Alaska Exch. Carriers Ass'n Inc. v. Regulatory Comm'n of Alaska

• Decision Date: 03 November 2011
• Docket Number: No. S–13528.,S–13528.
• Citation: 262 P.3d 204
• Court: Alaska Supreme Court
• Parties: ALASKA EXCHANGE CARRIERS ASSOCIATION, INC., Appellant,v.REGULATORY COMMISSION OF ALASKA, General Communications, Inc., d/b/a General Communications, Corp., d/b/a GCI, and Alascom, Inc., d/b/a AT & T ALASCOM, Appellees.

262 P.3d 204

ALASKA EXCHANGE CARRIERS ASSOCIATION, INC., Appellant,

v.REGULATORY COMMISSION OF ALASKA, General Communications, Inc., d/b/a General Communications, Corp., d/b/a GCI, and Alascom, Inc., d/b/a AT & T ALASCOM, Appellees.

No. S–13528.

Supreme Court of Alaska.

Oct. 7, 2011.Rehearing Denied Nov. 3, 2011.

Robin O. Brena and Anthony S. Guerriero, Brena, Bell & Clarkson, P.C., Anchorage, for Appellant.Robert E. Stoller, Senior Assistant Attorney General, Stuart W. Goering, Assistant Attorney General, Anchorage, and Daniel S. Sullivan, Attorney General, Juneau, for Appellee Regulatory Commission of Alaska.James R. Jackson and Martin M. Weinstein, Anchorage, for Appellee General Communications, Inc. d/b/a GCI.Notice of non-participation filed by Robert A. Royce, Ashburn & Mason P.C., Anchorage, for Appellee Alascom, Inc., d/b/a AT & T Alascom.Before: CARPENETI, Chief Justice, FABE, WINFREE, CHRISTEN, and STOWERS, Justices.

OPINION

CHRISTEN, Justice.I. INTRODUCTION

Six weeks after the Regulatory Commission of Alaska approved the 2007 Access Charge Rates long distance telephone companies pay to local telephone companies, an association of local telephone companies realized that five of the rates the Regulatory Commission approved were based upon an erroneous spreadsheet the association included in its rate filings. The association requested that the Regulatory Commission correct the rates. The Regulatory Commission corrected the rates prospectively, but concluded retrospective application was barred by this court's case law on retroactive ratemaking. The superior court agreed that retrospective application of the adjusted rates was impermissible, and the association appealed. We reaffirm our decision in Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc. ¹ prohibiting retroactive ratemaking in “second look” cases, but hold that the Regulatory Commission has the authority to implement corrections of some procedural mistakes starting when notice of a mistake is given. We remand to the Regulatory Commission to determine the type of error that occurred in this case and whether the error should be corrected retrospectively.

II. FACTS AND PROCEEDINGS

The Regulatory Commission of Alaska (RCA) regulates public utilities and pipeline carriers throughout the state.² The RCA “certif[ies] qualified providers of public utility and pipeline services and [ ] ensure[s] that they provide safe and adequate services and facilities at just and reasonable rates, terms, and conditions.” ³ The RCA is composed of five full-time commissioners serving six-year terms who are appointed by the governor and confirmed by the state legislature.⁴ The RCA also has staff that “includes Administrative Law Judges, engineers, financial analysts, telecommunications specialists, tariff analysts, consumer protection officers, paralegals, administrative and support staff.” ⁵

Generally, when a utility requests a change in rates or services, the RCA provides notice to the public of the proposal and allows a period of 30 days for comments.⁶ Notice may be provided as an advertisement in a local newspaper; sometimes the utilities will provide information in a flyer included with bills sent to consumers.⁷ The RCA also engages in a quasi-judicial process for purposes of assessing rate proposals—hearing testimony from experts, witnesses, the parties, and other interested individuals.⁸ The RCA can either approve or disapprove of the utility's proposal at the end of this process.⁹

A. Background On Access Charges In Alaska.

The Alaska Exchange Carriers Association (AECA) is an association of non-competing local telephone companies, known as local exchange carriers. AECA is authorized by the legislature ¹⁰ and mandated by the RCA to represent the interests of local exchange carriers when the RCA sets the access charges that long distance telephone companies pay for the use of local telephone systems to complete long distance telephone calls.¹¹ Prior to the development of the access charge system, individual local exchange carriers negotiated with individual long distance telephone companies to establish payment agreements for the use of local telephone systems for long distance telephone calls.¹² With the development of the access charge system, the RCA began regulating the rates for these services through a complex administrative process that balances the interests of AECA, long distance telephone companies, and rate payers. The resulting access charge system was intended to create a more uniform, transparent, and efficient system for dividing costs between local and long distance carriers.

The access charge rates payable by long distance carriers for access to the facilities of AECA's pooling local exchange carriers are determined on an annual basis in accordance with applicable RCA regulations. Specifically, 3 Alaska Administrative Code (AAC) 48.440 (2006) provides:

Access charges shall be assessed for use of local exchange telephone utility facilities by the providers of intrastate interexchange telecommunications services. Those charges must be determined, assessed, and collected, and revenues from those charges must be distributed, in accordance with [the RCA's] rules as set out in the Alaska Intrastate Interexchange Access Charge Manual....

The Manual sets forth a very specific and deliberate annual process pursuant to which access charges of the pooling local exchange carriers are “determined, assessed, and collected,” as well as the process by which the revenues from charges are “distributed,” as mandated in 3 AAC 48.440.¹³ The Manual dictates that this annual process, beginning no later than October 1 and concluding by April 1 of the following year, is governed by a filing schedule which is established by RCA order.¹⁴

The two primary elements of AECA's pooled access charge rates are the collective revenue requirement and demand for AECA's pooling member local exchange carriers.¹⁵ The revenue requirement is the total of the various costs incurred by a local exchange carrier during the course of a recent 12–month period to create and maintain the lines of communication between long distance carriers and the consumer. The demand element is the number of minutes during the course of that same 12–month historic period that long distance carriers accessed the facilities of the pooling local exchange carriers.¹⁶ These actual historical revenue and demand elements are adjusted to reflect what are known as “known and measurable changes.” ¹⁷ Adjustments are made to convert the actual historical revenue requirement and demand figures into projections of what can reasonably be expected in the future.¹⁸

Interested parties, such as GCI and AT & T Alascom, are permitted to participate in the annual access charge proceedings and are thereby given the opportunity to test the revenue requirement and demand estimates advanced by AECA and its members. New pooled access charge rates are presented to the RCA by AECA in the form of tariff advice letters, along with underlying work papers and calculations that provide specific information on the derivation of such rates.

B. The 2007 Access Charge Proceedings.

The 2007 Access Charge proceedings began with AECA, GCI, and AT & T Alascom filing a Joint Petition to Adopt the Access Charge Filing Schedule with the RCA. The Joint Petition was adopted by the RCA on September 26, 2006. Subsequently, AECA, GCI, and AT & T Alascom reached stipulations as to: (1) the revenue requirements for AECA and its members; and (2) the demand for access minutes. These stipulations were accepted by the RCA. The RCA also accepted a stipulation by AECA, GCI, and AT & T Alascom that the 2007 Access Charges would be effective on April 1, 2007.

Following the RCA's acceptance of the revenue requirement and demand stipulations, AECA submitted “Tariff Advice Letter No. 55–999” (TA55–999) to the RCA on May 2, 2007, with copies sent to GCI and AT & T Alascom. Incorporated into TA55–999 was the “2007 Rate Development Workpapers” submitted by AECA, setting forth calculations for the 2007 Access Rate Charges. The workpapers contain a series of spreadsheets apportioning total revenue requirements among members and dividing the overall revenue requirements into the requisite rate elements. The RCA approved TA55–999 on June 21, 2007, with an effective date of April 1, 2007 pursuant to the parties' stipulation. The RCA closed the proceedings on the 2007 Access Charge rates on June 29, 2007.

In mid–August 2007, approximately six weeks after the RCA had closed the 2007 Access Charge proceedings, AECA discovered an error in the spreadsheets it had filed with the RCA as support for its 2007 Access Charges. The error was the result of a failure to link spreadsheet cells correctly. AECA contends that three steps in the rate calculation were affected. Five rates were affected by the error; some were increased and some were decreased. The error resulted in the dial equipment minutes (DEM) subsidy ¹⁹ being improperly incorporated into the calculations. The net result was a set of rates that caused $677,503.42 in underbilling for the year 2007.

On August 20, 2007, AECA submitted a “Supplemental Filing to Tariff Advice Letter No. 55–999” to the RCA. This letter provided revised calculations and requested that the RCA modify certain 2007 rates accordingly. The RCA responded by requiring AECA to submit its request as a new tariff advice letter, rather than as a supplement to TA55–999. The next day, AECA submitted “Tariff Advice Letter No. 57–999” (TA57–999). On October 10, 2007, the RCA issued public notice of TA57–999 setting forth the changes AECA proposed to TA55–999 and inviting public comment. AECA provided a more detailed explanation of the error as well as the impact of the under-billing in response to a request for additional information from the RCA.

GCI responded to the request for public comment with a written argument...