Central Maine Power Co. v. Public Utilities Commission

• Decision Date: 20 October 1954
• Parties: , 7 P.U.R.3d 1 CENTRAL MAINE POWER CO. v. PUBLIC UTILITIES COMMISSION.
• Court: Maine Supreme Court

Page 512

109 A.2d 512

150 Me. 257, 7 P.U.R.3d 1

CENTRAL MAINE POWER CO. v. PUBLIC UTILITIES COMMISSION.

Supreme Judicial Court of Maine.

Oct. 20, 1954.

Hutchinson, Pierce, Atwood & Scribner, Portland, Edward H. Maxcy, Augusta, for plaintiff.

Richard Sanborn, Augusta, for defendant.

Before FELLOWS, C. J., and WILLIAMSON, TIRRELL, WEBBER, BELIVEAU and TAPLEY, JJ.

WEBBER, Justice.

On December 29, 1952 the Central Maine Power Company filed with the Public Utilities Commission a revision of its rates. Suspension orders issued pending hearing. Public hearings were duly held during which voluminous testimony and exhibits were received in evidence. By its decree on November 6, 1953, the Commission disallowed the proposed rates but authorized an increase of rates designed to produce approximately $750,000 total additional gross revenues. The authorized rates were predicated upon the assumption that the corporate income tax rate would be reduced on April 1, 1954 from 52% to 47%. Upon reconsideration, the Commission on November 18, 1953, anticipating correctly that Congress might, as it now has, maintain the 52% rate, issued a supplemental decree authorizing a surcharge of 2.7% to be added to all bills, designed to cover the interim situation until the new corporate income tax rate should be established. The surcharge was expected to produce additional annual revenues of $670,000. These total revenues, however, are substantially less than those proposed by the Company, and its exceptions properly raise here legal issues testing the decrees.

The 19 exceptions overlap as to issues raised and we will therefore deal with issues rather than with the exceptions seriatim. In general, the basic question before us is whether or not the Commission has fixed reasonable and just rates, supported by substantial evidence, which will produce a fair return upon the reasonable value of the property of the Company used or required to be used in its service to the public within the state.

The Legislature has established the formula for making rates and has entrusted to the Commission the difficult task of balancing between the interests of the producer of electric power and the consumer. The Commission deals exclusively with problems of this type and is expected to have and acquire special knowledge and skill which come to the specialist through experience. In a review of Commission action in a rate case, therefore, the court must not err on the side of substituting its discretion and judgment for that of the Commission. It is unlikely that in any given case the rates established by the Commission would be exactly the same as those which a court might determine upon the same evidence--but that fact in and of itself does not render the rates erroneous. Rate making is by no means an exact science and in the last analysis fair rate making depends on the application of a sound judgment. Our review is confined to matters of law only. As we so recently stated in New England Telephone & Telegraph Co. v. Public Utilities Commission, 148 Me. 374, at page 377, 94 A.2d 801, at page 803, 'The Commission is the judge of the facts in rate cases such as this. This court under the statute which created it is only a court to decide questions of law. It must be so, for it has not at its disposal the engineering and the technical skill to decide questions of fact which were wisely left within the province of the Commission. Only when the Commission abuses the discretion entrusted to it, or fails to follow the mandate of the legislature, or to be bound by the prohibitions of the constitution, can this court intervene. Then the question becomes one of law. We cannot review the Commission's findings of fact and seek to determine what rates are reasonable and just. When the Commission decides a case before it without evidence, or on inadmissible evidence, or improperly interprets the evidence before it, then the question becomes one of law.'

The first task of the Commission in any rate case is to determine a rate base, that is to say, the fair value for rate making purposes upon which the Company is entitled to earn a fair rate of return. This fair value is quite distinguishable from a fair value as a basis of purchase. It is in effect a composite ascertained and fixed by giving 'due consideration to evidence' of certain factors. The Legislature during the pendency of these proceedings by enactment in P.L.1953, Ch. 377, Sec. 17 enumerated these factors as 'the cost of the property when first devoted to public use, prudent acquisition cost to the utility, current value thereof, less depreciation on each, and any other factors or evidence material and relevant thereto.' We agree with the Commission and both parties to the controversy that here was no change in the substantive law, but only an attempted clarification and amplification of procedural requirements to effectuate what has long been the accepted law of this state. As evidence of reproduction cost less depreciation would be material in any determination of 'current value', it would be improper for the Commission to exclude such evidence or fail to give it 'due consideration'. We so recently defined fair value for rate making purposes in the Telephone case, supra, that no further elaboration seems helpful or necessary.

The requirement that the Commission give 'due consideration' to evidence tending to establish any factor of fair value does not mean that the Commission is not the judge of the weight to be given to the proffered evidence. Nor does it mean that equal weight must be given to each factor proven. The Commission may not proceed with a closed mind and no disposition to be convinced by unimpeachable evidence. 'Due consideration' requires at least reasonable and fair consideration, and once a factor is well proven, 'not only must the Commission give consideration to it, but such factor must find reflection in the finding of value.' Ashland Water Co. v. Railroad Comm., D.C. 7 F.2d 924, at page 927. As was emphasized in the Telephone case, supra, arbitrary and capricious disregard by the Commission of a factor established by legislative mandate, or of evidence tending to prove such a factor, is reversible error.

In this case the Company offered evidence in support of the various factors, none of which was excluded. Admittedly the Company had the burden of proof throughout. R.S.1944, Ch. 40, Sec. 69.

Average book value depreciated. As a preliminary to a determination as to what property of the company remains unretired and devoted to public service and what the depreciated original cost factor may be, substantial evidence was received as to the net average property account as shown on the books of the company. As the property is always in a state of flux resulting from increases by way of new construction and other acquisitions and from decreases by way of destruction, obsolescence, retirement and the like, it is recognized that some average period must be used. The Company relied on estimates to forecast the future for the year 1953. The weight to be attached to such estimates is to be determined by the Commission, and the Company does not show prejudicial error where the Commission found an average figure substantially higher than the average for the most recent full year of actual figures, especially where figures for the last four months of that period indicate that the then current trend was for retirements to exceed acquisitions. It is not in dispute that on a long range basis the Company is expanding very substantially, but in its determination of a fair average of book properties, the Commission could not be expected to project its forecast beyond the period it chose, which reflected six months of actual figures and six months estimated. We therefore find no error as a matter of law in the finding of the Commission 'that $135,000,000 represents a fair estimate of what the net operating properties will average on the books of the Company for the year 1953, under the Company's present method of allocation and distribution of accounts.' It should be noted that this finding was not of such a nature as to preclude the Commission from a further determination as to whether all of this book property was of a type properly includable in a rate base or whether there should be further reductions for retirement and the like.

Original cost less depreciation. There is no dispute that this factor is intended to be the depreciated original cost of property now existing and devoted to the public use. This cost is taken as of the time when the property was first devoted to the public use, whether what event occurred when it was in the hands of this Company or a former owner. There is apparent agreement also that if accounts are properly distributed and kept in accordance with the Uniform System of Accounts promulgated by the Commission, the original cost is readily ascertainable by subtracting so-called Account E-371 from the amount of net operating property or 'book cost'. Any and all excess over original cost paid by any subsequent owner or owners is properly accumulated and carried in E-371. The problem here, however, is complicated by conflicts arising out of the evidence as to whether or not Account E-371 is accurate or complete and as to whether or not further deductions should not be made for non-operating property, non-existent property or property which has been or should have been retired. The Company has acquired many plants from other concerns as it has expanded. The original cost of the operating property of some of these plants was incurred thirty or forty years ago. Such matters are properly to be weighed by the Commission both in determining what was depreciated original cost and in giving due consideration to original cost as a factor.

When, however, the Commission makes a determination of depreciated original cost, as it did in this decree, and discloses manifest,...