Opinion ID: 493663
Heading Depth: 2
Heading Rank: 3

Heading: preemption of the separations field

Text: 39 Reaching the merits, appellant Consumer Advocate contends that FCC Order 81-312 did not preempt state regulation of separations procedures and that the PUC's use of state-developed procedures was perfectly proper for intrastate ratemaking. This argument raises a question of law reviewed here de novo. United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984). 40 Appellants concede the FCC's plenary authority over separations procedures, but argue in their Joint Brief that the FCC has not exercised this power. They point to the absence of an express statement of intention to preempt the field of separations for intrastate ratemaking purposes in FCC Order 81-312. 28 They argue that the applicable test for preemption is whether both the state and federal regulations can be enforced without impairing the federal superintendence of the field. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963). 41 Appellants' argument overlooks the extent to which separations for interstate ratemaking and separations for intrastate ratemaking are two sides of the same coin. 29 When the same plant and equipment is used to provide both interstate and intrastate services and different authorities set rates for these respective services, cost and investment must be apportioned uniformly in order to establish fair rates. See The Minnesota Rate Cases, 230 U.S. 352, 435, 33 S.Ct. 729, 755, 57 L.Ed. 1511 (1913); Washington Utilities & Transportation Commission v. FCC, 513 F.2d 1142, 1146 (9th Cir.), cert. denied, 423 U.S. 836, 96 S.Ct. 62, 46 L.Ed.2d 54 (1975). If the sum of the intrastate and interstate portions for rate-base allocation purposes were not 100 percent, 42 some costs of plant and expenses would not be included in the rate computations of either [the PUC or the FCC]. In [that] situation ..., the carrier may be deprived of a fair rate of return when interstate and intrastate jurisdictions are both taken into account. 43 Application of Hawaiian Tel. Co., 67 Haw. at 385-88, 689 P.2d at 751-52 (quoting New England Tel. & Tel. Co. v. Public Utilities Comm'n, 448 A.2d 272, 298 (Me.1982)). See also Illinois Bell, 740 F.2d at 567; Washington Utilities & Transportation Commission, 513 F.2d at 1146-47 (recognizing complementary nature of the separations process). 44 The Communications Act empowers the FCC to prescribe uniform separations procedures. Illinois Bell, 740 F.2d at 567; see 47 U.S.C. Sec. 221(c) (granting FCC authority to classify property for interstate or foreign telephone toll service); id. Sec. 410(c) (requiring use of Federal-State Joint Board for separations rulemaking). These statutes evince a congressional intent that FCC separations orders control the state regulatory bodies, because a nationwide telecommunications system with dual intrastate and interstate rates can operate effectively only if one set of separations procedures is employed. E.g., State Corporation Commission v. FCC, 787 F.2d 1421, 1426-27 (10th Cir.1986) (citing cases); see Louisiana Public Service, 106 S.Ct. at 1902 (citing Smith v. Illinois Bell Telephone Co., 282 U.S. 133, 51 S.Ct. 65, 75 L.Ed. 255 (1930)); S.Rep. No. 92-362, 92d Cong., 1st Sess., reprinted in 1971 U.S.Code Cong. & Admin.News 1511, 1513, 1515 (noting need to preserve federal superintendence in the separations field, citing Smith v. Illinois Bell, supra); see also NARUC v. FCC, 746 F.2d 1492, 1499-1501 (D.C.Cir.1984); In re Establishment of Interstate Toll Settlements & Jurisdictional Separations Requiring the Use of Seven Calendar Day Studies by the Florida Pub. Serv. Comm'n, Memorandum Opinion & Order on Reconsideration (Docket No. 84-268), 98 F.C.C.2d 777-84 (1984); In re AT & T & the Associated Bell System Companies Charges for Interstate & Foreign Communication Service, Interim Decision & Order (Docket Nos. 16258 & 15011), 9 F.C.C.2d 30, 90-91 (1967). 45 The FCC's statements during the lengthy Ozark Plan proceedings indicate a desire to adopt a separations scheme agreeable to as many states as possible because that scheme will apply to the entire nation. E.g., Prescription of Procedures for Separating and Allocating Plant Investment, Operating Expenses, Taxes and Reserves Between the Intrastate and Interstate Operations of Telephone Companies, Report & Order 70-1151 (Docket 18866), 26 F.C.C.2d 247, 257 (1970). In 1972, the FCC began efforts to integrate Hawaii into the established rate scheme for communications services applicable to the Mainland. Docket No. 16495, 35 F.C.C.2d at 856-57. The FCC extended Ozark to Hawaii as a central part of that rate scheme in Order 81-312, expressly citing its separations authority under Sec. 221(c) and following the procedure set forth by Sec. 410(c). 46 This history, the statutory framework underlying it, and the need for consistent apportionment between interstate and intrastate operations, are sufficient to convince us that FCC Order 81-312 necessarily preempted any independent separations procedures of the Hawaii PUC.