Opinion ID: 2366694
Heading Depth: 1
Heading Rank: 2

Heading: purchases by the company from western electric

Text: For many years Western Electric Company has virtually been the manufacturing department for American Telephone and Telegraph Company affiliates and has supplied them with a major portion of their telephone equipment and supplies. Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 153, 51 S.Ct. 65, 70, 75 L.Ed. 255, 265 (1930); Illinois Bell Tel. Co. v. Gilbert, 3 F. Supp. 595, 602 (N.D. Ill. 1933). This relationship has often resulted in inquiries as to the fairness and reasonableness of Western's profits on its sale to those affiliates. The commission deducted $71,000 from the company's operating expenses. This court's earlier decision required the commission to substantiate its deduction of $71,000 from the company's operating expenses for purchases by the company from Western Electric. Its sole substantiation for that deduction was found in the conclusory statement that `   on the basis of what has been presented [that amount] appears to be fair under the circumstances.' We stated that [a]djustments in rate cases cannot rest on conjecture, and we therefore cannot permit the commission to `roam the unfenced fields of speculation.' Rhode Island Consumers' Council v. Smith, supra , quoting St. Louis-San Francisco Ry. v. State Corp. Comm'n, 187 Kan. 23, 27, 353 P.2d 505, 507 (1960). In its supplementary report and order, the commission eliminated its disallowance of $71,000 from operating expenses pointing out that this merely meant that, on this record, the Company's showing that such transactions and the prices it pays Western are reasonable has been demonstrated neither to be wrong, nor sufficient to persuade us to reach a contrary conclusion. The company in its original testimony presented uncontradicted evidence that Western Electric's prices were substantially lower than the prices of other suppliers of the same products and that Western Electric's profits have been below those achieved by other large industrial corporations. This evidence satisfied the company's burden of showing the propriety of its transactions with Western Electric. See Smith v. Illinois Bell Telephone Co., supra at 152-53, 51 S.Ct. at 70, 75 L.Ed. at 265; City of Houston v. Southwestern Bell Telephone Co., 259 U.S. 318, 42 S.Ct. 486, 66 L.Ed. 961 (1922). The council challenges this aspect of the commission's supplementary decision by reasserting its previous arguments made in support of the evidence it presented through its expert witness, Robert G. Towers. As this court has previously indicated, the commission considered the Towers' presentation and found there was insufficient basic data to warrant its adoption. The council contends that the commission erred because it has failed to specify the evidence upon which it relied in modifying its original decision. The council's argument ignores the direction of this court in the remand that the commission submit support, if support can be provided, for the limited disallowance it made in its earlier decision. The commission found that no such support exists in the record, and therefore properly eliminated its earlier disallowance.