20040421Petition for Rehearing.pdf

STATE OF IDAHO
April 20, 2004
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
HAND DELIVERED
Frederick C. Lyon
Clerk of the Courts
Idaho Supreme Court
451 West State Street
Boise, ill 83720-0101
Re: Docket No. 29016 Idaho Power Company v. Idaho Public Utilities Commission
Dear Mr. Lyon:
Enclosed with this correspondence are:
1. A check for $71 for the Commission s Petition for Rehearing. LA.23(a)(7).
2. The Commission' Petition for Rehearing filed pursuant to LA.R. 42.
3. The Commission s Memorandum in Support of Its Petition for Rehearing.
The Commission has enclosed an original and nine copies of the Petition for Rehearing and the
Memorandum in Support of the Commission s Petition. Please date stamp one copy of this
document.
If you have any questions, please contact me at 334-0357. Thank you for your assistance.
Sincere/yours/~t---
J phil R. Hammond
Deputy Attorney General
Enclosures
cc: Parties of Record
O:IPCEO 134- CoITespondence _Lyon jh6
Contracts & Administrative Law Division, Idaho Public Utilities Commission
O. Box 83720, Boise, Idaho 83720-0074, Telephone: [phone], FAX: [phone], E-mail: Ipuc(g)puc.state.id.
Located at 472 West Washington S1., Boise, Idaho 83702
LAWRENCE G. WASDEN
ATTORNEY GENERAL
JOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ill 83720-0074
Idaho Bar No. 5470
Tele: [phone]
FAX: [phone]
Attorneys for the Respondent on Appeal
Idaho Public Utilities Commission
IN THE SUPREME COURT OF THE STATE OF IDAHO
IDAHO POWER COMPANY,
Applicant/Appellant
IDAHO PUBLIC UTILITIES COMMISSION
Respondent on Appeal.
SUPREME COURT
DOCKET NO. 29016
IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION
FOR REHEARING
COMES NOW the Respondent on Appeal, Idaho Public Utilities Commission
Commission ), pursuant to Idaho Appellate Rule 42, and files this timely Petition for
Rehearing of the Court's Opinion No. 32 issued in this proceeding on March 30, 2004. The
Commission respectfully asserts that the Court erred in holding that the Commission s use of the
word "may" was intended to mean "shall" or "must." Even if the Commission was imprecise in
its use of the word "may," the denial of lost revenue recovery was neither confiscatory nor a
violation of any constitutional right. The Court should have employed the ratemaking standard
IDAHO PUBLIC UTILITIES COMMISSION'
PETITION FOR REHEARING
of review when considering the Commission s decision to deny recovery oflost revenue in Order
Nos. 28992 and 29103 that were part of the annual Power Cost Adjustment rate setting process.
See Industrial Customers v. Idaho pac 134 Idaho 285 , 289, 1 P.3d 786, 790 (2000). See also
Hayden Pines Water Company v. Idaho pac, 122 Idaho 356, 358, 834 P.2d 873 , 875 (1992)
quoting Duquesne Light Co. v. Barasch 488 U.S. 299, 109 S.Ct. 609, 102 L.Ed.2d 646 (1989).
In addition, there is substantial and competent evidence in the record supporting the
Commission s ratemaking decision to deny the recovery of lost revenue in Order Nos. 28992 and
29103.
To expedite the Court's review of this matter, the Commission also submits its
Memorandum in Support of the Petition for Rehearing. The Commission respectfully requests
that the Court grant a rehearing of this appeal.
DATED this 20th day of April 2004.
Attorney for the Respondent on Appeal
Idaho Public Utilities Commission
bls/O:lPCEO134 Appeal Filings Petition for Rehearing
IDAHO PUBLIC UTILITIES COMMISSION'
PETITION FOR REHEARING
LAWRENCE G. WASDEN
A TTO RNEY GENERAL
JOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
Idaho Bar No. 5470
Tele: [phone]
FAX: [phone]
Attorneys for the Respondent on Appeal
Idaho Public Utilities Commission
IN THE SUPREME COURT OF THE STATE OF IDAHO
IDAHO POWER COMPANY,
Applicant/Appellant
IDAHO PUBLIC UTILITIES COMMISSION
Respondent on Appeal.
SUPREME COURT
DOCKET NO. 29016
MEMORANDUM IN
SUPPORT OF THE IDAHO
PUBLIC UTILITIES
COMMISSION'S PETITION
FOR REHEARING
COMES NOW the Respondent on Appeal, Idaho Public Utilities Commission
Commission ), pursuant to Idaho Appellate Rule 42, and files this timely Memorandum in
Support of its Petition for Rehearing of the Court's Opinion No. 32 issued on March 30, 2004.
STATEMENT OF THE CASE
This appeal arose from the latter of a two-case proceeding before the Commission.
In the first case (No. IPC-01-3), the Commission approved the implementation of an Idaho
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
Power energy conservation program called the IrrigationBuy-Back Program ("Program ). In the
second case (No. IPC-01-34), the Commission allowed Idaho Power to recover nearly $74
million in "direct costs" the Company had paid to irrigators to reduce their power consumption
but denied the recovery of approximately $12 million of alleged "lost revenue.Order Nos.
28992 and 29103; R. at 190, 224.
The central issue on appeal concerned the Commission s decision to deny the
recovery of lost revenue in the annual Power Cost Adjustment (PCA) case that adjusts customer
rates. On March 30, 2004, the Court issued its Opinion vacating the Commission s decision to
deny the Company the recovery of lost revenue. In response, the Commission has filed its
Petition for Rehearing and this supporting Memorandum. For purposes of this Memorandum the
Commission relies onthe Statement of Facts contained in its Brief from pages 4 through 15.
ARGUMENTS IN SUPPORT OF THE PETITION FOR REHEARING
A. There is substantial and competent evidence that the Commission s use of the
word "may" in Order No. 28699 was not intended to be mandatory or to
mean "shall" or "must.
B. Idaho Power provided no evidence that the Commission s denial of lost
revenue recovery resulted in PCA rates that were confiscatory or that the
denial violated any constitutional right.
C. There is substantial and competent evidence in the record to support the
Commission s decision in Order Nos. 28992 and 29103 to deny Idaho Power
recovery of lost revenues.
ARGUMENT
Standards of Review
Article V, Section 9 of the Idaho Constitution provides the Supreme Court shall
have jurisdiction to review on appeal any Order of the Commission. Industrial Customers of
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
Idaho Power v. Idaho pac 134 Idaho 284, 288 , 1 P.3d 786, 789 (2000). Idaho Code g 61-629
defines the scope of the Supreme Court's limited review and states in relevant part:
The review on appeal shall not be extended further than to determine whether
the commission has regularly pursued its authority, including a determination
of whether the order appealed from violates any right of the appellant under
the constitution of the United States or of the state of Idaho.
Idaho Code g 61-629; Hulet v. Idaho pac 138 Idaho 476, 478, 65 P.3d 498 500 (2003).
The Court's review of Commission determinations as to "questions of law" is limited
to determining whether it has regularly pursued its authority and whether the constitutional rights
of the appellant have been violated. Industrial Customers 134 Idaho at 288, 1 P.3d at 789.
Regarding "questions of fact " where the Commission s findings are supported by substantial
competent evidence in the record, the Court must affirm those findings and the Commission
decision. Id. The Court has delineated the test for substantial competent evidence as:
The "substantial evidence rule" is said to be a "middle position" which
precludes a de novo hearing but nonetheless requires a serious review that
goes beyond the mere ascertainment of procedural regularity. Such a review
requires more than a mere "scintilla" of evidence in support of the agency
determination, though "something less than the weight of the evidence.
" "
Put
simply , we wrote
, "
the substantial evidence rule requires a court to
determine 'whether (the commission s) findings of fact are reasonable.
Industrial Customers 134 Idaho at 293 , 1 P.3d at 794 quoting Idaho State Insurance Fund
Hunnicutt 110 Idaho 257 , 260, 715 P.2d 927 930 (1985) (citations omitted).
The "Commission as the finder of fact, need not weigh and balance the evidence
presented to it but is free to accept certain evidence and disregard other evidence.Industrial
Customers 134 Idaho at 293 , 1 P.3d at 794. "The commission is free to rely on its own expertise
as justification for its decision.Id. Simply put, findings of the Commission must be reasonable
when viewed in the light that the record in its entirety furnishes, including the body of evidence
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
opposed to the (Commission s) view.Application of Hayden Pines 111 Idaho 331 , 336, 723
2d 875 880 (1986) quoting Hunnicutt 110 Idaho at 261 , 715 P.2d at 931. The Commission
findings of fact are entitled to a presumption of correctness and should be sustained unless the
clear weight of the evidence is against its conclusions or is strong and persuasive that the
Commission abused its discretion. Industrial Customers 134 Idaho at 288, 1 P.3d at 789. The
Court will not displace the Commission s findings of fact when faced with conflicting evidence
even though the Court would have made a different choice had the matter been before it
novo." Rosebud Enterprises, v. Idaho pac 128 Idaho 609 618 917 P.2d 766, 775 (1996).
There is substantial and competent evidence that the Commission s use of the word
may" in Order No. 28699 was not intended to be mandatory or to mean "shall" or
must."
In Order No. 28699 the Commission used the word "may" with the phrase "
treated as a purchased power expense in the Company s power cost adjustment mechanism
only to direct the Company to book or record the "direct costs and lost revenue impacts" so that
the accounts could be reviewed later to determine if recovery was proper. R. at 402. In addition
it would be inconsistent with the Commission s duties if it were to issue a blank check to the
Company prior to knowing whether any cost was actually incurred by the Company. See Idaho
Code 99 61-301 , 61-302. Furthermore, it is necessary and standard practice to order a public
utility to first record expenses or costs so that they can be verified and reviewed when recovery
is sought in the future (i., the second proceeding). Industrial Customers 134 Idaho at 287, 1
3d at 788. See also In re Idaho Power 161 PUR 4th 18 (IPUC 1995) (amounts spent by
Company in the past are not eligible for recovery through future rates because of the retroactive
ratemaking proscription unless they were preserved for that purpose by deferral or other
regulatory action). Accordingly, it was not the intent of the Commission when using this
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
language to guarantee Idaho Power therecovery of lost revenues. Its only intent was to reserve
the issue of cost recovery of direct costs and lost revenues for later review.
The Commission clearly understood the distinction between the words "may" and
shall." Both words appear in that portion of Order No. 28699 that was quoted in the Court'
Opinion:
The Commission further finds that the direct costs and lost revenue impacts
of this Program may be treated as a purchased power expense in the
Company s Power Cost Adjustment ("PCA") mechanism. Idaho Power andthe parties shall develop and present a proposal to the Commission
recommending a procedure to calculate the amount of revenue impact that
should be passed through the Company s PCA mechanism.
Slip Op. at 5 (emphasis added). In this context the Commission used "may" in a discretionary
sense and "shall" in a mandatory sense. The proper interpretation of the meaning of the word
may" here is indicative that the Commission will exercise discretion in deciding whether the
Company might recover lost revenues in the future. As the Commission noted in its Brief
may" means the right to exercise discretion, while "shall" means must or is mandatory (without
discretion). Commission Brie/at , citing Rife v. Long, 127 Idaho 841 , 848 908 P.2d 143, 150
(1995). By using this language the Commission clearly intended for the "may" to be permissive
and the "shall" to be mandatory. In other words, if the Commission had intended in Order No.
28699 to guarantee lost revenue recovery for Idaho Power it would have stated so clearly by
using the word "shall" or other mandatory language. As the author of these Orders the
Commission is in the best position to know what it intended.
I For example, in the Order concerning the Company s 2001 PCA filing the Commission found explicitly it was
authorizing Idaho Power to recover approximately $168.3 million(.)" through an increase in retail rates. Order No.
28722 at R. 580. No such explicit language appears in Order No. 28699.
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
The Court's reliance on Idaho Power s statements that it would not go forward with
the Program without recovery of lost revenues is misplaced.2 As the Order accurately depicts
the state was facing an energy crisis at the time Idaho Power submitted its Application. R. at
310. Without this Program Idaho Power would have had to purchase a larger quantity of power
from the wholesale market to serve its customers at prices that were projected to be double that
of purchasing load reductions from irrigators. 3 This is the reason the Commission said it would
have been imprudent and unreasonable for the Company to not implement this Program with or
without lost revenue recovery.R. at 197, 233.By using the "may treat" language, the
Commission guaranteed that Idaho Power would have the opportunity in the cost recovery
proceeding to demonstrate it should recover lost revenues. This reservation of cost recovery
authorization is consistent with the Court's recognition of this practice in Industrial Customers
134 Idaho at 287, 1 P.3d at 788.
Idaho Power provided no evidence that the Commission s denial of lost revenue
recovery resulted in PCA rates that were confiscatory or that the denial violated
any constitutional right.
Even if the Commission was imprecise in its use of the word "may , its denial of lost
revenue recovery was neither confiscatory nor a violation of any constitutional right. The Court
should have employed the ratemaking standard of review when considering the Commission
decision to deny recovery of lost revenue in Order Nos. 28992 and 29103 that were part of the
2 The Court in the Opinion, at p. 2, stated that the Commission s "findings" in Order No. 28647, R. at 308, noted the
Company s willingness to proceed with the Program was dependent upon assurances it would recover lost revenues.
This "fmding" comes from the "Background" section of the Commission Order which merely describes Idaho
Power s Application. R. at 308. The Commission s "findings" in this Order are contained in the record at pages
310-, and do not discuss or explicitly guarantee Idaho Power recovery of lost revenues.
3 Prior to approval of the implementation of the Program Idaho Power represented that the average Flat Mid-
Columbia Forward Market Price of power was $305 per MW as of March 2 2001. R. at 394. This compared to the
$150 per MW the Company paid irrigators for their load reductions.
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
annual Power Cost Adjustment rate-setting process. The function of ratemaking its legislative
and not judiciaL Industrial Customers 134 Idaho at 289, 1 P.3d at 790. The Commission, as an
agency of the legislative department of government, exercises delegated legislative power to
make rates. Id. So long as it regularly pursues its authority and remains within constitutional
limitations, the courts have no jurisdiction to interfere with its determinations. Id. Thus, the
Commission s rate setting Order Nos. 28992 and 29103 carry with them a presumption of
validity. See Application of Utah of Power Light Co.107 Idaho 446, 448-, 690 P.2d 901
903-04 (1984). In other words, the judicial power to declare legislative action invalid upon
constitutional grounds is . to be exercised only in clear cases where the invalidity is manifest.
Petition of the Mountain States Tel. Tel. Co.76 Idaho 474, 480, 284 P.2d 681 , 683 (1955)
citing Los Angeles Gas Electric Corp.289 U.S. 287, 304-, 53 S.Ct. 637, 643-, 77 LEd.
1180 (1933).
The only constitutional issue raised by Idaho Power is that the denial of lost revenue
recovery was confiscatory. Idaho Power has the burden of proof to demonstrate that rates are
confiscatory. Id. However, as the Commission pointed out in its Brief on Appeal, Idaho Power
offered no evidence that the denial resulted in a PCA rate order that was confiscatory under
either the Idaho or United States Constitutions.Commission Brief at 38-39.Indeed, the
Company presented no authority or evidence in the proceeding before the Commission or on
appeal regarding confiscation. Id.Rat 234.
In Hayden Pines Water Company v. Idaho pac 122 Idaho 356, 834 P.2d 873 (1992)
this Court adopted the United States Supreme Court's test regarding confiscation set out in
Duquesne Light Co. v. Barasch 488 US. 299, 109 S.Ct. 609, 102 LEd.2d 646 (1989), stating:
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
The guiding principle has been that the Constitution protects utilities from
being limited to a charge for their property serving the public, which is so
unjust" as to be confiscatory. If the rate does not afford sufficient
compensation, the State has taken the use of utility property without paying
just compensation and so violated the Fifth and Fourteenth Amendments. . . .
It is not the theory but the impact of the rate order that counts. If the total
effect of the rate order cannot be said to be unreasonable, judicial inquiry. . . is
at an end.
122 Idaho at 358 386 P.2d at 875 (emphasis added) quoting Duquesne 488 U.S. at 307-310
1089 S.Ct. at 615-17.
Idaho Power failed to meet its burden of providing any evidence clearly establishing
that the Commission s rate order was confiscatory. Rather, the record demonstrates that unlike
the direct costs (i., payments to irrigators) of this Program, lost revenues were just an estimate
of revenue the Company might have received from the sale of power to irrigators had the
Program not operated. R. at 224. The Commission found rates should accurately reflect the
actual costs to provide service and given the unique context that caused this Program to be
implemented, lost revenues were not an actual cost of service that should be borne by ratepayers.
Id.Thus, the Commission determined it would be unreasonable to force Idaho Power
customers to pay for power they did not purchase, consume or benefit from. Id.
As this Court has noted and as the Chief Justice observed in her dissent
, "
the concern
of this Court is not in the details of the PUC's decision, but in the overall effect the ratemaking
order will have on ratepayers, and in ensuring that the effect of the order will not
unreasonable or unjust to the utility.Slip Op. at 7. See also Intermountain Gas Co. v. Idaho
pac 97 Idaho 113 , 120 , 540 P.2d 775 , 782 (1975) citing Federal Power Commission v. Hope
Natural Gas Co.320 u.S. 591 , 64 S.Ct. 281 , 88 LEd. 333 (1944). Here the Company offered
no evidence and the record is devoid of any evidence that the "total effect of the rate order" is
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
unjust and umeasonable. Furthermore, the Commission s findings in Order Nos. 28992 and
29103 explain the explicit reasons why recovery of lost revenues was denied and provide the
substantial and competent evidence needed for the Court to affirm the Commission s decision.
There is substantial and competent evidence in the record to support the
Commission s decision in Order Nos. 28992 and 29103 to deny Idaho Power
recovery of lost revenues.
Even if the Commission was inartful in the use of the word "may" there is no legally
compelling reason to require ratepayers to pay for the Company s lost revenue.4 However, there
is substantial and competent evidence to support the Commission s decision to deny recovery of
lost revenue. In Order No. 29103 the Commission listed four findings why it was not reasonable
to charge ratepayers for lost revenues. First and foremost, the Commission found that "lost
revenue is not a recoverable 'expense ' to be recovered from ratepayers.R. at 232. The
Commission found "that lost revenue does not constitute an actual cost of providing service that
should be borne by ratepayers.Id. (emphasis added). Unlike the direct costs (i., payments to
irrigators), lost revenue is an estimate of revenue that Idaho Power might have received from the
sale of power to irrigation customers if the Program had not operated.R. at 224.The
Commission found that allowing the recovery of lost revenue would force the Company
customers to pay for power they did not purchase, consume or benefit from. R. at 232.
Second, the Commission found that customer rates should not be raised to
compensate the Company for lost revenues because "rates should accurately reflect the actual
cost incurred to provide service." R. at 232. The Commission rejected the recommendations of
4 The Company has stated and the Court cites Idaho Power s reliance on what it thought Order No. 28699 meant.
Despite this reliance the Company did not suffer any harm as it was given the opportunity to demonstrate that it was
entitled to recover lost revenues in the cost recovery proceeding (the second case).
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
the Company and its Staff and relied upon its own expertise. Industrial Customers 134 Idaho at
293 , 1 P .3d at 794. The Commission declared that requiring "ratepayers to pay for energy they
did not consume, but avoided due to this program, is . . . unreasonable." R. at 232. The issue of
recovering lost revenues through the PCA rate mechanism clearly implicated the Commission
ratemaking functions as delegated by.the Idaho Legislature. Industrial Customers 134 Idaho at
289, 1 P.3d at 790. The Commission s rate setting decision carries with it the presumption of
validity. See Application of Utah of Power Light Co.107 Idaho 446, 448-, 690 P.2d 901
903-04 (1984).
Third, the Commission found given the unique context that caused this Program to be
implemented, allowing lost revenue recovery would "partially destroy the goal of reducing
overall energy costs to all ratepayers at a time when energy costs were at all time highs." R. at
232.The purpose of this Program was to conserve power and mitigate rate impacts on
consumers not to generate revenue for the Company. Thus, the Commission found the recovery
of lost revenue would be inappropriate and unreasonable. R. at 232.
Fourth, the Commission further found that denying the recovery of lost revenue is
consistent with our prior conservation and DSM Orders. . . . See Order Nos. 25062, 25122 and
25640." R. at 233; see also R. at 598; supra at n. 11.
The Commission contends these findings explain the reasons and disclose the facts
that it relied upon to deny the Company the recovery of lost revenue. While acknowledging that
there is contrary evidence in the record and that the language of Order No. 28699 was inartful
the Commission s findings to deny the Company the recovery of lost revenue in Order Nos.
28992 and 29103 are still supported by substantial, competent evidence and should be affinned
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
by the Court on rehearing. Industrial Customers 134 Idaho at 288, 1 P.3d at 789; Hulet 138
Idaho at 478 65 P.3d at 500.
CONCLUSION AND REQUEST FOR RELIEF
Based on the foregoing, the Commission requests rehearing on the Court's Opinion.
The Commission requests that the Court grant and schedule the rehearing at its earliest
convenience. The record demonstrates that denial of lost revenue did not violate any
constitutional right of the Company. Furthermore, the record contains substantial and competent
evidence to support the Commission s deCision in Order Nos. 28992 and 29103 to deny the
Company recovery of lost revenues through the annual Power Cost Adjustment case.
RESPECTFULLY SUBMITTED this 20th day of April 2004.
Attorney for the Respondent on Appeal
Idaho Public Utilities Commission
bls/O:IPCEO 134- Appeal Filings Memorandum in Support
MEMORANDUM IN SUPPORT OF
THE IDAHO PUBLIC UTILITIES
COMMISSION'S PETITION FOR REHEARING
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 20th DAY OF APRIL 2004
SERVED THE FOREGOING PETITION FOR REHEARING AND MEMORANDUM IN
SUPPORT OF PETITION FOR REHEARING, IN SUPREME COURT DOCKET NO.
29016, IPUC CASE NO. IPC-01-, BY MAILING A COpy THEREOF, POSTAGE
PREP AID, TO THE FOLLOWING:
LARRY D RIPLEY
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
(~~
SECRETARY