159 S.E. 38 | W. Va. | 1931
This hearing involves orders entered by the Public Service Commission on August 16th and December 4, 1930. The orders were entered in an investigation by the commission of the rates charged the protestants for gas by United Fuel Gas Company. The result of the investigation is a very substantial increase in the rates. The majority of the commission *247 (hereinafter referred to as the commission for the sake of brevity) fixed the fair value of the utility's property as on December 31, 1928, as follows:
Production system ................. $15,146,352 Transmission system ............... 17,793,598 Distribution system ............... 3,935,193 General property .................. 951,254 ----------- $37,826,397 Going concern value ............... 3,171,021 ----------- $40,997,418 Leaseholds ........................ 7,914,037 ----------- Total ....................... $48,911,455
Included in the valuation of the physical property ($37,826,397) are allowances for general overheads of 20% on the cost of labor and materials in the transmission system and of 17% on such cost in the other three items. The going concern value is "10% of the estimated value of labor and materials in the plant depreciated, and exclusive of land and general overheads." (Statement of commission). The value accorded the leaseholds is their "adjusted" book value. The commission estimated that $12,200,000 (of the $48,911,455) was the value of the utility's property appropriated to the use of consumers within the state. On the property so appropriated $109,800 was allowed for depreciation, and $506,300 for amortization. Tariff rates for consumers were then approved, which after furnishing enough revenue to pay operating expenses, including taxes, should also provide the allowances for depreciation and amortization and a net return of 8% to the utility.
The duty imposed upon the commission in cases such as this is that it shall "enter such orders as may be just and lawful." Code 1923, chapter 15-O, section 2. A like charge is given to this Court upon appeal, as the statutory injunction to us differs only in words: "The court shall decide the matter in controversy as may seem to be just and right." Code,supra, section 17. Despite the obvious legislative invitation *248
to us to become a fact finding body, we have persistently held that because the commission is "experienced in rates and familiar with the intricacies of rate making" we will ordinarily not substitute our judgment for that of the commission on controverted evidence. Town v. Gas Co.,
The statistician of the commission, Mr. E. V. Williamson, made a thorough investigation of the utility and reported that the original cost of its physical properties was $36,183,011 (not depreciated). Mr. John Jirgal, an expert accountant, engaged by the protestants, fixed that cost from the books of the utility at $37,916,873 (not depreciated). The opinion of the majority of the commission reflects no consideration whatever of the Williamson and Jirgal reports so far as they deal with this subject. Mr. F. H. Lerch, Jr. (of Ford, Bacon
Davis, engineers) filed a valuation report on behalf of the utility, in which he estimated the cost of reproducing new the physical properties of the utility at $53,972,197, as on December 31, 1928. Of this sum, the estimate for general overhead charges was $9,847,102 and for labor and material, $44,125,095 which was depreciated to $32,846,125. Mr. Lerch fixed the going value of the utility at $5,397,220 or 10% of his estimated reproduction cost new. Mr. J. Paul Blundon, an experienced engineer, filed a similar report on behalf of the protestants in which he estimated the reproduction cost, new, of the same property at $42,286,901. Of this estimate $5,188,314 was for general overheads, and $37,098,587 for labor and material which he depreciated to $22,069,430. We find no estimate of going value by Mr. *249
Blundon, but Mr. Earl L. Carter, an experienced engineer, appearing for protestants, estimated the going value at $4,500,000. The commission (as shown by its opinion) adopted the estimates of Mr. Lerch of the costs of material and labor (without general overheads) requisite to reconstruct new, the physical properties of the utility. The commission also adopted his calculation of depreciation except as to an increase of $854,804 on a certain well equipment account, to meet the decision in the Clarksburg Light Heat Company case, P. U. R. 1928 B 290, 313. Much of the briefs of the contestants is devoted to an attack upon the qualifications and conclusions of Mr. Lerch, and to the support of Mr. Blundon. The utility responds warmly in kind, attacking Mr. Blundon and supporting Mr. Lerch. Both of these gentlemen are evidently competent and of very high standing. The wide divergencies between them may be accounted for on the supposition that, without volition, neither could be entirely "unmindful of his client's interest."Light Co. v. State (N.H.)
The commission seems to have been led into this error partly by the belief that a similar appraisal of this utility's property by Ford, Bacon Davis "formed the basis for the commission's findings in the 1924 rate case." This belief is not borne out by the opinion in that case. That opinion states expressly that "the use to which this physical property is put, the book cost, the historical cost estimate, the reproduction cost new, less depreciation estimates" were all considered. *250
See p. 276, 2 P. S.C. of W. Va. And it further appears from that opinion that the estimated historical cost was much closer to the amount fixed by the commission than any other estimate. In Bluefield Co. v. The Commissioner,
It was stated in argument by counsel for the utility that the cost of well equipment was fixed at 46% of the original cost, no matter whether the wells were new or old. We suggest that the commission review again the evidence as to the wells; and unless there is a sufficient number of old wells to offset the new wells, then the value of the equipment be adjusted in some more uniform manner.
Some dissatisfaction was expressed as to the depreciation and amortization fixed by the commission. These matters depend largely upon the experience of the commission as well as upon the evidence of witnesses, and we cannot say that the commission has abused its discretion thereon. Telephone Co. v.Commission, supra, p. 302.
Complaint is made that the estimate of Mr. Lerch included property which was of no present or potential service to the public. If this complaint be well founded, the value given such property should, of course, be disregarded. City v. Fashay Co.,
The orders in this case entered by the commission on August 16th and December 4, 1930, respectively, are set aside, and the case remanded.
Orders set aside; remanded.
Since writing this opinion I have given further study to the case of Board etc. v. Telephone Co.,