Colorado Mun. League v. Mountain States Tel. & Tel. Co.

• Decision Date: 18 July 1988
• Docket Number: No. 86SA347,86SA347
• Citation: 759 P.2d 40
• Parties: COLORADO MUNICIPAL LEAGUE, Petitioner-Appellant, v. MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY; the Public Utilities Commission of the State of Colorado; Commissioners Andra Schmidt, Ronald L. Lehr and Arnold H. Cook, Respondents-Appellees.
• Court: Colorado Supreme Court

Page 40

759 P.2d 40

96 P.U.R.4th 537

COLORADO MUNICIPAL LEAGUE, Petitioner-Appellant, v. MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY; the Public Utilities Commission of the State of Colorado Commissioners Andra Schmidt, Ronald L Lehr and Arnold H. Cook Respondents-Appellees.

No. 86SA347.

Supreme Court of Colorado En Banc.

July 18, 1988.

Rehearing Denied Aug. 22, 1988.

Gorsuch, Kirgis, Campbell, Walker and Grover, Leonard M. Campbell, Dudley P. Spiller, Jr., Peter R. Nadel, Denver, for petitioner-appellant.

Coleman M. Connolly, Denver, for respondent-appellee Mountain States Tele. & Tele. Co.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., John E. Archibold, Sp. Asst. Atty. Gen., Denver, for respondents-appellees Public Utilities Com'n, Com'rs Andra Schmidt, Ronald L. Lehr and Arnold H. Cook.

VOLLACK, Justice.

In this case we must decide whether the Public Utilities Commission (Commission) followed our instructions in Colorado Municipal League v. Public Utilities Commission, 687 P.2d 416 (Colo.1984), concerning productivity offsets to wage increases occurring during the test period. We conclude that it has not, and therefore reverse the judgment of the district court.

I.

In 1980, Mountain States Telephone and Telegraph Co. (Mountain Bell) sought to raise $78,628,044 in revenue through a rate increase. The Colorado Municipal League (League) intervened, arguing that Mountain Bell's rate actually should be decreased. The League claimed that whatever additional cost Mountain Bell experienced as a result of higher wages and salaries would be completely offset by increased revenue from higher labor productivity. The Commission suspended the proposed rate increase and held hearings. On September 16, 1980, the Commission issued its original order. ¹ The original order denied the rate increase requested by Mountain Bell. The Commission also rejected the League's request to lower the rate.

The League appealed the original order to the Denver District Court after exhausting its administrative remedies. The district court affirmed the original order. This court affirmed in part and reversed in part in Colorado Municipal League v. Public Utilities Commission, 687 P.2d 416 (Colo.1984) (Colorado Municipal League I ). ²

In Colorado Municipal League I, we recognized that, in substance, the Commission had employed year-end test period data for wages and salaries, ³ and average test period data for almost everything else. Id. at 423. We pointed out that, in considering test year data, it is "not enough to look at only wage rates or expenses" because total labor cost is affected by a number of other factors. ⁴ Id. at 424 (quoting Re Pac. Tel. & Tel. Co., 53 PUR3d 513, 572, 576 (Cal. PUC 1964), aff'd in part, rev'd in part, 62 Cal.2d 634, 674, 401 P.2d 353, 378, 44 Cal.Rptr. 1, 26 (1965)). We stated that the critical defect in the Commission's order was its failure to make adequate findings supporting its decision to annualize in-period wage increases without annualizing other components of expense and revenue. Id. at 425. We concluded that "annualization of test period wage increases alone strongly suggests that the PUC has abused its discretion." Id. We recognized, however, that the Commission could annualize one variable alone without abusing its discretion so long as its order was based on findings supported by substantial evidence in the record. We then reviewed the record for evidence supporting a finding that in-period wage and salary increases do not require a corresponding offset for increased labor productivity.

In reviewing the record, we examined the testimony of Monte Shriver, Mountain Bell's district staff manager. He provided the only possible evidence at the time that no productivity offset was required. We held that, in context, Mr. Shriver's statement that no productivity offset was required was "more an estimation of the legal effect of our holding in Mountain States Tel. & Tel. Co. v. PUC, 182 Colo. 269, 513 P.2d 721 (1973), ... than a statement of fact or an expert opinion." Colorado Mun. League I, 687 P.2d at 425-26 (footnote omitted). Accordingly, we held that there was no substantial evidence in the record to support an express or implied finding on the productivity offset issue and, for that reason, concluded that the Commission's order was arbitrary and capricious. We reversed the Commission's order on this issue with no guidance other than to hold that, in the absence of adequate findings of fact, the order permitting annualization of wage and salary increases without "adjustment or offset for other changes" was arbitrary and capricious. Id. at 426.

In conjunction with this holding, we examined the Commission's characterization of $506,000, the amount by which Mountain Bell's earnings exceeded its pro forma revenue requirement in the test year, as de minimis. ⁵ We held that this characterization was "marginally acceptable." Id. at 428. Although we declined to reverse the Commission for that reason alone, we directed the Commission to examine whether its finding on the productivity offset issue would affect the amount by which earnings exceeded the revenue requirement for the test year, and if so, whether the adjusted amount was substantial enough to merit additional findings on whether the 1980 rate of return on the rate base was no longer appropriate. Id. We remanded the case to the district court with instructions to set aside the original order and to remand the case to the Commission for additional findings on these two issues.

The district court set aside the original order and remanded the case to the Commission. On July 12, 1985, the Commission's staff sent its comments to the Commission. The staff argued that there was no evidence in the record to support a finding that in-period wage increases could be made without a productivity offset. ⁶

On August 20, 1985, the Commission issued its supplemental decision to the original order. Despite a contrary recommendation by its staff, the Commission made express findings that no productivity offset was required. Based on "the record as already made," it found that labor productivity is "inherently reflected in the revenues associated with that test period." It concluded that a separate productivity offset for in-period wage and salary increases "would result in double counting, distorting a proper matching relationship [between the test year variables of revenue, cost, and investment], and would be harmful both to Mountain Bell and to its ratepayers." The Commission also found that determination of the excess $506,000 had become "moot" because it had concluded that no productivity offset was required. The Commission adopted these findings nunc pro tunc as of September 16, 1980.

The League requested the Commission to reconsider its supplemental decision. That request was denied.

After exhausting its administrative remedies, the League sought judicial review of the supplemental decision in Denver District Court. The district court observed that the Commission did discuss the two issues that were the subject of the remand. It characterized the Commission's findings as "skimpy" but "adequate to comply with the remand," and held that the Commission did not abuse its discretion in readopting the original order.

At a separate hearing, the League sought to depose a member of the Commission. It alleged that two of the commissioners failed to review the record in approving the supplemental decision, relied solely on the decision of the one commissioner who was present when the original decision was adopted, and considered evidence outside of the record. The district court issued protective orders prohibiting the League from deposing members of the Commission. The League appealed the judgment of the district court to this court pursuant to section 40-6-115(5), 17 C.R.S. (1984).

II.

A.

Our review of administrative decisions is limited to three concerns: whether the Commission has regularly pursued its authority; whether its decisions are just and reasonable; and whether its conclusions are in accordance with the evidence. Colorado Office of Consumer Counsel v. Public Util. Comm'n, 752 P.2d 1049, 1057 (Colo.1988); § 40-6-115(3), 17 C.R.S. (1984). Orders of the Commission are presumed to be reasonable and valid. Caldwell v. Public Util. Comm'n, 200 Colo. 134, 137, 613 P.2d 328, 330 (1980). The party challenging an order bears the burden of showing its impropriety. Public Util. Comm'n v. Weicker Transp. Co., 102 Colo. 211, 217, 78 P.2d 633, 636 (1938). A reviewing court may not substitute its judgment for that of the Commission. Public Serv. Co. v. Public Util. Comm'n, 644 P.2d 933, 940 (Colo.1982). Findings will not be set aside merely because evidence before the Commission is conflicting or because more than one inference can be drawn from the evidence. Morey v. Public Util. Comm'n, 629 P.2d 1061, 1068 (Colo.1981). Findings may be express or implied from the reading of the record as a whole. See Aspen Airways, Inc. v. Public Util. Comm'n, 169 Colo. 56, 62, 453 P.2d 789, 792 (1969). A reviewing court may not modify or set aside an order that is supported by competent evidence. Colorado Mun. League I, 687 P.2d at 419.

For purposes of judicial review of administrative decisions, competent evidence is the same as substantial evidence. Compare Morey, 629 P.2d at 1068 ("competent evidence" is quantum of evidence sufficient to support an administrative decision) with City of Montrose v. Public Util. Comm'n, 629 P.2d 619, 622 (Colo.1981) ("substantial evidence" is quantum of evidence sufficient to support an administrative decision).

Substantial evidence is more than a scintilla, and must do more than create a suspicion of the existence of the fact to be established. "It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion," ... and it must be...