4. Legal Authority
Under § 451, public utilities may demand and receive only just and reasonable charges, and they must provide "adequate, efficient, just, and reasonable service" in a way that promotes the "safety, health, comfort, and convenience of [their] patrons, employees, and the public." Under § 454, public utilities must make a showing to the Commission that any proposed rate change is justified, and receive a finding by the Commission to that effect, before making such change. Under §§ 701 and 728, the Commission has the authority to determine what is just and reasonable, and to disallow costs not found to be just and reasonable.
Our legal obligation to the customers of Apple Valley is to ensure that Apple Valley provides adequate service at just and reasonable rates. As we use the term here, adequate service encompasses all aspects of the utility's service offering, including but not limited to safety, reliability, public information services, new customer connections, and customer service. In addition, a utility that provides adequate service must do so in compliance with laws, regulations, and public policies that govern public utility facilities and operations. In carrying out this obligation, we assess whether Apple Valley has justified the revenue increase proposals, disallow those proposals to the extent that they have not been justified, and may even order reductions in the revenues collected by Apple Valley if the evidence shows that is necessary.
There is a natural litigation advantage enjoyed by utilities in that we must rely in significant part on their evidence and experts; this advantage reinforces the importance of placing the burden of proof in ratemaking applications on the applicant utilities. Apple Valley has the sole obligation to provide a convincing and sufficient showing to meet the burden of proof, and any active participation of other parties can never change that obligation. This was described in D.87-12-0672 as follows:
The inescapable fact is that the ultimate burden of proof of reasonableness, whether it be in the context of test year estimates, prudence reviews outside a particular test year, or the like, never shifts from the utility seeking to pass its costs of operations onto ratepayers on the basis of the reasonableness of those costs.
And further:
The longstanding and proper rule is set forth in D.90642 at 2 CPUC 89, 98-99 and requires that the utility meet its burden by clear and convincing evidence. To meet this burden we have specified that "... the applicant must produce evidence having the greatest probative force."
Nothing in this decision in any way alters or redefines the obligations of Apple Valley to meet the legal requirements on burden of proof.
2 CPUC 2d, 1, 21, and footnote 1 at p. 169.
