A gas company whose franchise obliges it to render efficient
service to the public and whose rates and service are subject,
under the state law and constitution, to regulation by a public
commission, and which has charged its customers the maximum rate
allowed, on the basis of the quantities of gas furnished, is not
deprived of property without due process of law by an order of the
commission reducing bills to compensate for poor service
(insufficient gas pressure) and requiring corresponding refunds to
consumers. P. 258 U. S.
78 Okla. 5
Error to a judgment affirming an order of a commission by which
the bills of a company engaged in distributing gas supplied by
plaintiff in error were reduced and refunds to consumers were
MR. JUSTICE McKENNA delivered the opinion of the Court.
Error to review the judgment of the Supreme Court of Oklahoma
sustaining an order of the Corporation Commission of the state
directing, on account of the failure of the gas companies to
furnish adequate gas service, a refund in certain districts of
Oklahoma City of from eight to twenty-five percent of the bills
rendered by the companies during December, 1917, and January,
The initial steps in the proceedings against the gas companies
were petitions filed before the Corporation
Page 258 U. S. 235
Commission of the state, and numbered 3188, 3192, and 3197. They
charged that the Oklahoma Gas & Electric Company was a
corporation of Oklahoma, and was granted a franchise by Oklahoma
City to supply the latter and its inhabitants with natural gas for
light, heat, and power, and as such corporation, exercised the
right of eminent domain. And they alleged that the Oklahoma Natural
Gas Company was also a corporation of Oklahoma for the purpose of
transporting gas from Cushing, Oklahoma, to Oklahoma City, and was
under contract to deliver gas to the pipelines of the gas and
The petitions represented in various ways in what the two
companies were deficient and delinquent in the execution of the
purpose of their incorporation in the supply of gas at certain
times to those entitled to be served, and the prayers of the
petitions varied according to the respective standpoints of the
petitioners and their conceptions of remedies.
In No. 3188, it was prayed that the companies reveal their
relationship and contracts in regard to supplying Oklahoma City
with gas, and that the electric company show the daily consumption
of gas by the city, the volume and pressure in ounces necessary to
provide adequate service. There was the further prayer that the
companies be required to provide and maintain gas storage
In No. 3192, it was prayed that the electric company be
restrained from forcing collection of gas bills before the
determination of the issue presented, the charge being that,
notwithstanding the insufficiency of the gas supply, the company
was threatening to require prompt payment of bills and, in default
thereof, to discontinue service.
In No. 3197 (it was presented by the county attorney and his
assistants), the relief asked was that the Commission take charge
and management of the corporations,
Page 258 U. S. 236
they being delinquent in their duties. It was also prayed that
the companies be declared in contempt of an order of the Commission
previously rendered which required such efficiency in the
distributing systems as to render adequate service, and dealt with
Separate answers were made by the companies in Nos. 3188 and
3197. In No. 3192, the electric company alone answered.
Each company averred the exertion of all means within its power
to supply the needs and requirements of the city with gas, and was
specific in the enumeration of its facilities and powers and their
exertion, and denied faults and delinquencies.
The Corporation Commission, by the Constitution and laws of the
state, is given power and authority, and is charged with the duty
of supervising and regulating transportation companies and other
public utilities, and given the same authority to prescribe rates
which the state might prescribe or make. And the supreme court
decided that any of the orders of the Commission prescribing rates
and regulating the service of such utilities are as much a law of
the state as if enacted by the legislature, and that a public
utility, in furnishing natural gas, is as much subject to the
provisions of such orders as if they had been made an integral part
of the contract between the consumer and the public utility.
It was in view of the jurisdiction and powers of the Commission
that the petitions in this case were presented to it. They were
consolidated, and testimony taken for and against them and the
Commission set forth its conclusion in an opinion of great length
-- too long, we may say, to make even a summary of it
We can only say that the Commission found the quality of the gas
deficient, but otherwise found for the companies. For instance, the
Commission found that storage facilities for a reserve supply as
prayed were impossible. It found
Page 258 U. S. 237
also against the charge that the companies had been guilty of
negligence for failure to extend their lines to other and more
abundant sources of supply. Indeed, the Commission, intimating a
doubt of its power to do so, refused to exercise the power against
the companies, circumstances not demanding it.
The final order of the Commission was that discounts of various
amounts from the payments made by consumers in certain districts
(they were named) should be allowed. The discount, it was ordered,
should be applied to bills for domestic consumption of gas only,
and this consumption was considered to mean only gas used for
physical comfort or for cooking in residences.
The prayer in No. 3197 that the Commission take charge and
operate the property of the Oklahoma Gas & Electric Company was
denied; also that fines for contempt be imposed was denied.
There were modifications of the order not necessary to mention.
On error to the supreme court by the Oklahoma Natural Gas Company,
the order of the Commission was affirmed.
The supreme court, in its opinion, stated the points in
litigation, and said it was not controverted that the service was
inadequate; the contention of the gas company being that
"natural gas is a commodity for which the utilities are entitled
to payment on a quantum
basis, as shown by meter readings,
and the adequacy and inadequacy of service does not enter into the
payment of bills."
The court rejected the contention, and affirmed the order of the
Commission expressing its, the court's, understanding of it to be
that it proceeded
"upon the theory that, inasmuch as the maximum compensation of
the gas company is allowed upon the basis of adequate service,
where the service is not kept to this standard, the rate charged
the public should be graded in proportion to the falling off in
Page 258 U. S. 238
Stating a further contention of the company in resistance to the
order of the Commission, the court said it seemed to be that the
company was entitled to the maximum rate "regardless of the
efficiency of the service." The court rejected the contention
considering that the rule announced by the Commission was "entirely
just and reasonable, provided a practical basis for its
application" could "be established," and the court said it could
"see no insuperable barrier in the way of doing" that. And the
court further decided that the Commission had correctly solved the
problem by basing the proportion of the maximum rate the company
could justly collect from the public upon the quality of the
service rendered, as well as upon the quantity of gas furnished.
And this solution of the problem, the court was of the view, the
The company assails the reasoning and conclusions of the court
and Commission, and asserts that they penalize the company "for
failing to supply gas which nature had not produced." It supplied,
is the contention, the maximum amount which it could produce, and
the Commission found that it was not negligent in failing to supply
more. It is the contention, therefore, that the order of the
Commission and the action of the supreme court in sustaining it are
offensive to the Constitution of the United States.
The contention is based on a wrong estimate of the action of the
Commission and that of the court. Neither was based on deficiency
in the volume of gas, but upon the failure of the company to
transport it under sufficient pressure to render efficient service.
It was the view of the Commission and the court that the company
owed efficient service, and, for failing to supply it, there should
be a deduction in the compensation charged in proportion to the
The company assails both conclusions as depriving it of property
without due process of law. We cannot assent.
Page 258 U. S. 239
Both the Commission and the supreme court decided, construing
the charter of the company, that it, the company, was required to
render efficient service, and we concur in that view, and that it
was competent for the state to compensate the deficiency in the
service -- deficiency in the supply of gas -- by a rebate of the
payments to the company. The percentage of reduction and its
adequate relation to a deficiency in service were necessarily
determined by the Commission from the case as presented to it, and
the supreme court, upon consideration, affirmed the determination
as a just and supported relation. In the judgments of the
Commission and the court we are unable to see error, certainly not
an infringement of the Fourteenth Amendment.
We repeat, therefore, the action of the Commission and Court
were not, as represented by the company, a requirement of the
impossible. It was simply and clearly the determination of what the
franchise of the company required and the obligation to perform it,
and the failure to perform justified a reduction of the fees
charged or if paid a proportionate repayment.
We are not called upon therefore to review or answer the
interesting argument of the company based upon the contention that
the order of the Commission imposed upon the company the impossible
or the unreasonable. It imposed, we repeat, the performance of the
service that the gas company had agreed to perform.
MR. JUSTICE CLARKE took no part in the consideration and
decision of this case.