Court Opinion

ID: 5452177
Source: CourtListenerOpinion
Date Created: 2022-01-08 19:12:59.6494+00
Date Added: 2024-06-11T08:32:26.925138
License: Public Domain

MOSK, J.
I dissent from the conclusion of the majority that the interim rate increase is just and reasonable.
First, I disagree with the majority’s reliance on decisions of the Public Utilities Commission as justification for the increase. The majority recognize that until recently the commission itself has acknowledged interim rate increases are justified to compensate for a utility’s investment-related costs only if there is a financial emergency or for costs that are undisputably reasonable. As the opinion holds, these are exceptions to the general principle that rate increases may not be granted until a final determination of costs, and the exceptions are valid because they comply with the statutory requirement of reasonableness. The majority then rely on two recent instances in which the commission allowed interim increases despite the absence of these factors, and which established an additional exception based on other matters as justifying such an increase. The opinion concludes that these factors are present in the instant case. (Ante, pp. 875-876.) But the commission’s judgment as to the requirements that must be met in order to comply with the statutory standards is not determinative. That is the issue in the present proceeding. Since the majority do not hold that the additional exception created by the commission in its recent decisions conforms to the *881statutory requirements, its reliance on these decisions does not support the holding.
Second, I disagree on several grounds with the majority’s determination that section 454.8 of the Public Utilities Code1 authorizes the increase. In my view, the section by its own terms does not apply to interim rate increases but only to increases based on a final determination of reasonable rates. It provides: “In any decision establishing rates for an electrical or gas corporation reflecting the reasonable and prudent costs of the new construction of any addition to or extension of the corporation’s plant, when the commission has found and determined that the addition or extension is used and useful, the commission shall consider a method for the recovery of these costs which would be constant in real economic terms over the useful life of the facilities, so that ratepayers in a given year will not pay for the benefits received in other years.” (Italics added.)
As I see it, the language emphasized above requires the rates set to reflect the reasonable costs of new construction and, as the majority recognize, the commission has expressly stated in its decision that its determination as to interim rates is not based on any judgment of the reasonableness of any of Pacific Gas and Electric Company’s (PG&E) investment costs. (Ante, p. 876.) Thus, the interim rates cannot “reflect the prudent costs of the new construction of any addition to . . . the corporation’s plant.” All the construction costs are disputed. The fact that some of the disputed costs may ultimately be allowed and that customers may receive refunds, does not mean that the rates allowed by the commission reflect prudent construction costs.
Even if the statute did allow interim rates in this situation, the majority are unjustified in concluding that the rates which were set represent an appropriate balance between the benefits realized by present and future ratepayers. This determination is entirely premature, since it depends on the amount of the construction costs ultimately allowed. The commission itself recognized this, since it expressly declined to justify the granting of interim rates on such basis. Indeed, it went to great pains to make the point. In its opinion, the commission at first held that the interim rates were justified under the principle that “plant costs borne by ratepayers should closely match the benefits they receive.” On rehearing, it held that the interim increase could not be justified under this principle because it is “inapplicable at this stage of the proceeding. The plant costs to be borne by ratepayers are not to be considered until Phase 2.”
*882Nor do I agree with the majority’s reliance on PG&E’s need for cash flow as justifying the increase. There is nothing in either the statutes governing the circumstances under which rate increases can be granted or in prior decisions of the commission or this court which would allow the granting of an interim rate increase on the ground that cash flow is “important” in keeping down the utility’s costs of raising capital. Indeed, the previous standard followed by the commission, which required a financial emergency to justify the grant of an interim rate increase, would seem to negate a cash flow problem as a sufficient ground for such an increase. Admittedly, the desirability of cash flow does not rise to a financial emergency.
Moreover, this justification for the increase could have a broad impact on the commission’s authority to grant interim increases since a utility, in common with other businesses, will often desire to increase its cash flow in order to keep down costs of raising capital. The extent of the utility’s need for cash has not been estimated as a basis for the increase; the entire fuel savings is withheld from the ratepayers for a period which the opinion recognizes may run into several years, on the general justification that the withholding of these funds from the public will ease PG&E’s ability to raise capital.
There is considerable merit in the argument of Toward Utility Rate Normalization (TURN) that the granting of the interim rate increase is unfair to ratepayers. In its brief, TURN states: “Countless times, PG&E’s ratepayers have held the utility harmless against rising fuel costs. The few times that fuel costs decline are hardly proper occasions on which to change the rules of the game. There is very little ‘balance’ in the balancing account procedure if the utility passes increased fuel costs on to the ratepayers but keeps fuel savings for itself.” Even if the retention by the utility of the amount of fuel savings, as here, is said to be only temporary, the majority’s decision, in my view, unjustly deprives ratepayers of the amounts withheld.

 All statutory references are to the Public Utilities Code.