State v. Public Service Comm. of MO

• Decision Date: 16 January 2001
• Citation: 40 S.W.3d 381
• Parties: (Mo.App. W.D. 2001) . State of Missouri, ex rel. Alma Telephone Company, et al., and State of Missouri, ex rel. BPS Telephone Company, et al., Respondents, v. Public Service Commission of the State of Missouri, Appellant. WD58324 Missouri Court of Appeals Western District Handdown Date: 0
• Court: Missouri Court of Appeals

40 S.W.3d 381 (Mo.App. W.D. 2001)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

State of Missouri, ex rel. Alma Telephone Company, et al., and State of Missouri, ex rel. BPS Telephone Company, et al., Respondents, v. Public Service Commission of the State of Missouri, Appellant.

WD58324

Missouri Court of Appeals Western District

Handdown Date: 01/16/2001

Appeal From: Circuit Court of Cole County, Hon. Thomas Joseph Brown III

Counsel for Appellant: Keith R. Krueger

Counsel for Respondent: Craig Steven Johnson and William Ross England III

Opinion Summary:

The Missouri Public Service Commission (Commission) appeals the decision of the trial court overturning the Commission's Reports and Orders issued June 10, 1999, and remanding the cause to the Commission. In its Reports and Orders, the Commission directed that the Primary Toll Carrier (PTC) Plan, the established plan for routing and charging long distance calls in rural Missouri, be terminated on October 20, 1999, and proposed a mechanism that would allow Respondents, BPS Telephone Company, et al., and Alma Telephone Company, et al., (Telephone Companies) to achieve revenue neutrality after termination of the plan. On appeal, the Respondent Telephone Companies contend that (1) the doctrines of the law of the case and res judicata barred the Commission from relitigating the revenue neutrality issue first determined by the circuit court in the preceding case without appeal and raised again in this appeal from the subsequent case, and (2) the revenue neutrality mechanism in the Commission's Reports and Orders was unlawful because (a) the mechanism shifted the burden of proof to the Respondent Telephone Companies to show that their present rates and revenues are reasonable and (b) the mechanism constituted retroactive ratemaking.

AFFIRMED.

Division I holds: Where the trial court previously held in PTC II that the Commission must provide a revenue neutrality mechanism assuring the Telephone Companies' earnings would not be adversely affected by elimination of the PTC Plan and that the Commission's invitation to the Telephone Companies to file rate proceedings in the future if they were adversely affected by the elimination of the PTC Plan was unlawful and unreasonable, and the Commission did not challenge the trial court's judgment in the PTC II case, the trial court's decision in PTC II became the law of the case in all subsequent proceedings regarding the litigated issues.

Where the facts in PTC III, the instant case, were not substantially different from the facts vital to the trial court's decision in PTC II, the doctrine of law of the case applied in PTC III to preclude the Commission from relitigating the issue of revenue neutrality upon elimination of the PTC Plan. The Commission's attempt in PTC III to enter an order in conflict with the trial court's judgment in PTC II was unreasonable and unlawful. The judgment of the trial court reversing the Commission's Reports and Orders in PTC III is, therefore, affirmed.

Opinion Author: Robert G. Ulrich, Judge

Opinion Vote: AFFIRMED. Breckenridge, P.J., and Howard, J., concur.

Opinion:

The Missouri Public Service Commission (Commission) appeals the decision of the trial court overturning the Commission's Reports and Orders issued June 10, 1999, in Case No. TO-99-254, and cases consolidated therewith, as modified and clarified by the Commission's subsequent orders in the various consolidated cases, and remanding the cause to the Commission. In its Reports and Orders, the Commission directed that the Primary Toll Carrier (PTC) Plan, the established plan for routing and charging long distance calls in rural Missouri, be terminated on October 20, 1999, and proposed a mechanism that would allow Respondents, BPS Telephone Company, et al.¹, and Alma Telephone Company, et al.², (Telephone Companies) to achieve revenue neutrality after termination of the plan. On appeal, the Respondent Telephone Companies contend that (1) the doctrines of the law of the case and res judicata barred the Commission from relitigating the revenue neutrality issue first determined by the circuit court in the preceding case without appeal and raised again in this appeal from the subsequent case, and (2) the revenue neutrality mechanism in the Commission's Reports and Orders was unlawful because (a) the mechanism shifted the burden of proof to the Respondent Telephone Companies to show that their present rates and revenues are reasonable and (b) the mechanism constituted retroactive ratemaking. The judgment of the trial court is affirmed.

I. FACTS

The Telephone Companies are small telephone companies providing local telecommunication services and interexchange access services in rural areas of the State of Missouri. Missouri is divided into four long distance calling areas known as "local access and transport areas" or "LATAs." IntraLATA calls are long distance calls that are outside a customer's local calling scope but within a LATA.

In 1987, in Case Nos. TO-84-222 et al. (the first PTC case or PTC I), the Commission established the Primary Toll Carrier (PTC) Plan. The PTC Plan required that all "single-digit plus number" (1+ or 0+) intraLATA toll calls be carried by one of four incumbent local exchange telecommunications companies (LECs) designated as Primary Toll Carriers or PTCs. The PTCs were Southwestern Bell Telephone Company, GTE Midwest Incorporated, Sprint Missouri, Inc., and Fidelity Telephone Company. All other LECs, including the Telephone Companies, were designated as Secondary Carriers or SCs. Other long distance carriers could provide intraLATA toll services in competition with the PTCs, but customers had to dial a special access code in order to complete calls.

The PTC Plan required that each SC deliver all single-digit plus dialed intraLATA toll calls originating from the SC service area to the PTC that served the SC. The PTC carried all such calls, paid all associated expenses, and retained all associated toll revenues. One such associated expense was the originating and terminating access paid by the PTC to the SC.

The enactment of the Federal Telecommunications Act of 1996, however, jeopardized the PTC Plan. Section 251(b)(3) of the Act required LECs to allow competing long distance carriers to provide intraLATA long distance service on a single-digit plus (1+) basis rather than requiring customers to use an access code. This requirement was referred to as "dialing parity." The customers' ability to select their own long distance carrier for single digit plus intraLATA calls was also called "intraLATA presubscription."

After passage of the Act, the Federal Communications Commission (FCC) adopted rules to guide the states on how to implement dialing parity. Thereafter, in November 1996, the Commission's staff filed a motion requesting the Commission to establish a case for the purpose of investigating whether to modify or terminate the PTC Plan in light of the FCC's dialing parity requirement. This case was designated Case No. TO-97-217 (the second PTC case or PTC II). An evidentiary hearing was held before the Commission in PTC II in October 1997.

The Commission issued its Report and Order in PTC II on March 12, 1998. In its Order, the Commission determined that the clear mandate of the Telecommunications Act of 1996 was to establish a competitive environment in the telecommunications industry and that the PTC Plan was incompatible with a competitive environment and inconsistent with the implementation of intraLATA presubscription. Thus, the Commission found that the PTC Plan must be phased out on a schedule that coincides with the implementation of intraLATA presubscription and ordered it completely eliminated in all exchanges by February 28, 1999. It concluded that the most effective replacement for the PTC Plan was an Originating Responsibility Plan (ORP) where each SC would be designated as an intraLATA toll carrier of last resort (ITCOLR) and would bear the responsibility for making intraLATA toll service available to its customers.

The Commission established a technical committee to consider issues and make recommendations to it regarding the specific implementation of intraLATA presubscription. It directed that implementation of intraLATA presubscription must begin for all Missouri local exchange carriers on June 1, 1998; that each local exchange company file its implementation plan for intraLATA presubscription no later that June 15, 1998; and that implementation of intraLATA presubscription be completed in every exchange in the state no later than December 1, 1998.

The Commission directed that the technical committee "consider to what extent revenue neutrality is desirable and achievable, bearing in mind the necessity of eliminating the requirement that PTCs purchase billing and collection services from SCs." The Commission found that the existing rate of return regulation mechanism is adequate to address any problem of over- or under-recovery that may arise in the wake of elimination of the PTC Plan and that an SC that experiences revenue losses impacting its provision of basic local service has access to the Commission's procedures for relief.

The Telephone Companies thereafter filed a petition for writ of review of the Commission's Report and Order in PTC II. The trial court reversed the Commission's Report and Order on September 11, 1998, finding it to be unlawful and unreasonable. The court found that as a consequence of the elimination of the PTC Plan, PTCs were authorized to stop providing intraLATA toll services in the Telephone Companies' exchanges and were, thereby, also relieved of the obligation to purchase tariffed billing and collections services from the Telephone Companies for IntraLATA calls thus causing the companies to suffer reduced revenues in the future. The court also found that the Commission did not calculate...