By this appeal we are called on to decide whether an order of the commission prescribing specific, as distinguished from maximum, rates to be charged for natural gas furnished by a public utility, is repugnant to the due process clause of the Fourteenth Amendment.
The Citizens Gas Company, similarly authorized, installed a distribution system and, in October, 1928, commenced furnishing natural gas to consumers in Shelby. Its schedule, specifying a base rate of 35 cents, was approved by the commission. Within a brief period many of appellee's customers left it, and have since obtained their gas from the other company. In November appellee filed and, though the commission did not approve, put in force a schedule specifying a base rate of 20 cents. The commission ordered it to submit evidence as to the reasonableness of such rates. Appellee did not support them as adequate or compensatory, but insisted that under competitive conditions then existing they were justified. And it declared that should the Citizens company meet them it would propose a further reduction.
The commission, January 22, 1929, found the 20 cent schedule too low to yield enough to cover reasonable operating expenses including depreciation; that such rates would tend to imperil or impair appellee's ability dependably to serve; held such schedule contrary to the public
The Citizens company had filed, January, 1930, and without the commission's approval put in force a schedule naming as a base rate 23 cents but subject to a reduction of 3 cents for prompt payment. The record shows that, notwithstanding appellee's reduction to the base rate of 20 cents and a further reduction, September 1, 1931, to a flat rate of 15 cents, its sales of gas decreased from 129 million cubic feet in 1927 to 106 million in 1928, to 73 in 1929, to 67 in 1930, to 58 in 1931. The sales of the Citizens company have correspondingly increased. During the first seven months of 1932, the latest period for which the figures are given, appellee sold less than 40 million cubic feet and the Citizens company sold over 67 million.
December 22, 1930, appellee brought this suit and dismissed the one in the state court. The district court granted a temporary injunction against the enforcement of the order on the ground that, as the utility necessarily lowered its rates for self-preservation, the order prescribing higher rates was unreasonable and repugnant to the due process clause of the Fourteenth Amendment. In a concurring opinion one of the judges construed the complaint to charge confiscation, and maintained that the
The rights conferred upon appellee by the authorizing ordinance are subject not only to the proper exertion of power of the State to regulate its services and rates, but also to authority of the city to grant to others the privilege similarly to serve. The city was free to admit other purveyors of gas. Madera Water Works v. Madera, 228 U.S. 454. Piedmont Power Co. v. Graham, 253 U.S. 193. Springfield Gas Co. v. Springfield, 257 U.S. 66, 70. The appellee does not complain that the rates imposed upon it by the order differ from those which have been established and are binding on its competitor. The gravamen of its complaint is that the enforcement of the order will deprive it of the "right to competition in rates essential to protection and preservation of its property and business," and of the "right to charge rates concededly less than reasonable rates." The demand for gas in the community served is not sufficient to require both systems, and there is no suggestion that it is likely to become great enough to justify the expenditures made for them. The
But appellee, having undertaken to serve under conditions permitting competition, now insists that it has a constitutional right by unrestrained cutting of rates to destroy the competitor. And for that purpose it has made reductions from the 60 cent schedule in force until shortly before the Citizens company entered the field to the flat rate of 15 cents, which yields less than the necessary cost of the service. The commission found that the
The appellee contends that the rates prescribed by the order are so unreasonably low as to deprive it of just compensation. The appellants maintain that no such question is presented by the record. The complaint was grounded upon the claim, not that the rates were too low, but that the order prevented appellee from charging lower ones. It prayed judgment that it be allowed to charge less than the rates prescribed in the order. After the evidence was taken, appellee proposed an amendment. It merely alleged that the rates prescribed "are not sufficient to furnish plaintiff a fair or any return on the value of its gas plant or system and such rates, if made effective, would confiscate and deprive this plaintiff of its property" without due process of law. Appellee here admitted that its purpose in asserting the belated claim that the rates specified in the order are too low was not that it might collect more for its services but that it might continue, once the order was set aside, to serve at a loss and so if possible force the other company out of the field. It is a well-established rule that an allegation merely asserting in general language that rates are confiscatory