City of Defiance v. Toledo Edison Co.

This is an action in injunction coming to this court on appeal from the Common Pleas Court of Defiance county, Ohio. The action is brought by the plaintiff, the city of Defiance, to enjoin the defendant, the Toledo Edison Company, from collecting certain charges it has made for electric energy, alleged to be in excess of the rates provided in an ordinance of the plaintiff duly adopted on the 18th day of December, 1928, which was duly accepted by the defendant, and also to enjoin it from collecting certain charges for gas which it has made and which are alleged to be in excess of the rates provided in the schedule of rates for such service filed by the defendant with the Public Utilities Commission of Ohio, which became effective September 15, 1928.

The Toledo Edison Company is a public utility corporation serving the city of Defiance and its citizens with electric current and artificial gas. It acquired this utility by purchase from the Defiance Gas Electric Company, and at the time of the purchase it was the custom of the Defiance Gas Electric Company to read its customers' meters on or about the 10th of each month, and at the 1st of the following month to render bills based upon such readings, payable upon the 10th day of the month the bills were rendered. The result of this custom was that the electricity or gas consumed during the 30-day period from the 10th of one month to the 10th of the following month was payable on the 10th of the next succeeding month. This custom was continued by the defendant until the month of July, 1932, when it was determined by defendant company that it would be more expedient, efficient, and economical to separate the dates of meter readings and bill payments, and to bring the period of consumption nearer the date of payment. The company thereupon decided to change the date of meter reading from about the 10th of the month to about the 18th of the month, and pursuant to this decision made the change and read its meters in the month of July, 1932, on or about the 18th of the month instead of the 10th, thus making a period of approximately 38 days between meter readings for that particular period of consumption. Bills for that 38-day period were then computed by taking the total amount of consumption for the total period and prorating it for 30 days and 8 days.

No application was made by the company either to the Public Utilities Commission or to the plaintiff to put this change into effect, and neither the Public Utilities Commission nor the plaintiff assented to or acquiesced in such change.

The matter of rates, and the method of computing the bills for electricity and paying for the same, are governed by Ordinance No. 926 of the city of Defiance, which, in so far as it relates to this matter, reads as follows: "Section 1. That during the period of five years from the effective date of this ordinance The Toledo Edison Company, its successors or assigns, shall charge for electric energy furnished for illuminating purposes and incidental domestic service within the limits of the city of Defiance, Ohio, eight cents per kilowatt hour for the first thirty kilowatt hours consumed during any one month, and five cents per kilowatt hour for all over thirty kilowatt hours consumed during such month; provided, however, that where a customer does not use enough electric energy during any one month for which the charge is being made to amount to 75¢ said Company, its successors or assigns, shall have the right to charge a minimum of 75¢ for such month, and provided further that monthly charges against each customer shall be paid on or before the 10th day of the month next following the month for which bill for service is rendered, and upon failure of any customer so to pay the Company, its successors or assigns, it shall have the right to charge and collect an additional ten per cent upon any and all such unpaid charges."

The matter of rates and bills, so far as the same relates to the consumption of gas, is governed by a schedule of rates on file with the Public Utilities Commission of Ohio, reading as follows:

For the first 500 cu. ft. or any part thereof metered per month ...................................... $1.00 For the next 1500 cu. ft. or any part thereof metered per month, per 1000 cu. ft. .................... $1.75 For the next 1000 cu. ft. or any part thereof metered per month, per 1000 cu. ft. .................... $1.25 For the excess of 3000 cu. ft. metered per month, per 1000 cu. ft. ....................................... $1.00

Discount: None.

The above net rates apply only in case a bill is not paid within 10 days of the date of same. If not so paid, the gross rates, which are the above rates plus 10%, then apply. Net minimum charge per meter per month, ............................ $1.00

By putting the change into effect the company received payment of its bills for electric energy and gas approximately a month sooner than it would have received payment under the custom above mentioned, and, as stated above, the company covered in the bills rendered by it a period of from 36 to 38 days, while in the ordinance fixing rates for electrical energy, and in the schedule fixing rates for gas, monthly bills are provided. The minimum rate which it was entitled to charge each customer during any month where such customer did not use enough electric energy to amount to 75 cents at the general rate specified in the ordinance was under the ordinance 75 cents per month, but in determining and fixing the minimum rate in the bills rendered for the 38-day period, above mentioned, it added to the minimum rate of 75 cents, authorized by the ordinance, a charge of 15 cents where the period covered by the bill was 36 days, and a charge of 20 cents where the period covered by the bill was 38 days, which it intended should cover the minimum rate on a pro rata basis for the period of days in excess of 30 days covered by such bill.

The minimum rate provided by the schedule filed with the Public Utilities Commission for gas was $1 for the first 500 cubic feet or any part thereof metered per month, but the company in its bills putting such change into effect added to such minimum rate a charge in excess of the rate provided by said schedule, intended to cover the proportionate part of such minimum rate for the period in excess of 30 days for which such bills were so rendered. This charge also had the effect of depriving some of the consumers of gas of a part of the benefit of the lower rates provided in the rate schedule on a monthly basis for quantity consumers.

The meters for the consumers of gas and electricity were read beginning on June 9, and were finished within five days thereafter, and the same meters were not subsequently read for a period of from 36 to 38 days thereafter; this being the period covered by the bills against which this action is brought to enjoin the collection of the alleged excess charges therein.

In the bills for such period which had not been paid at the time this action was brought the additional pro rata minimum rate charges amounted to approximately $350, and in the bills for such period which had been paid at the time this action was brought the additional minimum pro rata charges amounted to from $150 to $200.

The defendant contends that no order of injunction should be made in this case, because:

First, this is not a case for equity jurisdiction inasmuch as plaintiff has an adequate remedy at law under Sections 614-8, 614-10 and 614-21, General Code.

Second, even if the case were one for equity jurisdiction, still no order of injunction should be made, inasmuch as no damage was done or suffered.

With reference to the first contention the ordinance relating to rates for electric energy above mentioned was duly accepted by the defendant, and constituted a legal and binding contract between the plaintiff and defendant. Village of New Lexington v.Ohio Fuel Supply Co., 27 C.D., 678, 24 C.C. (N.S.), 537; OhioRiver Power Co. v. City of Steubenville, 99 Ohio St. 421,124 N.E. 246.

Irrespective of the jurisdiction of the subject-matter that may have been conferred on the Public Utilities Commission, the courts have equitable jurisdiction to enforce and prevent the breach of such contracts.

It is held in the New Lexington case, above mentioned: "While a controversy between a municipality and a gas company as to rate to be paid by consumers for gas would fall within the jurisdiction of the Public Service Commission, the courts have jurisdiction to settle differences of that character, whenever a contract has been entered into and so long as the contract exists."

Following these decisions, we hold that in so far as this case relates to the rates to be charged for electric energy this action is properly brought.

The question as to whether this court has jurisdiction of this case, in so far as it relates to the charges for gas, presents a different problem, as there was no contract between the plaintiff and defendant relating to the charges for gas, and such charges are based on a schedule filed by the defendant with the Public Utilities Commission.

Section 614-20, General Code, among other things, provides: "No rate, joint rate, toll, classification, charge or rental or anychange in any rate, joint rate, toll, classification, charge or rental or any regulation or practice affecting any rate, joint rate, toll, classification, charge or rental of a public utilityshall become effective until the commission, by order, shalldetermine the same to be just and reasonable * * *." (Italics ours.)

The change made by the defendant was both a change in rate and change in practice, and was made without order by the Public Utilities Commission, and without authority in law. Being wholly illegal and void, the courts have jurisdiction to enjoin its enforcement. Such injunction, however, will not prevent the defendant from making application to the Public Utilities Commission for an order to make a change in rate or practice similar to the one attempted to be made by it, or the carrying into effect of such order as the commission may make.

With reference to its second contention, the defendant has offered evidence showing that under certain conditions based on monthly averages the charges to consumers based on the change being made effective would not exceed the charges based on the monthly or 30-day rate previously in effect. However, all this evidence is based on assumed monthly averages of consumers, and not on actual meter readings, for the reason, as stated above, that the defendant did not make any meter readings at the end of the customary 30-day period following June 9, 1932, and did not make any readings until from 36 to 38 days had elapsed from the date of the former reading. The company being the only one authorized to make the readings, and not having availed itself of the opportunity, is not in position to complain of the inability of the plaintiff to produce evidence of the exact extent of the alleged overcharges made to consumers. There is evidence offered by the plaintiff to the effect that the rates charged by defendant in carrying the change into effect were in excess of the amounts that some of the consumers would have been required to pay had the charges been made on a monthly basis, as had been the custom previously, and in our opinion this evidence of damage is sufficient, if evidence of damage is required, to authorize the issuance of an injunction. On the other hand, if, as contended by plaintiff, the Public Utilities Commission has jurisdiction of the rates for electricity under the accepted ordinance, as well as jurisdiction over the gas rate, the action of the defendant in making the change is in violation of the provisions of Section 614-20, General Code, and injunction lies without proof of damage.

Both the ordinance and the schedule of rates provided for a monthly minimum rate, and there is no express authority to defendant to make any change in these rates or to in any way prorate them. It is said in 19 Ohio Jurisprudence, at page 288: "Where there is an ambiguity or uncertainty as to which of two constructions should prevail in a franchise contract, it is quite clear that that construction should be adopted by the courts that would be most favorable to the public interest and welfare, so the rule is well established that grants of this character should be strictly construed in favor of the public and against the grantee."

The reasoning upon which this rule is based applies as well to rate ordinances and schedules as to franchises, and consequently we are of the opinion that neither the ordinance nor the schedule of rates can be construed as authorizing the defendant to make minimum charges for any period other than the period expressly provided in such ordinance and schedule.

The changes mentioned were made by the defendant of its own initiative and for its own advantage in expeditiously carrying on its own business, and, such changes not being authorized either by the ordinance or the rate schedule, the defendant must bear the burdens as well as enjoy the benefits of making such changes, and, under the provisions of the ordinance and schedule aforesaid, is entitled to charge only the monthly minimums provided therein, irrespective of the fact that the period covered by such charges is in excess of the 30-day (monthly) period.

Holding these views, the injunction issued by the lower court herein, as modified by its journal entry of August 6, 1932, will be continued and made perpetual, except that it shall contain a provision to the effect that it shall not prevent defendant from at any time making application to the Public Utilities Commission for an order permitting change in rates for gas, and practices in connection therewith, and the carrying into effect of such order.

Decree accordingly.

KLINGER, J., concurs.

CROW, P.J., not participating.