Opinion Concurring in Part and Dissenting in Part
Sullivan, J.— The holdings of the majority opinion, handed down December 30, 1975, are contained in Parts III through VI thereof. It is to these parts that I address my separate opinion.
PRELIMINARY STATEMENT
I unhesitatingly concur in the thrust and tenor of the majority opinion which requires that in its Findings, the Public Service Commission must provide this court with sufficient tools for effective and meaningful judicial review. We of the judiciary are not blessed with the technical expertise expected of the Commission itself.
The majority ably points out that the legislature has not set forth guidelines to be followed by the Commission in approving or rejecting rate increase applications. A substantial portion of the Commission’s adjudicative function has been committed to the Commission’s discretion which must, however, be exercised within a sound framework of reasonable policy determinations. Herein lies the dilemma.
Since, unfortunately, the Commission, by legislative authorization, implication, or inaction, formulates its rate-*528making policies on an ad hoe basis (Part II, p. 482) , meaningful judicial review has been rendered difficult at best. If we are to decide whether a given rate increase is reasonable, we must require the Commission through its factual findings to disclose such reasonableness, at least prima facie. Rate making is a legislative, not a judicial function. P.S.C. v. City of Indianapolis (1956), 235 Ind . 70, at 81, 131 N.E.2d 308 at 312. And, we are not permitted to' transgress upon the Commission’s policy making prerogatives.- Yet, we-of the judiciary are required to-review for legality.
It may be seriously questioned whether we may review the reasonableness of a rate increase order unless it is illegal or unconstitutionally confiscatory for we are precluded from striking down other legislative acts even if we deem them unreasonable. Be that as it may, the review for reasonableness is fixed in the case law of this state, as elsewhere. P.S.C. v. City of Indianapolis, supra, 235 Ind. at 84-85, 131 N.E.2d at 315-16; P.S.C. v. City of LaPorte (1935), 207 Ind. 462, 465, 193 N.E. 668. And that review includes whether the Commission considered or failed to consider elements or factors essential to a reasonable order. P.S.C. v. City of Indianapolis, supra, 235 Ind. at 84-85,131 N.E.2d at 315-16.
■ What happens, however, if the reasonableness of a particular rate increase depends upon decisions which the Commission may term “policy”? May we review that policy or must we avoid such a clash and merely “rubber stamp” the decision of the Commission? It is my belief that we are required to review such “policy” if such review is essential for an enlightened determination as to the reasonableness of the rate established. I read the majority opinion to so hold. It states that “basic findings on all material issues” are necessary (Part II, p. 482). Material issues, in my estimation, include those involving “policy” determinations as well as those which are purely factual so long- as reasonable policy application depends upon the presence or absence of certain varying factual considerations. We there*529fore must, have a basis, whether- it be evidentiary or - a statement of -policy- reasons by -the -Commission, before we can determine, as we must, that the rate order is reasonable under the law.
It is my belief that the majority overly complicates our review by making extremely 'fine and somewhat inconsistent distinctions between “policy determinations” and “factual determinations” and by subjecting some certain Commission conclusions to a requirement that the findings contain basic facts supportive of the conclusion, while not subjecting other conclusions similar in nature to the same finding requirement.
In light of the above, I concur without comment or stated reservation as to Parts III, V (A),V (D) and VI; I concur with separate comment as herein contained as to Parts IV, V (C) and V(E) (2) ; and I dissent with respect to Parts V (B) and V .(E) (1).
!V
PUBLIC NOTICE
I concur in the majority view that use of a rate increase petition caption as the requisite public notice is not per se unreasonable. I fear, however; that certain broad language used by my colleague's may be subjected to unwarranted'construction. That language is as follows: . .
“A review of the statutory scheme clearly indicates that the case-by-case determination of what constitutes adequate public notice has been legislatively committed to the Commission’s.informed, discretion. It is Well'established that an ...agency’s interpretation of the statutory scheme'it administers is entitled to judicial deference, especially when, the legislative plan necessarily contemplates administrative rule elaboration.” (p.496).
Certainly, the “statutory scheme” which commits to the Commission’s “informed discretion” the determination of “what constitutes adequate notice” is limited by the - constitutional dictates of due process. The Commission .may *530correctly determine in its discretion that a particular public notice is adequate only if that notice is reasonably calculated to apprise the public of the matters to be considered. Mullane v. Central Hanover Trust Co. (1950), 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865. Subject to this due process caveat, I concur in Part IV of the majority opinion.
V (B)
ALLOCATION OF COMMON PLANT
“Used and useful” is a determination of ultimate fact. The facts which render the plant or its severable components “in service” and “reasonably necessary” and thus “used and useful” are basic facts which must be found by the Commission.
PartV (B) of the majority opinion recites that:
“In allocating ‘common plant’ between gas and electric operations, the Commission adopted a separation technique denominated as the ‘supervised expense’ method . . . Thus, the Commission found that approximately seventy-seven percent of the common plant was properly allocated to the jurisdictional electric rate base because seventy-seven percent of Petitioner’s total expenses were incurred in its electric operations.” (p. 502).
I locate in the record no such finding or findings. Nowhere in its findings does the Commission “adopt a separation technique” nor do the findings mention a 77 % allocation to electric service. The sole finding with respect to common plant allocation is as follows:
“... In addition, petitioner owns and operates common plant, facilities allocated to electric service plus materials and supplies properly included as a part of its utility plant in service.”
The City in its brief has appropriately called attention to the absence of a definitive finding respecting common plant allocation.
To be sure, exhibits and testimony submitted by Petitioner, unobjected to by the City, utilized a “supervised expense” *531allocation method and the evidence might well support an allocation percentage of 77% under that method. However, the Commission did not by its findings give us the review tools by which we might test the City’s evidentiary attack, except as may be surmised from the Commission finding that “the fair value of Petitioner’s electric utility properties used and useful . . . was not less than $125,334,454”, or from its finding that “the net jurisdictional original cost of Petitioner’s electric utility plant in service and used and useful for the convenience of the public (excluding the Broadway turbine plant, $4,814,511) amounted to $95,000,441. Contributions in aid of construction attributable to the aforesaid net jurisdictional plant amounted to $364,863 and are not to be included in Petitioner’s net jurisdictional original cost for fair value purposes.” The evidentiary Exhibit A-III, relied upon by the majority as the basis for the conclusion that the Commission did in fact adopt a 77% allocation does not lead inescapably to such conclusion. That the Commission did not adopt Exhibit A-III in toto is seen from the Commission’s exclusion of the Broadway turbine plant and the exclusion of certain contributions in aid of construction. Even considering such exclusions or modifications to Exhibit A-III, it does not appear to me as a matter of arithmetic that the net jurisdictional original cost as found by the Commission comports with Exhibit A-III. The variance in bottom line figures may or may not be explained by other determinations made by the Commission. The Commission may in fact have adopted the 77% allocation. The important thing is that we cannot tell from the findings. We cannot even tell from a comparison of the findings with the exhibit for if the Commission accepted the 77 % allocation figure of $2,435,655, the variance in net original cost must be explained elsewhere. Such explanation is not made even by slightest hint in the Commission’s findings.
Surmise of this nature is the precise exercise in futility which we have sought to avoid for future utility rate reviews. *532It is the very reason we- require-the Commission ■ to make more complete findings with respect to other material issues. It is improper for us to make an independent review -of the record to search for evidence to support findings which have never been made. Accordingly, I dissent from Part y (B) of the majority opinion and as we did with reference-to the test year selected and adjustments made thereto, I would require the Commission to make specific findings with respect to common plant allocation- as such is reflected in its- “used -and useful” determination.
V (C)
DEFERRED TAX EXPENSE RESERVE ACCOUNT
I concur in the holding of Part V (C) but find certain dictum therein to be unacceptable.
The majority has defined “rate base” as “that utility property employed in providing the public with the service for which rates are charged and constitutes the investment upon which the ‘return’ is to be earned.’’ ■ (p. 479) (Emphasis supplied).
It appears incongruous to me that the majority content plates, under some circumstances, inclusion of consumer contributed capital in the form of deferred tax reserves within the rate base but to “reduce to zero the rate of return allowed on plant constructed with the reserve funds”, (p. 513). Likewise, the contemplation that the Commission might permit use of the funds as working capital, but “assigning the funds a zero cost of capital in computing the Petitioner’s “fair rate of return.” (p. 513). ....
Certainly, the reserve funds may be utilized by Petitioner for either purpose contemplated by the majority, i.e., for capital construction or as working capital, but should not be includable in the rate base.
I therefore disassociate myself from the dictum contained at p. 513 of the majority opinion and would simply preclude Peti-*533tionér from utilizing deferred taxes as current expense unless such fund is excluded from the rate base. City of Alton v. Commerce Commission (1960), 19 Ill.2d 76, 165 N.E.2d 513. To do otherwise is to unnecessarily complicate the process. See Swiren, Accelerated Depreciation Tax Benefits in Utility Rate Making, 28 U. Chi. L. Rev. 629 at 649.
V (E) (1)
THE “IN SERVICE” REQUIREMENT
V (E)(2)
THE “REASONABLY NECESSARY” REQUIREMENT
With reference to the “In Service” facet of the “Used and Useful” test, the majority considers inclusion of Petitioner’s Ohio River facility. As the majority notes, the Commission found that the Ohio River plant was used and useful. Such is the only finding by the Commission with respect to the Ohio River plant.
. The majority opinion at the outset categorized the “used and useful” determination to be one of ultimate fact (p. 486). Yet the naked conclusion with respect to the Ohio River facility is unsupported by findings of basic fact. I fail to see ho wwe might intelligently make judicial review without such findings. The “used and useful” conclusion is similar in this respect to the test year selection and adjustment treated in Part III wherein we required the Commission to articulate the policy and evidentiary basis for its ultimate fact conclusion. I would remand the “material issue” of “in service” as to the Ohio River Plant for findings of basic fact. Without such findings, we cannot truly address the City’s evidentiary attack upon the ultimate conclusion.
The majority correctly, I believe, breaks the “used and useful” ultimate fact determination into two components — (1) in-service and (2) reasonably necessary. Interspersed in the majority’s consideration’are words which denote the “in service” determination as one of.“policy”. Such designation *534presumably accounts for the majority’s acceptance of the Ohio River plant as “in service” without requisite findings of basic fact.
Inconsistently, however, when considering the “reasonably necessary” facet of the “used and useful” test, the majority holds a finding of basic fact actually made by the Commission with respect to the “reasonably necessary” sub-test, to be too imprecise to allow our review, (p. 519). Whether both the “in service” and “reasonably necessary” components are “policy” determinations or whether, as is more appropriate in my view, they are both factual determinations, they should receive like examination with respect to our judicial review. It is not enough to say that the ultimate fact of “used and useful” is adequately supported by naked conclusions of “in service” and “reasonably necessary” even though such conclusions since not ultimate may be disguised as a “finding of basic fact”. See dissent to Part V (B), supra. Without regard to the semantics of “policy” versus “fact”, I would require findings of basic fact to support not only the conclusion that the plant is “used and useful” but also to support the conclusions that the plant is in service and that it is reasonably necessary.
For these reasons, I concur in Part V (E) (2) which remands to the Commission for more specific findings with respect to “reasonably necessary”. Such concurrence necessarily compels my dissent from Part V (E) (1).
Note. — Reported at 339 N.E.2d 562.