Pacific Tel. & Tel. Co. v. Wallace

• Decision Date: 01 February 1938
• Citation: 158 Or. 210,75 P.2d 942
• Parties: PACIFIC TELEPHONE & TELEGRAPH COMPANY <I>v.</I> WALLACE
• Court: Oregon Supreme Court

158 Or. 210

75 P.2d 942

PACIFIC TELEPHONE & TELEGRAPH COMPANYv.

WALLACE

Supreme Court of Oregon.

Argued September 15, 1937.

Affirmed February 1, 1938.

Telegraphs and telephones — Rates — Duty of trial court

1. In telephone company's suit attacking public utilities commissioner's order prescribing rates to be charged for local exchange service, the circuit court's function was not to substitute its judgment with respect to wisdom of legislative action pursuant to which commissioner made order or to make rates, but to determine whether commissioner acted within his jurisdiction, to adjudicate only such issues of law or fact as might be required to test validity of order, and to test order by standards of constitutional provisions allegedly violated.

Evidence — Statutes — Constitutionality

2. Legislative action is always supported by a strong presumption of constitutionality, and that presumption extends to decisions of administrative bodies exercising legislative powers.

Telegraphs and telephones — Rates — Confiscation

3. A telephone company challenging order of public utilities commissioner prescribing rates to be charged for local exchange service on ground that rates would result in confiscation of its property in violation of constitutional provisions was entitled to independent judgment of the courts upon the law and evidence applicable to order, and in arriving at that independent judgment the circuit court was required to avail itself of whatever assistance commissioner's analysis of the record afforded.

Evidence — Administrative findings

4. The supreme court must give effect to findings of an impartial administrative officer who derives authority to investigate from the legislature, unless a complaining party proves with the required degree of cogency that findings are the means whereby his constitutional rights will be invaded.

Telegraphs and telephones — Utilities commissioner — Findings

5. On appeal from decree holding invalid order made by public utilities commissioner prescribing rates to be charged by telephone company for local exchange service, the supreme court was bound by rules that commissioner's findings were supported by favorable presumptions and that his findings could not be disturbed unless evidence overcame those presumptions and proved incorrectness of findings.

Telegraphs and telephones — Rates — Valuation

6. For purposes of rate making a telephone company may not include within its valuations property which is not used or useful to the public service, and property which is not reasonably necessary to the adequate furnishing of telephone service must be excluded from the rate base.

Public service commissions — Valuation

7. Under rule that public utility rates should be based upon fair value of utility's property used and useful in the public service, property or equipment provided or acquired in anticipation of reasonable future need should be allowed, even though wholely or partially unused at time to which inquiry relates.

Telegraphs and telephones — Valuation

8. In determining fair value of telephone company's property used and useful in the public service for rate-making purposes, reproduction cost new, like original cost, is not necessarily controlling, but it is entitled to a fair consideration.

Telegraphs and telephones — Valuation — Fair return

9. In telephone company's suit to restrain enforcement of public utilities commissioner's order prescribing rates to be charged for local exchange service, evidence supported circuit court's finding that entire plant devoted to telephone service was fairly worth $31,500,000, that exchange properties were fairly worth $20,790,000, and that part devoted to intrastate toll was fairly worth $5,481,000, and company was entitled to earn a fair return on those values.

Telegraphs and telephones — Depreciation fund

10. A telephone company was not required to keep its depreciation fund separate but could properly employ amounts credited to that fund in the business like any other money belonging to company, as respects depreciation of company's property for rate purposes.

Telegraphs and telephones — Depreciation fund

11. As respects depreciation of telephone company's property for rate purposes, company properly accumulated a fund equal to existing depreciation, since fund provided company with funds necessary to defray purchase price of new equipment when old was retired, and accumulating cash balanced receding value of depreciating property and thereby maintained capital assets in their original amount.

Telegraphs and telephones — Depreciation

12. Where telephone company employed straight line method of determining depreciation with approval of public utilities commissioner, the commissioner, in prescribing rates to be charged by company for local exchange service and in ascertaining depreciation of company's property for that purpose, improperly applied depreciation rate to depreciated value of property, since rate should have been applied to book investment value.

Telegraphs and telephones — Salary account

13. The action of the public utilities commissioner in reducing telephone company's general office salary account for one year for rate purposes on ground that amount of that account increased more than other accounts was unwarranted, where size of account was increased, independent of any salary increases that may have been made, because of changes in company's operations and bookkeeping methods, changes did not increase total operating expenses, and commissioner's findings did not state that account included too many employees or paid for any unnecessary service.

Telegraphs and telephones — Distribution of revenue

14. The public utilities commissioner in distributing telephone company's revenue and expense between local and long-distance service for purpose of prescribing local exchange service rates improperly made distribution in accordance with commercial expense, but should have adopted board-to-board method used by company's general traffic engineer, whereby each department was permitted to retain all it had received from its rates and was charged with expense of maintaining its own equipment on assumption that exchange rates include charge for giving patron access to toll board and that long-distance rates charge only for service between toll boards.

Telegraphs and telephones — Taxes

15. The public utilities commissioner in prescribing rates to be charged by telephone company for local exchange service should have adopted method of tax distribution between exchange and toll property employed by company's general traffic engineer, who, taking into consideration fact that total tax included not only property taxes but also federal and franchise taxes, allocated franchise taxes exclusively to exchange because they were wholly associated with exchange operations and assigned balance in accordance with ratios representing apportionments of exchange and toll property.

Telegraphs and telephones — Operating expense

16. When public utilities commissioner, in prescribing telephone company's local exchange service rates, and circuit court, in reviewing commissioner's order, disallowed as an operating expense for depreciation payment made by company to its parent company for services because record failed to disclose with any degree of certainty value and cost to parent company of services paid for, supreme court likewise disallowed item.

Telegraphs and telephones — Rates — Evidence

17. Evidence did not warrant public utilities commissioner in requiring telephone company's toll department to bear all station-to-station expenses without assigning to it any exchange revenue, in reducing rates to be charged for local exchange service, and, though commissioner had power to direct company to distribute

revenue and expense on station-to-station basis and to compel company to employ that method in establishing its rates, he should have been consistent and should have employed the same basis in distributing expenses, property and revenue where rates were established on board-to-board basis.

Public service commissions — Rates

18. The validity of an order prescribing a public utility rate should not be tested by the experiences of one year alone, especially where that year did not present normal business conditions.

Public service commissions — Rates

19. A public utility's returns in time of business adversity should not be reduced to the same extent as that of unregulated businesses, since its rates are so graduated by regulatory officials that utility never enjoys advantages of prosperity to the extent that other businesses do.

Telegraphs and telephones — Depreciation account

20. A telephone company's excessive accumulation in its state depreciation fund could not be employed for purpose of reducing future rates for local exchange service in state, since that fund, whether excessive or not, belonged to company.

Telegraphs and telephones — Rates — Confiscation

21. An order made by the public utilities commissioner prescribing rates to be charged by telephone company for local exchange service in state was invalid as imposing confiscatory rates, where fair value of company's exchange property was $20,825,000 and company's return on fair value would have been 4.29 per cent over the course of several years and its intrastate toll department would have reduced yield to approximately 3 per cent if rate reduction order had become effective.

Courts — Telephones — Rates

22. In determining whether local telephone rates prescribed by public utilities commissioner were confiscatory, supreme court would not apply rule of United States supreme court case that a telephone company claiming that rates were confiscatory had burden of making convincing showing that amounts charged to operating expenses for depreciation were not excessive, where proof in that case showed that order would not impair company's ability to...