State ex rel. Hotel Continental v. Burton, 47529

Citation334 S.W.2d 75
Decision Date14 March 1960
Docket NumberNo. 1,No. 47529,47529,1
PartiesSTATE of Missourl, at the Relation of HOTEL CONTINENTAL et al., Appellants, v. Tyre BURTON, Charles Henson, E. L. McClintock, D. D. McDonald, and William Barton, Members and Comprising the Public Service Commission of Missouri, Respondents
CourtUnited States State Supreme Court of Missouri

Dietrich, Tyler, Davis, Burrel and Dicus, by Ilus W. Davis, Kansas City, Hendren & Andrae, by John H. Hendren, Jefferson City, for relators-appellants.

Glenn D. Evans, General Counsel, Thomas J. Downey, Asst. General Counsel, Public Service Commission, Jefferson City, for respondents.

Spencer, Fane, Britt & Browne, by Irvin Fane, Joseph J. Kelly, Jr., Arthur J. Doyle, Kansas City, and Kyle D. Williams, Jefferson City, for intervenor.

COIL, Commissioner.

This case comes to the writer on reassignment.

In October 1957, Kansas City Power & Light Company, a public utility (herein sometimes called company), filed with respondent Public Service Commission of Missouri (herein sometimes called commission) revised schedules and later substitute revised schedules of rates for steam service. The commission by two orders suspended the proposed tariffs for ten months and investigated and held a hearing to determine whether the proposed rates were excessive or unreasonable. The City of Kansas City (herein sometimes called city) and 41 users of the company's steam service participated in that hearing. The commission's report and order, in effect, approved the new rates for steam service proposed in the substitute revised schedules. The company intervened in the ensuing review proceedings in the circuit court where the order and findings of the commission were affirmed and the 41 users have appealed from the order of affirmance.

Appellants contend, inter alia, that $20,000 of the increase in rates was erroneously authorized because not supported by substantial and competent evidence. Consequently, the amount in dispute gives this court jurisdiction .

Ninety-eight per cent of company's revenue was from the sale of electricity and only two per cent from the sale of steam. The production and sale of steam, however, was conducted as a separate 'Heat Department' and as to all pertinent questions on this appeal the company may be considered as selling steam service only. The company's entire distribution of steam was to customers within as area seven blocks square in downtown Kansas City.

The first controversy presented concerns a so-called tax adjustment clause which the company proposed and which the commission approved as a part of the company's tariffs. That tax adjustment provision was: 'There shall be added to the monthly bill of the Customer, as separate items, a surcharge equal to the proportionate part of any license, occupation, or other similar fee or tax applicable to steam service by the Company to the Customer, which fee or tax is imposed upon the Company by local taxing authorities on the basis of the gross receipts, net receipts, or revenues from steam sales by the Company.'

Appellants contend the foregoing provision makes the commission's order unlawful and unreasonable for several reasons we shall hereinafter notice. Prior thereto, however, we note that the proceedings before the commission was a valuation and rate case wherein the company contended that its rates for steam service approved by the commission in 1951 were not sufficient to provide a fair return on the value of the property used in furnishing such service. The commission found from the evidence that a 5.345 per cent rate of return on the value of the property used was fair and reasonable and that to provide that rate of return, it was necessary that customer billings be increased $139,718 annually, i. e., from $1,118,463 to $1,258,181; that the $139,718 increase included the sum of $75,491, being the annual gross receipts tax (at the then-existing tax rate) payable to the city; that by eliminating (for rate purposes) the $75,491 gross receipts tax item from both gross revenue and operating expense, the resulting rates (those proposed by the company in the substitute revised schedules) would produce the desired 5.345 per cent rate of return if the company was permitted to add each customer's proportionate share of the $75,491 gross receipts tax to each customer's respective bill.

It follows, and appellants make no contrary contention, that if the proposed and approved rate schedules did not, as they do, permit company to collect the money with which to pay the gross receipts tax imposed on it by city in the manner above noted, the company's steam rates would have to be increased sufficiently to provide company with $75,491 additional revenue with which to pay the gross receipts tax, in order to provide the approved rate of return of 5.345 per cent.

There was evidence that no gross receipts tax had been imposed by city by the time company's rates were (prior to the present hearing) last fixed by the commission in 1951; that in that same year a license tax equal to five per cent and in 1952 an additional tax equal to one half of one per cent of company's gross receipts from the sale of steam were imposed by city; that in 1955 the one half of one per cent was increased to one per cent with an expiration date of June 30, 1958, for both the five and one per cent taxes; that there was no indication that the tax would be reduced but there had been some recent indications that it might be increased.

The company's stated reason for proposing the tax adjustment clause as a part of its rate schedules was to enable its steam customers to receive immediately and automatically the benefit of any reduction in or abolition of such a tax and on the other hand to enable the company to protect itself from attrition of its rate of return due to further increases in the tax rate; both benefits to immediately and automatically accrue without the necessity for a valuation and rate hearing for the sole purpose of adjusting permissible company revenues because of fluctuation in the gross receipts tax rate caused by the city's actions.

The commission's stated ground for approving the tax clause as an integral part of company's rate schedules to accomplish the claimed benefits (which the commission apparently deemed desirable) was that the commission properly could and should determine what items of operating expense were so subject to fluctuation by the actions of governmental agencies uncontrolled by the commission as to substantially affect a rate of return theretofore fixed by the commission and to determine and order how such operating expense item or items should be so treated in determining rates as to eliminate the effect of such agency action.

In this review our province is to determine whether the commission's order is lawful and, if so, whether it is reasonable and based upon competent and substantial evidence upon the whole record. Section 386.510 (all section citations are to sections of RSMo 1949, V.A.M.S.); Mo.Const. 1945, Art. V, Sec. 22, V.A.M.S.; State ex rel. Chicago, Rock Island & Pacific R. Co. v. Public Service Commission, Mo., 312 S.W.2d 791, 796[3, 4].

Appellants remind us that the commission has only the power and authority specifically conferred upon it by the statutes and such power as may be reasonably necessary to enable the commission to effectively exercise the power specifically granted. State ex rel. and to Use of Public Service Commission v. Padberg, 346 Mo. 1133, 145 S.W.2d 150, 151. Appellants contend there is no statute authorizing or empowering the commission to approve rate schedules containing a so-called tax adjustment clause like the one here in question and that consequently the commission's order is unlawful.

Section 393.290 makes the provisions of the other sections of Chapter 393 (among others) as to the fixing of just and reasonable rates controlling with respect to the present company in so far as those provisions are 'practically, legally or necessarily applicable to heating companies * * *.' The presently pertinent provisions of Section 393.130 require company's charges for steam to be just and reasonable and not in excess of charges allowed by law or by order of the commission; those of Section 393.140 vest the commission with general supervision of company and with power to determine just and reasonable rates and charges. See State ex rel. Missouri Water Co. v. Public Service Commission, Mo., 308 S.W.2d 704, 716. Section 393.150 provides in part: 'Whenever there shall be filed with the commission * * * any schedule stating a new rate or charge * * * or any new rule, regulation or practice relating to any rate, charge or service * * * the commission shall have, and it is hereby given, authority * * * to enter upon a hearing concerning the propriety of such rate, charge, * * * rule, regulation or practice, and pending such hearing and the decision thereon, the commission * * * may suspend the operation of such schedule and defer the use of such rate, charge, * * * rule, regulation or practice, * * * and after full hearing * * * the commission may make such order in reference to such rate, charge, * * * rule, regulation or practice as would be proper in a proceeding initiated after the rate, * * * rule, regulation or practice has become effective.' Section 393.230 empowers the commission to hold valuation and revaluation hearings. Valuations so determined are for consideration in establishing fair values for ratemaking purposes, State ex rel. Missouri Water Co. v. Public Service Commission, supra, 308 S.W.2d 719, and obviously to enable the commission to determine what charges will permit the utility to make a fair and reasonable return. Section 393.270, paragraphs 3 and 4 of which seem applicable (although the present hearing was not initiated by defendant as described in Section 393.260 and mentioned...

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