Riverside Cement Co. v. Public Utilities Commission

SHENK, J.

This is a proceeding to review an order of the Public Utilities Commission which dismissed three complaints for reparations filed by Riverside Cement Company and Southwestern Portland Cement Company. Only two of the eases are involved, and the pertinent facts as to them will be noted.

In the fall of 1942, at the request of the United States War Production Board, Riverside Cement Company (referred to as Riverside), reopened its plant near Oro Grande. Power was furnished by California Electric Power Company (referred to as the utility) and Riverside commenced negotiations to obtain a rate lower than the filed tariff schedules and on a par with rates afforded under existing special contracts. A contract approved and authorized by the commission was executed by which the utility was to supply electric energy for a five-year term commencing October 14, 1942, at a minimum charge of $1.00 per month per horsepower of maximum demand but not less than $4,000 per month, or a total minimum of $240,000 for the five-year period. Paragraph 10(e), designated as the escalator clause, provided that whenever during the contract the market price of fuel oil should exceed $1.30 per barrel, the energy charge should be automatically increased one-fourth mill per kwh for each full 10-cent increase above the basic oil price. Elsewhere the contract provided for written notice of the increase to Riverside which had the option to rescind within 90 days, the increased rate to become effective if the option was not exercised. Paragraph 14 of the contract stated: “That in the event the [utility] Company shall at any time, either voluntarily or by order of any legal authority place in effect any lower or more advantageous rates than those at any time in effect hereunder or to any other cement manufacturing plant or consumer having a load similar to that of Consumer and in the same territory, the Company shall likewise make the same rate effective for the Consumer hereunder.” By agreement the contract was extended to March 31,1948.

On March 19, 1947, the market price of fuel oil increased to $1.50 per barrel, and pursuant to notice the service charge was raised five mills per kwh effective July 1, 1947. Notice of rescission of the contract was not given. In the same manner an additional identical increase became effective on October 23, 1947, reflecting the rise in the fuel oil market price to $1.70 per barrel. Pursuant to a third notice following the upward fluctuation in the fuel oil price to $2.15 per barrel, a further increase of one cent per kwh might have been charged commencing April 12, 1948, except for the expiration of the contract on March 31, 1948. After the latter date the Riverside service charge was governed by the tariff schedules on file with the commission.

A similar contract was executed between the utility and Southwestern Portland Cement Company (herein referred to as Southwestern), except that the contract period was from May 1, 1944, to April 30, 1949. The same increases were noticed and charged under the escalator clause, but as in the case of Riverside after March 31, 1948, service was billed according to the filed schedules.

Riverside filed a complaint with the commission invoking the application of paragraph 14 of the contract, alleging overcharges after July 1, 1947, and seeking reparations in the sum of $21,739.91. Similarly Southwestern sought reparations to the extent of $16,535.72. The commission found that increases in the fuel oil market price above $1.41 per barrel would and did from July 1, 1947, result in charged rates higher than rates computed under the filed schedules or than rates under contracts of four other consumers alleged to have similar loads and to be operating in the same territory. During the existence of these contracts none of the filed schedules or other existing contract rates was revised in any manner bearing on the issues presented.

The question of which rate was chargeable from July 1, 1947, to March 31, 1948,—the successive increased rates under the escalator clause or the rate under the filed schedules or other contracts of similar consumers in the same territory— depended on the effect to be accorded the language of paragraph 14. The commission rejected the contention of the petitioners that it was the parties’ expressed intention that if at any time there was available a schedule or other rate lower than the contract rate the lower rate was to be made available to the petitioners. On the contrary the commission adopted the utility’s contention that by the use of the word “shall” in paragraph 14 the intention was to make available to the petitioners only such lower or more advantageous rate as should in the future be placed in effect either by the utility or the commission; that is, that since the lower rates from July 1, 1947, were under schedules or contracts which were in effect at the time of the execution of the petitioners ’ contracts, they were not rates which the utility thereafter placed in effect; that the oil escalator clause rather than paragraph 14 applied; that petitioners’ remedy was rescission after notice of the increase; that that remedy was not pursued and the petitioners were not entitled to reparations.

The petitioners urge that the position of the commission is contrary to the applicable policy announced in other cases. In. City of Vernon v. Southern Calif. Gas Co., Dec. No. 21860, 34 C.R.C. 46 (Dec. 1929), and Batchelder-Wilson Co. v. Southern Calif. Gas Co., Dec. No. 22806, 35 C.R.C. 132 (Aug. 1930), several complainants were held entitled to reparations because of the defendant’s failure to comply with a rule, designated as Rule 19, making it the duty of the defendant where two or more rate schedules were applicable to any class of service to call attention to the different rates at the time application was made for the service, and whenever new schedules should be adopted to call the consumer’s attention to the new rates.

A similar Rule 19 applicable to the utility was in effect when the consumer selected a rate under tariff schedules in existence at the time service was requested, and placing upon the utility the duty to advise those of its customers affected in the event of adoption of new or optional schedules or rates. This rule and the foregoing decisions of the commission indicate a required utility policy of affording to the consumer the opportunity to select the lowest rate suited to its needs at the commencement of service and the consumer’s right to be kept apprised of new lower rates when such should become effective.

Apparently none of the existing schedule rates was deemed suitable to the needs of these petitioners, who sought a lower rate to be based on guaranteed length of service and specified minimum payments. The executed contract providing such a rate was based on those considerations. Since Rule 19 was inapplicable to the special case, paragraph 14 was added to the contract for the obvious purpose of complying with the required policy, thus preserving to the petitioners the right to a lower or more advantageous rate should such be placed in effect during the life of the contract.

As the provisions both of Rule 19 and paragraph 14 indicate, it was not the purpose to place on the consumer the onus of seeking and acquiring information as to the probable lowest available tariff. The utility thereby undertook to perform the office of supplying the information and opportunity of selection when occasion demanded. The general policy required the utility to afford to the consumer the lowest or most advantageous rate. Since the purpose of the contracts was to obtain a rate lower than the filed tariffs and on a par with other special rates, it is unreasonable to assume that the petitioners agreed to pay any rate higher than such existing rates. The contrary intention expressed in paragraph 14 indicates that if, at any time during the contract, rates lower than the contract rates should become available the petitioners should have the advantage thereof. It follows that the purpose of the escalator clause was to protect the utility’s cost differential between the lower contract rate and available existing tariffs. And it is likewise unreasonable to assume that the utility might with impunity employ that clause to raise charges above existing schedules. The utility itself recognized the appropriate remedy and procedure when the price of fuel oil no longer justified the filed tariff schedules and in 1948 applied to the commission for increases in those tariffs. It was during the progress of that application that the petitioners discovered they had been paying charges higher than the existing tariffs.

The utility’s attempt to rest upon the future tense of the verb in paragraph 14 cannot avail it under the facts. Obviously the language would apply in the event tariffs were reduced below the contract rate. But that is not the exclusive application. A similar situation in effect obtained here when the company gave notice increasing the contract charge above the existing tariff. That act was the equivalent of placing in effect a rate or schedule lower or more advantageous than the contract rate. As the commission found, the price of fuel oil could go to $1.41 without increasing the contract rate above the filed tariff. When, however, the utility raised the contract rate above the filed tariff, to all the intents and purposes of paragraph 14 it was placing in effect a rate lower or more advantageous than the increased contract rate.

It may not be questioned that if the language of paragraph 14 applied it took precedence over the provisions of the escalator clause and afforded a lower rate to the petitioners from July 1, 1947, overcharges resulted, and the petitioners were entitled to recover reparations. That result is determinative here and it becomes unnecessary to discuss other matters, none of which may be deemed to override the controlling intent and policy. Nor is it proper on this review to consider which of the lower rates applies, whether that under the filed tariffs or the contract rate of other consumers in the same territory. Those are factual issues bearing on the amount of the reparations and are for the commission to resolve.

From the foregoing it follows that the portions of the commission’s order dismissing the two complaints should be annulled and the cases remanded for computation of the amount of reparations due to the petitioners respectively.

It is so ordered.

Gibson, C. J., Carter, J., Sehauer, J., and Spence, J., concurred.