Opinion ID: 1141408
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Heading Rank: 2

Heading: Judicial Review of the Public Service Commission's Rate Order

Text: In regulating fees for the public service of river pilotage it is evident that the Public Service Commission necessarily must follow a procedure similar to that which it employs in regulating the rates of a public utility. The Public Service Commission, when acting in place of the pilot fee commission, is charged with the responsibility of fixing and establishing reasonable and just pilotage fees. La.R.S. 34:1122. The primary purpose of its rate making process is to set pilotage fees at such a level that the pilots' revenues will be sufficient to permit them to both pay their legitimate operating expenses and to provide them compensation for their services and investment adequate to maintain efficient, economical and reliable pilotage service, giving due regard to the length, draft and tonnage of the vessels to be piloted, the difficulty and inconvenience of the particular service and the skill required to render it, the supply and demand for pilotage services, and other factors relevant to reasonable and just ratemaking. La.R.S. 34:1122; see A. Parks, Law of Tug, Tow and Pilotage, 516-519 (1975). When this level is achieved the pilots' revenues may be said to produce a fair rate of return, and rates which produce such a return are reasonable and just. Cf. So. Cent. Bell Tel. v. La. Public Service Comm'n, 352 So.2d 964 (La.1977); Jones, Judicial Determination of Public Utility Rates: A Critique, 54 B.U.L.Rev. 873 (1974); J. Bonbright, Principles of Public Utility Rates, 147-283 (1961); 1 A. Priest, Principles of Public Utility Regulation, 45-226 (1969). In reviewing this rate making process the inquiry of the judiciary is generally confined to a determination of whether the Public Service Commission acted unreasonably or arbitrarily in establishing fees for pilotage services. Hendrix v. Louisiana Public Service Commission, supra ; cf. So. Cent. Bell Tel. Co. v. Louisiana Public Service Commission, supra ; Priest, supra at 436. As the United States Supreme Court, in assessing the Federal Power Commission's performance of its statutory duty to fix just and reasonable rates, observed: If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end. The fact that the method employed to reach that result may contain infirmities is not then important. Moreover, the Commission's order does not become suspect by reason of the fact that it is challenged. It is the product of expert judgment which carries a presumption of validity. And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.    Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 288, 88 L.Ed. 333 (1944); So. Cent. Bell Tel. v. La. Public Service Com'n, 352 So.2d at 968. Nevertheless, for purposes of judicial review, and in order to assure that the Commission has acted reasonably and in accordance with law, in a contested case involving complex issues, the agency is required to make basic findings supported by evidence and ultimate findings which flow rationally from the basic findings; and it must articulate a rational connection between the facts found and the rates fixed. Baton Rouge Waterworks v. Louisiana Public Service Commission, 342 So.2d 609 (La. 1977); cf. Bowman Transportation Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); Capital Transit Co. v. Public Utilities Commission, 213 F.2d 176, 187 (D.C.Cir.1954) (separate opinion by Stephens, C. J.), cert. denied 348 U.S. 816, 75 S.Ct. 25, 99 L.Ed. 643 (1954); 3 K. Davis, Administrative Law Treatise, 124, 130 (2d ed. 1978). For instance, a rate order establishing a pilot fee schedule should include findings supported by evidence of basic facts such as the pilots' total revenues, expenses and investments during the test year; the pilots' average annual earnings during the test year; the pilots' estimated revenues, expenses, investments and average earnings for future years; the pilots' work schedules and working conditions; the supply and demand for pilotage services; and any other basic facts affecting the maintenance of efficient, economical and reliable pilotage service. The order should include findings of ultimate facts, flowing from the basic findings, as to the fair average annual compensation for a pilot operating under similar working conditions and the rates necessary to produce such a return after subtracting legitimate expenses and a fair return on any capital investment of the pilots. Finally, the order should articulate reasons showing that there is a rational relationship between the rates fixed, the ultimate facts inferred, and the basic facts found and supported by evidence. A statement of reasons must be adequate to enable the court to determine whether the agency's decision was reached for an impermissible reason or for no reason at all. For this essential purpose, although detailed findings of fact are not required, the statement of reasons should inform the court and the complaining party of both the grounds of decision and the essential facts upon which the agency's inferences are based. Cf., Dunlop v. Bachowski, 421 U.S. 560, 571-572, 95 S.Ct. 1851, 1859-60, 44 L.Ed.2d 377 (1975); K. Davis, supra, p. 125. In cases presenting only simple issues for judicial review, where the findings and reasons for the Commission's action are necessarily implied by the record, and where our study of a brief administrative record readily yields sufficient evidence to support the administrative determination, we have refused to remand for the formality of having the agency make explicit its finding which was already self evident. Baton Rouge Waterworks v. Louisiana Public Service Commission, supra ; see Central Louisiana Electric Co., Inc. v. Louisiana Public Service Commission, 370 So.2d 497 (La.1979). We will remand for the purpose of having the Commission make findings and state reasons, however, when we are unable to review the agency determination without them. As the United States Supreme Court has said, while we may not supply a reasoned basis for the agency's action that the agency has not given ... we will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned. Bowman Transportation Inc. v. Arkansas-Best Freight, Inc., supra, 419 U.S. 281, 285-86, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); See 3 K. Davis, Administrative Law Treatise, p. 130. The Public Service Commission's rate order merely sets forth its conclusions as to the increased rates which should be charged and the number of new pilots which should be commissioned. It does not contain any finding as to revenues, expenses or average annual earnings of pilots. [2] Nor does it include any statement of reasons. The commission's schedule of fees suggests that it did not accept the findings of basic facts urged by either party. The pilot commissioners presented evidence which tended to support larger increases in pilot fees and more additional pilots, whereas the industry commissioners' evidence could have provided a basis for a reduction in pilotage fees. [3] The Commission must have made different basic findings than those urged by the parties, or else it must have drawn different inferences for different reasons from the basic facts. This is not a simple case in which the findings and reasons for the Commission's action are necessarily implied by the record. The Public Service Commission's schedule of pilot fees sets forth over 60 different charges for pilotage, docking or undocking, shifting, trial trip, compass adjusting and calibrating R.D.F., detention and discharge, and transportation. [4] Without findings of fact by the agency as to the frequency of each charge during the test year we are unable to determine the gross revenues which the fees are expected to yield. Without findings of fact as to the expenses and investment necessary to perform the services for which the fees are imposed we cannot calculate the net annual return to the pilots. In the absence of these basic findings and further ultimate findings and reasons, we cannot tell whether the Public Service Commission's apparent conclusion that the fee schedule will produce a return which is adequate, and not deficient or excessive, is reasonable. The industry commissioners, in an effort to carry their heavy burden of making a convincing showing that the Public Service Commission's rate order is unjust and unreasonable in its consequences, present two arguments: That the pilot fee schedule is patently excessive as shown by the evidence proffered in the district court that one pilot had annual earnings in excess of $110,000 under the old fee schedule; and that the fee schedule is based upon a double reimbursement of boat expenses to the pilots. [5] While the industry commissioners have not at this time persuaded us that the Commission's fee schedule is unjust and unreasonable in its consequences, we are persuaded that in order to obtain the judicial review to which the industry commissioners are entitled, the Commission must provide some additional reasons for the agency decision. See Camp v. Pitts, 411 U.S. 138, 139, 93 S.Ct. 1241, 1242, 36 L.Ed.2d 106 (1973); Maine v. Kreps, 563 F.2d 1043 (1st Cir. 1977).