ML19208B779

Forwards Requested Financial Info & Orders Re Exclusion of Costs of Const Work in Progress from Util Rate Base to Consumers.Negotiations W/Four Banks for Notes Are Underway, W/Nuclear Fuel as Security

ML19208B779
Person / Time
Site:	Seabrook
Issue date:	09/17/1979
From:	Ritsher J ROPES & GRAY
To:	Rubenstein L Office of Nuclear Reactor Regulation
References
NUDOCS 7909210372
Download: ML19208B779 (34)

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ROPES & GRAY ,

225 FRAN KLIN STREET ,

GOSTON O2110

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canLE acomess ROPGR ALOR" aar a coor 617 423-0100

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September 17, 1979

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L. S. Rubenstein, Branch Chief Light Water Reactors, Branch #4 Division of Project Management

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United States Nuclear Regulatory Commission Washington, D. C. 20555 Re: Public Service Company of New Hampshire, Docket Nos. 50-443 and 50-444; Staff Request for Additional Financial Informa- I tion dated July 17, 1979. l

Dear Mr. Rubenstein:

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• I enclose twenty-five copies of material which Public Service Company of New Hampshire furnished directly to the Staff at its request.

Very truly yours,

'An b Jo'.i A. Ritsher JAR:vm1 Enclosures cc: Attached List

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Copies to: '

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E. Tupper Kinder, Esquire

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Alan \ S. Rosenthal, Chairman As'sistant Attorney General Atomic. Safety and Licensing Environmental Protection Division Appeal Board Office of the Attorney General U.S. Nuclear Regulatory Commission 208 State House Annex Washington, D.C. 20555

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Concord,. New Hampshire 03301

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Dr. John H. Buck Karin P. Shelden3 Esquire Atomic Safety and Licensing -

Sheldon Harmon, Roisman & Weiss

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Appeal Board U.S. Nuclear Regulatory Commission Suite 566 1725 I Street, N.W.

Washington, D.C. 20555

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Washington, D.C. 20000

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Michael C. Farrar, Esquire Dr. Ernest O. Salo Atomic Safety and Licensing Appeal Board Frofessor of Fisheries Rer'srch U.S. Nuclear Regulatory Commission CollegeInstitute Washington, D.C. 20535 of Fisheries

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University of Washington 92attle, Washington 98195 Ivan W. Smith, Esquire Atomic Safety and Licensing' Dr. Kenneth A. McCollum Board Panel 1107 West Knapp Street U.S. Nucle 2r Regulattry Commission Stillwater, Oklahoma 7407h

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Washingten, D.C. 20555 Robert A. Backus, Esquire

• Joseph F. Tubridy, Esquire O'Neill Backus Spielman 410.0 Cathedral Avenue, N.W. 116 Lowell Street Washington, D.C. 20016 Manchester, New Hampshire 03105 Dr. Marvin M. Mann Laurie Burt, Esquire

• Atomic Safety and Licensing Assistant Attorney General Board Panel One Ashburton Place

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U.S. Nuclear Regulatory Commission Boston, Massachusetts 02108 Washington, D.C. 20555 Lawrence Brenner, Esquire Office of the Executive Legal

.. Director g-U.S. Nuclear Regulatory Commission Washington, D.C. 20555

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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE Enclosures 1 - NHPUC Order !!o. 13,555 in DF 79-53, dated March 29, 1979.

2 - Statement regarding current status, nuclear fuel financing.

3 - Further response to question 5, in request for further information dated July 17, 1979.

4 - NHPUC Order No. 13,799 in DR 79-107, dated August 29, 1979.

5 - Status of Revolving Credit Agreement 6 - Revision 1, to c**achment 8 7 - Preliminary prospectus, dated September 6,1979 covering the sale of $50,000,000 of General and Refunding Bonds. (Forwarded under letter dated September 12, 1979 to L. S. Rubenstein.)

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07 79-53 FUBLIC SERVICE COMoANY OF NEW HAMPSHIRE Petition of Public Sertice Company of New Hampshire for certain authority with respect to the issuance and renewal of short-term notes.

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Appearances: for the Petitioner, Ralph H. Wood, Esquire for the LUCC, Harold T. Judd.

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By this unopposed petition filed W rch 13, 1979, Public Service Company of New Hangshire (the " Company"), a corporation duly organized and existing under the laws of the State of New Hampshire and operating therein as an electric public utility under the jurisdiction of this Cocznission, seeks authority pursuant to the provisions of RSA 369 to issue and sell far cash, and from time to time to renew, notes p.; sble less than twelve months after the date thereof (hereinafter referred to as 'Short-term Notes ) in such amounts that short-term notes outstanding at any time may aggregate up to but not exceed the maxime.s short-term unsecured indebtedness the Company may at any time issue or assume without a favorable vote of its preferred stockholders.

That maximum is set forth in subdivision 8(b) of Article V of the Company's Articles of Agreement, as follows :

" Twenty per centum (2u7.) of the total of (i) the total principal amount of all bonds or other securities representing secured indebtedness issued or assumed by l the corporation, and then to be outstanding and (ii) l the capital and surplus, less the amount, if any, by which Electrir. Plant Adjustments exceed re. serves pro-

, vided therefor, as then stated on the books of account l of the corpora tion."

l A public hearing was conducted on March 26, 1979 at the Cocunission.

Company witness Harrison testified that at January 31, 1979, uing the abovs formula, the maximum allowable amount of Short-term indebtedness was approxi-mately $121,700,000. The maximum will increase from time to time in b

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D7 79-5'3 oropos e .4 to the increa',e . the Company's secured indebtedness, capital and surplus. Harrison furcher testified that the Short-term Notes currently out-atanding amount. to $95,100,'000, and that the current projections would change this figure to 098,100,000, at March 31, 1979, and to $114,100,000, on April 30, 1979.

The proceeds of the asle of the Short- N rm Notes will be expended in tha purchase and construction of property reasonably requisite for present and future use in the conduct of the Company's business and for obher proper corporate purposes and will primarily be used to finance the Company's construction program on an interim basis. The Company stated that the con-struction program for the years 1979 - 1984 would include principally the following listed items estimated to cost about one billion forty-six million five hundred thousand dollars ($1,046,500,000) .

Estimated Construction Expenditures 1979-84 Facilities (Millions of Dollare)

Generation facilities Company's share of Seabrook Nuclear Plant $ 751.5 Participation in Other Planta 70.6 Other Generation 8.4 Total Generating Facilities 830.5 Transmission Facilities 106.4 Distribution and General acilities 109.6 TOTAL $1,046.5 The Company presently has lines of credit with banks aggregating

$100,350,000. All of the banks without the State of New Hampshire are presently lonning monies on a " Revolving Credit Agrewnt". This group has 1

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Indicated a willingness to increase their credit extension to the Company by another $20,000,000.

Y A balance sheet as of January 31, 1979, a statement of esticated cash flow for the period of February through April, 1979, and a copy 'f authorizing votes of the Company's Board of Directors were filed as Dthibits.

i De LUCC had no objadtion to an extension of short-term debt limits I

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and consented to waive any rights of appeal to the granting of the petition by the Coenission based on the evidence submitted.

We Comunission is ownre of RSA 369:1 which requires any utility to seek our approval concerning the issuance and sale of stocks, bonds, notes and I

any oi:her evidence of indebtedness. W e consnission has a duty pursuant to i l RSA 369:1 and 369:4 to consider the public interest in each financing arrange-ment contemplated by a utility. As a con. sequence, the Cocnission is hesitant to issue an open-ended order that would tie the Coaxniscion to an automntic

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However, the Connission is firmly convinced that the anxinsm allowable amount of short-term indebtedness should be extended;to $121,700,000 at this time since this order is being issued three days after the public hearing.

We Company is aware that quick regulatory cction is possible if necessary.

Based upon all of the evidence, the Cocanission finds that the anxinam short-teta debt limit should be raised to $121,700,000. W e proceeds from the Short-term notes will be reasonably necessary for present and future use i in the conduct of the petitioners business and for other corporate purposes.

The issuance and sale of Short-tem notes will be consistent with the public good. Our order will issue accordingly.

J. Michael _Iove Chairman Malcolm J. Stevenson , Coemissioner

( Francis _J. Riordan , Cocuissioner S84039 Concurring:

March 29, 1979 a

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2 Dr 79-53 PUBLIC SERVICE COMPANY OF NEW RAMPSHIRE y ..o0..

03DIa H g. 13.555 Upon consideration of the foregoing report, which is aude a part hereof; it is ORDERED, that Public Service Company of New Hampshire, be, and hereby is, authorized to issue and sell, and from tism to time rener, for cash its 1

Notes or Hotes Payable less than twelve (12) months after the date thereof in,q '

l an aggregate principal enount not exceeding one hundred twenty-one rnillion seven hundred thousand dollars ($121,700,000); and it is FURTHER ORDERED, that interest on bank borrowings will be at the prime rate or a rate of rates based on the prime rate; and it is FURUIER ORDERED, that on or before January first and July first of

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each year, Public Service Company of New Hatapshire shall file with this C Courni::sion a detailed statement, duly sworn to by its Treasurer or an Assist- l ant Treasurer, showing the disposition of the proceeds of the Notes herein au-thorized until the expenditures of the whole of said proceeds shall have been fully accounted for.

I By order of ths Public Utilities Comission of New Hampshire this i twenty-ninth day of March 1979. l l '

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x4 iincent . Iacopino

! Execut e Director and Secretary L 384040

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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATUS OF NUCLEAR FUEL FINANCING The Company is currently negotiating with a group of three banks for the sale of $25,000,000 of Secured Notes, such notes to he secured by the Company's ownership of nuclear fuel. The banks involved are as follows:

Marine Midland Banks, Inc.

Union Bank of Switzerland Credit Lyonnais Current plans call for closing on the sale of Secured Notes in early - to mid-October. A hearing on this matter was held before the New Hampshire Public Utilities Commission on September 7, 1979.

In addition to the above banks, the Company has entered into discussions with a fourth bank, which could lead to such fourth bank being included in the sale of Securc? Notes, bringing the total amount to $32,000,000.

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PUBLIC SERVICE COMPANY OF NEW liAMPSHIRE Further Response to Question No. 5 Of July 17, 1979 Request For Information The negative internal cash in 1979, 1981 and 1982 is, in each case, substantially less than the total AFDC, as follows:

Internal Cash AFDC (millions) 1979 $(19) $(32) 1931 (4) (55) 1982 (11) (65)

$(34) $(152)

In the normal regulatory model (i.e. AFDC is accrued so that investors in facilities may be compensated when such facilities are used in the public service) an implicit assumption is that dividends and interest payments associated with funds acquired to construct facilities will be added to the cost of such facilities; consequently the funds required to make such payments are construction costs, and like all construction costs, must be raised in a financing program. In the specific instances above, the shortfall ($34,000,000) is substantially less than what might have been expected ($152,000,000) using the normal regulatory model.

These funds will be raised as a part of the Company's ongoing construction program.

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%* CHAIRMAN VINCENT J. IAOOPINO J MICHAEL LOVE SECRETARY COMMISSIONERS ~"w' FRANCIS J. RIORDAN MALCOLM J STEVENSON Stutt of Nem 3 amps!;tre PUBLIC UTILITIES COMMISSION Concord 03301 Telephone Area Code 603 271-2452 PRESS RELEASE August 30, 1979 The New Hampshire Lblic Utilities Commission issued a Report and Order regarding the Exclusion of Construction Work In Progress from the rate base.

The Commission found that the Statute RSA 378:30a requires that the ,

Public Service Company of New Hampshire remove CWIP from its rates as of May 7, 1979.

The Commission ordered that a complete investigation of the electric rate charged by Public Service begin in an effort to establish a just and reasonable rate of return for the Company and a fair rate for the consumer.

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The above investigation shall include all pending requests by the Company and the Legislative Utilities Consumers' Council for increases or decreases in the present rates.

The Commission ordered the hearings to begin as soon as possible and has scheduled September 7, 1979 to review and establish the procedural aspects of the case.

The Order' established existing rates as temporary rates during the duration of the investigation or the further Order of the Commission.

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DR 79-107 I; PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 1,

] Exclusion of Construction Work in Progress from the Rate Base

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Appearances: Martin Gross, Esquire, for Public Service Company of New Hampshire; for the Legislative Utility Consumers' Council. Harold T.

Judd, Esquira and for the Community Action Program, Gerald Eaton, Esquire.

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l REPORT

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y; G3 May 7, 1979 the Governor of the State of New Hanpshire signed

N into law House Bill 155 amending RSA 378:30. This law precludes the I

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n inclusion of construction work in progress (CWIP) into rate base and thereby l

h' ultimately in rates and charges paid by consumers. The law became effective I

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as of May 7, 1979.

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j. In Public Service Company of New Hampshire DR 77-49 (1978) this '

I d i Commission found in favor of the inclusion of CWIP in rate base. The Com-b.

mission's decision was upheld on appeal by the New Hampshire Supreme Court

I 'LUCC v. PSCNH III, 119 N.H.

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(1979). Therefore, as of May 7, 1979 rates I and

! charges collected from ratepayers in Public Service Company's (hereinaf tet

I p referred to as PSC) service territory reflected the inclusion of CWIP in the rate base.

The Commission pursuant to RSA 378, Sections 1 through 31, was I j

compelled to initiate a formal docket as to the question whether the new l statute required the immediate removal of CWIP'from existing rates as of l ,

May 7, 1979.

If the new statute was found not to apply to existing rates, then the aforementioned Commission decision would continue to be the law the Commission would be bound to uphold. No further inquiry would be necessary.

If, however, the new statute was found to supercede our order as of May 7, 6 i

1979, then the commission would have to embark upon an investigation as to wh.tt

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, were just and reasonable rates for both PSC and its consumers. OSOO44 ,

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Consequently, the Commission in its Order No. 13,617 specifically *

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limited the scope of the initial stage of this docket to the legal question l of whether or not RSA 378:30-a required the removal of CWIP from existing rates. The Comission refused to allow the inclusion of testimony presented by the Company as to the various economic factors affecting the Company.

It was the Comission's position that such inquiry would lead to a full rate investigation which would be unnecessary if the law did not change the exist-ing rates. While RSA 378:7 allows for a rate investigation prior to the expiration of a two-year period following a previous decision, the Comission attempts to adhere to the general rule of waiting the two years unless there I

are unusual circumstances or a possible confi.*.ation of property. It was these aforementioned conev.ns that were of consequence to the Comission -

when it embarked on formal hearings on June 5, 1979. The Comission later requested memorandum from all parties which were receised by the Comission l o.n June 12, 1979.

l Before reaching the merits of the proceeding, the Comission must address the procedural question raised by the Granite State Alliance (hereinaf ter referred to as the " Alliance"). The Alliance contends that the newly passed statute is clear as to its intention to remove CWIP from electric rates as of May 7, 1979. The Alliance further contends that the statute is unambiguous and, therefore, no hearing is required. The Alliance concludes its arguments with a request that ratepayers be spared any expenses incurred by the Company or the Commission because of the alleged unnecessary hearing.

Th'e Alliance's contentions, however, flounder when placed on the shoals of New Hampshire statutes which govern the operation of the i

Comission.

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I l New Hampshire RSA 378:7 was used by the Comission to initiate these proceed-ings because the Comission was concerned with the possibility that the conti-nued billing of rates based on the inclusion of CWIP in rate base after May 7,1979 was centrary to the provisions of RSA 378:30-a. New Fampshire RSA 378:7 states:

Whenever the Comission shall be of the opinion, af ter a_ hearing, had upon its own motion or upon complaint that the rates, charges demanded or collected or proposed to be demanded or collected by any public utility in service rendered or to be rendered are...in any wise ;n violation of any provision of law...the Comiss.on shall determine the just and reasonable or lawful rates, fares and charges to be thereafter observed and in force as ,

the maximum to be charged for the service to be performed and shall fix the same by ceder to be served on all public utilities by which such rates, fares and charges thereafter to be observed.

(Emphasis Supplied)

The West Virginia Public Service Comission recently was confronted with a similar problem where the West Virginia Legislature amended its statute and thereby decreased the state business and occupation tax on domestic sales of electricity, VEPCO v. West. Virginia Public Service Comission W. Va.

248 SE2d 322, 28 FUR 4th 12 (1978). He West Virginia Comission's response to the legislative initiative was to order VEPCO to imediately reduce rates and provide refunds so as to pass through to the utility's cust-mers this reduction in the utility's cost of doing business. We Comission in that proceeding chose not to have a hearing.

We West Vf rginia Supreme Court reversed the Comission's decision because of ,the failure of the Comission to conduct a hearing. He West Virginia Statute 24-2-3 (1923)' is very similar to RSA 378:7 both as to languagc and intent. Both clearly delineate that the Comission can only act "af ter j

hearing". As the West Virginia Supreme Court stated:

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Laudable as the Commission's goals may be in attempting to reduce the burden on utility con-sumers in this age of inflation, there is no ques-tion that a significant reduction in a utility's tariff is a taking of property which must be accompanied by some fair procedure to preclude an unlawful taking.

The business and occupation tax is but one element of a utility's cost and before the Commission can pass through a reduction in that cost to consumers by changing the effective tariff, it must permit the utility to demonstrate that on its side overall costs have increased which would imply that a timely tariff reduction will effectively reduce the utility's rate of return below the constitutionally mandated fair rate of return. 28 PUR4th at p. 15.

The New Hampshire Supreme Court has likewise found the necessity of a hearing in any proceeding in which the Commission is involved in an investigation of rates. New England Telephone and Telegraph Co. v. State, 95 NH 353, 64 A.2d 9 (1949).

I The recently passed Administrative Procedure Act, RSA 91-A also, requires that meetings or hearings be open to the public. The spirit of o

i this law, as well as the statutes governing the operations of this Commis-l sion, are designed to encourage rather than discourage the hearing process.

These considerations have recently been part of the rationale behind the Commission's rejection of attempts by certain New Hampshire utilities to negate the procedural due process afforded in a hearing on temporary rates.

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Manchester Cas DR 78-100 (1979), Pennichuck Water Co. DR 79-3 (1979) and

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Hampton Water Works DR 79-51 (1979). As the Commission stated in the latter proceeding: ,

"The Commission while exercising its quasi-judicial capacity must observe the traditional safeguards against arbitrary action. Furthermore, the fun-

• damental requisites of due process of law and pro-cedural due process require that notice and a timely and reasonable opportunity to be heard be given to people whose rights will be affected by the Commis-sion's decision."

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Those people whose rights will be affected by a Commission decision can be either shareholders or consumers, and neither will be denied due process by arbitrary action.

The Alliance also raises the question of whether or not it is a party to this proceeding. At the public hearings this issue was addressed from the bench. In that ruling the Commission stated that the Alliance's status was one of a limited appearance and not a party. The rationale for this ruling is the failure by the Alliance to sufficiently notify the Commission of the desire to actively participate or to state why its interests are affected by the overall proceeding, or that its interests were necessary for a f air evaluation of the issues and that theit interests were not represented by other parties to the proceeding.

Support for these requiremants can be found in a recently rendered decision by the Ohio Supreme Court. Office of Consumers Council b v. Public Utilities Commission, 56 Ohio St. 2d 220, 383 N.E. 2d 593 (1978).

II In that proceeding, the Ohio Supreme Court upheld the Commission's decision to restrict intervention of a participant when that participant: (1) filed its appearance that day; (2) f. tiled to file objections prior to the hearing; or (3) failed to senk prior approval of its leave to intervene. To do other-wice fails to give adequate notice of the parameters of the proceeding to those parties who respect the rules and regulations of the Commission as well as fair play by filing appearances and objections sufficiently in advance of the initiation of the proceedings.

The Commission, therefore, continues to uphold its decision that the Alliance is a limited participant rather than a party to this proceeding.

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, PSNH Position l

PSNH's position is that nothing in RSA 378:30-a either expressly or impliedly voids the Commission's rate order of May 25, 1978 nor requires the Commission to disturb the order. PSNH provides an additional argument that the legislative ~ history of the debate on this

• statute supports PSNH's contention that existing rates can continue to be based on the inclusion of CWIP in rate base.

In addition, PSNH argues that if RSA 378:30-a is used to exclude existing CWIP from rate base, such a result would be a retroactive applica-t, tion of a statute and thereby void. Finally, PSNH argues that even if L

RSA 378:30-a requires the removal of existing CWIP from the rate base,

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there is no f actual basis on the record for revising the rate order of i

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May 25, 1978 or tariff #22.

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Community Action Program Position i

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The Community Action Program (CAP) supports the Commission's order #13,617 that existing rates must be based on a rate base exclusive of CWIP. CAP asserts that the Commission is a delegation of the legislature and is thereby bound to comply with its direction which CAP argues is embodied in RSA 378-30-a. CAP conterdsthat while previous statutes governing the operation of the Commission were devoid of any prescribed methodologies, RSA 378:30-a specifically prescribes such a methodology.

l As to statutory construction, CAP relies on prior Supreme Court decisions for the proposition that RSA 378:30-a is plain and unambiguous and that its plain meaning must be upheld. CAP asserts that compliance with the statute's plain meaning requires axisting rates to be based on a rate base absent any inclusion of CWIP.

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.. d I; LUCC Position i

The LUCC's position is that RSA 378:30-a does not provide any discretion to the Comission as to compliance with the statute. LUCC argues that the statute is clear on its face and abs'olutely prohibits 1

. any continued inclusion of CWIP in the rate base. Consequently, the LUCC

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contends that the passage of the statute requires the Comission to alter l ,

the rates presently in effect.

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i 1 The LUCC also contends that the Commission is a delegation of

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o; e the legislature's power to regulate and that the legislature can impose h conditions upon exercise of such delegated authority, i'

h As to the recent case of LUCC v. PSNH,119 N.H. (1979),

l the LUCC argues that it should be given a very minor role in our decision process due to the focus of the opinion being prior to the passage of the statute.

Ambiguity Question

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The first question to be addressed is whether or not RSA 378:30-a f is unclear or subject to more than one interpretation. In performing

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that analysis, the Comission must attempt to apply the hierarchy established by decisions of our Supreme Court to statutory interpretation.

At the pinnacle of this hierarchy is the language of the statute itself. Plymouth School District v. State Board of Education, 112 N.H. 74, 289 A.2d 73 (1972); Ahern v. Laconia Country Club Inc.,

118 N.H. ,392 A.2d 587 (1978). The New Hampshire Supreme Court placed the rule in the following context in its Ahern decision.

"Thus we must look to the language of the statute itself as the prime determining factor in its interpretation. Where the language of the statute is plain and unambiguous the statute must be given effect according to its plain and obvious meaning.

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[ 82 C.J.S. Statutes g322 (1953). The legislature I must be presumed to know the meaning of words, and to have used the words of a statute advisedly.

73 Am. Jur. 2d Statutes g196 (1974)." 119 N.H. at While the legislative intent of a section in question is to be determined from its language as a whole snd not from a particular word or phrase, Costoras v. Noel,100 N.H. 81, 83,119 A.2d 705, 706 (1956),

the statute will not be construed unicas the meaning of the statute i

words contained therein are unclear. State v. Wilton, 89 N.H. 59 (1937).

In examining the language of a statute, significant words are 3 not to be rejected or rendered ineffectual by construction, but the i.

.I il statute is to be so read "as to give every part its due weight." Jewell

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so that "no clause, sentence or words shan be superfluous, void or

.' insignificant." Tilton v. Tilton, 35 N.H. 430, 432.

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RSA 378:30-a states the following:

"378:30-a Public Utility Rate Base; Exclusions Public utility rates or charges shall not in any f manner be based on the cost of construction work i

in progress. At no time shall any rates or charges be based upon any costs associated with construction 1l, work if said construction work is not completed.

All costs of construction work in progress, including

!j but not limited to, any costs associated with constructing, owning, maintaining or financing construction work in progress, shall not be included in a utility's rate base nor be allowed as an expense for rate making purposes until and not before, said construction project is actually pro-viding service to consumers.

2. Effective Date. This act shall take effect upon

,assage."

p This statute does not lend itself to ambiguity. Language such as "shall not in any manner", "at no time" and "all costs" are clearly 384051

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terms which any legislator has a full understanding. These terms are not subject to two different interpretations. Furthermore, there are no exceptions, exemptions, or modifications as to either the effective date, the companies involved or the mandate.

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PSNH coottids that nowhere in the statute does there appear language which requires the Commission to void its order of May 25, 1978.

PSNH then sets forth three alternate sets of language that were never l discussed in the legislative history, proceeds to discus ~s'.them and then arrives at a conclusion that there is no express language in the statute l requiring the Comission to void its order.

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J The Comission cannot find value in speculating as to what additional terms the legislature could have added. If the question could be resolved by this imaginative approach, the Comission would have to consider arguments from the other parties such as 'since the statute fails

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ll to state terms like "this statute applies to all further CWIP increases,"

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[ the existing CWIP charges should be removed. ' Such imaginative arguments, h'Ias well as those proposed by PSNH, fail to address the actual language li j of the statute. It simply is not our function to speculate upon any II i supposed intention not appropriately addressed in the act itself. Ahern

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v. Laconia Country Club Inc., 119 N.H. (1978).

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PSNH miscasts the issue when it argues that the legislature did l l not intend to " void" the Comission's order of May 25, 1978. The true I

question presented is whether the legislature has so changed the law that the Comission must change its rate order.

While PSNH claims there is no express requirement in the statute to change or void the order, this interpretation becomes a victim of the plain language of the statute. Each sentence clearly states that rates can neither be based on, nor charged to, customers if they are based on CWIP. The final sentence also states when and only when such

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. 1 I} charges can be made to consumers, namely, af ter the plant is completed, d

ilI Since the Comission has the statutory authority to supervise utility practices (RSA 374:3) and set just and reasonable rates (RSA 378:7) it is clear that this language is a directive for which the legislature expects compliance. When the legislature enacts a statute involving a public

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utility ratemaking methodology, it is fair to assume that they know / ich I

agency they have entrusted with that power.

If this Comission f ailed to respond to this clear legislative mandate, the Comission would be in direct violation of RSA 374:2, which states the following:

I ji " Charges. All charges made or demanded by any public ij utility for any service rendered by it or'to be rendered ji in connection therewith, shall be just and reasonable jj and not more than is allowed by law or by order of the q public utilities comission. Every charge that is lj unjust or unreasonable, or in excess of that allowed by I law or by order of the comission, is prohibited."

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Consequently, the Comission finds that rates or charges based p -

p on the inclusion of CWIP in rate base are no longer allowed by State law, i

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j Retroactivity Question

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The next question to be addressed is one of retroactivity. If the statute has retroactive application, there becomes an additional consi-deration of constitutionality under Part I, Article 23 of the New Hampshire Constitution. Before proceeding to answer this question, it is necessary

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to note that all parties agree that RSA 378:30-a has no impact prior to I

May 7, 1979. The application of the statute to existing rates beginning on May 7,1979.is where the divergence in position appears. The question to be answered is whether application of RSA 378:30-a to existing rates is retrospective as maintained by PSNH or prospective as maintained by LUCC and CAP.

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spective or prospective application of a statute is that all statutes I'

affecting substantive rights are to have prospective effect only unless there is a clear legislative statement that the statute is to have retro-l spective effect. Lessard v. Manchester Fire Department, 118 N.H. 43, 47

(1978). "The presumption that a statute applies prospectively only is i

j reversed when its purpose is remedial or a contrary intent is shown."

!

i Pepin v. Beaulieu, 102 N.H. 84, 89 (1959) citing 82 C.J.S. 993, 50 Am.

l Jur. 505.

! PSNH relies on Pepin decision in stating that if the Commission

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l'i; removes CWIP from the rate base that supports existing rates, the Commis-h sion would be applying the statute retrospectively. PSNH argues that to

'i apply the statute in this fashion "will take away or impair vested right j' , acquired under existing laws". Also that such an application would " create a new obligation, imposes a new duty or attach a new disability in respect

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f to transactions or considerations already past", (Pepin at p. 89.) and

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thereby must be deemed retrospective and in violation of the New Hampshire

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Constitution, Article I, section 23. PSNH alleges that the award of a l rate increase which was based in part on the inclusion of CWIP in rate l ' base has become a vested right and that as such neither the legislature l

I nor the Commission can tamper with this alleged vested right.

The New Hampshire Supreme Court has been reluctant to find vested rights in any instance and has noted that success on these grounds have been infrequent in this state and most other jurisdictions. Vachon

& Sons, Inc. v. Concord, 112 N.H. 107, 110 (1972) citing Dumais v.

Somersworp , 101 N.H. 111, 115; Annot., 6 A.L.R. 2d 960 as cited in

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384034

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f Arsenault v. Keene, 104 N.H. 356, 358, 18 A.2d 60, 61 (1962).

i The question of whether or not a public utility rate or level I of rates are vested rights for all practical purposes were resolved in New England Telephone & Telegraph Co.,104 N.H. 229,183 A.2d 237 (1962).

i here the Co= mission found that existing rates were allowing a return on rate base in excess of that found to be a just and reasonable rate of return and ordered a reduction in rates. New England, 104 N.H. at 232.

There the Supreme Court upheld the Comission findings by finding "that there is more than one rate that may be a just and reasonable rate of return.

] The area between the lowest rate that is not excessive and extortionate has been referred to as a zoae of reasonableness." 104 N.H. at 232-233 citing i Banton v. Belt Line Ry., 268 U.S. 413, 423; Atlantic Coast Line v. Florida, i'

295 U.S. 301, 317.

The Supreme Court ' ent on to etate that rate:s must be just

[ and reasonable and that the "Coc; mission will make adjustments in the rates of utilities to maintain them at a just and reasonable level. RSA 378:7.

I j This standard is to prevail whether rates are reduced or increased.

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PSA 378:27, 28". 104 N.H. at 240. If the Comission is to make adjustments

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into rates to maintain them at a just and reasonable level and that further these adjustments can either raise or lower rates, it is impossible to

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conclude that a level of rates, let alone a ratemaking methodology, is a vested right.

i l What PSNH is entitled to is "a just and reasonable rate base and a just and reasonable rate of return thereon". RSA 378:28. Public Service Co. v. State, 113 N.H. 497, 508, 311 A.2d 513, 520 (1973). Nothing in this report deviates from that statutory mandate. As a consequence,

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PSNH is not prejudiced by this decision.

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i 384055 1

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Nor can the Cemission find i. hat our action in this order creates a new obligation, duty or disability in respect to transactions or considerations in the past. The Comission is still obligated to ' set .

I just and reasonable rates alba'.t with due respect to RSA 378:30+a. That mandate has not changed. Furthermore, since the Comission is not applying RSA 378:30-a to any rate or charge rendered to consumers prior j to May 7, 1979, the Commission is not altering any events prior to May 7, 1979. The Comission is thus applying RSA 378:30-a to events or rates aft 6c May 7, 1979 and thereby prospectively.

Legislative Debate il PSNH introduced the Hi se debate on the bill that led to

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( RSA 378:30-a. PSNH relies upon various passages of the debate to support l

] its contention that RSA 378:30-a doesn't apply to rates being rendered i

daily to consumers after May 7, 1979.

While the Comission finds the statute unambiguous, and therefore Linds it unnecessary to examine materials outside the four '

corners of the statute, the House debate does not disturb the plain

,j meaning of th statute.

To begin wi'.4 the statute was not changed from its inception. It was filed and passed with the exact same language. As to the leCislators who spoke during the debate, only eight legislators can reasonably be determi; 1 to have addressed the application of the statute to existing rates.

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Those legislators are Representatives Quimby, Morgan, Wight, Wiggine.

Snell, Lamy, Chambers and Spirou. Of these eight only the latter two actually g spoke in faitor of the bill. As a consequence it is these legis1ators that have any relevance.

Representative Spirou indicated on Page 61 of Exhibit 2 the f ollovj ng:

"CWIP charges are not going to be a vehicle for them to conduct their business. It is all over."

Representative Chambers, who the Company cites,

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addressed tne issue on pages 15-16 of Exhibit 2. While her comments aro lengthy a key passage is as follows:

l "From the time of passage of this bill-

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I CWIP is not a viable way to raise capital."

l page 15.

These passages together with the plain language of the statute support the decision arrived at by the Commission in this order. Representa-tive Chamber's comments about fair hearings, rebates and present CWIP must l be read in conjunction with her early statement that from the day of I

passage CWIP is no longer a viable way to raise capital. If the Commission were to hold otherwise, the Commission would not be honoring either the

specific lat.uage of the statute or comments by these two legislators.

The Commission cannot possibly know or understand the motivations of all the. legislators that voted either in favor or against the creation of the new statute. Here lies the logic of applying the plain language of the statute and not construing the statute unless the words contained therein

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are unclear. The Commission finds the words to be clear as to their

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meaning. For this reason the Commission must now review what factors go into the cenoideration process of determining just and reasonable rates and thereby the revenue requirement.

As will become evident, the Commission finds the decision by the West Virginia Supreme Court persuasive not only as to the requirement of a hearing but also as to requiring a full investigation as to the present financial needs of the Company balanced against the rights of the public.

VEPCO v. West Virginia Public Service Commissio. W. Va. 248 SE2d.332, 28 PUR 4th .12 (1978).

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384067

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Revenue Involved The most disturbing aspect of this case is the misstatement l by both the LUCC and PSNH as to the revenue involved in this docket.

Contrary to the assertions made by both these parties, the amount in contraversy is not $18 million dollars. Both of these parties focus their attention solely on the question of the inclusion of CWIP in rate base. In doing so, both ignore the standard ratemaking practice where rate base is only one f actor in determining overall revenue requirements.

Although in f airness PSNH at best tried to focus on other aspects thrcugh the testimony of witnesses Frain and Harrison. Therefore, the Commission i -

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believes it necessary to re-examine the entire revenue question for this Company.

To do so, it is necessary that the parties, as well as others i

who read this opinion, understand the ratemaking considerations that have i

j an impact on the revenue requirement for a particular utility. The

!i p overall revenue requirement is determined by applying the following I

formula:

R = E + (v-d)r where: .

R = Operating Revenues E = Operating Expenses (such as salarias and taxes)

V = Value of rate base (which includes plant in service, working capital plus intangibles) d = Accrued or accumulated depreciation r = Rate of return Prior to the passage of RSA 378:30-a, the Commission was not bound by any narrow or rigid concepts of ratemaking. LUCC v. PSCNH III, 119 N.H. at Slip Opinion p. 7 and 19 (1979). The statutory scheme dictated that this Commission's ratemaking power was " plenary save in a

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few specifically excepted instances". State v. New England Tel. 6 Tel. Co. ,

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103 N.H. 394, 397, 173 A.2d 728, 730 (1961), citing Lorenz v. Stearns,

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! 85 N.H. 494, 506, 161 A. 205, 212 (1932). As of May 6, 1979, the

'l' statutory scheme for public utility regulations mandated by the legislature in RSA ch. 378 clearly expresses an intent that the Comission be afforded wide parameters within which to exercise its judgment.

RSA ch. 378 was conspicuously devoid of any prescribed methodologies.

[UCC v. PSCNH III, 119 N.H. at Slip Opinion p. 19. However, as of May 7, 1979, this situation has changed. The legislature by its action has mandated a specific ratemaking methodology on the Comission through its amendment to RSA ch. 378. The plenary power of the Commission while still strong now has one additional specifically excepted practice.

I Thus when the Comission calculates the "R" it now must be nindful that

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when a value for the rate base is found ("V") that such value must be absent any inclusion of CWIP.

l. While this limitation on rate base must be complied with in t

f both existing and future deliberations, the Comission still has the duty to balance the interests of the investor and the consumer through the establishment of just and reasonable rates, the " touchstone" for utility regulation. Therefore, the Comission must embark upon a rate-making proceeding to determine just and reasonable rates given the above formula.

This task, while always complicated and extremely technical,

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has increased complexity because of the major changes that have occurred since our May 1978 order. These changes can be better understood by l

. an application of the aforementioned formula to the PSNH situation.

0 Expenses or "E" have changed but these changes, contrary to the usual situation, have been both upward and downward. For example, while expense items such as salaries and property taxes have increased 384059

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due to inflation, federal income taxes have decreased due to the lowering i

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of the effective tax rate from 48 to 46 percent. What the net effect as to expenses is in a comparison between May 1978 and August 1979 is not i

apparent from the record. However, records filed with the Commission tend to indicate a slight increase but hardly conclusive given the lack of a complete investigation.

The next factor, "V - value of rate base" also has changed.

The Commission included $111,258,428 of CWIP in rate base in its May of 1978 opinion. RSA 378:30-a only requires that portion that remains un-finished to be removed. ' A portion of this CWlP inclusion is related to I.

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the Wyman #4 plant, which is now operational and serving the public.

Furthermore, the Company's investment in that particular plant has increased over what was allowed into rate base as of May,1978. Consequently, i

even as to CWIP the entire amount included in May of 1978 is not excluded

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l by operation of RSA 378:30-a. In addition, new investment in completed transmission and distribution facilities prudently incurred and operational g would be included in rate base now v'hereas they were not even started during

] the pendency of the last proceeding.

Another element of "V", or the value of rate base, is working capital. The Commission has opted for the balance sheet approach to working capital since the last PSNH proceeding. This approach has been applied in Cranite State Electric, DR 77-63 (1978), Concord Electric, DR 77-142 (1978) and Hudson Water Co., DR 78-135 (1979). The balance sheet approach as opposed to the previous 45-day allowance has resulted in a lower working capital allowance for Granite State Electric and Concord Electric and a higher allowance for Hudson Water Co. The effect on PSNH, which had its previous working capital allowance arrived at via the 45-day procedure, is unclear at this time.

384060

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With changes in plant, as well as technology, come changes f in depreciation or "d". This factor is usually determined by a study, which focuses on considerations of useful life salvage value and the like, and cannot be predicted. However, again it is logical to assume that existing depreciation charges would be higher than those found in DR 77-49, the previous PSNH proceeding, because of increased completed plant.

The most difficult factor as far as evaluation and the one with the greatest impact is the "r", or rate of return. This calculation is the product pf the weighted averages of debt, preferred stock, common stock multiplied by their cost rate. The cost rate of debt and preferred stock are generally agreed upon by all experts to a proceeding as they are readily ascertainable. Applying this consideration to PSNH, the debt and preferred costs are more costly than at the time of our last proceeding.

All other things being equal, this would increase the required overall rate I

of return.

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j However, all things are not equal and a large factor in any new evaluation as to overall rate of return is the return allowed on common equity. The Commission has developed methods to evaluate what this return would be for any given utility. This Commission, as well as the New Hampshire Supreme Court, has applied the test set forth in FPC v. Hope Natural Gas.

320 U.S. 59, 64 S. CA. 281, 51 PURNS 193, 88 L.Ed. 333 (1944) and Bluefield Waterworks v. West VA Public Service Commission 262 U.S. 679, 43 S. Ct. 675; 67 L.Ed.1176 (1923).

These cases require the Commission to set rates that will:

"... permit it to earn a return on the value of the property which it employs for the convenience of the public equal to that generally being made at the same time and in the same undertakings which are attended by corresponding risks and uncertainties;" 262 U.S. 679, 692-93 (1923)

"be commensurate with returns to the equity owner in other enterprises having corresponding risks." 320 U.S. 591,603 (1944) bbOtOO1

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To measure these risks, the Commission has developed criteria l (Public Service Company DR 77-49 1978, Pennichuck Water DR 79-3 1979),

of which the following are the most important: market-to-book ratio, construction program compared to existing rate base, percentage of AFUDC, yield, average ratios, debt-equity ratios, dividends per share, and earnings per share. As to the first three of these criteria, PSNH is riskier than it was in May of 1978, whereas as to the last five, they are less risky.

However, before reaching any conclusion as to a reasonable return on common equity, a comparison would have to be made to other companies and

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industry composites. Furthermore, the fact that PSNH may no longer include CWIP in rate base may increase their overall risk to investors substantially.

It is sufficient to state that at this early stage of investigation that based on information routinely filed with the Commission, PSNH is entitled to an overall rate of return higher than what was allowed in the last pro-ceeding.

This overall revenue situation is complicated by many factors, not the least of which is what percentage of the Cowpany's construction

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program (as of the last proceeding) is the Company still committed to building. The proposed divestiture of a partial interest in Seabrook and the emergence of RSA 378:30-a, together with other factors such as inflation and the reduced corporate tax level, require this Commission to re-evaluate the entire revenue level of the Public Service Company so as to comply with the statutory mandate of just and reasonable rates.

Further support for this action stems from passage of the Public Utility Regulatory Policy Act of 1978, which requires commissions like this one to develop rates among the various customer classes as well as the usage levels within those classes that will encourage conservation, efficiency and equity.

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I Consolidation J% Cor: mission would be inefficient if it continued to pursue a revenue level pursuant to DR 79-107 and conducted the same investigation pursuant to DR 79-166, the new rate request by PSNH. As a consequence, the Commission on its own initiative consolidates these two proceedings.

This will allow all parties to present their financial evidence as to why rates should be higher than those presently in effect (PSNH) or lower (LUCC & CAP).

It is impossible to perform this evaluation with the record as pre-sently compiled. Only through a careful re-examination of all factors can the observations made by this Commission in the previous section of the opinion be tested.and just and reasonable rates be found. See 28 PUR4th 12 (19 8)

} Time Period i

The Commission has set September 7, 1979 for a hearing in DR 79-166. That hearing will now be the focus of the consolidation of dockets

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DR 79-107 and DR 79-166. Any final order eventually rendered will date back to May 7, 1979. Since in our original order the Commission placed the Company and the public on notice that as of May 7,1979 rates were subject to

'l alteration, the Commission pursuant to RSA 378:3, 7, and 27 designate the I

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Company's rates as of May 7, 1979 as temporary rates.

, Revenue From Other Jurisdictions The Commission also strongly suggests that PSNH continue to pursue the appropriate level of rates in other jurisdictions where it serves. Records of the Company filed with the Commission show the following rates of return as of March 31, 1979:

NH Retail 11.77%

ME Retail 6.71%

VT Retail 3.84% S&l0M NH Wholesale 8.89%

Unit Sales 8.12%

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Our order will issue accordingly.

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l _Michnol invp Chairman

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Francis J. Riordan , Commissioner Malcolm Jo Stevenson , Cotnissioner

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. - . o Concurring August 29, 1979 ,

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• DR 79-107 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE ORDER N 0. 13,799 Upon consideration of the foregoing report which is made a part

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hereof; it is l-ORDERED, that the rates of the Public Service Company of New

, Ham; shire as of May 7, 1979, shall no longer include an amount for CWIP

! in the rate base; and it is FURTHER ORDERED, that there will be an extensive investigation into revenue requirements to establish a just and reasonable rate of return for PSNH and for a fair and reasonable rate for its consumers; and it is FURTHER ORDERED, that the Dockets DR 79-107 and DR 79-166 are hereby consolidated with a hearing scheduled for September 7, 1979 at 9:30 A. M.; and it is FURTHER ORDERED, that the rates of PSNH are made temporary as of May 7, 1979; and it is FURTHER ORDERED, that the elderly discount presently provided for in the existing tariffs shall be considered in a future supplemental order.

By order of the Public Utilities Commission of New Hampshire this twenty-ninth day of August, 1979.

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Vincent J.,,facopino '

Executiv7' Director and Secretary

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984065

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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATUS OF REVOLVING CREDIT AGREEMENT Tlu Company has a Revolving Credit Agreement with seven commercial banks, calling for the extensi.n of up to $115,000,000 of short-term credit. The agent banks for this credit, the maturity of which had been scheduled for October 15, 1979, informed the Company on August 31, 1979 that they had agreed to extend the maturity to July 1, 1980.

38406G

ATTACHMENT TO ITEM NO. 8*

PUBLTC SERVICE COMPANY OF NEW HAMPSIIIRE j ADDITIONAL ( } CASH REQUIREMENTS FOR BUYING ENTITIES

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FOR 22% OWNERSHIP INTEREST IN SEABROOK PURCilASES (000 OMITTED)

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BUYERS PAY PLANT NUCLEAR FOR INCREASE PSNil PSNil SHARE BUYERS SilARE ONLY FUEL TOTAL CUMULATIVE SHARES (2) PAYS (2) $  % $ ,

%

Dec. 31, 1978 $478,938 $21,097 $500,035 $ 500,035 $ -

$ - $250,018 50 % $- -%

January-March 1979 73,017 9,650 82,677 582,712 - -

291,356 50 - -

Cumulative, March 31, 1979 551,955 30,757 582,712 582,712 - -

291,356 50 - -

April 19,900 7,853 27,753 610,465 -

13,877 305,233 50 - -

Iby 20,000 1,750 21,750 632,215 - 10,875 316,108 50 - -

June 26,800 465 27,265 659,480 -

13,632 329,740 50 - -

July 22,700 1,452 24,152 683,632 -

12,076 341,816 50 - -

August 22,700 (1,517) 21,183 704,815 -

10,591 352,407 50 - -

September 21,500 4,195 25,695 730,510 -

12,848 365,255 50 - -

October 24,700 15,095 39,795 770,305 - 19,898 385,153 50 - -

November 24,400 1,834 26,234 796,539 -

13,117 398,270 50 - -

December 26,800 1,673 28,473 825,012 - 14,236 412,506 50 - -

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$121,150 Regulatory Approvals on December 31, 1979 January, 1980 25,100 4,830 29,930 854,942 14,965 -

412,506 48.2 14,965 1.8 February 23,300 1,818 25,118 880,060 12,559 -

412,506 46.9 27,524 3.1 March 23,000 3,973 25,973 907,033 13,487 -

412,506 45.5 41,011 4.5 April 29,633 2,488 32,121 939,154 16,061 -

412,506 43.9 57,072 6.1

,g May 4, 29,633 2,488 32,121 9 71, . N 16,061 - 412,506 42.5 73,133 7.5 June c; 29,634 2,488 32,122 1,00J,397 16,061 -

412,506 41.1 89,194 8.9 July-September $$ 91,000 7,472 98,472 1,101,869 49,236 -

412,506 37.4 138,430 12.6 October-Decembei 77,100 7,480 84,580 1,186,449 42,290 -

412,506 34.8 180,720 15.2 January-November 1981(3) 258,280 28,507 286,787 1,473,236 143,393 -

412,506 28.0 324,113 22.0 1, Over and above requirement associated with April 1, 1979 ownership.

2. Total monthly cash x 50%.

3. Assumes linear distribution of 1981 expenditures, on a monthly basis; $2G6,787 expended through November 10, 1981.