Kansas-Nebraska Natural Gas Co. v. City of St. Edward
| Decision Date | 27 June 1958 |
| Docket Number | No. 34374,KANSAS-NEBRASKA,34374 |
| Citation | 167 Neb. 15,91 N.W.2d 69 |
| Parties | , 25 P.U.R.3d 118 NATURAL GAS COMPANY, Inc., Appellee, v. CITY OF ST. EDWARD et al., Appellants. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. A franchise for the sale of gas granted by a city of the second class to a public service corporation is made with the right of regulation of rates to be charged for gas a part of the contract.
2. The power of regulation rests in the Legislature until such time as it is delegated to a proper body.
3. The fact that the delegation of the power to another body occurs after the granting of the franchise is not material.
James E. Conway, Elmer J. Jackson, Hastings, Cline, Williams, Wright, Johnson, Lincoln, for appellee.
Earl Hasselbalch, St. Edward, for appellants.
Paul J. Gerdes, Smith Bros., Lexington, for City of Lexington, amicus curiae.
Stewart & Stewart, Lexington, Sidner, Lee, Gunderson & Svoboda, Fremont, for Nebraska Natural Gas Co., amicus curiae.
Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, WENKE and BOSLAUGH, JJ.
In this action plaintiff sought a judgment enjoining the defendants from preventing plaintiff putting into effect a rate schedule for the sale of gas to its customers in the defendant city.
The plaintiff is a corporation engaged in the sale of natural gas. The defendants are the city of St. Edward (a city of the second class), its mayor, and councilmen. They will be hereinafter referred to as the defendants.
Issues were made and trial was had based upon a stipulated statement of facts. It contained the following: 'That the issues of this case are limited to whether the Court has jurisdiction to grant Plaintiff the injunctive relief prayed for, and if so, then (1) whether the Defendants must regulate Plaintiff's rates under the Statutes of Nebraska and under the terms of Plaintiff's Franchise in the Defendant City, or (2) whether under such Statutes and Franchise, Plaintiff's Franchise constitutes a contract to furnish gas at the rates set out therein for the life of said Franchise.'
The trial court 'perpetually enjoined' the defendants from preventing the plaintiff putting the proposed rates into effect.
Defendants appeal.
We find generally in favor of the plaintiff but find that it is necessary to reverse the judgment and remand the cause because of the extent of the order perpetually enjoining the defendants from preventing the plaintiff from putting the proposed rates into effect.
On October 2, 1950, the city, pursuant to the authority of section 17-125, R.S.1943, granted the plaintiff a franchise for a period of 25 years which the plaintiff accepted on October 20, 1950. The ordinance set up a schedule of rates to be charged for natural gas. It will be quoted later herein. In March 1954, the plaintiff requested orally (and later in writing) an increase in rates to provide sufficient revenue to earn a fair and reasonable return on its invested capital. This request was supported by data indicating the necessity. Plaintiff requested the enactment of a new franchise ordinance and a supplemental rate ordinance. The defendants failed and refused to act on the proposed rate increase.
A study by an engineering firm was then made and its finding corroborated plaintiff's request. This report was made available to the defendants. On November 1, 1954, plaintiff renewed its request for a rate increase and again the defendants failed and refused to grant it.
This was followed by litigation in the federal courts. See Kansas-Nebraska Natural Gas Co. v. City of St. Edward, D.C., 134 F.Supp. 809, and (same title) 8 Cir., 234 F.2d 436.
Following that litigation the plaintiff on July 30, 1956, requested the defendants to exercise the regulatory power vested in them by section 17-125, R.R.S.1943, and section 17-528.01, R.S.S.upp., 1955. (Both original sections are now repealed and as amended are contained in section 17-528.02, R.S.Supp., 1957.) The plaintiff requested the city to adopt the proposed rates. The defendants by resolution on August 3, 1956, denied the request on the ground that the existing ordinance constituted a valid contract for a period of 25 years.
Plaintiff initiated this action on August 23, 1956. It was stipulated that plaintiff's evidence would show that its costs had increased by January 1, 1954, so that the established rates did not render fair and reasonable return and were confiscatory. Defendants did not resist that showing. We accept that as a fact established for the purposes of this litigation.
Defendants here advance the contentions that the courts are without jurisdiction to interfere with the discretionary power of the city council; that the existing franchise is a valid contract; and that plaintiff is estopped to assert a deprivation of property without due process of law and in violation of the Constitutions of the United States and of Nebraska.
The plaintiff concedes that the franchise is a contract as a matter of law but contends that by its terms there was intended a flexibility of rates; that the city has regulatory power which is explicitly and impliedly a part of the contract; and that the rates to be charged are subject to regulation. Section 4 of the franchise ordinance provided: 'Grantee shall file and make effective initially the schedule of maximum rates for natural gas service set forth below, and shall furnish natural gas at such rates, or at such other reasonable, lawful, and valid rates as may hereafter be established from time to time by Grantee, subject to the approval of the proper body having jurisdiction over such rates for gas service by Grantee in said city.
Schedule of Rates
---------------------------------------------------------
First 500 cu.ft. per month $.20 Per C.C.F
Next 1,500 cu.ft. per month .15 Per C.C.F
Next 1,000 cu.ft. per month .10 Per C.C.F
Next 7,000 cu.ft. per month .60 Per M.C.F
Next 90,000 cu.ft. per month .50 Per M.C.F.
Next 100,000 cu.ft. per month .40 Per M.C.F.
Balance .35 Per M.C.F.
Minimum Charge $1.00 Per Month
Gross Rate (above rate plus 10%) applied if bill is not paid within 10 days after date of bill.'
The Proposed schedule of rates is as follows:
First 1,000 cu.ft. $.20 Per C.C.F.*
Next 4,000 cu.ft. . 10 Per C.C.F.
Next 45,000 cu.ft. . 06 Per C.C.F.
Next 50,000 cu.ft. . 05 1/2 Per C.C.F.
All Additional .04 1/2 Per C.C.F.
* Minimum Monthly Charge: $2.00 Delayed Payment Charge: 5% on first $20.00
Note of bill, plus 2% on excess. Bills will be rendered at monthly intervals.
The above language in the franchise is subject to the reasonable construction that 'initially' the rates provided in the franchise were applicable until such time, within the period of the franchise, the plaintiff established 'other reasonable, lawful, and valid rates * * * subject to the approval of the proper body having jurisdiction over such rates * * *.'
The question, then, is: Is the city the 'proper body' having regulatory power, since it is the city that has been requested and which has refused to exercise the regulatory power?
At the time the franchise was granted, section 17-125, R.S.1943, provided in part: 'Such franchise shall fix the amount that may be charged during such period for such gas or electricity and provide that such city may, after such period, make any reasonable regulation with reference to any person, firm or corporation holding such franchise either as to charges for such gas or electricity or otherwise.'
In City of University Place v. Lincoln Gas & Electric Light Co., 109 Neb. 370, 191 N.W. 432, 433, we stated: 'At the time of the adoption of the ordinance hereinafter referred to, no power had been granted by the Legislature to cities of the second class to regulate the rates which a public utility corporation might lawfully charge for furnishing gas to the inhabitants of the city; such power was not granted until 1911. Rev.St.1913, § 5019.' (Section 5019, Rev.St.1913, became section 17-125, R.S.1943.)
We did not there undertake to define the extent of the regulatory power granted. Both parties here state that the language is dictum. Neither party contends that it is an erroneous statement. We hold it to be a correct statement of the law.
In 1955 the Legislature by an independent act provided: 'Cities of the second class and villages shall have power to regulate and fix the rents or rates of gas, and to regulate and fix the charges for gas meters or other device or means necessary for determining the consumption of gas.' Laws 1955, c. 41, section 1, p. 156. This became section 17-528.01, R.S.Supp., 1955, and became effective September 18, 1955.
In 1957 the Legislature repealed both section 17-125, R.R.S.1943, and section 17-528.01,...
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