City of New York v. Public Service Commission

• Citation: 17 A.D.2d 581,237 N.Y.S.2d 617
• Parties: , 48 P.U.R.3d 192 Application of The CITY OF NEW YORK and New York City Housing Authority and Chesebrough Building Company, et al., Petitioners, for an order pursuant to Article 78 of the Civil Practice Act, v. PUBLIC SERVICE COMMISSION of the State of New York and Consolidated Edison Company of New York, Inc., Respondents.
• Decision Date: 08 February 1963
• Court: New York Supreme Court — Appellate Division

Page 617

237 N.Y.S.2d 617

17 A.D.2d 581, 48 P.U.R.3d 192

Application of The CITY OF NEW YORK and New York City

Housing Authority and Chesebrough Building

Company, et al., Petitioners, for an

order pursuant to Article 78

of the Civil Practice Act, v. PUBLIC SERVICE COMMISSION of the State of New York and Consolidated Edison Company of New York, Inc., Respondents.

Supreme Court, Appellate Division, Third Department.

Feb. 8, 1963.

Leo A. Larkin, Corp. Counsel, New York City, for petitioner City of New York. (Samuel Mandell and Francis I. Howley, New York City, of counsel).

Hays, Sklar & Herzberg, New York City, for petitioner New York City Housing Authority. (Ben Herzberg, Renee Schwartz, New York City, and Edward Klagsbrun, New York City, of counsel).

Poletti, Freidin, Prashker & Harnett, New York City, for petitioner Chesebrough Building Company et al. (Charles Poletti and Herbert Prashker, New York City, of counsel).

Kent H. Brown, Albany, for respondent Public Service Commission. (Joseph J. Doran, George H. Kenny, Norman Abell and Martin L. Barr, Albany, of counsel).

Whitman, Ransom & Coulson, New York City, for Consolidated Edison Company of New York, Inc. (Colley E. Williams, Patrick H. Sullivan, and Bernard L. Sanoff, New York City, of counsel).

Before BERGAN, P. J., and COON, GIBSON, REYNOLDS and TAYLOR, JJ.

PER CURIAM.

Petitioners challenge orders of the Public Service Commission made November 14 and December 12, 1961 and January 17, 1962 allowing the Consolidated Edison Company increased revenues for electric service and allocating the burden among certain classes of consumers.

All of the petitioners except the City of New York are large consumers of electricity who have been substantially and adversely affected by the impact of the increased rates. The City of New York is a petitioner in its representative capacity in pursuance of Public Service Law, § 108, on behalf of the residents of the city generally.

Petitioner New York City Housing Authority is the largest single consumer of electricity on tariff rates of this utility and the third largest in total utilization of electricity. It estimates that under the increases allowed its electric bill will be $6,700,000 annually.

The decision of the Commission may be summarized by saying that the utility was allowed an annual increase of rates of approximately $26,000,000, more than half of which ($15,700,000) was reflected in a temporary interim determination on January 12, 1960 and the rest ($10,400,000) in the final orders. The entire scope of the orders are here reviewed.

In the final orders decreases in rates for some groups of consumers were effected in the amount of approximately $11,000,000 while others (largely those of consumer-petitioners) were further increased approximately $21,400,000 to reach the net increase of $10,400,000 which the final order added to the temporary interim order of $15,700,000 to approximate $26,000,000. We have heretofore denied a stay during the pendency of this review proceeding (16 A.D.2d 1015, 229 N.Y.S.2d 320; affd. 12 N.Y.2d 786, 235 N.Y.S.2d 4, 186 N.E.2d 678).

The attack on the validity of the final determination by the Commission is laid on a broad front. It is said that the allowed rate of return of 6 1/2% is excessive and made without sufficient factual findings; that the rate base was inflated and overstated; that the return earned for the test year (1959) by the utility was understated; that adequate deductions for revenue deficiencies arising from special contracts for electric services were not made; that the distribution of the revenue burden and its impact on consumer-petitioners was arbitrary and unjust. Petitioners also complain of rulings on evidence.

We look first to the scope of review in this court. The right of petitioners to challenge the decisions of the Commission in this proceeding is not open to doubt. Nothing said or decided in Matter of Campo Corp. v. Feinberg (279 App.Div. 302, 110 N.Y.S.2d 250; affd. 303 N.Y. 995, 106 N.E.2d 70) suggests any infirmity in the right of a consumer whose utility bills are increased by a ruling of the Commission to review in an Article 78 procedure the effect on him of the higher rates. The City of New York has this right in a representative capacity pursuant to express provisions of statute (Public Service Law, § 108).

Since the Commission must 'determine and prescribe' both rates and classifications that are 'just and reasonable' (Public Service Law, § 66, subd. 5) it must be clear that a consumer such as the petitioner Housing Authority whose annual charges for electricity as a result of the orders here reviewed are imputed to have increased by $1,200,000 a year is firmly and properly in court with a right to challenge the legality of the orders.

Insofar as Article 78 allows a review, the right of a utility claiming an insufficient rate, or even confiscation, and the right of a consumer claiming an excessive rate are not essentially different.

Nevertheless our power is narrow in scope. We may interfere 'only for erroneous determination of a question of law' (People ex rel. Consolidated Water Co. of Utica v. Maltbie, 275 N.Y. 357, 366, 9 N.E.2d 961, 963). 'The business of rate making has been confided by the Legislature to a body of experts with powers of inquiry and modification adequate to the task' (Cardozo, J., in City of Rochester v. Rochester Gas & Electric Corp., 233 N.Y. 39, 49, 134 N.E. 828, 832).

It was there noted in sweeping terms that the courts will not interfere with the Commission's judgment and discretion 'except to safeguard the consumer against arbitrary power' (p. 49, 134 N.E. 832).

We look then to see, not whether the Commission has made a determination wholly free from error in the process, or quite in accord with a judicial view of how the procedure before the Commission should be managed in detail, but to the 'total effect' of the rate order in relation to what is just and reasonable (Federal Power Comm. v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 88 L.Ed. 333).

A somewhat similar view was expressed in this court six years before Hope in Matter of Long Island Lighting Co. v. Maltbie (249 App.Div. 918, 919, 292 N.Y.S. 807). Despite some errors found in the proceeding it was held the rates were sufficiently grounded in the record. We noted that 'It is only the ultimate result which counts.'

The essential test of such a review as this is that the determination shall have a reasonable basis (Matter of Fink v. Cole, 1 N.Y.2d 48, 53, 150 N.Y.S.2d 175, 178, 133 N.E.2d 691, 693) which, in a rate case, must be read with the statute to mean that there is reasonable basis for finding the rates in question to be 'just and reasonable'.

Examining the temporary rates which have become integrated in the final order now here, we have heretofore held them sufficiently supported by the proof before the Commission (Matter of Sixty Wall Tower, Inc. v. Public Service Commission of State of New York, 12 A.D.2d 853, 209 N.Y.S.2d 688, affd. 10 N.Y.2d 861, 222 N.Y.S.2d 692, 178 N.E.2d 914), but the scope of the present review is not only wider; it rests upon a more highly developed record.

One of the main attacks of petitioners on the final orders is that addressed to the overall 6 1/2% rate of return on the company's electric operations. This is based on a finding by the Commission that a rate of between 6.2 and 6.3 per cent would be fair on the basis of the record for the test year to which was added approximately 1/4% for future 'attrition' of the rate to compensate for the inflationary trend. Of three elements which weigh into a calculation of a fair rate of return, debt, preferred stock and common stock, based in turn on the proportion of each to the total capital, the main difference in the record between witnesses related to the percentage attributable to the common stock. The Commission in its opinion stated this percentage to have been between 8 and 10.5 per cent. Although petitioners contend this should have been pinned down more precisely in the opinion, the omission does not require annulment of the orders when the overall percentage found of between 6.2 and 6.3 per cent lies well within the range of all the proof before the Commission and reasonable calculations based on such proof.

Not only does this process involve an advised judgment, but the resulting overall rate lies within the proof and is a sufficient resolution of the complex and contested issue before the Commission. Moreover the rate of return was not devised in a vacuum. The Commission had in 1952 determined that a rate of return of approximately 6% was for this utility company then fair and reasonable and the Commission noted that since that time there had been an increase of over $700 million in the long-term debt of the company, increasing the proportion of debt to total capital and that new capital would be required during 1960 through 1963 of $475 million.

We think the finding of a fair rate of return of between 6.2...