COLORADO OFFICE OF CONSUMER COUNSEL and the Colorado Municipal League, Intervenors--Appellants, v. The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, Petitioner-Appellee, and The Public Utilities Commission of the State of Colorado and Arnold H. Cook, Ronald L. Lehr, and Andra Schmidt, the individual Commissioners thereof, Respondents-Appellees, and AT & T Communications of the Mountain States, Inc.; MCI Telecommunications Corporation; the Colorado Association of Radio Common Carriers; Competitive Telecommunications; Association of Colorado and Wyoming; Eagle Telecommunications, Inc.; US Sprint Communications Company; and Universal Telephone Company of Colorado, Intervenors and Co-Respondents-Appellees.
No. 89SA400.
Supreme Court of Colorado, En Banc.
July 15, 1991.
As Modified on Denial of Rehearing Sept. 16, 1991.
816 P.2d 278
Gorsuch, Kirgis, Campbell, Walker and Grover, Dudley P. Spiller, Jr., Joseph B. Wilson, Denver, for intervenor-appellant Colorado Mun. League.
Eiberger, Stacy, Smith & Martin, Raymond W. Martin, Roy A. Adkins, Laurie Bennett, and Russell P. Rowe, Robert L. Connelly, Denver, for petitioner-appellee.
Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Mana L. Jennings, Asst. Atty. Gen., Denver, for respondents-appellees.
Justice KIRSHBAUM delivered the Opinion of the Court.
Appellant, the Colorado Office of Consumer Counsel (the Office), seeks review of a judgment of the District Court in and for the City and County of Denver setting aside a decision of the Public Utilities Commission (the Commission) applying provisions of the Intrastate Telecommunications Services Act, sections
I
The Act provides for Commission regulation of intrastate telecommunications services in Colorado.2 Part 2 of the Act provides for full Commission regulation of certain basic local services.
Each of these three parts of the Act refers to general types of telecommunications services encompassed within that part‘s provisions. Thus, the Act provides general basic guidelines for classification of the myriad services and products developed by telecommunications providers subject to Commission regulation.
The Act was approved July 2, 1987. Ch. 313, 1987 Colo. Sess. Laws 1476. By order dated July 2, 1987, the Commission initiated Case No. 6635 to explore in general what telecommunications products and services warranted relaxed regulation pursuant to Part 3 of the Act. The case was not limited to products and services provided by Mountain States. The Commission ultimately suspended its proceedings in Case No. 6635 pending its final decisions in two other cases, Case No. 6645 and Case No. 6647.
By letter dated August 5, 1987, Mountain States informed the Commission of the corporation‘s intent to delete certain of its services from Commission regulation, pursuant to Part 4 of the Act. The Office, the Colorado Association of Radio Common Carriers, and the Commission staff filed documents in opposition to Mountain States’ proposal. The Commission responded by initiating two proceedings to determine which statutory provisions governed Mountain States’ tariffed services. On September 28, 1987, the Commission initiated Case No. 6645 as a declaratory order proceeding, pursuant to Commission Rule 60(a) and section
In Case No. 6645, the Commission staff prepared a list of tariffed Mountain States services arguably eligible for deregulation under Part 4 of the Act. The Commission invited interested parties to intervene and comment upon the list, whereupon twelve entities filed various pleadings in the case. The Commission assigned burdens of proof, authorized discovery, and set the case for an evidentiary hearing before a hearing examiner. At the outset of the December 3, 1987, hearing, the hearing examiner stated that, although the Commission did not so order, notice had been sent in compliance with those portions of the APA applicable to agency rule-making proceedings.
By decision dated January 6, 1988, the Commission enumerated certain specific tariffed services of Mountain States that were subject to the deregulation provisions of Part 4 of the Act. Mountain States, the Office and other intervenors sought judicial review of that decision. The Commission ultimately confessed error, and Case No. 6645 was remanded to the Commission for new proceedings.
Attached to the Commission order initiating Case No. 6647, which case underlies this appeal, was a document listing ninety-eight tariffed Mountain States services proposed for full regulation pursuant to Part 2 of the Act. On February 10, 1988, the Commission entered an order permitting substitution of another list of services and products prepared by the Commission staff for the initial attachment. The order provided that procedures similar to those used in Case No. 6645 would be utilized in Case No. 6647 and that “any party having a differing view” as to which Mountain States services should be fully regulated under Part 2 of the Act would have the burden of establishing that such services were not correctly identified by the Commission staff as subject to such full regulation.
On that same day, the Commission sent information to several entities inviting their participation in Case No. 6647. Several entities did file pleadings contesting the revised list of Mountain States services arguably subject to full regulation,4 and the Office intervened to support the Commission‘s position.
A hearing was conducted in Case No. 6647 on March 14, 1988, before three commissioners. On April 27, 1988, the Commission issued its initial decision. See
Mountain States timely filed a petition for judicial review of the Commission‘s decision in the District Court in and for the City and County of Denver.
II
A
The scope of district court review of Commission decisions is controlled by section
[T]he district court shall decide all relevant questions of law and interpret all relevant constitutional and statutory provisions. The review shall not extend further than to determine whether the commission has regularly pursued its authority, including a determination of whether the decision under review violates any right of the petitioner under the constitution of the United States or of the state of Colorado, and whether the decision of the commission is just and reasonable and whether its conclusions are in accordance with the evidence.
B
In Case No. 6647, the district court applied the factors enunciated in Home Builders Ass‘n and concluded that the
The Commission‘s authority to regulate public utilities is defined by
In addition to the powers now vested in the General Assembly of the State of Colorado, all power to regulate the facilities, service and rates and charges therefor ... as a public utility ... is hereby vested in such agency of the State of Colorado as the General Assembly shall by law designate.
Until such time as the General Assembly may otherwise designate, said authority shall be vested in the Public Utilities Commission of the State of Colorado....
Regulation of rates—correction of abuses. The power and authority is hereby vested in the public utilities commission of the state of Colorado and it is hereby made its duty to adopt all necessary rates, charges, and regulations to govern and regulate all rates, charges, and tariffs of every public utility of this state to correct abuses; to prevent unjust discriminations and extortions in the rates, charges, and tariffs of such public utilities of this state; to generally supervise and regulate every public utility in this state; and to do all things, whether specifically designated in articles 1 to 7 of this title or in addition thereto, which are necessary or convenient in the exercise of such power....
The Commission‘s powers are not unlimited, however. Specific statutory provisions regulating public utilities serve to restrict the Commission‘s authority. See Peoples Natural Gas Div. v. Public Util. Comm‘n, 626 P.2d 159 (Colo.1981). Furthermore, we have recognized that because the Commission‘s delegated powers are legislative in nature, they do not extend generally to adjudicatory matters. City of Montrose v. Public Util. Comm‘n, 629 P.2d 619 (Colo.1981) (Commission authorized to establish manner in which utilities assess consumers for utility franchise charges); Haney v. Public Util. Comm‘n, 194 Colo. 481, 574 P.2d 863 (1978) (Commission not authorized to impose fines for violation of Commission laws). But see Peoples Natural Gas Div. v. Public Util. Comm‘n, 698 P.2d 255 (Colo.1985) (Commission may initiate complaint and impose reparations for illegal overbilling). Most importantly, because of the broad authority reposed in the Commission, procedural requirements shape the exercise of that authority in various contexts.
C
The Office and the League concede that the procedures utilized in Case No. 6647 did not comport with the procedures applicable to the exercise of the Commission‘s rule-making authority established by section
The APA contrasts rule-making with “[a]djudication,” and defines the latter as “the procedure used by an agency for the formulation, amendment, or repeal of an order and includes licensing.”
While these APA provisions suggest that agency rule-making functions are clearly distinct from agency adjudicative functions, the experience of agency process has proved to be to the contrary. See K. Davis, Administrative Law of the Eighties, Supplement to the Administrative Law Treatise § 7:25 at 262 (1989); A. Bonfield, State Administrative Rule Making, § 3.2.2 (1986). Agency proceedings often require application of both rule-making and adjudicatory authority because of the nature of the subject matter, the issues to be resolved, or the interests of parties or intervenors. In general, agency proceedings that primarily seek to or in effect determine policies or standards of general applicability are deemed rule-making proceedings.
The Office and the League emphasize that Case No. 6647 was initiated by the Commission as a declaratory order proceeding, pursuant to section
In our view, the record as a whole does not support the conclusion that Case No. 6647 was designed primarily for resolution of particular issues affecting only Mountain States. In July of 1987, the Commission was faced with the responsibility of implementing new statutory provisions regulating telecommunications services. On July 2, 1987, the Commission initiated Case No. 6635 to investigate generally what services and products should be subject to regulation under Part 3 of the Act.7 While that case was ultimately suspended, the suspension was ordered in response to the fact that Case No. 6645 and Case No. 6647 had been instituted. This sequence of events suggests that not only were all three proceedings closely related, but that
The direct interrelationship of Case No. 6647 and Case No. 6645 is unmistakable. Portions of the record in Case No. 6645 form a substantial part of the record in Case No. 6647. All participants, as well as the presiding commissioners, expressly noted that the Commission‘s classification of services subject to full regulation under Part 2 of the Act had a direct bearing on its classification of services not subject to regulation under Part 4 of the Act. Throughout the hearing, participants volunteered and were requested to give opinions about the meaning of and the legislative intent behind particular provisions of the Act. The record supports the conclusion that the primary purpose for the initiation of Case No. 6647 was to assist the Commission in developing policies appropriate for the task of determining which particular telecommunications products and services should be considered subject to full regulation, relaxed regulation or no regulation under Parts 2, 3 and 4 of the Act.
Case No. 6647 was not initiated primarily to resolve disputes over historic facts. The basic disagreements explored in the pleadings and at the hearing were disagreements concerning descriptions of services, the meaning of terms contained in the Act, and the General Assembly‘s intent or rationale for adopting various statutory provisions. Case No. 6647 could not have been resolved fully and fairly in the absence of the development of administrative standards to remedy the Act‘s lack of precise definitions. Those standards and the administrative policies compelling their adoption would necessarily inform future Commission decisions. Thus, while the decision appears in form as a classification of a single public utility‘s services, it in effect necessarily establishes standards and policies applicable to telecommunications services of all public utilities.
The League argues that the Commission has implied authority pursuant to section
The judgment of the district court is affirmed.
LOHR, J., dissents.
Justice LOHR dissenting:
The majority holds that the Public Utilities Commission (P.U.C.) engaged in rule-making conduct in Case 6647 in which it delineated a list of telecommunications services provided by The Mountain States Telephone and Telegraph Company (Mountain States) that would be subject to traditional regulation by the P.U.C. under the Intrastate Telecommunications Services Act. Because the P.U.C. did not follow statutorily mandated procedures for the exercise of its rule-making power, the majority upholds the judgment of the Denver District Court invalidating the decision of the P.U.C. In contrast, it is my opinion that the P.U.C. engaged in adjudication or, alternatively, adjudication coupled with proper adjudicatory rule-making, within the scope of its authority, in arriving at its decision in Case 6647. Accordingly, I respectfully dissent and would reverse the judgment of the district court and remand for reinstatement of the P.U.C. decision.
The Intrastate Telecommunications Services Act,
Three related proceedings before the P.U.C. involve the classification of telecommunications services provided by Mountain States. First, the P.U.C. initiated Case No. 6635, not limited to Mountain States’ telecommunications services, to determine which emerging telecommunications services should be subject to alternative regulation or deregulated pursuant to Part 3 of the Act. Later, Mountain States informed the P.U.C. that it regarded certain specific services as exempt from regulation under Part 4 of the Act. In response, the P.U.C. initiated two declaratory order proceedings. In Case No. 6645, the P.U.C. sought to identify those Mountain States’ services covered by section
Under the State Administrative Procedure Act,
An examination of P.U.C. Case 6647 reveals its essentially adjudicatory nature. The purpose of this case is to identify those Mountain States’ telecommunications services that would be subject to regulation pursuant to Part 2 of that Act. Under Part 2,
(2) The following products, services, and providers are declared to be subject to regulation pursuant to this part 2 ...:
(a) Basic local exchange service;
(b) Basic emergency service;
(c) Public coin telephone service;
(d) White page directory listing;
(e) Local exchange listed telephone number service;
(f) New products and services necessary for the provision of basic local exchange service;
(g) Dual tone multifrequency signaling.
The majority contends that the Act lacks precise definitions, and, in the absence of administrative standards and policies, this imprecision prevented the P.U.C. from fully and fairly resolving Case 6647. See maj. op. at 285. Section
In Home Builders Ass‘n v. Public Util. Comm‘n, 720 P.2d 552 (Colo.1986), we invalidated a purported adjudication wherein the P.U.C. adopted a completely new formula for calculating consumer charges for electrical distribution extensions.4 We reversed the P.U.C. because its adoption of this new formula constituted rule-making and the P.U.C. had not complied with the APA rule-making procedures. We identified several factors demonstrating that the P.U.C. had undertaken rule-making. First, the decision had general applicability to the utility‘s future permanent customers. Id. at 561. These customers were not parties to the P.U.C. proceeding and therefore had no ability to participate in the formulation of the new P.U.C. policy. Second, the P.U.C. characterized the new formula as a “permanent service policy,” thereby establishing the intent to apply this formula to future situations affecting many people. Id. Finally, the P.U.C. stated that it adopted the new formula as an interim measure pending a more comprehensive revision of the previous formula. Id. We commented that the P.U.C. actually amended an existing rule by its decision. In light of these considerations, we found the P.U.C.‘s action to be functionally indistinguishable from de facto rule-making. Id.
The P.U.C.‘s decision in Case 6647 does not exhibit the characteristics of its decision in Home Builders. Case 6647 specifically concerns the application of Part 2 to Mountain States, a single utility. This decision does not apply to Mountain States’ customers or to other utilities. The P.U.C. did not purport to define the services subject to regulation but merely fit existing services into the statutory classifications. The P.U.C. simply determined the regulatory status of specific Mountain States’ telecommunications services based upon existing facts, existing law and the P.U.C.‘s regulatory expertise. Although the decision in Case 6647 has implications for future proceedings, such implications will result from any adjudicatory action. Those implications do not require formal rule-making proceedings.
Moreover, any minor policy determination necessitated by the application of the criteria of Part 2 to particular facts is appropriately handled through adjudicatory rule-making. We have recognized that an agency may make policy through either adjudication or rule-making. Charnes v. Robinson, 772 P.2d 62, 66 (Colo.1989). Generally, the purpose of adjudicative rules is to fill in the gaps or interstices of statutory or regulatory schemes. See Securities and Exchange Comm‘n v. Chenery Corp., 332 U.S. 194, 202, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947) (Chenery II); Weaver, Chenery II: A Forty Year Retrospective, 40 Admin.L.Rev. 161, 199 (1988). Part 2 provides a comprehensive statutory scheme and enumerates the services subject to its provisions. The P.U.C. merely decides whether a particular service offered by a specific company comes under the purview of Part 2. This decision involves a factually bound determination which will vary from service to service. The P.U.C. must examine each particular telecommunications service and its relationship to the statutory categories. For example, in Case 6647 the P.U.C. had to de-
This type of determination at most involves interstitial statutory interpretation. Such interpretations are best arrived at in the context of concrete facts. Given the large number of possible services and the distinct nature of each service, the P.U.C. needs significant flexibility in order to apply Part 2. Thus, general standards would have only marginal utility. The need for flexibility, the individualized nature of each service, and the unsuitability of general standards make adjudicatory rule-making appropriate. See Charnes, 772 P.2d at 66.
The majority would require formal rule-making proceedings whenever the P.U.C. determines policy, even within narrow limits. The APA‘s formal rule-making process entails, among other things, formal and detailed procedures which include published notice of proposed rule-making,
Moreover, the P.U.C. is implementing a new statutory regime. Its lack of experience with the issues arising under this program warrants administrative hesitance to rigidify its tentative judgments into hard and fast rules. See Chenery II, 332 U.S. at 202, 67 S.Ct. at 1580.7 Through adjudicatory rule-making and experience in future cases, the P.U.C. can fashion an appropriate, flexible regulatory response to problems arising under its Part 2 determinations.
I respectfully dissent and would reverse the judgment of the district court and reinstate the decision of the P.U.C.
ERICKSON and VOLLACK, JJ., join in this dissent.
Notes
Part 4 contains a similarly detailed description of deregulated services:
(1) The following products, services, and providers are exempt from regulation under this article or under the “Public Utilities Law” of the state of Colorado:
(a) Cable services as defined by section 602(5) of the federal “Cable Franchise Policy and Communications Act of 1984“;
(b) Cellular telecommunications services;
(c) Mobile radio service;
(d) Radio paging service;
(e) New products and services other than those necessary to provide basic local exchange service;
(f) Centron and centron-like services;
(g) Special arrangements;
(h) Special assemblies;
(i) Informational services;
(j) Operator services;
(k) Advanced features offered and provided to nonresidential customers with more than five lines;
(l) Special access.
§ 40-15-401. Part 3 lists the emerging competitive services as follows:
(2) The following telecommunications products, services, and providers are declared to be initially subject to regulation pursuant to this part 3 and subject to potential deregulation under section 40-15-305:
(a) Advanced features offered and provided to residential customers and nonresidential customers with no more than five lines;
(b) Premium services except as provided in section 40-15-401(1)(f), (g), (h), and (1)(i);
(c) InterLATA toll;
(d) IntraLATA toll, subject to the provisions of section 40-15-306;
(e) Switched access, subject to the provisions of section 40-15-307;
(f) Private line service, subject to the provisions of section 40-15-308.
§ 40-15-301. Furthermore,
(2) Any telecommunications service or product not defined in part 1 of this article or not already classified pursuant to parts 2 to 4 of this article shall be classified as an emerging competitive telecommunications service under this part 3.
§ 40-15-305. Through these enumerations, the legislature classified telecommunications services and specified the appropriate extent of regulatory treatment for each service.
Section
Every agency shall provide by rule for the entertaining, in its sound discretion, and prompt disposition of petitions for declaratory orders to terminate controversies or to remove uncertainties as to the applicability to the petitioners of any statutory provision or of any rule or order of the agency. The order disposing of the petition shall constitute agency action subject to judicial review.
Commission Rule 60(a) states as follows:
If Part 2 lacked adequate statutory standards and safeguards and administrative standards and safeguards, then the P.U.C.‘s attempt to apply Part 2 to Mountain States would be invalid as an uncontrolled exercise of agency discretion, see, e.g., Colorado Ass‘n of Public Employees v. Department of Highways, 809 P.2d 988, 995 (Colo.1991) (contracts with private sector providers for services previously performed by classified state employees invalid in the absence of sufficient statutory and regulatory framework), not as a procedurally defective rule-making proceeding.Declaratory Orders
(a) General. The Commission may issue a declaratory order to terminate a controversy or to remove an uncertainty as to the applicability to an applicant or a petitioner of any statutory provision or Commission rule, regulation or order.
(1) Any person, firm, or corporation may file an application in an original proceeding, or a petition in a pending proceeding for a declaratory order.
(2) The application or petition shall be subject to Rule 57, Colorado Rules of Civil Procedure, except the words The Commission shall be substituted for the words District and Superior Courts, and the word order shall be substituted for judgment or decree.
During oral arguments the question arose as to whether this appeal of Case No. 6647 had become moot. Mountain States subsequently filed a status report indicating that it no longer disputed the Commission‘s conclusions regarding regulation of 13 of the disputed services and that the remaining item “involves a de minimis amount of revenues” and was no longer “a contentious matter.” The Office filed a status report which stated that discussions regarding the classification of disputed services were partly successful but did not “resolve all disputed services.”
While all issues respecting what services are subject to full Commission regulation under Part 2 of the Act have seemingly been resolved, the question of the nature of the proceedings employed by the Commission to determine what services were subject to full regulation remains a viable issue. Colorado-Ute Electric Ass‘n v. Public Util. Comm‘n, 760 P.2d 627 (Colo.1988). This court has recognized that a case need not be deemed moot because an issue is no longer contested if the issue is of public importance and is capable of repetition, but might escape judicial review. See Cloverleaf Kennel Club, Inc. v. Colorado Racing Comm‘n, 620 P.2d 1051 (Colo.1980); Rocky Mountain Ass‘n of Credit Management v. District Court, 565 P.2d 1345 (Colo.1977).