State v. Alabama Public Service Commission

• Citation: 293 Ala. 553,307 So.2d 521
• Parties: STATE of Alabama and George C. Wallace as Governor of the State of Alabama et al. v. ALABAMA PUBLIC SERVICE COMMISSION. SC 728.
• Decision Date: 16 January 1975
• Court: Supreme Court of Alabama

Page 521

307 So.2d 521

293 Ala. 553

STATE of Alabama and George C. Wallace as Governor of the State of Alabama et al. v. ALABAMA PUBLIC SERVICE COMMISSION.

SC 728.

Supreme Court of Alabama.

Jan. 16, 1975.

Maurice F. Bishop, Birmingham, for George C. Wallace, Governor, and for the State of Ala.

Oliver W. Brantley, Troy, for appellant Cities and Towns.

Hill, Hill, Carter, Franco, Cole & Black, Montgomery, and Ward W. Wueste, Jr., Durham, N.C., for Gen. Tel. Co. of the Southeast.

HARWOOD, Justice.

On 23 September 1971, General Telephone Company of Alabama (hereinafter referred to as GT of Alabama), filed an application with the Alabama Public Service Commission seeking an increase in intrastate telephone rates from its Alabama customers in the amount of $2,504,450 annually.

GT of Alabama was an Alabama corporation and prior to 31 August 1971 was a wholly owned subsidiary of General Telephone and Electronics Corporation, hereinafter referred to as GTE.

General Telephone Company of the Southeast, hereinafter referred to as GTSE, is an operating company and a wholly owned subsidiary of GTE. GTSE is qualified to do business in Alabama.

GTSE acquired the stock in GT of Alabama and effective 1 September 1971, GT of Alabama became a wholly owned subsidiary of GTSE. GTSE also is the operating company for General Telephone Company of Georgia, General Telephone Company of North Carolina, Pee Dee Telephone Company and Mutual Telephone Company, all of which were merged into GTSE at the end of 1970. Each of the above companies, including GT of Alabama were under the common management of GTSE prior to their mergers.

The debt-equity ratio of GTSE is about 45% Debt and 55% Equity, while that of GT of Alabama prior to the merger was 30% Debt and 70% Equity.

The petition for increased rates filed by GT of Alabama alleged that its continued investment in telephone plants and facilities since its last rate increase, together with the increased costs of materials, wages, and supplies, resulted in a rate of return to GT of Alabama of 6.64%, which was inadequate to enable the company to fully perform its duties to the public. The petition further alleged that a fair rate of return to GT of Alabama should be not less than 9.4% And the proposed rate increase of $2,504,450 would produce a rate of return of 9.35% On the reasonable value of GT of Alabama intrastate property devoted to public use.

On 27 October 1972, the Commission established a reasonable test period to be used in its consideration of the petition to be the year ending 31 May 1971.

Hon. George C. Wallace, as Governor of the State of Alabama, and 16 municipalities, and the citizens of those municipalities who were telephone subscribers entered the proceedings as intervenors and actively participated therein.

After several days of hearings, the matter was taken under advisement by the Commission on 21 January 1972.

On 29 February 1972, while the matter was under submission, the GT of Alabama and GTSE filed a petition for merger of GT of Alabama into GTSE, and for the issuance of a certificate of convenience and necessity authorizing GTSE to operate the properties of GT of Alabama. After notice, the petition was heard on 3 April 1972.

On 18 April 1972, the intervenors filed a petition for further hearing on the petition to increase rates and in the alternative for the incorporation of the merger proceedings in the present rate proceedings. No action was taken on this petition, and on 19 April 1972, the Commission confirmed and approved the merger, and granted to GTSE a certificate of convenience and necessity to operate the telephone properties of GT of Alabama, 'and to acquire all the operating rights and privileges belonging thereto. The rates for telephone service now in effect in each of the telephone exchanges affected hereby shall continue until otherwise ordered by the Commission.'

Following the order approving the merger, the intervenors on 5 May 1972, filed a petition to dismiss the application filed by GT of Alabama, or, in the alternative that further hearings be had on the petition to increase rates. The Commission took no action on this petition. The petition of 5 May 1972, among other things, asserted that prior to 31 August 1971, GT of Alabama was a wholly owned subsidiary of GTE, and on 1 September 1971, just prior to filing a petition for increase in rates, GT of Alabama became a wholly owned subsidiary of GTSE, which resulted in a change of parties. (GTSE had acquired all of the stock of GT of Alabama on 31 August 1971.)

On 27 October 1972, a majority of the then Commission (Connor and Owen) issued an order granting an annual increase in operating revenue of $1,435,970 to GTSE.

Commissioner McDaniel dissented setting forth several reasons among which are that the record did not justify the increase and that there was a complete change in parties.

The Commission majority found that the income available for return on 31 May 1971 was $2,941,263. Since the investment by the company was to be computed through the year ending 31 May 1972, it was necessary to determine the income which the additional investments made in the year of 31 May 1971 to 31 May 1972, would produce. The company introduced evidence tending to show that its main stations would grow by 4,875 during the projected year, and increase in income factor would be 1.072143. The Commission found this projection acceptable. The Commission further found toll revenues under this formula would impute an additional $248,724, but that with such additional revenue calculated on the intrastate (Alabama) rate base of $44,771,378 at the end of the test year would amount to a rate of return of 7%. The Commission found this rate of return insufficient to support the programs the utility must carry on, and that a rate of return in the range of 8.50% To 8.75% Would be reasonable. The Commission thereupon found that a rate of return of 8.58% Would be reasonable, and so fixed the rate of return. This rate of return is not challenged on this appeal. The Commission on the basis of such rate of return further fixed an annual increase in intrastate operating revenue to GTSE in the amount of $1,435,970, instead of in the amount of $2,504,450, as requested in the application. This was on the intrastate rate base of $44,771,378.

The order of the Commission was appealed to the Circuit Court of Montgomery by both the intervenors and the company.

After consideration of the record, oral arguments, and what the appellants describe as 'multiple briefs,' the Circuit Court found that the Commission did err in its order 'as to the following specific issues * * *'

The specific aspects of the Commission's order found to be erroneous by the court were discussed in detail, with reason and calculations demonstrating and substantiating the court's conclusions that in the named instances the Commission erred. The net result was that the court found that the order of the Commission allowing a rate increase of $1,435,970 was excessive in the amount of $208,924. The case was thereupon remanded to the Commission for the purpose of entering a proper lawful order in accordance with the decree of the court.

Since the court's action in specific instances resulting in a reduction in the rate increase allowed by the Commission was adverse to the company, and no appeal was perfected by the company from the order of the court, we see no necessity for setting out in detail the reasons and calculations by which the court arrived at its conclusions in these instances.

As to refund of the amounts already paid under the Commission's order, which was found to be excessive in the amount of $208,924, the court below found and decreed:

'The Court is of the opinion that the only time the Court could order a refund is when a supersedeas bond is made. The Court can find no provision for reparation in the statute applicable to the facts in the case, so no refund is due. The Court having decided this point, no duty rests on the Court to decide the issues of attorney fees.'

The limits and standards of our review on appeal from an order of a circuit court upholding an order of the Alabama Public Service Commission was stated as follows in Floyd & Beasley Transfer Co., Inc. v. Alabama Public Service Commission, 276 Ala. 130, 159 So.2d 833:

'* * * The order of the Commission is taken as prima facie just and reasonable, Title 48, Sec. 82, Code of 1940, and the burden is on the party who would upset the order of the Commission. Alabama Public Service Commission v. Atlantic Coast Line R. Co., 253 Ala. 559, 45 So.2d 449. Also, findings of the Commission will not be overturned if supported by legal evidence of substantial weight and probative force. Alabama Public Service Commission v. Higginbotham, 256 Ala. 621, 56 So.2d 401; Alabama Public Service Commission v. Nunis, 252 Ala. 30, 39 So.2d 409; North Alabama Motor Express v. Rookis, 244 Ala. 137, 12 So.2d 183. * * * This Court has made it clear in the Rookis case, supra, as well as in the case of Alabama Public Service Commission v. Crow, 247 Ala. 120, 22 So.2d 721, that courts must guard against a substitution of their own judgments of findings of fact for the judgment of the Commissioners. * * *'

See also Hiller Truck Lines, Inc. v. Alabama Public Service Commission, 292 Ala. 161, 290 So.2d 649, citing with approval the above statement from Floyd & Beasley v. Alabama Public Service Commission, supra.

The legislature has committed to the Alabama Public Service Commission matters of vast public interest. Among these powers are the regulation of utilities and their rates, and the regulation of transportation over both railroads and highways. Presumptions are indulged in favor of the orders of the Commission. Alabama Public Service Commission v. Redwing Carriers, Inc., 281 Ala. 111, 199 So.2d 653.

The ultimate question in a rate case is a fair rate of return from a predetermined rate...