BELLSOUTH TELECOMMUNICATIONS, INC. d/b/a South Central Bell Telephone Company, Petitioner/Appellant, v. H. Lynn GREER, Chairman, Sara Kyle, Director, and Melvin J. Malone, Director, Constituting the Tennessee Regulatory Authority, Respondents/Appellees. BELLSOUTH TELECOMMUNICATIONS, INC., Petitioner, v. TENNESSEE PUBLIC SERVICE COMMISSION, Respondent. STATE of Tennessee, on relations of BELLSOUTH TELECOMMUNICATIONS, INC., Petitioner/Appellant, v. Keith BISSELL, Steve Hewlett, and Sara Kyle, in their capacity as Commissioners of the Tennessee Public Service Commission, Respondents/Appellees.
Court of Appeals of Tennessee, Middle Section, at Nashville.
Oct. 1, 1997.
Rehearing Denied Nov. 19, 1997.
Application for Permission to Appeal Denied by Supreme Court June 15, 1998.
663
Val Sanford, John Knox Walkup, Gullett, Sanford, Robinson & Martin, Nashville, for AT & T Communications of the South Central States, Inc.
Charles W. Burson, Attorney General and Reporter, Michael E. Moore, Solicitor General, Michael W. Catalano, Associate Solicitor General, Nashville, for Tennessee Public Service Comm.
Charles W. Burson, Attorney General and Reporter, Michael E. Moore, Solicitor General, L. Vincent Williams, Consumer Advocate, Nashville, for Tennessee Consumers.
OPINION
KOCH, Judge.
This consolidated appeal of three separate proceedings involves the efforts of BellSouth Telecommunications, Inc. to take advantage of the 1995 legislation easing the traditional regulatory burdens on telecommunications service providers. After making significant adjustments in BellSouth‘s reported operating results, the Tennessee Public Service Commission determined that BellSouth‘s current earned rate of return exceeded its authorized rate of return and that BellSouth was receiving $56.285 million in excess revenues. The Commission directed BellSouth to reduce its rates by $56.285 million and set the initial rates in the company‘s price regulation plan accordingly. On this appeal, BellSouth and another, intervening party take issue with the procedures employed by the Commission to consider and act upon BellSouth‘s application for a price regulation plan. We have determined that these proceedings were not preempted by the federal Telecommunications Act of 1996. We have also determined that the General Assembly did not give the Commission authority to adjust BellSouth‘s reported operating results
I.
Almost ten years ago, the Tennessee Public Service Commission began its efforts to modernize Tennessee‘s telecommunications network and to explore less cumbersome ways to regulate the telephone companies under its jurisdiction.1 The Commission‘s work culminated in its first regulatory reform rule that took effect on January 10, 1993.2 One day later, BellSouth Telecommunications, Inc. filed its conditional election to operate under this rule.
.On August 20, 1993, the Commission entered an order governing BellSouth‘s rates from 1993 through 1995. See In re South Central Bell Telephone Co., 1993-1995, Docket No. 92-13527, 1993 WL 564240. Based on the results of an earnings investigation that had been commenced in 1992, the Commission concluded that a range of return on BellSouth‘s rate base of 10.65% to 11.85% would be just and reasonable. The Commission adopted BellSouth‘s recommendation that future rate adjustments and deferred revenue account contributions should be based on the company‘s actual first-year results, as opposed to projections.3 It also determined that there would be no rate ad-
In December 1994, the Consumer Advocate4 requested the Commission to resolve what he considered to be inappropriate expense allocations in BellSouth‘s Form PSC-3.01 reports.5 When the Commission did not respond, the Consumer Advocate filed a petition on January 23, 1995 requesting the Commission to commence an investigation into BellSouth‘s earnings. In March 1995, the Commission announced that it was commencing another earnings investigation with regard to BellSouth.
In the meantime, two competing telecommunications bills were introduced in the first session of the Ninety-Ninth General Assembly that had convened in January 1995. The avowed purpose of both bills was to ease the traditional regulatory constraints on local telephone companies and to permit greater competition for local telecommunications services. Filed concurrently with these bills was a bill to replace the Commission with a new regulatory entity. On May 26, 1995, the Governor signed a bill replacing the Commission with the Tennessee Regulatory Authority effective July 1, 1996.6 Two weeks later, the Governor signed another bill dramatically altering the regulation of local telephone companies and opening up the local telecommunications market to unprecedented opportunities for competition.7
The expressed goal of the new regulatory structure was
to foster the development of an efficient, technologically advanced, statewide system of telecommunications services by permitting competition in all telecommunications services markets, and by permitting alternative forms of regulation for telecommunications services and telecommunications services providers.
See
The transition procedure for existing local telephone companies was designed to be simple and expeditious. It requires an existing local telephone company desiring to take ad-
The Commission‘s revised regulatory reform rules took effect one week after the Governor signed the telecommunications reform legislation.13 On June 20, 1995, BellSouth filed its application for a price regulation plan. On July 24, 1995, the Commission permitted AT & T Communications of the South Central States, Inc. to intervene in the proceeding. Approximately two weeks later, the Commission directed its staff to conduct the audit of BellSouth‘s most recent Form PSC-3.01 report in accordance with
On August 17, 1995, the Commission‘s staff issued the results of its audit of BellSouth‘s Form PSC-3.01 report for the twelve-month period ending on December 31, 1994. At the outset, the staff determined that, except for four minor discrepancies, BellSouth‘s December 1994 report accurately reflected the company‘s books and records, that it reflected the Commission‘s previously ordered rate-making adjustments, and that it complied with the generally accepted accounting principles as adopted in Part 32 of the Uniform System of Accounts. Accordingly, the staff concluded that BellSouth‘s corrected rate of return for 1994, as taken from its books, was 10.21%.
Even though BellSouth‘s corrected rate of return for 1994 was less than its authorized rate of return in the Commission‘s August 20, 1993 order, the Commission‘s staff decided that BellSouth‘s audited rate of return should be adjusted to reflect “out-of-period and non-recurring items” and “known charges” occurring during the audit period. Accordingly, the staff concluded that BellSouth‘s adjusted rate of return for 1994 was 12.29% and that this adjusted rate of return “more accurately reflects the earnings potential of the rates in effect at the end of the audit period.” Since this adjusted rate of return exceeded BellSouth‘s currently authorized rate of return, the staff recommended that the Commission initiate a contested rate-making proceeding under
The staff‘s August 17, 1995 report and recommendations provoked a swift and strong reaction from BellSouth. On September 12, 1995, the company filed a petition for a declaratory order pursuant to
On September 15, 1995, the Commission‘s staff issued its second audit report—this time covering BellSouth‘s Form PSC-3.01 report for the twelve months ending on March 31, 1995. This report employed the same audit methodology used in the August 17, 1995 report. The staff made three corrections to BellSouth‘s Form PSC-3.01 report and then concluded that the corrected report accurately reflected the company‘s books and records and the Commission‘s previously ordered rate-making adjustments and that it complied with the generally accepted accounting principles as adopted in Part 32 of the Uniform System of Accounts. As a result of its corrections, the staff concluded that BellSouth‘s corrected rate of return for the twelve months ending on March 31, 1995 was 10.30%.15
The staff again recommended making “adjustments” to the results in BellSouth‘s Form PSC-3.01 report. It recommended fifteen “out-of-period” adjustments to remove items recorded on BellSouth‘s books during the twelve months ending on March 31, 1995 that applied to months prior to April 1994 and for items recorded outside the audit period that applied to the audit period. It recommended nine additional adjustments for abnormal or unusual expenses that were not expected to occur. Finally, it recommended twelve adjustments for “known changes” reflecting the annualized cost of rate changes or volume changes occurring during the period covered by the Form PSC-3.01 report. As a result of these adjustments, the Commission‘s staff
On September 20, 1995, the Commission accepted its staff‘s September 15, 1995 report and convened a contested case proceeding to set BellSouth‘s initial rates. Approximately one month later, it also convened a contested case proceeding to consider BellSouth‘s petition for a declaratory order concerning the staff‘s audit methodology and directed that the proceeding be consolidated with the pending contested rate-making proceeding. The consolidated proceeding commenced on November 1, 1995. After denying BellSouth‘s request for a declaratory order without permitting BellSouth to introduce proof substantiating its challenge to the staff‘s audit methodology and conclusions,16 the Commission proceeded with the proof establishing a fair rate of return for BellSouth. On November 7, 1995, the Commission determined that BellSouth‘s rate of return should be 10.35% and, based on the adjustments in its staff‘s September 15, 1995 report, directed BellSouth to reduce its rates by $56.285 million.
On November 20, 1995, the Commission resumed its hearing to consider recommendations from BellSouth, the Consumer Advocate, and AT & T concerning the most appropriate way to reduce BellSouth‘s rates by $56.285 million. On January 23, 1996, the Commission entered an order formally determining that BellSouth‘s rate of return should be 10.35% and, therefore, that BellSouth was earning $56.285 million in excess revenues. The Commission prescribed changes in BellSouth‘s rate design to eliminate these excess revenues17 and determined that BellSouth‘s rates would be affordable for the purpose of
On February 14, 1996, BellSouth filed a
II. PREEMPTION BY THE TELECOMMUNICATIONS ACT OF 1996
As a threshold matter, we take up AT & T‘s assertion that this appeal should be re-
A.
Our federal system of government recognizes the dual sovereignty of the federal government and the various state governments. Printz v. United States, 521 U.S. 898, 918, 117 S.Ct. 2365, 2376, 138 L.Ed.2d 914 (1997); Gregory v. Ashcroft, 501 U.S. 452, 457, 111 S.Ct. 2395, 2399, 115 L.Ed.2d 410 (1991). The states possess sovereignty within their particular spheres concurrent with the federal government subject only to the limitations imposed by the Supremacy Clause,
The Supremacy Clause provides Congress with the power to preempt state law.20 The courts are, however, reluctant to presume that preemption of state law has occurred. Building & Constr. Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. 218, 224, 113 S.Ct. 1190, 1194, 122 L.Ed.2d 565 (1993); Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 132, 98 S.Ct. 2207, 2217, 57 L.Ed.2d 91 (1978). Thus, the courts work from the assumption that the historic powers of the states are not displaced by a federal statute unless that was the clear and manifest intent of Congress. California Div. of Labor Standards Enforcement v. Dillingham Const., N.A., 519 U.S. 316, 325, 117 S.Ct. 832, 838, 136 L.Ed.2d 791 (1997); BFP v. Resolution Trust Corp., 511 U.S. 531, 544, 114 S.Ct. 1757, 1765, 128 L.Ed.2d 556 (1994); Louisiana Pub. Serv. Comm‘n v. F.C.C., 476 U.S. 355, 368, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986).
Preemption occurs when there is an outright or actual conflict between federal and state law. Freightliner Corp. v. Myrick, 514 U.S. 280, 287, 115 S.Ct. 1483, 1487, 131 L.Ed.2d 385 (1995); Louisiana Pub. Serv. Comm‘n v. F.C.C., 476 U.S. at 368, 106 S.Ct. at 1898. It can also occur by implication when compliance with both federal and state law is impossible or when state law obstructs the accomplishment of Congress‘s objectives. Boggs v. Boggs, 520 U.S. 833, 844, 117 S.Ct. 1754, 1760-61, 138 L.Ed.2d 45 (1997); CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 663, 113 S.Ct. 1732, 1737, 123 L.Ed.2d 387 (1993); California Fed. Sav. & Loan Ass‘n v. Guerra, 479 U.S. 272, 281, 107 S.Ct. 683, 689, 93 L.Ed.2d 613 (1987). Preemption may also arise when Congress‘s legislation is so pervasive that it leaves no room for state legislative action. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 2617, 120 L.Ed.2d 407 (1992); Louisiana Pub. Serv. Comm‘n v. F.C.C., 476 U.S. at 368, 106 S.Ct. at 1898.
The courts begin their inquiry with the presumption that Congress did not intend to preempt state law. Building & Constr. Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc., 507 U.S. at 224, 113 S.Ct. at 1194. The proper approach is to reconcile the federal and state laws, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 127, 94 S.Ct. 383, 389-90, 38 L.Ed.2d 348 (1973), rather than to seek out conflict where none clearly exists. Exxon Corp. v. Governor of Maryland, 437 U.S. at 130, 98 S.Ct. at 2216. State law should be displaced by federal law only to the extent there is a conflict. Dalton v. Little Rock Family Planning Servs., 516 U.S. 474, 475-77, 116 S.Ct. 1063, 1064, 134 L.Ed.2d 115 (1996).
B.
AT & T asserts that the case should be remanded to the Authority to consider whether the Telecommunications Act of 1996 preempts state law because the federal Act‘s interconnection provisions differ from their state law counterparts. However, the mere existence of a federal regulatory program does not imply preemption of similar state laws. English v. General Electric Co., 496 U.S. 72, 87, 110 S.Ct. 2270, 2279, 110 L.Ed.2d 65 (1990). Thus, AT & T must demonstrate something more if its preemption argument is to succeed.
The goals of the federal Telecommunications Act of 1996 and Tennessee‘s 1995 telecommunications legislation are similar.21 Neither the federal Act nor the regulations promulgated by the Federal Communications Commission pursuant to the Act contain explicit preemption provisions. In fact, the Act specifically states that “[t]his Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless expressly provided in such Act or amendments.” Telecommunications Act of 1996, § 601(c)(1),
The Telecommunications Act of 1996 contains no explicit preemption language and does not contain provisions that are in outright or actual conflict with state law. Accordingly, AT & T‘s preemption argument can succeed only if it can demonstrate that Congress‘s regulatory statutes have completely occupied the field, that it is impossible to comply with the requirements of both the federal and state law, or that the state law somehow obstructs the accomplishment of the objectives of the Telecommunications Act of 1996. AT & T has failed on all counts. Nothing in the text or structure of the Act supports its unfocused preemption claims.
Congress plainly did not desire to displace local telecommunications regulation when it enacted the Telecommunications Act of 1996. The Act itself makes it clear that state commissions play a pivotal role in implementing telecommunications policy. They provide a forum for resolving disputes between existing local telephone companies and their competitors seeking access to an existing telephone network. See
AT & T has already invoked the remedies before the Authority made available by
III. PRICE REGULATION PLANS UNDER TENN.CODE ANN. § 65-5-209
The determinative issues on this appeal involve the Commission‘s process for considering BellSouth‘s application for a price regulation plan. BellSouth essentially asserts that the Commission and its staff exceeded the plain mandate of
A.
The search for the meaning of statutory language is a judicial function. Roseman v. Roseman, 890 S.W.2d 27, 29 (Tenn.1994); State ex rel. Weldon v. Thomason, 142 Tenn. 527, 540, 221 S.W. 491, 495 (1920). Courts must ascertain and give the fullest possible effect to the statute without unduly restricting it or expanding it beyond its intended scope. Perry v. Sentry Ins. Co., 938 S.W.2d 404, 406 (Tenn.1996);
When approaching statutory text, courts must also presume that the legislature says in a statute what it means and means in a statute what it says there. Connecticut Nat‘l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992); Worley v. Weigel‘s, Inc., 919 S.W.2d 589, 593 (Tenn.1996). Accordingly, we must construe statutes as they are written, Jackson v. Jackson, 186 Tenn. 337, 342, 210 S.W.2d 332, 334 (1948), and our search for the meaning of statutory language must always begin with the statute itself. Neff v. Cherokee Ins. Co., 704 S.W.2d 1, 3 (Tenn.1986); Pless v. Franks, 202 Tenn. 630, 635, 308 S.W.2d 402, 404 (1957); City of Nashville v. Kizer, 194 Tenn. 357, 364, 250 S.W.2d 562, 564-65 (1952).
Statutory terms draw their meaning from the context of the entire statute, Lyons v. Rasar, 872 S.W.2d 895, 897 (Tenn.1994); Knox County ex rel. Kessel v. Lenoir City, 837 S.W.2d 382, 387 (Tenn.1992), and from the statute‘s general purpose. City of Lenoir City v. State ex rel. City of Loudon, 571 S.W.2d 297, 299 (Tenn.1978); Loftin v. Langsdon, 813 S.W.2d 475, 478 (Tenn.Ct.App.1991). We give these words their natural and ordinary meaning, State ex rel. Metropolitan Gov‘t v. Spicewood Creek Watershed Dist., 848 S.W.2d 60, 62 (Tenn.1993), unless the legislature used them in a specialized, technical sense. Cordis Corp. v. Taylor, 762 S.W.2d 138, 139-40 (Tenn.1988).
The legislative process does not always produce precisely drawn laws. When the words of a statute are ambiguous or when it is just not clear what the legislature had in mind, courts may look beyond a statute‘s text for reliable guides to the statute‘s meaning. We consider the statute‘s historical background, the conditions giving rise to the statute, and the circumstances contemporaneous with the statute‘s enactment. Still v. First Tenn. Bank, N.A., 900 S.W.2d 282, 284 (Tenn.1995); Mascari v. Raines, 220 Tenn. 234, 239, 415 S.W.2d 874, 876 (1967); Davis v. Aluminum Co. of Am., 204 Tenn. 135, 143, 316 S.W.2d 24, 27 (1958). We also resort to legislative history.23 Storey v. Bradford Furniture Co. (In re Storey), 910 S.W.2d 857, 859 (Tenn.1995); University Computing Co. v. Olsen, 677 S.W.2d 445, 447 (Tenn.1984); Chapman v. Sullivan County, 608 S.W.2d 580, 582 (Tenn.1980).
Courts consult legislative history not to delve into the personal, subjective motives of individual legislators, but rather to ascertain the meaning of the words in the statute. The subjective beliefs of legislators can never substitute for what was, in fact, enacted. There is a distinction between what the legislature intended to say in the law and what various legislators, as individuals, expected or hoped the consequences of the law would be. The answer to the former question is what courts pursue when they consult legislative history; the latter question is not within the courts’ domain.
Relying on legislative history is a step to be taken cautiously. Piper v. Chris-Craft Indus., Inc., 430 U.S. 1, 26, 97 S.Ct. 926, 941, 51 L.Ed.2d 124 (1977); North & South Rivers Watershed Ass‘n, Inc. v. Town of Scituate, 949 F.2d 552, 556 n. 6 (1st Cir. 1991). Legislative records are not always distinguished for their candor and accuracy, Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 396, 71 S.Ct. 745, 751, 95 L.Ed. 1035 (1951) (Jackson, J., concurring), and the more that courts have come to rely on legislative history, the less reliable it has become. Rather than reflecting the is-
Even the statements of sponsors during legislative debate should be evaluated cautiously. 2A Norman J. Singer, Statutes and Statutory Construction § 48:15 (rev. 5th ed.1992). These comments cannot alter the plain meaning of a statute, D. Canale & Co. v. Celauro, 765 S.W.2d 736, 738 (Tenn.1989); Elliott Crane Serv., Inc. v. H.G. Hill Stores, Inc., 840 S.W.2d 376, 379 (Tenn.Ct.App.1992), because to do so would be to open the door to the inadvertent, or perhaps planned, undermining of statutory language. Regan v. Wald, 468 U.S. 222, 237, 104 S.Ct. 3026, 3035, 82 L.Ed.2d 171 (1984). Courts have no authority to adopt interpretations of statutes gleaned solely from legislative history that have no statutory reference points. Shannon v. United States, 512 U.S. 573, 583, 114 S.Ct. 2419, 2426, 129 L.Ed.2d 459 (1994). Accordingly, when a statute‘s text and legislative history disagree, the text controls. Stromberg Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d 928, 931 (7th Cir.1996).
B. THE SCOPE OF A TENN.CODE ANN. § 65-5-209 AUDIT
The pivotal dispute between BellSouth and the Commission involves the scope and purpose of the audit required by
1.
The 1995 telecommunications reform legislation requires the Commission to set the initial rates of any incumbent local telephone company that applies for a price regulation plan.
Since
The textual analysis of
The original substance of the telecommunications reform legislation was far different from the substance of the legislation that eventually became law. The original legislation contained no procedure for re-examining an incumbent local telephone company‘s rates. Instead, it simply provided that the company‘s “rates, terms and conditions for the services provided on February 1, 1995” were just and reasonable and that these rates would be the company‘s initial rates.27 This provision encountered immediate opposition from the Consumer Advocate and other consumer groups because they believed that it would enable BellSouth to earn between $350 and $800 million in excess revenues.
The concern about excess revenues was the focus of the debate on April 11, 1995, when the Senate State and Local Government Committee considered the bill and a proposed amendment containing what would later become
The Senate State and Local Government Committee convened on April 18, 1995 to continue its consideration of the bill. The hearing again focused on the advisability of conducting a “full-blown rate hearing” before approving BellSouth‘s initial rates. The Commission‘s General Utility Counsel described an audit of the Form PSC-3.01 report as follows:
in order to audit the 3.01 statement ... it‘s not just a matter of adding up math on a single sheet of paper. It‘s knowing that they [the company] have accurately reported those figures to us. So that we will send our auditors on site, they‘ll look at all the items as reported on the company‘s books and correlate that with the statement. And that‘s what we mean by a full audit ... When the staff concludes their audit, and they may find some discrepancies or some items that need to be corrected, that‘ll be re-presented to the Commission for approval in a contested case format ...
The current Director of the Utility Rate Division also informed the Committee that the Commission‘s staff had already commenced an audit of BellSouth and that they intended to proceed with the audit no matter which telecommunications bill passed. He explained that an audit of a Form PSC-3.01 report was an “historical audit” of the company‘s earnings for the preceding twelve months and that the staff planned to complete its work in September 1995.
Commissioner Steve Hewlett also pointed out to the Committee that “looking at the backup on a 3.01 is significantly different than a full blown audit.” Mr. Burcham repeated that the Form PSC-3.01 report, which he designed, “wouldn‘t give you a representative picture of the future.” In addition, he pointed out that he had objected to similar language in the Commission‘s proposed rule and that he had attempted “to get the Commission to change that language, and we were unsuccessful in doing that; and we think this language here is so restrictive that, really, you‘re not going to get an earnings investigation.” The Consumer Advocate agreed with Mr. Burcham. He pointed out
When the Senate State and Local Government Committee considered the bill again on April 25, 1995, Chairman Cohen offered an amendment requiring the continuation of rate hearings for basic telephone services through 1996. Senator Rochelle, the bill‘s sponsor, opposed this amendment on the ground that “rate of return regulation ... encourages everybody to be fat; it encourages monopolistic practices; it encourages lack of innovation.” After tabling Chairman Cohen‘s amendment, the Committee approved the bill as amended for passage by a 6 to 3 vote.
The debate over the need for a full-blown rate hearing before permitting incumbent local telephone companies to operate under a price regulation plan continued on the Senate floor on May 11, 1995 when the bill came up for third and final reading. Senator Rochelle offered an amendment to the bill containing what would later become
ures.” He also stated categorically that this amendment “doesn‘t address rate setting. This addresses auditing of an audit.”
Upon hearing Senator Rochelle‘s explanation of his proposed amendment, other senators, including Senators Cohen, Cooper, and Gilbert pointed out that the amendment would permit the Commission to make sure that the numbers are correct but not to go behind the numbers. These senators asserted that the Commission should conduct a traditional earnings investigation before approving an incumbent local telephone company‘s initial rates. Senator Rochelle opposed these suggestions on the ground that the rate hearings demanded by these senators would be a “three-year ordeal.” The Senate finally adopted Senator Rochelle‘s amendment on a voice vote.29
The adoption of Senator Rochelle‘s amendment did not end the matter. The Senate considered and defeated three other amendments that would have replaced the audit of the Form PSC-3.01 report with a more traditional rate proceeding. One amendment would have authorized the Commission to conduct a contested case proceeding “to determine the justness and reasonableness of the existing rates” and to “make appropriate adjustments to arrive at just and reasonable rates.”30 Another amendment was to the same effect.31 The third amendment would have required the Commission to “make public the anticipated revenues and profits each provider will make under such plan.”32
Senator Rochelle opposed each of these amendments on the ground that they were motivated by the “greed” of BellSouth‘s competitors who desired to delay the company‘s ability to compete in a less regulated market. He disagreed with Senator Gilbert‘s observation that it would make “better sense to have a full evidentiary hearing before we turn
[W]e‘re using the existing rules that have already been adopted by the PSC and that gives them the ability to set the rates. It wouldn‘t be in the bill. We‘re using existing practices, rules, and statutes.
In response to Senator Rochelle‘s explanation, Senator Gilbert then pointed out to his colleagues that
We‘re passing a statutory scheme that may be interpreted to override every one of those existing rules. Let me tell you why he can‘t point to any language in subsection (c) that tells you that the PSC will change the rates if they find out through their audit that something‘s wrong, because there isn‘t any language in that section that allows them to do that.
Senator Rochelle ended the colloquy by pointing out that the Commission could adjust the rates if it determined that BellSouth‘s earnings were above the company‘s authorized rate of return. The Senate thereafter approved the amended version of Senate Bill No. 891 by 24 to 8 to 1 vote and sent the bill to the House of Representatives.33
The House leadership was not satisfied with the Senate‘s version of the bill. Accordingly, when Senate Bill 891 came on for third and final reading on May 24, 1995, Representative Purcell, one of the bill‘s House sponsors, convinced his colleagues to adopt an amendment that added several new provisions to the Senate‘s version of the bill. This amendment contained the restated version of the telecommunications policy that now appears in
review the implementation of the Act every two years that now appears in
The House amendment did not alter the portions of the Senate amendment containing
I need to, at this point, with your indulgence, read three brief statements into the record for legislative intent purposes as this bill leaves this House and goes to the Senate. The first was requested by the AARP. The audit provisions in this bill were requested by the AARP, and it was their hope that we would, as a matter of legislative intent, make it clear what we mean. And so, let me say on the subject of Section 13, legislative intent is that this bill establishes a process by which consumers are assured affordable rates. To achieve this, the bill provides that the rates of incumbent local exchange companies will be based on an audit of the company‘s actual achieved results and not on a speculative forecast.
An audit consistent with the provisions of this bill is currently being performed by the TPSC staff by their compliance unit of SCB‘s TPC 3.01 form. As stated by Dr. Chris Klein, Director of the PSC‘s Utility Rate Division, in a letter sent earlier this year,37 the TPSC 3.01 form is a monthly
Section 13 makes clear that this TPSC 3.01 compliance audit of actual achieved results and without speculative forecasts will be completed, and affordable rates will be set pursuant to Section 10(c) and (j) of this bill.38
See House Journal, at 1865. The House then passed Senate Bill No. 891 by an 89 to 8 vote.39
The bill containing the House amendments was returned to the Senate and was called up for consideration on May 25, 1995. On this occasion, Senator Rochelle read the same statement that Representative Purcell had read the previous day. When asked to explain how the amended bill would assure affordable telephone service, Senator Rochelle replied
we have read ... for legislative intent purposes, the language requested that helped everybody understand that the authority of the Consumer Advocate and the authority of the PSC and such as that remains in place and is there to ... help insure that all reports, audits and such as that are based on actual figures, not speculative forecasts and such as that. So I would refer you to the statement of legislative intent, and to the language that‘s previously been in the bill, plus the language in Amendment No. 2 to 2.
When asked how the House‘s version of the bill differed from the Senate‘s version, Senator Rochelle explained that the principal change was the creation of the fund for small and minority businesses and that “there are language changes, of course, but they were changes that were worked out with the AARP, they were after consultation with the AARP, Mr. Burcham, and these other folks.” The Senate proceeded to concur in the House amendments by a 23 to 10 vote.40 Both Senator Rochelle and Senator Gilbert, who had voted against the bill and the House amendments, requested that Senator Rochelle‘s statements concerning the scope of the audit of the Form PSC-3.01 report be included verbatim in the Senate Journal.41
3.
The legislative history of
The statements concerning the scope of the audit read into the record by Senator Rochelle and Representative Purcell are inconsistent with the language of
The Commission, like any other administrative agency, must conform its actions to its enabling legislation. Tennessee Pub. Serv. Comm‘n v. Southern Ry., 554 S.W.2d 612, 613 (Tenn.1977); Pharr v. Nashville, C. & St. L. Ry., 186 Tenn. 154, 161, 208 S.W.2d 1013, 1016 (1948). It has no authority or power except that found in the statutes. Tennessee-Carolina Transp., Inc. v. Pentecost, 206 Tenn. 551, 556, 334 S.W.2d 950, 953 (1960). While its statutes are remedial and should be interpreted liberally, see
Both the language of
The Commission exceeded its authority under
BellSouth also asserts that the Commission should have granted its request for a contested case hearing to challenge the legal and factual basis for the adjustments to BellSouth‘s Form PSC-3.01 report. The Commission responds that BellSouth is not entitled to a contested case hearing because the first two phases of a
The Commission relies on National Health Corp. v. Snodgrass, 555 S.W.2d 403 (Tenn. 1977) to support its argument; however, this case is significantly different from the one before us. In National Health Corp., the state comptroller audited several related intermediate care facilities to determine whether their charges were consistent with federal and state law. After the auditors concluded that the company had overcharged the State, the Department of Public Health informed National Health Corp. that it intended to withhold a portion of its next regularly scheduled payment to offset the overcharge. Instead of proceeding against the Department of Public Health, National Health Corp. sought judicial review of the comptroller‘s audit under the Uniform Administrative Procedures Act.
The Chancery Court for Davidson County dismissed National Health Corp.‘s petition for review under
BellSouth has the right to have its application for a price regulation plan considered in accordance with
IV. REVIEW OF ALL BELLSOUTH‘S RATES AND TARIFFS
AT & T also argues that the Commission did not complete its task because it failed to review each of BellSouth‘s rates and tariffs to determine whether they were affordable and non-discriminatory.42 We need not ad-
V.
In summary, we vacate the Commission‘s January 23, 1996 order and all related earlier orders with regard to BellSouth‘s application for a price regulation plan. Since the Commission has adopted its staff‘s conclusion that BellSouth‘s rate of return reported on its Form PSC-3.01 report for the twelve months ending March 31, 1995 is less than its current authorized rate of return, we remand the case to the Tennessee Regulatory Authority with directions to approve BellSouth‘s application for a price regulation plan. In light of our conclusion that the Commission did not have the authority to adjust the actual results on BellSouth‘s Form PSC-3.01 report, we need not consider the remaining issues raised by BellSouth and AT & T. These issues and all other issues raised by the parties are accordingly pretermitted.
We tax the costs of this appeal which includes BellSouth Telecommunications, Inc. v. Greer, App. No. 01A01-9601-BC-00008 and BellSouth Telecommunications, Inc. v. Tennessee Pub. Serv. Comm‘n, App. No. 01A01-9602-BC-00066 to the Tennessee Regulatory Authority. We tax the costs of the appeal in State ex rel. BellSouth Telecommunications, Inc. v. Bissell, App. No. 01A01-9601-CH-00016 to BellSouth Telecommunications, Inc. and its surety for which execution, if necessary, may issue.
LEWIS and CANTRELL, JJ., concur.
OPINION ON PETITION FOR REHEARING
BellSouth Telecommunications, Inc. has filed a petition for rehearing that requests this court to modify its October 1, 1997 opinion to include a holding that BellSouth‘s price regulation plan became effective on March 1, 1996. At our invitation, the other parties to this appeal have now responded. AT & T Communications of the South Central States, Inc. asserts that the issues raised by BellSouth are within the original, primary jurisdiction of the Tennessee Regulatory Authority. The Tennessee Regulatory Authority asserts that setting March 1, 1996 as the effective date of BellSouth‘s price regulation plan is improper because BellSouth has not been operating under a price regulation plan as a result of our April 3, 1996 stay order. The Consumer Advocate Division launches an unfocused fusillade of complaints that our October 1, 1997 opinion “overlooks” or “misapprehends” prior case law, material facts, and the arguments in the Consumer Advocate‘s earlier briefs.1
Our October 1, 1997 opinion focused on the procedure employed by the Tennessee Public Service Commission to consider and act on BellSouth‘s application for a price regulation plan. Rather than focusing on the substance or merits of the Commission‘s decision, we held that the procedure the Commission followed did not comply with
We again decline the invitation to review the wisdom of the General Assembly‘s choice of the transition procedure in
The doctrine of separation of powers counsels the courts to avoid requiring an administrative agency to take a particular action except in the most extraordinary circumstances. We should decline, for constitutional and practical reasons, to shoulder an agency‘s responsibilities. Thus, the goal of a remand in cases of this sort should generally be to require the agency to carry out its task in a manner consistent with its statutory authority. See Hoover, Inc. v. Metropolitan Bd. of Zoning Appeals, 955 S.W.2d 52, 55 (Tenn.Ct.App.1997).
Throughout these proceedings, BellSouth consistently asserted that the procedure followed by the Commission was not authorized by
Ordering the Authority to grant BellSouth‘s application for a price regulation plan and to declare that this plan has been in effect since March 1, 1996 would invade the Authority‘s jurisdiction and would also be inconsistent with our April 3, 1996 stay order. As a result of our stay, BellSouth has continued to operate under the former regulatory statutes rather than the new statutes enacted in 1995. Accordingly, BellSouth has not, as a matter of fact and law, been operating under a price regulation plan since March 1, 1996. It would be error for us to hold at this juncture that it has.
BellSouth‘s petition for rehearing is respectfully denied and the case is remanded to the Tennessee Regulatory Authority. The costs incident to this petition are taxed against BellSouth Telecommunications, Inc. and its surety for which execution, if necessary, may issue.
LEWIS and CANTRELL, JJ.
Notes
These points were taken from a memo by Dr. Chris Klein, Director of the Utility Rate Division, and Mike Gaines, Manager of the Telecommunications Section, to PSC Chairman Keith Bissell in response to a letter from Senator Rochelle. This memo, and the transcripts of the “legislative intent” statements read by Senator Rochelle and Representative Purcell on the Senate and House floors, are attached as Appendices B, C, and D to this Report.the Staff has followed the statements of the sponsors of the Bills that became the new law by auditing the Company‘s financial records for the twelve months ended March 31, 1995, to determine if the amounts on the TPSC 3.01 Report:
- are accurately taken from the company‘s books and records;
- accurately reflect any Commission ordered rate making adjustments;
- do not include unusual or abnormal financial occurrences;
- were calculated following proper accounting rules and procedures for separating the company‘s interstate and intrastate operations, as well as, its regulated and nonregulated operations;
- accurately reflect allowable charges from affiliated companies.