Opinion
Docket Nos. 97858, 97860.
Decided September 21, 1988.
Hill, Lewis, Adams, Goodrich Tait (by Roderick S. Coy and Timothy P. Collins), for General Motors Corporation in 97858.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, and Hugh B. Anderson, Assistant Attorney General, for Attorney General in 97860.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, and Don L. Keskey, Henry J. Boynton, Elizabeth R. Schwartz, and James A. Ault, Assistant Attorneys General, for Public Service Commission in 97858, 97860.
David A. Mikelonis, and Loomis, Ewert, Ederer, Parsley, Davis Gotting (by George W. Loomis, Michael G. Oliva, and Ronald W. Bloomberg), for Consumers Power Company in 97860.
Plaintiffs, the Attorney General and General Motors Corporation, appeal as of right from a December 23, 1986, opinion and order of Ingham Circuit Judge Michael G. Harrison. That opinion and order affirmed a June 27, 1979, order of defendant Public Service Commission in PSC Docket No. U-5732. The PSC granted defendant Consumers Power Company a natural gas rate increase. Plaintiffs raise issues concerning whether Consumers' Marysville plant should have been included in the rate base. We affirm.
Consumers provides natural gas service to customers in Michigan. Consumers' Marysville plant produced synthetic natural gas from feedstocks (light hydrocarbon liquids). See Consumers Power Co v Federal Energy Administration, 413 F. Supp. 1007, 1015 (ED Mich, 1976), modified 413 F. Supp. 1024 (ED Mich, 1976). Consumers obtained the feedstocks through allocations granted by the United States Department of Energy. Consumers built the plant in the early 1970s when natural gas was scarce and deliveries of it were unpredictable. The plant was controversial because the synthetic natural gas which it produced was more expensive than gas which was obtained from other sources.
This case began on March 13, 1978, when Consumers applied for a gas rate increase. Hearings were held. The record was finally closed on September 27, 1978. In March, 1979, the Marysville plant stopped producing synthetic natural gas. In April, 1979, the Department of Energy cancelled the Marysville plant's feedstock allocation for the period ending June 30, 1979. However, Consumers still had a feedstock allocation application pending before the Department of Energy for the period beginning July 1, 1979.
On June 27, 1979, the PSC issued an order granting Consumers a $29,162,000 annual rate increase to correct a revenue deficiency of that amount. The lower court affirmed the rate increase. We note that these appeals are two of several from the "Marysville cases." The PSC reopened the ratemaking proceeding after Consumers notified it that the Marysville plant would be mothballed. On October 2, 1979, the PSC ordered an immediate rate reduction of $23,914,000 per year.
The PSC is given broad discretionary power to set just and reasonable rates for privately owned public utilities. It is specifically vested with authority to regulate the rates of gas utilities. Attorney General v PSC, 118 Mich. App. 311, 315-316; 324 N.W.2d 628 (1982), lv den 417 Mich. 1003 (1983). All rates fixed by the PSC are deemed prima facie lawful and reasonable. MCL 462.25; MSA 22.44; Attorney General v PSC No 1, 133 Mich. App. 719, 725; 349 N.W.2d 539 (1984), lv den 422 Mich. 910 (1985).
The party attacking a PSC order has the burden of showing by clear and satisfactory evidence that the order complained of is unlawful or unreasonable. MCL 462.26; MSA 22.45; Attorney General v PSC No 1, supra, p 725; The Detroit Edison Co v PSC, 127 Mich. App. 499, 507; 342 N.W.2d 273 (1983), lv den 419 Mich. 867 (1984). The standard of judicial review of a PSC decision is whether that decision is lawful and supported by competent, material, and substantial evidence on the whole record. Const 1963, art 6, § 28; Building Owners Managers Ass'n of Metropolitan Detroit v PSC, 131 Mich. App. 504, 516; 346 N.W.2d 581 (1984), aff'd 424 Mich. 494; 383 N.W.2d 72 (1986). The reviewing court is to give due deference to the PSC'S administrative expertise and is not to substitute its judgment for that of the commission. Id., p 517.
"On matters involving the exercise of good common sense and judgment only, the determination of the commission must be held to be final unless such determination in its application results in the establishment by `clear and convincing' proof of a rate so low as to be confiscatory or so high as to be oppressive. What return a public utility shall be entitled to earn upon its invested capital, and what items shall be considered as properly going to make up the sum total of that invested capital, are questions of fact for the determination of the commission, and their conclusions thereon, upon which the rate is based, are unassailable unless, as a necessary result, it can be affirmatively asserted that the resultant rate is unreasonable and unlawful.
"Between the point where a rate may be said to be so low as to be confiscatory and the point where it must be said to be so high as to be oppressive upon the public, there is a `twilight zone' within which the judgment of the commission may operate without judicial interference. Assume that the commission, in determining the amount of the capital invested, allows as an element of the sum an amount which the court, if charged with the initial duty of determination, might find to be excessive or inadequate; or, assume that the commission, in the exercise of its best judgment, permitted a rate of return upon the invested capital higher or lower than the court, under like circumstances, might believe to be proper — nevertheless, the court would not be warranted in interfering unless the rate, as established, was clearly unreasonable and unlawful." [ Michigan Bell Telephone Co v PSC, 332 Mich. 7, 26-27; 50 N.W.2d 826 (1952), quoting Detroit v Michigan Railroad Comm, 209 Mich. 395, 433-434; 177 N.W. 306 (1920).]
Plaintiffs claim that the lower court erred in affirming the PSC decision to include the Marysville plant in the rate base because the plant stopped producing synthetic natural gas in March, 1979, and was not useful. The lower court approached this issue by stating that it would not review the PSC decision from hindsight, but would determine whether the decision was lawful and reasonable when it was rendered. We agree. The PSC adopted the test period of July 31, 1976, to July 31, 1977, which all parties utilized. The PSC decision notes that all parties offered out-of-period adjustments so that the test period might reflect current conditions more accurately. When the PSC rendered its decision, the Marysville plant was not producing synthetic natural gas and apparently would not be needed for the next several years because natural gas was available from other sources. However, evidence indicated that the "supply bubble" would end, causing a future need for the Marysville plant to produce synthetic natural gas. A utility is entitled to a return on the value of the property which it employs for the convenience of the public. Michigan Bell Telephone Co, p 38. Plaintiffs have failed to carry their burden of showing by clear and satisfactory evidence that the PSC order was unlawful or unreasonable.
We turn to General Motors' claim that the lower court erred in affirming the PSC'S June 27, 1979, order because the PSC erroneously denied General Motors' motion to reopen the record to consider important new evidence that the Marysville plant was not used and useful. The PSC had ample evidence on these matters. General Motors has failed to convince us that the alleged new evidence was significant. General Motors argues that if the record had been reopened, then the PSC could have been presented with additional facts supporting its finding that the Marysville plant would not be needed for several years. General Motors agrees with this PSC finding. General Motors then argues that because there was no present need for the plant, it should not have been included in the rate base. As we discussed above, we reject this argument because of the projected future need for the Marysville plant.
Finally, we consider the Attorney General's claim that the lower court erred, in a February 6, 1986, order, by refusing to permit him to present additional evidence demonstrating that the Marysville plant had not been operated since March of 1979, would never be operated, and that Consumers owed its customers refunds. The lower court rejected evidence that the Attorney General offered in 1985, years after the record was closed and the PSC rendered its decision in this case. The evidence concerned matters which arose after the record was closed. The lower court did not abuse its discretion in rejecting the offer of evidence as untimely and inconsistent with the orderly review of administrative appeals.
Affirmed.