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In re Proposed Increased Intrastate Industrial Sand Rates

Decided: July 23, 1973.

IN THE MATTER OF PROPOSED INCREASED INTRASTATE INDUSTRIAL SAND RATES BY THE CENTRAL RAILROAD COMPANY OF NEW JERSEY, R.D. TIMPANY, TRUSTEE


Lora, Allcorn and Handler.

Per Curiam

As we earlier observed in directing the remand of this cause for findings, "in the performance of its rate-fixing function the Board [of Public Utility Commissioners] is bound by one over-riding statutory direction and consideration -- namely, that the rates fixed be 'just and reasonable.'" Equally fundamental is the proposition, universally accepted, that the "justness and reasonableness of a particular rate * * * can only be determined after an examination of a company's property valuation which constitutes its rate base; its expenses, including income taxes and and an allowance for depreciation; and the rate of return developed by relating its income to the rate base." Public Service Coord. Transport v. State, 5 N.J. 196, 216 (1950).

Thus it is that the sole authority of the Board to determine the justness and reasonableness of an existing or proposed rate without finding a rate base is restricted to

the three exceptional and extraordinary situations spelled out by the Legislature in N.J.S.A. 48:2-21.2. And thus it is that the authority granted to the Board to "negotiate * * * with * * * [the] public utility for an adjustment of the individual rates," must be confined to interim relief pending a proceeding to determine the justness and reasonableness of an existing or proposed rate, N.J.S.A. 48:2-21.1; In re N.J. Power & Light Co., 15 N.J. 82, 96-97 (1954). Were N.J.S.A. 48:2-21.1 to be otherwise construed, rates could be negotiated by the utility with the Board on a permanent basis, completely without regard to the resultant rate of return to the utility and absent any other legislative standards indispensable to a proper delegation of the rate-making power.

In the present case the Board has approved the new rates which, admittedly, were fixed by way of negotiation with the carrier, on a permanent rather than on an interim basis. Lacking such authority, the orders from which the appeals are taken cannot be sustained under N.J.S.A. 48:2-21.1. Compare, Driscoll v. Edison Light & Power Co., 307 U.S. 104, 59 S. Ct. 715, 83 L. Ed. 1134 (1938).

Neither may the orders be justified by virtue of the authority delegated to the Board under N.J.S.A. 48:2-21, generally to fix, modify, approve and disapprove rates. For, although the Board concluded that the "proposed increased rates * * * are just and reasonable," the conclusion is founded upon considerations other than a fair rate of return calculated by relating projected income (including that reasonably to be anticipated from the proposed increase) to the carrier's rate base. We do not consider fully allocated costs to be an acceptable substitute. A "finding of fact as to rate base * * * is the foundation stone of a rate determination," and without it there is nothing to support a rate approved or fixed under N.J.S.A. 48:2-21. Central R. Co. of N.J. v. Dept. of Public Utilities, 7 N.J. 247, 263 (1951).

Except for the authority granted to the Board by N.J.S.A. 48:2-21 and N.J.S.A. 48:2-21.1, the single remaining

grant of authority to the Board to fix and approve rates here applicable is found in N.J.S.A. 48:2-21.2(1)(a). It is there provided:

In arriving at any determination as to the justness or reasonableness of any existing rate, fare or charge, or in prescribing a just and reasonable rate, fare or charge, the board shall not be bound:

1. To find a rate base, if it determines that

(a) the applicable operating expenses plus depreciation and taxes of conducting the business, for which the rate, fare or charge is established, computed on the basis of the 12 months next preceding the month in which the proceeding is initiated, exceeds the revenue from said operation, during said period, under the existing rates, fares and charges and that the revenue under the proposed ...


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