United Fuel Gas Co. v. Public Service Commission

• Decision Date: 05 July 1957
• Docket Number: No. 10794,10794
• Citation: 143 W.Va. 33,99 S.E.2d 1
• Parties: , 19 P.U.R.3d 504 UNITED FUEL GAS COMPANY v. The PUBLIC SERVICE COMMISSION of West Virginia.
• Court: West Virginia Supreme Court

Page 1

99 S.E.2d 1

143 W.Va. 33, 19 P.U.R.3d 504

UNITED FUEL GAS COMPANY v. The PUBLIC SERVICE COMMISSION of West Virginia.

No. 10794.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 25, 1956.

Decided July 5, 1957.

Syllabus by the Court

'A final order of the Public Service Commission, based upon findings no supported by evidence, or based upon a mistake of law, will be reversed and set aside by this Court upon review.' Point 3, syllabus, Atlantic Greyhound Corporation v. Public Service Commission of West Virginia, 132 W.Va. 650 [54 S.E.2d 169].

Charles C. Wise, Jr., R. K. Talbott, Tilford A. Jones, Charleston, for petitioner.

John G. Fox, Atty. Gen., Fred H. Caplan, Asst. Atty. Gen., for respondent.

HAYMOND, Judge.

This proceeding is before this Court upon the petition of United Fuel Gas Company, a public service corporation, filed September 26, 1955, pursuant to Section 1, Article 5, Chapter 24, Code, 1931, for review of a final order entered by the defendant, The Public Service Commission of West Virginia, August 26, 1955, which found that the existing rates for the intrastate gas service rendered by the petitioner in West Virginia were inadequate and prescribed new rates which would increase the existing annual rates by $565,283.00 which amount was increased by an additional $16,000.00 by supplementary order of the commission entered September 8, 1955. By those orders the total increase allowed amounted to $581,283.00.

On July 20, 1954, the petitioner instituted this proceeding before The Public Service Commission of West Virginia , sometimes referred to as the commission, by filing its application for authority to put into effect new rates for the intrastate gas service rendered by the petitioner in West Virginia. By its application the petitioner asserted that the existing rates charged for its intrastate gas business in West Virginia were inadequate to the extent of approximately $2,283,000.00 in annual revenue. The test period involved for the determination of just and reasonable rates for the intrastate gas service rendered by the petitioner was the period from July 1, 1953 to June 30, 1954. Numerous hearings were held from time to time by the commission until June 21, 1955, when the last hearing occurred.

The final order of the commission was concurred in by two of its members and one member dissented.

The petitioner, upon this review, which was granted by this Court January 23, 1956, asserts that the final order entered by the commission August 26, 1955, supplemented by its order entered September 8, 1955, is violative of the provisions of the Constitution of the United States and of the Constitution of the State of West Virginia.

The proceeding was first submitted for decision April 10, 1956. On June 29, 1956, this Court ordered reargument and resubmission of the proceeding and it was continued until September 25, 1956. On September 26, 1956, the proceeding was finally submitted for decision upon the petition, the papers, documents, evidence, records and exhibits introduced before the commission, the statement of the commission of its reasons for the entry of the orders of August 26, 1955 and September 8, 1955, and the oral arguments and briefs of counsel in behalf of the petitioner and the commission.

By its assignments of error the petitioner seeks reversal of the final order of the commission on these grounds: (1) The final order is without evidence to support it, is contrary to the evidence, and for those reasons is arbitrary and violative of the due process clauses of the Constitution of the United States and the Constitution of West Virginia; (2) it obstructs and burdens interstate commerce in violation of the Constitution of the United States by giving West Virginia consumers of the gas furnished by the petitioner an unlawful preference over the consumers of its gas in other states; and (3) it results in the confiscation of the property of the petitioner without just compensation in violation of the Constitution of the United States and the Constitution of the State of West Virginia.

The controlling question involved in this proceeding upon review of the final order of the commission is whether by that order the petitioner is denied its right to recover from its West Virginia gas consumers the just and proper proportion of the total cost of the service provided by the company. There is no contention that the service provided is in any wise inadequate or that the petitioner has failed to meet in any substantial measure the demands of any of its consumers of gas in West Virginia.

There is, however, disagreement between the petitioner and the commission concerning the valuation of the property of the petitioner in its entire system for the purpose of determining the rates to be charged by the petitioner. The petitioner contends that it should be allowed to earn a return on its net original cost rate base on June 30, 1954, the end of the test period, of $112,792,408.00, instead of the average net original cost rate base during the test period July 1, 1953 to June 30, 1954 of $111,774,095.00 which was adopted by the commission, and the difference between the valuation for which the company contends and the valuation recognized by the commission is $1,018,313.00. Upon this review, however, the petitioner does not challenge the total valuation of $111,774,095.00 placed upon its property by the commission for the purpose of determining proper rates; and as there is a conflict in the evidence on that point the total valuation of $111,774,095.00 will be considered as correct and proper on this review of the final order of the commission.

About the year 1903 the petitioner became a West Virginia corporation and was organized for the purpose of obtaining additional supplies of gas for markets in Ohio. In 1909 it acquired large gas reserves and properties in West Virginia and Kentucky and at that time assumed obligations under an earlier contract which required it to use certain gas reserves in West Virginia to supply markets centered in Cincinnati, Ohio, and Covington, Kentucky. In the performance of that contract is constructed facilities to transport gas produced in West Virginia to the Cincinnati area and those facilities without change of location have since been used continuously for that purpose. In 1910 the petitioner entered into a contract with a predecessor of Ohio Fuel Gas Company to deliver gas produced in West Virginia to that company at the Ohio River near Ravenswood and gas from West Virginia is delivered to the Ohio Fuel Gas Company at that point by facilities constructed and maintained in accordance with that contract. The petitioner has furnished gas to Portsmouth Gas Company in Ohio since 1909; to Central Kentucky Natural Gas Company for markets in and around Lexington, Kentucky, since 1912, and for markets in and around Cincinnati, Ohio, since 1910; to Manufacturers Light and Heat Company since 1927; and to Atlantic Seaboard Corporation, an affiliate of the Columbia Gas System, since 1932.

From the foregoing undisputed facts it is clear that the petitioner, since its organization, has been primarily interested in the sale of natural gas to interstate markets; that its present interstate customers have been such for many years; that no new interstate customer has been added since 1932; that from 1909 to 1944 the interstate market and the West Virginia market were supplied with gas produced and purchased in West Virginia and Kentucky; and that since 1944 the petitioner has supplied these markets with gas produced or purchased in West Virginia, Kentucky and the Southwest.

Since 1944 the petitioner has been unable to meet its wholesale and retail gas supply requirements with gas produced and purchased in West Virginia and Kentucky, and in October, 1944, it began to purchase gas in large quantities from gas supply areas in the Southwest to meet its requirements for additional supplies of gas and it became necessary to increase the amount of its purchases of southwest gas from time to time until, in 1953, the petitioner received approximately 71 per cent of its gas supply from the Southwest in addition to its continued production and purchase of available gas in West Virginia and Kentucky.

The price which petitioner pays for southwest gas is fixed by the Federal Power Commission. In 1950 the price of southwest gas purchased by the petitioner on a high load factor was less than the price of the gas produced and purchased in West Virginia but the price of the southwest gas was subsequently increased and during the test period the price of that gas was 28.33 cents per Mcf. as compared with the price of 23.21 cents per Mcf. for gas produced and purchased in West Virginia.

During the year 1953 the petitioner produced 28,778,000 Mcf. of gas in West Virginia and it purchased 18,256,747 Mcf. of gas from other West Virginia producers or a total of 47,034,747 Mcf. of gas produced and purchased by it in West Virginia, gas of this total supply of West Virginia gas it sold to its West Virginia customers 21,903,491 Mcf. of gas. From these figures it appears that the petitioner produced and purchased more than twice as much West Virginia gas during the year 1953 as it sold and delivered to its West Virginia consumers. During the test period the petitioner purchased 20,133,911 Mcf. of gas in West Virginia, 16,693,547 Mcf. of gas in Kentucky, and 176,193,743 Mcf. of southwest gas at a total cost of $56,755,000.00, or about two-thirds of its total service cost of $82,896,323.00. The petitioner purchases its southwest gas under a contract by which it was required to pay to the Tennessee Gas Transmission Company $11,853,208.00 as a demand charge and $37,796,724.00 as a commodity charge, or a total of $49,649,932.00, during the test period.

More than 85 per cent of the entire business of the petitioner consists of interestate sales of gas to five wholesale...