IND. BELL TELEPHONE CO. v. IND. UTILITY REG. COM'N, 93S02-9906-EX-350.

• Decision Date: 30 July 1999
• Docket Number: No. 93S02-9906-EX-350.,93S02-9906-EX-350.
• Citation: 715 N.E.2d 351
• Parties: INDIANA BELL TELEPHONE COMPANY, INCORPORATED d/b/a Ameritech Indiana; Ameritech Corporation; and SBC Communications Inc., Appellants (Respondents below), v. INDIANA UTILITY REGULATORY COMMISSION; Office of Utility Consumer Counselor; AT&T Communications of Indiana, Inc.; Consolidated City of Indianapolis and Marion County, Indiana; Indiana Cable Telecommunications Inc.; Time Warner Communications of Indiana, Inc.; Sprint Communications Company L.P., and United Telephone Company of Indiana, Inc. d/b/a Sprint; Indiana Payphone Association; KMC Telecom II, Inc.; Communications Workers of America, Inc.; Citizens Action Coalition of Indiana, Inc.; American Association of Retired Persons, Inc.; and United Senior Action of Indiana, Inc., Appellees (Statutory Parties and Intervenors Below).
• Court: Indiana Supreme Court

715 N.E.2d 351

INDIANA BELL TELEPHONE COMPANY, INCORPORATED d/b/a Ameritech Indiana; Ameritech Corporation; and SBC Communications Inc., Appellants (Respondents below), v. INDIANA UTILITY REGULATORY COMMISSION; Office of Utility Consumer Counselor; AT&T Communications of Indiana, Inc.; Consolidated City of Indianapolis and Marion County, Indiana; Indiana Cable Telecommunications Inc.; Time Warner Communications of Indiana, Inc.; Sprint Communications Company L.P., and United Telephone Company of Indiana, Inc. d/b/a Sprint; Indiana Payphone Association; KMC Telecom II, Inc.; Communications Workers of America, Inc.; Citizens Action Coalition of Indiana, Inc.; American Association of Retired Persons, Inc.; and United Senior Action of Indiana, Inc., Appellees (Statutory Parties and Intervenors Below).

No. 93S02-9906-EX-350.

Supreme Court of Indiana.

July 30, 1999.

Sue E. Stemen, Teresa E. Morton, Stanley C. Fickle, Daniel W. McGill, Peter J. Rusthoven, Indianapolis, Indiana, Attorneys for Appellant Ameritech Indiana.

Paul K. Mancini, Joseph E. Cosgrove, Jr., San Antonio, Texas, Randolph L. Seger, Robert B. Scott, Indianapolis, Indiana, for Appellant SBC Communications, Inc.

Kay Pashos, Plainfield, Indiana, Robert E. Heidorn, Bryan G. Tabler, Indianapolis, Indiana, Peter L. Hatton, Merrillville, Indiana, George A. Porch, Evansville, Indiana, for Amici Curiae Cinergy Corp., Indiana Energy, Inc., Ipalco Enterprises, Inc., Nisources, Inc., Sigcorp, Inc. Jeffrey A. Modisett, Attorney General of Indiana, Geoffrey Slaughter, A. Scott Chinn, Cindy M. Lott, Deputy Attorneys General, Indianapolis, Indiana, for Indiana Utility Regulatory Commission.

Anne E. Becker, Keith L. Beall, Robert M. Glennon, Timothy M. Seat, Karol H. Krohn, Indianapolis, Indiana, for Office of Utility Consumer Counselor.

Michael A. Mullett, Indianapolis, Indiana, for American Association of Retired Persons, Inc., Citizens Action Coalition of Indiana, Inc., United Senior Action of Indiana, Inc.

John F. Wickes, Jr., Todd A. Richardson, Indianapolis, Indiana, for Amicus Curiae Indiana Industrial Energy Consumers, Inc.

ON EMERGENCY PETITION TO TRANSFER

BOEHM, Justice.

This case deals with the jurisdiction of the Indiana Utility Regulatory Commission under Indiana Code § 8-1-2-83(a). This section uses language that contrasts sharply with its counterparts in some other states. It provides that "no public utility, as defined in section 1 of this chapter, shall sell, assign, transfer, lease or encumber its franchise, works, or system ... without approval of the commission." Based on the language of section 83(a), the history of that section and similar legislation, and this Court's and the Commission's existing interpretations of that section, we hold that section 83(a) does not confer Commission jurisdiction over transactions in the outstanding securities of a public utility or its parent.

Factual and Procedural Background

Ameritech Corporation and SBC Communications, Inc., are two of the "Baby Bells" created by the breakup of AT&T in 1984. On May 11, 1998, they announced their intent to merge. Ameritech is the corporate parent and holding company of Indiana Bell Telephone Company, Inc., which operates approximately 65% of Indiana's local exchange telephone access lines. Ameritech also owns operating telephone companies in Michigan, Wisconsin, Illinois and Ohio. If the transaction is consummated as proposed, Indiana Bell will continue to be wholly owned by Ameritech, but Ameritech will be a wholly-owned subsidiary of SBC. The form of the proposed transaction is a merger of Ameritech with a newly formed wholly-owned subsidiary of SBC whereby Ameritech shareholders would exchange their shares for shares in SBC.

On September 2, 1998, the Indiana Utility Regulatory Commission, on its own motion, opened an investigation of the proposed transaction. The Commission's investigation included a hearing on December 1 & 2, 1998, where SBC, Ameritech and Indiana Bell (together the "appellants") responded to the Commission's questions and presented witnesses. At the close of the hearing, the Commission asked the parties to address the jurisdiction of the Commission to approve the merger under Indiana Code § 8-1-2-83(a). Several intervenors filed briefs with the Commission addressing the jurisdictional issue. These included consumers, industrial customers and current and potential competitors.

On May 5, 1999, the Commission found that section 83(a) required the Commission to review the proposed merger because "a transaction in which at least fifty percent of a public utility's voting capital stock is sold, transferred, etc. necessarily constitutes the sale, transfer, etc. of that public utility's franchise, works, or system." The appellants filed a notice of appeal with the Court of Appeals. This Court granted their subsequent petition for transfer pursuant to Appellate Rule 4(A)(9) and set an expedited briefing schedule.¹

There is no dispute that the effect of the proposed transaction will be to transfer control of Indiana Bell from Ameritech, its current parent, to SBC. It is equally undisputed that Indiana Bell will do nothing to effect the transaction. Its ownership—more precisely its indirect ownership—will change, but it will remain the same regulated utility that exists today with the same assets and liabilities, the same customers and suppliers, and the same corporate structure and capitalization. The issue, in simple terms, is whether section 83(a) requires the Commission's approval for a transfer of control of a public utility if the assets of the operating company—in this case Indiana Bell—remain in the operating company and the only things transferred are the outstanding shares of the operating company.²

Appellants point out that the Commission has continuing power over Indiana Bell's rates, service levels, etc., regardless of who owns it. They argue that the language of section 83(a) reflects a legislative choice not to regulate transactions at the shareholder level and a legislative determination that the ongoing jurisdiction of the Commission is sufficient to protect the public. The proponents of Commission jurisdiction respond that the proposed transaction is the functional equivalent of a transfer of all of Indiana Bell's assets to SBC and should be subject to Commission approval. They contend that a shift in beneficial ownership at the shareholder level should be sufficient to trigger the requirement for prior approval to prevent utilities from falling into the hands of owners who are potential threats to adequate service. They argue further that ongoing jurisdiction over Indiana Bell's affairs is a less effective tool than the power to disapprove the transaction altogether in carrying out the Commission's mission to assure protection of customers' interests.

For the reasons explained below, we conclude that the legislature has made the choice to rely on the Commission's ongoing powers to regulate utilities directly and has expressly refused to give the Commission the jurisdiction it claims over transactions at the shareholder level.

Standard of Review

The Commission's jurisdiction under Indiana Code § 8-1-2-83(a) is a legal question this Court reviews de novo. See Public Service Comm'n of Indiana v. City of Indianapolis, 235 Ind. 70, 82-83, 131 N.E.2d 308, 312-13 (1956)

.

I. Jurisdiction over Transfers by a Shareholder

There is no dispute that the Commission's jurisdiction is defined by statute and that section 83(a) is the only basis for Commission jurisdiction to approve or disapprove this transaction.³

A. The Language of the Statute

The first and often the last step in any effort to interpret a piece of legislation is to examine the language of the statute. See Collier v. Collier, 702 N.E.2d 351, 354 (Ind. 1998)

; Indiana Dep't of State Revenue v. Horizon Bancorp, 644 N.E.2d 870, 872 (1994) ("nothing may be read into a statute which is not within the manifest intention of the legislature" as ascertained from "the plain and obvious meaning" of the words of the statute); see also In re Northwestern Indiana Tel. Co., 201 Ind. 667, 676, 171 N.E. 65, 68 (1930) (the Commission must "determine the question of its jurisdiction ... by giving [the statutes] what is known as a `practical construction'").

On its face this section prohibits only actions by a "public utility" that effect a "transfer" etc., of the utility's "franchise, works, or system." Given this syntax, the appellants contend that section 83(a) does not apply to transfers of outstanding stock of a public utility for two reasons. First, the appellants argue that even if control of the utility is affected, Commission approval is required only if a "public utility," which is a defined term, proposes to transfer something. Second, they contend that the transaction does not transfer the "franchise, works or system" of the public utility, all of which remain, as before, in Indiana Bell. If, as here, the proposed transaction would effect a transfer of the entire utility, these two linguistic points are two sides of the same coin. Because ownership of the "franchise, works, or system" of a utility rests in the utility, if the statute is read literally, it takes action by the utility to transfer them.

1. Who is a "Public Utility"

"Public utility" is defined by statute as an entity "that may own, operate, manage, or control any plant or equipment within the state." IND.CODE § 8-1-2-1 (1998). The appellants argue that the shareholders of the public utility's holding company do not fall within this defined term. If we were writing on a clean slate, inclusion of "control" in this definition might be fairly interpreted to include among "public utility" anyone who has control of a public utility by ownership of voting stock or otherwise. A very sizeable body of precedent points in the other direction however, and finding holding companies to be public utilities would effect a...