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January 20, 1953



Joseph Sharfsin, Philadelphia, R. Paul Lessy, Chester, for appellant.

Ernest R. von Starck, Robert H. Young, Morgan, Lewis & Bockius, Philadelphia, for Philadelphia Suburban Water Co., intervening appellee.

Jack F. Aschinger, Asst. Counsel, Lloyd S.Benjamin, Acting Counsel, Harrisburg, for Pennsylvania Public Utility Commission.

Before Rhodes, P. J., and Hirt, Reno, Dithrich, Ross and Gunther, JJ.

Author: Reno

[ 172 Pa. Super. Page 474]

RENO, Judge.

This is the appeal of the Township of Ridley and 12 property owners from an order of the Pennsylvania

[ 172 Pa. Super. Page 475]

Public Utility Commission dismissing their complaint against the Philadelphia Suburban Water Company, intervening appellee, for refusing their request for an extension of its facilities.

Ridley is a township of the first class, located in Delaware County, within the Company's chartered territory. Its population of 8641 in 1940 was increased to 17,212 in 1950, an increase of 8571 or 99%, which is comparable with the increase in Delaware County of 33% and in Pennsylvania of 6%. According to the map of the United States Census Bureau it lies adjacent to the City of Chester, and of its total population, 15,636 inhabitants are included in the Philadelphia Urbanized Area.*fn1 A map of the part of the Township here involved, introduced in evidence, bears the legend, '17 minutes from Broad St. [Philadelphia].'

The appellants sought an extension of the Company's facilities in a residential section of the Township known as Faraday Park, a part of which is already served by the Company. The Township requested the installation of a fire hydrant and the property owners desired water for their homes. It is not necessary to describe further the conditions prevailing in the area, for the Commission found 'that there is need for the extension facilities and service.' Unless other substantial and competent evidence negatived that finding the Commission should have sustained the complaint, since the Public Utility Code of May 28, 1937, P.L. 1053, § 401, 66 P.S. § 1171, clearly commands that 'Every public utility * * * shall make all such * * * extensions * * * as shall be necessary or proper for the accommodation,

[ 172 Pa. Super. Page 476]

    convenience, and safety of its patrons * * * and the public.'*fn2 (Emphasis added.)

The majority of the Commission based the dismissal of the complaint upon the finding: 'We find, however, that it is not economically feasible or reasonable for the water company to provide the extension facilities and service and bear all of the cost; and that it would be an unfair burden on the water company's other customers.' This finding reproduces almost verbatim the concluding averment of the Company's answer and is not supported by the evidence. An order of the Commission cannot stand unless it is based upon substantial and competent evidence 'having a rational probative force', upon 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' Pittsburgh & Lake Erie R. R. Co. v. Pa. P. U. C., 170 Pa. Super. 411, 416, 85 A.2d 646, 650.

The extension would require laying 1547 feet of pipe. The Commission found that the cost of the extension would be about $6,950 to service the fire hydrant and 8 prospective domestic consumers and that the annual net income, after giving effect to operating, maintenance, depreciation and income tax charges, would be $65.71, a return of .95% on the investment. Should the Company serve the hydrant and 20 customers the investment would come to $7,600, with an annual net income of $182.93, a 2.4% return. Appellants question these findings but there is evidence to sustain them, and the exigencies of the case do not call for a minute examination of the figures.

The Company's balance sheet, introduced in evidence, shows total assets in 1950 of $42,458,124.41, an increase of $3,193,016.48 over 1949. Its current and accrued assets in 1950 were $3,270,429.61, and increase

[ 172 Pa. Super. Page 477]

    of $474,933.77 over 1949. Its earned surplus in 1950 was $4,708,323.19, an increase of $536,907.47 over 1949. 'Not economically feasible' is an elusive phrase and may mean anything. If it means that the Company lacks the resources to make the extension, the evidence will not support the finding. For the evidence conclusively shows that the extension would entail the expenditure of less than one-fourth of one per cent of the Company's current and accrued assets.

Nor is there any evidence showing that extension 'would be an unfair burden on the water company's other customers.' If the Commission means by that phrase that the extension would require an increase of the rates payable by other patrons, there is not a shred of competent evidence to support the finding. The Company and the Commission contend that proof of increased rates would compel 'a full-scale rate case', which is patently fallacious. The purpose of an inquiry upon a complaint for refusing an extension of facilities is not to establish rates but merely to determine the effect of an extension upon the total return from the overall operation of the entire system. The rate of return on the extension has been shown. If this figure had been supplemented by proof of the Company's total revenues and expenses, the relation which the extension bears to its entire business, and its allowable and actual rate of return, a simple mathematical calculation would have demonstrated whether a general rate increase was prima facie indicated by the 1,500-foot extension.*fn3

[ 172 Pa. Super. Page 478]

A public utility cannot collect the cream in its territory and reject the skimmed milk. 'A public service corporation may not 'pick and choose' only presently profitable territory covered by its franchise. If a portion of the territory served is not profitable, but the entire service produces a fair return on the investment, the utility may still be required to serve the unprofitable portion, if the rendering of such service does not result in an unreasonable burden on its other service'. Phila. Rural T. Co., v. Public Service Comm., 103 Pa. Super. 256, 261, 158 A. 589, 591. Although the Company does not enjoy a monopoly in the Township it is obliged to render service within a reasonable distance from its distribution system, and if it takes only the profitable business no other water company will enter the area to pick up the unprofitable business which it declines. No other company will become 'a snapperup of its unconsidered trifles.'

The reasonableness and validity of the Commission's suggestion*fn4 that appellants bear part of the cost of the extension rests upon the same factors hereinbefore discussed. Ordinarily, it is not the business of the citizen or consumer to construct any part of a utility's system. There are, doubtless, instances where, under special circumstances, warranted by the evidence, the Commission may, in the exercise of its administrative discretion, withhold exercise of its power unless patrons

[ 172 Pa. Super. Page 479]

    offer to participate in the cost of construction. Altoona v. Pa. P. U. C., 168 Pa. Super. 246, 77 A.2d 740. But no inflexible rule can be laid down; participation in construction costs cannot be exacted indiscriminately; and it cannot be required upon a mere showing that an extension with not immediately produce an adequate profit. The action of the Commission must rest upon evidence which shows that, without the contribution or loan of the consumers, the cost of construction would materially handicap the utility in securing a fair return on all its operations. Riverton Consolidated Water Co. v. Public Service Comm., 105 Pa. Super. 6, 159 A. 177. Such proof, as already indicated, is lacking.

The obligation imposed upon the Commission to exercise its powers and discretion reasonably applies as well to patrons and the public as to the utilities. The Commission operates on a two-way street. 'The primary object of the public service laws is not to establish a monopoly or to guarantee the security of investment in public service corporations, but first and at all times to serve the interests of the public '. Hoffman v. Public Service Comm., 99 Pa. Super. 417, 429. (Emphasis added.)

The Company relies principally upon Sherman v. Public Service Comm., 90 Pa. Super. 523, 526, where this Court said: 'We are not to be understood as holding that the extension of service of a public utility is dependent on the profit which may reasonable be expected therefrom; in proper cases such extension may be ordered though the immediate result of the expansion may entail financial loss to the company; but the company should not be subjected to unreasonable expenditures, nor the consuming public be unduly burdened, because of the over development or premature development of scattered sections of the city in advance of its normal

[ 172 Pa. Super. Page 480]

    growth, when there is no rational expectation of the event justifying the expenditure.' The principle has been followed and applied in Wyoming Valley Water Supply Co. v. P. S. C., 104 Pa. Super. 432, 159 A. 340; United Natural Gas Co. v. Pa. P. U. C., 153 Pa. Super. 252, 33 A.2d 752; Fayette Co. Gas Co. v. Pa. P. U. C., 153 Pa. Super. 271, 33 A.2d 761. This Court still adheres to that doctrine.

However, the facts of these cases differ vastly from those in this record. For instance, in the Sherman case, the water company, which operated a gravity system of supply, was requested to extend its mains to lots 'located on the hillside at elevations varying from 1,040 to 1,150 feet', the lowest of which was '150 feet away from the company's highest main in that neighborhood', and '11 to 127 feet above the company's reservoir.' To supply the ten complainants the company would have been required to lay 1,200 feet of high pressure pipe, and install a pumping system and a supply tank at an elevation of 1,170 feet, the cost of which would have been $14,564. The annual operating expenses would have been in excess of the probable return. This Court found: 'There is no present likelihood of any considerable building development near or beyond complainants' properties', and affirmed the Commission's order denying the extension.

In the Wyoming case, the Commission had ordered an extension of one and one-fifth miles costing $18,000 to a dying coal town, formerly supplied by another water company whose distribution system was practically worn out, and this Court reversed. The facts in the United and Fayette cases bear no relation to those here presented.

This case does not fit in the factual pattern of the precedents upon which the Company relies. Appellants do not reside in a small hillside settlement without

[ 172 Pa. Super. Page 481]

    prospects of future development or in a moribund mining village. They are residents of suburban Philadelphia, adjacent to the City of Chester, within a few minutes of travel to the center of the metropolis, and of a community whose increase of population during the last decade denotes civic stability and presages continued healthy growth and expansion. Nothing in the record suggests 'over development or premature development of scattered sections of' the Township 'in advance of its normal growth', and while the immediate returns from the extension may not now equal the overall return of the Company it cannot be said, on this record, that 'there is no rational expectation of the event justifying the expenditure.' These people are entitled to fire protection and domestic water service without subsidizing a large and prosperous utility.

The order is reversed and the record is remanded to the Commission for further action in accordance with this opinion.

ARNOLD, J., absent.

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