Arkansas-Louisiana Gas Co. v. City of Texarkana, Ark.

• Decision Date: 31 October 1936
• Docket Number: No. 219.,219.
• Parties: ARKANSAS-LOUISIANA GAS CO. v. CITY OF TEXARKANA, ARK., et al.
• Court: U.S. District Court — Western District of Arkansas

17 F. Supp. 447

ARKANSAS-LOUISIANA GAS CO. v. CITY OF TEXARKANA, ARK., et al.

No. 219.

District Court, W. D. Arkansas, Texarkana Division.

October 31, 1936.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

H. C. Walker, Jr., of Shreveport, La., W. H. Arnold, Jr., and Arnold & Arnold, both of Texarkana, Ark., and W. C. Fitzhugh, of Shreveport, La., for plaintiff.

Willis B. Smith and Ben E. Carter, both of Texarkana, Ark., for defendants.

RAGON, District Judge.

On October 23, 1933, the original plaintiff, Southern Cities Distributing Company, filed an application with the city council of Texarkana, Ark., for an increase in rates on gas furnished to the residents of the city. The rate under which gas was being furnished was fixed by the city council in 1923, and provided for a rate of 50 cents per thousand cubic feet on the first 100,000 cubic feet, or fraction thereof, sold in any thirty-day period to domestic or commercial consumers. A rate of 22 cents per thousand cubic feet was provided on gas sold in an amount over 100,000 cubic feet. The industrial rate provided for a charge of 21 cents per thousand cubic feet on the first 500,000 cubic feet, and a reduction of one cent on each successive million in excess of 500,000, until the rate was reduced to seventeen cents. The rate schedule provided further that bills for monthly consumption should be subject to a discount of 10 per cent. from the above rates if the bill be paid within ten days after rendition.

In 1930, the gas company applied for an increase in rates, and after hearings were held the gas company and the city council agreed upon the following rates to domestic and commercial consumers.

First 1,000 cubic feet, $1.00. Next 149,000 cubic feet, $.50. Excess of 150,000 cubic feet, $.25.

All gas sold for the 50-cent rate was subject to a 5 per cent. discount if paid within ten days after the bill was rendered, and that sold on the 25-cent rate was likewise subject to a discount of 2 cents per MCF. The industrial rates were the same for all practical purposes in this opinion as the 1923 schedule. A charge of $1 was provided for each connect and disconnect on domestic and commercial customers after first installation was made for the same customer, except where meter was to be removed for company purposes. The resolution providing these rates was submitted to a vote of the people on a petition for a referendum and the resolution was defeated. The gas company attempted to enjoin the enforcement of the 1923 rates, but their action was eventually dismissed by the Circuit Court of Appeals.

On October 23, 1933, the gas company applied again for an increase of rates and provided for the following schedule:

First 1,000 cubic feet, $1.75. Next 2,000 cubic feet, $.75. Next 7,000 cubic feet, $.55. Over 10,000 cubic feet, $.35.

A minimum charge of $1.75 for each thirty-day period should be made to each domestic and commercial consumer connected to the distributing system. An additional 10 per cent. charge over the above rates was to be made to each consumer who failed to pay his bill within ten days after it was rendered. Industrial gas was to be served under a special contract, mutually agreed upon between the company and customer, and a minimum charge of $25 per month was to be charged to those customers to whom the industrial rates applied.

The city council, after hearings had been held, declined to grant the gas company's rate and on December 22, 1933, passed a resolution ordering the gas company to proceed under the following rates:

First 100,000 cubic feet, $.50. Over 100,000 cubic feet, $.22.

A 10 per cent. discount applying on monthly accounts for service rendered at any individual installation where services rendered are paid at the company's office on or before ten days following the date of bill. It provided practically the same rates for industrial gas as the 1923 schedule. The council further reserved the right to consider reductions at subsequent hearings.

On February 12, 1934, the council made another order further reducing the rates to 45 cents on the first 100,000 cubic feet, and providing for a discount of 5 cents per MCF on bills carrying the 45-cent rate. This resolution concluded as follows: "Except as herein modified, the order embodied in the Resolution of December 22, 1933, shall remain in full force and effect." I have enumerated only the rates in the different applications of the company and council resolutions which I have deemed pertinent to the issues involved, and the short resolution of February 13, 1934, had only the effect of amending the resolution of December 22, 1933, on the first 100,000 cubic feet of gas furnished.

The plaintiff then filed its bill, asking that the city council be enjoined from enforcing the rates embodied in the resolutions of December 22, 1933, and February 13, 1934, and enjoined from interfering with the plaintiff in charging the schedule of rates set forth in their application of October 22, 1933. A temporary injunction was granted on February 16th in the terms of plaintiff's bill.

All of the stock, excepting qualifying directors' shares, in the original plaintiff corporation, Southern Cities Distributing Company, the Arkansas-Louisiana Pipe Line Company, and the Reserve Natural Gas Company, was, at the time of the institution of this litigation, owned by the Arkansas Natural Gas Corporation, which was in turn controlled and dominated by the H. L. Doherty interests in the city of New York. During November, 1934, the first three named corporations were merged under the name of Arkansas-Louisiana Gas Company; the new company was substituted as plaintiff. The original plaintiff corporation bought the gas which it distributed to its customers in the city of Texarkana from its affiliates, the Arkansas-Louisiana Pipe Line Company and the Reserve Natural Gas Company, which were operated as a unit, paying for the gas it distributed to its domestic consumers thirty-nine cents per MCF, making special contracts with its industrial consumers, paying the operating companies three cents less per MCF than it received from industrial customers. The Arkansas Natural Gas Corporation was also fiscal agent for its subsidiaries, receiving and disbursing all, or at least the major portion, of all funds of all companies.

Before going to the issues, a brief discussion of the statutes of Arkansas, authorizing the city council to fix rates, will not be amiss, since there is some diversity of opinion as to the weight which should be given to the council's action. In 1921 the Arkansas Legislature passed Act No. 124, p. 177, which gave exclusive jurisdiction to the city council of municipalities to fix, or modify, gas rates within the municipalities. This act provides the procedure to be followed in rate legislation by the city council. It provided for initiation of rate schedules by either the gas company, or the council, and that a hearing should be held and upon these hearings a rate should be determined. It required the utility to furnish, upon order of the council, all reports, rates, classifications, rules, or other practices in force at any time and to furnish for the purpose of examination and investigation all books, records, and other information as to any matter pertaining to its business or organization. It also requires the utility to furnish from time to time verified itemized and detailed inventories and valuations of any or all its property. The act sets out a full and complete procedure for the council to follow in establishing or modifying rate schedules.

On March 3, 1933, a statute became effective (Acts 1933, p. 203, No. 72) providing for the creation of a fact-finding tribunal for a period of four years. Section 2 of the act gave to the tribunal the power to investigate and make a finding of all facts entering into or forming the basis of rates charged by any public utility, whether operating under a franchise or indeterminate permit. Such investigation and finding of facts are to be made at the instance of any city council, utility company, or of the corporation commission. Section 5 of the act stated the purposes for which the tribunal was created and reciting that the cities and towns were financially unable to ascertain and develop facts upon which rates might be determined. Act No. 174, p. 471, of the Acts of 1935, declares the meaning of Act No. 72 of the Acts of 1933 by making the findings of the tribunal the sole record upon which the council or courts could act in fixing a rate.

Under the Act of 1921, the city council was made a rate-regulating body by the State Legislature. The fact-finding tribunal was created for the purpose of assisting the city council, if the council or the utility called upon them. Its creation neither took away nor added to the authority of the city council, except to lend itself as an agency in developing facts when called upon to do so. Although the fact-finding tribunal was in existence, neither party to this action called upon it to assist in finding the facts upon which rates might be determined. The hearings before the city council proceeded over a period of several days, both sides being represented by able counsel, and several hundred pages of testimony was produced and among the witnesses before the council appeared for both sides some of the ablest experts in the country. The council, through a questionnaire, procured various data as to the company's affairs. I find from arguments of counsel that the principal witnesses before the master were also the principal witnesses before the council.

After giving several weeks' consideration to the plaintiff's application, the city council passed a resolution embodying a finding of facts which have been made a part of the record. These findings of facts in their thoroughness of detail and orderliness of conclusions disclose a consideration in rate structures not usually found in...