Charleston v. Pub. Serv. Comm'n
| Decision Date | 10 March 1931 |
| Docket Number | Nos. 6956, 6956-A.,s. 6956, 6956-A. |
| Court | West Virginia Supreme Court |
| Parties | OF CHARLESTON et al. v. PUBLIC SERVICE COMMISSION. |
OF CHARLESTON et al.
v.
PUBLIC SERVICE COMMISSION.
Nos. 6956, 6956-A.
Supreme Court of Appeals of West Virginia.
March 10, 1931.
The cost of reproduction new should ordinarily not be given dominant weight in a gas plant rate valuation, although it should be considered.
Whether going concern value should be allowed in determining a rate base depends upon the circumstances of the case.
[159 S.E. 39]Neither allowances for going concern value nor expenditures for general overhead costs should be based on purely conventional percentages.
If the leaseholds of a utility have a market value, that value is entitled to consideration for rate-making purposes; but the market value alone is not controlling as the utility is subject to regulation. This fact is to be taken into consideration by the rate-making body as well also as the safeguards, benefits, and privileges which the public has conferred upon the utility.
A utility is not entitled to an arbitrary percentage of net return. What is a fair net return depends upon present day conditions. A return is ordinarily considered ample which provides a sufficient amount to pay reasonable dividends, and pass something to a surplus account.
Appeal from Public Service Commission.
Proceedings before the Public Service Commission, by the City of Charleston and others, in the matter of gas rate to be charged by the United Fuel Gas Company. From two separate orders entered, after due investigation into rates, the petitioners appeal.
Orders of the Public Service Commission set aside, and the case remanded.
Charles Ritchie and Philip H. Hill, both of Charleston, for city of Charleston.
Paul W. Scott and H. L. Ducker, both of Huntington, for city of Huntington.
George S. Wallace, of Huntington, for Huntington Manufacturers' Club.
W. T. Lovins, of Huntington, for city of Kenova, town of Ceredo, and Kenova Chamber of Commerce.
Wm. B. Hogg, of Williamson, for city of Williamson.
B. Randolph Bias, of Williamson, for Williamson Chamber of Commerce.
Claude A. Joyce, of Logan, for city of Logan.
Grover F. Hedges, of Spencer, for city of Spencer.
J. Luther Wolfe and T. J. Sayre, both of Ripley, for town of Ravenswood, town of Sandyville, and town of Silverton.
C. W. Staats and Burton Crow, both of Ripley, for town of Ripley.
Harold A. Ritz, and Rummel, Blagg & Stone, all of Charleston, for respondent United Fuel Gas Co.
HATCHER, J.
This hearing involves two orders entered by the Public Service Commission on August 16, and December 4, 1930. The orders were entered in an investigation by the commission of the rates charged the protestants for gas by the United Fuel Gas Company. The result of the investigation is a very substantial increase in the rates. The majority of the commission (hereinafter referred to as the commission for the sake of brevity) fixed the fair value of the utility's property as on December 31, 1928, as follows:
-----------------------------------
|Production system.. |$15,146, 352|
|--------------------|------------|
|Transmission system |17, 793, 598|
|--------------------|------------|
|Distribution system.|3, 935, 193 |
|--------------------|------------|
|General property |951, 254 |
|--------------------|------------|
| |37, 826, 397|
|--------------------|------------|
|Going concern value |3, 171, 021 |
|--------------------|------------|
| |40, 997, 418|
|--------------------|------------|
|Leaseholds |7, 914, 037 |
|--------------------|------------|
|Total |$48,911, 455|
-----------------------------------
Included in the valuation of the physical property ($37,826, 397) are allowances for general overheads of 20 per cent, on the cost of labor and materials in the transmission system, and of 17 per cent on such cost in the other three items. The going concern value is "10i% of the estimated value of labor and materials in the plant depreciated, and exclusive of land and general overheads." (Statement of commission.) The value accorded the leaseholds Is their "adjusted" book value. The commission estimated that $12,-200, 000 (of the $48,911, 455) was the value of the utility's property appropriated to the use of consumers within the state. On the property so appropriated $109,800 was allowed for
[159 S.E. 40]depreciation, and $506,300 for amortization. Tariff rates for consumers were then approved, which after furnishing enough revenue to pay operating expenses, including taxes, should also provide the allowances for depreciation and amortization and a net return of 8 per cent, to the utility.
The duty imposed upon the commission in cases such as this is that it shall "enter such orders as may he just and lawful." Code 1923, c. 150, § 2. A like charge is given to this court upon appeal, as the statutory injunction to us differs only in words: "The court shall decide the matter in controversy as may seem to be just and right." Code, supra, section 16. Despite the obvious legislative invitation to us to become a fact-finding body, we have persistently held that because the commission is "experienced in rates, and familiar with the intricacies of rate making" we will ordinarily not substitute our judgment for that, of the commission on controverted evidence. Town of Harrisville v. Public Service Commission, 103 W. Va. 526. 529, 138 S. E. 90, 100. Our position was clearly stated in Gas Co. v. Commission, 101 W. Va. 63, 132 S. E. 407: "An order of the Public Service Commission, fixing rates to be charged by a public service utility, within the constitutional and legislative power of the commission, will not be disturbed, unless it appears that the finding of fact on which the order is based is contrary to evidence, or without evidence, or there has been a misapplication of legal principles; and, where there is a substantial conflict of evidence on any question of fact, the probative value accorded by the commission to such evidence will not be disturbed."
The statistician of the commission. Mr. E. V. Williamson, made a thorough investigation of the utility and reported that the original cost of its physical properties was $36,-183, 011 (not depreciated!.-Mr. John Jirgal, an expert accountant, engaged by the protestants, fixed that cost from the books of the utility at-$.37, 016, S73 (not depreciated). The opinion of the majority of the commission reflects no consideration whatever of the Williamson and Jirgal reports, so far as they deal with this subject. Mr. F. H. Lerch. Jr. (of Ford, Bacon & Davis, engineers) filed a valuation report on behalf of the utility, in which he estimated the cost of reproducing new the physical properties of the utility at $53,072, 197, as on December 31, 1928. Of this sum, the estimate for general overhead charges was $9,847, 102, and for labor and material $44,125, 095 which was depreciated to $32,-. 846, 125. Mr. Lerch fixed the going value of the utility at $5,307, 220 or 10 per cent, of his estimated reproduction cost new. Mr. J. Paul Blundon, an experienced engineer, filed a similar* report on behalf of the protestants, in which he estimated the reproduction cost new, of the same property, at $42,2S6, 901. Of this estimate $5,188, 314 was for general overheads, and $37,098, 587 for labor and material which he depreciated to $22,069, 430. We find no estimate of going value by Mr. Blundon, but Mr. Earl L. Carter, an experienced engineer, appearing for protestants, estimated the going value at $4,500, 000. The commission (as shown by its opinion) adopted the estimates of Mr. Lerch of the costs of material and labor (without general...
To continue reading
Request your trial