Arkadelphia Electric Light Co. v. Arkadelphia

• Decision Date: 01 May 1911
• Citation: 137 S.W. 1093,99 Ark. 178
• Parties: ARKADELPHIA ELECTRIC LIGHT COMPANY v. ARKADELPHIA
• Court: Arkansas Supreme Court

137 S.W. 1093

99 Ark. 178

ARKADELPHIA ELECTRIC LIGHT COMPANY v. ARKADELPHIA

Supreme Court of Arkansas

May 1, 1911

[Copyrighted Material Omitted]

Appeal from Clark Chancery Court; James D.Shaver, Chancellor affirmed.

STATEMENT BY THE COURT.

This suit is by appellant, hereafter called the Company, against appellee, called the City, to enjoin the enforcement of an ordinance of the City, fixing rates to be charged by the Company for electricity furnished consumers.

The rates fixed by the City in said ordinance and required to be applied by the company are challenged as unreasonable and unjust to the Company and its consumers, and in violation of established methods of rate-making, and confiscatory, in that they deprive the Company of a reasonable return upon its capital invested, and operate to take from it its property without just compensation, in violation of both the Federal and State constitutions. The Company further contended that said Ordinance of January 4, 1909, fixing the rates, impaired its contract entered into with the City in August, 1904, and was in violation of the Constitution on that account.

The City answered, admitting the making of the ordinance of August 15, 1904, granting the predecessor of the Company the right and privilege of supplying electricity to the inhabitants of the City; denied "that the rates fixed by the ordinance are unreasonable or in violation of established methods of rate-making, that the ordinance does not allow discounts, and * * * that it entails a loss upon the Company's business, and that it greatly tends to reduce the Company's net revenue, and that the ordinance will cause any of the Company's customers to decline further service or deter prospective customers from installing lights, but alleges that it will cause new customers, and prevent the Company from increasing the rate to other customers at its pleasure; denied that the ordinance rates are confiscatory, and that they deny the Company and its stockholders a reasonable return upon the capital invested and all other material allegations to the complaint.

The testimony tended to show that by the ordinance of August 15 1904, the City granted the predecessor of the Company and its successors the right and privilege of supplying electric lights to the city and its inhabitants for a term of thirty years from the passage of the ordinance.

That ordinance provides (section 6) that "the maximum rate to be charged by the grantee to consumers for lights shall be based upon meter rates of 20 cents per thousand watts, and that if any customer becomes dissatisfied with flat rate based upon the above consumption they may demand metered service, according to the rules and regulations of the grantee, provided, however, that in no case shall metered current be furnished at a less rate than $ 1.50 per month for each consumer so furnished."

The corporation under this ordinance adopted and enforced a schedule of charges and discounts, the basic price for electric energy being fixed at 15 cents per thousand watt hours, on all meter bills, with a sliding scale of discounts, in consideration of payment on or before the 5th of the month "on a consumption for 16 c. p., one lamp equivalent, of less than 3,500 watts, one month, 10 per cent.," and on up to "on a consumption 16 c. p., one lamp equivalent to 15,000 watts and over, one month 60 per cent., the discount to be arrived at by dividing the watt hours consumed by the number of c. p. lamps connected, or their equivalent, and referring to the discount list.

On January 4, 1909, the City, upon complaint duly made, passed an ordinance fixing the rates to be charged by the Company for electricity furnished to the consumers as follows:

Section 1 provides: Meter rates for electricity consumed per month for 10,000 watt hours or less, $ 1.50.

For 10,000 to 20,000 watt hours, 14 cents per thousand watts.

For 20,000 to 25,000 watt hours, 13 cents per thousand watts.

For 25,000 to 30,000 watt hours, 12 cents per thousand watts.

For 30,000 to 35,000 watt hours, 11 3/4 cents per thousand watts.

For 25,000 to 40,000 watt hours, 11 1/2 cents per thousand.

And a graduated scale of reduction in price per thousand watt hours as the number of watt hours increased over said amounts, up to 800,000 and over per month, the price fixed thereon being 8 1/2 per thousand watts. The minimum rate was fixed at $ 1.50.

Section 2 of the ordinance required the Company to accept and adopt the rates, and section 3 made its refusal to do so and charge of a greater amount than that fixed by section 1 a misdemeanor, punishable by fine.

About September, 1908, the Company purchased the franchise granted its predecessor under the ordinance of 1904. It is incorporated for $ 25,000, of which amount $ 20,000 was paid in, and it claims that the property purchased from its predecessor was worth in cash $ 20,000; that an inventory was taken in February, 1907, showing the value of the property as $ 34,563.75, as stated by its president; that at the time of its sale $ 14,563 was charged off for depreciation, leaving the $ 20,000 at which the plant was purchased. He also stated that "the net cash value of the Company's income for the year referred to will not enable it to put aside for renewal the annual 10 per cent. required and to pay 6 per cent. interest upon the capital invested in the plant."

The Company engaged in the sale of merchandise, fixtures, lamps, wiring contracts, etc., and made a profit of $ 1,400 on this business. About $ 500 of its capital was invested in this stock, and the salaries and wages of employees engaged in this department were charged against the revenue derived from the rates charged consumers for electricity.

He made a statement showing the difference between the Company rates and the City rates from January to May, 1909, inclusive, which shows $ 3,487.20 gross collected under the city rate, when under the Company rate there should have been collected $ 3,682.80, a difference of $ 195.60 in five months claimed to be a loss to the company; that if the ordinance had not been passed the rates of the Company would not under its own rates have paid the current and fixed charges, the 10 per cent. to be set aside for repairs, renewals and replacement, and 6 per cent. on the capital actually invested in the electric light plant; that the prices charged by the Company prior to the passage of the ordinance were unreasonable, "in that they were too low and were adopted as an experiment which failed to pay a reasonable amount for depreciation and a fair rate of interest."

"I consider the ordinance rates unreasonable, first, because too low to provide sufficient revenue to meet current expenses, set aside a reasonable amount for depreciation, and pay a fair dividend.

"Second, because they are based upon rules contrary to the best established rules of rate-making, and are so low that the company is unable to allow discounts, and because thereof has more expense in collecting its accounts."

It has a contract with the Arkadelphia Milling Company, by which power is furnished at a certain rate of the gross amount received from the consumers, with the minimum fixed at not less than $ 250 per month.

The value of the entire property upon which Company is entitled to a return is $ 16,000, according to the president's estimate and inventory, and it was assessed for taxes at that value, and paid taxes on one-half the estimate.

Another witness, Mr. Dempsey, in charge of the entire electrical department of the Arkadelphia Milling Company that furnished the Company power, made an inventory of its property and testified that it amounted to $ 11,045.58.

Prof. Gladson, an expert, examined the inventory made by the Company in 1907, and stated that $ 14,961 would buy the property and pay for all costs of labor used in installation of the plant.

Prof. Burr said that a new plant, including machinery for motive power of the same capacity of the Company's plant could be constructed for $ 15,000.

The net revenue for the year ending September 1, 1909, after deducting all expenses, taxes and depreciation for scrip, amounted to $ 1,803.89, not including the $ 1,400 that the Company made by the sale of its merchandise and wiring of houses.

J. W. Bunch, one of the aldermen who investigated the rates before the passage of the ordinance, stated that, before it was passed by the council, he examined the rates as applied in more than 20 towns in Arkansas, and there was not a town that had sliding rates like the Company that discriminated between its customers. He stated that the Company gave him a report of the revenue and expenditures from December, 1907, to October, 1908, and since the passage of the ordinance he had compared the rates fixed by it during the like number of months in a year previous to the passage of it.

Beginning January, 1908, for eight months, statement shows $ 4,435.72 under the Company's rate. In 1909, after the City rates went into effect, eight months showed $ 5,117.32, making an increase of $ 681.60, and it was stated that the Company got more new patrons in the last six months under the City's rates than it had before under its own.

The Company's contention was, and its experts claimed, that the City rates were not fixed on a scientific and correct basis, that they did not take into account the size of the installation of the customer, the number of lights burned but only the amount of electricity actually consumed, and that this was unreasonable because it required greater expense to be ready to serve consumers with large installations who might not in fact use as much electricity as those with smaller installation who burned their lights constantly; on the other hand, the...