Case Name: Pittsburgh, Appellant, v. Pennsylvania Public Utility Commission
Court: Superior Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1953-07-14
Citations: 174 Pa. Super. 4
Docket Number: Appeals, No. 32
Parties: Pittsburgh, Appellant, v. Pennsylvania Public Utility Commission.
Judges: Before Rhodes, P. J., Hikt, Reno, Dithrich, Ross and Gunther, JJ.
Reporter: Pennsylvania Superior Court Reports
Volume: 174
Pages: 4–19

Head Matter:
Pittsburgh, Appellant, v. Pennsylvania Public Utility Commission.
Argued March 25, 1953.
Before Rhodes, P. J., Hikt, Reno, Dithrich, Ross and Gunther, JJ.
Anne X. Alpern, City Solicitor, for City of Pittsburgh, appellant.
James L. Stern, Assistant City Solicitor, with him Abraham L. Freedman, City Solicitor, for City of Philadelphia, appellant.
Joseph R. Rose, with him M. E. Goldstein, for Pennsylvania C.I.O. Council, appellant.
William J. Grove, Assistant Counsel, with him Lloyd S. Benjamin, Counsel, for Pennsylvania Public Utility Commission, appellee.
Clarence W. Miles, with him William B. Rafferty and John B. King, tor Bell Telephone Company of Pennsylvania, intervening appellee.
July 14, 1953:

Opinion:
Opinion by
Gunther, J.,
Bell Telephone Company of Pennsylvania (hereinafter called Bell) filed with the Public Utility Commission a proposed tariff for increased rates on January 7, 1952, expected to produce an increase in annual revenue of about $33,000,000. The rates were suspended by the Commission until December 7, 1952. After extended hearings the Commission issued an order December 1, 1952, authorizing rate increases totaling over $21,000,000.
The Cities of Pittsburgh and Philadelphia and the Pennsylvania C.I.O. Council have appealed from the Commission's order, alleging error in the findings relating to accrued depreciation and reproduction cost.
1. Accrued Depreciation. The Commission was presented with three measures of accrued depreciation: Bell's book reserve for depreciation, reserve requirement study, and Bell's own estimate of 24.83%. The latter was arrived at by starting with the Commission's finding. of accrued depreciation of 28.06% as of December 1, 1948, when the previous hearings were held, and working forward to 1952 by estimating the change in depreciation. The earlier finding was based upon a detailed study of the actual depreciation of. that time and such finding was affirmed by this Court in Pittsburgh v. Pa. P.U.C., 169 Pa. Superior Ct. 400, 82 A. 2d 515. After study of these three factors, the Commission concluded that the accrued depreciation was 26% as to original cost, and 29% as to reproduction cost. .
The order of the Commission must be affirmed if supported by sufficient competent evidence, and if no errors of law appear. Pittsburgh v. Pa. P.U.C., 165 Pa. Superior Ct. 519, 69 A. 2d 844. Of the three measurements appellants have no quarrel with the first two, but maintain that Bell's estimate of accrued depreciation was based upon incompetent evidence.
We see no error in the admission of Bell's study of relative depreciation between 1948 and 1952. It is true that the Commission in its order states that Bell's estimate of accrued depreciation is not a study of the absolute depreciation as of 1952, but .only- of relative depreciation. Yet that is exactly why it was introduced into evidence, and there is nothing to indicate that the Commission considered it as more than a . reasonable estimate. Since a finding of accrued depreciation was made less than four years earlier, there is no reason to require a completely new total appraisal of all Bell's assets. The prior finding is entitled to full consideration, though not res adjudicata. Philadelphia v. Pa. P.U.C., 162 Pa. Superior Ct. 425, 57 A. 2d 613. From that prior finding, Bell revised its estimate downward based on evidence that it has enormously expanded new plant in three years, and on the decrease in depreciation reserve requirements. The record is replete with testimony regarding the installation of vast new plant in the last few years. The three General Plant Managers of Bell testified at length and gave conclusions on depreciation based on physical inspections and consideration of such factors as the relative amounts of found troubles, 1918 as compared to 1951-52.
Appellants further complain that there was no evidence of obsolescence or inadequacy as to most of Bell's plant. Bell's engineer testified as to these factors only as to 7% of the plant, on the theory that these factors are undeterminable as to that portion of the plant for which no requirement plans have been made. The Commission therefore had before it an absolute evaluation of depreciation on only 7% of the plant, and a relative evaluation as to the remainder. While we do not say that this is the best method of estimating accrued depreciation, it is not therefore completely without merit. The Commission did not, as appellants state, declare Bell's method of estimate invalid. The weight to be given such estimate is, however, up to the judgment of the Commission.
Appellants admit the competency of the book reserve for depreciation and the reserve requirement study and contend that they are the only competent measures introduced into evidence. In view of what we have said above, we disagree and hold that the Commission also properly gave consideration to Bell's estimate based upon relative depreciation. "The Commission was not bound to accept any particular method of estimating accrued depreciation." Pittsburgh v. Pa. P.U.C., 171 Pa. Superior Ct. 187, p. 206, 90 A. 2d 607. The findings in respect to this factor necessarily repre sent a judgment figure, and the exact weight to he giren any particular estimate is for the Commission alone. Blue Mountain Telephone & Telegraph Co. v. Pa. P.U.C., 165 Pa. Superior Ct. 320, 67 A. 2d 441.
The final complaint oh this subject is that the Commission went outside the récord in making its conclusions. After concluding that BelPs accrued depreciation was 26% as to original cost, the Commission corrected that figure to 29% with respect to reproduction cost on the basis of its knowledge of the effect of the generally rising price level during the past forty years. The order stated that, recent cases had indicated a certain general percentage spread between the two applications of accrued depreciation and the Commission used the knowledge gained therein as a spring-board for its revision from 26% to 29%.
2. Reproduction Gost. In finding fair value the Commission considered depreciated original cost, depreciated reproduction cost based on average prices for periods of from one year to five years, and on a spot price, dated during the hearings. Appellants contend that the Commission erred in not requiring Bell to submit estimates based on a ten year average price period. They cite Pittsburgh v. Pa. P.U.C., 171 Pa. Superior Ct. 187, 90 A. 2d 607, which held that the Commission erred in refusing consideration of evidence offered to show ten year average prices. There is no question here of refusing to consider evidence; appellants, in effect, are asking us to hold that the Commission must require a ten year price study. This we have never held and do not now do so. Although ten year price studies have been used and approved, Equitable Gas Co. v. Pa. P.U.C., 160 Pa. Superior Ct. 458, 51 A. 2d 497, we have also affirmed findings based oh studies of five years and even less. Thus, in Pittsburgh v. Pa. P.U.C., 169 Pa. Superior Ct. 400, 82 A. 2d 515, we upheld the right of the Commission to base its findings on a study of 26 months average prices. If price "levels are inconstant the judgment of the Commission governs' and we cannot substitute our discretion for it." Pittsburgh v. Pa. P.U.C., 169 Pa. Superior Ct. 400, p. 405. The Commission found six different measures of value: original cost, and reproduction cost at one, two, three, four and five year price levels. It gave the several measures of value such consideration as it found to be just and proper, and we cannot substitute our judgment by requiring a ten year study.
Appellants further object to the consideration given to one of Bell's four methods of reproduction cost estimates. In trending original cost in regard only to a portion of its plant, Bell used price indices supplied by Western Electric Company. The complaint now is that although the index numbers were introduced into evidence the complete indices themselves were not offered. Yet the record discloses that appellants did not request the production of these indices, or even ask the expert witness testifying in regard to them to produce samples of the. original indices. This is a system which has often been used to trend prices and was explained fully and carefully by Bell's witness. It is not apparent why an enormously voluminous set of exhibits should be required as evidence when a more reasonable synopsis thereof is introduced and carefully explained and correlated. The testimony establishes that the price indices related to typical equipment sold by Western Electric Company to Bell for all the latter's plants throughout the country, and the standardization of such equipment was adequately set forth. The possible weaknesses in the price index- trending system were recognized by the Commission, which, however, found it to be a reasonably accurate set of index numbers. The weight to be given them is, of course, for the Commission. "
Order affirmed.
President Judge Rhodes and Judge Ross dissent.
Weight, J., took no part in the consideration or decision of this case.