Southwestern Bell Telephone Co. v. Arkansas Public Service Commission, No. 79-201

• Court: Supreme Court of Arkansas
• Writing for the Court: FOGLEMAN
• Citation: 267 Ark. 550,593 S.W.2d 434
• Docket Number: No. 79-201
• Decision Date: 28 January 1980
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. ARKANSAS PUBLIC SERVICE COMMISSION, Appellee.

Page 434

593 S.W.2d 434 267 Ark. 550 SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant,
v.
ARKANSAS PUBLIC SERVICE COMMISSION, Appellee. No. 79-201. Supreme Court of Arkansas. Jan. 28, 1980.

Page 438

[267 Ark. 554] Wayne E. Babler, Milwaukee, Wis., William C. Sullivan, Topeka, Kan., D. D. Dupre, Herschel Friday, Hermann Ivester, Little Rock, for appellant.

Robert H. Wood, Jr., Stephen K. Cuffman, Steve Clark, Atty. Gen., by Michael O'Malley, Asst. Atty. Gen., Little Rock, for appellee.

FOGLEMAN, Justice.

This appeal is the product of the inexorable march of inflation. Appellant, Southwestern Bell Telephone Company (hereafter referred to as Bell) seeks a reversal of the circuit court's affirmance of the order of the appellee Arkansas Public Service Commission (hereafter called PSC) setting aside proposed new intrastate rate schedules filed by the telephone company on March 1, 1976, and allowing the company to file a new rate schedule designed to produce additional revenues amounting to slightly more than one-third of those anticipated from the schedule proposed by the company.

[267 Ark. 555] On March 1, 1976, the telephone company sought PSC approval of a new rate schedule pursuant to Ark.Stat.Ann. § 73-217 (Repl.1957). It would have produced an increase of annual revenues to the company amounting to approximately $18,180,000. By an order entered March 29, 1976, the commission suspended the proposed rates for six months, the maximum period of suspension allowed under Ark.Stat.Ann. § 73-217(b), the applicable statute. Pursuant to the provisions of that statute, the telephone company, on August 1, 1976, made the proposed tariffs effective under an "Agreement & Undertaking" approved by PSC, and these rates were collected until June 20, 1978. The six months' suspension expired on September 29, 1976, both by the terms of the order and by operation of law. Hearings on appellant's application were not even commenced until November 15, 1976. They were concluded on November 24, 1976. Briefing time was allowed thereafter and the last briefs were filed on January 3, 1977. No order was entered by PSC until September 1, 1977. That order not only set aside the rates proposed by the telephone company, it also required the refund of all revenues collected by the company on the basis of its proposed rates in excess of those authorized in the order. On December 9, 1977, PSC entered an amended order authorizing an additional $26,120 in annual revenues.

The application filed by the telephone company was based upon a rate of return of 9.27 percent on the original cost of its property used in providing intrastate telecommunications service in Arkansas based on a test year ending December 31, 1976. This rate of return had been approved by PSC just six months prior to the filing of this application in the last previous rate proceeding involving appellant. Appellant asserted

Page 439

that the increase authorized by the earlier proceeding had proven insufficient to produce the rate of return allowed. The order entered September 1, 1977, as amended, fixed the rate of return at 8.31 percent and allowed increased annual revenues based on that rate applied to a test year rate base valued as of June 30, 1976.

Appellant's petition for review by the circuit court was filed November 11, 1977, after PSC had failed to act upon appellant's petition for rehearing filed September 21, 1977. [267 Ark. 556] The circuit court affirmed the PSC order on March 22, 1979.

Bell has presented its arguments in nine (stated) points for reversal. The arguments and contentions made under those points are to some extent overlapping and sometimes repetitive. Many of them would be more appropriately addressed to PSC than to the courts. We will endeavor to deal with Bell's basic arguments without attempting to treat the individual points separately. We must, however, give due regard to the limitations on the scope of judicial review and to the expertise of the commission. The scope of judicial review is neither so narrow as PSC would have it nor so broad as Bell asks us to make it. It is fixed by Ark.Stat.Ann. § 73-229.1 (Repl.1979). The courts can only determine whether: (1) the commission's findings as to the facts are supported by substantial evidence; (2) the commission has regularly pursued its authority; and (2a) the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or the State of Arkansas. It is only the findings of fact that are tested by the standard of substantial evidence, which is a question of law. Arkansas Public Service Com'n. v. Continental Telephone Co., 262 Ark. 821, 561 S.W.2d 645; State Highway Com'n. v. Byars, 221 Ark. 845, 256 S.W.2d 738; J. L. Williams & Sons v. Smith, 205 Ark. 604, 170 S.W.2d 82; St. Louis Southwestern Ry. Co. v. Braswell, 198 Ark. 143, 127 S.W.2d 637. All of the questions to be determined, then, are questions of law. In answering these questions, the courts may not pass upon the wisdom of the commission's actions or say whether the commission has appropriately exercised its discretion. City of Ft. Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S.W.2d 474; Allied Telephone Co. v. Arkansas Public Service Com'n., 239 Ark. 492, 393 S.W.2d 206; Arkansas Power & Light Co. v. Arkansas Public Service Com'n., 226 Ark. 225, 289 S.W.2d 688; Harding Glass Co. v. Arkansas Public Service Com'n., 229 Ark. 153, 313 S.W.2d 812. The judicial branch of the government must defer to the expertise of the commission. Arkansas Power & Light Co. v. Arkansas Public Service Com'n., supra. See also, Fisher v. Branscum, 243 Ark. 516, 420 S.W.2d 882. Judicial review is not reduced to a formality, however, and it is for the courts to say whether there has been an arbitrary or [267 Ark. 557] unwarranted abuse of the commission's discretion, even though considerable judicial restraint should be observed in finding such an abuse. Incorporated Town of Emerson v. Arkansas Public Service Com'n., 227 Ark. 20, 295 S.W.2d 778; Arkansas Public Service Com'n. v. Continental Telephone Co., supra. It is not for the courts to advise the commission how to discharge its functions in arriving at findings of fact or in exercising its discretion. Arkansas Power & Light Co. v. Arkansas Public Service Com'n., supra; Ohio Bell Telephone Co. v. Public Utilities Com'n., 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093 (1937). On the other hand, it is clearly for the courts to decide the questions of law involved and to direct the commission where it has not "pursued" its authority in compliance with the statutes governing it or with the state and federal constitutions. In questions pertaining to the regular pursuit of its authority, the courts do have the power and duty to direct the commission in the performance of its functions insofar as it may be necessary to assure compliance by it with the statutes and constitutions. The question of reasonableness of the commission's actions relates only to its findings of fact and to a determination of whether its action was arbitrary.

We must remember that the commission action has been reviewed in the

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circuit court and that the burden is on the appellant to demonstrate error in that court's judgment. See Fisher v. Branscum, supra.

Appellant first contends that its proposed rates became effective upon the expiration of the suspension and, as a result, none of the revenue collected prior to September 1, 1977, is subject to refund. The suspension order provided that the rates were suspended for six months, "or until such earlier time as the Commission may order." Appellant argues that its proposed rates became effective on September 30, 1976, and that PSC lost its power to act with regard to the rates and any revenues collected under them. The commission is authorized to suspend proposed rates pending its investigation and decision, but not for a period to exceed six months. There is no indication whatever of any legislative intent that PSC should entirely lose jurisdiction of the rate proceeding by its failure to reach a decision within the suspension[267 Ark. 558] period. By the same token, the time limitation is not meaningless, as it would be, if the refund order is held valid. It should be remembered that the hearings on the rate increase were not even commenced during the suspension period. The only purpose of the limitation on the suspension is to prevent the "regulatory lag" between the filing of an application for a rate increase and the commission's decision from having a confiscatory tendency. If the commission's decision can be delayed for 18 months after the filing of the application by the utility, it could be delayed for two or three times that long. In these days of galloping inflation, the passage of time can be crucial. Perhaps the delay was attributable to the heavy load falling upon PSC as a result of inflationary trends. If, however, the utility has no protection from a long delayed decision which requires a refund, repetitive applications for rate increases will be filed by it during the pendency of its initial application. This would only serve to increase the workload of the commission and produce additional delay. The time limitation must be given some meaning. We take it to mean that, in this case, the commission had no authority to order a refund of revenues collected on the basis of the proposed rates between the date of the expiration of the suspension order and the date of the order fixing the rates allowed. By the clear language of § 73-217, it is only the operation of the rates that may be suspended, but that suspension cannot exceed six months. See New England Telephone & Telegraph Co. v. Public Utilities Co., 362 A.2d 741 (Me.1976); State v.Montana-Dakota Utilities Co., 89 N.W.2d 94 (N.D.1958). On the other hand, we do not agree with appellant that refunds of collections made between August 1, 1976...