Opinion ID: 1720472
Heading Depth: 1
Heading Rank: 6

Heading: Increased Payroll Costs

Text: The company contends that the cities erred in eliminating the company's adjustments to operating expenses that reflected increased payroll and related expenses in the amount of $434,360 that became effective July 1, 1973. A witness for the cities testified that these increased costs, the amount and certainty of which are not in dispute, would be offset by increased worker productivity and possible gains in efficiency through the adoption of technological improvements. Although it has been held that such offsets to increased costs are proper when established by the record, see, e.g., Pacific Telephone & Tel. Co. v. Public Utilities Com'n, supra, we view the testimony of the cities' witness regarding this question as resting more upon speculation and assumption than upon fact or reasonably demonstrable projections. The company's witnesses testified that any increase in productivity was recognized and reflected in the block type rate design employed by the company, whereby increased sales units of power to a given customer are priced at lower prices per unit to reflect the lower labor costs of providing such increased amounts of power. Moreover, the company's evidence demonstrated that the growth in kilowatt hour sales per customer was substantially less than it had been in the past and that it was below that projected in the company's 1974 budget. In short, we conclude that the cities' finding that the known increased costs of payroll would be offset by assumed increases in productivity and efficiency was not supported by substantial evidence and therefore must be set aside.