Present: Kinser, C.J., Lemons, Millette, McClanahan, and Powell, JJ., and Lacy and Koontz, S.JJ.
VIRGINIA ELECTRIC AND POWER COMPANY OPINION BY v. Record Nos. 120519 SENIOR JUSTICE LAWRENCE L. KOONTZ, JR. & 120520 November 1, 2012
STATE CORPORATION COMMISSION, ET AL.
FROM THE STATE CORPORATION COMMISSION
These consolidated appeals arise from a final
determination of the State Corporation Commission
("Commission") in a mandated biennial review of "the rates,
terms and conditions for the provision of generation,
distribution and transmission services [of an] investor-owned
incumbent electric utility" pursuant to the provisions of the
Virginia Electric Utility Regulation Act. Code §§ 56-576 et
seq. As amended by the General Assembly in 2007, the Act
significantly altered the procedures and authority of the
Commission with respect to electric utility ratemaking. 1
As pertinent here, commencing in 2011, the Act requires
the Commission to conduct biennial reviews of an electric
utility's performance during the two successive 12-month
periods immediately prior to such reviews. Code § 56-
1 For a more detailed discussion of the legislative history of the regulatory scheme now incorporated in the Act and the intended goals of the Act see Appalachian Power Co. v. State Corporation Commission, 284 Va. ___, ___, ___ S.E.2d ___, ___ (2012) (this day decided). 585.1(A). In doing so, the Commission is required to
determine, among other things, "fair rates of return on common
equity" ("ROE") and "the rates that the utility may charge
until such rates are adjusted." Id.
These appeals present the first opportunity for this
Court to consider the Commission's application of Code § 56-
585.1 in a biennial review. The principal focus of these
appeals is whether in the 2011 biennial review of the
performance of Virginia Electric and Power Company ("VEPCO")
in the 2009-2010 test period, the Commission erred in
determining that the utility's authorized ROE of 10.9% would
apply to the entire 2011-2012 test period in the next biennial
review in 2013.
BACKGROUND
VEPCO is an investor-owned electric utility providing
generation, distribution, and transmission services within
Virginia. As such, the rates it charges for these services
are subject to regulation under the Act.
In accord with the requirements of Code § 56-585.1(A), on
March 31, 2009 VEPCO filed an application for the Commission
to review VEPCO's prevailing rates, terms and conditions for
generation, distribution, and transmission services and to
determine VEPCO's authorized base rate. This rate case,
frequently referred to as a "going-in" review, served as a
2 transition to the new biennial review process commencing in
2011. After completing its initial case, in an order entered
March 11, 2010, the Commission adopted an agreed stipulation,
made among VEPCO, the Office of the Attorney General Division
of Consumer Counsel, and various other interested parties,
that VEPCO's rates in the 2009-2010 biennial period would
reflect an ROE of 11.9% "unless and until reset in the
biennial review process" in 2011. Application of Virginia
Electric and Power Co., Case No. PUE-2009-00081 (March 11,
2010). In an addendum to the agreed stipulation, the parties
clarified that VEPCO's ROE "shall be utilized for purposes of
the Earnings Test prescribed for the Company's first biennial
review." Id. Accordingly, although the order was entered in
2010, under the agreed stipulation and addendum the 11.9% ROE
would serve as the fair rate of return for the entire 2009-
2010 period to be reviewed in 2011.
Thereafter, on March 31, 2011, VEPCO filed an application
with the Commission for the first biennial review as required
by Code § 56-585.1(A)(3). In its application, VEPCO requested
that the Commission approve a new ROE of 12.5% "to be applied
. . . prospectively upon the effective date of the final order
in this proceeding." Application of Virginia Electric and
Power Co., Case No. PUE-2011-00027 (March 31, 2011).
3 The biennial review process prescribed by Code § 56-585.1
includes many different elements, including a determination of
whether the ROE from the prior biennial period permitted the
utility to fully recover the costs of providing the utility's
services and to earn a fair rate of return and, if not, to
determine what recoupment or rebate would be applied to rates
going forward. The Commission also must set the ROE for the
current biennial period, as well as determine whether the
individual rates allowed for the utility's generation,
distribution, and transmission of electric power should be
altered. Accordingly, the ratemaking process is necessarily
fact driven, lengthy, and complex, generating a voluminous
record.
In these appeals, VEPCO has not challenged any of the
factual determinations of the Commission with regard to the
rates applied in the 2009-2010 biennium and which continued to
be charged while the review process was ongoing, or with
regard to the rates to be charged going forward in the 2011-
2012 biennium and the ROE which will be used to evaluate
VEPCO's performance for the 2011-2012 biennium in the 2013
biennial review. Rather, VEPCO has challenged only the
Commission's determination, as detailed below, that the ROE
set for the 2011-2012 biennial review would serve as the fair
rate of return for the entire 2011-2012 biennium rather than
4 for only the period following the date of the final order in
the 2011 review. Accordingly, we need only briefly summarize
the relevant rulings made by the Commission that relate to
this issue.
On November 30, 2011, the Commission entered a final
order on VEPCO's application, noting that it was "a first-of-
its-kind" proceeding. Application of Virginia Electric and
Power Co., Case No. PUE-2011-00027 (Nov. 30, 2007). After
reviewing the evidence and assertions of VEPCO, the Office of
the Attorney General Division of Consumer Affairs, other
interested parties, and the report and recommendations of its
staff, the Commission set a 10.9% ROE for the biennial period.
The order further stated that "[t]he 10.9% ROE determined in
this proceeding . . . will serve as the fair combined rate of
return against which [VEPCO]'s earned return will be compared
in its next biennial review proceeding" in 2013.
VEPCO filed a timely petition for reconsideration of the
November 30, 2011 final order. 5 VAC § 5-20-220. VEPCO
maintained in the petition that the Commission had "adopted"
the view expressed by VEPCO in the proceeding that the ROE
determined in the proceeding would apply prospectively only,
but wanted "confirmation" of this point. The Commission
granted VEPCO's petition in an order dated December 16, 2011,
5 stating that "[r]econsideration is granted for the purpose of
continuing the Commission's jurisdiction over these matters."
After setting a briefing schedule, the Commission
received briefs from its staff counsel, the Office of the
Attorney General Division of Consumer Counsel, and other
interested parties. VEPCO filed a response that, for all
intents and purposes, mirrors the positions it has taken in
these appeals. These arguments will be detailed in the
discussion below.
The Commission entered an order and opinion addressing
VEPCO's petition for reconsideration on March 29, 2012. The
Commission first opined that Code § 56-585.1(A) "is not
prescriptive but, rather, is discretionary as to when the ROE
- as determined by the Commission - becomes applicable for any
particular two-year biennial review period." The Commission
noted that the General Assembly had made express provision for
many aspects of determining ROE which limited the Commission's
discretion, but had not made any express provision for melding
two different ROEs in the same biennial period, as VEPCO had
requested the Commission to do. The Commission further noted
that the stipulation from 2010, which set the ROE to be used
for review of VEPCO's 2009-2010 earnings, had been advocated
by VEPCO as an appropriate exercise of the Commission's
authority.
6 The Commission rejected the position maintained by VEPCO
that "unless and until reset in the biennial review process"
language of the stipulation was intended to carry the 2009-
2010 ROE forward into 2011. To the contrary, the Commission
was of opinion that the language did no more than recognize
that the Commission would reset the ROE for the new biennial
period.
Finally, the Commission noted that the ROE for a given
biennial period does not "result in a rate change and is not
the same as setting rates." This is so, because the ROE for a
biennial period does not alter the rates to be charged during
that period but, rather, is only used to adjust the rates, if
necessary, in the next biennial review to allow the utility to
recoup a shortfall in revenue or rebate any excess revenue to
customers as determined by applying the ROE for that biennium.
Thus, the Commission concluded that utilizing the ROE set in
2011 for the entire 2011-2012 biennium was consistent with its
function within the ratemaking process because "[f]or purposes
of the biennial review, the relevant ROE interrogative is not
'when,' but 'what.' The proper question is not 'when' did the
Commission make such finding but, rather, 'what' is the ROE"
for the new biennial period.
The Commission concluded that Code § 56-585.1 "does not
mandate the specific time period of any ROE application in any
7 biennial review," and thus, the General Assembly intended for
this determination to be committed to the Commission's sound
discretion. Accordingly, the Commission ruled that in the
2013 biennial review the 10.9% ROE would serve as the fair
rate of return for the entire 2011-2012 biennium. These
appeals followed.
DISCUSSION
VEPCO noted appeals from both the Commission's November
30, 2011 order and its March 29, 2012 order, but assigned
identical errors in each appeal:
1. The State Corporation Commission ("Commission") erred in its November 30, 2011 Final Order in Case No. PUE-2011-00027 ("Final Order"), as clarified in its March 29, 2012 Order on Reconsideration and Opinion ("Order on Reconsideration"), when, in determining the Company's authorized fair rate of return on common equity ("ROE") pursuant to the biennial review process mandated by Va. Code § 56- 585.1, it held that it will apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from the date of the Final Order, contrary to Va. Code § 56- 585.1.
2. The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when it held that the determination of the effective date of the Company's authorized ROE pursuant to Va. Code § 56-585.1 falls within the discretion of the Commission, and thus erroneously held that it may apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from the date of the Final Order.
3. The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when, in determining the Company's authorized ROE pursuant to
8 the biennial review process mandated by Va. Code § 56-585.1, it held that it will apply the 10.9% ROE authorized in the Final Order retroactively to January 1, 2011, rather than prospectively from the date of the Final Order, implicating an unlawful retroactive change in rates of service authorized by the Commission to be charged by the Company in contravention of Virginia common law and the Constitutions of the Commonwealth of Virginia and the United States.
4. The Commission erred in its Final Order, as clarified in its Order on Reconsideration, when, in determining the Company's authorized ROE pursuant to the biennial review process mandated by Va. Code § 56-585.1, it held that its retroactive application of the 10.9% ROE authorized in the Final Order is consistent with its March 11, 2010 Order Approving Stipulation and Addendum in Case No. PUE-2009-00019, and that the parties to the Stipulation and Addendum, including the Company, agreed that the Company's 11.9% ROE authorized thereunder would not apply to earnings for the period January 1, 2011 through the effective date of the Commission's Final Order in the 2011 biennial review.
VEPCO and the appellees 2 agree as to the standard of
review we are to apply, each having cited Appalachian Voices
v. State Corporation Commission, 277 Va. 509, 515-16, 675
S.E.2d 458, 460-61 (2009), in which we quoted the following
passage from Northern Virginia Electric Cooperative v.
2 In addition to the Commission, represented by its staff counsel, the Office of the Attorney General Division of Consumer Counsel, the Virginia Committee for Fair Utility Rates, and the Fairfax County Board of Supervisors have appeared in these appeals as appellees in support of the Commission's ruling. With respect to the dispositive issues of these appeals, the appellees are mostly in accord in their positions supporting the Commission's decision. Accordingly, we will summarize their arguments jointly.
9 Virginia Electric & Power Co., 265 Va. 363, 368, 576 S.E.2d
741, 743-44 (2003):
It is firmly established that a decision by the Commission
comes to this court with a presumption of correctness. The Constitution of Virginia and statutes enacted by the General Assembly thereunder give the Commission broad, general and extensive powers in the control and regulation of a public service corporation. The Commission is charged with the responsibility of finding the facts and making a judgment. This court is neither at liberty to substitute its judgment in matters within the province of the Commission nor to overrule the Commission's finding of fact unless we can say its determination is contrary to the evidence or without evidence to support it.
Campbell County v. Appalachian Pow. Co., 216 Va. 93, 105, 215 S.E.2d 918, 927 (1975). Additionally, the Commission's decision "is entitled to the respect due judgments of a tribunal informed by experience," and we will not disturb the Commission's analysis when it is " 'based upon the application of correct principles of law.' " Lawyers Title Insurance Corp. v. Norwest Corp., 254 Va. 388, 390-91, 493 S.E.2d 114, 115 (1997) (quoting Swiss Re Life Co. Am. v. Gross, 253 Va. 139, 144, 479 S.E.2d 857, 860 (1997)). However, the Commission's decision, if based upon a mistake of law, will be reversed. First Virginia Bank v. Commonwealth, 213 Va. 349, 351, 193 S.E.2d 4, 5 (1972).
At the outset of our discussion, it is important to make
clear, as did the Commission, the distinction between the
"rates" which are allowed to be charged by an electric utility
as determined by the Commission for a biennial period, and the
"ROE" set in the same biennial review process. As the
10 Commission explained in its March 29, 2012 order, the setting
of the ROE does not "result in a rate change and is not the
same as setting rates" for the biennial period in which the
review is conducted. Rather, the ROE is used as a benchmark
in the next biennial review for determining whether the
utility has received a fair rate of return during the
preceding biennium, neither reaping a windfall if market
conditions, such as cost of fuel, consumer demand, and other
variables, are more favorable than anticipated, nor suffering
an undue loss if these variables are less favorable than the
projections used to set the rates in the preceding biennial
review. 3
During VEPCO's 2011 biennial review the determination
whether VEPCO's revenues from 2009 through 2010 had allowed it
an appropriate rate of return was controlled by the 11.9% ROE
established in the Commission's March 11, 2010 order. The
10.9% ROE established in the 2011 review process will be used
in the 2013 biennial review to determine what adjustment may
be necessary for VEPCO's revenue from 2011 through 2012. In
this sense, an ROE is "prospective" at the time it is
established in one biennial review, and it is not utilized by
3 The ROE is used by the Commission in setting rates when circumstances require rate adjustments under Code § 56- 585.1(A)(8). This aspect of that statutory provision is not at issue in these appeals.
11 the Commission until the Commission conducts its retrospective
review of prior earnings in the next biennial review. VEPCO
does not challenge the Commission's 10.9% ROE determination.
Where the parties differ is whether the Commission has the
discretion to apply that ROE to revenue that was earned before
that ROE was established by the Commission's order of November
30, 2011. Thus, the crux of these appeals is whether during
the 2013 biennial review VEPCO's revenues will be subject to
an 11.9% ROE for the first 11 months of 2011, and a 10.9% ROE
thereafter, as it maintains, or whether the Commission
correctly determined that it has the discretion to apply the
10.9% ROE to the entire 2011-2012 biennium.
VEPCO first contends that the Commission erred in holding
that it would apply the 10.9% ROE "retroactively" to January
1, 2011 in the 2013 biennial review because, in VEPCO's view,
the plain language of Code § 56-585.1 mandates prospective
application of a newly determined ROE. To support this
assertion, VEPCO relies on four selected statements gleaned
from the statute.
First, VEPCO notes that with regard to the initial
"going-in" review, Code § 56-585.1(A) provides that "the
Commission shall determine the rates that the utility may
charge until such rates are adjusted." (Emphasis added.)
VEPCO contends that this language shows that the legislature
12 intended for the rates set initially to continue, and be
subject to the ROE set for that period, until the rates were
adjusted in the first biennial review. In this regard, VEPCO
maintains that because it was required to charge the base
rates set by the "going-in" review and authorized to collect
the revenues generated thereby into the next biennium while
the 2011 review was taking place, it should be allowed "to
retain those revenues based on the 11.9% rate of return,"
subject to any adjustment in the next, that is the 2013,
biennial review.
VEPCO further notes that a similar provision is found in
Code § 56-585.1(A)(8), which provides that in subsequent
biennial reviews after the "going-in" review, "any revisions
in rates or credits . . . shall take effect not more than 60
days after the date of the order." (Emphasis added.) VEPCO
contends that this language shows that the legislature
intended for the effect of all actions taken by the Commission
in a biennial review to be prospective only, limiting its
discretion to when during the 60 day period the Commission's
order will take effect.
The appellees respond that when Code § 56-585.1 is read
as a whole, it is clear that the General Assembly understood
the distinction between "rates," any change in which must be
approved by the Commission, and the ROE, which is a benchmark
13 used to determine at a future date whether the approved rates
have provided the utility with a fair rate of return on
equity. Thus, they contend that VEPCO's reliance on these two
provisions within the statute is misplaced, as they clearly
speak to when a change may be affected in "rates," and have no
application to the ROE that is to be applied to revenue
derived from those rates at a future date. We agree.
When construing a statute, our " 'primary objective . . .
is to ascertain and give effect to legislative intent.' "
Conger v. Barrett, 280 Va. 627, 630, 702 S.E.2d 117, 118
(2010) (quoting Turner v. Commonwealth, 226 Va. 456, 459, 309
S.E.2d 337, 338 (1983)). "When the language of a statute is
unambiguous, we are bound by the plain meaning of that
language." Conyers v. Martial Arts World of Richmond, Inc.,
273 Va. 96, 104, 639 S.E.2d 174, 178 (2007). And if the
language of the statute "is subject to more than one
interpretation, we must apply the interpretation that will
carry out the legislative intent behind the statute." Id.
Moreover, in evaluating a statute in this way, we have said
that "consideration of the entire statute . . . to place its
terms in context to ascertain their plain meaning does not
offend the rule because 'it is our duty to interpret the
several parts of a statute as a consistent and harmonious
whole so as to effectuate the legislative goal.'" Eberhardt
14 v. Fairfax Cnty. Emps. Ret. Sys. Bd. of Trs., 283 Va. 190,
194-95, 721 S.E.2d 524, 526 (2012) (quoting VEPCO v. Board of
Cnty. Supervisors, 226 Va. 382, 387-88, 309 S.E.2d 308, 311
(1983)). Thus, "[a] statute is not to be construed by
singling out a particular phrase." VEPCO, 226 Va. at 388, 309
S.E.2d at 311.
Code § 56-585.1 is a comprehensive statute detailing a
complex and cohesive regulatory scheme. The two phrases that
VEPCO has singled out plainly do not support the proposition
being advanced because, as the appellees observe, these
provisions apply to rates not rate of return, which under the
statute are distinct, separate concepts.
VEPCO, however, points to two additional provisions in
Code § 56-585.1 to support its contention that all decisions
made by the Commission in a biennial review are to be
prospectively applied. First, VEPCO notes that in subsection
(A)(2), the statute provides that an ROE "shall be determined
by the Commission during each such biennial review." VEPCO
reasons that it would be harmonious to interpret this
provision as meaning that an ROE should be applied
prospectively in the same way as the rates, as both are
determined in the biennial review.
VEPCO asserts that there is further support for this view
in subsection (A)(2)(c), which provides that if the Commission
15 adopts a "Performance Incentive" increasing a utility's base
ROE, the incentive "shall remain in effect without change
until the next biennial review for such utility is concluded."
VEPCO contends that this language plainly evinces a
legislative intent that both the incentive and the ROE to
which it is added can only be changed prospectively. 4
According to VEPCO, these provisions demonstrate that
"[i]f the General Assembly had intended the [ROE] to apply
retroactively . . . then the 2007 Act would have said so. In
fact, it explicitly provides to the contrary."
The appellees respond that VEPCO's assertion in this
regard is contrary to the overall scheme of the statute. They
contend, as did the Commission in its March 29, 2012 opinion,
that when read as a whole it is clear that where the General
Assembly wished to limit the discretion of the Commission, it
did so expressly. See, e.g., Code §§ 56-585.1(A)(2)(a)
(requiring a set floor and ceiling for the ROE); -585.1(A)(10)
(prescribing what capital structure and cost to use in
measuring return on equity); -585.1(A)(6) (prescribing
additional ROE for different generation technology). By
contrast, the legislature did not dictate that a new ROE would
4 Whether a performance incentive can only be changed prospectively is not before us in these appeals. Accordingly, we express no opinion on that issue.
16 serve as the fair rate of return for the entire biennium
because the ROE would not be utilized until the next biennial
review in any case. Thus, the absence of such language, far
from indicating an intent that the ROE not be applicable to
the entire biennium, must be interpreted as a recognition that
the General Assembly did not wish to alter the manner in which
an ROE would be utilized, leaving it to the Commission to make
such adjustments in its discretion if it deemed proper and
necessary.
We agree with the Commission's observation in its March
29, 2012 opinion that the directive that the ROE for a
biennium "shall be determined by the Commission during each
such biennial review" means exactly what it says and nothing
more. That is, this language directs that a new ROE is to be
determined by the Commission during the biennial review based
on the most recently available criteria, but it says nothing
about limiting the application of an ROE to less than the full
biennium in the subsequent review. It plainly does not
mandate that an ROE must be applied to less than the full
biennium.
In short, the better reading of VEPCO's four selections
from Code § 56-585.1 is to place them in context within the
entire statute. In doing so, it is entirely consistent with
the overall legislative intent expressed therein that the
17 General Assembly would expressly dictate that the "rates"
which already have been assessed while a biennial review was
pending could only be modified prospectively, but would make
no such provision for an ROE, which is used as a benchmark to
evaluate performance after the biennium which is under review
has ended. Accordingly, we hold that the Commission did not
err in concluding that Code § 56-585.1 does not mandate
prospective application of an ROE from the date it is set by
the Commission's final order at the conclusion of a biennial
review.
VEPCO next contends that even if Code § 56-585.1 does not
expressly mandate that the Commission must apply the ROE
determined in a biennial review prospectively from the date of
its final order, the Commission nonetheless erred in
concluding that it had the discretion to utilize the ROE for
the entire 2011-2012 biennium because of statutory,
procedural, and due process constraints as well as policy
considerations. 5 We will address each aspect of VEPCO's
contentions in turn.
Initially, VEPCO maintains that the same statutory
provisions that it relied upon in asserting that prospective
application of an ROE is mandatory also in this case limit the
5 On brief, VEPCO combined the issues of its second and third assignments of error in this argument.
18 Commission's discretion to apply the 10.9% ROE to the entire
2011-2012 biennium. VEPCO notes that the Commission itself
recognized that many of the provisions of Code § 56-585.1
place express limits on the Commission's discretion as to the
determination of an ROE. VEPCO contends that if the
Commission were also not limited in its discretion as to when
an ROE would be applied, this would "swallow up or 'end-run'
many of the stated limitations on its authority."
The appellees respond that the General Assembly expressly
set specific limitations on the Commission's authority to
determine the ROE, but was silent as to when the ROE should be
applied. They contend that because the nature of the biennial
review process makes it self-evident that the ROE would not be
determined until sometime during the first year of the
biennium to which it would apply, the legislature must have
been aware that the Commission would have been required to
determine when the ROE was to be applied. Having given no
express direction on this matter, they assert that the
legislative intent was to leave the matter to the Commission's
sound discretion. We agree.
"The Commission is a specialized body with broad
discretion in regulating public utilities." Level 3 Commcn's
of Virginia v. State Corp. Comm'n, 268 Va. 471, 474, 604
S.E.2d 71, 72 (2004); Central Tel. Co. of Va. v. State Corp.
19 Comm'n, 219 Va. 863, 874, 252 S.E.2d 575, 581 (1979).
Moreover, when the Commission is conducting a ratemaking
procedure, it is exercising a legislative function delegated
to it by the General Assembly. Potomac Edison Co. v. State
Corp. Comm'n, 276 Va. 577, 587, 667 S.E.2d 772, 777 (2008).
Thus, when a statute delegates such authority to the
Commission, we presume that any limitation on the Commission's
discretionary authority by the General Assembly will be
clearly expressed in the language of the statute. In the
absence of an express limitation, we will not add language to
the statute by inference. See Jackson v. Fidelity & Deposit
Co., 269 Va. 303, 313, 608 S.E.2d 901, 906 (2005) ("Courts
cannot 'add language to the statute the General Assembly has
not seen fit to include.' ") (quoting Holsapple v.
Commonwealth, 266 Va. 593, 599, 587 S.E.2d 561, 564-65
(2003)). Rather, we presume that where the General Assembly
has not placed an express limitation in a statutory grant of
authority, it intended for the Commission, as an expert body,
to exercise sound discretion. Accordingly, we hold that there
is no statutory prohibition of the Commission's exercising its
discretion to determine when an ROE for a given biennium will
be applied.
VEPCO next contends that permitting the Commission to
utilize the newly set ROE for the entire 2011-2012 biennium
20 violates Rule 1:1 because this would permit the Commission to
modify its March 11, 2010 order "authorizing the 11.9% rate of
return that was in effect during" the period of January 1,
2011 to November 30, 2011. However, the Commission made an
express finding in the March 29, 2012 order that the
stipulation adopted in the March 11, 2010 order "does not
apply the 11.9% ROE determined therein to the second biennial
review." VEPCO has not assigned error to this finding by the
Commission. Therefore, under the facts as determined by the
Commission, the 11.9% ROE never applied to the 2011-2012
biennial period, and, accordingly, the November 30, 2011 order
did not modify the March 11, 2010 order.
VEPCO next contends that by applying the 10.9% ROE to the
entire 2011-2012 biennium, the Commission has effectively
instituted a retroactive rate change for the period of January
1, 2011 to November 30, 2011 in violation of due process
guarantees of the Virginia and federal constitutions. This
argument is premised on VEPCO's assertion that the March 11,
2010 order "authorized the Company to charge rates designed to
provide it with the opportunity to earn an 11.9% rate of
return." However, as the Commission expressly found that the
11.9% rate did not apply after December 31, 2010, VEPCO's
assertion must fail.
21 Moreover, as appellees note in responding to this issue,
and as we have already explained in addressing VEPCO's first
assignment of error, the term "rates" as used in this statute
refers to the rates that a utility is authorized to charge.
It does not refer to the ROE which is used to measure whether
the rates allowed the utility a fair rate of return. While
VEPCO was required to continue charging the rates set in 2010
until the 2011 biennial review was complete, it is simply not
correct to say that those "rates [were] designed to provide it
with the opportunity to earn an 11.9% rate of return" in the
2011-2012 biennium. The 11.9% ROE was "designed" in the
"going-in" review process that was limited to the time period
applicable to that review process. Likewise, it was the 2011
biennial review that would determine the appropriate ROE for
the 2011-2012 biennium. Accordingly, we hold that there has
been no due process violation of VEPCO's rights under the
facts of this case.
VEPCO next contends that the General Assembly could not
have intended for the Commission to have discretion to set an
ROE during the period to which it will be applied because this
would create "significant operational concerns and risks
. . . . with respect to the ability of the Company to manage
its business and comply with its financial reporting
obligations, as well the ability for investors to evaluate
22 their investment options in the Company." VEPCO contends that
such uncertainty "would run directly contrary to the goals of
promoting healthy and stable electric utility returns and
investor perceptions that are an evident purpose of the 2007
Act."
Even if we assume that VEPCO's contentions accurately
reflect public policy concerns that the Act is intended to
facilitate, this Court is not the appropriate forum for
addressing VEPCO's asserted deficiencies of the Act regarding
those concerns. The legislature is the "author of public
policy." Campbell v. Commonwealth, 246 Va. 174, 184 n.8, 431
S.E.2d 648, 654 n.8 (1993). The courts "can only administer
the law as it is written." Coalter v. Bargamin, 99 Va. 65,
71, 37 S.E. 779, 781 (1901). For the courts, then, the "best
indications of public policy are to be found in the enactments
of the Legislature." City of Charlottesville v. DeHaan, 228
Va. 578, 583, 323 S.E.2d 131, 133 (1984) (quoting City of
Danville v. Hatcher, 101 Va. 523, 532, 44 S.E. 723, 726
(1903)).
Having found that Code § 56-585.1 does not expressly
limit the discretion of the Commission to set an ROE during
the biennium to which it will apply, we must presume that the
General Assembly found such discretion to be consistent with
the policy objectives of the statute. Accordingly, we will
23 not consider VEPCO's policy-based arguments, but presume that
if they have merit they will find redress in the appropriate
forum of the legislature.
Finally, VEPCO contends that the Commission erred in
relying on the stipulation agreed to by VEPCO and adopted by
the Commission in the March 11, 2010 order as demonstrating
that VEPCO had effectively agreed that utilization of the ROE
determined during the "going-in" review was appropriate, and,
thus, that utilization of the ROE determined in the 2011
biennial review was permissible. Appellees Fairfax County and
the Virginia Committee for Fair Utility Rates respond that the
Commission's prior action is merely consistent with and
provides a rational basis for its action in the present case.
Because we have already determined that the Commission
has the discretion to utilize the 10.9% ROE for the entire
2011-2012 biennium, any reliance that the Commission may have
placed on VEPCO's prior stipulation to the retrospective
application of the ROE from the "going-in" review, even if
misplaced, would not impugn the Commission's action in this
case. Moreover, the March 29, 2012 order is clear that the
Commission principally relied upon its interpretation of Code
§ 56-585.1 as the basis for finding that it could apply the
10.9% ROE to the entire 2011-2012 biennium. The references to
the 2010 stipulation in the order relied upon by VEPCO to
24 support its argument principally set the background of the
case, and to the extent they may be viewed as justification
for the Commission's action, this would only serve as an
alternative basis for a ruling that was, in any case, correct.
CONCLUSION
In summary, we find no merit to VEPCO's contentions that
the Commission is not permitted to utilize the 10.9% ROE set
in the November 30, 2011 order for the entire 2011-2012
biennial period in the 2013 biennial review of the rates,
terms, and conditions for the provision of generation,
distribution, and transmission services by VEPCO. The
Commission's construction of Code § 56-585.1 was based upon
the proper application of legal principles, and we hold that
the Commission did not abuse the discretion afforded to it
under that statute. For these reasons, the judgment of the
Commission will be affirmed.
Affirmed.