1. Under § 19(b) of the Natural Gas Act, providing for review of
orders of the Commission by the circuit courts of appeals, an
objection that the natural gas company is not located and does not
have its principal place of business in the circuit in which the
proceeding was brought goes not to the jurisdiction but only to the
venue, and is too late when raised for the first time after
judgment. P.
324 U. S.
638.
2. In the exceptional circumstances of this case, the Federal
Power Commission, in determining reductions in interstate wholesale
rates of a natural gas company whose business consisted of direct
industrial sales (unregulated) as well as interstate wholesales
(regulated),
Page 324 U. S. 636
did not exceed the limits of its discretion when it allocated to
the regulated business all excess earnings of the entire business
over 6 1/2 percent. P.
324 U. S.
646.
3. It was not error for the Commission to construct a natural
gas company's rate base on the actual legitimate cost of the
company's property, or to include in the rate base the company's
producing properties and gathering facilities.
Canadian River
Gas Co. v. Federal Power Comm'n, ante p.
324 U. S. 581. P.
324 U. S.
648.
4. Having failed to object in its application for rehearing
before the Commission to the inclusion of its producing properties
and gathering facilities in the rate base, petitioner is precluded
by § 19(b) of the Act from attacking the order of the Commission on
the ground that they are included. P.
324 U. S.
649.
5. Since the issue in a rate case under the Natural Gas Act is
whether the rate fixed is "just and reasonable," the question on
review is not the method of valuation, but the end result obtained.
P.
324 U. S.
649.
6. Upon the undisputed facts of this case, the Court cannot say
that the rate of return allowed by the Commission is not
commensurate with the risks, that confidence in the company's
financial integrity has been impaired, or that the company's
ability to attract capital, to maintain its credit, and to operate
successfully and efficiently has been impeded.
Federal Power
Comm'n v. Hope Natural Gas Co., 320 U.
S. 591. P.
324 U. S.
650.
143 F.2d 488 affirmed.
Certiorari, 323 U.S. 808, to review the affirmance of an order
of the Federal Power Commission under the Natural Gas Act.
Page 324 U. S. 637
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Panhandle Eastern Pipe Line Co. (whom we will call Panhandle
Eastern) owns properties which constitute a natural gas production,
transportation, and marketing system. [
Footnote 1] The system extends from gas fields in Texas,
Oklahoma, and Kansas through Missouri, Illinois, Indiana, and Ohio,
and into Michigan. [
Footnote 2]
The City of Detroit and the County of Wayne, Michigan, filed a
complaint with the Federal Power Commission alleging that Panhandle
Eastern's rates on gas sold to a distributing company in Michigan
for resale there were unjust and unreasonable. The Commission, on
its own motion, instituted an investigation under the Natural Gas
Act of 1938, 52 Stat. 821, 15 U.S.C. § 717, of all of the
interstate wholesale rates of Panhandle Eastern. [
Footnote 3] Following extended hearings, the
Commission entered an interim order, here under review, finding
petitioner's interstate wholesale rates to be excessive and
requiring petitioner to reduce them on and after November 1, 1942,
as to reflect, when applied to petitioner's 1941 transportation and
sales, a reduction of not less than $5,094,384 per annum below the
1941 consolidated gross operating revenues of $17,789,573.
See 45 P.U.R.(N.S.) 203, 223. That order was affirmed
by
Page 324 U. S. 638
the Circuit Court of Appeals for the Eighth Circuit, one judge
dissenting in part. 143 F.2d 488. The case is here on a petition
for a writ of certiorari which we granted limited to the two
questions which we will discuss. But, before we reach them, we must
dispose of a challenge made by the City of Cleveland, as
amicus
curiae, to the jurisdiction of the Circuit Court of Appeals
for the Eighth Circuit over the subject matter of this litigation.
Panhandle Eastern sought review in that court of the Commission's
order under § 19(b) of the Act, which, so far as material here,
provides:
"Any party to a proceeding under this chapter aggrieved by an
order issued by the Commission in such proceeding may obtain a
review of such order in the circuit court of appeals of the United
States for any circuit wherein the natural gas company to which the
order relates is located or has its principal place of business, or
in the United States Court of Appeals for the District of Columbia.
. . ."
The petition for review stated that petitioner had its principal
place of business in Kansas City, Missouri. That was not denied by
the Commission, and at no time prior to the entry of the judgment
affirming the Commission's order was the jurisdiction of the
Circuit Court of Appeals challenged. After the judgment of
affirmance had been entered, however, the City of Cleveland filed a
motion in the Circuit court of Appeals for leave to intervene and
challenged the jurisdiction of that court on the ground that
petitioner did not have its principal place of business in that
circuit. The same objection is pressed here.
If the objection is to the jurisdiction of the court, it does
not come too late.
Industrial Addition Assn. v.
Commissioner, 323 U. S. 310. But
we think it goes to venue, not to jurisdiction. We read § 19(b) to
invest all intermediate federal courts with the power to review
orders of the Commission, provided, however, that if a Circuit
Court of
Page 324 U. S. 639
Appeals, rather than the Court of Appeals for the District of
Columbia, is chosen, the parties may object that the particular
circuit lacks the specified qualifications. Venue relates to the
convenience of litigants.
Neirbo Co. v. Bethlehem Shipbuilding
Corp., 308 U. S. 165. The
provisions of § 19(b) plainly are of that character. Review in the
Court of Appeals for the District of Columbia, where the Commission
must maintain its principal office and hold its general sessions
(46 Stat. 797, 16 U.S.C. § 792), is convenient for the Commission.
Review in any circuit where the natural gas company is located or
has its principal place of business is designed to serve the
convenience of the company. The general grant of authority in §
19(b) to all the courts of appeal suggest that the question of
which one should exercise the power in a particular case is a
question of venue. None of the respondents objected at any time to
the venue of the court below. The right to have a case heard in the
court of proper venue may be lost unless seasonably asserted.
Industrial Addition Assn. v. Commissioner, supra. It may
be waived by any party, including the government.
Peoria &
P.U. R. Co. v. United States, 263 U.
S. 528,
263 U. S.
535-536;
Industrial Addition Assn. v. Commissioner,
supra. The objection of the City of Cleveland which came after
judgment had been rendered came too late.
Cf. United States v.
California Co-op Canneries, 279 U. S. 553,
279 U. S. 556.
Hence, we need not decide whether the suit was brought in the
proper circuit.
Segregation of the Regulated and Unregulated Business.
Panhandle Eastern makes direct industrial sales, as well as sales
to distributing companies for resale. The Commission made no
segregation or separation of the properties used in these two
classes of business. Nor did it make an allocation of costs between
the regulated and unregulated phases of the business, as it did in
Colorado Interstate Gas Co. v. Federal Power Commission,
Canadian River Gas Co. v. Federal Power Commission, and
Colorado-Wyoming Gas Co. v. Federal Power Commission,
Page 324 U. S. 640
ante, pp.
324 U. S. 581,
324 U. S. 626. The
reasons which the Commission advanced for its failure to make any
allocation are so crucial to the disposition of the case that we
quote from the opinion:
"Upon the record before us, we consider it unnecessary to make
an allocation of the respondents' business as between sales for
resale and direct sales. The direct sales are made to nineteen
industrial customers on an interruptible basis and at prices fixed
in competition with other fuels."
"According to respondents' own evidence, no capacity has ever
been constructed or provided in their gas plant for these direct
industrial customers. It is equally clear that deliveries are made
to them only when there is available excess off-peak capacity not
required by the other wholesale customers. As evidence of this
fact, in 1941, the volume of gas sold to the direct industrial
customers amounted to 13.2 percent of the total system sales,
whereas, on the system peak day of the 1941-1942 winter, the direct
industrial sales constituted only 2.69 percent of the total
deliveries, due to interruptions and curtailments brought about by
the necessity for meeting the wholesale customer requirements."
"Testimony of respondents' witnesses discloses that only
$128,848 of the entire investment in plant (less than one-sixth of
one percent) is used exclusively in the service of the direct
industrials. Moreover, the respondents themselves treat their
entire business as a unit, and make no segregation of costs or
profits on their books as between the two classes of sales. Indeed,
Panhandle Eastern's president testified quite clearly on
cross-examination that any attempt to allocate would be
'theoretical,' 'unrealistic,' and 'not practical' because of the
unified character of the business."
"Deliveries to the direct industrials are made only when the
plant is not fully used in serving the requirements of
Page 324 U. S. 641
the wholesale business, and are curtailed or interrupted when
the capacity is required by the wholesale customers. It is apparent
that the incidental direct industrial business is in reality a
byproduct of the wholesale business, comparable to the respondents'
gasoline extraction business. All parties are agreed that the
expenses and revenues in connection with the sale of gasoline
extracted from the natural gas should be treated as an integral
part of the respondents' entire operations. Thus, it is manifest
from the evidence that the direct industrial sales are purely
incidental to the main or principal enterprise,
viz.: the
wholesale business of the respondents."
45 P.U.R.(N.S.) p. 218.
Petitioner contends that these reasons do not justify the
failure of the Commission to make a formal allocation either of the
property or the costs between the regulated and unregulated
business. It says that the direct sales are beyond the jurisdiction
of the Commission even though they are comparatively small. It
asserts that the fact that the direct sales are on an interruptible
basis merely emphasizes the relatively small amount of the cost of
construction and operation attributable to such sales. It says that
no waiver of the statutory right to have the direct sales free from
regulation can be inferred, and that, in any event, the
Commission's jurisdiction cannot be enlarged by waiver. And it
contends that the Commission's finding that the direct industrial
business is "in reality a byproduct of the wholesale business" is
not supported in reason or in fact.
We agree that the Commission must make a separation of the
regulated and unregulated business when if fixes the interstate
wholesale rates of a company whose activities embrace both.
Otherwise the profits or losses, as the case may be, of the
unregulated business would be assigned to the regulated business,
and the Commission
Page 324 U. S. 642
would transgress the jurisdictional lines which Congress wrote
into the Act. [
Footnote 4] The
Commission recognizes this necessity. As it stated in
Re Cities
Service Gas Co., 50 P.U.R.((N.S.)) 65, 89:
"The company's facilities and operations are devoted in part to
natural gas service which is not subject to our jurisdiction. This
service consists principally of gas sales made directly to large
industrial consumers. The necessity arises, therefore, for making
an allocation of costs as between the jurisdictional and
nonjurisdictional sales."
The question is whether a formal allocation was necessary under
the exceptional circumstances of this case.
We state the question that narrowly because the dispute in this
case reflects not a rejection by the Commission of the principle of
allocation, but a disagreement over the propriety of the procedure
followed here.
What the Commission did was to allocate to the interstate
wholesale business all of the earnings from the entire business in
excess of a 6 1/2 percent return. Insofar as that procedure
allocated to the interstate wholesale business any earnings from
the direct industrial sales in excess of 6 1/2 percent, it is said
to be justified by the use which the direct industrial business
made of the main transmission line and its facilities. If that was
unfair, the order must be set aside. If it was fair, no reversible
error is shown.
A witness for petitioner testified at the hearing that, under
petitioner's allocation of costs, the unregulated business
Page 324 U. S. 643
has the use of facilities of the company without any charge. He
testified that there should be a charge against the unregulated
business for the use of that property. Another witness for
petitioner stated that the company did not make any allocation
between the regulated and unregulated business -- "that is,
allocation of jointly used assets" -- in determining what would be
charged to the unregulated sales. He stated, "It may be heresy to
say so, but we try to charge our nonregulated customers all the
traffic will bear." It was conceded that the company attempts no
allocation in the conduct of its business. The business is operated
as a unit. And one of petitioner's officers testified:
"Q. That is, any attempt to allocate return as between regulated
business and unregulated business: is that what you meant was
unrealistic?"
"A. That is correct . . . If you are going to allocate it,
theoretically you should allocate it on the basis of the investment
and the expenses incident to each part of the business."
"Q. But it is theoretical?"
"A. That is correct."
"Q. And not practical?"
"A. That is what I am trying to say."
Petitioner presented evidence showing that, in the test year,
91.57 percent of its total revenues, or $16,289,045, was received
from its wholesale sales and 8.43 percent, or $1,500,527, was
received from its direct industrial sales. It presented a study
showing total operating expenses of about $7,900,000 (not including
federal income taxes and return) and assigning $499,699 to the
direct industrial sales. Thus, an apparent profit of $1,000,828
before income taxes was shown for the direct industrial sales. But
that study did not allocate any of the annual depreciation expense
of the main transmission line ($2,238,589) to the direct industrial
sales. Of the $633,270
ad valorem taxes
Page 324 U. S. 644
on transmission lines, only $1,738 applicable to the laterals
used exclusively for direct industrial sales were allocated to
them. None of the main transmission line operating and maintenance
costs was charged to the direct industrial sales.
Petitioner recognized the unfairness of attributing to the
direct industrial sales all of the apparent profit of $1,000,828.
One of petitioner's witnesses testified:
"Q. Is there any engineering basis for a division from an
engineering standpoint?"
"A. Not as an engineering matter. I do not know of any basis. As
a business matter, I think there are ways in which it could be
fairly decided. I think it requires some judgment based upon
business experience to make a fair allocation of it, but there is a
little over a million dollars, some portion of which could, in all
fairness, be set aside as a charge against operations on the
nonregulated sales and a credit against operations on the regulated
sales."
He went on to indicate what he thought a fair allocation would
be:
"A. It is my opinion that that $1,000,828.98 should be divided
fifty-fifty."
"Q. Why?"
"A. It is just my judgment as a businessman that would be a fair
allocation of it."
"Q. You mean fifty-fifty as between regulated and nonregulated
business?"
"A. That is correct. I think that would be a fair
allocation."
"Q. That is a business judgment estimate, not a mathematical
estimate?"
"A. That is right. In that way, this nonregulated business has
contributed half a million dollars a year towards the reduction in
cost of the regulated business,
Page 324 U. S. 645
and if it does not contribute something, I do not think there is
any justification for having the business."
Petitioner requested the Commission to find that it had built no
capacity for its direct industrial sales which were "incremental"
in nature, and that it was reasonable to allocate
"50 percent of the net earnings from nonregulated sales as a
credit to net earnings from regulated sales, as compensation for
the temporary use of such facilities provided for regulated sales
but used from time to time in transporting the gas for direct,
interruptible, nonregulated sales, when not required for regulated
sales."
Petitioner asserts that it also requested the Commission to make
a segregation of the properties used in the two classes of
business. No such request, however, was included in the petition
for rehearing. At that stage, the petitioner merely asserted that
the Commission erred (1) in taking the proceeds from the direct
industrial sales into consideration in determining the amount of
its profits and in ordering the rate reduction, and (2) in failing
reasonably to allocate petitioner's earnings between regulated
sales and unregulated sales. That precludes an attack in the courts
on the Commission's order for failure to make a segregation of
property. For § 19(b) of the Act provides that
"No objection to the order of the Commission shall be considered
by the court unless such objection shall have been urged before the
Commission in the application for rehearing unless there is
reasonable ground for failure so to do."
No such excuse has been tendered.
On these facts, we cannot say that the Commission transgressed
the jurisdictional requirements of the Act when it failed to make a
formal allocation of costs or of property. All agreed that an
allocation on the basis of investment or costs would be
impractical. All agreed that some division of the apparent profit
from the direct industrial business had to be made. All agreed that
the fair division was a matter of judgment, not mathematics.
Page 324 U. S. 646
In view of those concessions by petitioner, the manner in which
it conducted its business, its failure to insist on a segregation
of property in its petition for rehearing, and its own failure to
keep accounts which reflected a segregation of the properties or an
allocation of costs among the two classes of business, we do not
think it can now be asserted that the Commission erred in forsaking
a formula and using its informed judgment instead.
We do not mean to imply that such concessions would warrant a
departure of the Commission from the statutory scheme of
regulation. The issue is a much narrower one. The Commission did
not undertake to fix industrial rates. The Commission, as was its
duty, merely determined what earnings were properly allocable to
the unregulated business. Petitioner disagrees with the result. The
use of a formula for an allocation of costs or a segregation of
property might or might not have been more favorable to petitioner.
But, once the use of such a formula is waived or is conceded to be
impractical or theoretical, there must be some discretion in the
Commission to make that determination through the exercise of its
informed judgment. We cannot say that the Commission abused its
discretion by concluding, on the basis of the special circumstances
here presented, that earnings of the entire business in excess of a
6 1/2 percent return should be allocated to the interstate
wholesale business. The small investment in the direct industrial
business, the incremental nature of it, the extent of the
interruptions in service to the direct industrial customers, the
manner in which the management has treated, it afford a basis for
the refusal of the Commission to credit it with a larger share of
the earnings than 6 1/2 percent.
The Commission, while it lacks authority to fix rates for direct
industrial sales, may take those rates into consideration when it
fixes the rates for interstate wholesale sales which are subject to
its jurisdiction. For § 5(a) provides
Page 324 U. S. 647
that, whenever the Commission
"shall find that any rate, charge, or classification demanded,
observed, charged, or collected by any natural gas company in
connection with any transportation or sale of natural gas, subject
to the jurisdiction of the Commission,
or that any rule,
regulation, practice, or contract affecting such rate, charge, or
classification is unjust, unreasonable, unduly discriminatory, or
preferential, the Commission shall determine the just and
reasonable rate."
(Italics added). It is clear that contracts covering direct
industrial sales come within that italicized clause of § 5(a).
[
Footnote 5] The industrial
rates in force here produce revenues of $1,500,527 with expenses of
$499,699, which, according to petitioner, result in earnings of
$1,000,828 before income taxes. That is an apparent profit of more
than 200 percent. It is a fairly obvious indication that the
regulated business is being saddled with costs which, in fairness,
should be borne by direct industrial sales. That is an extremely
relevant consideration for the Commission to take into account when
it determines what costs are fairly attributable to each business
and what the resultant rate for the wholesale business should be.
Sec. 5(a) does not, of course, give the Commission authority to
disregard the jurisdictional lines which Congress has drawn between
interstate wholesale sales and direct industrial sales so as to
level the profits between the two classes of business. But § 5(a)
reinforces our conclusion that, in the exceptional circumstances of
this case, the Commission did not exceed the limits of its
discretion when it allocated to the regulated business
Page 324 U. S. 648
all excess earnings of the entire business over 6 1/2
percent.
Producing and Gathering Facilities. The Commission
constructed a rate base on the actual legitimate cost of
petitioner's property in service on December 31, 1941, which it
found to be $78,814,292. It deducted $12,596,987 for accrued
depreciation, depletion, and amortization. It added $920,000 for
working capital. The result was a rate base of $67,137,305 on which
the Commission allowed a return of 6 1/2 percent, which it found to
be "fair and liberal." It included in the rate base petitioner's
producing properties [
Footnote
6] and gathering facilities. Petitioner claims that was error.
It contends that it was incumbent on the Commission to determine
the field price or actual field value of natural gas in the areas
in which petitioner produces gas, to eliminate petitioner's
leaseholds and producing and gathering facilities from the rate
base, to disallow expenses of gathering and production, and to
allow petitioner, as an expense item, the field price or actual
field value for all gas produced by it and taken into the pipeline
system. Evidence was offered to show what the market price or
actual field value of the gas was. The argument is that the
procedure followed by the Commission extends its jurisdiction over
"the production or gathering of natural gas" contrary to the
mandate of § 1(b). [
Footnote 7]
Petitioner suggests, moreover, that, if its leaseholds are to be
included in the rate base, they should not be included at cost, but
at what petitioner claims to be the market value. [
Footnote 8]
Page 324 U. S. 649
This phase of the case is controlled by
Canadian River Gas
Co. v. Federal Power Commission, supra. We need not repeat
what we said there. It is clear that the value of producing
properties and gathering facilities is affected whenever rates are
fixed. That is inevitably true whether the leaseholds are put into
the rate base or whether as petitioner urges the gas is valued as a
commodity. That result is not avoided unless Congress puts a floor
under production properties and gathering facilities of natural gas
companies and fixes a minimum return on them. That Congress has not
done. As Judge Sanborn aptly stated in the opinion of the Circuit
Court of Appeals:
"If there is an infirmity in the Commission's determination of
the amount which should be included in the rate base as the cost or
value of such facilities, we think the infirmity arises from the
method used in making the valuation, and not from any lack of
jurisdiction."
143 F.2d at 495. Petitioner, moreover, failed to object in its
application for rehearing before the Commission to the inclusion of
its producing properties and gathering facilities in the rate base.
It is accordingly precluded by § 19(b) of the Act from attacking
the order of the Commission on the ground that they are
included.
Federal Power Commission v. Hope Natural Gas Co.,
320 U. S. 591,
holds that the Commission is not bound to use any single formula
for the fixing of rates. It is not precluded from using actual
legitimate cost, as it did here. The question on review is not the
method of valuation which was used, but the end result obtained,
since the issue is whether the rate fixed is "just and reasonable."
§ 5. In the present case, the 6 1/2 percent return allowed by the
Commission will permit petitioner to earn $4,363,925 annually on
the basis of the test year after meeting all operating expenses,
which include depreciation, exploratory and development costs, and
federal income taxes. The cost of servicing petitioner's long-term
debt is $957,786, or
Page 324 U. S. 650
2.88 percent. The cost of meeting the requirements of the
preferred stock is $939,000 or 5.8 percent. That leaves $2,467,139
for $20,184,175 of common stock -- a return of 12 percent. The
return would be 9 percent figured on the basis of common stock and
surplus of $27,650,000. We are unable to say on these undisputed
facts that the return is not commensurate with the risks, that
confidence in petitioner's financial integrity has been impaired,
or that petitioner's ability to attract capital, to maintain its
credit, and to operate successfully and efficiently has been
impeded. [
Footnote 9]
See
Federal Power Commission v. Hope Natural Gas Co., supra, p.
320 U. S.
603.
Affirmed.
[
Footnote 1]
The other petitioners, Illinois Natural Gas Co. and Michigan Gas
Transmission Corp., were wholly owned subsidiaries of Panhandle
Eastern. They sold all of their properties to Panhandle Eastern
after these proceedings were instituted and were then dissolved.
Accordingly, we will refer throughout to the three companies as
"petitioner."
[
Footnote 2]
The Commission found that the aggregate lines in this system
constitute
"the longest natural gas pipeline in the world, serving more
than 200 cities, towns, and communities with more than 700,000
retail customers in Texas, Kansas, Missouri, Illinois, Indiana,
Michigan, and Ohio."
45 P.U.R.(N.S.) 203, 208.
[
Footnote 3]
The investigation also included Illinois Natural Gas Co. and
Michigan Gas Transmission Corp.
See note 1 supra.
[
Footnote 4]
Sec. 1(b) provides:
"The provisions of this chapter shall apply to the
transportation of natural gas in interstate commerce, to the sale
in interstate commerce of natural gas for resale for ultimate
public consumption for domestic, commercial, industrial, or any
other use, and to natural gas companies engaged in such
transportation or sale, but shall not apply to any other
transportation or sale of natural gas or to the local distribution
of natural gas or to the facilities used for such distribution or
to the production or gathering of natural gas."
[
Footnote 5]
There must be filed with the Commission not only schedules of
rates subject to the jurisdiction of the Commission, but
"the classifications, practices, and regulations affecting such
rates and charges, together with all contracts which in any manner
affect or relate to such rates, charges, classifications, and
services."
Sec. 4(c). By Rule 54.30, the Commission requires the filing
with it of all contracts for direct industrial sales involving
sales in excess of 100,000 Mcf per year.
See 8 Fed.Reg.
16101.
[
Footnote 6]
Petitioner produces approximately 50 percent of the gas which it
transports and sells, the remainder being purchased. The payments
for gas purchased were allowed by the Commission as an operating
expense.
[
Footnote 7]
See note 4
supra.
[
Footnote 8]
The market value is alleged to be about $8,400,000, as compared
with some $955,000 which the Commission found to be the actual
legitimate cost.
[
Footnote 9]
The Commission stated on this phase of the case:
"The evidence discloses that the respondents' business is
exceptionally free from serious business hazards. The gas supply is
assured for at least thirty to thirty-five more years. We have made
ample provision in the annual depreciation allowance for the
restoration of the capital investment in the property over the
claimed life of the gas supply. The respondents' markets are
rapidly expanding, and embrace the large metropolitan area of
Detroit, which alone takes 40 percent of the entire output under a
long-term contract. Panhandle Eastern's president testified that
the demand for service is so great that, within the next year, the
respondents will be called upon to sell every cubic foot of gas
that can possibly be delivered through the lines, and that the
capacity factor will increase from 70 percent to 90 percent."
"It is likewise apparent from respondents' own evidence that
Panhandle Eastern has been able to raise considerable capital at
low cost. Only recently, it successfully completed a financing
program at remarkably low rates, which resulted in a substantial
reduction in its annual cost of capital. In February, 1941,
Panhandle Eastern sold $18,250,000 of first mortgage and first lien
bonds and $5,000,000 of serial notes at an average annual interest
cost of 2.74 percent. In February, 1942, it sold an additional
$10,000,000 of first mortgage bonds at an interest cost of 3.13
percent and $15,000,000 of preferred stock at a cost at 5.86
percent. After the financing, Panhandle Eastern's annual cost of
long-term debt was 2.88 percent and preferred stock was 5.87
percent, a combined annual cost of only 3.85 percent for these
securities."
"Panhandle Eastern has earned an average of 10.64 percent on its
net investment over the past five years, and Michigan Gas, an
average of 8.5 percent during approximately the same period."
45 P.U.R.(N.S.) p. 215.
MR. CHIEF JUSTICE STONE, concurring.
MR. JUSTICE ROBERTS, MR. JUSTICE REED, MR. JUSTICE FRANKFURTER
and I concur for the following reasons only:
Petitioners did not raise objections in their application for
rehearing to the Commission to the inclusion of their
Page 324 U. S. 651
producing and gathering facilities in the rate base. By § 19(b)
of the Natural Gas Act:
"No objection to the order of the Commission shall be considered
by the court unless such objection shall have been urged before the
Commission in the application for rehearing unless there is
reasonable ground for failure so to do."
No reason appears for the failure of petitioners here to make
objection on rehearing to the inclusion of the production and
gathering facilities in the rate base.