Opinion by
On April 1, 1936, the Borough of State College acquired the properties of the State 'College Water Company which had supplied water to the public, both within and without the borough, at a uniform minimum rate of $3 per quarter for 12,000 gallons. On January 1, 1938, the Borough increased the rate to consumers outside the borough to $4 per quarter without any increase to consumers within. On September 15, 1941, appellant, the State College Borough Authority, incorporated pursuant to the Act of June 28, 1935, P. L. 463 as amended, 53 PiS §2900f et seq.., acquired the properties from the Borough and immediately increased the rates to consumers outside the borough to $5 per quarter for 10,000 gallons with no change in the rates to consumers within the borough except the reduction from 12,000 to 10,000 gallons of the allowance for the minimum rate.
In January 1942, the present complaint was filed by consumers outside the borough, alleging that the rates as to them were unjust, unreasonable and discriminatory. The commission upheld the complaints, ordered appellant to revert to the rates previously charged by the Borough, and ordered a refund of all charges collected in excess thereof. The Authority appealed.
The appeal involves three principal questions: (1) Does 'Section 301 of the Public Utility Law, Act of May ’28, 1937, P. L. 1053 as amended, 66 PS §1101 et seq., subject the rates of appellant to regulation and control .by the commission for water service outside the borough
First. Does the Public Utility Commission have jurisdiction?
Whether or not this question was raised below, we are bound to consider it. Com. ex rel. Mees v. Mathieu, 107 Pa. Superior Ct. 261, 163 A. 109; In re Brusstar's Estate, 123 Pa. Superior Ct. 45, 186 A. 147.
Section 301 (as amended by Act of March 21, 1939, P. L. 10, No. 11, §2, 66 PS §1141), provides: “Every rate made, demanded or received by any public utility, or by any two or more public utilities jointly, shall be just and reasonable, and in conformity with regulations or orders of the commission: Provided, That only public utility service being furnished or rendered by a municipal corporation, or by the operating agencies of any municipal corporation, beyond its corporate limits, shall be subject to regulation and control by the commission as to rates, with the sáme force, and in like manner, as if such service were rendered by a public utility.” (Italics supplied). Section 2(15) provides: “ ‘Municipal Corporation’ means all cities, boroughs, towns, townships, or counties of this Commonwealth, land also any public corporation) authority, or body whatsoever created or organized under any law of this Commonwealth for the purpose of rendering any service similar to that of a public utility,”
We think the natural, unstrained reading of- the proviso of section 301, in the light of the definition which includes a municipal authority within the term ‘municipal corporation’, suggests a meaning that is clear; it gives to the commission regulatory jurisdiction over the public utility service of municipalities and their
Because of the importance of the question and the zeal and skill with which appellant’s position has been submitted to us we .shall discuss the arguments in some detail.
It is important to bear in mind that appellant concedes that if its rates are not subject to regulation by the commission injured consumers have a remedy in the court of common pleas under the Act of June 16, 1836, P. L. 781, 790, §13, 17 PS §§281, 282, as extended by Act of February 11,1857, P. L. 39 §1,17 PS §283. See Barnes Laundry Co. v. Pittsburgh, 266 Pa. 21, 109 A. 535. We emphasize this at the outset because it disposes of a number of arguments advanced in the brief filed under Bule 61 which, if valid, would give appellant complete immunity from regulation.1
And before facing the main problem, we shall dis
It is conceded that if the Borough had continued the operation of the water service, the commission would have jurisdiction over the rates charged to consumers beyond its corporate or territorial limits. Section 301 of the Public Utility Law; Ambridge Borough v. Pa. P. U. C., 137 Pa. Superior Ct. 50, 8 A. (2d) 429.
It must also be conceded that appellant is a public corporation organized by the Borough to perform the public utility service for it. See Lighton v. Abington Twp., 336 Pa. 345, 9 A. (2d) 609. And although it is not, in law, the agency of the Borough, but a separate entity. (Williams v. Samuel, 332 Pa. 265, 2 A. (2d) 834; Tranter v. Allegheny County Authority, 316 Pa. 65, 173 A. 289), the Borough is the parent, the Author
The argument is: Since an authority has no corporate limits but a municipality has, when the legislature gave the commission regulatory control over a ‘municipal corporation’ for public utility service beyond its corporate limits it must have referred to a municipality only. But this does violence to the legislative definition in section 2(15) of ‘municipal corporation’; the legislature has expressly said ‘municipal corporation’ includes municipal authority. Moreover, although the question is not before us and we express no opinion on it, if this argument were valid, the effect might be that the commission has jurisdiction over all the rates of appellant. We understand this to be the position taken by Commissioner Buchanan in his brief concurring opinion. A public utility is defined in section 2(17) to mean ‘persons or corporations’ operating a public utility service. Appellant is a corporation. And that the legislature assumed municipal corporations operating a public utility are included in the broad general definition of a public utility is borne out by the fact that after making a general provision in the first part of section 301 that the rates of ‘any public utility’ are subject to regulation by the commission, a proviso, which ordinarily implies an exception, is used to specially limit the regulatory power over the rates of municipal corporations.4 If municipal authorities were
The alternative argument is equally unpersuasive. The gist.of it is: If ‘municipal corporation’ in section 301 includes a municipal authority, the language of the section must be read literally — that only public utility service furnished by a municipal authority beyond its corporate limits is subject to regulation by the commission — and that when so read the commission, in reality, has no control whatever over a municipal authority 'because its ‘corporate limits’ are its project limits and in this case — in any case in which it renders a utility service beyond the corporate limits of- its parent municipality — appellant’s ‘corporate limits’ include all the territory, inside and outside the - borough, which it serves. But ‘corporate limits’ does not mean one thing when applied to a municipality and something else as applied to a municipal authority. By its context it means the same as applied to both. There is no reason why it could not mean project limits as applied to a municipality since one which renders utility service beyond its territorial limits may be said to have project limits beyond its territorial limits. But if it were so construed, the proviso to section 301 would be meaningless; it would be a phantom enactment; it would purport to give some jurisdiction and yet give none.
These arguments suggest that the legislature has played fast and loose with words. We again ask: Why should it have resorted to subtle niceties to give to municipal authorities immunity from commission regulation?
Moreover, it seems to us there is a fundamental, although perhaps inadvertent, inconsistency in appellant’s position. If, as it contends, its operations are a
It is suggested that the fact the commission has heretofore not attempted to regulate municipal authorities is of some significance. Of course, when words of a law are not explicit, the intention of the legislature may be ascertained by considering the administrative interpretations of it. Statutory Construction Act of May 28,1937, P. L. 1019, art. IV §51, 46 PS §551. But there is no proof that prior to the present case there have been administrative interpretations of the commission’s jurisdiction; the only expression on the subject called to our attention is the opinion of the Attorney General that the commission has jurisdiction. The mere silence or inaction of the commission, even though for a substantial period, does not meet the requirements of the principle of statutory construction urged upon us.
It is argued that the legislature’s failure to adopt several amendments to the Municipality Authorities Act, offered in 1941, indicates that the legislature has
Finally, it is argued that since two or more municipalities may now (Amendment of 1937, 53 PS §2900h) jointly incorporate and operate an authority to render utility service, intolerable difficulties would arise from commission regulation of a part but less than all the services. But complications in rate regulation are relative things. The division of jurisdiction between the courts and the commission over the public utility rates of a single municipality is not entirely free from complicating factors. Wherever there is a division of jurisdiction, they are bound to exist. A common complication arises from the division of' jurisdiction between state and federal regulatory bodies over the intrastate and interstate rates of a ¡single operating utility. And
Underlying all these considerations is the constantly recurring question: Is there any valid reason why the legislature should have made a distinction between the regulatory power of the commission as between a municipality on the one hand and its authority on the other? In our opinion none has been pointed out. Prior to the Public Utility Law of 1937, the Public Service Commission had no jurisdiction over a municipally operated public utility whether or not it rendered service beyond its corporate limits. Shirk v. Lancaster, 313 Pa. 158, 169 A. 557. A realistic appreciation of the temptation to discriminate against the outside users impelled the change. When a municipality limits its service to its own voters the power of the ballot is perhaps an adequate protection. The officials who manage the property are elected by and, therefore, beholden to the consumers for their power to manage. See Barnes Laundry Co. v. Pittsburgh, supra. It is the consumer outside the corporate limits, who ha’s no right to participate in the governmental affairs of the municipality and, therefore, in its selection of manage-, ment, who needs protection against the natural inclination of management to favor its constituents at the expense of the outsider who has no voice. The basic reasons for the change in the law apply equ’ally to the authority, the creature of the municipality which renders the .service for it. Under the Municipality Authorities Act, an authority comes into being by resolution or ordinance of the incorporating borough whose governing body is composed exclusively of citizens of such municipality. (Section 7). We think the natural tendency to discriminate equally .strong. And the right of holders of municipal bonds to mandamus the public officials to levy and collect taxes to produce revenues
Second. If we thus construe it, is section 301 unconstitutional on the ground that there is nothing in the title of the Public Utility Law to indicate that it includes a municipal authority in the definition of municipal corporation?
We have already indicated the close natural relationship between municipalities and their authorities. Appellant concedes this when it argues it is entitled to the benefit of the provision in section 301 of the Public Utility Law that: “No rate charged by a municipality for any public service rendered or furnished beyond its corporate limits shall be considered unjustly discriminatory solely by reason of the fact tjhat a different rate is charged for a similar service within its corporate limits.” The title of the Act indicates that it relates to “the regulation of public utilities, including, to a limited extent, municipalities engaging in public utility business,” that jurisdiction was conferred upon the Public Utility Commission over “persons, associations, companies, and corporations, including, to a limited extent, municipal corporations subject to the act.” Thus the Act, by its title, applies to ‘corporations/ ‘municipalities/ and ‘municipal corporations.’ By nature and function, an authority is a corporation of a public character organized by a municipality to render a public utility service and bearing a close relationship to a municipal corporation. In our opinion the title gives ample notice to the reasonably careful readers. Lehigh Navigation Coal Co. v. Pa. P. U. C., 133 Pa. Superior
Third. Does tbe evidence support tbe finding of the commission that tbe rates charged tbe complainants were unreasonable or discriminatory?
Appellant contends that the burden of proof was on complainants. If it was, tbe evidence they offered was scarcely sufficient to meet tbe burden. After proving tbe difference in rates, they called two former employes of appellant who testified that “the cost of service” outside tbe borough limits “would be about the same” as within. This was the extent of their proofs; there were no boobs or records offered. And apart from its general vagueness it fundamentally lacks probative value; the inference is that the costs were being compared on a per-customer basis. The cost of water service to a particular customer varies relatively little with the am'ount of consumption which measures the amount of revenue he pays. Thus, at the same rate, the utility makes a large profit from the large consumer and a small, or perhaps no profit at all, from the small consumer. Obviously, if the cost of. serving each is the same or about the same a higher rate to tbe small consumer class should be allowed. And one of .the witnesses stated that the vast majority of customers outside the borough were .domestic users who were within the minimum consumption, whereas the large users were within tbe borough.
On the other hand, the commission contends the burden of proof was on .appellant. If it was, the record is equally unsatisfactory. The evidence .offered by appellant consisted primarily of an exhibit which purported to justify an anticipated revenue of f5,200 from one hundred and seventy-three customers outside tbe borough limits. It showed what purported to be tbe original cost of that part ,of the plant devoted to serving all customers and then apportioned it on the basis of the number of customers. To the amount thus ap
There are a number of things wrong with this exhibit. In the first place, the segregation or separation of the jointly .used property, i. e. jointly used for service to both inside and outside customers, for valuation purposes on the basis of the number of customers is wholly invalid. The proper basis for segregating property for rate-making purposes between various types of users and various types of service is a usage basis, particularly where, as here, a division of jurisdiction is involved. Smith v. Illinois Bell Telephone Co., 282 U. S. 133, 75 L. Ed. 255. Usage means consumption or quantity of service. In the second place, the alleged rate base was reached without depreciating either the original cost of the property jointly used by both classes of customers or the reproduction cost of that used exclusively by outside customers.. And the appellant’s effort to compensate for this obviously vulnerable position by setting up a low annual depreciation rate does not necessarily cure the • defect. At least, there is nothing in the record to show that it does except the wholly unsatisfactory statement of appellant’s engineer that some .of the plant would not depreciate at
The cost of carrying the unused portion of the debt requires special consideration. When the authority was incorporated, it issued bonds in the amount of $585,000. It paid $233,000 for the property and deposited the balance, $352,000, with the trustee in a ‘Construction Fund.’
The commission refused to allow any portion of 'the interest as an operating expense; it was not asked to include any portion of the principal in the rate base. The fund was intended to be used for what are said to be much needed improvements.
We can take judicial notice of the fatet that this country is engaged in a war (Alko Express Lines v. Pa. P. U. C., 152 Pa. Superior Ct. 27, 30 A. (2d) 440) and that the federal government’s imposition of material priorities has substantially interfered with, if not entirely prevented, the initiation of the work. $30,-000 of this fund has been expended for engineering services, legal services, land .surveys, leakage and wastage survey, purchase of water shed land, the installation of a new main, the enlargement of the main from the distribution reservoir, and ‘trustee’s fees.’ It is obvious that none of the interest paid on the bonds
We are clear that the unexpended portion, the ‘Construction Fund,’ adds n'othing of value to the property used and useful in rendering the service. But, in dealing with the problem, we are confronted with the fact that the legislative policy, clearly expressed, is to protect the bondholders of municipal authorities.7 And it is the duty of the commission, the legislature’s agency, to carry out the latter’s undertaking. Appellant is hot an ordinary public utility and the differences must be observed in the regulation of its rates. This is not to say that the full interest cost must be allowed in determining the allowable return. But it is to say that •if, after proper rate base and allowable operating costs are determined, a reasonable return based thereon would be inadequate to enable appellant to meet its 'obligations to the bondholders or'would seriously jeopardize the security of the bonds, an additional allowance should be made. And the consumers outside the borough limits should be required to carry their proper share of the burden.
We agree with the commission that the burden of proof was on appellant. There is'a strong presumption that the legislature intended to fully implement the
We feel that the ends of justice require that the record be returned to ’the commission for a complete reconsideration of the case.
The order is vacated and the record returned for further proceedings in accordance with this opinion.
1.
For example, that the Municipality Authorities Act authorizes appellant to fix, charge and collect for its services reasonable rates, “to he determined by it”; that since the Amendment of 1939 to section 9 of the Municipality Authorities Act gave appellant the right to acquire property “without reference to any other law,” (53 PS §2900n) it would be inconsistent to hold it cannot fix rates with similar impunity.
2.
“Such trustee......may...... (a) by mandamus or other suit, action, or proceeding- -at law or in equity enforce all rights of the bondholders, including the right to require the Authority to collect rates, rentals, and other charges, adequate to carry out :any agreement as to or pledge -of the revenues or receipts of the Authority,......” Section 6, 53 PS § 2900k.
3.
We express no opinion on the validity of the limitation.
4.
Although ‘public utility’ and ‘municipal corporation’ arc separately defined, it is not unusual to find overlapping definitions in the same act and it does not necessarily mean that the terms are mutually exclusive. For example, the Vehicle Code,
5.
For example, see Act of May 4, 1927, P. L. 519 art. XIII, §1302, 53 PS §13392.
6.
One of the most puzzling unanswered questions about the depreciation feature arises from the abundant evidence that the entire scheme — the creation of the authority and the large borrowings' — was predicated on a public demand for improvement of the water system which certainly suggests that it was obsolete or in a dilapidated condition.
7.
Section. 6, Municipality Authorities Act, supra.