76 P.2d 393 (Okla. 1938), 27259, Community Natural Gas Co. v. Corporation Com'n of Okl.

Docket Nº:27259, 27628.
Citation:76 P.2d 393, 182 Okla. 137, 1938 OK 51
Attorney:Roy C. Coffee and Marshall Newcomb, both of Dallas, Tex., C. C. Hatchett, of Durant, and Blakeney, Wallace, Brown & Blakeney, of Oklahoma City, for plaintiffs in error.
Case Date:January 25, 1938
Court:Supreme Court of Oklahoma

Page 393

76 P.2d 393 (Okla. 1938)

182 Okla. 137, 1938 OK 51







Nos. 27259, 27628.

Supreme Court of Oklahoma

January 25, 1938

Rehearing Denied Feb. 21, 1938.

Syllabus by the Court.

1. In order for the Corporation Commission of Oklahoma to have authority to make a valid permanent rate order for a public utility, the commission must have made a complete investigation of the circumstances, and have accorded all parties an opportunity to be heard, and have made findings of fact and conclusions of law upon the evidence introduced, and have reached a final result that is fair and reasonable to the public and utility alike.

2. Proceedings legislative in nature are not judicial proceedings in a court, no matter what the dominant character of the body in which such proceedings are had. The question depends not upon the character of the body, but upon the character of the proceedings.

3. Rate making proceedings are legislative and, since the establishment of a rate is not a matter of exact science or capable of precise mathematical calculations, broad, general, equitable principles must govern in the establishment of a rate.

4. In a case where a public utility has properly, sufficiently, justly, and lawfully applied to the Corporation Commission for an increase of its rates and charges, and alleges that its present rates are inadequate and deprive it of its property without due process of law, the Corporation Commission, upon assuming jurisdiction over the cause, is required by law to proceed with a hearing on said case, and to make a final determination of the issues, and in so doing it must not, without the consent or fault of the utility, permit unnecessary, unreasonable, unjust, or unjustifiable delay.

5. A state, having established by law an agency to perform a governmental function for it, is bound to see that those over whom such agency exercises control are not misled or prejudiced by its agents, and all of the actions of the state's agency must be characterized by resolute good faith.

Appeal from Corporation Commission.

Proceedings instituted before the Corporation Commission of Oklahoma by citizens of the town of Walters, Okl., against the Community Natural Gas Company and against the Lone Star Gas Company, seeking to obtain a reduction in the burner-tip rates for natural gas. From orders of the Corporation Commission, the Community Natural Gas Company and the Lone Star Gas Company each appeal.

Reversed and remanded with directions.

OSBORN, C.J., dissenting in part, and RILEY and WELCH, JJ., dissenting.

Roy C. Coffee and Marshall Newcomb, both of Dallas, Tex., C. C. Hatchett, of Durant, and Blakeney, Wallace, Brown & Blakeney, of Oklahoma City, for plaintiffs in error.

J. B. A. Robertson and S. J. Gordon, both of Oklahoma City, for Corporation Commission.

D. A. Stovall, of Hugo, for Citizens of Hugo.

S.D. Williams, of Wynne Wood, for Citizens of Pauls Valley and Wynne Wood.

Walter Hubbell, of Walters, for City of Walters.

BAYLESS, Vice Chief Justice.

Community Natural Gas Company, a corporation, and Lone Star Gas Company, a corporation, bring separate appeals to this court, under Nos. 27,259 and 27,628; the Corporation Commission of Oklahoma et al., being defendants in error in each case. The appeals are consolidated and involve complaints concerning the actions of the commission in consolidated cause No. 10,777 before the commission. The cause was instituted December 28, 1930, by citizens of the town of Walters, Okl., seeking to obtain a reduction in the burner-tip rates for natural gas. Citizens of other towns in southern Oklahoma joined with similar pleas until eventually the citizens of twenty-six towns were involved. Community Natural Gas Company, hereafter referred to as Community, serves the users of natural gas in these towns with burner-tip service. It purchases the natural gas in wholesale quantities at the city gates and distributes and sells it to users within the respective towns. Its business is wholly intrastate and is wholly subject to regulation as a public utility by the state of Oklahoma. Article 9, Constitution of Oklahoma, and chapter 93, Sess.Laws 1913, as amended by Laws 1929, c. 353, § 1, 17 Okl.St.Ann. §§ 151-155. Community makes such purchases of natural gas from Lone Star Gas Company, hereafter referred to as Lone Star, which is a foreign corporation, admitted to do business in Oklahoma, and, in so far as we are shown, is engaged in intrastate and interstate business and probably is not subject to regulation by the state of Oklahoma. Virtually the entire capital stock of these corporations is owned by Lone Star Gas Corporation, a corporation, hereafter referred to as holding company, a foreign corporation, not admitted to do business in Oklahoma, and, in so far as this case is concerned, not subject to regulation in Oklahoma.

The commission conducted hearings and received much evidence. Because of this intercorporate affiliation, and certain contractual relations, the commission desired evidence of the business practices among these corporations in order to determine the effect thereof upon the rate base of Community. Lone Star furnished evidence.

Page 395

Holding company refused on the theory that it was not in anywise subject to the jurisdiction of the state of Oklahoma. The commission deemed itself unable to proceed to a final order fixing a permanent rate without the evidence it desired from holding company. After making detailed findings of fact as to the rate base of Lone Star, it announced that no findings could be made finally as to Community or Lone Star, nor a permanent rate ordered until the evidence it desired was furnished. An appeal was taken from the order of the commission, No. 6201, embodying these issues and our opinion thereon is reported as Lone Star Gas Co. v. Corporation Commission, 170 Okl. 292, 39 P.2d 547.

In that opinion we approved the formula adopted by the commission upon which to arrive at the rate base of Community, which included evidence regarding the business of Lone Star and holding company. We upheld the right of the commission to demand such evidence from them. We approved the establishment of a temporary reduction in burner-tip rates, as probably justified by the evidence introduced when further supported by the additional evidence sought, and as proper in a punitive nature to enforce the will of the commission on the obstinate holding company, which alone would actually be affected by any confiscation arising from the temporary rate. We disapproved the effort of the commission to regulate the price at which Lone Star could sell natural gas to Community, and we disapproved the use of distress labor prices in arriving at costs in the rate base of Lone Star. We remanded for further testimony and a final order and permanent rate. The appeal before us now concerns what was done in obedience to the remand.

By express language in order No. 6201, the reduction in burner-tip rates was temporary, (1) because sufficient evidence was not available to justify a permanent rate under the formula adopted; and (2) it was said the additional evidence desired might justify a further reduction. In other words, additional evidence was necessary to permit the establishment of a permanent rate differing from the one in effect when the investigation began. It was possible that when all of the evidence was in no reduction would be legally permissible, or that an increase would be proper. Our remand affirmed the power to demand this evidence and directed the taking of it.

After the commencement of the investigation, Community petitioned for a raise in rates. Following the remand of the former appeal, Community again petitioned for an increase in rates. Therefore, in addition to the pleas for a reduction in rates, there were pleas for an increase in rates. The dissatisfaction of both utility and customers with existing rates is manifested, and the commission had a duty to perform.

After receiving our mandate and suspending further the temporary rates, the commission conducted an investigation of the records of the holding company, and set the cause for hearing at different dates, but never thereafter held another hearing. On May 5, 1936, the application for an increase in rates filed July 19, 1935, the second one filed by Community, was ordered docketed under No. 16,956, as a separate proceeding. On June 5, 1936, a date duly set for hearing the cause, Community and Lone Star appeared ready for trial. The commission refused to hear them, and entered a general order disposing of the entire matter. These appeals are from those orders.

By these orders, the following was provided: (1) The rate case against Community, that is the pleas to reduce rates, was dismissed without prejudice; (2) the case against holding company was dismissed, without prejudice; (3) order No. 2591 suspending further the operation of the temporary rates was vacated and set aside; (4) order No. 6201, the order involved in the former appeal, was adopted as the permanent rate for the burner-tip; (5) all of the findings of fact of order No. 6201 are adopted as the findings of fact to support the permanent rate (although it is to be noticed that such findings relate to the rate base of Lone Star and not Community); (6) required Lone Star to reduce its gate rate to Community 10 cents per M. C. F. when we had expressly condemned such an order in our former opinion; (7) required Community to reduce its burner-tip rate 10 cents per M. C. F. as a resulting savings, without basing the same on evidence; and (8) rendered judgment against...

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