Wis. Hydro-Electric Co. v. R.R. Comm'n of Wis.

• Decision Date: 20 June 1932
• Citation: 208 Wis. 348,243 N.W. 322
• Parties: WISCONSIN HYDRO-ELECTRIC CO. v. RAILROAD COMMISSION OF WISCONSIN.
• Court: Wisconsin Supreme Court

208 Wis. 348

243 N.W. 322

WISCONSIN HYDRO-ELECTRIC CO.

v.RAILROAD COMMISSION OF WISCONSIN.

Supreme Court of Wisconsin.

June 20, 1932.

Appeal from Circuit Court, Dane County; August C. Hoppmann, Judge.

On rehearing.

Former opinion reversing the judgment vacated in part, and order of the Railroad Commission reversed, with directions.

For former opinion, see 236 N. W. 663.--[By Editorial Staff.]John W. Reynolds, Atty. Gen., Samuel Bryan, Asst. Atty. Gen., and David E. Lilienthal, of Chicago, Ill., for appellant.

Sanborn, Blake & Aberg, of Madison, for respondent.

Olin & Butler and R. M. Rieser, all of Madison, amici curiæ.

FRITZ, J.

On the motion for a rehearing, argument was ordered. From the briefs and argument upon the rehearing, it now appears probable that because of the existence of other material facts than those which are stated in the meager allegations of the pleadings, upon which alone the action was tried, without taking any other proof, the real controversy has not been fully tried. As stated in the former opinion, there were allegations in the answer (which for the purpose of the trial were assumed to be correct) that the rural rates, in the cases in which customers had made donations to finance line construction and extensions, “were established upon a basis which did not provide for a return to the utility upon the capital thus donated by customers; that the customers' donation plan above outlined made it possible for the electric utility to establish a lower rate for rural electric service, which tended to promote the expansion of rural electrification to the benefit of the utility and also of the public; that the rate schedule of the Luck Light & Power Company under which the customers' donations under consideration were made was constructed upon the principles above set forth, and did not permit said Luck Light & Power Company to earn a return upon the amount of said customers' donations.” Plaintiff now asserts, without challenge by the defendant, that as a matter of fact conditions have changed so as to extinguish all rights which the original donors may have had in the matter of rates by reason of such donations; and that the donors are now enjoying the general rates of the plaintiff, which are less than the rates they enjoyed prior to the purchase of the property by plaintiff, and less than they ever received by reason of any special arrangement with plaintiff's predecessor as a result of their donations. If those changes have occurred, all of the rights to which the donors were entitled by reason of their donations may have been satisfied.

[1][2][3][4] So far as the record discloses, defendant refused to permit the issuance of securities upon a basis which included assets acquired by customers' donations simply because the rate schedule of the plaintiff's predecessor did not permit such predecessor to earn a return upon the amount of such donations. Clearly, in determining the amount of securities that may be issued upon a public utility property, the question of the return which the utility may be permitted to earn upon its property cannot be ignored. That is one of the elements which section 184.09, Stats. (1929), contemplates shall be taken into consideration by the commission in determining the amount of securities that the utility company may be permitted to issue upon its property. Under the public policy of this state, as evidenced by its legislative enactments and recognized by this court in State ex rel. Central S. H. & P. Co. v. Gettle, 196 Wis. 1, 220 N. W. 201, the authority of a public utility to issue stocks and bonds is a mere privilege which is subject to such legislative regulations as are prescribed in section 184.09, Stats. Rightly, the Legislature has not confined the factual basis, which the commission is to ascertain and consider in determining the amount of the security issues, to merely the value of the assets to which the corporation technically has title. On the contrary, after expressly requiring the corporation to submit to the commission, in connection with other data, a verified statement which, among other specified matters, shall state its “previous financial operation and business,” section 184.09 (4), Stats., provides that the commission is to exercise its power to issue a certificate of authority to the corporation to issue securities only if it determines that (1) the financial condition, (2) the plan of operation, and (3) the proposed undertakingsof the corporation are such as to afford reasonable protection to purchasers of the securities to be issued. Manifestly, reasonable protection to prospective purchasers is to constitute an important consideration.

[5][6] It seems that in the development of similar utilities prospective customers who desired utility service, but who resided beyond the normal zone supplied by the utility, would, in order to secure service, contribute substantial amounts to the utility to defray the expense of extending the service to such customers. Such donations enabled the utility, as in the case at bar, to build the necessary lines and supply the necessary equipment to enable it to furnish to the donating customers the same service which it was furnishing to the public within the normal zone served by the utility. As long...