290 U.S. 561 (1934), 114, State Corporation Commission of Kansas v. Wichita Gas Co.

Docket Nº:No. 114
Citation:290 U.S. 561, 54 S.Ct. 321, 78 L.Ed. 500
Party Name:State Corporation Commission of Kansas v. Wichita Gas Co.
Case Date:January 08, 1934
Court:United States Supreme Court

Page 561

290 U.S. 561 (1934)

54 S.Ct. 321, 78 L.Ed. 500

State Corporation Commission of Kansas


Wichita Gas Co.

No. 114

United States Supreme Court

Jan. 8, 1934

Argued November 16, 1933




1. The sale, transportation, and delivery of natural gas from one state to distributors in another state is interstate commerce, and

Page 562

the rates to be charged therefor are not subject to state regulation. P. 563.

2. An order of a state commission which requires local distributors of natural gas not to include in their operating expense accounts more than a stated price for the gas delivered to them in interstate commerce by an affiliated pipeline company, and not to consider any payment in excess of that price in fixing a rate for domestic consumers, and which is merely a preliminary step in an investigation toward ascertaining the reasonableness of the local rates, can have no force as res judicata to bind the distributors in respect of payments to the pipeline company or the rates to be charged their consumers. P. 569.

3. Therefore, such an order is not, in itself, a ground for an injunction, even if unconstitutional, since injunction is not granted unless necessary to protect rights against injuries otherwise irremediable. P. 568.

2 F.Supp. 792 modified and affirmed.

Appeal from a decree enjoining the members of the commission from enforcing two orders, only one of which was questioned. It was conceded that the other was invalid.

BUTLER, J., lead opinion

MR. JUSTICE BUTLER delivered the opinion of the Court.

Ten suits were consolidated for trial.1 The appellee in each of the first nine is a local public service corporation,

Page 563

for convenience called a distributing company, engaged in the business of furnishing natural gas to consumers, domestic and industrial, in Kansas, and together they operate in 128 cities and towns. The other appellee, Cities Service Gas Company, is a pipeline company engaged in transporting gas from Texas and Oklahoma fields into Kansas and other states. The stock of each of the distributing companies is owned by the Gas Service Company, and its stock is owned by the Cities Service Company; the common stock of the Cities Service Gas Company is owned by the Empire Gas & Fuel Company, the voting stock of which is owned by the Cities Service Company. Henry L. Doherty, doing business as Henry L. Doherty & Co., owns 35 percent of the voting stock of the Cities Service Company. The policies of the distributing companies and the pipeline company are subject to control by the Cities Service Company, and Doherty controls its policies. These corporations and he constitute "affiliated interests" as defined by a Kansas statute effective March 9, 1931,2 the substance of which is later to be stated.

The Kansas statutes empower its Public Service Commission to regulate the service and to fix rates to be charged by public utilities, including the distributing companies.3 They prescribe heavy penalties for failure to comply with commission-made orders.4 But the sale, transportation, and delivery [54 S.Ct. 323] of natural gas by the pipeline company to the distributing companies constitutes interstate commerce, and therefore the state is without power to prescribe rates or prices to be charged therefor. Missouri

Page 564

v. Kansas Gas Co., 265 U.S. 298, 305 et seq.; People's Gas Co. v.Pub. Ser. Comm'n, 270 U.S. 550, 554; Public Util. Comm'n v. Attleboro Co., 273 U.S. 83, 90; Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 148.

The Act of March 9, 1931, § 1, gives the commission jurisdiction over holders of the voting stock of public utility companies to the extent necessary to require disclosure of the identity of the owners of substantial interests therein, and provides that the commission shall have access to the accounts and records of affiliated interests, relating to transactions between them and public utility companies. Section 2 declares that no management or similar contract with any affiliated interest shall be effective unless first filed with the commission, and authorizes the commission to disapprove any such contract found not to be in the public interest. Section 3 provides:

In ascertaining the reasonableness of a rate or charge to be made by a public utility, no charge for services rendered by a holding or affiliated company, or charge for material or commodity furnished or purchased from a holding or affiliated company, shall be given consideration in determining a reasonable rate or charge unless there be a showing made by the utility affected by the rate or charge as to the actual cost to the holding or affiliated company furnishing such service and material or commodity. Such showing shall consist of an itemized statement furnished by the utility setting out in detail the various items, cost for services rendered, and material or commodity furnished by the holding or affiliated company.

July 2, 1931, the commission, exerting powers granted by the Act, ordered an investigation of the charges made by holding companies for services rendered and commodities furnished to the distributing companies. It directed them to give the commission such information as they

Page 565

might see fit and as the commission might require; it ordered them to show cause why charges made by any holding company, if found unreasonable, should not be disallowed as operating expenses. The order was not directed to Henry L. Doherty & Co., the pipeline company, or any holding company, and none of them appeared or became a party to the proceeding before the commission.

And, pursuant to the order, there were held extended hearings at which there was submitted much evidence as to the value of the pipeline company's properties located in five states, its operating expenses, including depreciation and taxes, and its gross revenues and income available for return. In short, the facts adduced were such as appropriately might be considered by a commission for the ascertainment of reasonable rates to be charged by the pipeline company or by a court in determining whether established rates are confiscatory. Each distributing company tendered proof of the value of its own property used to furnish gas to its customers, together with other facts essential to the determination of the reasonableness of the rates then being, and later to be, charged its customers. But the commission, not then being engaged in the investigation of the reasonableness of such rates, refused to hear evidence other than that bearing upon the reasonableness, as operating...

To continue reading