Mid-Atlantic Power Supply Ass'n v. Maryland Public Service Commission

KRAUSER, Judge. The principal issue before us is whether the electric restructuring plan of the Baltimore Gas and Electric Company (“BGE”) violates the Electric Customer Choice and Competition Act of 1999, §§ 7-501, et seq. of the Public Utility Companies Article (“PUC”) of the Maryland Code Annotated (1998, 2000 Supp.)(“Act”).x The Maryland Public Service Commission (“Commission”) determined that it did not. And that decision was subsequently affirmed by the Circuit Court for Baltimore City. At the time that the Commission reviewed the BGE restructuring plan, it was part of the Stipulation and Settlement Agreement (“Agreement”) reached by co-appellees BGE, the Maryland Office of People’s Counsel (“OPC”), the Commission, and other interested public and private parties (“Settling Parties”). 1 2 Not all interests, however, were parties to that agreement.

Appellant, Mid-Atlantic Power Supply Association (“MAP-SA”), a trade association for wholesale and retail electric supply companies in the mid-Atlantic area, declined to sign the ⁴²⁶ Agreement. Instead, it challenged the Agreement — first before the Commission and then, after the Commission approved the Agreement, before the Circuit Court for Baltimore City, claiming that the Agreement violated the Act and did not promote competition among electricity suppliers. Before both the Commission and the circuit court, appellant questioned the provisions of the Agreement that granted BGE $528 million in stranded costs, that permitted BGE to grant its residential customers a 6.5% rate reduction over six years, that allocated 68% of that 6.5% residential rate reduction to BGE’s generating assets, that allocated BGE’s transition costs to residential customers, and that permitted BGE to transfer its generating assets to its unregulated affiliates at book value. Failing to persuade either tribunal of the justice of its cause, appellant noted this appeal.

At the core of this appeal lie two orders of the Commission. The first order (“Settlement Order” or “Order No. 75757”) approved the Agreement, while the second order (“Letter Order”), pursuant to the Agreement, authorized the transfer of BGE’s generating assets to its unregulated affiliates. Challenging these orders on appeal, appellant presents nine issues, which we have reworded and consolidated into eight issues for our review. Those eight issues are: 1.

Whether the circuit court applied the correct standard of review in upholding the Commission’s Settlement Order. 2. Whether the circuit court erred in holding that the Commission’s adoption of $528 million in stranded costs was well-reasoned, articulate, supported by substantial evidence and in compliance with PUC § 7-513(e). 3. Whether the circuit court erred in holding that the Settlement Order properly defers the establishment of a market power proceeding to consider market power issues affecting BGE’s service territory until such time as a party files a formal complaint with the Commission. 4. Whether the circuit court erred in holding that the Settlement Order does not violate PUC § 7-505 by provid ⁴²⁷ ing a residential rate reduction of 6.5% over a six year period. 5.

Whether the circuit court erred in holding that the allocation of 68% of a 6.5% residential rate reduction to BGE’s generating assets in the Settlement Order does not violate PUC § 7-504. 6. Whether the circuit court erred in holding that the Settlement Order does not improperly allocate transition costs to residential customers. 7. Whether the circuit court erred in upholding the Commission’s Letter Order approving BGE’s transfer of its generating assets to its unregulated affiliates at book value. 8. Whether the Commission lacked jurisdiction to approve the transfer of BGE’s generating assets while the Settlement Order was being appealed.

For the reasons that follow, we conclude that the circuit court did not err in holding that the Commission’s Settlement Order and Letter Order satisfied the statutory requirements of the Act. We further hold that MAPSA’s appeal of the Settlement Order did not divest the Commission of jurisdiction to approve the Letter Order authorizing the transfer of BGE’s generating assets to it’s unregulated affiliates. Consequently, we shall affirm the judgment of the circuit court. The Act The Maryland electric industry provides three main services: 1) the generation of electricity; 2) the transmission of electricity to distribution networks; and 3) the distribution of electricity to customers.

The Act deregulates the generation of electricity but not the transmission and distribution of electricity. Under the Act, customers will be able to choose their electricity supplier, while the transmission and distribution of electricity will still be provided by their local utilities. The purpose of the Act, is to “(1) establish customer choice of electricity supply ...; (2) create competitive retail electricity supply ...; (3) deregulate the generation, supply, and pricing of electricity; (4) provide economic benefits for all customer ⁴²⁸ classes; and (5) ensure compliance with federal and State environmental standards.” PUC § Y — 504(f)(5). The Act’s enhancement of consumer choice will presumably apply competitive pressure on market prices, and allow competition, instead of regulation, to police the market power of utilities.

To achieve these goals, the Act creates a comprehensive legal framework for restructuring the electrical industry with, among other things, price protection mechanisms, provisions for the transfer of generating assets to unregulated affiliates, and rules governing the treatment of transition costs associated with deregulation. The Act directs the Commission to provide that the transition to a competitive electricity supply and electricity supply services market shall be orderly, maintain electric system reliability, and ensure compliance with federal and State environmental regulations, be fair to customers, electric company investors, customers of municipal electric utilities, electric companies, and electricity suppliers, and provide economic benefits to all customer classes. PUC § Y — 505(á)(l). Procedural History On July 1, 1998, before the passage of the Act, BGE outlined its restructuring plan in an application it filed with the Commission, seeking approval of certain transition costs and price protection mechanisms (Case No. 8794). 3 In response, OPC petitioned the Commission to reduce the energy rates proposed by BGE in that plan (Case No. 8804).

After consolidating these two cases, the Commission granted the request of appellant and other interested parties to intervene in the consolidated case. Before the hearing on BGE’s requests, BGE and OPC, together with other interested parties, filed a Stipulation and Settlement Agreement (“Agreement”) with the Commission. As noted earlier, appellant declined to sign the Agreement, ⁴²⁹ claiming that it did not comport with the Act and failed to promote a competitive market for electricity suppliers. Notwithstanding appellant’s objections, the Commission approved and adopted the Agreement in Order No. 75757 (the “Settlement Order”) on November 10,1999.

The Agreement provides that, starting July 1, 2000, retail customers of electricity suppliers will have the opportunity to select their own supplier of generated power. The Agreement “unbundles” or separates the rates BGE charges for generating electricity from the rates it charges for transmitting and distributing electricity and thereby permits customers to compare generation rates charged by different electricity suppliers. To insulate these customers from possible rate instability during this transition period, the Agreement gives certain residential and non-residential customers the option to retain BGE as their electricity supplier under a Standard Offer Service (“SOS”) 4 through June 30, 2006. Until July 1, 2003, BGE “will have the discretion to arrange for generation service for its SOS customers.” Thereafter, BGE is required to obtain generated electricity through a competitive bidding process.

In addition, the Agreement provides for a six-year 6.5% rate reduction for most residential customers. 5 Rates for nonresidential customers, although not subject to the 6.5% residential rate reduction, will be frozen on June 30, 1999 for four years. The purpose of these rate caps is to protect customers, during the transition to a deregulated electric industry, against the volatility of a competitive marketplace. Incorporated into these rates is a Competitive Transition Charge (“CTC”), which will allow BGE to recover “stranded ⁴³⁰ costs.” “Stranded costs” — or as they are referred to in the Act “transition costs” — represent the difference between the net book value and the fair market value of BGE’s generating assets that will ultimately be transferred, pursuant to the Settlement Order, to its unregulated affiliates. To recoup those costs, BGE is entitled, under the Agreement, to recover $528 million dollars in stranded costs through the CTC. 6 In approving the Agreement, the Commission concluded that it was in the public interest, comported with the requirements of the Act, and provided for a sensible transition to a competitive electric market.

The Commission also found that the transfer of BGE’s generating assets would “deregulate the generation, supply and pricing of electricity provided to BGE’s customers.” On December 10, 1999, appellant filed both a petition for judicial review and a motion to stay the Settlement Order in the Circuit Court for Prince George’s County; this matter was then transferred to the Circuit Court for Baltimore City. Upon transfer of the case, appellant amended its motion to stay by adding specific requests to stay certain portions of the Settlement Order. Those portions included the Commission’s “acceptance” of the $528 million stranded cost recovery, the proposed CTC option process for commercial and industrial customers, the separation of the stranded cost valuation process from the asset transfer process, the use of book values in the transfer process, the six-year residential rate cut, the allocation of the rate cut to generation service, the deferral of a market power proceeding, and the collection of the CTC from customers based on the stranded cost recovery amount. In response to appellant’s petition and motion, BGE filed a motion requesting summary judgment on the ground that appellant lacked standing to contest the Commission’s decision.

Notwithstanding appellant’s pending petition for judicial ⁴³¹ review, BGE also filed an application to transfer its generating assets to its unregulated affiliates in accordance with the Settlement Order. The circuit court ultimately granted BGE’s motion for summary judgment, holding that appellant, as an association, lacked standing to bring such an action and denied its motion to stay portions of the Settlement Order. After noting an appeal to this Court, appellant once again moved for a stay of the Settlement Order in the circuit court, this time, on the ground that the appeal it had noted was pending. When that motion was also denied, appellant filed a motion in this Court, requesting injunctive relief, and a petition for a writ of certiorari in the Court of Appeals, requesting review of the “standing” issue and a stay of the Settlement Order.

Although this Court denied appellant’s request for injunctive relief, the Court of Appeals granted its petition for a writ of certiorari and stayed the implementation of the Settlement Order. Shortly thereafter, the Commission held an “administrative meeting” to address the proposed transfer of BGE’s assets. At that meeting, appellant and Shell Energy, LLC (“Shell”) opposed the transfer, arguing that the Commission lacked jurisdiction to hear this matter because the circuit court had assumed jurisdiction by accepting appellant’s petition to review the Settlement Order. Rejecting that argument, the Commission approved the transfer of BGE’s generating assets to its unregulated affiliates and issued a Letter Order dated June 19, 2000, authorizing that transfer.

MAPSA and Shell then filed a joint petition for judicial review in the Circuit Court for Baltimore City, seeking review of the Letter Order. In an opinion dated September 20, 2000, the circuit court affirmed both the November 10, 1999 Settlement Order and the June 19, 2000 Letter Order approving the transfer of BGE’s generating assets to its unregulated affiliates. Thereafter, the Court of Appeals held that appellant had standing to seek judicial review in this matter, and appellant noted this appeal. ⁴³² Scope of Review The scope of review for decisions' of the Commission is set forth in PUC Article § 3-203. That section states: Every final decision, order, or regulation of the Commission is prima facie correct and shall be affirmed unless clearly shown to be: (1) unconstitutional; (2) outside the statutory authority or jurisdiction of the Commission; (3) made on unlawful procedure; (4) arbitrary or capricious; (5) affected by other error of law; or (6) if the subject of review is an order entered in a contested proceeding after a hearing, the order is unsupported by substantial evidence on the record considered as a whole.

Because a final decision of the Commission is prima facie correct, it “will not be disturbed on the basis of a factual question except upon clear and satisfactory evidence that it was unlawful and unreasonable.” Office of the People’s Counsel v. Maryland Public Service Commission, 355 Md. 1, 14 , 733 A.2d 996 (1999). Indeed, if reasoning minds could reasonably reach the Commission’s decision from the facts in the record, then the decision is based upon substantial evidence, and we will not reject that conclusion. Liberty Nursing Center, Inc. v. Department of Health and Mental Hygiene, 330 Md. 433, 442-43 , 624 A.2d 941 (1993). Finally, in reviewing a decision of an agency, our role “is precisely the same as that of the circuit court.” Department of Health & Mental Hygiene v. Shrieves, 100 Md.App. 283, 303-04 , 641 A.2d 899 (1994).

Consequently, we “do not evaluate the findings of fact and conclusions of law made by the circuit court.” Consumer Protection Division v. Luskin’s, Inc., 120 Md.App. 1, 22 , 706 A.2d 102 (1998), rev’d in part on other grounds, 353 Md. 335 , 726 A.2d 702 (1999). This Court is not concerned with whether the circuit court applied the correct standard of review so long as we are satisfied that the agency decision is proper. Giant Food, Inc. v. Department of Labor, Licensing and Regulation, 124 Md.App. 357, 363 , 722 A.2d 398 (1999), rev’d on other grounds, 356 Md. 180 , 738 A.2d 856 (1999). ⁴³³ Discussion 1. (Issue 1) Appellant contends that the circuit court applied the wrong standard of review in affirming the Commission’s Settlement Order.

According to appellant, the circuit court erred in rejecting the standard of review set forth in Colao v. County Council of Prince George’s County, 109 Md.App. 431 , 675 A.2d 148 (1996), aff'd, 346 Md. 342 , 697 A.2d 96 (1997), in favor of the standard of review promulgated in Insurance Commissioner v. National Bureau of Cas. Underwriters, 248 Md. 292 , 236 A.2d 282 (1967). In support of that claim, appellant cites the following language from the opinion of the court below: This Court believes that neither the Colao decision nor the other federal agency cases are directly on point. Maryland’s appellate courts have had repeated opportunities to define the scope of judicial review of PSC and other state agency rulings and those decisions consistently return to Chief Judge Hammond’s articulation in Insurance Comm’r v. Nat’l Bureau, 248 Md. 292 , 236 A.2d 282 (1967).

In Colao , we were asked to determine, among other things, whether the decision of the county council, sitting as a district council, approving two zoning applications was supported by substantial evidence and, more importantly for our purposes, whether the council, in rendering its decision “sufficiently articulated its findings of fact and conclusions of law.” Colao, 109 Md.App. at 453 , 675 A.2d 148 . We held that it did not and reversed the decision of the circuit court, stressing that “without well-reasoned and articulated administrative findings ... a reviewing court may not uphold an agency’s decision.” Id. at 454 , 675 A.2d 148 (citing Moritimer v. Howard Research & Dev. Corp., 83 Md.App. 432, 441 , 575 A.2d 750 (1990)). Insurance Commissioner v. National Bureau, on the other hand, involved appeals by two insurance companies from the denial by the Insurance Commissioner of their applications for ⁴³⁴ rate increases.

In that case, the Court of Appeals stated that “judicial review essentially should be limited to whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Insurance Comm’r, 248 Md. at 309 , 236 A.2d 282 . Despite the distinction the circuit court drew between the two cases, there are no grounds for concluding that they employed different standards of review. On the contrary, they applied the same standard of review but just stressed different aspects of it because of the factual differences between the two cases. Indeed, there is no basis for suggesting that the Colao Court departed from the standard of review articulated in Insurance Commissioner , requiring that judicial review be confined to determining “whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Id. at 309-10 , 236 A.2d 282 .

The Colao Court expressly adhered to that standard when, quoting Columbia Road Citizens’ Association v. Montgomery County, 98 Md. App. 695, 698 , 635 A.2d 30 (1994), it stated that, “[i]n regard to findings of fact, the trial court cannot substitute its judgment for that of the agency and must accept the agency’s conclusions if they are based on substantial evidence and if reasoning minds could reach the same conclusion based on the record.” Colao, 109 Md.App. at 458 , 675 A.2d 148 . The Colao Court did stress the need for “specific findings' and well-articulated conclusions” by the reviewing agency. Id. at 453 , 675 A.2d 148 . But that emphasis is understandable, as this Court was reviewing a zoning decision that appeared to simply adopt, without analysis, the findings and conclusions of a zoning hearing examiner.

That practice had been the object of substantial criticism by the Court of Appeals. See Montgomery v. Board of County Com’rs, 256 Md. 597 , 261 A.2d 447 (1970). In any event, regardless of the comments of the court below, we hold, in the words of that court, that “the Settlement Order sufficiently sets forth the basis for its conclusions ⁴³⁵ and contains the required factual determinations.” Indeed, the Commission began its opinion with a detailed description of the provisions of the Agreement and discussed at length the testimony provided by key witnesses in support of the Agreement, notably, David A. Bruñe, Vice President and Chief Financial Officer for BGE; Eugene T. Meehan, Vice President of National Economic Research Associates, Inc.; and Shelton Switzer, Director of BGE’s Electric Pricing and Tariffs Unit. It also recounted the testimony of OPC witness Jonathan F. Wallach, Vice President of Resource Light, Inc., and the testimony of Matthew I. Kahal of Exeter Associates who testified on behalf of the Department of Natural Re-sourees/Maryland Energy Administration (“DNR”).

Wallach testified as to why the settlement was in the public interest. And Kahal described how the Agreement “fairly balances the interests of customers and BGE’s investors and gave testimony as to the fairness and efficacy of various parts of the [Agreement].” Finally, the Commission summarized the testimony of Calvin L. Timmerman, Director of the Commission’s Rate Research and Economics Division, in support of the Agreement and quoted from briefs submitted by the following supporters of the Agreement: Enron Energy Services, Inc., Maryland Retailers Association, Building Owners and Managers Association of Baltimore, Inc., Johns Hopkins University, and Board of County Commissioners of Calvert County. The Commission also summarized the testimony and arguments presented by opponents to the Settlement, notably, appellant, Trigen Energy, Inc. and Statoil Energy Services Inc., as well as those with objections to specific parts of the Settlement, such as Bethlehem Steel Corp. and the City of Baltimore. It then reviewed each issue addressed by the Agreement, liberally drawing from the testimony adduced by both sides, while discussing in detail the evidence presented and the applicable law.

In the course of reviewing each issue, the Commission made findings of fact and conclusions of law, which were later summarized at the conclusion of its opinion in a section entitled “Statement of Commission Findings.” We are therefore unpersuaded by appellant’s argument that the ⁴³⁶ Commission failed to make specific findings and to provide well-articulated conclusions.

II

(Issue 2) Appellant contends that the Commission erred in approving $528 million in stranded costs. As noted earlier, stranded costs represent the difference between the net book value and the fair market value of the BGE generating assets that are to be transferred to its unregulated affiliates pursuant to the Commission’s Letter Order. To recoup those costs, as agreed by the Settling Parties, BGE is entitled to recover $528 million in stranded costs through a Competitive Transition Charge (“CTC”). Pursuant to the Settlement Order, the CTC will be incorporated into the rates charged to BGE customers.

Appellant claims that the approval of those costs was not supported by substantial evidence and did not meet the requirements of PUC § 7-513(e). That section provides, in part: (1) In determining the appropriate transition costs or benefits for each electric company’s generation-related assets, the Commission shall: (i) conduct public hearings; and (ii) consider, in addition to other appropriate evidence of value: 1. book value and fair market value; 2. auctions and sales of comparable assets; 3. appraisals; 4. the revenue the company would receive under rate-of-return regulation; 5. the revenue the company would receive in a restructured electricity supply market; and 6. computer simulations provided to the Commission. (2) The Commission shall determine any equitable allocation of costs or benefits between shareholders and ratepayers. In determining the allocation of transition costs or benefits, the Commission shall consider the following factors: (i) the prudence and verifiability of the original investment; (ii) whether the investment continues to be used and useful; (iii) whether the loss is one of which ⁴³⁷ investors can be said to have reasonably borne the risk; and (iv) whether investors have already been compensated for the risk.

(Emphasis added). Appellant asserts that the words “the Commission shall consider” in PUC § 7-513(e) requires the Commission to consider and discuss each of that subsection’s enumerated factors before approving a stranded cost recovery. The Commission, appellant claims, failed to do so and, consequently, its decision to award $528 million in stranded costs does not rest upon substantial evidence. In support of that claim, appellant relies upon Ocean Hideaway Condominium Association v. Boardwalk Plaza Venture, 68 Md.App. 650, 656 , 515 A.2d 485 (1986).

In that case, the issue before us was whether a local zoning board made the findings of fact that were required by a local zoning ordinance in approving a request to build a 17 story building at the Ocean City Boardwalk. That ordinance provided in part that the board “ ‘in its decision shall render a finding of fact on each of the nine (9) standards stated .. . above.’ ” Id. at 655 , 515 A.2d 485 . It also provided that the board may grant a special exception if “ ‘in its opinion, ... such exceptions will not substantially affect adversely the uses of the adjacent and neighboring property.’ ” Id. In reversing the board’s decision, this Court stressed that “the Board states its conclusions under each of the nine categories without any factual findings whatsoever.” Id. at 659 , 515 A.2d 485 .

We observed that “[e]ach of the one sentence conclusions contains nothing more than a positive statement of each of the conditions precedent to the approval by the Board of the special exception.” Id. We therefore concluded that the “citizens of Ocean City [were] entitled to more than the perfunctory disposition which the Board made of this important zoning case.” Id. at 659-60 , 515 A.2d 485 . Attempting to apply that reasoning to this case, appellant argues that the circuit court failed to adequately address the statutory factors of PIJC § 7-513(e) “[g]iven the conclusory ⁴³⁸ (and incomplete) reference” to specific PUC § 7-513(e)(l) factors, and the “complete absence of reference to specific § 7-513(e)(2) factors.” Because the Commission, according to appellant, “failed to analyze and consider each of these factors in detail,” appellant urges this Court to reverse the decision of the circuit court and remand this matter for the development of an appropriate record. Given the differences between the governing regulation in Ocean Hideaway and the governing statute here, however, the applicability of Ocean Hideaway to the instant case is problematic.

The ordinance at issue in Ocean Hideaway required the zoning board to “render a finding of fact on each ... standard.” Id. at 655, 515 A.2d 485 . In marked contrast, PUC § 7-513(e) does not state that the Commission is to render a finding as to each of that subsection’s factors in determining stranded costs. Rather, PUC § 7-513(e) only requires that the Commission “shall consider” certain enumerated factors in determining stranded costs. See supra page 437 of text for statute.

Nowhere does the Act require that the Commission state its findings as to each of these factors. In fact, this Court held in Lussier v. Maryland Racing Commission, 100 Md.App. 190, 213 , 640 A.2d 259 (1994), that the words “shall consider” in an administrative statute “only require[s] [an agency] to consider the listed factors” of the statute. Id. at 213 , 640 A.2d 259 . “[I]t is not required,” we stated, “to make written findings or findings on the record.” Id. Indeed, Lussier v. Maryland Racing Commission is particularly instructive on this point and merits further explication.

In that case, the Maryland Racing Commission (“Racing Commission”) fined Lussier for participating in “improper acts in relation to racing.” The Racing Commission imposed a fine on Lussier, pursuant to COMAR 01.10.01.10(H)(3). That regulation listed four factors that the Racing Commission “shall consider” in determining the penalty to be imposed. 7 Id. at ⁴³⁹ 212-13 , 640 A.2d 259 . On appeal before this Court, Lussier argued that the Racing Commission erred in fining him without making a ■written finding as to each factor. We disagreed and stated: [TJhe Commission is only required to consider the listed factors; it is not required to make written findings or findings on the record....

Thus, it is sufficient if the record supports the conclusion that the Commission considered these factors. Id. at 213 , 640 A.2d 259 . Like the regulation in Lussier , the statute in this case only requires the Commission to “consider” certain enumerated factors. Therefore, as in Lussier , “it is sufficient if the record supports the conclusion that the Commission considered these factors.” Id.

We believe that it does. Our review of the record persuades us that the Commission did consider the factors enumerated in PUC § 7-513(e) in approving $528 million in stranded costs. For example, in BGE’s July 23, 1999 filing, David A. Bruñe, Vice President and Chief Financial Officer of BGE, summarized the evidence presented by BGE on each of the PUC ’ § 7-513(e)(l)(ii) factors: Q. Is the recovery of the transition cost consistent with the requirements of the Restructuring Act and consistent with the public interest? A. Yes.

The Restructuring Act requires, in Section 7-513(E)(1)(H), that the Commission consider, in addition to other appropriate evidence of value: 1) book value and fair market value; 2) auctions and sales of comparable assets; 3) appraisals; 4) the revenue the company would receive under rate-of-return regulation; 5) the revenue the company would receive in a restructured electricity supply market; and 6) computer simulations provided to the Commission. ⁴⁴⁰ As part of its original July 1, 1998 testimony, BGE estimated its stranded investment through a comparison of book and market value at $1,048 billion and its total transition cost at $1,133 billion, as set forth in the Direct Testimony of Ralph Bourquin, Jr., Exhibit RHB-1. The market value of BGE’s non-nuclear assets was estimated to be $1,426 billion and the market value of BGE’s nuclear assets was estimated to be $305 million. The Company used a discounted cash flow methodology to calculate its stranded investment and thus compared the book value of its generation assets to the revenue it expected to receive in a restructured electricity supply market. Subsequent to the July 1 filing, various parties to this proceeding have filed their opinion as to the value of BGE’s generation assets and presented testimony regarding auctions, sales of comparable assets, and appraisals.

In its filing of December 22, 1998, Staff Witness Akers and Staff Witness Stuart-Paul presented testimony. Staff Witness Akers provided an overview of generation asset sales across the country. Staff Witness Stuart-Paul provided a determination of BGE’s stranded costs, by making adjustments to BGE’s discounted cash flow methodology, at $227.1 million; this value was also updated on March 22, 1999, to $241.9 million. OPC also filed testimony on December 22, 1998 and provided another analysis of the value of BGE’s generation assets.

OPC Witness Chernick calculated a stranded benefit of $1.6 billion associated with BGE’s generation assets utilizing a discounted cash flow methodology, as noted on Exhibit PLC-9. Mr. Chernick also reviewed the auction process and comparable sales and calculated a market value for BGE’s non-nuclear generation of $2,677 billion. Other parties filed testimony on the value of BGE’s assets. MEA Witness Kahal provided an estimate of BGE’s stranded costs/benefits based upon both an analysis of comparable sales ($2.2 billion pre-tax market value of non-nuclear assets) and a discounted cash flow analysis (stranded costs range between $58 million and $673 million).

MAPSA Witness Younger’s testimony of December 22,1998 claimed that recent asset sales produced median revenues of ⁴⁴¹ 170% of book value and that such a premium would be sufficient to eliminate BGE’s stranded investment. In performing these analyses, the Company, as well as other parties, estimated stranded investment in generating assets through the use of computer simulations that incorporated and considered the revenue the Company would receive. BGE, in its March 22, 1999 rebuttal testimony, offered testimony comparing the appraisal and auction processes. The Company presented testimony that the sole use of comparable sales data produced unreliable results and did not support a contention that the market value of BGE’s assets exceeds book value and that the Commission should not rely solely upon this data in reaching a decision in this proceeding.

BGE also filed testimony on March 22, 1999 regarding revenue losses of $331 million resulting from the onset of customer choice as compared to continued cost of service regulation. Bruñe also testified to the “equitable allocation of costs or benefits between shareholders and ratepayers,” set forth in PUC § 7-513(e)(2). As to that issue, Bruñe stated, among other things, that BGE “filed testimony demonstrating that investors did not expect to bear the risk of stranded investment and that allowed rates of return have not compensated investors for that risk.” Moreover, Bruñe noted that “BGE’s generation assets continue to be ‘used and useful’ in providing service to Maryland ratepayers.” Appellant further contends that the Commission ignored contrary evidence concerning the propriety of granting BGE the $528 million in stranded costs. Specifically, appellant claims that the Commission ignored the testimony of PSC witness Tracy Stuart Paul who said that BGE’s stranded costs were $227.1 million, as well as the testimony of OPC witness Paul L. Chernick.

Chernick testified that his estimate of the market value of BGE’s generating assets exceeded BGE’s estimate by $2.6 billion or by 155 percent. He further stated: Since I assume the same value for the net book costs, there is also a $2.6 billion difference between my estimate of restructuring gain and the Company’s estimate of stranded ⁴⁴² costs. I estimate a $1.6 billion gain, while BG & E estimates $1.05 billion in stranded generation costs. In support of its claim that the Commission erred in failing to consider the testimony of Stuart Paul and Chernick, appellant cites the following language from Colao : This Court has many times held that upon appeal the Circuit Court in its review of the evidence is bound by the record made before the governmental body from which the appeal is taken.

However, these decisions are directed to matters which would enhance or diminish the evidence supporting or challenging the application, such as evidentia-ry matters bearing on mistake or change or need and were not, in our opinion, intended as authority to exclude matters of public record which directly relate to the arbitrary, capricious or discriminatory quality of the conduct of the zoning authority which affects the property of the applicant. Colao, 109 Md.App. at 467 , 675 A.2d 148 (citations omitted)(emphasis original). That the Commission did not address the testimony of Stuart Paul and Chemick in the Settlement Order does not mean that the Commission acted arbitrarily or capriciously. The Commission was free to accept or reject any witness’s testimony.

Nor can we conclude from the mere failure of the Commission to mention a witness’s testimony that it did not consider that witness’s testimony. Moreover, the Commission did a commendable job in the Settlement Order of reviewing the evidence that both supported and opposed the stranded cost amount agreed to by the Settling Parties. For example, the Commission discussed at length the testimony of Calvin L. Timmerman, Director of the Commission’s Rate Research and Economics Division. In the Settlement Order, the Commission stated: “Timmerman provided a summary of the stranded cost estimates of all of the parties, which ranged from $1,023 billion in stranded ⁴⁴³ benefits 8 to $897 million in stranded costs.

Staff estimated BGE’s stranded costs at $242 million. The Settlement result of $528 million, Mr. Timmerman observed, is within the range of the parties’ filed positions.” The Commission then reviewed, in detail, the testimony of the Department of Natural Resources (“DNR”) witness, Matthew I. Kahal. As observed in the Settlement Order, Kahal’s stranded cost estimates were based upon a determination that BGE’s “stranded costs associated with the [transfer of generating assets to] Calvert Cliffs nuclear generation facility would be approximately $783 million.” Kahal testified that “the figure of $783 million appears to be reasonably based on Calvert Cliff’s capacity rating and nuclear sales to date as compared to Calvert Cliffs recorded book value.” In adopting Kahal’s estimate of the Calvert Cliff’s facility, DNR, after factoring in other costs and benefits associated with deregulation, found the total stranded costs to be in the range of $521 million to $683 million. The Settling Parties agreed, and ultimately the Commission found, that the figure of $528 million in stranded costs was quite reasonable as, among other things, it fell on the low end of a range of reasonable stranded costs established by expert testimony.

The Commission also considered the testimony of the various parties in opposition to the Agreement. In the Settlement Order, the Commission discussed at length the testimony of MAPSA witness, Mark Younger. In dismissing BGE’s stranded cost estimate, Younger opined that a range of from “zero to $252 million” in stranded costs was more accurate. Younger also found that the Commission’s preliminary estimate of stranded costs failed to include “the net value of common and general plant and should have removed deferred income taxes from the estimate of the book value of BGE’s generating assets.” He also complained that Timmerman’s ⁴⁴⁴ analysis of BGE’s stranded costs was based on the Maryland Energy Administration’s preliminary analysis and not its final results.

Younger’s