The court has jurisdiction to determine the extent of the authority of either or both the City and the Water District. Such was decided in City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68, 71. In that case the Public Service Commission, in a proceeding before it, had undertaken to decide that a city was without authority to sell and distribute electrical current beyond the city limits.
The manifest purpose of the Public Service Commission is to require and insure fair and uniform rates, prevent unjust discrimination, and prevent ruinous competition. City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68 (1947). Also, the service regulation over which the Commission was given jurisdiction refers clearly to the quantity and quality of the commodity furnished as contracted for with the facilities provided.
We hold that the PSC's attempt to use the provisions of KRS 278.255 as a basis for allocating the cost of the merger study to the respondent Water Districts exceeds the statutory authority granted to the PSC by the General Assembly. If the General Assembly had intended the cost of the merger study under KRS Chapter 74 to be funded like a management audit under KRS 278.255, such provision could easily have been specifically included in the language of Chapter 74. It was not. The PSC's powers are purely statutory. City of Olive Hill v. Public Service Commission, [ 305 Ky. 249], 203 S.W.2d 68 (1947). When a statute prescribes the procedures that an administrative agency must follow, the agency may not add or subtract from those requirements. Union Light, Heat and Power Company v. Public Service Commission, Ky., 271 S.W.2d 361 (1954).
The city relies on our opinion in McClellan v. Louisville Water Company, Ky., 351 S.W.2d 197 (1961), wherein the Louisville Water Company, without seeking or obtaining approval of the Public Service Commission, had substantially increased its water rates for non-resident consumers. The opinion noted that KRS 278.010(3) had been construed as not exempting a city-owned utility from regulation of its extraterritorial operations by the Public Service Commission citing City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68 (1947), and a series of cases involving the exception in the statute. Overruling Olive Hill, we said at page 198 of 351 S.W.2d of McClellan:
We think it also should be made clear that there is no rule in this jurisdiction giving to an existing utility the absolute right, or imposing upon it the absolute duty, to make its service adequate, before a new utility will be permitted to enter the field. Some of the decisions of this Court, particularly the decision in City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68, have been sought to be construed to lay down such a rule. However, an examination of the opinion in the Olive Hill case will disclose that the reason for denial of a certificate to the new utility was to prevent unnecessary duplication of plants, facilities and service, and "ruinous" competition, and the basis of the decision was that the nature and extent of the inadequacy of service was not such as to establish the necessity for a new service system.
In fixing rates, the Commission must give effect to all factors which are prescribed by the legislative body, but may not act on a matter which the legislature has not established, id., Sec. 41, (c)(aa) p. 1093. We have held that the Commission's powers are purely statutory. City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68 (1947). When a statute prescribes a precise procedure, an administrative agency may not add to such provision.
Those decisions are not directly in point with the problem which confronts us because, insofar as we have discerned, none of them deal with the constitutional question which we deem to be controlling here, with one exception, presently to be noted. City of Olive Hill v. Public Service Comm., 305 Ky. 249, 203 S.W.2d 68; Shirk v. City of Lancaster, 313 Pa. 158, 169 A. 557, 90 A.L.R. 688; Valcour v. Village of Morrisville, 110 Vt. 93, 2 A.2d 312; City of Wheeling v. Benwood-McMechen Water Co., 115 W. Va. 353, 176 S.E. 234; Yamhill Electric Co. v. City of McMinnville et al., Or., P.U.R. 1927E, 353; Rex Moore v. Town of Evansville, Wyo., 95 P.U.R., N.S., 357; Town of Milwaukee v. City of Milwaukee, Wis., 87 P.U.R., N.S., 254; In re Loveland Municipal Water Works, Colo., 83 P.U.R., N.S., 72. Also court opinions and commission decisions collected in 127 A.L.R. 94, 96. The exception referred to is the case of City of Lamar v. Town of Wiley, upon which the plaintiffs place considerable reliance.
The Public Service Commission's powers are purely statutory; like other administrative boards and agencies, it has only such powers as are conferred expressly or by necessary or fair implication. City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68 (1947), overruled on other grounds, McClellan v. Louisville Water Company, Ky., 351 S.W.2d 197 (1961); Ashland-Boyd County City-County Health Department v. Riggs, Ky., 252 S.W.2d 922 (1953). KRS 278.280, the statute pertaining to situations where existing rules are not appropriate for application to certain circumstances, reads in part as follows:
" The legal right or authority of Ashland to acquire and to operate the water system is a question of law pertaining to the general powers of the city. It presents a question of the construction of statutes which is one for a court of original jurisdiction and not the Commission. City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68 (1947); City of Cold Spring v. Campbell County Water District, Ky., 334 S.W.2d 269 (1960). As the Commission was without jurisdiction to determine the rights and general powers of Ashland on these questions, they were never validly before the Commission, the Franklin Circuit Court, or this court.
" 'Utility' means any person, except a water district organized under Chapter 74 or a city, who owns, controls, operates or manages any facility * * *." This subsection has been construed as not exempting a city-owned utility from regulation of its extraterritorial operations by the Public Service Commission. City of Olive Hill v. Public Service Commission, 305 Ky. 249, 203 S.W.2d 68; Louisville Water Company v. Preston Street Road Water District, Ky., 256 S.W.2d 26; Fraley v. Beaver Elkhorn Water District, Ky., 257 S.W.2d 536; City of Covington v. Sohio Petroleum, Ky., 279 S.W.2d 746; City of Richmond v. Public Service Commission, Ky., 294 S.W.2d 513; Louisville Water Company v. Public Service Commission, Ky., 318 S.W.2d 537. Appellee is in the category of a municipally owned utility. Louisville Water Company v. Public Service Commission, Ky., 318 S.W.2d 537; Rash v. Louisville Jefferson County Metropolitan Sewer District, 309 Ky. 442, 217 S.W.2d 232.