Gearhart v. PUC , 356 Or. 216 ( 2014 )

216 October 2, 2014 No. 63
IN THE SUPREME COURT OF THE
STATE OF OREGON
Frank GEARHART;
Patricia Morgan;
Kafoury Brothers, Inc.,
Petitioners on Review,
and
UTILITY REFORM PROJECT,
Petitioner,
v.
PUBLIC UTILITY COMMISSION OF OREGON
and Portland General Electric Company,
Respondents on Review.
(PUC 08487, 09093; CA A140317; SC S061517 (Control))
Frank GEARHART;
Patricia Morgan;
Kafoury Brothers, Inc.,
Petitioners,
and
UTILITY REFORM PROJECT,
Petitioner on Review,
v.
PUBLIC UTILITY COMMISSION OF OREGON
and Portland General Electric Company,
Respondents on Review.
(PUC 08487, 09093; CA A140317; SC S061518)
En Banc
On review from the Court of Appeals.*
Argued and submitted March 4, 2014.
Linda K. Williams, Portland, argued the cause and filed
the briefs for petitioners on review Gearhart, Morgan, and
Kafoury Brothers, Inc.
______________
*  Judicial review of an order of the Public Utility Commission, 255 Or App
58, 299 P3d 533 (2013).
Cite as 356 Or 216 (2014) 217
Daniel W. Meek, Portland, argued the cause and filed the
brief for petitioner on review Utility Reform Project.
Michael A. Casper, Deputy Solicitor General, Salem,
argued the cause and filed the brief for respondent on review
Public Utility Commission of Oregon. With him on the brief
were Ellen F. Rosenblum, Attorney General, and Anna M.
Joyce, Solicitor General.
James N. Westwood, Stoel Rives LLP, Portland, argued
the cause and filed the brief for respondent on review
Portland General Electric Company. With him on the brief
was Rachel C. Lee.
Scott G. Seidman, Portland, filed a brief for amicus
curiae Edison Electric Institute.
Katherine McDowell, McDowell Rackner & Gibson PC,
Portland, filed a brief for amici curiae Avista Corporation,
Idaho Power Company, Northwest Natural Gas Company,
and PacifiCorp. With her on the brief was Lisa Rackner.
G. Catriona McCracken, Portland, filed a brief for amicus
curiae Citizens’ Utility Board of Oregon. With her on the
brief were Sommer Templet and Ray Myers.
BALMER, C. J.
The decision of the Court of Appeals and the order of the
Public Utility Commission are affirmed.
On remand from the Court of Appeals of earlier rate orders, the Public
Utilities Commission (PUC) issued Order No. 08-487, now before the court on
judicial review in this case. In the order, the PUC had reexamined the rates
it would have set for 1995-2000 if it had not made a legal error, concluded that
the post-2000 rates would have been lower without the legal error, and ordered
Portland General Electric (PGE) to order a refund to the post-2000 ratepayers.
The Court of Appeals upheld the PUC order. Held: (1) The PUC had authority
to take the actions in the order, including reexamining the rates, ordering the
refund, and allowing PGE to recover interest on its investment to account for
the time value of money; and (2) the PUC order was supported by substantial
evidence in the record.
The decision of the Court of Appeals and the order of the Public Utility
Commission are affirmed.
218 Gearhart v. PUC
BALMER, C. J.
At issue in this case is an order of the Public
Utility Commission (PUC) that addressed Portland
General Electric’s (PGE) recovery of its capital investment
in the Trojan nuclear generating facility after that facil-
ity was retired from service. In that order, the PUC made
three key decisions that are now before this court. First, to
determine whether a legal error that the PUC had made in
an earlier rate case had affected rates that the PUC had
authorized PGE to charge, the PUC reexamined those ear-
lier rates. Second, in undertaking that reexamination, the
PUC determined that PGE had been required to recover
its capital investment over time, and that the rates there-
fore should have included interest to account for the time
value of money. Third, the PUC determined that, despite
the legal error, the rates that it had authorized for the 1995
to 2000 time period were just and reasonable, but that
to make the post-2000 rates just and reasonable, it was
required to order a refund to the post-2000 ratepayers. In
affirming the PUC order, the Court of Appeals concluded
that the PUC had not erred in making those three deter-
minations. We affirm the decision of the Court of Appeals
and the order of the PUC.
This case dates back to 1976, when PGE began com-
mercial operation of the Trojan nuclear generating facil-
ity. Initially, PGE was allowed to recover its investment in
that facility through rates charged over a 35-year period.
Problems with the facility and other considerations led
PGE to retire Trojan in 1993, before the end of that 35-year
period. Since that time, PGE, the Utility Reform Project
(URP), and plaintiffs (the Class Action Plaintiffs, or CAPs)
in two class action cases against PGE have argued before
the PUC, the Court of Appeals, and this court about PGE’s
recovery of the remaining balance of its capital investment
in Trojan and about whether and to what extent ratepayers
can recover their payments of certain amounts associated
with the retired Trojan facility.1
1
As discussed below, the CAPs are class action plaintiffs representing PGE
ratepayers from the period of April 1995 through September 2000 in two class
action cases against PGE.
Cite as 356 Or 216 (2014) 219
The order at issue here, PUC Order No. 08-487,
followed the Court of Appeals’ remand of three prior PUC
orders involving PGE’s ability to recover the remaining bal-
ance of its investment in Trojan through rates. The Court
of Appeals in this case affirmed the PUC’s order, reject-
ing arguments by URP and the CAPs that the PUC had
exceeded its authority on remand. Gearhart v. PUC, 255 Or
App 58, 104-05, 299 P3d 533 (2013). Judge Schuman dis-
sented, arguing that the methodology used by the PUC went
beyond the scope of the remands and that the case should
have been remanded to the PUC for further proceedings.
Id. at 105, 113 (Schuman, J., dissenting). For the reasons
discussed below, we affirm the Court of Appeals.
I.  PUBLIC UTILITY RATEMAKING
We begin with a brief overview of public utility
ratemaking. Public utilities exhibit characteristics of nat-
ural monopolies. For that reason, public utilities often are
granted exclusive territories within which to operate, and
many aspects of public utility operation are closely regulated
by public utility commissions. See Charles F. Phillips, Jr.,
The Regulation of Public Utilities 4 (2d ed 1988) (explaining
that public utilities are unique because they operate more
efficiently as monopolies, they must be regulated to ensure
they contribute to the general welfare, there is a high degree
of public interest in the services rendered, and administra-
tive commissions have jurisdiction over rates and services).
In Oregon, the PUC’s responsibilities include “establishing
fair and reasonable rates” for services provided by public
utilities. ORS 756.040(1).2
2
ORS 756.040(1) provides:
“In addition to the powers and duties now or hereafter transferred to or
vested in the Public Utility Commission, the commission shall represent the
customers of any public utility or telecommunications utility and the public
generally in all controversies respecting rates, valuations, service and all
matters of which the commission has jurisdiction. In respect thereof the com-
mission shall make use of the jurisdiction and powers of the office to pro-
tect such customers, and the public generally, from unjust and unreasonable
exactions and practices and to obtain for them adequate service at fair and
reasonable rates. The commission shall balance the interests of the utility
investor and the consumer in establishing fair and reasonable rates. Rates
are fair and reasonable for the purposes of this subsection if the rates pro-
vide adequate revenue both for operating expenses of the public utility or
220 Gearhart v. PUC
The statutes direct the PUC to examine three key
components in ratemaking. First, the PUC determines the
utility’s operating expenses, such as wages, fuel, mainte-
nance, and taxes. See id. (fair and reasonable rates allow
recovery of revenue “for operating expenses”); see also
Phillips, The Regulation of Public Utilities at 169. Second, the
statute provides that rates should provide adequate revenue
“for capital costs of the utility.” ORS 756.040(1). That amount
is represented in the PUC’s calculation of rate base. Although
the term “rate base” is not defined by statute, it is under-
stood within public utility ratemaking to represent “the net
or depreciated value of the tangible and intangible property,
or net investment in the property,” although there are lim-
itations on what may be included in rate base. Phillips, The
Regulation of Public Utilities at 169-70. Third, the PUC must
determine the appropriate rate of return on the utility’s capi-
tal investment. See ORS 756.040(1) (fair and reasonable rates
allow recovery of “capital costs of the utility, with a return
to the equity holder * * * [c]ommensurate with the return on
investments in other enterprises having corresponding risks”
and “[s]ufficient to ensure confidence in the financial integ-
rity of the utility”); see also Phillips, The Regulation of Public
Utilities at 170. The rate of return should “be fair to investors
so as to avoid the confiscation of their property” and “pre-
serve the credit standing of the utility to enable it to attract
new capital to maintain, improve, and expand its services.”
Phillips, The Regulation of Public Utilities at 170.
Taken together, those components are represented
in the following formula: R = E + (V    – d)r, where “R” rep-
resents the revenue requirement, “E” represents allowable
operating expenses, “V” represents rate base, “d” represents
accumulated depreciation, and “r” represents the rate of
return. In calculating those components, and in calculating
“adequate revenue,” there is no single correct sum, but rather
a range of reasonable rates. See Phillips, The Regulation of
telecommunications utility and for capital costs of the utility, with a return
to the equity holder that is:
“(a)  Commensurate with the return on investments in other enterprises
having corresponding risks; and
“(b)  Sufficient to ensure confidence in the financial integrity of the util-
ity, allowing the utility to maintain its credit and attract capital.”
Cite as 356 Or 216 (2014) 221
Public Utilities at 173 (“[T]he required earnings of a utility
cannot be represented by a specific sum, nor determined by
a precise formula.”); PUC Order No. 08-487 at 7 (noting that
the Commission uses this “standard ratemaking formula” to
determine how much revenue a utility should receive).
When the PUC makes those calculations and sets
rates, it is performing a quasi-legislative function. Dreyer v.
PGE, 341 Or 262, 282, 142 P3d 1010 (2006). Rate orders are
prospective, Valley & Siletz R. R. Co. v. Flagg, 195 Or 683,
715, 247 P2d 639 (1952), but, “[i]n determining the amount
of each of the terms in the ratemaking formula and in mak-
ing its estimate of revenues under the proposed rates, the
[PUC] looks at data for a given ‘testyear’ either in the past,
present, or future.” Stefan Krieger, The Ghost of Regulation
Past: Current Applications of the Rule Against Retroactive
Ratemaking in Public Utility Proceedings, 1991 U Ill L Rev
983, 995 (1991); see PUC Order No. 08-487 at 12 (listing test
year estimates of power costs for 1995 and 1996 as one factor
affecting estimated revenue requirement). The use of a test
year results in rates that inherently are based on estimates
that may overcompensate or undercompensate utilities. See
Krieger, 1991 U Ill L Rev at 995, 995 n 52; see also Phillips,
The Regulation of Public Utilities at 188 (“[T]he actual rate
of return earned by a utility may be quite different from the
rate allowed by the commission.”); PUC Order No. 08-487 at
7 (“The utility absorbs the expenses if they are higher than
expected and benefits if the expenses are lower, which gives
the utility the incentive to manage its operations efficiently
*  *.”). In sum, ratemaking is a unique enterprise that is
*
governed by statute but largely left to the PUC’s discretion.
See Springfield Education Assn. v. School Dist., 290 Or 217,
230, 621 P2d 547 (1980) (explaining that the PUC is empow-
ered to “make delegated policy choices of a legislative nature
within the broadly stated legislative policy”).
II.  FACTUAL BACKGROUND AND
PROCEEDINGS BELOW
There are three separate, but related, proceedings
that are relevant on review. We describe those three pro-
ceedings in detail to provide the background necessary for
222 Gearhart v. PUC
understanding the order at issue in this case, PUC Order
No. 08-487.
A.  Rate Case After Trojan’s Closure: PUC Order No. 95-322
in UE 88 and Trojan I
PGE began commercial operation of the Trojan
nuclear facility in 1976. At that time, the PUC allowed PGE
to recover its investment in Trojan by including that amount
in rates over a 35-year period. PGE also had the opportunity
to earn a return on its investment in Trojan because PGE’s
investment in the facility was included in rate base.
PGE retired the facility in 1993, before the end of
the 35-year period for recovering its investment, because,
as the PUC explained in PUC Order No. 08-487, “PGE con-
cluded that closing the plant was the least-cost option for its
customers, meaning that closing Trojan and replacing its
output with purchased power was expected to be less expen-
sive than continuing to operate the plant.”
After retiring the Trojan facility, PGE sought a
declaratory ruling on whether PGE could recover in rates
the remaining balance of its capital investment in the
Trojan facility. In PUC Order No. 93-1117, the PUC declared
that “if PGE met certain conditions and could show certain
‘assumed facts’ to be true in a rate case or similar forum,
then PGE could set rates to obtain both a ‘return of’ and
a ‘return on’ its Trojan investment.” Dreyer, 341 Or at 267(emphasis in original; footnote omitted) (summarizing PUC
Order No. 93-1117). URP and the Citizens’ Utility Board
(CUB) challenged that order in circuit court, and the court
summarily affirmed. Id. URP and CUB appealed.
Meanwhile, the PUC conducted a rate case consis-
tent with PUC Order No. 93-1117, which resulted in PUC
Order No. 95-322. PUC Order No. 95-322 set PGE’s rates
to include both a return of and a return on PGE’s invest-
ment in the Trojan facility.3 See Utility Reform Project v.
PUC, 215 Or App 360, 365, 170 P3d 1074 (2007) (Trojan
II) (so noting). URP and CUB had intervened in the
rate case, and they challenged the order in circuit court.
3
Those rates were in effect from 1995 to 2000.
Cite as 356 Or 216 (2014) 223
Id.4 The court concluded that PGE could not recover a
return on its investment in Trojan and reversed. Id. PGE
and the PUC appealed.
The Court of Appeals consolidated the two appeals
and analyzed the two statutes at issue—ORS 757.140(2),
which addressed the inclusion of undepreciated investments
in rates, and ORS 757.355, which addressed the exclusion of
certain costs from rates.5 The court held that, “read together,
ORS 757.140(2) and ORS 757.355 allow only the principal
amount of the undepreciated investment to be recovered
through rates.” Citizens’ Utility Board v. PUC, 154 Or App
702, 714, 962 P2d 744 (1998) (Trojan I). In other words, the
court held, “ORS 757.140(2) authorizes rates that would reim-
burse the utility for its principal investment in retired capital
assets”—a return of PGE’s investment—“but it does not autho-
rize the return on the investment that ORS 757.355 proscribes.”
Id. at 716. The court “reversed and remanded with instruc-
tions to remand [the] orders to PUC for reconsideration.” Id.
at 717. As explained below, the PUC addressed that remand in
PUC Order No. 08-487, now at issue before this court.6
B.  Rates Implementing Settlement: PUC Order No. 00-601
in UM 989, PUC Order No. 02-227, and Trojan II
Following the Court of Appeals’ decision in Trojan I,
CUB and PGE agreed to a settlement that removed the
4
As discussed below, the procedure for challenging PUC orders was changed
in 2005, and judicial review proceedings are now filed in the Court of Appeals.
5
ORS 757.140(2) now (as then) provides, in part, that “the commission may
allow in rates, directly or indirectly, amounts on the utility’s books of account
which the commission finds represent undepreciated investment in a utility
plant, including that which has been retired from service * * * [w]hen the commis-
sion finds that the retirement is in the public interest.” At the time, ORS 757.355
(1993) provided that “[n]o public utility shall, directly or indirectly, by any device,
charge, demand, collect or receive from any customer rates which are derived
from a rate base which includes within it any construction, building, installation
or real or personal property not presently used for providing utility service to the
customer.” The legislature amended ORS 757.355 in 2003, but no party argues
that those amendments are material to this case. See Or Laws 2003, ch 202, § 2.
All references to ORS 757.355 are to the 1993 version of the statute.
6
The PUC and PGE sought review of the court’s decision in Trojan I. This
court granted review, but held the case in abeyance based on settlement talks
between PGE and CUB, as well as pending legislation that could have affected
the case. See Dreyer, 341 Or at 269. After PGE and CUB reached a settlement,
which the PUC approved, this court dismissed the petition for review on its own
motion. Id. at 269-70.
224 Gearhart v. PUC
remaining balance of PGE’s investment in the Trojan facility
from PGE’s balance sheet entirely by offsetting that amount
against existing credits owed to PGE’s ratepayers. Trojan
II, 215 Or App at 366. The theory behind the settlement was
that the parties could end the controversy over Trojan by
removing the remaining balance from PGE’s books. Dreyer,
341 Or at 269. As a result, following the settlement, rates
would no longer include a return of or a return on PGE’s
investment in Trojan. The PUC approved revised rate sched-
ules implementing the settlement in PUC Order No. 00-601,
and the rates went into effect in October 2000. Id.URP, however, was not a party to the settlement,
and it filed a complaint with the PUC challenging the rates
that the PUC imposed to implement the settlement. Trojan
II, 215 Or App at 366. Among other things, URP argued
that the rates did not provide a mechanism for recovery of
amounts collected under the 1995 to 2000 rates that were
attributable to a return on PGE’s investment in Trojan.
The PUC rejected all of URP’s arguments in PUC Order
No. 02-227, reasoning, in part, that it had no authority to
order refunds. Id. at 367. URP sought review of PUC Order
No. 02-227 in circuit court, and the court determined that
PGE should have been required to issue refunds for the
“ ‘unlawfully collected rates as a matter of law.’  Id. at 368
”
(quoting circuit court). The court reversed and remanded,
directing the PUC “  immediately revise and reduce the
‘to
existing rate structure’  or “  order PGE to immediately
” ‘to
issue refunds’  to allow ratepayers to recover any amounts
”
attributable to a return on PGE’s investment in Trojan. Id.
at 368 (quoting circuit court). The PUC and PGE appealed.
The Court of Appeals vacated and remanded. Id. at
376. The Court of Appeals reasoned that the PUC had relied
on an incorrect interpretation of ORS 757.225 in concluding
that it had no authority to issue refunds.7 Accordingly, the
7
ORS 757.225 provides:
“No public utility shall charge, demand, collect or receive a greater or
less compensation for any service performed by it within the state, or for any
service in connection therewith, than is specified in printed rate schedules as
may at the time be in force, or demand, collect or receive any rate not speci-
fied in such schedule. The rates named therein are the lawful rates until they
are changed as provided in ORS 757.210 to 757.220.”
Cite as 356 Or 216 (2014) 225
court concluded that the order had to be remanded to the
PUC for reconsideration in light of the correct interpretation
of that statute. Id. at 373. Moreover, the court noted, the cir-
cuit court’s remand instructions were erroneous because the
court improperly had assumed that the PUC had authority
to offer a remedy and was required to exercise that author-
ity. Id. at 374. The Court of Appeals explained that those
issues had to be resolved by the PUC in the first instance,
and the court vacated the judgment and “remanded to cir-
cuit court with instructions to remand Order No. 02-227 to
PUC for reconsideration of issues raised on appeal and cross-
appeal.” Id. at 375-76. That remand also was addressed in
PUC Order No. 08-487, now at issue before this court.
C.  The CAPs’ Claims Against PGE: Mandamus Proceeding
in Dreyer
After Trojan I, the CAPs filed an action against PGE
in circuit court alleging, among other things, that PGE was
liable for damages under ORS 756.185. See ORS 756.185(1)
(providing that public utility is liable to person injured for
damages sustained when public utility “does, or causes or
permits to be done, any matter, act or thing prohibited by
ORS chapter 756, 757 or 758 or omits to do any act, matter
or thing required to be done by such statutes”). The CAPs
alleged that they were entitled to damages for rates paid
between 1995 and 2000 because PGE had violated ORS
757.355 by charging rates that included a return on PGE’s
investment in Trojan.
After the circuit court denied PGE’s motion to
dismiss, PGE sought a writ of mandamus from this court
directing the circuit court to dismiss the case. Dreyer, 341
Or at 275-76. In Dreyer, we held that we could not issue a
peremptory writ ordering the circuit court to dismiss the
case because we concluded that the CAPs’ claim under ORS
756.185 had a basis in law. Id. at 279-80, 283. In particular,
we rejected PGE’s argument that ORS 757.225, which pro-
hibits public utilities from collecting rates greater or lesser
than those approved by the PUC, made the rates approved
by the PUC and charged by PGE between 1995 and 2000
necessarily lawful. See id. at 279-80 (explaining that ORS
757.225 “is not aimed, as PGE suggests, at conclusively and
226 Gearhart v. PUC
permanently binding the entire world to the rate decisions
of the PUC”). In other words, we rejected PGE’s argument
that ORS 757.225 embodies a strict version of the “filed rate
doctrine” that would treat all PUC-approved rates as con-
clusively lawful until changed, and to bar any claim by the
CAPs for damages based on the PUC-approved rates that
PGE had charged between 1995 and 2000. See id. at 278-
80.8 Dreyer also rejected PGE’s argument that the circuit
court lacked jurisdiction to hear the case because it inher-
ently would involve ratemaking. See id. at 282 (concluding
that one approach for addressing damages might “invade
the PUC’s exclusive ratemaking authority,” but that alter-
native approach might not do so).
Nonetheless, we concluded that the circuit court
had “a legal duty to abate the proceedings” because the PUC
remand proceedings for PUC Order No. 95-322 involved
“(essentially) the same controversy.” Id. at 283. We reasoned
that the PUC had primary jurisdiction “to determine what,
if any, remedy it [could] offer to PGE ratepayers.” Id. at 286.
We went on to explain that, if the PUC could provide a rem-
edy, the CAPs’ claims might become moot. Id. We issued
a peremptory writ ordering the circuit court to abate the
CAPs’ case.
D.  Order at Issue on Review: PUC Order No. 08-487
Following the three appellate cases discussed above,
the PUC conducted further proceedings and issued a 106-page
order addressing the Trojan I and Trojan II remands. That
order began by resolving three threshold issues. First, the
PUC explained that Trojan I had not declared the 1995 to
2000 rates unlawful, but rather had held that the rate order
was based on an error of law. The PUC concluded that even
if the rate order was erroneous, the overall rates themselves
could be lawful.
Second, the PUC determined that it had authority
to order a utility to issue refunds in limited circumstances,
including when necessary to “remedy an error identified by
8
The filed rate doctrine provides that “any rate filed with and approved by
the relevant ratemaking agency represents a contract between the utility and the
customer and is conclusively lawful until a new rate is approved.” Dreyer, 341 Or
at 270 n 10.
Cite as 356 Or 216 (2014) 227
a reviewing court on appeal.” The PUC appeared to conclude
that that authority stemmed from ORS 756.040, which gives
the PUC authority to do “all things necessary and conve-
nient” in the exercise of its legislatively delegated powers.
Third, the PUC clarified its understanding of this
court’s decision in Dreyer, particularly noting that this court
had not determined the scope of the filed rate doctrine or its
impact on the PUC’s remedial authority. On the contrary,
noted the PUC, this court had left it to the PUC to deter-
mine in the first instance whether and to what extent the
PUC had remedial authority.
In applying those legal principles, the PUC con-
cluded that its task was to determine whether the 1995 to
2000 rates and the post-2000 settlement rates were just
and reasonable. The PUC began by examining what rates
it would have approved for the period from 1995 to 2000 if
it had known that it could not authorize PGE to recover a
return on its investment in Trojan. The PUC concluded that
it had to “undertake a comprehensive review of the rate-
making decisions” at issue in Trojan I as a “natural con-
sequence of [the PUC’s] statutory and constitutional man-
dates.” Although the PUC acknowledged that in doing so
it would not be setting rates, it concluded that ratemaking
principles should guide its analysis. In adopting that frame-
work, the PUC rejected URP’s argument that the PUC
could simply remove the return on investment in Trojan
from rates “while holding all other rate determinations con-
stant.”9 Instead, the PUC’s review involved reexamining ele-
ments of the revenue requirement that were affected by the
decision in Trojan I, and then comparing the new revenue
requirement with that approved in 1995. In undertaking
that review, the PUC reopened the record to allow the PUC
to consider new evidence in light of Trojan I.
The PUC analyzed aspects of its ratemaking deci-
sion in PUC Order No. 95-322 that it believed would have
been affected by Trojan I. Before this court, URP and the
9
According to URP, using its proposed method, PGE would owe the 1995 to
2000 ratepayers $522.8 million, which includes interest. URP further contends
that PGE owes the post-2000 ratepayers $436.4 million. As discussed below,
using the PUC’s method, the only refund ordered was $33.1 million to the post-
2000 ratepayers.
228 Gearhart v. PUC
CAPs challenge the PUC’s decision to use a different amor-
tization period for return of PGE’s investment in Trojan
than it had used when it set rates previously and its related
decision to reexamine rates as if PGE had been allowed to
recover interest on the undepreciated balance during that
shorter amortization period.
In undertaking its reexamination, the PUC short-
ened the amortization period from 17 years to 10 years
because, without the opportunity to earn a return on its
investment in Trojan, recovery of PGE’s investment over
17 years “would likely increase PGE’s risk profile.”10 Because
of that “opportunity cost,” the PUC concluded that, had it
not provided for a return on PGE’s investment, it would have
used the shorter period of 10 years to “equitably allocate the
benefits and burdens while allowing quicker recovery to off-
set any increase in PGE’s risk profile.”
Moreover, the PUC concluded, if it had not allowed
PGE to earn a return on its investment, it would have
allowed it to recover “some form of interest—not profit—to
compensate the utility for the delayed recovery of the invest-
ment.” Although the PUC noted that it often uses a utility’s
authorized rate of return as the applicable interest rate, it
concluded in its reexamination that it would have used a
different interest rate because of Trojan I. The PUC used
the 1994 United States Treasury 10-year bond rate, which
was 7.09 percent, reasoning that that rate would reflect only
the time value of money, and not any risk premiums, profit,
or other return on investment.11
Based on the shorter amortization period, the inclu-
sion of interest, and other adjustments that the PUC made in
10
The PUC originally had chosen the 17-year amortization period because it
had allowed PGE to continue to include its undepreciated investment in Trojan
in rate base, and there were 17 years left in the original 35-year amortization
period at that time. In setting these rates, the PUC is directed by statute to pro-
vide “a return to the equity holder that is: (a) Commensurate with the return on
investments in other enterprises having corresponding risks; and (b) Sufficient
to ensure confidence in the financial integrity of the utility, allowing the utility
to maintain its credit and attract capital.” ORS 756.040(1).
11
In contrast, in its original rate order, PUC Order No. 95-322, “PGE’s pre-
tax rate of return was 13.22 percent for 1995 and 13.34 percent from 1996 for-
ward. PGE’s authorized rate of return was 9.51 percent in 1995 and 9.6 percent
from 1996 forward.” See PUC Order No. 08-487 at 62 n 227.
Cite as 356 Or 216 (2014) 229
its reexamination, the PUC concluded that the 1995 to 2000
rates would have been $4.03 million higher than the authorized
rates. Because ratepayers would have had to pay $4.03 mil-
lion more in rates during the 1995 to 2000 time period if the
PUC had not made the legal error identified in Trojan I, the
PUC reasoned that “there [was] no basis to conclude that the
error identified in Trojan I * * * resulted in unjust and unrea-
sonable rates” during that period. In other words, because the
PUC’s error had benefitted ratepayers by creating rates that
were too low, the rates that the ratepayers actually had paid
could not have been unjust and unreasonable.
The PUC went on to explain that its recalculation
of the 1995 to 2000 rates also would have affected the rates
it would have set following the 2000 settlement. Specifically,
the PUC concluded that, had it used the shorter amortiza-
tion period, the result would have been a remaining Trojan
balance at the time of settlement that was $15.4 million less
than the balance that it had actually used to calculate the
settlement. Thus, fewer offsetting ratepayer credits would
have been needed to remove the remaining Trojan balance
from PGE’s books. That, in turn, would have left more cred-
its on PGE’s books to benefit ratepayers following the 2000
settlement. Because the PUC concluded that it had remedial
authority, the PUC determined that it could compensate the
post-2000 ratepayers for the difference between the rates
approved following settlement and the rates that would have
been approved if the remaining balance had been $15.4 mil-
lion lower. The PUC ordered PGE to issue a refund to the post-
2000 ratepayers to compensate for the amount of that differ-
ence plus interest at PGE’s authorized rate of return from
2000—9.6 percent—for a total refund amount of $33.1 mil-
lion. With the $33.1 million refund as an adjustment to the
settlement that had originally produced the post-2000 rates,
the PUC concluded that “the settlement was reasonable and
appropriate, and that the resulting rates were just and rea-
sonable.” The PUC rejected URP’s remaining challenges to
the settlement rates.
E.  The Court of Appeals Decision
The Court of Appeals affirmed. Gearhart, 255 Or App
at 105. The court began by addressing the PUC’s authority
230 Gearhart v. PUC
on remand, concluding that the PUC had authority to exer-
cise its broad discretion and reexamine rates for the period
when rates had included an unlawful component. The court
ruled that the PUC could undertake that inquiry to deter-
mine what rates it would have approved in the absence of
error because no judicial instruction limited the PUC from
doing so. Id. at 88. The court also affirmed the outcome
of that inquiry: “We hold that the PUC’s conclusion—that
the inclusion of the unlawful component did not cause the
rates to be unjust or unreasonable and, therefore, has not
resulted in any unrectified damage to ratepayers—was con-
sonant with the remands and with the PUC’s responsibility
* * *.” Id. at 94. In support of that conclusion, the court noted
that the legality of the end result of ratemaking, and not the
legality of each calculation or input, controls. Id.
The court went on to conclude that “[t]he PUC did
not err in allowing PGE interest,” because it was within the
PUC’s discretion to reach that issue and to allow rates to
account for the time value of money. Id. at 95. Moreover, the
court stated, the PUC’s decision to allow interest was not
equivalent to allowing PGE to recover a prohibited return
on its investment, but rather was part of allowing PGE to
recover a return of its investment. Id. at 95-96.
The court next concluded that the PUC had the
authority to order PGE to issue refunds, and the court again
noted the breadth of the PUC’s statutory authority. Id. at
98, 103. The court also noted that the PUC had not engaged
in retroactive ratemaking when it ordered those refunds.12
Id. at 100. The court detailed prior Oregon cases that had
addressed the rule against retroactive ratemaking and rea-
soned that it “is or should be *  * narrow” in Oregon, pro-
*
hibiting the PUC from incorporating past profits or losses in
future rates but allowing certain other retroactive adjust-
ments. Id. at 100. Along those lines, the court held that
the rule “does not prohibit the PUC from determining that
a refund is appropriate when there is a determination on
12
As discussed below, the rule against retroactive ratemaking has been dif-
ferently defined and applied by various courts, but one commentator describes
the rule as “prohibit[ing] a public utility commission from setting future rates
to allow a utility to recoup past losses or to refund to consumers excess utility
profits.” Krieger, 1991 U Ill L Rev at 984.
Cite as 356 Or 216 (2014) 231
judicial review that a timely appealed rate order is errone-
ous.” Id. The Court of Appeals concluded by rejecting URP’s
arguments that certain aspects of the PUC’s order were
not supported by substantial evidence and were outside the
PUC’s discretion. Id. at 103-04.
Judge Schuman dissented. Although he agreed
with most of the majority’s discussion, he argued that prior
appellate decisions limited the PUC’s authority on remand
so that the PUC had to “simply determin[e] the effect on
the previously approved rates of including Trojan in the rate
base.” Id. at 105, 107 (Schuman, J., dissenting). Moreover,
Judge Schuman reasoned that the PUC had violated the law
by including Trojan in the rate base. As a result, the rates
were “unlawful no matter how fair and reasonable they may
be, and the PUC’s role on remand [was] to determine a rem-
edy for that unlawfulness.” Id. at 108, 112-13. The dissent
would have “reverse[d] [the PUC’s] order on the pre-October
2000 rates and remand[ed] the case for further proceed-
ings.” Id. at 113.
The Court of Appeals denied a request for recon-
sideration, and URP and the CAPs petitioned for review.
On review, the parties ask this court to address five issues:
(1) whether the PUC exceeded its authority on remand with
respect to the April 1995 to September 2000 rates and with
respect to the rates implemented in October 2000 after the
settlement; (2) whether the PUC had authority to order PGE
to issue refunds to its customers; (3) whether the PUC erred
in allowing PGE to recover interest; (4) whether the PUC
order was supported by substantial evidence; and (5) whether
the CAPs can proceed with their action against PGE in cir-
cuit court.13
III.  THE PUC’S AUTHORITY ON REMAND
The powers and duties of the PUC, like those of
other executive agencies, are limited to those expressly
13
Since 2005, PUC final orders have been subject to judicial review as orders
in contested cases under the Oregon Administrative Procedures Act (APA). ORS
756.610(1); see also ORS 183.315(6) (noting sections of the APA that do not apply
to the PUC). Under the APA, “[r]eview of a contested case shall be confined to the
record, and the court shall not substitute its judgment for that of the agency as to
any issue of fact or agency discretion.” ORS 183.482(7).
232 Gearhart v. PUC
authorized or necessarily implied by statute. See Ochoco
Const. v. DLCD, 295 Or 422, 426, 667 P2d 499 (1983)
(“[Agency] power includes that expressly conferred by stat-
ute as well as such implied power as is necessary to carry
out the power expressly granted.”). The PUC has express
authority to “establish[  fair and reasonable rates” for util-
]
ity services, and, in doing so, the PUC must “balance the
interests of the utility investor and the consumer.” ORS
756.040(1). As part of that balance, the legislature directed
the PUC to, on the one hand, “protect [public utility] custom-
ers, and the public generally, from unjust and unreasonable
exactions and practices and to obtain for them adequate ser-
vice at fair and reasonable rates,” and, on the other hand, to
establish rates that “provide adequate revenue” for both the
operating expenses and the capital costs of the utility, “with
a return to the equity holder.” Id.In this case, the PUC exercised its ratemaking
authority when it originally issued PUC Order No. 95-322,
allowing PGE to recover both a return of and a return on
its investment in Trojan, and again when it issued the order
implementing the rates agreed to in the settlement between
PGE and CUB. We examine the PUC’s actions on remand in
light of its ratemaking authority and the authority arising
from the binding remand order from the Court of Appeals.14
In particular, we examine the PUC’s actions of reexamin-
ing the rates that it previously had authorized; ordering
PGE to refund a portion of rates that had been collected as
a result of the PUC’s legal error of allowing PGE to recover
a return on its investment in Trojan; and concluding that
it would have allowed PGE to recover interest on the unde-
preciated balance of its investment in Trojan to account for
the time value of money. We begin by examining the scope
of the remand, and then turn to the statutory scheme to
determine whether the PUC had authority to take those
actions.
14
As noted, Trojan II—and the subsequent remand—did not arise directly
out of the PUC’s order setting rates following the PGE and CUB settlement, PUC
Order No. 00-601. Rather, after the PUC issued that order, URP filed a complaint
before the PUC challenging those rates, and it was the order rejecting that chal-
lenge that was at issue in Trojan II, PUC Order No. 02-227. See Trojan II, 215 Or
App at 366-67.
Cite as 356 Or 216 (2014) 233
A.  The Scope of the Remand
PUC rate orders are subject to judicial review.
See ORS 756.610(1) (“[F]inal orders of the Public Utility
Commission are subject to judicial review as orders in con-
tested cases under the provisions of ORS 183.480 to 183.497
[of the APA].”). Although a 2005 law made PUC final orders
subject to review under the APA, the PUC orders at issue
in both Trojan I and Trojan II were subject to review under
the PUC’s own judicial review statutes. See Or Laws 2005,
ch 638, § 6 (amending PUC judicial review statute to bring
review of PUC orders under the APA). Under those stat-
utes, a party aggrieved by a PUC order could bring a suit
against the PUC in circuit court. See former ORS 756.580
(2003), repealed by Or Laws 2005, ch 638, § 21 (allowing a
party “aggrieved by any findings of fact, conclusions of law
or order” to “prosecute a suit against the commission” in cir-
cuit court). The circuit court could “affirm, modify, reverse
or remand the order,” but could not “substitute its judgment
for that of the Public Utility Commission as to any finding
of fact supported by substantial evidence.” Former ORS
756.598(1) (2003), repealed by Or Laws 2005, ch 638, § 21. A
party challenging an order had to show “that the order [was]
unreasonable or unlawful.” Former ORS 756.594 (2003),
repealed by Or Laws 2005, ch 638, § 21 (“[T]he burden of
proof is upon the party seeking to modify, vacate or set aside
findings of fact, conclusions of law or the order to show by
clear and satisfactory evidence that the order is unreason-
able or unlawful.”).
Unlike the APA, the PUC judicial review statutes
did not direct the court to take any particular action when
concluding that the PUC had erred. Compare Mitchell Bros.
Trk. Lines v. Hill, 227 Or 474, 480, 363 P2d 49 (1961) (con-
cluding that the purpose of the PUC judicial review statute
was “to grant to the courts a full scope of review to admin-
ister the relief appropriate to the cause”), with Megdal v.
Board of Dental Examiners, 288 Or 293, 319-20, 605 P2d 273
(1980) (explaining that, under the APA, “[i]f error is found,
the statute provides for reversal, modification, or remand as
appropriate to the character of the error and the agency’s
further role in the matter”). Under general principles of
234 Gearhart v. PUC
administrative law, however, remand usually is the appro-
priate remedy when the court concludes that an agency
has erred. Charles H. Koch, Jr., 3 Administrative Law and
Practice § 8:62[1], 295 (3d ed 2010) (“The most appropriate
remedy is usually remand to the agency for it to correct any
error.”); see also Krieger, 1991 U Ill L Rev at 1022 (noting
that, in most jurisdictions, if a rate order is reversed by a
reviewing court, “the court remands the case to the com-
mission either for further proceedings or the entry of a new
order”). In particular, a general remand, without specific
instructions to the agency, allows the court to perform its
review function without invading the province of the agency.
See Koch, 3 Administrative Law and Practice § 8:62 at 295
(“Rarely should a court impose its will on the agency by spe-
cific instructions. Usually the best approach is for the court
to note the error and allow the agency to correct that error.”).
Even when an agency has interpreted a statute
incorrectly—that is, when the agency has made a legal
error—courts ordinarily remand for the agency to apply the
law as interpreted by the court. See, e.g., Jefferson County
School Dist. No. 509-J v. FDAB, 311 Or 389, 395-96, 399,
812 P2d 1384 (1991) (concluding that agency erroneously
interpreted the term “duty” and affirming Court of Appeals
decision to remand to agency under the APA “to apply the
proper interpretation of ‘duty’  but see Dearborn v. Real
”);
Estate Agency, 334 Or 493, 504-06, 53 P3d 436 (2002)
(reversing, without remanding, agency order revoking real
estate license where order acknowledged that there was no
evidence to support the ruling under the interpretation of
the law adopted by the court). It is particularly appropri-
ate for a court to remand when application of the correct
interpretation of law requires a discretionary decision that
has been delegated to the agency. See Dickinson v. Davis,
277 Or 665, 675-76, 561 P2d 1019 (1977) (explaining that,
under PUC judicial review statutes, modification of an
agency order on review “is proper only when the court can
find that the law mandates one single correct result,” and
remanding case back to trial court that improperly had
substituted its judgment on discretionary issue decided by
agency); Springfield Education Assn., 290 Or at 240 (mod-
ifying agency order where it could “simply be corrected by
Cite as 356 Or 216 (2014) 235
modification in [a] single respect” and where “no further
determinations need[ed to] be made by [the agency]”).
As noted, ratemaking involves discretionary deci-
sions that the legislature largely has entrusted to the PUC.
See ORS 756.040(1) (providing that the PUC is charged
with “establishing fair and reasonable rates”); Springfield
Education Assn., 290 Or at 229-30 (noting that legislature
delegated discretionary decisions involved in ratemaking
to PUC). Accordingly, courts reviewing a rate order “do
not attempt as an original question to exert authority over
rates.” Valley & Siletz R. R. Co., 195 Or at 715 (internal
quotation marks omitted). In other words, courts review a
rate order to determine whether it complies with statutory
and constitutional requirements; on determining that a rate
order violates a statute or the constitution, courts typically
remand, rather than modify, a rate order because such a
modification often would involve ratemaking. See Krieger,
1991 U Ill L Rev at 997 (“Because courts consider the fixing
of specific rates a function solely for the commission, judges
will not order new rates if they reverse the commission-
ordered rates on review. Instead, they will remand the case
to the commission for the setting of new rates consistent
with the decision on review.”).
In accordance with those limitations, in both
Trojan I and Trojan II, the Court of Appeals directed that
the orders be remanded to the PUC, and the court did not
direct the PUC to take any particular action on remand. In
Trojan I, after the court concluded that the PUC had erred
by interpreting the statutes to allow PGE the opportunity
to recover a return on its investment in Trojan, the court
“reversed and remanded with instructions to [the circuit
court to] remand orders to PUC for reconsideration.” 154 Or
App at 717. In Trojan II, the court “remanded to circuit court
with instructions to remand Order No. 02-227 to PUC for
reconsideration of issues raised on appeal and cross-appeal.”
215 Or App at 376. The court did not, for example, remand
with instructions for the PUC to calculate the amount of
rates attributable to a return on investment in Trojan or
with instructions to refund that amount. Nor did the court
modify the PUC’s order to remove that amount from rates.
236 Gearhart v. PUC
The remand instructions from the Court of Appeals did not
purport to limit the authority of the PUC on remand, con-
sistently with the general understanding that a reviewing
court should direct agency action on remand only when
“the law mandates one single correct result.” See Dickinson,
277 Or at 675. Here, Trojan I held that the PUC could not
include a return on PGE’s Trojan investment in rates. It
did not hold, however, that that interpretation of law man-
dated a single result. Consequently, the court remanded the
case to the PUC to determine the result, or effect, of that
interpretation.
Moreover, although the parties argue about whether
Trojan I declared the rate order or the rates themselves
unlawful, that distinction does not control our analysis.
Rather, we focus on the effect of the holding in Trojan I.
Trojan I held that the statutes “preclude[d]” the PUC “from
allowing rates *  * that include[d] a rate of return” on
*
retired capital assets, as the orders at issue in that case had
allowed. Trojan I, 154 Or App at 716. Stated differently, the
court concluded that the PUC did not have statutory author-
ity to include a return on PGE’s Trojan investment in rates.
The court did not address the effect of that error on PGE or
its ratepayers. At no point did the court conclude that either
PGE or its ratepayers had been injured by that error. Thus,
contrary to URP’s arguments, Trojan I required only that
the PUC not include a return on investment in Trojan in
PGE’s rates. It had no more specific effect in limiting the
PUC’s authority on remand.15
We turn next to the statutory scheme to determine
whether the PUC had authority to determine the effect of
15
The PUC concluded in PUC Order No. 08-487 that removal of a return
on investment would have led to higher rates and that the PUC’s legal error
therefore did not “result in unjust and unreasonable rates during the April 1995
through September 2000 period.” The PUC went on to state that those rates
“were just and reasonable.” We focus on the total effect of the rate order, rather
than the rates themselves, in affirming the PUC. We do not address whether
rates that include a component prohibited by the law can be just and reasonable,
an issue discussed by both the majority and dissenting opinions in the Court of
Appeals. Instead, consistent with our decision in Dreyer, we determine only that
the fact that rates include a component that is prohibited by statute does not
necessarily mean that ratepayers have been injured. See Dreyer, 341 Or at 285(noting that PUC proceeding could determine “whether [ratepayers] have been
injured (and, if they have been, the extent of the injury)”).
Cite as 356 Or 216 (2014) 237
the PUC’s error on ratepayers by reexamining prior rates,
and, if so, whether the PUC had authority to order PGE to
issue refunds.
B.  Reexamination of Previously Authorized Rates to Deter-
mine Injury
Rate orders are inherently prospective, setting
rates to be collected from future ratepayers. See Valley &
Siletz R. R. Co., 195 Or at 715 (noting that “all rate orders
are prospective in character”). Accordingly, URP and the
CAPs reason, the PUC cannot reexamine past rate orders,
reversed on judicial review, to determine whether the rates
set were just and reasonable. Moreover, they note, courts
around the country have held that state utility commissions
cannot reexamine past rates on remand. URP and the CAPs
urge this court to adopt a similar approach by adopting a
rule against retroactive ratemaking.
Although the rule against retroactive ratemaking
has been defined and applied in many different ways, the
rule can be described generally as “prohibit[ing] a public
utility commission from setting future rates to allow a util-
ity to recoup past losses or to refund to consumers excess
utility profits.” Krieger, 1991 U Ill L Rev at 984; see also
Dreyer, 341 Or at 270 n 10 (explaining that, under the rule,
“approved utility rates may be modified only prospectively”
and “utilities cannot provide retrospective relief from such
rates”). We have never expressly decided whether Oregon
accepts some form of the rule against retroactive ratemak-
ing. See id. (so noting). For purposes of this case, we need not
precisely define the contours of that rule or decide whether
Oregon accepts that rule in all circumstances. It is suffi-
cient for present purposes to conclude, as we do, that the
rule against retroactive ratemaking does not preclude the
action that the PUC took on remand in this case. The PUC
did not alter PGE’s rates retroactively, but rather used rate-
making principles to calculate the rates that it would have
authorized PGE to charge had it not included a return on
the investment in Trojan.
First, nothing in Oregon’s statutory scheme, which
delegates extensive power to the PUC, limits the PUC’s
238 Gearhart v. PUC
authority in a way that would have prevented it from reexam-
ining past rates in this case. See Hammond Lbr. Co. v. Public
Service Com., 96 Or 595, 609, 189 P 639 (1920) (explaining
that predecessor to the PUC was charged “with statutory
duties closely allied to the legislative power of the state”).
Courts applying the rule against retroactive ratemaking to
prevent utility commissions from retroactively examining
or altering rates often rely on statutes that differ in their
terms from the Oregon statutes. In Arkansas Louisiana Gas
Co. v. Hall, 453 US 571, 578, 101 S Ct 2925, 69 L Ed 2d 856(1981), for example, the United States Supreme Court stated
that the Federal Energy Regulatory Commission (FERC)
had “no power to alter a rate retroactively” because the
governing statute provided that, when FERC found a rate
unreasonable, it had to determine the just and reasonable
rate to be “thereafter” observed. See also Krieger, 1991 U Ill
L Rev at 1033 (explaining that some courts have relied on
the word “thereafter” to conclude that utility commissions
have power to set rates only prospectively). In contrast, in
Oregon, any time a public utility files a new rate or sched-
ule or an increase in an existing rate or schedule, the PUC
may “conduct a hearing to determine whether the rate or
schedule is fair, just and reasonable.” ORS 757.210(1)(a).
After the PUC conducts a “full hearing, whether completed
before or after such rate or schedule has gone into effect,
the commission may make such order in reference thereto
as would be proper in a proceeding initiated after such rate
or schedule has become effective.” ORS 757.215(3); see also
ORS 756.558(2) (providing that PUC shall “make and enter
the order” of the PUC on a complaint based on findings of
fact and conclusions of law, and that order shall state effec-
tive date). The complaint and hearing provisions of the PUC
statutes say nothing about setting rates only prospectively,
or rates to be “thereafter” observed. Therefore, the statutes
did not preclude the PUC from reexamining the previously
charged rates as ordered by the Court of Appeals.
Second, in Dreyer, this court rejected the notion
that Oregon’s statutory scheme incorporates an “extreme”
version of the filed rate doctrine, which serves as another
common rationale for prohibiting the retroactive examina-
tion of rates. See Dreyer, 341 Or at 278-79. As noted, the filed
Cite as 356 Or 216 (2014) 239
rate doctrine generally provides that “any rate filed with and
approved by the relevant ratemaking agency represents a
contract between the utility and the customer and is conclu-
sively lawful until a new rate is approved.” Id. at 270 n 10. In
Dreyer, PGE argued that that doctrine is embodied in ORS
757.225, which provides:
“No public utility shall charge, demand, collect or receive a
greater or less compensation for any service performed by
it within the state, or for any service in connection there-
with, than is specified in printed rate schedules as may at
the time be in force, or demand, collect or receive any rate
not specified in such schedule. The rates named therein are
the lawful rates until they are changed as provided in ORS
757.210 to 757.220.”
The court in Dreyer did not find that argument persua-
sive. Although the court stated in a footnote that it was not
rejecting “the possibility that Oregon utility law incorpo-
rates some form of the doctrine,” Dreyer, 341 Or at 279 n 14,
the court rejected the notion that PGE was shielded from
liability because it was required by ORS 757.225 to charge
the rates that were later held to improperly include a return
on the investment in Trojan. Id. at 279-80.
Thus, unlike some courts, this court has not read
ORS 757.225 as a manifestation of legislative intent to allow
retroactive relief only when a utility collects rates different
than those approved by the PUC. See Krieger, 1991 U Ill L
Rev at 1033-34 (noting that some courts have interpreted
similar provisions to “infer that the legislature intended
the granting of retroactive relief only in the limited cir-
cumstances when a utility assesses a rate that is different
from the approved tariff”). Dreyer instead suggests that a
utility that collects rates approved by the PUC may have
to return a portion of those rates if they are later found to
be invalid on judicial review. See Dreyer, 341 Or at 278-79(ORS 757.225 does not absolutely shield utilities from hav-
ing to return part of rates later determined to have included
an unlawful component). Moreover, as this court noted in
Dreyer, ORS 757.225 is a direction to utilities—“[n]o public
utility shall charge *  * greater or less compensation *  *
*  *
than is specified in printed rate schedules”—and not a limit
on the authority of the PUC. Id. at 278; see Krieger, 1991
240 Gearhart v. PUC
U Ill L Rev at 1034 (suggesting that those types of provi-
sions prevent utilities from changing their rates without
PUC approval, but noting that, textually, such provisions
do not address PUC authority). This court’s analysis of ORS
757.225 in Dreyer suggests that that statute is not a limit on
the PUC’s authority to reexamine past rates, because com-
mission-approved rates are not “conclusively lawful for all
purposes.” See Dreyer, 341 Or at 278.
Finally, we consider whether the rule against retro-
active ratemaking, independently of the statutory provisions
discussed above, precluded the action that the PUC took on
remand in this case. We conclude that it did not. The theory
behind the rule is that ratemaking inherently is a prospec-
tive process. Krieger, 1991 U Ill L Rev at 998. Courts have
applied the rule against retroactive ratemaking in a vari-
ety of ways, with some courts rejecting the rule entirely. See
id. at 1022, 1027 (explaining that cases are “almost evenly
split” as to whether a prevailing party can obtain retroactive
relief in the form of a refund or a surcharge for the period
between the order and reversal and the period after rever-
sal). Of those courts adhering to the rule, some have inter-
preted it as preventing a PUC from ordering any refunds or
surcharges. See, e.g., In re Application of Columbus S. Power
Co., 138 Ohio St 3d 448, 460-61, 8 NE 3d 863, 874-76 (2014)
(explaining that excessive rates charged during the appeal of
a commission order are not subject to refund and that “pres-
ent rates may not make up for revenues lost due to regula-
tory delay”). Others have interpreted the rule as preventing
a PUC from adjusting future rates based on actual expenses
and revenues. See, e.g., In re Providence Water Supply Bd.’s
Application to Change Rate Schedules, 989 A2d 110, 115,
118 (RI 2010) (explaining that future rates may not be
designed to recoup past losses and affirming PUC denial of
request to increase rates to cover past payments for retirees’
health-care costs).
In considering whether the rule against retroactive
ratemaking prohibits the PUC’s reexamination of previously
set rates in this case, it is important to recognize the context:
the issue was not back before the PUC because projected
circumstances on which rates were based (such as expected
Cite as 356 Or 216 (2014) 241
profits or losses) had not come to pass as forecast. Rather,
the orders at issue in PUC Order No. 08-487 were remanded
to the PUC because it made an error of law in exercising its
ratemaking authority described in ORS 756.040. The PUC
was not reexamining past rates because ratepayers were
seeking to benefit from PGE’s excess profits, or because PGE
was asking ratepayers to make up for a year of particularly
bad losses. The PUC was reexamining past rates because
the Court of Appeals concluded that the PUC had made a
legal error in setting those rates. See Indep. Voters of Ill. v.
Ill. Commerce Com’n, 117 Ill 2d 90, 104-05, 510 NE 2d 850,
857 (1987) (rejecting argument that rule against retroactive
ratemaking applies after rate order is reversed by review-
ing court where commission action was “a result of a direct,
statutorily authorized, review” of the commission’s order);
District of Columbia v. D.C. Pub. Serv. Com’n, 905 A2d 249,
258-59 (DC 2006) (suggesting that refund might be appro-
priate where agency is implementing judicial reversal of
order, but rejecting argument that agency, like courts, can
undo what is wrongfully done by its order where final order
was not subject to judicial review or reversed on appeal).
Given the posture of the remand orders, the PUC
could rely on the ratemaking authority that it had exercised
in the original proceedings under ORS 756.040 to deter-
mine on remand the effect of the Court of Appeals’ inter-
pretation of law on its earlier decision. See Jefferson County
School Dist. No. 509-J, 311 Or at 395, 399 (affirming Court
of Appeals decision to remand order reversing dismissal of a
school teacher to Fair Dismissal Appeals Board “to apply the
proper interpretation of ‘duty’ and, in the light of that inter-
pretation, to reconsider whether [the teacher] had neglected
a duty she owed”); Sec. & Exch. Comm’n v. Chenery Corp., 332
US 194, 200, 67 S Ct 1575, 91 L Ed 1995 (1947) (“After the
remand was made, therefore, the [Securities and Exchange]
Commission was bound to deal with the problem afresh,
performing the function delegated to it by Congress.”). The
exercise of that authority on remand included the authority
to reconsider all aspects of the decision affected by the error.
See Jefferson County School Dist. No. 509-J, 311 Or at 396-
97, 399 (affirming remand for agency to apply correct inter-
pretation of term “duty” in determining whether teacher
242 Gearhart v. PUC
properly was dismissed for “neglect of duty,” and, because
that error “permeated [the agency’s] sanction analysis,” also
affirming remand for reconsideration of that issue).16 The
ability to reconsider multiple aspects of the rate order was
necessary because ratemaking involves a variety of interre-
lated variables. See Hammond Lbr. Co., 96 Or at 609 (noting
that “it is impossible to fix rates that will be mathematically
correct or exactly applicable to all the new conditions that
may arise” because “the factors involved in an inquiry of this
kind are so many and so variable”); Phillips, The Regulation
of Public Utilities at 168 (explaining that the different
aspects of rate regulation “overlap in many instances”). To
the extent that the PUC’s error in allowing PGE to recover
a return on its investment in Trojan affected other parts of
the PUC’s original ratemaking analysis, the PUC could con-
sider those effects in assessing the effect of the error on the
rate order.
In addition, the rationale behind the rule against
retroactive ratemaking does not support its application to
this circumstance. The rule against retroactive ratemaking
serves the important function of providing stability in the
regulatory process—parties can reasonably rely on the fact
that rates will not be changed after they have been set and
paid. Krieger, 1991 U Ill L Rev at 1044. Moreover, the rule
plays a critical role in providing an incentive for efficient
operations because utilities know that they can keep profits
16
The CAPs attempt to distinguish Jefferson County School District No. 509-
J, 311 Or 389, by noting that the agency in that case “did not redetermine past
facts” or allow new issues or evidence. However, nothing in this court’s opinion
suggested that the agency could not have reopened the record or reconsidered
prior determinations if it had concluded that that was appropriate.
Moreover, there is nothing in the PUC judicial review statutes in place during
Trojan I that suggests that the PUC could not reopen the record on remand or
otherwise reconsider its analysis of facts in the existing record. Administrative
records often are reopened on remand. See Pierce, 3 Administrative Law Treatise
§ 18.1 at 1679 (5th ed 2010) (discussing agency options on remand, including
option of reopening record to receive additional evidence). Although a remand
based on legal error may not typically require the taking of additional evidence,
the CAPs have not identified anything in the statutes or the remand instructions
in Trojan I that prevented the PUC from doing so. See id. (explaining agency
options on remand, but not discussing reopening the record when remand is
based on error of law); Koch, Administrative Law and Practice § 8:31 at 186, 191
(suggesting that remand for application of correct legal principle may occur on
the existing record, but also noting that “the agency is somewhat free to decide
how to carry out the judicial will”).
Cite as 356 Or 216 (2014) 243
even if they exceed the authorized rate of return and that
they cannot seek to recover losses from ratepayers. Id. Here,
however, when URP and CUB appealed the PUC’s original
rate order, PUC Order No. 95-322 from 1995, all parties
knew that the rate order might be reversed on review. Given
that knowledge, the parties could not reasonably rely on the
rates not being reexamined, and PGE continued to have
an incentive to operate efficiently because it did not know
whether the rate order would be reversed on review. See id.
at 1046 (explaining that appeal of rate order should lead to
expectation that court may reverse rates on review and that
allowing retroactive ratemaking after judicial review does
not create negative economic incentives).
In sum, when a PUC order issued in the exercise of
its ratemaking authority has been reversed and remanded
after a reviewing court determines that there was a legal
error, the PUC can again use ratemaking principles on
remand to determine the effect of its error on the outcome of
the proceeding. Although the rule against retroactive rate-
making may prevent certain actions on remand, it does not
prevent the PUC from reexamining prior rates to determine
what rates it would have set in the absence of its legal error.
Because the PUC in this case reexamined past rates follow-
ing judicial review and reversal of prior rate orders, we con-
clude that that reexamination was permissible and did not
violate the rule against retroactive ratemaking.
C.  PUC Authority to Order Refunds
Independent of their challenge to PUC’s methodol-
ogy for determining the effect of its legal error, the CAPs
challenge the PUC’s authority to remedy that error by order-
ing refunds to the post-2000 ratepayers who were injured by
that error.17 More fundamentally, however, the CAPs argue
that they should be able to proceed in circuit court regardless
17
URP challenges the refund primarily on the ground that the PUC erred
in calculating the refund by engaging in retroactive ratemaking, and does not
challenge the PUC’s authority to order PGE to issue refunds. In fact, URP seems
to assume that the PUC can order PGE to issue refunds, albeit by reducing future
rates, rather than reexamining past rates. URP asserts that, on remand, the
PUC had to “calculate the prior unlawful charges” and “return those funds,
with appropriate interest, to those who paid them.” Because we have already
addressed URP’s retroactive ratemaking arguments above, we do not discuss
URP’s arguments regarding refunds further in this section.
244 Gearhart v. PUC
of whether the PUC has the authority to issue refunds. That
is so, the CAPs assert, because either the PUC lacks author-
ity to offer a remedy to the CAPs or the PUC has declined to
offer any remedy that it has the authority to provide.
We begin by considering whether the PUC had
authority to provide a remedy to the post-2000 ratepay-
ers by ordering PGE to issue refunds. As noted, the PUC’s
statutory authority is phrased in sweeping terms. See ORS
756.040(2) (granting the PUC authority to “supervise and
regulate every public utility” in the state and “to do all
things necessary and convenient in the exercise of such
power and jurisdiction”). In exercising that authority, the
PUC is charged with “mak[ing] use of the jurisdiction and
powers of the office to protect [public utility] customers, and
the public generally, from unjust and unreasonable exac-
tions and practices and to obtain for them adequate service
at fair and reasonable rates.” ORS 756.040(1). In addition,
the legislature has directed that laws administered by the
PUC “shall be liberally construed in a manner consistent
with the directives of ORS 756.040(1) to promote the public
welfare, efficient facilities and substantial justice between
customers and public and telecommunications utilities.”
ORS 756.062(2). Reading those statutes together, a liberal
construction of both the PUC’s power to “supervise and reg-
ulate public utilities” and its duty to protect ratepayers by
obtaining adequate service at fair and reasonable rates sup-
ports the PUC’s implied authority to correct legal errors that
lead to “unjust and unreasonable exactions.” Refunds are
one way of correcting those types of errors, and if the PUC
could not order refunds, it would be limited in its ability
to protect ratepayers. See Springfield Education Assn., 290
Or at 230 (PUC must regulate to allow just and reasonable
rates and has authority to make delegated policy choices
“within the broadly stated legislative policy”). See generally
Ochoco Const., 295 Or at 434 (concluding that agency did
not have specific implied power, in part because none of the
duties expressly delegated to the agency would be frustrated
by the agency’s inability to exercise that implied power).
An additional source of authority to order the refund
comes from the binding final remand order from the Court of
Cite as 356 Or 216 (2014) 245
Appeals. The PUC ordered the refund in this case after the
Court of Appeals, having engaged in statutorily authorized
judicial review, remanded the case to the PUC for reconsid-
eration in light of the court’s ruling that the PUC had made
a legal error. See Indep. Voters of Ill., 117 Ill 2d at 105, 510
NE 2d at 857-58 (concluding that commission could order
refund where it was “a result of a direct, statutorily autho-
rized, review of [a] Commission order” and where court had
remanded the case “to correct the erroneous portion of the
rates, not for original rate-making”).18 The authority to order
a refund reasonably can be implied when a rate order has
been reversed on judicial review and sent back to the PUC
for additional proceedings. See Appeal of Granite State Elec.
Co., 120 NH 536, 540, 421 A2d 121, 123 (1980) (“[T]he PUC
has authority to order the Electric Company to refund rev-
enues collected under rates authorized and approved by the
PUC but later found upon judicial review to have been col-
lected under improper rates.”). If the PUC could not order a
refund in the circumstances presented in this case, judicial
review would lose much of its effectiveness because the prob-
lem could only be addressed prospectively. See Indep. Voters
of Ill., 117 Ill 2d at 105, 510 NE 2d at 858 (“The function
of the courts in reviewing Commission proceedings would
be meaningless if no remedy could be provided after the
court holds that a Commission-approved rate order included
allowance of improper expenses and deductions for the util-
ity company.”).
We recognize, as the CAPs note, that certain stat-
utory provisions authorize the PUC to order refunds in spe-
cific circumstances. See ORS 757.215(4) (providing that,
when a public utility has filed to establish new rates or
18
Notably, the court in Independent Voters of Illinois concluded that rate-
payers were not entitled to refunds for amounts paid during the pendency of the
appeal, and instead limited refunds to the period after the rates were invali-
dated. 117 Ill 2d at 99-100, 510 NE 2d at 855. That conclusion was based, at
least in part, on statutes requiring utilities to collect the rates approved by the
commission. See id. at 97, 510 NE 2d at 854. As explained above, this court has
rejected that construction of Oregon’s parallel statutory provision. The court also
suggested that provisions allowing for a stay during appeal suggested that the
utility was entitled to collect and keep rates approved by the commission in the
absence of a stay. Id. We reject that conclusion. The availability of a stay does not
make it the only option for correcting an error, particularly where the fact that
the order is being appealed puts the parties on notice that the rates may be sub-
ject to reexamination.
246 Gearhart v. PUC
increase existing rates, and the PUC conducts a hearing on
those rates without suspending them, amounts exceeding
rates later approved by the PUC must be refunded); ORS
757.215(5) (providing that the PUC has authority to autho-
rize interim rates and to later order refund of any portion of
those rates that was not justified). We do not agree with the
CAPs, however, that those provisions preclude the PUC from
ordering refunds in other circumstances. The fact that the
PUC must order refunds in certain proceedings under ORS
757.215 does not mean that the PUC may not order refunds
in other circumstances, such as those presented in this case.
Express authority to act in one set of circumstances does
not necessarily preclude implied authority to carry out simi-
lar actions in entirely different circumstances.19 In fact, the
PUC’s authority to order refunds under ORS 757.215 sug-
gests that allowing the PUC to order refunds here would
not “materially alter the nature” of the PUC’s authority. See
Southern Pacific Co. v. Heltzel, 201 Or 1, 39-40, 44, 268 P2d
605 (1954) (concluding that Public Utilities Commissioner
lacked authority to set minimum rates or order a railroad
to increase rates because that power would alter the nature
of the Commissioner’s duties without guidance from the
legislature).20
19
An express grant of general power does not necessarily confer implied gen-
eral powers. See, e.g., Southern Pacific Co. v. Heltzel, 201 Or 1, 24, 268 P2d 605
(1954) (“The fact that the Commissioner has been given some power to act in some
areas of utility regulation does not imply that he may exercise all the power that the
legislature might have exercised had it chosen to act directly.”). In this case, how-
ever, the implied power to order refunds is necessary to the PUC’s ability to carry
out its express duty to obtain “adequate service at fair and reasonable rates.” See
ORS 756.040(1) (setting forth powers and duties). Moreover, the express authority
to order refunds of interim rates does not imply that refunds in all other circum-
stances are prohibited—the PUC’s authority to order refunds on interim rates is
not inconsistent with its authority to order refunds after a rate order is invalidated
on judicial review. The absence of a conflict between the express and implied pow-
ers makes it more likely that the legislature intended to vest the implied power
in the PUC, particularly given the legislature’s direction that the PUC statutes
should be liberally construed. See ORS 756.062(2) (so stating).
20
Similarly, we reject the CAPs’ argument that a statutory provision allow-
ing for stay of a PUC rate order “upon the giving of [a] bond” demonstrates that
the legislature intended losses incurred during appeal to be paid only by a bond,
and not remedied by the PUC. See former ORS 756.590 (2003), repealed by Or
Laws 2005, ch 638, § 21 (providing that PUC order can be stayed pending final
disposition of a case “upon the giving of such bond or other security, or upon such
conditions as the court may require”). At most, that provision indicates that the
legislature intended errors identified during judicial review to be remedied by
Cite as 356 Or 216 (2014) 247
This court’s decision in McPherson et al v. Pacific P. &
L. Co., 207 Or 433, 296 P2d 932 (1956), does not compel a dif-
ferent result, as the CAPs contend. In McPherson, this court
held that a surcharge added to a public utility’s rates had
been approved lawfully by the Public Utilities Commissioner
and therefore had been “established as [a] lawful rate[ ].” Id.
at 461. As a result, the court did not have to reach the issue
of whether the Public Utilities Commissioner or the court
could order the utility to refund the surcharge. In addition,
to the extent that McPherson discussed the commissioner’s
authority to order reparations, that discussion involved a dif-
ferent statutory context. The court emphasized, for example,
that the railroad statutes conferred jurisdiction on the com-
missioner to award reparations, but that the public utility
statutes did not; that analysis is outdated, however, because
the PUC no longer regulates railroads and no longer has
express authority to order reparations in some industries,
but not others. Moreover, since McPherson, we have sug-
gested that the PUC’s refund authority was not a matter of
settled law—in Dreyer we ordered the circuit court to abate
its proceedings so that the PUC could determine “what, if
any, remedy it [could] offer to PGE ratepayers, through rate
reductions or refunds.” Dreyer, 341 Or at 286.
We conclude that the PUC had authority to order
PGE to issue refunds to the post-2000 ratepayers in this
case. To the extent that the CAPs argue that the PUC
declined to award them a remedy by ordering a refund only
for the post-2000 ratepayers, we note that the PUC did not
order a refund to the CAPs who claimed to be injured by the
1995-2000 rates because it determined that the CAPs were
not injured by those rates. As we discuss below, whether the
CAPs can nonetheless proceed in circuit court is an issue
that they must address before that court.
IV. INTEREST
As noted, when the PUC reexamined the 1995
to 2000 rates, it observed that the previously approved
17-year period for PGE’s recovery of its investment in Trojan
“appropriately balanced the interests of the utility and its
returning money to those injured. The existence of a remedy through a bond does
not foreclose an alternative remedy through a refund.
248 Gearhart v. PUC
customers,” but only because PGE had had the opportunity
to earn a return on its investment. PUC Order No. 08-487
at 67. Consequently, when the Court of Appeals determined
that the rates could not include a return on PGE’s invest-
ment in Trojan, the PUC had to decide what rates it would
have allowed if it had not included that factor in its rate cal-
culation. Id. at 71. As part of that reconsideration, the PUC
decided that it would not have used a proposed one year
recovery period. The PUC explained that that would have
led to “an immediate 30.5 percent increase in rates for one
year,” which would have been inconsistent with the PUC’s
policies “to avoid rate shock and to promote rate stability
and intergenerational equity.” Id. at 70. The PUC instead
concluded that a 10-year period would have “equitably allo-
cate[d] the benefits and burdens while allowing quicker
recovery to offset any increase in PGE’s risk profile” result-
ing from PGE’s inability to earn a return on its investment
in Trojan. Id. at 72.
The PUC also concluded that it would have been
reasonable to include interest on the investment “to com-
pensate for the time value of money” because PGE would be
recovering its investment over a 10-year period. Id. at 71.
As the PUC explained, “[t]o allow PGE the ability to fully
recover that amount [of its investment] over time, we need
to include some form of interest—not profit—to compen-
sate the utility for the delayed recovery of the investment.”
Id. Although the PUC often uses a utility’s authorized rate
of return as the applicable interest rate when an amount
is amortized over time, because of Trojan I the PUC rea-
soned that it could not use that rate in this case. Id. at 72.
Therefore, instead of using (1) PGE’s pre-tax rate of return
for 1995 (13.22 percent) or for 1996 forward (13.34 percent);
or (2) PGE’s authorized rate of return for 1995 (9.51 percent)
or for 1996 forward (9.6 percent), the PUC chose to use in
its calculation an interest rate that was “unrelated to util-
ities” to “ensure the rate reflect[ed] solely the time value of
money.” Id. at 62 n 227, 73. The PUC calculated the rates it
would have set had it allowed PGE to recover 7.09 percent
interest, based on the Treasury rate for 10-year bonds in
1994. Id. at 73. URP now argues that Trojan I forbids that
result, and that, independent of Trojan I, the PUC lacked
Cite as 356 Or 216 (2014) 249
the statutory authority to include interest in its recalcula-
tion. As explained below, we reject both of those arguments.
The holding in Trojan I prohibiting PGE from recov-
ering a return on its investment in Trojan did not prohibit
PGE from recovering interest because, in the public utility
context, the rate of return—the return on investment—is
distinguishable from interest: “Return is the term used
in public utility regulation to describe the compensation
which the owners receive over and above allowable deduc-
tions from gross revenues. It is a word having a connotation
different from such words as earnings, net income, inter-
est, and dividends.” Ellsworth Nichols, Ruling Principles of
Utility Regulation: Rate of Return 1 (1955). Although inter-
est rates may be taken into account, a rate of return typi-
cally “pays something over and above the usual interest rate
on well-secured loans, to compensate for the hazards of the
business and for the profits of management.” Id. at 210; see
also Richard A. Posner, Economic Analysis of Law 142 (9th
ed 2014) (explaining that a reasonable rate of return is “a
weighted average of the long-term interest rate plus the rate
of return to the equity shareholders that the agency con-
siders appropriate in light of the risk of the investment and
the rate of return enjoyed by shareholders in comparable
firms” (emphasis added)); ORS 756.040(1)(a) (directing that
rates are fair and reasonable if, in part, the return to the
equity holder is “[c]ommensurate with the return on invest-
ments in other enterprises having corresponding risks”).
Thus, Trojan I prevented the PUC from allowing a return
on PGE’s investment in Trojan, but did not prevent the PUC
from allowing PGE to recover interest to account for the
time value of money.21
21
Trojan I did not, as URP contends, equate the terms “return on invest-
ment” and “interest.” Instead, the court equated the phrase “return on invest-
ment” with profit. See, e.g., Trojan I, 154 Or App at 706 (explaining that PUC
orders allowed PGE to “include a ‘rate of return’ (i.e., profit) component” in rates);
id. at 713 (explaining that text of statute did not “contemplate[ ] a return or profit
on undepreciated investment”). In fact, the court rejected PGE’s attempt to jus-
tify the return on investment by characterizing it as interest, indicating that
the court considered interest to be a separate concept. See id. at 713-14 (“PGE’s
arguments that turn on the word ‘interest’ instead of the term ‘rate of return’
also lose sight of ORS 757.355. *  * It makes no difference whether the profit
*
is called ‘interest’ instead of a ‘return.’  (Emphasis added.)). We also reject
”
URP’s argument that the court’s reference to PGE recovering only the “princi-
pal amount of the undepreciated investment” demonstrates that the PUC cannot
250 Gearhart v. PUC
Here, the PUC was careful not to recalculate rates
using a factor that would allow PGE to recover a profit on its
investment, instead relying on lower Treasury bond rates to
account only for the time value of money. See Irving Fisher,
The Theory of Interest 34-35 (1930) (describing a “pure rate
of interest” as “the rate on loans which are practically devoid
of chance,” such as “safe securities of fixed terms not likely
to be transferred or transferred often before maturity”);
Paul A. Samuelson & William D. Nordhaus, Microeconomics
288 (19th ed 2010) (“The safest assets in the world are the
securities of the U.S. government.”). In other words, to the
extent that interest generally accounts for both the time
value of money and the risk involved in an investment, the
PUC used an interest rate that primarily accounted for the
time value of money, rather than for risk. See Samuelson &
Nordhaus, Microeconomics at 288 (describing the bond rate
as a “ ‘riskless’ interest rate”). Trojan I does not prevent the
PUC from allowing PGE to recover interest to account for
the time value of money.
In addition, the PUC’s statutory authority to con-
clude that it would have allowed PGE to recover interest
on its investment in Trojan can be implied from the PUC’s
discretionary ratemaking authority. As noted, the legisla-
ture expressly delegated the authority to establish fair and
reasonable rates under ORS 756.040(1), and the PUC was
charged with determining how to set those rates within the
broader legislative policy. See Springfield Education Assn.,
290 Or at 230 (explaining that the legislature delegated
authority to the PUC to set just and reasonable rates in a
way that allows the PUC “to make delegated policy choices
of a legislative nature within the broadly stated legislative
policy”). We recognize, as URP notes, that the legislature
has expressly stated when interest can be awarded in other
statutes, including other provisions within ORS chapter 757.
See, e.g., ORS 757.215(6) (providing that refunds of interim
rates shall include interest). As discussed above, however,
those express grants of authority, which address different
award interest. See id. The court was not asked to decide whether the “principal
amount,” if recovered over a period of years, would include interest to account for
the time value of money or whether a recovery in the absence of interest would
sufficiently compensate PGE for its investment in Trojan.
Cite as 356 Or 216 (2014) 251
circumstances, do not necessarily preclude the PUC from
using interest in its recalculation, particularly where those
other statutes indicate that the legislature intends to allow
the PUC to award interest to account for the time value of
money.22 See ORS 757.215(6) (requiring the PUC to include
interest on amount subject to refund after the PUC approves
rates lower than interim rates); ORS 757.259(4) (allowing
the PUC to authorize deferrals for later incorporation in
rates of certain amounts, “together with interest established
by the commission”). Those statutes indicate that the use
of interest to account for the time value of money is within
the policy choice expressed by the legislature—the PUC is
charged with establishing “fair and reasonable rates” that
“provide adequate revenue *  * for operating expenses of
*
the public utility.” ORS 756.040(1). We therefore affirm the
PUC’s decision to include interest on PGE’s investment in
Trojan.
V.  SUBSTANTIAL EVIDENCE
URP argues that the PUC’s order is not supported
by evidence that was in the record. Under ORS 183.482(8)
(c), “[t]he court shall set aside or remand [an agency’s] order
if the court finds that the order is not supported by substan-
tial evidence in the record.” Substantial evidence supports
an agency’s finding “when the record, viewed as a whole,
would permit a reasonable person to make that finding.” Id.Here, URP asserts that, in making the calculations neces-
sary for PUC Order No. 08-487, the PUC used two electronic
spreadsheets provided by PGE and PUC staff in response to
a July 2008 PUC request. Hard copies of those spreadsheets
were submitted by PGE and PUC staff as part of the record
in 2005 during the first phase of the remand proceedings,
which addressed the 1995 to 2000 rates, but URP contends
that the hard copies did not contain the formulas and certain
other data on which the PUC ultimately relied. Accordingly,
URP reasons, the PUC’s findings are not supported by
22
Similarly, although ORS 757.140(2) authorizes the PUC to allow rates that
include “amounts on the utility’s books of account which the commission finds
represent undepreciated investment in a utility plant,” which may not include
interest, that statutory provision does not state that the PUC can include only
amounts listed on the books of account, without adjustment for factors such as
the time value of money.
252 Gearhart v. PUC
evidence in the record because those formulas and data were
not in the record.
Formulas, however, are methods of reasoning and
analysis, not evidence. As long as the data used in those
formulas is supported in the record—and URP does not
point to any indication that the data were unsupported—the
method for analyzing that data need not be separately sup-
ported by evidence. In addition, in a footnote in PUC Order
No. 08-487, the PUC explained how it reached the conclu-
sion that the 1995 to 2000 rates would have been higher if
Trojan had not been included in rate base. The PUC detailed
each of the ways in which it modified the spreadsheet pro-
vided by PUC staff. Thus, to the extent that the PUC had
to disclose or explain that analysis, the PUC did so in the
order.
VI.  THE ABATED CIRCUIT COURT PROCEEDINGS
In Dreyer, this court issued a peremptory writ order-
ing the circuit court to abate the CAPs’ claims against PGE
for damages, pending the PUC’s determination of “what, if
any, remedy it [could] offer to PGE ratepayers, through rate
reductions or refunds, for the amounts that PGE collected
in violation of ORS 757.355 (1993) between April 1995 and
October 2000.” Dreyer, 341 Or at 286-87. The CAPs argue
that the abatement should be lifted either because the PUC
has no authority to provide a remedy to the CAPs or the
PUC has declined to offer a remedy to the CAPs. URP sim-
ilarly contends that this court should lift the abatement so
that the ratepayers from 1995 to 2000 can pursue their rem-
edies in circuit court.
We decline to reach that issue because it is not
properly before this court in this proceeding, which arises
out of the PUC’s order following the remand proceedings
stemming from Trojan I and Trojan II. Dreyer involved an
entirely separate proceeding in circuit court that is not now
before us. Accordingly, if the CAPs want the abatement
lifted, they must address their request to the circuit court.
See Dreyer, 341 Or at 286 (“Certainly, after the PUC has
made its ruling, plaintiff will retain the right to return to
the circuit court for disposition of whatever issues remain
Cite as 356 Or 216 (2014) 253
unresolved.” (Emphasis added.)). If the circuit court denies
that request, the CAPs can appeal from that order.
VII. CONCLUSION
The PUC did not exceed either the scope of the
remand or the scope of its statutory authority in PUC Order
No. 08-487. Moreover, the order is supported by substantial
evidence.
The decision of the Court of Appeals and the order
of the Public Utility Commission are affirmed.