Court Opinion

ID: 9641890
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:42:44.589758+00
Date Added: 2024-06-11T18:10:40.417224
License: Public Domain

NEBEKER, Associate Judge,
dissenting:
The shortsighted and cryptic review of the Public Service Commission’s determination to alter its long-established accounting treatment of funds invested in plant projects under construction (CWIP) cannot, in my view, be permitted. Therefore, I respectfully dissent.
For purposes of brevity, I will not accost the reader with any further rendition of the facts or the tortured procedural posture of this case. My sole concern is to highlight the nature of our mistake in abandoning so cavalierly our responsibility to review a major revision in the Commission’s accounting policy. I cannot in any way rationalize into the realm of discretionary prerogative the Commission’s decision. There simply is not the “reasoned decision-making” which we require when evaluating a change in Commission policy. See Consolidated Gas Supply Corporation v. F.P.C., 172 U.S.App.D.C. 162, 171, 520 F.2d 1176, 1185 (1975).
The nub of the Commission’s decision is the rejection of an established accounting procedure whereby funds invested in construction work in progress are included in *401the rate base permitting a direct return to investors as the funds are invested. This long standing practice by the Commission was adopted in Formal Case No. 373 (Order No. 3317, Feb. 20, 1948):
The change proposed will allow a direct return currently as the funds are invested in electric plant destined for use in the service of the public. The Commission finds that the proposed change is equitable and proper. [Id. (emphasis added).]
Now, seemingly by regulatory fiat, the Commission has chosen to abandon a 30-year policy and to direct Pepeo, instead, to capitalize on an allowance for funds used during construction (AFUDC) to compensate it for use of those same funds. This policy switch is not inconsequential. In fact, CWIP accounts for 16 percent of Pep-co’s rate base systemwide. See Formal case No. 685 (Order No. 6096, June 14, 1979) at 40. I therefore, cannot, like the majority, defer to Commission analysis of the reasons for the change.1
“The rule of law does not forbid an agency [to] modify its regulatory policy .... ” City of Chicago v. F.P.C., 128 U.S.App.D.C. 107, 115, 385 F.2d 629, 637 (1967), cert. denied sub nom. Public Service Commission v. F.P.C., 390 U.S. 945, 88 S.Ct. 1028, 19 L.Ed.2d 1133 (1968). In fact, “within the limits imposed by the requirement of reasoned decision-making, the Commission is free to modify or even reverse its established policy.” Consolidated Gas Supply Corporation v. F.P.C., supra at 171, 520 F.2d at 1185. “[T]he Commission is ‘free within the ambit of [its] statutory authority to make the pragmatic adjustments which may be called for by particular circumstances.’ ” Id. (quoting F.P.C. v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942)). However, the discretion to alter policy does not carry with it unbridled authority to do so on whim. “[T]he rule of law requires not only that the new standards ‘flow rationally from findings that are reasonable inferences from substantial evidence,’ but that ‘the agency give due consideration to the equities, if any, arising out of commitments based on previous rulings.’ ” Consolidated Gas Supply Corporation v. F.P.C., supra, 172 U.S. App.D.C. at 173, 520 F.2d at 1187 (quoting City of Chicago v. F.P.C., supra, 128 U.S. App.D.C. at 115, 385 F.2d at 637). Ultimately, the Commission decision must fail under either of these tests.
Succinctly, the Commission proposes to support its decision by the disarming conclusion that “as a matter of policy, present customers should not pay for facilities that will be used to provide service for future customers.” Formal Case No. 685, supra at 52. The change in accounting methods will purportedly rectify this inequity. I, however, cannot find in this bald platitude either the reasoned analysis or substantial evidence that we, as a reviewing court, must require in support of such a policy change. In vain, I search the Commission’s decision for further basis upon which to support their policy shift. Simply, there is none.
Furthering the evidentiary inadequacy of the Commission’s decision is an apparent gross insensitivity to the accrued equities (including necessarily the full retroactive effect on the utility and its investors— something avoided if traditional rule-making procedures are followed) arising out of previous rulings. I recognize that the Commission has proposed to “phase in” the AFUDC accounting method, but this does not fairly address the fact that the net effect of 30 years under the CWIP accounting method has produced utility rates well *402below the average for the industrialized northeast. It does not address concerns about continued investor confidence. The Commission has seemingly abdicated its responsibility to fairly assess the true impact of this accounting policy change. Nowhere does the Commission address itself to how legitimate concerns may be allayed.
The majority’s “hear no evil, see no evil” approach to appellate review of this matter is disheartening. “The reviewing court’s duty to ‘assure fidelity to the functions assigned to the regulatory agency by congress’ requires that it hold the agency to its duty to give reasoned consideration to the facts and issues material to its determinations.” Public Service Commission, State of New York v. F.P.C., 167 U.S.App.D.C. 100, 107, 511 F.2d 338, 354 (1975) (quoting Public Service Commission v. F.P.C., 159 U.S.App. D.C. 172, 208-09, 487 F.2d 1043, 1079-80 (1973), vacated and remanded sub nom. Shell Oil Co. v. Public Service Commission, 417 U.S. 964, 94 S.Ct. 3166, 41 L.Ed.2d 1136 (1974)). “Courts may not abandon their responsibility by acquiescing in a charade or a rubber stamping of non-regulation in agency trappings.” Id. at 292, 511 F.2d at 354 (quoting Public Service Commission v. F.P.C., supra, 159 U.S.App.D.C. at 208-09, 487 F.2d at 1079-80). I am afraid that this is precisely what the majority has done.
In conclusion, I note that it is not for this court to substitute its opinion for that of the Commission. The plain fact, however, is that the Commission has not as yet reached a decision which is supported by substantial evidence. The Commission has avoided its statutory duty and we have ignored ours. I commend to all the dissenting opinion of Commissioner Straton, Formal Case No. 685 (Order No. 7000, July 18, 1979) at 28, wherein he states aptly that “The Commission has dealt with the CWIP issue as if there were no yesterday and no tomorrow. Thus, a legacy will be squandered and a future mortgaged. I can think of no worse public policy.” Id. I dissent and would therefore vacate the Commission’s decision and remand with directions to exclude this change in accounting methods from the rate setting calculus until such time as further hearings may shed factual light on such a draconian and retrospective step.

. I am not unmindful that on several occasions previous to the Commission ruling at issue, the Commission has asserted, in effect, that the use of the CWIP accounting method in place of AFUDC was a choice between two acceptable alternatives. See Formal Case No. 438, In re Potomac Electric Power Company, 8 PUR 3d (1955); Formal Case No. 464 (Order No. 4525, April 10, 1973); In re Potomac Electric Power Company, 3 PUR 4th 65 (1974); Formal Case No. 630 (Order No. 5739, Nov. 12, 1975), 11 PUR 4th 215. See also Goodman v. P.S.C., 162 U.S.App.D.C. 74, 497 F.2d 661 (1974). However, preserving the right to change its mind does not allow the Commission to dispense with supporting their decision to do so.