B-114666, JUNE 25, 1953, 32 COMP. GEN. 577

B-114666: Jun 25, 1953

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PUBLIC UTILITIES - RATES - INCLUSION OF FRANCHISE TAX A CITY FRANCHISE TAX ASSESSED AGAINST A PUBLIC UTILITY COMPANY WHICH A PUBLIC UTILITIES COMMISSION DETERMINED TO BE AN OPERATING EXPENSE AND WHICH THE COMPANY WAS PERMITTED TO RECOVER BY INCLUDING THE TAX AS A SEPARATE ITEM ON ITS INVOICES TO ITS CUSTOMERS MAY BE CONSIDERED AS AN INCREASE IN RATES AUTHORIZED BY THE COMMISSION. 1953: REFERENCE IS MADE TO YOUR LETTER OF APRIL 2. YOU REQUEST A DECISION AS TO WHETHER PAYMENT THEREON IS AUTHORIZED. SUCH SERVICE WAS TO COMMENCE EFFECTIVE MARCH 28. THE COMPANY'S ELECTRIC SERVICE REGULATIONS WHICH WERE ATTACHED TO AND MADE A PART OF THE CONTRACT. MADE APPLICATION TO THE PUBLIC SERVICE COMMISSION OF UTAH TO HAVE A TWO PERCENT SALT LAKE CITY FRANCHISE TAX INCLUDED IN ITS RATE BASE IN ORDER TO PASS SUCH FRANCHISE TAX ON TO ITS CUSTOMERS THROUGH ITS RATES.

B-114666, JUNE 25, 1953, 32 COMP. GEN. 577

PUBLIC UTILITIES - RATES - INCLUSION OF FRANCHISE TAX A CITY FRANCHISE TAX ASSESSED AGAINST A PUBLIC UTILITY COMPANY WHICH A PUBLIC UTILITIES COMMISSION DETERMINED TO BE AN OPERATING EXPENSE AND WHICH THE COMPANY WAS PERMITTED TO RECOVER BY INCLUDING THE TAX AS A SEPARATE ITEM ON ITS INVOICES TO ITS CUSTOMERS MAY BE CONSIDERED AS AN INCREASE IN RATES AUTHORIZED BY THE COMMISSION, AND THEREFORE, PROPERLY CHARGEABLE TO THE GOVERNMENT UNDER THE UTILITY SERVICE CONTRACT:

COMPTROLLER GENERAL WARREN TO E. H. FOSS, DEPARTMENT OF AGRICULTURE, JUNE 25, 1953:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 2, 1953, TRANSMITTING A CERTIFIED INVOICE DATED FEBRUARY 12, 1953, IN THE AMOUNT OF $10.49, RENDERED BY THE UTAH POWER AND LIGHT COMPANY, SALT LAKE CITY, UTAH, REPRESENTING CERTAIN FRANCHISE TAXES SUSPENDED FROM VARIOUS MONTHLY BILLINGS OF THE COMPANY FOR THE PERIOD AUGUST 11, 1952, TO JANUARY 9, 1953. YOU REQUEST A DECISION AS TO WHETHER PAYMENT THEREON IS AUTHORIZED, IN VIEW OF THE CIRCUMSTANCES HEREINAFTER RELATED.

UNDER CONTRACT NO. A4FS-8421 DATED MARCH 27, 1947, THE CONTRACTOR AGREED TO FURNISH ELECTRICAL SERVICE AT THE FOREST SERVICE BASE REPAIR SHOP, LOCATED AT 520 SOUTH REDWOOD ROAD, SALT LAKE CITY, UTAH. SUCH SERVICE WAS TO COMMENCE EFFECTIVE MARCH 28, 1947, AND CONTINUE UNTIL FURTHER NOTICE, AT RATES INCORPORATED IN SCHEDULE NO. 6, TARIFF 6, ISSUED JANUARY 2, 1945, AND THE COMPANY'S ELECTRIC SERVICE REGULATIONS WHICH WERE ATTACHED TO AND MADE A PART OF THE CONTRACT.

UNDER DATE OF MARCH 26, 1952, THE POWER COMPANY, A PUBLIC UTILITY, MADE APPLICATION TO THE PUBLIC SERVICE COMMISSION OF UTAH TO HAVE A TWO PERCENT SALT LAKE CITY FRANCHISE TAX INCLUDED IN ITS RATE BASE IN ORDER TO PASS SUCH FRANCHISE TAX ON TO ITS CUSTOMERS THROUGH ITS RATES. AFTER APPROPRIATE HEARINGS, IT WAS DETERMINED THAT THE COMPANY COULD NOT INCLUDE THE SAID SALT LAKE CITY OR ANY OTHER CITY FRANCHISE TAXES IN ITS RATE BASE, SINCE IT WAS BELIEVED THAT SUCH RATE STRUCTURE WOULD BE UNFAIR TO THOSE CUSTOMERS NOT RESIDING WITHIN THE FRANCHISE TAXING JURISDICTIONS. ON THE OTHER HAND, HOWEVER, THE COMMISSION RECOGNIZED SUCH TAXES AS BEING OPERATING EXPENSES AND, ACCORDINGLY, PERMITTED THE COMPANY TO RECOVER THEM BY INCLUDING THE TAX AS A SEPARATE ITEM ON ITS INVOICES TO ITS CUSTOMERS. PURSUANT THERETO, THE COMPANY, ON AUGUST 5, 1952, ISSUED ITS NEW SCHEDULE OF RATES NO. 6 FOR THE STATE OF UTAH, WHEREIN THERE WAS SET FORTH THE AUTHORIZED INCREASED RATES EFFECTIVE AUGUST 11, 1952, BUT SUCH SCHEDULE MADE NO MENTION OF THE SALE LAKE CITY FRANCHISE TAX.

IT IS WELL SETTLED THAT RATES FIXED BY CONTRACT BETWEEN A PUBLIC UTILITY COMPANY AND A PATRON THEREOF ARE NEVERTHELESS SUBJECT TO LEGISLATIVE REGULATION AND ARE SUPERSEDED BY A SCHEDULE OF RATES PRESCRIBED BY THE LEGISLATURE OR A COMMISSION TO WHICH IT HAS DELEGATED ITS REGULATORY POWER. SEE WOLVERTON V. MOUNTAIN STATES TELEGRAPH AND TELEPHONE COMPANY, 142 P. 165; ADAMS V. NORTHWESTERN TELEPHONE EXCHANGE COMPANY, 183 N.W. 113; UNITED STATES V. OKLAHOMA GAS AND ELECTRIC COMPANY, 297 F. 575, AND AUTHORITIES CITED THEREIN. IN THE LIGHT OF SUCH AUTHORITIES, IT IS EVIDENT THAT RATES SET FORTH IN SCHEDULE OF RATES NO. 6, ISSUED ON JANUARY 2, 1945, MADE A PART OF THE CONTRACT HERE INVOLVED, NECESSARILY WERE SUBJECT TO LEGISLATIVE CONTROL AND, AS SUCH, ARE SUPERSEDED BY RATES WHICH SUBSEQUENTLY MIGHT BE ESTABLISHED BY LEGISLATIVE ACTION AND WHICH THEREBY BECOME THE LEGAL RATE PAYABLE FOR THE SERVICES RENDERED. THAT IS TO SAY, THE PARTIES MUST BE PRESUMED TO HAVE CONTRACTED WITH KNOWLEDGE OF THESE WELL-ESTABLISHED PRINCIPLES OF LAW AND, ACCORDINGLY, TO HAVE IMPLIEDLY AGREED TO BE BOUND BY SUCH RATES AS MIGHT THEREAFTER BE ESTABLISHED PURSUANT TO THE POLICE POWER OF THE STATE INVOLVED. SEE, PARTICULARLY, LAMB V. CALIFORNIA WATER AND TEL. CO., 129 P.2D, 371.

IN VIEW OF THE FOREGOING, IT MUST BE CONCLUDED THAT THE NEW RATES WHICH BECAME EFFECTIVE ON AUGUST 11, 1952, ISSUED PURSUANT TO AN ORDER OF THE PUBLIC SERVICE COMMISSION OF THE STATE OF UTAH DATED JULY 29, 1952, MAY BE CONSIDERED APPLICABLE TO THE SERVICES FURNISHED UNDER THE CONTRACT HERE INVOLVED. WHILE THE SUPPLEMENTAL BILLINGS TO CUSTOMERS IN SALT LAKE CITY SHOW AN ITEMIZATION OF THE FRANCHISE TAX, AS A PRACTICAL MATTER SUCH BILLINGS MAY PROPERLY BE VIEWED AS AN INCREASE IN RATES APPLICABLE ONLY TO USERS IN SALT LAKE CITY WHICH WAS AUTHORIZED BY THE SAME ORDER; AND, SINCE THERE IS NO SHOWING THAT SUCH AN INCREASE IS UNREASONABLE OR NOT UNIFORM IN ITS APPLICATION TO THE GENERAL PUBLIC, THERE IS PERCEIVED NO LEGAL BASIS FOR OBJECTION TO PAYMENT THEREOF.