Case Title: THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY v. THE PUBLIC SERVICE COMMISSION OF WYOMING

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1985-04-23T00:00:00Z

Document:
THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY v. THE PUBLIC SERVICE COMMISSION OF WYOMING1985 WY 53698 P.2d 627Case Number: 84-90Decided: 04/23/1985Supreme Court of Wyoming
THE MOUNTAIN STATES 
TELEPHONE AND TELEGRAPH COMPANY, PETITIONER, 

v. 

THE PUBLIC SERVICE 
COMMISSION OF WYOMING, RESPONDENT.

Rehearing Denied May 28, 
1985.

 
 
Appeal from the District 
Court, LaramieCounty, Joseph F. Maier, 
J.

 
 
W. Douglas 
Hickey, Cheyenne, for petitioner.

A.G. McClintock, 
Atty. Gen., Steven R. Shanahan, Senior Asst. Atty. Gen., Michael L. Hubbard, 
Asst. Atty. Gen., and Bruce Asay, Sp. Asst. Atty. Gen., Cheyenne, for respondent.

Before THOMAS, C.J., and 
ROSE, ROONEY, BROWN and CARDINE, JJ.

ROONEY, 
Justice.

[¶1.]     On February 4, 1983, 
The Mountain States Telephone and Telegraph Company (Mountain Bell) filed with 
the Wyoming Public Service Commission (PSC) an Application for Authority to 
Change Tariffs requesting an increase in its rates to generate additional 
revenues in the amount of $20,861,000 annually. This requested rate increase was 
later reduced to $16,016,000. The Independent Staff of the PSC intervened in the 
case, as did several other entities. On November 22, 1983, the PSC entered its 
order granting an increase in revenues in the amount of $1,494,328 per annum. An 
Application and Petition for Rehearing was denied by the PSC; the case was 
appealed to the district court, and certified to this court upon a stipulation 
and joint motion, pursuant to Rule 12.09, W.R.A.P.

[¶2.]     Appellant articulates 
numerous issues on appeal. The issues all boil down to (1) whether the rate of 
return authorized by the PSC is proper, or whether it resulted in a confiscatory 
rate, thus denying Mountain Bell its constitutional guarantees of equal 
protection and due process, (2) whether the rate allowed was arbitrary, 
capricious and an abuse of discretion and not supported by substantial evidence, 
and (3) whether certain adjustments to rate base and expenses made by the PSC 
were supported by substantial evidence or whether they were arbitrary and 
capricious.

[¶3.]     We 
affirm.

[¶4.]     The PSC is charged with 
the responsibility of regulating public utilities. Section 37-2-112, W.S. 1977. 
Our review of an administrative agency's action is governed by the Wyoming 
Administrative Procedure Act (§§ 16-3-101 through 16-3-115, W.S. 1977). Board of CountyCommissioners of TetonCounty 
v. Teton County Youth Services, Inc., Wyo., 652 P.2d 400 (1982). Section 
16-3-114(c), W.S. 1977,1 provides for a review of the whole 
record, or those parts of it cited by a party, and provides that the reviewing 
court shall hold as unlawful agency actions, findings and conclusions found to 
be, among other things, unconstitutional, arbitrary, capricious or unsupported 
by substantial evidence. We have often said that we will not substitute our 
judgment for that of the PSC if the PSC's decision is supported by substantial 
evidence. Mountain Fuel Supply Company v. 
Public Service Commission of Wyoming, Wyo., 662 P.2d 878 (1983); McCulloch Gas Transmission Company v. Public 
Service Commission of Wyoming, Wyo., 627 P.2d 173 (1981); Appeal of 
Williams, Wyo., 626 P.2d 564, cert. denied 454 U.S. 896, 102 S. Ct. 394, 70 L. Ed. 2d 211 (1981); Great Western Sugar 
Company v. Johnson, Wyo., 624 P.2d 1184 (1981); Matter of Rule Radiophone Service, Inc., 
Wyo., 621 P.2d 241 (1980); Sage Club, 
Inc. v. Employment Security Commission of Wyoming, Wyo., 601 P.2d 1306 
(1979). We recognize that the direction to review the whole record of the 
administrative agency hearing requires more than an examination of evidence 
favorable to a prevailing party.

"Prior to 1979, the 
`substantial evidence' standard was definitely mandated in the Wyoming 
Administrative Procedure Act:

"`(c) The court's review 
pursuant to the provisions of this section shall be limited to a determination 
that:

* * * * * 
*

"`(iv) The findings of 
facts in issue in a contested case are supported by substantial evidence * * *.' 
Former § 9-4-114(c), W.S. 1977.

"This subsection was 
amended, effective May 25, 1979, to require agency action, findings and 
conclusions to be supported by substantial evidence, but also to provide for a 
review of the `whole record.' Under this standard, we do not examine the record 
only to determine if there is substantial evidence to support the Board's 
decision, but we must also examine the conflicting evidence to determine if the 
Board could reasonably have made its findings and order upon all of the evidence 
before it. After reviewing the history and rationale in changing the 
`substantial evidence' rule in the Wagner Act to the `whole record' provision of 
the Federal Administrative Procedure Act (similar to present provisions of § 
9-4-114(c)), the consideration is stated in Universal Camera Corp. v. National Labor 
Relations Board, 340 U.S. 474, 488, 71 S. Ct. 456, 465, 95 L. Ed. 456 (1951), 
and quoted in National Labor Relations 
Board v. Walton Manufacturing Company, 369 U.S. 404, 405, 82 S. Ct. 853, 854, 
7 L. Ed. 2d 829 (1962):

"`* * * the "reviewing 
court is not barred from setting aside a Board decision when it cannot 
conscientiously find that the evidence supporting that decision is substantial, 
when viewed in the light that the record in its entirety furnishes, including 
the body of evidence opposed to the Board's view," it may not "displace the 
Board's choice between two fairly conflicting views, even though the court would 
justifiably have made a different choice had the matter been before it de novo." 
* * *'" (Footnote omitted.) Board of 
Trustees of School District No. 4, Big Horn County v. Colwell, Wyo., 611 P.2d 427, 428-429 (1980).

The same is true 
with reference to a determination of constitutional action, illegal action, etc. 
Accordingly, we here review the whole record to determine if there is 
unconstitutional confiscatory action by the PSC and if there is substantial 
evidence to support the PSC holdings.

[¶5.]     In addition, the 
initial burden of proof rests on the utility to show that an expense of 
investment is properly included in rates. Section 37-3-106(a), W.S. 1977. When 
the utility fails to meet its burden, that expense is properly excluded. Mountain Fuel Supply Company v. Public 
Service Commission of Wyoming, supra; Montana Power Company v. Department of 
Public Service Regulation, Mont., 665 P.2d 1121 (1983); Utah Department of Business Regulation, 
Division of Public Utilities v. Public Service Commission, Utah, 614 P.2d 1242 (1980). It should also be noted that it is the end result of the various 
PSC findings which dictates whether confiscation has occurred, not the method 
employed in achieving such result. Application of Northern Utilities Co., 
70 Wyo. 225, 247 P.2d 767 (1952); Federal Power Commission v. Hope Natural Gas 
Co., 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 
(1944); Bluefield Waterworks & 
Improvement Co. v. Public Service Commission of West Virginia, 262 U.S. 679, 
43 S. Ct. 675, 67 L. Ed. 1176 (1923).

SETTING OF CONFISCATORY 
AND UNREASONABLE RATES

[¶6.]     Mountain Bell contends that the 
rates allowed by the PSC are unreasonable and result in an unconstitutional 
confiscation of the property of Mountain Bell.

[¶7.]     Mountain Bell finds fault with the 
PSC's use of a historical test period, with an end-of-test-year rate base. This 
involves utilizing figures from the end of a twelve-month period of time, in 
this case ending September 30, 1982, with adjustments made for known and 
measurable changes. Mountain Bell contends that this results in "regulatory 
lag" which

"* * * results from the 
fact that the Commission is making decisions for the future based upon 
information that is, in many cases, several months old by the time a case is 
filed and even more stale by the time the rates go into 
effect."

Thus, Mountain 
Bell continues,

"* * * the Commission by 
focusing on the past, sets rates upon conditions that may bear little or no 
resemblance to those which will exist when the rates are in 
effect."

Mountain 
Bell then 
informs us that its earnings have been insufficient in the past to allow the 
company to achieve even the rate of return previously authorized by the PSC. 
Mountain Bell 
contends that this results in a confiscatory and unreasonable rate, thus denying 
them equal protection and due process.

[¶8.]     We have upheld the use 
of a historical test year. In Mountain 
Fuel Supply Company v. Public Service Commission of Wyoming, supra, we 
specifically refused to accept the proposition that the use of a historical test 
year will result, as a matter of law, in rates which are unreasonable and 
unjust. We said at 885:

"The PSC is required by 
statute to arrive at rates which are `just and reasonable.' Section 37-3-101, 
W.S. 1977 (Cum.Supp. 1982). Mountain Fuel concedes in its reply brief that the 
real question concerning the methodology for choosing a particular test year is 
whether the rates derived from the use of the selected methodology comply with 
this standard. The burden is upon Mountain Fuel to prove that the rates arrived 
at are unjust or unreasonable. [Citations.] Mountain Fuel, while denying any 
such intention, is seeking a determination by this court that the use of a 
methodology based upon an historical test year instead of a projected future 
test year will result, as a matter of law, in rates which are unjust and 
unreasonable. We find no sufficient justification for adopting such a 
proposition of law."

[¶9.]     In the present case we 
must again say that the utility has failed to meet its burden of showing that 
the rates are unjust or unreasonable. The primary concern of the PSC is to see 
that the public interest is met. Mountain 
Fuel Supply Company v. Public Service Commission of Wyoming, supra; Matter of Rule Radiophone Service, Inc., 
supra; Big Horn Rural Electric Company v. 
Pacific Power & Light Company, Wyo., 397 P.2d 455 (1964). Desires of a 
utility are secondary, Big Horn Rural 
Electric Company v. Pacific Power & Light Company, supra; Matter of Rule Radiophone Service, Inc., 
supra. It is interesting to note that Mountain Bell complains that the use 
of the historical test year is unreasonable because it is not based on the time 
period in which the rate will be applied, i.e. the future, but then Mountain 
Bell objects to the adjustments made to the test year, even though these 
adjustments are made for known and measurable changes which have occurred after 
the end of the test year. As we have said before, Mountain Bell has failed to 
meet its burden of proving that the rate ultimately set is unreasonable. We will 
discuss, infra, the individual adjustments made.

RATES NOT SUPPORTED BY 
SUBSTANTIAL EVIDENCE AND SET ARBITRARILY AND CAPRICIOUSLY

[¶10.]  Mountain Bell also contends that the rate set by the PSC 
is unreasonable because it constitutes an arbitrary and capricious abuse of 
discretion. As explained by Mountain Bell, the appropriate revenues of a 
regulated firm are determined in accordance with the following formula: R = C + 
Ir (Revenue equals cost of operation plus assets invested times a reasonable 
rate of return on that investment). The investments are divided into debt and 
equity components. The debt component is that amount of investment which was 
generated by means of corporate contractual obligations, such as bonds or other 
debt instruments; the equity component is that investment provided by 
shareholders in the enterprise. The PSC fixes an appropriate rate of return for 
each of the two components, and then, using a weighted average, formulates an 
overall rate of return upon the company's overall investment or rate base. Based 
on a capital structure consisting of 45% debt and 55% equity, the PSC 
established the cost of debt at 8.83%, the cost of equity at 13.85%, and an 
overall rate of return of 11.59%. Mountain Bell contends that the 13.85% cost of equity is 
not supported by the evidence.

[¶11.]  What Mountain Bell should say is that the PSC decision in 
this regard is not supported by its 
evidence. We find from reviewing the entire record that Mountain Bell and the 
Independent Staff presented vastly differing evidence relative to the cost of 
equity. There is no disagreement with the leading cases regarding rate of 
return. The capital attraction standard for the rate of return is set out in Bluefield Waterworks & Improvement Co. 
v. Public Service Commission of West Virginia, supra, 262 U.S. 679, 693, 43 S. Ct. 675, 679:

"* * * The return should 
be reasonably sufficient to assure confidence in the financial soundness of the 
utility and should be adequate, under efficient and economical management, to 
maintain and support its credit and enable it to raise the money necessary for 
the proper discharge of its public duties. A rate of return may be reasonable at 
one time and become too high or too low by changes affecting opportunities for 
investment, the money market and business conditions 
generally."

[¶12.]  The United States Supreme Court then 
established the corresponding risk standard in the case of Federal Power Commission v. Hope Natural Gas 
Co., supra, 320 U.S. 591, 603, 64 S. Ct. 281, 288, where they 
said:

"* * * [T]he return to 
the equity owner should be commensurate with returns on investments in other 
enterprises having corresponding risks. That return, moreover, should be 
sufficient to assure confidence in the financial integrity of the enterprise, so 
as to maintain its credit and to attract capital. * * *"

These standards 
have been incorporated into the decisions of this court by virtue of Application of Northern Utilities Co., 
supra. The PSC too recognized these decisions in the final 
order.

[¶13.]  However, Mountain Bell's experts 
testified to a rate of return based on comparison with other enterprises which 
were not utility companies. The Independent Staff presented evidence based on 
comparison with other utilities. A perusal of the whole record shows that there 
is ample evidence to support the rate of return, presented by the Independent 
Staff, set by the PSC. We need not set out the specific evidence presented on 
both sides, but will note that we are in accord with that said by the PSC, in 
its order, explaining its comparison of the evidence presented by the 
Independent Staff and that presented by Mountain Bell:

"The Independent Staff 
presentation provides the substantial evidence of record meeting the governing 
law, court announcements and the Commission's decisions based thereon, because: 
it demonstrates that the compared utilities are comparable in key elements of 
risk and nature of operations, and it provides supported substantive data for 
determining a reasonable growth element of the DCF 
formula.

"Mountain Bell has not supported its 
basic criteria because most of the identified compared companies vary widely as 
to financial and operational risk from Mountain Bell, and Mountain Bell did not 
provide required reasonable risk adjustments; and the unidentified compared 
companies cannot be compared in any meaningful manner."

[¶14.]  This is not to say that comparisons must 
be restricted to other utilities. A return on equity in non-utility enterprises 
is definitely pertinent. Both types of enterprises compete for the same 
investors. However, in this instance, we agree that the whole record reflects 
the rate of return for comparable risk enterprises in which reasonable 
adjustments were indicated and supports the resulting rate allowed by the 
PSC.

[¶15.]  We could listen to arguments ad infinitum 
on this issue, but we would still reach the same conclusion. When the rate set 
by the PSC is based on substantial evidence from the whole record, we will 
uphold it as reasonable, regardless of the method employed in achieving such 
result.

"* * * Nor is it 
important to this case to determine the various permissible ways in which any 
rate base on which the return is computed might be arrived at. For we are of the 
view that the end result in this case cannot be condemned under the Act as 
unjust and unreasonable from the investor or company viewpoint." Federal Power Commission v. Hope Natural Gas 
Co., supra, 320 U.S.  at 603, 64 S. Ct.  at 
288.

RATE ADJUSTMENTS 
SUPPORTED BY SUBSTANTIAL EVIDENCE

[¶16.]  Mountain Bell refers to seven adjustments made in the 
test-year calculations which it contends were made arbitrarily and without 
substantial supporting evidence:

1. Expense adjustment for 
reduction in number of employees subsequent to end of test year without 
corresponding adjustment for loss of revenue and for offsetting capital 
investment.

2. Depreciation expense 
for test year was analyzed at year-end levels rather than at an average 
level.

3. One percent of gross 
revenues limitation was placed on license contract expense (services from 
affiliated entities - AT & T and Western Electric).

4. Twenty-One Thousand 
Dollars ($21,000) in advertising expense was rejected as a promotional 
expense.

5. Right-to-use fees for 
software systems and development costs for electronic data processing were 
amortized over a three-year period rather than expensed.

6. A flow back over a 
two-year period was ordered for that received as a result of federal legislation 
relative to treatment of cost of removal of property which occurred in 1971 and 
a change in corporate income tax rate in 1979.

7. Working capital for a 
thirty-day time lag was disallowed on the basis of a combination lead/lag 
approach and balance-sheet approach.

[¶17.]  The controversy over items 3, 4, and 5, 
(license contract expense, right-to-use fees, and advertising expense) is 
ultimately founded on that resulting from the divestiture of the Bell system. The number of 
appeals to the courts from the utility regulating authorities in the several 
states reflect the reassessment made necessary by the fact that no longer can 
the expenses of one of the Bell system's former operations be subsidized 
by the income from another. The PSC is certainly mindful of the fact that this 
reassessment must be accomplished without jeopardizing the ability of Mountain 
Bell to provide good telephone service and at the same time prevent necessary 
increased cost to the consumer from becoming unreasonable.

[¶18.]  Sufficient time has not elapsed since the 
divestiture to positively gauge the benefits resulting to Mountain Bell from the 
license contracts with AT & T, the services to be received from the 
affiliated entities or the advertising expenses.2 However, on the record before us we 
cannot find that Mountain Bell has met its burden to show the propriety of 
allowing additional amounts in these expense items. As already noted, the burden 
is on Mountain Bell to do so. The difficulty in attributing the exact portions 
of such expenses which are used or useful to Wyoming service is obvious. Yet, the 
difficulty is one for Mountain Bell to overcome. It is an area in which we can 
properly give great deference to the expertise of the PSC. Great Western Sugar Company v. Johnson, 
supra.

[¶19.]  With reference to the 1% limitation, 
Mountain Bell's witness testified:

"* * * There are a total 
to my knowledge of five jurisdictions out of 49 that have imposed a 1 percent 
cap. They are Arkansas, Kansas, West Virginia, 
Texas and this year Utah. * * 
*"

Likewise, 
Mountain Bell's witness testified as follows with reference to the software 
involved in the right-to-use fees:

"A. I know they have a 
life of over one year. I don't know what that life is. * * 
*"

[¶20.]  Such evidence substantiates the PSC's 
decision to amortize the right-to-use fees and to limit the license contract 
expense to 1% of the gross revenues.

[¶21.]  Items 2 and 7 (depreciation at year end 
and working capital adjustment) concern the method by which the PSC reached its 
result. As noted supra, we are concerned with the legal propriety of the end 
result reached by the PSC rather than with the method used. The evidence does 
not reflect an injury to Mountain Bell resulting from moving the expense and 
revenue items susceptible of amortization to year-end levels so as to match a 
year-end rate base. In fact, Mountain Bell's revenue requirement was actually 
increased by the adjustment. This methodology is just and reasonable and is 
within the prerogative of the PSC. Mountain Fuel Supply Company v. Public 
Service Commission of Wyoming, supra; New England Telephone and Telegraph Company 
v. Public Utilities Commission, Me., 390 A.2d 8 
(1978).

[¶22.]  Evidence was presented by the Independent 
Staff in the form of a combination lead/lag and balance-sheet approach to 
determine necessary working capital. It reflected a time lag of 20.56 days 
rather than the traditional 30 days. It also reflected that the lag resulting 
from taxes collected from subscribers to be paid to taxing authorities made a 
negative figure on available working capital. Based on this evidence, the PSC 
reduced the amount of working capital to be applied to the rate base by about 
85%. Mountain Bell's witness criticized the Independent Staff's evidence in that 
respect by contending that the combined time-lag and balance-sheet approach 
improperly results in consideration of certain revenues twice, that a composite 
factor was improperly applied to taxes with different lag days, and that it 
failed to include certain categories of expense. Mountain Bell did not submit a 
time-lag study or any other evidence reflecting the actual cash collection and 
actual cash payouts from which a working capital requirement could be computed. 
It did not apply specific figures to its criticism of the evidence presented by 
the Independent Staff. It was proper for the PSC to consider time lags working 
in favor of Mountain Bell in addition to those working against it. Gas Service Company v. State Corporation 
Commission, 4 Kan. App. 2d 623, 609 P.2d 1157 (1980); New England Telephone and Telegraph Company 
v. Public Utilities Commission, supra. There was substantial evidence in the 
whole record to support the PSC findings in these 
respects.

[¶23.]  Item 6 (flow back of taxes) presents the 
question as to which group of customers shall ultimately pay the taxes which 
have been deferred through changes in the tax laws. Mountain Bell contends that 
inasmuch as the taxes will eventually have to be paid, it should hold the 
previously deferred amount until time for payment. The PSC directed a "flow 
back" of the taxes to the ratepayers over a two-year period. Mountain Bell does not cite 
authority or refer to any evidence which would indicate injustice in returning 
the tax money to the consumers whose service most concurrently generated the tax 
benefits.

[¶24.]  The evidence to support the adjustment 
made in Item 1 (expense adjustment for reduction of employees) is not as 
positive as is the evidence in support of the other adjustments made by the PSC. 
The adjustment was made to reflect a disallowance of an expense in the test year 
for a work force reduction of 386 employees on April 30, 1983, seven months 
after the end of the test year. Mountain Bell contends that the work force reduction was 
necessitated by a decrease in customer demand and a centralization program for 
certain operations. It argues that this treatment of one category of expenses 
without corresponding attention to its cause, i.e. decreased revenue, etc., 
violates the fundamental concept of the test year, i.e. matching appropriate 
levels of expenditures, revenues and investments. The PSC, in turn, points out 
that it is obligated to adjust the test-year data for known and measurable 
changes where the changes are shown to be reliable and certain. Utah Power and Light Company v. Idaho Public Utilities Commission, 102 Idaho 282, 629 P.2d 678 
(1981). In support of its contention, the PSC presented the following quotation 
from Gas Service Company v. State 
Corporation Commission, supra, 609 P.2d 1157, 
1166-1167:

"`Ratemaking, by its very 
nature, is prospective and in order to neutralize the negative effects of 
speculation and guesswork about future economic conditions, it is accepted 
practice to base future rates upon known past and present conditions through the 
use of data gathered during a specified test period. [Cite omitted.] This 
process of prognostication creates a conflict between the need to lend some 
finality to ratemaking by utilizing a well-defined, finite test period and the 
need to base calculations upon the latest available relevant data which often 
pertains to time periods other than the test period. [Cite omitted.] A 
satisfactory resolution of this conflict is that when known and measurable post-test-year 
changes affect with certainty the test-year data, the commission may, within, its sound 
discretion, give effect to those changes. * * *'" (Emphasis in 
original.)

[¶25.]  We agree known and measurable 
post-test-year changes which affect the test-year data "with certainty" are 
proper considerations. The inquiry here is whether the complete change was 
considered or whether only one aspect of the change was considered. Stated 
another way: Did the changes which were considered affect the test-year data with certainty or were other 
considerations (revenue, etc.) necessary to make certain the effect of the 
change?

[¶26.]  The Independent Staff proposed an 
adjustment for employee reduction in the amount of $3,908,477, representing an 
average decline in number of employees of 20.5%. The PSC accepted evidence that 
many of the transferred employees were handling Wyoming work from other 
locations resulting in a work decrease of only 11%, and used the 11% figure 
rather than the 20.5% figure in making the adjustment. This action will support 
our conclusion that the PSC did not abuse its discretion in this instance, and 
we find there is evidence sufficiently substantial to support the 
adjustment.

[¶27.]  In doing so, we again point to the fact 
that utilization of test-year data, be it historical or pro-forma, or both, is a 
mechanism to assist in determining the anticipated profit of a utility which 
together with the rate base will enable the PSC to set a just and reasonable 
rate of return. In Mountain Fuel Supply 
Company v. Public Service Commission of Wyoming, supra, 662 P.2d  at 885, we 
said:

"The PSC is required by 
statute to arrive at rates which are `just and reasonable.' Section 37-3-101, 
W.S. 1977 (Cum.Supp. 1982). * * * The burden is upon Mountain Fuel to prove that 
the rates arrived at are unjust or unreasonable. * * *

"* * * In Federal Power Commission v. Hope Natural Gas 
Co., 320 U.S. 591, 602, 64 S. Ct. 281, 287-288, 88 L. Ed. 333 (1944), the 
Court held:

"`* * * Under the 
statutory standard of "just and reasonable" it is the result reached not the 
method employed which is controlling. [Citations.] It is not theory but the 
impact of the rate order which counts. If the total effect of the rate order 
cannot be said to be unjust and unreasonable, judicial inquiry under the Act is 
at an end. The fact that the method employed to reach that result may contain 
infirmities is not then important. Moreover, the Commission's order does not 
become suspect by reason of the fact that it is challenged. It is the product of 
expert judgment which carries a presumption of validity. And he who would upset 
the rate order under the Act carries the heavy burden of making a convincing 
showing that it is invalid because it is unjust and unreasonable in its 
consequences. * * *'

"Our court recently has 
stated:

"`* * * We will not set a 
formula to be applied by the PSC in establishing a rate structure or in setting 
rates.' Great Western Sugar Company v. 
Johnson, supra, 624 P.2d  at 1188."

[¶28.]  Inasmuch as Mountain Bell has not carried 
its burden to demonstrate the established rates to be confiscatory, and inasmuch 
as the PSC adjustments to the rate base and expenses were supported by 
substantial evidence, the allowed rate was not a result of arbitrary and 
capricious action on the part of the PSC. We do not find an abuse of 
discretion.

[¶29.]  Affirmed.

1 Section 16-3-114(c), 
W.S. 1977, provides:

"(c) To the extent 
necessary to make a decision and when presented, the reviewing court shall 
decide all relevant questions of law, interpret constitutional and statutory 
provisions, and determine the meaning or applicability of the terms of an agency 
action. In making the following determinations, the court shall review the whole 
record or those parts of it cited by a party and due account shall be taken of 
the rule of prejudicial error. The reviewing court shall:

"(i) Compel agency action 
unlawfully withheld or unreasonably delayed; and

"(ii) Hold unlawful and 
set aside agency action, findings and conclusions found to 
be:

"(A) Arbitrary, 
capricious, an abuse of discretion or otherwise not in accordance with 
law;

"(B) Contrary to 
constitutional right, power, privilege or immunity;

"(C) In excess of 
statutory jurisdiction, authority or limitations or lacking statutory 
right;

"(D) Without observance 
of procedure required by law; or

"(E) Unsupported by 
substantial evidence in a case reviewed on the record of an agency hearing 
provided by statute."

2 The amount here involved 
in advertising expenses is de minimus.