Case Name: Frank M. Jewell, et al, Appellants, v. Washington Utilities and Transportation Commission, et al, Respondents
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1978-11-02
Citations: 90 Wash. 2d 775
Docket Number: No. 44800
Parties: Frank M. Jewell, et al, Appellants, v. Washington Utilities and Transportation Commission, et al, Respondents.
Judges: 
Reporter: Washington Reports
Volume: 90
Pages: 775–787

Head Matter:
[No. 44800.
En Banc.
November 2, 1978.]
Frank M. Jewell, et al, Appellants, v. Washington Utilities and Transportation Commission, et al, Respondents.
John D. Blankinship (of Montgomery, Purdue, Blankinship & Austin), for appellants.
Slade Gorton, Attorney General, and James R. Cunningham and Ellis Ross Anderson, Assistants, for respondent State.
C. Lee Coulter (John Robert Jones, of counsel), for respondent General Telephone.
Thomas R. Beierle, for respondent Pacific Northwest Bell.

Opinion:
Brachtenbach, J.
Should charitable contributions by privately owned telephone companies be paid by the telephone users or by the companies' stockholders? That is the issue in this case.
In two telephone rate setting cases, the Utilities and Transportation Commission (commission) allowed charitable contributions to be included as part of the expenses of doing business in establishing telephone rates pursuant to RCW 80.01.040(3). This allowance was a change in policy by the commission which had previously denied contributions as an expense to be taken into account in determining rates.
Appellants are subscribers and therefore ratepayers of General Telephone Company. They sought review of the rate setting order of the commission. Pacific Northwest Bell (PNB) intervened. The trial court upheld the commission's action. We reverse.
Telephone companies and certain other utilities occupy unique status under state law. They are granted a monopoly. Telephone companies are awarded the ultimate sovereign power of eminent domain. RCW 80.36.010. In return they are regulated extensively by the commission, including most importantly the rate structure which they may charge their customers. RCW 80.36.080.
The commission is directed to "[rjegulate in the public interest. . . the rates . of all persons . . . supplying any utility service . . . including . . . telephone companies . . ." RCW 80.01.040. The commission is to set rates which are fair, just, reasonable and sufficient to allow the telephone company to render prompt, expeditious and efficient service. RCW 80.36.080.
We recognize the commission's broad generalized powers in rate setting matters. We are not at liberty to substitute our judgment for that of the commission. Our review of the actions of the commission is limited to those promulgated in the administrative procedures act, specifically RCW 34.04.130. However, the commission must act within its statutory authority, RCW 34.04.130(6) (b), and its acts cannot be arbitrary or capricious, RCW 34.04.130(6)(f). We conclude that its orders in these cases were beyond its statutory authority and arbitrary and capricious upon the record before it.
While the statutory direction to the commission in rate setting is broadly stated and while rate cases are complicated, the legislative intent is rather simple. The public interest, in return for the grant of a monopoly, requires prompt, expeditious and efficient service. Quid pro quo, the company is entitled to rates which are fair, just, reasonable and sufficient to allow it to render such services. RCW 80.36.080.
There is nothing in the statutory scheme which directs that the telephone company must be a good corporate neighbor or that it is entitled to rate charges for contributions which result in improving the image of the corporation. Yet that is the essence of the testimony before the commission. There is a total lack of any proof or finding that the telephone users are receiving any more "prompt, expeditious and efficient" telephone service because the telephone companies choose to contribute to, among other charities, hospitals or private colleges.
The commission's orders demonstrate how far it has strayed from its statutory function. Those orders state, in part, that charitable contributions are "socially appropriate, indeed mandatory Company expenses." Further, "all businesses in the state of Washington are expected to, and in fact do, support social and charitable institutions through contributions." The commission is not the keeper of the social conscience of the citizens of this state. The arbitrary and capricious nature of its orders is simply proved by its conclusions that (1) it is socially appropriate, indeed mandatory, that the contributions be made and that (2) all businesses are expected to, and in fact do, make charitable contributions. The commission may be accurate in its statements, but that does not mean it has statutory authority to order telephone users to make involuntary contributions.
The commission's orders beg the essential question. Those orders are premised upon the idea that utility contributions are expected and desirable. We agree. The question is who pays for them. They can be paid for by the investors who own the utility and are interested in its corporate image and its community responsibilities, or they can be paid for by the unwitting telephone subscribers who just want to be able to use their telephones.
The attitude of PNB in its brief before the commission indicates that it hardly considers itself a public service company. It stated:
The amount and burden on the ratepayer which would result from the recognition of charitable contributions by the Commission as a legitimate rate making expense is so minuscule as not to be measurable. However, the underlying principle is extremely important.
It is respectfully submitted that more harm has been done to deserving charities and those whom they seek to help with the thoughtless repetition of that old shibboleth: "charitable contributions are an involuntary levy on the ratepayer" than the mind of man can conceive.
That slogan is the product of an era of unenlightened irresponsibility on the part of all segments of society. It is an embarrassment. It should not be dignified by repetition. It is contrary to the oft-repeated concerns of this Commission for the poor and the less fortunate. It is completely demoralizing to the regulated utility which recognizes and assumes its share of social responsibility. It is a phrase that is mean and penurious.
It is suggested that the impact of charitable contributions on the enlightened ratepayer would be the least objectionable on the scale of increased costs because of the nature of the needs to which those contributions respond.
Suffice it to say that the state of Washington in granting PNB a monopoly, has not delegated to it the decision as to who is an "enlightened" ratepayer or the right to decide that any portion of the telephone bill is so minuscule as to be not measurable. If it is so minuscule as to be not measurable, surely the stockholders will find it minuscule, not measurable and therefore not objectionable.
Next, the position of the telephone companies overlooks the fact that the legislature has addressed the charitable responsibility of telephone companies. In RCW 80.36.130, the companies are authorized to render free or reduced cost services to certain identified charities.
Equally unimpressive is the argument that because the legislature has authorized corporate contributions, RCW 23A.08.020(13), it impliedly approved these contributions. No one attacks the legality of the contributions and the issue is irrelevant.
The dangers inherent in the commission's action are apparent from the contents of its orders. It cautions the utilities that the contributions must be distributed free of political interests or pressure. It warns the utilities that they should not withhold contributions from charities, such as a legal services organization, with interests adverse to the utility. The order states: "The utility is warned that should a situation of this nature occur, the utility's total charitable contribution budget for the year in question may be disallowed." We have no doubt that the legislature did not authorize the commission to determine what is political interest or pressure inherent in a contribution or what organizations have a potential interest adverse to the utility.
Because our decision is based upon interpretation of the statutes, we do not reach the constitutional issues raised. However, it is apparent that the kinds of decisions and pressures inherent in the limitations of the order would put the appointed commissioners into an entanglement of politics, private schools, religious issues and social policies beyond anything authorized by the legislature and into a constitutional thicket of substantial question.
This issue of whether charitable contributions are to be charged to the users or the shareholders is not new. There is a clear division of authorities, both from the courts and the regulating commissions throughout the country. Most of the cases and decisions are merely conclusionary. Those denying allowance refer to the involuntary levy upon the ratepayer. Most of those allowing the contributions rely upon the desirability of the charitable acts. The companies allege that the trend of decisions is toward allowance. Yet our research discloses recent cases and orders denying allowance. For example, in Pacific Tel. & Tel. Co. v. Public Util. Comm'n, 62 Cal. 2d 634, 668, 401 P.2d 353, 44 Cal. Rptr. 1 (1965), it is stated:
However, Pacific's present attempt to charge all of its own contributions as an operating expense to be borne by ratepayers is plainly unwarranted. "... [Pacific] should not be permitted to be generous with ratepayers' money but may use its own funds in any lawful manner."
Likewise in Southern New England Tel. Co. v. Public Util. Comm'n, 29 Conn. Supp. 253, 274, 282 A.2d 915 (1970), it was said:
Charitable contributions are not universally regarded as a deductible expense for rate making purposes. There is a considerable divergence of opinion on this point. Most regard such contributions as an involuntary levy on ratepayers, who, because of the monopolistic nature of utility service, are unable to obtain service from another source and thereby avoid such a levy. Others consider charitable contributions a matter of personal choice and that they should not be hidden in a customer's bill, especially when their beneficial effect may be far removed from his community.
Contra, New England Tel. & Tel. Co. v. Department of Pub. Util, 360 Mass. 443, 484, 275 N.E.2d 493 (1971). See also the cases cited in Davenport Water Co. v. Iowa State Commerce Comm'n, 190 N.W.2d 583, 607 (Iowa 1971). Commission rulings disallowing charitable contributions include Re Mountain States Tel. & Tel. Co., 78 PUR3d 429, 440 (Utah 1969); Re Wisconsin Tel. Co., 84 PUR3d 50, 53 (Wis. 1970); Re Mountain States Tel. & Tel. Co., 94 PUR3d 263, 288 (Ariz. 1972); Re Mountain States Tel. & Tel. Co., 96 PUR3d 321, 326 (Colo. 1972); Re Southern Union Gas Co., 12 PUR 4th 219, 228 (N.M. 1975); Bainbridge Motor Co. v. General Tel. Co., 12 PUR 4th 416, 423 (Pa. 1975); Re Hawaii Elec. Light Co., 13 PUR 4th 329, 333 (Hawaii 1976). See also Re Pacific Northwest Bell Tel. Co., 100 PUR3d 82, 90 (Ore. 1973), which states:
That which is involuntarily removed from the telephone subscribers' pockets is more akin to a tax than a charitable contribution. Pacific Northwest Bell Telephone Company is a monopoly and the subscribers cannot go elsewhere for service.
The order of the trial court is reversed.
Wright, C.J., and Rosellini, Hamilton, Stafford, Horowitz, and Hicks, JJ., concur.