Thursday, December 18, 2014

The Right to Sue

By Henry Curtis

The modern air conditioner was developed in the early 1800s but became popular in the 1950s and 1960s.

During the 1950s and 1960s consumers were urged to increase their use of electricity. 

Live Better Electrically (LBE) was launched in March 1956. The industry-wide campaign was supported by 180 electrical manufacturers and 300 electric utilities.

The Southwest Museum of Engineering, Communications and Computation has posted a historical document with historical advertisements.

 “The campaign got then-actor Ronald Reagan, the popular host of ‘General Electric Theater,’ to take his television audience on a series of tours of his and wife Nancy's all-electric Pacific Palisades home.”

“In October 1957, LBE launched the "Medallion Homes" campaign, which sought to sell 20,000 all-electric homes nationwide by 1958, 100,000 by 1960 and 970,000 by 1970.”

The electric industry took off. Profits soared. Rates were low. Regulators did little.

 The Gas Company (GASCO) and Hawaiian Electric Company (HECO) filed requests with the Hawai`i Public Utilities Commission to have ratepayers finance their advertising campaigns encouraging people to use more electricity.

The Commission approved these requests in 1970 and 1972, respectively.

Life of the Land had filed a Motion to Intervene in the HECO case. The intervention was denied but Life of the Land was permitted to ask questions through the Commission staff. This pre-dated the separation of the Commission and the Consumer Advocate.

Life of the Land convinced the staff that requiring ratepayers to pay for advertisement to promote electricity over gas was a bad idea. But the Commission approved it.

Life of the Land appealed. The Commission challenged the right of Life of the Land to appeal arguing that since they were not a party in the proceedings they had no right to appeal.

Justice Benjamin Menor wrote the unanimous Hawaii Supreme Court reversing the Commission on the use of promotional advertisement:

The appellants are users of electrical energy, and two members of appellant Life of the Land, in opposing the rate increase, testified that they would be paying the higher utility rates. A ratepayer who is compelled to pay higher utility rates by agency action is a person specially, personally and adversely affected. 

The fact that he shares this additional burden with all other users does not disentitle him from challenging the results. ...

The PUC staff, however, failed to appeal the decision of the PUC with regard to the rate increase. The practical effect of denying the appellants standing here would be to silence the voice of all those who would speak in the public interest, a duty that normally resides with the PUC staff.

We hold, therefore, that where the appellants have been "aggrieved" by the action of the PUC, and where they were involved as "participants" during the agency hearings, and where the PUC staff (the agency through which they participated at the hearings) has failed to appeal the decision of the PUC, the appellants may challenge the order of the PUC in this court. We shall thus consider their appeal. ...

The appellants contend that the PUC's decision to permit HECO to include promotional expenditures in its budget for ratemaking purposes was arbitrary and unreasonable, and contrary to the best interests of the general public. The PUC staff found itself in complete agreement with the appellants on this issue ...The commission, however, approved ...

The programs due to competitive fuels are designed to attract new customers and, where possible, capture customers and usage from the Honolulu Gas Company [hereinafter GASCO], while defending against similar efforts on the part of GASCO, the electric company's sole competitor in this area. They consist mainly of allowances of payments to owners and developers who build all-electric homes and apartments and advertise them for sale as such. ...

The disturbing aspect of the PUC decision to allow expenditures for these programs is the rationale behind it. GASCO had been granted an allowance for similar promotional expenditures earlier. See Decision and Order No. 2621 (PUC of Hawaii, Aug. 31, 1970).

GASCO, in making its request, had argued that the expenses were necessary to attract customers away from Hawaiian Electric. HECO, in its present application for a rate increase, pointed to the GASCO allowance as justification for its own request. It seems apparent from the record that the PUC's decision was based on this particular argument of HECO.

The PUC has consistently failed to meet squarely the issue of the reasonableness of competitive advertising expenditures. In late 1963, the PUC ordered the opening of Docket No. 1581 for the avowed purpose of inquiring into the promotional practices of the utilities ...

On April 24, 1964, the commission issued its Order No. 1417, requiring the utilities to show cause why certain of their promotional practices should not be discontinued. To date no concrete action aimed at a final resolution of the problem has been taken by the commission. 

On the contrary, it has recently closed Docket No. 1581, thereby assuring the continuance of its practice of passing upon allowances for promotional expenditures on a case-by-case basis, and lending unwarranted validity to the circular arguments of HECO and GASCO.

One of the primary factors the PUC must take into consideration when it fixes rates is fairness to the ratepayer. Obviously, the particular type of advertising competition involved here does not benefit the ratepayer. ...

There are alternative, viable means to promote sound competition among utilities, particularly between two utility companies (HECO and GASCO) which have already established themselves in Hawaii's marketplace. Efficiency of management, technological improvements, superiority of service, and economy of costs should more properly provide the bases for any competition between them.

By basing its decision purely on the previous grant of similar expenditures to a competing utility, the PUC has failed to give adequate consideration to the interests of the ratepayer and has thereby abused its discretion. ...

Moreover, since the appliances being promoted by HECO are those generally in use during peak-load periods, it is difficult to see how HECO can argue that these expenses encourage the increase of off-peak utility loads. ...

In the face of dwindling oil supplies and spiralling costs, promotional practices which are wasteful or which only serve to fuel the energy crisis should be viewed by a regulatory agency with extreme caution.”

The Honolulu Star Bulletin Editorial (Right to Sue, May 9, 1975): “’Right-to-sue’ has always been a red flag in the environmental area. Environmentalists rally round. They see it as one of their most effective tools for stopping environmental abuse.

The Establishment cringes at its potential for harassment, delays of projects, extra costs.

As a result of a unanimous State Supreme Court decision this week, the fight may largely be settled.

A wide right to sue is now law, the Supreme Court has held. The court placed a broad interpretation on the right-to-sue privileges spelled out in the Hawaii Administrative Procedure Act ...It held that two Life of the Land officers were aggrieved parties in a Hawaiian Electric rate setting case because their bi-monthly electric bills are affected.”

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