Colorado Office of Consumer Counsel v. Public Utilities Commission

od of reincarceration.7 Agencies; Sprint US Communications Corporation; Agate The Mutual Tele Applying these determinations to the cir- phone Exchange, Big Sandy Telecom presented here, cumstances it is clear that munications, Inc., Bijou Telephone The Anderson could not have been reincarcerat- Cooperative Association, Inc., Colum period ed for a of time in excess of 378 Telephone Company, County bine Delta days balance original of his sentence. —the Cooperative Telephone Company, East Any good time credit earned Anderson Slope Telephone Company, ern Rural against should have been credited peri- Inc., Telephone Farmers Mutual Com od of reincarceration. Under this view of pany, Telephone Company, Sunflower statute, eligible Anderson was for re- Inc., Wiggins Telephone Association, custody Department lease from the Telephone Company, Nucla-Naturita at the corpus time he filed his peti- habeas Telephone Pine Company, doing Drive tion. Enterprises, Inc., business as JED Telephone Cooperative & T S Associa Ill tion, Inc., Telephone and Universal Company Colorado; and AT & T reasons, foregoing For the judgment Communications the Mountain of the trial court is affirmed. States, Inc., Intervenors-Appellees. The COLORADO MUNICIPAL LEAGUE Comptel Wyo of Colorado and ming, Plaintiffs-Appellants,

v. The PUBLIC UTILITIES COMMISSION Colorado; of the State of and Arnold Cook, Schmidt, H. Andra and Ronald Lehr, Commissioners, L. Defendants- Appellees, Telephone The Mountain States COLORADO OFFICE OF CONSUMER Telegraph Company; The Staff of the COUNSEL, Petitioner-Appellant, Commission; The Colorado Office of v. Counsel; Consumer AT & T Communi cations; Sprint; MCI; U.S. Denver The PUBLIC UTILITIES COMMISSION Burglar Alarm; Country; Colorado Ski Colorado; of the State of and Arnold Agate Telephone Exchange, Mutual et Cook, Schmidt, H. Andra and Ronald al., The Colorado Association of Radio Lehr, Commissioners; L. and The Carriers, Secretary Common and The Telephone States Defense, Co-defendants-Appellees. Telegraph Company, Respondents-Ap pellees, No. 88SA451. Supreme Colorado, Court of En Banc. Municipal League;

The Colorado Com Feb. 1990. petitive Telecommunications Associa Rehearing Denied March 1990. tion; The Colorado Association of Ra Carriers; dio Common Colorado Ski U.S.A.;

Country Department of De fense and other Federal Executive circumstances, course, In other imposed the maxi- on an offender who violates terms period years mum might reincarceration parole. of five or conditions of

Gorsuch, Kirgis, Campbell, Walker and Grover, Dudley Spil- Joseph B. Wilson and ler, Jr., Denver, League Mun. for Colorado Comp Wyoming. tel of Colorado Pascoe, Ireland, Stapleton, Pryor & Trautman, George Rosenberg D. Tucker K. Barnes, Denver, T Larry T. for AT & States, Communications of the Mountain Inc. Jason, and Mark N. Den-

William Levis ver, for Telecommunications. MCI appearance by intervenors-appellees No Ass’n, Competitive Telecommunications The Colorado Ass’n of Radio Common Carriers, U.S.A., Country Colorado Ski The Dept, of Defense and Federal Execu- Other Agencies, Sprint tive US Communications Corp., Agate Telephone The Mutual Ex- Telecommunications, change, Big Sandy Inc., Ass’n, Inc., Bijou Telephone Co-op The Co., Telephone County Delta Columbine Co- Co., op Telephone Slope Eastern Rural Co., Inc., Telephone Mut. Tele- Farmers Co., Co., Inc., phone Telephone Sunflower Ass’n, Wiggins Telephone Nucla-Naturita Co., Co., Telephone Telephone Pine Drive Inc., T Enterprises, d/b/a JED The S & Ass’n, Telephone Co-op. Inc. and Universal Telephone Co. of Colorado. appearance co-defendants-appel- No Alarm, Sprint, Burglar lees US Denver Col- Agate Telephone Country, orado Mut. Ski al., Exchange, et Ass’n of Colorado Secretary and The Radio Common Carriers Defense. Justice delivered the ERICKSON Opinion of the Court. Anthony Marquez, Atty. First Asst. appeal This is an from the order of the Gen., Weiske, Gen., Atty. and Sue E. Asst. denying Denver District Court relief and Denver, petitioner-appellant. affirming the decisions of the Colorado Archibold, Denver, John E. for The Pub- (Commission) Public Utilities Commission lic Utilities Com’n State of Colo. major restructuring telephone in a rates. 40-6-115(5), See C.R.S. Eiberger, Stacy, Martin, Smith & David ac- appellants1 claim that the Commission’s Rowe, Stacy, David H. Jett and Russell P. approving Denver, generally tion in for Mountain States Tel. and Tel. Company’s Telephone Telegraph Co. States Counsel), (Consumer appellants the Colora- 1. The are the Colorado of Con- sumer Counsel Office (Mountain Bell’s) proposed rates and tariffs Colorado is divided into two LATAs. was not substantial evidence Springs The Colorado LATA includes Colo- record, arbitrary capri- and was Pueblo, Springs, rado and southeastern addition, appellants argue cious. that Colorado. The Denver LATA consists of the decisions of the Commission authorize Denver and most western and northern illegal price squeeze, an in violation of Colorado. United States v. Western Elec. state law. We affirm. Co., F.Supp. at 1049.

Only interexchange carriers such as AT I. & T and the “other common carriers” (OCCs) provide are allowed to interLATA appeal significant This involves the first telecommunication services. Interex- telephone proceeding rate restructure be change commonly carriers are referred to 1977, fore the Commission since and fol long-distance companies.3 as The MFJ did breakup System pur lowed the the Bell prohibit not interexchange carriers from judgment suant to the of final modification Id. competing the intraLATA market. (MFJ) entered in United States v. AT order at 994 n. interexchange 16. Whether carri- T, aff'd, & 552 (D.D.C.1982), F.Supp. 131 ers would be compete authorized to so 1001, 1240, 460 U.S. 103 S.Ct. 75 L.Ed.2d left regulation. to state and local The 472 interexchange carriers that are authorized required AT T MFJ & to divest itself (or “certificated”) operate to within Colora- twenty-two Operating Compa- Bell do are AT & T Communications of the (BOCs), including nies Mountain Bell. In States, (AT T), MCI, Mountain Inc. & US addition, MFJ, under the terms of the all Sprint Corporation Communications territory Bell in the continental United (Sprint), Union, Telephone Western and States geographically was divided into Corporation Electronics West. based transport “local access and areas” 1, 1984, January After divestiture on the (LATAs).2 United States v. Western Elec. Assembly General enacted the Intrastate Co., (D.D.C.1983). F.Supp. 569 990 Act, Telecommunications Services 40- permits provide §§ MFJ a BOC to telecommu- -110, (1984).4 15-101 to 17 C.R.S. Relevant (intra- nication services within a LATA LATA), provide sections of the Act that intrastate prohibited but a BOC is carrying (interLATA providers telecommunications services are calls between LATAs telecommunications), public subject regulation by or utilities interexchange the T, Commission, United States v. AT 40-15-102, & F.Supp. 552 at that intrastate § 227. providers required are to obtain a certifi- Municipal League (League), Comptel "Long-distance company” do 3. is somewhat mis- Wyoming (Comptel). Colorado and leading carry since BOCs are also allowed to (or "toll”) long-distance long they calls so as developed 2.The term LATAwas because of con- originate single a and terminate within LATA. “exchange” fusion over the use of the word two different senses. The first sense in which Co., F.Supp. United States v. Western Elec. at Interexchange 995. carriers are also called "exchange" exchange,” is used is in “local an IXCs or IECs. by regulators. area created local state At the approved time that most LATAs were court, 7,000 In after the decisions of the Commission 4. there were about Bell local ex- case, Assembly repealed change in this the General areas in the continental United States. Co., F.Supp. United reenacted the Intrastate Telecommunications States v. Western Elec. at significant changes 993 n. 9. A local is identified Services Act with digits average telephone -404, first three anof num- amendments. 17 C.R.S. §§ 40-15-101 ber. Id. at 995 n. 18. The MFJ used the term (1989 Supp.). will be devel- For reasons that "exchange” way. explained in a different As oped opinion, we conclude that text, "exchange” an in the MFJ was the area inapplicable proceedings Act is to the before the operate, within which a BOC could prises and it com- opinion PUC in are this case. References in the larger exchange. a area much than a local Act, to the former unless otherwise noted. “exchange” Id. at 994-95. An created MFJ ais LATA. Id. at 993 n. 9. 29, 1986, Bell, T, public necessity Mountain AT cate of convenience and ber & and Commission, 40-15-103, jointly from the Commission Staff submitted § agreement shall provision of services intraLATA contested settlement to the governed by regulated Hearings reception the doctrine of Commission. 40-15-104(2), prefiled testimony monopoly,5 but and exhibits into evi- § dence, regulated competition6 shall as well as doctrine of cross-examination of wit- services, nesses, prevail respect to interLATA were held in the second half of 40-15-104(1). 4, 5, January February and on 1987. testimony Public was received December Investigation Suspen- I Phase 30, 1986,January 9, 1987, 7 and and Febru- (I 1700) the sion Docket No. 1700 & S ary 12 and entitling entered a decision 20, 1987, By Bell to a increase of decision revenue dated March $21,113,000. Commission, permitted exceptions, gener- Mountain Bell was with some ally accepted to increase its rates across the board to settlement contested reap agreement. the revenue increase. Left undecided The Commission both Bell, was the manner in which Mountain Bell’s cost studies done Mountain but ultimately adopted rates would be restructured. the Staff as reasonable. advancing directly Rather than to the IntraLATA toll and interLATA access decreased, II (spread-of-the- exchange, Phase rate restructure rates were and basic rates) line, proceeding, private special charges the Commission closed I and access 25, July & S 1700. On 1986 Mountain Bell were increased. Commissioner Lehr dis- part. 9, 1987, filed Advice Letter 2041 420 tariff in April appel- sented On proposing changes gen- Counsel, sheets in League, rate five lants Consumer and (1) service; (2) MCI, eral areas: Comptel, applications basic and filed toll; (3) access; (4) intraLATA rehearing, reargument, interLATA or reconsideration. access; private (5) special day applica- line and and an- the same AT T On & filed an cillary Principally, partial reargument, services. Mountain Bell rehearing, tion for or requested that intraLATA inter- application toll and reconsideration. The of Con- decreased, LATA access granted part rates be and basic sumer Counsel was line, exchange, private special original access decision was modified two minor respects. be increased. applications The other were de- League nied. Consumer Counsel and then 14, 1986, August On the Commission sus- applications rehearing, reargu- filed pended the effective dates of the tariffs ment, or reconsideration from the modified Bell, proposed by pending a hear- applications decision. These were denied ing propriety. 40-6-111(1), on their See § by decision dated June 1987. (1984). 17 C.R.S. The Commission also in- I petitioned stituted & S the rate restructure The Consumer Counsel the dis- parties, including appel- docket. Various trict court for review of the three decisions lants, permitted pursuant intervene and sub- of the Commission to section 40- 6-115, objections proposed changes. (1984), mit to the League 17 C.R.S. while the support proposals, Comptel of its rate Mountain Bell judicial filed an action for submitted two different cost-of-service review of the same decisions under section 24-4-106, (1988). studies. The pro- Commission Staff also filed 10A C.R.S. The two study. its own ceedings cost-of-service On Decem- were consolidated in the district "Regulated monopoly” by providers 5. is defined as "the doc- furnished two or more of such which, geographical state, trine within a defined notwithstanding service in this the fact area, may telecommunications service be fur- provided by existing provid- that said service an only single provider.” nished a may may substantially inadequate.” er or not be 40-15-101(8), (1984). § 17 C.R.S. 40-15-101(7), 17 C.R.S. " 'Regulated competition' means the doctrine may which telecommunications service be the record as a whole to deter- Novem- must search dated By written decision court. mine the administrative decision is whether 3, 1988, court denied the district ber supported substantial evidence since decisions requested relief and affirmed express implied or findings may either be appeal followed. This of the Commission. Id. reading of the entire record. from a findings need not be Commission’s II. form, may implied any particular but Consumer of deci- from other facts. judicial review The standards for Office Comm’n, v. Public Util. Counsel are contained of the Commission sions (1984): (Colo.1988). 40-6-115(3), 17 C.R.S. section (3) review, district court Upon administrative deci- Whether or not an affirming, judgment enter either shall evidence is sion is substantial aside, the decision setting modifying or Atchison, question of law for the court. necessary So far as of the commission. Ry., T. & P.2d at 1042. With S.F. presented, and where to the decision principles these well-settled of review all relevant court shall decide district mind, turn to the various contentions of we interpret all rele- questions of law and appellants. statutory provi-

vant constitutional fur- The review shall not extend sions. III. the com- than to determine whether ther pursued its author- regularly mission has Comptel claim League first including of whether ity, a determination adopted by the Commission the rates any under review violates the decision price squeeze in viola illegal constitute an constitu- right petitioner under the 40-3-106, 17 40-3-102 and tion of sections the state 40-15-105(1), tion of the United States or of (1984), 17 C.R.S. and section Colorado, the decision of of and whether (1989 Supp.). No federal antitrust C.R.S. just and reasonable the commission is alleged. Section 40-3-102 violations are are ac- general authority and whether its conclusions gives the Commission the rates, the charges, cordance with evidence. and tariffs “regulate to all to cor every public utility of this state of as for of review is the same Our standard abuses; prevent unjust discrimina- rect 40-6-115(5), 17 the district court. See rates, charges, in the tions and extortions (1984); City Montrose v. Public C.R.S. public utilities of this and tariffs of such Comm’n, 119, 121, 590 P.2d Util. 197 Colo. ” state.... (1979). 504 40-3-106(l)(a) provides: Section deci- review of an administrative Judicial Advantages prohibited graduated is thus limited to sion of the Commission — (l)(a) Except operating when whether schedules. three concerns: (b) of this subsection authority; paragraph wheth- under regularly pursued its has rates, charges, reasonable; (1), public utility, as to just no er its decision is service, facilities, any re- or in other supported by sub- or whether the decision is grant any prefer- spect, make or viewed as a shall stantial evidence the record corporation or Municipal League v. advantage any ence or whole. Colorado Co., per- any corporation or Tel. person subject or Mountain States Tel. & disadvantage. any prejudice or (Colo.1988). determining In son to 40, 44 whether or main- public utility shall establish supported by substantial No the decision is as to difference evidence, any tain unreasonable a court must view evidence service, facilities, rates, or in charges, light most favorable to the record Atchison, or Ry. any respect, either between localities T. & S.F. the Commission. Comm’n, any class of service. P.2d as Public Util. 763 between v. power to determine reviewing commission has the (Colo.1988). The court charges” were in any question arising of fact under this cess fact lowered , However, section. decision. it is the Commission’s interrelationship between the interLATA price squeeze The definition of advanced charges and access Mountain Bell’s intra- appellants City comes from Kirk allegedly LATA toll rates that create the Co., wood v. Elec. 671 F.2d Union price squeeze. According appel- to the (8th Cir.1982): price squeeze n. 4 “A lants, require the Commission should vertically integrated compa occurs when a impute pur- Mountain Bell to to itself for ny monopoly power has at the whole poses charge of intraLATA toll an access competition sale level but at faces or similar identical to the one it high retail level sets its wholesale rates so words, resellers.7 other Mountain Bell wholesale customers will be un that its should be considered a customer of itself compete with it in retail mar able to purposes charge. of the access added.) (Emphasis Appellants’ theo ket.” ry that there exist resellers of Mountain We find the federal and out-of-state Bell’s services the intraLATA toll mar by appellants inapplicable cases cited to the purchase at ket who these services whole facts and circumstances in Colorado. The sale. There was some evidence in the argument fatal defect is that at the approved by record that the rates the Com time Commission’s decisions were ren- provision mission for the of these services dered in this case Mountain Bell held a (access bands, charges), mileage in some statutory monopoly provision on the day, and at times some exceed the rates §40-15-104(2), intraLATA toll services. charged by Mountain Bell to its own cus C.R.S. When access rates and tomers for intraLATA toll calls. The theo intraLATA approved by toll rates were ry that the competi assumes resellers are Commission, legal Mountain Bell had no tors of Mountain Bell in the intraLATA toll competitors for the intraLATA toll market market, posits that the resellers are except for the resellers that accounted for compete unable to because of the discrimi only of the market. 0.3% natory rates. We conclude that the rates set 40-l-103(l)(b)(III), Section 17 C.R.S. Commission for interLATA access and (1984), exempts regula- from Commission unreasonably intraLATA toll do not dis- only tion gen- “entities which resell to the against criminate the resellers. The access public long eral intrastate distance tele- approved were interLATA ac- phone by using services the tariff services in only cess mind. It is because the resell- regulated telephone and facilities of utili- provide ers themselves choose to intra- Interexchange ties.” carriers such as AT long using LATA distance service Moun- T& and the OCCs are not resellers and discrep- tain Bell’s facilities that there is a prohibited from providing intraLATA addition, ancy alleged in rates. In dis- toll services at the time of the Commission only mileage in crimination occurs some decisions. only day. bands and at certain times of the Furthermore, by because the resellers are by The services sold Mountain Bell and Commission, unregulated by definition purchased by interexchange carriers treating there is a rational basis for them and resellers are for access to the telecom- differently than Mountain Bell which is by munications network owned Mountain Bell, regulated. Unlike Mountain the re- Bell in order that the and carriers resellers change can set their and may complete interLATA calls. The sellers own rates rates will, by at in set the Commission for access are them choose markets which based calls, they business, completing on the costs of interLATA wish to do and enter and and not for intraLATA calls. These “ac- leave those markets at will. See Public imputation Charges Prerequisite 7. For discussion of of access IntraLATA —A for Effective charges, Dingwall, Imputation Competition, see Toll 40 Admin.L.Rev. Access 433 of

1093 arbitrary evidence are by v. AT T substantial and Comm’n & Communica Util. (Tex.1989) capricious. The tions, and Consumer Counsel 777 S.W.2d 366-67 (access charges implemented by argues Pub first that Commission Staffs Texas study Utility plagued Commission were not unreason cost-of-service was seri- lic discriminatory imputing access and that the ac- ably not ous flaws Commission’s exchange companies ceptance study local charges on was not treating exchange companies local as evidence the record or suffi- in not substantial Second, themselves), findings fact. rev’g 735 S.W.2d cient of the decision customers 1987) (relied on custom (Tex.App. price calling 866 to certain services be- —Austin brief). League principle in their Comptel low cost inconsistent with setting provid- rates based on the cost of After the of the Commis decisions Third, ing the service. the conclusion that case, were handed in this sion down (PBX) private exchange branch rates Assembly in and re repealed 1987 General regular lowered to should be business enacted Intrastate Telecommunications unsupported by line rates is substantial In changes. Act with Services substantial evidence. The Consumer Counsel claims particular, longer provides the Act no com- that these erroneous determinations governed by intraLATA toll services are unreasonably the rates bined to increase regulated monopoly. the doctrine of See small paid residential 40-15-306, (1989 Supp.). C.R.S. § customers. business addition, Assembly the General enacted League Comptel agree with the 40-15-105(1), (1989 17 C.R.S. section that uncorrected errors Consumer Counsel prohibits discriminatory ac Supp.), which study cost-of-service allowed Staffs charges. cess recovery unreasonable excessive effect, any, if has What this new section line users. Even if the Staff private price-squeeze argu on or would have however, reasonable, only accepted as by appellants ment raised need not be de guidance general cate- provided thirteen cided, are section since we convinced that provided specif- no gories. It basis for the 40-15-105(1), enacted after the decisions intra-category proposed rates Moun- ic case, ap not this does approved by Bell and the Commission. tain ply. expressly The statute not state does examine each of these contentions We will application. it is to have retroactive in turn. presumed operate prospec are Statutes 2-4-202, (1980); tively. IB De C.R.S.

partment v. Intermountain Highways V. Co., Colo. 354, 360, P.2d Terminal appellants challenge the Commis- (1967)(statute subsequent enacted study be- acceptance of the Staff sion’s proceedings in trial could not have court alleged errors of six uncorrected cause applicable). The Constitu been Colorado (1) the use of Plant study: Subscriber legislation. prohibits retrospective tion costs was arbi- Factor to allocate access II, 11; People in Const. art. see Colo. (2) of capricious; the allocation trary and R.F.A., 1202, 1204 Interest of and toll costs between local traffic-sensitive (Colo.App.1987). reject We therefore use average on minutes of useage based by the appellants’ claim that the rates set great- the significantly to account for failed illegal discrimina Commission constitute minute, resulting in an first er costs of the tion. costs residential sub- of overstatement scribers; (3) assignment loop-related of

IV. relative costs on the of maintenance basis an loop in the caused plant the deci- appellants The also claim that investment costs with resi- supported of associated of the Commission are not overstatement sions 1094 (4) over-assignment loops;8 responsible

dential an Commission Staff who was study, loops investment to residential result- for the the Commission stated: costs ing reliance Mountain Bell’s LAP- on determining the allocation of cus- (5) analysis; the failure to allocate GAP access, suggested tomer the Staff has loop to residential circuit investments the use of the Subscriber Plant Factor users; (6) assumption the incorrect (SPF) as an interim measure. has SPF property that noncontinuous extension traditionally jurisdiction- been used (NCP) loops through were all routed Moun- separations process in al telecommunica- tain Bell central offices. tions at the federal level and is a com-

monly recognized accepted method may of allocation. While other methods A. used, important they is be (SPF) Subscriber Plant Factor way configuration in some based on used the Federal Communications Com they of the network and that are uni- utility’s to allocate a investment mission formly applied. The Staff believes that lines, equipment, station subscriber and the SPF constitutes such an allocation meth- (NTS)9 portion non-traffic sensitive of of odology and recommends it be equipment in fice between interstate and adopted allocating purposes for the 67.2(b)(3)(iv), 47 trastate use. C.F.R. §§ proceeding. customer access costs in this 67.124(d)(4) (1987). See Cincinnati Bell find that We the Staff’s recommendation Comm’n, Tel. v. Public Co. Util. 12 Ohio adopted. is reasonable and should be 280, 288-89, St.3d 466 N.E.2d 856 The Commission Mountain Bell’s (1984), appeal dismissed for want of sub placed method of allocation which all of the Í166, question, stantial federal 476 U.S. loop subscriber costs on the subscriber. (1986); see also 90 L.Ed.2d S.Ct. loop many Since has users —residential FCC, Rural Tel. Coalition v. U.S.App. customers, businesses, large small and 357, 361, (D.C.Cir. D.C. 838 F.2d carriers, government, interexchange 1988). resellers, among others —the Commission The pay Commission Staff used SPF in its that all believed users should joint in order proportion loop. to allocate the costs10 fair for access to the loops among or investment complains adop- subscriber Consumer Counsel that the loop, users of the such as residential tion of SPF factor for allocation was customers, interexchange arbitrary. expert business had tes- carriers, Parkins, timony George and resellers. The Consumer from Dr. a mem- expert Staff, introduced Counsel evidence that that all heretofore em- ber developed ployed SPF was for allocation of costs allocation methods were to some use, arbitrary. expert between interstate and intrastate was extent Another witness essentially arbitrary politi- Staff, as the result of Wendling, from the Warren L. testi- factors, apply cal did not experts disagreed to intrastate fied that with re- while setting. expert SPF, rate Based on the spect testimo- its use in this case was not ny Wendling, arbitrary. Wendling Warren L. a member of also advocated loop study, “joint 8. A subscriber consists of the line from the 10.In the Staff costs" referred to premises customer's to the local com provision costs incurred when the of one service pany’s central office. Rural Tel. Coalition v. automatically provided by production FCC, 357, 360, U.S.App.D.C. 267 838 F.2d example service. An is the of another cost of (D.C.Cir. 1988). 1310 providing loop provides subscriber multiple vice, opportunities service such as local ser- 9. "Non-traffic sensitive costs are those associat service, (toll) long-distance and custom exchange company’s telephone ed with the local plant increases, calling. testimony Direct of Warren L. Wen- usage that do not increase as traffic or dling at 11. cables, poles, telephone such as instruments.” Public Util. Comm’n v. AT & T Communications, 777 S.W.2d at 364.

1095 Position, sophisticated already use of more and exact meth- and the Commission had rely reply held that it would not on allocation in the future state- ods of cost when position ments of It evidence. there- necessary the tools and data avail- paragraph fore deleted containing able. above-quoted original statement from the accept free some decision. expert testimony, reject contrary testi- Similarly, original decision, in the' mony. RAM Broadcasting Colorado v. response in Commission concluded to Dr. Comm’n, Public Util. P.2d objection regarding assignment Kahn’s (Colo.1985). circumstances, these Under loop-related maintenance costs that: conclude that the Commission’s decision we loop fact is that maintenance costs rely study [T]he on a cost-of-service that em- were subdivided the Staff and were ployed SPF as an interim allocation method primarily allocated in some cases on supported by was substantial evidence in investment, (cid:127)basis of and in certain other record, Commission did not act minor cases on the basis of the number arbitrarily adopting in it. note, loops. event, in any We would loop the allocation of maintenance B. long costs on the of investment is a basis standing principle and sound of cost allo- We also conclude from our review cation. of the record that the Commission’s deci reconsideration, On the Commission omit- study sion to utilize the Staff notwithstand phrase ted the “and in certain other minor ing the testimony cross-rebuttal of Con cases loops” on basis of the number of sumer witness H. Counsel Marvin Kahn paragraph quoted from the above. The supported by substantial evidence. Commission conceded that the information opinion Dr. Kahn in his testified only omitted in the was contained Staff’s study Staff contained three other errors: Position, Reply Statement of and was not the allocation of traffic-sensitive costs be otherwise the record. The Commission useage tween local and toll on aver based apparently explicitly did not address Dr. age minutes of use failed to account for the objection respect Kahn’s third to the significantly greater costs of the first min analysis.11 use of Mountain Bell’s LAPGAP ute, resulting in an overstatement of costs any- If our review of the record teaches subscribers; assignment for residential thing experts’ opinions it is that the varied loop-related maintenance costs on the wildly. presented Bell dif- two loop basis of relative investment ferent cost-of-service studies plant caused an overstatement of costs as expert testimony, its own but the Commis- loops; sociated with residential and em sion both for reasons delineated ploying analysis Mountain Bell’s LAPGAP original experts decision. The Staff over-assignment resulted an of invest disagreed methodologies adopted with the loops. ment cost to residential Bell, by Mountain and Mountain Bell’s ex- decision, original In its the Commission perts disagreed Appellants’ with the Staff. dial-equip- stated that “the Staff did use experts disagreed with Mountain Bell and ment minutes of use for traffic-sensitive the Staff. In the face of these irreconcilia- inherently give weight costs which to the conflicts, ble we conclude that the Commis- appropri- first minute and we find that was arbitrarily capriciously sion did not act application reconsideration, ate.” On notwithstanding accepting Staff’s agreed with the Consumer objections. Dr. Kahn’s Mellow Yellow Comm’n, Counsel that this information was con- P.2d Taxi v. Public Co. Util (Colo.1982). Reply tained the Staff’s Statement of Position, Reply no effect on the In its Statement of the Staff Kahn would have little or study. proposed claimed that the correction Dr. results of the precision accepting study mathematical is not re as rea- Perfect quired study used in not be a cost-of-service sonable should reversed. determining of thou the reasonableness

sands of and rates. individual C. precision importantly, More mathematical judge not the is standard we league Comptel The and also assail E.g., City Commission’s actions. Mont adoption study of the Staff on two of Comm’n, 629 P.2d rose v. Public Util. loop circuit bases: the failure to allocate (Colo.1981). The is users; investments to residential and the charged public duty overseeing assumption incorrect that noncontinuous public ensuring utilities and that the rates (NCP) property loops extension were all they charge just are and reasonable. through routed Mountain Bell central of 40-3-101, -102, 17 C.R.S. It is §§ acknowledging fices. While the failure to the result reached and not the means em allocate, the Commission held that such ployed which determines whether the deci appreciable failure had no effect on the upheld. sion of the Commission must be validity study, since the effects of Comm’n, City Montrose v. Public Util. study unimportant. the error on the study 629 P.2d at The cost-of-service The Commission concluded that the in- only expert was a tool or form of assist assumption involving loops correct NCP rely ance that the Commissionneeded to on insignificant per- was based on cost studies performing duty. study its itself expert formed Mountain Bell’s Dallas primary goal was not the of the Commis Elder. that the We believe Commission’s accept study sion and the decision to as findings supported by are evi- substantial only reasonable was an intermediate one. reject League’s dence and therefore explicit implicit decisions of the Comptel’s challenge to the Commis- reject Commission to criticisms of the employ study. sion’s decision to the Staff study relatively part as minor were a small extremely complicated of this and difficult case. In the absence evidence that the YI. study unsound, inherently Staff we study accepted Even if the is Staff will not insist that it be abandoned. at Id. reasonable, however, League as already 624. Mountain Bell had obtained Comptel argue only provided guid that it an across-the-board rate The fun increase. general categories, ance in thirteen changes damental in the telecommunica supplied specific no basis for the intra-cate- industry tions since the rate last increase gory proposed by rates Mountain Bell and spread-of-the-rates decision it im made approved by appears the Commission. It

perative for the Commission to redetermine from the record that Mountain Bell’s stud appropriate relative rates. price ies changes arrived at costs and this, Having said and while it is true the general line with those in the areas covered findings any Commission’s need not be in the Staff which the Commission particular form, may implied but already had found reasonable. We con facts, other Consumer Counsel Office of clude that the decision of the Commission Comm’n, v. Public 752 P.2d Util. substantial evidence in the 1055, we are concerned with the absence of record. specific findings some of the Commission appellants We do not understand the regarding objections study. to the Staff Comm’n, position take the there was no evi- v. Public See Caldwell Util. 134, 138, (1980). dence adduced Mountain Bell in the Colo. However, record, support large record to of indi- our review of the number case, Rather, light pricing proposals. appel- of this vidual circumstances requires apparently any us to conclude that the decision of lants contend that evidence tending support majority set, record to Mountain which’the of the rates were specific proposed rejected tariffs was calling Bell’s Touch Tone and custom services rejected when it Moun- by priced the Commission below cost a manner incon- two cost-of-service studies. We tain Bell’s principle sistent pric- of cost-based read the Commission’s decision this do not (or ing. particular, the non-recurring broadly. The cost-of-service studies sub- time) charges one were set below Mountain rejected mitted Mountain Bell were principle Bell’s cost. The of cost-based the Commission because of the theoretical pricing public utility’s dictates that a rates employed methods and not because of their determining set first the cost of a results. When the results of Mountain adding service and then to that a reason- Bell’s studies were tallied with the Staff’s utility. rate return for the able study, acceptance found Commission indicated in original Commission deci- intra-category most of the rates reason- they sion that while cost-based “favor[] able. pricing, recognize we that at times exter- require nalities will some deviation from a Telephone

We said in Mountain States strictly pricing method in order cost-based Telegraph v. & Co. Public Utilities Com just the rates are and reasonable.” mission, 269, 279-80, Colo. (1973): Apparently accepting the Consumer significance It is of here to also ob- premise, the Counsel’s Commission never- fixing serve that rate involves more than approved theless the Touch Tone and cus- finding applying of facts and them. It rates, calling stating, tom services “We involves also to a considerable extent were convinced Mountain Bell that con- many questions judgment or discre- recurring charges tribution from will more part tion on the of the PUC. Public than offset lower revenues non- utility making legislative rate is a mat- recurring charges.” We conclude that this PUC, ter, statutory and to the under our finding evi- is substantial scheme, delegated has been this task. It in the record. The dence Consumer Coun- true, course, pursuing that in this sel, however, argument step takes the one task, the PUC must have before it evi- decision, In the further. Commission matter, subject dence on the but the de- proposal Mountain Bell’s to set fair, just termination as to what is non-recurring residential below judgment reasonable rate is a matter of it believed that other resi- cost because judgment or discretion. This or discre- cus- dential users should not subsidize new part tion on the of the PUC must be through higher monthly for tomers bills facts, calculations, evidentiary based on recurring charges. The Consumer Counsel factors, relationship known between alleges that this treatment of residential factors, adjustments known inconsistent with the Commis- customers is may relationship affect between recurring charges to let sion’s decision known factors. calling Touch Tone and custom services that, considering complexity We believe non-recurring charges. subsidize task, competently the Commission is a fatal We do not believe this expertise exercised its in this case. Ac- inconsistency, however. As Mountain Bell cordingly, we decline to hold that the Com- out, monopoly points statutory it has a arbitrarily capriciously in mission acted or providing exchange residential ser- local way setting the individual rates in the vice, found that Moun- did. meaningful subject any Bell not tain competition in that market. On the other

VII. hand, “[cjertain found that are also candidates central office services Counsel also con Consumer that, monopoly treatment accepting tends even the method for transition [from they practical- found that it was competition], particularly where face Commission ly impossible for Bell to deter- increasingly sophisticated competition from particular being ifmine a business line was in on-premise equipment which is available used as a de facto trunk line. Taken to- many unregulated market to custom- gether, findings, supported these which are In of these differences mar- ers.” view record, justi- evidence in the substantial was, ket “externalities” the Commission realign fy the Commission’s decision to therefore, required price Touch Tone not charges. PBX line and business calling precisely and custom services manner as residential service. same

IX. conclude, the district VIII. We therefore as did court, that are the Commission’s decisions Finally, the Consumer Counsel supported by substantial evidence claims that the Commission’s decision to arbitrary capricious. record and are not charged private reduce the rates for branch Accordingly, judgment we affirm the of (PBX) lines to the rates trunk district court. charged regular lines was business solely made in the interest of administra ROVIRA, J., participate. not does unsupported by convenience and was tive evidence in the record. substantial MULLARKEY, J., dissents, and stated: The Commission C.J., QUINN, joins in the dissent. during Mountain Bell did demonstrate dissenting: Justice MULLARKEY hearings developments CPE premises equipment] respectfully made I of dissent. Office [customer technologically impractical significant to monitor Consumer Counsel has raised particular questions line which were not addressed whether or not customer Commission and which seri- (due Public Utilities sophisticated equipment) to his own ously validity undercut of the staff actually using his line as a de factd study. the staff formed the Because words, In trunk. other because of tech- primary evidentiary support for the Com- advances, nological the distinctions be- adopting the rate re- mission’s decision charges charges tween line and trunk structuring, I would find that the Commis- obsolete, practically have become and we approval restructuring of the rate sion’s proposal find that Mountain Bell’s to rea- plan evi- was not substantial lign proper, these two rate elements is at dence. time. this put important It is this case context. Apparently, early types of PBX devices notes, majority As the this is the Commis- needed to interconnected with Mountain attempt to restructure tele- sion’s first public using spe- Bell’s switched network up AT phone rates since 1984 break cially conditioned lines that increased their & T. Mountain Bell’s entitlement to a rate higher charges justified cost and is not at increase of million issue. $21 the service than normal business lines. pay is at issue is who will for the What Technological developments have now specifically, More this case de- increase. for a business customer to possible made it charged cides what rates will be for what equip- perform PBX functions with his own types of services. lines. The ment over normal business concluded, testimony on based system traditionally The rate structure develop- hearings, these during goal has been intended to further the PBX distinction between telephone ments made the service. Mountain universal obsolete, lines and the Public regular business States Tel. & Tel. v. Utils. addition, (Colo.1988); Comm’n, artificial. disparity 40-15-110, (1984) (general knowledged sponsored as- that Mountain Bell C.R.S. testimony including and offered exhibits sembly public policy declares that of state indicating studies the extent of the in- competitive entry providers is to allow competition company creased which the service in the intra- telecommunications faced but the Commission this evi- practicable consist- state market as soon as dence, stating that find that each of “[w]e availability of uni- ent with the continued the studies was riddled with extensive service). end, telephone oth- versal To purports flaws and does not show what it yellow pages er sources of revenue such as demonstrate_” to Finally, the Commis- advertising have been used to subsidize agreed sion stated that “that access States, 763 residential service. Mountain lowered, charges should be but not because decision, however, P.2d at 1023. this competitive of the bypass threat of as al- adopts rates for the Commission cost-based leged by Mountain Bell.” significant departure services. This is a Although rejected the Commission Moun- past practices in a dra- results proferred justification tain Bell’s for the exchange matic increase in the cost of basic restructuring, agreed rate it nonetheless say exaggeration services. It is no to that that restructuring pro- Mountain Bell’s rate the Commission has effected a fundamen- posals by large appropriate were in paying in tal shift the burden of for the light of the Commission staff’s cost of ser- telephone costs of service in Colorado. Al- study support vice and the Commission’s though the Commission-authorized increase pricing.1 for “cost-based” Thus it is clear charges of more than million in $40 study that the staff’s cost of service was exchange services as well as the cor- basic primary if not the sole for the basis responding charges decrease in intraLATA adopting Commission’sdecision most of the may justified, of more than million I restructuring plan proposed by $26 rate Moun- do not in tain Bell. believe that the record this case adequate support major

was such a revi- expert The Consumer Counsel introduced in telephone sion rate structure. Ac- testimony challenging certain methodolo- cordingly, I would reverse and remand for gies by study. used the staff in its This hearing. a new testimony reliability cast doubt on the study as the basis for the Commission’s rejected completely The Commission adoption in of the rates this case. The justification put by forward Mountain Bell testimony, presented Consumer Counsel support in restructuring plan. of its rate witnesses, corroborated Mountain Bell’s argued Mountain Bell to the Commission that the method which the staff allocat- restructuring proposal that the rate was ed costs local services and access between necessary light dynamic changes in services, toll-related the so-called subscrib- industry the telecommunications caused (SPF), plan er to an allocation factor led deregulation rapid federal techno- arbitrary capricious was logical advancements, both of which have true causation. If it did not reflect cost competition among to increased contributed believed, it de- testimony this would providers. telecommunication service stroy purported prefer- the Commission’s However, Commission found charges. The ence for cost-based rate Con- “Mountain Bell has not met its burden expert testimony indicated sumer Counsel’s proof competi- to' establish that sufficient approach that the SPF to cost assessment major justify tion exists markets to developed political com- was as a result of promise pricing proposals.” its The Commission ac- in order to allocate costs between change, "oft-repeated prior the $26 1. The Commission other to the rate then charges contention of Mountain Bell and AT & T Comm to local access million shift from toll that toll rates subsidize basic rates.” charges in this case ordered time, At the same the Commission affirmed its i.e., apparently subsidy, in a new local results support pricing. I for "cost-based” find these subsidizing long charges access distance positions two inconsistent. If neither local ac- charges. long cess nor distance subsidized each telephone use and intrastate interstate and determining not a suitable basis Colorado, of the State of The PEOPLE The Consumer Counsel intrastate rates. Plaintiff-Appellee, criticizing oth- testimony several

presented v. the staff important aspects of er assignment of costs to respect to the CZEMERYNSKI, Charles John maj. op. at 1096-97. local services. See Defendant-Appellant. recognize that majority is correct No. 88SA280. determining the Commission’s whether by substantial evi- supported decision Colorado, Supreme Court dence, the evidence the court must view En Banc. to the light in a most favorable the record However, though the even Commission. 12, Feb. need not take findings of the Commission Rehearing Denied March form, particular any findings to show which should make competent accepts it as

conflicting evidence of the evi- worthy of belief and which Airways, Inc. v. rejects. Aspen it dence Comm’n, 169 Colo. Public Utils. findings not Such P.2d 789 respect to the evi- made in this case with Counsel to dence offered the Consumer validity report. the staff challenge the suggest that the Commis- This is not to every objection raised sion must address testimony offered at a hear- party or all or incidental to ing no matter how trivial However, the issue under consideration. by the Consumer here the evidence offered but went to the Counsel was not trivial challenged It the validi- heart of the issue. study, which was the evi- ty of the staff relied upon dence Commission Bell’s rate re- largely adopting Mountain Thus, this court cannot structuring plan. meaningful judicial review with- engage knowing that the Consumer Counsel’s out and the Commis- was considered evidence rejecting it. In this ma- sion’s reasons for case, restructuring which effected jor rate shift the burden of such a fundamental telephone the common costs of paying for access, especially critical that this properly require the

court foregoing rea- explain For the its decision. sons, respectfully I dissent. C.J.,

QUINN, in this dissent. joins

Case Details

Case Name: Colorado Office of Consumer Counsel v. Public Utilities Commission

Court Name: Supreme Court of Colorado

Date Published: Feb 5, 1990

Citation: 786 P.2d 1086

Docket Number: 88SA451

Court Abbreviation: Colo.