Gearhart v. Public Utility Commission

216 October 2, 2014 No. 63

IN THE SUPREME COURT OF THE

STATE OF OREGON

Frank GEARHART;

Patricia Morgan;

Kafoury Brothers, Inc.,

Petitioners on Review,

and

UTILITY REFORM PROJECT,

Petitioner,

v.

PUBLIC UTILITY COMMISSION OF OREGON

and Portland General Electric Company,

Respondents on Review.

(PUC 08487, 09093; CA A140317; SC S061517 (Control))

Frank GEARHART;

Patricia Morgan;

Kafoury Brothers, Inc.,

Petitioners,

and

UTILITY REFORM PROJECT,

Petitioner on Review,

v.

PUBLIC UTILITY COMMISSION OF OREGON

and Portland General Electric Company,

Respondents on Review.

(PUC 08487, 09093; CA A140317; SC S061518)

En Banc

On review from the Court of Appeals.*

Argued and submitted March 4, 2014.

Linda K. Williams, Portland, argued the cause and filed

the briefs for petitioners on review Gearhart, Morgan, and

Kafoury Brothers, Inc.

______________

*  Judicial review of an order of the Public Utility Commission, 255 Or App

58, 299 P3d 533 (2013).

Cite as 356 Or 216 (2014) 217

Daniel W. Meek, Portland, argued the cause and filed the

brief for petitioner on review Utility Reform Project.

Michael A. Casper, Deputy Solicitor General, Salem,

argued the cause and filed the brief for respondent on review

Public Utility Commission of Oregon. With him on the brief

were Ellen F. Rosenblum, Attorney General, and Anna M.

Joyce, Solicitor General.

James N. Westwood, Stoel Rives LLP, Portland, argued

the cause and filed the brief for respondent on review

Portland General Electric Company. With him on the brief

was Rachel C. Lee.

Scott G. Seidman, Portland, filed a brief for amicus

curiae Edison Electric Institute.

Katherine McDowell, McDowell Rackner & Gibson PC,

Portland, filed a brief for amici curiae Avista Corporation,

Idaho Power Company, Northwest Natural Gas Company,

and PacifiCorp. With her on the brief was Lisa Rackner.

G. Catriona McCracken, Portland, filed a brief for amicus

curiae Citizens’ Utility Board of Oregon. With her on the

brief were Sommer Templet and Ray Myers.

BALMER, C. J.

The decision of the Court of Appeals and the order of the

Public Utility Commission are affirmed.

On remand from the Court of Appeals of earlier rate orders, the Public

Utilities Commission (PUC) issued Order No. 08-487, now before the court on

judicial review in this case. In the order, the PUC had reexamined the rates

it would have set for 1995-2000 if it had not made a legal error, concluded that

the post-2000 rates would have been lower without the legal error, and ordered

Portland General Electric (PGE) to order a refund to the post-2000 ratepayers.

The Court of Appeals upheld the PUC order. Held: (1) The PUC had authority

to take the actions in the order, including reexamining the rates, ordering the

refund, and allowing PGE to recover interest on its investment to account for

the time value of money; and (2) the PUC order was supported by substantial

evidence in the record.

The decision of the Court of Appeals and the order of the Public Utility

Commission are affirmed.

218 Gearhart v. PUC

BALMER, C. J.

At issue in this case is an order of the Public

Utility Commission (PUC) that addressed Portland

General Electric’s (PGE) recovery of its capital investment

in the Trojan nuclear generating facility after that facil-

ity was retired from service. In that order, the PUC made

three key decisions that are now before this court. First, to

determine whether a legal error that the PUC had made in

an earlier rate case had affected rates that the PUC had

authorized PGE to charge, the PUC reexamined those ear-

lier rates. Second, in undertaking that reexamination, the

PUC determined that PGE had been required to recover

its capital investment over time, and that the rates there-

fore should have included interest to account for the time

value of money. Third, the PUC determined that, despite

the legal error, the rates that it had authorized for the 1995

to 2000 time period were just and reasonable, but that

to make the post-2000 rates just and reasonable, it was

required to order a refund to the post-2000 ratepayers. In

affirming the PUC order, the Court of Appeals concluded

that the PUC had not erred in making those three deter-

minations. We affirm the decision of the Court of Appeals

and the order of the PUC.

This case dates back to 1976, when PGE began com-

mercial operation of the Trojan nuclear generating facil-

ity. Initially, PGE was allowed to recover its investment in

that facility through rates charged over a 35-year period.

Problems with the facility and other considerations led

PGE to retire Trojan in 1993, before the end of that 35-year

period. Since that time, PGE, the Utility Reform Project

(URP), and plaintiffs (the Class Action Plaintiffs, or CAPs)

in two class action cases against PGE have argued before

the PUC, the Court of Appeals, and this court about PGE’s

recovery of the remaining balance of its capital investment

in Trojan and about whether and to what extent ratepayers

can recover their payments of certain amounts associated

with the retired Trojan facility.1

1

As discussed below, the CAPs are class action plaintiffs representing PGE

ratepayers from the period of April 1995 through September 2000 in two class

action cases against PGE.

Cite as 356 Or 216 (2014) 219

The order at issue here, PUC Order No. 08-487,

followed the Court of Appeals’ remand of three prior PUC

orders involving PGE’s ability to recover the remaining bal-

ance of its investment in Trojan through rates. The Court

of Appeals in this case affirmed the PUC’s order, reject-

ing arguments by URP and the CAPs that the PUC had

exceeded its authority on remand. Gearhart v. PUC, 255 Or

App 58, 104-05, 299 P3d 533 (2013). Judge Schuman dis-

sented, arguing that the methodology used by the PUC went

beyond the scope of the remands and that the case should

have been remanded to the PUC for further proceedings.

Id. at 105, 113 (Schuman, J., dissenting). For the reasons

discussed below, we affirm the Court of Appeals.

I.  PUBLIC UTILITY RATEMAKING

We begin with a brief overview of public utility

ratemaking. Public utilities exhibit characteristics of nat-

ural monopolies. For that reason, public utilities often are

granted exclusive territories within which to operate, and

many aspects of public utility operation are closely regulated

by public utility commissions. See Charles F. Phillips, Jr.,

The Regulation of Public Utilities 4 (2d ed 1988) (explaining

that public utilities are unique because they operate more

efficiently as monopolies, they must be regulated to ensure

they contribute to the general welfare, there is a high degree

of public interest in the services rendered, and administra-

tive commissions have jurisdiction over rates and services).

In Oregon, the PUC’s responsibilities include “establishing

fair and reasonable rates” for services provided by public

utilities. ORS 756.040(1).2

2

ORS 756.040(1) provides:

“In addition to the powers and duties now or hereafter transferred to or

vested in the Public Utility Commission, the commission shall represent the

customers of any public utility or telecommunications utility and the public

generally in all controversies respecting rates, valuations, service and all

matters of which the commission has jurisdiction. In respect thereof the com-

mission shall make use of the jurisdiction and powers of the office to pro-

tect such customers, and the public generally, from unjust and unreasonable

exactions and practices and to obtain for them adequate service at fair and

reasonable rates. The commission shall balance the interests of the utility

investor and the consumer in establishing fair and reasonable rates. Rates

are fair and reasonable for the purposes of this subsection if the rates pro-

vide adequate revenue both for operating expenses of the public utility or

220 Gearhart v. PUC

The statutes direct the PUC to examine three key

components in ratemaking. First, the PUC determines the

utility’s operating expenses, such as wages, fuel, mainte-

nance, and taxes. See id. (fair and reasonable rates allow

recovery of revenue “for operating expenses”); see also

Phillips, The Regulation of Public Utilities at 169. Second, the

statute provides that rates should provide adequate revenue

“for capital costs of the utility.” ORS 756.040(1). That amount

is represented in the PUC’s calculation of rate base. Although

the term “rate base” is not defined by statute, it is under-

stood within public utility ratemaking to represent “the net

or depreciated value of the tangible and intangible property,

or net investment in the property,” although there are lim-

itations on what may be included in rate base. Phillips, The

Regulation of Public Utilities at 169-70. Third, the PUC must

determine the appropriate rate of return on the utility’s capi-

tal investment. See ORS 756.040(1) (fair and reasonable rates

allow recovery of “capital costs of the utility, with a return

to the equity holder * * * [c]ommensurate with the return on

investments in other enterprises having corresponding risks”

and “[s]ufficient to ensure confidence in the financial integ-

rity of the utility”); see also Phillips, The Regulation of Public

Utilities at 170. The rate of return should “be fair to investors

so as to avoid the confiscation of their property” and “pre-

serve the credit standing of the utility to enable it to attract

new capital to maintain, improve, and expand its services.”

Phillips, The Regulation of Public Utilities at 170.

Taken together, those components are represented

in the following formula: R = E + (V    – d)r, where “R” rep-

resents the revenue requirement, “E” represents allowable

operating expenses, “V” represents rate base, “d” represents

accumulated depreciation, and “r” represents the rate of

return. In calculating those components, and in calculating

“adequate revenue,” there is no single correct sum, but rather

a range of reasonable rates. See Phillips, The Regulation of

telecommunications utility and for capital costs of the utility, with a return

to the equity holder that is:

“(a)  Commensurate with the return on investments in other enterprises

having corresponding risks; and

“(b)  Sufficient to ensure confidence in the financial integrity of the util-

ity, allowing the utility to maintain its credit and attract capital.”

Cite as 356 Or 216 (2014) 221

Public Utilities at 173 (“[T]he required earnings of a utility

cannot be represented by a specific sum, nor determined by

a precise formula.”); PUC Order No. 08-487 at 7 (noting that

the Commission uses this “standard ratemaking formula” to

determine how much revenue a utility should receive).

When the PUC makes those calculations and sets

rates, it is performing a quasi-legislative function. Dreyer v.

PGE, 341 Or 262, 282, 142 P3d 1010 (2006). Rate orders are

prospective, Valley & Siletz R. R. Co. v. Flagg, 195 Or 683,

715, 247 P2d 639 (1952), but, “[i]n determining the amount

of each of the terms in the ratemaking formula and in mak-

ing its estimate of revenues under the proposed rates, the

[PUC] looks at data for a given ‘testyear’ either in the past,

present, or future.” Stefan Krieger, The Ghost of Regulation

Past: Current Applications of the Rule Against Retroactive

Ratemaking in Public Utility Proceedings, 1991 U Ill L Rev

983, 995 (1991); see PUC Order No. 08-487 at 12 (listing test

year estimates of power costs for 1995 and 1996 as one factor

affecting estimated revenue requirement). The use of a test

year results in rates that inherently are based on estimates

that may overcompensate or undercompensate utilities. See

Krieger, 1991 U Ill L Rev at 995, 995 n 52; see also Phillips,

The Regulation of Public Utilities at 188 (“[T]he actual rate

of return earned by a utility may be quite different from the

rate allowed by the commission.”); PUC Order No. 08-487 at

7 (“The utility absorbs the expenses if they are higher than

expected and benefits if the expenses are lower, which gives

the utility the incentive to manage its operations efficiently

*  *.”). In sum, ratemaking is a unique enterprise that is

*

governed by statute but largely left to the PUC’s discretion.

See Springfield Education Assn. v. School Dist., 290 Or 217,

230, 621 P2d 547 (1980) (explaining that the PUC is empow-

ered to “make delegated policy choices of a legislative nature

within the broadly stated legislative policy”).

II.  FACTUAL BACKGROUND AND

PROCEEDINGS BELOW

There are three separate, but related, proceedings

that are relevant on review. We describe those three pro-

ceedings in detail to provide the background necessary for

222 Gearhart v. PUC

understanding the order at issue in this case, PUC Order

No. 08-487.

A.  Rate Case After Trojan’s Closure: PUC Order No. 95-322

in UE 88 and Trojan I

PGE began commercial operation of the Trojan

nuclear facility in 1976. At that time, the PUC allowed PGE

to recover its investment in Trojan by including that amount

in rates over a 35-year period. PGE also had the opportunity

to earn a return on its investment in Trojan because PGE’s

investment in the facility was included in rate base.

PGE retired the facility in 1993, before the end of

the 35-year period for recovering its investment, because,

as the PUC explained in PUC Order No. 08-487, “PGE con-

cluded that closing the plant was the least-cost option for its

customers, meaning that closing Trojan and replacing its

output with purchased power was expected to be less expen-

sive than continuing to operate the plant.”

After retiring the Trojan facility, PGE sought a

declaratory ruling on whether PGE could recover in rates

the remaining balance of its capital investment in the

Trojan facility. In PUC Order No. 93-1117, the PUC declared

that “if PGE met certain conditions and could show certain

‘assumed facts’ to be true in a rate case or similar forum,

then PGE could set rates to obtain both a ‘return of’ and

a ‘return on’ its Trojan investment.” Dreyer, 341 Or at 267

(emphasis in original; footnote omitted) (summarizing PUC

Order No. 93-1117). URP and the Citizens’ Utility Board

(CUB) challenged that order in circuit court, and the court

summarily affirmed. Id. URP and CUB appealed.

Meanwhile, the PUC conducted a rate case consis-

tent with PUC Order No. 93-1117, which resulted in PUC

Order No. 95-322. PUC Order No. 95-322 set PGE’s rates

to include both a return of and a return on PGE’s invest-

ment in the Trojan facility.3 See Utility Reform Project v.

PUC, 215 Or App 360, 365, 170 P3d 1074 (2007) (Trojan

II) (so noting). URP and CUB had intervened in the

rate case, and they challenged the order in circuit court.

3

Those rates were in effect from 1995 to 2000.

Cite as 356 Or 216 (2014) 223

Id.4 The court concluded that PGE could not recover a

return on its investment in Trojan and reversed. Id. PGE

and the PUC appealed.

The Court of Appeals consolidated the two appeals

and analyzed the two statutes at issue—ORS 757.140(2),

which addressed the inclusion of undepreciated investments

in rates, and ORS 757.355, which addressed the exclusion of

certain costs from rates.5 The court held that, “read together,

ORS 757.140(2) and ORS 757.355 allow only the principal

amount of the undepreciated investment to be recovered

through rates.” Citizens’ Utility Board v. PUC, 154 Or App

702, 714, 962 P2d 744 (1998) (Trojan I). In other words, the

court held, “ORS 757.140(2) authorizes rates that would reim-

burse the utility for its principal investment in retired capital

assets”—a return of PGE’s investment—“but it does not autho-

rize the return on the investment that ORS 757.355 proscribes.”

Id. at 716. The court “reversed and remanded with instruc-

tions to remand [the] orders to PUC for reconsideration.” Id.

at 717. As explained below, the PUC addressed that remand in

PUC Order No. 08-487, now at issue before this court.6

B.  Rates Implementing Settlement: PUC Order No. 00-601

in UM 989, PUC Order No. 02-227, and Trojan II

Following the Court of Appeals’ decision in Trojan I,

CUB and PGE agreed to a settlement that removed the

4

As discussed below, the procedure for challenging PUC orders was changed

in 2005, and judicial review proceedings are now filed in the Court of Appeals.

5

ORS 757.140(2) now (as then) provides, in part, that “the commission may

allow in rates, directly or indirectly, amounts on the utility’s books of account

which the commission finds represent undepreciated investment in a utility

plant, including that which has been retired from service * * * [w]hen the commis-

sion finds that the retirement is in the public interest.” At the time, ORS 757.355

(1993) provided that “[n]o public utility shall, directly or indirectly, by any device,

charge, demand, collect or receive from any customer rates which are derived

from a rate base which includes within it any construction, building, installation

or real or personal property not presently used for providing utility service to the

customer.” The legislature amended ORS 757.355 in 2003, but no party argues

that those amendments are material to this case. See Or Laws 2003, ch 202, § 2.

All references to ORS 757.355 are to the 1993 version of the statute.

6

The PUC and PGE sought review of the court’s decision in Trojan I. This

court granted review, but held the case in abeyance based on settlement talks

between PGE and CUB, as well as pending legislation that could have affected

the case. See Dreyer, 341 Or at 269. After PGE and CUB reached a settlement,

which the PUC approved, this court dismissed the petition for review on its own

motion. Id. at 269-70.

224 Gearhart v. PUC

remaining balance of PGE’s investment in the Trojan facility

from PGE’s balance sheet entirely by offsetting that amount

against existing credits owed to PGE’s ratepayers. Trojan

II, 215 Or App at 366. The theory behind the settlement was

that the parties could end the controversy over Trojan by

removing the remaining balance from PGE’s books. Dreyer,

341 Or at 269. As a result, following the settlement, rates

would no longer include a return of or a return on PGE’s

investment in Trojan. The PUC approved revised rate sched-

ules implementing the settlement in PUC Order No. 00-601,

and the rates went into effect in October 2000. Id.

URP, however, was not a party to the settlement,

and it filed a complaint with the PUC challenging the rates

that the PUC imposed to implement the settlement. Trojan

II, 215 Or App at 366. Among other things, URP argued

that the rates did not provide a mechanism for recovery of

amounts collected under the 1995 to 2000 rates that were

attributable to a return on PGE’s investment in Trojan.

The PUC rejected all of URP’s arguments in PUC Order

No. 02-227, reasoning, in part, that it had no authority to

order refunds. Id. at 367. URP sought review of PUC Order

No. 02-227 in circuit court, and the court determined that

PGE should have been required to issue refunds for the

“ ‘unlawfully collected rates as a matter of law.’  Id. at 368

”

(quoting circuit court). The court reversed and remanded,

directing the PUC “  immediately revise and reduce the

‘to

existing rate structure’  or “  order PGE to immediately

” ‘to

issue refunds’  to allow ratepayers to recover any amounts

”

attributable to a return on PGE’s investment in Trojan. Id.

at 368 (quoting circuit court). The PUC and PGE appealed.

The Court of Appeals vacated and remanded. Id. at

376. The Court of Appeals reasoned that the PUC had relied

on an incorrect interpretation of ORS 757.225 in concluding

that it had no authority to issue refunds.7 Accordingly, the

7

ORS 757.225 provides:

“No public utility shall charge, demand, collect or receive a greater or

less compensation for any service performed by it within the state, or for any

service in connection therewith, than is specified in printed rate schedules as

may at the time be in force, or demand, collect or receive any rate not speci-

fied in such schedule. The rates named therein are the lawful rates until they

are changed as provided in ORS 757.210 to 757.220.”

Cite as 356 Or 216 (2014) 225

court concluded that the order had to be remanded to the

PUC for reconsideration in light of the correct interpretation

of that statute. Id. at 373. Moreover, the court noted, the cir-

cuit court’s remand instructions were erroneous because the

court improperly had assumed that the PUC had authority

to offer a remedy and was required to exercise that author-

ity. Id. at 374. The Court of Appeals explained that those

issues had to be resolved by the PUC in the first instance,

and the court vacated the judgment and “remanded to cir-

cuit court with instructions to remand Order No. 02-227 to

PUC for reconsideration of issues raised on appeal and cross-

appeal.” Id. at 375-76. That remand also was addressed in

PUC Order No. 08-487, now at issue before this court.

C.  The CAPs’ Claims Against PGE: Mandamus Proceeding

in Dreyer

After Trojan I, the CAPs filed an action against PGE

in circuit court alleging, among other things, that PGE was

liable for damages under ORS 756.185. See ORS 756.185(1)

(providing that public utility is liable to person injured for

damages sustained when public utility “does, or causes or

permits to be done, any matter, act or thing prohibited by

ORS chapter 756, 757 or 758 or omits to do any act, matter

or thing required to be done by such statutes”). The CAPs

alleged that they were entitled to damages for rates paid

between 1995 and 2000 because PGE had violated ORS

757.355 by charging rates that included a return on PGE’s

investment in Trojan.

After the circuit court denied PGE’s motion to

dismiss, PGE sought a writ of mandamus from this court

directing the circuit court to dismiss the case. Dreyer, 341

Or at 275-76. In Dreyer, we held that we could not issue a

peremptory writ ordering the circuit court to dismiss the

case because we concluded that the CAPs’ claim under ORS

756.185 had a basis in law. Id. at 279-80, 283. In particular,

we rejected PGE’s argument that ORS 757.225, which pro-

hibits public utilities from collecting rates greater or lesser

than those approved by the PUC, made the rates approved

by the PUC and charged by PGE between 1995 and 2000

necessarily lawful. See id. at 279-80 (explaining that ORS

757.225 “is not aimed, as PGE suggests, at conclusively and

226 Gearhart v. PUC

permanently binding the entire world to the rate decisions

of the PUC”). In other words, we rejected PGE’s argument

that ORS 757.225 embodies a strict version of the “filed rate

doctrine” that would treat all PUC-approved rates as con-

clusively lawful until changed, and to bar any claim by the

CAPs for damages based on the PUC-approved rates that

PGE had charged between 1995 and 2000. See id. at 278-

80.8 Dreyer also rejected PGE’s argument that the circuit

court lacked jurisdiction to hear the case because it inher-

ently would involve ratemaking. See id. at 282 (concluding

that one approach for addressing damages might “invade

the PUC’s exclusive ratemaking authority,” but that alter-

native approach might not do so).

Nonetheless, we concluded that the circuit court

had “a legal duty to abate the proceedings” because the PUC

remand proceedings for PUC Order No. 95-322 involved

“(essentially) the same controversy.” Id. at 283. We reasoned

that the PUC had primary jurisdiction “to determine what,

if any, remedy it [could] offer to PGE ratepayers.” Id. at 286.

We went on to explain that, if the PUC could provide a rem-

edy, the CAPs’ claims might become moot. Id. We issued

a peremptory writ ordering the circuit court to abate the

CAPs’ case.

D.  Order at Issue on Review: PUC Order No. 08-487

Following the three appellate cases discussed above,

the PUC conducted further proceedings and issued a 106-page

order addressing the Trojan I and Trojan II remands. That

order began by resolving three threshold issues. First, the

PUC explained that Trojan I had not declared the 1995 to

2000 rates unlawful, but rather had held that the rate order

was based on an error of law. The PUC concluded that even

if the rate order was erroneous, the overall rates themselves

could be lawful.

Second, the PUC determined that it had authority

to order a utility to issue refunds in limited circumstances,

including when necessary to “remedy an error identified by

8

The filed rate doctrine provides that “any rate filed with and approved by

the relevant ratemaking agency represents a contract between the utility and the

customer and is conclusively lawful until a new rate is approved.” Dreyer, 341 Or

at 270 n 10.

Cite as 356 Or 216 (2014) 227

a reviewing court on appeal.” The PUC appeared to conclude

that that authority stemmed from ORS 756.040, which gives

the PUC authority to do “all things necessary and conve-

nient” in the exercise of its legislatively delegated powers.

Third, the PUC clarified its understanding of this

court’s decision in Dreyer, particularly noting that this court

had not determined the scope of the filed rate doctrine or its

impact on the PUC’s remedial authority. On the contrary,

noted the PUC, this court had left it to the PUC to deter-

mine in the first instance whether and to what extent the

PUC had remedial authority.

In applying those legal principles, the PUC con-

cluded that its task was to determine whether the 1995 to

2000 rates and the post-2000 settlement rates were just

and reasonable. The PUC began by examining what rates

it would have approved for the period from 1995 to 2000 if

it had known that it could not authorize PGE to recover a

return on its investment in Trojan. The PUC concluded that

it had to “undertake a comprehensive review of the rate-

making decisions” at issue in Trojan I as a “natural con-

sequence of [the PUC’s] statutory and constitutional man-

dates.” Although the PUC acknowledged that in doing so

it would not be setting rates, it concluded that ratemaking

principles should guide its analysis. In adopting that frame-

work, the PUC rejected URP’s argument that the PUC

could simply remove the return on investment in Trojan

from rates “while holding all other rate determinations con-

stant.”9 Instead, the PUC’s review involved reexamining ele-

ments of the revenue requirement that were affected by the

decision in Trojan I, and then comparing the new revenue

requirement with that approved in 1995. In undertaking

that review, the PUC reopened the record to allow the PUC

to consider new evidence in light of Trojan I.

The PUC analyzed aspects of its ratemaking deci-

sion in PUC Order No. 95-322 that it believed would have

been affected by Trojan I. Before this court, URP and the

9

According to URP, using its proposed method, PGE would owe the 1995 to

2000 ratepayers $522.8 million, which includes interest. URP further contends

that PGE owes the post-2000 ratepayers $436.4 million. As discussed below,

using the PUC’s method, the only refund ordered was $33.1 million to the post-

2000 ratepayers.

228 Gearhart v. PUC

CAPs challenge the PUC’s decision to use a different amor-

tization period for return of PGE’s investment in Trojan

than it had used when it set rates previously and its related

decision to reexamine rates as if PGE had been allowed to

recover interest on the undepreciated balance during that

shorter amortization period.

In undertaking its reexamination, the PUC short-

ened the amortization period from 17 years to 10 years

because, without the opportunity to earn a return on its

investment in Trojan, recovery of PGE’s investment over

17 years “would likely increase PGE’s risk profile.”10 Because

of that “opportunity cost,” the PUC concluded that, had it

not provided for a return on PGE’s investment, it would have

used the shorter period of 10 years to “equitably allocate the

benefits and burdens while allowing quicker recovery to off-

set any increase in PGE’s risk profile.”

Moreover, the PUC concluded, if it had not allowed

PGE to earn a return on its investment, it would have

allowed it to recover “some form of interest—not profit—to

compensate the utility for the delayed recovery of the invest-

ment.” Although the PUC noted that it often uses a utility’s

authorized rate of return as the applicable interest rate, it

concluded in its reexamination that it would have used a

different interest rate because of Trojan I. The PUC used

the 1994 United States Treasury 10-year bond rate, which

was 7.09 percent, reasoning that that rate would reflect only

the time value of money, and not any risk premiums, profit,

or other return on investment.11

Based on the shorter amortization period, the inclu-

sion of interest, and other adjustments that the PUC made in

10

The PUC originally had chosen the 17-year amortization period because it

had allowed PGE to continue to include its undepreciated investment in Trojan

in rate base, and there were 17 years left in the original 35-year amortization

period at that time. In setting these rates, the PUC is directed by statute to pro-

vide “a return to the equity holder that is: (a) Commensurate with the return on

investments in other enterprises having corresponding risks; and (b) Sufficient

to ensure confidence in the financial integrity of the utility, allowing the utility

to maintain its credit and attract capital.” ORS 756.040(1).

11

In contrast, in its original rate order, PUC Order No. 95-322, “PGE’s pre-

tax rate of return was 13.22 percent for 1995 and 13.34 percent from 1996 for-

ward. PGE’s authorized rate of return was 9.51 percent in 1995 and 9.6 percent

from 1996 forward.” See PUC Order No. 08-487 at 62 n 227.

Cite as 356 Or 216 (2014) 229

its reexamination, the PUC concluded that the 1995 to 2000

rates would have been $4.03 million higher than the authorized

rates. Because ratepayers would have had to pay $4.03 mil-

lion more in rates during the 1995 to 2000 time period if the

PUC had not made the legal error identified in Trojan I, the

PUC reasoned that “there [was] no basis to conclude that the

error identified in Trojan I * * * resulted in unjust and unrea-

sonable rates” during that period. In other words, because the

PUC’s error had benefitted ratepayers by creating rates that

were too low, the rates that the ratepayers actually had paid

could not have been unjust and unreasonable.

The PUC went on to explain that its recalculation

of the 1995 to 2000 rates also would have affected the rates

it would have set following the 2000 settlement. Specifically,

the PUC concluded that, had it used the shorter amortiza-

tion period, the result would have been a remaining Trojan

balance at the time of settlement that was $15.4 million less

than the balance that it had actually used to calculate the

settlement. Thus, fewer offsetting ratepayer credits would

have been needed to remove the remaining Trojan balance

from PGE’s books. That, in turn, would have left more cred-

its on PGE’s books to benefit ratepayers following the 2000

settlement. Because the PUC concluded that it had remedial

authority, the PUC determined that it could compensate the

post-2000 ratepayers for the difference between the rates

approved following settlement and the rates that would have

been approved if the remaining balance had been $15.4 mil-

lion lower. The PUC ordered PGE to issue a refund to the post-

2000 ratepayers to compensate for the amount of that differ-

ence plus interest at PGE’s authorized rate of return from

2000—9.6 percent—for a total refund amount of $33.1 mil-

lion. With the $33.1 million refund as an adjustment to the

settlement that had originally produced the post-2000 rates,

the PUC concluded that “the settlement was reasonable and

appropriate, and that the resulting rates were just and rea-

sonable.” The PUC rejected URP’s remaining challenges to

the settlement rates.

E.  The Court of Appeals Decision

The Court of Appeals affirmed. Gearhart, 255 Or App

at 105. The court began by addressing the PUC’s authority

230 Gearhart v. PUC

on remand, concluding that the PUC had authority to exer-

cise its broad discretion and reexamine rates for the period

when rates had included an unlawful component. The court

ruled that the PUC could undertake that inquiry to deter-

mine what rates it would have approved in the absence of

error because no judicial instruction limited the PUC from

doing so. Id. at 88. The court also affirmed the outcome

of that inquiry: “We hold that the PUC’s conclusion—that

the inclusion of the unlawful component did not cause the

rates to be unjust or unreasonable and, therefore, has not

resulted in any unrectified damage to ratepayers—was con-

sonant with the remands and with the PUC’s responsibility

* * *.” Id. at 94. In support of that conclusion, the court noted

that the legality of the end result of ratemaking, and not the

legality of each calculation or input, controls. Id.

The court went on to conclude that “[t]he PUC did

not err in allowing PGE interest,” because it was within the

PUC’s discretion to reach that issue and to allow rates to

account for the time value of money. Id. at 95. Moreover, the

court stated, the PUC’s decision to allow interest was not

equivalent to allowing PGE to recover a prohibited return

on its investment, but rather was part of allowing PGE to

recover a return of its investment. Id. at 95-96.

The court next concluded that the PUC had the

authority to order PGE to issue refunds, and the court again

noted the breadth of the PUC’s statutory authority. Id. at

98, 103. The court also noted that the PUC had not engaged

in retroactive ratemaking when it ordered those refunds.12

Id. at 100. The court detailed prior Oregon cases that had

addressed the rule against retroactive ratemaking and rea-

soned that it “is or should be *  * narrow” in Oregon, pro-

*

hibiting the PUC from incorporating past profits or losses in

future rates but allowing certain other retroactive adjust-

ments. Id. at 100. Along those lines, the court held that

the rule “does not prohibit the PUC from determining that

a refund is appropriate when there is a determination on

12

As discussed below, the rule against retroactive ratemaking has been dif-

ferently defined and applied by various courts, but one commentator describes

the rule as “prohibit[ing] a public utility commission from setting future rates

to allow a utility to recoup past losses or to refund to consumers excess utility

profits.” Krieger, 1991 U Ill L Rev at 984.

Cite as 356 Or 216 (2014) 231

judicial review that a timely appealed rate order is errone-

ous.” Id. The Court of Appeals concluded by rejecting URP’s

arguments that certain aspects of the PUC’s order were

not supported by substantial evidence and were outside the

PUC’s discretion. Id. at 103-04.

Judge Schuman dissented. Although he agreed

with most of the majority’s discussion, he argued that prior

appellate decisions limited the PUC’s authority on remand

so that the PUC had to “simply determin[e] the effect on

the previously approved rates of including Trojan in the rate

base.” Id. at 105, 107 (Schuman, J., dissenting). Moreover,

Judge Schuman reasoned that the PUC had violated the law

by including Trojan in the rate base. As a result, the rates

were “unlawful no matter how fair and reasonable they may

be, and the PUC’s role on remand [was] to determine a rem-

edy for that unlawfulness.” Id. at 108, 112-13. The dissent

would have “reverse[d] [the PUC’s] order on the pre-October

2000 rates and remand[ed] the case for further proceed-

ings.” Id. at 113.

The Court of Appeals denied a request for recon-

sideration, and URP and the CAPs petitioned for review.

On review, the parties ask this court to address five issues:

(1) whether the PUC exceeded its authority on remand with

respect to the April 1995 to September 2000 rates and with

respect to the rates implemented in October 2000 after the

settlement; (2) whether the PUC had authority to order PGE

to issue refunds to its customers; (3) whether the PUC erred

in allowing PGE to recover interest; (4) whether the PUC

order was supported by substantial evidence; and (5) whether

the CAPs can proceed with their action against PGE in cir-

cuit court.13

III.  THE PUC’S AUTHORITY ON REMAND

The powers and duties of the PUC, like those of

other executive agencies, are limited to those expressly

13

Since 2005, PUC final orders have been subject to judicial review as orders

in contested cases under the Oregon Administrative Procedures Act (APA). ORS

756.610(1); see also ORS 183.315(6) (noting sections of the APA that do not apply

to the PUC). Under the APA, “[r]eview of a contested case shall be confined to the

record, and the court shall not substitute its judgment for that of the agency as to

any issue of fact or agency discretion.” ORS 183.482(7).

232 Gearhart v. PUC

authorized or necessarily implied by statute. See Ochoco

Const. v. DLCD, 295 Or 422, 426, 667 P2d 499 (1983)

(“[Agency] power includes that expressly conferred by stat-

ute as well as such implied power as is necessary to carry

out the power expressly granted.”). The PUC has express

authority to “establish[  fair and reasonable rates” for util-

]

ity services, and, in doing so, the PUC must “balance the

interests of the utility investor and the consumer.” ORS

756.040(1). As part of that balance, the legislature directed

the PUC to, on the one hand, “protect [public utility] custom-

ers, and the public generally, from unjust and unreasonable

exactions and practices and to obtain for them adequate ser-

vice at fair and reasonable rates,” and, on the other hand, to

establish rates that “provide adequate revenue” for both the

operating expenses and the capital costs of the utility, “with

a return to the equity holder.” Id.

In this case, the PUC exercised its ratemaking

authority when it originally issued PUC Order No. 95-322,

allowing PGE to recover both a return of and a return on

its investment in Trojan, and again when it issued the order

implementing the rates agreed to in the settlement between

PGE and CUB. We examine the PUC’s actions on remand in

light of its ratemaking authority and the authority arising

from the binding remand order from the Court of Appeals.14

In particular, we examine the PUC’s actions of reexamin-

ing the rates that it previously had authorized; ordering

PGE to refund a portion of rates that had been collected as

a result of the PUC’s legal error of allowing PGE to recover

a return on its investment in Trojan; and concluding that

it would have allowed PGE to recover interest on the unde-

preciated balance of its investment in Trojan to account for

the time value of money. We begin by examining the scope

of the remand, and then turn to the statutory scheme to

determine whether the PUC had authority to take those

actions.

14

As noted, Trojan II—and the subsequent remand—did not arise directly

out of the PUC’s order setting rates following the PGE and CUB settlement, PUC

Order No. 00-601. Rather, after the PUC issued that order, URP filed a complaint

before the PUC challenging those rates, and it was the order rejecting that chal-

lenge that was at issue in Trojan II, PUC Order No. 02-227. See Trojan II, 215 Or

App at 366-67.

Cite as 356 Or 216 (2014) 233

A.  The Scope of the Remand

PUC rate orders are subject to judicial review.

See ORS 756.610(1) (“[F]inal orders of the Public Utility

Commission are subject to judicial review as orders in con-

tested cases under the provisions of ORS 183.480 to 183.497

[of the APA].”). Although a 2005 law made PUC final orders

subject to review under the APA, the PUC orders at issue

in both Trojan I and Trojan II were subject to review under

the PUC’s own judicial review statutes. See Or Laws 2005,

ch 638, § 6 (amending PUC judicial review statute to bring

review of PUC orders under the APA). Under those stat-

utes, a party aggrieved by a PUC order could bring a suit

against the PUC in circuit court. See former ORS 756.580

(2003), repealed by Or Laws 2005, ch 638, § 21 (allowing a

party “aggrieved by any findings of fact, conclusions of law

or order” to “prosecute a suit against the commission” in cir-

cuit court). The circuit court could “affirm, modify, reverse

or remand the order,” but could not “substitute its judgment

for that of the Public Utility Commission as to any finding

of fact supported by substantial evidence.” Former ORS

756.598(1) (2003), repealed by Or Laws 2005, ch 638, § 21. A

party challenging an order had to show “that the order [was]

unreasonable or unlawful.” Former ORS 756.594 (2003),

repealed by Or Laws 2005, ch 638, § 21 (“[T]he burden of

proof is upon the party seeking to modify, vacate or set aside

findings of fact, conclusions of law or the order to show by

clear and satisfactory evidence that the order is unreason-

able or unlawful.”).

Unlike the APA, the PUC judicial review statutes

did not direct the court to take any particular action when

concluding that the PUC had erred. Compare Mitchell Bros.

Trk. Lines v. Hill, 227 Or 474, 480, 363 P2d 49 (1961) (con-

cluding that the purpose of the PUC judicial review statute

was “to grant to the courts a full scope of review to admin-

ister the relief appropriate to the cause”), with Megdal v.

Board of Dental Examiners, 288 Or 293, 319-20, 605 P2d 273

(1980) (explaining that, under the APA, “[i]f error is found,

the statute provides for reversal, modification, or remand as

appropriate to the character of the error and the agency’s

further role in the matter”). Under general principles of

234 Gearhart v. PUC

administrative law, however, remand usually is the appro-

priate remedy when the court concludes that an agency

has erred. Charles H. Koch, Jr., 3 Administrative Law and

Practice § 8:62[1], 295 (3d ed 2010) (“The most appropriate

remedy is usually remand to the agency for it to correct any

error.”); see also Krieger, 1991 U Ill L Rev at 1022 (noting

that, in most jurisdictions, if a rate order is reversed by a

reviewing court, “the court remands the case to the com-

mission either for further proceedings or the entry of a new

order”). In particular, a general remand, without specific

instructions to the agency, allows the court to perform its

review function without invading the province of the agency.

See Koch, 3 Administrative Law and Practice § 8:62 at 295

(“Rarely should a court impose its will on the agency by spe-

cific instructions. Usually the best approach is for the court

to note the error and allow the agency to correct that error.”).

Even when an agency has interpreted a statute

incorrectly—that is, when the agency has made a legal

error—courts ordinarily remand for the agency to apply the

law as interpreted by the court. See, e.g., Jefferson County

School Dist. No. 509-J v. FDAB, 311 Or 389, 395-96, 399,

812 P2d 1384 (1991) (concluding that agency erroneously

interpreted the term “duty” and affirming Court of Appeals

decision to remand to agency under the APA “to apply the

proper interpretation of ‘duty’  but see Dearborn v. Real

”);

Estate Agency, 334 Or 493, 504-06, 53 P3d 436 (2002)

(reversing, without remanding, agency order revoking real

estate license where order acknowledged that there was no

evidence to support the ruling under the interpretation of

the law adopted by the court). It is particularly appropri-

ate for a court to remand when application of the correct

interpretation of law requires a discretionary decision that

has been delegated to the agency. See Dickinson v. Davis,

277 Or 665, 675-76, 561 P2d 1019 (1977) (explaining that,

under PUC judicial review statutes, modification of an

agency order on review “is proper only when the court can

find that the law mandates one single correct result,” and

remanding case back to trial court that improperly had

substituted its judgment on discretionary issue decided by

agency); Springfield Education Assn., 290 Or at 240 (mod-

ifying agency order where it could “simply be corrected by

Cite as 356 Or 216 (2014) 235

modification in [a] single respect” and where “no further

determinations need[ed to] be made by [the agency]”).

As noted, ratemaking involves discretionary deci-

sions that the legislature largely has entrusted to the PUC.

See ORS 756.040(1) (providing that the PUC is charged

with “establishing fair and reasonable rates”); Springfield

Education Assn., 290 Or at 229-30 (noting that legislature

delegated discretionary decisions involved in ratemaking

to PUC). Accordingly, courts reviewing a rate order “do

not attempt as an original question to exert authority over

rates.” Valley & Siletz R. R. Co., 195 Or at 715 (internal

quotation marks omitted). In other words, courts review a

rate order to determine whether it complies with statutory

and constitutional requirements; on determining that a rate

order violates a statute or the constitution, courts typically

remand, rather than modify, a rate order because such a

modification often would involve ratemaking. See Krieger,

1991 U Ill L Rev at 997 (“Because courts consider the fixing

of specific rates a function solely for the commission, judges

will not order new rates if they reverse the commission-

ordered rates on review. Instead, they will remand the case

to the commission for the setting of new rates consistent

with the decision on review.”).

In accordance with those limitations, in both

Trojan I and Trojan II, the Court of Appeals directed that

the orders be remanded to the PUC, and the court did not

direct the PUC to take any particular action on remand. In

Trojan I, after the court concluded that the PUC had erred

by interpreting the statutes to allow PGE the opportunity

to recover a return on its investment in Trojan, the court

“reversed and remanded with instructions to [the circuit

court to] remand orders to PUC for reconsideration.” 154 Or

App at 717. In Trojan II, the court “remanded to circuit court

with instructions to remand Order No. 02-227 to PUC for

reconsideration of issues raised on appeal and cross-appeal.”

215 Or App at 376. The court did not, for example, remand

with instructions for the PUC to calculate the amount of

rates attributable to a return on investment in Trojan or

with instructions to refund that amount. Nor did the court

modify the PUC’s order to remove that amount from rates.

236 Gearhart v. PUC

The remand instructions from the Court of Appeals did not

purport to limit the authority of the PUC on remand, con-

sistently with the general understanding that a reviewing

court should direct agency action on remand only when

“the law mandates one single correct result.” See Dickinson,

277 Or at 675. Here, Trojan I held that the PUC could not

include a return on PGE’s Trojan investment in rates. It

did not hold, however, that that interpretation of law man-

dated a single result. Consequently, the court remanded the

case to the PUC to determine the result, or effect, of that

interpretation.

Moreover, although the parties argue about whether

Trojan I declared the rate order or the rates themselves

unlawful, that distinction does not control our analysis.

Rather, we focus on the effect of the holding in Trojan I.

Trojan I held that the statutes “preclude[d]” the PUC “from

allowing rates *  * that include[d] a rate of return” on

*

retired capital assets, as the orders at issue in that case had

allowed. Trojan I, 154 Or App at 716. Stated differently, the

court concluded that the PUC did not have statutory author-

ity to include a return on PGE’s Trojan investment in rates.

The court did not address the effect of that error on PGE or

its ratepayers. At no point did the court conclude that either

PGE or its ratepayers had been injured by that error. Thus,

contrary to URP’s arguments, Trojan I required only that

the PUC not include a return on investment in Trojan in

PGE’s rates. It had no more specific effect in limiting the

PUC’s authority on remand.15

We turn next to the statutory scheme to determine

whether the PUC had authority to determine the effect of

15

The PUC concluded in PUC Order No. 08-487 that removal of a return

on investment would have led to higher rates and that the PUC’s legal error

therefore did not “result in unjust and unreasonable rates during the April 1995

through September 2000 period.” The PUC went on to state that those rates

“were just and reasonable.” We focus on the total effect of the rate order, rather

than the rates themselves, in affirming the PUC. We do not address whether

rates that include a component prohibited by the law can be just and reasonable,

an issue discussed by both the majority and dissenting opinions in the Court of

Appeals. Instead, consistent with our decision in Dreyer, we determine only that

the fact that rates include a component that is prohibited by statute does not

necessarily mean that ratepayers have been injured. See Dreyer, 341 Or at 285

(noting that PUC proceeding could determine “whether [ratepayers] have been

injured (and, if they have been, the extent of the injury)”).

Cite as 356 Or 216 (2014) 237

the PUC’s error on ratepayers by reexamining prior rates,

and, if so, whether the PUC had authority to order PGE to

issue refunds.

B.  Reexamination of Previously Authorized Rates to Deter-

mine Injury

Rate orders are inherently prospective, setting

rates to be collected from future ratepayers. See Valley &

Siletz R. R. Co., 195 Or at 715 (noting that “all rate orders

are prospective in character”). Accordingly, URP and the

CAPs reason, the PUC cannot reexamine past rate orders,

reversed on judicial review, to determine whether the rates

set were just and reasonable. Moreover, they note, courts

around the country have held that state utility commissions

cannot reexamine past rates on remand. URP and the CAPs

urge this court to adopt a similar approach by adopting a

rule against retroactive ratemaking.

Although the rule against retroactive ratemaking

has been defined and applied in many different ways, the

rule can be described generally as “prohibit[ing] a public

utility commission from setting future rates to allow a util-

ity to recoup past losses or to refund to consumers excess

utility profits.” Krieger, 1991 U Ill L Rev at 984; see also

Dreyer, 341 Or at 270 n 10 (explaining that, under the rule,

“approved utility rates may be modified only prospectively”

and “utilities cannot provide retrospective relief from such

rates”). We have never expressly decided whether Oregon

accepts some form of the rule against retroactive ratemak-

ing. See id. (so noting). For purposes of this case, we need not

precisely define the contours of that rule or decide whether

Oregon accepts that rule in all circumstances. It is suffi-

cient for present purposes to conclude, as we do, that the

rule against retroactive ratemaking does not preclude the

action that the PUC took on remand in this case. The PUC

did not alter PGE’s rates retroactively, but rather used rate-

making principles to calculate the rates that it would have

authorized PGE to charge had it not included a return on

the investment in Trojan.

First, nothing in Oregon’s statutory scheme, which

delegates extensive power to the PUC, limits the PUC’s

238 Gearhart v. PUC

authority in a way that would have prevented it from reexam-

ining past rates in this case. See Hammond Lbr. Co. v. Public

Service Com., 96 Or 595, 609, 189 P 639 (1920) (explaining

that predecessor to the PUC was charged “with statutory

duties closely allied to the legislative power of the state”).

Courts applying the rule against retroactive ratemaking to

prevent utility commissions from retroactively examining

or altering rates often rely on statutes that differ in their

terms from the Oregon statutes. In Arkansas Louisiana Gas

Co. v. Hall, 453 US 571, 578, 101 S Ct 2925, 69 L Ed 2d 856

(1981), for example, the United States Supreme Court stated

that the Federal Energy Regulatory Commission (FERC)

had “no power to alter a rate retroactively” because the

governing statute provided that, when FERC found a rate

unreasonable, it had to determine the just and reasonable

rate to be “thereafter” observed. See also Krieger, 1991 U Ill

L Rev at 1033 (explaining that some courts have relied on

the word “thereafter” to conclude that utility commissions

have power to set rates only prospectively). In contrast, in

Oregon, any time a public utility files a new rate or sched-

ule or an increase in an existing rate or schedule, the PUC

may “conduct a hearing to determine whether the rate or

schedule is fair, just and reasonable.” ORS 757.210(1)(a).

After the PUC conducts a “full hearing, whether completed

before or after such rate or schedule has gone into effect,

the commission may make such order in reference thereto

as would be proper in a proceeding initiated after such rate

or schedule has become effective.” ORS 757.215(3); see also

ORS 756.558(2) (providing that PUC shall “make and enter

the order” of the PUC on a complaint based on findings of

fact and conclusions of law, and that order shall state effec-

tive date). The complaint and hearing provisions of the PUC

statutes say nothing about setting rates only prospectively,

or rates to be “thereafter” observed. Therefore, the statutes

did not preclude the PUC from reexamining the previously

charged rates as ordered by the Court of Appeals.

Second, in Dreyer, this court rejected the notion

that Oregon’s statutory scheme incorporates an “extreme”

version of the filed rate doctrine, which serves as another

common rationale for prohibiting the retroactive examina-

tion of rates. See Dreyer, 341 Or at 278-79. As noted, the filed

Cite as 356 Or 216 (2014) 239

rate doctrine generally provides that “any rate filed with and

approved by the relevant ratemaking agency represents a

contract between the utility and the customer and is conclu-

sively lawful until a new rate is approved.” Id. at 270 n 10. In

Dreyer, PGE argued that that doctrine is embodied in ORS

757.225, which provides:

“No public utility shall charge, demand, collect or receive a

greater or less compensation for any service performed by

it within the state, or for any service in connection there-

with, than is specified in printed rate schedules as may at

the time be in force, or demand, collect or receive any rate

not specified in such schedule. The rates named therein are

the lawful rates until they are changed as provided in ORS

757.210 to 757.220.”

The court in Dreyer did not find that argument persua-

sive. Although the court stated in a footnote that it was not

rejecting “the possibility that Oregon utility law incorpo-

rates some form of the doctrine,” Dreyer, 341 Or at 279 n 14,

the court rejected the notion that PGE was shielded from

liability because it was required by ORS 757.225 to charge

the rates that were later held to improperly include a return

on the investment in Trojan. Id. at 279-80.

Thus, unlike some courts, this court has not read

ORS 757.225 as a manifestation of legislative intent to allow

retroactive relief only when a utility collects rates different

than those approved by the PUC. See Krieger, 1991 U Ill L

Rev at 1033-34 (noting that some courts have interpreted

similar provisions to “infer that the legislature intended

the granting of retroactive relief only in the limited cir-

cumstances when a utility assesses a rate that is different

from the approved tariff”). Dreyer instead suggests that a

utility that collects rates approved by the PUC may have

to return a portion of those rates if they are later found to

be invalid on judicial review. See Dreyer, 341 Or at 278-79

(ORS 757.225 does not absolutely shield utilities from hav-

ing to return part of rates later determined to have included

an unlawful component). Moreover, as this court noted in

Dreyer, ORS 757.225 is a direction to utilities—“[n]o public

utility shall charge *  * greater or less compensation *  *

*  *

than is specified in printed rate schedules”—and not a limit

on the authority of the PUC. Id. at 278; see Krieger, 1991

240 Gearhart v. PUC

U Ill L Rev at 1034 (suggesting that those types of provi-

sions prevent utilities from changing their rates without

PUC approval, but noting that, textually, such provisions

do not address PUC authority). This court’s analysis of ORS

757.225 in Dreyer suggests that that statute is not a limit on

the PUC’s authority to reexamine past rates, because com-

mission-approved rates are not “conclusively lawful for all

purposes.” See Dreyer, 341 Or at 278.

Finally, we consider whether the rule against retro-

active ratemaking, independently of the statutory provisions

discussed above, precluded the action that the PUC took on

remand in this case. We conclude that it did not. The theory

behind the rule is that ratemaking inherently is a prospec-

tive process. Krieger, 1991 U Ill L Rev at 998. Courts have

applied the rule against retroactive ratemaking in a vari-

ety of ways, with some courts rejecting the rule entirely. See

id. at 1022, 1027 (explaining that cases are “almost evenly

split” as to whether a prevailing party can obtain retroactive

relief in the form of a refund or a surcharge for the period

between the order and reversal and the period after rever-

sal). Of those courts adhering to the rule, some have inter-

preted it as preventing a PUC from ordering any refunds or

surcharges. See, e.g., In re Application of Columbus S. Power

Co., 138 Ohio St 3d 448, 460-61, 8 NE 3d 863, 874-76 (2014)

(explaining that excessive rates charged during the appeal of

a commission order are not subject to refund and that “pres-

ent rates may not make up for revenues lost due to regula-

tory delay”). Others have interpreted the rule as preventing

a PUC from adjusting future rates based on actual expenses

and revenues. See, e.g., In re Providence Water Supply Bd.’s

Application to Change Rate Schedules, 989 A2d 110, 115,

118 (RI 2010) (explaining that future rates may not be

designed to recoup past losses and affirming PUC denial of

request to increase rates to cover past payments for retirees’

health-care costs).

In considering whether the rule against retroactive

ratemaking prohibits the PUC’s reexamination of previously

set rates in this case, it is important to recognize the context:

the issue was not back before the PUC because projected

circumstances on which rates were based (such as expected

Cite as 356 Or 216 (2014) 241

profits or losses) had not come to pass as forecast. Rather,

the orders at issue in PUC Order No. 08-487 were remanded

to the PUC because it made an error of law in exercising its

ratemaking authority described in ORS 756.040. The PUC

was not reexamining past rates because ratepayers were

seeking to benefit from PGE’s excess profits, or because PGE

was asking ratepayers to make up for a year of particularly

bad losses. The PUC was reexamining past rates because

the Court of Appeals concluded that the PUC had made a

legal error in setting those rates. See Indep. Voters of Ill. v.

Ill. Commerce Com’n, 117 Ill 2d 90, 104-05, 510 NE 2d 850,

857 (1987) (rejecting argument that rule against retroactive

ratemaking applies after rate order is reversed by review-

ing court where commission action was “a result of a direct,

statutorily authorized, review” of the commission’s order);

District of Columbia v. D.C. Pub. Serv. Com’n, 905 A2d 249,

258-59 (DC 2006) (suggesting that refund might be appro-

priate where agency is implementing judicial reversal of

order, but rejecting argument that agency, like courts, can

undo what is wrongfully done by its order where final order

was not subject to judicial review or reversed on appeal).

Given the posture of the remand orders, the PUC

could rely on the ratemaking authority that it had exercised

in the original proceedings under ORS 756.040 to deter-

mine on remand the effect of the Court of Appeals’ inter-

pretation of law on its earlier decision. See Jefferson County

School Dist. No. 509-J, 311 Or at 395, 399 (affirming Court

of Appeals decision to remand order reversing dismissal of a

school teacher to Fair Dismissal Appeals Board “to apply the

proper interpretation of ‘duty’ and, in the light of that inter-

pretation, to reconsider whether [the teacher] had neglected

a duty she owed”); Sec. & Exch. Comm’n v. Chenery Corp., 332

US 194, 200, 67 S Ct 1575, 91 L Ed 1995 (1947) (“After the

remand was made, therefore, the [Securities and Exchange]

Commission was bound to deal with the problem afresh,

performing the function delegated to it by Congress.”). The

exercise of that authority on remand included the authority

to reconsider all aspects of the decision affected by the error.

See Jefferson County School Dist. No. 509-J, 311 Or at 396-

97, 399 (affirming remand for agency to apply correct inter-

pretation of term “duty” in determining whether teacher

242 Gearhart v. PUC

properly was dismissed for “neglect of duty,” and, because

that error “permeated [the agency’s] sanction analysis,” also

affirming remand for reconsideration of that issue).16 The

ability to reconsider multiple aspects of the rate order was

necessary because ratemaking involves a variety of interre-

lated variables. See Hammond Lbr. Co., 96 Or at 609 (noting

that “it is impossible to fix rates that will be mathematically

correct or exactly applicable to all the new conditions that

may arise” because “the factors involved in an inquiry of this

kind are so many and so variable”); Phillips, The Regulation

of Public Utilities at 168 (explaining that the different

aspects of rate regulation “overlap in many instances”). To

the extent that the PUC’s error in allowing PGE to recover

a return on its investment in Trojan affected other parts of

the PUC’s original ratemaking analysis, the PUC could con-

sider those effects in assessing the effect of the error on the

rate order.

In addition, the rationale behind the rule against

retroactive ratemaking does not support its application to

this circumstance. The rule against retroactive ratemaking

serves the important function of providing stability in the

regulatory process—parties can reasonably rely on the fact

that rates will not be changed after they have been set and

paid. Krieger, 1991 U Ill L Rev at 1044. Moreover, the rule

plays a critical role in providing an incentive for efficient

operations because utilities know that they can keep profits

16

The CAPs attempt to distinguish Jefferson County School District No. 509-

J, 311 Or 389, by noting that the agency in that case “did not redetermine past

facts” or allow new issues or evidence. However, nothing in this court’s opinion

suggested that the agency could not have reopened the record or reconsidered

prior determinations if it had concluded that that was appropriate.

Moreover, there is nothing in the PUC judicial review statutes in place during

Trojan I that suggests that the PUC could not reopen the record on remand or

otherwise reconsider its analysis of facts in the existing record. Administrative

records often are reopened on remand. See Pierce, 3 Administrative Law Treatise

§ 18.1 at 1679 (5th ed 2010) (discussing agency options on remand, including

option of reopening record to receive additional evidence). Although a remand

based on legal error may not typically require the taking of additional evidence,

the CAPs have not identified anything in the statutes or the remand instructions

in Trojan I that prevented the PUC from doing so. See id. (explaining agency

options on remand, but not discussing reopening the record when remand is

based on error of law); Koch, Administrative Law and Practice § 8:31 at 186, 191

(suggesting that remand for application of correct legal principle may occur on

the existing record, but also noting that “the agency is somewhat free to decide

how to carry out the judicial will”).

Cite as 356 Or 216 (2014) 243

even if they exceed the authorized rate of return and that

they cannot seek to recover losses from ratepayers. Id. Here,

however, when URP and CUB appealed the PUC’s original

rate order, PUC Order No. 95-322 from 1995, all parties

knew that the rate order might be reversed on review. Given

that knowledge, the parties could not reasonably rely on the

rates not being reexamined, and PGE continued to have

an incentive to operate efficiently because it did not know

whether the rate order would be reversed on review. See id.

at 1046 (explaining that appeal of rate order should lead to

expectation that court may reverse rates on review and that

allowing retroactive ratemaking after judicial review does

not create negative economic incentives).

In sum, when a PUC order issued in the exercise of

its ratemaking authority has been reversed and remanded

after a reviewing court determines that there was a legal

error, the PUC can again use ratemaking principles on

remand to determine the effect of its error on the outcome of

the proceeding. Although the rule against retroactive rate-

making may prevent certain actions on remand, it does not

prevent the PUC from reexamining prior rates to determine

what rates it would have set in the absence of its legal error.

Because the PUC in this case reexamined past rates follow-

ing judicial review and reversal of prior rate orders, we con-

clude that that reexamination was permissible and did not

violate the rule against retroactive ratemaking.

C.  PUC Authority to Order Refunds

Independent of their challenge to PUC’s methodol-

ogy for determining the effect of its legal error, the CAPs

challenge the PUC’s authority to remedy that error by order-

ing refunds to the post-2000 ratepayers who were injured by

that error.17 More fundamentally, however, the CAPs argue

that they should be able to proceed in circuit court regardless

17

URP challenges the refund primarily on the ground that the PUC erred

in calculating the refund by engaging in retroactive ratemaking, and does not

challenge the PUC’s authority to order PGE to issue refunds. In fact, URP seems

to assume that the PUC can order PGE to issue refunds, albeit by reducing future

rates, rather than reexamining past rates. URP asserts that, on remand, the

PUC had to “calculate the prior unlawful charges” and “return those funds,

with appropriate interest, to those who paid them.” Because we have already

addressed URP’s retroactive ratemaking arguments above, we do not discuss

URP’s arguments regarding refunds further in this section.

244 Gearhart v. PUC

of whether the PUC has the authority to issue refunds. That

is so, the CAPs assert, because either the PUC lacks author-

ity to offer a remedy to the CAPs or the PUC has declined to

offer any remedy that it has the authority to provide.

We begin by considering whether the PUC had

authority to provide a remedy to the post-2000 ratepay-

ers by ordering PGE to issue refunds. As noted, the PUC’s

statutory authority is phrased in sweeping terms. See ORS

756.040(2) (granting the PUC authority to “supervise and

regulate every public utility” in the state and “to do all

things necessary and convenient in the exercise of such

power and jurisdiction”). In exercising that authority, the

PUC is charged with “mak[ing] use of the jurisdiction and

powers of the office to protect [public utility] customers, and

the public generally, from unjust and unreasonable exac-

tions and practices and to obtain for them adequate service

at fair and reasonable rates.” ORS 756.040(1). In addition,

the legislature has directed that laws administered by the

PUC “shall be liberally construed in a manner consistent

with the directives of ORS 756.040(1) to promote the public

welfare, efficient facilities and substantial justice between

customers and public and telecommunications utilities.”

ORS 756.062(2). Reading those statutes together, a liberal

construction of both the PUC’s power to “supervise and reg-

ulate public utilities” and its duty to protect ratepayers by

obtaining adequate service at fair and reasonable rates sup-

ports the PUC’s implied authority to correct legal errors that

lead to “unjust and unreasonable exactions.” Refunds are

one way of correcting those types of errors, and if the PUC

could not order refunds, it would be limited in its ability

to protect ratepayers. See Springfield Education Assn., 290

Or at 230 (PUC must regulate to allow just and reasonable

rates and has authority to make delegated policy choices

“within the broadly stated legislative policy”). See generally

Ochoco Const., 295 Or at 434 (concluding that agency did

not have specific implied power, in part because none of the

duties expressly delegated to the agency would be frustrated

by the agency’s inability to exercise that implied power).

An additional source of authority to order the refund

comes from the binding final remand order from the Court of

Cite as 356 Or 216 (2014) 245

Appeals. The PUC ordered the refund in this case after the

Court of Appeals, having engaged in statutorily authorized

judicial review, remanded the case to the PUC for reconsid-

eration in light of the court’s ruling that the PUC had made

a legal error. See Indep. Voters of Ill., 117 Ill 2d at 105, 510

NE 2d at 857-58 (concluding that commission could order

refund where it was “a result of a direct, statutorily autho-

rized, review of [a] Commission order” and where court had

remanded the case “to correct the erroneous portion of the

rates, not for original rate-making”).18 The authority to order

a refund reasonably can be implied when a rate order has

been reversed on judicial review and sent back to the PUC

for additional proceedings. See Appeal of Granite State Elec.

Co., 120 NH 536, 540, 421 A2d 121, 123 (1980) (“[T]he PUC

has authority to order the Electric Company to refund rev-

enues collected under rates authorized and approved by the

PUC but later found upon judicial review to have been col-

lected under improper rates.”). If the PUC could not order a

refund in the circumstances presented in this case, judicial

review would lose much of its effectiveness because the prob-

lem could only be addressed prospectively. See Indep. Voters

of Ill., 117 Ill 2d at 105, 510 NE 2d at 858 (“The function

of the courts in reviewing Commission proceedings would

be meaningless if no remedy could be provided after the

court holds that a Commission-approved rate order included

allowance of improper expenses and deductions for the util-

ity company.”).

We recognize, as the CAPs note, that certain stat-

utory provisions authorize the PUC to order refunds in spe-

cific circumstances. See ORS 757.215(4) (providing that,

when a public utility has filed to establish new rates or

18

Notably, the court in Independent Voters of Illinois concluded that rate-

payers were not entitled to refunds for amounts paid during the pendency of the

appeal, and instead limited refunds to the period after the rates were invali-

dated. 117 Ill 2d at 99-100, 510 NE 2d at 855. That conclusion was based, at

least in part, on statutes requiring utilities to collect the rates approved by the

commission. See id. at 97, 510 NE 2d at 854. As explained above, this court has

rejected that construction of Oregon’s parallel statutory provision. The court also

suggested that provisions allowing for a stay during appeal suggested that the

utility was entitled to collect and keep rates approved by the commission in the

absence of a stay. Id. We reject that conclusion. The availability of a stay does not

make it the only option for correcting an error, particularly where the fact that

the order is being appealed puts the parties on notice that the rates may be sub-

ject to reexamination.

246 Gearhart v. PUC

increase existing rates, and the PUC conducts a hearing on

those rates without suspending them, amounts exceeding

rates later approved by the PUC must be refunded); ORS

757.215(5) (providing that the PUC has authority to autho-

rize interim rates and to later order refund of any portion of

those rates that was not justified). We do not agree with the

CAPs, however, that those provisions preclude the PUC from

ordering refunds in other circumstances. The fact that the

PUC must order refunds in certain proceedings under ORS

757.215 does not mean that the PUC may not order refunds

in other circumstances, such as those presented in this case.

Express authority to act in one set of circumstances does

not necessarily preclude implied authority to carry out simi-

lar actions in entirely different circumstances.19 In fact, the

PUC’s authority to order refunds under ORS 757.215 sug-

gests that allowing the PUC to order refunds here would

not “materially alter the nature” of the PUC’s authority. See

Southern Pacific Co. v. Heltzel, 201 Or 1, 39-40, 44, 268 P2d

605 (1954) (concluding that Public Utilities Commissioner

lacked authority to set minimum rates or order a railroad

to increase rates because that power would alter the nature

of the Commissioner’s duties without guidance from the

legislature).20

19

An express grant of general power does not necessarily confer implied gen-

eral powers. See, e.g., Southern Pacific Co. v. Heltzel, 201 Or 1, 24, 268 P2d 605

(1954) (“The fact that the Commissioner has been given some power to act in some

areas of utility regulation does not imply that he may exercise all the power that the

legislature might have exercised had it chosen to act directly.”). In this case, how-

ever, the implied power to order refunds is necessary to the PUC’s ability to carry

out its express duty to obtain “adequate service at fair and reasonable rates.” See

ORS 756.040(1) (setting forth powers and duties). Moreover, the express authority

to order refunds of interim rates does not imply that refunds in all other circum-

stances are prohibited—the PUC’s authority to order refunds on interim rates is

not inconsistent with its authority to order refunds after a rate order is invalidated

on judicial review. The absence of a conflict between the express and implied pow-

ers makes it more likely that the legislature intended to vest the implied power

in the PUC, particularly given the legislature’s direction that the PUC statutes

should be liberally construed. See ORS 756.062(2) (so stating).

20

Similarly, we reject the CAPs’ argument that a statutory provision allow-

ing for stay of a PUC rate order “upon the giving of [a] bond” demonstrates that

the legislature intended losses incurred during appeal to be paid only by a bond,

and not remedied by the PUC. See former ORS 756.590 (2003), repealed by Or

Laws 2005, ch 638, § 21 (providing that PUC order can be stayed pending final

disposition of a case “upon the giving of such bond or other security, or upon such

conditions as the court may require”). At most, that provision indicates that the

legislature intended errors identified during judicial review to be remedied by

Cite as 356 Or 216 (2014) 247

This court’s decision in McPherson et al v. Pacific P. &

L. Co., 207 Or 433, 296 P2d 932 (1956), does not compel a dif-

ferent result, as the CAPs contend. In McPherson, this court

held that a surcharge added to a public utility’s rates had

been approved lawfully by the Public Utilities Commissioner

and therefore had been “established as [a] lawful rate[ ].” Id.

at 461. As a result, the court did not have to reach the issue

of whether the Public Utilities Commissioner or the court

could order the utility to refund the surcharge. In addition,

to the extent that McPherson discussed the commissioner’s

authority to order reparations, that discussion involved a dif-

ferent statutory context. The court emphasized, for example,

that the railroad statutes conferred jurisdiction on the com-

missioner to award reparations, but that the public utility

statutes did not; that analysis is outdated, however, because

the PUC no longer regulates railroads and no longer has

express authority to order reparations in some industries,

but not others. Moreover, since McPherson, we have sug-

gested that the PUC’s refund authority was not a matter of

settled law—in Dreyer we ordered the circuit court to abate

its proceedings so that the PUC could determine “what, if

any, remedy it [could] offer to PGE ratepayers, through rate

reductions or refunds.” Dreyer, 341 Or at 286.

We conclude that the PUC had authority to order

PGE to issue refunds to the post-2000 ratepayers in this

case. To the extent that the CAPs argue that the PUC

declined to award them a remedy by ordering a refund only

for the post-2000 ratepayers, we note that the PUC did not

order a refund to the CAPs who claimed to be injured by the

1995-2000 rates because it determined that the CAPs were

not injured by those rates. As we discuss below, whether the

CAPs can nonetheless proceed in circuit court is an issue

that they must address before that court.

IV. INTEREST

As noted, when the PUC reexamined the 1995

to 2000 rates, it observed that the previously approved

17-year period for PGE’s recovery of its investment in Trojan

“appropriately balanced the interests of the utility and its

returning money to those injured. The existence of a remedy through a bond does

not foreclose an alternative remedy through a refund.

248 Gearhart v. PUC

customers,” but only because PGE had had the opportunity

to earn a return on its investment. PUC Order No. 08-487

at 67. Consequently, when the Court of Appeals determined

that the rates could not include a return on PGE’s invest-

ment in Trojan, the PUC had to decide what rates it would

have allowed if it had not included that factor in its rate cal-

culation. Id. at 71. As part of that reconsideration, the PUC

decided that it would not have used a proposed one year

recovery period. The PUC explained that that would have

led to “an immediate 30.5 percent increase in rates for one

year,” which would have been inconsistent with the PUC’s

policies “to avoid rate shock and to promote rate stability

and intergenerational equity.” Id. at 70. The PUC instead

concluded that a 10-year period would have “equitably allo-

cate[d] the benefits and burdens while allowing quicker

recovery to offset any increase in PGE’s risk profile” result-

ing from PGE’s inability to earn a return on its investment

in Trojan. Id. at 72.

The PUC also concluded that it would have been

reasonable to include interest on the investment “to com-

pensate for the time value of money” because PGE would be

recovering its investment over a 10-year period. Id. at 71.

As the PUC explained, “[t]o allow PGE the ability to fully

recover that amount [of its investment] over time, we need

to include some form of interest—not profit—to compen-

sate the utility for the delayed recovery of the investment.”

Id. Although the PUC often uses a utility’s authorized rate

of return as the applicable interest rate when an amount

is amortized over time, because of Trojan I the PUC rea-

soned that it could not use that rate in this case. Id. at 72.

Therefore, instead of using (1) PGE’s pre-tax rate of return

for 1995 (13.22 percent) or for 1996 forward (13.34 percent);

or (2) PGE’s authorized rate of return for 1995 (9.51 percent)

or for 1996 forward (9.6 percent), the PUC chose to use in

its calculation an interest rate that was “unrelated to util-

ities” to “ensure the rate reflect[ed] solely the time value of

money.” Id. at 62 n 227, 73. The PUC calculated the rates it

would have set had it allowed PGE to recover 7.09 percent

interest, based on the Treasury rate for 10-year bonds in

1994. Id. at 73. URP now argues that Trojan I forbids that

result, and that, independent of Trojan I, the PUC lacked

Cite as 356 Or 216 (2014) 249

the statutory authority to include interest in its recalcula-

tion. As explained below, we reject both of those arguments.

The holding in Trojan I prohibiting PGE from recov-

ering a return on its investment in Trojan did not prohibit

PGE from recovering interest because, in the public utility

context, the rate of return—the return on investment—is

distinguishable from interest: “Return is the term used

in public utility regulation to describe the compensation

which the owners receive over and above allowable deduc-

tions from gross revenues. It is a word having a connotation

different from such words as earnings, net income, inter-

est, and dividends.” Ellsworth Nichols, Ruling Principles of

Utility Regulation: Rate of Return 1 (1955). Although inter-

est rates may be taken into account, a rate of return typi-

cally “pays something over and above the usual interest rate

on well-secured loans, to compensate for the hazards of the

business and for the profits of management.” Id. at 210; see

also Richard A. Posner, Economic Analysis of Law 142 (9th

ed 2014) (explaining that a reasonable rate of return is “a

weighted average of the long-term interest rate plus the rate

of return to the equity shareholders that the agency con-

siders appropriate in light of the risk of the investment and

the rate of return enjoyed by shareholders in comparable

firms” (emphasis added)); ORS 756.040(1)(a) (directing that

rates are fair and reasonable if, in part, the return to the

equity holder is “[c]ommensurate with the return on invest-

ments in other enterprises having corresponding risks”).

Thus, Trojan I prevented the PUC from allowing a return

on PGE’s investment in Trojan, but did not prevent the PUC

from allowing PGE to recover interest to account for the

time value of money.21

21

Trojan I did not, as URP contends, equate the terms “return on invest-

ment” and “interest.” Instead, the court equated the phrase “return on invest-

ment” with profit. See, e.g., Trojan I, 154 Or App at 706 (explaining that PUC

orders allowed PGE to “include a ‘rate of return’ (i.e., profit) component” in rates);

id. at 713 (explaining that text of statute did not “contemplate[ ] a return or profit

on undepreciated investment”). In fact, the court rejected PGE’s attempt to jus-

tify the return on investment by characterizing it as interest, indicating that

the court considered interest to be a separate concept. See id. at 713-14 (“PGE’s

arguments that turn on the word ‘interest’ instead of the term ‘rate of return’

also lose sight of ORS 757.355. *  * It makes no difference whether the profit

*

is called ‘interest’ instead of a ‘return.’  (Emphasis added.)). We also reject

”

URP’s argument that the court’s reference to PGE recovering only the “princi-

pal amount of the undepreciated investment” demonstrates that the PUC cannot

250 Gearhart v. PUC

Here, the PUC was careful not to recalculate rates

using a factor that would allow PGE to recover a profit on its

investment, instead relying on lower Treasury bond rates to

account only for the time value of money. See Irving Fisher,

The Theory of Interest 34-35 (1930) (describing a “pure rate

of interest” as “the rate on loans which are practically devoid

of chance,” such as “safe securities of fixed terms not likely

to be transferred or transferred often before maturity”);

Paul A. Samuelson & William D. Nordhaus, Microeconomics

288 (19th ed 2010) (“The safest assets in the world are the

securities of the U.S. government.”). In other words, to the

extent that interest generally accounts for both the time

value of money and the risk involved in an investment, the

PUC used an interest rate that primarily accounted for the

time value of money, rather than for risk. See Samuelson &

Nordhaus, Microeconomics at 288 (describing the bond rate

as a “ ‘riskless’ interest rate”). Trojan I does not prevent the

PUC from allowing PGE to recover interest to account for

the time value of money.

In addition, the PUC’s statutory authority to con-

clude that it would have allowed PGE to recover interest

on its investment in Trojan can be implied from the PUC’s

discretionary ratemaking authority. As noted, the legisla-

ture expressly delegated the authority to establish fair and

reasonable rates under ORS 756.040(1), and the PUC was

charged with determining how to set those rates within the

broader legislative policy. See Springfield Education Assn.,

290 Or at 230 (explaining that the legislature delegated

authority to the PUC to set just and reasonable rates in a

way that allows the PUC “to make delegated policy choices

of a legislative nature within the broadly stated legislative

policy”). We recognize, as URP notes, that the legislature

has expressly stated when interest can be awarded in other

statutes, including other provisions within ORS chapter 757.

See, e.g., ORS 757.215(6) (providing that refunds of interim

rates shall include interest). As discussed above, however,

those express grants of authority, which address different

award interest. See id. The court was not asked to decide whether the “principal

amount,” if recovered over a period of years, would include interest to account for

the time value of money or whether a recovery in the absence of interest would

sufficiently compensate PGE for its investment in Trojan.

Cite as 356 Or 216 (2014) 251

circumstances, do not necessarily preclude the PUC from

using interest in its recalculation, particularly where those

other statutes indicate that the legislature intends to allow

the PUC to award interest to account for the time value of

money.22 See ORS 757.215(6) (requiring the PUC to include

interest on amount subject to refund after the PUC approves

rates lower than interim rates); ORS 757.259(4) (allowing

the PUC to authorize deferrals for later incorporation in

rates of certain amounts, “together with interest established

by the commission”). Those statutes indicate that the use

of interest to account for the time value of money is within

the policy choice expressed by the legislature—the PUC is

charged with establishing “fair and reasonable rates” that

“provide adequate revenue *  * for operating expenses of

*

the public utility.” ORS 756.040(1). We therefore affirm the

PUC’s decision to include interest on PGE’s investment in

Trojan.

V.  SUBSTANTIAL EVIDENCE

URP argues that the PUC’s order is not supported

by evidence that was in the record. Under ORS 183.482(8)

(c), “[t]he court shall set aside or remand [an agency’s] order

if the court finds that the order is not supported by substan-

tial evidence in the record.” Substantial evidence supports

an agency’s finding “when the record, viewed as a whole,

would permit a reasonable person to make that finding.” Id.

Here, URP asserts that, in making the calculations neces-

sary for PUC Order No. 08-487, the PUC used two electronic

spreadsheets provided by PGE and PUC staff in response to

a July 2008 PUC request. Hard copies of those spreadsheets

were submitted by PGE and PUC staff as part of the record

in 2005 during the first phase of the remand proceedings,

which addressed the 1995 to 2000 rates, but URP contends

that the hard copies did not contain the formulas and certain

other data on which the PUC ultimately relied. Accordingly,

URP reasons, the PUC’s findings are not supported by

22

Similarly, although ORS 757.140(2) authorizes the PUC to allow rates that

include “amounts on the utility’s books of account which the commission finds

represent undepreciated investment in a utility plant,” which may not include

interest, that statutory provision does not state that the PUC can include only

amounts listed on the books of account, without adjustment for factors such as

the time value of money.

252 Gearhart v. PUC

evidence in the record because those formulas and data were

not in the record.

Formulas, however, are methods of reasoning and

analysis, not evidence. As long as the data used in those

formulas is supported in the record—and URP does not

point to any indication that the data were unsupported—the

method for analyzing that data need not be separately sup-

ported by evidence. In addition, in a footnote in PUC Order

No. 08-487, the PUC explained how it reached the conclu-

sion that the 1995 to 2000 rates would have been higher if

Trojan had not been included in rate base. The PUC detailed

each of the ways in which it modified the spreadsheet pro-

vided by PUC staff. Thus, to the extent that the PUC had

to disclose or explain that analysis, the PUC did so in the

order.

VI.  THE ABATED CIRCUIT COURT PROCEEDINGS

In Dreyer, this court issued a peremptory writ order-

ing the circuit court to abate the CAPs’ claims against PGE

for damages, pending the PUC’s determination of “what, if

any, remedy it [could] offer to PGE ratepayers, through rate

reductions or refunds, for the amounts that PGE collected

in violation of ORS 757.355 (1993) between April 1995 and

October 2000.” Dreyer, 341 Or at 286-87. The CAPs argue

that the abatement should be lifted either because the PUC

has no authority to provide a remedy to the CAPs or the

PUC has declined to offer a remedy to the CAPs. URP sim-

ilarly contends that this court should lift the abatement so

that the ratepayers from 1995 to 2000 can pursue their rem-

edies in circuit court.

We decline to reach that issue because it is not

properly before this court in this proceeding, which arises

out of the PUC’s order following the remand proceedings

stemming from Trojan I and Trojan II. Dreyer involved an

entirely separate proceeding in circuit court that is not now

before us. Accordingly, if the CAPs want the abatement

lifted, they must address their request to the circuit court.

See Dreyer, 341 Or at 286 (“Certainly, after the PUC has

made its ruling, plaintiff will retain the right to return to

the circuit court for disposition of whatever issues remain

Cite as 356 Or 216 (2014) 253

unresolved.” (Emphasis added.)). If the circuit court denies

that request, the CAPs can appeal from that order.

VII. CONCLUSION

The PUC did not exceed either the scope of the

remand or the scope of its statutory authority in PUC Order

No. 08-487. Moreover, the order is supported by substantial

evidence.

The decision of the Court of Appeals and the order

of the Public Utility Commission are affirmed.