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PITTSBURGH v. PENNSYLVANIA PUBLIC UTILITY COMMISSION (09/15/66)

decided: September 15, 1966.

PITTSBURGH, APPELLANT,
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION



Appeals from order of Pennsylvania Public Utility Commission, Nos. C. 17993, C. 17990, C. 17997, C. 17999, C. 18001 to C. 18008, inclusive, C. 18020, C. 18021, C. 18025, and C. 18040, in cases of City of Pittsburgh v. Pennsylvania Public Utility Commission et al.; Metro Glass, Division of National Dairy Products Corporation, et al. v. Same; and Columbia Gas of Pennsylvania, Inc. v. Same.

COUNSEL

W. Russel Hoerner, with him Paul H. Rhoads, J. M. Noel, William Anderson, and Rhoads, Sinon & Reader, for utility company.

Albert D. Brandon, Assistant City Solicitor, with him David Stahl, City Solicitor, for City of Pittsburgh.

Robert E. Jamison, for protestants.

Robert L. Orr, with him Harold F. Reed, Jr., for protestants.

Robert M. Harris, Assistant Counsel, with him Joseph C. Bruno, Chief Counsel, for Public Utility Commission.

Ervin, P. J., Wright, Watkins, Montgomery, Jacobs, Hoffman, and Spaulding, JJ. Opinion by Ervin, P. J.

Author: Ervin

[ 208 Pa. Super. Page 264]

This rate proceeding began when Columbia Gas of Pennsylvania, Inc. filed tariffs increasing Columbia's gross revenue by some $6.5 million or about 9%. Complaints against the proposed increase were filed by the commission, the City of Pittsburgh, County of Allegheny, Borough of Ambridge, Borough of Canonsburg and eleven industrial consumers. The commission suspended the proposed rates for a period of nine months (July 28, 1964 to April 28, 1965). Further, the commission provided that the existing rates should continue in effect after April 28, 1965 as temporary rates, under ยง 310 of the Public Utility Law, subject to recoupment on final order.

By final order dated October 4, 1965 the commission granted an increase in allowable operating revenues of $5,085,466, or more than 75% of the increase sought. The commission found a fair return of $5,917,000 based on a fair rate of 6.1%, on a fair value finding of $97 million.

[ 208 Pa. Super. Page 265]

Appeals to this Court from the commission order of October 4, 1965 were taken by Columbia, the City of Pittsburgh and ten of the eleven industrial complainants. Columbia was permitted to intervene as appellee in the appeals of the city and the industrial companies. All appeals have been consolidated for argument and will be disposed of in one opinion.

In general, Columbia contends that the commission's finding of (1) fair value, and (2) rate of return is too low, and (3) that the exclusion of certain operating expenses makes the allowance for that item too low. By contrast, the city and industrial complainants contend the findings of the commission on fair value, rate of return and allowable operating revenues, are excessively high.

Fair Value: Original Cost. The commission accepted Columbia's claim of $93,729,608 for undepreciated original cost. The city alleges there is no evidence showing original cost of Columbia's property on the record. Columbia was "spun off" from Manufacturers Heat and Light Company pursuant to a realignment order of the commission dated September 12, 1961. Complainants did not raise any question concerning original cost before the commission, or in their appeal petitions, and ordinarily cannot raise such question on appeal. Cf. George Hyam Associates, Inc. v. Pa. P.U.C., 199 Pa. Superior Ct. 3, 184 A.2d 414 (1962).

Under the Uniform System of Accounts, original cost figures for Manufacturers, the parent company, were recorded, and approved by commission orders dated December 30, 1946 and February 21, 1955. Original cost figures for the parent company were produced in two rate cases. See Pa. P.U.C. v. Manufacturers Light and Heat Co., 35 Pa. P.U.C. 727, 740 (1958), and 37 Pa. P.U.C. 345, 354 (1959), and Pittsburgh v. Pa. P.U.C., 187 Pa. Superior Ct. 341, 144 A.2d 648 (1958). Thus the property of Manufacturers, the parent

[ 208 Pa. Super. Page 266]

    company, used in furnishing gas service in Pennsylvania, was recorded at original cost prior to the transfer to Columbia. Further, on September 12, 1961 the commission entered a detailed order approving realignment and transfer. Pittsburgh contends that some $17 million of transmission mains were improperly reclassified by Manufacturers as distribution mains, and transferred in the realignment proceedings to Columbia. The implication is that the "reclassification" was made to wrongfully increase the property transferred to Columbia as part of its rate base. However, there is no showing, as the city contends, that transmission mains of Manufacturers were wrongfully included in the original cost, or wrongfully entered into the fair value finding of Columbia's property. Columbia presented an original cost figure and many exhibits dealing with original cost of its property in this proceeding. Exhibit 9 showed net depreciated original cost of plant in service as of March 31, 1964 as $73,801,438, or $93,732,200 undepreciated. The realignment proceeding of September 12, 1961 expressly provided that it did not bind the commission on the question of valuation in a subsequent rate case. However, the realignment proceeding did disclose original cost figures, less reserve, for depreciation, depletion and amortization, and to which was added other current assets, making a total of $82,526,579.

Property installed by Columbia since the transfer of 1961 has been recorded at original cost pursuant to the Uniform System of Accounts. The commission decided, in the realignment proceeding of September 12, 1961, that the transfer between Manufacturers and Columbia was proper. Cf. Berner v. Pa. P.U.C., 382 Pa. 622, 116 A.2d 738 (1955). While the realignment is not conclusive on the question of the valuation of Columbia's property in a rate case, it does furnish substantial evidence on this question.

[ 208 Pa. Super. Page 267]

Columbia properly points out that reclassification does not change the dollar value of the property. The commission in the 1961 realignment proceeding held the reclassification of property by Manufacturers in 1959 was lawful, and that the property transferred to Columbia was properly part of Columbia's system. So, the reclassification by Columbia in 1963 of gas mains from transmission ...


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