*1
UNITED GAS PUBLIC SERVICE
LOUISIANA COMMISSION.
No. 45485.
May 29, 1961.
.089 *3 Atty. Gremillion, Gen., P. F. Joseph Jack Sp. Kavanaugh, Counsel, Liska, H. Alvin J. City Atty., Ainsworth, Jr., A. Robert Bald- win, Haspel, Molony, Meyer, Rainold & Molony, Lawrence A. Lawrence Mo- J. Meyer, lony, III, Orleans, New Conrad Dallstream, Schiff, Plardin, Waite & Dorschel, S. Hunt, Robert 111., Chicago, ITurndon, City Joseph IT. Atty., Asst. New Orleans, appellants for and intervenors-ap- pellants. Lewis,
C. Huffman Madison, M. John Woods, E. W. Freiberg, Vernon Saun- J. Gregg, Meadows, Willis L. ders Shreve- appellee. port, for <693 parts States, orig- serve all of the United
SANDERS, Justice. inate here. in This proceeding gas utility a gas Com All in the Pipe by Line of the sold United
stituted the United Gas by the pany. produced New in South appeal Orleans zone is It is an before us on and gas, produced Other Louisiana. likewise Public Service through Louisiana, in South is transmitted various a intervenors from pipe lines traversing the New Orleans fix Court Nineteenth District Judicial zone to interstate markets elsewhere. intrastate ing the of return years In recent price field natural operations company in spiralled. gas has This adjusting has resulted from Orleans and zone at 6% these in the increase in number and service, reversing long size of thereby pipe lines, rapidly Commis distance respects expanding Order No. 8061 ap gas, competi- use of aggressive sion issued March a peal purchase seeks tion en- companies who in its by United answered gaged in granted further sale.1 in the .rate transmission increase the district court. April 29, appli- On filed United cation with the Louisiana Public Service Company Pipe The United Gas Line Commission for contained a rate increase wholly-owned subsidiary of United nat- applicable two schedules sales of Corporation. busi- engaged in the gas ural sched- New Orleans zone: transport- gas, purchasing ness natural ule Pub- G-NOD available to New Orleans pipe lines, selling it ing through it Service, lic Serv- Inc. Louisiana Gas n distributors and industries. pipe line Its Company; ice avail- and schedule D-NOD Louisi- system extends into states able gas natural distributors. other Alabama, and ana, Texas, Mississippi, composed Rate was schedule G-NOD Florida. parts: used two a rate for the sale of residential, space heating, residential purchases producers commercial, space heating and commercial Lou- principally states but several South (usually purposes referred to as domestic Texas. Each of these isiana and South *4 ; gas rate to gas) and a for sale of required gas than produces more areas large users. industrial consumption. vast local So is the schedules, proposed produced to quantity gas in these areas United of gas major pipe lines, the rate for domestic increase of the most 348-350, Contemporary 364-366. Problems See Law and in- area, in- of per New group and to and a per MCF MCF Orleans 17^ 21.40 United crease from dustries. To gas interventions large rate for industrial these of per exceptions filed thereby fix- cause .right or per MCF, MCF no of 19.70 excep- ing a action. The price per MCF be- court maintained differential of 1.7^ Board tions Sewerage as to tween and Water domestic industrial sales. of Com- New of Orleans and the Chamber sought an additional increase was merce of the New area. Orleans $2,947,974 upon year based of the test compre- adjusted. The district rendered a court It an increase involved written, upon zonal judgment hensive based revenues of 41.3%. opinion. the Com- It affirmed order A motion make the in- of United to insofar mission as it: subject creased immediately rates effective (1) purchased gas Disallowed a to a refund bond was Com- denied adjustment clause. mission. Rejected adjustment to re- (2) an Petitions of were intervention filed flect dollar. changed value City Orleans, New Sewerage be- (3) price Fixed the differential
Water Board Orleans, of New and a num- gas tween users sold to domestic ber of customers. The Commission at large sold to industrial users allowed the interventions. per MCF. 2.75‡ a lengthy After hearing and voluminous in- reversed order of testimony, adopted the Commission a rate it: sofar as return of on the rate base fixed 5.5% it, thereby authorizing an increase (1) in rev as a fair rate of re- Fixed 5.5% $1,848,696 or enues From this turn. court increased the 25.9%.2 petition filed a order review in 6%.
the Nineteenth pur cost, District Court Judicial system-wide average (2) Used a provisions VI, suant to the of Article Sec establishing serv- the cost of tion of the LSA-Constitution and LSA- United. ice of 45:1192. R.S. defendant, Lou- From Commission, parties A number Public Service and in- filed interventions isiana tervenors, Orleans, City Among Sewerage the district them were of New court. Orleans, Board New Sewerage Water and the Board of and Water Orleans, appealed. have the Chamber Commerce industrial intervenors
2. 34 PUR 3rd 78. *5 697 698 praying appeal Therefore, has answered the gas.
United sells natural at the rate purchases Court increase the rate which the Board New gas that Service, to by the district court Orleans Public allowed is not the rate Inc. 6% by required the of return involved in these proceedings, “that fair rate and the requisite The disallowance Board without law the evidence.” and interest to and an gas escalator clause sustain purchased intervention. value changed adjustment to reflect Testimony public of a accountant,. who' challenged in has not been the dollar prepared evidence, schedules introduced in appeal. the answer to the was offered to show the pro- effect of the posed increase in rate if passed were it pro only appeal On one of to by customers New Orleans Public Serv- trial presented to the questions cedural ice, Inc. strenuously upon It is pressed court us. held that the interest re- has been dis the trial court erred in
contended that quired must be a authorize intervention Sewerage missing the intervention of intervenor is to one direct This New Board of Orleans. and Water gain or immediate suffer immediate obtain question the threshold of stands at may ren- judgment which by the loss case. original parties. The between dered intervention, Sew- As a basis for closely with the must be connected interest Board New Orleans erage Water and object dispute on some and founded alleges United serves these facts: claim, or lien, either conventional right, or Inc., Service, Public a local New Orleans Mart., Saul, 4 & legal. Sons v. Brown Orleans gas New distributor 434; Ex- v. New Lincoln Orleans N.S., zone; purchases gas from the Board 937; 729, 12 So. press Co., 45 La.Ann. operations this distributor serve Blackman, 46 So. La. Wells v. supply, water sew- public providing Co., Municipal 437; v. Morris system Parish drainage erage, 1001; v. Black La. 46 So. Orleans; gas an if increase Co., Ry. Light 145 La. & Orleans United, this increase will allowed rates is Brick 81; Silica New Orleans 82 So. ultimately passed on the Board and Son,& Thatcher Company v. John materially gas increase its costs. will 236; Board of Med- State 392, 107 So. McHenery, La.App., 69 v. intervention, Examiners Opposing United con- ical 592; Land New Orleans purchased natural So.2d tends that no 266, 41 Realty S.Ct. is the Board Board from no.r Leader Articles 259, 65 L.Ed. any contract under which United party to establishing 1870.3 the Commission in Practice of 391 of the Code 57b, pages cost of service for United. Parties See also 67 § C.J.S. 61, page Parties, para.
987; 39 Am.Jur.
in af-
3.The
court erred
district
firming
price
differential
2.75‡
per
indus-
MCF between
domestic
herein, the
appreciate
record
As we
trial
fixed
the Commission
*6
on
passed
can be
increase allowed
rate
rejecting
greater
the
differential
5^
Serv-
Public
by New Orleans
the Board
per
prior
MCF which existed
But
eventually be done.
may
ice, Inc.
It
present
proceeding.4
rate
not establish
the evidence does
seems clear
mandatory.
It
transference
is to
that we now
these contentions
if
only
affected
will
the Board
address ourselves.
Orle-
is taken
action
further
of Return
Rate
termina-
Service, Inc.,
after
Public
ans
Hence, the inter-
proceeding.
this
tion
ap
By
mandate,
constitutional
indirect,
remote,
by the Board is
est shown
pellate
review
this Court
of orders
contingent.
the Louisiana Public
Commission
Service
both the law and
extends to
the facts. Ar
the intervention of
conclude
We
VII,
10,
ticle
Section
Louisiana Constitu
New Orle-
Water Board
Sewerage and
1921;
45:1192;
tion of
LSA-R.S.
Vicks
dismissed.
properly
ans was
Ry.
burg, &
v.
S.
P.
Co. Railroad Commis
advanced
contentions
merits
On the
193,
199;
Louisiana,
sion of
132
61
La.
So.
stated, but
variously
appellants
by the
Southern Bell
& Tel.
v.
Tel.
Co. Louisiana
major
under three
subsumed
they may be
Commission,
175,
Public Service
239 La.
points:
2. resolving issue, great 250. system-wide (“rolled in”) 2d jecting weight must be accorded to the adopted by ruling of gas as purchased sponsored by 1091, Compare 4.This the in- LSA-Code of Article contention intervenors-appellants. dustrial Procedure. Civil 702 701 slowly Hope Company, in mission Natural Gas act v. Courts should Commission. 602, 287, 281, for those of 320 U.S. S.Ct.
substituting their own views
charged
legisla-
333. There the
said:
expert body
with the
L.Ed.
court
making, a technical
function
tive
statutory
“Under
standard of
far-reaching economic
which embraces
field
‘just
it
and reasonable’
is the result
Commission
policies.
decision
employed
reached not the method
which
absence of a
not
disturbed in the
should
controlling.
Angeles
Los
Cf.
Gas
Burke
power.
showing
abuse
clear
Corp.
Railroad
& Electric
v.
Commis-
Commission,
Public
Louisiana
Service
v.
sion,
287, 304-305, 314,
289 U.S.
53 S.
916;
Gulf States
215 La.
40 So.2d
637, 643, 644, 647,
1180;
77 L.Ed.
Ct.
Service
Louisiana Public
Utilities
v.
Co.
Ohio
v. Public Utilities
West
Commission, supra;
Central R. Co.
Illinois
1),
63, 70,
294 U.S.
(No.
Commission,
Public Service
Louisiana
v.
761;
316, 320,
L.Ed.
v.
S.Ct.
West
43;
Bell
Southern
69 So.2d
La.
Chesapeake & Potomac Tel.
Public Serv-
& Tel. Co.
Louisiana
Tel.
v.
662, 692-693,
894, 906,
S.Ct.
Commission,
94 So.2d
232 La.
ice
opin-
(dissenting
meager return
incapable
given
in a
a
case is matter
rate base.”
value’
of exact mathematical demonstration.
is found
of the fair return
A classic test
approximation
is one
reasonable
Improvement
&
in Bluefield Water Works
having
proper
its basis in a
considera-
Company
Public Service Commission
of all
tion
relevant facts.”
679, 692,
262 U.S.
Virginia,
of West
State
The rate of return is a
L.Ed. 1176:
43 S.Ct.
percentage the rate base which the
will constitute
annual
“What
interest,
utility is entitled
earn for
to
depends upon many
compensation
just
payments,
require
dividend
and related
must
determined
be
circumstances
high
ments. The rate
be
enough
should
of a fair and en-
exercise
by the
higher
may
than
necessary
but not
regard
judgment, having
lightened
capital
attract
and to hold it there.6 The
* *
*
The return
facts.
all relevant
product
return is the
of the rate of return
reasonably
sufficient
assure
should
and rate base.
in the financial soundness
confidence
question
adequate,
of what
utility
should be
constitutes
reasonable return is
one of fact
manage-
and economical
rather
efficient
under
Glaeser,
*8
6. See
Public
in
Utilities
Ameri-
Interstate Gas Com
Colorado
also
5. See
Capitalism (1957) p. 386;
Commission,
Barnes,
can
324
pany
Power
Federal
v.
1206;
Utility
829,
Reg-
581,
Economics
89 L.Ed.
Public
65 S.Ct.
p.
Company
(1942)
Pipe
ulation
Line
Eastern
Panhandle
Commission, 324 U.S.
Power
Federal
v.
821,
635,
L.Ed. 1241.
65 S.Ct.
requires
application
than of law.
It
In the first case this Court said:
enlightened judgment
of an
the multi-
to
“With regard
application
to the
plicity
disclosed
the evi-
variables
Capital’ method,
‘Cost of
the Su-
1909,
early
recognized
dence. As
it was
preme Court of the United States has
there
be no standard rate of
could
recognized
peculiar
situation
applicable
all
all utilities under
utility,
each
largely
which is
re-
circumstances. Willcox v. Consolidated
flected in
capital,
its cost of
dictates
Co.,
19,
192, 198,
48,
212 U.S.
29 S.Ct.
earnings.
level of its
There is no
Therein,
decisions of this
Southern Bell
Court.
payments
dividend
equity,
investors in
Tel. & Tel.
v.Co. Louisiana Public Service
flotation,
the cost
payments
into
Commission,
431, 436;
446,
232 La.
94 So.2d
surplus
Southern Bell Tel. & Tel. Co. v. Louisiana
Commission,
Public Service
The cost of
capital
debt
has a
reliable means of controversy The in this case most serious Cor- to cost of is to look debt involves the rate of return on common well It company. poration, parent equity. capital, Unlike is no debt there a determination making that, in established ascertaining contractual basis for cost. reviewing purposes, of costs for approach used the Com corporate through may look Commission earnings-price was utilize mission to probe corporations affiliated form Commission, necessity, used ratios. The realities.8 for economic company parent ratio which owns technique all of the stock of United. This fact, of statistical matter is a designed opinion reflect as to investor historical disputed, that not which is as attractiveness of the common stock company parent capital to of debt shortcomings an investment. It has establish not does The evidence is 3.71%. theory re practice have been replaced. is to outstanding debt that the 10 by. this ferred rate authorities Hence, do so. imprudent It would infirmities, however, Despite Court.11 securing the borrowed current cost of reasonably guide reliable it serves controlling in is not equity novo capital capital de the cost of it fixing when with the of an is used exercise informed present case.9 Clemens, Aspects v. 10. Some of the Rate of & Co. Bell Tel. Tel. Southern 8. See Commission, Return, 32; 30 Land Economics Thatch- Service Public Cost-of-Capital er, 372; Techniques, 175, Alabama 30 Land 118 So.2d La. 239 85; Morehouse, Comments, Economics v. Southern Public Service 1, 75; Thatcher, Land Economics Ala. 42 So. 31 Com- & Tel. Tel. Bell 183, 78; Nichols, Op. Cit., pp. ments, 655; 250. 31 Land Economics Morris- 2d sey, Capital Railways A of Cost Balti Reconsideration & Electric Co. of 9. United 251, Return, 234, West, and a Reasonable Rate of 50 S.Ct. 280 U.S. more 229; Badger, Important 390; Economics Tele Land 123, Re Wisconsin L.Ed. Concepts (NS) Company (Wis.), Fair as to Return and Cost 93 PUR phone 389; Fortnight- Op. Cit., p. Money, Glaeser, 504; 66 Public Utilities of ly 93; Bickley, 490, Thatcher, 529-530; pp. Op. Cit., The Relation Barnes, Between a Base, Techniques Cost-of-Capital Fair Return the Rate 66 Pub- in Deter Fortnightly 145. mining Public lic Utilities of Return Rate Bell Tel. & Tel. Co. v. Lou- Utilities, Cf. 11. Southern Land Economics Commission, Public Service isiana & Tel. v. Loui Tel. Bell Southern Commission, 118 So.2d 239 La. Service Public siana 118 So.2d only not impossible, based statistical to identify other business under- data but also on the other relevant takings factors truly comparable. that are When precisely.12 which cannot be measured made comparison results more in little than a consideration the effects The evidence shows that the average current economic conditions in investors’ earnings-price ratio United Gas Cor- Finally, attitudes. there is a dearth poration years for the five was 1954-1958 objective comparisons data to make trust- For ending twelve months 6.97%. worthy.13 earnings-price 30, 1959, ratios September sub- earnings-price ratio *10 mitted by expert witnesses, Friend and was 7.18%. Knappen, pipeline covered the same com- earning's We now turn to the studies of panies and the same gas distributing natural companies application other of utilities. comparison They may be summarized as standard. These must used circumspection. difficult, with It is if not follows:
12 Mos. 5 Yr. Ended Mr. Friend 1954 1955 1956 Avg. Sept. 1957 1958 Pipeline 10 Natural Gas Cos. 6.60 7.25 7.30 7.15 6.34 6.93 23 Natural Gas Dist. Util. 7.35 7.99 7.34 7.99 7.08 7.55 Knappen Dr. Pipeline
10 Natural 6.08 7.01 Gas Cos. 7.04 8.33 5.31 6.75 6.17 23 Natural Gas Dist. Util. 6.59 7.10 7.74 8.47 6.18 7.22 6.41 30 Electric Utilities 6.56 6.52 7.00 7.14 5.55 6.55 6.55 The variances from differences in result The Commission concluded that of computation method of and the effect earnings-price applicable ratio pipeline the reduction in income of com- United proof was No of flotation 7%. panies making due to refunds appears cost in the record. The Commis good purpose increases under bond. No sion correctly, concluded opinion, in our attempting served in cottld be to reconcile them. Nichols, l Op. Cit., pp. 318-319; Cost-of-Capita Thatcher, Bon- Techniques, bright, Principles Utility 85; of Public Bates Thatcher, Land Economics Com Klein, p. (1961), Accounting ments, As- 31 Land Economics 78. Utility pects Regulation, Op. Barnes, Cit., p. 19 Law 13. See Contemporary Problems, 453-454; 5.5%, return of which includes warranted for it was allowance no 8.18% just. equity, common is reasonable and proof.14
the absence of such by power no abuse the Com- evidences based Through the exercise of opinion, mission. our it achieves adopted evidence, on the proper balancing of investor and consumer capital. equity cost of proper as the 8.18% interests and enables to maintain United dif- components in By combining integrity, capital, and its financial attract an capital determination ferentiated cost compensate as- risks its investors resulted return of rate of overall 5.5% sumed. adopted: and was Allocation of of Service: Cost =3.71 Debt: 2.23% 60%'X The Cost Purchased = Equity: X 8.18 3.27%‘ 40% appeal propriety Raised is the 530% system- the use the Commission of strenuously that the urges United in” average method wide or “rolled herein ruling of the Commission determining the cost the decision rate of conflicts question purchased it. This natural Tel. Bell Tel. & this Court Southern gas costs importance. Purchased looms in Commis Service Louisiana Public Co. v. the total approximately constitute 80% sion, 175, 118 372. Reference So.2d zone. Orleans of service *11 property rate of 6% of the to the is made severe circumstances, the Under these case. the in that fixed Court rate base gas costs compression of the unrealistic present However, problem in the rate the unreason- inevitably render the will upon its It is based not identical. case is rate absorption. The by process of able evidence, different facts with own variant unrecouped will be defeated of return respective utilities The and circumstances. costs. similarly rate in situated. The
are not gas for of natural sources main The two controlling here. not case is former and South are South United gas price of natural The well head utility in a favored Texas. As a United in substantially than lower enjoys stable demand in Texas position. a rather for basis economic While constitutional product under Louisiana. for its to in is adverted differential rate of cost that the protection. conclude We Light 14. Driscoll v. Electric Galveston & Power L.Ed. Edison Galveston, Valley City 42 S.Ct. 258 U.S. supra; Electric Wabash Co. v. Young, 66 L.Ed. S.Ct. ment, evidence, subject proper it is not deemed a it reasons that an in the increase analysis for here. All of sold gas transmission of gas Texas to the interstate pro- Orleans customers of zone will United New United vol- in the increase the duced gas For determina- ume of consumption Louisiana. cost for in the New tion, however, adopted a Commission Orleans zone an identical amount. system-wide average thereby gas, These cost They contentions are untenable. reducing purchased gas for the ignore physical limitations of United’s $517,761. New Orleans zone sum of facilities and contravene the scheme of regulation. multi-state The final mathemat- study of system United’s shows A ical period exercise a leaves test cost of separate that it systems is in two fact $517,761 unaccounted for. costs so Gas interconnecting smaller facilities. One wholly calculated synthetic. are Viewed system Louisiana, runs north from southern in the light existing realities, “rolling and the other runs and north northeast only in” becomes a portaging method of gas from southern Texas. Natural cannot past recovery of the actual costs be brought the New zone into Orleans gas purchased. terminating South Texas without service major portion urged
to a It is the customers Federal Power adopted reversing gas approved can Commission has flow. Neither system-wide pipeline gas garden average a moved at will “like costs fixing rates gas hose” natural advantage falling to take well head lower under its prices. regulatory jurisdiction. support The The seeks decisions of body system-wide average controlling not cost determination here.16 postulation reserves mandatory separation The of in pipe system which enter the line constitute and interstate costs trastate and revenues supplying common reservoir all of the regulatory purposes state is well estab physical customers. absence of a flow lished. producing from all areas to zone, asserted, Orleans it is moment of no rule is stated with clarity in 9 place by because Jurisprudence, Carriers, the movement takes dis American Sect. placement. theory displacé p. Under the 520: Although upon to in referred the Commis the dual based pipeline structure opinion system. “system-wide,” Pipe sion’s the rec Line *12 Mississippi Company, ord discloses the Nos. North Docket G-9547 and G- January 10592, 4, in zone was excluded the calculation. order issued Power Commission has Federal re- This Court is informed that the is case jected appeal. pending in” method the “rolled for United now on company of the was too small could unreason- and justify
“A state cannot transporta- be make good increased to the loss. domestic ably rates for low alone, upon ground tion, the considered profits large earning carrier is that the (Simpson In the Minnesota Rate Cases the business, can nor on interstate 352, 435, 729, Shepard), U.S. 33 S.Ct. unreasonably high rates impose carrier 755, 1511, 57 L.Ed. the court held: to meet order business in on domestic the business of the “Where carrier the business: interstate losses on intrastate, is both interstate and the rates
reasonableness fixed question whether scheme of maxi- with decided the state must be by rates fixed the state mum for intra- just exclusively to what reference transportation affords state a fair re- domestic respect in reasonable and turn, must be determined consider- ours.) (Italics business." separately ing property the value of Telephone Com- v. Illinois Bell In Smith employed in intrastate business and 133, 146-148, 51 S.Ct. pany, compensation allowed that busi- * * stated: L.Ed. prescribed. under the rates ness the.court * * * state The reason discussion, “At threshold of justify unreasonably cannot low rates that, fact met with the we transportation, considered domestic Commission findings, the these alone, upon carrier ground that the between no distinction made court large profits earning on its inter- property interstate and the intrastate hand, business, and, on the other state * * Company *. business of justify ureasonably the carrier cannot domestic high rates on business because separation of the intrastate “The is, way it able only in that to meet and ex- property, revenues interstate interstate, on its business.” important not Company is losses penses allocation a theoretical simply as very early aligned itself This Court the business. branches two Morgan’s R. this rule. & T. recognition appropriate essential Louisiana, Railroad Commission of S. Co. v. & S. governmental author- competent So. the Court 12 * * * regulation. field of ity in each syllabus stated held as written it: no have would had “Moreover, company where rates, if impose intrastate authority'to revenue, partly confiscatory, derives inter- they would such partly from intrastate state busi- interstate revenue theory that the *13 ness, jurisdic- a state board without used in the zone. The trans- remainder.is predicate upon tion a rate the rev- mitted to interstate markets. The record enue derived from the interstate busi- discloses purchases that gas United at this ness.” a lower rate major than all but one competitors. In adopting the alternative This case has been cited and followed allocation herein, based on the evidence we Ry. the following & cases: Louisiana do not hold pro- Commission is Navigation Co. v. Railroad hibited from requiring precise a more 820; Louisiana, 131 La. 59 So. classification of zonal when gas costs Vicksburg, Ry. &S. Railroad P. feasible accomplish so as to an isolation Louisiana, supra; Commission of Alex- of the cost gas actually used in the Ry. andria & W. Co. v. Railroad Commis- zone. Louisiana, sion of 143 La. 79 So. Gulf States Utilities Co. v. Louisiana adjusted As by us, total cost supra; Public Service Commission, South- purchased gas period is in- the test ern Bell Tel. & Tel. v.Co. Louisiana Public $517,761. creased in the sum of Commission, Service 239 La. 118 So.2d Rate between Domestic Differential
and Industrial Gas recognize We that the Commission adopt any petition
is vested with discretion In to the Commis sion, of cost sought method allocation which is United to have the historic reason appropriate. Nonetheless, per able or differential of MCF between domes we to conclude gas per forced and allocation of tic industrial reduced to 1.70 in the instant case gas part costs based in MCF. The Commission fixed the differ gas purchased low cost upon per another ential at MCF. The trial court 2.750 none of is used or state, usable in ruling. not disturb In did this Court arbitrary zone, is the rate destructive the industrial strenuously intervenors con end reasonable result. of a must be tend that the full differential of should rej ected. reinstated. alternative cost pur- allocation for It is a differential true between do- presented by gas
chased record is based and industrial rates is mestic warranted. average gas upon the cost of transmitted normally rates are Industrial lower be- by into the rate All zone. of this better load cause of factors large produced purchased within the operations. However, volume each class Approximately state. one-third of it business must bear its fair share of the plaintiff, United Gas purchased opinion, the sub- our service. Company. Pipe Line costs industrial
sidization consumers domestic and other residential rate differential affirm the III.We is unwarranted. per domestic MCF between 2.750 fixed the Louisi- and industrial gas the differ- in reference evidence respects ana Public Service Commission. conflicting in some ential it,of analysis thorough inadequate. After assigned, the For reasons stated: the Commission insofar is reversed the district court *14 the peak it set aside Order No. 8061 of accurate lack “Because the of of rate as to the Public Service Commission General Serv- day the information of return, the return of and rate of the two of business 5.5% ice and Industrial hereby rein- is by the discrepancies fixed apparent Commission utilities, and the stated; respects judgment the the in all other assumption the of resulting affirmed; Vandervoort, and court we the district is of Nissel and Witnesses Pipe Company, in fix- Line plaintiff, United must use our own best effective file and make in rates between is authorized the differential ing natural rate schedules for revised forthwith classes business.” these two of zone consistent Orleans gas ruling apparent that of It is decree. with this upon an evaluation is based Commission differ- rate pertinent factors. The all of part. McCALEB, J., dissents in calculated to reasonably adopted ential domestic con- protect the interests J., FOURNET, dissents. C. preserve the time at the same and sumer industry. dis- position We competitive of part). in McCALEB, (dissenting Justice power in its caprice or of abuse no cern of rulings with the agree While I therefore, will, main- It confection. case, I in other to the issues as Court tained. reducing action in to its cannot subscribe recapitulation: In rate of return plaintiff’s overall from 6% that the rate of return find I. We affirmance the Public to 5.5%. by Pub- as the Louisiana fixed of 5.5% allowance of Commission’s Service reasonable, lic Service contrary plainly rate of return 5.5% reinstate it. we and year ago a in Southern Bell our decision Louisiana Pub. Serv. Tel. & Tel. system-wide aver- reject II. We 372, 389, Comm., So.2d natural determination age cost pared that, Fur- where it resolved to allow for electric utilities. was 10% ther, a return it in- company that, was shown in 34 cases (Southern Bell) 6%, by shown volving less than when it was utilities engaged in transmis- utility receiv- sion of industry other was natural con- evidence no gas to “ ** return, ing anywhere sumers, near as low the Federal has Power Commission disparity uniformly instance) that we must great (except is so in one isolated necessity that the action of hold Com- allowed an or overall return of 6% discriminatory mission its end result more. just not rea-
and that the rates fixed facts, I find it difficult view these sonable under the circumstances.” comprehend approve can how Court rate of Com- fixed 5.5% is, course, of. well settled one mission in this reached case was important considered factors to be earnings-price utilization This ratio. just fixing and reasonable rates is that the " * * * technique, as has majority acknowledge, equity return to the owner should shortcomings practice theory with returns on invest commensurate was criticized us in our recent Southern enterprises ments in having cor other * * decision,1 Bell specific our being holding *.” responding risks Federal See “* * * earnings-price that an ratio of Hope Power Natural Gas Commission v. hypothetical on a of common 6.75% 281, 288, L. 55% S.Ct. stock capital applied utility, to one while case, Ed. 333. In instant it was es similarly others situated are earning tablished that investment in the natural 8.5% *15 equity capital on and not less than on 6% transmission a greater business involves property base, discriminatory is and for than risk investment in either electric or that just reason is not and reasonable.” telephone past 13 utilities and that for the years, throughout rate-making bodies say that, by To employing the unrealistic average States have allowed an ratios, earnings-price proper is the 8.18% equity pipeline in on investment capital equity cost of on to which base companies approximately return, as com- rate of similarly while others sit- 12% fallacy using earning an We said: “The an earn excessive rate of return and ings-price relationship ratio a based on the another rate of return so low as to be earnings confiscatory, yet earnings-price of current and current market ratio prices pointed Compa approximately is out would be the same because ny’s expert Langum. consequent high price witness As earn market ings go up price down, or the market the stock the former and the conse- goes quent correspondingly up price the stock low market or the stock of down, earnings-price so that ratio the latter. utility may remains the same. One be capital utility company lic entitled a fair and uated is to earning equity are on 12% base, property rate
and not than less on investment, and to 6% reasonable return opinion fair incompatible my with is in effect what determining further that discriminatory, such a treatment. Being just are rates far as and reasonable so base, Bell as in the stated Southern concerned, such the most utilities are one of * * “* just case, not Tel. Tel. considered, important as factors be to -and reasonable.” pointed out in Federal Power Commission Hope 591, Natural majority not subscribe to If does rates S.Ct. L.Ed. is that these Tel. and Bell rationale of our last Southern “should commensurate returns on matter, or, that to Gulf Tel. decision enterprises investments in cor- other having Pub. Serv. Utilities States Co. v. risks.” responding Comm., So.2d say case, so and it should evidently my opinion While it is that the Commis- particular possessed sion in this specifically over- case those should be was authorities of sufficient information and evidence to this public ruled. in the interest It is support its order increasing the rates to views, particular- clear its Court make plaintiff just insure would a realize the mem- ly position, in its so that change a investment, and a reasonable return on its know bers and bar able of the bench my arriving it at these rates view interpret jurisprudence. necessary Commission lacked evi- the trial court the decision I think support the lesser dence differential it and should affirmed. levying correct in the authorized rates for
sold domestic consumers and that sold historically ap- to industrial FOURNET, (dissenting). consumers — Chief Justice per 5‡ proximately and, for this MCF — with the full accord views ex- am in I reason, believe the case should I be re- by Mr. McCALEB pressed Justice manded to Commission for further con- opinion in he dissents in separate particular and action in this sideration re- to the effect that which is we part, and spect. depart juris- from settled not should and, indeed, must, therefore, respectfully from prudence I dissent court — obtaining. pub- majority universally decision. the law —that