US WEST took some heat from the Utah Supreme Court on Wednesday for forcing its customers to pick up the $4 million tab for 12 years of charitable contributions after the Public Service Commission clearly told the company it could not bill customers for its donations.
The Utah attorney general and a citizens group are accusing US WEST of trying to keep the public and the PSC from knowing that ratepayers were paying for the company's charitable contributions from 1976 to 1988, when a ratepayer discovered the practice. The consumer group wants US WEST to return the $4 million to ratepayers.The PSC told Utah utilities in 1969 that they could not charge ratepayers for the companies' charitable donations. That expense must be picked up by shareholders, the commission ruled.
Yet in a 1976 rate application, Mountain Bell - as the company was then called - included charitable contributions in the costs billed to ratepayers.
The expenses were included in a line item called "miscellaneous deductions" contained in an income statement submitted, along with sheaves of other documents, to the PSC. Only by reading a later footnote in the income statement could one discover the company included its charitable donations in the "miscellaneous deductions" paid by ratepayers.
Ted Smith, attorney for US WEST, told the court that the PSC read the income statement and should have known that Mountain Bell was billing ratepayers for charitable contributions. Mountain Bell "clearly and unambiguously" let the commission know of the practice by including the footnote in the income statement, he said.
"All the evidence on the record indicates the commission did not know," countered Ken Walgren, attorney for the citizens group and the Utah attorney general's office.
Justice Michael Zimmerman questioned Smith's claim that, by mentioning the deductions in a footnote, US WEST had drawn the PSC's attention to the fact that it was disobeying a PSC order.
US WEST appears to be saying that it can try again and again to slip something past the PSC and the public and "once they miss it you don't have an obligation to raise an issue that obviously they have adjudicated against you before," Zimmerman told Smith.
Smith paused, then agreed.
Zimmerman said US WEST's attitude suggested the company believed it could bill ratepayers for an inappropriate expense, such as the cost of proxy solicitations, so long as the PSC and the public didn't discover the practice.
The company seemed to say, "so long as we've got it in the mass of paper we filed, it's clearly stated. (If the expense is missed) it's the PSC's hard time and we have no duty to highlight it," Zimmerman said.
Smith agreed. If the expense is disclosed somewhere in documents to the PSC, the utility has met its obligation, he said.
Walgren disagreed. When a company is granted monopoly status, it has a greater responsibility to act in good faith than other companies, he argued. From 1976 to 1988, US WEST operated in 14 states, pulled in hundreds of millions of dollars in revenues each year and wielded considerable monopoly power, he said.
"It is regulated by a commission and staff that only take up half of one floor in the Heber Wells Building," he said. US WEST took advantage of its size and resources when it tried to hide the charitable contributions in its rate increase request, he said.
Justice Daniel Stewart questioned US WEST's apparent belief that a PSC order can be relitigated with each request for a rate increase. Smith said US WEST did not believe a PSC order carried the weight of a court order.
In his court arguments, Walgren accused US WEST of deliberate fraud. The company continued to bill ratepayers for charitable contributions even though the PSC made it clear again in 1980 that it would not allow such a practice, Walgren said. In the wake of allegations of impropriety by a UP&L lobbyist, the PSC ordered UP&L, Mountain Fuel and Mountain Bell in 1980 to make its contribution records public.
The PSC told the utilities at the time that it worried that ratepayers were charged for charitable contributions and reminded utilities that it had forbidden the practice in a 1969 ruling. UP&L and Mountain Fuel offered complete records of contributions, Walgren said. Mountain Bell offered a brief record that again did not make it clear that it was charging ratepayers for charity.
Smith argued that the PSC reviewed US WEST's 12-year charitable billing practice in 1988 after a consumer complained about paying for the company's charitable donations. After a formal hearing, the PSC concluded that US WEST did meet its obligation to disclose the practice to the commission, though it's written ruling made reference to Mountain Bell's "deliberate obtuseness."
Smith urged the court to uphold the PSC ruling.