Summary
In Ridley, twelve homeowners sought an extension of a public water utility's facilities to a residential section of a township, a part of which was already served by the utility.
Summary of this case from Popowsky v. Pennsylvania Public Utility CommissionOpinion
October 10, 1952.
January 20, 1953.
Public utility law — Extension of service — Public necessity — Economic feasibility — Resources of company — Effect upon total return from overall operations — Right of company to choose only profitable territory — Participation by consumers in cost of construction — Evidence — Sufficiency to support order — Public Utility Law.
1. The Public Utility Law of May 28, 1937, P. L. 1053, § 401, directs that every public utility shall make all such extensions as shall be necessary or proper for the accommodation, convenience, and safety of its patrons and the public.
2. The purpose of an inquiry upon a complaint for refusing an extension of facilities is not to establish rates but merely to determine the effect of an extension upon the total return from the overall operation of the entire system.
3. A public service corporation may not pick and choose only presently profitable territory covered by its franchise; if a portion of the territory served by the public service corporation is not profitable, but the entire service produces a fair return on the investment, the utility may still be required to serve the unprofitable portion, if the rendering of such service does not result in an unreasonable burden on its other service.
4. Ordinarily, it is not the business of the citizen or consumer to construct any part of a utility's system.
5. No inflexible rule can be laid down to determine whether the consumer should be required to bear part of the cost of construction of an extension; participation in construction costs cannot be exacted indiscriminately; and it cannot be required upon a mere showing that an extension will not immediately produce an adequate profit.
6. The action of the Commission in withholding exercise of its power to direct a utility to construct an extension unless the consumers participate in the cost of construction must rest upon evidence which shows that, without the contribution or loan of the consumers, the cost of construction would materially handicap the utility in securing a fair return on all its operations.
7. The obligation imposed upon the Commission to exercise its powers and discretion reasonably applies as well to patrons and the public as to the utilities.
8. The primary object of the public service laws is not to establish a monopoly or to guarantee the security of investment in public service corporations, but first and at all times to serve the interests of the public.
9. An order of the Commission cannot stand unless it is based upon substantial and competent evidence having a rational probative force, upon such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.
10. Sherman v. P. S.C., 90 Pa. Super. 523, and Wyoming Valley Water Supply Co. v. P. S.C., 104 Pa. Super. 432, distinguished.
11. In a proceeding upon a complaint of a township and property owners against a water company for refusing their request for an extension of its facilities, in which it appeared that the township requested the installation of a fire hydrant and the property owners desired water for their homes, in a residential section of the township, a part of which was already served by the company; that the township was within a few minutes of travel to the center of a large metropolis, and its population had approximately doubled in the last decade; that the water company was a large and prosperous utility, and the extension would require an expenditure of less than one-fourth of one percent of its current and accrued assets; and that the Commission found that it would not be economically feasible or reasonable for the company to provide the extension facilities and service and bear all of the costs, and that it would be an unfair burden on the water company's other customers; it was Held that (1) the Commission, having found that there was need for the extension, should have sustained the complaint unless other substantial and competent evidence negatived that finding; (2) the evidence did not support a finding that the company lacked resources to make the extension or that the extension would be an unfair burden on the water company's other customers; (3) the evidence did not establish that without participation by the consumers in the cost of construction the utility would be handicapped materially in securing a fair return on all its operations; and (4) the order of the Commission should be reversed.
Before RHODES, P.J., HIRT, RENO, DITHRICH, ROSS and GUNTHER, JJ. (ARNOLD, J., absent).
Appeal, No. 211, Oct. T., 1952, from order of Pennsylvania Public Utility Commission dated July 14, 1952, Complaint Docket No. 15183, in case of Township of Ridley et al. v. Pennsylvania Public Utility Commission and Philadelphia Suburban Water Co. Order reversed.
Proceeding upon complaint of property owners to Pennsylvania Public Utility Commission for extension of water service.
Order entered dismissing complaint. Complainants appealed.
Joseph Sharfsin, with him R. Paul Lessy, for complainants, appellants.
Jack F. Aschinger, Assistant Counsel, with him Lloyd S. Benjamin, Acting Counsel, for Public Utility Commission, appellee.
Ernest R. von Starck, with him Robert H. Young and Morgan, Lewis Bockius, for water company, intervenor, appellee.
Argued October 10, 1952.
This is the appeal of the Township of Ridley and 12 property owners from an order of the Pennsylvania Public Utility Commission dismissing their complaint against the Philadelphia Suburban Water Company, intervening appellee, for refusing their request for an extension of its facilities.
Ridley is a township of the first class, located in Delaware County, within the Company's chartered territory. Its population of 8641 in 1940 was increased to 17,212 in 1950, an increase of 8571 or 99%, which is comparable with the increase in Delaware County of 33% and in Pennsylvania of 6%. According to the map of the United States Census Bureau it lies adjacent to the City of Chester, and of its total population, 15,636 inhabitants are included in the Philadelphia Urbanized Area. A map of the part of the Township here involved, introduced in evidence, bears the legend, "17 minutes from Broad St. [Philadelphia]."
These facts do not appear in the testimony. They have been abstracted from the report of the United States Bureau of the Census of 1950, and we have taken judicial notice of them. 9 Wigmore, Evidence, § 2577.
The appellants sought an extension of the Company's facilities in a residential section of the Township known as Faraday Park, a part of which is already served by the Company. The Township requested the installation of a fire hydrant and the property owners desired water for their homes. It is not necessary to describe further the conditions prevailing in the area, for the Commission found "that there is need for the extension facilities and service." Unless other substantial and competent evidence negatived that finding the Commission should have sustained the complaint, since the Public Utility Law of May 28, 1937, P. L. 1053, § 401, 66 P. S. § 1171, clearly commands that "Every public utility . . . shall make all such . . . extensions . . . as shall be necessary or proper for the accommodation, convenience, and safety of its patrons . . . and the public." (Emphasis added.)
The difference between need and necessary is so subtle that only a lexicographer can recognize it.
The majority of the Commission based the dismissal of the complaint upon the finding: "We find, however, that it is not economically feasible or reasonable for the water company to provide the extension facilities and service and bear all of the cost; and that it would be an unfair burden on the water company's other customers." This finding reproduces almost verbatim the concluding averment of the Company's answer and is not supported by the evidence. An order of the Commission cannot stand unless it is based upon substantial and competent evidence "having a rational probative force", upon "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Pittsburgh Lake Erie R. R. Co. v. Pa. P. U. C., 170 Pa. Super. 411, 416, 85 A.2d 646.
The extension would require laying 1547 feet of pipe. The Commission found that the cost of the extension would be about $6,950 to service the fire hydrant and 8 prospective domestic consumers and that the annual net income, after giving effect to operating, maintenance, depreciation and income tax charges, would be $65.71, a return of .95% on the investment. Should the Company serve the hydrant and 20 customers the investment would come to $7,600, with an annual net income of $182.93, a 2.4% return. Appellants question these findings but there is evidence to sustain them, and the exigencies of the case do not call for a minute examination of the figures.
The Company's balance sheet, introduced in evidence, shows total assets in 1950 of $42,458,124.41, an increase of $3,193,016.48 over 1949. Its current and accrued assets in 1950 were $3,270,429.61, an increase of $474,933.77 over 1949. Its earned surplus in 1950 was $4,708,323.19, an increase of $536,907.47 over 1949. "Not economically feasible" is an elusive phrase and may mean anything. If it means that the Company lacks the resources to make the extension, the evidence will not support the finding. For the evidence conclusively shows that the extension would entail the expenditure of less than one-fourth of one per cent of the Company's current and accrued assets.
Nor is there any evidence showing that extension "would be an unfair burden on the water company's other customers." If the Commission means by that phrase that the extension would require an increase of the rates payable by other patrons, there is not a shred of competent evidence to support the finding. The Company and the Commission contend that proof of increased rates would compel "a full-scale rate case", which is patently fallacious. The purpose of an inquiry upon a complaint for refusing an extension of facilities is not to establish rates but merely to determine the effect of an extension upon the total return from the overall operation of the entire system. The rate of return on the extension has been shown. If this figure had been supplemented by proof of the Company's total revenues and expenses, the relation which the extension bears to its entire business, and its allowable and actual rate of return, a simple mathematical calculation would have demonstrated whether a general rate increase was prima facie indicated by the 1500 foot extension.
Cf. Phila. Rural T. Co., v. P. S.C., 103 Pa. Super. 256, 261, 158 A. 589, where this Court, affirming an order requiring an extension, said: "It [the utility] made no attempt to prove its total investment in its business, nor its total revenues and expenses, nor the relation which the extension bears to its total business."
A public utility cannot collect the cream in its territory and reject the skimmed milk. "A public service corporation may not `pick and choose' only presently profitable territory covered by its franchise. If a portion of the territory served is not profitable, but the entire service produces a fair return on the investment, the utility may still be required to serve the unprofitable portion, if the rendering of such service does not result in an unreasonable burden on its other service": Phila. Rural T. Co., v. P.S.C., 103 Pa. Super. 256, 261, 158 A. 589. Although the Company does not enjoy a monopoly in the Township it is obliged to render service within a reasonable distance from its distribution system, and if it takes only the profitable business no other water company will enter the area to pick up the unprofitable business which it declines. No other company will become "a snapper-up of its unconsidered trifles."
The reasonableness and validity of the Commission's suggestion that appellants bear part of the cost of the extension rests upon the same factors hereinbefore discussed. Ordinarily, it is not the business of the citizen or consumer to construct any part of a utility's system. There are, doubtless, instances where, under special circumstances, warranted by the evidence, the Commission may, in the exercise of its administrative discretion, withhold exercise of its power unless patrons offer to participate in the cost of construction. Altoona v. Pa. P. U. C., 168 Pa. Super. 246, 77 A.2d 740. But no inflexible rule can be laid down; participation in construction costs cannot be exacted indiscriminately; and it cannot be required upon a mere showing that an extension will not immediately produce an adequate profit. The action of the Commission must rest upon evidence which shows that, without the contribution or loan of the consumers, the cost of construction would materially handicap the utility in securing a fair return on all its operations. Riverton Consolidated Water Co. v. P. S.C., 105 Pa. Super. 6, 159 A. 177. Such proof, as already indicated, is lacking.
"It is not unusual in such instances for interested parties voluntarily to offer to participate in the cost of an extension by agreement, usually providing for refunds for each additional abutting customer; such participation being for the purpose of making the extension a reasonable one for the water utility to make. Such participation cannot be required by either the utility or this Commission, but the Commission would give consideration to such a voluntary offer to participate, in making its determination in the case. However, there is no such offer of record in this instance."
The obligation imposed upon the Commission to exercise its powers and discretion reasonably applies as well to patrons and the public as to the utilities. The Commission operates on a two-way street. "The primary object of the public service laws is not to establish a monopoly or to guarantee the security of investment in public service corporations, but first and at all times to serve the interests of the public": Hoffman v. P. S.C., 99 Pa. Super. 417, 429. (Emphasis added.)
The Company relies principally upon Sherman v. P. S.C., 90 Pa. Super. 523, 526, where this Court said: "We are not to be understood as holding that the extension of service of a public utility is dependent on the profit which may reasonably be expected therefrom; in proper cases such extension may be ordered though the immediate result of the expansion may entail financial loss to the company; but the company should not be subjected to unreasonable expenditures, nor the consuming public be unduly burdened, because of the over development or premature development of scattered sections of the city in advance of its normal growth, when there is no rational expectation of the event justifying the expenditure." The principle has been followed and applied in Wyoming Valley Water Supply Co. v. P. S.C., 104 Pa. Super. 432, 159 A. 340; United Natural Gas Co. v. Pa. P. U. C., 153 Pa. Super. 252, 33 A.2d 752; Fayette Co. Gas Co. v. Pa. P. U. C., 153 Pa. Super. 271, 33 A.2d 761. This Court still adheres to that doctrine.
However, the facts of these cases differ vastly from those in this record. For instance, in the Sherman case, the water company, which operated a gravity system of supply, was requested to extend its mains to lots "located on the hillside at elevations varying from 1,040 to 1,150 feet", the lowest of which was "150 feet away from the company's highest main in that neighborhood", and "11 to 127 feet above the company's reservoir." To supply the ten complainants the company would have been required to lay 1200 feet of high pressure pipe, and install a pumping system and a supply tank at an elevation of 1,170 feet, the cost of which would have been $14,564. The annual operating expenses would have been in excess of the probable return. This Court found: "There is no present likelihood of any considerable building development near or beyond complainant's properties", and affirmed the Commission's order denying the extension.
In the Wyoming case, the Commission had ordered an extension of one and one-fifth miles costing $18,000 to a dying coal town, formerly supplied by another water company whose distribution system was practically worn out, and this Court reversed. The facts in the United and Fayette cases bear no relation to those here presented.
This case does not fit in the factual pattern of the precedents upon which the Company relies. Appellants do not reside in a small hillside settlement without prospects of future development or in a moribund mining village. They are residents of suburban Philadelphia, adjacent to the City of Chester, within a few minutes of travel to the center of the metropolis, and of a community whose increase of population during the last decade denotes civic stability and presages continued healthy growth and expansion. Nothing in the record suggests "over development or premature development of scattered sections of" the Township "in advance of its normal growth", and while the immediate returns from the extension may not now equal the overall return of the Company it cannot be said, on this record, that "there is no rational expectation of the event justifying the expenditure." These people are entitled to fire protection and domestic water service without subsidizing a large and prosperous utility.
The order is reversed and the record is remanded to the Commission for further action in accordance with this opinion.