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United Utilities v. APUC (3/28/97), 935 P 2d 811
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Notice: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to
bring errors to the attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska 99501, telephone (907)
264-0607, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
UNITED UTILITIES, INC., )
) Supreme Court Nos. S-7019/7099
Appellant and )
Cross-Appellee, ) Superior Court No.
) 3AN-93-4496 CI
v. )
) O P I N I O N
ALASKA PUBLIC UTILITIES )
COMMISSION, ) [No. 4797 - March 28, 1997]
)
Appellee, )
)
SUMMIT TELEPHONE COMPANY, )
)
Appellee and )
Cross-Appellant. )
______________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage,
Karen L. Hunt, Judge.
Appearances: Kevin G. Clarkson, Brena &
McLaughlin, P.C., Anchorage, for
Appellant/Cross-Appellee United Utilities,
Inc. Ron Zobel, Assistant Attorney General,
Anchorage, and Bruce M. Botelho, Attorney
General, Juneau, for Appellee Alaska Public
Utilities Commission. Margaret J. Rawitz,
Hoge & Lekisch, Anchorage, for
Appellee/Cross-Appellant Summit Telephone
Company.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, and Fabe, Justices.
FABE, Justice.
I. INTRODUCTION
This appeal arises from a decision by the Alaska Public
Utilities Commission (APUC) to grant the application of Summit
Telephone Co. (Summit) and to deny the application of United
Utilities, Inc. (United) to provide telephone service to the
communities of Coldfoot and Wiseman. United contends that the
APUC failed to follow its prior decisions regarding the factors
to be considered in choosing between competing applications and
that the APUC's decision is not supported by the record. United
also argues that the APUC violated its right to due process under
the Alaska and United States constitutions. The superior court
upheld the APUC's decision. We affirm.
II. FACTS AND PROCEEDINGS
Coldfoot is a small village located at the southern
edge of the Brooks Range on the Dalton Highway. Wiseman is an
old mining town about ten miles from Coldfoot. Both communities
currently have expensive and unreliable telephone service. All
calls from Wiseman must be routed through an interconnection in
Coldfoot to the long-distance carrier. Summit and United filed
applications to provide modern telephone service to these
communities. The APUC scheduled a hearing for January 25, 1992,
to consider the competing applications.
Summit and United proposed different methods of linking
Coldfoot and Wiseman. United's filings called for a permanent
microwave system that would transmit signals between two towers.
Summit proposed to handle traffic between the two communities by
Basic Exchange Telephone Radio Service, to be replaced within
five years by buried cable. The applications also revealed the
difference in the size of the two companies. United provides
telephone service to fifty-six communities and employs more than
100 people. Summit has four employees and provides service to
about sixty subscribers in two areas.
In Summit's written testimony filed with the APUC,
Perry Stoop, the founder, general manager, and part owner of
Summit, stated that United's plan to use a microwave system would
not work as proposed because of obstacles in the signal's path.
He testified that the system would work only if United, at a cost
higher than its estimate, built taller towers or installed a
repeater. In response, United filed supplemental testimony from
B. Charles Russell, the vice president of operations and
engineering for United, stating that United had recently
developed a "better path"between Coldfoot and Wiseman. Russell
stated that the new path, while still obstructed and $10,000 more
expensive than the original proposal, would provide "a workable
system." The supplemental testimony was based on the work of
Jack Reed, a consultant hired by United, but United did not file
testimony from Reed or include Reed on its witness list.
After Russell's testimony, United offered to call Reed
as a witness and sought to introduce two new exhibits to support
Reed's testimony. The hearing officer refused to admit the
testimony and exhibits, stating that United was "simply too
late."
On February 24, 1993, the APUC approved Summit's
application to serve Coldfoot and Wiseman and denied United's
application. The APUC noted that its "decision [was] based
primarily on two important points." First, it concluded that
United "simply has not . . . demonstrated"its ability to "extend
satisfactory service to Wiseman." Second, the APUC found that
Summit's plan "to install cable between Coldfoot and Wiseman is
the best way to ensure adequate and satisfactory service in
Wiseman."
After United's motions for reconsideration and a trial
de novo were denied by the APUC, it appealed to the superior
court. Superior Court Judge Karen Hunt affirmed the APUC's
decision in its entirety.
III. DISCUSSION
A. Standard of Review
We apply a "reasonable basis standard of review to
administrative determinations of complex issues involving agency
expertise and specialized knowledge." Cook Inlet Pipe Line Co.
v. Alaska Pub. Utils. Comm'n, 836 P.2d 343, 348 (Alaska 1992).
Under this standard of review "we give deference to the agency's
determination 'so long as it is reasonable, supported by the
evidence in the record as a whole, and there is no abuse of
discretion.'" Id. (citations omitted). This is the appropriate
standard of review in determining whether the APUC abused its
discretion by failing to follow its own adjudicative precedents.
We review the APUC's findings of fact under the
substantial evidence test. Municipality of Anchorage, Police &
Fire Retirement Bd. v. Coffey, 893 P.2d 722, 726 (Alaska 1995).
Substantial evidence exists if, considering the record as a
whole, the quantum of evidence is substantial enough such that a
reasonable mind might accept the APUC's decision. Id. at 726.
Under this standard, we do not independently weigh the evidence
but only determine whether such evidence exists. Id.
In considering an appeal from a judgment of the
superior court acting as an intermediate court of appeal, we give
no deference to the superior court decision. Cook Inlet Pipe
Line Co., 836 P.2d at 348.
B. Did the APUC Abuse Its Discretion by Failing to Follow
Its Own Adjudicative Precedents?
United argues that the APUC abused its discretion by
basing its decision on the quality of the applications rather
than on an "analysis of which applicant is best suited to serve
the public interest." The APUC has stated that under AS
42.05.241, "[w]here competing applicants seek a certificate that
may be issued only to one entity, the [APUC] must select the
applicant it considers the most fit, willing and able of those
who demonstrate threshold levels of fitness, willingness and
ability to serve." Re Applications for a Certificate of Public
Convenience and Necessity to Operate as a Telecommunications
(Cable Television) Public Utility in the Anchorage Area, 2
A.P.U.C. 527, 533-34 (1979). The factors relevant to the
selection process may be divided into three categories: (1)
internal strengths; (2) external strengths; and (3) miscellaneous
indicia of fitness and ability. Id. at 538. The category of
"internal strengths"includes "organization; financial backing;
technical facilities and equipment, including proposals for
engineering and construction of plant to be built; operations
expertise; and management and administrative experience." Id.
These five factors establish a "threshold"that all applicants
must meet. Id. Once the APUC has made this initial inquiry, it
considers "external strengths." Id. at 539. These factors
"focus on the interface between the applicant and the public"and
include the rates proposed by the utility, its track record, and
its demonstrated alertness to consumer needs or desires, as well
as any indications of consumer preferences. Id. Finally, the
"miscellaneous indicia of fitness and ability"include, among
other factors, the "quality of application or filing." Id.
In addressing the threshold factors in this case, the
APUC concluded that although United had sufficient organization,
financial backing, expertise, and experience, it failed to
establish the adequacy of its proposal for engineering and
construction of the microwave system. The APUC stated that "it
is extremely doubtful that, without additional evidence and
explanation, [United] would be granted even an unopposed,
noncompeting application to extend its service area."
In contrast, the APUC concluded that Summit, in
addition to demonstrating "significant technical, operational,
and managerial acumen"and "satisfactory arrangements for
financing,"also fully supported all aspects of its proposal. As
to the factors in the "external strengths"category, the APUC
found that Summit's plan for a buried cable would "better serve
the needs of Wiseman." It noted United's advantage in consumer
preference, but also gave a reasonable explanation why that
preference did not outweigh other factors. It also found that
other factors in this category, including the proposed rates, did
not favor either company. Finally, in considering the
miscellaneous factors, the APUC found that the quality of
Summit's application and filings was superior to those of United.
Our review of the APUC decision indicates that it had a
reasonable basis for its consideration and weighting of the
relevant factors in this case. Contrary to United's assertion,
the APUC did consider the strengths and weaknesses of each
applicant. In accordance with the specific provisions of its
prior decisions, the APUC also considered the strengths and
weaknesses of the applications. Indeed, United's distinction
between "applicant"and "application"strikes us as somewhat
artificial; certainly, the APUC must base its evaluation of an
applicant at least partly on the quality of its application.
United's argument, taken to its logical conclusion, would force
the APUC to ignore the nature and quality of a proposal and base
its decisions solely on the identity of the competing applicants.
Such an approach would not be in line with the APUC's statutory
mandate under AS 42.05.241 or its past practice. Therefore we
hold that the APUC did not abuse its discretion in denying
United's application and approving Summit's based on a
consideration of both the applications and the applicants.
C. Were the APUC's Findings with Regard to United's
Microwave System, Summit's Cable System, and Summit's
Financial Capabilities Supported by Substantial
Evidence?
1. United's microwave system
United contends that the APUC's finding that United's
"ability . . . to extend satisfactory service to Wiseman simply
has not been demonstrated in the record of this proceeding"is
not supported by substantial evidence. The APUC based this
finding on United's significant modification of its proposal less
than a week before the hearing, its failure to establish how the
power and space requirements for the modified proposal would be
met, and its lack of explanation for how it would interconnect
with the long-distance provider. It also noted that the proposed
path was obstructed and that "[t]here is some dispute whether the
newly proposed microwave path is adequate." In its decision
denying United's petition for reconsideration, the APUC further
stated that the engineers for both Summit and United testified
that they did not know of other instances in which an obstructed
microwave path like that proposed by United had been used for
commercial telephone service.
We hold, in light of the above, that the APUC's
findings regarding the potential problems with United's proposed
microwave system were based on substantial evidence in the
record. Our role in reviewing the APUC's decision is not to
reweigh the evidence, but only to determine whether substantial
evidence for the APUC's decision exists. Municipality of
Anchorage, Police & Fire Retirement Bd. v. Coffey, 893 P.2d 722,
726 (Alaska 1995). As the APUC stated, United might have
eventually been able to "perfect its application"and demonstrate
that its proposal would provide adequate service. However, the
APUC, which has the duty and expertise to evaluate such
proposals, found that United failed to make this demonstration
when it had the opportunity.
2. Summit's cable system
United also challenges the APUC's finding that Summit's
proposal to link Coldfoot and Wiseman by cable "is the best way
to ensure adequate and satisfactory service in Wiseman." It
argues that "Summit did not even present an elementary plan for
serving Coldfoot and Wiseman by cable." Summit, however, did
estimate the cost of installing buried cable, and a Summit
employee testified that he had studied the cable route and
visited the area. Furthermore, Summit has experience with
installing buried cable. Finally, the APUC appears to have based
its decision partly on its familiarity with cable as a proven
technology compared to microwave systems. These considerations
provide substantial support for the APUC's finding that Summit's
plan to install buried cable between Wiseman and Coldfoot "will
better serve the needs of Wiseman"than a microwave system over
an obstructed path.
3. Summit's financial capabilities
United finally argues that the record does not support
the APUC's finding that "Summit has adequate financial resources,
and has made satisfactory arrangements for financing, to provide
the service for which it applied." Summit proposed to finance
its service partially with a loan from the Rural Telephone
Finance Cooperative (RTFC). Summit had twice before received
loans from RTFC and presented testimony and evidence that further
requests for financing would be successful. It also presented
testimony that it could use a savings account and funds from a
previous loan to finance its proposal. The APUC noted that the
RTFC had not given final approval to a loan for the project, but
stated that this was "not significant"because "[f]inal
commitments typically come after legal authorization to provide
service." We hold that this evidence is sufficient to support
the APUC's finding that Summit was capable of financing its
proposal.
D. Did the APUC Violate United's Due Process Rights?
United also argues the APUC violated its right to due
process under the Alaska and United States constitutions. United
failed to raise this issue before the superior court and in its
points on appeal. We will not consider arguments that were
neither raised below nor included in the points on appeal "unless
the new issues either establish plain error or 1) do not depend
on new or controverted facts; 2) are closely related to the
appellant's arguments at trial; and 3) could have been gleaned
from the pleadings." Arnett v. Baskous, 856 P.2d 790, 791 n.1
(Alaska 1993). United's due process argument does not meet this
standard, and therefore we will not consider it.
IV. CONCLUSION
The APUC had a reasonable basis for denying United's
application and granting Summit's application to provide
telephone service to the communities of Coldfoot and Wiseman, and
its decision was supported by substantial evidence in the record.
Therefore we AFFIRM the APUC's decision and the judgment of the
superior court. (EN1)
ENDNOTES:
1. Because we affirm the APUC's decision, we do not need to
consider Summit's cross-appeal in this matter.
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