Grafton County Electric Light & Power Co. v. State

• Citation: 100 A. 668,78 N.H. 330
• Parties: GRAFTON COUNTY ELECTRIC LIGHT & POWER CO. et al. v. STATE.
• Decision Date: 06 February 1917
• Court: Supreme Court of New Hampshire

100 A. 668

78 N.H. 330

GRAFTON COUNTY ELECTRIC LIGHT & POWER CO. et al.

v. STATE.

Supreme Court of New Hampshire.

Feb. 6, 1917.

Appeal from Public Service Commission.

Petition by Grafton County Electric Light & Power Company and others before Public Service Commission to increase capital stock. Petition dismissed, and plaintiffs appeal. Recommitted for further consideration.

Previous decisions in the same controversy are reported in 77 N. H. 490, 93 Atl. 1028, and 77 N. H. 539, 94 Atl. 193. After the last decision, further evidence was introduced before the commission as to the value of the property which the plaintiffs wished to capitalize. The commission found the fair value of this property on November 1, 1912, was $165,000 and, the plaintiffs declining to ask for an order permitting capitalization of the property at this sum, ordered the petition dismissed.

Streeter, Demond, Woodworth & Sulloway, of Concord, Thomas W. Streeter, of Boston. Mass., and Benjamin W. Couch and F. S. Streeter, both of Concord, for appellants. James P. Tuttle, Atty. Gen., and Louis E. Wyman, of Manchester, for the State.

PARSONS, C. J. This is a petition brought by the Grafton County Electric Light & Power Company, owners of the capital stock of the Lebanon Electric Light & Power Company and of the stock and bonds of the Mascoma Electric Light & Power Company, and hence of all of the property of these companies. Under this petition and petitions of the other two companies, all being considered together, it has already been determined that the combination of the two last-named companies into one should be allowed, and the plaintiffs in this petition be given permission to engage as a public utility in the distribution of electricity for light and power as asked in the petition. 77 N. H. 539, 94 Atl. 193. The only remaining question is that of the amount of the capitalization of the plaintiffs' company. This company owning the securities of the combining companies desires to issue its securities in place thereof. But under the act establishing the Public Service Commission, the commission may authorize any public utility to issue stock in payment for property of other corporations which it may lawfully acquire.

Laws 1913, c. 145, § 15e, p. 673; S. P. S. p. 352.

It has also been decided in this case that the property of the Mascoma and Lebanon companies the transfer of which to the plaintiff company was authorized might "be paid for in securities of the latter company in such sum as will represent the value of the property transferred." Grafton, etc., Co. v. State, 77 N. H. 539, 542, 94 Atl. 193, 195. Since that decision, further evidence upon the question of value has been submitted to the commission, and they have found the value of the property of the two companies which the plaintiffs desire to capitalize to be $165,000. The substantial question upon this appeal is this question of value.

Although the finding of the commission is prima facie correct, the question now before the court necessarily involves the determination of the fact according to the court's view of the relative weight of the evidence in the record. 77 N. H. 490, 93 Atl. 1028. The question now presented is, not the amount of the property as a basis for making rates, but what is the value of the property which in the exercise of their business judgment the company considers wise to put into the business.

"It may capitalize what it owns, but it can charge rates only on the basis of so much of its property as is devoted to the business in hand." Grafton, etc., Co. v. State, supra, 77 N. H. 541, 94 Atl. 195.

Property instead of cash is to be represented by the securities to be issued. The question obviously is: What amount in cash does the property fairly and reasonably represent? Assuming the securities are to be sold to the public, what is a reasonable sum under all the circumstances for the public to pay? If the securities were not to be sold, if the capitalization were to be a mere book entry, it is obvious the public would have no interest in the question. The answer to the question, what is it reasonable for the investing public to pay, is plainly, what is the property worth for the purpose for which it is to be used? What would a single individual with abundant means desirous of engaging in the business, but perhaps cautious in making investments, pay for such properties in the situation found upon the date of the proposed capitalization? Such an investor would naturally consider, if the facts were available to him, what the property had actually cost the original owners; how much it would cost to construct a new plant to carry on the business as economically as the existing one; how much less the existing plant would be worth than a new one because of depreciation or inferior or antiquated construction; what return upon the investment was probable? The prospect of future business, whether an increase of profit by economies in management, or whether a greater expense account than in the past must be expected. Upon the question of future returns, such investor would have in mind that he would be permitted to charge only a fair price for the product of his business, and also that he could sell at a fair price without competition. Such an investor would pay the fair value of the property at the time and the general investing public can ask no greater consideration.

"The ascertainment of that value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts." Minn. Rate Cases, 230 U. S. 352, 434, 33 Sup. Ct. 729, 754 (57 L. Ed. 1511, 48 L. R. A. [N. S.] 1151, Ann. Cas. 1916a, 18).

"In order to ascertain that value, the original cost of construction, * * * the amount and market value of its stock and bonds, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case." Smyth v. Ames, 169 U. S. 466, 546, 547, 18 Sup. Ct. 418, 434 (42 L. Ed. 819).

Logically the value to be determined would appear to be the value at the time the securities are to be issued. The petition was filed in September, 1912. Since that time large additions have been made to the plants of both companies. The expenditure for these additions has been found, and the parties ask to have the value for capitalization found by adding the additional expenditure to the value taken as of November 1, 1912. There seems no serious objection to this procedure.

The evidence of the value at that date consists of the actual expenditure for construction up to that time as accurately as it could be determined; the cost of reproduction less depreciation, in the opinion of two engineers, one employed by the plaintiffs and one by the commission, whose results are in substantial agreement; the amount of the income and expense accounts of the two companies up to the time of the hearing and the price paid for the properties in 1912 by the plaintiffs. Upon all this evidence the commission find the value of the properties to be $165,000. The plaintiffs claim the value is not less than $300,000, the sum at which they desire to capitalize, and contend that it is in fact much greater. The attempt to establish a rule for the decision of questions of fact always results in failure. The different...