Date Argued: May 7, 2018.
Barbera, C.J., Greene, Adkins, McDonald, Watts, Hotten,
(b) It is the intent of the General Assembly that the purpose
of this section is to accelerate gas infrastructure
improvements in the State by establishing a mechanism for gas
companies to promptly recover reasonable and prudent costs of
investments in eligible infrastructure replacement projects
separate from base rate proceedings.
-Statement of "Legislative Intent," Senate Bill 8,
2013 Md. Laws, ch. 161, § 1.
appeal, we are asked to interpret Public Utility Article
("PU") § 4-210 of the Maryland Code, known
also as the STRIDE statute. In short, the STRIDE statute
allows Maryland gas companies more timely cost recovery if
they submit plans that increase the pace of natural gas
General Assembly passed the STRIDE statute (Senate Bill 8) in
response to increasing concerns about threats to public
safety posed by aging and deteriorating gas infrastructure
throughout the state. The Fiscal and Policy Note for Senate Bill
8 highlighted the occurrence of "30 'significant
[pipeline] incidents' in Maryland from 2002 through 2011,
totaling $12 million in property damage and causing one
fatality and 16 injuries." Dep't Leg. Servs.,
Fiscal and Policy Note, Senate Bill 8, at 6 (2013
Session) (hereinafter cited as "Senate Bill 8 Fiscal
Note"). To underscore the importance of providing
Maryland residents with a safe and reliable gas distribution
infrastructure throughout the State, the legislature codified
a rarely used express statement of legislative intent.
See PU § 4-210(b).
Washington Gas Light Company ("Washington Gas")
asserts that the Maryland Public Service Commission
("the Commission"), the Circuit Court for
Montgomery County, and the Court of Special Appeals each
erred in their statutory analysis, from which they ultimately
concluded that the STRIDE statute provides accelerated cost
recovery only for gas infrastructure projects located in the
State of Maryland. Respondents Maryland Office of
People's Counsel ("OPC") and the
Commission argue that the prior tribunals' interpretation
of PU § 4-210 was correct. We are therefore called upon
to conduct statutory interpretation, analyzing both the plain
language and the legislative history of PU § 4-210.
following reasons, we conclude that PU § 4-210 is
unambiguous and requires that "gas infrastructure
improvements" be located "in the State" in
order to promptly recover investment costs separate from base
rate proceedings. We also hold that the STRIDE statute's
legislative history supports this interpretation.
Accordingly, we affirm the judgment of the Court of Special
Gas is a public service company that provides natural gas and
delivery services to customers in the Maryland counties of
Montgomery, Prince George's, Charles, Calvert, St.
Mary's, and Frederick, as well as customers in
Washington, D.C. and jurisdictions in Virginia. To transport
natural gas to its customers, Washington Gas operates a
system of distribution pipelines spanning its geographic
service area throughout Maryland, Virginia, and Washington,
Commission is tasked with regulating Maryland public service
companies, including Washington Gas, and its duties are
summarized in Maryland Off. of People's
Counsel v. Md. Pub. Serv. Comm'n:
The Maryland Public Service Commission is an independent unit
in the executive branch of State government (PU §
2-101(b)), with jurisdiction over public service companies
that operate utility businesses within the State. PU §
2-112(a). The Commission's primary duties are to
"supervise and regulate" the companies subject to
its jurisdiction[, ] to "ensure their operation in the
interest of the public[, ]" and to "promote
adequate, economical, and efficient delivery of utility
services in the State without unjust discrimination [.]"
PU § 2-113(a)(1)(i).
226 Md.App. at 488. The statutory authority for the
Commission's regulation of public service companies is
provided in Title Four of the Public Utilities Article.
Gas has a duty to "charge just and reasonable rates for
the regulated services that it renders," PU §
4-201, and the Commission retains "the power to set a
just and reasonable rate of a public service company[.]"
PU § 4-102(b). Generally, the Commission determines just
and reasonable rates for a public service company by
accounting for the company's "income and expenses
during a test year, calculating the rate base (the fair value
of the property used and useful in rendering service) during
that year, determining the utility's cost of capital (its
required rate of return), and then multiplying that rate of
return against the rate base." Bldg. Owners &
Managers Ass'n of Metro. Baltimore, Inc. v. Pub. Serv.
Comm'n of Maryland, 93 Md.App. 741, 753 (1992). The
Commission may order an adjustment in the company's rates
if the utility's level of income deviates significantly
from the test year's net income. See id.
Importantly, prior to the enactment of the STRIDE statute, a
public service company would recover the costs of investment
in infrastructure improvements through distribution rates,
determined with the Commission, after the work was
completed. PU § 4-101(3) (defining "just and
reasonable rate" as "a reasonable rate on the fair
value of the public service company's property used
and useful in providing service to the public."
The STRIDE statute - PU § 4-210
in 2011, the General Assembly considered legislation to
accelerate replacement of aging gas infrastructure and allow
cost recovery separate from base rate proceedings.
See S.B. 8, 2013 Reg. Sess. (cross-filed as H.B.
89); S.B. 541, 2012 Reg. Sess. (cross-filed as H.B. 662);
S.B. 332, 2011 Reg. Sess. (cross-filed as H.B. 856). On
February 22, 2013, the General Assembly enacted a bill titled
"An Act Concerning Gas Companies-Rate
Regulation-Infrastructure Replacement Surcharge," the
STRIDE statute, creating an exception to the normal
ratemaking process. The law took effect on June 1, 2013. 2013
Md. Laws, ch. 161, § 2.
STRIDE statute created § 4-210 of the Public Utilities
Article. To increase the pace of natural gas infrastructure
improvements, promote public safety, and enhance gas pipeline
system reliability, the General Assembly created incentives
for public service companies to submit STRIDE-compliant
infrastructure plans, which would receive more timely cost
recovery than would otherwise be available under the
traditional rate setting process. Pursuant to the STRIDE
statute, a public service company may file "a plan to
invest in eligible infrastructure replacement projects"
with the Commission accompanied by "a cost-recovery
schedule . . . that includes a fixed annual surcharge on
customer bills to recover reasonable and prudent costs"
of those projects. PU § 4-210(d)(1). An "eligible
infrastructure replacement" project is defined as
"a replacement or an improvement in an existing
infrastructure of a gas company." PU § 4-210(a)(3).
an "eligible infrastructure replacement" project:
"(i) is made on or after June 1, 2013; (ii) is designed
to improve public safety or infrastructure reliability; (iii)
does not increase the revenue of a gas company by connecting
an improvement directly to new customers; (iv) reduces or has
the potential to reduce greenhouse gas emissions through a
reduction in natural gas system leaks; and (v) is not
included in the current rate base of the gas company as
determined in the gas company's most recent base rate
proceeding." Id. A STRIDE plan filed by a
public service company must include: "(i) a time line
for the completion of each eligible project; (ii) the
estimated cost of each project; (iii) a description of
customer benefits under the plan; and (iv) any other
information the Commission considers necessary to evaluate
the plan." PU § 4-210(d)(2).
most legislation, the STRIDE statute included a statement of
legislative intent: "It is the intent of the General
Assembly that the purpose of this section is to accelerate
gas infrastructure improvements in the State by establishing
a mechanism for gas companies to promptly recover reasonable
and prudent costs of investments in eligible infrastructure
replacement projects separate from base rate
proceedings." PU § 4-210(b). If the Commission
approves a proposed infrastructure project under the STRIDE
statute, a public service company may recover costs through a
fixed annual surcharge that is collectible while the approved
work is being performed. See PU § 4-210(d)(3).
Gas filed a STRIDE plan with the Commission on November 7,
2013, that was approved by the Commission. PU §
4-210(d). The proposed 2013 STRIDE plan consisted of four
distribution system replacement programs, all of which were
located within the company's Maryland service territory.
Subsequently on March 10, 2015, Washington Gas filed an
application for approval of a proposed amendment to add four
new transmission system programs. While the majority of the
assets included in the amended application were physically
located in Maryland, three proposals contained individual
projects located outside of Maryland. Specifically,
Transmission Program 1 contained two projects replacing
pipeline in Virginia, Transmission Program 2 contained four
infrastructure replacement projects in Virginia, and
Transmission Program 4 contained six replacement projects in
Virginia or Washington, D.C.
Commission was required to approve or deny the amended
application within 150 days of the amendment's filing. PU
§ 4-210(e)(2). The Commission deferred its decision and
delegated the matter to a public utility law judge on March
16, 2015. PU § 3-104(d)(1). The Commission staff and the
OPC intervened in the proceeding before the public utility
law judge, then-Chief Judge Terry J. Romine.
evidentiary hearing was held on April 29, 2015, and initial
and reply briefs were filed on May 14 and May 21, 2015,
respectively. The parties mainly disputed whether Washington
Gas could recover costs for infrastructure replacement
projects located outside of Maryland through the STRIDE
statute. Washington Gas contended that since Maryland
customers would benefit from the improvements located outside
of Maryland, PU § 4-210 permitted STRIDE cost recovery
on those out-of-state assets. On May 27, 2015, Chief Judge
Romine issued an order, concluding that for "an
infrastructure replacement project to be an 'eligible
infrastructure replacement' under the STRIDE law,"
and thus qualifying for accelerated cost recovery associated
with the project through the STRIDE surcharge mechanism, the
project "must be located on pipeline system located in
the State and subject to the Commission's
jurisdiction." Further, Chief Judge Romine stated that
the STRIDE statute "is clear and unambiguous; the
incentive for cost recovery outside a base rate proceeding is
available to 'accelerate gas infrastructure improvements
in the State.'" Since Transmission Programs 1, 2,
and 4 included infrastructure located outside of Maryland,
Chief Judge Romine ...