Georgia Power Company v. Georgia Industrial Group

In 1991, the Georgia legislature passed the Integrated Resources Planning Act (planning act). The planning act provided that utilities could recover costs for any demand-side programs for energy conservation, like interruptible service credits, that paid customers to reduce their consumption of electricity during periods of high demand. Utilities were permitted to collect an additional sum (subject to regulatory approval) as an incentive to administer such programs. The legislature intended that the planning act provide a mechanism for utilities to recover the costs of demand-side energy-conservation programs outside of the traditional ratemaking procedure. The traditional procedure employed the future-test-year accounting method. This traditional method provided utilities with an overall rate of return based on cost estimates rather than recovery of specific, actual costs as authorized by the planning act for demand-side programs. The traditional method required utilities to establish costs, like construction costs, as part of its rate base (i.e., total value of investments by a utility) so that it could receive rates from customers that provided a sufficient rate of return on investment. The planning act did not call for demand-side-program costs to be included in a utility’s rate base and simply provided for recovery in rates. Georgia Power Company (defendant) requested permission to recover the costs of certain demand-side programs through riders, or surcharges, on customers’ bills rather than through the traditional future-test-year accounting method. The Georgia Public Service Commission (the commission) authorized Georgia Power’s proposed recovery rider. The rider mechanism was designed to ensure that any inaccurate collection of costs would be remedied the following year. Georgia Industrial Group (plaintiff), representing industrial customers, appealed the commission’s orders to the superior court. The superior court reversed the commission’s orders as a violation of the accounting methods prescribed by OCGA § 46-2-26.1 (i.e., use of the future-test-year accounting method). Georgia Power appealed.