Court Opinion

ID: 8019483
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:08:55.542413+00
Date Added: 2024-06-11T16:36:34.610751
License: Public Domain

WOODSON, J.
(dissenting) — There are but two legal propositions here presented for determination; and :the first is stated by counsel for the company in this language:
“The reasonableness of the rates charged by a public utility' corporation cannot be* determined by a comparison with rates charged elsewhere, unless it is made to appear that all the conditions and circumstances under which the service is rendered are the same, and that the rates are remunerative.”
There is no pretense that the facts and circumstances under which the appellant manufactured and distributed gas were the same as those under which the companies in the other cities mentioned manufacture and distribute the same product. For that reason counsel for appellant insist that the comparison of rates mentioned, made by the commission, was erroneous.
*540There can be no doubt but what that ruling of the commission, as well as that of the circuit court, was improper. We know from observation and common knowledge that the cost of producing an article greatly varies, according to the facts and circumstances surrounding the parties making the production.
While the complainant introduces evidence tending to show that coal was. cheaper at Columbia than in some other parts of the State, and that the cost and expense of laying gas pipe in that city was less expensive than it was in the city of Hannibal, yet they by no means cover all the facts and circumstances involved in the manufacture and distribution of gas. They constitute but a small percentage of the facts, and their cost by no means constitutes the bulk of the cost of such production, or, at least, in the absence of all evidence on that subject, neither the commission nor the court has any authority to so presume. All such facts and circumstances must be established by evidence before such a comparison can be legally made as a basis for or element in an order reducing the prices to be charged for the gas furnished to the consumer.
Moreover, should it be conceded that the cost of production by all of said companies was the same, yet that showing of itself would not warrant a reduction of appellant’s rates, unless the evidence should further show that the rates charged by said other companies produced a reasonable remuneration for the capital invested by them. This is true, for the reason that gas companies, like many other corporations, do not earn a sufficient sum to pay expenses of operation, much less to pay a reasonable percentage on the investment.
The following authorities so hold: C. & N. W. Ry. Co. v. Dey, 35 Fed. 866; Ames v. Union Pac. Ry. Co., 64 Fed. l. c. 188; Smyth v. Ames, 169 U. S. l. c. 528; In re Arkansas Rate Cases, St. Louis Southwestern Ry. Co. v. Allen, 187 Fed. 290.
*541RatesSCat°ry II. Appellant’s second contention is that the schedule of rates to he charged hy relator, as fixed hy the order of the Public Service Commission, is unreasona^e’ unjust, confiscatory, and, consequently, deprives relator of his property without just compensation.
In order to fully understand this contention as applied to this case, it becomes necessary for us to briefly state the evidence hearing on this point.
The evidence tended to show and the commission found that the value of the property of the company was $77,-000. This valuation does not include the value of $10,124 of the coal gas plants the company owns, hut not in use in the production of gas, hut as counsel does not insist upon having that value added to that fixed by the commission, we will pass it hy.
The commission found that the company was entitled annually to three per cent, of the value of the property for depreciation, repairs, the upkeep of the plant, etc., and 7.5 per cent, interest on the investment, equaling a total of 10.5 per cent.
The average annual gross receipts of the company for the last six years were $21,386.83, and the average annual operating expenses during the last five years were $16,803. The net annual receipts of the company during that period were $4,583.83, or less than six per cent, on the money invested — $77,000.
Deducting the three per cent, for depreciation, etc., from the net income, $4,583.83, leaves a net annual income on. the investment of only $2,273-83, or less than three per cent per annum, being only forty per cent of the income the company was entitled to as fixed hy the commission, 7.5 per cent. In other words, the commission declared that the company was entitled to an annual net income of $8,085, and it found that the company is now earning at its old rates only $4,593.83 net.
It therefore follows from the commission’s own findings that the company is entitled to earn 76 per cent more than its present net income.
*542Notwithstanding those figures, the commission ordered a reduction of the rates of the company now charged for gas, from $1.75 net to consumers using less than 10,000 cubic feet per month, to $1.35 net, and from $1.60 net to consumers using over 10,000 cubic feet per month, to $1.26 net, equaling a reduction of its present aggregate rates to a fraction more that 20 per cent, and if we deduct this 20 per cent, $454.76, from the present annual net income on the investment of the company, $2,273.83, then its net annual income on investment will be only $1,819.07. And the only reason assigned or shown by the evidence for said reduction of rates, is the testimony of the following witnesses, which is as follows:
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 rates and the minimum charge per month, would materially increase the number of consumers.
Col. Stewart, a witness for complainant, testified that there would unquestionably be a much greater number of consumers if the gas rates were reduced.
W. J. Sheppard, witness for complainant, testified that the reduction of rates at Columbia would, in his opinion, materially increase the business of the company.
To say nothing of the evidence introduced by the company tending to show a reduction in the rates to be charged for gas would not increase its net income, yet it was upon the foregoing vague and speculative testimony of those witnesses that the commission found that the reduction of the rates mentioned would increase the business of the company, but how much no witness stated, nor did the commission attempt to ascertain or fix the percentage of increase of the earnings of the company would be, if any, caused by said reduction of rates. However,- by implication it must have been sufficient to not only overcome the large difference between the sum the company was entitled to receive on its investment and the sum it was actually receiving under the old *543rates, but also to so increase tbe volume of its business so as to enable it to pay the three per cent net for depreciation, etc., and the 7.5 per cent on its investment, equaling 10.5 per cent net, amounting as before shown, to the sum of $8,065, as against its present net income of $4;583.83, which would practically double its annual net income.
In order to accomplish this result, the company would have to practically double the volume of its business, with but a small proportional percentage of increase in the cost of production — the exact amount and percentage of each, I have not figured.
In the case of the Chicago, Burlington & Quincy Ry. Co. v- Public Service Commission, 266 Mo. 333, it was held that such vague and speculative evidence, as that before mentioned, was' insufficient to support a similar order of the commission. But independent of any authority upon that subject, it seems to me that common sense would dictate a contrary conclusion to be drawn therefrom, especially in the light of the facts that Columbia has a population of only 9,662, having only one manufacturing plant of any importance, the greatest consumer of gas, and was operating its own independent electrical plant, thereby greatly lessening the demand for illuminating gas.
Under this state of facts we fully concur with the contention of counsel for the company that the rates fixed by the commission are unreasonable, unjust and confiscatory, and, if enforced, would under the State and Federal constitutions deprive it of its property without just compensation; so hold the following cases, cited by counsel, all of which, and many others, we had occasion to examine and consider in the case of White v. Delano et al., Receivers of W]abash Ry. Co., 270 Mo. 16; Chicago & N. W. Ry. Co. v. Dey, 35 Fed. 866, 881; Smyth v. Ames, 169 U. S. 466; Seaboard Air Line Ry. v. Alabama R. R. Comm., 155 Fed. 792; Buell v. C., M. & St. P. Ry. Co., 1 Wis. R. R. Comm. Rep. 324; Milwaukee El. Ry. & Light Co. v. Milwaukee, 87 Fed. 577; In re Rochester, (N. Y. P. S. C. 2 District) Pub. Utilities Rep. Ann. *5441915-A, p. 1095; Cumberland Tel. & Tel. Co. v. Louisville, 187 Fed. 637; Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129.
Counsel for tbe commission present tbe four following-legal propositions for decision, viz:
“1. Tbe right of a corporation to earn a fair return upon its investment is qualified by the proviso that in no event shall the company be permitted to charge the consumer more than the service is reasonably worth.
“2. In fixing just and reasonable rates, it is proper to consider the probability that increased consumption at the lower rate may result in increased earnings.
“3. In determining just and reasonable rates for service of a public utility, comparison with rates customarily charged in localities similarly situated is a proper test.
‘ ‘ 4. The utility corporation assumes the risk of its investment and no return whatever is guaranteed to it. ’ ’
That those statements are correct, abstract legal propositions, as shown by the many authorities cited in support thereof, no one will question; but the facts of this case are such, as disclosed by this record, they do not warrant their application to it.
The majority opinion seems to proceed upon the theory that because the order of the commission fixing the unjust and confiscatory rates mentioned is temporary in character, and not permanent, therefore it should be upheld.
In reply to that I wish to state that I know of no law. or morals which authorizes the commission to take the property of this company for public use for any period of time,. however long or short, without just compensation. That such has been done in this case there is no question, which clearly violates both the State and Federal Constitutions. [State v. Canning Co., 157 N. W. (Minn.) 777.]
There is a class of cases which hold, and properly so, that where, upon the' face of the entire record, it appears in all probability that a public service corporation is charging and collecting exorbitant and unreasonable *545rates for the service performed, the commission may make a temporary order lowering th’e rates to sneh figures as it believes to be reasonable, and require the company to keep an accurate account of its receipts and expenditures during the existence of said order, and determine therefrom whether in fact said rates are reasonable or not; and if by that means they are found to be reasonable, then the rates may be restored or raised to á figure ■ that will yield a reasonable remuneration upon the capital invested in the business. [State ex rel. Missouri Pacific Ry. Co. v. Public Service Coinmission, post, p. 634.] But that is not this case — here the commission has found from the evidence that at the old rate the company is not earning but about one-half of what is a reasonable remuneration on the capital invested. And in the class of cases mentioned, the order generally permits the ■ company to collect and retain the proceeds of the old rates until it can be ascertained whether or not the new rates are reasonable; if found to be reasonable, then the company must refund to its patrons the difference between the old and the new ratesbut if found to be unreasonably low, under this order, then the company can-net recuperate its loss, and, consequently, to that extent its property has been confiscated. So hold the authorities before cited. I therefore dissent.
Bond, Jconcurs.