Opinion ID: 1211297
Heading Depth: 2
Heading Rank: 5

Heading: System Operating Division Charges.

Text: Finally, GSTC maintains that the APUC erred in holding that its system operating division charges should be excluded from its revenue requirement. The commission reduced the revenue requirement by the amount of these expenses because it found that GSTC had failed to meet its burden of proving that these expenses were necessary, in the public interest, and reasonably based. We find that the commission erred in disallowing all of these charges and remand on this issue. The expenses at issue consist of public relations, executive, accounting/finance, legal, and personnel expenses incurred by GSTC's parent, Continental Telephone Service Corporation. Apparently it is difficult to directly allocate portions of a parent company's expenses to individual operating subsidiaries. The APUC staff and GSTC disagreed about exactly how to apportion these costs, but neither suggested that GSTC was not entitled to include some of these expenses in its revenue requirement. The commission held that the expenses should be excluded because GSTC had failed to meet its burden of proof under AS 42.05.511(c). This statute provides that: In a rate proceeding the utility involved has the burden of proving that any written or unwritten contract or arrangement it may have with any of its affiliated interests for the furnishing of any services or for the purchase, sale, lease or exchange of any property is necessary and consistent with the public interest and that the payment made therefor, or consideration given, is reasonably based, in part, upon the submission of satisfactory proof as to the cost to the affiliated interest of furnishing the service or property and, in part, upon the estimated cost the utility would have incurred if it furnished the service or property with its own personnel and capital. The issue is whether the APUC was required to allow at least some of the expenses, since it is likely that at least some of them were valid. The commission maintains that since GSTC failed to provide the proof required by AS 42.05.511(c), it was authorized to completely eliminate the claimed expenses from GSTC's revenue requirement. GSTC argues that the commission was compelled at least to accept the recommendation of its staff that the requested charges only be reduced. The APUC's decision was unnecessarily harsh. On remand, the commission should consider the expenses recommended by its staff and by GSTC, and accept those it finds to be reasonable given the factors stated in AS 42.05.511(c). AFFIRMED in part, REVERSED in part, and REMANDED for proceedings consistent with this opinion.