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In the Matter of the Application of the Pacific Telephone and Telegraph Company for Authority to Increase Rates.
Pacific Telephone and Telegraph Company (a California corporation, hereinafter referred to as the company), is, and for many years has been, engaged in rendering telephone service to the public, both interstate and intrastate, in the states of California, Oregon, Washington, and in that portion of Idaho embracing Lewiston and generally the territory between Lewiston and Grangeville. March 22, 1938, the company filed an application to put into effect a new schedule of rates, increasing local exchange rates (annexing the proposed schedule to such application). The application alleged:
"That the exchange rates, charges, and rentals set forth in Exhibit 'F' [the proposed new schedule of rates] and which said rates, charges, and rentals this applicant seeks an order from this Commission authorizing this applicant to place in effect on the first billing dates subsequent to April 22, 1938, when placed in effect will, in the belief of the applicant, enable the applicant to meet its operating expenses and taxes in the State of Idaho and in addition obtain a return upon the cost of its property in the State of Idaho devoted to the public service but that such return will be less than one per cent either during the year 1938 or so far as can now be estimated or determined during the year 1939.
"Wherefore, applicant asks that the Public Utilities Commission of the State of Idaho make its order authorizing applicant to place in effect on the first billing dates subsequent to April 22, 1938, the schedule of rates set forth in Exhibit 'F' herein."
April 15, 1938, a hearing on the application began before the Commission, at which time counsel for the Commission made the following motion:
"At this time I move for a dismissal of the cause, on the ground that there is a previous action pending for valuation for rate fixing purposes, commenced in the year 1927 and never terminated in this Commission."
Discussing the motion counsel for the company (Mr. Rupp) stated: *Page 572
"I will reply very briefly. It is true that there was a valuation proceeding commenced before this Commission some time in the year 1926 or 1927, and it is true so far as I know . . . that the same was never terminated, but I fail to see how that necessitates the dismissal of the proceeding in this particular case.
"We have filed an application for an increase in rates, and if it should become necessary, or the Commission deems it necessary, after the introduction of testimony, to make a valuation in this case before it comes to a conclusion as to whether the rates should be increased or not, that will be something that will appear from the evidence in this case.
". . . The Company is not here asking, and the application does not state, that it requests a fair rate of return upon its property in the State of Idaho. On the contrary, the application distinctly states that the rate proposed will not produce, that is substantially any return upon its investment in the property.
". . . If it should appear later on in the proceedings that a valuation proceeding is necessary before the Commission can form a conclusion, that will be the time to determine that particular matter."
During the course of the hearing, to-wit, April 16, 1938, counsel for the Commission moved:
"I am going to make a motion that the Commission require that the petitioner here, before proceeding further with this case, to file an inventory of their physical properties within the state, designating the exact location of the property within the several counties of the state, showing in detail the cost of construction, together with the depreciation costs incident thereto since construction."
Counsel for the Commission then added the following:
"I move the Commission, in addition to the request I just made, and before proceeding further with this hearing, that the petitioning company furnish the Commission with a statement showing the amount of depreciation in the reserve account applicable to Idaho as of December 31st, 1937, and the amount of money that should have been in the depreciation reserve fund if such fund had been kept in conformity with the law, showing the *Page 573 amount which should have been deposited in such fund, and the disposition made of such money for the same reason."
The Commission ruled:
"The motion of counsel for the Commission, on his request, to the effect that the petitioner supply the information contained in his motion, will be granted.
"The Commission will recess this hearing to such time as the Commission may, by proper notice to all parties concerned, re-set the same. As soon as the petitioner obtains the information requested, the petitioner will submit copies thereof to the Commission and give the Commission's representatives an opportunity to examine the same, and, if necessary, to go over it with the petitioner's representatives and check it."
* * * *
"The Commission will give proper notice for reconvening for the purpose of completing the hearing. You will all be duly notified."
In October, 1938, the company advised the Commission its inventory was completed. The Commission then set April 5, 1939, as the date for resuming the hearing on the company's application, at which time the hearing was resumed. Some time after the hearing was concluded, that is to say, September 6, 1939, the Commission made "Findings" and entered the following order thereon:
"Now therefore it is ordered the application of the Pacific Telephone and Telegraph Company for increased rates be and the same is hereby denied."
September 27, 1939, the company filed an application for a rehearing. November 6, 1939, the Commission granted the application. December 11, 1939, a rehearing was had at Boise, Idaho. January 9, 1940, the Commission made "Findings" covering the questions presented on rehearing and again entered an order denying the company's application for increased rates. The company appeals from both orders.
It appears from the company's application it sought authority to put into effect a schedule of rates which would simply enable it "to meet its operating expenses *Page 574 and taxes in the State of Idaho and in addition obtain a return upon the cost of its property in the State of Idaho devoted to the public service" of "less than one per cent either during the year 1938 or as far as can now be estimated or determined during the year 1939." Nevertheless, the company insists that inasmuch as counsel for the Commission requested it to file an inventory of its physical properties in the state as well as a statement of depreciation (as shown by the record hereinbefore quoted), and further that inasmuch as it supplied the requested inventory and statement (at, it is stated, considerable expense), the proceeding is, in fact, a "valuation hearing," involving the fixing of a fair rate of return, since it is assigned as error and earnestly urged by the company the Commission erred in that it "did not make any finding of a fair rate of return to which appellant is entitled for its services as a telephone company in the State of Idaho." However that may be, the assignment in and of itself, as, of course, intended by the company, presents the question as to whether the Commission erred in failing to find a fair rate of return.
The Commission correctly found and ruled the burden of proof was on the company. (Mountain View Rural Telephone Company v.Interstate Telephone Company, 55 Idaho 514, 519,46 P.2d 723; Sawyer v. Mays, P. U. R. 1920D, 793; Re Proposed Increasesin Freight Rates, P. U. R. 1918B, 52; Re American RailwayExpress Company, P. U. R. 1921C, 453; Re Virginia Railway Power Co., P. U. R. 1925B, 14; Re Viola Telephone Co., P. U. R. 1919F, 47; In re Joplin Waterworks Co., P. U. R. 1915C, 125;Anderson v. Clinton County Telephone Co., P. U. R. 1917A, 31;New Jersey Central Traction Co. v. Board of Public UtilityCom., 96 N.J.L. 90, 113 Atl. 692, P. U. R. 1921D, 39; Re LongIsland Railroad Co., P. U. R. 1918A, 649; Re United TractionCo., P. U. R. 1921B, 638; Re Rates on Wall Board, Carloads, P. U. R. 1916E, 109; Quinn v. Harrisburg Railways Co., P. U. R. 1920C, 106; City of Pottsville et al. v. Pottsville WaterCo., P. U. R. 1928B, 613; Re New England Telephone TelegraphCo., P. U. R. 1927C, 348; Natural Gas Co. of West Virginia v.Public Service Comm., 95 W. Va. 557, 121 S.E. 716, P. *Page 575 U. R. 1924D, 346.) That brings us at once to the decisive question presented on this appeal: Is the evidence offered by the company "unsatisfactory, inadequate and insufficient," as found and held by the Commission? In other words, did the company fail to sustain the burden of proof?
The transcript is voluminous — 1660 folios. In addition to that, there are 66 exhibits, ranging from a page to 1365 pages. A review and discussion of the evidence, therefore, would extend far beyond the proper limits of an opinion. Although it is quite impossible to review the evidence at length, we direct particular attention to the testimony of Robert P. Judy, general commercial manager, and apparently the "star" witness of the company, called, and with great care, qualified, as an expert. On direct examination Mr. Judy testified:
Q. "Please state your name?
A. Robert P. Judy.
Q. And your residence?
A. Seattle, Washington.
Q. You are employed by the Pacific Telephone and Telegraph Company?
A. Yes, I am employed as General Commercial Manager.
Q. Have you prepared a statement of your experience in the telephone business?
A. I have.
Q. Does the document just handed you, marked by the Reporter for identification as Exhibit No. 50,1 contain a *Page 576 statement of that experience?
A. Yes, it does."
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Q. "To what extent are you familiar with the company's operations and rate practices in the State of Idaho? *Page 577
A. Part of the responsibility of a general commercial manager is to see that the rates for the telephone service are adequate; that they are sufficient to protect the people who put money in the business, provide adequate revenue to take care of the employees on a fair basis, and that the allocation of the charges for the various services are such that they permit the maximum number of customers to enjoy telephone service. Also that these rates and rate practices be administered without personal discrimination between customers. That being part of the responsibilities, I have reviewed pretty thoroughly the situation in Idaho from the standpoint of the rates, and the effect of the proposed application rates, . . ."
On cross-examination, he testified:
Q. "What in your opinion, if you know, would be a proper rate to apply at this time to give you a fair return on your investment in your Idaho property?
A. I would have to make a study to determine that. [Emphasis ours.] We do not believe that would be the right thing to do, and haven't set up new rates, even on a test basis, to see what could be done.
Q. You are not asking for an increase in order to get a fair return at this time?
A. Not immediately, that is correct. Our principal objective is to get rates which will balance in all these considerations, and will permit us to overcome this situation of having big losses with the hope, we sincerely hope that we will have a return on our investment with these application rates. We even hope, over a period of years, that there would be a fair return, but in my opinion, that is very unlikely. We hope, but nobody can forecast what will happen in 1942 and 1943."
Mr. Judy, the expert, must have known what rates would give his company a fair return on its Idaho investment, in that he testified he had "reviewed pretty thoroughly the situation in Idaho from the standpoint of rates," and yet he carefully avoided answering the question which would have given the Commission that information. Instead, he said he would, "have to make a study to determine that." If Mr. Judy, after a thorough review *Page 578 of the "situation in Idaho from the standpoint of the rates," and with all the evidence offered by his company, could not "determine that" — in other words, if the evidence offered by his company is not sufficient to enable him, an outstanding expert, to state what rate would give the company a fair return on its Idaho investment, just how can it logically be insisted the evidence is sufficient to enable the Commission to do so?
A painstaking examination and study of the evidence leads to the conclusion the company failed to sustain the burden of proof; therefore, the orders appealed from are affirmed with costs to respondent.
Ailshie, C.J., and Budge, Givens and Morgan, JJ., concur.
ON PETITION FOR REHEARING,
(May 28, 1941) 1 ". . . . . . . .
Occupation: General Commercial Manager, The Pacific Telephone and Telegraph Company, Washington-Idaho Area.
Education: Pomona College, Claremont, California. A. B. Degree in 1920 Majored in Electrical Engineering and Chemistry. University of California, Berkeley, Post Graduate Work in Chemistry. Six months' practical course in Telephony in Coast Guard at Fort Scott, San Francisco, and Fortress Monroe, Virginia.
. . . . . . . .
Experience: Electrician Sergeant, First Class, in charge of telephones and searchlights for 15th Anti-Aircraft Section, 41st Brigade. Nine months in 1918, including the training and actual service periods.
Southern California Telephone Company.
1922-1923 Commercial Representative in Los Angeles Business Office, principally engaged in handling telephone service requirements of larger business customers.
1923-1927 Commercial Supervisor on Division and General Office Staff, principally engaged in staff work involving development and application of methods, practices, results, training and equipment in connection with commercial aspects of the telephone business.
American Telephone and Telegraph Company.
1927-1934 Engineer in various specialized groups of the Operation and Engineering Department, engaged in developing new and improved methods, practices, results, information, training, supervisory materials and technique, plans of organization and equipment in connection with commercial aspects of the telephone business. Includes assistance to various Associated Companies in their introduction and application.
1934-1938 In charge of the Commercial Results and Practices Section in the Operation and Engineering Department, which includes specialized groups working on various commercial administration matters of the type previously mentioned. Includes administration aspects of sales, directory, rate and inter-company operations.
The Pacific Telephone and Telegraph Company:
Nov., 1938 Appointed General Commercial Manager in charge of the Commercial Department in the Washington and Idaho Area. The work of the Commercial Department includes the handling of the Company's business transactions with its customers (such as requests for new service, additions, changes or disconnections, inquiries regarding services, charges, etc., and collection of the Company's revenue); sale of service; determination and administration of rates and rate practices; forecasting growth and revenue; compilation and issuance of telephone directories; and handling the Company's relations with other connecting and wire using companies." (Emphasis ours.)