U.S. West Communications, Inc. v. Wyoming Public Service Com'n

• Decision Date: 17 April 1998
• Docket Number: No. 96-25,96-25
• Citation: 958 P.2d 376
• Parties: U S WEST COMMUNICATIONS, INC., Appellant (Petitioner), v. THE WYOMING PUBLIC SERVICE COMMISSION; Steve Ellenbecker, Doug Doughty, and Bil Tucker, in their official capacities as Commissioners of the Wyoming Public Service Commission; Appellees (Respondents). and Silver Star Telephone Company, Inc., Intervenor (Respondent).
• Court: Wyoming Supreme Court

Page 376

958 P.2d 376

U S WEST COMMUNICATIONS, INC., Appellant (Petitioner), v. THE WYOMING PUBLIC SERVICE COMMISSION; Steve Ellenbecker, Doug Doughty, and Bil Tucker, in their official capacities as Commissioners of the Wyoming Public Service Commission; Appellees (Respondents) and Silver Star Telephone Company, Inc., Intervenor (Respondent).

No. 96-25.

Supreme Court of Wyoming.

April 17, 1998.

William P. Heaston, Denver, CO; and Paul J. Hickey and Richard D. Bush of Hickey, Mackey, Evans, Walker & Stewart, Cheyenne, for Appellant.

William U. Hill, Attorney General; Michael L. Hubbard, Deputy Attorney General; and Ivan H. Williams, Special Assistant Attorney General, Cheyenne, for Appellees Wyoming Public Service Commission, Steve Ellenbecker, Doug Doughty and Bil Tucker.

Dennis L. Sanderson, Afton, for Intervenor Silver Star Telephone Company, Inc.

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN ^* and LEHMAN, JJ.

TAYLOR, Chief Justice.

The citizens of Star Valley requested that separate local telephone exchanges currently provided by U S West Communications, Inc. and Silver Star Telephone Company, Inc. be combined into one local exchange. After a public hearing, the Wyoming Public Service Commission agreed and issued an order to implement the service. U S West Communications, Inc. claims that the Wyoming Public Service Commission exceeded the statutory authority conferred by the Wyoming Telecommunications Act of 1995 when it independently determined the additive rates and ordered U S West Communications, Inc. to pay Silver Star Telephone Company, Inc. an annual settlement amount.

We find that the Wyoming Public Service Commission's order must be reviewed under the authority granted by the Public Utilities Act prior to amendments effected by the Wyoming Telecommunications Act of 1995 and hold that the Wyoming Public Service Commission's order did not exceed that authority. We therefore affirm the order of the Wyoming Public Service Commission.

I. ISSUES

Appellant, U S West Communications, Inc. (U S West), presents the following issues for review:

I.

Whether the Commission acted in excess of its statutory authority in setting additive prices for EAS [Extended Area Service].

II.

Whether the Commission has the authority to order U S West to remit revenues collected from its customers through an EAS additive charge to Silver Star in order to subsidize the operation and provision of EAS by Silver Star.

III.

Whether the Commission has the authority to impose a revenue neutral standard to pricing which requires U S West to subsidize the provisioning of EAS by Silver Star.

Appellee, Wyoming Public Service Commission (PSC), responds with this statement of issues:

I. Did the Wyoming Public Service Commission act outside the scope of its statutory authority in establishing additive prices for extended area service?

II. Does the Wyoming Public Service Commission have the authority to establish a levelized extended area service additive price which results in the creation of an intercompany subsidization of a noncompetitive service?

III. Should the Wyoming Supreme Court remand the issue of pricing to the Wyoming Public Service Commission for further findings related to the extended area service additive price which was established in this case?

Intervenor, Silver Star Telephone Company, Inc. (Silver Star), joins the fray posing several new issues:

I. Does W.S. 8-1-107 preclude the Wyoming Telecommunications Act of 1995 from applying to this case?

II. Is U S West bound by the theories that it advanced before the Commission?

III. If the Telecommunications Act of 1995 applies to this case, does the Commission have authority to establish EAS under its authority to regulate quality of service and order an EAS additive and an inter-company settlement in order to maintain revenue neutrality?

IV. Was the intercompany settlement arrangement ordered by the Commission a reasonable mechanism to avoid a revenue deficiency in Silver Star and a windfall to U S West?

V. Was the intercompany settlement arrangement a subsidy?

II. FACTS

On July 7, 1994, the Mayor of Afton, Wyoming sent a letter to the PSC requesting that an extended area service (EAS) be implemented in the upper and lower Star Valley. An EAS is a service plan in which long distance toll rates between two or more exchanges are eliminated, and all users in that area may call any exchange for a flat local rate. The Mayor's letter was accompanied by a petition bearing approximately 729 signatures of U S West customers located in Afton and Silver Star customers located in Freedom and Alpine, Wyoming. The petition also requested that the cellular service provided by Union Telephone Company (Union) be included in the EAS.

Upon receipt of the Star Valley residents' petition, the PSC notified and directed U S West, Silver Star and Union to jointly provide estimated costs, rates and a timetable for the establishment of the requested EAS. The PSC set the matter for public hearing in Afton on December 6, 1994.

At the public hearing, all parties and witnesses enthusiastically agreed that the people of Star Valley would benefit from the creation of an EAS. The parties further agreed that the implementation of the EAS should include an additive rate which would result in a return of the net revenues that were formerly received from long distance services, i.e., a "revenue neutral" transition. There was significant disagreement, however, on the actual amounts which should be attributed to long distance revenues and the allocation of responsibility for revenue reimbursement.

The difficulty lay in the manner in which long distance revenues were received by the companies. U S West was the only long distance provider for Star Valley and its revenues were received from long distance toll rates to consumers. The revenues flowing to Silver Star, however, were received in the form of payments made by U S West to Silver Star for the use of Silver Star's lines, billing, and collection services. Although the combined long distance revenues from all Star Valley exchanges netted U S West a profit after payment to Silver Star, the revenues from the Alpine/Freedom exchange alone were less than payments made to Silver Star for services in that area. Therefore, under the old scheme between the two companies, part of the U S West long distance revenues received from the Afton area subsidized the costs of long distance service to the Alpine/Freedom area.

At the public hearing, U S West proposed that its lost revenues from the Afton exchange be replaced through an additive service charge to Afton customers and that Silver Star's lost revenues be replaced by an additive service charge to the Alpine/Freedom customers. Silver Star disagreed, alleging that U S West's proposal would result in an additive charge to the Alpine/Freedom customers in an amount significantly greater than that charged to Afton customers. Silver Star also alleged that U S West's proposal would result in a windfall to U S West in the amount used to subsidize the Alpine/Freedom service charges.

Instead, Silver Star submitted several alternative proposals, one of which provided that the same additive rate for each class of service be uniformly applied throughout Star Valley in an amount generally sufficient to meet lost revenues of both companies. U S West would then reimburse to Silver Star an amount which represented the excess additive charges collected from the Afton customers. Thus, the amounts transferred would approximate the difference between the amount Silver Star formerly billed U S West and the amount collected from additive charges to the Alpine/Freedom customers.

The PSC issued its findings of fact, conclusions of law and final order on May 11, 1995. The PSC concluded that the EAS was a non-competitive service which would be beneficial to the general public. ¹ It further found that U S West had a long distance toll loss of $73,959.00 from the Afton exchange and that Silver Star's lost revenues amounted to $158,097.00. The PSC ordered the implementation of an EAS in Star Valley and authorized a uniform rate additive of $3.65 for residential lines and $5.50 for business lines in all the Star Valley exchanges. The order, however, did not provide for any intercompany payments.

U S West timely filed a petition for rehearing, challenging the PSC's authority to establish an additive price due to the recent enactment of the Wyoming Telecommunications Act of 1995, which was approved on March 1, 1995. U S West also alleged that the prices set by the PSC had no factual basis in the record. Silver Star responded by opposing the petition and seeking an amendment of the final order to include a directive that U S West remit to Silver Star the amount of $76,759.00 annually to achieve revenue neutrality. On July 14, 1995, the PSC denied rehearing and granted Silver Star's request.

U S West filed a petition for review with the district court on August 7, 1995. On January 3, 1996, the district court certified the appeal to this court.

III. STANDARD OF REVIEW

General appellate standards used by a reviewing court of the first instance are applicable to cases certified to us pursuant to W.R.A.P. 12.09. Union Telephone Co., Inc. v. Wyoming Public Service Com'n, 907 P.2d 340, 341-42 (Wyo.1995). The scope of review is defined in Wyo. Stat. § 16-3-114(c) (1997), which states, in pertinent part:

(c) * * * [T]he reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. In making the following determinations, the court shall review the whole record or those parts of it cited by a party * * *. The reviewing court shall:

* * *

(ii) Hold unlawful and set aside agency action, findings and conclusions found to be:

(A) Arbitrary, capricious, an abuse of discretion or otherwise not in...