Turpen v. Oklahoma Corp. Commission

769 P.2d 1309, 1988 WL 122538

• Court: Supreme Court of Oklahoma
• Decided: January 19, 1989
• Docket: 66038, 66686
• Status: Published

Opinions

OPALA, Justice.

Two issues are presented for review: [1] Did the Corporation Commission [Commission] err by dismissing the Attorney’s General motion to modify its rate order? and [2] Is the Commission’s order authorizing Southwestern Bell Telephone Company [SWBT] to implement new rates and charges to recover a revenue deficiency sustained by law and substantial evidence?

To resolve the second issue we must consider whether the Commission acted within its discretion by: (a) investigating and addressing the impact on Oklahoma ratepayers of SWBT’s status qua subsidiary of a holding company; (b) deciding to address in SWBT’s next rate relief request what imputed benefit or value the other Southwestern Bell Corporation [SWBC] subsidiaries receive from the use of the Southwestern Bell name; (c) investigating and addressing whether revenues and expenses were properly imputed from Southwestern Bell Publications, Inc. to SWBT; [d] deciding to address in SWBT’s next rate relief request whether SWBT’s transfer of its directory operations to Southwestern Bell Publications, Inc. was properly effected at the assets’ net book value; [e] basing SWBT’s authorized rates on a capital structure of 55.82% equity and 44.68% debt; [f] not addressing the disposition to be made of reimbursements received by SWBT from AT & T; [g] adopting a Universal Service Option plan; and [h] including prepaid expenses in SWBT’s rate base.

We give a negative response to the first question. We answer the second question by affirming the Commission’s rate decision as to parts (a), (b), (c), (e) and (g), supra; but because the Commission failed either to address or treat adequately issues material to that decision in parts (f) and (h), we reverse the rate order with regard to these parts and remand this proceeding with directions to conduct further inquiry and make additional findings; and although part (d) is legally efficacious we direct that the Commission on remand address whether SWBT’s transfer of its directory operations to SWB Publications was properly effected at the assets’ net book value.

THE IMPACT OF DIVESTITURE

On August 11, 1982 the U.S. District Court for the District of Columbia entered a “modified final judgment” [MFJ] in the government antitrust case against A.T. & T. The MFJ was later examined and amended in United States v. American Tel. & Tel Co. [A.T. & T.].¹

The MFJ required A.T. & T. to divest itself of the portions of its twenty-two operating companies that supplied local telephone service. These divested operating companies were reorganized into seven new operating companies that would supply local telephone service in an “exchange area.” SWBT is one of these seven new operating companies whose primary roll is to provide quality, economical local telephone service.²

The present case is the first Oklahoma decision to address the impact of the national telecommunications network’s restructuring. While attempting to conform to whatever past precedent is still applicable, the court recognizes the fundamental changes in rate regulation necessitated by divestiture.

The general principles in A.T. & T. provide insight into the present matter, but it must be remembered that A.T. & T. dealt with antitrust, not rate regulation, and addressed issues quite different from the ones before us today.

A.T. & T. was decided by a federal district court. Unless that court’s decision is affirmed by the U.S. Supreme Court, it is not binding upon state courts as precedent.³ When A.T. & T. was summarily affirmed by the U.S. Supreme Court, it became a source of authority for state courts,⁴ but the precedential weight of that summary disposition is confined to the narrowest possible grounds.⁵ As was stated by the U.S. Supreme Court in Mandel v. Bradley,⁶ “a summary affirmance is an affirmance of the judgment only.”

In sum, this court, while bound by the result of the federal antitrust divestiture cases, is not required to adhere to their reasoning and specific pronouncements.

FACTS

Shortly after divestiture the newly independent SWBT filed an interim rate increase request with the Oklahoma Corporation Commission.⁷ On May 24, 1983 the Commission granted SWBT an interim rate increase of $43.7 million which was followed by interim rate increases of $135,-197,000.00 on December 29, 1983 and $32,-520,695.00 on February 13, 1985.

On January 29, 1986 the Commission issued Order No. 292337, the rate order under examination here, which authorized SWBT to implement permanent rates and charges to recover a revenue deficiency of $47,544,561.00 in addition to the previously granted interim relief. As noted in the dissents, the Commission incorporated previous interim rate increases into the order by reference only. Although this indirect approval of interim rate increases appears to have been the Commission’s past practice, in the future the Commission must provide better disclosure of the total rate increase by listing in its orders the number and amount of previous interim rate increases it is making permanent.

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On February 11, 1986 the Attorney General and SWBT filed separate motions to modify the rate order; on February 28, 1986 the Attorney General brought an appeal from the order. The Commission granted its Staff’s request for dismissal of the Attorney’s General and SWBT’s modification motions on May 12, 1986; in a second appeal the Attorney General seeks review of this ruling. The two appeals were consolidated for disposition by a single opinion.

INTRODUCTION

Under Art. 9, § 18, Okl. Const., the Commission has the duty of “supervising, regulating, and controlling” SWBT in all public service matters. The bottom-line question on this appeal is whether the Commission adequately performed that duty in the rate proceeding below.

The terms of Art. 9 § 20, Okl. Const., address this court’s responsibility when it reviews a rate proceeding to determine whether the Commission fulfilled its constitutional duty:

“ * * * The Supreme Court’s review of appealable orders of the Corporation Commission shall be judicial only, and ... shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence....” [Emphasis supplied.]

Substantial evidence is more than a scintilla of evidence; it possesses something of substance and of relevant consequence that is fit to induce conviction and may lead reasonable men fairly to differ on whether it establishes a case.⁸ In determining if the Commission’s findings and conclusions are supported by substantial evidence, the court will review all the evidence found in the record including that which fairly detracts from its weight.⁹

A presumption of correctness accompanies the Commission’s findings in matters it frequently adjudicates and in which it possesses expertise.¹⁰ The Commission has wide discretion in the performance of its duties.¹¹ When the Commission fixes rates, it acts in a legislative capacity and is not limited to any particular theory or method.¹²

I

THE COMMISSION ACTED PROPERLY WHEN IT DISMISSED THE ATTORNEY’S GENERAL MOTION FOR MODIFICATION OF ITS RATE ORDER

The Attorney General asserts that the Commission improperly dismissed his modification motion. His argument rests on 12 O.S. 1981 § 1031.1,¹³ which provides that within 30 days of a judgment a district court may modify, correct, open or vacate its judgment sua sponte or upon motion of a party. If the motion is filed within the 30-day span, the district court is empowered to consider it after the lapse of that period.¹⁴

Under Commission Rule 24¹⁵ a party litigant may file a motion to modify, reopen or rehear a Commission order within ten days of the order’s rendition. The Attorney General asserts that the procedural analysis used in determining the effect of § 1031.1 should apply to Commission Rule 24 — i.e. the Commission should be empowered to consider motions to modify after the lapse of the maximum time (30 days) for the commencement of an appeal.

While the Attorney General correctly restates the law with respect to district court jurisdiction after a timely § 1031.1 motion has been filed, he fails to recognize the difference between motions to modify district court judgments and motions to modify Commission orders.

Oklahoma jurisprudence treats a motion to modify a Commission order differently from that of a district court.¹⁶ Commission orders automatically become final after 30 days.17 Once an order has become final, its vacation is beyond that agency’s power. The Commission is without authority even to review and modify the order unless statutory notice of a hearing concerning the proposed modification is given to all interested parties.¹⁸ Even during the 30 day-period before an order becomes “final” — in the sense of passing beyond the reach of appellate review — the Commission may act upon a motion to rehear, modify or reconsider its order but is not required to do so.¹⁹ It is well established that the Commission has no power to entertain a rehearing or reconsideration request of a decision after an appeal from it has been made to this court.²⁰ Extant caselaw compels us to hold that, insofar as Rule 24 may be construed to empower the Commission to entertain a request to modify an appealable order after the lapse of 30 days from that order’s issuance, its provisions plainly conflict with 12 O.S. 1981 § 991(a)²¹ and are hence unauthorized by law.²²

There are two primary reasons for according a different procedural consequence to a motion to modify a Commission order and a motion to modify a district court judgment. The first reason is the difference between an appeal from a district court judgment and one from a Commission order. Although Art. 9 § 20, Okl. Const., provides that an appeal from the Commission shall be taken “directly to the Supreme Court ... in the manner and in the same time in which appeals may be taken to the Supreme Court from the District Courts,”²³ this means only that appeals from the Commission are the same as appeals from the district court unless the law provides differently. Otherwise, this language conflicts with other parts of § 20 which state that an appeal from the Commission to the Supreme Court “shall be of right” and “directly to the Supreme Court” and “shall be to the Supreme Court only.” These provisions assure that an appellant will have the opportunity to be heard in this court and gain access for immediate review of the Commission’s order. The second reason is that the terms of 12 O.S. Supp.1986 § 991(a) — which provide that if a motion for a new trial is filed in the district court no appeal may be taken to this court until the trial court rules on the motion — do not apply to appeals from Commission orders.²⁴

The Commission clearly was without jurisdiction over its January 29, 1986 rate order now before us when it dismissed the pending motion for modification more than 30 days after that order’s entry. Moreover, because the Attorney General has had ample opportunity in this appeal to make his argument for the Commission order’s reversal, he has not been prejudiced by the adverse action. The May 12, 1986 dismissal was plainly mandated by lack of jurisdiction and must be affirmed.

II

THE COMMISSION’S INVESTIGATION INTO THE IMPACT ON OKLAHOMA RATE PAYERS OF SWBT’S STATUS AS A SUBSIDIARY OF A HOLDING COMPANY WAS LEGALLY SATISFACTORY; IN ITS TREATMENT OF FUTURE RATE RELIEF REQUESTS, THE COMMISSION’S INVESTIGATION OF SUCH IMPACT MUST BE IN ACCORDANCE WITH THE STANDARDS PROMULGATED HEREIN

The Attorney General contends that the Commission erred because it did not require SWBT to have its parent holding company, SWBC, provide information on all of the holding company’s affiliates. He asserts that the Commission failed to scrutinize adequately the impact of the SWBC holding company relationship on SWBT’s revenues, expenses and investments in order to ensure that SWBT’s regulated operations are not subsidizing the unregulated operations of SWBC’s other affiliates.

One of the dissents asserts that the Commission failed to execute its constitutional duty to require SWBT to provide “[ejvidence of Oklahoma — specific costs and revenues which are ‘used and useful’ in providing utility service to citizens within the State of Oklahoma.” [Emphasis theirs.] While the Commission must closely monitor SWBT’s costs and revenues, the term “used and useful” is misplaced in such an examination; that concept is only applied when determining the firm’s rate base.²⁵

Throughout the United States it is recognized that a public utility’s dealings with affiliates require thorough investigation and close scrutiny by a public utility commission.²⁶ It is generally held that, while the regulatory agency bears the burden of proving that expenses incurred in transactions with nonaffiliates are unreasonable, the utility bears the burden of proving that expenses incurred in transactions with affiliates are reasonable.²⁷ While a public utility cannot make a rate confiscatory by reducing its net earnings through contracts unduly favoring affiliates, common ownership is not of itself a ground for disregarding agreements with affiliates.²⁸

Investigation of all aspects and operations of a public utility’s affiliates is not required. It is transactions between the utility and its affiliates and the allocation of expenses by the parent holding company to the regulated utility that provide an opportunity for abuse and must be investigated thoroughly.²⁹

At issue here is whether there is substantial evidence that the Commission sufficiently investigated 1) the prices charged to or by SWBT affiliates for goods and services and 2) the allocation of expenses by SWBC to SWBT and by SWBT to Oklahoma ratepayers. For purposes of brevity these expense items will hereafter be referred to as “payments to affiliates.” There is substantial evidence to demonstrate that the Commission’s investigation of payments to affiliates was satisfactory.

In the Commission hearings the Attorney General presented no evidence that any specific payment to an affiliate was not reasonable. Matters pending before the Commission are, as in this case, generally of a complex and technical nature and should be considered and initially decided by the Commission. The Commission has the experience and expertise “to amalgamate those intricacies into specific findings and conclusions in a form presentable for review on appeal.” For this reason, matters which could have been but were not presented before the Commission by “affirmative evidence, objection or proceedings for review by the Commission” are not reviewable by this court.³⁰

Fred C. Buck, a certified public accountant [CPA] and Commission Staff utility supervisor, testified concerning the sufficiency of the audit performed by the Staff. He stated that his team had sufficient time to make their audit; they spent eight to ten man-months working on the audit and SWBT provided all the information that was requested.³¹

Betty Borgmier, a CPA and an outside utility analyst specializing in telecommunications, was the audit team member in charge of investigating and analyzing the organizational makeup and functions of the regional holding company and its subsidiaries. The detail of her testimony shows that she thoroughly investigated the procedures and the factors used to allocate the SWBC holding company charges and SWBT headquarters charges to Oklahoma. She explained the allocation process and the audit trail of allocated expenses.³² While she expressed concern that the allocation method used by SWBC might allocate more expenses to SWBT than is equitable, she was unable to come up with a more accurate method.³³

Since the Commission members could not personally examine the payments to affiliates and the Attorney General produced no specific evidence that any particular cost or expense was improper, the Commission reasonably relied upon the Staffs and Borgmier’s audit of those costs.

The Commission’s investigation of the impact of SWBT’s status qua subsidiary of a holding company is upheld as satisfactory. In its handling of future requests for rate relief, the Commission’s investigation of payments to affiliates must conform to the principles we announce today.

It is generally held that, while the regulatory agency bears the burden of proving that payments to nonaffiliates are unreasonable, the utility shall bear the onus of proving that payments to affiliates are reasonable.³⁴

Although the Commission acts in a legislative capacity when engaging in rate-making and is not bound by technical rules of evidence, when the meaning of evidential terms, e.g. burden of proof, is important to the Commission’s handling of an issue, these terms and their impact must be clearly defined.³⁵ The utility’s burden of proving that payments to affiliates are reasonable includes both a burden of production and of persuasion.³⁶ The utility has the initial burden of producing evidence to show prima facie the reasonableness of its payments to affiliates — a mere showing of the expenses’ incurrence will not suffice.³⁷ The utility must produce evidence, for example, that it charged affiliates the same amount as it did arms-length buyers.³⁸ Unless the utility meets this affirmative duty of showing the reasonableness of payments to affiliates, no such expenses may be allowed.³⁹

If the utility sustains this initial burden of production, the burden then shifts to the Commission or the rate protestant to produce evidence showing why the payments to affiliates were not reasonable and should not be allowed. If no such challenge is made, the payments to affiliates will be allowed as an includable expense. If a payment to an affiliate is challenged, the utility will bear the burden of persuading the Commission that the payment to an affiliate should be allowed as an includable expense.

Beyond explaining the impact of the utility having the burden of proof and providing the minimum standards below, the court leaves to the Commission the task of establishing guidelines to determine whether a utility’s payments to affiliates are reasonable. The Commission acts in a legislative capacity when engaging in rate-making and is not limited to any particular theory or method in fixing rates.⁴⁰ The criteria to be used in determining whether payments to affiliates are reasonable are of a complex and technical nature and their adoption is to be suited to the Commission’s experience and expertise.⁴¹

At a minimum, the Commission must require SWBT to provide the following information to aid in its monitoring of payments to affiliates:⁴²

1. A list of all companies affiliated with SWBC or SWBT.

2. Financial statements which include balance sheets, income statements, and sources and uses of funds statements for each company.

3. A description of how and when each company was established as well as an outline of what SWBT resources were used, either directly (e.g. personnel) or indirectly (e.g. backing lines of credit).

4. A description of the types of services or products that each company provides.

5. A list and the cost of SWBT facilities that are being used, were used or are expected to be used in the future by each company.

6. Whether the telephone operating companies will be using each company’s services or products and the expected cost to SWBT.

7. Whether each company will be using SWBT’s services or products and SWBT’s method of billing the company for such services or products.⁴³

8. A list of assets transferred or sold to each company by SWBT (including any purchases made by SWBT in 1983 and 1984 from an affiliate where the telephone company received stock for compensation and then turned the stock over to SWBC or another affiliate).

9. Whether each company will use information obtained by the telephone operating companies in its business.

This court’s appellate review of the criteria will extend no further than to determine 1) whether the criteria meet the minimum standards to be followed; 2) whether the criteria established by the Commission are within its lawful discretion; 3) whether the criteria adequately ensure that only reasonable payments to affiliates are allowed; 4) whether the criteria are sufficiently definite to apprise fairly the utility of the evidence it will have to produce to show that a payment to an affiliate will be held reasonable;⁴⁴ and 5) whether the Commission has applied its criteria properly.⁴⁵

Ill

THE COMMISSION ACTED WITHIN ITS LAWFUL DISCRETION WHEN IT DECIDED TO ADDRESS IN SWBT’S NEXT RATE RELIEF REQUEST THE IMPUTED BENEFIT OR VALUE TO OTHER SWBC SUBSIDIARIES OF USING THE SOUTHWESTERN BELL NAME

The Commission expressed concern in its order about the imputed benefit or value to the other SWBC subsidiaries which are allowed to use the Southwestern Bell name. Despite its concern, the Commission decided to address this issue in the future and directed the Staff to consider it in SWBT’s next rate relief request. The Attorney General contends that by this deferment the Commission failed to investigate adequately the parent-subsidiary relationship between SWBT and SWBC.

The Commission has wide discretion in the performance of its duties and the deferral of this issue to SWBT’s next request for rate relief did not render the Commission’s investigation of the parent-subsidiary relationship between SWBT and SWBC insufficient. The Attorney General cited no rule or precedent requiring the Commission to investigate specifically the value to other SWBC subsidiaries of being allowed to use the Southwestern Bell name. In fact, the Attorney General states that the only notable effect of the affiliation between SWBT and its parent holding company (SWBC) is that the relationship calls for a close Commission scrutiny of both the costs of services performed by or for other affiliates and the SWBC expenses allocated to SWBT.

Two Staff witnesses, Dr. Fish and Ms. Borgmier, recognized that other SWBC subsidiaries benefit from using the Southwestern Bell name. Because of the great difficulty in quantifying this benefit to the subsidiaries, neither recommended an adjustment to the allowed revenue requirement. They also noted that SWBT derives certain advantages from being part of a holding company. Borgmier stated that some diversification into unregulated entities will cause shareholders to see the possibility of the best of two worlds: 1) the safety of regulation and 2) the high return provided by successful unregulated subsidiaries. Although diversification into unregulated subsidiaries will increase the risk to investors and SWBT could possibly end up bearing more of the holding company expenses and other financial burdens should the ventures be unsuccessful, if the unregulated subsidiaries are successful the attraction to potential shareholders of the possibility of a higher return can mean a lower cost of capital for SWBT and lower rates for SWBT ratepayers.

Since the Attorney General could cite no rule or precedent mandating the Commission’s investigation into the value to the other SWBC subsidiaries of using the Southwestern Bell name, and there is evidence indicating that SWBT derives certain advantages from the holding company relationship, the Commission did not err by deciding to address this issue in SWBT’s next rate relief request.

IV

THE COMMISSION’S FINDINGS AND CONCLUSIONS PERTAINING TO THE IMPUTATION OF REVENUES AND EXPENSES FROM SOUTHWESTERN BELL PUBLICATIONS, INC. TO SWBT ARE SUSTAINED BY THE LAW AND SUBSTANTIAL EVIDENCE; FOR USE IN FUTURE RATE PROCEEDINGS, THE COMMISSION MUST ESTABLISH SPECIFIC CRITERIA AND PROCEDURES FOR IMPUTING DIRECTORY REVENUES AND EXPENSES

Southwestern Bell Publications, Inc., [SWB Publications] was not spun off from SWBT and established as a separate unregulated SWBC subsidiary until January 1, 1984. Because of such factors as the long-term nature of Yellow Pages contracts, two-thirds of the directory revenues and expenses imputed to SWBT for the 1984 test year were attributable to SWBT’s own conduct of directory operations prior to 1984.

SWBT’s Chief Accountant, T.D. White [White], testified extensively about the procedure used to impute revenues and expenses from SWB Publications to SWBT and explained that these amounts were imputed as though they were those of SWBT. In other words, actual figures were used in his recommendations. SWBT maintains a record of directory revenues and expenses for the years prior to the transfer of directory operations to SWB Publications. If the amount of directory revenues and expenses imputed from SWB Publications to SWBT differs significantly from the directory revenues and expenses of years prior to the transfer, SWBT investigates the difference. White also testified that SWBT maintains an employee at SWB Publications headquarters to ensure that the revenues and expenses imputed to SWBT are correct. The Commission Staff recommended that the Commission adopt White’s figures.

The Attorney’s General expert witness, Nancy Bright [Bright], testified on the issue of imputing revenues and expenses from the directory subsidiary to SWBT. Although she suggested imputing the same directory expenses, Bright recommended that an additional 7.6 million in directory revenues over actual figures be imputed. In Bright’s opinion, the revenues should have been increased to raise directory profits to the level which she believed would have been obtained absent the transfer of directory operations from SWBT to SWB Publications. The only evidence she offered to support this assertion was a table showing that directory revenues had increased by 18.6% between 1980 and 1981, 25.8% between 1981 and 1982, 13.1% between 1982 and 1983, but only 2.7% between 1983 and 1984.

The Commission ruled that the weight of the evidence did not support Bright’s adjustment of imputed growth but rather supported the Staff’s recommendation to adopt the actual figures shown by SWBT’s exhibits and supported by White’s testimony. This decision is clearly supported by law and substantial evidence.

First, the Staff relied on actual figures while Bright merely expressed concern that “the directory revenues suddenly are not increasing anymore.” Although Bright seemed to believe that this might be attributable to the formation of SWB Publications, she produced no evidence to prove that was the reason.

The Attorney General states in his brief: “SWB concludes that because the Attorney General could not obtain sufficient information to prove that SWB’s numbers were incorrect, SWB has met its burden of proof.” Bright testified to the contrary that, although she was restricted to reviewing materials with a SWBT employee present and to taking notes rather than photo-copying the information, she eventually obtained all the information she had requested from SWBT concerning directory revenues. The Attorney General cannot rely on SWBT’s supposed refusal to supply information to explain the lack of evidence produced by Bright.

Second, when White was asked if there was anything about the transfer of directory operations from SWBT to SWB Publications that would affect directory revenues’ growth rate, he answered in the negative, stating that all directory sales were handled in exactly the same manner as before the transfer. The same salesmen, he said, work just as hard and call on the same customers.

Lastly, White also testified about the decrease in the growth of directory revenues. He gave two reasons for their decline — the poor state of Oklahoma’s economy and the increase of competition in Yellow Pages advertising.

Bright admitted that she knew the oil and gas industry had not fared well and the Oklahoma economy had begun to falter in 1982, but she believed that if these were the reasons for the decrease in revenues the effects would have shown up earlier than 1984. As noted by the Commission’s order, Bright’s own testimony reflects that Oklahoma’s economic downturn did affect directory revenues prior to 1984. While directory revenues increased 25.8% between 1981 and 1982, they increased only 13.1% between 1982 and 1983. The Commission was not acting improperly by considering the State’s economy when making its decision.⁴⁶

White also testified that competition in the field of Yellow Pages advertising had increased greatly, e.g. the Donnelly Co. had issued seven directories in the suburban directory area.

The Commission’s investigation of the imputed revenués and expenses from the directory subsidiary to SWBT is upheld as satisfactory. For use in future rate proceedings, the Commission must develop and fashion specific criteria and procedures for imputing directory revenues and expenses.

V

ALTHOUGH THE COMMISSION ACTED WITHIN ITS DISCRETION BY DECIDING TO ADDRESS SWBT TRANSFERRING ITS DIRECTORY OPERATIONS TO SWB PUBLICATIONS AT THE ASSETS’ NET BOOK VALUE IN SWBT’S NEXT RATE RELIEF REQUEST, THE MATTER SHOULD BE ADDRESSED BY THE COMMISSION IN THE POST-REMAND HEARING SWBT transferred its directory operations to SWB Publications at the assets’ net book value without recognizing the going concern value of the directory operations. The Commission directed that its Staff investigate coincidentally with SWBT’s next rate relief request why SWBT was not compensated for the going concern value.

The Commission’s concerns are well founded. They are most relevant when a regulated utility transfers assets to an unregulated affiliate at the assets’ net book value and that unregulated affiliate uses the assets to earn revenues that benefit only the shareholders of the parent holding company, not the ratepayers of the regulated utility. The ratepayers in that situation have, in essence, subsidized the shareholders of the parent company.⁴⁷ In the present case the revenues and corresponding expenses of SWB Publications have been imputed back to SWBT. In addition, the Commission imputed the intrastate investment, less accumulated depreciation, of SWB Publications into SWBT’s rate base. As noted by the Commission, these imputations made a significant profit contribution and enabled the Commission to keep rates for other services lower.⁴⁸

SWBT ratepayers have continued to benefit because directory revenues have been earned in essentially the same way as before the transfer of assets to SWB Publications. In effect, the transfer of assets was more akin to a change in corporate form than to a sale.⁴⁹ There is evidence in the record that the present arrangement could in the long run be possibly more advantageous to ratepayers than the receipt of compensation for the going concern value of the directory operations. Once such compensation is received, ratepayers can no longer expect to benefit from the imputation of directory revenues and expenses. Ratepayers will then have “cashed in their chips”, so to speak, and will no longer be entitled to benefit from directory operations.

Dr. Fish, a Staff witness, opined that the directory operations were worth much more than their book value. But he, as well as other witnesses who addressed this matter, believed that there would be a great deal of difficulty in quantifying the going concern value of the directory operations and offered no basis or method for making such a computation. Given this great difficulty and the presence of evidence indicating that ratepayers benefit from the present arrangement, the Commission did not clearly abuse its wide discretion by deciding to postpone this issue’s resolution until SWBT’s next rate relief request.

Although the Commission’s treatment of the issue would not by itself warrant a reversal, since the proceeding must be remanded for other reasons, the Commission is directed to readdress itself to this issue in the post-remand hearing.⁵⁰

VI

THE COMMISSION ACTED WITHIN ITS DISCRETION BY BASING SWBT’S AUTHORIZED RATES ON A CAPITAL STRUCTURE OF 55.32% EQUITY AND 44.68% DEBT; IN ITS TREATMENT OF FUTURE RATE RELIEF REQUESTS THE COMMISSION MUST IMPUTE A HYPOTHETICAL CAPITAL STRUCTURE IF THE ONE CHOSEN BY SWBT IS MORE EQUITY-LADEN THAN NECESSITATED BY BASIC TELEPHONE OPERATIONS IN OKLAHOMA

The Attorney General contends that the Commission erred by basing SWBT’s authorized rates on an excessively equity-laden capital structure.⁵¹ As recommended by its Staff, the Commission based the authorized rates on SWBT’s actual capital structure as of June 30, 1985 — 55.32% equity and 44.68% debt. The Attorney General recommended that a hypothetical capital structure of 45% equity and 55% debt be imputed.

The Attorney General contends that the debt-equity ratio used by the Commission is excessively equity-laden and forces ratepayers to bear an “unwarranted and unreasonable capital cost and taxation burden” to enable SWBC to raise money for the support of its unregulated, non-public related activities.

An appropriate capital structure is one that balances properly the requirements of safety of investment, stability of dividends and availability of capital with low cost to the ratepayer.⁵²

The practice of imputing a hypothetical debt-equity ratio for purposes of rate setting is accepted throughout the United States.⁵³ The reason for doing so is to protect ratepayers from excessive capital charges.⁵⁴ The ratepayers of a regional holding company that raises funds jointly for both its competitive ventures and its regulated services are especially in need of protection from having to pay for excessive capital charges.⁵⁵

Mr. Kaufman, SWBC’s Assistant Treasurer and Director of Investor Relations and Earnings Requirements, testified that the ultimate effect of an imputed capital structure is to lower the amount of revenue a public utility is allowed to collect. As noted by the U.S. Supreme Court, there is, in essence, no difference between capital costs and operating expenses. Each is a necessary cost of supplying the service and must be paid for out of current income.⁵⁶ Since good faith is presumed on the part of public utility managers, their judgment about prudent outlays, including outlays for capital, should not be overruled unless inefficiency or improvidence on their part is shown.⁵⁷ The Commission’s decision not to overrule the judgment of SWBT’s managers concerning the appropriate capital structure for SWBT and impute a hypothetical debt-equity ratio for purposes of ratemaking is clearly sustained by the law and substantial evidence.

Kaufman also testified that, in connection with efforts to identify the appropriate capital structure for SWBT, SWBC asked its investment banking advisors whether SWBT’s debt-equity ratio was appropriate given the business risks confronting the utility, the known rating agency criteria, and the current and expected economic environment.⁵⁸ Each consultant recommended that SWBT maintain a debt ratio of 40-45%.⁵⁹

The Attorney General stated that one of the factors in the recommendations made by the three investment houses was SWBC’s plan to diversify into unregulated areas; this was only one of the variables. The investment houses also considered the increasingly competitive nature of the telecommunications business, the danger of large customers and/or interexchange carriers bypassing the local exchange companies, the uncertainties regarding the post-divestiture environment, the unfavorable regulatory environment, and the need to maintain a credit rating high enough to have access to the capital markets on favorable terms.

All of the investment houses were concerned that an increase in SWBT’s debt-equity ratio might result in a downgrading of SWBT’s debt rating and thereby prevent SWBT from being able to attract capital at a reasonable cost. At the time of the rate proceeding SWBC had an AA minus rating from Standard & Poor’s. Salomon Brothers stated that it has been their experience that in difficult markets issuers rated below AA sometimes have difficulty in obtaining long-term funds in substantial amounts. Salomon Brothers also noted that A-rated issuers have no margin of safety in terms of a further downgrade into the BBB category where issuers typically have significant limitations on the sources and amounts of capital they can raise and in which funds become more expensive. Further downgrades in SWBT’s credit rating could increase the cost of both debt and equity enough to more than compensate for the savings obtained from a high debt-equity ratio and thereby result in a higher overall cost of capital for SWBT.

SWBT’s debt-equity ratio is not unusually low. In fact, of the 21 Bell Operating Companies, only three had higher debt-equity ratios as of December 31, 1984.

Dr. Wilson, witness for the Attorney General, relied on a comparison of SWBT’s capital structure with the capital structures of independent telephone companies and electric utilities to support his assertion that SWBT’s debt-equity ratio should be higher. This is not a valid comparison. While independent telephone companies are subject to competitive and other business risks somewhat similar to those of SWBT, the generally more rural nature of their service areas makes them less vulnerable to bypass risks than SWBT. Also, these companies have been gradually reducing their debt ratios over the past few years. Electric utilities face somewhat similar business risks as SWBT, but there are significant differences.

The Commission’s decision in the present cause not to overrule the judgment of SWBT’s managers concerning the appropriate capital structure for SWBT is consistent with the law and supported by substantial evidence. In handling future requests for rate relief, the Commission must continue to monitor SWBT’s capital structure closely.

The Attorney General asserts that the increased business risks faced by SWBT are due primarily to two factors: the increased business risk of the unregulated SWBC subsidiaries and the increased competition facing the basic telephone operations of states other than Oklahoma.⁶⁰ He contends that, since these increased business risks are not attributable to SWBT’s basic telephone operations in this state, Oklahoma ratepayers should not bear their burden by paying rates based on an excessively equity-laden capital structure. Although the Commission did not address the impact of the increased competition facing the basic telephone operations in other states, it did assess the impact of the other factor.

The Commission explained in its rate order that, even if SWBC's plans to diversify into unregulated areas was one of the factors considered by SWBT when it chose its capital structure, it was only one of several variables.⁶¹ On this basis the Commission found the capital structure chosen by SWBT to be reasonable. It is not unpersuasive to advance the argument that, if SWBC’s plan to diversify into unregulated areas were even one of the variables used by SWBT to choose a capital structure, ratepayers should be shielded from being affected by this variable by imputing a hypothetical capital structure calculated without measuring the effect of SWBC’s plans to diversify into unregulated areas.

While the Commission’s decision to allow SWBT to use its actual capital structure is upheld, the Commission is instructed that in its handling of future requests for rate relief it is to investigate and address the impact of the above two factors on SWBT’s capital structure and to impute a hypothetical capital structure if the investigation should indicate that the capital structure chosen by SWBT is more equity-laden than necessitated by basic telephone operations in Oklahoma.

VII

THE COMMISSION ERRED WHEN IT DID NOT ADDRESS THE PROPER TREATMENT OF REIMBURSEMENTS RECEIVED BY SWBT FROM AT & T

The Federal Communications Commission [FCC] ruling In the Matter of American Telephone and Telegraph Company⁶² required AT & T to remit to the Bell Operating Companies refunds of operational shared administration expenses and pre-op-erational customer-premised equipment expenses. It is clear from the FCC’s opinion that it intended these reimbursements to be passed on to the ratepayers of the Bell Operating Companies if the ratepayers had borne these expenses.⁶³ It is also clear that the FCC intended for state commissions to determine the amount of reimbursements to be given the ratepayers in each jurisdiction.⁶⁴ The Commission’s order did not contain a finding concerning the reimbursements received by SWBT from AT & T.

SWBT and the Commission offer four reasons why the Commission did not make a finding concerning the reimbursements.

First, both SWBT and the Commission Staff used 1984 as the test year and determined the 1984 expense and revenue levels by using fourth-quarter data. Since the reimbursements were received in August 1984, they had no impact on test year revenues because they were not received in the fourth quarter. Second, authorized rates are designed to recover future revenues and the reimbursements were nonrecurring revenue and could have no impact on future revenues.

In general, rate regulation is prospective. Future rates are set on the basis of forecasts of income, expenses and profits.⁶⁵ The focus of ratemaking is on whether proposed rates are just and reasonable, not on accounting for mistakes in past rates.⁶⁶ Accounting for mistakes in past rates in the setting of future rates, or retroactive ratemaking,⁶⁷ was rejected by this court in Southwestern Public Service Co. v. State.68 In that case, we held that the Commission erred when it ordered a rebate of excessive charges made by a subsidiary to its parent utility company for fuel purchases covering the period prior to the effective date of the order determining the charges to be excessive. The court in Southwestern Public Service Co. pointed out that the utility’s fuel purchases from its subsidiary conformed to a previous Commission order. Clearly, the Commission was attempting to account for mistakes in past ratemaking in the setting of future rates and thereby engaging in prohibited retroactive ratemaking.

The treatment of the AT & T reimbursements SWBT received has nothing to do with mistakes in past ratemaking. In essence, the reimbursements represent an unexpected windfall and the relevant question posed here is who should receive the benefit of this windfall — SWBC shareholders or SWBT ratepayers. The Commission would not be engaging in prohibited retroactive ratemaking if it considered the proper treatment of the reimbursements.

Third, the reimbursements were for expenses incurred in years prior to the test year. SWBT asserts that since it did not earn its authorized rate of return during these years, its retention of the reimbursements would cause no overearning by SWBT. If the Commission allowed SWBT to retain the reimbursements because it did not earn its authorized rate of return in years prior to the test year, the Commission would be engaging in de facto prohibited retroactive ratemaking by setting rates that would allow SWBT to recover past losses.

Finally, SWBT contends that it is beyond the PCC’s authority to determine what the Commission should do with the intrastate portion of the refund. Even if the FCC does not have the authority to determine what the Commission should do with the intrastate portion of the refund, this does not relieve the Commission of its duty to supervise and regulate SWBT in all matters pertaining to SWBT’s performance of its public duties.⁶⁹

Even assuming the Commission’s and SWBT’s assertions as true, they are not dispositive of the question before us— i.e., whether the Commission erred by not addressing itself to the proper disposition of the reimbursements. The Commission’s findings must be sufficient in content to apprise this court of the actual basis for its ruling so that the court may determine whether the decision is supported by law and substantial evidence. If the Commission makes no finding on a necessary point, its order cannot be sustained on that point.⁷⁰ The matter at issue here is such a necessary point. This cause must hence be remanded to the Commission for consideration of the proper treatment of the reimbursements received by SWBT from AT & T for operational shared administration expenses and pre-operational customer premised equipment expenses.

Since the reimbursements were a refund of money collected in prior years, the treatment of the reimbursements is a question separate from determining SWBT’s allowable future revenue requirements by using the formula R = 0 4- B(r).⁷¹ The Commission should determine SWBT’s allowable future revenue requirements under this formula without considering the effect of the reimbursements.

Although the treatment of the reimbursements is a question separate from determining SWBT’s allowable future revenue requirements by using the formula R = 0 + B(r), this rate proceeding was the appropriate place for the Commission to address the proper treatment of the reimbursements. The Commission and its Staff do not cite any authority that would prohibit the Commission’s consideration of such an ancillary question in a rate proceeding. The Commission must hence address the proper treatment of the reimbursements in its post-remand inquiry. The Commission’s decision on the matter will in no way be dependent upon its determination of SWBT’s allowable future revenue requirements by using the formula R = 0 + B(r) and may be effectuated before such allowable future revenue requirements are determined.

In its post-remand inquiry, the Commission must determine what portions, if any, of the reimbursements received were provided by ratepayers and whether these amounts should be refunded to ratepayers. The Commission must then determine the particular method by which any refund will be made. Whether the refund will be amortized over the period that the rates are expected to be in effect or other methods, such as a direct payment to each ratepayer or a credit on each bill rendered, will be used to effectuate any refund is within the Commission's discretion.

VIII

THE COMMISSION ACTED WITHIN ITS DISCRETION IN ITS ADOPTION OF A UNIVERSAL SERVICE OPTION PLAN

AUniversal Service Option is a plan designed to provide basic telephone service to low-income individuals who otherwise would not be able to afford it. None of the parties opposed the concept of a Universal Service Option, but all of them differed concerning the form the plan should take. The Commission did not explicitly adopt any of the plans proposed by the parties, but rather adopted a plan containing elements from each of the proposed plans.

The Attorney General asserts that this part of the Commission’s order should be vacated because there is no evidence in the record to support the specific plan adopted by the Commission.

There is no requirement that the Commission follow a specific plan in setting rates. Setting rate schedules for public utilities is a legislative process and the Commission acts in a legislative capacity when it establishes rate schedules.⁷² Rate-making is not an exact science involving precise mathematical calculation. The Commission is not limited to any particular theory or method in fixing rates.⁷³ On the contrary, the Commission has wide discretion in the performance of its duties.⁷⁴ The Commission’s ruling on the adoption of a Universal Service Option Plan was within its wide discretion.

ÍX

THE COMMISSION’S FINDINGS PERTAINING TO THE INCLUSION OF PREPAYMENTS IN THE RATE BASE LEAVE TOO MUCH TO SPECULATION AND CONJECTURE

When determining the value of a utility’s rate base for ratemaking purposes, an allowance for working capital is usually included.⁷⁵ Such an allowance is designed to provide the utility a return on funds that are used to pay expenses before the income produced by those expenses is received.

There are three methods of determining a cash working capital allowance: the lead/lag study approach, the formula approach and the balance sheet approach. Both SWBT and the Commission Staff recommended that the formula approach be used in the present case. The Attorney General recommended that no working capital allowance be included in the rate base because SWBT’ had not performed a lead/lag study although it had been ordered to do so in the last SWBT rate case. The Commission concluded that, since SWBT had not performed a lead/lag study as ordered and the recommendations pertaining to the amount of working capital to be included varied so widely, the only proper solution was to deny SWBT’s request for a cash working capital allowance. Despite this conclusion, the Commission allowed the inclusion of $18,399,709.00 of prepaid expenses⁷⁶ in SWBT’s rate base, including an allowance for Yellow Pages prepayments so as to match revenues and expenses. The Attorney General contends that this inclusion of prepayments in the rate base was not based on evidence in the record and was in contravention of the Commission’s own finding that no cash working capital allowance would be included in the rate base.

The Commission made only one finding pertaining to inclusion of prepayments in the rate base: “For these items [prepayments], the Commission relies on previous Commission treatment and thus adopts Staff’s proposal.”⁷⁷

Both SWBT and the Commission Staff assert that the inclusion of prepayments in the rate base was proper because prepayments are not a part of cash working capital, but rather both prepayments and cash working capital are subdivisions of working capital. In an earlier order the Commission directed that the basis for a cash working capital allowance must be a lead/lag study. Evidence was presented to show that prepayments could be included in a lead/lag study.⁷⁸ The Commission failed to make any reference to this evidence or the weight afforded it in its findings. The court is left with nothing but conjecture and speculation to explain why, if prepayments could be included in a lead/lag study, they could not also be included in cash working capital.

This confusion may have resulted from the rate order’s imprecise definition of working capital. Inflows and outflows of funds are typically measured in terms of either (1) cash (or cash plus short-term investments; often called the near-cash basis) or (2) working capital (i.e., current assets minus current liabilities).⁷⁹ The Commission states at page 41 of its order:

“* * * Because of the divergent recommendations made on cash working capital, the Commission is of the opinion that it is necessary to first define cash working capital in the regulatory environment. For ratemaking purposes, working capital is the average amount of capital provided by investors in addition to other specifically identified rate base items. The inclusion of working capital is to bridge the gap between the time expenditures are required in order to provide service and the time collections are received for that service. * * * ” [Emphasis added.]

Although the Commission states that it is necessary to define “cash working capital,” its order instead defines “working capital.” This confusion of terms leaves the actual basis of the Commission’s findings in a state of uncertainty.

The Commission’s findings must be detailed sufficiently to ensure against arbitrariness and to apprise this court of the actual basis for its decision so that the court may determine whether the findings are supported by the law and substantial evidence. Findings made in general terms are insufficient.⁸⁰ The Commission’s findings with respect to inclusion of prepayments in the rate base are not sufficient to apprise this court of the actual basis of its decision and are framed in general terms. While the Commission did admit evidence pertaining to prepayments, it failed to make any reference in its order to such evidence or to the weight afforded such evidence in its findings. We are hence left with nothing more than conjecture and speculation as a basis for our review of the Commission’s decision. The proceeding must hence be remanded to allow reconsideration of prepayments’ inclusion in the rate base.

In its inquiry the Commission must define precisely what it intends working capital to mean. Its definition need not conform precisely to either of the typical meanings given above. The Commission is free to shape a definition of working capital particularly suited to its regulatory scheme or needs. After the Commission has clearly defined what it intends working capital to mean, it must use its definition in the disposition of the present and subsequent requests for rate relief.

CONCLUSION

The Commission’s dismissal of the Attorney’s General motion for modification of the rate order after a lapse of 30 days from its entry is affirmed.

The Commission’s rate order is legally efficacious as to issues resolved in Parts II through IV and in Parts VI and VIII and is affirmed insofar as it determines the issues discussed in these parts.

Because the Commission failed to address the proper treatment of reimbursements received by SWBT from AT & T, and since its consideration of prepaid expenses is confusing, the rate order is reversed insofar as it resolves issues outlined in Parts VII and IX. The proceeding is remanded to the Commission for further inquiry to be conducted, and findings to be made, in conformity with directions given in this pronouncement. Although Part V is legally efficacious, in the post-remand inquiry to be conducted the Commission is directed to address whether it was proper for SWBT to transfer its directory operations to SWB Publications at the assets’ net book value.

If the Commission’s post-remand findings prove to be inconsistent with the rate structure declared in its original order now on review in this case, then the Commission shall modify its rate structure to conform to the post-remand findings.⁸¹ The post-remand inquiry ordered here shall be deemed a continuation of the pre-appeal proceedings below. The present rate structure shall remain in force until the Commission has completed its post-remand inquiry and rendered its final decision.

Order affirmed in part and reversed in part; proceeding remanded with directions to conduct a further inquiry and make additional findings.

HARGRAVE, V.C.J., and LAVENDER, SIMMS, OPALA and SUMMERS, JJ., concur. BRIGHTMIRE and GARRETT, S.JJ., sitting by designation, concur in part and dissent in part. DOOLIN, C.J., and ALMA WILSON, J., dissent. HODGES, J., disqualified. KAUGER, J., recused.

1 . 552 F.Supp. 131 [D.C.C.1982], aff'd 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 [1983].

2 . In United. States v. American Tel. and Tel. Co., supra note 1 at 141, the court stated:

“The Operating Companies would provide telephone service from one point in an exchange area to other points in the same exchange area — ‘exchange telecommunications’ —and they would originate and terminate calls from one exchange area to another exchange area — ‘exchange access.' The interex-change portion of calls from one exchange area to another exchange area would, however, be carried by A.T. & T. and the other interexchange carriers, such as MCI and Southern Pacific Co.” [Footnote references deleted]

3 . Blackmon v. State, Tex.Cr.App., 642 S.W.2d 499, 500 [1982]; State v. McKay, 680 S.W.2d 447, 450 [Ten.1984]; Holland v. Independent Fire Ins. Co., 168 Ga.App. 761, 310 S.E.2d 297, 298 [1983]; State v. Harmon, 107 Idaho 73, 685 P.2d 814, 817 [1984]; Nandorf, Inc. v. CNA Ins. Companies, 134 Ill.App.3d 134, 88 Ill.Dec. 968, 479 N.E.2d 988, 993 [1985].

This court acknowledged in Dority v. Green Country Castings Corp., Okl., 727 P.2d 1355, 1359 n. 24 [1986], that an inferior federal court’s pronouncement on a federal-law question is "highly persuasive” even though not binding on a state court of last resort. In the present case, we deal with state rate regulation not federal antitrust law. Hence, the principles of A.T. & T. provide insight into but are not determinative of the issues before us today.

4 . Hicks v. Miranda, 422 U.S. 332, 344-345, 95 S.Ct. 2281, 2289-2290, 45 L.Ed.2d 223, 236 [1975].

5 . Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 499, 101 S.Ct. 2882, 2888, 69 L.Ed.2d 800, 809 [1981]; Mandel v. Bradley, 432 U.S. 173, 176, 97 S.Ct. 2238, 2240, 53 L.Ed.2d 199, 204 [1977].

6 . Supra note 5 97 S.Ct. at 2240.

7 . Rate regulation is designed to prevent a public utility from making excess monopoly profits and to assure fair prices and adequate service to consumers. The most common method of rate regulation, and the method used in Oklahoma, is to control the utility’s aggregate revenue by application of the formula R = O + B(r). Application of Oklahoma Natural Gas Company, Okl, 406 P.2d 273, 277 [1965] and State ex rel. Cartwright v. Okl. Natural Gas, Okl., 640 P.2d 1341, 1349 [1982].

"R" represents the utility’s allowed revenue requirements.

“(r)” is the utility’s allowed rate of return on its rate base. A public utility is entitled to earn a rate of return sufficient to enable it to operate successfully, maintain its financial integrity, attract capital and compensate its investors for the risk assumed. Lone Star Gas Co. v. Corporation Com’n., Okl., 648 P.2d 36, 39 [1982].

“O” represents the utility’s operating expenses. It encompasses both out-of-pocket costs, such as wages and raw materials, and depreciation of capital assets used to provide the regulated product. Since rates are determined prospectively, “O” should theoretically represent the firm’s future operating expenses, but since the future is difficult to forecast, "O” traditionally has been based upon actual expenses incurred by the utility during a recent past period referred to as the "test year.” This is the method employed in Oklahoma. Southwestern Public Service Co. v. State, Okl., 637 P.2d 92, 98 [1981]. The test year in the present case was 1984. “B” represents the utility’s rate base. This is the amount upon which the utility is permitted to make a profit. Application of Oklahoma Natural Gas Co., supra at 277. In Oklahoma this amount is based upon the value of the property “used and useful in [the utility’s] public service business at the time the inquiry was made.” Southwestern Public Service Co. v. State, supra at 97. Consideration is given to both original cost and present reproduction cost, less depreciation, together with all other facts and circumstances which could have a bearing upon the value of the property. Lone Star Gas Co. v. Corporation Com’n, supra at 38.

The Commission used the following data in applying the basic formula:

8 . Application of Valliant TeL Co., Okl., 656 P.2d 273, 275 [1982] and State ex rel. Cartwright v. Okl. Natural Gas, supra note 7 at 1347.

9 . State ex rel. Cartwright v. Okl Natural Gas, supra note 7 at 1347 and Application of Valliant Tel Co., supra note 8 at 275.

10 . Teleco, Inc. v. Corporation Com’n., Okl., 653 P.2d 209, 212 [1982].

The terms of 52 O.S.1981 § 111 provide in pertinent part:

“* * * On appeal every such [Commission] order, rule or regulation shall be regarded as prima facie, valid, reasonable and just. * * * " [Emphasis supplied.]

11 . Arkansas La. Gas Co. v. Sun Oil Co. of Pa., Okl., 554 P.2d 14, 16 [1976]; State v. Southwestern Bell Tel. Co., Okl., 662 P.2d 675, 679 [1983]; Teleco, Inc. v. Corporation Com’n., supra note 10 at 212, and Bishop v. Corporation Commission, Okl., 394 P.2d 235, 236 [1964].

12 . Application of Valliant Tel Co., supra note 8 at 275 and 277.

13 . The terms of 12 O.S.1981 § 1031.1 provide: "Within thirty (30) days after the rendition of a judgment, the court, of its own initiative or on motion of a party, may correct, open, modify or vacate the judgment. The court may prescribe what notice, if any, shall be given.” [Emphasis supplied.]

14 . Matter of Chad S., Okl., 580 P.2d 983, 984-985 [1978] and Orthopedic Clinic v. Jennings, Okl., 481 P.2d 139, 141 [1971].

15 . The terms of Rule 24, Corporation Commission Rules of Practice, effective August 1, 1985, provide in pertinent part:

“RULE 24. RELIEF FROM ORDERS OF THE COMMISSION

(a) Within ten (10) days after an order of the Commission is entered, any person may file a motion for rehearing, or a motion to set aside or to modify the order, or for any other form of relief from the order. * * * Such motion shall be set for hearing before the Commission, unless referred. * * *

(b) At any time subsequent to ten (10) days after entry of an order of the Commission, an application to vacate or modify the order, or for any other form of relief from the order, filed by any person, whether or not a party of record in the original cause, shall be treated as a separate cause, and shall be governed by rules applicable to the commencement of a cause_" [Emphasis supplied.]

16 . Western Okl. Chapter, Etc. v. State, Etc., Okl., 616 P.2d 1143, 1146 [1980] and Garrison v. State, Okl., 420 P.2d 474, 476 [1966]; see also, Matter of Chad S., supra note 14 at 984-985 and Orthopedic Clinic v. Jennings, supra note 14 at 141 for a discussion of the historical antecedents of the 12 O.S. 1981 § 1031.1.

17 . After 30 days following its entry a Commission order can no longer be appealed. Art. 9, § 20, Okl.Const., infra note 20, provides that appeals from Commission orders must be taken within the same time as appeals from district court judgments. 12 O.S. 1981 § 990 provides that an appeal from a district court judgment must be brought within 30 days. Hence, appeals from Commission orders to this court must be brought within 30 days. Furthermore, filing a motion to modify a Commission order does not extend the 30-day period. 12 O.S. 1981 § 991(a), infra note 24. See also, Rule 1.86(b), Rules on Perfecting a Civil Appeal, 12 O.S.1981, Ch. 15, App. 2, which states:

"Any party desiring to procure a review of a decision of the Corporation Commission rendered in the exercise of its constitutional powers to regulate ... public utility and public service corporations may commence an appeal ... by filing a petition in error within thirty days from the date of the decision_”

18 . Crews v. Shell Oil Company, Okl., 406 P.2d 482, 487 [1965].

19 . Crews v. Shell Oil Company, supra note 18 at 487 and Garrison v. State, supra note 16 at 476.

20 . In Southwestern Bell Telephone Co. v. State, 181 Okl. 246, 71 P.2d 747, 748 [1937] (Syllabus 1), the court stated:

“Where the Corporation Commission of Oklahoma has jurisdiction of a proceedings [sic] to inquire into the reasonableness of the rates charged by a public utility in Oklahoma, and after a full hearing thereon has made an order, the commission has implied power and authority to entertain an application for rehearing on the matter and the power to set aside its order and upon reconsideration of the matter to enter another order; provided such is done within a reasonable time and before an appeal from such order has been lodged in the Supreme Court and no prejudice thereby is shown." [Emphasis added.]

21 . See infra note 24 for text of 12 O.S.1981 § 991(a).

22 . Transok Pipe Line Company v. Darks, Okl., 515 P.2d 218, 219 [1973].

23 . The terms of Art 9, § 20, Okl. Const, provide in pertinent part:

"From any action of the Corporation Commission prescribing rates, charges, services, practices, rules or regulations of any public utility or public service corporation, or any individual, person, firm, corporation, receiver or trustee engaged in the public utility business, an appeal may be taken by any party affected, or by any person deeming himself aggrieved by any such action, or by the State, directly to the Supreme Court of the State of Oklahoma, in the manner and in the same time in which appeals may be taken to the Supreme Court from the District Courts,. except that such an appeal shall be of right, and the Supreme Court may provide by rule for proceedings in the matter of appeals in any particular in which the existing rules of law are inapplicable. If such appeal be taken by the public utility or public service corporation affected by any such action, the State of Oklahoma shall be made the appellee, but in other appeals hereunder, the public utility or public service corporation affected shall be made the appellee.

An appeal from an order of the Corporation Commission affecting the rates, charges, services, practices, rules or regulations of public utilities, or public service corporations, shall be to the Supreme Court only, and in all appeals to which the State is a party it shall be represented by the Attorney for the Corporation Commission, and the Attorney General, or his duly authorized representative. * * * ” [Emphasis supplied.]

24 .The terms of 12 O.S.1981 § 991(a) provide: "(a) The right of a party to perfect an appeal from a judgment, order or decree of the trial court to the Supreme Court shall not be conditioned upon his having filed in the trial court a motion for a new trial, but in the event a motion for a new trial is filed in the trial court by a party adversely affected by the judgment, order or decree, no appeal to the Supreme Court may be taken until subsequent to the ruling by the trial court on the motion for a new trial. This provision shall not apply, however, to an appeal from an order of the Corporation Commission." [Emphasis supplied.]

25 . The rate base in Oklahoma is founded upon the value of property "used and useful in [the utility’s] public service business at the time the inquiry was made." Southwestern Public Service Co. v. State, supra note 7 at 97. Also see, Okmulgee Gas Co. v. Corporation Commission, 95 Okl. 213, 220 P. 28 [1923].

26 . "As long as a Regional Holding Company is engaged in both monopoly and competitive activities, it will have the incentive as well as the ability to ‘milk’ the rate-of-return regulated monopoly affiliate to subsidize its competitive ventures and thereby to undersell its rivals in the markets where there is competition ... To the extent that a Regional Holding Company used the same facilities, equipment, and personnel to serve both its regulated and its unregulated activities, it would have the ability to overallocate the costs assigned to the former in order to maximize the amount that would be passed on to the ratepayers (who have no choice but to pay). Not only would this improper assignment of costs burden the rate payers; it would also enable the company profitably to charge less for its competitive products and services than do its rivals who enjoy no such subsidy." United States v. Western Elec. Co., Inc., 592 F.Supp. 846, 853 [D.D.C.1984]. This view is also expressed in Smith v. Illinois Bell Teleph. Co., 282 U.S. 133, 157, 51 S.Ct. 65, 72, 75 L.Ed. 255, 267 [1930]; General Tel. Co. of Upstate N.Y. v. Lundy, 17 N.Y.2d 373, 271 N.Y.S.2d 216, 222-23, 218 N.E. 2d 274, 278-279 [1966]; New England T. & T. Company v. Dept. of Pub. Util, 371 Mass. 67, 354 N.E.2d 860, 868-869 [1976]; Washington Water Power v. Idaho Public Util, 101 Idaho 567, 617 P.2d 1242, 1247-1248, 16 A.L.R.4th 435 [1980]; Pacific Telephone and Telegraph Co. v. Flagg, 189 Or. 370, 220 P.2d 522, 529-530 [1950] and Town of New Shoreham v. R.I. Pub. Util Com'n., 464 A.2d 730, 733 [R.I.1983].

27 . Boise Water Corp. v. Idaho Public Util. Commission [Boise Water I], 97 Idaho 832, 555 P.2d 163, 167-169 [1976]; Boise Water Corp. v. Idaho Public Util. Com’n. [Boise Water II], 99 Idaho 158, 578 P.2d 1089, 1090, 1091 [1978]; Washington Water Power v. Idaho Public Util., supra note 26, 617 P.2d at 1251 and Southwestern Bell v. State Corp. Com’n of Kan., 4 Kan.App.2d 44, 602 P.2d 131, 133 [1979],

28 . Southwestern Public Service Co. v. State, supra note 7 at 102; United Fuel Gas Co. v. Railroad Commission, 278 U.S. 300, 320, 49 S.Ct. 150, 156, 73 L.Ed. 390, 401 [1929] and Houston v. Southwestern Bell Teleph. Co., 259 U.S. 318, 323, 42 S.Ct. 486, 488, 66 L.Ed. 961, 964 [1922],

29 . In Boise Water I, supra note 27 at 555 P.2d at p. 169 the court states:

‘The reason for this distinction between affiliate and non-affiliate expenditures appears to be that the probability of unwarranted expenditures corresponds to the probability of collusion. In dealing with non-affiliates the pressures of a competitive market and the fact of arm’s length bargaining for goods and services allows us to assume, in absence of a showing to the contrary, that such operating expenditures are legitimate.” [Emphasis theirs.]

See also, Dayton P. and L. Co. v. Comm’n., 292 U.S. 290, 295, 54 S.Ct. 647, 650, 78 L.Ed. 1267, 1273 [1934].

30 . State ex rel. Cartwright v. Okl. Natural Gas, supra note 7 at 1346.

31 . Excerpts from the Rate Order’s Summary of Evidence attest to the thoroughness of the Staff’s audit.

******

"By confining the audit to the last quarter, Staff was able to audit this period more intensively, and use the time saved to investigate related areas, such as Headquarters expenses, holding company/subsidiary relationships, and Bell Communications Research (BCR).

******

"Staff disallowed 96.4% of advertising expenses, at an annual rate of $3,082,296. Staff reviewed all advertising copy for expenses incurred in the test year. In several instances, advertisements were found which were information oriented, but they were disallowed in accordance with the Oklahoma Statutes since they did not carry the statement ‘paid for by ratepayers.' Staff disallowed all contributions and club dues (annual amount of $411,176).

“Mr. Buck explained a year end composite factor of 93.47% was used to allocate SBC fourth quarter expenses to SWBT, and a composite factor of 12.20% to allocate to Oklahoma, resulting in a downward adjustment of ($77,348) for the quarter. This computed amount was then compared to the actual amount of SBC costs charged to Oklahoma, with an adjustment made for the difference. Since Staff adjustments had already been made in the area of advertising, contributions and dues, aircraft expense, and treasury department expense, these amounts were removed both from the SBC expense allocation pool and the amount actually allocated to SWBT, thus avoiding double counting. An adjustment of minus ($460,011) for the quarter was made to SBC allocated Treasury Department costs, because they were abnormally high in the last quarter. An adjustment was made to normalize SBC executive department and pensions/benefits expenses of a negative ($111,916) for the quarter. Mr. Buck further testified he used an Oklahoma prorate factor of 12.20% to allocate G.H.Q. expenses for the last quarter, resulting in an adjustment of a negative ($733,576) for the quarter.

"Mr. Buck further testified a review was made of the financial records to ascertain what records are available to support Bellcore’s financial statements, its billings to its owners, and its reports of charges to work projects. This involved the examination of procedures for cost allocation, overhead cost processing and billing, and entailed the tracking of costs back through the system to the point of examining original source documents such as expense vouchers on a sample basis.

******

"Ms. Borgmier explained how costs were tracked to specific activities, projects, or services. In Ms. Borgmier’s analysis of the allocation factors she found the reported last quarter factors to be correct based on the original data supplied.

******

“The basis for apportioning the GHQ headquarters expenses follow the principles is [sic] outlined in the ‘Separations Manual’ prepared by the NARUC-FCC Cooperative Committee on Communications.

******

"Ms. Borgmier examined the basis for the prorate factors and made a judgment as to their reasonableness. She obtained original data used for computing the factors and recomputed the factors to ascertain that the Oklahoma portion was, in fact, based on the stated factors. She found some inconsistencies in the data reported by the states to GHQ for use in calculating the prorate factors. Her findings, together with the need for a means to year end the prorate factors, led her to calculate a composite prorate factor of 12.-20 percent based on each state’s year end investment and employees, and the revenues and expenses for the last quarter of 1984. She recommended this composite prorate factor be used to calculate the year end level of GHQ expense charged to Oklahoma. This resulted in an adjustment of $6,021,496 (total state) for the test year. Since Staff made several adjustments and specific expense disallowances to the prorated GHQ expense, Mr. Buck incorporated the 12.20 prorate percentage in calculating his adjustment to the GHQ expense for the test year and recommended a disallowance of $2,934,304 on an Oklahoma intrastate basis.”

See Commission rate Order of January 29, 1986 at pages 17, 18 and 20.

32 . See Commission rate Order of January 29, 1986 at pages 19 and 20.

33 . See Commission rate Order of January 29, 1986 at pages 19 and 20.

34 . Boise Water I, supra note 27 555 P.2d at 167-169; Boise Water II, supra note 27 578 P.2d at 1090, 1091; Washington Water Power v. Idaho Public Util, supra note 26 617 P.2d at 1251 and Southwestern Bell v. State Corp. Com’n of Kan., supra note 27 602 P.2d at 133.

35 . Chesapeake and Ohio Ry. Co. v. Public Utilities Com’n, 163 Ohio St. 252, 126 N.E.2d 314, 319.

36 . The evidentiary effect of the burden of proof imposed on public utilities with regard to payments to affiliates is discussed in Boise Water I, supra note 27 555 P.2d at 167-171; Boise Water II, supra note 27 578 P.2d at 1090-1092; Washington Water Power v. Idaho Public Util, supra note 26 617 P.2d at 1247-1254 and Southwestern Bell v. State Corp. Com’n of Kan., supra note 27 602 P.2d at 133-141.

37 . Boise Water I, supra note 27 555 P.2d at 167-171; Boise Water II supra note 27 578 P.2d at 1090, 1091 and Washington Water Power v. Idaho Public Util, supra note 26 617 P.2d at 1251.

38 . "The burden does not shift to the Commission until the utility makes a showing of the reasonableness of its expenses. In the present case, as in most, this requires more than simply showing the actual cost to the affiliate of providing the service expensed. The reasonableness of the expense to the utility, for ratemaking purposes, will depend, among other factors, on whether the services provided themselves are necessary or beneficial to Kansas ratepayers." [Emphasis theirs.] Southwestern Bell v. State Corp. Com’n of Kan., supra note 27 602 P.2d at 136-137.

39 . Southwestern Bell v. State Corp. Com’n of Kan., supra note 27 602 P.2d at 136-137.

40 . Application of Valliant Tel. Co., supra note 8 at 275 and 277.

41 . “The commission’s decisions involve the difficult problems of policy, accounting, economics and other special knowledge that go into rate making. It is equipped with a staff of assistants, with experience as statisticians, accountants and engineers. The courts have no compa-rabie suitability for making the determination." Southwestern Bell Tel. Co. v. State Corp. Com’n., 192 Kan 39, 48-49, 386 P.2d 515, 525 [1963]; Southwestern Bell v. State Corp. Com’n of Kan., supra note 27 602 P.2d at 135; see also, State ex rel. Cartwright v. Okl. Natural Gas, supra note 7 at 1346 and Washington Water Power v. Idaho Public Util., supra note 26 617 P.2d at 1248-1250.

42 . These minimum guidelines are suggested in one of the dissents. The court also refers the Commission to Section XII of another dissent for further guidance in establishing minimum standards of disclosure for SWBT. Unlike the author of the latter dissent, the court does not believe that the entire rate order must be vacated and remanded. The court also disagrees with the following parts of the thesis advanced in Section XII of that dissent;

1. Income taxes paid by SWBT are not properly includable as an operating expense. [See Oklahoma Natural Gas Co. v. Corporation Commission, 90 Okl. 84, 216 P. 917, 922 (1923) ].

2. The court should determine SWBT’s appropriate rate of return on equity.

3. The Commission Staff should conduct a detailed audit of the records of each affiliate. [While those transactions defined as “payments to affiliates” must be carefully audited, the Staffs resources are limited and they

should concentrate on conducting detailed audits of SWBT’s payments to affiliates.]

4. Prepayments of operating expenses may not be included in cash working capital.

5. The court should select the appropriate depreciation method for SWBT.

43 . One of the dissents voices well-founded concern about SWBT’s method of billing its affiliates for services on an incremental cost plus contribution basis.

There are several reasons for billing affiliates for services on an incremental cost basis — the preferred method according to managerial accounting theory. For example, as in the present case, there may not be a readily ascertainable market price. Also, unless fixed assets are being used at full capacity, a corporation can always increase its overall profitability by selling additional units at a price above its incremental or variable cost for that unit. While incremental cost pricing is appropriate for transactions between two unregulated affiliates, when one of the affiliates is a regulated entity a new problem is introduced. Since ratepayers have paid the cost of the fixed assets of a regulated affiliate, they are entitled to recover from the price charged to an unregulated affiliate not only the variable costs but also the fixed costs of producing the product.

44 . Washington Water Power v. Idaho Public Util., supra note 26 617 P.2d at 1247.

45 . Washington Water Power v. Idaho Public Util., supra note 26 617 P.2d at 1250-1251.

46 . Ohio Bell Teleph. Co. v. Public Utilities Com., 301 U.S. 292, 301, 57 S.Ct. 724, 729, 81 L.Ed. 1093, 1100 [1937].

47 . In United States v. Western Elec. Co., Inc., supra note 26 at 854, the court stated:

“[a] Regional Holding Company could also subsidize its competitive ventures by transferring assets from its regulated affiliates to its unregulated affiliates at less than their cost or below their market value. Such a practice would not only adversely affect the ratepayers who ultimately fund the research and development costs of the transferred assets, but it would, once again, impede fair and effective competition in the competitive market: this cross subsidization would give the company’s unregulated enterprise an obvious and improper advantage over its competitors.”

48 .This contribution, when allocated on an access line basis, lowers the rate by approximately $2.60 per customer per month. Commission rate order of January 29, 1986 at p. 47.

In United States v. American Tel. and Tel. Co., supra note 1 at 194, the court stated:

"All those who have commented on or have studied the issue agree that the Yellow Pages provide a significant subsidy to local telephone rates.... The loss of this large subsidy would have important consequences for the rates for local telephone service_ This result is clearly contrary to the goal of providing affordable telephone service for all Americans.” [Footnote references deleted.]

49 . In United States v. American Tel and Tel Co., supra note 1 at 201 and 203, the court stated:

"Those who claim that the Operating Companies should be compensated for assets transferred to AT & T misperceive both the law and the nature of the proposed reorganization. Under long-established general legal principles, the transfer of assets between a parent and its subsidiary is not an arm’s length transaction for which compensation is required. Corporate law holds that such a transfer constitutes an intra-enterprise exchange for which compensation is not necessary.

******

Opponents of the settlement rely on Democratic Central Committee v. Washington Metropolitan Transit Commission, 485 F.2d 786 [D.C.Cir.1973], as allegedly requiring a different result. To be sure, the Court of Appeals held in that case that capital gains realized on the disposition of assets do not automatically flow to the firm’s investors but instead inure to the benefit of ratepayers, and opponents of the proposed decree conclude from that holding that AT & T must compensate the Operating Companies and thus, indirectly, local ratepayers. But there is a crucial difference between the disposition of assets that was involved in that case and the transfer of assets proposed here. In Democratic Central Corn-mittee, the assets were taken out of operation and out of the rate base; obviously, when this occurred a gain was realized and it then became necessary to determine to whom the benefit of that gain should inure. But no assets are here being removed from public service: the same assets will continue to he used to provide the same services to the same ratepayers, and the assets will remain subject to the same ratemaking jurisdictions of the same regulators.

******

This result also makes sense from a practical point of view, for several reasons.

* * . * * * *

Third, payment of compensation would convert what would otherwise be a tax-free transfer into a taxable exchange, thus exposing the Operating Companies to possibly billions of dollars in federal and state tax liabilities.” [Footnote references deleted.]

50 . As noted in section IV of one of the dissents:

"... the fact remains that evaluating SWBT’s property rights will not become less difficult as time goes by. Indeed it will be more difficult because the more time that elapses between the divestiture and the determination of vital facts and resolutions of critical issues, the more difficult it will be to unravel further complexities wrought by constant corporate shifting of assets and modifications of accounting principles and procedures. The sooner the issue is resolved the better.”

51 . The debt-equity ratio “substantially affects the manner and cost of obtaining new capital. It is therefore an important factor in the rate of return and must necessarily be considered by and come within the authority of the body charged by law with the duty of fixing a just and reasonable rate of return.” New England Tel. & Tel. Co. v. State, 98 N.H. 211, 220, 97 A.2d 213, 220 [1953]; Communications Satellite Corp. v. F.C.C., 611 F.2d 883, 902-903 [D.C.Cir.1977]; Equity capital is usually more expensive than interest (debt) capital for two reasons: 1) dividend payments to stockholders are not tax deductible while interest payments are and 2) advantages are sometimes gained by leverage. Leverage is the advantage that a corporation’s equity interest may possess in its ability to achieve a profit by receiving a higher rate of return on borrowed capital than the rate of interest paid. Securities and Exch. Com’n. v. Central-Ill. Sec. Corp., 338 U.S. 96, 150, n. 49, 69 S.Ct. 1377, 1404, n. 49, 93 L.Ed. 1836, 1874, n. 49 [1949].

52 . Re Western Union Telegraph Co., 25 F.C.C. 535, 600-601, 25 P.U.R.3d 385, 465 [1958].

53 . Communications Satellite Corp. v. F.C.C., supra note 51 at 904.

54 . See Communications Satellite Corp. v. F.C.C., supra note 51 at 904, where the court stated:

"Perhaps the ultimate authority for imputing debt when necessary to protect ratepayers from excessive capital charges is the Supreme Court’s statement in [F.P.C. vj Hope Natural Gas Co. [320 U.S. 591, 603, 64 S.Ct. 281, 288, 88 L.Ed. 333, 345, (1944) ] that ‘The rate-making process under the Act, i.e., the fixing of ‘just and reasonable’ rates, involves a balancing of the investor and the consumer interests' ... The equity investor’s stake is made less secure as the company’s debt rises, but the consumer rate-payer’s burden is alleviated.” [Emphasis added.]

55 . United States v. Western Elec. Co., Inc., supra note 26 at 863-864.

56 . Missouri ex rel. S. W. Bell T. Co. v. Public Serv. Com., 262 U.S. 276, 306-307, 43 S.Ct. 544, 552-553, 67 L.Ed. 981, 993 [1923] (Brandeis, L, concurring).

57 . West Ohio Gas Co. v. Public Utilities Com., 294 U.S. 63, 72, 55 S.Ct. 316, 321, 79 L.Ed. 761, 769 [1935].

58 . Kaufman testified that each of SWBC's subsidiaries secures its own debt and has a unique capital structure.

See Commission rate order of January 29, 1986 at page 13.

59 . First Boston recommended 40-43%; Morgan Stanley recommended 40-45%; Salomon Brothers recommended 40-45%.

The pertinent portions of the January 29, 1986 rate order, p. 37, state:

“Even considering that such sources and the bond rating organizations may be biased toward investor safety, their influence on the choices of investors with money to invest cannot be ignored. The effect of bond rating downgrading, particularly to below institutional investment grade, not only increases the cost of money but may cause postponement of needed repairs and expansion, all to the detriment of the customers. It appears to take a great deal longer for a company to be reinstated at a higher rating that [sic] it does to be downgraded.”

60 . As stated in Southwestern Public Service Company v. State, supra note 7 at 96:

‘The reasonableness or unreasonableness of rates prescribed by the Commission for a public utility engaged in both interstate and intrastate business must be determined with reference only to the intrastate business done within the State of Oklahoma and the profits derived from the intrastate business.”

61 . The pertinent portions of the January 29, 1986 rate order, p. 37, state:

‘The testimony of several of the witnesses presented comparisons with other telephone companies and other types of regulated utilities, and with unregulated businesses perceived to have similar business risk. Consideration of this testimony together with the Commission's awareness of the increased business pressures a number of telephone and utility companies in this State are currently experiencing, due primarily to competition and reduced demand for their services, convinces this Commission it would be detrimental to the customers of those companies under our jurisdiction to increase their business risk at this time.”

62 . 91 F.C.C.2d 578, 598, 603-604 [1982],

63 . In the Matter of American Telephone & Telegraph Co., supra note 62 at 593.

64 . In the Matter of American Telephone & Telegraph Co., supra note 62 at 598-599 and 603-604.

65 . Williams v. Washington Metropolitan Area Transit Com’n., 134 U.S.App.D.C. 342, 415 F.2d 922, 940-941 [1968] cert. denied 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 [1969]; In re Cent. Vermont Public Service Corp., 144 Vt. 46, 473 A.2d 1155, 1159 [1984] and cases there cited.

66 . Nader v. FCC, 172 U.S.App.D.C. 1, 21, 520 F.2d 182, 202 [1975]; In re Cent. Vermont Public Service Corp., supra note 65, 473 A.2d at 1159 and cases there cited.

67 . In re Cent. Vermont Public Service Corp., supra note 65 at 1159.

68 . Southwestern Public Service Co. v. State, supra note 7 at 102.

The United States Supreme Court and many state courts have also prohibited retroactive ratemaking. In re. Cent. Vermont Public Service Corp., supra note 65 473 A.2d at 1159 and cases there cited.

69 .The terms of Art. 9 § 18, Okl. Const, (as amended in 1985) provide in pertinent part that the Commission has the

«* * * ¿uty Qj supervising, regulating and controlling all transportation and transmission companies doing business in this State, in all matters relating to the. performance of their public duties and their charges therefor, and of correcting abuses and preventing unjust discrimination and extortion by such compa-nies_” [Emphasis supplied.]

70 . Southwestern Public Service Co. v. State, supra note 7 at 100.

71 . Supra, note 7.

72 . Application of Valliant Tel. Co., supra note 8 at 275 and Arkansas La. Gas Co. v. Sun Oil of Pa., supra note 11 at 16.

73 . Application of Valliant Tel. Co., supra note 8 at 277 and Public Serv. Co. of Okl. v. Okl. Corp. Com’n., Okl., 688 P.2d 1274, 1282 [1984].

74 . Teleco, Inc. v. Corporation Commission, supra note 10 at 212 and Bishop v. Corporation Commission, supra note 11 at 236.

75 . “Working capital is defined as current assets minus current liabilities. If all of the current assets were converted to cash at their book value and all of the current liabilities paid at their book value, working capital would be the amount of cash remaining." Glenn A. Welsch, Charles T. Zlatkovich and Walter T. Harrison, Jr., Intermediate Accounting, 6th ed. [Home-wood, Illinois: Richard D. Irwin, Inc., 1982], p. 113.

"Current assets are cash and other assets, commonly identified as those which are reasonably expected to be realized in cash, or to be sold or consumed during the normal operating cycle of the business or within one year from the bal-anee sheet date, whichever is longer. The normal operating cycle is defined as the average period of time between the expenditure of cash for goods and services and the date those goods and services are converted back into cash. * * * The major items comprising current assets, in order of liquidity, are cash, short-term investments, receivables, inventories, and prepaid expenses.” Welsch, supra at 111.

“ * * * [C]urrent liabilities are short-term liabilities ‘whose liquidation is reasonably expected to require the use of existing resources properly classified as current assets, or the creation of other current liabilities.’ [AICPA, Accounting Research and Terminology Bulletins, Final Edition (N.Y., 1961), p. 21] * * * This definition includes items such as revenue collected in advance, which entails an obligation to ‘perform or render the revenue activity¹ within the next year or operating cycle, whichever is longer. Also included in current liabilities are liabilities whose liquidation is expected to occur within a relatively short period of time, usually one year.” Welsch, supra at 111. The major items comprising current liabilities are accounts payable, short-term notes payable, current maturities of long-term liabilities, collections in ad-vanee for unearned revenue, and accrued expenses for payrolls, interest, and taxes. See Welsch, supra at 112.

The amount of working capital is viewed as a measure of liquidity, that is, the ability of the enterprise to meet its short-term obligations. See Welsch, supra at 113.

76 . A prepaid expense occurs when services or supplies were purchased or otherwise acquired but not consumed or used by the end of the accounting period. For example, a three-year insurance premium would not be used or consumed by the end of the accounting period in which it was purchased and would thus be a prepaid expense. Welsch, supra note 75 at 47.

77 . Commission rate order of January 29, 1986 at p. 41.

78 . Nancy B. Bright, witness for the Attorney General, stated in her prefiled testimony:

"The working capital requirement associated with prepaid expenses, as well as cost free capital sources, would have been fully reflected in a valid lead/lag study, if one were available. The Company’s failure to file a lead/lag study should not give it the opportunity to selectively increase rate base for prepaid expenses, with no offset for cost free capital sources such as accrued taxes. Given available evidence in this case, the appropriate cash working capital allowance, including prepayments, is zero.” [Emphasis supplied.] [Ex. No. A30, p. 44, Tr. Vol. XII, p. 15Ó4]

Mr. T.D. White, SWBT’s Chief Accountant, stated in response to cross examination:

"Q. Would it be true to say that a valid lead/lag study would include prepayment expenses in its calculation?

A. A lead/lag study would include anything which involves the movement of cash one way or the other.

Q. And that would include prepayment?

A. It could include prepayments. Now, there is no standard way of making a lead/lag study.

Q. I understand that. But as a general premise, a prepayment is—

A. If you include prepayments as a separate item of cap structure — I mean of your rate base, I would not include prepayments in the lag study.” [Emphasis supplied.] [Tr. Vol. II, p. 165]

79 . See Welsch, supra note 75 at 822-823.

80 . Southwestern Public Service Co. v. State, supra note 7 at 101.

81 . In the exercise of its power under Art. 9, § 20, Okl. Const., to review the Commission’s rate orders, the Supreme Court can modify the order and remand it with instructions to change or modify the order to conform to the appellate court’s pronouncement. See supra note 23 and the text in the introduction for the pertinent terms of Art. 9, § 20, Okl. Const.

See also the terms of 17 O.S.1981 § 7 which provide in pertinent part: " * * * If the judgment of the Commission is reversed or modified by the Supreme Court, the same shall be remanded to the Commission with instruction to change or modify the former judgment of the Commission to conform to the opinion of the Supreme Court. The Supreme Court may remand any case for additional evidence or rehearing, and make such final order or judgment in the case as the Court may deem proper" [Emphasis supplied.]

1 . Okl. Const, art. 9, § 20, reads in pertinent part:

"The Supreme Court’s review of appealable orders of the Corporation Commission shall be judicial only, and in all appeals involving in [sic ] asserted violation of any right of the parties under the Constitution of the United States or the Constitution of the State of Oklahoma, the Court shall exercise its own independent judgment as to both the law and the facts. In all other appeals from orders of the Corporation Commission the review by the Supreme Court shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence. Upon review, the Supreme Court shall enter judgment, either affirming or reversing the order of the Commission appealed from." (Emphasis added.)

Okl.Const. art. 9, § 22, reads in relevant part:

"The Corporation Commission shall, whenever an appeal is taken therefrom, file with the record of the case, and as a part thereof, a written statement of the reasons upon which the action appealed from was based, and such statement shall be read and considered by the Supreme Court, upon disposing of the appeal.... [T]he cause shall be heard on the record made before the Corporation Commission, and the Chairman of the Commission, under the seal of the Commission, shall certify to the Supreme Court all the facts upon which the action appealed from was based, and which may be essential for the prompt decision of the appeal, together with all evidence introduced before said Corporation Commission, as may be selected, specified or required to be certified, by any party in interest, as well as such other evidence, so introduced before the Commission as the Chairman may deem proper to certify_” (Emphasis added.)