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08/25/77 WESTERN MASSACHUSETTS ELECTRIC COMPANY v.

August 25, 1977

WESTERN MASSACHUSETTS ELECTRIC COMPANY
v.
DEPARTMENT OF PUBLIC UTILITIES (AND A COMPANION CASE) *FN1



Suffolk. Two civil actions commenced in the Supreme Judicial Court for the county of Suffolk on May 24, 1976, and July 15, 1976, respectively. The cases were reserved and reported by Kaplan, J.

Hennessey, C.j., Braucher, Wilkins, Liacos, & Abrams, JJ.

SYLLABUS BY THE COURT

Public Utilities. Electric Company. Practice, Civil, Review of order of department of public utilities.

The opinion of the court was delivered by: Wilkins

An electric company was prohibited by G. L. c. 164, § 94G, from using a fuel charge to recover costs which were not related in any way to the cost of fuel. [232]

The Department of Public Utilities was not precluded from prohibiting an electric company from recovering costs according to a longstanding exclusion in a fuel expense adjustment clause where the exclusionary language of the clause had previously had no practical significance and where, from the first occasion when it became significant, the department expressed uncertainty about the propriety of the company's fuel expense adjustment factor and granted only tentative approval of the fuel factors. [234-235]

It was within the discretion of the Department of Public Utilities not to compel a retroactive adjustment in an electric company's fuel charges which were found to be in violation of G. L. c. 164, § 94G. [236]

These appeals concern orders and decisions of the Department of Public Utilities (department) which dealt with charges made by Western Massachusetts Electric Company (company) for fuel costs. The company appeals from a decision, and accompanying orders, which disapproved its fuel charge to be effective during July, 1976. The department concluded, we think correctly, that the company's proposed fuel charge failed to conform to the requirements of G. L. c. 164, § 94G, inserted by St. 1974, c. 625, § 1. The Attorney General, acting through his consumer protection division, has appealed from two decisions, and accompanying orders, which approved the company's fuel charges to be made during March and April, 1976. These two earlier filings of fuel charges were based on the same procedure which the department later concluded was not in conformity with G. L. c. 164, § 94G. However, the department did not order any adjustment of the earlier fuel charges, and we conclude that, in the absence of any showing of substantial prejudice to the company's customers, the department acted properly within its discretion in declining to apply its ruling concerning the unlawfulness of the company's fuel charges to periods prior to July 1, 1976.

On August 26, 1974, in response to the requirements of St. 1974, c. 625, § 4, *fn2 the company filed an application with the department for approval of a fuel expense adjustment clause to be effective on September 16, 1974. *fn3 Put in general terms, the proposed fuel clause provided that the company's fuel charge would be determined by dividing the company's fuel expense in a given month by the net kilowatt hours (KWH) supplied by the company during that month, with one exception which lies at the heart of the principal dispute in these appeals. The company proposed to exclude from the calculation of its fuel charge (a) those fuel costs which were attributable to any new nuclear unit which was not reflected in the rate base used in determining its rates currently in effect, and (b) the energy supplied by any such new nuclear unit during the appropriate month. The resulting "Current Period Cost per " was to be charged uniformly to customers during the second successive month. *fn4

In 1974 and 1975, the provision concerning new nuclear units was of no consequence in the determination of the company's fuel charges because the company had no nuclear unit in commercial operation whose existence was not reflected in its rates. In January, 1976, however, a nuclear plant, known as Millstone Unit No. 2 (Millstone #2), in which the company had a 19% share, became operational commercially. When the fuel charge for March, 1976, came to be calculated (based on the January, 1976, experience), the exclusionary language of the company's fuel expense adjustment clause became significant in a practical sense for the first time. *fn5

It is clear beyond question that the cost of nuclear fuel per KWH was substantially less than the company's cost of fuel per KWH from other fuel sources. *fn6 Therefore, if the exclusionary language of the company's fuel adjustment expense clause were disregarded, the March, 1976, fuel charge per KWH made uniformly to all customers of the company would have been lower.

As required by G. L. c. 164, § 94G, the department held a public hearing on the company's filing of its proposed fuel charge to be effective during March, 1976. The Attorney General intervened and challenged the company's fuel expense adjustment clause as unauthorized by G. L. c. 164, § 94G. The department concluded that the subject required further investigation, and on March 1, 1976, it approved the company's proposed fuel factor "reserving the right to make a subsequent determination in this matter." The department called for a further hearing and indicated that the March fuel factor would "be subject to further adjustment in our decision regarding the April fuel factor." We think it clear that the department authorized the company's March, 1976, fuel charge on a tentative basis and that the department did not make a final decision concerning the company's March, 1976, fuel charge until a later date. *fn7

The department continued in a state of uncertainty concerning the question whether the company's fuel expense adjustment clause met the requirements of G. L. c. 164, § 94G. On March 31, 1976, after two further public hearings, the department issued its decision and orders relating to the company's April, 1976, fuel charge. The department authorized the company to impose fuel charges in April calculated as previously, ordered a further hearing on the lawfulness of the procedures followed by the company, and reserved the right to modify the fuel charge of any subsequent period to adjust for whatever Conclusions it might reach on further consideration. The Attorney General has appealed from this decision and its associated orders. *fn8

The next step in this administrative process, as far as the record discloses, led to the decision and orders of the department from which the company appeals. On July 13, 1976, the department filed a decision and entered orders concerning the company's application for approval of a fuel charge to be effective during July, 1976. The department also treated its action as supplemental to its decision of March 31, 1976, relating to the company's April, 1976, fuel charge. *fn9 The department concluded that the exclusion of the fuel costs of, and energy supplied by, Millstone #2 produced a fuel charge which did not conform to G. L. ...


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