No. 86SA53Supreme Court of Colorado.
Decided March 14, 1988.
Appeal from the District Court, City and County of Denver Honorable Paul A. Markson, Jr., Judge
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Anthony Marquez, for Colorado Office of Consumer Counsel.
Gorsuch, Kirgis, Campbell, Walker and Grover, Dudley P. Spiller, Jr., Joseph B. Wilson, for Colorado Municipal League.
Duane Woodard, Attorney General, Charles B. Howe, Chief Deputy Attorney General, Richard H. Forman, Solicitor General, Mark A. Davidson, Assistant Attorney General, Eugene C. Cavaliere, Assistant Attorney General, for Public Utilities Commission.
Eiberger, Stacy Smith, Steven H. Denman, for Mountain States Telephone and Telegraph Company.
EN BANC
JUSTICE VOLLACK delivered the Opinion of the Court.
[1] The Colorado Municipal League (League) and the Office of Consumer Counsel (Office) appeal the order of the Denver District Court affirming the decisions of the Public Utilities Commission (Commission) to permit tariff increases requested by Mountain States Telephone and Telegraph Co. (Mountain Bell) to go into effect. The League and the Office claim that the Commission abused its discretion in failing to hold formal hearings, in permitting the tariffs to become effective on less than thirty days notice, and in failing to consider test year data.[1] The Office makes the additional claim that the district court improperly dismissed its complaint for failure to exhaust administrative remedies. We affirm the judgment of the district court.Page 1051
I.
[2] This appeal traces it origins to Advice Letter 1980 filed by Mountain Bell on December 7, 1984. Advice Letter 1980 sought to implement tariffs designed to produce annual revenue increases of approximately $19 million. The tariffs were sought to offset higher costs attributable to its implementation of Equal Life Group (ELG) depreciation methods and to its shortening of the amortization period of customer premises wiring (CPW) from seven to three years. The proposed effective date of Advice Letter 1980 was March 1, 1985.
II.
[8] The district court held that it lacked jurisdiction to hear the Office’s claims because the Office failed to apply for rehearing of the March 12 decisions. The Office claims that its failure to apply for rehearing of the March 12 decisions does not preclude it from seeking judicial review. In support of this position, the Office argues that it made a timely application for rehearing of the February 21 decisions, that the March 12 decisions were not substantial modifications of the February 21 decisions, and that it raised no argument to
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the district court other than those raised in its application for rehearing of the February 21 decisions. We conclude that failure to apply for rehearing of the March 12 decisions precludes the Office from seeking judicial review.
[9] The Office and the Commission agree that section 40-6-114, 17 C.R.S. (1984) is the appropriate statute to consider in determining whether the Office can obtain judicial review of the March 12 decisions. The Office’s interpretation of section 40-6-114, however, differs from that of the Commission. Our primary role is to construe statutes so as to effectuate the intent of the General Assembly. In ascertaining that intent, words and phrases should be given their plain and obvious meaning. Englebrecht v. Hartford Accident Indem. Co., 680 P.2d 231, 233 (Colo. 1984). [10] A plain reading of subsections (1), (3) and (4) to section 40-6-114reveals that the Office’s failure to apply for rehearing of the March 12 decisions is a defect fatal to its petition for judicial review. Subsection (1) permits a dissatisfied party to dispute the Commission’s decision by filing an application for rehearing within twenty days thereafter. Subsection (3) requires[2] the party to file a second application for rehearing of a decision reversing, changing or modifying the original decision within the time specified in subsection (1). Subsection (4) permits the party whose application for rehearing is denied to enforce, suspend, modify or set aside the decision “in a district court of the state of Colorado, as set forth in this article, but not otherwise.” §40-6-114 (emphasis added). The clear import of these subsections is that failure to apply for rehearing of the March 12 decisions modifying the February 21 decisions precludes the Office from setting aside the March 12 decisions in district court. See Public Util. Comm’n v. Northwest Water Corp., 168 Colo. 154, 167, 451 P.2d 266, 272 (1969); Bender, Prosecuting an Appeal from a Decision of the Colorado Public Utilities Commission, 16 Colo. Law. 2163, 2164 (1987). [11] Contrary to the claims of the Office, section 40-6-114(3) does not require a subsequent decision to be a substantial modification of the original decision. Section 40-6-114(3) provides: [12] “If after rehearing, reargument, or reconsideration of a decision of the commission it appears that the original decision is in any respect unjust or unwarranted, the commission may reverse, change, or modify the same accordingly. Any decision made after rehearing, reargument, or reconsideration, reversing, changing, or modifying the original decision, shall be subject to the same provisions with respect to rehearing, reargument, or reconsideration as an original decision. . . .” [13] 17 C.R.S. (1984). The Commission modified its February 21 decisions by explaining more fully in the March 12 decisions its reasons for the new tariffs.[3] These modifications could have been challenged by the
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Office simply by filing a second application for rehearing. All of the Commission’s decisions denying rehearing of the February 21 and March 12 decisions included reminders to the parties of the twenty day requirement of section 40-6-114(1). The League filed a second application for rehearing and exhausted its administrative remedies, while the Office did not. Failure to exhaust administrative remedies precludes a party from seeking judicial review of an administrative decision. Colorado Mun. League v. Public Util. Comm’n, 197 Colo. 106, 118, 591 P.2d 577, 585
(1979); Public Util. Comm’n v. Poudre Valley Rural Elec. Ass’n, 173 Colo. 364, 480 P.2d 106 (1970); Denver-Laramie-Walden Truck Line, Inc. v. Denver-Ft. Collins Freight Serv., Inc., 156 Colo. 366, 399 P.2d 242
(1965).
III.
[15] The League contends that the Commission abused its discretion by failing to hold a formal hearing when it permitted the tariffs to go into effect. It argues that a reading of section 40-6-109(5) together with Rule 17 of the Commission’s Rules of Practice and Procedure requires the Commission to hold a formal hearing whenever a timely protest is filed. The Commission argues that neither section 40-6-109(5) nor Rule 17 is apposite, and that the appropriate statutory authorities, section 40-6-111(1)(a) and Rule 18 of the Commission’s Rules of Practice and Procedure, make the decision to hold a hearing discretionary. We conclude that the Commission was not required to hold a hearing when it permitted the tariffs to go into effect.
in Public Serv. Co. v. Public Util. Comm’n, 653 P.2d 1117 (Colo. 1982). [19] “Colorado has a `file and suspend’ system of public utility ratemaking. The procedure is initiated by the utility’s filing of tariffs with the Commission setting forth the proposed new rates. If the Commission does not suspend the rates, they go into effect automatically in thirty days, or in a lesser time if the Commission so orders. Section 40-6-111(2), C.R.S. 1973. The Commission may, however, order a hearing and suspend the tariffs for two periods not exceeding an aggregate of 210 days If a hearing is ordered, all parties are `entitled to be heard, examine and cross-examine witnesses, and introduce evidence.’ Section 40-6-109(1), C.R.S. 1973.”
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[20] Id. at 1121 (citation omitted) (emphasis added). [21] The League nevertheless contends that section 40-6-109(5) is the controlling statute.[4] Section 40-6-109(5) describes procedures for the taking of evidence in noncontested or unopposed proceedings. It is an inappropriate vehicle for requiring a hearing in this contested proceeding because it refers to noncontested or unopposed proceedings. Rule 17 of the Commission’s Rules of Practice and Procedure is similarly inapposite, because, as its title indicates, the rule applies to noncontested proceedings.[5] [22] The appropriate rule to consider is not Rule 17, but Rule 18 of the Commission’s Rules of Practice and Procedure, 4 C.C.R. 723-1 (1987). Rule 18(I)(A)(4) permits the Commission to suspend the effective date of a contested tariff proposal if the tariff warrants additional investigation “in the discretion and judgment of the Commission.” Rule 18(I)(A)(5) states: “[T]he Commission may, in its own discretion and judgment . . . grant permission for rates and tariffs to become effective without formal hearing and without requiring the thirty days’ notice . . . .” 4 C.C.R. 723-1 at 14. [23] The unambiguous language of section 40-6-111 and Rule 18, and the cases construing them, support the conclusion that the Commission is vested with discretion to refuse to hold a hearing before permitting a proposed tariff to go into effect. Accordingly, we conclude that the district court correctly held that the Commission did not abuse its discretion in refusing to grant the League’s request for a hearing.IV. A.
[24] The League claims that the Commission abused its discretion in permitting the tariffs to become effective on less than thirty days notice because it failed to show good cause under section 40-3-104(2) for expediting the effective date. The League argues that the power of the Commission to expedite the effective date of a proposed tariff is a “narrow and extraordinary exception” to the due process rights granted in section 40-3-104 that can be exercised only “in unusual or emergency circumstances.” The League proposes that good cause, in the context of public utilities proceedings, requires a “showing of extraordinary circumstances, either unique or urgent.” We do not agree.
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4 C.C.R. 723-1 (1987), sets forth guidelines for the Commission to follow in permitting tariffs to become effective on less than thirty days notice. These guidelines include the amount of the previous tariffs, the amount of the proposed tariffs, the “circumstances and conditions” relied upon in expediting the effective date, and prior relevant Commission proceedings. 4 C.C.R. 723-1 at 14.
[26] We are guided by the following rules in determining whether the Commission had good cause to permit the tariffs to become effective on less than thirty days notice. In reviewing decisions of the Commission, the record must be reviewed as a whole. Rocky Mountain Natural Gas Co. v. Public Util. Comm’n, 199 Colo. 352, 617 P.2d 1175 (1980). The Commission’s findings of fact need not be presented in any particular form, and may be implied from other facts. Caldwell v. Public Util. Comm’n, 692 P.2d 1085, 1088 (Colo. 1984). Such findings are presumed to be valid, City of Montrose v. Public Util. Comm’n, 629 P.2d 619 (Colo. 1981), and must be viewed in the light most favorable to the Commission’s decisions. Home Builders Ass’n v. Public Util. Comm’n, 720 P.2d 552, 560(Colo. 1986). Findings of the Commission concerning disputed questions of fact are generally not subject to judicial review, and will not be set aside because the evidence is conflicting, or because conflicting inferences can be drawn from the evidence. Morey v. Public Util. Comm’n, 629 P.2d 1061 (Colo. 1981). Such findings will be set aside only if the record lacks competent evidence to support them. Colorado Mun. League v. Public Util. Comm’n, 687 P.2d 416, 419 (Colo. 1984). [27] The record reveals competent evidence to support the conclusion that the Commission considered all of the factors described in Rule 18(I)(A)(5) in some or all of its decisions of February 21, March 12 and April 9, 1985. In particular, the Commission made several findings of fact concerning the circumstances and conditions that justified its decisions to expedite the effective date of the ELG tariff and the CPW tariff. [28] The Commission found three circumstances and conditions to justify its decision to expedite the effective date of the ELG tariff. First, the ELG tariff would align state and federal depreciation methods.[7] Second, the ELG tariff would “produce a more accurate measure of actual depreciation and [would] assist Mountain Bell in modernizing plant to meet public demands for improved service.” Third, making the ELG tariff effective on March 1 would save Mountain Bell and the Commission money and time by avoiding recomputation of various cost and revenue projections that were made after the February 5-6 informal meetings. [29] The Commission found five circumstances and conditions justifying its decision to
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expedite the CPW tariff. First, the CPW tariff would benefit Colorado ratepayers because shortening the amortization period would permit Mountain Bell to shift a greater portion of CPW costs to the interstate jurisdiction than would be possible under the previous tariff. Second, the faster write-off associated with a shorter amortization period would generate long run savings to ratepayers because the cost of the initial investment would be more quickly removed from the rate base. Third, the FCC had already granted a similar request to Illinois Bell pending Illinois Commission approval of the rate hike; granting the CPW tariff would accelerate FCC approval of the shortened amortization period. Fourth, the CPW tariff would relieve a class of customers of the disproportionate share of the cost of consumer premises wiring that the previous tariff had imposed. Finally, making the CPW tariff effective on March 1 would save time and money by avoiding the problem of “reworking the numbers” to reflect cost and revenue projections affected by changing the effective date of the tariff.
[30] These circumstances and conditions demonstrate that the Commission complied with section 40-3-104(2) and Rule 18(I)(A)(5), and thereby had good cause to permit the ELG tariff and the CPW tariff to become effective on less than thirty days notice. B.
[31] The League contends that these findings by the Commission are nevertheless insufficient to demonstrate “good cause shown.” In its view, good cause is analogous to the term “special circumstances” described in Rule 31, section I(g) of the Commission’s Rules of Practice and Procedure, 4 C.C.R. 723-3 (1977)[8] and interpreted in Home Builders Ass’n v. Public Util. Comm’n, 720 P.2d 552 (Colo. 1986).[9]
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[34] The record reveals competent evidence supporting the district court’s finding that the Commission showed good cause in permitting each of the tariffs to go into effect on less than thirty days notice. We conclude that the district court properly held that the Commission complied with the statutory requirements of section 40-3-104(2) and Rule 18(I)(A)(5) in expediting the effective date of the tariffs. V.
[35] The League claims that the Commission did not regularly pursue its authority in permitting the tariffs to go into effect without considering test year data for Mountain Bell. It argues that consideration of test year data is required by case law and by statute.[11] The Commission concedes that it did not review test year data in granting the tariffs, but contends that such a review is not required.
(Colo. 1984); Colorado Ute Elec. Ass’n v. Public Util. Comm’n, 198 Colo. 534, 602 P.2d 861 (1979). [38] Although consideration of test year data is desirable in balancing the interests of investors and consumers, neither statutory law nor our case law requires the Commission to review such data before granting a proposed tariff. Section 40-3-111(1) states that, in making a determination of whether a tariff is unjust, unreasonable or discriminatory,
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[39] “the commission may consider current, future, or past test periods or any reasonable combination thereof and any other factors which may affect the sufficiency or insufficiency of such rates, fares, tolls, rentals, charges, or classifications during the period the same may be in effect, and may consider any factors which influence an adequate supply of energy and any factors which encourage energy conservation.” [40] 17 C.R.S. (1984) (emphasis added). The identical passage appears in section 40-6-111(2)(a). [41] Our cases have likewise approved but not required use of test year data in permitting rate hikes to go into effect. See Colorado Mun. League, 687 P.2d at 423; Colorado Ute Elec. Ass’n, 198 Colo. at 539, 602 P.2d at 864; Mountain States Tel. Tel. Co. v. Public Util. Comm’n, 182 Colo. 269, 275, 513 P.2d 721, 724 (1973). In addition, we have upheld Commission decisions making limited use of “one-sided adjustments” to test year data by adjusting for an item that reduced costs while refusing to make corresponding adjustments for items which increased costs. Colorado Ute Elec. Ass’n, 198 Colo. at 539, 602 P.2d at 863. Such a decision was justified because the legislature has vested the Commission with “considerable discretion in its choice of means to fix rates,” because the adjustments were supported by competent evidence, and because the important factor in determining whether a rate is just and reasonable “is the result reached, not the method employed.” Id., 602 P.2d at 864 (citing Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944)). [42] Here the Commission’s decisions to permit the tariffs to go into effect were supported by findings of fact and approved by the district court. First, the findings of circumstances and conditions that justified the Commission’s decisions to permit the tariffs to become effective on less than thirty days notice provide equal justification for the decision to permit the tariffs to go into effect without considering test year data. Second, as the district court noted, the Commission found in its March 12 and April 9 decisions that granting the tariffs would not affect Mountain Bell’s operating earnings, in that “the Commission is allowing Mountain Bell to recapture costs incurred.” The district court characterized these tariffs as “routine cost adjustments” in furtherance of the Commission’s obligations under section 40-3-102, 17 C.R.S. (1984), to adopt all necessary rates in order to correct abuses.[13] [43] Finally, in Re Mountain States Tel. Tel., 74 PUR4th 724 (Colo. PUC 1986), decided after this appeal was initiated, the Commission as part of a general rate case examined Mountain Bell’s statements of revenue, expense and investment in order to establish 1985 test year data. The data necessarily included expenses attributable to ELG depreciation and shortening the CPW amortization period. Because it had only prospective effect, that decision does not render the question of test year data moot in this case. It does, however, limit the impact of the Commission’s decision not to consider test year data in this case by its subsequent review of test year data.[14] [44] “As this Court has repeatedly emphasized, rate-making is not an exact science,Page 1059
but a legislative function involving many questions of judgment and discretion.” Colorado Ute Elec. Ass’n v. Public Util. Comm’n, 198 Colo. 534, 539, 602 P.2d 861, 864 (1979) (citing Public Util. Comm’n v. Northwest Water Corp., 168 Colo. 154, 451 P.2d 266 (1969)). Because the Commission made findings of fact which are supported by competent evidence in the record, and because of the permissive character of the relevant statutes, we conclude that, considering the particular facts involved, the Commission has regularly pursued its authority in permitting the ELG tariff and the CPW tariff to go into effect without considering test year data. We therefore may not set aside the Commission’s order. § 40-6-115(3), 17 C.R.S. (1984).
[45] The judgment of the district court is affirmed.In its applications for rehearing of the February 21 decisions, the League made two arguments: (1) the Commission must hold a hearing when parties protest a proposed tariff; and (2) the Commission failed to show good cause for permitting the proposed tariff to go into effect on less than the statutory notice required under section 40-3-104(1), 17 C.R.S. (1984). As part of its second argument, the League in both applications stated that “there is substantial reason to believe” that the respective tariffs are not just and reasonable. The statements that follow it are addressed to the issue of good cause under section 40-3-104(2), and are insufficient to raise the independent issue of whether the rates are unreasonable under section 40-3-106(1)(a). We conclude that the district court properly denied the League’s request to raise this argument before the court. See § 40-6-114(5), 17 C.R.S. (1984); Bender, Prosecuting an Appeal from a Decision of the Colorado Public Utilities Commission, 16 Colo. Law. 2163, 2164 (1987). In addition, the League argued for the first time in its opening brief to this court that the Commission engaged in selective updating when it granted the tariffs. This argument also is not properly before us. § 40-6-114(5); People v. District Court, 134 Colo. 324, 303 P.2d 692 (1956).
(Colo. 1982).
(4th Cir. 1984). The Virginia State decision was itself overruled i Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355 (1986), which held that the FCC regulation does not preempt state regulations of depreciation methods for purposes of intrastate ratemaking. At the time the League protested the Commission’s decisions, certiorari in the Virginia State
case was pending before the United States Supreme Court. Mountain Bell in its application for the ELG tariff agreed to refund with interest any funds collected in the event the Supreme Court later invalidated the FCC regulation. The Commission recognized this possibility as part of its findings in its February 21 ELG tariff decision.