Opinion ID: 493663
Heading Depth: 2
Heading Rank: 4

Heading: LOUISIANA PUBLIC SERVICE AND Sec. 152(b)

Text: 47 In its recent decision in Louisiana Public Service, the Supreme Court held that Sec. 152(b) of the Act bars federal preemption of state regulation over depreciation of dual jurisdiction property for intrastate ratemaking purposes. 106 S.Ct. at 1904. Section 152(b) provides: 48 [N]othing in this chapter shall be construed to apply or to give the [FCC] jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier.... 49 47 U.S.C. Sec. 152(b). Appellants argue that this provision, and the Louisiana Public Service decision, support their view that the FCC cannot dictate separations practices to the states for use in their intrastate ratemaking. We disagree. 50 The Supreme Court made it quite clear in Louisiana Public Service that federal separations procedures were an essential prerequisite to the creation of independent spheres of federal and state power over communications: 51 The Communications Act not only establishes dual state and federal regulation of telephone service; it also recognizes that jurisdictional tensions may arise as a result of the fact that interstate and intrastate service are provided by a single integrated system. Thus, the Act itself establishes a process designed to resolve what is [sic] known as jurisdictional separations matters, by which process it may be determined what portion of an asset is employed to produce or deliver interstate as opposed to intrastate service. 47 U.S.C. Sec. 410(c). Because the separations process literally separates costs such as taxes and operating expenses between interstate and intrastate service, it facilitates the creation or recognition of distinct spheres of regulation. 52 Louisiana Public Service, 106 S.Ct. at 1902. See also id. at 1899 (the jurisdictional limitations placed on the FCC by Sec. 152(b), coupled with the fact that the Act provides for a 'separations' proceeding to determine the portions of a single asset that are used for interstate and intrastate service, 47 U.S.C. Sec. 410(c), answer arguments for preemption of depreciation). 53 Thus, it is only after a uniform separations formula has been applied that a state's independent depreciation rule for intrastate ratemaking can be protected from federal preemption. See Smith v. Illinois Bell, 282 U.S. at 148, 51 S.Ct. at 68. The Supreme Court's decision in Louisiana Public Service accordingly supports our conclusion that the FCC separations procedures authorized by Sec. 410(c) of the Act bind the states, and that Sec. 152(b) does not stand in the way. 30 VI. PUC DISOBEDIENCE OF THE FCC ORDER 54 Finally, appellants contend that the PUC did not disobey the FCC order. The district court found that it did. We review factual findings for clear error. E.g., United States v. McConney, 728 F.2d at 1201. 55 We have already determined that the FCC properly preempted the separations field, employing the authority granted by the Communications Act. No one disputes the authority of a state PUC to establish a reasonable rate of return for utilities within its jurisdiction. But, as the district court found, the appropriate adjustment here was a fairly transparent and improper attempt to circumvent the FCC mandate. Cf. Aloha Airlines, Inc. v. Director of Taxation, 464 U.S. 7, 12-13, 104 S.Ct. 291, 294-95, 78 L.Ed.2d 10 (1983) (state could not circumvent preemptive federal Act prohibiting gross receipts tax on airlines by calling its tax a property tax measured by gross receipts). The Supremacy Clause does not countenance state policies--in this case, a state ratemaking ruling--that may produce results inconsistent with the objective of a federal statute. E.g., Maryland v. Louisiana, 451 U.S. 725, 747, 101 S.Ct. 2114, 2129, 68 L.Ed.2d 576 (1981). 56 The undisputed evidence is that, while the PUC initially used the Ozark Plan to calculate rates, it then adjusted rates downward by 1.1 percent. The PUC arrived at its 1.1 percent Adjustment for Change in Separation Plan by comparing 1981 rates under the Ozark Plan and under Hawaiian Plan II. It also took into account the transitional payments from AT & T even though it acknowledged that these had to be considered as interstate revenues. The district court did not clearly err in finding that this adjustment was an attempt to nullify the FCC's Ozark separations plan. Although no new comparison was performed in 1984 in Docket 4588, the PUC expressly carried over the 1.1 percent adjustment even after it found that 11.25 percent was a reasonable rate of return and that a rate increase of $30 million was necessary to achieve the 11.25 percent return. 31 Appellants offered only the explanation that the 1.1 percent adjustment resulted from the PUC's determination, within its proper authority, that the adjustment was necessary, fair and reasonable. PUC Decision & Order No. 8042, Docket No. 4588 at 15 (noting that adjustment would be treated as an adjustment to expenses). No support for such a finding appears in the PUC order or in evidence, however. 57 Rather than simply accept the PUC's statements that it was applying the Ozark Plan, the district court properly considered the effect of the PUC's ruling to determine whether it conflicted with federal law. See Perez v. Campbell, 402 U.S. 637, 652, 91 S.Ct. 1704, 1712, 29 L.Ed.2d 233 (1971); New York State Commission on Cable TV v. FCC, 669 F.2d 58, 62 (2d Cir.1982). Reviewing the record, we conclude that the district court committed no clear error in finding that [t]he so-called 'appropriate adjustment' ... in Docket No. 4588 was calculated solely and precisely on the difference between the Hawaiian Plan II and Ozark Separations formulas. Judgment for Permanent Injunction p 13. That finding supports a conclusion that PUC violated the FCC-imposed Ozark Plan.