New England Tel. & Tel. Co. v. PUC OF MAINE, Civ. A. No. 83-0166-P.

• Decision Date: 20 September 1983
• Docket Number: Civ. A. No. 83-0166-P.
• Citation: 570 F. Supp. 1558
• Parties: NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY, Plaintiff, v. PUBLIC UTILITIES COMMISSION OF MAINE, Peter A. Bradford, Chairman, Cheryl Harrington, Commissioner and Ralph H. Gelder, Commissioner, Defendants.
• Court: U.S. District Court — District of Maine

570 F. Supp. 1558

NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY, Plaintiff, v. PUBLIC UTILITIES COMMISSION OF MAINE, Peter A. Bradford, Chairman, Cheryl Harrington, Commissioner and Ralph H. Gelder, Commissioner, Defendants.

Civ. A. No. 83-0166-P.

United States District Court, D. Maine.

September 20, 1983.

Ralph I. Lancaster, Everett P. Ingalls, Portland, Me., for plaintiff.

Francis X. Belotti, Atty. Gen., Charles R. Peck, Sp. Asst. Atty. Gen., Utilities Division, Boston, Mass., amicus curiae for Mass.

John E. Ingle, Deputy Assoc. Gen. Counsel, Fed. Comm. Comm., Washington, D.C., amicus curiae for the FCC.

Thomas Wies, Montpelier, Vt., amicus curiae for the Public Service Board of Vermont.

Joseph G. Donahue, Charles F. Dingman, William E. Furber, Maine Public Utilities Commission, Augusta, Me., for defendants.

Richard E. Crowell, Jr., Comm. Counsel, R.I. Public Utilities Comm., Faith A. LaSalle, Asst. Atty. Gen., R.I. Atty. Gen.'s Office, Providence, R.I., amici curiae for the State of R.I. & Providence Plantations.

Charles R. Peck, Asst. Atty. Gen., Dept. of Atty. Gen., Boston, Mass., amicus curiae for Utilities Div., Public Protection Bureau, Commonwealth of Mass.

OPINION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER IN PROCEEDINGS FOR PRELIMINARY AND PERMANENT INJUNCTIONS

CARTER, District Judge.

I. INTRODUCTION

This is an action seeking declaratory and injunctive relief, pursuant to 47 U.S.C.A. § 401(b) (1962) of the Communications Act of 1934 (the "Act"), see 47 U.S.C.A. § 609 (Supp.1983), to achieve enforcement of a certain order of the Federal Communications Commission. Plaintiff initially sought a temporary restraining order against the Defendant which was denied by Judge Cyr of this Court on June 15, 1983.

A hearing was held on August 15, 1983, on the Plaintiff's claims for a preliminary and permanent injunction, which are consolidated for decision by consent of the parties. The Court has subject-matter jurisdiction under 28 U.S.C.A. § 1337 (Supp.1983). The Plaintiff was represented at the hearing by Robert A. Lewis, Esq., Ralph I. Lancaster, Esq., and Everett P. Ingalls, Esq. The Defendants, the Maine Public Utilities Commission and the individual Commissioners as defendants, were represented by Charles F. Dingman, Esq., Joseph G. Donahue, Esq., and William E. Furber, Esq. of the legal staff of the Maine Public Utilities Commission. The Federal Communications Commission (hereinafter FCC), participated as amicus curiae via a written submission. The Public Service Board of Vermont and the Attorney General of the Commonwealth of Massachusetts also participated as amici by briefs questioning the jurisdiction of this Court and urging dismissal of the case. The Court also granted a motion filed by the State of Rhode Island seeking leave to participate as amicus in the case. As of the date of this opinion and order the Court has received no brief from the State of Rhode Island.

The Court, having reviewed the record and the written submissions of counsel in this matter, finds the facts, states its conclusions of law and orders as follows.

II. FINDINGS OF FACT

The Defendant, Public Utilities Commission of Maine ("MPUC"), is authorized by the laws of the State of Maine to regulate the intrastate charges, services, facilities and practices of the Plaintiff, New England Telephone and Telegraph Company ("NET"), to the extent that Plaintiff is engaged in the business of providing telephone utility service to the public within the State of Maine. The Defendants, Peter A. Bradford, Cheryl Harrington and Ralph H. Gelder, are the three Commissioners of the Defendant, MPUC.

On July 27, 1982, NET filed with the MPUC tariff revisions as a result of which it sought an increase of approximately $49.8 million in its annual revenues.

NET based its request for a rate increase in part on the FCC's adoption of the Remaining Life Depreciation Method ("RLDM"). The FCC had allowed that method for capital recapture in a rule making proceeding by its Order No. 20188, of December 5, 1980, 83 F.C.C.2d 267 (1980); reconsidered 87 F.C.C.2d 916 (1981). In a second rule making proceeding on the petition of the National Association of Regulatory Utility Commissions ("NARUC"), the FCC determined that Order No. 20188 did not preempt state regulatory agencies from prescribing depreciation rates and methods inconsistent with RLDM. Amendment of Part 31, Uniform System of Accounts for Class A and Class B Telephone Companies, No. 79-105 (April 27, 1982). Prior to the issuance of the MPUC order, however, the FCC held proceedings which resulted in its Order No. 82-542 (hereinafter cited as "Prescription Order") prescribing depreciation methods to be utilized in rate making proceedings before the FCC involving telephone operating companies. In response to an FCC Order of Public Notice, the MPUC filed comments opposing the adoption of RLDM and rates for telephone utilities. The so-called Prescription Order was released on December 14, 1982, and since no appeal was filed, it has become final.

On January 6, 1983, in separate proceedings on the consolidated petitions of American Telephone & Telegraph Co. ("AT & T") and GTE Service Corp. on behalf of themselves and of associated Bell System operating companies, the FCC again considered the preemption issue. The resultant "Memorandum Opinion and Order," in Amendment of Part 31, Uniform System of Accounts for Class A and Class B Telephone Companies, No. 79-105 (Jan. 6, 1983), (hereinafter cited as "Preemption Order") held that RLDM, as set forth in the prior FCC Order of December 14, 1982, preempted all inconsistent methodologies for treatment of depreciation allowances promulgated by state regulatory agencies in the setting of intrastate telephone rates.¹ The Preemption Order is directed to all state regulatory agencies, is entitled an Order, grants the petition for declaratory ruling, and orders that "this order" be published in the Federal Register and be "served on" each state regulatory commission. Preemption Order at 1 and 17.

The Preemption Order was published in the Federal Register on January 19, 1983. The Defendant, MPUC, admits that it received a copy of the Order from the FCC and had general knowledge of it. Defendant's Responses to Plaintiff's First Request for Admission of Facts, Response No. 23. The MPUC also admits that the Preemption Order is currently the subject of appellate review;² that various states and NARUC have sought and received permission to intervene in the appellate proceedings and that the MPUC did not file a petition to intervene in the appellate proceedings. After making some inquiries, the MPUC determined "that no purpose would be served by such intervention,"³id., Response No. 30, and has not filed a motion to appear as amicus curiae in the proceedings on that appeal. Id., Response No. 31.

On April 26, 1983, the MPUC issued its Decision and Order in New England Telephone & Telegraph Co., Re: Proposed Increase in Rates, No. 82-124 (April 26, 1983) (hereinafter cited as the "MPUC order").

The MPUC never undertook to challenge the Preemption Order either through direct-party status before the FCC or by participating in the appellate review of that Order in the Court of Appeals for the Fourth Circuit. Yet, in the rate-making proceedings involving NET, the MPUC declined to apply the RLDM prescribed by the FCC in its determination of NET's intrastate rates. Rather, the MPUC based its determination of NET's rates upon the WLDM, which is different from RLDM. MPUC Order at 37-39; Defendant's Responses to Plaintiff's First Request for Admission of Facts, No. 32, at 12. In considering NET's contention, the MPUC undertook a full review of the substantive propriety of the FCC's conclusions reached in both the Prescription Order and the Preemption Order. See MPUC Order at 30-40. As a result of analysis of issues already analyzed and decided by the FCC, the MPUC reached its own decision. It stated:

We conclude therefore that the FCC erred both in its conclusions of blanket preemption and preemption under federal supremacy, and therefore we do not consider the Maine Commission bound by the FCC's January preemption Order in setting depreciation rates for NET. We note also, as the FCC has, that depreciation and capital recovery are overlapping concepts. To the extent that depreciation is more rapid, capital recovery is quicker and more certain. Thus, the risks to investors are reduced. Our return on equity allowance in this case assumes that our depreciation practices are controlling. If different depreciation rates are used, our estimate of the risk to investors would vary as well. Consequently no change can be made to depreciation without a reappraisal of the allowed return on equity as well.

Id. at 36 (emphasis in original). The MPUC indicated its disagreement with the FCC position as set out in the Prescription and Preemption Orders by stating:

We are aware that three state commissions have been enjoined preliminarily from disregarding the FCC Order. While we will oppose any effort to obtain a similar injunction, we note that Maine law does not permit the Commission to resolve this matter by allowing rates under bond. Consequently, the course we are pursuing is the only way that we can protect Maine consumers from prolonged depreciation overcharges in the event that litigation against the FCC is ultimately successful.

Id. The MPUC's opinion did not consider methods to protect the utility's interests in the event that the litigation against the FCC would prove ultimately un successful.

In discussing NET's contention that RLDM should be employed, the Commission referred to its decision in Continental Telephone Co. of Maine, No. 81-61 (Dec. 23, 1981), in which it had expressed various reservations about the propriety of applying remaining life depreciation rates to Maine utilities. The Commission also found NET's analysis lacking in many respects:

The core

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