Ohio & Colorado Smelting & Refining Co. v. Public Utilities Commission of Colorado

• Decision Date: 05 January 1920
• Docket Number: 9458.
• Citation: 68 Colo. 137,187 P. 1082
• Parties: OHIO & COLORADO SMELTING & REFINING CO. v. PUBLIC UTILITIES COMMISSION OF COLORADO et al.
• Court: Colorado Supreme Court

187 P. 1082

68 Colo. 137

OHIO & COLORADO SMELTING & REFINING CO. v. PUBLIC UTILITIES COMMISSION OF COLORADO et al.

No. 9458.

Supreme Court of Colorado, En Banc.

January 5, 1920

Rehearing Denied March 1, 1920.

Writ of Review to the Public Utilities Commission.

Proceeding by the Ohio & Colorado Smelting & Refining Company against the Public Utilities Commission of the State of Colorado and another for a writ to review the determination of the Commission allowing the Colorado Power Company to charge an increased rate for electricity.

Order of Commission reversed, with instructions.

Yeaman & Gove, of Denver, for plaintiff in error.

William V. Hodges, D. Edgar Wilson, and Elson H. Whitney, all of Denver, for defendant in error Colorado Power Co.

SCOTT J.

The Salida Light, Power & Utility Company, a corporation organized under the laws of the state of Colorado, on the 10th day of October, 1907, entered into a written contract with the Ohio & Colorado Smelting & Refining Company, a corporation, by which the power company agreed to supply, and the smelting company agreed to purchase from the power company electrical energy sufficient to operate its smelter, located near Salida, Colo. The price to be paid under the contract was $50 per horse power per annum, which it is agreed is equivalent to 7.65 mills per kilowatt hour. This contract was continued or extended by written agreement between the parties to October 10, 1923; the last extension bearing date of January 21, 1913. The contract involved extensive improvements by both parties which were afterwards made. Power has been continuously supplied to the smelting company under the agreement until the present proceeding.

In February, 1915, the plant, properties, contracts, etc., of the Salida Light, Power & Utility Company were conveyed and assigned to the Colorado Power Company, which has since continued to operate the same.

On April 13, 1918, the Colorado Power Company filed a petition with the Public Utilities Commission of the state praying for an order increasing the rates above those provided in the contract to one cent per kilowatt hour. To support this petition it was alleged:

'(a) Increase in operating expenses. * * *

'(b) The fair value of the Salida plant is $500,000. A fair net return would be $40,000 per annum. The present net return is $32,224. The company is therefore entitled to an increase in its net return of $8,000. * * *

'(d) The smelting company requires approximately 60 per cent. of the output of the power company, and the inability of the power company to derive a reasonable return is principally due to the rate named in the agreement for service to the smelting company.'

By motion to dismiss and by answer, the smelting company contended in substance as follows: That the action demanded of the Public Utilities Commission was in violation of those certain provisions of the federal and state Constitutions which guarantee due process of law, the inviolability of contracts, and which deny the enactment of laws having retroactive effect; (b) denial of the allegation in the power company's petition that $32,224, the alleged net revenue for the company for the year 1917, is not an adequate return upon the fair value of petitioner's property, and other specific denials, including the allegations of necessary increased use of steam power, necessary increase of operating expenses, averments as to average rates and distribution of current generated, denial that increase in revenue is necessary, and general denial of averments in petition not specifically denied. It was further alleged in substance:

'The erection of an electric power plant by the smelter company for its own use. Efforts of the Salida Light, Power & Utility Company to have smelting company abandon its own plant and take its power from the former company.

'The execution of the contract of October 10, 1907.

'The extension of that contract on January 9, 1913, at instance of Salida Light, Power & Utility Company.

'The transfer of all of the capital stock of the Salida Light, Power & Utility Company to the Colorado Power Company about January 9, 1913. The transfer of all the assets of the Salida Light, Power & Utility Company to the Colorado Power Company February 10, 1915.

'That the smelting company, as required by said contract, made certain changes, alterations, and additions in its smelting plant and electrical system in compliance with provisions of the contract.

'At date of contract power was generated by petitioner almost wholly by water power. Its capacity was largely in excess of demands. The smelting company was the only concern of that character supplied by petitioner, and the power company plant was sufficient to supply all requirements of the district.

'That subsequent to January 9, 1913, petitioner entered into other contracts with other consumers, which necessitated additional electric steam power equipment.

'The issuance by petitioner of $4,000,000 of first mortgage 5 per cent. bonds, $750,000 of 7 per cent. preferred stock, and $11,000,000 of common stock.

'Payment by petitioner of interest on its bonds, dividends upon its preferred and common stock, the sitting aside for depreciation reserve of $99,000 in 1916 and $115,000 in 1917, and the accumulation of a surplus of $29,000 for 1916 and more than $91,000 for 1917.

'That the net earnings of petitioner for 1917 were more than 18 per cent. in excess of net earnings for 1916, and the net income for 1917 was 25 per cent. in excess of the net income for 1916. The total income of petitioner for 1917 exceeded $700,000, and the net income after all deductions exceeded $357,000.

'That petitioner on June 1, 1913, entered into a contract with the American Smelting & Refining Company, and thereby agreed to furnish electrical current to that company for its smelter in Leadville upon practically the same terms specified in the contract of October 10, 1907, with the Ohio Smelting Company.

'That any order of the commission increasing the smelting company's rates would require it to pay a greater charge than the American Smelting & Refining Company and would be unjust, unreasonable, discriminatory, and preferential.

'That the smelting company's plant was erected at a cost many times exceeding the cost of petitioner's Salida plant. The smelting company's plant has been operated at a loss, but has been largely beneficial to the city of Salida. An increase in the rate of the smelting company would result in additional loss to that company and increase the income of the power company.'

The commission, upon hearing, ordered that the rate of 7.65 mills per kilowatt hour fixed in the contract be canceled, and fixed the flat rate of 9.5 mills per kilowatt hour to be charged to the smelting company. We are asked to review that order.

Counsel for the smelting company has very elaborately and ably argued its contention that the decision of the commission was in violation of the several constitutional provisions suggested, and that the obligation of the contract between the parties was impaired, and that the plaintiff in error was deprived of its property without due process of law, that the statute was retroactive, and that therefore the commission was without power to change or alter the terms of the contract.

We think without further discussion that it is the overwhelming weight of judicial opinion in this country that the constitutional interdiction of statutes impairing the obligations of contracts does not prevent the state from properly exercising such powers as are vested in it for the promotion of the common weal, or as are necessary for the general good of the public, though contracts previously entered into between individuals may thereby be affected.

We have heretofore decided this question as to contracts entered into by municipalities in relation to rates to be charged by public utilities, as affected by the after-asserted power of the state. Denver & South Platte Ry. Co. v. City of Englewood, 62 Colo. 229, 161 P. 151, 4 A.L.R. 956. But a careful review of the authorities leads us to the conclusion that this rule as to the after-asserted exercise of the police power applies equally in the case of contracts relating to a public service as between persons and corporations.

The rule requires no further citation than that of the latest decided case of the United States Supreme Court callled to our attention, where the doctrine seems to be announced as the final word upon that subject by that court. A further examination of the decisions of the appellate courts from the several states discloses the great weight of authority to be in agreement with the view of the federal Supreme Court. In the case of Union Dry Goods Co. v. Georgia Public Service Corporation, 248 U.S. 372, 39 S.Ct. 117, 63 L.Ed. 309, speaking through Mr. Justice Clarke, it was said:

'The Georgia Public Service Corporation and the Union Dry Goods Company, both corporations organized under Georgia law and doing business in Macon, on July 18, 1912, contracted together in writing for the term of five years, the former to supply electric light and power to the latter, which agreed to pay stipulated rates for the service.

'The contract was performed for almost two years, until in April, 1914, when the Dry Goods Company refused to pay a bill for service rendered during March, in which a rate higher than that of the contract was charged. The Service Corporation claimed that this rate was authorized and required by an order of the Railroad Commission of Georgia, entered after investigation and hearing.

'Soon thereafter the Dry Goods Company commenced this suit to compel specific performance of its contract, which

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