State ex rel. Washington University v. Public Service Commission

GRAVES, C. J.

This is not the first opinion in this case, and snclx fact bespeaks a concise, yet a considerate statement of the case. Volume adds nothing to a statement. What is said in briefs, and in statements, can be stated shortly, for the purpose of passing upon the vital questions. There are eighteen cases before us, all growing out of two cases filed before the Public Service Commission. The two eases, out of which all the present cases grow, were two applications to the Public Service Commission, which applications were made by the Union (Electric Light & Power Company, for temporary increased -rates both on electricity and power, and upon heating. These applications were filed about November 28, 1917, and the applications were heard, and investigated, and-by the Commission determined in February, 1920. Before the Public Service Commission the case as to heating was number 1395- and that as to. electricity was numbered 1396. The Public Service Commission raised rates as to both services, upon proven facts as to the respective costs of operation. These increases were to be for a limited time, and the Commission by requisite orders placed itself in position to determine from future reports of the utility as to how long the rates should be retained. There were a number of consumers (of both heat and electricity) who opposed any change of rates, as are usual in such cases. This case is out of the ordinary, however, because' in many instances these particular consumers had been operating their own plants, within their own buildings, from which they got a part, if not all of their heat, and electrical current and power. These plants were leased to the Union Electric Light & Power Company, which leases (as is claimed) fixed the price of service to these special consumers. Other customers, who likewise turned over their plants, have not complained. The details of these will be left to the opinion, if they become material. The applications for these increases in rates brought; a storm of protests from eighteen consumers of heat and electrical current and power furnished them by the Union Electric Light & Power Company, and they intervened in the two cases. Their charges ran the gamut from the alleged fact the Union Electric Light & Power Company was not a public service corporation as to furnishing heat, and clear down the line. One principal contention is that these special consumers have term contracts (as to rates) under these leases, and that such rates cannot be increased during these contract terms. The front door question is that the Union Electric Light & Power Company (as to heating) is not a public service corporation at all, and hence an absence of jurisdiction in the Public Service Commission to deal with that question. Beaten before the Public Service Commission these intervening’ consumers sued out statutory certiorari to the Circuit Court of Cole County, where upon a hearing the orders of the Public Service Commission were set aside.

Prom that judgment the Public Service Commission and the Union Electric Light & Power Company have appealed.- The individual complaints of the several eighteen consumers have been separately preserved, so that if one (in matters of its individual rights) has advantage over the other, they are preserved in the eighteen cases here. The broad questions are common to all cases. , j , ;u i-*c

I. What we have denominated the “front door” question, in this case relates to the heating activities of the Union Electric Light & Power Company. The Public Service Commission (much better equipped than is this or any other court) to find and determine facts, has this to say upon this branch of the case:

“The appellant company has established a large downtown heating plant in the vicinity of Tenth and St. Charles streets, and has installed steam pipes connecting it with a number of large adjacent buildings, and has contracted to furnish steam heat to those .building from this plant when needed and to furnish electricity from its large central station. In addition the company has made contracts for steam heating with a number of consumers so situated that they could not be reached from the St. Charles heating plant. In accordance with these contracts the company has taken over the private plants of a number of consumers, agreeing to furnish the consumer steam for heating or other purposes, and with electricity for light.and power. Usually the right is reserved in these contracts whereby the applicant may shut down the private plant entirely and supply both heat and electricity from some outside source. The company has managed the detail of supplying such service in each case in whatever manner appeared to it to be the most economical. In the summer when there was little or no heating demanded the company has followed the policy of shutting down most, if not all, of these isolated plants, and furnishing electricity .from its own more efficient central plant. During the heating season it has operated some of the consumers’ heating plants, furnishing heat to such consumers and sometimes connecting to adjacent consumers, and supplying them with heat from the same plant or plants. During this period of heating demand the company has apparently considered it economical to operate the consumers ’ electrical generating equipment, using the exhaust steam therefrom for heating. Usually the contract provided for steam heat for a definite space and for certain stipulated amounts of electricity, all for some fixed annual payment, with additional charges for electricity for any excess used above the amount called for in the contract. These contracts have carried with them temporary possession and use of the machinery, with provisions as to extensions or repairs and conditions pertaining to their return to the consumer when the contract- has expired. A number of such proposals have been accepted, and the company has taken over some forty-odd such plants, some of which are entirely closed down, but a number of which are operated during the heating season, as above described.”

The foregoing findings of facts is of material moment here. They cover much more than the eighteen cases involved. This finding of the facts is well buttressed by the proof. Included in that proof are the contracts pleaded by interveners. These contracts are of no vitality, in so far as they affect rates. The Public Service Commission, in fixing rates, cannot be clogged or obstructed by contract rates. This question was early threshed out by this court in several cases, some of which went to the Federal Supreme Court, in each of which this court was sustained. The original ease, the ruling in which has never been changed, is State ex rel. City of Sedalia v. Public Service Commission, 275 Mo. 201. The effect of this and subsequent holdings, is that contract prices count for naught in the fixing of rates by the Public Service Commission. The Public Service Commission is not a court, and cannot be influenced in any regard by the contract prices as to rates. As said such body is not a court, and has neither the power to construe contracts, nor to enforce them. If the contracts have any effect at all (as wé think they have not) the only effect would be upon the question of whether or not the Union Electric Light & Power Company was a public utility, in so far as heating’ is concerned. We doubt their efficacy in that regard. This because such question depends largely upon charter powers, and what has been done under the charter powers. But of this question later. Certain it is that such contracts cannot influence service rates. All of these contracts (and there were many not involved in these eighteen suits) indicated a general purpose upon the part of the Union Electric to extend the steam heating branch of their business.

II. If these contracts have any bearing' whatever in these cases, it must be on the theory that they tend to prove that the appellant was not in fact a public utility in this regard. Fortunately for the brevity of this opinion, we have had before us the question of steam heating. [State ex rel. Case v. Public Service Commission, 298 Mo. 303.] It does not show clearly in that opinion, but it was a fact in the case that the public utility had several different plants from which steam heat was furnished and generated. It appeared there, as it appears here, that there is too much waste in conducting’ steam heat for any great distance. In fact the only economical way of engaging in such a public utility is to have different plants, located in districts wherein there would be demand for the commodity, and that seems to be the plan of the claimant in these cases. Another question settled in the'case, supra, is that where there is a combined plant for the production of both electricity and steam heat, there should be a proper allocation of the value of the plant as to the separate uses. In the cases before us we have instances where more electricity is produced than is required for the local plant, but such is saved for the company’s reserve for general use. In other cases there is not a sufficient quantity, and the deficiency is made up from the general reserve in the main plant, or some of the minor plants. So too, if there was surplus steam in a given building, it would be piped out to fill another contract. So when the very nature of the business is considered, a multiplicity of smaller plants is required to save waste, and in order to economize in. the business. The divers contracts suffice to show nothing in these cases. As a public utility the corporation cannot engage in private contracts, and the contracts before us do not show that the corporation intended to so engage. Steam heating comes under the Public Service Commission Act under our rulings, and the only real question in this case is the propriety of the temporary rates fixed. The rates fixed were for a test of a year, and then a time in addition given to get in reports, and from them determine the fair rates.

III. It is not disputed that the Union ¡Electric Light & Power Company had the charter, power to manufacture and furnish heat and power to the general public. Not only heat by electricity,' but heat by steam. Its ’c^ar^er seems to have been .so drawn as to enable it to make use of all elements. It chose to engage (under its. charter) in furnishing steam heat and power as well as electric lights, electric heat and electric power. It was so engaged when the applications for increased rates were made, which applications were based upon increased labor and fuel costs. There were separate applications, and for this there is ample authority. [Hackworth v. Missouri Southern Railroad Co., 286 Mo. 282.] In the last named case it was made to appear that the railroad was hauling railroad ties at an actual loss, although, its whole business might not show the company to be in the red. We ruled, and rightfully so, that other customers of the railroad should not be compelled (by increased rates on their shipments) to make up the deficits from hauling ties. What is true in a case like that, is also true in a case like this. The Case case, supra, is practically on all-fours with the Hackworth case. In that we required a proper allocation ■ of the instrumentalities used in the production of steami, so that it might be made to not only bear its proportionate part of the expenses, but likewise its proportionate part of the profits, to insure a reasonable return upon the whole investment for public use. The enactment of the Public Service Act marked a new era in the history of public utilities. Its purpose is to require the general public not only to pay rates which will keep public utility plants in proper repair for effective public service, but further to insure to the investors a reasonable return upon funds invested. The police power of the State demands as much. We can never have efficient service unless there is a reasonable guaranty of fair returns for capital invested. The woof and warp of our Public Service Commission Act bespeaks these terms. The law would be a dead letter without them, and a commission under the law, that would not read the law in the proper spirit, would be breathing into it tlie flames of ultimate deterioration of public utilities. These instrumentalities' are a part of the very life blood of the State, and of its people, and a fair administration of the act is mandatory. When we say fair, we mean fair to the public, and fair to the investors. This answers some suggestions in the briefs.'

IV. Learned counsel for respondents have in view the force and effect of a contract under the views expressed in the Old Dartmouth College case. They overlooked the changes in the law made by constitutional provisions since that date. We have always been a strict constructionist, but in State ex rel. City of Sedalia v. Public Service Commission, 275 Mo. 210, we had occasion to review the law as it is now. Under our Constitution the police power of the State is held inviolable. [Sec. 5, Art. XII, Mo. Const.] In State ex rel. v. Public Service Commission, 275 Mo. l. c. 209, we said.

“Note the language, ‘the exercise of the police power of the State shall never be abridged.’’ Under such a constitutional restriction the Legislature would be powerless to enact a valid law by the terms • of which the right of the State in the exercise of its sovereign police power in the fixing of reasonable rates for public services could be limited or abridged. This court so held in Tranbarger v. Railroad, 250 Mo. l. c. 55, whereat Bond, J., said: • ,

“ ‘ (2) All powers of government which regulate the public health, welfare and the property rights of its people&emdash;these, no State can strip herself of, for that would render it incapable of carrying out the prime purpose of its creation. The sanctity and import of this attribute of sovereignty are recognized in the Constitution of this State, to-wit: “The exercise of the police power of the State shall never be abridged, or so construed as to permit corporations to conduct their business in such manner as to infringe the equal rights of individuals, or the general well-being of the State.” [Art. 12, Sec. 5, Constitution of Missouri.] The only restrictions upon the exercise of this faculty are that its use shall be reasonably adapted to the ends for which it is given, and that it shall not infringe any right or privilege .guaranteed by the F'ederal Constitution. The .authorities and cases demonstrating these principles are uniform. ’

“Some of us thought the pronouncement a little broad and dissented, but the case was taken to the United States Supreme Court and there affirmed. [Chicago & Alton Railroad Co-, v. Tranbarger, 238 U. S. 67.]

“The United States Supreme Court was even more explicit in this Tranbarger case than was the majority opinion in this court. To its rule we must bow. At page 76 of this Tranbarger case, 238 U. S. 67, it is said:

“ ‘It is established by repeated decisions of this court that neither of these provisions of the Federal Constitution has the effect of overriding; the power of the State to establish all regulations reasonably necessary to secure, the health, safety, or general welfare of the community; that this power can neither be abdicated or bargained away, and is inalienable even by express grant; and that all contract and property rights are held subject to its fair exercise. [Atlantic Coast Line v. Goldsboro, 232 U. S. 548, 558, and cases cited.] And it is also settled that the police power embraces regulations designed to promote the public convenience or the general welfare and prosperity as well as those in the interest of the public health, morals or safety. [Lake Shore & Mich. Southern Ry. Co. v. Ohio, 173 U. S. 285, 292; C. B. & Q. Ry. Co. v. Drainage Commissioners, 200 U. S. 561, 592; Bacon v. Walker, 204 U. S. 311, 317.] ’ ”

The fixing of a rate for a public commodity, as we have here, falls under the police power of the State. F'rom the beginning we have so ruled. This constitutional provision disrobes the contention of interveners as to private contract rights. They are not private contract rights, and when so viewed, there is no substance to these sundry contracts. The reasonableness of the rates fixed will call for another paragraph.

V. Details will serve no useful purpose. The Public Service Commission first determined that the Union Electric Power & Light Company was a public utility, both tor electric power and current, and for steam heat. Having* determined that it was a public utility for all purposes, supra, the only matter left was to fix reasonable rates. These it determined to do by,a series of investigations, all mentioned within the record. After a full investigation as to the increased cost of its products, the Commission entered a trial order or judgment. By the terms of this the matters were to be tested for a year, and the data kept and gathered for its information. The rates were not permanent, but rates based upon the best information then before the Commission. If, at the end of the year, the experiment showed a wrong conclusion, it could be set aside, and new rates fixed. We are dealing solely with these experimental rates. Not only so, but with experimental rates as to steam heat. This court will be slow to interfere with the Public Service Commission," when they order an experiment to be made in order that equitable rates may be determined. Our province is to determine whether or not the order made is unreasonable. Of course the rigjht to make the order is of first consequence, but this right clearly appears. It does not appear that the order was unreasonable. Without such a showing, neither this court, nor the circuit court should vacate the order. Prom all it appears, that the circuit court was in error in its judgment, and the same is for that reason reversed. Such court overlooked the right of the Commission to await the result of an experimental judgment. Take from the Commission the right to experiment upon what should be a final judgment, is to rob it of its most valuable asset. We do not feel like so ruling, and have never before so ruled.

The judgment of the circuit court is reversed.

White, Wooclson and Atwood, JJ., concur; Blair and Ragland, JJ., not sitting; Walher, J., dissents in separate opinion.