South Central Bell Tel. Co. v. LOUISIANA PUB. SERV., Civ. A. No. 83-557-A.
| Decision Date | 01 August 1983 |
| Docket Number | Civ. A. No. 83-557-A. |
| Citation | 570 F. Supp. 227 |
| Parties | SOUTH CENTRAL BELL TELEPHONE COMPANY v. LOUISIANA PUBLIC SERVICE COMMISSION, Thomas E. Powell, George J. Ackel, Ed Kennon, Louis Lambert and John F. Schwegmann. |
| Court | U.S. District Court — Middle District of Louisiana |
COPYRIGHT MATERIAL OMITTED
Herschel Abbott, Jr., New Orleans, La., for plaintiff.
Michael P. Fontham, New Orleans, La., Marshal B. Brinkley, Louisiana Public Service Comm., Baton Rouge, La., Shelly Zwick, Asst. U.S. Atty., Baton Rouge, La., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff, South Central Bell Company, brings an action for declaratory and injunctive relief against the defendants, the Louisiana Public Service Commission and its individual commissioners, Thomas E. Powell, George J. Ackel, Ed Kennon, Louis Lambert and John G. Schwegmann, Jr. This matter is before the court on plaintiff's motion for a preliminary injunction. A hearing was held and the motion was submitted upon the submission of briefs. The court has subject jurisdiction under 28 U.S.C. § 1337.
1) Defendant, Louisiana Public Service Commission, is authorized by the laws of the state of Louisiana to regulate the intrastate rates, services, facilities and practices of South Central Bell Company insofar as that company is engaged in the business of supplying utility service to the public with the state of Louisiana.
2) On May 3, 1982, South Central Bell filed tariff revisions with the Louisiana Public Service Commission seeking an increase of $238,600,000.00 in annual revenues in Docket No. U-15445.
3) As part of the justification for the increase, plaintiff relied upon the Federal Communications Commission's (FCC) 1980 adoption of the Remaining Life and Straight Line Equal Life Group depreciation method in the Order released December 5, 1980, in Docket 20188, 83 F.C.C.2d 267 (1980), on reconsideration 87 F.C.C.2d 916 (1981). Plaintiff further relied upon the F.C.C. Order which requires the expensing of station connection released March 30, 1981, CC Docket No. 79-105, 85 F.C.C.2d 818 (1981).
4) On December 30, 1982, the F.C.C. issued an Order in Docket No. 82-576 which prescribed depreciation methods for South Central Bell equipment. The Louisiana Public Service Commission had an opportunity to participate in the hearings which culminated in the formation of the Order.
5) No appeal was filed from the December 30, 1982 Order and it is now final.
6) On January 6, 1983, the F.C.C. released its Memorandum Opinion and Order adopted December 22, 1982, in CC Docket No. 79-105 which held that the F.C.C.'s depreciation methods preempt inconsistent state depreciation methods and rates. The Order also contained a provision requiring the Secretary of the F.C.C. to serve a copy of the Order on each state commission. According to William J. Tricarico, Secretary of the F.C.C., members of his staff mailed copies of the Order to all state public service commissions, including defendant, on or about January 7, 1983.
7) The Order was published in the Federal Register on January 19, 1983.
8) The testimony of Bruce Louiselle indicates that the Louisiana Public Service Commission had actual knowledge of the F.C.C.'s January 6, 1983 Order and the commission so concedes.
9) The Louisiana Public Service Commission continues to prescribe methods of depreciation other than those prescribed by the F.C.C., the straight line equal life group method. The last official order of the Louisiana Public Service Commission which addresses regulation of depreciation rates for plaintiff's equipment in Louisiana is dated June 30, 1981. It states: The Order expresses the intent of the Commission in that it provides that the Order is "issued to set forth the scope of the regulatory authority over telephone tariffs that is exercised, and will continue to be exercised absent a contrary and authoritative judicial order, by the Louisiana Public Service Commission."
10) The Louisiana Public Service Commission requires plaintiff to employ a depreciation technique known as Whole Life straight line depreciation. When an asset is acquired, a fixed life is assigned to it and the costs of depreciation are allocated over the assigned period regardless of the actual life of the asset. Recovery of these costs occurs at a slow rate at the beginning of the life of the asset.
11) The technique now prescribed by the F.C.C., the remaining life method, evaluates the remaining life of the assets at specified intervals and the remaining value of the asset is depreciated over its remaining life, regardless of the length of its actual life to date.
12) The remaining life method results in greater recovery of costs early in the life of the asset. The same is true of the straight line equal life group technique.
13) The actual expenses of plaintiff, including costs associated with depreciation of assets, are one factor evaluated by the Louisiana Public Service Commission in determining what rates South Central Bell will be allowed to charge.
14) If depreciation of plaintiff's assets is computed according to the method prescribed by the F.C.C. rather than according to the technique employed by the Louisiana Public Service Commission, its expenses will be substantially increased.
15) The Louisiana Public Service Commission also requires that station connection costs be capitalized, rather than expensed, as required by the F.C.C. Expensing Order.
16) The use of the F.C.C. mandated accounting procedures will result in accelerated depreciation and increased expenses which require an increase in rates. The need for additional revenue originates in the settlement of the government's antitrust action against American Telephone & Telegraph Co. and is one of the "benefits" to the public of the break-up of the Bell System into separate entities.
17) Plaintiff's need for additional cash flow is indisputable and delay in switching to F.C.C. mandated accounting procedures will deny plaintiff the additional cash flow required, thus impairing its financial position and cash flow which it is presently losing because of the actions of the Louisiana Public Service Commission. Such losses are irretrievably lost, even though a rate increase should be granted in the future.
1) The terms of the Federal Communications Act of 1934 expressly grant to the F.C.C. the authority to enter orders effectuating the provisions of the Act, 47 U.S.C. §§ 151, 152(a), 154(i). In the exercise of its authority, the F.C.C. has broad discretionary power, see e.g. United States v. Southwestern Cable Company, 392 U.S. 157, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968).
2) In keeping with its statutory grant of power, the F.C.C. has held that, under Section 220(b) of the Act, states may not prescribe depreciation rates which are inconsistent with the depreciation rates and policies mandated by the F.C.C., see Memorandum Opinion and Order, CC Docket No. 79-105, January 6, 1983. 48 Fed.Reg. 2324 (1983).
3) The Supremacy Clause of the United States Constitution, Article XI, cl. 2, dictates that federal laws preempt those enacted by the states when the latter are in conflict with the purposes of Congress, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963).
4) The January 6, 1983 Memorandum Opinion and Order carefully considers the impact of inconsistent state imposed methods of depreciation computation on intrastate communications and concludes that their continued use would frustrate the objectives of Congress expressed in the Federal Communications Act. The order clearly states: "... We find it imperative to declare today that inconsistent state prescribed depreciation rates are preempted by the Communication Act and are accordingly void." 48 Fed.Reg. at 2330 (1983) and: "... Id., at 2230, and "... Accordingly, we find that this Commission's depreciation policies and rates, including the expensing of inside wiring, preempt inconsistent state depreciation policies and rates." (Id. at 2331)
5) The rulings and orders of administrative agencies carry the full force of federal law and are accorded the same preemptive effect as federal statutes, Fidelity Federal Savings & Loan Association v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).
6) The Louisiana Public Service Commission continues to require the plaintiff to employ methods of computing depreciation which conflict with those specified by the F.C.C. and, in so doing, are in violation of federal law.
7) Plaintiff asks the court to grant injunctive relief in accordance with the provisions of 47 U.S.C. § 401(b) which allows any party, injured by another person who neglects to comply with any order of the Commission, to ask the court for enforcement of the order through issuance of an injunction.
8) After a hearing, the court "shall enforce obedience to such order by a writ of injunction ..." if the court determines that the order was "regularly made and duly served" and that the defendant is acting in violation of the order. 47 U.S.C. § 401(b).
9) The first of the statutory requirements of § 401(b) has already been met, the defendants are clearly acting in defiance of the F.C.C.'s January 6, 1983 Ord...
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