State Ex Rel. Dept. of Public Service Regulation v. Montana Irrigators, Inc.

680 P.2d 963, 209 Mont. 375, 1984 Mont. LEXIS 915
CourtMontana Supreme Court
DecidedMay 1, 1984
Docket83-367
StatusPublished
Cited by2 cases

This text of 680 P.2d 963 (State Ex Rel. Dept. of Public Service Regulation v. Montana Irrigators, Inc.) is published on Counsel Stack Legal Research, covering Montana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Ex Rel. Dept. of Public Service Regulation v. Montana Irrigators, Inc., 680 P.2d 963, 209 Mont. 375, 1984 Mont. LEXIS 915 (Mo. 1984).

Opinions

MR. JUSTICE MORRISON

delivered the Opinion of the Court.

The Department of Public Service Regulation, the Montana Public Service Commission (PSC) and the individual commissioners appeal an order of the Jefferson County District Court which “reversed” a decision of the Commission. The Commission ruled on the question of type of rate structure to be used by Montana Power Company in collecting the company’s authorized revenue increase. Commercial users adversely affected by the Commission’s ruling, Montana Irrigators, Inc., filed for judicial review in Jefferson County District Court. Champion International, Conoco, Inc., and Anaconda Minerals Co., appeared as intervenors (plaintiffs) and users of electric service and energy supplied by Montana Power Company. We reverse the District Court and reinstate the PSC order.

Montana Power Company filed a rate increase request with the Public Service Commission. PSC divided the request into two phases: Phase I is the revenue requirements question; Phase II is the rate structure, or how the increased rates were to be allocated to residential, business, irrigation and industrial users. Phase I is not an issue in this case.

[378]*378Diverse interests were represented in the proceedings. The Montana Consumer Counsel and the Human Resources Counsel advocated a marginal cost approach to distribution of the rate increases. Under this theory, cost of service is arrived at by examining costs incurred to provide energy in addition to what is now being produced. Theoretically, rates would proportionally reflect the per unit cost of the additional service, and would therefore establish class and customer “price signals” such that the consumer faces the economic consequences of consumption.

Industrial users advocated use of an imbedded cost approach. This method establishes rates by referring to historical accounting costs invested by the utility. This method results in a “clean” allocation of the revenue pie. But historical costs may be misleading to the extent they reflect costs in a cheap energy era.

The Montana Power Company presented both methods of determining cost of service but advocated the imbedded cost approach.

The Montana Irrigators also advocated the imbedded cost approach. Their major points of contention, however, were directed at misrepresentation of the cost of service burden of the irrigators due to (1) misinterpretation and misapplication of load survey data, (2) lack of reliable and informative load data, (3) unsupported and arbitrary cost allocation between irrigation season and off season, (4) failure to consider contribution to system peak. The irrigators contend that this misrepresentation of the cost of service attributable to their class results in arbitrary and improper rates. The irrigators also challenge the failure of the commission to consider transcribed testimony of some of their witnesses.

The Commission adopted a marginal cost method rate structure.

The trial court appears to have misunderstood the nature of the petition for judicial review filed by the irrigators. While the irrigators sought to vacate or modify the Com[379]*379mission’s orders for the misrepresentation explained above as well as procedural shortcomings, the district court’s decision was directed only at the adoption of the marginal cost methodology in favor of the imbedded cost approach. The judgment of the court was explained by an accompanying memorandum.

“It is evident the marginal cost pricing approach is new. It is also evident it would have had great future impact on the MPC and its customers. And it is evident that marginal cost is a change of real proportions from the traditional ‘embedded cost’ approach used in this State.

“This Judge is convinced of the wisdom and clear necessity for a clear articulation of the PSC in its findings and conclusions and finally its orders. This requirement, to this Court, means a statement or statements in easily understood language of ‘why’!

"...

“After reading the PSC’s Findings again and checking against the record, the Court is convinced ‘. . . any such reason would have to be found in paragraphs 18, 19 or 20 of Order 4714d, and no valid reason is stated there. (That irrigation rates have been too low — by either marginal or embedded cost standards — is no basis for choosing marginal costs)’

“The record before the Court is not single in its thrust.” The memorandum went on to analyze the testimony of various expert witnesses for each side of the marginal cost— imbedded cost controversy.

The court “reversed” the Commission’s order as follows:

“Order 4714d does not satisfy the general requirements of a reasoned decision as required by law that an agency must clearly articulate its findings and give supporting reasons to allow a reviewing Court to understand what its decision means and therefore understand it and then rule.

“The entire record below does not contain substantial credible evidence to support the PSC’s Orders 4714d and [380]*3804714e.

“Montana Public Service Commission’s Orders 4714d and 4714e are reversed.”

PSC now appeals the district court’s order claiming:

1. The court substituted its judgment as to the weight to be accorded to the testimony of the experts regarding the marginal cost and imbedded cost approaches.

2. The District Court should have “remanded” rather than “reversed” if it felt the commission’s decision was not clearly articulated.

The following issues are raised on appeal:

1. Is this appeal moot by virtue of a new rate structure proceeding involving all parties to this controversy?

2. Is there substantial credible evidence to support the Commission’s decision to use a marginal cost theory for determining rate structures?

3. Is there sufficient credible evidence to support the adopted rate structured

4. Did the Commission adequately support its decision with reasoned opinion, authority and findings?

Respondent Montana Irrigators, Inc. (Irrigators) contend the controversy surrounding the PSC decision is rendered moot by a subsequent rate structure case now in progress before the Commission involving the same issues and parties. We disagree. The PSC order establishes cost allocations for the interim until a new rate structure is established. As long as the Irrigators oppose the first decision, a justiciable controversy exists.

The Public Service Commission contends the district court erroneously substituted its judgment for that of the agency on a question of complex fact and public policy. The PSC argues that the district court failed to properly apply the “substantial evidence” standard. Instead, the court found the PSC decision was inadequately reasoned and thus justified adoption of the court’s own reasoning and judgment.

We find that the district court did in fact erroneously [381]*381substitute its judgment. The district court concluded that evidence relied upon by the agency was misstated, that the agency was wrong when it said there was no evidence that the imbedded cost method was better, and that the agency was wrong to conclude that cost-based price signals cannot be established with imbedded costs. Rate structuring involves highly specialized theories of economics.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
680 P.2d 963, 209 Mont. 375, 1984 Mont. LEXIS 915, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-dept-of-public-service-regulation-v-montana-irrigators-mont-1984.