Consumers' Gas Co. v. Corporation Com'n

• Decision Date: 18 September 1923
• Docket Number: 13352.
• Parties: CONSUMERS' GAS CO. v. CORPORATION COMMISSION. CITY OF MIAMI ET AL. v. CORPORATION COMMISSION.
• Court: Oklahoma Supreme Court

219 P. 126

95 Okla. 57, 1923 OK 609

CONSUMERS' GAS CO. v. CORPORATION COMMISSION.

CITY OF MIAMI ET AL. v. CORPORATION COMMISSION.

No. 13352.

Supreme Court of Oklahoma

September 18, 1923

Syllabus by the Court.

Rate making being a legislative power, notice to parties affected by an order of the Corporation Commission increasing gas rates upon application of a public service corporation need not be given, unless specifically required by statute.

If a party is entitled by statute to notice, in a particular manner, of a hearing before the Corporation Commission, such notice is waived by such party appearing and participating in the proceedings, without objection to the sufficiency of the notice given.

Where the Corporation Commission, on March 29, 1922, at the conclusion of a hearing for the purpose of establishing rates to be charged by a natural gas utility, announced that the rate was fixed at 63 cents per M. cubic feet, to be effective April 1, 1922, but such order was not reduced to writing or dated until April 19, 1922, and recited that it was effective April 1, 1922, held, that the order was, in fact made on March 29th, and the mere delay in reducing it to writing did not have the effect of rendering it retroactive and inoperative prior to that time.

The Corporation Commission has the power to supersede its own order establishing a rate, pending an appeal to this court by requiring of the party appealing the suspending bond provided for by section 21, art. 9, of the Constitution.

The power to regulate rates and charges for services rendered the public by a public service corporation is inherent in the state, and is a necessary attribute of sovereignty.

The Legislature having delegated to the Corporation Commission the exclusive power of regulating rates for gas furnished by public utilities, the Corporation Commission may properly disregard the rates fixed by franchise, as well as those fixed by contract between the utility and individual consumers.

A natural gas utility is entitled to earn a reasonable return on its investment, and a reasonable amount for depreciation and amortization.

Where the Corporation Commission found that a public utility was entitled to earn a specified sum, but fixed a rate which would not produce such sum, the order fixing such rate will not be permitted to stand, but this court will establish such rate as will yield the income found necessary by the Commission.

Record examined and held, that the rate established by the Corporation Commission is unreasonable, and that the rate herein fixed should prevail.

Appeal from Corporation Commission.

Application by the Consumers' Gas Company to the Corporation Commission, to fix gas rates, and, from an order fixing the rates, the applicant and the City of Miami and others appeal. Order reversed, and rate established.

NICHOLSON J.

This is an appeal from an order of the Corporation Commission establishing rates to be charged by the Consumers' Gas Company, for natural gas furished to consumers in the towns of Miami, Commerce, Cardin, and Picher.

It appears from the findings of fact and order of the Corporation Commission that in the month of August, 1920, the Consumers' Gas Company filed its application with the Commission to fix and authorize a rate to be charged for gas used for gas engines in the Miami district; that on October 1, 1920, after a hearing had, the Commission made its order No. 1790, fixing a rate for gas engine purposes in said district at 35 cents per M cubic feet; on December 21, 1920, upon the petition of various consumers, both domestic and industrial, in the district, the cause was reopened and set for hearing; on January 4, 1921, and on different dates in February, 1921, all interested parties appearing before the Commission, the hearing was proceeded with. In the meantime, the Consumers' Gas Company amended its application and included therein a prayer for readjustment of rates for gas for all kinds of industrial use and domestic consumption in the towns and district served by it.

It is recited in said order that at these hearings much testimony was introduced by both the company and protestants; that it was disclosed by the testimony that the Consumers' Gas Company produced none of the gas distributed by it, but purchased its entire supply from the Quapaw Gas Company, and one of the reasons for the amendment to the application so as to include a general readjustment of rates was based upon the fact that the matter of fixing a just and proper gas rate to be charged by the Quapaw Gas Company was, at the time, pending before the Commission.

It is further recited that on July 1, 1921, the Commission made order No. 1888, fixing the gate rate to be charged by the Quapaw Gas Company for all gas transported and delivered to distributing companies at 25 cents per M cubic feet for domestic gas, and 20 cents per M cubic feet for industrial gas. It is then recited in this order that:

"The Commission, for the purpose of arriving at a fair value of the property of the Consumers' Gas Company, will take as a basis the original cost as shown by the testimony, of $646,488.63, to which will be added for contingencies and overheads which were not included in that figure, 20 per cent. or $129,297.72, making a value of $775,785.72, and it is upon this basis and value that the company is entitled to earn a reasonable return and depreciation.

The testimony upon the part of the company's witnesses shows that in the past 75 per cent. of the gas sold and distributed by it has been sold to industrial consumers, and that 25 per cent. of the gas sold and distributed has been used by domestic users. At the time of the hearing herein, a great many of the industrial consumers located in the mining district in Ottawa County, were shut down--the testimony tending to show this shutdown to be temporary in its nature. It is shown that at the time of the hearing, approximately 50 per cent. of the gas sold and distributed was being used by domestic consumers, and 50 per cent. by industrial users. It was also shown that during the year 1920, 2,069,556 cubic feet of gas was sold by the company and that at the beginning of the year 1921, owing to the temporary decrease in the consumption upon the part of industrial users, approximately an equal amount of gas was being taken by domestic and industrial users, or approximately 600,000 cubic feet for each purpose.

The Commission cannot believe that the company will sell less than 1,500,000 cubic feet in the towns and cities served by it and to the industrial users of gas in the territories served by it, in the future. Taking that figure as a basis and dividing the amount equally as between industrial users and domestic users, allowing a rate of 25 cents for industrial consumption and 45 cents as the maximum rate for domestic consumption, would result in a gross return of $580,000. The operating expenses as shown by the monthly reports for the year 1920, total for that year $495,871.17. There can be no doubt but that operating expenses for the present and coming years should be less, but, taking this figure, results in a net of $84,129, to the company as a return. Any increase in the industrial consumption of the mining fields of Ottawa county will result in an addition to these figures."

The Commission then fixed a rate of 50 cents per M cubic feet for the first 150,000 cubic feet per month, 40 cents per M cubic feet for the next 350,000 cubic feet per month, 25 cents per M cubic feet for all in excess of 500,000 cubic feet per month and 30 cents per M cubic feet for gas used for gas engines in excess of 500,000 cubic feet per month. Said order took effect from and after July 1, 1921.

On December 19, 1921, the Consumers' Gas Company filed its application for a readjustment of rates, in which it was shown that it had operated under the rates fixed by the order above mentioned for approximately six months, and as a result thereof, had obtained an operating revenue of $15,071.78 during said period, applicable to return on the investment and depreciation charges; that the Quapaw Gas Company, from which it obtained its supply of gas, had made application to the Commission for an increase in the price of gas; and prayed the Commission to install a temporary rate sufficient to take care of any increase granted the Quapaw Gas Company, and also to afford the applicant a reasonable and adequate return upon the fair value of its property used and useful in the conduct of its business, and to furnish an adequate depreciation charge on said property. Upon this application a hearing was had, and the Commission made its order No. 2051; that portion of which it is necessary to notice reading as follows:

"After a conference attended by representatives of the towns involved in this order, the applicant and the Corporation Commission, which conference was followed by mass meeting of citizens of said towns, the Corporation Commission was notified by telegram that the people of the cities and towns involved in this order would not use gas at a rate higher than 63 cents per M cubic feet.

In the hearing December 31, 1921, the

applicant offered the original cost valuation as found in order No. 1895, which was $775,785.72, as a basis for a further adjustment of the rate. While the Commission does not have a segregation of the property of the applicant in the towns of Miami, Picher, Commerce, and Cardin as compared with the company's property as a whole, it has a statement from the company showing that during the year ending November 30, 1921, it sold 480,800 M cubic feet of gas for domestic purposes on its system of which 321,434 M cubic feet or approximately 66 per cent was sold in the towns involved in this case,

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