174 Pa. Super. 641 | Pa. Super. Ct. | 1954
The order of the Pennsylvania Public Utility Commission of December 8, 1953, is affirmed. The opinion of this Court will be filed at a subsequent date.
The order issued by this Court on December 15, 1953, making the appeals a supersedeas of the Commission’s order, is vacated, and supersedeas is terminated.
Opinion by
These appeals by the City of Philadelphia relate to orders of the Pennsylvania Public Utility Commission granting fare increases under tariffs filed by the Philadelphia Transportation Company.
In Philadelphia v. Pennsylvania Public Utility Commission, 173 Pa. Superior Ct. 38, 95 A. 2d 244, we reviewed an order of the Commission of December 23, 1952, allowing rate increases under tariffs filed Feb-
Pending the disposition of the increase in rates under the tariffs filed February 29, 1952, and approved by the Commission on December 23,1952, the Company, on February 11, 1953, filed new tariffs which were to become effective March 14, 1953. They provided for an increase in the basic charge for single vehicle rides from 15 cents cash to 18 cents cash or two tokens for 35 cents. On March 9, 1953, the Commission suspended the operation of the tariffs for a period of six months until September 14, 1953, and by concurrent order instituted an investigation on its own motion for the purpose of determining the fairness, justness, reasonableness, and lawfulness of the rates and charges for
The City of Philadelphia, on March 2, 1953, filed its complaint against the proposed rates under the tariffs of February 11, 1953, alleging the proposed rates to be unjust and unreasonable except to the extent they would produce increased revenues as would enable the Company to provide for increased labor costs.
The Commission by its order of December 8, 1953, dismissed the complaints against the tariffs filed February 11, 1953, and directed that the fares contained in said tariffs become effective on or after midnight December 13, 1953, upon the filing of the proper supplements.
The City appealed on December 10, 1953, from the order of the Commission of December 8, 1953. On December 15, 1953, this Court granted a supersedeas and advanced the argument of the appeals to December 29, 1953.
In our opinion in Philadelphia v. Pennsylvania Public Utility Commission, supra, 173 Pa. Superior Ct. 38, 95 A. 2d 244, we also directed that the Commission find the fair value of the Company’s transportation system; that it consider the factors which relate to actual and functional obsolescence; that it exclude from the rate base payments representing no property owned by the Company and used and useful in the public service, and amounts charged to operating expense; and that market value of securities which had been offered and received in evidence should be considered by the Commission as a measure of value.
FAIR VALUE — RATE BASE: The Commission in finding the fair value of the Company’s physical property used and useful in the public service at $75,-000,000 had before it for consideration several measures of value. The measures submitted by the Company were as follows: (1) Original cost; (2) estimated reproduction cost at the spot prices of December 31, 1952; (3) estimated reproduction cost at the average prices for the five years 1948-1952. The Company’s original cost figure at December 31, 1952, was $120,-984,402; reproduction cost based on spot prices was $314,874,000; and reproduction cost at the average prices for five years was $284,262,000. The Commission adjusted undepreciated original cost to $109,-171,040. It disallowed franchise paving in an amount of $8,201,412, direct overheads in an amount of $1,-831,950, and indirect overheads in an amount of $1,-780,000 or a total of $11,813,362. The Commission adjusted reproduction cost based on spot prices to $298,-342.000, and at average prices for five years to $268,-420.000. On these measures of value the accrued depreciation was fixed at $53,113,000, $163,567,000, and $146,811,000, respectively. Adding work in progress of $492,500 to the two reproduction cost estimates and $3,000,000 for materials and supplies to the three esti
From these four measures of value which the Commission had before it for consideration, it does not appear that the Commission abused its administrative discretion in finding the fair value of the Company’s system at $75,000,000. As we have so often said, the weight to be given any measure of value in evidence is for the Commission, although its action must be within the area of its administrative discretion and supported by the evidence. It is not bound by any formula in considering the various relevant factors for the determination of a rate base. City of Pittsburgh v. Pennsylvania Public Utility Commission, 171 Pa. Superior Ct. 187, 195, 90 A. 2d 607; Pittsburgh v. Pennsylvania Public Utility Commission, 168 Pa. Superior Ct. 95, 106, 78 A. 2d 35. A fair and equitable result depends largely on the proper exercise of the Commission’s discretionary power.
OBIGINAL COST: The City initially contends that there can be no finding of fair value as there is no original cost study or evidence of depreciated original cost of the Company’s property, and that, as the Company has the burden of proof, this failure required the Commission to deny the increased rates. If the Company was unable to show accurately original cost
FUNCTIONAL OBSOLESCENCE — REPRODUCTION COST: Consideration of the extent of functional obsolescence, which is necessarily a material factor in the ultimate determination of fair value of the Company’s system, was, likewise for the Commission. See Pittsburgh v. Pennsylvania Public Utility Commission, 165 Pa. Superior Ct. 519, 527, 69 A. 2d 844; Pittsburgh v. Pennsylvania Public Utility Commission, 174 Pa. Superior Ct. 224, 232, 101 A. 2d 127. We made refer
MARKET VALUE OF SECURITIES:.. We also directed the Commission, in our previous order, to consider market value of securities as, under our law, that was established as one of the measures or factors, if made a part of the record, entering into a determination of fair value. Philadelphia v. Pennsylvania Public Utility Commission, supra, 173 Pa. Superior Ct. 38, 54, 55, 95 A. 2d 244. We have made it clear that the weight to be given to it, as to any other measure of value, necessarily varies according to the circumstances. In such matters the Commission has the duty to exercise its sound discretion on the facts before it. Although it may not be a primary measure of value, it has some significance and is relevant for .the Commission’s consideration until a change has been made in the Public Utility Law by the Legislature, In compliance with our order the Commission expressly gave recognition to market value of securities.
ACCRUED DEPRECIATION: It is recognized that accrued depreciation is essentially a. judgment figure. Pittsburgh v. Pennsylvania Public Utility Commission, 174 Pa. Superior Ct. 4, 8, 9, 98 A. 2d 249;
The Commission used the depreciation factor of 56 per cent for reproduction cost. This percentage apparently was based upon the finding of original cost, a study of the trended reproduction cost components, and a study of price indices data of record. See City of Pittsburgh v. Pennsylvania Public Utility Commission, supra, 171 Pa. Superior Ct. 187, 206, 90 A. 2d 607. There is substantial evidence in the record to support the Commission’s accrued depreciation findings.
REVENUES, EXPENSES AND NET INCOME: The Commission in the present proceeding based its findings as to revenues and expenses on the base year ending December 31, 1952, or upon the most recent actual experience figures available. In 1952 the Company’s net income before interest and income taxes was $2,377,876, including non-rate case items.. For the base year operating revenues were $71,050,552 and total operating expenses were $68,672,676. The Commission accepted the Company’s estimate of passenger revenues at the December 31, 1952 tariff rates in the amount of $73,800,000 for the calendar year 1953, an increase of $4,162,292 over the passenger revenues collected in 1952. The Commission found that the proposed tariffs of February 11, 1953, would yield additional revenues of $3,386,000 which added to the ' base yéai* receipts, as adjusted, of $73,800,000 would produce passenger revenues of $77,156,700, after adjustment for route abandonments of $29,300. With other revenues of $1,416,932 the total annual adjusted operating revenues would be $78,573,632. The Commission thereupon found that the annual net income available for return from the proposed tariffs of February 11, 1953,
We shall limit specific reference to a few of the. items.
Annual Depreciation — Track A llomance.- The Commission’s allowance for annual depreciation was $2,-788,389. The City contends that this is excessive. In
Show and Ice Removal Expense. There is also no ground for the complaint of the City relative to allowance for snow and ice removal. The allowance was computed on the basis of a five-year average of such cost, as adjusted for current cost of labor and material. This, like the other adjustments, was within the discretionary power of the Commission to make.
Increased Labor Costs. There seems to be no difference of opinion as to the material effect of increased labor costs in the amount of $4,538,000 through 1954 on the Company’s operating expenses.
Coin Boxes. The City again questions the failure of the Company to use coin boxes in the collection of fares. The installation of coin boxes is, in the first instance, for the Company to determine, and secondly for the Commission to consider whether the failure to do so constitutes an abuse of managerial discretion.
JURISDICTION — THE CITY-COMPANY AGREEMENT OP 1907: The City attempts to re-argue the question of the jurisdiction of the Commission over City-owned high speed lines and facilities leased to the Company, and the City’s right under the 1907 lease agreement to require its consent to fare increases. We think our ruling on these' two matters in the prior appeals.sufficiently disposes, of the issues raised, and we shall not review them again. See Philadelphia v. Pennsylvania Public Utility Commission, supra, 173 Pa. Superior Ct. 38, 43-47, 95 A. 2d 244.
We may not be unmindful that rate-making is an exercise of the legislative power, and necessarily implies a range of legislative discretion. This function has been delegated by the Legislature to the Commission which, as an administrative body equipped with a staff of investigators, accountants, engineers, and experts, is peculiarly fitted for the task. Consequently, if not confiscatory, the reasonableness of rates is an administrative question for the Commission, and the Commission’s findings, if supported by the evidence, may not be disturbed by us. Sheets v. Pennsylvania Public Utility Commission, 171 Pa. Superior Ct. 151, 155, 90 A. 2d 633.
This rate case has been exhaustively contested. Weaknesses in the Company’s evidence have been noted by the Commission. Counsel for the City has disclosed contradictions and inconsistencies. The Commission in its order has analyzed the massive record, and made its findings of fact. We think the Commission is fully aware of its duty to require this utility to provide adequate service at reasonable rates. There may be differ-
We have affirmed on January 19, 1954, the order of the Commission of December 8, 1953.
In the 1952 rate case the Commission found an accrued depreciation of $53,000,000 applicable to total original cost of $121,-«79,017.
The Commission in its brief has submitted the following reconciliation of its finding:
Actual net income — 1952 $ 2,378,000
Increased revenue from 12-31-52 tariffs 5.033.000
Increased revenues from proposed tariffs 3.386.000
Total — before adjustments 10,797,000
Adjustments per Commission Order of 12-8-53
Revenue adjustments:
Decrease in riding levels:
Amount claimed above from 12-31-52 tar-
iffs for base year ended 7-31-53 $5,033,000
Amount used by Commission for base
year ended 12-31-52 4,162,000
871,000
Decrease due to route abandonments 29,000 (900,000)
Increase in other operating revenues 4,000
9,901,000
Expense adjustments:
Increase in expenses:
Additional wage costs — 1952 labor contract 375.000
Additional wage costs — 1953 labor contract 3.063.000
Additional wage costs — 1954 labor contract 1.458.000
Increased cost of supplies, tires, gasoline, etc. 242.000
Increased pension costs 82,000
Locust St. subway expense 177.000
5-year average snow-ice removal 176.000
Additional track renewal expense 12-mile avg. 382.000
Additional depreciation aUowed (track) 379.000
“Emergency measures” restored 365,000
Difference in days 1952-1953 48,000
Total 6,888,000
Decreases in expenses:
Extension of one-man car operation (1952) 184,000
Adjustments for 1953 riding levels 360,000
Miscellaneous economies 240,000
Charitable contributions 30,000
Injuries & damages disallowed 50,000
Executive salaries saved 25,000
Route abandonments 172,000
Cross receipts tax — no longer paid 136,000
Miscellaneous adjustments 28,000
Printing, general & miscellaneous expense 26,000
Decrease in operating taxes 59,000
Decrease in rentals 43,000
Total 1,353,000
Total net increases. 5,535,000
Non-operating income & expenses disallowed 400,000
Total net decreases to net income 5,935,000
Adjusted net income $ 3,966,000
Present Accrual . , $2,331,661
Less:
Present Provisión for Track Abandonment 144,500
Total ' ' ......$2,187,161
Add:
Provision for Track Depreciation 601,228
Total . $2,788,389
Allocatur refused by the Supreme Court of Pennsylvania on April 18, 1958.