Case Name: The City of Lima v. The Public Utilities Commission
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1919-12-23
Citations: 100 Ohio St. 416
Docket Number: No. 16374
Parties: The City of Lima v. The Public Utilities Commission.
Judges: Nichols, C. J., Jones; Johnson, Wanamaker, Robinson, and Merrell, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 100
Pages: 416–423

Head Matter:
The City of Lima v. The Public Utilities Commission.
Public Utilities Commission — Jurisdiction — Gas rates —Municipal ordinance a contract, when — “Readiness to serve” charge not authorised, when.
1. Section 4, Article' XVIII of the Constitution of Ohio, authorizes municipalities to contract with public utilities for their product or service to be furnished to the municipality or its inhabitants, and when such contract duly executed fixes the rate and charge for furnishing such product, the Public Utilities Commission of the state is not empowered to authorize such public utility to exact the payment of a rate or charge in excess of that agreed upon.
2. Where a gas company enters into a contract with a municipality and thereby agrees for a term of three years to furnish gas to such municipality and its inhabitants at a rate and charge therein stipulated, it being further agreed that no meter rental shall be charged by the company, the exaction of a “readiness to serve charge” in addition to the rate agreed upon is violative of the terms of the contract and cannot be validated by an order of the Public Utilities Commission.
(No. 16374
Decided December 23, 1919.)
Error to the Public Utilities Commission
An ordinance of the city of Lima, duly passed, fixed the price, that might be charged for natural gas furnished the consumers thereof in that city for a period of three years from and after September 1, 1918. The essential provisions of that ordinance are as follows: Such company may be entitled to charge for natural gas furnished to the citizens and public buildings a rate for the months of November, December, January? February, March and April not exceeding fifty cents per 1000 cubic feet for all natural gas consumed up to and including the first 25,000 cubic feet; for all gas consumed between 25,000 and 30,000 cubic feet sixty cents per 1000 feet; for all gas consumed in excess of 30,000 cubic feet seventy cents per' 1000 cubic feet; for the months of May, June, July, August, September and October a rate not exceeding fifty cents for each 1000 cubic feet; and no meter rental shall be charged by any company or companies furnishing natural gas under this ordinance.
The Lima Natural Gas Company, in writing, duly signified its consent to and acceptance of such ordinance and declared its purpose to furnish gas thereunder, and'did furnish gas. to the consumers thereof in Lima, Ohio, under the terms and conditions set forth in such ordinance.
Thereafter, on May 29, 1919, said gas company filed with the Public Utilities Commission its application for approval of its schedule of rates for gas therewith presented, which were the rates prescribed by said ordinance with the. addition thereto of a “readiness to serve charge of thirty-five cents per month,” the same to be effective from July 1, 1919. Objection to the approval of the proposed “readiness to serve charge,” contained in said schedule, and to the consideration thereof by the Public Utilities Commission, was made by the city of Lima. Hearing was had upon the issue joined by such application and objection thereto, whereupon the commission found that “such a financial device, or charge, is not provided for nor prohibited by the ordinance of the city of Lima, Ohio, regulating the rates and charges which the applicant may impose and collect for the furnishing of such service in said city.” And it further found such charge to be practicable and advantageous to the parties, and entered its order approving the same. Thereafter, an application for rehearing having been denied by the commission, this proceeding* in error was instituted to reverse said order, on the ground that the commission had no jurisdiction in the premises and that its order therein is unjust and unreasonable.
Mr. Melvin C. Light and Mr. W. H. Leete, for plaintiff in error.
Mr. John G. Price, attorney general, and Mr. Edward E. Corn, for defendant in error.
Messrs. Wheeler & Bentley, for The Lima Natural Gas Company.

Opinion:
Matthias, J.
The city challenges not only the finding and order of the commission wherein it approved the schedule filed by the gas company and thereby authorized it to charge and collect from each consumer of gas in the city of Lima a "readiness to serve charge of thirty-five cents per month," but further challenges the jurisdiction of the commission to hear and determine the application of the gas company for the approval of that provision in its schedule of rates.
The question is thus squarely presented, whether, when a municipality passes an ordinance fixing the price which a gas company may charge its con sutners within such municipality for gas for a period of three years thereafter, including a provision relative to meter rental charges, and the gas company, in writing, signifies its assent to and acceptance thereof, a contract is thereby entered into, full and complete and binding alike upon the municipality and upon the gas company; or whether the gas company during such period of three years covered by the ordinance and acceptance may exact a- "readiness to serve charge" in addition to the rate agreed upon, and whether, under the circumstances stated,-the Public Utilities Commission has any authority to validate such additional charge.
For many years a statute has been in force and operation in this state substantially as now set forth in Sections 3982 and 3983, General Code, authorizing the council of a municipality to regulate the price which electric lighting companies may charge for electric light or gas companies may charge for gas furnished to the citizens thereof, and containing the further provision that when such prices are so fixed for a period not exceeding ten years, and the company desiring to furnish electricity or gas assents thereto by written acceptance, such company shall in no event charge more for electric light or gas than the price so specified, and the council shall not require the company to furnish electricity or gas at a less price during the period of time agreed upon.
The constitution of the state, as amended in 1912, Section 4, Article XVIII, expressly authorizes municipalities to enter into contracts for, the product or service of any public utility, and it must be conceded that the acceptance by the utility company of the price and terms prescribed by an ordinance of a municipality completes a contract between the municipality and the utility company which is now authorized by'the express terms of the constitution. This court held in the recent case of The Ohio River Power Co. v. City of Steubenville, 99 Ohio St., 421, that where the price of electric current for light and other purposes is fixed by ordinance, and the company duly files its written acceptance thereof, such ordinance and acceptance constitute a contract between the municipality and the company, binding on both parties during the term named in the ordinance.
It is elementary that the consideration expressed in a contract is presumed to be the full and entire consideration for the services therein agreed to be rendered, or for the material or commodity therein agreed to be furnished and delivered. In this case the record discloses that a gas rate ordinance passed July 20, 1915, was repealed at the time the ordinance here in question was passed; that such ordinance prescribed a rate of thirty-three cents per 1000 cubic feet, with a service charge of fifty cents,, which included the first 1000 cubic feet of gas used, or in other words, a minimum charge of fifty cents. That ordinance did not expire for three years, but it was repealed and a new ordinance granting the company a very material increase of rates was adopted upon the application of the company and for the purpose of meeting changed conditions. In the latter ordi nance there is no provision for either a minimum charge or a "readiness.to .serve charge," but there is an express-provision that "no meter rental rate shall be charged by any' company or companies furnishing natural gas under this ordinance." There is clearly-.-manifested the agreed purpose and intent that all charges to be made for furnishing gas should be and w,ere merged in the rate stipuláted. i Any, futther charge exacted by the gas -company from'its consumers, no matter what such additional charge be denominated, whether it be called a charge or rate or financial device, would be contrary to and in direct violation of the express terms of the contract between the municipality and the gas company. The imposition of a "readiness to serve charge" in this instance, in addition to the agreed .rate, would result in charging every consumer, not fifty cents, the agreed rate, but eighty-five cents for the first 1000 cubic feet of gas.
The right to contract for'the product or service of a, public utility necessarily includes the right and authority to agree upon 'rates and charges. There can be no virtue in the right conferred upon municipalities to contract for the product or service of a public, utility company if it is powerless to agree upon the rate or price to be paid therefor, or, if, after such, agreement' is made, and during the period covered by the contract, its terms may be 'materially altered by the'Public Utilities Commission. Aside from the proposition that the right to make such contract is now conferred by constitutional provision, it is to be borne in mind that the powers of the Public Utilities Commission are conferred by statute and it possesses no authority other than that thus vested in it. The City of Cincinnati v. The Public Utilities Commission, 96 Ohio St., 270, and The City of Washington v. The Public Utilities Commission, 99 Ohio St., 70.
The commission based its action upon the terms of Section 614-17, General Code, which provides in substance that "nothing in this act" shall be taken to prohibit the public utility from providing any other financial device that may be practicable or advantageous to the parties interested, provided the same be filed with and approved by the commission. But it must be observed that it is expressly provided by Section 614-47, General Code, that "this act," by which is meant the public utilities act of which Section 614-17 is a part, shall not apply to prices fixed under Sections 3644, 3982 and 3983, General Code, except as provided in Sections 614 -44, 614-45 and 614-46, neither of which confers any authority whatever upon the Public Utilities Commission to act where the utility accepted the rate fixed by ordinance, except in the event of a complaint being filed by the electors of the municipality, as therein provided.
This court held in the Steubenville case, supra, that by the provisions of Section 614-47, General Code, such contracts are specifically exempted from the operation of the statutes of this state defining the powers and duties of the Public Utilities Commission in relation to the rate, price, charge, toll or rental that such public utility may charge, demand, exact or collect for any service rendered or to be rendered by it. But even if the rates and charges stipulated in such contfacts were not specifically exempt from the consideration and action of the commission, the authority to enter into a contract, such as that under review, being now expressly conferred by' constitutional provision, any statute which purports to modify or restrict the power thus conferred would be in conflict therewith and must ,f all.
It follows that the exactioin of the "readiness to serve charge" incorporated in the schedule of rates filed by the gas company, in addition to the rate agreed upon, is violative of the terms of the contract, and that it cannot be validated by any order of the Public Utilities Commission. The order of the commission is therefore reversed.
Order reversed.
Nichols, C. J., Jones; Johnson, Wanamaker, Robinson, and Merrell, JJ., concur.