Brush Electric Co v. City of Galveston, 179
| Decision Date | 04 June 1923 |
| Docket Number | No. 179,179 |
| Citation | 43 S.Ct. 606,262 U.S. 443,67 L.Ed. 1076 |
| Parties | BRUSH ELECTRIC CO. v. CITY OF GALVESTON et al |
| Court | U.S. Supreme Court |
Messrs. William H. Armbrecht, of Mobile, Ala., Charles A. Frueauff, of New York City, and Terry, Cavin & Mills, of Galveston, Tex., for appellant.
Messrs. James W. Wayman and Frank S. Anderson, both of Galveston, Tex., for appellees.
The appellant for many years has been operating an electric light and power plant in the city of Galveston under a franchise reserving to the city the right to regulate rates.
In 1918 an ordinance was enacted increasing the rates then in force. By a subsequent ordinance, passed in 1919, these 1918 rates were decreased.
The present suit was brought by appellant in the federal District court for the Southern District of Texas to enjoin the enforcement of these ordinances, and especially that of 1919, on the ground that the rates fixed thereby were confiscatory. In 1920 the case was referred to a master who heard the evidence and made a report, in which he determined that the rates of 1919 were confiscatory and that those of 1918 were not. To this report both parties filed exceptions. These filed by the appellant were overruled by the District Court, while those of the appellee were, with two exceptions, sustained. The questions presented are numerous, but, in view of the conclusion we have reached, we do not consider it necessary to review them in detail.
The parties stipulated, and the master found, that the then undepreciated value of the physical property, at January 1, 1920, prices, was $784,689, and that the cost of the physical property at average pre-war prices, undepreciated, as of January 1, 1920, was $576,898. The master found the former amount, after deducting the value of real estate, office and utility equipment, and depreciation, represented the depreciated value of the depreciable property for rate-making purposes, following the principle established by this court. See Missou i ex rel. Southwestern Bell Telephone Co. v. Public Service Comm., 262 U. S. 276, 43 Sup. Ct. 544, 67 L. Ed. ——, decided May 21, 1923, and cases cited.
The testimony as to depreciation was conflicting and speculative—the estimates ranging from 15 per cent. to 40 per cent. of the value of the plant. The master fixed it at 28 per cent., making the present depreciated value of the depreciable property $534,818. To this he added the value of various items, including intangible property, real estate, and office and utility equipment, bringing the total up to $800,000. This he held to be the fair present value of the property. Upon this valuation he recommended an annual return of 8 per cent. and an annual rate for depreciation of 4 1/2 per cent. The gross earnings for the year ending July 31, 1920, which arose from the application of the rates fixed by the ordinance of 1918, were $333,079.65, which left, after deductions for expenses of operation and maintenance, net earnings of more than $104,000, or over $4,000 in excess of a reasonable and fair return. He estimated that under the rates fixed by the 1919 ordinance the net earnings would have been only $77,665, or over $22,000 less than a fair and reasonable return. The 1919...
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