Court Opinion

ID: 9772688
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:26:35.162385+00
Date Added: 2024-06-11T07:31:46.984429
License: Public Domain

MURRAY, Chief Justice
(dissenting in part).
I concur in the opinion of the majority wherein it holds that (1) the Telephone Company exhausted its administrative remedy before resorting to the courts, and (2) the City of Weslaco did not have the power to regulate the rates for intra-state calls which originate among its inhabitants within the City, but I do not concur in the holding of the majority that the depreciation deduction for the year 1959, the test year, was not supported by the evidence, and that the trial court’s error in using this item in determining the net revenue of the Telephone Company requires a reversal of the judgment.
The majority opinion on rehearing holds: “The issue is now narrowed to the determination of the depreciation rate, which in turn will control the amount of the depreciation expense. If the court fixed that rate too high, the expense for 1959 is too high, and the net income for 1959 is correspondingly too low.” The majority decided that the annual depreciation of the plant for the year 1959, in the sum of $37,592.67, was too high, and therefore reversed the judgment and remanded the cause.
The majority find that the value of the local telephone plant in 1959, for rate base purposes, was correctly found to be the sum of $675,245.33; that the operating revenue from local service during 1959 was $197,-878.90, and that the operating expense for 1959 was $166,280.00, with the exception that the depreciation of $37,592.67 was too high, thus causing the net revenue to be too low.
The majority say: “The trial court erred because it fixed the annual depreciation rate by a method which is inconsistent with that used in fixing the rate base and the plant value.” In my opinion, this is no reason for a reversal of the trial court’s judgment. The Telephone Company would have preferred to take the same figure for a rate base value as it took for fixing the depreciation value, but in deference to the rule laid down in Railroad Commission v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559, the Telephone Company reluctantly agreed that the appraised value of the plant in 1959 might be correlated with the original costs, less straight-line depreciation on a 50% basis, thus lowering the rate base value of the plant from $735,033.08 to $675,245.33, which would make their annual percentage of income at a higher rate, so the taking of the rate base value at $675,-245.33, instead of $735,033.08, inured to the benefit of the City.
The evidence shows without dispute that the Telephone Company was entitled to a depreciation in the sum of $37,592.67. This was based upon the testimony of a number of experts whose testimony stands undis*269puted and, so far as I understand the record, unobjected to. Appellants’ Exhibit No.' 14 demonstrates how this figure was computed, To clarify this matter, I copy Exhibit 14:

It will be seen that various rates of depreciation for various kinds of ■ property were used, one as low as 2%, and one as high as 13.70%. The experts stated that these rates of depreciation were furnished by the Federal Communications Commission and were correct. There was no evidence to the contrary.
The total plant value of $730,997.01, as used in plaintiff’s Exhibit 14, was the average of reproduction cost new before adjustment for present age and condition and gross book cost for all depreciable property accounts. In this connection, neither land nor vehicles and other work equipment are depreciable accounts under the Uniform System of Accounts, as prescribed by Federal Communications. The experts testified that unless the Telephone Company is allowed to recover this value during the useful life of the plant it is not recovering the proper depreciation. This testimony was not disputed. If present values should recede in future years, the City would be • entitled to a new appraisal of the local plant
The majority have cited with approval the case of Iowa-Illinois Gas and Electric Co. v. City of Fort Dodge, 248 Iowa 1201, 85 N.W.2d 28. In that case a temporary injunction bond had been given by the Gas Company and certain refunds were to be made out of this bond. Much of the discussion in the opinion relates to calculating these refunds, a matter not here involved. There is some very interesting language found in that opinion. It is there stated:
“One question, then, is how much weight is to be given to original cost and how much to present-day construction costs, to arrive at a properly-judged figure as to present value. We think that where construction costs have been substantially level for a long period of time, perhaps for a large part of the average life expectancy of a utility property, original cost would merit major consideration. Where fluctuations of price levels are sharp, but seem likely to balance out over a short term, a ‘50-50’ weighting such as that given by the trial court would be completely tenable. However, where con*270struction costs have fallen more or less continuously over a substantial period of time, or have risen more or less continuously over such a period, original cost can be given weight only to the extent that a return to the same level appears reasonably imminent.
“It would appear that the level of construction costs which can be expected to prevail in the foreseeable future would be a floor below which the pricing of the present value of a utility property could not go without entering the area of possible confiscation. In this, as in any other constitutional inquiry, the duty of the trial court is to determine the facts from the material and competent evidence before it, and not on its own impulse. We believe that in its approximate ‘50-50’ fair value determination, unsupported in the record, the trial court was in error.” (Emphasis mine.)
Under the conditions that exist in this country today, there is no one who is so optimistic as to believe that in the foreseeable future construction costs will soon return to levels of 1956. The general belief is that costs are going to climb higher. There is nothing in the record that contradicts this present trend, known to everybody. The trend in the foreseeable future is that prices will go higher and higher.
I am of the opinion that from the undisputed evidence the court properly held that the depreciation item for the year 1959 was $37,592.67.
The rate ordinance adopted in June, 1960, was not retroactive in its effect. It fixed future rates for the Telephone Company and it is shown that under such rates the Company will not be permitted to make a fair return on the fair value of its local plant at Weslaco, and is therefore confiscatory and void. In my opinion, the trial court properly so held. I would affirm the judgment and put it into immediate effect.
My original dissenting opinion handed down on Nov. 29, 1961, is withdrawn and this opinion substituted therefor.