Applications of Intermountain Gas Co., 8314

• Decision Date: 28 October 1955
• Docket Number: No. 8314,8314
• Citation: 289 P.2d 933,77 Idaho 188
• Parties: , 11 P.U.R.3d 366 Applications of INTERMOUNTAIN GAS COMPANY, Pocatello Natural Gas, Inc., Idaho Natural Gas Company, for a Certificate of Convenience and Necessity.
• Court: Idaho Supreme Court

Page 933

289 P.2d 933

77 Idaho 188, 11 P.U.R.3d 366

Applications of INTERMOUNTAIN GAS COMPANY, Pocatello Natural Gas, Inc., Idaho Natural Gas Company, for a Certificate of Convenience and Necessity.

No. 8314.

Supreme Court of Idaho.

Oct. 28, 1955.

As Modified on Denial of Rehearings Nov. 29, 1955.

Graydon W. Smith, Atty. Gen., Kenneth G. Bergquist, Asst. Atty. Gen., for Idaho Public Utilities Comm.

Hawley & Marcus, Langroise & Sullivan, Boise, for appellant Intermountain Gas Co.

J. L. Eberle and W. D. Eberle, Boise, Q. P. Dorschel, Chicago, Ill., for respondent Idaho Nat. Gas Co.

TAYLOR, Chief Justice.

A hearing was had before the Idaho Public Utilities Commission, beginning October 27, 1954, on the applications of Intermountain Gas Company (appellant) and of Idaho Natural Gas Company (respondent), rival applicants for a certificate of convenience and necessity for the distribution of natural gas within certain counties in the southern part of the state. There were other applicants, intervenors and contestants in the proceedings who have taken no appeal and are not now involved. February 2, 1955, the commission entered its order No. 3041 granting the application of, and issuing certificate of convenience and necessity to, Idaho Natural Gas Company, respondent, and denying the application of appellant and others. March 10, 1955, the commission entered its order denying a rehearing. The Intermountain Gas Company brought this appeal from those orders.

Plan and Organization

From its showing before the commission it appears appellant was incorporated under the laws of Idaho October 12, 1950. All of its officers and directors are residents of the state of Idaho, except its vice-president and manager. Appellant's application for a certificate of convenience and necessity was filed October 21, 1950. Appellant began the preparation of its proposal in 1952. It became active in support of the application of Pacific Northwest Pipeline Corporation, before the Federal Power Commission for authorization to construct a pipeline from fields in New Mexico, Colorado and Wyoming through southern Idaho and into the Pacific Northwest.

Appellant employed H. Zinder and Associates, Inc., of Washington, D. C., a qualified company, to determine the economic feasibility of its proposed distribution system. It also employed Fish Service and Management Corporation, of Houston, Texas, recognized experts and specialists in the engineering of gas distribution systems, to lay out and prepare plans for its proposed system. Appellant expended considerable sums of money in preparing to qualify for certification by the commission. Mr. C. A. Brandt, of H. Zinder and Associates, a rate engineer, worked on appellant's proposal from June, 1954, to the time of the hearing. Mr. K. E. Graff of the Fish Service and Management Corporation, a qualified expert in designing, engineering, installing and inspecting of natural gas distribution systems, worked on the appellant's project from November, 1953, to the time of hearing. Mr. K. W. Spencer, of H. Zinder and Associates, an engineer of qualified experience in the gas distribution industry, worked on appellant's proposal from January, 1954, to the time of hearing. Mr. H. H. Ross, of Houston, Texas, also an engineer qualified in gas distribution industry, employed by the Fish organization, worked on the appellant's proposal for several months. After coming to Idaho Mr. Ross was elected vice-president and general manager of appellant.

These experts spent months traveling about the state and into the communities covered by appellant's application; also in surveying and mapping the proposed distribution system and canvassing local officials, citizens and industries in the proposed market areas.

Appellant also procured the services of White, Weld & Co., New York City, an investment banking firm, organized in 1896, with offices in several cities in the United States and in some foreign countries. That firm specializes in the financing of corporations entering or engaged in transmission and distribution of natural gas. Mr. H. L. Remmel, a partner in the firm, testified that his firm had been working with appellant from June, 1953, assisting in the preparation of its proposal and the determination of its financial and economic feasibility; also that his firm has approved the plan and agreed to place the first mortgage bonds and underwrite the debentures involved.

Through the efforts of its officers and the aforementioned experts, the appellant presented to the commission a complete plan and proposal for the construction and operation of a gas distribution system in the territory it proposes to serve. It also furnished a statement of its organization; its articles of incorporation; a list with a biographical sketch of each of its officers and directors; a list of its stockholders, and a financial statement. It also filed a complete list of subscribers to its common stock, all residents of Idaho, showing a total subscription of approximately eighty-five to ninety percent of its requirements.

Appellant properly calls attention to the fact that it is and proposes to remain a locally owned and locally controlled corporation. This showing is to the effect that all or practically all of the voting stock of the corporation will be held by residents of the state. Beside the economic advantage to the state involved in such ownership, local control of the corporation would facilitate future regulation and control by the commission. State Corporation Commission v. Mountain States Tel. & Tel. Co., 58 N.M. 260, 270 P.2d 685, 698-700. On this score respondent merely proposes that it will make a public offering of its common stock in Idaho. Respondent's present and future ownership and control was not revealed to the commission, the record showing only that qualifying shares have been issued to its officers and directors, the principals of whom are non-residents of this state.

Appellant's plan provides for an investment during the construction period of approximately $8,000,000, and for the laying of approximately 1,428,700 feet of distribution lines. It has attached maps of municipalities to be served showing the location of distribution lines and their related facilities. These maps show that appellant's plan calls for an initial laying of service lines in the 'core' or central areas of each community, of such dimensions and so laid out that they can be extended outward to include outlying areas when and if the demand arises, and additional gas becomes available.

June 18, 1954, the Federal Power Commission issued its decision authorizing Pacific Northwest Pipeline Corporation to build and operate the pipeline hereinbefore referred to. Based upon market estimates and the capacity of the pipeline authorized by it, the FPC approved the allocation of 33,149 Mcf of peak day gas for distribution in Idaho.

Respondent was incorporated July 14, 1954, and filed its application with the commission July 22, 1954. This company produced to the commission its articles of incorporation. It did not exhibit a financial statement nor a statement of its organization, officers directors or stockholders.

Respondent employed Stone & Webster Service Corporation, of New York, a corporation specializing in engineering service to corporations engaged in or entering gas, electrical or other utility enterprises. Mr. George W. Carpenter, of New York, an engineer employed by Stone & Webster to make a field survey for that organization, accompanied by 'a fellow engineer', spent ten days in Idaho visiting the municipalities to be served. They procured aerial photographs made by the Department of Agriculture, and maps and outlined on these the area in each community to be served. Because of limited time available, their contacts with residents, local officials and industries were limited. They did not make a canvass of the potential commercial and industrial customers nor attempt to determine the public accepttance of gas. The information they gathered from these visits, together with other information and data, collected by the organization, was compiled and examined in the offices of Stone & Webster, and a plan and proposal was submitted by that organization in support of respondent's application. Mr. Carpenter was the only expert witness of respondent who testified concerning the engineering phases of its case.

Respondent also procured the services of Central Republic Co., a corporation of Chicago, Illinois, which specializes in the underwriting of debt and equity securities. This company, in collaboration with Stone & Webster, prepared and approved the financial features of respondent's proposal. Mr. E. K. Hays, a vice-president and director of Central Republic, appeared and testified in support of respondent's application. The proposal contemplates a capital investment during the construction period of approximately $16,000,000, and the laying of 2,888,000 feet of distribution lines. The maps and other data submitted indicate that respondent's plan calls for the initial laying of service pipes in all of the 'built up' area in each community. The plan does not contemplate any house to house canvass to determine whether there will be customers available on the streets and alleys proposed to be piped. Mr. Carpenter testified that the plan to pipe the entire area immediately was adopted because 'the system can be constructed considerably cheaper by building it all at once.'

The other experts were of the opinion that the safer and more prudent way is to lay service pipe in the older center of each community where older and established businesses and residences are located. These are more likely to convert to gas than are prospective customers in newer districts who would be reluctant to scrap relatively new electric, oil, or coal buring equipment. After a balanced load of industrial, commercial, and residential customers is...