Mobile Gas Co. v. Patterson

290 F. 476, 1923 U.S. Dist. LEXIS 1538

Opinions

BRYAN, Circuit Judge.

The Alabama Public Utility Act, approved October 1, 1920 (Gen. & Loc. Laws Sp. Sess. 1920, p. 38), provides for the supervision, inspection, and regulation by the Alabama Public Service Commission of the construction, maintenance, and operation of public utilities, including gas companies, of the rates charged by them, and of their valuation, financing, and issuance of securities. Section 14 empowers the commission, after investigation, to fix the valuation upon the property of such utilities. Section 16 provides that the valuation so fixed shall become final, and “for all future rate-making purposes be the permanent basic valuation of the property of such utility.” Section 47 authorizes the commission to require the production of books, records, and accounts, and authorizes an examination thereof by the commission. The valuation provided for may be made upon the application of a utility, and when so made the utility is required to bear the expense.

Pursuant to the provisions of this statute, the Mobile Gas Company, the plaintiff, demanded a valuation of its property, and on February 14, 1922, the commission, after investigation, entered an order fixing such valuation at $1,969,565, and the gas .company paid the expenses incident to the investigation, amounting to $2,200. Within the 30 days provided by the statute the gas company filed a protest against the valuation, and a hearing was held by the commission March 22, 1922. At that hearing the gas company withdrew its protest, but a rehearing was asked and granted on behalf of the city of Mobile, and upon such rehearing the commission, by an order dated July 24, fixed a valuation of $1,700,000 upon the property of the gas company. The commission thereupon fixed rates which were attacked by the gas company as confiscatory, and which formed the basis of the main suit filed shortly thereafter, in which an interlocutory injunction has heretofore been issued. The issues raised in that suit are as yet undetermined.

Sections 15, 16, and 47 of the Public Utility Act were amended by an act of the Legislature, approved February 13, 1923. The amendment provides for a single revaluation of the property of a public utility, which thereafter, for all future rate-making purposes, shall be the permanent basic valuation. Section 47 was amended so as to continue, and in some respects to broaden, the power of the commission to require the production of, and to examine, books, records, and accounts. April 16, 1923, the commission canceled and revoked the valuation of July 24, 1922, as well as the rates thereby fixed, and by a separate order of the same date required a revaluation in pursuance qf the amendment of February 13, 1923.

Thereupon the gas company filed its supplemental bill, seeking to enjoin the commission from making a revaluation, upon the ground that the act of 1923, which purports to authorize it, is unconstitutional, as impairing the obligation of a contract. The bill avers that the commission caused the company’s books and records to be thoroughly and exhaustively examined upon the company’s application for a valuation, and just prior to the entry of the commission’s order of July 24, 1922, and also seeks to enjoin another examination of the company’s records at this time, upon the ground that it would constitute an unreasonable search in violation of the Fourth Amendment.

An application was .recently made by the commission in the main suit for an order requiring the company to submit its records for examination by the commission, and in an opinion upon that application it was stated incidentally that to permit a revaluation would be to authorize the commission to impair the obligation of a contract in violation of the federal Constitution. However, upon further consideration of the Public Utility Act, we are of opinion that a contract between the state and the gas company did not result- from the valuation of the company’s property at its expense. The title of the act authorizes the commission to supervise, inspect, and regulate public utilities, for the purposes of fixing rates and of safeguarding the issuance of securities. Neither in the title nor in the text of the act is the purpose disclosed of authorizing the commission to enter into contracts as to rates with public utilities. Authority to make contracts, not being expressly granted, will not be implied from the circumstance that the expenses incident to valuation are required to be borne by the public utility. Milwaukee Electric Railway & Light Co. v. Wisconsin Railroad Commission, 238 U. S. 174, 35 Sup. Ct. 820, 59 L. Ed. 1254; San Antonio v. San Antonio Public Service Commission, 255 U. S. 547, 41 Sup. Ct. 428, 65 L. Ed. 777. Such expenses are incurred in order to enable the commission to pass intelligently upon the issuance of securities by a public utility, as well as to enable it to make a proper valuation, so as to determine upon just and reasonable rates, and in no proper sense can they be considered as consideration for a contract by the commission upon the subject of rates. The provisions for valuation appear to be more in the nature of restrictions or limitations upon the commission in the matter of examinations of records of public utilities.

In order to determine a rate which will produce a fair return, it is essential to know the value of the property used and useful in conducting plaintiff’s business. But an examination of its records has been so recently made that, as it appears to us, there is no necessity for a re-examination at this time, with the accompanying inconvenience to the gas company. According to the averments of the bill, which are undisputed, a complete and exhaustive search has been made within the last few months, and the commission already has or can get the necessary information without another examination of the same records.

An interlocutory injunction will therefore issue, restraining the commission from compelling the gas company to produce its records for another examination. We recognize’ the right of the commission to proceed to a revaluation, and it may apply for any information necessary to that end.