Opinion ID: 1568028
Heading Depth: 1
Heading Rank: 2

Heading: Electric Bond and Share Company Engineering Charges

Text: The engineering department of Electric Bond and Share provided the licensee with designs and specifications for the Wallenpaupack project under a contract whereby the licensee reimbursed Electric Bond and Share for the salaries paid to the employees of Electric Bond and Share who did the work and in addition paid a stated percentage to cover overhead. The overhead charged averaged approximately 95% of the salaries. The Commission determined that but 50% was properly allocable as overhead to the engineering and other services rendered on the project. It allowed as actual cost to Electric Bond and Share the salaries paid by it plus 50% and disallowed the remaining 45% which amounted to $84,555.75. Our discussion of the Phoenix fee is equally applicable to the Electric Bond and Share charges insofar as those charges represent profits to Electric Bond and Share. However the partial disallowance of these charges raises the additional question whether the Commission erroneously reduced the overhead charges from 95% to 50%. The Commission reached its conclusion because it found from an independent study that Electric Bond and Share in computing the overhead claimed for the engineering department had loaded that department with expenses of other departments without justification. The purport of the licensee's argument is that the findings of the Commission are contrary to the testimony of witnesses called on behalf of the licensee, to the conclusions reached by the licensee's accountants, Haskins & Sells, in their accounting report, and to a report of an examiner of the Federal Trade Commission which contained a study and audit of Electric Bond and Share's engineering overhead. However, the licensee does not contend that the Commission's findings are contrary to the facts as presented by Andrew W. Wilcox, who audited the Electric Bond and Share books for the Commission and of Charles W. Smith, the Commission's chief accountant. The Commission's determination that the facts do not justify more than a 50% allocation of the total overhead of Electric Bond and Share to the engineering department was not reached arbitrarily and capriciously but only after an exhaustive study of the books and practices of Electric Bond and Share. Section 313(b) of the Federal Power Act provides that the finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. This court, therefore, may not disturb the determination of the Commission upon this question. The Commission disallowed three items paid by the licensee to Electric Bond and Share as its proportionate share of engineering salaries and expenses incurred in making preliminary engineering investigations. The Commission disallowed the first two items because there was no evidence that the work related to the Wallenpaupack site or project and also because there was no evidence as to how the charges were allocated. The licensee claims that there is testimony of one witness that as a result of the investigation which cost $10,812.81 and for which the licensee paid as its proportionate share $3,536.26 Wallenpaupack was recommended for development and acquired from the syndicate controlling it. We have examined that testimony and find that it relates to an investigation ordered by the licensee and does not by its terms refer to the investigation ordered by Electric Bond and Share for which the charges were paid. It, therefore, cannot be held as a matter of law that there was evidence to connect the salaries and expenses incurred for the investigation for which the charges were made with the site actually developed. The second item for preliminary engineering studies is for $2,000 which was allocated as the licensee's share of a total of $12,336 paid by Electric Bond and Share as salaries and expenses. The licensee rests its claim upon the plea that since these expenses were incurred prior to 1921 and before construction of the Wallenpaupack project it is impossible to determine the accuracy of the allocation at this late date. The necessary voucher support was not submitted and although the reason for the failure to do so is understandable we cannot hold that the Commission erred in disallowing this item. The third item is for $313.73. Before the commencement of active construction of the project the licensee gave a work order for an engineering study designed to obtain a greater water supply for the Wallenpaupack reservoir. The study had been estimated to cost $3,000 but was abandoned after but a small percentage of the work contemplated had been done. That work had no effect upon the project, either positive or negative, because not enough was accomplished to have any meaning. We conclude that the Commission properly disallowed the three items claimed for preliminary engineering investigations.