STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITIZENS OF THE STATE OF FLORIDA, )

)

Petitioners, )

)

vs. ) CASE NO. 79-1124RP

)

ROBERT T. MANN, Chairman, ) Commissioner WILLIAM T. MAYO, ) Commissioner GERALD L. GUNTER, ) Commissioner JOSEPH P. CRESSE, ) and Commissioner JOHN R. ) MARKS, III, as and constituting ) the FLORIDA PUBLIC SERVICE )

COMMISSION, )

)

Respondents. )

)

FINAL ORDER

This is a proceeding brought pursuant to Section 120.54(4), Florida Statutes. Petitioners are seeking a declaration that a rule proposed for adoption by the -Florida Public Service Commission constitutes an invalid exercise of delegated legislative authority.

FINDINGS OF FACT

1. Southern Bell Telephone and Telegraph Company filed petition with the Public Service Commission pursuant to Section 120.54(5), Florida Statutes, seeking to have the Commission adopt a new rule numbered 25-9.11(2). By Order entered April 10, 1979, the Commission initiated rule-making proceedings in accordance with the petition of Southern Bell, and by Order entered May 4, 1979, amended the rule-making proceeding by expanding the applicability of the proposed rule to include not only telephone utilities as proposed by Southern Bell, but also electric, gas, water and sewer utilities. On May 24, 1979, the Citizens of the State of Florida, represented by the Office of Public Counsel, initiated the instant proceeding by filing a petition to determine that a portion of the proposed rule is invalid. Various regulated utilities moved to intervene in the proceeding, and were granted intervenor status. The Public Service Commission and various other Intervenors moved to dismiss the proceeding on jurisdictional grounds. The motions were denied by Orders entered June 12 and 19, 1979. The Public Service Commission filed a Petition for Writ of Prohibition in the Supreme Court of Florida with respect to the jurisdictional issues. Proceedings before the Division of Administrative Hearings were stayed. The Petition for Writ of Prohibition was denied on September 5, 1979. Florida Public Service Commission v. Division of Administrative Hearings, Case No. 57,116 (Supreme Court of Florida). A Petition for Rehearing was denied by Order entered November 9, 1979. Subsequently, the final hearing was scheduled to be conducted on December 27, 1979, and upon stipulation of the parties was rescheduled for January 22, 1980.

2. At the final hearing, the Public Service Commission and the Intervenors stipulated that the Petitioners have the requisite substantial interest in the proposed rule to maintain the instant rule challenge. The Petitioners and the Commission stipulated that the Intervenors have the requisite standing to participate in the proceeding as Intervenors. A copy of the rule was received in evidence. Issues respecting the validity of the rule are legal rather than factual, and the parties have submitted post-hearing briefs and legal memoranda.

   
   

3. The proposed rule [25-9.11(2)] relates to whether a regulated utility is entitled to a rate increase during the period in which a rate proceeding is pending before the Public Service Commission. The rule provides:

   
   

   In any general rate case filed by a utility, the utility shall be permitted upon thirty (30) days' notice to increase its rate pending final disposition of the case by an amount sufficient to produce a rate of return on its investment rate base at the bottom of its most recent previously allowed zone of reasonableness;

   provided, however, that any such interim increase shall be subject to refund.

   
   

4. The rule purports to implement the provisions of the so-called file and suspend laws. As to telephone companies, the file and suspend law is set out at Section 364.05(4), Florida Statutes. The section provides:

   
   

   Pending a final order by the Public Service Commission in any rate proceeding under this section, the commission may withhold consent to the operation of all or any portion of the new rate schedules, delivering to the utility requesting such increase, within 30 days, a reason or written statement of good cause for withholding its consent. Such consent shall not be withheld for a period longer than 8

   months from the date of filing the new schedules. The new rates or any portion not consented to shall go into effect under bond at the end of such period, but the commission shall, by order, require such utility to keep accurate account

   in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and upon completion of hearing and final decision in such proceeding, shall by further order require such utility to refund with interest at a fair rate, to be determined by the commission in such manner as it may direct, such portion of the increased rate or charge as by its decision shall be found not justified. Any portion of such refund not thus refunded to patrons or customers of the utility shall be refunded or

   disposed of by the utility as the commission may direct; however, no such funds shall accrue to benefit of the utility.

   Virtually identical provisions have been adopted with respect to gas and electric utilities [Section 366.06(4), Florida Statutes], and with respect to water and sewer utilities [Section 367.081(5), Florida Statutes]. The leading judicial decision interpreting the provisions of the file and suspend laws is Citizens of the State of Florida v. Mayo, 333 So.2d 1 (Fla. 1976). The Court described the alternatives available to the Public Service Commission in conjunction with a request for interim rate increase as follows: (at p. 4)

   
   

   1. If the Commission does not affirmatively act within 30 days to suspend the proposed new rate schedule file as a part of the request for higher rates, the new rates go into effect automatically on the 31st day following the utility company's filing. Since the Commission's inaction is equivalent to its consent to the new rate schedule, no bond is required of the utility and there is no mechanism by which customers of the utility system can ever recover interim charges which, after the full rate proceeding, the Commission

      may find to have been wholly or partly unwarranted.

   2. If the Commission acts within thirty days to suspend all or part of the tariffs, the utility may not charge its customers the proposed new rates. The Commission's action

      is effective on a day to day basis until either (a) it grants full or partial consent to the new rates, or (b) eight months elapse from the date the new schedules were filed.

      If consent is given before the time expiration, as it was here, the utility may then begin to charge the new rates. Where consent is continuously withheld, the utility may still begin to charge its customers on the new basis after eight months have passed, under bond and record-keeping requirements required by statute.

      
      

      The relationship of the interim rate relief provisions to the general scheme of rate regulation was described by the Court as follows: (at p. 5)

      
      

      1. The Legislature did not intend all public utility filings to go into effect without some review by the Public Service Commission. Had that been the intent the Legislature would not have created a "suspend" power in the Commission.

      2. By placing the file and suspend law in Section 366.06, however, the Commission was given direct responsibility in this type of proceeding to insure that all charges collected by a public utility are lawful.

         See Section 366.06(1), Florida Statutes (1975).

      3. The Legislature did not intend a full rate hearing before all new rate schedules become effective. Had it intended that result, there would have been no need to enact subsection 366.06(4) at all.

      4. The Legislature obviously intended to

         allow public utilities the benefit of proposed rate increases from the date they could satisfy the Commission on the basis of an uncontested preliminary showing that the needs of the company were such as to necessitate immediate financial aid. Where the Commission is so satisfied after a preliminary analysis extending over a period not longer than thirty days, the rates become effective without further action by the Commission. (It follows from this, of course, that the Commission's affirmative act of suspending proposed rates means that the Commission is dissatisfied with the utility's preliminary showing.)

      5. The Legislature has relieved the Commission of the responsibility for balancing the rights

         of the company and its customers when the utility is unable to develop new facts to show that there exists good cause to put into operation the new rates which have been found to be unjustified on the basis of the preliminary showing. This was done by providing that Commission inaction following an initial suspension is overcome by time, and that the rates become effective at the end of eight months, automatically, under bond.

      6. In light of the conclusion in paragraph 5 and the fact that the Commission must provide its "reason or written statement of good cause" whenever it withholds consent to the new rates, the Legislature must have intended that there be some presentation of evidence or development of new facts between that initial withholding of consent by the Commission and its later grant of consent. (citations omitted)

      
      

5. Petitioners contend that the proposed rule is invalid because it would render an interim rate increase automatic upon the filing of a request for interim rate relief by a regulated utility without regard to the merits of the request and without any review of the propriety of the request by the Commission. Petitioners argue that the proposed rule removes the discretion and range of alternatives available to the Commission set out in Citizens of Florida

   v. Mayo, supra. These contentions are without merit. Rather than making an interim rate increase automatic, the proposed rule sets the standard against which a proposed increase would be measured, that being a rate sufficient to produce a return on the utility's investment at the bottom of the most recently determined zone of reasonableness. The utility's expenses, revenues and investment rate would be calculated in the same manner as was used in the most recent general rate case involving the utility. See: proposed Rule 25-9.11(4). Under the proposed rule, the public Service Commission would retain its discretion to suspend an interim rate increase if the substantive requirements of the proposed rule were not met. The Commission would also retain its responsibility to consider the propriety of interim rate increases.

   
   

6. Petitioners' contention that the proposed rule improperly denies appropriate parties who may contest the need for interim rate increases an opportunity for hearing is also without merit. The rule does not address

   procedures to be followed by the Commission in applying the substantive standards of the rule. The fact that procedures are not addressed does not mean that no such procedures exist. The rule neither expressly nor implicitly undermines rights to a hearing that parties may have under the Administrative Procedure Act, Chapter 120, Florida Statutes, or under constitutional due process requirements, Florida Power Corporation v. Hawkins, 367 So.2d 1011, 1013 (Fla. 1979).

   
   

7. Petitioners further contend that the proposed rule is an effort to reinstate the so-called "make-whole" doctrine set out in Southern Bell Telephone and Telegraph Company v. Bevis, 279 So.2d 285 (Fla. 1973). Petitioners' argument is that the make-whole doctrine has been superseded by the file and suspend laws. In Southern Bell, the utility requested that the Public Service Commission grant it an interim rate increase pending completion of a general rate proceeding. The Commission denied the request for interim relief. The Court stated: (at p. 286)

   
   

   Thus when Southern Bell alleged that its rate of return was below that approved by the Commission as a minimum it had alleged a prima facie case to require approval of the Commission for an interim rate increase, so long as the increase would not raise the company's rate of return above the minimum level of 8.25 percent approved by the Commission. Since it must be assumed that the Commission obeyed its statutory mandate. . . any rate of return above the authorized minimum must, of necessity, be unfair, unjust, unreasonable and insufficient.

   
   

   If Southern Bell has proved the allegations which were made in its petition for an interim rate increase, the Commission must approve that request so as to bring the Southern Bell rates within statutory guidelines. It is for the Commission to determine whether or not Southern Bell has met this requirement, as the Commission sits as trier of fact, rather than this Court.

   
   

   The proposed rule adopts this same standard. The file and suspend laws have not changed that standard, but rather have streamlined the mechanism for considering whether interim rate increases should be granted. Maule Industries, Inc. v.

   Mayo, 342 So.2d 63 (Fla. 1977); Citizens of the State of Florida v. Mayo, supra, at Footnote 12, p. 6.

   
   

8. The Petitioners have failed to establish that Public Service Commission Proposed Rule 25-9.11(2) constitutes an invalid exercise of delegated legislative authority. The proposed rule is presently pending for consideration before the Commission. Whether the proposed rule constitutes the best of various policy alternatives that may be available to the Commission has not been an issue in this proceeding. Based upon the foregoing, it is, hereby

ORDERED:

Petitioner has failed to establish that Proposed Rule 25-9.11(2) of the Public Service Commission constitutes an invalid exercise of delegated legislative authority, and the petition to determine invalidity of the proposed rule filed by the petitioners is hereby dismissed.

ENTERED this 22nd day of February, 1980, in Tallahassee, Florida.

G. STEVEN PFEIFFER Assistant Director

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Norman H. Horton, Jr., Esquire Marta Crowley, Esquire

Staff Counsel

Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Benjamin H. Dickens, Jr., Esquire Office of Public Counsel

Room 4, Holland Building Tallahassee, Florida 32301

Lorin H. Albeck, Esquire Post Office Box 110 Tampa, Florida 33601

Lee L. Willis, Esquire Ausley, McMullen, McGehee,

Carothers & Proctor Post Office Box 391

Tallahassee, Florida 32302

William E. Sundstrom, Esquire Myers, Kaplan, Levinson

Kenin & Richards

1020 East Lafayette Street Tallahassee, Florida 32301

James F. Sanfield, Esquire Post Office Box 14042

St. Petersburg, Florida 33733

Ms. Nancy H. Roen

1111 South Bayshore Drive Miami, Florida 33131

Matthew M. Childs, Esquire

1400 Southeast First National Bank Bldg. Miami, Florida 33131

Ms. Mary Jo Francis Post Office Box 47000N Miami, Florida 33147

William B. Barfield, Esquire General Attorney

666 North West 79th Avenue, Room 680 Miami, Florida 33126

Ms. Liz Cloud, Chief

Bureau of Administrative Code Department of State

The Capitol

Tallahassee, Florida 32301

Carroll Webb, Esquire Executive Director

Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301

Docket for Case No: 79-001124RP

Orders for Case No: 79-001124RP