7 F.(2d) 192 heat content as 650 British thermal units has never been prescribed or supplied anywhere for general industrial and domestic uses. All witnesses agreed that efficient or satisfactory service is obtainable only by the furnishing of gas of a substantially uniform heat content. Gas is used in appliances that generally utilize the Bunsen burner, which Mr. Searle said was so devised as to consume the largest possible quantity of gas in the smallest possible flame area. It is essential that there be a suitable and proper premixture of gas and air which is admitted through a shutter into a chamber through which the gas passes to the tip of the burner. The quantity of air that should be admitted is dependent upon the heat content of the gas. It is obvious that, as the heat content of the gas varies, the mixture will not be balanced. When the heat content of the gas is increased without adjustment in the air shutter, a long yellow flame is produced, due to the insufficiency of air in the mixture, and the utensil to which the flame is applied is covered with a deposit of carbon. On the other hand, if the heat content of the gas is reduced, there is an oversupply of air, causing reduction in the flame area, and oftentimes a flareback in the air chamber, sometimes causing an explosion. "If it is impossible to supply 650 British thermal units gas uniformly, there cannot be satisfactory or efficient service. Gas of 650 British thermal units cannot be manufactured at the works with the same degree of uniformity of heat content as gas of a lower heat content. An increase in heat content is effected through the use of additional gas oil. It appears that, to make gas of 537 British thermal units, for instance, requires approximately 2.83 gallons of gas oil per 1,000 cubic feet of gas made, while to make gas of 650 British thermal units would require at least 4.65 gallons of gas oil. Mr. Little testified that it would require at least 2 gallons more to make the higher heat-content gas. In the use of such large quantity of gas oil the witnesses say that it is impossible to make gas as stable or as uniform as when the smaller quantity of oil is used. When it is attempted to distribute and supply high heat-content gas, extreme and undesirable variations are met, due to the effect of varying temperature affecting gas in the holders and in the distribution system. The additional gas oil used produces in the gas a larger quantity of condensible hydrocarbons, which drop out of the gas as the temperature falls, causing the heat content to be lowered, and then, when the tempera ture rises, these are picked up and increase the heat content. These variations in heat content, not only produce an unsatisfactory service, but create hazards. Gas of 537 British thermal units may vary 5 per cent., or about 25 units, from the standard on delivery to consumer, which is stated to be the limit of utilization of appliances without readjustment; 650 British thermal unit gas might vary 100 British thermal units either way from the standard. "Since October, 1922, plaintiff has fur nished gas in compliance with the order of the commission of August 30, 1922, prescribing an average of 537, and a minimum of 525, British thermal units per cubic foot. The appliances of plaintiff's consumers are adjusted or suited to utilize such gas, and consist mainly of gas ranges and water and room heaters. While the larger part of the appliances have adjustable burners, they are not so simple or easy to adjust that it can be done by consumers themselves. The adjustment of burners is distinctly a function of men trained to that work. All of the witnesses are in agreement that it is entirely impracticable and impossible for plaintiff to furnish 650 British thermal unit gas unless and until the appliances are adjusted or adapted for such gas. Twenty-one per cent. of the appliances are not adjustable and would have to be discarded. "Any attempt to adapt the adjustable appliances to gas of 650 British thermal units would require at least six months' time, for there would need to be, first, an adjustment to approximate 600 British thermal units and a raising of the gas manufactured to that point, and then an adjustment for the 650 with gas of that standard thereafter manufactured. The work would have to be done in two stages, because it is impossible to change at once from a 537 gas to a 650 gas, because of the great difference between these standards. The need of a considerable period of time in which thus to adjust appliances and to make other changes is well known to commissions and others familiar with the gas business. The Legislature, however, provided that its statute, proposing that the standard should be changed from the existing standard fixed by the commission at 537 British thermal units to 650 British thermal units, should take effect immediately. The companies were thus apparently expected to comply forthwith, in disregard of physical facts, or suffer the penalties of violation of a provision of law. The temporary injunetion herein, however, permitted the plaintiff to continue under the standard fixed by the commission pending the outcome of this suit. "Regardless, however, of immediate compliance, it is to be observed that such a substantial raising of the heat content would require adjustment of appliances. Many appliances could not be adjusted and would need to be scrapped. Furthermore, the plaintiff contends that no duty is imposed upon it, or legal right given to it, to enter the premises of consumers to adjust appliances, or to compel the discarding of nonadjustable appliances, nor is there any legal obligation requiring consumers to adjust their own appliances, or to have appliances that will utilize efficiently gas of a prescribed standard. A mere notice from the company to consumers to adjust or obtain appliances suitable to gas to be furnished would be ineffective. Yet, if all appliances were not proper in adjustment, danger would follow from an attempt by the company to furnish gas that would not be properly utilized. The Legislature has not provided a procedure that will permit assurance of properly adjusted appliances. Without such assurance, compliance with the proposed standard would be dangerous to life and property, a responsibility that the Legislature could hardly have intended. Incidentally, gas of such a standard, as has been indicated above, would result in unsatisfactory and inefficient service, because of wide variations in quality, even if all appliances were set for 650 British thermal units. "Such a regulation would seem to be beyond the proper police power of the state. Analogous is the holding of the Supreme Court in Willcox v. Consolidated Gas. Co., 212 U. S. 19, 53, 29 S. Ct. 192, 200 (53 L Ed. 382, 48 L. R. A. [N. S.] 1134, 15 Ann. Cas. 1034), as to a regulation as to pressure, where it is said: "The evidence shows that to put a pressure such as is demanded by the acts upon the mains and other service pipes in their present condition would be to run a great risk of explosion, and consequent disaster. Before compliance with this provision would be safe, the mains and other pipes would have to be strengthened throughout their whole extent, and at an expenditure of many millions of dollars, from which no return could be obtained at the rates provided in the acts. This would take from the complainant the ability to secure the return to which it is entitled upon its property used for supplying gas, and the provision as to the amount of pressure is therefore void.' "And also South Covington Railway v. Covington, 235 U. S. 537, 548, 549, 35 S. Ct. 158, 161 (59 L. Ed. 350, L. R. A. 1915F, 792), where the court said: "As to the regulation affecting the temperature of the cars, and providing that they shall never be permitted to be below 50° Fahrenheit, the undisputed testimony shows that it is impossible in the operation of the cars to keep them uniformly up to this temperature, owing to the opening and closing of doors, and other interferences that make it impracticable. We therefore think, upon this showing, this feature of the ordinance is unreasonable and cannot be sustained.' "Burns Baking Co. v. Bryan, 264 U. S. 504, 515, 516, 44 S. Ct. 412, 414 (68 L. Ed. 813, 32 A. L. R. 661), is one of the latest expressions of the United States Supreme Court on this subject, holding certain restrictions on the weight of bread to be unreasonable and arbitrary and repugnant to the Fourteenth Amendment. The court there said: "As indicated by the opinion of the state Supreme Court, ingredients selected to lessen evaporation after baking would make an inferior and unsalable bread. It would be unreasonable to compel the making of such a product, or to prevent the making of good bread in order to comply with the provisions of the act fixing maximum weights. The act is not a sanitary measure.' "These and other rulings of the courts hold that a police regulation cannot be arbitrary, but must be just and reasonable, and within the requirement that it shall properly protect the lives, health, morals, or welfare of a community. The plaintiff, in harmony with efforts of the industry, has attempted to furnish gas of a quality best suited to presentday needs of its public, and in accordance with the findings of the Public Service Commission, which, as an expert agency of the state, has kept itself informed upon such matters. The action of the Legislature in thus attempting to make effective an arbitrary standard, condemned by expert witnesses on both sides, and productive of danger, with no compensating advantages, has, in my opinion, gone beyond its power, and its enactment should be held unconstitutional and void. "Conclusion. "The views herein expressed and the conclusions reached indicate so clearly that the proposed rate is confiscatory, as well as the proposed standard arbitrary and beyond the police power to enact, that there would seem 7 F.(2d) 192 no room for argument that the company should have experimented under the new rate and presumably with the new standard. I am unable to find any case that would require a trial period of the statute before questioning its validity, with the facts so clear as to actual operating expenses and results so serious from an attempt to change to the proposed standard. "I have made formal findings of fact and conclusions of law, which are attached and submitted herewith. A correct transcript of the testimony and copies of the exhibits, together with a stipulation of the various solicitors, waiving the signatures of the witnesses to their several depositions, and further waiving the filing of the original exhibits waiving the filing of the original exhibits marked in evidence, are also filed herewith. Upon the proofs as taken I find and report as follows: "Findings of Fact. "1. Plaintiff was duly incorporated on the 26th day of May, 1904, under the Transportation Corporations Law of the state of New York, and since July 1, 1904, has been and still is engaged in the business of manufacturing, furnishing, and selling gas for public and private use in the territory comprising the Thirtieth ward and a small part of the Thirty-First ward of the borough of Brooklyn in the city of New York, which is a city containing a population of 1,000,000 or more. "2. The Kings County Gas & Illuminating Company was incorporated December 17, 1889, under chapter 40 of the Laws of 1848, and the several acts amendatory thereof and supplementary thereto, and on or about December 26, 1889, received the consent of the municipal authorities of the town of New Utrecht, Kings county, to lay conductors for conducting gas through the streets, lanes, alleys, and squares in said town. Said Kings County Gas & Illuminating Company commenced supplying gas for public and private use on or about September 1, 1891, and continued to supply the same until its merger with the plaintiff July 1, 1904. Pursuant to the provisions of chapter 451, Laws of 1894, the territory comprising the town of New Utrecht on July 1, 1894, was added to the city of Brooklyn as the Thirtieth ward thereof, and since January 1, 1898, has been, and now is, the Thirtieth ward of the borough of Brooklyn, city of New York. "3. On July 1, 1904, plaintiff, being then the owner of all the issued and outstanding capital stock thereof, duly merged into and with itself said Kings County Gas & Illuminating Company in accordance with the pro 7 F. (2d)-14 visions of the Stock Corporation Law of the state of New York, and thereupon acquired and became, and since has been, possessed of all its estate, property, rights, privileges, and franchises. "4. Plaintiff has issued and outstanding in the hands of the public $750,000 of 5 per cent. first mortgage bonds, due October 1, 1940, and $2,389,000 of 5 per cent. and $1,822,000 of 62 per cent. first refunding mortgage bonds, due October 1, 1954. Plaintiff has issued and outstanding 50,000 shares of common capital stock of no par value, and $500,000, par value, of 8 per cent. cumulative preferred stock. Since January 1, 1924, plaintiff has obtained subscriptions in the amount of $702,400 to an issue of 7 per cent. which subseriptions were from its customers cumulative preferred stock, two-thirds of and employees. At May 8, 1924, such subscriptions to the amount of $429,900 had been paid in full, and $95,169.50 had been received on account of the balance of the subscriptions. "5. The credit balance in the contingency reserve on plaintiff's books at December 31, 1922, was $256,695.72, and at December 31, 1923, it was $292,689.21. Its bond amortization reserve at December 31, 1923, had a credit balance of $38,189.09, its uncollectible bill reserve a credit balance of $5,000, and its retirement reserve a credit balance of $201,910.62. "6. Plaintiff owns a piece or parcel of land bounded on the east by First avenue, on the north by the south line of Fifty-Fourth street and the center line of Fifty-Fourth street extended, on the west by New York Bay, and on the south by the center line of Fifty-Fifth street extended, in the borough of Brooklyn, having a total area of 462,208 square feet, 295,855 square feet being uplands, and 166,353 square feet being lands under water outside the bulkhead line, the present fair market value of which land, without improvements, is $1,141,344. Plaintiff's gasworks or manufacturing plant is located upon the lands above described, and 231,381 square feet of the upland and 55,073 square feet of the lands under water are used by the plain tiff in the conduct of its business, the pres ent fair market value of which land, without said improvements, is $811,650. "7. Plaintiff owns four parcels of land at Ninth avenue and Sixty-Fifth street, on which are located its gas holders, shops, and yards. The parcel at the northwest corner of Ninth avenue and Sixty-Fifth street has an area of 18,000 square feet, the present fair market value of which parcel, without improvements, is $23,750. The parcel at the northeast corner of Ninth avenue and SixtyFifth street has an area of 4,001 square feet, the present fair market value of which parcel, without improvements, is $6,300. The parcel at the southwest corner of Ninth avenue and Sixty-Fifth street has an area of 109,017 square feet, the present fair market value of which parcel, without improvements, is $138,771. The parcel at the southeast corner of Ninth avenue and Sixty-Fifth street has an area of 8,825 square feet, the present fair market value of which parcel, without improvements, is $13,531. "8. Plaintiff's manufacturing works are equipped with seven gas generators of a combined rated capacity of 17,400,000 cubic feet of gas per 24 hours. Its gas storage holders have a capacity of 2,500,000 cubic feet. Plaintiff, on June 1, 1923, had approximately 205 miles of gas mains laid in the streets, avenues, and public places of said Thirtieth and Thirty-First wards, consisting of 1,076,410 feet of cast iron mains, ranging in sizes from 3 inches to 20 inches, 6,361 feet of wrought iron mains, ranging in sizes from 1 inch to 3 inches, and 814 feet of wrought steel mains, ranging in sizes from 4 inches to 18 inches. On June 1, 1923, plaintiff's said gas mains were connected to the premises of its consumers by 26,168 service pipes, of a combined length of 1,217,866 feet, and on that date plaintiff had installed on the premises of said consumers 50,717 gas meters. "9. The cost of reproducing the manufacturing plant, distributing system, and all other structural property owned and used by the plaintiff in its gas business as of June 1, 1923, at prices for labor and material then prevailing, exclusive of the cost of restoring street pavement over gas mains and gas service pipes, was and is at least the sum of $8,059,417, classified as follows: Buildings Manufacturing apparatus and equipment and gas holders... Gas mains in streets. Gas service pipes..... Gas meters on customers' premises and in stock... Engineering, superintendence, and general contractor's expense and profit Interest during construction.. Taxes during construction.... Administration, legal and miscellaneous general expenses during construction "10. The plant, machinery, and equipment of the plaintiff have been well maintained, repairs, renewals, and replacements having been made as required. Said plant, machinery, and equipment are in as efficient operating condition for the economical production of gas as if new. The uncontradicted evidence shows that an expenditure of $1,855.50 on the buildings and $16,557.92 on the machinery, apparatus, and equipment, as of June 1, 1923, would put the same in a condition substantially as good as they were when new. These amounts deducted from the reproduction cost of the structural property give a reproduction value of $8,041,003. "11. The cost to restore the street pavement then existing over the gas mains and gas service pipes of plaintiff as of June 1, 1923, at prices for labor and material then prevailing, was and is at least the sum of $1,639,333, made up as follows: Contract price...... Engineering, superintendence, and miscellaneous expenses... Interest during construction. $1,444,347 108,326 86,660 $1,639,333 "12. To June 1, 1923, plaintiff had expended the sum of $97,696.65 in the restoration of street pavement necessarily cut in the laying of gas mains and gas service pipes in the extension from time to time of its distribution system. "13. As of June 1, 1923, plaintiff owned and used in its gas business miscellaneous general equipment, consisting of laboratory apparatus, office and storeroom furniture and fixtures, stable and garage vehicles and accessories, and small tools, which had cost the sum of $102,541. "14. Between June 1 and December 31, 1923, plaintiff expended for additions, extensions, and improvements to its manufacturing plant and distributing system the sum $ 752,134 of $565,414.25 in excess of the cost of all property withdrawn from service during said 1,590,291 317,536 421,623 25,646 "15. The territory served by plaintiff is a rapidly growing section of New York City, 816,870 and to meet the increase in demand for gas plaintiff has been obliged to enlarge its manufacturing facilities, extend its mains, and install additional new gas service pipes and meters each year. Plaintiff installed at new locations 4,029 meters in 1921, 5,665 meters in 1922, 7,086 meters in 1923, and 2,744 meters in the first 4 months of 1924, having on $8,059,417 the premises of its consumers at April 30, 127,014 7 F.(2d) 192 1924, a total of 58,653 meters. The estimat- "17. In 1923 plaintiff entered into a contract for, and commenced, the construction on its lands at Ninth avenue and Sixty-Fifth street of a booster station, necessary adequately to distribute under suitable pressure the constantly increasing supply of gas to outlying districts within its territory. Expenditures estimated to amount to $148,674.96 were required to be made in 1924 to complete the work under said contract. such element of going concern is of the fair and reasonable value of $800,000. "21. The land upon which plaintiff's gas holders, shops, and yards are located, as aforesaid, was acquired by the Kings County Gas & Illuminating Company in 1890 at a cost of $20,000, and the land upon which plaintiff's manufacturing works are located was acquired by said Kings County Gas & Illuminating Company in 1896 at a cost of $119,000. The total cost to the Kings County Gas & Illuminating Company of all the property owned by it and acquired by the plaintiff upon its merger July 1, 1904, as shown by the books of said Kings County Gas & Illuminating Company was $2,441,997.40. The investment of plaintiff and its predecessor, with land at its then present market value, in the property owned by the plaintiff at December 31, 1923, exclusive of working capital, was $7,847,212.59, made up as follows: Cost to Kings Coun "18. Plaintiff has never owned an office building, but has rented office space for its officers and clerical force. Due to the growth of its business and the consequent increase in its office requirements, the quarters occupied by plaintiff for several years past have become entirely inadequate. Plaintiff has acquired a site on which to construct an ade- Net additions to fixed capital, quate office building, the estimated cost of which is $550,000. ty Gas & Illuminating Company of property existing June 30, 1904 Less cost of land.. 139,000.00 $2,302,997.40 "19. The average monthly working capital employed by the plaintiff in the year ended December 31, 1923, was $868,372.47, made up of the average monthly capital in the following accounts: .$2,441,997.40 July 1, 1904, to December 31, ... Present value of land. 02,997.40 4,198,603.69 1,345,611.50 $7,847,212.59 "22. The fair and reasonable value of the land, manufacturing plant, distributing sys$303,988.60 tem, and all other property, tangible and in219,233.80 195,142.20 tangible, owned and used by the plaintiff in 125,000.00 its gas business, excepting its franchises, as 12,162.40 of June 1, 1923, was and is the sum of $10,635,242, and as of January 1, 1924, was and 5,358.38 is the sum of $11,200,656, classified as follows: 1,000.00 Land 649.68 5,837.41 $868,372.47 Manufacturing plant, distributing "The reasonable and necessary working capital employed by plaintiff in its gas business since January 1, 1923, has been, and is, at least $600,000. "20. Plaintiff's gasworks, plant, and system is a complete, connected, established, and operating property, doing business and earning money, and the element of going concern value therein is a property right, independent of the franchise, or of any mere good will as between such plant and its consumers, and Restoring street pavement over Cost of additions to fixed capital, $ 994,002 8,041,003 97,696 102,541 600,000 800,000 $10,635,242 565,414 $11,200,656 |