Opinion ID: 2312375
Heading Depth: 1
Heading Rank: 3

Heading: Interest on Plant under Construction.

Text: Under the Uniform System of Accounts funds invested by the Company in current construction are placed in a special account. When the construction is completed these amounts are transferred to another account. The amount of plant under construction as of December 31, 1956 (the mid-point of the test year), is included in the rate base, so that the Company is permitted to earn a return on the investment although it is not income-producing. Five per cent of that amount is credited to the Company's income as interest on Plant under Construction. This is a book entry, only, designed to avoid a duplication of earnings. The amount included in the rate base, calculated on an intrastate basis, was $390,805. The Company urged that in computing revenues only five per cent on that amount should be included as interest on plant under construction. The Commission ruled that all interest on plant under construction accrued from time to time during the entire test year (calculated on an intrastate basis) should be credited to revenue. The Superior Court reversed, holding the Company's position to be correct. We agree with the Superior Court. If the Company's revenues are to be credited with all interest during the test year, then the entire year should have been taken into consideration in determining the amount of plant under construction. The amount of interest to be credited to revenues should be five per cent of the amount of plant construction included in the rate base. The Commission's method was manifestly one-sided, and hence unfair. The Commission makes two arguments in support of its ruling. First, it is said that the total of interest under construction credited during the year should be included because this item is no different in principle from revenues received by the Company for its exchange services. The fallacy of this argument is manifest. Interest under construction is not revenue in a real sense; it does not, like exchange revenue, represent money received by the Company. As above stated, it is a mere book entry  an accounting device to avoid duplication of earnings on the amounts invested in plant under construction. It is therefore directly related to the amount of plant under construction included in the rate base. Second, it is urged that the decision of the Commission on the matter here involved was peculiarly one within its discretion and should not be disturbed, because its solution requires the application of purely accounting principles. This argument is reiterated at length in the last division of the Commission's brief. It is said that accounting questions are questions of fact, and the Commission's determination of such questions should not be disturbed unless capricious or against the clear weight of the evidence. No doubt in some cases this rule would apply, but to the point here involved it does not apply. The question is one of basic fairness or unfairness in the use of accounting methods. There is no disputed question of fact The suggestion that because the point involves accounting it should be left to the Commission would, if approved, certainly have the advantage of relieving the courts from the necessity of grappling with many questions in these rate cases. Without doubt there has been a tendency in recent years for the courts to sustain the findings of administrative bodies if it is possible to do so, whether accounting or some other field of expertise is involved. Possibly this is desirable; certainly, as above noted, it is a way of relieving the courts from the consideration of some difficult questions. But there is something to be said upon the other side of the matter. The Public Service Commission performs primarily a legislative function. It is here in our Court as a litigant, not as a judicial tribunal. The presumption in favor of the acts of a judicial or quasi judicial tribunal does not apply with the same force to a legislative tribunal, nor to a tribunal which possesses not only to some extent the powers of a court, but also to some extent the powers of a public prosecutor. Public Service Gas Co. v. Board of Public Utilities Com'rs, 84 N.J.L. 463, 87 A. 651, 653, L.R.A.1918A, 421, quoted with approval by the Supreme Court of New Jersey in Petition of Public Coordinated Transport, 5 N.J. 196, 74 A.2d 580, 590. The General Assembly has committed to the courts broad powers of review of the decisions of the Commission (26 Del. C. § 192). The courts are required, we think, to examine the evidence before the Commission and the reasoning on which its findings are based. Cf. Petition of Public Consolidated Transport, supra. This is not to say that the reviewing court will not give considerable weight to the Commission's findings, especially on disputed factual questions. But the statutory right of the utility to review by the courts must be safeguarded. In the light of these principles we do not think that the Commission's findings and opinion were treated by the Superior Court with less than proper dignity, as its counsel suggests. The ruling of the Superior Court on this point is affirmed.