Irwin A. POPOWSKY, Consumer Advocate, v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 107. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 101. PA CABLE TELEVISION ASS‘N v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 108. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 102. MCI TELECOMMUNICATIONS CORP. v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 109. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 103. CENTRAL ATLANTIC PAYPHONE ASSOCIATION v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 110. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 104. AT & T COMMUNICATIONS OF PENNSYLVANIA, INC. v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 111. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 105. CITY OF PITTSBURGH v. PENNSYLVANIA PUBLIC UTILITY, Appellant at No. 112. Appeal of BELL ATLANTIC-PENNSYLVANIA, INC. at No. 106.
Nos. 101-112
Supreme Court of Pennsylvania
Decided Dec. 24, 1997
706 A.2d 1197 | 550 Pa. 449
Decided Dec. 24, 1997.
Philip F. McClelland, Harrisburg, for Consumer Advocate.
Ashley Schannaur for City of Pittsburgh.
John McManus, Chairman, for Pennsylvania Legislative Com‘n.
Susan Weinstock for Pennsylvania Legislative Com‘n and AARP/Pennsylvania St. Legislative Committee.
Mark A. Keffer, Fairfax, VA, Daniel Clearfield, Harrisburg, for AT&T Communications.
David M. Kleppinger, Pamela C. Polacek, Harrisburg, for Pennsylvania Cable TV Assoc.
John A. Levin, John F. Povilaitis, Frank B. Wilmarth, Harrisburg, for PUC.
Susan Jin Davis, Harrisburg, Joan M. Campion, Washington, DC, for MCI Telecommunications.
Derrick P. Williamson, Harrisburg, John Sullivan, for appellees.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE and NIGRO, JJ.
OPINION OF THE COURT
FLAHERTY, Chief Justice.
Under a new telecommunications statute, Bell Atlantic Pennsylvania, Inc., filed a network modernization plan which proposed alternative regulation for noncompetitive services that featured a price cap formula for changing rates; classifi
In July 1993, the Pennsylvania legislature enacted chapter 30 of the Public Utility Code,
The statute also allows local telephone companies, in conjunction with a petition for an alternative regulatory framework, to seek a PUC determination that any of its services is a “competitive service.” Rates, tolls, charges, rate structures, rate base, rate of return, and earnings of competitive services may be completely deregulated.
In October 1993, Bell filed a petition for an alternative regulatory framework, accompanied by a network modernization implementation plan and a proposal that certain services be deemed competitive. Three administrative law judges held evidentiary hearings and public input hearings.
The ALJs recommended that Bell‘s petition and plan be denied. They concluded that the price stability mechanism did not ensure that rates for noncompetitive services were just, reasonable, and nondiscriminatory; the modernization plan was not sufficiently detailed and did not adequately balance deployment between rural, urban, and suburban areas; and the services sought to be deregulated did not meet the definition of competitive services and the proposal did not provide adequate competitive safeguards.
The PUC did not adopt the ALJs’ recommendations, but approved Bell‘s petition and plan with a number of modifica
The state consumer advocate and various Bell competitors, who had challenged the petition and plan, appealed the PUC order. The Commonwealth Court vacated the part of the PUC‘s order which had set the inflation offset figure at 2.93%. The court remanded, ordering the PUC to calculate and include an “input price differential.”2 With regard to the PUC‘s classification of six services as competitive, the court held that the PUC failed to make required findings before deciding that the services were competitive and erred in determining that the services were competitive without first finding that the statutory competitive safeguards had been met. The court therefore reversed the PUC as to four of the services, concluding that the competitive safeguards were inadequate. As to the other two services, the court vacated and remanded for further proceedings to determine the adequacy of the competitive safeguards. In all other respects, the Commonwealth Court affirmed.
We granted allocatur to review the issues raised by Bell and the PUC. They may be summarized as follows. First, whether there was substantial evidence to support the price stability mechanism adopted by the PUC, that is, inflation minus 2.93%
A price stability mechanism is designed to calculate reasonable changes in rates for noncompetitive services, using a price change formula which starts with the general rate of inflation then adjusts for various factors. Bell proposed an offset of 2.25% as authorized in
The standard of review to be applied by the Commonwealth Court when reviewing the PUC is that the court should not substitute its judgment for that of the PUC when substantial evidence supports the PUC‘s decision on a matter within the commission‘s expertise. The court itself has said:
Our duty is to determine only whether or not the PUC‘s findings are supported by substantial evidence; we may not substitute our judgment for that of the PUC, nor may we “indulge in the processes of weighing evidence and resolving conflicting testimony.” Johnstown-Pittsburgh Express, Inc. v. Public Utility Commission, 5 Pa.Commonwealth Ct. 521, 525, 291 A.2d 545, 547 (1972).
Philadelphia Electric Co. v. Pennsylvania Public Utility Comm‘n, 61 Pa.Cmwlth. 325, 433 A.2d 620, 624 (1981), quoted in Barasch v. Pennsylvania Public Utility Comm‘n, 507 Pa. 430, 490 A.2d 806, 809 (1985). The decision at issue, involving complex financial determinations and weighing and interpreting statistical and economic evidence, is within the PUC‘s area of expertise. See Popowsky v. Pennsylvania Public Utility Comm‘n, 542 Pa. 99, 665 A.2d 808 (1995); West Penn Power Co. v. Pennsylvania Public Utility Comm‘n, 147 Pa.Cmwlth. 6, 607 A.2d 1132 (1992).
As long as there is a rational basis for the PUC‘s methodology [in establishing a rate structure], such decisions are left entirely up to the discretion of the PUC which, using its expertise, is the only one which can properly determine which method is the most accurate given the particular circumstances of the case and economic climate.
It is well settled that the establishment of a rate structure is an administrative function peculiarly within the expertise of the PUC.
Reviewing the Commonwealth Court‘s judgment in the light of these standards, it appears that the court exceeded its scope of review and invaded the PUC‘s area of expertise and role as fact-finder.
The PUC decision to utilize a price cap formula which excluded an input price differential is supported by substantial evidence in the record. The state consumer advocate and Pennsylvania Cable Television Association, two challengers to the Bell petition and plan, claimed that the price of inputs for telecommunications companies did not increase as fast as the inputs in the economy across the board, and that the inflation offset should be increased in recognition of the differential. Nevertheless, Bell produced substantial evidence which supports the PUC‘s rejection of an input price differential in the price cap formula.
Briefly stated, the PUC observed that the consumer advocate and PCTA “estimate[d] widely divergent values” based on “similar data sources and timeframes” and therefore rejected their estimates as being unreliable. Bell‘s expert witness, on the other hand, testified credibly that a proper analysis showed no statistically significant difference between input prices for the telecommunications industry vis-à-vis the national economy.
The Commonwealth Court‘s injection of an input price differential into the price stability mechanism appears to be based on a misreading of factual evidence in the record. The court relied on a PUC statement, in dictum, that it acknowledged that “the theory of using the input price differential in the price stability mechanism has merit.” The court then stated:
Being charged with the responsibility of ensuring that the rates under the price stability mechanism remain reasonable throughout the duration of Bell‘s Plan, the [PUC] cannot recognize the input price differential as affecting those rates and then refuse to ascertain the value to be assigned to that differential by stating that the evidence is insufficient to reach an appropriate figure or that the analytical measurements used to calculate the input price differential may be in need of future improvements. Instead, the [PUC] should have reviewed the evidence and fixed a value that best approximates the input price differential....
669 A.2d at 1041. The court noted that a Bell exhibit indicated an input price differential of 0.3%, so the PUC “acted arbitrarily in refusing to assign any value to the input price differential factor.” Id. at 1041 n. 22.
It was erroneous to rely on the 0.3% figure, however, because it was from an exhibit in a different, unrelated case involving Illinois Bell; because it was for a different, earlier period of time; and because the exhibit later explained that “it is likely that the future differential will be small or nonexistent,” R. 148a, and that “over the period 1948 to 1979, input prices for U.S. telephone companies grew at virtually the same rate as for the rest of the economy. This is what one would expect over any time period of substantial duration.” R. 150a.
Despite substantial evidence supporting the PUC‘s determination of a price stability mechanism, the court substituted its judgment for that of the commission. Despite the deference due the PUC in a function peculiarly within its area of expertise, the court usurped the discretion of the commission. We conclude that the Commonwealth Court erred in vacating the price stability mechanism and remanding for recalculation including an input price differential.
The second and third issues are closely intertwined. They relate to the PUC‘s finding that six of Bell‘s services were competitive: directory advertising, billing and collection, centrex, paging, repeat call, and speed calling. The Commonwealth Court reversed the PUC on two grounds. First, the court held that the PUC violated a formal requirement by failing to include in its order a mechanical recitation, as to each of the six services, that it satisfied each of the eight criteria set forth in the statute. Second, the court held that the statute prohibited the PUC from classifying a service as competitive, even if it met the statutory criteria, unless the PUC first determined that the competitive safeguards of the statute had been met.
We will deal first with the question of whether the PUC correctly determined that services may be designated as being competitive before a determination is made that statutory safeguards are met. This, in essence, is a procedural determination requiring us to interpret the statute providing for alternative form of regulation of telecommunications companies.
The Commonwealth Court erred in reversing or vacating the PUC‘s classifications of services as competitive without a prior determination that competitive safeguards are in place. The PUC applied sections
Moreover, the Commonwealth Court‘s holding exceeded its scope of review in a PUC case. We have stated:
The proper place to begin the appropriate inquiry is ... due deference to the views of the regulatory agency directly involved in administering the statute in question.... “[A]n administrative agency‘s expert interpretation of a statute for which it has enforcement responsibility is entitled to great deference and will not be reversed unless clearly erroneous.”
Alpha Auto Sales v. Dep‘t of State, 537 Pa. 353, 357-58, 644 A.2d 153, 155 (1994) (emphasis added). The PUC‘s interpretation of
The final issue is whether there was substantial evidence to support the PUC‘s finding that six of Bell‘s services were competitive. In regard to the required statutory findings, the court quoted
(1) The commission shall make findings which, at a minimum, shall include evidence of ease of market entry, including the existence and impact of cross-subsidization, rights-of-way, pole attachments and unavoided costs; presence and viability of other competitors, including market shares; the ability of competitors to offer those services or other activities at competitive prices, terms and conditions; the availability of like or substitute services or other activities in the relevant geographic area; the effect, if any, on protected services; the overall impact of the proposed regulatory changes on the continued availability of existing services; whether the consumers of the service would receive an identifiable benefit from the provision of the service or other activity on a competitive basis; the degree of regulation necessary to prevent abuses or factors which are in the public interest....
The court then stated: “The findings set forth in [
We hold that the necessary findings were made. The Commonwealth Court raised the form of the findings to a preeminent level which it should not occupy. The purpose of
The context of the PUC decision explains and justifies the form of the decision. In the proceedings before the ALJs, there was no contest as to some of the services Bell sought to classify as competitive, and certainly no contest as to each of the eight specific findings necessary for classification as competitive. The ALJs and the PUC, therefore, focused on the contested issues rather than giving equal consideration to all eight findings related to all six competitive services.
The PUC emphasis on the contested issues, however, does not mean that it did not make findings as to the other issues. It made the requisite findings under the standard of Barasch v. Pennsylvania Public Utility Comm‘n, 101 Pa.Cmwlth. 76, 515 A.2d 651, 655 (1986), citing UGI Corp. v. Pennsylvania Public Utility Comm‘n, 49 Pa.Cmwlth. 69, 410 A.2d 923 (1980):
We have held that a Commission decision is adequate where, on each of the issues raised, the Commission was merely presented with a choice of actions, each fully developed in the record, and its choice on each issue amounted to an implicit acceptance of one party‘s thesis and rejection of the other party‘s contention.
Under this standard, the competing positions of the parties were fully explained in the record and the PUC adopted the position of Bell, implicitly accepting Bell‘s position with regard to each of the findings necessary to hold that each service was competitive.
Even without relying on the Barasch standard, the necessary findings were expressed by the PUC. It utilized the time-honored, useful, and noncontroversial technique of incorporating by reference findings made by the ALJs and adopting as its findings the detailed positions of particular parties. R. at 1278a, 1282a. The Commonwealth Court‘s holding that the PUC failed to make the required specific findings was, therefore, erroneous.
NEWMAN, J., did not participate in the consideration or decision of this case.
CAPPY, J., files a concurring opinion which is joined by CASTILLE, J.
CAPPY, Justice, concurring:
I concur with the majority‘s decision. I write separately, however, in order to express my concern regarding the conclusion of the majority that the Commonwealth Court should not substitute its judgment for that of the PUC when substantial evidence supports the PUC‘s decision on a matter within the commission‘s expertise and in order to, once again, more particularly set forth the underlying requirements for scrutinizing matters such as these while utilizing a substantial evidence standard of review.
My Concurring and Dissenting Opinion in Bowman v. Department of Environmental Resources, 549 Pa. 65, 700 A.2d 427 (1997), which was joined by Mr. Justice Castille, explained that the Commonwealth Court‘s function, as a reviewing appellate court, does not end once the Commonwealth Court finds a single, substantive item of evidence that supports the commission‘s decision. The Commonwealth Court‘s review, pursuant to
An agency opinion needs to contain sufficiently detailed findings of fact, together with a coherent legal discussion, so that the Commonwealth Court can perform a meaningful review. Any less would frustrate the legislative intent, in addition to providing agency panels with a means of nullifying the effect of legislation, because it would enable an agency to shield its decisions from review by drafting opinions in generalized and conclusory terms.
In Bowman, because it was not apparent from the Commission‘s adjudication why particular evidence was significant, I stated my belief that a remand to the Civil Service Commission was appropriate.
In contrast, the PUC‘s adjudication in the case presently before us set forth the evidence from the record and the rationale relied upon by the commission in rendering its adjudication. I agree with the majority that the Commonwealth Court, in vacating the price stability mechanism and remanding for recalculation including an input price differential, improperly substituted its judgment for that of the commission. Moreover, I agree with the majority that the Commonwealth Court erred in reversing or vacating the PUC‘s classifications of services as competitive without a prior determination that competitive safeguards are in place. Finally, I agree that the Commonwealth Court‘s holding, that the PUC failed to make the required statutory findings for each of the
I therefore respectfully concur with the majority opinion.
CASTILLE, J., joins this Concurring Opinion.