State ex rel. City of West Plains v. Public Service Commission

• Decision Date: 10 March 1958
• Docket Number: No. 45807,45807
• Citation: 310 S.W.2d 925
• Court: Missouri Supreme Court
• Parties: STATE of Missouri, at the relation of the CITY OF WEST PLAINS, Missouri, and the City of Mountain View, Missouri, municipal corporations, Relators- Appellants, v. PUBLIC SERVICE COMMISSION of the State of Missouri, and Tyre W. Burton, E. L. McClintock, Charles L. Henson, M. J. McQueen, and D. D. McDonald, as Members of said Public Service Commission, and Western Light & Telephone Company, a corporation, Respondents.

Page 925

310 S.W.2d 925

23 P.U.R.3d 164

STATE of Missouri, at the relation of the CITY OF WEST PLAINS, Missouri, and the City of Mountain View Missouri, municipal corporations Relators- Appellants, v. PUBLIC SERVICE COMMISSION of the State of Missouri, and Tyre W. Burton, E. L. McClintock, Charles L. Henson, M. J McQueen, and D. D. McDonald, as Members of said Public Service Commission, and Western Light & Telephone Company, a corporation, Respondents.

No. 45807.

Supreme Court of Missouri, En Banc.

March 10, 1958.

Esco V. Kell, West Plains, for appellants.

Glenn D. Evans, General Counsel, Public Service Commission of Missouri, Jefferson City, for respondents Public Service Commission and Tyre W. Burton, E. L. McClintock, Charles L. Henson, M. J. McQueen and D. D. McDonald, Members of Said Commission.

Hedrick & Hedrick, Robert W. Hedrick, Robert W. Hedrick, Jr., Jefferson City, Thompson, Mitchell, Thompson & Douglas, James M. Douglas, Richard L. Eckhart, St. Louis, for respondent Western Light & Telephone Co., Inc.

James V. Frank, City Counselor, Forrest G. Ferris, Jr., Associate City Counselor, St. Louis, Marvin E. Boisseau, Director

of Law, City of University City, amici curiae.

COIL, Commissioner.

Respondent Western Light & Telephone Company, Inc., herein sometimes called Western, a Kansas corporation licensed to and furnishing telephone service in 36 exchanges located in 36 Missouri municipalities, applied to respondent Public Service Commission of Missouri, herein sometimes called commission, for an order authorizing Western to file a new schedule of rates calculated to produce a reasonable rate of return and authorizing applicant to file a general rule with such rate schedule authorizing it to 'add to its basic rates in each community the pro rata amount of the occupational tax levied in said community.' The commission held hearings on March 29 and April 13, 1955. Three cities, with leave, intervened and others, pursuant to notice, were represented at either or both hearings. The commission staff had made an examination and investigation of Western's books and records and adduced evidence of its findings. On August 2 and August 8, 1955, the commission filed its report and order and supplemental order, respectively, in which it found, in effect, that to receive a fair and reasonable return on its investment, which the commission fixed at 6.20 per cent, Western would need to increase its gross annual revenue in the approximate sum of $100,000; that the desired result would be accomplished (i. e., a fair return procured) by increasing rates sufficiently to produce $85,500 in additional gross annual operating revenue and eliminating license and occupation taxes ($14,491.85 for 1954) as operational expenses payable from over-all revenues and passing on such taxes to the subscribers in the respective cities and towns levying such taxes by means of surcharging Western's bills in the appropriate amounts.

The cities of West Plains and Mountain View have appealed from the judgment of the circuit court affirming the order of the commission. They attack, however, only that portion of the order which permits and directs Western to file a general rule providing for the passing on to telephone subscribers residing in a particular municipality the license and occupation taxes levied by that municipality. Inasmuch as the reasonableness and lawfulness of only that limited portion of the commission's order is involved on this appeal, it will be unnecessary to set forth the substantial evidence which was adduced in the main valuation and rate case and from which the commission found Western's need for additional revenue to produce a fair return on its net investment. The evidence which specifically pertained to the instant question was that, of the 36 exchanges operated by Western, 11 of them were in cities or towns which levied no license or occupation tax; that the other 25 levied a license or occupation tax; that of those, 10 assessed a fixed annual sum varying in amount from $10 to $75; that the remaining 15 levied a tax in an amount equal to 2, 3, 4, or 5 per cent of Western's gross receipts. The 25 levies ranged in amounts during the calendar year 1954 from $10 to $2,964.42, and the total amount of all such taxes paid by Western for that year was $14,491.85.

The evidence was also that Western's rates had been fixed upon a systemwide basis in five classifications based upon the number of stations involved. License and occupation taxes theretofore had been included in the 'operational expenses' of the company along with all other taxes. Some of Western's 36 exchanges operated at a loss and others at a profit. Those operating at a profit might carry the weaker ones. The proposed rates for each class of service to produce the additional revenue necessary to produce a fair return had been increased without regard to whether that class of service had theretofore more than paid its way. The cities and towns in which were located Western's 36 exchanges extended from Atlanta in north Missouri to West Plains and Willow Springs in the south, so that many of the various exchanges were relatively far removed from the localities of other exchanges in Western's system.

The City of St. Louis and the League of Municipalities of St. Louis County were granted leave to and have filed a brief as amicus curiae. Appellants contend that the order of the commission is unreasonable and unlawful because the portion of the order here in question was beyond the commission's jurisdiction, constituted an attempt to interfere with and restrict the taxing power of municipalities, and was not supported by substantial and competent evidence. Amicus curiae contends that there was no reasonable basis for the findings and order of the commission and therefore the order was unlawful and unreasonable.

The reviewable question is whether the commission's order was reasonable and lawful. Section 386.510. (All section citations are to sections of RSMo 1949, V.A.M.S.) It should be noted that the case before the commission in which the instant order was made was a valuation and rate case wherein the primary and basic questions for decision were whether Western was earning a fair return and, if not, what constituted a fair return and what action was necessary to permit the company to earn a fair return. As stated, the commission found that Western was not earning a fair return; that it was entitled to a rate increase; that 6.20% would constitute a fair return; that Western would need to receive an additional annual gross revenue (or its equivalent) of $100,000 in order to produce a return of 6.20%; that its revised schedules should provide for an increase in rates to the various classifications of Western telephone subscribers sufficient to provide for a total increase in gross annual revenue of $85,500, and for the absorption by particular subscribers of license and occupation taxes.

Consequently, so far as concerns the decision of the present issue, these propositions are established: appellants and amicus curiae concede that Western was entitled to a rate increase to produce the fair return of 6.20%; that to produce such a return would require additional gross revenue of $100,000; that the rates set forth in the schedules filed containing the increases are fair and nondiscriminatory; and appellants and amicus curiae tacitly concede that if the $15,000 of the $100,000 necessary additional gross revenue is not obtained by passing on license and occupation taxes in accordance with the order of the commission, the evidence justified, and Western was entitled to, a further increase in rates in the various classifications sufficient to provide an additional $15,000 gross revenue.

The lawfulness of the order depends primarily on whether the commission had statutory authority and power to permit the general rule to be filed as a result of the commission's total rate determination. And if the commission had such authority and power, the reasonableness of that portion of the order depends upon whether it was unreasonably and unjustly discriminatory as to particular telephone subscribers who, as a result of the order, paid in addition to the amount provided by the revised rates, their pro rata share of the license and occupation taxes assessed by the respective municipality in which they resided.

Appellants point out that the power and authority of the Public Service Commission is only that specifically granted by statute or warranted by clear implication as necessary to render a specifically granted power effective. It would appear that the statutory power and authority which the commission has to pass upon the reasonableness and lawfulness of rates and to determine and pass upon the question of what rates are necessary to permit a utility to earn a fair and reasonable return (Secs. 392.220, 392.230, 392.240) necessarily includes the power and authority to determine what items are properly includable in a utility's operating expenses and to determine and decide what treatment should be accorded such expense items. Cf. State ex rel Western Union Tel. Co. v. Public Service Commission, 304 Mo. 505, 517, 264 S.W. 669, 672, 35 A.L.R. 328. Section 392.240(2) provides in part: 'Whenever the commission shall be of the opinion, * * * that the rules, regulations or practices of any * * * telephone corporation are unjust or unreasonable, * * * the commission shall determine the just, reasonable, adequate, efficient and proper regulations, practices, * * * thereafter * * * to be observed and used and to fix and prescribe the same by order * * *.' The rules and regulations prescribed by the commission for Western pertaining to the manner in which the utility would thereafter treat the expense item of license and occupation taxes became an integral part of Western's schedule of rates and charges. See State ex rel. St. Louis County Gas Co. v. Public Service...