State v. New Jersey Bell Tel. Co.
Citation | 30 N.J. 16,152 A.2d 35 |
Decision Date | 01 June 1959 |
Docket Number | No. A--109,A--109 |
Parties | , 29 P.U.R.3d 87 STATE of New Jersey and David D. Furman, Attorney General of New Jersey, Appellants, v. NEW JERSEY BELL TELEPHONE COMPANY, etc., and Department of Public Utilities, Board of Public Utility Commissioners, State of New Jersey, Respondents. |
Court | United States State Supreme Court (New Jersey) |
David D. Furman, Atty. Gen., argued the cause for appellants (Thorn Lord, Trenton, attorney appointed to protect the public interest pursuant to N.J.S.A. 48:2--31.1, of counsel; William L. Boyan, Deputy Atty. Gen., on the brief).
Duane E. Minard, Jr., Newark, argued the cause for respondent, New Jersey Bell Tel. Co. (Thomas Glynn Walker and Duane E. Minard, Jr., Newark, attorneys).
Eugene Brennan, Regional Counsel, New York City, argued the cause for General Services Administration of the United States, Amicus curiae (George Cochran Doub, Asst. Atty. Gen., John G. Laughlin, Atty., Civil Division, Washington, D.C., of counsel; J. H. Macomber, Jr., Gen. Counsel, Frederick W. Benniston, Asst. Gen. Counsel, Malcolm D. Miller, Chief Counsel, Washington, D.C., Donegan Mann, Clarence J. Koontz, Washington, D.C., Attorneys).
John R. Sailer, Elizabeth, argued the cause for Plaintiff-Union Water Co., Amicus curiae (William R. Holzapfel, Elizabeth, on the brief).
H. Frank Pettit, Westfield, argued the cause as rate counsel by appointment of the Attorney General in Plainfield-Union Water Co. v. Board of Public Utility Com'rs, as amicus curiae.
Samuel William Zerman, Weehawken, for Hackensack Water Co., amicus curiae (Russell E. Watson, New Brunswick, of counsel).
Alfred W. Kiefer, Hackensack, rate counsel by appointment of the Attorney General in Hackensack Water Co. v. Board of Public Utility Com'rs, as amicus curiae (Christian Bollermann, Hackensack, on the brief).
The opinion of the court was delivered by
This is a public utility rate case. On April 26, 1957 the New Jersey Bell Telephone Company filed new rate schedules with the Board of Public Utility Commissioners. The new schedules, which were to become effective on June 1, 1957, were designed to increase annual intrastate revenues by $14,148,000 and income after deductions of taxes and operating expenses (net income) by $6,444,700.
The Board, pursuant to statutory authority (R.S. 48:2--21, N.J.S.A.) entered an order suspending the effective date for increased rates and providing for a public hearing on the question of the justness and reasonableness of the proposed rate increases. The Board held public hearings on 24 days between June 19 and December 2, 1957. On December 30, 1957 it filed its decision and order allowing the company to:
'file tariffs which will produce net additional earnings from operations of $5,657,800 after giving effect to associated costs including Federal Income Tax at 52% And Gross Receipts Tax at 5% As well as consolidated tax savings.'
The company was permitted, effective January 1, 1958, to increase basic monthly exchange rates for residential service by 7% And basic monthly exchange rates for business service 11%. Supplemental service charges were increased as proposed in the company's schedule and non-recurring charges, with certain exceptions, were to be raised not more than 25%.
With respect to establishing a rate of return, the Board declared: 'That a fair rate of return would be in the range of 6% To 6.37%.'
On February 13, 1958 the State and the Attorney General prosecuted an appeal to the Superior Court, Appellate Division. On February 28 the company filed a motion in that court requesting that the cause be remanded to the Board to the end that the Board be permitted to re-examine its decision and order of December 30, 1957. On March 17, 1958 the Appellate Division ordered that the cause be remanded to the Board, the appeal to be retained in that court, pending determination by the Board of the matters presented on remand.
On the remand, supplemental petitions and memorandums were filed by the parties and further hearings were held in March and April of 1958. One of the major issues on the remand was the Board's determination that the company's rate base was $527,541,000. This figure was arrived at by adding to the 1957 year-end net investment of $502,041,000 (which figure included depreciated original cost of intrastate plant, materials and supplies and property held for future use), the sum of $25,500,000, which the Board found represented the average increase in net plant investment in 1958, the year following the test year. It was argued by the attorneys in the public interest that inclusion of average increase in net investment for 1958 in the end-of-year 1957 rate base was erroneous.
On June 19, 1958 the Board filed its decision and order on remand reaffirming its original finding of a rate base of $527,541,000. The decision and order of December 30, 1957, with certain minor exceptions not here relevant, were reaffirmed. It was found that the operating income which would be earned by the company on an annual basis at the rate allowed would amount to $32,913,900, which figure represented a return of 6.24% On the rate base adopted. This rate of return fell within the Board's determination of the range of fair rate--6% To 6.37%.
Upon return of the appeal to the Superior Court, Appellate Division, while pending therein and prior to argument, this court granted appellants' motion for direct certification, pursuant to R.R. 1:10--1A.
The question on this appeal is whether it was erroneous for the Board to include in the rate base calculated upon the depreciated original cost of plant, i.e., book value, as of December 31, 1957, the sum of 25 1/2 million dollars representing the average 1958 increase in net investment, in order to arrive at a fair value of the company's property.
Preliminarily, it is important to dissect and consider the decision and order of the Board on remand with respect to the 25 1/2 million dollar figure forming the subject matter of the present controversy.
The Board first noted that the primary ingredient of its determination of the rate base was the depreciated original cost of intrastate plant--book value--as of December 31, 1957, which figure, when added to the allowances for cash working capital, materials and supplies and property held for future use, afforded a rate base of $502,041,000. The Board then discussed the item of 25 1/2 million dollars as follows:
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