Opinion
No. 23922
Decided March 29, 1933.
Public Utilities Commission — Jurisdiction — Municipal rate ordinance, after acceptance, cannot be altered during term, when.
Where a city, by ordinance regularly passed, fixes a rate whereby a particular public utility will be permitted to market its product to the city for a specified time, and the proffer contained in such ordinance is accepted, in writing, by such public utility, a contract is thereby made between the city and the public utility, and a contract rate is established which the Public Utilities Commission has no power to alter during the term of the contract. ( Link v. Public Utilities Commission, 102 Ohio St. 336, approved and followed.)
ERROR to the Public Utilities Commission.
The city of Akron, on June 7, 1932, passed an ordinance fixing the rates of the East Ohio Gas Company, which was then serving the city with its product. This ordinance was accepted, in writing, by the East Ohio Gas Company, on June 27, 1932. The term of the contract was fixed and a provision was contained therein whereby the contract could be terminated by either party by service of six months written notice.
On October 5, 1932, the city of Akron filed with the Public Utilities Commission an application for a reduction of the rates fixed by the city and accepted by the gas company, alleging an emergency, due to the depression. It is alleged in substance that the general drop in price levels has not been reflected in the rates imposed upon the public by the East Ohio Gas Company in Akron. The application contained a further allegation that the company is able to sustain a large emergency reduction and still pay its operating expenses, depreciation charges and regular dividends at the rate of seven per cent. on its preferred stock and six per cent. on its common stock, and in addition thereto carry a substantial amount in its surplus account.
On October 14, 1932, the East Ohio Gas Company moved the commission to dismiss the application of the city of Akron, on the ground that the commission was without jurisdiction to hear and determine such application on its merits.
On December 20, 1932, after hearing, the commission sustained the motion of the gas company and dismissed the application, on the sole ground that it was without jurisdiction to hear and determine such application upon its merits.
On December 28, 1932, the city of Akron filed its application with the Public Utilities Commission for a rehearing, and on December 30, 1932, the commission overruled such application.
Thereupon, the city filed its petition in error in this court, making the following assignments:
First, that said Public Utilities Commission of Ohio erred in holding that it is without jurisdiction to hear and determine upon the merits of the application of the city of Akron for a temporary emergency reduction in rates for natural gas service in the city of Akron;
Second, that the Public Utilities Commission of Ohio erred in holding that it is without jurisdiction to issue a temporary order reducing rates for natural gas service in the city of Akron in and during the present emergency under the facts set forth in the application filed by the city of Akron with the said commission;
Third, that said Public Utilities Commission of Ohio erred in dismissing the application of the city of Akron for a rehearing of such matter;
Fourth, that the said Public Utilities Commission of Ohio erred in refusing to change or vacate its decision and order made in said proceedings; and,
Fifth, that the Public Utilities Commission of Ohio erred in not taking jurisdiction of the application of the city of Akron for a temporary emergency reduction in rates for natural gas service.
It is sought by this petition in error to reverse the finding and order made by the Public Utilities Commission.
Mr. Gillum H. Doolittle, director of law, and Mr. Rice A. Hershey, for plaintiff in error.
Mr. John W. Bricker, attorney general, and Mr. T.J. Herbert, for the Public Utilities Commission.
Messrs. Tolles, Hogsett Ginn, Mr. William B. Cockley and Mr. Walter J. Milde, for The East Ohio Gas Company.
The city of Akron claims that the Public Utilities Commission has jurisdiction to grant this change in rate by virtue of Section 614-32, General Code, which reads as follows:
"The commission shall have power, when deemed by it necessary to prevent injury to the business or interests of the public or any public utility of this state in case of any emergency to be judged by the commission, to temporarily alter, amend, or with the consent of the public utility concerned suspend any existing rates, schedules or order relating to or affecting any public utility or part of any public utility in this state. Such rates so made by the commission shall apply to one or more of the public utilities in this state or to any portion thereof as may be directed by the commission, and shall take effect at such time and remain in force for such length of time as may be prescribed by the commission."
This is a direct grant of power and there is little question concerning the clarity and emphasis of this section. It will be conceded that the Public Utilities Commission ordinarily has the power, on proper hearing, to increase or reduce a rate in case of emergency; but there is one hurdle that is hard to overcome in this particular case. The city made its rate by ordinance, and the gas company accepted the contract, in writing. By its contract, made by way of proffer, the city fixed a certain rate at which the gas company, if it saw fit, would be permitted to furnish natural gas to the city for a specified time. By its acceptance, the gas company agreed, during the term of the contract, as set out by the ordinance, to furnish its product to the city at the rate set out in the ordinance.
The rights of the parties became vested when the gas company accepted the proffer of the city, and we know of no power delegated, or that could be delegated, to any individual or state agency to in any wise interfere with these vested rights. If the state Legislature undertook to do so, it would be walking squarely in the face of the Constitution of the state.
We are not unmindful that the state and its municipalities are given a wide latitude in the exercise of their police powers; but the state cannot extend its police power or that of its municipalities so as to interfere with vested contract rights. An interest in a contract is private property, and it has the same sacrosanct attributes as other property.
Section 614-47, General Code, is of no help in this case as we view it. It is simply a reiteration of the spirit of the Constitution. It is sought herein to make a distinction between a contract right and a regulatory right. There is no question but that there is a distinction. A regulatory right ordinarily prescribes an inhibition. If a public utility agrees to furnish its product to the municipality at the regulatory rate, and there is a meeting of the minds and an acceptance, then the regulatory rate becomes a contract rate and such rate is not subject to review by the Public Utilities Commission.
Notwithstanding the fact that Section 614-44, General Code, was involved in the case of Link v. Public Utilities Commission, 102 Ohio St. 336, 131 N.E. 796, the same question was therein involved as here. The city of Akron had a constitutional and statutory right to fix a rate for the gas company, which it did. The gas company accepted the rate and thereby made a contract; and this rate, during the term of that contract, cannot be altered in any wise by the Public Utilities Commission. An abundance of authorities could be cited to sustain this position, but the court does not deem it necessary.
The Public Utilities Commission had no jurisdiction to entertain the application of the city herein, and it committed no error in refusing to entertain such application. The order of the Public Utilities Commission is hereby affirmed.
Order affirmed.
WEYGANDT, C.J., DAY, ALLEN, JONES and MATTHIAS, JJ., concur.
KINKADE, J., not participating.