City of Cambridge v. Public Utilities Commission

• Decision Date: 04 March 1953
• Docket Number: No. 33178,33178
• Parties: , 50 O.O. 68 CITY OF CAMBRIDGE v. PUBLIC UTILITIES COMMISSION.
• Court: Ohio Supreme Court

Page 88

159 Ohio St. 88

111 N.E.2d 1, 50 O.O. 68

CITY OF CAMBRIDGE v. PUBLIC UTILITIES COMMISSION.

No. 33178.

Supreme Court of Ohio.

March 4, 1953.

Syllabus by the Court.

1. Under the provisions of Section 614-32, General Code, the determination of the question whether an emergency warranting a temporary increase of telephone service rates exists is within the sound discretion of the Public Utilities Commission, and a finding by the commission, that it will be unable to give prompt consideration to an application for an increase of rates and that the revenues of a telephone company are inadequate to pay interest on its bonded indebtedness and dividends on preferred stock, provides a proper basis for declaring such an emergency and, accordingly, a temporary increase of rates.

2. In determining whether temporary rates prescribed by the Public Utilities Commission for telephone service rendered by an Ohio telephone company in any particular exchange are fair, just and reasonable, the property, revenues and expenses of such company may be considered on a company-wide basis.

Ohio Consolidated Telephone Company is an Ohio corporation having its principal place of business at Portsmouth, Ohio. It owns and operates a single telephone system consisting of 39 telephone exchanges located in as many communities in Ohio, of which the Cambridge exchange is one.

On July 23, 1951, the company filed with the Public Utilities Commission an application for authority to increase certain rates and charges for service and to revise its general and local exchange and toll service tariffs.

Pending the hearing on such application, on September 21, 1951, it filed an application for the fixing of temporary emergency service rates pursuant to Section 614-32, General Code. The application for such rates was submitted to the commission on November 26, 1951.

On January 29, 1952, the commission made its finding on the application for emergency rates that an emergency does exist because the company is unable, on the basis of its then current rates, to earn sufficient return to pay interest on its bonded indebtedness and dividends on its preferred stock and because the original application for increase of rates could not be processed for several months, and as a result ordered an increase of such rates by 11.43 per cent, pending the final hearing on the company's original application for increase of rates.

On February 8, 1952, the company filed an application for rehearing on the ground that the commission's finding and order are unlawful, unreasonable and confiscatory in that, among other things, the rates fixed provide an annual rate of return of only 2.52 per cent on the undepreciated book value of the company's plant in service as of September 30, 1951. This application was denied.

On February 28, 1952, the city of Cambridge, as protestant, filed its application for rehearing demanding that the commission set aside, vacate and rescind its finding and order of January 29, 1952, and thereupon to dismiss the application of the company for emergency rates. The city claimed that the commission committed error in several respects, among others, in finding 'that the company is unable under its present rates to earn sufficient money to pay its fixed charges' where such finding was not supported by the evidence; in finding 'that such inability constitutes an emergency under Section 614-32 of the General Code'; in 'overruling protestant's motion that the company be required to submit evidence on the question of whether an emergency * * * existed with respect to the operation of its Cambridge, Ohio, exchange'; and in 'considering and determining the application for emergency increase in rates and charges on the basis of the combined experience of the 39 separate exchanges owned and operated by the company.' The city claimed also that 'the application for emergency relief, on its face, clearly shows that the company is not entitled to emergency relief under Section 614-32 of the General Code.'

The application of the protestant was likewise denied. On March 25, 1952, the city instituted its appeal in this court.

Daniel D. Knowlton, Jr., City Sol., Cambridge and Charles J. Chastang, Columbus, for appellant.

C. William O'Neill, Atty. Gen., James

M. Burtch, Jr., and John P. Case, Columbus, for appellee.

HART, Judge.

The city asserts that alleged needs of the company for increased rates to cover cost of increased wages, to provide proper maintenance of its plant and property, to cover operating expenses and taxes, and to provide funds to meet interest requirements and dividends on its preferred stock and reasonable dividends on its common stock do not constitute an emergency within the purview of Section 614-32, General Code, and that the motion to dismiss the application of the company for temporary increase of rates should have been sustained.

Section 614-32 reads as follows:

'The commission shall have power, when deemed by it necessary to prevent injury to the business or interests of the public or any public utility of this state in case of any emergency to be judged by the commission, to temporarily alter, amend or with the consent of the public utility concerned suspend any existing rates, schedules or order relating to or affecting any public utility or part of any public utility in this state. Such rates so made by the commission shall apply to one or more of the public utilities in this state, or to any portion thereof as may be directed by the commission * * *.'

It will be noted that, under the statute, the determination of an emergency rests within the sound discretion of the commission; that one emergency objective is 'to prevent injury to the business or interests of * * * any public utility of this state'; and that an emergency is 'to be judged [or determined] by the commission.'

It appears from the finding and order of the commission that when the company filed its original application for increased rates on July 23, 1951, the commission advised it that the application could not be processed for several months due to the fact that several other large companies had filed for rate increases prior to the date applicant had filed. This fact furnished one of the constituent grounds for the 'emergency' as found by the commission and was one of the motivating influences which caused the company to apply for temporary increase of rates. See Section 614-20, General Code.

The city, in its brief, argues that 'here we have a company which seeks to avoid complying with Section 614-20 and other sections of the General Code pertaining to public utility rate-making and obtain rate increases, as an emergency matter, by claiming that additional revenues are needed for purposes which in the normal course of business easily could have been anticipated,' all of which must mean, in the view of the city, that the company should have applied for and obtained rate increases at an earlier date under the provisions of Section 614-20, General Code. This argument is not persuasive and suggests that the city has suffered no prejudice by the emergency order. The court does not regard the emergency order of the commission as unreasonable or unlawful. See City of Cincinnati v. Public Utilities Commission, 149 Ohio St. 570, 574, 80 N.E.2d 150; City of Akron v. Public Utilities Commission, 126 Ohio St. 333, 336, 185 N.E. 415; City of Cincinnati v. Public Utilities Commission, 96 Ohio St. 270, 274, 117 N.E. 381.

The city claims also that a necessity for increased revenues furnishes no basis for an emergency order increasing rates, and that the commission's order in that respect was not supported by the facts or by the law. There was undisputed evidence to sustain the finding that the income available for fixed charges in the sum of $165,564.40 is not sufficient to defray the cost of bond interest and dividends on the preferred stock; that the company requires additional annual revenue in the amount of $221,871 in order to meet increased operating expenses and pay its fixed charges; that the undepreciated book value of the company's plant as of September 30, 1951, was $7,830,150.78, which was less than its reproduction cost new less depreciation; and that even with increased revenues in the amount of $221,871, the rate of return on the book value of $7,830,150.78, as of September 30, 1951 (without adding thereto an amount for material and supplies and cash working capital), would be only 2.52 per cent as the result of an increase of 11.43 per cent in the then present rates of the company.

The city, in support of its contention that inability to pay dividends does not constitute an emergency for increase of rates, cites the case of New England Telephone & Telegraph Co. v. State, 95 N.H. 58, 57 A.2d 267. That case, however, was considered in the case of Southwestern Bell Telephon Co. v. State, 202 Okl. 291, 293, 214 P.2d 715, 717, in which the court said:

'The Commission does not contend that under the showing made by the Company in its application for temporary or emergency rates the Company is receiving a fair and just return on its investment, its chief contention being that so long as it had an income sufficient to pay operating costs, fixed charges, including interest on borrowed capital with...