Wabash Valley Electric Co. v. Young - 287 U.S. 488 (1933)
U.S. Supreme Court
Wabash Valley Electric Co. v. Young, 287 U.S. 488 (1933)
Wabash Valley Electric Co. v. Young
Argued December 7, 1932
Decided January 9, 1933
287 U.S. 488
1. In fixing rates of a public utility for part of the territory served, conditions may be such as to require or permit that the property used and useful in serving the smaller area be treated as the rate base, rather than the entire plant serving the whole territory. P. 287 U. S. 497.
2. An electrical plant, built and operated as a generating and distributing plant for a single municipality, became part of a large system. The new owner ceased to generate current locally and brought in current over its lines from without. It served many other towns and cities, and also delivered varying proportions of the entire current borne by its lines to affiliated companies for delivery to their customers, including many towns and cities within their respective territories.
(1) That, under the Indiana Public Utility Act, the municipality was properly treated as the unit for determining the rates to be charged therein, and that this is consistent with due process. Pp. 287 U. S. 495-498.
(2) The property to be valued is that which is used and useful for supplying current to the municipality, adding thereto the proportionate part of the value of the general distributing system fairly attributable to the local service, but disregarding local plants in other municipalities which are separate and distinct and bear no relation to the one in question. P. 287 U. S. 499.
(3) The calculation is of necessity more or less approximate, but must be fair. P. 287 U. S. 499.
(4) No allowance for cost of financing need be made in the absence of evidence that such a cost was incurred, or that it necessarily would be incurred in the event of reconstruction. P. 287 U. S. 500.
(5) Rate case expenses of the utility on matters not connected with the valuation are properly disallowed, and the conclusion of the state commission, the master, and the court as to the proper allowance will not be disturbed when not definitely shown to be erroneous. P. 287 U. S. 500.
3. The fact that an electric power company is in a favorable financial position through being a subsidiary of a larger one may be taken into account in determining the rate of return to which it is entitled. P. 287 U. S. 501.
4. What may be an inadequate percentage of return on capital to one kind of public utility in its particular circumstances may be adequate for another kind in different circumstances. United Railways v. West, 280 U. S. 234. P. 501.
5. Seven percent rate of return is not shown to be confiscatory under the facts disclosed in this case. P. 287 U. S. 502.
1 F.Supp. 606 affirmed.
Appeal from a decree of the District Court of three judges dismissing for want of equity a bill to restrain the enforcement of rates fixed by the defendant Indiana Commission for electric service in the City of Martinsville.