2d at 241, 243 (citing Chicopee Mfg. Co. v. Company, 98 N.H. 5, 11 (1953) and Power Comm’n v. Hope Gas Co., *726320 U.S. 591, 602 (1944)). A failure to consider these factors in authorizing a financing, even initially, can only be considered error in light of the purpose of RSA chapter 369 and this court’s decisions. Given the magnitude of this financing, the gravity and immensity of the PUC’s error is apparent.
This court should remand this case to the commission for findings as to how the financing proposed by the utility is consistent with the public good. RSA 369:1.