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HomeMy WebLinkAboutProceeding against Fishers Island Farms re: rates & charges of electricitySTATE SF NEW YORK DEP~%RTNIENT OF PUBLIC SERVICE STATE DIVISION December 1£~ 1933 FROM: Malcolm F. 0rton Director ef Research and Valuation TO: The Oommissicn SUBJECT: Case No. 7506 - In the matter of the Proceeding on the motiofl of the Com- mission as to the rates, charges er classifications of service of electricity ' sold by Fishers Island Farms, Incorporated. A?PE;~ANCES: · aul R. Skilling, Assistant to the'~resident, Fishers Island Farms, Incorporated. HISTORY OF THE CASE On November 30, 1931 certain revisions were made to the company's rate schedule affecting reductions in rates to ccmmercial customers. The report ¢.n these revisions togother with certain operating data for the year 1930 was submitted tc the Commission on December 17, iRS1 with the recommendation that further reductions be made by the company in its general rate structure. This recommendation was approved and an attempt was made to secure reductions by negotiation. At first there appeared to be likelihood of doing sc, but after several menths tho company stated that business in tho 1932 s~mor season had fallen off so greatly from thc previous season that any rate reduction was out of tho question. On Juno 8, 1932, this proceeding was initiated upon motion of tho Commission. A hearing was hold at Fishers Island on July 25, 1932, before ~alcolm F. 0rton, Director of Research and Valuation, especially authorized therefor, No consumer appeared nor has any at any time shown any interest in this proceeding or tho matter of rates. offered: At tho hearing tho following exhibits wore A s~m~ary of'Fixed Capital of Fishers Island Farms, as prepared by Day & Zdmmorman, Inc., based'on inventory and appraisal as of December 31, 1930 (marked for identification only, as tho members of Day & Zim~orman staff who prepared it were not produced. 2) Affida$it by Samuel Forguson upon rate of return. 3) Detailed analysis'of revenues for tho year ended December ~1, 1931. Comparison of Electric Rates for yearly rosid0ntial customers of Fishers Island Farms, with'similar service in other communities. Additional data was provided by tho company sub- sequent to tho hearing which included a summary of Fixed tapital of Fishers Island Corporation as of December 31, 1931 and comparative revenues and expenses of Fishers Island Farms for thc years 1930, 1934 and 1932. Tho corporate structure of the company and tho relationship to affiliated companies arc extremely complicatod~. The company is incorporated under the Business Corporation Law and in its earlier years was exempted from making full re- ports to tho Commission. Its revenue from tho aale of elec- tricity increased from $3,166 in 1918 to $53,497 in 190~8 and on FebrUary 13, 1930 in Case No. 7~6 this exemption was revoked and full reports wore required. In addition to electric service, the company renders water, transportation, telephone and other services incidental to the opera,ion of its hotels and tho development of thc Island, of ~hich it and its affiliates are the chief owners, as a resort. Thc'delay in reporting tho case is duo to (1) the company,s proposal, later abandoned, to form separate corp- orations to carry on the electric, water, and telephone operations, respectively, and (2) the expectation that an examination of tho company,s books and records would bo made by the Accounting Division of the Commission early in 1~3~. The $hief ACCountant now states that, due to the pressure of ether cases, there is no prospect that an ex- amination can bo made in tho near future. DESCRIPTION OF PROPERTY Fishers Island is a part of tho t~n of Southhold, Suffolk County. Tho island, which lies off tho c~ast of Conne?ticut, is about 7 milos long with eh area of about 2900 acres. Tho electric property ~wnod by Fishers Island Farms is located on the west end of the island comprising about 1800 acres and tho property serving the east end is leased from Fishers Island Corporation, an affiliated company. Both c~rporations are prira~rily real estate development companies engaged in a variety of enterprises. Electricity is purchased from tho Borough of Croton, Connecticut, and is delivered by two submarine cables owned by Fishers Island Farms one extending from ~oton Long ~oint to ~unnmtawk~t ~each on tho west end 0md tho other ex- tending to tho cove atChocomount on the east end. Electricity is transmitted over those cables at 6,600 volts to a substation on each end from uhich it is distributed at a primary voltage of 2,300. The Shocomount substation and its site on thc east end are the property of the Fishers Island Corporation. Since December 31, 1930 a new subr~rineJ~able of the sume size ~nd specifications w~s installed to connect the Chocomount ~nd Munnato~kot substations so that continuity' of service may bo onsurod. PET .E~. ?I-NA~!0N OF RATE BASE ~ND RETURI~~ The annual reports of the company reflect only that portion of the assets and liabilities which are applicable to electric operations. Sonsequently the balance sheets are. incomplete. The assets and liabilities reported for the elec- tric department of Fisher~ Island Farms, In©., for the years 1929 to 1932 are as follows: Assets 1929 1930 1931 1932 Fixed capital-Electric $ 78~C54 $ 93~231 $115;382 $119;654 Materials and supplies 15;651 13;772 13~118 11~583 Accounts Receivable 19~715 22~222 12~531 23~980 Work in ~rogress - - '15~ '441 Total Assets $113,420 $129~2~-$~~~w~'- Liabilities Current liabilities Retirement reserve Total Liabilities ~ $4;139 m % $19~667 23~966 $27;384~ $19,667 $28,105 $'27',98~' The income accounts applicable to electric opera- tions, adjusted to show separately rent ,f distribution system of Fishers Island Corporation~ for the years 1930 to 1932 are reported as follows: 1930 1931 1932 Operating Revenues $ 72!913 $ ?.9~706 $ 68~734 )pc:sting Expenses 44,~V9 56,221 54,743 Uncollectible Bills 248 - 216 Taxes '399 '433 '626 Total Revenue Reductions $ 4'5~426 $ 56~.654 $ 5~.585 $~erating Income Rent for lease of Eas~ end plant Income applicable to corporate property $ 27~48~ $ 23~05~ $ 13,149 6~785 7~259 -(a) $ 20,702 $ 15,T93 $ 13,149 Ca) Rental not paid on distribution system of Fishers Island Corporation but is to bo adjusted by mutual agreoment at a later date. -7- FIXED CAPITAL The detail of fixed capital for Fishers Island ~arms, Inc., and the Fisher Island Corporation is as follows: Decembe~i31. 1931 , Fishers Fishers Island Islaa~ ~arms 0orlon. Oombined Land - $ 3,760 $ 3,760 Structures $ 1,156 6,70~ Underground coudu/t . 11,553 11,553 Poles, towers & fixtures 12,~7 10,860 23,307 0verhe~d conductors 9,23~ 9,019 18,253 Underground ,' 62,565 51,121 113,706 6e~vices 2,6~9 761 3,390 Line Transformers and devices ~, ~07 6?6 5,~5 Line trmnsformer installations 3~3 ~0onsumerlS meters 5,26~ - 5,262 eter installations 233 - 233 Installations on Prc~ises 76 Street ti~;ht~ equip. 70~ ~ 70 General equipment 72~ - 722 ~gineering and eu~erinten~ence 1, S65 16,07~ 17,939 Misc. construction expenditures ~etal ~'ixed 0apital$115.~62$L~l~.2] December ~1, Fishers Fishers Island Island Farms Oor~. 0ombined '$ 1,736 $ 3,760 $ 5,$96 1,156 6,702 7,65~ 13,~08 8,726 22,53v - 11,553 n,553 12,721 10,$60 23,581 9,252 9,019 16,301 62,565 51,121 113,706 3,31~ 761 ,o75 76 - 70' 723 - 723 2,939 16,07~ 19,013 - 1 OP~ATINGHEV~W~ The ~ross revenue from smles of electricity on both the Owne~ system of Fishers Island Farms, Incorporated and the lease~ system ~f Fishers Island Corporation is reported as fellows: Owned System General Consumers Fort Wright Other departments Total Owned System Leased System General Consumers Other Departments Affiliated Companies Total Leased System Municipal Street Lighting Total Sales of Current Merchandise and Jobbing Total Operating Revenue 1930 1931 1932 $22;C51 $22;910 $22;600 7;758 8;478 9;528 $9;592 $11;581 $12;034 5;203 4;964 6;429 1;6o o 11;744 The decrease in gross revenues in 1932 over t931 was due practically entirely to the decrease in merchandise and jobbing revenues. The company states that these were unusually high in 1931 due to the inclusion of a large amount of wiring in its own buildings and in houses rented by it or its ~2filiates, partly for tho purpose of stablizing employ- ment. OPERATING EXPENSES The operating expenses of both owned and leased systems are reported as a unit, as follows: -9- 1930 1931 1932 Electric energy purchased $22;739 $24~593 $24;094 Transmission expenses I~963 1;869 2;573 Distribution expenses 3,271 2~839 3,519 Utilization expenses 181 237 823 Commercial expenses 154 212 387 New business expenses 26 30 ' iI Administrative salaries 2;218 4~973 6~230 Other general office salaries 2~429 4;223 2;0S9 Miscellaneous general expenses 6~470 10~645 8;877 Retirement expenses 4~299 5~063 6,170 Other general and miscellaneous expenses ~ ~ 30 Total Operating Expenses $~?f~/~' In 1930 administrative salaries, other general office salaries and miscellaneous expenses were distributed among tho differsnt departments of tho company in tho ratio of general overhead to total expenses. During tho years 1931 and 1932 such expenses were divided equally among tho five departments of tho company, comprising General, Telephone, Water, Navigation and Electric, Tho record shows that if tho se]no basis of distributing these expenses was used in 1931 and 1932 as in 1930 tho amounts charged to Administrative Salaries, Other General Office Salaries, and Miscellaneous General Ex- penses would not have shown an increase for those years. The cost .f repairs and maintenance of the leased property is charged to operating expenses of Fishers Island Farms, Inc., but no provision is made through operating expenses for depreciation ~f leased property. -lO- RESULTS OF OPERATIONS Ca) 1930 Owned P~ ~.~e-~ cost $85;643 Average retirement reserve 21'817 Average book value Working Capital (a) 4'478 Rate Base Operating Income $27;487 Rental for leased property 6~785 Net income applicable to owned property $20~702 6% on rate base 4;098 Excess over 6% · 1/10 of. operating expenses. 1931 1932 $104~307 $117 ~ 518 $ 23~052 $ 13,149 7~2§9 - $ 15~793 $ In the above table the property of the F~shers Island $orporation is reflected only in the rentals paid. The company claims that a reasonable allowance for annual depreciation on such property is 5%, the same rate charged on -.age owned property. Assuming an average[of 6 years and computing accrued depreciation on that basis, the results for the co~- bine~ properties for the year 1932 are as follows: Average book cost Average accrued depreciation Average book value Working capital Rate Base $238; 761 6;,8 ~1~7~400 Operating Income (c] 6% en rate base Deficlency under 6% on rate base v 5~557 (e) Retirement reserve on owned'property plus 30% of leased property. (b) 1/10 ~f operating expenses. (c) After deducting $% depreciation charge on leased property. -ll- The appraisal made by Day & zimmerman of the owned ~property differed only slightly from the book cost except in the case of overheads~ As no competent testimony was pre- ~sented upon it, it was not received as evidence. DISCUSSIO~ The charges for administrative and general ex- ilpenses in 1931 and 19~2 are unreasonably high, but it is difficult to determine to what extent this is so in 193£. ~he company takes the position that the renta~ paid for property of the Fishers Island Corporation should be ignored and the entire property considered in fixing de- preciation and return. It is clear that this property is used and useful in the public service to the same extent as awned property and that the system is operated as a unit, It also appears that the rental has been fixed partly from considerations other than the value of the property ~ented. This is Obviously so in 1932 when no rental was paid. I find that for purposes of this case tho entire ~ropert¥ owned by the two affiliated companies should be con- sidered. On this basis there is not justification for further reductions at ~rosent, It is recommended that tho continued and that thc ease bo closodo is attached. MF0 MCK [I ~EOVED ~E ~.~ C$~iSSI0~ investigation bo dis- Ar. order to that effect -llcspoctfully submitted, Director of Research and Valuation Mr. S. Wenthworth Herren Supervisor, town of Southold, Suffolk county Greenport, N. Y. Herewith is a certified copy of an order of this Commission, dated December 19, 1933 , in the matter of the Proceeding on motion of the Commission as to the rates, charges or classi- fications of service of electricity sold by Fishers Island Farms, Inc. DISOONTINUING PR00EEDING ALSO ENCLOSED HEI~ITH YOU WILL FIND 00PY OF REPORT BY MALCOLM F. 0RTON, DIRECTOR OF RESEARCH AND VALUATION WITH THIS COMMISSION, APPROVED BY THE COMMISSION DECemBER 19, 1933. Also herewith is a form of notification to this Commission, under section 25 of the public service law, of receipt by you of said certified copy of said order. Please sign mzmwm~J~m~this notification paper and mail forthwith to this Commission. By the Commission. Secretary. MAS STATE OF N~ YORK DEPARTMENT OF PUBLIC SERVICE STATE DIVISION At a session of the Public Service Commission (State Division~ De- partment of Public Service) held in the city of New York on the 19~h day of December, 1933. PREScotT Milo R. Maltbie, Chairman George R. Van Namee George R. Lunn Meal B~ewster Mau~ioe 0. Bu~ritt ) ) C0~ISSIONERS ) ) CASE 2~0. 7508 IN TP~ ~ATTER -o~ the- Proceeding on motion of the Commission as to the rates, charges or classifications of service of electricity sold by Fishers Island Parms, Inc. This Commission having on its own motion znstitu- ted a proceeding for the purpose o£ inquiring into and determin- ing ~hether the rates, charges, or classificationS of service o£ electricity sold by Fishers Island Parms~ Inc.~ were just and reasonable, and a hearing, after due notice, having 0een held on this oroceeding at Fishers Island, N.Y., on July ~5, 1~$2, before ~alcolm F. 0rton, Director of Research and Valuation, specially authorized to conduct said hearing, Paul R. Skillin~, Assistant to the President of Fishers Island Farms, Inc., having apDo~red for the co~pany, and the Commission having determined that the 7503 - 2 said ~ r.~es, charges, or classifficat~nsof service arc n~:ither unjust nor unreasonable, it is 0 R D~v R E D that the ~oroceedinm_ hs~r_=i_% br the s,_~.q-~ hereby is discontinued and th~ c~oe~q~ closed on the Com_.zs~ ion s records. (SE L) By the Commission, (SIGNED) FRANCIS E. ROBERTS ]~o~m~O. 5-15-33-I0,000 (t8-6771) ~fubltt f~ru~x~ ~nmmism~n ] have compared the preccdin9 copy with the original o~dex o:f th~ O~mmm:l.mm%o~ dated D~ 19, 1933 ~ ~e ~tt~ of ~ ~m~f~t~ of s~oe of e~ci~ sold ~ Zl~m l~ on file in this offwe, and I do HEREBY CER?VFY the same to be a correct transcript therefrom and of the whole thereof. WITNESS my hand and the seal of the Public Service Commission (State Division--Department of Public Service), at the city of Albany, this · ].~,lt day of one th~and nine hundred and · ,? S?,~ o~ N~v Yo~ OF PUBLIC SERVICE ? "'~ i~ublic ~,L'btCZ ~;ommtJ~J~tOn IN THE MATI'EB. P~ooeeding on motion of the 0~Oumiss~on as to the rates, oJ~rges or classifications of~ service of electricity odd by Fishers Island Farms, iDISCONTINUING PROCEEDING OERTZFIED COPY OF ORDER Fora No. 43. 4o24o4~-20,000 (X8-8060) Case No. 8618 June 20, 1940. Russell L. Davidson, Olerk Town of Southold, Suffolk County Southold, N. Y. Herewith is a certified copy of an order of this Commission, dated June 11, 1940 , in the matter of the Application of THE FI~EP~ ISLAND ELECTRIC CORPORATION, for permission and approval to exercise rights, privileges and franchises, etc., pursuant to Section 68 of the Public ~ervice Commissions Law. Also herewith is a form of notification to this Commission, under section 23 of the public service law, of receipt by you of said certified copy of said order. Please sign~this notification paper and mail forthwith to this Commission. By the Commission. ~Secretary~~. XE slKaed and acknowledged by a person or 'STATE'OF NEW TORE Pb'BLIC SERV!0E COMMISSION At a session of the Public Service Commission held in the city of New York, on June 11, 1940. PRESENT: Milo R. Maltbie, Ohairman ) George R. Van Namee ) George R. Lunn ) CoM~.'~ISSIONERS Neal Brewer er ) Maurice O. Burritt (not votlB~) CASE NO. 8818 IN THE NATTER - of the - Application of TH~ FISHERS ISLA~ND FELECTRIC COR- PORATION, for permission and approval to exercise : rights, privileges and franchisee, etc., purs'~ant to: Section 68 of the Public Service Commissions Law. : f"ne Fishers Island Electric Corpors.tion by verified petition having asked for permission and approval of this Commission to exercise the rights and privileges in a franchise granted by the Town Board of the Town of Southold, and a public hearing having been held, and the Commission h&~mg determined that the exercise of rights or privileges under said franchise is necessary or convenient for the public service, it is ORDERED: That this Commission hereby permits and approves the exercise by The Fishers Island Electric Corporation ~f the rights or privi- leges under a franchise granted by the :own of Southold, Suffolk 0ounty, on June 21, 19S5, O ommi s si on. (S~AL) RJN: LS certified copy of v~ich franchise is filed with the (SIGNED) By the 0ommission, MUB_MAY O. TANNER Secret~'y Form 50. g-~-40-10,O00 (18-7278) I have compared the preceding copy with the original gr~le~ of this Co. lesion, dated ~ 11. ~. In the ~tt~ of the ~plloatlon of ~ FIS~ %~D ~C ~R~ON, fo~ ~lsslon on file in this offure, and I do HEREBY CERTIFY the same to be a correct transcript there/rom and of the whole thereof. WITNESS my hand and the seal of the Public Service Commission (State Division--Department of Public Service), at the city of Albany, this ~wen~ ~.o~h day of 8~ o~e thousand nine humlred ~ ~