Stewart v. Utah Public Service Commission

Gigi, STEWART, George A. L. C. Justin Toomer, Cox, Ronald Tur- Barbara

Earl Petitioners, Coryell,

pin, and Pat COMMIS-

UTAH PUBLIC SERVICE Communica- and U.S. West

SION

tions, Inc., Respondents. of Public Utilities

Division of Consumer

Committee

Services, Intervenors.

No. 910405. of Utah.

Supreme Court

July 1994.

Rehearing Nov. Denied Barker, Flynn, regulated company James L. John J. Lake provides Salt industrial City, petitioners. various products telecommunications proceeding, services. In this the Commis- Dam, Gen., Atty. Paul Van R. David L. sion and the Division of Public Utilities have Stott, Walgren, Ginsberg, L. Kent Michael aligned themselves with USWC. The Com- Gen., Attys. City, Asst. Salt Lake for Div. of mittee of Consumer Services intervened in Utilities, Com’n, Public Public Service Com- proceedings before the Commission but mittee Consumer Services. position appeal taken no on this and has Jensen, Smith, Floyd A. D. Ted Salt Lake appeared party. as a City, for U.S. West Communications. proceedings began pe- These when USWC King, Kaysville, Fred Felshaw and B. titioned the Public Service Commission for Zaleznick, Goldberg, Washington, Steven approval an regulation of plan incentive DC, for amicus curiae American of Ass’n whereby USWC shareholders and Utah rate- Retired Persons. payers company profits would share in ex- of specified cess of STEWART, equity. rate return on Associate Chief Justice: assigned case was docket No. 90-049-03. petition This case is here on a to review an (1) proposed plan provided of order the Utah Public Commission Service telephone rates could not be lowered for four Communications, increased U.S. West years, irrespective high of how USWC’s rate (USWC) Inc.’s authorized rate of return on was, of return but could be increased on a equity 12.2%, ordered mod- central office pass-through categories cost basis four fiber-optic ernizations and extensions to edu- (2) costs; USWC could not file for a rate institutions, adopted cational and an incentive profits year increase unless its for one regulation plan pursuant vetoed amounted to less than a 10.5% return on statutory petition authorization. The equity (presumably nonconfiscatory rate of review was filed Justin C. Stewart and (3) return); and retain would all (collec- telephone ratepayers other users and earnings up to a equity, 14% return on and (1) tively “ratepayers”) challenge who and ratepayers shareholders Utah lawfulness of the 12.2% rate of return on equally would earnings share from 14% to (2) equity constitutionality and Utah plan 17%. The did not indicate what a fair (1990), § Code Ann. 54-4-4.1 which autho- just and rate return on USWC’s invest- approve rizes the Commission to incentive ment be. would regulation plans rate and allows a plans. veto such also con- After proposal, USWC filed its the Divi- tend if authorizing that even the statute such sion of Public petition Utilities filed a constitutional, plans is the incentive investigate earnings. petition, That adopted by the Commission is unlawful. assigned 90-049-06, docket No. resulted in a Lastly, an of at- seek award general proceeding rate before the Commis- torney fees. hold We 12.2% rate of sion. The Commission consolidated the two just reasonable, return on is not and cases.1 pending, While the cases were provision veto Ann. 54- Code prospective Commission ordered two interim 4-4.1(2) unconstitutional, the Commission’s reductions, $10,711,000 22,1990, rate on June unlawful, regulation plan incentive and the $8,238,000 January and 1991. All is- ratepayers are entitled to reasonable attor- concerning sues requirements, revenue ex- ney fees. cept capital depreciation, cost of were disposed by stipulation USWC, between

I. BACKGROUND Division, the Committee of Consumer USWC, regulated Services, public utility, operates AT though & T. Even in a number of wholly western states. It is a propriety resolving important such issues West, Inc., subsidiary owned of U.S. an un- requirements as the revenue of a utili- separate appeal USWC filed a that is the sub- v. Inc. Public e S Communications, ject opinion (Utah 1994). our in U.S. West years, Company contin- past four findings ty stipulation with by private highly ques- earn in excess of its authorized ues to any kind tionable, challenged proce- ap- telephone network no one of return and the Dep’t Busi- in this case. See Utah needs of its pears dure to have met the basic Comm’n, 614 Public Regulation addition, Serv. telephone ness sub- customers. 1980). The Commis- seribership is at an all time in this state Re- stipulation, but accepted 1990) sion (96.5 March, percent as of high level noted, “The Commission port and Order average the national and is well above presented pen- a more not been could have sys- argues one that the percent. 93.3 No problematic nature of etrating example of the perfect, evidence that tem is but concrete Here, signatory parties could stipulations. major failing respect is absent it is agree on their own words meant what not hand, On other from this record. dispute opportunity seized this prom- this case shows record on what other- their own interests advance ised benefits of incentive grounds.” might have been reasonable wise spec- proposals before comment did otherwise The Commission un- possibility exists that ulative and legal far-reaching public policy regulation plan is specific less a important deciding is- implications of such crafted, of harm to carefully there is risk the basis of a general in a rate case on sues occur in the ratepayers. That could the precludes all Commission stipulation that ratepayers higher rates than would form of data, notwithstanding scrutiny of critical paid, or a windfall to share- have otherwise an disapproving such from this Court cases earnings than higher in form of holders the id.2 approach. See jus- risk otherwise their investment would 19, 1991, the entered Commission On June in detail tify, as will be discussed more in The Report Order both dockets. its and later. “re- further Commission ordered not ... The on the record does evidence $19,799,- by [prospectively] its revenues duce substantially corroborate the assertions 000,” thereby ordering a total future revenue regulation by of incentive proponents made $38,748,000during of of the course reduction regu- in attacks on traditional either their also authorized ease. The Commission the of in- support or in of the benefits lation of on of an increased rate regulation. centive rejected plan. incentive USWC’s 12.2% plan, rejecting the respect regulation plans incentive to incentive In With specific find- a of generally, found: made number Commission ruling rejecting ings support that its being signifi- make a asked to We plan that are also inconsistent but of departure from the current scheme cant plan the Com- general with the incentive in state regulation [T]ra- of Utah.... and, ultimately in promulgated itself performing relatively mission regulation is ditional addition, ruling the rate of return. with its jurisdiction. Ratepayers have inwell this reason, that we set out extensive over For a of rate reductions received series Regula Department stipulations Business disapproved of ders. recently We the use of Commission, 614 P.2d significant rate tion v. Public Service issues in cases. to resolve 1980), (Utah Corp. first v. Public Service we stated that the Telecommunications MCI Commission, 1992), preced we stat- it prerequisite a rate order is that be of findings. explained: hearing ed: We ed commission, pow- regulatory whose A state Moreover, fixing by pri- the of rates rate, a reasonable have been invoked to fix ers negotiation findings of fact raises vate know, it act ad- and before can is entitled to legality integri- questions about the serious visedly relevant facts. informed of all must be em- ty procedures of Otherwise, regulatory body the hands of ployed. a crucial role The Commission serves it not fashion could could be tied in such overreaching protecting in effectively proposed rate determine whether monopoly provide power that es- entities with justified. was many We services. have on occasions sential Regu- Dep’t (quoting Utah Business at 773 emphasized make Id. that the Commission must of lation, 1246). findings justify or- 614 P.2d appropriate of fact to (market portion findings sup- of Commission’s earn the allowed rate of return rejection: port of its capital) utility investment, cost of on its and with linked rates to that investment in major of sponsored One witnesses base, the form of rate has an Company proceeding this was Pro- incentive to increase investment order spoke fessor Davidson who in favor of profits. to increase the absolute level regulation incentive as means of address- ing emergence competition Company The offered no concrete evi- national and Yet widely accepted international scene. oth- dence to counter this view. Company Company er witnesses testified that example The did not offer Company’s plan made, technologies incentive was not investments with- designed meet the concerns com- held from Utah because of lack of incen- tive, petition. or services not offered Utah be- Company cause had no incentive to Company produce could not an anal- earn additional revenues. ysis impacts upon regulation. Company incentive Company witnesses has asserted a number impossible that quantita- it is proceedings Commission, before this testified tively demonstrate rates under an proceeding, this it faces a equal will be to or lower serious from competition. threat It than rates regulation. under traditional hard accept theory Compa- was, however, ny There testimony would withhold introduction of new Company adoption technologies an incentive or new services would regulation plan help would increase cost competition simply meet be- capital higher to the Company due to regulation plan cause an incentive did not addition, Company risks. In evidence, witnesses in however, exist Utah. There is advantages that one the in- that USWC has invested considerable testified of regulation encourages years centive is that it in sums introducing recent in new taking” by Company “risk technologies the but that improving the telecom- exposed would be to the risk generally. munications infrastructure Company addition, appears since investment made independent that the failure during plan the the telephone course incentive companies operate that in the in plan. will be rate base the end at the state have had the incentive under tradi- regulation tional sys- modernize their major degree. tems to a The Commission finds that the record There is also evidence liberal depre- that fully support arguments by does not the policies, ciation such adopted by as those proponents regulation of incentive this Commission since have a more Company lacks incentives to be efficient impact upon direct and substantial mod- regulation. under current It further finds ernization decisions than an would incen- that record in the is deficient evidence that regulation plan. tive plans the regulation proposed incentive in proceeding this will create the incentives company Some argued witnesses that efficiency promised. There is also an regulation under traditional Company the fully support put absence evidence the is in risk its modernization efforts contention that by arguments will benefit that certain investments are adoption Company’s from the prudent, of the or the yet not Company the offered no proposed regulation Division’s incentive evidence that this Commission has ever plans. any declared by Company investment the imprudent be and thus not in allowable argument]

2. reg- that [The traditional rate base. ulation retards technological the rate of innovation which bewill corrected under The Commission therefore finds that an regulation plan incentive ... in the flies there is insufficient to justify evidence the long-established face of a principle, that if assertion that regulation, traditional as im- Company the opportunity plemented jurisdiction, is allowed the in this discourages (as let- gan established numerous the introduction of new modernization Furthermore, by sup- in technologies ters received or services. proposed port does find valid the of the modernization the Commission ap- purports plans, incentive which letters were on this record which evidence adoption large part by that parently generated the assertion substantiate lead to more lobbying Company) would incentive active services or tech- rapid deployment during proceeding, new was the course nologies. during that would frozen rates regulation plan. duration of regu- argument that traditional Company requested Yet bias.... It has an anti-investment lation be allowed to increase the event rates argument of this appears that the essence designated pass-through the four items discouraged Company is is parties argued require it. The jurisdictions investing in activities and against pass-throughs inclusion of high other return not as where the by selecting contended that items opportunities. jurisdictions or business result increases would all likelihood fact, Company witnesses asserted on rates, excluding factors that would but Company really record that all the after in all result in additional reve- likelihood higher investment. The is a return Company not fair to rate- by nues that a commitment Commission finds argued that such payers. It was further Company provision pass-throughs single-item rate cases opportunity to earn the service and an illegal in this which have been declared equal to the market allowed rate of jurisdiction. The Commission finds as determined this Com- capital, cost of mission, arguments against pass-throughs are long- provides appropriate allow persuasive and we will not them upon which investment deci- term basis Company. plan approved the Commission. be made sions should Compa- specific 4. The elements of

ny plan rejected the Division and the foregoing, Based Committee. adopt the incentive of either cannot proposed gap a. between the au- presented Company or the Division as the sharing return and the thorized rate of the the that to Commission. We find percent. believe that the level We Ifof adoption plans their current such of a evidence on the record shows that such promised the not result would forms the gap result in a to would windfall they nor would or investments efficiencies ratepay- Company expense at the the of ratepayers state. to the this be of of benefit ers. studies of Division witnesses Compton Henningsen substantiate rejecting plan, the Commis- After Testimony of wit- this conclusion. MCI it adopted plan incentive that devised an sion a ness Cornell to the effect that such hearing argument. a its own without Company for gap reward the would years, for plan That was to be effect five “easy further efficiencies” is evidence. by subject order of the Com- to termination that the The Commission therefore finds during were be frozen mission. Rates of a justify record not the existence does subject exceptions. period, certain autho- gap the rate of return between plan, profits share the USWC would Under proceed- in this by rized of authorized 12.2% rate in excess of the ratepay- the ing point the at which following pursuant return in the Com- begin ers to share results of formula: pany efficiencies. Company Ratepayer Share all to 12.2% proposed pass-through items b. The Up 12.2 to 80% 20% 13.2% plan. proposed Company One 60% 40% 13.2 14.2% by the public the assertions made more 50% 14.2 to 17% 50% proceeding be- Company before the both all over 17% justification earnings offered no becoming The Commission more efficient plan, through properly for other than bald the the conclusion a crafted plan, incentive plan company’s would the an including the increase that the assurance rates that efficiency, contrary conclusion that is begin the we with are Company such that the rejecting windfall, findings enjoy will promise Commission’s the plan. respect earnings Commission stated with increased is motivation enough plan proper monetary “that probably its incentive that efficiencies will result. may efficiency incentives increase the of the added.) (Emphasis Company.” explain The Commission did not Furthermore, the Commission offered no “monetary how those incentives” would in- support rationale of the various revenue efficiency provide any crease and failed sharing percentages in excess of the 12.2% preventing from enhancing means for equity, return on although it did remark that efficiencies, profits by achieving false such as should be allowed “to receive at by reducing expenditures produced could be least benefit overearnings.” some Given maintenance customer services. In- unprecedented record of USWC’s exces- not, any means, profits creased earnings period sive over a of at least five greater efficiency by public indication of years, note 12 accompanying see infra utility. text, sharing profits of some excess with The Commission’s admission the best ratepayers might provide justifica- some argument in favor of incentive was plan.3 Nevertheless, tion for the the Com- simply “intuition” makes clear its reli- allowing mission did not how indicate its greater efficiency ance on awas hollow ratio- large portion USWC to retain such a nale. The Commission stated: earnings in excess of a fair return —even half arguments put all the earnings justified toup 14.2% Of forth 17%— proponents regulation, policy, especially the one plan since the would appeal most deprive ratepayers is the one with right of the to rates If just other than “intuition.” we make based on a and reasonable basis rate of re- possible Company for the to increase turn.4 justifies 3. The any Commission stated: during termination. At time plan Company duration request can argument carefully Another favor of craft- addition, a rate case. In time the Divi- plan sharing overeamings, ed request sion or the Committee can the Com- accounting earnings, annual and the allow- investigation mission to undertake an of the earnings ance of a their share of the However, charges Company. rates and subsequent year, per- in some manner in the Company, Division and Committee mits the to receive at least some presumption will have to overcome the that it overeamings. past benefit of In the several is in the years overearnings interest that al- Compa- of consistent go five-year experimental lowed ny, the entire overeamings only such have benefitted period. shareholders. plan perfor- 8. The will the include service sharing 4. plan addition revenue set out proposed mance standards the Division in text, plan pro- the Commission's incentive proceeding. this tion, however, It is the Commission's inten- vided: comprehensive to conduct a ex- except quality 1. will be amination of Rates frozen as modified of service and to assess pursuant subject adequacy item the 6 hereafter and of these standards within six changes following adoption] revenue rates neutral in ordered months of the incentive plan. the contemplated Commission as a of result monitoring regular cost-of-service on basis. Regulation Company will Company continue 11. The will file with the Com- mission, respects regulation, evaluate, in all as with traditional and the Division will annual except as modified requirement this Order. intrastate revenue determina- prospective tion[s] on both an actual and a pass-through adjust- will test-year 5.There be no basis. ments. 12. The Division will file the Commis- sion the of results annual cost-of-service stud- plan years. 7. The using term of the is for five ies the DCOS model. The cost-of-service The any Commission the can terminate pro- studies are also to be actual on an and spective test-year time if it is convinced that the interest to be basis and consistent

767 ); strong.... system remains THE 12.2% economic OF II. THE LAWFULNESS Baker, Washington Light v. 188 Gas Co. EQUITY RATE OF RETURN ON (D.C.Cir.1950) (inclusion 11, F.2d 19-20 the Commis- ratepayers assert just and rate base must be reasonable rate of return of a 12.2% sion’s authorization denied, investors), cert. 340 consumers and by the supported not evidence equity is 952, 571, 572, L.Ed. 71 95 686 U.S. S.Ct. findings com- own and that the Commission’s Co., 55, (1951); Myers v. Tel. 194 Neb. Blair 11.8% rate of the pel conclusion (“The (1975) 190, 196 N.W.2d commission 230 to re- previously in effect continued return utility permit have confis can no more capital. equity actual cost of flect the performs it catory than rates for service ratepayers argument, their support of provide compel can service (1) findings that rely on Commission’s just equitable compensation.”); and without of previously rate of return authorized Department Tel. Tel. v. Mountain States & permit ... the Com- 11.8%was “sufficient 331, Comm’n, Pub. Serv. 191 Mont. 624 of (2) rates”; capital pany to at reasonable raise (1981). 481, 483 rate and the last since the last USWC case case, capital confiscatory To on the filing in the instant avoid rates one (3) other, declined; had fi- exploitive costs hand rates had just capital its from what a nanced almost 100% of needs must determine Commission extremely “liberal is Ann. cash flow created reasonable rate under Code depreciation by applying taxes. rates” of and deferred 54r-4-4 standard Commission, utility’s A ratepayers on a of service. eost-of- assert based cost fact, pro in law or increased mandates that rates without basis service standard oper pay utility’s of enough rate induce revenue to USWC’s authorized duce “discretionary” ating expenses plus investments return on USWC to make a reasonable invested, that there is sub- as the capital in Utah. USWC contends often referred to cost support capital 12.2% rate of capital. stantial evidence to The cost of includes the have mar- return and that the service and a return on cost debt investors, given capital and shown that the evi- to attract shaled the evidence sufficient support that rate of return dence the nature of risk the investment. legally inadequate. Hope v. Natural Federal Power Comm’n 281, Co., 603, 288, 591, 64 Gas 320 U.S. S.Ct. principles fix the polar Two constitutional (1944); Jersey Power & L.Ed. 333 Cent. parameters regulation for natural mo of rate 1168, FERC, Light Co. v. 810 F.2d protection nopolies: investors (D.C.Cir.1987); Bonbright see also James C. confiscatory and, equal impor rates from al., Utility Principles Public Rates 302- et tance, ex- protection 1988). (2d capital The cost of for ed. ploitive principles were set out rates. Those cost of generally less than the utilities case of Federal Power watershed corporations because in capital industrial Co., Hope Natural Gas Commission typically risky less vestments utilities 281, (1944), 88 L.Ed. 333 U.S. 64 S.Ct. corporations. in industrial than investments subsequent and have been reiterated cases, Throughout E.g., proceedings before and state. Federal both federal brief before this Memphis Light, & Gas Power Comm’n v. Div., 1723, Court, has contended that Water U.S. S.Ct. (1973) (“[UJnder capital which it is entitled Hope equity on to return 36 L.Ed.2d 426 the of return its ‘just be the same as rate and reasonable’ should

Natural Gas rates West, unregulated parent corporation, U.S. only protected if and consumer interests are Inc., equity capital.5 The Com- pipeline our earns on its if the of the in financial health argument respond in require- to that 5. The the of revenue with determination per- their brief: shall be ment. The cost-of-service studies accounting utilizing Many non-telephone information and of U.S. formed activities studies, entrepreneurial unregulated special activities as access lines and min- West are such use, systems building optic fiber in period. like cable tv and the same time utes of from rejected reviewing testimony initially expert pre- that conclusion the mission and After and argument that economic tech- parties supported sented all which rates regulated in nological conditions the telecom- of from to considering return 11.1% 15% and industry changed so munications had much factors, variety of other the Commission simply equivalent the of that USWC was stated, complete summary this a ‘Were of unregulated corporation. industrial or, conclusions, at, our a return award more despite technological ruled that Commission probably, the below current allowed return industry, changes in was not the USWC like (Emphasis inescapable.” [11.8%] would be unregulated company.” “an The Commission added.) although stated penultimate In its part conclusion in that industry is chang the telecommunications report fixing of return its the rate of [sjuch ing significant ways[,] changes equity, the Commission stated: yet have to the essential character disturb regulated provider istics of as a of dispute, capital Without costs have de- jurisdiction: essential services this the previous the of clined since rate return aspects monopoly position known of a well percent, decision of 11.8 and even since the market, in the relevant relation trust filing testimony. alone, of direct Taken consumers, ship between and and argue this would for a reduction allowed imposed upon prices constraints both return.... The Commission is convinced charged for services and rate of return. return, equity a reduction in the current change, As conditions Commission though for advocated witnesses dockets, may, in future conclude otherw Division, Committee and the would like- ise.6 error, given implica- be in wise the risk Accordingly, the Commission discounted tes- of changing industry tions and the respect timony experts with general economy status of relation equity capital opin- cost because their thereto. premise ions were on the incorrect based added.) Thus, (Emphasis compa- that investment risks were in unregulated rable investment risks in- refused to reduce USWC’s rate return corporations.7 11.8%,8 dustrial though below even the Commission other countries. One of the concerns with investment in USWC were risks less than U.S. West, witness, authorizing earnings monopoly profits expert Inc. Another USWC Dr. Morin, Roger rejected comparisons and the failure to what done control A. with the them, pro- will regional be forced to holding other seven telecommunications capital non-regulated companies vide for comparison economic activi- and instead based his for establishing sample ties—a form of taxation Utah consumers to on a com- markets, support thereby posed equally regional activities in holding companies other and overcharging telephone for and unregulated companies. service under- industrial charging in the other markets. promulgating regulation plan" its "incentive refusing 8.In to reduce the rate of return below authorizing significant prof- USWC to retain 11.8%, the Commission referred to several fac- beyond what the Commission found to be fair tors: reasonable, wholly failed to comparability, The record on risk-return while grips problem. come with this complete, suggesting increasing on balance risk; questioned reliability of model 6. results The Commission has demonstrated its sensitivi- during economy unsettled ty emergence competitive moments conditions in industry; large, contrary, even difference by detariffing types certain areas certain of ser- Compa- in results obtained witnesses for the vices. ny compared Compton with witness for the CAPM; example, company using For C. knowledge witness Peter Cum- Division mings placed utility may degree shedding cost of 15% on be 14.5% certain assumption nonregulated characteristics; ambiguous firms were rec- (cid:127) comparable purpose expected price, deter- ord behavior of stock are all mining Cummings USWC’s rate of return. ac- influential which considerations must evalu- however, knowledged, range had been ated in the 11.8% suffi- context of a wide cost of capital equity application to by cient allow USWC to raise at reason- results obtained witness rates, capital requirements able that USWC’s of models. The Commission concludes there is financed, internally capital upper were grant and that the no reason to an award at the end the connection between and for the “risk and made allowances previously made had discretionary investment aimed this industry the changing and implications of the for economy in state. general relation of the status very allowing accelerated liberal thereto” rate It is the earned the of fact The assets. Com- depreciation of USWC’s what equity, return on distinct is from mission stated: allowed, highest among is the in Utah states, decisions, and been so in recent the has past H however, argued thereby years. Company, The granted shorter asset lives return, expected rate based on depreciation expense. One re- of increased return, past rate protect the allowed not actual of policy has been to sult of this to decisions. technological what is related investment Company from the risks of Nevertheless, notes that en- Commission Another has been to obsolescence. past rate positive flow in the recent when the allowed Company’s cash hance the of among highest, expand return in was enabling it continue to Utah thus pattern discemably The discretion- infrastructure. modernize Utah different of ary affecting implied investment decisions that there is Commission finds appeared. The Commission concludes relationship depreciation policy its between does reveal a prudent that historical evidence expectations for and eco- its relationship clear between either allowed nomic future investments. equity on or earned rate return of declining rate of return After to reduce the discretionary one hand and amount of stated, the in- for the reasons Commission in the on the other. investment state rate return from 11.8% creased the Nevertheless, the Commission acknowl- 12.2% induce to make “discretion- relationship edges logic between ary investment decisions” favorable Utah. decision- rate return and investment had The Commission did that because USWC making. Regulation presumes a reason- “discretionary explicitly linked investment management. This is time when able allowed rate of aimed for the state” with the competing high- states are in sense for “linkage” call return.9 The to and tele- tech additions refinements of by the Commission to induce “bribe” plant equipment. communications to invest in Utah. pru- it is The Commission concludes that findings The own reveal Commission’s into ac- dent to take these considerations underpinnings of fallacious the Commission’s determining rate return. count when conclusion: they argue Together, an addition repeatedly Company stressed that The produced capital cost estimate mod- discretionary decisions are its investment els. considerations, by profitability driven enough The is concerned part analysis, meaning in that economic enumerated in the discus- factors analysis, employed or business case equity return on sion raise allowed Implied at times and rank alternatives. existing percent capital to 12.2 message explicit was the times 11.8, this return to be reason- and finds jurisdictional return allowed able. determining be the commissions could fac- added.) (Emphasis rate of return on in Utah tor. The Court, cent, legal this there- issue before per the lowest 14-state 11.8 fore, ruling, territory. as framed the Commission’s Company’s service can increase the is whether the Commission that rate unreasonable witnesses labeled rejecting why amply this After range, are reasons case demonstrates. and indeed there context, argument simply this be error. it is extraor- would dinary would nonetheless that the Commission argument support 9. USWC offered the same basis increase the rate regulation plan, but the Commission rejected. argument it earlier fallacious had rejected argument ground on the that USWC Utah, ample as the had motive to invest record Comm’n, Light of return on er authorized rate above & Co. v. Public Serv. 155, 191-96, 152 (1944) utility 542, of to reasonable rate return induce Utah 559-61 “discretionary” (profits chargeable to make investments to not ratepay affiliate to plant equipment ers); Ind., in Utah. and Stated Action Citizens Coalition Inc. of case, this issue Co., context of the is whether the v. Northern Ind. Pub. Serv. 485 N.E.2d implied (Ind.1985) (cost can to submit USWC’s generating of nuclear making appropriate threat to refrain plant completion charge cancelled before not if it investments in Utah is not allowed a denied, ratepayers), able to cert. 476 U.S. greater capital prudent return on than 1137, 2239, (1986); 106 S.Ct. 90 L.Ed.2d 687 investor, given the nature of the risk of the Consumers’ Counsel v. Public Utils. of Office Comm’n, investment, require. would St.3d Ohio N.E.2d (1982) (investment 587-88 in cancelled nucle necessary emphatically It is to state that chargeable plants ratepayers). ar not the issue is not whether needs a applies same standard of review also when of higher rate return than a fair rate of deciding whether the Commission has relied necessary capital return to be able to obtain improper determining factors the rate return, to invest in Utah. A fair of applied return that is be to the rate because it is based on the market “cost of base. See Utah Code Ann. 63-46b- capital,” necessarily availability ensures the 16(4)(d) (authorizing appellate grant court to capital It investment. is axiomatic agency “agency relief from order if the that time USWC wishes to resort to the erroneously interpreted applied law”); nation, capital markets of the it can obtain Dep’t Utah Admin. Servs. Public Serv. capital at a fair rate return to invest Comm’n, 1983); truth, 658 P.2d see really Utah. issue whether Congress also Lake given a Salt Citizens v. Moun higher USWC should be rate of Co., fair tain States Tel. & Tel. return than a 846 P.2d 1245 dictates induce (Utah 1992) West, Inc., parent (deciding sub corporation, U.S. silentio that bind ing operations invest USWC’s in Utah. effect Commission rule on nondeducti- bility of charitable contributions was issue of turning Before merits that law). issue, appropriate we address the standard of eases, In both rate-of-return and rate-base Although argues review. that the issue is what economic factors the Com- issue factual and that we accord must may determining mission consider what discretion,10 Commission broad the issue re charged ratepayers rates should be for the ally is may what factors the Commission take shareholders, benefit of weight not how much setting into account in a rate of return. Thus, any given should be accorded factor. may The factors that the Commission given legally the issue is whether a factor is a legitimately take into account in determining account, permissible factor to into take and questions a rate of return are of law. As a that issue is an issue of law. general proposition, courts have ruled as a matter of argument law that certain factors not is that a USWC’s includable in the E.g., necessary rate base. can appropri- Pow- refuse to make witnesses, argues ratepayers' 10. USWC range, attack on or at the bottom of the they witnesses, i.e., rate of return must fail because proposed by 12.2% as other from 11.1% supporting did not marshal the evidence the in- 11.6%. concludes that there is volumi- creased rate of return the rate of return supports nous evidence in the record that various supported by fact substantial evidence. rates of return and the rate established (1) USWC states that the Commission examined range the Commission falls within variety produced of results different models expert point. evidence on that (DCF primarily and relied on the "DCF" model difficulty position flow); (2) is that it stands for discounted cash looked acknowledge fails to economy, industry, the Commission as- at conditions in the weight "may given degree fact that USWC to a sessed all those factors be shed- characteristics”; ding certain when decided rate of return found that 11.8% top ruling rate of 12.2% return was should be lowered. The neither Commission’s 15%, range proposed by point 14.5% on that is not contested.

771 right profits to such as are real- public for convenience stitutional investments ate anticipated highly profitable ized utility paid or en- necessity unless the is more and terprises speculative ventures. re- posi- That a rate of return. than reasonable reasonably utility’s turn be to as- should sufficient flatly irreconcilable with a tion is sure in the financial soundness state of confidence under the laws legal duties utility adequate, un- duties to and should be and with the Commission’s Utah management, necessary der and economical utility to do that is to efficient require a all necessity support to maintain-and credit and en- and its public convenience serve necessary just money to raise the and rate of See able it for for a fair return. return 54-4-1, -4, -7, proper discharge public §§ of its duties.” Ann. -8. Code Utah (quoting 152 P.2d at 568 Water using monopo- prevent a from its To Bluefield Works, 679). 692, 43 262 U.S. at S.Ct. rates, Leg- ly power charge exploitive to utility may a provided that islature has wholly a and a USWC is multi-state just to charge only those found and rates subsidiary large compa- a owned industrial by the Service Commis- reasonable Public ny. It used to a has those features coerce §Ann. 54-4-4. Just and sion. Utah Code higher from return the Commission necessarily based on reasonable rates by threatening to divert investment funds capital, and whatever cost of service cost to states from Utah other and more Legisla- particular formula used.11 The risky, profitable, but more investments just provided has and reasonable ture parent unregulated company can make. for utilities are rates telecommunications higher utility’s A effort to obtain a rate of those on cost of service. Utah Code based ' using profit- the existence of more return 54-8b-3.2, -3.3, §§ -11. Ann. possibilities able alternative investment as making appropriate invest- reason for A rate based on cost of service utterly ments in inconsistent with a Utah pay operating means rate sufficient to costs utility’s legal obligations. legal has a fair return to investors for plus cost of utilities, duty, do all make all invest- as providing capital, both and debt. See necessary appropriate to ments and maintain Dep’t Regulation v. Public Utah Business equipment. plant and modernize Comm’n, 1980); 1242 614 P.2d Serv. order, may and in this Commission case Light also Power & Co. Public see Utah ordered, improvements modernization of Comm’n, 155, 212, 152 P.2d Serv. Utah duty plant equipment, and that USWC’s (1944) (citing Works Water Bluefield statutory implicit in That scheme. Comm’n, Improvement Co. v. Public Serv. & by the un- order is enforceable 678-79, 679, 692, 262 U.S. 43 S.Ct. of this state. Utah Code der the statutes See (1923)). capital L.Ed. 1176 A fair return on 54-3-23, 54-7-24, 54-7-25, 54-7-26; §§ Ann. return, given nature means a rate of Co., Myers v. Tel. 194 Neb. see also Blair risk, capi the investment sufficient attract (1975) (affirming commission N.W.2d for stated in Power tal investment. As directing utility to rates retro- order reduce Light & Co.: service). actively inadequacy of its because utility is rates “A entitled such grant For permit it to the value will earn a it to rate of return induce invest employs which it for the increased property state or in public equal in Utah rather than some other of the convenience risky parent might being time investments its generally made at the same more country statutory general make to subvert scheme part in the same using designed prevent utilities their undertak- investments other business monopoly power exploitive rates ings corresponding to extract which are attended uncertainties; reeog- The Commission but has no con- from consumers. risks and it fixing operating use as a means for rates. ratios 11. Various industries use different.formulae formulas, however, recognize give recognition differences in the economic and com- to con- All industry petitive is not of an conditions cepts of cost. carriers, example, monopoly. natural Motor when, rejecting stay, unabashedly nized as much motion for a was plan, specifically explicit “regulated utility re- that a return” was position West, Inc., jected acceptable that it had insuffi- not to it because U.S. (the parent in equity capi- to invest Utah. In that its source cient incentive of USWC’s connection, ruled, tal), contrary greater the Commission could a on obtain return its return, ruling allowing rate of that to on investments elsewhere. USWC stated: capital” provided the “market cost of The Commission stated it has that will appropriate long-term upon which “an basis allow a reasonable to return be earned on by investment decisions should be made the that, therefore, they these investments and Company”: approach are without risk. an Such fails appears It that the essence this recognize parent to that USWC and its of argument Company that the West, Inc., [USWC’s] is managers capital U.S. as investing discouraged is in activities variety on behalf of investors have a from jurisdictions the and where return is not options to deployment as the use and high jurisdictions as as other or business capital. Among options these are the use opportunities. fact, Company wit- capital projects greater in with a return nesses asserted on the record all the potential regulated utility than a return. Company really higher is a Thus, is return may given that USWC be after fact on its investment. The Commission opportunity regulated utility to earn a finds Company commitment to the myriad return does not obviate the other public provision oppor- service and an potential opportunities. investment tunity to earn the allowed rate return added.) (Emphasis equal to capital, the market cost quite properly rejected The Commission Commission, provides determined this extraordinary argu- impropriety of the appropriate long-term upon basis context, ment in though even it had which decisions be investment should yielded argument to that when it increased Company. made of return denying USWC’s rate to 12.2%. In added.) (Emphasis stay, rejected the Commission USWC’s position respect If the Commission’s argument even suggested that USWC give the effect can profitability to good in failing had not acted to faith make determining alternative investments rate contemplated investments the Commis- stand, of return play were to off USWC could depreciation policies. sion’s accelerated against Utah Public Service Commission Commission stated: regulatory other state commissions. Each While this is statement made the con- commission against would have to bid request stay order, text of a for a of our higher other offer ever rates of to return nonetheless, it seems to reflect induce USWC to invest in that Alter- state. present utility attitude towards invest- natively, require USWC could the Commis- generally. judgment ments In our this grant to equal sion rate of to attitude stands traditional West, riskiest of U.S. Inc.’s investments. apparently Company’s its head. It is yield For Commission to to such threats utility view simply investment is one concept capital is to detach the of the cost of among many opportunities. investment in rate-making any meaningful stan- monopoly While it used be that for subject dard what- leave provider obligation service was exploitive utility might ever rates a be able to now, paramount, in Mr. [USWC’s Fuehr’s leverage compliant from a regulatory com- view, provider play witness] is free mission. another, option against one investment in- Ironically, specifically cluding utility re- investment. The Commis- jected argument point at a put position different sion therefore bid, opinion in its when it motion having literally, against denied USWC’s other non- stay directing order options, imag- Commission’s investment real or ined, modernize its facilities. On its in order to insure invest- unregulated adequacy enterprises that would re- are required ments service jurisdictions quired to meet rates other made. efficiency factors other eost-of-

where are service considerations different. statement further flawed Mr. Fuehr’s by the that it assumes that USWC fact short, ease in this very to financial resources limited access asserting governing stan- correct in utility investments required and the determining the of return on dard in more in- displace profitable much would inducing capital cost is the markets opportunities elsewhere. There vestment USWC, inducing not the cost of to invest record to absolutely no evidence Accordingly, we USWC to invest in Utah. go the financial cannot show that USWC fixing order the hold that the Commission’s capital the at time and obtain markets unlawful, rate of on is return 12.2% highly on favorable terms. desires and we remand this ease the Commission addition, and well- it is an established fixing order a lawful rate of to enter an utility are known fact that investments rel- opinion. this return consistent with safe, atively dependable. low-risk not, however, conclude this is- That does Nonetheless, Mr: would Fuehr’s statement own sue. The Commission’s admissions as require we that these other that assume of return raise the most USWC’s actual rates supposedly more lucrative investments questions serious and fundamental concern- low-risk, dependable. equally safe ing nonperformance of its the Commission’s on establishing the allowed return invest- legal denying In its order USWC’s duties. risk, ment, fully guided consider we stay, made motion for a the Commission Mr. Fuehr parity. need risk-return for rates stunning admission that USWC’s would non-utility fails note that invest- likely approximating produce a rate of return Company may will make offer ments 17%, not the 12.2% fixed the Commission. higher only greater if risk is return as- The Commission stated: sumed. Furthermore, we do not believe argument take into Nor does the USWC allegedly opportuni- loss more lucrative of depreciation which account the accelerated justification stay given for a ties a is Company enjoyed its invest- has on in history overearnings of USWC’s Utah utility past over service ments five years. The past or six Com- over the five depreciation years. was The accelerated nearly annually pany has earned 17% utility investment intended to make new period its investments over that of more the invest- attractive to USWC but very that actual and we doubt much time though made even ments haven’t been signifi- returns in the near will future Company has the in- had of benefit noting cantly lower. It is worth depreciation. creased revenues from years now its rate cases some each for added.) (Emphasis relatively Company projected a has protect- Clearly, the Commission’s task and the its investment dismal significantly ing is more interest above that actual return has well been wholly a a owned difficult when by this Commission. There- authorized giant. unregulated subsidiary of an industrial fore, Company will the likelihood facts, however, need emphasize the Those making a lose revenues rela- substantial scrutiny of which such a closer the extent to op- tively investment in Utah modest legal obligations utility complies its investments posed “pie-in-the-sky” to its appropriate plant, equipment, and provide is minimal. elsewhere required by higher than service at rates added.) (Emphasis cost operations and the market the cost of perplexing indication astonishing and capital. It of sound econom- clear abuse expected to ac- nothing fairness to principles, say ic 17%, tually approximately 40% higher nearly ratepayers, charge earn to seek return, rate of necessary risky, more than the authorized for more rates that would be suggests practices serious breakdown the Com- lation of USWC’s rates and why regulatory mission’s rates. process has been abused troubling is Equally USWC’s record of over- years by company “for some now” that has earnings goes far back in time. The repeatedly “projected a relatively dismal re history unprecedented overearn- investment,” turn on its as the Commission years ings for a indicates an ex- number acknowledged. itself has Whether USWC traordinary abdication the Commission of has, fact, profits collected since the Com statutory duties. The Commission itself Report mission entered its Order this “nearly admitted that USWC has earned approximate return, case that 17% rate of annually on its Utah 17% investments” over so, earnings and if whether the excess should years.12 approxi- past five or six That is ratepayers, be credited to the benefit of mately than 45% more USWC’s authorized presently might us but well before be a many rate return and amounts to tens of matter that will come before the Commission collected millions dollars England on remand. See New Tel. & Tel. of a fair return. Notwithstanding excess FCC, (D.C.Cir.1987) Co. v. F.2d history, apparently the Commission was (holding higher that where earns rate allowing content to continue exorbitant earn- prescribed by of return than regulatory case, ings even after the Order in this as commission, against rule retroactive rate- by indicated its admission that “we [the Com- making requiring does bar order excess very mission] doubt much that actual returns revenues to be in credited cer significantly in near will future lower” circumstances), denied, tain cert. 490 U.S. than the actual “nearly historical returns of 1039, 109 1942, 104 (1989); S.Ct. L.Ed.2d a 17%.” We are at loss to understand how see Corp. also MCI Telecoms. v. Public Serv. the Commission could have fixed a 12.2% Comm’n, 765, (Utah 1992). 840 P.2d expect rate of return and then USWC’s actu- approximate al rate of return to 17% “in the III. THE CONSTITUTIONALITY OF near future.” § ANN. UTAH CODE 54-4-4.1 The record in history this case and the prior proceedings give grave rejected rise to After the concerns USWC’s integrity proposed about the of the regu- regulation Commission’s plan, the Com- years, 1988, a For number USWC has been al- The Commission found in U.S. 12. profits Inc., West, lowed to earn far in excess of its autho- had earned a return on generally rized rate of See return. MCI 14.9%, Telecoms. highest history. company’s Comm'n, Corp.v. Public Serv. Tel., re Mountain States &Tel. docket No. 88- 1992). One in witness this case stated that be- 049-07, 18, Report and Order issued October 1990, tween USWC exceeded the au- 1989, operations 69. Its Utah earned 16.2% by $91 thorized rate of return some million. in Id. The Commission ordered further history regulation of the of USWC's earn- $10,711,000 22, prospective reduction of on June ings replete is constantly with Commission’s 1990, $8,238,000 and another such reduction of ordering rate reductions that were too small to 1, January later, on 1991. Six months the Com rectify persistent overearnings. USWC's As a mission entered its order in the instant case result, consistently produced rates have exorbi- requiring by to reduce revenues future profits. tant In December the Commission $19,799,000, though still another even the Com prospective ordered reduction in USWC's rates mission had increased the rate of return from projection $9 of million based USWC's of the 11.8% 12.2%. effect of the Tax Reform Act of 1986. See id. at Since the Commission has entered a woefully projection inexpli- 768. That was reductions, only total of seven rate two which error, cably especially light of the fact that findings were based of fact. All the rest were other utilities did not err in same manner. by stipulation. done In no case has the Commis- Pursuant Commission few directives months later, explained persistent sion prospectively cause over- USWC reduced its rates an- 22, 1988, earnings. September pro- $16 other Because have million effective rates been reduced basis, spectively $10 then step-by-step an additional on a million effective the Commis- January 1989. Id. at 769. In an order issued possible capture sion has made it for USWC to 18, 1989, 88-049-07, October docket No. profits beyond retain excessive far those prospective Commission ordered another reduc- authorized law. $22 tion USWC's revenues almost million. Id. plan argument is based more on the regulation an incentive mission devised ground party that no before the Court now § 54—4- Code Ann. its own. See Utah plan promul- 4.1(1). argues that the plan the Commission’s USWC vetoed 54-4-4.1(2). gated binding, although lawful and is § Ann. pursuant to Utah Code 54-4-4.1(2) ratepayers affirmatively plan assert that the § ratepayers assert unconstitutional, if is unlawful and would be delegates illegally unconstitutional because support otherwise lawful. USWC does not private judicial power to a legislative and such, plan 54-4-4.1(2) the lawfulness of the as but con- provides: party. Section plans tends that incentive are constitutional days entry of than 60 from the Not later wholly even if detached from cost-of-service adopting a adoption or of a rule an order factors, long as the can veto such a whereby of rate reve- method dissenting plan. opinion Justice Howe’s public utility earnings of a above nues agrees position with that the issue specified equitably shared be- level argues moot because no one that the Com- customers, public utility and its tween the plan mission’s should be in effect. proceed public utility may elect not to regulation by filing with a method of rate However, party the fact on this the commission a notice that it does appeal argues plan should be proceed with the method not intend dispositive. effect is not The Commission regulation. has not confessed error as to the lawfulness plan. only of its USWC’s veto is the reason argues that the constitutional plan the Commission’s is not now effect. 4—4.1(2) ity is a moot of the veto under 54— plan presump- The Commission’s incentive “no kind is now issue because tively if valid and effect its veto USWC powers granted to the Com effect under the legal require- is unlawful and it meets other opinion mission Section 54-4-4.1” and Clearly, ments. the issue of the constitution- constitutionality as to the subsection 4-4.1(2)’s § ality granting power a veto 54— advisory opinion would constitute an which joined private party and ar- to a has been may give. Alpha not Black v. this Court See gued by ratepayers and both the USWC. (Utah 409, 1982); Corp., 410-11 Fin. 656 P.2d not moot.13 The issue is Assocs., v. H.A. Folsom & 646 P.2d Merhish Kallas, 731, 1982); 732 State v. 97 regula promulgating In its incentive (1939). 492, 504, 414, 94 P.2d 424 legisla plan, tion the Commission exercised a factually power delegated Legislature, to it position if were tive Even order, USWC, correct, not, private argument nullifying and in a and it is is not legislative power. The party, exercised a valid. Mootness is not a doctrine forev- adjudication. only of veto legal confers one kind er insulates a issue from Constitution acts, argument, power legislative over and that is the the constitutional- Under power by the Constitution on the ity provision of the veto could never be ad- conferred a balance on regulation plan If an executive branch as check and dressed. incentive legislative power. does not adopted by and a utili- The Constitution were it, power private parties to veto ty validity of the veto confer a did not veto 4.1(2) Nevertheless, § clearly legislative acts. provision could not be raised. On the 54-4— hand, power a purports only not to confer a veto other when an incentive it, quasi-legislative act of the Com plan adopted is and a vetoes as over mission, establishing here, so constitutionality of the statute au- but it does without Thus, governing thorizing clearly a moot issue. standards its exercise. the veto is not authorizing regula- plan provision supported incentive 13. Whether the Commission’s is extent, constitutional, tion, by party appeal on this is irrelevant to the issue and at least to that provi- constitutionality of whether the of the veto plan supports the Commission's as mat- plan Commission’s is at least sion is moot. The presumptively argue general principle. The ter of binding power to lawful and if the 54-4-4.1(1) just vigorously § is unconsti- and if the order meets veto is unconstitutional issue, therefore, presented tutional. The veto Indeed, vigor- legal requirements. other ously argues requisite adversarial context. 4.1(1), that Utah Code Ann. 54-4— 776 did, could, delegated legislative power apparently veto the tional because it pur- private party: for the sole ato

Commission’s interest, advancing its own not the pose of operation contingent law [T]he is not public interest. primarily upon public the determination of cases, has held that In this Court several advantage by proper convenience and ad- constitutionally Legislature cannot dele- authority, primarily but ministrative parties governmental power gate private contingent upon caprice the whim and private further interests that can be used to competitors obviously whose interests contrary public interest. Revne opposed competition. to additional Commission, 155, Trade 113 Utah 192 (1948), 192; held unconstitutional a 427, this Court 211 P.2d at 116 Utah see also authorizing of the barbers in a statute 70% City Lake v. International Salt Ass’n of adopt prices and hours of geographic area to (Utah 1977) 786, Firefighters, 563 P.2d to a operation state board of for submission (legislature may delegate legislative not au governor. appointed barbers thority private group may whose interests delegated power approve board interest); antagonistic public Southern proposed by prices working hours Comm’n, Transp. Pac. v. Public Co. Util. barbers, did not have the but the board 189, 192, Cal.Rptr. Cal.3d 556 P.2d proceeding prices power to initiate a set (1976) (“The Legislature may not holding legislative delega- and hours. upon private persons confer unrestricted au proposals initiate such power tion of the thority to make administrative determina unconstitutional, stated that the Court tions.”). Chadha, generally See I.N.S. v. place given “second interest was 2764, 77 U.S. 103 S.Ct. L.Ed.2d 317 majority profession interest of a 70% (1983)(one Congress house of could not exer 163-64, directly the law.” Id. at affected power cise a veto over an order of an admin explained: 192 P.2d at 567. The Court U.S., agency); istrative Consumers Union of If, then, question as to or whether (D.C.Cir.1982) F.T.C., Inc. v. 691 F.2d 575 locality promul- given shall have such law (congressional power veto over FTC rule modified, or, gated already if rescinded making separation powers violated existence, is left to the whim of this procedure legislative Article I for exercise of group, escape it to is hard conclusion powers), sub nom. Process Gas Con aff'd authority legislative improp- has been Group Energy sumer’s v. Consumer Counsel erly delegated to that or surrendered Am., 1216, 3556, 463 103 77 U.S. S.Ct. class. (1983). 1402, forego L.Ed.2d 1403 For the 164, In concurring Id. at 192 P.2d at 568. a 1.1(2) reasons, ing § we hold 54-4— opinion, Latimer stated that the stat Justice unconstitutional. operation ute “vests and control of the case, In the instant role directly in a group law of individuals who are protect Commission is to the interests of interested the economical features of the 169, 192 (Latimer, J., both the and the shareholders act.” Id. at P.2d at 570 concurring). and to accommodate both those interests to public power the overall interest. The veto Simmons, Union Trust Co. v. 116 Utah granted utility the statute a power to is a (1949), 422, 211 190 is to the same only that can be used to advance the share Trust, regulating effect. In a statute Union interests, regard holders’ without to either prohibited the establishment of branch banks ratepayers’ public interests or the overall approving the bank commissioner from addition, interest. In the statute sets out no compet- establishment of such bank unless guidelines purport that even to limit the utili community ing gave banks the com- ty’s power; delega exercise of the veto missioner written consent to consider the essence, legislative power only tion of application. is not to competing banks private party, wholly power held a veto but it is also without over the bank commission- Revne, Trust, er’s acts. The Court held the law unconstitu- standards. Union Under 54-4^4.1(2) Long § Texas Ass’n Distance Tel. City, we hold uncon- Cos. Lake Salt Comm’n, 875, Public Util. 798 S.W.2d 881-82 stitutional. (Tex.Ct.App.1990); In re Central Vermont however, contends, apart that even USWC 46, 1155, Corp., 144 Pub. Serv. Vt. 473 A.2d right statute it has a constitutional from the (1984). sharing plan. ar- a revenue to veto 54-4^4.1(2) hand, gues sug effect codifies On the other there are cases rate-making and that against gesting constitutionally rule retroactive that the rule is not constitutionally According the rule is based. based. See Elizabethtown Water Co. v. New USWC, Util., sharing plan 440, can be Jersey a revenue Bd. Pub. 107 N.J. (it (1987) only utility voluntarily 354, if a waives its valid purview A.2d is within right prohibit legislature grant constitutional retroactive board of utilities rate-making rate-making oc- general rate-making power); and retroactive retroactive Burke, plan because it Narragansett curs under the Commission’s Elec. Co. v. 505 A.2d (R.I.1986) profits 1147, 1148-49 allow to retain all (public does not utilities com authorized rate of return. statutory authority excess of USWC’s mission had to order re fund of rates earned in excess of authorized essence, argument is that it return; utility rate of did not have vested right to all revenues it constitutional right earnings above authorized rate of collects, they even if exceed the authorized return); In re Central Vermont Pub. Serv. return, excess, large rate of however (1984) Corp., 144 Vt. 473 A.2d even if the Commission’s order or a statute (requiring pay past consumers to deficits of prohibit were to that result in whole or in utility utility previously to refund earned part. profits illegal excess to consumers is unless case, USWC cites no and we are aware of statute).14 authorized none, suggests that holds or that a even right against has a constitutional to retain all hold that the rule retro We earnings rate-making constitutionally in excess of a reasonable rate of active is not Rather, nullify return or that allows a a mandated. that rule is based sharing plan prospectively rate-making policies, revenue al- sound not constitutional nature, earnings. subject lows share excess and is number Indeed, argument solely general exceptions. is based if the limitations dicta, language, usually opin- against rate-making found in rule retroactive were some nature, argues, ions from other courts to the effect that constitutional in devastating general against rate-making application rule retroactive could have financial See, because, constitutionally e.g., consequences based. South for utilities as seen below, charg Tel. Cent. Bell Co. v. Louisiana Pub. Serv. would bar utilities ever Comm’n, (La.1992); ing ratepayers any part overwhelming 594 So.2d Gen- Michigan expenses eral v. Pub. occasioned unforeseeable and Tel. Co. Serv. Comm’n, 528, 874, extraordinary Mich.App. 78 260 N.W.2d circumstances. See MCI Tele Comm’n, (1977); Bowling Corp. v. v. Public 840 876 Straube Green Gas coms. Serv. (Utah 1992). Co., 132, (1950); 765, 666, 227 771-74 360 Mo. S.W.2d 671 1959); (Del.Pub.Serv.Comm'n proposition against 14. The that the rule retroac 137-38 Re Kansas 337, Co., (PUR) Pub.Util.Rep.4th rate-making constitutionally Light tive based is also Power & 8 (Kan. 1975); holding State C.C. Re Detroit Edison inconsistent with number of cases 352-53 Co., 1, (Mich.Pub. (PUR) extraordinary arising Pub.Util.Rep.4th can recover costs 20 34 utilities Co., 1977); Chrisp’s unusually E.g., Narragansett Re Tel. 65 from severe storms. Serv.Comm'n Burke, (PUR) 317, (Neb. (R.I.1980); Pub.Util.Rep.3d Elec. Co. v. A.2d 177 Wis 319-20 State 415 Co., Decade, 1966); Long Comm'n Re Beach Water consin's Envtl. Comm’n, Inc. v. Public Serv. R.R. 682, 495, (N.J.Pub. 205, (PUR) Pub.Util.Rep.3d 98 Wis.2d 298 N.W.2d 212 53 498-99 Co., 1964); City Light Long Lighting (Ct.App.1980); Util.Comm'n Re Island Re Kansas Power & 21, Co., 1, (PUR) (N.Y.Pub.Serv. (PUR) (Mo. Pub.Util.Rep. Pub.Util.Rep.4th 55 4th 38-41 9 35 1986); 1975); Pennsylvania Re Comm'n Pub. Util. Comm’n Pub.Serv.Comm’n see United Illumi Co., Co., (PUR) Pub.Util.Rep.4th nating Pub.Util.Rep.4th Pennsylvania Elec. 25 (Conn.Pub.Util.Comm’n 1974); (PUR) 342, (Penn.Pub.Util.Comm’n Re Diamond 357-58 Co., (PUR) 1978). Pub.Util.Rep.3d Tel. State (Utah 1992), the Court in on the 840 P.2d leading case this state general rule was a sound rate-making is stated that against retroactive rule only applies Regulation rate-making principle, v. Pub but that it Business Department of “ Commission, ‘missteps rate-making process.’ P.2d 420 in the It to lic Service 1986) (the ease), justice apply DBA which held where re- does rate-making adjustments barred for unfore- against quire retroactive be made rule charged rate adjustments to increase rates seen windfalls or disasters not caused balancing “energy by means of an payers utility.” Id. at 772. MCI held that when an policy stated account.” Court in an “extraordi- unforeseeable event results provide “to utilities underlying the rule is nary expenses in or increase or decrease efficiently.” operate revenues,” with some against the rule retroactive rate- was essence of the rule at 420. The Id. making adjustment utility an in does not bar utilities to be that stated extraordinary rates to take into account such adjust permitted overearnings underearnings. then- at 771- generally not or Id. are retroactively compensate for unan earnings expenses or caused rates 72. Because revenues. ticipated reasonably costs or unrealized an unforeseeable event cannot be utility places jus- and the process anticipated rate-making process, both in This rate-making equity may require appropriate at risk that consumers tice and ad- accurately predicted procedures justments have not in extraordi- future rates offset Thus, If underes nary adjust- and revenues. consequences. costs financial or overestimates reve missteps timates its costs to future rates to offset in ments nues, money. By less rate-making process makes inabili- based on the token, utility’s ty if a revenues ex predict expenses the same revenues and accu- if costs are below expectations rately permitted, or ceed are not but utility keeps predictions, the excess. extraordinary and unforeseeable na- [t]he omitted). (citations According at 420-21 Id. expenses recognized ture under rate-making ly, bar on retroactive “[t]he exception differentiates them from ex- exception missteps made the rate- penses inaccurately estimated because of though projections making process,” even misstep rate-making process, such year expenses and revenues for the test inability predict precisely, or as the vary experience. actual Id. at 424. mismanagement. An from' increase or de- adjustments general proposition, aAs expenses crease that is unforeseeable at compensate in future rates to for er- made rate-making proceeding the time of a can- prior rate-making proceedings are rors not, by hypothesis, be taken into account nature, and such ad- deemed retroactive fixing just and reasonable rates. Further- justments generally not consistent with a more, because the increase or decrease pro- statutory regulatory scheme based on extraordinary must have effect Nevertheless, spective rate-making. the ad- utility’s earnings, the increase decrease justment account rates take into necessarily will be outside the normal future technically past is not a retroactive events range projecting variance occurs truth, process set on at all. In the rates are expenses. future Indeed, EBA wholly prospective basis. Id. stated, recognized that fact when it case underestimates are then “Overestimates and parenthetically We note that the ex general at the next taken into account ception to the rule does not relieve investors just proceeding attempt arrive at a they of the inherent investment risks assume Id. at 421. and reasonable future rate.” investing capital. Jersey Power See Cent. FERC, 1168, 1190-91 Light v. F.2d Consistent with the nonconstitutional basis & Co. 810 (D.C.Cir.1987) (Starr, J., Thus, against rate-making, concurring). of the rule retroactive recognized exceptions exceptions against to the rule retroactive this Court has certain guarantee general rate-making do not investors to the rule. MCI Telecommuni- Commission, Corp. against all losses. cations v. Public Service unconstitutional because the two subsec- against rule ret held exception to the Another integrally recognized in Salt tions are related. rate-making was roactive States Congress v. Mountain Lake Citizens relationship Because the nature of the be- Co., P.2d Telephone Telegraph & provisions two is critical to tween the (Utah 1992). There, held Court hand, inquiry at we set out the two subsec- apply if a general rule does not §of 54r-4r-4.1: tions integrity utility’s undermines conduct (1) may, by The commission rule or or- also MCI rate-making process. See der, any adopt regulation method of rate Comm’n, 840 Corp. v. Public Serv. Telecoms. title, including consistent with this a meth- (Utah 1992); England New whereby earnings or of a pub- od revenues FCC, F.2d 1101 v. Tel. & Tel. Co. utility specified equita- lic above a level are denied, (D.C.Cir.1987), cert. 490 U.S. utility bly public shared between (1989). 1942, 104 L.Ed.2d 413 109 S.Ct. its customers. to a constitution- None of our cases alludes (2) days than from the en- Not later against rate- al basis for the rule retroactive try adoption adopt- of an or of a rule order case, con- making. In each the Court was whereby ing of rate method solely applying sound rate-mak- cerned with earnings public of a revenues or principles light of fairness to both ing specified equitably above a level are justi- core ratepayers and shareholders. The public utility and its shared between against retroactive rate- fication for the rule customers, utility may elect not reliability making give degree is to proceed regula- method of rate imprecise inherently predictability to the by filing with the commission a notice tion Advantages process fixing rates. proceed that it does not intend to with the may temporarily inure to the benefit of ei- regulation. method of rate ratepayers or investors because of the ther rate-making pro- inherent inexactitude part of a statute that is Whether long run. ceedings should even out is from the held unconstitutional severable simplifies rate-making pro- The rule also depends legisla remainder of the statute by precluding cess the constant reexamina- intent is not ex tive intent. Where prior rate-making proceedings. To tion of stated, pressly probable a court will infer the extent, provides benefits simi- some the rule relationship legislative intent from the provided by the doctrine of res lar to those remaining provision unconstitutional analogy judicata, although that cannot be by determining wheth sections of the statute pushed too far. sections, alone, standing remaining er the Thus, against retroactive rate- the rule legislative purpose. will further rest is not absolute and does not making general principle was stated Union earnings in right of a constitutional Simmons, 422, 211 116 Utah Trust Co. just and reasonable excess what (1949): P.2d 190 gives ratepayers than a consti- more the rule Severability separability part where right tutional to service at rates that are less unconstitutional, primarily of a statute is just and reasonable. than legislative intent. The test a matter of 54-4-4.1(2) sum, § Ann. Utah Code fundamentally legislature is whether the delegation legislative of a an unconstitutional passed would have the statute without power. objectionable part, or not the and whether dependent upon each other parts are so CODE IV. OF UTAH SEVERABILITY should conclude the inten- that the court 54-4-4.1(1) (2) § AND ANN. only effective tion was that the statute be entirety. Frequently courts are provision in in its Having the veto held (2) unconstitutional, legislative aided the determination subsection 54-4-4.1 a statute of a argument intent the inclusion within ratepayers’ come we now (1) “saving clause.” §of 544H.1 must also be that subsection (citation omitted); confiscatory of in- rates not be shareholder 429, P.2d at 193 Id. at sum, contends that City v. International vestments. USWC Lake also Salt see 786, 791 are no substantive standards that the Firefighters, 563 P.2d there Ass’n of ease, 1977). imposes charged on either rates or there is no sav- statute instant rates of return. ings clause. (1) is severable hold that subsection We question do not reach the We (2). invalidation of sub-

from subsection 54-4-4.1(1) § whether would be constitution (2) necessary legal practical has no section if all substan al it were read to be devoid of (1). of subsection upon operation effect protect ratepayers’ tive standards that would (2) not of subsection does The invalidation view, interests as USWC reads it. In our legislative purpose embodied frustrate the 54r-4r-4.1(l) § cannot so read. be (1) (1). not, there- Subsection subsection 54^4-4.1(1) grants the Section Commission fore, under the doctrine of severabili- invalid authority adopt “any regu- method of rate ty. lation” which is “consistent with” Title 54 of added.) (Emphasis Act. the Public Utilities THE COMMIS- OF V. LAWFULNESS abundantly that all Title 54 makes clear rates PLAN RATE REGULATION SION’S “just of a must be and reason- § ANN. 54-4- UTAH CODE UNDER 54-3-1, 54-4-4, § § able.” Utah Code Ann. 4.1(1) 54^1a-6(4).15 requires § Section 54-8b-ll 54-4-4.1(1) § that ratepayers contend administering Title 54 to provides because is unconstitutional high-quality, endeavor “to make available guiding the standards for Com- substantive just at universal telecommunications service utility’s fixing rates or rate of mission and reasonable rates for all classes of cus- fixing a rate of return is return so 54-8b-3.3(l) tomers,” specifically pro- § subject only discretion of to the unbounded for “cost-based” vides least alternative, In the the Commission. respect aspects to certain of telecommunica- argue that the Commission must tions service: to avoid apply standards cost-of-service (1) section, As used in this “cost-based” return that are adopting tariffs or rates of prices means that the for the telecommuni- ratepayers. exploitive as to the cations services shall be established after particular method asserts that no taking pro- into consideration the cost of required long rate-making is or formula of viding the service. The term “cost-based” pursuant proce- as rates are established prevent does not the establishment of process requirements dural and are due prices promote that availabil- the universal confiscatory interests. shareholder ity of service in the state. ratepayers’ argues that interests Thus, “just term rates” and reasonable provision, protected need not under that 54, particularly as used in Title as used charged not be except should 54-8b-ll, §in has reference to “cost-based” exploitive does not define the rates. USWC rates, meaning all rates sufficient to cover Thus, sees “exploitive term rates.” necessary operation costs of and the cost of the rates it could no effective limitation on capital. argument the Com charge provision. under that USWC asserts setting mission has unfettered discretion Hope Power Commission Federal except confiscatory rates rates Co., Natural 320 U.S. 64 S.Ct. Gas ignores statutory language. (1944), Light 88 L.Ed. 333 and Utah Power & Commission, legality We turn now to the of the Co. v. Public Service (1944), require only plan promulgated by the under 152 P.2d 542 guide ... 15. To Public Utilities in its vice at the lowest cost consistent with other the Division of activities, Legislature provided that the term provisions” apportionment and a "fair reasonable, include, "just, adequate" should among categories of service customer total cost criteria, to, in- but not be limited a number 54-4a-6(4)(c), (d). and individual customers.” cluding provision "adequate levels of ser- plan justified be 54-4^4.1(1). no Nor can Commission’s made The Commission ratepayers it ground that enables on break- percentage findings support in earnings. in excess share some USWC’s sharing of reve- determine downs that extraordinary de- the Commission’s Given ratepayers. utility and the nues between earnings fault in the of USWC’s begins at a rate of return sharing Revenue years, might that well seem a past over erroneously 12.2%, the rate the Commission objective, hardly it is a ratio- but desirable on just reasonable based to be and found institutionalizing legalizing exor- for and nale plan, standards. Under cost-of-serviee possible justify if Even it is bitant rates. overearnings be- 20% of all retains sharing earnings in excess of an autho- 13.2%; 40% of all overearn- 12.2% and tween necessary rate of return because of a rized 14.2%; and 50% ings between 13.2% rate-fixing lag procedures, and inevitable and 17%. overearnings between 14.2% all justifiable certainly not for a it is to be re- of 17% were Earnings excess increasingly larger earnings in retain excess Thus, ratepayers. notwith- turned above the authorized rate of re- percentages rate of return standing the 12.2% authorized Finally, the equity. turn on Commission’s Commission, in- has an fixed that another rate- plan effect assumes of return. up to a 17% rate centive to earn place un- making proceeding need not take 17%, until earns in excess of less and for a is defective The order Commission’s neglect regulatory for and ex- prescription First, it was entered of reasons. number ploitive rates. hearing any party without notice Second, plan plan. the merits reasons, For all the above the Commis- principles essentially forsakes eost-of-service arbitrary, capricious, sion’s required by Title 54 of the Public Utilities unlawful. begins at sharing of revenue Code. 12.2%, earnings over and above but all ATTORNEY FEES VI. can retain are neces- percentage that USWC argue they are justified sarily they are not excessive because attorney contends fees. USWC entitled principle. Nor can by any cost-of-service attorney fees should not be that the issue of they justified ground that they be on the it was not by this Court because addressed for USWC invest provide an “incentive” that, the Commission presented to point has been discussed That Utah. event, awarding attorney there is no basis fact, to earn length the incentive above. fees. easily, or profits can be achieved as higher such as cut- easily, false economies more procedural first the We address reducing expenses, custom- ting maintenance raised USWC—that issue services, necessary deferring invest- er be issue before this Court cannot raise the score, emphatically note we ments. On to the Commis presented cause was ac- has allowed USWC may that the Commission that an issue general rule is sion. The depreciation rates to induce USWC appellate celerated court that presented to an not be not made and USWC has tribunal. presented to invest Utah to a lower was not first Unjustifia- are, however, contemplated.16 exceptions to rule. the investments There that an issue need not depreciation exception rates translate accelerated One such ble agency if it presented to an administrative unjustifiable charges against ratepayers into the issue. See John- properly cannot decide shareholders. inure to the benefit of the Company though had the denying USWC’s motion for even In its order benefit of granted depreciation. stay, noted that it had the Commission revenues the increased past depreciation added.) knowing way "over the (Emphasis USWC accelerated There is connection, years.” In that depre- five the accelerated this record how much stated: failure to invest funds and USWC's ciation rates depreciation was intended thereby to USWC’s The accelerated generated have contributed attractive to investment more make new overearnings. extraordinary been made the investments haven't USWC but 782 Office, power equitable 621 P.2d inherent to award reason-

son v. Utah State Retirement (Utah 1980); Tanner, 1234, attorney In re able when it appropri- 1237 549 fees deems it (Utah 1976); justice equity. see also Kenneth C. ate in In P.2d 703 the interest Text, 20.07, Cole, 1, Davis, 5, 1943, Law at Hall v. 412 Administrative U.S. 93 S.Ct. (1972). 1946, (1973), 391 36 L.Ed.2d 702 the United Supreme States stated: Court law, state of the Given current attorney power award Commission lacked Indeed, power to “is award such fees addition, plaintiffs. plain- fees to In because part original authority of the chan- single a prevail tiffs did not issue before particular cellor to do a situa- Commission, application attorney an for Bank, tion,” Sprague v. Ticonic National futile, wholly fees would have even if been 166, [780], 161, 307 59 U.S. S.Ct. 777 83 authority statutory there to award were such (1939), and L.Ed. 1184 federal courts do short, pow- fees. In had no equi- not hesitate to this exercise inherent awarding plaintiffs er or factual for basis power “overriding table whenever consid- attorney Accordingly, fees. we hold that we the need erations indicate for such a recov- considering plaintiffs’ are not barred from ery.” they attorney contention that are entitled to have that inher Courts exercised they fees fact that virtue of the did not power categories ent in several of cases. raise the issue the Commission. before faith, party One is acts “in when a bad We now address the merits of the vexatiously, wantonly, oppressive or for rea Utah, general rule in claim. The and the al., sons.” James W. Moore et Fed Moore’s rule, subject traditional American to certain ¶ (2d 1972). eral Practice 54.77 ed. In addi exceptions, attorney is that fees cannot be tion, attorney an award of fees is common prevailing party a recovered a unless nonparty class action eases when mem class statute or contract authorizes such an financially bers are benefitted as a result Cole, 1, 4, award.17 412 Hall v. U.S. 93 S.Ct. litigants successfully the efforts of a few who 1943, 1945, (1973); see, e.g., 36 702 L.Ed.2d a create fund that benefits the entire class. Burton, 1188, Baldwin v. 850 P.2d 1198 Co., 375, Mills v. Electric Auto-Lite 396 U.S. (Utah 1993); Bracken, Dixie State Bank v. 393-94, 616, 626-27, 90 24 593 S.Ct. L.Ed.2d (Utah 985, 1988); 764 P.2d 988 Turtle Man Bruno, (1970); 911, Weiss v. 83 523 Wash.2d Inc., agement, Haggis Management, Inc. v. (en (1974) banc). 915, example, P.2d 916 For (Utah 667, 1982); 645 P.2d 671 see also Go State, 734, in Plumb v. 809 P.2d 739-40 Leeuwen, Copier vert v. Painting Van 801 (Utah 1990), attorney fees were awarded 163, P.2d Ct.App.1990). 173 plaintiffs against named in class action However, monetary in the absence of a state for a statu award that benefitted tory authorization, or contractual a court has the entire class.18 Courts also have exer- prior Notwithstanding equity.... 17. dictum in court of This cases doctrine likewise has attorney only fees applicability are awardable if there is a instant case. award, (Citation omitted.) basis in for contract or statute such an we attorney unaware of case that holds that expression equitable 18. Another of the inherent may equi- fees never be under a awarded court's power attorney recog of a court to award fees is Note, powers. Sager, Attorney table See Kellie litigation plaintiff's nized when a sub Utah, confers "a 553, Fees in L.Rev. 1984 Utah stantial benefit on the members of an ascertain Management, Haggis Management, Turtle Inc. Hall, 5, able class.” 412 U.S. at at Inc., 93 S.Ct. 667, (Utah 1982), n. 1 645 671 1946; Co., v. Electric see also Mills Auto-Lite 396 Court stated: 375, 616, (1970); U.S. 24 90 S.Ct. L.Ed.2d 593 attorney's There is an basis additional fees Priest, 315, Cal.Rptr. Serrano v. Cal.3d cases, special in some known as the "common (1977). Hall, 569 P.2d doctrine, "equitable fund" or fund” which has Court stated: cases, upon never been commented in the Utah presumably inapplicable. exception origins it was because Un- This in the "common doctrine, cases, attorney traditionally der this fee of whose fund” which have awarded create, increase, preserve attorneys' plaintiff services property or a fund fees to successful when may representative others also his action which have a creates or traces fund,” may paid claim therefrom order of a "common economic benefit of attorney exception against the rule retroactive rate- power to award the inherent cised attorney beneficiary making, plaintiffs’ sues a trustee for award of fees fees when recovery Mills, of the trust and obtains violation come out of that fund. should rights whose were 393-94, 626-27; for all other beneficiaries see U.S. at S.Ct. re Estate by the trustee. In also violated Plumb, P.2d at 739-40. 809 184, McCart, (Colo.Ct.App. 187 847 P.2d alternative, In if no such fund is creat- 1993) (Feb. 22, (unpub 1992), cert. denied ed, attorney general private find that the we Kirbie, P.2d v. 793 opinion); Robinson lished applicable exception to the American rule 315, Fred Hutchin (Okla.Ct.App.1990); 319 to this case and that USWC should be or- Holman, v. 107 Research son Cancer pay As set out dered to those fees.19 974, (1987); 693, Al 732 P.2d 987 Wash.2d throughout opinion, plaintiffs this have suc- Bank, 394, Nat’l 99 Wash.2d lard v. Pacific cessfully important public poli- an vindicated (1983). 104, also have P.2d 112 Courts 663 cy benefitting ratepayers all of the attorney party “pri as a fees to awarded Plaintiffs, ratepayers a handful of act- “vindication state. attorney general” when the vate own, USWC, societally important public entirely took on strong ing or on their of a necessary Commission, place and the costs policy” takes and the Division Public Service plaintiffs the individual doing so “transcend succeeded in of Public Utilities and have requiring to an extent pecuniary interest set having the Commission’s rate Priest, v. 20 Cal.3d Serrano 54-4-4.1(2) subsidization.” unlawful, section de- aside as 326, 1303, 315, 25, Cal.Rptr. 569 P.2d 141 unconstitutional, clared Commis- (1977). 1314 It “incentive” held invalid. sion’s of Consumer significant that the Committee present case. now turn to the We Services, by charged which statute is plaintiffs in this no doubt that the There is representing consumer responsibility benefits on ease have conferred substantial interests, appearance made no at all this ratepayers. on the authori all Based appeal and that the Commission Division above, we conclude ties discussed opposed ratepay- of Public have Utilities attorney us warrant an award facts before by on all issues. The results achieved ers court’s plaintiffs’ counsel under this fees to necessarily benefit all ratepayers will remand, powers. On equitable inherent espe- in the state of Utah the USWC is directed to determine Commission rates, cially irrespective of reasonably expended as to future of time amount might attorneys past overcharges issues before the plaintiffs’ on the whether a refund of upon plain Here, appeal which ultimately Commission and be ordered. making In this determi prevailed.

tiffs have that is under a rate of return collected rates nation, guided the Commission should be authorized the Commis- unlawful and was attorney making fee prior our decisions on regulation” order unlawful “incentive sion’s Cottrell, P.2d E.g., v. awards. Cabrera in excess of a reasonable to retain revenues 1985). 622, 624-25 action, plaintiffs’ all return. But for rate of unchallenged, none been that would have finds, after To the extent Commission ratepayers would have had ever today’s ruling of the effects consideration fund, any of a common it, relief. the absence proceeding before that USWC on the rate circumstances, appro- it is these overcharges pursuant to an and under disgorge must nonpecuniary pecuniary of a of the class. stantial benefit' which is shared all members 321, 1309; See, e.g., Banking Cal.Rptr. Railroad & Co. at 569 P.2d at Central nature." 141 116, 387, Pettus, 911, Bruno, 5 S.Ct. 28 L.Ed. 915 113 U.S. Wash.2d Weiss v. see also (1885); Greenough, 105 U.S. banc). Trustees v. (1974) (en (1881). 26 L.Ed. 1157 n. 7. As the at 6 n. 93 S.Ct. at 1947 412 U.S. general holding private attorney Serrano, Supreme Court stated in California here, exceptional applies we note the doctrine exception "may be viewed as substantial benefit We note that of this case. further nature doctrine, outgrowth of the ‘common fund’ attorney under this doctrine award of fees future litigant, permits when the the award of fees [and] extraordinary equally case. take an will representative capacity, proceeding obtains resulting a ‘sub- in the conferral of a decision rights shareholders of cial priate require the relief cannot affect plaintiffs’ litigants, attor- the case is moot and a court pay cost of reasonable will Serrano, 326, normally adjudicating refrain from it on ney Cal.Rptr. fees. See merits.” here. This is the case No incentive at 1314. 569 P.2d plans

rate were left on table after USWC plan. vetoed the Commission’s incentive rate VII. CONCLUSION then ordered the traditional reasons, foregoing we hold For the regulation, method of which the return on is unlaw- the 12.2% rate of consistently regarded have as desirable and 5444.1(2) ful, § Ann. that Utah Code Thus, ratepayers’ lawful. interest unconstitutional, Ann. Utah Code 54- maintaining traditional 4.1(1) incorporates cost-of-service criteria 4— realized, declaring USWC has been and sec- types plans on the of incentive as a limitation 5444.1(2) tion unconstitutional will not af- Commission, may adopted and Sims, fect that interest. See State v. 881 regulation the Commission’s (Utah 1994) (holding P.2d 840 case moot plan in this case is invalid. We also hold that ruling question where on constitutional would attorney plaintiffs are entitled to fees. We legal parties). have effect on the pro- remand to the Commission for further majority ceedings. concludes that if this case is moot, constitutionality held to be of the C.J., DURHAM, J., ZIMMERMAN, and provision escape veto presumably will review concur. always operate because the veto will to elimi- plan nate the authority authored under the HOWE, Justice, concurring in the result However, section 5444.1. the absence of part dissenting part: and plan such a is not the reason this case is parts I concur in I and II of the result of moot. It party moot because no However, majority opinion. because the sought plan to have the vetoed reinstated. constitutionality issue of the utili- Obviously, objects plan USWC to the be- ty’s power veto Ann. under Utah Code 54- cause it vetoed it. The Commission has not 4-4.1(2) justiciable, respectfully I is not dis- veto, appealed that and have III, IV, parts sent and I as to V. also consistently opposed regula- incentive rate part dissent because as VI there is no general. By declaring tion in power the veto authorizing attorney statute the award of unconstitutional, majority revitalizes the part fees and because a substantial of the vetoed plan incentive rate formu- ratepayers’ attorneys time and effort of the Commission, lated party result no issues, spent pursuing has been moot this case seeks. explained opinion. in this parties uniformly opposed With the case, proposed an instant 5444.1(2) legal declaring effect of section regulation plan incentive rate which the Pub- unconstitutional, majority’s opinion rejected. lic Service Commission Pursuant nothing amounts to advisory more than an 5444.1(1), to section the Commission then opinion. See Merhish v. H.A. Folsom & plan, formulated its own incentive rate but Assocs., (Utah 1982) 731, 646 P.2d 732 proceed” with that “electfed] (recognizing strong judicial policy against 5444.1(2). plan. §Ann. Utah Code giving advisory opinions). We should wait to ratepayers argue power that this veto constitutionality decide the of section 544- delegation legislative unconstitutional 4.1(2) parties until or one more favor the judicial power private party. to a plan argue vetoed for its reinstatement. counters that’the issue is moot “no because ruling constitutionality Then a on the of the plan kind is now effect under the power veto will affect the interests powers granted to the Commission Sec- then, litigants. province Until it is not the tion 5444.1.” power this court “to exercise the delicate Morris, (Utah 43, In Duran pronouncing v. 635 P.2d a statute unconstitutional in ab- 1981), stract, requested judi- we held that hypothetical, “[i]f the or moot otherwise cases” However, Hoyle v. context. constitu- “[a] now before us. adversarial such as the one 1980).1 (Utah Monson, question merely tional does not arise because 606 P.2d sought and a it is raised decision is thereon.” Furthermore, not have do Hoyle, question P.2d at 242. The must challenge the The con standing to statute. justiciable. also be In the recent case of stitutionality be attacked of a statute cannot (Utah Sims, 1994), v. State P.2d 840 we been, “by parties have not whose interests question constitutionality of the held be, prejudiced by the are not about of a roadblock under the Utah Constitution Id.; operation statute.” see also Ca parties though was moot even both had Cox, vaness 598 P.2d 351-52 v. argued sought question briefed and 1979) party may challenge con (holding that any opin- opinion. our We declined because only being it is stitutionality of statute when par- no legal ion “would have effect on the applied to disad or is to be his or her about ties.” Id. at 842. Smith, vantage); 571 P.2d Sims (Utah 1977) may (holding party that before By declaring power in section 54- veto statute, constitutionality attack he she (2) unconstitutional, majority 4—4.1 adversely very stat must be affected breathes life into the Commission’s incentive ute). quickly proceeds but then to shoot plan finding down it unlawful. This ratepayers’ preju- interests were not contradictory course is unwarranted. The 54^4-4.1(2). operation diced section 54-4-4.1(2) constitutionality pre- of section as Rather, way for the USWC’s veto cleared nonjusticiable ques- in this case is a sented reg- Commission to order traditional being case, unnecessary tion. That it is they explained ulation which seek. As we severability to decide the of section 54-4- (Utah Jackson, McRae 1190 v. P.2d 4.1(1) or the lawfulness of the Commission’s 1974), courts, appellate function of like “The plan incentive rate under that section. opin- generally, give that of is not to courts merely mat- ions on abstract theoretical

ters, only but to decide actual controversies HALL, J., arguments heard but affecting rights party injuriously some opinion. before he could act on the retired add- litigation.” (emphasis to the Id. ed) Error (quoting Appeal 5 Am.Jur.2d (1962)); Reynolds,

§ 761 also 788 P.2d at see 54-4^4.1(2)

1045. did not Because section

operate disadvantage, to their challenge standing

lack its constitutionali-

ty. majority

Finally, that USWC notes “vigorously argues that Ann. Utah Code 54-4-4.1(1), authorizing in- provision regulation, is centive rate constitutional” “ratepayers argue just vigorously contrary.”2 ques- to the It then reaches presented requisite tion because it “is exceptions moot 1. The doctrine do not ued to exist "after issue has become mootness Sims, excep Reynolds, apply. (listing litigants.” P.2d at 881 P.2d at 842 See doctrine) (citing Reynolds veto of the incentive rate tions Commission's to mootness ratepayers' Reynolds, Ct.App. advanced the interest main- 1045-46 1990)). taining regulation, party and no explained, capable repeti traditional rate while As tion, plan. argues escape for reinstatement of "likely [to] the instant case is not Fisher, judicial review.” Wickham v. 629 P.2d (Utah 1981). Likewise, argues question “irreparable 2. USWC the constitutional alternative, injury” stating argu- that its constitutional will result if the case is not decided J.P., only immediately, Court declines to re ments "are relevant if the 648 P.2d (Utah 1982), controversy contin- that those issues are moot.” and the has not rule

Case Details

Case Name: Stewart v. Utah Public Service Commission

Court Name: Utah Supreme Court

Date Published: Jul 29, 1994

Citation: 885 P.2d 759

Docket Number: 910405

Court Abbreviation: Utah