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DAVID M. BARASCH v. PENNSYLVANIA PUBLIC UTILITY COMMISSION (02/18/87)

decided: February 18, 1987.

DAVID M. BARASCH, CONSUMER ADVOCATE, PETITIONER
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION, RESPONDENT. CONSUMERS EDUCATION AND PROTECTIVE ASSOCIATION (CEPA), PETITIONER V. PENNSYLVANIA PUBLIC UTILITY COMMISSION, RESPONDENT



Appeals from the Order of the Pennsylvania Public Utility Commission in the case of Limerick Unit No. 2, Nuclear Generating Station Investigation, No. I-840381, dated December 5, 1985.

COUNSEL

Irwin A. Popowsky, with him, Susan Perkins Weston, and Scott J. Rubin, Assistant Consumer Advocates, and David M. Barasch, Consumer Advocate, for petitioner, David M. Barasch, Consumer Advocate.

Steven P. Hershey, for appellant, Consumers Education and Protective Association (CEPA).

Daniel P. Delaney, Deputy Chief Counsel, with him, Veronica A. Smith and Louis G. Cocheres, Assistant Counsels, and Charles F. Hoffman, Chief Counsel, for respondent.

Robert H. Young, with him, William, E. Zeiter, Jay H. Calvert, Jr., Donald F. Clarke and Paul H. Zoubek; Morgan, Lewis & Bockius ; Of Counsel: Edward G. Bauer, Jr., Vice President and General Counsel, for intervenor, Philadelphia Electric Company.

Roger E. Clark, Chief Counsel, for intervenor, Governor's Energy Council.

President Judge Crumlish, Jr., and Judges Craig, MacPhail, Doyle, Barry, Colins and Palladino. Opinion by Judge Barry.

Author: Barry

[ 104 Pa. Commw. Page 54]

This appeal results from an order of the Pennsylvania Public Utility Commission (PUC or Commission) which granted certain exceptions of Philadelphia Electric Company (PECO) filed with respect to the recommended opinion of Administrative Law Judge Allison Turner (the ALJ). The granting of the exceptions had the practical effect of permitting PECO to complete construction of Limerick Unit No. 2, a nuclear-powered electric generating station.

The PUC order involved declared specifically that "unconditioned completion of construction of Limerick Unit No. 2 is not in the public interest," but adjured further that PECO notify the Commission within thirty

[ 104 Pa. Commw. Page 55]

    days regarding "whether it accepts and agrees to be bound by the terms and conditions of [certain] cost containment plans . . . ." Those plans, compliance with which has since been agreed to by PECO, were formulated by the PUC in its opinion accompanying the order, and were articulated as prerequisites to Limerick 2 being in the public interest, and hence to the PUC's approval of continued construction of Limerick 2.

Petitioners, the Office of the Consumer Advocate (OCA); the Governor's Energy Council (GEC); and the Consumers Education and Protective Association (CEPA), have petitioned for review from the PUC order.

1. Prior Related Proceedings and Origin of the Present Litigation

The construction of the nuclear reactors at Limerick has been the subject of continuing litigation since 1979. Most notably, after concerns had been raised with respect to the wisdom of simultaneous construction of Limerick Units 1 and 2, the PUC in 1982 ordered PECO to either suspend or cancel construction of the second unit. After a challenge by PECO to the authority of the PUC to issue such an order, the Supreme Court confirmed that the PUC indeed possessed constructive power to render such an order by refusing to approve securities issues for the funding of the project.*fn1 PECO then did, in fact, suspend construction.

As completion of Unit 1 approached, concerns with respect to Unit 2 continued, and public hearings were held by the House Select Committee to Investigate Limerick 2 to assess the wisdom of completing the unit. In apparent response to this legislative concern, the

[ 104 Pa. Commw. Page 56]

PUC on August 7, 1984, ordered PECO to show cause why the completion of Limerick 2 would be in the public interest. The order set forth four issues raised by the spectre of completion of the unit: (1) "[the] serious question [ ] . . . regarding the need for the additional generating capacity represented by Unit 2"; (2) "the cost effectiveness of Unit 2 as compared to other alternatives"; (3) "the effect upon PECO's financial health and its ability to provide safe and adequate service at reasonable rates"; and (4) "the potential effect of the cost burden of Unit 2 upon PECO's existing customer base." Show Cause Order at 2, reproduced in PUC Decision, No. I-840381, December 5, 1985, at 6. The Order then directed the institution of an investigation and the examination of the following specific issues:

1. Is construction of Unit 2 necessary for PECO to maintain adequate reserve margins?

2. Are there less costly alternatives -- such as cogeneration, additional conservation measures, or purchasing power from neighboring utilities or the [Pennsylvania-New Jersey-Maryland] interchange -- for PECO to obtain power or decrease consumption?

3. How will the capital requirements necessary to complete Unit 2 affect PECO's financial health and its ability to provide adequate service?

4. Should the Commission reject any securities filing; or impose any other appropriate remedy, to guarantee the cancellation of Unit 2?

5. If Unit 2 is cancelled, what, if any, percentage of the sunk costs should PECO be permitted to recover from its rate payers?

6. If construction of Unit 2 is found to be in the public interest, should the Commission

[ 104 Pa. Commw. Page 57]

    adopt an "Incentive/Penalty Plan" as an inducement to cost efficient and timely construction?

Show Cause Order at 2-3, reproduced in id. at 6-7.

Hearings were thereupon convened before an ALJ, and twenty-three days of such hearings were held from January to April, 1985. At those hearings the foregoing issues were addressed by way of documentary and oral testimony adduced by PECO and adversary groups, some of which groups are pursuing the present appeal. After making extensive findings of fact, the ALJ concluded that "completion of Limerick 2 is not in the public interest," explaining that conclusion as follows:

[This ALJ has been] persuaded that Limerick 2's capital and operating costs will most probably be higher than projected by PECO, and that in any event, the alternatives [to completion] presented . . . would be more economically beneficial than completion of Limerick 2. The impact of Limerick 2's capital costs alone would have a strong adverse impact on PECO's rate payers, its customer base, and its sales and revenue flows.

ALJ Decision at 407. The ALJ thus recommended against the approval of "any securities certificates the proceeds of which are to be used in whole or in part for Limerick 2." Id. at 420.

PECO thereafter filed exceptions to the decision, arguing, among other things, that completion of the unit was in fact in the public interest and that "any uncertainties concerning the costs/benefits of Unit No. 2 [could] be eliminated by a reasonable cost containment plan." See PECO Exceptions at 3. Such a plan had been advocated by several parties during the proceedings and had been characterized by the ALJ as a necessary ingredient of a Limerick 2 completion scenario.

After PECO had filed its exceptions and the parties had briefed the case before the PUC, the legislature enacted

[ 104 Pa. Commw. Page 58]

    legislation which supplied the Commission with the express authority to cancel a plant. That legislation mandated that the Commission was to order cancellation when such unit was found not to be in the public interest.

2. PUC Decision

In a decision dated December 5, 1985, the PUC granted in part and denied in part PECO's exceptions. First re-assessing the evidence, the PUC found that "PECO may need additional base load capacity as early as 1992," but pointedly refrained from making any "finding as to how that need should be met." The PUC then went on to consider the alternatives to completion.*fn2 In this respect, the PUC concluded that "there is

[ 104 Pa. Commw. Page 59]

    no clear best choice among the alternatives analyzed." PUC Decision at 49 (emphasis in original). Against this backdrop, the PUC (1) found that "there may be present value benefits to customers if Limerick Unit No. 2 were to be completed and operated under a cost containment and operating plan." id. ; (2) went on to formulate such a plan, id. at 77-89; and (3) ordered that PECO notify it, the PUC, with respect to whether "it accepts and agrees to be bound by the terms and conditions of the . . . plans set forth in . . . this Opinion and Order." Id. at 90.

With respect to the pivotal issue addressed by both the show cause order and the new statute, the Commission concluded that "the unconditioned completion of construction of Limerick Unit No. 2 is not in the public interest." Id. (Emphasis added.) The further conclusion, however, was made that if the Company accepted the plans, completion of Limerick 2 was in the public interest. Id. at 89.

PECO accepted imposition of the cost-containment and incentive plans, and a number of intervenors (petitioners) thereupon filed petitions for review in this Court.*fn3 Those intervenors argue that imposition of the plans was a regulatory response inherently inconsistent with the newly-enacted Section 520 of the Public Utility Code, 66 Pa. C.S. § 520, and that certain provisions of the statute were ignored. Further, intervenors argue that the PUC abused its discretion in imposing the plans, asserting specifically (1) that substantial evidence does not support the components of the plan; (2) that the plans are ineffective to satisfy their announced goals;

[ 104 Pa. Commw. Page 60]

    and (3) that the failure of the PUC to provide intervenors with renewed opportunity to comment on the plans constituted a denial of due process.

3. Task of the PUC: This Court's Review of The Involved Order

We find it necessary as a preliminary matter to establish precisely what issue the PUC was obliged to resolve in the proceedings presently subject to our review. Our consideration of the advocacy in this case reveals, as will be seen, an implicit lack of consensus on this point.

The original show cause order which initiated these proceedings contemplated, of course, the PUC forbidding the completion and operation of Limerick 2, were that facility not demonstrated as being in the public interest. Any doubts with respect to the direct authority of the Commission to order a cancellation were conclusively put to rest by the legislature which, before the PUC rendered the present order, enacted the following legislation:

The commission shall order any public utility engaged in producing, generating, transmitting, distributing or furnishing electricity to cancel or modify the construction of, or its participation in the construction of any generating unit where the commission, after notice and an opportunity for hearing, determines that construction is not in the public interest. In addition to any other relevant matters, the commission shall consider in its determination whether:

(1) The generating unit is necessary for the utility to provide adequate and reliable service to the public.

(2) There are less costly alternatives by which the utility could maintain its ability to provide adequate and reliable service.

[ 104 Pa. Commw. Page 6166]

Pa. C.S. § 520 (Section 4(b) of the Act of October 10, 1985, P.L. 257). We note, of course, that as a statutory requirement existing prior to the PUC's decision concerning the future of Limerick 2, the agency was bound by the strictures of the statute.*fn4

Being bound by the foregoing statute, it devolved upon the Commission to determine whether PECO had established*fn5 that completion of Limerick 2 was "in the public interest," and to consider in the course of such determination whether the proposed plant was necessary for the provision of adequate and reliable service to the public, and whether less costly alternatives existed. This Court's task, consequently, is limited to determining whether any error of law was committed in the course of the determination, whether the necessary findings of fact are supported by substantial evidence, and whether any constitutional rights have been violated. 2 Pa. C.S. § 704. See U.S. Steel Corp. v. Pennsylvania Public Utility Commission, 69 Pa. Commonwealth Ct. 134, 139, 450 A.2d 1073, 1075-76 (1982).

A. The PUC's Compliance With Section 520

As suggested in the preceding section, a basic premise of the petitioners' appeal is that the PUC misconstrued its duty under the new statute. We, however, detect no error in the approach undertaken by the Commission in discharging its new statutory duty.

[ 104 Pa. Commw. Page 62]

That approach, as detailed above,*fn6 involved a two-step process, contemplated in the original show cause order and comporting with the statute as well. The first step entailed a determination of whether the new unit was necessary to satisfy future electric power needs. The second step, meanwhile, proceeded logically from the first and embraced a determination of whether ...


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