Opinion ID: 1297749
Heading Depth: 1
Heading Rank: 14

Heading: Donations, Contributions, and Service Club Dues.

Text: [34] During the test year Pacific recorded on its books of account $160,000 of dues, donations and contributions as intrastate operating expense, and charged an additional $542,000 to its stockholders. But in this rate proceeding Pacific sought to have the latter sum likewise included in operating expense, which would result in assumption by ratepayers of the entire $702,000. The commission found it reasonable to increase the test-year operating expenses by $145,000 over the recorded amount for this item, and allowed a total of $305,000. Pacific challenges as arbitrary the resulting disallowance of $397,000 (i.e., some 56 1/2 per cent) of the amount claimed by it, and again charges the commission with erroneous failure to find in accordance with Pacific's assertion that in every case the contributions and dues were reasonable in amount. Amici curiae on behalf of various recipients of Pacific's contributions support this challenge, pleading worthiness of their causes and their need for funds. Pacific states that its payments fall into four broad categories: (1) Contributions to united funds, community chests and the Red Cross, (2) contributions to colleges and universities, (3) contributions to hospitals, (4) contributions to various cultural organizations and dues to chambers of commerce and service clubs. It further appears that Pacific encourages its employees to make similar contributions and believes that its ratepayers should do so. However, Pacific's present attempt to charge all of its own contributions as an operating expense to be borne by ratepayers is plainly unwarranted. The commission in its decision observes that Dues, donations and contributions, if included as an expense for rate-making purposes, become an involuntary levy on ratepayers, who, because of the monopolistic nature of utility service, are unable to obtain service from another source and thereby avoid such a levy. Ratepayers should be encouraged to contribute directly to worthy causes and not involuntarily through an allowance in utility rates. [Pacific] should not be permitted to be generous with ratepayers' money but may use its own funds in any lawful manner. The commission further points out that, conceding worthiness of the donees and benefits in good will reaped by Pacific, many ratepayers may not approve various of the donations made and they should be permitted to exercise their own free choice in such matters. Assuming that as argued by Pacific many of the objects of its bounty might otherwise require or receive support from taxpayers and that it is thus helping to keep taxes from rising, nevertheless Pacific is not authorized to exact from its customers payments in lieu of taxes. The commission's decision notes that the Federal Communications Commission in June 1963 refused American's request for permission to charge all contributions directly to operating expenses. [35] We believe that the view expressed by the further declaration in the decision now before us that Pacific hereby is placed on notice that it shall be the policy of this Commission henceforth to exclude from operating expenses for rate-fixing purposes all amounts claimed for dues, donations and contributions (italics added) states the correct rule; it also accords with the approach adopted in certain other jurisdictions. (See Chesapeake & Potomac Tel. Co. v. Public Service Com. (1963) 230 Md. 395 [187 A.2d 475, 485 [8]], and cases there cited.) A contrary holding is not required by decisions of other courts and other commissions, permitting all or part of a utility's contributions to be charged against its ratepayers. Accordingly, although the commission erred in allowing a total of $305,000 for donations, contributions, and service club dues as an operating expense in the test-year period, Pacific was not prejudiced thereby and none of the parties has challenged the commission's decision on the ground that the allowance was excessive. It may be emphasized that the commission's declared future policy does not purport to prohibit the utility from making contributions but only precludes charging them against its ratepayers. Further, we have no doubt of the importance of the contributions to the donees, as so eloquently expressed by able counsel appearing in their behalf, or that the funds so received will be devoted to beneficial uses. However, we hold that the policy adopted by the commission to exclude such contributions from operating expenses for rate-fixing purposes is correct.