J. R. Simplot Co. v. Intermountain Gas Co.

BAKES, Chief Justice.

On August 31, 1978, Intermountain Gas Co. filed a “tracker” application with the Idaho Public Utilities Commission requesting authority to raise rates in order to pass through an impending increase in the cost of natural gas. The new rate was to take effect on October 1, 1978. On September 25, 1978, an abbreviated hearing was held, and an order approving a uniform 1.191 cents per therm increase was entered on September 29,1978. Nine days prior to the approval of the tracker application, the commission had also entered an order authorizing a uniform general rate increase of 3.1% to all customers of Intermountain Gas, pursuant to a prior application. J. R. Simplot Company and Beker Industries have appealed both orders; however, this appeal is concerned only with the tracker increase. The appeals of Simplot and Beker as to the tracker increase have been consolidated.

The alleged errors are twofold. First, the appellants assert that the commission erred by failing to determine Intermountain’s total revenues, expenses, appropriate rate base and rate of return, as impacted by the tracker increase. In essence they ask for a hearing with all the accoutrements of a general rate proceeding. Second, it is claimed that the authorized increase on a uniform cents-per-therm basis was arbitrary and capricious, because it was completely inconsistent with the uniform percentage general rate increase authorized nine days earlier. It is argued that a uniform per-therm basis yields a non-uniform increase of from 5.3% to 3.4%, with high volume users bearing the greatest percentage increase.

As to the first issue, Intermountain Gas simply seeks to maintain its authorized rate of return by passing through to its customers the increased cost of natural gas. Where, as in this case, a utility has no control over substantially increased costs, a pass-through rate increase to cover the additional costs will not impact the authorized rate of return. In such situations, the common utility regulation practice is to permit a scaled down proceeding focusing only on the particular increase. California Manufacturers Ass’n v. P.U.C., 24 Cal.3d 251, 155 Cal.Rptr. 664, 667, 595 P.2d 98, 101 (1979); Montana Consumer Council v. Public Service Comm’n, 168 Mont. 180, 541 P.2d 770, 774 (1975); Railroad Comm’n v. City of Fort Worth, 576 S.W.2d 899, 902 (Tex.Civ.App. 1979). “Little purpose is served by requiring the commission to hold a general rate proceeding, recalculating all expenses, revenues, rate base, and rate of return, when the only substantial issues are extraordinary changes in fuel costs .... ” California Manufacturers Ass’n v. P.U.C., supra. With a view to constitutional considerations, it is clear that within the regulatory context, due process is a flexible concept permitting expert administrative agencies broad latitude to adapt procedures to the specific regulatory needs of their jurisdictions. City of Los Angeles v. Public Utilities Comm’n, 15 Cal.3d 680, 125 Cal.Rptr. 779, 791, 542 P.2d 1371, 1383 (1975); see Federal Power Comm’n v. Pipeline Company, 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1941). Consequently, we find that the commission addressed all the issues pertinent to the “tracker” application and that the commission acted properly in conducting an abbreviated proceeding on this matter.

We also sustain the commission’s uniform cents-per-therm increase in rates. The appellants contend that the uniform cents-per-therm increase in rates is arbitrary because it creates a non-uniform percentage increase. However, that argument does not go to the point. Where per therm rates are non-uniform in the first instance, as is the case here, a uniform cents-per-therm increase will always create a percentage variation in rates. Thus, the focus must be upon the reasons behind the uniform cents-per-therm increase, and not merely upon its mathematical manifestations.

The commission stated that “[tjhese increases [in the cost of gas] have historically been tracked through by increasing the commodity charges, but not the demand charges of gas sold to applicant’s customers .... ” The commission also concluded that “[t]he rate increase granted will compensate the applicant only for increases in the costs of purchased gas and therefore this commission will not require a cost of service study before allowing applicant to put the increased rates into effect.”

Where the objective of the commission, as in this case, is only to pass through the increased cost of gas, it is not unreasonable or arbitrary to require each customer to pay for the increased cost of the gas which it uses. If the utility must pay an increase of 1.191 cents per therm for each therm purchased, then each customer may reasonably be required to pay an increase of 1.191 cents per therm for each therm that it uses. As recognized by the commission, other factors involved in the cost of service which support variable rates are not affected and need not be examined. If, however, the commission has other objectives, such as conservation of fuel, which it wishes to consider in addition to merely passing through the cost of gas, more extensive hearings and findings concerning the allocation of the rate increase may be necessary. See California Manufacturers Ass'n v. PUC, supra.

Under the facts of this case, we find no error in the commission’s conclusion that “the [uniform 1.191 cents per therm] rate increase granted is fair, reasonable and nondiscriminatory and will compensate the applicant only for increases in the costs of purchased gas .... ” The order of the commission is affirmed.

McFADDEN, DONALDSON and BISTLINE, JJ., concur.