Opinion ID: 2391146
Heading Depth: 1
Heading Rank: 15

Heading: summary as to income and expenses

Text: Under the circumstances of this case we are unable to hold that error prejudicial to the rights of the Company was committed by the Board in its determination and order of August 15, 1951 relative to the expense-income factor. In this case the adjustments made by the Board constitute a relatively small change in the rate of return actually achieved on the rate base. We are satisfied that even if the Company's claims were allowed in their entirety, that rate would be neither confiscatory nor unreasonable. Atlantic City Sewerage Co. v. Bd. Public Utility Com'rs, supra, 128 N.J.L., at p. 372. Cf. Driscoll v. Edison Light & P. Co., supra, 307 U.S. 104, 59 S.Ct. 715, 83 L.Ed., at pages 1145-1146; Dayton P. & L. Co. v. Public Utilities Commission, supra, 292 U.S. 290, 54 S.Ct. 647, 78 L.Ed., at page 1280. Further, the burden of proof on these items is upon the Company and it has not been borne in this case. See In re New Jersey Power & Light Co., supra, 9 N.J., at pp. 526-527.
The rate of return found to be reasonable by the Board in the 1947 and 1949 proceedings was 5.6% and the Company did not appeal in those cases. In the present case the Board found the actual indicated rate of return on the redetermined rate base ($77,836,000. larger than in the determination in 1949) to be 6.07%, increased to 6.37% after adjustment of the income-expense factor hereinbefore discussed. This rate of return it found just and reasonable. In this connection the question involved is whether the Board correctly applied the standards laid down by the courts of this State, viz.:    sufficient to encourage good management and furnish a reward for efficiency, to enable the utility, under efficient and economical operation, to maintain, and support its credit; and to enable it to raise money necessary for the proper discharge of its public duties. Public Service Coordinated Transport v. State, supra, 5 N.J., at p. 225; Central R. Co. of N.J. v. Dept. of Pub. Utilities, supra 7 N.J., at p. 260. It should be added to these general principles, all of which are pertinent in the present case, that when the return under the existing rates is within the range of reasonableness, the zone between the lowest rate not confiscatory and the highest rate fair to the public, the rates are reasonable. In re New Jersey Power & Light Co., supra, 9 N.J., at p. 534, citing Public Service Coordinated Transport v. State, supra, 5 N.J., at page 225; Michigan Bell Tel. Co. v. Michigan Public Service Com., supra, 332 Mich. 7, 50 N.W. 2 d, at pages 838, 839. Cf. Driscoll v. Edison Light & P. Co., supra, 307 U.S. 104, 57 S.Ct. 715, 83 L.Ed., at page 1145. The expert testimony in this case as to the rate of return which would be fair to the Company and its investors ranged from 5.25% to 8.0%. Witnesses testified to costs of debt capital applicable to this utility company ranging from 2.85% to 3.2%, cost of equity capital, 7.41% to 10% and to percentages of debt in capital structure of the Company (hypothetical, not actual) ranging from 33 1/3% to 52.8%. These experts' computations were considered and scrutinized by the Board, as the analysis expressed in its decision demonstrates. The coordination and evaluation of expert evidence is a matter of considerable difficulty and has been committed to the Board as a body contemplated to bring an informed judgment from specialized experience to the balancing and resolution of the complex factors involved. Cf. D.L. & W.R. Co. v. City of Hoboken, 10 N.J. 418, 425 (1952). We see no necessity to amplify the Board's dissection of the opinion evidence in this category. Its decision reasonably demonstrates fallacies in the approach of the Company witnesses and greater reliability of the calculations employed by an intervenor's witness. The record supports its conclusions in this respect and we see no occasion to disturb them. The principal deviation appears to be in the factor of debt ratio in the capital structure of the Company. The Board's finding that the witness for the intervenor used a ratio consonant with existing and foreseeable fact has evidential support in the record. The Company argues that this factor is unsound because it is related to a temporarily distorted capital structure due to excessive post-war demand for service. See Alabama Public Service Comm. v. Southern Bell Tel. & Tel. Co., 253 Ala. 1, 18, 22, 42 So. 2 d 655, 669, 672 ( Sup. Ct. 1949). A reasonable forecast for the future is required. The evidence in this case indicates that for the Company an excessive demand for new service continued to exist, and there was no evidence that the so-called distorted debt structure would not continue during a period reasonably forecast to be covered by the current rates. Therefore in this respect the Board did not exceed its authority in giving greater weight to the opinion evidence in question, and lesser weight to the opinion evidence based upon a hypothetical normal debt ratio. If actual inequities result, the Company may file new schedules under the statute.