Court Opinion

ID: 5451042
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:39:51.3261+00
Date Added: 2024-06-11T08:32:23.182932
License: Public Domain

TRAYNOR, J., Dissenting.
The annulment of the commission’s order is based on the premise that the utility placed in effect lower rates to another consumer having a load similar to that of petitioners within the meaning of paragraph 14 of the contract. The rates allegedly placed in effect are the tariff rates that were in effect when the contract was signed. In 1942, when Riverside asked the commission’s approval of a special contract deviating from PW-1 and PW-2, the existing tariffs, Riverside stated in a letter to the commission on October 7, 1942: “With reference to the Power Company’s published schedules PW-1 and PW-2, our belief is that neither of these schedules is reasonably adapted to the conditions of cement plant operation. So far as we are advised, no cement company has ever operated under either of these schedules.” Yet we are now asked to interpret the contract as having incorporated a schedule not “reasonably adapted to the conditions of cement plant operation.”
It is contended that the original tariff of rates in effect in 1942 when the special contract was signed by the parties and approved by the commission was “placed in effect” on July 1,1947, when the utility raised the contract price of electricity (above the level of the tariff prices) by virtue of the fuel oil escalator clause, paragraph 10(e). The words “shall place in effect” would ordinarily lead one to interpret paragraph 14 as applying only to tariffs approved after the signing of the contract. It is urged that paragraph 14 be construed to limit possible increases under the “escalator” clause to the level of rates already in existence because “the purpose of the escalator clause was to protect the utility’s cost differential between the lower contract rate and available existing tariffs. ’ ’ Testimony in the record bearing on the meaning of the fuel oil escalator clause runs counter to this interpretation, and leads to the conclusion that the purpose of the clause was to preserve for the utility a margin of profit over its operating costs.1
*334If this testimony is disregarded and the existing rates are accepted as a ceiling on the rates under the contract,2 paragraph 12 thereof is rendered meaningless. That paragraph specifically gives the consumer power to terminate the contract after an increase in price under paragraph 10(e), the “escalator” provision. The protection afforded the consumer by this power of termination and the protection afforded the utility by the escalator clause are both rendered superfluous if the contract rates no longer apply after the price of fuel oil rises to $1.41 per barrel, the point at which the price of fuel oil causes the price of power under the contract to rise to the level of the tariff prices. In my opinion the contract per*335mits the consumer either to continue the contract in the hope of a drop in fuel oil prices or to terminate the contract and accept the potential advantages or disadvantages of the tariff rates. To order reparations to the petitioners now that the contract has expired permits the consumer to accept all the benefits of the contract, with prices set retroactively as though their power to terminate had been exercised.
We turn now to the four special contracts with other consumers that allegedly “placed in effect” lower rates. Two of the contracts, those with Sierra Talc Company and Natural Soda Products Company, merely extended the rates of Schedule P-2, a schedule of limited applicability, to companies that had been served on that basis for years. After the commission authorized the utility to cancel the schedule of limited applicability, the same rates were continued by special contracts. The contract with West End Chemical Company provided the same rates as those set forth in the filed schedule No. PW, discussed above. It cannot be said' that lower rates were “placed in effect” by these three contracts, since they merely continued rate schedules available to and refused by petitioners at the time their contract was signed. The conclusion that paragraph 14 did not refer to the PW schedules in effect when the contract was signed applies with equal force to contracts that provided rates equivalent to the tariff rates.
Finally, petitioners complain that the contract between the utility and the United States Navy for service to the Naval Ordnance Station at Inyokern “placed in effect” lower rates. The commission apparently agrees: “that contract contained rates which were identical with those in Option B of rate Schedule No. PW. Since the Navy received service at 33,000 volts, a discount of 5% was incorporated in the contract. The inclusion of this high voltage discount, coupled with the provisions of Schedule No. PW, in the commission’s opinion constituted placing in effect a lower and more advantageous rate than Schedule No. PW.” The commission concluded, however, that even “if the Cement Companies had facilities available to take delivery at this voltage, and could have qualified for the high voltage discount, it is not apparent that the rates of the special contract with the Navy Department would have produced a lower bill throughout the period of the contracts than was actually billed to the Cement Companies.” The failure to grant reparations despite the finding that the rate to the Navy was lower than the contract rate to Riverside *336and Southwestern indicates that the Cement Companies failed to sustain their burden under section 71 of proving to the commission that they were injured because the utility “deprived them of any rate to which they were entitled.” (Batchelder-Wilson Co. v. Southern Calif. Gas Co., 35 C.R.C. 132, 134; City of Vernon v. Southern Calif. Gas Co., 34 C.R.C. 46, 48.)
We are referred to Rule and Regulation No. 19, the “policy” of which was allegedly violated by the utility in this case. The applicable portions of the rule provide: “(b) Where there are two or more rate schedules applicable to any class of service, the Company or its authorized employees will call applicant’s attention, at the time application is made, to the several schedules, and the customer must designate which rate or schedule he desires, (c) In the event of the adoption by the Company of new or optional schedules or rates, the Company will take such measures as may be practicable to advise those of its customers who may be affected that such new or optional rates are effective. ” It is conceded that Rule 19 applies only to consumers given service under tariff schedules and not to consumers with special contracts. This fact alone distinguishes the eases relied upon by petitioners, since all the consumers granted reparations in those cases were operating under rate tariffs. (Batchelder-Wilson Co. v. Southern Calif. Gas Co., 35 C.R.C. 132; City of Vernon v. Southern Calif. Gas Co., 34 C.R.C. 46.) Furthermore, Rule 19 applies by its terms only where two or more rate schedules are available at the time application for service is made, or “in the event of the adoption by the [utility] of new or optional schedules or rates.” In the latter case, the utility is bound only to take such measures to advise consumers “as may be practicable. ’ ’
Even if it is assumed that paragraph 14 gives the consumer the protection of Rule 19, it does not follow that the utility undertook “to perform the office of supplying the information and opportunity of'selection [of more advantageous rates] when occasion demanded.” Under the commission’s view, this would be a promise to perform the impossible. “Since any such determination depends upon the future operations of this customer, the final decision with respect to whether or not any other rates are lower or more advantageous is the ultimate responsibility of the customer. Neither the utility nor this Commission can anticipate future customer usage which is *337entirely within the discretion of the customer as to its future volume. ’ ’3
Rule 19 requires notification, as may be practicable, about newly promulgated tariff schedules or novel special contracts. Neither the letter nor the spirit of Rule 19 requires utilities to prognosticate the future nature and extent of the consumer’s use of power and then advise the consumer if there is a possible advantage under preexisting tariff rates. It is sensible to require notice to consumers of newly-adopted schedules or contracts, because the consumer probably would not have knowledge of them. It is a different matter when the utility is placed under a duty to give notice of tariffs that had been in effect at least five years and from which the consumer had specifically asked to be excepted.
Since the rise in power prices under the “escalator” clause did not “place in effect” lower rates within the meaning of paragraph 14, and since Rule 19 does not apply to this case, the order should be affirmed.
Edmonds, J., concurred.
Respondents’ petition for a rehearing was denied June 1, 1950. Edmonds, J., and Traynor, J., voted for a rehearing.

“One of the two witnesses heard by the Examiner was the chief rate engineer of the defendant utility, called as a witness by the complainant. He testified:
“Q. Didn’t you, in general, try to establish your rates so that com*334panies like the Cement Companies, with large volumes of power or using large volumes would pay less per kilowatt hour than the companies using a smaller volume of power?
“A. Yes, as long as we had large volumes of cheap power available.
“Q. And you tried, in general, to keep the relationship between the Cement Companies and other large volume users versus the smaller users on that basis as best you could?
“A. Except that where a margin of profit was extremely small we have incorporated hedging clauses like the fuel oil clause so that we would not be caught selling power at a loss when prices went up.
“Q. Coming back to my question again, the policy was, apart from the earnings of the Company, the policy was, as between rates for consumers, that the larger volume consumer would normally have a lower rate than the smaller volume consumer?
“A. Generally, yes; when you got into very large volumes other factors entered.
“Q. Do you have any instance in your Company, or did you have in 1947, where you considered large volume users should pay a higher rate for their electricity than lower volume users?
“A. Yes, we did. You have to consider, if you are thinking of the Southwestern and Riverside Cement, you have to consider the period of the contract as a whole, and if we were selling on a very thin margin of profit there, which was evidently contemplated in the contract, this eventuality was contemplated in the contract so that when our costs went up this thin margin was preserved to a degree.”

Had the parties so intended the provision could have been drafted simply and directly. In a recent ease before the commission (Re Pacific Gas $ Electric Co., Decision No. 42234, Application No. 27459), a utility was permitted to modify a special contract containing an escalator clause. The modification conformed to an oral understanding between the utility and the consumer-lumber company that: “In the event, during the term of said agreement, application of rates and conditions of an applicable filed electric tariff of Pacific to the account of lumber company would result in lower cost for electric service than the rates set out in said agreement, lumber company would be accorded the benefit thereof.” Both parties in that case agreed that this sentence embodied the understanding of the parties. In the present ease there was no testimony by Cement Company officials concerning the original negotiations; petitioners have sought merely to make paragraph 14 applicable.
For another example of a contract containing a fuel oil escalator clause subject to stated maximum and minimum rates, see City of Vernon v. Southern Calif. Gas Co., 34 C.R.C. 46 [1929].

The rate schedule of the contract indicates that the monthly charge for electricity fluctuates with the intensity and volume of customer usage. Paragraph 10 provides:
“Energy Charge—Eirst 200 kilowatt-hours per month per
horsepower of maximum demand ........... 1.04 cents per kwh
All over 200 kilowatt-hours per month per horsepower of maximum demand.........................416 " " "
“Minimum Charge—$1.00 per month per horsepower of Maximum Demand, but not less than $4,000.00 per month.
“Special Conditions—(a) The maximum demand in any month shall be the average horsepower input, (746 watts equivalent), indicated or recorded by instruments to be furnished and installed by the Company upon Consumer’s premises adjacent to or integral with watt-hour meter or meters, in the 15-minute interval in which the consumption of energy is greater than in any other 15-minute interval in such month, or, at the option of the Company the maximum demand may be determined by test.
“(b) The maximum demand for monthly billing purposes for any given month shall be the horsepower of measured maximum demand occurring during such month but in no case less than 75% of the maximum demand occurring during the eleven next preceding months.
“(c) In case notice of contemplated curtailment of operations on the part of Consumer is given to the Company and such curtailed operations occur over a period of at least six consecutive calendar months, the provisions of paragraph (b) hereinbefore shall not apply. . . .’’