ÿWPC 3# ÚU:å % 0(%b Mw@Y4™­ 0l¼ 0D(l 0Jt 0T¾ 0^ 0hp 0rØ 0|J 0†Æ 0L 1uÜ 0dQ Bµ AQÒ Æ# 0Dé 0@- 0Dm D/± Bà D3ý U *0 B)Z DCƒ AMÆ  §$v~ËvÓI˜HP LaserJet 4SiHPPCL5MS,ü,,,,,ü0nLhÎ, øð AZ‹"Arial RegularX($¡¡- ù - 0U1U2U34D5U678Ó€Bê‚_#3|xE((3üÝ$¤¤Ý ƒ!ÝÝ  Ýà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ d!"#$&Cþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5(3¯$¢¢Ý ƒ!ÝÝ  Ý("ÿÿ$££Ò  ÒÒ  Ò($$””ò òÚ  Ú1Ú  Úó ó(('÷ÿ dxdüÿP Pd'ÿÿdxd< Œ 9p`(Arial% Line 7 d,,,,7Border 1dd!#-Cþÿ << Gÿÿ Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€+ÔÝ  ÝÝ ƒ""ÝÝ  ÝÔ€+ÔÓ  Óò òÔ YYY ÔFILEDÔ€+XÔÌÌJuly€1,€1998ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó ó Ý ƒ!ÝÑ#€d#ÑÔ€+ÔÝ  ÝÒ € ÒÒ „ ÒÓ  ÓÔ€+ôÔà àòòÚ  ÚÚ  ÚóóThere€are€three€other€blocks€in€the€interruptible€industrial€category€of€users.€€Block€oneÏapplies€to€usage€of€1„1,500€decatherms›€per€month;€block€two€covers€the€1,501„4,000€category;Ïand€block€three€applies€to€the€4,001„9,000€category.ÌPtPtHHÚ(ÿáÿâùFG(üHHÚ(d'hStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑGenevaÑÑ ÑÒ  ellan Geneva ÒÒ  ellan Geneva ÒÝ ƒ!ÝÔ . ÔÔ€+ÔÝ  ÝÒ € ÒÒ „ ÒÑ X ÑÑ\R AØ'\ћрÑÑ7€ϼXXdædÈ7ÑÑ  ÑÑ  Ñò òÔ€+¼ÔÓ  Ӝـ!ÙßR€./-A1-j|¹¦` ç `€€@ÿRß›Þ ÞÌà@ àIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌà@ àAT€NASHVILLEó óÔ€+XÔÌÌÌÌÌCONSUMER€ADVOCATE€DIVISION,à à)Ìà àà àà àà àà àà à)Ìà àPetitioner/Appellant,à àà à)Ìà àà àà àà àà àà à)à àAppeal€No.ÌœVS›.à àà àà àà àà àà à)à àœ01„A„01„9708„BC„00391›Ìà àà àà àà àà àà à)à àÌTENNESSEE€REGULATORYà àà à)à àTennessee€RegulatoryÏCommissionÌAUTHORITY;€NASHVILLE€GASà àà à)à àNo.€96„00977ÌCOMPANY,à àà àà àà àà à)à àà àà àà àà àà àÌà àà àà àà àà àà à)Ìà àRespondents/Appellees.à àà à)ÌÌÌà@ àAPPEALED€FROM€THE€TENNESSEE€REGULATORY€COMMISSION€Ìà@ àAT€NASHVILLEÌÌÌÌJOHN€KNOX€WALKUPÌAttorney€General€&€ReporterÌÌL.€VINCENT€WILLIAMSÌAssistant€Attorney€GeneralÌ425€Fifth€Avenue€NorthÌNashville,€œTennessee›€37243Ìà àAttorney€for€Petitioner/AppellantÌÌH.€EDWARD€PHILLIPS,€IIIÌTennessee€Regulatory€AuthorityÌ460€James€Robertson€ParkwayÌNashville,€Tennessee€37243„0505Ìà àAttorney€for€Respondent/Appellee€Tennessee€Regulatory€AuthorityÌÌT.€G.€œPAPPAS›ÌJOSEPH€F.€œWELBORN›€IIIÌ2700€First€American€CenterÌNashville,€Tennessee€37238ÌÌJERRY€W.€AMOSÌP.€O.€Box€787ÌGreensboro,€North€Carolina€27402Ìà àAttorneys€for€Respondent/Appellee€Nashville€Gas€CompanyÌÌHENRY€WALKERÌ414€Union€Street,€Suite€1600ÌNashville,€Tennessee€37219Ìà àAttorney€for€Intervening€Appellant€Associated€Valley€IndustriesÌÌÌÌà@ àAFFIRMED€AND€REMANDEDÌÌÌÌà àà àà àà àà àà àà àBEN€H.€CANTRELL,€JUDGEÌÌÓÓò òÔ€+„Ôòòà@ àO€P€I€N€I€O€Nóóó óÔ€+XÔÌÑ Ü ÑÑ ° ÑÌà àà àThis€petition€under€Rule€12,€Tenn.€R.€App.€Proc.,€to€review€a€rateÏmaking€order€of€the€Tennessee€Regulatory€Authority€presents€a€host€ofÏprocedural€and€substantive€issues.€€We€affirm€the€agency€order.ÌÌà@ àò òI.ó óà àà àÌÌà àà àOn€May€31,€1996€Nashville€Gas€Company€(œNGC›)€filed€a€petitionÏbefore€the€Tennessee€Public€Service€Commission€requesting€a€general€increaseÏin€its€rates€for€natural€gas€service.€€œThe›€proposed€rates€would€produce€anÏincrease€of€$9,257,633€in€the€companyððs€revenue.€€The€Consumer€AdvocateÏDivision€(CAD)€of€the€State€Attorney€Generalððs€office€filed€a€notice€of€appearanceÍon€June€6,€1996€and€Associated€Valley€Industries€(œAVI›),€a€coalition€of€industrialÏusers€of€natural€gas,€entered€the€fray€on€August€20,€1996.ÌÌà àà àThe€Public€Service€Commission€was€replaced€on€July€1,€1996€byÏthe€Tennessee€Regulatory€Authority€(œTRA›),€a€new€agency€created€by€theÏlegislature.€€By€an€administrative€order,€œTRA›€laid€down€the€procedure€by€which€itÏwould€accept€jurisdiction€of€matters€previously€filed€before€the€Public€ServiceÏCommission,€and€the€parties€successfully€navigated€the€uncharted€waters€of€theÏœTRA›€to€get€the€case€ready€for€a€final€hearing€on€November€13,€1996.ÌÌà àà àAt€a€scheduled€conference€on€December€17,€1996,€the€œTRA›€orallyÏapproved€a€general€rate€increase€for€NGC,€effective€January€1,€1997,€that€wouldÏproduce€approximately€$4,400,000€in€new€revenue.€€When€a€final€order€had€notÏbeen€€filed€by€December€31,€1996,€NGC€began€charging€the€rates€orallyÏapproved€at€the€conference€on€December€17.€€On€February€19,€1997€TRA€filed€itsÏwritten€order€adopting€the€oral€findings€of€December€17,€1996.€€The€order€allowedÏthe€increased€rates€ð ðfor€service€rendered€on€and€after€January€1,€1997.ððÌÌà@ àò òII.€€à@ àThe€Procedural€IssuesÌà@ àa.ó óÌÓÓà@ àò òWas€the€TRA€required€to€appoint€an€administrative€law€judgeÌÓÓà@ àor€hearing€officer€to€conduct€the€hearing?à àó óà àÌÌà àà àThe€Tennessee€Administrative€Procedures€Act€provides€that€aÏcontested€case€hearing€shall€be€conducted€(1)€in€the€presence€of€the€agencyÏmembers€and€an€administrative€judge€or€hearing€officer€or€(2)€by€anÏadministrative€judge€or€hearing€officer€alone.€€Tenn.€Code€Ann.€ðð€4„5„301(a).€€TheÏCAD€asserts€that€the€TRAððs€order€in€this€case€is€void€because€the€agency€did€notÏfollow€the€mandate€of€this€statute.ÌÌà àà àThe€TRA,€however,€is€also€governed€by€an€elaborate€set€ofÏprocedural€statutes.€€òòSeeóó€Tenn.€Code€Ann.€ðð€65„2„101,€et€seq.€€Tenn.€Code€Ann.Ïðð€65„2„111€provides€that€the€TRA€òòmayóó€direct€that€contested€case€proceedings€beÏheard€by€a€hearing€examiner,€and€we€held€in€òòJackson€œMobilphone›€Co.€v.ÏTennessee€Public€Service€œComm›.óó,€876€S.W.2d€106€(Tenn.€App.€1994),€that€theÏTRAððs€predecessor,€the€Public€Service€Commission,€could€conduct€a€contestedÏcase€hearing€itself€òòoróó€appoint€a€hearing€officer.€€We€think€that€decision€is€still€goodÏlaw€and€that€it€applies€to€the€TRA.ÌÌà@ àò òb.ÌÓÓà@ àDid€the€TRA€staff€conduct€its€own€investigation€and€à@ àimproperly€Ìà@ àconvey€ex€parte€information€to€the€TRA?ó óÌÌÌÌÓÓà àà àThe€CAD€argues€that€the€TRA€violated€two€sections€of€the€œUAPA›€inÏthe€proceeding€below:€(1)€the€section€prohibiting€a€person€who€has€served€as€anÏinvestigator,€prosecutor,€or€advocate€in€a€contested€case€from€serving€as€anÍadministrative€judge€or€hearing€officer€in€the€same€proceeding,€Tenn.€Code€Ann.Ïðð€4„5„303;€and€(2)€the€section€prohibiting€ex€parte€communications€during€aÏcontested€case€proceeding,€Tenn.€Code€Ann.€ðð€4„5„304.ÌÌà àà àAs€to€the€first€contention,€there€is€nothing€in€the€record€that€supportsÏit.€€The€Regulatory€Authority€members€sat€as€a€unit€to€hear€the€proof€in€the€hearingÏbelow.€€We€have€held€that€they€were€entitled€to€do€so.€€There€is€no€proof€that€anyÏof€them€had€served€as€an€investigator,€prosecutor,€or€advocate€in€the€sameÏproceeding.ÌÌà àà àAs€to€the€second€contention,€it€is€based€on€the€CADððs€suspicion€thatÏmembers€of€the€TRA€staff€had€taken€part€in€an€investigation€of€NGC,€had€preparedÏa€report€for€the€Authority,€and€had,€in€fact,€continued€to€communicate€with€NGCÏand€relay€that€information€to€the€Authority€members.ÌÌà àà àAt€the€beginning€of€the€hearing€the€Consumer€Advocate€moved€toÏdiscover€what€he€described€as€a€report€from€the€staff€that€augmented€or€boostedÏthe€position€of€one€party€or€the€other.€€He€admitted€that€he€did€not€know€that€suchÏa€report€existed€but€that€he€believed€it€did,€because€of€the€past€practice€before€theÏPublic€Service€Commission.ÌÌà àà àThe€Authority€chairman€moved€to€deny€the€motion€with€the€followingÏexplanation:ÌÓÓà8 àà8 àà àI€believe€that€as€a€director€I€have€a€right€to€haveÏprivileged€communication€with€a€member€of€my€staff€forÏthe€purpose€of€understanding€issues€and€analyzing€theÏevidence€in€the€many€complicated€proceedings€thatÏthis€Agency€has€to€hear.€€I€reject€your€allegation€that€IÏhave€abdicated€my€responsibility€as€a€decision€maker.€ÏI€rely€on€my€staff€expertise€as€the€law€permits€me€to€doÏso.€€Therefore,€I€move€that€your€motion€be€denied.ÌÌThe€Agency€members€unanimously€denied€the€CADððs€motion.ÌÌÌÌÓÓà àà àOn€this€part€of€the€controversy€we€are€persuaded€that€the€TRA€wasÏcorrect.€€The€TRA€deals€with€highly€complicated€data€involving€principles€ofÏfinance,€accounting,€and€corporate€efficiency;€it€also€deals€with€the€convolutedÏprinciples€of€legislative€utility€regulation.€€To€expect€the€Authority€members€to€fulfillÏtheir€duties€without€the€help€of€a€competent€and€efficient€staff€defies€all€logic.€€And,Ïwe€are€convinced,€the€staff€may€make€recommendations€or€suggestions€as€to€theÏmerits€of€the€questions€before€the€TRA.€€òòSeeóó€Tenn.€Code€Ann.€ðð€4„5„304(b).€ÏOtherwise,€all€support€staff€„„€law€clerks,€court€clerks,€and€other€specialists€„„Ïwould€be€of€little€service€to€the€person(s)€that€hire€them.€€We€are€satisfied€that€anyÏreport€made€by€the€agency€staff€based€on€the€record€before€the€TRA€was€notÏsubject€to€the€CADððs€motion€to€discover€it.ÌÌà àà àThe€other€part€of€the€CADððs€contention€is€more€troubling.€€It€containsÏan€assertion€that€members€of€the€TRA€staff€were€passing€along€to€the€TRAÏevidence€received€from€NGC.€€We€would€all€agree€that€such€ex€parteÏcommunications€are€prohibited.€€òòSeeóó€Tenn.€Code€Ann.€ðð€4„5„304(a)€and€(c).ÌÌà àà àIn€support€of€his€contention€Consumer€Advocate€called€the€managerÏof€the€utility€rate€division€who€testified€that€he€did€an€investigation€of€NGC€underÏan€audit.€€At€that€point€the€parties€engaged€in€a€general€discussion€about€theÏAuthorityððs€prior€ruling€that€the€staff€membersðð€advice€could€not€be€discovered.€€AÏquestion€about€whether€his€advice€was€based€on€anything€other€than€the€facts€inÏthe€record€was€excluded€after€an€off„the„record€discussion,€and€the€witness€wasÏasked€only€one€other€question.€€He€answered€ð ðyesðð€when€asked€if€he€had€talkedÏwith€the€company€or€company€officials€since€the€time€of€the€audit.€€There€were€noÏquestions€bearing€on€the€nature€of€the€conversations,€or€whether€the€witnessÏreceived€or€disseminated€any€information€pertinent€to€the€NGC€proceeding.ÌÌà àà àWe€cannot€find€on€the€basis€of€the€evidence€in€this€record€that€theÏAgency€received€any€ex€parte€communications€that€were€prejudicial€to€the€CADððsÏposition.€€We€would€add€only€one€further€point:€€that€administrative€agenciesÏshould€ensure€compliance€with€the€Administrative€Procedures€Act.€ÌÌà@ àò òc.ÌÓÓà@ àDid€NGC€unlawfully€put€its€Ìà@ ànew€rates€into€effect€on€January€1,€1997?ó óà àÌÌÌÌÓÓà àà àThe€CAD€argues€that€since€no€written€order€had€been€enteredÏallowing€the€rate€increase,€NGC€had€no€authority€to€start€charging€the€increasedÏrates,€and€the€TRAððs€February€order€amounted€to€retroactive€œratemaking›.ÌÌà àà àThe€TRA€has€the€power€to€fix€just€and€reasonable€rates€ð ðwhich€shallÏbe€imposed,€observed,€and€followed€thereafterðð€by€any€public€utility.€€Tenn.€CodeÏAnn.€Ìðð€65„5„201.€€But€the€statutory€scheme€„„€which€is€the€same€as€it€was€during€theÏexistence€of€the€Public€Service€Commission€„„€recognizes€that€a€public€utility€mayÏset€its€own€rates,€subject€to€the€power€given€to€the€TRA€to€determine€if€they€areÏjust€and€reasonable.€€Tenn.€Code€Ann.€ðð€65„5„203(a).€€òòSee€Consumer€AdvocateÏDivision€v.€œBissell›óó,€No.€01„A„01„9601„BC„00049€(Tenn.€App.,€Nashville,€Aug.€26,Ï1996).€€The€increased€rates€may€be€suspended€for€an€outside€limit€of€nine€monthsÏwhile€the€TRA€conducts€its€investigation,€òòid.óó,€but€after€six€months€the€utility€may,Ïupon€notice€to€TRA,€place€the€increased€rates€into€effect.€€Tenn.€Code€Ann.€ðð€65„5„203(b)(1).€€The€authority€òòmayóó€require€a€bond€in€the€amount€of€the€proposedÏannual€increase.€€òòId.óóÌÌà àà àIn€this€case,€NGC€filed€its€petition€on€May€31,€1996.€€Because€theÏPublic€Service€Commission€was€replaced€by€the€TRA€on€July€1,€1996,€NGCÍrefiled€the€petition€on€July€29,€1996.€€The€CAD€argues€that€the€petition,€therefore,Ïhad€not€been€pending€for€the€six€months€period€that€would€allow€NGC€to€put€theÏrates€into€effect.ÌÌà àà àUnder€the€circumstances€of€this€case,€however,€we€think€thatÏargument€exalts€form€over€substance.€€The€TRA€had€heard€the€proof,€and€in€anÏopen€meeting€had€announced€its€decision€to€allow€part€of€the€rate€increase€to€goÏinto€effect€on€January€1,€1997.€€While€a€written€order€had€not€been€entered,€NGCÏnotified€the€TRA€that€it€would€put€the€approved€rates€into€effect€on€the€dateÏspecified€in€the€TRAððs€oral€decision.ÌÌà àà àIn€our€view,€the€increased€rates€had€been€pending€since€May.€€TheÏhiatus€between€May€and€July€was€caused€by€a€massive€overhaul€of€the€stateÏregulatory€machinery,€and€that€fact€cannot€be€attributed€to€NGC.€€So,€under€theÏstatutory€scheme,€NGC€had€the€power€to€put€the€approved€rates€into€effect€onÏJanuary€1,€1997.ÌÌà àà àIn€addition,€Tenn.€Code€Ann.€€ðð€65„2„112€says€ð ðEvery€final€decisionÏor€order€rendered€by€the€authority€in€a€contested€case€shall€be€in€writing,€or€statedÏin€the€record€.€.€.€.ðð€€NGC€could€have€used€the€TRAððs€oral€decision€as€the€basis€forÏits€action€of€putting€the€rates€into€effect.€€The€decision€had€been€ð ðstated€in€theÏrecordðð€on€December€17,€1996.€€We€add€this€caveat,€however.€€The€statute€goesÍon€to€say€that€either€a€written€or€oral€decision€ð ðshall€contain€a€statement€of€theÏfindings€of€fact€and€conclusions€of€law€upon€which€the€decision€of€the€authority€isÏbased.ðð€€We€do€not€express€an€opinion€on€whether€the€December€17€oralÏdecision€complies€with€that€mandate.€€But€we€do€agree€that€findings€of€fact€andÏconclusions€of€law€are€a€necessary€requirement€for€a€meaningful€review€of€anÏadministrative€agencyððs€decision.€€òòSee€Levy€v.€State€œBd›.€of€Examiners€for€SpeechÏPathology€&€Audiologyóó,€553€S.W.2d€909€(Tenn.€1977).ÌÌÌÌà@ àò òIII.€€The€Substantive€IssuesÌà@ àa.€€à@ àHearsayó óÌÌà àà àThe€CAD€argues€that€some€of€the€evidence€offered€by€NGCððs€expertÏon€the€projected€increase€in€company€expenses€was€based€on€rank€hearsay.€€WeÏnotice,€however,€that€Tenn.€Code€Ann.€ðð€65„2„109€allows€TRA€to€admit€and€giveÏprobative€effect€to€any€evidence€that€would€be€accepted€by€reasonably€prudentÏpersons€in€the€conduct€of€their€affairs.€€The€same€statute€relieves€the€TRA€from€theÏrules€of€evidence€that€would€apply€in€a€court€proceeding.ÌÌà àà àThe€CAD€does€not€address€the€question€of€whether€the€evidence€itÏcalls€hearsay€is,€nevertheless,€of€the€kind€that€would€be€relied€on€by€reasonablyÍprudent€persons€in€the€conduct€of€their€affairs.€€NGC€argues€that€the€evidence€wasÏnot€hearsay€because€it€was€based€on€the€company€records€that€are€kept€in€theÏordinary€course€of€business.€€òòSeeóó€Tenn.€R.€œEvid›.€801,€803(6).€€We€need€notÏdecide€whether€the€proffered€evidence€was€hearsay€because€we€are€satisfied€thatÏthe€evidence€was€reliable€and€could€be€considered€by€the€TRA.€€The€TRA€heardÏthe€objections€to€the€evidence€and€the€CADððs€argument€that€its€evidence€on€theÏsame€subject€should€have€been€received.€€The€TRA€chose€NGCððs€evidence€asÏmore€reliable.€€We€find€no€fault€with€the€TRAððs€decision€on€this€issue.ÌÌà@ àò òb.€€à@ àAdvertisingó óÌÌà àà àThis€is€an€issue€on€which€the€briefs€of€the€principal€parties€seem€toÏbe€speaking€different€languages.€€The€following€explanation€is€the€best€we€canÏglean€from€the€record.€€In€1984€the€Public€Service€Commission€adopted€a€ruleÏthat€disallowed€as€a€recoverable€expense€by€a€utility€any€ð ðpromotional€or€politicalÏadvertising.ðð€€The€prohibition€covered€advertising€for€the€purpose€of€encouragingÏany€person€to€select€or€use€gas€service€or€additional€gas€service.€€It€did€not€coverÏ(among€other€things)€advertising€informing€customers€how€to€conserve€energy€orÏto€reduce€peak€demand€for€gas,€or€advertising€promoting€the€use€of€energyÏefficient€appliances.€€òòSeeóó€former€Rule€1220„4„5„.45,€Tenn.€œRegis›.ÌÌà àà àIn€a€1985€proceeding€involving€a€rate€increase€application€by€NGC,Ïthe€Commission€deviated€from€the€rule€and€allowed€advertising€expenses€up€toÏ.5%€of€revenues.€€In€March€of€1996€the€Commission€repealed€1220„4„5„.45€andÏproposed€a€new€rule€that€would€allow€a€utility€to€recover€ð ðall€prudently€incurredÏexpenditures€for€advertising.ðð€€Apparently€the€rule€had€not€made€it€completelyÏthrough€the€adoption€procedure€when€the€TRA€heard€this€case€below.ÌÌà àà àNevertheless,€based€on€proof€of€$1,486,000€in€external€advertisingÏexpenses,€$800,000€in€marketing€personnel€payroll€and€$300,000€inÏmiscellaneous€sales€expenses,€the€TRA€allowed€the€recovery€of€all€butÏapproximately€half€of€the€external€advertising€expenses.€€The€CAD€urgedÏdisallowance€of€all€the€related€expenses€except€approximately€$647,000€andÏNGC€claims€that€the€TRA€erred€in€reducing€the€external€operating€expensesÏbecause€there€was€no€proof€that€they€were€imprudently€incurred.ÌÌà àà àWe€think€the€TRA€was€justified€in€its€conclusion€on€this€issue.€€BasedÏon€the€testimony€in€the€record€that€the€advertising€expenses€were€incurred€toÏmeet€competition,€to€add€new€customers€on€existing€mains,€and€to€get€existingÏcustomers€to€use€more€gas,€the€TRA€concluded€that€the€rate€payers€benefitedÏfrom€at€least€part€of€the€external€advertising.ÌÌÌÌà@ àœò òc.›€€à@ àThe€Long€Term€Incentive€Planó óÌÌà àà àThe€TRA€allowed€NGC€to€recover€approximately€one„half€of€the€costÏof€its€Long€Term€Incentive€Plan.€€The€CAD€opposes€the€allowance€of€any€of€thisÏexpense€on€the€basis€that€the€plan€encourages€executives€to€seek€growth€throughÏrate€increases€instead€of€through€performance€gains.€€According€to€the€CAD,€theÏplan€does€not€promote€improved€service.ÌÌà àà àNGC€offered€evidence,€however,€that€the€plan€had€increasedÏemployee€efficiency€and€had€reduced€the€number€of€company€employees€perÏcustomer€in€Tennessee.€€The€savings€amounted€to€$7€million€annually€in€wagesÏand€salaries.€€The€same€witness€rebutted€the€CAD€witness€who€testified€that€theÏplan€encourages€employees€to€seek€rate€increases€rather€than€improvedÏefficiency.ÌÌà àà àNone€of€the€parties€to€the€appeal€cited€any€authority€governing€theÏallowance€of€incentive€payments€in€utility€rate€cases.€€The€proof€included€someÏreferences€to€cases€in€other€jurisdictions€where€that€stateððs€utility€commission€hadÏallowed€either€100%€of€the€incentive€payments€or€some€fraction€thereof.€€TheÏconsensus€seems€to€be€to€look€at€each€plan€on€a€case€by€case€basis€and€viewÏeach€plan€in€the€context€of€the€utilityððs€total€compensation€package.ÌÌà àà àWe€do€not€think€the€TRA€erred€in€the€treatment€of€the€long€termÏincentive€plan€in€this€case.ÌÌà@ àò òd.€€à@ àRate€of€Returnó óÌÌà àà àNGC€requested€a€rate€of€return€on€equity€in€the€range€of€13%€toÏ13.25%.€€The€CAD€requested€an€11%€rate€of€return€and€offered€expert€testimonyÏshowing€that€monthly€compounding€of€the€companyððs€income€would€raise€the€rateÏof€return€to€11.60%.€€The€TRA€set€a€rate€of€return€of€11.5%.ÌÌà àà àWe€fail€to€see€how€either€side€could€make€much€of€a€case€onÏappeal.€€The€TRAððs€findings€and€conclusions€are€supported€by€evidence€in€theÏrecord€that€is€both€substantial€and€material.€€òòSeeóó€Tenn.€Code€Ann.€ðð€4„5„322(h).€ÏA€proper€rate€of€return€is€not€a€point€on€a€scale,€òòTennessee€Cable€TelevisionÏœAssððn›€v.€œPSC›óó,€844€S.W.2d€151€(Tenn.€App.€1992),€it€covers€a€fairly€broad€range,Ïas€indicated€by€the€testimony€of€the€competing€experts€in€this€case.€€We€affirm€theÏTRAððs€decision€on€this€point.ÌÌà àà àWe€take€no€position€on€the€issue€of€the€compounding€effect€of€theÏcompanyððs€receipts.€€It€is€a€concept€that€is€new€to€us€in€utility€regulation,€and€itsÏmerits€need€to€be€explored€more€thoroughly€than€they€have€been€in€this€record.ÌÌà@ àò òIV.€€à@ àThe€Rate€Designó óÌÌà àà àThe€intervenor,€œAVI›,€challenges€the€part€of€the€TRAððs€order€thatÏraised€the€ð ðœtailblock›ðð€rate€for€gas€supplied€to€NGCððs€largest€interruptibleÏcustomers.€€The€œtailblock›€rate€is€the€lowest€rate€charged€per€unit€and€it€applies€toÏusage€of€over€9,000€œdecatherms›€per€month.œ× ƒ0 ××  ×›€€NGCððs€petition€did€not€seek€anyÏincrease€in€the€rates€falling€in€this€category.€€The€CADððs€proof€proposed€that€anyÏchanges€be€spread€to€all€customer€classes,€but€the€intervenor€sought€an€overallÏrate€decrease.€€œAVI›ððs€witness€testified€that€industrial€rates€were€set€well€aboveÏcosts€and€should€not€be€increased€€The€TRAððs€order€increased€the€œtailblock›€rateÏfrom€$0.21€per€œdecatherm›€to€$0.228€per€œdecatherm›.€€The€TRA€said€in€its€order:ÌÓÓà8 àà8 àà àAfter€careful€consideration€of€the€testimony€andÏexhibits€of€the€parties,€the€Authority€finds€that€the€rateÏincrease€approved€herein€should€be€spread€equally€toÏall€customers.€€It€is€the€intent€of€the€Authority€to€spreadÏthis€increase€to€all€ratepayers,€including€interruptibleÏSales€customers,€Transportation€customers,€andÏSpecial€Contract€customers,€in€order€to€minimize€theÏoverall€impact€of€this€rate€change.€€In€addition,€theÏAuthority€concludes€that€the€residential€customerÏcharge€should€be€increased€from€$6.00€per€month€toÏ$7.00€per€month.ÌÌÌÌÓÓà àà àWe€think€the€question€of€whether€to€spread€the€rate€increase€to€allÏclasses€of€users€was€within€the€discretion€of€the€TRA.€€In€òòCF€Industries€v.€Tenn.ÏPub.€Serv.€œComm›.óó,€599€S.W.2d€536€(1980),€our€Supreme€Court€said:ÌÓÓà8 àà8 àà àSpecifically,€there€is€no€requirement€in€any€rateÏcase€that€the€Commission€receive€and€consider€cost€ofÏservice€data,€or€what€such€data,€if€in€the€record,€are€toÏbe€accorded€exclusivity.€€It€is€self„evident€that€cost€ofÏservice€is€of€great€significance€in€the€establishment€ofÏrates€but€is€of€lesser€value€in€arriving€at€rate€design.€€AÏfair€rate€of€return€to€the€regulated€utility€is€one€thing;€theÏestablishment€of€rates€among€various€customerÏclasses€is€quite€another.ÌÌà àà à599€œS.W.›€at€542.ÌÌà@ à*€€€*€€€*ÌÌà8 àà8 àà àThus,€the€Public€Service€Commission€in€rateÏmaking€and€design€cases€is€not€solely€governed€by€theÏproof€although,€of€course,€there€must€be€an€adequateÏevidentiary€predicate.€€The€Commission,€however,€isÏnot€hamstrung€by€the€naked€record.€€It€may€consider€allÏrelevant€circumstances€shown€by€the€record,€allÏrecognized€technical€and€scientific€facts€pertinent€toÏthe€issue€under€consideration€and€may€superimposeÏupon€the€entire€transaction€its€own€expertise,€technicalÏcompetence€and€specialized€knowledge.€€ThusÏfocusing€upon€the€issues,€the€Commission€decides€thatÏwhich€is€just€and€reasonable.€€This€is€the€litmus€test€„„Ïnothing€more,€nothing€less.ÌÌà àà à599€œS.W.›€at€543.ÌÌÓÓÌà àà àWe€think€it€would€be€a€rare€case€where€the€court€would€interfere€withÏa€rate€increase€spread€evenly€over€all€classes€of€users.€€If€the€rate€design€isÏinequitable€it€was€not€established€in€this€proceeding.€€Therefore,€a€request€thatÍthe€rate€increase€be€applied€unevenly€is,€in€fact,€a€request€to€change€the€rateÏdesign€„„€on€which€the€intervenor€would€have€the€burden€of€proof.€€A€changeÏwould€have€to€be€shown€by€a€greater€amount€of€proof€than€appears€in€this€record.ÌÌà àà àThe€TRAððs€order€is€affirmed€and€the€cause€is€remanded€to€theÏTennessee€Regulatory€Authority€for€enforcement.€€Tax€the€costs€on€appeal€to€theÏConsumer€Advocate€Division.ÌÌÌÌÓÓà àà àà àà àà àà àà à____________________________Ìà àà àà àà àà àà àà àBEN€H.€CANTRELL,€JUDGEÌÌÌÌCONCUR:ÌÌÌÌÌ_______________________________ÌHENRY€F.€TODD,€PRESIDING€JUDGEÌMIDDLE€SECTIONÌÌÌÌÌ_____________________________ÌWILLIAM€C.€KOCH,€JR.,€JUDGEÌÇÑ  ÑÔ€+¼Ôœ›