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JOHNSTOWN v. PENNSYLVANIA PUBLIC UTILITY COMMISSION. (06/11/57)

June 11, 1957

JOHNSTOWN, APPELLANT,
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION.



Appeal, No. 214, Oct. T., 1955, from order of Pennsylvania Public Utility Commission, March 28, 1955, Complaint Docket No. 16090, in case of City of Johnstown v. Pennsylvania Public Utility Commission, and Johnstown Water Company, intervening appellee. Order affirmed.

COUNSEL

M. H. Goldstein, with him Elvin Teitelbaum, City Solicitor, for City of Johnstown, appellant.

Edward Munce, Assistant Counsel, with him Albert Luttrell, Assistant Counsel, and Thomas M. Kerrigan, Acting Counsel, for Public Utility Commission, appellee.

Ernest R. VonStarck, with him Robert H. Young, and Morgan, Lewis & Bockius, for Johnstown Water Company, intervening appellee.

Before Rhodes, P.j., Hirt, Gunther, Wright, Woodside, Ervin, and Watkins, JJ.

Author: Rhodes

[ 184 Pa. Super. Page 59]

OPINION BY RHODES, P.J.

In this rate proceeding the Pennsylvania Public Utility Commission has approved a proposed rate increase

[ 184 Pa. Super. Page 60]

    for the Johnstown Water Company, intervening appellee, without making a specific determination of the fair value of the utility's property and without making a specific finding of a fair rate of return. The City of Johnstown has appealed, and questions the action of the commission.

The Johnstown Water Company was incorporated in 1866 and is a wholly owned subsidiary of the Bethlehem Steel Company. It provides water service, including fire protection, to domestic, commercial, industrial, and municipal customers in the City of Johnstown and in the boroughs and townships in the vicinity thereof. On February 25, 1954, the utility filed a supplement to its tariff providing for an increase of 20 per cent in all rates except fire protection service. The proposed rates became effective on May 1, 1954, by operation of law. The City of Johnstown had filed a protest on April 5, 1954. The rates had previously been increased by 33 1/3 per cent on February 1, 1953. Prior to the increase of 1953, the last general rate increase for this utility was in 1926. This was followed by a decrease in charges for public and private fire protection service in 1928.

The proposed rates were estimated to increase annual revenues by $197,240, or by 19.05 per cent more than that produced by the existing rates at the level of operations of December 31, 1953. The purpose of the increase, according to the utility, was "To offset the increased cost of operations ... [and] To provide an operating income in an amount more nearly approaching a fair return on the minimum fair value of the company's property."

The utility, in presenting its case before the examiner, proceeded on the theory that the proposed rates would not produce the maximum allowable return. At the opening of the hearing, counsel stated that the utility

[ 184 Pa. Super. Page 61]

    would present evidence to establish a present value of its property of $19,500,000 and a fair value for rate purposes of $12,500,000; and that, as the return from the proposed rates would be only $465,000 or 3.6 per cent of this rate base, it would be unnecessary to submit evidence to substantiate the fairness of such return. The utility thereupon proceeded to introduce what it considered to be sufficient substantial evidence to support the rates. It submitted evidence of original cost, and reproduction cost at spot prices of December 31, 1953, and at average price levels of 1951-1953, and 1949-1953.*fn1 The commission determined that original cost depreciated was $6,500,000 ($6,479,100) which was substantially in accord with the evidence presented by the utility. But the evidence of reproduction cost was found to contain certain infirmities and limitations which the commission fully discussed. After taking these into consideration and subject thereto, the commission made the following reproduction cost estimates depreciated: At spot prices of December 31, 1953, $19,024,085; at average price level of 1951-1953, $17,970,661; at average price level of 1949-1953, $17,059,240. (These amounts do not include $47,000 in materials and supplies.) The commission declined, however, to make a definite finding of ...


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