Storm Team 7: Latest storm assessment news from the SJC

April 14, 2014:- An unsettling decision emerged from the Massachusetts Supreme Judicial Court (SJC) today. For readers who prefer executive agencies to stick to executing the law rather than making fundamental policy, the decision will come as rather a disappointment. The case involved the question of regulatory takings and its name is Fitchburg Gas & Electric Company v. Department of Public Utilities, No. SJC-11397. In this decision the seven justices of the SJC interpreted a statute one way, and then granted the enforcing agency the right to interpret the same statute in exactly the opposite manner. Appropriately, the statute in question had its origins in the confusion and finger-pointing that followed a natural disaster.cloud

After the storms of 2011, the consensus among state lawmakers was that the response of the utilities had been somewhat desultory.  So in 2012 the Massachusetts Legislature enacted a statute establishing the Storm Trust Fund to help the Department of Public Utilities (DPU) examine the power companies’ storm preparedness. The law required all electric utilities to pay for the Fund via an annual assessment.

But, readers may wonder, as rational economic actors with a duty to their shareholders, would not the utilities simply pass on the cost of the assessment to the consumers? Ah, the Legislature thought of that. In order to prevent that very outcome it crafted section 18, para. 3, prohibiting the utilities from seeking “recovery of any assessments in any rate proceeding before the department.” Five electric companies sued on the basis that, among other things, the law amounted to a regulatory taking. The result was today’s decision from the SJC upholding the law.

A quick reminder: Did the Legislature intend to give the utility companies leeway to pass the cost of the assessment on the consumers? No, because (as the court explained) the Legislature’s intent was to raise funds to “investigate public utilities’ storm preparedness and responsiveness” and require the companies to “absorb the costs associated with achieving these purposes.” So the DPU must prohibit the utilities from effectively recouping that cost, correct? No. The DPU can interpret the statute in a way that permits the utilities to do exactly that.

Yes, you read that correctly.

Here is how the court summarized its decision: “[T]he Legislature may… prohibit the companies from including the assessment as a direct cost in a rate proceeding… However, even when such an assessment is properly excluded from the rate base, the department must permit the utilities to achieve a fair and reasonable rate of return on their investment, in accord with our constitutional mandates… What constitutes a reasonable return is a fact-specific inquiry that must be made in the context of a particular rate proceeding.”

The court held that although the DPU could interpret the statute to prevent a utility from claiming the assessment as part of its rate base, the DPU could — on the other hand — “offset the impact of the assessment through the allowance of a higher rate of return.” In footnote 4 the court observed, “It appears that the [DPU]… has not settled on an interpretation of the statutory language.”

Because the industry is such a highly regulated one the case is, in some respects, quite complex. But in one regard it is reasonably clear: An executive agency may interpret a statute in a way that contradicts what the SJC has determined to have been the clear intent of Legislature in enacting it. If you can call that reasonably clear.

 

The meaning of “the”

Does “the” mean “the,” or does “the” mean “a”? theThat is the essence of the key question before the Supreme Court of the United States, which will hear oral arguments today in National Labor Relations Board v. Noel Canning. Ten years ago, when President George W. Bush was in office, the late Senator Ted Kennedy argued that “the” means the definite article. Today counsel for President Obama’s NLRB will say that it does not.  As Senator Kennedy’s brief makes clear, this is not an inherently partisan question, and the meaning of “the” should not depend on which party controls the White House.

At issue is the President’s authority to appoint government officials without the advice and consent of the Senate. As a default rule, the Constitution requires Senate approval for these appointments, but provides an exception:  “The President shall have power to fill up vacancies that may happen during the recess of the Senate, by granting commissions which shall expire at the end of their next session.” U.S. Const. art. II, S.2., cl. 3.

When can the President exercise this power?  In other words, what is “the recess”? Can any break within a Senate session qualify, or does the phrase only apply to the recess that occurs between sessions?

Ted_Kennedy,_official_photo_portrait_crop
Senator Ted Kennedy

In 2004, Senator Kennedy argued that President Bush’s appointment of a judge was invalid because it happened during a 10-day break after the Senate had reconvened in January 2004 for its second session.  A break within a session does not create an opportunity to exploit the Recess Clause, Kennedy argued. “An intrasession adjournment is not ‘the Recess’ to which the Recess Clause refers.” (Kennedy Amicus Brief, p. 4).

The issue arose again after President Obama made appointments to the NLRB without the Senate’s consent.  The Senate was not between sessions at the time, and was holding pro forma sessions of the sort that it used in 2007 for the express purpose of preventing President Bush from making any more recess appointments.  President Bush appears to have agreed that these pro forma sessions had the effect of keeping the Senate in session and not in recess.  At any rate, he made no further purported “recess” appointments.

The alleged “recess” that President Obama used in January 2012 – like President Bush in 2004 – was within a session of the Senate (an intrasession recess as opposed to an intersession recess). This was precisely the kind of appointment that Senator Kennedy’s brief denounced as unconstitutional.

Back in 2004 the Court of Appeals for the Eleventh Circuit rejected Senator Kennedy’s argument and ruled in favor of President Bush. It held that the “Senate’s break fits the definition of ‘recess’ in use when the Constitution was ratified.” Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004).  In contrast, the Court of Appeals for the D.C. Circuit held that “the recess” does not mean just any break in proceedings, but rather is confined to the gap between sessions.

The lower courts are divided.  Now it is up to the Supreme Court to decide which argument is correct: Senator Kennedy’s or President Obama’s.

Update: June 26, 2014: The Supreme Court of the United States held that the Senate is in session whenever it says that it is, so long as it has the capacity to transact Senate business.

Gas in Mass.? Not so fast.

In October I gave a talk on the law surrounding hydraulic fracturing (fracking) and shared the stage with Professor Steven Petsch, a geologist who teaches at the University of Massachusetts, Amherst. oct 9 mtg 1 You can watch both presentations by clicking here. Mine starts around the 46-minute mark, by the way.

My presentation focused on the current regulatory ban on Class II wells and the question of whether it could withstand a courtroom challenge. Professor Petsch described the geology of the Pioneer Valley and made absolutely clear that nobody has discovered natural gas in the area. He also explained why: The history of the rock formations in Western and Central Massachusetts make it extremely unlikely that they contain recoverable natural gas.

About a year ago the Massachusetts State Geologist posted a helpful overview online, which you can read here. Like Professor Petsch, the State Geologist makes abundantly clear that nobody has discovered natural gas in Massachusetts.

Nevertheless an organization called Environment Massachusetts keeps claiming that gas deposits have been found here. The people who work for Environment Massachusetts may be right about a lot of things, but on this they are just wrong. So please remember, if a canvasser from Environment Massachusetts asks you for a contribution because (as their website alleges) “geologists recently discovered shale gas in Western Massachusetts,” you may decline with a perfectly clear conscience.

Can you hear the silence? The SJC can.

Do you remember that day in high school or college when you learned about the separation of powers? Today the Massachusetts Supreme Judicial Court issued a decision that contains some language which might leave you wondering whether, during the intervening years, somebody went and amended the Constitution.

The case is Massachusetts Teachers’ Retirement System v. Contributory Retirement Appeal Board and it is important for several reasons. This post deals with just one of those reasons, one that matters to anyone who might be affected by how much leeway a government agency has when it interprets a statute.

First some background.  In 2005 the Legislature passed a law allowing vocational education teachers to increase their pensions by having up to three years of non-teaching employment count toward their “creditable service.”  During that three-year period they must have been working in the same trade they ended up teaching, e.g. a plumber who becomes a vocational plumbing teacher can ask the retirement board to count three years of her pre-teaching plumbing when calculating her pension.

To qualify for this significant pension boost, teachers have to contribute “makeup payments” into the retirement system, in an amount equal to ten per cent of their regular annual compensation. They also have to pay “buyback interest.” But when should the interest accrue: when they entered the retirement system, or the start of the three-year period?

In answering that question, two agencies had competing interpretations of the statute. One agency, the Contributory Retirement Appeals Board (CRAB) said that the statute was clear and unambiguous. Interest should run from when the teacher joined the system. The other agency, the Massachusetts Teachers’ Retirement System (MTRS) disagreed, saying that the statute was silent on the issue.  The Supreme Judicial Court heard the same silence, and held that the way the MTRS filled the silence was reasonable and entitled to deference.

Can you hear the silence?

One topic for a future post is the question of how silent the statute really is. In the meantime, I would like to address a more basic, constitutional aspect of the case.

What the Court said in explaining its decision is worth noting, not only if issues like democratic accountability rank high on your list of priorities, but also if you think that at some point your life may be affected by how an executive agency interprets a piece of legislation.

By way of a prelude to the Court’s explanation, let me refresh your memory of that high school or college lesson. The Constitution of the United States embodies the doctrine of the separation of powers, allocating the executive, legislative, and judicial roles to three distinct branches.  The Massachusetts Constitution, which predates it, is more explicit. Article 30 states:

“In the government of this commonwealth, the legislative department shall never exercise the executive and judicial powers, or either of them: the executive shall never exercise the legislative and judicial powers, or either of them: the judicial shall never exercise the legislative and executive powers, or either of them: to the end it may be a government of laws and not of men.”

Because the Constitution prohibits the Legislature from delegating is lawmaking powers to the executive, courts and commentators refer to the “doctrine of non-delegation.” Of course, Massachusetts judges have long recognized that modern government requires some degree of delegation, but they have distinguished between situations where agencies are just “working out the details” of a policy that the Legislature has announced (which is permissible) and those where the agency is making “fundamental policy” (which is not).

If the Legislature has delegated to an agency the task of making “fundamental policy decisions” it has violated Article 30. That was a point the Court made very clear in 2006 when it decided Commonwealth v. Clemmey.  But in today’s decision, which did not mention the non-delegation doctrine, the Court said this:

“[T]he Legislature simply chose to be silent on the issue, thereby leaving a policy gap to be filled by agency action.”

So this is a policy question, without doubt, not merely a matter of “working out the details.”  Is the question of when interest accrues on a vocational teacher’s buyback a “fundamental policy question” or is it something less than that, e.g. a trifling or minor policy question?  This recent report on the commonwealth’s unfunded pensions liabilities may influence how you answer that question.  It mentions a figure of $23.6 billion.

One important lesson from today’s decision is this: It has become even easier for the Legislature to delegate policy questions to executive agencies, when even an issue that involves a multi-billion dollar unfunded mandate does not qualify as a “fundamental policy decision” of the sort that the Legislature has no constitutional right to delegate.  If you have any questions or comments about the decision, I welcome your posts.