Petition of Mountain States Tel. & Tel. Co.

• Decision Date: 15 April 1955
• Docket Number: No. 8194,8194
• Parties: , 8 P.U.R.3d 265, 9 P.U.R.3d 290 PETITION of the MOUNTAIN STATES TELEPHONE and TELEGRAPH COMPANY, a Corporation, for a Hearing to Consider Certain Substantial Changes in Expenses.
• Court: Idaho Supreme Court

Page 681

284 P.2d 681

76 Idaho 474, 8 P.U.R.3d 265, 9 P.U.R.3d 290

PETITION of the MOUNTAIN STATES TELEPHONE and TELEGRAPH COMPANY, a Corporation, for a Hearing to Consider Certain Substantial Changes in Expenses.

No. 8194.

Supreme Court of Idaho.

April 15, 1955.

Rehearing Denied June 16, 1955.

Carey H. Nixon, Boise, and J. H. Shepherd, Denver, Colo., for appellant.

Graydon W. Smith, Atty. Gen., J. N. Leggat, and Edward J. Aschenbrener, Asst. Attys. Gen., for respondents.

Gregg R. Potvin, American Falls, Ben B. Johnson, Preston, Grant L. Ambrose, Meridian, Lloyd D. Browning, Pocatello, and Harold Ryan, Weiser, for protestants.

On Rehearing (Respondent's Petition)

TAYLOR, Chief Justice.

Subsequent to the first opinion filed December 22, 1954, rehearing was had on March 7, 1955. The first opinion is withdrawn and the following substituted.

After having been granted four rate increases subsequent to November 14, 1946, the appellant filed this, its fifth application for further increases, May 17, 1952. The application is based upon alleged increased costs in wages, materials, and taxes, and upon improved and added plant and equipment.

Hearings were had on and subsequent to September 3, 1952, culminating in an order on May 15, 1953, denying the application.

A rehearing was granted and after further hearing order No. 2644 was entered May 14, 1954, likewise denying any increase.

The company appealed from both orders and the state appealed from the portion of order No. 2644 allowing the sum of $467,164 for materials and supplies as a part of the company's rate base.

The state accepted the company's statement of the value of its total Idaho plant in service, $33,426,056, but took issue with the company as to the portion thereof which should be separated from the total and allocated to its intrustate rate base. The state also took issue with items which the company contends should be added to the rate base, that is, plant under construction, property held for future use, materials and supplies and cash working capital. The issue as to separation also involved the amount of the company's depreciation reserve, which should be allocated to and deducted from its intrastate rate base.

The principal difference between the parties continues to be as to procedures and methods necessary to a reasonable and just separation of the properties, expenses, and depreciation reserve, in arriving at the proper portion thereof to be allocated to the intrastate rate base. The company continues to urge that the Separation Manual, as amended or modified by the so-called Charleston Plan, must be accepted and applied by the commission because it is the most authoritative and widely accepted plan of separations available. The commission contends that it is not bound to accept the manual, that it is not accurate, and is weighted against intrastate rates. The Separations Manual is a document containing standard procedures for separating telephone properties, revenues and expenses, adopted by the National Association of Railroad and Utilities Commissioners, and the Federal Communications Commission, October, 1947, and the addendum covering charges therein adopted in October, 1951, at Charleston, S. C.

In approaching the subject we are mindful of the limitations upon the scope of our review in such cases. Our constitution provides jurisdiction in this court to review upon appeal any order of the Public Utilities Commission, but it also says 'the legislature may provide conditions of appeal, scope of appeal, and procedure on appeal from orders of the public utilities commission * * *.' Const. Art. 5, § 9. Pursuant to such authority, the legislature has defined the scope of appeal as follows:

'No new or additional evidence may be introduced in the Supreme Court, but the appeal shall be heard on the record of the commission as certified by it. The review on appeal shall not be extended further than to determine whether the commission has regularly pursued its authority, including a determination of whether the order appealed from violates any right of the appellant under the constitution of the United States or of the state of Idaho. Upon the hearing the Supreme Court shall enter judgment, either affirming or setting aside the order of the commission. * * *' § 61-629, I.C.

The function of rate making a legislative and not judicial. The commission as the agency of the legislative department of government exercises delegated legislative power to make rates. So long as it regularly pursues its authority and remains within constitutional limitations, the courts have no jurisdiction to interfere with its determinations.

'It is fundamental that the judicial power to declare legislative action invalid upon constitutional grounds is to be exercised only in clear cases. The constitutional invalidity must be manifest, and if it rests upon disputed questions of fact, the invalidating facts must be proved.' Los Angeles Gas & Electric Corp. v. Railroad Commission, 289 U.S. 287, 53 S.Ct. 637, 645, 77 L.Ed. 1180, at page 1194.

'We do not sit as a board of revision, but to enforce constitutional rights. San Diego Land & Town Co. v. Jasper, 189 U.S. 439, 446, 23 S.Ct. 571, 47 L.Ed. 892 . The legislative discretion implied in the rate-making power necessarily extends to the entire legislative process, embracing the method used in reaching the legislative determination as well as that determination itself. We are not concerned with either, so long as constitutional limitations are not transgressed. When the legislative method is disclosed, it may have a definite bearing upon the validity of the result reached, but the judicial function does not go beyond the decision of the constitutional question. That question is whether the rates as fixed are confiscatory. And upon that question the complainant has the burden of proof, and the court may not interfere with the exercise of the state's authority unless confiscation is clearly established.' Los Angeles Gas & Electric Corp. v. Railroad Commission, 289 U.S. 287, 53 S.Ct. 637, 643, 77 L.Ed. 1180, at page 1192.

'It is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end. The fact that the method employed to reach that result may contain infirmities is not then important. Moreover, the Commission's order does not become suspect by reason of the fact that it is challenged. It is the product of expert judgment which carries a presumption of validity. And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.' Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 288, 88 L.Ed. 333, at page 345.

The desirability of a uniform method of effecting a separation of properties and expenses of a telephone company engaged in both interstate and intrastate transactions is perfectly obvious, and no doubt the Separations Manual with the Charleston amendments is a good start to that end. However, it is generally recognized that the goal has not been attained and that further studies and determinations are necessary to effect methods and procedures which will result in reasonable and just separations equitable to both the utility and to the user, interstate and intrastate. Before the Charleston modifications were made it was recognized that the Separations Manual was weighted against the intrastate use.

'There can be no doubt that the application of the use method as prescribed in the Manual has discriminated against users of the intrastate services. In the postwar rate cases, the Bell companies have generally demonstrated that they are entitled to an increase in rates in some amount. They have shown that their cost of operation have increased substantially. Since this is true of all their costs, it seems that interstate rates as well as intrastate rates should be raised. Yet no application has been made by any Bell Company, including the Long Lines Department, for higher interstate rates. On the contrary, the Federal Communications Commission has recently declared that earnings of the Long Lines Department are excessive and has initiated proceedings with the view to reducing interstate toll rates. Presumably the Federal Commission has based its calculations on the separation formula of the Manual for the Commission has been an influential advocate of its adoption. Since interstate rates have been reduced on several occasions after the inception of the Commission in 1934, once as recently as 1946, the inference is inescapable that application of the Separations Manual results in the allocation of a disproportionate share of property and expenses to intrastate operation.' The Bell Telephone System Rate Cases, by Joseph R. Rose, Virginia Law Review 699, at 730 and 731.

It was in response to such criticism and protests from state commissions that the Federal Communications Commission suggested the Charleston amendments to meet the objection that the plan was inequitable and resulted in toll rates that were higher for intrastate messages than for interstate communications. Thus the so- called Charleston plan was proposed and adopted to correct admitted defects resulting in divisions which were unfair to intrastate users. The remedy, however, did not fully correct the inequities. The disparity between toll rates, interstate and intrastate, continues, and unexplained, is the most telling argument against the application of the plan by the state commission.

'The development by our commission of their own separations manual is almost a practical impossibility at this time. Therefore, the commission must accept in substance the separation formulas handed them by the telephone company. We mention this only because the consensus of opinion is...