Alabama Power Co. v. Federal Power Commission

• Decision Date: 30 March 1942
• Docket Number: No. 7853.,7853.
• Citation: 128 F.2d 280
• Parties: ALABAMA POWER CO. v. FEDERAL POWER COMMISSION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

128 F.2d 280 (1942)

ALABAMA POWER CO. v. FEDERAL POWER COMMISSION.

No. 7853.

United States Court of Appeals for the District of Columbia.

Decided March 30, 1942.

COPYRIGHT MATERIAL OMITTED

Messrs. P. W. Turner and Walter Bouldin, both of Birmingham, Ala., with whom Messrs. H. Cecil Kilpatrick, of Washington, D. C., and William M. Moloney, of Birmingham, Ala., were on the brief, for petitioner.

Messrs. Wallace H. Walker, Assistant General Counsel, and Charles V. Shannon, both of the Federal Power Commission, with whom Messrs. William S. Youngman, Jr., General Counsel, and Stanley M. Morley, both of the Federal Power Commission, were on the brief, all of Washington, D. C., for respondent.

Before GRONER, Chief Justice, and MILLER and EDGERTON, Associate Justices.

MILLER, Associate Justice.

In 1921, the Federal Power Commission issued to the Alabama Power Company a license authorizing the construction of a hydroelectric project on the Coosa River, a navigable stream in the State of Alabama. Upon completion of the project the Company filed with the Commission, in 1930, a cost statement claiming $10,646,056.76 as the total cost of the project. After audit, hearings, and reconsideration following application for rehearing, the Commission, on December 19, 1932, found the cost to be $7,094,913.69, and ordered the Company to conform its accounts accordingly. In 1933, the Company filed suit in the District Court of the United States for the District of Columbia to enjoin enforcement of the Commission's orders. Following a trial on the merits, that court dismissed the bill of complaint. On appeal, the United States Court of Appeals reviewed the proceedings and contentions of the parties in extenso; affirmed the Commission's determinations and orders in part and reversed in part. By way of summary this court said: "We hold that the trial court correctly sustained the Commission's allowances for land, taxes and interest, and its refusal to allow the fee of the Dixie Construction Company. But we hold further that the trial court should have directed the Commission to consider the cost of the water right at Lock 15 and to have required the Commission to allow not merely the out-of-pocket cost of electric energy but the total cost exclusive of profit, and therefore to have required the Commission to determine whether or not the rate of 1.187 per k. w. h. included any element of profit. We further hold that since the case must be returned to the Commission in respect of the foregoing items, it would be proper for the Commission to allow the licensee further opportunity to introduce evidence of the cost of financing, engineering, and promotional services prior to 1913 included in the Power Company's claimed figure of $3,500,000. We therefore reverse the decree of the trial court with orders to direct the Federal Power Commission to proceed in accordance with this opinion."¹

Pursuant to the court's direction, the Commission, between November 30, 1939 and January 9, 1940, held hearings on the remanded items and fixed the actual legitimate original cost of the project at $7,209,363.99; increasing its earlier determination in the following amounts: "* * * (1) $51,966.58 as the `total cost exclusive of profit' of electric energy furnished by petitioner to the project during its construction; (2) $66,603.78 as the actual reasonable cost of this project's portion of the Lock 15 water right; and (3) $26,540.82 additional interest during construction." It found that the Company had presented no evidence of the cost of financing, engineering, and promotional services prior to 1913 and made no allowance therefor.

On this appeal, the first question presented for our decision is the cost of the water right at Lock 15. In Alabama Power Co. v. McNinch,² we said: "The Commission erred, however, in failing to consider the cost to the licensee of the water right owned by the Wetumpka Power Company at Lock 15, which was down-stream from Duncan's Riffle. No lands at Lock 15 are involved in the Mitchell Dam project and apparently the Commission for that reason failed to allow the cost of any water rights at Lock 15. The record shows, however, that the Wetumpka Power Company had the right under Alabama law to develop Lock 15 by a dam which would have impounded water to a height which would have flooded Duncan's Riffle, the present site of Mitchell Dam proper, to a depth of approximately 14 feet. The Mitchell Dam project therefore was erected in derogation of the water right of the Wetumpka Power Company at Lock 15, at least to this extent. The right of the Wetumpka Power Company passed to the licensee in the merger of 1913. The trial court should have directed the Commission to allow the introduction of evidence as to the cost to the Power Company in 1913 of the right of the Wetumpka Power Company to develop Lock 15 to an extent which would have made the Mitchell Dam project impossible, and to allow such cost as part of the original cost of the project."

Both parties now agree that the cost of the water right at Lock 15 should be measured by the market value of the securities issued therefor. They disagree as to how that market value should be determined. At the hearing before the Commission, the Company renewed its contentions — which were fully considered and rejected in our earlier opinion — as to the formula which should be used; and urges that we now abandon our earlier decision in favor of those contentions. Consistently with this steadfastly maintained position, the Company introduced evidence to prove the cost of the water right at Lock 15, in terms of values "not as an isolated project, but as part of the more efficient and valuable two dam development Mitchell Dam and Jordan Dam. * * * made possible by single ownership of all dam sites * * *." It insisted that the consideration paid for control of the water right at Lock 15 was in no way identical with the value of such water right when utilized at Mitchell Dam and Jordan Dam "in an economic two high dam development of the entire head in that stretch of the river." Its expert witness then set up as the "major factors which would determine the value of the water power sites * * *" reestablished "as of a 1913 point of view * * *" the following: "1. The market and the ability of the market to absorb the power. 2. The number and size of the new hydro plants to be brought in on the system, the available capacity, and the schedule of development of these sites which were already owned by the company. 3. The construction costs which would be incurred in the development of these hydro plants, and the associated operating and annual carrying costs. 4. The cost of providing this power from the most effective alternative source. In this case that would be from steam plants. Consideration of the costs of power from alternative steam plants necessarily involves the determination of the capital cost of constructing such alternative steam plants, and the annual operating costs taking into consideration, the improvement in efficiency which could have been foreseen in 1913." His conclusion, as to the cost which should be allocated to Lock 15, is then summarized in petitioner's brief as follows: "* * * At this point, the witness exercised his expert judgment and opinion and stated that he would have advised the prospective purchaser that it would not be justified in paying more than one-half of the 1913 present worth of the sites, namely, for Mitchell $1,450,000; Jordan $2,300,000; Lock 14-$1,200,000; Lock 15-$750,000; Lock 18-$1,600,000. * * * The witness then used these last figures, representing his judgment or opinion, rather than any arithmetical calculation * * * in determining the value of the water rights at Lock 15 to the extent that the same contributed to the Mitchell Dam project. The excess value of Mitchell over Lock 14, or the value contributed to the Mitchell property by Lock 15, was determined on the basis of these figures to be reasonably worth to a prospective purchaser $250,000."

It will be seen from the foregoing statement of the Company's position that it failed to take advantage of the opportunity presented by our earlier decision, and elected, instead, to reopen large questions which were put to rest in that decision. It urges upon us at this time arguments supporting our power to reopen those questions. But we see no reason to do so. Moreover, we conclude that the Commission was justified, especially under the circumstances, in adopting, for its determination of the cost of the Lock 15 water right, the formula which it had used in determining the cost of other water rights, and which was approved by this court in Alabama Power Co. v. McNinch.³

No review is sought, on this appeal, of the Commission's allowance for the item of total cost, exclusive of profit, of electric energy furnished by the Company during construction of the project. The only remaining item remanded for consideration by the Commission concerned the cost of financing, engineering and promotional services prior to 1913, which was included within the Company's claimed figure of $3,500,000. As to this, although opportunity was given, no evidence was offered; consequently, we hold, as we did in our earlier opinion, that where the record shows no adequate basis for an estimate of such expenditures, and any estimate would be merely guesswork, the action of the Commission in refusing to make an allowance was proper.

On this appeal a number of additional questions are presented, which grow out of the Commission's order of November 26, 1940, requiring the Company to make specified accounting disposition of the allowed and disallowed items. These requirements are set out in the margin.⁴ The Company contends that (1) its accounts, securities, books, rates and services are all regulated by the Alabama Public Service Commission; (2) the Commission's jurisdiction over the Company's accounts is limited to those...