Agency Deference Wins Again


Over eleven months after oral argument, the Minnesota Supreme Court issued its opinion in In the Matter of the Application of Minnesota Power for Authority to Increase Rates for Electric Service in Minnesota this Wednesday. (Chief Justice Gildea’s opinion for the Court, Justice Dietzen’s concurrence and Justice G. Barry Anderson dissent can be viewed by following this link. The decision affirms the strong deference Minnesota courts grant to administrative agencies and may impact next year’s energy agenda at the Minnesota legislature.

In Minnesota Power, the utility challenged the Minnesota Public Utilities Commission’s decision in a general rate case to limit the utility’s ability to collect “interim rates” during the pendency of a general rate case.  Minnesota law allows such rates to take effect during the litigation of a rate case, subject to refund if they ultimately prove to have been set too high.  However, the statute also provides that in the case of “exigent circumstances,”  the Commission need not follow the formula.

In this case, the Commission found exigent circumstances based on three factors:  (1) the utility filed the case immediately after concluding a prior case, (2) the rate increase request was the highest ever by the utility, and (3) the area served was suffering “the worst economic downturn in the past 60 years.”  The Commission found that these factors collectively created hardship for the utility’s customers, warranting deviation from the formula and limiting the interim rate recovery to 60% of the increase request.  Ultimately, the Commission found the utility required a rate increase of $5 million per year higher than the amount allowed in interim rates.  However, the statute provides no “true-up” in such a circumstance, so the utility could not recoup those dollars and it appealed the Commission’s decision.

In affirming the Commission’s decision, the Court emphasized that agency decisions “enjoy a presumption of correctness, and deference should be shown by courts to the agencies’ expertise and their special knowledge in the field of their technical training, education, and experience.” The Court further agreed with the Commission that whether exigent circumstances exist “necessarily requires application of the [Commission’s] technical knowledge and expertise to the facts presented.”

Justice Anderson’s vigorous dissent argued that the Court has now gone too far in deferring to administrative agencies, stating that “if the judiciary is to serve as a meaningful check against the possibility of error, abuse, and overreach in the ever-expanding administrative state, I believe we will need to adopt a more robust and assertive program of judicial review of agency action, including the implementation of an arbitrary and capricious review practice resembling the hard look doctrine.”

This debate may continue, but with a strong majority affirming the Commission, Minnesota agencies seem in as strong a position as ever.

One side effect of the decision may be that legislative attempts to limit utilities’ ability to collect interim rates (which have stalled the past two sessions) will fall well down the priority list.  Certainly, the Court has affirmed the Commission’s authority to set interim rates at what it believes to be a “just and reasonable” level, in the event it finds exigent circumstances.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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