Pennsylvania Gas Company v. Public Service Commission Second District of State of New York/Opinion of the Court

This writ of error brings before us for consideration the question whether the Public Service Commission of the State of New York has the power to regulate rates at which natural gas shall be furnished by the Pennsylvania Gas Company, plaintiff in error, to consumers in the city of Jamestown in the state of New York. The Court of Appeals of New York (225 N. Y. 397, 122 N. E. 260) held that the Commission had such authority.

The statute of the state of New York, section 65 Public Service Commission Law (Laws 1910, c. 480), provides:

'Every gas corporation, every electrical corporation and     every municipality shall furnish and provide such service,      instrumentalities and facilities as shall be safe and      adequate and in all respects just and reasonable. All charges     made or demanded by any such gas corporation, electrical      corporation or municipality for gas, electricity or any      service rendered or to be rendered, shall be just and      reasonable and not more than allowed by law or by order of      the commission having jurisdiction. Every unjust or     unreasonable charge made or demanded for gas, electricity or      any such service, or in connection therewith, or in excess of      that allowed by law or by the order of the commission is      prohibited.'

Consumers of gas, furnished by the plaintiff in error in the city of Jamestown, New York, filed a complaint demanding a reduction of gas rates in that city. The Public Service Commission asserted its jurisdiction which, as we have said,w as sustained by the Court of Appeals of New York.

The federal question presented for our consideration involves the correctness of the contention of the plaintiff in error that the authority undertaken to be exercised by the commission, and sustained by the court, was an attempt under state authority to regulate interstate commerce, and violative of the constitutional power granted to Congress over commerce among the states. The facts are undisputed. The plaintiff in error, the Pennsylvania Gas Company, is a corporation organized under the laws of the state of Pennsylvania and engaged in transmitting and selling natural gas in the state of New York and Pennsylvania. It transports the gas by pipe lines about fifty miles in length from the source of supply in the state of Pennsylvania into the state of New York. It sells and delivers gas to consumers in the city of Jamestown, in the town of Ellicott, and in the village of Falconer, all in Chatauqua county, New York. It also sells and delivers natural gas to consumers in the cities of Warren, Corry and Erie in Pennsylvania.

We think that the transmission and sale of natural gas produced in one state, transported by means of pipe lines and directly furnished to consumers in another state is interstate commerce within the principles of the cases already determined by this court. West v. Kansas Natural Gas Co., 221 U.S. 229, 31 Sup. Ct. 564, 55 L. Ed. 716, 35 L. R. A. (N. S.) 1193; Haskell v. Kansas Natural Gas Co., 224 U.S. 217, 32 Sup. Ct. 442, 56 L. Ed. 738; Western Union Telegraph Co. v. Foster, 247 U.S. 105, 38 Sup. Ct. 438, 62 L. Ed. 1006, 1 A. L. R. 1278.

This case differs from Public Utilities Commission v. Landon, 249 U.S. 236, 39 Sup. Ct. 268, 63 L. Ed. 577, wherein we dealt with the piping of natural gas from one state to another, and its sale to independent local gas companies in the receiving state, and held that the retailing of gas by the local companies to their consumers was intrastate commerce and not a continuation of interstate commerce, although the mains of the local companies receiving and distributing the gas to local consumers were connected permanently with those of the transmitting company. Under the circumstances set forth in that case we held that the interstate movement ended when the gas passed into the local mains; that the rates to be charged by the local companies had but an indirect effect upon interstate commerce and, therefore, the matter was subject to local regulation.

In the instant case the gas is transmitted directly from the source of supply in Pennsylvania to the consumers in the cities and towns of New York and Pennsylvania, above mentioned. Its transmission is direct, and without intervention of any sort between the seller and the buyer. The transmission is continuous and single and is in our opinion, a transmission in interstate commerce, and there fore subject to applicable constitutional limitations which govern the states in dealing with matters of the character of the one now before us.

The general principle is well established and often asserted in the decisions of this court that the state may not directly regulate or burden interstate commerce. That subject, so far as legislative regulation is concerned, has been committed by the Constitution to the control of the federal Congress. But while admitting this general principle, it, like others of a general nature, is subject to qualifications not inconsistent with the general rule, which now are as well established as the principle itself.

In dealing with interstate commerce it is not in some instances regarded as an infringement upon the authority delegated to Congress, to permit the states to pass laws indirectly affecting such commerce, when needed to protect or regulate matters of local interest. Such laws are operative until Congress acts under its superior authority by regulating the subject-matter for itself. In varying forms this subject has frequently been before this court. h e previous cases were fully reviewed and deductions made therefrom in the Minnesota Rate Cases, 230 U.S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18. The paramount authority of Congress over the regulation of interstate commerce was again asserted in those cases. It was nevertheless recognized that there existed in the states a permissible exercise of authority, which they might use until Congress had taken possession of the field of regulation. After stating the limitations upon state authority, of this subject, we said (230 U.S. 402, 33 Sup. Ct. 741, 57 L. Ed. 1511, 48 L. R. A. [N. S.] 1151, Ann. Cas. 1916A, 18):

'But within these limitations there necessarily remains to     the states, until Congress acts, a wide range for the      permissible exercise of power appropriate to their      territorial jurisdiction although interstate commerce may be      affected. It extends to those matters of a local nature as to     which it is impossible to derive from the constitutional      grant an intention that they should go uncontrolled pending federal intervention. Thus, there are certain     subjects having the most obvious and direct relation to      interstate commerce, which nevertheless, with the      acquiescence of Congress, have been controlled by state      Legislature from the foundation of the government because of      the necessity that they should not remain unregulated and      that their regulation should be adapted to varying local      exigencies; hence, the absence of regulation by Congress in      such matters has not imported that there should be no      restriction but rather that the states should continue to      supply the needed rules until Congress should decide to      supersede them. * *  * Our system of government is a practical      adjustment by which the national authority as conferred by      the Constitution is maintained in its full scope without      unnecessary loss of local efficiency. Where the subject is     peculiarly one of local concern, and from its nature belongs      to the class with which the state appropriately deals in      making reasonable provision for local needs, it cannot be      regarded as left to the unrestrained will of individuals      because Congress has not acted, although it may have such a      relation to interstate commerce as to be within the reach of      the federal power. In such case, Congress must be the judge     of the necessity of federal action. Its paramount authority     always enables it to intervene at its discretion for the      complete and effective government of that which has been      committed to its care, and, for this purpose and to this      extent, in response to a conviction of national need, to      displace local laws by substituting laws of its own. The     successful working of our constitutional system has thus been      made possible.'

The rates of gas companies transmitting gas in interstate commerce are not only not regulated by Congress, but the Interstate Commerce Act expressly withholds the subject from federal control. Chapter 309, § 7, 36 Stat. 539, 544 (Comp. St. § 8563).

The thing which the state commission has undertaken to regulate, while part of an interstate transmission, is local in its nature, and pertains to the furnishing of natural gas to local consumers within the city of Jamestown in the state of New York. The pipes which reach the customers served are supplied with gas directly from the main of the company which brings it into the state, nevertheless the service rendered is essentially local, and the sale of gas is by the company to local consumers who are reached by the use of the streets of the city in which the pipes are laid, and through which the gas is conducted to factories and residences as it is required for use. The service is similar to that of a local plant furnishing gas to consumers in a city.

This local service is not of that character which requires general and uniform regulation of rates by congressional action, and which has always been held beyond the power of the states although Congress has not legislated upon the subject. While the manner in which th business is conducted is part of interstate commerce, its regulation in the distribution of gas to the local consumers is required in the public interest and has not been attempted under the superior authority of Congress.

It may be conceded that the local rates may affect the interstate business of the company. But this fact does not prevent the state from making local regulations of a reasonable character. Such regulations are always subject to the exercise of authority by Congress enabling it to exert its superior power under the commerce clause of the Constitution.

The principles announced, often reiterated in the decisions of this court were applied in the judgment affirmed by the Court of Appeals of New York, and we agree with that court that until the subject-matter is regulated by congressional action, the exercise of authority conferred by the state upon the Public Service Commission is not violative of the commerce clause of the federal Constitution.

Affirmed.