Argued December 13, 1922. These three appeals are from the same order of the Public Service Commission in disposing of complaints filed by the City of Erie and the Borough of Warren *Page 67 against a schedule of rates filed by the Pennsylvania Gas Company. In the appeal of the Pennsylvania Gas Company that company complained that the valuation by the commission of its property used and useful for the service of the public is inadequate and being adopted by the commission as the rate base, the rates fixed by the commission do not afford a fair and just return upon the property of the company and are, in effect, confiscatory.
We have considered all the evidence and the record as certified to us by the commission and, exercising our own independent judgment as to the law and the facts, are not convinced that the finding of the commission of the value of the property for rate-making purposes is confiscatory; in this conclusion all the judges who sat at the argument concur. The appeal of the Pennsylvania Gas Company must, therefore, be dismissed.
In the appeals by the City of Erie and the Borough of Warren (appeals Nos. 128 and 129, April Term, 1922), the contention of the appellants is that the valuation of the property determined by the Public Service Commission is too high and based upon a wrong theory. The judges who sat at the argument of these appeals are equally divided in opinion upon the essential question raised. They differ as to the theory of valuation of the gas holdings to be adopted for the purpose of a rate base. The commission found that the presently used and useful portions of the gas holdings should go into the rate base at $5,500,000. The difference in opinion is confined to this phase of the record.
Three judges agree the commission has authority to make the finding; that it is supported by sufficient evidence; that this court is bound by the facts so found (when the appeal is by the consumer alleging that the rate is too high) and may not require the commission to apply one economic theory of valuation for rate-making purposes as against another, not unlawful. These three judges agree that the Public Service Company Law confers authority upon the commission to value the gas *Page 68 rights of this company, and that the original cost of acquiring such rights is only one element in determining their value, and that the exercise of its statutory function by the commission in this regard is legislative or administrative in character. These three judges agree that the commission erred in not considering and determining what allowance should be made for the value of the gasoline extracted from the gas involved in this proceeding, said gasoline representing revenue from the property upon which the commission had fixed a valuation; they find no other reversible error.
The other three judges are of opinion that in determining the fair value of the company's property for rate-making purposes, the gas holdings should be valued at their original cost; that though treated as real estate for many purposes, they are not of the same permanent character as ordinary land and the improvements thereon, but are consumed by use and after a term of years are wholly exhausted; that they should be treated, rather, as stored product which the company will sell in the course of years and eventually exhaust; that the purchase of additional gas rights, the reasonable cost of prospecting for gas, the drilling of wells, etc., should be allowed as operating charges, necessary to secure the product which the company sells; and that the commission erred as matter of law in capitalizing the company's gas holdings at their present value, and allowing a rate thereon, covering fair return and depreciation, as if such holdings were of a permanent character and not being constantly diminished and exhausted by use.
125. Appeal dismissed.
128, 129. Order affirmed by a divided court. *Page 69