Case Title: People's Counsel v. MD. Public Service

Citation: 355 Md. 1

Docket Number: 120/97

State: maryland

Court: Maryland Supreme Court

Date: 1999-07-27T00:00:00Z

Document:
IN THE COURT OF APPEALS OF  MARYLAND
NO.  120
SEPTEMBER TERM, 1997
_________________________________________
OFFICE OF PEOPLE’S COUNSEL
v.
MARYLAND PUBLIC SERVICE COMMISSION
_________________________________________
          
Bell, C. J.
           Eldridge
           Rodowsky
           Chasanow
                   Raker
   
           Wilner
           Cathell
JJ.
_________________________________________
Opinion by Bell, C. J.
_________________________________________
             FILED:  July 27, 1999
     Maryland Code, Article 78 was repealed by Acts 1998, ch. 8, § 1, effective October 1,
1
1998 and recodified in the Public Utility Companies Article.  The provisions regarding rate
regulation are now codified in § 4-101 et seq. of the PUC Article.   Section 4-102 is  derived
without substantive change from former Article 78, § 68(a), Revisor’s note, see also Acts of
1998, ch. 653, and § 4-101 is similarly derived from §69(a).  See Revisor’s note. The
provisions of §69(e) are now codified in § 4-301, also without substantive change.  See, in
addition to the Revisor’s note, Acts of 1998, ch. 653.  We shall refer throughout this opinion
to the statute in effect at the time of the actions giving rise to this appeal.
The central issue in this case is whether telecommunication rates set pursuant to
Maryland Code (1957, 1995 Repl. Vol.) Article 78, § 69(e) , an “alternative” form of
1
regulation, must meet the “just and reasonable rates” requirement of the traditional rate of
return regulatory scheme, and in particular § 68(a).  
The Public Service Commission (the “Commission” or “PSC”), in Order No. 73011,
In Matter of the Inquiry into Alternative Forms of Regulating Telephone Companies, Case
No. 8715, adopted an alternative form of regulation, specifically a price cap regulatory plan.
In so doing, it  concluded that § 69(e) permits it to subscribe to a “broader and more forward-
looking measure of rate reasonableness than can be obtained through an examination and
matching of the [telecommunications company’s] rate base, revenues, and expenses.”  More
particularly, the Commission adopted the view that § 69(e) obviates the requirement that it
set “just and reasonable rates” as §§ 68(a) and 69(a) prescribe.  
Disagreeing with the Commission’s interpretation of the inter-relationship among
these statutory provisions and alleging that the Commission’s factual determinations were
arbitrary and capricious, the Office of People’s Counsel (“People’s Counsel” or “OPC”)
sought judicial review of the Commission’s Order in the Circuit Court for Wicomico County.
Although that court disagreed with the Commission, finding that § 69 (e) did not relieve it
2
of meeting the obligation § 68(a) imposes,  to set “just and reasonable rates,” it nevertheless
affirmed the Commission’s Order.  The court concluded that “it does not follow ... that the
determination of whether a rate is ‘just and reasonable’ is confined to or dictated by the
provisions of Sec. 69 (a).   That ‘subsection’ applies to the determination when public service
company rates are set by the ‘traditional method’ outlined in Sec. 69 (a).   It no more applies
to determinations made pursuant to the authority of Sec. 69 (e) than to those made pursuant
to the authority of Sec. 69 (b).”  
We shall affirm the judgment of the circuit court.   
Factual and Procedural Context
The Commission has regulated the telecommunication industry in Maryland since
1910. See 1910 Maryland Laws, ch. 180, § 13.  Traditionally, the Commission utilized “test
year” data to project the future cost of service and expenses of Bell Atlantic (the former
Chesapeake and Potomac (“C&P”) Telephone Company of Maryland) and, ultimately, to set
telephone rates.  The rates are designed to yield to Bell Atlantic a “revenue requirement”
sufficient to pay its prudent expenses and to allow it the opportunity to earn a fair return on
investments.  See Public Service Comm’n v. Baltimore Gas & Electric Co., 273 Md. 357,
360 n.2, 329 A.2d 691, 694 n.2 (1974), in which this Court, citing 1 A. J. G. Priest,
Principles of Public Utility Regulation 45 (1969),  summarized the determinations that
undergird  public utility rates, as follows:
 “The orthodox making of public utility rates requires four basic
determinations: (1) what are the enterprise's gross utility revenues under the
rate structure examined; (2) what are its operating expenses, including
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maintenance, depreciation and all taxes, appropriately incurred to produce
those gross revenues; (3) what utility property provides the service for which
rates are charged and thus represents the base (rate base) on which a return
should be earned and (4) what percentage figure (rate of return) should be
applied to the rate base in order to establish the return to which investors in the
utility enterprise are reasonably entitled.” 
Thus, the Commission’s role is to determine what rates the utility should be allowed to
charge in future years to cover prudent expenses and earn a reasonable profit. 
The “rate-of-return” regulatory scheme is prescribed primarily in two statutes:
Maryland Code (1957, 1995 Repl. Volume, 1997 Cum. Supp.) Article 78, §§ 68(a) and
69(a).  Pursuant to § 68 (a),  
“The Commission shall have the power to determine just and reasonable rates
of public service companies, whether as maximum, minimum or maximum and
minimum, respectively.  The rates so determined shall be fixed by order to be
served upon each public service company affected thereby. This subsection
does not apply to small rural electric cooperatives.” 
Section 69(a) addresses, inter alia, the “[s]tandard for determining rates and charges” and
provides:
“(a) ‘Just and reasonable rates’ defined; common carriers excepted. — ‘Just
and reasonable rates’ means rates which are not in violation of any of the
provisions of the article, which fully consider and are consistent with the
public good, and which will result in an operating income to the public service
company, except common carriers, yielding, after reasonable deduction for
depreciation and other necessary and proper expenses and reserves, a
reasonable return upon the fair value of the company’s property used and
useful in rendering services to the public.”
In the early 1980's, the Commission began modifying the regulation of Bell Atlantic’s
rates in an effort to allow Bell Atlantic more pricing flexibility, with the intent that Bell
Atlantic would have the incentive to operate more efficiently.  Subsequently, in the early
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1990’s, the Commission began to investigate alternatives to rate-of-return rate-making for
Maryland’s regulated telephone companies;  however,   recognizing that its authority in this
area was limited by statute, § 68 (a) requiring the Commission to “determine just and
reasonable rates of public service companies,” it was unable to adopt certain attractive price
plans recommended by Bell Atlantic.   In response to requests from the industry and the
Commission, the Maryland General Assembly amended the PSC Law in 1995, see 1995
Maryland Laws, ch. 140 and 141,  by adding § 69(e) to Article 78.   That section, effective
June 1, 1995, states:
“(e) Regulation of telephone company. — Notwithstanding the provisions of
subsection (a) of this section or any other provision of law to the contrary, the
Commission may regulate a telephone company by means of alternative forms
of regulation, which may include, but not limited to, the use of price
regulation, revenue regulation, ranges of authorized return, rate of return,
categories of services, or price indexing, if it finds, after notice and hearing
that the alternative form of regulation protects consumers by, at a minimum,
producing affordable and reasonably priced basic local exchange service, as
defined by the Commission, by ensuring the quality, availability, and
reliability of telecommunications services through the State; encourages the
development of competition; and is in the public interest.” 
  Soon after § 69(e) took effect, four “price cap” proposals, each offering an
alternative method of regulating Bell Atlantic’s  rates, were filed with the Commission. 
Also filed with the Commission were requests to reduce Bell Atlantic’s rates.  The first
“price cap” proposal, contained in a “Petition for Implementation of Competition Plus: A
True Price Cap Plan for Maryland,” was made by MCI Communications, Inc. (“MCI”.) The
MCI proposal was followed a short time later by a petition, filed by  the Office of People’s
Counsel, to reduce Bell Atlantic’s rates.  Subsequently, the Commission, by Order No.
5
     Price Caps  are often utilized to regulate the prices that a monopoly utility in the
2
transition from a monopoly to a competitive market may charge.   They include a wide
variety of “competitive safeguards” to encourage other companies to enter the market and
compete with the monopoly provider.  Competitive safeguards are designed to restrain the
73011, In the Matter of the Inquiry Into Alternative Forms of Regulating Telephone
Companies, Case No. 8715,  instituted  a formal proceeding to investigate the alternatives
for regulating telephone companies permitted by § 69(e), its newly acquired statutory
authority.    Bell Atlantic also filed a “Petition for Adoption of a Price Cap Form of
Alternative Regulation.”  The PSC Staff and People’s Counsel later filed separate price cap
proposals.   
The Commission’s order, which adopted a procedural schedule and required the
parties to develop and file a list of issues,  contemplated an investigation that would include
“one evidentiary proceeding which will encompass an examination of all alternative
regulation proposals . . . as well as a review of Bell Atlantic’s rates as necessary to meet the
requirements of [section] 69(e).”   Also, it  made clear that “[a]ll parties should be aware that
the Commission envisions that this proceeding will involve something less than a traditional
rate case.”  
Following the receipt of written testimony, evidentiary hearings before the full
Commission, at which witnesses were cross-examined on their  written testimony, and
argument by the parties, the Commission issued Order No. 73011, In the Matter of the
Inquiry Into Alternative Forms of Regulating Telephone Companies, Case No. 8715,
adopting a Price Cap Plan,  (hereinafter, the “Price Cap Order”), to replace the rate-of-return
2
6
monopolist from anti-competitive pricing, squeezing out competitors, exercising its dominant
market position and generally thwarting competition by using its profits from monopoly
services.
regulation.   The Commission thus abandoned traditional rate setting under § 69)(a) in favor
of a price cap under the new § 69(e).   The order described the plan adopted as an incentive-
based price cap regime designed to simulate market competition.  Under the plan, the PSC
set the initial price for telecommunication services (“going-in-rates”), with  future price
changes being controlled by a formula that takes into account the rate of inflation, the
increasing productivity of the Company and costs,  such as taxes and regulatory requirements
(“exogenous changes”),  that are beyond the Company’s control. 
The Price Cap Plan the Commission adopted was of its own design, it having found
that none of the plans proposed by the parties was acceptable in its entirety.  Its Order
adopting the plan does not expressly address the “just and reasonable” standard, but instead
adopts a “broader and more forward-looking measure of rate reasonableness than can be
obtained through an examination and matching of the Company’s rate bases, revenue, and
expenses.”  The Commission set Bell Atlantic’s “going in” rates,  using its existing rates and
ordered a reduction in the “access rates paid by long-distance carriers to terminate calls on
Bell Atlantic’s local network.”  
Both People’s Counsel and MCI sought judicial review in the Circuit Court for
Wicomico County.  The actions having been consolidated, following a hearing, the court
issued an Opinion and Order,  affirming  the Commission’s Order.   The court specifically
7
concluded that, when setting rates pursuant to § 69 (e), the Commission still was required
by § 68 (a) to set “just and reasonable” rates.   People’s Counsel noted its appeal to the Court
of Special Appeals.   Before the case was heard by the intermediate appellate court, this
Court, on its own motion, issued a Writ of Certiorari.
Before this Court, People’s Counsel argues  that, by adopting  the Price Cap Order,
the Commission (1) improperly interpreted Article 78, § 69(e) and, as a result, failed to set
“just and reasonable” rates for the telecommunications industry, as § 68 (a ) requires and (2)
acted arbitrarily, thus in violation of the  residential telephone customers’ substantive due
process rights.   People’s Counsel urges the Court to reverse and remand the case to the
Commission for further proceedings.   In addition to determining that the “just and
reasonable rates” standard of §68(a) applies to rates set  pursuant to §69(e), People’s Counsel
asks the Court to require the Commission to:
“to explain the term ‘just and reasonable rates’ as applied to alternative forms
of regulation under § 69(e), and to establish criteria to evaluate rates under that
definition;
“to explain ‘affordable and reasonably priced basic local exchange service’ as
required by § 69(e) and develop criteria for its application;
“once all explanations and criteria are in place, to reevaluate whether all rates
set in Order No. 73011 are ‘just and reasonable’ and whether the elements of
basic local exchange service are ‘affordable and reasonably priced’; and
“to make adequate findings of fact based on the record, conclusions of law and
determinations of the issues based on a reasoned analysis of those finding and
conclusions.”
Addressing the standard of review of Commission decisions, People’s Counsel
8
contends that the  issue this case presents concerns legal, not factual, determinations.    Thus,
it points out  that, when administrative agencies like the Commission determine questions
of law, “[a]ppellate courts are not bound by the decision of the agency, but may substitute
their interpretation of the statute for that of the agency.”   Because, People’s Counsel
maintains, in this case, the Commission was required only to interpret a statute, this Court
is not obligated to give any deference to the Commission’s interpretation.   
Predictably, the Commission takes a contrary view, arguing instead that “[a] review
of the relevant statutory and case law clearly demonstrates that ‘a great deal of discretion
is necessarily vested in the Commission in order that it may discharge its important and
complex duties,’” (quoting People’s Counsel v. Public Service Comm’n., 52 Md. App. 715,
722, 451 A.2d. 945, 949 (1982), cert. denied, 295 Md. 441(1983)).  The Commission also
maintains that a significant measure of its discretionary authority includes  evaluating and
balancing conflicting opinions and recommendations presented during hearings, and using
its expert judgment to arrive at reasoned determinations that are statutorily required to be
accorded great judicial deference. 
The Legislature has clearly defined the powers of the Commission, as follows:
“§1. Jurisdiction and powers of Commission generally.
“The jurisdiction and powers of the Public Service Commission shall
extend to all public service companies, as hereinafter defined, engaged in or
operating a utility business in this  State . . . . The powers of the Commission
shall be liberally construed; and the Commission shall have the powers
specifically conferred by this article and by any other law, and also all implied
and incidental powers necessary and proper to carry out effectually the
provisions of this article.” 
9
     Unless otherwise indicated all future statutory references will be to this version of Article
3
78.
Md. Code (1957, 1995 Repl. Vol.) Art. 78, §1.    The scope of the Court’s review also is
3
expressly defined:
“§ 97. Scope of Review.
“Every final decision, order, rule or regulation of the Commission shall
be prima facie correct and shall be affirmed unless clearly shown to be (1) in
violation of constitutional provisions, or (2) not within the statutory authority
or jurisdiction of the Commission, or (3)  made upon unlawful procedure, or
(4) arbitrary or capricious, or (5) affected by other error of law, or (6) if the
subject of review is an order entered in a contested case after hearing, such
order is unsupported by substantial evidence on the record considered as a
whole.” 
 Art. 78, §97.  
In addition, this Court has made clear that a decision of the Commission is subject to
judicial review, but it will not be disturbed on the basis of a factual question except upon
clear and satisfactory evidence that it was unlawful and unreasonable. See Public Service
Commission  v. Byron, 153 Md. 464, 479, 138 A. 404, 410 (1927); West v. United Rys. &
Elec. Co., 155 Md. 572, 582, 142 A. 870, 873 (1928) (quoting  Interstate Commerce
Commission v. Union Pac.  R. R. Co., 222 U. S. 541, 32 S. Ct. 108, 56 L. Ed. 308 (1912);
Mayor and Council of Crisfield v. Public Serv. Comm’n, 183 Md. 179, 185-87, 36 A.2d 705,
708-09 (1944); Public Serv. Comm’n v. Baltimore Transit Co., 207 Md. 524, 531, 114 A.2d
834, 836-37 (1955); Public Serv. Comm’n v. Baltimore Gas & Elec. Co., 273 Md. 357, 361-
62, 329 A.2d 691, 694 (1974); Baltimore Gas & Elec. Co. v.  Public Serv. Comm’n, 305 Md.
10
145, 161-62, 501 A.2d 1307, 1315 (1986). Such a decision is accorded the respect due an
informed governmental agency that is aided by a competent and experienced staff. Potomac
Edision Co. v. Public Serv. Comm’n, 279 Md. 573, 582-83, 369 A.2d 1035, 1041 (1977),
citing Balto.  Trans.  Co. v. Pub. Ser.  Comm., 206 Md. 533, 558, 112 A.2d 687, 698 (1955).
Questions of law, however, are “completely subject to review by the courts,”
Cambridge v. Eastern Shore Public Serv. Co., 192 Md. 333, 339, 64 A.2d 151, 154
(1948)(citing Mayor & Council of Crisfield v. Public Serv. Comm’n, 183 Md. at 189, 36
A.2d at 710). See also Baltimore Gas and Elec. Co. V. Department of Health and Mental
Hygiene,  284 Md. 216, 395 A.2d 1174 (1979), although the agency’s interpretation of a
statute may be entitled to some deference. See  Baltimore Gas & Elec. Co. v.  Public Serv.
Comm’n, 305 Md. at 161-62, 501 A.2d at 1315.   That deference is, by no means,
dispositive, nor anywise as great as that applicable to factual findings or mixed questions of
law and fact.   Baltimore Building and Constr. Trades Council v. Barnes, 290 Md. 9, 14, 427
A.2d 979, 982 (1981).  
 This is consistent with the standard of review applicable to all administrative
agencies. Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 836-37, 490 A.2d 1296,
1300-02 (1985).  See  Liberty Nursing Center, Inc. v. Department of Health and Mental
Hygiene, 330 Md. 433, 443, 624 A.2d 941, 946 (1993); Caucus Distrib., Inc. v. Maryland
Securities Comm'r, 320 Md. 313, 324, 577 A.2d 783, 788 (1990);  Maryland State Police v.
Lindsey, 318 Md. 325, 334, 568 A.2d 29, 33 (1990);  State Election Bd. v. Billhimer, 314
Md. 46, 58, 548 A.2d 819, 825 (1988), cert. denied, 490 U.S. 1007, 109 S.Ct. 1644, 104
11
      Maryland Code (1957, 1979 Repl. Vol.) Art. 100 § 101 (c), in pertinent part, provides:
4
“(c) Hearing; filing of order.  Within thirty (30) days after an investigation has
been completed, the Commissioner shall order a hearing thereon at a time and
place to be specified and shall give notice thereof ... (to) all interested persons,
including the interested public body.  Every interested person shall have an
opportunity to be heard in respect to the matters complained of .... The
Commissioner in such an investigation and hearing shall be deemed to be
acting in a judicial capacity and shall have the right to issue subpoenas,
administer oaths, and examine witnesses.... (U)pon such hearing and
investigation, the Commissioner shall determine the issues thereon and shall
make and file an order in his office stating such determination and forthwith
serve a copy of such order, together with notice of filing upon the public body
interested, and the parties to such proceeding ....”
 
L.Ed.2d 159 (1989); Washington Nat'l Arena v. Comptroller, 308 Md. 370, 378-79, 519 A.2d
1277, 1281-82 (1987). 
Barnes is an example of a case in which review of an administrative decision
resolving a legal question was involved.  At issue in that case was the meaning of “interested
person” as used in the Maryland Prevailing Wage Law, Maryland Code (1957, 1979 Repl.
Vol.) Art. 100, § 101(c).  290 Md. at 14, 427 A.2d at 981.  Considering  “the language of the
4
enactment in its natural and ordinary signification,” id. at 15, 427 A.2d at 982, this Court
held that the Commissioner of Labor and Industry wrongly determined that a labor union
council was an “interested person” within the meaning of that section.  Rejecting the
argument that the agency’s interpretation of the statute was not given proper deference, the
Court explained:
“The Council misunderstands the standard of review.  We pay great
12
deference to findings of fact of an administrative agency since it has heard and
observed the witnesses.  The standard for review of the decision of an
administrative agency was stated for the Court by Chief Judge Hammond in
Insurance Comm'r v. Nat'l Bureau, 248 Md. 292, 309, 236 A.2d 282 (1967),
as ‘whether a reasoning mind reasonably could have reached the factual
conclusion the agency reached.’  (Emphasis added.)  This has been repeated
in a host of cases since then.  See, e. g., Resetar v. State Bd. of Education,  284
Md. 537, 554, 399 A.2d 225 (1979); Folly Farms I, Inc. v. Trustees,  282 Md.
659, 670, 387 A.2d 248 (1978); Shell Oil Co. v. Supervisor,  278 Md. 659,
670, 366 A.2d 369 (1976); and Pemberton v. Montgomery County,  275 Md.
363, 367-68, 340 A.2d 240 (1975).  Here, however, the review is one of law.
It is true that as we stated in Holy Cross Hosp. v. Health Services,  283 Md.
677, 685, 393 A.2d 181 (1978), in the matter of statutory construction it is
well understood that the view taken of a statute by administrative officials
soon after its passage is strong, persuasive influence in determining the judicial
construction and should not be disregarded except for the strongest and most
urgent reasons.  See, e. g., F. & M. Schaefer v. Comptroller,  255 Md. 211,
218, 257 A.2d 416 (1969); Smith v. Higinbothom, 187 Md. 115, 132-33, 48
A.2d 754 (1946); and John McShain, Inc. v. Comptroller,  202 Md. 68, 73, 95
A.2d 473 (1953), and cases cited in each.  However, as Judge Delaplaine said
for the Court in Rogan v. Baltimore & O. R. R.,  188 Md. 44, 58, 52 A.2d 261
(1947), ‘(W)here the language is plain and unambiguous, the judicial
construction cannot be controlled by extraneous considerations.  No custom,
however venerable, can nullify the plain meaning and purpose of a statute.’
Schaefer could be cited for the latter proposition because we there held,
despite the prior construction by the Comptroller, that his ‘rule as (t)here
sought to be applied (was) an invalid attempt to render taxable that which the
General Assembly ha(d) precisely defined as not taxable.’  255 Md. at 219,
257 A.2d 416.”
Id. at 14-15; 427 A.2d 981-82.   We made the same point in Baltimore Gas & Elec. Co. v.
Public Serv. Comm’n, 305 Md. at 161-62, 501 A.2d at 1315, when we said: 
“The weight to be accorded an agency's interpretation of a statute
depends upon a number of considerations.  Although never binding upon the
courts, the contemporaneous interpretation of a statute by the agency charged
with its administration is entitled to great deference, especially when the
interpretation has been applied consistently and for a long period of time.  
“Another important consideration is the extent to which the agency
13
engaged in a process of reasoned elaboration in formulating its interpretation
of the statute.  When an agency clearly demonstrates that it has focused its
attention on the statutory provisions in question, thoroughly addressed the
relevant issues, and reached its interpretation through a sound reasoning
process, the agency's interpretation will be accorded the persuasiveness due a
well-considered opinion of an expert body.   
“In addition, the nature of the process through which the agency arrived
at its interpretation is a relevant consideration in assessing the weight to be
accorded the agency's interpretation.  If the interpretation is the product of
neither contested adversarial proceedings nor formal rule promulgation, it is
entitled to little weight.”  (Citations omitted).   
See generally 2A N. Singer, Sutherland on Statutes and Statutory Construction § 49.05 (“an
agency’s interpretation is not binding on the court, and will not be upheld if it is considered
to be clearly erroneous.” (footnote omitted)).
 
  
  In the instant case, the term, “affordable and reasonably priced local exchange
service,” as used in § 69(e),  has never been interpreted, much less consistently applied, for
a substantial period of time by the Commission.  Moreover, the Commission’s proffered
interpretation of § 69(e) is neither long-standing nor a  product of a “process of reasoned
elaboration.”  Therefore, with respect to the interpretation of § 69(e), the scope of this
Court’s review is essentially plenary, with a primary reliance upon the plain meaning and
purpose of the statute.  Substantial deference, however, is accorded to the Commission’s
factual determinations and to its implementation of the statutory provisions based on those
factual determinations.
The Commission contends that, under § 69(e), it is not required to apply the “just and
reasonable rates” standard of sections 68(a) and 69(a) because that standard applies only to
14
a rate-of-return regulation, not to alternative means of telecommunication regulation, such
as a price cap regulatory scheme. The Commission argues: 
“The Act specifically permits traditional rate base/rate-of-return regulation to
be supplanted by alternative modes of regulation. Thus, rate-of-return
regulation merely is one of a list of choices. While the alternative forms of
regulation must protect consumers, this protection may be achieved within the
new regulatory structures authorized by the Act, not by requiring
superimposition of old methods which are no longer mandatory.”   
To be sure, the “old method” of establishing rates that conform to the “just and reasonable
rates” standard and requirements of sections 68(a) and 69(a) is no longer mandatory when
regulation is done by means other than the traditional rate-of-return methodology.  This
approach, the Commission argues, is not only supported by legislative intent, but is made
crystal clear by the Legislature’s use in the first clause of § 69(e) of the language,
“Notwithstanding the provisions of subsection (a) of this section.”  Stated differently,
according to the Commission, the “notwithstanding” clause of § 69(e) permits the
Commission to disregard the requirements of § 69(a) because that statute has historically
been interpreted to mean that “the Commission must use a rate-of-return methodology to
establish just and reasonable rates.” (emphasis in original).  Relying on People’s Counsel v.
Heintz, 69 Md. App. 74, 87, 516 A.2d 599, 606 (1986) for support, the Commission asserts
that “[t]he ratemaking provisions of [t]he Public Service Commission Law consistently have
been interpreted to link ‘just and reasonable rates’ to a rate-of-return methodology.”
Therefore, the Commission reasons, when the rate-of-return methodology  is not used or
another methodology is used, the applicability of the “just and reasonable rates” standard
15
becomes “optional,” rather than mandatory.   
People’s Counsel disagrees, contending that the Commission’s interpretation of
sections 68(a), 69(a) and 69(e), the relevant statutory provisions, does not conform with the
Commission’s previous interpretation of the significance of the “just and reasonable”
standard in telecommunication regulations, the rules of statutory construction or the
legislative history of those provisions.  People’s Counsel first points to Re Chesapeake and
Potomac Telephone Co., 79 Md. PSC 169 (1988), in which the Commission addressed the
“just and reasonable rates” standard, articulated in § 68(a), within the context of alternatives
to rate-of-return rate-making.  There, the Commission opined:
“The concept of just and reasonable rates is the cornerstone of regulation in
Maryland and  every other jurisdiction of the United States.  The phrase “just
and reasonable rates” appear frequently in The PSC LAW and the laws of
many other jurisdictions. Any regulatory methods adopted by this Commission
must result in just and reasonable rates in accordance with the provisions of
The PSC Law.”
*   *   *   
“Importantly, Section 56 . . . states that ‘the Commission shall enforce
compliance by the public service companies with all requirements of the law.’
Thus, the general authority of the Commission is broad, but the Commission
must make certain that a public service company’s rates and charges adhere to
the ‘just and reasonable’ statutory requirement.” 
Id. at 188-89.  
Furthermore, People Counsel argues that the Commission’s interpretation of the
statutes is “overly expansive” and renders § 68(a) nugatory.  While  People’s Counsel seems
to agree with the Commission that the § 69(a) definition of “just and reasonable rates” is not
16
     To that point, the Commission counters:
5
“In BGE, the Court interpreted the phrase ‘Notwithstanding any other
provision of this article’ to allow consideration of other consistent and
complementary portions of Article 78. However, Section 68(a) and Section
69(a) are not complementary to Section 69(e)’s attempt to authorize the
Commission to establish rates using other than traditional rate-of-return
methodology.  As noted by [People’s Counsel], Section 69(a), in conjunction
with 68(a) mandates the rate-of-return method.  However, application of
Section 69(a) is optional under Section 69(e). In those situations where the
Commission chooses not to use Section 69(a), there is no statute for Section
68(a) to work in conjunction with. Thus, Section 69(e) controls in spite of any
apparent conflicts with other parts of [t]he Public Service Commission Law.”
(citation omitted)(emphasis in original).
directly applicable to alternative forms of regulation adopted under § 69(e), it maintains that
§ 68(a), as an “enabling” provision, requires the Commission to set just and reasonable rates
for all public service companies, whenever § 69(e) is employed to determine  rates, whatever
the methodology utilized, and to develop a  definition for “just and reasonable” consistent
with that methodology.  As support, he points out that in Baltimore Gas & Elec. Co. v.
Public Serv. Comm’n, 305 Md. 145, 501 A.2d 1307 (1986),  we said:
“BG & E places great weight on the introductory phrase in § 54F(c),
‘[n]otwithstanding any other provisions of this article,’ interpreting it to mean
that in construing § 54F we must not look beyond the language of this single
section.  As we read it, this phrase simply means that the procedure set forth
in § 54F controls within its area of applicability in spite of any apparent
conflict with other parts of the Public Service Commission Law.  It does not
mean that § 54F must be interpreted in a vacuum, without due consideration
of other consistent and complementary portions of the article.”
Id. at 158, 501 A.2d at 1313.  
5
 
Section 68(a) and, for that matter,  Md. Code (1957, 1995 Repl. Vol.) Art. 78,
17
     Maryland Code (1957, 1995 Repl. Vol.) Art. 78, § 28(d) imposes on public service
6
companies the affirmative duty to “[c]harge just and reasonable rates, in accordance with the
provisions of this article, for the utility services rendered by it.”  This section is now PUC
Article, § 4-201. 
§28(d),  People’s Counsel maintains, charge the Commission with the responsibility of
6
ensuring that public service companies only charge rates that are “just and reasonable.”
Additionally, People’s Counsel argues that the Commission’s conclusion that rates are
“affordable and reasonably priced” is not a substitute for finding that rates are just and
reasonable under §68(a).  He reasons: “The legislative intent, as evidenced by the statutory
language and the legislative history, requires the [Commission] to make a finding that
consumers have affordable and reasonably priced basic local exchange service and that the
rates are just and reasonable under [section] 68(a).”  People’s Counsel adds that a failure to
find that rates are just and reasonable effectively provides the public with no assurance that
the telecommunications company is not “extracting monopoly profits.”      
Next, People’s Counsel points to the “legislative history” of § 69. It maintains that,
when the Commission requested in 1994 that Bell Atlantic submit draft legislation to modify
§ 69(a) and allow alternative forms of regulation, it clearly articulated its desire that an
amendment to § 69 not repeal the “just and reasonable rates” standard. In Re Regulation of
Firms, Including Current Telecommunications Providers and Cable Television Firms, Which
May Provide Local Exchange and Exchange Access Service In Maryland In The Future, 85
Md. PSC 187 (1994), the Commission wrote:
“In order to eliminate any questions or doubts about the scope of our authority,
18
we favor a simple legislative amendment to Article 78 which makes clear the
authority of the Commission to consider alternative to rate base/rate of return
methodology in determining just and reasonable rates for any public service
company. 
*   *   *
“[W]e note that [t]he PSC Law currently sets the very broad policy of enabling
the Commission to ‘determine just and reasonable rates of public service
companies. . . (Art. 78, Section 68(a)). The purpose of our directive to [Bell
Atlantic] to submit draft legislation and our consideration of the same is not
to change this broad standard but instead to redefine ‘just and reasonable rates’
to include something other than rate base/rate of return.”
Id. at 210. 
While the process of statutory construction is straight forward and requires resort only
to the words of the statute when the statute is clear and unambiguous, State Dept. of
Assessments and Taxation v. Maryland-National Capital Park and Planning Comm’n, 348
Md. 2, 13, 702 A.2d 690, 696  (1997); Chesapeake and Potomac Telephone Co. of Maryland
v. Director of Finance for Mayor and City Council of Baltimore, 343 Md. 567, 579, 683
A.2d 512, 517 (1996), something more is required when the statute is ambiguous.  Blitz v.
Beth Isaac Adas Israel Congregation, 352 Md. 31, 39, 720 A.2d 912, 916 (1998).  Where the
meaning of the plain language of the statute, or the language itself, is unclear, “we seek to
discern legislative intent from surrounding circumstances, such as legislative history, prior
case law, and the purposes upon which the statutory framework was based.” Lewis v. State,
348 Md. 648, 653, 705 A.2d 1128, 1131 (1998).  See also Haupt v. State, 340 Md. 462, 471,
667 A.2d 179, 183 (1995).  We are also  required to interpret the statute as a whole, for
“[w]here the statute to be construed is a part of a statutory scheme, the legislative intention
19
      Section 69(e) also provides for a rate of return analysis.  Adoption of a rate case
7
regulatory scheme under § 69(e) presumably frees the Commission from complying with  the
very specific and   strict requirements of § 69(a).
is not determined from that statute alone, rather it is to be discerned by considering it in light
of the statutory scheme.”  Geico v. Insurance Com'r, 332 Md. 124, 132, 630 A.2d 713, 717
(1993).  See Gordon Family Partnership v. Gar on Jer,  348 Md. 129, 138, 702 A.2d 753, 757
(1997); Popham v. State Farm Mutual Insurance Company, 333 Md. 136, 148, 634 A.2d 28,
34 (1993).  Moreover, neither the words in the statute nor any portion of the statutory scheme
should be read “so as to render the other, or any portion of it, meaningless, surplusage,
superfluous, or nugatory.” Geico, 332 Md. at 132, 630 A.2d at 717.  See also  DeBusk v.
Johns Hopkins, 342 Md.  432, 445, 677 A.2d 73, 79 (1996); Schlossberg v. Citizen’s Bank,
341 Md.  650, 660, 672 A.2d 625, 629-630 (1996); State v. Pagano, 341 Md. 129, 134, 669
A.2d 1339, 1341 (1996); In Re Roger S., 338 Md.  385, 394, 658 A.2d 696, 700 (1995).  Nor
should we read a statute in a way that is inconsistent with, or ignores, common sense or
logic. Frost v. State, 336 Md. 125, 137, 647 A.2d 106, 112 (1994). 
Under the plain meaning § 69(e),  the Commission is authorized  to regulate telephone
companies using alternative forms of regulation, “notwithstanding  any provisions of § 69(a)
or  any other provision of law to the contrary.”  Among such alternative forms of regulation
is the instant price cap plan.    Section 69(a)  requires a traditional rate analysis to be made
7
from a specified comparison of costs, rates and profits to determine just and reasonable rates.
 Indeed, it defines “just and reasonable rates” in just those terms.  Thus, the criteria
20
       When initially enacted, in 1955, the definition was codified as §62(a). Subsequently,
8
in 1959,  we amended the definition to exempt “carriers of inflammables.”   It was, at that
point,  codified as §69(a) in Chapter 545 of the Laws of 1959.
enumerated in § 69(a) to guide evaluation of justness and reasonableness does not apply
when the Commission  regulates a telephone company by means different from the
traditional rate-of-return methodology.
Whether § 68(a) falls within the category of “any other provision of law to the
contrary” is the critical question to be resolved by this Court.  The Commission suggests, but
does not actually argue, that the requirement of § 68(a), that “[t]he Commission shall have
the power to determine just and reasonable rates of public service companies,” does not
apply when the rates are set pursuant to the alternative forms of regulation permitted by  the
provisions of § 69(e).  This, of course, is not so because § 68(a) merely requires the
Commission to set “just and reasonable” rates;  it does not prescribe the specific criteria to
be used for the determination, and evaluation, of the justness and  reasonableness of those
rates.  As People’s Counsel correctly observes, the “just and reasonable” standard has been
incorporated into the Public Service Commission Laws since the establishment of the
Commission in 1910.  See 1910 Md. Laws, ch. 180, § 13, entitled “Safe and Adequate
Service: Just and Reasonable Charges: Excessive Charges Prohibited.”  Section 69(a)   with
its  definition of  “just and reasonable” in the context of a rate-of-return analysis  was added
in  1955.   See 1955 Md. Laws, ch. 441.     Hence, § 68(a) stood alone, without § 69(a), from
8
1910 to 1955. 
21
Section 69(a) provides the definition of “just and reasonable” that § 68(a) lacked.
That definition, however, is for the traditional mode of telecommunication regulation: rate
base/ rate-of-return.  It has no applicability to alternative modes of regulation such as price
or revenue regulation.  The definition of “just and reasonable rates” applicable to alternative
forms of regulations, that is, what is required to be shown or the result that these alternative
forms of regulation are expected to achieve, is prescribed in § 69(e).  That section, as we
have seen,  provides that the Commission must determine that the alternate form of
regulation chosen produce “affordable and reasonably priced basic local exchange service,
as defined by the Commission.”  “Affordable and reasonably priced basic local exchange
service” under § 69(e) is the equivalent of the “just and reasonable rates” the Legislature
mandated under § 68(a).  Thus, the Legislature has effectively left the definition of
“affordable and reasonably priced,” the  meaning of “just and reasonable” under a non-rate
base regime, to the Commission.  Thus, rather than the two concepts being contradictory,
they are consistent, if not complementary.   Indeed, and in point of fact, they must be
presumed to have been intended by the Legislature to be consistent.  Had the Legislature
intended otherwise, it easily could have so stated, as it did expressly with respect to  the
inapplicability of § 69(a) to § 69(e). 
The concept of  just and reasonable rates is the cornerstone of the regulation of public
utilities  in Maryland.   Section 68(a) defines the general powers of the Commission in terms
of determining only “just and reasonable rates of public service companies.”  Even the public
service companies, under § 28(d), have an “affirmative duty” to charge the “just and
22
     Article 24, Due process, of the Maryland Declaration of Rights, provides:
9
“That no man ought to be taken or imprisoned or disseized of his freehold,
liberties or privileges, or outlawed, or exiled, or, in any manner, destroyed, or
deprived of his life, liberty or property, but by the judgment of his peers, or by
the Law of the land.” 
reasonable rate” determined by the Commission.  See Baltimore Gas and Elec. Co., 305 Md.
at 150, 501 A.2d at 1309.  These mandates clearly remain unchanged by the 1995 legislation
enacting § 69(e).  
People’s Counsel contends that the Commission’s application of § 69(e) in Order No.
73011 violates the “substantive due process rights” of Maryland residential customers.
People’s Counsel explains:
“Excessive prices for regulated telecommunication services used by over 97%
of Maryland households, and (it is safe to assume every business) clearly has
an economic impact.  The stated basic premise of [section] 69(e), that the
[Commission] is authorized to continue regulating telephone companies using
alternative means as long [as] consumers are still protected, is ignored when
the [Commission] sets rates that are not subject to the ‘just and reasonable’
standard.  Such action is arbitrary and offensive to a legislative policy that
demands just, reasonable, affordable and reasonably-priced basic telephone
service.  Setting inflated rates and unilaterally eliminating an important test
designed to protect consumers from excessive rates is not rationally related to
the State’s interest in exercising its police powers to protect the public interest,
enforce its valid statutes and protect regulated utility consumers.”
(emphasis supplied).  People’s Counsel cites no legislative history or other authority to
support  this argument and we are not persuaded by it.
Article 24 of the Maryland Declaration of Rights  and the “Due Process” clause of the
9
23
     “All persons born or naturalized in the United States, and subject to the jurisdiction
10
thereof, are citizens of the United States and of the State wherein they reside. No State shall
make or enforce any law which shall abridge the privileges or immunities of citizens of the
United States; nor shall any State deprive any person of life, liberty, or property, without due
process of law; nor deny to any person within its jurisdiction the equal protection of the
laws.” 
Fourteenth Amendment to the United States Constitution  ensure that governmental actions,
10
particularly legislative enactments, must meet the requirements of substantive due process.
In Bowie Inn v. City of Bowie, 274 Md. 230, 236, 335 A.2d 679, 683 (1975), for example,
this Court rejected a  “substantive due process” challenge, similar to the one advanced in the
case sub judice, to economic regulatory legislation.  There, we emphasized that “[t]he
wisdom or expediency of a law adopted” by a legislative body “is not subject to judicial
review, and the law will not be held void if there are any considerations relating to the public
welfare by which it can be supported.”  Id. at 236, 333 A.2d 683 (citing Dawson v. State, 329
Md. 275, 283-284, 619 A.2d 111, 115 (1993); see also Ogrinz v. James, 309 Md. 381,
394-395, 524 A.2d 77, 84 (1987);  Montgomery County v. Fields Road, 282 Md. 575,
583-585, 386 A.2d 344, 348-349 (1978);   Edgewood Nursing Home v. Maxwell, 282 Md.
422, 426-427, 384 A.2d 748, 751 (1978);  Governor v. Exxon Corp., 279 Md. 410, 423-429,
370 A.2d 1102, 1110-1113 (1977), aff'd, 437 U.S. 117, 98 S. Ct. 2207, 57 L. Ed.2d 91
(1978);  Westchester West No. 2 v. Montgomery  Co., 276 Md. 448, 454-455, 348 A.2d 856,
860 (1975)).  See also General Motors Corp. v. Romein, 503 U.S. 181, 112 S. Ct. 1105,
1112, 117 L.Ed.2d 328, 340 (1992);  Ferguson v. Skrupa, 372 U.S. 726, 83 S.Ct. 1028, 10
L.Ed.2d 93 (1963);  Williamson v. Lee Optical Co., 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed.
24
     The Commission stated in Order No. 73011:
11
“The price cap regulation we adopt today is authorized
specifically in Section 69(e) of [t]he PSC Law.  We find that our
563 (1955). Also, “[o]ne who attacks a statute on due process grounds bears the burden of
proving the absence of such a basis, viz., that it does not bear a real and substantial
relationship to the governmental object sought to be attained.” Comprehensive Accounting
Service Co., 284 Md. at 483-84, 397 A.2d at 1024-25. See also  Rucker v. Comptroller of
Treasury, 315 Md. 559, 567, 555 A.2d 1060 (1989); Maryland Bd. of Pharmacy v.
Sav-A-Lot, 270 Md. 103, 311 A.2d 242 (1973); Salisbury Beauty Schools v. State Bd. of
Cosmetologists, 268 Md. 32, 300 A.2d 367 (1973). 
Here, there is no dispute that § 69(e) was  enacted to achieve three legitimate goals:
(1) provide price and quality protection for Maryland customers, (2)  encourage the
development of competition in the regulated telecommunications industry, and (3) protect
the public interest.  To achieve these goals, the Legislature authorized the Commission to
regulate telephone companies “by means of alternative forms of regulation, which may
include, but [are] not limited to, the use of price regulation, revenue regulation, ranges of
authorized return, rate of return, categories of services, or price indexing.”  These alternative
forms of regulation must produce “affordable and reasonably priced local exchange service,
as defined by the Commission.”  There is no question that these alternative forms of
regulation are intended to achieve the goals enumerated and that they are, therefore,
rationally related to achievement of those objectives.   “[S]etting inflated rates and
11
25
plan protects consumers by producing affordable and reasonably
priced basic local exchange service.  Our plan also ensures the
quality, availability, and reliability of telecommunications
services throughout the State, encourages the development of
competition and is in the public interest.”
unilaterally eliminating an important test designed to protect consumers from excessive
rates,” as correctly argued by People’s Counsel, clearly are not the means by which the
Legislature intended to achieve the stated objectives of § 69(e).
People’s Counsel nevertheless maintains that, in promulgating Order No. 73011, the
Commission made arbitrary and irrational decisions in several confusing ways, in violation
of the  substantive, not procedural, due process rights of  Maryland telephone customers.
More particularly, as we understand the arguments, it contends:
 
(1) 
The Commission “interpreted away” § 68(a) without informing the
public it had done so until the Order was subject to judicial review;
(2) 
The Commission adopted “a facially inadequate definition of the
‘affordable and reasonably priced’ standard” in § 69(e);
(3) 
Without any analysis concerning the manner in which that decision was
reached, the Commission arbitrarily set “going in” rates at levels $100-
200 million above the ratio that would have been set under rate of
return regulation.  Specifically, the People’s Counsel asserts that the
Commission failed to explain:
(a) 
How § 69(e) and the “affordable and reasonably priced”
standard applied; and
(b) 
Why the rates authorized by the Commission are “just
and reasonable”; and 
26
(4) 
The Commission deviated from its previous published pronouncements,
made during the process of amending § 69 and the adjustment of Bell
Atlantic’s rates when the OPEB amortization was complete, relating to
the retention of the “just and reasonable rates” standard.
None of these arguments has merit.
People’s Counsel argues that “[t]o have received substantive due process in this
proceeding, Maryland residential telephone customers . . . were entitled to notice from the
[Commission] of the appropriate administrative standards that would be applied in reaching
a decision.”  A quasi-judicial administrative process should be totally transparent, it
continues,  and “[no party] should be required to guess what standards will be applied or
what reasoning the [Commission] actually used to reach it final conclusions.”  This
argument, similar to some of  the aforementioned arguments made by People’s Counsel,
concerns the Commission’s position that rates determined pursuant to § 69(e) —  by a means
different than the traditional rate-of-return analysis —  are not required to be “just and
reasonable” under either § 68(a) or § 69(a).  As earlier stated, the  rates determined by the
Commission using the  alternative means of regulation authorized under § 69(e) are subject
to the just and reasonable standard prescribed by § 68(a), but not § 69(a).  And, in this
instant case, the Commission  deliberately  applied § 69(e) and, thus, there was yielded, in
the judgment of PSC,  a “just and reasonable rate” under § 68(a), which was not arbitrary.
That is the standard that, as we have seen, People’s Counsel maintains is applicable to the
Commission’s decision.
Another argument advanced by People’s Counsel is that, although the Legislature
27
specifically authorized the Commission to define “affordable and reasonably priced local
exchange service,” the  definition the Commission settled on was arbitrarily determined and
applied. In arriving at the definition of the phrase, the Commission reasoned that Bell
Atlantic’s current telephone rates met the “affordable and reasonably priced” requirement
of 69(e) because: (1) more than 97% of Maryland households currently have telephone
service, and (2) existing other-than-competitive (“OTC”) rates are lower  than they were in
1985.  People’s Counsel disagrees with the Commission’s definition, arguing that (1) there
is a difference between “affordability” and ”reasonably priced,” thus, each term  should be
defined separately, (2) the number of households with telephone service is not an adequate
indicator of affordability, telephones now being a necessity that almost everyone has whether
they can afford them or not, and (3) the fact that existing rates are lower in dollar terms  than
they were in 1985 cannot establish that local exchange is reasonably priced because existing
rates have not been adjusted to reflect the changes in Bell Atlantic’s cost of service.  In
addition, well aware of this Court’s limited review when  the Legislature has specifically left
a matter to the determination of a governmental agency with expertise,  People Counsel
points out that it is not arguing for the Commission to adopt its analysis of “affordability”
or “reasonably priced,” but only that  “some rational analysis” be adopted and applied by the
Commission.  
As we see it, however,  People’s Counsel’s challenge to the Commission’s definitions
is, in addition to being based on a disagreement with the definitions themselves, a continuing
attempt to infuse factors usually considered in the traditional rate of return analysis of §
28
     
This is a requirement of § 69(a), which requires the Commission to consider the
12
operating income of the public service company, “after reasonable deduction for depreciation
and other necessary and proper expenses and reserves” Article 78, §69(a).
      The PSC Law, Art. 78, § 85(a), provides:
13
“§ 85. Decisions and orders.
“(a) To be based on record, in writing and state grounds. — Every decision and order
of the Commission in any contested proceeding shall be based upon a consideration of the
record, shall be in writing and shall state the grounds for the Commission’s conclusions.”
     OTC or “other-than-competitive” services are those that, unlike competitive services,
14
can not be market-priced.    
69(a) into the Commission’s newly-adopted price cap regulation under § 69(e).  In arriving
12
at its definition of  “affordability and reasonably priced” the Commission properly exercised
its discretion, as authorized by the General Assembly.  Its exercise was neither arbitrary nor
unreasonable. Indeed, contrary to People Counsel’s contention, the Commission’s findings
are supported by “rational analysis.”13
“As previously described, Staff and OPC proposed adjustment to [Bell
Atlantic’s] OTC  revenue requirement prior to the initiation of (or ‘going-in’
14
to) a price cap plan. [Bell Atlantic], conversely, contends that existing OTC
rates should be the starting point for the price cap plan.
“We understand Staff’s and OPC assertions that, based on traditional
rate base/rate of return ratemaking methodologies, [Bell Atlantic’s] rates
should be reduced.  However, underlying their assertions is the assumption
that the only appropriate tool to measure the reasonableness of [Bell Atlantic]
OTC revenue requirement is a RB/ROR approach.  We find that [t]he PSC
Law does not require us to adopt that assumption.  Specifically, we observe
that Section 69(e) of the PSC Law leaves to us the definition of ‘affordable
and reasonably priced basis local exchange service.’  While the reasonableness
of OTC service rates certainly could be determined utilizing a RB/ROR
approach, it is neither the only nor the best approach.
29
     See supra at ____, holding that “affordable and reasonably priced basic local exchange
15
service” finding establishes  “just and reasonable rates”standard that the Commission is
specifically required, § 68(a), to meet.
“After considering the evidence and arguments presented on this issue,
we find that it is reasonable to utilize [Bell Atlantic’s] existing OTC rates,
except access rates, as we initiate price cap regulation.  In doing so, we find
that since so many Maryland households currently have telephone service at
existing rate levels (in excess of 97 percent), and since existing OTC rates
actually are lower now than they were in 1985, current OTC rates are
reasonable.  Moreover, since the OTC rates set herein will be in effect for an
extended period of time, we find it is reasonable to utilize a broader and more
forward-looking measure of rate reasonableness than can be attained through
an examination and matching of Company’s rate base, revenues and expenses.
Additionally, a broader measure of rate reasonableness also is justified by the
competitive incursions into some and eventually all of [Bell Atlantic’s] OTC
service offerings that we can expect in the years ahead.”
Order at 90-91.  
 People Counsel argues that the Commission failed to provide a “comprehensive
analysis” concerning the manner in which its decision was reached and, specifically, how
the “affordable and reasonably priced” standard applied and why the rates settled upon  are
“just and reasonable.    We are not persuaded by these arguments.  As we have stated in
15
prior opinions, judicial review of an administrative agency’s finding  is “limited to whether
a reasoning mind reasonably could have reached the factual conclusion the agency reached.”
Baltimore Gas & Electric 273 Md. at 363, 329 A.2d at 695 (citing Insurance Comm’r v.
National Bureau, 248 Md. 292, 309-10, 236 A.2d 282, 291-92 (1967)). See also Potomac
Edison v. Public Service Commission, 279 Md. 573, 581, 369 A.2d 1035, 1040-41 (1977).
“[t]he burden is on  those who seek to set it aside on appeal to show by clear and satisfactory
30
evidence that there is illegality or unreasonableness” Baltimore Gas & Electric Co. v.
McQuaid, 220 Md 373, 387, 152 A.2d 825, 832 (1959).  Here, the findings of the
Commission are clearly reasonable and, equally as clear, People Counsel has failed to show
that the findings are arbitrary.
People’s Counsel’s final argument in support of its contention that the Commission
engaged in arbitrary decision-making is that the Commission retracted two “regulatory
promises” it made in Re C & P Telephone of Maryland, 84 Md. PSC 135 (1993). The first
promise,  People’s Counsel alleges, was that the Commission would thoroughly review Bell
Atlantic’s rates to ensure that they remained “just and reasonable” after permitting a period
of experimental pricing, incentive concepts and profit sharing to develop.
The Commission also made promises, People’s Counsel continues, concerning
changes in the accounting of the other post-employment benefits (“OPEB”) and transitional
benefit obligations (“TBO”). According to People’s Counsel, in Re C & P Telephone of
Maryland, 84 Md. PSC at 140-42, “[t]he Commission allowed [Bell Atlantic] to shorten the
period for the amortization of OPEB expenses from 16 ½ years to 6 years (amortization
began in 1991) and use excess profits that otherwise would have been returned to ratepayers
(under the then-existing ‘profit sharing’ regulatory scheme) to payoff the OPEB amortization
expense at a faster rate.”  After the OPEB obligation was fully amortized in 1996, however,
the Commission failed to reduce rates and instead continued a fictitious $59 million expense
to be built into Bell Atlantic’s rate base, while the Company no longer incurred such
expense.  As evidence of this “regulatory promise,” People’s Counsel points to the
31
Commission’s 1993 ruling:
“Having considered the arguments raised by OPC and Staff, . . . we
continue to believe that accelerated amortization of the OPEB obligation will
serve the ratepayers’ interests as well as the Company’s interest.
“A key element of concern expressed by OPC and Staff is that, after the
rapid amortization of the OPEB transition obligation is completed, the rates
paid by customers will be excessive and C & P will be the beneficiary of
inflated earnings . . . .
“The concerns of OPC and Staff are misplaced because Staff and OPC
have ignored the Commission’s expressed intent to institute a proceeding after
a three-year period.”
Re C & P Telephone Co., 84 Md. PSC at 243. 
 People’s Counsel argues that it relied on and made decisions based upon the
Commission’s statements that it would review rates in 1996 and that the OPEB TBO
amortization, while costing customers in the short run, would benefit customers in the long
run through a hybrid profit-sharing/rate-of-return form of regulation.  Instead, People’s
Counsel maintains, the Commission arbitrarily adopted a “new direction without any analysis
showing why the OPEB expenses should not be removed.”
In response, the Commission does not dispute the facts stated by People’s Counsel.
Rather, it simply argues that “[t]here is no basis in law for the argument that a prior
regulatory decision must be continued despite the intervening enactment of a new statute.”
The passage of § 69(e), the Commission contends, disrupted its “prior regulatory promise”
to determine rates using the traditional rate-of-return regulation.  This change of form of
regulation, as authorized by the Legislature in § 69(e), permitted the Commission to
32
implement new policies and to make “adjustments,” including the termination of any
“ongoing regulatory treatments.”  Once the Commission decided, pursuant to § 69(e), that
an alternative method of regulation would better serve the public interest, it was no longer
required to factor OPEB adjustments into its analysis, as that consideration is part of rate-of-
return regulation, not price cap regulation. 
Despite the Commission’s claim that § 69(e) permitted it to change forms of
regulation and to implement new policies, it is clear that the Commission did not have to
renege on its acknowledged “regulatory promises.”  Section 69(e), however, gave the
Commission an option to adopt methods of regulation that it was previously unable to
implement.  These alternative means of regulation made it impracticable for the Commission
to use OPEB adjustments in its analysis.  In any event, as the Commission said, its actions
“may well have frustrated OPC’s expectations, but it denied no legally protected interest in
doing so.”
JUDGMENT OF THE CIRCUIT COURT
FOR 
WICOMICO 
COUNTY
AFFIRMED. COSTS TO BE PAID BY
THE APPELLANT.