Yonkers Electric Light & Power Co. v. Maltbie

Hill, P. J.

A review under certiorari of a determination and order of the Public Service Commission requiring the petitioner, from and after November 10, 1934, to reduce all its electric rates six per cent, this to continue until permanent rates are fixed in a proceeding therefor now being conducted before the Commission. The Commission purported to act under new section 114 of the Public Service Law (Laws of 1934, chap. 287, in effect April 24, 1934). The proceeding to fix permanent rates was commenced on October 11, 1932; the taking of testimony began June 19, 1933. The motion for temporary rates was made by the corporation counsel of the city of Yonkers on May 9, 1934. The memorandum and decision of the Public Service Commission in the matter of temporary rates was dated October 22, 1934, and the order under review was made on the following day. The new statute in part provides: “ Said temporary rates so fixed, determined and prescribed shall be sufficient to provide a return of not less than five per centum upon the original cost, less accrued depreciation, of the physical property of said public utility company used and useful in the public service.” The Commission promulgated a definition at the beginning of the hearing to fix temporary rates. The chairman said:

“ I will state for the record that the Commission rules:

“1. Original cost of the property of the respondent company shall mean the actual money cost (or the current money value of any consideration other than money) at the time when said property was first devoted to the public service whether by the respondent company or by predecessor public utilities. If there is any indicar tion that such cost was excessive or unnecessary, evidence in relation thereto will be received.” (It is to be noted that the definition omits a correlative provision to be applied in the event there is “ any indication ” that the cost is less than the value.) The Commission purported to fix a rate founded on “ original cost ” as it defined that term. This did not include going value or working capital other than the value of the supplies on hand according to the books of the company. The amount fixed was substantially the amount of the company’s fixed capital account, less two items aggregating about $500,000.

In the prevailing opinion in the most recent case decided by the Supreme Court of the United States (West v. Chesapeake & Potomac Telephone Co., 295 U. S. 662) the court says concerning the elements to be considered in determining the amount upon which a public utility is entitled to earn a return, “ We have therefore held that where the present value of property devoted to the public service is in excess of original cost, the utility company is not limited to a return on cost. Conversely, if the plant has depreciated in value, the public should not be bound to allow a return measured by investment. Of course the amount of that investment is to be considered along with appraisal of the property as presently existing, in order to arrive at a fair conclusion as to present value, for actual cost, reproduction cost and all other elements affecting value are to be given their proper weight in the final conclusion.” (Citing Los Angeles Gas & Elec. Corp. v. Railroad Commission of California, 289 U. S. 287, 306.) Thus, to affirm this determination and order, we must decide that temporary rates under new section 114 may be fixed upon a rate base which, if adopted as to permanent rates, would be confiscatory.

“ Nor did the fact that the orders of the Commission merely prescribed tempqrary rates to be effective until its final determination, deprive the company of its right to relief at the hands of the court. The orders required the new reduced rates to be put into effect on a given date. They were final legislative acts as to the period during which they should remain in effect pending the final determination; and if the rates prescribed were confiscatory the company would be deprived of a reasonable return upon its property during such period, without remedy, unless their enforcement should be enjoined.” (Prendergast v. New York Telephone Co., 262 U. S. 43, 49.) The Attorney-General and the attorney for the Commission point out that the new statute provides a remedy which will safeguard the interests of the utility should it be determined later that the temporary rates were too low and confiscatory. The last paragraph of the new section (§ 114) contains this sentence: “ The commission is hereby authorized in any proceeding in which temporary rates are fixed, determined and prescribed under this section, to consider the effect of such rates in fixing, determining and prescribing rates to be thereafter charged and collected by said public utility company on final determination of the rate proceeding.” It is argued that this sentence permits the Commission, by fixing permanent rates above current requirements, to compensate the company if an adequate and reasonable return was not earned under the temporary rates. I do not adopt the construction urged. The sentence is more susceptible of a construction that the Commission may consider as evidence the experiences under the temporary rate in fixing a permanent rate that will be compensatory in the future without regard to past losses. However, I will adopt for the sake of the argument the construction urged. It was said in Love v. Atchison, T. & S. F. R. Co. (185 Fed. 321): “ The legislative function in rate-making looks to the future and determines what future rates shall be. * * * It is as clear a violation of the Constitution, and one as promptly remediable in the national courts, to take the property of a railroad company without just compensation by the enforced operation of tentative rates during the process of their making as by the operation of final rates after that process is complete. Railroad companies that have been, are, or will be deprived of parts of their property devoted to the public use of transportation without just compensation during the continuance of the rate-making process by provisions of a State Constitution, or of a State law, or by orders of a State commission, prescribing tentative rates and putting them in effect during the rate-making process under severe penalties, may maintain suits for and obtain relief by injunction during the continuance of the rate-making process to the same extent that they may after the process is completed ” (p. 327). And in Springfield Gas & Electric Co. v. Barker (231 Fed. 331, 335), in answer to an argument similar to that now presented on behalf of the Commission, it was said: “ A sufficient answer to this argument is found in the fact that consumers of electricity are constantly changing, and that additional charges could scarcely be enforced against those who had not enjoyed the lower rate.” And finally ixi Oklahoma Natural Gas Co. v. Russell (261 U. S. 290) it was said by the late Mr. Justice Holmes of the United States Supreme Court: “ Coming to the principal question, if the plaintiffs respectively can make out their case, as must be assumed for present purposes, they are suffering daily from confiscation under the rate to which they now are limited. They have done all‘that they can under the State law to get relief and cannot get it. If the Supreme Court of the State hereafter shall change the rate, even nunc pro tunc, the plaintiffs will have no adequate remedy for what they may have lost before the court shall have acted,” and in this connection he cites with approval Love v. Atchison, T. & S. F. R. Co. (supra) and Springfield Gas & Electric Co. v. Barker (supra) and thus raises the arguments above quoted almost to the dignity of pronouncements of the Supreme Court of the United States. Justice Holmes was speaking of the Oklahoma Constitution which gives to a utility an appeal to the Supreme Court of the State from a determination of the Commission, and empowers the court to act in a legislative capacity and to make new and retroactive rates if it be found that those made by the Commission should be reversed.

“ Whenever the court, upon appeal, shall reverse an order of the Commission affecting the rates, charges, or the classifications of traffic of any transportation or transmission company, it shall, at the same time, substitute therefor such orders as, in its opinion, the Commission should have made at the time of entering the order appealed from; otherwise the reversal order shall not be valid. Such substituted order shall have the same force and effect (and none other) as if it had been entered by the Commission at the time the original order appealed from was entered.” (Constitution of Oklahoma, art. 9, § 23.) His above-quoted statement, “ If the Supreme Court of the State hereafter shall change the rate, even nunc pro tunc, the plaintiffs will have no adequate remedy for what they may have lost before the court shall have acted,” needs no explanation and establishes the rule that nunc pro tunc orders are not an adequate remedy for losses suffered before the entry of the order and seems determinative of the lack of legal effectiveness of the last paragraph of section 114 to undo the confiscatory rule as to valuation. And this even if we adopt the construction of the sentence urged on behalf 'of the Commission. Loss occasioned to the company by fixing an illegal rate base for temporary rates may not be compensated for by fixing rates in the future in excess of the current legal requirements.

Tentative rates pending the determination in a proceeding to fix permanent rates have, on many, possibly most, occasions been temporary in name only. This has been recognized as bearing upon the discretion to be exercised by a court in granting an interlocutory injunction. “ If the Commission, however, had fixed an early date for the final hearing this might have been taken into consideration by the court as an element affecting the exercise of its discretion in the matter of granting an interlocutory injunction.” (Prendergast v. New York Telephone Co., supra, p. 50.) The danger of permitting a rate base for tentative rates to be determined by a formula and without regard to sound principles of law upon the theory that the rates will be operative for a brief period only, is shown in this case. The Commission’s order fixing temporary rates became effective, except for the stay granted by the Special Term, on November 10, 1934, and was to continue until the termination of the proceeding to fix permanent rates which has now been pending for more than three years and the end not in sight.

It may be argued that the sole issue to be determined by a court in a review of this character is, whether there has been confiscation of petitioner’s property, and that a decision and order should not be annulled because of improper methods or the receipt and consideration of evidence which, in a court of law, would be deemed incompetent (United States v. Abilene & Southern R. Co., 265 U. S. 274), and further that the burden of proof as to confiscation was upon the company. True, the burden was upon the company, but this company was in the anomalous position of having that burden and not being permitted to introduce evidence. In the permanent proceeding there already had been received evidence indicating a rate base nearly four and a half million dollars greater than that here fixed. Petitioner’s offer of this evidence in the temporary proceeding was refused.

Holding the views I do, it is unnecessary to consider the other points raised.

The decision and order should be annulled, with costs.

Rhodes and McNamee, JJ., concur; Heffernan, J., dissents, with an opinion in which Bliss, J., concurs.