BELLSOUTH )
TELECOMMUNICATIONS, INC., )
)
Petitioner/Appellant, ) Appeal No.
) 01-A-01-9509-BC-00400
VS. )
) Public Service Commission
KEITH BISSELL, STEVE HEWLETT, ) No. 95-01050
SARA KYLE, Constituting the )
Tennessee Public Service Commission, )
)
FILED
Respondents/Appellees. )
October 2, 1996
COURT OF APPEALS OF TENNESSEE Cecil W. Crowson
MIDDLE SECTION AT NASHVILLE Appellate Court Clerk
APPEALED FROM THE TENNESSEE PUBLIC SERVICE COMMISSION
AT NASHVILLE, TENNESSEE
FOR APPELLANT: FOR APPELLEES:
Bennett L. Ross Dianne F. Neal
Nashville, Tennessee Public Service Commission
Nashville, Tennessee
FOR INTERVENOR FOR TENNESSEE CONSUMERS:
AT&T COMMUNICATIONS, INC: Charles W. Burson
Attorney General & Reporter
Val Sanford
John Know Walkup Michael E. Moore
Nashville, Tennessee Solicitor General
L. Vincent Williams
Consumer Advocate Division
Nashville, Tennessee
REVERSED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
LEWIS, J.
KOCH, J.
OPINION
The Tennessee Public Service Commission ordered the completion of
a previously authorized investigation of the future earnings of BellSouth
Telecommunications, despite legislative developments that stripped the Commission
of its authority to use such an investigation to set telephone rates. BellSouth filed a
petition with this court for review of the PSC’s order, arguing that completion of the
investigation was inconsistent with the legislative purpose. We reverse the
Commission’s order and remand the case for further consideration by the Tennessee
Regulatory Commission.
I.
Prompted by a petition filed by the State Consumer Advocate, the Public
Service Commission voted on March 28, 1995 to conduct an investigation of the
intrastate earnings of South Central Bell (now BellSouth Telecommunications) for a
one-year future test period. Under the statute in effect at that time, such an
investigation of future earnings was a required preliminary step in the performance of
the P.S.C.’s function of establishing “just and reasonable rates” for telephone service.
On May 25, 1995, the Legislature enacted the Teleommunications
Reform Act, now codified at Tenn. Code Ann. § 65-5-201 et seq. The new act was
expressly designed to encourage competition in the telecommunications services
market, and it created an alternative to the traditional method of establishing
consumer telephone rates by future rate-of-return analysis.
Under the new procedure, a telephone company could apply for price
regulation, and the P.S.C. was required to implement a price regulation plan within 90
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days, based on an audit of the rate of return earned by the utility within the most
recent reporting period. See Tenn. Code Ann. § 65-5-209(c)and (j). Thus the statute
permitted expedited decision-making based on retrospective rather than prospective
financial data.
BellSouth applied on June 20, 1995 for price regulation under the new
statute. Nonetheless, on July 14, 1995 the Commission voted to complete the
earnings investigation, reserving the issue of “whether any use could be made of the
results of this investigation under the price regulation scheme set out in the
Telecommunications Act . . . .” BellSouth filed a petition under Rule 12,
Tenn.R.App.P. to appeal that order. The PSC and intervenor AT&T filed a joint
motion to dismiss the petition, on the ground that the order of investigation was not
a final order subject to appellate review.
On October 25, 1995, this court dismissed the joint motion on the ground
that “interlocutory administrative orders are reviewable where the agency has plainly
exceeded its statutory authority or threatens irreparable injury in clear violation of an
individual’s rights.” This court also stayed all proceedings in the Commission related
to the earnings investigation, and directed that the appeal proceed.
On July 1, 1996, the PSC was replaced by a new, appointed agency
called the Tennessee Regulatory Authority. See Tenn. Code Ann. § 65-1-201. On
June 11, 1996, this court heard oral arguments on BellSouth’s petition for review.
Neither in the briefs nor in oral argument did the PSC articulate a reason why the
investigation should continue. The parties all acknowledge that the information gained
through the investigation would be irrelevant to BellSouth’s rates. The PSC argues
only that the investigation might serve some purpose.
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We think the PSC’s decision to continue the investigation is simply
arbitrary, a decision “that is not based on any course of reasoning or exercise of
judgment.” See Jackson Mobilphone v. Tennessee PSC, 876 S.W.2d 106 at 111
(Tenn. App. 1993). An agency’s arbitrary decision -- even a preliminary, procedural,
or intermediate one -- may be reversed by the reviewing court. Tenn. Code Ann. §
4-5-322(a)(1), (h)(4).
We are aware that in adopting regulatory reform the legislature was
careful to say that nothing in the act would “affect the authority and duty of the
Commission to complete any investigation pending at the time” the act became
effective. See Acts 1995, ch. 408. But we do not think the legislature intended to
authorize the PSC to continue an investigation that no longer had any purpose.
We, therefore, reverse the PSC’s order continuing the earnings
investigation and remand the cause to the Tennessee Regulatory Authority for further
proceedings consistent with this opinion. Tax the costs on appeal to the PSC.
_____________________________
BEN H. CANTRELL, JUDGE
CONCUR:
______________________________
SAMUEL L. LEWIS, JUDGE
______________________________
WILLIAM C. KOCH, JR., JUDGE
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