C & P Telephone Co. of W.Va. v. Public Service Com'n of W.Va., 15661

• Court: Supreme Court of West Virginia
• Citation: 301 S.E.2d 798,171 W.Va. 708
• Decision Date: 29 March 1983
• Docket Number: No. 15661,15661
• Parties: The C & P TELEPHONE COMPANY OF W. VA. v. PUBLIC SERVICE COMMISSION OF W. VA.

Page 798

301 S.E.2d 798 171 W.Va. 708 The C & P TELEPHONE COMPANY OF W. VA.
v.
PUBLIC SERVICE COMMISSION OF W. VA. No. 15661. Supreme Court of Appeals of West Virginia. March 29, 1983.

Page 799

[171 W.Va. 710] Syllabus by the Court

1. "In reviewing a Public Service Commission order, we will first determine whether the Commission's order, viewed in light of the relevant facts and of the Commission's broad regulatory duties, abused or exceeded its authority. We will examine the manner in which the Commission has employed the methods of regulation which it has itself selected, and must decide whether each of the order's essential elements is supported by substantial evidence. Finally, we will determine whether the order may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable. The court's responsibility is not to supplant the Commission's balance of these interests with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors." Syllabus Point 2, Monongahela Power Company v. Public Service Commission, 166 W.Va. 423, 276 S.E.2d 179 (1981).

2. "Under the provisions of W.Va.Code § 24-2-4a (1980 Replacement Vol.) a public utility seeking an increase in rates and charges has the burden of showing that the proposed increase is just and reasonable."

Page 800

Syllabus Point 4, The Chesapeake and Potomac Telephone Company of West Virginia v. Public Service Commission of West Virginia, (No. 15424, Filed March 4, 1982).

3. "The Public Service Commission may employ such methods for determining utility rates as it deems suitable, so long as the end result guarantees West Virginia consumers good service at fair rates and enables utilities to earn a competitive return for their stockholders upon their investment in West Virginia.'' Syllabus, Virginia Electric and Power Co. v. Public Service Commission, 161 W.Va. 423, 242 S.E.2d 698 (1978).

David B. Frost, Charleston, for petitioner.

Joel B. Shifman, Daniel L. Frutchey and Marc E. Lewis, Legal Div., Public Service Com'n, Charleston, for respondent.

HARSHBARGER, Justice:

The Chesapeake and Potomac Telephone Company of West Virginia, Inc. appeals from a May 7, 1982 order of the Public Service Commission denying its requested rate increases for (1) salaries scheduled for C & P's lower level managers, (2) the cash working capital component of C & P's rate base, and (3) the inflation adjustment on Western Electric purchases. ¹ C & P's original tariff sought a $75 million increase in rates and charges. It revised its request to $67.69 million dollars. This matter was heard before the Public Service Commission in February and March, 1982. On May 7, 1982, the Commission granted C & P an increase in annual revenues of $32,069,000.

Our standard of review in Public Service Commission cases was stated in [171 W.Va. 711] Syllabus Point 2 of Monongahela Power Company v. Public Service Commission, 166 W.Va. 423, 276 S.E.2d 179 (1981):

In reviewing a Public Service Commission order, we will first determine whether the Commission's order, viewed in light of the relevant facts and of the Commission's broad regulatory duties, abused or exceeded its authority. We will examine the manner in which the Commission has employed the methods of regulation which it has itself selected, and must decide whether each of the order's essential elements is supported by substantial evidence. Finally, we will determine whether the order may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable. The court's responsibility is not to supplant the Commission's balance of these interests with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors.

The burden of proof is on a public utility to show that its proposed increased rates or charges are just and reasonable. W.Va.Code, 24-2-4a; Syllabus Point 1, Natural Gas Company v. Public Service Commission, 95 W.Va. 557, 121 S.E. 716 (1924).

I.

SALARIES

C & P sought management wage level increases of $5,036,000 as going-level adjustments. ²

Page 801

² These increases would have been implemented over the years 1980, 1981 and 1982. In Case No. 80-182, C & P's prior rate filing, the Commission allowed management wage increases for 1980 and 1981 of $536,000 and $779,000, respectively. In this case, C & P requested management wage increases of $1,343,000 and $2,335,000, respectively for 1980 and 1981. The Commission approved an increase of 20.1 percent over the 1980 test year levels, ³ and granted a wage level increase of $3,808,000. The Commission's disallowance of $1,228,000, does not reduce the increase previously approved in Case No. 80-182, and the Commission found that it permitted C & P to meet other competitive salaries in the utility industries.

Finding of Fact No. 34 of the Commission's final order reads:

C & P needs to pay reasonable wage levels to its management level employees in order to retain and hire qualified managers, and compete on a nationwide basis for qualified employees....

In Conclusion of Law No. 15, the Commission decided:

While C & P is entitled to a reasonable level of management wages, it is unreasonable to approve an increase in those wages in excess of the inflation adjustment approved as reasonable for C & P by the Commission in this case given the current economic climate of this State.

In the text of the final order, the Commission explained its position more clearly:

The Commission is of the opinion that the C & P management levels which are [171 W.Va. 712] included in this salary increase are entitled to higher levels than those approved by this Commission in Case No. 80-182-T-42T. Common sense indicates that for all citizens, the cost of living has increased and C & P's employees are not exempt from these increases. However, this Commission also recognizes that currently the State and the entire nation are undergoing a period of economic downturn, in which both union and management employees in companies across the nation are accepting either lower wage increases, no increases, or even wage reductions in return for continued employment. The Commission is of the opinion that C & P's proposed management salary increases should be approved only to the extent that they are not in excess of the inflation adjustment approved by the Commission previously in this order. Thus, we will adopt the Company adjustment up to the level of the inflation adjustment adopted previously in this order but will disallow those management salary increases, amounting to $1,228,000 which exceed the level of the inflation adjustment we have approved in this case. This decision reasonably reflects both the need of C & P employees for reasonable salaries and a recognition that in this current economic period, unlimited management salary increases may not be justified. We are mindful of C & P's arguments that its proposed salary levels are the minimum necessary to hire and retain qualified management; however, we are of the opinion given the occurrences set forth previously in this section (i.e. union and management employees across the nation accepting small or no wage increases, or even wage reductions),

Page 802

a management salary level increase up to 20.1 percent over the levels approved in Case No. 80-182-T-42T adequately meets C & P's need to pay competitive salaries.

The Public Service Commission has balanced the financial integrity of C & P with appropriate protection to the relevant public interests and we cannot say their conclusion is contrary to the evidence, arbitrary, or results from a misapplication of legal principles. Virginia Electric and Power Company v. Public Service Commission, 161 W.Va. 423, 242 S.E.2d 698 (1978).

II.

CASH WORKING CAPITAL

Traditionally, a cash working capital allowance is a component of C & P's rate base. This allowance permits the company to retain investor-supplied funds to pay its outstanding indebtedness between the time when service is rendered and payments are received from the customers. It is placed in the rate base so investors will get a fair return on their money.

The Public Service Commission may employ such methods for determining utility rates as it deems suitable, so long as the end result guarantees West Virginia consumers good service at fair rates and enables utilities to earn a competitive return for their stockholders upon their investment in West Virginia.

Syllabus, Virginia Electric and Power Co. v. Public Service Commission, 161 W.Va. 423, 242 S.E.2d 698 (1978).

The Public Service Commission, exercising powers granted it in W.Va.Code, 24-1-7, has established Rules and Regulations for the Government of the Construction and Filing of Tariffs of Public Utilities and Common Carriers by Motor Vehicle. Rule 19 explains procedure for proposed rate changes:

A public utility desiring to modify, change, cancel or annul any of its rates, fares, classifications, charges, or rules and regulations, may file with the Commission its application, together with seven (7) copies of the same, in the form prescribed by the Commission for that purpose. Such application shall set forth (1) the rates, charges, rules and regulations in effect, (2) the proposed rates, charges, rules and regulations, (3) if increase or reduction in rates estimated annual effect on revenue, and (4) the reason for the proposed change.... The [171 W.Va. 713] application shall be accompanied by the information prescribed by Rule 42.

Rule 42 states, in...