BEFORE WALKER, ROY NOBLE LEE AND HAWKINS
WALKER, PRESIDING JUSTICE, FOR THE COURT:
This is an appeal from the Chancery Court of the Second Judicial District of Harrison County, wherein the chancellor vacated an order of the Mississippi Public Service Commission denying a rate increase to the appellee.
Coast Waterworks, Inc. (hereinafter Coast) provides water and sewage services to residents of Harrison and Jackson Counties. On June 3, 1980, Coast filed with the Mississippi Public Service Commission (hereinafter PSC or Commission) separate applications to adjust its water and sewer rates. Attached to the applications were a balance sheet for the year ending December 31, 1979 and a proforma operating statement. *fn1
Coast received its last rate increase on July 1, 1977. Since that time, the appellee argues that the cost of providing these services has increased due to inflation, government regulations, and needed improvements in the plant. In order to secure a reasonable rate of return, Coast sought to raise its residential water rates from $8.00 to $10.00 per month and its residential sewer rates from $10.00 to $15.00 per month. An increase in commercial and industrial rates was also requested.
On Friday, September 19, 1980 Coast filed a revised proforma operating statement showing expenses of $68,609.00 in excess of those shown in the proforma statement previously
submitted. Part of the reason for this revised statement was that Coast determined only the day before the revised proforma was filed that one of its wells contained manganese. In order to rid the water of this element a treatment plant costing approximately $50,000.00 would have to be constructed. This plant would also necessitate additional operating expenses.
The Public Service Commission set hearing dates of September 22-23, 1980 for both the water and sewer applications. Prior to the hearing Coast made a motion to consolidate the cases. This motion was denied by the Commission and the application for an increase in water rates was heard on September 22-23, 1980. It was followed on September 23 by the hearing on the application for an increase in sewer rates.
On October 7, 1980, the Public Service Commission entered an order denying all of the proposed water increase. On that same date it entered an order allowing an increase of only $2.00 for residential sewage service and $4.00 for commercial sewage service. Thereafter Coast filed a petition for rehearing. When the Commission failed to act on the petition within twenty days, it was deemed refused under Mississippi Code Annotated section 77-3-65 (1972).
Coast then perfected an appeal to the Chancery Court for the Second Judicial District of Harrison County. Coast also petitioned the court for an order staying enforcement of the Commission's order. With its petition it filed supersedeas and refund bonds. On October 30, 1980 the chancellor granted the petition and allowed Coast to implement the proposed rates subject to refund with interest of any amount determined to be excessive. On December 15, 1981 the chancellor issued an opinion *fn2 and decree vacating the orders of the PSC and returning the cases to the Commission for determination of a rate that would allow Coast a reasonable return on its investment. It is from this order that the PSC appeals. Several issues are presented, each of which will be discussed separately.
WAS IT ERROR FOR THE COURT NOT TO CONSOLIDATE THE CASES?
The Mississippi Public Service Commission is vested with broad discretion in determining how applications for rate increases are to be heard. We cannot say that the Commission abused that discretion when it refused to consolidate the water and sewer application of the appellee. Therefore, no error was committed in this regard. It appears, however, that a consolidation would facilitate a better understanding of the highly integrated water and sewer operations of Coast Waterworks, Inc.
The decree of the chancery court is therefore affirmed in this regard.
WAS IT ERROR NOT TO ALLOW INTO EVIDENCE COAST'S REVISED PROFORMA SUBMITTED ON SEPTEMBER 19, 1980, THREE DAYS BEFORE THE HEARING?
A utility is required to submit a proforma operating statement with its application for a rate increase. Amendments to the proforma, except to correct errors, are allowed at the discretion of the PSC. The Commission refused to admit the revised proforma filed by the appellee in both the water and sewer cases.
During the hearing on the water application, evidence established that only after Coast filed the first proforma operating statement did it learn that a water treatment plant would have to be constructed at one of its wells. The plant was needed to cleanse the water of certain elements that originate in the earth's strata from which the water is drawn. It is evident that the lateness of the revised proforma was neither intentional nor due to the neglect of Coast. Therefore, it should have been admitted into evidence and considered to the extent that the Commission might find it relevant to the water application.
In the sewer case, however, Coast acquired no new information which would justify the lateness of the revised proforma. For this reason, the Commission properly exercised its discretion in not allowing the ...