STATE OF ALASKA
THE REGULATORY COMMISSION OF ALASKA
Before Commissioners: Mark K. Johnson, Chair
Kate Giard
Dave Harbour
James S. Strandberg
G. Nanette Thompson
In the Matter of the Application for the Approval of the )
Transfer of Control of Alaska Pipeline Company, Holder of ) U-03-91
Certificate of Public Convenience and Necessity No. 141 ) ORDER NO. 5
ORDER GRANTING RECONSIDERATION, VACATING
ORDER U-03-91(4), REJECTING STIPULATION, APPROVING
TRANSFER OF CONTROL, ALLOWING PARTIES TO REQUEST
FURTHER PROCEEDINGS, AND FINDING MOTIONS FOR
EXPEDITED CONSIDERATION MOOT
BY THE COMMISSION:
Summary
We grant the petition for reconsideration(1) filed by SEMCO Energy,
Inc. (SEMCO) and we vacate Order U-03-91(4).(2) We reject the Stipulation(3) and
proposed order filed March 26, 2004, by the parties(4) approving transfer of
control of Alaska Pipeline Company (APLC), holder of Certificate of Public
Convenience and Necessity (Certificate) No. 141, from SEMCO to Atlas Pipeline
Partners, L.P. (Atlas). We
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(1) Petition for Clarification or Alternatively Reconsideration, filed May
5, 2004.
(2) Order Accepting Stipulation Approving Transfer of Control, Finding
Motion for Expedited Consideration Moot, and Requiring Filing, issued April 20,
2004.
(3) Stipulation of All Parties for Entry of a Final Order Approving
Transfer of Control of Alaska Pipeline Company, filed March 26, 2004.
(4) The parties to this proceeding are SEMCO, Atlas, State of Alaska
(State), Agrium U.S. Inc. (Agrium), and the Municipal Light & Power Department
(ML&P).
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approve transfer of the control of APLC from SEMCO to Atlas. We allow the
parties to request further proceedings in this Docket concerning the Special
Contract for Gas Transportation, the inclusion of income taxes in rates, the
pass-through of rates to ENSTAR,(5) and any other issues that must now be
decided concerning SEMCO, Atlas, APLC, or ENSTAR. We find SEMCO's Motion for
Expedited Consideration(6) of the Petition for Clarification or Alternatively
Reconsideration, is moot. We find the request by Atlas, the State, Agrium, and
ML&P for expedited consideration of their Joint Response(7) and SEMCO's Petition
for Clarification or Alternatively Reconsideration, is moot.
Background
On October 10, 2003, SEMCO and Atlas jointly filed a request for
approval to transfer control of APLC, holder of Certificate No. 141, from SEMCO
to Atlas.(8) In the Request for Transfer, SEMCO and Atlas asked us for five
specific rulings in a final order subject to appeal within 30 days:
o approval of the transfer of control of Certificate No. 141 from SEMCO
to Atlas;
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(5) ENSTAR Natural Gas Company, a division of SEMCO Energy Inc., and Alaska
Pipeline Company, a wholly-owned subsidiary of SEMCO (collectively referred to
as ENSTAR).
(6) Motion for Expedited Consideration, filed May 5, 2004.
(7) Joint Response of Atlas Pipeline Partners, L.P., State of Alaska,
Agrium U.S. Inc. and Municipal Light & Power Department to Petition for
Clarification or Alternatively Reconsideration of SEMCO Energy, Inc. and
Non-opposition to Expedited Consideration, filed May 10, 2004.
(8) Request for Approval of Transfer of Control of Alaska Pipeline Company,
Holder of Certificate No. 141 (Request for Transfer), filed October 10, 2003.
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o approval of the Special Contract for Gas Transportation (Special
Contract);
o an acknowledgement that the rates in the Special Contract are being
approved even though the conversion of APLC from a corporation to a limited
liability company to facilitate its acquisition by a Master Limited Partnership
means that APLC will no longer pay income taxes directly;
o a ruling that SEMCO and Atlas can rely on the economic arrangements
to which they have agreed, specifically that, for a 10-year period, SEMCO will
pay Atlas the difference between the transportation rate ENSTAR has agreed to
pay APLC and any lower rate we set;
o a statement that we require no further regulatory approval for the
transfer.
The application was noticed to the public on November 14, 2003, and we
received comments and requests for intervention. We granted intervention to
Agrium, ML&P, and the State (Intervenors) and set a procedural schedule.(9)
After filing initial comments on the transaction, the Office of the Attorney
General (AG) elected not to participate in this proceeding.(10)
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(9) Order U-03-91(1), Order Granting Intervention, Setting Deadline for
Other Intervenors, Scheduling Prehearing Conference, and Appointing an
Administrative Law Judge, issued January 21, 2004. See also Order U-03-91(2),
Order Affirming Electronic Ruling Granting Intervention, Adopting Procedural
Schedule and Requiring Filing, issued February 17, 2004.
(10) Comments of the Attorney General, filed December 18, 2003; Responsive
Notice of Election Not to Participate, filed February 25, 2004.
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SEMCO and Atlas prefiled testimony(11) in support of their Request for
Transfer and a memorandum supporting continued inclusion of an income tax
allowance in APLC's rates.(12) Intervenors did not file testimony because they
entered into the Stipulation with SEMCO and Altas.(13)
In the Stipulation, the parties agreed not to object to transfer of the
control of APLC from SEMCO to Atlas provided we issue the order (Parties'
Proposed Order) they attached to their Stipulation. The Stipulation, including
the attached Parties' Proposed Order, was intended by the parties to resolve all
issues in this proceeding.
SEMCO and Atlas requested that we issue a decision on the Stipulation
by April 16, 2004.(14) We held a public hearing on the Stipulation on April 7,
2004, during which we posed questions to the witnesses for SEMCO and Atlas and
to counsel for all parties.(15) At that hearing, we vacated the date we had
reserved for the hearing in this proceeding if a stipulation could not be
reached.
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(11) Direct Testimony of Bruce H. Fairchild; Prefiled Testimony of Anthony
Izzo; Prefiled Testimony of Eugene Dubay; Prepared Direct Testimony of Michael
L. Staines; Testimony of Daniel M. Dieckgraff, filed February 11, 2004.
(12) Memorandum of Points and Authorities of SEMCO Energy, Inc. and Atlas
Pipeline Partners, L.P. in Support of Continued Inclusion of an Income Tax
Allowance in APLC's Rates, filed March 4, 2004.
(13) The Stipulation of All Parties for Entry of a Final Order Approving
Transfer of Control of Alaska Pipeline Company (Stipulation), was filed March
26, 2004, the date Intervenors' testimony was due.
(14) Motion for Expedited Consideration, filed March 26, 2004.
(15) After our initial review of the Stipulation, we asked the parties to
address certain issues at the hearing. See Order U-03-91(3), Order Addressing
Stipulation, issued April 5, 2004. At the hearing, we also requested SEMCO to
file additional information. See Notice of Filing Supplemental Information,
filed April 13, 2004.
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In Order U-03-91(4),(16) we accepted the Stipulation and the Parties'
Proposed Order, subject to the express condition that no issue or fact shall be
considered to have been finally determined or adjudicated by virtue of our
acceptance of the Stipulation and the Parties' Proposed Order. Rather than ask
us to accept their Stipulation, as is our usual practice, the parties asked us
to issue the Parties' Proposed Order exactly as written.
SEMCO petitioned for clarification or reconsideration of Order
U-03-91(4). SEMCO asks us to clarify that Order U-03-91(4) adopted the
provisions of the Parties' Proposed Order as official Commission actions or,
alternatively, SEMCO asks that we reconsider Order U-03-91(4) and enter an order
expressly approving all items in the Parties' Proposed Order.(17) Apparently,
SEMCO does not believe that Order U-03-91(4) contains the definitive regulatory
approvals necessary to consummate the transfer of APLC from SEMCO to Atlas under
the Purchase and Sale Agreement. SEMCO asks for expedited consideration of its
request (within 15 days without hearing)(18) so that the transfer transaction
can be closed as scheduled on June 16, 2004.
In their Joint Response, Atlas, the State, Agrium, and ML&P argue that
Order U-03-91(4) does not need reconsideration or clarification. However,
because SEMCO filed the request, they urge us to end any controversy by quickly
issuing a further order confirming that, in Order U-03-91(4), we "acted
officially to fully accept, approve and adopt the [Parties Proposed Order] and
joint Stipulation."
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(16) Order Accepting Stipulation Approving Transfer of Control, Finding
Motion for Expedited Consideration Moot, and Requiring Filing, issued April 20,
2004.
(17) See n.1 at 1.
(18) See n.6.
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Discussion
SEMCO does not look at Order U-03-91(4) in the same way as the
remaining parties. SEMCO believes the order is unclear while the other parties
think it is clear. We are concerned that SEMCO does not believe the Order
U-03-91(4) is clear. We grant reconsideration and vacate Order U-03-91(4).
In Order U-03-91(4), we "accepted" the Stipulation and the Parties'
Proposed Order as a stipulation of the parties. We did not issue the Parties'
Proposed Order as our own. A stipulation in our proceedings is an agreement of
all the parties to a proceeding resolving some or all of the issues in the
proceeding in a particular way. The word we use to give effect to the parties'
agreement and accordingly resolve the issues in the proceeding is "accept"
rather than "approve." We use the word "accept" because, when the parties
stipulate, we do not conduct a hearing and develop a full record. Using the word
"approve" would suggest that we had conducted a full regulatory review, which we
do not do in stipulated proceedings.
We accepted the Stipulation and the Parties' Proposed Order as a
resolution of this proceeding, and included the following language in Order
U-03-91(4): "subject to the express condition that no issue or fact shall be
considered to have been finally determined or adjudicated by virtue of our
acceptance of the stipulation." That language is included in our orders when we
accept a stipulation resolving issues in a proceeding. We include that language
to inform the parties and other concerned entities that they cannot cite our
acceptance of a stipulation resolving an issue in a particular way as precedent
in the future and that our acceptance of a stipulation is not an indication that
we would, after full adjudication, resolve the issue in the same way in a future
proceeding. We do not want to imply by our language that we have considered the
issues to which the parties stipulated to the same extent we would have
considered them had we held a hearing and developed a full record. We rely on
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the parties and their diversity of interests to substitute in part for full
regulatory review. We allow resolution of proceedings without full regulatory
review to save public and private resources and shorten regulatory lag.
The uncertainty surrounding Order U-03-91(4) comes not from the order,
but from the agreement of the parties (the Stipulation and Parties' Proposed
Order) that Order U-03-91(4) accepted. However, the whole effect is that a
reasonable person could believe that Order U-03-91(4) is ambiguous about our
position on the specific provisions contained in the Parties' Proposed Order.
The provisions of the Parties' Proposed Order, which we interpreted as a
stipulation, included language that might be interpreted as Commission rulings
on substantive issues in this proceeding. We have not previously seen that kind
of language in a stipulation. To accept those provisions, we had to accept them
as though they were a stipulation of the parties because we do not make
substantive rulings based on a stipulation. The purpose of accepting a
stipulation is so we do not need to rule on substantive issues.
We issued Order U-03-91(4) only after due consideration. We were
hesitant to accept the provisions of the Stipulation and the Parties' Proposed
Order as a stipulation of the parties, much less as our own words and actions.
We hesitated for two reasons. First, it appeared to us during the course of the
hearing on the Stipulation that the parties did not all interpret the
Stipulation in the same way. Second, no party to the Stipulation represented the
public interest, including the interest of the ENSTAR customer.
There was palpable tension among the parties at the hearing on the
Stipulation. We were concerned that there was no longer a true agreement among
them. Ultimately, however, we decided to give the parties the benefit of the
doubt in accepting their stipulation. We also believed that a stipulated end to
this proceeding was in the public interest.
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We tried, through our review, to make up for the absence of public
interest representation among the stipulating parties. However, our structural
inability to investigate issues independently, as a party representing the
public interest could do, gave us concern. Again, however, we believed that when
balanced against full litigation of the many issues in this proceeding, a
stipulated end was in the public interest.
We hoped our acceptance of the provisions of the Parties' Proposed
Order as a stipulation of the parties, binding only on the parties in accordance
with 3 AAC 48.166 and not on the Commission, would satisfy the parties and allow
the transaction to close. However, SEMCO does not believe that our acceptance of
the Parties' Proposed Order as a stipulation is sufficient to allow the
transaction to close. SEMCO requires that we adopt the provisions of the
Parties' Proposed Order as our official actions. Even Atlas and the other
Intervenors who say Order U-03-91(4) does not need to be reconsidered,
apparently do not interpret Order U-03-91(4) as we intended. They interpret
Order U-03-91(4) as though we had fully adopted the Parties' Proposed Order as
our own.(19) As we stated, it is not our practice to make substantive rulings
based on a stipulation and we decline to change our practice in this proceeding.
We recognize that if we clarified Order U-03-91(4), we might introduce
further uncertainty into this proceeding, making the parties rush to stake out
their legal and business positions concerning the proposed transaction.
Regulatory uncertainty
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(19) "[T]he responding parties believe that Order No. 4 `adopted as
official actions of the Commission the provisions contained in the [Parties'
Proposed Order]." Joint Response, p. 2.
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is not in the public interest and should be avoided, if possible. The only way
to assure certainty in this proceeding is to reconsider Order U-03-91(4), vacate
it, and reevaluate the record.
Having vacated Order U-03-91(4), we again have before us in this
proceeding the Stipulation with the attached Parties' Proposed Order. However,
based on filings(20) made in this proceeding after Order U-03-91(4) was issued,
we view the Stipulation and the Parties' Proposed Order differently than we did
when we issued Order U-03-91(4). We now know that at least one party, SEMCO, and
possibly all parties to this proceeding believe that their Stipulation requires
that we make substantive rulings on issues in this proceeding. We must base
substantive rulings on the record in the proceeding. We cannot base them on a
stipulation. Further, in this proceeding, there appears to be no meeting of the
minds on the meaning of the documents (Stipulation and the Parties' Proposed
Order) the parties' wrote and filed. Accordingly, a stipulation, to the extent
one any longer exists, serves no purpose in this proceeding and should be
rejected. We reject the Stipulation and the Parties' Proposed Order as a
resolution of the issues in this proceeding.
Having rejected the Stipulation and the Parties' Proposed Order, we
have before us the issues raised by the Request for Transfer by SEMCO and
Atlas(21) and by the initial comments filed in this Docket. To resolve those
issues, we have a record consisting of the Request for Transfer; the initial
comments; the prefiled testimony of SEMCO and Atlas; the brief of SEMCO and
Atlas on income taxes; the
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(20) See n. 1 and 7.
(21) Request for Approval of Transfer of Control of Alaska Pipeline
Company, Holder of Certificate No. 141 (Request for Transfer), filed October 10,
2003.
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oral testimony of SEMCO and Atlas witnesses at the hearing held April 7, 2004 on
the rejected Stipulation; an exhibit received at the hearing; the argument of
counsel at the April 7, 2004 hearing; and a supplemental filing by SEMCO.
In the Request for Transfer, SEMCO and Atlas asked us for five specific
rulings in connection with their transfer. In the Request for Transfer SEMCO and
Atlas stated:
The content of the order is as crucial as the date of the order. This
transaction cannot be consummated and the ratepayers cannot obtain its benefits
unless the RCA order contains five specific rulings for which the parties have
bargained.(22)
Based on the record thus far made in this Docket, we can make only one
of the requested rulings, which is to approve the transfer of ALPC from SEMCO to
Atlas. In order to approve a transfer of control in a public utility, the
applicant must prove that it is fit, willing, and able to provide the utility
services applied for and that the utility services applied for are required by
the public convenience and necessity. AS 42.05.241. The current record
demonstrates that Atlas is fit, willing, and able to provide the utility service
currently provided by APLC and that the public convenience and necessity
requires the continued operation of APLC. No party in this proceeding opposes
the transfer of APLC from SEMCO to Atlas.
We cannot issue the other requested rulings based on the current
record. We recognize that the transaction cannot be consummated without the
other requested rulings. We allow the parties to request further proceedings in
this Docket concerning the Special Contract for Gas Transportation, the
inclusion of income taxes
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(22) See n. 8 at 9.
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in rates, the pass-through of rates to ENSTAR, and any other issues that must
now be decided concerning SEMCO, Atlas, APLC, or ENSTAR.
In the alternative, the parties can negotiate a new stipulation. We
will accept a stipulation only if it is a stipulation of the parties resolving
the issues in this proceeding. The public interest should be represented in any
new stipulation presented to us.(23)
ORDER
THE COMMISSION FURTHER ORDERS:
1. The Petition for Clarification or Alternatively
Reconsideration, filed May 5, 2004, by SEMCO Energy, Inc., is granted.
2. Order U-03-91(4), Order Accepting Stipulation Approving
Transfer of Control, Finding Motion for Expedited Consideration Moot, and
Requiring Filing, issued April 20, 2004, is vacated.
3. The Stipulation of All Parties for Entry of a Final Order
Approving Transfer of Control of Alaska Pipeline Company, filed March 26, 2004,
is rejected.
4. The transfer of control of Alaska Pipeline Company, holder
of Certificate of Public Convenience and Necessity No. 141, from SEMCO Energy,
Inc. to Atlas Pipeline Partners, L.P., is approved.
5. By 4 p.m. June 21, 2004, any party may request further
proceedings in this Docket.
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(23) AS 44.23.020(e) states: There is established within the Department of
Law the function of public advocacy for regulatory affairs. The attorney general
shall participate as a party in a matter that comes before the Regulatory
Commission of Alaska when the attorney general determines that participation is
in the public interest.
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6. The Motion for Expedited Consideration, filed May 5, 2004,
by SEMCO Energy, Inc., is moot.
7. The request for expedited consideration contained in the
Joint Response of Atlas Pipeline Partners, L.P., State of Alaska, Agrium U.S.
Inc., and Municipal Light & Power Department to Petition for Clarification or
Alternatively Reconsideration of SEMCO Energy, Inc. and Non-opposition to
Expedited Consideration, filed May 10, 2004, by Atlas Pipeline Partners, L.P,
State of Alaska, Agrium U.S. Inc., and the Municipal Light & Power Department,
is moot.
DATED AND EFFECTIVE at Anchorage, Alaska, this 4th day of June, 2004.
BY DIRECTION OF THE COMMISSION
(SEAL)
REGULATORY COMMISSION OF ALASKA
701 West Eighth Avenue, Suite 300
Anchorage, Alaska 99501
(907) 276-6222; TTY (907) 276-4533
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