Appendix — Colorado-Ute Electric Ass'n v. Public Utilities Commission
Supreme Court brief1989
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IN THE
Supreme Court of the United States
OCTOBER TERM, 1988
COLORADO-UTE ELECTRIC ASSOCIATION, INC., et al.,
Appellants,
THE PUBLIC UTILITIES COMMISSION OF
THE STATE OF COLORADO, et al.,
Appellees.
On Appeal from the Supreme Court of Colorado
APPENDIX TO JURISDICTIONAL STATEMENT
(Volume 1 of 2)
William H. Burchette
(Counsel of Record)
1025 Thomas Jefferson St., N.W.
Suite 700
Washington, D.C. 20007
Carol A. Curran John R. McNeill
1010 South Cascade Ave. James H. Delman
Suite D P.O. Box 1149
Montrose, Colorado 81401 Montrose, Colorado 81402
Counsel for Appellants
December 14, 1988
LTTE AOE AAS TO ERD AERIS ARE ITN ROOM A AT AN a
TABLE OF CONTENTS
VOLUME 1
Opinion of Supreme Court
OE Gee = Wee BE, Fee ww ee ce
Decision of Montrose District
ee ee ws 5 ve eves
VOLUME 2
PUC Decision C83-1176 - July 26, 1983 .....
PUC Decision C83-1392
ek i wt awe ee
PUC Decision C83-1561
I IY x v6 ata 0g eon haem oe
Order of Supreme Court denying Petition
for Rehearing - August 15, 1988 .......
Notice of Appeal to Supreme Court
of United States - November 1, 1988 .....
Colorado-Ute’s Petition for Rehearing
Re ae ee ee
Colorado-Ute Members Petition for
Reheanng - July 25, 1966 2... ww ees
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SUPREME COURT, STATE OF COLORADO
CASE NO. 86SA244 JULY 11, 1988
COLORADO-UTE ELECTRIC ASSOCIATION, INC.;
DELTA-MONTROSE ELECTRIC ASSOCIATION; EMPIRE
ELECTRIC ASSOCIATION, INC.; GRAND VALLEY RURAL
POWER LINES, INC.; GUNNISON COUNTY ELECTRIC
ASSOCIATION, INC.; HOLY CROSS ELECTRIC
ASSOCIATION, INC.; INTERMOUNTAIN RURAL
ELECTRIC ASSOCIATION; LA PLATA ELECTRIC
ASSOCIATION, INC.; SANGRE DE CRISTO ELECTRIC
ASSOCIATION, INC.; SAN ISABEL ELECTRIC
ASSOCIATION, INC.; SAN LUIS VALLEY RURAL
ELECTRIC COOPERATIVE, INC.; SAN MIGUEL POWER
ASSOCIATION, INC.; SOUTHEAST COLORADO POWER
ASSOCIATION; WHITE RIVER ELECTRIC ASSOCIATION,
INC.; YAMPA VALLEY ELECTRIC ASSOCIATION, INC.,
Petitioners-Appellieces,
THE PUBL” UTILITIES COMMISSION OF THE STATE
OF COLORADO; SHELL OIL COMPANY; ATLANTIC
RICHFIELD COMPANY; EXXON COMPANY, U.S.A.; CITY
OF DELTA, COLORADO,
Respondents-Appellants,
and
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ATLANTIC RICHFIELD COMPANY and EXXON
CORPORATION,
Petitioners-Appellees
PUBLIC UTILITIES COMMISSION OF THE STATE OF
COLORADO; COMMISSIONERS EDYTHE S. MILLER,
RONALD L. LEHR, AS SUCCESSOR TO FORMER
COMMISSIONER DANIEL E. MUSE; ANDRA SCHMIDT,
AS SUCCESSOR TO FORMER COMMISSIONER
CLARENCE RAYMOND CLARK, III,
Respondents-Appellants,
and
COLORADO-UTE ELECTRIC ASSOCIATION, INC.,
Respondent-Appeliece.
Appeal from District Court, Montrose County
Honorable Richard J. Brown, Acting District Judge
EN BANC JUDGMENT REVERSED IN PART,
AFFIRMED IN PART, AND CASE
REMANDED WITH DIRECTIONS
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Robert T. James
Colorado Springs, Colorado
Attomey for Delta-Montrose Electric Association; Grand
Valley Rural Power Lines, Inc.; Gunnison County Electric
Association, Inc.; Holy Cross Electric Association, Inc.;
intermountain Rural Electric Association; La Plata Electric
Association, Inc.; Sangre De Cristo Electric Association, Inc.;
San Isabel Electric Association, Inc.; San Luis Valley Rural
Electric Cooperative, Inc.; Southeast Colorado Power
Association; White River Electric Association, Inc.; Yampa
Valley Electric Association, Inc.
Carol A. Curran
John R. McNeill
Montrose, Colorado
Attomeys for Colorado-Ute Electric Association, Inc.
Gorsuch, Kirgis, Campbell, Walker & Grover
William Hamilton McEwan
Joseph B. Wilson
Denver, Colorado
Attomeys for Empire Electric Association, Inc.
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Miller, Schmidt & Lehr
Duane Woodard, Attommey General
Charles B. Howe, Chief Deputy Attomey General
Richard H. Forman, Solicitor General
Eugene Cavaliere, Deputy Attorney General
Denver, Colorado
Attomeys for Public Utilities Commission of the State of
Colorado
JUSTICE ROVIRA delivered the Opinion of the Court.
JUSTICE ERICKSON concurs in part and dissents in part;
JUSTICE LOHR and JUSTICE VOLLACK join in the concur-
rence and dissent.
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SUPREME COURT, STATE OF COLORADO
CASE NO. 86SA246 JULY 11, 1988
COLORADO-UTE ELECTRIC ASSOCIATION, INC.;
DELTA-MONTROSE ELECTRIC ASSOCIATION; EMPIRE
ELECTRIC ASSOCIATION, INC.; GRAND VALLEY RURAL
POWER LINES, INC.; GUNNISON COUNTY ELECTRIC
ASSOCIATION, INC.; HOLY CROSS ELECTRIC
ASSOCIATION, INC.; INTERMOUNTAIN RURAL
ELECTRIC ASSOCIATION; LA PLATA ELECTRIC
ASSOCIATION, INC.; SANGRE DE CRISTO ELECTRIC
ASSOCIATION, INC.; SAN ISABEL ELECTRIC
ASSOCIATION, INC.; SAN LUIS VALLEY RURAL
ELECTRIC COOPERATIVE, INC.; SAN MIGUEL POWER
ASSOCIATION, INC.; SOUTHEAST COLORADO POWER
ASSOCIATION; WHITE RIVER ELECTRIC ASSOCIATION,
INC.; YAMPA VALLEY ELECTRIC ASSOCIATION, INC.,
Petitioners-Appellees,
Vv.
THE PUBLIC UTILITIES COMMISSION OF THE STATE
OF COLORADO; ATLANTIC RICHFIELD COMPANY;
EXXON CORPORATION; SHELL WESTERN E&P, INC.,
Respondents-Appelilants,
and
ATLANTIC RICHFIELD COMPANY and EXXON
CORPORATION,
Appellants
| EE
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v.
PUBLIC UTILITIES COMMISSION OF THE STATE OF
COLORADO; COMMISSIONERS EDYTHE S. MILLER,
RONALD L. LEHR, AS SUCCESSOR TO FORMER
COMMISSIONER DANIEL E. MUSE; ANDRA SCHMIDT,
AS SUCCESSOR TO FORMER COMMISSIONER
CLARENCE RAYMOND CLARK, III; COLORADO-UTE
ELECTRIC ASSOCIATION, INC.; SAN LUIS VALLEY
RURAL ELECTRIC COOPERATIVE, INC.; YAMPA
VALLEY ELECTRIC ASSOCIATION, INC.;
INTERMOUNTAIN RURAL ELECTRIC ASSOCIATION;
WHITE RIVER ELECTRIC ASSOCIATION, INC.; SAN
ISABEL ELECTRIC ASSOCIATION, INC.; SANGRE DE
CRISTO ELECTRIC ASSOCIATION, INC.; GRAND
VALLEY RURAL POWER LINES, INC.; DELTA-
MONTROSE ELECTRIC ASSOCIATION; HOLY CROSS
ELECTRIC ASSOCIATION, INC.; EMPIRE ELECTRIC
ASSOCIATION, INC.; SAN MIGUEL POWER
ASSOCIATION, INC; GUNNISON COUNTY ELECTRIC
ASSOCIATION, INC.; LA PLATA ELECTRIC
ASSOCIATION, INC.; SOUTHEAST COLORADO POWER
ASSOCIATION,
Appellees.
Appeal from District Court, Montrose County
Honorable Richard J. Brown, Acting District Judge
EN BANC JUDGMENT REVERSED IN PART,
AFFIRMED IN PART, AND CASE
REMANDED WITH DIRECTIONS
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Robert T. James
Colorado Springs, Colorado
Attomey for Delta-Montrose Electric Association; Gunnison
County Electric Association, Inc.; Holy Cross Electric
Association, Inc.; Intermountain Rural Electric Association; La
Plata Electric Association, Inc.; Sangre De Cristo Electric
Association, Inc.; San Isabel Electric Association, Inc.; San
Luis Valley Rural Electric Cooperative, Inc.; White River
Electric Association, Inc.; Yampa Valley Electric Association,
Inc.
Carol A. Curran
John R. McNeill
Montrose, Colorado
Attomeys for Colorado-Ute Electric Association, Inc.
Holland & Hart
Robert M. Pomeroy, Jr.
Timothy M. Rastello
Denver, Colorado
Attomeys for Atlantic Richfield Company and Exxon
Corporation
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Jones, Meiklejohn, Kehl & Lyons
Edward T. Lyons, Jr.
Denver, Colorado
Attomeys for Shell Western E&P, Inc.
Miller, Schmidt & Lehr
Duane Woodard, Attomey General
Charles B. Howe, Chief Deputy Attomey General
Richard H. Forman, Solicitor General
Eugene Cavaliere, Deputy Attorney General
Denver, Colorado
Attomeys for Public Utilities Commission of the State of
Colorado
JUSTICE ROVIRA delivered the Opinion of the Court.
JUSTICE ERICKSON concurs in part and dissents in part;
JUSTICE LOHR and JUSTICE VOLLACK join in the
concurrence and dissent.
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These two cases concem a judgment of the Montrose
County District Court which set aside orders promulgated by
the Public Utilities Commission of Colorado (PUC or
Commission) involving the design of electric power rates to be
charged by Colorado-Ute Electric Association (Colo-Ute).
We reject Colo-Ute’s claim that this appeal is moot. We
further hold, contrary to the district court’s order, that the PUC
possessed statutory authority to determine whether the tariffs
filed by Colo-Ute were just and reasonable. Moreover, the
PUC’s order that Colo-Ute’s proposed all-energy rate should be
replaced by a seasonally-differentiated demand-energy rate is
supported by adequate findings of fact and substantial evidence.
We do, however, affirm the ruling of the district court setting
aside that portion of the PUC’s order which allocated
$24,084,126 of generation fixed costs to the energy component
of the demand-energy rate design. Accordingly, we reverse in
part, affirm in part, and remand for further proceedings
consistent with this opinion.
I.
Colo-Ute generates and transmits electrical power on a
wholesale basis to 14 member rural electrical cooperatives (co-
ops), which in tum market the electrical power on a retail
basis to electrical consumers. The co-ops are consumer owned
and have representatives on the board of directors of Colo-Ute,
a non-profit corporation.
In December 1981, Colo-Ute filed Advice Letter No. 45
with the PUC. The purpose of the filing was to increase Colo-
Ute’s wholesale electric power rates and thus increase annual
revenue from the co-ops by approximately $11,120,603. At
the time Advice Letter No. 45 was filed, Colo-Ute’s pricing
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scheme for its member co-ops was on a "flat" or “all-energy"
rate basis.’ This pricing method had been approved by the
PUC in February 1981. To reach its desired revenue increase,
Colo-Ute proposed increasing its all-energy rate by a uniform
12.157 percent.
A revised rate schedule became effective on January 15,
1982. As a result of a statutory provision adopted by the
legislature in 1981, which is central to a resolution of the
jurisdictional issue in this case, the Commission is without
authority to suspend the effective date of tariff changes filed
by cooperative electric associations. See § 40-6-111(4)(a), 17
C.R.S. (1984). The PUC, assuming that this statutory
provision relating to suspension had no effect on its authority
to investigate rate filings, on January 12, 1982, initiated Case
No. 6076 for the purpose of investigating the reasonableness of
the tariffs filed by Colo-Ute, and set the matter for hearing.
A number of parties intervened and participated in Case
No. 6076. Intervening parties included the co-ops, as well as
customers of the co-ops: Union Carbide Corporation, Shell Oil
Company, Exxon Company, USA (Exxon), Atlantic Richfield
Company (ARCO), and the City of Delta, Colorado. At the
hearings, Colo-Ute and some of the co-ops presented evidence
both in support of the revenue increase and in the continued
use of a flat or all-energy rate. The PUC’s staff offered
evidence generally supporting a revenue increase, but
recommended abandoning the continued use of the all-energy
rate, which the staff asserted was not "cost tracking," and
therefore, no longer appropriate for Colo-Ute.? In its place, the
staff recommended a seasonally-differentiated demand-energy
rate.” The intervening customers concurred in_ the
recommendations of the Commission’s staff.
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The Commission approved the revenue increase sought by
Colo-Ute. However, it disapproved the continued use of the
all-energy rate, and ordered Colo-Ute to file "demand energy
rates for its wholesale electric customers with seasonally
differentiated demand charges and an annualized energy
[charge] on a uniform kwh basis." Decision No. C83-1176.
Intervenors ARCO and Exxon, while in general agreement
with the PUC’s ultimate findings regarding the revenue
increase and the substitution of the demand-energy ate,
objected to that part of the PUC’s decision which allocated
over $24 million in generation fixed or demand costs to the
energy component of the demand-energy rate design.
Thereupon, ARCO, Exxon, Colo-Ute, and the co-ops filed
application for rehearing, reargument, and reconsideration. In
Decision No. C83-1392, the Commission denied the application
of Colo-Ute and the co-ops and granted the application of
ARCO and Exxon in part. Decision No. C83-1176 was
modified as a result, but such modifications are not at issue.‘
Colo-Ute and the co-ops sought judicial review in the
Montrose County District Court. The appeal was assigned
Case No. 83CV218. They challenged the authority of the PUC
to commence an investigation conceming the rate increase on
its own motion. They also claimed that the Commission’s
orders with respect to rate design were arbitrary, capricious,
unconstitutional, an abuse of discretion, and not in accordance
with the law and the evidence. Finally, they moved for a stay
Or suspension of the Commission’s decisions, pending final
determination by the district court of their challenge. This
motion was granted.
ARCO and Exxon sought judicial review in the Denver
District Court of that portion of the PUC’s decisions which
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allegedly had misclassified certain demand costs as energy
costs. Given the similarities of the parties in the Denver and
Montrose District Court actions, and the presence of common
quesions, the Denver District Court ordered the case
transicrred to the Montrose District Court, pursuant to C.R.C.P
98(f)(1), where it was assigned Case No. 84CV7.
Subsequently, the court consolidated the two cases for hearing.
The only issue in Case No. 84CV7 concems the PUC’s
decision to shift substantial demand costs onto the energy
portion of the demand-energy rate.
With respect to Colo-Ute’s claims in Case No. 83CV218,
the district court held, inter_alia, that: (1) The PUC does not
possess statutory authority, in the absence of a complaint, to
investigate and modify the rate design of an_ electric
cooperative association, such as Colo-Ute; (2) The PUC’s
orders conceming rate design amount to an _ unwarranted
intrusion into the management prerogative and discretion of
Colo-Ute; (3) The Commission’s findings are conclusory in
nature and are not supported by substantial evidence.* The
district court thereupon set aside that part of Decision No.
C83-1176 which required Colo-Ute to file rates and tariffs
ordered by the Commission.
In Case No. 84CV7, the district court concurred in the
arguments presented by ARCO and Exxon, finding that the
decision of the Commission to allocate over $24 million of
demand costs to energy costs was not supported by substantial
evidence or adequate findings of fact, was arbitrary and
Capricious, and resulted in an unjust and discriminatory rate.
The court set aside that portion of Decision No. C83-1176
which allocated $24 million of the demand costs to the energy
costs and further held that if this court (supreme court) were to
find lawful the Commission’s imposition of the demand-energy
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rate, the PUC would be directed to allocate demand-energy
costs in accordance with the staff's cost-of-service study, as
contained in Exhibit No. 84.°
On appeal the Commission raises the following issues: (1)
Whether the Commission possesses statutory authority to
institute on its own motion a proceeding to determine whether
tariffs filed by Colo-Ute are just and reasonable; (2) Assuming
that it possesses such authority, is the Commission’s decision
relating to rate desigr vumnwarranted intrusion into the
management prerogative ui Colo-Ute, and do adequate findings
of fact and substantial evidence exist to support its decision;
and (3) Whether there is substantial evidence to support the
findings that $24 million in generation fixed costs should be
allocated to the energy component of the demand-energy rate.’
Il.
Before considering the substantive issues raised in the
appeals, we first address the claim of Colo-Ute, raised in its
answer brief, that these appeals are moot and should therefore
be dismissed.
In support of its position, Colo-Ute states that in October
1986, five months after the decision of the district court, it
filed a new wholesale rate tariff governing electric power sales
to the co-ops which became effective by operation of law on
December 1, 1986. The tariff represented a 5-percent decrease
in the all-energy rate it charged the co-ops. Colo-Ute contends _
that since the tariff supersedes the tariff which is the subject of
Case No. 6076 and these appeals, the issues raised in the
instant case are "purely academic." The PUC, ARCO, Exxon,
and Shell Westem E&P, Inc. argue to the contrary and urge us
not to dismiss on the ground of mootness.
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We have previously stated that a case is not moot where
interests of a public nature are asserted under conditions that
may be immediately repeated. Page v. Blunt, 126 Colo 324,
327, 248 P.2d 1074, 1075 (1952). Under our latest
formulation of the mootness test, we have held that a case is
not moot where the controversy is one "capable of repetition,
yet evading review." ke v f itutions,
198 Colo. 407, 410 n.5, 603 P.2d 123, 124 n.5 (1979) (quoting
Roe_v. Wade, 410 U.S. 113 (1973)); Star Journal Publishing
Corp. v. County Court, 197 Colo. 234, 236, 591 P.2d 1028, -
1029 (1979).
This case is not moot because the issue of proper rate
design survives the most recent tariff filing. Colo-Ute’s 1986
rate filing retains the same flat-energy rate structure which the
Commission found objectionable, and which is at issue in the
instant appeal. Colo-Ute may have changed the level of its
rates with its most recent filing, but the level of rates has
never been a matter of dispute. In fact, the issue which has
given rise to these appeals -- the authority of the PUC to
prescribe the demand-energy rate for Colo-Ute -- presents no
less a controversy now than when the PUC first set Case No.
6076 for hearing. The lawfulness of the Commission’s orders
with respect to Colo-Ute’s rate design remains a viable legal
controversy. See New England Tel
Public Utilities Comm’n, 329 A.2d 792, 806 (Me. 1974)
(rejecting mootness argument based on new rate filing where
important issues remain to be decided); Milwaukee & Suburban
Transport Corp. v. Public Utilities Comm’n, 268 Wis. 573, 68
N.W.2d 552, 556, cert. denied, 350 U.S. 877 (1955)
(controversy presented in review proceeding not moot where
issue over method of computing depreciation of utility property
remains a continuing controversy).
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In addition, Colo-Ute’s argument, if accepted, would
operate to insulate much of its activity from judicial and/or
Commission review. With the addition of section 40-6-
111(4)(a), 17 C.R.S. (1984), the PUC no longer possesses the
statutory authority to suspend the date on which a tariff filed
by a cooperative electric association becomes effective. As a
result, any new or revised tariff filed by a cooperative electric
association such as Colo-Ute becomes effective by operation of
law after the expiration of the 30-day notice period specified in
section 40-3-104, 17 C.R.S. (1984). But it takes longer than
30 days for the Commission to review a rate tariff filed by
Colo-Ute, to say nothing of the time necessary for an appeal of
a Commission decision to work its way through the judicial
system. If a cooperative could render an appeal moot merely
by filing a new tariff while an appeal is pending, the
Commission’s authority to regulate cooperative utilities would
be undermined.
Moreover, ARCO, Exxon, and Shell Western E&P, Inc.
seek an order from this court directing Colo-Ute to pay refunds
to customers who might have over paid under the all-energy
rate scheme. Refund amounts would be based on the
difference in payments made under the all-energy and demand-
energy rates.
If ARCO, Exxon, and SWEPI are entitled to refunds, an
issue we do not decide, this would preclude dismissing the
instant case On mootness grounds. It is generally the law that
claims for damages or other monetary relief automatically
avoid mootness, so long as the claim remains viable. Wright,
Miller & Cooper, Federal Practice & Procedure: Jurisdiction
Second § 3533.3 at 262 (1984). Other courts have rejected
mootness claims in analogous circumstances, where, addressing
the customer’s complaint regarding damages, they first require
| _— — _
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a resolution of other issues on their merits. See, eg.
Memphis Light, Gas & Water Div. v. Kraft, 436 U.S. 1, 7-8
(1978) (although injunctive relief from utility’s termination of
service had been mooted, customer’s claim for damages saved
case challenging termination procedures from the bar of
mootness); Meyers v. Jay Street Connecting Railroad, 288 F.2d
356, 358 (2d Cir.), cert. denied, 368 U.S. 828 (1961).
Finally, Colo-Ute cites in support of its position Air
Pollution Control Comm’n_ y. Colorado-Ute Electric Ass’n, 672
P.2d 993 (Colo. 1983). In that case, Colo-Ute challenged the
validity of an air pollution control commission regulation
setting forth conduct necessary to obtain an emission permit.
Although Colo-Ute cites the case for the proposition that
"when the issues in a case have been changed by subsequent
events, this court has not hesitated to find that the case has
been mooted," Colo-Ute has glossed over the particular facts in
that case. We held in Air Pollution Control Comm’n that the
question of whether the regulation had been validly adopted
was moot, because the regulation had subsequently been
repealed. 672 P.2d at 997. By comparison, Colo-Ute’s all-
energy rate is still in use and thus an issue which gave rise to
the present controversy remains unresolved.
Having determined that Colo-Ute’s mootness claim is
without merit, we now address the substantive issues raised by
this appeal.
Ill.
In holding that the PUC lacked jurisdiction to investigate
Colo-Ute’s rate filing, the district court focused upon a
provision of the public utilities law which provides, in pan:
"Upon complaint filed by any member or customer of a
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cooperative electric association or by any affected ‘public utility,
the commission shall determine whether the rate, charge, rule,
or regulation in question is contrary to this section, section 40-
3-106(1), or section 40-3-111." § 40-6-111(4)(a), 17 CRS.
(1984). Although the court made reference to a number of
other provisions in the public utilities law granting the
Commission the authority to investigate rates either upon the
filing of a complaint or upon its own motion, it concluded that
section 40-6-111(4)(a):
[Pjermits that authority only upon the filing of
a complaint by any member or customer of a
cooperative electric association or by any
affected public utility. Subparagraph (4)(a)
removes the power of the PUC to suspend
rates, fares, tolls, rentals, charges,
classifications, practices, rules or regulations
pending a hearing, and does not provide that
the PUC, of its own motion, may hold such
hearings.
Although other statutory provisions concem public utilities
in general, the court stated that section 40-6-111(4)(a) is a
"specific statutory provision relating to cooperative electric
associations, and must be followed." The district court relied
on a maxim of statutory construction that "where specific and
general statutes conflict, the provisions of the specific statute
prevail." In other words, section 40-6-111(4)(a) trumps all
other provisions in the public utilities law which give the PUC
the authority to investigate rates upon the filing of a complaint,
Or upon its Own motion. The cour concluded that the PUC
does not have the authority pursuant to section 40-6-111(4),
without complaint, to change the rate design of an electric
cooperative such as Colo-Ute.
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We have stated on numerous occasions that where a statute -
is capable of more than one interpretation, it must be construed
in light of the apparent legislative intent and purpose. Among
the guidelines to be considered are the ends the statute was
designed to accomplish, and the consequences which would
flow from an altemative construction. If separate clauses in
the same statutory scheme may be harmonized by one
construction, but would be antagonistic under a different
construction, we should adopt that construction which results in
harmony rather than that which produces inconsistency.
Mooney _v. Kuiper, 194 Colo. 477, 479, 573 P.2d 538, 539
(1978); Travelers Indemnity Co. v. Bames, 191 Colo. 278, 283,
552 P.2d 300, 303 (1976). Two statutes conceming the same
subject matter are to be read together to the extent possible so
as to give effect to legislative intent. Peoples Natural Gas Div,
v. Public Utilities Comm’n, 698 P.2d 255, 263 (Colo. 1985).
Further, we will presume that the legislature intended a just
and reasenable result when it enacted a statute. Allen v,
Charnes, 674 P.2d 378, 381 (Colo. 1984). See also § 2-4-
201(1)(b), 1B C.R.S. (1980) ("the entire statute is intended to
be effective").
The maxim of statutory construction relied upon by the
district court is, however, wholly irrelevant where the specific
Statute itself -- section 40-6-111 -- expressly vests the PUC
with authority to investigate rates, and therefore, raises no
conflict with other provisions of the public utilities law. If the
district court had applied proper principles of statutory
construction, it would not have ignored the remainder of
section 40-6-111, particularly subsection (1), and other pertinent
provisions of the public utilities law, all of which confirm the
Commission’s power and duty to investigate tariff changes
involving utilities such as Colo-Ute. The district court should
have read section 40-6-111(4)(a), 17 C.R.S. (1984), together
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with other relevant statutory provisions, including sections 40-
6-111(1), 40-6-108(1)(b), and 40-3-102, 17 C.R.S. (1984), in
light of the apparent legislative intent and purpose.
The General Assembly added subsection (4) to section 40-
6-111 in 1981. See “An Act Concerning the Public Utilities
Commission," ch. 482, sec. 2, § 40-6-111(4), 1981 Colo. Sess.
Laws 1922-1923 [codified at § 40-6-111(4)(a), 17 C.R.S. (1981
Supp.)]. The effect of the 1981 amendment was to grant to
cooperative electric associations relief from the PUC's power to
suspend rates for up to 120 days pending investigation and
hearing, see § 40-6-111(1)(b), without diminishing the PUC’s
power under existing statutes to investigate and hold hearings,
whether upon complaint or on its own motion, and to enter
remedial orders to carry out the purposes of the public utilities
law.
As a result of the 1981 amendment, when a cooperative
electric association files a tariff with the PUC, such a tariff
becomes effective at the expiration of the 30-day notice period
provided by section 40-3-104, 17 C.R.S. (1984). Therefore,
any hearing commenced by the PUC, whether on its own
motion, or upon complaint made to the PUC, pursuant to
sections 40-6-101(1) or 40-6-111, does not have the effect of
suspending the effective date of such tariffs. This is not the
case, however, with respect to other utilities in Colorado
subject to the PUC’s jurisdiction. With respect to those
utilities, the PUC still retains the power to suspend the
effective date of such tariffs. See § 40-6-111(1)(a), (b)?
It was the statutory suspension power -- not the PUC’s
power to investigate and hold hearings -- which was abolished
by section 40-6-111(4)(a) for the benefit of cooperative electric
associations. These organizations had contended that the
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“regulatory lag" which accompanied the investigation and
hearing process made it difficult for them, because of the
intervening suspension period, to be adequately compensated
for the costs of inflation even if the proposed rate increase was
ultimately approved in full. See Colorado-Ute Electric Ass'n
y. Public Utilities Comm'n, 198 Colo., 534, 544, 602 P.2d
861, 867 (1979). The efforts of cooperative electric
associations to persuade the General Assembly to grant some
form of relief achieved fruition with the passage of section 40-
6-111(4)(a) in 1981. See also Advice Letter No. 45 ("Under
the provisions of {section 40-6-111(4)(a)], this rate filing
becomes effective on thirty (30) days notice -- thereby
eliminating any regulatory lag in obtaining necessary rate
relief."). The statute only eases the burden on cooperative
electric associations resulting from suspensions during the
hearing process. It does not exempt cooperative electric
associations from PUC review of tariff changes.
The court below wrongly concluded that by removing the
suspension power, the legislature also intended to limit the
Commission’s powers to investigate tariff changes, hold
hearings, and enter remedial orders. We have previously
rejected the assumption that the power to investigate and hold
hearings is inseparably tied to, and dependent upon, the
suspension power, such that removing the power to suspend
also precludes an investigation. See, ¢e.g., Public Service Co.
y. Public Utilities Comm'n, 653 P.2d 1117, 1122 (Colo. 1982)
("we decline to impose an ‘all or nothing’ requirement upon
the commission”). Moreover, section 40-6-111(2)(a), 17 C.R.S.
(1984), states that tariff changes “not so suspended” shall go
into effect after the 30-day notice period “subject to the power
of the commission, after a hearing on its own motion or upon
complaint, as provided in this article, to alter or modify the
same." Traditionally, the PUC has enjoyed broad discretion in
‘‘* tal bt, ~~ io
al ae
A-21
determining whether to suspend the effective date of newly
filed rates, while under investigation, or allow rates to become
effective (after the statutory notice period), fully or in par,
pending the outcome of an investigation.
In enacting section 40-6-111(4)(a), the General Assembly
was careful to structure the amendment in such a fashion as to
make the suspension powers inapplicable to cooperative electric
associations, while leaving such entities subject to the other
provisions of that section and the public utilities law. The
Statute expressly provides that “this subsection (4) shall not be
construed to exempt such associations from any other provision
of this section." Among those “other provisions of this
section:"” section 40-6-111(1), which grants the Commission
the power to have a hearing concerning the propriety of a
newly filed rate or changed raic, "either upon complaint or
upon its own initiative . . ."; and section 40-6-111(2)(a).
When the statuie is read in this way -- that cooperative electric
associations are exempted only from that provision relating to
the PUC’s power of suspension -- an interpretation is achieved
which gives a harmonious and consistent effect to its various
provisions.
In fact, when the last sentence of section 40-6-111(4)(a) is
read in conjunction with section 40-6-108(1)(a) and (b) and
section 40-6-111(1), it becomes possible to discem that not
only are these provisions consistent with each other, but also
that the last sentence of section 40-6-111(4)(a) lessens a
requirement in section 40-6-108(1)(b) -- thereby promoting the
legislative intent behind subsection (4) of easing the regulatory
burden on cooperative electric associations.
Section 40-6-108(1)(b) prohibits the PUC from entertaining
complaints as to the reasonableness of any rates or charges of
A-22 ,
any public utility "except upon its own motion,” or upon a
complaint signed by:
The mayor or the president or chairman of the
board of trustees or a majority of the council,
commission, or other legislative body of the
county, city and county, city, or town, if any,
within which the alleged violation occurred, or
not less than’ twenty-five customers’ or
prospective customers ef such public utility.
On the other hand, section 40-6-111(4)(a) authorizes the PUC
to determine whether a rate charged is discriminatory or
preferential "[uJpon complaint filed by any member or
customer of a cooperative electric association or by any
affected public utility .. ."
In a sense, the complaint provision incorporated in section
40-6-111(4)(a) is a counterweight to the freedom given
cooperative electric associations to increase their rates without
suspension. Although the legislature, by adding section 40-6-
111(4)(a), terminated the authority of the PUC to suspend the
effective date of a tariff filed by an electric cooperative, the
members or customers of a cooperative electric association or
affected public utility were given added protection in the form
of an eased requirement for challenging the utility’s rate
increases.
The last sentence of subsection (4) states thai "[uJpon
complaint . . . the commission shall determine. . . ." § 40-6-
111(4)(a) (emphasis added). In other words, under certain
circumstances the Commission is required to investigate a tariff
change. But nothing in subsection (4) can be interpreted as
diminishing any of the Commission’s powers under existing
a
A-23
law to investigate tariff changes and, if necessary, to prescribe
just and reasonable rates.”
Having concluded that the PUC was properly acting within
the scope of its authority, we now consider whether that
authority was exercised in a lawful manner.
IV.
The district court found "that the Commission’s action in
changing Colorado-Ute’s rate design from a flat-energy rate to
a seasonally adjusted demand-energy rate is an unwarranted
intrusion into the management prerogatives and discretion of
Colorado-Ute.". Among the reasons given by the cour were
that in 1981 the PUC approved a flat-energy rate for Colo-Ute
and no findings in Decision No. C83-1176 vitiated the 1981
order, and in the absence of evidence or findings of abuse
associated with Colo-Ute’s existing all-energy scheme, "the
Court can only conclude that the Commission is substituting its
Own personal preference in managerial matters and _ has
exceeded its statutory authority."
The adequacy of the Commission’s findings will be
discussed later in this opinion. Considering solely the issue of
managerial discretion, it is clear that the district court erred in
concluding that the Commission, in prescribing the proper rate
design for Colo-Ute, overstepped the bounds of its proper
authority. The setting of "just and reasonable rates," both as to
level and design, goes to the very essence of the Commission’s
duties under the public utilities law. See § 40-3-102, 17
C.R.S. (1984). It is precisely the Commission’s raison d’ etre
to determine and prescribe just, reasonable, non-discriminatory,
and non-preferential “rates of every public utility in this state."
Both statutory and case law demonstrate that rate-making, both
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as to charge and design, is a vital part of the Commission’s
area of responsibility.
Rate-making is a legislative function. Mountain States
hone & Tel h_v Li iliti mm’n, 176 Colo.
457, 464, 491 P.2d 582, 586 (1971). Under the Colorado
Constitution, art. XXV, the legislative authority in public utility
matters has been delegated to the PUC. Mountain States
Telephone & Telegraph v. Publi ilities Comm’n, 195 Colo.
130, 134, 576 P.2d 544, 547 (1978). As such, the PUC, in
the area of utility regulation, including rate-making, has broadly
based authority to do whatever it deems necessary or
convenient to accomplish the legislative functions delegated to
it. Id.; Miller Bros. v. Public Utilities Comm’n, 185 Colo.
414, 431, 525 P.2d 443, 451 (1974).
Nowhere in title 40, C.R.S., has the legislature specifically
restricted the authority of the PUC in designing rates for
cooperative electric associations. To the contrary, the public
utilitics law imposes upon the PUC no more imperative duty
than to “adopt all necessary rates . . . and regulate all rates
. . Of every public utility of this state." § 40-3-102. No
exception is provided for cooperative electric associations.
Until the General Assembly changes the law, the Commission
possesses not only the power and authority, but also the duty
to prescribe the rates of all utilities subject to its jurisdiction.
The fact that the instant case involves rate design, as opposed
to rate increase, is irrelevant for purposes of the analysis.
After all, rate design, just as much as rate levels, could
produce unjust, unreasonable, discriminatory, or preferential
results.”
The district court held that the Commission can set aside a
rate Only where "there is a substantial showing that rate payers
Re |
A-25
are prejudiced materially . . ." and that "the rate is so
unreasonable as to be detrimental to the public interest . . .";
in all other circumstances, rate design "[is] within the realm of
sound management discretion of the public utility."
It is of course generally accepted that the management of
the utility belongs to the company. Li Ivi Vv
Public Utilities Comm’n, 653 P.2d 1117, 1123 (Colo. 1982).
The PUC may not, under the guise of rate regulation, take
over the management of the company. As to matters
specifically entrusted to management, the PUC may not assert
itself absent an abuse of managerial discretion. Id. But it has
never been the law in Colorado that rate-making is solely a
matter within the domain of management, such that PUC
involvement is triggered only following an abuse of that
discretion. Rate-making, including the designing of rates, has
long been the exclusive province of the Commission. In fact,
in a previous case where this court recognized that "[cjourts
and Commission should . . . in general, not succumb to the
temptation of assuming the role of management," we went on
to hold that “our regulatory commissions have a duty to
declare the abuse and 1 ke such orders as will give to
ratepayers the advantage of those economies in_ which
management has failed to avail itself." Colorado Municipal
League _v. Publi iliti omm’n, 172 Colo. 188, 203-04,
473 P.2d 960, 967 (1970).
The district court erred when it concluded that the
Commission’s action in ordering Colo-Ute to shift to a
demand-energy rate "is an unwarranted intrusion into the
management prerogatives and discretion of Colorado-Ute."”
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We now tum to issues conceming the adequacy of the
Commission’s findings, and the sufficiency of the evidence to
support the findings.
¥.
A.
Adequacy of Commission Findings
The district court held that the “whole tenor of Decision
No. C83-1176 as it relates to rate design is one of personal
preference on the part of the Commission as opposed to
specific findings of fact which would support a new rate
design." In the court’s words:
The commission has made no such findings in
any of its decisions regarding Case No. 6076,
and a review of the record indicates that no
such findings can reasonably be made. The
bootstrap attempt to do so in Decision No.
C83-1392 makes no additional findings than
those contained in the original Decision No.
C83-1176. Nothing in the record supports the
bold faced conclusion stated by the commission
on page 3 in Decision No. C83-1392 that the
flat energy rate currently charged by Colorado-
Ute is discriminatory, preferential, creates an
advantage, or otherwise violates 40-3-106(1) or
40-3-111.
Any ultimate findings the district court was able to discern in
the PUC’s decisions, whether implied or stated, were critiqued
Pia aE Ligh WORDT, AP SE LOTTIIS < IRE AE re A ae BoB ey
‘<bean ARE eet teh meena
Be ites Cai aK) LA i "
A-27
as “conclusive [sic] in nature and . . . not supported by any
factual findings based on the record."
The standard for judicial review of the Commission’s
decisions is govemed by section 40-6-115(3), 17 C.R.S. (1984),
which provides:
(3) Upon review, the district court shall
enter judgment either affirming, setting aside, or
modifying the decision of the commission. So
far as necessary to the decision and where
presented, the district court shall decide all
relevant questions of law and interpret all
relevant constitutional and statutory provisions.
The review shall not extend further than to
determine whether the commission has regularly
pursued its authority, including a determination
of whether the decision under review violates
any right of the petitioner under the
Constitution of the United States or the State of
Colorado, and whether the decision of the
Commission: is just and reasonable and whether
its conclusions are %# accordance with the
evidence.
We have held that this statutory provision limits the court’s
review of PUC decisions to a determination of whether the
PUC has regularly pursued its ‘authority, whether _ its
conclusions are supported by findings of fact based upon
adequate evidence, and whether the Commission has reached its
decisions by applying the appropriate constitutional and
legislative standards. R B asting of Col Inc. v
Publi iliti mm’n, 702 P.2d 746, 750 (Colo. 1985);
A-28
Public Utilities Comm’n v. Northwest Water Corp., 168 Colo.
154, 169, 451 P.2d 266, 273-74 (1969).
We have long held that the factual determinations of an
administrative body such as the PUC are entitled to
considerable deference. Trucking Co. v. li iliti
Comm’n, 745 P.2d 211, 216 (Colo. 1987). After all, a
reviewing court, since it is without the assistance of a staff,
and the expertise of the Commission, should not undertake to
duplicate the evaluation and judgment processes followed by
the PUC in arriving at its decision. Morey v. Public Utilities
Comm’n, 629 P.2d 1061, 1068 (Colo. 1981); Atchinson,
Topeka & Santa Fe Railroad Co. v. Public Utilities Comm'n,
194 Colo. 263, 267, 572 P.2d 138, 141 (1977). It is peculiarly
within the province of the PUC to decide what weight should
be accorded the evidence and to choose among conflicting
inferences that may reasonably be drawn from that evidence.
G&G Trucking, 745 P.2d at 216; Acme Delivery Service _v.
Cargo Freight System, 704 P.2d 839, 843 (Colo. 1985). When
two equally reasonable courses of action are open to the
Commission, the reviewing court should not substitute its
judgment for that of the Commission in selecting the
appropriate alternative. City of Montrose _v. Public Utilities
Comm'n, 629 P.2d 619, 623 (Colo. 1981). A_ reviewing
court’s function is limited to determining whether substantial
evidence exists in the record to supporn the PUC’s
determinations. If not, the Commission’s order must be set
aside. If so, the judicial inquiry is at an end, for the
reviewing Court is not permitted to substitute its judgment for
that of the Commission. G&G Trucking, 745 P.2d at 216.
Findings by the Commission need not be presented in any
particular form, and a necessary finding may be implied from
other findings made. Caldwell v. Public Utilities Comm'n, 200
“a
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Colo. 134, 138, 613 P.2d 328, 332 (1980); Aspen Airways,
Inc. v. Public Utilities Comm’n, 169 Colo. 56, 62, 453 P.2d
789, 792 (1969). Where the Commission purports to make
such findings, they must be discernible to the reviewing court.
Caldwell, 200 Colo. at 138, 613 P.2d at 332. Further, findings
of fact by the Commission must show which evidence it
accepts aS competent and worthy of belief, and that which it
rejects. Id.; Aspen Airways, 169 Colo. at 62, 453 P.2d at 792.
Based upon these standards we are satisfied that the
Commission’s conclusions are supported by adequate findings
of fact.
Examination of Decision Nos. C83-1176 and C83-1392
reveals that the Commission’s findings are adequate to support
its ultimate conclusion that the all-energy rate is no longer
appropriate for Colo-Ute and should be replaced in favor of the
demand-energy rate. It found, based upon the evidence
presented, that Colo-Ute’s member distribution cooperatives
exhibit a high coincidence of peak demand with the Colo-Ute
system peak demand; that Colo-Ute’s “total cost per unit of
Output has varied monthly," contrary to Colo-Ute’s position that
the all-energy rate and its resource management plan have
resulted in a uniform cost per unit of output on a monthly
basis; and that the Colo-Ute system is characterized by a
"definite surplus of base load capacity at certain times which
indicates that Colo-Ute has not achieved uniform loading of
Capacity throughout the day. This condition results in an
uneconomic under-utilization of capacity."
With respect to Colo-Ute’s resource management plan, the
-PUC found that it was not effective in that it contributed to
growth in peak demands. Further, Colo-Ute’s load curve is not
flat; Colo-Ute has not been able to make non-member sales to
fill in the valleys of its load; its load factor has deteriorated in
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recent years; and given likely economic prospects in the near
and long-term, it is not expected that Colo-Ute will be better
able "to sell energy to non-members so as to use iis plants
more efficiently.” Also, significantly increased expenses
associated with Colo-Ute’s purchase of power from other
utilities to meet peak demand, and the fact that Colo-Ute is
"unable to meet its valleys on its system, indicate that its
resource management plan and associated flat-energy rate are
not working to the benefit of its ratepayers." The PUC then
found that since Colo-Ute’s total cost of generating a kilowatt
hour is not uniform over time "it follows that a flat or uniform
energy rate is not cost tracking,” and the all-energy rate
provides a distorted price signal to member systems.
In support of its adoption of the demand-energy rate, the
PUC found that a demand-energy rate is appropriate for a
utility whose members exhibit a high coincidence of peak
demand with the system peak; that as much as two-thirds of
Colo-Ute’s costs are capital related; that the demand-energy
rate, premised as it is upon the separate and _ distinct
recognition of the two major cost compenents of producing
electricity, capital and fuel, provides a more accurate price
signal than the all-energy rate, and more directly tracks costs
than an all-energy rate, as it "assigns costs more directly to the
cost causer"; that the wholesale customers of Colo-Ute are
capable of comprehending a demand and energy rate with a
fixed customer charge; and that the demand-energy rate is the
most cost tracking rate for the wholesale power charges of
Colo-Ute.
One of the fundamental principles of electric power rate
design is that rates charged should accurately reflect the
utility’s actual cost of providing service, including both capital
costs and operating expenses. We have held that the "PUC
eee Se eet eT |
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2 PAE MOL, 9 LE ERRATA, OM AEG 8 eae ORI
A-31
must therefore set rates which protect both: (1) the nght of a
public utility company and its investors to eam a rate of retum
reasonably sufficient to maintain the utility’s financial integrity;
and (2) the right of consumers to pay a rate which accurately
reflects the cost of service rendered." Public Service Co. v.
Public Utilities Comm’n, 644 P. 2d 933, 939 (Colo. 1982).
Here, inasmuch as the Commission has made specific
findings establishing that the all-energy rate currently in place
is less able to track the cost of service than a demand-energy
rate, the Commission has complied with the _ statutory
requirement of determining whether the rate charged is
violative of sections 40-3-106(1) or 40-3-111."°
The court below erred when it concluded that "these
findings . . . are conclusive [sic] in nature and are not
supported by any factual findings based on the record.” To
the contrary, the Commission’s findings, whether explicitly
stated or implied, comply with statutory requirements that
findings be made. Moreover, these findings are adequate to
support the Commission’s ultimate conclusions regarding Colo-
Ute’s rate design.
Eviden
The district court held that "(t]he record does not support
the conclusions reached by the PUC as to the applicability of
the demand-energy rate to the Colorado-Ute system.” Further,
"[iJn short, there does not appear to be sufficient competent
evidence for the Commission to conclude that either the
demand-energy rate is most appropriate for Colorado-Ute
because of the high degree of coincidence of peaks, nor [sic]
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that the demand-energy rate is the most cost tracking rate
available for Colorado-Ute.”
The standard of substantial evidence requires more than
merely "some evidence in some particulars" to support the
Commission’s decision. Home Builders Ass’n of Metropolitan
Denver v. Public Utilities Comm’n, 720 P.2d 552, 562 (Colo.
1986); Ross _v. Fire & Police Pension Ass'n, 713 P.2d 1304,
1308 (Colo. 1986). Review of the record satisfies us that there
is substantial evidence to support the Commission’s ultimate
conclusions that (1) the demand-energy rate is the most cost
tracking rate for the wholesale power charges; and (2)
"Colorado-Ute [should] file demand-energy rates for its
wholesale electric customers with seasonally differentiated
demand charges and an annualized energy on a _ uniform
kilowatt basis as hereinafter ordered.” Without discussing all
of the evidence in detail, we will refer to the most significant
presentations put before the Commission.
The Commission heard testimony from Dr. William Leehr,
professor of economics and expert in the area of rate design.
Loehr testified ‘#ot "rates should track costs as closely as
possible." Further, to properly reflect costs, "rates should be
based theoretically upon marginal costs,” Le., the social costs
of increasing or decreasing the supply of that commodity.
Since the calculation of marginal costs for utilities is difficult,
however, Loehr testified that "[t}he direct application [to
utilities} of marginal cost pricing is often not practical.”
Rates based upon separate charges for demand and energy
costs, or demand-energy rates, recognize that there are two
major components to the cost of producing energy: (1) fixed
Capital expenses associated with the generation and transmission
of electricity (demand costs); and (2) variable operating and
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maintenance expenses consisting primarily of fuel costs (energy
costs). In Colorado, utilities, particularly Colo-Ute,
predominantly use coal-fired plants. Therefore, fuel costs
represent the cost of coal, which is low in comparison with oil
or gas. Capital costs, however, tend to be relatively high,
since it is more costly to build coal-fired facilities than oil or
gas-fired ones. All utilities face trade-offs among costs. Loehr
testified that “the trick for utilities is, over the long run, to
choose that combination of capital . . . and fuel costs which
together imply minimum total cost.”
An exhibit sponsored by the president of Colo-Ute, for
example, revealed that "fof] the total costs that must be
recovered by ([Colo-Ute], approximately two-thirds are
associated with the cost of capital and one-third with the cost
of fuel and purchase power." In effect, Colo-Ute has “incurred
the high capital cost of coal-fired generation units to take
advantage of low fuel costs."
The Commission staff's cost-of-service study, which was
uncontroverted, and which was the only cost-of-service study
offered, also demonstrates that Colo-Ute incurs these two types
of costs, demand and energy, in supplying electricity. The
cost-of-service study also indicates that approximately 56
percent of Colo-Ute’s costs are fixed capital (demand) costs,
and the remaining 44 percent are fucl and similar variable
(energy) costs.
Lochr testified that since capital is the predominant element
in Colo-Ute’s costs, it should be reflected in Colo-Ute’s rates.
For this reason, a demand charge should be a pan of Colo-
Ute’s rate structure. This demand charge would be designed to
"track," or recover, that proportion of total cost representing
Capital cost. Accordingly, Colo-Ute’s rates must include both
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demand charges, to recover fixed capital costs, and energy
charges, to recover the cost of fucl and other variable
expenses. Further, it was Loehr’s position that these two costs
should be segregated, and billed separately to each customer.
If not, the utility's customers receive a distorted price signal,
and do not pay a rate that tracks the actual cost of providing
electric service.
The rationale behind the demand charge, as explained by
Loehr, is that through such a charge, Colo-Ute’s customers,
i.¢., member systems, can be charged directly for their share of
the use of the Colo-Ute system’s facilities. "[A]s the system
grows, members must choose whether or not to place
increasing demands upon that system. Increased demands on
the system imply additional commitments of capital resources.
[Colo-Ute] members should face a rate structure which reflects
the cost of the capital resources that they will force [the Colo-
Ute system] to incur should they choose to increase demand.”
Other witnesses, including Warren L. Wendling, a public
utilities engineering analyst, offered testimony in which they
recommended that Colo-Ute adopt a scasonally-differentiated
demand-energy rate. Among the advantages cited were: (1)
Demand-energy raics provide an incentive to customers to
adjust their consumption pattern so that the total costs to them
are lowest and marginal costs of the system are lowest; (2) the
system would be deferring capital investments in generation
and transmission plants; and (3) other benefits lie in reduced
Capacity purchases on peak or for reserve requirements, and in
reduced operation and maintenance costs.
Moreover, the witnesses testified that any demand charges
should be seasonally differentiated, since the Colo-Ute system
peaks in the winter time, not in the summer time. The staff's
ee eee ee ot Ley
A-35
analysis based on an adjusted total cost-of-service shows a
significant disparity between the system's summer and winter
season costs (the summer figure is 34.545 mills per kwh; the
winter figure is 42.625 mills per kwh). Growth in peak
demand in winter is the type of growth which causes the
system to incur additional capital expenditures. "A _ higher
demand charge in winter than in summer should be used to
signal [Colo-Ute] members that their winter peak consumption
places constraints upon the capacity of the system.""*
When asked their opinions of the all-energy rate as
proposed by Colo-Ute, the rate design specialists attacked such
a scheme as failing to track costs, and therefore, failing to
properly reflect the costs of service. In Lochr’s words:
I do not believe the flat energy rate to be based
upon sound principles and therefore I cannot
recommend _ it. The flat energy rat is
constructed as if the only cost of generating
and supplying electricity were fucl costs. Since
fuel costs are only a small part of total costs, a
flat energy rate conveys a distorted price signal.
As I mentioned before, the main costs are the
costs of capital. A flat energy charge conveys
a signal to the members and their ultimate
customers to conserve energy. It conveys no
signal related to how they conserve energy. If
energy conservation occurs during off peak
periods, but energy use remains high during
peak periods, the system will still have to incur
the costs of capacity to provide power on peak,
yet use that capacity less during off peak
periods. The result of this would be that
Capacity cosis would have to be spread over
A-36
fewer kwh and the average price per kwh
would have to rise.
Wendling, when asked whether Colo-Ute’s flat-energy rate
is a "just and reasonable rate," responded that the flat-energy
rate "does not reflect how a utility is planned, constructed nor
operated. The rate does not track costs to cost causers.
Therefore the rate is not just."
The record indicates additional evidence regarding the
Colo-Ute system’s load factor and coincidence of member peak
demands with system peak demands, both of which underscore
the failings of Colo-Ute’s all-energy rate structure, and the
benef cial results which would accompany the introduction of
the demand-energy rate structure.
Colo-Ute witness Krumins contended that "the combination
of a flat energy rate and Colorado-Ute’s resource management
plan have resulted in a unifcrm cost per output on a monthly
basis, the operation of generation units at full capacity and a
flat load curve." In fact, an exhibit sponsored by Krumins,
"makes it clear that during the test year total costs varied from
3¢/kwh in January to 4.3¢/kwh in October, a 1.3¢/kwh
difference (or 43 percent); by 1982, the total cost varied from
3¢/kwh in January to 4.5¢/kwh in June, a difference of
1.5¢/kwh (or 50 percent)." On the basis of these figures, the
Commission concluded "from Colo-Ute’s own evidence that the
total cost per unit of output has varied monthly." Further,
since Colo-Ute’s total costs of generating a kwh are not
uniform over time, "it follows that a flat [or all] energy rate is
not cost tracking."
Finally, the Commission heard testimony regarding the
coincidence of peak demands within the Colo-Ute system.
*
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After noting that "[t]he commission relied heavily upon Exhibit
94 in an attempt to show a high coincidence between the
system’s peaks and the members’ peaks,” the court below
remarked that "that exhibit does not appear to accurately track
all of the data available to determine coincidence of peaks.”
Further, the exhibit "shows that the peaks are not nearly as
coincident as believed by the commission." The Commission’s
findings on this issue, however, are also supported by
substantial evidence.
Among other pieces of information, Exhibit 94 documents
the dates, times, and monthly peak demands for Colo-Ute and
its CO-Op members during the period from November 1980
through October 1981. Working with this data, Mitchell, a
staff witness, testified that during February 1981, which is the
highest peak load month of Colo-Ute’s system during the test
year, 8 of the 10 members documented peaked during the top
5 percent of peak hours of the entire Colo-Ute system. The
exhibit further demonstrates that in February 1981, the 14-
member coincidence peak as a percentage of the maximum
demand for the system as a whole was 96.18 percent, and, in
fact, for the entire test year, in only two months did this figure
drop below 90 percent. Moreover, for all months of the test
year the Colo-Ute members had individual peaks which were
highly coincident with the Colo-Ute system peak. Further,
another exhibit submitted by Colo-Ute, and which indicates that
9 of the 14 members exhibited a coincidence in excess of 90
percent, similarly demonstrates the high coincidence of member
demands with the system peak.
The significance of all this for ‘ate design is that the
Commission heard testimony that "[iJn cases where peak
demands tend to be highly coincident, a de: .d-energy rate is
appropriate."
A-38
This evidence regarding peak demands is more than
sufficient to support the Commission’s findings on this issue.
In ignoring or casting aside Exhibit 94, the court below
exceeded the proper standard of judicial review.
The evidence put forth by Colo-Ute and the Commission
staff to support or challenge the propriety of the ail-energy rate
design was in dispute. Given the conflicting nature of the
evidence, alternate conclusions could have been reached. All
this establishes is that the Commission performed its duty by
resolving these disputed issues of fact in favor of the demand-
energy rate. The court may have disagreed with these findings
on disputed questions of fact, but ii is not within the province
of the district court to substitute its judgment for that of the
PUC on disputed questions of fact. Answerphone, Inc. v.
Public Utilities Comm'n, 185 Colo. 175, 178, 522 P.2d 1229,
1230 (1974).
Substantial evidence supports the Commission’s adoption of
the seasonally-differentiated demand-energy rate. The district
court’s rejection of the Commission’s findings constitutes an
impermissible intrusion into the PUC’s rate-making process.
Accordingly, the order of the district court in Case No.
83CV218 is reversed.
VI.
Finally, we consider the issue raised in Case No. 84CV7.
In that case, two customers of the co-ops, ARCO and Exxon
(ARCO/Exxon), sought review of that portion of the
Commission’s decision which allocated over $24 million of
generation fixed costs (demand costs) to the energy component
of the demand-energy rate.
A-39
4 The evidentiary basis for the allocation was provided by
Wendling who testified that electric utilities, in an effort to
operate in the most economical manner, construct a mixture of
base-load, intermediate, and peaking power plants. Base-load
plants (usually either coal or nuclear) are designed to run 24
hours a day and are characterized by high capital costs and
low operating costs, whereas peaking plants (usually oil-fired
or gas-fired) are designed to be operated for short periods of
time, and are characterized by low capital costs, but high
operating costs.
Fe Ee ee wT
so
Wendling was of the opinion that with respect to
generating costs only, there should be a recognition of a
utility’s greater investment in a generating plant able to bum
coal:
A utility can minimize its investment in a
generation plant by constructing oil or gas fired
generators. However, a fuel cost penalty is
increased. On the other hand a utility may
expend more capital and build a coal fired unit
and burn a lower price fuel. Therefore, this
additional investment should be recovered in the
energy charge.
He testified that one method used by utilities to address
Capacity problems resulting from a utility’s greater investment
in higher capital cost generation is the adoption of a time-of-
day rate, which recognizes the use of capacity at the time it
occurs.'” He noted that a number of obstacles stood in the
way of Colo-Ute’s adoption of a time-of-day rate, including the
increased complexity of metering and billing, and the need to
perform cost allocation studies for the distribution cooperatives.
Wendling conceded that the PUC staff had failed to request the
A-40
data necessary to formulate or propose such a rate for
Colorado-Ute.
As a surrogate for this time-of-day rate which he believed
appropriate for the Colo-Ute system, and to compensate for the
recognized insufficiencies regarding time-of-day rate data,
Wendling proposed a modification of the basic demand-energy
rate. This surrogate would be created by shifting to the energy
component of the demand-energy rate $24,084,126 of demand
costs representing the "average" portion of the “average and
excess demand (AED)" allocation.”
Wendling testified that since the average demand
component of the AED allocation is analogous to the base-load
portion of generating capacity -- the costs of which are
recovered through the energy charge under time-of-day rates --
the average demand component should, therefore, be recovered
in the energy charge. As the Commission described this
modification: "Mr. Wendling testified that for the Colorado-
Ute system, the amount so calculated approximated very
closely the dollars of base-load generation that would have
been spread to all hours by a time of use rate." For Colo-Ute
this average demand component, ic., the $24 million in
demand-related costs, is a surrogate for the cost of base-load
generation.
In effect, the allocation of $24 million in generated fixed
(capital) costs to be recovered under the variable (operating)
costs is a recognition of the fact that Colo-Ute, because it had
constructed only coal-fired base-load plants, was using such
plants to meet its peak, and therefore, was substituting capital
costs for operating costs in its operations. As a result of this
allocation, member cooperatives would be charged the same
A-41
rates as if Colo-Ute had originally constructed the "correct"
mixture of plants.
Relying exclusively on the time-of-day surrogate approach,
the Commission concluded that the revenue requirement
associated with base-load generation should be transferred to
the energy charge, and only the excess portion of the AED
allocation should be collected in the demand charge. The
Commission determined that piacing only the excess portion of
the AED allocation in the demand charge would provide an
automatic incentive for Colo-Ute to improve its system load
factor, since: "The higher the load factor becomes, the higher
is the proportion of generation costs collected in the energy
charge and the lower is the demand charge. This provides the
incentive to maintain and improve the system load factor that
was absent in the flat energy rate."
Because the court found that "there was no _ technical
literature to support this classification and that the witness had
conducted no research or studies which would support this
misclassification,” it concluded that the Commission’s decision
was not supported by substantial evidence and ‘was arbitrary
and capricious.
Next, the district court concluded that the Commission
failed to make adequate findings of fact to support its
classification of certain demand costs as energy costs. "[T]here
was no finding nor evidence which suggested how the shift of
the [$24 million] corresponded to the premise,” i.e., Colo-Ute’s
needing a greater investment of capital than that generally
needed for oii or gas plants.
Finally, the court held that the PUC rate is discriminatory
and establishes a preference because it requires a high-load
A-42
customer to subsidize a low-load customer, and summer users
to subsidize winter users. It reasoned that the shift of demand
cost to energy cost, which is contrary to the Commission’s
own cost-of-service study, results in an unjust and
discriminatory rate in violation of section 40-3-106.
The district court set aside that portion of the
“Commission’s order which allocated over $24 million in
demand cost to energy cost. Further, the court ruled that if the
supreme court were to set aside the district court’s order in
No. 83CV218, and, in effect, uphold the Commission’s
adoption of the demand-energy rate design, then the
Commission would be directed to adopt rates based upon the
staff’s cost-of-service study as set forth in the record.
A.
As noted above, section 40-6-115(2) and (3) limits the
district court to a narrow scope of review. Part of this review
includes determining whether the Commission’s findings of fact
are based upon substantial evidence. Ram _ Broadcasting of
Colorado, 702 P.2d at 750. Our review of the record indicates
that the Commission’s decision to shift $24 million in demand
cost to the energy component of the demand-energy rate is not
supported by substantial evidence.
After the Commission concluded, based upon the cost-of-
service study, that the seasonally-differentiated demand-energy
rate is necessary and appropriate for Colo-Ute, it disregarded
the rates dictated by that same cost-of-service study and
Classified certain demand costs as energy costs in the rates
finally adopted. Although the cost-of-service study revealed
that 56 percent of Coiv-Ute’s costs were demand related and
44 percent energy related, the Commission then adopted
err ierrrerrrneermnnniiimaieieaiiililill
A-43
Wendling’s recommendation to transfer a substantial amount of —
Colo-Ute’s demand costs to the energy component of the rate,
thereby assigning ultimately 32 percent of the utility’s costs to
the demand component, and 68 percent to the energy
component. This change represents a shift from demand to
energy of approximately 24 percent of the utility’s actual costs.
During the hearing, Wendling testified that a time-of-day
rate could not be properly calculated without further data, and
that he had not asked Colo-Ute for off-peak demand billing
data so that he could actually prepare a time of use seasonally-
differentiated rate. He also stated that the surrogate-time-of-
day rate adopted by him was without suppor in_ the
Commission staff's own studies, in outside research, or in the
technical literature. The following exchange which occurred
during his cross-examination is instructive:
QUESTION: And again, what is your
authority, if there is any authority for such an
assumption?
ANSWER: I don’t believe I have an authority.
QUESTION: Okay. Have you done any --
ANSWER: Other than myself.
QUESTION: -- research on the development of
the AED allocation factor that supports this?
ANSWER: No.
A-44
QUESTION: Can you give any reference in
technical literature that you are familiar with
which indicates that, where the AED method is
characterized as being a proxy for base-load
and peaking generation?
ANSWER: Well, my previously referred to
work papers on the time-of-day design did that.
QUESTION: But as far as technical literature
which might support that approach, can you
refer me to anything which parallels your
recommendation?
ANSWER: I can’t.
When Wendling was asked whether the approach he was
recommending has ever been advocated by the Commission in
other rate cases, he responded: "Well, it might have been but
I am not familiar with them or what their intent was, or for
what purposes they were advocated.""”
Viewing the record as a whole, and in a light most
favorable to the Commission, G&G Trucking, 745 P.2d at 216;
Home _ Builders Ass’n, 720 P.2d at 560, we conclude that
Wendling’s unsupported opinion does not constitute substantial
evidence necessary to uphold the decision of the Commission.”
Home Builders Ass’n, 720 P.2d at 562-63.
B.
We have held that where an order of the Commission is
issued solely as a matter of administrative convenience, or in
the absence of sufficient investigation into pertinent
A-45
considerations, the order is arbitrary, capricious, and invalid.
City of Montrose v. Public Utilities Comm’n, 197 Colo. 119,
123, 590 P.2d 502, 505-06 (1979) (commission’s order
arbitrary and capricious, where no study commissioned
regarding cost-of-service breakdown, although study was
feasible, and no discussion in commission’s order of disparate
service cost; therefore, order issued solely as a matter of
administrative convenience), Further, orders of the
Commission which are arbitrary and capricious must be set
aside. 1 Div, v Li iliti mm’n,
698 P.2d 255, 265 (Colo. 1985); Colorado Municipal League v.
Public Utilities Comm’n, 687 P.2d 416, 419 (Colo. 1984). See
also Federal Trade Comm'n v. Crowther, 430 F.2d 510, 514
(D.C. Cir. 1970) (adoption of significant policy change without
sufficient study and explanation is arbitrary and capricious).
The same factors which cause us to conclude that the
Commission’s conclusions are not supported by substantial
evidence, also lead us to find this portion of the Commission’s
decision arbitrary and capricious. The proposed shift to
demand costs represents little more than an ad hoc and
unsupported analytical shortcut invented and adopted simply
because the necessary rate design studies had not been
performed by the Commission staff. The evidence clearly
shows that such a study was entirely feasible, had the staff
collected the necessary data. The district court, therefore, was
fully justified in holding that this portion of the Commission’s
order was arbitrary and capricious.
<
As noted above, section 40-6-109(3) imposes on the
Commission the requirement that a reported decision shall be
accompanied by findings of fact. Moreover, section 40-6-
A-46
111(4)(a) obliges the Commission to determine whether the rate
or charge issue violates sections 40-3-106(1) and -111. The
factors relied upon by the Commission must be sufficiently
clear to enable the court to engage in meaningful review of the
Commission’s decision. well v li iliti n,
200 Colo. 134, 138, 613 P.2d 328, 332 (1980).
The Commission justified its decision to shift demand costs
on the grounds that Colo-Ute makes use of coal-fired power
plants which require a greater investment of capital than is
needed for oil or gas facilities. The Commission failed to
find, however, that the specific amount of demand costs shifted
to the energy charge accurately corresponds to the incremental
additional capital costs of coal plants in comparison with oil or
gas facilities. Indeed, the Commission could not have made
such a finding since no evidence was presented on this point.
We hold that the Commission failed to conform to the
Statutory requirements that its reported § decisions be
accompanied by adequate findings of fact.
D.
Finally, section 40-3-102 imposes upon the Commission a
duty to prevent unjust discrimination in rates. Further, section
40-3-106(1) recognizes that such discrimination may manifest
itself in a number of ways. We have previously held that one
of the primary purposes of the Commission’s regulatory
scheme is "to insure that the rates charged are not excessive or
unjustly discriminatory." rell v. Ci unty of Denver,
636 P.2d 703, 711 (Colo. 1981).
ARCO and Exxon have alleged that the rate design
ultimately approved by the PUC, with its accompanying shift
A-47
in demand costs, unlawfully discriminates in two ways: (1) It
establishes a preference for winter users and, in effect, requires
summer users to subsidize winter customers; and (2) creates a
preference in rates for low-load factor customers at the expense
of high-load factor customers, who would then pay excessive
rates to subsidize preferred customers.
We need not resolve these claims, however, as_ the
Commission’s errors mandate that this portion of Decision No.
C83-1176 be set aside.
In summary, we reject Colo-Ute’s claim that this appeal is
moot. We hold that the PUC possessed statutory authority to
institute, On its own motion, Case No. 6076, to determine
whether the tariffs filed by Colo-Ute were just and reasonable.
The Commission’s order that Colo-Ute adopt a seasonally-
differentiated demand-energy rate is supported by adequate
findings of fact and substantial evidence. We affirm the ruling
of the district court setting aside that portion of the PUC’s ~—
order which classified over $24 million of demand costs as
energy costs.
Accordingly, we reverse in part, affirm in part, and remand
for further proceedings consistent with this opinion.
JUSTICE ERICKSON concurs in part and dissents in part;
JUSTICE LOHR and JUSTICE VOLLACK join in the
concurrence and dissent.
A-48
The flat or all-energy rate does not differentiate between “demand”
charges (fixed capital costs associated with the generation and transmission o/
electricity) and “energy” charges (variable operation and maintenance
expenses, especially fuel costs). Instead, it recovers all costs -- both demand
and energy -- from a uniform charge per kilowatt hour (kwh).
tN
"Cost tracking” simply means that the rates charged for public utility
service must “wack” actual costs; in other words, the utility should accurately
assign actual costs to the consumers who are causing those costs. Ideally,
the rate schedule should be designed in such a way that the consumers
receive accurate and clear price signals from the utility and adjust their
economic behavior accordingly.
ee
Under a seasonally-differentiated demand-energy rate, an electric utility
charges its customers a rate which reflects separate charges for demand and
energy costs. Such a demand-energy rate provides separate and distinct
recognition to the two major cost components of producing electricity:
capital and fuel. Seasonal differentiation refers to the imposition of different
demand charges for summer and winter, reflecting the greater power load
burdens placed on generating facilities during the winter months.
ARCO, Exxon, Colo-Ute, and the co-ops thereupon filed new
applications for rehearing, reconsideration, and reargument of Decision No.
C83-1392. Colo-Ute also filed a motion to stay the filing date for rates and
tariffs under Decision Nos. C83-1176 and C83-1392. In Decision No. C83-
1561, the PUC denied the applications and Colo-Ute’s motion.
A-49
The district court found for the Commission on certain constitutional and
administrative due process claims raised by Colo-Ute. It held that the
Commission's procedures did not violate the Colorado Open Records Act,
§§ 24-72-101 to -309, 10 C.R.S. (1982), or the due process clauses of the
United States and Colorado Constitutions. Colo-Ute has not raised these
claims on appeal.
6
A cost-of-service study is a generally recognized approach for allocating
a utility's various fixed and variable costs based upon a utility's actual costs
of service.
~
The PUC urges reversal of the district court’s order. Colo-Ute and the ;
co-ops request dismissal on mootmess grounds, or, in the alternative, to affirm
the order. Intervenors ARCO, Exxon, and Shell Western E&P, Inc. (SWEPI)
(the successor in interest to Shell Oil Company), urge reversal of the district
court’s order on the jurisdictional issue and on the question of whether
substantial evidence exists to support the rate design change promulgated by
the PUC. On the issue of allocation of demand charges as energy charges,
ARCO and Exxon request affirmance of the district court's order.
In its entirety, section 40-6-111(4)(a), 17 C.R.S. (1984), reads as
follows:
The provisions of this section relating to suspension
of rates, fares, tolls, rentals, charges, classifications,
contracts, practices, rules, or regulations pending the
hearing and decision thereon shall not apply to cooperative
A-50
electric associations, but this subsection (4) shall not be
construed to exempt such associations from any other
provision of this section. Notwithstanding any other
provision of law, no cooperative electric association shall
establish, charge, or collect a discriminatory or preferential
rate, charge, rule, or regulation which would be violative
of section 40-3-106(1) or section 40-3-111. Upon
complaint filed by any member or customer of a
cooperative electric association or by any affected public
utility, the commission shall determine whether the rate,
charge, rule, or regulation in question is contrary to this
section, section 40-3-106(1), or secuon 40-3-111.
oO
Section 40-6-111(1)(a), (b), 17 C.R.S. (1984), reads as follows:
Hearing on schedules - suspension - new rates -
rejection of tariffs.
(1)(a) Whenever there is filed with the commission any
tariff or schedule stating any new or changed individual or
joint rate, fare, toll, . . .the commission has power, either
upon complaint or upon its own initiative, . . . but upon
reasonable notice, to have a hearing concerning the
propriety of such rate, fare, toll, . . . if it believes that
such a hearing is required and that such rate, fare, toll,
. may be improper.
(b) Pending the hearing and decision thereon, in the
case of a public utility other than a rail carrier, such rate,
fare, toll, rental, charge, classification, contract, practice,
rule, or regulation shall not go into effect; but the period
of suspension of such rate, fare, toll, . . . shall not extend
beyond one hundred twenty days beyond the time when
ae a ae
)
A-51
such rate, fare, toll, . . . would otherwise go into effect
unless the commission, in its discretion, and by separate
order, extends the period of suspension for a further
period not exceeding ninety days.
10
Section 40-6-111(2)(a), 17 C.R.S. (1984), provides in pertinent part:
If a hearing is held thereon, whether completed
before or after the expiration of the period of suspension,
the commission shall establish the rates, fares, tolls, . . .
proposed in whole or in part, or others in lieu thereof,
which it finds just and reasonable. ... All such rates,
fares, tolls, . . . not so suspended, on the effective date
thereof, which in the case of a public utility other than a
rail carrier, shall not be less than thirty days from the
time of filing the same with the commission, or of such
lesser time as the commission may grant,shall [sic] go into
effect and be the established and effective rates, fares,
tolls, . . . subject to the power of the commission, after a
hearing on its own motion or upon complaint, as provided
in this article, to alter or modify the same.
11
In its answer brief, Colo-Ute provides us with the legislative history of
H.B. 1441, the 1981 amendment eventually codified at section 40-6-
111(4(a). This information does not support Colo-‘"te’s position. In fact,
some of the legislative history actually supports the position of the PUC.
Govemor Richard D. Lamm’s message accompanying H.B. 1444 is
instructive on this point:
A-52
It [H.B. 1444} will allow REA rate increases to go into
effect after 30 days from the time they are filed with the
PUC, thereby eliminating costly delays presently incurred
because of the lengthy hearing procedure. Should a
complaint concerning the reasonableness of an increase
occur, H.B. 1444 stipulates that only one complainant is
necessary to require the PUC to review the new rate:
Under existing law, 25 customers or prospective customers
must complain before the PUC can intercede. ... While
streamlining the bureaucratic process for the rural electric
cooperatives in rate setting, this legislation does not
eliminate PUC control of facility development or other
consumer protections.
H.R.J. 2309, 53rd Leg., Ist Sess., 1981 Colorado (emphasis added).
12
For decisions of other jurisdictions holding that their state’s PUC
possesses the power and authority to regulate rate design, see, e.g., Rhode
Isiand Chamber of Commerce Fed’n vy. Burke, 443 A.2d 1236, 1237 (R.I.
1982) (commission had authority to modify rate design submitted by electric
utility); Central Main Power Co. v. Public Util. Comm'n, 416 A.2d 1240,
1247 (Me. 1980) (commission acted properly in regulating rate design
proposal submitted by utility); Cascade Natural Gas Corp. v. Davis, 28 Ore.
App. 621, 560 P.2d 301, 304 (1977) (authority to impose rate design
different from that proposed by the utility is encompassed in statutory
authority of commissioner to look after the interest of the utility’s customers,
to obtain a fair and reasonable rate and guard against discriminatory
exactions).
A-53
13
The district court also held that it could discover “no findings in
Decision C83-1176 which vitiates [sic] these findings previously made by the
Commission [in C81-373, in which the Commission in 1981 approved an all-
energy scheme for Colo-Ute].". The adequacy of the Commission’s findings
are discussed, infra. To the extent that the court below is imposing upon
PUC decision-making the applicability of stare decisis principles, it is in
error. We have held that:
Because of the legislative character of rate-making, the
Commission is not bound by its prior decisions or by any
doctrine similar to stare decisis. Moreover, while
consistency in administrative rulings is considered
essential, and while agency rulings are entitled to great
weight in subsequent proceedings . . . the appearance of
arbitrariness is dispelled when new findings are made, as
they were here, on the basis of new evidence and a new
record.
Colorado-Ute Electric Ass'n v. Public Util. Comm’n, 198 Colo. 434, 540-41,
602 P.2d 861, 865 (1979) (citation omitted). See also B&M Service, Inc. v.
Public Util. Comm’n, 163 Colo. 228, 232, 429 P.2d 293, 295 (1967)
(doctrines of stare decisis as wcll as equitable estoppel are gencrally held not
to apply to the determination of administrative tribunals).
14
The term "peak demands” refers to the maximum rate of customer
electricity consumption (in kilowatts) occurring during a 15 or 20-minute
interval for any given month. The term “coincidence of peak demands”
expresses a relationship between a customer's and system's peak demands for
a particular point in time.
A-54
15
Section 40-3-106(1)(a), 17 C.R.S. (1984), provides as follows:
40-3-106. Advantages prohibited - graduated
schedules. (1)(a) Except wher operating under paragraph
(b) of this subsection (1), no public utility, as to rates,
charges, service, or facilities, or in any other respect, shall
make or grant any preference or advantage to any
corporation or person or subject any corporation or person
to any prejudice or disadyantage. No public utility shall
establish or maintain any unreasonable difference as to
rates, charges, service, facilities, or in any respect, either
between localities or as between any class of service. The
commission has the power to determine any question of
fact arising under this section.
Section 40-3-111(1), (2), 17 C.R.S. (1984), provides in pertinent part:
40-3-111. Rates determined after hearing.
(1) Whenever the commission, after a hearing upon its
own motion or upon complaint, finds that the rates, tolls,
fares, . . . demanded, observed, charged, or collected by
any public utility for any service, . . . or that the rules,
regulations, practices, or contracts affecting such rates,
fares, tolls, . . . are unjust, unreasonable, discriminatory,
or preferential, or in any way violate any provision of
law, . . . the commission shall determine the just,
reasonable, or sufficient rates, fares, tolls, . . . to be
thereafter observed and in force and shall fix the same by
order. In making such determination, the commission may
consider . . . factors which may affect the sufficiency or
insufficiency of such rates, fares, tolls, . . . during the
period the same may be in effect and may consider any
A-55
factors which influence an adequate supply of energy and
any factors which encourage energy conservation.
(2) The commission has the power, after a hearing
upon its Own motion or upon complaint, to investigate a
single rate, fare, toll, . . . or the entire schedule of rates,
fares, tolls, . . . of any public utility; and to establish new
rates, fares, tolls, . . . in lieu thereof.
16
Additional fuel is required as additional electric energy is consumed. A
component of the electric power rates reflecting additional fuel costs is,
therefore, also in keeping with the principle that rates should track costs.
17
A time-of-day rate varies the price of demand and/or energy over the
hours of the day. Such a rate attempts to signal to customers the various
cosis associated with generating electricity throughout various periods of the
day.
18
The “average and excess demand (AED)” allocation is a method used
for allocating demand-related costs. It allocates a portion of the demand-
related costs on the basis of “average” demand (kilowatt hour usage
throughout the year) and the remainder of the demand-related costs on the
basis of “excess” demand (the difference between the utility’s peak and
average demands).
19
Moreover, Gary Pearson [sic], Colo-Ute’s supervisor of rate and cost
analysis, testified that he could not think of “any articles conceming
utilization of this type of rate in any other wholesale rate proceeding”;
A-56
further, to his knowledge, “this rate concept [has never] ‘xen used in
Colorado before."
20
See also Electricity Consumer's Resource Council v. Federal Energy
Regulatory Comm'n, 747 F.2d 1511 (D.C. Cir. 1984). In that case, the court
reversed the adoption by the Federal Energy Regulatory Commission (FERC)
of a rate-making modification which effectively shifted demand costs to the
energy component of the electric rate in question. The court held that the
evidence failed to show that the modification would result in a rate which
was cost tacking. In the words of that court: "[T]he commission appears to
treat the demand charge like modeling clay in order to force the application
of marginal cost pricing to the energy component.” 747 F.2d at 1515.
l ic v ic Uulit mmission
No. 86SA244
JUSTICE ERICKSON concurring in part and dissenting in part:
I would affirm the decision of the Public Utilities
Commission of Colorado (PUC). I agree with the majority
that this appeal is not moot and that the PUC had statutory
authority to determine sua sponte whether the tariffs filed by
Colorado-Ute Electric Association (Colo-Ute) were just and
reasonable. I also agree with the majority that substantial
evidence supports the PUC’s order that Colo-Ute’s proposed
rate be replaced by a seasonally differentiated demand-energy
rate. In my view, however, competent evidence supports the
PUC’s allocation of $24,084,126, representing part of the fixed
capital costs of Colo-Ute’s coal-fired plants, to the energy
component of the formula used to determine the new sate.
Accordingly, I would reverse the trial coun and remand with
directions to affirm the PUC’s order.
The PUC’s order is supported by the testimony of Warren
L. Wendling (Wendling),| a Public Utilities Engineering
Analyst employed by the PUC. Generally, utilities em ioy
three types of power plants to meet fluctuating demand. for
electricity. Coal-fired plants typically operate continuously.
They are expensive to construct, but because of the low cost of
coal, cheap to operate. The combined generating capacity of
plants that a utility operates continuously is called the “base
load capacity" of the utility.» When the demand for electricity
exceeds the base load capacity, the utility typically uses either
oil- or gas-fired plants to satisfy the “peaks” in demand.
These plants are cheap to build, but because of the high cost
A-58
of oil and gas, expensive to operate. Contrary to industry
practice, Colo-Ute employs orily coal-fired plants to meet all of
its commitments tO power users.
As an integral pan of the PUC’s rate determination,
Wendling performed a cost-of-service study (study) to compute
the utility’s “cost of service," the total revenues required to
cover the utility’s cost of operation plus a fair return on its
investment. The “cost of service” is used to set the demand-
energy rates for each of Colo-Ute’s customers.“ The study
allocates costs to each customer by dividing Colo-Ute’s costs
into numerous categories. The costs distributed to each
Category are adjusted to provide Colo-Ute with a reasonable
rate of retum and then allocated to each customer based in part
on the customer’s consumption of electricity. Wendling’s
study was the only cost-of-service study of Colo-Ute presented
to the PUC.
In the cost-of-service study, Wendling followed gencrally
accepted cost allocation methods, such as that contained in the
NARUC Electric Utility Cost Allocation Manual. Generally
accepted allocation methods assume that a utility uses either
oil- or gas-powered plants to mect peaks in demand.
Accordingly, Wendling concluded that the study results had to
be modified to reiiect Colo-Ute’s investment in coal-powered
plants to meet peaks in demand. Colo-Ute’s use of coal-fired
plants, rather than oil- or gas-powered plants, to mect surges in
demand in excess of base load capacity results in lower fuel
costs but higher plant construction costs (capital costs). To
strictly follow the unmodified study results would defeat the
purpose of the study itself; that is, the study’s results would
not accurately track Colo-Ute’s actual cost of service.* With-
Out appropriate adjustments, the demand-energy rates would
cause non-peak users of electricity to subsidize peak users.
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Accordingly, based upon his analysis of Colo-Ute’s operations
Wendling modified the results of his study by allocating
$24,086,126, the plant capital costs required to supply peak
demand, from the demand component of the demand-energy
rate to the energy component. The modification caused
customers to pay more for electricity used to satisfy peak
demands than under the unadjusted rates.°
Based on the testimony of Wendling, the PUC made the
following findings:
Wendling testified that . . . there should be
a recognition of the utilities’ [sic] investment in
thermal coal-fired generation plants. Investment
in such plants minimizes the cost of fuel
relative to investment in peaking plants with its
attendant low capacity or capital costs and high
fuel costs for fuels such as oil or gas.
. Substantial portions of [Colo-Ute’s
coal-fired units} are being used for peaking
purposes. In effect, units with high capital
costs and low running costs have been
substituted for units with low capital costs and
high running costs in meeting Colorado Ute’s
{electrical needs}. Although such capital
substitutions may accord with the national
energy policy, it _mevertheless creates an
artificially low energy charge. Moreover, no
gy tg he off neal a
load .
A-60
The PUC examined Wendling’s modification of the study
results and concluded that the allocation would enable more
accurate tracking of Colo-Ute's costs.’
Adantic Richfield Company (ARCO) and Exxon
Corporation (Exxon), two customers of Colo-Ute who will pay
higher power costs as a result of Wendling’s modification,
contend that the PUC’s decision to modify the study results is
not supported by substantial evidence. They argue that the
capital costs of the coal-powered plants are “fixed costs” and
can only be recovered in the demand variable of the demand-
energy rate and that the allocation of $24,084,126 to the
energy component of the rate was arbitrary and capricious.
Finally, they claim that the PUC’s prescribed energy rates are
discriminatory in violation of sections 40-3-102 and -106, 17
C.R.S. (1984 & 1987 Supp.).
A.
In reviewing the propriety of the PUC’s modification to the
demand-energy rate, we must consider two issues: (1) whether
the decision to modify the rate formula constituted an abuse of
discretion and (2) whether the amount of the modification was
supported by the record. Conceming the first issue, the PUC
has broad discretion in determining rates, provided the rates are
just and reasonable. Colorado Ute Elec. Ass'n, Inc. v. Public
Util, Comm'n, 198 Colo. 534, 602 P.2d 861 (1979);
Consumers’ League v. Colorado & S. Ry., 53 Colo. 54, 125 P.
577 (1912); § 40-3-102. It is the result reached, not the
method employed, which determines whether a rate is just and
reasonable. City of Montrose v. Public Util. Comm'n, 629 P.
2d 619 (Colo. 1981). Orders of the PUC are presumed to be
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just and reasonable. Id, at 623. Rate-making is not an exact
science but a legislative function involving many questions of
judgment and discretion based upon a myriad of factors
including evidentiary facts, calculations, known factors, and
adjustments that may affect the relationship between known
factors. City of Montrose, 629 P.2d at 623; Colorado Ute
Elec. Ass'n, 198 Colo. at 539, 602 P.2d at 864. A reviewing
court has neither the expertise nor resources of the PUC and,
absent a clear abuse of discretion, should not substitute its
judgment for that of the PUC. Atchison, T. & S. F. Ry. v.
Public Util. Comm'n, 194 Colo. 263, 572 P. 2d 138 (1977).
In my view, the decision to modify the demand-energy ratc
formula was not an abuse of discretion. The PUC found,
based on competent evidence, that the cost-of-service study did
not accurately track Colo-Ute’s costs Secause the study's cost
allocations assumed that oil- and gas-powered planis would be
used to meet peaks in power demand. The assumption of the
study was inappropriate in this case since Colo-Ute employed
only coal-fired plants to meet peaks in energy demand. The
unmodified rates also failed io realize a policy goal of the
PUC. The rates, by not charging increased costs for electricity
used to supply peaks in demand, would not encourage Colo-
Ute’s customers to conserve energy and encourage Colo-Ute to
improve its load factor." Although the ability of the PUC to
effect social policy through rate-making is limited, Mountain
States Legal Foundation vy. Public Utilities Commission, 197
Colo. 56, 590 P.2d 495 (1979), the PUC has a duty to protect
the public from unreasonable and unjust rates and to prevent
destructive rate-making that could adversely affect the
availability of service to the public. Consolidated Freightways
Cor. v. Public Util. Comm'n, 158 Colo. 239, 406 P.2d 83
(1965); see Consolidated Gas Supply Corp. v. Federal Power
Comm'n, 520 F.2d 1176 (D.C. Cir. 1975) (holding federal
A-62
power commission's adoption of new rate formula, shifting a
greater proportion of capital costs from the demand component
to the commodity component of the rate formula, to be just
and reasonable where the modification was supported neither
by technical research nor by commission studies); Fuels
Research Council, Inc. v. Federal Power Comm'n, 374 F.2d
842 (7th Cir. 1967) (recognizing federal power « ~ nission’s
broad discretion in using rate formulas to achieve policy
goals); State Corp, Comm'n vy. Federal ower Comm'n, 206
F.2d 690 (8th Cir. 1953) (affirming power commission's
adoption of new rate formula that was supported neither by
technical literature nor by commission studics or rescarch), cert.
denied, 346 U.S. 922 (1954). Considering the innumerabic
factors that must be identified and quantified to determine
rates, scientific precision in rate-making is not always possible
and the PUC must be accorded broad discretion in setting
rates. Accordingly, since the impact of the modified rate on
Colo-Ute and its customers is just and reasonabic, the
moditication of the rate was not an abuse of discretion.
The second issue raised by ARCO and Exxon is whciher
the amount of the modification, $24,084,126, is supported by
the record. Section 40-6-115(3), 17 C.R.S. (1984), limits the
scope of judicial review to determinations whether a PUC
decision is unconstitutional, “whether the decision . . . is just
and reasonabic,” and “whether its conclusions are in accordance
with the evidence.” It is well established that the findings and
conclusions of the PUC on disputed questions of fact, when
Sanne GE CONGMINE GHNEINE, are final and must be upheld on
judicial review.” See, ¢.g., Mellow Yellow Taxi Co. v. Public
Util, Comm'n, 644 P.2d 18 (Colo. 1982); Contact-Colorado
Springs, Inc. v. Mobile Radio Tel. Serv., Inc., 191 Colo. 180,
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551 P.2d 203 (1976). While the factual findings of the PUC
need not be presented in any particular form and may even be
implied, the findings must be discernible to the reviewing
coun. Caldwell v, Public Util. Comm'n, 200 Colo. 134, 613
P.2d 328 (1980).
In my view, the amount of the modification is supported
by competent evidence and must be upheld ori review. Based
upon his analysis of Colo-Ute’s operation and his calculations,
Wendling stated that a modification of the rate formula in the
amount of $24,084,126 was necessary to permit accurate
tracking of Colo-Ute’s costs."° Although a time-of-day rate
would also have enabled accurate tracking of Colo-Ute’s costs,
Wendling testified that that rate would be much more difficult
to implement and would provide less accurate results.
Accordingly, the modification of the demand-energy rate must
be upheld on review.
Finally, ARCO and Exxon contend that the PUC’s
prescribed energy rates are discriminatory in violation of
sections 40-3-102 and -106, 17 C.R.S. (1984 & 1987 Supp.).
They claim that the PUC’s modifications to the demand-energy
rate do not accurately track actual costs and are discriminatory
because they cause some users to subsidize rates of other users.
They argue that the modified rates (1) favor winter users and
discriminate against summer users and (2) favor customers with
fluctuating demand for electricity during the year and
discriminate against those customers with relatively constant
demand each year.
Section 40-3-102 provides that the PUC has authority “to
prevent unjust discriminations” in rates, charges, and tariffs.
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(Emphasis added.) Section 40-3-106(1) states uiat “no public
utility shall . . . make or grant any preference or advantage to
any corporation or person or subject any corporation or person
to any prejudice or disadvantage" and that no utility "shall
establish or maintain any unreasonable difference . . . in any
respect, either between localities or as between any class of
service." (Emphasis added.) In Mountain States Legal
Foundation v. Public Utilities Commission, 197 Colo. 56, 590
P.2d 495 (1979), we found a violation of section 40-3-106(1)
when the PUC ordered utility companies to provide a lower
rate to low-income elderly and low-income disabled persons
that was “unrelated to the cost or type of service provided.”
Id, at 59, 590 P.2d at 498 (emphasis added).
In this case, the modification of the demand-energy formula
is related to the actual costs of Colo-Ute to supply users and
violates neither section 40-3-102 nor -106. On the contrary,
the modification prevents non-peak users from subsidizing peak
users and avoids the type of unjust discrimination raised by
ARCO and Exxon. The unadjusted demand-energy rates
endorsed by ARCO and Exxon discriminate against certain
users since the rates do not accurately reflect Colo-Ute’s costs.
Competent evidence in the record supports the PUC’s
conclusion that the modified rates accurately reflect Colo-Ute’s
costs and therefore charge Colo-Ute’s customers fairly.
Accordingly, I would reverse the district court and remand
with directions to affirm the PUC.
I am authorized to say that JUSTICE LOHR and JUSTICE
VOLLACK join in this dissent. |
A-65
The qualifications and experience of Wendling was admitted as
evidence. Wendling has a bachelors degree in electrical engineering, a
masters degree in science, and a masters degree in business administration.
He is a registered professional engineer in Colorado with over eight years’
experience in electrical engineering. He has previously testified as an expert
witness before the PUC in other cases involving rate determinations.
No
"Base load" units are those units that are in continuous operation and
“pase load capacity" is the generating capacity of those units. Mississippi
Indus. v. Federal Regulatory Comm'n, 808 F.2d 1525 (D.C. Cir.), vacated in
part, 814 F.2d 773 (D.C. Cir.), opinion reinstated, 822 F.2d 1103 (D.C. Cir.),
cert. denied, 108 S. Ct. 500 (1987). The “generating capacity" of a power
plant refers to the maximum amount of electricity that it can generate.
Ww
Peak demand refers to demand in excess of base load capacity. The
plants used to meet peaks in demand are called “peaking plants." The
typical period of peak demand for utilities is during the winter, when energy
demand far exceeds demand during other times of the year. During non-
peak periods, den. nd is typically met by the base units, which are generally
coal powered plants. When the demand of cooperative members is less than
base load capacity, Colo-Ute sells the unused capacity to non-members.
>
The demand variable is a component used to determine the demand-
energy rate and is the sum of several components, including a generation
component. The generation component is based on total average and excess
demand (also called “Average and Excess Demand"), which is the sum of the
average demand and excess demand figures. Demand-related costs are
A-66
allocated by the generation component based on “average demand” (annual
kilowatt hour usage) and “excess demand” (difference between the utility's
peak and average demands).
Ww
Wendling testified:
The energy charge was computed [after the demand charge].
Here Staff is proposing only for generation costs to recognize
the increase[d] investment in demand related dollars made by
Colorado-Ute in its generating plant so that they can bum coal.
A utility can minimize its investment in generation plant by
constructing oil or gas fired generators. However, a fuel cost
penalty is [incurred]. On the other hand a utility may expend
more capital and build a coal fired unit and burn a lower
priced fuel. Therefore, this additional investment should be
recovered in the energy charge. To accomplish this consistent
with the cost of service methodology the average portion of
the average and excess demand allocation factor was split... .
6
Wendling testified that another way to accurately track Colo-Ute’s costs
is through a time-of-day rate. He stated that a portion of the average
demand component of the average and excess demand a!location for Colo-
Ute should be recovered in the energy charge since that component is
analogous to the base load portion of generating capacity. In time-of-day
rates, the costs of base load generating capacity are recovered through the
rate’s energy component. He stated that a similar formula was used in two
prior PUC rate determinations. According to Wendling, his rate design
tracked costs better than time-of-day rates and was much easier to
A-67
implement. The PUC and Wendling use the terms “time-of-day rate” and
"“time-of-use” rate interchangeably.
~
Other pertinent parts of the PUC order stated:
One way to address (Colo-Ute’s investment in coal fired
plants to meet peaks in demand] is by the use of a time-
of-use rate which would recognize the use of capacity at
the time it occurs.
The disadvantages of a time-of-use rate, of course, is
the increased complexity of metering and billing and the
need to perform cost allocation studies for the distribution
cooperatives. As a surrogate for such a rate, Mr.
Wendling proposed a modification of the demand-energy
rate. In this modified rate, the dollars of generation costs
associated with the average portion of the [average and
excess demand] allocation were spread into the energy
charge. Mr. Wendling testified that for the Colorado-Ute
system, the amount so calculated approximated very
closely the dollars of base load generation that would have
been spread to all hours by a ume-of-use rate.
oo
A customer's annual “load factor" is the percentage relationship of its
average daily demand (annual use/365) to its maximum daily demand.
Northern Ind. Pub. Serv. Co. v. Federal Energy Regulatory Comm'n, 782
F.2d 730 (1986). Concerning the modification of the demand-energy rate,
the PUC order stated:
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. . For Colorado-Ute’s particular load shape and
seasonality, the excess portion of the AED [average and
excess demand] is a proxy for the peaking portion of the
generating facilities. This peaking capacity was allocated
on the basis of coincident peak demand recognizing that
the members exhibit a high coincidence with the
Colorado-Ute system peak. Placing only the excess
portion of the AED allocation in the demand charge
provides an automatic incentive to Colorado-Ute to
improve its system load factor since the higher the load
factor becomes, the higher is the proportion of generation
costs collected in the energy charge and the lower is the
demand charge. This provides the incentive to maintain
and improve the system load factor that was absent in the
flat energy rate. . . . This should, if applicd in
conjunction with an effective resource management pian,
produce essentially a flat rate, the very rate Colorado Ute
seeks to employ. This rate form has the additional
advantage that, in the present apniication, it comports with
the regulatory objective of rate stability.
‘©
We have also held that the Pl'C's findings and conclusions may be set
aside or modified if not supported by substantial evidence. See, e.g., City of
Montrose, 629 P.2d at 622; Public Util, Comm'n v. City of Loveland, 87
Colo. 556, 289 P. 1090 (1930). The substantial evidence standard requires a
party challenging the findings and conclusions of the PUC to carry a heavy
burden.
Substantial evidence is more than a scintilla, and must do
more than create a suspicion of the existence of the fact
to be established. “It means such relevant evidence as a
reasonable mind might accept as adequate to support a
A-69
conclusion,” . . . and it must be enough to justify, if the
trial were to a jury, a refusal to direct a verdict when the
conclusion sought to be drawn from it is one of fact for
the jury.
National Labor Relations Bd. v. Columbian E. & S. Co., Inc., 306 U.S. 292,
300 (1939) (quoting ‘cidade 4, taoiee kidibianalin
Bd., 305 U.S. 197, 229 (1938)). See generally 5 K. Davis, Administrative
Law Treatise § 29:5 (2d ed. 1984)(discussing substantial evidence standard).
In my view, the PUC’s findings and conclusions in this case are supported
by substantial evidence.
10
Wendling’s opinion that a modification in the amount of $24,084,126
was necessary was based on the staff's separation of demand functionalized
costs and revenues. See supra note 5. The $24,084,126 is the sum of the
total of the average demand portion as set forth in Exhibit 60 in the PUC
hearing.
A-70
DISTRICT COURT, MONTROSE COUNTY, COLORADO
Civil Action No. 83 CV 218
ORDER
COLORADO-UTE ELECTRIC ASSOCIATION, INC.;
DELTA-MONTROSE ELECTRIC ASSOCIATION;
EMPIRE ELECTRIC ASSOCIATION, INC.;
GRAND VALLEY RURAL POWER LINES, INC.;
GUNNISON COUNTY ELECTRIC ASSOCIATION, INC.;
HOLY CROSS ELECTRIC ASSOCIATION, INC.;
INTERMOUNTAIN RURAL ELECTRIC ASSOCIATION;
LA PLATA ELECTRIC ASSOCIATION, INC.;
SANGRE DE CRISTO ELECTRIC ASSOCIATION, INC.;
SAN ISABEL ELECTRIC ASSOCIATION, INC.;
SAN LUIS VALLEY RURAL ELECTRIC COOPERATIVE,
INC.;
SAN MIGUEL POWER ASSOCIATION, INC.;
SOUTHEAST COLORADO POWER ASSOCIATION;
WHITE RIVER ELECTRIC ASSOCIATION, INC.; and
YAMPA VALLEY ELECTRIC ASSOCIATION, INC.,
Petitioners,
VS.
THE PUBLIC UTILITIES COMMISSION OF THE STATE
OF COLORADO; CHERYL MUHOVICH; UNION CARBIDE
CORPORATION; SHELL OIL COMPANY; EXXON
A-71
COMPANY, U.S.A.; ATLANTIC RICHFIELD COMPANY;
and CITY OF DELTA, COLORADO,
Respondents.
AND
DISTRICT COURT, MONTROSE COUNTY, COLORADO
Civil Action No. 84 CV 07
ORDER
ATLANTIC RICHFIELD COMPANY and EXXON
CORPORATION,
Petitioners.
VS.
PUBLIC UTILITIES COMMISSION OF THE STATE OF
COLORADO; COMMISSIONERS EDYTHE S. MILLER,
RONALD L. LEHR, AS SUCCESSOR TO FORMER
COMMISSIONER DANIEL E. MUSE, ANDRA SCHMIDT,
AS SUCCESSOR TO FORMER COMMISSIONER
CLARENCE RAYMOND CLARK, III and COLORADO-UTE
ELECTRIC ASSOCIATION, INC.,
Respondents,
and
A-72
SAN LUIS VALLEY RURAL ELECTRIC COOPERATIVE,
INC.; YAMPA VALLEY ELECTRIC ASSOCIATION, INC.;
INTERMOUNTAIN RURAL ELECTRIC ASSOCIATION;
CHERYL MUHOVICH; WHITE RIVER ELECTRIC
ASSOCIATION, INC.; SAN ISABEL ELECTRIC
ASSOCIATION, INC.; SANGRE DE CRISTO ELECTRIC
ASSOCIATION, INC.; GRAND VALLEY RURAL POWER
LINES, INC.; DELTA-MONTROSE ELECTRIC
ASSOCIATION; HOLY CROSS ELECTRIC ASSOCIATION,
INC.; EMPIRE ELECTRIC ASSOCIATION, INC.; CITY OF
DELTA, COLORADO; UNION CARBIDE CORPORATION;
WESTERN SLOPE ENERGY RESEARCH CENTER;
WESTERN COLORADO CONGRESS; SHELL OIL
COMPANY; SAN MIGUEL POWER ASSOCIATION, INC.;
GUNNISON COUNTY ELECTRIC ASSOCIATION, INC.; LA
PLATA ELECTRIC ASSOCIATION, INC.; and SOUTHWEST
[sic) COLORADO POWER ASSOCIATION,
Intervenors.
This matter coming on for hearing this 12th day of March,
1985, and the Court receiving argument of counsel, being
advised in the parties’ briefs, reviewing the record, and being
otherwise advised in the premiscs, hereby enters the following
order:
83 CV 218
I. HI RY
Colorado-Ute Electric Association, Inc. (hereinafter referred
to as Colorado-Ute) generates and transmits electrical power on
a wholesale basis to fourteen member electrical cooperatives
A-73
(hereinafter referred to as Co-ops), which in tum, sell the
electrical power on a retail basis to electrical consumers. The
Co-ops are consumer-owned and also have representatives on
the Board of Directors of Colorado-Ute, which is a non-profit
corporation.
Colorado-Ute filed Advice Letter Number 45 with the
Public Utilities Commission (hereinafter referred to as the
Commission or PUC) on December 15, 1981, to increase its
revenue by approximately 12.157%. At this time, Colorado-
Ute’s pricing rate to its fourteen member Co-ops was on a flat
rate, that is, a flat rate per kilo-watt [sic] hours used. This
method of charging had previously been approved by the PUC
on February 24, 1981, in Decision No. C81-373. No member
co-op is charged under a demand-energy rate. As a result of
Advice Letter Number 45, the PUC instituted Case No. 6076
and set the matter for hearing.
The hearing was held over several days in October and
November of 1982, and none of Colorado-Ute’s member Co-
ops complained to the PUC about the rate increase or the
pricing rate. As a result of the hearing, the PUC granted the
request for the increase in revenue but required Colorado-Ute
to change from charging its member Co-ops on a flat rate to
requiring Colorado-Ute to institute what was called a season-
ably-differentiated demand-energy rate. As a result of the
hearings in Case No. 6076, the PUC issued Decision No. C83-
1176, dated July 26, 1983. A re-hearing was held and the
PUC issued Decision No. C83-1392 on September 7, 1983,
which denied the application for re-hearing by Colorado-Ute
and granted, in part, some of the requests filed by Exxon and
Arco. Applications for re-hearing were again filed, and by
Decision No. C83-1561, the Commission denied those applica-
tions.
A-74
On October 21, 1983, Colorado-Ute and the twelve mem-
ber Co-ops filed a petition for writ of ceniorari in the
Montrose District Court and also filed a motion for stay or
suspension of the PUC’s decisions. The motion for stay or
suspension of the Commission decisions was granted on
January 16, 1984, and a briefing schedule was then set forth
for the parties.
Il. GROUNDS FOR REVIEW
Colorado-Ute alleges that the Commission decisions
Outlined above are unlawful, arbitrary, capricious, unjust, un-
reasonable and abuse of discretion and violate their nights
under the Constitutions of the United States and the State of
Colorado and that the PUC has not regularly pursucd its
authority and has rendered decisions upon findings and
conclusions not in accordance with the law and the evidence of
record. Colorado-Ute and the member Co-ops make the
following assertions:
1. The Commission does not have jurisdiction to
investigate the filing of a tariff or schedule under C.R.S. 1973,
40-6-111(4) by a cooperative electric association where no
member or consumer of such cooperative or affected public
utility has filed a complaint, as required by Section 40-6-
111(4), which provides in part:
"Notwithstanding any other provision of law, no
cooperative electric association shall establish,
charge, or collect a discriminatory or preferen-
tial rate, charge, rule, or regulation which
would be violative of Section 40-3-106(1) or
Section 40-3-111. Upon complaint filed by any
member or customer of a cooperative clectric
A-75
association or by any affected public utility, the
Commission shall determine whether the rate,
charge, rule or regulation in question is contrary
to this section, Section 40-3-106(1), or Section
40-3-111."
C.R.S. 1973, 40-3-106 prohibits a public utility from making
any preferential or advantage or subjecting any corporation or
person to any prejudice or disadvantage. C.R.S. 1973, 40-3-
111 provides that whenever the PUC, after hearing, finds that
rates, charges, classifications, regulations or practices, etcetera,
are unjust, unreasonable, discriminatory, or preferential, or in
any way violate any provision of law or that they are insuffi-
cient, the Commission shall determine the just, reasonable or
sufficient rates, rules, regulations, etcetera, and may consider
any factors which influence an adequate supply of energy and
any factors which encourage energy conservation. This par-
ticular statute also allows the PUC, upon its own motion or
upon complaint, to investigate the matter and to establish new
rates, fares, tolls, rentals, charges, classifications rules, regula-
tions, contracts, practices, or schedules, in licu of the previous
existing matters.
Several statutes contained within the public utilities law
grant the PUC the authority and the power to conduct hearings
and investigations as to the propriety of rates, charges, clas-
sifications, etcetera, upon the filing of a complaint or on its
own motion. In contrast, this statute, 40-6-111(4)(a), permits
that authority only upon the filing of a complaint by any mem-
ber or customer of a cooperative electric association or by any
affected public utility. Subparagraph (4)(a) removes the power
of the PUC to suspend rates, fares, tolls, rentals, charges, clas-
sifications, practices, rules or regulations pending a hearing,
and does not provide that the PUC, of its own motion, may
A-76
hold such hearings. Even upon complaint, Subparagraph (4)(a)
limits the Commission's determination to whether or not the
rate, charge, rule or regulation in question is contrary to 40-6-
111, 40-3-106(1) or 40-3-111. Here we have a specific statu-
tory scheme set out by the legislature and the gencral rule is
set forth in State v. Dayhoff, et al, 609 P.2d 119 (Colo.
1980), in which the court stated:
“Finally, we adhere to the well-established rule
that where specific and general statutes conflict,
the provisions of the specific statute prevail
[citations omitted).”
While the legislature has enacted numerous general and specific
Statutory provisions relating to public utilities in general, 40-6-
111(4)(a) is a specific statutory provision relating to coopera-
tive electric associations, and must be followed. To hold
otherwise would be to create nonsense out of what appears to
the Court to be a very clear and unambiguous statute and to
defeat the obvious legislative intent of the Legislature. People
y. Meyers, 182 Colo. 21, 510 P.2d 430 (1973). The Coun
therefore finds that the PUC does not have the authority pur-
suant to C.R.S. 1973, 40-6-111 (4), without complaint as pro-
vided by statute, to change the rate design of an elective [sic]
cooperative such as Colorado-Ute.
2. Colorado-Ute argues that the PUC may not reject a
tariff by a cooperative electric association and direct the coop-
erative to file a new tariff or schedule without finding that the
original tariff or schedule was unjust, unreasonable, discrimina-
tory, preferential or otherwise in violation of the law, and
without further finding that the new tariff or schedule ordered
by the Commission is just, reasonable, non-discriminatory, non-
preferential, or not unlawful.
A-77
This particular point was addressed in Decisie~ *‘o. C83-
1392 at Page 3. This was the re-hearing order in Case No.
6076 which essentially denied the petitioner's application for
re-hearing and affirmed its previous order in Case No. 6076,
that is, its Decision No. C83-1176. At Page 3 of that Deci-
sion, the PUC rejected Colorado-Ute’s argument that the PUC
was required to find that Colorado-Ute's rate schedules were
unjust and unreasonable and that the rates ordered by the PUC
were just and reasonable, relying on the case of Aspen _Air-
ways, Inc, v. Public Utilities Commission, 169 Colo. 56, 453
P.2d 789 (1969) holding that the findings of the Commission
need not take any particular form and that certain findings of
the Commission may be implied. The Commission thereupon
made the following finding:
. since, in Colorado-Ute’s view, the record
does not contain any competent evidence that a
unit pricing rate, which charges everyone the
same cents per kilo-watt [sic] hour, is unjust,
unreasonable, discriminatory, preferential, or in
violation of the law, we shall nonetheless ex-
plicitly state that Colorado-Ute'’s rate structure
is in fact unjust, unreasonable, discriminatory,
and preferential, and that its unit pricing rate is
not cost tracking for the reasons sect forth in
Decision No. C83-1176. By the same token,
we explicitly find the rate schedule proposed by
the staff of the Commission, as a result of iis
cost-of-service study, being a demand-energy
rate with seasonally differentiated demand
charges for summer and winter and an annual-
ized energy charge on a uniform kwh basis, is
more nearly cost tracking than that proposed by
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Colorado-Ute, and accordingly, the staff rate is,
in fact, just and reasonable and should be
adopted."
The whole tenor of Decision No. C83-1176 as it relates to rate
design is one of personal preference on the part of the Com-
mission as opposed to specific findings of fact which would
support a new rate design. The essence of the PUC findings is
that the seasonally differentiated demand-energy rate, based on
the PUC staff's cost-of-service study, is more cost tracking,
provides an accurate price signal, and will encourage a more
effective resource management plan. The apparent basis for
requiring the implementation of a demand-energy rate is found
at Page 16 of Decision No. C83-1176 wherein the Commission
found that the Colorado-Ute members exhibit a high coinci-
dence of demand with the Colorado-Ute system peak and there-
fore demand-energy rates are appropriate for Colorado-Ute.
The Commission found that because the total cost per unit of
Output vanes monthly, that this condition resulted in an un-
economic under-utilization of capacity.
In coming to this conclusion, the Commission ignored the
evidence presented by Colorado-Ute and the member Co-ops
that a combination of a flat energy rate charge and proper
resource management will have the same effect. The Commis-
sion did not accept the notion that the overall economic condi-
tions, such as the recession and surplus energy in the region
has made Colorado-Ute less able to sell energy to non-mem-
bers so as to more effectively use its plants, however, the
Commission stated that these factors were impondcrable at best.
However, this ignores C.R.S. 1973, 40-3-111(1) which provides
in part:
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. . . any may consider any factors which influ-
ence an adequate supply of energy and any
factors which encourage energy conservation."
Strangely, the Commission, at Page 22 of its Decision in C83-
1176 found that the use of the demand-energy rate, if applied
in conjunction with an effective resource management plan,
would produce essentially a flat rate, the very rate Colorado-
Ute seeks to employ. The Commission further stated that this
rate form would have the additional advantage of rate stability
which is a regulatory objective.
There does not appear to be any evidence to support that
conclusion, and on the contrary, it is difficult to conceive a
more stable rate than the flat energy rate currently used by
Colorado-Ute. Since the result of the proposed energy-demand
rate sought to be instituted by the Commission, in conjunction
with an effective resource management plan, is essentially a
flat rate, it is extremely difficult to see why the flat energy
rate currently employed by Colorado-Ute, in conjunction with
an effective resource management plan, needs to be changed.
Based upon the Commission’s findings contained in Decision
No. C83-1176, it is clear that the Commission has simply
preferred its own rate design over that employed by Colorado-
Ute, and as such, should be set aside. The Colorado Supreme
Court in Public Utilities Commission v lorado_Motorw
Inc., 165 Colo. 1, 437 P.2d 44 (1968) stated that:
"There is no question, as an abstract proposition
of law, that the Commission has broad constitu-
tional and statutory authority. However, the
breadth of that authority is to be tested by the
Statutes themselves and not by the unbridled
whim of the Commission. The Commission is
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a creature of statute. Both the power and the
scope of its authority and its procedures are
necessarily controlled by the act upon which it
relies."
C.R.S. 1973, 40-6-111(4), specifically provides:
"The Commission shall determine whether the
rate, charge, rule, or regulation in question is
contrary to this section, Section 40-4-106(1) or
Section 40-3-111."
The Commission has made no such findings in any of its
decisions regarding Case No. 6076, and a review of the record
indicates that no such findings can reasonably be made. The
bootstrap attempt to do so in Decision No. C83-1392 makes no
additional findings than those contained in the original Decision
No. C83-1176. Nothing in the record supports the boldfaced
conclusions stated by the Commission on Page 3 in Decision
No. C83-1392 that the flat energy rate currently charged by
Colorado-Ute is discriminatory, preferential, creates an advan-
tage, or otherwise violates 40-3-106(1) or 40-3-111. Further, it
appears that the requirement by the Commission that Colo-
rado-Ute implement a new rate design was of its own motion,
based on staff recommendations without the filing of a com-
plaint by any member or customer of a cooperative electric
association or by any affected public utility. The Court does
agree with the Commission that Colorado-Ute can hardly claim
Surprise after going through several days of hearing [sic] when
it appears from the record that the question of rate design was
the primary concern, however, that does not alter the statutory
requirement that a complaint must be filed. Therefore, the
Court finds that the Commission improperly considered the rate
design which was not requested by Advice Letter No. 45.
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Findings 1 and 5 on Page 22 of Decision C83-1176 are the
closest thing to findings which would support the Commis-
sion’s decision pursuant to 40-3-106(1), being that Colorado-
Ute’s costs are not uniform at all levels of output, and that the
demand-energy rate more directly tracks cost than a flat rate.
However, there is no finding that this is an unreasonable dif-
ference as to rates or charges between localities or class of
service. As outlined earlier, based on the Commission’s own
findings, either rate design coupled with an effective resource
management plan will produce essentially the same result. The
record does not support the contention that any such findings
pursuant to 40-3-106, 40-3-111 or 40-6-111 can be made, and
the Commission made no such findings.
The Court does agree with the Commission in Decision
No. C83-1392 that certain findings of the Commission may be
implied, and the fact that the Commission did not specifically
determine that the demand-energy rate ordered by the Commis-
sion was just, reasonable or sufficient is of no particular conse-
quence. The whole tenor of Decision No. C83-1176, is that
the Commission felt that its proposed rate design was just,
reasonable and sufficient, however, these findings, both implied
and stated, are conclusive in nature and are not supported by
any factual findings based on the record.
Colorado-Ute argues that, while the Commission found that
the revenue increase sought by Colorado-Ute was reasonable
and should be granted, that the new rate design did not take
into consideration whether or not they would be sufficient
pursuant to 40-3-111. The rate design and rate proposed by
the Commission failed to take into account the uncontroverted
testimony that the proposed rate would raise revenue when
Colorado-Ute’s monthly costs are at its lowest point and lower
the rates when its monthly costs are highest. The Commission
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found that the TIER of 1.31 would be reasovzable and that ‘he
proposed rate design and rate would provide Colorado-Ute with
a margin of safety in meeting its indenture requirements, how-
ever, there is nothing in the record to indicate how this would
be done. The expectation, of course, is that this would aver-
age out over a calendar year, but does not take into account
the financial difficulties which apparently would be encountered
by Colorado-Ute in the summertime, resulting in increased
short-term borrowing by Colorado-Ute. This also did not take
into account the increased costs associated with a changed
billing procedure and acquisition of equipment and meters
necessary to implement the changeover. There is no indica-
tion, except conjecture, that such rates would be sufficient and
would allow Colorado-Ute to achieve the TIER level.
3. Colorado-Ute next argues that the Commission may not
disregard the convenience and preference of Colorado-Ute and
its member Co-ops in designing rates for electrical service by
substituting the Commission’s own rate design.
In this case, Colorado-Ute by its Advice Letter No. 45 was
not seeking to change its existing rate design, but merely seek-
ing an increase in that rate. The record is clear that Colorado-
Ute and all member co-ops which provided testimony before
the Commission supported a unit pricing rate, that is, the flat
energy rate. People’s National Division v. Publi iliti
Commission, 193 Colo. 421, 567 P.2d 377 (1977) notes that
unless there is a substantial showing that rate payers are preju-
diced materially by the managerial options in the area of capi-
tal financing, such matters are within the realm of sound man-
agement discretion of the public utility. That case dealt with
Capital financing as opposed to rate design, however, the prin-
ciple remains the same. Although an old case, this principle
was also followed in Refining Co. v Public Utilities Commis-
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sion, 68 Colo. 137 (1920), determined that the cancelling of an
existing rate in a contract could only be done if the Commis-
sion determined that the contract rate was detrimental and
injuriously affected the public welfare. That case requires the
Commission to determine that the rate is so unreasonable as to
be detrimental to the public interests before the Commission
may establish the new rate. Even in this case, the court was
talking about the rate as opposed to a new rate design. Also
see 73B C.J.S., Public Utilities, § 19. There is no evidence of
a substantial showing that the rate payers are being materially
prejudiced by the unit pricing rate and apart from the staff, as
Outlined earlier, only the intervenors such as Union Carbide
and Exxon, which would benefit from the new rate design,
opposed the unit pricing rate.
The Commission ignored substantial testimony in the record
by the member Co-ops in which they testified that if Colorado-
Ute were forced to charge them on an energy-demand rate,
they in tum would have to charge their consumers on the same
basis. Not only would this necessitate a change in billing and
metering by Colorado-Ute, and therefore increase the cost, but
the same eifect would apply to the member Co-ops and the
end use consumer. This, contrasted against the questionable
benefits of going to an energy-demand rate does not support
the Commission’s findings.
The Court finds that the Commission’s action in changing
Colorado-Ute’s rate design from a flat energy rate to a season-
ally adjusted demand-energy rate is an unwarranted intrusion
into the management prerogatives and discretion of Colorado-
Ute. The Commission itself in Decision No. C81-373, Febru-
ary 24, 1981, approved a flat energy rate for Colorado-Ute.
Page 4 of that Decision recites several findings made by the
Commission in this regard and the Commission in that Deci-
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sion notes that the costs to Colorado-Ute to generate power are
basically constant and uniform, and that a flat energy rate
would recover both the demand cost and the energy cost on
the basis of usage. The Court can find no findings in
Decision No. C83-1176 which vitiates these findings previously
made by the Commission, and although the Commission has
general authority to correct managerial abuses of discretion
which adversely or injuriously affect the public interest, no
such findings have been made. As stated in Public Service
Co. v. Public Utilities Commission, 653 P.2d 1117 (Colo.
1982), the management of the public utility belongs to the
company. And where, as here, there is no evidence or find-
ings of abuse, the Court can only conclude that the Commis-
sion is substituting its own personal preference in managerial
matters and has exceeded its statutory authority.
Based upon the record, it is clear that the Commission
totally ignored the evidence and the testimony presented by
Colorado-Ute and the member Co-ops conceming the flat ener-
gy rate. The Court concurs with Mr. James at Page 13 of his
brief wherein it is noted that Colorado-Ute and the member
Co-ops have had an experience factor with both a flat energy
rate structure and a demand-energy rate structure and all, with-
Out exception, from a managerial point of view, favor the flat
energy rate. This is particularly highlighted by the fact that,
while Colorado-Ute only wholesales power to the fourteen
member Co-ops, the member Co-ops retail this electrical power
to the use of the consumer. Their testimony, particularly as it
relates to an understandable pricing signal and general wants of
the public, cannot be minimized. This is particularly true since
Colorado-Ute and the fourteen member Co-ops are all non-
profit, consumer-owned, cooperatives. It is extremely difficult
to ascertain any improper motivation on the part of their col-
lective managements which would cause them to prefer a flat
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arose,
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A-85
energy rate. Certainly the profit motive does not exist, and it
is difficult to see any irresponsibility in their wanting to keep
the flat energy rate.
4. Colorado-Ute next argues that its right to due process
under the Fourteenth Amendment to the United States Constitu-
tion and under Article II, § 25 of the Colorado Constitution,
was violated by admitting testimony based on the WASP-82
computer analysis, and that the Commission violated C.R.S.
1973, 24-72-304 (The Colorado Open Records Act), in refusing
to provide Colorado-Ute with a copy of the WASP-82 com-
puter program.
The Court rejects this argument advanced by Colorado-Ute.
Hearings in this case were held before the Commission on
seven separate days between October 6, 1982, and ending
November 16, 1982. While Colorado-Ute is entitled to due
process as set forth in Mountain States T. and T. Co. v. De-
partment of Labor, 184 Colo. 334, 520 P.2d 586 (1974), a
review of the record discloses that Colorado-Ute did not re-
ceive information on the WASP-82 analysis and did sponsor
testimony as a result thereof. This matter was discussed at
length at the hearing date on October 26, 1982, and again on
November 15, 1982. Colorado-Ute erroneously stood on their
objection and did not cross-examine staff witness Mr. Wen-
dling, and did so at their own peril. Based upon the applica-
tion for re-hearing, the Commission in its Decision No. 1392
addressed this issue on Pages 3 and 4 of that Decision, and a
review of the record in that regard clearly substantiates the
Commission in that regard. The Court therefore finds that the
Commission neither violated the Colorado Open Records Act
nor Colorado-Ute’s right to due process under the Fourteenth
Amendment to the U.S. Constitution or Article II, § 25 of the
Colorado Constitution.
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5. The record does not support the conclusions reached by
the PUC as to the applicability of the demand-energy rate to
the Colorado-Ute system.
The Commission relied heavily upon Exhibit 94 in an
attempt to show a high coincidence between the system’s peaks
and the members’ peaks, however, that Exhibit does not appear
to accurately track all of the data available to determine coin-
cidence of peaks. Page 1 of that Exhibit, listing the date and
time of occurrence of member system peaks, together with the
Colorado-Ute system peak "date hour", shows that the peaks
are not nearly as coincident as believed by the Commission. It
appears from the testimony in the record that the applicability
of the demand-energy rate to the Colorado-Ute system is only
appropriate if the peak demands are highly coincident. Further,
the testimony indicated that the demand energy rate acts as a
functional surrogate for time-of-day rates, and that time-of-day
rates are not relevant at this point in time for the Colorado-Ute
electric system. In shor, there does not appear to be sufficient
competent evidence for the Commission to conclude that either
the demand-energy rate is most appropriate for Colorado-Ute
because of the high degree of coincidence of peaks, nor that
the demand energy rate is the most cost tracking rate available
for Colorado-Ute.
Ill. NCLUSION
WHEREFORE, based upon the foregoing, the Court hereby
directs that the order of the Commission in Decision No. C83-
1176 requiring Colorado-Ute Electric Association, Inc. to file
rates and tariffs reflecting the rates set forth in Appendix B of
said order is hereby set aside and is of no force and effect.
Paragraph 3 of said order is hereby affirmed, and Colorado-Ute
Electric Association shall submit to the Commission a feasi-
bility study of a load research program as contained in the
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Commission’s order. Further, the suspending bond filed by
Colorado-Ute in the amount of $500,000.00 is hereby
discharged and released.
84 CV 7
I. HISTORY
This case, 84 CV 7, was consolidated with Case No. 83
CV 218, and was docketed in the Montrose District Court on
January 12, 1984. Atlantic Richfield Co. (hereinafier referred
to as ARCO), and Exxon Corporation (hereinafter referred to
as Exxon) had filed a complaint seeking judicial review of the
Commission’s decision in Case No. 6076. A motion to dis-
miss the petitioners’ complaint was filed by several of the
intervenors and by Colorado-Ute, which motions were denied
on January 4, 1984. Because of the similarity of parties, and
because both of these cases revolved around Case No. 6076
before the Commission, venue in Case No. 84 CV 7 was trans-
ferred to the Montrose District Court and then consolidated
with 83 CV 218. The history of 83 CV 218 and 84 CV 7 are
therefore identical, and the only issue in 84 CV 7 relates to
ARCO’s and Exxon’s disagreement with the Commission’s
decision to shift substantial demand costs into the energy por-
tion of the demand-energy rate required by the Commission
and that such shift was contrary to the staff’s cost-of-service
study, which is Exhibit 84 of the record.
Il. GROUNDS FOR REVIEW
1. ARCO and Exxon argue that the Commission’s deci-
sion to classify certain demand costs as energy costs is not
supported by substantial evidence in the record.
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In particular, the petitioners argue that the Commission's
shift of certain demand related cosis to the energy component
of the seasonably adjusted energy-demand rate proposed by the
staff and required by the Commission to be implemented as sct
forth in Appendix B of Decision No. C83-1176 is not sup-
ported by the evidence and the Commission's findings. Ac-
cording to the staffs cost-of-service study, approximatcly 56%
of Colorado-Ute’s costs are fixed capital costs, that is, expenses
associated with the generation and transmission of clectric
power, and 44% of the costs are operational and mainicnance
expenses, primarily fucl costs. Assuming that the demand-
energy rate proposed by the staff and adopted by the Commis-
sion is implemented, then that rate includes a demand charge
to recover fixed capital cosis and an energy charge to recover
operational and maintenance expenses, the idca being that a
separate energy charge and a separate demand charge most
accurately tracks the actual cost of electrical service for any
particular user.
In its decision, the Commission allocated $24,084,126.00 of
the average demand revenue to the annualized cnergy charge,
which, to a high energy user such as the petitioners, results in
increased cicctnical costs.
Based upon the testimony and recommendations of Mr.
Wendling, a staff witness, the Commission shificd pan of
Colorado-Ute’s demand related costs to the energy component
of their rate thereby assigning 32% of the cost to the demand
charge and 68% to the energy charge, in contrast to the cost of
service study which had determined that 56% of the costs were
demand related and 44% energy related. The record is not
clear on what basis this shift was made, and appears to be an
attempt to devise a kind of “time-of-day" rate. The witness
rrr em oe we
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acknowledged that such a rate could not properly be calculated
without further data.
While exactitude and unerroring precision is not required,
guesswork and personal preference is not allowed. The record
is clear that there was no technical literature to support this
classification and that the witness had conducted no research or
studies which would support this misclassification. This is
particularly true when or. notes that such misclassification is
contrary to the cost-of-service study resulting in a reduction of
the demand related costs from 56% to 32% and an increase of
the energy related costs from 44% to 68%. As noted on Page
14 of petitioners’ brief, the existence of “some evidence and
some particulars” is insufficient if the evidence as a whole
does not support the Commission's decision. Lassner v. Civil
Service Commission, 177 Colo. 257, 259, 493 P.2d 1087, 1089
(1972) (emphasis in original). This is particularly true since
the only evidence apart from the conjecture and personal pre-
ference of Mr. Wendling is as it relates to the allocation of
costs to the demand in energy components of the demand-
energy rate, consists of the staff's cost-of-service study. There-
fore, the Coun finds that the Commission's decision in this
regard should be set aside and the Commission be directed to
adopt the cost-of-service study rates set forth in Exhibit 84.
2. The petitioners argue that the Commission’s misclas-
sification of demand costs as energy costs is arbitrary and
Capricious.
Any part of the Commission’s order which appears to be a
matter of personal preference or administrative convenience,
and without the necessary investigation and research data, may
be considered arbitrary and capricious and therefore invalid.
i Vv mmission, 197 Colo.
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119, 590 P.2d 502 (1979). The Court in that case held that
there was no study done which would support the order of the
Commission, however, in this case, there was a study done, the
staff's cost-of-service study, however the basis for the misclas-
sification, contrary to the study, was not founded upon any
administrative or technical literature nor upon any research or
Studies to support the shift. As such, the Court must conclude
that the decision of the Commission to reclassify the
$24,084.126.00 [sic] of the demand costs to the energy costs
was arbitrary and capricious and without sufficient study and
foundation. Further, as noted on Page 22 of the petitioners’
bricf, the evidence indicates that such a study as proposed by
Mr. Wendling was feasible, but like the City of Montrose case,
supra. was not done.
3. The petitioners argue that the Commission failed to
make adequate findings of fact to support its misclassification
and shift of certain demand costs as energy costs.
The petitioners contend that the findings of the Commis-
sion must be sufficiently clear as to enable the reviewing coun
to engage in a meaningful review of the Commission’s deci-
sion. A review of the record shows that the primary basis for
this shift of demand costs inconsistent with the cost-of-service
study was that Colorado-Ute utilized coal-fired power plants
and therefore required a greater investment of capital than that
generally needed for oil or gas plants, however, there was no
finding nor evidence which suggested how the shift of the
$24,084,126.00 corresponded to that premise.
Since one of the primary purposes of the public utilities
law is to insure that the rates do not establish an unreasonable
difference between classes of customers and that the ratc
payers be accorded equal treatment, it is clear that this shift of
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demand costs to energy costs, contrary of the cost-of-service
study, results in an unjust and discriminatory rate as it relates
to the petitioners. The practical and end result of this shift, of
course, is that the petitioners, and users like them, will pay
considerably more for their electrical power and is therefore a
preferential rate forbidden by law as set forth in C.R.S. 1973,
40-3-102 and 40-3-106. As pointed out on Pages 30 through
33 of the petitioners’ brief, the Commission's proposed rate
established a preference in that the winter customers pay rates
below the actual cost of service to them (the record shows that
Colorado-Ute is a winter peaking system) and that summer
users pay higher rates than the actual cost-of-service and there-
fore in effect subsidizes the preferential rate for winter users.
This preference is eliminated by requiring the Commission to
adopt the rates based upon the staff's cost-of-service study.
Electric customers such as the petitioners, are constant and
consistent users of electrical power, and are high-load consum-
ers. That is, their use of electrical energy is fairly constant
and is not significantly increased or decreased by summer or
winter conditions. This means that the higher the load the
lower the unit cost of electrical energy. Therefore, the mis-
classification of demand costs as energy costs significantly
increase the costs of electrical power to such consumers. Since
the rates should approximate the actual cost of service, the
PUC rate is discriminatory in nature and in effect requires a
high load consumer to subsidize a low load consumer. Moun-
197 Colo. 56, 590 P.2d 495 (1979). While exact precision is
not required as noted earlier, the enormity of this shift cannot
be justified.
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III. CONCLUSION
WHEREFORE, based upon the foregoing, the Court hereby
sets aside that portion of the Commission’s order in Decision
No. C83-1176, Case No. 6076, which allocates $24,084,126.00
of the demand cosis to the energy costs, and, if the Court’s
order in 83 CV 218 is set, hereby directs the Commission to
adopt rates based upon the staff’s cost-of-service study set forth
in Exhibit 84 of the record. For the record and for clarifica-
tion, 11 of the intervenors had filed a motion to dismiss in the
Denver District Court in 84 CV 7, and the Court has not yet
formerly [sic] denied Colorado Ute’s [sic] motion to dismiss in
that case. By this order, the Court hereby denies Colorado-
Ute’s motion to dismiss.
DONE IN OPEN COURT this 7th day of May, 1986.
/s/ Richard J. Brown
JUDGE
xc: All interested parties
J
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.