New Jersey Bell Telephone Co. v. Department of Public Utilities, Bd. of Public Utility Com'rs

• Decision Date: 15 June 1953
• Docket Number: No. A--130,A--130
• Parties: NEW JERSEY BELL TEL. CO. v. DEPARTMENT OF PUBLIC UTILITIES, BOARD OF PUBLIC UTILITY COM'RS.
• Court: New Jersey Supreme Court

Page 568

12 N.J. 568

97 A.2d 602

NEW JERSEY BELL TEL. CO. v. DEPARTMENT OF PUBLIC UTILITIES, BOARD OF PUBLIC UTILITY COM'RS.

No. A--130.

Supreme Court of New Jersey.

Argued May 11, 1953.

Decided June 15, 1953.

Thomas Glynn Walker and Duane E. Minard, Jr., Newark, argued the cause for the appellant.

Joseph Harrison, Sp. Deputy Atty. Gen., argued the cause for the respondent (Jacob Schwartz, Newark, of counsel; Edward S. Binkowski, Deputy Atty. Gen., on the brief; Theodore D. Parsons, Atty. Gen., attorney).

The opinion of the court was delivered by

BURLING, J.

This is a public utility rate case. The New Jersey Bell Telephone Company, a corporation of the State of New Jersey (hereinafter adverted to as the Company), appeals from two determinations of the Board of Public Utility Commissioners, Department of Public Utilities, State of New Jersey (hereinafter called the Board). The first of the orders appealed from is the Board's decision and order of August 15, 1951 denying the Company an increase in intrastate rates; the second is the Board's order of September 18, 1952 denying the Company's petition for rehearing in this matter.

The present proceedings were induced by the Company's filing with the Board on April 20, 1950 new rates schedules proposed to become effective May 21, 1950. The net result of these proposed tariff changes was estimated by the Company to produce at least $9,800,000 in additional annual gross intrastate revenues.

Two earlier efforts by the Company to increase rates had been successful. The Company introduced in evidence in the present proceedings the decision and order of the Board with respect to each of these earlier rate increases and the same are to same extent interrelated in the determination now under review.

The first of these prior orders related to proceedings for increased rates initiated before the Board by the Company in 1947. The Board by order of November 25, 1947 had held that the schedule of increased rates then filed by the Company was excessive and therefore 'unjust and unreasonable,' but had allowed a revised schedule of rates designed to produce an increase in annual intrastate operating revenues of $10,515,000 to result in an annual net intrastate operating income of $8,347,000. The Board found the Company's rate base to be $149,045,000 and that the rate of return thereon under the tariff increase allowed would be 5.6%. This rate the Board held would constitute a fair rate of return at that time.

The second of the above mentioned prior orders of the Board related to proceedings concerning increased intrastate rates proposed by the Company and subsequently made subject to hearings before the Board in 1948. The Board by order of April 11, 1949 had held that the schedule of rates then proposed by the Company was unjust and unreasonable in that it would yield an excessive return but that a schedule of rates that would increase annual intrastate operating revenues by $8,305,000 was just and reasonable. It again determined the rate base, in the amount of $178,000,000, and determined that a fair rate of return thereon would be 5.6%.

The Company appears to have filed no appeal from either the November 25, 1947 or the April 11, 1949 decision and order of the Board.

The present proceedings, as hereinbefore stated, had their inception in the filing of the Company's new proposed tariff increases on April 20, 1950, to be effective May 21, 1950. On April 26, 1950 the Board ordered a hearing thereon and ordered that the effective date of the proposed schedules (May 21, 1950) be suspended until August 21, 1950. The Board on August 2, 1950 ordered the further suspension of the proposed rates to November 21, 1950. On August 24, 1950 the Company filed a stipulation with the Board voluntarily consenting to stay of operation of the proposed rates to January 20, 1951. Additional stipulations extending the suspension of the rates were filed on January 18, 1951, April 19, 1951 and June 18, 1951.

On August 15, 1951 the Board filed its decision and order. It held that the existing rates were not unjust, unreasonable or insufficient, and that the proposed rates were unjust and unreasonable. Accordingly it denied the rate increase sought by the Company. The Board found the intrastate rate base to be $255,836,000; it adjusted operating expenses (which as estimated indicated a rate of return of 6.07%) and found the rate of return after adjustment to be 6.37%. This rate of return it found 'clearly not insufficient.'

On August 29, 1951 the Company filed with the Board a petition for rehearing. In this petition the Company argued that the evidence it had submitted on its rate base during the course of the 1950--1951 proceedings should be reconsidered. It sought in addition to supplement that evidence and to introduce 'current' evidence of changed conditions and of the 'imminence of the imposition of higher tax rates by Congress and the continuing increase in other elements of cost.' The Company did not detail the items of decision which it contended constituted material error.

On April 18, 1952 the Company requested that its petition for rehearing be granted. The Board on April 29, 1952 by letter suggested to the Company that it supplement the petition for rehearing filed August 29, 1951. Accordingly on May 5, 1952 the Company filed with the Board a 'Supplement to Petition for Rehearing' asserting further changed conditions and seeking additional increase in gross revenue, namely $4,406,000.

A hearing before the Board was held on May 21, 1952. This hearing was confined to argument as to whether a rehearing should be allowed the Company. The Company's petition was resisted by intervenors, namely, the United States Government and the City of Perth Amboy.

Subsequently on June 11, 1952 the Board ordered further information to be furnished it in affidavit form by the Company. This order was complied with on June 13, 1952. Thereafter on September 18, 1952 the Board filed its order denying the Company's petition and supplemental petition for rehearing. It appears that this order was issued by the Board on September 20, 1952.

The Company served and filed its notice of appeal (from the Board's orders of August 15, 1951 and September 18, 1952) to the Superior Court, Appellate Division, on October 6, 1952. The Attorney General acting for the State as respondent moved to dismiss the appeal. Decision on the motion was reserved by the Superior Court, Appellate Division, pending argument of the appeal. Prior to hearing there, certification was allowed on our own motion, after the matter was open to the court by petition of the State in its individual capacity as a respondent. The State as such respondent at the same time renewed its motion to dismiss the Company's appeal. The motion to dismiss the appeal was denied.

The Questions Involved

On the appeal there are many questions involved. Tersely, these questions relate to the adequacy and validity of the findings of the Board concerning the three principal factors in utility rate determination, namely rate base, income and expenses, and rate of return. The detail of these questions will be treated separately in this opinion under discussion of the pertinent factors.

It suffices at this point to state that our examination of the record and consideration of the pertinent principles of law results in affirmation of the Board's orders of August 15, 1951 and September 18, 1952.

The Appeal

In view of the novelty of the questions relative to the Board's order denying the Company's application for rehearing, we move first to the disposition of that portion of the appeal.

I The Denial of Rehearing

The questions involved on the phase of the appeal dealing with the Board's order of September 18, 1952, denying the Company's petition for rehearing may be summarized as follows:

(a) Did the Board abuse its discretion in denying the petition for rehearing on the original evidence and determination?

(b) Did the Board abuse its discretion in denying the petition for rehearing insofar as changed conditions were asserted therein?

That the Board has authority to order a rehearing is substantiated by R.S. 48:2--40, N.J.S.A., which provides that 'The board at any time may order a rehearing and extend, revoke or modify an order made by it.' Cf. Central R. Co. of N.J. v. Dept. of Pub. Utilities, 7 N.J. 247 at page 254--255, 81 A.2d 162 (1951). This statutory provision is a rule of the Board within the contemplation of Rule 1:2--6(d) adopted June 7, 1951. Cf. Borough of Jamesburg v. Hubbs, 6 N.J. 578, 584, 80 A.2d 100 (1951). It is a legislative recognition of the principle that unless qualified by statute the right to order a rehearing is inherent in administrative tribunals, expressed by Mr. Justice Heher for this court in Handlon v. Town of Belleville, 4 N.J. 99, 106--107, 71 A.2d 624, 16 A.L.R.2d 1118 (1950).

The general rule with respect to allowance of rehearing is stated in the Handlon case, supra, to be qualified by the requirement for the exercise of reasonable diligence. R.S. 48:2--40, N.J.S.A., supra, expresses the legislative purpose to enlarge this inherent power of the Board to permit it to allow a rehearing 'at any time.' Central R. Co. of N.J. v. Dept. of Pub. Utilities, supra, 7 N.J. at pages 254--255, 81 A.2d 162. However, this would not have permitted the Board of grant a rehearing after the allowance of a writ of Certiorari (pending determination thereon) under the former procedure relating to resort to the writ for review of the Board's orders. R.S. 48:2--43, N.J.S.A. Nor does it affect the course of review ordained by this court under our constitutional mandate. The pertinent portion of N.J.Const.1947, Art. VI, Sec. V, par. 4, provides:

'Prerogative writs are superseded and, in lieu thereof, review, hearing and relief shall be afforded in the Superior Court, on terms and in the manner provided by rules of the Supreme Court, as of...