TIME WARNER AXS, APPELLANT, v. PUBLIC UTILITIES COMMISSION OF OHIO, APPELLEE. AT&T COMMUNICATIONS OF OHIO, INC., APPELLANT, v. PUBLIC UTILITIES COMMISSION OF OHIO, APPELLEE. MCI TELECOMMUNICATIONS CORPORATION, APPELLANT, v. PUBLIC UTILITIES COMMISSION OF OHIO, APPELLEE.
Nos. 95-587, 95-588 and 95-589
SUPREME COURT OF OHIO
March 5, 1996
75 Ohio St.3d 229 | 1996-Ohio-224
MOYER, C.J.
Submitted December 13, 1995
[Cite as Time Warner AxS v. Pub. Util. Comm., 1996-Ohio-224.]
Publiс Utilities Commission—Telecommunications—Alternative regulation—Commission exceeded scope of its statutory authority when it used alternative rate-setting methods to establish telecommunications company‘s basic local exchange service rates—Increasing single tariff does not trigger application of
APPEALS from the consolidated order of the Public Utilities Commission of Ohio, Nos. 93-487-TP-ALT and 93-576-TP-CSS.
{¶ 1} These appeals involve the consolidated order by the Public Utilities Commission of Ohio (“commission“) adopting a stipulation resolving an Ameritech Ohio (“Ameritech“)1 application for an alternative form of regulation under
{¶ 2} Ameritech is an Ohio corporation engaged in the business of providing telecommunications service within Ohio, and is subject to the commission‘s control and jurisdiction. Ameritech‘s service territory comprises approximately twenty-five percent of the state of Ohio, including the metropolitan areas of Akron, Columbus, Cleveland, Dayton, Toledo, and Youngstown, and provides local exchange services for nearly 3.5 million access lines through its 192 exchanges. This represents about sixty percent of all access lines in Ohio. Approximately eighty percent of Ameritech‘s revenues are derived from its provision of monopoly local exchange services. Ameritech‘s rates were last reviewed by the commission in 1985.
{¶ 3} On March 23, 1993, Ameritech docketed notice of its intent to file an application for an alternative form of regulation under
{¶ 4} On June 30, 1993, Ameritech filed its aрplication for an alternative form of regulation. Attached to the application was a proposed plan for alternative regulation, which included a basic local exchange service and total jurisdictional revenue reduction of $14.3 million. On September 2, 1993, the commission accepted Ameritech‘s application for filing as of June 30. In this same entry, the commission found that OCC‘s complaint set forth reasonable grounds for a complaint under
{¶ 5} On Mаrch 25, 1994, the commission‘s staff issued its Report of Investigation of Ameritech‘s plan (“Staff Report“). The Staff Report recommended a reduction in Ameritech‘s total jurisdictional revenues of $125.88 million to
{¶ 6} Eighty-one witnesses testified over a period of forty-five days between June 22 and September 13, 1994. The consolidated hearings concluded on September 13, 1994.
{¶ 7} On September 20, 1994, a partial stipulation was filed by Ameritech, the commission staff, OCC, American Association of Retired Persons (“AARP“), Edgemont Neighborhood Coalition (“Edgemont“), city of Columbus, city of Cleveland, city of Toledo, Greater Cleveland Welfare Rights Organization (“GCWRO“), Consumers’ League of Ohio, Western Reserve Alliance, Committee for Fair Utility Rates, Ohio Department of Administrative Services (“DAS“), Ohio Department of Education (“DOE“), Ohio Library Council (“OLC“), and Bell Communications Research, Inc.
{¶ 8} The stipulation resolved both cases and adopted the alternative regulation plan that phased in an $84.4 million reduction in Ameritech‘s basic local exchange service rates and total jurisdictional revenues (the actual reduction is $92.3 million, less an in-place toll service reduction of $7.9 million) over the term of the six-year plan. The reductions were phased in as follows: $37.8 million, year one; $11.9 million, year two; $11.2 million, year three; $8.6 million, year four; $7.5 million, year five; and, $7.4 million, year six. The phased-in revenue reduction is the same as a one-time reduction of $60.6 million. The revenue reductions are allocated among the residence (65.5 percent), nonresidence (25 percent), and carrier access (9.5 percent) customer classes. Thirteen local public hearings were held in various locations around the state between September 20 and October 12, 1994.
{¶ 10} Hearings reconvened on October 17, 1994, to consider the reasonableness of the stipulation. Ameritech witnesses Hollinger and McKenzie and OCC witness Rosselet supported the stipulation. AT&T witness Baumol, ONA witness Hatfield, Time Warner witness Selwyn, Sprint witness Sievers, and OPCA witness Meister opposed the stipulation, focusing upon the revenue reduction distribution and the plan‘s failure to address various competition issues.
{¶ 11} On November 23, 1994, the commission issued its opinion аnd order approving the stipulation. However, the commission reserved the right to revisit, during the term of the plan, several aspects of the plan and also changed or clarified other portions of the stipulation and plan. On rehearing, the commission found all of the allegations of error to be without merit.
{¶ 12} Timely appeals were then brought to the court by Time Warner, AT&T, and MCI.
Emens, Kegler, Brown, Hill & Ritter, Samuel C. Randazzo, Richard P. Rosenberry and Denise C. Clayton, for appellant Time Warner AxS.
Vorys, Sater, Seymour & Pease, Sandra J. Anderson and Benita Kahn; and Larry Salustro, for appellant AT&T Communications of Ohio, Inc.
Betty D. Montgomery, Attorney General, Duane W. Luckey, Ann E. Henkener, Thomas W. McNamee and Steven T. Nourse, Assistant Attorneys General, for appellee, Public Utilities Commission of Ohio.
Calfee, Halter & Griswold, Kevin M. Sullivan and Mark I. Wallach; Michael T. Mulcahy and Jon F. Kelly, for intervening appellee Ameritech Ohio.
Robert S. Tongren, Consumers’ Counsel, Barry Cohen, David C. Bergmann, Andrea M. Kelsey and Richard W. Pace, for intervening appellee Office of Consumers’ Counsel.
Bruce J. Weston, for intervening appellee American Association of Retired Persons.
William M. Ondrey Gruber, Chief Assistant Director of Law, for intervening appellee city of Cleveland.
Crabbe, Brown, Jones, Potts & Schmidt and Gregory J. Dunn, for intervening appellee City of Columbus.
Kerry Bruce, for intervening appellee city of Toledo.
Ellis Jacobs, for intervening appellee Edgemont Neighborhood Coalition.
Joseph P. Meissner, fоr intervening appellees Greater Cleveland Welfare Rights Organization, Consumers’ League of Ohio and Western Reserve Alliance.
MOYER, C.J.
{¶ 13} Appellants propound a total of six propositions of law arguing that the commission abused its discretion when it adopted the partial stipulation and proposed alternative regulation plan. Each party also briefed the issue that we raised sua sponte: whether the commission exceeded its statutory authority
{¶ 14} We will reverse an order of the Public Utilities Commission only if we find the order to be unlawful or unreasonable.
{¶ 15} The jurisdictional issue presented by this appeal invokes our authority to review questions of law. MCI Telecommunications Corp. at 268, 527 N.E.2d at 780; Indus. Energy Consumers of Ohio Power Co. v. Pub. Util. Comm. (1994), 68 Ohio St.3d 559, 563, 629 N.E.2d 423, 426. The determination of whether the commission deviated from the proper standard when applying
{¶ 16} The commission, as a creature of statute, may exercise only that jurisdiction conferred upon it by statute. Canton Storage & Transfer Co., 72 Ohio St.3d. at 5, 647 N.E.2d at 141; Columbus S. Power Co. v. Pub. Util. Comm. (1993), 67 Ohio St.3d 535, 537, 620 N.E.2d 835, 838. The commission‘s authority to use non-traditional rate-setting methods is set forth in
{¶ 17} Prior to 1989, the commission set all telephone utility rates pursuant to the statutory criteria in
{¶ 18} During the late 1970s and early 1980s, increasing competitive pressures and technological advances dramatically changed the telephone industry. We recognized these changes as early as 1982:
“What is clear is that the radical transformation of the formerly monopolistic, regulated telecommunications market is proceeding apace and that this transformаtion is of such magnitude as to require a thorough reexamination of these regulatory practices and procedures which have become inapplicable or obsolescent in the face of non-monopolistic market conditions.” Armco, Inc. v. Pub. Util. Comm. (1982), 69 Ohio St.2d 401, 411, 23 O.O.3d 361, 368, 433 N.E.2d 923, 929.
{¶ 19} On June 23, 1987, H.B. No. 563 was introduced to accommodate the technological evolution in the industry. H.B. No. 563 (as introduced); Accord Darr, Deregulation of Telephone Services in Ohio, 24 Akron. U. Law Rev. (1990) 294-295. H. B. No. 563 sought to deregulate the telephone industry, including removal of limitations on market entry and commission control and regulation of rates. Legislative Services Analysis of H.B. No. 563 (as introduced) at 3-4, 6. However, after the initial hearings, H.B. No. 563 stalled for approximately a year. Deregulation of Telephone Services in Ohio, supra, at 296.
{¶ 20} Then, in late 1988, the commission‘s chairman provided a substitute bill to the House Public Utilities Committee. Sub. H.B. No. 563, 117th General Assembly, 2d Session (1988). This version of the bill was much less expansive than its predecessor. Although Sub. H.B. No. 563 permitted deregulation for competitive services, it retained the existing monopoly franchises and drastically limited the deregulation of rates in the local monopoly markets to rate increases
{¶ 21} Under
“In considering an application pursuant to sections
4909.18 and4909.19 of the Revised Code for an increase in rates and charges for basic local exchange service * * *, the commission, upon its own initiative or the request of the applicant, may establish rates and charges for the service by a method other than that specified in section4909.15 of the Revised Code, provided the commission finds the use of the alternative method of establishing rates and charges to be in the public interest and provided, in instances where the alternative method is proposed by the commission, the applicant consents. * * *” (Emphasis added.)
{¶ 22} Thus, the commission may use alternative rate-setting methods to set rates for basic local exchange services when the commission is reviewing an application that (1) is filed pursuant to
{¶ 23} Ameritech argues that it filed its application pursuant to
{¶ 24} The commission asserts that Ameritech‘s application was filed pursuant to
{¶ 25} We next consider the question of whether Ameritech‘s application sought to increase Ameritech‘s basic local exchange rates. Ameritech and the intervening consumer appellees initially argue that
{¶ 26} “‘Where the language [of a statute] * * * clearly expresses the legislative intent, the court need look no further[,]‘” because “at that point the interpretive effort is at an end, and the statute must be applied accordingly.” Provident Bank v. Wood (1973), 36 Ohio St.2d 101, 105-106, 65 O.O.2d 296, 298, 304 N.E.2d 378, 381. Accord Wachendorf v. Shaver (1948), 149 Ohio St. 231, 36 O.O. 554, 78 N.E.2d 370, paragraph five of the syllabus. The commission was permitted to use alternative rate-making methods to set rates for basic local exchange services only when considering an application “for an increase in the
{¶ 27} Appellees also assert that Ameritech‘s application sought to increase basic local exchange service rates because it includes one basic local exchange service tariff that immediately increases (Centrex installation costs for some new customers) and a few other tariffs (residential flat rate service and residential network access service after a three year freeze) that may increase sometime in the future.
{¶ 28} Ameritech contends that there is a conceptual distinction between increasing rates and increasing revenues. Ameritech argues that an application including a single tariff increase constitutes an application for a rate increase, even though the company‘s revenues for basis local exchange service go down. We disagree. We understand the relationship and correlation between rates and revenues, and find that in the context of
{¶ 29} Centrex installation rates for new customers could increase under the new rate structure, depending upon how many station lines were installed at one time.4 However, the remaining basic local exchange tariffs were frozen or decreased by $14.3 million. Thus, the question becomes whether a nominal increase in one basic local exchange tariff, alone, can trigger application of R.C.
{¶ 30} Under
{¶ 31} Under this analysis, increasing a single basic local exchange tariff may not constitute аn overall increase in the rates and charges for the basic local exchange service. Had the General Assembly intended the commission‘s authority under this section to be triggered by a single tariff rate increase, irrespective of its effect on the service as a whole, the General Assembly would have used similar language to that found in
{¶ 32} Were we to conclude that
{¶ 33} Although one basic local exchange service tariff increased immediately in this case, the rates and charges for the basic local еxchange service as a whole decreased by approximately $14 million. Under these facts, we find that Ameritech‘s application did not constitute an application for an increase in basic local exchange service rates as required by
{¶ 34} Ameritech argues that it could have reduced rates without a hearing under
{¶ 35} True, Ameritech could, with commission approval, reduce its rates without a hearing under
{¶ 36} The commission argues that the proposed price cap mechanism is analogous to a flexible rate tariff under
{¶ 37} In Armco, Ohio Bell Telephone Company sought commission approval of a flexible pricing tariff for its non-monopoly equipment tariff, so that the tariff prices could rapidly change to accommodate competitive pricing pressures. Id. at 401-404, 433 N.E.2d at 924-925. The commission approved the request and established a flexible rate tariff, with both a minimum and a maximum rate, under
{¶ 38} We found that ”
{¶ 39} Here, the plan proposed no maximum rate for the price cap formula. The price cap automatically moves with the various indexed factors that comprised its formula. Thus, rates under the proposed price cap could increase every year the plan was in effect if the formula so permitted. Moreover, the equipment tariff rates in Armco were competitive in nature. 69 Ohio St.2d at 408-409, 433 N.E.2d at 928. Here, the price cap purports to apply to basic local exchange services, which are decidedly not competitive. Further, under
{¶ 40} The commission‘s failure to make this essential finding is understandable in light of its apparent misinterpretation of
{¶ 41} It follows that, Ameritech‘s application did not trigger the commission‘s use of alternative rate treatment under
{¶ 42} Although the commission‘s order may be grounded in sound public policy and furthers the commission‘s recent attempts to foster free and open competition in Ohio, it is beyond the scope of the commission‘s statutory authority. The General Assembly, not the commission, must make changes in the regulatory scheme to permit the use of alternative rate setting methods for basic local exchange service in cases not involving a rate increase. Thus, only the General Assembly makes policy decisions based upon the concept of free competition. See, e.g., Canton Storage & Transfer Co., supra, 72 Ohio St.3d at 5, 647 N.E.2d at 141. If basic local exchange service in Ohio is to become freely competitive, the General Assembly must effect that change. Absent that change in the statutory framework, the commission is constrained, as we аre, to apply the existing statutory framework to all applications for an alternative form of regulation. Accordingly, the commission erred when it attempted to bypass the General Assembly and use alternative regulation in setting basic local exchange service rates for Ameritech in a case not requesting an increase in basic local exchange service rates.
{¶ 43} For the reasons set forth above, we find that the commission exceeded the scope of its statutory authority when it adopted the partial stipulation and set Ameritech‘s basic local exchange service rates using alternative methods
Order reversed and cause remanded.
DOUGLAS, WRIGHT, RESNICK, F.E. SWEENEY, PFEIFER and COOK, JJ., concur.