98 F.2d 180 | 5th Cir. | 1938
This litigation began by Florida Power & Light Company filing on March 15, 1933, a bill to enjoin execution of an ordinance of the City of Miami which fixed rates for electrical service within the City to begin March 24 following, whereby net income would be reduced about $700,000 per annum. The bill claimed that the ordinance, contrary to the federal Constitution, U.S.C.A. Const, art. 1, § 10, cl. 1, impaired the obligation of a contract respecting rates found in Section VII of the franchise ordinance which was passed by the City March 3, 1925, and accepted by Miami Electric Light & Power Company, the grantee, on May 12, 1925. This franchise was assigned to Florida Power & Light Company and the transfer approved by the City early in 1926. The bill also claimed that the new rates were confiscatory under the Fourteenth Amendment, U.S.C.A.Const. Amend. 14. Preliminary injunction was granted, with bond to repay any unlawful charges collected, which is still in force. A Special Master made a careful and elaborate report April 4, 1936, recommending the sustaining of the rates and the dismissal of the bill. The District Judge corrected the report in some of its details, but upheld it substantially, and on Feby. 18, 1937, gave final decree dismissing the bill but without prejudice to the maintenance of a similar suit in the future if conditions so change as to make the rates confiscatory. It provided for refunds to the customers of excess collections pending the suit. This appeal followed, presenting the general questions as to the validity and impairment of the franchise contract and of confiscation, with numerous minor que'stions arising out of the claim of confiscation.
In considering the impairment of a contract obligation by a state law contrary to the federal Constitution, the federal courts judge independently of the existence, meaning and violation of the contract, leaning to an agreement with the decisions, if
The Charter, Sect. 3(k), expressly empowers the City “To establish, impose and enforce water rates and charges for gas, electricity and all other public utilities or other service or convenience operated, rendered or furnished by the City, or by any other person, persons, firm or corporation.” The Florida Constitution, Art. 16, Sect. 30, provides : “The Legislature is invested with full power to pass laws * * * to prevent unjust discrimination and excessive charges by persons and corporations engaged as common carriers * * * or performing other services of a public nature.” The legislature has passed no law establishing a State Commission to fix or regulate water or electric rates, but has committed the power to various cities, including Miami, and their Charter provisiqns are held to be laws passed under this constitutional provision and therefore an exercise of the State’s police power on this subject. See the cases above cited. Against this background of law the franchise here involved was granted by the City. The material provisions of Section VII relied on as a contract are set forth in full in the margin.
The major question on confiscation is what property, if any, outside of the City of Miami is to be valued in fixing the rate base. Since the City Commission in making the attacked ordinance was not representing the City and its corporate interests under the franchise agreement, but was representing the legislature in rate regulation, the rate base and the rate of return mentioned in the franchise are not controlling, though they may be given some weight in considering what is just and reasonable. The rules and methods generally used are rather to be applied. It would be unreasonable to take as the sole standard of present value cost without depreciation, as the franchise provides, now that the life of some of the equipment must be half exhausted. The Master and Judge did not err in giving controlling weight to reproduction cost, less depreciation, of what is used and useful in supplying Miami with electricity, using historical cost, so far as it appears, for purposes of corroboration or correction. And a return of seven percent may be considered reasonable for an established business in a large City, though ten percent was considered reasonable in the earlier stages and in the midst of the Florida boom when locally profits were exceedingly high. As respects the property to be valued, the City contends that the franchise expressly provided for a generating plant in Miami, as well as a distribution system, and that both were built and still exist sufficient to serve the City, and that nothing besides ought to be valued as used and useful in supplying electricity to the City. The Company shows that at the time it acquired the franchise and the property at Miami it was engaged in building a statewide system of transmission lines extending down the east coast from St. Augustine to south of Miami, and from Fort Pierce west to Fort Myers and Bradenton, served by a large generating plant at Fort Lauderdale twenty-five miles north of Miami, and smaller ones at the north and at the west ends. Since 1927 Miami has been furnished with current from this inter-connected system, along with about one hundred and fifty other towns and communities.
The court after correcting some of the Master’s findings, found a rate base of $9,322,171, and a net income of $831,784 yielding 8.923%. We think the legislative finding made" by the City Commissioners that 7% is reasonable is not overborne by the opiftions of witnesses that 8% is reasonable. Certainly confiscation is not shown if the return is as much as 7%. We have considered all the criticisms of these figures, depending for the most part on a weighing of the evidence and the exercise of judgment, and we see no clear error in any of them. Upon one or more there may be doubt, but to change these would not reduce the return below 7%. Confiscation is not established.
The evidence submitted covered the period prior to June, 1934. The case was argued before and decided by the Master and the Judge on that evidence as sufficient. The Judge announced his decision by a written opinion on Oct. 26,1936. Pending the preparation of findings of fact and 'conclusions of law and a formal decree (signed Feby. 17) on Feby. 12, 1937, the Company moved to reopen the case to prove-that in 1935 and 1936 there had been a great increase in the peak requirements for electricity in Miami and that it would be still greater in 1937. This evidence would have been material to illustrate the generating plant needs at Miami, and might show that the arrangement to take current from the transmission system is proving wise and necessary. It might for the years named tend to show that a larger proportion of the system value ought to have been .allowed. But the failure in diligence in presenting the evidence only after the decision had been announced is so gross that the court was well warranted in refusing to reopen this case. We think, however, that should another bill be filed under the terms of the decree to test the rates for the period sinee the decree, the enquiry ought to begin from Feby. 17, 1937, and that if begun within sixty days from the filing of our remitter, refunds claimed under the bond given on this appeal should stand in abeyance pending its determination; and it is so ordered. With this direction the decree appealed from is
Affirmed.
“Subject to reasonable minimum charges and service guarantees the Grantee hereunder is authorized and empowered to establish and maintain the same rates and charges for electric energy furnished during the first five years of the life hereof as were in effect in the City of Miami on January 1st, 1925. After the expiration of said five year period the Grantee’s rates and charges for electric service shall be such as to yield and enable the grantee to earn and pay from its electric revenue all the costs of electric service rendered * * * proper reserves * * * replacements and depreciation * * * and an annual return equal to at least 10% on the contemporaneous rate base. * * * Said contemporaneous rate base shall be determined as of any particular time by adding to $4,911,912, being the agreed and approved value of the property used or held for use in rendering electric service on the 31st day of July, 1924, the total cost of all subsequent extensions and improvements thereof and of all property additional thereto constructed or provided from time to time, used or held for use in rendering electric service. * * * Whenever after the expiration of said five year period the return earned by the Grantee for any calendar year shall be in excess of an annual return as herein-above defined of 10%, one-half of such excess shall become due and payable to the City and shall be so paid on or before March 1 of the following year. * * * It is the purpose and intent of this provision to maintain as nearly as practicable after the first five year period hereof a basis of charge that will yield the cost of service and the 10'% return as hereinabove defined and Grantee shall from time to time, subject to the lawful regulatory authority of the City or ■State Commission having jurisdiction, adjust its rates for electric service in such a manner and to such an extent as will conform thereto.”