The State ex rel. Watts Engineering Co. v. Public Service Commission
| Citation | 191 S.W. 412,269 Mo. 525 |
| Parties | THE STATE ex rel. WATTS ENGINEERING COMPANY, Appellant, v. PUBLIC SERVICE COMMISSION |
| Decision Date | 17 January 1917 |
| Court | Missouri Supreme Court |
Appeal from Cole Circuit Court. -- Hon. J. G. Slate, Judge.
Affirmed.
J. L Hornsby for appellant.
(1) Neither the Legislature nor a commission with power to regulate and fix rates, can fix rates so low as to deprive a public utility corporation of a reasonable return on the amount of its investment used in the public service. Upon the conception of the right to take tolls as a species of property belonging to a public utility corporation rest all decisions of all courts, both State and Federal, denying the right of legislature or commissions to restrict such tolls below a reasonable amount. In fixing rates experimentation with the property of anyone is never justifiable. Speculations as to the future are not guides for judicial action. Railroad v. Dey, 35 F. 881; Smyth v Ames, 169 U.S. 466; Railroad v. Railroad Comm., 155 F. 792; Buel v. Railroad, 1 Wis. R. C. R. 324; Milwaukee El. R. & L. Co. v. Milwaukee, 87 F. 577; In re Rochester (N. Y. P. S. C. 2d Dist.), Pub. Utilities Rep. Ann. 1915-A, p. 1095; Tel. & Tel. Co. v. Louisville, 187 F. 637; Coal & Coke Ry. Co. v. Conley, 67 W.Va. 129. (2) The reasonableness of rates charged by a public utility corporation cannot be determined by comparison with rates charged elsewhere, unless it is made to appear that all the conditions and circumstances under which the service is rendered are the same, and that the rates elsewhere are remunerative. Railroad v. Dey, 35 F. 866; Ames v. Railroad, 64 F. 188, cited with approval in Smyth v. Ames, 169 U.S. 528; Arkansas Rate Cases, 187 F. 303.
Wm. G. Busby and Alex. Z. Patterson for respondent.
(1) The right of a corporation to earn a fair return upon its investment is qualified by the proviso that in no event shall the company be permitted to charge the consumer more that the service is reasonably worth. Road Co. v. Sandford, 164 U.S. 597; Water Works v. San Francisco, 192 F. 137; Water Co. v. San Francisco, 165 F. 679; Water District v. Water Co., 99 Me. 371; Brymer v. Water Co., 176 Pa. 231; Smyth v. Ames, 169 U.S. 545; Land Co. v. National City, 174 U.S. 757; Cotting v. Stock Yards Co., 183 U.S. 91; Public Service Co. v. Public Utility Board, 84 N. J. L. 474; Long Branch Comm. v. Water Co., 70 N.J.Eq. 84, 71 N.J.Eq. 790; Pond on Public Utilities, secs. 444, 543. (2) In fixing just and reasonable rates, it is proper to consider the probability that increased consumption at the lower rate may result in increased earnings. Wilcox v. Gas Co., 212 U.S. 50, 48 L. R. A. (N. S.) 1134; Wyman on Public Service Corporations, sec. 1129. (3) In determining just and reasonable rates for service of a public utility, comparison with rates customarily charged in localities similarly situated is a proper test. Gas Co. v. Public Utility Board, 84 N. J. L. 463; Traction Co. v. Chicago, 199 Ill. 645; Cotting v. Stock Yards Co., 183 U.S. 79; Railroad v. Wilson, 119 Ind. 358; Johnson v. Railroad, 16 Fla. 623; Gunning, on Law of Tolls, p. 61; Angell on Carriers, sec. 392. (4) The utility corporation assumes the risk of its investment and no return whatever is guaranteed to it. Telephone Co. v. Carthage, 235 Mo. 644; Water District v. Water Co., 99 Me. 371; Smith v. Ames, 169 U.S. 466; Pond on Public Utilities, sec. 454; Water Works v. San Francisco, 192 F. 137.
OPINION
In Banc.
This proceeding was instituted by the city of Columbia, by filing a complaint with the Public Service Commission against the Watts Engineering Company, a manufacturer, distributor and seller of gas in said city. The complaint charged that the company's rates charged for gas to consumers were "excessive, exorbitant and unreasonable," and asked that the same be reduced "to such amount as the commission shall deem reasonable and just."
In due time the company filed its answer denying the allegations of the complaint. Thereafter, at the time the cause was set for hearing, each party introduced evidence before the commission.
The evidence introduced by the complainant was to the following effect:
That the rates charged by other gas companies in the cities of this State, as compared with the rates complained of, were lower. These rates were ascertained by a study of the schedules of rates of gas utilities of this State, required by law to be filed in the office of the commission. The cities considered in this statement are Boonville, Brookfield, Cape Girardeau, Chillicothe, Clinton, Columbia, Excelsior Springs, Hannibal, Independence, Jefferson City, Kirksville, Lexington, Louisiana, Marshall, Mexico, Moberly, Oak Grove, Rich Hill, Springfield, Sedalia, St. Charles, St. Joseph, St. Louis and Kansas City.
Witness Sheppard, a city councilman of Columbia, testified that the rate for gas in Columbia was higher than similar rates in all of these twenty-four cities, with the exception of Oak Grove, which had only a total population of 641, and in which a more expensive kind of gas was manufactured. That only one city (Cape Girardeau) of the twenty-four had as high a minimum charge per month for gas as Columbia.
The appellant objected to a comparison of the rates of some of the cities with the rates in Columbia for the reason that in said cities the same company owned both the gas and electric plants, whereas in Columbia the electric plant was owned by the municipality. This objection was overruled, and exceptions duly saved. The commission ascertained the rates in existence in the cities of Brookfield, Kirksville, St. Charles, Hannibal, and Independence, in all of which the gas utilities were operated independently of the electric utilities.
The results of its findings of these rates and comparison with those of appellant at Columbia are shown by the following table:
Comparative rates of utilities, furnishing gas service only, operating in Missouri in cities of size comparable with Columbia.
Cost per 1,000 cubic feet
Cost per 1,000 cubic feet
up to 10,000 cubic feet
over 10,000 cubic feet.
City
Population
Gross
Dis-
Net
Gross
Dis-
Net
count
count
Columbia
9,662
2.00
.25
.40
1.60
Brookfield
5,749
1.35
.10
1.25
1.25
.10
1.15
Kirksville
6,347
1.35
.10
1.25
1.35
.10
1.25
St. Charles
9,437
1.10
.10
1.00
1.10
.10
1.00
Hannibal
18,341
1.50
.50
1.00
1.50
.70
.80
Independ-
ence
9,859
1.25
.10
1.15
1.25
.10
1.15
Average in-
cluding
Columbia
1.31
1.13
1.29
1.07
It further appeared from the evidence that the cost of coal at Columbia was less that the average market price in the State because of competing railroads; that the character of the ground at Columbia was not such as to make the construction of the plant more expensive than other cities, since the mains could be laid without cutting through rock, as was the case at Hannibal. That Columbia was a city of much wealth, with several schools and colleges, including the State University; that the E. W. Stephens Publishing Company and other industries were there located.
The evidence showed that the University and the E. W. Stephens Publishing Company were permanent customers of appellant, and together consumed fully one-fourth of appellant's product; that the demand by the University was increasing rapidly.
That the company has in its plant at Columbia three separate equipments for the manufacture of gas:
First: A water gas equipment in duplicate of ample size to supply the present requirements and an increase to approximately double these requirements. This equipment is the only part of appellant's gas producing plant in use at this time.
Second: A coal gas equipment of vertical coal gas retorts of such size as to easily care for the present requirements. This equipment has not been used by appellant for a number of years.
Third: A still older coal gas equipment, capable of caring for the present requirements, but too small to be relied on. This equipment is likewise not in use.
Mr. Babb, witness for complainant, testified that he delayed putting gas into his house for two years on account of the high rates and the high minimum charge of one dollar per month. He also testified that in his opinion the lowering of the rate and the minimum charge per month would materially increase the number of consumers.
J. A. Stewart, witness for complainant, testified that there would unquestionably be a much greater number of customers if the gas rate was lowered. This witness further testified that the appellant company would not supply gas to a new addition in Columbia, and witness was compelled to lay his own mains in this addition, though there were from forty to sixty consumers in the addition, and prospects of a greater number. That after witness put in his own mains, appellant furnished gas to consumers at its regular rates, to-wit, a new rate of $ 1.75 to consumers using less than 10,000 cubic feet.
Witness W. J. Sheppard, for complainant, testified that the reduction of rates at Columbia would, in his opinion, materially increase the business of appellant. That the total value of the appellant's property, tangible and intangible, used in the service of the public in the production, manufacture and sale of gas at Columbia, was $ 77,000.
In determining this value, the commission excluded the value of the coal gas equipment, since it appeared that it was not in use, and had not been used since the water gas equipment was installed, and since it appeared that the water gas equipment was more than ample for the present requirements, and all probable future...
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