Opinion ID: 1271937
Heading Depth: 1
Heading Rank: 1

Heading: the decision to surcharge municipal franchise charges

Text: The Public Utilities Commission is invested with broad authority to regulate public utilities in this state. Colo. Const. Art. XXV; section 40-3-102, C.R.S.1973; see Mountain States Telephone and Telegraph Co. v. Public Utilities Commission, 195 Colo. 130, 576 P.2d 544 (1978). The powers delegated to the Commission on these matters are legislative and not judicial. Colorado Ute Electric Association v. Public Utilities Commission, 198 Colo. 534, 602 P.2d 861 (1979); Mountain States Telephone and Telegraph Co. v. Public Utilities Commission, supra . The Commission therefore has considerable discretion in its choice of the means to accomplish its functions. Colorado Ute Electric Association v. Public Utilities Commission, supra . However, the PUC does not have limitless legislative prerogative. For example, by statute the legislature may restrict the legislative authority delegated to the PUC. Mountain States Legal Foundation v. Public Utilities Commission, 197 Colo. 56, 590 P.2d 495 (1979). Another check on the exercise of the PUC's actions is the ability of a party to a Commission proceeding to seek judicial review of the Commission's final decisions. Sections 40-6-113 to 115, C.R.S.1973. Consonant with the Commission's extensive authority, however, the scope of permissible judicial review is relatively narrow. The district court may only ensure that the Commission has regularly pursued its authority, that its decisions are just and reasonable and that the Commission's conclusions are in accordance with the evidence before it. Section 40-6-115(3), C.R.S.1973. PUC decisions which are not supported by substantial evidence must be set aside. See Morey v. Public Utilities Commission, Colo., 629 P.2d 1061 (1981); Sangre de Cristo Electric Ass'n. v. Public Utilities Commission, 185 Colo. 321, 524 P.2d 309 (1974). The PUC entered the order in this case without taking additional evidence on the issue of franchise charges and the manner in which they were to be allocated. Therefore, the decision challenged here must find support in the same record which we had before us in City of Montrose v. Public Utilities Commission, supra . In that case the issue was whether the PUC could order Rocky Mountain to surcharge only municipal customers with the franchise charge imposed by the respective municipalities. We determined from the record that this method of allocation was ordered pursuant to the Commission's policy, adopted in December 1975, of surcharging municipal fees to municipal residents, see Colorado Municipal League v. Public Utilities Commission, 197 Colo. 106, 591 P.2d 577 (1979), and was not based on any evidence of the actual differential in service costs between municipal and non-municipal customers served by Rocky Mountain. Because the surcharge to municipal customers was ordered as a matter of administrative convenience unsupported by any factual basis in the record we held the order to be arbitrary and capricious. [2] City of Montrose v. Public Utilities Commission, supra . For essentially the same reason, the City urges that the PUC's order requiring surcharging of franchise charges to all of Rocky Mountain's customers is arbitrary and capricious. It claims that those expenses should be charged as operating costs and included in the formula for computing reasonable rates. [3] We do not agree with this contention. There is evidence in the record that the utility will recover the full amount of the franchise charges paid by it whether those charges are included as operating costs in computing the basic gas service rates or surcharged independently. The portion of the total amount of franchise fees which is passed on to each customer may possibly be different depending on which method is used; we cannot determine this with certainty from the record. But the City does not contend that use of the surcharge method would result in unreasonable or unjust rates. Its challenge simply revolves around the fact that franchise charges are treated differently than other arguably similar expenses. [I]t is the result reached, not the method employed, which determines whether a rate is just and reasonable. Colorado Ute Electric Association v. Public Utilities Commission, supra, 602 P.2d at 864. Rate making is not an exact science but a legislative function involving many questions of judgment and discretion. Id. We have held that the orders of the PUC are presumed to be reasonable. Contact-Colorado Springs, Inc. v. Mobile Radio Telephone Service, Inc., 191 Colo. 180, 551 P.2d 203 (1976). Thus, when two equally reasonable courses of action are open to the Commission, the reviewing court cannot substitute its judgment for that of the Commission in selecting the appropriate alternative. Id. ; Colorado Ute Electric Association v. Public Utilities Commission, supra . The City has produced no evidence that it is any less reasonable to allocate municipal franchise charges by a system-wide surcharge than by incorporating those charges into Rocky Mountain's rate formula as operating costs. Nor has it shown that the surcharge method will result in discriminatory rates for any class of Rocky Mountain's customers. [4] In the absence of any evidence that the surcharge method of allocation is inherently unsound we cannot insist that it be abandoned. Colorado Ute Electric Association v. Public Utilities Commission, supra ; see Peoples Natural Gas Division v. Public Utilities Commission, 193 Colo. 421, 567 P.2d 377 (1977). It appears clear that it is the fact that the franchise charges are broken out on the customer's bill and not the actual rate resulting from a surcharge method of allocation to which the City most strenuously objects. The remaining issues before us, therefore, concern whether the PUC's order requiring Rocky Mountain to show those charges separately on its bills was an abuse of discretion or otherwise unlawful.