Opinion by
Wright, J.,
These appeals mark the third time in recent years that proposed rate increases sought by the Duquesne Light Company (hereinafter called Duquesne) have been before this Court. The litigation had its beginning on February 6, 1950, when Duquesne filed with the Pennsylvania Public Utility Commission (hereinafter called Commission) Tariff No. 10 superseding Tariff No. 9, and providing for increases in rates to become effective April 10, 1950, and designed to produce additional annual revenue of $7,720,612. Complaints were filed against the proposed tariff and hearings were held by the Commission. By its order of August 29, 1951, the Commission disallowed the full increase proposed, and allowed instead an increase of $3,556,924. The Commission found annual operating revenues to be $60,574,238 based upon the 1949 level of operations, and allowed a rate of return of 6 percent or $12,900,000 on a fair value of $215,000,000. On appeal to this Court the order was (July 17, 1952) reversed and the case remanded to the Commission. See City of Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607. Following this decision, the Commission held further hearings as a result of which it issued its order of March 9, 1953. This order reduced the rate base from $215,000,000. to $208,-000,000 and the allowable return from $12,900,000 to $12,080,000. Annual operating revenues were redueed from $60,574,238 to $59,921,499. The Commission did [574]*574not, however, reduce the rate increase which it had originally allowed. The City of Pittsburgh (hereinafter called City) and Duquesne both appealed this order and this Court (August 28, 1953) affirmed the Commission. See Duquesne Light Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 62, 99 A. 2d 61. The new rates were embodied in Tariff No. 11.
Meanwhile, on December 11, 1952, Duquesne had filed with the Commission its Tariff No. 12, proposing new rates resulting in a total increase in gross revenues of $4,732,022 to become effective March 1, 1953. The effective date of Tariff No. 12 was suspended by the Commission for a total period of nine months to December 1, 1953. By an order dated November 23, 1953, the Commission prescribed Tariff No. 11 as temporary rates to be in force until the final disposition of the proceedings involving Tariff No. 12. Complaints were filed by the City and by the St. Joseph Lead Company (hereinafter called St. Joseph). There were eighteen days of hearings with a considerable amount of testimony and numerous exhibits.1 On December 22, 1953, the Commission issued an order finding the proposed rates of Tariff No. 12 to be unjust and unreasonable. The fair value of the utility’s property was found to be $297,000,000 upon which the Commission allowed a return of 6 percent or $17,820,000. The Commission, also found that the allowable annual operating revenues should be $77,518,493 or $1,811,000 less than the annual revenues under the prior ratés. The entire reduction was allocated to industrial consumers.
On January 11, 1954, Duquesne appealed from the order of December 22, 1953, to Nos. 78, 79, and 80 [575]*575April Term, 1954. On January 18, 1954, St. Joseph was permitted to intervene as a party appellee at Nos. 78 and 80 April Term, 1954, and the City was permitted to intervene as a party appellee at Nos. 78, 79, and 80 April Term, 1954. On January 21, 1954, the City appealed from the order of December 22, 1953, at No. 88 April Term, 1954. On February 11, 1954, Duquesne was permitted to intervene as a party ap-pellee at No. 88 April Term, 1954. On petition of Du-quesne we directed that its appeal should operate as a supersedeas on condition, however, that it should not have the right, in the event it was successful on appeal, to amortize or recover the deficiency between the temporary rates which went into effect prior to the date of the Commission’s final order and any increased rates which might be allowed by this court or by the Commission after remand.
Preliminary Considerations
Commission Procedure. Duquesne contends that the Commission was in error “in reducing allowable revenues under existing rates where no complaint was filed against such revenues and the Commission did not institute any proceeding against them”. It is the position of Duquesne that the only issue before the Commission was the reasonableness of the proposed increase in revenues set forth in Tariff No. 12, and that, so far as the present proceeding is concerned, the Commission could not provide for any revenues below the levels established by Tariff No. 11; Duquesne relies upon §309 of the Public Utility Law, Act of May 28, 1937, P. L. 1053, as amended, 66 PS §1149, which provides that the Commission shall not impose a reduction in existing rates except “after reasonable notice and hearing”. Its position is that, since there was no complaint against, or investigation initiated concerning, existing rates, and no notice in connection [576]*576therewith, the Commission had no power to reduce revenues under existing rates. We are not in agreement with this contention.
Section 309 concerns the fixing of rates by the Commission upon its own motion or upon complaint. It is §308 (66 PS §1148) which sets forth the procedure to be followed in cases where a utility has filed new tariffs proposing voluntary changes in rates. Du-quesne initiated the present proceedings by filing Tariff No. 12. Paragraph (c) of §308 provides in such event: “If, after such hearing, the commission finds any such rate to be unjust or unreasonable, or in anywise in violation of law, the commission shall determine the just and reasonable rate to be charged or applied by the public utility for the service in question, and shall fix the same by order to be served upon the public utility; and such rate shall thereafter be observed until changed as provided by this act”. There is thus imposed upon the Commission the duty of prescribing just and reasonable rates, and it is necessarily implied that such rates may be either higher or lower than the existing rates which the utility voluntarily seeks to change.
Duquesne cites West Penn Power Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 123, 100 A. 2d 110, but that case is not controlling. We there held that the Commission, having made a conclusive affirmative order, thereafter had no authority without notice and hearing to reverse such action and enter a different order. Nor does Armour Transportation Co. v. Pa. P. U. C., 138 Pa. Superior Ct. 243, 10 A. 2d 86, also cited, support Duquesne’s-position. We there said: “The question of what is proper notice, or, as here, of what constitutes a specific designation of the issue raised or charges made, depends necessarily upon the facts of each case, the type of investigation being- .conducted,- the viola[577]*577tions alleged, and the penalty or order sought to he imposed. Where the purpose of the investigation by the Commission is only to determine the reasonableness of rates charged by a utility, a different standard would seem to apply than where the franchise of the utility is sought to be revoked for violation of the utility laws and a penalty or fine imposed”. As provided by §308, the Commission acted upon the evidence submitted by Duquesne in support of its proposed rates schedule under Tariff No. 12. If such evidence fell short of justifying the revenues under rates previously established by Tariff No. 11, it was not necessary for the Commission to abandon the proceeding. While Tariff No. 11 and Tariff No. 12 involved two separate rate schedules, the findings previously made in the proceeding upon Tariff No. 11 were not conclusive for the future. Orders fixing rates are not res judicata: Philadelphia v. Pa. P. U. C., 173 Pa. Superior Ct. 38, 95 A. 2d 244. We have concluded that the action of the Commission, if otherwise correct, was entirely within the broad powers committed to it by the Public Utility Law. See Latrobe Bus Service v. Pa. P. U. C., 175 Pa. Superior Ct. 164, 103 A. 2d 442.
Court Function. In the words of Judge Head in the early case of Baltimore & Ohio R. R. Co. v. Public Service Commission, 66 Pa. Superior Ct. 403: “Establishing a schedule of the rates or tolls that a public service company may lawfully demand is one of the most complicated and important of all of the many important tasks imposed by the legislature on the Public Service Commission. The proper determination of such questions necessarily involves the consideration of many matters and things far removed from the atmosphere of an appellate court of law”. The ascertainment of fair value for rate making purposes “is not a matter of formulas, but it is a matter which calls [578]*578for the exercise of a sound and reasonable judgment upon a proper consideration of all relevant facts . . . Much must be left to tbe sound discretion of tbe appraising body, the tribunal appointed by law and informed by experience, for tbe discharge of these delicate and complex duties”: Ben Avon Boro. v. Ohio Valley Water Co., 260 Pa. 289, 103 A. 744. Tbe classification and reasonableness of rates is an administrative question for tbe Commission: Sheets v. Pa. P. U. C., 171 Pa. Superior Ct. 151, 90 A. 2d 633. As pointed out by Judge Cunningham in Boland v. Public Service Commission and Abington Electric Co., 101 Pa. Superior Ct. 102, we are not a second administrative tribunal. And see Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 363, 101 A. 2d 761.
In enacting tbe present Public Utility Law tbe legislature provided: “Tbe order of tbe commission shall not be vacated or set aside, either in whole or in part, except for error of law or lack of evidence to support tbe finding, determination, or order of tbe commission, or violation of constitutional rights”. Act of May 28, 1937, P. L. 1053, §1107, as amended, 66 PS 1437. See Pittsburgh v. Pa. P. U. C., 158 Pa. Superior Ct. 229, 44 A. 2d 614. It is further provided in §1112 of tbe Act (66 PS 1442) : “Whenever tbe commission shall make any rule, regulation, finding, determination, or order under tbe provisions of this act, tbe same shall be prima facie evidence of the facts found”. See Pennsylvania R. R. Co. v. Pa. P. U. C., 154 Pa. Superior Ct. 86, 35 A. 2d 558. It is only where tbe utility appeals on tbe ground of confiscation that we may make independent findings. Otherwise we are bound by tbe findings made by tbe Commission if there is evidence to support them, and if they support tbe Commission’s order. See Schuylkill Valley Lines, Inc. v. Pa. P. U. C., 165 Pa. Superior Ct. 393, 68 A. 2d 448, [579]*579and Pittsburgh v. Pa. P. U. C., 169 Pa. Superior Ct. 400, 82 A. 2d 515. With the foregoing restatement as a guide, we will proceed to consider the several arguments advanced by the respective appellants as a basis for their attack upon the merits of the order of the Commission.
Fair Value
Trended Cost. The City contends that the Commission should have rejected the evidence of trended original cost presented by Duquesne as measures of value. This evidence showed, inter alia, the original cost of Duquesne’s property trended to the cut-off date of December 81, 1952, and to three-year, five-year, and ten-year average price levels. In determining these trended prices, fifteen of ninety-one plant accounts were trended by the use of factors developed from Duquesne’s own experienced unit costs. The remaining accounts were trended by the use of various published index numbers from which trending factors were derived. The Commission found that the fifteen accounts were the only ones for which Duquesne’s experience costs were available. They had been considered reliable in the prior rate case and were so considered in this proceeding. By use of factors reflecting Duquesne’s own experienced costs, the original cost trended so far as these fifteen accounts were concerned, amounted to $118,419,399. By using published Handy-Whitman index numbers, the trended original cost of these same fifteen plant accounts amounted to $95,692,331. The City’s objection to the use of trend factors developed by Dusquesne is that they are unreliable since they do not take into account differences in quality of units of property installed in different years. There can be no question that any trended original cost study will contain certain inherent errors or inconsistencies arising out of changes in the nature of property, and the [580]*580Commission does not take the position that the figures developed by the use of Duquesne’s factors have an accurate mathematical certainty. Its position is that any trended original cost study is merely an estimate of the translation of past costs into terms of present-day values; and is merely a guide to enable the Commission, in the exercise of its judgment on all the evidence, to ascertain the fair value. Furthermore, the Commission was of the opinion that Duquesne’s figures based on its own experience were preferable to the hypothetical indicies representing general experience, since they more accurately reflected the exact conditions which Duquesne has had to face. As was said in Solar Electric Co. v. Pa. P. U. C., 137 Pa. Superior Ct. 325, 9 A. 2d 447: “We also agree with the assumption of the commission that where the actual experience of a particular utility is available and the rates of that utility are being examined, such information is of great value”.
The City also argues that Duquesne admittedly included in trended cost measures of value items which had previously been charged to expense. These items were amounts representing purchasing and warehousing costs which, prior to 1931, had been charged to expense. The Commission found that seven accounts included such costs and, accordingly, adjusted the various price levels by amounts to correct this error. This was in accord with our decision in Philadelphia v. Pa. P. U. C., 173 Pa. Superior Ct. 38, 95 A. 2d 244, wherein we pointed out that amounts charged to operating expense cannot be capitalized and included in the rate base. Essentially, it would appear that the question involved here is one of the weight to be given the trended cost evidence. Such evidence is merely a guide in the determination of fair value. It cannot be seriously contended that even under the best of conditions it is [581]*581free from error, and the fact that it does contain defects would not justify the Commission in rejecting it. So long as the evidence is reasonably accurate, the weight to be given it is a matter for the Commission: Equitable Gas Co. v. Pa. P. U. C., 160 Pa. Superior Ct. 458, 51 A. 2d 497; Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607.
Accrued Depreciation. The Commission found that the accrued depreciation applicable to original cost of Duquesne’s property on the cut-off date of December 31, 1952, amounted to 26.5 percent, that the accrued depreciation applicable to trended original cost amounted to 34.5 percent, and that the accrued depreciation applicable to reproduction cost amounted to 34 percent. Both Duquesne and the City object to these findings. Duquesne contends that they are too high while the City asserts that they are too low.
The Commission had before it the following: a reserve requirement study by the City, a reserve requirement study by Duquesne, the finding of the Commission in the prior rate proceeding, and the booh reserve. The Commission did not consider the book reserve controlling since it had not been accumulated on actual service life but from percentages of revenues and by lump sum appropriations from surplus. Duquesne’s witnesses stated that the company’s records were not adequate to enable it to prepare a reserve requirement study based on its own experience, and based the study presented upon the retirement experience of utilities in the State of New York. In the words of the Commission: “We quite agree that failing a utility’s own retirement experience, the second best measure would be the retirement experience of other comparable utilities”. The City contends that the estimated amount of accrued depreciation applicable to original cost based on Duquesne’s requirement study should have [582]*582been adjusted upward by the Commission in the amount of $11,786,063. Its position is in effect that the Commission should have given less weight to Duquesne’s study and more weight to the study presented by the City, which was based primarily on five of the fourteen utilities included in Duquesne’s study. Which of the two studies it should accept as a guide was clearly a matter for the exercise of judgment and discretion by the Commission: Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607. We have consistently held that accrued depreciation is essentially a judgment figure,2 and that the exact weight to be given to any particular estimate is for the Commission to determine: Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 363, 101 A. 2d 761.
Duquesne’s contention that the percentage figures are too high is based on a comparison of the percentages of accrued depreciation determined by the Commission in the order made on Tariff No. 11, and the percentages developed in the present proceeding. In so doing, Duquesne is attempting to treat the findings in the prior proceeding as res judicata. This it cannot do. See Philadelphia v. Pa. P. U. C., 162 Pa. Superior Ct. 425, 57 A. 2d 613. The prior findings were based on a record developed in a different proceeding at a previous time. They were worthy of consideration by the Commission in the present case, but they can in no sense be considered as binding: Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 4, 98 A. 2d 249. Duquesne also argues that the spread of eight points between the percentage of accrued depreciation appli[583]*583cable to original cost and tbe percentage applicable to trended original cost is inconsistent in view of tbe spread in tbe findings in the Bell Telephone Company case. See Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 4, 98 A. 2d 249. This argument is rather tenuous in view of the fact that the figures in Duquesne’s own reserve requirement study showed a spread of 7.46 percent. However, it is sufficient answer to the contention to point out that the two proceedings involved different factual situations.
The duty of the Commission was to determine according to its best judgment the accrued depreciation from all the evidence presented: Blue Mountain Telephone & Telegraph Co. v. Pa. P. U. C., 165 Pa. Superior Ct. 320, 67 A. 2d 441; Orlosky v. Pa. P. U. C., 171 Pa. Superior Ct. 409, 89 A. 2d 903. Since the record contained sufficient probative evidence upon which the Commission could arrive at a percentage of accrued depreciation, its finding in this regard was not an abuse of administrative discretion, see Equitable Gas Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 450, 102 A. 2d 235, and our conclusion is that it should not be disturbed: Pittsburgh v. Pa. P. U. C., 168 Pa. Superior Ct. 95, 78 A. 2d 35.
Investment in Elrama No. 2. On January 18, 1953, Duquesne placed in operation a generating plant, known as Elrama No. 2. This was after the cut-off date of December 31, 1952. However, since the first hearing did not take place until March 11, 1953, the Commission could properly take into consideration the construction costs of the plant and the expense savings which Duquesne expected as a result of more efficent operation. The Commission may not ignore recent information and evidence in the record which substantially affects the problem before it. See Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607. [584]*584It was estimated that if Elrama No. 2 had been in operation throughout the year 1952, the operating expenses would have been reduced by $3,000,000. This amount was deducted from expenses by the Commission, and no question is raised concerning its order in this connection. However, Duquesne claims that the construction of Elrama No. 2 is but one step in a building program involving a total expenditure of $27,-951,000. The Commission included in the rate base a rounded figure of $14,500,000 representing the construction costs of Elrama No. 2. Duquesne contends that the Commission erred in refusing to include the total amount, asserting that $14,500,000 was simply the cost of the generating unit and a fraction of the transmission system. It argues that $27,951,000 is “the amount which is required for the operation of the Elrama No. 2 generator”. The basis of this argument is the testimony of the head of the Company’s Planning Department that that figure was an “estimate of the amount of plant that should have been in service during 1952 to carry the loads actually on the lines in that year with a reasonable amount of reserve”.
It is apparent that the amount sought by Duquesne represents the total cost of proposed expansion and, on the basis of the quoted testimony, expansion which Duquesne felt should have been made earlier. The fact is however that, of this proposed expansion, only one portion (Elrama No. 2) had been completed and was in service. Duquesne concedes that “The Commission has allowed $14,500,000 which is substantially the amount required to be spent for the generator unit alone, with immediately related transmission facilities”. The Commission found that the remaining items making up the balance of $13,500,000 were proposed improvements to be made at some unascertained date, not related or essential to either the construction [585]*585or operation of Elrama No. 2. Under §311 of the Public Utility Law (66 PS §1151) only the property used and useful in the public service may be considered in fixing fair value. The Commission properly rejected those items which will not come into existence until some unascertained future time: Schuylkill Valley Lines v. Pa. P. U. C., 165 Pa. Superior Ct. 393, 68 A. 2d 448.
Materials and Supplies. The City objects to the allowance of $9,250,000 comprising $5,500,000 for materials and supplies and $3,750,000 for coal inventory. There was no claim made by Duquesne for cash working capital, and the Commission made no allowance in this connection, which is in accord with the ruling of this court and the Pennsylvania Supreme Court in Pittsburgh v. Pa. P. U. C., 169 Pa. Superior Ct. 400, 82 A. 2d 515, 370 Pa. 305, 88 A. 2d 59. We are not in agreement with the City’s contention that there is no distinction between a cash working capital allowance and an allowance for material and supplies. In the words of Judge Hirt in Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 363, 101 A. 2d 761: “The same principles which called for a denial of an allowance for cash working capital, cf. City of Pittsburgh v. Pennsylvania Public Utility Commission, 370 Pa. 305, 309-312, did not necessarily prohibit a capital allowance for materials and supplies”. While tax accruals may properly be used to eliminate a hypothetical cash working capital allowance, the same principle does not apply to materials and supplies, which represent inventories of tangible property owned by the utility and required in rendering service. Our conclusion is that an allowance for materials and supplies was entirely proper. The amount of that allowance was for the judgment of the Commission. See Pittsburgh v. Pa. P. U. C., 174 Pa. Superior Ct. 363, 101 A. 2d 761.
[586]*586Animal Revenue
Projected Revenues. In order to determine the projected revenues for the future it was necessary for the Commission to adjust the operating revenues and expenses of the test year so as to eliminate the effect of a strike in the steel industry, and also to annualize revenues received from, and expenses incurred in serving, customers during the test year. The Commission adopted the City’s study relative to the effect of the steel strike. Briefly, the computation to counteract the effect of the strike was measured by the difference between what the revenues would have been had the trend prior to May, 1952, been continued up to August, and by projecting the trend after August, 1952, back to May. The difference between these overlapping values was $1,902,000. No question is raised on this appeal challenging the Commission’s acceptance of this evidence. The City contends however, that there was error in rejecting the results of its study for annualization of operating revenues and expenses and in accepting Duquesne’s annualization study.
The City’s study was based on a mathematical projection on a total system basis, which did not distinguish between residential and industrial use. The Commission found that residential sales exert slight weight in the tabulations of total sales, and that the City’s calculations so weighted were unacceptable. Du-quesne’s study was based on an analysis of the number of new customers added in the residential, small commercial and small industrial classes, with the amount of kilowatt hours used by each. From this was determined the amount which would have been consumed had they been customers throughout the entire year. In the case of large industrial and commercial users the number of new contracts and the changes in old contracts were analyzed and the estimated additional [587]*587use was projected for the entire year, as if they had had such contracts for that period. Similar treatment was applied to the cost of producing the additional energy consumed. With the two studies to choose between, it was incumbent upon the Commission to determine which one represented the better adjustment. It has the power to exercise its own judgment in forecasting probable future revenue: Orlosky v. Pa. P. U. C., 171 Pa. Superior Ct. 409, 89 A. 2d 903. The Commission in its order stated that “load growth adjustments of commercial and industrial sales based factual detailed studies are far better than the assumed Taw of averages’ calculations applied to all classes of sales by City”. It was not error for the Commission to adopt the study which it felt was the more accurate.
Excess Profits Tax. By Act of Congress dated July 16, 1953, the federal excess profits tax expired on December 31, 1953, or nine days after the entry of the Commission’s order of December 22, 1953. The order disallowed excess profits taxes. Duquesne objects on the ground that the tax was in existence during the entire base year of 1952. We recognize that, in practical application, the use of a test year and cut-off date in determining a rate case is not free from difficulty, since changes may become known before the order is entered. In strict theory perhaps, these subsequent developments should be ignored. However, this court has stated that the Commission “cannot be oblivious” to them: Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607. It must be kept in mind that rates are being fixed for the future, and the Commission, having “a wide area of discretion as to the extent and the type of adjustments to be made to base year figures”: Pittsburgh v. Pa. P. U. C., supra, 174 Pa. Superior Ct. 62, 99 A. 2d 61, could properly make [588]*588an adjustment to reflect the elimination of the excess profits tax.
On the other hand, Duquesne alleges that the Commission committed an injustice in disallowing the excess profits tax without taking cognizance of a wage increase which became effective October 1, 1953, over two and a half months before the order was made. We agree that an adjustment to reflect the elimination of the excess profits tax without a corresponding adjustment to reflect the wage increase is not only inconsistent but directly in conflict with the principle underlying our prior decisions. The wage increase “was called to the Commission’s attention at the oral argument on November 10, 1953, and was actually in effect prior to the writing of the Commission’s Order”.3 In Pittsburgh v. Pa. P. U. C., supra, 171 Pa. Superior Ct. 187, 90 A. 2d 607, with regard to the repeal of the federal electric energy tax, we said, “As the record must be remitted for other reasons, the Commission should take into consideration this very material change in Duquesne’s allowable tax expense”. So in the case at bar, as the record must be remitted for another reason (as will hereinafter appear), the Commission should either make a corresponding adjustment for the wage increase, or adhere more strictly to the base year concept by not making either adjustment.
Fuel Adjustment Clause. A fuel adjustment clause is a method designed to enable a utility to adjust its revenues either upward or downward to reflect changing fuel costs without having to resort to the cumbersome procedure of filing new tariffs. Tariff No. 12 provided a fuel cost adjustment applicable to certain [589]*589commercial users4 “at the rate of 0.0154 cents per kilowatt-hour, for each one cent variation from 20 cents in the cost per million B.T.TJ. of fuel consumed at the Company’s generating stations” (Italics supplied). A clause of this type was approved by the Commission in its prior orders, and by this court on appeal. See Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 90 A. 2d 607; Duquesne Light Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 62, 99 A. 2d 61. In the present order, the Commission substituted a clause providing that “an adjustment up or down in cents per KWH will be made, equal to the increase or decrease in the average current fuel cost per KWH, above or below a fuel cost of 0.3111 cents per KWH” (Italics supplied). Under the clause proposed by Duquesne an adjustment would be made in the customer’s bills to reflect changes in the cost per million BTU of fuel. For each one cent change in this cost, the adjustment is at a constant rate, 0.0154 cents per kilowatt-hour. Under the Commission’s clause the adjustment will vary with the cost of fuel per KWH. The Commission’s position is that the cost of fuel per KWH is affected not only by the cost of fuel per million BTU, but also by the amount of fuel consumed to produce a KWH, or, in other words, by the thermal efficiency of the system. It reasons that, if a fuel adjustment clause contains a fixed thermal efficiency factor, then any improvement in thermal efficiency would not be reflected in the adjustment of the basic charge. Consequently, a utility having a fuel cost adjustment clause with a fixed thermal efficiency factor would collect a relatively greater rate in the event of an improvement in thermal efficiency. [590]*590The controversy is in effect between a fixed and a variable thermal efficiency factor.
Duquesne argues that the Commission’s clause gives the rewards of efficiency to customers while the costs of efficiency must be borne by the company, and that a premium will thereby be placed on inefficient operation. The Commission answers that recovery of capital outlay should be by way of the demand charge, otherwise the Company will receive a double return. In Magee Carpet Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 438, 102 A. 2d 229, President Judge Rhodes said: “The obvious and fundamental purpose of a fuel adjustment clause is to provide for the adjustment of charges for service to a consumer to directly reflect the changing fuel cost to the utility”.
We must agree that “the changing fuel cost to the utility” is determined both by the change in cost of fuel per million BTU, and the change in the efficiency of converting fuel into electric energy. The operation of the clause, like most questions dealing with the refinements of rate structures, is primarily a factual matter for determination by the Commission: Magee Carpet Co. v. Pa. P. U. C., 174 Pa. Superior Ct. 438, 102 A. 2d 229. The mere fact that the type of clause advocated by Duquesne formerly found approval does not preclude the Commission from changing it in the exercise of its functions as an administrative agency of the legislature: Aizen v. Pa. P. U. C., 163 Pa. Superior Ct. 305, 60 A. 2d 443. Rate making is an exercise of the legislative power, delegated to the Commission, and necessarily implies a range of legislative discretion: Philadelphia v. Pa. P. U. C., 174 Pa. Superior Ct. 641, 102 A. 2d 428.
Annual Depreciation Allowance. Duquesne complains that the order of the Commission is confiscatory in that the allowance for annual depreciation is not [591]*591sufficient to allow it to recover the full original cost of its depreciable plant amounting to $279,957,341. Duquesne’s book reserve for depreciation is 24.5 percent or $68,736,193. It contends that it must have an annual allowance for depreciation of $6,602,187 in order to recover the cost in the remaining period of the life of the property as found by the Commission (about 29 years). Since the Commission allowed only $6,-190,1875 as the annual depreciation recoverable, it is Duquesne’s position that the difference between this amount and the amount which should have been allowed, or $412,000 a year, will result in the eventual confiscation of $12,000,000 of its property. Basically, Duquesne’s position is founded on the “remainder-life” theory of depreciation. See Clark’s Ferry Bridge Co. v. P. S. C., 108 Pa. Superior Ct. 49, 165 A. 261; Equitable Cas Co. v. Pa. P. U. C., 160 Pa. Superior Ct. 458, 51 A. 2d 497.
In its 1951 Order, the Commission allowed Du-quesne the amount necessary to enable it to recover the full amount of the original cost of the property. The Commission, after pointing out that the annual accruals would produce an overall total of only $200,-817,528 said (29 Pa. P.U.C. 674, 758) : “This amount compares with $212,199,261 representing the original cost of depreciable and depletable plant and construction work in progress in service, as shown above in Table YI. So that respondent will be provided with this difference of $11,381,633, we will include in our finding of annual depreciation for the purposes of this proceeding, $443,555 which, over remaining useful service life, will accrue to that difference”. Although [592]*592the additional allowance was attacked by the City, this Court affirmed, saying that “the Commission’s allowance for annual depreciation was calculated to permit the utility to recover the original cost of its property”: Pittsburgh v. Pa. P. U. C., 171 Pa. Superior Ct. 187, 213, 90 A. 2d 607.
In the present order the Commission has held that there can be no increase in the annual depreciation charges to enable the Company to recover the deficiency in the reserve requirement; It now takes the position that it was in error in the previous case involving Duquesne. Briefly, the Commission contends that Duquesne did not prove that its deficiency in book reserve in the past resulted from lack of earnings. Furthermore, it takes the position that (1) it is a practical impossibility in most cases to make a determination of whether past earnings were adequate or inadequate, and (2) the past must be forgotten if rates are to be based on the present cost of service to the utility. The Commission relies on Newport Home Water Co. v. P. S. C., 76 Pa. Superior Ct. 386, for the proposition that a utility may not amortize a deficiency in the book reserve for depreciation when that deficiency was caused by mistakes of the management in the past. An examination of the Newport case discloses irregularities on the part of the water company management amounting to deliberate misapplication of funds. In the present case, however, there is nothing to show that the Company was guilty of any faulty past practices in accumulating its book reserve, or that the conceded deficiency therein is not genuine. In fact, in 1937 the Commission expressly approved the Company’s reserve for depreciation and its annual accruals: P. U. C. v. Duquesne Light Co., 20 P.U.R. N.S. 1, 6. The subsequent accruals have been greater than the amount strictly required. In now changing its policy, the Com[593]*593mission concedes that its allowance for annual depreciation will not reimburse Duquesne for the full original cost of its property.
We are of the opinion that the reasoning in Pittsburgh v. Pa. P. U. C., 370 Pa. 305, 88 A. 2d 59, applies with equal force to the present situation. The appeal in that case presented the question whether a deficiency in a pension fund should be borne by the company or by the ratepayers. Mr. Justice Chidsey said: “Someone must pay the pension costs properly attributable to past services. At the present time such costs can be placed upon present and future rate payers or the investors in the Company. In the present situation the test for determining where the burden should be placed as between these two classes of individuals is whether management abused its discretion in Í927 by not placing the full cost on the ratepayers from that time on. If they did, the investors for whom they acted should bear the cost. If they did not, there is no valid legal objection to placing the burden on present and future ratepayers. Since we have already demonstrated it cannot properly be held that management abused its discretion in 1927, the costs of pensions including the freezing payment were correctly included by the Commission as an operating expense”. The present record shows no abuse of discretion by Duquesne, nor is any such abuse asserted. We have therefore concluded that the case must be remanded to the Commission for redetermination of the allowance for annual depreciation expense.
Conclusion
To summarize, we find no errors in the Commission’s order except with regard to (1) the making of an adjustment for the elimination of the excess profits tax without making. a corresponding adjustment for the wage increase; and (2) the allowance.for annual [594]*594depreciation expense. In the latter connection we are not to be understood as indicating that the remainder investment approach should always be followed. In the case at bar, however, we cannot now approve a complete change in policy to the Company’s prejudice.
Order
The order of the Commission is reversed, and the record is remanded to the Commission with instructions to proceed in a manner consistent with the views expressed in this opinion.