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402 So. 2d 1209, *; 1981 Fla. App. LEXIS 20623,'
<br />utility has the burden of showing 5 that the rates are out-
<br />side or beyond the "zone of reasonableness," 6 as estab-
<br />lished by the evidence, and not necessarily by the PSC,
<br />so as to be confiscatory or discriminatory. ' Absent a
<br />controlling statute, a municipal utility, like any other
<br />utility, is entitled to eam a reasonable rate of return on its
<br />capital 6 and its rates may be set so that it earns a rate of
<br />return on its equity comparable to other similar busi-
<br />nesses.
<br />4. Cooper v. Tampa Elec. Co., 154 Fla. 410,
<br />17 So.2d 785 (1944); City of Pompano Beach v.
<br />Oilman, 389 So.2d 283 (Fla. 4th DCA 1980); and
<br />64Am,Jur.24 Public Utilities §§ 80, 89 (1972).
<br />5. Mohme v. City of Cocoa 328 So.2d 422
<br />(FtaI976); Miami Bridge Co. v. Miami Beach
<br />Ry. Co., 152 Fla. 458, 12 So.2d 438 (1943); 12 E.
<br />McQuillin, Municipal, Corporations, § 3537a
<br />(1970).
<br />[**4]
<br />6. Federal Power Comm'n v. Hope Natural
<br />Gas Co., 320 US. 591, 64 S. a 281, 88 L Ed
<br />333 (1944); Cooksey v. Utilities Comm'n, 261
<br />So.2d 129 (F1a1972); Pinellas Apartment Assic,
<br />Inc. v. City ofSt Petersburg 294 So.2d 676 (Fla.
<br />2d DCA 1974); § 180.13(2), FIaStat (1979); 64
<br />Am.Jur.2d Public Utilities §§ 135, 190 (1972);
<br />Annot.,127 A.L.R. 94 (1940).
<br />7. Miami Bridge Co. v. Miami Beach Ry. Co.,
<br />152 Fla. 458, 12 Sa2d 438 (1943); City of Pom-
<br />pano Beach, v. Oltman,. 389 So.2d 283 Oa 4th
<br />DCA 1980); Clay Util. Co. v. Cary of Jackson-
<br />ville, 227 So.2d 516 (Fla 1st DCA 1969); see:
<br />Edris v. Sebring Uttl. Comm'n, 237 So.2d 585
<br />(Fla. 2d DCA), cert denied, 240 So.2d 643
<br />(Fla 1970); Wichita Gas Co. v. Public Serv.
<br />Comm'n of Kan., 2 F. Supp. 792 (D.Kan.1933),
<br />modified, 290 U.S 561, 54 S OE 321, 78 L Ed
<br />S00 (1934); 64 Am.Jur.2d Public Utilities § 86
<br />(1972); 29 C.J.S. Electricity § 33 (1965).
<br />8. The parties all agree that basing rates on
<br />"cost of capital" is the most. universally adopted
<br />and reasonable method in the industry. The OUC
<br />has employed this method in setting its rates.
<br />9. Federal Power Comm'n v. Hope Natural
<br />Gas Co., 320 U.S 591, 64 S. Ct. 281, 88 L Ed
<br />333 (1944); City of Logansport v. Public Serv.
<br />Comm'n of Ind, 202 Ind 523, 177 N.E 249, 76
<br />A.LR 838 (1931).
<br />[O*51 Rosalind argued that certain payments made
<br />by the OUC to Orange County "in lieu of taxes" and
<br />payments in the nature of franchise fees paid by the OUC
<br />to the City of Orlando were improper operating expens-
<br />es, and if disallowed as operating expenses, the results
<br />would substantially increase the OUC's income, and
<br />Page 2
<br />therefore its rate of return on capital, far above what oth-
<br />er municipal utilities and private utilities are allowed to
<br />earn. Rosalind also argued that the OUC should not have
<br />been allowed to set its rates so as to earn as high a return
<br />on its equity as an investor-owned utility. The OUC ar-
<br />gues that these matters relate to the method of calculating
<br />rates and not to the reasonableness of' the rates them-
<br />selves. Obviously the method of calculating rates im-
<br />pacts on their reasonableness, and it is a proper subject
<br />for judicial review. 10 We shall consider each point raised
<br />by Rosalind separately.
<br />10. In re Permian Basin Area Rate Cases,
<br />390 U.S. ' 747, 88 S. Ct. 1344, 20 L Ed 2d 312
<br />(1968) (reviewed method of regulation); Barton
<br />v. Belt Line R. Corp., 268 U.S. 413, 45 S. Ct. 534,
<br />69,L. Ed 1020 (1925) (reviewing operating ex-
<br />penses); Wichita Gas Co. v. Public Sere. Comm'n
<br />of Kan., 2 F. Supp. 792 (D.Kan.1933), modified,
<br />290 U.S. 561, 54 S Ct. 321, 78 L Ed 500 (1934)
<br />(reviewed proper operating expenses and fair rate
<br />of return on utility property); Shevin v. Yar-
<br />borough, 274 So.2d 505 (Fla 1973) (reviewed
<br />method to calculate rate base, inclusion of items
<br />in operating expenses); City of Mlami v. Florida
<br />Public Sere Comm'n, 208 So.2d 249 (F1a1968)
<br />(reviewed method to compute rate of return);
<br />Hawaiian Elec. Co., Inc., 56 Haw. 260, 535 P.2d
<br />1102, 83 A.LR3d 951 (1975) (reviewed "prnno-
<br />tional" expenses as operating expenses); State v.
<br />Deportment of Pub. Serv., 19 Wasit2d 200, 142
<br />P.2d 498 (1943) (reviewed operating expenses).
<br />[**6] I. "IN LIEU OF TAX" PAYMENTS
<br />MADE BY ORLANDO UTILITIES COMMISSION TO
<br />ORANGE COUNTY.
<br />The record established that the OUC made payments
<br />totaling approximately $ 1,114,000 to Orange County
<br />from 1973 through 1978. Theamount of each annual
<br />payment was based on,1 % of the mail sales of electricity
<br />to the OUC's customers outside the City of Orlando, but
<br />within Orange County. Witnesses for the OUC testified
<br />[*1212] that these payments were somewhat less than a
<br />private utility would have paid Orange County for ad
<br />valorem taxes based on the value of OUC's property lo-
<br />cated within Orange County, and that the payments were
<br />for police and fire protection and other services afforded
<br />the utility by the County.
<br />Rosalind argued that the City's property could not
<br />legally be taxed by the County absent a general statute, "
<br />which does not now exist, that the amount paid to Or-
<br />ange County was not a valid obligation of the OUC, but
<br />rather was a "gift", and therefore it should not serve to
<br />reduce the OUC's income by allowing the utility to treat
<br />it as an operating expense.
<br />55
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