Court Opinion

ID: 6894032
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:47:38.631434+00
Date Added: 2024-06-11T16:05:55.249044
License: Public Domain

WILBUR K. MILLER,
Associate Justice (dissenting).
In my opinion, the sliding scale rate arrangement permitted by paragraph 18 of the utility regulatory act here involved must be one which is entered into voluntarily by the utility, and alterations in it may not be made by the Commission without the utility’s consent, and certainly not over its protest. It is my view also that the District of Columbia regulatory act differs basically from the Natural Gas Act, in that its paragraphs 6 and 7 prescribe standards for the Commission to follow in the rate-making process which are not contained in the Natural Gas Act; consequently, the Natural Gas Pipeline and Hope cases1 do not control here. I think that the action of the Commission complained of in this case constituted a departure from the sliding scale arrangement to which the utility had agreed and that when the company refused to acquiesce and withdrew from the agreement theretofore existing concerning a sliding scale scheme, the power of the Commission under paragraph 18 ceased; that the Commission then was relegated to its general rate-making power under the Act, in the exercise of which it is bound to observe the dictates of paragraphs 6 and 7 of the statute. Consequently I cannot concur in the decision of the majority.
To test the correctness of the Court’s opinion in this case, it is necessary first to examine and understand paragraph 18 of the District statute.2 While that paragraph could have been framed so as to eliminate the difficulty of interpretation which is illustrated in the present case, I have no doubt as to its true meaning. In its inception, the paragraph is to the effect that a public utility shall not be prohibited from providing, with the consent of the Commission, a sliding scale of rates. The second sentence, “No such arrangement or device shah be lawful until it shall be found by the commission, after investigation, to be reasonable and just and not inconsistent with the purposes of this section,” means nothing except that the Commission shall not blindly accept a sliding scale rate proposal made by a utility, but that the Commission must investigate and must de*530•cide that the suggested arrangement is reasonable and just, and consistent with the general purposes of the Act, before it can enter into the agreement offered. The purposes of the Act are found in paragraph 2 and, simply stated, are that every public utility must furnish reasonably safe and adequate service and facilities at reasonable, just and nondiscriminatory charges. After having satisfied itself that the sliding scale rate proposed will not result in unreasonable, unjust or discriminatory charges, the Commission is authorized to accept the suggested sliding scale.
The next sentence of paragraph 18, “Such arrangement shall be under the supervision and regulation of the commission,” means nothing more than that the sliding scale arrangement, after having been agreed upon by the. utility and the commission, shall be supervised and regulated by the Commission in order to insure observance of it according to its terms.
Continuing a sentence-to-sentence analysis of the paragraph, .we come to this language, “The commission shall ascertain, determine,, and order such rates, charges, and regulations, and the duration thereof, as may be necessary to give effect to such arrangement, *' * To my mind this simply means that the Commission shall promulgate official rates to give effect to the contractual scheme; not at all does it mean that, under the guise of proceeding pursuant to the agreement, the Commission may order other rates and institute other regulations which will completely change the arrangement, instead of giving effect to it.
The sentence continues, “* * * but the right and power to make such other and further changes in rates, charges, and regulations as the commission may ascertain and determine to be necessary and reasonable, and the right to alter or amend all orders relative thereto, is reserved and vested in the commission notwithstanding any such arrangement and mutual agreement.” 1 have no doubt that the part of the sentence just quoted has caused the majority to conclude that, once a sliding .scale rate proposed by a utility has been accepted by the Commission, the utility thereby has surrendered all its rights under the general rate provisions of the statute and has given carte blanche to the Commission thereafter to depart from the agreement and to substitute a different rate arrangement, without regard to the rest of the statute and without observing any procedure or following any standard set forth in the Act with respect to the method of establishing rates when there is no agreed device under paragraph 18.
If that were the proper meaning of the words last quoted above, no utility managed by sane men would ever venture into such a sliding scale arrangement; *for the management would know that, having done so, the utility would be completely at the mercy of the Commission, no matter how arbitrary its orders might be. It is my view that, in its rational meaning, the latter part of the last sentence of paragraph 18 reserves to the Commission the right to withdraw from the agreed arrangement whenever it shall find and determine that the scheme is no longer reasonable and just. In fact, the closing words of the paragraph, “notwithstanding any such arrangement and mutual agreement,” in my view emphasize that mutuality is essential to the continuance of the sliding scale.
It should be carefully noted that in the sentence there is reserved the power to make “other and further changes in rates * * * notwithstanding any such arrangement and mutual agreement.” Had the Congress intended this to be a grant of power to only one of the parties unilaterally to make changes in what had been a mutual agreement, it would have been apt to say there is reserved to the Commission “the right and power to make such other and further changes in the arrangement as the Commission may determine to be necessary and reasonable.” In addition, words like these probably would have been added: “without regard to paragraphs 6 and 7 of this section,” had the Congress intended to authorize action such as was taken in this case.
But instead, the legislators granted the Commission the power to change the agreed rates “notwithstanding any such arrangement and mutual agreement.” Webster defines “notwithstanding” as “without prevention or obstruction from or by; in spite *531of.” He adds that the word “implies the presence of an obstacle.” Clearly, then, the statutory words mean to reserve to the Commission the right to change rates in spite of a previous mutual agreement, and without prevention or obstruction from or by it. That can only mean that the right is reserved to change rates outside the mutual agreement, not within it. When one party changes a mutual agreement it is no longer mutual.
With the sliding scale permitted by paragraph 18 thus disclosed to be dependent for its validity upon the mutual consent of the utility and the Commission, let us see how this trouble started. On April 26, 1943, the Commission entered an order, the pertinent portion of which is as follows
“It is ordered: That an investigation be made to determine:
“1. Whether the Sliding-Scale method of electric rate regulation shall be abandoned.
“2. Whether the Sliding-Scale method of rate regulation shall be continued in its present form or with modifications of the basic elements of the existing arrangement.
“3. Without limiting the scope of the investigation, what modifications, if any, shall be made in the following basic elements of the present Sliding-Scale arrangement.
“(a) The Rate Base.
(b) Rate of Return.
(c) Depreciation Accruals.
(d) Method of effecting rate reductions.”
Thus it will be seen that the Commission wanted to inform itself so as to decide whether it should withdraw from the agreement concerning the sliding-scale method of rate-making regulation, whether that method should be continued as theretofore, or whether it should be continued with modifications of its basic elements. It will be observed that the Commission wanted to ascertain whether modification should be made in the basic arrangements of (a) The Rate Base, (b) Rate of Return, (c) Depreciation Accruals, and (d) Method of effecting rate reductions.
This was proper procedure under paragraph 18 and particularly the last clause of its closing sentence. For, if after investigation, the Commission should decide that the sliding-scale method of rate-making regulation should be abandoned, well and good. It could then withdraw from thet agreement. If it should decide that the sliding scale method of rate-making regulation should be continued in its present form, well and good. It could be so continued unless the company should withdraw. But if, after its investigation, the Commission should decide that the sliding scale arrangement should be modified as to the rate base, the rate of return, the depreciation accruals or the method of effecting rate reductions, then it could do nothing more than suggest to the utility its desires in those respects, and see if the utility would be willing to continue the agreed sliding scale after such modifications. If it could then impose its will on the utility, without the latter’s consent and over the latter’s protest, the mutuality which is the very basis of the rate regulation permitted by paragraph 18 would be destroyed.
The only way, in my opinion, that the Commission could impose upon the utility a rate base, a rate of return, a treatment of depreciation or a method of reducing rates other than those contained in the arrangement originally proposed and agreed to by the company, as modified from year to year through subsequent agreements, would be to enter upon a general investigation for the purpose of establishing new rates. In that undertaking, paragraph 18 would no longer have significance and it would be the duty of the Commission to pursue the method and to observe the standards, if any, contained in those portions of the Act, other than paragraph 18, which have to do with the general power of the Commission to establish rates.
Pursuant to the order of April 26, 1943, the Commission proceeded with its investigation. Its conclusion was that the rate base should be reduced by $24,700,000; that the rate of return should be reduce'd from 6 per cent to 5% per cent; that the method of depreciating the property should be substantially changed; and that the rate adjustment should be altered so that the annual reduction of one half of the “excess income” should be from net income instead *532of from gross reverme. The sliding scale arrangement so proposed by the Commission bore little resemblance to that which had existed theretofore and to which the company had agreed. The utility refused to accept it, and withdrew from the agreement under paragraph 18, as I think it had a right to do. If I am correct in thinking that no rate regulatory scheme to which the affected utility has not agreed can be valid under paragraph 18, then certainly the Commission’s order complained of here, which set up a plan radically different from that to which the company had assented, can have no validity under that paragraph of the statute.
It follows that the order appealed from in this case is wholly invalid, unless it can stand as a rate order formulated under the general rate-making power conferred on the Commission by the District statute. Not having been reached under the process permitted by paragraph 18, the order is void unless it was arrived at through the procedure and according to the standards prescribed by the remainder of the statute.
In establishing rates under its general power, in the absence of an agreed sliding scale, what must the Commission do ? Paragraph 6 of the Act requires it to ascertain original cost and reconstruction cost, as well as other data. This was not done. Paragraph 7 provides that “the commission shall value the property * * * at the fair value thereof at the time of said valuation.” There was no pretense of compliance with this mandate which contains the imperative “shall.”
How, then, can the Commission’s order be regarded as valid by my brothers of the majority? By the simple expedient of saying paragraphs 6 and 7 have nothing to do with rate-making. It is suggested that the data assembled as required by those paragraphs would be otherwise useful to the Commission, and of interest to the Congress when submitted to it in the Commission’s annual report.
The idea that the fair value valuation required by paragraph 7 was not intended to be used as a rate base is contrary to our decisions. In Public Utilities Commission of the District of Columbia v. Capital Traction Co.,3 this Court said: “It must be remembered, moreover, that the present valuation is not intended as a buying and selling price of the property, but for rate-making purposes.” (Emphasis supplied.) Our opinion in Washington Gas Light Co. v. Byrnes4 describes paragraph 7 of the Act (§ 306, Title 43, District Code) as the “governing statute” concerning the establishment of a rate base. In that opinion it clearly appears that this Court then considered the valuation contemplated by paragraph 7 as an important step in rate-making, and not merely the assembling of comprehensive data for some vague and fanciful purpose.5
But in spite of what seems to be the apparent and logical meaning of paragraphs 6 and 7, and in spite of the prior pronouncements of this Court to which reference has just been made, the majority of the Court feel themselves bound in this case by the Natural Gas Pipeline and Hope cases. I suggest that they misconstrue those cases. The majority seem to conclude that the Supreme Court has announced' a new principle of regulatory law: that the only test which can be applied to any rate order is to examine its result; if that be not confiscatory, then the rates are reasonable and just. The Supreme Court did hold, in the two cases cited, that the end-result of the rates shows whether they are reasonable *533and just. But those cases arose under the Natural Gas Act, which contains no standards except that rates be just and reasonable. There is in that Act no equivalent of paragraphs 6 and 7 of the District statute here under consideration. It does not require the Commission to proceed in any particular manner in determining rates; it contains no mandate as to how a rate base shall be established. Under the Natural Gas Act, as interpreted by the Supreme Court, the Commission may proceed in any manner it may choose — it may even determine rates by lot or guess — so long as the effect of the rates so established cannot be said to be unjust and unreasonable.
But here we deal with a different regulatory statute which, as this Court has said heretofore, directs the Commission how to proceed. In the presence of definite, specific statutory standards, the principle of the Natural Gas Pipeline and Hope cases does not apply, and any commission action which does not observe those standards is invalid if it harms, even if it does not confiscate.
The majority say, however, in the Court’s opinion in this case that the utility cannot complain because it does not show the rates established without observing the statutory procedure to be confiscatory in effect. I would agree, if this case had ".risen under the Natural Gas Act or some other statute containing no standards except that the end result be reasonable and just. But when a Commission proceeds in defiance of its governing statute, its action amounts to unauthorized regulation. Unauthorized regulation is unlawful, if the utility is deprived of its property, even though the deprivation is short of confiscation. The late Chief Justice Stone, in his dissent in Colorado Interstate Gas Co. v. Federal Power Commission, 324 U.S. 625, 65 S.Ct. 829, 849, 89 L.Ed. 1206, clearly recognized and stated the distinction between the true holding of the Hope case and the universal application of its doctrine to all situations, regardless of the presence in governing statutes of standards which are absent from the Natural Gas Act, which is contended for by the appellees and sustained by the Court’s opinion in this case.6
By what I think was an action wholly unauthorized by the District statute and in fact in violation of its terms, the appellant has been subjected to a substantial rate reduction. I cannot agree to what seems to me to he a grossly erroneous conception of the regulatory act and an equally erroneous idea of the Supreme Court’s decisions in the Natural Gas Pipeline and Hope cases.

 Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 88 L.Ed. 1037; Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333.

 “Par. 18. That nothing in this section shall ba taken to prohibit a public utility, with tile consent of the commission, from providing a sliding scale of rates and dividends according to what is commonly known as the Boston sliding scale, or other financial device that may bo practicable and advantageous to the jxirties interested. Mo such arrangement or device shall be lawful until it shall be found by the commission, after investigation, to be reasonable and just and not inconsistent with the purposes of this section. Such arrangement shall be under the supervision and regulation of the commission. The commission shall ascertain, determine, and order such rates, charges, and regulations, and the duration thereof, as may be necessary to give effect to such arrangement, but the right and power to make such other and further changes in rates, charges, and regulations as the commission may ascertain and determine to be necessary and reasonable, and the right to alter or amend all orders relative thereto, is reserved and vested in the commission notwithstanding any such arrangement and mutual agreement.”

 57 App.D.C. 85, 17 F.2d 673, 676.

 78 U.S.App.D.C. 107, 137 F.2d 547, 558.

 In the Byrnes opinion this sentence occurs, “In furtherance of this object the Price Administrator requested that the Commission undertake a revaluation of the Company’s rate base by applying a method that is in conflict with the provisions of section 43 — 306 of the District Code wherein it is provided that the Commission shall value the property of every public utility in the District at the fair value thereof at the time of the valuation. In that case the Price Administrator was insisting that original cost be ascertained by a general rate investigation and that it be used as the rate base. The opinion characterized the proposal as “an investigation upon lines contrary to the governing statute.” The “governing statute” is that which requires fair value to be ascertained at the time of valuation.

 In the Colorado Interstate Gas Co. case, the late Chief Justice said
“Authorized utility regulation may, of course, result in a permissible diminution of property values and income, provided the regulation does not so exceed constitutional limitations as to be ‘confiscatory’. Hence, loss or damage caused by authorized utility regulation gives rise to no actionable wrong if the regulation is within constitutional limitations. Such was the principle laid down in the Hope case.
“But any such diminution in value or return, caused by unauthorized regulation, is unlawful without reference to constitutional principles. * * *. So far as the unauthorized regulation deprives petitioner of its property, the deprivation cannot be justified by saying that, if authorized, it would not violate the Constitution.”