Source: https://openjurist.org/226/f2d/29
Timestamp: 2019-04-18 14:37:45+00:00

Document:
Petition for Rehearing in Banc Denied Sept. 9, 1955.
Certiorari Denied Nov. 21, 1955.
Mr. George Spiegel, apellant pro se.
Mr. Lloyd B. Harrison, Sp. Asst. Corp. Counsel for the District of Columbia, with whom Messrs. Vernon E. West, Corp. Counsel, and J. Hampton Baumgartner, Jr., Asst. Corp. Counsel, were on the brief, for appellee Public Utilities Commission of the District of Columbia.
Mr. W. V. T. Justis, Washington, D.C., with whom Messrs. Edmund L. Jones, F. Gloyd Awalt and F. Keith Kelly, Washington, D.C., were on the brief, for appellee Capital Transit Co.
Before WASHINGTON, DANAHER and BASTIAN, Circuit Judges.
This is an appeal by a transit rider from a judgment of the District Court affirming an order dated January 20, 1954, of the Public Utilities Commission of the District of Columbia, which granted [96 U.S.App.D.C. 308] a rate increase to the Capital Transit Company. The opinion of the District Court (Judge Keech) sets forth the facts in some detail. Allied Civic Group, Inc., v. Public Utilities Commissioner, D.C. 1954, 125 F.Supp. 453.
The appellant relies in this court on two principal contentions, both of which the District Court over-ruled: first, that under the circumstances of this case the Commission cannot properly use a rate base resting on the original cost of the Transit Company's properties, and, second, that the Public Utilities Commission has jurisdiction, which it failed to exercise, to regulate fares for Transit's operations between points within the District of Columbia and points within Maryland. These two contentions are dealt with in Parts 10 and 12 of the opinion of the District Court. 125 F.Supp. 460, 461. In reference to the second point mentioned, we are satisfied that there is no error.
'The Commission has in the past consistently stated, as the rate base, the amount reflecting the historical cost of property used and useful in the Company's transit operations in the District of Columbia, stated at the cost to the owner first devoting the properties to public use, less accumulated depreciation per books-- plus a single working capital allowance in respect of the cost of materials and supplies. See In re Capital Transit Company, Formal Case No. 417, decided August 21, 1952; id., Formal Case No. 413, decided January 4, 1952; id., Formal Case No. 396, decided June 28, 1950.
'For the purposes of this proceeding, we find and conclude that $23,420.691 is the Company's rate base on which a return is allowable.
'Although an 'original cost' basis for rate making is thus continued for the purposes of the present case, it is to be observed that the real value in the market place of the Company's operating properties have been seriously affected by the steady and rapid decline in passenger riding sustained, over a long period of time, except for a brief period during World War II. Economically, the transit industry and the Company are contracting, capital-wise, rather than stable or expanding operations.
'In considering the rights of the investors, we properly give weight to the Company's practical situation as a unit of a 'generally sick industry', beset by competition, and with an investment 'already impaired by economic forces.' Market Street R. Co. v. Railroad Comm. of Cal., 324 U.S. 548, 554 (65 S.Ct. 770, 89 L.Ed. 1171). In this industry, we can and do take account of the practical results of fare increases in respect of the Withdrawal of public patronage from the Company; Id., 324 U.S. at (page) 563-564 (65 S.Ct. 770).
'In view of rapid current decline in transit riding, discussing later, it is obviously in the long-term interest of the investors, as well as the interest of transit riders and the community, that fares be kept at the lowest level consonant with the preservation of the Company in private hands, in a healthy operating condition. Thus, the investors would suffer with the public if, as suggested in the record, excessive fares produced a boycott of the use of mass transit. It is clear that the interests of all are fostered by fare structures and Company policies designed to encourage mass riding.
'Second, we have no duty to impose unreasonable transit fares in order simply that stockholders may earn dividends. Covington & L. Turnp. Road Co. v. Sandford, 164 U.S. 578, 596. (17 S.Ct. 198, 41 L.Ed. 560). We should attempt to set fares sufficient to secure a fair return to the investors 'provided the business is capable of earning it. But regulation does not insure that the business shall produce net revenues.' Federal Power Comm. v. Nat. Gas Pipeline Co., 315 U.S. 575, 586 (62 S.Ct. 736, 86 L.Ed. 1037). No more can be exacted from the public than the service is reasonably worth (Smyth v. Ames, 169 U.S. 466, 547 (18 S.Ct. 418, 42 L.Ed. 819)).
'While under certain circumstances, reliance on a prior proceeding for this purpose might be permissible, such circumstances, do not exist in this case. There is nothing before us to indicate that pertinent local conditions and economic conditions generally have remained static during the intervening years.' Washington Gas Light Co. v. Baker, 1950, 88 U.S.App.D.C. 115, 121, 188 F.2d 11, 17, certiorari denied, 1951, 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686.
'Under the circumstances of this case, we are unable to fix a rate of return high enough to restore the economic decline in the market value of the Company's stock which occurred many years ago. We further conclude that a return that is sufficient to protect the financial integrity of the Company, that will permit of the raising of such additional capital as may be needed for the foreseeable future, and will permit of the payment of reasonable dividends to the investors in equity capital, constitutes a fair rate of return, and that a return falling within the range of 6-1/4% to 6-1/2% will meet these requirements.
The considerations just indicated may, of course, properly be taken into account by the Commission in reaching its final decision. But they must be balanced against other relevant factors. They cannot be regarded, standing alone, as justification for adopting the original cost rate base as contrasted with other possible bases.1 'The investor and consumer interests may so collide as to warrant the rate-making body in concluding that a return on historical cost or prudent investment, though fair to investors would be grossly unfair to the consumers.' Federal Power Commission v. Natural Gas Pipeline Co., 1942, 315 U.S. 575, 608, 62 S.Ct. 736, 753, 86 L.Ed. 1037 (concurring opinion; quoted by the Commission in its order here under review at p. 4).
We are not here expressing a judgment as to what rate base the Commission should have adopted. That is not our function; we could not substitute our own view on such a question-- if we had reached a view-- for that of the Commission. Federal Power Commission v. Colorado Interstate Gas Co., 1955, 348 U.S. 492, 75 S.Ct. 467. Nor are we saying that the Commission may not ultimately be able to justify its adoption of the original cost rate base, if it decides to adhere to that course. But we do say that the decision of the Commission must be based on a 'suitably complete statement' of its reasons for its conclusions. Florida v. United States, 1931, 282 U.S. 194, 215, 51 S.Ct. 119, 75 L.Ed. 291, citing Beaumont, S.L. & W. Ry. v. United States, 1930, 282 U.S. 74, 86, 51 S.Ct. 1, 75 L.Ed. 221. And see Capital Transit Co. v. Public Utilities Commission, 93 U.S.App.D.C. 194, 205, 213 F.2d 176, 186-187 (separate opinion of Chief Judge Stephens), certiorari denied, 348 U.S. 816, 75 S.Ct. 25.
Concluding, as we do, that the report and order of the Commission do not reflect an adequate statement of its reasons for adopting the original cost rate base, we must reverse the judgment of the District Court, with directions to remand the case to the Commission for such further action on its part as may be consistent with this opinion. Pending such further action, which should be taken without unreasonable delay, the District Court may permit the Commission's order to remain in effect. Any new finding or order issued by the Commission will be subject to judicial review in the ordinary course. Under the circumstances, we do not deem it necessary to pass on the remaining contentions of the parties.
1 The same may be said of the Commission's findings-- made in connection with its examination of the investors' situation rather than its study of the rate base problem-- that 'the Company is in an excellent condition financially, as compared to the transit industry generally' (Order, p. 7), and that the market price of its stock in 1953 was about three times what it was in 1949 (Order, p. 5).

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