McDaniel v. Ark. Pub. Serv. Comm'n.1

2014 Ark. App. 529
CourtCourt of Appeals of Arkansas
DecidedOctober 8, 2014
DocketCV-13-667
StatusPublished
Cited by2 cases

This text of 2014 Ark. App. 529 (McDaniel v. Ark. Pub. Serv. Comm'n.1) is published on Counsel Stack Legal Research, covering Court of Appeals of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McDaniel v. Ark. Pub. Serv. Comm'n.1, 2014 Ark. App. 529 (Ark. Ct. App. 2014).

Opinion

Cite as 2014 Ark. App. 529

ARKANSAS COURT OF APPEALS DIVISIONS II & III No. CV-13-667

DUSTIN MCDANIEL, ARKANSAS Opinion Delivered October 8, 2014 ATTORNEY GENERAL, CONSUMER UTILITIES RATE ADVOCACY DIVISION APPELLANT APPEAL FROM THE ARKANSAS PUBLIC SERVICE COMMISSION V. [DOCKET NO. 12-056-U]

ARKANSAS PUBLIC SERVICE COMMISSION and ENTERGY ARKANSAS, INC. APPELLEES REVERSED AND REMANDED

ROBERT J. GLADWIN, Chief Judge

This case comes to us from two orders of the Arkansas Public Service Commission in

Docket No. 12-056-U. In Order No. 7, the Commission found that a temporary surcharge

implemented by appellee Entergy Arkansas, Inc., complied with Act 310 of 1981. In Order

No. 8, the Commission approved Entergy’s resulting rate schedule. The Consumer Utilities

Rate Advocacy Division of the Arkansas Attorney General’s Office (“the AG”) appeals both

orders after unsuccessfully urging the Commission to consider certain grounds for disapproval

of the surcharge. For reversal, the AG argues that the Commission erred in failing to make

findings as to those grounds and in relying on a previous Commission ruling from another

docket to decide an issue in this case. We agree with both of the AG’s points and reverse and

remand for additional findings by the Commission. Cite as 2014 Ark. App. 529

I. Act 310 of 1981

Act 310, which is codified at Arkansas Code Annotated sections 23-4-501 to -509

(Repl. 2002), allows a utility to recover certain expenditures by imposing a surcharge on its

customers outside the context of a general rate case. Recovery is allowed for expenditures

reasonably incurred as a direct result of legislative or regulatory requirements relating to the

protection of the public health, safety, and the environment. See Ark. Code Ann. § 23-4-502.

The surcharge mechanism is unusual in that it does not require Commission approval

before its implementation. Rather, the surcharge becomes effective immediately upon being

filed by the utility. Ark. Code Ann. § 23-4-504. Within thirty days of the filing and upon

reasonable notice to the utility, the Commission must conduct an investigation concerning

the reasonableness of the surcharge. Ark. Code Ann. § 23-4-505. Following the investigation

and a hearing, the Commission may modify or disapprove the surcharge. Ark. Code Ann. §

23-4-507(a).

II. Entergy’s Act 310 Filing

On July 26, 2012, Entergy filed an interim rate surcharge under Act 310. Entergy’s

notice to the Commission and accompanying attachments declared that, since July 1, 2010

(the end of the pro-forma period in its last general rate case), it had increased its capital

expenditures by approximately $39 million based on three government mandates: 1) Nuclear

Regulatory Commission (NRC) requirements to upgrade security at the Arkansas Nuclear

One power plant; 2) Federal Energy Regulatory Commission (FERC) requirements to

upgrade information-technology security; and 3) Arkansas Highway & Transportation

2 Cite as 2014 Ark. App. 529

Department (AHTD) requirements to relocate poles and other facilities during road projects.

Entergy asserted that, pursuant to Act 310, the expenditures were reasonably incurred as a

direct result of legislative or regulatory requirements relating to the protection of public health

and safety and were therefore recoverable through an interim surcharge under Act 310.

The AG opposed the filing, arguing that Entergy’s expenditures did not meet the

purposes of Act 310. According to the AG, Act 310 was intended to remedy a situation in

which a utility faced a “gross inequity” by being forced to spend “abnormal, significant

amounts of money for the public good for which the public is not providing fair

compensation in the form of just, reasonable, and sufficient rates.” In this instance, the AG

claimed, Entergy’s expenditures were neither substantial enough, nor new and different

enough, to warrant Act 310 treatment, and were in fact “probably included in current rates.”

The AG additionally claimed that Entergy’s highway-relocation expenditures did not result

from legal requirements relating to the protection of public health and safety.

III. Commission Hearing

The Commission held a hearing on Entergy’s interim surcharge on February 19, 2013.

Entergy witnesses Bryan Ford and Christopher Peters testified that the company had recently

expended money for NRC and FERC security measures in order to comply with laws or

regulations relating to public health and safety. They explained that, in response to concerns

that terrorists would attack nuclear plants or disrupt a utility’s computer system, the NRC and

FERC promulgated new regulations requiring upgrades to physical and cyber security. With

regard to Entergy’s highway-relocation expenditures, Bernard Neumeier testified that, as the

3 Cite as 2014 Ark. App. 529

result of government highway projects, Entergy had spent money to relocate its distribution

lines and poles. Neumeier referenced the AHTD’s Utility Accommodation Policy (UAP),

which mandated the relocations. He said that failure to comply with the UAP would create

hazardous conditions for the public during highway construction. Neumeier also testified that

the Commission had ruled in a previous docket, No. 91-078-U, that the UAP’s provisions

were related to public safety.

Entergy witnesses Michael Considine and Cindy Layne testified as to the manner in

which Entergy’s surcharge was calculated. They determined which of the expenditures at issue

were not already included in Entergy’s rate base, and, after performing the regulatory

accounting, computed a final retail revenue requirement of about $4.4 million (later modified

to about $4 million), for which each residential-rate customer would pay approximately

twenty-four cents per month.

PSC Staff witness Jeff Hilton agreed that Entergy’s expenditures were in compliance

with Act 310. He recommended approval of the interim surcharge, with the previously

mentioned accounting adjustments.

William Marcus testified for the AG that a utility’s interim expenditures under Act 310

must be for the purpose of substantial additional investments. He stated that the $4 million

sought by Entergy did not appear to meet the substantiality requirement because it paled in

comparison to Entergy’s overall revenue requirement and gross plant investment. Marcus also

stated that a utility must demonstrate a “gross inequity” before utilizing the Act 310 interim

surcharge. He testified that Entergy could not meet that standard because the company would

4 Cite as 2014 Ark. App. 529

soon file a new general rate case1 in which it could recover its expenditures and, in any event,

Entergy may have been over-earning since its previous general rate case and could recover its

expenditures without seeking interim relief. Regarding the highway-relocation expenditures,

Marcus stated that they were not the result of a legal or administrative mandate relating to

public health and safety as required by Act 310. He also testified that the Commission should

not rely on its ruling in Docket 91-078-U, where it held that AHTD’s UAP provisions were

related to public safety.2

IV. Commission’s Ruling

Following the hearing, the Commission ruled in Order No. 7 that Entergy’s surcharge

complied with Act 310.

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