In re Lakes Region Water Co.

171 N.H. 515

198 A.3d 898

APPEAL OF LAKES REGION WATER COMPANY, INC. (NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION)

Public Utilities Commission No. 2017-0452

Supreme Court of New Hampshire.

Submitted: April 12, 2018

Opinion Issued: November 28, 2018

Upton & Hatfield, LLP, of Portsmouth (Justin C. Richardson on the brief), for the petitioner.

Gordon J. MacDonald, attorney general (Laura E. B. Lombardi, senior assistant attorney general, on the brief), for the New Hampshire Public Utilities Commission.

HICKS, J.

The petitioner, Lakes Region Water Company, Inc. (Lakes Region), appeals an order of the New Hampshire Public Utilities Commission (Commission) requiring Lakes Region to refund a second base charge it had imposed on its customer, Robert Mykytiuk, and prohibiting it from "imposing such charges unless and until they are included in the company's tariff." We affirm.

The following facts are taken from the Commission's orders or recount testimony given at the hearing on the merits. In March 2016, Lakes Region learned that Mykytiuk had constructed an additional structure on his property. To supply the new structure with water, Mykytiuk had tapped into his primary residence's service connection. Shortly after learning of the new construction, Lakes Region sent Mykytiuk an application for new service for the additional structure and requested to inspect the water service connection.

Lakes Region sent an inspector to Mykytiuk's property in May. Despite concluding that the new structure required a separate service connection, Lakes Region chose not to install one at that time. Rather, Lakes Region began billing Mykytiuk for an additional "base charge," which refers to the "[m]inimum charge per customer per quarter" scheduled in Lakes Region's tariff. Mykytiuk complained to the Commission, asserting that he was not required to have a second service connection. The Commission treated the matter as a formal complaint and held a hearing on the merits.

At the hearing, Mykytiuk argued that Lakes Region could not charge him a separate base charge or require him to install a separate meter for the additional structure because neither was provided for in Lakes Region's tariff. He testified that his additional structure is a "garage[ ] with bunkhouse" and that, according to his definition, a bunkhouse "is subordinate to a primary residence, [and] ... contain[s] sleeping facilities, and may contain sanitary facilities, but does not contain cooking facilities." He further testified that he rents out his primary residence by the week as a vacation rental, during which times he stays in the bunkhouse.

Lakes Region's utility manager testified that she considered Mykytiuk's service to his additional structure to be a "tandem connection" — which she, in turn, understood to mean a connection from the service line to a second place of consumption after the meter — prohibited by New Hampshire Administrative Rules, Puc 606.04(h). According to her testimony, as summarized in the Commission's order, Lakes Region's tariff contains "no specific working definition about what tandem service is." Furthermore, notwithstanding the conclusion that Mykytiuk had installed a prohibited tandem service, Lakes Region "decided not to disconnect [him] in April 2016 after being satisfied that there were no health concerns and that [he] had not bypassed recording water usage on the meter. Moreover, Lakes Region did not want to cause an undue hardship on [him]."

Following the hearing, the Commission issued its order, finding that Lakes Region had no basis under its current tariff to impose the second base charge on Mykytiuk. It ordered Lakes Region to refund those charges and further ordered that "Lakes Region shall not impose a second base charge on [Mykytiuk's] property ..., until such time as Lakes Region receives approval to impose a second charge under the terms of a properly filed tariff amendment." Lakes Region now appeals, arguing that the Commission erred in failing to: (1) apply both RSA 378:1 (2009) and its own rules; (2) explain its rules on rehearing; and (3) reconsider a new issue determined in its order.

We first set forth our standard of review. "A party seeking to set aside an order of the [Commission] has the burden of demonstrating that the order is contrary to law or, by a clear preponderance of the evidence, is unjust or unreasonable." Appeal of Northern New England Tele. Operations, LLC, 165 N.H. 267, 270, 75 A.3d 1102 (2013) ; see RSA 541:13 (2007). The Commission's findings of fact "are presumed prima facie lawful and reasonable." Northern New England Tele., 165 N.H. at 270, 75 A.3d 1102 ; see RSA 541:13.

We give the Commission's "policy choices considerable deference," but review its statutory interpretations de novo. Northern New England Tele., 165 N.H. at 271, 75 A.3d 1102 (quotation omitted).

Lakes Region first challenges the Commission's determination that it could not charge an additional base charge for the service to Mykytiuk's garage and bunkhouse. Lakes Region concedes that its tariff "does not contain an express provision authorizing a second base charge for an additional residence." Nevertheless, it attempts to justify Mykytiuk's second base charge through the interplay of several statutes and regulations.

For ease of reference, we set forth the relevant provisions here. First, RSA 378:1 provides, in pertinent part:

Every public utility shall file with the [Commission], and shall print and keep open to public inspection, schedules showing the rates, fares, charges and prices for any service rendered or to be rendered in accordance with the rules adopted by the commission pursuant to RSA 541-A ....

RSA 378:1. Next, New Hampshire Administrative Rules, Puc 606.04 provides, in part, that "[n]o tandem services shall be permitted." N.H. Admin R., Puc 606.04(j). Finally, RSA 378:14 provides:

No public utility shall grant any free service, nor charge or receive a greater or lesser or different compensation for any service rendered to any person, firm or corporation than the compensation fixed for such service by the schedules on file with the commission and in effect at the time such service is rendered.

RSA 378:14 (2009).

Lakes Region's argument begins with the assertion that its tariff, which applies to "all water service in the franchise area," specifically applies to water service " ‘rendered in accordance with the rules adopted by the commission.’ " (Quoting RSA 378:1.) Lakes Region then points out that the Commission's rules specifically prohibit tandem services, N.H. Admin R., Puc 606.04(j)(2), which, according to Lakes Region, explains why its tariff does not include a rate for such service. Nevertheless, Lakes Region argues, it must charge Mykytiuk a second service charge because his tandem service "carries a significantly greater cost" than would be accounted for in the tariff's metered rate for actual water usage.

Specifically, Lakes Region cites the hearing testimony of the Director of the Commission's Gas and Water Division, Mark A. Naylor, who opined that "adding a second unit to an existing service ... creates demand cost." Naylor explained that Lakes Region, like all utilities, is required "to be able to provide [its] peak demand, plus a safety factor over that, on a 365 day basis," and, thus, must have "facilities to meet its peak demand[ ]." According to Naylor:

When you add additional places of consumption, when you add additional customers, which is what [Mykytiuk's situation] is, it adds to the peak demand. And that may not have an out-of-pocket cost today or tomorrow, [but] it will result in cost that the Company will have to face.

Lakes Region elaborates on the foregoing concepts in explaining the importance of the fixed customer charge or base charge in its scheduled rates:

Lakes Region's systems, being located in New Hampshire's Lakes and White Mountain Regions, serve[ ] primarily seasonal customers who own second homes that may be unoccupied for prolonged periods. During off-peak seasons, use is low. However, during peak holiday periods such as during weekends in July and August, demand is high which requires larger storage tanks, larger pipe diameters, and larger treatment and production (wells and pumps) facilities. As a result, Lakes Region's rates are designed to recover the fixed capital costs to make service available during periods of peak demand. Its base per customer charge is high while its metered consumption is correspondingly low.... The addition of a summer vacation rental ... places significant additional peak demand. Lakes Region does not recover the costs to serve this additional peak demand in the absence of an additional fixed customer charge.

Based upon all of the foregoing assertions, Lakes Region concludes that, in Mykytiuk's case, "allowing a second dwelling without a second customer charge would result in free or discounted service in violation of law." See RSA 378:14. More specifically, Lakes Region contends that "the Commission allowed [Mykytiuk] to maintain a second use in violation of Rule ... 606.04 while paying rates that are less than required by RSA 378:1." It asserts that "[t]he Commission ... fail[ed] to address the central issue in the proceeding" by failing to apply RSA 378:1 and its own rules as outlined above. We conclude, however, that the statutes and administrative rules at issue do not support Lakes Region's construction of them.

First, we note that the Commission made no finding as to whether the service to Mykytiuk's bunkhouse was or was not a tandem connection prohibited by Rule 606.04(j). The lack of such a finding, however, is immaterial to the disposition of this appeal, as we hold that, in any event, RSA 378:14 does not authorize the sort of self-help employed by Lakes Region here. To construe the statute as Lakes Region urges would render it internally inconsistent.

No public utility shall grant any free service, nor charge or receive a greater or lesser or

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