Court Opinion

ID: 9571785
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:35:11.506067+00
Date Added: 2024-06-11T12:30:56.407183
License: Public Domain

ROSE, Justice,
specially concurring.
I concur with the result reached by the majority but do not join in that portion of the opinion which would allow the consumers to bear all costs associated with canceled construction projects so long as the Public Service Commission (PSC) had approved the projects prior to investment by the utility. As I interpret Wyoming’s statutory scheme pertaining to the regulation of public utilities, the PSC is without authority to accept or veto proposed construction projects for the purpose of shifting their cost to ratepayers. Furthermore, even if the PSC possessed such authority, the ratemaking principles embodied in our statutes do not permit the recovery of costs associated with construction projects which are terminated before ever providing service to utility customers.
I
This court has consistently held that the PSC possesses only that power and authority granted to it by the Wyoming Constitution and statutes. The enabling statutes must be strictly construed and any reasonable doubt as to the existence of any power must be resolved against its exercise. Public Service Commission v. Formal Complaint of WWZ Company, Wyo., 641 P.2d 183 (1982); Phillips Petroleum Company v. Public Service Commission, Wyo., 545 P.2d 1167 (1976); Tri-County Electric Association, Inc. v. City of Gillette, Wyo., 525 P.2d 3 (1974).
The general powers of the PSC are set out in § 37-2-112, W.S.1977:
“The commission shall have general and exclusive power to regulate and supervise every public utility within the state in accordance with the provisions of this act.”
This statute, as the majority recognize, empowers the PSC to regulate and supervise utilities, not to manage 1 them. Regulation and supervision, however, necessarily entail control over the effects of decisions made by those who manage public utilities.
The position advocated by the majority would extend the PSC’s sphere of control to cover not only the effects of managerial decisions but the decision-making process itself. In support of their position, the majority cite and discuss a number of provisions in our regulatory scheme as illustrative of the degree of control that the PSC exerts over management as a necessary adjunct to regulation. These statutes, in my judgment, emphasize the supervisory or watchdog function of the PSC in protecting the public interest. Section 37-2-122, W.S.1977, authorizes the PSC to eliminate existing services, facilities, and regulations which are inadequate, unsafe, unjust, or *810unreasonable. Section 37-6-101, W.S.1977, empowers the PSC to supervise the issuance of securities and the creation of liens, activities which are regulated in competitive as well as monopolistic enterprises in order to protect the public investor. Section 37-6-102, W.S.1977, mandates PSC approval of proposed securities transactions unless such transactions are inconsistent with the public interest, unlawful, or exceed the assets of the utility. Finally, § 37-3-111, W.S.1977 and PSC Rule 218 require public utilities to file designated contracts in order to keep the PSC informed.
Clearly, these statutes authorize the PSC, in obeying its charge to guard the public interest, to monitor the business decisions previously made by utility exqcu-tives. Using these statutes as a foothold, however, the majority make what I consider to be a monumentally faulty and frighteningly unjustified logic-leap to the conclusion that the PSC has the authority to rule on the viability of proposed utility projects with respect to whether consumers will bear the risk of failure. To deny that such authority would encompass the power to dictate whether a particular project should be undertaken is to deny reality. Utility executives would be compelled to consult the PSC and obtain approval before embarking on any project, or face possible stockholder suits for mismanagement in the event the project fails. The PSC would, in effect, be making crucial decisions concerning utility proposals — all in the name of regulation and, with all due respect to our Public Service Commission and its able membership, the PSC is not required to be qualified and probably is not qualified to make such delicate and technical public utility management decisions.
The function of the PSC is to protect the consumer through the regulation of public utilities, while taking into consideration the legitimate interests of the utilities. McCulloch Gas Transmission Company v. Public Service Commission of Wyoming, Wyo., 627 P.2d 173 (1981). In carrying out this function, the PSC is empowered to control the effect that new energy projects will have on rates — but only after the utility management has assessed the merits and drawbacks of the proposal and reached a final decision based on sound business judgment, and only after the project has become used and useful in providing energy. It is not the function of the PSC to provide an insurance policy under which the ratepayers will protect the investments of utility stockholders against all risks. This court recognized as much in McCulloch Gas Transmission Company v. Public Service Commission of Wyoming, supra, 627 P.2d at 179, where we described the regulatory function of the PSC and said:
“ * * * 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.”
Not only is the participation by a state agency in a utility’s business decisions unnecessary to regulation, it is impermissible. The United States Supreme Court in State of Missouri ex rel. Southwestern Bell Telephone Company v. Public Service Commission of Missouri, 262 U.S. 276, 289, 43 S.Ct. 544, 547, 67 L.Ed. 981, 985 (1923), said:
“ * * * It must never be forgotten that while the State may regulate, with a view to enforcing reasonable rates and charges, it is not the owner of the property of public utility companies, and is not clothed with the general power of management incident to ownership. The applicable general rule is well expressed in State Public Utilities Commission ex rel. Springfield v. Springfield Gas and Electric Company, 291 Ill. 209, 234 [125 N.E. 891].
“ ‘The commission is not the financial manager of the corporation, and it is not empowered to substitute its judgment for that of the directors of the corporation * * ” (Emphasis added.)
*811The proper relationship between regulators and regulated enterprises was described by 1 Priest, Principles of Public Utility Regulation, p. 23:
“Where inefficiency or improvidence or economic waste or abuse of discretion or action inimical to the public interest have been demonstrated, the agency having jurisdiction may intervene. Business decisions are, however, the prerogative of management. Regulators are not the masters of public utility enterprises. They may, and often should, breathe down the executive’s neck, but the basic responsibility is his, not theirs.”
The majority opinion would permit utility companies to recover their investments in terminated construction projects, ineligible for inclusion in rate base or operation expenses, if the proposal is first submitted to the PSC for approval. I conclude that the exercise of such power by the PSC would exceed the scope of the enabling statutes and implicate constitutional proscriptions concerning private property.
II
The majority conclude, and I agree, that Pacific Power & Light Company’s capital investment in the now terminated nuclear plants cannot properly be included in the rate base as used and useful property or be amortized as an operating expense. However, the majority would permit the PSC, in determining just and reasonable rates, to consider the costs associated with such investments under the “other values” language of § 37-2-122(a), W.S.1977. That statute provides:
“In determining what are just and reasonable rates the commission may take into consideration depreciation of plant, obsolescence of equipment, expense of operation, physical and other values of the plant, system, business and properties of the public utility whose rates are under consideration.”
Under this statute, the decisive question is whether “an investment of questionable return in a potential product producing project” (majority opinion 677 P.2d at 808) is one of the “other values of the plant, system, business and properties of the public utility,” which may properly be considered for ratemaking purposes. I conclude that it is not, because to allow the PSC to consider the value of a construction project which ultimately fails is to circumvent the used and useful principle of § 37-2-119, W.S.1977.2 I would interpret the physical and other — presumably nonphysical — values specified in § 37-2-122(a), supra, as encompassing only the values of those items properly includable in the rate base. That is, § 37-2-122(a) empowers the PSC to consider for ratemaking purposes only the property and business of the public utility which is used and useful in producing the product. I cannot attribute to the legislature the intent to embody in the ratemaking formula both the used and useful principle and the means to annihilate that principle.3
*812The majority cite several instances in which the PSC has considered for ratemak-ing purposes the costs of projects not currently useful in supplying the product. Such consideration was permissible, according to the majority, since the terminated activity had received the prior approval of the PSC or had a used and useful history. I would have held that our statutory scheme, including the used and useful principle, contemplates the consideration of the costs attributable to the cited projects, without expanding the meaning of the “other values” language of § 37-2-122(a) and notwithstanding a lack of prior approval by the PSC.
Pursuant to § 37-2-122(a), supra, obsolescence of previously useful equipment is a proper factor to be considered in setting just and reasonable rates. The cost of drilling a dry gas well is properly categorized as an operating expense, since gas, unlike electricity, is a commodity for which the utility must search in order to provide service. The search for gas necessarily includes the drilling of a certain percentage of dry holes, whereas the production of electricity does not necessarily include the building of a certain percentage of defunct plants. I agree with the pronouncement of the Ohio Supreme Court in East Ohio Gas Co. v. Public Utilities Commission, 137 Ohio St. 225, 28 N.E.2d 599, 609 (1940), concerning the propriety of considering the cost of gas leaseholds which turn out to be unproductive:
“It must be apparent that the cost of acquiring, holding for a time during which delay rentals must be paid, testing and finally canceling unproductive acres is the only method by which productive gas acres can be found and developed, and it is equally apparent that this expense must be borne by the consumer who ultimately uses the gas from the productive acres.”
It is not necessary to expand our existing statutory scheme in order to justify the recovery of these types of costs through rates.
I conclude that the statutory formula for setting just and reasonable rates does not permit the consideration of utility investments which are not attributable to the rate base and which are not properly designated as costs of operation. I would adopt the position reiterated by the Ohio Supreme Court when faced with a question of statutory interpretation under circumstances similar to the instant case:
“ * * * ' * * * It is only proper that their [the investors] venture be found operational before they commence to recoup their capital outlays from the consumers.’ * * *" Office of Consumers’ Counsel v. Public Utilities Commission, 67 Ohio St.2d 153, 423 N.E.2d 820, 829 (1981), quoting from Office of Consumers’ Counsel v. Public Utilities Commission, 58 Ohio St.2d 449, 456-457, 391 N.E.2d 311 (1979).

. The American Heritage Dictionary defines "manage" to mean: “To direct or administer (the affairs of an organization, estate, household, or business)."

. Section 37-2-119, W.S.1977, provides as follows:
"In conducting any investigation pursuant to the provisions of this act the commission may investigate, consider and determine such matters as the cost or value, or both, of the property and business of any public utility, used and useful for the convenience of the public, and all matters affecting or influencing such cost or value, the operating statistics for any public utility both as to revenues and expenses and as to the physical features of operation in such detail as the commission may deem advisable; the earnings, investment and expenditures of any such corporation as a whole within this state, and as to rates in local exchanges or plants of any telephone, telegraph, water, electrical or gas corporations, the geographical location thereof shall be considered as well as the population of the municipality in which such plant or exchange is located."

. See Office of Consumers’ Counsel v. Public Utilities Commission, 67 Ohio St.2d 153, 423 N.E.2d 820 (1981), where the Ohio Supreme Court refused to interpret a catch-all statute so as to permit the commission to consider the utility's investment in four terminated nuclear power plants as amortizable costs. The court said:
" * * * The commission views [the pertinent statute] as a virtual wild card to be played whenever the commission in its discretion sees fit. We interpret the statute less sweepingly, first because the provisions are linked *812inextricably with the ratemaking factors contained in [the statute specifying permissible considerations in ratesetting proceedings], and secondly because the General Assembly undoubtedly did not intend to build into its recently revised (1976) ratemaking formula a means by which the commission may effortlessly abrogate that very formula.” 423 N.E.2d at 828.