Opinion ID: 2329366
Heading Depth: 1
Heading Rank: 5

Heading: the refunded license contract fees

Text: The Commission ordered C & P to refund to its ratepayers $2,160,465 in license contract payments previously made to AT & T, which AT & T had paid back to C & P over a twenty-one month period from December 1982 to August 1984. C & P contends that this portion of the Commission's order is illegal and arbitrary. We disagree. The funds at issue were originally advanced by C & P to AT & T to pay development and formation expenses for American Bell, Inc. (AmBell), before AmBell began its customer premises equipment (CPE) operations. In November 1982 the FCC determined that the local Bell Operating Companies (BOCs) would no longer benefit from the operation of AmBell. The FCC therefore directed AT & T to reimburse the BOCs, including C & P, for these expenses, to assure that ratepayers will be reimbursed for funds that they have provided for these activities and for which they are not the beneficiaries. American Telephone & Telegraph Co., 91 F.C.C.2d 578, 593 (1982) (emphasis added). In response to the FCC order, AT & T paid approximately $1.8 million to C & P in 1982 and 1983, and $0.3 million in 1984. As C & P received these reimbursements, it placed them in a deferred account, where they earned no return for C & P. The reimbursements were never a part of C & P's rate base. The Commission eventually ordered all of this money, $2.1 million, to be refunded to the ratepayers. Because the state regulatory commissions were in a better position to weigh any facts that might affect the amount of the refunds, the FCC left it to those commissions to decide how much should be refunded to the intrastate ratepayers and how those refunds should be made. To facilitate state commission review, the FCC directed AT & T to file with each state commission a copy of a report, to be filed concurrently with the FCC, detailing the full amount of reported AmBell expenses allocated to each ratemaking jurisdiction. In addition, the FCC required the BOCs to report this information to their respective state regulatory commissions in conjunction with the first ratemaking proceeding following the reimbursement. 91 F.C.C.2d at 603-604. C & P asserts that it furnished the required information to the Commission in a previous ratemaking proceeding, Formal Case No. 798, and that the Commission had an opportunity to order a refund in that case but failed to do so. Therefore, C & P argues, the Commission acted unlawfully by ordering the refund in this case. We disagree. Under the FCC order, C & P was required, in conjunction with the first ratemaking proceeding following the reimbursement, to present the allocated [Am-Bell] expenses again to [the Commission] for ratemaking scrutiny. 91 F.C.C.2d at 603. C & P did not do this in case No. 798. As the Commission points out in its brief, without contradiction by C & P, the limited information on the license contract reimbursement which C & P provided in that case was merely accounting data required to be submitted as background information in support of [its] application for rate relief; it was not the kind of information contemplated by the FCC order. Since C & P did not provide the Commission with the necessary data in case No. 798, the Commission's consideration of the reimbursements in the instant case was entirely proper. As to the merits of the refund order, C & P argues that the Commission engaged in illegal retroactive ratemaking. C & P correctly points out that the law does not require the company to give up for the benefit of future subscribers any part of its accumulations from past operations and that [p]rofits of the past cannot be used to sustain confiscatory rates for the future. Board of Public Utility Commissioners v. New York Telephone Co., 271 U.S. 23, 32, 46 S.Ct. 363, 366, 70 L.Ed. 808 (1926); see People's Counsel v. Public Service Commission, 472 A.2d 860, 866-867 (D.C.1984); Washington Gas Light Co., supra, 450 A.2d at 1217; Payne v. Washington Metropolitan Area Transit Commission, 134 U.S.App.D.C. 321, 330-331, 415 F.2d 901, 910-911 (1968). The refund ordered by the Commission, however, did not come from accumulations from past operations or profits of the past; rather, it was intended to restore to the ratepayers what they themselves had invested in a project that was no longer of any benefit to them. Cf. Democratic Central Committee v. Washington Metropolitan Area Transit Commission, 158 U.S. App.D.C. 7, 27, 485 F.2d 786, 806 (1973) (he who bears the financial burden of particular utility activity should also reap the benefit resulting therefrom). The license contract fees that C & P paid to AT & T for the development of AmBell came directly from the ratepayers. The money never belonged to C & P; C & P was merely a conduit through which the funds passed from the ratepayers to Am-Bell. Originally it was expected that the ratepayers would benefit from the use of this money for the AmBell project. When the FCC determined otherwise, AT & T was ordered to reimburse C & P and the other BOCs for their pre-operational contributions to AmBell. The Commission then ordered these funds refunded to C & P ratepayers. This history makes clear that the funds which the Commission ordered to be reimbursed to the ratepayers represented the ratepayers' capital investment in the AmBell project, not C & P's accumulations from past operations. Since C & P never had any right to the money in the first place, it cannot complain that the Commission, following the lead of the FCC, [10] gave it back to the ratepayers. Thus we hold that there was no retroactive ratemaking in this case. The refund order was not retroactive in the forbidden sense. See Board of Public Utility Commissioners v. New York Telephone Co., supra, 271 U.S. at 32, 46 S.Ct. at 366. Nor was it even a ratemaking order; rather, it was a refund to the ratepayers of their own capital investment, entirely separate from the ratemaking process. [11]