Northwest Public Communications Council v. Qwest ( 2022 )

151
Argued and submitted March 30, 2021, reversed and remanded
December 14, 2022
NORTHWEST PUBLIC
COMMUNICATIONS COUNCIL,
Petitioner,
v.
QWEST CORPORATION,
fka U.S. West Communications, Inc.; and
Public Utility Commission of Oregon,
Respondents.
Public Utility Commission of Oregon
UT125; A166810
527 P3d 30
Northwest Public Communications Council (NPCC) seeks judicial review of a
final order of the Oregon Public Utilities Commission (PUC) that denied NPCC’s
motion to order Qwest Corporation (Qwest) to issue refunds for payphone rates
Qwest charged NPCC’s members between 1996 and 2003, which NPCC contends
do not comply with federal law. NPCC argues that the PUC’s prior orders and
state and federal law require the PUC to order Qwest to issue the requested
refunds, and it challenges two findings of fact as lacking substantial evidence.
Held: The PUC’s prior orders in this docket neither require nor preclude the
requested refunds and, on this record, the Court of Appeals cannot determine
whether state and federal law require the PUC to order the requested refunds.
However, the PUC relied on factual findings that are not supported by substan-
tial evidence.
Reversed and remanded.
James A. Pikl argued the cause for petitioner. On the
opening brief were Frank G. Patrick and Corporate Lawyers,
P.C. Also on the reply brief were James A. Pikl and Scheef
& Stone, LLP.
Rolf C. Moan, Assistant Attorney General, argued the
cause for respondent Public Utility Commission of Oregon.
Also on the brief were Ellen F. Rosenblum, Attorney General,
and Benjamin Gutman, Solicitor General.
Lawrence H. Reichman argued the cause for respondent
Qwest Corporation. Also on the brief was Perkins Coie LLP.
Before Ortega, Presiding Judge, and James, Judge, and
Powers, Judge.
152 Northwest Public Communications Council v. Qwest
ORTEGA, P. J.
Reversed and remanded.
Cite as 323 Or App 151 (2022) 153
ORTEGA, P. J.
Petitioner Northwest Public Communications Council
(NPCC) is a regional trade association representing compa-
nies that provide public payphone services (payphone ser-
vice providers or PSPs). Respondent Oregon Public Utilities
Commission (PUC) sets rates that PSPs pay to respondent
Qwest Corporation (Qwest), a regulated local exchange car-
rier (LEC) and former regional Bell Operating Company
(BOC),1 for telecommunications services in Oregon. NPCC
seeks judicial review of a PUC final order (PUC Docket UT
125, Order No. 17-473) that denied NPCC’s motion to order
Qwest to issue refunds for payphone rates Qwest charged
PSPs between 1996 and 2003, which NPCC contends do not
comply with federal law.
On review, NPCC asserts that the PUC erred in
denying the motion because, in NPCC’s view, the PUC’s
prior orders in PUC Docket UT 125 and state and federal
law require the PUC to order Qwest to pay the requested
refunds. We conclude that the PUC’s prior orders in this
docket neither require nor preclude the requested refunds
and that, on this record, we cannot say whether state and
federal law require the PUC to order the requested refunds.
However, because we conclude that the PUC relied on fac-
tual findings that are not supported by substantial evi-
dence, we reverse Order No. 17-473 and remand to the PUC
for reconsideration.
I. LEGAL BACKGROUND
To place the parties’ dispute in context, we begin
with an overview of the relevant legal background. “Because
public utilities are natural monopolies, the rates that they
charge for their services are regulated.” Gearhart v. PUC,
255 Or App 58, 60, 299 P3d 533 (2013), aff’d, 356 Or 216,
339 P3d 904 (2014) (Gearhart I). “The legislature has given
the PUC the broadest grant of authority—‘commensurate
with that of the legislature itself’—to carry out ratemaking
1
Bell Operating Companies “are those LECs that were part of the former Bell
System, which provided the great majority of local telephone service throughout
the country, and their successors.” Northwest Public Communications Council v.
PUC, 196 Or App 94, 98 n 5, 100 P3d 776 (2004); 47 USC § 153(5) (listing BOCs,
including Qwest’s predecessor, US West Communications Company).
154 Northwest Public Communications Council v. Qwest
and other regulatory functions.” Id. at 61 (quoting Pacific
N.W. Bell v. Sabin, 21 Or App 200, 214, 534 P2d 984, rev den
(1975)).
The PUC’s general powers under Oregon law
are set forth in ORS 756.040, which provides, in relevant
part:
“(1) In addition to the powers and duties now or
hereafter transferred to or vested in the Public Utility
Commission, the commission shall represent the customers
of any public utility or telecommunications utility and the
public generally in all controversies respecting rates, val-
uations, service and all matters of which the commission
has jurisdiction. In respect thereof the commission shall
make use of the jurisdiction and powers of the office to pro-
tect such customers, and the public generally, from unjust
and unreasonable exactions and practices and to obtain for
them adequate service at fair and reasonable rates. The
commission shall balance the interests of the utility inves-
tor and the consumer in establishing fair and reasonable
rates. Rates are fair and reasonable for the purposes of
this subsection if the rates provide adequate revenue both
for operating expenses of the public utility or telecommu-
nications utility and for capital costs of the utility, with a
return to the equity holder that is:
“(a) Commensurate with the return on investments in
other enterprises having corresponding risks; and
“(b) Sufficient to ensure confidence in the financial
integrity of the utility, allowing the utility to maintain its
credit and attract capital.
“(2) The commission is vested with power and jurisdic-
tion to supervise and regulate every public utility and tele-
communications utility in this state, and to do all things
necessary and convenient in the exercise of such power and
jurisdiction.”
The legislature has further directed that those laws admin-
istered by the PUC “shall be liberally construed in a manner
consistent with the directives of ORS 756.040(1) to promote
the public welfare, efficient facilities and substantial justice
between customers and public and telecommunications util-
ities.” ORS 756.062(2).
Cite as 323 Or App 151 (2022) 155
The PUC’s “power to prescribe prospective rates is
considered a legislative function” and involves “considerable
discretion to balance the interests of utility investors and
customers and the public in general.” Gearhart I, 255 Or App
at 60-61 (citing ORS 756.040(1) and Valley & Siletz R. R.
Co. v. Flagg, 195 Or 683, 715, 247 P2d 639 (1952)). Indeed,
the PUC’s “broad discretion in its legislative function of set-
ting rates[ is] subject only to statutory and constitutional
constraints.” Id. at 61 (citing American Can v. Lobdell, 55 Or
App 451, 462-63, 638 P2d 1152, rev den, 293 Or 190 (1982)).
The PUC sets rates “[i]n conjunction with its consid-
eration of the interests of customers and the public * * * so as
to provide a utility with an opportunity to recover its revenue
requirement, which is the amount of money the utility must
collect to cover its reasonable operating expenses incurred in
providing services, as well as a reasonable return on invest-
ments made to provide that service.” Gearhart I, 255 Or App
at 62 (citing ORS 756.040(1)). The ratemaking process under
Oregon law does not prescribe a precise formula or a “fixed
result,” but rather “allows the PUC to set just and reason-
able rates based on its forecast of the utility’s revenue needs
and consideration of the interests of customers and the pub-
lic.” Gearhart I, 255 Or App at 63; Pacific N.W. Bell, 21 Or
App at 224 (The PUC “is not obligated to employ any single
formula or combination of formulas to determine what are
in each case ‘just and reasonable rates.’ ”). Because “rates
are set prospectively, they necessarily involve estimates as
to the amount of revenue that will be raised, which may
be more or less than estimated” and “the validity of a par-
ticular determined rate is measured, not on the individual
theories or methodologies used by the PUC, but on the ‘end
result’ and whether it is just and reasonable.” Gearhart I,
255 Or App at 63.
One consequence of focusing on whether the utility’s
overall revenue requirement is just and reasonable is that
“reducing the rates for one service is likely to require rais-
ing the rates for another.” Northwest Public Communications
Council v. PUC, 196 Or App 94, 96, 100 P3d 776 (2004)
(NPCC I). Ratemaking under Oregon law therefore permits
“a practice known as cross-subsidization” where “the rates
for one service may be greater than [the utility’s] costs while
156 Northwest Public Communications Council v. Qwest
the rates for another may be less,” and “the first service is
said to subsidize the second.” Id. at 96-98.
Such cross-subsidization has been a problem histor-
ically in the payphone services market:
“ ‘Since the mid-1980s, independent payphone providers
have competed with Bell Operating Companies in the con-
sumer payphone market. At first, Bell Operating Companies
had a built-in advantage. In addition to operating some
payphones, Bell Operating Companies owned the local
phone lines that provide service to all payphones. An inde-
pendent payphone provider was thus ‘both a competitor
and a customer’ of the local Bell Operating Company. Davel
Communications, Inc. v. Qwest Corp., 460 F3d 1075, 1081
(9th Cir 2006). And that Bell Operating Company could
exploit its control over the local phone lines by charging
lower service rates to its own payphones or higher service
rates to independent payphone providers.’ ”
Northwest Public Communications Council v. Qwest Corp.,
279 Or App 626, 629, 379 P3d 633 (2016), rev den, 361 Or 886(2017) (NPCC II) (quoting Illinois Public Telecommunications
Ass’n. v. F.C.C., 752 F3d 1018, 1020 (DC Cir 2014), cert den,
575 US 912, 135 S Ct 1583, 191 L Ed 2d 636 (2015)); see
also NPCC I, 196 Or App at 98 (“The traditional regula-
tory approach [under state law] permitted [LECs] to subsi-
dize their payphone services from their earnings on other
services.”).
To address that historical problem, Congress enacted
legislation that placed additional constraints on how state
utility commissions set payphone service rates. The
Telecommunications Act of 1996 amended 47 USC section
276 (section 276) “to promote competition among payphone
service providers and promote the widespread deployment
of payphone services to the benefit of the general public.”
47 USC § 276(b)(1). Section 276(a) provides that a Bell
Operating Company “shall not subsidize its payphone ser-
vice directly or indirectly” or “prefer or discriminate in favor
of its payphone service.” Section 276(b) requires the Federal
Communications Commission (FCC) to “prescribe regula-
tions” governing rates charged by BOCs, including “a set
of nonstructural safeguards” to prevent cross-subsidization
that “shall, at a minimum,” incorporate the “Computer III
Cite as 323 Or App 151 (2022) 157
standards,” more commonly known as the new services test
(NST). 47 USC § 276(b)(1)(C); NPCC I, 196 Or App at 98.
Under the NST, which the FCC had previously adopted for
certain new telecommunications services, “the cost for a
service should be the direct cost of providing the services,
together with an appropriate level of overhead costs.” NPCC I,
196 Or App at 101 (Wollheim, J., concurring) (citing New
England Public Communications v. F.C.C., 334 F3d 69, 71-72
(DC Cir 2003)).
Over the years, the FCC has “issued a series of
orders intended to implement the requirements of the 1996
Act.” NPCC II, 279 Or App at 630. Those regulations preempt
“inconsistent” requirements under state law, 47 USC § 276(c),
and are binding in Oregon. NPCC I, 196 Or App at 100.
Relevant to this case, in 2013, the FCC issued an
order that clarified its prior orders implementing section
276 and provided further guidance on how states should
implement section 276. In re Implementation of the Pay
Telephone Reclassification and Compensation Provisions of
the Telecommunications Act of 1996, 28 FCC Rcd 2615 (FCC
2013), aff’d sub nom Illinois Public Telecommunications
Ass’n. v. F.C.C., 752 F3d 1018 (DC Cir 2014), cert den, 575
US 912, 135 S Ct 1583, 191 L Ed 2d 636 (2015) (Clarification
Order). The FCC explained that it had “charged the states
with the responsibility to ensure that BOC intrastate
payphone line rates comply with the NST and provided
the states with general guidance regarding compliance.”
Clarification Order ¶ 38 (citing In re Implementation of the
Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996, 11 FCC Rcd 21233,
21308 ¶ 163 (FCC 1996) order clarified sub nom Albert H.
Kramer, 13 FCC Rcd 3239 (FCC 1997), rev granted in part,
cause rem’d sub nom Illinois Public Telecommunications
Ass’n v. F.C.C., 117 F3d 555 (DC Cir 1997), clarified on reh’g,
123 F3d 693 (DC Cir 1997) (Payphone Reconsideration
Order)). That general guidance had stated that payphone
rates “must be: (1) cost-based; (2) consistent with the
requirements of section 276 with regard, for example, to the
removal of subsidies from exchange and exchange access
services; and (3) nondiscriminatory,” and that “states must
apply these requirements and the Computer III guidelines”
158 Northwest Public Communications Council v. Qwest
to intrastate service rates. Clarification Order ¶ 38 (citing
Payphone Reconsideration Order ¶ 163).
The FCC explained that it had allowed BOCs to
“self-certify compliance with the NST” and had not specifi-
cally addressed “whether refunds should be issued if a sub-
sequent proceeding determined that the rates the BOCs
self-certified were not consistent with the NST” but rather
had left the issue of refunds, “[l]ike other tariff and rate-
setting procedures,” to be “properly administered by the
states.” Clarification Order ¶ 38 (footnote omitted). The FCC
further explained that it had also “provided states with more
specific guidance on how to implement the NST,” such as using
“an appropriate forward-looking economic cost methodology”
and identifying which payphones services should be NST-
compliant. Clarification Order at ¶ 39 (citing In re Wisconsin
Public Service Comm’n, 17 FCC Rcd 2051, 2065-71 (FCC 2002),
rev den, order aff’d sub nom New England Public Commcations
Council, Inc. v. F.C.C., 334 F3d 69 (DC Cir 2003), order cor-
rected on denial of recons sub nom In re Wisconsin Public
Service Commision Order Directing Filings, 21 FCC Rcd 7724(FCC 2006) ¶¶ 45-65 (Wisconsin Payphone Order)).
As to refunds for non-NST-compliant payphone
rates, the FCC clarified that, “[a]lthough section 276 estab-
lishes requirements for payphone rates, it does not dictate
whether refunds are due under any given set of circum-
stances.” Clarification Order ¶ 41. The FCC confirmed that,
“consistent with section 276 and the Commission’s Payphone
Orders, states may, but are not required to, order refunds
for any period after April 15, 1997 that a BOC does not have
NST-compliant rates in effect. * * * Section 276 requires
that any BOC providing payphone service ‘(1) shall not sub-
sidize its payphone service directly or indirectly from its
telephone exchange operations or its exchange access oper-
ations, and (2) shall not prefer or discriminate in favor of its
payphone service.’ To meet these statutory requirements,
the Commission’s Payphone Orders required that BOC pay-
phone rates be NST-compliant. Consistent with the stat-
ute and these Commission decisions, states can find that
refunds are necessary for any period of time after April 15,
1997 during which BOCs’ rates were not NST compliant.”
Clarification Order ¶ 47 (footnotes omitted, italics in original).
Cite as 323 Or App 151 (2022) 159
II. FACTS AND PROCEDURAL HISTORY
With that legal background in mind, we turn to the
facts of this case. The PUC opened PUC Docket UT 125 in
1995 to review rates for all of Qwest’s regulated intrastate
telecommunications services, including the two payphone
service rates at issue in this case: public access line (PAL)
and fraud protection services.2 Under state law, the PUC’s
task was “to determine, after a hearing, whether Qwest had
proved that its proposed rates were just and reasonable,
and, if they were not, to adjust the rates so that they were.”
NPCC I, 196 Or App at 96 (citing ORS 759.180(1)). To make
that determination, the PUC “followed the traditional pro-
cedure for reviewing a regulated utility’s rate schedule.” Id.
In the first phase of the proceeding, the PUC determined the
total annual revenue Qwest was entitled to earn (Phase 1
or revenue requirement phase). Specifically, in Phase 1, the
PUC “established the rate of return that Qwest was entitled
to receive on its property that is used or useful for provid-
ing regulated services in Oregon (Qwest’s rate base).” Id. In
the second phase of the proceeding, “the PUC evaluated the
rates that Qwest proposed for its various services and made
appropriate adjustments so that, as a package, they would
provide [Qwest] the opportunity to earn that return” (Phase 2
or rate design phase). Id. (emphasis added). In other words,
in Phase 2, the PUC set Qwest’s telecommunications rates
so that, together, they met Qwest’s overall revenue require-
ment determined in Phase 1.
Pending completion of both phases of the rate review,
the PUC ordered all of Qwest’s service rates to be interim
and subject to refund with interest as of May 1, 1996.
A. Phase 1: The PUC determines Qwest’s revenue requirement.
The PUC concluded Phase 1 in 2000 when it adopted
a stipulation between Qwest and PUC staff. Pursuant to
that stipulation, the PUC ordered Qwest to (1) reduce its
annual revenues by $63 million; (2) make a one-time, lump
sum refund of revenues for the period of May 1, 1996, to the
2
A public access line is how a PSP connects a payphone to Qwest’s local tele-
phone network. Qwest’s fraud protection service, formerly known as CustomNet,
is a call screening service that PSPs need to avoid fraudulent payphone use by
customers, such as making long distance calls at a local call rate.
160 Northwest Public Communications Council v. Qwest
date of the refund of $53 million per year; and (3) provide
temporary bill credits of $63 million per year to reduce its
revenues going forward until the PUC could conclude the
Phase 2 rate design.
The refund and bill credits were based on “the tra-
ditional procedure for reviewing a regulated utility’s rate
schedule.” NPCC I, 196 Or App at 96. Accordingly, the
refunds the PUC ordered Qwest to pay in Phase 1 returned
to customers revenues Qwest earned above what its over-
all revenue should have been while its rates were interim.
Similarly, the bill credits functioned to reduce Qwest’s over-
all annual revenue by $63 million going forward until the
PUC could adjust Qwest’s rates to meet that revenue reduc-
tion in Phase 2.
NPCC objected to the stipulation, maintaining that
Qwest had not established that its payphone rates complied
with section 276 and the NST and, therefore, that Qwest
may be required to pay additional refunds to PSPs. In ask-
ing the PUC to adopt the stipulation, Qwest and PUC staff
argued that the PUC could not determine that any specific
customers or customer groups had overpaid for telecommu-
nication services until the Phase 2 rate design was com-
pleted. The PUC agreed with Qwest and PUC staff that,
on the record before it, it could not decide whether Qwest’s
payphone rates complied with section 276 and determined
that the overall result of the stipulation was “just and rea-
sonable” under state law. ORS 757.210(1)(a).
B. Phase 2: The PUC designs Qwest’s telecommunications
rates.
The PUC concluded Phase 2 in 2001 when it
approved Qwest’s proposed telecommunications rates. The
PUC reiterated that it was “establish[ing] the rate design
for the stipulated revenue requirement” set in Phase 1.
NPCC had objected to Qwest’s rate proposal, again arguing
that Qwest’s PAL and fraud protection rates were subject
to the NST and therefore must be based on Qwest’s actual
cost to provide the service plus reasonable overhead. NPCC
had also argued that Qwest’s proposed PAL and fraud pro-
tection rates exceeded rates allowed under section 276. The
PUC concluded that Qwest’s PAL rates satisfied the NST
Cite as 323 Or App 151 (2022) 161
and that Qwest’s fraud protection rates need not comply
with the NST. The PUC later denied NPCC’s motion for
reconsideration.
C. Phase 2: NPCC appeals the initial Phase 2 orders in
NPCC I.
NPCC sought judicial review of the Phase 2 rate
design order and the order denying reconsideration. On
appeal to this court, NPCC argued that section 276 and
the FCC orders implementing section 276 “fundamentally
changed the method for setting rates for payphone services
that Bell operating companies (BOCs), including Qwest,
provide to PSPs” and “requires the PUC to focus on a BOC’s
cost of providing the specific payphone service at issue
rather than on its total rate of return, thereby allowing
PSPs to compete with the BOC’s own payphones on a more
equal footing.” NPCC I, 196 Or App at 97-98. We agreed
with NPCC that the PUC erred because it failed to apply
the FCC’s approach to payphone service rates and reversed
and remanded the order to the PUC for reconsideration “in
light of * * * relevant FCC orders.” NPCC I, 196 Or App at
98-100 (footnotes omitted).
D. Phase 2: Proceedings on Remand
While NPCC I was pending, Qwest proposed “sig-
nificantly reduced” PAL rates in Advice Nos. 1935 (effective
March 17, 2003) and 1946 (effective August 28, 2003). In
2006, Qwest proposed payphone service rates identical to
those already in effect from Advice Nos. 1935 and 1946.
Also in 2006, Qwest proposed to increase its
non-payphone rates to make up the difference in annual
revenue from the lower, NST-compliant payphone rates that
would be necessary to comply with the NPCC I remand. The
PUC denied Qwest’s proposal, concluding that the Phase 1
stipulation precluded increasing non-payphone rates. The
PUC reasoned that, while “Qwest specifically agreed to
accept the risk that subsequent appeals of the [PUC]’s
order implementing the [Phase 1] [s]tipulation might result
in a situation where Qwest was required to make refunds
or rate reductions in addition to those set forth in the
[s]tipulation,” it “cannot imagine that the [PUC] or any of
162 Northwest Public Communications Council v. Qwest
the parties, including Qwest, would have been willing to
agree to any scenario requiring the agency to start [Phase 1]
all over again if Qwest’s refund/rate reduction obligations
were increased.” The PUC explained that its “obligation on
remand [from NPCC I] is limited to ensuring that the rates
for payphone services are calculated based upon the federal
methodology prescribed by the FCC.”
In 2007, the PUC adopted a stipulation between
PUC staff, Qwest, and NPCC as to “the unresolved issues
on remand” from NPCC I, namely “whether the PAL and
[f]raud [p]rotection rates filed on March 31, 2006, comply
with the [c]ourt’s remand to develop rates in compliance
with applicable federal requirements, and in particular, the
new services test.” The parties agreed that Qwest’s proposed
PAL and fraud protection rates filed on March 31, 2006,
which were identical to the payphone rates Qwest proposed
in 2003, complied with federal requirements and satisfied
the remand from NPCC I. The PUC reviewed the parties’
stipulation together with the testimony and exhibits filed in
support of the agreement and concluded that Qwest’s pro-
posed PAL and fraud protection rates filed March 31, 2006,
complied with applicable federal requirements, including
the new services test.
E. NPCC’s Motion and the Final Order on Review
In 2017, NPCC filed a motion in PUC Docket UT 125
asking the PUC (1) to issue an order requiring Qwest to show
cause why it is not in violation of the PUC’s prior orders in
this docket and state and federal law, and, (2) alternatively,
to amend the 2007 order entered after remand “to expressly
require Qwest to issue refunds for any excess revenue it col-
lected under rates that failed to comply with [prior orders in
PUC Docket UT 125], the Telecommunications Act of 1996,
and state law, less any refunds previously paid.”
The PUC denied the motion in Order No. 17-473.
The PUC concluded that its prior orders “comprehensively
resolved all [of Qwest’s] refund liability from May 1996
through 2000” and that its 2007 order issued after the
NPCC I remand “resolve[d] all outstanding issues” between
the parties, including the issue of additional refunds for
allegedly non-NST-compliant rates between 1996 and 2003.
Cite as 323 Or App 151 (2022) 163
After the PUC found that its prior orders precluded Qwest
from additional refund liability, the PUC further concluded,
“We find no other [PUC] authority or remedy available to
NPCC to pursue refunds for this time period. We find no
legal error in our rate setting orders in this docket, and we
find there is no other authority available to NPCC to seek
refunds here.” NPCC timely petitioned for judicial review.
III. STANDARD OF REVIEW
Our review of the PUC’s final order is “confined
to the record,” and we will “not substitute [our] judgment
for that of the [PUC] as to any issue of fact or agency dis-
cretion.” ORS 183.482(7); ORS 756.610(1) (providing that
PUC final orders are subject to judicial review under ORS
183.480 to 183.497). Relevant to NPCC’s arguments, we
review the PUC’s order for legal error and whether the order
is “supported by substantial evidence in the record.” ORS
183.482(8)(a), (c). “Substantial evidence exists to support a
finding of fact when the record, viewed as a whole, would
permit a reasonable person to make that finding.” Portland
Fire Fighters’ Ass’n. v. City of Portland, 321 Or App 569, 577,
518 P3d 611 (2022).
IV. ANALYSIS
On review, NPCC advances several arguments
challenging Order No. 17-473.3 As an initial matter, we do
not address NPCC’s arguments that the PUC erred in deny-
ing the motion on procedural grounds, because the PUC con-
cedes that it decided NPCC’s motion on the merits and does
not present any argument on appeal defending its order on
procedural grounds.
Turning to NPCC’s substantive arguments, NPCC
argues that the PUC erred in denying its motion because the
PUC is required to order Qwest to issue refunds for alleged
3
NPCC raises five assignments of error, each challenging various aspects of
the PUC’s order, that amount to separate arguments in support of a single assign-
ment of error challenging the PUC’s order denying NPCC’s motion. ORAP 5.45(3)
(“Each assignment of error must identify precisely the legal, procedural, factual
or other ruling that is being challenged.”); see, e.g., Marc Nelson Oil Products, Inc.
v. Grim Logging Co., 199 Or App 73, 75 n 1, 110 P3d 120, adh’d to as modified on
recons, 200 Or App 239, 115 P3d 935 (2005) (“[A]ssignments of error * * * are to
be directed against rulings by the trial court, not against components of the trial
court’s reasoning or analysis that underlie that ruling.”).
164 Northwest Public Communications Council v. Qwest
non-NST-compliant payphone rates between 1996 and 2003
under prior PUC orders in this docket and under state and
federal law. NPCC specifically challenges two PUC findings
as lacking substantial evidence: (1) that the PUC had previ-
ously determined Qwest’s 1997 PAL rates (Advice No. 1668)
to be NST-compliant; and (2) that its 2007 order (Order No.
07-497) had resolved all of Qwest’s refund liability from
1996-2003.
In response, the PUC and Qwest argue that the
PUC correctly concluded that its prior orders in this docket
and state law do not require it to order Qwest to pay the
requested refunds. The PUC acknowledges that NPCC’s
motion also relied on federal law, and specifically section
276, but asserts that “NPCC does not advance that argu-
ment in this appeal” and that, in any event, this court has
“already rejected the theory that federal law requires Qwest
to pay additional refunds” in NPCC II. Qwest argues that
NPCC’s motion and appeal rely solely on the Phase 1 orders.
We conclude that the PUC’s prior orders in PUC
Docket UT 125 do not require, but also do not preclude, the
requested refunds, and we agree that the two challenged
findings are not supported by substantial evidence. We
further conclude that, on this record, we cannot determine
whether state and federal law require the PUC to order the
requested refunds, because the PUC has not yet determined
whether Qwest’s pre-2003 payphone rates complied with
federal law.
We begin with the question whether the PUC
correctly concluded that its prior orders in this docket do
not require Qwest to pay refunds for allegedly non-NST-
compliant payphone rates between 1996 and 2003. At the
outset, we reject the argument, advanced by both the PUC
and Qwest, that the PUC’s interpretation of its prior orders
is entitled to deference akin to an agency’s interpretation
of its own rules. See Calpine Energy Solutions LLC v. PUC,
298 Or App 143, 162-63, 445 P3d 308 (2019) (reviewing the
PUC’s statement that it had addressed an issue in a prior
order for substantial evidence under ORS 183.482(8)(c) and
not consistency with an agency rule, officially-stated posi-
tion, or practice under ORS 183.482(8)(b)(B)).
Cite as 323 Or App 151 (2022) 165
As noted, in this docket, the PUC reviewed all of
Qwest’s telecommunications rates pursuant to the tradi-
tional regulatory method under Oregon law that focused on
whether Qwest’s rates as a whole met its overall revenue
requirement. As Qwest acknowledges in its brief, the refunds
and bill credits that the PUC ordered Qwest to pay in Phase 1
(Order Nos. 00-190 and 00-191) served to implement that
adjusted annual revenue reduction both retroactively (via
refunds) and prospectively (via bill credits) until the PUC
concluded the Phase 2 rate design. The Phase 1 refunds and
bill credits did not redress any alleged violation of federal
law. Indeed, the PUC acknowledged NPCC’s position at the
time that Qwest may be liable for additional refunds under
section 276 but concluded that the record before it did not
allow it to resolve that question. Thus, the language in the
Phase 1 orders that the refund was a “one-time, lump sum”
does not support Qwest’s position that the PUC agreed that
Qwest had no liability for potential violations of section 276.
Rather, that language simply contemplated a one-time, lump
sum refund for excess revenues Qwest had earned while its
rates were interim that was based solely on the reduced rev-
enue requirement under state law. And even that language
was not absolute in the context of the state law rate review
because the PUC later expressly interpreted the Phase 1
stipulation to contemplate Qwest paying additional refunds
in the event that the Phase 1 stipulation or an order imple-
menting the stipulation (i.e., a Phase 2 order) were reversed
on appeal, as occurred in NPCC I. Accordingly, the Phase 1
orders (Order Nos. 00-190 and 00-191) do not require or pre-
clude Qwest’s refund liability for non-NST-compliant rates
between 1996 and 2003.
In the initial Phase 2 rate design order (Order No.
01-810), the PUC concluded that Qwest’s fraud protection
rates need not comply with the NST and found that Qwest’s
1997 PAL rates (Advice No. 1668) complied with the NST.
NPCC appealed that order and the order denying reconsid-
eration, and, in NPCC I, we reversed and remanded both
initial Phase 2 orders. 196 Or App at 100 (“The PUC must
reconsider its order [approving payphone rates] in light of
* * * relevant FCC orders.”). Reconsidering its determina-
tions regarding Qwest’s payphone rates was squarely within
166 Northwest Public Communications Council v. Qwest
the scope of remand. Village at Main Street Phase II, LLC
v. Dept. of Rev., 360 Or 738, 749, 387 P3d 374 (2016) (“The
scope of remand is established by the appellate court’s opin-
ion in a particular case.”); see also NPCC I, 196 Or App at
106-08 (Wollheim, J., concurring) (discussing, in detail, how
the PUC erred in determining that Qwest’s PAL rates satis-
fied the NST and fraud protection rates were not subject to
the NST). Accordingly, we agree with NPCC that the PUC’s
finding in the order on review (Order No. 17-473) that it had
previously determined Qwest’s 1997 PAL rates (Advice No.
1668) to be NST-compliant is not supported by substantial
evidence.4
We turn to whether the Phase 2 rate design order
(Order No. 07-497) entered after the NPCC I remand pre-
cludes the requested refunds, which is a closer question.
The order describes its scope as “resolv[ing] all outstanding
issues and satisfy[ing]” the remand from NPCC I and frames
those “unresolved issues” as “whether [Qwest’s] PAL and
[f]raud [p]rotection rates filed on March 31, 2006, comply with
the [Court of Appeals] remand to develop rates in compliance
with applicable federal requirements, and in particular, the
new services test” prescribed by the FCC. (Emphasis added.)
Thus, the Phase 2 rate design order entered on remand did
not determine whether Qwest’s pre-2003/2006 payphone
rates complied with the NST, nor whether to order refunds
for that time period. That makes sense, given that the PUC
generally sets rates prospectively.
Thus, our review of the orders in this docket leads
us to conclude that, although none of the PUC’s prior orders
require Qwest to pay additional refunds, none of the orders
4
We also disagree with the PUC’s assertion that our decision in NPCC II
“conclusively answered the question of whether or not Qwest’s 1997 [PAL] rates
satisfied the new services test.” NPCC II involved NPCC’s complaint asking the
PUC to order Qwest to issue refunds for non-NST-compliant rates solely under
one specific FCC order, In re Implementation of the Pay Telephone Reclassification
and Compensation Provisions of the Telecommunications Act of 1996, 12 FCC Rcd
21370 (FCC 1997) (Waiver Order). 279 Or App at 634. We affirmed the PUC’s
order denying NPCC’s motion to amend its complaint without extended dis-
cussion. Id. at 646. We also affirmed the PUC’s grant of summary judgment in
favor of Qwest, because it was undisputed that Qwest did not rely on the waiver
granted under the Waiver Order that triggered the refund obligation under that
specific order. Id. at 642-45. NPCC II did not address whether Qwest’s 1997 PAL
rates satisfied the new services test.
Cite as 323 Or App 151 (2022) 167
in this docket, including the 2007 order on remand, pre-
clude Qwest from additional refund liability for non-NST-
compliant rates from 1996-2003. As far as we can tell, the
PUC has never (properly) determined whether Qwest’s 1996-
2003 payphone rates were NST-compliant. The record as a
whole does not permit a reasonable person to conclude that
the PUC “comprehensively resolved” Qwest’s refund liability
for potential violations of federal law from that time period,
particularly given that the PUC made clear throughout
both Phase 1 and Phase 2 that it was pursuing the tradi-
tional regulatory method under Oregon law and repeatedly
declined NPCC’s invitation to decide whether Qwest’s pay-
phone rates violated federal law or whether Qwest may be
liable for additional refunds for alleged violations of federal
law.5
We next turn to NPCC’s contention that state and
federal law require the PUC to order the requested refunds.
As noted, the FCC has made clear that, “consistent with sec-
tion 276 and the Commission’s Payphone Orders, states may,
but are not required to, order refunds for any period after
April 15, 1997 that a BOC does not have NST-compliant rates
in effect.” Clarification Order at ¶ 47 (italics in original). But,
as our review of the PUC’s prior orders in this docket makes
clear, the PUC has not yet determined whether Qwest’s
pre-2003 payphone rates are NST-compliant. Thus, on this
record, we cannot say one way or another whether state and
federal law require the PUC to issue the requested refunds.
However, we can say that the PUC incorrectly con-
cluded that, outside of its prior orders, no “authority or rem-
edy [is] available to NPCC to pursue refunds for this time
period.” The PUC’s broad regulatory authority consists of
“powers and duties.” ORS 756.040(1) (emphasis added). In
addition to its “power and jurisdiction to supervise and reg-
ulate every public utility and telecommunications utility in
this state, and to do all things necessary and convenient” in
exercising that power, the PUC “shall represent” ratepayers
5
For the same reason, we also reject the contention, advanced by both the
PUC and Qwest, that NPCC “waived” any challenge to Qwest’s potential refund
liability for its pre-2003 payphone rates by failing to appeal the 2007 remand
order. The PUC did not address that issue in Order No. 07-497, so it is unclear
how NPCC could have challenged that issue on appeal.
168 Northwest Public Communications Council v. Qwest
“in all controversies respecting rates,” id., “shall make use of
[its] jurisdiction and powers” to “protect” ratepayers “from
unjust and unreasonable exactions and practices,” id., “shall
inquire into any * * * violation of any law of this state * * *
relating to public utilities and telecommunications util-
ities by any public utility or telecommunications utility
doing business therein,” and “shall enforce all laws of this
state relating to” such utilities, ORS 756.160(1) (emphases
added). And “a liberal construction of both the PUC’s power
to ‘supervise and regulate public utilities’ and its duty to
protect ratepayers by obtaining adequate service at fair
and reasonable rates supports the PUC’s implied authority
to correct legal errors that lead to ‘unjust and unreason-
able exactions.’ ” Gearhart v. PUC, 356 Or 216, 244, 339 P3d
904 (2014) (Gearhart II) (quoting ORS 756.040(1) and ORS
756.062(2)). The PUC has authority to correct such errors by
ordering refunds, “and if the PUC could not order refunds, it
would be limited in its ability to protect ratepayers.” Id.Under the applicable regulatory scheme, the PUC
does not have discretion to simply ignore NPCC’s allega-
tions that Qwest’s pre-2003 payphone rates violate section
276. And if, after proper inquiry, the PUC finds that Qwest’s
pre-2003 payphone rates exceeded that allowed by federal
law and amount to “unjust and unreasonable exactions,”
the PUC has a duty to protect ratepayers, including NPCC’s
members, by providing some appropriate remedy. Such
a remedy may include ordering refunds for overcharges,
see Gearhart II, 356 Or at 247 (holding that the PUC had
implied authority to order PGE to issue refunds to ratepay-
ers for amounts associated with a retired nuclear generat-
ing facility), and one way it may do so is by amending its
prior order, as NPCC sought in its motion, see ORS 756.568
(The PUC “may at any time” amend any PUC order upon
notice to the telecommunications utility and an opportunity
to be heard.).
Reversed and remanded.