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Marathon Oil Co. v. Commerce Com.





APPEAL from the Circuit Court of Crawford County; the Hon. HARRY L. ZIEGLER, Judge, presiding.


Rehearing denied September 30, 1977.

This is an appeal by Marathon Oil Company from a decision of the circuit court of Crawford County which affirmed a decision of the Illinois Commerce Commission granting a rate increase for natural gas service on an application filed by Gas Utilities Company.

Respondent Gas Utilities Company is an Illinois corporation providing gas service to the public in the city of Robinson and the surrounding area in Crawford County. Petitioner operates an oil refinery in Robinson and is easily the largest consuming customer of Gas Utilities Company. Gas Utilities Company purchases its supplies of natural gas from Texas Gas Transmission Company, an interstate gas transmission company. Marathon is served directly off the pipeline of Texas Gas Transmission and service to Marathon requires none of the other common facilities of Gas Utilities Company which are used to service the rest of its customers. Texas Gas Transmission, however, bills Gas Utilities for the gas delivered to Marathon and Gas Utilities Company, in turn, bills Marathon. J.M. Imlay, president of Gas Utilities Company, testified that his company has only $9,370 invested in plant which is directly assignable to Marathon. Such investment consists of a calorimeter and an air conditioner. All the other plant and equipment necessary to serve Marathon is supplied by Texas Transmission, including the supply main and the meters which measure the quantity of gas delivered.

On November 21, 1973, Gas Utilities Company filed proceedings before the Illinois Commerce Commission seeking a rate increase, applicable only to Marathon Oil Company, for supplying natural gas. The then existing rate for Marathon had been established in 1969. Rates for all other customers of Gas Utilities Company had been established in 1958. Marathon filed a petition for leave to intervene in the proceedings, I.C.C. Docket Number 58730, and participated in the hearing and cross-examination of Utilities' witnesses. It presented its own exhibits, expert testimony, briefs and oral argument.

At the hearing respondent Gas Utilities contended that Marathon does not pay a reasonable proportion of total company expenses, resulting in an operating loss of $12,529 from sales of gas to Marathon. It claimed that its return of 1.4% on its base rate was derived from service to customers other than Marathon, that Marathon is a part of the entire system and should be charged a rate which will produce a reasonable return on the plant plus a fair share of the total operating system. It was further claimed that a proposed rate increase of 12.6% for Marathon would increase Marathon's share of total operating revenues from 48.4% to 51.8% while Marathon continues to use 56% of the total gas sold and thereby enable Gas Utilities to earn a return of 6.5% on the net cost of its plant.

Marathon argued that only $16,053 is the value of the utilities property used in serving Marathon and that the present rate applicable produces a return to the utility of 131% of the property utilized in service to Marathon. Marathon further argued that cost of service to it is the single most important factor and therefore should be given the most weight.

After denying Marathon's motion to dismiss Utilities' application the Commission entered its order on October 16, 1974, granting a rate increase that provided Utilities with a rate of return of 7.7% on its original rate base of $1,333,447. The evidence shows that $16,053 of this rate base is allocable to Marathon. To produce this return, the Commission designated a rate schedule for large volume industrial gas service that allowed a mark-up of 8% of the sum of the demand, commodity and gross receipts charges. The demand charge is the cost to Gas Utilities Company of gas actually delivered to Marathon by Texas Gas Transmission, the commodity charge is a charge levied by Texas Gas Transmission and is paid by Gas Utilities to the transmission company. The gross receipts charge is comprised of taxes and insurance premiums levied against Gas Utilities Company.

On November 15, 1974, Marathon filed an application for rehearing, supported by affidavit, under section 67 of the Public Utilities Act of Illinois, (Ill. Rev. Stat. 1973, ch. 111 2/3, par. 71) claiming that it had new and further evidence which would show that the application of a percentage mark-up to the price of gas charged would result in Marathon's paying a profit to Gas Utilities that was totally unrelated to the costs incurred in supplying services, and which would result in a profit far in excess of that found reasonable and proper by the Commission in its order. Marathon alleged that such evidence was not available at the time of the hearing for the reason that the rate schedule proposed in the Commission's order was not available until the date of the order itself, October 16, 1974.

The Commission failed to either grant or deny the petition for rehearing within 20 days of its receipt, and according to Rule 18 of the Rules of Practice of the Commission, such petition was thereby deemed denied and finally disposed of for purposes of appeal.

Marathon, pursuant to section 68 of the Public Utilities Act (Ill. Rev. Stat. 1973, ch. 111 2/3, par. 72), then appealed to the circuit court of Crawford County, which denied its request that the court remand the case to the Commission with directions that the Commission accept Marathon's proffered further evidence. The circuit court subsequently considered the entire record before the Commission, again accepting briefs and oral arguments on the issue of remandment. The court denied Marathon's appeal, ruling that the order of the Commerce Commission was sustained by the manifest weight of the evidence; that the Commission made findings of fact in support of its decision, and that the decision was within the scope of its statutory authority.

Marathon has appealed to this court presenting the issues (1) whether the Commission improperly refused to accept new evidence of Marathon which was proffered pursuant to section 68 of the Public Utilities Act and whether this cause should be remanded to the Commission for the presentation of such new evidence; (2) whether the order of the Commission was discriminatory; (3) whether the order of the Commission was just and reasonable; and (4) whether the findings of fact and conclusions of the Commission were supported by the evidence.

• 1 The court's power to remand a decision to the I.C.C. exists when it appears that the Commission failed to receive evidence properly proffered on a hearing or rehearing. (Public Utilities Act, sections 67 and 68 (Ill. Rev. Stat. 1973, ch. 111 2/3, pars. 71 and 72); People's Gas Light & Coke Co. v. City of Chicago, 309 Ill. 40; Produce Terminal Corp. v. Illinois Commerce Com. ex rel. Peoples Gas Light & Coke Co., 414 Ill. 582, 112 N.E.2d 141.) The remandment to the Commission with directions to accept the proffered evidence may be made independently of any finding by the court that the Commission's order was unlawful or unreasonable. County of Henderson v. Chicago, Burlington & Quincy R.R. Co., 320 Ill. 608, 151 N.E. 542, citing with approval People's Gas Light & Coke Co. v. City of Chicago.

The statutes make it plain that the standards governing the presentation of new evidence to the Commission are not to be stringently applied. Marathon claims that it should have been granted a rehearing pursuant to such statutes to permit it to present new evidence concerning the adverse ...

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