Appeals, Nos. 117, 118, and 119, and Nos. 122 to 155, inclusive, April T., 1958, from order of Pennsylvania Public Utility Commission, February 10, 1958, Nos. C. 16719, C. 16721, C. 16722, and C. 16807, in re City of Pittsburgh v. Manufacturers Light and Heat Company. Order affirmed.
Marcus Aaron, II, Assistant City Solicitor, with him J. Frank McKenna, Jr., City Solicitor, for City of Pittsburgh.
Paul H. Rhoads, with him William Anderson, Jr., John P. Egan, Jr., and Rhoads, Sinon & Reader, for Utility Company.
Morris Mindlin, Assistant Counsel, with him Thomas as M. Kerrigan, General Counsel, for Pennsylvania Public Utility Commission, appellee.
Robert L. Orr, with him Harold F. Reed, and Reed, Ewing, Orr & Reed, for certain industrial consumers, intervening appellees.
Before Rhodes, P.j., Hirt, Gunther, Wright, Woodside, Ervin, and Watkins, JJ.
[ 187 Pa. Super. Page 344]
The Pennsylvania Public Utility Commission, by its order of February 10, 1958, granted an increase in rates to The Manufacturers Light and Heat Company.*fn1 The City of Pittsburgh and The Manufacturers Light and Heat Company have appealed. Each sets forth certain alleged errors in the findings and order of the commission. Several industrial customers have intervened as appellees.
[ 187 Pa. Super. Page 345]
This rate proceeding was instituted by Manufacturers on March 12, 1957, by the filing with the commission of supplements 2 and 3 to Tariff Gas - Pa. P.U.C. No. 44 providing for increases and changes in the then existing rates to become effective May 12 and 13, 1957. On March 25, 1957, the commission suspended operation of these supplements for six months, that is, to November 12 and 13, 1957, and by concurrent order instituted on its own motion an investigation to determine the fairness, reasonableness, justness, and lawfulness of the rates, charges, rules, and regulations in the proposed supplements, the investigation to include consideration of the lawfulness of existing rates, rules, and regulations and the imposition of temporary rates. Subsequently, in the course of this proceeding, additional supplements were filed by Manufacturers affecting the rates involved in this proceeding, which supplements the commission considered in its final order.*fn2
[ 187 Pa. Super. Page 346]
Thirty-two complaints were filed against the proposed rates. After extensive hearings, the filing of briefs, and oral argument, the commission on February 10, 1958, issued its final order permitting an increase in annual operating revenues amounting to $3,071,902 over the rates which had become effective on September 3, 1957, by the filing of interim supplement 8. The commission disallowed $2,964,888 of the increase requested by Manufacturers.*fn3
[ 187 Pa. Super. Page 347]
Appellants have presented five questions for our determination.
The City of Pittsburgh submits the following three questions: (1) Did the commission violate the requirements of due process in computing accrued depreciation and depletion upon the basis of a reserve requirement study rather than the book depreciation reserve; (2) did the commission err in failing to reflect the effect of the liberalized depreciation provisions of section 167 of the 1954 Internal Revenue Code in computing the allowable federal income taxes for rate-making purposes; and (3) is the rate structure free from unreasonable and unlawful discrimination.
Manufacturers raises two questions: (1) Did the commission err in its finding of the fair value of Manufacturers' property; and (2) did the commission err in adjusting the test year revenues to reflect the effect of a steel strike occurring in the test year in view of an alleged decline in sales to the steel industry occurring after the test year.
We shall in this opinion consider the issues presented by both appellants in such sequence that repetitious discussions may be largely avoided.
Fair Value. The commission determined that the fair value of Manufacturers' property used and useful in the public service allocated to Pennsylvania retail sales was $115,000,000 at May 31, 1957, the cut-off date. Manufacturers contends that the finding of fair value would be at least $125,000,000 if the commission had given "proper consideration [to] prevailing price levels." In support of its proposed rates, Manufacturers submitted as measures of value its original cost and original cost trended at the average price level of
[ 187 Pa. Super. Page 348]
the test year and at two and three-year ...