Court Opinion

ID: 9628453
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:20:57.419795+00
Date Added: 2024-06-11T09:06:09.926679
License: Public Domain

BRIGHTMIRE, S.J., concurring in part and dissenting in part.
Did Southwestern Bell Telephone Company (SWBT) reach out and touch the ratepayers of this state too hard? The attorney general contends that it did. The Commission and SWBT say it did not and today this court approves a rate setting procedure employed by the Commission which I believe falls way short of that which is constitutionally acceptable.
While I agree with the result reached in Parts I and IX of the majority opinion — relating to the dismissal of the attorney general’s Rule 24 motion and the AT & T refund — I dissent from most of the conclusions and dicta set out in Parts II, III, IV, V, VI, VII and VIII because in my opinion they establish unwise precedent, contain some inappropriate dicta, leave the litigants to flounder in a sea of uncertainty in critical areas, and permit the cards to remain seemingly stacked against the ratepaying public.
I
The attorney general, on behalf of the ratepaying public, prosecutes this appeal complaining that the rate increase granted SWBT is unreasonable and offers several grounds for vacating the order granting it which fall into the following broad categories: (1) The order does not facially disclose findings of fact supported by substantial evidence as required by law with regard to a number of significant matters; (2) The order fails to consider various relevant matters entirely; and (3) The order reaches certain erroneous conclusions of law of both a substantive and a procedural nature.
The thrust of the attorney general’s contentions can be framed this way: That in rendering subject order, the Commission shirked three important constitutional duties imposed upon it, namely: (1) It failed to regularly pursue its authority; (2) It failed to make adequate findings and reach sustainable conclusions; and (3) Its order fails to disclose evidence and certify facts underlying its action which are essential for the prompt disposition of this appeal — that is, which are sufficient for us to determine whether the Commission’s find*1338ings rest on substantial evidence and whether its conclusions and proceedings accord with law.1
II
First, with respect to the attorney general’s complaint about the dismissal of his Rule 24 motion, I want to state that while I concur with the court’s affirmance of the dismissal under the circumstances of the case, I disagree with the implication that litigants before the Commission cannot extend the 30-day appeal time by filing a Rule 24 motion. The court should expressly settle the question by holding that the aggrieved party can either appeal from the Commission’s order or seek Rule 24 relief during the pendency of which appeal time is extended for a reasonable period.
In urging this I accept the fact that the Commission had authority to establish internal procedural Rule 24 pursuant to the broad powers granted by art. 9, § 18, of the Oklahoma Constitution. Here both the attorney general and SWBT sought to avail themselves of the benefits of Rule 24. Thus if Rule 24 is a valid procedural rule it would appear to me that the parties had a constitutional right to invoke it. The procedural uncertainty was brought into focus by the dismissal of the attorney general’s Rule 24 motion under the circumstances of his earlier appeal from the January 29, 1986 order.2 In affirming the Commission’s dismissal of the attorney general’s motion, the court emphasizes that orders “rendered by the Commission automatically become final after 30 days” thus implying that an appeal must in any event be filed within such 30-day period. This has the effect, it seems to me, of invalidating Rule 24 by implication, or at least leaves lingering the question of the appellate jurisdictional consequences of appealing from a timely-filed Rule 24 motion within 30 days after the rendition of an order disposing of such motion. The matter should be expressly resolved by this court one way or the other.
It is my view that Rule 24, being a constitutionally ordained creation of the Commission, can be invoked by a party without having to forfeit his constitutional right of appeal to this court. Therefore, to accommodate and protect both rights, and at the same time prevent unwarranted delay, I would hold that the timely filing of a Rule 24 motion shall extend a party’s appeal time for a reasonable period but not to exceed 60 days from the date of the filing. And, if during that time the Commission fails to dispose of the motion, either party may within 30 days appeal from the origi*1339nal order and this court shall exercise discretion in determining whether prosecution of the appeal shall be stayed pending disposition of the Rule 24 motion, whether the Rule 24 proceedings shall be stayed pending disposition of the appeal, or whether some other directional order will best accommodate justice.
Ill
To set the other issues raised by the attorney general in proper perspective and make them more understandable, reference to some orientational historical facts is in order.3
The forerunner of this litigation began long ago, on January. 14, 1949, when the United States government filed an action in a New Jersey federal court against the American Telephone & Telegraph Company and Western Electric Company, alleging that the defendants conspired to restrain trade in the manufacture, distribution and installation of various telephonic equipment in violation of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2 and 3 (1973).4 The relief sought included divestiture by AT & T of its stock ownership in Western, termination of certain “exclusive relationships,” divestiture of Western’s interest in Bell Telephone Laboratories, and cessation of other trade-restraining conduct.5 A prolonged period of negotiation and political activity followed ultimating in an agreement between the government and AT & T in 1955,6 and the issuance of a consent decree on January 24, 1956, by the U.S. District Court of New Jersey.7
The next major development occurred November 20,1974, when the United States filed another antitrust suit against AT & T, Western, and Bell Telephone Laboratories in the District Court for the District of Columbia. In that action, divestiture from AT & T of the Regional Bell Operating Companies (RBOCs) was sought, as well as the dissolution of the “exclusive relationships” between AT & T and Western.8
Trial of the case began in January 1981, and was near an end in January 1982, when the parties announced a stipulation consenting to the entry of what has come to be known as “Modification of Final Judgment” (MFJ) altering the decree previously rendered in the New Jersey action and dismissing the D.C. action.9 The proposed statement contained detailed provisions calling for, among other things, the divestiture of the RBOCs and various structural restrictions aimed at preventing the “recurrence of the type of discrimination and cross-subsidization that were the basis of the AT & T lawsuit.”10 The New Jersey action was transferred to the D.C. court which entered a consent decree January 21, 1982, that became the foundation for events leading to this appeal.11 Later on, in 1984, the RBOCs sought three more major modifications of the MFJ. Judge Greene, sitting in D.C., reviewed them and wrote an opinion in which cogent comments and observations were made about some of the very same problems we are dealing with today.12
It should especially be borne in mind that the stated objective of the divestiture was to prevent AT & T from using its control of the local telephone service monopoly to disadvantage competitors by (1) denying them *1340access to the local network and (2) using “profits earned from the monopoly of local telephone operations to subsidize its long-distance and equipment business in which it was competing with others.” 13 In light of this the Department of Justice urged the court to ensure against such misuse of the same monopoly power by the RBOCs by barring them from entering any competitive market. The court generally agreed but introduced two exceptions which it felt would “generate a substantial subsidy for local telephone rates” with minimal anti-competitive impact or abuse of the monopoly power. The two exceptions were: (1) Marketing of customer premises equipment (CPE) — the telephone and other devices used in subscribers’ homes and offices— and (2) production of the Yellow Pages advertising directories.14
Later, in ruling on motions of the Regional Holding Companies to waive the “line of business” restrictions in the MFJ, the federal court reiterated that under the decree (MFJ), “the Operating Companies’ basic responsibility is to provide local telephone service to the public.”15
Finally, it should be noted that the MFJ considered the telephone service entities spun off from AT & T — in this case SWBT —to be the “operating companies.”16 Transfer of operating company assets to a regional holding company does not seem to have been discussed or even contemplated by early federal decrees. SWBC was incorporated October 5, 1983, and transfer of SWBT assets to it was carried out January 1, 1984.17 Following this the Regional Holding Companies were discussed as such by the federal court.18
IV
The recent history of the cause under attack is as follows. SWBT applied for a rate increase of $138.5 million November 12, 1982. This resulted in a $43.7 million interim increase granted May 24,1983, presumably with regard to local telephone rates, which was made permanent December 29, 1983. On June 24, 1983, SWBT applied for another increase sufficient to generate an additional $301 million effective January 1, 1984. This request was reduced to $233.6 million at the behest of the Commission on September 16, 1983.19
On December 29, 1983 — after criticizing “the action taken by the federal court divesting AT & T of its operating companies” —the Commission issued an order making the May 1983 interim increase permanent and granting another “interim” increase of $135,197,000 — for “adjustment of rates for intrastate telephone service” — effective January 1, 1984. This huge rate hike was not based entirely on existing data or experience, but on “a budgetary report estimating” post-divestiture needs, prepared by SWBT. The Commission’s reason for this was that “setting rates for a company that [is] to dramatically change on January 1, 1984, would require reliance on some projected information and data.” Such rates and changes, said the Commission, were to be “reviewed ... after sufficient actual [post-divestiture] data becomes available.”
Also approved in the December 1983 order as an operating expense was a request by SWBT to make what appears to be about a $6 million contribution to a so-called Central Services Organization.20 The Commission promised, however, that SWBT would be required to demonstrate during “review of this cause [that] the services purchased by the monies allocated to *1341CSO do indeed benefit Oklahoma ratepayers, and the costs are reasonable and proper.” The amount is not disclosed but I assume it is disguised as the “Other” expense on page 10 of the December 1983 Order No. 250987 in Cause No. 28002 in the amount of $6.002 million. By the time Cause No. 29321 was heard in September 1985, the CSO had been established and named Bell Communications Research, Inc., which is referred to by the acronym “Bellcore” throughout the record. It is owned and operated by the seven operating companies in a manner strikingly similar to its celebrated predecessor — Bell Telephone Laboratories, Inc. In its January 1986 order, the Commission found that not all of SWBT’s contribution to Bellcore should be allowed and said it was adopting the staffs recommendation that Bellcore “expenses relating to applied research, quality assurance, 800 service,21 image enhancement, and imputed revenue” should be disallowed. In the next sentence, however, the Commission contradictorily found that not all expenses relating to, among others, “applied research” • should be disallowed.22 This court is not given the benefit of any figures so we do not know how much was allowed or disallowed. Again I have found no evidence in the record — substantial or otherwise — to support the ambiguous finding one way or the other.
On November 9,1984, SWBT filed another application for an additional rate increase of $121.4 million. Another “interim” increase of $32,520,695 was granted February 13, 1985, again based on no dis-cernable evidence. A hearing was held in September 1985 eventuating in the Commission’s issuance on January 29, 1986, of Order No. 292337 approving a rate increase of $80,075,256 and, without any supporting evidence, the Commission merely “approved” the $135,197,000 “interim increase” granted December 29, 1983, for a total rate increase of nearly a quarter of a billion dollars.
V
To further aid understanding of the issues to be resolved, I also draw attention at this point to several irregularities involved in the complained-of proceedings leading to the order appealed and also in the “interim” orders it approves.
First, the amount of the rate increase approved cannot be determined from a reading of the January 1986 order itself. The format of the ordering portion of the order misleadingly leaves the impression that an increase of only $47.5 million is being authorized when in fact a much larger “permanent” increase of some $215,262,-256 is granted by the simple expedient of “approving” two previous “interim” orders by reference only.23 The first was authorized December 29, 1983, in Order No. 250987, Cause No. 28002, in the amount of $135,197,000. The second, for $32,520,695, was granted in an order issued February 13, 1985.24 This figure was deducted from $80,065,256 — the total amount of the defi*1342ciency which was found by the Commission in the January 29, 1986, order25 to have resulted from test year revenue and expense figures found to be “appropriate,” whatever that means. There is nothing in the order to indicate that such deficiency is founded on predicatory findings of “reasonable” and “necessary” foundational test year data, revenues and expenses. Moreover, there is no evidence or findings in the order supportive of the other interim increase approved — the one for $135,197,000.
Another significant irregularity “approved” by the 1986 order in my opinion is the inclusion of “income tax” in the amount of $59,546,000 as an item of operating expense to achieve the $135,197,000 revenue deficiency figure authorized by the December 29, 1983, interim order, No. 250987, Cause No. 28002.26 Similarly, the Commission in its January 29,1986, order,27 deducted income taxes in the amount of $22,040,-996 from “Net Operating Income Before Taxes” in arriving at the “Net Operating Income” deficiency of $80,485,352. This means that the Commission is defining fair return on the rate base as being an after income tax return. In my opinion this is error. The rate should be set on the basis of a fair return on the net plant income before income taxes of any kind — federal, state or local. The only decision in this state on the subject is Oklahoma Natural Gas Co. v. Corporation Commission, 90 Okl. 84, 216 P. 917 (1923), and it construed and followed, evidently as binding, pre-Erie R.R. v. Tompkins28 federal common law precedent promulgated by the United States Supreme Court in a diversity case arising in Texas, namely, Galveston Electric Co. v. City of Galveston, 258 U.S. 388, 42 S.Ct. 351, 66 L.Ed. 678 (1922). The Galveston court saw no difference between operating tax expense and post-operational income taxes. Of course, in 1922 income taxes did not amount to much. But in any event the precedential effect of Galveston perished with the dramatic landmark change wrought by Erie in holding that the federal courts were bound to apply state substantive law to state law issues triable in federal court. It is my opinion that, under these circumstances, this court has never rendered any independent decision on the issue and it should take the opportunity to do so in this case by disallowing the deduction of income taxes as “operating expenses.”
Another irregularity is the fact that SWBT’s application in this cause, No. 29321, included a request for an increase in “intrastate access tariffs” (intrastate long-distance calls) which.the Commission for some undisclosed reason decided not to consider in this cause but in Cause No. 28309. This presents the question of how the rate-related issues in this appeal can be properly reviewed without the inclusion of SWBT’s revenue from its intrastate long-distance revenue.
Irregular also is an operating expense referred to in the December 1983 order as *1343“Gross Receipts Tax $1,665,000.” This item does not appear elsewhere and I cannot find where such a tax is levied upon any entity except electric cooperatives, 68 O.S.1981 §§ 1801-1807; intoxicating liquors, 37 O.S.Supp.1987 § 579; and various utilities, except telephone, provided by municipalities, 68 O.S.1981 §§ 2601-2605. Another puzzling operating expense in the December 1983 order — referred to as “Independent Company Settlements 8,774,000” —is unaccompanied by supporting evidence or even an explanation as to what it is.
Among the items included on the expense list in the January 29, 1986, order is one called “Other 43,238,643.” Again there is no explanation or evidence of what this “other” consists of. See footnote 76 for the speculatory possibility that it may be an inappropriate pension fund expense.
To make matters even more confusing the rate base approved in the order under review cannot be reconciled with either the one approved in December 1983 or the rate of return. An analysis of the figures given, the rate of return allowed and the amount of rate increase allowed cannot be reconciled.
For example, in Order No. 250987, issued December 29, 1983, the Commission found a need for an interim rate increase of $135,-197,000 based on little more than speculation and the hope of later confirmatory evidence — evidence which as it turned out was never forthcoming so far as I have been able to find.
To justify this large interim rate increase the Commission found that SWBT’s Oklahoma rate base (r) at the close of 1983 was $886,579,000.29 It accepted a capital structure of 55 percent equity and 45 percent debt with an overall debt cost of 9.37 percent. It found a fair return to be 14.25 percent on equity and 12.05 percent (B) on net plant. This meant, then, that SWBT was entitled to a return equal to $106,833,-000 (r x B). The Commission, at page 9 of Order No. 250987, found that SWBT’s total revenue during the 1983 test year30 was $482,098,000, total expenses were $406,-792,000, and total taxes were $32,783,000, for total operating expenses of $436,575,-000 (O), which it subtracted from total revenue to achieve a “total adjusted operating income of $42,523,000.” This was then subtracted from the required return, $106,-833,000. To the difference, $64,310,000— designated “Return Deficiency” — was added:
Income Tax $59,546,000
Gross Receipts Tax 1,665,000
Uncollectibles 902,000
Company Independent
Settlements 8,774,000
TOTAL $70,887,000
to arrive at a “Revenue Deficiency” of $135,197,000. Aside from the fact that the foregoing add-ons are suspect, a larger problem is encountered when we start totaling these revenue figures, add in the additional $32,520,695 interim increase granted in February 1985 and try to reconcile with the figures set out in the January 1986 order in that the 1983 revenue plus the $135,197,000 increase granted December 29, 1983, should have achieved revenue of some $617,295,000 for 1984, but the Commission found SWBT-reported revenue of only $582,799,267 for that year.
First of all, we know that 1984 is the test year with which we are dealing. Since no further hearing was held with respect to the $135,197,000 increase it can be assumed that it was collected during 1984 and boosted the 1983 revenue of $482,098,000 to somewhere in the neighborhood of $617,-295,000. There is no evidence to the contrary. For some inexplicable reason, however, the Commission came up with total revenues for 1984 of only $582,799,267, even though each item listed in the 1983 *1344revenue list, except “Miscellaneous”, gained significantly and the “Miscellaneous” decline was more than offset by revenue sources not considered in 1983. The question is why total revenue as found by the Commission — $582,799,267—is so far below the 1984 target of $617,295,000? Of course we know first of all that the 1983 figure was way too low because it included improper operating expenses in the revenue calculation. Beyond this there is absolutely no way that I can see to reconcile any of the figures in the two orders. There is no way this court can determine how the Commission arrived at most, if not all, of the figures it has used. In the rate formula we are unable to determine from the contents of the order what either (R), (r), (0) or (B) should be.
On its face then, the validity of the final order features serious fundamental irregularities; It undertakes to approve a large rate increase, most of which was granted in another cause, without substantial supporting evidence, findings, legally sufficient conclusions, or disclosure of the amount of the increase in the order under review. More specifically, there is no definitive evidence detailed in any of the orders which will support any of the revenue or expense figures given. As we will see, in order for this court to properly assess the issues raised it is necessary for the Commission to prepare detailed balance sheets and profit- and-loss statements for SWBC,31 SWBT, and each of the unregulated subsidiaries, complete with understandable explanations concerning each and every item listed along with all accounting changes or choices and the evidentiary support for all of it.32 None of this have I found.
VI
I turn now to the issues dealt with in the majority opinion. An analysis of the record establishes, as I see it, that the court’s conclusion reached in Part II— whether the Commission’s “investigation into the impact on Oklahoma ratepayers of SWBT’s status as a subsidiary of a holding company was legally satisfactory” — is a response to an incorrectly identified issue. The issue as I see it is not whether there was a satisfactory investigation of SWBT’s subsidiary status but whether the Commission garnered available evidence and made an evidentiary-supported determination as to whether, through cross-subsidization, the ratepayers have unlawfully been permitted to become uncompensated financiers of SWBC’s competitive pursuits. If this matter was addressed at all by the Commission it was given only cursory attention in Order No. 292337 (January 1986) by simply disallowing “certain corporate expenses” based on a limited unaudited review described by one witness as “balancing the books.”
The Commission’s failure to resolve this critical issue amounts to a failure to regularly pursue its authority. It should have specifically addressed, thoroughly explored and resolved the cross-subsidization issues arising from the implications of SWBC’s parental relationship to SWBT, its impact on the telephone service in this state, and SWBT’s revenue needs. This would, of course, include a careful in-depth analysis of holding company related costs and expenses paid by SWBT, headquarters expenses of both SWBT and SWBC, transactions of both with other affiliates, and allocation of costs and expenses in each category attributable to the basic telephone service rendered in Oklahoma — admittedly a difficult task. Other important matters, such as SWBT’s equity-debt ratio and the rate of return on the equity in SWBT, require consideration, both of which I deal *1345with later on. And, of course, the foregoing is not meant to imply that the findings and conclusions of the Commission with regard to the costs and expenses it approved “are sustained by the law and substantial evidence.”33 They are not in my opinion.
In resolving the important cross-subsidization issue the Commission appears to have lost sight of the fact that it is only SWBT’s financial structure and health with regard to its operation in Oklahoma that are to be considered. A distinction should have been drawn, for instance, between what might be an appropriate equity-debt ratio and rate of return on equity for SWBT of Oklahoma as distinguished from what it might be for SWBC and its worldwide operation. It is the former that must be regulated, not the latter. In other words, I do not think it was proper to set equity-debt ratios or rates of return based on the needs or wants of SWBC as appears to have been done in the 1986 order. Ironically the Commission seems to have acknowledged the reason for such a regulatory restriction in its December 29, 1983, order when it said: “Finally, Southwestern Bell [Telephone] will be operating in a largely monopolistic, regulated environment as a divested company. In this regard, it is axiomatic that regulated companies are less risky than competitive ones.”34
To ignore these matters is, as I said, a failure of the Commission to regularly pursue its authority.35 A fair rate is one that strikes a proper balance between the competing interests of the SWBC shareholders and the ratepayers of this state — the former in receiving maximal profits, the latter in obtaining “low-cost, high-quality telephone service,” which is, incidentally, a major objective of the federal divestiture decree and any factor which may help achieve this goal should be pursued.36
While the exercise of the Commission’s authority in this regard has been considered legislative in nature, it does not follow that it may be exercised in a manner which is unreasonable or not rationally consistent with the objectives delineated in the MFJ, or the general principles and guidelines prescribed in Lone Star Gas Co. v. Corporation Commission, 648 P.2d 36 (Okl.1982). It is the duty of this court when its review jurisdiction has been invoked to determine whether the Commission has properly fulfilled its constitutional obligations. And to do this, it is essential, as the court emphasized in Lone Star Gas Co., that the Commission shall have made explicit, comprehensive and detailed findings, concerning all relevant and material facts, and show them to be supported by *1346rational reasons and substantial evidence.37 Substantial evidence has been defined by this court as that “found to possess something of substance and of relevant consequence — something that carries with it fitness to induce conviction.” Teleco, Inc. v. Corporation Commission, 653 P.2d 209 (Okl.1982).
As applied to subject issue, this means that in order to ensure that regulated operations do not subsidize the unregulated operations of either the holding company or its other affiliates, there must be substantial evidence that the use of SWBT’s funds and other assets by SWBC or other affiliates is not only authorized by the regulatory agency, but is necessary and reasonable. I have not found such evidence.
Take for instance the transfer of the Yellow Pages operation from SWBT to SWBP. The order does not indicate that such transfer was authorized by the Commission but it does show that the consideration received by SWBT was far less than fair market value. The Commission’s review of this matter, as I discuss later, was wholly insufficient.
Similarly, the order fails to disclose that consideration was given to another significant circumstance bearing on both the cross-subsidization issue as well as the issues pertaining to the equity-debt ratio and rate of return, namely, SWBC’s public announcement that SWBT is apparently generating enough revenue to “internally” finance not only its own capital needs but those of SWBC as well. See SWCB’s 1986 Annual Report.
The danger of the ratepayers of this state being unwittingly forced to subsidize SWBC’s worldwide competitive enterprises is so great that the longer the Commission waits to properly and efficiently perform its constitutional duties the more difficult it will be to do so. This was recognized by the court in United States v. Western Electric Co., saying:
“Under the [divestiture] decree, the operating companies’ basic responsibility is to provide local telephone service to the public ... As will be seen, the vast and diverse programs the Regional Holding Companies are formulating, and the priorities the companies seem to be assigning to their programs, constitute a serious threat to their obligations under the decree and the implementing documents.” 38
The court’s prophecy has in fact come to pass. And for this reason an extensive and detailed investigatory audit of SWBC’s books and records as well as those of each subsidiary is urgently required at the earliest possible date to help control the situation and protect both SWBT and the rate-paying public from overreaching by SWBC. Comprehensive financial data benchmarks of both SWBT’s and SWBC’s entire operation beginning at least with the year 1981 need to be established for future comparative reference by the Commission, the courts and the public. There is little meaning in random, unrelated, unintegrated and isolated fragments of information, figures or statistics. To satisfy the requirements of our constitution the Commission must, in my judgment, receive evidence of and certify in detail the essential facts an investigation of SWBT’s application requires, and must state definite and certain findings made on the basis of such facts along with the conclusions reached with regard to how they affect the revenue requirements of SWBT.
The burden lies with SWBT of proving with clear and convincing evidence not only the reasonableness of expenses allocated to it for both SWBT and SWBC headquarters operations and affiliated company transactions, but that each such expense or transaction was necessary. The necessity of allowed expenses is overlooked by the majority opinion which instead states that it is the “good faith” of a “utility’s management” or its managerial abuse of discretion *1347that should govern the issue.39 It is difficult to see how managerial good faith, or for that matter its bad faith, has anything to do with resolving cost expense issues. The costs and expenditures are either necessary, reasonable, and authorized in order for SWBT to provide telephone service in this state, or they are not. And again it is with regard to this issue that the Commission’s order also falls reversibly short.
There is no way, for instance, to tell from the order exactly what expenses were encountered or considered by the Commission, what their amounts were, whether they were necessary, authorized, or lawful, or how they were allocated. Nor is there any evidence or finding with respect to the effect on the basic telephone rates in this state of SWBT being held by an unregulated holding company. Again I emphasize the element of rate-related necessity.
While there was some evidence that certain accounting entries were checked by Mr. Buck, Mrs. Steel, and perhaps others, there was no evidence in the order of (a) a verified spot-check audit, in the strict sense of that term, a review of accounting work papers, or a relational comparison of the three sets of books generally kept by utility companies — one for the IRS, one for the ratepayers, and one for the shareholders; (b) a detailed study of general headquarters expenses with emphasis on the necessity and reasonableness of such items as managerial and staff salaries and perks allocated to SWBT; (c) a detailed disclosure of the necessity and reasonableness of SWBC’s contributory expense allocation to SWBT; (d) a detailed disclosure of the space, premises, and equipment outlay of SWBC; or (e) a detailed disclosure of the advertising, entertainment, travel, political, and “miscellaneous” expenses handed off by SWBC to SWBT either directly or indirectly. Such evidence is essential and of critical importance in setting fair rates. The facts and circumstances in the court record as it now stands — confirmed incidentally by the public record (SWBC’s annual report) — in my opinion give rise to a presumption that SWBT is subsidizing the speculative ventures of the unregulated affiliates.
The burden of both proof and persuasion is upon SWBT to overcome the presumption. In addition to the circumstances already mentioned, SWBC has further publicly disclosed in its 1983-86 annual reports, for example, that during the past few years when most of our banks, farmers, businesses, and industries were showing steady losses, with even the state itself suffering badly from a depression-like economy, SWBC has been enjoying a steady steep climb in earnings due largely to skyrocketing post-divestiture rate increases,40 despite the fact that at the same time SWBC’s unregulated affiliates, capitalized by profits from their lucrative local telephone exchanges, have suffered huge losses of nearly $36 million through September 1985.41 When asked about such *1348losses during oral argument of this case, SWBT’s counsel said he did not know whether the unregulated affiliates were losing money or not because SWBC keeps such information a closely guarded secret. This is incredible. Such information is vital circumstantial evidence to aid in the proper resolution of cross-subsidization issues, as well as capitalization matters. That SWBC’s unregulated affiliates reported an aggregate loss of $85.8 million during the first nine months of 1985,42 is in my view an important segment of the total picture. To conceal this from either the Commission or SWBC stockholders is malum in se.
The president of SWBT testified before the Commission in September 1985 that the reason SWBT needed to collect more money from Oklahoma ratepayers was because of a so-called “earnings crisis” resulting from a “new competitive telecommunications environment” created by the federal divestiture decision and “the state of the economy in Oklahoma.” Implicit in this presidential testimony was the conclusion that prior to January 1, 1984, basic service rates were kept at a below-cost level through subsidization from superprofits generated by sales of non-basic services and equipment. More specifically, the president postulated that the loss of super-profits formerly generated by high pricing of such monopolistic non-basic telephone services as “long haul toll,” and leasing of “customer premises equipment (CPE)” are no longer available to SWBT and all SWBT has left to generate income are “access service” charges to various long-distance carriers, intra-state long-distance (intra LATA) toll, and basic local telephone service. He omitted mention of Yellow Pages, evidently because of a transfer to SWBP. The first two, he says, do not produce *1349enough superrevenue to subsidize basic service rates to a level desired by SWBC. The fact is, however, that there is no evidence that such an “earning crisis” ever existed, or that one ever threatened. But in the unlikely event one took place, it should be necessary for SWBT to adjust its operation in order to thrive on a reduced scale rather than expect the ratepayers to support the former earnings level. A fair return does not imply that SWBT is entitled to sufficient rate increases for SWBC to maintain a steady upward climb of earnings and dividend declarations regardless of general economic conditions, change in corporate structure, or anything else.
*1348[[Image here]]
*1349A review of “selected data” published by SWBT for 198343 and by SWBC for 1986,44 incidentally, makes the president’s testimony more puzzling. The data indicates that SWBT reported receiving regional operating revenue from “Local telephone service” in the amount of $3.6 billion in 1983, but only $2.8 billion in 1984 despite hefty rate hikes. It is difficult to understand how there could be such an abrupt revenue decline of this magnitude in this particular category and even more difficult to see how divestiture could adversely affect this basic source of revenue. One explanation might be that “Directory Advertising” was carried by SWBT as revenue from local telephone service in the 1983 report and SWBC removed it to an “other” category in 1984 and to “Directory Advertising” in 1986.45 The table below also indicates that SWBT’s income from “Long-distance service” fell from $3.7 billion in 1983 to $912.4 million in 1984 which, according to the SWBT president, was due to the divestiture loss of the AT & T “subsidy”. This is understandable only if AT & T’s use of the ratepayer’s intrastate network lines is considered as such a subsidy — a consideration that overlooks the fact that since AT & T’s long-distance service consisted almost entirely of using local network lines across the nation, it was AT & T being subsidized by state ratepayers. Regardless of that, however, SWBC’s 1986 Annual Report shows that such loss was largely offset with income from “network access” charges, intrastate long-distance service and “other” — whatever that is — coupled with a significant reduction in the workforce and other operating expenses.46
What this points up is that there are numerous data gaps in the evidentiary foundation underlying the orders being reviewed. And this is compounded by the fact that what evidence there is, is discordant, intermittent, fragmented and without cognizable referents thereby raising more questions than it answers. Such shortcomings become particularly critical when it is recalled that SWBT generates more than 90 percent of SWBC’s revenue, and is allocated a major portion of the expenses while most of SWBC’s efforts are involved with the worldwide competitive activities of its unregulated affiliates. Thus the Commis*1350sion’s failure to vigorously take every precaution to protect the ratepayers against the clear and present danger of cross-subsidization offends the spirit as well as the letter of our constitution.47 It is of the utmost importance that the Commission come to grips with the hard issues implicitly raised by SWBT’s post-divestiture structure and render an order that contains sufficient evidentiary details and findings to enable this court to judicially determine whether the Commission has properly performed its constitutional function. If, for instance, an allocation of both SWBT’s and SWBC’s headquarters expenses is made to attain a fair apportionment of SWBT’s operations in Oklahoma,48 then it should be done within the statutory strictures of 17 O.S.Supp.1987 § 137, which, among other things, restrict the rate base to property dedicated to telephone service in this state.
*1349[[Image here]]
*1350As background for SWBT’s various requests for rate increases in recent years, one should bear in mind that in 1985 SWBC advised its stockholders that the “Corporation” ended 1984 with its assets, revenues and earnings all being among the top one percent of publicly held companies in the United States,49 and that it in fact “continues to rank as one of the largest corporations in the world," with assets at the end of 1986 of approximately $20.3 billion, revenues of more than $7.9 billion, more than 8.8 million customers and 67,490 employees of which 61,770 worked for SWBT.50
It is also important to bear in mind that when the SWBT president speaks of a downturn in the economy as furnishing a basis for more revenue he failed to mention that in 1983 SWBT’s work force was reduced by some 8,000 people, including 2,700 transferred to AT & T, and on January 1, 1984, SWBT transferred another 18,000 employees to AT & T.51 Whether this work force reduction was due to unneeded employees, automation, or a downturn in the economy or otherwise, it had to substantially reduce operating expenses. The testimony of SWBT’s president must be viewed in the context of what SWBC told its stockholders in its 1985 Annual Report which is that “the telephone company (SWBT) now is serving more customers with fewer employees. In 1984, the telephone company reduced its work force 4.2 percent. In 1985, the number dropped another 3.4 percent. The telephone company achieved these reductions in force while gaining more than 500,000 customer lines.”52
The order in this case, as we said, refers to no hard evidence supportive of the opin*1351ions and conclusions reached either by the witnesses or the Commission. Opinions of the various witnesses, aside from being speculative and unsupported by factually-based reasons, are based on assumptions consistent with the needs of the holding company rather than SWBT. As such they have no probative force and do not constitute the quality of evidence that will sustain a finding. Downs v. Longfellow Corp., 351 P.2d 999, 1004 (Okl.1960). This again demonstrates why it is impossible for this court to properly perform its constitutional review role.53
VII
A kindred issue is dealt with in Part III of the majority opinion, namely, the propriety of the Commission’s failure to determine the economic value which should be imputed to SWBT for the use of the SWB name and logo by the holding company and its affiliates. While the court’s opinion considers early determination of this issue unimportant, I consider it to be urgent and the indefinite postponement of its resolution to be a fundamental and prejudicial irregularity.
The name and logo, which have been owned by SWBT for many years, are imbued with familiarity and good will and are therefore valuable property within the meaning of 17 O.S.Supp.1987 § 137. No rule or precedent is needed to underline the Commission’s duty to determine the fair value of SWBT’s property appropriated by the holding company and its unregulated affiliates — a value which must be imputed to SWBT as revenue for rate setting purposes.
Nor is the Commission’s reason for postponing consideration of this matter until “the next rate relief request,” on the ground that it may be difficult to “quantify,” tenable. First of all, though it may be that, like the morning sunrise, another plea for a rate increase is inevitable — at least it would seem that the Commission assumes so — the fact remains that evaluating SWBT’s property rights will not become less difficult as time goes by. Indeed it will be more difficult because the more time that elapses between the divestiture and the determination of vital facts and resolution of critical issues, the more difficult it will be to unravel further complexities wrought by constant shifting of corporate assets and modifications of accounting principles and procedures.54 The sooner the issue is resolved the better.
The majority opinion points to some testimony by a couple of staff witnesses to the effect that SWBT may derive certain advantages from being part of a holding company. But aside from being speculative such “advantages” to SWBT remain unidentified. Certainly none are claimed to favor the ratepayers of this state. Indeed the only “advantage” alluded to is the possibility of SWBC stockholders being bene*1352fited. Advancing the interests of SWBC stockholders as such, of course, lies beyond the scope of the Commission’s constitutional obligations.
VIII
I cannot agree with the court’s treatment of the attorney general’s complaints concerning the confusing Yellow Pages directory revenue situation in Parts IV and V of its opinion.
The issue of whether the Yellow Pages severance from SWBT was proper is raised by the attorney general, as well as the question of the fair cash value of the Yellow Pages directory as an ongoing, profitable business. Also challenged is the propriety of not investigating the Yellow Pages gross and net revenue data very closely and determining why a precipitous drop occurred during the 1984 test year period. All these issues have important implications for the ratepayers.55 The propriety of the transfer is not to be judged on how it affects the stockholders but how it affects the ratepayers.
As previously noted, SWBC was created in 1983 to hold SWBT and three other subsidiaries, and to commence operations January 1, 1984. One subsidiary was Southwestern Bell Publications. SWB.C caused the lucrative Yellow Pages directory business of SWBT — grossing way over a half billion dollars a year — to be transferred to SWBP along with more than 2,000 employees skilled in the production of the famous directory at a price of only $200,-000 — its net book value. It did so apparently without objection on the part of the Commission.
SWBC may, of course, argue that the Yellow Pages directory is not an integral part of local telephone service in order to justify its excision from the SWBT corporate body, but we think we can say without fear of contradiction that every telephone user, particularly business subscribers, uses the Yellow Pages nearly as frequently, if not more so, than the white pages. Ratepayers have been taught by SWBT to finger “walk” their way through the Yellow Pages to discover the number and identity of those engaged in various services or businesses and they commonly do so. In this sense the Yellow Pages directory or its equivalent is essential to the full enjoyment of basic telephone service. I would hold that through custom and usage the Yellow Pages directory has become an integral part of and an essential adjunct to the full enjoyment of local telephone service.56
In my opinion both issues should have been addressed, heard and decided. Refusal to hear and determine whether to approve the transfer of the Yellow Pages to an unregulated affiliate, and failure to insist on a complete audit of the 1984 Yellow Pages financial experience were, in my opinion, reversible irregularities. And failure to fully investigate and obtain foundational revenue and expense data relative to the Yellow Pages allocation also means that the appealed order is without the support of appropriate findings and substantial evidence.
Handling the matter as the Commission did in subject order leaves it in limbo. *1353There is, for instance, some evidence that all the ratepayers are going to get from the Yellow Pages transfer is the revenue from existing advertising contracts and when these expire the ratepayers get no more Yellow Pages benefits. Therefore, it is urgent that the status of the Yellow Pages directory and its revenue should be determined. If the transfer is disapproved, the revenue allocated to Oklahoma will have to be determined on that basis.57 Disapproval of the transfer from public service as a basic telephone service subsidizing segment is in keeping with the contemplations and objectives promulgated by the federal court in United States v. Western Electric Co.,58 and United States v. American Telephone and Telegraph Co.59 In the absence of substantial evidence that transfer of the Yellow Pages out of SWBT is beneficial to the ratepayers of this state, the Commission will be obliged to disallow it.
Again I state that the burden of proof and persuasion on these issues should be upon SWBT. The order contains no factual foundation or finding justifying the Commission’s conclusion that SWBT’s figures were reasonable and supported by substantial evidence. Merely generalizing about the poor state of the economy in Oklahoma and an increase in Yellow Pages advertising competition, while factors to be considered, are too indefinite and inadequate to explain the precipitous 1983-1984 drop in net Yellow Pages income which went far below the established income trend line.
IX
With regard to the equity-debt ratio, I am unable to agree that substantial evidence underlies the Commission’s approval of SWBT’s existing capital structure of 55.-32 percent equity and 44.68 percent debt, as is concluded in Part VI of the court’s opinion. On its face a 55.32 percent equity for a telephone service monopoly — one which is able to obtain sufficient rate increases to internally finance not only all of its own capital needs but those of the holding company — appears to impose excessive capital costs on the ratepayers, costs which are increased even more by the excessive return on equity (14.25 percent) authorized by the Commission. The high equity ratio also results in placing on the ratepayers a higher taxation burden since the net income of SWBT is passed to the holding company as dividends,60 thus subjecting it to double taxation by the time SWBC shareholders receive their dividends.61
Again I say that most, if not all, of the problem stems from the fact that the Commission focused on the needs of SWBC rather than those of SWBT — a critical error. The assumption underlying such a high equity percentage is said to be “increased business risks faced by the appel-lee [SWBT], principally from the threat of bypass of the telephone network by large users and interexchange carriers.” Such risk, in and of itself, should not, however, cause any significant increase in the cost of capital to a monopolistic utility able to seek rate adjustments, like it might if it were merely a competitive enterprise totally dependent upon outside venture capital. It is generally accepted that the higher the risk of a given business enterprise the greater the equity portion should be. Thus a lower-*1354risk monopoly able to obtain rate increases should benefit from a higher debt share. Those who invest in utility companies generally do so more for safety of the investment than for growth and are willing to accept a lower rate of return in lieu of the increased risk of higher income or growth potential. But however this may be the ultimate fact appears to be here that SWBC has been able to obtain so much money from the ratepayers that it has internally financed both competitive ventures and regulated services.62 As a witness pointed out there is a tendency to use the utility as a “cash cow” generating capital to use for entry of the holding corporation and its non-regulated subsidiaries into the riskier “competitive arena.” In recommending a ratio of 45 percent equity and 55 percent debt for SWBT, one witness, a Dr. Wilson, explained it this way:
“The strategy has been to try to get, try to use the utility as a cash cow and to use this cash cow to sustain and support entry into competitive markets. Now, what I am recommending is a departure from that on the part of this Commission. What I am saying is that really if there needs to be a cash infusion to posture the company for its entry into competitive arenas, that that ought to be stockholder responsibility and not something that the jurisdictional ratepayers should cross-subsidize and that’s why I recommend moving to a utility type capital structure as opposed to the more competitive type capital structure on a corporate basis that Southwestern Bell is attempting to impose for jurisdictional rate-making purposes.” (Tr. 460-461).
Indeed the holding company (SWBC) was created, according to SWBT’s 1983 Annual Report, “for two important reasons: [1] It allows the organization maximum flexibility in financing operation's and [2] It puts the organization in the best possible position to explore new business opportunities.”63
Even more important, however, is the fact that there is a current lack of need for expanded investment because, as we said earlier, SWBC is being totally capitalized internally — with revenue produced by SWBT — and has been for quite some time according to the following statement on page 32 of SWBC’s 1986 Annual Report to its stockholders:
“In order to provide high quality communications services to its customers, the Corporation, and in particular the Telephone Company, must make significant investments in property, plant and equipment. Construction and other capital expenditures totaled $1,970.0 for 1986, $2,090.3 for 1985 and $1,804.1 for 1984. The Corporation had funded these construction and other capital expenditures with internally generated funds. These are defined as funds derived from operations less dividends to shareowners as shown in the Consolidated Statements of Changes in Financial Position. The Corporation’s ratio of internally generated funds to construction and other capital expenditures *1355was 1.04 for 1986, 1.02 for 1985 and 1.05 for 1984. Management expects the level of internally generated funds to again meet projected construction and other capital expenditures of approximately $1,800.0 in 1987.
Dividends declared by the Corporation totaled $638.2 ($6.40 per common share) in 1986, $597.9 ($6.00 per common share) in 1985 and $549.0 ($5.60 per common share) in 1984. This represents a payout ratio of 62 percent in 1986, 60 percent in 1985 and 62 percent in 1984. Management will continue to monitor this payout ratio in order to ensure that it remains consistent with the expectations and requirements of shareowners and the internal requirements of the Corporation.” (Emphasis added.)
Since SWBT and maybe SWBP (because of Yellow Pages) are the only two subsidiaries not losing money, it has to be that the return is sufficient to satisfy all capital requirements even after bearing heavy losses from the competitive operations and paying liberal dividends.
The testimony offered by SWBT concerning the conjectural opinions of various Wall Street investment counselors and economists about both capital structure and yield expectancies may have been appropriate for competitive enterprises having higher •risk and growth potentials, but it had little relevance so far as low risk monopolistic telephone utility companies were concerned. The most conservative investor should be delighted with a lower rate of growth and yield from a SWBC-type company because it features the best of all possible investment worlds — the reduced risk of a regulated service monopoly able to obtain frequent substantial rate increases, and the potential of competitive growth with little or no risk of loss. The Commission was aware of this on December 29, 1983, but apprently forgot it by January 29, 1986. In its December 29, 1983, order the Commission observed:
“In reviewing the analyses performed by the expert witnesses in this cause, it appears to us that the assumptions made by Mr. Kaufman concerning investor expectations as to achieved returns for the near future and consequential dividend growth appear to have a questionable foundation. Recent higher return authorizations clearly are not evidence that such trends will continue, especially in light of lower costs of money. Further, Mr. Kaufman’s substantial reliance on investment analyst projections, in our view, also appears to be misplaced. While such projections are not to be ignored, we question their validity as an indicator of investor requirements.”
Under these circumstances, it does not appear that such a high rate of return as the Commission has allowed is needed for credit rating purposes as suggested by SWBT’s testimony, nor, as we will see, is a SWBT equity-debt ratio greater than 45-55. Certainly the evidence does not support either the equity-debt ratio or the rate of return on equity set by the Commission in this case with regard to SWBT and SWBT alone. Indeed, one would be hard-pressed to find evidence to justify a rate of return on equity in excess of 8 percent for SWBT under the depressed conditions that have prevailed in this state for the past few years.64
X
The problem I have with the Universal Service Option adopted by the Commission as a plan designed to provide service to low-income individuals is that it appears to be arbitrary and discriminatory in both form and substance.
No one else seems to have come up with anything like it and there appear to be no *1356findings made or reasons given as a foundation for adopting the plan. To sustain the Commission’s “plan” the court once again falls back on the rather tenuous foundation that the rate-fixing process is a “legislative function.” Be that as it may, such function must rest on regularly pursued authority and substantial evidence and is subject to judicial review. There must be substantial evidence identifying and justifying any discriminatory class established. Even then it is doubtful the Commission can discriminate at all with regard to exercising its ratemaking authority. In short, I do not believe the Commission has authority to issue arbitrary orders or orders which discriminate among classes not having legally rational distinctions.
XI
Other questions for which there are no answers in the record are these:
(a) What is responsible for the rate base increasing from $886,579,000, as the Commission found it to be in the December 29, 1983,65 and February 13, 1985, orders66 to $1,006,522,353 in December 31,1984, as the Commission found it to be in its order of January 29, 198667 — a $119,943,353 or 13.-43 percent increase in 1984 — particularly in view of the Commission’s finding of a decrease of over 1,000 access lines in 1984 along with a reduction of operating expenses presumably through a substantial reduction in work force and plant usage? 68 A breakdown of the rate base appears below.69
(b) What accounts for the fact that the Commission found that the total revenues “proper for [the December 29, 1983] proceeding” for the 1983 calendar test year *1357amounted to only $482.1 million,70 yet SWBT published in its 1983 Annual Report that its total 1983 operating revenue in Oklahoma was $923.2 million?71
(c) Why is there such a large increase in expenses, especially maintenance, in view of the substantial reduction in the work force and increased automation, and why is there nearly a $10 million increase in depreciation over the 1983 anticipated amount particularly in view of fact that there were only $12.2 million in telephone plant under construction at the close of 1984, and presumably reduced plant needs as a result of the stated decrease in access lines and transfer of a substantial portion of ratepayer financial assets to AT & T?72 A summarized breakdown in the revenue and expense figures contained in the 1983 and 1986 orders is set out below.73
(d) With regard to working capital, why is there no evidence or finding with regard *1358to the financial consequence of the fact that ratepayers pay for basic telephone service one month in advance? Is the unearned portion of such payments used as cash working capital or is it deposited in an interest-bearing account? Either way, the fund should be substantial and show up as a credit someplace in the balance sheet, or profit-and-loss statement,74 and be considered in determining working capital needs. If, for instance, there are 2 million ratepayers in this state and one uses a figure of only $15 dollars a month, it would amount to $30 million, which equates with an average of $15 million available for SWBT’s use for 30 days. This sum at 6 percent for 12 months would be $9 million dollars. Of course, business phones cost much more than $15 a month.
(e) Why is there nothing in the record about whether the operating expenses in the rate base formulation were reduced by the fact that SWBT’s older high-interest-bearing bonds have been called and the debt refinanced with lower-interest-bearing debentures — as reported in the same Annual Report? 75
(f) Why does the record fail to disclose whether or not SWBT is managerially top-heavy to an unnecessary and unreasonable extent, and if it is, why is the effect of such inefficiency on the rates paid by the ratepayers of this state not shown?
(g) Why does the record fail to contain the “proper tariffs and rate schedules” showing approval by the Commission in compliance with the January 29, 1986, order?
(h) How can the Commission’s admitted delegation to a staff member of its important non-delegable duty to approve tariffs and rate schedules be constitutionally justified? See Okl.Corp. Comm’n Order No. 292337, Cause No. 29321 at 64 (January 29, 1986).
XII
The order appealed should in my view be vacated and remanded with instructions to rehear the application in accordance with the essentials mentioned above as well as the following directions:
I. For the purpose of determining rates and charges for telephone service in this state, the Commission shall treat the telephone service of SWBT as though it were a separate corporate entity operating only in Oklahoma;
*1359II. To be legally sufficient, the order must specify the recorded evidence supportive of each and every finding made. Such evidence shall be accompanied by a record reference. When reaching a final permanent rate change amount — which includes one or more interim increases — such as we have in this case, it is not sufficient to simply approve an interim order by reference, but the Commission must set out the full amount of any increase or decrease being granted or made permanent and then break that figure down into whatever interim grants are being approved, or permanent grants being made;
III. If the Commission decides to use a certain year as a test year for determining a fair return on the fair value of property used to furnish the ratepayers of this state telephone service, then it must use the full year data and not annualize a small portion of it. Moreover, if adjustments of the test year data are made for anticipated variances, as they were in this case in favor of SWBT — for example, granting SWBT’s requested adjustment of its 1984 salary expense to reflect pay raises granted in the spring of 1985 — then to avoid distortion the Commission will have to adjust for all anticipated revenue and expense components; 76
*1360IV. To be constitutionally valid, the order setting a rate must comply with the following directions and guidelines and set forth specific findings with regard to these essential components of the rate to be set:
A. Rate Base. This must be strictly limited to the fair value of capital assets which are necessary and are actually being used for furnishing local telephone service in this state.
1. Original cost may be used unless the Commission specifically finds other factors, such as replacement costs, require its modification.77
2. The rate base may not include plant under construction which is not being used or ready for local service use at the close of the test year.78 It may not include property used for competitive enterprises or other activities unnecessary for the rendition of local telephone service unless such enterprises or activities are regulated and their revenue is included in the rate structure.
3. Net cash working capital may be included in the rate base only if clear and cogent evidence demonstrates it is needed to meet current expenses necessary to operate local telephone service during the test year. It shall not include prepayment of operating expenses. And it shall be reduced by the amount received from ratepayers for advance telephone service payments as set out in direction No. 5 below.
4. Prepayments of expense or expensi-ble items not actually incurred in, or expended or allocated to usage during the test year shall be disallowed.79 Nor may stockpiled or accumulated on-hand expensi-*1361ble assets be included in the rate base, as if they were capital assets. To hold otherwise would permit SWBT to both expense and capitalize an asset and thus realize, in effect, a double recovery or benefit by deducting the item as an operating expense and at the same time adding the unexpend-ed remainder of the same asset to the rate base.
5. Advance customer deposits, payments on debts, and deferred income taxes must be subtracted from the rate base.80 The former are not assets and the latter consist of capital furnished by ratepayers.
6. Reserve for accumulated depreciation must be deducted from the rate base. It is not an asset used for furnishing telephone service supplied by SWBT. The Commission shall take appropriate steps to prevent any capital loss to ratepayers.81 Depreciation expense shall be limited for *1362rate base purposes to a straight line basis extended to the service life of a given asset.
B. Operating Expenses. Only those expenses may be allowed which are reasonable in amount and necessary for the supplying of local telephone service in Oklahoma during the test year. The order must identify and deal with operating expenses in sufficient detail to enable the court to determine precisely what expenses the Commission finds to be necessary and reasonable along with the amount of each. Income taxes paid by SWBT or SWBC may not be included as an operating expense.
C. Rate of Return. The Commission shall authorize a fair return on the established rate base taking into consideration the cost during the test year of funds actually borrowed to finance SWBT’s local telephone service rendered in this state plus a reasonable equity ratio economically feasible for a regulated utility furnishing a basic telephone service. In this case the evidence thus far adduced, along with that of which the Commission and this court may take judicial notice, does not warrant the high rate of return on equity allowed by the Commission for the 1984 test year — a year in which interest rates as well as corporate earnings were generally substantially down, particularly in this state.82
D. Revenues and Expenses. Both income and expenses must be identified in itemized detail using a standard format and standard references consistent with those used in earlier rate change orders and in formulating the rate base. Any deviation should be definitively explained. All entries must, of course, be based upon evidence set out in the order. Such catch-alls as “Miscellaneous,” and “Other,” shall be avoided. Moreover, various generic terms used such as “Traffic,” “Commercial,” “Maintenance,” “General Office,” “Depreciation,” “Rents and Compensation,” “Toll,” “Other,” “Inter-Industry,” “Directory,” and the like should be defined, for purposes of the order, in the sense used by the Commission.
If, for instance, there is a deviation from an annual revenue item, such as those used in determining net operating income, the Commission should disclose what the true figure is and the basis for the deviation. Unless such information is given with each item of income, expense and plant, there is no way the court can correctly perform its review obligations. It also goes without saying that each item must be premised upon a foundation of substantial evidence.
As mentioned earlier, depreciation expense must be limited to a straight line basis extended to the service life of an asset.
E.Additional Contents of Order. Among the details which the Commission must include in the order are the number of SWBT and SWBC directors and executives employed during test year, their titles and basic duties, specific details of what they do that is necessary for local telephone service in Oklahoma, the amount they are paid, and the amount of SWBC stock each owns directly or beneficially, and the number of wage-earning employees of SWBC and SWBT and the total wages paid. And in addition the order must contain the following orientational and comparison evidence:83 (1) Detailed balance sheets and profit-and-loss statements for SWBC and its headquarter operation and for each individual subsidiary, complete with explanatory details for the test year *1363and the five preceeding years; (2) The following financial information concerning SWBC’s operation and concerning SWBT and its telephone service operations in Oklahoma and in each of the other four states in the region — Arkansas, Kansas, Missouri and Texas — for the test year and the five calendar years preceding it:
(a) Total operating revenues;
(b) Total operating expenses;
(c) Net income;
(d) Construction in progress at year end;
(e) Total assets at year end;
(f) Total number of employees at year end;
(g) Total number of managerial employees at year end;
(h) Number of access lines at year end;
(i) Net telephone plant in use at year end;
(j) Rate base at year end;
(k) Equity-debt ratio authorized for telephone service subsidiaries;
(l) Return on equity authorized for telephone service subsidiaries;
(m) Return on net plant or total capital authorized for telephone service subsidiaries.
(n) Amount and percentage of internal financing and its source.
All of the foregoing information should be submitted with each rate change application filed by SWBT, in addition to all other data required by law, and be sworn to by SWBC’s board chairman, SWBT’s president and SWBT’s chief accountant.
V. The Commission’s order should specify definitively, and in positive terms, the evidence relied upon by the Commission to support each of its findings.
The foregoing should be considered only minimal requirements supplementing other legal obligations of the parties.
XIII
In my opinion the dismissal of the attorney general’s motion to reconsider should be affirmed because of the earlier appeal of the order to this court — but subject, however, to the further approval of a post-Rule 24 motion disposition appeal period.
Order No. 292337 should be reversed and vacated and the cause remanded with these directions: (1) SWBT should be ordered to place in escrow or post a bond in an amount equal to the sum of all revenue collected pursuant to the order appealed including the two interim rate increase orders — No. 250987 in Cause No. 28002, and No. 273137 in Cause No. 28309 — made permanent in the appealed order. The cause should be remanded with directions to the Commission to rehear Cause No. 29321 and to SWBT to comply with the directions and data requirements set out in this opinion; and (2) after such compliance and hearing to prepare and publish an order which at least meets the criteria, standards, directions and requirements prescribed in this dissenting opinion.
I am authorized to state that Justice GARRETT concurs with the views expressed in the foregoing opinion.
INTRODUCTION

. Okl.Corp. Comm’n Order No. 292337, Cause No. 23921 (Jan. 29, 1986).

. Title 12 O.S.1981 §§ 2201-2203. It should also be noted that the legislature may repeal or amend §§ 18-34, art. 9 of our constitution. Okl. Const, art. 9, § 35.

. United States v. Am. Tel. and Tel. Co., 552 F.Supp. 131, 135 (D.C.Cir.1982).

. Id. at 136.

. Id. at 137.

. Id. at 138.

. Id. at 139.

. Id. at 140. See also Exhibit No. A59 at page 1541 of the Official Record.

. 552 F.Supp. at 142.

. Id. at 145.

. See also United States v. W. Elec. Co., 592 F.Supp. 846 (D.C.Cir.1984).

. 552 F.Supp. at 223.

. Id. at 224.

. 592 F.Supp. at 861.

. 552 F.Supp. at 139.

. SWBT, 1983 Annual Report, Inside Front Cover (1984).

. 592 F.Supp. at 854.

. See OkI.Corp.Comm’n Order No. 250987, Cause No. 28002 at 1-3 (December 29, 1983).

. The federal court granted permission to the seven RBOCs to organize a research and development entity for their joint use to which each would contribute. To begin with it was called Central Services Organization. Once organized it was given the name Bell Communications Research, Inc. (Bellcore). See OkI.Corp. Comm’n Order No. 250987, Cause No. 28002 at *13419 (December 29, 1983), and Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 at 51 (January 29, 1986).

. Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 at 51 and 53 (January 29, 1986) (emphasis added).

. Id. at 51.

. One of these "interim” orders, No. 250987, Cause No. 28002, (Dec. 29, 1983), incidentally, gives permanent approval to an earlier increase of $43.7 million granted May 24, 1983, and made permanent December 29; 1983. This brings to $258 million the total amount of rate increases granted since May 1983. Such a large increase in such a short period of time is not only unsupported by evidence disclosed in the order under review but points up the fact that SWBT is on a more or less “cost-plus” basis which discourages ratepayer-oriented efficiency, either managerially or cost-wise.

.Okl.Corp.Comm’n Order No. 273137, Cause No. 28309 at 53 (February 13, 1985). It should be pointed out that the Commission said that none of the $135.5 million increase “may be imposed on local service.” It authorized $478.8 million to be collected through access charges from interstate carriers and $56.3 million from "increases for vertical or competitive services.” Id. at 23.
In this regard it may be noted that the $32.6 million "interim relief’ authorized in Order No. *1342273137 was for a "$2.27 per month increase on all of SWB’s residence and business exchange access lines and $.28 per month on all SWB's centrex lines.” Id. at 7.
In Order No. 273137 the Commission also rejected a proposed $81.9 million rate base increase said to be caused by an alleged decrease of over 1,000 access lines.

. Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 at 54 (Jan. 29, 1986).

. Official Record, Exhibit A61B, p. 16.

. Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 (Jan. 29, 1986).

. 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In overruling the long standing doctrine of Swift v. Tyson, 41 U.S. (16 Pet.) 1, 10 L.Ed. 865 (1842), the Erie court said:
"Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state. And whether the law of the state shall be declared by its Legislature in a statute or by its highest court in a decision is not a matter of federal concern. There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a state whether they be local in their nature or ‘general,’ be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.”

. For convenience I refer to the rate development formula referred to by this court in State ex rel. Cartwright v. Oklahoma Natural Gas Co., 640 P.2d 1341, 1349 (Okl.1982). R (revenue requirement) = O (operating expense) + B (rate base) x r (fair rate of return on rate base).

. Staff used the 1983 calendar year. SWBT used the 1982 fiscal year ending July 1, 1983.

. Southwestern Bell Corporation, parent holding company of SWBT.

. After studying the post-divestiture restructuring of the Southwestern Bell Telephone system - it becomes evident that the five states in the SWBC region should consider creating an interstate communication compact commission in order to more economically obtain essential rate-related data, to coordinate resources in a manner that reduces any unfair advantages that might otherwise occur, to provide a vehicle for preventing discriminatory practices among the states, and to standardize the data required for rate design and structure.

. See Okl. Const, art. 9, §§ 20 and 22.

. Okl.Corp.Comm’n Order 250987, Cause No. 28002 at 13 (December 29, 1983). The distinction was also recognized by the court in United States v. W. Elec. Co., 592 F.Supp. at 864.

. Title 17 O.S.Supp. 1987 § 137, reads in relevant part:
"A. In any proceeding ... to regulate the rates of a telephone utility subject to the jurisdiction of the Corporation Commission, said Commission shall prescribe and enforce rates to provide a fair return on the fair value of the property devoted to public service in this state.”
“I. It is the intention of the Legislature that this entire section is an amendment to, and alteration of Section [sic] 18 through 34, inclusive, as authorized by Section 35, Article IX of said Constitution.”

.See United States v. W. Elec. Co., 592 F.Supp. at 875. Said the court:
"The decree assumes, as does the Court, that the Regional Holding Companies may diversify on a significant scale only as they demonstrate the centrality to their corporate life of the responsibilities imposed upon them by the decree, their firm commitment to low-cost, high-quality telephone service, and the improbability of their involvement in anti-competitive conduct based upon their monopoly status. The rules established herein are designed to achieve these objectives while also permitting the Regional Holding Companies to enter into new business ventures to the extent that this will not be a threat to the fundamental purposes of the decree.”

. Okl. Const, art. 9, § 22.

. 592 F.Supp. at 861.

. The case cited in the court’s opinion for the "good faith” comment is a pre-Erie federal common law creation in a 1935 U.S. Supreme Court decision concerning an Ohio-based controversy which, as I pointed out earlier, perished in 1938 when Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, was decided. The burdens of proof and of persuasion lie with proponents under Oklahoma law..

. See SWBC 1985 and 1986 Annual Reports showing net income for 1984 to be $883 million; 1985 to be $996.2 million; and in 1986 it topped one billion dollars, reaching $1,022.7 million. Judicial notice of SWBT and SWBC published annual reports may be taken by this court sua sponte. 12 O.S.1981 §§ 2202 and 2203.

.The Truth About Telephone Company Diversification, Edwin B. Spievack, president and executive director of the North American Telecommunications Association, Public Utilities Fortnightly 13 (May 15, 1986). He wrote:
“The data — derived from documents at the FCC and Securities and Exchange Commission (see the accompanying figure) — show that NYNEX lost $79.3 million in the first nine months of 1985. The American Information Technologies Corporation dropped $65 million on competitive undertakings. Bell Atlantic lost $58.9 million. Southwestern Bell lost $35.8 million. PacTel’s losses totaled $47.4 million. BellSouth' lost $4 million, while US West dropped $180 million on a more ambitious program. So much for the fantasy that diversification and entry into *1348new competitive markets adds to RBOC profitability." (Emphasis added.) The article includes the following graph:

. Id. at 15.

. SWBT, 1983 Annual Report 19 (1984).

. SWBC, 1986 Annual Report 34 (1987).

.The 1986 SWBC Annual Report shows the following operating revenues for 1984, 1985 and 1986 at page 34. The 1983 figures are from SWBT’s 1983 Annual Report at page 19.

.See SWBC, 1986 Annual Report 34 (1987).

.There is evidence that the RBOCs’ primary objective is not the fulfillment of their obligation under the federal decree “to provide low-cost, high-quality telephone service,” but the "diversion of capital and managerial resources in pursuit of outside ventures." 592 F.Supp. at 862. "Diversification into various unregulated enterprises,” said the court, "appears to have a negative effect on local rates.” The source of funds for their high-cost ventures "is likely to be ... the local ratepayers. In recent months,” said the court in 1984, "the public has witnessed a number of requests for local rate increases in all parts of the country. These requests are sometimes blamed on divestiture, but in fact they may stem from the need to raise capital for outside ventures, lavish advertising campaigns, and the construction of plants and the hiring of staff suitable for what the Regional. Holding Companies consider themselves to be — diversified conglomerates which are fast outgrowing their modest and relatively pedestrian telephone origins." 592 F.Supp. at 863.
The holding companies’ response to this is that if the ventures are successful, the ratepayers will benefit from lower capital costs. This pie-in-the-sky argument, says the court, is "erroneous in every respect,” and it gives three cogent reasons why. 592 F.Supp. at 862-864.

. Title 17 O.S.Supp.1987 § 137, reads in part as follows: “The Corporation Commission ... shall prescribe and enforce rates to provide a fair return on the fair value of the property devoted to public service in this state.”

. SWBC, 1984 Annual Report (1985).

. SWBC, 1986 Annual Report 6 (1987).

. SWBT, 1983 Annual Report 8 (1984).

. SWBC, 1985 Annual Report 5 (1986). (Emphasis added.) In this regard it is also interesting to note what SWBT told its customers in *1351April 1988 on page 1 of a "Tele-Help” advertisement flyer mailed with the bills it sent out:
"In towns across Oklahoma, we continually upgrade our equipment to provide more efficient service. It took 71 employees to maintain 10,000phone lines in 1984; today it takes 51. Updating our equipment means dependable service while holding down maintenance expenses.
As our customer, you have the right to expect good, affordable phone service....” (Emphasis added.)

. Southwestern Pub. Serv. Co. v. State, 637 P.2d 92 (Okl.1981).

. For example, just this year SWBC has completed the acquisition of an eighty percent interest in Gulf Printing Company, "the fifth largest directory printer in terms of sales and number of directives published,” according to Moody’s Handbook of Common Stocks, Summer 1988 Edition. The same source indicates Gulf will be printing the Yellow Pages and Southwest Bell Publications, Inc., will handle "marketing of directory advertising.”
And, according to the source, first quarter net income fell 8.9 percent because of "acquisition costs associated with new cellular and paging properties,” and "higher expenses due to increased depreciation and accounting charges." (Emphasis added.)

. SWBTs chief accountant testified that there were two reasons for the 1984 decline: (1) The poor state of Oklahoma’s economy; and (2) increase of competition in Yellow Pages advertising.
This is difficult to follow in that Oklahoma’s economy had been poor since the price of oil fell in 1981. The second reason is also subject to serious question in view of the fact that directory advertising revenue rose from $744 million in '1984 to $974.8 million in 1985 and then backed off some in 1986 to $824.1 million according to SWBC’s 1986 Annual Report. Is the 1984 revenue distorted by a shift of 1983 expenses to 1984 or deferral of 1984 revenue to 1985? This question was not answered by the Commission.

. Accord, State ex rel. Util. Comm’n v. S. Tel. & Tel. Co., 57 N.C.App. 489, 291 S.E.2d 789 (1982).

. Because Oklahoma is one of five states served by SWBT an issue arises as to the effect of one state’s disapproval. Until this matter is clarified or all five states likewise disapprove the transfer, the Commission should treat the profit or loss resulting from the Yellow Pages operation as though no transfer had occurred.

. 592 F.Supp. at 853, 854.

. 552 F.Supp. at 169, 193; and 194.

. This means of handling subsidiary income is a policy of SWBC, according to SWBT's chief accountant, Dr. White. See Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 at 8 (January 29, 1986).

.This is at least one reason why SWBC seeks such a high rate of return on equity — to enable it to pay a higher dividend. Again I say that the welfare of SWBC’s shareholders — as distinguished from the ownership of SWBT — is not a concern of the Commission. The ratepayers of this state should not be put into a position of having to assure the prosperity of SWBC in order to protect the economic well-being of SWBT.

. The court discussed one aspect of this financial phenomenon in United States v. W. Elec. Co., 592 F.Supp. at 864 saying:
“Thus, to the extent that a Regional Holding Company raises funds jointly for both its competitive ventures and its regulated services, the cost of capital may be lower for the competitive venture (because it will be averaged with the lower capital costs of the regulated monopoly) but higher for the regulated telephone service. The ratepayers will then, in effect, be subsidizing the activities of the competitive venture by assuming, through higher interest rates, part of its cost. It follows that, if diversification of the Regional Holding Companies into new competitive ventures enhances their financial viability at all, the beneficiaries will more likely than not be those holding companies, their managers, and their unregulated affiliates, not the Operating Companies which provide local telephone service.”

. SWBT, 1983 Annual Report 4 (1984).

. This, of course, in no way restricts SWBC in setting up whatever capital structure, debt ratio or return target it desires.

. Okl.Corp.Comm’n Order No. 250987, Cause No. 28002 at 16 (December 29, 1983).

. Okl.Corp.Comm’n Order No. 273137, Cause No. 28309 at 7 (February 13, 1985). The Commission rejected SWBT's request to increase the rate base $81.9 million as unwarranted and used the same rate base used in Order No. 250987 (December 29, 1983). The Commission also "excluded related depreciation and ad valo-rem taxes, and made the needed corresponding federal and state income tax adjustments.”

. Okl.Corp.Comm’n Order No. 292337, Cause No. 29321 at 54 (January 29, 1986).

. Okl.Corp.Comm’n Order No. 273137, Cause No. 28309 at 6 (February 13, 1985). See also infra note 76 for an excerpt from SWBC’s 1985 Annual Report showing a 4.2 percent reduction in the work force (about 2,900 employees) in 1984 and an increase of one-half million access lines!

. Rate Base
1983 Order 1986 Order
886,579,000 (12-29-83) 1,006,522,353 (12-31-84)
Dec. 29,
1983 Jan. 29. 1986
Description Order Order
Intrastate Tel. Plant in Service ? $1,449,808,785
Tel. Plant Under Constr. ? 12,255,013
Total Tel. Plant ? $1,462,063,789
Less: Reserve for Depreciation ? (276,697,472)
Materials and Supplies ? 14,753,528
Prepayments ? 18,399,709
Less: Customer Deposits ? (6,683,675)
Less: Deferred Inc. Tax ? (204,690,869)
Less: Unamortized Pre-71 ITC ? (622,666)
$886,579,000 $1,006,522,353 Okl. Intrastate Rate Base

. Okl.Corp.Comm’n Order No. 250987, Cause No. 28002 at 9 (December 29, 1983).

. SWBT, 1983 Annual Report 1 (1984).

. The Commission recognized that SWBT would have a reduced revenue requirement by reason of a "reduction in depreciation expense” in 1984. Okl.Corp.Comm’n Order No. 250987, Cause No. 28002 at 3 (December 29, 1983).

.
Summary of Revenue, Expenses and Net Income
Dec. 1983 Jan. 1986
Revenues Order Order
(Est. for 1984) (1984 Reported)
Local Services $287,823,000 $293,582,526
Toll 118,923,000 142,724,866
Carrier Access 59,774,697
Billing/Collecting 9,441,076
Other Inter-Industry 3,539,079
Directory 75,069,328
Miscellaneous [?] 78,434,100 6,057,379
*(Less) Uncollectibles (3,091,000) (7,389,684)
Total Revenues $482,098,000 $582,799,267
*NOTE: Uncollectibles are largely from Yellow Pages — See page 25 of 1986 Order. Query: Was net or gross Yellow Pages income imputed to SWBT? If net, why the second deduction?
Expenses (page 10 of the 1983 Order and page 52 of the 1986 Order)
(Millions) 1983 Order 1986 Order
Maintenance $127,145,000 $139,054,551
Depreciation 83,329,000 93,945,905
Traffic 39,020,000 34,510,861
Commercial 56,779,000 70,605,312
General Office 40,651,000 48,477,937
Rents and Compensation 13,222,000 11,140,417
**Pensions and Benefits 40,638,000 _
General Service and License _ _
Contributions and Club Dues _ _
Other [?] 6,008,000 43,238,643
Interest on Customer Deposits _ 401,021
Taxes Other Than Income _ 38,898,272
$406,792,000
*1358Expenses (page 10 of the 1983 Order and page 52 of the 1986 Order)
Taxes 1983 Order 1986 Order
Fed. Inc. (1,796,000)
State Inc. 107,000
Ad valorem 16,094,000
Social Security 13,601,000
Municipal Inspection 4,378,000
Other 399,000
Total Taxes $ 32,783,000
Total Expenses $439,575,000 $480,272,919
Net Oper. Inc. Before Taxes Less: Income Taxes $102,526,348 22,040,996
Net Operating Income $80,485,352
**The amount of this pension allocation is about twenty percent of the entire SWBC pension expense reported in 1984. See infra note 76.

. See Oklahoma St. AFL-CIO v. State Bd. for Prop. & Cos. Rates, 463 P.2d 693 (Okl.1970), holding, in an analogous situation, that it was error for the State Board for Property and Casualty Rates to fail to take into consideration a carrier’s investment income from unearned premium and loss reserves in establishing rates.

. SWBT, 1983 Annual Report 32 (1984).

. For example, there should have been an adjustment to reflect a reduction of work force in 1985 — a reduction of nearly 2,900 employees which could amount to over $87 million given an average salary of only thirty thousand dollars plus fringe benefits, perks, taxes, and payroll handling expense.
SWBC’s 1985 Annual Report reported on page 5 that:
"The telephone company now is serving more customers with fewer employees. In 1984, the telephone company reduced its work force 4.2 percent [to about 68,700 employees]. In 1985, the number dropped another 3.4 percent. The telephone company achieved these reductions in force while gaining more than 500,000 customer lines.”
And at page 7 of the report SWBC says that SWBT had 65,836 employees as of December 31, 1985. It had only 61,770 as of December 31, 1986, according to SWBC’s 1986 Annual Report.
Another substantial adjustment that should have been made is with regard to the excessive amount of expense pumped into the pension fund for SWBT employes in 1984 which resulted from "assuming” too low a rate of return on pension assets in 1984 — the test year. The magnitude of this expense overstatement came to light in SWBC’s 1986 annual report at page 39. Of course, when this matter was heard in September 1985, the major accounting standard change — SFAS No. 87 — had not yet been published. Standard No. 87 was published in December 1985 (See Financial Accounting Standards, Explanation and Analysis (CCH) 843) and its use was begun by SWBC effective January 1, 1986. Whether its adoption by FASB was known by SWBC’s chief accountant or the Commission staff in September 1985 is not disclosed. If it was it should have been an important adjustment of the 1984 operating expenses based on an anticipated substantial decrease in the 1984 pension cost. What should have been determined, however, or at least considered, was why the 1984 pension cost was abnormally high and whether "a higher assumed investment earnings rate” that was being used in 1985 should have been used to reduce the 1984 pension cost — and consequently effect a substantial downward adjustment of the 1984 operating expenses.
But the record is silent with regard to Oklahoma’s share of the pension cost except for a $40,638,000 operating expense deduction in the December 29, 1983, order. See supra note 73. Oklahoma’s share should have been substantial.
The modified treatment of SWBC’s pension expense (a deductible operating expense) after the 1984 test year furnishes a dramatic example of how changes in accounting principles and altered assumptions can result in immense changes in a company’s profit-and-loss statement. It is figure juggling at its best and is shown at page 39 of the 1986 Annual Report:
Pension Cost (millions) 1984 1985 1986
Amount capitalized in property, plant and equipment $ 21.9 $ 11.7 $ (5.8)
Pension Cost for 1986 was broken down as follows:
Service costs — benefits earned during period (in mil-
lions) $ 90.0
Interest cost on projected benefit obligation 276.6
Actual return on plan assets (878.1)
Other Net 452.6
Net Pension Cost $ (58.9)
*1360SWBC explained the enormous 1985 reduction in pension costs (and an even greater drop in 1986) below what was reported for the test year — 1984—this way:
"The decline in pension cost from 1984 to 1985 was due primarily to the utilization of a higher assumed investment earnings rate. The higher rate reflects a change in the investment strategy for the pension plans' assets as well as continued increases in the actual rates of return experienced by the plans’ assets. The effect of this change was to decrease 1985 pension cost by approximately $94.4.
"Statement No. 87 requires certain disclosures to be made reconciling the fair value of the plans’ assets with amounts reported in the Corporation’s balance sheets. This comparison, while intended to provide a general indication of the soundness of the pension plans’ financial status, can be misleading. This is because the pension plans’ assets are not general assets of the Corporation but are instead entrusted to irrevocable trust funds to provide retirement and survivor benefits.
"A point in time comparison of the fair value of the plans’ net assets to the estimated projected benefit obligation has certain limitations. This is because market conditions will result in fluctuations in the fair value of the plans' net assets while having no direct effect on the actual benefits to be paid. In addition, the projected benefit obligation is based on assumptions concerning future events, conditions and payments covering a time period equivalent to the estimated life span of the existing employee work force. If actual experience differs from expectations, the benefit obligation will be affected. Consequently, a point in time comparison of the fair market value of the plans’ net assets which fluctuate with market conditions to an estimated projected benefit obligation which is heavily dependent upon the ability to forecast future events should be cautiously viewed." (Emphasis added.)

. See Lone Star Gas. Co. v. Corp. Comm'n, 648 P.2d 36 (Okl.1982).

. Southwestern Pub. Serv. Co. v. State, 637 P.2d 92 (Okl.1981).

. Sufficient capital may have been supplied by ratepayers during the 1984 test year from advance payment of monthly telephone bills, customer deposits, and the like, particularly when coupled with post-payment of most accounts payable to create a negative working capital situation. This may account for SWBT’s failure to carry out the lag-time study ordered by the Commission’s Order No. 250987, Cause No. 28002 (Dec. 29, 1983). Whether there should be a negative working capital allowance cannot be determined without a lag-time study. Certainly no working capital amount should be allowed until the Commission’s order is complied with. Beyond this it would seem that the Commission must take appropriate action to see that the order is complied with including the potential of a negative working capital allowance after an appropriate investigation.
It follows, therefore, that it was error to include ? 18 million in "prepayments” in the rate base. Not only was there no justifying lag-time study but the identity of the "prepayment" item remained a mystery, evidence of its legitimacy is absent and its allowance was specifically denied prior to its inclusion in the rate base "summary."

. In its December 29, 1983, order, the Commission said that it "takes judicial notice, as did the Referee, that the use of flow through with accelerated depreciation would result in Southwestern Bell possibly losing its right to claim accelerated depreciation and being liable for back taxes since it first elected to use accelerated depreciation. Likewise, if Southwestern Bell treated investment tax credit (ITC) as a reduction to rate base, it would result in its possible loss of its right to claim ITC." See Okl.Corp. Comm’n Order No. 250987, Cause No. 28002 at 10, 11 (December 29, 1983).
Since then there have been some significant decisions relating to the problem. One is that the United States Supreme Court has rejected the FCC’s earlier position that the exercise of its authority under the Communications Act of 1934 as amended, for interstate ratemaking purposes, preempted state regulatory action with regard to plant used interchangeably to provide both intrastate and interstate service. This includes regulations with respect to depreciation. 47 U.S.C. §§ 152(b), 220; Louisiana Pub. Serv. Comm’n v. F.C.C., 476 U.S. 355, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986).
In 1986 the supreme court of New Mexico held that a regulatory commission order employing the “flow-through” method of calculating state income taxes was not an arbitrary and capricious departure from past practice and that use of the “normalization” method was a reasonable means of protecting ratepayers from future problems associated with divestiture of the parent company. In re Rates & Charges of Mountain States Teh & Teh Co., 104 N.M. 36, 715 P.2d 1332 (1986).
See also, Majoros, Telephone Company Deferred Taxes and Investment Tax Credits — a Capital Loss for Ratepayers, Public Utilities Fortnightly 21 (September 27, 1984).

. It should be noted that one of the few states to hold that income taxes are to be considered an operating expense for the purpose of determining fair telephone service rates and charges is Kansas. It so held in State ex reh Hopkins v. Southwestern Bell Teh Co., 115 Kan. 236, 257, 223 P. 771, 781 (1924), after noting that considering “Federal income tax as an operating expense is a matter of controversy. That the tax was disallowed by the commissioner, ... but under a recent decision of the United States Supreme Court in Galveston Elec. Co. v. City of Galveston, 258 U.S. 388, 399, 42 S.Ct. 351, 356, 66 L.Ed. 678 (1922), the tax should have been allowed.”
Galveston Elec. Co. is of no precedential value, or at least is not binding because it was a pre-Erie Railroad diversity suit filed in a Texas federal court. The trial court disallowed the income tax items as an operating expense. The basis for the high court’s conclusion was that there “is no difference between income taxes and others,” a conclusion that is at war with reality.
The only other decision to follow the Kansas case is a second Kansas case decided the same year, 1924, on the basis of stare decisis. It was Swatter v. Williamson Milling Co., 116 Kan. 329, 226 P. 1001 (1924). It evidently was in the appellate pipeline when State ex reh Hopkins v. Southwestern Bell Teh Co. was decided. It is interesting to note that in Swatter an outside auditor examined the milling company’s books to determine net income and in so doing did not include income taxes as an operating expense. Both the referee and the district court agreed with the auditor.
A few states, including Oklahoma in Oklahoma Natural Gas Co. v. Corp. Comm’n, 90 Okl. 84, 216 P. 917 (1923), accepted the Galveston Elec. Co. conclusion during the pre-Erie era, noting that it was based upon the particular federal income tax laws concerning dividends in effect at that time. Maybe they did so feeling it was necessary as a practical matter because of stare decisis. This court should now make a post-EWe reappraisal of the matter and adopt the better and more realistic view that there is an obvious difference between operating expense and a post-operational tax on net income. It simply is not fair for the ratepayers of this state to be paying SWBC’s income taxes or those of its stockholders.
In my opinion the U.S. Supreme Court’s 1922 common law view of what state substantive law should be — that there is no difference between taxes paid in the course of operations, such as sale taxes, production taxes, various excise taxes, and the like paid during the taxable year, and post-operational taxes such as that levied on net income — is not the better view and does not accord with generally accepted accounting prin*1362ciples. I would hold that income taxes may not be deducted as operating expenses.

. See corporate earnings data in Standard Corporation Description, and Standard and Poor’s Stock Reports Index, both published by Standard and Poor’s Corp.

. In Smyth v. Ames, 169 U.S. 466, 540, 18 S.Ct. 418, 431, 42 L.Ed. 819 (1898), for instance, the court recognized that reference to evidence of rates in other jurisdictions is of substantial value if evidence of all relevant elements bearing on the problems is presented.
Such operational data is available to the investing public in various publications such as Moody's Public Utility Manual, published annually by Moody’s Investor’s Service, Inc.