168 Pa. Super. 95 | Pa. Super. Ct. | 1951
Opinion by
These appeals by the City of Pittsburgh are from the order of the Pennsylvania Public Utility Commission of July 25, 1950, allowing further increases in fares for street railway, incline plane, and feeder and street car type bus service of Pittsburgh Railways Company,
On November 19, 1948, the Trustees of Pittsburgh Railways Company and of Pittsburgh Motor Coach Company filed tariff increases with the Commission under which the basic street car fare was increased from 10 cents to 12 cents, and the through-bus fare from 12% cents to 15 cents. The Commission, by its orders of June 15, 1949, permitted such increases. The City of Pittsburgh appealed from those orders of the Commission to this Court, and we directed that the appeals should operate as a supersedeas. On November 15, 1949, we terminated the supersedeas, vacated the orders of the Commission, and remanded the matter to the Commission for further proceedings. Pittsburgh v. Pennsylvania Public Utility Commission, 165 Pa. Superior Ct. 519, 69 A. 2d 844. The increased fares under the tariffs filed November 19, 1948, became effective on November 23, 1949. Beginning December 14,
The Commission by its order of July 25, 1950, found that the proposed rates would not yield an excessive return upon any finding of fair value and fair rate of return thereon that the Commission would be justified in making. The Commission concluded, however, that the 1 cent transfer charge and the basic street car fare (15 cent cash or 12% cent token) discriminated in favor of those using transfers as compared to the single vehicle passenger. Accordingly the Commission ordered Railways to revise its tariff, canceling the proposed 12% cent token fare and the proposed 1 cent transfer charge and all proposed 15 cent cash fares and substituting therefor a 12 cent token fare available at five for 60 cents , and a 3 cent charge for transfers, and a 15 cent cash fare which should include the transfer at no additional charge. It appears that the increase
The City appealed to this Court from the Commission’s order of July 25,1950, and at the same time petitioned for a supersedeas. On August 2,1950, we granted a rule to show cause why the appeals should not operate as a supersedeas. After hearing on August 10, 1950, we refused a supersedeas upon the condition that Railways issue reparation slips covering the 3 cent transfer charge pending final disposition of the appeals.
The City’s present contentions relate in part to matters within the administrative discretion of the Commission and to possible conditions which may or may not arise. The position of the City advanced in the former appeals as to consideration being given to zoning and to a more equitable distribution of transportation costs has been recognized by the Commission as well as the specific suggestions of this Court in remitting the record in the prior proceedings. In any event, we may set aside the present order of the Commission only “for error of law or lack of evidence to support the finding, determination, or order . . .” Section 1107 of the Act of May 28, 1937, P. L. 1053, as amended by the Act of July 3,1941, P. L. 267, §3, 66 PS §1437.
The City asserts that the rates established by the Commission’s order of July 25,1950, are unfair and discriminatory. According to the City, the 3 cent transfer charge in particular is arbitrary, excessive, and unreasonably discriminatory in that such charge is neither related to the length of the ride nor based on the service provided. In considering a schedule of rates that would be equitable and non-discriminatory to all classes of service, the Commission had before it testimony as to several different rate structures. One such rate struc
In determining whether rates are unreasonably discriminatory the administrative agency must be granted an area of discretion.
The City also complains that the Commission failed to find the fair value of Railways for rate purposes in this proceeding. The City argues that the Commission blindly accepted the figures which in the past it had thought appropriate to the utility, and that there should have been a finding of fair value for the reorganized company. We may note here that a finding of fair value, in a case in which such finding was necessary, would be based on the properties used and useful in the public service, and would not be dependent upon the corporate structure.
In the previous proceeding and appeal, Pittsburgh v. Pennsylvania Public Utility Commission, supra, 165 Pa. Superior Ct. 519, 524, 69 A. 2d 844, the Commission found a fair value of Railways for rate making pur
Railways submitted as measures of value a depreciated original cost as of October 31, 1949 (including allowances for materials, supplies, and cash working capital) of $47,235,257, and a depreciated reproduction cost, using a five-year price level ending October 31, 1949, of $68,686,033. The Commission found, with respect to Railways, five measures of value as of October 31, 1949: (1) Depreciated original cost $46,412,259; (2) depreciated reproduction cost based on price levels as follows: (a) year ending October 31, 1949, $78,-437,575; (b) three years ending October 31, 1949, $73,-917,255; (c) five years ending October 31, 1949, $67,-656,176; (d) ten years ending October 31, 1949, $58,-166,467. These amounts include the allowances for materials, supplies and cash working capital. Certain, items previously the subject of controversy now aye excluded — namely, 64 old type street cars having an original cost of $920,537, and 2 routes which had been abandoned. The properties of the through motor coach routes are not included.
The Commission found that future annual operating revenues of the reorganized company under the proposed fares would be $28,214,128, and that the operating expenses would amount to $25,936,267, leaving $2,277,861 available for return; and that under the then existing fares the amount available for return would be about $717,000. The Commission also found that if Railways were to be considered under its then existing corporate structure,, the income available for return.under .the..proposed fares would be $3,063,766,.
In its brief the City refers to the valuation of $22,-283,000 placed upon Railways by an engineering firm in the reorganization proceedings, and the valuation of $17,000,000 placed upon Railways by the Division of Public Utilities of the Securities and Exchange Commission, and emphasizes the spread between these figures and the measures of value as found by the Commission, and the Commission’s previous fair value finding of $50,000,000 in its order of June 15, 1949. The Commission in its present order recognized the disparity between its previous valuation of $50,000,000 and these lower valuations suggested in the reorganization proceedings. But the Commission pointed out that the latter were valuations made from an investor’s standpoint based on a capitalization of earnings to
The City again contends that Railways, by repeated increases in fares, is rapidly pricing itself out of the mass transportation field. The Commission recognized in these proceedings, as it did in the former proceedings (Pittsburgh v. Pennsylvania Public Utility Commission, supra, 165 Pa. Superior Ct. 519, 528, 529, 69 A. 2d 844), that the law of diminishing returns applies to rate increases. In the present proceedings the Commission followed the general experience estimate of such decline, namely, a one-quarter per cent decline for each one percent increase in fare. However, it is plain from the tables showing the number of passengers carried monthly during 1948-1949 and the first eight months of 1950 that some of the decline in the number of passengers carried occurred without relation to increased fares, and was attributable to other causes. It may be that Railways is reaching a point where increased fares will yield a smaller rather than a greater net return. We made reference to this in Pittsburgh v. Pennsylvania Public Utility Commission, supra, 165 Pa. Superior Ct. 519, 528, 529, 69 A. 2d 844. And it may be, as the City says, that the solution to the transportation problem and its increased operating costs does not lie in increased fares.
Finally, the City contends that the Commission in its consideration of accrued depreciation failed to recognize or consider functional obsolescence. The City’s view is based upon the premise that there is a high element of obsolescence, particularly in street railway equipment, and upon the testimony of its expert, Dr. John Bauer, to the effect that the entire street railway system was largely obsolete and should be abandoned in favor of bus transportation over a period of the next five years. As to this the Commission found: “The record in these proceedings clearly indicates that no major abandonments are presently contemplated either immediately before or immediately following reorganization .... Whatever exclusions may be made in the future, if made at all, are presently only a matter of conjecture and, if made may take years for consummation. In the matter of any substitution of bus for rail, any estimates of costs of operation of the substituted facilities and any estimates of revenues from the substituted service can also at this time be only a matter of conjecture and not of firm estimate.” Moreover, the record before us on these appeals shows that the Commission considered the question of accrued depreciation at length and in detail, including the subsidiary problem of functional obsolescence. The Commission pointed out that Railways used two bases for determining accrued depreciation and the per cent condition of its property, one being future life and average service life, and the other being physical inspection. The
Railways has included as part of its property and results of operations the property of Motor Coach devoted to feeder and street car type bus service and the
Our order of August 10, 1950, providing for the issuance of reparation slips for the 3 cent transfer charge to patrons, pending final disposition of the appeals, is terminated.
The order of the Commission is affirmed.
“The rate-making power is a legislative power and necessarily implies a range of legislative discretion.” Minnesota Rate Cases (Simpson v. Shepard), 230 U.S. 352, 33 S. Ct. 729, 57 E. Ed. 1511.
“Rate making ... is never a mathematical application of a theoretical principle.” Re Rates and Rate Structures of Corporations Supplying Electricity in New York City. New York Public Service Commission, P.U.R. 1931c, 337.
“We are not unmindful of the argument . . . that the effect of lower prices may be to swell the volume of the business, and by thus increasing revenues enhance the ultimate return. Upon the record as it comes to us, this is guesswork, and no more”: West Ohio Gas Co. v. Public Utilities Commission, 294 U.S. 79. 82. 55 S. Ct. 324. 79 L. Ed. 773, 777.