Court Opinion

ID: 9567691
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:56:46.168678+00
Date Added: 2024-06-11T09:53:13.362195
License: Public Domain

DISSENT
ANDERSON, G. BARRY, Justice
(dissenting).
I respectfully dissent, because the Commission has failed to explain why it has departed from prior norms and has not set forth a “reasoned analysis” for the departure and its actions with regard to the matter before us are therefore arbitrary and capricious. See Sierra Club v. Clark, 755 F.2d 608, 619 (8th Cir.1985) (citation omitted) (internal quotation marks omitted).
Preliminarily, but fundamentally, it is important to note that the language governing the authority of the Commission to grant a variance is mandatory rather than permissive. The rule at issue provides that the Commission “shall grant a variance” when it determines that “enforcement of the rule would impose an excessive burden on the applicant,” and that “granting the variance would not adversely affect the public interest,” and that “granting the variance would not conflict with the standards imposed by the law.” Minn. R. 7829.3200, subp. 1 (2007). Here, unlike, for example, a zoning variance, Commission discretion is limited by the language of the rule, and if the criteria are met, the variance “shall” be granted. Cf. Minn. Stat. § 462.358, subd. 6 (2008) (stating that variances “may only” be granted if criteria are met).
Thus, the first step in order to determine whether it was an arbitrary and capricious action by the Commission to deny relief to CenterPoint, is to consider whether the Commission properly analyzed Cen-terPoint’s claim that it was suffering under an “excessive burden” absent a variance.
When the Commission first considered the excessive burden issue, it used, in its order, the figure of $2.4 million in Center-Point’s calculation errors, an amount almost ten times less than the actual error of $21 million. Not only is the Commission’s order wrong as to the amount of the error, the Commission at least partially relied upon the erroneous figure, noting that $2.4 million is approximately 1.6% of CenterPoint’s reported net income over that time period. When CenterPoint petitioned for a rehearing, relying in part on this error, the Commission declined to reconsider its decision but instead simply amended the original order to include the correct amount of unrecovered costs.
But this is more than a citation mistake.
The decision to deny CenterPoint’s variance request does not square with Commission precedent. As the majority opinion recognizes, the only two reported variance cases based on similar facts reveal a Commission willing to grant variances for unrecovered costs as excessive burdens in the amount of $1 million and $164,781, respectively. In re Review of the 1991 Automatic Adjustment of *126Charges for All Gas & Elec. Utils. (NSP) MPUC Docket No. G, E-999/AA-94-762 (July 13, 1995); In re Review of the 1997 Annual Automatic Adjustment of Charges for All Gas & Elec. Utils. (Interstate), MPUC Docket No. G, E-999/AA-97-1212 (May 28, 1998). Here, the unrecovered costs are at least twenty times previous amounts found to qualify for a variance. While the denial of a variance here may be justifiable, the Commission has not fully explained this drastic departure from its previous decisions. The Commission asserted, for example, that it was CenterPoint’s error that caused the unrecovered costs and that the error persisted over five years. But industry errors are frequently the cause for seeking variances1 and the Commission did not sufficiently explain why a five-year delay in seeking a variance is not acceptable. And even if a five-year variance is too long, the Commission did not explain why a variance for a shorter period of time should not be granted.
Nor has the Commission explained why it compared CenterPoint’s unrecovered costs to the company’s overall gas costs and not, as it had in previous cases, to profitability. A comparison of unrecov-ered costs to profitability here reveals that CenterPoint’s profitability declined, as a result of the unrecovered costs, in a range between .55% and 15.31% in the five years for which it seeks a variance. In contrast, the diminution in NSP was 10%. NSP, at 7.
The Commission’s decision that a variance would be adverse to public interest also appears to be arbitrary and capricious. The Commission claimed to be concerned about intergenerational equity among ratepayers. While this may be a legitimate public interest, the Commission was not particularly concerned with inter-generational equity among ratepayers in previous cases. In NSP, the Commission acknowledged the equity issue if it granted the variance, but ultimately granted the variance, concluding that the inequity did not outweigh the benefit of allowing the company to recoup its gas costs. NSP, at 7-8. The Commission reached a similar decision in Interstate. Interstate, at 5.
Furthermore, while this ease could be distinguished from the other two cases because the period in question is five years, rather than one year or two years, the Commission failed to explain why it would be against the public interest to grant a partial variance for some period of time shorter than five years. As the court of appeals noted, the Commission was not faced with an “all-or-none” decision. In re Review of the 2005 Annual Automatic Adjustment of Charges for All Elec, and Gas Utils., 748 N.W.2d 322, 330 (Minn.App.2008). The Commission must explain why this case is so different from its previous cases and why a complete denial of the variance was more appropriate than a partial variance.
Finally, the Commission stated that it was concerned about the “incentives” that allowing the variance would create for regulated industries. It apparently was concerned that allowing a variance would foster an environment where variances would be sought rather than instituting the required accounting and record-keeping changes necessary to find errors such as occurred here.
*127To say that this argument is unpersuasive is too kind; among other things, it presupposes bad faith, or at least sloppiness, on the part of businesses subject to Commission jurisdiction. It assumes that there are no other charges associated with delayed recovery of costs in a variance proceeding, such as legal fees, the lost investment value of those unrecovered costs, or the lost time by employees who must prepare the necessary filings to seek variances from the Commission, all of which could be avoided by installing proper accounting procedures in the first place.
A regulated business subject to Commission jurisdiction is not entitled to a variance simply because there are unrecovered costs. But where, as here, the Commission chooses to deviate from previously established norms in granting such variances, the Commission must set forth “a reasoned analysis for change.” See Sierra Club, 755 F.2d at 619 (citation omitted) (internal quotation marks omitted). Because the Commission did not do so in denying CenterPoint’s request for a variance from the true-up rule, its actions were arbitrary and capricious and I would therefore affirm the court of appeals and remand to the Commission. See Citizens Advocating Responsible Dev. v. Kandiyohi County Bd. of Comm’rs, 713 N.W.2d 817, 836-37 (Minn.2006) (finding several of the factors the county relied upon to be arbitrary and capricious, leading to the conclusion that there was insufficient evidence for the agency’s decision and that a remand was necessary).

. Indeed, NSP also made an error that caused NSP to seek a variance. NSP, at 5. The Commission distinguishes the two cases because NSP was attempting to comply with new federal regulations while the CenterPoint error occurred of its own volition. Center-Point, at 3. The relevance of this distinction is not explained by the Commission.