Riverside Cement Co. v. Public Utilities Commission

Citations: 35 Cal. 2d 328; 217 P.2d 403; 1950 Cal. LEXIS 340Docket: L. A. No. 21085

Court: California Supreme Court; May 2, 1950; California; State Supreme Court

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The proceeding involves a review of an order from the Public Utilities Commission that dismissed complaints for reparations filed by Riverside Cement Company and Southwestern Portland Cement Company. Riverside reopened its plant in 1942 at the request of the United States War Production Board, securing power from California Electric Power Company. A contract was established for a five-year term with a minimum charge of $1.00 per month per horsepower, totaling at least $240,000. An escalator clause allowed for automatic increases in energy charges based on fuel oil market prices, with provisions for written notice and a rescission option for Riverside. The contract was extended to March 31, 1948.

On March 19, 1947, fuel oil prices rose to $1.50 per barrel, leading to a service charge increase effective July 1, 1947, with further increases following as prices continued to rise. After the contract expired, Riverside's charges were governed by tariff schedules. Southwestern entered into a similar contract with the same escalator provisions. Both companies filed complaints alleging overcharges after July 1, 1947, seeking reparations of $21,739.91 and $16,535.72, respectively. The commission determined that increases in fuel oil prices above $1.41 per barrel led to rates charged that exceeded those computed from filed schedules or contracts for similar consumers. The resolution of the chargeable rate from July 1, 1947, to March 31, 1948, hinged on the interpretation of paragraph 14 of the contract, which addressed the applicability of lower rates offered to other consumers.

The commission dismissed the petitioners' claim that their contracts required the utility to provide them with any lower rates that became available. Instead, it upheld the utility's argument that the use of "shall" in paragraph 14 indicated that petitioners would only receive lower rates enacted by the utility or the commission in the future. The commission clarified that lower rates in effect since July 1, 1947, were not applicable, as they were already existing at the time the contracts were executed. Consequently, the oil escalator clause was deemed relevant, while the petitioners could have pursued rescission after a notice of the rate increase but did not, thus forfeiting their right to reparations.

The petitioners argued that the commission's stance conflicted with prior rulings, specifically regarding Rule 19, which required utilities to inform consumers of applicable lower rates. This rule mandated that utilities alert customers about the availability of new or optional rates. However, in this case, Rule 19 was not applicable, as the petitioners sought a lower rate based on guaranteed service length and minimum payments, which was outside the normal tariff schedules.

The contracts aimed to secure a lower rate, comparable to other special rates, and it was unreasonable to presume the petitioners would accept a higher rate than existing ones. The intention of paragraph 14 was to ensure that any lower rates enacted during the contract period would benefit the petitioners, with the escalator clause intended to protect the utility’s cost differential. Overall, the utility was obligated to provide information and options for the lowest rate, affirming a consumer's right to select the most advantageous rate.

The utility cannot justifiably use a clause to raise charges above existing tariffs without facing consequences. In 1948, the utility recognized the need for tariff increases due to fuel oil price changes and applied to the commission for those adjustments. During this application, petitioners realized they were paying rates exceeding the existing tariffs. The utility's reliance on future language in paragraph 14 is invalid based on the facts. This paragraph applies not only if tariffs are reduced but also when the utility increases charges beyond the current tariff. The commission found that the fuel oil price could rise to $1.41 without affecting the contracted rate, but when the utility raised the contract rate above the filed tariff, it effectively created a rate that was more favorable than the new contract rate. Consequently, if paragraph 14 applies, it supersedes the escalator clause, entitling petitioners to a lower rate from July 1, 1947, and resulting in overcharges that warrant reparations. The commission's dismissal of the complaints is to be annulled, and the cases are remanded for calculating the reparations owed to the petitioners. Concurrence is noted from Justices Gibson, Carter, Sehauer, and Spence.