Petition of Citizens Utilities Co.

• Decision Date: 07 October 1952
• Docket Number: No. 945,945
• Citation: 91 A.2d 687,117 Vt. 285
• Parties: Petition of CITIZENS UTILITIES CO.
• Court: Vermont Supreme Court

Page 687

91 A.2d 687

117 Vt. 285

Petition of CITIZENS UTILITIES CO.

No. 945.

Supreme Court of Vermont.

Oct. 7, 1952.

Hubert S. Pierce, Newport, Milton S. Gould, New York City, for petitioner.

Before SHERBURNE, C. J., and JEFFORDS, CLEARY, ADAMS and CUSHING, JJ.

SHERBURNE, Chief Justice.

This is the second time this cause has been before this Court. See City of Newport v. Citizens Utilities Co., 116 Vt. 103, 70 A.2d 590, where the order of the public service commission was reversed pro forma and the cause was remanded for a hearing de novo. The cause has been fully reheard, and new findings of fact and a new order have been made. Three questions are now presented for review: (1) whether certain so-called flowage rights were erroneously excluded from the rate base, (2) whether the rate of return found by the commission is supported by the evidence, and (3) whether the commission erred in allocating interest for income tax purposes. These questions are raised or attempted to be raised by exceptions to certain findings as being contrary to the evidence, against the weight of the evidence and contrary to law, and by exceptions to the failure to find as requested.

The petitioner, hereinafter called the company, is a public utility corporation organized under the laws of the state of Delaware. It operates in the states of Arizona, Colorado, Idaho, Maine, Vermont and Washington. It supplies manufactured gas, natural gas, telephone, water, electric service and ice in one or more of these states. It also has two wholly owned subsidiaries, the Citizens Utilities Company of California, which supplies telephone and water service in that state, and Ketchikan Cold Storage Company of Alaska, which provides cold storage facilities. In Vermont the company is engaged in the generation, transmission and distribution of electricity, through its Newport Electric division, in Grand Isle county, and in parts of Caledonia, Essex, Franklin and Orleans counties.

On February 18, 1948, the company filed with the commission a revised schedule of rates which were placed in effect on March 19, 1948, by filing a bond, and on April 17, 1950, the company filed with the commission a revision of its tariffs pertaining to water heating. These two matters were consolidated and have been handled together in the findings and order of the commission.

Whenever the company has briefed an exception to a finding we shall use the standard adopted when this cause was first before this Court, and stated on page 105 of 116 Vt., 70 A.2d 590, that in order for a finding to be warranted by the evidence, there must be substantial evidence in the case to support it. On review we do not weigh the evidence since its persuasive effect and the credibility of the witnesses are for the triers of fact to determine. Schwarz v. Avery, 113 Vt. 175, 179, 31 A.2d 916. A finding must stand if supported by any substantial evidence, although there may be inconsistencies, or even substantial evidence to the contrary. D'Amato v. Donatoni, 105 Vt. 496, 502, 168 A. 564.

Flowage Rights

Under the heading 'Property Held for Future Use' the commission finds: 'Petitioner owns certain flowage rights which are included in its service account. The company has no definite plans for the use of such property in the near future and said property is not used or useful in serving the public. We cannot agree with the petitioner that this property should be included in its rate base and we have deducted the cost of these rights in the amount of $43,201.50 in our final calculations of said base.' The company excepted to the finding * * * 'that certain 'flowage rights,' referred to under the heading 'Property Held for Future Use,' are not used or useful in serving the public and should, therefore, be deducted from the calculation of Petitioner's rate base.'

Our attention is called to evidence showing that of the total amount of $43,201.50, $201.50 represents the cost of a small piece of land below the company's Newport generating station which was purchased for a future site of a station, and that the rest of the total amount, or $43,000 represents the cost of land and water rights above its Newport generating station and below its Charleston generating station, which were purchased for a possible hydro-development. In its main brief the company insists that the total amount of $43,201.50 was improperly excluded from its rate base. However, in its reply brief it admits that the sum of $201.50 for the cost of the small piece of land, on the basis of the record, was properly excluded therefrom.

As we view the exception to the finding it was general to the extent that it covered all the rights that were included in the total amount of $43,201.50. Since $201.50 of the amount, representing the cost of the small piece of land, was properly excluded as against the exception, the exception is without avail as to the rest of the property. Little v. Loud, 112 Vt. 299, 303, 23 A.2d 628, and cases cited.

Had the company saved the question by a proper exception it would be no better off. The burden of proving that the up stream land and water rights are used and useful in serving the public was upon the company. All the evidence in behalf of the company on this question came from Joseph C. Briggs, its treasurer, who has supervision of its accounting and financial work, and who testified that 'at one time the company thought that they might be able to develop additional hydro and acquired these land rights, but it so turned out, and this is what is the best informed opinion that I have been able to get, that we need those land rights to protect our stream flow. * * * Now if we were to give up the rights that we purchased along the river, there is a chance someone else might be able to use those rights and interfere with our control of the stream flow and reduce our hydro generation.' Although this evidence is uncontradicted it does not come within the rule stated in Neill v. Ward, 103 Vt. 117, 160, 153 A. 219, that when a credible witness distinctly and positively testifies to a fact and is not contradicted, and there is no circumstance shown from which an inference against the fact testified to can be drawn, the fact can be taken as established. Our attention is called to no evidence that the witness ever examined the river in connection with locating the up stream land and water rights, or for determining if a dam were to be built there it could be operated in such a way as to interfere with the stream flow at the Newport generating station, to meet the State's claim that his evidence was based upon hearsay. Moreover the last quoted sentence of his testimony is not positive. He does not state that if someone else owned these rights he would be able to use them in such manner as to interfere with the stream flow at the company's generating station and to reduce its hydro generation. Instead of the phrase 'would be able' he uses the phrase 'might be able.'

There is another fact which should be taken into consideration. This land and these water rights were purchased for the purpose of erecting a dam and developing power. When a dam is erected across a river it sets the water back against the up stream river banks and over them to at least the level that the surface of the water is maintained at the dam. The right to so set the water back is a flowage right. We can safely assume that the water rights referred to are flowage rights. If this water power had been developed the good faith of management in expending $43,000 for land and water rights would be presumed. Petition of New England Tel. & Tel. Co., 115 Vt. 494, 510, 511, 66 A.2d 135. To have accomplished the purpose for which the company now wants to use these rights to protect the stream flow at its Newport generating station, it would only have been necessary to purchase from the same riparian land owners who sold it the land and flowage rights the right to have the water flow past their lands at its natural level. It is self evident that such right would cost far less than the right to set the water back against and upon such lands. Consequently the good faith of management in allocating all of such $43,000 to protection of stream flow cannot be presumed.

In support of the finding there was the testimony of the company's former manager of its Newport Electric Division that he was familiar in a general way with these rights, and that he considered that they were not in use.

Rate of Return

The commission finds that for the years 1948, 1949 and 1950 and for the next few years the company can reasonably finance plant expansion and maintain its credit with a return of 6 1/2% on the rate base allowed in this case, provided it is able to earn the same return on its other operations, and that such return will be sufficient to pay all interest charges, dividends on preferred stock, maintain its present dividend rate on common stock, and leave a substantial balance for surplus. It does, however, allow a return of 7% for the years 1948, 1949 and 1950 because the company's reports for those years already reflect the revenues allowed and if the company had to make a downward revision of its past earnings there might be an adverse effect upon its credit position.

Throughout its findings the commission shows that it was aware of the rule governing a proper rate of return, as recently twice announced by this Court as follows: The fixing of just and reasonable rates involves a balancing of the investor and consumer interests. From the standpoint of the investor it is required that there be enough revenue for capital costs of the business, including service on the debt and dividends on the stock. The return to the equity owner should be commensurate with returns on other investments in other enterprises having corresponding risks. The return should be sufficient to assure confidence in the financial integrity of the enterprise, so as to...