Ponderosa Tel. Co. v. Cal. Pub. Utilities Comm'n

*1002 In this original proceeding, three rural telephone companies, The Ponderosa Telephone Co., Sierra Telephone Company, Inc., and Volcano Telephone Company (together petitioners), challenge the decision of the California Public Utilities Commission (PUC) establishing petitioners' "cost of capital," which is a financial yardstick used by the PUC as a component in *1003 ratemaking. 1 Conceptually, a utility company's cost of capital, also referred to as a rate of return, reflects that company's cost of generating or obtaining capital for investment in assets (e.g., facilities, equipment or infrastructure) that provide utility services to customers. 2 Petitioners contend the PUC failed to adequately consider certain risks that exist for investing in small, rural telephone companies, and therefore the cost of capital was set at an unreasonably low level, resulting in a confiscatory rate of *204 return. Based on this line of argument, petitioners claim the PUC decision should be annulled as allegedly (i) contrary to constitutional principles that require a reasonable rate of return, and (ii) lacking in substantial evidence or otherwise arbitrary and capricious. The PUC responds that…