*1 outlined above, the reason Accordingly, and tbe sentence appellant viction for contempt, tbe all to be paid are with costs imposed, reversed, appellee. Appellant, Heat Steam v. Scranton
Scranton,
Company. Before C. J., 1961. September 27, Argued Bell, JJ. Eagen, Cohen Jones, Musmanno,
re- argument refused 1962. January 8,
Miles Warner, Assistant with him Counsel, Louis J. Assistant Carter, and Counsel, I. Joseph Chief Lewis, for Pennsylvania Counsel, Public Utility Commission, appellant. M.
Morey with Myers, him W. James McNulty, City appellant. Scranton, C. Anthony with him Falvello, Rocco C. Falvello, James E. and Riely, Creskoff, Riely for util- Holton, ity appellee. company, by
Opinion Benjamin Mr. Justice R. No- Jones, vember 1961: 14, appeals
These are from a judgment Court which reversed a Pennsylvania Public Utility Commission (Commission) order entered a case.
On April Scranton 28, 1959, Steam Heat Company filed (Company) with the Commission supplement a heat to its steam tariff, become effective July 1,1959, Com- which supplement provided in the increases pro- pany’s base rates for .To thése steam heat service. posed (Scranton) rate increases of Scranton the City com- one Klein filed Harry consumer, (Klein), plaints. these disposition The pending Commission, pro- suspended the effective complaints, date posed rate increases,1 April held and on hearings di- 1960 the Commission complaints sustained the sup- rected the to cancel tariff heat plement. The reversal of order Court challenged appeals. these The factual background simple. is relatively and steam furnishing both electric service Electric heat service was the Scranton constructed by On Company (Electric) 1894. January 31, *3 & (Power Power & Light Company Septem- On acquired plant from Light) Electric. ber heat the Company acquired the steam 26, 1956, service facilities of from & plant Light the Power pro- a consisted of $250,000. property acquired (a) Light used and duction Electric Power system2 elec- both steam in the of produce generation to used distribution and to supply heat; (b) steam tricity em- and (b) (c) being system;3 (c) general property,4 found in heat As ployed steam service. exclusively upon Power and by the Commission sufficient evidence, to production need in system did not 1956 the Light it offered for sale and electricity steam generate and of production system the used only portion that distri- heat service the supplying plus useful in steam general and property. bution system (cid:127) 1 argues proposed vary from that the rate increases Scranton that over An examination the record indicates the of to 30% 47%. approximately increase is all 20.16%. 2 plant and related structures. Boiler 3 mains, meters, etc. Steam 4 trucks, equipment, etc. Office and, increases for rate applied In Electric had the of found that the Commission time, at 60% service devoted to electric system was production in fixing service and, heat devoted to steam 40% of of use such allocation base, electric and steam heat Commis employed by the production system Electric Company, P.U.C. Scranton (Pa. sion P.U.C; system distribution and the steam 660) 650, 658, in exclusively included were property and general rate base. in electric base and not heat rate sold that Power & Light beyond question It clear is of portion only purchased the Company heat of steam supplying used and useful service. appeal: on this presented issue is
One narrow “fair fixed the order which the Commission’s whether of basis on the sole of the Company’s property value” an- and the allowance acquisition nual sustainable? depreciation legally Com- fixed “fair of
The Commission value” aggregated it at so pany’s property $900,000; doing, plant purchase price (1) acquisition net expenses (3) organization $5,257; (2) $250,000; purchase from the date of plant additions $357,655 1959,® the end of the test year February —a From this total $612,913. total, since accrued depreciation on the (1) deducted being depreciation said $73,500, the date purchase, *4 remainder life method.5 determined by straight-line $73,500— less net total of $539,413 $612,912 To the — sup- for materials and $230,000 the Commission allowed total of “consideration for a $769,413. Giving plies,7 5 (3) questioned appeal. (2) are not 6 Appellee questions depreciation the amount of accrued in figure depreciation, for accrued on an unde sense that based larger. preciated $4,003,716, is 7 questioned appeal. on this Not
401 to the decline in value of the dollar addition to rec- ognizing that Company] is a going concern”, [the Commission added an additional for total $130,587 k “fair value” of $900,000. offered evidence of measures of three
value:8 (1) original $2,200,000; (2) reproduction cost — cost at spot reproduction cost prices $5,772,000; (3) — at five year average prices $5,074,000 as evidence —
“fair value”.
More “the than half a it was held century ago basis all calculations as to the reasonableness rates to be of the charged . . . must the fair value be property used for convenience being it by . public. . . ask is What is .entitled to company for fair return upon employs value of that which it S. public 169 U. Smyth convenience”: v. Ames, Ct. Superior v. 187 Pa. 466; Pittsburgh Pa. P. U. C., 648; A. 2d et al. v. Pa. P. U. 341, 144 Pittsburgh C., Com 2d Superior Pa. Ct. 44 A. Solar Electric 614; 229, A. P. Pa. Ct. 2d 325, U. pany C., L. P. 447; Utility May 28, 1937, Public Law 66 PS §311, §1151. Ct. v. Pa. P. U. 187 Pa. Pittsburgh C., rule recognized A. 2d the Court
341, 349, Pennsylvania: been the law decades has which not however, rate-making purposes, “Fair value pur- particular for any fair value present the literal as that biit value it is fair pose, in this purposes; rate-making is understood term to rate peculiar connotation value has a fair respect, which by formula particular no There is proceedings. all base; the rate fixing is bound as value, on fair bearing a relevant have which facts should be proceedings, in rate is used term in this prevailing rule fair value . . ‘Under . sidered by the Commission. made disallowances certain As modified *5 402 and cost original consideration should be given
state,
property;...’”
cost
average price reproduction
construction
cost
cost of
original
means
Original
considered
must be
and
a factor
facilities
is
which
“fair,
value”
the Commission
at
arriving
v. Pa.
Corp.
Steel
making purposes: Harrisburg
Pitts
719;
A. 2d
P. U.
176 Pa.
Ct.
109
Superior
550,
C.,
A.
Ct.
90
Superior
v. Pa. P.
171 Pa.
burgh
391,
U. C.,
v.
2d
Brook Water Service Co.
850; Scranton-Spring
735;
2d
Superior
Pa. P. U.
Pa.
Ct.
67 A.
286,
165
C.,
Pa. Supe
Solar Electric
v. Pa. P. U.
137
C.,
Company
2d
Co. v.
447.; Peoples
rior Ct.
A.
Natural Gas
325, 9
Superior
Pa. P.
Pa.
Ct.
In the case at the Commission bar, acknowledged precedent” required law “long-accepted reproduction sideration of both cost and original cost, rejected repro- but nevertheless both original cost and duction cost and placed its determination solely acquisition cost frankly that which alone, i.e., ithe had for the paid Acquisi- 1956. iu tion cost not and never has been “fair the criterion of valúe” or a substitute for either the factors or both construction Pa. reproduction cost: Steel Harrisburg Corp. Peo 719; P. 2d U. Ct. A. C., *6 Pa. Su P. ples Natural Gas v. Pa. U. Company C., Co. Electric perior Ct. 34 A. 2d Mercersburg 375; su v. P. Harrisburg, S. 76 Pa. Ct. 58. C., the p. by pra, paid it was stated: “The amount as if it be even acquiring utilities, the can sumed length, the transactions were at arms pur not be for making as cost adopted original recog has poses.” The Commission itself the past Pa. nized P. C. v. principle: Pa. U. Yablonski, Pa. P. U. v. Pa. Power & 509; Light Co., C. Pfeifle P. York U. C. York v. Bus 52; City Co., P. U. C. 665. com- the for its assigned
The reason Commission by standing plete the decisional law of disregard long for production was that the constructed system was for dual generation use, i.e., primarily, steam heat electricity and, service, secondarily, elec- for the system generation when the use heat abandoned and devoted to steam tricity only was acquired was price which service, . . for the limited service was the “fair value . use and Such it would could be devoted thereafter.” which nor support legally factually reason finds neither both no justification completely ignoring furnishes repro- of construction and cost the cost of original utilities devoted heat duction of the to steam exclusively Commission order was both as service. The erroneous well of fact. a matter of law as as complaint made Superior Court, Before in failing erred to base allow- Commission depreciation upon original for annual cost ance did was What actually construction. upon plant depreciation annual the actual to calculate acquisi- found by as Commission, i.e., investment expense plus net addi- organization plus tion tions or pur- a total of for the $612,914. Company, pose of this not method does with the appeal, quarrel annual calculating depreciation employed by Commission but rather deprecia- claims that annual tion should have been based on cost of original struction. Since de- the determination question of this pends upon what was the cost of construction as a factor in “fair determining final determi- value”, nation of the amount of must annual depreciation await the Commission’s action mandated us to con- sider the original cost of construction in determining the fair rate base this case.
The Commission’s order herein is erroneous palpably and the Superior Court was eminently correct in re- *7 that versing order. Su- However, the of judgment the perior Court remanded the record Commission to the “for the of an entry appropriate order not inconsistent with this majority] opinion” Superior [the Court. Such a judgment our inappropriate; view is the Commission should be given an opportunity to re- evaluate the entire record in the of light both ma- the opinion of the jority Superior Court and this Court. To that judgment of end, the Court affirmed the modification with that the record be re- manded to the Commission so that it reconsider may the entire record and an appropriate enter order. Alpern took no
Justice part consideration case. decision of this
Dissenting Opinion Mr. Justice Cohen : all of the Historically, heating companies the Commonwealth of Pennsylvania were originally formed for the utilization of the by-products of some other endeavor. the steam Here, heating company of plant utilized the a by-product devoted previously few to the of primarily generation Very electricity. (if any) originally instances exist where a was for a steam production devoted to of steam solely heating by-product Since this was a utility. formerly to plant which devoted is now the first time solely of production treatment steam, the Commission’s no an with utility’s plant acquisition as original historical cost and with a original reproduction cost is length acquisition evidenced arm’s only by concept justified. The other in ar- employment of any we fair under at value that riving requires these facts, resort to unrealistic and uneconomical valua- fantastic, tions. with Court agree Judge Weight
I peculiar under the in this circumstances that, case, price “in purchase correct treating independent measure of separate a value as predominant it.” I cannot according to believe weight Pennsylvania owned such that as publicly utility, these disposed Avouldhave Light Company, Power not detriment its shareholders were it assets price adequately the sale $250,000 convinced disposition. true at represented value time not Power & could Light Company fair alone heating plant a steam conceive as be such purposes Avould determined by value reproduction formulae as cost and egregious *8 knew Light Company Power cost. value of the steam facilities and fair the true and, customers heating the service devoted did satisfied with the rate of being return, apparently for the increased rates services now under not seek and unrealistic These fantastic values sideration. remand reproduction cost should on cost and Commission. consideration only passing he given circumstances of Com- case, under I feel, completely. them ignoring justified mission I reverse Hence, would the action of the Court and affirm the order of the Commission. Eagen
Mr. joins opinion. Justice in this dissenting County Rockwell York Retirement Board, Appellant.