Opinion ID: 1171923
Heading Depth: 1
Heading Rank: 4

Heading: Rate Making Authority

Text: Utah Code Ann. § 54-4-4 (1986) gives the Commission broad discretion in establishing rates for public utilities. See Kearns-Tribune Corp. v. Public Serv. Comm'n, 682 P.2d at 859, 860. Any activities that are related to rate making are therefore subject to the Commission's broad powers in this area. The pooling mechanism may be sustained if it is closely connected to [the] supervision of the utility's rates and ... the manner of the regulation is reasonably related to the legitimate legislative purpose of rate control for the protection of the consumer. Id. at 860. While we agree that the public policy supporting the Commission's rules and orders establishing pooling is a valid concern, we find that this pooling procedure cannot be justified as part of the Commission's broad rate-making authority. Although the pooling of surcharges is connected to the supervision of rates as an attempt to maintain lower rates for non-Lifeline customers of independent companies, it is nevertheless an attempt to interrelate the rates of several otherwise unconnected companies, something not contemplated by the statutory language. Section 54-4-4, discussing the classification and fixing of rates, speaks of the process and authority as applicable to individual companies only; the statute mentions the rates of any public utility. The connection between regulation of the rates of a single utility company and the pooling of surcharges from several companies is not sufficiently close to justify the pooling. In Maine Water Co. v. Public Utils. Comm'n, 482 A.2d 443 (Me. 1984), the Maine Supreme Court held that the Public Utilities Commission had erred in allowing large expenses in one division of the Maine Water Company to be absorbed by increasing the rates charged customers of the company's other divisions. In order to avoid a major rate increase for the revenue-losing division's customers, the Commission established a rate design in which the excess cost of service of the single division was shifted to customers of the remaining four divisions. Id. at 455. The court, in overruling the Commission's rate decision, stressed the fact that each division of the water company was a separate operational entity and that rate making should not be used to shift the burden of losses from the customers who receive the benefits of service to another class of customers. Id. at 456. In this case, the reasons for avoiding cross-subsidization are even clearer. The pooling structure at issue results in a burden on customers of companies unrelated to the company to whose customers the benefits flow, not simply a burden on customers from other divisions of a single company. Additionally, the manner of regulation in this case is not reasonably related to the purpose of rate control for the protection of the consumer. Although pooling may be beneficial to the non-Lifeline customers of the smaller independent telephone companies operating in Utah, it results in an increase in the Lifeline surcharge Mountain Bell's non-Lifeline customers must pay. In light of the pooling mechanism's unequal effect on different classes of customers, we cannot say that the funding method is reasonably related to rate control and is done for the protection of all consumers. [4]