Northern States Power Company v. Board of Railroad Commissioners
| Decision Date | 23 April 1941 |
| Docket Number | 6665 |
| Citation | 298 N.W. 423,71 N.D. 1 |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1. The fair value upon which a utility is entitled to earn a return is the reasonable value of its property used and useful for the service of the public at the time it is being so used.
2. In determining fair value allowance must be made for the increase or decrease in value of the utility's property from its original cost, unless the allowance of the increase will result in a rate which would be unfair to the public.
3. In finding fair value, the weight to be given to evidence of historical cost and reconstruction cost depreciated and other evidence must be determined in the light of the facts of the case under investigation.
4. A rule or precedent which requires that evidence of historical cost be given predominating weight in every case is arbitrary.
5. Where the undisputed evidence of reproduction cost disclosed a substantial increase in the value of the utility's property over its original cost, it was the duty of the Board of Railroad Commissioners to give consideration and effect to that evidence as a major factor in reaching its finding of fair value.
6. Going concern value is a property right which should be considered in a valuation of a utility's property for rate making purposes.
7. Going concern value as defined in rate cases does not include either good will or franchise values.
8. Section 4609c37, Supplement to the Compiled Laws of North Dakota 1913, does not prohibit a consideration and allowance of going concern value in computing a utility's rate base.
9. A utility plant which has a history of continuous profitable operation over a long period of years has a going concern value.
10. The fact that the depreciation of a utility's property was computed upon the basis of its actual physical condition rather than upon a salvage basis, may not be construed as an allowance of going concern value.
11. Where the evidence showed that a utility had a history of continuous profitable operation, it was the Commission's duty to consider and allow going concern value in determining the fair value of the utility's property.
12. Under the provisions of Section 4609c42 Supplement to Compiled Laws of 1913, the Board of Railroad Commissioners is required to make a finding of fact setting forth the amount at which going concern value has been allowed.
13. In making allowances for operating costs or expenses, it was the duty of the Board of Railroad Commissioners to allow such amounts as in its judgment were necessary, but the judgment which the Commission must exercise is a judgment based upon the evidence; it may not disregard the undisputed evidence of actual expenditures and substitute therefor its opinion of what the expenditures for any specific purpose ought to be.
14. Where the undisputed evidence disclosed that a utility had expended $8,476.01 for legal services during the year immediately preceding the inquiry and there was no evidence tending to show that such expenditures were wasteful or extraordinary or that such services would cost less in the future, an annual allowance of $3,000 for attorney fees was too great a departure from the unchallenged proof to be accounted for as a reasonable exercise of the Commission's judgment.
15. Where the evidence showed an itemized list of dues and donations totaling $4,638.94 which the utility had paid out during the year immediately preceding the inquiry, a finding that some but not all of such dues and donations were properly chargeable to operating expenses without specifying which were proper and which were not, and an allowance of $3,000 for all the purposes listed, was, in the absence any claim of bad faith or that the expenditure for any particular purpose was excessive, an attempt to control the management of the utility and beyond the powers of the Board of Railroad Commissioners.
16. In its investigation of a utility for the purpose of establishing a rate base the Board of Railroad Commissioners is required to make findings of fact upon all matters which have a bearing upon the rates which a utility will be permitted to charge.
17. The findings of fact of the Commission upon all material matters must be sufficiently definite to enable a reviewing court to determine if such findings were supported by any evidence and afforded a reasonable basis for the decision.
18. A " lump sum" allowance for operating costs at a figure substantially less than the amount which the utility claimed and offered evidence to prove was necessary, made upon findings which did not disclose the extent to which the utility's specific claims had been allowed, reduced or rejected, was made upon insufficient findings of fact.
Appeal from District Court, Cass County; Daniel B. Holt, Judge.
Proceeding by the Northern States Power Company against the Board of Railroad Commissioners of the State of North Dakota and Ben C. Larkin, Elmer W. Cart and S. S. McDonald, the members of the Board of Railroad Commissioners and the City of Fargo and the Villages of West Fargo and Southwest Fargo, North Dakota, by way of an appeal from findings, decisions and orders of the Board of Railroad Commissioners ordering a reduction in the rates of the electric department of the Northern States Power Company. From a judgment in favor of the plaintiff, defendants appeal.
Judgment affirmed, and case remanded with instructions.
Alvin C. Strutz, Attorney General, and James M. Hanley, Jr., for appellants.
The jurisdiction of the courts on an appeal from an order of the Public Service Commission is limited. Tri-City Motor Transp. Co. v. Great Northern R. Co. 67 ND 119, 270 NW 100; East Ohio Gas Co. v. Public Utilities Commission, 12 N.E.2d 765, 22 PUR(NS) 489.
The court has no power to interfere with the legislative function of the Commission in setting rates. People's Gas, Light & Coke Co. v. Slattery, 31 PUR(NS) 193; West Ohio Gas Co. v. Public Utilities Commission, 294 U.S. 63, 79 L ed 761, 55 S.Ct. 316.
The court does not sit as a board of revision to substitute its judgment for that of the legislature or its agents as to matters in the province of either. St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 80 L ed 1033, 56 S.Ct. 720.
The basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. Smyth v. Ames, 169 U.S. 466, 42 L ed 819, 18 S.Ct. 418.
The weight to be given to actual cost, to historical cost, and to the cost of reproduction new, is to be determined in the light of facts of the particular case. Los Angeles Gas & E. Corp. v. Railroad Commission, 289 U.S. 287, 77 L ed 1180, 53 S.Ct. 637; Railroad Commission v. Pacific Gas & E. Co. 302 U.S. 388, 82 L ed 319, 58 S.Ct. 334; Clark's Ferry Bridge Co. v. Public Serv. Commission, 291 U.S. 227, 78 L ed 767, 54 S.Ct. 427; McCardle v. Indianapolis Water Co. 272 U.S. 400, 71 L ed 316, 47 S.Ct. 144; San Diego Land & Town Co. v. Jasper, 189 U.S. 439, 47 L ed 892, 23 S.Ct. 571.
On an appeal from the Board of Railroad Commissioners the court is primarily required to determine the lawfulness of the order appealed from. State v. Great Northern R. Co. 56 ND 822, 219 NW 295.
Rate-making commissions sometimes consider the "bare-bones" value of the property and add a going-concern value as a separate item and sometimes charge it in with other items of cost and expenses and make no separate allowance. Arkansas-Louisiana Gas Co. v. Texarkana, 17 F.Supp. 447, 17 PUR(NS) 241; Dayton Power & L. Co. v. Public Utilities Commission, 292 U.S. 290, 78 L ed 1267, 54 S.Ct. 647, 3 PUR (NS) 279.
There is a distinction between "going concern value" and "good will." Florida Power & L. Co. v. Miami, 98 F.2d 180, 16 PUR(NS) 159.
Nilles, Oehlert & Nilles and Hance H. Cleland, for respondent.
As a basis for establishing a reasonable rate certain fundamental facts must be ascertained; first, the fair value of the property used and useful in rendering the service; second, the amount of income which will probably be produced by the rate to be established, and third, what constitutes a fair return. Wisconsin Teleph. Co. v. Public Serv. Commission, 287 NW 122, and 287 NW 169.
The power to review the facts and apply the law, and to reverse an order of the Commission in whole or in part, necessarily includes the power to remand for correction of whatever error is shown to have been committed. State ex rel. Hughes v. Milhollan, 50 ND 184, 195 NW 292.
What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. Smyth v. Ames, 169 U.S. 466.
"Reproduction cost" must be considered in determining "fair value." Missouri ex rel. Southwestern Bell Teleph. Co. v. Public Serv. Commission, 262 U.S. 276, 67 L ed 981, 43 S.Ct. 544, 31 ALR 807; Standard Oil Co. v. Southern P. Co. 268 U.S. 146, 69 L ed 890, 45 S.Ct. 465.
Reproduction cost is not the sole measure of fair value. Georgia R. & Power Co. v. Railroad Commission, 262 U.S. 625, 67 L ed 1144, 43 S.Ct. 680.
When its use is imminent, although not actual, its value may be taken into account, but unused property held for future use need not be included in the rate...
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