Court Opinion

ID: 9753158
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:01:20.142371+00
Date Added: 2024-06-11T07:27:31.188467
License: Public Domain

Wolcott,
Justice (concurring in part and dissenting in part).
The petition for re-argument filed by the Company raises two questions for our consideration, viz., (1) Did the Public Service Commission comply with the provisions of 26 Del. C. Ch. 1, when it fixed a rate base for the company of $22,000,000, and (2) Does the Superior Court have the authority under 26 Del. C. Ch. 1, on appeal from the Public Service Commission, if it finds that the Commission has committed error, to make its *222own findings and enter an order directing the Commission to give effect to those findings?
I concur in the opinion of Justice Bramhall upon the first question holding that the Public Service Commission committed error in fixing the Company’s rate base at $22,000,000, but in view of the importance of the question I feel justified in setting forth the following additional reasons which in my view also support his conclusion. 26 Del. C. § 155, requires the Public Service Commission to fix “just and reasonable” rates to be charged by any public utility. It is required to establish rates which will yield a fair return to the utility upon the present fair value of its property dedicated to public use. All are agreed that this is the requirement of the statute. All are also agreed that a rate of return of 6*4% upon the present fair value of the utility’s property is just and reasonable. The only point in dispute, therefore, is the figure representing the present fair value of the utility’s property dedicated to the public use.
26 Del. C. § 126, sets forth a number of factors which the Commission may take into consideration in fixing the fair value of a utility’s property dedicated to public use. Among these elements are original cost, reproduction cost, and “the probable earning capacity of the property under particular rates”. There are other factors included in this code section but they are obviously inappropriate to enter into the fixing of value of this Company’s property in the state of this particular record.
The entire statute is designed to supply by regulation the missing element of competition, which in the case of competitive businesses protects the public from excessive and exorbitant charges. At the same time, the statute is designed to insure through regulation that the utility will receive a fair return upon the current value of its property devoted to public use. This means that the rates to be established must be such as to permit the utility to earn sufficient income to enable it to pay its operating expenses, to add sufficient money to its surplus to attract new capital for expansion purposes, and to pay a fair return to *223its stockholders. United Ry. & Electric Co. of Baltimore v. West, 280 U. 5. 234, 50 S. Ct. 123, 74 L. Ed. 390; Federal Power Commission v. Hope Natural Gas Co., 320 U. S. 591, 64 S. Ct. 281, 88 L. Ed. 333. Rates therefore, must be fixed upon the basis of a value which will insure a profit sufficient to induce the investment of private capital in the business. Consolidated Gas Co. of New York v. Newton, D. C., 260 F. 231.
It is obvious that there is no hard and fast mathematical formula to be applied in all cases which will establish a just and reasonable schedule of rates. The problem is largely one of sound judgment to be exercised in the light of current conditions. One approach to the problem is to undertake to estimate the present fair value of the utility’s property and to apply a determined rate of return to it in order to compute the amount of income the utility will be permitted to earn. However, this is only a proper beginning to a solution. It cannot be the sole criterion for the reason that reliance upon this, approach alone would ignore as a practical matter the earnings the utility must have in order to operate at a fair profit. It is for this reason that Sec. 126 authorizes the Commission to take prospective earnings into account in determining the fair value of the utility’s property.
In the opinion in this cause of the former majority of this Court, inclusion in Sec. 126 of authority to take prospective earnings into consideration was spoken of as circuity of reasoning, since the fair value of the utility’s property could be fixed by considering the rates allowed, and at the same time the rates would be fixed upon the basis of the fair value of the property. However, this is not necessarily the fact. I think Sec. 126 requires the rate-fixing body to determine the present fair value of a utility’s property, and then to test that finding by a determination of the utility’s prospective earnings from the rates established by that value. If the earnings allowed the utility by an application of the rate of return to the proposed valuation does not permit the utility to pay its operating expenses, add to surplus and pay a reasonable return to its stockholders, then an error has been made in establishing the fair value of the utility’s *224property. By the application of the test of prospective earnings, it is possible to judge whether or not a proper fair value has been determined. If the rate of return applied to the valuation figure yields insufficient earnings, then the valuation figure is too low.
In this cause, the record demonstrates that the Company to pay its ordinary operating expenses must earn net above taxes approximately $1,700,000. This amount of earnings is required to permit the Company to continue to pay its ordinary dividend, which is not attacked as excessive, to attract additional capital for a necessary $10,000,000 expansion of its plant, to make provision for depreciation of its plant in the light of current inflationary costs, which it is not permitted to do by the ordinary depreciation charge permitted it by the Commission’s regulations, and to add a modest sum to surplus.
The fair value fixed by the Commission of $22,000,000 would allow the Company to earn on the basis of the fixed rate of return net income of approximately $1,375,000 per year. Thus is demonstrated that the fair value placed by the Commission upon the Company’s property is too low.
For the foregoing reasons, and for the reasons set forth in his opinion, I concur in the result reached by Justice BramHALL that the Commission erred in determining the fair value of the Company’s property to be $22,000,000 because that amount is inadequate to give the Company a reasonable return upon the present fair value of its property. I, therefore, join in the decision to remand the cause to the Commission with instructions to reconsider the matter.
Upon the second question raised by the petition for re-argument, viz., the scope of the power of review of the Superior Court over the orders of the Public Service Commission, I dissent from the opinion of the majority of the Court.
26 Del. C. § 192 provides for an appeal from the orders of the Public Service Commission to the Superior Court, and au*225thorizes the Superior Court upon such appeal to “affirm, modify or revise the order of the Commission, in whole or in part, or * * * (to) remand the cause to the Commission for rehearing, in whole or in part.” This section must be read in conjunction with 26 Del. C. § 183(b) which directs the Commission to make its findings “in sufficient detail to enable the (superior) court on appeal to determine the controverted question presented by the proceeding, and whether proper weight was given to the evidence.”
These two particular statutory provisions confer upon the Superior Court broad powers when sitting in review of the orders of the Public Service Commission. No other conclusion is possible. The Superior Court is directed to determine whether or not proper weight was given by the Commission to the evidence before it, and also to “determine the controverted question” and to affirm, modify or revise the orders of the Commission in whole or in part, or to remand in whole or in part, for further hearing.
The majority of this Court interprets this particular statutory language as requiring the Superior Court, upon making a determination that the Commission has committed error, to remand the entire cause to the Commission for rehearing. By this construction of the statutory provisions, the majority has emasculated the clear intention of the Legislature to provide a flexible review of the orders of the Public Service Commission. The majority in effect has ruled that the powers of the Superior Court sitting in review of the Public Service Commission are only those powers any appellate court has inherently. The result reached ignores the grant of authority to the Superior Court to determine the proper weight to he given the evidence and “to determine the controverted question”.
The majority finds an analogy between the appeal provisions of 26 Del. C. §§ 183(b) and 192 and those of 19 Del. C. § 2350(b) allowing an appeal to the Superior Court from an award of the Industrial Accident Board. Upon the basis of this *226supposed analogy the majority concludes that the powers of the Superior Court sitting in review are the same in both instances, and since on appeal from the Industrial Accident Board the Superior Court refuses to make an examination of the facts except to look for support in them for the Board’s findings, Wright v. American Brake Shoe Co., 8 Terry 299, 90 A. 2d 681, the same rule obtains with respect to appeals from the Public Service Commission. This supposed analogy, however, is demonstrated to be an illogical conclusion for several reasons.
First, 26 Del. C. § 183(b) specifically authorizes the Superior Court to determine on appeal from the Public Service Commission the proper weight to be given the evidence in the record. 19 Del. C. § 2350(b), however, contains no similar grant of authority to the Superior Court sitting in review of awards of the Industrial Accident Board. The majority does not explain how this difference in the reviewing powers of the Superior Court fits into its supposed analogy.
Second, the Public Service Commission and the Industrial Accident Board are administrative bodies with inherently different functions and methods of procedure. The Industrial Accident Board is a quasi-judicial Board performing judicial functions. It determines issues raised by litigants before it. It sits as an impartial referee. In many instances, the issues are tried before it by counsel representing the litigants. Appeals from the Industrial Accident Board are taken by the losing litigant and opposed by the successful litigant. The Industrial Accident Board is not a party to the cause which it decides. On the other hand, the Public Service Commission is not a quasi-judicial body at all, but an administrative body exercising delegated legislative powers. On its own motion, it may initiate the cause it has to decide. It represents the state. It retains its own counsel to present the state’s side of the cause. It acts as litigant, lawyer and judge in the determination of the cause initially. It is a necessary party to an appeal taken from its orders and, as a matter of fact, it appears before this Court as appellant in this cause. The major*227ity brushes aside this distinction in the nature of the two bodies as being of no consequence, yet this distinction is considered significant by some courts as I will point out later on.
Third, the statutes providing for review of the actions of these two administrative bodies in themselves are different in defining the powers of the Superior Court sitting in review.
The power of the Superior Court on appeal from the Industrial Accident Board is limited by the authority given it to “reverse, affirm, or modify the award of the Board, or remand the cause to the Board for a rehearing.” In the case of appeals from the Public Service Commission, however, the Superior Court is authorized to “affirm, modify or revise * * * in whole or in part”. The majority says that “revise” means the same as “modify”. If the word “revise” is synonymous with the word “modify”, it may properly be asked why both words were included in the appeal section of the Public Service Commission Act. Certainly, there must have been some purpose in including both words. As a matter of fact, the words are not synonymous. The word “revise” is defined, inter alia, as “to make a new, amended, improved, or up-to-date version of; to subject to revision.” Its synonyms are: correct, rectify, emend, remedy, redress, amend and reform. “Modify”, on the other hand, is defined as “to make somewhat different; vary; as, to modify the details of a plan.” Its synonyms are: change, alter and vary. There is, therefore, a difference in meaning between the two words and the Legislature in providing review of the actions of the Public Service Commission by revision must have intended a more flexible means of review than is the case with respect to the Workmen’s Compensation Board.
Thus, a comparison of the two statutes and the nature of the Public Service Commission and the Industrial Accident Board demonstrates that an attempt to draw an analogy from one to govern the other is unwarranted. This conclusion finds support in the decisions of courts of other jurisdictions.
*228In Petition of Public Service Coordinated. Transport, 5 N. J. 196, 74 A. 2d 580, the Supreme Court of New Jersey had before it for review the reasonableness of rates fixed by the Board of Public Utility Commissioners. Recognizing that rate-making is a legislative and not a judicial function, and that the Legislature had delegated its rate-making power, the court, nevertheless, held that when the reasonableness of a fixed rate is challenged, a reviewing court is in duty bound to weigh the evidence and resolve for itself the issue of reasonableness irrespective of the findings of the Commission in that respect. The only limitation upon the exercise of this reviewing authority is that courts are not permitted to merely substitute their own judgment for that of the legislative body.
Similarly, in State v. Hampton Water Works Co., 91 N. H. 278, 18 A. 2d 765, 19 A. 2d 435, the Supreme Court of New Hampshire, while recognizing the training and experience of the members of a Commission fixing rates, nevertheless, examined for itself the record made before the Commission not only for errors of law but to satisfy itself from a clear preponderance of the evidence that the rates fixed were in fact unjust and unreasonable. The court then made its own determination of fair value of the utility’s property and remanded the cause for further proceedings consistent with its finding.
See, also, General Foods Corp. v. Brannan, 170 F. 2d 220; Manlowe Transfer & Distributing Co. v. Department of Public Service, 18 Wash. 2d 754, 140 P. 2d 287, 155 A. L. R. 928, and East Ohio Gas Co. v. Public Utilities Comm., 133 Ohio St. 212, 12 N. E. 2d 765.
The foregoing authorities indicate that a reviewing court as a general proposition is not entirely helpless to correct the errors of an administrative body to which legislative authority to fix rates has been delegated, even though the errors committed be those of fact as well as law.
I think the statute confers upon the Superior Court broad powers on appeal to correct the errors of the Public Service *229Commission. These powers are to be exercised in the sound judicial discretion of the Superior Court. Depending on the state of the record before it, and the controverted question to be determined, the Superior Court in its discretion must tailor its own action to fit the particular circumstances of the cause. If the record presented permits of the final settlement of the controverted question, the Superior Court should end the matter. If, on the other hand, further hearing is necessary, the Superior Court should remand the cause to the Commission. Needless to say, the abuse by the Superior Court of its discretion in this respect is reviewable by this Court.
What was the state of the record before the Superior Court? There was no basic conflict of fact between the Commission and the Company. Indeed, all of the basic facts presented to the Commission were obtained from the Company’s records. The sole controversy presented for decision was one of theory. The Commission’s counsel argued that the fair value of the Company’s property must predominantly reflect the original cost depreciated of the Company’s plant. The Company, on the other hand, urged that the fair value must reflect predominantly the reproduction cost depreciated of its plant. The Commission accepted neither theory but arbitrarily reached a conclusion which on the record was an unjustified compromise between two conflicting theories. The Superior Court examined the record and concluded that the Commission’s theory was wrong and that the Company’s theory was right. With this conclusion, the majority of this Court now agrees.
Inasmuch as this ruling against the Commission made necessary the adoption of the opposing theory in view of the fact that the record made before the Commission permitted only this choice of alternatives, in my opinion the Superior Court quite properly went ahead and entered an order directing that the alternative theory be given effect. In so doing, it is true that certain adjustments were made by the Superior Court in the estimates of reproduction cost presented by the Company. Concerning these corrections, however, there can be no real dispute. *230The Superior Court fixed a fair value by taking 90% of the Company’s reconstruction cost figures in order to compensate for criticisms made of those figures by the Commission’s expert witnesses. The result would yield a net income after taxes to the Company of approximately $1,650,000.
Thus, applying the test of prospective earnings based upon an estimated fair value, it appears that the result reached by the Superior Court is sufficiently close to the anticipated income requirements of the Company as to warrant the conclusion that it is just and reasonable. Under the circumstances, therefore, I think the Superior Court was correct in exercising its sound discretion to save time and expense and to end litigation. It did for the Commission that which the Commission will probably have to do upon the remand of this cause.
In my opinion, there has been no showing of abuse of discretion on the part of the Superior Court, and, accordingly, I think that its judgment should be affirmed.