Consumer Protection Board v. Public Service Commission

Citations: 97 A.D.2d 320; 471 N.Y.S.2d 332; 1983 N.Y. App. Div. LEXIS 20366

Court: Appellate Division of the Supreme Court of the State of New York; December 7, 1983; New York; State Appellate Court

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In August 1973, Rochester Gas and Electric Corporation applied for certification to construct two fossil fuel power plants in Sterling, Cayuga County. Plans to build a nuclear power plant were later considered, leading the siting board to suspend proceedings in March 1975 due to potential delays. The application was ultimately dismissed in February 1980. In Spring 1974, Orange and Rockland Utilities and Central Hudson Gas and Electric agreed to collaborate with Rochester on the nuclear project, which received conditional certification in January 1978. However, the certification was suspended and vacated by February 1980 due to reduced need for additional capacity.

As part of their agreement, Orange, Rockland, and Central Hudson were to share two-thirds of Rochester's planning expenditures for the fossil fuel plants, while the remaining one-third (about $4.5 million) was deemed unshared costs, exceeding the necessary planning expenses. Additional unshared costs of approximately $127,000 and $2 million incurred by Central Hudson and Orange, Rockland for site planning were not shared. After the siting board's termination of proceedings, the utilities sought a determination from the Public Service Commission (PSC) on the recoverability of their planning expenditures, asserting they were prudently incurred.

The Consumer Protection Board contested the recoverability of the unshared costs, arguing they should have been written off following the abandonment of the projects. The PSC found the unshared costs were prudently incurred and recoverable. The Consumer Protection Board challenged this PSC determination in a CPLR article 78 proceeding, which was transferred to the court. The court noted that PSC decisions would not be overturned unless found to be unsupported by substantial evidence or unreasonable. The petitioner did not dispute the prudence of the unshared costs but claimed they were not beneficially related to the nuclear project.

Petitioner claims that certain projects were effectively abandoned when utilities opted to pursue a nuclear plant project, arguing that unshared costs should have been written off and not recovered from ratepayers alongside the nuclear project’s planning costs. Rochester counters that petitioner is collaterally estopped from contesting the Public Service Commission's (PSC) treatment of these costs, referencing a previous PSC ruling (Opinion No. 79-12) that allowed Rochester to accumulate Allowance for Funds Used During Construction (AFUDC) on unshared costs, implying the fossil fuel project was not abandoned. Petitioner participated in that case but did not argue abandonment at the time. 

While collateral estoppel can apply to administrative determinations, it typically requires a judicial or quasi-judicial context. Rochester asserts that the PSC's actions in this instance were legal determinations rather than rate-setting. However, the PSC's decision in Opinion No. 79-12 was indeed rate-setting and therefore does not carry collateral estoppel. Addressing the merits, the PSC found Rochester's unshared costs recoverable because the fossil fuel project was not deemed abandoned until 1980, despite petitioner asserting it was abandoned in 1977, supported by Rochester's claimed abandonment loss on its 1977 tax return. The ruling distinguishes between tax abandonment and PSC accounting definitions, concluding that the PSC's determination of recoverability is supported by evidence. 

The issue of recoverability for Central Hudson and Orange, Rockland's unshared costs is more complex, as these costs stemmed from investigations into potential generating sites that were halted in 1974 when both utilities opted for the nuclear project.

The petitioner argues that certain project sites, not formally presented to the siting board as alternatives for the nuclear plant project, were abandoned in 1974 and therefore their associated costs should not be recoverable. Initially, this argument appears valid; however, the Public Service Commission (PSC) determined that these costs were not abandoned. Evidence indicated that the investigations for these sites supported the utilities' involvement in the nuclear project, and these sites remained viable alternatives. If the project's certificate had been vacated for reasons other than reduced energy needs, the utilities could have revisited these sites. The PSC found that the accounting treatment of the costs by Central Hudson and Orange, Rockland was justifiable under Technical Release No. 6, which addresses the accounting for expenditures related to potential power plant sites. The utilities interpreted this release to mean that costs incurred for site studies beneficial to the certification process could be included in the construction costs of the chosen plant, even if those sites were not fully studied as alternatives. The PSC acknowledged that both interpretations of the release were reasonable, thus supporting the utilities' position. The PSC's conclusion that the unshared costs were recoverable was based on substantial evidence and was not arbitrary or capricious. Consequently, the determination was confirmed, and the petition was dismissed without costs, with all judges concurring. Additionally, Niagara Mohawk Power Corporation, which later joined the project, is no longer part of this proceeding. The unshared costs also included an allowance for funds used during construction (AFUDC), representing interest on borrowed funds for construction financing.