22 Cal.3d 529, 23668, Toward Utility Rate Normalization v. Public Utilities Com.

Docket Nº:23668
Citation:22 Cal.3d 529, 149 Cal.Rptr. 692, 585 P.2d 491
Opinion Judge:[10] Richardson
Party Name:Toward Utility Rate Normalization v. Public Utilities Com.
Attorney:[6] Ann Murphy and Antonio Rossmann for Petitioner. [7] Janice E. Kerr, Hector Anninos and Robert T. Baer for Respondents. [8] Robert V. R. Dalenberg, Margaret deB. Brown and Christopher Lee Rasmussen for Real Parties in Interest.
Case Date:October 25, 1978
Court:Supreme Court of California

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22 Cal.3d 529

149 Cal.Rptr. 692, 585 P.2d 491





S.F. 23668.

Supreme Court of California

Oct. 25, 1978.

In Bank

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Ann Murphy, Hayward, for petitioner.

Janice E. Kerr, Hector Anninos and Robert T. Baer, San Francisco, for respondents.

Robert V. R. Dalenberg, Chicago, Ill., Margaret deB. Brown and Christopher Lee Rasmussen, for real parties in interest.


We consider whether the Public Utilities Commission (Commission) has properly exercised its power and fulfilled its statutory obligations in ordering the implementation of a new method of measuring and assessing charges for local telephone service usage (Pacific Telephone & Telegraph Co. (1977) Cal.P.U.C. (Dec. No. 87584).) We conclude that it has.

Toward Utility Rate Normalization (TURN) is a nonprofit corporation organized under the laws of the State of California to represent, principally before Commission, the interests of residential consumers generally and specific consumer oriented organizations and constituencies.

At all times herein relevant real party in interest Pacific Telephone and Telegraph Company (Pacific), in the major metropolitan areas of California offered three types of residential telephone service: (1) a 60-local-message-unit allowance at $3.75 per month prior to 1974 (1 "message unit" was charged for each local telephone call made); (2) a

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30-local-message-unit allowance (termed "lifeline" service, and intended for those with limited incomes) at $2.50 per month; and (3) a flat rate service allowing an unlimited number of local calls at $5.70 per month. Pacific imposed an $11 "regrade" charge on those residential customers who changed from one type of service to another. Business customers were billed in accordance with the number of message units they used.

We describe in sequence certain relevant actions by petitioner, the Commission and Pacific. On July 23, 1974, the Commission issued its Decision No. 83162 (77 Cal.P.U.C. 117) which added a time factor to local billing by ordering Pacific, inter alia, to measure or account for local calls made by subscribers to Pacific's message unit services in increments of one message unit for each five minutes of usage or fraction thereof. In explaining its reasons for approving this innovative rate design concept the Commission said as follows: "The reason for instituting the timing of local messages is that the present rate structure fails to make any allowance for the fact that a customer who makes a five-minute call is charged one message unit at 4.5 cents whereas another customer who makes a six-hour call over the same route is also charged one message unit at 4.5 cents. Business customers' holding times on a single call may in some cases last for an entire business day. Some residence customers also have extremely long duration calls. Under present pricing arrangements long duration calls cost only 4.5 cents on message rate service." (P. 174.) This usage-sensitive rate design is known as single-message-rate timing (SMRT).

In Decision No. 83162 the Commission also found that while the present exchange message unit rate was 4.5 cents the evidence elicited at a hearing indicated that the cost to Pacific of an average local message was approximately 5 cents for approximately four minutes. The Commission in its decision therefore authorized Pacific to charge a message unit rate of 5 cents.

The Commission further required that the timing equipment to be installed by Pacific possess a capability for off-peak pricing. The periods of off-peak service were defined as during the hours of 11 p. m. to 8 a. m. daily and 8 a. m. to 5 p. m. on Sundays and holidays. However, the Commission delayed any differential treatment of on-peak and off-peak calls. Pacific did not have available the machinery necessary to provide on-- and off-peak pricing and thus was unable to commence implementation of SMRT until March 29, 1976, when the new rate design was

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introduced in the eastern portion of the San Francisco Bay Area and in Orange County.

June 7, 1976, in response to a separate general rate increase application filed by Pacific, the Commission staff sought an expedited interim order eliminating SMRT from lifeline service. On June 23, 1976, TURN, petitioner in the present proceeding, filed its motion for an expedited interim order eliminating SMRT from measured rate residential services generally. Thereafter, SMRT was instituted in San Diego, and appearances on the issue of SMRT were filed by numerous public and private entities including TURN.

On August 18, 1976, the Commission issued Decision No. 86248 (Pacific Telephone & Telegraph Co. (1976) Cal.P.U.C.) ordering that Pacific not institute single message rate timing for residential telephone service in any areas other than those where it was in operation as of the effective date of the order, pending further order on the subject by the Commission. Thus, implementation of SMRT was halted just prior to the date, August 22, 1976, that it was scheduled to commence in the western portion of the San Francisco Bay Area. However, Pacific completed the implementation of SMRT for business measured rate service in the San Francisco-East Bay, San Diego, Orange County, and the Los Angeles extended areas.

November 2, 1976, the Commission issued its Decision No. 86594 (Pacific Telephone & Telegraph Co. (1976) Cal.P.U.C.) terminating existing residential SMRT within five days of the decision and requiring Pacific to waive regrade charges until June 30, 1977.

Thereafter, on July 12, 1977, after holding public hearings, the Commission issued its Decision No. 87584 which is the subject of the present dispute. This decision eliminated SMRT as to the 30-message-unit-lifeline service but retained it as to the 60-message-unit service for residential and business use. The decision also changed the measure for timing these calls so that overtime periods (beyond the five-minute base allowed per message unit) were to be measured in one-minute increments charged at 1 cent per minute rather than in five-minute increments as previously provided. The Commission further found that SMRT should include off-peak incentives in the form of the removal of timing from 5 p. m. to 8 a. m. on weekdays and all day on Saturdays, Sundays, and holidays. There was an additional order waiving

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regrade charges for those users changing their residential services during the 90 days following the effective date of the decision. However, the Commission did not order that past regrade charges be refunded.

Before considering the principal issues herein we dispose of a preliminary matter. TURN did not file any application for rehearing of Decision No. 87584 but did file with us its petition for writ of review on August 11, 1977. The Commission and Pacific argue that TURN's petition is premature since it should have filed an application for rehearing before the Commission after Decision No. 87584 was issued. (Pub.Util.Code, §§ 1732, 1756; all code references hereafter are to this code unless otherwise cited.)

We find no merit in the Commission's contention that this matter is not properly before us because TURN is obliged to seek rehearing of the decision under dispute. The concept and application of SMRT has been worked and reworked by the Commission through a series of decisions first starting in July 1974. The presently disputed decision was itself rendered after a petition for rehearing was filed by both Pacific and TURN.

SMRT was first ordered implemented by a decision of the Commission in July 1974. Because the necessary machinery was not immediately available, SMRT was not actually instituted until March 1976. In June 1976 TURN filed a motion seeking to eliminate SMRT from residential service, the same end it seeks in the present hearing. The Commission took briefs in the matter and, after first staying further implementation of SMRT as of August 1976, ordered it eliminated in November 1976. However, the Commission then granted rehearing of its decision to eliminate SMRT and ultimately, by the decision presently under consideration, reversed itself again and ordered implementation of SMRT to 60-message-unit customers.

We find no statutory requirement that TURN seek rehearing of a decision following rehearing. Neither section 1731 nor section 1756 makes any mention of rehearings of decisions on rehearing. Section 1756 does not seem to contemplate it. The section states: "Within 30 days after the application for a rehearing is denied, or, if the application is granted, then within 30 days after the decision on rehearing, the applicant may apply to the Supreme Court of this State for a writ of certiorari or review for the purpose of having the lawfulness of the original order or decision

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or of the order or decision on rehearing inquired into and determined." Indeed, section 1756 implicitly appears to foreclose an application for rehearing of a decision on rehearing.

In the present case the argument to eliminate SMRT was first presented by TURN in its brief of August 10, 1976. SMRT was thereafter temporarily eliminated and has subsequently been reinstated in a modified form. Throughout all these proceedings the issues have remained constant and have been considered repeatedly by all parties. We treat petitioner's administrative remedies as having been exhausted and its petition as properly before us.

1. Commission Compliance with...

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