Central Kentucky Natural Gas Co. v. Railroad Commission

Decision Date28 January 1930
Citation37 F.2d 938
PartiesCENTRAL KENTUCKY NATURAL GAS CO. v. RAILROAD COMMISSION OF KENTUCKY et al.
CourtU.S. District Court — Eastern District of Kentucky

D. L. Hazelrigg, of Frankfort, Ky., Chester J. Gerkin, of New York City, Allen, Botts & Duncan, of Lexington, Ky., and Ernst, Cassatt & Cottle, of Cincinnati, Ohio, for plaintiff.

Robert H. Winn, of Mt. Sterling, Ky., David C. Hunter, of Lexington, Ky., J. W. Cammack, Atty. Gen., and J. A. Edge, of Lexington, Ky., for defendants.

Before MOORMAN and HICKENLOOPER, Circuit Judges, and DAWSON, District Judge.

PER CURIAM.

The plaintiff, a Kentucky corporation, is engaged in the sale and distribution of natural gas in the city of Lexington, Ky., under a franchise granted to it by the city on February 25, 1927, under the provisions of sections 163 and 164 of the Constitution of Kentucky. While the franchise goes into much detail as to the duties and obligations of the plaintiff in distributing and selling natural gas to consumers, it does not fix the rate to be charged for such service. Lexington, under the law of Kentucky, is a city of the second class. Charters of cities of the second class confer upon such cities no power to regulate the rates to be charged by public utilities furnishing service to their inhabitants. Chapter 61 of the Acts of the General Assembly of 1920 (now sections 201e-1 to 201e-26, Kentucky Statutes, Carroll's 1922 Edition), confers that power upon the Railroad Commission of Kentucky.

Section 4 of the franchise deals with the question of the rates to be charged by the plaintiff under its franchise. That section reads as follows:

"Sec. 4. (A) The Company shall have the right to charge, demand, collect and receive for its gas service just and reasonable rates, charges or compensation.

"(B) The Company shall, within two (2) days after the effective date of the franchise contract promulgate in writing the rates, charges and compensation which it may deem to be just and reasonable and which it proposes to charge for its gas service, and shall on said day file a copy thereof with the Mayor of the City of Lexington and shall also, on said day, file a copy thereof, and a copy of this ordinance with the Railroad Commission for the State of Kentucky.

"(C) The Board hereby declares that any rate in excess of forty cents ($.40) per one thousand (1,000) cubic feet of gas would be in excess of a just and reasonable rate for such gas service, but this declaration shall not be binding on the Company, nor shall anything herein contained ever restrict the City from contending for a lower, nor the Company from contending for a higher, nor the Railroad Commission of the State of Kentucky or other tribunal in the exercise of a lawful jurisdiction, nor any court in the exercise of its jurisdiction, from fixing a lower or higher rate than forty cents ($.40) per one thousand (1,000) cubic feet of gas.

"(D) In the event the rates and charges promulgated and filed by the Company as aforesaid, shall, in the opinion of the City, be in excess of just and reasonable rates and charges then the City shall proceed before the Railroad Commission as provided in Sections 201e-1 to 201e-20 of the Kentucky Statutes, and in such proceeding the Company shall assume the burden of proving that the rates and charges promulgated by it as aforesaid, are just and reasonable.

"(E) Pending the final determination of such controversy and the fixing of just and reasonable rates and charges by said Railroad Commission and including any subsequent proceedings in court, the Company shall have the right to charge, receive and collect as temporary rates and charges not to exceed fifty cents ($.50) per one thousand (1,000) cubic feet of gas until the Company is furnishing gas through a pipe line of sufficient capacity, or (should the purchaser hereof already have that ten inch line named in Section 23) then through two pipe lines, as provided in Section 23 of this ordinance, and after it is furnishing gas through a pipe line of sufficient capacity, or (should the purchaser hereof already have that ten inch line named in Section 23), then through two pipe lines as aforesaid, not to exceed sixty cents ($.60) per one thousand (1,000) cubic feet of gas; but provided that of the amount collected under such temporary rates the Company shall under the direction and control of said Railroad Commission, or of the court, impound ten cents ($.10) per one thousand (1,000) cubic feet until the final fixation of just and reasonable rates and charges as aforesaid. Upon final determination of just and reasonable rates and charges as aforesaid, the sums so impounded together with all interest accumulations thereon shall be distributed under the order of said Commission, or court to the Company, or to its several customers, or in part to each, as the final determination may direct. If the Company during any part of the time prior to said final determination shall have collected sums including or other than those impounded, in excess of the rates and charges as finally determined, it shall then and thereupon repay said excess sums to the several customers who may have made such payments. The Company shall give to each customer a receipt for the amount paid by him pending the final determination of said suit or proceeding. It shall also keep an accurate record of all sums paid in by all and any of its customers under temporary rates and said records shall at all times be open to the City and to any customer as to his own contributions thereto; and the Company on demand from the City, if so ordered by said Railroad Commission, or other tribunal, or court, shall file with said Railroad Commission, or court, where said proceeding or suit may be pending, a full and detailed statement of the amounts, times and sums contributed by each customer to said funds. In addition to said temporary rates hereinabove provided for, the Company shall have the right to charge three cents ($.03) per one thousand (1,000) cubic feet, if the bill for service is not paid within ten (10) days after said bill is mailed or delivered to the customer.

"(F) The rates, charges or compensation to be charged, demanded and collected by the Company as herein provided shall be the total rates, charges and compensation charged, demanded and collected by the Company and they shall not be increased by any other charge or device of any kind or description. The rates, charges and compensation finally fixed and determined as provided in Subsection (D) hereof shall continue in effect until modified, altered or changed under and pursuant to the provisions of the franchise, as hereinafter provided."

The bill discloses that, in compliance with section 4 (B), the plaintiff, within two days after the effective date of its franchise, promulgated in writing the rates proposed to be charged by it in rendering the service contemplated in the franchise, and that, as provided in section 4 (D) of the franchise, the city of Lexington and S. B. Featherstone, an interested citizen, for himself and other consumers, filed a complaint with the Railroad Commission, attacking the rates published by the plaintiff as excessive and extortionate, and asking that commission to fix just and reasonable rates to be charged by the plaintiff. After notice to the plaintiff, a hearing was had, and on October 9, 1929, the commission entered an order, holding that the rates proposed to be charged by the plaintiff were unreasonable and extortionate, and fixing 45 cents per 1,000 cubic feet, with an additional charge of 3 cents per 1,000 cubic feet for overdue bills, as the lawful rate to be charged by the plaintiff. The order further provides that the rate thus fixed should be effective from January 28, 1927, which date is declared by the order to be the effective date of the franchise.

The fourth and fifth paragraphs of the commission's order are as follows:

"Fourth. That the Central Kentucky Natural Gas Company filed herein, at the inception of this hearing and controversy, a copy of its ordinance-franchise whereunder it is operating in the City of Lexington; that said franchise-contract made certain stipulations and provisions about the fixation of rates under it, and that the Commission had conformed its procedure as near as might be to the agreements of the said franchise-contract. That it is provided in Section 4(E) of said franchise-contract that pending the final determination of just and reasonable rates and charges by this Commission and including any subsequent proceedings in Court, the defendant Company shall have the right to charge not to exceed sixty (60) cents per thousand cubic feet for its gas; and that in order to afford either side hereto the right, if it be so desired, to proceed in the courts with respect to such fixation of rates, the application of the forty-five cent rate hereby fixed is suspended for a period of thirty (30) days from the entry of this order; that if within said thirty day period either side shall have filed such proceeding in court, then the application of the forty-five cent rate hereby fixed shall be suspended until there be a final fixation in court of said rates, and subject to such modification, if any, of said rate as may be fixed by said Court or Courts; but that if no such proceeding be filed in said time, then the said forty-five cent rate shall at once be put into force and effect.

"That it be specifically recited and reserved, however, that no such suspension of the application of said forty-five cent rate shall affect the fact that it, or it as modified by the Courts, shall be effective from said 28th day of January, 1927.

"Fifth. That as appears of record herein there have been impounded under the control and orders of the Commission, as provided in Section 4(E) of said franchise, considerable sums of money out of the collections made by defendant Company as under the temporary rates by said section provided, which sums of...

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2 cases
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    ...supra, note 2; Reagan v. Farmers' Loan & Trust Co., 1894, 154 U.S. 362, 14 S.Ct. 1047, 38 L.Ed. 1014; Central Kentucky Natural Gas Co. v. Railroad Comm. of Kentucky, D.C.1930, 37 F.2d 938; Union Light, Heat & Power Co. v. Railroad Comm., D.C.1926, 17 F. 2d 143; Van Wert Gaslight Co. v. Publ......
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