Pud No. 2 Of Pacific County v. Comcast And Centurytel

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PUBLIC UTILITY DISTRICT NO. 2 OF
PACIFIC COUNTY, a Washington DIVISION ONE
municipal corporation,
No. 77310-1-1
Respondent,
PUBLISHED OPINION
V.
/
COMCAST OF WASHINGTON IV, INC.,
a Washington corporation;
CENTURYTEL OF WASHINGTON,
INC., a Washington corporation; and
FALCON COMMUNITY VENTURES I,
L.P., a California limited partnership,
d/b/a CHARTER COMMUNICATIONS,
FILED: April 8, 2019
A.•ellants.
DWYER, J. — Pacific County Public Utility District No. 2 (District) permitted
Comcast of Washington IV, Inc., CenturyTel of Washington, Inc., and Falcon
Community Ventures I, L.P., d/b/a Charter Communications (collectively
Companies)to attach their communications equipment to the District's utility
poles pursuant to written agreements. In 2007, the District instituted significant
increases to the rates it charged the Companies to attach their equipment to the
utility poles. The Companies refused to pay the increased rates, and also
refused to remove their equipment from the District's utility poles, leading the
District to bring this lawsuit.
No. 77310-1-1/2
In 2008, our legislature amended the statute governing utility pole
attachment rates, RCW 54.04.045, effective June 12, 2008. The amendment
included a specific rate calculation formula, the result of which would yield a "just
and reasonable" rate. RCW 54.04.045(3)(a)-(c). Whether the District's revised
rates complied with the amended statute became the central dispute of the case.
This is the second time that this matter has come before us on appeal.
See Pub. Util. Dist. No. 2 of Pacific County v. Comcast of Wash. IV, Inc., 184
Wash. App. 24, 336 P.3d 65(2014)(hereinafter PUD I). In deciding the first
appeal, we held that none of the parties correctly interpreted the statutory
formula set forth by the amended statute because, instead of interpreting and
applying the words of the statute, the parties attempted to shoehorn the statutory
language into various preexisting formulas. We rejected this "closest to the pin"
method of statutory interpretation, PUD 1, 184 Wash. App. at 64, and remanded the
matter for the parties to determine whether the District's rate was in compliance
with the formula as it is set forth by the words of the statute.
In the trial court—and now on appeal—the District and the Companies
derived different mathematical formulas from the words of the statute.
Furthermore, the parties also dispute the validity of various data and inputs that
the District utilized when calculating the maximum permissible rate allowed by
the statute. We are presented with two principal issues:(1) whether the District
abused its discretion when calculating the data and inputs it utilized to calculate
the maximum permissible rate pursuant to RCW 54.04.045(3), and (2) whether
the trial court erred by accepting the District's interpretation of the language set
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No. 77310-1-1/3
forth in RCW 54.04.045(3)(a). We affirm the trial court with respect to the
District's choice of data and inputs, but reverse the trial court's interpretation of
the language set forth in RCW 54.04.045(3)(a). However, because the trial
court's error in interpretation herein was harmless, we affirm the judgment.
1
The District is a consumer-owned utility organized as a municipal
corporation pursuant to RCW 54.04.020. It provides electricity to customers in
Pacific County. PUD I, 184 Wash. App. at 35. The District owns and maintains
utility poles that it uses to provide its services, and to which it also permits third
parties to attach communications equipment. PUD I, 184 Wash. App. at 35.
The Companies provide a variety of communication services to customers
in Pacific County by attaching their communications equipment to the District's
utility poles. PUD I, 184 Wash. App. at 35. The Companies initially attached their
equipment to the District's utility poles pursuant to rental agreements assigned to
them by previous communications providers in Pacific County. PUD I, 184 Wn.
App. at 35. The assigned agreements date back to the 1970s and 1980s with
respect to Comcast and Charter, and to the 1950s and 1960s with respect to
CenturyTel. PUD I, 184 Wash. App. at 35.
Prior to 2007, the District's annual pole attachment rates had remained
fixed for 20 years at $8.00 per pole for telephone companies and $5.75 per pole
for cable companies. PUD I, 184 Wash. App. at 36. In February 2006, the District
informed the Companies that it intended to terminate the agreements and
provide the companies a new pole attachment agreement and new pole
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attachment rates. PUD I, 184 Wash. App. at 36. The new rates would take effect
on January 1, 2007. PUD I, 184 Wash. App. at 36.
To set its new rate, the District relied on a rate study, performed several
years earlier, by EES Consulting, Inc. PUD I, 184 Wash. App. at 36. EES
recommended that the District increase its rate to at least $20.65 per pole but
preferably closer to $36.39 per pole. PUD I, 184 Wash. App. at 36. The study
considered four different formulas for calculating the pole attachment rate: the
United States Federal Communications Commission (FCC) Cable formula,' the
FCC Telecom formula,2 the American Public Power Association (APPA)formula,3
and the Washington PUD Association formula!' PUD 1, 184 Wash. App. at 36-37.
1 The Cable formula states that:
a rate is just and reasonable if it assures a utility the recovery of not less than the
additional costs of providing pole attachments, nor more than an amount
determined by multiplying the percentage of the total usable space, or the
percentage of the total duct or conduit capacity, which is occupied by the pole
attachment by the sum of the operating expenses and actual capital costs of the
utility attributable to the entire pole, duct, conduit, or right-of-way.
47 U.S.C. § 224(d)(1).
2 The Telecom formula is as follows:
(2) A utility shall apportion the cost of providing space on a pole, duct,
conduit, or right-of-way other than the usable space among entities so that such
apportionment equals two-thirds of the costs of providing space other than the
usable space that would be allocated to such entity under an equal
apportionment of such costs among all attaching entities.
(3) A utility shall apportion the cost of providing usable space among all
entities according to the percentage of usable space required for each entity.
47 U.S.C. § 224(e).
3 The APPA formula can be presented algebraically as follows:
Maximum Rate = Assignable Space Factor + Common Space Factor
Assignable Space Factor = Space Occupied by Attachment(Assignable Space)
x Assignable Space (Pole Height) x Average Cost(of Bare Pole) x Carrying
Charge
Common Space Factor = Common Space (Pole Height) x Average Cost of Bare
Pole (Number of Attachers) x Carrying Charge
PUD I 184 Wash. App. at 36 n.6.
4 The Washington PUD Association formula can be presented algebraically as follows:
Annual rental rate = Accumulated average Pole Value (PV) x Annual Cost Ratio
(ACR) x Pole Use Ratio(PR)
PUD I, 184 Wash. App. at 37 n.7.
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No. 77310-1-1/5
After considering and discussing the results of the study with the District's
supervisors, the District's general manager recommended to the District's board
of commissioners an annual rate of $19.70 per pole, to take effect at the start of
2008.5 PUD I, 184 Wash. App. at 37.
The board of commissioners held public hearings on the proposed rate
increases on December 5, 2006 and December 19, 2006. PUD I, 184 Wash. App.
at 38. Even though the Companies knew about the public hearings, they did not
send any representatives to attend, nor did they request the agenda or minutes
from the hearings. PUD I, 184 Wash. App. at 38. On January 2, 2007, the board of
commissioners adopted Resolution No. 1256, which accepted the proposed
rates. PUD I, 184 Wash. App. at 38.
Subsequently, the District sent new agreements, incorporating the new
rates, to the Companies and other then-current licensees for signature,
explaining that all licensees must either sign the new agreement and pay at the
new rate or remove their equipment from the District's utility poles. PUD I, 184
Wash. App. at 39. However, the Companies refused to sign the new agreement,
declined to remove their equipment, and tendered payment only at the historical
rates.6 Although the existing agreements between the District and the
Companies permitted the District to remove the Companies' equipment, the
5 The general manager also recommended that for the year 2007 the District impose a
transition rate of $13.25, thus allowing the steep rate increase to be phased in over a longer
period. PUD I, 184 Wash. App. at 37.
6 Two then-current licensees not involved in this action signed the new agreement and
timely began paying at the revised rate. PUD I 184 Wash. App. at 40. In contrast, at the time the
parties filed their briefs in the current appeal, the Companies still had not signed the new
agreements or tendered payment at the new rate, despite keeping their equipment attached to
the District's poles.
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No. 77310-1-1/6
District chose not to exercise this right. PUD I, 184 Wash. App. at 40. Instead, the
District filed complaints against the Companies alleging claims of breach of
contract, trespass, and unjust enrichment and seeking a declaratory judgment,
injunctive relief, and damages. PUD I, 184 Wash. App. at 40. The Companies
counterclaimed and sought to enjoin the District from imposing terms in violation
of RCW 54.04.045. PUD 1, 184 Wash. App. at 40. The lawsuits were consolidated
by agreement.
Meanwhile, in March 2008, the legislature amended RCW 54.04.045, with
an effective date of June 12, 2008. LAWS OF 2008, ch. 197, § 1. The prior
version of the statute required only that pole attachment rates charged by
Washington Public Utility Districts be "just, reasonable, nondiscriminatory and
sufficient." Former RCW 54.04.045(2)(1996). This prior version did not provide
any specific formula for calculating an appropriate rate. The amendment,
however, instituted the following specific formula, the result of which would
constitute a "just and reasonable rate." RCW 54.04.045(3).
(3) A just and reasonable rate must be calculated as follows:
(a) One component of the rate shall consist of the additional
costs of procuring and maintaining pole attachments, but may not
exceed the actual capital and operating expenses of the locally
regulated utility attributable to that portion of the pole, duct, or
conduit used for the pole attachment, including a share of the
required support and clearance space, in proportion to the space
used for the pole attachment, as compared to all other uses made
of the subject facilities and uses that remain available to the owner
or owners of the subject facilities;
(b) The other component of the rate shall consist of the
additional costs of procuring and maintaining pole attachments, but
may not exceed the actual capital and operating expenses of the
locally regulated utility attributable to the share, expressed in feet,
6
No. 77310-1-1/7
of the required support and clearance space, divided equally
among the locally regulated utility and all attaching licensees, in
addition to the space used for the pole attachment, which sum is
divided by the height of the pole; and
(c) The just and reasonable rate shall be computed by
adding one-half of the rate component resulting from (a) of this
subsection to one-half of the rate component resulting from (b) of
this subsection.
RCW 54.04.045.
The legislature also included the following provision relating to subsection
(3)(a):
For the purpose of establishing a rate under subsection (3)(a) of
this section, the locally regulated utility may establish a rate
according to the calculation set forth in subsection (3)(a) of this
section or it may establish a rate according to the cable formula set
forth by the federal communications commission by rule as it
existed on June 12, 2008, or such subsequent date as may be
provided by the federal communications commission by rule,
consistent with the purposes of this section.
RCW 54.04.045(4).
The legislature provided a statement of legislative intent with the
amendment, which states:
It is the policy of the state to encourage the joint use of utility poles,
to promote competition for the provision of telecommunications and
information services, and to recognize the value of the
infrastructure of locally regulated utilities. To achieve these
objectives, the legislature intends to establish a consistent cost-
based formula for calculating pole attachment rates, which will
ensure greater predictability and consistency in pole attachment
rates statewide, as well as ensure that locally regulated utility
customers do not subsidize licensees. The legislature further
intends to continue working through issues related to pole
attachments with interested parties in an open and collaborative
process in order to minimize the potential for disputes going
forward.
LAWS OF 2008, ch. 197,§ 1.
7
No. 77310-1-1/8
Whether the revised rate was in compliance with the amended statute
became the central dispute in the case. Specifically, the parties disagreed about
the proper interpretation of the space allocator componene of the statutory
formulas in subsections (3)(a) and (3)(b).
Following a bench trial, the trial court issued a memorandum decision in
which it ruled in favor of the District and against the Companies. PUD 1, 184 Wn.
App. at 42. The trial court ruled that the new pole attachment rates and the new
agreement were valid and granted the District its requested relief. PUD 1, 184
Wash. App. at 42-43. The Companies appealed.
II
On appeal from the first bench trial, the District and the Companies each
asserted that the formula set forth in RCW 54.04.045(3) is actually just a
combination of preexisting formulas.8 PUD I, 184 Wash. App. at 58-59. In our
decision rejecting their proposed formulations, we explained that neither
attempted to apply the language of the statute as written. Instead, during the
trial, the parties presented expert witness testimony that attempted to compare
the language of the statute to preexisting formulas to show how the statutory
7 The space allocator component is the component of the rate formula that determines
what portion of the expenses for constructing and operating the pole will be charged to a
licensee.
8 The first appeal also resolved additional issues not pertinent to the current appeal.
First, we upheld the District's new pole attachment agreement, holding that most of the non-rate
terms were valid, and that all the invalid terms were severable. PUD I, 184 Wash. App. at 51. Next,
we held that the new rate was in compliance with the former version of RCW 54.04.045, resolving
the dispute as to the propriety of the rates changed during that time period. PUD I, 184 Wash. App.
at 58. Next, we held that the District did not fail to mitigate its damages. PUD I, 184 Wash. App. at
77. Finally, we reversed part of the District's award of attorney fees, but this was primarily a
result of our decision to reverse on the issue of the correct interpretation of RCW 54.04.045(3).
Because there was not yet a clear prevailing party on the issue, the award of attorney fees
regarding that issue was premature. PUD I, 184 Wash. App. at 82.
8
No. 77310-1-1/9
formula hewed more closely to their chosen formulas. PUD 1, 184 Wash. App. at
58-59. These experts compared the statutory language to existing formulas,
operating under the assumption that each subsection of the statute corresponded
to a preexisting formula.9 PUD I, 184 Wash. App. at 63-71.
A
The District asserted that its expert's interpretation of subsection (3)(a) as
the FCC Telecom formula was correct." Additionally, the District asserted that
its expert's interpretation was entitled to the deference courts show to agencies
interpreting statutes that they are charged with administering. The District's
primary support for its assertion that the formula was the FCC Telecom formula
was that subsection (3)(a) could not be the FCC Cable formula. According to the
District, the FCC Telecom formula and subsection (3)(a) both reference unusable
9 Although the parties in the first appeal disputed the meaning of both subsections (3)(a)
and (3)(b), we focus herein on the arguments they made regarding subsection (3)(a) because
that is the subsection at issue in the current appeal. The parties do not dispute that the trial
judge's interpretation of subsection (3)(b) during the remand trial was accurate, and the
interpretation faithfully follows the language of the statute. Subsection (3)(b) states (space
allocator language in bold):
The other component of the rate shall consist of the additional costs of procuring
and maintaining pole attachments, but may not exceed the actual capital and
operating expenses of the locally regulated utility attributable to the share,
expressed in feet, of the required support and clearance space, divided
equally among the locally regulated utility and all attaching licensees, in
addition to the space used for the pole attachment, which sum is divided
by the height of the pole.
RCW 54.04.045(3)(b).
The trial judge and the parties agreed that this corresponds to the following space
allocator formula:
Unusable space
((ti of attachers including the District)+(space used by attachment)
height of the pole
In the above formula, the support and clearance space, also known in the industry as
unusable space, is apportioned equally between the District and all attachers, and such portion is
added to the space used by the attachment. This sum is then divided by the height of the pole.
This matches the language of subsection (3)(b).
10 Br. of Resp't at 29, PUD 1, No. 70625-0-1 (Wash. Ct. App.), reprinted in 1 Briefs 184
Wn. App.(2014).
9
No. 77310-1-1/10
space,11 but the FCC Cable formula does not.12
Additionally, the District averred that subsection (3)(a) could not be the
FCC Cable formula because subsection (4) explicitly authorizes the use of an
alternative between using subsection (3)(a) or the FCC Cable formula.13 The
District asserted that framing the choice between subsection (3)(a) and the FCC
Cable formula as an alternative in the statute would be wholly nonsensical if
subsection (3)(a) was the FCC Cable formula.14
In contrast, the Companies asserted that their expert's interpretation of
subsection (3)(a) as the FCC Cable formula was correct.15 Additionally, the
Companies asserted that the District's interpretation was not entitled to any
deference and that we should interpret the statute de novo.16 The Companies
presented three reasons why the space allocator formula in subsection (3)(a) is
the FCC Cable formula and not the FCC Telecom formula. First, the Companies
asserted that subsection (3)(a) and the FCC Cable formula provide for a space
allocator that assigns costs in proportion to the space used for the pole
attachment. Second, the Companies asserted that the FCC Telecom formula
distributes two-thirds of the cost of unusable space on the pole based on the
number of attaching entities. In contrast, according to the Companies,
subsection (3)(a) and the FCC Cable formula do not assign costs based on the
11 Although the parties dispute whether safety space should qualify as unusable space,
they both agree that the support and clearance space referenced in subsection (3)(a) means
unusable space.
12 Br. of Resp't at 26, PUD 1, No. 70625-0-1.
13 Br. of Resp't at 27, PUD 1, No. 70625-0-1.
14 Br. of Resp't at 27, PUD 1, No. 70625-0-1.
15 Br. of Appellant Comcast at 20, PUD 1, No. 70625-0-1 (Wash. Ct. App.), reprinted in 1
Briefs 184 Wn. App.(2014).
16 Br. of Appellant Comcast at 17-18, PUD 1 No. 70625-0-1.
10
No. 77310-1-1/11
number of attaching entities and contain no reference to two-thirds of unusable
space on the pole. As a result, the Companies reasoned, subsection (3)(a)
cannot be the FCC Telecom formula and must be the FCC Cable formula.17
Finally, the Companies asserted that subsection (3)(a) must be the FCC Cable
rate because its language is virtually identical to the rate formula set forth in
RCW 80.54.040, which has been interpreted by the Washington Utilities and
Transportation Commission (WUTC)to be the FCC Cable formula.18
In our decision, we rejected the trial court's and the District's interpretation
of the statutory formula set forth in subsection (3)(a). PUD I, 184 Wash. App. at 63-
67. We held that the trial court erred by deferring to the testimony of the District's
expert witness, and that by so deferring the trial court erred by failing to apply the
language of the statute as written. PUD 1, 184 Wash. App. at 62-67.
We first concluded that "no evidence was presented to the trial court that
the PUD commission ever applied the unique formula in the amended statute to
determine whether its revised rate was in compliance." PUD 1, 184 Wash. App. at
62. Therefore, the trial court's decision to defer to the District's interpretation was
not appropriately deferential to the District's board of commissioners but, rather,
was inappropriately deferential to the District's expert witness. PUD I, 184 Wn.
App. at 63. We further explained that even if the trial court had deferred to the
District, rather than to an expert witness, such deference was inappropriate
17 Br. of Appellant Comcast at 29-30, PUD 1, No. 70625-0-1.
18 Br. of Appellant Comcast at 30, PUD 1, No. 70625-0-1.
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No. 77310-1-1/12
herein because the District is not the only public utility implementing the statute.
See PUD 1, 184 Wash. App. at 60-61 ("With regard to the methodology set forth in
subsections (3)(a), (b), and (c), that methodology must be applied. Uniformity
could not be achieved if the courts deferred to 28 different PUD commission
interpretations of the meaning of the words in a state statute.").
We next decided that the mistake of inappropriately deferring to the
District's expert witness was compounded by the fact that the District's expert
"evinced a disregard for the words of the statute as written by the legislature."
PUD I, 184 Wash. App. at 63. The District's expert witness compared the language
of the statute with the language of preexisting formulas and then applied those
formulas rather than simply applying the language of the statute itself. PUD I,
184 Wash. App. at 63. We expressly rejected this "closest to the pin" method of
statutory interpretation, PUD I, 184 Wash. App. at 64, explaining,
Accepting that the legislature, in drafting the amendment, was
unaware of these preexisting formulas—despite explicitly
referencing one of them in RCW 54.04.045(4)—would require, on
behalf of the trial court, a willing suspension of disbelief. Yet, by
sanctioning [such an] approach, the trial court, in effect, ruled that
while the legislature was aware of these various preexisting
formulas, and although it intended to make subsections (3)(a) and
(3)(b) reflect two of the established formulas, it instead wrote a
unique formula with distinctive features.
PUD I, 184 Wash. App. at 63 (footnote omitted).
However, because the Companies' expert witness utilized the same
"closest to the pin" approach to interpreting the statute, we did not rule that their
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interpretation of the statutory language was correct.19 PUD I, 184 Wash. App. at
63-64. Instead, we remanded the matter with instructions for the trial court to
interpret the unique rate formula set forth by RCW 54.04.045(3)"based on the
words of the statute and not based on opinions as to what formulas it appears to
resemble." PUD I, 184 Wash. App. at 72.
Although we rejected the trial court's interpretation of RCW 54.04.045(3),
we also concluded that "the formula is not designed to ensure mathematical
certainty" and that "because the District enjoyed ample discretion prior to the
2008 amendment, the District retains considerable discretion in its rate
calculation." PUD I, 184 Wash. App. at 72. We further explained that the lack of
any specific instructions regarding a formula in the former version of RCW
54.04.045 required us to show deference to the District regarding the manner in
which it calculated the pole attachment rate prior to the effective date of the 2008
amendment.29 Critically, we also concluded that "the legislature's amendment of
RCW 54.04.045 did not fully divest the District of the previously liberal discretion
it enjoyed." PUD I, 184 Wash. App. at 72. We noted specifically that the District's
discretion with regard to the data, assumptions, and other information it utilized to
calculate the attachment rate "was not divested by the 2008 statutory
19 Notably, we also declined to rule that subsection (3)(a) did not set forth a space
allocator component similar to the FCC Cable formula.
20 This was in keeping with our Supreme Court's decision in People's Org. for Wash.
Energy Res. v. Utils. & Transp. Comm'n, 104 Wash. 2d 798, 808, 823, 711 P.2d 319 (1985)(holding
that the WUTC did not act arbitrarily or capriciously where rates to be set were required to be
"'fair, reasonable, and sufficient"(quoting State ex rel. Pub. Util. Dist. No. 1 of Okanogan County
v. Dep't of Pub. Serv., 21 Wash. 2d 201, 209, 150 P.2d 709 (1944))).
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amendment." PUD 1, 184 Wash. App. at 61. Therefore, we announced, courts
must continue to defer to the discretion of public utility districts regarding the
data, assumptions, and other information used to calculate the attachment rate,
reviewing them only to determine if they were arbitrary and capricious. See
PUD 1, 184 Wash. App. at 61-62.
We emphasized that the District's exercise of discretion should be guided
by the policies set forth by the legislature in the statement of intent
accompanying the 2008 amendments to RCW 54.04.045. See PUD 1, 184 Wn.
App. at 73-74. To aid the trial court's review of the District's discretionary
exercise of authority, we provided a nonexhaustive list of examples of certain
aspects of the rate calculation over which the District retained discretion.
First, we declared that the District retained the discretion to decide
whether to use gross expenses or net expenses when calculating the expenses
attributable to attachers. PUD I, 184 Wash. App. at 73. This is so, we explained,
because the language of the statute does not specifically define the term
"expenses." PUD I, 184 Wash. App. at 73. Additionally, we concluded that the
District's choice between the two should be guided by the statement of intent the
legislature provided with the 2008 amendment to RCW 54.04.045. PUD 1, 184
Wash. App. at 73. In particular, we directed that the choice must be made in
accordance with the policies contained in the legislature's statement of intent "to
recognize the value of the infrastructure of locally regulated utilities" and to
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No. 77310-1-1/15
"'ensure that locally regulated utility customers do not subsidize licensees.'"21
PUD I, 184 Wash. App. at 73(quoting LAWS OF 2008, ch. 197, § 1).
Second, we expounded on the District's discretion to determine "whether
to designate a portion of the pole as unusable 'safety space' and, if it does so,
whether to require the Companies to bear a share of the cost associated with the
unusable space." PUD 1, 184 Wash. App. at 73. We concluded that the statute
does not define that which constitutes unusable space, and that such definition is
therefore left to the District's discretion. PUD 1, 184 Wash. App. at 73-74. We
specifically noted that Iiinstituting a policy of not using the safety space is a
prerogative of the District both as a rate maker and as a utility operator." PUD I,
184 Wash. App. at 74.
Third, and finally, we declared that the District retained the "discretion in
the manner in which it calculates the number of licensees that attach per pole."
PUD 1, 184 Wash. App. at 74. We rejected the contrary assertion by the
Companies that, as with the FCC formulas, which require rate makers to assume
that there are three attachers per pole, the District was required to assume that
there are three attachers per pole while calculating its rate pursuant to the
formula in RCW 54.04.045. PUD 1, 184 Wash. App. at 74. We concluded that the
District's exercise of discretion in this regard "is in harmony with the legislature's
stated intent that the amendment'ensure that locally regulated utility customers
21 This second policy goal originates from our state constitution. Local governments and
municipal corporations are generally prohibited by our state constitution from freely giving any
money, property, or credit to private individuals or businesses. CONST. art. VII, § 7.
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No. 77310-1-1/16
do not subsidize licensees." PUD I, 184 Wash. App. at 74 (quoting LAWS OF 2008,
ch. 97,§ 1).
In sum, we provided the following direction to the trial court:
On remand, the District must apply the statute as written to the
relevant data, albeit subject to the discretion that was not withdrawn
by the 2008 amendment. Only after receiving evidence and
testimony based both on a proper application of the amended
statute and on underlying data that, in the trial court's view, is
worthy of being credited may the trial court determine whether the
District's revised rates are, in addition to the other requirements
imposed by RCW 54.04.045, "just and reasonable."
PUD I, 184 Wash. App. at 74-75.
III
Following our ruling in PUD I, the matter was remanded to the trial court
for a new trial on the issue of whether the District's new pole attachment rate was
in compliance with the amended version of RCW 54.04.045(3). Unsurprisingly,
the District and the Companies disputed the correct interpretation of RCW
54.04.045(3)(a) and whether the District had properly exercised its discretion
when determining what data to rely on when calculating the maximum allowable
pole attachment rate pursuant to subsection (3). Ultimately, the trial court ruled
that the District had correctly interpreted subsection (3)(a) and did not abuse its
discretion when determining what data to rely on when calculating the maximum
allowable pole attachment rate.
At the remand trial, the District presented exhibits and testimony from the
District's general manager regarding the District's process for determining
whether its rate complied with RCW 54.04.045(3), as amended. The District's
general manager testified that, after reviewing our decision in PUD 1, he looked
16
No. 77310-1-1/17
through the amended version of RCW 54.04.045(3)(a) and attempted to convert
the language of the statute to a numerical formula. Testifying specifically about
his interpretation of the space allocator component of subsection (3)(a), the
general manager explained that the space allocator component began with the
language "attributable to that portion of the pole, duct, or conduit" and continued
until the end of the paragraph. According to the general manager, this language
corresponded to a two part mathematical formula in which the parts are added
together.
For the first part, the general manager explained that he considered the
language "that portion of the pole, duct, or conduit used for the pole attachment"
to correspond to the following mathematical formula:
occupied space
usable space
For the second part, the general manager then considered the remaining
language in subsection (3)(a), "including a share of the required support and
clearance space, in proportion to the space used for the pole attachment, as
compared to all other uses made of the subject facilities and uses that remain
available to the owner or owners of the subject facilities," concluding that it
corresponded to the following mathematical formula:
((occupied space
usable space )x (support and clearance space)\
height of the pole
Thus, added together, the District's proposed interpretation of the
formulaic expression of the space allocator component of subsection (3)(a) is:
17
No. 77310-1-1/18
((occupied space
(occupied space) usable space )x (support and clearance space)\
usable space height of the pole
The general manager further testified to the District's process for
determining whether its new rate was in compliance with RCW 54.04.045. He
explained how the District's board of commissioners reviewed and adopted his
interpretation of subsection (3)(a) and selected the data to rely on while
calculating the rate. The commissioners met multiple times to discuss the
District's pole attachment rate subsequent to our decision in PUD I. During these
meetings, the general manager presented his analysis of RCW 54.04.045(3) and
an analysis of the effect on the maximum allowable rate caused by relying on
different data inputs when calculating the rate, such as using either gross or net
expenses.22 The general manager made several recommendations to the
commissioners regarding the data that should be used to calculate the rate,
including a recommendation that the District be permitted to use gross expenses
and to classify the safety space as support and clearance (and therefore
22 The board of commissioners' resolution regarding the data used to calculate the pole
attachment rate stated that
among the data and inputs the District's General Manager considered in his
review of the District's pole attachment rate, are, without limitation, those relating
to: number of poles; data regarding transmission poles as well as distribution
poles; average pole height; expected useful pole life; determination of costs
using gross versus net numbers; average number of attachments per pole;
usable pole space; support and clearance space; safety space as a component
of support and clearance space; the share of the costs attachers on District poles
should bear; carrying charge (e.g., various expenses and return on investment);
and the General Manager has considered these types of inputs and data in light
of the Legislature's statement of its intent in the 2008 amended statute
recognizing the value of the District's infrastructure and ensuring that District
utility customers do not subsidize attachers on District poles, pursuant to the
Court of Appeals decision.
Plaintiff's Exhibit 1019, Resolution No. 1364, at 1-2.
18
No. 77310-1-1/19
unusable) space.
At the conclusion of its meeting on November 3, 2015, the commissioners
adopted Resolution No. 1364, which accepted the general manager's
interpretation of RCW 54.04.045(3), including subsection (3)(a), accepted the
general manager's selection of data to input into the formulas set forth in RCW
54.04.045(3), and concluded that the District's pole attachment rate was below
the maximum rate permitted by the statute.
At trial, the Companies disputed the District's evaluation of subsection
(3)(a) and asserted that the District abused its discretion when determining the
data it input into the formulas in subsections (3)(a) and (3)(b).23 According to the
Companies, the proper interpretation of all of the language of subsection (3)(a)
is:
( (occupied space)
( occupied space ) l usable space x (support and clearance space)
+
height of the pole height of the pole
The Companies further argued that this could be mathematically simplified to
produce the following formula24:
(occupied space)
usable space )
The Companies also claimed that the District included inappropriate
charges in its rate calculation and misclassified the safety space as unusable
23 The Companies did not dispute the District's interpretation of the formula set forth in
subsection (3)(b).
24 This formula is identical to the mathematical expression of the FCC Cable formula
space allocator.
19
No. 77310-1-1/20
space. The Companies' preferred data and rate methodology resulted in a
maximum permissible rate that was significantly lower then the District's.
The trial court ruled in favor of the District, accepting its interpretation of
subsection (3)(a) and adopting its selection of expenses and other data inputs
when calculating the pole attachment rate. Following its ruling, the trial cburt
entered supplemental findings of fact and conclusions of law on remand, findings
of fact and conclusions of law regarding plaintiff Pacific PUD's motion for
supplemental award of attorneys' fees and litigation expenses based on remand
trial, an order awarding attorneys' fees and litigation expenses based on remand
trial, and an amended and restated judgment. The trial court awarded the District
its requested damages, including prejudgment interest and attorney fees and
costs.
The trial court rejected the Companies' interpretation of subsection (3)(a)
because, in the judge's view, the Companies wanted the court "to find that (3)(a)
is the same as the FCC Cable Formula based on their interpretation of the 'space
factor' and their formula simplification which results in (3)1(a) being the FCC Cable
formula." The trial court reasoned that "[i]f the legislature I had intended for (3)(a)
to be the FCC Cable formula, the legislature would have no need to create a
'unique'formula. Therefore, an unstrained, plain reading of(3)(a) leads one to
the logical conclusion that 3(a) is not, in its entirety, the FCC Cable formula."
The trial court also rejected the Companies' arguments that the District
had abused its discretion while determining the data to be used when calculating
the pole attachment rate formula. The trial court found that the testimony of the
20
No. 77310-1-1/21
Companies' expert witness alleging that inappropriate data and methods were
utilized to calculate the pole attachment rate was unhelpful when determining
whether the District abused its discretion because she had little to no experience
with a public utility such as the District.25
The Companies appealed to Division Two, which transferred the matter to
us for resolution.
IV
The Companies contend that the District abused its discretion when
selecting the inputs and data used to calculate the pole attachment rate pursuant
to RCW 54.04.045(3). Specifically, the Companies object to the District's
classification of the "safety space"26 on a utility pole as unusable space and to
the District's inclusion of a return on equity, rate of return for depreciated debt
expenses, taxes, and attorney fees as actual expenses. in response, the District
contends that it has not abused its discretion by defining the safety space as
unusable and by utilizing the aforementioned expenses to calculate its pole
attachment rate. The District has the better argument.
25 In its supplemental findings of fact and conclusions of law on remand, the court further
explained that the Companies' expert witness had "virtually no experience with consumer-owned
utilities," "no real-world knowledge of the District's operations, other than through review of some
District documents," and that "[t]he only testimony Defendants' expert witness had ever given that
relates to pole attachments is testimony filed in 2011 with the Public Service Commission of
Utah." The trial court found that "[t]he testimony of Defendants' expert, based on private industry
standards, provided little or no guidance as to how her testimony should relate to a public utility's
discretionary authority." Additionally, the trial court found that "[w]hen Defendants' expert witness
formed her conclusions, she had not reviewed updated District documents previously provided to
Defendants' legal counsel by Plaintiff's counsel, because Defendants' counsel had not given
those documents to her." Furthermore, instead of utilizing District-specific documentation when
analyzing the District's rate calculations, the trial court found that "Defendants' expert witness
used an FCC template for her work analyzing the District's rate calculations."
26 The safety space comprises 40 inches of space on the pole between the
communications attachments and the electrical attachments.
21
No. 77310-1-1/22
If a municipal utility's actions "come within the purPose and object of the
enabling statute and no express limitations apply" then "the choice of means
used in operating the utility [is left] to the discretion of municipal authorities." City
of Tacoma v. Taxpayers of City of Tacoma, 108 Wash. 2d 679, 695, 743 P.2d 793
(1987). Courts "limit judicial review of municipal utility choices to whether the
particular contract or action was arbitrary or capricious, or unreasonable." City of
Tacoma, 108 Wash. 2d at 695 (citation omitted). This is an extremely deferential
standard of review.
"Arbitrary and capricious" refers to "willful and unreasoning action,
taken without regard to or consideration of the facts and
circumstances surrounding the action. Where there is room for two
opinions, an action taken after due consideration is not arbitrary
and capricious even though a reviewing court may believe it to be
erroneous."
Lane v. Port of Seattle, 178 Wash. App. 110, 126, 316 P.3d 1070 (2013)(quoting
Abbenhaus v. City of Yakima, 89 Wash. 2d 855, 858-59, 576 P.2d 888 (1978)).
In PUD I, we concluded that, in regard to setting pale attachment rates,
each public utility district "retains its preexisting discretion with regard to rate-
setting except as that discretion is restricted by the amended [RCW 54.04.045]."
PUD I, 184 Wash. App. at 60. Because the amended statute does not specifically
define the data and expenses that the district must use to calculate an
attachment rate, courts must defer to public utility districts when reviewing the
compilation and calculation of the data and expenses they use to calculate their
pole attachment rates. PUD I, 184 Wash. App. at 61-62, 72-74. However, a public
utility district's exercise of discretion regarding the actual expenses used to
calculate the pole attachment rate must be guided by the legislature's statement
22
No. 77310-1-1/23
of intent set forth in its 2008 amendment of RCW 54.04.045, including its
instructions that the rate "'recognize the value of the infrastructure of locally
regulated utilities" and "'ensure that locally regulated utility customers do not
subsidize licensees." PUD I, 184 Wash. App. at 73 (quoting LAWS OF 2008, ch.
197,§ 1). So long as the District sets its rates by applying the formula set forth in
RCW 54.04.045(3), the various inputs the District uses are reviewed only to
determine whether the District acted arbitrarily and capriciously. See PUD 1, 184
Wash. App. at 61-62.
A
The Companies first contend that the District acted arbitrarily and
capriciously when it classified the safety space on its utility poles as unusable
space. This is so, they assert, because the District can and does place
attachments in the safety space. In response, the District asserts that the record
shows that it has a policy of avoiding placing attachments in the safety space and
that occasional use of the safety space by the District does not make it arbitrary
1
and capricious for the District to consider the safety space to be unusable space.
The District has the better argument.
This issue was directly addressed in PUD I. Therein, we concluded that
the District "retains discretion to determine whether to designate a portion of the
pole as unusable 'safety space' and, if it does so, whether to require the
Companies to bear a share of the cost associated with the unusable space."
PUD I, 184 Wash. App. at 73. Our decision was clear that "the legislature did not
define that which constitutes a proper share, and it did not define that which
23
No. 77310-1-1/24
constitutes unusable space," and that "the absence of further definition affords
1
the District discretion to determine that which constitutes unusable space." PUD
184 Wash. App. at 73-74. "Instituting a policy of not using the safety space is a
prerogative of the District both as a rate maker and as a Utility operator." PUD I,
184 Wash. App. at 74.
Despite these clear directions from us, the Companies assert that the
District's discretion regarding the classification of safety space is restrained by
language in RCW 54.04.045(3)(a). Specifically, the Companies assert that the
section that reads "including a share of the required support and clearance
space, in proportion to the space used for the pole attachment, as compared to
all other uses made of the subject facilities and uses thaf,remain available to the
owner or owners of the subject facilities" prohibits the District from classifying the
safety space as unusable space. RCW 54.04.045(3)(a). This is so, they assert,
because the safety space remains available for use by the District, the owner of
the utility poles, for installation of streetlights and the District's fiber and that the
District uses the space for those purposes.
The Companies' argument completely ignores our directive that the
statute does not define that which constitutes unusable space and that such
definition is left to the District's discretion. The Companies' statutory argument
fails because, as the District has defined unusable space, something we decided
in PUD 1 that the District has the discretion to do, the safety space is unusable.
If, as here, there is some support in the record for the District's classification, it is
not "willful and unreasoning action, taken without regard to or consideration of
24
No. 77310-1-1/25
the facts and circumstances surrounding the action." Abbenhaus, 89 Wash. 2d at
858. Herein, the District's classification is supported by the record, which shows
that the District has established a policy of not using the safety space and taken
steps to comply with that policy. The implementation of Such a policy is "a
prerogative of the District."27 PUD I, 184 Wash. App. at 74. The District did not
abuse its discretion by classifying the safety space as unusable.
The Companies next assert that the District abused its discretion by
including numerous expenses in its calculation of the pole attachment rate and
that these inclusions resulted in an arbitrary and capricious over-allocation of
costs to the Companies. Specifically, the Companies object to the inclusion of a
return on equity, rate of return on debt expenses, taxes, and attorney fees as
actual expenses.28 In response, the District asserts that it has the discretion to
include all of these expenses because they are actual expenses of the District
and are within the bounds of the District's discretion to determine the expenses it
27 The Companies' rather churlish protestations that they should not be required to pay
for the safety space, created to protect the safety of their own workers, see PUD I, 184 Wash. App.
at 73 n.39, because of the District's staff's failure to always comply with the District's policy not to
use the safety space, would be better directed toward the District's board of commissioners in
their supervisory role over the District's management.
28 The Companies also object to the District's allocation of indirect costs. However, the
Companies offer no argument grounded in Washington law to support their contention that the
District has misallocated indirect costs. Instead, the Companies simply argue that the allocation
of indirect costs must be arbitrary and capricious because the indirect cost allocation is not
proportional to the allocation of capital costs and direct costs among the District's different
operations. We disregard this argument because the Companies' position is unsupported by any
legal authority or any citation to the record indicating that the District utilized inaccurate numbers.
The Companies also claim that the trial court erred by finding that the Companies conceded that
the District utilized the correct number of attachers per pole when calculating the rate. However,
the record clearly shows that the Companies withdrew their position on this issue during the
remand trial.
25
No. 77310-1-1/26
includes when calculating the pole attachment rate. Again, the District has the
better argument.
The Companies first aver that the District is precluded from including a
return on equity as an actual expense chargeable to the Companies.29 This is
so, they assert, because RCW 54.04.045 does not explicitly permit the District to
include just compensation as a component of its pole attachment rate.3°
However, the legislature's stated intent in passing the 2008 amendments to RCW
54.04.045 was to "recognize the value of the infrastructure of locally regulated
utilities" and to "ensure that locally regulated utility customers do not subsidize
licensees." LAWS OF 2008, ch. 197,§ 1. The District's customers are functionally
equivalent to investors because they fund the construction and maintenance of
the District's utility poles, and it respects their investment in the system to charge
29 The Companies also assert that the District's financial records did not include the
necessary information for the District to calculate a return on equity component of the pole
attachment rate. This assertion is rebutted by the record. The Distriet's general manager
testified as to how the District calculated the rate based on its financial records, specifically by
relying on its records of retained earnings as set forth in the District's balance sheet. This
balance sheet was included as a part of aggregate figures in the District's annual report to the
state auditor. The trial court obviously credited this testimony when it ruled in the District's favor
on this issue.
39 The Companies also contend that the inclusion of a return on equity as a component of
the pole attachment rate violates RCW 54.16.330(4). This argument fails for three reasons.
First, the statute addresses the District's ability to set rates for the sale of its telecommunications
services, not pole attachment rates. Second, the Companies' referenced subsection only
prohibits the District from giving itself a discount when it uses its own telecommunications
services, it does not address the rates the District can charge other entities for other services.
RCW 54.16.330(4)("A public utility district may not charge its nontelecommunications operations
rates that are preferential or discriminatory compared to those it charges entities purchasing
wholesale telecommunications services."(emphasis added)). Third, even if RCW 54.16.330(4)
did apply to the setting of pole attachment rates, RCW 54.16.330(2) defines discriminatory rates
as "when a public utility district offering rates, terms, and conditions to an entity for wholesale
telecommunications services does not offer substantially similar rates, terms, and conditions to all
other entities seeking substantially similar services." Because the Companies seek a different
service than the District's wholesale telecommunications customers, namely to attach equipment
to utility poles rather than purchasing broadband, the District need not charge a similar rate.
26
No. 77310-1-1/27
a return on equity to third party pole attachers that make use of the publicly
financed utility poles for their private gain.31
Furthermore, the Companies admit in their briefing that the FCC Cable
formula incorporates a return on equity. It can hardly be argued that the
legislature sought to prohibit the District from obtaining a return on equity in RCW
54.04.045(3) when, in RCW 54.04.045(4), it explicitly authorizes the District to
make use of the FCC Cable formula, which includes such a return on equity. We
therefore conclude that the District did not abuse its discretion by incorporating a
return on equity in its pole attachment rate.
The Companies next aver that the District inappropriately included a rate
of return component for the District's depreciated debt expenses in its pole
attachment rate calculations. Citing to no authority, the Companies rely solely on
the testimony of their expert witness—testimony which was explicitly rejected by
the trial court—to assert that the District can charge a rate of return only for its
undepreciated assets. As admitted by the Companies' expert witness, this is
essentially an objection to the District's use of gross figures instead of net figures
when calculating the rate of return on debt expenses.32 However, because the
credibility of witnesses is best determined by the trier of fact, In re Disciplinary
31 This also addresses the Companies' assertion that the District, as a nonprofit entity,
has no reason to obtain a return on equity. As the District notes in its briefing, any return on
equity received by the District can be reinvested into maintenance of the District's utility poles.
This further helps to protect the investment in the system made by the District's customers.
32 The Companies' expert claimed that "the rate of return is only applicable on
unrecovered investment." She further explained that the "rate of return is the payment for the fact
that someone has expended money ahead of time and you are now paying back that principal
over time." The basic idea is that the Companies should not be required to pay a rate of return
based on the initial amount invested, the gross costs, because the District has recovered some of
its investment through the use of those poles, thus reducing its net costs.
27
No. 77310-1-1/28
Proceeding Against Kuvara, 97 Wash. 2d 743, 747, 649 P.2d 834 (1982), and the
trier of fact herein chose not to credit this testimony, we have no basis to rely on
the testimony of the Companies' expert witness in resolving this claim of error.
Furthermore, even if we did consider the argument raised by the
Companies' expert witness, the District's decision to incorporate a rate of return
element on depreciated debt expenses simply does not constitute arbitrary and
capricious action.33 As we previously stated in PUD 1, the use of gross or net
figures is left to the District's discretion. 184 Wash. App. at 73. That discretion is
guided by the legislature's intent that the pole attachment rate "'recognize the
value of the infrastructure of locally regulated utilities" and to "'ensure that locally
regulated utility customers do not subsidize licensees." PUD 1, 184 Wash. App. at
73 (quoting LAWS OF 2008, ch. 197, § 1). The District concluded that the use of
gross costs, in this case charging a rate of return on debt expenses for all assets
instead of just undepreciated ones, resulting in a higher rate of return, is best in
keeping with these goals.34 The District's choice herein to charge a rate of return
for all assets regardless of depreciation does not run afotil of the legislature's
33 As with many of the Companies' arguments regarding inputs, their complaint about the
District's accounting choices would more appropriately be directed toward the District's board of
commissioners. The arbitrary and capricious standard of judicial review is not a catch all
standard intended to allow courts to interfere with agency decision-making in order to forestall
any and all mistakes or perceived errors in judgment made by public,officials. Rather, it permits
courts to intervene to stop only "willful and unreasoning action, taken without regard to or
consideration of the facts and circumstances surrounding the action." Abbenhaus, 89 Wash. 2d at
858. For other discretionary actions that do not constitute arbitrary and capricious conduct, the
remedy for those disapproving of choices made is at the ballot box. ,
34 The District additionally contends that the fact that it pays no federal income tax also
justifies the higher rate of return on debt. This is irrelevant. Whether the District receives a tax
benefit for depreciation is not at issue. However, how much the District, and thus the District's
customers, should be compensated for having made the costly initial investment into the District's
utility pole system, is guided by the legislature's stated intent in RCW 54.04.045. The legislature
wished to recognize the value of the infrastructure, and charging a rate of return on all assets,
depreciated or not, recognizes that value.
28
No. 77310-1-1/29
stated intent. Thus, even were we to accept the Companies' expert witness's
testimony, we would decline to conclude that such a decision by the elected
commissioners constituted arbitrary and capricious action.
The Companies next aver that the District improperly included taxes on its
electrical operations as an expense component of its pole attachment rate. This
is so, the Companies assert, because the taxes on the District's electrical
business are not attributable to third party telecommunications pole attachers. In
response, the District asserts that the tax expense is a component of the
District's utility pole system, and that because the Companies would have
nowhere to attach their equipment without the District's utility pole system, they
should be required to pay a share of the taxes. The District's position is
consistent with our decision in PUD I that not every expense of operating the
utility poles has to benefit attachers in order to warrant the attachers sharing in
the expense. 184 Wash. App. at 72 n.38 (concluding that a deduction in the rate
for the "cross arms" space on a pole is not required by statute even though the
cross arms do not benefit attachers). We conclude that the District's inclusion of
taxes as an expense chargeable to attachers in the pole attachment rate is in
keeping with the legislature's stated intent to value the District's infrastructure
and that the District's inclusion of tax expenses as a component of the pole
attachment rate was not arbitrary and capricious.
Finally, the Companies contend that the District improperly included
attorney fees as an expense component of its pole attachment rate. Specifically,
the Companies assert that the District may not include litigation expenses in the
29
No. 77310-1-1/30
rate because the District has been granted a partial award of attorney fees in
court, and thus the recovered fees are no longer an actual expense.
The Companies' contention here is essentially a claim that they should
receive an offset in the rate because they will have already made payment for
some of the District's litigation expenses. Such a claim of entitlement to an offset
constitutes an avoidance, and is therefore an affirmative defense. See CR 8(c);
Locke v. City of Seattle, 133 Wash. App. 696, 713, 137 P.3d 52(2006)(holding that
jury instructions placing the burden of proof for establishing the amount of an
offset on the defendant City of Seattle were proper because an offset is "in the
1
nature of an avoidance"), aff'd, 162 Wash. 2d 474, 172 P.3d 705 (2007). In such
circumstances, "[t]he burden of proof is. . . placed upon the party asserting the
avoidance or affirmative defense." Locke, 133 Wash. App. at 713 (citing Gleason v.
Metro. Mort. Co., 15 Wash. App. 481, 551 P.2d 147 (1976); Tacoma Commercial
Bank v. Elmore, 18 Wash. App. 775, 573 P.2d 798 (1977); 3A LEWIS H. ORLAND &
KARL B. TEGLAND, WASHINGTON PRACTICE: RULES PRACTICE CR 8, at 138 (4th ed.
1992)).
The Companies do not assert that they have actually paid any of the
District's litigation expenses to date, nor do they offer anything in support of their
contention other than vague assertions that the District is double counting.
Nowhere in the record did the Companies prove that they have actually paid any
of the District's litigation expenses. Nowhere in the record did the Companies
establish a percentage of the rate sought to be charged to them as
corresponding to payments that they have already made. Nowhere in the record
30
No. 77310-1-1/31
l
did they establish what amount of the District's litigation expenses that they may
be ordered to pay would impact in any quantified way the lawfulness of the rate
sought to be charged to them. In this way, they have failed to meet their burden
of proof to establish that they are entitled to an offset.
Litigation expenses are an actual expense of the District in its effort to
conduct its utility pole operations. Including them as an expense in the pole
attachment rate was not an abuse of discretion.
V
The Companies' primary assertion on appeal is that the trial court erred by
accepting the District's interpretation of RCW 54.04.045(3)(a). Specifically, the
Companies object to the District's interpretation of the space allocator component
of the formula set forth therein. The Companies aver that the District's
interpretation improperly applies the language of the statute by interpreting the
words "the pole" to mean "usable space on the pole" without justification. In
response, the District avers that the Companies' proposed alternative, which
interprets the words "the pole" to mean "the height of the entire pole," disregards
1
our previous directive that RCW 54.04.045 sets forth a unique formula that does
not match any preexisting formulas. This is so, the District asserts, because the
Companies' proposed alternative interpretation is mathematically functionally
equivalent to the FCC Cable formula.
A trial court's interpretation of a statute is subject to de novo review.
Landmark Dev., Inc. v. City of Roy, 138 Wash. 2d 561, 569, pso P.2d 1234 (1999).
Courts must interpret a statute to effectuate the legislature's intent. Bostain v.
31
No. 77310-1-1/32
Food Express, Inc., 159 Wash. 2d 700, 708, 153 P.3d 846 (2007). Where the
meaning of the words of a statute are plain and not ambiguous,"we give effect to
that plain meaning as the expression of the legislature's intent." Bostain, 159
Wash. 2d at 708. "Plain meaning is determined from the ordinary meaning of the
language used in the context of the entire statute in which the particular provision
is found, related statutory provisions, and the statutory scheme as a whole."
Bostain, 159 Wash. 2d at 708. If a statute's language is subject to more than one
reasonable interpretation, then we look to other indicia of,legislative intent.
Bostain, 159 Wash. 2d at 708. A "clear and explicit statement of intent should guide
analysis of the statute as a whole." In re Custody of M.W., 185 Wash. 2d 803, 814,
374 P.3d 1169(2016).
A
The District contends that the space allocator formula set forth in RCW
54.04.045(3)(a) can be mathematically depicted as:
/occupied space)
(support and clearance space)\
(occupied space' usable space x
'¼ space height of the pole
According to the District, this formula converts the language of subsection (3)(a)
to a mathematical formula that the District can apply as the space allocator
component of its calculation of the maximum permissible pole attachment rate
pursuant to that subsection. In response, the Companies'assert that the first
1
component of the District's formula incorrectly divides thel occupied space by the
usable space on the pole when the statutory language requires division by the
total height of the pole.
32
No. 77310-1-1/33
The Companies assert that the space allocator formula set forth in RCW
54.04.045(3)(a) is correctly mathematically depicted as:
/(occupied space)
( occupied space ) usable space x (support and clearance space)\
+
height of the pole height of the pole
Furthermore, the Companies assert that this formula can be simplified to the
following equation:
(occupied space\
usable space
As a result, the Companies contend that subsection (3)(a) is the FCC Cable
formula.
In response, the District avers that the Companies' simplified formula
cannot be correct because it does not reflect the words set forth in subsection
(3)(a). The District further contends that even the nonsimplified version must be
an inaccurate interpretation because it is the mathematical equivalent of the FCC
Cable formula, which, according to the District, would contradict our holding in
PUD I that RCW 54.04.045(3) sets forth a unique formula.35 We conclude that
the Companies' nonsimplified formula accurately interprets the statutory
language set forth in RCW 54.04.045(3)(a).
35 Contrary to the District's assertion, we never held that the space allocator component
of the portion of the formula set forth in RCW 54.04.045(3)(a) could not be mathematically
equivalent to the space allocator component of the FCC Cable formula. While PUD I directed the
trial court on remand to apply the "unique rate formula based on the Words of the statute," 184
Wash. App. at 72, it said nothing to the effect that subsection (3)(a) cannot produce a space
allocator component that is mathematically equivalent to the FCC Cable formula's space
allocator. By focusing on the mathematics, rather than on the words of the statute, the trial court
erroneously concluded that subsection (3)(a) must set forth a space allocator component that is
mathematically distinct from the FCC Cable formula's space allocator.
33
No. 77310-1-1/34
The District failed to provide any analysis of the disputed statutory
language that supports the first component of its interpretation of the space
allocator formula set forth in subsection (3)(a).36 The closest the District comes
to making any sort of argument that supports its interpretation is when it asserts
that the divisor of the first part of its formula must be the usable space because it
is "the only space on the pole that third-party attachers are authorized by
National Electrical Safety Code(NESC) Rules to use." However, such an
argument fails to overcome the plain language of subsection (3)(a), which states
that the District must calculate costs that are "attributable to that portion of the
pole. . . used for the pole attachment" instead of attributable to that portion of
the usable space on the pole used for the pole attachment. RCW
54.04.045(3)(a)(emphasis added).
The Companies point out precisely the aforementioned problem with the
District's interpretation," asserting that the first component of the space allocator
36 Rather than offer support for its position in the statutory text, the District merely
restates, with conclusory language, that the general manager interpreted the statutory language
and that the trial court accepted this interpretation. However, the record reveals that when
questioned regarding his interpretation, the District manager was unable to articulate any reason
derived from the language of the statute for his interpretation of the words "of the pole" to mean of
the usable space on the pole. Furthermore, as we previously discussed herein, our review of the
trial court's interpretation of the statute is de novo and we owe no deference to the District's, nor
the District's general manager's, interpretation.
37 The Companies assert two additional reasons for rejecting the District's interpretation.
First, they assert that the District's interpretation is "mathematically impossible" because it double
allocates a portion of the costs of the unusable space on the pole to the Companies. How this
makes the formula mathematically impossible, as opposed to simply a formula which allocates a
greater percentage of the costs of the pole to the Companies than they desire, is never explained.
Second, the Companies assert that we should give great weight to the WUTC's interpretation of
RCW 80.54.040, which the Companies assert has nearly identical language to RCW 54.04.045.
The Companies contend that because the WUTC has interpreted the pertinent language in RCW
80.54.040 to be the FCC Cable rate, we should construe RCW 54.04.045(3)(a) in the same
manner. This argument contrasts sharply with the Companies' position in PUD I, wherein they
correctly asserted that we should construe the language of the statute de novo without deferring
to an implementing agency's interpretation. If it is correct, and indeed it is, that we should not
defer to an agency responsible for implementing RCW 54.04.045, it is undoubtedly correct that
34
No. 77310-1-1/35
formula set forth in subsection (3)(a) must divide the occupied space by the total
height of the pole. Such an interpretation matches the directive set forth in the
statute that the pole attachment rate charge attachers for costs "attributable to
that portion of the pole . . . used for the pole attachment:: RCW 54.04.045(3)(a)
(emphasis added). We therefore conclude that the Companies' nonsimplified
formula, as set forth herein, correctly interprets the space allocator component of
1
subsection (3)(a):
((occupied
( occupied space \ space) x (support and clearance space)\
usable space
)+
height of the pole height of the pole
Had they stopped with their nonsimplified formula, the Companies would
have correctly interpreted the space allocator component ofthe formula set forth
in RCW 54.04.045(3)(a). However, the Companies, not Satisfied with our ruling
in the first appeal, seek once again to have subsection (3)(a) declared to be the
FCC Cable formula. At trial, the Companies' expert witness testified that the
expanded space allocator formula that the Companies assert is set forth in RCW
54.04.045(3)(a) can be mathematically simplified to be the mathematical
representation of the space allocator component set forth by the FCC Cable
formula. Therefore, they assert, subsection (3)(a) is the FCC Cable formula. We
do not agree.
we decline to defer to a different agency's interpretation of a different statute when that agency is
not even charged with the implementation of RCW 54.04.045. We therefore reject these
arguments.
35
No. 77310-1-1/36
In PUD 1, we noted that RCW 54.04.045(3) sets forth a unique formula
and, thus, despite some similarities to previously existing'formulas, does not
simply adopt one or more previously existing formulas. See 184 Wash. App. at 70-
71. A product of intense legislative negotiation, RCW 54.04.045(3) sets forth a
two part formula that combines half of the rate calculated by applying the words
of the statutory formula set forth in subsection (3)(a)38 with half of the rate
calculated by applying the words of the statutory formula 'set forth in subsection
(3)(b). Although there are similarities to other formulas, the language used in
these subsections is not the same as that set forth by any of the preexisting
formulas that the Companies and the District compared the statute to in PUD I,
including the FCC Cable formula.39 See 184 Wash. App. at 70-71.
Furthermore, if the legislature had intended for subsection (3)(a) to be the
FCC Cable formula, as opposed to merely producing a mathematically equivalent
formula, it could have simply stated that the District should apply the FCC Cable
formula." See PUD 1, 184 Wash. App. at 63. However, by refusing to do so, the
legislature ensured that public utility districts utilized a mathematically equivalent
rate to the FCC Cable formula, without becoming bound to follow any federal
interpretations or rules relating to the FCC Cable formula. The legislative
process can be a delicate balancing act between competing interests, and we
38 Or, as subsection (4) states, the District may use half of the rate calculated using the
current FCC Cable formula instead of using the formula set forth by subsection (3)(a).
38 The Companies assert that it is the mathematical equivalency to the FCC Cable
formula that makes subsection (3)(a) the FCC Cable formula. This is directly contrary to our
directive in PUD Ito apply the words of the statute. Whether the space allocator formula
produced by the language of subsection (3)(a) is mathematically equivalent to any preexisting
space allocator formulas is irrelevant, as it is the words of the statute that are significant. See
PUD I, 184 Wash. App. at 72.
48 As it did in subsection (4).
36
No. 77310-1-1/37
can easily envision the legislature actively avoiding shortcut references in the
language of the 2008 amendment to RCW 54.04.045 in order to avoid the
prospect of foreign judicial opinions or agency interpretations interfering with the
1
balance struck between public utility districts and those entities, such as the
Companies, who were involved in the 2008 bill's development and
implementation. Indeed, we noted a specific example of the results of such an
approach in PUD I when we explained that, while the FCC Cable formula
requires certain assumptions to be made regarding the inputs used when
calculating the pole attachment rate, no assumptions regarding inputs are
required by the formula set forth in RCW 54.04.045(3)(a)4b). See 184 Wash. App.
at 74 ("[P]ursuant to the federal formulas, the number of attachers must be
assumed to be three. However, because the formula created by the legislature is
unique, it was not incumbent on the District to assume that there were three
attachers per pole.").
The formula set forth in subsection (3)(a) is both Mathematically
equivalent to the FCC Cable formula and distinct from the FCC Cable formula.
The legislature's decision to choose its own words to establish a rate formula
(and thereby foreclose foreign authorities from in any way acting in a manner that
would alter the balance struck by the legislature) protectslpublic utility districts
from any limitations to their discretion not specifically enumerated in the 2008
1
amendment. Similarly, it protects attachers from any rate changes not
authorized by the legislature. Thus, we reject the Companies' assertion that
RCW 54.04.045(3)(a) is the FCC Cable formula. Instead, it is what it is.
37
No. 77310-1-1/38
Although the District and the trial court erred in interpreting the language
of RCW 54.04.045(3)(a), that does not establish,that the Companies should
prevail. Because the District's and the trial court's only error was in its
interpretation of the space allocator component of the formula set forth in RCW
54.04.045(3)(a), and because we affirm the trial court's decision to credit the
District's selection of data and inputs to calculate the maximum permissible rate
pursuant to the statute, we may determine if the trial court's error herein was
harmless.'" We conclude that it was.
"Error without prejudice is not grounds for reversal: and error is not
1
prejudicial unless it affects the case outcome." Qwest Corp. v. Wash. Utils. &
Transp. Comm'n, 140 Wash. App. 255, 260, 166 P.3d 732(2007)(citing Brown v.
Spokane County Fire Prot. Dist. No. 1, 100 Wash. 2d 188, 196, 668 P.2d 571
(1983)). Where the trial court incorrectly interprets a statute, but such
misinterpretation has no effect on the outcome of the case, the error is harmless.
See Qwest, 140 Wash. App. at 259-60 (holding that trial court's failure to apply the
correct standard of review required by statute was harmless error).
Herein, because we conclude that the District's selection of data and
inputs, credited by the trial court,42 was within the bounds of the District's
41 Remarkably, the District declined to address this possibility in its briefing or when
specifically asked about it during oral argument. However, we "may affirm the trial court's
ultimate decision on any grounds established by the pleadings and supported by the record."
Verbeek Props., LLC v. GreenCo Envtl., Inc., 159 Wash. App. 82, 90, 246 P.3d 205 (2010).
42 Our calculation of the maximum permissible rate pursuant to the statute is possible
because we are affirming the trial court's decision to credit the District's selection of data and
inputs. If the trial court had not credited these data and inputs, or if we concluded that resort to
any of them constituted an abuse of the District's discretion, we would not be able to calculate the
maximum permissible rate without inappropriately placing ourselves in the role of fact finder.
38
No. 77310-1-1/39
discretion, we can apply those data and inputs to the formula set forth in RCW
54.04.045(3).43 Our calculations regarding the maximum permissible rate for the
' years 2008 through 2015 are set forth in the following table:44
2008 2009 2010 2011 2012 2013 2014 2015
1. Avg Cost of 678.54 690.16 717.11 726.88 736.42 746.26 764.79 795.63
Bare Pole ($)
2. Carrying 17.41 17.79 18.65 16.79 17.24 17.76 18.08 17.53
Charge(%)
3. Avg pole height 41.8 41.8 42.0 42.0 42.0 42.1 42.1 42.2
(ft.)
4. Total support 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5
and clearance
space (ft.)
5. Total usable 14.3 14.3 14.5 14.5 14.5 14.6 14.6 14.7
space (ft.)
6. Space 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Occupied (ft.)
7. RCW 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07
54.04.045(3)(a)
space allocator
component
8. Maximum 8.27 8.59 9.36 8.54 8.89 9.28 9.68 9.76
permissible rate
per subsection
(3)(a)($)
9. Maximum 33.08 34.38 36.11 32.95 34.28 35.78 37.33 37.66
permissible rate
per subsection
(3)(b)($)
10. Maximum 20.68 21.49 22.74 20.75 21.59 22.53 23.51 23.71
permissible rate
per RCW
54.04.045(3)
($)
43 The data and inputs we rely on herein are drawn from Plaintiff's Exhibit 1033, which is
attached to this opinion as Appendix A.
44 The following details provide an explanation of the data contained in the table. First,
the data in rows 1 through 6 and row 9 are copied verbatim from Plaintiffs Exhibit 1033. Rows 1
and 2 set forth the amount of the average cost of a bare pole and the carrying charge. These
inputs reflect the capital and operating expenses of the District regarding their utility poles. Rows
3 through 6 provide the data utilized by the District regarding the height of their utility poles and
the classification of space on the pole. Row 9 sets forth the District's calculation of the maximum
permissible pole attachment rate pursuant to RCW 54.04.045(3)(b). Because the District
correctly interpreted subsection (3)(b) and utilized appropriate data and inputs we do not need to
recalculate the maximum permissible rate pursuant to subsection (3)(b). Row 7 contains the
space allocator component obtained as a result of applying the District's data to the formula set
forth by RCW 54.04.045(3)(a) as discussed above, rounded to the nearest one hundredth (the
39
No. 77310-1-1/40
In each year, the maximum permissible rate (row 10) is higher than the
District's rate of $19.70. Therefore, the trial court's failure to properly apply the
space allocator component of the formula set forth by RCW 54.04.045(3)(a) did
not materially affect the outcome of the trial. The trial court's error was harmless
because the District's rate is in compliance with the statute as properly applied.
VI
The District also seeks affirmance of its award of attorney fees from the
first trial in addition to subsequent awards granted by the trial court and an award
of its fees and costs incurred in this appeal. Because the District's contracts with
the Companies provide for an award of attorney fees when the District is the
prevailing party, and because the District is the prevailing party, the District is
entitled to an award of fees.
Whether there is a legal basis for awarding attorney fees is reviewed de
novo, but a discretionary decision to award fees and expenses, and the
reasonableness of such an award, is reviewed for an abuse of discretion.
Gander v. Yeager, 167 Wash. App. 638, 647, 282 P.3d 1100 (2012).
"Washington follows the American rule 'that attorney fees are not
recoverable by the prevailing party as costs of litigation unless the recovery of
such fees is permitted by contract, statute, or some recognized ground in
L
equity." Panorama Vill. Condo. Owners Ass'n Bd. of Dirs. v. Allstate Ins. Co.,
144 Wash. 2d 130, 143,26 P.3d 910(2001)(quoting McGreevy v. Or. Mut. Ins. Co.,
same rounding as performed by the District in Plaintiff's Exhibit 1033). Row 8 sets forth the
maximum permissible rate pursuant to RCW 54.04.045(3)(a), and row 10 sets forth the maximum
permissible rate pursuant to RCW 54.04.045(3).
40
No. 77310-1-1/41
128 Wash. 2d 26, 35 n.8, 904 P.2d 731 (1995)). This rule requires, initially, that a
party must prevail in order to receive an attorney fee award. "In general, a
prevailing party is one who receives an affirmative judgment in his or her favor."
Riss v. Angel, 131 Wash. 2d 612, 633, 934 P.2d 669 (1997). "Contractual
provisions awarding attorney fees to the prevailing party also support an award of
appellate attorney fees." City of Puyallup v. Hogan, 168 Wash. App. 406, 430, 277
P.3d 49(2012). In PUD 1, we concluded that "in the event that the District
prevails on remand, the award of expenses [from the first trial] should not be
disturbed." 184 Wash. App. at 86.
The District is the prevailing party on appeal and, as we explained in PUD
I, the District's contracts with the Companies, on which it brought this lawsuit,
provide for the recovery of attorney fees. See 184 Wash. App. at 82-87.
Accordingly, the District is entitled to its award of fees froM the first trial, its
awards of fees and costs subsequent to the first trial, as reflected in the amended
and restated judgment, and an award of fees and costs for this appeal.
In summary, we (1) affirm the trial court's ruling that the District did not
abuse its discretion while selecting the data and inputs tol utilize when calculating
the maximum permissible pole attachment rate pursuant to RCW 54.04.045(3),
(2) reverse the trial court's ruling incorrectly interpreting RCW 54.04.045(3)(a),
and (3) affirm the judgment and award the District its fees and costs on appeal.
Upon the District's compliance with RAP 18.1, a commissioner of our court will
enter an appropriate order awarding fees and costs.
41
No. 77310-1-1/42
The judgment is affirmed.
42
• Pacific County PUP #2
Pole Attachment Rate Model per RCW 54.04.045
Rate Computation
2007-2015
Exhibit 1
RATE CALCULATION - 2007 thru 2015 - Gross
POLE & ATTACHMENT DATA 2015 2014 2013 2012 2011 2010 2009 2008 2007
(I) Number of Poles 9,460 9,549 9,586 9,636 9,667 9,704 9,662 9,684 9,784
(2) Average Number of Attachments(Contacts/Pole)I 2.61 2.61 2.61 2.61 2.61 2.61 2.61 2.61 2.61
(3) Space Occupied by One Attachment 1.00 ft 1.00 ft 1.00 ft 1.00 ft 1.00 ft 1.00 ft 1.00 ft 1.00 ft 1.00 ft
(4) Average Cost ofBare Pole2 $ 795.63 $ 764.79 $ 746.26 $ 736.42 $ 726.88 $ 717.11 $ 690.16 $ 678.54 $ 655.00
(5) Carrying Charge 17.53% 18.08% 17.76% 17.24% 16.79% 18.65% 17.79% 17.41% 16.74%
_
--
ASSIGNABLE & COMMON SPACE PER POLE
(6) Average Pole Height 42.2 ft 42.1 ft 42.1 ft 42.0 ft 42.0 ft 42.0 ft 41.8 ft 41.8 ft 41.7 ft
I
Underground Pole(10% + 2') 6.2 ft 6.2 ft 6.2 ft 6.2 ft 6.2 ft 6.2 ft 6.2 ft 6.2 ft 6.2 ft
Ground Clearance(per NESC) 18.0 ft 18.0 ft 18.0 ft 18.0 ft 18.0 ft 18.0 ft 18.0 ft 18.0 ft 18.0 ft
Safety Space(per NESC) 3.3 ft 33 ft 3.3 ft 3.3 ft 3.3 ft 33 ft 3.3 ft 3.3 ft 3.3 ft
(7) Total Support & Clearance Space 27.5 ft 27.5 ft 27.5 ft 27.5 ft 27.5 ft 27.5 ft 27.5 ft 27.5 ft 27.5 ft
(X) Total Usable Space 14.7 ft 14.6 It 14.6 ft 14.5 ft 14.5 ft 14.5 ft 143 ft 14.3 ft 14.2 ft
POLE ATTACHMENT RATE
(s) Space Factor(RCW 54.04.045 3A)4 0.11 0.11 0.11 0.11 0.11 0.11 0.12 0.12 0.12
(to) Space Factor(RCW 54.04.045 3B)5 0.27 0.27 0.27 0.27 0.27 0.27 0.28 0.28 0.28
Maximum Attachment Rate per 3A 6 $ 15.34 $ 15.21 $ 14.58 S 13.97 S 13.42 S 14.71 $ 14.73 $ 14.18 $ 13.16
Maximum Attachment Rate per 3B 7 $ 37.66 S 37.33 $ . 35.78 $ 34.28 S 32.95 S 36.11 $ 34.38 S 33.08 S 30.70
Rate per RCW (1/2 of3A + 1/2 of3B) $ 26.50 $ 26.27 $ 25.18 $ 24.13 $ 23.19 $ 25.41 $ 24.56 $ 23.63 $ 21.93
I. Based on sample from pole inventory
2. (Investment in Poles)/(Total No. ofPoles), see Exhibit 3 Ili 5 26.27
3. See Exhibit 2 Lo $ 21.93
4.[(3)+ MI+ i[(3)+(5)1x(7)*(6)) Avg S 24.29
5. ((3)+[(7)+(2)l) +(6)
6.(9)•(4)•(5)
7.(IR)•(4)•(5)
1VAIBlitidlill/serhomelmarkhkPole ContactilawSuinemand\2013 Rate UpdatelPacitie PUD Pole Attachment