Justices Reject Rate Hike for 4 Failed A-Plants

The Supreme Court today handed state officials and consumers a big victory, ruling that two Pennsylvania utilities may not recover from electricity customers the costs of four abandoned nuclear power plants.

The justices said states have broad power to set rates that balance the interests of utility investors and the public. The Constitution does not require that states allow utility companies to recover from their customers all “prudent” investment, the justices said.

By an 8-1 vote, the justices upheld a ruling that bars the Pennsylvania companies from billing electricity customers for $50 million invested in the abandoned plants.

Chief Justice William H. Rehnquist, writing for the court, said, “The Constitution within broad limits leaves the states free to decide what rate-setting methodology best meets their needs in balancing the interests of the utility and the public.”

Cites Broad Discretion

Rehnquist rejected arguments that Pennsylvania regulators unconstitutionally confiscated the utilities’ property when they overturned a previously approved rate increase to cover the costs of the abandoned plants.

The court upheld a provision of Pennsylvania law that instructed utility regulators on how to set rates.

“It cannot seriously be contended that the Constitution prevents state legislatures from giving specific instructions to their utility commissions,” Rehnquist said.

He said states have broad discretion over how they go about regulating utilities, as long as the final result is a reasonable system.

“An otherwise reasonable rate is not subject to constitutional attack by questioning the theoretical consistency of the method that produced it,” Rehnquist said.