Silverado Communication Corp. v. Public Utilities Com'n of State of Colo.

• Decision Date: 24 April 1995
• Docket Number: No. 94SA206,94SA206
• Parties: SILVERADO COMMUNICATION CORPORATION, Plaintiff-Appellant, v. PUBLIC UTILITIES COMMISSION OF THE STATE of COLORADO, Commissioners Robert E. Temmer, Christine E.M. Alvarez, and Vincent Majkowski; and US West Communications, Inc., Defendants-Appellees.
• Court: Colorado Supreme Court

Page 1316

893 P.2d 1316

SILVERADO COMMUNICATION CORPORATION, Plaintiff-Appellant, v. PUBLIC UTILITIES COMMISSION OF THE STATE of COLORADO,

Commissioners Robert E. Temmer, Christine E.M.

Alvarez, and Vincent Majkowski; and US

West Communications, Inc.,

Defendants-Appellees.

No. 94SA206.

Supreme Court of Colorado,

En Banc.

April 24, 1995.

Rehearing Denied May 15, 1995.

Nichols & Hecht, LLC, Robert W. Nichols, Charles B. Hecht, Julie C. Tolleson, Denver, for plaintiff-appellant.

Denman & Associates, P.C., Steven H. Denman, Richard L. Corbetta, Wendy M. Moser, Denver, for defendants-appellees U S West Communications, Inc.

Justice MULLARKEY delivered the Opinion of the Court.

Plaintiff-appellant Silverado Communications Corporation (Silverado), appeals from the Denver District Court holding that defendant-appellee U S West Communications, Inc. (US West) did not engage in retroactive ratemaking and was entitled to shift Silverado's service from a "semi-public" business trunk service (PBX trunks) to its Public Access Line (PAL) tariff. Silverado challenges the applicability of the PAL tariff from October 1991 to February 1993. We affirm the holding of the district court.

I.

The Public Utilities Commission (PUC) regulates Silverado as a provider of computer-based telecommunications services, including a product designed to enable inmates in correctional institutions to communicate with persons outside of the facilities. Silverado purchases connections to the local exchange telephone network from US West under that company's effective tariffs. Silverado then provides service to its customers pursuant to its own PUC-approved tariffs. Silverado originally provided the inmate service through U.S. West's PBX trunks but was switched unilaterally by US West to its PAL lines. ¹ All other inmate service providers, including US West, provide service under the applicable PAL tariffs.

Originally, Silverado's inmate service product was technically incompatible with US West's PAL system. However, because Silverado's product was technically compatible with the US West's PBX trunks, US West agreed to temporarily provide service through its PBX trunks on a flat-rate basis. A letter from US West confirming the agreement stated:

The purpose of this letter is to inform you that US West Communications, Inc. has installed service as of November 15, 1989, at your request.... However, it is US West Communication, Inc.'s position that the definition in the semi-public service tariff, 5.3.2.6, does not actually fit the type of service your company intends to provide ... Even though it does not appear that the semi-public tariff definition applies, there does not appear to be any other tariff offering which exactly applies.

Rather than US West Communications, Inc. taking the position that it cannot provide service, it is providing service as requested. However, US West Communications, Inc. plans to take this matter to the Commission [PUC] in the near future in the form of a new tariff offering which will apply to your situation, as well as other companies that may have the same need for service.

Although US West subsequently sought approval on one occasion from the PUC for a specially designed PAL tariff for inmate service in Advice Letter 2181, it ultimately withdrew its application.

According to testimony, once technical compatibility was attained, Silverado was not immediately converted to PAL service. US West explained that it did not switch Silverado to PAL service because of a pending general rate case which resulted in our decision in Integrated Network Services v. P.U.C., 875 P.2d 1373 (Colo.1994). At issue in that case was the applicable tariff for providers of payphone and shared tenant services. Integrated Network held that US West appropriately applied measured PAL service rates to resellers of telecommunications services. Payphone providers and providers of shared tenant services were held to be resellers of the communications service, ² and, thus, were subject to the measured resale PAL service rate. ³

In September 1991 and after the general rate case was determined by the PUC, US West notified Silverado that it was canceling the PBX trunk service and converting all of Silverado's inmate service access lines to the existing PAL service. US West began conversion of the lines in October of 1991, but, because of administrative difficulties, did not complete conversion of all of Silverado's lines to PAL service until March of 1992. This conversion significantly increased the cost of service to Silverado. Shortly thereafter, Silverado filed a formal protest with the PUC.

After Silverado filed its grievance, US West filed a new proposed amendment to its existing PAL tariffs through Advice Letter 2254. According to US West, the amendment was intended to clarify any ambiguity in the PAL tariff and to ensure adequate inmate service coverage under the PAL tariff. The amendment was consolidated with Silverado's protest and was assigned to an Administrative Law Judge (ALJ) for hearing. The ALJ accepted the proposed amendments and rejected Silverado's formal protest. In so doing, the ALJ held that the amendments were clarifications and that the original service problem was one of technical incompatibility rather than inapplicability of the PAL tariff. Despite exceptions filed by Silverado, the PUC affirmed the decision of the ALJ. Silverado then appealed to the district court, arguing that US West engaged in retroactive ratemaking by charging for the PAL service before its "inmate service amendment" had been accepted. The district court held that since the original PAL tariff preceded this matter and included inmate service, no retroactive ratemaking occurred. The district court also held that US West could properly change Silverado's service from PBX to PAL. Silverado now appeals to this court on the grounds that US West's action was not permitted under the applicable tariffs existing at the time of the change. Silverado also argues that US West engaged in retroactive ratemaking. We hold that US West could apply the earlier PAL tariff to Silverado and did not engage in retroactive ratemaking.

II.

A.

Silverado asserts that the proper standard of review in this case is de novo because it involves construction of the PAL tariff. We disagree.

This case requires us to review a ratemaking decision of the PUC. Ratemaking in public utility matters is a legislative function delegated to the PUC. Colo. Const. art. XXV; Integrated Network, 875 P.2d at 1377; City of Montrose v. P.U.C., 629 P.2d 619, 622 (Colo.1981). Because they are made by an administrative agency with considerable technical expertise in the area of utility regulation, the PUC decisions should be accorded due deference. Integrated Network, 875 P.2d at 1377. Our review of a PUC decision is limited to determining whether the PUC has pursued its authority regularly, whether its decision is just and reasonable, and whether its conclusions are in accordance with the evidence. Id.; § 40-6-113(3), 17 C.R.S. (1993).

B.

Silverado argues that it could not be charged at the PAL rate because no PAL tariff for inmate service existed prior to the amendments approved by the ALJ. US West's position is that it was entitled to transfer Silverado to the PAL lines under the tariff structure existing prior to the amendments. ⁴ The district court and the ALJ both found that US West was entitled to change Silverado to the PAL rate under the then-existing tariff structure. We agree.

The PUC found that:

the record demonstrates that [Silverado], in its provision of inmate service, is a reseller of local telephone service. Company witnesses testified, and we find this testimony to be credible, that [US West] provides access under the PAL tariff to resellers of local service, such as [Silverado]. The evidence in this proceeding indicates that all other providers of inmate service in Colorado take service from [US West] under the PAL tariff. In fact, [US West] imputes PAL rates to its own inmate services. [US West] also presented evidence that inmate service providers throughout its 14-state region use PAL lines.

....

The evidence here further indicates that [US West] categorizes inmate service such as that provided by [Silverado] as similar to payphone service (i.e. both involve the resale of local service). As such, the company requires all inmate service to take access under the PAL rate. We hold that [US West's] categorization of [Silverado's] service as a PAL service was reasonable. In particular, this categorization is consistent with our stated policy that resellers of basic service should be required to purchase access under a measured rate. In brief then, we hold that the conversion of [Silverado's] lines to the PALs was proper. Since that conversion was appropriate, Complainant is required to pay for service under the PAL rate.

This decision is within the regular authority of the PUC. The PUC in effect held that Silverado avoided the PAL tariff until its 1991-92 conversion only because of a special accommodation by US West required by Silverado's equipment and that the subsequent conversion of Silverado to the PAL tariff was proper, lawful and consistent with PUC policy because Silverado was a reseller. The PUC rejected Silverado's position that it was entitled to preferential rates and upheld US West's action in converting Silverado to the PAL tariff. The proper application of rates and tariffs is undoubtedly within the regular authority of the PUC. See § 40-3-101 et seq, 17 C.R.S. (1993).

The decision of the PUC is just and reasonable. The PUC found, as a factual matter, that all other inmate providers, including...