City of Miami v. Florida Public Service Commission

• Decision Date: 15 January 1968
• Docket Number: 35994,Nos. 35978,s. 35978
• Citation: 208 So.2d 249
• Court: Florida Supreme Court
• Parties: The CITY OF MIAMI, Florida, Petitioner, v. FLORIDA PUBLIC SERVICE COMMISSION, and Southern Bell Telephone and Telegraph Company, Respondents. The CITY OF MIAMI, Florida, Petitioner, v. FLORIDA PUBLIC SERVICE COMMISSION, and Florida Power & Light Company, Respondents.

Page 249

208 So.2d 249

73 P.U.R.3d 369

The CITY OF MIAMI, Florida, Petitioner, v. FLORIDA PUBLIC SERVICE COMMISSION, and Southern Bell Telephone and Telegraph Company, Respondents.

The CITY OF MIAMI, Florida, Petitioner, v. FLORIDA PUBLIC SERVICE COMMISSION, and Florida Power & Light Company, Respondents.

Nos. 35978, 35994.

Supreme Court of Florida.

Jan. 15, 1968.

As Revised on Denial of Rehearing March 27, 1968.

Jack R. Rice, Jr., City Atty., and Sam Daniels, Miami, Special Counsel for City of Miami, petitioner.

William C. Steel, Phillip Goldman, Scott, McCarthy, Steel, Hector & Davis, Miami, James H. Sweeny, Jr., DeLand, and Sidney Hoehl, Coral Gables, for Florida Power & Light Co.

Harold B. Wahl, Loftin & Wahl, Jacksonville, William C. Lantaff, John H. Wahl, Jr., Walton, Lantaff, Schroeder, Carson & Wahl, Miami, Nathan H. Wilson, Jacksonville, Jefferson Davis, and Drury B. Thompson, Atlanta, Ga., for Southern Bell Telephone and Telegraph Co.

Lewis W. Petteway, Tallahassee, for Florida Public Service Commission.

ERVIN, Justice.

Petitioner, the City of Miami, Florida, seeks judicial review by certiorari of Orders 4076 and 4078 of the Florida Public Service Commission relating to the rates, charges and earnings of, respectively, Southern Bell Telephone and Telegraph Company and Florida Power & Light Company. Upon certiorari granted, the two cases were consolidated for oral argument pursuant to motion of the Petitioner. Due to the fact that the basic issues in both cases involve common questions of law, we have consolidated them for purposes of review and decision.

General Services Administration, a protestant with Petitioner in the original hearings, did not petition us for review.

Some background facts involved in the instant consolidated cases are related as follows:

On November 30, 1964 the Florida Public Service Commission issued an order fixing January 18, 1965 as the date for commencement of hearings on the justness and reasonableness of the rates and charges of Southern Bell Telephone and Telegraph Company for intrastate service in the State of Florida. The Commission on December 4, 1964 issued an order fixing January 28, 1965 as the date for commencement of similar hearings regarding the justness and reasonableness of rates and charges of Florida Power & Light Company. The purpose and reason for each of the orders was to hear

'* * * all interested parties who desire an opportunity to testify concerning the rates, charges, and earnings * * * as well as the rate-making practices, policies and philosophies under which said public utility operates and prices its services, so that the Commission may be fully advised in the premises and, on the basis of all the testimony in this proceeding, establish a proper rate base, depreciation rates, and rate of return for said utility and make whatever rate adjustment, if any, may be appropriate and in the public interest.'

After a number of public hearings were held in each case, producing more than 5,000 pages of testimony and in excess of 400 documentary exhibits, the cases were submitted to the Commission, which determined as follows:

Regarding Southern Bell Telephone and Telegraph Company, on October 26, 1966 the Commission issued Order No. 4076, the basic import of which is as follows:

'* * * we specifically find that the rates and charges of Southern Bell Telephone and Telegraph Company are unreasonably high to the extent that annual gross revenues for the test year, on an annual basis at the end of said period, resulted in earnings in excess of 6.80% When applied to the adjusted year-end net investment rate base which we have found to be $478,530,895; that said excess earnings, restated on a gross revenue basis, amount to the sum of $3,741,885 after having deducted $1,192,000 for income tax savings previously passed on to the Company's rate payers; and that the Company's gross revenues for the test period, adjusted to the year-end basis, should be reduced by said amount of $3,741,885.'

Regarding Florida Power & Light Company--on November 2, 1966 the Commission entered Order No. 4078, the basic import of said order being:

'* * * we specifically find that the rates and charges of Florida Power and Light Company are excessive and unreasonably high to the extent that annual gross revenues for the test year, on an annual basis, resulted in earnings in excess of 6.95% When applied to the adjusted year-end net investment rate base which we have found to be $637,826,667; that said excess earnings, restated on a gross revenue basis, amount to the sum of $7,973,000; and that the Company's gross revenues for the test year should be reduced by said amount of $7,073,000.'

Petitioner contends that in both cases the Commission should and would have ordered a much greater reduction in rates if due consideration had been given the applicable law and admitted facts. Specifically, Petitioner contends that in both orders the Commission departed from essential requirements of law by doing or allowing the following:

A. Computing rate base at the end of the test year rather than on the average investment during the twelve-month period.

B. Making only a 20% Deduction for federal income tax accruals.

C. Allowing the companies concerned to make charitable contributions with consumer monies.

D. Allowing each company to retain its excessive charges rather than making the reduction orders retroactive.

E. Erred in the determination as to the fair rate of return on invested capital of each company.

We preface our discussion of the aforementioned points with the following general proposition regarding judicial review of utility rates:

'* * * When a case arises in which it becomes necessary to determine whether a properly established rate is a reasonable or constitutional one, either to protect the public against excessive or unreasonable charges or to protect a public utility against the infringement of its constitutional rights and rates which are so low as to amount to confiscation or deprivation of its property, the courts may determine the reasonableness of such rates and may enjoin the enforcement of an unjust, unreasonable, or confiscatory rate . . .

'* * * However, the duty of courts with respect to rate making is merely to inquire concerning results; and where the issue is whether rates prescribed by public authority are confiscatory, the court is not bound to accept the findings of the rate-making authority, though they are supported by substantial evidence, but may exercise its independent judgment upon the facts.' 43 Am.Jur., Public Utilities and Services § 185, pp. 693--695.

REGARDING POINT A:

In both cases Petitioner contends that while it has no quarrel with the test period adopted by the Commission, it does most vigorously take exception to the computations of rate base at the end of the test year selected by the Commission which extended from October 1, 1963 to September 30, 1964, rather than on the average investments during the twelve-month period. Petitioner argues that the soundest and most reliable method of computing a utility's earned rate of return is to relate the average rate base during the test year to the actual earnings produced by that rate base. In the briefs Petitioner asserts that 'most regulatory bodies, both State and Federal' employ this average investment method, and further argues 'that the radical departure below from such a well established method * * * was a clear departure from the essential requirements of law.' In both orders reviewed the Florida Public Service Commission sets forth some of the policy reasons and factors supporting utilization of the year-end rate base as follows:

'Since 1953 this Commission has used year-end investments as the starting point in calculating the rate base. In 1953 Florida had already begun its surge forward in population growth and economic development. New industries were moving in and the State found itself bounding ahead on all fronts. At that time Florida public utilities were striving to keep pace with the pyramiding demands for service. They were confronted with the task of securing hundreds of millions of dollars in order to finance the necessary expansions so that they could keep pace with Florida's mounting economic boom. It was at that time that this Commission determined that it was in the public interest to depart from its traditional use of average year investment in calculating the rate base when fixing rates for public utilities engaged in extraordinary expansion programs. * * *

'In Florida the year-end rate base is permissible under the statutes and controlling court decisions. Its use should be determined by the necessities and circumstances existing when the determination is made. The growth problems that existed in 1953, when its use was first adopted by this Commission, have not abated, but on the contrary, have increased and are even more pronounced at this time. * * *

'We are firmly convinced that terminal or year-end investment, under all the circumstances of this case, should constitute the starting point in calculating the rate base on which the respondent, Southern Bell Telephone and Telegraph Company (and Florida Power & Light Company), will be allowed to earn a fair and reasonable return. Continued growth, and the accompanying demands for more and more telephone (and electric) service by the increasing population, businesses and industries * * * are real facts in this case and demand a better answer than anyone has advanced who would have this Commission revert to a philosophy that is incapable of meeting the demands of a booming economy.'

Sections 364.14 and 366.06, Florida Statutes, F.S.A., deal with the procedures for fixing and changing rates, charges, tolls etc., of telephone and telegraph companies and public utilities, respectively. F.S. Section 364.14, F.S.A., reads in part:

'Whenever the commissioners shall find, after a hearing had upon their...