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BEAVER VALLEY WATER CO. v. DRISCOLL

July 5, 1938

BEAVER VALLEY WATER CO.
v.
DRISCOLL et al.



The opinion of the court was delivered by: GIBSON

GIBSON, District Judge.

The court, after hearing and consideration, makes the following Findings of Fact and Conclusions of Law:

 Findings of Fact.

 1. Beaver Valley Water Company, the plaintiff, is a public utility company and supplies water to the public in the City of Beaver Falls and various Boroughs and Townships in Beaver County, Pennsylvania. It is organized under the laws of the Commonwealth of Pennsylvania, and its principal office is in the City of Beaver Falls.

 2. The individual defendants constitute the Pennsylvania Public Utility Commission (hereinafter called the "Commission"), and as such Commission they have the powers and duties prescribed by the Public Utility Law of that Commonwealth, which was approved on May 28, 1937, P.L. 1053, 66 P.S.Pa. § 1101 et seq. Two members of said Commissionare residents of the Western District of Pennsylvania.

 3. On June 21, 1937, the Commission instituted an Inquiry and Investigation upon its own motion for the purpose of determining the fairness, reasonableness and justness of the rates and charges of the plaintiff. Within the scope of the Inquiry and Investigation and the notice thereof, the Commission included consideration of the imposition of temporary rates under the provisions of Section 310 of the Public Utility Law, 66 P.S.Pa. § 1150. Hearings were held in Beaver, Pennsylvania, on August 6, November 4, and December 10, 1937, at which hearings 289 pages of testimony were taken and 19 exhibits prepared by plaintiff were admitted in evidence.

 4. Under date of March 15, 1938, the Commission made what it called an Interim Report and Order, in and by which it arrived at a temporary rate base, made findings as to operating revenues and expenses, and ordered the plaintiff to make changes in its rate schedule which the Commission estimated would yield about $29,500 less annual revenue than the yield under the plaintiff's rate schedule then in effect. The Order of the Commission was sent to plaintiff by registered mail and was received by plaintiff on March 18, 1938. The Order of the Commission required plaintiff to file with it on or before March 24, 1938, a supplement to its rate schedule then in effect, embodying the temporary rates designated by the Commission, which would replace all of the plaintiff's metered service rates then in effect and which supplement was to become effective April 1, 1938.

 5. The plaintiff filed its Bill of Complaint herein on March 23, 1938, together with Injunction Affidavits, praying for an injunction against the enforcement of the Commission's Order. A Temporary Restraining Order was made by Robert M. Gibson, District Judge, on March 23, 1938, and such Temporary Restraining Order was continued in effect from time to time for periods not exceeding ten days until a three-judge statutory court could be convened. In the meantime the defendants filed an Answer to the Bill of Complaint, and the plaintiff filed a Supplement to its Bill of Complaint. An Answer to such Supplement has been filed by the defendants.

 6. On May 16, 1938, this case came on for hearing on plaintiff's application for preliminary or interlocutory injunction before J. Warren Davis, Circuit Judge, and Robert M. Gibson and F. P. Schoonmaker, District Judges. At said hearing there were offered in evidence certain averments of the Bill of Complaint which had not been denied; by agreement of counsel the testimony and exhibits which were before the Commission; certain letters of the Secretary of the Commission, addressed to counsel for plaintiff; an admission that no oral argument had been had or briefs filed with the Commission before the Commission made its temporary rate order. The plaintiff offered to present testimony and exhibits showing the present value of its property, to which offer objection was made and sustained and exception granted. Argument was then had as to whether or not a preliminary or interlocutory injunction should be granted on the record as it then was before this court.

 7. Upon the institution by the Commission of its complaint against the rates of the plaintiff, the plaintiff began the preparation of an inventory of its physical property. At such hearings the Commission was advised as to the progress which was being made. At the hearing on December 10, 1937, a witness for the plaintiff testified that the engineers preparing the inventory were striving to have it done by January 1, although, if accuracy and completeness required, it might take a little longer. The testimony shows that, following the preparation of the inventory, the plaintiff intended to have the same priced in order to determine the present cost of constructing its physical property as of the date of the inquiry.

 8. At a hearing before the Commission, plaintiff put in evidence its Exhibit "J," a present cost valuation less depreciation of its property, made by an engineering firm as of January 1, 1928, which said exhibit is also before this court. The said exhibit shows that such valuation of the plaintiff's property on April 1, 1928, less accrued depreciation, amounted in the aggregate to $3,384,507. As a part of said exhibit was a tabulation of the amount expended by the Company for additions and improvements to its property from January 1, 1928, to December 31, 1937, less property retired, in the net amount of $582,850.144, which tabulation also shows that during the period from January 1, 1928, to December 31, 1937, the depreciation reserve of the plaintiff had increased $120,771.51. Accordingly, Exhibit "J" indicates that the value of plaintiff's property on December 31, 1937, was $3,846,585.93. An examination of Exhibit "S" in the record shows that there was little, if any, change between construction costs in 1928 and construction costs in June, 1937, and that, inasmuch as there was any change, the change was upward and not downward. If changes in the Fixed Capital and Depreciation accounts of the plaintiff between December 31, 1936 and June 30, 1937, as shown by Exhibit "E", are taken into account, Exhibit "J", as so brought down to the date of June 30, 1937, indicates that the value of plaintiff's property as of June 30, 1937, is $3,870,565.93.

 9. The predecessor of the Pennsylvania Public Utility Commission was the Pennsylvania Public Service Commission. Before that Commission there was instituted in the year 1914, a complaint of certain consumers against the rates of the plaintiff company. That Commission made findings as to the value of the property of the plaintiff, and thereupon further proceedings were had in the Superior and Supreme Courts of Pennsylvania. The Superior Court of Pennsylvania, exercising its own independent judgment, in and by its opinion reported in Beaver Valley Water Co. v. Public Service Comm., 76 Pa.Super. 255, arrived at the conclusion that the fair value for rate making purposes of plaintiff's property on February 1, 1915, was in excess of $1,475,000. Such decision was approved by the Supreme Court of Pennsylvania in an opinion reported in 271 Pa. 358, 114 A. 373.

 10. At hearings before the Commission, plaintiff introduced in evidence Exhibits "H" and "I", Exhibits "H" and "I" Revised, and Exhibits "Q," "R" and "S" in connection with the testimony of Nathan B. Jacobs, an engineer who had done work in connection with the rate case before the Public Service Commission of Pennsylvania, instituted in 1914, and was familiar with the plaintiff's property since that date, and who had prepared said exhibits. Such testimony and exhibits, particularly Exhibit "Q", show that the valuation of plaintiff's property, as made by the Superior Court as of March 31, 1914, before depreciation and excluding working capital, was $1,689,386.18, and that from April 1, 1914 to June 30, 1937, there had been retired from service property which, according to the Superior Court valuation, had a value of $216,518.55, leaving as the net value of property still in service on June 30, 1937, except as mentioned, $1,472,867.63. Changes in construction cost of property such as that owned by the plaintiff between April 1, 1914, and June 30, 1937, were determined in accordance with the method as explained by the said witness and as shown in Exhibit "R", and the trended cost of such property was determined as of June 30, 1937, to be $2,759,999.81. Additions and betterments to plaintiff's property between April 1, 1914, and June 30, 1937, were ascertained to amount to $1,667,793.57 at the cost thereof, and of such additions and betterments during said period there were retired from service items of property amounting in the aggregate to $60,509.60, leaving as the net cost of such additions and betterments $1,607,283.97. The cost of such property was likewise trended to reflect changes in construction costs between the date of installation and June 30, 1937, as explained by the said witness and as shown by his Exhibit "S". The cost of constructing said additions and betterments as of June 30, 1937, was determined thereby to be $1,753,999.76. Accordingly, the said Exhibit "Q" shows that the Superior Court decision before depreciation and excluding working capital, plus additions and betterments to the plaintiff's property between April 1, 1914, and June 30, 1937, less retirements, trended to June 30, 1937, amounts to $4,513,999.57. Such conclusion may be slightly affected by the testimony of said witness to the effect that, inasmuch as the inventory of plaintiff's property had not been completed, he could not determine whether there was reflected in said exhibit the value or cost of any ...


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