Natural Gas Consumers v. Northern Utilities Co.

Wyoming Supreme Court

Natural Gas Consumers v. Northern Utilities Co.

247 P.2d 767, 70 Wyo. 225, 1952 Wyo. LEXIS 30

CourtWyoming Supreme Court

DecidedSeptember 2, 1952

DocketNo. 2534

StatusPublished

Cited by7 cases

This text of 247 P.2d 767 (Natural Gas Consumers v. Northern Utilities Co.) is published on Counsel Stack Legal Research, covering Wyoming Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Natural Gas Consumers v. Northern Utilities Co., 247 P.2d 767, 70 Wyo. 225, 1952 Wyo. LEXIS 30 (Wyo. 1952).

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Opinion

[232]*232OPINION

Riner, Justice.

The District Court of Laramie County made an order confirming an order of the Public Service Commission of this state increasing rates to be charged by the applicant, Northern Utilities Company, for natural gas furnished by it to consumers in the city of Rock Springs, Wyoming.

From that order sundry persons who assert that they are customers of and are served by the Northern Utilities Company (hereinafter usually designated “The Company”) with natural gas, have appealed to this court. The Public Service Commission, which for convenience hereinafter will be usually referred to as “The Commission” while the customers, the opposing parties in this litigation, will be mentioned as the “appellants.”

By its application for an increase in rates which was filed with said Commission July 13, 1948, by the president of the Company, it is stated in substance as follows:

That the Northern Utilities Company acquired its Rock Springs distribution and transmission pipeline system from the Fremont Natural Gas Company in 1926 at a cash cost said to be of $144,651.70; that since then it has additionally invested in this system, and by the end of 1948 will have spent in bettering the system the sum of $548,387.10; that the Northern Utilities Company plans to add capital investment for a new purification plant — the present one being unable to handle peak loads — bringing the total plant investment amount as of December 21, 1949, to the sum of $620,-000.00; the total 1949 capital expenditure being estimated to be about $70,000.00.

[233]*233That upon acquiring the Rock Springs Gas system the rates filed by its predecessor were continued— though considered unreasonbly low by the Company officials and supplied the Northern Utilities Company with a gross margin of only 8% cents per m.c.f. for handling.

The Company considered at first that an increased business volume would result in a profit even at the low rates under which it endeavored to operate and so aggressively sought new business. However, the Company’s increased costs have risen more rapidly than its gross revenue increases, with the result that it was compelled to receive lower profits each year. For example the Company’s field cost for gas at the present time is cents per m.c.f. while at the start of its operations this cost was 5 cents per m.c.f. (1000 cubic feet).

Due to rising costs in its field of operations the Company for three years last past has been unable to recover its operating expenses before depreciation charges were made and consequently it has continued those operations at a loss without any return on the investment of capital made, although gas sales have materially enlarged and increased. The Company has been advised also it may expect an additional increase of one cent per m.c.f. at the hands of the producer of the gas. (Note: the Northern Utilities Company does not produce gas; it buys it from the field producer under a written contract with the latter.)

In addition to field costs the Company is obliged to purify the gas purchased before it can be permitted to enter the Rock Springs distributing system; this operation costs iy¿ to 2y% cents per m.e.f. making the resultant city gate gas cost, when considered with transmission expenses, about ten cents per m.c.f.

[234]*234That while the Commission is familiar with related increases in costs due to labor and salary increases and material costs, it is of special interest to note that direct operational costs have risen from a 1928 ultimate cost of about $20,000.00 per year to an amount in excess of $90,000.00 during the year 1948. General administrative expenses have also proportionately risen during the same period.

The Company now feels its peak volume of business has finally been reached and that any additional future revenue will be minor, at least, so its 1948 gross should be regarded as fairly representative with respect to future years, thus causing the Company to operate at a loss unless relief is granted by a rate increase. That the 13Y2 cents per m.c.f. present sale rate with increased field and distribution costs causes the Company a continued loss and therefore the Commission is asked for such reasonable rate increase as will result in the recovery of its operating expenses with depreciation charges, and, if possible, provide for some small return on the capital investment at Rock Springs.

That the Commission should note that the Company’s capital investment of $403,737.40 made between 1927 and December 31,1948, has been obtained from outside funds and that the above mentioned sum of $70,000.00 to be invested during the year 1949 must also come from corporate sources outside its earnings from the Rock Springs operations.

Endeavoring to fix the new rates applicable to Rock Springs which will properly spread the requested rate increase, the Company has placed the major portion of such requested increase against its low priced 1314 cents per m.c.f. gas sales so that the commercial and industrial gas sales will bear most of the proposed increase with a correspondingly lower increase to do[235]*235mestic consumers as per attached schedule No. 8, which shows the following composite breakdown:

“20.59% of customers, totaling 364 accounts, will be raised an average of 2.89% ; 55.47% of customers, totaling 994 accounts, will be raised an average 12.85% ; 13.78% of customers, totaling 247 accounts, will be raised an average of 20.11%; 3.91% of customers, totaling 70 accounts, will be raised an average of 25.54% and 6.25% of customers, totaling 112 accounts, will be raised an average of 26.32%.”

The attention of the Commission is also directed to the fact:

“that passing merely the 2!%c per m.c.f. increased field cost on to the 13y%c per m.c.f. gas users would mean an increase of approximately 20%, whereas, the below proposed new rate of I6V2C per m.c.f. will only pass 3c per m.c.f. increase to aifected customers and the overall requested increase of $29,600.00 is only an increase of approximately 16% on undersigned’s annual gross of $182,899.00 at Rock Springs for 1948, also to the fact that such requested increase of $29,600.00 is only about $7,700.00 in excess of the amount which cost of gas involved, has increased to” the Company.

The Northern Utilities Company requests that the Commission grant the Company permission to establish as of October 1st, 1949, the following proposed new rate scale which will increase the Company’s earnings about $29,600.00 per year if all present customers continue to use natural gas:

“Minimum charge $3.00 per mo.

“First 6 m.c.f. per mo. Gross 50c per m.c.f. Net 45c per m.c.f.

“Next 19 m.c.f. per mo. Gross 27 ^c per m.c.f. Net 25c per m.c.f.

“Next 125 m.c.f. per mo. Gross 21c per m.c.f. Net 19c per m.c.f.

“Balance Gross 18c per m.c.f. Net 16 %c per m.c.f.

[236]*236If the above requested rate increase is approved the Company hopes that this will enable it to cover its oper-. ating expenses, depreciation, income tax and to make not to exceed 3% on its capital investment at Rock Springs.

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