Capital Transit Co. v. Public Utilities Com'n

• Citation: 213 F.2d 176,93 US App. DC 194
• Decision Date: 10 December 1953
• Docket Number: No. 11501.,11501.
• Parties: CAPITAL TRANSIT CO. v. PUBLIC UTILITIES COMMISSION OF DISTRICT OF COLUMBIA et al.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

93 US App. DC 194, 213 F.2d 176 (1953)

CAPITAL TRANSIT CO. v. PUBLIC UTILITIES COMMISSION OF DISTRICT OF COLUMBIA et al.

No. 11501.

United States Court of Appeals District of Columbia Circuit.

Decided December 10, 1953.

Order Amending Judgment Filed February 25, 1954.

COPYRIGHT MATERIAL OMITTED

Mr. Samuel O. Clark, Jr., Washington, D. C., with whom Messrs. Edmund L. Jones, F. G. Awalt, W. V. T. Justis and F. Keith Kelly, Washington, D. C., were on the brief, for appellant.

Mr. Lloyd B. Harrison, Counsel for the Public Utilities Commission of the District of Columbia, with whom Mr. Vernon E. West, Corp. Counsel for the District of Columbia, was on the brief, for appellee Public Utilities Commission of the District of Columbia.

Mr. T. Justin Moore, Richmond, Va., with whom Messrs. George D. Gibson, Richmond, Va., James Francis Reilly and Cornelius Means, Washington, D. C., were on the brief, for appellee Potomac Electric Power Co. Messrs. H. W. Kelly and Thomas E. O'Dea, Washington, D. C., also entered appearances for appellee Potomac Electric Power Co.

Before STEPHENS, Chief Judge, and WILBUR K. MILLER and FAHY, Circuit Judges.

FAHY, Circuit Judge.

Proceedings were initiated in July 1950 before the Public Utilities Commission of the District of Columbia by the Potomac Electric Power Company for an increase in its rates. The Capital Transit Company, a customer, was permitted to intervene as an interested party.¹ On February 12, 1951, the Commission made its order No. 3762, accompanied by an opinion. It concluded, inter alia, that a weighted rate base of $146,926,000 for the test year 1951 constituted a fair and reasonable estimate of the amount upon which the Power Company was entitled to earn a fair and reasonable return in the immediate future, that a rate of return of 5½% was fair and just, and that in order to provide the Power Company with a fair return upon its property devoted to furnishing electric service throughout its system an increase of approximately $2,600,000 in rates was necessary. It accordingly ordered the Power Company to file rate schedules designed to produce for the system as a whole additional gross operating revenue of not more than that amount annually, based upon the year 1951. By another order, No. 3774, the Commission on March 20, 1951, made effective rate schedules so filed, insofar as they applied to the District of Columbia, finding them to be just, reasonable and nondiscriminatory. The increase for Transit's street railways in the District was approximately $209,000 per annum, to begin April 20, 1951. Transit's application for reconsideration was denied. With other parties it then appealed to the District Court as authorized by § 43-705, D.C.Code 1951. The court dismissed the appeal and affirmed both orders, giving its reasons in an opinion reported sub nom. Leeman v. Public Utilities Commission of District of Columbia, D.C., 104 F.Supp. 553. Whereupon Transit, but no other party, appealed to this court as also authorized by said § 43-705.

I. The principal attack upon the rate schedules arises out of the fact that the Power Company serves not only the District of Columbia, to which the Commission's jurisdiction is limited, but parts of Virgina and Maryland where its rates are subject to regulation by other commissions, and also certain interstate consumers the rates for whom are under the jurisdiction of the Federal Power Commission.² In approving the increase for District consumers, however, the Commission, as has been noted, did so on the basis of system-wide schedules. It found the rate base of the Power Company by evaluating the total system properties, ascertained its revenue needs also on a system-wide scope, determined the rate of return required to meet those needs and then approved, for the District alone, rate schedules which, as applied throughout the system, would net the required revenues.³ Transit points out that the Commission failed to segregate or allocate, terms which we use interchangeably, costs and revenues applicable to the business in the District, separate and apart from those applicable in the other jurisdictions. It contends that, therefore, the rates fixed for the District cannot be said to be "reasonable, just, and nondiscriminatory", the standards prescribed by the local statute. § 43-301, D.C.Code 1951.⁴

Appellees — the Commission and the Power Company — as justification for the system-wide approach point to the highly integrated character of the Power Company, with part of its generating plant located in Virginia yet essential to the total system operations in the District, in Maryland, and interstate. They point also to the relatively compact area served, to the long history of regulation on a system-wide basis, and to the great difficulty which would be encountered in segregating either properties, costs or revenues along jurisdictional lines. These are not mere arguments. They are Commission findings and conclusions with support in the evidence.

In these circumstances it is not always essential in fixing rates for District consumers to segregate properties, costs or revenues merely because the total properties and services of the Power Company extend to other jurisdictions. This conclusion has involved our consideration of decisions of the Supreme Court and of this court relied upon by Transit to the contrary.⁵ The reason given in Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819, for separate treatment of the intrastate and interstate aspects of a railroad business in the fixing by a state body of intrastate rates was to avoid the inequity and unreasonableness of interstate traffic bearing more than its due burden in relation to the intrastate. No rational alternative to such separate treatment appears to have been presented as a basis for judging the validity of the state action. To avoid discrimination by the rates of one jurisdiction against those of another — to establish the reasonableness of the intrastate rates to be approved — separation of the property, costs and business involved in the intrastate business was deemed necessary. This purpose has led to the statement that allocation is essential to the appropriate recognition of state and federal authority. See Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 148-149, 51 S.Ct. 65, 75 L.Ed. 255, involving intrastate telephone rates. Minnesota Rate Cases, 230 U.S. 352, 435, 33 S.Ct. 729, 57 L.Ed. 1511, is in the same line of decisions. But thereafter, in Colorado Interstate Gas Co. v. Federal Power Comm., 324 U.S. 581, 589, 65 S.Ct. 829, 89 L.Ed. 1206, the principle of segregation of properties was said not to have been written by Congress into the Natural Gas Act as the only prescribed formula for rate regulation. So, too, with respect to the District of Columbia statute. It does not incorporate, as essential, any particular segregation formula; and although a type of segregation was used by the Commission in the proceedings considered in Colorado Interstate Gas Co. v. Federal Power Comm., the opinion of the Court permits a latitude not restricted to segregation of one kind or another. Illinois Commerce Comm. v. United States, 292 U.S. 474, 54 S.Ct. 783, 78 L.Ed. 1371, and Lone Star Gas Co. v. Texas, 304 U.S. 224, 58 S.Ct. 883, 82 L.Ed. 1304, are we think to similar effect. In the former the Court was reviewing an order of the Interstate Commerce Commission directed at removal of unjust discrimination against interstate commerce due to disparity of the intrastate and interstate switching rates of interstate carriers in the Chicago Switching District. The Court said that where conditions are found to be substantially the same as to all features bearing on the reasonableness of the rate, and the interstate and intrastate classes of traffic are shown to be intimately bound together, separation of interstate and intrastate costs and revenues is not required. In Lone Star Gas Co. v. Texas the Court upheld, without requiring segregation, an order of the Texas commission reducing natural gas rates charged by a Texas utility. The utility had been treated by the commission as an integrated system which included properties in Oklahoma. Chief Justice Hughes, who had written the opinions in Minnesota Rate Cases and Smith v. Illinois Bell Tel. Co., said for the Court:

"* * * This was not a case where the segregation of properties and business was essential in order to confine the exercise of state power to its own proper province. Compare Smith v. Illinois Bell Telephone Co., 282 U.S. 133, 148, 149, 51 S.Ct. 65, 68, 69, 75 L.Ed. 255. Here, as we have seen, the Commission in its method of dealing with the property and business of appellant as an integrated operating system did not transcend the limits of the state\'s jurisdiction or apply an improper criterion in its determinations. * * *" 304 U.S. at page 241, 58 S.Ct. at page 891.

Where, as in Lone Star Gas Co. v. Texas, it appears the whole of the integrated company, lying in part beyond the commission's jurisdiction, can be considered without interference with other governmental authority or departure from applicable rate-fixing standards, allocation of properties, or of costs or revenues, are not the only formulae available. We are unwilling to attribute to Mississippi River Fuel Corp. v. Federal Power Comm., 82 U.S.App.D.C. 208, 163 F.2d 433, a rigid rule that allocation is essential where the system operates in more than one jurisdiction. There the Commission itself had adopted allocation, within its "wide power in the selection of formulae for the ascertainment of costs." 82 U.S.App.D.C. at page 214, 163 F.2d at page 439. We set aside the order because in applying allocation the Commission had used in part improper measures and had failed to make adequate findings.⁶

By reason of the foregoing it seems plain that at least certain steps taken by the Commission on the basis of the system-wide operations of the well...