Public Utilities Commission of Kan. v. Wichita R. & Light Co.

• Decision Date: 15 July 1920
• Docket Number: 5529.
• Parties: PUBLIC UTILITIES COMMISSION OF KANSAS et al. v. WICHITA R. & LIGHT CO. [1]
• Court: U.S. Court of Appeals — Eighth Circuit

268 F. 37

PUBLIC UTILITIES COMMISSION OF KANSAS et al. v. WICHITA R. & LIGHT CO. ^[1]

No. 5529.

United States Court of Appeals, Eighth Circuit.

July 15, 1920

This action was instituted by the appellee against the Public Utilities Commission of the state of Kansas, to restrain the commission from putting into effect an order authorizing the Kansas Gas & Electric Company to add a surcharge to its rates for electricity furnished to consumers in the state of Kansas, classified according to the quantities consumed. A temporary restraining order was granted by the court. By leave of the court the appellant Kansas Gas & Electric Company was permitted to intervene as a party defendant. For convenience the parties will be referred to in this opinion the appellee as the Railroad & Light Company, the appellant Public Utilities Commission as the Commission, and the appellant Kansas Gas & Electric Company, as the Gas &amp Electric Company.

Answers were filed, and thereupon the Railroad & Light Company filed a motion for a final decree upon the pleadings and exhibits. The exhibits filed with the complaint are: Exhibit A is the order of the Commission sought to be enjoined; Exhibit B is a copy of the contract entered into between the Gas & Electric Company and the Railroad & Light Company on May 2, 1910, to continue until November 30, 1930; Exhibit C is a copy of the application of the Gas & Electric Company to the Commission for permission to add a surcharge to certain of its rates on electricity supplied to its patrons in the state of Kansas. Upon a hearing the court held the order of the Commission complained of void and made the injunction perpetual.

The Railroad & Light Company in its complaint charges that, after having received notice from the Commission of the filing of the petition and the date set for the hearing thereof, it appeared and objected to the Commission's jurisdiction. This was by the Commission overruled. The ground upon which it objected was that there was a contract between the Gas &amp Electric Company and the plaintiff, which contract specifically fixed the rates and charges under which the Gas & Electric Company was bound to furnish it electrical current from the date of the contract until November 30, 1930; but notwithstanding its objection, the Commission on March 25, 1918, granted the application of the Gas & Electric Company, with some modifications.

Another ground upon which it attacks the order of the Commission is that it was without jurisdiction or authority to determine any question relative to the plaintiff's business, in that it conducts its business wholly within the city of Wichita, and is not subject, under the law, to control or regulation by the Commission. Another ground set up is that its contract with the Gas & Electric Company was made and executed prior to the enactment of the law creating the Commission; that therefore the order of the Commission violates the constitutional provision prohibiting a state from enacting any law impairing the obligation of contracts.

It is next claimed that the added charges by the order of the Commission are preferential and discriminatory against large consumers of electricity, and especially against the plaintiff, for the reason that the rates as fixed are upon a scale, increase as the volume of consumption increases, and thereby is in violation of the Fifth and Fourteenth Amendments to the Constitution of the United States. It is next claimed that the order fixes the rates unreasonably high and are confiscatory.

The application of the Gas & Electric Company to the Commission for permission to add a surcharge to certain of its rates states that the schedules of rates then in force was filed with the Commission on May 4, 1914; that the rates were based upon the cost of producing and distributing electrical energy at that time, and yielded a reasonable return upon the value of its property used in producing and distributing electrical energy in the state; that since then the cost of producing and distributing such electrical energy has increased enormously, on account of the increased cost of fuel and labor due to the fact that the nation is engaged in war. As a result of this increase the cost of producing energy for the year 1917 was 100 per cent greater than the cost of production for the year 1914, all on account of such increase in the cost of the production and distribution; that its net income for the year ending December 31, 1917, was approximately $190,000 less than it would have been if it could have operated under the normal conditions existing in 1914, at the time its rates were first installed; that, if said rates are continued in effect, the result will be disastrous to your petitioner, depriving it of a reasonable return upon the value of its said property, and making it impossible to find a market for the securities which it must issue in order to provide funds with which to make improvements, additions, and betterments which are necessary to furnish proper and adequate service.

It further states that in December, 1916, being of the opinion that it would be able to reduce its rates for residential and commercial lighting, it filed a schedule of rates with the Commission, under which it proposed to put in effect a gradual reduction of such rates, such reduction extending over a term of 10 years, and requested an order authorizing it to make such reductions; that the Commission has not yet acted on that petition. Still on January 1, 1917, it did reduce its rates for residential and commercial lighting in accordance with its proposed schedules; that the effect of such proposed reductions for the year 1918 will further reduce its net income in the sum of approximately $30,000, making a total loss of net earnings for the year 1918 of at least the sum of $220,000; that in order to meet this situation, and to enable it to earn an amount sufficient to offset the loss from the conditions set out, it asks for authority to add to its existing rates the surcharge proposed. It is then stated that there are approximately 19,900 consumers served, but that 17,000 consumers use 100 KWH or less per month, and therefore would not be affected by the proposed schedule of surcharges. To proportion the surcharges equitably among the remainder of its consumers, fuel is approximately 75 per cent. of the cost of generating electricity, and therefore the surcharge, for the purpose of reimbursement, should be so adjusted that the surcharge should increase in proportion to the amount of energy consumed. The percentage of increase fixed by such surcharge over existing rates is therefore increased in proportion to the amount of consumption. The last step in the surcharge schedule offered affects at the present time 6 consumers, and the last two steps 38 consumers. The schedule proposed by the Electric & Gas Company was: For the first 100 KWH per month, no surcharge; for the next 1,000 KWH per month, 12 mills net per KWH; for the next 10,000 KWH per month, 9.5 mills net per KWH; for the next 1,000,000 KWH per month, 8 mills net per KWH; for all excess, 3.5 mills net per KWH.

The intervening petition of the Gas & Electric Company, which is in the nature of an answer to the complaint and was treated as such, stated that the Public Utilities Commission of the state was created by an act of the Legislature of the state of Kansas in the year 1911, and is vested with full power, authority, and jurisdiction to supervise and control public utilities doing business in the state of Kansas, and fix and regulate the rates to be charged by said utilities for service; it admits the execution of the contract and the order of the Commission set out in the complaint and exhibits, until the further order of the Commission; by reason of said order of the Commission it claims it is lawfully authorized to make the surcharges fixed in the order of the Commission; that although the surcharge, so far as it affects the plaintiff, became effective on April 1, 1918, the plaintiff has failed to pay it, and the amount due from it up to December 31, 1918, amounts to $9,088.18; that the temporary injunction granted by the court on April 26, 1918, prevented it from enforcing or attempting to enforce the order of the Commission of March 25, 1918; that the bond required of the plaintiff, when the temporary injunction was granted, was for the sum of $20,000; that the intervener has an interest in this action, and is the party entitled to the benefits to be derived from the order of the Public Utilities Commission; therefore it asks for the dissolution of the injunction and to recover from the plaintiff the amount due it from the plaintiff on account of the surcharge.

Upon these pleadings and exhibits a final decree was entered, making the injunction perpetual.

H. L. McCune, of Kansas City, Mo., and F. S. Jackson, of Topeka, Kan. (McCune, Caldwell & Downing, of Kansas City, Mo., on the brief), for appellants.

T. F. Doran, of Topeka, Kan., and Henry I. Green, of Urbana, Ill. (Green & Palmer, of Urbana, Ill., Harris & Harris, of Wichita, Kan., Ferry & Doran, of Topeka, Kan., and William H. Lee, of Urbana, Ill., on the brief), for appellee.

Before SANBORN and CARLAND, Circuit Judges, and TRIEBER, District judge.

TRIEBER District Judge (after stating the facts as above).

The learned trial judge held that, although appellee had a contract with the Gas & Electric Company made on May 2, 1910 to remain in force until November 30, 1930, the Commission could, under the police power of the state, to prevent injustice, and unreasonable and extortionate rates for service by the Gas & Electric Company, exercise the power to raise the rates, if necessary to prevent a loss, but that the facts disclosed by the...