Richfield Oil Corp. v. Public Utilities Commission

• Court: California Supreme Court
• Writing for the Court: TRAYNOR; GIBSON
• Citation: Richfield Oil Corp. v. Public Utilities Commission, 6 Cal.Rptr. 548, 54 Cal.2d 419, 354 P.2d 4 (Cal. 1960)
• Decision Date: 01 July 1960
• Parties: , 354 P.2d 4, 34 P.U.R.3d 579 RICHFIELD OIL CORPORATION (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent, Southern Counties Gas Company of California (a Corporation), Real Party in Interest. SOUTHERN CALIFORNIA EDISON COMPANY (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent. Southern Counties Gas Company of California (a Corporation), Real Party in Interest. S. F. 20302, 20311, 20303, 20313.

Page 548

6 Cal.Rptr. 548

54 Cal.2d 419, 354 P.2d 4, 34 P.U.R.3d 579

RICHFIELD OIL CORPORATION (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent, Southern Counties Gas Company of California (a Corporation), Real Party in Interest.

SOUTHERN CALIFORNIA EDISON COMPANY (a Corporation), Petitioner, v. PUBLIC UTILITIES COMMISSION of the State of California, Respondent.

Southern Counties Gas Company of California (a Corporation), Real Party in Interest.

S. F. 20302, 20311, 20303, 20313.

Supreme Court of California, In Bank.

July 1, 1960.

Rehearing Denied Jury 27, 1960.

Mervyn W. Phelan, Los Angeles, Ball, Hunt & Hart, Joseph A. Ball, Clark Heggeness, Long Beach, Rollin E. Woodbury, Harry W. Sturges, Jr., Trippet, Yoakum & Ballantyne, Oscar A. Trippet and Thomas H. Carver, Los Angeles, for petitioners.

Pillsbury, Madison & Sutro, Turner H. McBaine, San Francisco, O'Melveny & Myers, Pierce Works, Richard C. Bergen, William W. Alsup, Hanna & Morton, Harold C. Morton, David A. Thomas, Frank B. Belcher, Los Angeles, McCutchen, Doyle, Brown & Enersen, San Francisco, William R. Gardner, Stanley & Kirby and

Charles C. Stanley, Los Angeles, as amici curiae on behalf of petitioners.

William M. Bennett, Chief Counsel, Roderick B. Cassidy, Assistant Chief Counsel, Mary Moran Pajalich, Senior Counsel and J. Calvin Simpson, Asst. Counsel, San Francisco, for respondent.

Reginald L. Vaughan, San Francisco, William P. Gray, Joseph R. Rensch, Milford Springer and Herman F. Selvin, Los Angeles, for real party in interest.

Dion R. Holm, City Atty., Orville I. Wright, Deputy City Atty., San Francisco, Roger Arnebergh, City Atty., Alan G. Campbell, Asst. City Atty., Los Angeles, Jean F. DuPaul, City Atty., Frederick B. Holoboff, Deputy City Atty., San Diego, John K. Colwell, City Atty., Santa Ana, Thomas W. Bewley, City Atty., Whittier, Charles A. Rummel, General Counsel, California Farm Bureau Federation, William L. Knecht, Berkeley, Chickering & Gregory, Sherman Chickering, C. Hayden Ames, Robert W. Tallman and George A. Malloch, San Francisco, as amici curiae on behalf of respondent and real parties in interest.

TRAYNOR, Justice.

In these proceedings Richfield Oil Corporation, an oil and gas producer, and Southern California Edison Company, a public utility electrical corporation, attack two orders of the Public Utilities Commission determining that in respect to its gas operations Richfield is a public utility gas corporation subject to the jurisdiction of the commission and ordering it to cease and desist from delivering gas to Edison's Mandalay steam-electric generating plant.

This controversy arose out of Edison's wish to obtain and Richfield's willingness to deliver a dependable supply of natural gas to be used as boiler fuel for a new steam electric generating plant at Edison's Mandalay station in Ventura County. That plant is located in the certificated service area of Southern Counties Gas Company, a regulated public utility gas corporation. Southern Counties objects to the invasion of its service area by Richfield. Edison contends, however, that Southern Counties is unwilling or unable to provide the gas service Edison requires and that therefore it is compelled to seek gas elsewhere. It points out that Southern Counties offers it only an interruptible gas supply subject to being shut off when the gas is required for Southern Counties' firm or non-interruptible customers and that Southern Counties will not commit itself to deliver a fixed volume of gas per year. It asserts that use of fuel oil as an alternative fuel when gas is unavailable is objectionable because of air pollution, and that unless it can count on a given total supply of gas, whether supplied with or without interruption, it cannot arrange for an economical supply of fuel oil to complete its fuel requirements.

Richfield is willing to supply Edison with gas for its Mandalay plant pursuant to a contract it entered into with Edison, but it is not willing to do so as a regulated public utility gas corporation and has therefore refused to apply for a certificate of public convenience and necessity to provide such service and would not accept such a certificate if it were offered to it.

Southern Counties and the commission contend that Richfield's delivery of gas to Edison is subject to the commission's jurisdiction and that since Richfield has refused to seek permission to perform that service pursuant to lawful regulation, the cease and desist order was proper. They contend that to permit a major producer of natural gas to commit a significant fraction of the state's gas reserves to a major consumer without regulation will defeat the public interest. They point out that a public utility gas corporation must secure sufficient gas and build adequate facilities to supply all of its firm customers, predominantly householders, with all of the gas they need on the coldest days. To operate economically such a system must have interruptible customers, such as industrial plants and power plants, that can use gas for fuel when it is not needed by the firm customers, but who can switch to oil when it is. If interruptible customers are permitted to secure firm supplies of gas through unregulated contracts made directly with producers, the balance between firm and interruptible customers of regulated utilities may be destroyed. Moreover, since there is not enough gas to supply all of the needs of all of the consumers who wish to use it, it is contended that the public interest requires that the commission determine how the supply shall be allocated.

There is no need to expand the persuasive arguments of Southern Counties and the commission that the Legislature could constitutionally provide for the regulation of Richfield's service to Edison. It may be assumed that the public interest in such an important natural resource as natural gas would justify under the United States Constitution comprehensive legislation regulating all phases of its production and use. These questions do not arise, however, unless the commission has been vested by the California Constitution and legislation pursuant thereto with the jurisdiction over Richfield that it asserts. ¹

Richfield contends that the commission has no jurisdiction to regulate it as a public utility gas corporation on the ground that it has not dedicated its property to a public use. It relies upon an unbroken line of decisions from Thayer v. California Development Co., 1912, 164 Cal. 117, 128 P. 21, to California Water & Tel. Co. v. Public Util. Comm., 1959, 51 Cal.2d 478, 334 P.2d 887, requiring dedication as a prerequisite to public utility regulation, and it contends that the requirement of dedication is implicit in the constitutional and statutory definitions of public utilities as utilities that render services 'to or for the public' (Cal.Const. art. XII, § 23) or 'to the public or any portion thereof.' (Pub.Util.Code, § 216, subd. a; see also, Associated Pipe Line Co. v. Railroad Commission, 176 Cal. 518, 522-523, 169 P. 62, L.R.A.1918C, 849; Souza v. Public Utilities Comm., 37 Cal.2d 539, 542-543, 233 P.2d 537.

Southern Counties contends that dedication of property to a public use is different from service 'to or for the public' or 'to the public or any portion thereof,' and that the requirement of dedication was engrafted onto the statutory provisions by the court to meet constitutional objections under the due process clause of the United States Constitution. Since in its view these constitutional objections did not survive the decision of the United States Supreme Court in Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (see also, Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 677, 74 S.Ct. 794, 98 L.Ed. 1035; Federal Power Comm. v. Natural Gas Pipeline Co., 315 U.S. 575, 582, 62 S,.ct. 736, 86 L.Ed. 1037), it contends that the courts should reinterpret the relevant statutes and give effect to the plain meaning of their terms to the extent constitutionally permissible today. Cf., Carl F. W. Borgward, G. M. B. H. v. Superior Court, 51 Cal.2d 72, 75, 330 P.2d 789; Henry R. Jahn & Son v. Superior Court, 49 Cal.2d 855, 858-859, 323 P.2d 437.

Subdivision (a) of SECTION 216 OF THE PUBLIC UTILITIES CODE² provides: "Public utility' includes every * * * gas corporation * * * where the service is performed for or the commodity delivered to the public or any portion thereof.' Subdivision (b) provides: 'Whenever any * * * gas corporation * * * performs a service or delivers a commodity to the public or any portion thereof for which any compensation or payment whatsoever is received, such * * * gas corporation * * * is a public utility subject to the jurisdiction, control, and regulation of the commission and the provisions of this part.' Subdivision (c) provides: 'When any person or corporation performs any service or delivers any commodity to any person, private corporation, municipality or other political subdivision of the State, which in turn either directly or indirectly, mediately or immediately, performs such service or delivers such commodity to or for the public or some portion thereof, such person or corporation is a public utility subject to the jurisdiction, control, and regulation of the commission and the provisions of this part.' Section 222 provides: "Gas corporation' includes every corporation or person owning, controlling, operating, or managing any gas plant for compensation within this State, except where gas is made or produced on and distributed by the maker or producer through private property alone solely for his own use or the use of his tenants and not for sale to others.' Section 221 provides: "Gas plant' includes all real estate, fixtures, and personal property, owned, controlled, operated, or managed in connection with or to facilitate the production, generation, transmission, delivery, or furnishing of gas,...