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Alaska Public Utilities Commision v. Anchorage Telephone Utility (9/8/95), 902 P 2d 783
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THE SUPREME COURT OF THE STATE OF ALASKA
ALASKA PUBLIC UTILITIES )
COMMISSION and STATE OF )
ALASKA, ) Supreme Court No. S-6452
) Superior Court No.
v. ) 3AN-93-7957 CI
MUNICIPALITY OF ANCHORAGE ) O P I N I O N
D/B/A ANCHORAGE TELEPHONE )
Respondent. ) [No. 4248 - September 8, 1995]
Petition for Review from the Superior Court
of the State of Alaska, Third Judicial
District, Palmer, Beverly W. Cutler, Judge.
Appearances: Virginia A. Rusch, Assistant
Attorney General, Anchorage, and Bruce M.
Botelho, Attorney General, Juneau, for
Petitioners. Heather H. Grahame and Ann M.
Bruner, Bogle & Gates, Anchorage, for
Before: Moore, Chief Justice, Rabinowitz,
Matthews, Compton, and Eastaugh Justices.
Anchorage Telephone Utility (ATU) charged rates for
services not approved by the Alaska Public Utilities Commission
(APUC). APUC ordered a refund of approximately half of these
revenues. On appeal the superior court, sitting as an
intermediate court of appeals, reversed and remanded the case to
APUC. In this petition for review, APUC argues that it has
implied authority to order such a refund. ATU argues that no
authority exists; alternatively, it argues that if such authority
exists, a refund may only be ordered for that portion of the
rates found unreasonable. We reverse.
I. FACTS AND PROCEEDINGS
During an internal review, the Municipality of
Anchorage, d/b/a Anchorage Telephone Utility, discovered that it
was offering several services for which rates had not been set by
APUC. Total revenue from these untariffed services was
approximately $1.2 million. ATU notified APUC, which commenced
an investigation. APUC ordered a report prepared by its staff.
ATU argued that all but one of the untariffed rates
were reasonable. It offered to refund the unreasonable portion
of the revenues from that one service, which amounted to
approximately $68,000, as well as another $30,000 in services, in
an effort to resolve the matter.
APUC issued an order rejecting ATU's argument that only
the unreasonable portion of the rates should be refunded. It
based this on two policy concerns. First, it found that "where
ATU had 25 separate untariffed services which were implemented
and revised at various points in time, it would be a practical
impossibility to go back and determine what rate would have been
approved as reasonable if ATU had followed the law and filed the
tariff for approval." Second, it noted the necessity of
providing an incentive for utilities to comply with the law.
In considering the amount to be refunded, APUC noted
several mitigating factors:
ATU brought the tariff discrepancies to the
Commission on its own initiative; the
discrepancies appear to be the result of
procedural errors that are unlikely to recur
in the future due to the institution of
improved procedures; most of the rates were
at reasonable levels; the revenue and costs
for the services were included in the
determination of ATU's overall revenue
requirement; and ATU's customers received
service for the rates charged.
APUC ordered approximately a fifty percent refund, finding that
this balanced the need for deterrence with the mitigating
factors. A refund of $553,831 was ordered; the total amount
subject to possible refund was found to be approximately $1
ATU appealed to the superior court. Appellate Rule
602(a)(2). The superior court ruled for ATU, concluding that
APUC had no authority to order a refund of revenues collected
from untariffed rates. This court granted APUC's petition for
review. Appellate Rule 402.
A. Standard of Review
The question of whether APUC has authority to order a
refund is a question of law not involving agency expertise; thus,
this court applies the "substitution of judgment" standard of
review. Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746
P.2d 896, 903 (Alaska 1987). If the agency has the power to
order a refund, the decision is discretionary and thus is
reviewed under the reasonable basis standard. Lake & Peninsula
Borough v. Local Boundary Comm'n, 885 P.2d 1059, 1062 (Alaska
1994). Because the superior court acted as an intermediate
appellate court, no deference is given to its decision. Tesoro,
746 P.2d at 903.
B. APUC Has Implied Authority to Order a Refund
APUC argues that finding implied power to refund serves
the purpose of the Alaska Public Utilities Act and that power to
order a refund is necessarily incident to its express powers.
ATU responds that since the legislature did not expressly grant
refund power, and instead provided a comprehensive statutory
scheme, no refund power should be implied.
This specific point has not been addressed previously
by this court. Although the Alaska Statutes contain several
sections discussing rates and public utilities, none addresses
the specific point at issue in this case. AS 42.05.371,1
.381(a),2 .391(c),3 .411(a),4 .431(a).5 Consideration of policy
reasons and a review of case law from other jurisdictions
persuades us that APUC does have implied power to order a refund.
Foreign cases both find and reject implied refund
authority. However, those finding implied power are based on
situations similar to this one; those denying implied power arise
from distinguishable situations. The case most analogous to the
instant case is GTE North, Inc. v. Public Service Commission, 500
N.W.2d 284 (Wis. 1993), where the state public service commission
ordered a refund of compensation collected in violation of the
filed tariffs. The court addressed section 196.37(2) of the
Wisconsin statutes.6 GTE argued that the "in the future" phrase
limited the commission to prospective remedies. Id. at 287. The
court examined the former version of the section. It contained a
clause following "in the future," which stated that "and shall
make such other order respecting such measurement, regulation,
act, practice or service as shall be just and reasonable." Id.
at 287. The court noted that the legislation removing this
clause contained language indicating that no substantive change
was intended. Therefore, the court held that the "future" clause
was not a restriction on the commission's powers, and a refund
order was "a just and reasonable order regarding a 'measurement,
regulation, act, practice, or service.'" Id. at 288.
The court went on to analyze the case on policy grounds
and reached the same conclusion. It first noted that it "must
presume a legislative intent that advances the purposes of the
statute." Id. It stated that if the commission has the power to
order a refund, consumers can use "speedy and informal"
commission proceedings to obtain monies to which they would be
entitled. If such authority were lacking, the burdensome court
system would have to be used, something often not worth the
benefit to an individual consumer. The court finally noted that
the commission was likely to enforce its decisions across the
board, something the courts do not have the power to do. Id.
The Oregon Court of Appeals also has held that implied
authority does exist. In Pacific Northwest Bell Telephone Co. v.
Katz, 841 P.2d 652 (Or. App. 1992), the court upheld a commission
order requiring a utility to refund a portion of collected rates
in a situation where no express power existed. The court held:
To hold that PUC does not have the power to
order a refund of amounts over collected
under temporary rates that failed to comply
with an ordered revenue reduction would be
inconsistent with its regulatory role and
statutory duties. Such a holding would
deprive PUC of much of its power to protect
customers from abusive delay tactics or, as
in this case, unexpectedly long delays in
implementing an ordered revenue reduction.
Id. at 656-57. Specifically, the funds at issue were collected
while the commission was considering how to reduce rates and were
above the allowed rate of return. The court characterized the
collected funds as "excess revenues collected under an interim
rate schedule that was not in compliance with the authorized
revenue level." Id. at 657. But the court also noted that "PUC
allowed PNB to . . . operate temporarily under an interim rate
schedule that was . . . higher than the authorized revenue
level." Id. at 654.
Although other jurisdictions have found that their
local commissions did not have implied authority to order
refunds, these cases are distinguishable. In Niagara Mohawk
Power Corp. v. Public Service Commission, 388 N.Y.S.2d 157 (N.Y.
App. Div. 1976) (Niagara A), the New York court struck as
retroactive ratemaking a refund ordered by a public service
commission. At issue were tax refunds made by the government to
the utility. The state commission ordered the refunds to be
passed along to the consumers. The court reversed. It first
held that such refunds were retroactive ratemaking. It then
[W]e may not approve [the refund] unless it
is authorized by existing law. It is well
settled that the Commission may exercise only
such powers as are conferred upon it by the
Legislature, or which are incidental to such
power, or necessarily implied therefrom. We
find no statutory power, either express or
implied, permitting a refund under these
Id. at 158-59 (citations omitted). The court noted that the
state legislature allowed refunds in two specific instances,
neither of which fit the circumstances of the case. Id. at 159.
The court decided that it was "reasonable and logical" to
conclude that no general refund power was authorized. Id. The
court stated, "Rate-making is a prospective and not a
retrospective process." Id. It finally noted that the proper
approach was for the commission to consider the refunded taxes
when the utility next requested a rate adjustment. Id.7
In Long Island Lighting Co. v. Public Service
Commission, 438 N.Y.S.2d 606 (N.Y. App. Div. 1981), the
commission ordered refunds to a group of consumers who had been
classified in the wrong rate group. The court held that the
commission was without authority to order such a retroactive
refund. It noted that the applicable statute provided for power
in the commission to adjust discriminatory rates "thereafter to
be in force." Id. at 608. The court also noted "the absence of
any express or implied statutory power permitting a refund under
the present circumstances." Id.
These New York cases are not analogous to our own.
Niagara A did not address illegally charged rates. Rather the
question was the treatment of a tax refund. In Long Island
Lighting, the rates were already in effect; the wrong rate was
charged. Furthermore, the rate change was based on a commission
interpretation of a statute made after the rates were charged and
collected. 438 N.Y.S.2d at 607.
The highest appellate court of New York has limited the
holdings in these cases by allowing a refund in a different
situation. Niagara Mohawk Power Corp. v. Public Serv. Comm'n,
507 N.E.2d 287 (N.Y. 1987) (Niagara B). There the commission
ordered a refund for imprudently incurred fuel costs passed along
to ratepayers through an automatic rate adjustment clause.8 The
court upheld the refund, noting the validity and importance of
the automatic rate adjustment clauses. The parties did not
dispute the lack of direct statutory authority, id. at 291,
although the legislature amended the law to grant the commission
that power shortly after the case arose. Id. at 289 n.*. Noting
several other statutorily-allowed refunds, the court stated that,
"Nothing in these provisions suggests that the Legislature meant
to prohibit the Commission from ordering the refund of
automatically recovered fuel expenses when such expenses had not
been subjected to a Commission review for reasonableness in a
regular rate proceeding." Id. at 293.
The Minnesota Supreme Court held that Minnesota's
public utility commission did not have implied authority to order
a public utility to refund charges collected under rates that the
commission had previously declared discriminatory. Peoples
Natural Gas Co. v. Minnesota Pub. Utilities Comm'n, 369 N.W.2d
530 (Minn. 1985) (PNG). That case involved the rates for
provision of natural gas to a few large consumers. Id. at 531-
32. The court first decided that the refund was not retroactive
ratemaking, but rather restitution of rates charged in violation
of a ratesetting order. Id. at 533. Thus, it analyzed the
question in terms of whether the commission had implied authority
to enforce its order by a refund. Id. at 534-35. The court held
that it did not, as utility regulation was "an intricate, ongoing
process," where a reallocation "may set in motion an ever-
widening set of consequences and adjustments." Id. at 535. It
therefore held that granting such enforcement power would
introduce such an important new factor into the equation that
such power could not be implied. Id. at 535.
This case is only partially on point. PNG involved a
small group of affected parties. The court indicated that it saw
the issue not as retroactive ratemaking, but rather direct
enforcement, where other adequate tools were available, such as
penalties and legal action by the attorney general. Id. at 535.
In addition to these differences, we are not persuaded by the
analysis of the Minnesota court.
By statute, the powers of APUC are to be liberally
[a] public service commission is an
administrative agency that has whatever
powers are expressly granted to it by the
legislature or conferred upon it by
implication as necessarily incident to the
exercise of powers expressly granted.
Glacier State Tel. Co. v. Alaska Public Utilities Comm'n, 724
P.2d 1187, 1190 (Alaska 1986) (citations omitted).
We held previously that APUC may have implied powers.
Far N. Sanitation, Inc. v. Alaska Pub. Utilities Comm'n, 825 P.2d
867 (Alaska 1992). In Far North, APUC issued an order declaring
a rate "interim" and subject to refund. The utility argued that
APUC had no power to declare a rate interim and thus subject to
refund, except when the utility had requested a rate increase.10
Id. at 871. APUC did not dispute the lack of direct
authorization. We held that "APUC has implied authority to set
interim rates," but noted that APUC must first conduct an
investigation and hold a hearing before exercising its implied
authority. Id. at 873.
ATU argues that since the legislature expressly
provided refund authority in one situation,11 APUC has no other
refund authority. ATU also argues that the existence of the
penalty provision12 and legislative history discussing its use as
a compliance tool indicate that no refund authority should be
The civil penalties are without doubt an enforcement
tool. The question not addressed by ATU is whether the existence
of one enforcement tool precludes implying others, especially
where the tools are designed to combat problems with different
effects. For instance, a penalty does not make whole consumers
who were charged excessive rates. The utility may disgorge
excessive profits with the proper penalty, but the penalty is not
given to the consumers who initially paid the excessive rates.13
A holding that implied powers do not exist would
undercut APUC's authority. This would allow a utility to charge
any sort of rate for an untariffed service and refund nothing if
caught. No incentive would be provided to comply with the filing
requirements. As for post-event rate determination, if a
"reasonable rate" can be forecast for the future, it should be
easier to calculate the proper past rate since all data is
available and speculation is minimized.
In Far North Sanitation, Inc. v. Alaska Public
Utilities Comm'n, 825 P.2d 867 (Alaska 1992), we noted several
reasons for the general rule against retroactive ratemaking.
These included utility planning, investor confidence, utility
credit rating, and the integrity of service. Id. at 872. None
of these concerns would be impacted by a refund order in the
The court in GTE North, 500 N.W.2d at 288, noted that
refund powers allow consumers "speedy and informal" commission
proceedings to obtain monies they would be entitled to, versus
resort to court proceedings. Enforcement by the commission is
also likely to be across the board, which would require a class
action in court. Penalty provisions do not protect consumers
from overcharges. We find these policy concerns persuasive and
hold that power to order a refund in the instant case may be
fairly implied from article 5 of chapter 42 of the Alaska
Statutes. AS 42.05.361-.441.14
C. APUC May Not Order a Refund of the Reasonable
Portion of the Untariffed Rates
ATU argues that a refund may not be ordered in this
case, even if APUC has the power to do so, because the untariffed
rates in question were reasonable. It begins by noting the
purpose of APUC is to establish "just, fair, and reasonable"
rates. See AS 42.05.141(a)(3). ATU argues that APUC found the
rates reasonable; APUC disputes this fact, noting that ATU relies
on a staff report which stated that the rates were probably
reasonable, but that the issue was irrelevant.15 ATU argues that
since the rates were reasonable the ratepayers were not harmed,
and any sanction should take the form of a civil penalty under AS
APUC counters that the civil penalties are not intended
to be exclusive, noting the language at the beginning of the
penalty statute: "In addition to all other penalties and
remedies provided by law . . . ." AS 42.05.571(a). APUC also
notes that the penalty provisions are primarily for enforcement
of commission orders, where a refund applies to a very different
situation. Finally, it argues that untariffed rates are
unreasonable as a matter of law.
ATU cites Alaska Public Utilities Commission v. Greater
Anchorage Area Borough, 534 P.2d 549, 558 n.26 (Alaska 1975), for
the proposition that "[r]ates which do not afford a reasonable
return on the value of property used in the public service have
been held to be confiscatory." ATU argues that past decisions of
APUC only required a refund of the unreasonable portion of the
rate charged by the utility at issue.
Untariffed rates are unquestionably illegal. See AS
42.05.371 & .411(a). Neither party provides any helpful
discussion of whether APUC is limited to setting a reasonable
rate after a utility violation such as this.
On policy grounds, a commission does not have authority
to order refunds beyond what is necessary to reduce rates to
reasonable levels. Statutory authority may not be implied beyond
this point, as APUC's authority is limited to setting "just and
reasonable" rates. If APUC wishes to penalize ATU beyond
ordering the refund of unreasonable charges, AS 42.05.571
provides for civil sanctions. With such penalty authority
clearly given by the legislature, APUC should not be allowed to
order excessive refunds; this would result in windfalls to
consumers. While APUC argues that it cannot determine what a
just and reasonable rate would have been, this argument is not
persuasive. If reasonable rates can be forecast into the future,
they can be determined much more easily based on past data.
APUC does have implied power to order a refund of the
unreasonable portion of the untariffed rates. Therefore, the
judgment of the superior court is REVERSED and the case is
remanded to APUC for its determination of reasonableness and such
other proceedings as may be consistent with this opinion.
1 The terms and conditions under which a public
utility offers its services and facilities to
the public shall be governed strictly by the
provisions of its currently effective
2 All rates demanded or received by a public
utility . . . for a service furnished or to
be furnished shall be just and reasonable . .
3 A public utility may not directly or
indirectly refund, rebate or remit in any
manner, or by any device, any portion of the
rates and charges or charge, demand or
receive a greater or lesser compensation for
its services than is specified in its
4 A public utility may not establish or place
in effect any new or revised rates, charges,
rules, regulations, conditions of service or
practices except after 45 days notice to the
commission and 30 days notice to the public.
5 When the commission, after an investigation
and hearing, finds that a rate demanded,
observed, charged or collected by a public
utility for a service subject to the
jurisdiction of the commission . . . is
unjust, unreasonable, unduly discriminatory
or preferential, the commission shall
determine a just and reasonable rate,
classification, rule, regulation, practice,
or contract to be observed or allowed and
shall establish it by order.
6 Wisconsin Statute ' 196.37(2) states:
If the commission finds that any measurement,
regulation, practice, act or service is
unjust, unreasonable, insufficient,
preferential, unjustly discriminatory or
otherwise unreasonable or unlawful, . . . the
commission shall determine and make any just
and reasonable order relating to a
measurement, regulation, practice, act or
service to be furnished, imposed, observed
and followed in the future.
GTE North, 500 N.W.2d at 286-87 (quoting Wis. Stat. ' 196.37(2)).
7 Statutory authority was later granted to the PSC to
require utilities to pass along tax refunds. N.Y. Pub. Serv. Law
' 113(2) (1977).
8 Such a provision automatically varies the rate charged
based on changes in operating costs, such as fuel.
9 Alaska Statute 42.05.141(a) provides:
(a) The Alaska Public Utilities Commission
(1) regulate every public utility engaged or
proposing to engage in such a business inside
the state, except to the extent exempted by
AS 42.05.711, and the powers of the
commission shall be liberally construed to
accomplish its stated purposes . . . .
10 The utility cited McDaniel v. Cory, 631 P.2d 82, 88
(Alaska 1981), for the language that agencies are "creatures of
statute and therefore must find within the statute the authority
for the exercise of any power [they] claim." Far N. Sanitation,
825 P.2d at 871.
11 Presumably ATU refers to AS 42.05.421(c), which
provides for refunds of rates collected under interim rate
increases in effect while the Commission studies the increase.
That portion of the rates later found to be unreasonable or
unlawful is subject to a refund order.
12 AS 42.05.571 - .621 allow APUC to assess civil
penalties for most violations of statutes or regulations.
13 APUC argues that the legal maxim of expressio unius est
exclusio alterius (the expression of one thing implies the
exclusion of others) does not apply to this case. ATU mentions
the issue briefly.
APUC is correct. In Sonneman v. Hickel, 836 P.2d 936,
939 (Alaska 1992), this court noted, "While this maxim is often a
useful and logical guide to the meaning of an enactment, it does
not always apply." We noted Chevron U.S.A., Inc. v. LeResche,
663 P.2d 923, 930-31 (Alaska 1983), where application of the
principle was declined as the court found that the resulting
limitation would be contrary to the purpose of the statute.
Sonneman also declined application on the same grounds. We hold
that application of the maxim would also be contrary to the
regulatory system here.
14 Support for our holding is also found in AS
42.05.421(c), supra note 11. Since APUC may order a refund in an
interim rate setting, it may also do so when the utility has
improperly avoided the interim rate route.
15 Although APUC in its order did state that "most of the
rates were at reasonable levels," APUC prevails on this point for
three reasons. First, this statement does not clarify which of
the rates it might have thought reasonable and which not.
Second, this is a general statement used as a mitigating factor,
not a specific finding of reasonableness. Third, the procedures
for determining reasonable rates had not been followed, as that
was not the nature of the case. See AS 42.05.411, .421.
16 In addition to all other penalties and
remedies provided by law, a public utility
and every person, and their lessees or
receivers appointed by a court in any way
subject to the provisions of this chapter,
together with their officers, managers,
agents or employees that either violate or
procure, aid or abet the violation of any
provision of this chapter, or of any order,
regulation or written requirement of the
commission are subject to a maximum penalty
of $100 for each violation. Each act of
omission as well as each act of commission
shall be considered a violation subject to