US West Communications, Inc. v. Public Service Commission

STEWART, Justice,

concurring:

¶22 I concur in the Court’s opinion affirming the Public Service Commission’s ruling that the directory publishing assets are “utility assets” and that imputation of the profits from these assets should continue to inure to the benefit of ratepayers. I write separately, however, to emphasize the importance of continuing the imputation of revenues. The Commission’s action prevents U.S. West from cherry picking the most profitable assets and diverting the profits therefrom to its shareholders.

¶23 The facts that gave rise to the instant case originated in 1984 when U.S. West spun off its directory publishing assets to an affiliated, unregulated corporation, U.S. West Dex. U.S. West did not seek or obtain, then or at any time, an order from the Commission permitting that transfer. The Commission quite properly required U.S. West to impute the revenues and expenses from the directory publishing assets to U.S. West’s utility operations, thereby protecting the interests of ratepayers. Thus, to achieve fairness to the ratepayers and to be true to its regulatory duties, the Commission treated Dex’s assets as if they were utility assets still owned by U.S. West. The Commission, in its report and order, properly identified the real issue here:

It is also the basis of the concern expressed by the Commission in the 1985 rate case that U.S. West would attempt to segment itself into discrete operations, spin off the most profitable ones to its affiliates and leave the laggards within its utility operations.

The Commission then observed:

Since 1985, we have seen U.S. West try to do exactly this or position itself to do so in the future.

¶ 24 U.S. West’s actions are not unique to its Utah operations.- In Mountain States Telephone & Telegraph Co. v. Public Utilities Commission, 763 P.2d 1020 (Colo.1988), the Colorado Supreme Court stated:

In the AT & T divestiture case, United States v. American Tel. & Tel. Co., 552 F.Supp. 131, the court rejected a proposal that directory publishing assets should be transferred from the Bell operating companies such as Mountain Bell to AT '& T. The court determined that the assets should remain with the operating companies, in part because profits from Yellow Pages revenues were used to subsidize rates charged to local telephone customers as a means of furthering the goal of universal telephone service. United States v. American Tel. & Tel. Co., 552 F.Supp. at 194. Indeed, as many as thirty states use Yellow Pages profits for this purpose. State ex rel. Util. Comm’n v. Southern Bell Tel. & Pel. Co., 307 N.C. 541, 299 S.E.2d 763, 765 (1983). When the divestiture court again áddressed this issue in 1984, it observed with dismay that the intent of its 1982 order had been circumvented by the acts of regional holding companies (such as U.S. West, Inc.) transferring publishing assets from the local operating companies to unregulated subsidiaries. United States v. Western Elec. Co., Inc., 592 F.Supp. at 866.

763 P.2d at 1031-32.

¶ 25 The majority opinion in the instant case acknowledges that telécommunications services and directory publishing operations each “helped expand and develop the other.” Supra ¶ 15. The opinion also acknowledges that prior to AT & T’s breakup, Mountain Bell included the directory publishing expenses in its utility operation expenses, that revenues from the publication of directories were included in Mountain Bell’s telecommunications revenues, and that ratepayer funds were “applied without distinction to support and develop both telecommunications services and directory publishing operations. Directory publishing. • assets were ■ part of Mountain Bell’s rate- base, and a return on investment was allowed on those assets.” Supra ¶ 15 (emphasis added). More to the specific point of this opinion, the Public Service Commission held that the directory publishing operations were in fact “utility operations,” and the majority opinion affirms that conclusion. The Commission stated:

We cannot make the distinction that USWC does relative to the Yellow Pages listings. Customers of USWC’s telephone service receive automatic listing in the alphabetical and the classified portions of the directory. Customers must pay extra charges not to be listed. Both the alphabetical and the classified listings facilitate use of USWC’s telephone service. We disagree with USWC’s attempt to distinguish the existence of alternative providers of directories in the current case from the circumstances in Wexpro I. One must remember that in Wexpro I, the contested assets were those that were classified as oil wells under Mountain Fuel Supply’s classification system. These oil wells produced oil, natural gas and other hydrocarbon products. Alternative, non-utility providers of oil wells, natural gas, oil, and other hydrocarbon products existed in Wexpro I, just as there are non-utility providers of directories in the current ease.

We reject the distinction that USWC tries to make relative to Yellow Pages advertising with the existence of other providers of directories and what USWC characterizes as competing advertising media. Indeed, a considerable amount of the evidence presented on the directory publication matter has been directed to competition in directory publication, competitive alternatives that may or may not exist with respect to directories and, specifically, yellow pages, and information on market shares. In the context of the Wexpro I analysis, this evidence appears irrelevant.

(Emphasis added.)

¶ 26 The Commission stated: “Parties that presented evidence explored the relationship between directories and the other services provided by USWC. Many witnesses argue that directories are part of the utility’s functions and responsibilities. USWC’s position is that publishing directories is not a utility function.” The Commission squarely ruled- — correctly so — that with respect to the directory operations and assets, “we must conclude that they were utility operations and utility assets.”

¶ 27 Perhaps circumstances will change to such a remarkable degree that the publishing assets would no longer be utility assets and a one-time transfer would be permissible. As things currently exist, however, the cessation of imputation of revenues would unfairly transfer the benefit of present and future profits from the ratepayers to the shareholders. See Mountain States, 763 P.2d at 1031-32.

¶ 28 Chief Justice HOWE, Associate Chief Justice DURHAM, and Justice ZIMMERMAN concur in Justice STEWART’S concurring opinion.