Case Name: THE STATE ex rel. WASHINGTON UNIVERSITY v. PUBLIC SERVICE COMMISSION OF MISSOURI et al., Appellants
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1925-05-23
Citations: 308 Mo. 328
Docket Number: 
Parties: THE STATE ex rel. WASHINGTON UNIVERSITY v. PUBLIC SERVICE COMMISSION OF MISSOURI et al., Appellants.
Judges: White, Wooclson and Atwood, JJ., concur; Blair and Ragland, JJ., not sitting; Walher, J., dissents in separate opinion.
Reporter: Missouri Reports
Volume: 308
Pages: 328–358

Head Matter:
THE STATE ex rel. WASHINGTON UNIVERSITY v. PUBLIC SERVICE COMMISSION OF MISSOURI et al., Appellants.
In Banc,
May 23, 1925.
1. PUBLIC SERVICE: Contract Rates: Ineffectual. The Public Service Commission, in fixing the rates of electricity to be charged private consumers by a public utility, cannot be clogged or obstructed by contract rates agreed upon -when said utility took over the individual plants of such consumers. The Commission is not a court, and has no power either to construe or enforce contracts, neither can its acts in fixing rates be influenced by contracts existing between the utility and consumer.
Hold, by WALKER, J., dissenting, that the police power does not authorize the abrogation of rates fixed by a voluntary contract between the public service corporation and a private consumer unless it can be determined with reasonable certainty, by the use of every instrumentality at the command of the Public Service Commission, that the rate fixed by the contract injuriously affects the public welfare and is detrimental to the public interest; and where the Commission’s expert appraisers have not appraised the properties of the public corporation, its prayer for an increase of rates far above the contract rates “to meet the increased costs of fuel, taxes and wages” should not be granted.
2. - — : -; Public Utility: Different Plants: Steam-Heating. The fact that the electrical corporation had one central plant, and various other smaller plants located at different parts of the city, in the neighborhood of consumers, from some of which certain consumers were supplied with electricity and steam heat, and from some of the others other consumers were supplied with electricity or steam heat or both, the various local plants being used in winter when steam-heating was necessary, and usually not used for the supply of electricity in summer, did not tend to prove that the corporation was not a public utility, and therefore contracts with such consumers have no bearing on the right of the Public Service Commission to fix rates. [WALKER, J., dissenting.]
3. ' -: Electricity and Steam Heat: Allocation of Rates: Applications. A corporation whose charter empowers it to ma'hufacture and furnish heat and power to the public — heat by electricity, heat by steam, as well as electric light and electric power — may make separate applications to the Public Service Commission for an increase of rates, based upon increased labor and fuel costs, but whether the application is made separately for an increase in the rates for steam heat or for heat by electricity and for electric power and light, or is general, and made for an increase of all rates, the instrumentalities used in producing steam must be so allocated that its production must bear its proportionate expense of operating the plant, and receive its fair proportion of the profits, in order that there may be a reasonable return upon the whole investment for public use.
Held, by WALKER, J., dissenting, that the public electrical corporation in this case, in the matter of furnishing steam heat, was performing a private and not a public service; it did not do a general heating business; it picked one building here and another there, and discriminated among buildings by separate bargaining, and where it failed to make a contract that would yield a profit it refused steam-heating service to such buildings; and therefore the Public Service Commission had no jurisdiction to put into effect any schedule of rates for steam-heating service, and such rates cannot be allocated with the public service electric rates.
4. -: Purpose of Public Commission Act: Fair Return. The pur- , pose of the Public Service Act is to reauire the general public to pay such rates as will keep public utility plants in proper repair for effective public service and insure the investors a reasonable return upon the funds invested. The police power demands such even-handed justice, and the Public Service Commission is required to fix rates that are at the same time fair both to the public and the investors.
5. -: Bates: Impairment of Private Contracts: Police Power. The constitutional provision (Sec. 5, art. 12) that “the exercise of the police power of the State shall never be abridged” prevents the abdication or bargaining away of the State’s power to fix rates for electricity, steam and other public service furnished by a public utility to private citizens, and makes wholly inapplicable a private contract relating to such rates. Such rates are not private contract rights, and no contract agreement upon rates is of any force or effect in arriving at a fair rate or the reasonableness of a rate fixed by the Public Service Commission.
Held, by WALKER, J., dissenting, that where the public service corporation and.a private consumer voluntarily entered into a contract fixing the rates to be paid by the consumer for the service rendered by the corporation, the corporation must furnish the service at the stipulated price, unless the State itself revokes the contract on the ground thg,t its rates result in confiscating the corporation’s property and are clearly detrimental to the public welfare; and the State cannot, under its police power, increase the rates fixed by the contract solely in order that the corporation may have a reasonable income from its investment and pay dividends to its stockholders, but it must be made to appear that the corporation cannot continue to function unless the contract rates are increased; and its public circular announcements of a steady and healthy improvement in its financial affairs show that no emergency exists, and therefore such agreed contract rates cannot be abrogated.
6. -: Experimental Bates: Beasonableness. Courts will be slow to interfere with experimental rates fixed by the Public Service Commission; they will interfere only when its order is unreasonable; and it cannot be held that the Commission, after full investigation as to increased cost of production, acted unreasonably in making a trial order, by the terms of which the rates by it fixed were to remain in force for one year, during which time further data would be kept and gathered for its information, and if at the end of the year the test rates appeared to be unfair they would be changed.
Held, by WALKER, J., dissenting, that the facts show that the test rates fixed upon are discriminatory in favor of the city, which is receiving .service at less rates than other consumers, and the rates are therefore void under the statute (Sec. 10477, R. S. 1919).
Citations to Headnotes: Headnote ,1: Electricity, 20 C. J. sec. 26. Headnote 2: Electricity, 2,0 C. J. sec. 26 (Anno); Steam, 36 Cyc. p. 1261 (Anno). Headnote 31: Electricity, 20 C. J. secs. 26 (Anno), 29; Steam, 36 Cyc. p. 1261 (Anno). Headnote 4: Electricity, 20 O.. J. sec. 26; Steam, 36 Cyc. p. 1261 (Anno). Headnote 5: Electricity, 20 C. J. sees. 26, 29; Steam, 36 Cyc. p. 1261 (Anno). Headnote 6: Electricity, 20 C. J. sec. 26.'(Anno); Steam, 36 Cyc. p. 1261 (Anno). ,
Appeal from Cole Circuit Court. — Hon. John G. Slate, Judge.
Reversed.
B. Perry Spencer and Jourdan, Bassieur db Pierce for appellants.
The only questions properly reviewable in this case are (a) whether the Commission had jurisdiction to inquire into the public character of the company’s business, electric and steam, heating, (b) whether the company is or is not a public utility in such businesses, (c) whether the evidence justified the Commission in permitting an increase in the company’s rates, and (d) whether the rates allowed are reasonable and not discriminatory. (1) The Commission has power to establish maximum rates for the public utility business defined in the Public Service Act, but the Commission has no power to pass bn the effect of such rates upon particular contracts, nor to include or exempt particular contracts from such rates, nor to determine whether the company in entering into particular contracts acted in a private capacity if the subject matter of the contract comes within the act— nor did the Commission undertake to do so in this case. These are judicial questions. The Commission is not a part of the judicial system authorized by the ■ Constitution. It is an administrative agency of the law-making power. Hence, the circuit court had no power to determine such questions in certiorari proceedings, and no such questions should be considered on this appeal. Lusk v. Atkinson, 268 Mo. 109; Mo. Valley Realty Co. v. Cup-pies Sta.'L. H. & P. Co. 199 S. W. (Mo.) 151; Atchison T. & St. P. Ry. Co. v. Pub. Serv. Comm., 192 S. W. (Mo.) 460; In re York Water Co., 1918E, P. IT. R. 356; United Coml. Travelers v. Livery Co., 1918E, P. U. R. 391, 395 ; In re Independent Sewer Pipe Co., 248 Ped. 547; Ex parte City of Birmingham, 74 So. (Ala.) 51; People ex rel. v. Straus, 174 N. Y. Supp. 868'. (2) The order of the Commission is a general order fixing rates for electric service and for steam service. It is applicable to all customers, but does not attempt to adjudicate any rights which relators may have to dispute such rates if in conflict with their contracts. (3) If relators have contracts entitling them to rates which cannot be changed by subsequent state regulation, then relators have an adequate remedy. If sued by the company for the increased rates they can plead their contracts and defend at law, or, they may pay under protest, according to the now rates, and recover back the excess by action at law; if the company threatens to discontinue the service because of their failure to pay the increased rates, relators have an adequate remedy in equity for specific performance or by injunction. (4) Under the evidence in this case it is clear that the company is a public utility corporation as to steam heating as well as electric service. (5) The Public Service Act expressly subjects the business of electrical corporations! and of steam heating corporations to state regulation, and empowers the Commission to determine and prescribe just and reasonable rates. (6) The question whether there is a public use cannot depend on whether or not the company has a franchise; the validity of the franchise must depend on the question whether there is a public use. It must first be decided whether there is a public use — if there is then it is subject to state regulation, whether there is a franchise or not. (7) The fact that there is no general ordinance in the city of St. Louis creating steam heating franchises is immaterial. Permits granted by the city to the company authorizing it to use the streets for such purpose and such actual use by the company, tend as strongly to show that the company is in fact engaged in furnishing steam, heat as a public utility, as if it were operating under a general ordinance. Insurance Co. v. Lewis, 233 U. S.'389, 406; Munn v. Illinois, 94 U. S. 113, 125. (8) The Legislature has seen fit to regard public heating- service as a service “affected with a public interest” and has placed it under the jurisdiction, control and regulation of the Commission. The Legislature had power to do so. Munn v. Illinois, 94 U. S. 113, 125; Insurance Co. v. Lewis, 233 U. S. 389, 406; State ex rel. Subway Co. v. St. Louis, 145 Mo. 551. (9) Rates fixed in contracts with public service corporations must give way to rates subsequently fixed by the Commission, which is charged with the duty of fixing just and reasonable rates. This is true whether the rates fixed by the Commission be increased or decreased, and whether the contract was made before or after the passage of the law creating the Commission. K. C. Bolt & Nut Co. v. L. C. L. & P. Co., 275 Mo. 529; State ex rel. City of Sedalia, v. Pub. Serv. Comm., 275 Mo. 201; City of Fulton v. Pub. Serv. Comm., 275 Mo. 67; City of St. Louis v. Public Service Commission, 270 Mo. 528; Kansas City v. Public Service Comm., 276 Mo. 548; Union Dry Goods Co. v. Georgia P. S. C., 248 U. S. 372; Raymond Lbr. Co. v. Raymond L. & W. Co., P. U. R. 1916F, 441; Adams v. Dakota Central Telephone Co., P. IT. R. 1916F, p. 579; Pinney & Boyle Co. v. Los Angeles G. & E. Co. L. R. A. (N. S.) 1915C, p. 282, and note. (10) The evidence shows that an urgent emergency existed, due to increased costs of coal and labor and taxes, which compelled the company to ask for relief, if it expected to be able to continue in business and serve the public. But whether an emergency then existed or not is really immaterial. The Commission, upon the evidence before it, had the poyer to establish the rates, and the only question which can now be raised is whether the rates as fixed are reasonable and not discriminatory. (11) The Commission did not err because it failed to declare that such of the relators as were the owners of isolated plants where the function of generating both heat and electricity was combined- (Washington University, Income Leasehold Company, St. Louis Brewing Association, Wainwright Real Estate Company, National Bank of Commerce, Stix, Baer &.Fuller -Dry Goods Company and Ely $ Walker Dry Goods Company) belonged to a separate class, and were entitled to lower rates than , other customers. Such customers had leased their plants to the company and the company was operating them as a public utility, selling service to them and, in some instances, to other customers from such plants, and therefore the relators, the lessors of such plants, were in the same class with other customers getting similar services from the company. (12) If the Commission had not increased the rates of isolated plant customers, the Commission would have been forced to place' the whole burden upon the remaining customers of the company, in order to permit the company to earn a reasonable return on its investment, and such a classification of rates, exempting isolated .plant customers, would have been discriminatory. Tap ¡Line Cases, 234 U. S. 1.
Bryan, Williams db Gave for respondents.
(1) The Commission undertook, by its order, to change rates and charges in the private contracts for private service to the Pierce Building and other buildings. This court has held that the question whether public rates fixed by the Commission will supersede rates fixed by private contract, should properly be raised in the proceeding by certiorari to review the ruling of the Commission. K. O. Bolt & Nut Co, v. Light & Power Co., 275 Mo. 529; State ex rel. City of Sedalia v. Pub. Serv. Com., 275 Mo. 201. (2) While the Electric Company was a public service corporation in some respects, this fact is in no way inconsistent with the fact that that part of its business which consisted in operation of private isolated plants of private individuals for such individuals was a private business, and not subject to the jurisdiction of the Commission. Chesapeake & Potomac Tel. Co. v. Manning, 186 U. S. 238; Terminal Taxicab Co. v. District of Columbia, 241 U. S. 252; Manufacturers Ry. v. United States, 246 U. S. 494; Notawa Gras Co. v. Henry Oil Co., 269 Fed. 742. (a) The Public Service Act expressly recognizes the fact that an electrical corporation may be engaged in carrying on “other business than owning, operating or managing” an electric plant, and expressly provides that with respect to snch other business said corporation shall not he subject to the provisions of the act. R. S. 1919, sec. 10478, subdv. 13. (b) The question as to whether a particular kind of business done by a public utility corporation is a public service or a private business is to be determined, not by the charter powers of the company, but by the nature of the particular business in question. United States v. Brooklyn Terminal, 249 U. S. 304; Terminal Taxicab Co. v. District of Columbia, 241 U. S. 25>2; Chesapeake & Potomac Tel. Co. v. Manning, 186 U. S. 238. (c) The State cannot by mere legislative fiat or by any regulating order of a Commission convert into a public utility a work which is in its nature a private business. Producers Transportation Co. v. Railroad Comm.., 251 U. S. 228. (3) The operation by the Electric Company of the private plant of the Pierce Building for the use of the Pierce Building under a private contract with the Pierce Building was not a public service. Chesapeake & Potomac Tel. Co. v. Manning, 186 U. S. 238; Terminal Taxicab Co. v. District of Columbia, 241 U. S. 252; State ex rel. Danciger v. Pub. Serv. Comm., 275 Mo. 483.; Cawker v. Meyer, 147 Wis. 320; Public Utilities Com. v. Telephone Assn., 270 111. 183; State ex rel. v. Spokane Co., P. U. R. 1916D, pi. 469'; Wyman on Public Service Corporations, sec. 115; Allen v. Railroad Comm., 179 Cal. 68; Notawa Gras Co. v. Henry Oil Co., 269 Fed. 742. (a) The Electric Company had no schedule for public heating, (b) The Pierce Building could not have obtained an order from the Commission to compel the Electric Company to operate the Pierce Building plant. State ex rel. Danciger v. Pub. Serv. Comm., 275 Mo. 483. (c) The Electric Company had no franchise to transmit heat along or across the streets of St. Louis. (4) Even if the service under the contract with the Pierce Building were considered a public.service, still, such contract would not be abrogated, except by the exercise of the police power of the State. State ex rel. v. Pub. Serv. Comm., 275 Mo. 201. (5) The limit to the exercise of the police power is this: The rulings of the Commission must have reference to the health, comfort, safety or welfare of society or the public generally. The selfish interest of one party to a contract cannot justify the exercise of the police power of the State to nullify it. Ohio & Colorado Smelting & Refining' Co. v. Public Utilities Com., 187 Pae. 1082; Public Utilities Com,, v. "Wichita R. & L. Co., 268 Fed. 45; In re Stockton Springs Water Co., P. U. R. 1920E, p. 918; In re Rockingham County L. & P. Co., P. U. R. 1917F, p. 26'. (a) There .was no finding by the Commission anywhere that the increase in "rates was necessary to enable the company to perform its public duties, nor was there a finding anywhere that the welfare of the public was in any way involved in this case, (b) It was error for the Commission to undertake to shift the heavy burdens of the war period from public utilities to their patrons. Re Home Telephone Co., P. U. R. 1919A, p. 250'; Re Hydro E. L. & P. Co., P. U. R. 1918A, p. 325; Re S. W. Gas Co., P. U. R. 1918B, p. 82; Re Tri-State Tel. & Tel. Co., 1919C, p. 5. . (6) Statements of the financial condition of the company made by the company itself while this suit was pending’, show that the company was in a prosperous condition. Its ability to serve the public was not in any way impaired, and it was not in any way necessary to the welfare of the public that the contract with the Pierce Building, or other similar contracts, should be abrogated. (7) If' there was to be any increase at all in rates, the failure to include municipalities, and persons holding contracts for hydro-electric current, among the persons to be affected by the increase, was unjust discrimination. Milwaukee E. R. & L. Co., P. U. R 1919A, p. 136; State v. M. K. & T. Ry. Co., 262 Mo. 507; Simms v. Columbia Tel. Co., P. U. R. 1915C, p. 360; Hollister v. Hollister Water Co., P. U. R. 1915D, p. 626; In re Augusta Water Hist., P. U. R. 1916E, p. 31; In re Atlantic County Electric Co., P. U. R. 1918B, p. 589.
Charles M. Polk also for respondents.
(1) A valuation of the physical property of a utility company is ordinarily required before rates are fixed. The only condition that would justify making* a rate without a valuation would be that an emergency existed which threatened the ability of the utility to continue to operate. The burden of proving that such an emergency exists is upon the utility. The evidence in this case shows that there was no emergency, either in 1917, when the petitions for increases were granted, or in 1918,. when the increases were granted. The increases, granted were unreasonable and put the entire increased expense of the Electric Company on its consumers instead of requiring it to bear at least a part of the burden, (a) There was m> emergency as emergency is defined in the following cases: Public Service Co., P. U. E. 1.918E, p. 915; Lincoln Traction Co., P. U. E. 1918D, p. 168; In re Tutwiler, P. U. E. 1919E, p. 320. (b) The burden of proof was on the Electric Company to show that an emergency existed. Ohio & C. S. Co., 187 Pac. 1086; Ee Idaho Public TJ. Com,., P. TJ. E. 1918B, p. 56; In re Queensborough G-. & E. Co., P. U. E. 1918F, p. 983; Ee Public Service Co., P. TJ. B. 1918D, p. 240; Home Telephone Co., P. TJ. E. 19180, p. 495; Arizona Gk & E. Co., P. H. E. 1918F, p. 733. (c) The facts in evidence show that there was no emergency in 1917. (d) The earnings for 1918 were in excess of 1917. (e) The Buffner or Compensatory Method, advocated by the Electric Company to ascertain the increase that should be granted, and the argument that the Electric Company should have the same 'rate of return as prior to the war, are wrong in principle. The company must bear at least a share of the burden. The police power is exercised not for the purpose of allowing the utility to maintain its dividends, but in order that its contract rates may be raised so as to allow it a sufficient revenue to continue to operate, this being for the public good and not meant for the benefit of the stockholders of a utility. In re Queensborough O. & ,El Co., P. U. R, 1918F, p. 872; In r© Hydro E. L. & P. Co., P. U. R, 1918A, p. 341; Re S. W. Cas. C'o., P. U. R. 1918B, p. 85; Re Tri-State L. Co., 19190, p. 7; Re Northern California Co., 19180, p. 397; Re N. T. Tel. Co., 1918D, p. 29:; Re Salt Lake U. R, Co., 19190, p. 571; In re Louisiana "Water Co., P. U. R. 1918B, p. 778; Ohio & C. S. Co., 187 Pac. 1086; Monigault v. Springs, 199 U. S. 480. (f) The Whitlow* or “Adjusted Cost” Theory of ascertaining expenses was entirely artificial and gave a wrong’ mathematical result. Its use by the Commission resulted in the ascertainment of expense that was incorrect and an allowance therefor that was mathematically wrong, (g) The Allison Method of ascertaining the expense, based on the actual cost, should have been adopted, (h) The rates allowed by the Commission gave the company an excessive earning. (i) The steam losses which the company alleged it was suffering were ascertained by an improper allocation of costs as between the steam and coal departments. This method of allocation was criticized by the Commission at one time, but apparently adopted when it awarded the Electric Company its increases. (2) The earning’s of the Electric Company for past years have been excessive. Therefore, it should not have been allowed any increase. Re Queensborough G. & E. Co., P. U. R. 1918F, p. 879; Home Tel. Co., P. U. R. 1919A, p. 250; Lincoln Traction Co., P. U. R. 1918U, p. 174. (3) The company asked and the Commissioner put into effect schedules which were discriminatory as between its various classes of customers. (4) In furnishing steam service the Electric Company was performing a purely private service. The Public Service Commission, therefore, had no jurisdiction to put into effect any rate schedule concerning such steam service. Terminal Taxicab C'o. v. Public Util. Com., 241 U. S. 252; State ex rel. D'aneiger v. Public Serv. Com., 275 Mo. 483; State ex rel. United Railways Co. v. Public Serv. Com., 270 Mo. 429. (5) The lack of jurisdiction of the Public Service Commission to establish steam rate schedules for the Electric Company in the city of St. Louis may properly he considered in this proceeding.

Opinion:
GRAVES, C. J.
This is not the first opinion in this case, and snclx fact bespeaks a concise, yet a considerate statement of the case. Volume adds nothing to a statement. What is said in briefs, and in statements, can be stated shortly, for the purpose of passing upon the vital questions. There are eighteen cases before us, all growing out of two cases filed before the Public Service Commission. The two eases, out of which all the present cases grow, were two applications to the Public Service Commission, which applications were made by the Union (Electric Light & Power Company, for temporary increased -rates both on electricity and power, and upon heating. These applications were filed about November 28, 1917, and the applications were heard, and investigated, and-by the Commission determined in February, 1920. Before the Public Service Commission the case as to heating was number 1395- and that as to. electricity was numbered 1396. The Public Service Commission raised rates as to both services, upon proven facts as to the respective costs of operation. These increases were to be for a limited time, and the Commission by requisite orders placed itself in position to determine from future reports of the utility as to how long the rates should be retained. There were a number of consumers (of both heat and electricity) who opposed any change of rates, as are usual in such cases. This case is out of the ordinary, however, because' in many instances these particular consumers had been operating their own plants, within their own buildings, from which they got a part, if not all of their heat, and electrical current and power. These plants were leased to the Union Electric Light & Power Company, which leases (as is claimed) fixed the price of service to these special consumers. Other customers, who likewise turned over their plants, have not complained. The details of these will be left to the opinion, if they become material. The applica tions for these increases in rates brought; a storm of protests from eighteen consumers of heat and electrical current and power furnished them by the Union Electric Light & Power Company, and they intervened in the two cases. Their charges ran the gamut from the alleged fact the Union Electric Light & Power Company was not a public service corporation as to furnishing heat, and clear down the line. One principal contention is that these special consumers have term contracts (as to rates) under these leases, and that such rates cannot be increased during these contract terms. The front door question is that the Union Electric Light & Power Company (as to heating) is not a public service corporation at all, and hence an absence of jurisdiction in the Public Service Commission to deal with that question. Beaten before the Public Service Commission these intervening' consumers sued out statutory certiorari to the Circuit Court of Cole County, where upon a hearing the orders of the Public Service Commission were set aside.
Prom that judgment the Public Service Commission and the Union Electric Light & Power Company have appealed.- The individual complaints of the several eighteen consumers have been separately preserved, so that if one (in matters of its individual rights) has advantage over the other, they are preserved in the eighteen cases here. The broad questions are common to all cases. , j , ;u i-*c
I. What we have denominated the "front door" question, in this case relates to the heating activities of the Union Electric Light & Power Company. The Public Service Commission (much better equipped than is this or any other court) to find and determine facts, has this to say upon this branch of the case:
"The appellant company has established a large downtown heating plant in the vicinity of Tenth and St. Charles streets, and has installed steam pipes connecting it with a number of large adjacent buildings, and has contracted to furnish steam heat to those .building from this plant when needed and to furnish electricity from its large central station. In addition the company has made contracts for steam heating with a number of consumers so situated that they could not be reached from the St. Charles heating plant. In accordance with these contracts the company has taken over the private plants of a number of consumers, agreeing to furnish the consumer steam for heating or other purposes, and with electricity for light.and power. Usually the right is reserved in these contracts whereby the applicant may shut down the private plant entirely and supply both heat and electricity from some outside source. The company has managed the detail of supplying such service in each case in whatever manner appeared to it to be the most economical. In the summer when there was little or no heating demanded the company has followed the policy of shutting down most, if not all, of these isolated plants, and furnishing electricity .from its own more efficient central plant. During the heating season it has operated some of the consumers' heating plants, furnishing heat to such consumers and sometimes connecting to adjacent consumers, and supplying them with heat from the same plant or plants. During this period of heating demand the company has apparently considered it economical to operate the consumers ' electrical generating equipment, using the exhaust steam therefrom for heating. Usually the contract provided for steam heat for a definite space and for certain stipulated amounts of electricity, all for some fixed annual payment, with additional charges for electricity for any excess used above the amount called for in the contract. These contracts have carried with them temporary possession and use of the machinery, with provisions as to extensions or repairs and conditions pertaining to their return to the consumer when the contract- has expired. A number of such proposals have been accepted, and the company has taken over some forty-odd such plants, some of which are entirely closed down, but a number of which are operated during the heating season, as above described."
The foregoing findings of facts is of material moment here. They cover much more than the eighteen cases involved. This finding of the facts is well buttressed by the proof. Included in that proof are the contracts pleaded by interveners. These contracts are of no vitality, in so far as they affect rates. The Public Service Commission, in fixing rates, cannot be clogged or obstructed by contract rates. This question was early threshed out by this court in several cases, some of which went to the Federal Supreme Court, in each of which this court was sustained. The original ease, the ruling in which has never been changed, is State ex rel. City of Sedalia v. Public Service Commission, 275 Mo. 201. The effect of this and subsequent holdings, is that contract prices count for naught in the fixing of rates by the Public Service Commission. The Public Service Commission is not a court, and cannot be influenced in any regard by the contract prices as to rates. As said such body is not a court, and has neither the power to construe contracts, nor to enforce them. If the contracts have any effect at all (as wé think they have not) the only effect would be upon the question of whether or not the Union Electric Light & Power Company was a public utility, in so far as heating' is concerned. We doubt their efficacy in that regard. This because such question depends largely upon charter powers, and what has been done under the charter powers. But of this question later. Certain it is that such contracts cannot influence service rates. All of these contracts (and there were many not involved in these eighteen suits) indicated a general purpose upon the part of the Union Electric to extend the steam heating branch of their business.
II. If these contracts have any bearing' whatever in these cases, it must be on the theory that they tend to prove that the appellant was not in fact a public utility in this regard. Fortunately for the brevity of this opin ion, we have had before us the question of steam heating. [State ex rel. Case v. Public Service Commission, 298 Mo. 303.] It does not show clearly in that opinion, but it was a fact in the case that the public utility had several different plants from which steam heat was furnished and generated. It appeared there, as it appears here, that there is too much waste in conducting' steam heat for any great distance. In fact the only economical way of engaging in such a public utility is to have different plants, located in districts wherein there would be demand for the commodity, and that seems to be the plan of the claimant in these cases. Another question settled in the'case, supra, is that where there is a combined plant for the production of both electricity and steam heat, there should be a proper allocation of the value of the plant as to the separate uses. In the cases before us we have instances where more electricity is produced than is required for the local plant, but such is saved for the company's reserve for general use. In other cases there is not a sufficient quantity, and the deficiency is made up from the general reserve in the main plant, or some of the minor plants. So too, if there was surplus steam in a given building, it would be piped out to fill another contract. So when the very nature of the business is considered, a multiplicity of smaller plants is required to save waste, and in order to economize in. the business. The divers contracts suffice to show nothing in these cases. As a public utility the corporation cannot engage in private contracts, and the contracts before us do not show that the corporation intended to so engage. Steam heating comes under the Public Service Commission Act under our rulings, and the only real question in this case is the propriety of the temporary rates fixed. The rates fixed were for a test of a year, and then a time in addition given to get in reports, and from them determine the fair rates.
III. It is not disputed that the Union ¡Electric Light & Power Company had the charter, power to manufac ture and furnish heat and power to the general public. Not only heat by electricity,' but heat by steam. Its 'c^ar^er seems to have been .so drawn as to enable it to make use of all elements. It chose to engage (under its. charter) in furnishing steam heat and power as well as electric lights, electric heat and electric power. It was so engaged when the applications for increased rates were made, which applications were based upon increased labor and fuel costs. There were separate applications, and for this there is ample authority. [Hackworth v. Missouri Southern Railroad Co., 286 Mo. 282.] In the last named case it was made to appear that the railroad was hauling railroad ties at an actual loss, although, its whole business might not show the company to be in the red. We ruled, and rightfully so, that other customers of the railroad should not be compelled (by increased rates on their shipments) to make up the deficits from hauling ties. What is true in a case like that, is also true in a case like this. The Case case, supra, is practically on all-fours with the Hackworth case. In that we required a proper allocation of the instrumentalities used in the production of steami, so that it might be made to not only bear its proportionate part of the expenses, but likewise its proportionate part of the profits, to insure a reasonable return upon the whole investment for public use. The enactment of the Public Service Act marked a new era in the history of public utilities. Its purpose is to require the general public not only to pay rates which will keep public utility plants in proper repair for effective public service, but further to insure to the investors a reasonable return upon funds invested. The police power of the State demands as much. We can never have efficient service unless there is a reasonable guaranty of fair returns for capital invested. The woof and warp of our Public Service Commission Act bespeaks these terms. The law would be a dead letter without them, and a commission under the law, that would not read the law in the proper spirit, would be breathing in to it tlie flames of ultimate deterioration of public utilities. These instrumentalities' are a part of the very life blood of the State, and of its people, and a fair administration of the act is mandatory. When we say fair, we mean fair to the public, and fair to the investors. This answers some suggestions in the briefs.'
IV. Learned counsel for respondents have in view the force and effect of a contract under the views expressed in the Old Dartmouth College case. They overlooked the changes in the law made by constitutional provisions since that date. We have always been a strict constructionist, but in State ex rel. City of Sedalia v. Public Service Commission, 275 Mo. 210, we had occasion to review the law as it is now. Under our Constitution the police power of the State is held inviolable. [Sec. 5, Art. XII, Mo. Const.] In State ex rel. v. Public Service Commission, 275 Mo. l. c. 209, we said.
"Note the language, 'the exercise of the police power of the State shall never be abridged.'' Under such a constitutional restriction the Legislature would be powerless to enact a valid law by the terms • of which the right of the State in the exercise of its sovereign police power in the fixing of reasonable rates for public services could be limited or abridged. This court so held in Tranbarger v. Railroad, 250 Mo. l. c. 55, whereat Bond, J., said: • ,
" ' (2) All powers of government which regulate the public health, welfare and the property rights of its people&emdash;these, no State can strip herself of, for that would render it incapable of carrying out the prime purpose of its creation. The sanctity and import of this attribute of sovereignty are recognized in the Constitution of this State, to-wit: "The exercise of the police power of the State shall never be abridged, or so construed as to permit corporations to conduct their business in such manner as to infringe the equal rights of individuals, or the general well-being of the State." [Art. 12, Sec. 5, Constitution of Missouri.] The only restrictions upon the exercise of this faculty are that its use shall be reasonably adapted to the ends for which it is given, and that it shall not infringe any right or privilege .guaranteed by the F'ederal Constitution. The .authorities and cases demonstrating these principles are uniform. '
"Some of us thought the pronouncement a little broad and dissented, but the case was taken to the United States Supreme Court and there affirmed. [Chicago & Alton Railroad Co-, v. Tranbarger, 238 U. S. 67.]
"The United States Supreme Court was even more explicit in this Tranbarger case than was the majority opinion in this court. To its rule we must bow. At page 76 of this Tranbarger case, 238 U. S. 67, it is said:
" 'It is established by repeated decisions of this court that neither of these provisions of the Federal Constitution has the effect of overriding; the power of the State to establish all regulations reasonably necessary to secure, the health, safety, or general welfare of the community; that this power can neither be abdicated or bargained away, and is inalienable even by express grant; and that all contract and property rights are held subject to its fair exercise. [Atlantic Coast Line v. Goldsboro, 232 U. S. 548, 558, and cases cited.] And it is also settled that the police power embraces regulations designed to promote the public convenience or the general welfare and prosperity as well as those in the interest of the public health, morals or safety. [Lake Shore & Mich. Southern Ry. Co. v. Ohio, 173 U. S. 285, 292; C. B. & Q. Ry. Co. v. Drainage Commissioners, 200 U. S. 561, 592; Bacon v. Walker, 204 U. S. 311, 317.] ' "
The fixing of a rate for a public commodity, as we have here, falls under the police power of the State. F'rom the beginning we have so ruled. This constitutional provision disrobes the contention of interveners as to private contract rights. They are not private contract rights, and when so viewed, there is no substance to these sundry contracts. The reasonableness of the rates fixed will call for another paragraph.
V. Details will serve no useful purpose. The Public Service Commission first determined that the Union Electric Power & Light Company was a public utility, both tor electric power and current, and for steam heat. Having* determined that it was a public utility for all purposes, supra, the only matter left was to fix reasonable rates. These it determined to do by,a series of investigations, all mentioned within the record. After a full investigation as to the increased cost of its products, the Commission entered a trial order or judgment. By the terms of this the matters were to be tested for a year, and the data kept and gathered for its information. The rates were not permanent, but rates based upon the best information then before the Commission. If, at the end of the year, the experiment showed a wrong conclusion, it could be set aside, and new rates fixed. We are dealing solely with these experimental rates. Not only so, but with experimental rates as to steam heat. This court will be slow to interfere with the Public Service Commission," when they order an experiment to be made in order that equitable rates may be determined. Our province is to determine whether or not the order made is unreasonable. Of course the rigjht to make the order is of first consequence, but this right clearly appears. It does not appear that the order was unreasonable. Without such a showing, neither this court, nor the circuit court should vacate the order. Prom all it appears, that the circuit court was in error in its judgment, and the same is for that reason reversed. Such court overlooked the right of the Commission to await the result of an experimental judgment. Take from the Commission the right to experiment upon what should be a final judgment, is to rob it of its most valuable asset. We do not feel like so ruling, and have never before so ruled.
The judgment of the circuit court is reversed.
White, Wooclson and Atwood, JJ., concur; Blair and Ragland, JJ., not sitting; Walher, J., dissents in separate opinion.