State v. Public Service Commission

• Decision Date: 05 March 1923
• Docket Number: No. 23728.,23728.
• Citation: 249 S.W. 955,298 Mo. 303
• Parties: STATE ex rel. CASE et al. v. PUBLIC SERVICE COMMISSION et al.
• Court: Missouri Supreme Court

249 S.W. 955

298 Mo. 303

STATE ex rel. CASE et al. v. PUBLIC SERVICE COMMISSION et al.

No. 23728.

Supreme Court of Missouri, Division No. 1.

March 5, 1923.

Rehearing Denied April 6, 1923.

Appeal from Circuit Court, County; Willard P. Hall, Judge.

Proceedings by Mary 3. Case and others to review an order of the Public Service Commission fixing steam heat rates to be charged by the Kansas City Light A Power Company. Prom an order of the circuit court, setting aside the order of the Commission fixing rates, the Commission, the members thereof, and the Light & Power Company appeal. Reversed and remanded, with directions.

L. H. Breuer, successor to R. Perry Spencer, Gen. Counsel Public Service Commission, of Rollo, James D. Lindsay, Asst. Gen. Counsel Public Service Commission, of Jefferson City, John E. Lucas, William C. Lucas, and Ludwick Graves, all of Kansas City, for appellants.

Lathroo, Morrow, Pox & Moore and Scarritt, Z'onea, Seddon & North, all of Kansas City, for respondents.

SMALL, C.

I. This is an appeal from the circuit court of Zackson county. The proceeding in the lower court was to review an order of the Public Utilities Commission, fixing the rates which the Kansas City Light & Power Company might charge its consumers for steam-heating service. The petition for review was filed by Mrs. Mary 3. Case and about 70 other heat consumers, including the city of Kansas City. The order of the commission was set aside, and the Light & Power Company duly appealed from the action of the circuit court. The order so set aside was dated September 27, 1919. It also fixed rates for electricity, as well as steam heat, furnished by said light and power company, but the electrical rates were not complained of, nor brought before said circuit court for review.

The Kansas City Light & Power Company not only supplier, electricity to Kansas City and Its Inhabitants, but also furnishes steam heat to a small area in the business district of said city. The steam for heating purposes was furnished from four plants, three small ones located, respectively, at Eighth and Walnut, at Ninth and Walnut streets, and at 1023 Grand avenue. These small plants were exclusively heating plants, and supplied about one-third of the steam heat furnished by the company. The other, or large plant, was at Thirteenth and Baltimore avenue. It was a joint steam heat and electric plant, and from it was supplied about two-thirds of the steam heat furnished customers by the company. At said joint plant the steam from the boilers was first passed through engines or "prime movers" to generate electricity, and after it was used for that purpose—that is, the exhaust steam—was allowed to flow into the pipes of the heating system and was used for heating purposes. But no electricity, or substantially none, was made, unless there was at the same time demand and use for all the exhaust steam in the heating service. The commission, in apportioning the valuation and operating expenses of the property in this joint plant, for determining rates for steam heat and electricity, allocated 85 per cent. as properly chargeable to steam heat, and 15 per cent, to electricity. This apportionment was In substantial accord with the undisputed evidence as to the units in the steam used for each service; a little less than 15 per cent, of the heat units in all the steam produced by the joint plant being used in making electricity, and a little more than 85 per cent. for heating.

The grounds upon which the lower court set aside the commission's order were: That the valuation and expense of the joint plant should have been apportioned equally to the electrical service and the heating service, that is, 50 per cent, allocated to each service; also that the finding of the commission of the value of the property was in a lump sum, and did not separately state the items of value and the amounts thereof considered by the commission in arriving at its total valuation, and that the heating rates fixed were unjust and excessive.

As their general contention in this court, respondents state in their brief:

"We wish to emphasize here that we did not question before Judge Hall, nor are we questioning here, the figures found by the commission as to the physical value of the different units of the property nor the figures found by the commission as to the investment of the company in the different units of the property. What we do question is the form of the order made by the commission (which does not comply with the statute) and the principles applied by the commission in determining the valuation of the property and the allocation of the joint property and of operating expenses as between the two services. We also assert that the commission has ignored the value of the service to the consumer."

The Light and Power Company's evidence as to the joint plant:

As to the use and character of the joint plant, A. E. Bettis, superintendent of the light company, testified in substance:

"It was constructed for the purpose of supplying heat to the downtown districts to the possible limits of conveying heat. It was not constructed as an adjunct, auxiliary to the furnishing of electricity. It was constructed, primarily for the purpose of furnishing heat, in 1907. It isn't considered economical to transmit heat at the pressures that you transmit it on a low-pressure system much over 4,000 or 5,000 feet. It covers an area less than a mile. When the Baltimore avenue plant was constructed, there was no electrical apparatus in the building whatever, and no space to put in any. It consisted of the regular mechanical apparatus that goes with an ordinary heating plant. We had practically no heating business below Twelfth street. In 1911 a new addition was made to the plant, 50 per cent. increase. Another increase was made in 1912, and also in 1916. * * * The combination plant was a benefit to the steam users, but not to the electrical consumers, because it wasn't for the electrical business. We would never put [electrical] machines in that location."

H. G. Blackwell, secretary of the light company, testified, in substance:

"All the steam we generated at that plant is passed through the electrical generators, and is delivered to the lower pressure heating system through the mains. There is produced from these generating engines a certain amount of electrical energy, dependent upon the amount of steam that goes out to the consumers. If the consumers demand a large quantity of steam, such as to-day, that will, as a result, produce comparatively a large amount of electricity. But if it is upon a fairly warm day, the steam that goes out to the consumers will produce through the generators a correspondingly small amount of electricity. These units were put in there to replace the old machinery; were specially built units, not economical in any sense, but were designed to operate on a certain amount of steam per kilowatt hour, primarily to act as reducing valves to reduce the high pressure to a relatively low distribution pressure."

Mr. Porter, president of the light company, testified:

"We were going to use the exhaust steam to furnish heat as a by-product to electric lighting Well, it turned out that there was nothing to it, that we didn't gain anything by that Particularly, and following along that idea the General Electric Company developed these turbines in order to furnish exhaust steam, and at the same time make a certain amount of electricity in conjunction with this class of plant. The economy of those engines was so low that they better not have been installed, and as a consequence, when you come to start your engine to get any service out of the plant, it is regulated—that is, the use of the engine is ordinarily regulated—by the amount of steam that you require. On an extreme cold day, they might be able to furnish a certain amount of electricity; but on the ordinary day you can't start to make it. It costs you too much to make it.

"Q. In other words, you mean you don't always operate that plant to capacity all the time? A. You can't do it, because you can't use the steam. You can't afford to use the units because it would cost you about 15 cents a kilowatt for current to run them, 10 or 15 cents. It would be out of reason.

"Q. You are paying to-day, aren't you, 2½ cents for current that you buy from the Long Building and the Bryant Building? A. Yea, sir; a few of those small buildings."

Speaking in view of the actual operation and results, Mr. Porter said the electricity produced at the joint plant was considered the by-product. In view of the actual heat units in the steam used for each purpose The engineer of the commission, testified that the proper allocation of the values and' operating expense of the property devoted to the joint use for rate making should also be the same ratio, to wit, 13 per cent. to the electrical service, and 87 per cent. to heating.

Respondents' evidence as to joint plant:

Mr. Baldwin, the expert engineer for the respondents, as to the proper ratio of apportionment, said:

"I made my division somewhat as is usually done in dividing a property by taking the maximum demand as the basis. The maximum demand is usually aged to divide the property value, the amount of money that it takes to put into a property determined by the maximum demand required. The use of that property is used as the usual thing to divide the operating expenses, very similar to dividing a waterworks property. If yon took a waterworks property and tried to divide the fire services and domestic services by means of the use of the property you would get almost no part of it chargeable to fire services, and I know that the commission is familiar with the fact that a big part of the investment is due entirely to fire service. I have applied that method to this property. The generating equipment at that plant would require certain boiler capacity. The facts are that the intentions...