Court Opinion

ID: 8019482
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:08:55.538228+00
Date Added: 2024-06-11T16:36:34.606945
License: Public Domain

GRAVES, C. J.
This proceeding was instituted by the city of Columbia, by filing a complaint with the Public Service Commission against the Watts Engineering Company, a manufacturer, distributor and seller of *528gas in said city. The complaint charged that the company’s rates charged for gas to consumers were “excessive, exorbitant and unreasonable,” and asked that the same be reduced “to such amount as the commission shall deem reasonable and just.”
In due time the company filed its answer denying the allegations of the complaint. Thereafter, at the time the cause was set for hearing, each party introduced evidence before the commission.
The evidence introduced by the complainant was to the following effect:
That the rates charged by other gas companies in the cities of this State, as compared with the rates complained of, were lower. These rates were ascertained by a study of the schedules of rates of gas utilities of this State, required by law to be filed in the office of the commission. The cities considered in this statement are Boonville, Brookfield, Cape Girardeau, Chillicothe, Clinton, Columbia, Excelsior ¡Springs, Hannibal, Independence, Jefferson City, Kirksville, Lexington, Louisianá, Marshall, Mexico, Moberly, Oak Grove, Rich Hill, Spring-' field, Sedalia, St. Charles, St. Joseph, St. Louis and Kansas City.
Witness Sheppard, a city councilman of Columbia, testified that the rate for gas in Columbia was higher than similar rates in all of. these twenty-four cities, with the exception of Oak Grove, which had only a total population of 641, and in which; a. more expensive kind of gas was manufactured. That only one city (Cape Girardeau) of the twenty-four had as high a minimum charge per month for gas as Columbia.
The appellant objected to a comparison of the rates of some of the cities with the rates in Columbia for the reason that in said cities the same company owned both the gas and electric plants, whereas in Columbia the electric plant was owned by the municipality. This objection was overruled, and exceptions duly saved. The commission ascertained the rates in existence in the cities of Brookfield, Kirksville, St. Charles, Hannibal, and Inde*529pendence, in all of which the gas utilities were operated independently of the electric utilities.
The results of its findings of these rates and comparison with those of appellant at Columbia are shown by the following table:

It further appeared from the evidence that the cost of coal at Columbia was.less that the average market price in the State, because of competing railroads; that the character of the ground at Columbia was not such as to make the construction -of the plant more expensive than other cities, since the mains could be laid without .cutting. through rock, as was the case at Hannibal. That; Columbia was a city of much wealth, with several schools and colleges, including the" State University; -that, the E. Y". Stephens- Publishing Company >ard other industries were there located.
The evidence showed that the University and the E. Y. Stephens Publishing Company were permanent customers of appellant, and together' consumed fully one-fourth ,,of appellant’s-product;-that the demand by the University was increasing rapidly.
-That the company has in its plant at Columbia three separate equipments for the manufacture of gas:
First: A water gas. equipment in duplicate of ample size to supply the present requirements and-an increase *530to approximately double these requirements. This equipment is the only part of appellant’s gas producing plant in use at this time.
Second: A coal gas equipment of vertical coal gas retorts of such size as to easily care for the present requirements. This equipment has not been used by appellant for a number of years.
Third: A still older coal gas equipment, capable of caring for the present requirements, but too small to be relied on. This equipment is likewise not in use.
Mr. Babb, witness for complainant, testified that he delayed putting gas into his house for two years on account of the high rates and the high minimum charge of one dollar per month. He also testified that in his opinion the lowering of the rate and the minimum charge per month would materially increase the number of consumers.
J. A. Stewart, witness for complainant, testified that there would unquestionably be a much greater number of customers if the gas rate was lowered. This witness further testified that the appellant company would not supply gas to a new addition in Columbia, and witness was compelled to lay his own mains in .this addition, though there were from forty to sixty consumers in the addition, and prospects of a greater number. That after witness put in his own mains, appellant furnished gas to consumers at its regular rates, to-wit, a new rate of $1.75 to consumers using less than 10,000 cubic feet.
Witness W. J. Sheppard, for complainant, testified that the reduction of rates at Columbia would, in his opinion, materially increase the business of appellant. That the .total value of the appellant’s property, tangible and intangible, used in the service of the public in the production, manufacture and sale of gas at Columbia, was $77,000.,
In determining this value, the commission excluded the value of the coal gas equipment, since it appeared that it was not in use, and had not been used since the water gas equipment was installed, and since it appeared that the water gas equipment was more than ample for the pres*531ent requirements, and all probable future requirements of Columbia.
A net return of 7.5 per cent, on appellant’s investment was found by tbe commission to be fair and reasonable.
An allowance of three per cent as a Reasonable allowance for. Surplus and contingencies was made, as is required by law. The average annual operating expense of appellant’s plant for the last five years was found to be $15,803.
The evidence for the defendant .showed in substance the following facts:
The defendant offered evidence showing the value of the property of the Columbia Gas Works;-also, the annual receipts and operating expenses of the'business for the last five years. It also appeared from defendant’s testimony that it owned about twelve miles of gas mains, and that, in addition, there were about three miles of mains laid by private enterprise to serve an outlying residence district recently developed for the purpose of real estate speculation,- and that defendant furnished gas through these also, making a _ total of fifteen miles of mains in Columbia.
It further appeared Ghat defendant had made special efforts several times in the last few years to develop and increase the consumption of gas. It also appeared that defendant was operating in competition, so far as the lighting business was concerned, with a-;municipal electric light plant belonging to complainant. It further appeared that defendant sells approximately eleven million cubic feet of gas per annum, of which about one-fourth is sold to two consumers, the ,State University and the E. W. Stephens Publishing Company; that the rates charged for gas by defendant are $1.75 net per one thousand cubic feet per month, and $1.60 net per thousand cubic feet to those using over ten thousand cubic feet per month; that the State University and the E. W. Stephens Publishing Company were the only consumers which need sufficient gas to obtain the rate of $1.60 per thousand cubic feet.
It further appeared from the testimony of Mr. W. H. Judge, who became manager of the gas plant of defend*532ant in 1893, that .when he took charge the rate for gas was $2.70 net per thousand cubic feet; that some time after he took charge, he reduced the rate for fuel gas to $1.50 per thousand cubic feet, but the rate for gas for illuminating purposes remained at $2.70 net per thousand cubic feet until 1907. ■ It appeared from the testimony that in 1907, the rates for gas were changed from $2.70 for illuminating purposes and $1.50 for fuel, to the present rates, $1.75 net to consumers using less than ten thousand cubic feet per month and $1.60 for consumers using more than ten thousand cubic feet per month. That the reduction in the price of fuel gas from $2.70 to $1.50, made about 1895, resulted in a substantial increase in the number of consumers of gas for .fuel purposes, but that the reduction made in 1907, from $2.70 to $1.75 per thousand cubic feet, did not result in any substantial increase, either in the number of consumers or in the amount of gas sold.
After complainant and defendant had introduced their evidence in the case, the commission had its engineer make an inventory and appraisal of the property of the company, and upon this appraisal the commission has fixed the value of the property of defendant used in the service of the public at $77,000. The defendant’s coal-gas plants were worth an additional sum of $10,124, which was by the commission disallowed in fixing its rates. The testimony showed that the plant’is in first-class condition, the quality of gas produced very good, and the service generally satisfactory.
The commission, in deciding this case, found, as stated. above, that the value of the property of the Columbia Gas Works upon which relator is entitled to earn a return is $77,000; that relator is entitled to three per cent of the value of the property for surplus and contingencies each year (depreciation fund) and that relator is -entitled to a net return on its investment of not less than 7-5 per cent, making thus a total return which relator is entitled to earn of 10.5 per cent on a valuation of $77,000, or $8,085.
*533It further appeared that the entire force employed in the operation of the gas works consisted of only six persons, including the president; that the president received a salary of $1,000 per annum; the general manager, who was also book-keeper, collector, and entire office force, received a salary of $2,000 per annum, and that the other four persons on the pay-roll constituted the mechanical and laboring force of the plant.
It further showed that for some time past, by reason of the exorbitantly high rates charged for insurance, the company had carried its own insurance risk;' that the cost of insurance, if paid to an insurance company, would be $431 per annum; that the average receipts of the company for the past five years had been $21,385.83 per annum, and that the average operating expense for the last five years has been $16,803 per annum, making the annual average net income for the past five vears $4,583.83.
The commission found from the evidence before it that the rates charged by appellant for gas were $1.75 net per 1,000 cubic feet for consumers using less than 10,000 cubic feet, and $1.60 net per 1000 cubic feet for consumers using more than 10,000 cubic feet. (The meaning of the terms “net gas rate,” as used in this connection, is the rate after deduction of amount allowed for prompt payment from the gross rate.) Appellant made a- minimum charge of one dollar per month to all consumers using 600 cubic feet or less.
By the order of the commission, entered after a consideration of the evidence before it, appellant’s rates were fixed as follows:
For the first 10,000 cubic feet per month, a net rate of $1.35 per 1000 cubic feet. For all in excess pf 10,000 cubic feet per month, a net rate of $1.25 per. 1000 cubic feet, with a minimum monthly charge of seventy-five cents.
After the decision and order of the commission made in this case on February 3, 1915, the defendant therein filed its motion for rehearing, which, in due course, was overruled. Thereupon the defendant therein, relator *534herein, applied to the circuit court of Cole County for a writ of review, assigning numerous reasons therefor. The trial in the circuit court resulted in a finding and judgment against the company, and an affirmance of the order of the commission. From that judgment the company appealed to this court.
It is important, however, that the order of the commission be set out. As to the rates fixed, the foregoing sufficiently outlines the order, but the important part of the order (so far as a determination of this controversy is concerned) reads:
“Order 6. That defendant, Watts Engineering Company, keep true and correct records of its total gross income and total gross operating expenses, from month to month, and file a monthly sheet with the commission, duly verified by its secretary and treasurer, setting forth fully such income and operating expenses, said reports to begin April 1,1915, and continue until otherwise ordered by the commission.
“Order 7. That the commission hereby retains jurisdiction of this case and reserves the right to modify the above named rates at any time on its own motion; and that complainant or defendant shall be at liberty at any time after an actual test of the rates fixed herein has been made to apply to> the commission by motion or supplemental petition, upon such proof’ as either may desire, and upon reasonable notice to said complainant or defendant, for a modification o*. revision of the rates herein prescribed, if found to be unreasonable or unjust to the public or said defendant, or shall fail to provide a fair and just return on the fair present value of defendant’s property as fixed herein.
“Order 8. That this order shall take effect on,February 25, 1915, and that the secretary of the commission shall forthwith serve on each of the parties hereto a certified copy of this order and of the opinion filed herewith. ” .
This outlines the case.
*535Test Order. I. If the order made in this case had been one permanent in character the question presented would be entirely different. But such is not the nature of the order made by the Public Service Commission. Our function • is to determine the reasonableness of the order, as we it. The present order is one made for the purpose of making a test, to the end that the real question of a reasonable rate may be ultimately determined. The Public Service Commission is an administrative board, created by the lawmakers, as an arbiter between the general public and the public service corporations, and to this end has been given extensive powers (Laws 1913, p. 602 et seq.), with all its acts subject to court review, however. The fixing of rates is a delicate and vital subject, when both the public interest and the interest of the public service corporations are considered. These corporations should not be crushed by the fixing of inadequate rates, nor should the public.-be imposed upon by arbitrary business methods adopted by such corporations, which would increase rates. To be more pointed, such corporation should not..be permitted to fix an exorbitant rate for their product or service, and then tie the hands of the Public Service Commission, by showing that at those rates their business is unprofitable. A large per cent of profit on limited sale, will'-often not yield, in the aggregate, as much actual profit, as a small per cent of profit :on larger sales. The price of a product may be made so high as to preclude its general use. These are all vital questions for determination by the Public Service Commission.
In the instant case the evidence tends to show an exorbitant rate for gas at Columbia. It further tends to show that a reduction in rates would increase the sales or consumption. Grant it, that there' is evidence contra. No one knows just what increase of consumption might follow a reduced rate. This can only be determined by actual test. Such was the course pursued by the Public Service Commission by the order made in this case, and it is this “test” order that we are called upon to declare unreasonable. To say that the Public *536Service Commission cannot, under the showing made in this case, make an order putting in a test rate as in this case, would he to sap the very vitals of the Public Service Act.
In discussing a fixed rate (as contra-distinguished from a mere test rate)' the U. S. Supreme Court in Willcox v. Consolidated Gas. Co., 212 U. S. l. c., 50 and 51, said:
“But there may he other cases where the evidence as to the probable result of the rates in controversy would show that they were so nearly adequate that nothing ;but a practical test could satisfy the doubt as to their sufficiency.
“In this case a slight reduction in the estimated value of the real estate, plants and mains, as given by the witnesses for complainant, would give a six per-cent return upon the total value of the property as above stated. And again, increased consumption at the lower rate might result in increased earnings, as the cost of furnishing the gas furnished.
“The elevated railroads in New York when first built charged ten cents for each passenger, hut when the rate was reduced to five cents it is common knowledge that their receipts were not cut in two, but that from increased patronage the earnings increased from year to year, and soon surpassed the highest sum ever received upon the ten-cent rate.”
There is really no better way to determine just what effect lower rates will have on a public service business, than by an actual test.
Again along the same line, the. United States Supreme Court in Louisville v. Tel. & Tel. Co., 225 U. S. 430, used this language: “But when it is remembered what clear evidence the court requires before it declares legislation otherwise valid void on this ground, and when it is considered how speculative every figure is that we have set down with delusive exactness, we are of opinion, that the result is too near the dividing line not to make actual experiment necessary.” '
*537The interests of the public service corporation are not the only interests to be conserved by the orders of the Public Service Commission.
In Turn Pike Co. v. Sandford, 164 U..S. l. c. 596, it was said:
“It cannot be said that a corporation is entitled, as of right, and without reference to the interests of the public, to realize a given per cent, upon its capital stock. When the question arises whether the Legislature has exceeded its constitutional power in prescribing rates to be charged by a corporation controlling a public highway, stock-holders are not the only persons whose rights or interests are to be considered. The rights of the public are not to be ignored. It is alleged here that the rates prescribed are unreasonable and unjust to the company and its stockholders. But that involves an inquiry as to what is reasonable and just for the public. If the establishing of new lines of transportation should cause a diminution in the number of those who need to use a turnpike road, and, consequently, a diminution in the tolls collected, that is not, in itself, a sufficient reason why the corporation, operating the road, should be allowed to maintain rates that would be unjust to those who must or do use its property. The public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends. The Legislature has the authority, in every case, where its power has not been restrained by contract, to proceed upomthe ground that the public may not rightfully -be required to submit to unreasonable exactions for the use of a public highway established and maintained unden legislative' authority. If a corporation cannot maintain such a highway and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by imposing unjust burdens upon the public. So that the right of the public- to use the defendant’s turnpike upon payment of such tolls as in view of the nature and value of the service rendered by the company are reasonable, is an element in the general inquiry whether the rates established by law are *538unjust and unreasonable. That inquiry also involves other considerations, such, for instance, as the reasonable cost of maintaining the road in good condition for public use, and the amount that may have been really and necessarily invested in the enterprise. In short, each case must depend upon its special facts;, and when a court, without assuming itself to prescribe rates, is required to determine whether the rates prescribed by the Legislature for a- corporation controlling a public highway are, as an entirety, so unjust as to destroy the value 'of its property for all the purposes for which it was acquired, its duty is to take into consideration the interests both of the public and of the owner of the property, together with all other circumstances that are fairly to be considered in determining whether the Legislature has, under the guise of regulating rates, exceeded, its constitutional authority, and practically deprived the owner of property without due process of law. ’ ’
The order made in the instant case has in view the working out of the rate question at Columbia along those lines hereinabove suggested. The order and findings show the value of the investment, and the expense of operation. It shows that the plant has capacity for increased production, 'if increased consumption could be procured. The facts tend to show that increased consumption would most probably follow a reduction of rates. Under these circumstances we do not think that the order involved here is an unreasonable one.
Rates i.n cities!r II. The fact that other cities of a similar population were procuring gas' at a much less rate is some evidence of the fact that the rates in Columbia were unreasonable. We think'the doctrine well'annoimced in Public Service Comm. v. Public Utility Board, 84 N. J. L. l. c. 474-5, thus: “In.determining the justice and reasonableness of rates, perhaps no better test can ordinarily be found than the rates customarily charged in localities similarly situated, although we do not say that even., that test is infallible. A table printed in one of the briefs shows that while in *539some municipalities with a population no larger than that of the Passaic district the charge is less than ninety cents, in others it is as high or higher. Upon the whole we find no reason in the rates charged elsewhere to believe that ninety cents is too high for a community with the population of the Passaic district. Nor do we find the charge too low when compared with other municipalities. As a business question, the price seems within the bounds of a fair chance.”
The proof in that case took very much the lines in this case. The evidence there showed the rates for gas given to other communities, and the populations thereof. The showing made in the instant case in this respect was amply sufficient to support the character of the order here made. The order was not an unreasonable one on the showing made, and the judgment of the circuit court, which sustained the order, should be and is affirmed. If after the test, the rate is found to be too low, the matter can be corrected by the Public Service Commission.
Faris, Blair and Bevelle, JJ., concur; Woodson, J., dissents in opinion filed; Bond, and Walker, JJ., dissent.