Duquesne Light Company v. Barasch

Facts

In 1967, Duquesne Light Company and Pennsylvania Power Company joined a venture called the Central Area Power Coordination Group (CAPCO) to build seven large nuclear generating units in response to predictions of increased electricity demand. By 1980, the utilities canceled plans for four of these plants due to intervening events, including the Arab oil embargo and the Three Mile Island accident, which dramatically changed the outlook for electricity demand and nuclear energy. At the time of cancellation, Duquesne had invested approximately $35 million and Penn Power had invested about $9.6 million in preliminary construction costs for the canceled plants. The Pennsylvania Public Utility Commission initially allowed the utilities to recover these costs through amortization over a 10-year period, finding that the utilities’ decisions were “reasonable and prudent.” However, in December 1982, Pennsylvania enacted Act 335, which prohibited including the costs of facilities not “used and useful in service to the public” in utility rates. The Pennsylvania Supreme Court interpreted this law to prohibit recovery of the canceled plant costs either through inclusion in the rate base or through amortization, rejecting the utilities’ constitutional challenge to the statute.