Opinion
43777 Record No. 781175.
March 2, 1979
Present: All the Justices.
Order for partial refund of revenue collected by telephone company through surcharge proper; investigations by Commission involving issue whether rate just and reasonable satisfy requirements of Code; whether expenses of telephone company recurring or nonrecurring is question of fact for Commission; consistency of treatment of purchases issue resolved by decision in companion case.
(1) Public Service Companies — Proposed Surcharge by Telephone Company — Investigations by Corporation Commission Complied with Code — No Error in Ordering Partial Refund of Surcharge.
(2) Public Service Companies — Rate Making — Whether Expenses of Telephone Company Recurring or Nonrecurring Question of Fact for Corporation Commission.
(3) Public Service Companies — Rate Making — Inconsistency in Treatment of Purchases by Company and Subsidiary from Affiliate Resolved by Decision Adverse to Commission in Companion Case.
This is a companion case to Central Tel. Co. of Va. v. Corp. Comm., 219 Va. 863, 252 S.E.2d 575 (1979). The Division of Consumer Counsel, Office of the Attorney General, appealed from the final order of the Commission in the Central case raising issues not dealt with in that decision. These are (1) that the Commission should have required Central to refund the January 1977 surcharge in its entirety because the surcharge was not subsequently investigated and found just and reasonable as the Code requires; (2) the Commission erred in including certain expenses of Central for rate making purposes, the recurrence of which the Commission found questionable; (3) the Commission was not consistent in the manner in which it treated Central and Southern Telephone Company, (a wholly owned subsidiary of Central, which had also applied for a permanent increase in local service rates, an increase approved by the Commission, from which there was no appeal in the Central case) with respect to excessive prices allegedly paid by the two companies to Central Service Company.
1. The investigations by the Commission complied in all respects with the Code and in particular with Code Sections 56-236, -237, -238, -240. The issue whether the rates were just and reasonable was involved in the investigation and hearing of 22 December 1976 on the proposed surcharge as well as the extensive investigations and hearing preceding the order of 18 April 1978 which required a partial refund of the revenue collected under the surcharge, there being no error by the Commission in ordering only a partial refund rather than a full refund.
2. Whether or not the expenses incurred by Central in 1976 were recurring or nonrecurring was a matter peculiarly within the expertise and discretion of the Commission, is a question of fact, and the Commission's action will not be disturbed.
3. While the Commission was not consistent in the manner in which it treated purchases made from Central Service Company by Central and by Southern, the issue is not addressed because the Commission was held to err in its treatment of Central's purchases in Central Tel. Co. of Va. v. Corp. Comm., 219 Va. 863, 252 S.E.2d 575 (1979).
Appeal from an order of the State Corporation Commission.
Affirmed.
Donald G. Owens, Assistant Attorney General (Marshall Coleman, Attorney General, on brief), for appellant.
Edward L. Flippen; David Meade White; Donald W. Glaves [Ill.] (White Wood, P.C.; Ross, Hardies, O'Keefe, Babcock Parsons [Ill.], on brief), for appellees.
No brief for State Corporation Commission, appellee.
This is a companion case to Central Tel. Co. of Va. v. Corp. Comm., 219 Va. 863, 252 S.E.2d 575 (1979), this day decided. All facts necessary for our decision in the instant case are there stated.
The Division of Consumer Counsel, Office of the Attorney General, has appealed from the final order of the State Corporation Commission entered April 18, 1978, involved in the Central case. The Attorney General argues (1) that the Commission erred in not requiring Central Telephone Company of Virginia to refund in its entirety the surcharge it permitted to go into effect in January, 1977, "in that, contrary to the requirements of the Code of Virginia, such surcharge was not subsequently investigated and found just and reasonable"; (2) that the Commission erred in including for rate making purposes certain expenses of Central, the recurrence of which was found to be questionable by the Commission; and (3) that the Commission was not consistent in the manner in which it treated Central and Southern Telephone Company, the two companies involved, with respect to excessive prices allegedly paid to Central Service Company.
Central's application for an interim increase in local service rates recited that, pursuant to Virginia Code Sec. 56-237, et seq., it was filing a rider to the Company's tariff schedules which "it proposes be made effective November 27, 1976, upon such notice to the public and in such manner as the Commission may require". The Commission refused to allow the surcharge to become effective until after the need for the increase was investigated. Accordingly, it scheduled and conducted a public hearing at which both Central and the Commission's staff presented evidence.
The Commission, on December 22, 1976, found that a substantial need for interim relief had been demonstrated and ordered the increase (surcharge requested by Central), effective January 7, 1977, to remain in effect pending a full investigation, public hearing and decision on an application for permanent rate relief which Central proposed to file. The Commission ordered Central to file on or before December 30, 1976, a revised tariff schedule designed to produce the additional gross revenue needed, and it was duly filed.
Central and Southern, on June 15, 1977, filed their applications for a permanent increase in local service rates to become effective July 15, 1977. This date was suspended and extensive investigations were made and public hearings conducted on the applications, resulting in a record in Central in excess of 1,400 pages plus approximately 100 exhibits.
It is our conclusion that the investigations conducted by the State Corporation Commission have complied in all respects with the requirements of the Code of Virginia, including specifically Code Sections 56-236, -237, -238, -240, and that no error was committed by the Commission in not requiring Central to refund in its entirety the surcharge. A determination as to whether the rates proposed in Central's October 27, 1976 application were just and reasonable was necessarily involved, not only at and prior to the December 22, 1976 hearing by the Commission, but thereafter in the investigation and hearings which ultimately resulted in the Commission's order of April 18, 1978, involved here and in Central's appeal. This order required a partial refund of the revenue collected by Central under the interim surcharge.
In its order of April 18, 1978, the Commission did speculate about the recurrence of some of the expenses actually incurred by Central in 1976, observing that "it appears questionable to us that these same expense items will recur annually. . . ." However, it accepted the 1976 level of expenses with the caveat "[that the] service [by Central] should substantially improve". Apparently the Commission was responding to the numerous customers of Central who appeared at the public hearing and voiced complaint about the service that Central was providing; and to the testimony introduced by Central of its program to improve the caliber of its service and of its need for additional revenue to accomplish that purpose. In any event, whether or not the expenses were recurring or nonrecurring was a matter peculiarly within the expertise and discretion of the Commission. This question of fact has been resolved by the Commission, and we will not disturb its action.
Finally, the appellant says that the Commission was not consistent in the manner in which it treated the purchases made by Central and those made by Southern. While this contention is correct, we need not address it because we concluded in Central that the Commission's treatment of Central's purchases was in error. Further, the purchases made by Southern from Central Service Company since 1967 are minimal, amounting to only $70,548.
Southern sought only an approval of rates which would provide it an additional gross annual revenue of $262,681, resulting in an annual rate of return of 4.47% and a return on common equity of 7.62%. While these percentages were low by comparison with Central, the explanation is that they are designed to simplify a merger of Central and Southern which is apparently planned.
We find no reversible error in the manner in which the Commission treated Southern's application for a rate increase. We affirm the April 18, 1978 order of the Commission appealed from, except in the respects noted in our opinion in Central. Affirmed.