Rhode Island Consumers' Council v. Smith
| Decision Date | 28 March 1973 |
| Docket Number | Nos. 1784-M,s. 1784-M |
| Citation | 302 A.2d 757,111 R.I. 271 |
| Parties | , 99 P.U.R.3d 209 RHODE ISLAND CONSUMERS' COUNCIL v. Archie SMITH et al. NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY v. PUBLIC UTILITIES COMMISSION. P., 1786-M.P. |
| Court | Rhode Island Supreme Court |
This is a public utility rate case. On April 16, 1971, the New England Telephone & Telegraph Company ('the company'), under authority of G.L.1956 (1969 Reenactment) § 39-3-11, P.L.1969, ch. 240, sec. 5, filed with the Public Utilities Commission ('the commission') a tariff revision designed to add approximately $14,800,000 to its annual revenue. While the company had scheduled the new tariffs to take effect on May 15, 1971, their inception was suspended initially by a commission order entered under § 39-3-11, as amended, and, according to the parties, thereafter from time to time pursuant to regulations of the Presidential Price Commission and the utilities commission's suspension orders related thereto. Extensive public hearings before the commission followed at which the Rhode Island Consumers' Council ('the council'), among others, appeared in opposition to the rate increase.
On May 4, 1972, the commission announced its decision. The proposed tariffs were rejected and the company was authorized to file in their stead a modified rate schedule structured to increase revenues by approximately $7,989,000. Thereafter, the company and the council acting under authority of § 39-5-1, as amended, commenced separate certiorari proceedings in order to test the legality and reasonableness of the commission's decision and order. 1 The two petitions were consolidated and, pending argument, we denied the requiest (1) of the council for a stay of the commission's order permitting the company to file a modified revision of its rates; and (2) of the company for leave, pending final determination, to be permitted to operate on its proposed rate schedule. Rhode Island Consumers' Council v. Smith, R.I., 290 A.2d 617 (1972).
The last general increase in telephone rates authorized by the commission took effect in February, 1970. New England Tel. & Tel. Co., Docket No. 1024 (Jan. 30 and Feb. 10, 1970). In that case the company was afforded the opportunity to increase its annual revenue in the approximate amount of $5,925,000. The company's principal justification for its current filing is that the impact of an acknowledged inflationary economy on its operating expenses and upon the cost of needed plant and equipment have far outdistanced its revenues despite the 1970 increases. Unless relief is granted, the company says, the return on its intrastate investment will decrease to a dangerously low level and its general financial condition will further deteriorate. To demonstrate its dire position, the company presented evidence showing, inter alia, that in the period between 1968 (the test year used by the commission in New England Tel. & Tel., supra) and 1971: (1) its average net investment has increased 40.1 per cent and its operating expense 14.6 per cent whereas the corresponding increase in its revenue has been only 13.6 per cent; and (2) its actual rate of return under the January 30, 1970 order has remained at an average of about 6 per cent rather than in the 7.4 per cent to 7.65 per cent range authorized by the commission.
It is the asserted inadequacy of the 1970 authorization as a source of revenue for bridging the gap between available revenue on the one hand, and the need for new funds to meet expenses and to provide plant on the other, which prompted this current proposal. Following public hearings on the reasonableness of that proposal, the commission filed a written decision and order which:
1. rejected the company's April 16, 1971 filing;
2. authorized the filing of a revised tariff designed to produce additional annual revenue in the approximate amount of $7,989,000;
3. forbade the inclusion in the tariff thus authorized of an increase in rates for the Hopkinton-Richmond area and
4. directed the incorporation therein of a special rate for certain persons 65 years of age or over.
The company challenges the commission's order because it is allegedly confiscatory in that it fails to provide the company with an opportunity to earn a fair and reasonable return on the investment it employs in providing intrastate telephone service. More specifically, it claims that the order is illegal, arbitrary and unreasonable in the following particulars:
1. the selection of a test period;
2. the computation of operating expenses and utility revenues;
3. the establishment of a rate base;
4. the setting of 8.38 per cent as the rate of return;
5. the barring of an increase in rates for the Hopkinton-Richmond area; and
6. the granting of a special rate for certain elderly subscribers.
The council also challenges the commission's order and claims that it erred in:
1. selecting a test period;
2. overstating the rate base in certain designated areas; and
3. authorizing the filing of a revised tariff.
In passing upon the legality and reasonableness of the commission's decision and order we do not engage in factfinding. General Laws 1956 (1969 Reenactment) § 39-5-3, as amended. That is the commission's role; ours is to determine whether the commission's decision and order are lawful and reasonable and whether its findings are fairly and substantially supported by legal evidence and sufficiently specific to enable us to ascertain if the facts upon which they are premised afford a reasonable basis for the result reached. Town of Jamestown v. Kennelly, 81 R.I. 177, 180-181, 100 A.2d 649, 651 (1953). This is not to say that the necessary factual determinations must be set out in precise or specific language, or that they may not be fairly and reasonably implied from the commission's language and actions. United Transit Co. v. Public Utility Hearing Board, 96 R.I. 435, 445, 192 A.2d 423, 428-429 (1963); Yellow Cab Co. v. Public Utility Hearing Board, 79 R.I. 507, 511, 90 A.2d 726, 728 (1952). But if it becomes impossible for us properly to fulfill our assigned function because of the commission's failure to set forth sufficiently the findings and the evidentiary facts upon which it rests its decisions, or the reasons or true bases for its conclusions, we will not speculate thereon nor search the record for supporting evidence or reasons. Neither will we decide for ourselves what is proper in the circumstances. Instead, we will remand the case in order to afford the commission an opportunity to fulfill its obligations in a supplementary or additional decision. United Transit Co. v. Nunes, 99 R.I. 501, 504-505, 209 A.2d 215, 217-218 (1965); New England Tel & Tel. Co. v. Kennelly, 81 R.I. 1, 9-10, 98 A.2d 835, 839 (1953).
It is within the framework fo these general principles that we examine the commission's decision and order of May 4, 1972.
In any public utility rate case a first step is the selection of an appropriate test period, that is a span of time (usually twelve months) over which the utility's revenues, expenses, rate base and rate of return may be measured. Inasmuch as performance may, and usually will, vary from year-to-year and indeed from month-to-month, the selection of the test period may well have a substantial effect on the return eventually authorized.
In this case the company, recognizing that rate-making calls for the establishment of tommorrow's rates based upon today's facts, attempted to furnish data relating to its most recent financial experiences in the expectation, or at least the hope, that their use might better protect its interests against the impact of an inflationary economy. To that end it proposed to make the calendar year 1971 the test period. Although it did not then have available actual figures for the full twelve months of that year, it annualized those it had for the eight months ending August 31, 1971 by multiplying them by 1.5. Alternatively, it suggested that the test period include only its actual figures for the eight months ending August 31, 1971.
The commission found both of the company's proposals unacceptable: the annualized period because it used figures which, even if substantially correct, were nonetheless hypothetical and projections of actuals; and the eight-month period because it failed to provide figures for a time interval '* * * sufficiently long to overcome cyclical effects and permit reasonable assurance of reliability for rate-making purposes.' In their stead it chose figures for the twelve-month period ending August 31, 1971. Initially requested by the council, they were produced in response to a commission directive and were then selected by the latter '* * * as the most appropriate period for which factual data is available * * *.'
Basically the company's quarrel with this test period is that the figures are stale, and that it is not as keyed as are its own proposals to an inflationary economy which permitted its rate of return to decrease from the 5.73 per cent earned during the eight-month period ending August 31, 1971 to 5.45 per cent on December 31, 1971. For the commission to disregard those circumstances in the selection of a test period, the company argues, was to pave the way to the establishment of a confiscatory rate structure.
The company's position would require more...
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