Great Lakes Steel Division of National Steel Corp. v. Public Service Commission

A. M. Bach, J. Plaintiffs, industrial energy customers, appeal from a decision of defendant Michigan Public Service Commission granting intervening defendant, The Detroit Edison Company, an interim rate increase in the form of a surcharge on electricity rates. On July 20, 1977, Edison filed an application with the commission for a permanent rate increase of $122.3 million and for a partial and immediate revenue increase of $69.9 million, as *697 provided by MCL 460.6a; MSA 22.13(6a). After conducting extensive hearings, the commission on February 17, 1978, allowed an interim revenue increase of $35 million. This interim rate hike, the commission found, would protect Edison from unreasonable and irreparable losses which would be sustained if Edison had to await disposition of its requests for a permanent increase. In this initial opinion, the commission declined to consider alterations in the rate structure to favor one group of consumers over others. The commission refused the motion of intervenor Michigan Council of Senior Citizens’ Organizations to exempt from any surcharge the first 500 kwh per month for residential customers. At the end of the opinion on rate design, the commission concluded simply and without explanation: "A uniform surcharge of .96 mills per kwh is appropriate for all classes affected, based on the revenue deficiency found herein.” On March 8, 1978, plaintiffs as industrial users filed an application for rehearing and attacked the commission’s method of applying the rate surcharge. Under the rate structure in effect at the time of the interim order, plaintiffs paid lower rates than did residential customers. Therefore, a flat surcharge of .96 mills per kwh meant that plaintiffs would be assuming a greater proportion of the rate increase than if the surcharge were a percentage increase of previous rates. Plaintiffs attacked the commission’s method of surcharge as lacking support in the record, a requirement of § 85 of the Administrative Procedures Act (APA). MCL 24.285; MSA 3.560(185). In response to plaintiffs’ application, the commission on April 10, 1978, denied rehearing. Al *698 though the commission’s staff had recommended that interim rate increases be spread on a percentage basis to each class of customers, the commission felt that rate design, especially for interim purposes, was a matter within its sole discretion, and that a surcharge per kwh was as equitable as any other interim design. The commission held that § 85 of the APA was not applicable to orders for partial and immediate relief and did not require specific findings and conclusions. But, in any event, the commission felt that the rate surcharge was based on substantial and material evidence in the record. On December 13, 1978, the Ingham County Circuit Court affirmed the commission and ruled specifically that § 85 of the APA did not apply to orders for partial and immediate relief because such orders were not "final”. During the pendency of the circuit court action, the commission issued on Edison’s request a final order for a permanent rate increase. Plaintiffs contend on appeal that § 85 of the APA does apply to interim rate increases and that the commission’s opinion in the present case does not conform to § 85 requirements. We agree. 1 Section 85 of the APA provides in part: "A final decision or order of an agency in a contested case shall be made, within a reasonable period, in writing or stated in the record and shall include findings of fact and conclusions of law. Findings of fact shall be based exclusively on the evidence and on matters officially noticed. Findings of fact, if set forth in statutory language, shall be accompanied by a concise and explicit statement of the underlying facts support *699 ing them. If a party submits proposed findings of fact which would control the decision or order, the decision or order shall include a ruling upon each proposed finding. Each conclusion of law shall be supported by authority or reasoned opinion. A decision or order shall not be made except upon consideration of the record as a whole or such portion thereof as may be cited by any party to the proceeding and as supported by and in accordance with the competent, material and substantial evidence.” MCL 24.285; MSA 3.560(185). (Emphasis supplied.) Without question, a request for partial and immediate relief is a contested case. The applicability of § 85 therefore depends only on the characterization of an order for interim relief as "final”. The statute authorizing an interim rate increase provides: "[T]he commission * * * may in its discretion and upon written motion by such utility make a finding and enter an order granting partial and immediate relief, after first having given notice to the interested parties within the service area to be affected in the manner ordered by the commission, * * *.” MCL 460.6a; MSA 22.13(6a). (Emphasis supplied.) The importance of such interim relief for utilities stems from the inability of the commission to award retroactive rate increases in a request for a permanent rate hike. The commission may not set a future rate to permit Edison to recover for a loss suffered in the past, as during the pendency of the permanent increase request. Michigan Consolidated Gas Co v Public Service Comm, 389 Mich 624; 209 NW2d 210 (1973), General Telephone Company of Michigan v Public Service Comm, 341 Mich 620; 67 NW2d 882 (1954), Michigan Bell Telephone Co v Public Service Comm, 315 Mich 533; 24 NW2d 200 (1946). In one sense, therefore, *700 an order for interim relief is final because it limits the applicant’s revenue until a new permanent rate structure is approved. In Attorney General v Public Service Comm, 392 Mich 660; 221 NW2d 299 (1974), this principle of finality was at least recognized when the Court ruled that a plaintiff requesting an interim rate increase may appeal as a matter of right to the Court of Appeals from a circuit court judgment under MCL 462.26; MSA 22.45. Compliance with § 85 of the APA by the commission will facilitate judicial review by insuring that the orders for interim rate increases are supported in fully reasoned opinions by evidence presented to, or principles considered and notified by, the commission. The fact that in a permanent order the commission may at a later time adjust an interim rate and order the utility to make a refund does not suggest a contrary result. As explained in Michigan Bell Telephone Co v Public Service Comm, 85 Mich App 163, 166; 270 NW2d 546 (1978), if new rate determinations were to render moot contested issues in prior appeals, the entire review scheme would be rendered a nullity. The commission usually issues permanent rate orders prior to the conclusion of judicial review of the interim rate. 2 For the sake of consistency, an interim order should not be final as against a utility which may not secure retroactive rates at a later date and not final for another aggrieved party which seeks relief. That haphazard application of § 85 would only confuse the commission’s operations. Section 85 of the APA must apply to all orders for partial and *701 immediate relief under MCL 460.6a; MSA 22.13(6a). Review of the record in the present case indicates that neither the commission nor the circuit court applied the requirements of § 85 in arriving at their conclusions. The cause must therefore be remanded for compliance with the APA. On remand, the commission may, if necessary, hear further arguments on the question of the method of allocating the surcharge among different classes of users. Any conclusion must be supported by reasoned opinion. The commission need not, in making a determination on a request for partial and immediate relief, have before it the type of plenary, expert analysis which the staff prepares on an application for a permanent rate increase. That construction of § 85 would thoroughly undermine the commission’s authority under MCL 460.6a; MSA 22.13(6a) to act without delay in order to prevent irreparable harm to the utility. See Attorney General v Public Service Comm, 63 Mich App 69, 77; 234 NW2d 407 (1975). In deciding how to allocate the surcharge among classes of customers, the commission may notice and consider facts drawn from its expertise and from general knowledge, as well as evidence presented by the parties. Cf. St Paul Area Chamber of Commerce v Minnesota Public Service Comm, 251 NW2d 350, 355 (Minn, 1977). In arriving at our conclusions on the applicability of § 85 of the APA, we decline to express an opinion on the merits of the surcharge of .96 mills per kwh. After reconsideration of the surcharge question, the commission is free to arrive at the same result as before, provided the opinion complies with § 85. If plaintiffs are aggrieved by the commission’s *702 new order, they may sue in Ingham County Circuit Court on the grounds that the rate is unlawful or unreasonable, or is not supported by competent, material, and substantial evidence on the whole record. MCL 462.26; MSA 22.45, Const 1963, art 6, §28. The circuit court order of December 13, 1978, in this cause is reversed and the matter is remanded to the Public Service Commission for proceedings consistent with this opinion. No costs, a public question. Footnotes [1] In at least one prior decision of this Court the applicability of § 85 to interim rate increases was assumed but never stated. Attorney General v Public Service Comm, 63 Mich App 69, 76; 234 NW2d 407 (1975). [2] An added consideration is that the doctrine of mootness does not control where issues of continuing public interest, and open to repetition, may never be subject to review. See Southern Pacific Terminal Co v Interstate Commerce Comm, 219 US 498; 31 S Ct 279; 55 L Ed 310 (1911).