The Rate Case and Who Takes Part in It

A general rate case is a contested administrative proceeding. It begins with an application, proceeds through discovery and pre-filed testimony to an evidentiary hearing, and ends with a written order that fixes the revenue the utility may collect and the rates through which it collects them. The structure is stable across jurisdictions, and so is the cast of parties.

The application that opens the case

The statutes specify what a filing must contain. It begins with a schedule of the existing rates, tolls, classifications, charges and rentals, followed by a schedule of the proposed changes and a statement of the facts and grounds relied on. Applications proposing a new service, a new item of equipment or a new regulation must also describe what is proposed and how it differs from current practice.

Where the application seeks an increase, more is required. The utility must file a report of the property claimed to be used and useful, a complete operating statement for the most recent fiscal year showing receipts, revenues, costs and expenditures, a statement of the income and expense anticipated under the proposed rates, and a statement of financial condition setting out assets, liabilities and net worth. The commission may require further information.

The filing is accompanied by the direct testimony of the utility's witnesses, organized by subject. There is customarily a policy witness who frames the case, an accounting witness who presents the revenue requirement, an engineering or operations witness who supports the plant additions, a cost of capital witness who supports the requested return, a cost of service witness who allocates cost among classes, and a rate design witness who converts the allocated cost into tariff sheets.

Two things follow from the burden of proof. First, the applicant must prove that the proposed rates and practices are just and reasonable rather than merely defend them against attack. Second, gaps in the utility's own case are not filled by the absence of opposition, and commissions regularly disallow items the applicant supported thinly even where nobody contested them.

Notice and intervention

Statutes require notice of the application, typically by publication in the affected service territory and sometimes by bill insert. Notice serves the intervention process: it tells potentially affected persons that the proceeding exists and when they must appear. Intervention rules follow a common pattern. A person may intervene of right where a statute confers the right, and otherwise on a showing of a real and substantial interest in the proceeding that may as a practical matter be impaired unless existing parties adequately represent it.

Commissions weigh a set of factors in ruling on a motion: the nature and extent of the movant's interest, the legal position advanced and its relation to the merits, whether the intervention will unduly prolong or delay the proceeding, whether the movant will significantly contribute to full development and equitable resolution of the factual issues, and the adequacy of representation by existing parties. Limited intervention, confined to specified issues, is available and is frequently granted.

Who appears in almost every case

The commission's own staff functions as a party in most states, filing testimony and taking positions independent of the commissioners who will decide. That arrangement strikes newcomers as odd and is deliberate: it separates the advocacy function from the adjudicative one, and it supplies a technically capable adversary in cases where no ratepayer group has the resources to build one.

A statutory residential advocate appears in many states, variously titled consumers' counsel, ratepayer advocate or public counsel. Such an office typically holds the rights and powers of a party in interest, may examine witnesses and present evidence, and may intervene in related state and federal proceedings. Large industrial and commercial customers appear through associations formed for the purpose, since the cost of participation is justified only when spread across several large loads.

Beyond those, the roster varies with the case. Environmental organizations appear where generation or fuel choices are at issue. Low-income advocacy groups appear where the rate design affects fixed charges or disconnection practice. Competitive suppliers appear in restructured states, and municipalities appear where they take service or franchise the utility.

Discovery in these proceedings runs through written data requests rather than depositions. Parties serve sets of questions and document demands on the applicant, responses are due on short cycles, and disputes over objections are resolved by the hearing examiner. The volume is substantial in a general case, and the responses become exhibits, which is why a utility's answers to data requests receive as much internal review as its filed testimony.

The schedule and the hearing

The commission or its hearing examiner issues a procedural schedule shortly after the filing. It sets the intervention deadline, discovery cutoffs, dates for staff and intervenor testimony, rebuttal, the hearing, and post-hearing briefs. Public comment hearings are commonly held in the service territory, separately from the evidentiary hearing, and the comments received are part of the record even though they are not sworn testimony subject to cross-examination.

The evidentiary hearing is conducted on pre-filed testimony. Witnesses adopt their written direct or rebuttal testimony under oath and are then cross-examined, which compresses the hearing considerably and shifts the real work into the discovery and testimony phases. Exhibits are marked and admitted, objections are ruled on by the examiner, and the record closes.

The order that follows must, in a contested case, contain findings of fact and a written opinion setting out the reasons prompting the decision. That requirement is not formal. It supplies the basis on which the order will be reviewed, and an order resting on findings the record does not support is the classic candidate for reversal under the process described in rehearing an order, and appealing it.

What the order actually determines is built up from the components described in the revenue requirement and how it is built and what enters the rate base. A large share of cases never reach a fully litigated order at all, resolving instead through the process described in settling a rate case instead of litigating it, which changes what the commission must find and what the record has to contain.