Opinion ID: 1264723
Heading Depth: 1
Heading Rank: 1

Heading: The Method of Rate Determination

Text: We agree with appellants' contention that Commissioner Catterall's method of determining rates is not sound. He inquired into a proper return only on the common equity of the Company as a whole, and he made his conclusion in terms of the annual revenue needed by the Company as a whole. Rates fixed by the Commission should be just and reasonable to the consumers whose rates are fixed, as well as to the Company. To determine only the fair return from all customers, jurisdictional and nonjurisdictional, does not carry out the Commission's function of determining a fair return from jurisdictional customers. The Commission should fix just and reasonable rates to be charged jurisdictional customers in relation to the Company's cost of serving them. If rates for jurisdictional customers are fixed upon estimates of total revenues from jurisdictional and nonjurisdictional customers, without regard to jurisdictional rate base, jurisdictional customers may be charged rates disproportionate to the Company's cost of serving them. The Commission carries out its function by looking to just and reasonable rates for jurisdictional customers in relation to the cost of serving them, leaving it to the Company to secure a fair return from nonjurisdictional customers. Nevertheless, we disagree with appellants' further contention that disapproval of Commissioner Catterall's method means disapproval of the conclusion reached by the majority of the Commission. Appellants contend that the majority did not make an independent finding that a rate increase of $22,482,000 was just and reasonable. Rather, they contend, the majority accepted the determination improperly arrived at by Commissioner Catterall and applied the rate base/rate of return method only to justify that determination. We cannot accept appellants' characterization of the majority opinion. Instead, we must accept the majority opinion according to its tenor as an independent determination by Commissioners Hooker and Dillon, applying the rate base/rate of return method, that a rate increase of $22,482,000 was just and reasonable. We have approved that method, which relates rates to the cost of service. If, therefore, the rates so determined are within the zone of the Commission's discretion as a legislative body and are not based on error of law, we must affirm. City of Norfolk v. Chesapeake and Potomac Tel. Co., 192 Va. 292, 64 S.E.2d 772 (1951).