New England Tel. & Tel. Co., In re

• Decision Date: 08 November 1977
• Docket Number: No. 104-76,104-76
• Citation: 382 A.2d 826,135 Vt. 527
• Court: Vermont Supreme Court
• Parties: , 23 P.U.R.4th 114 In re NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY.

Page 826

382 A.2d 826

135 Vt. 527, 23 P.U.R.4th 114

In re NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY.

No. 104-76.

Supreme Court of Vermont.

Nov. 8, 1977.

Motion for Reargument Denied Jan. 9, 1978.

John D. Carbine and Allan R. Keyes, Rutland, for petitioner.

M. Jerome Diamond, Atty. Gen., and Mary Just Skinner, Sp. Asst. Atty. Gen., Montpelier, for respondent.

Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.

BILLINGS, Justice.

This is an appeal by the Attorney General from a Public Service Board order, dated March 24, 1976, which granted the New England Telephone and Telegraph Company (hereinafter N.E.T.) rate increases that N.E.T. had sought in two separately filed petitions. (P.S.B. Docket Nos. 3806 and 4033).

On January 21, 1974, N.E.T. petitioned for an increase in its intrastate rates of approximately 23% To become effective on February 20, 1974. (Docket No. 3806). The Board suspended those rates pursuant to 30 V.S.A. § 226(a); however, the utility began collecting the rates under bond on September 11, 1974, pursuant to a statutory procedure On June 24, 1975, N.E.T. filed a second separate application for an additional rate increase of approximately 17% (Docket No. 4033). N.E.T. did not collect this additional rate increase under the statutory bonding provision.

that permits the action pending determination of a rate increase petition. 30 V.S.A. § 227(a).

On January 15, 1976, the Board issued a preliminary order in which it consolidated the two dockets, allowed updating based upon a test year of calendar year 1975, allowed recoupment in Docket No. 3806 from February 20, 1974 (30 V.S.A. § 226(b) ), established an overall rate of return of 9.40%, reaffirmed the use of the separations manual as a method of allocating interstate and intrastate expenses, ¹ adopted N.E.T.'s rate design with some modifications, and admitted into evidence N.E.T.'s class cost of service studies. The updating provision of the order required that all updated exhibits be filed by February 16, 1976, that rebuttal exhibits be filed by March 17, 1976, and that an "update" hearing be held on March 23, 1976.

On March 17, 1976, N.E.T. and the Board-appointed counsel for the Public filed a stipulation and agreement, which provided in relevant portions that N.E.T. was entitled to permanent rates the same as those then in effect under bond (those rates would produce $4.986 million in additional annual revenue) and was entitled to recoupment in the amount of $5.626 million ($3.639 million in Docket No. 3806 and $1.987 million in Docket No. 4033) to be recovered in twenty months through an 8.3% Surcharge applied to intrastate services charged in the first three lines of a customer's monthly bill, i. e. basic monthly service, message units and long distance calls. The Attorney General and the other intervenors refused to join in the stipulation and agreement.

The "update" hearing commenced and, over the objections of the appellant and intervenors, the Board proceeded to consider the reasonableness of and the justification for the proposed rates and revenues set forth in the stipulation. The Board rejected the appellant's request for a continuance, and on March 24, 1976, it issued its final order which accepted the stipulation and agreement and implemented new rates and revenues according to its terms. This resulted in certain changes from its earlier preliminary order as follows: recoupment was allowed in Docket No. 4033; directory assistance charges were allowed without consideration of whether the number provided was listed in the directory; and a new coin telephone tariff was approved that increased the charge for "pay" telephones from ten cents to twenty cents.

Pursuant to V.R.A.P. 13(d), the Board has certified twelve questions for review.

The appellant's first claim is that the Board erred when it admitted the separations manual into evidence as the basis for allocating intrastate expenses. Essentially it contends that there was no evidence introduced to demonstrate its applicability to Vermont usage and experience and that no competent witness testified that the separations performed for purposes of this rate case were done in accordance with the manual or that their application produced a reasonable allocation of costs to Vermont intrastate operations. N.E.T. argues that the certified question is phrased in terms of admissibility and that therefore technically the appellant has not complied with the general rule that certified questions that are not briefed are waived. In re Petitions of Burlington Electric Light Department, 135 Vt. ---, 373 A.2d 514, 516 (1977), citing In re Smith, Bell & Hauck Real Estate, Inc., 132 Vt. 295, 300, 318 A.2d 183 (1974). The appellee further asserts that the separations manual was clearly admissible on grounds of judicial notice or official notice.

In response to the appellant's basic allegation, appellee replies that the evidence in the record supports the Board's findings on the appropriateness of the manual use and further that the principles of federal pre-emption and comity control this issue and require use of the manual. See note 1, supra.

While the Board's first certified question asks whether the Board erred in admitting certain exhibits, we believe that it was intended to present questions about the separations manual as opposed to the narrow focus suggested by the appellee directed toward the admissibility of the exhibits under the rules of evidence. ² Thus the waiver rule is not applicable on these facts.

The appellant is incorrect in its allegation about a lack of evidence relative to the separations manual. One of N.E.T.'s witnesses testified that the separations were performed in accordance with the manual and further testified that the procedures, or formulae for separation represented by the manual, are fair.

We recognize that interstate operations are the problem of the Federal Communications Commission. However, the Board has jurisdiction over intrastate operations, Petition of New England Tel. & Tel. Co., 115 Vt. 494, 503, 66 A.2d 135 (1949), and we hold that the F.C.C. has not pre-empted the issue of separations, since no irreconcilable difficulties have been created between regulation by the federal agency and a state agency, the Board. In re Petition of Trustees of Westminster, 108 Vt. 352, 356, 187 A. 519 (1936); Re Frontier Airlines, Inc., 43 P.U.R.3d 158, 165 (Neb.St.Rwy.Comm.1962); 47 U.S.C.A. § 151, et seq.; 30 V.S.A. ch. 5. It is the evidence presented, not the claimed principle of pre-emption, which defeats the first claim of error.

The appellant's second claim is that the Board erred in its findings relating to the intrastate rate base. Specifically, it objects to the treatment of four components: investment tax credits for plant in service, construction work in progress, property held for future use, and allowance for working capital.

(a) The Board's findings correctly state the general principle that the ratepayers should receive the benefit of investment tax credits. The central issue before the Board was whether those benefits should be applied immediately or be applied over the life of the asset for which the credit was given. In the case at bar, the Board chose the second method. Rhode Island Consumers' Council v. Smith, 113 R.I. 232, 243, 319 A.2d 643 (1974). This is a matter upon which the Board must exercise its discretion and business judgment. The findings and evidence are sufficient to support its conclusion, and thus its decision is well within the ambit of the exercise of sound and discretionary judgment. In re Petitions of Burlington Electric Light Department, 135 Vt. ---, 373 A.2d 514, 517 (1977).

(b) The appellant attacks the Board's allowance of construction work in progress in the rate base alleging that N.E.T. failed to relate any construction pending or planned to Vermont intrastate operations, that construction work in progress does not meet the "used and useful" test and thus is not properly a part of the rate base upon which ratepayers should pay a return, and that the Uniform System of Accounts requires capitalization of interest.

Our review of the record shows that the Board did receive evidence that construction work in progress represented plant in construction which was part of a continuing construction program and that the N.E.T (c) In regard to certain properties held for future use, the appellant contends that there was not sufficient evidence of a definite plan or imminent use, requirements of the Uniform System of Accounts and Vermont case law; that the Board's order lacks essential findings vis a vis this test; and that the Board erroneously double counted certain properties that had been transferred into plant accounts. N.E.T. responds that this is a matter of business judgment for the Board since timing poses a question of fact and that its business plan in evidence supported the Board's findings.

testimony on rate base was computed upon Vermont investment only. The next contention, that construction work in progress does not meet the "used and useful" test, is without merit because construction work in progress is in the nature of working capital whose "use" is imminent. Lastly, the Board ordered that the petitioner should capitalize no interest on construction work in progress and therefore should add no interest income to its revenues; its approach prevented a double return and was in accord with principles approved by this Court. Petitions of New England Tel. & Tel. Co., 116 Vt. 480, 483-84, 80 A.2d 671 (1951); Petition of New England Tel. & Tel. Co., 115 Vt. 494, 504-05, 66 A.2d 135 (1949).

In a recent electric utility rate case, we reaffirmed the standards by which we would test disputes concerning property held for future use. In re Village of Stowe Electric Department, 134 Vt. 559, 565-66, 367 A.2d 1056 (1976), citing Petition of New England Tel. & Tel. Co., 115 Vt. 494, 505,...