Tennessee Cable Television Ass'n v. Tennessee Public Service Commission

OPINION ON PETITIONS FOR REHEARING

KOCH, Judge.

Both parties have filed Tenn.R.App.P. 39 petitions for rehearing with regard to our July 2, 1992 opinion. The TCTA requests (1) clarification of our opinion concerning the substantive validity of the regulatory reform plan and the technology master plan, (2) further consideration of the procedural validity of the Commission’s pending rulemaking proceedings involving these plans, and (3) a determination whether the commissioners should be disqualified from future proceedings involving these plans. For its part, the Commission seeks clarification concerning the application of the opinion to the order in which the plans are adopted.

We have prepared this opinion to clarify two matters. First, we do not conceive that it is our role to conduct a substantive review of the wisdom of any rule or regulation. Second, we believe that it is inappropriate for appellate courts to render advisory opinions concerning proceedings and issues not properly before them.

I.

We turn first to the questions raised by TCTA concerning whether the Commission’s pending rulemaking proceedings comply with the Uniform Administrative Procedures Act and the other applicable statutes and whether the commissioners should be disqualified from these or any other related proceedings. We express no opinion on these issues since these proceedings are not before us.

The Tenn.R.App.P. 12 petitions for review define the limits of our jurisdiction in this case. As we read them, they challenge the Commission’s July 31, 1990 order adopting the regulatory reform plan and the technology master plan and the Commission’s September 28, 1990 and January 17, 1991 orders involving South Central Bell’s excess earnings. They raise no issue concerning the validity of the rulemaking proceedings the Commission commenced on November 30, 1990.

Appellate courts will not render advisory opinions, Banks v. Jenkins, 224 Tenn. 23, 35 , 449 S.W.2d 712, 717 (1969), and will not decide theoretical issues based on contingencies that may or may not arise. United States Fidelity & Guaranty Co. v. Askew, 183 Tenn. 209, 212 , 191 S.W.2d 533, 534 (1946); American Nat’l Bank & Trust Co. v. Mander, 36 Tenn.App. 220, 234 , 253 S.W.2d 994, 1000 (1952). Our earlier opinion dealt only with the Commission’s efforts prior to November 30, 1990, to adopt the regulatory reform plan and the technology master plan and with the Commission’s decisions concerning South Central Bell’s excess earnings. We did not deal at all with the pending rulemaking proceedings because no issue had been raised concerning them and because they had not yet been completed.

After we remand this case, we anticipate that the Commission will first complete its rulemaking proceedings and will then proceed with rate-making proceedings 1 for South Central Bell, United Inter-Mountain Telephone Company, and any other telephone company electing to accept the terms and requirements of the regulatory reform plan and the technology master plan. In any of these proceedings, the parties or the intervenors have a right to challenge any substantive or procedural irregularity by raising the issue with the Commission.

It follows, therefore, that the TCTA may still raise issues before the Commission concerning whether the rulemaking proceedings are consistent with all the applicable statutory requirements. The TCTA *168 also remains free to request that the commissioners disqualify themselves from the rulemaking proceedings because of bias or prejudice. We have held only that the disqualification standards for rulemaking proceedings differ from those for adjudicative proceedings and that the present record does not contain sufficient evidence to warrant disqualification from the rulemaking proceedings. If the TCTA wishes to pursue the bias issue, it has the burden of presenting clear and convincing evidence that the commissioners have unalterably closed minds on matters critical to the disposition of the proceeding.

II.

We also recognized in our earlier opinion that the Commission has broad power to set the regulatory policy for the utilities under its jurisdiction, Patterson v. City of Chattanooga, 192 Tenn. 267, 277-78 , 241 S.W.2d 291, 295 (1951), and that the courts must be reluctant to second-guess the Commission’s exercise of its regulatory judgment and discretion. We also recognized that the manner in which the courts review the Commission’s actions depends on whether the actions are taken in the context of a rulemaking or adjudicative proceeding.

The courts have jurisdiction to review procedural issues no matter whether the Commission is engaged in rulemak-ing or adjudication. Like any other administrative agency, the Commission must comply with the statutes and constitutional provisions governing its procedures. Thus, we may review one of the Commission’s rules to determine whether the Commission has the authority to promulgate it and whether the Commission complied with all applicable statutory requirements in doing so.

The Constitution of Tennessee provides clear demarcation of the boundaries of the three branches of government and directs each branch not to usurp the prerogatives of the others. Tenn. Const, art. 2, §§ 1 & 2. Mindful of the judiciary’s role, the Tennessee Supreme Court has stated repeatedly that the courts should leave the formulation of policy to those with a constitutional mandate. Smith v. Gore, 728 S.W.2d 738, 746 (Tenn.1987); Hyde v. Hyde, 562 S.W.2d 194, 196 (Tenn.1978).

Rulemaking is essentially a legislative act. It is one of the ways that this State’s public policy is formed. It follows, therefore, that an agency’s decision concerning how the public’s interest can best be served is entitled to substantial deference. FCC v. WNCN Listeners Guild, 450 U.S. 582, 596 , 101 S.Ct. 1266, 1275 , 67 L.Ed.2d 521 (1981). Courts will not substitute their judgment for an agency’s expertise, FCC v. Schreiber, 381 U.S. 279, 290-91 , 85 S.Ct. 1459, 1468 , 14 L.Ed.2d 383 (1965); Amax, Inc. v. Colorado Water Quality Control Commission, 790 P.2d 879, 883 (Colo.App.1989); Department of Human Servs. v. Berry, 297 Ark. 607 , 764 S.W.2d 437, 438 (1989), and accordingly will not inquire into the wisdom of a rule or determine whether a rule embodies good or bad policy. Vermont Ass’n of Realtors, Inc. v. State, 156 Vt. 525 , 593 A.2d 462, 466 (1991); Omega Nat’l Ins. Co. v. Marquardt, 115 Wash.2d 416 , 799 P.2d 235, 241 (1990).

Agencies may not, however, promulgate rules that are so lacking in reason that they are patently arbitrary, unreasonable, or capricious. Griffin v. State, 595 S.W.2d 96, 99 (Tenn.Crim.App.1980); see also Benton v. Board of Supervisors of Napa County, 226 Cal.App.3d 1467 , 277 Cal.Rptr. 481, 488 (1991); Granite City Div. of Nat’l Steel Co. v. Pollution Control Bd., 221 Ill.App.3d 68 , 163 Ill.Dec. 549, 555 , 581 N.E.2d 703, 709 (1991); Alevras v. Delanoy, 245 N.J.Super. 32 , 583 A.2d 778, 779-80 (App.Div.1990). The scope of review under the “arbitrary and capricious” standard is narrow. The United States Supreme Court has pointed out that

Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence *169 before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Motor Vehicle Mfrs. Ass’n v. State Farm, Mut. Ins. Co., 463 U.S. 29, 43 , 103 S.Ct. 2856, 2866 , 77 L.Ed.2d 443 (1983).

In the absence of some constitutional infirmity, our review of an agency’s rulemaking must stop if we find that the agency has the authority to promulgate the particular rule, that the agency has promulgated the rule properly, and that the rule itself is not arbitrary and capricious. As we pointed out in our earlier opinion, we will not weigh the evidence presented in favor of or in opposition to a rule since Tenn.Code Ann. § 4-5-322(h) (1991) does not apply to rulemaking proceedings. Thus, we will not disturb a rule even though the evidence may be in dispute and alternatives other than the rule may be available. Griffin v. State, 595 S.W.2d at 99 .

Our earlier opinion should not be construed as indicating that we either approve or disapprove the substance of the regulatory reform plan or the technology master plan or whether the commission should adopt the plans at all. We have done neither. We have, however, determined that the commission has the statutory authority to promulgate rules dealing with the subject matter of these plans, that the substance of these plans is not contrary to any of the Commissions’ other statutory authority, and that the plans themselves are not arbitrary or capricious.

We have also determined that if the plans are to be adopted, they must be promulgated as rules in accordance with the Uniform Administrative Procedures Act and the other statutes governing the commission’s rulemaking power. Whether the Commission ultimately elects to promulgate either or both plans and the substance of the plans are the Commission’s prerogative, not the courts’.

III.

The Commission also expresses concern that our earlier opinion requires the adoption of both plans and stands for the proposition that the existence and validity of one plan depends on the existence and validity of the other. We agree that a clarification of our holding is in order.

If the Commission decides to adopt either of these plans, it must promulgate them as rules. The substance of the plans and the timing of their adoption are within the Commission’s discretion. However, the Commission cannot base its decision in any related rate-making proceeding on either of the plans until they have been promulgated as rules. Accordingly, the Commission could theoretically promulgate the technology master plan without promulgating the regulatory reform plan. However, if it did so, it cannot pattern its decision in later implementing the technology master plan proceedings after any element of the regulatory reform plan.

TODD, P.J., and CANTRELL, J., concur.

. We consider "excess earnings investigations” to be within the scope of rate-making proceedings.