211 A.D. 272 | N.Y. App. Div. | 1925
The present increased cost of construction must be considered in determining the value of the property, and due weight must be given to such present reproductive cost. The Supreme Court has refused to adopt the prudent investment cost theory. (State of Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Commission of Missouri, 262 U. S. 276; Bluefield Waterworks & Improvement Co. v. Public Service Commission of West Virginia, Id. 679; Monroe Gaslight & Fuel Co. v. Michigan Public Utilities Commission, 292 Fed. 139.) Concededly the Commission has ignored present (1921) reproductive costs of the relator’s properties in determining their present values and has adopted a rate base which only squares with reproductive cost based on ten years’ average prices covering the ten-year period prior to 1921, less depreciation. The Commission was divided as to the rate base to be allowed. We are assuming the higher one to have been adopted by a majority of the Commission, namely, $370,000, although the divergent opinions of the Commissioners leave the question in doubt. Upon this basis we find that the Commission totally ignored the only testimony in the record giving cost of reproduction based upon present (1921) prices. One witness, at 1921 prices, testifies to present reproductive cost new at $842,000 and less depreciation at $730,000. Another witness testifies to present reproductive cost
Moreover, it is sought tó defend the rate base found by Commissioner Semple by reference to the Stone & Webster appraisal of 1910 plus the additions to fixed capital since that time. This totally leaves out of consideration any readjustments to present 1921 values, particularly as to the properties covered in the 1910 appraisal. The same is true of the values testified to by the city’s engineer based on his views of original cost. The same may be said of figures based upon a United States Circuit Court appraisal
We have been unable to determine to our satisfaction what rate of return has been allowed by the Commission. The same is true as to the amount allowed for annual depreciation reserve. This has been due to the divergent views expressed in their two opinions and the failure of the Commission to present any findings upon which the majority reached their conclusion fixing a gas rate of one dollar and seventy cents per 1,000 cubic feet. If there is any present necessity of heavy expenditures for replacements, the evidence indicates that the responsibility is not wholly charggable to inefficient company management, but that much is due to the past low rates allowed by the present and former Commissions. Commissioner Semple has demonstrated in his opinion that a one dollar and seventy-five cent rate will produce an eight per cent return on the rate base of three hundred and seventy thousand dollars. We are given to understand that the one dollar and seventy cent rate allowed by the majority will, on that basis, produce not to exceed seven and one-tenth per cent return. Even assuming the rate base adopted as fair and that the one dollar and seventy cent rate will yield to the company the amount for annual depreciation reserve allowed in Commissioner Semple’s opinion and seven and one-tenth per cent return on that rate base, we think such rate of return under the circumstances of this case may well be considered inadequate, in view of the holding of the United States Supreme Court in Bluefield Waterworks & Improvement Co. v. Public Service Commission of West Virginia (supra). In that case the United States Supreme Court referred to the fact that the company had received a rate of return that was very low through a long period up to the time of the inquiry by the Commission and that such fact should be taken into consideration and a higher rate allowed in order to be fair.
For these reasons the determination should be annulled, with fifty dollars costs and disbursements, and the matter remitted to
Determination annulled, with fifty dollars costs and disbursements, and proceeding remitted to the Commission, with leave to reopen and take further evidence, if desired.