Arkansas Public Service Commission v. Continental Tel. Co.
| Decision Date | 20 February 1978 |
| Docket Number | No. 77-126,77-126 |
| Citation | 262 Ark. 821,561 S.W.2d 645 |
| Parties | ARKANSAS PUBLIC SERVICE COMMISSION et al., Appellants, v. CONTINENTAL TELEPHONE COMPANY of Arkansas, Appellee. |
| Court | Arkansas Supreme Court |
Michael C. O'Malley, Little Rock, C. Richard Lippard, Booneville, Bill Clinton, Atty. Gen., by Ellen B. Brantley, Asst. Atty. Gen., Little Rock (amicus curiae brief), for appellants.
House, Holmes & Jewell, by Tom S. Lovett and Steve L. Riggs, Little Rock, Mayer, Brown & Platt, by Robert A. Helman, Wayne W. Whalen and James E. Honkisz, Chicago, Ill., for appellee.
On May 30, 1975, Continental Telephone Company of Arkansas applied to Arkansas Public Service Commission requesting an increase in rates. The commission suspended the rate increase for a period of six months, or until such earlier time as the commission's staff completed its investigation. The rates went into effect, under bond and subject to refund, on November 30, 1975. The City of Booneville had filed a petition on April 21, 1975, requesting an investigation and hearing by the commission on the quality of service being rendered by Continental in that city. On November 14, 1975, the two proceedings were consolidated. Hearings were conducted for four days beginning January 26, 1976.
It was first essential that a rate base be established. Here there was little difference between the company and staff figures. Continental proposed a rate base figure of $31,343,850, which the staff adjusted to $31,110,358. Continental sought a return between 8.5% And 8.9%. The staff recommended a rate of return of 7.48%. The rate deficiency for which Continental contended was $1,594,072. The staff computed the rate deficiency by "the flow method" at $661,644 or, alternatively, at $790,905, if the commission permitted the company to use the "normalization" approach.
On May 19, 1976, the commission entered its order denying any rate increase, finding that the service rendered by the company was grossly unsatisfactory, that the company had not provided adequate and efficient service to its patrons and the public, that there had been specific violations of certain special rules of the commission, and that denial of the rate increase would not result in confiscation of Continental's property.
On June 23, 1976, the commission denied Continental's application for a rehearing. Continental then filed its petition to review, set aside and modify the commission's order in the Circuit Court of Pulaski County. On March 1, 1977, that court entered an order remanding the case to the commission, directing the commission to fix just and reasonable rates within a zone of reasonableness ranging from 7.48% To 8.9% And to state its findings of fact in sufficient detail to show how it arrived at its decision.
The commission appealed asserting that the court erred in holding that the commission had exceeded its authority by denying any adjustment in rates, and that, if it did not err in so holding, it did err in finding that the commission must fix rates that would allow the company to earn a return within a zone of reasonable rates, the lower end of which was the increase in revenues recommended by the commission staff. We agree that the case must be remanded to the commission for specific findings of fact, but do not agree with the circuit court's holdings as to the rate increase.
The commission's ultimate findings on the denial of the rate increase were as follows:
The Commission has reviewed the testimony of both the Company and Staff witnesses in regard to each issue raised.
In finding, as we do, that no increase in rates has been justified, we also find that, under its approved rates, the Applicant will continue to collect sufficient funds with which it can meet all of its operating expenses, including debt service, and provide a return to its stockholders.
The Commission makes this finding after a thorough analysis of the evidence presented on the issue of quality of service which is set forth in detail herein.
The commission did indeed make a detailed resume of the testimony and findings of fact on the quality of service rendered by Continental. There is no contention that this element was not a pertinent factor to be considered on the question of rates.
It is elementary that the rate fixed by the commission must not be so low as to amount to a confiscation of the property of a utility. City of Fort Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S.W.2d 474. The only effort of the commission to make specific findings on the reasonableness of the rates fixed was:
The Applicant will continue to be in a position whereby it can pay its operating expenses, interest on its debt and provide a return to its stockholders. Therefore, we find that a denial of this Application will not result in a confiscation of the utility's property.
On the other hand, if a rate increase is granted even though the evidence shows that the quality of service doesn't meet the adequate and efficient standard, then the new rates will be discriminatory in that the Company will be earning a rate of return which will compensate it in the same manner as other companies who do maintain adequate and efficient service. The subscriber and the public will also be discriminated against in that the customers property will be confiscated since he is paying for adequate service but in reality receiving debased service which is so poor that he is unable to obtain the full benefits of that for which is paying.
This Commission will not shy away and allow a company to increase rates regardless of the quality of service it provides. Rather, we will take a hard line with such companies and fix rates which are just, reasonable and commensurate with the quality of service that it renders.
The foregoing analysis has spelled out this Commission's responsibilities and duties as required by the Arkansas Statutes when considering the issue of adequate and efficient service. Based on the overwhelming evidence found in the record, the Commission therefore finds:
4. That the just and reasonable rates to be charged by the Company for the commensurate service that it provides should be those rates charged prior to the Company's filing this Application on May 30, 1975. We find that the Application for a rate increase should be denied.
IT IS, THEREFORE, ORDERED:
That the rates and tariffs filed by Applicant on May 30, 1975, be, and the same are rejected. The Application is denied in its entirety.
The pertinent statute required more than this.
On this point Ark.Stat.Ann. § 73-229 (Supp.1977) states the following requirement:
After the conclusion of any hearing, the Commission shall, within sixty (60) days, make and file its findings and order, with its opinion, if any. Its findings shall be in sufficient detail to enable any court in which any action of the Commission is involved to determine the controverted question presented by the proceeding.
Ark.Stat.Ann. § 73-229.1 (Supp.1977) governing judicial review provides:
* * * The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. The review shall not be extended further than to determine whether the Commission's findings are so supported by substantial evidence, and whether the Commission has regularly pursued its authority, including a determination of whether the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or of the State of Arkansas. * * *
The court must determine, not whether the conclusions of the commission are supported by substantial evidence, but whether its findings of fact are so supported. It is the duty of the commission to fix rates that lie between that which would amount to an overcharge to the public and that which would amount to confiscation of the property of the utility. City of Ft. Smith v. Southwestern Bell Telephone Co., supra. Since it is the duty of the courts in determining whether the commission's findings are supported by substantial evidence, and to determine whether the commission's order or decision violates appellee's constitutional rights by fixing a rate which amounts to confiscation of its property (see City of Ft. Smith v. Southwestern Bell Telephone Co., supra), the commission's findings must be in sufficient detail to enable the courts to make an adequate and meaningful review. Courts cannot perform the reviewing functions assigned to them in the absence of adequate and complete findings by the commission on all essential elements pertinent to determination of a fair return. Southwestern Bell Telephone Co. v. State Corp. Com'n, 192 Kan. 39, 386 P.2d 515 (1963).
The United States Supreme Court has addressed the problem which the circuit court faced and which confronts us on appeal in Colorado-Wyoming Gas Co. v. Federal Power Com'n, 324 U.S. 626, 65 S.Ct. 850, 89 L.Ed. 1235 (1945). In an opinion by Mr. Justice Douglas, that court, in remanding a case for further proceedings because of the generality of findings made by the Federal Power Commission, said:
The review which Congress has provided for these rate orders is limited. Section 19(b) 15 USCA § 717r(b), 4 FCA title 15, § 717r(b) says that the "finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive." But we must first know what the "finding" is before we can give it that conclusive weight. We have repeatedly emphasized the need for clarity and completeness in the basic or essential findings on which administrative orders rest. (Citations omitted.) Their absence can only clog the administrative function and add to the delays in rate- making. We cannot dispense with them for Congress has provided the standards for judicial review under this Act. § 19(b). The courts cannot perform the function which Congress assigned to them in absence of adequate findings. * * *
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