New England Tel. & Tel. Co. v. Public Utilities Com'n

Decision Date06 July 1982
Citation448 A.2d 272
CourtMaine Supreme Court
PartiesNEW ENGLAND TELEPHONE & TELEGRAPH CO. v. PUBLIC UTILITIES COMMISSION et al.

Pierce Atwood, Scribner, Allen, Smith & Lancaster, Ralph I. Lancaster, Jr. (orally), Everett P. Ingalls, Portland, John F. Natoli, Morrison DeS. Webb, Boston, Mass., for plaintiff.

Joseph G. Donahue (orally), Charles F. Dingman, Horace S. Libby, Cushing W. Pagon, Kimball L. Kenway, Augusta, for P. U. C.

Smith, Loyd & King, Angus S. King, Jr. (orally), Brunswick, for Casco Bank & Trust Co.

Smith, Stein & Bernotavica, Gordon E. Stein (orally), Jeffrey A. Smith, Hallowell, Thomas J. Connolly, Intern, for Common Cause.

Before GODFREY, NICHOLS, ROBERTS, CARTER, VIOLETTE and WATHEN, JJ.

GODFREY, Justice.

On July 1, 1980, New England Telephone & Telegraph Company (NET), pursuant to 35 M.R.S.A. § 64 (Supp.1981-82), filed with the Public Utilities Commission (hereinafter the "PUC" or the "Commission") revised tariffs to become effective July 31, 1980, seeking a $39.5 million increase in its annual gross revenues. The effective date of the tariffs was suspended twice per orders of the Commission dated July 22 and October 24, 1980. After filing, 1 notices of NET's proposed rates were published in various newspapers providing that all petitions to intervene must be filed by July 28, 1980. Petitions were filed by Casco Bank & Trust Co., the United States Department of Defense, the Telephone Answering Association of New England and twenty-two individual answering service companies, Common Cause, the Maine Committee for Utility Rate Reform, and Peter M. Beckerman, Esq., who sought limited intervention on the issue of directory assistance charges. On October 16, 1980, the Commission granted party status to all petitioners.

The Commission subsequently granted NET's motion to place the burden of proof on intervenor Beckerman regarding the directory assistance charge issues, and later the Maine Committee for Utility Rate Reform withdrew as a party prior to the commencement of the hearings. After the hearings began, the Maine State Department of Finance and Administration petitioned the Commission to permit it to participate in the proceedings as a public witness under Commission Rule 6(c)(2) by presenting an expert on its behalf.

Procedural Order No. 1 issued on August 5, 1980 established that the alternative procedure prescribed by Commission Rule 6(I) would be followed. According to Rule 6(I), the presiding officer may require that an alternate hearing procedure be followed whereby prefiled direct testimony and exhibits are employed as a time-saving device. A somewhat compressed hearing schedule was promulgated by the Commission in Procedural Order No. 2, issued on November 17, 1980. This schedule established the various dates on which data requests, prefiled testimony, exhibits, and briefs were due. It also established the dates on which the hearing and the presentation of evidence was to occur.

After extensive prehearing discovery, actual hearings commenced on December 15, 1980, recessed for the holidays on December 22, and did not reconvene until January 12, 1981. The hearings concluded finally on January 30, 1981, after having consumed approximately sixteen working days.

During the hearings, some thirty-three witnesses were presented by the parties. At the close of the hearings on January 30, NET moved orally that the Commission not be permitted to consult ex parte with the hearing examiners, 2 arguing that such consultations violate due process of law. The Commission denied this motion on February 12, 1981 (Commissioner Smith dissenting). After the filing of briefs, the examiners issued their report on March 16, 1981. The parties had until March 22, 1981 to file exceptions, and on March 30, 1981, the Commission issued its Decision and Order (Commissioner Smith dissenting in part).

The Commission denied NET's proposed $39.5 million rate increase. Instead, it authorized NET to file a revised schedule of rates designed to increase revenues by $8.45 million; NET's revised tariffs were approved in a Supplemental Order dated April 16, 1981. On April 9, 1981, NET filed a petition to reopen the hearing, which was granted by the Commission on April 29, 1980. In its May 22, 1981 Decision and Order on Reopening, the Commission authorized NET to file a revised schedule of rates designed to generate an additional $4.8 million in revenue. NET's revised schedule was approved by a Supplemental Order on Reopening dated May 29, 1981. The Commission thus authorized a total revenue increase of $13.25 million, approximately $26 million less than the original increase sought by NET.

On April 30, 1981, NET filed a complaint with the Law Court, pursuant to 35 M.R.S.A. § 305 (1978), seeking review of the March 30, 1981 Decision and Order. On June 2, 1981, NET filed a notice of appeal with the Commission, pursuant to 35 M.R.S.A. § 303 (1978), that it was appealing the March 30, 1981 Decision and Order, the April 16, 1981 Supplemental Order, the May 22, 1981 Decision and Order on Reopening, and the May 29, 1981 Supplemental Order on Reopening. By order of July 8, 1981, the senior justice of the Supreme Judicial Court consolidated for oral argument NET's section 305 complaint with its section 303 appeal.

NET challenges the Commission's decision in a number of respects. It raises procedural, evidentiary and substantive questions of law and fact. We sustain the Commission's order in most respects but vacate it in certain particulars.

I. STANDARD OF REVIEW

Under 35 M.R.S.A. §§ 69 & 307, a public utility has the burden of proving that its proposed rate changes are just and reasonable. On appeal, the burden remains on the utility to demonstrate that the Commission has committed legal error. Central Maine Power Co. v. Public Util. Comm'n, 156 Me. 295, 299, 163 A.2d 762, 765 (1960). Two basic tenets of appellate review of ratemaking proceedings are (1) that the Commission, not the Court, is the judge of the facts and (2) that the Commission's findings of fact are final when supported by substantial evidence in the record. Central Maine Power Co. v. Public Util Comm'n, Me., 414 A.2d 1217, 1232 (1980). The Court's review is limited to questions of law. "Only when the Commission abuses the discretion entrusted to it, or fails to follow the mandate of the legislature, or to be bound by the prohibitions of the constitution, can this court intervene." New England Tel. & Tel. Co. v. Public Util. Comm'n, 148 Me. 374, 377, 94 A.2d 801, 803 (1953). Traditionally, the Court's review is further limited by the institutional deference it pays to the Commission. The Court defers to the Commission's expert judgment in choosing among various ratemaking techniques or methodologies. See, e.g., Mechanic Falls Water Co. v. Public Util. Comm'n, Me., 381 A.2d 1080 (1978); Central Maine Power Co. v. Public Util. Comm'n, 153 Me. 228, 136 A.2d 726 (1957). Because of this limited and deferential standard of review, the Court is usually reluctant to substitute its judgment for that of the Commission. See Central Maine Power Co. v. Public Util. Comm'n, Me., 405 A.2d 153, 182 (1979).

NET's first contention on appeal is that the Court should abandon its traditional deferential standard of review and strictly scrutinize the Commission's action because of the numerous errors of procedure and judgment that NET asserts were committed throughout the proceedings. Several of NET's claims of error raise issues of constitutional due process.

1. The Order. NET argues that the order is not the product of the Commission's independent consideration and deliberation but the predetermined product of the hearing examiners. According to NET, the short interval between the deadline for filing exceptions to the examiners' report (March 22, 1981) and the release of the order (March 30, 1981) demonstrates the physical impossibility of adequate independent review. That the order is a reiteration, nearly verbatim, of the examiners' report is further evidence of the lack of independent consideration, NET asserts.

In reviewing administrative actions we have recognized and applied the principle that reviewing courts should presume, in the absence of clear evidence to the contrary, that administrative agencies have properly discharged their official duties. 3 State v. Boyajian, Me., 344 A.2d 410, 414 (1975); In re General Marine Construction Co., Me., 272 A.2d 353 (1971). Here, NET asks us to infer from the short time--eight or nine days--in which the Commission considered the examiners' report and from the fact that the order substantially incorporated the report, that the Commission did not independently appraise the evidence and make the decisions. In effect, we are asked to hold that there is clear evidence that the Commission did not properly discharge its duties in reviewing NET's rates.

It is generally true that officials charged by statute with the duty of making a decision must consider and appraise the evidence on which their decision is based. Morgan v. United States, 298 U.S. 468, 481, 56 S.Ct. 906, 911, 80 L.Ed. 1288 (1936). But due process does not require that they hear or read all the testimony, and they may be properly aided by reports of subordinates. Id. In fact, 35 M.R.S.A. § 299 (1978), by specifically providing for the use of hearing examiners, contemplates that the Commission will be aided by their reports. Hence, even apart from the presumption of regularity that we accord to the proceedings of the Commission, the record in this case does not support a finding of a failure of due process attributable to the quickness of the Commission's decision and the resemblance of that decision to the examiners' findings. The record reveals no misuse by the Commission of the examiners' report, nor can we infer from the relatively short time the Commission had to consider the examiners' report that...

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