State ex rel. American Tel. & Tel. Co. v. Public Service Com'n

• Decision Date: 19 November 1985
• Docket Number: No. WD,WD
• Citation: 701 S.W.2d 745
• Court: Missouri Court of Appeals
• Parties: STATE of Missouri, ex rel., AMERICAN TELEPHONE & TELEGRAPH COMPANY, and AT & T Information Systems Inc., Relators/Appellants, v. PUBLIC SERVICE COMMISSION of the State of Missouri, Southwestern Bell Telephone Company, and Office of Public Counsel of the State of Missouri, Defendants/Respondents. 36158.

Page 745

701 S.W.2d 745

STATE of Missouri, ex rel., AMERICAN TELEPHONE & TELEGRAPH COMPANY, and AT & T Information Systems Inc Relators/Appellants, v. PUBLIC SERVICE COMMISSION of the State of Missouri Southwestern Bell Telephone Company, and Office of Public Counsel of the State of Missouri Defendants/Respondents.

No. WD 36158.

Missouri Court of Appeals Western District.

Nov. 19, 1985.

Louis F. Bonacorsi, St. Louis, for relators/appellants.

Steven Dottheim, Michael C. Pendergast, Jefferson City, for Missouri Public Service Comm.

James E. Taylor, St. Louis, for Southwestern Bell.

Douglas M. Brooks, Jefferson City, for Office of Public Counsel.

Before LOWENSTEIN, P.J., and NUGENT and BERREY, JJ.

BERREY, Judge.

American Telephone and Telegraph Company (AT & T) and AT & T Information Systems (ATTIS) appeal from the decision of the Circuit Court of Cole County which affirmed an order of the Missouri Public Service Commission approving a tariff assessed against ATTIS for the use of certain embedded complex inside wiring owned by Southwestern Bell Company (SWB). Judgment affirmed.

The wire which is specifically at issue is referred to as embedded complex inside wire (CIW). CIW is "the telephone wire on a multi-access business customer's premises that connects all of the common equipment and terminals." The "common equipment" includes switchboards and key equipment; "terminals" are the telephone sets themselves. Common equipment and terminals are known collectively as "Customer Premises Equipment" (CPE).

Prior to 1981, the cost of installing CIW was charged to the business customer on a one-time basis at a price well below cost in order to expand services. The remaining expense was capitalized as an asset of the telephone company and depreciated over a period of time rather than expensed in the year of installation. In 1981 the Federal Communications Commission (FCC) ordered that the cost of any new wire installation was to be expensed in the year the installations were made. In re Uniform System of Accounts, 85 F.C.C.2d 818, 828 (1981) (Docket 79-105). An enormous account for the CIW had been built up over the years, and the FCC order provided that this capitalized investment was to be recovered over a ten year period ending in 1991. Id. at 829.

In 1982, pursuant to the approval of a consent decree, AT & T was ordered to divest itself of its Bell Operating Company subsidiaries such as SWB. See United States v. American Tel. and Tel. Co., 552 F.Supp. 131, 135-140 (D.D.C.1982), aff'd. sub nom., Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983), referred to herein as the Modification of Final Judgment (MFJ). AT & T was ordered to submit a Plan of Reorganization (POR) to the Department of Justice which was approved after limited modification. See United States v. Western Electric Co., Inc., 569 F.Supp. 1057 (D.D.C.1983), summarily aff'd, California v. United States, 464 U.S. 1013, 104 S.Ct. 542, 78 L.Ed.2d 719 (1983). The POR contained a provision for the Bell Operating Companies to retain ownership of the CIW installed prior to the divestiture on January 1, 1984. Those companies also remained responsible for the recovery of the revenue requirement arising from the FCC order of 1981. Ownership of the CPE in existence at the time of divestiture was transferred to ATTIS.

To recover its historical investment, the telephone company (SWB) had previously been assessing a charge directly against those customers who used the CIW based on the number of station lines on the customers' premises. After divestiture, SWB would no longer have records of the customers' use of the wiring, but would have information regarding how much outside access wire was being fed into the common equipment. Thus, the problem arose as to how the revenue requirement was to be satisfied.

On February 1, 1983, SWB filed new tariffs, rates, tolls and charges for it and its future subsidiaries with the Missouri Public Service Commission (PSC). On July 25, 1983, the PSC granted SWB permission to file supplemental testimony wherein SWB proposed a new method for recovering the historical investment in CIW. SWB's annual revenue associated with CIW requirement at that time was $18,179,000.00. SWB proposed recovering the investment by assessing a charge of $9.30 per month for each outside access line to which the business customer subscribed. However, the charge was to be collected from the CPE owner (ATTIS) and not the business customer. Because ownership of the CPE in existence prior to 1984 had been transferred to ATTIS, the charges would be collected almost exclusively from ATTIS. The PSC granted ATTIS' application to intervene.

The PSC conducted a hearing on the CIW issue beginning October 18, 1983. In support of its position SWB argued that it would no longer have any records of customers' use of the wire. SWB will know, however, how much access wire is fed into the common equipment, the switchboards and key equipment. SWB would no longer be installing new CIW nor maintaining existing CIW; its service personnel responsible for installation and maintenance of CIW were to be transferred to ATTIS. SWB argued that CIW is an "integral part of the terminal equipment" and it is "not directly connected to the Southwestern Bell network." SWB likened its position to that of a "wholesaler, so to speak, of a component part" who "wishes to sell or lease or impose rates for the use of complex inside wire upon the business entity that's in the business of assembling terminal equipment packages and marketing them to terminal equipment users." SWB referred to the general economic premise that the "cost causer has to be responsible for the cost recovery."

ATTIS countered that the PSC lacked authority to approve "an assessment of utility charges against someone who has not requested and does not use the utility service." In support of its position, ATTIS argued it was not a user of the wire but rather ATTIS' customers who lease the equipment are users because they are provided the inside wire used to interconnect the equipment. The decision to use the wire already in existence on the premises is made by the customer. ATTIS set forth other potential problems with SWB's proposal including the creation of "serious administrative problems for the CPE owner which would ultimately result in additional expense to the consumer." Also, ATTIS argued that there is "no direct relationship between the number of access lines subscribed to and the amount of inside wire actually used by the CPE owner's customers causing small customers to pay more for the use of the same amount of inside wire as large customers;" that additional administrative costs will be incurred because the CPE owner will be required to pass the charges along to their customers; that there would be "an enhancement of the possibility that the existing network will be inefficiently utilized;" that CPE owners would be burdened with charges for costs for which they are not responsible; and that significant portions of the CIW will be stranded, thus making recovery of the historical investment even more difficult.

ATTIS presented its proposal in which the revenue requirement would be collected from the general body of ratepayers. If the $18.2 million were spread equally among all ratepayers, ATTIS' proposal would increase each individual's monthly bill by $.95. This increase would be applicable regardless of whether or not the wire was present on the individual's premises. Although ATTIS' proposal would cause the costs to be imposed upon those who are clearly not users of the wire, i.e., small businesses who have no switchboards or key equipment and residential customers, ATTIS continues to assert the order of the PSC is improper because ATTIS is not a user of CIW service.

The PSC issued its Report and Order--Part II, on December 20, 1983, wherein it found SWB's proposal to be just and reasonable. The PSC noted in its findings that the transfer of common and station equipment to ATTIS "without the transfer of the complex inside wire which serves the equipment will leave Southwestern Bell in the position of being interposed between the CPE supplier [ATTIS] and the supplier's customer." The PSC found that a charge "based upon the number of access lines leading to the common equipment is supported by the fact that there is a direct relationship between the number of access lines and the amount of wire used on the premises of a complex customer." The PSC also noted that any customer could avoid the charge by purchasing the existing wire from SWB or installing his own wiring.

AT & T and ATTIS filed a petition for writ of review with the Circuit Court of Cole County. Following oral arguments, the court affirmed the PSC's orders on July 2, 1984. AT & T and ATTIS appealed that decision to this court.

Appellants first argue that the PSC has no lawful authority to approve utility charges against the lessor [ATTIS] of appliances for the lessee's [CPE customers] consumption of utility services during operation of the appliances. Appellants assert that ATTIS is a private unregulated business which is under no obligation to provide public utility services and the PSC has neither the statutory nor constitutional power to authorize charges against the business.

It is true that the PSC is a creature of statute with powers limited to those conferred by the statute. State ex rel. Utility Consumers Council v. Public Service Commission, 585 S.W.2d 41, 49 (Mo. banc 1979). However, it is also true in this case that the PSC has acted within its authority by assessing charges against ATTIS.

The PSC is "vested with and possessed of the powers and duties in this chapter specified, and also all powers necessary or proper to enable it to carry out fully and effectually all the purposes of this chapter [Chapter 386]." Section 386.040, RSMo 1978. ¹ One of the PSC's duties is supervision of...