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Montana Administrative Register Notice 38-2-208 No. 19   10/14/2010    
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DEPARTMENT OF PUBLIC SERVICE REGULATION

BEFORE THE PUBLIC SERVICE COMMISSION

OF THE STATE OF MONTANA

 

In the matter of the adoption of new rule I regarding the nonproprietary nature of utility executive compensation

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NOTICE OF ADOPTION

 

TO:      All Concerned Persons

 

1.  On April 15 2010 the Department of Public Service Regulation Montana Public Service Commission published MAR Notice No. 38-2-208 pertaining to the public hearing on the proposed adoption of the above-stated rule at page 875 of the 2010 Montana Administrative Register Issue No. 7.

 

2.  The commission has adopted New Rule I (ARM 38.2.5031) but with the following changes from the original proposal new matter underlined deleted matter interlined.

 

RULE I (38.2.5031) PUBLIC UTILITY EXECUTIVE COMPENSATION  (1)  If the commission is in possession of executive compensation information‚ the commission will not afford proprietary‚ confidential treatment to the compensation of the three highest-paid‚ Montana-based employees.  Each year‚ jurisdictional public utilities shall submit to the commission‚ the names and total company compensation- including, Total compensation includes‚ but is not limited to base salary‚ short-term (annual) incentive plan benefits‚ long-term incentive plan benefits‚ stock options‚ any supplemental benefit plans and perquisites‚ and compensation from the public utility affiliates of their executive management personnel in MontanaExecutive management personnel in Montana are those persons whose responsibilities are material to the public interest determinations of the commission and whose total compensation exceeds $100‚000 per year. The total compensation utility executive total compensation information of the three highest-paid‚ Montana-based utility employees will not be treated as confidential information and will not be protected from public disclosure through issuance of a protective order by the commission.  If a public utility or a public utility employee contends that the circumstances of the privacy of an employee's particular compensation warrants issuance of a protective order despite the wording set forth above‚ the utility or employee may seek issuance of a protective order and set forth the circumstances that may justify issuance of such an order.

(2)  When a protective order is requested for salary information because the duties of the position are not material to the public interest determination by the commission the commission will not issue a protective order if the position's duties include any of the following: 

            (a)  Oversee diverse activities for multiple work units or major organizational functions and which have responsibility for integrating work or multiple organizational units to align them with the company’s established goals and objectives;

            (b)  Secure and allocate human and financial resources to accomplish goals; and

            (c)  Develop and establish organizational standards goals objectives business plans and evaluate organizational performance.

(3) (2)  Adoption of this rule does not preclude the commission from seeking and securing other information from regulated businesses.

 

            AUTH:  69-3-103 MCA

            IMP:  69-3-102 69-3-106 69-3-201 69-3-203 69-3-330 MCA

 

            3.  The commission has thoroughly considered the comments and testimony received.  A summary of the comments received and the commission's responses are as follows:

 

Comment 1:

 

            Cedron Jones of Helena Montana provided oral comments at the rulemaking hearing.  Mr. Jones supported the proposed rule but proposed that the commission remove the criteria that the rule covers only those management personnel who are located in Montana.  Mr. Jones reasoned that with the growth in private equity firms the commission may be regulating private firms at some point in the future and if that were the case the Securities and Exchange Commission rules on disclosure of employee compensation would not apply.

 

            Mr. Jones asserted that persons working for publicly regulated utilities should have no expectation of privacy regarding their income just like government employees.

 

            Lastly Mr. Jones maintains that a key element of trust in government is open government that is easy public access to any and all information held by the government therefore if the commission has executive salary information the public should have access to such information.

 

Response 1:

 

            The commission concludes that the revised rule adopted herein appropriately responds to and is supportive of the concerns expressed by Mr. Jones.  The adopted rule would provide access to the compensation information of the three highest-paid Montana-based public utility employees if such information is in the possession of the commission.  The commission is persuaded that the public no longer recognizes that a subjective expectation of privacy as regards his/her salary is reasonable for the highest-paid Montana-based utility employees.

 

Comment 2:

 

            Bob Brock representative of the International Brotherhood of Electrical Workers (the IBEW) appeared in support of the proposed rule at the May 18 hearing.  The IBEW represents the vast majority of utility and telecommunication workers in the state of Montana.  Mr. Brock stated that executive compensation of all of the cooperatives in Montana was available when the co-ops file their Form 990s each year in compliance with Internal Revenue Service regulations.  In addition compensation information for labor organization members is available through the U.S. Department of Labor.  It is no secret what linemen in Montana receive as it is often available through the U.S. Dept. of Labor's database of collective bargaining agreements.  The IBEW feels that the executive compensation information available to the commission should also be available to the general public.

 

Response 2:

 

            The commission concludes that the revised rule adopted herein appropriately responds to and is supportive of the comments of Mr. Brock.  The adopted rule would provide access to the compensation information of the three highest-paid Montana-based public utility employees if such information is in the possession of the commission.  The commission is persuaded that the public no longer recognizes that a subjective expectation of privacy as regards his/her salary is reasonable for the highest paid Montana-based utility employees.

 

Comment 3:

 

            Both oral testimony and written comments were received from counsel for Montana Dakota Utilities Co. (MDU) and Mountain Water Company (MW) (collectively, MDU/MW).  MDU/MW maintain that the commission misapprehends the controlling issue on the subject of executive compensation.  MDU/MW contend that the commission mistakenly believes that the utility industry is protecting the compensation information as such information is proprietary.  The commission's notice of rulemaking indicates that the commission is considering adopting a rule regarding the nonproprietary nature of executive utility compensation.  The primary basis for the utilities' refusal to publicly disclose the salaries and wages of their employees is that their employees are entitled under Art. II sec. 10 of the Montana Constitution to maintain the privacy of their financial affairs.  MDU/MW contend that the proposed rule violates the constitutionally protected individual right of privacy belonging to each of the utilities' Montana employees.  The Proposed Rule I is not a "public's right to know" issue, for it does not address information in the possession of the commission; rather what it does is require information that is in the possession of utilities to be produced for public scrutiny.  Section (1) of the proposed rule is a demand for compensation information in the possession of the utilities and does not involve the Montana Constitution Article II sec. 9 balancing test viz. whether the person's right of privacy clearly exceeds the public's right to know.  The commission's proposed rule exceeds the commission's jurisdiction in that it determines that the utility employees do not have a constitutional right of privacy that maintains the privacy of their compensation.

 

            An individual has a constitutionally recognized right to maintain the privacy of information under Article II sec. 10 of the Montana Constitution if: (1) the individual has a reasonable expectation of privacy and (2) society is willing to recognize the expectation as reasonable.  Missoulian v. Bd. of Regents 207 Mont. 513, 675 P.2d 962 (1990).  The reasonableness of the expectation is reflected in the fact that individual tax records are confidential under both Montana and federal law.  See Section 15-30-511 MCA; 26 U.S.C. § 6103.  MDU/MW further state that the Montana Supreme Court has held that employee specific financial data must be protected against public disclosure when the state of Montana reviews financial information in an administrative proceeding.  Montana Healthcare Association v. State Fund 256 Mont. 146 152 845 P.2d 113 (1992).  Counsel for MDU/MW could envision one or more public utility executives' compensation becoming an issue in a rate case but he hadn't seen such a circumstance yet.  The proposed rule attempts to set broad brush policy when the issue (compensation disclosure) is fact-specific and must be addressed on a case-by-case basis.

 

            MDU/MW state that previous iterations of the proposed rule limited public disclosure to the "Top Ten" compensated Montana employees of each jurisdictional utility.  The noticed proposed rule abandoned the Top Ten approach and mandates disclosure of all salary and benefits when "[T]otal compensation including but not limited to base salary short-term (annual) incentive plan benefits long-term incentive plan benefits stock options and supplemental benefit plans and perquisites exceeds $100000 per year."  Proposed Rule I(1).  This change has the effect of broadening the scope of the proposed rule not narrowing the scope from the prior iterations.  Mountain Water believes that when health and other benefits are added the $100000 total compensation threshold probably equates to about a $60000 to $70,000 per year salary or wage.  As many as 20 of Mountain Water's Montana employees might be subject to the commission's proposed reporting requirement.  MDU believes that under the broadened definition it would have to publicly disclose salary and wage information for nearly 60 of its Montana employees 40 of which would be bargaining unit employees.

 

            MDU/MW also maintain that the scope of executives under the proposed rule to include any employee "position material to the public interest determination by the commission" is unworkable.  The commission has supplied no definition of this amorphous concept in the proposed rule.  MDU/MW contend that it will be impossible to apply the concept on a case-by-case basis in a contested case proceeding which Proposed Rule I(2) appears to address.  Since discovery in a contested case proceeding occurs long before the commission makes a decision there is no way to determine what the commission's "public interest determination" will be in that particular proceeding.

 

Response 3:

 

            The commission's revised rule eliminates the original wording requiring annual filings of executive compensation information, as well as the "material-to-the-public-interest" standard from the originally proposed rule.  The revised adopted rule discards the $100000 per year criteria and reduces the number of possible employees affected. The commission also eliminated the description of executive functions concluding that focusing on the three highest-paid Montana-based public utility employees would include persons that possessed the requisite authority to perform executive-type tasks.  The commission finds that these contemplated requirements in the original rule were unworkable as was contended by several commenters.  The revised rule does contemplate that the commission will be in possession of compensation information e.g. during a contested case proceeding setting rates for a public utility.  When the commission is in possession of such information the commission will not issue protective orders to prevent the disclosure of compensation information of the three highest-paid Montana-based public utility employees.  Disclosure of other utility employee personnel compensation information will be determined on a case-by-case basis.

 

            The commission finds that in order to be classified as a public utility in Montana the entity must have devoted property to a use in which the public has an interest; in effect the owner of the property grants to the public an interest in the use of the property so devoted.  See 69-3-1-1 MCA and Great N. Util. Co. v. P.S.C. 88 M 180 293 P. 294 (1930).  Once deemed a public utility the very existence of the public utility depends upon monies provided through rates by its ratepayers.  It does not strike the commission as being discordant to reason that the ratepayers of a public utility would want to know and ought to know how their money is spent.  There are undoubtedly exceptions to the public's right to know any and all public utility-possessed information e.g. trade secrets possessed by the public utility but the commission concludes that the ratepayers have a right to know the compensation paid the highest paid public utility employees.  The commission determines in the revised adopted rule that this right to know governs the total compensation of the three highest-paid Montana-based public utility employees.  Should the issue of the public's right to know compensation information of other public utility employees the commission will consider protection from disclosure versus the publics' right to know on a case-by-case basis.  The commission finds that the public does not recognize that any subjective expectation of privacy as regards their compensation held by the highest paid utility employees is a reasonable expectation.

 

            Moreover the commission finds precedent addressing the private or public nature of government employee salaries to be analogous.  The Attorney General of Montana determined that no privacy right is infringed by the disclosure of a state employee's salary.  See Opinion No. 109 (1980) 38 Op. Atty Gen. Mont. 375.  The Attorney General favorably cited a Michigan decision that found that salaries of state university employees were not "intimate details" of a "highly personal" nature and that "disclosure of this information would not thwart the apparent purpose of the exemption to protect against the highly offensive public scrutiny of totally private personal details."  The Michigan decision further found that "The precise expenditure of public funds is simply not a private fact."  Id.  Even if the information being sought did infringe on the privacy of the employees it would have to be disclosed because "[t]he minor invasion occasioned by disclosure of information which a university employee might hitherto have considered private is outweighed by the public's right to know precisely how its tax dollars are spent."  Id.  Moreover the Attorney General did not find it necessary to consider the privacy of government employees on a case-by-case basis in order to conclude that:

 

            "Even if the information you have asked about [a state employee's salary] did            infringe on an individual's privacy Montana's balancing test likewise would     require it to be disclosed."  Id.

 

            The analogy is that disclosure of public utility employee compensation either does not involve a private fact or that it is at most a minor invasion.  Ratepayers have a right to know how the revenue derived from assessed utility rates is being spent by the business that has devoted property to a public purpose i.e. a business that is clothed with a public purpose.

 

            The commission finds support for its revised rule in the general rule that government records are open to the public and the burden placed upon the custodian of the records is to affirmatively show the demands of individual privacy clearly outweigh the merits of public disclosure when balancing the merits of public disclosure and individual privacy before protection is afforded the information.     Opinion No. 107, 37 Op. Atty Gen. Mont. 460 (1978).

 

            The adopted rule does not contemplate disclosure of federal or state income tax records; it does not address an individual's expenses or investments that may be reflected on tax records; it does not require disclosure of income from a source unrelated to the public utility.  It simply would require disclosure of the total compensation paid the three highest-paid Montana-based public utility employees if the commission were asked for such information that was in the agency's possession.

 

Comment 4:

 

            The Montana Telecommunications Association (MTA) provided oral and written comments on the proposed rule.  The MTA states that the proposed rule violates clear Montana Supreme Court case law that requires in every instance a case-by-case determination of the public's right to know as measured against an individual's expectation of privacy.  Havre Daily News LLC v. City of Havre 2006 MT 215 333 Mont. 331 142 P.3d 864.  The balancing of the inherent tension between the constitutionally protected right of privacy and the constitutionally guaranteed public right to know requires a factual determination of whether the individual whose privacy interest is at stake has an actual expectation of privacy.  Id. ¶ 23 citing Bozeman Daily Chronicle v. Police Department 260 Mont. 218 224 859 P.2d 435 439 (1993).  Following that determination a factual inquiry must be made into whether or not society is prepared to recognize that expectation of privacy as reasonable.  MTA states that the Supreme Court went on to note that the following inquiries may be relevant to that factual analysis:  (1) the attributes of the individual; (2) the particular characteristics of the discrete piece of information; and (3) the relationship of that information to the public duties of the individual.  Id.  The MTA also cites Disability Rights Montana v. State 2009 MT 100 350 Mont. 101 207 P.3d 1092 for the proposition that an agency could not categorize information that would always be released.  The court rejected that approach and found that the determination of the right to know vis-à-vis the right to privacy is always a fact-specific inquiry that can never be short-circuited by rule or policy.  Id. ¶ 23.  The MTA also cites Associated Press Inc. v. Department of Revenue 2000 MT 160 300 Mont. 233 4 P.3d 5 in which the Department of Revenue (DOR) attempted to implement a rule that declared tax returns and other documents it received relating to the coal severance tax to be confidential.  The court rejected the DOR's categorization of tax documents as private on a "wholesale basis" without engaging in the balancing test required by Article II, sec. 9.  The court found the regulation to be unconstitutional on its face because there was no mechanism that would allow for disclosure if a proper showing was made under the right-to-know provision of the constitution.  Id., 300 Mont. at ¶ 26.  The MTA states that the commission's proposed rule presents the precise scenario as that rejected in Associated Press, except in the other extreme.  Here the commission is attempting to wholesale categorize documents as public without any mechanism by which they may be kept confidential.  The commission cannot avoid the balancing test by implementing a rule that predetermines information as public.

 

            The MTA further comments that an individual's personal income has long been recognized as a matter of personal privacy.  Citing 26 U.S.C. § 6103 (income tax returns are confidential); 15-30-303 MCA (state income tax information is confidential) and Montana Attorney General Opinion 43 Op. Atty Gen. No. 25 (1989).

 

            The MTA also questions the commission's reliance of cited statutes as authority for adoption of the proposed rule.  The commission cited 69-3-102, MCA which sets forth the general power and ratemaking authority of the commission.  MTA contends that the commission already has the information addressed by the rulemaking in its possession.  The commission has the ability to use the information to exercise its powers under Title 69, but it does not have the authority to disseminate this information to the public at large.  Moreover the MTA argues that the other statutory cites relied upon by the commission for this rulemaking viz. sections 102 106 201 203 and 330 of Part 3, Title 69 do not confer upon the commission a statutory basis for requiring the production of the information and the public disclosure of such information.  Section 102 affords the commission the authority to regulate supervise, and control public utilities.  Section 106 gives the commission the authority to inquire into the management of the business of public utilities.  Section 201 requires utilities to provide adequate service at reasonable charges.  Section 203 requires utilities to provide an annual report to the commission.  Section 330 authorizes the commission to fix the rates of public utilities at just and reasonable rates.  The MTA maintains that adoption of this administrative rule would be an arbitrary or capricious disregard for the purpose of the authorizing statute and under such circumstances a court may declare the rule invalid.  See Pennaco Energy Inc. v. Montana Board of Environmental Review 2008 MT 425 ¶ 20 347 Mont. 415 ¶20 199 P.3d 191 ¶ 20.  A rule comports with the Montana Administrative Procedure Act only if it is (a) consistent and not in conflict with the applicable statute; and (b) reasonably necessary to effectuate the purpose of the statute.  The MTA contends that the commission has met neither of these requirements.  None of the statutes cited by the commission gives it the authority to carte blanche make certain information available to the public at large.

 

            The MTA further comments that adoption of the proposed rule will harm the individuals whose information is made public will harm the companies who are required to disclose the information and it will harm the state of Montana.  Executives living elsewhere would be reluctant to secure employment in Montana if their compensation was public information.  Losing these executives would harm Montana businesses.  Moreover revealing such compensation packages may allow competing companies to recruit personnel.

 

            The MTA asserts that the threshold $100000 per year compensation level incorporated into the proposed rule is arbitrary and the commission has no basis supporting keeping confidential compensation information below that level or basis to publicly disclose compensation information above that level.

 

            The MTA contends that the privacy interest at stake is a fundamental right under the Montana Constitution.  As such the commission's proposed rule abrogating an individual's right to privacy in compensation information is subject to strict scrutiny analysis.  Montana Environmental Information Center v. Montana DEQ 1999 MT 248 296 Mont. 207 988 P.2d 1236.  The arbitrary selection of compensation levels subject to disclosure together with application of an undefined "public interest" standard cannot successfully withstand strict scrutiny for the commission must show a compelling state interest for its action.  Id. at ¶ 61.  The compelling state interest must be closely tailored to effectuate only that compelling state interest.  Shapiro v. Thompson (1999) 394 U.S. 618 89 S.Ct. 1322 22 L.Ed.2d 600.  Moreover the commission must show that its choice of action is the least onerous path that can be taken to achieve its objective.  State v. Pastos (1994) 269 Mont. 43 887 P.2d 199.  The MTA contends that the commission is not able to make any of these requisite showings.  The commission has not identified what its objective is or its need for this rulemaking proceeding let alone attempted to explain what compelling state interest justifies its action.

 

            The MTA asserts that the proposed rule is void for vagueness citing Monroe v. State (Mont. 1984) 265 Mont. 1 8 873 P.2d 230 234.  In Monroe the Montana Supreme Court noted that the issue of vagueness with regard to a statute or ordinance "can be raised in two different connotations: (1) whether it is so vague the law is rendered void on its face; or (2) if it is vague as applied in a particular circumstance."   The MTA contends that it is impossible for employees to know whether or not their salaries will be subject to public disclosure in any given year; therefore, the proposed rule is void on its face and will be void as applied to any particular situation.

 

Response 4:

 

            The commission's Response No. 3 above responds to many of the MTA assertions.  The commission finds that a public utility employee's subjective expectation of a right of privacy to his/her utility compensation is more akin to a governmental employee's subjective expectation that his/her governmental compensation would not be publicly disclosed than a private business' employee's privacy expectations.  Disclosure is a minor invasion outweighed by the rate-paying public's right to know.  Public utility compensation information does not constitute intimate details of a highly personal nature of a public utility employee.  As described in Response 3 above a public utility is a business clothed with a public purpose and the utility has dedicated property to a public use.  The rate-paying public has a right to know how a public utility is expending the revenues it receives from its customers.  If the utility is a publicly-traded corporation the Securities and Exchange Commission requires the filing and public availability of the top five highest-paid executive compensation.  See Tr. pp. 48-50.  Moreover there are times when Montana utility cooperatives under Internal Revenue Service regulations are required to file executive compensation information in their annual 990 form.  See Tr. pp 59-60.  The commission finds that a subjective expectation of privacy at least with regard to the highest-paid public utility employees is not an expectation that is accepted by the public as reasonable.

 

            The MTA also questions the commission's statutory citations that it relies upon as the source of authority for adoption of this rule.  The commission cites among other provisions 69-3-102 MCA which sets forth the general power and ratemaking authority of the commission.  Clearly public utility employee compensation is a factor in the setting of rates by the commission and the commission routinely reviews such information most often in a contested case that sets utility rates.  The revised rule simply informs the public that when such information is in the commission's possession the agency will not issue a protective order to govern disclosure of the three highest-paid Montana-based employees.  Requests for protective orders for employees other than the three highest-paid Montana-based employees will be considered on a case-by-case basis.  Moreover if the public utility or its employees believe that there are unique circumstances that would warrant issuance of a protective order for all or one of the three highest-paid Montana-based employees it may seek the issuance of such a protective order.  The commission maintains that the cited statute authorizes the commission to indicate to the public how it will treat information in its possession (protected or disclosed) upon which utility rates are in part based.

 

            The commission also cites as authority for adoption of the rule 69-3-102 MCA which confers upon the commission the authority to regulate supervise, and control public utilities and 69-3-106 MCA which authorizes the commission to inquire into the management of the business of public utilities.  The commission maintains that these statutes certainly authorize it to seek and secure public utility compensation information.  The revised rule adopted herein simply informs the public how the commission will handle such information when it is in the commission's possession.  A similar analysis is appropriate for 69-3-201 MCA which requires utilities to provide adequate service at reasonable charges; 69-3-203 MCA which requires utilities to provide an annual report to the commission; and 69-3-330 MCA which authorizes the commission to fix the rates of public utilities at just and reasonable rates.  These sections authorize the commission to seek and secure compensation information (utility rates are set in part on compensation information).  The rule simply informs the public how the commission intends to handle such information in its possession.

 

            The commission finds no objective basis for MTA's assertion that adoption of the rule will harm the individuals whose information is made public.  The commission has described above that disclosure of such information is a minor invasion of privacy and the public does not find subjective expectations of privacy applicable to utility compensation information to be reasonable.  The commission sees no concern about utility executives living in other states displaying a reluctance to secure employment in Montana if their compensation was public information.  As noted above executive compensation is disclosed if the utility is a publicly-traded corporation under SEC rules and under certain circumstances Montana utility cooperative compensation frequently appears in their Form 990.

 

            The commission also contends that any assertions that the proposed rule is void for vagueness cannot stand against the revised rule adopted herein.  The MTA's basis for the "void-for-vagueness" assertion was that an employee would not know whether his/her salaries would be subject to disclosure under the proposed rule.  The revised rule makes it clear that the three highest-paid Montana-based public utility employees would be subject to the rule.

 

Comment 5:

 

            John Barrows Executive Director of the Montana Newspaper Association provided comments in support of the commission's efforts.  Mr. Barrows emphasized the Article II Section 9 public's right to know overrides every other argument except when a case for personal privacy is specifically stated and claimed.  It is up to the agency not the courts to initially make the balancing act.  Only where the individual privacy clearly exceeds the public's right to know is nondisclosure permitted.

 

Response 5:

 

            The commission contends that the revised rule comports with the stated position of the Montana Newspaper Association.

 

Comment 6:

 

            Oral comments were supplied by counsel for Hot Springs Telephone Company.  Hot Springs points out the numerous orders issued over decades by the current and former commissions ruling that there is a right to privacy associated with employees compensation and that this information should be protected by law.  Only if there is some new or compelling reason should that precedent be overturned.  Counsel also contends that the proposed rule is not necessary because the commission can perform its duties and regulate public utilities without the proposed rule and can perform its statutory functions through issuance of protective orders.  Hot Springs maintains that the proposed rule is not relevant to the commission's duties.  Moreover disclosing of executive compensation of regulated utilities provides an advantage to the utility competitors that are not regulated.  Hot Springs also contends that the proposed rule does not address the trade secret nature of executive compensation which is a legal theory independent of the right to privacy issues associated with utility compensation.  Hot Springs fails to see any identified benefit of public disclosure of the executive compensation packages at least in the context of what the commission is doing under its statutory charge.  The commission can fully meet its duties without public disclosure of the salary information.  Hot Springs also notes that experts and technical witnesses testify at rate hearings under oath.  Members of the public that wish to testify do so without being sworn and their testimony is technically not on the record.  Disclosure of compensation information to the public would therefore not impact commission rate cases.

 

Response 6:

 

            The commission maintains that in recent years the public's acceptance of subjective expectations of privacy held by public utility executives as regards compensation information has changed.  Perceived abuses of compensation packages golden parachutes post-merger key employee packages and insider-trader convictions of utility executives have eroded the public's acceptance of any such expectations.

 

            As with the MTA's assertions, the commission finds no objective basis to assume that disclosure of compensation information provides an advantage to unregulated competitors.  The commission also finds no basis that public utility compensation information is a trade secret under Montana law as there is no evidence of record to show that the information (compensation) derives independent economic value from its secrecy or that competitive advantage is derived from its secrecy a prerequisite to classifying the information as a trade secret.  See ARM 38.2.5007(4)(b).

 

Comment 7:

 

            Jay Preston, Chairman of Ronan Telephone Company (Ronan Tel.) Ronan Montana provided oral comments at the May 18, 2010 hearing.  Ronan Tel questions the policy goals underlying the proposed rule.  The telecommunications industry is competitive and consumers can vote with the pocketbook as to what services they choose to purchase and from what service provider.  Under these circumstances Ronan Tel. fails to see why a rule stripping certain people in regulated companies of their right of privacy should be done when nonregulated companies are not subject to the same disclosures.  Moreover Ronan Tel. maintains that utility-initiated rate cases before the commission are rare because of competition.

 

Response 7:

 

            The revised rule adopted herein simply informs the public of how the commission intends to handle compensation information that is in its possession.  There is no doubt that the commission will possess such information at certain times.  The distinction between regulated companies and unregulated competitors is characterized by the public utility's dedication of assets to a public purpose and to subject such entities in Montana to regulation by this commission.  The competitors that Ronan Telephone Company refers to are not regulated by this commission; therefore the compensation information of such competitors will not be in the possession of this commission.  The rule simply addresses how the commission intends to handle compensation information when it is in the commission's possession.

 

Comment 8:

 

            Qwest Corporation (Qwest) filed written comments contending that the proposed rule prescribes an outcome of public disclosure when Montana Supreme Court cases require a case-by-case balancing.  Qwest also maintains that the proposed rule is vague in three particular areas:  (1) the lack of specificity regarding the term "total company compensation"; (2) the lack of specificity in the term "executive management personnel"; and (3) the proposed rule description of executive functions.

 

            The $100000 threshold is an arbitrary figure and that no public interest attaches at any particular compensation threshold.  Qwest contends that it is unclear whether health insurance benefits is to be one of the elements of compensation under the proposed rule.  Qwest maintains that Proposed Rule (2)(a) through (c) [description of executive functions] would include most employees of Qwest working in Montana.  Qwest contends that there are no monopolies left in the telecommunications industry and that the public interest is being well-served by the significant levels of competition affording an unprecedented level of customer choice.  The proposed disclosure of executive compensation will not advance the public interest.

 

            The right of privacy received extensive attention at the 1972 Constitutional Convention that adopted Article II sec. 10 of the Montana Constitution.  The end result is that the right of privacy cannot be infringed without a compelling state interest and no compelling state interest has been indentified that calls for commission securing the executive compensation information.

 

Response 8:

 

            The commission's Response Nos. 3 and 4 above address many of the Qwest comments.  The revised rule addresses Qwest's stated concerns about lack of specificity and the assertion that a $100000 threshold is arbitrary.

 

DEPARTMENT OF PUBLIC SERVICE REGULATION

 

 

 

/s/ Al Brogan                                                  /s/ Greg Jergeson

Al Brogan                                                       Greg Jergeson

Rule Reviewer                                               Chairman

                                                                        Public Service Commission

 

 

            Certified to the Secretary of State September 30 2010.

 

 

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