Court Opinion

ID: 9863778
Source: CourtListenerOpinion
Date Created: 2023-09-25 05:53:55.462559+00
Date Added: 2024-06-11T12:04:19.153203
License: Public Domain

Justice LOHR,
dissenting:
The majority affirms the district court’s ruling that the Public Utilities Commission (“PUC” or “the commission”) engaged in unlawful retroactive ratemaking when it authorized an incentive award to Public Service Company of Colorado (“Public Service”) after Public Service successfully pursued litigation against a natural gas supplier to recover excessive charges for natural gas. The majority also affirms the district court’s determination that the PUC’s granting of the incentive award to Public Service was unjust, unreasonable, and an abuse of discretion. Because I disagree with the majority’s analysis and conclusions as to both issues, I respectfully dissent.
I agree with the majority that ratemaking is a legislative function, subject to the constitutional prohibition against retroactivity. See Colo. Const, art. II, § 11; Colo. Energy Advocacy Office v. Public Service Co. of Colo., 704 P.2d 298, 305 (Colo.1985); Peoples Natural Gas Division v. Public Utilities Comm., 197 Colo. 152, 155, 590 P.2d 960, 962 (1979). I conclude, however, that the effect of the PUC allocation to Public Service of a portion of the funds obtained by settlement of a complex contract dispute with Public Service’s gas supplier, Colorado Interstate Gas Company, did not amount to unlawful retroactive ratemaking and that the allocation was fully within the commission’s discretion,
I.
In November 1990, Public Service filed an application with the PUC requesting PUC approval of a manner of disposition of payments that Public Service had received and would receive from Colorado Interstate Gas Company, its gas pipeline supplier. Public Service had recently reached a settlement with Colorado Interstate Gas, after more than six years of litigation before the Denver District Court and the Federal Energy Regulatory Commission. Colorado Interstate Gas had agreed to repay Public Service approximately $64 million, the amount it had overcharged Public Service over a period of several years. During that same period, Public Service had passed the charges on to its customers by charging higher rates. After settlement, Public Service intended to return to Public Service ratepayers their share of the settlement money received from Colorado Interstate Gas. In order to structure the refund, it asked the PUC to reduce future gas and electric rates or provide a one-time credit on customer bills. Public Service also asked that the PUC allow it to retain $5.75 million of the recovered charges *875as a reward for pursuing the claim against Colorado Interstate Gas for the benefit of its ratepayers.
The PUC decided to grant Public Service a $3.2 million incentive, five percent of the original settlement. The commission stated:
The incentive rewarded [sic] to Public Service is designed to motivate the company and its employees to pursue excellent results in the future, by demonstrating that they can benefit from superior performance. We believe that granting an incentive to the company is a reasonable step towards improved efficiency, and thus ultimately lower rates to customers in the future.
The PUC’s decision was reversed by the Denver District Court. The court ruled that allowing Public Service to keep a portion of the refund constituted unlawful retroactive ratemaking and that granting the award was unjust, unreasonable, and an abuse of discretion. The district court entered judgment accordingly. The majority of this court now affirms that judgment. Because I disagree with both bases of the district court’s decision, I dissent.
II.
The constitutional provision regarding retroactive legislation, Colo. Const, art. II, § 11, “has been interpreted to prohibit legislation which ‘takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past.’ ” Peoples Natural Gas, 197 Colo, at 155, 590 P.2d at 962 (quoting Moore v. Live Stock Company, 90 Colo. 548, 10 P.2d 950 (1932)). Here, neither has a vested right been impaired nor a new obligation been imposed. As stated by the district court, the prohibition against retroactive ratemaking is “based on the common sense notion that ratepayers have the right to know the charges for utility service before the services are rendered.” See also Public Util. Comm’n v. FERC, 988 F.2d 154, 163 (D.C.Cir.1993) (stating “[p]re-dictability is an underlying purpose of ... the rule against retroactive ratemaking”). When Public Service’s customers bought gas between 1979 and 1984, they had no expectation that they might receive a share of the settlement payments sometime in the future. Far from suffering from a retroactive rate increase, ratepayers unexpectedly benefitted by receiving all but five percent of the sixty-four million dollar settlement achieved through Public Service’s extraordinary efforts- in bringing more than six years of complex contract litigation to a successful resolution.1
The Colorado Office of Consumer Counsel contends and the majority agrees that Public Service’s ratepayers should have received one hundred percent of the recovered proceeds and that anything less amounts to retroactive ratemaking.2 It argues that one commission decision, In Re Moon Lake Electric Association, Inc., Case No. 6308, Decision No. C83-1268 (Colo. PUC 1983), as well as one of this court’s decisions, Citizens Utilities Co. v. City of LaJunta, 121 Colo. 261, 215 P.2d 332 (1950), require such a finding.3 *876However, the evidence and findings in these cases are distinguishable. In neither Moon Lake nor Citizens Utilities was there ever any indication that the utility, which wanted to retain some of the amounts returned to it by its supplier, played any meaningful role in obtaining the refund. In addition, while the utility’s claims in Moon Lake and Citizens Utilities were grounded in a desire to recoup unrelated past losses, Public Service in the present case is not seeking an increased rate in order to compensate for the losses of a previous period. See Moon Lake, Case No. 6308, Decision No. C83-1268 (Colo. PUC 1983) (noting that “[t]o allow a utility to retain refunds and apply them to past losses sets the stage for retroactive ratemaking”); Citizens Utilities, 121 Colo. 261, 215 P.2d 332 (court reversed commission’s decision approving distribution of one-half of a fund to utility for rehabilitation of its local pipelines said to have rapidly deteriorated because of peculiar soil conditions). As the majority recognizes, Public Service had already been reimbursed for all of its attorney’s fees and other costs associated with recovering the Colorado Interstate Gas fund. See Maj. op. at 870 n. 5. The commission’s justification for awarding a portion of the fund to Public Service was forward looking not backward looking. The commission permitted retention of a portion of the recovered fund in order to provide utilities an incentive to exert extraordinary efforts to protect consumer interests in the future. See City of Montrose v. Public Utilities Comm., 629 P.2d 619, 624 (Colo. 1981) (the commission has a general responsibility to protect the public interest regarding utility rates and practices). I would hold that an award for this purpose is fully within the commission’s broad discretionary power.
III.
The Public Utilities Commission’s power to regulate ratemaking is “equivalent to that of the legislature except as limited by statute.” Colo. Energy Advocacy Office, 704 P.2d at 306. In fact, the PUC has “ ‘broadly based authority to do whatever it deems necessary or convenient to accomplish the legislative functions delegated to it.’ ” City of Mont-rose, 629 P.2d at 624 (Colo.1981) (quoting Mountain States Telephone & Telegraph Co. v. Public Utilities Comm., 195 Colo. 130,135, 576 P.2d 544, 547 (1978)). Those functions include:
[the] duty to adopt all necessary rates, charges, and regulations to govern and regulate all rates, charges, and tariffs of every public utility of this state to correct abuses; to prevent unjust discriminations and extortions in the rates, charges, and tariffs of such public utilities of this state; to generally supervise and regulate every public utility in this state; and to do all things, whether specifically designated in articles 1 to 7 of this title or in addition thereto, which are necessary or convenient in the exercise of such power....
§ 40-3-102, 17 C.R.S. (1993). When establishing these rates, charges, or regulations, “the commission may consider current, future, or past test periods or any reasonable combination thereof and any other factor's which may affect the sufficiency or insufficiency of such rates....” § 40-6-1 ll(2)(a), 17 C.R.S. (1993) (emphasis added).
The PUC’s determination that an award was appropriate was fully within its discretion. It allowed Public Service to retain $3.27 million of the recovered proceeds as an incentive “to encourage the company to pursue similar types of issues in the future.” The commission reasoned:
If no incentive were awarded, PSCo’s management and employees would have less motivation to pursue settlements or other innovations leading to efficiencies or other benefits for its customers in the future. As the utility industry prepares to face new competition and other challenges, it is key to all, including consumers, that the company and its employees change the regulated monopoly mindset of “why both*877er maldng an extra effort to improve revenues or reduce costs, the Commission will just take it away in the next rate case anyway.” The incentive rewarded [sic] to Public Service is designed to motivate the company and its employees to pursue excellent results in the future, by demonstrating that they can benefit from superi- or performance. We believe that granting an incentive to the company is a reasonable step towards improved efficiency, and thus ultimately lower rates to customers in the future.
While the district court has the power, by statute, to review decisions of the PUC, “the scope of permissible judicial review is relatively narrow.” City of Montrose, 629 P.2d at 622. The district court’s evaluation extends only to determining “whether the commission has regularly pursued its authority,” and “whether the decision of the commission is just and reasonable and whether its conclusions are in accordance with the evidence,” § 40-6-115(3), 17 C.R.S. (1993). The commission’s discretion and judgment on rate matters is not to be disturbed on appeal absent a clear abuse of discretion. See City of Montrose 629 P.2d at 624.
Considering that the commission found it to be in the public’s interest to grant Public Service an incentive for future performance, and that no statute prohibits the granting of such an incentive where the commission finds it to be in the public’s interest, I cannot agree with the majority that the commission’s ruling was unjust, unreasonable, or an abuse of discretion.
I respectfully dissent and would reverse the judgment of the district court and remand the case to that court with directions to affirm the decision of the PUC authorizing the incentive award to Public Service.
ROVIRA, C.J., and MULLARKEY, J., join in this dissent.

. The actual amount received totaled $56.9 million, rather than $64 million, because by paying early, Colorado Interstate Gas avoided paying three years of interest.

. The Office of Consumer Counsel argues that consumers are the "sole owners” of the refund and that therefore Public Service has no right to retain any portion thereof. In providing for distribution of the settlement payment, however, the commission approved tariff reductions in the amount of $13.2 million to both gas and electric consumers to implement a "long-planned correction” of the imbalance between electric rates and gas rates, despite the fact that only gas consumers were adversely affected by the overcharges. No one challenges the commission’s decision to distribute a portion of the refund to consumers of electricity or the Commission's discretion to award "the statutory maximum in effect on September 1, 1992," from the unclaimed balance to the Colorado Energy Assistance Foundation for the energy needs of low-income citizens. Nor does the majority suggest any impropriety in use of the refund in part to benefit persons other than consumers of gas. The majority’s contention that ratepayers are always entitled to all of the refund is thus contradicted by the unchallenged means of allocation adopted by the commission.

."Because of the legislative character of rate-making, the commission is not bound by its prior decisions or by any doctrine similar to stare *876decisis." Colo. Ute Elec. Ass'n v. Public Utilities Comm., 198 Colo. 534, 540-41, 602 P.2d 861, 865 (1979). "[W]hile consistency in administrative rulings is considered essential, and while agency rulings are entitled to great weight in subsequent proceedings, the appearance of arbitrariness is dispelled when new findings are made ... on the basis of new evidence and a new record." Id. at 541, 602 P.2d at 865 (citation omitted).