General Telephone Co. of The Northwest, Inc. v. Idaho Public Utilities Com'n
Decision Date | 09 January 1986 |
Docket Number | No. 15275,15275 |
Parties | GENERAL TELEPHONE COMPANY OF THE NORTHWEST, INC., Appellant, v. IDAHO PUBLIC UTILITIES COMMISSION, Respondent. |
Court | Idaho Supreme Court |
Karl M. Shurtliff, Boise, L. Russell Mitten, II and William C. Fleming, Everett, Wash., for appellant.
Jim Jones, Atty. Gen., State, John J. McMahon, Chief Deputy Atty. Gen., State, and Michael S. Gilmore, Deputy Atty. Gen., State, for respondent.
This is an appeal from an order of the Idaho Public Utilities Commission granting General Telephone Company of the Northwest a rate increase but in an amount less than that requested by the utility company. Affirmed.
On November 5, 1982, appellant General Telephone of the Northwest, Inc. ("GTNW" or "the company") filed an application with the Idaho Public Utilities Commission, seeking approval to raise its rates to Idaho customers by 19%. Public hearings were held on the proposed rates. On August 8, 1983, the commission rejected the filed request for additional revenues of $4,941,570 but allowed an increase of $1,026,598. GTNW appeals, alleging that the commission erred in evaluating the company's capital structure and income tax expense, and in adjusting downward the rates allowable for advertising costs paid by GTNW to its sister corporation, General Telephone Directories Company. We affirm the commission's decision.
Appellant GTNW is a wholly-owned subsidiary of General Telephone and Electronics Corporation (GTE), a utility holding company. Accordingly, GTNW's stock is not publicly sold; instead, GTE Corporation provides all of GTNW's equity capital. Furthermore, GTNW does not file its own federal income tax return, but participates in a consolidated return with GTE and GTE's other subsidiaries.
In determining the rate increase allowable to GTNW, the commission took into consideration this relationship between GTNW and GTE, and the commission imputed the capital structure of the holding company into the appellant operating company. The commission stated:
The commission concluded:
We note at the outset that the commission has broad discretion in designing rates chargeable by utilities to their customers. "If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry ... is at an end." FPC v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 288, 88 L.Ed. 333 (1944). See also, Idaho Const. art. 5, § 9; I.C. § 61-629; Utah Power & Light Co. v. Idaho Pub. Util. Comm'n, 102 Idaho 282, 629 P.2d 678 (1981); Grindstone Butte Mut. Canal Co. v. Idaho Pub. Util. Com., 102 Idaho 175, 627 P.2d 804 (1981). We have formerly held that the only question presented to us when the commission adopts a hypothetical capital structure is whether, under the circumstances of the case, the commission has abused its discretion. Citizens Util. Co. v. Idaho Pub. Util. Com., 99 Idaho 164, 174, 579 P.2d 110, 120 (1978); Petition of Mountain States Telephone & Tel. Co., 76 Idaho 474, 284 P.2d 681 (1955).
Courts which have reviewed the imputed capital approach, in calculating the rate of return for a wholly-owned subsidiary of a holding company, have largely accepted it. See generally Communications Satellite Corp. v. F.C.C., 611 F.2d 883 (D.C.Cir.1977), wherein the court stated:
(Footnotes containing case citations omitted.) 611 F.2d at 904-905).
See also General Tel. Co. v. Ark. Public Service Com., 272 Ark. 440, 616 S.W.2d 1 (1981); Gen. Tel., Etc. v. Iowa State Commerce Com., 275 N.W.2d 364 (Iowa 1979); So. Cent. Bell Tel. v. La. Public Service Com'n, 352 So.2d 964 (La.1977), cert. denied, 437 U.S. 911, 98 S.Ct. 3103, 57 L.Ed.2d 1142 (1978); New England Tel. & Tel. Co. v. Public Utilities Com., 448 A.2d 272 (Me.1982); Potomac Edison Co. v. Public Service Com., 279 Md. 573, 369 A.2d 1035 (1977); Southern Bell Tel. & Tel. Co. v. Mississippi Public Service Com., 237 Miss. 157, 113 So.2d 622 (1959); Mountain States, Tel. & Tel. Co. v. Dept. of Public Service Regulation, 624 P.2d 481 (Mont.1981); Re Application of General Tel. Co. of Southwest, 98 N.M. 749, 652 P.2d 1200 (1982); Spring Valley Water Co. v. Public Service Com., 71 A.D.2d 55, 422 N.Y.S.2d 155 (1979); Ohio Suburban Water Co. v. Public Utilities Com., 62 Ohio St.2d 17, 402 N.E.2d 539 (Ohio), cert. denied, 449 U.S. 876, 101 S.Ct. 219, 66 L.Ed.2d 97 (1980); New England Tel. & Tel. Co. v. Public Utilities Com., 459 A.2d 1381 (R.I.1983); General Tel. Co. v. Public Utility Com'n, 628 S.W.2d 832 (Tex.App.1982); Central Tel. Co. v. State Corp. Com., 219 Va. 863, 252 S.E.2d 575 (1979).
GTNW asserts that the commission's use of an imputed capital structure denies the company equal protection, because a company which was not a wholly-owned subsidiary but was otherwise similarly situated to GTNW would have been allowed a higher rate of return upon the evidence presented. Assuming the truth of GTNW's allegation, the question becomes whether the distinction between wholly-owned subsidiaries and non-subsidiaries, for ratesetting purposes, is a valid one. We hold that it is, and we therefore find no denial by the commission of GTNW's right to equal protection under the law.
The mere fact of different treatment does not necessarily violate the equal protection clause of either the fifth or fourteenth amendment to the United States Constitution or article I, § 2 of the Idaho Constitution.
We note first that the ratesetting order herein is reviewed in the same manner as a challenged statute would be reviewed by this Court, because ratesetting is a legislative function delegated to the Public Utilities Commission by the legislature. The commission's authority derives from enabling statutes; it exercises limited jurisdiction, and nothing is presumed in favor of its jurisdiction. Idaho State Homebuilders v. Washington Water Power, 107 Idaho 415, 690 P.2d 350 (1984); Petition of Mountain States Tel. & Tel. Co., 76 Idaho 474, 284 P.2d 681 (1955); Idaho Power & Light Co. v. Blomquist, 26 Idaho 222, 141 P. 1083 (1914).
In Jones v. State Bd. of Medicine, 97 Idaho 859, 555 P.2d 399 (1976), cert. denied, 431 U.S. 914, 97 S.Ct. 2173, 53 L.Ed.2d 223 (1977), this Court reviewed traditional equal protection analysis. We stated "If the classification [of persons to whom the statute applies] involves a fundamental right or a suspect classification such as race, the state bears a heavy burden to justify the classification by a compelling state interest. That has been termed the strict scrutiny test.
"In other classifications, particularly in the areas of social welfare legislation, a restrained standard of review is applied. Such standard is set forth in McGowan v. Maryland, 366 U.S. 420, 425-426, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961):
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