Columbia Gas of West Virginia, Inc. v. Public Service Com'n of West Virginia, 15945

• Decision Date: 14 December 1983
• Docket Number: No. 15945,15945
• Citation: 173 W.Va. 19,311 S.E.2d 137
• Court: West Virginia Supreme Court
• Parties: COLUMBIA GAS OF WEST VIRGINIA, INC. v. The PUBLIC SERVICE COMMISSION OF WEST VIRGINIA.

Page 137

311 S.E.2d 137

173 W.Va. 19

COLUMBIA GAS OF WEST VIRGINIA, INC. v. The PUBLIC SERVICE COMMISSION OF WEST VIRGINIA.

No. 15945.

Supreme Court of Appeals of West Virginia.

Dec. 14, 1983.

Syllabus by the Court

W.Va.Code, 24-2B-1, our legislatively-imposed moratorium on rate increases for natural gas utilities until March 12, 1984, does not offend due process or just compensation provisions in the Fourteenth Amendment to the United States Constitution, nor our State Constitution, Art. III, § 10.

Charles R. McElwee, Kim Brown Poland, William C. Porth, Robinson & McElwee, Charleston, T.E. Morgan, W.R. Barnes & A.J. Sonderman, Columbus, Ohio, for petitioner.

Robert R. Rodecker, William H. Roberts, Legal Div., Charleston, for Public Service Com'n.

HARSHBARGER, Justice:

Columbia Gas Company has petitioned this Court for review of a June 7, 1983 order of our Public Service Commission.

On June 1, 1982, the commission approved Columbia's present rates that provided for a 14.5 percent return to shareholders which included an 11.5 percent return on Columbia's West Virginia investments.

As is so often the case, the next month Columbia asked for another increase pursuant to W.Va.Code, 24-2-4a, ¹ in case 82- 380-G-42T, seeking a 7.22 percent increase of $21,083,961. Rate change filings become effective thirty days after notice to the commission and public unless the commission enters an order suspending the proposed rates. See fn. 1.

On August 27, 1982, the commission suspended the operation of Columbia's new filing for the maximum period then allowed by Code, 24-2-4a: 270 days beyond the thirty-day notice period. In addition, Section 4A provides that "if any such hearing and decision thereon is not concluded within the periods of suspension, as above stated, such rate, charge, classification, regulation or practice shall go into effect at the end of such period not subject to refund." By this suspension order, the commission was required to hear and determine the reasonableness of Columbia's rates by June 8, 1983 or else those rates would go into effect and not be subject to refund provisions, even if unreasonable. We affirmed the constitutionality of this procedure in State ex rel. Knight v. Public Service Commission, W.Va., 245 S.E.2d 144 (1978).

On March 12, 1983, the legislature passed a utility reform act that included this portion of W.Va.Code, 24-2B-1 (1983):

[U]pon the effective date [March 12, 1983] of this article, the commission shall authorize no increase of rates charged by any utility for natural gas to any customer of any class for a period of twelve months. With respect to cases for rate increases which are pending before the commission on the effective date [March 12, 1983] of this section, such cases may be suspended by the commission and held in abeyance by the commission during the pendency of the period of suspension mandated by this section or any such cases may proceed to completion and the commission may rule thereon upon the same to the same extent as if this section had not been enacted, all with the sound discretion of the commission.

It is the application of this new legislation that brings the company here.

Hearings were held several days after that statute became effective in March, 1983. On April 18, the Public Service Commission staff moved to suspend 82-380-G- 42T per Code, 24-2B-1. A month later a hearing examiner entered his recommended order that Columbia be given a rate increase of $8.35 million, but that that increase be suspended until March 12, 1984 in accord with the new act. All parties were given fifteen days to file exceptions to this recommended decision.

That same day the commission responded to its staff's motion to suspend the pending rate case pursuant to Code, 24-2B-1, and to Columbia's response in opposition to the staff motion. It issued an order for Columbia to appear and show cause at a May 26, 1983 hearing why its request for increased rates should not be suspended. In that order the Commission announced two principles it would follow when exercising its discretion to suspend pending rate cases:

1. Without a rate increase the Company does not have sufficient revenue to pay reasonable operation and maintenance expenses, taxes, debt service and preferred dividends. The Company should have sufficiently internal generated cash to cover depreciation expense and to pay a reasonable portion of its 1983 construction program; and

2. Whether other relevant factors, such as physical disasters necessitating emergency construction, periodic principal payments regularly due, etc., exist that require the Commission, in the exercise of its sound discretion to continue Columbia's rate case to completion.

Following the May 26 hearing, the hearing examiner solicited additional briefs from the parties.

On June 6, Columbia and the Consumer Advocate Division of the Public Service Commission (CAD) excepted to the hearing examiner's May 18 decision. The June 8, 1983 effective date for Columbia's applied-for rate was rapidly approaching, and the commission knew that if it did not act, Columbia's proposed new tariffs would go into effect and not be subject to refund. In order to prevent this, the commission issued its June 7, 1983 order affirming the hearing examiner's May 18, 1983 recommendations of a rate increase less than Columbia asked for, and invited the parties to raise the issues once again by filing petitions for further hearing, reopening or rehearing. On June 8, the hearing examiner issued his second decision, based on the May 26 hearing, affirming suspension of Columbia's rates for one year.

Columbia filed petitions for reconsideration of the commission's June 7 order, exceptions to both of the hearing examiner's orders, and a complaint for declaratory judgment and injunctive relief in Kanawha County Circuit Court. The commission's staff and CAD also objected to these decisions.

Kanawha County Circuit Court Judge Robert Harvey heard the parties' preliminary injunction arguments and denied Columbia's motion on June 30, 1983 because it had an adequate remedy by appeal, here; and so we now are asked to decide whether the suspension of rate increases until March 12, 1984, W.Va.Code, 24-2B-1, is unconstitutional as applied to Columbia's pending rate case. ²

In the exercise of its police powers, a state legislature has the right to set rates for public utilities in the public interest. United Fuel Gas Co. v. Public Service Commission, 73 W.Va. 571, 80 S.E. 931 (1914); Boggs v. Public Service Commission, 154 W.Va. 146, 174 S.E.2d 331 (1970). It may use that power itself or it may delegate it to an agency or authority. Bluefield Waterworks & Improvement Co. v. Public Service Commission, 262 U.S. 679, 43 S.Ct. 675, 67 L.Ed. 1176 (1976). The legislature or its designated rate-making agency, in this case the West Virginia Public Service Commission, may set any rate it deems just and reasonable, so long as it does not violate the constitutional proscription against confiscation of private property without just compensation found in U.S. Const. amend. XIV, and W.Va. Const. art III, § 10. Lumberport-Shinnston Gas Co. v. Public Service Commission, W.Va., 271 S.E.2d 438, 441 (1980); United Fuel Gas Co. v. Public Service Commission, 143 W.Va. 33, 99 S.E.2d 1, 8 (1957); see also West v. Chesapeake & Potomac Telephone Co., 295 U.S. 662, 55 S.Ct. 894, 79 L.Ed. 1640 (1935); Mountain States Telephone and Telegraph Co. v. New Mexico State Corp. Commn., 90 N.M. 325, 563 P.2d 588 (1977); Utah Power and Light Co. v. Public Service Commission, 107 Utah 155, 152 P.2d 542 (1944). Deprivation of the right to earn a reasonable rate of return, considering facts and circumstances and economic realities of the times, is governmental confiscation of property. City of Huntington v. Public Service Commission, 89 W.Va. 703, 110 S.E. 192 (1921).

Rates set by the legislature and the Public Service Commission are presumed to be valid. It is the burden of a utility challenging their presumptive validity to clearly show that rates established are confiscatory. Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591, 602, 64 S.Ct. 281, 287-88, 88 L.Ed. 333 (1944); Cf., City of Charleston v. Public Service Commission, 83 W.Va. 718, 99 S.E. 63 (1919); C & P Telephone Co. v. Public Service Commission, W.Va., 301 S.E.2d 798 (1983); New England Telephone and Telegraph Co. v. Public Utilities Commission, 354 A.2d 753 (Me.1976); New England Telephone and Telegraph Co. v. Public Utilities Commission, 116 R.I. 356, 358 A.2d 1, 22 (1976); State ex rel. Laclede Gas Co. v. Public Service Commission, 535 S.W.2d 561 (Mo.Ct.App.1976).

Columbia has not met that burden.

The United States Supreme Court recognized that the Constitution does not prevent setting maximum or price ceilings and that regulation of industries, including utilities, may limit returns on investments without being confiscatory. Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312, reh. denied, 392 U.S. 917, 88 S.Ct. 2050, 20 L.Ed.2d 1379 (1968); Baltimore & Ohio R. Co. v. United States, 345 U.S. 146, 73 S.Ct. 592, 97 L.Ed. 912 (1953); Lichter v. United States, 334 U.S. 742, 68 S.Ct. 1294, 92 L.Ed. 1694 (1948), reh. denied, 335 U.S. 836, 69 S.Ct. 11, 93 L.Ed. 389; Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892, 28 Ohio Ops. 180 (1944). "Regulation may, consistently with the Constitution, limit stringently the return recovered on investment, for investors' interest provide only one of the variables in the constitutional calculus of reasonableness. Covington and Lexington Turnpike Company v. Sandford, 164 U.S. 578, 596, 17 S.Ct. 198, 205, 41 L.Ed. 560, 566." Permian Basin Area Rate Cases, supra, 390 U.S. at 769, 88 S.Ct. at 1361, 20 L.Ed.2d at 337.

Other courts as well have articulated the difference between constitutionally impermissible confiscatory rates and rates lower than...