Office of Public Advocate v. Public Utilities Commission

2005 ME 15, 866 A.2d 851, 2005 Me. LEXIS 16
CourtSupreme Judicial Court of Maine
DecidedJanuary 26, 2005
StatusPublished
Cited by3 cases

This text of 2005 ME 15 (Office of Public Advocate v. Public Utilities Commission) is published on Counsel Stack Legal Research, covering Supreme Judicial Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Office of Public Advocate v. Public Utilities Commission, 2005 ME 15, 866 A.2d 851, 2005 Me. LEXIS 16 (Me. 2005).

Opinion

SAUFLEY, C.J.

[¶ 1] At issue in the present case is the method by which the Public Utilities Commission sets the rates that telephone companies may charge their ratepayers. Specifically, we are called upon to determine whether the Legislature intended to authorize the Commission to approve alternative forms of rate regulation without making a good faith attempt to compare the rates obtainable under those regulations with the rates that would be projected under traditional rate-of-return proceedings.

. [¶ 2] The Office of Public Advocate and the American Association of Retired Persons challenge the Commission’s determination that no comparison was required. We conclude that the Commission failed to compare the rates generated using the alternative method of ratemaking with the rates that would have been projected using a traditional method, as required by statute. We vacate the rates set by the Commission and remand the matter to the Commission for further proceedings.

I. BACKGROUND

[¶ 3] The telephone industry has traditionally been a highly regulated industry. Because of the historic monopolies held by one or two companies, the rates charged to consumers have been tightly controlled by the Commission, which acts only through the authorization of the Legislature.1 35-A M.R.S.A. § 103(2) (1988 & Pamph. 2004); Me. Pub. Serv. Co. v. Pub. Utils. Comm’n, 524 A.2d 1222, 1226 (Me.1987) (“The Commission’s powers are derived wholly from statute.”).

[¶ 4] In the regulation of telephone rates, there are three different types of rates at issue: local calling rates, intrastate long distance calling rates, and interstate calling rates. See 35-A M.R.S.A. §§ 301, 7106, 7303-A, 7307 (1988 & Pamph. 2004). A primary focus of the Legislature and the public, through referendum, has been the goal of keeping local calling rates low and predictable. See 35-A M.R.S.A. § 7303 (1988) (passed by referendum and enacted by P.L. 1987, ch. 141, § A(6)); see also 35-A M.R.S.A. §§ 9101-9105 (Pamph. 2004). As a consequence, rates for local calls must be flat rates, and the Legislature has historically focused on keeping local rates at “as low a cost as possible.” 35-A M.R.S.A. § 7303(2).

[854]*854[¶ 5] Until 1993, the Commission engaged in frequent reviews of the rates that telephone companies could charge for local and intrastate calls. See Office of Pub. Advocate v. Pub. Utils. Comm’n (PUC I), 2003 ME 23, ¶2, 816 A.2d 833, 835-36. That rate review process was known as a rate-of-return case, or “ROR.” See 35-A M.R.S.A. §§ 301-312 (1988 & Pamph. 2004); see also 9 C.M.R. 65 407 120-11 § 5(C)(7) (1999). This traditional type of rate setting generally took place when a telephone utility sought to change “rates, tolls and charges ... the effect of which [was] to increase the annual operating revenues of a public utility by more than 1%.” 35-A M.R.S.A. § 307 (1988 & Pamph. 2004). Such ROR proceedings wete permitted as frequently as once a year. Id.

[¶ 6] The primary focus of an ROR case was the establishment of a reasonable rate of return to the phone company balanced against reasonable charges to the consumers. See 35-A M.R.S.A. § 301 (1988 & Pamph. 2004). The RORs required intricate analyses of the utility’s expenses, revenues, debts, and operations. 9 C.M.R. 65 407 120-10 to 120-12 § 5 (1999); see generally 35-A M.R.S.A. §§ 301-312.2

[¶ 7] Because the ROR rate setting process was considered costly, time consuming, and resistant to innovation, the Legislature authorized the Commission to experiment with different types of rate-making or Aternative Forms of Ratemaking (AFOR). 35-A M.R.S.A §§ 9101, 9102; see L.D. 1947, Statement of Fact (116th Legis. 1994) (stating the purpose was to “preserven affordable universal service while encouraging the development of new and expanded telecommunications services in the State”). In general an AFOR is intended to focus less on the immediate confirmation of an appropriate rate of return for the telephone company, and more on longer-term income incentives for the telephone company, designed to encourage improved service and low rates for the ratepayers. See 35-A M.R.S.A. §§ 9101, 9103. One of the benefits of the AFOR method of setting rates is the authorization to review the rates much less frequently. Instead of conducting a new rate case as frequently as once each year, the Commission is only required to review AFOR rates every five to ten years. Id. § 9103(1). This approach combines the benefits of allowing longer-term incentives to work in the marketplace and reducing the regulatory costs that would be passed on to the consumer.

[1Í 8] To authorize this alternative approach to rate setting, the Legislature enacted chapter 91 of title 35-A, which permits the Commission to adopt an AFOR if certain conditions are met. 35-A M.R.S.A. §§ 9101-9105. In 1995, the Commission adopted the first AFOR for telephone service in Maine. PUC I, 2003 ME 23, ¶ 7, 816 A.2d at 837-38. It was intended to remain in effect for five years with a possible extension for up to five additional years. Id. When that AFOR came up for its five-year review, the Commission was asked by the Public Advocate to undertake an ordinary ROR analysis for the purpose of comparing the prospective local rates under an ROR and an AFOR. Id. ¶ 16, 816 A.2d at 840. The Commission declined to compare’ the rates to determine whether the ratepayers would “pay more for local telephone services as a result of the implementation of an alternative form of regulation than they would under traditional rate-base or rate-of-return regulation.” [855]*85535-A M.R.S.A. § 9103(1); see PUC I, 2003 ME 23, ¶ 16, 816 A.2d at 840. It then entered a new modified AFOR order to control rates for the next five years. Id. ¶¶ 16-17, 816 A.2d at 840. The Public Advocate appealed from that decision. Id. ¶ 18.

[¶ 9] Because the Commission failed to undertake even a cursory comparison of the local rates that would be set under an ordinary ROR proceeding, we vacated the order by which the Commission adopted an AFOR pursuant to chapter 91 of title 35-A. PUC I, 2003 ME 23, ¶¶ 20-29, 816 A.2d at 841-43.3 We held that the Commission failed to comply with the mandate of 35-A M.R.S.A. § 9103, which “does not allow the Commission to choose incentive based regulation of telephone utilities without making a specific determination based on at least some comparison of local rates estimates under the different systems of regulation.” Id. ¶ 27, 816 A.2d at 843. We remanded the matter to the Commission for further proceedings consistent with our opinion. Id. ¶ 29, 816 A.2d at 843.

[¶ 10] Following the remand, the Commission issued a notice of further proceedings. The Public Advocate and AARP, which was granted intervenor status, first argued that because we vacated the AFOR, the Commission should order that the rates return to their pre-AFOR levels until the Commission reached a final decision on remand. Verizon disagreed, arguing that because we concluded that “the Commission acted within its discretion in allowing Verizon to increase its basic service rates” by $1.78, PUC I,

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

Related

Commonwealth v. Sanchez
82 A.3d 943 (Supreme Court of Pennsylvania, 2013)
Quiland, Inc. v. Public Utilities Commission
2008 ME 135 (Supreme Judicial Court of Maine, 2008)
Bertl v. Public Utilities Commission
2005 ME 115 (Supreme Judicial Court of Maine, 2005)

Cite This Page — Counsel Stack

Bluebook (online)
2005 ME 15, 866 A.2d 851, 2005 Me. LEXIS 16, Counsel Stack Legal Research, https://law.counselstack.com/opinion/office-of-public-advocate-v-public-utilities-commission-me-2005.