State v. N.H. Gas & Elec. Co.

• Decision Date: 04 October 1932
• Citation: State v. N.H. Gas & Elec. Co., 86 N.H. 16, 163 A. 724 (N.H. 1932)
• Parties: STATE v. NEW HAMPSHIRE GAS & ELECTRIC CO. et al.
• Court: New Hampshire Supreme Court

163 A. 724

STATE

v. NEW HAMPSHIRE GAS & ELECTRIC CO. et al.

Supreme Court of New Hampshire.

Oct. 4, 1932.

Appeal from Public Service Commission.

Proceeding by the State against the New Hampshire Gas & Electric Company and another. From orders of the Public Service Commission, defendants appeal.

Appeals sustained.

Appeals, from orders of the Public Service Commission made upon an investigation and hearing instituted on its own motion to inform it whether or not the appellants, or their affiliates owning, operating, and managing utility plants or equipments in New Hampshire, "have complied with all provisions of the law and orders of the commission," and to that end requiring their representatives to "evidence in detail the capitalization, franchises and manner in which the lines and property controlled or operated by said companies are managed and operated." P. L. c. 240, § 4; 14 N. H. P. S. C. 89.

The investigation, called for June 30, 1930, developed into a hearing in the nature of a trial which consumed fourteen days, and, by reason of postponement and adjournments, was spread over a year's time. On June 30, 1931, the commission made an order requiring the appellant companies to show cause, on or before September 10, 1931, why certain enumerated orders should not then become effective. The first appeal was taken from this order. Upon transfer to this court, the state moved to dismiss the appeal as premature. The motion was denied on September 9th. 85 N. H. 218, 156 A. 816. On the resumption of the hearing before the commission, on September 10th, the appellants declining to offer further evidence, an order was issued making the suggested orders operative, from which the second appeal was taken.

The orders and other material facts are stated in the opinion.

Francis W. Johnston, Atty. Gen., and Louis E. Wyman, Sp. Counsel, of Manchester, for the State.

Robert G. Dodge and John M. Raymond, both of Boston, Mass., and Robert W. Upton, of Concord, for appellants.

SNOW, J.

Although the evidence, findings, and arguments have covered a wide range, the issues of law directly presented by the record are limited in number and scope. In their final analysis they involve the single question of the extent of the powers invested in the Public Service Commission to make regulatory orders. Convenience calls for a statement and consideration of the orders in groups, assembled according to their subject-matter.

I. Orders 8, 4, 5, and 9.—The appellants are corporations organized under the laws of New Hampshire to do utility business in this state. The Associated Gas & Electric Company, hereinafter called the Associated Company, is a New York corporation holding directly or indirectly the stock of numerous widely scattered operating utilities and of numerous affiliated companies. The New England Gas & Electric Association, hereinafter called the New England Association, is a Massachusetts trust holding the shares of various utility companies in New England. A group of individuals in New York hold a controlling interest in each of the two major companies. The affiliated companies include engineering, construction, management, purchasing, advertising, financing, and accounting corporations which, in their respective capacities, serve the operating units. These various companies are more or less interrelated by stock ownership or interlocking directorates, and, taken together, are spoken of as the Associated Gas & Electric System, hereinafter called the System. The signs and stationery of the local utilities carry this designation. Among such affiliated companies are the J. G. White Management Corporation, hereinafter called the Management Corporation, and the Associated Appliance Corporation, a purchasing and sales company, each of which sustain contract relations in their respective capacities with each of the appellants.

In 1924 the Associated Company acquired the stock of the Portsmouth Power Company, now the appellant New Hampshire Gas & Electric Company, hereinafter called the New Hampshire Company. In 1928 the stock of the Derry Electric Company, hereinafter called the Derry Company, was acquired by the System through the Management Corporation. In 1930 the property of the Derry Company, sold on foreclosure sale, was purchased by the New Hampshire Company which has since operated the plants of both appellants. The New England Association is now the sole stockholder of the New Hampshire Company.

Each appellant has a contract with the Management Corporation dated June 1, 1929, for a term of ten years, entitled "Agreement for Managerial Services," calling for a remuneration to the latter of 2.5% of the gross earnings of the utility. These contracts are of a comprehensive nature as respects both the authority conferred and the services to be performed, but are expressly subject to "such limitations as the laws of the state * * * impose." Each expressly disclaims the surrender or abandonment by the directors of the utility of any powers or duties imposed upon them by law, or the investment of such manager with any nondelegable authority or duties.

The appellants, at the behest of the Management Corporation, have abandoned the appliance business which they formerly conducted at a profit, and have submitted to arrangements made for them with the Associated Appliance Corporation dated December 1, 1928, under which the latter consigns all appliances to the former which sell them upon a commission basis; the profits beyond a commission of 2.5 per cent. inuring to said corporation instead of to the utilities. No charge is made by either utility for storage or display space. The appellants permit their employees during working hours, and on their own account, to sell the securities of the Associated Company. A substantial number of the employees of both utilities are licensed to make such sales.

The commission finds that "From a practical standpoint both New Hampshire Gas & Electric Company and Derry Electric Company are controlled and operated by the Associated Gas & Electric Company. * * * If we look through the shell to the substance, all these trusts and companies are really a unit operating a utility in New Hampshire, and justifying the 'System' title which they bear * * * the local utility officials, irrespective of their title, act merely as subordinates to the real voice of management and control located in New York. From there, authority is transmitted to the office of the New England Gas & Electric Association, Cambridge, Massachusetts. From there, it is sent to the local employees." The commission further finds: "That the J. G. White Management Corporation is managing and in fact operating a 'plant or equipment * * * for the manufacture or furnishing of light, heat (or) power * * * for the public' and is a public utility as defined by P. L. c. 236, § 4, and [rules] that the commission having never made a finding that the 'contract for the operation of the works and system of New Hampshire Gas & Electric Company and Derry Electric Company 'will be for the public good and (made) an order assenting thereto' that both said management contracts are void until P. L. c. 240, §§ 28 and 29 are satisfied." 14 N. H. P. S. C. 96, 116.

On these findings and ruling the commission ordered:

"3. That New Hampshire Gas and Electric Company and Derry Electric Company hereafter pay no sums to the J. G. White Management Corporation under said contracts of June 1, 1929, unless and until upon proper petition the Public Service Commission shall find said contracts to be for the public good, and make an order assenting thereto;

"4. That the New Hampshire Gas and Electric Company and Derry Electric Company henceforth discontinue the present practice of selling appliances for and on behalf of the Associated Appliance Corporation;

"5. That so long as New Hampshire Gas and Electric Company and Derry Electric Company do not engage in a so-called appliance business they shall not provide storage or other space for appliances sold or display space for appliances sold at their offices without adequate recompense therefor."

"9. That New Hampshire Gas and Electric Company and Derry Electric Company forthwith discontinue the present practice of permitting certain of their employees to sell stock of the Associated Gas and Electric Company during hours when said employees are engaged to perform duties for said utilities."

The appellants contest not only the findings of the commission, but its ruling that a contract of the nature of that found to exist between each appellant and the Management Corporation, or between each appellant and the affiliates of the System as a unit, was "a contract for the operation of its [the utility's] works or system," requiring commission approval under P. L. c. 240, §§ 28, 29. The question of the interpretation of this phrase is presented. These sections read: "Any public utility may transfer or lease its franchise, works or system or any part of such franchise, works or system, exercised or located in this state, or contract for the operation of its works and system located in this state, when the commission shall find that it will be for the public good and shall make an order assenting thereto, but not otherwise." Section 28. "Any such attempted transfer, lease or contract shall be void unless the same shall have been approved by the commission." Section 29.

In the parent act, this provision (section 28) was paragraph (b) of Laws 1911, c. 164, § 13, which was interposed between provisions requiring like commission approval (a) to the commencement of business by a utility and (c) to the acquisition of the stocks or bonds of another utility engaged or preparing to engage in the same or similar business. The evident purpose of section 13, as amended by Laws 1913, c. 145, § 13 (a) (b) (c), was to assure competence of the utility to meet the public need and to preserve to each utility its corporate...