THE CITIES OF McPHERSON, et al., Appellees,
v.
THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, et al., Appellants, and THE KANSAS POWER AND LIGHT COMPANY, Appellant. NATIONAL GYPSUM COMPANY, Appellee,
v.
THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, et al., Appellants, and THE KANSAS POWER AND LIGHT COMPANY, Appellant.
No. 38,880
Supreme Court of Kansas.
Opinion filed May 9, 1953.Jay Kyle, of Topeka, argued the cause, and Robert M. Corbett, of Topeka, was with him on the briefs for the appellant, State Corporation Commission of the State of Kansas.
Clayton E. Kline, of Topeka, argued the cause, and M.F. Cosgrove, Balfour S. Jeffrey, and Robert E. Russell, all of Topeka, were with him on the briefs for the appellant, The Kansas Power and Light Company.
Jerome M. Joffee, of Kansas City, Mo., argued the cause, and Russ B. Anderson, city attorney, of McPherson, and Charles C. Calkin, of Kingman, were with him on the briefs for the appellee cities.
Harry W. Colmery and James E. Smith, both of Topeka, and Paul R. Wunsch, of Kingman, were on the briefs for the appellee, National Gypsum Company.
The opinion of the court was delivered by
HARVEY, C.J.:
These appeals are from orders of the trial court sustaining motions of the appellees to set aside orders of the State Corporation Commission as being unlawful and unreasonable on their face without an examination of the record before the Commission required by G.S. 1949, 66-118d.
The legislature, by statute (G.S. 1949, 74-601), organized the State Corporation Commission, which hereinafter will be called the "Commission," and by chapter 66, Laws of 1949, gave the Commission full power, authority and jurisdiction to supervise and control public utilities, as defined by the act, doing business in this state, and empowered it to do all things necessary and convenient *408 for the exercise of such power, authority and jurisdiction. The Kansas Power and Light Company, hereinafter called the "Company," is a public utility as defined by the act (G.S. 1949, 66-104). It is a Kansas corporation. Its business is confined to Kansas. A part of its business is to generate electricity, which it distributes to various places in the state for sale. This part of its business is not involved here. As a part of its business it purchases natural gas from producers or pipe lines, which it sells to various cities and industries.
The Company has three separate gas systems. First, it distributes gas to Atchison, Leavenworth, Lansing and Emporia, and for this it obtains its supply of gas wholesale from the Cities Service Gas Company, which delivers the gas at the town borders. This system is not involved here. Second, it distributes gas in fifteen Kansas cities located along the line of the Northern Natural Gas Company, from which it purchases the gas wholesale at the city gates. Only as it pertains to the proposed increases in industrial rates is this system directly concerned. Third, it maintains a main transmission system from the Hugoton gas field, which it owns and operates and from which it distributes gas to 107 cities in Kansas. This is not connected with either the first or the second system above mentioned. It is the one involved here.
On November 24, 1951, the Company filed with the Commission, under G.S. 1949, 66-117, an application requesting the consent of the Commission to file and place in effect certain changed schedules of rates to be charged for natural gas which affected only two classes of rates: (1) Since 1931 the Company had on file and in effect its general gas rate schedule known as GG-6, which covered its charges for natural gas for domestic and commercial purposes, to all its customers served from its main transmissions system, with the exception of fifteen named cities, which fifteen cities, while being served from the Company's main transmission system had been receiving gas at rates lower than those contained in Schedule GG-6, by reason of their proximity to local gas fields which had been exhausted. The application requested the Commission to place these cities and their inhabitants on the same schedule of rates in effect in the other ninety-two cities served by the company on its main transmission system, eliminating an existing discrimination in their favor. (2) To replace its present industrial rate schedule, known as the Company's Schedule OCG-2, which, with slight amendments, has been in effect since 1931, by the filing and placing *409 into effect a new interruptible contract gas rate schedule designated as ICG-1.
These requests were of a character that the Commission could have given or withheld its consent without a hearing. (See, Wichita R.R. v. Pub. Util. Comm., 260 U.S. 48, 56, 43 S.Ct. 51, 54, 67 L.Ed. 124, 129.) Counsel for appellees frankly admit this to be true. In State, ex rel., v. Postal Telegraph Co., 96 Kan. 298, 306, 150 Pac. 544, 548, speaking of the procedure in such a case, the court used this language:
"All that was necessary for the defendant to do was to make application to the commission, setting up the facts. It would then be the duty of the commission to verify the facts by proper investigation; and if the alleged facts were true and no other lawful interest was materially affected, the commission would be bound to grant the application."
Since the application involved numerous users of gas the Commission concluded to have a hearing and gave notice for a hearing on December 19, 1951. At that time representatives of twelve of the cities which previously had been receiving gas from the Company at a rate lower than its GG-6 schedule and some of the users of gas for industrial purposes, including the National Gypsum Company, appeared and asked for further time for preparation for the hearing. The Commission granted these requests and set the hearing for March 3, 1952, on which date and the two days following the hearing was held. At this hearing testimony was taken which made a record of 426 pages of transcript and forty-nine exhibits. At the close of the hearing the Commission took the matter under advisement and on April 30, 1952, filed its order, a copy of which is hereto attached and marked "Appendix A," giving its consent to the putting in of the rates as requested by the Company. On the same date the Commission filed its memorandum opinion stating the pertinent facts and giving the reasons which prompted it to consent to the Company's application. This opinion is hereto attached and marked "Appendix B."
The protesting cities and the National Gypsum Company, an industrial gas consumer, filed motions for rehearing. These were duly heard by the Commission and overruled. Within due time and on June 9, 1952, the twelve protesting cities and the National Gypsum Company, proceeding under our statute (G.S. 1949, 66-118c), filed their respective applications for review in the district court of Kingman county and on the same date filed in that court motions for immediate reversal of the order of the Commission of April 30, 1952, *410 and gave notice of the hearing of such motions on June 19, 1952. The clerk of the district court of Kingman county duly notified the Commission and the Company of the filing of the petitions for review and of the motions and of the date the motions were noticed to be heard. On June 19, 1952, the Commission appeared by its counsel; also the Company appeared and asked leave to intervene in opposition to the motions, which leave was granted.
The transcript of the hearing before the Commission had not been filed in the district court. The motions for immediate reversal of the order of the Commission made on April 30, 1952, were taken up for hearing. After the argument the court made an oral decision in open court, which was recorded as a part of the case and constituted the findings of fact and conclusions of law of the court. A copy is attached as "Appendix C." These were incorporated in and made a part of the journal entry. The court found that the order of the Commission of April 30, 1952, "is unlawful and unreasonable in its entirety and should be vacated and set aside." Judgment was rendered accordingly. The court further adjudged that the proceedings and judgment of the court should be transmitted by its clerk to the Commission. The Commission and the Company each filed a motion for a new trial, which were considered by the court and overruled.
We turn now to the legal questions presented here. Counsel for the respective appellants contend the trial court did not follow the procedure outlined by our statute, but adopted a procedure of its own, that it considered matters not before it, and that its conclusions were erroneous.
The pertinent sections of our statute, all in G.S. 1949, outlining the procedure and describing the duties of the district court in a case such as this, may be summarized or quoted in whole or in part as follows:
66-118c outlines the procedure for review by the district court of decisions of the Corporation Commission. This procedure was followed and the matter was properly taken to the district court for review, and the Commission and interested parties were given notice as provided in that section.
66-118d reads as follows:
"The secretary upon receipt of said copy of the application for review shall forthwith transmit to the clerk of the district court in which the application for review has been filed, a certified transcript of all pleadings, applications, proceedings, orders or decisions of the commission and of the evidence heard *411 by the commission on the hearings of the matter or cause: Provided, That the parties, with the consent and approval of the commission, may stipulate in writing that only certain portions of the record be transcribed. Said proceedings for review shall be for the purpose of having the lawfulness or reasonableness of the original order or decision or the order or decision on rehearing inquired into and determined, and the district court hearing said cause shall have the power to vacate or set aside such order or decision on the ground that such order or decision is unlawful or unreasonable. After the said transcript shall be filed in the office of the clerk of the district court of the county in which the application is filed, the judge of said district court may, on his motion, or on application of any of the parties interested therein, make an order fixing a time for the filing of abstracts and briefs and shall fix a day for the hearing of such cause. All proceedings under this section shall have precedence in any court in which they may be pending, and the hearing of the cause shall be by the court without the intervention of a jury. The procedure upon the trial of such proceedings in the district court and upon appeal to the supreme court of this state shall be the same as in other civil actions, except as herein provided. No court of this state shall have power to set aside, modify or vacate any order or decision of the commission, except as herein provided." (Our emphasis.)
66-118f in part reads:
"No new or additional evidence may be introduced upon the trial or any proceedings for review under the provisions of this act, but the cause shall be heard upon the questions of fact and law presented by the evidence and exhibits introduced before the commission and certified by it:" (Our emphasis.)
66-118k in part reads:
"If the court shall find that the order or decision of the state corporation commission is unlawful or unreasonable in whole or in part and shall vacate or set aside the order or decision in whole or in part, the court shall make findings of fact and conclusions of law, ..." (Our emphasis.)
Counsel for appellants contend the trial court had no jurisdiction to entertain appellees' motions without having before it the transcript of the proceedings before the Commission. The point is well taken. Our district courts have only such jurisdiction as may be provided by the legislature. (Const. Art. 3, § 6.) Here the legislature outlined the procedure before the court and specifically provided that, "No court of this state shall have power to set aside, modify or vacate any order or decision of the commission, except as herein provided." Several of our cases have thoroughly discussed the procedure of the district court in such matters. (See Southern Kansas Stage Lines Co. v. Public Service Comm., 135 Kan. 657, 11 P.2d 985; Union Pac. Rld. Co. v. State Corporation Commission, 165 Kan. 368, 194 P.2d 939; White Eagle Oil Co. v. State Corporation Comm., 168 Kan. 548, 554, 214 P.2d 337, considering another statute having the same conditions *412 (see Wakefield v. State Corporation Comm., 151 Kan. 1003, 101 P.2d 880); Rock Island Motor Transit Co. v. State Corporation Comm., 169 Kan. 487, 219 P.2d 405.)
Counsel for appellees cite Atchison, T. & S.F. Rld. Co. v. State Corporation Commission, 166 Kan. 548, 203 P.2d 211, as a case in which the trial court and this court passed upon an order of the Commission upon a motion. In that case, however, there was a transcript filed by the Commission with the district court (p. 550). A re-examination of the abstract and briefs in that case discloses that counsel for appellant so stated on page 7 of its brief and the appellee so stated on page 4 of its brief. The record also discloses that the trial court considered the Commission's transcript. It is true that there were two or more motions in that case which were ruled upon by the trial court and this court, but the case is not an authority for the hearing of motions to set aside the decision of the Commission when the district court has no transcript before it.
Counsel for appellees further contend that in this case the filing of the Commission's transcript with the district court was waived by a stipulation, shown in the journal entry. We think that point is not well taken. The stipulation says nothing about waiving the filing of the transcript before the hearing upon the motion. Obviously the trial court did not consider it was waived, for in the second paragraph of its oral findings it treated that subject and held that it had authority to proceed without the transcript being filed. More than that, the parties to an action cannot waive the jurisdiction of the court as the subject matter of the action. (See, Behee v. Beem, 156 Kan. 115, syl. 3, 131 P.2d 675, and the authorities cited therein.)
Counsel for appellants further contend the court was not justified in its conclusion that the Commission's hearing was held under G.S. 1949, 66-110, which provides for a full hearing for the purpose of fixing a rate base. This point is well taken. Clearly, the Company's application to the Commission was made under G.S. 1949, 66-117. The application was for the consent of the Commission to put in certain schedules of rates. As previously stated here, the Commission could have given or could have withheld its consent without a hearing, but as stated in State, ex rel., v. Postal Telegraph Co., supra, it was the duty of the Commission to verify the facts stated in the application. Certainly if the Commission thought it appropriate to have a hearing for that purpose it had authority to do so. The Commission specifically stated in its memorandum opinion *413 that it was not conducting a hearing for the making of a rate base. The court was not justified in construing the action of the Commission as being something which the Commission had not done. Neither was it justified in holding that the Commission could not determine whether it would consent to or withhold its consent to the application made to it by the Company without a hearing under 66-110 and determining a rate base. The jurisdiction of the court was to review what the Commission had done. That is all it had authority to do.
Counsel for appellees cite Southwestern Bell Tel. Co. v. State Corporation Comm., 169 Kan. 457, 219 P.2d 361, as authority for the trial court in this case to consider an application to put in a schedule of rates filed under 66-117, to be heard before the Commission under 66-110. The case is not in point here. In that case Southwestern did file its schedule of rates under 66-117, but its application to put the rates into effect disclosed on its face that the hearing of the application and the making of the order would require an examination of the existing rates, the assets, and income of the application. As a result of this, as shown on page 459 of the opinion:
"Southwestern and the Commission entered into a stipulation which authorized and permitted the latter, on October 9, 1947, to issue an order wherein it found: that in order to determine the issues raised by the application and to carry out the duties imposed upon it by law it was necessary for it to investigate all of the operations of Southwestern, its affiliates, subsidiaries and other members or segments of the Bell system which affect the rates and charges now or to be made applicable within the state, and to appraise the property wherever located which affects the determination or establishment of just or reasonable charges within the exchanges covered by Southwestern's application; that the costs and expenses necessarily incurred in the making of or reasonably attributable to such investigation and appraisal should be assessed against Southwestern; that in making such investigation, appraisal and all proceedings involved, the Commission should exercise the power and authority conferred upon it by G.S. 1935, chapter 66; and directed that the investigation be initiated and carried out for the purpose and in the manner set forth in such findings."
This order also provided that the expense of the hearing should be paid by the applicant, as authorized by 66-1502. No such situation existed in this case. Since the transcript of the proceedings before the Commission was not before the trial court it has not been abstracted, so we are handicapped, as was the trial court, in knowing all that transpired before the Commission. From the order of the Commission and its memorandum opinion, which were *414 before the trial court and are abstracted here, it seems clear that no question concerning the lawfulness or reasonableness of the rates charged by the Company to the consumers of gas in the 92 cities on the Company's main transmission line was involved in the hearing. The trial court was not justified in considering the question of the lawfulness and reasonableness of the rates charged by the Company in those ninety-two cities. Its function was to consider what the Commission had considered, not to inject its own views into what should have been considered by the Commission. The court had no authority under the statute to review the work of the Commission except in the manner and to the extent the statute gave it such authority. It was error to do otherwise.
In paragraphs 11 and 12 of the Commission's order the Commission found some unaccounted for gas and some interdepartmental transactions of gas between the gas and electric departments of the Company which it desired to further investigate. It transferred these matters to its docket No. 43579-U for hearing under 66-110 and 66-1501. The trial court was of the opinion that those matters should be heard before the Commission should give its consent to the application made by the Company. In this the court erred, for two reasons: First, it is the function of the Commission to determine when and under what doctrine those matters should be heard. The court is given no authority to determine that question; and, second, any modification of the rates as a result of such hearing would affect the users of gas in all of the 107 cities serviced by the Company on its main transmission line and would not be applicable to the 15 cities alone which previously had enjoyed a lower rate.
In the oral statement made by the court, later characterized as its findings, the court said nothing to indicate the invalidity or unreasonableness of the interruptible industrial contract gas rate schedule (ICG-1) which the Company had asked the consent of the Commission to put into effect, and which consent was granted. Notwithstanding that, the court set aside as unlawful and unreasonable the order of the Commission respecting that matter. We see nothing in this record that justified that action by the court.
There is another matter which we think worth while to note. The portion of the statute (66-118k) previously quoted, requires the trial court, when it reverses an order of the Commission in whole or in part, to make "findings of fact and conclusions of law." The oral statement made by the court in this case, later designated *415 as findings of fact, can hardly be said to comply with the statute. Much of it is argumentative and some of it deals with matters not included in the order or in the memorandum opinion of the Commission. This procedure was inaccurate.
The result is that the judgment of the trial court must be reversed. It is so ordered.
"APPENDIX A"
BEFORE THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS
In the matter of the application of The Kansas Power and Light
Company for consent of the Commission to make certain changes
in its charges for natural gas service. Docket No. 42,829-U.
ORDER
Now on this 30th day of April, 1952, the above-entitled matter
comes before the Commission for further consideration and final
disposition. The Commission, having examined the application,
files and record and being fully advised in the premises, finds:
1. That the application herein was filed on the 24th day of
November, 1951; it is an application for authority to file and to
place into effect certain schedules of gas rates which are
two-fold in purpose and will be referred to in Findings No. 4 and
5; that the applicant is a public utility engaged exclusively in
business in this state, which business includes, inter alia,
the transmission and distribution of natural gas at both
wholesale and retail; that pursuant to notice, a hearing was held
on the application on December 19, 1951, and March 3, 4 and 5,
1952, at the Commission's hearing room in Topeka, Kansas.
Appearances were entered on behalf of the applicant by Clayton E.
Kline and Balfour S. Jeffrey, its attorneys. The cities entering
appearances were McPherson, by Russ Anderson, its attorney;
Hoisington by J.L. Griffith, its attorney; Lindsborg by E.W.
Jernberg, its attorney; Pratt by John D. Megaffin, its attorney;
Great Bend, Buhler and Ellinwood by Barton Carothers, their
attorney; Canton and Inman by George R. Lehmberg, their attorney;
St. John and Macksville by Jack Copeland, their attorney; La
Crosse by Neil Hotchkiss and R.W. Johnson, its attorneys; Clay
Center by H.L. Sheppeard, its attorney; and Jerome M. Joffee,
Kansas City, Missouri, for the interested cities. The Pratt
Chamber of Commerce appeared by B.V. Hampton, its attorney and
the city of
*416 Kinsley was represented by Albert E. Wilson, its city manager and
the city of Greensburg by Fred E. Heinze, its mayor. Further
appearances were James E. Smith and Harry W. Colmery, attorneys
for the National Gypsum Company, Medicine Lodge, and Arthur L.
Claussen, attorney for the Kaw Dehydrating Company, Topeka;
Junction City Dehydrating Company, Junction City; and R. and W.
Alfalfa Mills, Wamego. Jay Kyle, General Counsel, appeared for
the Commission and the public generally.
2. Since 1944, the applicant has had on file its general gas
rate schedule known as GG-6, which generally is in effect
throughout its gas properties in Kansas with certain exceptions.
3. The cities of Kingman, McPherson, Pratt, Buhler, Canton,
Ellinwood, Galva, Great Bend, Hoisington, Inman, Kinsley, La
Crosse, Larned, Lindsborg and Marquette, that are on the
applicant's main transmission system, have not in the past been
receiving gas under the GG-6 schedule but had been the recipient
of rates lower and more favorable to them although the other
ninety-two cities served on the main transmission system are
under the GG-6 schedule.
4. That applicant requests authority to file and to place into
effect the GG-6 schedule of rates in the cities named in Finding
No. 3, which schedule of rates is now on file with the Commission
and is as follows:
First 1,000 cu. ft. per month ...................... $1.00
Next 19,000 cu. ft. per month ...................... .50 per MCF
Next 80,000 cu. ft. per month ...................... .40 per MCF
Next 300,000 cu. ft. per month ..................... .25 per MCF
Next 600,000 cu. ft. per month ..................... .225 per MCF
Excess ............................................. .20 per MCF
Minimum Charge: $1 per month per meter installed.
5. Further, the applicant seeks to replace its present
industrial rate schedule known as the company's schedule OCG-2
(substantially the same since 1931) by the filing and placing
into effect a new interruptible contract gas rate schedule
designated as ICG-1, which proposed schedule of rates is as
follows:
First 1,000,000 cu. ft. ........................... 25¢ per MCF
Next 6,000,000 cu. ft. ............................ 22.5¢ per MCF
Excess ............................................ 20¢ per MCF
Minimum bill $50.
6. The Commission, as of this date, has entered in this docket
a Memorandum Opinion that comprehensively narrates the nature,
*417 scope and substance of these proceedings and which should be
incorporated in and made a part of this order by reference.
7. The applicant is in immediate need of additional revenues
for the operations of its gas department.
8. The proposal contained by the addition of the cities named
in Finding No. 3 to the level of the GG-6 schedule of rates now
on file would not be unreasonable or unfair.
9. That the schedule of rates for industrial consumers as
proposed by the promulgation of the company's proposed rate
schedule, ICG-1, referred to in Finding No. 5, would be neither
unfair nor unreasonable.
10. Further, that by adding the cities named in Finding No. 3
on the GG-6 rate and the filing and placing into effect of the
new proposed industrial rate schedule, ICG-1, would not be
discriminatory and will not be conducive to producing an
excessive rate of return on the applicant's investment in its gas
properties in Kansas but moreover will be in the public interest
and welfare.
11. That the evidence at the hearing disclosed that the company
had purchased large quantities of gas that were unaccounted for,
which should not be countenanced by the Commission but on the
other hand the company should be required to take immediate steps
to reduce the item of unaccounted-for gas and make periodic
reports to the Commission in respect thereto.
12. That there are interdepartmental transactions of gas
between the gas and electric departments, the accounting
practices of which are vague and indefinite from the record and
the Commission should make full and complete exploration of these
interdepartmental transactions.
13. That because of the circumstances encountered and referred
to in Findings Nos. 11 and 12 and for other good and sufficient
reasons, the Commission should take steps to initiate an
investigation of the applicant as it relates to its gas utility
business in Kansas under the statutory authority conferred upon
it, to wit: G.S. 1949, 66-110 and 1501, et seq.
14. That the application herein should be granted.
IT IS, THEREFORE, BY THE COMMISSION ORDERED: That the
application herein be and the same is hereby granted.
IT IS FURTHER BY THE COMMISSION ORDERED: That the applicant
take immediate steps to reduce the item of gas unaccounted for,
*418 referred to in Finding No: 11, and make monthly periodic reports
to the Commission in respect thereto beginning on June 1, 1952.
IT IS FURTHER BY THE COMMISSION ORDERED: That the Memorandum
Opinion entered in this docket as of this date be and the same is
hereby incorporated and made a part of this order by reference.
The Commission retains jurisdiction of the subject matter and
the parties for the purpose of entering such further order or
orders and promulgating and implementing such further rules and
regulations as from time to time it may deem proper.
BY THE COMMISSION IT IS SO ORDERED.
"APPENDIX B"
BEFORE THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS
In the matter of the application of The Kansas Power and Light
Company for consent of the Commission to make certain changes
in its charges for natural gas service. Docket No. 42,829-U.
MEMORANDUM OPINION
The Kansas Power and Light Company, applicant in this
proceeding filed an application on November 24, 1951, requesting
authority (1) to file and place into effect its general domestic
gas rate schedule (GG-6) in fifteen cities on its main
transmission system and (2) to increase its industrial gas rates
throughout its properties in Kansas except at Atchison,
Leavenworth, Lansing and Emporia, Kansas.
After due notice, public hearings were held on December 19,
1951, and March 3, 4 and 5, 1952. Representatives of twelve of
the fifteen cities heretofore referred to entered appearances in
protest to the application placing them on the standard domestic
schedule. The twelve cities were McPherson, Great Bend, Buhler,
Ellinwood, Canton, Inman, Hoisington, Lindsborg, La Crosse,
Pratt, Larned and Kinsley. Three cities that would be affected
by granting the application as it relates to the standard
domestic schedule, namely Galva, Marquette and Kingman, did not
enter appearances and are not here regarded as protesting cities.
As to the portion of the application respecting the proposed
increase in industrial rates, there was a group of protestants
entering appearances including National Gypsum Company, the Kaw
Dehydrating Company, Junction City Dehydrating Company, R. and W.
*419 Alfalfa Mills and the cities of St. John, Macksville, Greensburg
and Clay Center, along with certain of the protesting cities,
which cities all purchase gas for industrial purposes, i.e.,
municipal electric plants.
At the hearing on December 19, 1951, the protesting cities
requested a continuance of the hearing for the purpose of
permitting them to prepare their case as they had only a few days
prior employed a rate expert and had not had adequate time to
make an analysis of the application. The applicant opposed the
granting of the continuance but the Commission continued the
hearing until March 3, 1952.
THREE SEPARATE GAS SYSTEMS
KP&L is a public utility engaged in business exclusively in the
State of Kansas which business includes in part the transmission,
distribution and sale of natural gas at both wholesale and
retail. It produces no gas of its own but the sole sources of gas
are from the gas fields of this state through purchase from
producers and pipeline companies. By way of brief description of
its gas operations in Kansas, it is essential to note that KP&L
has three separate and distinct systems.
First, it distributes gas to Atchison, Leavenworth, Lansing and
Emporia all in Eastern Kansas, and obtains its supply of gas
wholesale from the Cities Service Gas Company. It does not
transport any of the gas that it receives from Cities Service as
the latter delivers to KP&L at the town borders. This system is
not involved in these proceedings directly.
Second, the Company distributes gas in fifteen Kansas cities
located along the line of the Northern Natural Gas Company from
whom it purchases gas wholesale at the city gates and then
distributes it to the respective cities. These cities parallel
the interstate transmission line of Northern, which, as far as
KP&L is concerned, extends from Englewood in a northeasterly
direction to Miltonvale, Kansas. Only as it pertains to the
proposed increases in industrial rates is this system directly
concerned.
The third is the main transmission system of KP&L and is owned
and operated by KP&L serving 107 cities retail including the
twelve protesting cities here. This system is not interconnected
with the other two systems or does it furnish gas to any of the
cities connected to the other systems.
*420 AS TO DOMESTIC RATES
For over a substantial period of time all the cities on the
main transmission system, excepting the protesting cities and
Kingman, Galva and Marquette, have been on the GG-6 schedule
which is on file with the Commission. This schedule of rates is
higher than those on file for any of the twelve protesting cities
and Kingman, Galva and Marquette. The schedules of rates being
charged these latter cities, however, are not uniform but are
lower and more favorable to them than is the GG-6 schedule.
The first part of the application is to bring the schedule of
rates in the protesting cities and Kingman, Galva and Marquette,
up to those of the other ninety-two cities on the main
transmission system by placing them on the standard domestic rate
for the system. The GG-6 rate has been on file with the
Commission and in effect since 1931, and has remained unchanged
except for a new designation and a provision respecting delayed
payment charges.
LOCAL GAS AND JURISDICTION
Years ago the protesting cities and Kingman, Galva and
Marquette, were supplied with gas exclusively from near-by local
fields. These sources of supply were obviously cheaper, more
easily accessible and the transmission charges were considerably
less than those under current existing conditions which are later
described in this opinion. These cities, in some instances,
entered into contracts with predecessor companies of the
applicant which in most cases were local companies and so-called
"one-city" utilities. These contracts generally called for a
specified rate as long as sufficient quantities of local gas were
available to supply the requirements of the respective
communities. Subsequently, all of the companies supplying the
fifteen cities were acquired and became absorbed in this public
utility under the jurisdiction of the Commission and are now
served from the main transmission line of the company.
The objections of the protesting cities to the granting of the
application is grounded in part on the belief that there are
adequate volumes of local gas to supply their needs but the offer
of proof by any of the protesting cities is weak and there is no
indication that substantial quantities of local gas are available
to the applicant for transmission and distribution to the
respective cities. On the contrary, the great preponderance of
evidence is to the effect that the requirements of the protesting
cities greatly exceed any appreciable
*421 amount of local gas available to the applicant for retail sale in
the respective protesting cities.
Some of the protesting cities posed the question of the
jurisdiction of the Commission to hear the application herein
because of the old contracts or possible understandings which the
various protesting cities had with either the applicant or its
predecessor companies relating to local gas and rates.
At the hearing we adopted the position that the jurisdiction of
this Commission as it pertains to the regulation of public
utilities is clear and more especially so in light of the recent
pronouncement of the Supreme Court of Kansas on December 8, 1951.
That KP&L is a public utility and under the jurisdiction of
this Commission cannot seriously be challenged because the
statute is clear that the authority is vested with this
Commission which it can neither abrogate nor delegate to the
cities. It might be said too on behalf of some of the cities that
when certain contracts were entered into years ago with some of
the predecessor companies providing for rates dependent upon
local gas the individual companies then in some instances might
have fallen within the purview of the one-city utility statutory
exception. To be sure, when these one-city utilities became
absorbed into this integrated utility under the jurisdiction of
this Commission, any exemptions granted by the statute with
respect to the category of a one-city utility had to give way to
the intent of the legislature respecting regulation by the state.
In addition to its duties as a public regulatory body this
Commission is also the agency charged with the administration of
the gas conservation statutes of Kansas. From the files of this
Commission, as the gas conservation agency, it is fully
conversant with the sources of supply of natural gas in Kansas.
From the official records available to the public, it is evident
that the local supply of gas to the near-by protesting cities is
insufficient for their requirements as the fields adjacent to
these cities are old, for the most part, and now are either
virtually exhausted or rapidly nearing the stage of depletion. To
point out two illustrations relating to two of the large
protesting cities, namely Pratt and McPherson, the closest local
supply of natural gas to Pratt is the Cunningham Gas Field which
is located in parts of Kingman and Pratt Counties. Prior to
February 27, 1952, the Commission had been studying the
Cunningham Gas Field for more than two years, especially as it
related to the field's rapid state of depletion and finally by an
order on February 27, 1952, after
*422 a public hearing, we took the field out from under proration in
order that the field might yield the fullest amount of gas in its
dying days. It will not be long before this field will be a
memory.
McPherson County some twenty years ago was an important source
of supply of natural gas and was a great producing gas county for
that era. The records of this Commission disclose that during
1951, there were only two gas wells in the entire county which
were delivering gas in pipelines at 16.4 pounds pressure and the
evidence does not reflect that there is any possible increase in
number of wells to be connected with pipelines at the present
time although there is minor scattered gas production, some of
which is being sold locally, principally to one refinery. In
addition to the city of McPherson, there are six other cities in
the county where the applicant has distribution systems. The
local fields in McPherson County cannot be said, and
unfortunately so, to be capable of producing sufficient volumes
of gas to meet the requirements of the seven cities in McPherson
County.
As a passing commentary, the only principal and all-important
source of supply of gas now in Kansas, with many years of life
remaining, is the Hugoton Gas Field in southwestern Kansas. In
this connection, the records of this Commission further indicate
that outside of the Hugoton Field all the other gas fields in the
state taken as a whole declined in delivery to pipelines from
1950 to 1951, and the trend can only continue in a downward
course until and unless there are new discoveries of large gas
fields in Kansas.
To permit the protesting cities here to remain on a more
favorable schedule of rates than their sister cities located on
the same transmission system can be construed only as
discrimination in favor of the protesting cities. There is no
justification with the rapidly diminishing local production and
the higher costs for gas plus increasing transmission expenses
for permitting the protesting cities to remain in a more
advantageous position than other towns so similarly situated.
They should be on the standard domestic schedule of rates for the
system.
ACUTE SUPPLY SHORTAGES
For many years, especially before 1948, KP&L has had an
extremely serious problem in its inability to obtain adequate and
available supplies of gas on a firm basis to meet its
requirements. In a measure, this condition has been improved for
at least the time being but it remains an enigma which the
company management
*423 has not yet solved. There were two simple reasons for applicant's
acute shortage of gas.
The first is the unprecedented increase in demand for gas for
domestic purposes because of new construction and the ever
increasing domestic conversions to gas from other fuels and the
continuing mounting demands from industry for this precious
commodity which is substantially cheaper and more efficient than
other fuels.
The second reason and by far the most important has been
occasioned by the rapid depletion and exhaustion of sources of
supply that have been available to KP&L prior to 1948, and the
lack of any new substantial sources through either the
development of new gas fields or purchase from willing sellers
except one which will be referred to later.
As heretofore remarked, Cities Service furnishes gas for the
company distribution systems at Atchison, Leavenworth, Lansing
and Emporia, and Northern supplies gas at the city gates to
fifteen other cities not connected to the main transmission
system.
The record in this proceeding is replete with evidence of the
foregoing facts which can be substantiated readily by the records
of this Commission.
RELIEF BY TEMPORARY CONNECTION
By 1948, the company management fully aware of the impending
crisis in the shortage of gas for its main transmission system
was able to enter into a temporary contract with Cities Service
for the following heating season and was able to buy small
amounts of gas from other pipeline companies. The reason that the
Cities Service was able to literally come to the rescue of KP&L
for its main transmission system at that time was because of the
fact that it had under construction a new pipeline across the
state from the Hugoton Gas Field into the Kansas City area. By
the 1948-49 heating season, this line was completed only as far
as Hutchinson, from where it was able to divert large volumes of
gas for that particular heating season to the applicant. If that
source of gas had not been available then, it is unquestioned but
that there would have been hardships and extreme suffering
besides economic losses to the public relying upon gas from the
applicant's main transmission system.
By way of comparison, for instance, the applicant's principal
source of gas prior to 1948, was from fields in Barber County,
from which deliveries of gas to the applicant declined over fifty
percent from 1947 to 1949. Deliveries from the fields in
McPherson County
*424 in the same period of time dropped approximately one-third. In
face of the continual demand for more gas throughout the
territory before 1949, the applicant's reserves were rapidly
diminishing.
HUGOTON PRODUCTION COMPANY'S CONTRACT
On October 18, 1948, KP&L entered into a long-time contract
with the Hugoton Production Company, a newly-formed corporation
owning some 95,000 proven acres in the Hugoton Gas Field, which
acreage was dedicated exclusively to KP&L. Obviously, Hugoton
Production, although it had substantial acreage, but with little
development, could not in any degree start to fill KP&L's
requirements. To further complicate the situation, one of the
conditions of the Hugoton Production contract was that the point
of delivery of its gas was to be in the Hugoton Gas Field
necessitating KP&L seeking authority from this Commission to
construct a 145-mile steel pipeline from Grant County in the
Hugoton Field to a location in Pratt County so as to connect with
the applicant's main transmission system. This necessitated
substantial financing and obviously the time of construction was
over a long period of months.
After the creation of Hugoton Production, it soon became
involved in litigation commenced by the Federal Power Commission
in which this Commission was an active litigant on the side of
Hugoton Production. This litigation eventually reached the
Supreme Court of the United States where the matter was
ultimately adjudicated by that tribunal. Not until, however, the
final adjudication of the controversy could there be any positive
assurances that Hugoton Production could fulfill its contract
with KP&L although all of its gas was to be produced from a
Kansas field by a Kansas company delivering its entire production
to a Kansas utility for transmission, distribution and sale
exclusively to Kansas citizens.
Another factor in connection with the Hugoton Production
contract is that at the time it was entered into it was common
knowledge that KP&L was required to pay the highest field price
then known in the state. The contract further includes an
escalator clause which will be up for renegotiation for the first
time next year.
Hugoton Production, under the terms of its contract, began
supplying gas to KP&L but it was readily discernible that it
could not fulfill the demands of the public for gas on the
applicant's main transmission system, if at all, for a number of
years. Since 1949, and up to the present time, Hugoton Production
has had an extensive
*425 drilling program and has added new wells to the line practically
every month since it started making deliveries to the applicant.
Although Hugoton Production was and is supplying large volumes
of gas to the applicant, on April 12, 1951, it filed an
application with the Commission in which it requested an
exception to the provisions of paragraph "p" of the Basic
Proration Order for the Hugoton Gas Field and for temporary
relief against the shut-in provisions of said paragraph.
Following the filing of the application, the Commission conducted
a public hearing on the application on April 27, 1951, at
Wichita, and three days later entered its order in this docket
granting the application to Hugoton Production. The Commission
found in its order, inter alia, that forty-nine of the sixty
wells furnishing gas to KP&L had been shut in for overproduction
pursuant to the provisions of said paragraph "p" and that KP&L
was experiencing acute shortages for its requirements and that if
the application was not granted, distressed conditions and undue
hardships would prevail and substantial economic losses would be
incurred by the public all along KP&L's main transmission system.
There was testimony to the effect that possibly before September,
1951, all industrial users of gas on the system, including
schools, churches and hospitals, would be cut off completely and
further, it was highly questionable whether there would be any
appreciable amount of gas for domestic users throughout the
heating season of 1951-1952.
We will not elaborate here on the evidence in connection with
the possibility of an acute shortage which would have existed to
both domestic and industrial users of gas on KP&L's main
transmission system only to say that if that application had not
been granted it is apparent that all users of gas on the main
transmission system of KP&L would have had drastic shortages of
gas and in many instances there would have been no available
supply whatsoever. It is pointed out here that Hugoton Production
is still legally overproducing its wells and adding new wells
monthly in an effort to meet the requirements of KP&L, which
condition, as it pertains to the legal overproduction, may
continue throughout this year and into 1953.
Under the rules relating to the Basic Proration Order for the
Hugoton Field, Hugoton Production, in order not to violate the
spirit and intent of the law and the proration order, will be
required
*426 to make up every foot of gas that it has legally overproduced and
bring its wells into balance.
The foregoing has been related by us because we feel that it is
only fair that we look at the matter objectively and record a
clear picture of some of the events that have transpired in the
procurement of gas supplies for the domestic, commercial and
industrial users on KP&L's main transmission system.
PROPOSED INDUSTRIAL RATES
The schedule of industrial rates (OCG-2) now in effect was
first established in 1931 and was slightly modified in 1944. The
proposed new rate is designated as the applicant's Interruptible
Contract Gas Rate Schedule (ICG-1) with which the company
proposes to supersede the OCG-2 rate.
Prior to the filing of the application the company alleged that
it had written commitments from more than seventy-five percent of
its industrial users through voluntarily executed agreements
accepting the newly proposed industrial rates in Schedule ICG-1.
The record discloses that the industrial users not executing
agreements for the new proposed industrial rate did not, on the
other hand, appear as protestants in these proceedings excepting
those that are noted on page two.
The prime factors that evidently brought about this application
are the increased costs of gas and the attendant increasing
transmission expenses that are clearly demonstrated by the
requirements of this company in building the new 145-mile
pipeline to the Hugoton Field which has heretofore been referred
to. We observe that the bottom step in the OCG-2 rate is
extremely low and within close range of the Hugoton Field price
which applicant is required to pay for its main source of gas. We
are fearful that the schedule of industrial rates (OCG-2) is now
outmoded and was designed for the day when the price of gas at
the wellhead was considerably less than it is now. The original
filing date of the present industrial rates of over twenty years
ago gives rise to serious doubt whether the rates in certain
steps of that schedule even return to the applicant today's
purchase price and transmission costs of the gas.
We are further concerned that the OCG-2 schedule is not a fair
and reasonable rate and places a burden on domestic consumers.
Especially is this true if the delivered rates to industrial
consumers are at a loss or at near cost. Then too we are fully
aware that even
*427 with the new industrial rates proposed by the applicant the price
of gas delivered to the industrial customers is not remotely
competitive with either coal or oil. There is no evidence in the
record that the proposed new industrial rates are not fair and
reasonable or is there convincing evidence that would indicate
that the increased revenues to be realized by applicant from the
new industrial rates would be conducive to producing an
unreasonable return to the applicant for the use of its gas
facilities.
The applicant alleges and its evidence (which is not disputed)
discloses that the vast number of its industrial consumers have
not taken issue as to the proposed promulgation of the new
industrial rates. We always must be alert that industry pay its
fair and proportionate share of the cost of industrial gas so
that it will not be to the detriment and burden of the domestic
consumers.
We realize that industrial users desire to purchase this
valuable commodity as cheaply as is possible but in this
particular instance there is no evidence to warrant us in
arriving at any conclusion other than that the new proposed
industrial rates are fair and reasonable and the applicant should
be permitted to file them and place them into effect.
NEED FOR ADDITIONAL REVENUES
An objective sought to be achieved by the applicant through the
granting of the application now before the Commission, according
to an allegation therein, is "to provide additional needed
revenue." An examination of all the exhibits touching on the need
for additional revenues proffered at the hearing show a thorough
analysis pointing to a deduction that the company must obtain
additional revenues from its gas operations. The protestants here
have not substantially challenged the testimony of the applicant
relative to this point.
While an audit has not been made by this Commission of the
company's books, accounts and records, the financial data that
has been submitted up to this time, discloses that the company is
entitled to some additional revenues from the operations of its
gas department. We are not here determining any rate base for the
gas properties of the applicant, nor are we here concurring in
the reflections of the financial data that has been submitted,
but until such time when a study may be made of the functions of
the gas department this allegation cannot be successfully refuted
for several reasons, including increasing costs of purchased gas,
wage increases,
*428 higher maintenance charges, and other items that go to make up
the expenses of an operating company, to say nothing of the
increased taxes which are a reality to the company now.
For the time being, the company has made an adequate showing of
its current need for additional revenues from the operations of
its gas transmission and distribution properties. We presently
believe that the most effective way to permit KP&L to increase
its revenues is by the proposals contained in its application. No
other alternative has been submitted to the Commission for the
company to obtain additional revenues from its gas properties.
We will not add further to this memorandum opinion in the
nature of a condensation of the applicant's requirements for
additional revenues, because the record contains an abundance of
evidence in support of the applicant's contention in this
respect.
INTERDEPARTMENTAL TRANSACTIONS
One of the complexities that confronts us here is the method
employed by applicant in treating its interdepartmental sales and
interdepartmental exchanges of gas between its electric and gas
departments. The manner of determining costs of gas in these
transactions between the departments of the applicant is so
involved and the record on the subject is so confused and
incomplete that we can not resolve the propriety of the proper
charges that should either be made to the electric department or
credited to the gas department.
The problem is further complicated by a question as to whether
some of the gas purchased from Hugoton Production by the
applicant ever finds its way into the proper accounts of the
company. There is a veiled possibility that through some degree
the gas department of the applicant, as it relates to the main
transmission system, may be subsidizing a segment of its electric
properties by a charge to the electric department of an
understated cost for the purchase and transmission of the gas
from the Hugoton Gas Field to the electric properties.
From the record that is before us we cannot determine this
particular question at this time but it is sufficient to say here
that there should be a full exploration of the costs and
accounting methods in the gas transactions between the two
separate departments of the applicant. The question of
interdepartmental sales or interdepartmental exchanges of gas
between the gas department and the electric department is of such
importance that it will be fully explored
*429 and studied in the investigation of KP&L which is being
instituted this date by an appropriate order because it is only
through such an investigation that a full and comprehensive
analysis of this problem may be made by us. The public interest
warrants, and the company should concur therein, that a full
disclosure be made relating to this phase of the company's gas
business.
UNACCOUNTED-FOR GAS
Another of the questionable factors in these proceedings is the
acknowledgment by applicant of the high percentage of gas
purchased which is unaccounted for. The applicant classifies this
undeterminable as unaccounted-for gas, which definition and
terminology certainly includes line losses that may only be
expressed as waste. The applicant's exhibits and testimony
reflect that there are substantial volumes of unaccounted-for gas
and for which the explanations as to the accountability are
indefinite and vague. Whether this is line loss or so-called
"free gas" or is diverted to other sources is not clarified by
the record and we are considerably disturbed that substantial
volumes of this precious fuel are unaccounted for in the
company's books, accounts and records. It appears that the
unaccounted-for gas of applicant may have run as high as 12.79
percent in 1950, and instead of decreasing in recent years the
volumes and percentages may have increased.
An exhibit offered by the protesting cities relating to
unaccounted-for gas is not helpful to us. It is simply a
tabulation of other gas utilities in the state which in
themselves cannot be compared with KP&L because in many instances
the other companies are not transporting companies. It is not
logical to compare a utility that purchases gas at a city gate
with another that transports and delivers gas from Grant County,
Kansas, in the southwestern part of the state as far north in
Kansas as Mahaska on the Nebraska line and as far east as Seneca
and Silver Lake in northeastern Kansas. KP&L transports and
distributes gas in more than thirty Kansas counties whereas some
of the companies which protestants seek to compare it with, in
some instances, serve only small and isolated communities.
Further, the protesting cities' exhibit is of little value to
us because it fails to adopt a uniform basis for comparisons of
unaccounted-for gas as it relates to pressures and temperatures.
Without such a uniform basis any analysis by way of comparison is
not pertinent.
We cannot reach a conclusion as to the reasons for the
unaccountability
*430 of large volumes of gas by the applicant which could conceivably
affect not only the protesting cities and industrial protestants
but all ninety-two cities now on the standard domestic rate and
all industrial users on the system.
Likewise, if there are large volumes of gas that cannot be
accounted for it most certainly adversely affects the company and
because of the seriousness of the situation not only to the
applicant and to its consumers, but to the possibility of waste
which is prohibited by the statute, we are today by appropriate
order taking measures for an investigation of the applicant under
the statutory authority vested with this Commission, which
investigation, inter alia, will include the study and analysis
of the unaccounted-for gas of this utility. In the meantime,
however, by appropriate order entered this date, the company will
be required to take immediate steps to reduce the volumes of
unaccounted-for gas and to make periodic reports to the
Commission until further order of the Commission as to the
progress made in reducing the amounts of unaccounted-for gas.
There is some evidence that the company is making an effort to
decrease the item of unaccounted-for gas, but we are not content
to refrain from pursuing the various ramifications which have led
the company to not account for the ultimate disposition of large
quantities of gas.
We are not here passing on the question of the reasonableness
or unreasonableness of the unaccounted-for gas because the record
before us is inconclusive, incomplete and so fragmentary in
respect thereto that it will require extensive study and analysis
to reach an ultimate determination on the subject.
CONCLUSION
We have not presumed here to review in detail in this opinion
the voluminous record that was made in these proceedings which
includes 426 pages of testimony and forty-nine exhibits.
Throughout the proceedings there was much repetition and some
evidence offered that was extrinsic and not germane to the issues
before us. We do desire to say, however, that the evidence is
clear that the applicant has made and contemplates substantial
capital improvements in its gas properties; that it has been
required to obtain large amounts of financing to carry out its
construction program, including the further development of its
gas properties and it is rendering reasonably sufficient and
efficient service. The applicant has encountered
*431 in recent years as one of its marked increases in cost, the ever
increasing purchase price of gas; it has experienced increased
wage adjustments and has had to assume added responsibilities
through the construction, operation and maintenance of the
145-mile pipeline previously referred to.
There are certain points in these proceedings relating to the
interdepartmental transactions and the unaccounted-for gas, which
we have discussed, that we are not satisfied with. We have
concluded to institute an investigation as of this date which
will not only relate to the questions of interdepartmental
transactions and unaccounted-for gas but will also explore the
company's rates, charges, classifications, conditions of service,
costs, expenses and other matters which may be deemed necessary
in order that the Commission may fulfill and accomplish the
duties imposed upon it by the legislature.
We conclude that the applicant should be permitted to file and
to place into effect its general schedule of rates denominated as
GG-6 as it pertains to the fifteen cities which we deem to be
fair and reasonable and will avoid discrimination.
Further, we come to the conclusion that the applicant should be
permitted to file and place into effect its proposed
Interruptible Gas Rate Schedule (ICG-1), which rates cannot be
regarded as being unfair and unreasonable.
The increase in revenue from the granting of the foregoing
herein will not be conducive to producing an excessive rate of
return on applicant's investment in its gas properties in Kansas
and will not result in discrimination between the various classes
of consumers but on the other hand will be in the public interest
and welfare.
Appropriate orders in conformance with the views heretofore
expressed will be entered this date in this docket and in Docket
No. 43,579-U and this memorandum opinion is hereby incorporated
and made a part of said orders.
"APPENDIX C"
The Court: I suppose, gentlemen, that for the protection of my
own record possibly I should give this matter further thought and
take considerable more time to determine it. But it seems to me
like this is a case of considerable importance to all of the
parties and that this court is probably only an intermediate
court anyhow, and that the situation is such that this court
should make a decision as early as possible. I shall endeavor to
do so.
Now the first question, as I see it, as raised here is the
section
*432 of the statute under which the parties, or the commission
proceeded whether it was under section 66-110 or section
66-117? I am inclined to think that the Commission itself
proceeded under section 66-110 irrespective of the attitude and
intention of the Kansas Power and Light Company at the time of
filing the application.
Now it seems to me that section 66-117 would be a proper
section of the statute to determine the issue upon the
illustration that Mr. Kyle made, or gave, this morning upon the
establishment of a tariff for the shipment of a barrel of linseed
oil from Pratt to Kingman. Clearly on that situation the
Commission could proceed under 117 as to providing an equitable
rate or tariff, and that the question of the rates proper or of
the investment would not enter into it. While in the instant case
it seems to me that this is definitely a rate case and the
Commission has so considered it.
I think that if the number of cities here were just reversed
there could be no question but what this was fairly and
reasonably a rate case. As the situation stands now fifteen
cities are directly affected by the raise in rates, but had the
numbers been just reversed and the ninety-two cities were being
raised to the rate that the fifteen cities had been paying, then
I think there wouldn't be any argument probably that this was a
rate case. At least that is the way I view it, and I am not an
expert at all on rate cases. But that is the way it appeals to
me, that the Commission did fix the rate for fifteen cities of
the state and I don't know of any reason why they should not have
given the same consideration to the fixing of rates for those
fifteen cities that they would give for fixing the rate in the
107 cities that were involved in their system. So I am inclined
to think that the Commission proceeded under section 66-110 and
that this court should so treat the proceeding.
Now the next question which comes up is whether or not this
court has a right to determine this matter upon the motion. I am
inclined to think it has. I know of no reason why I should look
over four, five or six hundred pages of record here to determine
what the facts are in the case when I may look at the order and
findings of the Commission and determine a sufficient number of
facts upon which to make a decision. I treat all of the findings
that the Commission made as true. So why should I read the record
to find out what all the facts are? I think the Commission has
made ample findings there for me to determine what I think is the
law.
Accordingly, I think that I should proceed to determine the
matter upon the motion. There has been some argument upon
*433 discrimination. I don't think there is any question but what
there were some discriminatory rates here. I know of no
particular reason why these fifteen cities should not pay the
same rate that the other ninety-two cities are paying. But
probably the Commission was correct in its decision to eliminate
some discrimination. But that doesn't, in my mind, give them the
right to fix the rate, the ultimate rate which these cities
should pay, the fifteen cities and the ninety-two cities, one
with the other, whether the rates should have been increased to
equal the ninety-two cities or whether the ninety-two cities
should have been reduced to the fifteen cities. Certainly the
Commission had to act upon some theory in raising the rates.
Now were they sufficiently informed to do that under the
findings that they have made here? I am of the opinion now that
the Commission's order of April 30th was at least improvidently
and prematurely issued. As I view the situation the Corporation
Commission has a grave responsibility and a very serious
obligation in determining the respective rights under the
application now under consideration. On the one hand there is the
107 Kansas cities, and I don't know how many, but quite a number,
industrial plants responsible to hundreds of thousands of people
who are entirely dependent upon the Corporation Commission for a
determination of a fair and reasonable gas rate.
And on the other hand there is the Kansas Power and Light
Company with hundreds, or perhaps thousands, of stockholders
entirely dependent upon the Corporation Commission for a
reasonable rate of return upon their investment. So it seems to
me that with so much and so many involved the change in rates as
has been made here should be made only with reasonable certainty
as to the justification for a change.
As I see it, about all the Commission has done here has been an
attempt to equalize by raising the rates of the fifteen cities
affected and making them equal with the rates now and heretofore
in effect in the other ninety-two cities. But what is a fair and
reasonable rate in this case? I think that was what the
Commission was bound to determine. Is it the rate being paid
previously by the fifteen cities, or is it the rate being paid by
the ninety-two cities? Or is it some rate in between these two?
What is the fair and reasonable rate?
It seems to me like that was the proposition that was before
the Commission and which they did not basically determine in this
hearing.
*434 It is true that the Commission in its findings Nos. 7, 8, 9 and
10 I think it is, made some general findings which tended to
support its order. But it has also made some specific findings
upon which, or in disregard of which, the general findings are
made. And it is my opinion that the specific findings upon any
particular proposition are entitled to greater weight and credit
than a general finding upon the same subject.
In the memorandum opinion they clearly state that they have not
determined any rate base in this case and that they haven't
concurred in the Power Company's figures as to what the rates
should be. So I don't know how the Commission could know whether
to raise the rates in the fifteen cities or to lower them for the
ninety-two cities. I think it should have first determined what
the rate base would be; what would or would not give to the
Kansas Power and Light Company an adequate and fair return.
In findings Nos. 11 and 12 the Commission finds that there are
large quantities of unaccounted for gas and that there are
interdepartmental transactions of gas between the gas and
electric departments of the company which may or may not have a
great bearing upon the gas rate to be fixed for the applicant
cities.
And then in finding No. 13 the Commission finds that it should
immediately initiate an investigation of the company to determine
with reference to the unaccounted for gas and these
interdepartmental transactions. I fully agree with the Commission
upon that. I think they should be apprised of those matters. And
then further in their memorandum opinion some place they say that
these interdepartmental transactions are so confused and
incomplete that they cannot resolve the propriety of the proper
charges.
Well, it is inconceivable to me that they should attempt to do
so in the face of that statement.
Now it was said in the argument here, or in the application,
that the rates applied for, the increased rates applied for equal
some $658,000. And it is also said here that the unaccounted for
gas at the prevailing rate would equal somewhere in the
neighborhood of $600,000. It is conceivable to me, it might be
stretching the imagination some, but it is not an impossibility
that the amount of additional revenue sought by the Power and
Light Company here might be supplied through some Commission
orders relative to these two items.
So I think that they should have made a determination there.
*435 Altogether, just in the way of summation, it seems to me that
the Commission might have got the cart before the horse in this
matter and that in making their order on April 30 the Commission
in ordering this investigation of unaccounted for gas and
interdepartmental transactions should have completed that, at
least, before ordering the increase in gas rates for these
fifteen cities.
And I can't get away from the fact, with what little knowledge
I have of rate making, that they should also have determined the
valuations, investment, in order to know what would be the fair
and reasonable rate as between the company and its consumers.
So, gentlemen, in concluding it seems to me like the Commission
having raised these rates without establishing a rate base and
without first investigating the unaccounted for gas and the
interdepartmental transactions that the Commission's order of
April 30 is unlawful and unreasonable. And as a conclusion of law
I am of the opinion that the Commission's order should be
reversed and the entire matter should be certified back to the
Commission to proceed in accordance with the light of these
findings and their own rules of procedure. And that will be the
order, gentlemen.