Consolidated Gas Co. v. Prendergast
| Decision Date | 22 April 1925 |
| Citation | 6 F.2d 243 |
| Parties | CONSOLIDATED GAS CO. OF NEW YORK v. PRENDERGAST et al. |
| Court | U.S. District Court — Southern District of New York |
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Shearman & Sterling, of New York City (John A. Garver, William L. Ransom, Jacob H. Goetz, and Sanford H. E. Freund, all of New York City, of counsel), for plaintiff.
Charles G. Blakeslee, of Binghamton, N. Y. (Harry Myron Chamberlain and Charles F. Murphy, both of New York City, of counsel), for defendants Prendergast, Pooley, Van Voorhis, Semple, and Van Namee.
John Holley Clark, Jr., of New York City (Charles E. Buchner, of New York City, of counsel), for defendant Ottinger.
This is an action in equity, the object of which is to have declared unconstitutional, as confiscatory and void, chapter 899 of the Laws of 1923, state of New York, which prescribes a maximum rate in cities of 1,000,000 or more of $1 per 1,000 cubic feet of gas of not less than 650 British thermal units per cubic foot, and and for an injunction restraining the defendants from enforcing or attempting to enforce the provisions of said act. New York City is the only city of the state of over 1,000,000.
The special statutory court in this district composed of Rogers and Hough, Circuit Judges, and Bondy, District Judge, granted a preliminary injunction on July 6, 1923, as to this plaintiff and all other gas companies in the Southern district of New York, enjoining the enforcement of the statute under attack, on condition that the gas companies continue in effect, pendente lite, the rates theretofore fixed by the Public Service Commission, and on the further condition that they continue to furnish gas of the thermal content which the commission had authorized as the basis for such rates.
The defendants are members of the Public Service Commission of the state of New York, and the Attorney General of the state of New York.
The matter was referred by me to Hon. James G. Graham, as special master, by an order dated July 24, 1923, and later amended August 7, 1923, which order directed the special master to hear the evidence, make all computations, find the facts, and report with recommendations. The present motion brings on for final hearing in this court the report herein filed by the special master. This report, which is in full compliance with the direction of the court in appointing the special master, is most exhaustive on the questions of law and fact.
The report recommends the entry of a final decree in favor of the plaintiff. The plaintiff, however, prays that certain exceptions filed by it be sustained by this court, and that the report be modified accordingly, and then confirmed, as modified, and that a final decree be made in favor of the plaintiff.
The defendant Attorney General filed numerous exceptions to the findings in portions of the report, and now prays that the report be overruled, and that the constitutionality of the statute in question be sustained. The defendant Public Service Commission, while arguing in favor of the constitutionality of the statute, contends, however, that, if the court sustain the master's findings of fact as to operating costs and original cost of the property, it is not necessary or proper for the court to inquire further as to the value of the property for ratemaking purposes, or the rate of return which the plaintiff might be entitled to in a rate case.
The act in question became effective June 2, 1923, and provided as follows:
This statute has been under consideration by this court in New York & Queens Gas Co. v. Prendergast, 1 F.(2d) 351, and 371, and Bronx Gas & Electric Co. v. Prendergast, 1 F.(2d) 385.
By section 72 of the Public Service Commission Law, chapter 480 of the Laws of 1910 (N. Y.), chapter 134, § 49, of the Laws of 1921, the Legislature empowered the commission to fix rates to be charged by a gas corporation, and also to establish a period, not exceeding three years, during which the rate so fixed should continue in effect, and thereafter until the commission should fix a different rate. Subdivision 3 of section 66 of the same law authorized the commission to fix a standard of quality of gas to be furnished to consumers.
The Public Service Commission, pursuant to these provisions of the Public Service Commission Law, by orders adopted by it on or about August 30, 1922, effective October 1, 1922, provided for a rate applicable to the plaintiff of $1.15 per 1,000 cubic feet (except as to consumers of very large quantities of gas) of a total heating value of not less than 537 British thermal units (monthly average) per cubic foot. This rate and thermal unit, it was provided by the orders, were to continue for one year from October 1, 1922. The rate was accepted by the plaintiff herein, and the various requirements of the statute complied with. Large sums of money were expended by the gas company in adjusting its appliances and those of its customers to conform to the thermal unit prescribed. Before the expiration of the year during which the rate so prescribed by the Public Service Commission was in effect, the statute now under attack was enacted.
In the prior cases under consideration (New York & Queens Gas Co. v. Prendergast and Bronx Gas & Elec. Co. v. Prendergast, supra), the question of rates was of secondary importance, for the reason that the facts were conclusive that the cost of production and distribution alone in those cases exceeded the rate fixed by the statute, without providing any reasonable return upon the investment.
In pursuing his inquiry in the instant case as to whether or not the statute under consideration is confiscatory, the learned special master considered the case from three possible...
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