In re Twenty Four Electric Utilities

IN_RE_TWENTY_FOUR_ELECTRIC_UTILITIES.92-325; 160 Vt. 227; 627 A.2d 355


 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 92-325


 In re Twenty Four Electric                   Supreme Court
 Utilities
                                              On Appeal from
                                              Public Service Board

                                              February Term, 1993


 Richard H. Cowart, Chair

 John H. Marshall and Holly Ernst Groschner of Downs Rachlin & Martin,
   St. Johnsbury, for petitioners-appellees

 James A. Dumont and Bonnie Barnes of Sessions Keiner Dumont Barnes &
   Everitt, P.C., for intervenors-appellants

 Christopher L. Dutton, Burlington, for appellee Green Mountain Power
   Corporation

 Robert V. Simpson, Jr., Special Counsel, Montpelier, for appellee
   Department of Public Service


 PRESENT:  Allen, C.J., Gibson, Dooley and Morse, JJ., and Peck, J. (Ret.),
           Specially Assigned


      DOOLEY, J.   This is the third appeal involving the contract to import
 electricity from Hydro-Quebec (HQ), a Canadian producer of electricity.  In
 the first appeal, we affirmed the decision of the Vermont Public Service
 Board approving the contract with HQ.  In re Twenty-Four Vermont Utilities,
 ___ Vt. ___, ___, 618 A.2d 1295, 1309 (1992) [Hydro-Quebec I].  In the
 second, we affirmed a Board decision approving a waiver and release that
 effectively extended the time for HQ to terminate the purchase requirement.
 In re Twenty-Four Vermont Utilities, ___ Vt. ___, ___, 618 A.2d 1309, 1314
 (1992) [Hydro-Quebec II].  The present appeal concerns the Board's approval
 of the participation agreement that distributed the shares of the HQ
 purchase to the participating Vermont utilities.  The Board's decision is
 challenged by the New England Coalition for Energy Efficiency and the
 Environment (NECEE).  We affirm.
      In the original proceeding, the Vermont utilities sought approval for
 both the purchase contract with HQ and for the participation agreement that
 determined how much electricity each utility would receive.  The Board
 concluded that the requirements for approval specified in 30 V.S.A. { 248
 were shown for the state as a whole.  See Hydro-Quebec I, ___ Vt. at ___,
 618 A.2d  at 1307.  It also concluded that the showings in support of each
 utility's share were inadequate, except as to Central Vermont Public Service
 and Burlington Electric Department.  Id.  It made the certificate of public
 good conditional on the approval of the individual allocations to each
 utility and required filings in support of the allocations within sixty days
 after its decision.  The Board opened this docket, (FN1) specifying that each
 utility file a statement of position, including "prefiled testimony and
 exhibits demonstrating that the preferred allocations promote the general
 good of Vermont in accordance with . . . section 248."  It stated further
 that:
         In such proceedings, each participant (except Burlington
         Electric Department and Central Vermont Public Service
         Corporation) shall submit additional justification on
         how their respective allocations of Contract power under
         the Participation Agreement meet the present and future
         need for service that could not otherwise be met more
         cost-effectively through energy conservation, energy
         efficiency and load management measures.  If the Board
         determines that any such Participant is entitled under
         the Participation Agreement to power that exceeds such
         demand for service such Participant shall offer to sell
         to Hydro-Quebec or other parties an amount of power
         (and associated energy) equal to such excess.

 Pursuant to this order, each utility filed evidence supporting its
 allocation.  The Department of Public Service analyzed this evidence, and
 in almost all cases supported the proposed allocations.
      The Board held three days of evidentiary hearings and on February 12,
 1992, approved the allocations for nineteen utilities.(FN2) The allocations for
 three utilities -- Swanton Village, Inc. Electric Department; Village of
 Jacksonville Electric Company; Town of Readsboro Electric Light Department
 -- were not approved. (FN3) Post-judgment motions of NECEE were denied on May
 21, 1992, and this appeal followed.
      In the original appeal, NECEE first attacked the Board's decision to
 bifurcate the proceedings, characterizing it as unlawfully segmenting the {
 248 approval process and thereby avoiding a utility-by-utility analysis
 under each of the factors bearing on the public good.  That position was
 largely addressed in Hydro-Quebec I, ___ Vt. at ___, 618 A.2d  at 1307.
 There, we approved the certificate of public good, subject to later approval
 of the allocations, reasoning that:
         The Board determined that the energy supplied in the HQ
         contract was needed in the state; the only question was
         the allocation among the participating utilities.  There
         was no reason to delay the contract with HQ while the
         allocation was being determined.  The Board's power to
         order reallocation or resale meant that there could be
         no prejudice to any ratepayer or to the intervenors.

 Id.  We also noted that the alternative of twenty-four separate proceedings
 "would be oppressive and could lead to inconsistent results," and the Board
 had the power to make the proceedings "manageable while protecting fully the
 rights of the parties."   Id.
      In its reply brief, NECEE acknowledges that Hydro-Quebec I answered
 many of the issues raised in this appeal.  Certain of its remaining conten-
 tions are also foreclosed by Hydro-Quebec I.  Specifically, NECEE argues
 that the Board erred in failing to consider the economic benefits in
 increased jobs and tax revenues from demand-side management (DSM)
 investments, as well as the conflict between the HQ purchase and in-state
 generation sources.  These arguments were made in Hydro-Quebec I and
 rejected.  Id.  We found no error in the failure to consider the job
 creation and tax revenue consequences of DSM because there was no conflict
 between intensified demand-side management (IDSM) and the HQ purchase.  Id.
 We refused to consider conflicts between in-state generation sources and the
 HQ purchase because NECEE failed to raise the issue before the Board.  Id.
 NECEE cannot raise these issues anew in this follow-up proceeding. (FN4) See In
 re Vermont Power Exch., ___ Vt. ___, ___, 617 A.2d 418, 425 (1992).
      We also believe that the resolution of Hydro-Quebec I precludes
 revisiting the Board's treatment of DSM.  In this case, NECEE argues that
 the extent to which DSM will reduce the need for other sources of
 electricity varies from utility to utility, depending in part on the extent
 to which the utility has already implemented DSM.  It claims that the Board
 was required to determine the DSM potential of each utility as part of its
 consideration of the proposed allocation.  Instead, based on expert
 testimony, the Board assumed the average DSM effect.  See Hydro-Quebec I,
 ___ Vt. at ___, 618 A.2d  at 1299 (IDSM will reduce peak load by 27% and
 energy demand by 20% in the year 2000). (FN5) Because the overall purchase
 decision was based on IDSM, it was reasonable to base the allocation on the
 same demand-reduction assumptions.  Without applying similar methodology, it
 is likely that the allocation decision would be inconsistent with the
 purchase decision.
      A part of NECEE's appeal challenges the manner in which the Board
 conducted the follow-up proceeding, and we agree that this issue is not
 foreclosed by Hydro-Quebec I.  Specifically, NECEE argues that the Board
 restricted the proceeding to an analysis of utility-by-utility need, and
 then improperly relied upon non-need factors when it discovered that some
 utilities did not need all the electricity allocated to them.  NECEE bases
 this argument on showings by Green Mountain Power Corporation (GMP) and
 Citizens Utilities Company (Citizens) as to the optimum electricity
 purchase from HQ.
      Most of the utilities showed that their HQ allocations would reduce
 supply costs in the future and not interfere with the need to pursue IDSM.
 Most of them did not show, however, whether their allocations were optimum,
 in the sense that the allocations maximized the cost savings over other
 available sources of supply.  The evidence provided by GMP and Citizens
 showed that savings for these utilities would be maximized by a smaller
 allocation than that provided in the participation agreement.  For GMP, the
 Board found that a five megawatt reduction under one of the purchase
 schedules would optimize savings, but the savings did not "differ
 significantly" between the allocated amount and the optimum amount.  For
 Citizens, the Board found that a 10% decrease in its allocation would
 increase savings by 7%.  In both cases, the Board approved the allocation in
 the participation agreement because of uncertainty associated with other
 sources of supply.  For example, the main alternative for GMP, a
 cogeneration plant, was not permitted at the time of the analysis.  NECEE
 characterizes the consideration of risk as a "non-need" factor, and argues
 that it was improper for the Board to rely on such factors.
      We emphasize that "[i]n a { 248 proceeding, the Board 'is engaged in a
 legislative, policy-making process.'"  Hydro-Quebec I, ___ Vt. at ___, 618 A.2d  at 1306 (quoting Auclair v. Vermont Elec. Power Co., 133 Vt. 22, 26,
 329 A.2d 641, 644 (1974)).  It must use its "particular expertise and
 informed judgment" to weigh the alternatives presented to it.  Id.  We give
 deference to this expertise and informed judgment, and accord a strong
 presumption of validity to orders of the Board.  In re East Georgia
 Cogeneration Ltd. Partnership, ___ Vt. ___, ___, 614 A.2d 799, 803 (1992).
      The essence of the Board's view is contained in its conclusion that
 "'optimization' must both be dynamic over time and must recognize that the
 goal is a 'best fit' rather than unattainably absolute perfection."   In
 view of the broad { 248 criteria involved, see 30 V.S.A. {{ 248(a) (purchase
 must "promote the general good of the state"), 248(b)(4) (purchase must
 provide an "economic benefit" to the state and its residents), allowing an
 allocation above the optimum was within the Board's discretion. (FN6) The
 amounts involved here are relatively small, and the Board could rely on the
 resale requirement in its initial order.  We note that DSM is not involved
 directly in this issue because there is no conflict between IDSM and the
 allocated purchase amounts.  Thus, however we decide this issue, GMP and
 Citizens must pursue and obtain all of the DSM savings the Board found
 feasible.
      Nor do we find error in the consideration of "non-need" factors.
 Despite NECEE's assertion to the contrary, the contested factors actually go
 to need because they involve the availability and magnitude of alternative
 sources of supply.  The Board felt that "unexpected outages of existing and
 planned supply resources" and uncertainties in the "magnitude and
 availability of non-utility generation," as well as risks in the economy,
 warrant allowance of an HQ purchase slightly above the optimum level.
 Moreover, Hydro-Quebec I resolved whether there would be a HQ purchase and
 the amount of that purchase.  This follow-up proceeding determined the
 proper allocation of the purchase.  Nothing bearing on the allocation was
 foreclosed from consideration, except to the extent that one of the { 248(b)
 factors had been determined in the analysis of the overall purchase.  Thus,
 we see no error in examining the reliability of an alternative source of
 supply available to a particular utility in determining whether the HQ
 purchase should supplant that source of supply.  The overall determination
 of need in Hydro-Quebec I did not foreclose this inquiry.
      NECEE also raises a procedural objection to the consideration of "non-
 need" factors, arguing that it was denied notice of the scope of the
 proceeding and an opportunity to "present evidence and argument on all
 issues involved," as required by the Administrative Procedures Act (APA), 3
 V.S.A. {{ 809(a),(b),(c).  The standard of review for such claims is set
 forth in In re Green Mountain Power Corp., 131 Vt. 284, 293, 305 A.2d 571,
 577 (1973):
         The question on review is not the adequacy of the
         original notice or pleading but is the fairness of the
         whole procedure.  Critical to a determination of whether
         the procedure was fair is whether or not the parties
         were given an adequate opportunity to prepare and
         respond to the issues raised in the proceeding.

 See also In re Hot Spot, Inc., 149 Vt. 538, 540, 546 A.2d 799, 801 (1988)
 (notice in administrative proceeding "need only be reasonable").  As NECEE
 emphasizes, the Board limited the scope of the proceeding to determining
 whether the allocations "meet the present and future need for service that
 could not otherwise be met . . . through energy conservation, energy
 efficiency and load management measures."
      The "non-need" factors to which NECEE objects relate primarily to
 alternative sources of supply.  These considerations fairly go to the need
 for service and thus were within the scope of the proceeding as originally
 defined.  Moreover, they were raised in the prefiled testimony of the
 utilities, giving NECEE notice that they were before the Board.  NECEE had
 an adequate opportunity to prepare and respond to these issues.  See Hydro-
 Quebec II, ___ Vt. at ___, 618 A.2d  at 1313.  We see no violation of the
 APA.
      NECEE's third claim is that the Board erred in admitting and relying on
 expert testimony from two employees of the Public Service Department, the
 Director of Regulated Utility Planning and a power cost analyst.  The
 Department witnesses analyzed the information filed by each utility to
 determine whether it was credible and whether it showed net savings
 resulting from the HQ allocation.  The witnesses did not determine whether
 the allocations were optimum or whether a smaller purchase would alter the
 savings, except in the limited cases, discussed above, where the utilities
 did such analysis.  Nor did the witnesses memorialize their analysis in
 writing.  They testified to their conclusions and their general methodology
 in reaching them.
      NECEE's objections to the expert witnesses' testimony surfaced in
 cross-examination about their opinions of the utilities' ability to sell
 excess electricity.  The filings for a number of utilities indicated that
 they expected to resell some baseload power or surplus energy or both.
 Because the utilities often did not provide information about the terms and
 conditions of the sales, the Department witnesses made certain assumptions
 about these terms and conditions based on historic sales of other
 electricity.  In some cases, they concluded that the terms of resale did not
 matter because there would be net savings from the HQ allocation under any
 assumption.  When the witnesses indicated that they had not memorialized
 their assumptions or analysis on this issue, NECEE moved to strike all their
 testimony as without "evidentiary foundation."  On appeal, NECEE contests
 both the admission of the testimony and the Board's reliance upon it.
      NECEE does not contest that this is a proper subject for expert testi-
 mony.  See 3 V.S.A. { 810(1) (rules of evidence apply to administrative
 proceeding except when necessary to ascertain facts "not reasonably
 susceptible of proof under those rules"); V.R.E. 702 (expert witness may
 give opinion where "scientific, technical, or other specialized knowledge
 will assist the trier of fact to understand the evidence or to determine a
 fact in issue").  Nor does it contest that the witnesses could base their
 opinion on the utility filings, as well as other facts or data known to
 them.  See V.R.E. 703.  Its objection comes from V.R.E. 705:
         The expert may testify in terms of opinion or inference
         and give his reasons therefor without prior disclosure
         of the underlying facts or data, unless the court
         requires otherwise.  The expert may in any event be
         required to disclose the underlying facts or data on
         cross-examination.

 This rule provides for disclosure of the basis for an expert opinion, and is
 grounded on the principle that the court may not admit an opinion with an
 inadequate basis.  See Reporter's Notes to V.R.E. 705 ("[i]f the cross-
 examination discloses that the facts or data are insufficient to support the
 opinion, the court may strike the testimony").  The principle is rarely
 invoked, however, because an inadequate basis means the evidence has little
 weight.  See 2 Wigmore, Evidence { 659(c), at 898 (Chadbourn rev. 1979).
      NECEE has failed to show that the bases for the witnesses' opinions
 were inadequate.  Its real objection is that the witnesses failed to write
 down their analysis.  Most of the utility data and calculations relied on by
 the Department witnesses had been admitted in evidence.  NECEE could have
 insisted that the witnesses produce the rest.  Using that data, NECEE could
 have taken the Department witnesses through their analysis requiring them to
 show exactly how they reached their conclusions.  While this process may
 have been tedious, it was not unfair.  As the Advisory Committee's note to
 the identical Federal Rule of Evidence discusses, the rule assumes that the
 cross-examiner engaged in sufficient discovery to acquire the advance
 knowledge necessary to bring out the facts or data "unfavorable to the
 opinion."  Fed. R. Evid. 705. advisory committee's note.  An opinion does
 not become inadmissible because the opponent, as a result of its failure to
 engage in discovery, is forced to use cross-examination discover the
 foundation of the opinion.
      Moreover, NECEE accomplished much of its purpose through cross-
 examination.  For example, it showed reasons to question the assumptions
 about the effect of power resales, and the lack of a written analysis
 undermined the force of the witnesses' opinions.  As the rule contemplates,
 the cross-examination went to the weight, not the admissibility, of the
 expert opinions.  See United States v. Kail, 804 F.2d 441, 448 (8th Cir.
 1986).
      NECEE attacks the findings that were based on the testimony of the
 Department witnesses because they are "recitations of testimony," in
 violation of the holding in Krupp v. Krupp, 126 Vt. 511, 514, 236 A.2d 653, 656 (1967).  By recitations of testimony, we mean that the fact-finder has
 stated only what the evidence was and not the facts that were found from the
 evidence.  See Harrington v. Department of Employment Sec., 142 Vt. 340,
 346, 455 A.2d 333, 337 (1982) (use of terms such as "alleges" or "testifies"
 in a finding is improper, citing Krupp).  In this case, the Board made
 findings, not recitations of testimony.  The fact that the findings
 completely accept the evidence of the Department's witnesses does not make
 them ineffective.  We find no error in the admission of the testimony of the
 Department's expert witnesses or in the Board's findings based on that
 testimony.
      Affirmed.

                                         FOR THE COURT:




                                         Associate Justice




FN1.    It also opened a docket on proposals to resell part of the power and
 energy to HQ.  In that docket, it has approved two proposals of CVPS and
 proposals of the Village of Morrisville Water and Light Department and
 Lyndonville Electric Department for resales.

FN2.    The allocation for Franklin Electric Light Company was approved only
 in part.  Franklin was required to make a further filing in support of its
 full allocation.

FN3.    The voters in these communities did not approve the purchase
 contract.  Accordingly, the allocations would not be purchased even if need
 had been shown.  The same situation occurred with respect to Burlington
 Electric Department, although the Board already had  approved this
 allocation.  Pursuant to the HQ contract, the overall amount purchased was
 reduced to reflect these disapprovals.

FN4.    For this reason, we also refuse to consider either NECEE's new
 argument that 1981, No. 236 (Adj. Sess.), { 2(2), establishing a state
 energy policy, requires reliance on in-state generation to the greatest
 extent practicable; or its argument that 30 V.S.A. { 278(b)(4), as added by
 1987, No. 65, { 1, requires consideration of the economic benefit to in-
 state generation from DSM.

FN5.    The levels of demand reduction determined in Hydro-Quebec I were
 based on New England load shapes.  When IDSM was applied to Vermont-specific
 load shapes, the reductions were modified to 20% of total participant energy
 demand and 21% of peak demand in the year 2000.

FN6.    We also find within the Board's discretion its decision to leave
 specific reallocation or resale orders to the future.