Petition of New England Tel. & Tel. Co., Re Increased Rates

• Decision Date: 03 May 1949
• Parties: PETITION OF NEW ENGLAND TEL. & TEL. CO., RE INCREASED RATES
• Court: Vermont Supreme Court

66 A.2d 135

115 Vt. 494

PETITION OF NEW ENGLAND TEL. & TEL. CO., RE INCREASED RATES

Supreme Court of Vermont

May 3, 1949

February Term, 1949.

Public Service Corporation Rates.

1. The requirement that a commission make findings of fact imposes upon it the duty to sift the evidence and state the facts.

2. A reasonable and usual method for a commission to adopt in fixing rates is to determine the kind and amount of a proper rate base, and then determine, upon all the evidence, the rate of return which the utility should reasonably be entitled to earn thereon.

3. In order to reach a fair judgment of rates to be fixed it is necessary that a proper rate base and allowable expenses be determined.

4. Where a commission is required to find facts and has before it ample evidence upon which to find those facts it is error to fail to make a finding as to any essential issue.

5. While it is the better practice for a trier to report all of the facts upon which an ultimate finding is based, it is not error to omit to do so even though the finding be a conclusion resulting from mixed questions of law and fact but the Supreme Court cannot supply the omission of an essential fact which is not fairly or reasonably inferable from the facts as found.

6. A commission, upon making a finding of facts, is, following the analogy of the rule in jury trials, required to report fully upon all substantial issues raised by the material evidence even though there are no specific requests.

7. An ultimate conclusion as to fairness of rates is not binding upon an appellate court on review unless supported by specific findings on the essential elements on which the ultimate finding must be based so that a proper review may be had.

8. Where upon appeal from an order of the Public Service Commission it appears that essential findings have not been made, the order of the Commission will be reversed and the case remanded that such findings may be had.

9. The jurisdiction of the Public Service Commission extends only to intra-state operation and matters pertaining thereto.

10. A public utility company should expand in order to meet the need for additional service; new construction when reasonable should be encouraged; if upon hearing it appears that property under construction will be available for use during the period when the rates in question will be in effect, such property should be included in determining the rate base.

11. Unfinished construction should not be considered in determining the rate base in fixing of rates when it appears that the owner has capitalized interest on the expense of the unfinished construction; nor if it appears that additional revenue from such construction will result in a double return if it is included.

12. In dealing with the question of property held for future use it should be recognized that business judgment must be employed to anticipate future needs and that this judgment may not be arbitrarily interfered with; the test generally applied is whether the time for using the property in question is so near that it may properly be held to have the quality of working capital.

13. Upon hearing as to increase of rates charged by a public utility company the fact that the company has not during a long period prior to the hearing sought an increase of rates is immaterial upon the question of the reasonable amount of the increase to be granted.

14. It is not error to exclude evidence of rates in other localities for comparison with those in question unless it appears that all or substantially all of the physical and economic factors affecting the reasonableness of rates are similar in both communities.

15. Specific findings should be made as to the amount which should be allowed as operating expenses to a public utility for services rendered it under a license contract with another company.

16. Whether "freezing payments" made under a pension plan should be allowed as current operating expenses depends on the facts in each case.

17. The function of a public service commission is that of control and not of management, and regulation should not obtrude itself into the place of management.

18. On review before a public service commission of the fairness and reasonableness of expenses incurred, such expenses should not be disallowed unless it clearly appears that they are unwarranted or incurred in bad faith.

19. In fixing rates to be charged by a telephone company it should be recognized that exchange and toll services are not distinct undertakings as each supplements and adds to the usefulness of the other.

20. The fixing of just and reasonable rates involves a balancing of the investor and consumer interests.

21. Rates follow service; and a poor standard of service may afford a basis for a denial of a request for higher rates.

Petition to Public Service Commission for increase in rates. Upon the evidence findings of fact were made by the Commission, Paul A. Chase, chairman. The telephone company appealed from the order made by the Commission.

For reasons hereinbefore stated, the order of the Commission is reversed pro forma and the cause remanded for the entry of an order approving the rates made effective February 1, 1947, and for a hearing de novo in accordance with the views herein expressed as to the rates to be effective December 1, 1947.

John D. Carbine and Guy M. Page for the petitioner.

Clifton G. Parker, Attorney General, for the State of Vermont.

Arthur L. Graves for the Public.

Ernest E. Goodrich, pro se.

Present: SHERBURNE, JEFFORDS, CLEARY and ADAMS, JJ., and BLACK, Supr. J.

OPINION

JEFFORDS

This is an appeal by the New England Telephone and Telegraph Company from an order of the public service commission. The case comes to this Court under the provisions of § 9296 of V. S., 1947 rev.

Appearances of several attorneys are noted in the record for various parties. Among such is that of Arthur L. Graves, Esq., who appeared for the Public and who took a leading part in the hearing below and here. The attorney general appeared for the State and we shall hereafter refer to the parties as the company and the state.

On December 3, 1946, the company filed with the commission a revised schedule of rates which rates became effective under bond on February 1, 1947. On October 30, 1947, the company filed a second revised schedule of rates. These later rates went into effect on December 1, 1947, under a second bond. Protests were entered to the increase in rates set forth in both of these schedules and hearings on them were held before the commission. As a result of these hearings the commission found that the rates which became effective February 1, 1947, were only temporary and of an emergency nature and for the purpose for which they were filed were just and reasonable. It also found that the rates set forth in the schedule which became effective December 1, 1947, were not just and reasonable. It issued its order dated May 26, 1948, and effective as of December 1, 1947, setting forth a schedule of rates and charges higher than those set forth in the schedule effective February 1, 1947, and lower than those which the company had filed to become effective December 1, 1947. The commission found that its schedule, above mentioned, was just and reasonable. These findings follow the language of V. S. § 9368 which provides that when upon hearing rates are found to be unjust or unreasonable the commission may order and substitute therefor such rates as it shall find at the hearing to be just and reasonable.

We are met at the threshold by the claim of the company, supported by adequate exceptions, that the findings of fact made by the commission are so deficient in the determination of essential and controlling basic facts that an order based on the findings is necessarily so arbitrary that it constitutes denial of procedural due process.

V. S. § 9295 provides: "The commission shall hear all matters within its jurisdiction, and make its findings of fact.... Its findings of fact shall have the force and effect of a special master on transfer of the cause to the supreme court for review."

The requirement that the commission make its findings of fact imposes upon it the duty to sift the evidence and state the facts. Hammonds Inc. v. Flanders, 109 Vt. 78, 81, 191 A. 925; In re Est. of Wolff, 108 Vt. 54, 57, 182 A. 187; Francis v. London Guarantee & Accident Co., 100 Vt. 425, 138 A. 780; Hooper v. Kennedy, 100 Vt. 376, 138 A. 778; Raithel v. Hall, 99 Vt. 65, 70, 130 A. 749.

A reasonable and usual method for a commission to adopt in fixing rates is to determine the kind and amount of a proper rate base. It then determines, upon all of the evidence in the case, the rate of return which the utility should reasonably be entitled to earn thereon. In order to fix rates to provide for this return it is necessary to determine the allowable expenses for the period in question. It follows that the rates to be fixed must be such as will produce sufficient revenue after deducting the allowable expenses to allow the rate of return determined upon.

Whether the method adopted in fixing rates follows the one just suggested in the order of the steps taken is immaterial. It is apparent, and it is shown by all the cases which we have read touching on this point, that in order to reach a fair judgment of rates to be fixed, it is necessary that a proper rate base and allowable expenses be determined. West Ohio Gas Co. v. Pub. U. Com., 294 U.S. 63, 55 S.Ct. 316, 79 L.Ed. 761; Lindheimer v. Ill. Bell Tel. Co., 292 U.S. 151, 54 S.Ct. 658, 78 L.Ed. 1182; Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819; New England Tel. & Tel. Co. v. State, 95 N.H. 353, 64 A.2d 9; State ex. rel. P. T. & T. Co....