Central Kentucky Nat. Gas Co. v. Railroad Comm'n
290 U.S. 264 (1933)

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U.S. Supreme Court

Central Kentucky Nat. Gas Co. v. Railroad Comm'n, 290 U.S. 264 (1933)

Central Kentucky Natural Gas Co. v.

Railroad Commission of Kentucky

No. 11

Argued November 7, 1933

Decided December 4, 1933

290 U.S. 264




1. Where a contract between a public utility and a city provides that the utility shall set its own rates in the first instance, subject to the right of the city, if it deems them excessive, to take proceedings to have just and reasonable rates fixed by a state commission in accordance with the statutes of the state, rates so found and

Page 290 U. S. 265

prescribed by the commission are not to be deemed rates fixed by the contract, or by an arbitration of their dispute, but are rates fixed by the state, the enforcement of which, if confiscatory, is subject to be restrained by a federal court as an infraction of the Fourteenth Amendment. P. 290 U. S. 269.

2. District Courts of the United States may set aside a confiscatory rate prescribed by state authority because forbidden by the Fourteenth Amendment, but they are without authority to prescribe rates, both because that is a function reserved to the state and because it is not one within the judicial power conferred upon them by the Constitution. P. 290 U. S. 271.

3. The power to attach conditions to decrees of federal courts enjoining state rates should be cautiously exercised. P. 290 U. S. 272.

4. The District Court found a state rate on gas confiscatory, but declined to restrain its enforcement unless the complaining utility would accept another rate, somewhat higher, found reasonable by the court but protested by the utility, and would furthermore consent that collections in excess of the latter rate, which had been impounded by the court and by state authorities during the controversy, should be distributed in due proportions to the utility's patrons. Held, an improper exercise of the power to affix conditions. Pp. 290 U. S. 270-273.

5. Where the findings of the District Court as to the adequacy of a rate prescribed by a state commission all related to a time long antedating the decree, without regard to later increases in the expenses of the public utility, shown by the record, or profound economic changes affecting values, costs, etc., of which judicial notice may be taken, this Court, though satisfied that the weight of the evidence sustains the conclusion that the rate was unreasonable at the time referred to, directs that the decree of injunction to be entered shall be expressly without prejudice to the right of the commission to fix a just and reasonable rate, and that it shall not adjudge the validity of the rate enjoined insofar as affected by such changed conditions. P. 290 U. S. 275.

60 F.2d 137 reversed.

Appeal from a decree of the District Court (three judges) which denied a permanent injunction in a suit to restrain the enforcement of a rate on gas, and which directed that collections impounded during the suit in excess of a rate found reasonable by the District Court should be returned to the consumers who paid them.

Page 290 U. S. 266

MR. JUSTICE STONE delivered the opinion of the Court.

This is a suit in equity, brought by appellant, a Kentucky corporation, in the District Court for Eastern Kentucky, against the State Railroad Commission, certain state officers, and the City of Lexington, to set aside as confiscatory a rate prescribed by the Commission for the sale of natural gas distributed by appellant through its pipelines to consumers in Lexington. The District Court, of three judges, found the rate confiscatory, but refused to enjoin it because of the failure of the appellant to conform to a condition prescribed by the court as prerequisite to granting the injunction. 60 F.2d 137. From this decree the present appeal was taken under § 266 of the Judicial Code.

In 1905, the appellant had secured a twenty-year franchise for the distribution of natural gas to consumers through its pipelines in the City of Lexington. After the expiration of the franchise on September 5, 1925, and pursuant to ordinance of the City of Lexington of January 28, 1927, the appellant became the purchaser at public sale of a new franchise to distribute natural gas to consumers in Lexington, upon the terms and conditions of a written contract between appellant and the city, which

Page 290 U. S. 267

was incorporated in the ordinance and became effective on its acceptance by the city by ordinance of February 25, 1927.

The rate to be charged to consumers for gas was not fixed by the franchise contract. It stipulated that the gas supplied by appellant should be at just and reasonable rates, but it provided that, in the first instance, the rates should be designated by appellant in writing, by a rate schedule, filed with the mayor of the city and the Railroad Commission, and that, if the city should consider the scheduled rates in excess of just and reasonable rates, it should, within a time specified, institute proceedings before the Railroad Commission to have a just and reasonable rate found and prescribed by it in accordance with the applicable statutes of the state. It was also agreed by the franchise contract that, pending proceedings before the Commission and "subsequent proceedings in court" for the determination of a just and reasonable rate, the appellant should charge its patrons a temporary rate of 50

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