Central Maine Power Co. v. Public Utilities Commission

• Decision Date: 07 November 1957
• Citation: 136 A.2d 726,153 Me. 228
• Court: Maine Supreme Court
• Parties: , 21 P.U.R.3d 321 CENTRAL MAINE POWER COMPANY v. PUBLIC UTILITIES COMMISSION Re Increase In Rates.

Page 726

136 A.2d 726

153 Me. 228, 21 P.U.R.3d 321

CENTRAL MAINE POWER COMPANY v. PUBLIC UTILITIES COMMISSION Re Increase In Rates.

Supreme Judicial Court of Maine.

Nov. 7, 1957.

Everett Maxcy, William H. Dunham, Augusta, Leonard A. Pierce, Vincent McKusick, Portland, for Central Main Power Co.

Richard B. Sanborn, Atty. Gen., for Public Utilities Comm.

Before WILLIAMSON, C. J., and WEBBER, BELIVEAU, TAPLEY, SULLIVAN and DUBORD, JJ.

WILLIAMSON, Chief Justice.

This rate case is before us on exceptions by the central Maine Power Company to the denial by the Public Utilities Commission of its request for an increase in electrical rates. Rates under the statute must be just and reasonable. R.S. Chap. 44, Sec. 17. Questions of law may be raised by exceptions to the ruling of the Commission on an agreed statement of facts, or, as here, on facts found by the Commission. R.S. Chap. 44, Sec. 67.

The basic issue before the Commission was well stated in the Company's brief, 'What were just and reasonable rates required by the Company in order to provide a fair return on the reasonable value of all of the Company's property used or required to be used in its service to the public?'

Two of the major points necessary to a solution of the issue were disposed of by the Commission without complaint of the Company. First, the rate base was established at $179,250,000, and second, the gross revenues produced by the existing rate schedules were not in dispute. Thus the issues were narrowed to the determination of expenses to be charged against revenues, and of the amount required to constitute a fair return on the rate base.

There are certain fundamental principles to be kept in mind in passing upon exceptions to a decree of the Public Utilities Commission. (1) Questions of law, and only questions of law, are presented by exceptions. R.S. Chap. 44, Sec. 67. (2) The facts are found by the Commission and not by the Court. (3) The burden is upon the complaining party, here the Company, to establish the error of law. (4) Errors of law are committed if the Commission: (a) erroneously interprets and applies by its ultimate ruling the law applicable to the facts found by it, or, (b) in its findings of fact, which form the basis of such ultimate ruling, misinterprets the evidence, or, (c) makes such findings of fact unsupported by substantial evidence. (5) Further, the rates must not be confiscatory in violation of the due process clauses of the State and Federal Constitutions. State, Art. I, Sec. 19; Federal, 14th Amendment.

'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.' New England Tel. & Tel. Co. v. Public Utilities Comm., 148 Me. 374, 377, 94 A.2d 801, 803.

The above statement was quoted with approval in Central Main Power Co. v. Public Utilities Comm., 150 Me. 257, 261, 109 A.2d 512. Among other cases illustrating the 'substantial evidence' rule are: Hamilton v. Caribou Water, Light & Power Co., 121 Me. 422, 117 A. 582; Public Utilities Commission v. Utterstrom Bros., 136 Me. 263, 8 A.2d 207; Public Utilities Commission v. Gallop, 143 Me. 290, 62 A.2d 166; Public Utilities Commission v. Johnson Motor Transport, 147 Me. 138, 84 A.2d 142; In re Chapman, 151 Me. 68, 116 A.2d 130; Application of Ballard, 152 Me. 158, 125 A.2d 861.

In an earlier statement of the rule Chief Justice Cornish, speaking for the Court, said in Public Utilities Commission v. City of Lewiston Water Com'rs, 123 Me. 389, 390, 123 A. 177:

'This court is not an appellate court from the Public Utilities Commission, to retry questions of fact already tried and decided by that tribunal. The only power of review relates to questions of law. 'Questions of law may be raised by alleging exceptions to the rulings of the commission on an agreed statement of facts, or on facts found by the commission.' [Now R.S. Cahp. 44, Sec. 67]. 'Facts' found by the commission 'are not open to question in this court, unless the commission should find facts to exist without any substantial evidence to support them, when such finding would be open to exceptions as being unwarranted in law.' Hamilton v. Caribou Water, Light and Power Company, 121 Me. 422, 117 A. 582, a case which determines the power of this court on review in this class of cases and establishes the practice in such proceedings.'

We are not here concerned with the provisions for additional court review enacted in 1953 under which no case has yet been brought to the Law Court. R.S. Chap. 44, Sec. 69. The present case is governed by Section 67, unchanged in the pertinent language since first enacted in Laws of 1913, Chap. 129, Sec. 53.

The problem before us, as is so often the case, lies not chiefly in the ascertainment of the applicable rules of law, but in their application to the facts.

The contentions of the Company are conveniently summarized in the following table from its brief:

Table

'Return found by Commission ....................................... $10,064,075

(Percent of $179,250,000 rate base--5.61%).

Overstatement of above return through erroneous rulings of the

Commission as to operating expenses properly includable on a

test year basis:

Additional Federal income tax ...................................... $118,000

Additional wage costs ............................................... 105,000

Additional fuel costs ............................................... 191,000

Promotional expenses disallowed ...................................... 80,000

Federal income taxes deferred because of accelerated

depreciation ........................................................ 353,000

Total .............................................................. $847,000

A. Return which can be earned under present rates .................. $9,217,075

B. Additional amount required to produce a return equal to

5.8% on the rate base ....................................... 1,179,425 ^*

5.8% return on the $179,250,000 rate base found by the

Commission ...................................................... $10,396,500

Note * At the current 52% Federal income tax rate, a rate increase of over

Note $2,450,000 would be required to produce this return.

We here note that for the purposes of this case an income tax rate of 52% is applicable to all of the charges in operating expenses and to any additional amount necessary to produce a given return on the rate base. To bring 48 cents additional into the return upon the rate base requires $1.00 in revenue from the customer.

For the Company, the Commission, and the Court, the income tax is neither more nor less than an inescapable fact. Without question, the income tax is properly charged against utility operating revenues for rate making purposes. In other words, the return on the rate base must be computed after deduction of the income tax.

Additional Federal Income Tax--$118,000.

The Company urges that the reduction in income tax arising from losses and expenses chargeable against taxable income, but not against public utility operating revenue, should be a charge against such operating revenue, or, in other words, taken as an operating expense for rate making purposes. The argument is this: The Company lost $209,000 on merchandising operations and made charitable contributions of $17,000 in the test year of 1956. Applying the items against income from utility operations resulted in reducing the corporate federal income tax otherwise payable on the utility taxable income by 52% (the tax rate) X $226,000 (total of the item) or about $118,000.

It is agreed that merchandising losses and gains are neither to be subtracted from nor to be added to utility operating income for rate making purposes. Gains and losses of this type are taken and borne by the stockholders and not the ratepayers. In like manner, contributions to charity come from the stockholders.

The reduction in income tax obviously arises from the impact of the merchandising loss and contributions upon the utility income. Without the latter there would be no income tax to be saved. The Company would have it that the ratepayers should make good to the stockholders such tax reduction. The net amount which the Company seeks from increased rates to cover these items as $118,000. By operation of the 52% income tax an increase of $246,000 would be necessary to yield the desired amount.

The Company is not compelled to remain in the merchandising business, nor need it give its money to charities, no matter how deserving. If it chooses to run two distinct types of business--the one a public utility and regulated, and the other private and unregulated--in one corporate organization, it seems to us entirely reasonable that the income tax chargeable to the utility business for rate making purposes should be no more than the total tax on the corporation. The stockholder has an equity in both the utility and non-utility properties. He is interested in the profits and losses from both types of operations. The surplus exists as a source of strength for the utility as well as the private business. Any significant reduction therein harms the Company, hence the utility operation, and in the long run the ratepayers.

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