Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-02
TAX. CASE INVOLVES
I STATE AUTHORITY.
-"Gas War" Has Echo in
Appeal to Supreme Court.
May Set Precedent.
BY DEAN DMWOODEY.

The authority being asserted by state
public utility commissions In different
sections of the country TO investigate
and 70 consider, in fixing rates, the re-
lationship existing between parent COM
panies engaged in interstate commerce
and afiliated local utility companies Is
challenged in a test case filed with the
supreme Court of the United States.
The case arises out of the gas war"
which has been waged in the State OF
Kansas for some time between Gov.
Harry H. Woodring, Kansas ofnclals,
and other interested parties, on the one
hand, and Henry L. Doherty, the Dos
herty Co., and ahllated organlza-
tionS, on the other hand. 1t involves,
principally, the charge OF 40 cents per
thousand cubic feet of natural gas PAID
at the "city gate" by local Kansas dis
tributing companies to the Cities Service
Gas Co, a Doherty subsidiary.
Appeal Is Filed.
The appeal to the Supreme Court was
filed by the Western Distributing Co
controlled by the Doherty interests,
which owns the local natural gas system
serving the city of Ell Dorado, Kans
The company Is seeking to compel the
Kansas Public Service Commission to
order an increase in the local rate on
gas distributed for domestic purposes.
TO the company'S claim that the present
charges. established IN 1920, result IN
confiscation of it's property, the COM
missions attorneys countered with the
contention that If the price paid by the
company for its natural gas were reason
able 1t would be enabled to make
profit. The local company distributes
gas which 1t purchases under contract
from an affiliated interstate pipe line
company, as do other local units In
Kansas, at the fixed rate Of 40 cents per
thousand cubic feet.
The application of the western Dis
tributing Co. for an increased rate was
denied by the Public Service Commits
sion on the ground that the company
has failed to introduce evidence prov
ing to the satisfaction of the commits
sion the reasonableneSs OF the price OF
40 cents" paid at the city gate" Re
Judge district court, the company claim
ing that the commission has no power
to consider the relationship existing be-
tween it and the pipe line company and,
in particular, the matter Of the inter-
state Accent rate.
The Federal Court overruled this con-
tention All three judges were in agree
ness of the Accent rate charged by the
Cities Service Gas Co. and OF other
charges paid by the local company to
Henry l.. Doherty & Co. and the Gas
Service Co.. all four affiliated, were held
to be subjects of proper inquiry by the
State commission.
Judges Statement.
"The Accent rate at the city gate
is an interstate rate" one of the judges
stated. which the commission cannot
directly regulate. 1t does not follow,
however, that the commission may not
inquire into the reasonableness of that
rate for the purpose of fixing the local
rates 1t was the opinion OF another
Judge that the set-up of these COM
panieS is such as to justify a close
scrutiny Of the whole situation"
The commission may not fix an in
terstate rate but it may determine" the
third member Of the court concluded,
whether a corporation buying gas from
a related and aff1liated corporation is
paying such affiliated corporation an
unfair and fictitious charge for gas at
the city gate, and using that charge as
one of the elements Of cost upon which
it seeks to have the local rate fixed"
The Supreme Court has now been
asked to reverse the ruling of the Fed
eral District Court. The case presents a
novel legal situation to the high tribunal.
Probably the most closely analogous case
to come before the court was the So
called Chicago Telephone case involving
the relationship existing between COM
panies in the Bell Telephone system,
but the decision in that case, handed
down last year, did not determine the
questions now raised.
(Copyrieht 1921