Alaska Consumer Advocacy Program v. Alaska Public Utilities Commission

793 P.2d 1028, 1990 Alas. LEXIS 64
CourtAlaska Supreme Court
DecidedJune 1, 1990
DocketNos. S-3172, S-3173
StatusPublished
Cited by4 cases

This text of 793 P.2d 1028 (Alaska Consumer Advocacy Program v. Alaska Public Utilities Commission) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alaska Consumer Advocacy Program v. Alaska Public Utilities Commission, 793 P.2d 1028, 1990 Alas. LEXIS 64 (Ala. 1990).

Opinion

OPINION

MOORE, Justice.

As a result of unforeseen growth in Alaska interstate telephone usage, an interstate revenue settlement agreement between Alascom and AT & T provided substantially more income to Alascom than anticipated. In subsequent intrastate rate making proceedings before the Alaska Public Utilities Commission (“APUC”), Alas-com argued that it was entitled to this excess while the APUC staff and the Alaska Consumer Advocacy Program (“ACAP”) argued that Alascom should be required to use the excess to reduce intrastate rates. APUC adopted an intermediate position by choosing to treat the excess as cost-free capital. In a concurrent rate design proceeding, APUC also allowed Alascom to initiate service charges for operator-assisted calls.

ACAP appealed APUC’s treatment of the excess and Alascom cross-appealed. The superior court, Judge David C. Stewart, affirmed APUC’s treatment of the excess. ACAP appealed and Alascom cross-appealed.

ACAP also appealed APUC’s decision to allow operator service charges. The superior court, Judge William H. Fuld, dismissed this challenge without prejudice on the ground that it was not ripe for review. ACAP appealed.

We reverse the superior court decision affirming APUC's treatment of the excess on the ground that APUC had no jurisdiction over the interstate settlement revenues. We reverse the superior court decision dismissing ACAP’s challenges as not yet ripe, but note that these challenges are now moot.

I.

Rates for telephone calls between Alaska and the contiguous United States historically have been higher than rates for interstate calls of similar distance between points in the contiguous states. Not only were the costs of providing interstate service to Alaska relatively high, but high interstate rates partially subsidized the high cost of providing intrastate telephone service within Alaska. In the contiguous states, telephone companies separated their costs and revenues between interstate and intrastate jurisdictions according to a set of rules known as the “Ozark Plan,” which is contained in the FCC Separations Manual. AT & T reimbursed local telephone companies for the costs they incurred in originating and completing interstate calls. Because the Ozark Plan was not applicable to Alaska, Alascom historically negotiated a reimbursement of its interstate costs by [1030]*1030AT & T, receiving approximately eighty percent of the revenues from interstate calls to or from Alaska.

In 1972, the FCC concluded that the use of satellite technology could reduce the cost of providing long distance service to Alaska substantially. Second Report and Order, 35 F.C.C.2d 844, 845, 856-57 (1972). The FCC conditioned approval of satellite use on “rate integration,” the reduction of rates for calls to and from Alaska to levels comparable to those for interstate calls within the contiguous states. See 35 F.C.C.2d at 856. The first two of three steps toward full rate integration occurred in 1976 and 1977. Rates for calls to and from Alaska were lowered and Alascom received progressively larger proportions of the revenues from these calls so that Alascom’s revenue flow remained constant.

In 1977, the FCC was concerned that AT & T’s payment to Alascom of substantially all revenues from interstate calls to and from Alaska caused ratepayers in the contiguous states unduly to subsidize interstate phone service to Alaska. Memorandum Opinion and Order, 72 F.C.C.2d 672, 674 (1978); see Notice of Inquiry, Proposed Rulemaking and Creation of Federal-State Joint Board, 64 F.C.C.2d 1033, 1033-34 (1977). The FCC began proceedings to establish separations procedures for Alaska and thereby fairly allocate interstate revenues between AT & T and Alascom. 64 F.C.C.2d at 1033. The FCC convened a Federal-State Joint Board to recommend separations procedures for Alaska. Id.

In the proceedings before the Joint Board, Alascom argued that the application of the Ozark Plan without modification would cause revenue shortfalls and necessitate intrastate rate increases. However, the FCC was initially inclined to apply the Ozark Plan everywhere, 64 F.C.C.2d at 1034, and it informally told Alascom that it would not accept modification of the Ozark Plan. Alascom began to negotiate a settlement with AT & T. In 1980, they executed an agreement providing that each would (1) urge the FCC to apply the Ozark Plan in Alaska, (2) urge the FCC to delay full rate integration until 1985, and (3) seek FCC approval of the payment through 1984 of a “transitional supplement” by AT & T to Alascom in addition to cost-based payments computed according to the Ozark Plan. AT & T and Alascom both expected that the transitional supplement payments would total about $88 million. They also expected that this would approximate the amount of revenue received by AT & T from the postponement of rate integration and the amount of Alascom’s intrastate revenue deficiency. In 1981, the Joint Board recommended approval of the agreement, Memorandum Opinion and Order, 87 F.C.C.2d 20, 24 (1981), and the FCC concurred. Memorandum Opinion and Order, 87 F.C.C.2d 25 (1981). In 1984, the FCC postponed full rate integration and ordered continued transitional supplement payments until the end of 1986.

The growth of the Alaska economy during the transition period was accompanied by a dramatic and unexpected increase in calling to and from Alaska. Alascom received over $165 million in transitional supplement payments between 1980 and 1985. After taxes, Alascom netted approximately $84 million. Its intrastate revenue deficiency during this period was only about $29 million. It thus received about $55 million more than necessary to offset its intrastate revenue deficiency.

In 1984, Alascom filed a request for an intrastate rate increase with APUC. In the subsequent proceedings before APUC, the APUC staff and ACAP argued that Alas-com and AT & T intended that the transitional supplement be used for intrastate rate reduction and that the FCC believed this was the purpose of the transitional supplement. They suggested that the amount of the transitional supplement in excess of Alascom’s intrastate revenue deficiency should be applied as a reduction of Alascom’s cost of service for some period of years. The effect of this would be to lower intrastate rates. Alascom argued that the transitional supplement was not intended solely to-offset intrastate rates. Alascom argued that the supplement was intended to allow Alascom to maintain intrastate rates at a constant level and to build a state-of-the-art communication sys[1031]*1031tem covering all of Alaska. These purposes were achieved. Alascom asserted that it should be permitted to retain the money for its own purposes, and raised several legal objections to the staffs approach.

In 1986, APUC issued Order 32. The challenged part of that order concluded that Alascom, AT & T, and the PCC intended that the transitional supplement be used for public purposes. One public purpose for the supplement was holding intrastate rates constant while Alascom expanded its network to reach Bush communities. APUC found no intention to use the supplement to reduce intrastate rates dollar-for-dollar. APUC chose to treat Alascom’s transitional supplement revenues in excess of its past intrastate revenue deficiency as cost-free capital. APUC reaffirmed this part of Order 32 in Order 35.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
793 P.2d 1028, 1990 Alas. LEXIS 64, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alaska-consumer-advocacy-program-v-alaska-public-utilities-commission-alaska-1990.