Opinion
No. 4413.
Argued June 7, 1955.
Decided June 30, 1955.
The Public Utilities Commission in determining adequate rates for water service furnished by a foreign public utility to consumers in this state from a source located here but servicing consumers in both states through a single interconnected gravity system line is required to consider the cost of an additional reservoir found by the Commission to be necessary to furnish an adequate supply to those foreign consumers situate more distant from the source.
No distinction as to rate is permitted between consumers of the same class within a single utility system, although politically divided by state boundary, on the basis of their proximity to or distance from the source of supply which would result in an unreasonable preference or disadvantage.
APPEAL, by petition, under the provisions of R. L., c. 414, ss. 6 and 7, from a decision and order of the Public Utilities Commission (D-R 3347) dated February 14, 1955, denying a proposed increase in rates for water service furnished to consumers of the company in the section of Conway known as East Conway in this state. The decision and order were made, after hearing, in connection with a proposed new tariff filed by the water company on July 8, 1954, under the provisions of R. L., c. 292, as amended, Laws 1951, c. 203, s. 46, providing for an increase in rates.
The Fryeburg Water Company was organized in 1882 and in that year purchased land and established a reservoir on what is known as the White Brook lot in Conway, this reservoir being 155 feet above the main street of Fryeburg, Maine. From this reservoir, a line of pipe was laid in an easterly direction and extending approximately a mile and a half to the village known as East Conway. At this point, branch lines were laid from the main line northerly and southerly direction, from which service was Furnished to consumers in East Conway. The main line was continued easterly approximately one mile, crossing the state line, to the village of Fryeburg, Maine, and was there connected to various smaller lines running through the streets of Fryeburg. From 1882 until 1954, the water for this system was principally supplied by gravity from this reservoir in New Hampshire. The system is a single interconnected line providing service to approximately 330 consumers in Maine and 40 in New Hampshire. In Fryeburg, there are approximately 30 fire hydrants supplied from the system.
Upon establishment of regulatory commissions in both this state and in Maine, the company filed tariffs in each state and established uniform rates which have remained the same in each state for different types of general consumers. In 1951, the company sought increase in rates in both states. Following a hearing before the Maine Commission, the company was found by that Commission to have a net rate base of $45,400 and increased rates as to the Maine consumers were established. There being no opposition to a similar increase in rates for New Hampshire consumers, no hearing was held by the Commission in this state and the new rates established for Maine consumers became effective as to the consumers in this state.
In 1953, an additional water supply being needed, the company started the development of a new source known as the Ward Spring supply and completed it in 1954 at a cost of over $40,000. This source is located in Fryeburg at the easterly or opposite end of the system from the reservoir, and water from it is now supplied under pressure to the system in both states. The quantity of water available is of sufficient volume to permit the placing of the reservoir in New Hampshire on a stand-by basis.
As a result of this additional investment, the company represented its new rate base to be in excess of $80,000 and filed tariffs in both states calling for a 41.5% increase in all rates over those established in 1951. After hearings before the Maine Commission, increased rates in substantially the amounts proposed in the new tariff were established for the company's service area in that state. After a subsequent hearing before the Commission in this state, the proposed rates were denied. The Commission made no finding as to the company's rate base but found that the increase "was primarily necessary to cover the increased fixed charges resulting from the addition of the new Ward Hill Spring Water Supply" and that "this added source of supply was needed to give adequate service to the Fryeburg consumers and provide improved fire protection service, not enjoyed by New Hampshire consumers." It further found: "We fail to see any material benefits accruing to the New Hampshire consumers from this added investment by the Company. It would appear that no rate increase would have been needed if the Ward Hill Spring had not been developed for the benefit of Fryeburg customers."
The grounds upon which the company seeks to have the decision and order of the Commission vacated or remanded appear in the opinion.
Hastings Son (of Maine) (Mr. David R. Hastings, II orally), for the company petitioner.
L. Hamlin Greene (by brief and orally), for the New Hampshire consumers.
The basis upon which the Commission denied an increase in rates as to New Hampshire consumers was apparently the fact that the new source of supply was needed "to give adequate service to the Fryeburg consumers"; that "no rate increase would have been needed if the Ward Hill Spring had not been developed for the benefit of the Fryeburg customers"; and that since the new source was not required in order to adequately supply the New Hampshire consumers, no "material benefits [accrued] to [them] from this added investment." It is the company's position that the Commission's failure to consider the expense of adequately supplying the needs of the whole system as a unit was error and that the case should be remanded. With this contention we must agree.
The unit normally considered for rate making purposes, even when a utility does business in two or more states and is subject to regulation in each state, is the entire interconnected operating property of the utility without regard to particular groups of consumers or geographical subdivisions. Leeman v. Commission, 104 F. Supp. 553, 560; Wabash Valley Electric Co. v. Young, 287 U.S. 488, 497. Although conditions may be such in a particular case as to require. or permit the consideration of a smaller unit (American Bridge Co. v. Commission, 307 U.S. 486, 494), no such conditions appear to exist in this case.
The water system in question is a single interconnected line through which consumers in two separate communities have been supplied from the same sources since 1882. All of the company's New Hampshire customers are geographically located nearest the reservoir from which the supply formerly flowed and were adequately supplied from that source. The customers in Maine, located a mile farther from the source, were subject to the first demands of the New Hampshire customers against the gravity-fed flow and in recent years were frequently without an adequate supply particularly during dry seasons. The original source having proved inadequate, a new source was developed to cure this inequity and to supply the same users through the same system with a fully adequate supply under pressure.
Rates imposed upon like consumers within a single system "are required to be just and reasonable inter se, as well as in toto." Company v. State, 95 N.H. 353, 364. No distinction as to rate is permitted between consumers of the same class on the basis of their proximity to or distance from the source of supply which would result in an unreasonable preference or disadvantage. R. L., c. 292, s. 11, as amended by Laws 1951, c. 203, s. 46, subs. 10. Cf. Leeman v. Commission, supra, 560, 561. The only difference between the Maine and the New Hampshire consumers is that the latter were adequately supplied from the old source because of the fortuitous circumstance that they are located nearest to it. Such a difference is not a sufficient justification for the establishment of New Hampshire rates without consideration of the reasonable expenses required for those additions or improvements to the system as a whole which are required to provide adequate service to all consumers of the same class. "Where water furnished is all secured from the same sources, and is supplied to several contiguous communities embraced in one general district, with no unreasonable extensions to serve lean territory or other elements creating material difference in cost, a uniform rate for the entire territory is indicated and ordinarily justified." New Haven v. New Haven Water Co., 118 Conn. 389, 412, and cases cited.
The fact that some of the consumers are located in New Hampshire and others in Maine does not relieve the Commission of its duty to fix the rates of the New Hampshire consumers on the basis of the requirements of and benefits to all similar users throughout the system. It found that the Ward Spring development was needed "to give adequate service to the Fryeburg consumers" as well as to "provide improved fire protection" in Fryeburg. In so far as the new source was needed to provide fire protection, the New Hampshire consumers are not to be charged with its cost. However, to the extent that it was required to provide a supply of water to the general consumers in Maine equal to that furnished to New Hampshire consumers of the same class, its cost must be considered in determining the just and reasonable rates which the New Hampshire consumers should pay. This allocation of cost, so far as the New Hampshire rates are concerned, is not determined by the decision of the Maine Commission, which gave no particular weight to the fire protection provided and allowed merely a pro-rata increase in hydrant rates equal to that applicable to all other rates, but is one to be resolved by the New Hampshire Commission. New Eng. Tel. Tel. Co. v. State, 98 N.H. 211, 218.
Whether just and reasonable rates can be established consistent with this opinion without the complicated, expensive and time consuming procedure required to establish a rate base for the company, applicable to its New Hampshire rates, is left to the determination of the Commission. Cf. Chicopee Mfg. Co. v. Company, 98 N.H. 5, 21. Even though the new investment is situated in Maine, to the extent that it is "used and useful" in the conduct of the petitioner's business in New Hampshire, the petitioner is entitled to have it taken into account in the determination of just and reasonable rates here. Laws 1951, c. 203, s. 46, supra, subs. 27, 28,; New Eng. Tel. Tel. Co. v. State, supra, 95 N.H. 353, 358. The order of the Commission is vacated and the case remanded for further consideration.
Remanded.
All concurred.