STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GULF TELEPHONE COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 81-2201RP

)

FLORIDA PUBLIC SERVICE )

COMMISSION, )

)

Respondent. )

) INDIANTOWN TELEPHONE SYSTEM, INC., ) NORTH FLORIDA TELEPHONE COMPANY, ) NORTHEAST FLORIDA TELEPHONE COMPANY,) INC., and ST. JOSEPH TELEPHONE AND ) TELEGRAPH COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 81-2202R

) FLORIDA PUBLIC SERVICE COMMISSION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on March 12, 1982, in Tallahassee, Florida. The issue for determination in these consolidated proceedings is whether the Respondent's proposed Rule 25-4.290, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority.

APPEARANCES

For Petitioner Edwin B Browning, Jr.

Gulf Telephone Davis, Browning and Hardee Company: Post Office Drawer 652

Madison, Florida 32340

Lewis W. Petteway, Esquire

1020 East Lafayette Street, Suite 102

Tallahassee, Florida 32301

For Petitioners David Erwin Indiantown Mason and Erwin, P.A.

Telephone 1020 East Lafayette Street, Suite 108 System, et al.: Tallahassee, Florida 32301

For Intervenor

Southern Bell William B. Barfield

Telephone and 666 Northwest 79th Avenue, Room 680 Telegraph Co.: Miami, Florida 33126

Gene V. Coker, Esquire 4300 Southern Bell Center

675 West Peachtree Street Northeast Atlanta, Georgia 30375

For Respondent Patrick K, Wiggins Public Service Deputy General Counsel Commission: 101 East Gaines Street

Tallahassee, Florida 32301 FINDINGS OF FACT

Based upon the Stipulation of Facts filed and executed by all the parties in these proceedings, the following relevant facts are found:

1. Intrastate toll revenues are distributed among all telephone companies in Florida pursuant to procedures and terms contractually agreed upon between each individual telephone company and Southern Bell Telephone and Telegraph Company. The written contracts which embody the agreed upon procedures and terms are on file with the Florida Public Service Commission (PSC), pursuant to Section 364.07(1), Florida Statutes.

   
   

2. Prior to the 1980 amendment to Section 364.07, Florida Statutes, the Florida Supreme Court in the case of Florida Telephone Corporation v. Mayo, 350 So.2d 775 (,Fla., 1977) , addressed the scope of the PSC's authority to regulate intrastate toll revenue settlement contracts. The Court held that although the PSC could regulate service contracts between the telephone companies and their patrons (Florida Statutes, 364.19), and could require that there be filed with it contracts between telephone companies (Florida Statutes, 364.07), "the Commission has no statutory authority to regulate the contractual division of long distance toll revenues between telephone companies." Id at 778.

   
   

3. In preparation for the "sunset review" of Chapter 364, Florida Statutes, by the 1980 Legislature, the PSC submitted the following proposal relating to telephone toll settlement agreements:

   
   

   "The commission is authorized to review and approve all intrastate toll revenue settle- ments and settlement agreements and require the filing of all necessary reports and infor- mation pertinent thereto."

   
   

4. In lieu of the language proposed by the PSC, the 1980 Legislature enacted Section 364.07(2) , Florida Statutes (1981), which reads in pertinent part as follows:

   
   

   (2) The commission is authorized to review intra- state toll settlement agreements and disapprove any such agreement if such agreement is detrimental to the public interest. The commission may also require the filing of all necessary reports and information

   pertinent to intrastate toll revenue settlements. The

   commission is also authorized to adjudicate disputes among telephone companies regarding intrastate tele- communications settlements.

   
   

5. Citing Section 364.07(2), Florida Statutes, as the law being implemented, the PSC's proposed Rule 25-4.290, Florida Administrative Code, under challenge in this proceeding reads as follows:

   
   

   25-4.290 Intrastate Toll Settlement Procedures.

   1. All telephone companies operating under the jurisdiction of this Commission shall base the distribution of intrastate toll revenues upon

      costs as defined by the NARUCFCC Separations Manual and recognize operating revenues, operating expenses, operating taxes and operating investments.

   2. Southern Bell shall compute a share of the balance as follows:

      1. Summarize Operating Revenues.

      2. Subtract from Operating Revenues an amount equal to operating expenses and other taxes, fixed charges, and uncollectables. These amounts comprise the intrastate toll portion of Florida operations for all telephone companies.

   3. The share of the balance shall be distributed to each telephone company based upon the relative amount of equity assigned to the respective

      Florida operations of each telephone company given consideration to financial risk and effective tax rates. The determination of equity dollars shall be made in conformance with the policies and practices of the Commission with respect to ratemaking:

      1. Return on equity is calculated given consideration to financial leverage.

      2. Effective tax rates are calculated given consideration to all tax timing differences

         and investment tax credit normalization procedures.

   4. Each telephone company shall receive as its intra-state toll settlement an amount equal to the intrastatetoll assignment of operating expenses and other taxes,fixed charges, uncollectibles and a "share of the balance" which includes a return on equity as well as a return for income taxes.

      
      

      Specific Authority: 350.127(2), F.S. Law Implemented: 364.07, F.S.

      
      

6. The challenged proposed rule prescribes a method for distributing toll revenues which is different from the method contained in the written contract between Southern Bell and all other telephone companies in Florida. Compliance with the proposed Rule 25-4.290 would require changing or modifying material elements of each contract between Southern Bell and all other Florida telephone companies.

   
   

7. The PSC has made no determination that any contract between Southern Bell and any other telephone company in Florida is detrimental to the public interest, and no such contract has been disapproved by the PSC.

   CONCLUSIONS OF LAW

   
   

8. Pursuant to the provisions of Section 120.54(4)(a), Florida Statutes, the Petitioners have sought an administrative determination of the invalidity of the PSC's proposed Rule 25-4.290, Florida Administrative Code. Because the proposed rule mandates a toll revenue distribution methodology different from that contained in existing contracts between Southern Bell and all other telephone companies in Florida, the petitioning and intervening telephone companies in this proceeding are substantially affected by the proposed rule and have standing to challenge its validity.

   
   

9. An administrative agency, such as the Public Service Commission, has only those powers conferred upon it by statute and possesses no inherent authority. Florida Statutes, Section 120.54(14). It is a creature of the Legislature and is limited to those powers granted, either expressly or by necessary implication, by the statutes creating it. St. Regis Paper Company v. State, 237 So.2d 797 (Fla. 1st DCA 1970); State ex rel. Greenberg v. Florida State Board of Dentistry, 297 So.2d 628 (Fla. 1st DCA 1974); and Department of HRS v. Florida Psychiatric Society, 382 So.2d 1280 (Fla. 1st DCA 1980). If there is a reasonable doubt as to the lawful authority for a particular power that is attempted to be exercised by an administrative agency, that doubt must be resolved against the exercise thereof. Edgerton v. International Company, 89 So.2d 488 (Fla. 1956); State ex rel. Greenberg v. Florida State Board of Dentistry, supra. In determining whether a rule of an agency constitutes an invalid exercise of delegated legislative authority, it must be determined whether or not there is statutory authority for the rule. A careful review of the statutory language sought to be implemented by the proposed rule, the case law which preceded the statutory grant of authority and the terms of the proposed rule itself demonstrate that the proposed rule exceeds the authority granted to the PSC by the Legislature and is therefore invalid.

   
   

10. Prior to 1977, the only statutory authority granted the PSC with respect to intrastate toll settlement agreements between telephone companies was to require that such contracts and agreements be filed with the PSC. Section 364.07, Florida Statutes (1979). The Florida Supreme Court recognized this limited authority of the PSC in the case of Florida Telephone Corporation v. Mayo, 350 So.2d 775 (Fla. 1977). That case held that while the Commission did have the power to regulate telephone service contracts between telephone companies and their patrons, it had no statutory authority to regulate the contractual division of long distance toll revenues between telephone companies.

    
    

11. Seeking additional authority in the area of intrastate toll revenue distribution between telephone companies, the PSC submitted a proposal to the 1980 Legislature that it be authorized to "review and approve" all such settlements and settlement agreements. Instead of conferring the authority to review and approve" all such agreements, the Legislature, by the 1980 enactment of Section 364.07 (2) , Florida Statutes, bestowed a more limited authority to "review" and "disapprove...if such agreement is detrimental to the public interest." It is a cardinal rule of statutory construction that members of the Legislature are presumed to have a reasonable and intelligent command of the English language and that a statute means what it says based upon the ordinary meaning attributed to the words used.

    
    

12. The authority conferred upon the PSC by Section 364.07(2) is to review intrastate toll settlement agreements and to disapprove them only after a determination is made that a particular agreement or contract is contrary to the public interest. The parties have stipulated that no determination has been

    made by the PSC as to whether any particular contract is detrimental to the public interest. Such a determination is a condition precedent to disapproval, and until that determination is made, the PSC has no authority to enact a rule or to otherwise act to disapprove, change or modify existing agreements between Southern Bell and other telephone companies in Florida. Even if a determination were made that a particular agreement was detrimental to the public interest, the PSC would only be authorized to "disapprove" such an agreement. It would not be authorized to rewrite, change or modify the existing agreement. This is what the challenged proposed rule purports to do with respect to the distribution of intrastate toll revenues between telephone companies. It attempts to rewrite all present and future agreements to provide a different methodology for the distribution of toll revenues. The statute, Section 364.07(2), simply does not authorize an attempt to exercise such a power.

    
    

13. In summary, the PSC has no statutory authority to create or rewrite agreements or contracts between telephone companies regarding the division of long distance toll revenues. It has only the limited authority to review such agreements and to disapprove those particular agreements which are determined to be detrimental to the public interest. The challenged rule does not attempt to add specificity or refine the standard for making individual determinations of what may be considered as "detrimental to the public interest." It contains no criteria for the disapproval of contracts. It does not even address the question of public interest or existing contracts or agreements. It simply prescribes the mechanics or methodology for distributing toll revenues in a manner which is different from the method contained in existing contracts between Southern Bell and all other telephone companies in Florida.

    
    

14. Counsel for the PSC contends that the proposed rule does not cancel or disapprove all existing contracts between telephone companies. Rather, it is argued, the proposed rule simply requires existing contracts to be changed or modified to provide for a distribution of toll revenues in the manner prescribed by the rule. This is precisely what the PSC has not been authorized to do; to wit: prescribe the mechanics of dividing up monies between telephone companies in Florida. The Legislature did not bestow upon the PSC the authority to prescribe a new methodology for toll revenue distribution. Instead, it empowered the PSC with the authority to review existing toll settlement agreements and to disapprove only those agreements determined to be detrimental to the public interest.

Based upon the Findings of Fact and Conclusions of Law recited above, it is ORDERED that the PSC's proposed Rule 25-4.290, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority.

DONE and ORDERED this 22nd day of April, 1982, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 1982.

COPIES FURNISHED:

Edwin B. Browning, Jr., Esquire Carroll Webb, Executive Davis, Browning and Hardee Director

Post Office Drawer 652 Administrative Procedures Madison, Florida 32340 Committee

Room 120 Holland Building Tallahassee, Florida 32301

Lewis W. Petteway, Esquire Liz Cloud, Chief

1020 East Lafayette Street Bureau of Administrative Code Suite 102 1802 Capitol Building

Tallahassee, Florida 32301 Tallahassee, Florida 32301

David Erwin Steve Tribble, Clerk

Mason and Erwin, P.A. Public Service Commission 1020 East Lafayette Street 101 East Gaines Street Suite 108 Tallahassee, Florida 32301

Tallahassee, Florida 32301

William B. Barfield 666 NW 79th Avenue Room 680

Miami, Florida 33126

Gene V. Coker, Esquire 4300 Southern Bell Center

675 West Peachtree Street NE Atlanta, Georgia 30375

Patrick K. Wiggins Deputy General Counsel

Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Docket for Case No: 81-002201RP

Orders for Case No: 81-002201RP