Mountain States Tel. and Tel. Co. v. Public Utilities Com'n of State of Colo., 86SA319

• Citation: 763 P.2d 1020
• Decision Date: 31 October 1988
• Docket Number: No. 86SA319,86SA319
• Parties: The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado Corporation, Plaintiff-Appellant, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF COLORADO and Edythe S. Miller, Andra Schmidt and Ronald L. Lehr, Defendants-Appellees, and Colorado Municipal League; Staff of the Colorado Public Utilities Commission; and Colorado Office of Consumer Counsel, Co-Defendants-Appellees.
• Court: Supreme Court of Colorado

Page 1020

763 P.2d 1020

98 P.U.R.4th 534

The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado Corporation, Plaintiff-Appellant, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF COLORADO and Edythe S. Miller, Andra Schmidt and Ronald L Lehr, Defendants-Appellees and Colorado Municipal League; Staff of the Colorado Public Utilities Commission; and Colorado Office of Consumer Counsel, Co-Defendants-Appellees.

No. 86SA319.

Supreme Court of Colorado En Banc.

Oct. 31, 1988.

Rehearing Denied Nov. 28, 1988.

Coleman M. Connolly, Mary C. Snow, Kathryn Marie Krause, and Russell P. Rowe, Denver, for plaintiff-appellant.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Eugene C. Cavaliere, Deputy Atty. Gen., Mark A. Davidson, Asst. Atty. Gen., Denver, for defendants-appellees.

Dudley P. Spiller, Jr., Joseph B. Wilson, Gorsuch, Kirgis, Campbell, Walker and Grover, Denver, for the Colorado Mun. League.

Anthony Marquez, Asst. Atty. Gen., Denver, for Colorado Office of Consumer Counsel.

MULLARKEY, Justice.

Prior to January 1, 1984, the Mountain States Telephone and Telegraph Company (Mountain Bell) regularly published telephone directories, including White and Yellow Pages, for the use of its customers. Mountain Bell included the publishing assets in its base for ratemaking purposes. Mountain Bell's publishing revenues, particularly the profits from Yellow Pages advertising, were used to further the goal of universal telephone service by subsidizing rates charged to telephone customers. This case arose because, through a series of transactions in early 1984, Mountain Bell transferred its publishing assets to U.S. West Direct and entered into a three year contract with U.S. West Direct to publish directories for Mountain Bell's customers. In exchange for its publishing assets, Mountain Bell received stock which it transferred to U.S. West, Inc. as a dividend. Both Mountain Bell and U.S. West Direct are subsidiaries of U.S. West, Inc., although Mountain Bell is a telephone company regulated by the Colorado Public Utilities Commission (PUC) and U.S. West Direct is not.

After the publishing assets were transferred, Mountain Bell petitioned the PUC on April 2, 1984 to authorize the transfer. The PUC allowed the Colorado Municipal League and the Colorado Office of Consumer Counsel to intervene in the matter. In its initial application, Mountain Bell valued the transferred publishing assets at $64.6 million including $56.3 million in cash to be used as working capital. During the pendency of the PUC proceedings, Mountain Bell filed an amended application to adjust the amount of cash transferred, stating that because the initial estimate was too high, U.S. West Direct had returned to Mountain Bell $16.9 million plus interest. U.S. West Direct was then a newly formed company which was capitalized, not by U.S. West, Inc., but by the Bell operating companies in this region including Mountain Bell.

The PUC found that the transfer of Mountain Bell's publishing assets to U.S. West Direct was contrary to the public interest and an abuse of management discretion. The PUC concluded that, as a result of the transfer of the publishing assets, Mountain Bell would suffer a net loss of $45.7 million over the three year term of its contract with U.S. West Direct and Mountain Bell's customers would lose an annual rate offset which the PUC valued at over $29 million. ¹ The PUC ordered Mountain Bell to reacquire the publishing assets and to take the necessary steps at its own expense to resume its publishing operations in Colorado.

Mountain Bell appealed to the Denver District Court which stayed the PUC order pending appeal. The district court affirmed the PUC, and Mountain Bell now appeals to this court pursuant to section 40-6-115(5), 17 C.R.S. (1984). We also affirm.

In this request for judicial review, Mountain Bell advances a variety of theories to challenge the PUC's decision. These issues may be grouped as follows: (1) whether the PUC had jurisdiction over the transferred assets; (2) whether the PUC denied Mountain Bell a fair hearing; and (3) whether the remedy imposed by the PUC was an abuse of discretion or unconstitutional. We will consider each of Mountain Bell's contentions in turn.

I.

Mountain Bell challenges the constitutional and statutory bases for the PUC's jurisdiction over the assets transfer. It contends that it was acting in a private business capacity when transferring the assets and that the assets transferred were outside the scope of the PUC's jurisdiction because they were not "essential" to public utility service. Even if a jurisdictional basis were found to exist for the PUC's order, Mountain Bell argues that it would be unconstitutional as applied to Mountain Bell's transfer of its publishing assets.

A.

In support of its jurisdiction over this matter, the PUC relies on its broad authority derived from the Colorado Constitution which vests the commission with "all power to regulate the facilities, service and rates and charges therefor" of public utilities operating within the state of Colorado. Colo.Const. art. XXV. Because it is undisputed that Mountain Bell is a public utility as defined in section 40-1-103(1)(a), 17 C.R.S. (1984), the PUC asserts that it has specific jurisdiction over this matter under section 40-5-105, 17 C.R.S. (1984), which states The assets of any public utility, including any certificate of public convenience and necessity or rights obtained under any such certificate held, owned, or obtained by any public utility, may be sold, assigned, or leased as any other property other than in the normal course of business but only upon authorization by the commission and upon such terms and conditions as the commission may prescribe.

Mountain Bell's position on the PUC's jurisdiction has been inconsistent. Prior to the time when the PUC issued its decision, Mountain Bell repeatedly conceded that the PUC had jurisdiction over this matter. Mountain Bell originally acknowledged the necessity for PUC approval of the assets transfer in various documents including the board of directors' authorization of the transfer and the bill of conveyance which effectuated the transfer. Mountain Bell itself then invoked the jurisdiction of section 40-5-105 in both its initial application and its amended application requesting the PUC to approve the transfer of its publishing assets.

Before this court, Mountain Bell's legal analysis of the PUC's jurisdiction also has been flawed by inconsistency. On the one hand, Mountain Bell admits the PUC has jurisdiction when in its brief it assures us that the PUC may "look at the asset transfer ... to determine whether the ratepayer had any interest in the assets transferred and, if so, whether the ratepayer was adequately compensated." Yet, at the same time, Mountain Bell vigorously asserts that the PUC lacks jurisdiction over the assets transfer under either the constitution or section 40-5-105. Mountain Bell's position on jurisdiction is plainly contradictory because it concedes exactly what it is attacking. Mountain Bell fails to appreciate that jurisdiction is the power to act, not the correctness of the decision reached. See Department of Revenue v. Borquez, 751 P.2d 639, 641 (Colo.1988); Hill v. District Court, 134 Colo. 369, 373, 304 P.2d 888, 891 (1956). If the PUC may "look at" the assets transfer, it must have jurisdiction over the subject matter of the assets transfer.

Despite these concessions, Mountain Bell attacks the PUC's jurisdiction by raising two closely related arguments. First, it contends that it engaged in the directory publishing business in its private, proprietary capacity. It asserts that article XXV embodies the concept of regulated monopoly and, therefore, the constitution does not permit the PUC to regulate a public utility's private business ventures. Second, it claims that telephone directories are not essential to the utility service which it provides, i.e., telecommunications. It urges us to construe the phrase "assets of any public utility" in section 40-5-105 as limited to those assets which are "essential" to providing the utility service in question.

In interpreting the source of the PUC's jurisdiction in article XXV and section 40-5-105, we begin with the plain language of each. Urbish v. Lamm, 761 P.2d 756, 759 (Colo.1988); Engelbrecht v. Hartford Accident & Indem. Co., 680 P.2d 231, 233 (Colo.1984); People v. Howell, 701 P.2d 131, 133 (Colo.Ct.App.1985). Neither the constitution nor the statute contains the limitations on the PUC's jurisdiction which Mountain Bell suggests. On the contrary, article XXV effectuates a broad delegation of legislative power to the PUC, vesting the commission with as much authority as the general assembly had prior to the adoption of article XXV in 1954. Miller Brothers, Inc. v. Public Util. Comm'n, 185 Colo. 414, 431, 525 P.2d 443, 451 (1974).

This is not a case in which we need to decide the outer contours of the PUC's inherent authority under article XXV, but it is clear, as the Municipal League points out, that the PUC's authority under article XXV is not narrowly confined but extends to incidental powers which are necessary to enable it to regulate public utilities. See, e.g., Mountain States Tel. & Tel. Co. v. Public Util. Comm'n, 195 Colo. 130, 576 P.2d 544 (1978) (PUC has authority to grant attorney fees to intervenors in ratemaking proceedings). By acknowledging that the PUC may "look at" the assets transfer in a rate case, Mountain Bell implicitly admits that the PUC has jurisdiction under its constitutional grant of authority. In our view, Mountain Bell has mischaracterized its argument as attacking the PUC's subject matter jurisdiction under article XXV, and we find that the PUC has jurisdiction under the constitutional article.

In this case, the PUC's jurisdiction stems not only from the constitution, but also...