Mountain States Tel. & Tel. Co. v. New Mexico State Corp. Commission

• Decision Date: 20 April 1977
• Docket Number: No. 10983,10983
• Citation: 563 P.2d 588,90 N.M. 325,1977 NMSC 32
• Parties: , 19 P.U.R.4th 318 MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, Petitioner-Appellant and Cross-Appellee, v. NEW MEXICO STATE CORPORATION COMMISSION, Columbus Ferguson, Chairman, Floyd Cross, Member, Charles Rudolph, Member, Respondents-Appellees and Cross- Appellees, and New Mexico Retail Association, Intervenor-Appellee and Cross-Appellant.
• Court: New Mexico Supreme Court

Page 588

563 P.2d 588

90 N.M. 325, 19 P.U.R.4th 318

MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, Petitioner-Appellant and Cross-Appellee, v. NEW MEXICO STATE CORPORATION COMMISSION, Columbus Ferguson Chairman, Floyd Cross, Member, Charles Rudolph Member, Respondents-Appellees and Cross- Appellees and New Mexico Retail Association, Intervenor-Appellee and Cross-Appellant.

No. 10983.

Supreme Court of New Mexico.

April 20, 1977.

Rehearing Denied May 11, 1977.

Campbell & Bingaman, Santa Fe, Pauline J. Nelson, Albuquerque, for petitioner-appellant and cross-appellee

Toney Anaya, Atty. Gen., William C. Primm, Asst. Atty. Gen., Santa Fe, for Corporation Commission.

Montgomery, Federici, Andrews & Hannahs, Frank Andrews, III, Santa Fe, for intervenor-appellee and cross-appellant.

OPINION

EASLEY, Justice.

This cause was removed from the New Mexico State Corporation Commission (Commission) after a rate increase applied for by Mountain States Telephone & Telegraph Company (Mountain Bell or the Company) had been denied by the Commission. We reverse the Commission and remand with instructions.

In April, 1975, Mountain Bell filed an application with the Commission for a determination of its revenue requirements and for permission to file a schedule of proposed rates to obtain additional revenue. The parties stipulated that the hearings would be conducted in two phases, the first to be concerned with the adequacy of Mountain Bell's rate of return, the second to be for the determination of a schedule of rates.

On July 9, 1975, the Commission entered its order that Mountain Bell was entitled to an 11.7% rate of return on its average book equity, which translated into a finding that Mountain Bell was entitled to earn an additional $12,900,000 in revenue annually.

On July 14, 1975, Mountain Bell filed proposed rates designed to raise this additional revenue. The New Mexico Retail Association (Association) intervenued to oppose the rates. By order dated January 12, 1976, the Commission refused to approve the proposed rates on the basis that Mountain Bell had not sustained its constitutional burden of proof that the rates were fair and reasonable. Mountain Bell was advised by order of the Commission that a new application would be required, along with the requisite notice and second full hearing.

On February 3, 1976, Mountain Bell petitioned the Commission for an even-percentage increase in rates for all services to provide the required revenue, or, in the alternative, for the Commission to fix reasonable rates. On February 11, 1976, the Commission denied this petition for a supplemental order. The cause was then removed by Mountain Bell to this court. The Association is before this court on cross removal. ¹ On July 13, 1976, this court ordered the rates proposed to and rejected by the Commission to be fixed under bond.

The issues raised by Mountain Bell are: (1) whether, once the Commission had determined that Mountain Bell was entitled to an 11.7% rate of return it had a constitutional duty to fix the rates to provide the revenue; (2) whether, under the New Mexico Constitution, the Commission had only six months within which to fix some schedule of rates rather than just to deny the proposed rate schedule; (3) whether the Commission's denial of a motion to allow its new rates to go into effect under bond during the six months' period constituted confiscation of Mountain Bell's property in violation of the United States and New Mexico Constitutions; (4) whether the Commission erred in holding that Mountain Bell had failed to meet its burden of proof; and (5) finally, whether the Commission should be directed on remand to consider the most recent data in establishing the rate base period for an 11.7% return and should be directed to fix a permanent schedule of rates from January 14, 1976.

The Commission and the Association contested each of the utility's contentions.

This court's scope of review is set forth in N.M.Const. art. 11, § 7 where it is provided that . . the said Court shall have the power and it shall be its duty to decide such cases on their merits, . . .

This section was last considered in State Corporation Com'n v. Mountain States Tel. & Tel. Co., 58 N.M. 260, 270 P.2d 685 (1954) (hereinafter Mountain States 1954) where the court relied upon Seward v. D. & R.G., 17 N.M. 557, 131 P. 980 (1913) in which the court stated (17 N.M. at 583, 584, 131 P. at 989):

Our constitution . . . requires this court to pas upon the merits of the case, without indulging in any presumptions. This being true, it is our duty to take the order made by the commission and test its reasonableness and lawfulness by the evidence adduced upon the hearing. This court forms its own independent judgment, as to each requirement of the order, upon the evidence, . . .

This court, however, in Mountain States 1954, supra, held that we are not a rate-making body, that we do not have the power or authority to determine what a fair actual rate is and that we can only determine whether an order of the Commission is just and reasonable and to be enforced, or the contrary.

1) Mountain Bell argues that after the Commission found that Mountain Bell was suffering a revenue deficiency and determined a rate of return to which it was entitled, the Commission had a duty under the constitution and under its own rules to fix the schedule of rates sought to be implemented by Mountain Bell or to substitute a schedule of rates that the Commission found to be fair.

Mountain Bell has a legitimate concern that unless this court rules that the Commission has a positive duty to fix rates when it has disapproved those filed by the utility, the Commission could intermittently turn down proposed rates each six months, causing severe and irreparable injury to Mountain Bell from the loss of revenue. It is contended that the Commission could continue to deny entire rate structures unless Mountain Bell proved with mathematical precision to the satisfaction of the Commission the reasonableness of each of its four thousand separate rates for services and equipment.

On the other hand, the Commission and intervenors understandably contend that if this court holds that the Commission has a positive duty to fix rates, the utility could file a schedule of rates unsupported by sufficient data to substantiate the reasonableness thereof and thus place the burden back on the Commission to assemble the evidence necessary to support the reasonableness of the rates.

There is validity to the apprehensions of both sides. The problem becomes one of arriving at a solution that will prevent the occurrence of either of the postulated radical extremes.

In defining the duties of the Commission with regard to establishing telephone rates, the framers of the Constitution would have had difficulty finding language that was more clear, concise and forceful. N.M.Const. art. 11, § 7 states in part:

The commission shall have power and be charged with the duty of fixing, determining, supervising, regulating and controlling all charges and rates of . . . telephone . . . companies . . . within the state . . .. The commission shall have power to change or alter such rates, to change, alter or amend its orders, rules, regulations or determinations, and to enforce the same in the manner prescribed herein; . . . and it shall have power, upon a hearing, to determine and decide any question given to it herein, . . . (Emphasis added.)

The words 'shall . . . be charged with the duty' indicate that the provision is mandatory rather than discretionary. See § 1--2--2(I), N.M.S.A.1953 (Repl. Vol. 1, 1970); State v. Lujan, 90 N.M. 103, 560 P.2d 167 (1977); Application of Sedillo, 66 N.M. 267, 347 P.2d 162 (1959).

According to Webster's Third International Dictionary (1971), to 'fix' is 'to give a final or permanent form to': make definite and settled: to 'determine' is 'to fix conclusively or authoritatively . . . to settle a question or controversy . . . to settle or decide by choice of alternatives;' 'control' is the 'power or authority to guide or manage: directing or restraining domination.'

The statutes serve to implement the broad grant of constitutional authority to the Commission, giving it the power to prescribe its own rules, inspect a company's records, require reports under oath, initiate petitions for grievances and mediate them, grant time for assembling evidence, adjourn or continue hearings, investigate and take testimony, compel production of documents, invoke the aid of the courts, and take depositions. Sections 69--7--1 through 69--7--10, N.M.S.A.1953.

The Corporation Commission's rules further define the duties and authority of the Commission. Mountain Bell contends that it is entitled to rely on the duty imposed by § 8 of the Corporation Commission Rules, Docket No. 346 (1952) to establish that the Commission has a positive duty to fix rates:

If, after any such hearing, the Commission finds any such rate or rates to be unlawful or unreasonable, or both, or any part thereof, and the Commission having determined the reasonable or lawful rate or rates to be charged by such person subject to these rules herein, and shall fix the same by Order, or order such company to fix such reasonable and lawful rates in accord with the findings of the Commission . . .. (Emphasis added.)

Mountain Bell claims the Commission established a precedent upon which it could rely as to the Commission's interpretation of its authority and responsibility as set forth in the Mountain States' order of 1973 in which the Commission did not limit itself to considering only rates for which Mountain Bell had requested changes. The Commission explained its action as follows:

. . . we direct increases in certain rates not requested by the applicant. Since the applicant has presented an 'open filing' to the commission, it is our view that we have authority to adjust and change any rate, even though not...