Borough of Middletown v. Public Service Commission ( 1923 )

Argued March 16, 1923. These are appeals from the Public Service Commission in a rate case. The commission, on October 18, 1921, filed a report finding the historical cost of the property of the water company to have been "at least $173,359, without including any allowance for organization, incorporation and development costs or cost of establishing the business"; that the "reproduction cost new depreciation of the properties would be $213,000, with no allowance for going concern value"; and that the present fair value of the property of the company, used and useful in the public service was $202,000, upon which amount the company was entitled to a return of 7% per annum. The commission found that the company was entitled to a gross revenue of $32,540 per annum, made up as follows: Operating expenses and taxes $14,400; annual depreciation for renewals and replacements $4,000 and (7% return on $202,000) $14,140, making a total of $32,540. The commission found that the rate complained against did not at that time seem to be unreasonable. It did not, however, dismiss the complaints, but retained jurisdiction and ordered the water company to file with the commission monthly reports, showing operating costs and revenues, until June 1, 1922, after which date the commission would proceed to make a final determination of the amount to be allowed for operating cost and the gross annual revenue to which the company should be entitled. The complainants thereupon took the appeal No. 21 March Term, 1922, and it was agreed between the parties that the argument of that appeal should be postponed until after the commission made a final order disposing of the complaints. The company having filed with the commission, monthly, reports of the details of its operating costs and revenues until June 1, 1922, the commission subsequently heard and considered such testimony with regard to the cost of operations as the parties saw fit to present and, on October 24, 1922, filed a report reaffirming its former determination, finding the rates to be reasonable and dismissed the complaints. The complainants thereupon took the appeal No. 23 March Term, 1923. The appeals have been argued together, involve only the same questions and may be disposed of by one order.

Did the commission err in finding and determining the fair value of the plant and facilities of the company, for rate-making purposes, to be $202,000? Did the commission err in determining that the company should be allowed for operating expenses and taxes the sum of $14,400 per annum? These are the only questions involved in these appeals. The able counsel representing the appellants contended at the argument that this court should exercise its independent judgment, as to the law and the facts, and determine, from the weight of the evidence, what is the fair value of the property of the water company, for rate-making purposes, and what amount should be allowed annually for operating expenses and taxes. He frankly conceded that there was substantial, competent evidence to sustain the findings of the commission, and if the court was not required to exercise its independent judgment and determine the facts from the weight of the evidence, the appeals could not be sustained. We have held since this case was argued that where no question of confiscation of property or the violation of any right guaranteed by the Fourteenth Amendment of the Constitution of the United States was involved, findings of fact by the Public Service Commission, when sustained by substantial, competent evidence, must be sustained: City of Scranton v. Public Service Commission, 80 Pa. Super. 549, and Borough of Lewistown v. Public Service Commission,80 Pa. Super. 528. We have examined with care the evidence presented to the commission in this case and find that the findings of the commission were fully sustained by substantial, competent evidence. The report of the commission discloses that it considered all the elements involved, as required by the Public Service Company law in determining the fair value of the property of the water company. The commission found that the historical cost of the property, without any allowance for development cost or going concern value, was $173,359; that the reproduction cost new, with proper allowance for depreciation in the existing plant, would be $213,000, without any allowance for going concern value, and there was competent evidence to fully sustain such findings. The testimony of the engineer who was called by the appellants fixed the historical cost of the property at about $166,000, and the same witness testified that the cost of reproduction new, at the average prices for the five year period from 1916 to 1920, would be about $266,692, and that making the proper reduction for depreciation the valuation would be $209,347, if the average prices for the period named were to be accepted as the basis for the reproduction cost. Now, this was a witness produced by the complainants. The testimony of the witnesses called by the water company fixed the reproduction cost of the plant, less depreciation, at a higher figure. The commission in determining the present fair value of the property was required to make a proper allowance for development cost or going concern value, and having done this it found the present fair value of the property to be $202,000. It cannot, therefore, be said that the commission based its valuation upon the reproduction cost at the prices prevailing during the five year period 1916 to 1920, for the value which it fixed was lower than the estimated reproduction cost, less depreciation, testified to by any of the witnesses, and the commission included an allowance for going concern value, which the witnesses in their estimates did not. We cannot, therefore, say that the determination of the value of the property by the commission was without substantial, competent evidence to sustain it. The finding of the commission that a reasonable annual allowance for operating costs and taxes was $14,400 was also based upon substantial, competent testimony. There was upon this point, as well as upon the question of valuation, a conflict of evidence, but the question thus presented was one which it was the function of the commission to solve.

In the appeals Nos. 21, March Term, 1922, and No. 23, March Term, 1923, the determinations of the Public Service Commission are affirmed and the appeals are dismissed at cost of the appellants.