State of Missouri, ex rel. Sprint Missouri, Inc., Appellant v. Public Service Commission of the State of Missouri, a State Agency, and Its Members Kelvin Simmons, Connie Murray, Sheila Lumpe, Steve Gaw and Bryan Forbis In Their Official Capacity, Respondents and Office of Public Counsel, Respondent

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Western District Case Style: State of Missouri, ex rel. Sprint Missouri, Inc., Appellant v. Public Service Commission of the State of Missouri, a State Agency, and Its Members Kelvin Simmons, Connie Murray, Sheila Lumpe, Steve Gaw and Bryan Forbis In Their Official Capacity, Respondents and Office of Public Counsel, Respondent Case Number: WD63580 Handdown Date: 12/07/2004 Appeal From: Circuit Court of Cole County, Hon. Richard G. Callahan Counsel for Appellant: Kenneth A. Schifman Counsel for Respondent: David A. Meyer and Michael F. Dandino Opinion Summary:

Sprint Missouri, Inc., appeals the court's judgment affirming the Missouri public service commission's order issued in Case No. TT-2002-447, In the Matter of the Tariff Filing of Sprint Missouri, Inc., d/b/a Sprint, to Increase the Residential and Business Monthly Rate for the Metropolitan Calling Area (MCA) Plan. REVERSED AND REMANDED. Division One holds: The commission erred in rejecting Sprint's proposed tariff. The commission's order doing so was unlawful because its interpretation of section 392.245.11, RSMo, is inconsistent with the language and purpose of the statute as a whole, as well as other related statutes. In particular, section 392.245.11 does not contain a "use it or lose it" price cap mechanism as found by the commission, but instead authorizes Sprint to set its rates at or below the maximum allowable price for a given year without forfeiting its ability to increase those rates the following year. The language used by the legislature in the statute considered as a whole manifests its intent to give price cap regulated entities the option, on an annual basis, to set their actual rates for nonbasic telecommunications services (such as Sprint's metropolitan calling area service in the optional tiers of the Kansas City, Missouri, metropolitan area, which is at issue here) less than or equal to the corresponding maximum allowable prices while still maintaining future rate flexibility based on subsequent market conditions. Meanwhile, the construction urged by the commission is forced, unreasonable and inconsistent with the purpose of price cap legislation, as it erroneously interprets the meaning of the phrase "at such maximum allowable

prices" found in section 392.245.11, incorrectly confuses rates with maximum allowable prices, renders the last sentence of section 392.245.11 superfluous, and wholly ignores the text of related statutes which shed a good deal of light on the intended meaning of section 392.245.11. Because the commission's order rejecting Sprint's proposed tariff was unlawful, we reverse the circuit court's judgment and remand the matter to the commission for further proceedings. Citation: Opinion Author: Joseph M. Ellis, Judge Opinion Vote: REVERSED AND REMANDED. Smart, P.J., and Hardwick, J., concur. Opinion: Appellant, Sprint Missouri, Inc. ("Sprint"), appeals a judgment of the Circuit Court of Cole County affirming an order issued by Respondent, the Missouri Public Service Commission ("Commission" or "PSC"), in Case No. TT-2002- 447, In the Matter of the Tariff Filing of Sprint Missouri, Inc., d/b/a Sprint, to Increase the Residential and Business Monthly Rate for the Metropolitan Calling Area (MCA) Plan. Because the Commission's order rejecting Sprint's proposed tariff was unlawful, we reverse the judgment of the circuit court and remand the matter to the Commission for further proceedings. The facts of this case are not in dispute. As a telecommunications company under section 386.020(51), (FN1) Sprint is subject to the regulatory jurisdiction of the Commission pursuant to section 386.250(2). On August 19, 1999, in Case No. TO-99-359, the Commission reclassified Sprint as a price cap regulated company under section 392.245, a 1996 statute which established a fairly complex price cap regulation scheme. Section 392.245.1 requires "maximum allowable prices" to be established for telecommunications services offered by price cap regulated incumbent local exchange telecommunications companies ("ILECs"), (FN2) and further states that those "maximum allowable prices shall not be subject to increase except as otherwise provided" in section 392.245. Section 392.245.2 provides that large ILECs such as Sprint are subject to price cap regulation under section 392.245 "upon a determination by the commission that an alternative local exchange telecommunications company (FN3) has been certified to provide basic local telecommunications service and is providing such service in any part of the large incumbent company's service area." The maximum allowable prices for Sprint's telecommunications services were initially set based on the tariffs which were in effect for those services on December 31, 1998. See section 392.245.3. Beginning on August 19, 1999, Sprint was authorized, pursuant to section 392.245.11, to file tariffs increasing the maximum allowable prices for its

nonbasic telecommunications services by a maximum of 8% annually. Sprint offers optional residential and business Metropolitan Calling Area ("MCA") telecommunications service in three geographic areas within the Kansas City, Missouri, metropolitan area, which are further identified as Tiers 3, 4, and 5. (FN4) As of August 19, 1999, when Sprint became a price cap regulated company under section 392.245, the maximum allowable prices and actual rates charged for those services were as follows: August 19, 1999 Maximum Allowable PriceActual Rate Tier 3 MCA Exchanges

Residential:$12.35$12.35 Business:$24.80$24.80 Tier 4 MCA Exchanges

Residential:$21.55 $21.55 Business:$46.75$46.75 Tier 5 MCA Exchanges

Residential:$32.50$32.50 Business:$70.70$70.70 Since becoming a price cap regulated ILEC, Sprint has filed to increase the maximum allowable prices for these MCA services on two occasions. Effective December 11, 2000, the Commission approved revisions to Sprint's P.S.C. MO. No. 22 tariff that established maximum allowable prices for these MCA offerings which were 8% higher than those in effect on August 19, 1999. However, Sprint did not, at that time, request any increase in the rates actually paid by consumers for those services. This is reflected in the following table:

December 11, 2000Maximum Allowable Price Actual Rate Tier 3 MCA Exchanges

Residential:$13.33 $12.35 Business:$26.78$24.80 Tier 4 MCA Exchanges

Residential:$23.27$21.55 Business:$50.49$46.75 Tier 5 MCA Exchanges

Residential:$35.10$32.50 Business:$76.35$70.70 A year later, effective December 11, 2001, the Commission approved additional revisions to Sprint's P.S.C. MO. No. 22 tariff which established increased maximum allowable prices for Sprint's MCA service that were 8% over the maximum allowable prices from the previous year. Once again, however, Sprint did not request a corresponding increase in the actual rates charged to consumers for those services. This resulted in the following figures: December 11, 2001Maximum Allowable Price Actual Rate Tier 3 MCA Exchanges

Residential:$14.39 $12.35 Business:$28.92$24.80 Tier 4 MCA Exchanges

Residential:$25.13$21.55 Business:$54.52$46.75 Tier 5 MCA Exchanges

Residential:$37.90$32.50 Business:$82.45$70.70

On March 13, 2002, Sprint filed tariff sheet number 200200766, which proposed further revisions to Sprint's P.S.C. MO. No. 22 tariff and had a proposed effective date of May 1, 2002. This tariff sheet requested an increase in the residential and business nonbasic service rates for the optional MCA Plans in Tiers 3, 4, and 5 as follows: May 1, 2002 (proposed)Maximum Allowable PriceActual Rate 0 Tier 3 MCA Exchanges

Residential:$14.39$14.00 Business:$28.92$28.92 Tier 4 MCA Exchanges

Residential:$25.13$25.00 Business:$54.52$54.52 Tier 5 MCA Exchanges

Residential:$37.90$35.00 Business:$82.45$72.70 All of the proposed rates in Sprint's March 2002 tariff filing were, therefore, less than or equal to (i.e., not in excess of) the applicable maximum allowable prices which had been approved by the Commission effective December 11, 2001. In its filing, Sprint represented that the revised tariffs were in full compliance with section 392.245.11, which states, in relevant part: The maximum allowable prices for nonbasic telecommunications services of a large, incumbent local exchange telecommunications company regulated under this section shall not be changed until January 1, 1999, or on an exchange-by-exchange basis, until an alternative local exchange telecommunications company is certified and providing basic local telecommunications service in such exchange, whichever is earlier. Thereafter, the maximum allowable prices for nonbasic telecommunications services of an incumbent local exchange telecommunications company may be annually increased by up to eight percent for each of the following twelve-month periods upon providing notice to the commission and filing tariffs establishing the rates for such services in such exchanges at such maximum allowable prices. . . .

An incumbent local exchange telecommunications company may change the rates for its services, consistent with the provisions of section 392.200, but not to exceed the maximum allowable prices, by filing tariffs which shall be approved by the commission within thirty days, provided that any such rate is not in excess of the maximum allowable price established for such service under this section. On March 20, 2002, the Office of Public Counsel ("OPC") filed a Motion to Reject Tariffs. In this motion, OPC asserted that the proposed rate increases exceeded the annual percentage allowed by law and urged rejection of the proposed tariff or, alternatively, suspension of Sprint's proposed tariff and the scheduling of public evidentiary hearings. On March 28, 2002, the Staff of the Commission's Telecommunications Department ("Staff") made the following recommendation after reviewing Sprint's proposed tariff (emphasis in original): The Telecommunications Department Staff (Staff) has reviewed Sprint's proposed price cap filing for its MCA service in Kansas City for optional tiers 3, 4 and 5 as set forth in Section 392.245. Staff has no objections to the rate changes going into effect. In fact, Staff believes that the Commission has already addressed MCA rate changes as proposed by Sprint. The MCA Report and Order in Case No. TO-99-483, Findings of Fact, states: "The Commission also finds that it is in the public interest to allow ILECs to exercise the full pricing flexibility that they are statutorily entitled to have. The Commission determines that ILECs are allowed to change their MCA service charges in response to competition brought on by flexible pricing of MCA service by CLECs, subject to statutes and other safeguards against predatory pricing. For price cap companies, that means that pricing flexibility subject to maximum allowable prices under Section 392.245, RSMo." (Pages 23, 24). Residential and business customers will receive thirty days advance notice regarding the MCA increases as well as a concurrent reminder notice (notices attached). Staff recommends that the Commission approve the proposed tariff revisions to Sprint's P.S.C. MO. Tariff No. 22 with an effective date of May 1, 2002. The following day (March 29, 2002), Sprint filed a response in opposition to OPC's motion, arguing that section 392.245.11 required the Commission to approve the tariff within thirty days of its filing because the tariff increased rates to levels which were "not in excess of the maximum allowable price established for such service" by the Commission effective December 11, 2001. On April 1, 2002, Staff also filed a response in opposition to OPC's motion that agreed with Sprint's statutory interpretation and recommended that the Commission approve the proposed tariff sheets. On April 11, 2002, the Commission issued its Order Suspending Tariff and docketed a contested case styled "In the Matter of the Tariff Filing of Sprint Missouri, Inc., d/b/a Sprint, to Increase the Residential and Business Monthly Rate for the Metropolitan Calling Area (MCA) Plan, "Case No. TT-2002-447. Sprint filed a Motion for Reconsideration of the

order suspending the tariff on April 17, 2002, and OPC filed its response in opposition on April 22, 2002. After the filing of supplemental briefs and comments by Staff, OPC, and Sprint, on July 25, 2002, the Commission issued an order further suspending the proposed tariff's effective date and scheduling an on-the-record presentation for August 12, 2002. The presentation was heard as scheduled, and the parties filed post-hearing briefs. After further suspending the proposed tariff's effective date on October 17, 2002, the Commission issued a Report and Order rejecting Sprint's proposed tariff, effective October 27, 2002. The Commission's rejection of Sprint's proposed tariff was based on its construction of section 392.245.11. The Commission explained its interpretation in its Report as follows: Section 392.245(11) provides that "maximum allowable prices" (the price cap) may be increased by "up to eight percent" each year, by "providing notice to the commission and filing tariffs establishing the rates for such services in such exchanges at such maximum allowable prices . . . ." The Commission finds that the phrase "at such maximum allowable prices" means just that; the maximum allowable price (or price cap) may be raised no more than eight percent annually by establishing the rates at such maximum allowable prices. If an ILEC increases its prices by less than eight percent, then the price cap for the following year increases by less than eight percent -- and any part of the eight percent annual increase that is not used is lost. Thus, the statute provides a "use it or lose it" price cap mechanism and the maximum allowable price increase for the following year is still limited to eight percent. Therefore, Sprint's attempt to "bank" increases violates the Price Cap Statute and the proposed tariff must be rejected. (emphasis in original). As authorized by section 386.500.2, Sprint filed a timely Application and Motion for Rehearing. The Commission denied Sprint's Application and Motion for Rehearing in an order effective December 12, 2002. Sprint filed its Application for Writ of Review with the Circuit Court of Cole County on January 6, 2003, and on January 29, 2003, the circuit court issued a Writ of Review pursuant to section 386.510. The circuit court entered a judgment affirming the Commission's order on November 6, 2003. Sprint timely appealed the circuit court's judgment pursuant to section 386.540.1, and we subsequently granted OPC's motion to intervene as a party to this appeal, as Sprint neglected to include OPC in its notice of appeal even though OPC was a party to all the proceedings below. On appeal, we review "the decision of the Commission, not the judgment of the circuit court." State ex rel. Office of Pub. Counsel v. Pub. Serv. Comm'n, 938 S.W.2d 339, 341 (Mo. App. W.D. 1997). "Pursuant to section 386.510, the appellate standard of review of a PSC order is two-pronged: 'first, the reviewing court must determine whether the PSC's order is lawful; and second, the court must determine whether the order is reasonable.'" State ex rel. AG Processing,

Inc. v. Pub. Serv. Comm'n, 120 S.W.3d 732, 734 (Mo. banc 2003) (quoting State ex rel. Atmos Energy Corp. v. Pub. Serv. Comm'n, 103 S.W.3d 753, 759 (Mo. banc 2003)). "The burden of proof is upon the appellant to show that the order or decision of the PSC is unlawful or unreasonable." Id.; see also section 386.430. An order's lawfulness turns on whether the Commission had the statutory authority or power to act as it did. AG Processing, 120 S.W.3d at 734; State ex rel. City of St. Joseph v. Pub. Serv. Comm'n, 713 S.W.2d 593, 595 (Mo. App. W.D. 1986). "In determining the statutory authorization for, or lawfulness of, the order we need not defer to the commission, which has no authority to declare or enforce principles of law or equity." State ex rel. Util. Consumers Council, Inc. v. Pub. Serv. Comm'n, 585 S.W.2d 41, 47 (Mo. banc 1979) (citation omitted). Accordingly, there is no presumption in favor of the way the Commission resolved the legal issues before it, Atmos Energy, 103 S.W.3d at 759, and "all legal issues are reviewed de novo." AG Processing, 120 S.W.3d at 734. Thus, "[i]n determining whether the Commission's order is lawful, an appellate court must exercise unrestricted, independent judgment and correct erroneous interpretations of the law." State ex rel. Alma Tel. Co. v. Pub. Serv. Comm'n, 40 S.W.3d 381, 388 (Mo. App. W.D. 2001). If the Commission's order is found to be lawful, the reviewing court must then determine whether it is reasonable. AG Processing, 120 S.W.3d at 735; State ex rel. Associated Natural Gas Co. v. Pub. Serv. Comm'n, 37 S.W.3d 287, 292 (Mo. App. W.D. 2000). "Reasonableness depends on whether the order is supported by competent and substantial evidence on the whole record, whether the decision was arbitrary, capricious, or unreasonable, or whether the Commission abused its discretion." State ex. rel. Sprint Spectrum L.P. v. Mo. Pub. Serv. Comm'n, 112 S.W.3d 20, 24 (Mo. App. W.D. 2003). Or, to put it another way, during the reasonableness phase we review to determine whether the order "is arbitrary or capricious or is against the overwhelming weight of the evidence." State ex rel. Chicago, Rock Island & Pac. R.R. Co. v. Pub. Serv. Comm'n, 312 S.W.2d 791, 796 (Mo. banc 1958). While Sprint advances two points on appeal, we need only address the second, in which Sprint argues that the Commission erred in rejecting Sprint's proposed tariff because the Commission's order doing so was unlawful in that the Commission's interpretation of section 392.245.11 is inconsistent with the language and purpose of the statute as a whole, as well as other related statutes. In particular, Sprint claims that section 392.245.11 does not contain a "use it or lose it" price cap mechanism as found by the Commission, but instead authorizes Sprint to set its rates at or below the maximum allowable price for a given year without forfeiting its ability to increase those rates the following year. "[T]he Public Service Commission is a body of limited jurisdiction and has only such powers as are expressly conferred upon it by the Statutes and powers reasonably incidental thereto." State ex rel. Kansas City Power & Light Co. v. Buzard, 168 S.W.2d 1044, 1046 (Mo. banc 1943); State ex rel. City of West Plains v. Pub. Serv. Comm'n, 310

S.W.2d 925, 928 (Mo. banc 1958). As the Commission is an administrative agency with limited jurisdiction, "the lawfulness of its actions depends directly on whether it has statutory power and authority to act." State ex rel. Gulf Transp. Co. v. Pub. Serv. Comm'n, 658 S.W.2d 448, 452 (Mo. App. W.D. 1983). Accordingly, the Commission "has no power to adopt a rule, or follow a practice, which results in nullifying the expressed will of the Legislature." State ex rel. Springfield Warehouse & Transfer Co. v. Pub. Serv. Comm'n, 225 S.W.2d 792, 794 (Mo. App. W.D. 1949). In particular, the Commission "cannot, under the theory of 'construction' of a statute, proceed in a manner contrary to the plain terms of the statute[.]" Id. This case of first impression requires us to determine the correctness of the Commission's construction of section 392.245.11. Although it is sometimes said that "[a]ppropriate weight and consideration are given to administrative interpretations of statutes where the meaning of a statute is uncertain," Spudich v. Dir. of Revenue, 745 S.W.2d 677, 680 (Mo. banc 1988) (citing Foremost-McKesson, Inc. v. Davis, 488 S.W.2d 193, 197 (Mo. banc 1972)), when, as here, "an administrative agency's decision is based on the agency's interpretations of law, the reviewing court must exercise unrestricted, independent judgment and correct erroneous interpretations." Burlington N. R.R. v. Dir. of Revenue, 785 S.W.2d 272, 273 (Mo. banc 1990). Thus, statutory construction is an issue of law which this court reviews de novo. Delta Air Lines v. Dir. of Revenue, 908 S.W.2d 353, 355 (Mo. banc 1995). "The primary rule of statutory construction is to ascertain the intent of the lawmakers from the language used, to give effect to that intent if possible, and to consider the words used in the statute in their plain and ordinary meaning." State v. Knapp, 843 S.W.2d 345, 347 (Mo. banc 1992) (internal quotation marks omitted). "The provisions of a legislative act are not read in isolation but construed together and read in harmony with the entire act." Mo. Dep't of Soc. Servs., Div. of Aging v. Brookside Nursing Ctr., Inc., 50 S.W.3d 273, 276 (Mo. banc 2001). Thus, in interpreting legislation, we are not to be guided by a single sentence standing alone, but should look to the provisions of the whole law, including its object and policy. State v. Rousseau, 34 S.W.3d 254, 260 (Mo. App. W.D. 2000). Moreover, In determining legislative intent, the reviewing court should take into consideration statutes involving similar or related subject matter when those statutes shed light on the meaning of the statute being construed[.] This principle that statutes should be construed harmoniously when they relate to the same subject matter is all the more compelling when the statutes are passed in the same legislative session. Knapp, 843 S.W.2d at 347 (internal citations omitted). Applying these principles to section 392.245.11, we conclude that the language used by the legislature in the statute considered as a whole manifests its intent that the rates for nonbasic telecommunications services actually paid by

consumers to price cap regulated ILECs such as Sprint need not be the same as the corresponding maximum allowable prices, but may be either less than or equal to those maximum allowable prices. As noted supra, the last sentence of section 392.245.11 states: An incumbent local exchange telecommunications company may change the rates for its services, consistent with the provisions of Section 392.200, but not to exceed the maximum allowable prices, by filing tariffs which shall be approved by the commission within thirty days, provided that any such rate is not in excess of the maximum allowable price established for such service under this section. This clearly contemplates that maximum allowable prices and actual rates may be unequal as long as those rates are "not in excess of" the maximum allowable prices established under section 392.245 and approved by the Commission. It also reiterates that a price cap regulated ILEC may change its rates so long as they do not exceed the maximum allowable prices and clearly mandates that tariffs reflecting such rate changes "shall be approved by the commission within thirty days" of their filing, again provided that the rates are not in excess of the maximum allowable prices. That is to say, the legislature gave price cap regulated ILECs the option, on an annual basis, to set their actual rates for nonbasic telecommunications services (such as Sprint's MCA service in the optional tiers of the Kansas City metropolitan area) below the corresponding maximum allowable prices while still maintaining future rate flexibility based on subsequent market conditions. In concluding otherwise, the Commission relied exclusively on the following sentence within section 392.245.11: Thereafter, the maximum allowable prices for nonbasic telecommunications services of an incumbent local exchange telecommunications company may be annually increased by up to eight percent for each of the following twelve-month periods upon providing notice to the commission and filing tariffs establishing the rates for such services in such exchanges at such maximum allowable prices. Focusing on the phrase "at such maximum allowable prices," the Commission and OPC argue that since Sprint never filed tariffs which set the rates actually charged to consumers "at" the maximum allowable prices the Commission had approved effective December 11, 2000, Sprint forfeited its right to file tariffs raising its rates to levels less than or equal to the maximum allowable prices approved by the Commission effective December 11, 2001. In other words, as applied to the facts of this case, the Commission and OPC argue that under the "use it or lose it" price cap mechanism they claim is embodied in section 392.245.11, because Sprint did not request an 8% increase in its rates during the twelve-month period beginning December 11, 2000, Sprint was prohibited from requesting anything more than an 8% increase in its rates during the twelve-month period beginning December 11, 2001.

The construction urged by the Commission and OPC is not only forced, but unreasonable and inconsistent with the purpose of price cap legislation. It erroneously interprets the meaning of the phrase "at such maximum allowable prices," incorrectly confuses rates with maximum allowable prices, renders the last sentence of section 392.245.11 superfluous, and wholly ignores the text of related statutes which shed a good deal of light on the intended meaning of section 392.245.11. First of all, based on a careful reading of the statute, it is apparent that the legislature used the phrase "at such maximum allowable prices" in the sentence of section 392.245.11 relied on by the Commission simply to make it clear that should a price cap regulated ILEC desire to increase its actual rates for nonbasic telecommunications services in a given year to the statutory maximum allowable price, it must provide notice to the Commission and file tariffs establishing the rates for those services "at" the statutory maximum allowable price. Thus, when read in the context of the entire statute, the language relied on by the Commission merely allows a price cap regulated ILEC to increase its rates up to the maximum allowable price if and when it chooses to file corresponding tariffs. For this reason, we cannot agree with Commission and OPC that the legislature intended to (1) require actual rates and maximum allowable prices to run in strict lockstep with each other, and (2) force price cap regulated ILECs to increase their actual rates by 8% every twelve months in order to retain maximum future rate flexibility. Second, section 392.245.11, when considered as a whole, makes it abundantly clear that the maximum allowable prices for each twelve-month period are what serve to cap or limit the actual rates ultimately charged during that period. This is made evident by parsing the provisions of section 392.245.11 down to fundamental concepts. [T]he maximum allowable prices . . . may be annually increased by up to eight percent for each of the following twelve-month periods . . . . An [ILEC] may change the rates for its services . . . but not to exceed the maximum allowable prices . . . . section 392.245.11 (emphasis added). But the interpretation urged by the Commission and OPC has this backward, as it assumes that the actual rates ultimately charged are what limit maximum allowable prices. Under the plain terms of the statute, it is the maximum allowable prices that cannot be raised by more than 8% annually, not necessarily the actual rates which may be requested by price cap regulated ILECs. Third, if "the maximum allowable price effectively resets at the rate actually being charged to customers at the end of a twelve-month period," as claimed by the Commission in its brief, the last sentence of section 392.245.11 quoted supra would be rendered superfluous, as the rates charged would, by definition, never "exceed the maximum allowable prices" or be "in excess of the maximum allowable price established for such service under this section." As it is "presumed that

the legislature did not insert idle verbiage or superfluous language in a statute," Hyde Park Hous. P'ship v. Dir. of Revenue, 850 S.W.2d 82, 84 (Mo. banc 1993), this result "would defy the norm of statutory construction that 'every word, clause, sentence, and provision of a statute' must have effect." Civil Serv. Comm'n of St. Louis v. Members of the Bd. of Aldermen of St. Louis, 92 S.W.3d 785, 788 (Mo. banc 2003) (quoting Hyde Park Housing, 850 S.W.2d at 84). Fourth and finally, the interpretation of section 392.245.11 favored by the Commission and OPC ignores the text of another provision of section 392.245, to wit section 392.245.5, and a related statute, section 392.185, both of which shed considerable light on the legislative intent behind section 392.245.11. In section 392.245.5, the legislature implicitly rejected the Commission's contention that section 392.245.11 disallows a "carry over" of previously-approved maximum allowable prices in the absence of previous actual rate increases. Under section 392.245.5, if the Commission determines, after a hearing, that "effective competition exists in the exchange for the various services" of an ILEC, the ILEC is no longer subject to price cap regulation and "may thereafter adjust its rates for such competitive services upward or downward as it [the ILEC] determines appropriate in its competitive environment." The same sub-section also requires the Commission to reimpose price cap regulation if the Commission determines, after a hearing, "that effective competition no longer exists for the [ILEC] in such exchange." However, section 392.245.5 further mandates that "in any such case" where the Commission reimposes price cap regulation on an ILEC, "the maximum allowable prices established for the telecommunications services of such [ILEC] shall reflect all index adjustments which were or could have been filed from all proceeding years since the company's maximum allowable prices were first adjusted pursuant to subsection 4 or 11 of this section." (emphasis added). While this case does not involve the reimposition of price cap regulation after a finding that effective competition no longer exists, the highlighted language from section 392.245.5 is direct evidence of the legislature's intent that the maximum allowable price cap in the case sub judice be based not only on actual increases in rates, as claimed by the Commission and OPC, but also on all maximum allowable price adjustments that were, in fact, requested by Sprint and approved by the Commission. Similarly, section 392.185, which was passed in the same legislative session, on the same day, and even as part of the same bill (Senate Bill 507) as section 392.245, is enlightening. In relevant part, section 392.185 states: The provisions of this chapter shall be construed to: * * * (4) Ensure that customers pay only reasonable charges for telecommunications service; (5) Permit flexible regulation of competitive telecommunications companies and competitive telecommunications services; [and]

(6) Allow full and fair competition to function as a substitute for regulation when consistent with the protection of ratepayers and otherwise consistent with the public interest[.] * * * The interpretation of section 392.245.11 argued for by the Commission and OPC is inconsistent with all three of these express legislative directives governing the construction of the provisions of Chapter 392. It does not ensure that consumers pay only reasonable charges for telecommunications services as envisioned by section 392.185(4), because under the "use it or lose it" approach espoused by the Commission and OPC, we think it very likely that price cap regulated ILECs like Sprint would opt to "use it" by regularly raising their rates by 8% on a yearly basis, no matter what the prevailing market conditions, rather than "lose it." (FN5) Indeed, had their preferred interpretation of section 392.245.11 been in full effect during 2001 and 2002, it is fairly obvious that there would have been very little if any incentive for Sprint to defer rate increases as it did. Moreover, there is little doubt that Sprint, in an effort to maintain maximum future rate flexibility in the event of subsequent changes in market conditions, would have filed tariffs raising the actual rates for its optional nonbasic MCA offerings by 8% in December 2000, followed by another 8% increase in December 2001. Consequently, consumers of such nonbasic optional services would have paid 8% more than they actually did throughout 2001, and an additional 8% more than they actually did throughout the first four months of 2002. Likewise, the Commission's "use it or lose it" approach can hardly be considered "flexible" as envisioned by section 392.185(5) and replaces rate competition between ILECs and ALECs with a form of regulation not authorized by the applicable statute (section 392.245.11) even though the former approach appears to be entirely consistent with both the protection of ratepayers and the public interest under section 392.185(6). In contrast, the interpretation of section 392.245.11 that we adopt, which allows actual rates and maximum allowable prices to be different from and largely independent of each other, permits telecommunications service providers to receive the benefits of rate flexibility without ignoring the interests of consumers and the public. If price cap regulated telecommunications companies know they can maintain rates that are below the Commission-approved maximum allowable prices, and that they can forego or defer taking a particular year's allowable rate increase until later, when market conditions are more favorable, their incentive to file tariffs increasing actual rates by a full 8% each and every year is substantially reduced. Consistent with sections 392.185(4)-(6), this benefits telecommunications customers by producing reasonable rates, provides rate flexibility (thereby allowing price cap regulated companies to react to market conditions), and allows full and fair competition to function as a substitute for more traditional rate regulation while at the same time protecting consumers and serving the public interest.

For all of these reasons, we hold that the Commission's October 27, 2002 order rejecting Sprint's revised tariff sheet number 200200766 filed on March 13, 2002 was not authorized by statute and was, therefore, unlawful. Accordingly, the order issued by the Commission in Case No. TT-2002-447 must be reversed and the matter remanded to the Commission for further proceedings not inconsistent with this opinion. All concur. Footnotes: FN1. Unless otherwise specified, all statutory references are to RSMo 2000. FN2. ILECs are defined in section 386.020(22) as local exchange telecommunications companies ("LECs") which were authorized to provide basic local telecommunications service in a specific geographic area as of December 31, 1995. Section 386.020(30) defines LECs as companies engaged in the provision of local exchange telecommunications service and classifies them as either large or small, depending on whether they have at least 100,000 access lines in Missouri. The parties agree that Sprint is a large ILEC as defined in sections 386.020(22) and (30) and as used in sections 392.245.2 and 392.245.11. FN3. Alternative local exchange telecommunications companies ("ALECs"), which are also sometimes referred to as competitive LECs or CLECs, are defined in section 386.020(1) as LECs which were certified by the Commission to provide basic or nonbasic local telecommunications service, switched exchange access service, or any combination thereof in a specific geographic area after December 31, 1995. FN4. The parties agree that the optional MCA Plans in Tiers 3, 4, and 5 are "nonbasic telecommunications services" as defined in section 386.020(34) and as used in section 392.245.11. FN5. The record shows that the rates charged by Sprint for the optional residential and business MCA services in Tiers 3, 4, and 5 have been exactly the same since early 1994. Thus, although this was overlooked or ignored by both the Commission and OPC in their briefs, Sprint's March 2002 tariff filing represented the first increase in those rates in over eight years. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.