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Produce Terminal Co. v. Commerce Com.





APPEAL from the Superior Court of Cook County; the Hon. JOHN A. SBARBARO, Judge, presiding.


Rehearing denied May 18, 1953.

This is an appeal from a judgment of the superior court of Cook County affirming two orders entered by the Illinois Commerce Commission which approved the tariff amendments proposed by The Peoples Gas Light and Coke Company with respect to gas sold in large volume to industries in the city of Chicago on an interruptible or off-peak basis. These tariff amendments provided for an increase of about 30 per cent in interruptible and off-peak gas rates, and for the curtailment of interruptible boiler fuel service before curtailment of interruptible processing service. Appellants are interruptible and off-peak gas customers adversely affected by such tariff increases. Appellants Produce Terminal Corporation, Swift and Company, and Wilson and Company purchase interruptible natural gas for boiler fuel purposes. Swift and Company and Wilson and Company are meat packers and producers of pharmaceuticals and other related products. Produce Terminal Corporation is a public utility distributing electricity to various industries within the stock yards district of Chicago. Appellant United States Cold Storage Corporation, engaged in the business of general cold storage, car-icing, and ice manufacture, is located in the stock yards district and purchases off-peak gas. Appellant Great Lakes Carbon Corporation is engaged in the business of calcinating carbon and carbon products in the Calumet industrial area of Chicago and purchases off-peak gas. Appellants Republic Steel Corporation and United States Steel Corporation purchase natural gas on an interruptible basis, which is used by them in the processing of steel. Joanna-Western Mills is an off-peak user of gas.

This proceeding was initiated when the Gas Company, which furnishes gas to approximately 1,000,000 customers in Chicago, filed with the Commission on October 5, 1949, certain revised rate schedules proposing to increase the rates charged to its eight interruptible customers and 504 off-peak customers, to become effective on various dates in November, 1949. The Commission, in its discretion and pursuant to section 36 of the Public Utilities Act (Ill. Rev. Stat. 1951, chap. 111 2/3, par. 36,) entered an order providing for a hearing concerning the propriety of the proposed tariff amendments and suspended the operation thereof until March 4, 1950, and later further extended the suspension period until September 4, 1950. These appellants and others appeared before the Commission in opposition to the proposed increase in rates and other tariff amendments. On January 11, 1950, the city of Chicago filed a written appearance and petition for leave to intervene in the proceeding, contending both the existing and revised rates were unjust, unreasonable, and discriminatory with respect to the general customers of the company, and that any gas available for sale to interruptible and off-peak users, after the general customers had been supplied, should be regarded as a surplus commodity and its price fixed on a competitive basis with other fuels and the increased revenue applied to a reduction in rates and charges for gas sold to general customers. The city requested a hearing and investigation by the Commission to the end that just, reasonable and nondiscriminating rates for all classes of gas service might be fixed or established by the Commission. The Commission denied the city's petition for leave to intervene, and entered a citation order against the Company initiating a general investigation of the entire rate structure of the Company. That proceeding is now pending before the Commission.

On August 16, 1950, the Commission entered an order in this proceeding determining (1) that it was unnecessary for it to determine the earnings of the Company or the value of all of its property for rate-making purposes because the reasonableness of its overall utility earnings was the subject of investigation by the Commission in another proceeding, (2) that the revised rates were approved and were to become effective on and after August 31, 1950, and (3) that pending the completion of its investigation of the reasonableness of the Company's overall rate structure, all increase in net income resulting from these revised rates be placed in a temporary special reserve to meet special nonrecurring costs of integrating a new prospective supply of gas for its customers.

On petitions by appellants and others, the Commission granted a rehearing. On January 11, 1951, upon and after rehearing, the Commission entered an order to the same general effect as in its previous order, directing the revised rates to remain in full force and effect. Further petitions for rehearing were denied and appeals were taken by appellants to the superior court of Cook County, where, after consolidation of such appeals, the court entered judgment affirming the orders of the Commission.

The Gas Company is an Illinois Corporation engaged in the business of manufacturing, purchasing, distributing, and selling gas within the limits of the city of Chicago, and has been so engaged since 1855. It is a public utility within the meaning of section 10-3 of the Public Utilities Act. (Ill. Rev. Stat. 1951, chap. 111 2/3, par. 10.3.) In the late 1920's all of the gas which the Company sold was either purchased by-product gas or gas manufactured by the Company's own production facilities. A great portion of this was coke-oven gas. Coke ovens must be operated without interruption and hence the Company was obliged to use the same amount of coke-oven gas every day of the year. On warm days when the general firm customers' demand was low, the Company had an excess of gas which could not be used by its general customers. It hit upon the plan of selling this excess gas at "off-peak" rates for customers who would be willing to use gas as an alternate to their regular fuel during the warm periods of the year when the general customers' demands were low. Since these off-peak customers would be required to maintain both their regular equipment for their customary fuel, and also alternate equipment to burn off-peak gas, and because this gas must necessarily meet the competition of other available fuels, it was necessary to set the off-peak rates lower than the rate to general customers.

In 1931 natural gas became available to the Gas Company. This natural gas it mixed with manufactured gas for distribution to its general customers. The rate schedule for this natural gas included a substantial demand charge based on the maximum 24-hour demand in a 12-month period, as well as a commodity charge based on the quantity of gas actually taken. It was thus advantageous for the Company to take natural gas each day as nearly up to its maximum demand as possible so as to reduce the average cost of gas.

The Company has eight interruptible gas customers. These interruptible users take only natural gas, received through lines unconnected with the mixing facilities or general distribution system of the Company. This interruptible service is divided into two classifications numbered 12 and 13. Classification No. 12 is for the use of gas in steam boilers, and the former schedule of rates thereunder was 12.5, 15, and 19 cents per million B.t.u. Classification No. 13 is for use of gas in billet heating furnaces, soaking pits, lime kilns and/or forges, and/or for any other steel manufacturing, rolling or treating process, and the former schedule provided a rate of 19 cents per million B.t.u. The interruptible customers are subject to curtailment of service if serving them would increase the demand beyond the existing capacity of the company at any given time, processing customers receiving a two-hour notice and boiler fuel customers receiving a 30-minute notice. Under the revised schedules the rates for service classification No. 12 are 17.5, 21 and 23 cents per million B.t.u., and under service classification No. 13 the rate is 24 cents per million B.t.u. One of the incidents of interruptible service is that a customer paying a lower rate is totally interrupted from service before there is any interruption in the service to a customer paying a higher rate.

The revised schedules also increased the rates for gas motor fuel users under service classification No. 8, but none of these customers are involved in this appeal.

On appeal from an order of the Commission to the courts it is provided in section 68 of the Public Utilities Act (Ill. Rev. Stat. 1951, chap. 11 2/3, par. 72) that: "The findings and conclusions of the Commission on questions of fact shall be held prima facie to be true and as found by the Commission; and a rule, regulation, order or decision of the Commission shall not be set aside unless it clearly appears that the finding of the Commission was against the manifest weight of the evidence presented to or before the Commission for and against such rule, regulation, order or decision, or that the same was without the jurisdiction of the Commission." In reviewing an order of the Commission, the courts are limited to a consideration of the questions of whether the Commission acted within the scope of its authority, whether it made findings in support of its decision, whether the findings and decision have a substantial foundation in the evidence, and whether constitutional rights have been infringed by the decision. The statute does not authorize a court to put itself in the place of the Commission and to determine independently the issues presented, or to substitute its judgment for that of the Commission. (Illinois Central Railroad Co. v. Franklin County, 387 Ill. 301.) The law is well settled in this State that the matter of rate regulation is essentially one of legislative control. The fixing of rates is not a judicial function, thence the right to review the conclusion of the legislature or of an administrative body, acting under authority delegated by the legislature, is so limited. Public Utilities Com. ex rel. City of Springfield v. Springfield Gas and Electric Co. 291 Ill. 209.

It is contended by the appellants that the increased interruptible and off-peak rates are above the maximum reasonable rates, and hence are unlawful. Section 32 of the Public Utilities Act (Ill. Rev. Stat. 1951, chap. 111 2/3, par. 32) requires: "All rates or other charges made, demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or for any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge made, demanded or received for such product or commodity or service is hereby prohibited and declared unlawful."

This court has determined in the Springfield Gas Co. case that "The rate established must be just and reasonable, both to the public and to the utility. In Public Service Gas Co. v. Utility Comrs. 84 N.J.L. 463, 87 A. 651, it is said that a just and reasonable rate can never exceed, — perhaps can rarely equal, — the value of the service to the consumer, and on the other hand, it can never be made by compulsion of public authority so low as to amount to confiscation; that a just and reasonable rate must therefore certainly fall between these two extremes, so as to allow both sides to profit by the conduct of the business and the improvement of methods and increase of efficiency; that justice to the consumer, ordinarily, would require a rate somewhat less than the full value of the service to him, and justice to the company would ordinarily require a rate above the point at which it would become confiscatory; that to induce the investment and continuance of capital there must be some hope of gain commensurate with that realizable in other business, and that the mere assurance that the investment would not be confiscated would not suffice. Ordinarily that is a reasonable charge or system of charges which yields a fair return upon the investment. * * * A just and reasonable rate, therefore, is necessarily a question of sound business judgment rather than one of legal formula, and must often be tentative, since exact results cannot be foretold. (Public Service Gas Co. v. Utility Comrs. supra.) Like so many other questions in the law that involve reasonableness of conduct, it is a question of fact to be settled by the good sense of the tribunal it may come before. That it is not a question of ...

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