Court Opinion

ID: 9628454
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:20:57.434287+00
Date Added: 2024-06-11T09:06:09.948285
License: Public Domain

ALMA WILSON, Justice,
dissenting:
The Oklahoma Corporation Commission’s constitutional duty to the public, (acting through its three elected Commissioners), and its scope of authority in supervising, regulating and controlling utility operations in the public interest includes the establishment of utility rates which are reasonable and just. In the performance of its public duty, and in correcting abuses and preventing unjust discrimination and extortion by such companies, the Corporation Commission, sitting as a quasi-judicial tribunal, is legally bound to hold hearings, on the record, the purpose of which requires:
(1) Evidence of Oklahoma-specific costs and revenues which are “used and useful” in providing utility service to citizens within the State of Oklahoma;
(2) Official authorization and approval by the elected Commissioners of the State *1364of Oklahoma of any and all proposed schedules of rates/tariffs based upon 1, above.
In the present case neither of these requisite duties were ever constitutionally discharged. The appellate record is devoid of evidence supporting Oklahoma-specific “used and useful” costs, and the proposed tariffs are therefore without evidentiary basis. Moreover, such proposed tariffs were never reviewed or approved by the elected Commissioners, who alone are charged with that ultimate responsibility by the people of the State of Oklahoma. Such ultimate responsibility is non-delega-ble. Here, the proposed rate schedules/tariffs were filed and rubber stamped “approved” by a nameless Utility Director (not an elected official) on the same day, without a hearing and/or Official Authorization by the Commissioners of the Corporation Commission who must remain responsive to the citizens of this State. The Oklahoma Corporation Commission, thus, failed to regularly pursue its ratemaking authority.
These fundamental errors of law impel my dissent in this case. Furthermore, the present case represents Oklahoma’s first response to the dismemberment of the former AT & T nation-wide system of telecommunications under the dictates of federal law. Accordingly, the effectuation of divestiture, at the state level, requires judicial review in conformity with the Supremacy Clause of the United States Constitution, at Article VI, and the relevant federal case law.
REQUISITES OF FEDERAL DIVESTITURE
On August 24, 1982, the United States District Court for the District of Columbia entered a “Modified Final Judgment” (hereinafter, the “MFJ”) in the government antitrust case against American Telephone and Telegraph Company (AT & T) disposing of what is the largest and most complex antitrust action since the enactment of the Tunney Act.1 The MFJ engendered significant structural changes in the national tel-communications network and has introduced unprecedented issues into the regulatory scheme surrounding telecommunications service and exchange access functions in every jurisdiction. The present case represents Oklahoma’s first response to the dismemberment of the AT & T system under the dictates of the MFJ divestiture decree.
Fundamentally, the MFJ removed from AT & T’s fully integrated telecommunications system the function of supplying local telephone service by requiring AT & T to divest itself of those portions of its twenty-two interconnected operating companies which performed that function. From an amalgamation of the twenty-two former operating companies, seven new operating companies have been created. The MFJ assigned to those seven divested companies local telephone service functions, to be performed independently of AT & T.2 The rationale was that the divested companies, each standing alone, would operate differently than the former interconnected companies under the AT & T umbrella because of their smaller size and relative lack of complexity. In contrast to AT & T’s vast, vertically integrated operating system, which dominated local telecommunications, intercity telecommunications, telecommunications research and the production and marketing of equipment, the limited monopoly status of each of the MFJ’s divested operating companies is restricted to one geographic portion of one of these markets —local telecommunications.
Subsequent to the federal court’s judgment ordering the divestiture of local tele*1365communications service and exchange access functions from AT & T, Southwestern Bell Telephone Company filed applications with the Oklahoma Corporation Commission requesting interim and permanent intrastate rate increases. On May 24, 1983, the Oklahoma Corporation Commission authorized, on an interim basis and subject to refund, a rate increase in the amount of $43,700,000 [million dollars]; but contemporaneously ordered Southwestern Bell to advise the Commission what the public utility’s cost of service in the State of Oklahoma would be as a divested company. During the ensuing period, however, the Commission granted additional interim rate increases in the amounts of $135,197,000 [million dollars] and $32,520,695 [million dollars], subject to refund pending Southwestern Bell’s accumulation of a full year’s actual operating data as a divested company, and a full review thereof. On January 29, 1986, the Corporation Commission generally approved its interim rate increases and also granted an additional rate increase to Southwestern Bell in the amount of $47,-544,561 [million dollars], on an annual basis.
The Attorney General of Oklahoma, on behalf of the ratepaying public, prosecutes this appeal challenging the reasonableness of the rate increases granted Southwestern Bell and the propriety of the findings and conclusions of the Corporation Commission in ordering the increased rates. The Attorney General further contends that Southwestern Bell failed to meet its burden of proof to provide competent evidence to support its allegations that increased rates are necessary to provide Southwestern Bell an adequate return on the cost of local telephone service in Oklahoma; and that the Corporation Commission failed to regularly pursue its constitutional duties in the public interest to investigate the impact and relationship of the utility company’s divested state to rates imposed upon ratepayers in this jurisdiction.
BELL BACK TO BASICS-JURISDICTIONAL RAMIFICATIONS
The landmark event of divestiture of basic telephone service from the former AT & T network is extremely significant because our response will set the stage on how Southwestern Bell Telephone Company will be permitted to operate in this jurisdiction as a “stand-alone” company. The MFJ makes it clear that in the post-divestiture telecommunications environment, regulatory supervision is made increasingly vital in the public interest as entries are made by regulated telephone companies into unregulated competitive telecommunications markets such as équipment sales and mobile phones. Consequently, our judicial review of the host of important regulatory issues created by the telecommunications divestiture transition is unavoidable, considering applicable federal and state constitutional imperitives, as well as divestiture’s import within the context of our local laws and procedures and practices. Our task, therefore, cannot be sufficiently addressed with reference to pre-divestiture treatment alone, but must be carried out against a backdrop of actual evidentiary experience, with respect to the federal laws and the laws of the State of Oklahoma (upon which Southwestern Bell Telephone Company’s exclusive public utility grant is conditioned), which remain precedential in this jurisdiction. The discontinuance of our historical relationship with the local telephone company cannot be ignored within the principle substantive purpose of the federal divestiture decree — “to promote competition and hence to create conditions which will reduce the cost and improve the quality and reliability of telephone service.”3 As an integral component of its purpose the decree assigned and circumscribed the essential role of the divested telephone companies:
“they are to provide efficient, economical, and, if possible, technologically advanced local telephone service. Their role is not to provide a source of ratepayer funds, credits and other assets to *1366finance competitive ventures, nor were they meant to be vast conglomerates in which telephone service is relegated to a subordinate place.”4
Within this framework, the divested companies are prohibited from diversifying on a significant scale unless they can demonstrate the centrality of their corporate life to the responsibilities imposed upon them by the decree, that is, a firm commitment to low-cost, high quality telephone service, and the improbability of involvement in anticompetitive conduct based upon their monopoly status.5 Moreover, direct or indirect dependency upon basic telephone service rates as the underwriter for competitive ventures is clearly abhorent to the implementation of the divestiture decree and jeopardizes the successful operation of a free market in the competitive segments of the telecommunications industry.6 Thus, so long as Southwestern Bell retains its monopoly franchise (public grant) granting it the exclusive right to serve Oklahoma citizens by providing basic telephone service (which Oklahoma citizens have no choice but to pay) remains conditioned upon and subject to pervasive regulation in the public interest. While changes have occurred in the characteristics of the Bell Operating Companies and the environment in which they operate, these changes do not abrogate Southwestern Bell Telephone Company’s part of the bargain in being awarded monopoly status in Oklahoma.
II
THE OKLAHOMA RATEPAYER IS OBLIGED TO RELY UPON THE OKLAHOMA CORPORATION COMMISSION TO PROVIDE A COMPLETE, PERMANENT AND EFFECTIVE BOND OF PROTECTION FROM EXCESSIVE RATES AND CHARGES WHICH COULD RESULT FROM POTENTIAL ABUSES IN THE POST-DIVESTITURE TELECOMMUNICATIONS ENVIRONMENT.
The duty of the Oklahoma Corporation Commission to supervise, regulate, and control Southwestern Bell Telephone Company’s operations in Oklahoma in the public interest is established by Article 9, Section 18 of the Constitution of the State of Oklahoma, which states in pertinent part:
§ 18. Powers and duties— ...
The Commission shall have the power and authority and be charged with the duty of supervising, regulating and controlling all transportation and transmission companies doing business in this State, in all matters relating to the performance of their public duties and their charges therefor, and of correcting abuses and preventing unjust discrimination and extortion by such companies; and to that end the Commission shall, from time to time, prescribe and enforce against such companies, in the manner hereinafter authorized, such rates, charges, classifications of traffic, and rules and regulations, and shall require them to establish and maintain all such public service, facilities, and conveniences as may be reasonable and just, which said rates, charges, classifications, rules, regulations, and requirements, the Commission may from time to time, alter or amend. All rates, charges, classifications, rules and regulations adopted, or acted upon, by any such company, inconsistent with those prescribed by the Commission, within the scope of its authority, shall be unlawful and void. The Commission shall also have the right, at all times, to inspect the books and papers of all transportation and transmission companies doing business in this State, and to require from such companies, from time to time, special reports and statements, under oath, concerning their business; it shall keep itself fully informed of the physical condition of all the railroads of the State, as to the manner in which they are operated, with reference to the security and accommodation of the public, and shall, from time to time, make and enforce such re*1367quirements, rules and regulations as may be necessary to -prevent unjust or unreasonable discrimination and extortion by any transportation or transmission company in favor of, or against any person, locality, community, connecting line, or kind of traffic, in the matter of car service, train or boat schedule, efficiency of transportation, transmission, or otherwise, in connection with the public duties of such company. Before the Commission shall prescribe or fix any rate, charge or classification of traffic, and before it shall make any order, rule, regulation, or requirement directed against any one or more companies by name, the company or companies to be affected by such rate, charge, classification, order, rule, regulation, or requirement, shall first be given, by the Commission, at least ten days’ notice of the time and place, when and where the contemplated action in the premises will be considered and disposed of, and shall be afforded a reasonable opportunity to introduce evidence and to be heard thereon, to the end that justice may be done, and shall have process to enforce the attendance of witnesses; and before said Commission shall make or prescribe any general order, rule, regulation, or requirement not directed against any specific company or companies by name, the contemplated general order, rule, regulation, or requirement shall first be published in substance, not less than once a week, for four consecutive weeks, in one or more newspapers of general circulation published in the county in which the Capitol of this State may be located, together with the notice of the time and place, when and where the Commission mil hear any objections which may be urged by any person interested, against the proposed order, rule, regulation, or requirement; and every such general order, rule, regulation, or requirement made by the Commission, shall be published at length, for the time and in the manner above specified, before it shall go into effect, and shall also, so long as it remains in force, be published in each subsequent annual report of the Commission. The authority of the Commission, (subject to review on appeal as hereinafter provided) to prescribe rates, charges, and classifications of traffic, for transportation and transmission companies, shall subject to regulation by law, be paramount; but its authority to prescribe any other rules, regulations, or requirements for corporations or other persons shall be subject to the superior authority of the Legislature to legislate thereon by general laws: Provided, However, That nothing in this section may impair the rights which have heretofore been, or may hereafter be, conferred by law upon the authorities of any city, town or county to prescribe rules, regulations, or rates of charges to be observed by any public service corporation in connection with any services performed by it under a municipal or county franchise granted by such city, town, or county, so far as such services may be wholly within the limits of the city, town, or county granting the franchise. Upon the request of the parties interested, the Commission, as far as possible, to effect, by mediation, the adjustment of claims, and the settlement of controversies, between transportation or transmission companies and their patrons or employees. [.Emphasis added.]
In the regular pursuit of its constitutionally mandated duty to supervise, regulate and control the telephone transmission company doing business in this State “in all matters relating to the performance of public duties”, it clearly devolves upon the Corporation Commission in the post-divestiture environment, as the relevant regulatory body, to activate its scrutiny in the public interest and responsibly exercise its authority to ensure that the citizens of this State will not be charged excessive rates and charges which subsidize (through structural cross-allocation methodology and corporate procedures and transfers of stocks and/or assets) the costs of competí-*1368tive unregulated activities where a company is engaged in operating both regulated (monopoly) utility service and unregulated (competitive) ventures. The ratepayer is obliged to rely upon the Commission to provide a complete, permanent and effective bond of protection from excessive rates and charges which could result from potential abuses.7
III
THE OKLAHOMA SUPREME COURT IS OBLIGATED TO REVIEW THE ORDERS AND PROCEEDINGS OF THE CORPORATION COMMISSION WITHIN THE PROSCRIPTIONS OF THE CONSTITUTION.
Beyond these initial considerations concerning the powers and duties of the Oklahoma Corporation Commission, there is the overriding principle that this Supreme Court is obligated to review the orders and proceedings of the Corporation Commission within the proscriptions of its own constitutionally mandated responsibility. Judicial review of appealable orders of the Corporation Commission, at the threshold, involves judicial cognizance of the character of the issues, whether of constitutional origin or arising out of general statutory law or factually embedded. Since the jurisdiction conferred on the Oklahoma Corporation Commission by Article 9, Section 18 of the State Constitution, provides for the exercise of both “quasi-judicial” and “quasi-legislative” functions, the interest sought to be protected in either embracing or challenging an order of the Commission is a relevant consideration to avoid the impermissible blending of the legislative, judicial and executive powers of government in contradiction of the Federal Constitution, as well as the express separation of powers clause at Article 4, Section 1 of the State Constitution. Accordingly, the constitutional mandate directed to this Supreme Court as Article 9, Section 20 of the Constitution of the State of Oklahoma, embodies this distinction between the Commission’s treatment of constitutional interests (within the Commission’s adjudicatory/quasi-judicial capacity and therefore subject to unfettered judicial review); as opposed to the Commission’s factual findings and conclusions on technical or scientific matters peculiarly within its delegated expertise (promulgated pursuant to the Commission’s quasi-legislative capacity and therefore accorded deference on review within the bounds of the law and evidence.) In this regard, it is frequently stated, and correctly so, that a presumption of correctness accompanies the findings of the Corporation Commission in matters in which it has expertise and frequently adjudicates;8 and that to the extent that the Commission acts within its wide discretion there is a limitation of reviewability.9 Yet, courts have also stated that there exists a “presumption of reviewability” unless there is clear and convincing evidence to the contrary;10 and that a reviewing court may require an agency to exercise its discretion.11 Finally, a delegation of unlimited authority and unfettered discretion to an inferior governmental agency is constitutionally impermissible. Neither the Legislature nor the Supreme Court of this State may abdicate essential legislative and judicial functions. While a governmental agency may be permitted to engage in the making of subordinate rulings and determinations of facts in the regular pursuit of constitutional and statutorily conferred standards and policies, it is ultimately for the Supreme Court to say what the law is in a given context, *1369and it is for the Legislature to prescribe the applicable policies. Consequently, an appeal from the Corporation Commission must be characterized according to the proscriptions of Article 9, Section 20 of our Constitution, which states:
[[Image here]]
“The Supreme Court’s review of appeal-able orders of the Corporation Commission shall be judicial only and (I)n all appeals involving an asserted violation of any right of the parties under the Constitution of the United States or the Constitution of the State of Oklahoma, the Court shall exercise its own independent judgment as to both the law and the facts.
In all other appeals from orders of the Corporation Commission the review by the Supreme Court shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence.
Upon review, the Supreme Court shall enter judgment, either affirming or reversing the order of the Commission appealed from. [Emphasis added.]
[[Image here]]
In the present case, the question of re-viewability may be resolved with primary reference to the constitutional-specific standards delineated within Article 9, Section 20, above. First, it can be seen that our review is judicial only, that is to say that this Court is constitutionally restrained from sitting as a legislative body and exercising a legislative function in reviewing the Commission's order and proceedings. It is, rather, the province of this Court to find repose in the law in the context of the appellate record here on review. Therefore, this Court must at the outset look to see if there is law to apply. If there is, then the action is not, on the whole, committed to Commission discretion, though due deference will be accorded the Commission’s findings as to technical matters peculiarly within its expertise.
Further analysis of our fundamental constitutional directive within Article 9, Section 20, discloses that the law to apply may encompass the Constitution of the United States; the Constitution of the State of Oklahoma; or general laws of applicability as they relate to the findings and conclusions of the Commission; and laws governing the implementation of Commission authority. It is noted, moreover, that with the exception of constitutional facts and jurisdictional facts, this Court’s scope of review on questions of fact is limited by the prime directive to ascertaining, on the record as a whole, whether or not the Commission’s findings of fact are supported by substantial evidence. “Substantial evidence” has been variously defined as “evidence ‘possessing something of substance and of relevant consequence — something that carries with it fitness to induce conviction’ ”;12 as, “such relevant evidence as a reasonable mind accepts as adequate to support a conclusion”;13 and, as “more than a mere scintilla.”14
Article 9, Section 20, finally, requires this Court to enter a judgment, either affirming or reversing the order of the Commission appealed from. We may not enter a schedule of rates to be in force in lieu of those prescribed by the Commission, as such would constitute a regulatory prerogative, and therefore an usurption of the legislative function. However, this Court’s judicial function does demand review of the Commission’s determinations of law and interpretations of rules which have the force of law. This Court’s judgment on these questions of law is paramount, and may be substituted over that of the Corpo*1370ration Commission. Similarly, as noted earlier, constitutional facts and jurisdictional facts may be independently reviewed. When coupled with this Court’s preemptive judicial function on questions of law, this confers upon the Supreme Court the power to exercise its own independent judgment as to both the law and the facts on questions of constitutional magnitude, in addition to its general judicial function to de- • cide all other relevant questions of law. In making these determinations, in pursuance of its judicial function, this Court may re- . view the whole record.
The initial question of law this Court is called upon to resolve concerns the scope of the Corporation Commission’s authority and jurisdiction to act upon motions timely filed by both parties in the cause, requesting modification of the Commission’s order.
IV
THE OKLAHOMA CORPORATION COMMISSION HELD AN EN BANC POST-JUDGMENT HEARING TO ADJUDICATE THE MERITS OF TIMELY FILED MOTIONS FOR MODIFICATION FILED BY BOTH PARTIES, THEREFORE, THE TIME WITHIN WHICH JUDICIAL REVIEW IS GOVERNED RUNS FROM THE DATE OF THE EN BANC COMMISSION’S FINAL ACTION DISPOSING THEREOF.
Generally, judicial review becomes crys-talized when administrative remedies have been exhausted. Rule 24 of the Corporation Commission’s own Rules grants a party the right to finally challenge an order promulgated in that forum by filing within ten days of the order’s rendition, a post-judgment motion to modify, reopen or rehear a matter.
RULE 24 RELIEF FROM ORDERS OF THE COMMISSION
A. Within ten (10) days after an order of the commission is entered, any person may file a motion for rehearing, or a motion to set aside or to modify the order, or for any other form of relief from the order. However, a motion to reopen the record after an order has been entered shall not be considered a proper motion to seek relief from the order. The motion shall specifically state:
1. The parts or provisions of the order sought to be set aside or modified or from which relief is sought,
2. The specific modifications or other relief sought by the motion, and
3. The specific grounds relied upon for relief.
Such motion shall be set for hearing before the Commission, unless referred. A copy of the motion, including notice of the date set for hearing, shall be served by the movant on each party of record by regular mail. If any motion filed pursuant to this rule is placed on the emergency or regular docket for hearing the mov-ant shall give at least five (5) days written notice to all respondents listed on the affidavit of mailing, and all parties of record.
B. At any time subsequent to ten (10) days after entry of an order of the Commission, an application to vacate or modify the order, or for any other form of relief from the order, filed by any person, whether or not a party of record in the original cause, shall be treated as a separate cause, and shall be governed by rules applicable to the commencement of a cause. The application shall:
1. identify the order sought to be modified or vacated,
2. state specifically the parts or provisions sought to be modified or vacated,
3. state specifically the modifications or vacations sought, and
4. state specifically the grounds upon which such relief is sought.
Notice of hearing of the application shall be served and published as required upon the commencement of the cause. The application shall be set for hearing before the Commission or Hearing Officer, *1371as provided in these rules as to the commencement of a cause.
C. An order of the Commission, granted to a public utility pursuant to 17 O.S. §§ 181 through 189, approving the issuance of securities or the creation of liens on property in this state to secure the payment of evidences of indebtedness, shall not be vacated or modified pursuant to motion or application to vacate or modify filed by any person other than the public utility.
D. With or without notice or hearing, the Commission may make or cause to be made an order nunc pro tunc to correct any clerical errors, mistakes or omissions in an order, or as to timely mailing of the order by the Commission or otherwise to cause the order to correctly reflect the judgment or action of such Commission. [.Emphasis mine.']
In this way, a party who thinks the Commission has erred against it is enabled to call the Commission’s attention to such error, so that the Commission may have the opportunity to correct it. Otherwise, this Supreme Court could spend valuable time and resources considering erroneous findings and conclusions which could have been more efficiently corrected by the Commission in view of that agency’s access to pertinent resources and expertise.
An interpretation of Rule 24 which allows the Commission meaningful opportunity to correct its own mistakes before an appeal is decided by this Court is imminently desirable in terms of institutional (court-agency) compatibility and is legally efficacious. This precept is acknowledged by Article 9, Section 20 of our State Constitution, which provides that an appeal from the Corporation Commission shall be taken directly to the Supreme Court in the manner and in the same time which appeals may be taken to the Supreme Court from the District Courts. Article 9, § 20 states:
[[Image here]]
§ 20. Appeals to Supreme Court — Other courts to have no jurisdiction — Mandamus and prohibition
From any action of the Corporation Commission prescribing rates, charges, services, practices, rules or regulations of any public utility or public service corporation, or any individual, person, firm, corporation, receiver or trustee engaged in the public utility or public service corporation, or any individual, fect-ed, or by any person deeming himself aggrieved by any such action, or by the State, directly to the Supreme Court of the State of Oklahoma, in the manner and in the same time in which appeals may be taken to the Supreme Court from the District Courts, except that such an appeal shall be of right, and the Supreme Court may provide by rule for proceedings in the matter of appeals in any particular in which the existing rules of law are inapplicable. If such appeal be taken by the public utility or public service corporation affected by any such action, the State of Oklahoma shall be made the appellee, but in other appeals hereunder, the public utility or public service corporation affected shall be made the appellee. [.Emphasis mine.]
[[Image here]]
A contrary interpretation of Rule 24 by reason of secondary statutory construction is constitutionally repugnant. The Constitution is the fundamental law and both statutory construction and case authority must conform thereto. Therefore, statutory construction of 12 O.S.1981 § 991(a) cannot, by implication, dictate this Court’s interpretation of Rule 24 under the State Constitution. Because the Constitution directs that appeals from the Corporation Commission shall be taken directly to this Court in the same time which appeals may be taken from the District Courts, when the Corporation Commission took cognizance of both parties timely filed post-judgment motions, held a hearing thereon, and issued an order as a result thereof, the date of such order finally disposing of all matters in this cause properly governs the time of appeal. The present case illustrates the advisability of this holding:
*1372Within ten (10) days from the rendition of the Corporation Commission’s order setting rates and charges and conditions of service in this cause, both Southwestern Bell Telephone Company and the Attorney General filed motions requesting modification of the Commission’s order. The Corporation Commission evidently was unable to hold a hearing on these motions to modify until April 3,1986.15 On that date, even though the Attorney General had filed a precautionary appeal16 and the Commission staff had filed a motion to dismiss,17 the Commissioners, sitting en banc, exercised concurrent primary jurisdiction in the matter and called the cause for full hearing on all three motions. On the date of this hearing the interpretation of Rule 24 remained an open question.
At the lengthy oral argument, the Attorney General argued for a modification of the order (1) in the area of construction work in progress (CWIP), emphasizing that since the Commission has in recent years in Bell cases taken the step of allowing certain CWIP in the rate base, it should also consider increased revenues and expenses from that CWIP; (2) that the very laudito-ry determination of the Commission excluding cash working capital from consideration, due to Bell’s failure to provide a lead/lag study as it had been ordered by the Commission to do, has been short circuited by the allowance of prepayments in the amount of $18,000,000 million dollars in the rate base; stating that in an ordinary effective lead/lag study, prepayments would be one of the expense items included as either a plus or a minus; (3) that no evidence had been presented to account for the Commission’s conclusion on page 46 of its order that “directory revenues had increased in proportion to the uncollectibles”, but that questions had been raised as to why the portion of directory revenues that Southwestern Bell had collected were accruing and uncollectible at about 1.37, and why the one quarter of the year’s directory revenues that were attributable to Southwestern Bell Publication had a 9.6 uncol-lectible, while at the same time, revenues were staying basically flat — therefore, the Attorney General urged the Commission to review and study this area; and further (4) urged that the Commission must modify its order to include a prompt determination in this case as to the AT & T refund due Oklahoma ratepayers in accordance with the November 4, 1982 opinion and memorandum of the Federal Communications Commission, at paragraphs 69 and 70. Next, in the motion to modify, the Attorney General (5) sought reconsideration of the allocation of expenses and the separations process in determining critical charges to people jurisdictionally in Oklahoma, objecting to systemwide cost methodology that relates all services to local exchange service, thereby causing local customers to bear total costs, absent any finding of the relative benefits to Oklahoma ratepayers, asserting, e.g., that concession expenses for free or discounted service for Bell employees should be disallowed. Finally, in support of the motion for modification, (6) the Attorney General focused upon the issues of rate of return on common equity and capital structure, pointing out that in its previous order, the Commission had concluded, consistent with numerous jurisdictions, that the discounted cash flow method was the most appropriate methodology to be used. The Attorney General here asserted that on a discounted cash flow basis, without flotation and quarterly adjustment, all three of the experts’ testimonies fall *1373below the 14.25 percent authorized by the Commission; and that while the actions of Southwestern Bell Corporation may have been appropriate for the corporation as a whole — including its unregulated entities— the fundamental issue here is what capital structure is appropriate for the Oklahoma jurisdiction? The Attorney General emphasized that Southwestern Bell’s Oklahoma management had little or no input into the capital structure of Southwestern Bell Corporation, located in St. Louis, Missouri. The Attorney General requested the Commission to modify its order from the perspective of the capital structure that is appropriate to the Oklahoma jurisdiction.
Counsel for Southwestern Bell Telephone Company presented rebuttal arguments on behalf of the public utility and also presented the utility’s own motion to modify: (1) Southwestern Bell proffered that its return on equity should be increased. Bell argued that the credibility of Bell’s witness is greater than the credibility of any other return on equity witness; that the Commission’s finding of 14.25 percent is woefully inadequate because of the increased financial risk and the increased business risk that Southwestern Bell faces since divestiture; Bell attributed the increased risk to post-divestiture bypass by inter-LATA carriers illegally siphoning off intra-LATA services, loss of the customer premises equipment business due to divestiture, and loss of inter-LATA business due to divestiture; (2) Bell urged the Commission to reconsider its cash working capital finding of zero cash working capital complaining that the penalty for not providing a lead/lag study as ordered by the Commission is overly harsh in this divestiture case due to changes in operating procedures; (3) Bell further urged the Commission to rethink and then adopt Bell’s year ending of revenues methodology; (4) likewise, Bell assailed the methodology adopted by the Commission’s order as to allocation of headquarters and corporate expenses, and instead, implored the Commission to adopt Bell’s methodology which Bell asserted was more accurate; (5) Bell also took issue with the Commission’s legal expense adjustment, stating that legal expenses are an ongoing, necessary part of running any business, therefore, the Commission should apply the test year legal expenses; (6) as further grounds for modification of the order, Bell challenged reduction of Bellcore expenses; and (7) Bell additionally asked the Commission to reconsider an intra-syn-chronization adjustment permitted by the Commission’s order, avowing that it imputed a tax benefit that Bell has never had and which Bell will never get..
In response to the issues presented by the Attorney General, Bell submitted that (1) the Commission erred in not placing all of its CWIP in the rate base; and (2) reiterated Bell’s position that the Commission’s finding of zero cash working capital is wrong; the utility company then declared that (3) the prepayments in controversy are directory payments or monies that Bell expended before it received the services and that when this type of prepayment is placed in the rate base, it is inappropriate for a lead/lag study; and further that in order to impute the Yellow Pages net revenues to the Oklahoma jurisdiction, one must look at directory revenues, directory expenses and the prepayments as a whole; and (4) that the directory revenues grew during the test year, but not to the same extent that they had grown in prior years due to competition and the poor economy, as well as the transitional period of changing the operation to a separate subsidiary which has a different method of collecting revenues and accounting the un-collectibles; (5) that the AT & T refund dealt with years 1980, 1981 and 1982 and should be excluded as an out-of-period matter, the refund is nonrecurring, and was not received from AT & T in the last quarter of the 1984 test year; and the refund was associated with a pre-divestiture period when every relationship was entirely different than it is today; (6) Southwestern Bell also disputed the order as regards the corporate allocation process and (7) contended that its investment expenses and revenues were separated before it filed its rate appli*1374cation, stating that it did not file total state, inter-state and intra-state, but only those items that are subject to the Commission’s jurisdiction — intra-state operation; (8) that although Southwestern Bell initially included concession telephone service in its application date, it changed its mind and did not include concession for inter-LATA telephone calling in its permanent data, nevertheless, Bell asserted that concession telephone service has never been disallowed by this Commission in any order and that Bell had absolutely no reason to question or to understand a concession telephone service was at issue, since it was not raised by a witness, but originated from a question from the bench near the end of the cause. Moreover, protested Bell, a utility has an obligation to testify that its expenses are just, reasonable and proper, and it has no further burden unless it is put on notice that one of its items is subject to dispute or question — and it had no reason to believe concession telephone service was in this proceeding; (9) finally, Southwestern Bell asserted that a capital structure cannot be imputed to Southwestern Bell unless there is mismanagement or imprudence on the part of the corporation; and (10) that the post-divestiture rate of return authorized by the Commission is inadequate.
At the conclusion of the hearing, the Commission en banc, took all of the exhibits, arguments and evidence under advisement. Then on May 12, 1986, the Commission entered Order No. 297905, finally disposing of the matter. The Commission found that Staff’s motion to dismiss the motions of the Attorney General and Southwestern Bell should be granted. The Attorney General appealed this Order. We consolidated this appeal with the Attorney General’s prior appeal for disposition by a single opinion. However, because the Corporation Commission erroneously ruled that it was divested of jurisdiction to make an order treating the issues raised for reconsideration, as its single reason for dismissing the motions to modify, the final order should be reversed and this cause remanded to the Corporation Commission for further consideration of the issues raised in the Motion to Modify; and in view of the legal guideposts and standards set forth herein.
V
THE OKLAHOMA CORPORATION COMMISSION MUST PROMULGATE AN ORDER SUFFICIENT TO APPRISE THE SUPREME COURT OF THE ACTUAL BASIS UNDERLYING ITS UTILITY RATE INCREASE.
It is fundamental that a reviewing court must be apprised of the actual basis underlying a utility rate increase authorized by the Oklahoma Corporation Commission in order that it may be determined whether or not the amount of the award is sustainable. An absence of required findings is fatal to the validity of an administrative decision and findings in general terms are not sufficient.18 Moreover, findings must be free from ambiguity.19 On January 29, 1986, the Oklahoma Corporation Commission authorized Southwestern Bell to increase its Oklahoma jurisdictional telephone rates in the amount of $47,544,561 [million dollars], on an annual basis. The amount of $47,-544,561 is the sole amount specified in the Commission’s order. By reference only, the Commission approved further rate increases in the amounts of $43,700,000 [million dollars] annually; $135,197,000 [million dollars]; and $32,520,695 [million dollars] annually. The order of the Corporation Commission, however, is illusory because it fails to specify these referenced amounts (and, hence make clear the total rate increases aproved and authorized) and to *1375make the required findings pertaining to them in its order. The terms and consequential effect of the unstated additional rate increases, which were incorporated and approved by reference only, impacted upon the Commission’s ratemaking determinations, and thus impact our review of those determinations. On the remand of this matter it should be incumbent upon the Corporation Commission to state, with specificity, in its order every amount approved, granted or authorized, together with the date and number of every other order relating thereto. A general reference to other orders or documents is insufficient. Additionally, where the Commission incorporates by reference other orders and documents, or implements the terms and conditions thereof, it should attach such orders and documents referred to. Administrative adherance to these requirements is procedurally efficient and provides valuable assistance to the Supreme Court toward an expeditious appellate review. Particularly in a case of this magnitude with numerous unprecedented issues and an extremely voluminous record, the Corporation Commission has both the power and the opportunity to, at least partially, alleviate the enormous burden placed upon this Court by fulfilling its duty to provide findings sufficient in content, and free from ambiguity.
The Commission should stand apprised that on the appeal of an order from that body which fails to provide sufficient findings, while this Court may not be precluded, under certain circumstances, from making a review of the whole record and entering the appropriate order indicated by the record in its entirety,20 a statutory requirement that an administrative agency make findings of fact and conclusions of law is a matter of substance and not a mere technicality, and it is the general rule that if the administrative agency fails to supply such findings, its determinations will not be sustained.21
VI
THE OKLAHOMA CORPORATION COMMISSION MUST SUBSTANTIATE WITH RECORD EVIDENCE EVERY POST-DIVESTITURE ALLOCATION TO BE INCLUDED IN ITS AUTHORIZATION OF RATES TO BE CHARGED TO OKLAHOMA RATE PAYERS FOR BASIC TELEPHONE SERVICE.
What a public telephone utility company is entitled to ask is a fair return upon the value of that which is used and useful in providing basic telephone service to the public in Oklahoma.22 In order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under the particular rates prescribed, and the sum required to meet operating expenses are all matters for consideration on the question whether the rates set are reasonable. Where costs are allocated, competent, verifiable evidence must be presented to substantiate the measure of benefit to Oklahoma ratepayers for the totality of charges allocated to this jurisdiction.23 Pro-rata charges, like rolled-in rates in an integrated system, may be justified only to the extent that Oklahoma ratepay*1376ers derive benefit therefrom.24 The benefit must, of course, constitute an efficient, economical and necessary component of basic telephone service only, since the federal divestiture decree excluded other services from the agenda of the local operating companies. Further, in the post-divestiture telecommunications environment, the basis of all calculations as to the reasonableness of the rates to be charged by the telephone utility, involving as it does the element of “reasonableness” both as regards the utility company and as regards the public, is eminently a question for judicial review, requiring due process of law for its determination insofar as the rates may be said to be confiscatory. The courts, in this respect, are not bound by mere forms, nor are they to be misled by mere pretenses. They are at liberty — indeed, are under solemn duty — to look at the substance of things, whenever they enter upon the inquiry whether an administrative body has regularly pursued its authority in investigating the quantum and character of proof necessary to establish a rate as reasonable, or confiscatory, within the ambit of the Constitution. It is the duty of this Court to so adjudge, and thereby give effect to the Constitution and the laws of this State. These legal guideposts demand a thorough exposition and review of the post-divestiture realities in this case of first impression.
VII
Implementation of the federal divestiture decree required the following: Each of the twenty-two AT & T telephone operating companies were to transfer from its ownership assets which are not necessary for the performance of its new role: the provision of basic telephone service. These non-basic telephone service assets were to be transferred to other subsidiaries of AT & T. The twenty-two operating companies, however, were permitted to retain assets necessary for the performance of duties connected with basic telephone service. Simultaneously, the twenty-two telephone operating companies were reorganized into seven regional telephone operating companies (the divested companies) and “spun-off” from AT & T. AT & T thus achieved freedom in the competitive segments of its existing non-basic services and was relieved from a large amount of regulatory control and potential antitrust liability; however, it is now crucial to insure that AT & T’s win is not a loss for common ratepayers, for such was not the intent of the MFJ. Therefore, the responsibility inures to the Oklahoma Corporation Commission to begin its post-divestiture regulatory duties by requiring proof that clearly documents the purpose, cost and service category of all allocations to basic telephone service to permit regulatory analysis of every charge to Oklahoma ratepayers. The record in this case is replete with evidence that a proper lead/lay study is the most precise method of determining expenses and revenues flowing in and out of the utility operation; but Southwestern Bell has failed to perform them as ordered. On remand, the Commission should be directed to suspend the accounting and revenues requirement issues until this study is entered into evidence. Under principles of due process of law, charges to customers for costs that will not be incurred in the course of providing utility service are confiscatory. Until the Oklahoma Corporation Commission effectuates its order to require Southwestern Bell to disclose the results of a properly conducted lead/lag study, the Corporation Commission cannot be said to have regularly pursued its constitutional authority to establish the utility’s rates as reasonable.
VIII
THE PROPRIETY OF SOUTHWESTERN BELL TELEPHONE COMPANY’S ABSORPTION BY A NONREGULATED HOLDING COMPANY SHOULD BE CONSIDERED BY THE CORPORATION COMMISSION. '
In order to implement the dictates of divestiture, the MFJ provided for a plan of *1377reorganization of AT & T. However, whereas the other six regional telephone companies are made up from anywhere from two to five of the former AT & T operating companies, Southwestern Bell has the unique position of being the only region encompassing only one pre-divesti-ture telephone operating company. Therefore, whereas the other six regional telephone operating companies may have required some kind of holding company arrangement to effect divestiture, Southwestern Bell does not. Southwestern Bell, both before and after divestiture, includes a five-state area of Texas, Missouri, Arkansas, Kansas and Oklahoma. Since the absorption of Southwestern Bell by a no-nregulated holding company was not necessary to implement the terms of divestiture, the Corporation Commission is not precluded from considering such ultra vires to the interest of jurisdictional ratepayers and disregarding such if the only consequence thereof is detrimental to ratepayers, resulting in confiscatory rates in violation of rights secured by the Constitution of the United States and the Constitution of the State of Oklahoma.
The record discloses that Southwestern Bell Telephone Company is virtually managed, controlled, directed and administered in every aspect by the Holding Company, Southwestern Bell Corporation. Expenses are “allocated” among the five jurisdictions as to, e.g., accounting, legal, regulatory data, employee payroll, pension and health plans, and a multitude of “general expenses” and “miscellaneous” items. Testimony was that the general expenses had increased some two million dollars over the preceding year under the Holding Company’s allocation system; but that although basic telephone operations constitutes 93.47% of the Holding Company’s portfolio, much of the system data was asserted to be “proprietary” under the holding company arrangement — resulting in attribution of expenses to basic telephone service in the form of lump sums and categories of charges. Thus, under the holding company arrangement, there does not exist a method to verify the alleged relationship of cost of service to benefit to local ratepayers who pay for the service.
Article 9, Section 18 of the Oklahoma Constitution provides, in pertinent part, that the Corporation Commission shall keep itself fully informed, and that “(t)he Commission shall have the right at all times to inspect the books and papers of all transportation and transmission companies doing business in this State, and to require from such companies from time to time, special reports and statements, under oath, concerning their business.” On remand, the Corporation Commission must require evidentiary support that economic efficiency, from the ratepayers’ perspective, is enhanced by the holding company relationship. Otherwise, the relationship cannot be sustained. To accomplish this, the Corporation Commission must know the underlying costs of services. In addition, services that use common facilities, like the loop, must also be assigned a portion of costs and the decision of what portion to assign must be determined by the Commission since the market forces (due to the monopoly nature of basic exchange service) are not sufficient to allocate these costs. A properly constructed post-divestiture service category study (lead/lag) must be presented to determine what the costs are for each major service category, including local exchange, Centrex, intra-state intra-LATA toll, intra-state intra-LATA private line, intra state access and supplemental service.
The record presently does not justify an increase in basic telephone services, rather than other non-basic services. Costs should be the basis for rate charges, however, the telephone company has failed to produce a post-divestiture cost study to determine the present relationship of rates to costs. The fundamental purpose of a service category cost study is to determine the revenue requirements for each major service category. These findings can then be used to determine which service catego-*1378ríes require rate increases. This is an especially critical determination given the fact that some telephone service categories have been transferred to AT & T’s competitive operations while others have been retained by Southwestern Bell. The telecommunications industry has undergone and will continue to undergo significant structural changes. While competition is now becoming more important in various areas of telecommunication, a substantial portion of Southwestern Bell’s business in Oklahoma is still monopolistic and will continue to be for the foreseeable future. Under these circumstances there will be a natural tendency for regulated telephone utilities to overprice services in relatively protected monopoly markets so as to subsidize other ventures where competition is present. This cost allocation strategy is particularly damaging to Southwestern Bell’s monopoly utility ratepayers in that it- enables the Company to obtain and preserve competitive business at prices far below the full costs that these services impose on the system, thus loading cross-subsidy costs onto monopoly services on a virtually perpetual basis.
One of the foremost goals of regulation is to ensure that rates are equitable and reasonable. Certain tools, like an up-to-date category cost-of-service study, are necessary to accomplish these goals. Because telephone companies such as Southwestern Bell provide different products and services in distinctly different market environments, a service category cost study is needed to determine the revenue requirement for each of the individual service categories. If rates are established on the basis of cost-based service category revenue requirements, the important regulatory objective of eliminating cross-subsidization among categories will be achieved.
The access line category loss should not be viewed as justification for any rate increase because access is not a service but a part of exchange, intrastate intra-LATA toll intrastate access and inter-LATA access services. That is, the access line is the common facility needed to produce exchange and toll services. The access line category is not a service category, but rather, the collection of costs associated with the loop, which is a component of both toll and local service costs, and must be allocated to service categories. The effects of rate increases that were granted during 1983 and into 1984 are based on 1983 booked revenues — and do not include annualizing rate increases that were awarded in 1983 or 1984. Therefore, the 1983 cost/revenue relationship may not be reflective of the 1984 post-divestiture cost/revenue relationships and benefits of interstate customer premises equipment phase-out should be applied directly to local exchange rates.
Finally, it should be understood that total costs are not the total cost responsibility of local exchange. The interstate jurisdiction is currently responsible for 32% of those costs and intrastate toll and access service are responsible for another 20% share, unless these services are given a “free ride.” The average revenue is $14 per line, total access costs are $21 per line and exchange usage is $4 per line. Comparing the combined cost of access and usage with exchange revenues is incorrect since only local exchange, intra-LATA private line, intra-LATA toll, Centrex, other services and intrastate access are now offered by Southwestern Bell in Oklahoma. Terminal equipment, interstate and intrastate inter-LATA toll and interstate and intrastate inter-LATA private line are offered by AT & T.
The Company’s 1983 EDA indicates that a 1% increase is needed for local exchange services; a 1% increase in State toll rates and access charges, and 150% increase in private line rates is needed to make these services compensatory. However, competent evidence to support a relationship to benefits to Oklahoma ratepayers for these increases is absent from the record. In this regard, the Company’s disaggregation of local exchange service is unavailing *1379since neither dial tone nor usage is a separate service in and of itself, but an integral component of basic telephone service — no evidence has been presented that local ratepayers are demanding the single components of service separate from basic telephone service. The move to disaggregate these elements toward measured service has not been shown to be beneficial to local subscribers in Oklahoma. To the contrary, the record discloses that Southwestern Bell, in its divested state, has begun to engage in competitive operations, in addition to the operation of the local regulated telephone business which provides basic telephone service to the people of the State of Oklahoma. Besides the telephone operating company, Southwestern Bell has established four (known) subsidiaries. These include Southwestern Bell Publications, Southwestern Bell Telecommunications, Southwestern Bell Mobile Systems and Southwestern Bell Asset Management. These subsidiaries are engaged in publishing, equipment sales, cellular mobile telephone development and marketing, and real estate. Although Southwestern Bell refuses to provide a list of subsidiaries created since 1984, public information indicates that it has also purchased Mast Advertising and Publications, Inc. from Continental Telephone for $120,000,000 [million dollars]. The only apparent source for the capital that was used to establish these businesses was the local telephone company. The stockholders of AT & T at the end of 1983 owned Southwestern Bell Corporation, and the only assets transferred were the assets of the local regulated telephone company, Southwestern Bell Telephone Company. All of the subsidiaries were created to some extent with equity from the earnings of Southwestern Bell Telephone Company. In addition, at least two corporations (Southwestern Bell Publications and Southwestern Bell Telecommunications) were created from the telephone company’s assets.
At a minimum, the Commission should require the following information in order to protect the ratepaying public from potential abuses which could result in excessive rates and charges:
1. A list of all companies or organizations affiliated with Southwestern Bell Corporation or Southwestern Bell Telephone Company.
2. A financial statement including balance sheet and income statement and sources and uses of funds statements for each company.
3. A description of how the company was established and when it was established. This should include a description of what resources of the telephone company were used, either directly, (e.g. personnel), or indirectly, (e.g. backing lines of credit.)
4. A description of the types of services or products that are being provided by each organization.
5. A list and cost of telephone company facilities that are being used, were used or expected to be used in the future by each organization.
6. Whether the operating telephone companies will be using the service or products of each organization and the expected cost of each telephone company.
7. A list of assets transferred or sold to each organization from the operating telephone companies, (including any purchases made by the operating telephone companies in 1983 and 1984 from an affiliate where the telephone company received stock for compensation and then turned the stock over to Southwestern Bell Corporation or another affiliate.)
8. Whether the organization will use information obtained by the operating companies in the business.
Finally, since Yellow Page profits are a direct result of basic exchange telephone service, local ratepayers should benefit directly from the profits of directory operations.
IX
THE HOLDING COMPANY’S CREATION OF A SEPARATE YELLOW PAGES SUBSIDIARY BREACHED JUDICIAL IMPLEMENTATION OF DIVESTITURE.
*1380In United States v. Western Electric & AT & T,25 the Court states:
“When the Court required AT & T to turn over its Yellow Pages operations to the Operating Companies, it is assumed that the revenues from directory advertising would continue to be included in the rate base of the Operating Companies, providing a subsidy to local rates. Yet, the Regional Holding Companies, or some of them, have breached [emphasis mine ] that understanding. Instead of funnelling Yellow Pages revenues to the Operating Companies, they have created separate subsidiaries to handle their directory publishing operations which do not [emphasis original ] feed the revenues from these operations into the rate base.”
At footnote No. 79 of the opinion, it is noted that Southwestern Bell Corporation is one of the Regional Holding Companies that has established a directory publishing operation in a separate subsidiary, in breach of the understanding referred to in the body of the opinion. At footnote No. 80, the opinion goes on to observe that revenues from Yellow Pages operations have always far exceeded the costs of publication. Moreover, if there should ever come a time when these operations are not profitable, the Regional Holding Companies could simply discontinue them. In short the arrangement does not assist the ratepayers; it assists only the Holding Company.
In the present case, the Corporation Commission was not only remiss in ignoring the impropriety of the Holding Corporation’s creation of the separate subsidiary for the Yellow Pages operation, but in deferring remedial action as to the value of the Yellow Pages operation and declining to even address issues surrounding this concern until the “next” request for a rate increase. In this respect, the Commission indeed failed to regularly pursue its regulatory responsibility. Nor have I found evi-dentiary support in the record to substantiate the Holding Company’s imputation of revenues relative to the expenses imputed to the local telephone operation as a consequence of the creation of the Yellow Pages subsidiary. Conclusory generalizations are not substitutes for competent evidence.
X
SOUTHWESTERN BELL’S EQUITY-LADEN CAPITAL STRUCTURE IS INAPPROPRIATE FOR RATEMAKING PURPOSES
Southwestern Bell is economically healthy. Southwestern Bell is in sound financial condition. Southwestern Bell’s bond rating is AA-A2. During 1984 Southwestern Bell Corporation was able to raise $2,494 million, or $1,945 million after the payment of dividends, from internal sources (i.e., income, depreciation, and tax credits and deferrals) to carry out its construction and capital expenditure program, which amounted to $1,804 million. During 1984, the book value of Southwestern Bell Corporation’s outstanding common stock increased by $511 million, as retained earnings rose by $334 million after the payment of $549 million in stock dividends.
On a systemwide basis, out of revenues totalling $7,191 million, the Company required $4,742 million to cover its current operating and maintenance expenses, taxes and interest payments. In other words, Southwestern Bell Corporation’s net cash flow available for stockholder dividends and investment amounted to one-third of its total revenues.
Total Return = Current + Expected
to Investor Dividend Dividend
Yield Growth Rate

Since an individual investor cannot control either the dividend yield or the dividend growth rate, his decision about the adequacy of returns is reflected by his buy, sell, and hold decisions.

Because unregulated competitive enterprises are more risky than regulated utili*1381ties, it would be poor regulatory policy to permit utilities to earn profits in excess of or equivalent to earnings in the competitive sector.
Southwestern Bell is meeting all of its capital requirements from internal sources and there is little likelihood that the Company will be required to issue any new common stock to the public to support utility services in the foreseeable future. This means that there will be no public issuance expenses incurred and therefore, it is unnecessary to include any allowance in customer’s rates. There is no reason to charge customers for costs that will not be incurred in the course of providing utility service.
Moreover, Southwestern Bell’s common equity ratio is already more than adequate for utility service purposes and further common equity capital would not be the most economical source of additional telephone utility funds. This means that no allowance for issuing common stock is needed since it is neither necessary nor reasonable to provide revenues to cover hypothetical costs which are not attributable to serving the needs of the Company’s Oklahoma jurisdictional customers.
Utility operations, including those of independent local exchange telephone utilities, which are substantially protected from corresponding risk through the regulatory process generally have lower common equity ratios, typically in the 40% to 45% range, (vs. Southwestern Bell’s proposed 55.47% common equity ratio).

Southwestern Bell’s proposed capital structure contains an unnecessarily large share of common equity capital. The cost of the Company’s decision to maintain an unnecessarily high common equity ratio in support of jurisdictional telephone utility service substantially exceeds any benefits which the Company and its customers receive as a result of that decision.

The Company’s ratepayers should not be required to pay the unnecessary costs of a chosen financing strategy, but, instead should be held responsible for paying only a fair return on the Company’s assets devoted to public service. The Commission therefore may use an imputed consolidated capital structure.
The excessive cost of maintaining a common equity ratio that is too high is the resulting higher overall return requirement (including income tax allowances) that is largely attributable to the higher percentage of common equity in the Company’s overall capital structure.
The Bell company capital structure is more similar to non-regulated industries than to other utilities. This reflects, in part, AT & Ts traditional debt financing at the parent company level, which required less debt at the subsidiary level in order to keep the consolidated capital structure in balance. It also reflects an old Bell system regulatory strategy that has worked well for a time in some states where regulators focused on the equity return ratios. Today, it is more widely recognized that when excessive common equity ratios are used for ratemaking purposes, utility customers are forced to bear an unwarranted capital cost and tax burden. This is one reason why most electric utilities target their equity ratios in the 40% range.
Commissions have concluded that rates for basic utility services should not bear the higher cost of equity-rich capital structures that may be necessitated by other diversified operations in competitive markets where comparable degrees of capital structure leveraging would not otherwise be sustainable. When such capital structure issues arise, they may be resolved by reliance upon an adjusted or imputed capital structure or upon an industry average profile.
This is not to say that it is a necessary Commission role to tell the Company how or whether to bring its capital structure into line with appropriate ratemaking standards. Indeed, the Company may elect, for whatever reasons, not to do so, but that should be a matter of management discre*1382tion that does not inflate allowable utility rates. Thus, while the decision about Southwestern Bell’s capital structure is one for the Company, its directors and its shareholders to make, the Commission must be concerned about the capital structure that is used for ratemaking purposes. Whether Southwestern Bell adopts a financing strategy which will produce the minimum cost capital structure is up to the Company. The Commission’s ratemaking determinations in that regard should not be constrained by whether or not the Company chooses a minimum cost capital structure.
Utilities can be permitted to make their own capital structure decisions, with the condition that stockholders (not ratepayers) will bear any excess capital structure costs, and ratepayers will pay rates based on a capital structure that is reasonable in view of jurisdictional utility service requirements. That is, instead of telling Southwestern Bell how to adjust its capital structure, the Commission should instead tell the Company that regardless of what capital structure its management chooses, jurisdictional rates will be determined based on a reasonable common equity ratio. This approach keeps the regulatory and management roles distinct, and it also leaves management and stockholders accountable for management’s discretionary decisions. In this way ratepayers would pay the same amount if the utility had an efficient capital structure and utility revenues would also correspond with the consequences that would occur in a competitive capital market. This type of market-oriented approach should yield better economic efficiency and equity results than if the Commission were to follow a more aggressive interventionist role and prescribe the approach that a company should use to structure its capital optimally.
Moreover, while all telephone utilities rank well below the average unregulated firm, the various Bell Operating Companies face somewhat less equity risk than does the average independent telephone company, typically being larger and operating in a wider and more diverse service area. And while changes have occurred in the characteristics of the BOCs and the environment in which they operate, these changes do not substantially alter the relative risk relationship between the independent telephone companies and Bell companies.
The divestiture has now been in effect for a number of years. The effects of the breakup and related changes on the company’s equity risk are manifest: the discontinuance of the historical relationships between the Bell Operating Companies, AT & T, and Western Electric may increase the business risk of the divested companies; however, the divestiture agreement included certain provisions which have mitigated the risk.
First, the Bell Operating Companies support and share the costs of a centralized organization to provide engineering, administrative, and other support services. The Regional Bell Companies have created Bell Communications Research (Bellcore) to serve this function. The Commission specifically addressed this subject in its last decision regarding Southwestern Bell:
... [WJhile there is no doubt that Southwestern Bell loses some significant benefits of the AT & T “umbrella”, it is likewise clear that the new Central Services Organization will provide some of the lost technical support and the Bell Operating Companies are entitled to royalty free licenses to AT & T patents secured up to the date of divestiture and five years thereafter. (Oklahoma Corporation Commission, Order No. 250987, Cause No. 28002, P. 13.)
Second, AT & T’s restructuring grouped the twenty two divested companies under seven Regional Holding Companies (RHCs), each extremely large relative to most unregulated companies and most other utilities. Taking advantage of this plan, Southwestern Bell Corporation created the following subsidiaries: Southwestern Bell Mobile Systems, Southwestern Bell Publica*1383tions, Southwestern Bell Telephone Company. Other unregulated subsidiaries are bound to follow as the Corporation seeks to “(p)ursue a policy of diversification” as stated in its Mission Statement. (Annual Report of Southwestern Bell Telephone, 1983, P. 3).
Third, in order to allow for an orderly transition, the Modified Pinal Judgment (MFJ) stipulated that:
[U]ntil September 1,1987, AT & T, Western Electric, and the Bell Telephone Laboratories, shall, upon order of any BOC, provide on a priority basis all other support services to enable the BOCs to fulfill the requirements of this Modification of Final Judgment. (P. 3.)
Another obvious aspect of divestiture affecting the risk of the Company and other Bell Operating Companies is the resolution of the Department of Justice’s antitrust case against AT & T. After eight years of great uncertainty, investors now have a clearer picture of the future prospects for AT & T and the Bell Operating Companies. Reflecting this reduction of risk, during their first year on the market, the stocks of the Regional Holding Companies experienced strong growth and popularity. Investors need no longer fear the remote, but potentially vast downside risks of a major antitrust case by the United States Government.
Moreover, as a result of divestiture, the business risk of the average Bell Operating Company has diminished: the Bell Operating Company has a reduced involvement in the relatively volatile toll business, and the bulk of its revenues will be generated from the less risky provision of local access and local exchange services — two areas where it retains a substantial degree both of monopoly power and of government protection from competition.
Furthermore, because divestiture has increased regulatory awareness of the distinctions among different types of toll routes, competitive entry into the Bell Operating Companies’ remaining toll markets (intra-LATA) may be severely restricted, thereby reducing the riskiness of this portion of their business. The Oklahoma Corporation Commission has not authorized in-tra-LATA competition. Should this become a serious problem for the Company, the Commission might authorize a compensation plan or other mechanism to reduce the adverse effects. But even if intra-LATA competition is eventually allowed, the Company will still derive a substantial competitive advantage from its name recognition and longstanding goodwill. While I reject the most pessimistic view of the competitive forces, I recognize that some element of uncertainty has entered the picture. With the many changes in the telecommunications industry and sharply increased local telephone rates, some ratepayers are closely scrutinizing their options. In some instances, a customer can save money by constructing his own bypass system. In others he may discover readily available tariffed services, like private line services, which can serve the same purpose at an even lower cost. Such opportunities are not a new phenomenon, but customer awareness of them has been growing. To the extent that local telephone companies allow inflation of their labor and spiralling costs, they may be vulnerable to bypass and other costsaving customer options due to customer awareness of lower cost alternatives. However, bypass need not be a problem if the local telephone company adopts a properly designed and reasonable set of access charges. The Corporation Commission noted in Southwestern Bell Telephone Company’s last rate proceeding in this jurisdiction that although bypass was a possible problem, it did not presently loom large. The Commission specifically stated:
“While we are not ignorant of the alleged ‘bypass’ threat, very little evidence has been presented to this Commission that such a threat is currently serious in Oklahoma.” (Oklahoma Corporation Commission, Order No. 250987, Cause No. 28002, P. 13.)
Accordingly, the extent of the Company’s “bypass risk”, at this juncture, can remain *1384minimal, or be largely mitigated by the Company, dependent upon an equitable and efficient balance between the interests of the Company and its investors and those of its customers. Such a balance, which occurs naturally in the world of competition, is clearly a desirable goal for regulation in the public interest.
XI
UNIVERSAL SERVICE OPTION
The Company’s universal service option to residential customers is objectionable for two reasons. First, it is discriminatory in its implementation; and, Secondly, even if the discriminatory classification were justified, it does not insure that basic telephone service will be available to all people at comparable rates. The plan would be less discriminatory if the call allowance were set at the average number of calls for all customers. The average number of local calls per line in Oklahoma is 270 calls per month. The Company proposed a 30 call allowance. Either this should be raised to at least 90 calls per month, or the level of subsidization should be lowered to a level proportionate to regular service. The telephone company should not be allowed to charge a customer more than the regular service rate. Customers choosing the universal service option should not be billed at a level higher than the authorized flat rate service level. Low income users under the universal service option should not pay higher rates than they would if they had chosen regular flat rate service. Without these modifications, the so-called universal option plan is unconstitutionally discriminatory and merely represents a move toward local measured service.
XII
SOUTHWESTERN BELL’S BILLING METHOD SHOULD BE INVESTIGATED
Southwestern Bell bills affiliates for its services on an “incremental cost basis, plus a contribution”,26 according to its *1385Accounting Opinion No. 47. There is no method specified for how one determines incremental costs. Since a “contribution” is added to move the cost to a so-called market price, the costs must be short-run. This method allows Southwestern Bell substantial flexibility in what it charges its affiliates for services. Since ratepayers must bear the full cost of operations, there does not appear to be any great benefit to ratepayers as a result of this practice. On remand this practice should be fully investigated.
The total cost for Southwestern Bell Corporation activities for the test-year was $6.3 million dollars. The Commission should not include any of these costs until Southwestern Bell can provide complete documentation and justification why its parent’s charges should be passed on to Oklahoma ratepayers. Southwestern Bell has presented no reason why, for example, Southwestern Bell Corporation advertising should be paid for by local exchange ratepayers or why Southwestern Bell Corporation corporate planning is necessary for the provision of local exchange services. In response to a data request, Southwestern Bell provided a “one” word description of the basis for allocating these costs to the subsidiaries; (Exhibit A.B.-5 contains that response.) Southwestern Bell Corporation should be required to provide a complete description of the billing method used to allocate these costs and the actual allocation to each affiliate.
XIII
AN INCREASE PRIMARY IN LOCAL SERVICE RATES IS NOT JUSTIFIED.
Southwestern Bell has not provided justification for increasing local exchange rates rather than access, toll centrex rates or other rates. Costs should be the basis for rates. Even if the Commission departs from costs due to public policy reasons, the Commission should know the underlying costs of services. In addition, services that use common facilities, like the loop, must also be assigned a portion of these costs and the decision on what portion to assign must be determined by the Commission since the market forces (due to the monopoly nature of basic exchange service) are not sufficient to allocate these costs.
Southwestern Bell generally is urging that the entire increase be placed on local service rates. A properly constructed post-divestiture service category should have been presented to determine what the costs are for each major service category, (e.g., local exchange, Centrex, intrastate intra-LATA toll, intrastate intraLATA private *1386line, intrastate access and supplemental service.)
XIV
SERVICE CHARGES
Southwestern Bell’s service charge cost study presented the total -company cost of providing service connection even though about 32% of these costs are currently assigned to the interstate jurisdiction and recover from interstate rates. Another 20% is assigned to intrastate toll. The total costs presented by the Company need to be separated so that only the portion attributed to local operations is recovered from service charges. Otherwise, the Company will recover these costs twice.
In this regard, just as the Company’s total cost of service must be separated and a portion allocated to the interstate jurisdiction, so must the cost of establishing telephone service. Service is established not only in order to make local calls but also for interstate and intrastate toll calls as well. Although the FCC has required companies to expense station connections, it has not removed those expenses from jurisdictional separations. In calculating an alternative cost-based rate, the Company should recognize jurisdictional separations procedures. This simply means that the rate established for service charges should reflect the actual costs allocated to the local jurisdiction that the Company must recover from local operations.
Current separations procedures would apply the subscriber plant factor to these costs; this would assign about 52% of the costs to toll services (interstate and intrastate toll) and 48% to local ... Recognizing the proposed separations allocation the cost of obtaining access should be reduced by 50% for local exchange. The other 50% should be recovered through interstate in-tra-LATA toll rates and carrier access charges.
There are additional reasons why the . cost of establishing service should be passed on to the toll services or inter-LATA carriers. Every time a customer begins service, that customer creates another opportunity for toll calls to be completed. In addition, consider the fact that every new customer of Southwestern Bell also automatically becomes a customer of ATTCOM (AT & T Communications), the dominant inter-LATA carrier. No other inter-LATA carrier receives the same treatment. To obtain service from carriers such as MCI or SPCC, a customer must contact them and obtain an account number until equal access. To use ATTCOM, however, one simply uses one’s own telephone number. Every time a customer is added to the Southwestern Bell system, a new profit center is created for AT & T — an advantage for which it should pay.
XV
MAINTENANCE OF SERVICE CHARGE
The maintenance of service charge should be applied whenever the trouble is found to be in the customer’s equipment, or when the trouble is found to be in the inside wire, and the customer has not subscribed to Optional Wire Maintenance Plan. The charge should not be applied if the trouble is found to be in the telephone company line.
XVI
BELLCORE
Bell Communications Research (BCR), Inc., is a Southwestern Bell Telephone affiliate, which replaces the license contract-type service, i.e., centralized services, as a result of divestiture. An economist specializing in the telecommunications industry, testified that 25.2% of the expenses which are related to new services and research by BCR should be disallowed. Several potential problems with Bellcore must be examined to determine whether Bellcore operations have caused or will cause higher local rates.
The services now performed by the holding company are those which under the *1387pre-divestiture system were performed by AT & T’s General Department; also, those services now performed by Bellcore, called Bell Communications Research, Inc., were under the pre-divestiture system performed by Bell Laboratories. These activities were funded by the BOCs through mechanisms such as the license contract. Now various changes in AT & T’s structure have led to the creation of new entities; services once performed by AT & T and BTL will now be performed by the Regional Holding Companies, which is Southwestern Bell Corporation (SWBC) for Southwestern Bell (SWB) and Bell Communications Research (BCR).
Divestiture eliminated the centralized services agreement called the license contract. As to licensing requirements, Judge Green in the 1982 opinion of the Federal Court said:
“Until now, AT & T’s research and development have been financed primarily through the licensing contracts with local Operating Companies. As long as ratepayer-financed local exchange revenues were supporting this research and development, it made sense to require AT & T to share the fruits of its monopoly financing with others. But under the proposed decree, the licensing contracts will be terminated, and this rationale for exclusive licensing thus falls. Moreover, AT & T would be forced after divestiture to fund its research and development just like other competitive enterprises —without an artificial subsidy from captive ratepayers." (p. 80, emphasis added.)
BCR (Bellcore) is funded, owned, and operated by the newly created Regional Holding Companies. Some activities previously funded through licensing contracts will be assumed by BCR. In addition, SWBC, the parent company, is providing certain centralized services to its operating entities, including Southwestern Bell in Oklahoma. Bellcore is budgeted on a yearly basis. An evaluation of every project undertaken and its corresponding budget is supposed to be conducted each year to determine whether it should continue and at what level of expenditure. This is called zero-based budgeting.
XVII
THE DOCUMENTATION OF BELLCORE ACTIVITIES FOR 1984 WAS NOT SUFFICIENTLY DESCRIPTIVE TO AS SIGN MANY OF THE ACTIVITIES TO THE SERVICE BENEFITTED.
Testimony was that BCR activities will benefit activities other than local exchange. Purportedly, BCR will be focusing on a number of activities, including research and new service concepts that do not benefit current local exchange ratepayers. About 25% of BCR costs are related to these types of activities.
Local ratepayers should not be required to pay for the creation or implementation of new services. Also, substantial portions of the BCR budget will be spent on research. Research, although it may eventually benefit local ratepayers, will benefit many different commercial operations outside the local telephone company. This research should therefore not be paid for through Southwestern Bell’s rates unless there are direct and immediate benefits to the current services provided by Southwestern Bell. The Commission must insure that future BCR expenses are not used in the same manner.
The settlement of the antitrust case allowed, but did not require, the divested BOCs to establish BCR. BCR is similar to the license contract. The BOCs have a track record of including various competitive and new enterprise costs in the license contract. Therefore, the Commission should require from the BCR as well as all affiliates proof that clearly documents the purpose, cost and service category benefitted to permit regulatory analysis of every charge to Southwestern Bell. All affiliate activities are not clearly benefitted Southwestern Bell’s current ratepayers should be disallowed.
*1388We are dealing with a relatively new affiliate. The Commission should start this relationship off on the right foot by requiring that each activity of the BCR be shown to benefit the current services provided by Southwestern Bell. Activity that relates to enhancement of current services of the offering of new services should also be identified. Southwestern Bell should provide the Commission with an Annual Report that describes the activity, provides the direct and support costs separately, the purpose of the activity and the specific service or services that the activity will benefit, and how that activity benefits the service. Activities that relate to more than one service should describe why the activity relates to more than one service and which services are benefitted.

The costs of activities related to future services or research should be recovered from future service and not passed onto current ratepayers.

XVIII
WHAT SHOULD THE COMMISSION DO?

The Commission should disallow SWBC expenses included in Southwestern Bell’s test-year in this proceeding for the State of Oklahoma. The Commission should consider and examine the impact of restructuring of the Bell System into SWBC, and order the company to provide the necessary data on all affiliates. Until that complete information is provided and the Commission has determined to what extent ratepayers have funded these new enterprises, the Commission should require that any rate increase granted as a result of this proceeding be subject to refund. In addition, the Commission should recognize in this proceeding that the equity capital attributable to these new competitive subsidiaries should be separated from the local telephone operations.

In United States v. AT & T, supra, the Federal Court relied upon the assumption that:
“To be sure the States are closely regulating such activities as the transfer of assets by entities within their jurisdictions and the types of business operations in which the Operating Companies may engage.”
However, activation of this responsibility is overdue in Oklahoma.

. The Tunney Act, 15 U.S.C. § 16(e) required the Court to determine whether the Modified Final Judgment was "in the public interest.” Implementation thereof therefore must be effected in the manner most consistent with its purposes. The parties cannot proceed with implementation, or non-implementation, without fear of judicial interference. See, United States v. AT & T, 552 F.Supp. at 214-217.

. Id, at Modification of Final Judgment, I-(A)(1.).

. United States v. Western Electric Company, Inc. v. American Telephone and Telegraph Com-pony, 592 F.Supp. 846 at 867 (1984).

. Id, at 874.

. Id, at 875.

.Id.

. Permian Basin Area Rate Cases, 390 U.S. 747, 794-5, 88 S.Ct. 1344, 1374, 20 L.Ed.2d 312, 352 reh’g denied, 392 U.S. 917, 88 S.Ct. 2050, 20 L.Ed.2d 1379 (1968).

. Teleco, Inc. v. Corporation Commission, 653 P.2d 209, 212 (Okla.1982);

.Id. at 212.

. See, e.g. Abbott Labs v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967).

. Art. 9, Sec. 18, Okla. Const.

. Kuykendall v. Corp. Commission, 634 P.2d 711 (Okla.1981).

. State ex rel. Cartwright v. Okla. Natural Gas Co., 640 P.2d 1341 (Okla.1982).

.Application of Valliant Tel Co., 656 P.2d 273, 275 (Okla.1982).

. General interpretation of the Rule 24 requirements evidently compelled the Commission to comply with constitutional notice and publication requirements therefore delaying immediate consideration thereof.

. The Attorney General necessarily filed a precautionary appeal, pending interpretation of Rul2 24; otherwise a contrary ruling would preclude an appeal altogether.

.The basis of the motion to dismiss was the very fact that the Attorney General had filed tin appeal, thereby penalizing the Attorney General's exercise of prudence in uncharted waters per the interpretation of Rule 24.

. Southwestern Public Service Co. v. State, 637 P.2d 92 (Okla.1981); Southwestern Cotton Oil Co. v. Farmers Union Co-Op Gin, 165 Okl. 31, 24 P.2d 658 (1933).

. Id.

. Note 18 supra.

. Id.

. It is the long standing rule in this jurisdiction that in determining the adequacy of a rate, a public utility will be held to be entitled to a fair return on the present value of its property which is used and useful in serving Oklahoma public ratepayers. Okmulgee Gas Co. v. Corporation Commission, 95 Okl. 213, 220 P. 28 (1923); Southwestern Public Service Co. v. State, 637 P.2d 92 (Okla.1981); Lone Star Gas Co. v. Corporation Commission, 648 P.2d 36 (Okla. 1982).

.In Lone Star Gas Co. v. Corporation Commission we adopted the “benefits and fairness test” as announced in Northern States Power Co. v. Hagen, 314 N.W.2d 278 (N.D.1982).

. Id. Whether viewed technically as based on cost of service or as an addition to cost of service, rates must reflect a relationship to service or benefit provided in order not to be unreasonable or to discriminate unduly among classes. Also, See, LaRowe v. Kokomo Gas and Fuel Co., 179 Ind.App. 563, 386 N.E.2d 965, cited with approval by this Court in Lone Star, supra.

. 592 F.Supp. 846 (D.D.C.1984).

. A study of the cost and revenue relationship of broad categories of service for a prior calendar year. The total of these categories includes all services provided by Southwestern Bell. direct costs = those costs which can be identified as being caused directly by provision of services within a specific category. If the service had not been provided then these costs would not have been incurred.
Network access = costs associated with providing access into "the network. ” This access into the network may be used either for local exchange service or for state or interstate message telephone service. It is economically inappropriate to recover these non-traffic sensitive costs through usage sensitive rates.
common costs = costs which are not direct costs since they are not directly assignable to the provision of any specific group of products or services. They are corporate overhead costs and as such cannot he assigned on a cost-causative basis.
Embedded Direct Analysis (EDA) assigns
"booked” costs and revenues to the various service categories. This enables the EDA to balance the books and records of the company. Therefore for study purposes, a calendar year is chosen since year-end reports are available, year-end accruals are included, and clearing accounts are closed.
EDA is an account-by-account analysis of operating revenues, plant investments and all expenses, wages, and capital costs, so that total costs equal total revenues. The advantage of this approach is that the total result “closes to the books", that is, the EDA results are consistent with accounting and financial reports. The revenues associated with each category are first identified and quantified. Then the operating expenses taxes, and return are assigned to the various service categories on a cost-causative basis. The basis for the cost assignments fall into one of the following categories: Direct Assignments; Investment Related; Wage or Other Cost Related; Work Unit Related; and Special Studies. EDA DEALS WITH OVERALL ACCOUNTS AND IS NOT INTENDED TO SHOW REVENUE AND COSTS BY INDIVIDUAL PRODUCTS OR SERVICE.
EDA divides operating revenues into three broad categories: Local Service Revenues; Toll Service Revenues; and Miscellaneous Revenues. Total Operating Revenues is the sum of these three less Total Uncollectible Operating Revenues. (The individual sources are not directly identifiable.)
EDA, however, has a separate logic for analyzing investments and costs. Many costs (such as taxes, depreciation and return) are assigned on the basis of the related investment. EDA assigns the fixed assets of the firm to the service categories — the related investments follow. Division of revenues is therefore dif*1385ficult to ascertain. Where a cost item can be attributed to several services, a cost ‘factor" is used to “split” the cost. This results in near-impossibility in tracking investments and costs in the absence of the accounting working papers. THIS CAN ELIMINATE COST/REVENUE RELATIONSHIP EFFECTIVELY.
supplemental services = additional services over and above that required for basic residence exchange service. The majority of costs in the category are associated with providing Touch-Tone and Custom Calling Services.
Common to Firm = costs which are common to all categories and which, purportedly, are not directly assignable to specific services on a cost-causative basis. Executive, Legal, Financial, and Personnel expenses are included. This is impermissibly non-specific and involves cost averaging among various services, having little clarity as to the cost/revenue relationship.
“hot wire" or “pair-mile" = the term “hot wire” fill factor is based on the relationship of pair miles producing revenue to total pair miles in plant. Fair miles in plant per subscriber loop is based on the relationship of subscriber pair miles in plant to subscriber working pairs.
*note: The test year in this Cause is January 1, 1984 to December 31, 1984 (even though annualized.) It is therefore historical at this point, and it is now unnecessary to make "forecasts" and “predictions" with respect to it.

It is no longer 'forward looking" and can be detailed and quantified. No assumptions need now be relied upon.

fill factor investment (or costs) = spare capacity. There are no other factors utilized for spare capacity other than “fill factors.”
IDC = Interest During Construction. May be included in a company’s CWIP.