# Appendix — D. C. Transit System, Inc. v. Democratic Central Committee of the District of Columbia > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1447%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1974 - **Citation:** 415 U.S. 935 ## Text naa aN Se i ie at Nt ie 9 oF. edccde pUNaa i in Tg pe Oo BR, la APPENDIX A Anited States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 21,865 Democratic CentraL CoMMITTEE OF THE District or Cotumsia, ef al., Peririoners WasHinctron Merropouitan AREA TRANSIT ComMMISSION, RESPONDENT D.C. Transit System, Inc., IN TeERVENOR Petition for Review of an Order of the Washington Metropolitan Area Transit Commission Decided June 28, 1973 Landon G. Dowdey, with whom S. David Levy, Neil J. Cohen and William A. Grant were on the brief, for peti- tioners. Douglas N. Schneider, Jr., General Counsel, Washington Metropolitan Area Transit Commission, for respondent. Harvey M. Spear for intervenor. LEARNER ETD LEI CEOS LE OE HEAL PEELE LANL LOL ELE LEIA 2a Before Rostnson and MacKinnon, Circuit Judges, and Davis,* Judge, United States Court of Claims. Opinion for the Court filed by Circuit Judge ROBINSON. Opinion concurring in part and dissenting in part filed by Circuit Judge MACKINNON, at p. 93. Ropinson, Circuit Judge: This petition subjects to re- view Order No. 773 of the Washington Metropolitan Area Transit Commission’ in an aspect untouched hy today’s Powell decision.? Petitioners assert, as their major con- tention, that the Commission should have taken into ac- count, in the fare-setting process leading to that order, the amount hy which properties which Transit had transferred from operating to nonoperating status had appreciated in value while in service. We conclude, in the circumstances peculiar to Transit as a public utility, that the Commission erred in refusing to treat the excess of market value over book value of the properties when transferred as an offset to higher fares.* To that extent we hold Order No. 773 invalid and direct the remedial steps to be taken. In the other respect in which the order is complained of, we affirm the Commission.* * Sitting by designation pursuant to 28 U.S.C. § 293(a) (1970). 1 D.C. Transit Sys., Inc. (Order No. 773), 72 P.U.R.8d 113 (WMATC 1968). 2 Powell v. Washington Metropolitan Area Transit Comm’n, No. 21,750 (D.C. Cir. June 28, 1973). 3 See also Bebchick v. Washington Metropolitan Area Tran- sit Comm’n, No. 23,720 (D.C. Cir. June 28, 1973); Demo- cratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, No. 24,398 (D.C. Cir. June 28, 1973). 4 See note 16, infra. 3a I BACKGROUND The evolution of Order No. 773 is summarized in our Powell opinion.’ We need add only the events of record which bear particularly on the transferred assets." All are parcels of real estate which in times past were employed by Transit in mass transportation operations, but which, after later losing their usefulness for that purpose, were withdrawn from service. These withdrawals are reflected by entries on Transit’s books recording the removals—in utility jargon, from “above the line” to “below the line”— and denoting Transit's continuing interest in the properties as investments. In some instances, Transit retains direct ownership; in others, Transit has conveyed to a wholly- owned subsidiary, and in still others it has made an out- right sale. It appears without controversy that the market value of the unsold properties at the time of transfer below the line has invariably exceeded their value as tabulated on Transit's books.’ During the course of the proceeding before the Com- 5 Powell v. Washington Metropolitan Area Transit Comm'n, supra note 2, at 2-5. ® Many important facts pertaining to these properties are in dispute. We need not, for present purposes, undertake to resolve the disputes, and in any event we are not in position to do so. Simply as a point of reference, we reproduce, as an appendix to this opinion, the representation made in the Commission’s brief, al to a3, in Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 3. Our disposition of this case includes prominently a direc- tion to the Commission to identify the properties and the material facts as to each. See Part V, infra, following note 387. 7 Witnesses before the Commission had so testified, and Transit’s counsel conceded as much. 2 RI : ‘ Cahn ea bee ORANGE LE MIE TTAN sry POO LD Gr ea aA AA al _ . 4a mission, petitioners endeavored to probe into Transit’s helow-the-line real estate, Transit’s interrelationships with its subsidiaries, and the market value of withdrawn realty held by either. Transit resisted those efforts, maintaining that the properties belonged exclusively to its investors, and that information concerning them was irrelevant to the fare investigation in which the Commission was engaged.” The Commission, subscribing to Transit’s basic premise, ruled that petitioners’ inquiries had but limited pertinence to the proceeding.” It direeted that some of the sought- after information he made available to petitioners, but *In speaking of Transit’s “investors” we employ the lan- guage of ratemaking litigation. We are fully aware of the fact that Transit is a wholly-owned subsidiary of another corporation. ® Transit’s counsel argued that it is virtually axiomatic that non-depreciable prop- erty upon which no return is allowed, upon which no depreciation is allowable, and non-operating property upon which no return is allowed in a rate base pro- ceeding, and upon which no depreciation is allowed, are both matters which are not properly within the province of a rate proceeding. Counsel had earlier assumed a broader position: [T]he appraised market value of non-operating prop- erty does not belong in a rate proceeding. It is not part of what this Commission can consider as far as the rate of return is concerned, and it is not part of what af- fects the rate structure which any member of the pub- lic pays. If there is a loss on the sale of that real estate the stockholders bear it, and if there is a profit on the sale it goes to the stockholders of the company... . [N]one of these items requested here today as to non- operating properties are relevant in this proceeding .. . and the company will decline to furnish that informa- tion at this time because we don’t think it is relevant. 1° See note 11, infra. FRM INT NOE MEME PIMA NTE LIN IF RT REALS BOT I TO MRS I OP MR —0a refused to require disclosure of any market-value data on the properties." Not surprisingly, then, Order No. 773 reflects no con- sideration whatever by the Commission of rises in the value of the transferred assets during the course of structuring the increased fares which that order awarded. Petitioners filed a timely petition for reconsideration" containing, inter alia, what may fairly be characterized as a request that the Commission devise ways and means of giving Tran- ‘The Commission’s chairman declared “that the proceeds from non-operating property belong to the stockholders of the company and not to the rate-payer,” but felt that the in- formation requested was not completely irrelevant. Since some of the information had been supplied the Commission’s staff by Transit, the chairman instructed the staff to make certain of it available to petitioners’ counsel. The chairman ruled, however, that neither the staff nor Transit would be required to disclose information regarding the current mar- ket value of the properties, and, addressing petitioners’ coun- sel, that “[i]f that is information you think is pertinent or you think should be in the record it will be up to you... to adduce that evidence.”’ Petitioners, later undertaking some- thing of a showing as to market value of the properties, in- troduced the valuation of the properties for tax purposes and | testimony assuming that the assessments approximated 55% | of true market value. '2See Washington Metropolitan Area Transit Regulation Compact, tit. II, art. XII, §16 (Transit Regulation Com- pact), incorporated into Pub.L. No. 86-794, 74 Stat. 1031 (1960), with amendments, appearing as a part of Pub.L. No. 87-767, 76 Stat. 764 (1962), set forth following D.C. Code § 1-1410a (1967). Title II of the Transit Regulation Com- pact is the Washington Metropolitan Area Transit Authority Compact (Transit Authority Compact), which is incorpo- rated into Pub.L. No. 89-774, 80 Stat. 1824 (1966), and is set forth following D.C. Code § 1-1431 (1967). In this opin- ion, we refer to the Transit Regulation Compact and the Transit Authority Compact together as the “Compact.” TP ae . = a —— — ARSE ALTO BD le BADR isk PRC SRS mee Hs ARN wet EAR REE UATE RNA E SNES RT ARYAN LMG SIT BRS EY aaa EY, win AE NINE APH 6a sit’s farepayers appropriate credit for the appreciation in value of the properties while in service. By Order No. 781, the Commission denied the petition,” and by Order No. 78la stated its reasons for doing so."* The Commission's statement, like Order No, 773 itself, is devoid of anything which we can identify as a response to petitioners’ entreaty. And so it is that the theory underlying their plea is pre- sented here," now to support the charge that the Commis- sion was grievously in error." We have painstakingly examined this serious charge in all of its many ramifications, and in this opinion we set " D.C. Transit Sys., Inc. (Order No. 781) (WMATC Feb. 26, 1968) (unreported). "D.C. Transit Sys., Inc. (Order No. 781a), 74 P.U.R.3d 178 (WMATC 1968). '* See Compact, supra note 12, tit. II, art. XII, $ 17. '® Petitioners also allude to several other complaints they have against Order No. 773, and ask for remand of the case to the Commission for reconsideration in light of Williams v. Washington Metropolitan Area Transit Comm'n, 134 U.S. App.D.C. 342, 415 F.2d 922 (en bane 1968), cert. denied, 393 U.S. 1081 (1969), and Payne v. Washington Metropoli- tan Area Transit Comm'n, 134 U.S.App.D.C. 321, 415 F.2d 901 (1968). In their brief, however, petitioners offer no ar- gument whatever in support of these points. We accordingly decline to consider them. Fed.R.App.P. 20, 28(a) (4); D.C. Cir. R. 4(b) (5); Cratty v. United States, 82 U.S.App.D.C. 236, 243, 163 F.2d 844, 851 (1947); Abrams v. American Sec. & Trust Co., 72 App.D.C. 79, 80, 111 F.2d 520, 521, 129 A.L.R. 368 (1940) ; S. S. Kresge Co. v. Kenney, 66 App.D.C. 274, 275 n.1, 86 F.2d 651, 652 n.1 (1936) ; Smith v. Pickford, 66 App.D.C. 206, 209 n.6, 85 F.2d 705, 708 n.6 (1936); Schwartzman v. Lloyd, 65 App.D.C. 216, 218, 82 F.2d 822, 824 (1936); Helvering v. Helmholz, 64 App.D.C. 114, 117, 75 F.2d 245, 248 (1934), aff'd, 296 U.S. 93 (1935); Ginder v. Giuffrida, 61 App.D.C. 338, 340, 62 F.2d 877, 879 (1932); Wardman-Justice Motors v. Petrie, 59 App.D.C. 262, 267, 39 F.2d 512, 517, 69 A.L.R. 648 (1930). en Nr a ak ee ak ale Tle aa semaacceanns nay 7a forth the results of our investigation. We begin in Part IT with an exploration into the adjudicative history, adminis- trative and judicial, of allocations of capital gains on oper- ating utility assets. After that, in Part III, we serutinize the interest of investors in value-appreciations on such assets, with reference to treatments of that interest in rate- and depreciation-base formulations and, more particularly, in Transit’s ratemaking litigation. Next, in Part IV, we identify the doctrinal considerations guiding allocations of capital gains on in-service utility property and apply them to this case. Then concluding that Order No. 773 is invalid and must be set aside, we specify in Part V the basis for and mechanics of remediation. II ADJUDICATIVE HISTORY OF ALLOCATION OF CAPITAL GAINS ON OPERATING UTILITY ASSETS Seldom have regulatory agencies or courts been called upon to allocate, as between investors and consumers, gains on utility assets while in operating status.'7 None- theless, for the assistance and indispensable background they may afford to resolution of the controversy at hand, we must pause to examine this group of cases. In the realization that problems of allocation may well differ according to whether the asset is depreciable * or nonde- 7 No issue as to allocation of capital gains and losses once an asset is transferred below the line is tendered to us on this review. ** We use the word “depreciation,” as it is commonly em- ployed in District ratemaking, to refer not merely to physi- cal wear and tear but also to other types of diminution of serviceability. E.g., D.C. Transit Sys., Inc. (Order No. 245), 48 P.U.R.3d 385, 397 (WMATC 1968), remanded sub nom. 8a preciable, we look first to the decisions treating allocation issues in relation to depreciable properties. A. Depreciable Assets —Out-of-District Cases Outside the District of Columbia, we find relatively little authority precisely in point. In 1959, the question was presented to the Appellate Division of the New Jersey Superior Court” after a utility providing water service made a profitable sale of a portion of its distribution system, consisting of cast-iron mains and fire hydrants.” In subsequent rate proceedings, the New Jersey Board of Publie Utility Commissioners deducted the profit from the utility’s earned surplus and credited it to its depreciation reserve, in conformity with the board-adopted uniform sys- tem of accounts for water companies. From 1931, when the sale was made, to 1958, when the rate case was insti- tuted, the utility had not complained of this treatment. Aseribing controlling weight to the commissioners’ long D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, 121 U.S.App.D.C. 375, 350 F.2d 753 (en banc 1965), on remand sub nom. D.C. Transit Sys., Inc. (Or- der No. 563), 63 P.U.R.3d 32 (WMATC 1966), rev'd sub nom. Williams v. Washington Metropolitan Area Transit Comm'n, supra note 16, where the Commission said: Depreciation is the exhaustion of the service life of the property in use. The accrued depreciation in the prop- erty at a given time is the sum total of the exhausted service life of the various units of the property at that time. This exhaustion of service life is the combined re- sult of the working of three factors, namely: (1) in- adequacy, (2) obsolescence, and (3) physical deteriora- tion. 19 Jn re Revision in Rates Filed by Plainfield-Union Water Co., 57 N.J.Super. 158, 154 A.2d 201 (1959). 20 154 A.2d at 205, 211. 9a standing construction of their own regulation—the account- ing system preseribed—the court found no error in the challenged adjustment.” In the same year, a similar question arose in a rate pro- ceeding before the Minnesota Railroad and Warehouse Commission.” During its historical test period, a transit company sold obsolete buses and treated the proceeds as nonoperating income. This was held to be improper.** “The Uniform System of Accounts prescribed by this Commis- sion,” said the agency, “requires that such salvage * ‘shall be credited to the depreciation reserve account. “* In its words, the agency accordingly “added this income from sale of obsolete buses to operating income in determining actual operating results... ."** “{A|ny further income from sale of obsolete buses or equipment,” the agency added, “will be treated . .. as a reduction in depreciation expense and, thus, as an increase in operating income.” = A few years later, the Wyoming Publie Service Com- mission faced essentially the same problem in a variant context." A utility engaged in selling natural gas pur- 21 154 A.2d at 211. 22 Minneapolis St. Ry. Co., 31 P.U.R.3d 141 (Minn. R.R. and Warehouse Comm’n 1959). = Id. at 152. 24 The agency’s reference to salvage, viewed in context, is seemingly to the entire proceeds of sale, and not simply to the amount of future recoupment originally estimated for depre- ciation-computation purposes. 25 31 P.U.R.3d at 152. 26 Jd. 27 Id. 28 Wyoming Gas Co., 40 P.U.R.3d 509 (1961) (Wyo. Pub. Serv. Comm'n 1961). SR e ec oe paths - -- 10a chased mineral interests in lands, including a gas-producing well. The utility thus became entitled to a depletion allow- ance on the purchased assets.” After taking some gas from the purchased properties for its southern division customers, the utility sold them at a profit. Regulatory approval of the sale had been accompanied by a direction to treat the profit as utility income. In a later rate pro- ceeding, the Commission reiterated its position that the profit “must be treated as nonoperating utility income.” * The theory underlying the order approving the sale, the Commission said, was that “the profit to be made by the company upon the sale thereof should be used to reduce its . . . natural gas rates, rather than increase them.” ** “As we view the transaction,” the Commission explained, “the company will simply make the substantial profit from the sale of utility properties dedicated to its southern division operations, which, in our opinion, should inure to the benefit of the ratepayers in that division.” ” Such are the decisions outside this jurisdiction. In each, the entire gain from disposition of depreciable assets was passed on to the utility's consumers, to the exclusion of its investors. While it is true that two of the decisions were influenced by agency-adopted accounting practices, it must be remembered that such practices are but reflections in accounting technique of what is generally considered whole- some in substantive principle. And the principle to be gleaned, both from the practices and the decisions them- selves, is that consumers have the superior claim on capital gains achieved when depreciable utility properties are re- moved from service. We do not suggest that so small a 2° See Part V(A), infra, at note 222. 30 40 P.U.R.3d at 513. 31 Td. 32 Jd. IIOP PAE IE NILE LS OD IG te RD yy pers SS lla number of cases establish a rule of general and controlling applicability in the ratemaking field. But it can hardly be denied that these decisions are precedents of value in simi- lar litigation. —District Cases Within, much as without, the District of Columbia the problems of allocating value-appreciation of depreciable inservice utility property have but infrequently arisen be- fore either regulatory agencies or courts. And the litigation locally, such as it has been, has invariably involved Transit and, by the same token, the peculiarities inherent in its situation. That is to say not only that the reasoning fol- lowed elsewhere obtains as to Transit, but also that addi- tional reasons leading to similar results flow from Transit’s uniqueness, in comparison with other utilities, with respect to properties transferred below the line. Not surprisingly, then, the claim of Transit’s farepayers on capital gains ac- cruing to such properties while above the line has achieved considerable fruition. The leading case, and one which merits careful analysis, is D.C. Transit System, Inc. (Order No. 4577).3* There the Commission's predecessor, the District of Columbia Public Utilities Commission (PUC),"* addressed the question of allocating the profits on a sale of Transit’s Fourth Street Shops and Southern Carhouse to the District of Columbia Redevelopment Land Agency. Of the total sale price of $3,320,000, Transit proposed to credit all of the net profit of $2,181,363.08 to earned surplus, and thereby to pass it on to its investors.* This, PUC held, it could not be permitted to do. 33 30 P.U.R.3d 405 (D.C. Pub. Utils. Comm’n 1959). 34 Now the District of Columbia Public Service Commis- sion. 35 30 P.U.R.3d at 406. s ; : 4 diene a eT Ee READ aeccecmgee 2 NONE 12a As PUC determined, $1,039,657.72 of the sale price was attributable to land,** $1,915,034.81 to depreciable improve- ments on the land,* and the remainder to items not of present concern** PUC noted that strict adherence to the uniform system of accounts employed by it would require that the total amount received on disposition of depreciable assets—here $1,915,034.81—be credited to the depreciation reserve as salvage.*” Since to have done that would, by PUC’s caleulations, have built the reserve to a point greatly in excess of the sum needed to retire all unrecovered origi- nal cost of the improvements,” PUC felt that a departure from normal accounting procedures was warranted." 36 Jd. at 407, 409. So, after subtracting $89,089.17, repre- senting the original cost of the land, a net profit of $950,- 568.55 was realized on this aspect of the sale. Jd. at 407, 409, 411. 37 Jd. at 409. Original cost of this portion of the sold prop- erty was determined to be $1,077,824.06. Id. The depreciation reserve on the improvements was then $613,661.28, leaving $464,162.78 as the unrecovered original cost. Id. at 411. Thus net profit on the sale of the depreciable portion of the prop- erty was $1,450,872.03—the sale price of $1,915,034.81 less unrecovered original cost of $464,162.78. 38 See id. at 407-09. A part of the remainder was $36,- 550.92, net, representing so much of the sale price as was re- lated to certain equipment and machinery. Because of uncer- tainty as to the items of equipment and machinery included in the sale, PUC placed that amount in a suspense account pending ascertainment, “at which time determination will be made as to what portion thereof should be credited to the depreciation reserve and what portion, if any, should be credited to earned surplus.” Jd. at 409. 39 Jd. at 410. 4° The unrecovered portion of original cost was $464,162.78, that is, original cost of $1,077,824.06 less depreciation re- serve of $613,661.28. See note 37, supra. 4130 P.U.R.3d at 410. EA TPR ae ar CE Se RI HES ERASE BONES Y 13a In regard to the extent of the departure, PUC noted that Transit’s operating franchise demanded of it a seven- year program of gradual conversion from a streetcar-bus to an all-bus operation,*? and PUC was “unable to disasso- ciate the instant transaction from the imminent retirement of all rail property under the mandate contained in the Franchise.” ** Nor could PUC “ignore the probability that full provision for depreciation will not have been provided when the rail facilities are abandoned and retired by reason of conversion.” “4 Observing that Transit had consistently asserted, and PUC’s staff had indicated agreement, that any retirement loss in this connection was recoverable by charges against the farepayers,“” PUC emphasized that “if the customers are to be required to bear the burden of extraordinary retirement losses incident to the whole con- version program, it appears equitable that they should share, at least to some extent, in extraordinary retirement gains of the nature here under consideration.” ** PUC concluded, then, that of the total net profit of $1,450,872.03 realized on the sale of the improvements,” 42 Transit had purchased the assets of Capital Transit Company, its predecessor, which for many years had oper- ated a system of transportation by streetcars and buses in the Washington metropolitan area. The obvious purpose of the franchise provision mentioned in text was to eliminate the streetcars. This matter is discussed more fully in Part IV(B), infra. 43 30 P.U.R.3d at 412. 4 Td. 45 Jd. That such losses did fall on Transit’s farepayers sub- sequently became the fact. See Part IV(B), infra, at notes 243-46. 46 30 P.U.R.3d at 412. 47 See note 37, supra. ‘ = 2%: i PRESS —™ aS SS ey ~ ow ~ l4a $613,661.28 should inure to Transit’s consumers and $837,- 210.75 to its investors.* “This approach,” it said, “takes into consideration the right of the company to recover from its customers through depreciation the loss of service value over the life of the property as measured by the original cost of the property less net salvage realized upon retirement.” That treatment, in PUC’s view, “provides an equitable solution to a difficult problem maintaining, as | far as possible, what seems to be fair balance between the interests of the public and those of the company’s investors.” °° PUC’s allocation of the profit on the improvements on the Fourth Street Shops and Southern Carhouse subse- quently came under direct judicial review at Transit’s instance, and we held that PUC’s treatment was not arbi- trary or unreasonable. That allocation also entered into this court’s consideration of another problem several years later. In D.C. Transit System, Inc. v. Washington Metro- politan Area Transit Commission;? an expense allowance to Transit for unrecovered costs of abandoned rail facilities was contested on grounds which included reference to that sale. The argument was that the sale was occasioned by the conversion program required by Transit’s franchise,*> and that for that reason the profits made on the sale should be regarded as recoupment of obsolescence.** In rejecting the 48 30 P.U.R.3d at 411. 49 Td. 50 Td. at 412. 51 D.C. Transit Sys., Inc. v. Public Utils Comm’n, 110 U.S. App.D.C. 241, 292 F.2d 734 (1961). See also Part III(B), infra, at notes 89-99. 52 Supra note 18. 53 See note 42, supra, and accompanying text. 54 121 U.S.App.D.C. at 397, 350 F.2d at 775. The same argu- ment was made with reference to a capital gain achieved ERAS LPP LILLE LLY OE POE EINE LIE LIEN ELT LE AHA RAT lda argument, we noted that PUC did not omit to give the riding public some con- siderable share in the benefits of this sale... . [T]he profit on the depreciable property which went into surplus was $837,000. At the time of the sale, Transit carried this property on its books at an historical cost of $1,077,824, with an accrued depreciation reserve of $613,661. Thus only $464,163 was required from the proceeds of the sale to effect complete liquidation of this investment. The PUC, however, ordered a total of $1,077,824 he credited to the depreciation reserve, representing not only the $464,163 but an additional amount of $613,661 exactly duplicating the reserve already accrued. Tt was this action that we think was explained by the PUC’s comment that equitable con- sideration suggested the riders should share in the profits from the sale. Under all these circumstances, therefore, we do not interefer with the Commission’s discretion in deciding not to off-set the profits from the Fourth Street Shop sale against the [expense allow- ance for unrecouped investment in abandoned rail facilities }.% That, as PUC held in Order No. 4577,°° Transit’s fare- payers have a legitimate interest in capital gains on op- erating depreciable assets has never been doubted by its successor, the respondent Commission. In D.C. Transit System, Inc. (Order No. 245),°" the Commission recog- nized that “ratepayers may have a claim to depreciable property at least to the extent of the depreciation re- serves.” °* It added “that ‘gains’ may be experienced on on the depreciable portion of Transit’s Georgia and Eastern Terminal. We discuss the disposition of that facet of the ar- gument in Part IV(B), infra, at notes 292-300. 55 Id. (footnote omitted). 56 See text supra at notes 34-50. 57 Supra note 18. 58 48 P.U.R.3d at 399. Sa ee a a a icc RNCR INS l6a disposal of depreciable items, and these are indeed used as offsets to depreciation, under the heading of ‘sal- vage’”.*® Later, in D.C. Transit System, Inc. (Order No. 563), the Commission, in finding no connection between Transit’s track removal and repaving program and its sale of its Georgia and Eastern Terminal," concluded that “the ratepayer is not entitled to share in any portion of the proceeds of that sale, unless there was a profit on the depreciable portion of the asset sold,” * and found that “[t]here was none in this case.” ® And even after issuance of the order under review, the Commission has declared that “[t]here is no question that, when depre- ciable operating property is sold and a gain is realized, the gain should be used to reduce the depreciation ex- penses which ratepayers have paid but which the com- pany, because of the gain, does not actually incur.” “ In the District, then, the law on the topic immediately under discussion is already somewhat developed. Capital gains realized on disposition of depreciable assets while in service® do not automatically flow to Transit’s in- vestors,” although extraordinary cireumstances may en- 59 Td. at 404. 69 Supra note 18. 8! See note 287, infra, and accompanying text. 6°63 P.U.R.3d at 34. 63 Td. ** D.C. Transit Sys., Inc. (Order No. 1090), 85 P.U.R.3d 508, 513 (WMATC 1970). *> It may, of course, be that in given situations no gain is realized. That was so in D.C. Transit Sys., Inc. (Order No. 563), supra note 18, discussed in text supra at notes 60-63. 66 This is clear from all of the decisions in the District. xa eA H LIONS OT eT a ial 17a able them to share.®? On the contrary, Transit’s farepay- ers have a protectible interest in such gains which extends at the very least, to the amount of depreciation which has been charged to farepayers and may well extend far be- yond.® B. Nondepreciable Assets The question whether a gain on disposition of nonde- preciable assets inures to investors as capital surplus, or to consumers as a reduction in cost of service, has been litigated even less frequently than has the question in re- lation to depreciable assets. A survey of the few eases in point outside the District of Columbia reveals, somewhat paradoxically, a central strand of harmony amid diverse results. The decisions within the District—all administra- tive—have reached a uniform result, but without critical analysis either of the problem or the precedents. —Out-of-District Cases In New York Water Service Corporation v. Public Service Commission,” a utility sold, at a handsome profit, land which had outworn its usefulness as a storage reser- voir. Its regulatory agency held that for ratemaking pur- poses the net profit reaped on the sale should be passed on to its customers.” On judicial review, that adjudica- ®7 As in D.C. Transit Sys., Inc. (Order No. 4577), supra note 33. See text supra at notes 39-41. ® As in D.C. Transit Sys., Inc. (Order No. 4577), supra note 33. See text supra at notes 47-50. 12 App.Div. 122, 208 N.Y.S.2d 857 (1960). ™ New York Water Serv. Corp., 7 P.U.R.3d 32 (N.Y. Pub. Serv. Comm’n 1955). The commission felt that amortization of the profit from the sale over a seventeen-year period was “the most equitable method of meeting the problem.” Jd. It directed the utility to transfer the amount of the profit from Re . — . B a 18a tion was sustained.” The court explained: The uniform system of accounts approved by the Commission applicable to water companies in dealing with land used for utility purposes allows land sold at a loss to be debited to the depreciation reserve and thus increase the rate base. If land is sold at a profit, it is required that the profit be added to, i.e., “credited to”, the depreciation reserve, so that there is a cor- responding reduction of the rate base and resulting return. The utility is thus protected from a loss in the sale of the land in its operations; it seems reasonable it should pass on a profit to the consumer.” As the opinion on review makes plain, the guiding prin- ciple was that the gain belonged to those—investors or con- sumers—who previously bore the risk of loss from pos- sible decline in market value. In City of Lexington v. Lexington Water Company,” the pertinent facts were similar. The utility had acquired land which for many years it used to collect water for reservoirs, but when the reservoirs hecame inadequate the land was retired from service and removed from the utility’s rate base. Somewhat later, the land was sold,™ surplus to a reserve account and in each future year to amortize one-seventeenth against the depreciation accruals charged to operations. /d. 71 New York Water Serv. Corp. v. Public Serv. Comm'n, supra note 69, 208 N.Y.S.2d at 863-64. 72 Id. at 864 73 458 S.W.2d 778 (Ky. 1970). 74 Neither of the two published opinions in the case informs as to the time interval between the retirement of the prop- erty from service and its sale. Assuming, without deciding, that any appreciation in its value after retirement belonged to the utility investors, there would remain the question whether appreciation prior thereto would inure to the bene- fit of its customers. 19a and the utility distributed the very considerable profit realized thereon to its investors as dividends. When the utility subsequently sought a rate increase, its regulatory agency ruled that its consumers were entitled to the gain.” The agency, articulating essentially the same rationale espoused in New York Water Service Corporation, eluci- dated: The question arises, should this gain, made on prop- erty devoted to the public service over the years, be used to reduce the cost of service to the customers or should it be treated as a capital surplus item, and be allowed to be paid out to the stockholders. . . ? Hav- ing considered the evidence and arguments relating to this matter, we are of the opinion that it should be used to reduce the cost of service to the consumer. The subject property was not purchased by the utility as a land speculation but it was acquired for providing utility service to the public over the years and was subject to acquisition by condemnation.” In- asmuch as utility property necessary for rendering service to the public is not subject to sale at the op- tion of the utility, but must be continued in service as long as needed to provide that service, any loss 75 By the agency’s computation, the total net profit was $2,415,846, of which $138,791 was attributable to miscel- laneous improvements on the land. The latter portion of the profit invites the problem of allocation of capital gains on depreciable property. See Part II(A), supra. On judicial review of the agency’s decision, City of Lexington v. Lex- ington Water Co., supra note 73, the court did not distin- guish between the two portions of the $2,415,846. 76 Lexington Water Co., 72 P.U.R.3d 253 (Ky. Pub Serv. Comm’n 1968). 77 On review of the decision, the court stated that there was a dispute as to whether the land had been acquired by condemnation or the threat thereof. 458 S.W.2d at 778. The court was of the opinion, however, that “whether the prop- erty was acquired by threats of use of the power of eminent domain [is] irrelevant.” Jd. at 779. : : in service value of such property would properly be considered a cost of providing service and, in the case of depreciable property, is recovered through depre- ciation. . . . For nondepreciable property, where the change in service value cannot be determined until actual disposition of the property, amortization of an allowable loss or gain would be the proper procedure. ... If it is proper to recover losses of nondepreciable property through amortization, then conversely it should be proper to amortize gains on such prop- erty.” On review, however, it was held that the agency’s ruling was erroneous. The court distinguished New York Water Serrice Corporation ™® on the ground of a difference in the accounting methods respectively employed by New York and Kentucky regulatory authorities.*°° The Kentucky agency had adopted a system of accounts providing for the charging of losses and for the crediting of profits on land sales, not to customers, but rather to the util'ty’s surplus account.” On that premise, the court apparently believed that the risk of capital gain or loss had actually been borne entirely by the utility’s investors. On so much of the case, the court would seemingly have sustained the agency had the risk been on the utility’s consumers.” ™ Lexington Water Co., supra note 76, 72 P.U.R.3d at 259-60. 7 Supra note 69. ” For the New York practice, see text supra at note 72. *! 458 S.W.2d at 779. * The court, however, also relied upon a passage in Board of Pub. Util. Comm'rs v. New York Tel. Co., 271 U.S. 23, 32 (1926): Customers pay for service, not for the property used to render it. Their payments are not contributions to de- preciation or other operating expenses or to capital of the company. By paying bills for service they do not 2la In the only other reported decision we have found, the problem was presented only obliquely. In Columbus Gas € Fuel Company v. Public Utilities Commission the utility claimed that its annual depreciation allowance for depreciable property other than well-structures and equip- ment was inadequate because some items, consisting in land and rights of way, had been omitted from the com- putation.“ The Court denied the claim but in doing so in- dicated that under different conditions the claim might well have been valid.“ In relevant part the Court said: Certainly lands and rights of way may not be char- acterized as wasting assets in the absence of explana- acquire any interest, legal or equitable, in the property used for their convenience or in the funds of the com- pany. And from that the Court further concluded that “ [p] rofit made from the sale of non-depreciable land no longer used in serving customers is not an ingredient to be considered in fixing rates. The customers had no interest in the profit realized on the sale—it belonged to the stockholder” 458 S.W.2d at 780. In our view, New York Telephone Company hardly sustains that proposition. There the Supreme Court addressed the question whether consumers could benefit from excessive depreciation, taken by a utility in prior years, through an offset that would produce lower future rates. 271 U.S. at 26-31. The Court held that the assets representing the excess in the reserve for depreciation could not be used to make up a deficiency in current rates which rendered them confiscatory. Jd. at 32. As the Court said, consumers do not acquire an interest in utility assets merely by paying their bills for service. Jd. at 32. That is not to say that the utility’s investors have an indefeasibly vested right to gains arising from the appreciated market value of capital assets. See dis- cussion in Part III, infra. *§ 292 U.S. 398 (1934). Id. at 410-11. 8 Id. at 411. Oo — ~~~ a = = = 48a recoupment remains unimpaired, and appropriate adjust- ments must be made.*"* This is so although in terms of original expectations, the loss of serviceability is prema- ture.*** Consumers bear the risk of that loss *"* unless in- vestors have been compensated for assuming it; *"" if, as is more usual, investors have not, return of their investment is fully assured.*" In this milieu, the distribution of the risks and burdens on utility assets is apparent. Consumers must ordinarily bear the expense of normal maintenance *"* and, according 1 Abe + oot an ie 214 F.g., Wiliams v. Washington Metropolitan Area Transit Comm'n, supra note 16, 134 U.S.App.D.C. at 374-78, 415 F.2d at 954-58. 215 See cases cited supra notes 211-13. 216 See FPC v. Hope Natural Gas Co., supra note 133, 320 U.S. at 603; Bluefield Waterworks & Improvement Co. v. Public Service Comm’n, supra note 181, 262 U.S. at 692-93. Accord, Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 138, 390 U.S. at 792; Atlantic Ref. Co. v. FPC, supra note 182, 115 U.S.App.D.C. at 27-28, 316 F.2d at 678-79. 217 Wiliams v. Washington Metropolitan Area Transit Comm’n, supra note 16, 134 U.S.App.D.C. at 374-77, 415 F.2d at 954-57; D.C. Transit Sys., Inc. v. Washington Metropoli- tan Area Transit Comm'n, supra note 18, 121 U.S.App.D.C. at 394-95, 350 F.2d at 772-73, aff’g after remand in Bebchick v. Public Service Comm’n, supra note 185, 115 U.S.App.D.C. at 224, 318 F.2d at 195; Washington Gas Light Co. v. Baker, supra note 128, 88 U.S.App.D.C. at 123-24, 188 F.2d at 19-20. 218 See cases cited supra note 217. 219 In re Northwestern Bell Tel. Co., 73 S.D. 37, 43 N.W.2d 553, 564 (1950), cert. denied, 340 U.S. 934 (1951); D.C. Transit Sys., Inc. (Order No. 564), 63 P.U.R.3d 45, 55 (WMATC 1966); Cheyenne Light, Fuel & Power Co., 7 P.U.R.3d 129, 134 (Wyo. Pub. Serv. Comm’n 1955). Pe thin Pad, a ON ee ee ea Ue Pare ae OM 49a to some decisions, of deferred maintenance as well.” Be- yond that, consumers must usually absorb the investment losses wrought by normal wear and tear on depreciable assets," and by exhaustion of depletabie assets.2* Even when an asset is underdepreciated at the time it is retired from service, consumers must reimburse the investors therefor. And when utility property becomes unsuitable by reason of obsolescence before investors have fully re- couped their investment in it, the loss is passed on to con- sumers.*** In situations where consumers have shouldered these burdens on an asset which produces a gain, the equities clearly preponderate in their favor. This has been recog- nized in eases holding that rents received by a utility from the leasing of operating properties must be included in the utility’s operating income. More directly in point, 220 F.g., Wall v. Public Util. Comm’n, 182 Pa. Super. 35, 125 A.2d 630, 638-39 (1956) ; Penn-York Natural Gas Co., 5 F.P.C. 33, 37, 63 P.U.R. (n.s.) 235, 238 (1946) ; Lucerne Water Co., 52 P.U.R.3d 219, 224-25 (Cal. Pub. Util. Comm’n 1964). 221 See cases cited supra note 198. 222 See cases cited supra note 202. 223 Washington Gas Light Co. v. Baker, supra note 128, 88 U.S.App.D.C. at 123-24, 188 F.2d at 19-20; Minneapolis St. Ry. v. City of Minneapolis, supra note 185, 86 N.W.2d at 660-68. 224 See cases cited supra note 201. 23 Fleming v. Illinois Commerce Comm'n, 388 Ill. 138, 57 N.E.2d 384, 395 (1944), appeal dismissed and cert. denied, 324 U.S. 823 (1945); Pekin Water Works Co., 82 P.U.R.3d 460, 466 (Ill. Commerce Comm’n 1970); Illinois Commerce Comm’n v. Public Serv. Co., 4 P.U.R.(n.s.) 1, 27-30 (Ill. Com- merce Comm’n 1934) ; Hillsborough & M. Tel. Co., 14 P.U.R. 3d 212, 217 (N.J. Bd. Pub. Util. Comm’rs 1956); Farmer's Union Tel. Co., 84 P.U.R. (n.s.) 82, 85 (N.J. Bd. Pub. Util. Comm’rs 1950) ; Public Serv. Comm’n v. Mountain Fuel Sup- 0a the cases, as we have seen, generally agree that consumers have the superior claim to capital gains achieved on de- preciable assets while in operation ** and this, we believe, is as it should be. Investors who are afforded the oppor- tunity of a fair return on a secure investment in utility assets are hardly in position to complain that they do not receive their just due from the traveling public. On the other hand, it is eminently just that consumers, whose pay- ments for service reimburse investors for the ravages of wear and waste occurring in service, should benefit in in- stances where gain eventuates—to the full extent of the gain.**" B. Application of Doctrine In This Case We direct our attention now to the situation presented at bar with a view to resolving the conflicting claims of ply Co., 73 P.U.R. (n.s.) 428 , 441 (Utah Pub. Serv. Comm’n 1947). 226 See discussion in Part II(A), supra. 227 The Commission has recognized that Transit’s fare- payers are entitled to capital gains on depreciable assets with- borne the financial burden of loss of serviceability of the with- risk that such loss might occur prema- Had the gain been too small to enable full reimburse- they would have suffered the loss on the remainder. E">mental justice requires that they be awarded the full gain, even though it exceeds the amount necessary for reimburse- 5la Transit’s investors and farepayers to the capital gains in issue. At the outset, we lay aside the rule that capital gain accompanies risk of capital loss. As we point out to- day in No. 24,398, Democratic Central Committee v. Wash- ington Metropolitan Area Transit Commission,” and as the Commission itself admits,” there has never been any risk of financial loss, actual or foreseeable, on the parcels of land which concern us here. Despite an ever-present risk of obsolescence of land for utility purposes, land val- ues since acquisition of the properties by Transit have climbed steadly in the Nation’s Capital, and throughout Transit’s regulatory history could only hawe been expected to do so. So, while the risk of obsolescence is insoluble, the risk of any consequent financial loss has been foreclosed by the rising real estate market. It would be little more than an exercise in abstract logic to invoke the principle of gain-follows-loss where the financial risk is wholly il- lusory. Consequently, we confine ourselves to the second doctrinal consideration discussed—that benefit follows burden—in determining where the equities lie here. The exploration we find we must make is ramified, necessitat- ing examination of the history of the acquisition of the ques- tioned assets, the allocation of burdens and the accrual of advantages associated with the holding of tthose assets, and thereafter a balancing of the respective imterests compet- ing for the gains at stake. We undertake these tasks and, discharging them, we conclude that Tramsit’s farepayers must prevail. —Acquisition History And Allocation of Burdens In 1956, Transit was awarded its franchise to operate a mass transportation system within the Washington met- 228 Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, supra note 3, at nn. 101-06. 22° Brief for Respondent at 13. 52a ropolitan area.” The franchise was conditioned upon Transit’s acquisition of the assets of Capital Transit Com- pany (Capital), which for many years had served the area through a system in which both streetcars and buses were employed. Transit purchased Capital’s assets and on August 15, 1956, commenced its own operation. The par- cels of realty upon which this litigation centers were a part of Transit’s acq=‘sition from Capital.” At the time of Transit’s takeover, Capital’s assets were valued on its books at approximately $23.8 million. Transit’s puderhase price was about $13.5 million,™ of which only $500,000 represented an actual cash invest- ment.2*> The balance ultimately came partly from Capital’s cash on hand and partly from the sale of certain of Capi- tal’s properties, but mostly from farebox revenues after Transit went into business.”* Transit’s franchise imposed the requirement that Capi- tal’s streetcar-bus system be gradually converted into an all-bus system throughout the metropolitan area.” This 230 Pub.L. No. 757, 70 Stat. 598 (1956) (Franchise Act). See also H.R. Rep. No. 2751, 84th Cong., 2d Sess. (1956). 231 Jd. at tit. II, §§ 201(a), 202, 203. 232 See appendix. 233 S.Rep. No. 91-760, 91st Cong., 2d Sess. 3 (1970). 234 Jd.; D.C. Transit Sys., Inc. (Order No. 4631), supra note 164, 33 P.U.R.3d at 158. 25S. Rep. No. 91-760, 91st Cong., 2d Sess. 3 (1970). 236 Td. 231 The Franchise Act, tit. I, pt. 1, §7, 70 Stat. 598, 599 (1956), provides: The Corporation shall be obligated to initiate and carry out a plan of gradual conversion of its street railway operations to bus operations within seven years 53a program necessitated the removal of the abandoned street- ear tracks and the regrading and repaving of the aban- doned track areas,” at an estimated cost of $10,441,958." To accommodate that cost, PUC established a reserve for track removal and repaving,”* and directed the accrual of $1,044,196 thereto annually for ten years." And at an early stage in Transit’s regulatory history, the question ~ arose as to whether those accruals should be made by Transit’s investors through capital contributions or from Transit’s consumers in the form of higher fares. This was an expense with two aspects, and the nature of each militated, in terms of ratemaking law, against the ratepayers. The first was the loss incidental to abandon- ment of the rail facilities which had passed from Capital to Transit. As we have pointed out, it has ofttimes been from the date of the enactment of this Act upon terms and conditions prescribed by the Commission, with such regard as is reasonably possible when appropriate to the highway development plans of the District of Co- lumbia and the economies implicit in coordinating the Corporation’s track removal program with such plans; except that upon good and sufficient cause shown the Commission may in its discretion extend beyond seven years, the period for carrying out such conversion. All of the provisions of the full paragraph of the District of Columbia Appropriation Act, 1942, (55 Stat. 499, 533), under the title “Highway Fund, Gasoline Tax and Motor Vehicle Fees”, subtitle “Street Improvements”, relating to the removal of abandoned track areas, shall be applicable to the Corporation. 238 See District of Columbia Appropriation Act of 1942, 55 Stat. 499, 533 (1941). 239 D.C. Transit Sys., Inc. (Order No. 4631), supra note 164, 33 P.U.R.3d at 155. 240 Td. 241 Jd. d4a held that permanent losses on premature property retire- ments are to be amortized as operating expenses for fu- ture consumers to absorb.” In similar fashim. PUC, Transit’s then regulatory agency, treated the undepreci- ated cost of the tracks and streetcars acquired by Transit as a part of the depreciation expense recoverable from its farepayers.** This item of cost was anticipated to ag- gregate more than $5 million.** The second aspect of the expense was the cost of removing the tracks, and regrad- ing and repaving the street areas from which they were removed. That cost, too, PUC ruled, was to be paid by the farepayers.*® The estimate of this item of cost was, as we have stated, in excess of $10 million. PUC’s treatment of the latter item did not, hovever, go unchallenged. In Bebchick v. Public Utilities Commis- sion,7 consumers contended that the expense of track removal and street repaving was a burden which Transit’s investors had assumed by the terms of the franchise ** and so was not properly an operating cost. They asserted, in their words, that “it is unreasonable and unlawful to require the farepayers to make contributions of capital to Transit by the device of an allowance for track removal and repaving.” ** To buttress this point, they adyerted to Transit’s purchase of Capital’s assets at more than $10 242 See Part IV(A), supra, at notes 201, 211-18. 243 D.C. Transit Sys., Inc. (Order No. 4631), sepra note 164, 33 P.U.R.3d at 155-60. 244 Jd. at 156-57. 245 Td. at 155-56. 246 See text supra at note 239. 247 Supra note 185. 248 See note 237, supra. 249115 U.S.App.D.C. at 220, 318 F.2d at 191. % E 5 F 3 3 4 € z : : , ; 5 a ; ‘ ‘ ; € ; 7 3 | eee rer ag We are not advised of any prior rule or regula- tion of the Commission or its predecessor agency govern- ing specifically the allocation of property value apprecia- tions as between investors and consumers." There was no such promise, then, in 1956, or at the time these prop- erties were put below the line, that gain on land placed in nonoperating status would go automatically to the in- vestors. Next there is the argument, also discussed in Bebchick, that nothing can possibly be done about the gain until there is an actual sale or disposition. Aside from the fact that the properties in question have now been disposed of, albeit involuntarily,” most of the reasons given in Beb- chick for turning down that unqualified position ”* likewise apply with equal force here. In particular, the same grounds which moved the Commission to adopt Regula- tion 61 for depreciable property pertain as well to these below-the-line land properties. Though the Commission might, on a proper showing, have decided that this gain in land value should not be utilized for ratemaking pur-- poses until it was actually realized by the investors, the agency could not refuse, simply because of lack of reali- 116 Td, at 28 n.112. 1186 See Democratic Cent. Comm. v. Washington Metropoli- tan Area Transit Comm'n, supra note 59, at 66-68. 117 Pursuant to the National Capital Area Transit Act of 1972, Pub.L. No. 92-517, 86 Stat. 999 (1972), the company’s transportation operations and operating assets were taken over by the Washington Metropolitan Area Transit Author- ity on January 14, 1973. The purchase price is being deter- mined in condemnation proceedings initiated by the Transit Authority. See id. at 86-88. 118 See Bebchick v. Washington Metropolitan Area Transit Comm'n, supra note 78, at 31-33. ‘ 156a vation, to consider the possibility of using the profit be- fore that time.'” Finally, we do not think that it would be a denial of due process or of just compensation’ to require, in proper cir- cumstances, that all or some of the gain from these proper- ties be passed on to the riders, any more than Regulation 61 is unconstitutional with respect to depreciable property.’ In the special situation in which these pieces of real estate were acquired by Transit in 1956, Congress could have said explicitly, when it granted the franchise, that gain accrued and accruing on them would not necessarily redound to the investors’ benefit. That would certainly have been a rea- sonable legislative requirement,’ and the fact that Con- gress did not state it does not make it any less reasonable. 118 We hold today in Democratic Cent. Comm. v. Washing- ton Metropolitan Area Transit Comm’n, supra note 59, at 74, that the value appreciations of depreciable and nonde- preciable assets should there have been credited to busriders in fare-setting proceedings following the removal of those assets from operation prior to realization of any actual gain by Transit from their sale. 120 The point on constitutionality is raised only by Transit. 121 As we point out in No. 21,865, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, with the end of the fair value standard for com- puting rate base and depreciation, it can no longer be argued that investors possess an inalienable claim to value apprecia- tions accruing to in-service utility assets. Jd. at Part II. The allocation of such gain must be resolved by balancing the re- spective risks, benefits and burdens of investors and con- ‘umers, Jd, at notes 183-86. A careful study of the history f Transit’s operating franchise demonstrates that an equi- able balance here would pass that gain on to the riders. Jd. t Part IV(B). Hence, a legislative determination that the wereased value of these lands should not necessarily benefit ‘*'ransit’s stockholders would have been eminently reasonable. 157a In view of the special situation of these properties, we need not consider whether the same principle would control for other assets not acquired in comparable circumstances. Resting as it does solely upon considerations we have rejected as reasons for holding that investors are entitled to all the gain on the transferred properties, the Commis- sion has failed to address itself, under the correct stand- ~ ards, to the problem of how this gain should be used. Order No. 1052 is therefore invalid on this ground, in addition to others which we later discuss.’ We hold today in Demo- cratic Central Committee '* that the appreciation in the value of Transit’s assets—depreciable and nondepreciable —when moved into nonoperating status must be credited to the benefit of the bus riders.’ Our holding in the cases at bar, though necessarily narrower,’ adheres firmly to that decision. Moreover, since the Commission’s failure to do that in formulating Order No. 1052 cannot be cured by retroactive ratemaking '**°—particularly in light of the re- cent public takeover of Transit '"—it is left to implement the restitutionary remedy which we hereinafter describe more fully in our consideration of the disposition to be made.'** 122 See Parts III-IV, infra. 123 Supra note 59. 134 Jd, at 74. 128 See note 74, supra. 18@ Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, at 76-77; Williams v. Washington Metropolitan Area Transit Comm'n, supra note 75, 184 U.S.App.D.C. at 360-61, 415 F.2d at 940-41. 13T See note 117, supra. 128 See Part V, infra. i SL SR Se eR DS OCT OPER EET FER iy A ERY, Bt IS EID 158a Ill. EFFICIENCY OF MANAGEMENT We turn now to the question whether the Commission adequately considered the level of efficiency of Transit’s management in determining its right to the fare increase granted in Order No. 1052. All petitioners contend that the order must be set aside because the Commission did not follow the command of Section 6(a)(3) of the Compact, which provides: In the exercise of its power to prescribe just and reasonable fares and regulations and practices relating thereto, the Commission shall give due consideration, among other factors, to the inherent advantages of transportation by such carriers; to the effect of rates upon the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient transportation service by such carriers at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable such carriers, under hon- est, economical, and efficient management, to provide such service.'** In particular, petitioners say that the Commission failed to “give due consideration” to the efficiency of Transit’s management. The Commission, and Transit, stand on what was said in its fare orders themselves. There the Com- mission refused to make any findings on efficiency, or to give it any weight in reaching its decision, because, it said, “neither [the Commission’s] staff nor the protestants have presented facts indicating that the company’s hasie prob- lems lie in adequate management.” ° We hold that in ‘2° Compact, supra note 4, tit. II, art. XII, § 6(a) (3). 8° D.C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 37, denying reconsideration of D.C. Transit Sys., Inc. (Order No. 1052), supra note 1. There is no dis- cussion in Order No. 1052 itself concerning efficiency or any of the Section 6(a) (3) factors. That is because, as the Com- 159a failing to investigate the caliber of the company’s manage- ment on the ground that the formal parties had not pro- duced evidence of bad management, the Commission vio- lated the Compact. But since there is no need to do so, we do not decide whether this error, standing alone, would require setting aside Order No. 1052." Simply reading Section 6(a)(3) makes clear that in set- - ting transit fares the Commission was obligated to consider, among other factors, the efficiency of the carrier's manage- ment. The criteria by which efficiency was to be measured, and the weight to be given it as a factor, lay, of course, within the judgment of the Commission in the first in- stance.“* But the Compact required that efficiency be duly considered," and the Commission obviously did not take mission explained, it had given its view of this problem in D.C. Transit Sys., Inc. (Order No. 984), supra note 22, just eight months before. Indeed, the discussion in Order No. 1057 is, by the Commission’s own statement, taken virtually in haec verba from Order No. 984. The amicus curiae sug- gests that this heavy reliance on a prior order, and the record which underlay it, was improper. Our resolution of the effi- ciency issue renders unnecessary any expression of opinion on that point. 131 Compare Payne v. Washington Metropolitan Area Transit Comm’n, supra note 7, 134 U.S.App.D.C. at 338-42, 415 F.2d at 918-22. 132 The Commission did not indicate in either Order No. 1057 or Order No. 984 how it would judge efficiency, or what weight it would give it in deciding on the proper fares. Com- pare D.C. Transit Sys., Inc. (Order No. 1216) (WMATC May 19, 1972) (not yet reported), at 9-12. 133 See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, U.S.App.D.C. at , 466 F.2d at 408. See also H.R. Rep. No. 1621, 86th Cong. 2d Sess. (1960): “Section 6(a)(3) specifies certain - ——— PONE LPR See SS RT ES ER EE RE PLE EY POLITE GIO LOIS SE : - - ow — 160a efficiency into account at all when it set fares in Order No. 1052.‘* The reason given for this failure was that neither the staff nor the protestants brought forward evidence of mismanagement at the hearings. This reason is insufficient. The Commission cannot be said to have given “due con- sideration” to the efficiency factors where, as here, it de- clares that it would not consider it, and in any event there is so little evidence in the record that the Commission could not make any relevant findings. The role of efficient management in Commission decisions in fare-increase applications was delineated in D.C. Transit System, Inc. v. Washington Metropolitan Area Transit Commission, the most recent pronouncement of this court on that subject. There we were called upon by Transit to review the Commission’s denial in Order No. 1216'* of functions which the Commission shall take into account in administering its ratemaking powers.” The requirement that an agency promulgating public util- ity rates take into account the efficiency of the utility’s manage- ment is a common one. See, e.g., Mountain States Tel. & Tel. Co., 82 P.U.R. (n.s.) 46, 49 (Ariz. Corp. Comm’n 1949) ; United Fuel Gas Co., 46 P.U.R.3d 118, 123 (W.Va. Pub. Serv. Comm'n 1962). The question of efficiency of management is often closely connected with the question of adequacy of serv- ice. See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, —— U.S.App.D.C. at , 466 F.2d at 401-03, and cases there cited; Western Light & Tel. Co., 17 P.U.R.8d 422, 428-30 (Okla. Corp. Comm’n 1957); E. Nichols & F. Welch, Rate of Return, chs. 20, 21 (1955 and Supp. A 1964). 134 The section of the Commission’s opinion entitled “The Return to be Allowed,” in Order No. 1052, supra note 1, 85 P.U.R.3d at 14-18, does not mention efficiency of management at all. 135 Supra note 4. 136 D.C. Transit Sys., Inc. (Order No. 1216), supra note 132. 16la Transit’s request for a fare raise. Underlying Order No. 1216 was an extensive study of Transit’s operations and financial condition carried out by a consultant employed by the Commission for that purpose.’*? On the basis of the consultant’s report, the Commission concluded that Tran- sit’s seriously unstable and risky financial situation bred such an uneconomical and inefficient transportation opera- tion ™* that merely to increase fares would not cure either of those conditions."** The Commission, on that basis, denied Transit’s proposed increase, and held that a pre- requisite to any future elevation in fares was Transit’s compliance with a group of Commission directives aimed at putting the company’s financial house in order.’*° On review of Order No. 1216, we upheld the Commis- sion’s findings and conclusions, and affirmed its refusal to revise the fares.’*' We found the Commission’s view, as articulated in Order No. 1216—that it was required by the Compact to consider and weigh the interests of the public, including the public’s right to economical, efficient and adequate transportation service **—to be “eminently cor- rect,” '** and we went on to state that The parties to the Compact could hardly have more plainly mandated the well settled principle that rate- 137 See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, —— U.S.App.D.C. at , 466 F.2d at 398. 138 See id. at 401. 139 See id. at 403. 140 See id. at 403-04. 141 Td. at 423. 142 See text supra at note 129. 143 D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, —— U.S.App.D.C. at " 466 F.2d at 408. 162a making appropriately encompasses an examination and evaluation of the economy and efficiency of a public utility’s operations and the adequacy of its service." Accordingly, we affirmed the power of the Commission to precondition a fare raise upon terms calculated to safe- guard the public interest in the caliber of the transportation provided.'* In the instant cases, the failure of the staff and the protestants to produce evidence of mismanagement cer- tainly does not support an assumption that Transit was effi- ciently managed, and that was too vital a matter to be simply assumed away." The Compact placed an obligation upon the Commission to develop the record on important matters when it was unsatisfied with the record produced by the parties. The Commission, like other agencies charged with the protection of the public interest, was not created simply to “provide a forum for the” proceeding.’** The Commission was not at liberty to sit back and place “the responsibility for initiating or carrying through essential inquiries” on “private parties;” '** instead, it had “an af- firmative duty to assist the development of a meaningful record.” 4° “[{T]he Commisison’s primary raison d’etre is 144 Jd. (footnotes omitted.) . 145 Td. at 412-13. 146 Cf. Washington Gas Light Co. v. Baker, supra note 108, 88 U.S.App.D.C. at 120-21, 118 F.2d at 16-17. 141 Office of Communications of United Church of Christ v. FCC, 138 U.S.App.D.C. 112, 116, 425 F.2d 543, 547 (1969). 148 Payne v. Washington Metropolitan Area Transit Comm'n, supra note 7, 134 U.S.App.D.C. at 342 n.106, 415 F.2d at 922 n.106. 149 Office of Communications of United Church of Christ v. FCC, supra note 147, 1388 U.S.App.D.C. at 117, 425 F.2d at 548. eee — 163a furtherance of the public interest,” we have said; 150 and it could not fulfill that function if it did not assure, by its own efforts, that its decision would he based on a full record. We do not mean to suggest that the Commission could not rely on its staff. It certainly was not required that the Commission employ the services of a consulting firm every time it made an examination of Transit’s efficiency. But the Commission could not base a decision on the silence of either the staff or the protestants, especially where there was no indication that anyone’s attention was directed to the question at hand. The fact of the matter is that the staff in this very proceeding brought to the Commission's attention certain matters bearing upon Transit’s efliciency. For instance, on the staff's suggestion, the Commission disallowed some executive salary increases," and rein- stated its previous command that Transit purchase new buses."*= And the staff also pointed to a number of serious service problems, which the Commission commented upon.”** But this was not the same thing as an inquiry dirceted to the staff concerning the efficiency of Transit's management, Such an inquiry presumably would have brought a response which, for example, could have pointed to innovations which Transit had or had not made to reduce expenses or to increase revenues. Once this sort of evidence was in the record, the Commission could rationally have taken Transit's efficiency into account in setting fares. In short, while the Commission, of course, could have depended 150 Yohalem v. Washington Metropolitan Area Transit Comm’n, 141 U.S.App.D.C. 17, 22, 486 F.2d 171, 176 (1970). 151 See D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 13. 152 Td. at 12. 183 Td. at 28-29. —— irs. we Raia Da aE acne a 5am get ee | 164a on its staff for this task, it still should have put the evi- dence on which it relied into the record and provided a sufficient articulation of its views for us to discern “the path which it followed” '* to its conclusion about a just and reasonable return. We will add, though it hardly seems necessary, that Transit bore a large share of the unfulfilled responsibility for producing a record on which findings as to its efficiency could have been made. Indeed, this should have been clear to Transit since its very first fare case, where the Public Utilities Commission, predecessor to the respondent Com- mission, said: It is the opinion of the commission that when the earn- ings position of a public utility necessitates an increase in rates, that such position requires proof of eco- nomical management as well as provident control of expenditures.’® Of all the parties, Transit, of course, was in the best posi- tion to present facts which mighi have demonstrated the efficiency of its management, yet it hardly met that sort of standard.'** 154 Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 595 (1945). 155 D.C. Transit Sys., Inc. (Order No. 4480), 25 P.U.R.3d 371, 378 (D.C. Pub. Utils. Comm’n 1958). 156 Transit pointed to the testimony of its vice presidents as evidence of its efficient management. The most significant statement was that by its senior vice president who, when asked by Transit’s counsel to comment on the company’s operations, replied: D.C. Transit’s efficiency has been favorably recog- nized throughout the transportation industry for many years.... D.C. Transit has consistently been granted the na- tionally known Maintenance Efficiency Award each year without exception since 1958 and we have been advised eam ite Serial taken nT ces hes —, 1l6d5a The Commission’s failure to assure that an adequate rec- ord was prepared, and to give explicit consideration in setting rates to Transit’s efficiency, is particularly disturb- ing because that was a matter which went to the heart of the Commisison’s duty. Like all public utility regulators, the Commission was designed to provide a substitute for competition for a monopoly affected with the public inter- est.’** If the Commission had performed its task well, the company would have made a reasonable profit, not a monopoly profit, and resource allocation would not have been distorted.“* But the Commission was not a substitute for competition unless it inquired into efficiency, for in a competitive market only an efficient company could make a reasonable profit.* If the Commission refused to perform that this honor will again be accorded to the Company for the year 1969.... Appendix of Respondent-Intervenor at 25. The Commission nonetheless found that “[t]here is no ques- tion that the company’s maintenance program has been de- ficient... .” D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11. Transit also brought to light some other evidence which, it says, bears on efficiency—for example, its proposed use of computers for routing and its method of utilizing drivers whose contracts guarantee an eight-hour day. But by any reasonable measure Transit’s showing was substandard, and in any event it was for the Commission, not this court, to evaluate the evidence and to take Transit’s efficiency into consideration in setting fares. 187 See J. Bonbright, Principles of Public Utility Rates 25 (1960), which points out that the very objective of regula- tion is “to serve as a substitute for competition.” See also Northern Natural Gas Co. v. FPC, 130 U.S.App.D.C. 220, 226, 399 F.2d 953, 959 (1968). 158 See Northern Natural Gas Co. v. FPC, supra note 157, 130 U.S.App.D.C. at 226, 399 F.2d at 959. 159 F’.9., Northern Pac. Ry. v. United States, 356 U.S. 1, 4- 5 (1958). Atay SS WTA YR MENS RTI LAI MAT RT ES RRR EY IDLY RU: FL RON RBA BE RINT bE NE Pe RESALE TON SLE RE STR : -~ -~ ~—-- 166a its statutory duty to make such an inquiry, then Transit had no incentive to discover and utilize cost-saving de- vices. The alternative to an inquiry into efficiency, then, was to turn Transit into a high-cost plus profit company, and that plainly was not in the public interest. We note, in this connection, that some serious questions about Transit’s efficiency were raised. For example, peti- tioners point out, and we had previously noted,’ that one of Transit’s chronic problems was cash flow, a matter which the Commission had regularly considered in raising rates.’ But there was no inquiry here, so far as we are aware, into methods, other than a fare increase, which Transit might have employed to eliminate this problem. Thus while the Commission assumed for ratemaking purposes that Transit had heen paid the value of services it performed for a related corporation," it never addressed the question 166 This is particularly true for Transit, since under its franchise, Pub.L. No. 757, 70 Stat. 598 (1956), and under Section 6(a) (4) of the Compact, supra note 4, the “primary test of the reasonableness of Transit’s fares” is the “oper- ating ratio method.” D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 108, 121 U.S. App.D.C. at 400, 350 F.2d at 778. Thus if Transit’s costs of service rose avoidably, any given operating ratio resulted in higher-than-necessary fares—provided, of course, it was not caught by the Commission and that the Commission did not deem the fares too high. 161 Yohalem v. Washington Metropolitan Area Transit Comm’n, supra note 150, 141 U.S.App.D.C. at 27, 436 F.2d at 181. 162 See, e.g., D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 16. 163 See D.C. Transit Sys., Inc. (Order No. 773), 72 P.U.R.3d 113, 124 (1968), rev’d, Democratic Cent. Comm. v. Washing- ton Metropolitan Area Transit Comm’n, supra note 59. The amount in question—some $23,400 a year—is a “conserva- tive” estimate of the value to the D.C. Examiner, a news- SEARO DY NTR PRGRO PBN BEM OPES ELBIT NERO OIG EAR BLEND ME IE EFL TOL SR AE TEE RBtea, PP ENE Ty SLE ERIE LOL OI ELS ILI SLIN EEN RSS TIE GL IOE IE RIMES NEE SELL ASE TAS AGRE _— =~ + 167a whether an efficient management with a cash flow problem would have let the debt remain uncollected. As another example, it is alleged that Transit had the highest operating costs per mile among a group of major urban transporta- tion companies.’ If this is true, it raised obvious questions about efficiency. To take a third example, the Commission stated that Transit’s “maintenance program has been de- ficient and that, as a result, the number of buses available for service has been inadequate.” '® But this inadequacy did not spark an inquiry into management's efficiency, nor did it have any apparent effect on the rate of return al- lowed.’ Finally, and without trying to be exhaustive, we note that while the Commission thought it “erystal clear... that the financial problem of the company is due to a de- elining ridership and increasing labor costs,” '™ it made no investigation into what the company was doing to increase ridership,"* or to reduce labor costs. paper owned by the principals of Transit, of the space on its buses that Transit made available for the distribution of the paper. Id. '4 Brief for petitioner Democratic Central Committee at 15, relying on Exhibits 5-7 in Payne v. Washington Metropoli- tan Area Transit Comm’n, supra note 7. 65 D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11. 166 See note 130, supra. 167 D.C. Transit Sys., Inc. (Order No. 1057), swpra note 47, 85 P.U.R.3d at 37. 168 Indeed, the Commission took it upon itself to remedy “the inadequacy of the company’s marketing program” by ordering “a soundly conceived and well-carried out program of imparting information to riders and potential riders about the specifics of the company’s service... .” D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 23-24. Significantly, the Commission commented that it “believe[d] that [Transit’s] efforts to maintain its existing ridership and to obtain new ridership have been impaired by its failure to 168a In sum, the Commission, in allowing the increase here, fell far short of what it later claimed in Order No. 1216 to be the required degree of concern with Transit’s efficiency of management.’ While we commended the improvement in the Commission’s study of Transit’s efficiency in Order No. 1216,! that cannot save the inadequate showing in Order No. 1052, which, together with other defects,’ viti- ates the fares set by that order. IV. VIABILITY OF TRANSIT’S BUSINESS We must now consider the final argument challenging the validity of Order No. 1052—the argument that the Com- mission, in granting Transit the increases permitted by that order, acted on the erroneous premise that a public utility is entitled to a return on its investment although its fiscal status may be so precarious that it would be un- likely to obtain any return if it were forced to compete on the open market. Braided into Order No. 1052 is the cardinal assumption that the case law,’ the Compact,'™ the Franchise Act,’ promote adequately the use of its service.” Id. at 23. 169 D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4. 170 Td. at ——, 466 F.2d at 415-16. 171 See Part II, supra, and Part IV, infra. See also text supra at note 131. 1722 The Commission concluded that to compel Transit to operate without income sufficient to cover operating expenses and debt service as well as a return sufficient to attract in- vestment capital “is to confiscate its property without due process of law.” D.C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 36, citing Bluefield Water Works & Improvement Co. v. West Virginia Pub. Serv. Comm'n, 262 U.S. 679, 690 (1923). 173 Supra note 4. 174 Pub.L. No. 84-757, 70 Stat. 598 (1956). PIAL ELOY TOE. —-—s—-— —- oma 169a and particularly the Constitution,’ required the Commis- sion to set the fares at a level which would insure Transit an adequate return after costs and expenses. Amicus curiae and the District of Columbia challenge this postulate. Since both the Compact and the Franchise Act demand, in addi- tion to efficient and economical service, that Transit’s rates remain reasonable, and since a rash of recent fare in- creases has failed to solve Transit’s financial plight,’” it was error, they claim, for the Commission to grant another increase without a separate, prior determination as to whether at any fare level Transit was capable of consist- ently earning a profit and attracting investment capital. Amicus curiae has shouldered the burden of this facet of the cases and the argument he constructs can be sketched roughly as follows. From January, 1968, to June, 1970, Transit was allowed four fare increases, raising the basic District of Columbia cash fare from 25 cents to 40 cents —an overall increase of 60 percent. If increases in such rapid succession and in such proportions were necessary to keep the company in business, it follows that a serious ques-. tion existed as to whether the business was or could be 115 See note 172, supra. 176 Compact, supra note 4, tit. II, art. XII, §§ 3, 6(a). 117 See text infra at note 178. 178 D.C. Transit Sys., Inc. (Order No. 773), supra note 168, aff'd in part, Powell v. Washington Metropolitan Area Transit Comm’n, supra note 68, rev’d, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, supra note 59; D.C. Transit Sys., Inc. (Order No. 880), supra note 380, supplemented, D.C. Transit Sys., Inc. (Order No. 882) (WMATC Oct. 29, 1968), aff'd, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, supra note 7; D.C. Transit Sys., Inc. (Order No. 984), supra note 22, rev'd, D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, No. 28,958 (D.C. Cir. June 28, 1973) ; D.C. Transit Sys., Inc. (Order No. 1052), supra note 1. Tass Pye ts SELEET SELES RSS RY REE EARS LB IIE CEE PRY A I TE A PLT RIE FUE LIPTAY ES EN LEELA Sg ON : = = — —— | —— - 170a made viable. It was improper, the argument continues, for the Commission to decline to investigate the cause of Tran- sit’s near-deficit operation, for such an investigation might have revealed that Transit was unable to maintain itself financially without an endless chain of fare elevations. In that event, the argument concludes, neither the Constitu- tion, the Compact, the Franchise Act nor the case law would require or justify the increase in question; on the contrary, an unreasonable burden would fall on farepayers if fares were set at an artificially high level only to theo- retically provide a return to the company. For precedent to support this position, amicus draws heavily on the Supreme Court's decision in Market Street Railway Com- pany v. Railroad Commission.'” It is clear from the terms of the Compact and the Franchise Act '! that there are at least some circumstances in which Transit would not necessarily be entitled to an adequate return after costs and expenses. Section 6(a) (1) of the Compact requires the Commission, in deciding whether to suspend a fare change, to give consideration, among other things, to “whether the carrier is being oper- ated economically and efficiently.” '*? Section 6(a)(3) pro- 179 Supra note 3. 180 Supra note 4. 181 Pub.L. No. 84-757, 70 Stat. 598 (1956). 182 The Compact, supra note 4, provides in relevant part at tit. II, art. XII, § 6(a) (1), that: The Commission, upon complaint or upon its own ini- tiative, may suspend any fare, regulation, or practice shown in a tariff filed with it under Section 5.. ., at any time before such fare, regulation, or practice would otherwise take effect. . . . In determining whether any proposed change shall be suspended, the Commission shall give consideration to, among other things, the financial condition of the carrier, its revenue require- Widishviv shan’ tis Bases bes een 3 MDa ‘ " a l7la vides that, in prescribing just and reasonable fares, the agency shall take into account, inter alia, “the need, in the public interest, of adequate and efficient transportation service by such carriers at the lowest cost consistent with the furnishing of such service,” as well as “the need of revenue sufficient to enable [the] carrier[] under honest, economical, and efficient management, to provide such serv- ice.” *** Similarly, Section 4 of the Franchise Act, promises that “if [Transit] does provide the Washington Metropoli- tan Area with a good public transportation system, with reasonable rates, Congress will maintain a continuing in- terest in the welfare of the Corporation [Transit] and its investors.” '** It follows from these portions of the Compact ments, and whether the carrier is being operated eco- nomically and efficiently. .. . 183 Section 6(a) (3) is quoted in text supra at note 129. 184 Franchise Act, Pub.L. No. 84-757, 70 Stat. 598-99 (1956), tit. I, pt. I, § 4, provides: It is hereby declared as matter of legislative policy that in order to assure the Washington Metropolitan Area of an adequate transportation system operating as a private enterprise, the Corporation [Transit], in accordance with standards and rules prescribed by the Commission, should be afforded the opportunity of earn- ing such return as to make the Corporation an attractive investment to private investors. As an incident thereto the Congress finds that the opportunity to earn a return of at least 614 per centum net after all taxes properly chargeable to transportation operations, including but not limited to income taxes, on either the system rate base or on gross operating revenues would not be un- reasonable, and that the Commission should encourage and facilitate the shifting to such gross operating reve- nue base as promptly as possible and as conditions war- rant; and if conditions warrant not later than August 15, 1958. It is further declared as a matter of legislative policy that if the Corporation does provide the Wash- ington Metropolitan Area with a good public transpor- tation system, with reasonable rates, the Congress will 2, SSESce > PENA Pe ig SO NRT ie ERR EE 4 J TE - - . - - 172a and the Franchise Act that, if Transit were not run eco- nomically, efficiently, and honestly, then it would not be entitled to the level of return contemplated by the Compact and Franchise Act.’ This much is contested neither by the Commission nor by Transit. The Franchise Act couples the continued interest of Con- gress in the company to the provision of “a good transpor- tation system,” '** as well as the operation of such a system at “reasonable rates.” '*? It would appear that to Congress it was important not only that the transit system be good —honest, efficient, and economical—but also that the rates be reasonable in themselves.'"*® The Franchise Act also maintain a continuing interest in the welfare of the Cor- poration and its investors. 185 D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, —— U.S.App.D.C. at . 466 F.2d at 407-13, 418-23. See also Part III, supra. This principle had been recognized by District of Columbia regu- latory agencies on at least two occasions prior to promulga- tion of Order No. 1052. In D.C. Transit Sys., Inc. (Order No. 984), supra note 22, the Commission warned that a return to investors would be withheld if service deficiencies were not improved: We also would put Transit on notice that in any future rate case if the level of service is allowed to drop below that required by the compact, the commission will con- sider denying any return to the equity holder so long as that condition exists. 81 P.U.R.3d at 455. And on an earlier occasion, the District of Columbia Public Utilities Commission pointed to improvi- dent expenditures and indicated that it was setting rates as if Transit were operating efficiently. D.C. Transit Sys., Inc. (Order No. 4480), supra note 155, 25 P.U.R.3d at 378. 186 Pyb.L. No. 84-757, 70 Stat. 598-99 (1956), tit. I, pt. I, § 4, quoted supra note 184. 181 Td. 188 Like other regulatory bodies, the Commission was re- quired to balance the interests of both the consumer and the 173a states that Transit “should be afforded the opportunity of earning such return as to make the Corporation an attrac- tive investment to private investors.” '** This suggests, not a guarantee of a good return, but an opening to Transit to make such a return if it could. Section 6(a)(4) of the Compact contains a similar statement, and the same impli- cation as to the “opportunity of earning such return as to” make the carriers attractive investments to private in- vestors.” 1” These clauses of the Franchise Act and the Compact seem to us to embody principles not essentially dissimilar from those which found Supreme Court approval in Market Street Railway Company v. Railroad Commission.” In Market Street, the Court upheld as non-confiscatory a fare which would not return a profit to the utility but would permit a return on the worth of the company’s property investor. The scheme presented in the Franchise Act and the Compact recognized this balance. If Transit was efficient, it was to be permitted a fair return. If it was not efficient— that is, if it did not provide good service at a reasonably low cost—then it might be denied a return, or one which other- wise would have been higher. D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, U.S.App.D.C. at , 446 F.2d at 407-10; Washington Gas Light Co. v. Baker, supra note 108, 88 U.S.App.D.C. at 119, 188 F.2d at 15; Permian Basin Area Rate Cases (Con- tinental Oil Co. v. FPC), 390 U.S. 747, 769-70, 790-98 (1968) ; FPC v. Hope Natural Gas Co., 320 U.S. 591, 603, 610, 612 (1945) ; FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 606- 08 (1942) (concurring opinion). 189 Pub.L. No. 84-757, 70 Stat. 598 § 4 (1956), quoted supra note 184. 19° Compact, supra note 4, tit. II, art. XII, § 6(a) (4), quoted supra note 49. 191 Supra note 3. L. OSD gy LEE LIES SZ ELT LLL DINING AL OPER BIE ILLS, SALI EA A AE ER LOOT SE : es i he pes = _. | 174a valued at the price at which Market Street had agreed to sell the company to the City of San Francisco. The company’s history was that of a failing enterprise to which a prior fare increase had brought, not additional revenues, but instead a steady decline in traffic; and the Court’s opin- ion clearly distinguished between utilities which were finan- cially healthy and those that were sick. It pointed out that . most of our cases deal with utilities which had earning opportunities, and public regulation curtailed earnings otherwise possible. But if there were no pub- lie regulation at all, this appellant [Market Street] would be a particularly ailing unit of a generally sick industry. The problem of reconciling the patrons’ needs and the investors’ rights in an enterprise that has pasesd its zenith of opportunity and usefulness, whose investment already is impaired by economic forces, and whose earning possibilities are already invaded by competition from other forms of transpor- tation, is quite a different problem.” And, the Court reiterated, “[i]t is idle to discuss holdings of cases or to distinguish quotations of this or other courts which have dealt with utilities whose economic situation would yield a permanent profit, denied or limited only by public regulation.” * The considerations advanced in Fed- eral Power Commission v. Hope Natural Gas Company, the Court observed, ... concerned a company which had advantage of an economic position which promised to yield what was held to be an excessive return on its investment and on its securities. They obviously are inapplicable to a company whose financial integrity already is hopelessly undermined, which could not attract capital on any possible rate, and where investors recognize as lost a part of what they have put in. It was noted in the 192 324 U.S. at 554. 193 Td. at 566. 19 Supra note 188. LG ORT Saw era a at i - Oe ee oS cocina Bette. “17da a Hope Natural Gas case that regulation does not assure that the regulated business make a profit. All that was held was that a company could not complain if the return which was allowed made it possible for the com- pany to operate successfully. There was no suggestion that less might not be allowed when the amount al- lowed was all that the company could earn.’” Finally, the Court noted that the Constitution does not - require a regulatory agency to fix rates “on an investment after it has vanished ... or to maintain the credit of a concern whose securities already are impaired. The due process clause has been applied to prevent governmental destruction of existing economic values. It has not and cannot be applied to insure values or to restore values that have been lost by the operation of economic forces.” Market Street’s theme, in short, is that there is no re- quirement that regulation be used to bolster and make profitable a company which would not otherwise be suc- cessful. That is the principle which the Commission should have followed, but did not. We do not say that, in actual fact, the circumstances of Market Street Railway were those of Transit. What we do say is that there certainly were sufficient indications that Transit might have been ailing to have alerted the Commission to have investigated (a) if and to what extent the company would have been able to make a profit if there were no regulation at all, and (b) if and to what extent Transit could then earn a sufficient return so as to make it an attractive investment at any level of fares which could have been deemed “rea- sonable.” We do not think it can be said, under the Compact and the Franchise Act, that any fare was “reasonable” no matter how high it was or how few riders were able to 195 324 U.S. at 566 (citations omitted). 196 Td. at 567. PEF EIEL SI LEGO REE LOA IE BOREL: LOEFFLER RS ee - 176a pay the fare, so long as Transit was able to show a tech- nical excess of gross income over expenses.’ As we pointed out above, the Franchise Act stipulates “a good transpor- tation system” as well as “reasonable rates”; '* the fact that the system was “good” did not automatically endow with reasonableness any fares necessary to sustain that good system at a profit. Reasonableness entails a consider- ation of the value of the service to the riders, the numbers who can use the service at the fares set, and the burden of those fares upon the riding public or important segments of it. Similarly, in appraising whether an operation is economical,’ account must also be taken of the relationship between the level of the fares and the worth of services rendered to the riders. Service is not economical simply because it is honest, mechanically efficient, and as thrifty as it can be under the circumstances; it is not economical if the charge for the service must be set at inordinately high levels in order for the transit company to obtain a profit.2” ‘87 We do not mean to imply that to be reasonable a fare must necessarily be within everyone’s budget. See Powell v. Washington Metropolitan Area Transit Comm’n, supra note 68, at 5-8. 198 See text supra at notes 186-87. 199 See Compact, supra note 4, tit. II, art. XII, §§ 6(a) (1), 6(a) (3), quoted supra note 182 and text supra at note 129, respectively. 200 Key Sys. Transit Lines, 17 P.U.R.3d 505 (Cal. Pub. Utils. Comm’n 1957) is but another variation of this ap- proach. There the transit company refused to adopt and ef- fectuate an improved transportation system designed to save operating expenses and to yield a 9.11% rate of return. In refusing to implement the new system, the company was “un- lawfully denying to itself a reasonable opportunity to earn a fair return upon its: property reasonably devoted to public use,” Id. at 509, and the Commission felt no constitutional compulsion to relieve the company from its 2.7% return. l77a The record in these cases shows that ridership has de- clined considerably as the fares have risen.2" In Order No. 1052, the Commission estimated that the decline would continue with the new fare raise to 40 cents.* Since 1966, the trends toward higher fares and lower ridership have been both steady and rapid.?”* The fall in ridership has borne, of course, most heavily on the poor and those who neither have the use of automobiles nor can well afford taxis. The Commission has made a most conscientious effort to set Transit’s fares at the proper level, and its task has been a most difficult and complex one. But we cannot avoid con- cluding that, performing its burdensome function, the agency has throughout acted on the erroneous postulate that it was compelled—no matter to what level it must raise the fares, how substantial the fall in ridership, and how financially sick Transit might be—to set the fares so that Transit could always earn a profit. To be sure, Transit was entitled to a reasonable opportunity to earn a fair 201 That was quite expectable, owing to the phenomenon in ratemaking known as the “resistance factor.” See Powell v. Washington Metropolitan Area Transit Comm’n, supra note 68, at 6 n.17 and accompanying text. This factor was discussed by the Commission in the proceeding under review. D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 7-8. 202 Td. at 8. 23 From 1960 through 1967, when Transit’s basic District of Columbia cash fare remained at a constant 25 cents, the total number of revenue passengers changed from 134,925,- 430 in 1960 to 133,646,024 in 1967, with a high point of 137,771,403 in 1966 and a low point of 131,685,316 in 1963. S.Rep. No. 91-760, 91st Cong., 2d Sess. 24-25. In 1970, on the basis of a 40-cent fare, the Commission projected the rider- ship at between 112,785,616 and 113,253,766. D.C. Transit Sys., Inc. (Order ‘No. 1052), supra note 1, 85 P.U.R.3d at 8. See. REPS ES OF He Ge EET IELTS PN Lp LE LEAS ERLE EE LEI OLLI LES ENON BES EI OE _ ba i OCP: | 178a . return from its operations.2% It was not, however, for the Commission to insure a return. Neither the Compact ?% nor the Franchise Act *’* authorized a guarantee, nor did due process require it *? nor, as the cases make plain, was it the Commission’s prerogative to afford it.2° Though the Commission has also commented that it has considered the public interest in restraining the rise in fares, we are convinced that the incorrect postulate to which we have referred has initially infected the Commission’s whole thinking and its ratemaking process. Order No. 1052, in particular, cannot be judged apart from that mistaken premise, which we judge to he at its core. For this reason, as well as for the others we discuss in this opinion,?” that order cannot stand. V. DISPOSITION For three reasons we have concluded that Order No. 1052 is invalid. First, the Commission should have credited to Transit’s farepayers, to the extent not exhausted by its 204 F’.g., Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Comm’n, 262 U.S. 276, 290-91 (1923) (separate opin- ion). The return of which we speak would embrace, of course, reimbursement of all reasonable costs of providing the service and reasonable compensation for the public’s use of the capital utilized in the enterprise. 205 See text supra at notes 182-90. 206 See text supra at notes 182-90. 207 Market Street Ry. v. Railway Comm’n, supra note 3, 324 U.S. at 566-67; FPC v. Hope Natural Gas Co., supra note 188, 320 U.S. at 603; FPC v. Natural Gas Pipeline Co., supra note 188, 315 U.S. at 590; Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Comm’n, supra note 204, 262 U.S. at 291. See also D.C. Transit Sys., Inc. v. Washington Metro- politan Area Transit Comm’n, supra note 4, —— U.S.App. D.C. at , 466 F.2d at 418-23. 208 See cases cited supra note 207. 209 See Parts II, III, supra. 179a prior similar obligation,” the amount by which the com- pany’s lands increased in value up to the time they were removed from operating status.?"" Second, in determining Transit’s right to higher fares, the Commission should have inquired into the efficiency of Transit’s management—a necessary prerequisite, under the terms of the Compact, to considering any fare raise.”'* And finally, the Commission’s decision should have been guided by the precept that Tran- sit was entitled to an opportunity to earn a return on its investment but not to a guaranteed return, nor necessarily to a fare increase where an examination of its economic health could have revealed that it was incapable of main- taining profitable operations under any reasonable rate of return allowed.?"* Given these infirmities in Order No. 1052, we are faced with the question of the disposition mandated. Defective fare orders cannot be cured by retroactive ratemaking,*™* nor is the Commission in a position to promulgate any new fares for Transit in light of the recent public takeover of its transportation assets and operations.” Nevertheless, . we cannot give legal effect to the invalid fares set in Order No. 1052 by allowing that order to stand.7** As in Demo- 210 See Democratic Cent. Comm. v. Washington Metropoli- tan Area Transit Comm’n, supra note 59, at 85-86, and text supra following note 84. 211 See Part II, supra. 212 See Part III, supra. 213 See Part IV, supra. 214 See cases cited supra note 126. 215 See note 117, supra. 216 Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, supra note 59, at 78-79; Williams v. Washington Metropolitan Area Transit Comm’n, supra note 75, 134 U.S.App.D.C. at 363, 415 F.2d at 943. fe ae MRT RLS So Wee pose a reRaTH Ft AR IEAIRE AN TRON AIT ETE IR TING EIA LENE AIT ETL ISGP RAR SEER ANSI ER - -- -—9- = = | - 180a ° cratic Central Committee?" decided today, and as in its decisional forerunner, Williams v. Washington Metropoli- tan Area Transit Commission?"* we find the appropriate avenue of relief here to be restitution.?" The Commission is in an excellent position, both by virtue of its administrative expertise and its familiarity with Transit’s situation to conduct the investigations essential to ascertainment of restitution to be awarded here. For that purpose, we remand the case to the Commission.?”° Necessarily, three matters, correlative to the three defects we have found in Order No. 1052, must be explored by the Commission. The first is the amount of the increase in market value over book value of lands which Transit moved below the line prior to the issuance of Order No. 1052,?* and the amount of the increase remaining after the appli- cation to be made in Democratic Central Committee.?? “17 Supra note 59, at 78-82. “18 Supra note 75, 134 U.S.App.D.C. at 362-64, 415 F.2d at 942-44, 719 Order No. 1052, unlike the fare orders in Democratic Central Committee and Williams, has not been superseded by later orders. But the granting of relief is, nevertheless, com- plicated by the recent public takeover of Transit’s opera- tions, see note 117, supra, and the consequent termination of the Commission’s faresetting duties. See Compact, supra note 4, tit. III, art. XI, § 41, art. XIII, § 60; Democratic Cent. Comm, v. Washington Metropolitan Area Transit Comm’n, supra note 59, at 85-86. Thus, as in Democratic Central Com- mittee and Williams, restitution is the appropriate method of restoring to the riders any unlawful excess from fares col- lected under Order No. 1052. 220 Compare Democratic Cent. Comm. v. Washington Metro- politan Area Transit Comm'n, supra note 59, at 83-85. 221 See Part II, supra. 222 Supra note 59, at 85. See text supra following note 84. a 1Sla . . ee This is perhaps the least difficult of the three asisgnments since it involves essentially the same calculations required of the Commission by our opinions today in Democratic Central Committee *> and Bebchick.?** Once ascertained, the net amount of this value-apprecia- tion must be credited to the farepayers. The specific means by which the riders are to be benefited thereby must also be worked out by the Commission, preferably in consulta- tion with the Washington Metropolitan Area Transit Authority, the new owner of Transit’s system.” The other two matters which the Commission must look into relate to remedying the other two defects in Order No. 1052. One is the determination of the impact, if any, which the efficiency of Transit’s management should have had on its right to fare increases at the time of the order.” The other is the evaluation, which Market Street Rail- way 77 required, as to whether Transit’s then financial position would have enabled it to consistently maintain a profitable mass transportation system under any rate of return.?** The Commission has the benefit now of the Loconto report *° and the other evidence adduced in the hearings 223 Supra note 59, at 85. 224 Supra note 78, at 36-37. 225 See note 117, supra. This is the procedure we suggested in Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, supra note 59, at 86. 226 See Part III, supra. 227 Supra note 3. 228 See Part IV, supra. 229 See Part III, supra, at notes 1386-39; D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, ——U.S.App.D.C. at ——, 466 F.2d at 398-401. | i | @ Ay tent eine eee ee be ee eee he A eR CULT aaa SY oa SARTO. te Ln seme DMN ng fie an RE : = = .- KER | 182a on Order No. 1216 *°—evidence which convinced the Com- mission that Transit was operating inefficiently and under perilous economic circumstances two years after the fare- setting in Order No. 1052.7" The Commission is free to draw upon these sources for such assistance as they may afford in the performance of these duties on remand. It is conceivable that after reconstructing Transit’s situ- ation at the time of Order No. 1052, and after applying itself to the factors which we have found that it neglected, the Commission might nevertheless conclude that Transit’s request for higher fares was properly granted. In that event, the only infirmity in Order No. 1052 having any practical effect would be the failure to benefit the riders by the increased market value of the lands moved below the line. That would be handled as we have suggested above and in Democratic Central Committee.* Order No. 1052 is set aside. The case is remanded to the Commission for further proceedings consistent with this opinion. Our jurisdiction over the case is retained in full. So ordered. 230 See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm’n, supra note 4, —— U.S.App.D.C. at ——, 466 F.2d at 401-03. 231 Td. 232 Supra note 59, at 85-88. 183a a MacKinnon, Circuit Judge, concurring in part and dis- senting in part: For the reasons set out in my opinion in today’s companion case, Democratic Central Committee v. WMATC, No. 21865 (hereinafter No. 21865), I concur generally in this decision, dissenting only from Part II (and Part V insofar as it necessarily directs the Commis- sion to remedy the alleged defects delineated in Part IT). I would just like to add that it seems odd that the majority in this case manages to find some sort of “im- plicit” legislative intent in the Franchise Act (granting Transit its charter) that mandates the result reached. This intent is apparently derived from Congress’ total silence on the subject which the majority interprets as meaning that Congress could not have intended any re- sult other than that reached in this case. It is argued, supra at 23-25, 30, that nothing in the Act suggested that gain should accrue to the investors. Yet since that would have been the result absent any provision to the contrary, Congress’ silence on the matter would seem infinitely more supportive of an implicit acquiescence in awarding the gain to the investors rather than the converse as argued by the majority, supra at 30. This strikes me as a very weak strut to support the logic of the majority’s decision and is really nothing more than a restatement of the view that the history and circumstances of Transit are such that it would be desirable to award any and all gains to the farepayers. Here the majority seeks to clothe its basic equitable arguments in the garb of congressional intent. As an indication of a desperate need to lend some legal substance to its vague equitable leanings, this tactic serves only to weaken the majority’s position, rather than strengthen it. Transit was taken over by the public authorities on Jan- uary 14, 1973 and the operating officials are already con- sidering demands for fare increases in order to meet op- SV PORN PARE RDA TI TE WN 9? RO RLM, MENEAME REMIT AUR EAAPE CET MYR HIN OUI TNR OM , = ~ | 184a erating expenses. This is some indication that the past management was perhaps not as inefficient as has been contended and that the fare increases sought by Transit from time to time over the years were not as unreasonable as their opponents contended. In fact, local fares were generally not out of line with bus fares nationally. For the record there is appended in the margin fares in other comparable urban areas. (Exhibit 14, p. 1). CASH FARES, TRANSFERS AND MAXIMUM FARES IN 46 LARGEST U.S. AND CANADIAN CITIES (SOURCE: A.T.A. FARE SUMMARY BOOKLET) Maximum Fare Tickets Within Cash or Trans- City Incl. Owner- City Fare Tokens fer Transfer ship Kansas City, Missouri .............. $.50 None $.05 $.65 Public Akron, Ohio 40 5/$1.75 02 42 Private ee 40 None 05 45 Public St. Louis, Missouri .................. 40 None 05 45 Public Atlanta, Georgia ...................... 35 3/$.90 .05 40 Private Cincinnati, Ohio ... 35 5/$1.50 .10 55 Private Chel, Te cisiceeinccomninss 35 5/$1.75 .05 40 Public es CD cccctrtcteeennvns 35 None .05 40 Private NN, TRIED siicececcermecbennnn 35 10/$3.00 Free 55 Private Louisville, Kentucky ................ 35 10/$3.50 .05 40 Private Montreal, Canada .............-.-..00.- 35 3/$.90 Free Public Pittsburgh, Pennsylvania ........ 35 None 05 45 Public Portland, Oregon ..........--.-0++-++ 35 None’ Free 35 Private Toledo, Ohio 35 ©«©5/$1.75 = -.05 55 Private Baltimore, Maryland ................ .30 30 05 35 Private Birmingham, Alabama ............ 30 20/$5.50 .05 55 Private Buffalo, New York ................... 30 10/$3.00 = .05 35 Private Cte GID sescrsicerce 30 © 5/$1.50 Free 30 Private Dallas, Texas 30 None Free 70 Public Detroit, Michigan ..............-...-.-. 30 8=67/$2.00 = 05 35 Public Fort Worth, Texas ...................- 30 8/$2.00 .02 37 Private Indianapolis, Indiana ................ 30 None 05 30 Private Los Angeles, California .......... 30 30 05 ° Public —— SETSS PLL LA OPN NTN alld a 18a CASH FARES, TRANSFERS AND MAXIMUM FARES IN 46 LARGEST U.S. AND CANADIAN CITIES (Continued) Maximum Fare Tickets Within Cash or Trans- City Incl. Owner- City Fare Tokens fer Transfer ship Memphis, Tennessee ............-..- 30 None 05 35 Public Milwaukee, Wisconsin .............. 30 ©10/$2.75 Free 40 Private New York, New York (C) ...... 30 30 Free 55 Public Oklahoma City, Oklahoma ...... 30 None’ Free 40 Public Omaha, Nebraska ................-+-+++ a 36/$9.00 02 32 Private Phoenix, Arizona ....................-- 30 None 05 45 Private Philadelphia, Pennsylvania .... .30 None 054 AT Public San Diego, California .............. 30 4/$1.00 Free 30 Public Terente, Canada ...................--- 30 «©4/$1.00 Free 60 Public Honolulu, Hawaii ..............-....-- 25 5/$1.00 Free 35 Private Long Beach, California ............ 25 5/$1.00 Free 32 Public nen SI cocci ceencenesarnaes 25 None’ Free 25 Public Minneapolis-St. Paul, Minn. .... .25 None’ Free 25 Private Newark, New Jersey ...........----- 25 None .10-.20 ” Private New York, New York (A) ...... .25 None’ Free 55 Private New York, New York (B) ...... 25 None’ Free 55 Private Norfolk, Virginia ...................... 25 10/$2.25 Free 40 Private Oakland, California .................. .25 4/$1.00 Free 35 Public Rochester, New York ............-- 25 8/$2.00 = .02 27 Public San Antonio, Texas .........-...+--+. 25 None 02 40 Public Seattle, Washington ................ .25 25 Free Ad Public Boston, Massachusetts ............ 20 20 None .20@ Public a BLASTED BDL EEE LE PERSE Yo NET IE LLIN TIE ORL, ETN noe i 187a APPENDIX C UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT SepTremMsBEeR Term, 1973 FiLtep SEPTEMBER 25, 1973 Hveu E. Kuve, Clerk No. 21865 Democratic CENTRAL COMMITTEE OF THE DISTRICT OF CoLvMBIA, ET AL., Petitioners Vv. Tue WasHincton Metropouitan Area Transit CoMMISSION, Respondent D. C. Transrt System, Ixc., Intervenor No. 23720 Leonarp N. Bescuick, ET AL., Petitioners Vv. Wasuincton Mertnopoutitan Area Transit ComMISsSION, Respondent D. C. Transit System, Inc., Intervenor No. 24398 Democratic CENTRAL COMMITTEE OF THE DisTRICT OF CotvMBIA, ET AL., Petittoners . A Wasuincton MetropouitaN Area Transit ComMISSION, Respondent D. C. Transit System, Inc., /ntervenor 188a UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT SEPTEMBER TERM, 1973 No. 24428 Brack Unitep Front, Petitioner Wasuincton Arg, ETC., ntervenor v. Wasnincton Metropotitan AREA TRANSIT D.C. Transit System, Inc., Intervenor BerorE: Roptnson and MacKinnon, Circuit Judges and *Davis, Judge, Uxitep States Court or CLarms. ORDER On consideration of the motions by American Gas As- sociation, Washington Gas Light Company, and Potomac Electric Power Company for leave to file statements as amici curiae in support of petition for rehearing and sug- gestion for rehearing en banc, and of the petitions for rehearing by D.C. Transit, Inc., and Black United Front, it is OrvereED by the Court that the Clerk is directed to file the aforesaid statements by American Gas Association, Wash- ington Gas Light Company, and Potomac Electrie Power Company as amici curiae, and, it is FurTHERED Orperep by the Court that the aforesaid petitions for rhearing are denied. Per Curiam For the Court: Hveu FE. Kurxz, Clerk By: Dante M. Catuey Daniel M. Cathey Deputy Clerk *Sitting by designation pursuant to Title 28 U.S.C. Section 293(a). . i a ee ae ee ee ae eae Poe PL IS SE ON PE ee ee ee ee ee eR PRPs Pr tea a 2 Py ‘ ee SS ee eee — --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1447%3A02. Public record. Not legal advice.