Western Ky. Gas Co. v. Public Service Com'n

• Decision Date: 19 June 1945
• Citation: 300 Ky. 281,188 S.W.2d 458
• Parties: WESTERN KENTUCKY GAS CO. v. PUBLIC SERVICE COMMISSION.
• Court: Kentucky Court of Appeals

188 S.W.2d 458

300 Ky. 281

WESTERN KENTUCKY GAS CO. v. PUBLIC SERVICE COMMISSION.

Court of Appeals of Kentucky

June 19, 1945

Appeal from Circuit Court, Franklin County; William B. Ardery Judge.

Petition by Western Kentucky Gas Company against the Public Service Commission to review a ruling on petitioner's application for an increase in rates, in which Hon. Fred M. Vinson, then Stabilization Director, intervened. From a judgment dismissing the petition, the petitioner appeals.

Reversed with directions.

Cary, Miller & Kirk, of Owensboro, for appellant.

Dennis B. Wooton, of Frankfort, Harry H. Wilson and C. E. Nichols both of Munfordville, Harry R. Booth, of Washington, D. C T. J. Sparks, of Greenville, Gordon Lisanby, of Princeton and J. W. Powell, of Madisonville, for appellee.

MORRIS Commissioner.

Appellant by petition in the circuit court sought review of a ruling on its application for increase of rates. Following the filing Hon. Fred M. Vinson, then Stabilization Director (now William H. Davis), intervened. The company's demurrer to that pleading was overruled, and the Commission denied the allegations of the company's petition without affirmative plea. Upon submission the court dismissed the petition.

Appellant, engaged in the distribution of gas in twenty-six towns in southwestern Kentucky, alleged that in accord with K.R.S. 278.190 it had filed with the Commission a schedule of new rates and asked its adoption; that it had complied with § 961, 50 U.S.C.A.Appendix, providing for notice to the proper Federal agency, but the agency did not act. In its application it had shown that the fair value of its property was $325.396; for the year 1941 its operating revenue was $4,262.91, resulting in a return of 1.3 per cent on its rate base, while the general rule in the industry was a return of 6.5 per cent, just and reasonable, considering other factors; that in no year during its history had it received a sum approaching a reasonable return, to which it was entitled under 278.030, K.R.S.

It was alleged that upon a hearing it had made a detailed statement of its business and financial affairs, substantiated by testimony. In the hearings briefs were filed only by the company and some of the towns which had intervened. Local counsel for OPA was notified of hearings, and furnished copy of the schedule of proposed rates; the same information was sent to counsel in Washington, D. C. Both were informed later of postponed hearing dates. On June 28, following a communication of June 15, noted below, the company insisted that the Commission act on its application. An order of July 16, 1943 recited that: 'On June 15, 1943 the Commission, having considered the application in the light of the Congressional Acts and the President's executive order, notified all interested parties: 'It is the view of the Commission that under existing circumstances and the expressed policy of the Federal Government, this is not an appropriate time to inaugurate increase in rates.''

It was further recited that upon receipt of this July 15 notice applicant requested, and was granted an informal conference, and 'at this meeting Mr. Arnold Hirsch of the Office of Price Administration was present, though the O.P.A. had not availed itself of the right to intervene, except by correspondence.' The Commission did not agree with the contention that it was not to consider alone the Stabilization Act or the 'Hold the Line order, since it was directed to regulatory bodies such as this. We do not consider it necessary under the Act and the Order to have formal O.P.A. intervention.' The order then contains this statement, indicative of the Commission's interpretations: 'In normal times the record made by applicant might entitle it to favorable consideration. That we do not now decide. However, these are not normal. A war emergency exists that affects the whole nation, and we do not believe, under existing circumstances and the expressed policy of the Government an increase in utility rates should be allowed, unless and until it is shown to this Commission that service to the consumer would be impaired.'

Appellant filed petition for rehearing, discussing at length the effect of the act and order. Rehearing was denied, then followed the petition for review. The Government authorities first appeared in the circuit court, by pleading which set up provisions of the Control Act of 1942 (Public Laws 421 and 729, 79th Congress, 2d Session, 50 U.S.C.A.Appendix §§ 901 et seq., 961 et seq.) providing that prices, wages and salaries should be held as far as practicable at the level of September 15, 1942, 'with adjustments where necessary to aid in the prosecution of the war, or to correct gross inequalities'. It plead the salutary purpose of the act and order in checking inflation, and said: 'The same national interest which has required the stabilization of commodity prices, wages and salaries requires a fortiori, the stabilization of rates of public utilities, although in deference to the authorities already functioning in that field, Congress has excepted the regulation of public utility rates and charges from the emergency jurisdiction of the Price Administrator, and has allowed same to remain with the established regulatory Commission.' It was, and is contended that the Commission upon a fair appraisal of the facts determined that applicant should be denied an increase in rates unless and until it affirmatively showed that service would not be impaired, and therefore acted in its discretion in conformity with the program of stabilization. It may be remarked that the question as to whether a denial of an increase in rates would or would not impair service, is not a matter of concern to the intervenor, except that in undertaking to demonstrate that an increase would bring about inflation, the fact, if it were such, might be advanced as an argument that the line should be held until a change in circumstances would not have evil results.

In appellant's petition while it was said that 6.5 per cent would be a just return, in its prayer it asked that the Commission be directed to determine the case on its merits (admitting in argument that the Government intervenor might be heard) and to enter an order allowing a reasonable return, based on the record. An amended petition plead want of due process, equal protection, and that a denial of a just rate would constitute confiscation in violation of Federal and State Constitutions.

In order to determine just how far the act and order apply, we may advert to these documents, and the history attending enactment of the original act and amendment of October 2, 1942. The purpose of the Control Act, 50 U.S.C.A.Appendix § 901, was declared by Congress to be in the interest of national defense, and necessary to the effective prosecution of the war; to stabilize prices; to prevent speculation, unwarranted and abnormal increases in prices and rents; to eliminate and prevent profiteering, hoarding, manipulations and other disruptive practices resulting from abnormal market conditions or scarcities caused by or contributing to national emergency, etc. Following the section, supra, appear a number of executive orders providing for stabilization.

By the Stabilization Act 50 U.S.C.A.Appendix § 961, the President was empowered to issue general orders stabilizing prices, wages and salaries, affecting the cost of living, and to adjust prices, wages and salaries, when necessary to aid in war aims, or to correct gross inequalities. The section then reads: 'Provided, That no common carrier or other public utility shall make any general increase in its rates * * * which were in effect on September 15, 1942, unless it first gives thirty days notice to the President, or such agency as he may designate, and consents to the timely intervention by such agency before the Federal, State, or municipal authority having jurisdiction to consider such increase.'

The Executive Order No. 9328, of date April 8, 1943, 50 U.S.C.A.Appendix § 901 note, which was styled 'Stabilization of Wages, Prices, and Salaries,' by Section 4 provided: 'The attention of all agencies of the Federal Government, and of all State and municipal authorities, concerned with the rates of * * * public utilities, is directed to the stabilization program of which this order is a part so that rate increases will be disapproved and rate reductions effected, consistently with the Act of October 2, 1942, and other applicable federal, state or municipal law, in order to keep down the cost of living and effectuate the purpose of the stabilization program.'

The effect was to direct attention to the purposes of the Acts which did not undertake to regulate or control utility rates. This order, together with the acts, would not have the effect of prohibiting the Commission from taking cognizance of K.R.S. 278.030, which provides that 'every utility may demand, collect and receive fair, just and reasonable rates for the services rendered,' consistently with the order. In so far as Federal legislation is concerned the regulatory body could reasonably increase rates upon a proper showing, unless it be shown such would violate the purpose of the Act. The section, supra, permits timely intervention by the Administrator before the Commission, and such showing as 'he wishes to make' before general increases in rates, and holds in abeyance the effect of any proposed increase over levels existing on the date fixed by the law. Henderson v. Washington, M. & A. Motor Lines, 77 U.S.App.D.C. 26, 132 F.2d 729, certiorari denied 318 U.S. 779, 63 S.Ct. 854, 87 L.Ed. 1147. The right conferred on the Administrator does not include the power to compel regulatory bodies to make a complete investigation...