Opinion ID: 2329366
Heading Depth: 1
Heading Rank: 3

Heading: the bellcore expenses

Text: C & P contends that the Commission's decision to impose a one percent cap on Bell Communications Research, Inc. (Bellcore), expenses was arbitrary, capricious, and not supported by the evidence. We reverse the Commission's decision on this point, but not for the reasons urged by C & P. Bellcore is the successor to Bell Telephone Laboratories, Inc. It is owned by the seven regional telephone holding companies which were created in the course of AT & T's divestiture of its operating companies. [7] It was established to perform the coordination for national defense and other emergency purposes that is vital to the nation's security ... [and to] set the standards which will permit telecommunications to continue to operate in an engineering sense as one national network. United States v. Western Electric Co., 569 F.Supp. 1057, 1119 (D.D.C.1983) (footnote omitted). The allocation of costs for Bellcore expenses depends upon the type of research project involved. Bellcore activities are designated as either core or non-core projects. A core project is one which the Bellcore board of directors has determined by at least a five-to-two vote will be of substantial benefit to the seven owners. The costs of all core project are allocated among the seven regional holding companies on an equal basis, including those whose representatives on the board voted against it. A non-core project is one in which participation is optional. It requires only a four-to-three vote to authorize the commencement of work, and its costs are allocated to only those regional holding companies electing to participate. Core projects greatly outnumber non-core projects. In this case the Commission imposed a limit of one percent of C & P's intrastate operating revenues on recoverable Bellcore expenses because it concluded that those expenses were not, in total, adequately justified. Order No. 8300 at 115. The Commission was particularly troubled by recent increases in Bellcore costs and by the lack of control that Bell Atlantic, and in turn C & P, had over them; on the other hand, the Commission recognized that certain of those costs were reasonable. Noting that various other jurisdictions had imposed a one percent ceiling, the Commission concluded that such a ceiling was reasonable for purposes of this case in light of the failure of C & P to justify fully all of its costs. Id. We reverse this part of the Commission's order and remand the case for further proceedings. Without further explanation, the Commission's decision to impose a one percent ceiling on Bellcore expenses is arbitrary on its face. The Commission did not state the criteria by which it purported to decide the reasonableness vel non of the Bellcore expenses, nor did it explain how its rate order reflected application of those criteria to the facts of this case. It must do both of these things before the one percent limit may be upheld. Washington Public Interest Organization, supra, 393 A.2d at 75; see also People's Counsel v. Public Service Commission, 462 A.2d 1105, 1108 (D.C.1983) (a reviewing court cannot tell if the end result is reasonable unless it can examine the steps which lead to that result). The Commission imposed the one percent ceiling on Bellcore expenses without even attempting to explain why the expenses above that ceiling were, in its view, unreasonable. The fact that other state regulatory commissions may have imposed such a ceiling is utterly irrelevant here, for neither the Commission nor this court can know what evidence was before those tribunals when they made their rulings. As far as the record in this case discloses, the one percent figure was simply plucked out of the air. Absent precise explanation of methodology as applied to the facts of the case, there is no way for [this] court to tell whether the Commission, however expert, has been arbitrary or unreasonable.... [W]ithout insisting on more precise explanation, [we] could simply be fooled into accepting arbitrary agency action by the mesmerizing influence of the confidently expressed language of experts. Washington Public Interest Organization, supra, 393 A.2d at 77-78. We remand the case to the Commission for further proceedings with regard to the Bellcore expenses. If C & P can demonstrate that they are properly incurred, then the Commission shall allow them to be recovered in full from the ratepayers. Mississippi River Fuel Corp. v. FPC, supra, 82 U.S.App.D.C. at 212, 163 F.2d at 437. If the Commission concludes that C & P has not justified the Bellcore expenses and disallows them in whole or in part, it shall state its reasons for doing so with particularity, in a manner consistent with our decision in Washington Public Interest Organization, supra . [8]