New Jersey Power & Light Co., In re

• Decision Date: 26 May 1952
• Docket Number: No. A--74,A--74
• Citation: 89 A.2d 26,9 N.J. 498
• Parties: In re NEW JERSEY POWER & LIGHT CO. NEW JERSEY POWER & LIGHT CO. v. STATE.
• Court: New Jersey Supreme Court

Page 498

9 N.J. 498

89 A.2d 26

In re NEW JERSEY POWER & LIGHT CO. NEW JERSEY POWER & LIGHT CO. v. STATE.

No. A--74.

Supreme Court of New Jersey.

Argued Feb. 4 and 11, 1952.

Reargued April 7, 1952.

Decided May 26, 1952.

Russell Watson, New Brunswick, argued the cause for the appellant (Autenrieth & Rochester, Newark, attorneys; Joseph F. Autenrieth, Newark, of counsel).

Joseph Harrison, Deputy Atty. Gen., argued the cause for the respondent, State of New Jersey (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 an appeal by New Jersey Power & Light Company (hereinafter referred to as the Utility), from a decision and order of the Board of Public Utility Commissioners, Department of Public Utilities, State of New Jersey (hereinafter called the respondent), filed April 27, 1951, ordering that proposed increased rates for electric service filed by the Utility on May 28, 1950 should not be placed in effect, and cancelling the schedules filed by the Utility in connection therewith. The appeal was addressed to the Superior Court, Appellate Division, under Rule 3:81--8. Prior to hearing there certification was allowed by this court upon the respondent's petition. In re New Jersey Power & Light Co., 8 N.J. 320, 85 A.2d 272 (1951).

The Utility is a New Jersey corporation engaged in the business of generating, purchasing, transmitting, distributing and selling electric energy. It was incorporated under the laws of New Jersey on December 14, 1915 and maintains its principal office at Dover, Morris County, in this State. The electric service of this corporation, at the time of the initiation of these proceedings, was rendered throughout or in portions of 105 municipalities in the western and northwestern portions of the State of New Jersey, in the Counties of Hunterdon, Mercer, Morris, Passaic, Somerset, Sussex, and Warren, a territory of approximately 1,750 square miles with a population of approximately 180,000 according to the 1940 census. During the period covered by these proceedings it was a member of what is termed the 'G.P.U. power group,' composed of four affiliated companies, namely Metropolitan Edison Company, New Jersey Power & Light Company, Jersey Central Power & Light Company and Pennsylvania Electric Company, all of which were subsidiaries of General Public Utilities Corporation. This group's transmission facilities were interconnected directly or indirectly with Public Service Electric & Gas Company of New Jersey, Philadelphia Electric Company, and Pennsylvania Power & Light Company through what was denominated the 'Pennsylvania-New Jersey interconnection,' and also were interconnected with other Pennsylvania, New York and New Jersey generating facilities.

In accordance with formal approval contained in an order of the respondent filed March 28, 1944, the Utility had entered into an automatic rate adjustment plan, developed jointly by representatives of the respondent and of the Utility. Under this plan which was known as the New Jersey Rate Adjustment Plan, rate adjustments of this utility were made annually from 1944 to 1948 inclusive. In 1949 the Utility sought the respondent's approval of a deviation from the standard application of the aforesaid Rate Adjustment Plan for a temporary rate increase pending completion by the Utility of studies which it had undertaken and believed would serve as a basis for revision of the Rate Adjustment Plan formula relating to the determination of rate of return. This temporary rate increase was denied by the respondent for the reason that no emergency or critical situation requiring such relief was proved. Re New Jersey Power & Light Co., Docket No. 4496, 82 P.U.R.N.S. 554 (not officially reported). Pursuant to the authority contained in the plan as approved by the respondent, the Utility, after notice, terminated the Rate Adjustment Plan as of December 31, 1949, and on May 25, 1950 filed with the respondent the schedule of increased rates which became the source of this appeal. These rates were to become effective June 26, 1950, but on May 31, 1950 the respondent filed an order suspending the same pending hearing thereon. R.S. 48:2--21, N.J.S.A. Hearings before the respondent began on June 26, 1950. A subsequent hearing took place on July 13, 1950, at the close of which the proceedings were adjourned to October 9, 1950. Additional hearings were held in October and November, 1950 and at the hearing of November 21, 1950 the Utility stipulated 'it will not put its proposed rates into effect before March 15th, (1951) unless this Board should decide the matter prior to that time, and then it will do whatever the decision calls for.' Further hearings occurred in January and February 1951, concluding on February 21, 1951. At the last hearing the Utility stipulated that it would not put its proposed rates into effect prior to May 1, 1951. On April 27, 1951 the respondent filed its decision and order denying the proposed rate increases and the Utility appealed to the Superior Court, Appellate Division. Prior to hearing there, this court allowed certification upon respondent's petition, as hereinabove mentioned.

The questions involved on this appeal include: (1) was the respondent's determination of rate base unlawful, (2) was the respondent's decision and order illegal, arbitrary and capricious with respect to various items of revenues and expenses, (3) was the respondent's decision and order (a) arbitrary and without evidential support in its basic findings as to rate of return and (b) illegal in that it failed to find and determine a specific fair rate of return, and (4) was the respondent's denial of the Utility's proposed increase in rates a deprivation of its property without due process of law in violation of the provisions of the Federal and State Constitutions.

Upon consideration of the arguments addressed to these questions, the applicable law and the relevant and competent evidence in the record, we are of the opinion that the decision and order appealed should be affirmed.

The ultimate decision in any rate of fare or service controversy is whether the rates are just and reasonable. The statute aims to secure justice to both sides and the court stands between the public utility and its consumers to effect a just and reasonable status. Central R. Co. of N.J. v. Dept. of Public Utilities, 7 N.J. 247, 260, 81 A.2d 162 (1951). The three primary factors involved in the determination of justness and reasonableness of rates are an examination of a company's property valuation which constitutes its rate base, its expenses and the rate of return developed by relating its income to its rate base. This is settled law in New Jersey. Central R. Co. of N.J. v. Dept. of Public Utilities, supra, 7 N.J. at page 261, 81 A.2d 162; Public Service Coordinated Transport v. State, 5 N.J. 196, 216, 74 A.2d 580 (1950); Atlantic City Sewerage Co. v. Board of Public Utility Commissioners. 128 N.J.L. 359, 26 A.2d 71 (Sup.Ct.1942) affirmed 129 N.J.L. 401, 29 A.2d 850 (E. & A. 1943). These factors were determined by the respondent in the present case and it is to the sufficiency of these components of its decision and order that the Utility addresses the instant appeal.

It is our duty to weigh the evidence under the pertinent legal principles and determine whether the issue of reasonableness has been properly considered and decided. Central R. Co. of N.J. v. Dept. of Public Utilities, supra, 7 N.J. at pages 257--260, 81 A.2d 162; Public Service Coordinated Transport v. State, supra, 5 N.J. at page 215, 74 A.2d 580; Atlantic City Sewerage Company v. Board of Public Utility Commissioners, supra, 128 N.J.L. at page 364, 26 A.2d 71. There is, of course, a presumption in favor of the validity of the action of the respondent, since the respondent's exercise of the rate-making power involves a broad measure of legislative discretion. Public Service Coordinated Transport v. State, supra 5 N.J. at page 214, 74 A.2d 580; Atlantic City Sewerage Company v Board of Public Utility Commissioners, supra, 128 N.J.L. at page 365, 26 A.2d 71; State Board of Milk Control v. Newark Milk Co., 118 N.J.Eq. 504, 523, 179 A. 116 (E. & A. 1935); O'Brien v. Board of Public Utility Com'rs, 92 N.J.L. 587, 589, 106 A. 414 (E. & A. 1919); Public Service Gas Co. v. Board of Public Utility Commissioners, 84 N.J.L. 463, 467, 87 A. 651, L.R.A.1918A, 421 (Sup.Ct.1913) affirmed on reargument 87 N.J.L. 581, 597, 92 A. 606, 94 A. 634, 95 A. 1079, L.R.A.1917B, 930, L.R.A.1918A, 421 (E. & A. 1915), writ of error dismissed on stipulation, 242 U.S. 666, 667, 37 S.Ct. 243, 61 L.Ed. 552 (1917). However this is not a 'strong' or 'conclusive' presumption. The respondent's determination must find Reasonable support in the evidence. Central R. Co. of N.J. v. Dept. of Public Utilities, supra, 7 N.J. at page 261, 81 A.2d 162. Compare R.S. 48:2--46, N.J.S.A.

Further it is provided by statute that the burden of proof to show that an increase, change or alteration in existing rates proposed by a public utility is just and reasonable shall be upon the public utility making the same. R.S. 48:2--21d, N.J.S.A. See Central R. Co. of N.J. v. Dept. of Public Utilities, supra, 7 N.J. at pages 255--256, 81 A.2d 162; Public Service Coordinated Transport v. State, supra, 5 N.J. at page 219, 74 A.2d 580. Compare Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 88 L.Ed. 333, 345 (1944); Atlantic City Sewerage Co. v. Board Pub. Utility Commissioners, supra, 128 N.J.L. at page 369, 26 A.2d 71.

I. Rate Base

It is established that the rate base in a proceeding of this nature is the fair value of the property of the public utility that is used and useful in the public service at the time of its employment therein and is determined by viewing the plant as an...