243 F. 206 | W.D. Mo. | 1916
The St. Joseph Gas & Manufacturing Company, the immediate predecessor of the plaintiff, was incorporated in 1885, and the St. Joseph Light & Fuel Company in 1890. Each company for a number of years owned and operated in the city of St. Joseph, Mo., a plant for the manufacture and distribution of artificial gas. In 1897 the physical assets of the Light & Euel Company were sold under fore’ closure, and its property was thereafter consolidated with that of the Gas & Manufacturing Company, and the name of the latter company
This company, a corporation of the state of Missouri, continued to own and operate its gas plant, and up to 1905 was delivering manufactured gas at the rate of $1 per thousand cubic feet. On August 13, 1905, the St. Joseph Gas Company entered into a contract, effective December 1, 1905, with the Kaw Gas Company, a corporation of the state of West Virginia (afterwards merged into the Kansas Natural Gas Company). This contract recited that the Kaw Gas Company was the owner of leases of natural gas producing lands, with gas producing wells developed, in the state of Kansas, and was 'desiyous of marketing its natural gas product. Said contract recited further that the St. Joseph Gas Company was the owner of a system of pipes for tire distribution of gas in the city of St. Joseph, Mo., and desirous of securing a supply of natural gas for said city. Said contract provided that the Kaw Gas Company should deliver natural gas to1 the St. Joseph Gas Company at a point at the city limits of St. Joseph, Mo., for a period of 20 years after December 1, 1905; and the St. Joseph Gas Company agreed to purchase, receive, and pay for the natural gas so delivered, as the gas should be demanded by its consumers, and to distribute the same through its system of pipes in the city of St. Joseph, tire quantity of gas purchased to be ascertained by monthly readings of the meters in use by the consumers of such gas. The price was fixed for the consumer at ,the minimum rate of 30 cents per thousand cubic feet for five years, and at a minimum price of 40 cents per thousand cubic feet thereafter. Twenty cents per thousand cubic feet was to be paid by the St. Joseph Gas Company to tire Kaw Gas Company during the period when tire price to the consumers should be 30 cents for 1,000 cubic feet. The contract further provided that:
“The price of 20 cents per thousand cubic feet for natural gas to be paid by the St. Joseph Company is based on a general price of 30 cents net per thousand cubic feet to the St. Joseph Company’s consumers; but should the St. Joseph Company at any time obtain a higher price for natural gas than 30 cents net per thousand cubic feet for any part or all of the gas purchased from the Kaw Company, then and in that event, the price to be paid the Kaw Company shall be, for al-1 natural gas sold at the higher price, 20 cents per thousand cubic feet, plus two-thirds of the excess price obtained by the St. Joseph Company. In the event that any natural gas is sold at less than 30 cents per thousand cubic feet as hereinafter provided, to the St. Joseph Company’s consumers, then the price to be paid the Kaw Company shall be 20 cents per thousand cubic feet less two-thirds of the reduction made by the St. Joseph Company from its regular price of 30 cents per 1,000 cubic feet. The Kaw Company shall receive two-thirds of the amounts collected from the consumers failing to take advantage of the discount allowed ior prompt payment.”
Pursuant to the terms of said contract, the St. Joseph Gas Company since about February, 1906, has been engaged in selling and distributing natural gas. The St. Joseph Gas Company did not dismantle or abandon its manufactured gas plant, but maintained and improved the same, for the purpose of being ready to supply any deficiency in the supply of natural gas, and at various times during the period after February, 1906, has delivered manufactured gas to its consumers when the supply
In 1913 notice was given by the St. Joseph Gas Company to the public that, whenever it became necessary to manufacture gas in large quantities to supply the deficiency of natural gas, such manufactured gas would be charged for at the rate of $1 per thousand cubic feet net for the proportionate amount of manufactured gas each patron consumed. In February, 1914, a complaint was filed in the name of certain members of the city council, before the Public Service Commission of Missouri, against the St. Joseph Gas Company, in which it was alleged that the company had no authority to charge $1 per thousand cubic feet for manufactured gas at any price proposed, and prayed the Commission to restrain the charge of $1 per thousand cubic feet for manufactured gas; and by an amended complaint it was further alleged that the $1 rate was unreasonable. The St. Joseph Company in its answer alleged that the rate of $1 for manufactured gas had been the rate in force during the whole period of the Gas Company's life, and was a rate as low as would afford a reasonable return. It alleged further that the 40-cent rate which was then in force for natural gas was insufficient to afford any return upon its investment, and prayed the Commission to make such investigation as should be necessary in order to be advised as to what would be a reasonable rate for natural gas, which would afford the company a reasonable and fair return upon its investment, and to fix such rate. In July, 1914, the Commission issued its order directing the Gas Company to* file certain reports, and directing an inspection of the company’s books, and an inventory and an appraisal of its property by the accountants and engineers of the Commission.
The report of the engineers was filed May 28, 1915, and that of the accountants June 1, 1915. In the meantime, on account of its financial difficulties, the St. Joseph Gas Company on September 30, 1914, filed with the Commission a proposed new schedule of rates, effective November 1, 1914; the change to be effected by said new schedule being to raise the rate of natural gas from 40 cents to 60 cents per thousand cubic feet. The city of St. Joseph filed its objection to the 60-cent rafe, and requested that it be suspended. October 19, 1914, the Commission issued an order suspending said rate to March 1, 1915, and thereafter by subsequent orders continued the suspension until September 1, 1915. The power of the Commission to make further suspension being then exhausted, the suspension was continued by agreement until November 29, 1915.
The three matters, namely, that of the $1 rate for manufactured gas, that of the valuation of the Gas Company’s property, and that of the proposed 60-cent rate for natural gas, were, by consent of the parties, heard together as one case, and on November 27, 1915, the Commission handed down its opinion and order. The order, omitting the caption, is as follows:
“These causes being at issue upon complaint anil answer, filed with the application of the St. Joseph Gas Company for an increase of rates and*210 •charges and the order of the Commission to ascertain and determine the fair present valué of the property of the said St. Joseph Gas Company, due notice thereof having been given, and the three said causes having been duly heard and submitted by the parties, and full investigation of the matters and things involved having been had, and the Commission having on the date hereof made and filed its report, containing its findings of facts and conclusions thereon, and having ascertained the fair present value of the said property as therein described, which said report is hereby referred to and made a part hereof: Now, upon the evidence in these cases and after due deliberation, it is—
“Ordered: (1) That the Commission, upon a full consideration of all the evidence in these cases, finds as a fact that the fair present value for determining reasonable and just rates of all the property of the St. Joseph Gas Company as described and set forth in the report of the Commission filed herein and made a part of this order, as of date March 1, 1915, and used and-useful by the said company in the service of the public, considering said property and every part thereof as a going concern, and including engineering, supervision, and interest during construction, organization and general expenses, legal expenses, contingent expenses, insurance, general contractor’s profit, working capital, and all other elements of value, tangible and intangible, as used in the public service in the manufacture, sale, and distribution of artificial gas, is- the sum of §1,673,000, as used in the public service in the sale and distribution • of natural gas, the sum of $1,324,000, and as used in the public service in the sale and distribution of natural gas with water gas .as a reserve or stand-by service, the sum of $1,620,000, which said sums, respectively, are hereby fixed and determined by the Commission to be the fair present value of said property as of said date, for the purpose of determining reasonable and just rates.
“Ordered: (2) That the complaint of the city council and mayor of the city of St. Joseph be dismissed without prejudice.
“Ordered: (3) That the rates and charges for natural gas as shown in the schedule filed by the said St. Joseph Gas Company with the Commission September 29, 1914, to become effective November 1, 1914, and contained in the following tariff, viz., P. S. C. Mo. No. 1, 1st Revised Sheet No. 1, Canceling P. S. C. Mo. No. 1, Original Sheet No. 1, are unreasonable and unjust, and said company be and it is hereby ordered and required to cancel the same on or before November 29, 1915, and that the said St. Joseph Gas Company shall not put into force and effect the said schedule or any part thereof.
“Ordered: (4) That this order shall take effect on December 15, 1915, and that the secretary of the Commission forthwith serve a certified copy of this order and opinion filed herein on said St. Joseph Gas Company and the mayor and city council of the city of St. Joseph.”
In the opinion accompanying its order, the Commission reached the following conclusions, among others: (1) That 26% cents per thousand cubic feet, the rate paid by the St. Joseph Gas Company to the Kaw Natural Gas Company for natural gas delivered at the city limits in St. Joseph, was unreasonably high. (2) That 17 cents or 18 cents per thousand cubic feet was a reasonable rate to be paid for said gas so delivered, instead of 26% cents. (3) That 60 cents per thousand cubic feet, tire rate filed by the St. Joseph Gas Company, and proposed to be charged its customers for natural gas, was unreasonably high and unjust. (4) That 40 cents per thousand cubic feet for natural gas delivered by the St. Joseph Gas Company to its customers was not shown to be unreasonably low or unjust to the St. Joseph Gas Company.
On December 19, 1915, a motion for rehearing was filed by the St. Joseph Gas Company with the Public Service Commission of Missouri. January 15, 1916, the motion for rehearing was overruled. Meanwhile, on December 14, 1915, the St. Joseph Gas Company filed a mo
The St. J oseph Gas Company has brought this suit against the Public Service Commission of the state of Missouri and the members thereof, tlie Attorney General of the state of Missouri, the attorney for said Commission, the prosecuting attorney for Buchanan county, and certain consumers of gas, residents of St. Joseph, Mo., to prevent by the injunction of this court, the enforcement of that portion of the order of the Missouri Public Service Commission, which held that the pro posed rate of 60 cents for natural gas was unreasonable and unjust, and ordered and required the Gas Company to cancel the same. The injunction is sought on the grounds that the 40 cent rate for natural gas thus left in effect is unreasonable, noncompensatory, and confiscatory; that the new proposed rate of 60 cents is no more than is essential to avoid the confiscation of the plaintiJFs property; that by said order of said Commission the plaintiff has been and is deprived of the equal protection of the law, contrary to the provisions of the Constitution of tlie United States.
After the commencement of the suit an application for an interlocutory injunction against the enforcement of said porlion of said order of the Public Service Commission was made and has been heard, in accordance with the provisions of section 266 of the Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1162) as amended (Act March 4, 1913, c. 160, 37 Stat. 1013), 2 U. $. Compiled Statutes 1916, § 1243, p. 1960. The Commission conceded in its opinion and decision that, on die bases of the valuation of the property and of the expenses of its operation which it adopted, the 40-ceut rate was confiscatory unless (lj the complainant could and should in the future charge and collect for the free gas furnished to the state, the county, and the city, the proceeds from which would amount to less than $800 per annum; (2) increase the rales charged for natural gas for manufacturing purposes, but the quantity and the possible amounts obtainable by such increases are so small as to he negligible in the determination of the question here at issue; (3) refuse to pay the $4,800 per annum it has been paying for services and salaries of nonresident officers; and (4) reduce the 26% cents per thousand cubic feet it was paying to* the Kansas Natural Gas Company for its gas to 17 cents per thousand feet. The complainant asserts that the Commission’s bases of valuation and of expense of operation were erroneous in many respects and that the four changes in operating expenses specified above ought not to be made. These assertions, tlie denials of them by tlie Commission, and the evidence on these issues have been read and considered. But the evidence con
St. Joseph‘is the most distant city supplied by the Natural Gas Company, and it is supplied by a pipe line running from one of the trunk lines of the company across the Missouri river for the express purpose of supplying that city. There is, therefore, property of greater value used to supply St. Joseph than is used to supply cities nearer the source of supply. The greater the distance gas is piped the greater is the leakage and the loss of gas thereby, and tlie greater is the pressure required to send it to its destination. An immense volume of gas is delivered at Kansas City, Kan., and Kansas City, Mo., and a very small volume comparatively at St. Joseph, and the larger the volume delivered at a given place tlie less the compensatory rate per thousand feet. Tlie argument that the reasonable charge for the delivery of the gas to St. Joseph cannot be greater than 21% cents per thousand cubic feet, the amount that the Gas Company at Atchison would presumptively pay under the 32-cent rate, is not persuasive, because that rate has not been determined to be compensatory anywhere, much less in Atchison (all that this court has declared as to the 32 cent rate is that it was convinced by the evidence in the Tandon Case that no rate less than 32 cents would be found to be sufficient to compensate the Natural Gas Company for its gas on the basis of two-thirds of the proceeds to it and one-third to the local company), because the 32-cent rate suggested was not that particular rate to the consumers in each city which the Natural Gas Company supplies, wherever that city is located, but a suggestion of an average rate, and because it is patent that the reasonable rate to the consumers and the reasonable charge for obtaining gas at the city most distant from the source of supply is unavoidably higher per thousand cubic feet than it is at cities of the same size nearer to the source of supply.
Assuming, then, that all the aforementioned conditions except for cooking is lost, it will only result in a loss of about 30 per cent, of the consumption. We believe that the estimate of the witness Abel, that
The application for the injunction must therefore be denied without prejudice to another application to this court on the evidence already introduced and other evidence of a substantial change in the situation; and it is so ordered.