ML19347E654
| ML19347E654 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 03/20/1981 |
| From: | Matuschak J PENNSYLVANIA, COMMONWEALTH OF |
| To: | |
| Shared Package | |
| ML19347E637 | List:
|
| References | |
| C-80072105, C-80072106, I-79040308, NUDOCS 8105130184 | |
| Download: ML19347E654 (33) | |
Text
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De-n BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION METROPOLITAN EDISON COMPANY C-80072105 v.
I-79040308 PENNSYINANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA ELECTRIC
.C-80072106 COMPANY I-79040308 v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION t
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RECOMMENDED DECISION (Subject to Commission Approval)
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l Joseph P. Matuschak i
Administrative Law Judge March 20, 1981 l
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.s APPEARANCES:
Ryan, Russell & McConaghy Samuel B.
Russell, Esquire
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W. Edwin Ogden, Esquire Alan Michael Seltzer, Esquire Eric L. B.
Strahn, Esquire and Berlack, Israels & Liberman James A. Liberman, Esquire l
For:
Metropolitan Edison Company
,. Pennsylvania Electric Company,
1 Steven A. McClaren, Esquire Bohdan R. Pankiw, Esquire -
Julian S. Suffian, Esquire For:
Pennsylvania Public Utility Commission Walter W. Cohen, Esquire David M. Barasch, Esquire Craig R. Burgraff, Esquire Ashley Schannauer, Esquire For:
Office of Consumer Advocate 2
Duane, Morris & Heckacher Ronald Morris, Esquire l
Robert E. Kelly) Esquire For:
Victaulic Company of America
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McNees, Wallace & Nurick c
Maurice A. Frater, Esquire For:
National Gypsum Company P. H. Glatfelter Co.
i St. Regis Paper Company Abex Corporation Airco, Inc.
Avtex Fiber, Inc.
Dechart Price & Rhoads Bernard A.
Ryan, Jr., Esquire
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William L. Moyer, Esquire and Roger W. Robinson, Esquire Michael J. Delaney, Esquire For:
Bethlehem Steel Corporation l
John E. Fullerton, Esquire and Shearer, Mette & Woodside Charles B.
Zwally, Esquire For:
Electalloy Corporation Erie Malleable Iron Company Franklin Steel Company l ()
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3 National Forge Co.
4 The Proctor & Gamble Paper Products Company Talon Division of Textron, Inc.
United Refining Company Universal Cyclops Corporation Kenneth A, Wise, Esquire For:
Louise Riley and Denior Power Action Group David L. Kurtz, Esquire For:
Frank Bonin Merkel, Spang & Weidner John J. Speicher, Esquire For:
American Society of Utility Investors 4
Pepper, Hamilton & Scheetz Michael P. Kerrigan, Esquire For:
The Hospital Council of Central Pennsylvania and York Hospital The Hospital Council of Western Pennsylvania and O
Conemaugh Valley Memorial Hospital Buchanan, Ingersoll, Rodewald, Kyle &
Buerger Stephen A. George, Esquire For:
Standard Steel Division of Titanium Metals Corporation of America PPG Industries, Inc.
Wolf, Block, Schoor & Solis-Cohca Gerard Gornish, Esquire For:
- Citibank, N.A.,
Agent, and Chemical Bank, Co-Agent Kirschner, Walters & Willig Richard Kirschner, Esquire For:
Local Unions Nos. 563, 603, 803, 1261 and 1482 of Inter-national Brotherhood of Electri-cal Workers - Systems Council
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'I Wayne I. Emery, Esquire Kenneth R. Pepperney, Esquire For:
United States Steel Corpora-O tion Daniel Brocki, Esquire For:
Hammermill Paper. Company 9
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Legal Memoranda was filed by:
0-Metropolitan Edison Company and Pennsylvania Electric Company Standard Steel Division of Titanium Metals corporation of America Bethlehem Steel Corporation Victaulic Company of America Citicank, N.A. Agent and Chemical Bank', Co-Agent Briefs were filed by:
Metropolitan Edison Company and Pennsylvania Elactric Company Commission Staff Victaulic Company of America The Consumer Advocate
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1 History of the Proceedings C:)-
Metropolitan Edison Company On July 29, 1980, i
(Met-Ed) at C-80072105, and Pennsylvania Electric Company (Penelec) at C-80072106, (jointly as Complainants or Com-panies), each filed a ccmplaint against the temporary base' rates established for it at I-79040308 by this Commission in its Order of May 23, 1980, effective June 1, 1980, under the provisions of Section 1310(d) of the Public Utility Code, 66 Pa.C.S., Section 1310(d).
On the same day, Met-Ed at P-80070235, under the provisions of Section 1308(e) of the Code, 66 Pa.C.S.,
Section 1308 (e), filed its petition for extraordinary rate s
relief in the amount of $35' million.
By our Order of
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August 28, 1980, we adopted the Recommended Decision of Administrative Law Judge Joseph P. Matuschak (ALJ) in denying said petition.
Concurrently with the above filings, Met-Ed at R-80051196, and Penelec at R-80051197, each filed for a general rate increase in its base rates in the amount of i
$76.5 million and $67.4 million, respectively.
These pro-I posed rate increases have been suspended until April 27, 1981, and are the subject of Commission investigation.
In our said Order of May 23, 1980, this Commission, in determining that TMI-1 was not used or useful in the public service, excluded TMI-1 from the rate base of FMS.-Ed and Penelec.
On the basis of such deletion, we established, D
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for a period of six months, a temporary rate for Met-Ed and
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for Penelec at an annual' level of $26.9'million and $11.7 i
million, respectively, less than their existing rates.
A ful11 energy cost recovery at the same time was allowed.
A joint prehearing conference was held before the ALJ.for both Companies in the general rate proceeding and i
the complaints against temporary rates on' September 22, 1980 in Harrisburg.
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At said prehearing conference, the ALJ inquired of 4
i the parties as to the propriety of the consolidation of the i
j complaints against temporary rates witn the general rate case j.
proceedings.
Met-Ed and Penelec requested that the hearings on i
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the complaints against temporary rates be severed from the i
a hearings on'the general rate increase proceedings because the
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Companiesintendeptomakedifferentpresentationsinthe two classifications.
l-l Commission Staff and the Consumer Advocate requested i
j that the complaints against temporary rates and the general l-rate proceedings be consolidated.
In addition, Commission
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i Staff raised the question of the propriety or legality of the complaints against temporary rates in the circumstances.
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j Victaulic Company of America requested that Met-Ed's com-i plaint against temporary rates'be consolidated with its general rate case proceeding.
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4 The ALJ requested that each of the parties submit
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legal memorandum on the following issues:
1.
The propriety or legality of the filing of complaints by Met-Ed and Penelec on July 29, 1980 against temporary ra
- s fixed by the Commission on May 23, 1980 at the same time as they filed tariff supplements for general rate increases.
2.
The propriety of the consolidat. ion of said complaints with the general rate case pro-ceeding.
o Met-Ed, Penelec, Commission Staff, the Consumer Advocate, and victaulic Company of America each filed a memorandum on said issues.
In addition, counsel for certain industrial parties, while not submitting a memorandum, expressed the opinion that " convenience of all parties in consideration of the many common and interdependent issues
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raised by the general rate._ case and the. complaints against a
temporary rates dictates the consolidation of these pro-ceedings."
i Met-Ed and Penelec, in their joint memorandum, urged that the complaints against temporary rates require expedited treatment and should be kept separate from the proceedings involving the general base rate increase requests.
They further stated:
. As was pointed out during the pre-hearing conference, the presentations to be made by Met-Ed and Penelec with respect to the present level of tempo-rary rates is expected to differ from the future test year presentation made l
in support of the general rate increases (which are not expected to go into effect until next Spring).
An expeditious O' -
treatment of the complaints will enable i
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.1 the general rate proceedings to proceed more smoothly, without interjection of O.
evidence pertinent only to the temporary rate levels of the companies.
By Order dated October 16, 1980, the ALJ consol-idated the complaints with the general rate case proceedings "for hearing purposes only," without merger, and as to the legality or propriety of the filing of said complaints, 1
said:
The commission, having. established tem-porary rates, is required, under the provisions of the Public Utility Code, to afford the utilities the opportunity to contest such temporary rates by their timely complaints.
It is not incompat-ible in simultaneous proceedings to treat temporary rates F'aviously established by the Commissiva and the general rate increase investigation subsequently i
initiated.
The. timing and the nature of the permanent rates established in the O
temporary rate proceedings and the per-a manent rates established in the general rate proceedings need not be identical.,
In said Order the ALJ also suggested that all parties focus upon the complaints against temporary rates in the early hearings in order to enable an early disposition of that controversy to be made.
i On or cbout October 27, 1980, Met-Ed and Penelec each filed a novel pleading entitled:
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..~ PETITION.
.TO IMPLEMENT EARLY DETER-MINATION OF COMPLAINT AGAINST TEMPORARY RATES (AS CONTEMPLATED BY ADMINISTRATIVE
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LAW JUDGE'S ORDER OF OCTOBER 16, 1980) i AND CERTAIN RELATED MATTERS.
The ALJ construed such petition in the nature of a settlement offer.
In the petitions, Met-Ed and Penelec
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.s requested that modified base rates be established in response
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to the complaints and the petition, to provide for an incr' ease in Met-Ed's and Penelec's annual revenues (net of applicable revenue taxes) of $25 million and $10 million, respectively, upon the agreement of said utilities and the Commission to perform certain acts therein set forth.
Answers to either or both of said petitions were l
filed by Commission Staff, the Consumer Advocate, Louise Riley and Senior Power Group of York, and a host of industrial parties.
The ALJ had scheduled hearing on December 4, 1980 for the purpose of defining the issues and oral argument of the Complaint proceedings, and invited legal memoranda.
on or about December 31, 1980, Met-Ed and Penelec O
4 filed a joint memorandum in which they stated that in light-of Ehe consolidation of the complaint proceedings with the general rate increase proc'eedings, and as a result of extremely burdensome discovery, the Companies had concluded that wholly separate presentations in support of the com-plaints would be unwarranted; that Met-Ed and Penelec relied in said complaints on two sets of fully normalized and future test year presentations which also support the Com-panies' respective rate increase requests, as well as an exhibit showing actual operations for 12 months ending.
September 30, 1980; that no, revenue is sought under the
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complaints for TMI-1 costs; and that the Companies seek in
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.s the complaint proceedings only the restoration of the amounts
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by which the' Commission wrongfully reduced base rates when it removed TMI-l costs from base rates.
The companies concluded that under all the circumstances an expeditious decision on the record was not now feasible.
The matter of the complaints against temporary rates continued to be considered to.the conclusion of the consolidated hearings on January 23, 1981.
Sriefs in both the complaint proceedings and the general rate increase proceedings were filed by Met-Ed, Penelec, Commission Staff, the Consumer Advocate, Louise Riley and the Senior Power Action Group of York, Frank Bonin, and numerous industrial parties.
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Oral argument was held before the ALJ on February 20, 1981.
Summary of the Evidence In support of its complaint requesting $26.9 million in additional annual base rate revenues, Met-Ed submitted evidence that under a March 31, 1981 test year,
-its annual revenue requirement is $76.5 million (on original filing) '. _ It submitted that excluding the revenue requirement associated with TMI-1, its net revenue requirement is $44.1 million, or some $17.2 million more than sought under the i
l complaint.
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In addition, it submitted evidence showing that
-O based on the same future test year, excluding TMI-1, limited to a common equity return of 13.38% and a 9.83) cvarall return, yielded an annual revenue requirement of $35.273 million, or approximately $8 million more than the level of rate relief requested by Met-Ed in the temporary rate com-plaint proceeding.
Further, it submitted evidence an annual revenue '
requirement under a fully historical test year, a:t.cluding TMI-1, at a 15.5% common equity return, to be $31.592 million.
Lastly, it produced a record of the actaal cperations of the Company for the 12 months ending September 30, 1980, f
as a check against~the accuracy of the future test year data, showing an annual revenue requirement in the' amount of
$31.198 million, or $4.298'million higher than the $26.9 mil [ ion level being sought in Met-Ed's ccmplaint.
3ven though it believes that it is entitled to more than'the requested $26.9 million, it limited its claim to such amount.
It seeks recoupment in such additional annual revenue requirement from June 1, 1980 to date.
As was the case with Met-Ed, Penelec, relied on data for a future test year ending March 31, 1981, as the primary support for its request for the restoration of an annual level of $11.7 million in base rate relief, effective June 1, I
1930.
Penulec submits that when the revenue requirement under its original filing is reduced by the $15.587 million
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.s associated with TMI-1, its net revenue requirement is $53.595
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million.
Lastly, it presented testimony showing that based on its actual operations for 12 months ended September 30, 1980 limited to a 13.12% common equity return (as allowed in its last rate case) is $11.508 million.
Both companies submitted testimony also as to their financial condition, requiring restoration of the base rate reductions made in the temporary rates fixed by the Commission.
Commission Staff submitted testimony showing the annual revenue requirement in base rates for Met-Ed to be (adjusted from $9.7 million); and that the annual
$8,882,000 revenue requiremant for Penelec to be $11,758,000 (adjusted from $16.9 million).
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The Consumer Advocate submitted evidence showing i
that the annual revenue requirement in base rates for Met-Ed is no more than $4.1 million (restated from $2.9 to $5.2 million).
Commission Staff submitted evidence showing the annual revenue requirement in base rates for Penelec to be.
$11,758,000 (restated from $16.5 million).
The Consumer Advocate submitted evidence showing that the annual revenue requirement in base rates for Penelec e.han $30.2 million (adjusted from $27,376,000 to is no more
$31,474,000).
Both, Commission Staff and the Consumer Advocate,
, O however, urge dismissal of the complaints.against temporary o
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i Discussion O
This Commission, in its May 23, 1980 Order at removed TMI-l from the rate base of Met-Ed and I-79040308, Penelec because it had determined that since TMI-1 was not used and useful in the public service, ratepayers should not be required to support this plant.
Under t,he provisions of
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of the Public Utility Code, the Commission Section 1310(d) set temporary rates for six months, by reducing allowable annual revenues for Met-Ed by $26.9 million and by $11.7 million for Penelec, effective June 1,1980, as the revenue The financial effect of TMI-1 removal from rate base.
effect of TMI-1 removs1 from rate base upon the allowable based on the last rate case data, was revenue requirement, O
furnished, but not supported, by the Companies.
The Public Utility Code, in part applicable hereto, provides:
Section 1310. -- Temporary rates.
(d)
Excessive rates. -- Whenever the commission, upon examination of any annual or other report, or any papers, records, books, or documents, or of the property of any public utility, i
shall be of the opinion that any rates of such public utility are producing a return in excess of a fair return upon the f air value of the property of such public utility, used and useful in its public service, the commission may, by order, prescribe for a trial period of at least six months, which trial period may be extended for one such additional period of six months, s/
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.s' temporary rates to be observed by such
('T public utility as, in the opinion of x>
the commission, will produce a fair return upon such fair value, and the rates so prescribed shall become effec-tive upon the date specified in the order of the commission.
Such rates, so prescribed, shall become permanent at the end of such trial period, or extension thereof, unless at any time such trial period, or extension thereof, the public utility involved shall complain to the commission that the rates so prescribed are unjust or unreasonable.
Upon such complaint, the commission, after hearing, shall determine the issues involved, and pending fidal deter-mination the rates so prescribed shall remain in effect.
(e)
Effect and adjustment of rates.
Temporary rates Eo fixed, determined, and prescribed under this section shall be effective until the final determination of the rate proceeding unless terminated sooner by the com-n-
mission.
In every proceeding in which s
temporary rates are fixed, determined and prescribed under this action, the commission shall consider the effect of such rates to be thereafter demanded or received by such public utility on final determination of the rate pro-ceeding.
[ Emphasis added]
Within the six month period allowed by Section 1310(d),
each of the companies filed a complaint against the temporary
_ rates fixed for it by the Commission.
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The AIJ consolidated said complaints with the general rate increase proceedings of Met-Ed and Penelec at R-80051196 and R-80051197, respectively, for hearine purposes only, without meraer.
In his October 16, 1980 Order, the ALJ stated:-
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Beacause of the financial condition of
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said utilities, and because of possible recoupment impact on the customers, we believe it to be in the public interest to resolve the temporary rate complaints as expeditiously as reasonably possible.
To that end, we suggest that-in the I
early hearings all parties focus on evidence which will enable an early dis-position.
At the prehearing conference held on September 22, 1980, the companies stated that their presentations in the temporary rate proceedings and their presentations in the general rate proceedings would be different.
Later, when they chose to use the sam 2 presentations, involving a future i
test year ending March 31, 1981, in the complaint proceedings, as well as in the general rate increase proceedings, it was evident that the resolution of said complaint proceedings O
was not,possible until the close of the general" rate increase proceedings.
Backgrourd The proceeding at I-79040308 which led to the May 23, 1980 Order was not a base rate proceeding.
It was directed narrowly to three main issues:
(1) the "used.and useful" status of TMI-1; (2) Met-Ed's certificate of public convenience; and (3) an increase in Met-Ed's energy clause rate.
On November 27, 1979, Met-Ed and Penelec proposed that a future test year (i.e., calendar year 1980) be utilized
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to provide the necessary factual basis for revisions of the l
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- base rates of those Companies if TMI-l were to be removed Q
from their respective base rate.
In the prehearing Order adopted December 21, 1979, the Commission declined to set a test year for such purposes on the grounds that the levels of just and reasonable rates for Met-Ed and Penelec were not then an issue before the Commission in that proceeding.
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The record, therefore, at I-79040308, contained no develop-ment of ratemaking data necessary to determine the adequacy
.of the existing base rates.
The Commission, in its May 23rd Order said:
"The Commission finds that it cannot now deter-mine and fix the just and reasonable bass rates to be charged by respondent."
On July 29, 1980, both Met-Ed and Penelec filed a complaint against the respective temporary base rates so fixed for them by the Commission.
In furtherence of their-e requests that the reduction in their base' rates by the temporary rates be restored, those complaints alleged the following:
1.
That the temporary rates are unjust and i
unreasonable; 2.
The temporary rates. were set without reference to a timely test year; 3.
,The Commission admitted it was not in a
' position to determine and fix the just 4
I and reasonable levels of the companies' base rates in that proceeding; 4.
The testimony of witnesses by Met-Ed, Penelec and the Commission's prosecutory staff indicated that, even if the revenue requirements associated with each com-pany's investment in TMI-l were excluded
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from consideration, no significant reduc-(])
tion in Met-Ed's or Penelec's baso rates could be justified; j
i 5.
The May 23, 1980 Order deprives Met-Ed and Penelec of the opportunity to receive sufficient revenue to provide for its operating and capital costs, to assure confidence in its financial integrity, so as to maintain its credit and ability to attract capital, and to provide a return commensurate with returns on investment in other enterprises' having corresponding risks; and 6.
The Order is confiscatory and incon-sistent with statutory and constitutional requirements.
Met-Ed and Penelec state that in these proceedings they have not elected to pursue all the challenges they raise in their respective complaints.
They have stipulated and agreed that they are not raising any issue, questioning the propriety, or challenging the Commission's action relating
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to:
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Whether the Companies are pennitted to obtain an increase over and above the level of rates which were in effect at the time of the adoption of the temporary Order of May 23, 1980 (N.T. 818, 819);
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The propriety of the Commission's action in removing TMI-l from base rates (Penelec N.T. 320, 821);
3.
The Commission's calculations of the respective revenue requirement associated with TMI-l for purposes of the temporary rate reduction (Penelec N.T. 131-132, 327).
i Also, on July 29, 1980, the Companies filed for l
general rate increases, as set forth above, which were. con-solidated with the complaints against temporary rates for
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hearing purposes only.
TMI-1 is still not in operation. '
The Issues O
The nature of the Commissien's action in its May 23, 1980 Order, and the interrelationship with the sinultaneous filing by Met-Ed and Penelec for general rate increases, has presented an apparent perplexing and baffling situation.
It is a situation without precedent.
It was for j
this reason that the AIJ asked for oral argument on December 4, 1980, and for the submission of legal memoranda on the issues involved, saying:
We had called this meeting for the purpose of trying to obtain an input from the various parties as to the issues involved in these complaint proceedings against temporary rates, and in regard to the implementation of those issues.
We are not going to attempt ourselves to define the issues and restrict any~of the parties Os to any preconceived issues that we may have, nor are we going to restrict any of the parties from submitting whatever evidence they want on the issues as t:Ay envision them.
We do that for the purpose [that) in the event that any cf our views in regard to such matter are incorrect, the parties will have presented their case on the record, and whether we have considered any aspect of that evidence or those issues or not, the Commission will, nevertheless, have (that] before it and can make a final determination thereon.
~ As we understand it, the position of the Companies in the complaint proceedings is:
1.
That the Commission, at the time of its May 23rd Order, was under a duty to determine not only whether TMI-l should or should not be in rate base, but also o
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whether, even with the removal of TMI-l
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from rate base, the then existing per-
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manent base rates were just and reasonable.
2.
That had the Commission, at the time of j
its May 23rd Order, gone through a rate
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pr ceeding as required, it would have been shown that there.was at least an of* setting attrition of $26.9 million for Met-Ed and $11.7 million for Penelec.
3.
That the Commission, because of such attrition, even through removing TMI-l from rate base, should have left standing the then existing permanent level of base rates.
That Met-Ed and Penelec are entitled, in 4.
these complaint proceedings, to have restored the respective amounts which the Commission, without reasonable cause, reduced their base rates after it had decided that TMI-l was not used and useful.
That Met-Ed and Penelec hJ.e demonstrated 5.
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that just and reasonable levels of base ratas from June 1, 1980 to the present require, at a minimum, an increase on an annual basis of $26.9 million for Met-Ed and $11.7 million for Penelec, in tempo--
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i rary rates.
6.
That whether or not the Commission acted properly at the time of its May 23rd Order, the evidence presented by the Com-panies in these complaint proceedings requires that the base rates for Met-Ed i
and Penelec be restored, as of June 1,
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1980, to produce on an annual basis addi-tional revenues of $26.9 million and
$11.7 million, respectively.
That the Companies should be allowed to 7.
recoup, under Section 1310(e), the base rate reductions ordered by the Commission in its May 23rd Order.
That such recoupment could be recoversd 8.
as an addition to the deferred energy balance, to be applied as a uniform O,
charge to each KWH of sales subject t,o the jurisdiction of the Commission.
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On October 27, 1980, both Companies had filed
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petitions for an early determination of the complaint pro-ceedings upon the basis of $25 million for Met-Ed and $10 million for Penelec, conditioned upon the Commission's 4
acceptance of certain provisions therein contained.
They concede, however, that under the circumstances, it was not expedient to determine the complaint matt'ers until the record in both the complaint and general rate increase cases had been concluded.
After the close of the proceedings, the Companies still requested an early determination of their complaint proceedings.
While not formally withdrawing their
$25 million and $10 million offers, they have reverted to their original claims of $26.5 million and $11.7 million, respectively.
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In its complaint proceeding, Met-Ed, although claiming only the full restoration of the $26.9 million reduction in base rates in the temporary rates established for the Company by the Commission, contends that, excluding TMI-l costs, its revenue requirement based on future test year data and limited to a common equity return of 13.38%
and 9.83% overall return (as allowed in its last rate case),
is $35.2{3 million; that on a fully normalized test year on a common equity return of 15.5% it is $31.592 million; and
'that on the actual operations of the Company for twelve l
months ended September 30, 19'80 and limited to a 13.38%
common equity return it is $31.'198 million.
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4 In its complaint proceeding, Penelec, although
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claiming only the full restoration of the $11.7 million reduction in base rates in the temporary rates established for the Company by the Commission, contends that, excluding TMI-l costs, its revenue requirement based on future test year data at a 15.5% common equity return is $53.595; that on a 1
'ed historical test year with a 15.5% common equity retu_._ st is $19.517 million; and that based on l
actual operations of the Company for twelve months ended September 30, 1980 limited to a 13.12% common equity. return (as allowed in its last rate case) it is 011.508 million.
Bcth companies also cite their dire financial condition in further support of the restoration of their base rate reductions that were made in the temporary rates.
Various positions.have been taken by the other active parties in the proceedings:
(a)
Commission Staf$, the Consumer Advocate, Victaulic Company of America, and jointly St. Regis Paper Company, Nationa; Gypsum Company, P. H. Gladfelter Co., Abex Cor-poration, Airce, Inc. and Avtex Fibers, Inc., all oppose the requested rate relief in the complaints against temporary e
rates.
If any increase in temporary rates is granted, the Consumer Advocate woul'd agree to recovery on a KWH basis; all the above industrials object to any recovery on a IG'E basis.
i (b)
Louise Riley.and Senior Power Group; jointly, Standard Steel Division of Titanium Metals Corporation of America and PPG; jointly, Electralloy Corporation, Erie Mallhable' Iron Company, Franklin Steel Company, National Forge Co., Talon-Textron, The Proctor & Gamble Paper Products O
Company, United Refining Company and I
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l Universal Cyclops Corporation, all take O,
relief should be granted in the complaint no position as to the requested base proceedings.
If rate relief is granted, Louise Riley and Senior Power Action Group recommends recovery based on the KWH basis; the industrials oppose recov-ery, if any, on a KWH basis.
(c)
Bethlehem Steel Corporation supports the rate relief requested only if recovery is not on a KWH basis.
As we see it, tne only issues are:
(1) Did the Commission act properly in removing TMI-1 from rate base?;
(2) Did the Commission make the proper calculation in deter-mining the revenue effect of taking TMI-l out of rate base?;
W s there such a change in events (such as the and (3) a return of TMI-l to commercial operation) as would require a change in the level of the temporary rates?
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We need not address the suggested issue as to whether recoupment should be on a KWH basis, or otherwise, since such matter of recoupment is moot in view of our 4
decision herein.
We are inclined to agree with the indus-trials, however, that a substantial recoupment of base rates, if granted, through a deferred energy charge on a KWH basis, may not be the most appropriate treatment.
Review In our view, the problem involved in these pro-ceedings, though vexing, become less difficult when the matter is perceived in the proper perspective.
The appli-()
cation of Section 1310(d) must be made within its own
framework, without interplay with the provisions of O
section 1308.
The Commission's action in its May 23, 1980 Order was to remove TMI-1 from the rate base of each Company, and also to reduce the prior established revenue requirements.of the Companies by the revenue effects of such removal - $26.9 million reduction for Met-Ed and $11.7 mi111on reduction for Penelec.
The Commission took no action as to the remainder of either Met-Ed's or Penelec's investment; it made no change in the rate of return on the rate base, as corrected; it did not reduce the level of base rates on the corrected rata base.
In short, the Commission made no change in the proportionate revenue requirement as applied to non-TMI-1 capital investment.
While generally it may be true, as argued by the Companies,
()
that one cannot take a single item change in a company's operation and adjust rates thereon, here, where the Commission made the adjustment based'on the admitted total TMI-l revenue effect calculation, the procedure was justified.
While the TMI-l cost er*ect was based on the last rate case data, in all fairne.us, to the Companies, such approach was required in order to maintain compatibility with the th'en existing per-manent rates.
We see no merit in the contention of the Companies that at the time the Commission made its May 23rd order, it was required, under Section 1310(d), to investigate and I
determine whether the'then existing permanent rates were
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still just and reasonable; that in removing TMI-l from rate O
base, it was required to determine whether the revenue effect of such removal was offset by attrition; and if so, to make no change in the allowable revenue requirement of the Com-panies.
We do not agree that the Commission was required, in its action under Section 1310(d), to update all data relating to the operations of the CompaniIes.
If the Commission had taken no action on the rates on May 23rd, the then existing permanent rates, even though claimed by the Companies not to be just and reasonable because of attrition, would have remained in effect until the conclusion of the suspension period in the general rate increase cases.
Such lag is an inherent part of the regu-(])
latory system.
In the case of F.entral Maine Power Company v.
P.U.C. (Maine) 414 A. 2d 1217 (decided May 30, 1980) the temporary rates contested involved an adjustment of rates caused by the shutdown of the Maine Yankee' Nuclear Generating Plant (Maine Yankee) from March 15 to June 9, 1979.
There the Court said:
O The argument of the utilities.
3 appears to be the assertion of the posi-
's tion that the Commission, to make a valid te'mporarv alteration of an existing permanent rate, first must investigate,
)
and on the basis of that investigation 1
make a finding regarding whether the existing permanent rate to be altered has itself continued to be just and reasonabl& as a permanent rate.
Only in this manner, the claim seems to be, can
s l
the Commission have an adequate foun-dation for a second requisite step:
O-a determination and finding that the temporary alteration the Commission will be putting in effect is just and i
reasonable.
i On the hypothesis that the utilities are taking the [this] position the Commission attributes to them, we decide that it'indeed is unsound.
[at page 1231]
To accept the position of the Companies in this case -- that the Commission could not properly fix temporary rates under Section 1310(d) unless the Commission first investigated, and on the basis of such investigation made a finding regarding whether the existing permanent rates to be a'ltered has themselves continued to be just and reasonable --
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would nullify the intent of Section 1310 (d) and prevent the Commissica from acting promptly to protect the interests of the public.
By requiring the Commission to evaluate the continuing justness and reasonableness of the existing rate (less TMI-l effect) as a permanent rate would be to inject into a Section 1310(d) proceeding the prolonged and complex kind of investigation involved in proceedings under Sec-tion 1308 or Section 1309 of the Public Utility Code.
Thit:
would preclude the quick preventive action, on a temporary i
basis, that is the purpose of Section 1310(d) to authorize.
Moreover, we cannot accept the proposition that would naturally follow -- that the Commission, in eliminating
( -
a major capital._nvestment of a utility from its rate base
({}
under Section 1310(d), runs the risk that such action, from a rate aspect, could be nugatory (as claimed by the Companies),
or, even further, that it could result in an increase, rather than a decrease, in base rates.
In effect, what the Companies are saying here is that the Commission, in removing TMI-l from rate base, went through a useless exercise, that its action from a rt.e aspect was a vain effort; that its purported effort to protect the public interest went for naught.
Such thinking runs against the grain; it is incongruous.
3ut, the Companies argue, even assuming that the Commission was justified in fixing the temporary rates at the reduced levels of May 23, 1980, upon the information then available to it, its finding that the existing base rates were excessive have since been shown to be' invalid.
They 'ontend that under all of the evidence presented in the c
complaint proceedings, due to attrition, the then permanent rates since June 1, 1980 were shown not to be just and reasonable, even with TMI-l removal.
In removing TMI-l from rate base they say, the Commission must restore the rate reductions due to the offsetting revenue effect of r
~..
attrition of the then existing permanent rates.
We disagree.
Section 1308 of the Code provides for the procedure for voluntary changes in permanent rates by a public utility; Section 1309 provides the procedure for Commission-made per-
)' ()
manent rate changes, upon its own motion or upon complaint. t y
i f
It is true, of course, that a utility is entitled
({)'
to rates that are just and reasonable, but this is not to say that rates must fluctuate automatically with every change in economic conditions, or that a reasonable time may not be allowed for determining the reasonableness of a proposed rate increase before it is allowed to go into effect.
Hope Natural Gas Co. v. FPC, 196 F.
2d 803.
The confusion in these complaint proceedings arise out of an attempt by Met-Ed and Penelec to infuse into Sec-tion 1310(d) the rate increase procedures providing for in Sections 1308 and 1309.
A public utility, like other businesses, is required 1
~
to monitor the cost of doing business and to employ sound business judgment.
There is no requirement that the Commis-
, O sion correct, retrospectively, past errors of judgment made i
by 5he utility.
The impact of attrition to Met-Ed's and Penelec's permanent rates'go back to their last rate cases in March, 1979 and January, 1979, respectively, and not just to May 23, 1980.
If the permanent rates were not just and reasonable, these Companies could have applied for an increase i
in rates some 15 or 16 months before they did on July 29, l
1980.
In so saying, however, we must in all fairness, j
not be too critical with management for failing to file for timely rate increases.
The accident at TMI-2 on March 28, 1979 with all the problems related thereto, the investi-l()
gations involved, the financial pressures, the question of -
1 l
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political expediency in applying at the time for rate
()
increases, and all the rest, no doubt played a part in delaying a rate increase request.
But Section 1310',d) is not the proper vehicle for a utility to seek an increase in its permanent base rates.
It might be said that we are placing form over substance; that after all, the bottom line is:
What have been the just and reasonable base rates of Met-Ed and penalec since June 1, 1980?
In answer we must state that it is hornbook law that the Commission, as a creature of the Legislature, has only such powers as are expressly granted by statute, or as are necessarily implied therefrom.
Pennsylvania R. Co. v.
Pa.
P.U.C.,
187 Pa. Superior Ct. 590, 146'A. 2d 352; West Penn Rys Co. v. Pa.
P.U.C.,
135 Pa. Superior Ct. 89, 4 A. 2d 545; Day v.- Pa. S.
C.,
312 Pa. 381, 167 A.
565; Pittsburgh Rys. Co. v. Pa.
P.U.C.,
427 Pa. 562, 237 A.
2d 602.
The Commission is bound to the regulatory procedures spelled out in the Public Utility Code.
The Code provides that, except for extraordinary rate relief, the Commission has no authority to grant interim
_ rate increases during the suspension period of a rate increase filing.
To grant Met-Ed and Penelec the relief they request in the complaint proceedings -- tantamount to rate increases --
would result not only in interim rate increases during the period of suspension in the rate increase proceedings, but l
would also result in retroactive rate increases in a general
()
rate. proceeding, both prohibited by the Code.
l 4 l
t f
I
' ~,
We are aware of the dire financial conditions of
()
the Companies, especially Met-Ed.
But such does not warrant departure from the express mandates in procedure set forth by the Legislature in the Public Utility Code.
Within the discretion permitted, this Commission will address such financial problems in the general rate increase proceedings 1
of the Companies in an appropriate manner.
We find that Met-Ed and Penelec have not met their burden in the relief they seek under their complaints against the temporary rates established for them by the Commission.
Since we have considered the Companies' petitions for an early determination of the complaint proceedings to be in the nature of an offer of settlement, in view of our disposition of the complaints, it would appear that no action O-is required in connection with said petitions.
Findings of Fact 1.
By its May 23, 1980 order at I-79040308, the Commission removed TMI-1 from the rate base of Met-Ed and Penelec.
2.
By its said May 23, 1980 Order the Commission established temporary rates, effective June 1, 1960, for a period of six months, reducing the revenue requirements of Met-Ed and Penelec by $26.9 million and $11.7 million, respectively.
i.
v.
3.
On July 29, 1980, Met-Ed and Penelec each I
({).
filed a complaint at C-80072105 and C-80072106, respectively, against the temporary rates established for it by the said Commission's Order of May 23, 1980, requesting the restoration of said reductions in b'se rates of $26.9 million and $11.7 a
million, respectively.
4.
On July 29, 1980, Met-Ed and Penelec each filed proposed a tariff for an increase in its base rates by
$76.5 million and $67.4 million, at R-80051196 and R-80051197, respectively.
i 5.
The Commission on August 28, 1980 suspended the effective date of the proposed rate tariffs of Met-Ed and Penelec to April 27, 1981.'
6.
On or about October 27, 1980, Met-Ed and
()
^
~
o Penelec each filed a petition to implement possible early determination of complaint against temporary rates, providing for an increase in annual revenues in'the amount of $25 million and $10 million, respectively.
7.
Commission Trial Staff, the Consumer Advocate, and several industrials oppose the said' rate relief requested by Met-Ed and Penelec.
8.
Several industrials and one consumer group takes no position on the rate relief requested in said complaints.
9.
All d'dustrial parties oppose and recovery of said rate relief requested on a KWH basis.
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e
s.
. y 's 10.
THI-l is still not in operation.
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11.
The record in the proceedings on the said com-plaints and on the said general rate increase cases have been concluded.
12.
Met-Ed in its complaint proceeding has claimed
~
an increase in its annual base rate revenues in the amount of $26.9 million, retroactive to June 1, 1980.
13.
Penelec in its complaint proceeding has claimed an increase in its annual base rate revenues in the amount of $11.7 million, retroactive to June 1, 1980.
14.
We find that based on the future test year ending March 31, 1981, the annual revenue requirement for Met-Ed is S 301,.918,000 15.
We find that based on the future test year ending
()
March 31, 1981, the annual revenue requirement for Penelec is S 471,942,000 Conclusions of Law 1.
The Commission has jurisdiction over the subject matter and of the parties.
2.
The matters are properly before the Commission.
3.
Met-Ed and Penelec have not met their burden in their respective complaints against temporary rates.
4.
The base rate relief requested in said complaints should be denied.
c
v f.['I RECOMMENDED ORDER (Subject to Commission Approval)
IT IS HEREBY ORDERED:
1.
That the Complaint Against Temporary Rates of Metropolitan Edison Company, at C-80072105, be and is hereby dismissed.
2.
That the complaint Against Temporary Rates of Pennsylvania Electric Company, at C-80072,106, be and is hereby dismissed.
. =.
Joseph P. Matuschak Administrative Law Judge Q
March 20, 1981 c
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