Attorney General v. State Corp. Comm'n ( 2014 )

PRESENT: Kinser, C.J., Lemons, Millette, Mims and McClanahan,
JJ., and Lacy and Koontz, S.JJ.
OFFICE OF THE ATTORNEY GENERAL,
DIVISION OF CONSUMER COUNSEL
OPINION BY
v. Record Nos. 131872, 131873 JUSTICE ELIZABETH A. McCLANAHAN
September 12, 2014
STATE CORPORATION COMMISSION, ET AL.
FROM THE STATE CORPORATION COMMISSION
In these consolidated appeals, we consider whether the State
Corporation Commission (“the Commission”) properly interpreted
Code § 56-585.1(A)(6) (“Subsection (A)(6)”) to allow Virginia
Electric and Power Company, d/b/a Dominion Virginia Power
(“Dominion”), to recover an enhanced rate of return on common
equity for transmission infrastructure associated with the
Brunswick County Power Station and included in the Subsection
(A)(6) rate adjustment clause for that facility.
I. Facts and Proceedings
In 2012, Dominion filed an application with the Commission
for certificates of public convenience and necessity approving
construction of (1) the Brunswick County Power Station, an
approximately 1,358 megawatt natural gas-fired combined cycle
electric generating facility to be located in Brunswick County,
and (2) transmission interconnection facilities associated with
the Brunswick generation plant, including new transmission lines,
two new switching stations, and facilities necessary to “tap”
existing transmission lines in Brunswick and Greensville
Counties. The estimated costs of the Brunswick project total
$1.27 billion, including approximately $89.1 million in
associated transmission infrastructure costs.
Pursuant to Code § 56-585.1(A)(6), Dominion’s application
also sought approval of a rate adjustment clause (“RAC”),
designated as Rider BW, to recover the costs of the Brunswick
project and infrastructure associated therewith, “including the
transmission facilities necessary to interconnect the facility
with [Dominion’s] transmission system.” 1 At the time of its
1
At the time of Dominion’s application, Subsection
(A)(6) read, in relevant part, as follows:
To ensure a reliable and adequate supply of
electricity, to meet the utility’s projected
native load obligations and to promote
economic development, a utility may at any
time, after the expiration or termination of
capped rates, petition the Commission for
approval of a rate adjustment clause for
recovery on a timely and current basis from
customers of the costs of . . . one or more
other generation facilities. . . .
A utility that constructs any such facility
shall have the right to recover the costs of
the facility, as accrued against income,
through its rates, including projected
construction work in progress, and any
associated allowance for funds used during
construction, planning, development and
construction costs, life-cycle costs, and
costs of infrastructure associated therewith,
plus, as an incentive to undertake such
projects, an enhanced rate of return on common
equity calculated as specified below.
2
application, Dominion’s general rate of return on common equity
(“ROE”) authorized by the Commission during Dominion’s 2011
biennial rate review was 10.4%. As part of Rider BW, Dominion
sought a 100 basis point (1%) enhancement on its general ROE for
the projected construction work in progress period, the
associated allowance for funds used during the construction
period, and the first fifteen (15) years of the service life of
The costs of the facility, other than return
on projected construction work in progress and
allowance for funds used during construction,
shall not be recovered prior to the date the
facility begins commercial operation.
Such enhanced rate of return on common equity
shall be applied to allowance for funds used
during construction and to construction work
in progress during the construction phase of
the facility and shall thereafter be applied
to the entire facility during the first
portion of the service life of the facility .
. . .
Such enhanced rate of return on common equity
shall be calculated by adding the basis points
specified in the table below to the utility’s
general rate of return, and such enhanced rate
of return shall apply only to the facility
that is subject of such rate adjustment clause
. . . .
The basis points to be added to the utility’s
general rate of return to calculate the
enhanced rate of return on common equity . . .
shall vary by type of facility, as specified
in the following table.
Code § 56-585.1(A)(6) (as amended by 2012 Acts ch.
435)(emphasis added).
3
the Brunswick facility. 2 Dominion proposed applying the resulting
11.4% enhanced ROE to the costs of the generation facility as
well as the costs of associated transmission and non-transmission
infrastructure.
After receiving Dominion’s application, the Commission’s
staff filed a motion for ruling asking the Commission to rule
that the enhanced ROE authorized by Subsection (A)(6) “applies
only to the ‘facility,’ i.e., the generating plant, and not to
‘infrastructure associated therewith[.]’” The Office of the
Attorney General’s Division of Consumer Counsel (“Consumer
Counsel”) and the Virginia Committee for Fair Utility Rates each
filed responses supporting the Staff’s interpretation of
Subsection (A)(6).
Dominion filed a response opposing the Staff’s motion,
arguing that the Staff’s position is inconsistent with the plain
language of Subsection (A)(6), which establishes that costs of
associated infrastructure are “costs of the facility.” Moreover,
Dominion argued that the Staff’s interpretation of Subsection
2
Subsection (A)(6) includes a table designating the number
of basis points to be added in calculating the enhanced ROE
recoverable by a utility based on the type of generation
facility constructed. At the time of Dominion’s application, a
100 basis point enhancement was available for natural gas
combined-cycle generation facilities. See 2012 Acts ch. 435.
However, in 2013, the General Assembly amended Subsection
(A)(6). As a result, electric utilities may no longer receive
an enhanced ROE for new generation construction projects filed
for approval after January 1, 2013, except for nuclear and
offshore wind facilities. See 2013 Acts ch. 2.
4
(A)(6) is inconsistent with the General Assembly’s stated goal of
providing “an incentive to undertake such projects,” which
necessarily require transmission and other infrastructure to
function. 3
The Commission held a public evidentiary hearing at which
Dominion presented evidence in support of its application.
Significantly, Dominion presented testimony that “but for”
construction of the Brunswick generating facility, the related
transmission lines and facilities would not be built.
As relevant to this appeal, the Hearing Examiner found that
Subsection (A)(6) authorizes an enhanced ROE on all costs of a
qualifying generating facility, “including the costs of
infrastructure necessitated by the facility.” Consequently, the
Hearing Examiner recommended that the Commission should accept
Dominion’s proposed rate design contained in Rider BW, including
the application of the enhanced ROE to the project’s transmission
infrastructure, if the project were approved. 4
3
Dominion also asserted that the Staff’s position
contradicted the Commission’s established precedent from 12
previous cases in which it had approved recovery of an enhanced
rate of return for transmission infrastructure.
4
The Hearing Examiner also concluded that Dominion should
receive the enhanced ROE for the first 10 years of the plant’s
service life, rather than the 15 years sought by Dominion. This
finding was adopted by the Commission in its final order and is
not at issue in this appeal.
5
The Commission issued a final order approving construction
and operation of the Brunswick County Power Station and
associated transmission interconnection facilities. 5 The
Commission also approved Dominion’s proposed rate design for
Rider BW, including application of the enhanced ROE to “the
transmission infrastructure approved herein as part of the
[p]roject.” Specifically, the Commission found that the plain
language of Subsection (A)(6) “expressly includes ‘costs of
infrastructure associated therewith’ as ‘costs of the facility.’”
Therefore, because Subsection (A)(6) requires that the enhanced
ROE be applied to the “entire facility,” the enhanced ROE must be
applied to costs of associated infrastructure approved as “costs
of the facility” that is the subject of the RAC. 6
5
The Commission’s approval of the project is not disputed
in this appeal.
6
The Commission further noted that it had recently approved
an enhanced ROE for the transmission infrastructure of three
other new generation facilities. Thus, it reasoned, “[a]ny other
result would be a clear departure from the Commission’s
consistent implementation of the plain language of [Subsection
(A)(6)].”
Commissioner Dimitri concurred and joined in the final
order on the approval of the project and agreed with the 100
basis point enhancement to the ROE for the generation plant for
10 years. However, he dissented from the majority’s extension
of the Subsection (A)(6) ROE enhancement to the project’s
transmission infrastructure, asserting that the enhancement is
“focused specifically on generation facilities and not upon
transmission or distribution,” which are treated differently
under the statutory framework. Commissioner Dimitri further
contended that, while the portion of Subsection (A)(6)
6
Consumer Counsel filed a petition for reconsideration,
requesting that the Commission reconsider its final order and
enter an order finding that the enhanced ROE authorized by
Subsection (A)(6) applies only to the costs of the generation
facility, and not to costs of associated transmission
infrastructure.
The Commission subsequently entered an order on
reconsideration and opinion, rejecting Consumer Counsel’s
interpretation of Subsection (A)(6) and denying the petition. In
its order, the Commission reiterated its previous interpretation
of the plain meaning of Subsection (A)(6) that transmission
infrastructure was part of the “entire facility” subject to the
enhanced ROE and found, as a matter of fact, that both the
transmission and non-transmission infrastructure included in
Rider BW were associated with the Brunswick facility. 7 The
Commission further stated that its interpretation of Subsection
(A)(6) was both consistent with the General Assembly’s express
intent to encourage utilities to construct generation facilities
discussing the categories of costs a utility may recover through
a RAC includes both “costs of the facility” and “costs of
infrastructure associated therewith,” the discussion of the
enhanced ROE is addressed solely in terms of the “facility,” a
term that clearly means “generation facility” when read in the
context of the statute.
7
The Commission noted that these findings of fact were not
contested by Consumer Counsel.
7
to “ensure a reliable and adequate supply of electricity . . .
and to promote economic development” and with federal regulatory
treatment of interconnection infrastructure. Finally, the
Commission noted that its decision was consistent with prior
Commission precedent applying the Subsection (A)(6) enhanced ROE
to “transmission – and all other – infrastructure costs
statutorily included as costs of the facility in the RAC.” 8
Consumer Counsel appeals from both the Commission’s final
order (Record No. 131872) and its order on reconsideration and
opinion (Record No. 131873). 9
II. Standard of Review
We have long recognized that “[t]he Constitution of Virginia
and statutes enacted by the General Assembly thereunder give the
Commission broad, general and extensive powers in the control and
regulation of a public service corporation.” Virginia Elec. &
Power Co. v. State Corp. Comm’n, 284 Va. 726, 735, 735 S.E.2d
684, 688 (2012) (quoting Northern Virginia Elec. Coop. v.
Virginia Elec. & Power Co., 265 Va. 363, 368, 576 S.E.2d 741,
743-44 (2003)). Thus, “[i]n considering the appropriate standard
of review to be applied when reviewing a Commission decision, we
8
Commissioner Dimitri again dissented, restating his view
that the enhanced ROE in Subsection (A)(6) applies only to the
“generation facility” and nothing more.
9
The assignments of error asserted by Consumer Counsel are
identical for both cases. Consequently, we consolidated the
cases for our consideration.
8
begin by giving a decision in which the Commission has exercised
its expertise a presumption of correctness.” Appalachian Power
Co. v. State Corp. Comm'n, 284 Va. 695, 703, 733 S.E.2d 250, 254
(2012). However, we have also made clear that the standard of
review applied to a Commission decision “will depend on the
nature of the decision under review.” Id. Here, we are called
upon to review the Commission’s interpretation of Code § 56-
585.1(A)(6). This Court reviews such questions of statutory
interpretation de novo. See id.
Furthermore, “although questions of law are reviewed de
novo, the practical construction given by the Commission to a
statute it is charged with enforcing is entitled to great weight
by the courts and in doubtful cases will be regarded as
decisive.” Piedmont Envtl. Council v. Virginia Elec. & Power
Co., 278 Va. 553, 563, 684 S.E.2d 805, 819 (2009)(internal
quotation marks and citations omitted). For these reasons, “we
will not disturb the Commission’s analysis when it is based upon
the application of correct principles of law.” Virginia Elec. &
Power, 284 Va. at 736, 735 S.E.2d at 688 (internal quotation
marks and citations omitted). 10
10
We have also recognized that legislative acquiescence to
the Commission’s interpretation is presumed, and the
Commission’s interpretation will be considered decisive, when
the interpretation is a long-standing one. Appalachian Power,
284 Va. at 704, 733 S.E.2d at 255. Although the Commission has
implicitly interpreted Subsection (A)(6) to include an enhanced
9
III. Discussion
A. Under the Plain Language of Subsection (A)(6), “Costs of the
Facility” Include “Costs of Infrastructure Associated Therewith.”
This appeal requires us to discern the categories of costs
encompassed within the term “facility,” as it is used in
Subsection (A)(6). In this inquiry, we are guided by familiar
principles of statutory construction:
When construing a statute, [this Court’s]
primary objective “is to ascertain and give effect
to legislative intent,” as expressed by the
language used in the statute. “When the language
of a statute is unambiguous, [this Court] is bound
by the plain meaning of that language.” And if
the language of a statute “is subject to more than
one interpretation, [this Court] must apply the
interpretation that will carry out the legislative
intent behind the statute.” . . . “[C]onsideration
of the entire statute . . . to place its terms in
context to ascertain their plain meaning does not
offend the rule because it is [this Court’s] duty
to interpret the several parts of a statute as a
consistent and harmonious whole so as to
effectuate the legislative goal.”
Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420,
425-26, 722 S.E.2d 626, 629-30 (2012) (internal quotation marks
ROE for transmission infrastructure since the adoption of the
statute by the General Assembly in 2007, we have only applied
this rule of construction in instances where we have found that
the statutory language is ambiguous. See Commonwealth v.
Appalachian Electric Power Co., 193 Va. 37,45-46, 68 S.E.2d 122,
127 (1951) (noting that the presumption of legislative
acquiescence is a rule of construction that applies only when a
statute is ambiguous).
Because we hold, infra, that the language of Subsection
(A)(6) is plain and unambiguous, we do not presume here that the
General Assembly has acquiesced to the Commission’s
interpretation.
10
and citations omitted). Furthermore, we will not single out “a
particular term or phrase, but . . . construe the words and terms
at issue in the context of the other language used in the
statute.” Buonocore v. Chesapeake & Potomac Tel. Co., 254 Va.
469, 472, 492 S.E.2d 439, 441 (1997). Finally, “[r]ules of
statutory construction prohibit adding language to or deleting
language from a statute.” Appalachian Power, 284 Va. at 706, 733
S.E.2d at 256.
Subsection (A)(6) was enacted by the General Assembly in
2007 to create “a new proceeding allowing a utility to petition
the Commission for approval of a [RAC] for the ‘timely and
current’ recovery from customers for costs incurred in certain
identified programs.” Id. at 700-01, 733 S.E.2d at 253.
Specifically, Subsection (A)(6) states that:
A utility that constructs [one or more other
generation facilities] shall have the right to
recover the costs of the facility . . .through
its rates, including projected construction
work in progress, and any associated allowance
for funds used during construction, planning,
development and construction costs, life-cycle
costs . . . and costs of infrastructure
associated therewith.
Code § 56-585.1(A)(6)(emphasis added). The plain meaning of this
language dictates that the “costs of the facility,” recoverable
by a utility which petitions the Commission for approval of a
RAC, include the “costs of infrastructure associated therewith.”
11
It is clear from the language used by the General Assembly
that the phrase “associated therewith” relates to the term
“facility.” Thus, read as a whole, Subsection (A)(6) establishes
that the “costs of the facility” recoverable through a RAC
include “costs of infrastructure” associated with the facility.
In other words, Subsection (A)(6) dictates that costs of
associated infrastructure are a cost of the facility. This
interpretation of Subsection (A)(6) does not render the phrase
“associated therewith” “unnecessary and redundant.” Rather, it
clearly establishes that costs of infrastructure associated with
the facility, and only those infrastructure costs, are considered
“costs of the facility” that may be recovered under a RAC.
B. The Subsection (A)(6) Enhanced ROE Applies to the “Entire
Facility,” Including the “Costs of Infrastructure Associated
Therewith.”
In addition to providing for recovery of the “costs of the
facility,” Subsection (A)(6) states that “as an incentive to
undertake such projects” a utility will receive “an enhanced
[ROE] calculated as specified below.” The statute then
establishes that “[s]uch enhanced [ROE] shall be applied to
allowance for funds used during construction and to construction
work in progress during the construction phase of the facility
and shall thereafter be applied to the entire facility during the
first portion of the service life of the facility.”
12
Consumer Counsel contends that the term “facility,” as it is
used throughout Subsection (A)(6), means “generation facility.”
Additionally, Consumer Counsel asserts that we should construe
the term “entire facility” to mean “completed facility.” Thus,
Consumer Counsel argues, the “entire facility” to which the
Subsection (A)(6) enhanced ROE applies after the facility’s
construction phrase is the completed generation plant itself and
nothing more.
This interpretation of Subsection (A)(6) misconstrues the
plain language of the statute. To have us reach its desired
result, Consumer Counsel suggests that the portion of Subsection
(A)(6) that defines the “costs of the facility” merely
“enumerates the types of costs that a utility shall have the
right to recover through a [Subsection (A)(6)] RAC” and does not
apply to the portion of the statute discussing the application of
the enhanced ROE. We decline, however, to read the various
portions of the statute in isolation. See Cuccinelli, 283 Va. at
425-26, 722 S.E.2d at 629-30 (holding that portions of a statute
must be interpreted “as a consistent and harmonious whole.”). We
likewise decline to substitute the word “completed” for the word
“entire” when interpreting the meaning of the phrase “entire
facility” in Subsection (A)(6). See Appalachian Power, 284 Va.
at 706, 733 S.E.2d at 256 (“Rules of statutory construction
13
prohibit adding language to or deleting language from a
statute.”).
“Entire” means: “with no element or part excepted;” or
“complete in degree.” Webster’s Third New International
Dictionary 758 (1993). Therefore, because “costs of
infrastructure” associated with the facility are recoverable as
“costs of the facility” under a RAC, the plain meaning of “entire
facility” in the portion of the statute discussing the enhanced
ROE encompasses all costs of the facility expressly delineated in
the statute, including associated infrastructure costs. Even
assuming that the word “facility” must mean “generation
facility,” Subsection (A)(6) establishes that “costs of
infrastructure associated therewith” are “costs of the
[generation] facility.”
Moreover, in its order on reconsideration and opinion, the
Commission found that both associated transmission and non-
transmission infrastructure, “such as certain water and sewer
lines, roads, administrative and security buildings, and other
power lines that are included in the RAC under Subsection
(A)(6),” should receive the enhanced ROE under the statute.
Consumer Counsel does not, however, challenge the Commission’s
findings with regard to the non-transmission infrastructure, and
we can find nothing in the plain language of Subsection (A)(6)
that supports carving out only transmission infrastructure for
14
purposes of applying the enhanced ROE. Consumer Counsel asserts
that Subsection (A)(6) “clearly deals with generation plants, not
transmission lines.” However, it is undisputed that the type of
transmission interconnection infrastructure at issue here is
properly included in a Subsection (A)(6) RAC. 11
Consumer Counsel further argues that the portion of
Subsection (A)(6) which states that “such enhanced rate of return
shall apply only to the facility that is the subject of such
[RAC]” limits the applicability of the enhanced ROE to the
generation plant itself. Again, we disagree. The plain meaning
of this provision establishes that the enhanced ROE applies only
to the facility covered under the Subsection (A)(6) RAC, and not
11
Although a separate provision, Code § 56-585.1(A)(4)
(“Subsection (A)(4)”), allows a utility to seek approval of a
RAC for recovery of transmission costs, a Subsection A4 RAC is
limited to recovery of:
(i) costs for transmission services provided
to the utility by the regional transmission
entity of which the utility is a member, as
determined under applicable rates, terms and
conditions approved by the Federal Energy
Regulatory Commission [“FERC”], and (ii) costs
charged to the utility that are associated
with demand response programs approved by
[FERC] and administered by the regional
transmission entity of which the utility is a
member.
The interconnection facilities included in Dominion’s Rider
BW are not regulated by FERC. Therefore, they fall outside of
the ambit of Subsection (A)(4).
15
to other facilities that are included in other RACs or in base
rates.
C. The Commission’s Interpretation of Subsection (A)(6) Furthers
the General Assembly’s Expressly Stated Intention
The General Assembly was clear about its intentions in
enacting Subsection (A)(6), stating in the text of the statute
that a utility may petition the Commission for a RAC seeking
recovery of the costs of a generation facility “[t]o ensure a
reliable and adequate supply of electricity, to meet the
utility’s projected native load obligations and to promote
economic development.” Furthermore, the General Assembly
expressly stated in Subsection (A)(6) that a utility “shall have
the right to recover . . . as an incentive to undertake such
projects, an enhanced [ROE].” (Emphasis added).
Here, the Commission found that the transmission
interconnection facilities included in Dominion’s Rider BW “are
associated with the Brunswick generation facility and must be
constructed in order for the Brunswick facility to function and
serve its statutory purpose.” We agree with the Commission. The
expressly stated intention of the General Assembly in enacting
Subsection (A)(6) and providing for the recovery of an enhanced
ROE is to incentivize the construction of generation plants
capable of “ensur[ing] a reliable and adequate supply of
electricity” to citizens of the Commonwealth. The application of
16
the enhanced ROE to the “entire facility,” including the costs of
necessary transmission interconnection infrastructure associated
with the facility, clearly and unambiguously furthers this
statutory purpose.
IV. Conclusion
For the reasons stated herein, we hold that a utility has
the right to recover an enhanced rate of return on common equity
for the costs of associated transmission infrastructure included
in a Code § 56-585.1(A)(6) rate adjustment clause. The
Commission’s decision will be affirmed.
Affirmed.
JUSTICE MIMS, dissenting.
The disposition of this case turns on the interpretation of
the plain language of Code § 56-585.1. The parties ably
presented their arguments, and this is a close question on which
reasonable minds can respectfully differ. The majority’s
conclusion is articulated in a well-reasoned and well-written
opinion. Nevertheless, I dissent for the reasons stated by
Commissioner Dimitri in his opinions concurring in part and
dissenting in part from the Commission’s final order and order
on reconsideration. I found his views persuasive and I have
nothing new to add. Mindful that the question is one of
statutory interpretation, I am content to rely on the General
17
Assembly’s power to amend Code § 56-585.1 if the Court has
misapprehended its intent.
18