Jacksonville Gas Corp. v. Florida R. R. & Public Utilities Commission

• Decision Date: 05 January 1951
• Citation: 50 So.2d 887
• Court: Florida Supreme Court
• Parties: JACKSONVILLE gas corp. v. FLORIDA R. R. & PUBLIC UTILITIES COMMISSION.

Page 887

50 So.2d 887

JACKSONVILLE gas corp. v. FLORIDA R. R. & PUBLIC UTILITIES COMMISSION.

Supreme Court of Florida, en Banc.

Jan. 5, 1951.

Rehearing Denied March 14, 1951.

Elliott Adams and Wm. H. Robers, Jacksonville, for petitioner.

Lewis W. Petteway, Tallahassee, D. Fred McMullen, Tampa, and Guyte P. McCord, Jr., Tallahassee, for respondent.

Baker & Thornal, Orlando, for Florida Utilities Corp.

Patterson, Freeman, Richardson & Watson, Jacksonville, Macfarlane, Ferguson, Allison & Kelley, Tampa, Yonge, Whiteside & Prunty and Walton, Hubbard, Schroeder, Lantaff & Atkins, all of Miami, Giles J. Patterson, Jacksonville, Howard P. Macfarlane, Tampa, T. A. Whiteside, Miller Walton and S. O. Carson, all of Miami, William M. Madison and O. O. McCollum, Jr., Jacksonville, for City of Jacksonville.

Holland & Runyon and Harris, Barrett, McGlothlin & Dew, all of St. Petersburg, and Leroy B. Giles, Orlando, amici curiae.

THOMAS, Justice.

In accordance with Chapter 8974, Sp.Laws of Florida, Acts of 1921, authorizing the City Commission of Jacksonville to establish rates for gas consumed in the city so as to afford adequate compensation to the producer, the commission fixed the charges that could be exacted by the Jacksonville Gas Corporation. Being dissatisfied with the amounts set by the commission, the company appealed direct to the Railroad and Public Utilities Commission of the State of Florida, and this commission thereupon heard the matter de novo, computed the 'original cost' or petitioner's property, and sanctioned the gross income necessary to insure a return of seven per cent on that sum.

At the hearings the petitioner insisted, as it does now, that the basis for establishing the income to be authorized should be the 'reproduction cost new,' or, as otherwise stated, 'original costs trended by present day price tatios,' while the respondent held, and now maintains, that the rate should be based on the original cost of the property. Under both theories depreciation is taken into account. According to petitioner's theory the value of its property is approximately $4,600,000; under respondent's theory, $3,000,000; a sizeable disparity.

So it seems that we are importuned to decide wiether the criterion for the determination of rates legally to be charged for the utility should be what we shall call 'actual cost' or 'present fair value.' Though we do not propose to beg the question, we do not believe this litigation may be determined by simply choosing one of these theories and committing the respondent to it.

From the briefs and arguments the respective stands taken by petitioner and respondent are apparent. The one states that we have decided the point, that nothing we have announced since indicates a change of our view, and that a recent opinion of the Supreme Court of the United States, presently to be discussed, is not controlling, though conflicting. The other insists that we are not committed on the subject, having lately indicated an attitude conforming to its contention, and that, anyway, the Supreme Court of the United States has settled the matter.

In order more clearly to understand the position of the respondent it seems fitting that we should preface our comment with a condensation of the salient parts of the order assailed in the petition for certiorari.

In the order it was recited that 'it should be borne in mind that neither this Commission [respondent] nor the City Commission * * * in fixing just and reasonable rates to be charged * * * is bound by any particular statutory method or formula to be used in arriving at the valuation of the gas company's property,' and further: 'The fair value method, with its twin of reproduction cost new, of rate making was in vogue throughout this country from 1898 to 1944 as a result of the decision of the Supreme Court of the United States in the case of Smyth v. Ames, 169 U.S. 466 , 42 L.Ed. 819, wherein the court came to the conclusion that the Constitution required the fixing of rates so as to yield a fair return on the fair value of the property used and useful in the public service.' But, the order continued, the 'regulatory bodies * *re no longer bound by the decision in Smyth v. Ames, supra, because an enlightened court in the case of Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591 , 88 L. Ed. 333, effectively overruled Smyth v. Ames and sounded the death knell of the fair value doctrine.' This had been the attitude of the commission during the progress of the trial when, upon motion of the city attorney, there was struck from the record all evidence of present value because the commission thought it was 'entitled to no consideration in a rate case,' since under its construction of the opinion in the Hope case 'regulatory bodies are free within the scope of their statutory authority to fix just and reasonable public utility rates without regard to the fair value formula.'

Feeling that it was unfettered in choosing the method to be employed in establishing a return that would be, in itself, 'just and reasonable,' the Railroad, and Public Utilities Commission then took as a base the actual cost, and after allowing for all anticipated expenses of operation, replacements, depreciation, and so on, arrived at a total income that would yield a net return on that amount of seven per cent.

Adverting now to the insistence of the petitioner that we have already decided, by our holding in Tampa Electric Company v. Watson, 146 Fla. 695, 1 So.2d 739, 744, that 'present fair value' is the basis of which rates must be computed, we come upon what appear to be essential differences in the facts there and here. We said in that case that the utility board of Tampa was 'justified under the statute [Chapter 20160, Laws of Florida, Special Acts of 1939] in using the present 'fair value' of the applicable property as the basis of valuation for rate-making purpose instead of using the actual cost or investment value and making deductions or additions for depreciation or betterments.' But it does not follow that the language there approving what had been done by the utility board under Chapter 20160 becomes a precedent in the present controversy because not only was it provided in that law that rates should be 'just and reasonable,' but also that the board was 'prohibited from making any rate' which would not 'give to the utility a return on its real and legitimate investment * * * of at least 7% on said investment * * *.' (Emphasis supplied.) So when the provisions are read together it would seem that the rates to be determined were not only to be 'just' and 'reasonable,' but were to produce not less than seven per cent of the 'real and legitimate investment.' Thus the law there dealt with and the one here involved are not the same because of the injunction against the board's fixing rates below an arbitrary percentage and the reference to real and legitimate investment, although they do have the common provision that the amounts must be 'just and reasonable.'

The challenge of the respondent of the position taken by the petitioner that the court decided the point in the Tampa case and embraced the 'present value' as distinguished from the 'actual cost' doctrine has sent us to the original file in the Tampa case, where we have not found to have been presented the clean-cut issue between the two theories one would expect from the reported case. No testimony had been taken, and the matter reached us on an order striking parts of the bill of complaint, and the plaintiff, the utility company, preferred an appeal over an emendment of the pleading. The representation to the court was that the plaintiff should be entitled to a return on its property devoted to the operation of a street railway as well as that used in the distribution of electricity to its customers. Actually that seems to have been the prime issue in the case.

It was further urged that the utility board had not followed the proper course in adopting as a basis for the rates to be fixed the report of the engineers it employed showing an 'appraised' cost of $4,264,178 and a 'book' value of $4,528,473. According to a copy of the report attached to the bill, the first figure was reached from an inventory and appraisal made by the engineers, supplemented by an estimate of the value of the real estate made by appraisers of the board; and the second figure was 'predicated on the Original Cost of the property * * * as determined from the books and records of the company * * * referred to as the 'Book Cost." (Emphasis supplied.) It is true that the company alleged a figure of twice as much, but search as we may, we have not discovered in the pleading whence it came or how it was determined; therefore, so far as the facts reflected in the pleadings of that case are concerned, including the exhibits, we have concluded from a thorough re-examination of the record that although the trial judge referred to 'present fair value' in his opinion and we did the same in ours, it was a reference to the term without distinguishing it from 'actual cost,' except verbally. The question seems to have developed hypothetically.

In other words, the engineers had given two figures resembling 'present value' and 'actual cost,' which they called 'appraised cost' and 'book cost,' respectively, and between which there was relatively little difference; even so, the board had actually adopted a figure larger than either. Compared to the three figures was the sum alleged by the utility company, the origin of which cannot be ascertained from the record.

Now the immediate question is whether, in all the light cast upon this controversy, currently and often debated amongst experts in economics, we are so unalterably committed to the 'present value' doctrine, because of the decision in the Tampa case, that we should now dispose of the present litigation with the mere statement that we have cast the lot of utility...