Virginia Constitutional Interpretation: The General Assembly’s Plenary Authority and the SCC’s Constitutional and Statutory Authority
The Virginia Supreme Court issued a published opinion on September 14, 2017 in the case styled, Old Dominion Comm. for Fair Util. Rates v. State Corp. Comm’n, 2017 Va. LEXIS 136, Record No. 161519 (2017). The Court’s decision also resolved two other cases appealed from the State Corporation Commission (“SCC”), styled VML/VACO APCO Steering Committee v. State Corp. Comm’n, Record No. 161520, and Karen E. Torrent v. State Corp. Comm’n, Record No. 161521.
In each case, a group or individual (aggregately referred to as “Old Dominion”) challenged the constitutionality of Va. Code §56-585.1:1. Pursuant to that statute, inter alia, the General Assembly temporarily suspended the SCC’s authority to conduct biennial base rate reviews for both Appalachian Power Company (“APCO”) and Virginia Electric and Power Company (“Dominion Power”).
Old Dominion commenced the litigation by seeking declaratory relief from the SCC. The suit contended that Code §56-585.1:1 violated Article IX, §2 of the Constitution of Virginia. Specifically, Old Dominion contended that the statute improperly subordinated the SCC’s constitutional ratemaking powers, as provided in Virginia’s 1971 Constitution, to the General Assembly’s legislative power. Accordingly, Old Dominion asserted that Code §56-585.1 required the SCC to make regular biennial reviews of APCO’s and Dominion Power’s base rates notwithstanding the General Assembly’s effort to suspend those reviews.
The SCC upheld the constitutionality of Code §56-585.1:1. It relied on Supreme Court precedent to do so, including Commonwealth v. Virginia Elec. & Power Co., 214 Va. 457 (1974)(“VEPCO”), and Potomac Elec. Power Co. v. State Corp. Comm’n, 221 Va. 632 (1980). In relevant part, VEPCO held that the SCC’s authority “is subordinate to the power of the General Assembly to command otherwise.” 214 Va. at 465 (emphasis in original). Potomac’s ruling included a determination that the SCC’s “regulatory jurisdiction is not plenary.” 221 Va. at 636 (emphasis in original).
One SCC commissioner dissented, however, discussing “extensively what it views as the statute’s negative public policy outcomes.” The SCC majority considered public policy matters immaterial. Instead, the majority focused “on the purely legal issue of whether Old Dominion had carried its burden of overcoming the presumption in favor of the statute’s constitutionality[.]”
Old Dominion appealed the SCC’s final order. Justice Elizabeth A. McClanahan authored the Court’s opinion, writing for a six-member majority. Justice William C. Mims filed a lengthy dissent.
The relevant constitutional provision reads as follows:
Subject to such criteria and other requirements as may be prescribed by law, the [State Corporation] Commission shall have the power and be charged with the duty of regulating the rates, charges, and services and, except as may be otherwise authorized by the Constitution or by general law, the facilities of railroad, telephone, gas, and electric companies.
Va. Const. art. IX, § 2. (Clarification and emphasis added).
The Court’s opinion noted that Article IX, §2, as quoted above, constitutes the SCC’s “sole source of constitutional ratemaking authority.” It then gave an historical overview of the SCC’s statutory ratemaking authority. The opinion noted that in 1914, the “General Assembly first conferred statutory authority upon” the SCC “to regulate the rates of electric companies[.]” In 1999, “some 28 years after the passage of Article IX, §2,” the General Assembly enacted legislation to deregulate “part of the electric utility industry and introduced competition among the providers of electric generation.” In 2007, the General Assembly “ended the deregulation program” and enacted the current “regulatory regime” to biennially review “the performance of electric utility companies[.]” Finally, in 2015, the General Assembly enacted Code §56-585.1:1. The statute imposed a moratorium on biennial reviews of APCO’s base rates until 2020, and those of Dominion Power until 2021, with exceptions for certain emergency conditions.
In stating the standard of review, the Court initially noted that the “constitutionality of Code §56-585.1:1 presents an issue of law subject to de novo review.” It then recounted several guiding interpretive principles, liberally quoting previous decisions:
“We are guided in this review by the fundamental principle that ‘all actions of the General Assembly are presumed to be constitutional’…Indeed, there is ‘no stronger presumption known to the law’…and therefore ‘a heavy burden of proof is thrust upon the party’ challenging a statute’s constitutionality.”
“This strong presumption reflects the breadth of legislative power in Virginia. ‘Unlike the Congress of the United States, the General Assembly of Virginia functions under no grant of power’…The General Assembly, in ‘ represent[ing] the sovereign authority of the people’ is restricted only by the Constitution of Virginia ‘in express terms or by strong implication’…[I]t is a restraining instrument, and …the General Assembly…possesses all legislative power not prohibited by the Constitution’…In short, ‘[u]nless forbidden by some State or Federal constitutional provision,’ the General Assembly’s ‘powers are plenary.’”
“In deference to this broad legislative authority, we have repeatedly said that a statute will be upheld as constitutional unless it is ‘plainly repugnant’ to some provision of the Virginia or Federal Constitutions….In other words, the unconstitutionality of a statute must be ‘clear and palpable’…We are thus compelled to ‘resolve any reasonable doubt regarding a statute’s constitutionality in favor of its validity.’”
“[W]e recognize that this Court has ‘no constitutional authority to judge whether a statute is unwise, improper, or inequitable because the legislature, not the judiciary, is the sole author of public policy.’”
Relying specifically on VEPCO and other decisions delineating SCC authority, the Court affirmed the SCC. It held that “[t]here is nothing in Article IX, §2 that clearly indicates that the Commission’s authority to set rates displaces or is exclusive of the General Assembly’s authority. To the contrary, the prefatory phrase in Article IX, §2, clause 3 plainly makes the Commission’s authority to regulate rates “[s]ubject to such criteria an other requirements as may be prescribed by law.” Further, “[i]n light of this authority of the General Assembly, we have repeatedly stated since the passage of the 1971 Constitution of Virginia that the Commission’s authority to regulate the rates of electric utility companies has been ‘delegated’ to it by the General Assembly under various legislative enactments…A law suspending the Commission’s biennial reviews thus fits comfortably among such ‘requirements as may be prescribed by law.’ Va. Const. art. IX, §2.”
Lastly, the majority expressly rejected Old Dominion’s argument that the Court’s constitutional interpretation “lacks any limiting principle on the power of the General Assembly as relates to setting electric utility rates. The limiting principle in this instance, enshrined in our constitution, is the democratic process to which we certainly must also defer.”
Justice Mims’ dissent articulated a starkly different constitutional analysis. He rejected “the premise that rate-making authority granted to the Commission by the Constitution is subordinate to the General Assembly.” He asserted that Article IX, §2 enables the legislature to “control the general aspects of rate-making by establishing, by statute, standards and prerequisites for the Commission’s exercise of its constitutional power.” Yet, he concluded that the provision does not “empower the General Assembly to suspend the Commission’s constitutionally-conferred rate-making authority.”
Recognizing the importance of stare decisis, Justice Mims nevertheless asserted that the Court wrongly decided and should overrule VEPCO. He noted that the decisions on which the majority principally relied to decide VEPCO predated the Virginia’s 1971 Constitution. And he referenced The Commission on Constitutional Revisions’ proceedings to conclude that Article IX, §2 language intentionally “elevated the Commission’s authority over electric rates from a power merely delegated by the General Assembly to one with a direct constitutional foundation[.]” Thus, Justice Mims reasoned that the SCC’s exercise of its legislative ratemaking authority rests on its own constitutional bottom.
Justice Mims examined the “subject to” and the “except as” clauses to draw distinctions in their meanings. His examination also asserted that the majority opinion incorrectly renders those clauses redundant. He interpreted the two clauses as follows:
Read in context within Article IX, § 2's "subject to" clause, the meaning of "such criteria and other requirements" is unambiguous: it means the standards the Commission must consider while setting a rate and the prerequisites the Commission must fulfill before it does so. See Webster's Third New International Dictionary, supra, at 1791 (defining "prerequisite" as "something that is required"—i.e., a requirement—"beforehand"). These are two separate concepts: what must the Commission consider when deciding, and what must the Commission do before it decides.
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By contrast, the "except as" clause (which is also unambiguous) does permit the General Assembly to eliminate or reassign the Commission's power and duty to regulate facilities. Read in context, the meaning of the two clauses is clear. First, "[s]ubject to such [standards] and other [prerequisites] as may be prescribed by law, the Commission shall have the power and be charged with the duty of regulating the rates, charges, and services . . . of railroad, telephone, gas, and electric companies." Second, "the Commission shall have the power and be charged with the duty of regulating" "the facilities of railroad, telephone, gas, and electric companies," "except as may be otherwise authorized by this Constitution or by general law."
Lastly, the dissent decried the implications of the majority’s decision: “[I]f Article IX, §2 confers on the General Assembly the power to suspend the Commission’s authority, there is no limit to the duration for which such a suspension may last…But more to the point, the people already have endured a period of legislative inaction in the field of rate-making. They spoke clearly against it when they created the Commission in 1902. They granted the Commission rate-making authority of railroads and telephone companies then, and expanded that power to include electric companies in 1971. Nothing in the text or history of Article IX, §2 counsels otherwise….Article IX, §2 does not empower the General Assembly to suspend the Commission’s rate-making authority, whether for one year or forever. I therefore respectfully dissent from the majority’s holding to the contrary.”
In the aftermath of the Old Dominion decision, only an amendment to the Virginia Constitution, or a wholly revised constitution adopted at some future date can abrogate its holdings. Will a majority of the General Assembly agree with the Court’s decision? The 2015 enactment of Code §56-585.1:1 would appear to answer that question in the affirmative.
The Old Dominion decision certainly provides an excellent distillation of principles governing Virginia constitutional interpretation. Both the majority and the dissenting opinions cited and quoted numerous prior Court decisions applying those principles. Frankly, it is refreshing to read a decision that interprets the Constitution of Virginia in a context wholly untethered to the Constitution of the United States. It reaffirms the independent vitality of our Commonwealth’s Constitution. It also highlights the significance of that constitution’s purposes and ratification directly by the Virginia electorate.
As always, I will enjoy receiving your comments on this significant Court decision.
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