CITIZENS'UTILITY BD. v. ILL. COMMERCE COMMISSION

• Decision Date: 02 August 2000
• Docket Number: No. 3-99-0965., No. 3-99-0949, No. 3-99-0944
• Citation: 248 Ill.Dec. 772,315 Ill. App.3d 928,735 N.E.2d 92
• Parties: CITIZENS' UTILITY BOARD, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION and GTE North, Incorporated, Respondents-Appellees. Sandra Walden, et al., Petitioners-Appellants, v. Illinois Commerce Commission and GTE North, Incorporated, Respondents-Appellees. The People of the State of Illinois, Petitioner-Appellant, v. Illinois Commerce Commission and GTE North, Incorporated, Respondents-Appellees.
• Court: United States Appellate Court of Illinois

735 N.E.2d 92

315 Ill. App.3d 928

248 Ill.Dec. 772

CITIZENS' UTILITY BOARD, Petitioner-Appellant, v. ILLINOIS COMMERCE COMMISSION and GTE North, Incorporated, Respondents-Appellees.

Sandra Walden, et al., Petitioners-Appellants, v. Illinois Commerce Commission and GTE North, Incorporated, Respondents-Appellees.

The People of the State of Illinois, Petitioner-Appellant, v. Illinois Commerce Commission and GTE North, Incorporated, Respondents-Appellees.

Nos. 3-99-0944, 3-99--99-0965.

Appellate Court of Illinois, Third District.

August 2, 2000.

Modified Upon Denial of Rehearing September 13, 2000.

Susan L. Satter (argued), Robert J. Kelter, Citizens Utility, Chicago, for Citizens Utility Board.

James Ryan, Attorney General, John P. Kelliher, Special Assistant Attorney General (argued), Chicago, for Illinois Commerce Commission.

William Dunkel, Pleasant Plains, for William Dunkel.

John Rooney (argued), Michael Guerra, Ross E. Kimbarovsky, Hopkins & Sutter, Chicago, Tracy Pagliara, GTE, Irving, TX, for GTE North, Incorporated.

Roxanne Goldsby, Pleasant Plains, for Roxanne Goldsby.

Shelly Heideman, Pleasant Plains, for Shelly Heideman.

Larry Barregarye, Williamsville, for Larry Barregarye.

Janice Dale, Asst. Atty. General, J. Scott Sypolt, Public Utilities Bureau, Chicago, for the People.

MODIFIED ON DENIAL OF REHEARING

Justice BRESLIN delivered the opinion of the court:

Petitioners Citizens' Utility Board (CUB), the People of the State of Illinois and several individual telephone service consumers appeal from a decision of the Illinois Commerce Commission (ICC) in a case petitioners initiated against GTE North, Inc. (GTE), a local telephone service provider. Petitioners alleged that GTE has implemented a rate scheme that discriminates against its rural consumers. As a remedy, petitioners sought an expansion of GTE's home calling areas in rural exchanges. The ICC held in favor of GTE on the discrimination charge, finding petitioners had not met their burden of proving the rates were discriminatory. In our view, once it is shown that one group of consumers is paying more than another group for the same service, the burden of proof should shift to the utility to prove that its rates are nondiscriminatory and cost-based. Unfortunately, controlling legal precedent places the burden upon the petitioners to prove that the rates are discriminatory. Because petitioners did not have access to GTE's cost data, they were unable to meet this burden. Accordingly, we must affirm.

FACTS

A brief history of GTE's proceedings before the ICC is necessary to fully understand the circumstances surrounding this appeal. In 1976, GTE was authorized by the ICC to conduct a local measured service experiment to obtain consumer reaction to paying for local service on a measured basis as compared to the flat-rate method then in place. Following the experiment, in 1982 GTE sought and received ICC approval to begin replacing its flat-rate service with usage-sensitive service. From 1982 until 1986, GTE continued to convert its exchanges as approved.

In 1986, CUB filed a complaint with the ICC, alleging that GTE's usage-sensitive service rates violated the Public Utilities Act (Illinois Act or Act)(220 ILCS 5/1-101 et seq. (West 1998)) because the rates lacked cost justification and were unreasonable and discriminatory. Although the ICC determined that GTE's rate structure did not optimally reflect its underlying costs, the ICC ultimately concluded that CUB had not met its burden of proof as to the rates being unjust and unreasonable. See Citizens Utility Board v. GTE North, Inc., No. 86-0286 (Ill. Commerce Comm'n) (September 7, 1989). During the course of the proceedings in Docket No. 86-0286, GTE made known its intention to further expand usage sensitive service. As part of its decision in Docket 86-0286, the ICC ordered GTE to submit cost/benefit analyses when it filed tariffs to expand usage sensitive service into other areas. The analyses were to include data concerning the incremental cost of billing and capacity savings associated with usage-sensitive service.

In 1994, GTE requested authority to continue the process of conversion from flat-rate to usage sensitive-service. GTE represented to the ICC at that time that the usage-sensitive service rates were intended to be revenue neutral to its flat rates. The ICC approved GTE's request subject to GTE's compliance with the ICC's order in Docket No. 86-0286. See GTE North, Inc., No. 94-0041, 1994 WL 711847 (Ill. Commerce Comm'n)(October 11,1994).

As of the ICC's order in this case, GTE had converted 384 of its 523 exchanges to usage-sensitive service. The usage-sensitive service rates in effect for residential consumers at the time of the ICC's order are as follows:

RATE ELEMENT CLASS A (Urban) CLASS B (Rural) ----------------------------------------------------------- Access Charge $15.99/month $16.99/month Extended Area $0.04/call $0.04/call Service Charge $0.02/minute $0.02/minute (Peak) Home Calling Area $0.04/call $0.04/call Charge (Peak)

PETITIONERS' ARGUMENTS AND EVIDENCE

This case results from two complaints, the first filed by individual consumers, the second filed by CUB. The individual consumers charged that GTE's home calling areas in rural exchanges were unreasonably small. A home or untimed calling area is the geographical region in which a telephone service consumer under usage-sensitive service pays solely a connection charge to call other phones in that area, as opposed to an extended-area service for which she pays a connection and a per-minute charge (see chart above). According to the consumers, the geographically small home calling areas in rural locales were producing high local rates that were not revenue neutral to GTE's prior flat rates for local service in violation of the ICC's previous orders. Likewise, CUB petitioned the ICC to revise GTE's usage-sensitive service rates to insure that the usage-sensitive service revenues were equal to the flat-rate revenues that they replaced. Thus, the consolidated complaints requested that the extended-area service rates in rural areas be changed from rates having a connection charge and a per-minute charge to a single rate having only a connection charge, currently $0.04 per call. Testimony and other evidence of over 50 consumers and a petition signed by over 9,500 consumers were submitted to the ICC. This evidence recounted the purported increases in individual consumers' telephone bills occurring after the implementation of usage-sensitive service. Among other complaints, the consumers stated that (1) extended-area service charges made Internet use prohibitively expensive; (2) their families were restricted in calling their local schools and their children's classmates; (3) older people were becoming more isolated due to fear of incurring large telephone bills; and (4) essential services such as medical facilities and stores were beyond their untimed calling zone.

Petitioners also elicited the opinion testimony of William Dunkel. Dunkel is a former ICC staff member and a telecommunications expert who has consulted on telephone issues since 1980 and testified in over 130 regulatory proceedings nationwide. He stated that GTE's usage-sensitive service rates discriminated against rural consumers in violation of section 254(b) of the Telecommunications Act of 1996 (Federal Act) (47 U.S.C. § 254(b) (Supp. 1996)). He also testified that GTE's usage-sensitive service revenues vastly exceeded the flat-rate revenues that they replaced.

Dunkel analyzed billing data for three particular exchanges and reported revenue increases of $5.75, $6.62 and $9.07 per line per month. He further reported that business revenues for the three exchanges increased by $3,284, $3,824 and $4,190 per line per month. According to Dunkel, an expanded look at the conversion showed that GTE's average increase in revenues was $3.71 per line per month. The sum total added up to a $34 million per-year increase in revenue for GTE.

Dunkel also reviewed revenue data submitted by GTE and stated that for a particular group of exchanges GTE had underreported its revenue by over $100,000. In this regard, Dunkel noted that GTE had not filed any cost/benefit analyses that were required by the previous ICC orders and that the revenue documentation submitted by GTE was based on forecasted data instead of comparisons of actual billing data that was available to GTE at the time it filed its revenue reports. Petitioners alleged that the documentation submitted by GTE was incomplete and unreliable.

Finally, Dunkel stated that GTE's implementation of usage-sensitive service rates resulted in far fewer lines in rural untimed calling zones as opposed to urban untimed calling zones. Unlike Ameritech, GTE limits its untimed calling zones to one exchange. Thus, Bloomington, for example, has an untimed calling zone that includes approximately 69,000 lines, whereas 70% of the Class B (rural) exchanges have fewer than 1,500 lines and 28% have fewer than 500 lines. Dunkel maintained that GTE provided no cost basis for limiting untimed calling zones to one exchange in rural areas. Accordingly, Dunkel recommended that the extended-area service areas, already designated by the ICC to be within the community of interest for rural exchanges, be included within the untimed calling areas.

Barbara Tanzyus, a statistician, also offered opinion testimony on behalf of petitioners. It was mostly upon her study that Dunkel's testimony and analysis were based. Among other things, Tanzyus contended that the average size of a Class B (rural) exchange was 61 square miles, whereas the average size of a Class A (urban) exchange was 120 square miles.

GTE'S ARGUMENT AND EVIDENCE

GTE's central argument is that the petitioners did not meet their burden of proof in order to justify rezoning the rural calling areas. In other words, petitioners did not show that GTE's rate...