58 Ohio St. 2d 147 | Ohio | 1979
Initially, appellant challenges the nine percent rate of return allowed on its capital structure. Appellant argues that the weight of the testimony submitted with respect to its cost of equity demonstrates that a 14 td 16 percent rate of return was warranted. Appellant avers that the commission erred in accepting a 10 to 12 percent cost of equity calculation, since this recommendation was submitted by commission staff witnesses whose expertise in the field was not as extensive as appellant’s expert.
This court with regard to evidentiary matters does not review a finding and order of the commission de novo. Where conflicting evidence is presented to the commission with regard to a matter at issue, the commission’s determination will not be disturbed unless the party who challenges that finding demonstrates that it is manifestly against the weight of the evidence and so clearly unsupported by
Appellant maintains further that the commission’s exclusion of short-term debt from its computation of the appropriate rate of return for appellant’s capital structure was erroneous.
R. C. 4903.13
Upon an examination of the record, we conclude that the exclusion of short-term debt in ascertaining the cost of capital was neither unlawful nor unreasonable. The commission’s approach was in conformity with testimony to the effect that capital structure, by generally accepted definitions, does not include short-term debt.
Appellant argues further that in ascertaining the cost of equity for a utility which- is owned by an out-of-state parent company, it is impermissible for the commission to use the more favorable capital structure of the parent corporation to determine the cost of equity for the utility..
In calculating the cost of equity, the commission normally utilizes a discounted cash flow analysis of the utility
Appellant complains further that where the testimony of the commission staff is to the effect that the cost of equity is 11.5 to 12.3 percent, it was unreasonable and unlawful for the commission to allow a 10 to 12 percent cost of equity.
It is sufficient to note that the staff testimony submitted with regard to the 11.5 to 12.3 percent cost of equity resulted from the staff’s discounted cash flow analysis of the capital structure of Consumers, and was not the staff recommendation with regard to appellant’s cost of equity. The staff recommendation in that regard was a 10 to 12 percent rate of return. Cf. Cleveland Elec. Illuminating Co. v. Pub. Util. Comm. (1975), 42 Ohio St. 2d 403, 413, 330 N. E. 2d 1.
Appellant argues additionally that the commission, m determining the rate base of a utility under the original cost less depreciation method, must provide not only a reasonable rate of return at the time of investigation, but also for a reasonable time in the future, which warrants the allowance of a one percent premium adjustment in appellant’s cost of capital to compensate investors for attrition due to inflation.
Under the facts of this cause, the commission properly 'disallowed the attrition adjustment requested by appellant. “Attrition” has been defined as the tendency, of a rate of return to diminish in a period of rising costs
Appellant also challenges the commission’s determination that the value of property which constitutes appellant’s rate base amounts' to $1,125,495. -
Where the commission, in a cause properly before it, ..fixes, the rates or charges for a utility and renders an order'to that effect, a'presumption arises that the eomrpijSsion’s determination is fair and reasonable. A party who • contends- otherwise on appeal to. this court has .the burden of showing that it is unjust, unreasonable,- Or-.'unlawful. Franklin Co. Welfare Rights Org. v. Pub. Util. Comm. (1978), 55 Ohio St. 2d 1, 12-13, 377 N. E. 2d 990. Qur/.fe- . "view.'of[the.proceedings "below shows that this,,presumption has*, not- -been overcome;.with--regard; to.?-the.- commission’s
Finally, appellant urges that the commission’s allowance of $91,277 for construction work in progress (CWIP) was erroneous. It is contended that the record shows that all CWIP had been completed as of the “date certain,” and, therefore, the total cost of the construction projects ($100,000) should have been included by the commission as a reasonable allowance.
R. C. 4909.15(A)(1) expressly confers upon the commission the discretion to “permit a reasonable allowance for construction work in progress” if it first determines after a physical inspection that the construction project is at least 75 percent complete.
Appellant’s other arguments are not well-taken and the order of the commission, being neither unreasonable not unlawful, is hereby affirmed.
Order affirmed.
R. C; 4903.13 states, in applicable part:
“A final order made by the public utilities commission, ¿hall be reversed, vacated, or modified by the supreme court on appeal, if, upon consideration of the record, such court is of the opinion that such order was unlawful or unreasonable.”
With regard to construction work in progress, R. C. 4909.15(A) (1) provides that:
“* * * The commission may, in its discretion, permit a reasonable allowance for construction work in progress but, in no event, may any allowance for construction work in progress be made by the commission until it has determined, after a physical inspection, that the particular construction project is at least seventy-five per cent complete.”