State ex rel. City of St. Louis v. Public Service Com'n of Missouri

• Decision Date: 17 February 1932
• Docket Number: 30539
• Citation: 47 S.W.2d 102,329 Mo. 918
• Parties: State ex rel. City of St. Louis, a Municipal Corporation, Appellant, v. Public Service Commission of Missouri, the Laclede Gas Light Company, a Corporation, et al
• Court: Missouri Supreme Court

47 S.W.2d 102

329 Mo. 918

State ex rel. City of St. Louis, a Municipal Corporation, Appellant, v. Public Service Commission of Missouri, the Laclede Gas Light Company, a Corporation, et al

No. 30539

Supreme Court of Missouri

February 17, 1932

Reported at 329 Mo. 918 at 952.

Original Opinion of February 17, 1932, Reported at 329 Mo. 918. [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted]

White, J. All concur, except Ragland, J., who takes no part in the decision of the case.

OPINION

WHITE

SUPPLEMENTAL OPINION ON MOTION FOR REHEARING.

The Laclede Gas Light Company in its motion for rehearing has so misjudged the opinion that lest its misunderstandings make difficulties in a rehearing before the Public Service Commission it is important that the ineptness of some of the points made be noticed.

I. It is first charged that this court's rulings were in "conflict" with "express statutes" governing its jurisdiction, "to which the attention of the court was not called through inadvertence of counsel." The writer of the motion "through inadvertence of counsel," of course, failed to notice that the opinion cited, quoted and construed each and all of those statutes, outlined the court's duty under them and followed their requirements.

In like manner it was overlooked that the Company failed to appeal from the judgment of the circuit court affirming the report of the Commission on account of which the Company is not in position to complain of this court's approval of several findings of the Commission.

II. The inquiry started with the fair value of all the property found in the Valuation Case $ 45,600,000, and concerned only changes since that date, though the motion asserts error to the contrary.

It is well to keep in mind the purpose and effect of the Public Service Commission law, that the community served by a public utility shall protect the investment in such utility against loss:

(a) Where the property employed becomes impaired or wears out in the service so that it must be repaired or replaced, and

(b) Where the property depreciates by wear and tear and is not repaired or replaced.

The former is cared for as a part of the operating expenses, and the latter is made good by the depreciation reserve fund, kept at a figure to balance such unrepaired depreciation. All this comes out of the earnings at the expense of the consumers.

There is also depreciation and appreciation by fluctuation in values with no change in the efficiency of the property. Of this it was proper for the Commission to take account. The Company seems to agree that such decrease in values is the Company's loss as their increase is the Company's gain. The Company profited enormously by such fluctuation at the time of the hearing in the Valuation Case.

Besides all that there is depreciation by total abandonment of property not "used up" or worn out in the service and not repaired or replaced. In regard to this last the motion assumes a position in conflict with itself and contrary to that held by the Company in its original brief. It was the loss of this property that Commissioner Porter declared was not depreciation (in the sense that it should be made good), but "one of the hazards of the game." It was no longer used in the public service.

It is asserted in the motion:

"The court erred in holding that the fair value of abandoned property, including mains, entered into the estimates of the Commission and that the fair value of such property was not deducted from the former valuation."

Which amounts to an assertion that such abandoned property was deducted from the former valuation and that the Commission approved of the deduction. As proof that it was so deducted the motion continues:

"The evidence clearly shows, without dispute, that all property, when retired or abandoned, is charged off and written out of the plant account. Mr. White (the Company's Comptroller) testified: 'When property is retired we write it off the books at the figure included in the Commission's value.'"

Yet the motion further on calls attention to the passage in the opinion where it classed the abandoned lights and mains, which are never replaced, as a risk which investors in public utilities must take, and asserts that such a ruling is in conflict with controlling decisions and would result in confiscation in violation of Sections 21 and 30, Article II of the Missouri Constitution.

If the writer of the motion means that the opinion in the passage mentioned refers to something other than the abandoned property "written off the books" he has not read the context. If he means that abandoned property, he asserts that the court committed error in approving the Company's act; the Company voluntarily deducted the value of abandonments, but the court in holding it properly deducted permits confiscation.

There is no occasion for misunderstanding the plain designation in the opinion of property not "used up in the public service," as the motion says, but abandoned and never replaced, instancing the supersession of the gas lamps by electricity.

The record shows that such abandoned property was not deducted from the former valuation. Mr. White's statement that it was written off the books does not necessarily mean that the write-off was carried to the Commission so as to affect their valuation in this case.

It was the theory expressed throughout the argument in the Company's brief and elaborated in Mr. White's evidence, that the reserve fund should be sufficient to overcome abandonments, and charges on the Company's books were made accordingly. A depreciation reserve of 3.2 per cent was demanded to cover such retirements, and the motion for rehearing before the Commission assigned error for failure to allow it. The Commission allowed an annual reserve of 1.5 per cent and we held the finding supported by competent evidence without including the abandonments which the Company desired to have included. The Company, not having appealed, has now no right to complain of that holding. Under one of its present theories it is bound to concede the finding was correct.

All this occurred in considering the depreciation reserve. No mention was made of "writing off the books" the value of abandoned property when considering the value of the iron pipe mains nor in considering changes in the former valuation of other property. The Commission apparently was not apprised of such writing off and took no notice of it until the Company demanded an increase of the depreciation reserve sufficient to cover such property.

In order to account for that failure to mention abandoned property the motion for rehearing here says: (In this and the following quotations significant parts are put in italics.)

"Furthermore, it is clearly shown by the record that additions and betterments are net, that is to say, that from the total of new property added is deducted the items retired or abandoned, so that all property which is retired or abandoned is deducted from the valuation automatically at the time it is retired. Obviously, all property retired at the time of the Commission's valuation had been written off and was not included in the Commission's final figure because the Commission added only the net additions."

That is explained further:

"By net additions and betterments is meant the total additions and betterments, minus the property retired."

Those statements in the present argument are not supported by the evidence. The Company's motion for rehearing before the Commission contains the assignment of error:

"In holding that such items of property or any items of property the Company will not be allowed to make a full deduction from the depreciation reserve fund."

If such property was automatically and voluntarily deducted from the valuation by the Company's action, how could the Commission's approval of that action be error?

The motion cites the page where Mr. White testified:

"The net additions and betterments made last year, after deducting the property written off from the gross amount added was $ 1,200,000, the budget for 1928, I believe, calls for about $ 1,500,000 for plant additions. All this is new capital."

The witness refrains from saying that the write-off was reported to the Commission. The same witness, explaining the Company's exhibit 1-F, had just used this expression: "After crediting the reserve with the amount allowed by the Commission for depreciation expenses and charging against the reserve the property retired during the year."

While the retirements were written off the books the charge-off was balanced by reprisals from the reserve fund, leaving the original valuation unaffected, so there was no "automatic deduction." In 1926, $ 275,900.56, and in 1927, $ 420,749.73, was diverted from the reserve fund to fill up the hole made in the value of the property by retirals. Those figures are the exact amounts of the retirals for those years, and kept the property at the same level of book value. Therefore there could have been no automatic deduction of those sums for the Commission to approve. In commenting upon those retirals the Commission in considering the reserve fund said:

"The Company estimates $ 1,450,000 worth of property will be retired in the years 1928 and 1929, and that such heavy retirals will soon exhaust the reserve fund."

The witness said further:

"If the annual...