Opinion ID: 1370217
Heading Depth: 1
Heading Rank: 3

Heading: bapco revenue

Text: Consumer Advocate argues the circuit court erred in affirming PSC's decision on the amount of revenue generated by BellSouth Advertising and Publishing Co. (BAPCO) because that decision was not adequately documented in findings of fact or supported by substantial evidence. We agree. BAPCO, a subsidiary of BellSouth Telecommunications, handles Yellow Page operations. PSC previously had determined that it would recognize the net income of BAPCO as operating revenue and that it would recognize the BAPCO investment in the rate base. PSC's staff recommended that BellSouth's operating income from the test year include about $6 million from BAPCO operations. Consumer Advocate presented testimony showing that figure was abnormally low during the test year due to certain nonrecurring accounting adjustments made by BellSouth in December 1994. BAPCO's average net income was about $551,000 per month except for December, when it reported a loss of $25,000. BellSouth itself described the December expenses as extraordinary, and said they resulted from the downsizing of the work force and planned technological improvements, among other things, according to Consumer Advocate. BAPCO revenue ought to be set at $6.6 million, Consumer Advocate argued. PSC adopted the staff recommendation, concluding it was accurate and reliable. In its order upon reconsideration, PSC explained that it rejected Consumer Advocate's position because it was based upon pure speculation, not proof that BellSouth's accounting adjustments actually were nonrecurring. The circuit court affirmed PSC's decision. We conclude the circuit court erred in affirming PSC's decision on this issue for two reasons. First, the record does not contain substantial evidence supporting PSC's conclusion that Consumer Advocate's position was pure speculation. The operating loss in December, which followed eleven months of profits, indicates that month was somehow unusual. BellSouth itself described the December 1994 expenses as extraordinary and explained they were related to downsizing of the work force and technological improvements, among other things. The only conclusion that can be drawn from the record is that those expenses were nonrecurring. See Hamm, 315 S.C. at 122, 432 S.E.2d at 456 (substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion). Second, PSC must adjust atypical test-year figures in order to accurately perform calculations that affect the company's overall rate of return and, ultimately, customer rates. See Hamm, 309 S.C. at 289-90, 422 S.E.2d at 114 (object of test year figures is to reflect typical conditions .... Where an unusual situation exists which shows that the test year figures are atypical and thus do not indicate future trends, the Commission should adjust the test year data); see also S.C.Code Ann. § 58-9-570 (1976) (in determining rates, PSC shall consider, among other things, reasonable operating expenses and other costs necessary to provide the service, as well as other matters PSC may find necessary); Chesapeake Utilities Corp. v. Delaware Pub. Serv. Comm'n, 705 A.2d 1059, 1067 (Del.Super.Ct.1997) (extraordinary expenses are included in rate base only if they are a recognized component of the rate base or if the commission, in its discretion, determines that denying them would impair a utility's effective operation). Accordingly, we reverse the judgment of the circuit court on this issue.