On June 19, 2019, the Oregon Court of Appeals issued an opinion in Calpine Energy Solutions, LLC v. Oregon Public Utility Commission (Oregon Commission or OPUC), reversing the OPUC’s approval of PacifiCorp’s Transition Adjustment Mechanism (TAM). The core decision by the Court is that a state regulatory agency, like the Oregon Commission, must make its decision based on the evidence brought before it and not information or decisions from prior cases.
The TAM identifies the transition adjustment for customers that wish to move to direct access service. Direct access service is a program whereby a utility’s non-residential customers may refuse utility service and acquire their electric supply directly from a separate electricity service supplier. The purpose of the transition adjustment is to compensate the utility for investments the utility made in anticipation of continuing to serve that customer’s load, which would in theory be stranded and consequently shifted to the utility’s remaining customers without the transition adjustment.
The Oregon Commission, in a prior proceeding, had directed PacifiCorp to file a tariff that allows for a five-year opt-out program for customers that wish to move to direct access and pay the fixed transition charges for those five years. PacifiCorp then requested, and the Oregon Commission approved, an additional element to the transition adjustment referred to as the “opt-out charge,” which would be imposed on direct access customers based on fixed generation resources off-set by the value of freed-up power made available during years 6-10 after the customer leaves the utility. Upon approval of that charge, the OPUC directed PacifiCorp to file a new proceeding to implement it.
PacifiCorp’s compliance filing showed this “opt-out charge” as increasing over time at the rate of inflation. In response, Calpine Energy Solutions, LLC (Calpine), an electricity service supplier, offered new argument and evidence showing that the cost would actually decrease due to accumulated depreciation. The Commission ultimately found that it was reasonable for PacifiCorp to assume that fixed generation costs will increase at the rate of inflation.
The Oregon Court of Appeals reversed the Oregon Commission, finding that the minimal evidence offered by PacifiCorp in response to Calpine did not provide the OPUC with substantial evidence upon which to find that PacifiCorp’s rate was reasonable. This is due, in part, to the Oregon Commission’s statement in its final order that it had previously addressed the claim in the prior proceeding. The Court of Appeals found that the Oregon Commission was not required under the law to maintain consistency with its prior orders, and that it must determine in the record in each proceeding whether a utility’s rates and charges are just and reasonable. Because, in part, the Court found that the Commission relied on evidence from the prior case, rather than the evidence in case before it, the Court reversed the OPUC’s decision and remanded the case back to the agency for further proceedings.
This case has implications for present and future administrative proceedings before the OPUC. On a going forward basis, the Oregon Commission will likely be careful in the future to not rely on its past decisions when deciding its cases, and advocates before the Commission should be careful to submit any relevant evidence from prior proceedings within the administrative record of later proceedings. The Commission also may draft more detailed decisions that more clearly articulate its findings of fact.
Disclaimer
These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.
