Beaver Valley Water Co. v. Public Service Com.

• Decision Date: 03 January 1919
• Docket Number: 88-1917
• Citation: 71 Pa.Super. 43
• Parties: Beaver Valley Water Co., Appellant, v. The Public Service Commission
• Court: Pennsylvania Superior Court

71 Pa.Super. 43

Beaver Valley Water Co., Appellant, v. The Public Service Commission

No. 88-1917

Superior Court of Pennsylvania

January 3, 1919

Argued December 6, 1918 [Syllabus Matter]

Appeal by the Beaver Valley Water Company, from order of the Public Service Commission of Pennsylvania, Complaints Nos. 187-188 in case of Solon G. Thayer et al. v. Beaver Valley Water Company.

Complaints against Beaver Valley Water Company on account of schedule of increased rates effective April 1, 1914.

The charges in said schedule were alleged to be unjust and unreasonable. After hearing, Ainey, Chairman, filed the report of the commission, fixing a valuation and determining the rate thereon.

Errors assigned were various findings of fact by the commission and in making the following order:

" This matter being before the Public Service Commission of the Commonwealth of Pennsylvania upon complaints and answers on file, and having been duly heard and submitted by the parties and full investigation of the matters and things involved having been had, and the commission having on the date hereof made and filed of record a report containing its findings of fact and conclusions thereon, wherein it is determined that a fair value for rate-making purposes of the property of the respondent as of February 1, 1915, was nine hundred eighty-five thousand dollars ($ 985,000), and the respondent is entitled to an annual return thereon of one hundred thirty-five thousand nine hundred and fifty dollars ($ 135,950), which said report is hereby approved and made a part hereof:

" Now, to wit, July 15, 1916, the Beaver Valley Water Company is ordered to design a schedule of charges covering all the service rendered by it that will return an annual gross revenue of one hundred thirty-five thousand nine hundred and fifty dollars ($ 135,950); the said schedule to be in substantial accord with the divisions thereof suggested in the above-mentioned report, and the classification of service and rates contained therein to be such as to carry out the principles laid down in said report.

" And it is further ordered, that the said respondent shall submit the said schedule together with the necessary substantiating data to this commission for its approval within sixty days of the date of the service of this order."

Affirmed.

George E. Alter, of McKee, Alter & Mitchell, for appellant. -- An allowance should be made for overhead cost during construction: Oshkosh Water Works Plant, 12 W.R. C. Rep. 602; Montana W. & S. R. R. Co. v. R. R. Com., 198 F. 991; Bonbright v. Corp. Com. of Arizona, 210 F. 44; Nat. Tel. Co., Ltd., v. His Majesty's Postmaster Gen., 16 A. T. & T. Com. L., 491; Berlin Electric Light Co., 3 N.H. 174; Application Lier, Tel. & Tel. Co., 19 A. T. & T. Co., Com. L., 134; Queensboro Gas & Elec. Co., 2 P.S. C., 1st D. (N.Y.) 544; Baltz v. Brooklyn Bor. & Kings Co. Lighting Co., 2 P.S. C., 1st Dist. (N.Y.); Mayhew v. Kings County Lighting Co., 2 P.S. C., 1st Dist. (N.Y.) 659.

In connection with allowance for preliminary and organization cost: see In re Queensboro Gas & Electric Co., 2 P.S. C., 1st D. (N.Y.) 544; Public Service Gas Co. v. Board of Public Utility Commissioners (N.J.), 87 A. 651; In re Central California Gas Company, 2 Cal. R. R. Pom. Reports 116; In re Northern Michigan Power Company, 19 At. & T. Co. Com. L. 244; In re Rochester, Corning & Elmira Construction Co., L. P.S. C., 2d D. (N.Y.) 166.

Allowance should have been made for a going concern value: Commercial Club v. Citizens Gas and Fuel Company, Vol. I, New Jersey Public Utilities Commission Reports, at page 475; Turtle Creek Borough v. Pennsylvania Water Co., 243 Pa. 401; Des Moines Gas Company v. City of Des Moines, 238 U.S. 165; Kings County Lighting Co. v. Willcox, 210 N.Y. 479; Bonbright v. Geary, 210 F. 44, 54, 56; Lima v. Lima Telephone & Telegraph Co., Public Utilities Reports, 1916 E.; Public Service Gas Company v. Board of Public Utility Commissioner et al., 84 N.J.L. 463, 87 A. 651; Hanover Borough v. Hanover Sewer Company, 251 __ Pa. __, at page 100; Des Moines Gas Co. v. Des Moines, 238 U.S. 153; Knoxville v. Knoxville Water Co., 212 U.S. 1.

The water rights were capable of valuation and should have been included in the assets of the company: Murray v. Public Utilities Commission, -- Idaho, P. -- (Public Utilities Reports, 1915, Vol. F, page 436.

J. Sharp Wilson and Lawrence M. Sebring, for appellees. -- Going concern value does not have to be specifically itemized: Appleton Water Works Company v. Railroad Commission, 154 Wis. 121, 142 N.W. 476; Turtle Creek Borough v. Pennsylvania Water Company, 243 Pa. 401; Kings County Light Company v. Wilcox, 210 N.Y. 479.

Berne H. Evans, for the Public Service Commission.

Before Orlady, P. J., Porter, Henderson, Head, Kephart, Trexler and Williams, JJ.

OPINION

KEPHART, J.

The Beaver Valley Water Company was incorporated in 1902 to supply water in a district between Freedom and Baden on the northeasterly side of the Ohio river. Shortly after its organization it took over various water companies supplying seven municipalities covering a stretch of territory approximately eleven miles in length. The company filed two schedules increasing the water rates through this territory, one in 1912 and the second in 1914. Complaints were filed to both of these schedules which were disposed of in this proceeding. The company at that hearing asked that a schedule be adopted which would yield a fair return on a valuation of $ 2,540,000. This value was arrived at from an appraisement by the company of its property for rate purposes. It had a bonded indebtedness which sold at par for $ 1,038,000, an indebtedness of the underlying companies of $ 187,871.34 and a stock issue of approximately $ 1,000,000. The commission, after hearing the evidence, fixed a value of $ 985,000. The value so found by the commission represented the " bare bones" of the plant, stripped of all those items which are sometimes referred to as intangible property, which, with the physical property, make up present value. The commission fixed this at what it would cost at this time to reproduce the physical property of this plant -- pipe lines, right-of-way, reservoirs, real estate, etc. -- less depreciation. It did not allow for going concern value, or the cost of developing the business of the plant; nor for unpaid or deferred dividends, as suggested in a Supreme Court opinion; nor the property that was not presently useful; nor, it is claimed, property that was in use but was acquired by the company in the nature of a gift; nor did it allow for duplicate lines where the company stated these duplicate lines were necessary to supply present demand. The commission fixed the value as though the plant had been constructed at the present time, less depreciation, with a capacity of each part sufficient to take care of present day demand without regard to whether the plant had one customer or ten thousand customers. The appellant complains that the commission erred in not allowing nineteen separate items of value relating to either the physical or intangible property of the company. They are as follows:

A.

8,470 feet of 12-inch pipe from Freedom to

Conway, and rock excavation,

$ 15,772.00

B.

Duplicate pipe in Beaver Falls Distribut-

ing System,

39,330.00

C.

Valves, etc., in Beaver Falls Distributing

System used with said duplicate pipe,

1,006.40

D.

The People's Warehouse,

5,000.00

E.

The New Brighton Reservoir,

3,000.00

F.

The Upper Freedom Reservoir,

$ 4,000.00

G.

The Freedom Pumping Station,

13,500.00

H.

Paving where mains were laid before

pavements,

34,157.45

I.

Service lines installed by consumers,

60,861.50

J.

Lands excluded from valuation,

64,187.50

K.

Water Power Value at Hartman dam,

84,800.00

L.

Water Power Value at New Brighton

dam,

88,200.00

M.

Bed of Beaver River,

100,000.00

N.

Proposed additions to plant,

72,607.00

O.

Going concern value,

250,000.00

P.

Cost preliminary to construction,

30,000.00

Q.

Promotion service,

120,000.00

R.

Franchise costs,

120,000.00

S.

Financing and brokers' fees.

120,000.00

[71 Pa.Super. 48]

In Ben Avon Boro. v. Ohio Valley Water Co., 68 Pa.Super. 561; 260 Pa. 289, we considered the legal propositions as they bore upon the several questions presented by this appeal. In that case the court, following the direction of the Public Service Act, considered Section 22 of Article VI, of the Public Service Act that required this court upon the record to determine whether the order appealed from was reasonable and in conformity with law. By section 23 of the same act, the notes of testimony were made part of the record of the case. If, from this record the order did not appeal to the court as being a reasonable order, either from failure to consider items of value properly proven, or from a manifest disregard of evidence, or from reliance upon incompetent evidence, we were required to proceed as the law directed. The act plainly directed the evidence be reviewed, although in no event were we required to act as second administrative commission. In the Ohio Valley case we endeavored to point out where the commission had failed to allow items of value clearly proven and where there was little, and in some instances no testimony, to sustain its action, and where it had erred in its legal conclusion. In so directing, this court refrained as far as it was able from discussing or passing on questions where the evidence was fairly in dispute and the facts were found. The commission neglected to give the values claimed, not because they were not there, but because it, as a commission, did not believe them proper items of ratemaking value or claimed that some were insufficiently proven. On...