ML19347E663
| ML19347E663 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 02/17/1981 |
| From: | Ogden W, Russell S METROPOLITAN EDISON CO., RYAN, RUSSELL & MCCONAGHY |
| To: | PENNSYLVANIA, COMMONWEALTH OF |
| Shared Package | |
| ML19347E637 | List:
|
| References | |
| 2382, R-80051196, NUDOCS 8105130193 | |
| Download: ML19347E663 (20) | |
Text
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f' IN THE COMMONWEALTH COURT OF PENNSYLVANIA No. 2382 C.D. 1980 METROPOLITAN EDISON COMPANY, Petitioner v.
PENNSYLVANIA PUBLIC UTILITY CCMMISSION, Fespondent
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BRIEF FOR PETITIONER AND REPRODUCED RECORD Petition for Review of the September 18, 1980 Order of the Pennsylvania Public Utility Commission at R-80051196 Samuel B. Russell
- d. Edwin Ogden RYAN, RUSSELL S McCONAGHY 530 Penn Square Center P. O. Box 699 Reading, PA 19603 (215) 372 u761 Attorneys for Petitioner 1
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TABLE OF CONTENTS l
R_rre ;0R e_ r_1_m.r.0.sLeR r
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- fage, I.
Statement of Jurisdiction......................
1 II.
Crder in Question..............................
2 III.
Statement of the Questions Involved............
7 IV.
Statement of the Case 8
V.
Summary of Argument 10 VI.
Argumen:
11 1.
It was unreasonable and unlawful for the Commission to enter ordering paragraph 1 of
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.h the subject Order without affording Me -Ed
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notice and a hearing with respecf thereto 11 2.
The issue cf whether such uninsured costs are recoverable from rarepayers (a) has never been raised by pleading or investigation before the Commission, and (b) has not been the subject of any lawful adjudication by the Commission..............................
13 Conc _,usion.....................................
17 v12 Appendices - Orders Below 1.
Commission's Order of April 19, 1979 at Ca79040829 2.
Commission's Order of June 19, 1379 at R-790u0308 3.
Commission's Order of May 23, 1980 at R-79040308 REPRODUCED RECORD I.
Relevant Decke: Entries la II.
ME/PN Statement E, Dirset Testimony of J. G. Graham.......
2a b'
III.
Letter to Oc= mission dated September 12, 1980 from Floyd J. Smith, anier Vice Precident, c
Metropolitan Edi. son Ccmpany.................
23a IV.
Commission's Order of September 18, 198J at R-30051195 52a s..............................
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Table of Citations F. age, Cases i
Baker v.
?a.?.U.C.,
14 Pa.C=with. 245, 322 A.2d 12 735 ('060)
City of Pittsburgh v.
Pa.?.U.C., 423 A.2d 454 (1980) 12 Fusaro v.
?a.?.U.C.,
34 Pa.Cmwlth. 14, 382 A.2d 71 79a (lo7a) j Statures i
L2. Pa.C.S. 3763 1
66 Pa.C.S. 5331(a) 11 55 Pa.C.S. sl303 8
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Statement of Jurisdiction 4
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Utis court has jurisdiction over this' Petition for
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F.eview by reason of 'Ja.C.S.
876 3 (direct appeals from govern-I t
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o II.
Order in Question PENNSYLVANIA PUBLIC UTILITY COMMISSION
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Harrisburg, Pennsylvania 17120
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Public Meeting held September 18, 1980 Comissioners Present:
Susan M. Shanaman, Chainnan Michael Johnson James H. Cawley Linda C. Taliaferro Pennsylvania Public Utility Commission v..
Docket No.
Metropolitan Edison Company R-80051196 PREHEARING STATEMENT AND ORDER BY THE COMMISSION:
O In a conventional public utility rate proceeding, this Comission must identify the resonable costs incurred by a utility in the provision of intrastate utility service, and must allow the utility the opportunity to collect the revenues needed to repay those reasonable costs. This Commission, however, does not ordinarily a ttempt to monitor or control the actual expenditures of revenues by a public utility, leaving it to the utility's managerial discretion to administer its revenues responsibly.
The instant application of Metropolitan Edison Company (Met Ed) for an increase in its operati.ng revenues appears before us as an ordinary general rate proceeding, and incorporates all of the legal and economic questions familiar to such a proceeding.
- However, due to the uniqua circumstances attendant to Met Ed's ownership 1
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of the Three Mile Island Nuclear facilities (TMI), this instant rate
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proceeding clearly involves issues of Met Ed's managerial discretion in
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its past, present and future dispersal of intrastate utility revenues.
j Yet we cannot ignore the substantial burdens imposed upon Met Ed by the cleanup and restoration of the TMI nuclear facilities.
It is this Commission's intent that in the resolution of the upcomi.ng rate proceeding, some control over the prospective dispersal of revenues by Met Ed will be exercised to assure that intrastate utility revenues are not used for purposes that have not been authorized by this Commission for providing intrastate utility service.
These recoverable costs exclude cleanup costs and restoration which are in excess of existing insurance coverage.
In our Order entered June 19, 1979, at Docket No. I-79040308, we said:
O "The Commission is of the view that none of the costs of responding to the [TMIl incident, including repairs, disposal of wastes and decontamination 'are recoverable from retepayers.
These costs are and should be insurable."
This position was reaffirmed in our May 23, 1980 Order at the same We reiterate that these cleanup costs and expenditures not docket.
covered by insurance ultimately are the responsibility of the company's stockholders and/or the Federal Government; however, they are not the responsibility of ratepayers.
l First, an examination of the prepared testimony of Mr. John G.
Graham, ME/PN Statement E, submitted in the current rate proceeding at R-80051196, indicates: (1) during t'he period July 1980 through 1981, Met O
Ed will spend $25 million for cleanup in excess of insurance recoveries; 4
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-4 and (2) cleanup expenditures currently are being funded in part by
- O monies generated through revenues specifically authorized by the Commission to enable the company to amotize the deferred fuel expense accourit.
From the testimony it is clear that the Metropolitan Edison Company may be spending revenues received from its ratepayers for purposes which have not been requested by the company and have not been authorized by this Commission. Now, we are concerned that the company's customers may not continue to receive the reliable public service tot which they are by law entitled, and that the customers may be paying for services which they do not receive. Accordingly, our current investigation must address and attempt to resolve these concerns.
When our authorization which enabled the company to amortize the deferred fuel expense account, was. granted the Commission presumed
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that upon receipt of revenue, the bank which provided the funds for this energy, would be repaid. The banks are not being repaid; rather, the company according to its own testimony appears to be using these funds to some extent for cleanup costs.
Having announced our position on the issue of ratepayer payment for cleanup costs, the Commission no longer can permit ratepayers monies, as distinguished from stockholder monies, to be expended for cleanup.
Alternatively, we must now undertake to police the matter in order to insure that ratepayer monies are not bei.ng used, currently or in the future, either directly or indirectly, to pay cleanup expenses.
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In a September 12,1980 letter to the Commission the
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Met Ed Company indicated its intention to reduce expenses through Ap'ril, 1981, by $34.3 million.
It intends to accomplish this reduction in expenses in part by:
reducing its coal inventories; further deferring transmission and substation construction projects; deferring the conversion of oil turbines to gas; reducing the planned work originally scheduled at Portland Unit #1 for the Spring of 1979; deferring deferred outages at Titus Unit #2; and further reducing its production, administrative and general personnel by 700 jobs.
In short, Met Ed has now indicated fts intent to curtail the provision of various maintenance and capital expenditure programs, thereby now clearly raising the issue of the company's intent to provide reasonable and adequate service, as required by the Public Utility Code, 66 Pa. C.S. 51501. This Commission will not permit service to deteriorate to unacceptable levels as a prerogative of O
corporate management; THEREFORE, IT IS ORDERED:
1.
That the Metropolitan Edison Company cease and desist from using any operating revenues for uninsured cleanup and restoration cos ts.
2.
That the Metropolitan Edison Company present evidence during the course of the rate invest.igation at R-80051196 showing precisely how it has spent the revenues it has collected pursuant to our May 23, 1980 order at I-79040308, wherein we permitted a 7.4 mill /kwh surcharge for the recovery of the deferred ene.rgy baaance.
3.
That the Metropolitan Edison Company provide evidence during the course of the rate investigation at R-80051196, identifying
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l the amounts dispersed for the non-insured cleanup and restoration costs at the Three Mile Island facilities since March 28, 1979, to date, l
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and the anticipated expenses for such purposes for the next three years.
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That the Metropolitan Edison Company identify, during the course of the rate investigation at R-80051196, precisely the source of the rever.ues it has utilized for the cleanup of the Three Mile Island facilities since June 19,1979, and precisely the source of the revenues it intends to utilize to clean up 'and restore the facilities during 1981.
5.
That Mee opolitan Edison Company and the Commission',s Tria; Staff is directed, and all other parties at R-80051196 are requested, to respond with specific information regarding the impact on their
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operations of the Metropclitan Edison Company's proposed service cutbacks indicated in its September 12, 1980 letter, and recommend appropriate action.
O BY THE COMMISSION, '
n WILLIAM P. THIERFELDER Secretary (SEAL).
ORDER,[ ADOPTED:$EP 18 $80 s \\
ORDER ENTERED:
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Statement of the Ouestion Involved Is it reasonable and lawful for a state utility rate regulatory agency to order a public utility to cease and desist from using any operating revenues derived under its presently effective tariff for uninsured cleanup and restoration costs associated with an accident at one of that utility's generating facilities when:
(a) no prior notice was given and no hearing 4s allowed prior to the entry of such order; (b) there was no pleading or investigation then pending before such agency with respect to any such uninsured
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costs; and (c) the issue of whether any such u insured costs n
are recoverable frc= rarepayers had never theretofore been raised before, or adjudicated by, such agency?
Answered in affirmative below.
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",3 Lf IV.
Statement of the Case On July 29, 1980,- pursuant to Section 1308 of the Public Utility Code
(" Code"), 66 Pa.C.S. 91308, Metropolitan Edison Company (" Met-Ed") filed with the Pennsylvania Public Utility Ccamission (" Commission") its Tariff Electric Pa.?.U.C.
No. 44
(" Tariff 44"), together with a mass of supporting data (including that required by Commission regulations at 52 Pa. Code 553.51 et seq.).
Tariff 44 proposed a general base rate increase of $76.5 million annually over the level of the temporary base rates, under which Met-Ed is presently operating.
The Tariff 44 was docketed at R-80051196.
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Tariff 44 seeks to increase the present level of temporary base rates which were fixed (by Commission Order of May 23, 1980 at I-79040308) to eliminate the capital, operating and maintenance costs of Unit No. 1 of the Three Mile Island generating station ("TMI-1") from Met-Ed's base rates.
Prior to the Maj 23, 1980 Order, the Commission had already removed from Met-Edi s base rates the capital, oper-ating and maintenance costs of the second nuclear unit at that generating station ("TMI-2") by Orders entered on April 19, 1979 (at C-79040829) and June 19, 1979 (at I-79040308).
These orders followed the March 28, 1979 accident at TMI-2.
Copies of the foregoing three orders are appended (v~'3 to this Brief (Appendices 1-3).
On July 29, 1980, Met-Ed also filed with the Com-mission a petition for extraordinary rate relief requesting
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g) iv that a portion of the proposed base rate increase be permitted to become effective on or before September 1, 1980, pursuant to Section 1308(e) of the Code.
The Commission assigned a separate docket number (P-80070235) to that petition.
Following four days of hearings, the issuance of a recommended decision to deny such relief by the Administrative Law Judge assigned to the case and the filing of exceptions by various parties (including Me -Ed), the Commission entered an order on August 28, 1980 denying the petition.
That order is the subject of an appeal by Mer-Ed to this Court at No. 2266 C.D.
1980.
Following the denial of the requested extraordinary
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rate relief, Met-Ed wrote to the Commission on September 12, s-1980 to curline the specific cash conservation steps Met-Ed would promptly have to take (including the elimination of some 700 jobs, further reductions in the already sub-normal maintenance programs for the transmission and distribution systems, etc.) in the absence of such rate relief (R. 23a-51a).
l The present appeal is from an order of the Com-mission entered September 18, 1980 (" Order")
following the Commission's receipt of the foregoing letter, in which (by ordering paragraph 1) the Commission directed Met-Ed to cease and desist from using any of its operating revenues
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fcr uninsured cleanup and restoration costs arising out of s_
the March 23, 1979 accident.
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Cn September 23, 1980, Me:-Ed filed with the Com-mission a petition for a temporary stay of ordering paragraph 1 of the Order in order to give Mer-Ed an opportunity to prepare and submit requests for modification and clarification of the Order.
By order of September 25, 1980, the Commission denied that petition.
7.
Summary of Argument The first ordering paragraph of the Order (which purports to restrict the use which Me:-Ed say make of its present operating revenues under the temporary base rates fixed by the Cc= mission's May 23, 1980 Order at R-79040308) is unlawful because it was entered without any notice or hearing whatsoever with respect to the possible imposition of any such restriction.
Moreover, the first ordering paragraph is without substantial evidence to support it.
It is predicated on an assumption that none of the costs of responding to the accident at the Three Mile Island nuclear generating station, including repairs, disposal of wastes and decontamination, are recoverable from ratepayers.
While Met-Ed is of the view that such an assumption is clearly contrary to law, the j
question of the recoverability (or lack thereof) of such costs has not presently, nor at any time heretofore, been
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raised as an issue before, or lawfully adjudicated by, the Commission, nor has Me:-Ed ever been afforded notice and a
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The first ordering paragraph of the Order con-stitutes arbitrary and unreasonable action by the Commission and a denial of Me:-Ed's rights to substantive and procedural due process.
VI.
Argument 1.
It was unreasonable and unlawful for the Commission to enter ordering paragraph 1 of the subject Order without affording Met-Ed notice and a hearing with respect thereto.
Section 331(a) of the Code, 56 Pa.C.S. 5331(a) provides as follows:
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"(a) General rule.
The commission may, on its own motion and whenever it may be necessary in the performance of its duties, investigate and examine the condition and management of any public utility or any other person or corporation subject to this part.
In conducting the investigations the commission may proceed, either with or without a hearing, as it may deem best, but it shall make no order without affording the parties affecrec thereby a hearing."
(emphasis suppliec).
The action taken by the Commission in the first ordering paragraph of the Order is squarely in violation of this very basic rule governing the conduct of the Commission.
This Court repeatedly has acknowledged that due process requirements and principles of fundamental fairness apply to administrative as well as judicial bodies, and that
- a. party may not be deprived cf substantial property rights O
v without adequate notice and an opportunity to be heard.
See Fusaro v.
Pa.P.U.C.,
34 Pa.Cmwlth. 14, 382 A.2d 794 (1978).
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The only area within the Commission's province in which such notice and hearing requirements have been relaxed concerns the power of the Commission (under the former statutory provisions of the Public Utility Law) to permit rates to become effective or suspend them pending decision concerning their lawfulness.
City of Pittsburgh v.
Pa.P.U.C.,
pa.Cmwlth.
,323 A.2d 454 (1980); Baker v.
Pa.P.U.C., 14 Pa.C with. 245, 322 A.2d 735 (197a).
This Court provided the folicwing rationale in Pittsburgh, supra, at p. 457:
"The reason that no hearing is required on the initial question of the suspension is that the failure to suspend does not amount to commission approval and refunds are available if the increase is later held to be unjustified."
s Clearly, such reasoning has no application to the Order here under review.
While ordering paragrapns 2-5 of the Order are merely investigative in nature and merely direct that Met-Ed provide certain information for the record during the course of the pending rate proceeding, ordering paragraph 1 purports to be a substantive determination by the Commission that Met-Ed may not use any of its operating revenues to pay for specific categories of costs.
Such a determination, applied without orior notice or a hearing, has deprived Met-Ed of the use of its property in violation of its constitutional (due process O) clause, 14th Amendment, U.S. Constitution; Article I,
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Section 9, Constitution of the Commonwealth of Pennsylvania)
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and statutory procedural and substantive rights.
To point out some of the more glaring examples, the order would, among other things, deny Met-Ed the right to use the following components of its operating revenues for uninsured cleanup and restoration costs at TMI:
depreciation accruals, i.e.,
invested capital which is recovered from rarepayers via depreciation.
Thus, the order would deny Met-Ed the right to use part of its own capital fer the purpose of protect-ing public health and safety by cleaning up the effects of the accident at TMI.
common ecuity return -- if indeed Me:-Ed were to r^g
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obtain rate relief sufficient to enable it to earn a return on its common equity capital, the order would deny Met-Ed the right to use that com=cn stock-holder return component of its operating revenues for cleanup at TMI.
Such unreasonable and unlawful acticn on the part of the Commission cannot be permitted to stand.
It has no evidence whatsoever to support it; it clearly violates Met-Ed's rights to substantive and procedural due process.
2 The Issue of Whether Such Uninsured Costs Are Recoverable From Ratepayers (a) Has Never Been Raised by Pleading or Investigation Before the Commission, And (b) Has Not Been The Subject of any Lawful Adjudication By the Commission 7sb By its April 19, 1979 Order at C-79040829 (Appendix 1 to this Brief), the Commission removed all of the capital
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14 rhV and operating costs of TMI-2 from Met-Ed's base rates.
That order had nothing to do with TMI cleanup or restoration costs.
Notwithstanding, the Commission stated (at page 2 of that Order:
the Commission cannot and will not sit back and allcw the rarepayers, by default, to be saddled with all of the costs of this accident.
There will be no automatic pass-through of costs to consumers without justification and full opportuni*v-for all to be heard." (emphasis supplied).
While no one can reasonably quarrel with such an observation, to the extent that it purported to relate to TMI cleanup costs that observation was purely gratuitous because no issue relatine ;o such costs was then before the p
k-Commission.
In view of the gratuitous nature of that ob-servation, it is disturbing to see (a) how the clearly enunciated right to be heard (as recognized in that observation) has been ignored in subsequent Commission orders and (b) how the Commission has come to assume that there was a lawful adjudication under the April 19, 1979 Order as to the recover-ability of such cleanup costs.
The Commission's June 19, 1979 Order (Appendix 2 to this Brief) at I-79040309 ackncwledged (at p. 12) that no claim has'been made (either by Met-Ed or its sister company) in that proceeding for cleanup costs, but then goes on'to state gratuitously (at p. 13):
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"The Commission is of the view that none of the costs of responding to the incident, including repair, disposal of wastes and decontamination are recoverable from rarepayers."
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Once again, the issue of recoverability of such cleanup costs was not then before the Commission and such language of the Commission's Order is another-gratuitous observation and not a lawful adjudication of any such issue.
4 The Commission's May 23, 1980 Order (Appendix 3 to this Brief) at I-79040308 disclaimed any retreat from the Commission's view as to uninsured cleanup costs (at p. 14).
However, ence-again, the issue of recoverability of such costs was not one of the three issues before the Commission in that proceeding (see p. 1 cf Appendix 3).
The present proceeding at R-80051196 arose from a general rate increase filing by Met-Ed that did not involve 7,V any claim for recovery of cleanup costs at TMI.
Notwith-standing, the Co= mission in its subject "Prehearing Statement and Order" of September 18, 1980 in that rate proceeding entered, without notice or hearing, the " cease and desist" order which Me:-Ed challenges.
The fact of the matter is that there has as yet been no occasion for the issue of recoverability of any uninsured cleanup costs to be raised before the Commission.
The record does not reveal, for example, whether that result flows from adequate coverage thus far of cleanup costs by insurance proceeds and other capital resources or otherwise.
The Commission has simply assumed that (a) the use of any or
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all components of operating revenues for cleanup purposes has been decided to be improper and (b) that Met-Ed has been spending current operating revenues for uninsured cleanup Costs.
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N The record cited by the Commission (and reproduced herein) and upon which it relied in its Order was a woefully inadequate basis for ordering paragraph 1.
The prepared testimony of J. G. Graham (R.2a-22a), Treasurer of GPU, cealt with the financial plight of Me:-Ed in general, and only incidentally touched on orojected cleanup costs (R.
15a) but clearly did not do so as support for any claim for such costs.
Yet the Commission, without giving anyone (including Me:-Ed) notice or an opportunity to be heard with respect to what it proposed to do, purported to use such projections through 1981 as the purported factual basis for its cease and desist order.
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The letter of Met-Ed's ' lice President (R.23a-51a) likewise provided no basis for ordering paragraph 1.
It was intended to address Met-Ed's response to the financial plight created by the absence of extraordinary Icee relief.
The Co= mission has, without notice or hearing, prejudged an issue which was not before it.
The Commission's action was arbitrary and unreasonable, had no substantial evidence to support it and violates Met-Ed's rights under the Public Utility Code and the above cited substantive and procedural constitutional provisions.
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VII.
Conclusion The issue of who will ultimately bear the burden of any uninsured cleanup costs of the TMI-2 accident is too important to be swept away by Commission fiat.
The un-founded and unsupported first ordering paragraph of the Commission's ? rehearing Statement and Order of September la, 1930, was entered without the required notice and hearing, is without substantial evidence to support it, and is contrary to the applicable' statutory and constitutional law.
That paragraph of such Order should be reversed.
Respectfully submitted, o
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Russell
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Edwin Ogden Ryan, Russell S McConaghy Attorneys for Petitioner Metropolitan Edison Company Dared: February 17, 1931 l
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