STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITY OF GAINESVILLE, )

)

Petitioner, )

)

vs. ) CASE NOS. 81-2087RX

) 81-2161RP

FLORIDA PUBLIC SERVICE )

COMMISSION, )

)

Respondent. )

)

FINAL ORDER

The Petitioner, City of Gainesville, has filed two Petitions for Administrative Determination under the provisions of Sections 120.56 and 120.54(4), Florida Statutes. Petitioner is seeking a determination that certain rules and proposed rules of the Florida Public Service Commission constitute invalid exercises of delegated legislative authority. In its first petition, the City alleged that Public Service Commission Rules 25-17.01 through 25-17.05, Florida Administrative Code, constitute invalid exercises of delegated legislative authority, and that the Commissions interpretations of its Rules 25 ER 80-10 and 25-17.041(2), Florida Administrative Code, constitute rules which had not been properly promulgated and were therefore invalid. In the second petition, the City alleged that Public Service Commission proposed Rules 25-

17.02 and 25-17.041, Florida Administrative Code, constitute invalid exercises of delegated legislative authority. Both petitions were assigned to the undersigned Hearing Officer by order of the Director of the Division of Administrative Hearings. The matters were consolidated, and a formal hearing was conducted on September 30, 1981.

At the hearing, the Public Service Commission moved to strike various allegations of the petitions. The motion was granted as to paragraphs 12, 13,

14 and 15 of the petition in Case No. 81-2087RX, and paragraphs 45, 46 and 47 of the petition in Case No. 81-2161RP. The motion was otherwise denied. The parties thereafter made evidentiary presentations. Following the hearing, the parties submitted legal memoranda including proposed findings of fact and conclusions of law. The proposed findings and conclusions have, been adopted only to the extent that they are expressly included in the Findings of Fact and Conclusions of Law set out in this Final Order. They have been otherwise rejected as not supported by the evidence, irrelevant to the issues, or erroneous as a matter of law.

The City of Gainesville contends that the Public Service Commission rules being challenged are invalid because they were improperly promulgated, and because they are contrary to the rule making authority that has been delegated to the Commission by the Legislature.

FINDINGS OF FACT

1. During its 1980 Session, the Florida Legislature adopted the Florida Energy Efficiency and Conservation Act, Sections 366.80 through 366.85, Florida Statutes. The Act, which became effective July 1, 1980, mandated that the Florida Public Service Commission develop and adopt goals and plans related to the conservation of electric energy and natural gas usage. The Act required that initial goals be adopted no later than September 1, 1980. In order to comply with these legislative mandates, the Public Service Commission adopted Emergency Rules 25 ER 80-9 through 25 ER 80-14 through its Order No. 9512 issued September 2, 1980 (September 1, 1980, was an official state holiday).

   
   

2. The emergency rules set general and specific goals to be met by electric and natural gas utility systems. General goals were set out in Rule 25 ER 80-9(2) as follows:

   
   

   Generating Utilities

   1. Review and revise utility operat- ing practices such as maintenance sched- uling, daily and longer term unit com- mitment practices through the power broker system to facilitate economic dispatch on both a daily and extended basis and to reduce oil consumption

      to the extent cost effective.

   2. Plan development of the bulk power system over time so that the most cost effective combination of generating units, associated facil- ities and other technologies is developed for meeting generation requirements.

   3. Increase the efficiency of each generating unit and associated prac- tices to the extent cost effective.

      
      

      All Utilities

   4. Aggressively integrate nontradi- tional sources of power generation

      into the various utility service areas to the extent cost effective, including planning site development to facili- tate development of potential cogen- erators near generation units.

   5. Increase the end use efficiency of energy consumption and power demand to the extent cost effective.

   6. Increase the efficiency of trans- mission and distribution systems to

      the extent cost effective.

   7. Aggressively pursue research, development and demonstration pro- jects jointly with others as well as individual projects in individual service areas. In this context, the Commission anticipates that an aggres- sive research program would include

      both technological research, research on load behavior and related problems and market related research.

      
      

      General Authority: 366.05(1),

      366.82(1)-(4), F.S.

      
      

3. Law Implemented: 366.82(1)-(4), F.S. Specific goals were set in Rule

   25 ER 80-10 to reduce the growth rates of "weather-sensitive peak demand" of total electric consumption and of oil consumption. These goals were stated as follows:

   
   

   1. To reduce the average annual growth rate of kilowatt demand to less than

      the average annual growth rate of kilo- watthour consumption and to reduce the average annual growth rate of kilowatt- hour consumption to less than the aver- age annual growth rate in number of customers. The specific goals for the 1980-85 period are to reduce growth rates so that the total KW demand in 1985 does not exceed that of 1984 by

      more than 2.212 percent and the total KWH consumption in 1985 does not exceed

      that of 1984 by more than 2.6 percent. Peak demand in 1985 shall not exceed 23,188

      MW and total consumption in 1985 shall not exceed 116,733 gigawatthours

   2. To reduce the use of oil as gen- erating fuel to the greatest practi- cable and cost effective extent. The overall goal for the 1980-85 period

   is to develop or implement programs

   to reduce the use of oil by 25 percent by 1990. In order to meet this goal, generation capacity in excess of that allowed by the first goal may be installed to the extent cost effective.

   
   

   Utilities were required to submit plans and programs desk to address the general goals, and to meet the specific goals. The emergency rule did not mandate any specific plans programs to be used by utilities in meeting the goals, but rather left the nature of programs that would be utilized to the discretion of the individual utilities.

   
   

4. Following the adoption of the emergency rules, the Public Service Commission initiated permanent rule making proceedings. By its Order No. 9552 entered September 17, 1980, the Commission proposed to adopt Rules 25-17.01 though 25-17.06 as permanent rules. Notice of these proposed rules was published in the September 19, 1980, edition of the Florida Administrative Weekly. The proposed rules were substantively, identical to the emergency rules which had already been adopted. The Commission thereafter conducted public hearings on the proposed rules. Many interested persons, including the City of Gainesville, presented testimony and documentary evidence which was considered by the Commission. The Commission adopted Rules 25-17.01 through 25-17.05 through its Order No. 9634 issued November 13, 1980. The rules were filed with

   the Secretary of State. The rules as adopted were not identical to the rules that had been proposed for adoption. Specific differences between the adopted and proposed rules will be discussed hereafter. A statement reflecting that the rules as adopted were not identical to those proposed was published in the November 14, 1980, issue of the Florida Administrative Weekly. A description of the changes in the proposed rules was filed with the Joint Administrative Procedures Committee of the Florida Legislature. No person formally requested a detailed statement of the changes in response to the Order adopting rules, or in response to the publication in the Florida Administrative Weekly. A copy of the Order was distributed to all utilities affected by the rules, including Petitioner.

   
   

5. The Public Service Commission prepared an Economic Impact Statement in support of the permanent rules as they were originally proposed. The Economic Impact Statement was available for inspection at the time the rules were formally proposed. Additional or modified statements of the economic impact of the rules were not prepared during the course of the rule making proceeding. The only specific cost to the Public Service Commission of implementing the rules set out in the economic impact statement is salaries of new employees who

   would be required. It is estimated in the statement that one-fourth of the time of a new supervisor, one-fourth of the time of a new marketing specialist, and one-half of the time of a utility systems engineer would be required. The salaries of these personnel for the 1980-81 through 1984-85 fiscal years are estimated in the statement. The estimated salaries of the marketing specialist and of the utility systems engineer were reversed in the statement, but the overall sum of the salaries appears accurate. The statement does not include an estimate of costs other than salaries of hiring these personnel, nor does the statement contain any estimate of the cost of paper work that would be required to implement the rules. Clearly, there would be some costs other than salaries involved in hiring new employees, including cost of retirement benefits and the like. Also clearly, there would be paper work costs connected with implementing the rules. No evidence was presented at the hearing to demonstrate that these costs would be significant, nor that the failure to include them in the Economic Impact Statement in any manner prejudices the Petitioner, City of Gainesville.

   
   

6. The economic impact statement does not include any specific estimates of costs that would be incurred by utilities in implementing the rules. The statement includes a recognition that there would be such costs, that costs could be rather significant, and includes only conjecture that benefits that would accrue to the utilities would outweigh the costs. There are valid reasons for this lack of specificity. First, the rules leave to the individual utilities broad discretion in determining what plans or programs would be utilized to meet the goals established under the rules. There are many possibilities. Indeed, one purpose of allowing the utilities broad discretion in determining what plans and programs to utilize is to develop information as to how to best accomplish the conservation goals of the rules and of the Florida Energy Efficiency and Conservation Act. Since the utilities have broad discretion in determining plans and programs, it is not possible to give any accurate forecast of what costs utilities might accrue. Second, there is very little data available from which any useful forecast of cost of implementing plans and programs can be developed. This lack of information is recognized in the Act and in the rules, and it is a goal of both to develop the information. It has been estimated that in order to make any specific statement of the economic impact of the proposed rules in relation to plans and programs that might be anticipated would require the expenditure of hundreds of thousands of dollars simply to develop data. Such an expenditure would not be justifiable.

7. The Economic Impact Statement does not include any specific estimate of the cost to electrical consumers of implementing the rules. It can be anticipated that plans and programs adopted by individual utilities would require the expenditure of money on the part of consumers to obtain energy efficient appliances. It is not possible to make any useful prediction of what these costs might be for the same reason that it is not possible to predict what the cost of implementing the rules might be for individual utilities. In the first pace, the utilities have broad latitude in determining what plans and programs to utilize. The nature of the program adopted by the utility would govern what costs consumers would need to incur. Furthermore, there is a lack of data in this area. While the costs of individual appliances could be accurately estimated, the amount of savings in utility costs cannot be utilizing present data and given the broad variables that exist in utility charges.

   
   

8. Public Service Commission Rules 25-17.01 through 25-17.05, Florida Administrative Code, as adopted by Commission Order No. 9634 are not identical to the rules as proposed under Commission Order No. 9552. Most of the changes are of a non-substantive sort, serving to clarify the intent of the rules and the responsibilities of electrical and gas utilities in meeting the goals set out in the rules. For example, under adopted Rule 25-17.02, the responsibility of electric utilities to develop five-year goals and plans is clearly delineated, and the method for calculating consumption and growth rates is set out with a precision that was lacking in the rules as originally proposed. Some of the changes do, however, impose different substantive requirements upon utilities. The first of these is the goal for reducing consumption of electrical power. Under the proposed rules, a consumption goal was set in order to provide an allowable growth rate of consumption of 85 percent of projected growth rates for kilowatt-hour demand. The starting point for projections under the rule as adopted is the projected growth rate in residential customers. The

   85 percent goal under the proposed rules was changed to require that electrical utilities reduce the growth rate of end use weather-sensitive peak kilowatt demand and of kilowatt-hour consumption to an average of 72.25 percent and 75 percent, respectively, of the average annual growth rate in the number of residential customers for the 1980-89 period. While the percentage is reduced, what the percentage relates to is changed, and the period of the projection is changed. The result is that the rules as proposed and as adopted impose very nearly the same criteria, but the criteria are more easily identified under the rules as adopted. While the goals are nearly equivalent, they are not identical. The rules as adopted do impose a slightly more stringent requirement. As to the City of Gainesville, specifically, the requirement is more stringent, but not to the extent that the City cannot meet the goals with reasonable efforts.

   
   

9. Under the rules as originally proposed, a goal was specified for reducing annual peak demand loads for summer or winter. Under the rules as adopted, goals are set for summer and winter peak demands. While this is a substantively different goal which imposes different responsibilities upon utilities, the evidence does not reveal that the goal is more onerous or stringent that provided in the rules as proposed.

   
   

10. The rules as proposed set the same percentage oil reduction goal as in the rules as adopted. The rules require however, that the goals be met by 1989 rather than by 1990 as in the proposed rules. It would appear that this is a more stringent requirement; however, the rules do not require any actual oil reduction during the period 1981-85.

11. The emergency rules adopted by the Commission (Rules 25 ER 80-9 through

    25 ER 80-14) are substantively identical to the permanent rules as originally proposed by the Commission. All of the differences between the rules as adopted and the rules as originally proposed discussed in the foregoing paragraph pertain equally to differences between the emergency rules and the permanent rules.

    
    

12. Through its Order No. 9923 issued April 2, 1981, the Public Service Commission proposed to adopt amendments to its Rule 25-17.02 and a new Rule 25-

    17.041. With modifications not here pertinent, the rules were adopted through Commission Order No. 10069 issued June 17, 1981. The rules were not properly filed with the office of the Secretary of State, and they were accordingly withdrawn and reproposed under commission Order No. 10234 issued August 26, 1981. These proposed rules are the subject of the Petitioner's challenge in Case No. 81-2161RP before the Division of Administrative Hearings. The proposed revision to Commission Rule 25-17.02 modifies the goals for reduction of growth rates of end use weather-sensitive peak kilowatt demand and of kilowatt-hour consumption to relate to the average annual growth rate in the number of residential customers for the 1981-89 period rather than for the 1980-89 period. The percentage growth rates remain the same as originally provided. Other dates are modified to reflect the passing of another year. Proposed Rule 25-17.041 sets transitional goals for utilities that have not yet had plans and programs approved by the Commission. It appears that these proposed rules impose slightly more stringent goals upon electrical utilities. It does not appear that the changes are so onerous, however, as to be unreasonable.

    
    

13. The Public Service Commission has interpreted both the emergency rules and the permanent rules as requiring that electric utilities adopt "end use" plans and programs to meet the specific goals set out in the rules, rather than "supply side" plans and programs. "End use" refers to power uses on the customer side of the meter which lies between the utility's lines and the customer's home or business. Thus, "end use programs" would be designed to reduce consumption of electrical power by ultimate consumers. "supply side" refers to things that occur on the utility's side of the meter. "Supply side programs" would be programs designed to eliminate inefficiencies in the utility's generating system. The Public Service Commission consistently interpreted the emergency rules as requiring that utilities propose end use programs to meet the specific goals. While this interpretation is not readily obvious from a reading of the rules, it is neither inconsistent with them, nor a strained interpretation. General goals set out in the emergency rules include goals which would encourage electric utilities to improve supply side efficiencies. For example, Rules 25 ER 80-9 (2)(a), and (c), which relate to electric generating utilities, all require increased supply side efficiencies. The specific goals, however, relate to reduction of the growth rates of weather- sensitive peak demand and of total electric consumption. While "total electric consumption" could be interpreted as including supply side efficiencies, it would be inappropriate to interpret it in that manner because the goals are to reduce growth rates. Since generating utilities are specifically mandated under the general goals to improve supply side efficiencies, it would be inconsistent to interpret the specific goals as encouraging the same programs.

    
    

14. Whatever ambiguity there is in the emergency rules as to whether supply side programs could be used to meet the specific goals, there is no ambiguity under the permanent rules adopted by the Commission. Rule 25-17.02 sets specific goals for "end use KW [kilowatt] demand" and "KWH [kilowatt-hour] consumption." End use solutions are clearly required under the permanent rules.

15. The City of Gainesville operates an electric utility. The City submitted a plan to the Public Service Commission to meet the energy efficiency goals. The Commission disapproved the City's proposal and directed that a revised conservation plan be submitted. The City's plan was rejected because it proposed primarily supply side programs to meet the Commission's specific conservation goals. The Commission found in its Order No. 9906 issued March 31, 1981, that if the supply side programs proposed by the City were excluded, the City's plan would not fleet the specific goals. The City appears to concede that such end use programs as it has proposed would not meet the specific goals. Meeting the Commission's goals through end use programs would involve some additional expense by the City over what it would need to have expended to meet the goals through supply side programs. Whether the additional expense would ultimately prove cost effective because it would result in the City needing to spend less for new facilities in the future is a matter of conjecture, and cannot be determined from the evidence.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the challenges brought by the City of Gainesville to Public Service Commission Rules 25-17.01 through 25-17.05, Florida Administrative Code, over the challenge to Public Service Commission proposed Rules 25-17.02 and 25-17.041(2), and over the challenge to the Public Service Commission's interpretations of its emergency rules and permanent rules. Sections 120.54(4) and 120.56, Florida Statutes.

    The City of Gainesville is substantially affected by the rules and proposed rules herein challenged.

    
    

17. Petitioner contends that Public Service Commission Rules 25-17.01 through 25-17.05 as adopted by Commission Order No. 9634 are invalid because they were improperly promulgated. Petitioner contends that the rules were improperly promulgated because interested parties, including Petitioner, were not given adequate notice of the amendments that were incorporated into the rules between the time that they were originally proposed and the time that they were adopted, and because the rules were not supported by an adequate economic impact statement. As to notice, Petitioner argues that the only notices published by the Commission prior to the adoption of the rules related to the rules as originally proposed. Petitioner contends that since the rules as adopted were not the same as originally proposed, it was entitled to specific notice of the amendments and to thereafter avail itself of opportunities to present evidence with respect to the amendments and to challenge the amendments under the provisions of Section 120.54(4), Florida Statutes. This contention is without merit. If the City's argument was followed to its logical conclusion, an agency would not be able to amend proposed rules during rule making proceedings without initiating new rule making proceedings. Such a proposition would render meaningless any evidence that an agency might gather during the course of a rule making proceeding and could endlessly protract proceedings. While there may be some point at which amendments that are attached to proposed rules during a rule making proceeding so change the character of the rules originally proposed that they could not be labeled amendments at all, but rather distinct rules, that is not the case in thin instance. The rules ultimately adopted by the Commission follow the same format and relate to the same subject matter as the rules originally proposed. The adopted rules do not impose additional requirements upon affected persons that are different in kind from those imposed under the proposed rules. Any interested person could have anticipated, based upon that Public Service Commission's original order proposing rules, that amendments would be offered and considered during the rule making proceeding. In its Order, the Commission stated:

    [The proposed rules] represent a start- ing point for setting permanent state- wide energy conservation goals. They are essentially the same as the goals established by emergency rules, the only changes being renumbering and minor technical corrections. As addi- tional data becomes available, the Commission will be able to change the goals to achieve the most appropriate and foresighted standards possible.

    
    

18. Under Section 120.54(2)(a), Florida Statutes, an agency is required to prepare a detailed economic impact statement prior to the adoption of a rule. The statement prepared by the Public Service Commission in support of Rules 25-

    17.01 through 25-17.05 adequately addresses the matters required to be included in the economic impact statement. While the statement does not include precise estimates of the costs or the economic benefits of the proposed rules to all persons directly affected by them, it does contain a discussion of these impacts, which, given the broad latitude that affected persons have under the rules, and given the lack of data generally available in the area, could not have been drafted with the precision advocated by Petitioner. Petitioner's contention that the economic impact statement is inadequate is rejected.

    
    

19. Petitioner contends that Commission Rules 25- 17.01 through 25-17.03 constitute invalid exercises of delegated legislative authority because they provide different and further goals from those initially adopted by the Commission in the emergency rules. Section 366.82(2), Florida Statutes, provides:

    
    

    The commission shall adopt appropriate goals for increasing the efficiency of energy consumption . . . . The initial goals shall be adopted no later than September 1, 1980, for the succeeding

    5-year period. After the programs and plans to meet these goals are completed, the commission shall determine whether further goals, programs, or plans are warranted and, if so, shall adopt them.

    
    

    Petitioner argues that the Public Service Commission was authorized to adopt goals no later than September 1, 1980, and that these goals cannot, under the statute, be modified until plans and programs to meet the goals are completed. The contention is without merit. While the statute directed that initial goals be adopted no later than September 1, 1980, for the succeeding five-year period, nothing in the statute prohibits the Commission from refining the goals while programs and plans designed to meet them are being developed by utilities. Such an interpretation of the statute would have imposed a very tight schedule upon the Commission allowing virtually no opportunity for input from the public, including utilities affected by the rules. The approach taken by the Commission, which was to adopt its initial standards through emergency rules then to refine them through adoption of permanent rules, was a sensible means of meeting the statutory mandate. Petitioner's argument would have more appeal if the goals adopted by the Commission in its permanent rules were completely unrelated to those originally adopted in the emergency rules. This is not the

    case. The goals adopted by the Commission in the permanent rules, while in some instances more stringent than those set out in the emergency rules, are more in the nature of refinements than amendments.

    
    

20. Petitioner contends that the Commission's interpretation of its emergency rules, of the permanent rules adopted in November, 1980, and of proposed Rule 25-17.041(2), as requiring "end use" programs to meet goals specified in the rules constitutes a rule which was not properly adopted as a rule. This contention is without merit. The Commission's interpretation of its emergency rules as requiring end use as opposed to supply side solutions to meet the specific goals is reasonable and compatible with the language of the rule. The interpretation is even more obvious in the adopted permanent rules. The Commission's interpretation of its emergency rules and of its permanent rules does not constitute an unpromulgated rule.

    
    

21. Petitioner contends that the Commission's interpretation of its emergency rules, permanent rules and proposed rules as requiring end use rather than supply side programs to meet the specific goals is contrary to the provisions of the Florida Energy Efficiency and Conservation Act. This contention is without merit. While the statute does not specifically provide that end use programs be adopted by utilities, it does suggest that should be the focus. Section 366.82(2) provides that goals for increasing the efficiency of energy consumption should specifically include goals:

[D]esigned to increase the conserva- tion of expensive resources, such as petroleum fuels, and to reduce the growth rates of electric consumption, especially of weather-sensitive peak demand.

The statute focuses upon reducing growth rates of ultimate consumption of electrical power and petroleum fuels. Setting goals which require end use solutions is compatible with this language, especially when general goals mandating supply side efficiencies are also provided.

FINAL ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, hereby,

ORDERED:

Petitioner has failed to establish that Public Service Commission Rules 25-

17.01 through 25-17.05, Florida Administrative Code, proposed Public Service Commission Rules 25-17.02 and 25-17.041(2), and the Public Service Commission's interpretations of these rules constitute invalid exercises of delegated legislative authority, and the petitions filed in Case Nos. 81-2087RX and 81- 2161RP are accordingly dismissed.

DONE AND ORDERED this 23rd day of November, 1981, in Tallahassee, Florida.

G. STEVEN PFEIFFER Hearing Officer

Division of Administrative Hearings Department of Administration

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of November, 1981.

COPIES FURNISHED:

Ann Carlin, Esquire Assistant City Attorney

313 East University Avenue Post Office Box 490 Gainesville, Florida 32601

Paul Sexton, Esquire Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Carroll Webb, Esquire Executive Director

Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301

Ms. Liz Cloud, Chief Administrative Code Bureau Department of State

1802 The Capitol

Tallahassee, Florida 32301

Docket for Case No: 81-002087RX

Orders for Case No: 81-002087RX