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STATE OF MISSISSIPPI, EX REL. EDWIN LLOYD PITTMAN, ATTORNEY GENERAL, AND MISSISSIPPI LEGAL SERVICES COALITION, AND SOUTHEAST MISSISSIPPI LEGAL SERVICES CORP. v. MISSISSIPPI PUBLIC SERVICE COMMISSION AND MISSISSIPPI POWER COMPANY

DECEMBER 02, 1987

STATE OF MISSISSIPPI, EX REL. EDWIN LLOYD PITTMAN, ATTORNEY GENERAL, AND MISSISSIPPI LEGAL SERVICES COALITION, AND SOUTHEAST MISSISSIPPI LEGAL SERVICES CORP.
v.
MISSISSIPPI PUBLIC SERVICE COMMISSION AND MISSISSIPPI POWER COMPANY



EN BANC.

SULLIVAN, JUSTICE, FOR THE COURT:

In September, 1985, the Mississippi Power Company (the Company) interrupted service to twenty-three (23) counties in Southeast Mississippi when Hurricane" Elena "converged on the Gulf Coast area. On October 28, 1985, the Company filed with the Public Service Commission (the Commission) a" notice of change in rates "rather than" a notice of intent to change rates "because, contends the Company, its filing of $16,063,986.00 did not involve any substantial revenue adjustment or constitute a major change. The Company contends that its rules and regulations do not require it to file that data otherwise required by Mississippi Code Annotated, 77-3-37 (2) (Supp. 1986). The purpose of the rate increase was to recover losses allegedly resulting from Hurricane Elena.

On November 6, 1985, the Attorney General filed notice of intervention to protect the interest of the ratepayers and on November 25, 1986, the Mississippi Legal Services Coalition (MLSC) and Southeast Mississippi Legal Services Corporation (SMLSC) intervened for affected ratepaying clients and moved to dismiss the rate increase. Nothing was ever filed in opposition to these motions nor did the

 Commission hold a hearing on them. On November 27, 1985, the Commission gave notice to the public stating that the notice filed by the Company was returnable to the January 7, 1986, term. The Commission's notice stated that" If protest, answer or other appropriate pleading is on file in response to the application, the Commission will fix a date during the term for the trial of this cause. "

 Subsequent to preliminary discovery, but prior to any hearing, the Commission granted a temporary increase of $9,994,135.00 by order on December 20, 1985. This amount was to be amortized over a period not to exceed nineteen (19) months. This increase excluded certain labor and transportation costs claimed by the Company which the Commission found would have been expended any way. Also, the Commission disallowed fuel charges for the period of time the Company was in fact not in service. Also deducted from the estimated damages were the insurance proceeds available to the Company which it neglected to deduct. The Commission further approved a permanent $536,135.00 increase in the Company's annual jurisdictional contribution to its storm damage reserve account.

 On December 24, 1985, the Commission issued an amended order which established a ceiling of $10,928,400.00 on the total permissible accrual to the utility's storm damage reserve.

 The Commission's final order states that the Company filed for" a routine change in rates "under sub-sections (1) and (10) of Mississippi Code Annotated, 77-3-37 (Supp. 1986), which gave the Commission authority to grant a rate increase within thirty (30) days without a hearing since" no major revenue changes were involved. "The Commission allowed the Company to recover past" storm related expenses "of $8,793,422.00 and $1,200,713.00 to recoup profits" lost "because the utility was unable to sell electricity during and immediately after Hurricane Elena.

 On January 17, 1986, the Attorney General petitioned the Commission for a rehearing on the grounds that the Commission had exceeded its authority in granting a rate increase to a utility that had filed no notice of intent, had not shown any good cause why a hearing should not be held, nor why statutorily mandated documentation should not be required. The Attorney General further argued that there was no precedent for granting a rate increase to recover lost revenues for power not even delivered as a service to ratepayers. The petition further suggests that the increase in storm damage reserves was based upon inadequate and

 uncorroborated allegations by the Company. SMLSC and MLSC also sought a rehearing, requesting reconsideration and clarification of the Commission's order pursuant to Mississippi Code Annotated, 77-3-65 (Supp. 1986).

 On February 14, 1986, the rehearing was denied by the Commission. Commissioner Snyder filed a separate dissent claiming that" . . . a public hearing should have been held. "In the order denying the rehearing, the Commission abandoned its prior conclusion that the Company had filed a" routine rate increase "and determined that the filing could best be handled in a" miscellaneous proceeding "under the authority of Mississippi Code Annotated, 77-3-47 (Supp. 1985).

 I.

 WAS THE PUBLIC SERVICE COMMISSION ORDER CONTRARY TO OR IN EXCESS OF, ITS STATUTORY AUTHORITY?

 The Mississippi Public Service Commission is accorded its power and jurisdiction under Mississippi Code Annotated, 77-3-5 (1972), thus having exclusive authority over retail rates for public utilities in Mississippi. State of Mississippi, ex rel Edwin Lloyd Pittman, Attorney General, et al v. Mississippi Public Service Commission, 506 So. 2d 978 (Miss. 1987); Capital Electric Power Association v. Mississippi Power & Light Co., 216 So. 2d 429, 430 (Miss. 1968). The Commission's authority is also derived from Mississippi Code Annotated, 77-3-45 (Supp. 1986), which was adopted as part of the Public Utility Act of 1983, authorizing the Commission to develop reasonable rules and regulations, therefore enabling it to carry out the provisions of the Act.

 While broad authority and discretion has been promulgated in favor of the Commission that power is not unbridled and the rules and regulations which it has promulgated to aid in the fullfillment of its duties under the chapter must not be utilized in an arbitrary or capricious manner," It is clear under Mississippi law that an administrative agency cannot exceed the scope of authority which was granted to it by the legislature. (citations omitted). "Mississippi Board of Nursing v. Belk, 481 So. 2d 826, 829 (Miss. 1985). Further, the Commission's authority to interpret the statutes under which it operates may not supersede the requirements thereof, nor may it conflict with pertinent rules of law. Capital Electric Power Association v. Mississippi Power & Light Co., 240 Miss. 139, 153, 125 So. 2d 739, 744 (1961).

 The Commission and the Company vehemently argue that no evidentiary hearing was needed or required by statute in the instant circumstance. Indeed, it seems that this question has never before presented itself before this Court and apparently, although the appellees argue otherwise, if in the interest of the ratepayers a rate increase is contested the Commission has heretofore granted a hearing.

 This necessarily leads to a review of the language of the statute relied upon by all parties while keeping in mind that" an administrative agency cannot be vested with arbitrary and uncontrolled discretion. "Howell v. State, 300 So. 2d 774, 779 (Miss. 1974). Further, the Commission's rulings may not supersede the requirements of the statute. Capital Electric, supra. The Company originally maintained that its filing was for a routine rate change made pursuant to Section 77-3-37 (1), therefore, not subjecting it to the listed standard filing requirements of Section 77-3-37 (2). The Commission found that the rate increase was neither a routine one nor a major one [as defined in Section 77-3-37 (10)].

 The Commission, in its Order denying a rehearing, explains in detail why it perceives its actions appropriate for resolution of this matter, referring to the instant rate proceeding as a" miscellaneous "one. In so finding the Commission relied upon what it refers to as the" catch all "provision of Section 77-3-47, Mississippi Code Annotated (Supp. 1986), entitled" Hearings by Commission. "The pertinent paragraph reads:

 The Commission may, in addition to the hearings specifically provided for by this chapter, conduct such other hearings as may be required in the administration of the powers and duties conferred upon it by this title.

 The Commission cites as an example of such a proceeding those authorized by Mississippi Code Annotated, Section 77-3-41 (Supp. 1986), which provides for emergency, temporary rate changes. The second paragraph of that code section reads as follows:

 The commission shall have power, when deemed by it necessary to prevent injury to the business or interest of the people or any public utility of this state in case of any emergency, to permit any public utility to alter, amend or suspend temporarily any existing rates, schedules and orders relating to or affecting any public utility

 or part of any public utility in this state except as provided in section 77-3-42.

 This explanation somewhat begs the question and the attorney general's office should at least have an opportunity to cross-examine the Company prior to the implementation of such a rate increase. Further, a great deal of the rate increase is permanent, subject to a CAP, rather than temporary.

 Mississippi Code Annotated, Section 77-3-37 (1), (2), (5), (9), and (10), (Supp. 1985), as well as the Commission's own rules, which track the statute, are relied upon in support of the attorney general's contention that proper documentation was not filed by the Company. Those sections, in pertinent part, are as follows:

 (1) No public utility shall make any change in any rate which has been duly established under this chapter, except as provided in this chapter. A public utility seeking a change in any rate or rates shall file with the secretary of the commission a notice of intent to change rates. Routine changes in rates and schedules that do not involve any substantial revenue adjustment may go into effect after thirty (30) days notice to the commission or after such shorter period of notice as the commission, for good cause shown, may allow. In all other cases, the notice of intent shall contain a statement of the changes proposed to be made in the rates then in force, the new level of revenues sought, the reasons for the proposed changes and the date proposed for such changes to become effective, which date shall not be less than thirty (30) days after the date of filing. The proposed changes may be shown by filing new schedules, by plainly indicating the changes upon schedules filed and in force at the time and kept open to public inspection or by such other manner as will clearly indicate the rates to be changed and the rates proposed. All direct testimony, exhibits and other information which any utility will rely upon in support of the proposed changes shall be filed concurrently with the filing of the notice of intent. Data, documentation and exhibits shall comply with the standard requirement list established by the commission, and such other data as the commission shall request shall be supplied by such utility.

 (2) The commission shall establish by rule and regulation a standard requirement list of documentation to be filed with or to be included in every notice of intent, which standard requirement list in each case shall include: (See statute for list).

 * * * *

 (5) The notice of intent shall state the test period adopted by the public utility in support of its proposed rate changes, which may be a twelve-month period beginning with the proposed effective date of the rates proposed in the notice. For the purpose of expediting the regulatory process, all public utilities shall keep the commission, through the ...


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