A city cannot regulate the rates chargeable by a water company
unless authority to do so has been plainly granted by the
legislature. P. 251 U. S.
Such authority cannot be implied from powers to grant water
companies rights of way in the public streets and grounds and to
supervise and control their use. P. 251 U. S.
Kentucky Statutes, § 3490(8), (25), (30), (33), considered.
The case is stated in the opinion.
Page 251 U. S. 193
MR. JUSTICE DAY delivered the opinion of the Court.
The Winchester Waterworks Company filed its bill in the United
States District Court for the Eastern District of Kentucky seeking
to enjoin the enforcement of an ordinance establishing maximum
rates for water to be furnished the city for public use and to the
people thereof for private use. By the bill and amended bill, it
was charged that the city had no authority to pass or enforce an
ordinance fixing such rates, because (1) no power had been granted
to the city so to do by the Legislature of Kentucky; (2) because
the rates established were so low as to be confiscatory in their
character, and, consequently, the ordinance was violative of rights
secured to the company by the Fourteenth Amendment to the federal
Constitution. An answer was filed, and the court decided the case
and made a final decree in favor of the company upon the ground
that, under the laws of Kentucky, the city had no authority to pass
or enforce an ordinance fixing rates. The court found it
unnecessary to pass upon the question of the confiscatory character
of the rates. The bill invoked jurisdiction upon a constitutional
ground, and the case was brought here by direct appeal.
It appears that the company had a contract with the city, which
expired in 1916, and thereafter the ordinance in controversy was
passed. That a city has no power to regulate rates of this
character unless it has legislative authority so to do is
established, and does not seem to be disputed by the appellant.
"Independently of a right to regulate and control the rates to
be charged for public service reserved in a grant of a franchise or
right to use the city streets, a city or other municipality has no
power to regulate the rates to be charged by water, lighting,
Page 251 U. S. 194
other public service corporations in the absence of express or
plain legislative authority to do so."
3 Dillon on Municipal Corporations, 5th ed., § 1325. Nor does
such authority arise from the power to regulate the opening and use
of streets, nor a grant of the general right to control and
regulate the right to erect works and lay pipes in the streets of
the city. State v. Missouri & K. Telephone Co.,
Mo. 83; Jacksonville v. Southern Bell & Tel. Co.,
Fla. 374; Lewisville Natural Gas Co. v. State,
49; Mills v. Chicago,
127 F. 731; State v.
111 Wis. 23.
Bearing this general principle in mind, we come to examine the
sections of the laws of Kentucky which, it is insisted, give the
authority to fix water rates. The appellant insists that this power
is expressly conferred in subsection 25 of § 3490 of the Kentucky
Statutes, which reads as follows:
"The board of council may grant the right of way over the public
streets or public grounds of the city to any railroad company or
street railroad company on such conditions as to them may seem
proper, and shall have a supervising control over the use of same,
and regulate the speed of cars and signals and fare on street cars,
and, under like condition and supervision, may grant the right of
way that may be necessary to gas companies, water companies,
electric light companies, telephone companies, or any like
companies, and may compel any railroad company to erect and
maintain gates at any or all street crossings, and to prevent
railways from blocking or obstructing the streets or public ways of
the city, and to fix penalties for the violation of these
Other subsections claimed to be applicable are given in the
Page 251 U. S. 195
Examining subsection 25, we are unable to discover any grant of
authority to fix the rates for water consumption. It is therein
first provided that the council may grant the right of way over the
public streets to any railroad or street railroad company on such
conditions as to the council may seem proper, and shall have a
supervising control over the use of the same, and the council is
given the right to regulate the speed of cars and signals and fare
no street cars, and under like conditions and supervision, the
council may grant the right of way to water companies among others.
This language is certainly very far from that express authority to
regulate rates which is essential in order to enable municipalities
so to do. The power to grant a right of way to water companies is
specifically granted, and this under like conditions and
supervision already provided as to railroad and street
Page 251 U. S. 196
railroad companies. This is the full measure of the grant of
authority to deal with water companies. The right to regulate fares
is in the same sentence which grants authority to deal with water
companies, and is specifically limited to fares on street cars.
Nor do we find in other subsections of this section any
provision from which the right to fix the rates of water companies
can be inferentially deduced.
Counsel call to our attention but one case from Kentucky, whose
court of last resort is final authority upon the construction of
the statutes, and that is United Fuel & Gas Co. v.
159 Ky. 34. There, the United Fuel & Gas
Company held a franchise from a city in Kentucky under an ordinance
providing that the grantee of the franchise should furnish for
public and private use for the city and its inhabitants natural and
artificial gas at a reasonable price not exceeding, in any event,
one dollar per thousand cubic feet, and that the grantee in
delivering gas should not discriminate against the consumers in the
city. The company proposed to sell gas to the inhabitants of the
city at 20 cents per thousand feet if they would sign a contract
for five years, but it charged persons who did not sign such a
contract 25 cents a thousand feet. The city council passed an
ordinance providing that a gas company should not charge one
citizen more than another, and imposed a fine for violation of the
ordinance. The city was of the fifth class, and was given authority
to make "all other local police, sanitary, and other regulations
not conflicting with the general laws." The court held that the act
for the government of this city of the fifth class must be read in
connection with the statutes conferring power on larger cities, and
that, thus construed, there was no grant of authority to the city
to impose a fine such as the one in question in the absence of
legislative authority so to do. The section from Dillon on
Page 251 U. S. 197
stating that the authority of a municipality to regulate rates
to be charged by public service corporations is limited to cases in
which express or plain legislative authority has been given was
quoted with approval. Cases from other states in which the
principle has been approved were also cited.
It is true that this case is not precisely in point, but it
contains a recognition by the Court of Appeals of Kentucky of the
accepted principle that the right to fix rates must be granted to
municipal corporations by a plain expression of legislative
authority. It is said, however, that our decision in Owensboro
v. Owensboro Waterworks Co., 191 U. S. 358
holds a contrary view. So far as apposite, that case dealt with the
power of a city of the third class to fix rates for water
consumers. As to cities of that class, § 3290 of the Kentucky
statutes specifically provides authority to provide the city and
inhabitants thereof with water, light, etc., service by contract or
by works of its own, and to make regulations for the management
thereof, and to fix and regulate the price to consumers and
customers. Dealing with that section, and the authority conferred
upon cities of the third class, this Court said:
"The purpose of § 3290 was to provide the inhabitants of cities
of the third class with the services mentioned -- water, light,
power, heat and telephone. They could be provided by the cities
directly, or they could be provided by private persons; but,
whatever way provided, the power was given to regulate the
management and fix the rates of the services, and this was but the
endowment of a common governmental power."
This language was used in regard to the authority given in
express terms to fix rates. It was said of such authority that it
was but the endowment of a common governmental power. This is
undoubtedly true. But it is equally certain that the governmental
power rests with the state, and must be conferred upon the
Page 251 U. S. 198
in an unmistakable way. We find nothing in the
case which at all conflicts with the
construction which we have given to § 3490, applicable to cities of
the fourth class, to which the City of Winchester belongs.
Finding no error in the judgment of the district court, the same
* Kentucky Statutes:
"3490. The board of council, in addition to other powers herein
granted, shall have power within the city:"
"* * * *"
"(8) To provide the city with water, or erect, purchase, or
lease waterworks and maintain same, or to make all necessary
contracts with any person or corporation for such purposes; to
erect hydrants, cisterns, fire plugs and pumps in the streets
within or beyond the limit of the city."
"* * * *"
"(30) The board of council shall have power, by ordinance, to
prescribe the punishment, by fine not exceeding $100, or
imprisonment not exceeding 60 days of any person who shall molest,
damage or interfere with any system of waterworks laid in said
city, or the pipes and mains, hydrants, or any part thereof, and
shall have power to punish by ordinance and impose the same penalty
as for damaging or molesting any other public property, and may,
subject to the rules of any water company which may establish such
system, select persons who shall have the right to open, tap, or
make connection with such pipes or mains in streets, alleys, or
public ways of said city."
"* * * *"
"(33) Said city council shall have legislative power to make
bylaws and ordinances for the carrying into effect of all of the
powers herein granted for the government of the city, and to do all
things properly belonging to the police of incorporated cities.
Said board of council may change the boundary line of any ward or
wards of any city now divided into wards, or hereafter divided into
wards, under the provision of this act, not less than sixty days
previous to any November election."