*1 9, No. [S.F. 22832. In Bank. June 1972.] al., Petitioners,
CITY OF LOS ANGELES et v. al., PUBLIC et UTILITIES COMMISSION Respondents; COMPANY, PACIFIC TELEPHONE AND TELEGRAPH Real in Interest. Party
[S.F. No. In 22828. Bank. June 1972.] al., Petitioners,
WILLIAM M. BENNETT et v. COMMISSION,
PUBLIC UTILITIES Respondent; COMPANY, PACIFIC TELEPHONE AND TELEGRAPH Real in Interest. Party No. 22833. Bank. June
[S.F. 1972.] al., Petitioners, CALIFORNIA PUBLIC INTEREST et v. LAW CENTER COMMISSION, PUBLIC UTILITIES Respondent; COMPANY,
PACIFIC TELEPHONE AND TELEGRAPH Real in Interest. Party
(Consolidated Cases.)
Counsel Bennett, William M. in City Charles pro. per., Attorney, Roger Arnebergh, Mattson, E. Witt, John H. City City W. William Deputy Attorney, Attorney, Jr., O'Connor, Attor Thomas M. Deputy City Attorney, Kronberger, City Bourne, ney, Milton H. Mares and F. William W. Attorneys, City Deputy Woodmansee, Stein, Keith Michael M. S. Brutoco Mark Rinaldo and A. Ivener for Petitioners. Anninos, Moran E. Calvin
Mary Pajalich, Hector J. Timothy Treacy, and K. Scott Carter for Simpson Respondents. Sutro, Sutro, Madison & A.
Pillsbury, John Noble K. H. Gregory, George Eckhardt, in Richard W. and Francis R. Kirkham for Real Odgers Party Interest. Searls, Furbush Amici
Frederick T. John C. and Malcolm H. as Morrissey Curiae.
Opinion we Decision No. PETERS, J. In theseconsolidated review proceedings tele authorizes intrastate of the Public Utilities Commission which have in the We annually. rate increases amount phone Pacific issued a that all sums collected by Telephone providing partial stay decision and to the rates authorized Telegraph pursuant Company in court should shall refund whole or order subject upon part annulled or modi or Decision No. 77984 of commission be decision, latter which related to the calculation of Pacific’s federal fied. The tax for rate rendered making during income expense purposes in the course of the resulted instant proceedings subsequently decision, City & annulled the tax and decision in recently Com., v. Public Utilities 6 Cal.3d Cal. County San Francisco 119 [98 286, 490 P.2d Rptr. 798]. Com., v. Tel. Tel. Co. Public Util. 62 Cal.2d 644- & 353], P.2d general cormfiission’s Cal.Rptr. approach [44 “It
was described follows: appears proceedings telephone commission, fol- California general employed approach case, lowed determine with to a ‘test period’ present respect (1) i.e., base of the devoted to the rate value utility, public property use, revenues, costs (2) (3) allowed for gross expenses operating (4) net sometimes revenues rate-making resulting purposes, produced, Then, fair reason- ‘results of by determining termed operations.’ base, its rate able rate of return to fixed allowed utility upon *6 be at that rate with the net revenue which would achieved comparing how net whether and revenue test commission determines period, be . . The much the rates and should raised or lowered. . utility’s charges with the that it as as objective nearly test chosen present period possible which or to are known expected conditions operating the future months or for which commission during obtain years pro- to allow for the to fix rates. The results poses test-period ‘adjusted’ rev- effect of various known or reasonably anticipated changes gross enues, conditions, which did obtain or other throughout expenses future test but to which are period reasonably prevail during expected fixed, are to for which rates so that the results period test-period as be as determined the commission will by operations nearly repre- sentative of future conditions as possible.”
337 instant in the was followed proceedings, general The same approach as test year. using Code amended the Public Utilities 1961, section 1705 order, con- and file “. shall make . . the commission
provide stated, contain, findings separately shall The decision its decision. taining all material to issues law the commission and conclusions of of fact added.) (Italics . .” the order decision. . or Com., Cal.2d v. Public Utilities Co. Transport Motor In California 868, 324], reviewed this court 270, 379 P.2d 273-275 Cal.Rptr. [28 the amend review dictated by order the new commission scope applying convenience “public held that finding ment section 1705. We to be sustained court and that finding was an ultimate necessity” is ‘ma that ultimate finding be resolved to reach issue that must “[e]very ” stated. The decision . . .’ and must to the order . separately terial the factors material to determine left to the commission the discretion it but held that section 1705 requires convenience and necessity public on the material issues to state are and make findings what those factors ensue the factors. are essential It has been findings separate repeatedly emphasized reviewing assist the “afford rational basis for review and judicial and to court to relied commission ascertain principles upon as to know determine whether acted well assist arbitrarily, parties review, assist others the case was lost and to or why prepare rehearing the com and serve activities similar involving help planning questions, Lines, v. (Greyhound Inc. mission avoid action.” arbitrary careless 811, 484, Public Utilities Com. 65 423 P.2d Cal.Rptr. Cal.2d 813 [56 Com., 556]; supra, Tel. & Tel. Co. v. Public Util. Cal.2d Com., 648; supra, v. Public Transport Co. Utilities Motor California 270, 274-275.) We accordingly. Cal.2d review the findings must Expense
Federal Tax &City decision in Our tax commission’s annulling expense Com., supra, 6 v. Cal.3d County San Francisco Public Utilities before us. The was filed after the commission had established the Pacific’s federal instant decision in the amount of fixing the latter decision tax tax decision. Since followed its expense *7 annulled, be annulled.1 was the instant decision must also $143 is is due to the com 1It how million increase clear much annual our change expense. pointed As out mission’s in the treatment of federal tax Com., County supra, City opinion & Utilities Cal.3d San Francisco v. Public The fact that the with commission reopened proceedings respect does hot to the federal income tax after our decision question expense In Tel. & Tel. Co. v. Public Util. militate this conclusion. against Pacific Com., 634, 649-656, supra, 62 Cal.2d an the commission commenced rates, the lawfulness of after hearings into Pacific’s investigation lengthy excessive, new, rates, it concluded that the lower rates were ordered it ordered a refund of in the col- excessive rates amount of lected Pacific of the rate We an- during pendency proceedings. nulled the refund order on the ground general legisla- making future, tive and looks to the has Legislature authorized future, for the and that the did not have changes only power commission order refunds on of unreasonableness where the rate had ground that, been be It found to reasonable. follows unless the rate previously annulled, order now before isus it will become lawful rate and that all funds collected to it would and not be to'Pacific pursuant belong subject to refund. words, us, other annul the rate now must order because .before therein,
otherwise the rates which are based in on the annulled tax part decision, will become lawful for the future and will expense preclude refunds. Expense
State Tax concluded that for of computing expense purposes allowance for Pacific’s state franchise tax it would corporation liability, follow the same as to as the federal tax accounting procedures depreciation i.e., expense computation, accelerated with normalization. depreciation decision, Under the commission’s followed accounting procedure accelerated flow with imputed depreciation through. Accelerated for tax results in a tax depreciation or de purposes saving (See ferral. &City County Com., San Francisco supra, Public Utilities v. 123.) Cal.3d The problem is whether the tax or presented saving tax deferral should inure benefit of the form of lower rates whether ratepayer the tax or deferral saving should retained with no reduc tion in rates. When the saving passed ratepayer, accounting is called procedure accelerated with flow When depreciation through.2 119, 125, the dissenting commission refused to take evidence. The commissioners in 77984, supra, No. Decision estimated that years the increased rates in the next 10 due between 750 million and one to the commission’s tax decision would billion dollars. 2 Apparently, except all utilities in California Telephone and General follow depreciation through accelerated with flow as to both federal and state income tax *8 is called accounting is retained the the utility, procedure the saving accelerated with normalization. depreciation the In decision which we annulled the commission held that Pacific’s be for rate income tax would computed making purposes expense federal normalization, and in the on the basis of accelerated with depreciation tax ex- instant concluded that state decision commission corporation on the basis of accelerated pense would also depreciation computed reasoned: “If Pacific were to with normalization.4 The commission adopt der state taxes accelerated for income ‘flow-through’ accounting using with the it would not to be preciation, prerequisites appear compliance as Pacific must use in the Internal Revenue Code that a such taxpayer the use of accelerated method of for ‘normalization accounting’ qualify event, state in- tax In for federal income purposes. depreciation taxes income come taxes small total relatively paid portion warranted to consider different Pacific. Under these circumstances it is not for We for than federal taxes. rate-making treatment state accounting re- that the determination revenue find staff was correct basing for both state Exhibit No. 66 on the use of normalization quirement and federal income taxes. This avoids jeopardizing possibility much federal income tax deferrals.” larger
The above matters constitute the discussion corn- only quoted expense. line Pacific and that the two past straight used Telephone apparently Pacific and General have commission, depreciation. recognizing compel it could not change practices, Telephone its tax nevertheless concluded General corporations acting purpose imprudently were determined rates, impute through it would with depreciation accelerated to them flow imputed savings ratepayer. tax to the utility pays its income depreciation 3Accelerated with normalization means that commission, for depreciation. tax The or franchise the basis of accelerated on liability straight line recomputes if had purposes, then what would have been the tax used, by the expense to recovered been is the tax this amount treated as doing through The difference between the utility expense rates as an business. its for recomputed taxes on basis liability corporation taxes actual of straight as a is set on reserve for deferred taxes. up line then the books utilities, depreciation with flow system accelerated by nontelephone The followed depreciation and basis accelerated through, pays is that the taxes on the expense purposes. as for rate expense allowed tax is the amount the actual tax through, imputed system, depreciation with flow third accelerated on utility pays its taxes that the Telephone in General applied to Pacific and as taxes recomputes those but straight depreciation line the basis of if figure used, allowed this latter had been depreciation accelerated purposes. tax change in federal tax law. There was based on expense decision federal tax 4The Thus, tax the com law. change corporate our franchise comparable been no has mission decision. federal rely grounds in the did in the instant not and could *9 franchise of the allowance as to state depreciation corporation mission taxes. We annulled of the commission ac- have the decision establishing celerated the normalization as method of depreciation computation Francisco, City County supra. federal tax & San Since the expense deci- sole basis for instant as to taxes was the annulled the state taxes, decision, as to the federal instant to the extent it relates to the sion taxes-, state be cannot sustained.
Moreover, if the of federal even decision as to the treatment taxes had stand, the been to commission’s determination as to state taxes permitted could not be upheld.
The be commission’s decision not on the that the may theory upheld II, is amount involved Table Results of commission’s insignificant. Intrastate Rates—Test Operations Under Present Year reflects that $101,800,000 the test federal year taxes were adopted $19 state taxes were million. Thus the ratio is five adopted approximately to one. It assume seems reasonable to same ratio would apply $750 to tax regard $1 with Thus under the savings. million billion estimate of rate next increase in the due to the tax years federal deci- sion, there be rate may increases the next amounting due to the instant decision’s of state years treatment tax expense. There is showing no before us would which warrant conclusion commission, amount of involved money negligible; so far as appears, did not take evidence as the effect on tax state of the instant expense decision as to alternative treatment. it would compared Accordingly, be involved, to assume that a trivial amount of improper money the commission’s decision cannot be on the that the upheld theory im- of the portance decision as to tax state treatment is minimal.
Nor may commission’s state tax treatment be upheld on theory administrative convenience. No additional are computations required accelerated flow apply through. with Pacific will depreciation paying its taxes on the basis of accelerated figure would depreciation, Moreover, thus readily available. in order to establish the tax reserve normalization, used in isit essential to calculate in rate books the tax bewill of accelerated paid on and which depreciation basis would have been due without (See 3.) accelerated fn. depreciation.
Although between treatment of goal uniformity federal state tax sometimes furnish a may basis adoption particular uniformity does the state tax procedures, justify treatment adopted above, As out commission. law and state law federal pointed not the same Thus, with use of accelerated respect depreciation. large light potentially do not considerations apply. same incon- lack administrative involved and money amount *10 toas depre- the commission venience, uniformity sought the limited ordinary from departure principles the substantial would not justify dation of rate making.5 accelerated of the ordinary adhere to principle cannot that to agree
We state would taxes regard with jeopardize with flow through depreciation benefits.6 Pacific’s federal tax Code, amended in as the Internal Revenue 167(/)(2) of
Section term public the case of any property, “In post-1969 provides: (a) subsection means used in ‘reasonable allowance’ depreciation] [for under— an allowance computed (see Int.Rev. Une (l) [straight subsection
“(A) depreciation a method Code, (0(3)(f))], subs. § as acceler- allowable under this section
“(B) [such method otherwise a method ac- a taxpayer uses ated depreciation] normalization of if counting, or method, if, to its
“(C) the public with respect pre-1970 applicable serv- similar) kind (or recently most placed same utility property for ice, July the. of its accounting method flow-through used taxpayer added.) (Italics accounting period.” to use normali- (/)(3)(G) Subsection defines normalization: “In order zation method of with to any public utility accounting respect property— of the same
“(i) compute must use method taxpayer depreciation for of estab- its tax and its both purposes expense depreciation expense for its reflecting oper- cost of service for lishing ratemaking purposes account, its results in books of ating regulated section, if, under it this
“(ii) for allowance compute depreciation it used the pur- uses a other than the method method depreciation adjustments to a make (i), taxpayer must described in clause poses the use such resulting reserve to taxes dif- deferral of from reflect added.) depreciation.” (Italics methods ferent Francisco, City County supra, general & rule San pointed 5We out that through. depreciation with flow nontelephone all is accelerated followed utilities from, governing principle basic represents departure the instant Thus 124, 129.) (6 at expense. pp. treatment tax Cal.3d contrary to fact that affirmed purpose 6We assume for of discussion and course we annulled it. Since tax decision of the commission. federal Of speculative there it that only commission must reconsider tax treatment the federal tax benefits for Pacific. will federal whole, 167(Z)(3)(G)(ii) section is read as a is clear When reserve for deferred taxes need reflect deferral of taxes only resulting the use of “such” different methods of such depreciation different mean the methods difference in the allowance depreciation course, section,” “under this section.” term “under depreciation refers to federal taxes and not state taxes. reasons,
For tax state cannot foregoing computation be sustained. *11 Adjustment
The Western Electric Pacific, rate proceedings the commission prior involving generally certain and adjustments to Pacific’s establish adopted plant expenses lower than those Pacific its actually affiliated prices charged by manu- facturer, Western Electric Inc. is a owned Company, wholly Western. of subsidiary American and Telephone and American Telegraph Company, holds 90 of control the percent voting Pacific. reductions were based on that Western should theory be entitled to greater no of return than would be reasonable for regulated utility. decision,
In the instant the commission concluded that no adjustment should be made. The refused to make the not commission adjustment as to only current purchases Pacific from but refused to by also Western make the adjustment with and respect plant equipment purchased prior the last year made in Pacific’s rates. adjustment setting
The commission out pointed during years Western 1946 through 1969 had received a return on net from its Bell System equity operations course, 10.1 to (This, 10.2 is percent. substantially than higher return Pacific or in the current permitted during period proceeding.) The commission found that Western was efficiently operated, pointed out section 456 of the Public Utilities Code incentives permits rewards for a more efficient of an management enterprise.7
The basis that, commission’s decision as to the activities of West- ern, a rate of return be should commensurate to an permitted ordinary “Nothing part 7Section of the Public Utilities Code provides: shall to prohibit any public utility construed by profiting, permitted from to the extent commission, economies, efficiencies, any may improvements or which it make, distributing dividends, of, by way and from disposing or otherwise such profits. may arrangement The commission make permit public or such with efficiencies, economies, as it encouraging deems wise purpose improvements securing utility making public portions them such profits thereof as the commission determines.” such and that when Western of return permitted manufacturer’s return, were reasonable.8 prices Electric adjustment We considered Western extensively Com., supra, & Tel.
Tel. Co. Public Util. Cal.2d 659-662. We v. Pacific, to the affiliation of set forth the findings corporate commission’s American, the Bell System as to the dominance of pro Western and service, in its integrated and as to its viding advantage position telephone distributor, installer, manufacturer, researcher, designer, engineer, being business percent telephone junker, operator repairer, were entire United States. Those not findings continental disputed in the Pacific. concluded: of the commission pres We "The determination its sales to Pacific ent case that Western is entitled to no return on greater should Pacific is entitled to earn on that American than its operations, to subject not instrument of Western through permitted corporate return, is based greater Pacific’s to the burden of providing ratepayers on made on the subject extensive findings com but also theretofore followed methods and principle *12 herein, . a mission . . and as the found produces expressly 661-662.) and (62 rejected fair reasonable Cal.2d at We Pa result.” pp. “to a cific’s contention that it error for the commission to omit include fact as to the reasonableness or of Pacific’s finding prudence purchases apply 8The commission “The 456 also to an reasoned: intent of Section should utility. a quite possible affiliate of California is that the risks in the manu It inherent facturing operations supply and and Western Electric operations in.the service great are not as quite operating as the risks of some of used the manufacturers however, comparative presented proceeding. data no question, the that the in this There is capital is that structure of Western Electric similar to of manufacturers. operated an ex ample has been There tremely also evidence that Western Electric Considering manner, compared enterprises. as with risks efficient other operations, deem it reasonable for and efficiencies of Western Electric’s total we through 1969. it realized from Western to have earned returns Electric during adjustment charged products and services prices No to the Pacific for period is warranted. manufacturing reviewing. the appropriate tests reasonableness are “Further Also, by Western Electric. performed supply and functions and service functions utility, supply and manufacturing such service although not a function a normal repairing manufacturers, storekeeping, installing, as purchasing functions from other did though Electric not Even Western salvaging utility functions. are normal and adjustment a downward unreasonably high operations, an return on earn manufactured prices Electric charged appropriate if Western would be prices by others or if higher products manufactured products than similar were charges by at cost than supply functions lower perform the service could would cost at least and 8-A show that it Nos. 8 . . Exhibits Electric. . Western supply functions service and $14,500,000 duplicate to per year more for Pacific to adjustment that no confirm by exhibits performed Western Electric. These now Western warranted supplies is products services or for prices for manufactured Electric at this time.” (62 from of the . . Cal.2d. Western at payment prices charged, p. 661.) that, where
We thus determined it that a utility enjoys appears dominant shown commission’s it through findings, may position the use of corporate instrumentalities obtain return than greater would be entitled of the en- utility separate absence corporate tities, and was not determinative whether the one charged prices affiliated to another be considered reasonable. In other corporation might words, the must be as a regard viewed whole without utility enterprise entities, rate of return should be the same separate corporate for the entire utility enterprise.
seeWe no reason to from our A holding. corporation depart should not break use permitted utility up enterprise affiliated an increased obtain rate of return for corporations thereby its activities. In the dominance of the Bell and its in light System of the tegrated again the view reasonable position, reject finding ness of Pacific’s warrant prudence Western would termi purchases nation the Western Electric adjustment.
There has been no substantial since our as to change prior Pacific, the dominance of the Bell System or between relationship American, and Western. Western must be considered Accordingly, part and its should to reflect no prices adjusted enterprise, rate of on greater return its sales to Pacific than Pacific is entitled earn on its This result cannot be operations. avoided the basis of finding *13 that Western’s were when reasonable to other prices compared manu- facturing enterprises.
The increased of rate return for Western permitted activities not may be sustained the record before us on the it a that theory represents reward for efficiency. When the commission sees fit a to permit reward for efficiency pursuant section 456 of the Public Utilities Code (see 7), fn. it commission, must the amount of reward. If the specify reward, permitting reward, fails to the amount it of the specify becomes Thus, review the of impossible the commission. case, the instant there is no of out way the amount of the separating increased of return as a reward for and no permitted efficiency way of addition, what due determining increase is part other factors. In are entitled to ratepayers know the amount of rewards included any their it since is their that is money used for the being reward. When the commission determines to give away must ratepayers’ money, at least tell the donors how much they giving. Expenditures Producing Capital
New Nonrevenue rate base calculating followed usual The commission practice However, the an rate base. average year test year by using of $75 to reflect that million figure adjusted commission then would of capital expenditures expenditures capital base on the increased be The commission nonrevenue producing. com- at rate base. Also the forma basis those figures arriving pro taxes, and income ad valorem mission adjusted depreciation expense, taxes. be discretionary executive of that there would in
An Pacific testified items The discretionary vestment in 1970 1971 in above amounts. were not were identified as in the service apparently improvements long in the run. The but would necessary necessary immediately offices, centralized older listed such as executive items replacement band restoration which call broad systems, permits automatic distributing fire, when there is a wreck restoration service quicker improvement vandalism, in resi coin boxes so as to better withstand undergrounding cables, areas, and new items of station dential pressurization improved equipment. did as witness not these investments nonrevenue
Although identify investments in the sense but rather producing discretionary investments service, it to maintain were not commission order or they required would expected seems most the items apparent produce substantial increase in revenues. investment is commission’s nonrevenue categorization producing misnomer; are an revenue investments probably important part and it would to term the invest- seem more producing system, appropriate ments as revenues than non- investments which will not increase rather evidence revenue With is sufficient producing. qualification, expenditure amount of commission’s as to the finding support contention that the evidence is in- “nonrevenue” and the improvements, *14 sufficient must be rejected. is are insufficient
It also claimed that of commission findings The commission of the rate base and justify adjustment expenses. 102, includes alternative stated: “In Exhibits Nos. Pacific 1970 75 base rate and a weighted year-end results using operation average forma rate base rate base. Pacific contends that the use of a year-end pro which offset the rate of return in this erosion of justified proceeding that the is the inevitable effect of inflation. Pacific out Commission points has made an in rate return take care antici- allowance frequently in inflation. pated attrition results earnings primarily “We do not that the use of a rate base agree necessarily year-end . For if a by all of additions installed appropriate. capital example, are related to to new
utility during year service directly providing customers, the additional net to be from those new revenues received be if a customers should reflected in the test year year-end also normally hand, we rate base is to used. On the often have utilized rate other base which was than either a or a higher weighted average year-end base when installation of is imminent. In non-revenue-producing plant cases, such the additional would be before or soon after plant completed new rates became effective. Not there be no off- utility would investment, additional net revenues available to offset the setting higher there would be additional Unless the expenses. non-revenue-producing and related into depreciation taxes were ‘rolled back' plant expense would, the test never year, achieve the rate of return found reasonable the Commission. by
“To determine rate of the test return for year rate-making we will consider how much additional purposes non-revenue-producing have been plant will installed of the first by approximate midpoint 12 months that the new have been in effect. telephone Undisputed testimony Pacific’s vice shows that president charge operations 7,5 about dollars and 80 million capital expenditures dollars capital expenditures essentially non-revenue-producing. about half of Only those 1970 and none expenditures of the 1971 expendi- would be tures reflected a weighted average and. 1970 rate base corre- net revenue. When ‘roll back’ sponding into 1970 test all year such that will have been installed plant by non-revenue-producing 1971, end of the effect of additional including depreciation taxes, additional ad valorem offset in lower income taxes which part interest, result from the assumed higher bond the end expenses result should close which will reasonably return be realized Pacific the first 12-month during the new period rates are in effect.” telephone The basic out approach making, pointed at the of this beginning is to take test opinion, year determine the revenues, and investment the test expenses, We out year. pointed Com., & Tel. Tel. Co. v. Public Util. supra, 62 Cal.2d that the test results are adjusted allow for period reasonably anticipated revenues, changes or other expenses, conditions “so that the test-period results as determined the commission will operations be as nearly *15 rule, com- Within future conditions possible.” representative revenue, and investment all may mission adjust figures, expense, or of the but it not one side adjust part equation anticipated may changes that the finding there is particular without other unless adjusting when was recognized extraordinary. This expenditure weighted be from a change it out not to that it would proper pointed revenues also to- a rate base without year-end adjusting rate base average to reflect new customers. case, find the investment
In instant the commission did not that to extraordinary which would not increase revenue was in comparison that the invest- commission reasoned To past practice. contrary, “ ” The commission ment must be back’ into test always year. ‘rolled achieve reasoned that was would never unless made Pacific adjustment increased revenues the reasonable rate of This is true if the return. not be to in the future will sufficient offset this investment expected But is no that other increased there finding investment expenses. invest- increase in revenues will not offset all of the increased anticipated ment and investment which In of a that the finding absence expenses. increase would not increase revenue is or that extraordinary anticipated be in revenue will not to all increases sufficient offset anticipated investment, the test figures. there is no basis for expenses adjusting year made, we whether dis- way Under the have no findings knowing to considered large comparison prior should be cretionary investment be or relation total as to dollars to years viewed either spent when $80 It be years, investment. that in may comparison prior dis- were not because similar amounts large million are figures spent figures $80 $75 and investment in cretionary years. prior total of all invest- 10 percent anticipated represent approximately be that and it well may to be made Pacific 1970 and ments on dis- the test based more than 10 of the rate base for year percent be so, seem that any adjustments If would cretionary investment. that followed by be the direction made should made opposite event, be made only to made should commission. any adjustment extraordinary. of the investment which deemed may portion in- there which will Since is no the investment produce finding revenues increased creased revenues is or that the anticipated extraordinary to offset increased expenses for future insufficient years anticipated investment, the are insufficient the adjustment. findings support effects of to offset the is warranted that the argues adjustment ex- Discretionary unrelated. essentially But the two matters are inflation. *16 348 increase or decrease there-
penditures may without whether regard Moreover, or deflation. did not inflation commission on in- rely flation argument.
Rate Return The commission fixed the at of return permissible per 7.85 (with cent 9.5 on common which was substantial increase percent equity) over the was rate order. From 1948 1954 authorized rate 5.6 prior in it became percent, 1954 6.25 1958 it became percent, in 6.75 percent it was 6.3 & (Pacific reduced to Tel. Tel. Co. v. percent. Com., Public Util. supra, 643-644.) Cal.2d In the rate of return was 6.9 percent. case,
In the last cited concluded that rate of in- return there volved was “within reasonableness" and bounds would not be dis- (62 656.) turbed. at Cal.2d The return allowed in instant case was p. recommendation, within of the commission’s staff was range cities, above that slightly and was within the urged by petitioner range of reasonableness. matters considered commission fixing the rate of return were of the same nature as considered in last those case, cited and we are satisfied that the did not commission abuse its discretion in the rate of fixing return.
Licensing Contract Services American, Pacific’s parent, certain services such as basic provides research, assistance engineering, legal, accounting, other financing matters for the Bell one, System of which Pacific operating companies, where these services can more performed efficiently effectively a centralized basis. The amount Pacific to American for these services pays is computed an amount by taking to 1 equal gross percent Pacific’s revenue.
Historically, commission has the amount rejected computed on percentage-of-revenue basis when Pacific’s reasonable ex determining penses for rates.9 lieu setting purpose percentage-of-revenue computation, has used for setting actual purposes costs to American for services rendered to Pacific. The licensing contract percentage-of-revenue 9The payment rejected, although basis of because over a period years might average charges reasonable, result that were the end any particular year result in at particular might level reasonable. For example, a 10 percent percent increase Pacific’s rates in a would result in payments increase to- exactly American for the same services. *17 However, in this manner. case computed allowed instant in the the actual than a allowance resulted in higher use of the cost figures actual made to American. payments discussion of Western out earlier in connection with
We pointed Bell of the System of the dominance that in the adjustment light Electric be viewed as a whole must the utility enterprise and its integrated position, this with accordance entities. to corporate without regard separate to use actual decided the commission fundamental properly principle, amount rather than the American paid costs the services rendered by Pacific to American. Lifeline Service was pre “lifeline basic minimum service which The service” allowance $2.25 at the rate of month with message offered viously per two- same, of whether one or was the irrespective of 30 units. This rate areas where resi was used. The service is offered those service party available, being restriction only dential service is with message unit. allowable than such service is per dwelling more one no to be increased this service Pacific that the basic charge requested The be to zero. allowance reduced $2.95 and that the units 30-message $2.95, to but in basic charge commission authorized the increase to 20. allowed the be to This said unit allowance to reduced message to “lifeline” subscribers.10 increase cost amount percent cited us to evidence Neither Pacific nor the commission have any in cost of the lifeline the record increase extraordinary to support such service,11 failed to disclose and our review of the record has any the lifeline service cannot evidence. The increase in cost of extraordinary be sustained on the before us. record cost 10Although $2.95 actual percent, $2.25 the increase is 31.1 rate, also only figuring
should but the increase in basic calculated message calculating service, namely the loss in value of loss of 10 units of allowance, basis, percentage the actual one-third of the On this lifeline value. to be 52 percent. increase for users is claimed lifeline pages transcript as evidence that the lifeline 11Patific cited 5575-5577 $50 capital per customer. requires $25 a lifeline an investment of between service initial system could be testimony response question This was in to the whether instituted, already been such has established Sacramento. In cities where service requiring already cannot the basis for capital made and investments have been could offered No cost statistics were which an rate. increased answer, In its increase. proposed determine reasonableness produced greatly revenue service exceeds providing that the cost of lifeline asserts to sustain this assertion. point evidence in the record thereby but fails Long Term Construction Plans $750 The commission ordered Pacific to addi- install million of plant 1971,' 1972, for each of the years tions 1973. finding supporting this order stated that additions of at least plant per year by Pacific for the next three would decrease the years likelihood service This was based on evidence in the record included problems. finding *18 estimates, an analysis Pacific’s 1970 construction expenditures to size and both and of the necessity, expenditures construction anticipated next few years. the One of the the exhibits described detail manner in which Pacific arrived at estimates of future expenditures. construction The commission staff made estimates also their own matched closely those of Pacific. Code,
Under section 761 of Public Utilities is commission a authorized “. after a that the . . hearing finding practices, equip- ment, facilities, or service of . . are appliances, any . public utility unjust, unreasonable, unsafe, insufficient, or .. .” ff>order improper, inadequate, facilities, “. . . service., practices, . . to .” equipment, appliances, [or] be used regulated utility. Section 762 of Public Utilities Code authorizes the commission to order after a changes finding hearing . additions, extensions, . to, or repairs, or improvements changes in, the ... existing other plant physical any utility property public structures, . . . ought made, to be reasonably or that new should be erected, to . . promote security or convenience of . or in public, any other adequate facilities, to secure way (Italics added.) service or . . .”
It is contended that the instant order was outside authority of either section 761 or 762 because the sections author do specifically ize the commission to make a order to general gross dollar expend amount, rather than construction The ordering facility. particular intent of these sections is to allow commission insure that the can and will service. Such broad intent can provide adequate support a general order as was issued in the instant case.
Moreover, Pacific concedes that the commission has the review power made specific amount and disallow as expenditures gross an which it considered or wasteful. Such unjustified review alone satisfies to the petitioners’ objection order.
It is also contended that the is order based on an insufficient finding. The commission’s that the finding addition of year would per decrease the likelihood of service is problems sufficiently satisfy specific of section 1705 of Public Utilities Code. requirements that the commission ignored opposition urged important In addition this testi did not ignore The commission a certain witness. testimony by in detail the commission’s On mony. contrary, explained opinion evidence conflicting When testimony. reasons for rejecting from; drawn, can be commission’s inferences which conflicting presented Com., (Southern Co. v. Public Utilities 41 Cal.2d Pac. findings are final. 70].) P.2d [260 Advertising Expenses $11.5 include million spent allowed advertising as an The actual
advertising expense. expenditures operating $12.9 commis- were million. The attributable to California approximately $1.4 of its staff on the the recommendation sion disallowed million on *19 as to whether all actual advertising that there was doubt serious ground related as to “institutional” advertising. to “informative” opposed consumers, It is that since Pacific is with captive contended monopoly services that of advertising informing emergency except public and and no create image, is calculated to does more than good public as an as is not allowable such is institutional which advertising operating is as informative which classified Advertising expense. properly should result in results than a mere It fostering goodwill. in more costs and more efficient service to the reductions in operating ratepayer. that for such could conclude The commission expenditures properly a show and in the absence of are reasonable operating purposes expenses, was that the allowed for advertising amount informative ing primarily must be directed other allowance of the commission for purposes, upheld. Charges
Miscellaneous items majority affecting After individual consideration under the remained dealt with those which commission proposal, of the items in “Other Most heading of Miscellaneous Charges.” charges equipment and numerous category involved rate installation 11, All of in exhibit section and service the items identified functions. are cost studies. 3, each recent charge which such supported that is explains review and staff for These cost studies were commission provided one introduced evidence. such was study merely that the rate changes requested
The commission determined .” and that since “. . . offerings, . . costs recognized rising increase, they rates involved than 25 percent most of the less proposed conclusions, arid should In its findings commission approved.12 stated, herein, the record and the increases in upon “[b]ased rates charges authorized are herein rates and justified; charges authorized herein reasonable; are charges, insofar as differ present they herein, from those prescribed the future and unreasonable.” unjust It contended the commission’s that these were increases finding justified reasonable The on which these increases inadequate. finding were based not only enumerated commission’s reasons for allowing increase, was but substantial evidence before supported the commission. The contention is therefore without merit. Quash
Motion Service On March Bennett was issued three petitioner subpoenas the attendance of other compel Pacific’s two officers president corporate at hearings increases. The date on public involving return telephone 17, 1971, was March at 9:30 The were subpoenas a.m. left subpoenas Pacific, with an who was service of employee designated accept process 16,1971. on the on March corporation, held had served been subpoenas properly ordered, them quashed, thus an denying petitioners opportunity
examine the officials. Petitioner Bennett that such a hold- corporate argues constitutes a ing denial of due of law. process the Code Civil
Section 1987 of Procedure that provides except the of a “(a) case officer: . . the a . service of is made peace subpoena (b) ... the . delivering personally witness . . copy the [or] [f] director, ... officer, case of a ... or of who is an or man- anyone party such . of a aging agent . . the service party subpoena upon any witness is such not if written notice witness to such required requesting court, therein, before attend at a trial of an time or issue with the thereof, is served Such such or place upon attorney party person. days shall be served at required least 10 time attend- notice before for (Italics ance unless the added.) court a shorter time.” prescribes Petitioner Bennett 14 for days delayed serving subpoenas date, the eve mitil the commission did abuse its return not discretion in had on the they quashing subpoenas grounds served. been properly list, percent 12Of rates included in the 72 miscellaneous involved increases of (four items)
25 percent percept ranging less. The other 28 involved increases percent percent. from Meeting Propriety of Commission issuance Utilities Commission of the Public Following 22, 1971, Bennett rehear instant decision on June petitioner requested 29, 1971, This was denied on June initial for ing. petition rehearing 2, amended was filed on amended July an 1971. petition rehearing law, under effective date of the rate stayed provisions petition, 4, 1971, three of the commissioners came to On July increase. Sunday, Concord, California, at near and denied amended gether an airport Bennett such a was in excess of contends that meeting petition. Petitioner the commission’sjurisdiction. of the Public Utilities Code directs
Section . . “. at such . . . . bemay meet . times and in such . places expedi- duties, .” ent for the of its . . Petitioner necessary proper performance Concord, California, has not asserted was not an meeting expedient nor that was not a innu- place, July time. Petitioner’s necessary endos absent misconduct, basis allegations, an insufficient specific review of the meeting’s propriety.
Annulment the Commission’s Order seen, As we have with portions dealing the commission’s the federal and state tax the Western Electric expense, adjustment, new “nonrevenue cannot sustained producing” expenditures capital the record us. before the exact amount involved Although money these record, portions of the decision not clear is clear from the record that the amount is substantial in relation to the increase, million annual rate and it is that the amount involved possible the enumerated items to or exceeds the amount of the increase.13 equal basis No to sever these matters from increase of ordered appears *21 taxes, respect adjustment, 13With to the and the federal state Western Electric and capital figures to so-called expenditures, nonrevenue relevant the instant case the in relating to the departure accounting effect of the principles in the 1968 used proceeding Nevertheless, conflicting. are and respects unclear in some some of figures seem in $143 those which reliable indicate that more than half the million requirement crease accounting changes in the revenue is to the attributable cannot be strong sustained the record before us. There is also a indication that $143 more than accounted million is for when the amount of revenue increase neces accounting changes these sitated added the at is to amount of revenue increase return, change accounting tributable to the an in rate of which in sense is also words, adjustment. believe, although entirely In other there is not is it reason clear, changes relationship that there have been no substantial in the between revenue expenses Pacific, proceedings involving and rate increase since the 1968 rate and that none of the by changes expenses was necessitated in actual revenue and Pacific, but may change that the in the entire increase attributable account ing principles applied by determining and evaluations the commission in rates. commission, and is not it claimed severance possible. until the that the increased rates be continued effect com- should in urges rate, a new is no basis continue a mission establishes but there once it is determined that the rate is invalid. We conclude that commission’s order would rates must annulled in This ordi- increasing entirety. mean that the rate would then into narily gO' effect. prior lawfully adopted 4, 1972, Decision authorized On commission No. 79873 April an rates new rates which increase in telephone totalling provided ap- $143 it the This increase includes in million proximately annually. us. The 4 increase was not based on a full increase before April used scale rate results rather the figures proceeding; us, before used the same test year, merely proceeding using due ‘higher offset adjusted changes wages operating expenses tax law other On the basis of in some items. changes, paid, changes these the increase in rates so that the changes the commission granted would the rate return found reasonable produce revenues anticipated the instant proceeding. us, fixed although 4 is not before decision April erroneous determi- in that based in obviously proceeding part upon us, in the before we cannot annul in this nations proceeding proceeding 4 decision. April
Nevertheless, we that the 4 rates will must recognize April supersede us, errors the instant before that the proceed- the rates the decision it 4 decision should come would annulment of the ings April require taken, that unless this on review unless action before us appropriate found will court acts to our errors have merely effectuate be carried into future rate increases. forward order the that to avoid this result court should com-
We conclude the instant rates of its last lawful order mission to preceding reinstate however, interim rate increases that may grant rate proceeding, provided, Commission, 191 Cal. (see Saunby v. Railroad findings upon appropriate 487, 904]; 42530, Cal.P.U.C. 226, et No. P. Decision seq. [215 Com., 488; Dyke Co. v. 56 Cal.2d cf. Water Public Utilities 326]), it considers the 363 P.2d while propriety Cal-Rptr. [14 will increase Such permit for rate before us. provision application *22 if and should relief to Pacific commission to immediate grant appropriate commission in the instant determinations of the pro- invalid prevent to affect future rates. ceedings continuing
Refunds At Pacific, of with the request petitioners consent of we have issued a that all sums previously partial stay collected providing by to the rates authorized pursuant decision under review shall be to refund subject in whole or in order this court should the part upon decision or Decision No. annulled or modified.
Petitioners claim that annulment of the decision before us the upon invalid, increase will be determined to be that all sums collected in excess of the last lawful rate will have collected, been that all illegally such sums must be refunded. Pacific court urges defer determina- this tion refunds. Pacific’s is that the case should remanded to position the commission to set new lawful rate in the of our and that light opinion, difference, refunds should be limited to the if between the rates any, set before us and the rates set in the further proceedings. decision, Pacific’s argument was made in a brief filed before the April and it should be out that circumstances of pointed this case the rates contemplated by Pacific be set in further to-determine proceedings the amount of rates, refund artificial and will never into effect go for the except refunds purpose determining because new rates to be established commission for the future will no take doubt into account the matters which led to the 4 increase in April rates. It would obviously be to consider such inappropriate matters in determining amount of refund in the instant case.
The statutes dealing with stay commission rate changes pending review court do not deal with the expressly refunds question where there has been a and the stay rate increase is annulled. subsequently The statutes authorizing stays, sections 1762-1764 of the Public Utilities Code, merely for the and the provide stays or the im bonds posting pounding funds without with the dealing before situation us. In other situations, the Legislature has more out the clearly spelled rights of the Thus, parties. where a reducing commission order rates is or where stayed, a commission order a rate denying stayed, increase is and the utility is permitted charge review, proposed, higher the statute pending commission, for refunds provides expressly if order is ultimately (Pub. Code, affirmed. Util. Ry. 1766: cf. Market St. Co. § § v. Rail Commission, road 28 Cal.2d 875].) P.2d The ab [171 sence of any for provision refunds should a commission order be annulled reason establishes that no apparently refund will be permitted annulment of a rate decrease reasons for irrespective annulment. The decrease, situation, latter the annulment aof course is of the converse *23 increase, and this us, sug- of a rate the annulment the situation before increase is annulled. where a rate full refunds are order that gests & Tel. v. Tel. with a similar were confronted question We Com., case the com- In that 649-656. supra, 62 Cal.2d Public Util. rates, than its. more by reduce determined that Pacific should mission to its that Pacific refund also ordered commission annually. rates of the new in excess collected from its customers customers amounts had been investigation pending the rate two while during nearly years ordered of the refund was approxi- The amount before commission. the commission the decision of .Although $80 million. affirmed mately of the rates, we annulled it reduced future portion insofar as an extended review after refund. concluded which We required to the commission power had Legislature given statutes that the relevant order refunds of not to and has given power establish rates prospectively which order to an collected aby approved public pursuant amounts has final. become
(cid:127) its of a rate is application out that the fixing prospective We pointed Util character, the Public under section that legislative code, Code, the commission given well ities as as other sections and that the commission only, rates power prescribe prospectively unreasonableness, refunds of not, could even on grounds require at (62 had become final. Cal.2d fixed formal charges finding there 650-655.) arguments giving that recognized may policy We pp. rates are order where retroactively to the refunds commission power enrichment, con but we or to unjust found to unreasonable prevent Legislature, cluded should be addressed to that such “arguments derives, (62 this court.” rather authority whence the commission’s than the relevant 655.) has not changed any Cal. 2d at The Legislature p. statutory provisions. that the has author- out that the conclusion Legislature
We pointed of the Public ized section. 734 retroactive rate making supported 654-655.) (62 at That section Utilities Code. Cal.2d provides pp. commission, has found reasonable by when been formally ground shall not order the upon, reparation payment course, the to the Of rates present unreasonableness. existing prior pro- found, decision. have reasonable a final commission been ceeding decision, annulled, before us are law- the rates set in the When the instant decision. ful rates are those which were existence We prior to fix new for the the commission are satisfied purpose permit refunds, Pacific, involve rate making would retroactive requested by *24 in violation of the Tel. & principles recognized Tel. Co. v. Public Pacific Com., Util. supra, 634, 62 Cal.2d The 649-656. basic conclusion that the rates existing prior are proceeding unreasonable as well as the con- clusion that increases in rates are are justified both based on the same defective findings. To the commission permit to redetermine whether rates were preexisting unreasonable as of the date of its order and to establish new rates for the of refunds would purpose mean that the com- than, mission is establishing rather retroactively As we prospectively. seen, have the Legislature has expressly prohibited granting repara- tions on the basis of unreasonableness, where, here, there is an rate, and approved the Legislature has authorized only rate prospective making.
Although there
bemay
substantial
reasons to
retro
policy
permit
active rate making, there are also substantial reasons to the
contrary,
it is for the Legislature to determine whether California should abandon
against retroactive
policy
rate making.
scheme
rate
utility
regulation
of public
adoption
comprehensive
considerations,
involves
has been
that absolute
recognized
numerous
must sometimes
overall
give way
good, including
greater
equity
Industries, Inc.
(See
v. Cin-
demands of
Keco
certainty
efficiency.
Co.,
cinnati & Suburban Bell Tel.
evaluations made *25 the due to rate in rates changes changes rule retroactive against making be given and evaluations should accounting accounting in practices such are made record. effect after on proper prospectively changes Com., supra, Co. v. Tel. & Tel. Public Util. As out in pointed Pacific (italics 634, 656, reasonable, rates’ 62 or Cal.2d it “is the sufficient ‘just, added) to after first finds which section directs the commission fix 728 ” . . are that ‘the rates . . . unreasonable.’ The charged, . collected the of un finding the instant case are essential to in accounting changes reasonableness. 1211, v.
The cases States U.S. L.Ed. Morgan, of United 307 183 [83 Florida, 795], v. 301 L.Ed. 59 S.Ct. and Atlantic Coast Line 295 U.S. [79 1451, Pacific, 713], 55 S.Ct. In those relied are upon distinguishable. by cases, the administrative earlier rate which was be the by superseded was fixed the and found to be change invalid not agency’s by agency rate reasonable as was in the case before us. We hearings recog- after done be a nized that decisive might admihistrative agency prior approval Com., supra, consideration Tel. & Tel. v. Public Util. 62 in Co. Pacific 634, 653, Moreover, Cal.2d a case basis. where on this distinguished Morgan light Coast Line doubtful the Atlantic are of in validity M., Illinois, 300, v. St. & P. R. Co. 355 U.S. Chicago, later decision in P. 302, 292, 296, 2 304], footnote L.Ed.2d wherein district 78 S.Ct. [2 court had that funds due to the increase required impounded to the was annulled. paid event the administrative order ratepayers not dis- United States Court noted did Although Supreme merely cuss the refund in its the annulment order validity opinion upholding increase, of the rate to have been on seems squarely presented question court The then denied subsequent supersedeas. appli- application filed cation without but was dissenting urging opinion, five-page opinion (356 U.S. at Morgan the court to and Atlantic Coast Line. 906 follow 573, 574-577, 665].)14 S.Ct. 906-910 L.Ed.2d 78 pp. [2 Co., Thermoid 14In Western Co. v. Union 12 2d 256 Utah [365 Pacific Railroad Line, 65], cases, Morgan, Chicago P.2d like the Atlantic Coast the earlier rate change by agency superseded which was not fixed invalid rate hearings, Moreover, majority following distinguishable. case after Morgan thus the that, and Atlantic Coast Line stated had the funds from invalid rate (365 might at increase been a different have been reached. P.2d impounded, result was, 70.) effect, course, stay requiring an order p. partial Of in the instant case our impounded. the increase to be rates cited with the refunds with- problem other three state cases deal Pacific problem, and none of cited out discussion of the cases substantial making. against retroactive rate policy consider in connection the collected We conclude that the entire increase of rates pursuant that the the invalid must are informed rates order be refunded. We decision, amended, in the as went effect on into approved April May seen, 1972. As we of rates the invalid have increase includes April us, increase before and the based on a full scale latest increase was not before us to merely but rather offset proceeding adjusted the went certain Insofar as the rates which changes operating expenses. into on effect 27 reflect based the invalid order before May increases on us, However, refunds insofar rates are necessary. attrib May utable $70 million increase authorized April approximately they are refund at this time. subject
The decision is The commission is directed reinstate the annulled. of its last lawful order the instant rate preceding proceeding pro- interim, them, vided, however, that it rate increases should it may grant find while it reconsiders Pacific’s for increases. appropriate application The commission is further directed to Pacific order to make refunds accordance with the views herein. expressed J., McComb, J., Tobriner, J., Burke, J., J.,* C.
Wright, and Schauer, concurred. J.,
MOSK, I concurwith the Concurring Dissenting. majority opin ion for its except of the commission’s for approval authorization include $11.5 million on spent an expense. advertising operating of
By way I out introduction that several point ago Pacific years to include in attempted all dues it operating expenses to chambers paid of commerce and the contributions made to charities. In No. amount, commission disallowed over half of that observing “Dues, contributions, donations and if included as an rate-making who, become an purposes, involutary levy rate-payers, of because service, nature of are unable to obtain monopolistic utility from, service another source and such thereby avoid The levy. com then ruled mission that all such would disallowed expenses future, held this to be (Pacific “the correct & v. rule.” Tel. Tel. Co. Public Util (1965) Com. 62 Cal.2d 668-669 Cal.Rptr. [44 353]; P.2d see Mosk, J.).) also id. at 676-677 of pp. (concurring opn. that in the com- proceeding same I believe token By present * sitting assignment by the Supreme under of Court Retired Associate Justice Council. Chairman the Judicial claimed costs advertising have eliminated all Pacific’s
mission should Adver rate-making purposes. calculation operating expenses the cost I submit that create designed goodwill. tising generally of stock out of should come goodwill pockets promoting company voluntary conclusion in 1965 My regarding holders rather than ratepayers. dissatisfied, may here: “A stockholder contributions well equally applies directors, or sell defeat the seek to change corporation, policies available to a his stock No alternatives investment. comparable bill to' the full sent him whose choice is to ratepayer, pay monopoly of the company—or made the name —for rendered and gifts services v. Util. & Tel. Public (Pacific his Tel. Co. the use of abandon telephone.” Com., supra, at p. (concurring opn.).) first, service categories. falls into two
The advertising commission, is before the according testimony advertising, informative inform, advise, tele- “to instruct and solicit designed cooperation use of the Subjects the most efficient making users telephone. phone codes; direct area assistance dialing directory covered include: distance numbers; calls; correction of billing; use emergency promo- and posting on how here to advice tion ‘we’re goodwill through campaign; help’ *27 cable; calls; service; malicious, buried obscene or harassing handle repair house, and service.” open public use of
Public which deemed to necessary telephone instruction is proper facilities in the informational can adequately provided pages definition, of good- the for directory. “promotion item By annual telephone will calculated to foster through merely ‘we’re here to is help’ campaign” handle is And advice on how to obscene calls goodwill. telephone properly I all the a function Thus would eliminate agencies. of law enforcement costs to-the attributable first category.
The second service category, advertising, according promotional commission, the is use of before “to- stimulate the testimony designed etc., attachments, extensions, or to long-dis- stimulate revenue-producing tance also calling.” advertising This of is type suspect.
1 find should incongruous encouraged expend sums for calls at advertising stimulate the to make public telephone it is funds new because of very seeking time substantial for equipment can, of facilities. Nor I of sales overtaxing present justify promotion attachments, devices, which are extensions similar of more many functional, decorative essential item of than as an operating expense cost to- Such should be added chargeable charge ratepayers. itself, device but not a levy ratepayers constitute upon generally. course, well sense, the abstract judiciary placed been that has heretofore each and item of every accounting reexamine commission. On of the regulatory considered the staff and members hand, of advertising who testified on subject other staff member was conceded that “A review made of at the commission hearing types vs. made as to the cost bene- in-depth study but no was used advertising (Italics added.) I refuse advertising.” such would consideration fits time all at until such advertising rate-making least expenses purposes, has been made. analysis an in-depth appropriate a of the total $11.5 While not be substantial may percentage vast it is not a trivial utility, nevertheless operating expenses public bear- which as a sum when expended monopoly corporation operates ing state. It is visible use of obviously highly imprimatur to stir considerable resentment. money, ratepayers’ public appears up item, The decision itself that “The of Pacific’s recognizes commission’s to the most criticism of witnesses expenses subject public I can conclude that the commission should have advertising.” paid greater heed to the created to sensitivity of it is serve. public Public Utilities Commission real petitions respondent party in interest for were July denied rehearing opinion was modified to read as above. printed