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Washington Gas Energy Services, Inc. v. Dist. of Columbia Public Service Commission

March 9, 2006

WASHINGTON GAS ENERGY SERVICES, INC., PETITIONER,
v.
DISTRICT OF COLUMBIA PUBLIC SERVICE COMMISSION, RESPONDENT.
PEPCO ENERGY SERVICES, INC., PETITIONER,
v.
DISTRICT OF COLUMBIA PUBLIC SERVICE COMMISSION, RESPONDENT.



Petitions for Review of Orders of the District of Columbia Public Service Commission (PSC13478 & PSC13479).

The opinion of the court was delivered by: Fisher, Associate Judge

Argued December 16, 2005

Before SCHWELB, REID and FISHER, Associate Judges.

This is a case about administrative rulemaking. D.C. Code § 34-912 (b)(1) (2001 ed.) allows the Public Service Commission (PSC) to issue assessments to public utilities, electricity suppliers, and others in order to recover the amount of its own budget and that of the Office of People's Counsel (OPC). In these petitions consolidated for review, Washington Gas Energy Services, Inc. (WGES) and Pepco Energy Services, Inc. (PES) challenge the fiscal year (FY) 2003 and FY 2004 assessments imposed on them by the PSC. We conclude the PSC committed fatal procedural errors in promulgating the formula through which the assessments were made. Given the prohibition against engaging in retroactive rulemaking without express legislative authority, it is now too late to repair the damage for those two fiscal years. We do not reach petitioners' substantive challenges to the PSC's formula.*fn1

I. Factual Background

Prior to 2000, the electricity market in the District was monopolistically held by Pepco, which was responsible for generating, transmitting, and delivering electricity. Pepco was directly regulated by the PSC, as were the other public utilities in the city. In December of 1999, the Council of the District of Columbia passed the "Retail Electric Competition and Consumer Protection Act of 1999," effectively deregulating the retail supply of electricity in the District. D.C. Law 13-107, 47 D.C. Reg. 1091 (May 9, 2000), codified at D.C. Code § 34-1501 et seq. Electricity deregulation created new entities called "electricity suppliers." These "electricity suppliers" are distinct from "electric companies," which are still considered public utilities.*fn2

Under the old regulatory scheme, the public utilities were required to reimburse the District for the budgets of the PSC and the OPC by paying assessments levied on them by the PSC. D.C. Code § 43-612 (b)(1) (1999 Supp.) (recodified in 2001 ed. as D.C. Code § 34-912 (b)(1)). In order to accurately assess the public utilities, PSC established a revenue-based formula through rulemaking. 15 DCMR § 1300.1 et seq. (1999 Supp.). The term "public utilities" from the pre-2000 regulatory scheme included electric companies. D.C. Code § 43-203 (1999 Supp.).

As part of deregulation, the Council amended § 34-912 (b) to permit the PSC to assess electricity suppliers, as well as public utilities and telecommunications providers, in order to recover the PSC and OPC budgets. D.C. Code § 34-912 (b)(1). Specifically, the PSC was granted authority to assess each electricity supplier annually based on a formula that "shall be determined by the Public Service Commission." D.C. Code § 34-912 (b)(2) (2001 ed.). During the events at issue here, § 34-912 read, in relevant part, as follows:

(b)(1) All amounts appropriated for the Public Service Commission and the Office of People's Counsel for each fiscal year . . . shall be repaid during such fiscal year by the electricity suppliers and telecommunications services providers as a reimbursement fee.*fn3

(2) The amount of the reimbursement fee to be paid by each electricity supplier and local exchange carrier . . . authorized to provide service in the District, and the formula through which such an amount shall be annually established, shall be determined by the Public Service Commission.

WGES and PES entered the District's electricity market on January 2, 2001, and February 1, 2001, respectively. Apparently, no effort was made to assess them for a portion of the PSC or OPC budgets for FY 2001 or FY 2002.

On August 22, 2003, toward the end of fiscal year 2003, the PSC issued orders assessing both petitioners for what the PSC claimed were their portions of the FY 2003 budgets of the PSC and OPC.*fn4 The PSC did not explain how it had calculated the amounts in the assessments -- it simply sent them a bill. Both petitioners promptly filed an application for reconsideration. On February 6, 2004, the PSC issued Order No. 13062, which granted the applications for reconsideration and vacated the August 22, 2003, assessments. The PSC also acknowledged that the formula used to calculate the electricity suppliers' assessments as contemplated by D.C. Code § 34-912 (b)(2) was a "rule" within the meaning of the District of Columbia Administrative Procedure Act (DCAPA). See D.C. Code § 2-505 (a) (defining "rule") (2001 ed.). The PSC further admitted that petitioners were not "public utilities" covered by the Commission's then-existing assessment regulations. 15 DCMR § 1300.1 et seq. See note 2 supra.

Six months later, on August 5, 2004, the PSC issued a "Notice of Proposed Assessment" to each petitioner (emphasis supplied). In these two notices, the PSC proposed that WGES and PES pay the same amounts for FY 2003 as reflected in the August 22, 2003, orders. The PSC used the notices to explain what formula it would use to calculate the assessments, to give its reasons for using that formula, and to give the petitioners thirty days to file comments. The formula the PSC proposed using was the same revenue-based formula it had devised to assess all public utilities in the pre-2000 regulatory scheme.*fn5

Although both petitioners objected to that formula and the FY 2003 assessments, the PSC soon thereafter issued assessments for FY 2004 on September 17, 2004.*fn6 Those FY 2004 assessments used the same formula outlined in the FY 2003 assessments proposed on August 5. Petitioners promptly objected to the FY 2004 assessments and formula. On January 7, 2005, the PSC rejected petitioners' objections to the FY 2003 and FY 2004 assessments. On that day, it finalized the reimbursement fee and the methodology used to derive that fee and ordered the ...


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