State Ex Rel. Utilities Commission v. Public Service Co. of North Carolina, Inc. , 257 N.C. 233 ( 1962 )

125 S.E.2d 457 (1962) 257 N.C. 233

STATE of North Carolina ex rel. UTILITIES COMMISSION
v.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, Inc.

No. 455.

Supreme Court of North Carolina.

May 23, 1962.

Lake, Boyce & Lake By I. Beverly Lake, Raleigh, for defendant, appellant.

Thomas Wade Bruton, Atty. Gen., Charles W. Barbee, Jr., Asst. Atty. Gen., for the North Carolina Utilities Commission, plaintiff, appellee.

HIGGINS, Justice.

This proceeding involves many of the issues of fact and conclusions of law discussed by this Court in State ex rel. North Carolina Utilities Commission v. Piedmont Natural Gas Company, decided on May 3, 1961, and reported in 254 N.C. 536, 119 S.E.2d 469. We may say, however, the Commission entered the order now involved on April 8, 1960, more than one year prior to our decision in Piedmont. The Commission did not have, but the Superior Court did have before it that decision.

In this proceeding, as in Piedmont, the intent to have Public Service absorb Transco's rate increase is threaded throughout the record. Both the rate base and the allowable deductions seem to have been reduced so that the net income would reflect a six per cent profit at the 1958 rate. Notwithstanding the progressive increase in plant investment, the rate base as of October 8, 1960, was less, by $325,000, than the Commission had found it to have been on September 30, 1959. The record confirms the juggling of figures, charged without equivocation in the dissent, and alluded to in the concurring opinion. These confirm the purpose of the majority to fix a rate base and a net operating profit which would show a six per cent return. In fixing the rate base at $16,125,000 the majority opinion says: "In so finding we have considered all factors required by G.S. 62-124 and all other facts which we feel have bearing upon our conclusion—without reference to any specific formula." (emphasis added)

The statute gives the Commission the right to consider all other facts that will enable it to determine what are reasonable and just rates. The right to consider "all other facts" is not a grant to roam at large in an unfenced field. The Legislature properly understood that, at times, other facts may exist, bearing on value and rates, which the Commission should take into account in addition to those specifically detailed in G.S. § 62-124. However, it was contemplated that such facts be established by evidence, be found by the Commission, and be set forth in the record to the end the utility might have them reviewed by the courts.

The rules fixing rates are set forth in G.S. § 62-122 et seq. See especially § 62-124. They are discussed more or less in detail in State ex rel. Utilities Commission v. State, 239 N.C. 333, 80 S.E.2d 133; State ex rel. Utilities Commission v. Carolina Power & Light Co., 250 N.C. 421, 109 S.E.2d 253; State ex rel. North Carolina Utilities Commission v. Piedmont Natural Gas Co., supra. In fixing fair value, original cost is an item to be considered. The Commission's accountant testified: "Original cost would be the actual cost of the property * * * by either the predecessor company or present company * * * by original cost * * * I mean cost at the time it was installed without regard to who installed it. For illustration, if the Raleigh Gas Company installed a certain line of pipe, I mean the actual cost incurred at the time of laying the property. We are not talking about what Public Service may or may not have paid to Raleigh Gas Company."

Unquestionably we think the Commission should consider "original cost" as one of the items in determining fair value. How much or how little original cost should figure in fixing present value is a matter of judgment, depending on many things. Certainly, original cost to Public Service should not be ignored as the Commission's expert witness suggested in fixing rates giving a fair return on its investment.

Evidence before the Commission tends to support the right of Public Service to change its depreciation rate and to charge as expenses the $84,000 additional taxes the change required. The evidence tends to support the right to establish a pension fund for employees and to make reasonable contributions thereto. Likewise, the evidence tends to support the treatment of the minimum balance required by creditor banks as working capital. Findings to the contrary are without support.

This proceeding differs in one respect from Piedmont. In the latter, the superior court reversed the Commission, and the Commission appealed. In this case the superior court affirmed the Commission, and Public Service appealed. In Piedmont, the presiding judge held the rate base was a quotient, fixed arbitrarily to require the gas company to absorb Transco's price increase, and that the rate base so fixed was not supported by competent, material and substantial evidence. After review, this Court agreed with the superior court and affirmed the judgment. In this case the Commission fixed the rate base in the same manner and for the same purposes as in Piedmont. On appeal to the superior court, the presiding judge held the evidence of the rate base was sufficient to support the Commission's finding. This appeal confronts us with the same question presented in Piedmont: Is there competent, material, and substantial evidence in the record to support the rate base fixed by the Commission? We are forced to conclude, as in Piedmont, the record does not disclose evidence sufficient to support the findings. The appellant is entitled to go before the Utilities Commission for further hearing.

The Commission will determine, in the manner provided by law, and put into effect a rate schedule which is fair, reasonable, and nondiscriminatory. G.S. § 62-124; State ex rel. North Carolina Utilities Commission v. Piedmont Natural Gas Co., supra; State ex rel. Utilities Commission v. Carolina Power & Light Co., supra; State ex rel. Utilities Commission v. Greensboro, 244 N.C. 247, 93 S.E.2d 151; State ex rel. Utilities Commission v. State, 243 N.C. 12, 89 S.E.2d 727; State ex rel. Utilities Commission v. Southern Bell Tel. & Tel. Co., 239 N.C. 333, 80 S.E.2d 133.

The Superior Court of Wake County will remand the proceeding to the North Carolina Utilities Commission for further hearing in accordance with this opinion.

Reversed.