State ex rel. Empire Dist. Electric Co. v. Public Service Com'n

• Decision Date: 14 December 1936
• Parties: State of Missouri at the relation of Empire District Electric Company, a Corporation, Appellant, v. Public Service Commission et al
• Court: Missouri Supreme Court

100 S.W.2d 509

339 Mo. 1188

State of Missouri at the relation of Empire District Electric Company, a Corporation, Appellant, v. Public Service Commission et al

Supreme Court of Missouri

December 14, 1936

Appeal from Cole Circuit Court; Hon. N. G. Sevier, Judge.

Reversed.

A E. Spencer, Chas. H. Mayer and Mayer Conkling & Sprague for appellant.

(1) The Public Service Commission is an administrative body only and has no power beyond that expressed by the statute of its creation and such clear implication following therefrom as is necessary to render the power conferred effective. State ex rel. St. Louis v. Pub. Serv. Comm., 335 Mo. 457; City of Columbia v. Pub. Serv. Comm., 329 Mo. 43; State ex rel. Laundry, Inc., v. Pub. Serv. Comm., 327 Mo. 112; State ex rel. Terminal Ry. Co. v. Pub. Serv Comm., 308 Mo. 372; State ex rel. Kansas City v. Pub. Serv. Comm., 301 Mo. 190; Pub. Serv. Comm. v. Ry. Co., 301 Mo. 165. (2) The court will construe and apply the Public Service Commission Act, but the court will not, under the guise of construction, provide a more comprehensive scheme of regulation than the Legislature has already provided for. Minnesota Rate Cases, 230 U.S. 352, 57 L.Ed. 1511. (3) In the absence of a statute specifically empowering the commission to regulate depreciation reserves, the commission has no power to order any amount to be placed in such reserves even out of future earnings. People ex rel. New York Rys. Co. v. Pub. Serv. Comm., 223 N.Y. 373, 119 N.E. 848; Havre de Grace & Perryville Bridge Co. v. Towers, 132 Md. 16, 103 A. 319. (4) The amount voluntarily carried in the depreciation reserve of the company, accumulated out of moneys collected under a lawful rate, belonged to the company as much as if the amount had been carried on the books of the company as surplus, and the amount thus voluntarily carried as depreciation by the company was no more subject to the control of the commission than if the amount had been carried on the books as surplus. State ex rel. St. Joseph v. Pub. Serv. Comm., 325 Mo. 222; Board of Public Utility Commissioners v. New York Tel. Co., 271 U.S. 32, 70 L.Ed. 812; Monroe Gas Light & Fuel Co. v. Mich. Pub. Util. Comm., 292 F. 147. (5) The statute, Section 5200, Revised Statutes 1929, purporting to give the commission power, after hearing, to require the utility to carry a proper depreciation account and purporting to give the commission control of the fund accumulated under such order, gives the commission no power to make a retroactive order requiring the company to restore to depreciation reserve a sum of money which had been withdrawn from said reserve years before the making of the order. Brimstone Railroad & Canal Co. v. United States, 276 U.S. 104, 72 L.Ed. 487; Baltimore & O. Railroad Co. v. United States, 43 F.2d 603. (6) Even if the commission had possessed the power under the statute to make such an order in a proper case, which we deny, nevertheless, in the case at bar, the order was unjust, unreasonable and wholly arbitrary, for the reason that the commission specifically found that it could not determine that the company's depreciation reserve was inadequate. (7) Inasmuch as the commission had no statutory authority to make the order in question, neither convenience, expediency nor necessity can be properly urged as justification for the order. State ex rel. Kansas City v. Pub. Serv. Comm., 301 Mo. 190.

James P. Boyd, General Counsel, and Daniel C. Rogers, Assistant Counsel, for Public Service Commission.

Respondents do not attempt to controvert the fact that the Public Service Commission is an administrative body and has no power beyond the act creating it and such clear implication therefrom as is necessary to render the power conferred upon the commission effective. In this connection, however, it should not be overlooked that this court has heretofore declared what the construction should be and how the Public Service Commission Act should be construed. Sec. 5251, R. S. 1929; State ex inf. v. Kansas City Gas Co., 254 Mo. 535.

Frank, J. All concur, except Collet, J., not sitting.

OPINION

FRANK

This is an appeal by the Empire District Electric Company, a Kansas corporation, from a judgment of the Circuit Court of Cole County affirming an order of the Public Service Commission. For brevity we will refer to relator as the company and to respondents as the commission.

This cause was instituted by the commission on its own motion against the company to determine the fair value of the company's property. The commission made an appraisal of the company's properties and an audit of its books and accounts. Thereafter hearings were had before the commission as to the value of the company's property and as to the audit of its books and accounts as made by the commission. At such hearing evidence pro and con was heard as to the cost of reproduction less depreciation of the company's used and useful property.

It was further shown at said hearing that the company in the year 1915 voluntarily began the accumulation out of earnings of a depreciation reserve which, by the year 1923 reached the sum of approximately $ 1,000,000; that in that year the company's board of directors adopted a resolution to the effect that there was an over accrual in the depreciation reserve amounting to $ 400,000, and said sum of $ 400,000 was by authority of said board transferred from depreciation reserve to surplus, leaving in the depreciation reserve approximately $ 864,000; that in the year 1926 another sum of $ 400,000 was so transferred, leaving in the depreciation reserve at that time the sum of $ 1,760,000. Again in 1929 the sum of $ 800,000 was transferred from depreciation reserve to an account called "Special Surplus Reserve" where it still remains, leaving in the depreciation reserve in the year 1930 the sum of $ 1,226,000; that the $ 800,000 which was transferred from depreciation reserve to surplus was disbursed in the payment of dividends to the stockholders before the institution of the present proceedings; that each year from 1915 to and including the year 1935, the company made annual reports to the commission which showed the transfer of funds as above indicated.

Other necessary facts will be stated in course of the opinion.

At the conclusion of the hearing, the commission on August 6, 1935, ordered that the $ 1,600,000 which had been transferred from the depreciation reserve fund be replaced in that fund. The legality of that order is the only question presented for decision on this appeal.

There is no statute requiring the company to carry a depreciation reserve account. However, there is a statute, Section 5200, Revised Statutes 1929, which gives the commission power, after hearing, to require the company to carry such an account, subject to the control of the commission. That section of the statute reads as follows:

"The commission shall have power, after hearing, to require any or all gas corporations, electrical corporations and water corporations to carry a proper and adequate depreciation account in accordance with such rules, regulations and forms of account as the commission may prescribe. The commission may, from time to time, ascertain and determine and by order fix the proper and adequate rates of depreciation of the several classes of property of such corporation, person or public utility. Each gas corporation, electrical corporation and water corporation shall conform its depreciation accounts to the rates so ascertained, determined and fixed, and shall set aside the moneys so provided for out of earnings and carry the same in a depreciation fund and expend such fund only for such purposes and under such rules and regulations, both as to original expenditure and subsequent replacement, as the commission may prescribe. The income from investments of moneys in such fund shall likewise be carried in such fund." (Italics ours.)

The facts show that the commission, at no time, made any order requiring the company to set up or carry a depreciation reserve. The silence of the commission on that subject from 1915 to the date of the present hearing in 1935, necessarily left the question of a depreciation reserve and the upkeep of the property to the judgment of the board of directors of the company. The power of the commission to make orders relative to the depreciation reserve of the company is conferred by statute. We must, therefore, look to the statute to determine whether the commission had authority to make the order in question. It has been well said that ...