City of Huntington v. Public Service Commission

• Decision Date: 14 December 1921
• Citation: 110 S.E. 192,89 W.Va. 703
• Parties: CITY OF HUNTINGTON v. PUBLIC SERVICE COMMISSION ET AL.
• Court: West Virginia Supreme Court

110 S.E. 192

89 W.Va. 703

CITY OF HUNTINGTON v. PUBLIC SERVICE COMMISSION ET AL.

Supreme Court of Appeals of West Virginia.

December 14, 1921

Submitted December 9, 1921.

Syllabus by the Court.

Findings of fact by the Public Service Commission, based upon evidence to support them, generally will not be reviewed by this court.

In order that it may receive just compensation for the use of property which it has devoted to the service of the public, a utility is entitled to demand and receive a fair return upon the reasonable value of the property at the time it is being used by and for the public.

A public utility having a large bonded indebtedness remains the owner of the entire property which it devotes to public service, despite the existence of the indebtedness as a lien against it.

An owner of property devoted to public service is entitled to earn a reasonable return upon the whole of that property whether it be incumbered by indebtedness or not.

A public utility having a large bonded indebtedness is entitled to earn as a profit a reasonable return upon the full fair value of the property which it owns. Its net earnings cannot lawfully be measured by a reasonable return upon the difference between the outstanding indebtedness and the full fair value of the property, plus interest upon the indebtedness. (Poffenbarger and Lively, JJ., dissenting.)

Deprivation of the right to earn a reasonable return upon the full fair value of its property amounts to a confiscation thereof pro tanto.

A rate which a utility is authorized to charge must not be so low as to be confiscatory, nor so high as to exceed the value of the service to the consumer. A just and reasonable rate must fall somewhere between these two extremes.

In the ascertainment of a reasonable and fair return upon capital used by a corporation engaged exclusively in the business of supplying water to a city and its inhabitants, whose stock and bonds represent money actually employed in the business the amount of interest annually paid on its indebtedness and the dividends it pays or can pay upon its stock are material and forceful elements to be considered, and it is not entitled arbitrarily to rates that will produce sufficient net income to provide, after payment of all taxes, for 2 per cent. for depreciation and 7 per cent. as a return to it calculated upon the estimated value of all its property, it appearing that more than two-thirds of the money used in its business is borrowed at the rates of 5 per cent. and 6 per cent. (Lynch and Miller, JJ., dissenting.)

Original petition by the City of Huntington against the Public Service Commission and others to review an order entered by the Commission. Order suspended.

Deegan & Hall, of Huntington, for petitioner.

Fitzpatrick, Campbell, Brown & Davis, of Huntington, for respondent Huntington Water Corporation.

LYNCH J.

The first question to be answered is: Does the order entered by the commission preclude the right of the city of Huntington to prosecute this review? After fixing July 1, 1921, and the date of the June meter readings as its effective dates, and providing for continuation of its effectiveness until January, 1, 1922, and the enlargement of applicant's service in certain particulars not now involved, the order concludes:

"It is further ordered that the applicant file with the commission, on or before the 20th day of January, 1922, a complete report setting out in detail its monthly revenue and operating expenses for the period from the 1st day of July, 1921, to the 1st day of January, 1922; also setting forth what additions and improvements it has made during the said period, and what further additions and improvements are under construction at the time of the filing of the said report; and for the purpose of receiving said report, and taking such action thereon as the commission may deem proper, this case is retained upon the docket." This, it is argued, is not a final order within the meaning of section 16, chapter 15-O, Code 1918 (Code 1913, § 651). Its provisions are in substance and effect the same as those contained in the order reviewed in City of Charleston v. Public Service Commission, 83 W.Va. 718, 721, 99 S.E. 63. The opinion in that case properly conceived the existence of a difference between the order dealt with and the order reviewed in City of Bluefield v. Bluefield Waterworks & Improvement Co., 81 W.Va. 201, 94 S.E. 121, in that in the latter there was no such alteration of the respective rights of the parties concerned as warranted interference with the provisional order of the commission, or, to use the language of the opinion in the Charleston Case, "there," meaning the Bluefield Case, "an increase in the rates had been granted by an experimental order, and neither the city nor any of its inhabitants were complaining of the increase allowed, but the water company was complaining that the increase allowed it was not sufficient. * * * If, however, we take the view that what the Legislature meant [by the use of the word "final"] was such an order as grants relief to one party or the other, and changes the situation of the parties to their material advantage or disadvantage, the order complained of here is such an order."

In the case now considered there is such a change. The rate increase asked by applicant the commission substantially granted, thereby increasing its gross and consequently its net annual earnings, to the detriment of its consumers, if the revised rate schedules and the approved percentage produce inequitable results. The water corporation's revenues necessarily will be more from the operation of the property according to the revised schedule than according to the schedule thus superseded. These accretions must come from consumers of water provided for their use and convenience. The situation of the parties, the water corporation and its patrons, are affected--one favorably, the other unfavorably. The observations made have for their purpose, and are relevant only, to show the order to be within the purview of that provision of section 16, chapter 15-O, Code 1918, empowering this court to review the commissioner's orders. Viewed in the light of that section, the order considered is within the power so conferred.

It is hardly necessary to enter upon a prolonged discussion of the right to review the action of the commission, a right questioned because of the "purely administrative" character of proceedings contemplated by the statute, chapter 15-O, creating the commission and delegating to it the authority formerly possessed by the Legislature alone. A schedule of rates for a public utility that effects inequitable results is and always has been the subject of judicial inquiry, whatever may be the source of the authority prescribing such rates. As said in Chicago & G. T. R. Co. v. Wellman, 143 U.S. 339, 344, 12 S.Ct. 400, 402 (36 L.Ed. 176):

"The Legislature has power to fix rates, and the extent of judicial interference is protection against unreasonable rates."

In Budd v. New York, 143 U.S. 517, 12 S.Ct. 468, 36 L.Ed. 247, there is the further intimation that the cases all support the proposition that, while it is not the province of the courts to enter upon the merely administrative duty of framing a tariff of rates for carriage, it is within the scope of judicial power and a part of judicial duty to restrain anything which, in the form of a regulation of rates, operates to deny to the owners of property invested in the business of transportation that equal protection which is the constitutional right of all owners of other property. There is nothing new or strange in this. How may courts, without a judicial investigation in the form of a review determine the reasonableness of a rate? The act itself, section 16, if it does not expressly grant it, clearly implies authority for the review when the matter of rates is involved whether they are excessive from the standpoint of the patrons, or unreasonable from the standpoint of the utility. In either event this court is to "decide the matter in controversy as may seem to be just and right." The Supreme Court of the United States says:

"If the law be such as to make the decision of the Legislature or of a commission conclusive as to the sufficiency of the rates, this court has held such a law to be unconstitutional." Missouri Pacific R. Co. v. Tucker, 230 U.S. 340, 349, 33 S.Ct. 961, 963, 57 L.Ed. 1507, 1510, citing Chicago, M. & St. P. R. Co. v. Minnesota ex rel. R. & W. Commission, 134 U.S. 418, 10 S.Ct. 462, 702, 33 L.Ed. 970.

It cannot reasonably be said that there cannot be a review, except when the rates are confiscatory. The commission's authority relates to the effect they produce; that is, whether they are reasonable, just, and fair to the utility and its patrons. The result must not be inequitable to either; the rights of both are to be considered and preserved. If either is to be protected to the disadvantage of the other, the utility must bear the consequences.

The order entered by the Public Service Commission upon the application of Huntington Water Corporation, a utility engaged since 1886 in supplying water for use and consumption by the inhabitants of the city of Huntington and vicinity, is the subject-matter of this investigation. To obtain a review of the order and direct its temporary or permanent suspension, city of Huntington challenges its correctness upon several theories. The order and the opinion, considered together, state the facts ascertained by the commission as a result of its investigation, based upon the testimony of competent witnesses examined by the parties to the controversy.

The present fair value of the property of the Huntington Water Corporation, useful and...