The Legal Process
By law, the commission cannot issue a decision that changes customer rates or services until it has the legal evidence to back it up. Therefore, much of the commission's business revolves around public legal proceedings.
The commission has three basic decision-making procedures:
- a formal rate case, filed by the company;
- a commission-initiated rulemaking case to handle broad issues; and
- mediation to resolve case issues or party disputes without litigation.
Formal Rate Cases
Most formal rate cases come before the commission because a utility or transportation company wants to change the rates (tariffs) it charges or the services it offers. For many years, this has been the most common kind of proceeding at the commission, although rulemaking and mediation are becoming more common. During the open meeting, if the commissioners decide that further investigation is warranted on a company's request, it will suspend the companies' request, and the matter will be set for hearing.
Here's what happens, step-by-step:
- The application: when a company files an application for new rates or other changes, it is usually a major undertaking. Accompanying the proposed rates is the company's legal case for the changes -- written testimony and supporting exhibits prepared by a variety of company experts. For example, a company may want to document its higher business costs, its need to build new plant, or offer higher returns to its shareholders to remain competitive on the stock market. A major application can be hundreds of pages long. Once the application is delivered to the Records Center (the commission's documents room) and given an official docket number the clock starts ticking. Legally, the company's proposed rate changes or new tariffs take effect in 30 days if the commission does nothing. In some cases, however, the commission suspends the changes and sets the case for formal hearings. The commission now has 11 months to issue a final order.
- The case is announced: companies are required to announce proposed rate or service changes to the public, through the news media and customer billing notices. In addition, the commission publishes a weekly list of filings made by utilities and transportation companies. For a small fee, any group, business, or individual may subscribe. The commission also has a toll-free number that citizens may use to call for information about a particular case. They also may request to be placed on the case's interested persons' lists, so they may receive hearing announcements and other information. As always, all documents related to the case are public information.
- The commission staff gets its assignments: once the commission decides to hear the case, the commission department heads make staff assignments. A company's case usually consists of many different written, prefiled testimonies, covering different subject areas. Therefore, a wide range of commission staff expertise is called upon. For example, if, as part of its case, a utility wanted the expense of a new facility included in its rates, a commission economist could be assigned to evaluate its need and cost. An accountant could study the company's taxes and accounting methods. A consumer service expert could look at the quality of the company's customer service. Commission staffers prepare written testimony for the commissioners to evaluate alongside the company's testimony. And, like company experts, they are cross-examined on their testimony when hearings take place.
- Interveners get involved: interveners are groups or individuals who can show the commission that they have a stake in the outcome of a case. If granted intervener status, they become formal case participants, who, like the commission staff and company, may present testimony and cross-examine witnesses in the hearings. Typically, interveners are major customers, such as large manufacturers, seeking the lowest possible rates or favorable services. Consumer groups frequently intervene as well, often representing residential, small business, and low-income customers.
- Public Counsel: the Public Counsel Section of the Office of the Attorney General may appear on behalf of the people of the state of Washington. Public Counsel usually focuses on the interests of residential, small business, and low-income customers.
- Prehearing conference: in major cases, when there are many interveners and numerous contested issues, the commission may hold a prehearing conference to coordinate the proceeding. Hearing dates, issues and any scheduling problems can be worked out on an informal basis during this time.
- Prefiled testimony: commission hearings are usually complex and highly technical. For this reason, all of the parties in the case must file their testimony in written form by a deadline well in advance of the hearings. This way, everyone has a chance to study the material and are prepared to ask their questions (direct and cross-examination) when the hearings take place.
- The evidentiary hearings: the evidentiary hearings are held for all parties to question the experts (witnesses) who have submitted prefiled testimony in the case. An administrative law judge presides over these hearings, which are conducted much like a trial. Expert witnesses take the stand and swear to truthfully answer all questions asked about their prefiled testimony. A court reporter records the proceedings and attorneys for each party in the case have the opportunity to cross-examine. Most evidentiary hearings are held at commission headquarters in Olympia. In the first round of evidentiary hearings, company witnesses are questioned. Staff and intervener prefiled testimony is submitted in the following weeks, followed by the second round of hearings, so that those witnesses may be cross-examined. In major utility rate cases, company witnesses are allowed to submit prefiled rebuttal testimony, and a third round of hearings sometimes follows. In highly contested cases involving a large amount of money, each round of hearings may last for up to one week. All hearings are open to the public.
- Public comment hearings: when there is strong public interest in a commission case, the commissioners may travel to the company's service area to gather public opinion. Public witnesses do not have to be experts in utility regulation, but their comments are important to the commissioners because they often have valuable information about the quality of the company's service. Public witnesses make their statements under oath in the presence of a court reporter. Their comments become part of the evidentiary record.
- The final order: the hearings are over. The evidence is in. The questions have been answered. At this point, the commissioners meet to make dozens of decisions that will affect the rates the company will be allowed to charge. As the commissioners make their decisions, they are assisted by the commission's Executive Secretary, the commission's legal counsel, an accounting advisor, and the administrative law judge who presided over the case. A final order is always written, and it is legally binding, though the company may appeal. Most of the document is written by the administrative law judge who has presided over the case. Though every meeting and every document in every commission case is public information, commission meetings on the final order are kept private and strictly confidential. The major utilities are traded on the stock market. So advance knowledge of major commission decisions could potentially result in unfair and illegal insider trading.
- Public notification: the commission's Public Information Officer announces commission decisions -- usually on the same day issued.
- Appeals: if a company wants to appeal a commission order, its first step is to file a Petition for Rehearing or a Petition for Reconsideration within ten days of the final order. The commissioners may decide to reconsider some of the issues in the case, and more hearings could follow. If the company still is not satisfied, it may appeal to the county Superior Court, to the state Court of Appeals, and finally to the state Supreme Court.
A rulemaking case begins when the commission decides to investigate a new problem or development affecting an industry, and issues a Notice of Inquiry. For example, the commission might want to examine the effects of competition on the state's telephone companies. Deregulation and rapidly changing technology have given the commissioners new and more general industry issues to sort out. This is not a formal legal proceeding, but more like the legislative fact-finding process, in which the commissioners invite the companies and interested parties to submit written comments. Workshops or open meetings may follow, and the commissioners may or may not decide to issue a rulemaking order. If so, the new rules are published in the Washington Administrative Code.
To save time and expense, regulated companies can choose to avoid complex litigation and use what is called mutual gains negotiation In this process, the company, commission staff, interveners and public counsel attempt to settle all -- or at least some -- of the issues in the rate case before formal hearings take place. Administrative law judges for the commission preside over mutual gains negotiations, and they are always subject to the commission's approval. In addition, the same process may be used to settle disputes between the commission staff and companies, between companies, or between other parties to a case.
The commission is considered to be a quasi-legislative body because of its rulemaking powers. This means that aside from its judicial role of deciding fairly on specific cases brought before it, it also may take the initiative and establish general rules affecting many companies. For example, the commission may hold hearings and gather evidence on the need for better energy savings programs for industrial gas and electric customers. Or the commission may establish an incentive program that rewards efficiently run companies.