Idaho Power Co. v. Thompson

• Decision Date: 28 April 1927
• Docket Number: No. 1143.,1143.
• Citation: 19 F.2d 547
• Parties: IDAHO POWER CO. v. THOMPSON et al.
• Court: U.S. District Court — District of Idaho

19 F.2d 547 (1927)

IDAHO POWER CO. v. THOMPSON et al.

No. 1143.

District Court, D. Idaho, S. D.

April 28, 1927.

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Hawley & Hawley and A. J. Priest, all of Boise, Idaho, and John F. MacLane, of Salt Lake City, Utah, for plaintiff.

Albert H. Conner, Atty. Gen., John C. Rice, of Caldwell, Idaho, and Charles P. McCarthy and H. B. Walker, both of Boise, Idaho, for defendants.

Before RUDKIN, Circuit Judge, and DIETRICH and CUSHMAN, District Judges.

DIETRICH, District Judge.

The suit is brought to enjoin the enforcement of a set of rates for electric service, prescribed by the Public Utilities Commission of Idaho in its Order No. 939, dated February 29, 1924, Record, vol. 1, p. 122. Having taken over several hydroelectric generating plants of smaller competing companies, which went into liquidation, plaintiff has further developed them and united them into a single system, from which it distributes electric current for light and power, for heat in cooking and heating water for domestic use, and for power in pumping water for irrigation purposes. Its territory is a small part of Eastern Oregon and the whole of Southwestern and Southern Idaho. In Southeastern Idaho it comes into contact with the Utah Power & Light Company, a neighborly, if not a kindred, company. In its field it is without substantial competition.

The Idaho Public Utilities Commission, defendant, is created by the state statutes, with functions usual to such bodies, and has the power and duty to require that the rates charged be just, reasonable, and nondiscriminatory. Two main contentions are put forward by plaintiff; the first being that Order No. 939 is invalid because of irregularity in procedure by the Commission, and the other that the rates thus established are so low as to be confiscatory under the federal Constitution. Both issues are conceded to be within our jurisdiction.

We first discuss the question of confiscation, and hence for the moment we defer analysis of certain specific schedules, the sufficiency of which, viewed by themselves, is challenged, and consider only whether the rates fixed by the order, looking at them in their entirety, amount to the taking of plaintiff's property without just compensation. San Diego Land Co. v. National City, 174 U. S. 739, 754, 19 S. Ct. 804, 43 L. Ed. 1154. In respect to such an issue, the burden of proof is upon the plaintiff. Des Moines Gas Co. v. Des Moines, 238 U. S. 153, 163, 35 S. Ct. 811, 59 L. Ed. 1244. And the proof must be clear and convincing. "The judiciary ought not to interfere with the collection of rates established under legislative sanction, unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public; that is, judicial interference should never occur, unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the rates prescribed will necessarily have the effect to deny just compensation for private property taken for public use." San Diego Land Co. v. National City, 174 U. S. 739, 754, 19 S. Ct. 804, 810 (43 L. Ed. 1154).

In San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 441, 23 S. Ct. 571, 572 (47 L. Ed. 892), a further statement of the rule is made as follows: "In a case like this we do not feel bound to re-examine and weigh all the evidence, although we have done so, or to proceed according to our independent opinion as to what were proper rates. It is enough if we cannot say that it was impossible for a fair-minded board to come to the result which was reached." See, also, Van Dyke v. Geary, 244 U. S. 39, 37 S. Ct. 483, 61 L. Ed. 973; Georgia Ry. Co. v. Ry. Com., 262 U. S. 625, 43 S. Ct. 680, 67 L. Ed. 1144; Darnell v. Edwards, 244 U. S. 564, 37 S. Ct. 701, 61 L. Ed. 1317; Knoxville v. Knoxville Water Co., 212 U. S. 1, 29 S. Ct. 148, 53 L. Ed. 371; Minnesota Rate Case, 230 U. S. 352, 452, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; N. P. R. R. v. North Dakota, 236 U. S. 585, 35 S. Ct. 429, 59 L. Ed. 735, L. R. A. 1917F, 1148, Ann. Cas. 1916A, 1.

And, it is to be added, where a factor in the problem involves prophesy, or rests upon mere opinion evidence, the commission was not, nor are we, bound to accept absolutely and without qualification one or the other of two conflicting views, or the opinion of a single expert where but one testifies. The Conquerer, 166 U. S. 110, 17 S. Ct. 510, 41 L. Ed. 937. And see Willcox v. Consolidated Gas Co., 212 U. S. 19, 50, 51, 29 S. Ct. 192, 53 L. Ed. 382, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034.

We are to bear in mind, too, that the term "reasonable" or "just" return has a double aspect, one legislative and the other judicial, and that we are here concerned with it only in the latter sense. So understood, it is the equivalent of nonconfiscatory. Judicially a rate is unreasonable only when it yields a return less than the minimum which the capital invested may of right demand. In the legislative aspect the return may exceed such amount; that is, the Legislature or the commission may, without being unjust or unfair to the rate payer, add a substantial increment to this minimum in order to carry out some public policy. Detroit & M. R. Co. v. Michigan R. Com. (D. C.) 203 F. 864, 870. "A commission or other legislative body, in its discretion, may determine to be reasonable and just a rate that is substantially higher than one merely sufficient to justify a judicial finding in a confiscation case that it is high enough to yield a just and reasonable return. * * * It is well known that rates substantially higher than the line between validity and unconstitutionality properly may be deemed to be just and reasonable, and not excessive or extortionate." Banton v. Belt Line Ry. Co. (Dec. May 25, 1925) 268 U. S. 413, 45 S. Ct. 534, 69 L. Ed. 1120. See, also, San Diego Co. v. Jasper, 189 U. S. 439, 23 S. Ct. 571, 47 L. Ed. 892; Galveston Electric Co. v. Galveston, etc., 258 U. S. 388, 42 S. Ct. 351, 66 L. Ed. 678; Chesapeake, etc., v. Whitman (D. C.) 3 F.(2d) 938; Spring Valley Water Co. v. San Francisco (D. C.) 252 F. 979; U. P. Ry. Co. v. Com., 95 Kan. 604, 148 P. 667; City of Portsmouth v. P. U. C., 108 Ohio St. 272, 140 N. E. 604. It follows that an expression or finding of the defendant commission of what it deemed to be just or reasonable is not necessarily to be understood in a judicial sense, or as implying that, in the view of that body, anything less would be confiscatory.

Rate Base.

Formally, at least, both parties recognize the rule to be that for rate base we are to take the fair value of the plant as of the date to which the inquiry, touching sufficiency of net return, relates, adding thereto a reasonable amount for working capital. Both studies are made along the line of the reproduction cost theory. In the briefs is to be found some discussion of the question whether or not cost of reproduction is to be considered the "dominant" factor. But mere terminology is unimportant; whether dominant or not, it is a prime factor. It is not to be used as a formula, and is subject to many qualifying considerations; but nevertheless, broadly speaking, it is basic, and in both studies it is generally so treated. The parties also agree upon taking June 30, 1924, as the date for fixing the value of the rate base, and the evidence of reproduction cost, directly or indirectly, relates to that date.

I. Property in Existence December 31, 1919, and Still Embraced in the Plant as of June 30, 1924, Exclusive of Accounts (1) Organization, (2) Franchises, (3) Water Rights, (37) General Office Equipment, and (39) Utility Equipment, Which Five Accounts are Considered Separately.

(Note. — Both sides carry the same classifications under identical account numbers. For illustration, see Plaintiff's Exhibit 16a, vol. 1, p. 238, and Defendants' Exhibit 27, p. 419.)

Reserving for separate consideration the five accounts mentioned in the above heading, and deferring consideration of the factors referred to as "Working Capital," "Going Concern Value," and "Depreciation," the parties have divided the property into two groups as indicated in the heading; First, the properties in existence December 31, 1919, and still constituting a part of the system; and, second, the additions made during the period intervening between that date and June 30, 1924. Touching the latter group there is no substantial controversy.

Confining our attention to the first group, it appears that Rankin, plaintiff's engineer, fixes the reproduction cost as of June 30, 1924, at $13,178,318, which is $1,616,627 in excess of the appraisal by Kopelman, the defendants' engineer. (See first two columns Defendants' Exhibit 43, vol. 1, p. 474, and Plaintiff's Exhibit 45, vol. 1, p. 486.) The slight discrepancy in the two tabulations is negligible. Aside from the somewhat distinctive Oxbow item of $350,000, and interest, the differences relate largely to land values and overheads, or "undistributed costs" of different kinds, and involve many questions of a speculative character.

It will aid in understanding the issue to say that, some time prior to the making of Order No. 939, plaintiff, in compliance with the requirements of the commission, at great expense caused to be prepared and filed with the commission a detailed inventory of all its property, both used and unused, together with its appraisal thereof as of December 31, 1919. With unimportant exceptions, both parties now resort to this as a complete and correct descriptive list in detail of the property as it existed at that date, eliminating, of course, from their consideration in making their appraisals, such items as did not,...