Lone Star Gas Co. v. Corporation Commission

BAXLESS, J. The matter under consideration involves two appeals: No. 24995, Lone Star Gas Company, Plaintiff in Error, v. Corporation Commission of Oklahoma et al., Defendants in Error; and No. 24996, Community Natural Gas Company, Plaintiff in Error, v. Corporation Commission of Oklahoma et al., Defendants in Error. These appeals arise from certain orders of the Corporation Commission in cause No. 10777 pending before it. The parties to this appeal will be referred to hereinafter as follows ; Community Natural Gas Company, as Community; Lone Star Gas Company, as Lone Star; the Corporation Commission of Oklahoma, as Commission; and the Lone Star Gas Corporation, a corporation which plays a part in the discussion of this matter, as Holding Company. The proceedings originated before the Commission when certain citizens of Walters, Okla., filed their protest against the burner-tip rates charged by the Community for natural gas and applied for a reduction in said rates. The protest and application were joined in thereafter by the citizens of other towns served by Community until 26 towns were involved. A preliminary statement of the relationship of each of the companies above named to each other and to the proceedings, and of the substance of the order entered by the Commission, will be of assistance in understanding the discussion to follow. Community is a corporation organized under the laws of Delaware and serves consumers of natural gas in the towns above mentioned with natural gas at the burner-tip. Lone Star is a Texas corporation; it produces, buys, gathers, and transports natural gas to the city gates of the towns mentioned, and sells to the Community at the gates of said towns. It has qualified to do business in the state of Oklahoma. Holding Company is a corporation organized under the laws of Delaware, but maintains its principal offices in Pittsburgh, Pa. It has not qualified to do business in the state of Oklahoma. It owns approximately 95% of the stock of Lone Star and of Community. In addition, under contracts with them, it furnishes to them certain “management services” enumerated and commented upon later on in this opinion, in consideration for which services Lone Star and Community make payments to the Holding Company from their income. These payments are taken into consideration by Lone Star and Community in their base rate. The Commission at the outset decided that because of the intercorporate relationship of these parties it would be necessary to investigate into the reasonableness of the “management” fees paid by Community to the Holding Company and paid by the Lone Star to the Holding Company, to determine whether said management fees were reasonable charges for consideration in the rate base of Community, and to investigate the set-up of the Lone Star to determine whether or not the rate which was being paid by the Community to Lone Star for natural gas at the city gates was reasonable; and generally to determine whether or not by reason of the integration and intercorporate relationship of these three corporations unreasonable expenses were being charged into the rate base of the Community. Lone Star protested against the jurisdiction of the Commission to make such investigation of it, but upon its protest being overruled, submitted the evidence requested in every respect save such information as was within the possession of the Holding Company. Holding Company denied the jurisdiction of the Commission to investigate it, and. when its preliminary protest was overruled, ignored the proceedings, the Commission’s subpoenas to its officers, and the Commission’s subpoena duces tecum for its records. The Commission thereupon made findings based upon the evidence introduced and entered a temporary order, from which the Lone Star and the Community appeal. We will consider the appeal of Community first.. The argument advanced by Community pertains to the order actually made by the Commission, and consists of two parts: “1. The order of the Commission herein, in so far as same requires the Community to reduce its burner-tip rate for natural gas and natural gas service to the extent of ten (10c) cents per thousand cubic feet, *294 is arbitrary, mere legislative fiat and therefore void, for the reason that said Commission has made no determination or finding of the value of the properties devoted to the public service in the towns affected by said order, the expenses of operation, the proper annual allowance for depreciation and amortization, the income received by the company under the present rates and the income or probable income which it will receive under the rates fixed by the Commission, and what constitutes a fair and reasonable rate of return to the company. “2. The Commission erred in ordering and requiring the Community to reduce its burner-tip rate ten (10c) cents per thousand cubic feet of natural gas for the reason that the uneontradicted and undisputed evidence in this case shows that the Community is not receiving under the present rates and will not receive under the rates fixed by the Commission, a fair and reasonable return upon the fair value of the property devoted to the public service in any of the 26 towns in the state of Oklahoma in which it operates even though the gate rate paid by the Community to the Lone Star be reduced to and fixed at thirty (30c) cents per thousand cubic feet of gas.” This argument is made upon the assumption that the Commission had before it all of the evidence necessary to make findings and orders as contemplated by article 9, sec. 22, Constitution of Oklahoma. If this argument is not based upon this assumption, it is entirely irrelevant and beside the point. Without such an assumption it would not apply to the order actually made. The Commission’s specific finding No. 57 reads: “That this order is in the nature of a temporary order.” Its findings Nos. 58 and 59, based upon a record showing that all of the evidence desired and requested had not been presented to it but had been withheld, make it patent that no permanent order could have been entered at that time. The record plainly shows that the Commission entered upon a rate-making proceeding and adopted as a part of its formula for the determination of the matter the theory that an investigation of the intercorporate relations between the three corporations was an important factor. Any information to be obtained from such an investigation would enter into and affect the order to be made. Therefore, there could be no final or permanent order on this matter in the absence of this investigation and information to the extent to which the Commission, by law, could or should pursue it. Temporary orders are proper. Muskogee G. & E. Co. v. State, 81 Okla. 176, 186 P. 730; City of Bartlesville v. Corporation Commission, 82 Okla. 160, 199 P. 396; O. G. & E. Co. v. Corporation Commission, 83 Okla. 281, 201 P. 505; and American Indian Oil & Gas Co. v. Collins & Co., 157 Okla. 49, 9 P. (2d) 438, wherein it was said, quoting from the ease of O. G. & E. Co. v. Corporation Commission, supra: “The legislative power of the Corporation Commission over rates is not confined to prescribing permanent rates, but may be exercised as the exigency of the times and changing' conditions demand.” There are more theories or formulas than one which may be adopted and followed by rate-making bodies. None is exclusive or more favored than the others. Pioneer T. & T. Co. v. Westenhaver, 29 Okla. 429, 118 P. 354, and American Indian Oil & Gas Co. v. Collins & Co., supra. This is the federal rule also, for it was said in Los Angeles G. & E. Corp. v. Railroad Commission, 289 U. S. 287, 304-306, 77 L. Ed. 1180, 1192-1193: “The legislative discretion implied in the rate-making power necessarily extends to the entire legislative process, embracing the method used in reaching the legislative determination as well as that determination itself. We are not concerned with either, so long as constitutional limitations are not transgressed. When the legislative method is disclosed it may have a definite bearing upon the validity of the result reached, but the judicial function 'does not go beyond the decision of the constitutional question. * * * And mindful of its distinctive function in the enforcement of constitutional rights, the court has refused to be bound by any artificial rule or formula which changed conditions might upset. We have said that the judicial ascertainment of value for the purpose of deciding whether rates are confiscatory ‘is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts’.” Therefore, if the formula intended to be used by the Commission called for an investigation of the reasonableness of the gate rate, and of the reasonableness of the cost to Community and Lone Star of materials purchased for them by Holding Company, and of the reasonableness of the charges for management services contracted from holding company, as each of these items affected the rate base of Community, and if the Commission had the power to make such investigation, we must approve an investigation of these items as being properly within the legislative discretion involved in the proceeding's. If an investigation of these items was properly decided upon, the Commission must be consistent *295 and must make a reasonably complete investigation. We next consider whether the Commission has authority to make an investigation into the affairs of a foreign corporation, doing- interstate business in Oklahoma and a foreign corporation ássertedly not doing any business in Oklahoma as a part of the exercise of the Commission's admitted rate-making authority of a foreign corporation admittedly doing intrastate business only in Oklahoma, where an intercorporate relationship exists which renders the three corporations a single unit, in effect, in so far as ownership, officers, management, and purpose is concerned. We would not treat this question separately in so far as Community is concerned if it were not for the fact that the temporary order entered by the Commission relating to Community has been attacked as being improperly made upon the state of the record. As before stated, the Lone Star and Holding Company both denied the authority of the Commission to make this investigation, and the Community by its argument inferentially does so. For these reasons what we say here is applicable both to Community and Lone Star on their appeals and is applicable to the Commission’s asserted authority to investigate Holding Company. In opposition to the Commission’s asserted authority to make this investigation is cited the case of State Corp. Commission v. Wichita Gas Co. (U. S.) 78 L. Ed. 500, and the cases cited therein under headnote 2. Whether these cases are authority for this rule is questionable in the face of the opinion of the Supreme Court of the United States in the case of Pennsylvania Gas Co. v. Public Service Commission of New York, 252 U. S. 23, 64 L. Ed. 435. Whatever may be the difference between the holding in these cases, if any, or their analogy to this case, we believe the case of State Corp. Comm. v. Wichita Gas Co., supra, is authority for an investigation by a state rate-making board of integrated corporations, some of which may not be subject to its rate-making powers, for the purpose of ascertaining information to be used in arriving at the rate base of companies subject to its rate-making powers. If there is any doubt upon this question, it is settled in the opinion of the Supreme Court of the United States in Western Dist. Co. v. Public Service Commission, 285 U. S. 119, 76 L. Ed. 655. In that case a company doing an intrastate business, as Community is here, applied for an increase in its burner-tip rates. It purchased all of its natural gas at city gates from a pipe line company doing interstate business, as Lone Star is here. Both of those companies bore the relation to a foreign corporation that Community and Lone Star do to Holding Company herein. The Public Service Commission of Kansas called for information as to the interstate pipe line company and the holding company just as the Commission seeks information about Lone Star and Holding Company in this case. This information was refused by "the applicant and the application was thereupon dismissed. Upon appeal to the Supreme Court of the United States, that court said: “First. The appellant asserts that the rate charged by the pipe line company for gas delivered at the city gate is an interstate rate and not thp subject of regulation by any state authority. The soundness of this contention is conceded by the appellees. But the appellant argues that any inquiry by the State Commission into the reasonableness of this charge amounts to an indirect attempt at regulation, an effort on the part of the state to circumvent the paramount federal authority over interstate commerce, and hence an attempt to do by indirection what is forbidden by the federal Constitution. “The appellees disclaim any intent to control rates charged for interstate service, but say that as the Commission’s function is to set reasonable rates for the intrastate service rendered by appellant in the city of Eldorado, this necessarily requires a determination of the question whether the price paid for the gas distributed is fair and ^reasonable. Tío this end the Commission insists upon its authority to make such investigation as will satisfy it upon this point. Having in mind the affiliation of buyer and seller and the unity of control thus engendered, we think the position of the appellees is sound, and that the court below was right in holding that if appellant desired an increase of rates it was bound to offer satisfactory evidence with respect to all the cost which entered into the ascertainment of a reasonable rate. Those in control of the situation have combined the interstate carriage of the commodity with its local distribution in what is in practieai effect one organization. There is an absence of arm’s length bargaining between the two corporate entities involved, and of all the elements which ordinarily go to fix market, value. The opportunity exists for one member of the combination to charge the other an unreasonable rate for the gas furnished and thus to make such *296 unfair charge in part the basis of the retail rate. The state authority whose powers are invoked to fix a reasonable rate is certainly entitled to be informed whether advantage has been taken of the situation to put an unreasonable burden upon the distributing company, and the mere fact that the charge is made for an interstate service does not constrain the Commission to desist from all inquiry as to its fairness. A ny other rule would make possible the gravest injustice, and would tie the hands of the state authority in such fashion that, it could not effectively, regulate the intrastate service which unquestionably lies within its jurisdiction. * * *” The facts existing and presented to the Commission show that Community purchased all of its natural gas from Lone Star; that both of these companies were owned to the extent of 86 per cent, of eacli by Holding Company; that Holding Company acted as purchasing- agent for each of these companies ; that there was some indication (not entirely established for a lack of evidence, but which evidence could only be furnished by Holding Company) of an unreasonable -discrepancy between the cost price to Holding Company of materials purchased and the price charged to Lone Star and Community on what at most was a mere bookkeeping-transaction between the three companies; and that Holding Company received from each of the other companies payments of money for accounting, financial, engineering, purchasing, and general services. The cost of materials and management services to Lone Star entered into its rate base, and a portion thereof was passed on to Community.. The cost of materials purchased by Community and of management services rendered to it entered into its rate base. Therefore, there was ample evidence of such unification of a business affected with a public interest in Oklahoma as to justify the Corporation Commission in determining rightfully that it legally had the power to make such an investigation. In the Kansas case the Public Service Commission was authorized by a statute (chapter 239, S. L. 1931) to investigate affiliates of public service companies subject to its control. We have no such statute nor any need of one. Article 9, secs. 15-34, Constitution of Oklahoma, is ample authority for this investigation of affiliates of public service companies as therein defined. See. also, chapter 93, S. L. 1913. It is probable that Community as a separate, responsible corporate entity submitted to the Commission all of the evidence which was within its possession or control. The same is true of Lone Star. Community complains that the temporary rate established is confiscatory. It may also contend that it has furnished to the Commission all the evidence which it can furnish and that it is faced with a confiscatory temporary order, and it therefore has no remedy at law. The Commission, in the exercise of its rate-making powers, and this court upon appeal therefrom are not to be blinded to the situation. They will look through the form to the substance. In fact, the record shows that a large per cent, of the stock of Community and Lone Star is owned by Holding Company. Every day knowledge of corporations, their organization, operation, and benefits sought teaches that they are organized and operated by and for the stockholders and for the benefit of the stockholders. This common sense result was recognized by the Supreme Court of the United States in Western Dist. Co. v. Public Service Commission, supra, when argument was advanced as to why certain uncontroverted averments regarding inability to get gas elsewhere or at a lower rate should stand taken as true, and it said: “This might well be true were it not for the fact of unity of ownership and control of the pipe line and the distributing system. An averment of negotiation and effort to procure a reduction in the wholesale rate means little in the light of the fact that the negotiators are both acting in the same interest — that of the holding company, which controls both.” Therefore, when Community says that it has submitted to the Corporation Commission all of the evidence it can submit, it has stated the truth only partially. When it states that its property is being confiscated and it is without relief or protection, such statement is only partially true. Those who now own and control Community, and who hope to reap benefits therefrom, can furnish and must furnish to the Commission the evidence which will enable it to make orders to avoid such an end. The hands of the state’s rate-making body and state’s courts are not to be tied by artificial barriers set up in the form of holding c ompanies, organized and kept elsewhere, which seek to reap the benefits or profits earned under rates established for public service companies in Oklahoma and at the same time deny tbe state’s rate-making body and the state’s courts the information which they deem necessary to the determination of proper permanent rates. The unfairness and untenability of Community’s contention in this respect is apparent. In the case of Western Dist. Co. v. Public *297 Service Commission, supra, the application for increased rates was based upon the fact that the existing rates were inadequate and amounted to confiscation. But upon refusal on the part of the applicant (in reality on the part of its controlling company) to furnish evidence needed in the efforts to rectify this alleged condition the application was dismissed, and it was held that the applicant was not entitled to equitable relief under the circumstances. Because the Commission’s powers are invoked in this instance by the consumer rather than the public service company does not alter the reason back of the rule or the rule to be applied. If Community is being punished by this order or is suffering or likely to suffer ruinous consequences, its stockholders have within their possession and control the means of obviating such an end. In Dayton P. & L. Co. v. Public Utilities Commission (U. S.) 78 L. Ed. 1207, the Supreme Court of the United States says: “Even so, the burden of proof was on the buyer of the gas to show that in these transactions with the affiliated seller the price was no higher than would fairly be payable in a regulated business by a buyer unrelated to the seller and dealing at arm’s length. Western Distributing Co. v. Public Service Commission, 285 U. S. 119.’’ Much argument has been indulged in in the briefs as to the character of this appeal: that is to say, whether this court acts in a judicial capacity or in a legislative capacity in passing upon this record. Because tlu> order entered is temporary, becaiise the questions to be considered herein are practically all of law for the guidance of the Commission, and because our determination hereof necessarily cannot result in a final legislative act, we decline to pass upon that question in this appeal. Heretofore we have approved all the Com. mission has said and done, in so far as it determined the formula it desired to follow, determined the temporary rate, and found the necessity of a complete investigation and disclosure of the intercorporate relations. If the Commission was unable to enter a final order upon the record presented to it, necessarily we cannot enter a final order here, but must treat this appeal as being merely for the purpose of guidance as to the rules of law applied and to be applied by the Commission in the proceedings; and having so determined this, we must remand the proceedings to the Commission for further prosecution in keeping with the expressions herein contained. However, before doing so it is necessary to notice certain other acts of the Commission as disclosed in this record which do not meet our entire approval. The order entered by the Commission purports to direct the Lone Star to establish a gate rale for Community. It also purports to control the expenditures to be made by Community for its operations. The powers of the Commission are to regulate, supervise, and control the public service companies in their services and rates, but these powers 'do not extend to an invasion of the discretion vested in the corporate management. It does not include the power to approve or disapprove contracts about to be entered into nor to approve or veto the expenditures proposed. The powers of the Commission, as respects the acts of. public service companies, are limited to an investigation of these acts to determine whether or not they have a reasonable and fair effect upon the rights of the public and to take steps to avoid an unreasonable or unfair or prejudicial effect upon the public rights, if such be found. To give an illustration of what we mean. The Commission had no power to prohibit the unification of the companies involved herein, and has no power to dissolve their relationship. It had no power of inspection or approval of the contracts between these companies. But now that such contracts are made and are put forward as establishing certain rights upon the part of contracting parties, the Commission may ascertain their effect upon the public rights and approve, modify, or reject such effect if found to be unreasonable, unfair, or prejudicial. To be even more concrete: The Commission may have in the past, or may even now, establish a rate base for Community which would enable it to earn a return of 10 per cent, per annum upon an entirely satisfactory valuation of its property, but the Commission may not go further and insist upon Community declaring dividends in keeping therewith. ¿That is a matter for the discretion of corporate management. Suppose that Holding Company, which owns 95 per cent, of Community’s stock, desired to make exactions from Community for service rendered to Community which would consume the profit contemplated by such a return, in order to enhance the profitableness of Holding Company’s relations with Community and increase the dividends which Holding Company might pay to its stockholders: such decision would be no concern of the Commission. Bait if it does this, Community then cannot come before the Commission and ex *298 hibit the contractual relations between it and Holding Company and ask for an increase of rates because the disposition of its income from the established rate does not permit it to have a profit or declare a dividend. In such case the Commission may and should determine whether or not the payments contracted to be made by Community to Holding Company from the income derived from this established rate were unreasonable or prejudicial to public rights. Springfield G. & E. Co. Case, 291 Ill. 209, 125 N. E. 891; Missouri ex rel. S. W. Bell Tel. Co. v. Public Service Comm., 262 U. S. 276, 67 L. Ed. 981; O. G. & E. Co. v. Oklahoma Natural Gas, 85 Okla. 25, 205 P. 768. In this connection we desire to call attention to the manner in which the Corpora‘tion Commission of Kansas worded its order and exercised its powers in the investigation resulting in the appeal in the case of State Corp. Commission v. Wichita Gas Co., supra. The text of the pertinent part of the order entered therein is: “1. That on and after the first day of September, 1932, the 'distributing companies, respondents above named, shall cease to set up on their books as an expense item any payments made to Henry L. Doherty & Co. under the contract above mentioned, because of the 1%% charge, and also any payments made to City Service Gas Company for main line town border gas in excess of 30c per M. C. F., and should give no consideration to any such payments in fixing a rate for the domestic consumer.” This was not an attempt to order the distributor not to pay such sums of money, but rather was an order not to charge, as an item of expense, a sum in excess of the figure found to bo the reasonable cost of gas purchased at the city gate. This is a distinction of vital importance in rate-making. The rate making body makes calculations entering into a rate base designed to produce an adequate return. What the company does with its income is no concern of the rate-making body, so long as a full and complete disclosure thereof is made wheif called for in order that its effect under all of the circumstances may be judged properly. The Supreme Court of the United States in Dayton P. & L. Co. v. Public Utility Commission of Ohio, supra, noticed the same design in the action of the Ohio Commission in the following observation: “The contract between the appellant and the Ohio Fuel Gas Company called for payment at the rate of 45e per thousand cubic feet; the Commission found this price to be excessive to the. extent of 6c, thereby reducing to 39c the allowance to be made as a proper operating expense.” Therefore the findings and temporary order of the Commission must be modified in language and purport in this respect and its future orders herein must conform to this rule of law. Orders entered as to reasonableness of expenditures may indirectly affect or modify or even abrogate the contracts of Community with Lone Star and Holding Company, but this effect is legal and constitutional. Arkansas Nat. Gas Co. v. Arkansas Railroad Comm., 261 U. S. 379, 67 L. Ed. 705. The power of the Commission over rates cannot be defeated by contract between a public service company and its consumers. American Indian Oil & Gas Co. v. Collins, supra. Public service corporations may enter into contracts between themselves, but may not thereby defeat or avoid the inquiry of the Commission into them and their effect for purposes of regulation, supervision, and control of services an'd rates of public service companies under our Constitution, O. G. & E. Co. v. Oklahoma Natural Gas Co., supra, and O. G. & E. Co. v. Wilson & Co., 146 Okla. 272, 288 P. 316. A company doing an interstate business may .not contract with a public service company doing an' intrastate business in Oklahoma and subject to the powers of the Corporation Commission of Oklahoma, regarding matters affecting- the intrastate company’s service or rates, and thereby defeat the Commission’s power over the intrastate company, on the ground either of impairment of contract or interference with interstate commerce. Western Dist. Co. v. Public Service Commission, supra. Another portion of the findings and temporary order relates to the disposition of the savings of 10c per M. C. F. asserted to have been effected by the reduced charge for the gas purchased. Community asserts that the order passing such asserted savings on to the burner-tip is arbitrary and capricious when it assumes or finds that the reduction resulted .in savings. The Commission asserts that the reduction is bound to result in savings, for when the operating expenses are reduced by reason of the reduced charge for gas purchased the result is an automatic unearned increase in the profit resulting from sales in a like sum; and that this, by right, should pass on to the consumer. We cannot agree with the Commission that such a charge is in all instances, or even in this instance likely to be, a savings. To say so would mean that every thousand cubic feet of gas purchased would in turn be sold, or, in other words, that the gas purchases *299 and sales would be equal. This may not always be so. It is not called to our attention herein as being true as a matter of fact. Some allowances in a rate base are calculated upon a percentage, as applied to operating-charges and to income. Increases or decreases therein must be adjusted to avoid distortion. A complete investigation of the effect should ■be made before a permanent order is made regarding the disposition of the reduction, if it finally be ordered. It is possible that the theory of the Commission may prove true, but its truth must be made to appear from facts, not argument. However, in this instance the Commission has expressed its inability to, make a permanent order because of a lack of complete evidence and information. The record bears out this finding. Its order is stated to be temporary. What we have heretofore said regarding the inability of the Commission to secure this evidence, and of the duty of Community, or its overlord, Holding Com-l)any, to furnish this information applies here. We are not going to interfere with this temporary order because of their disagreement with the rule of law applied, for upon final order the matter can be adjusted in keeping herewith. The 10c per M. C. F. reduction in gas cost charge may be passed on to the burner-tip, under this record, as a temporary measure, pending complete investigation. In so holding it must be borne in mind that the proceedings herein were instituted on behalf of the consumers of the gas for the purpose of having the rates decreased, and the Community has only asked that its rates be raised since the hearing has been instituted. Therefore, we are of the opinion that, since the Holding Company has refused to submit its records to the Corporation Commission for the purpose of supplying the information the said Commission deems necessary in order to determine the proper permanent rate to be charged, the reasoning of the Supreme Court of the United States in Western Dist. Co. v. Public Service Commission, supra, is applicable herein. Therefore, in so far as Community is concerned, the proceedings are remanded to the Commission with directions: First, to continue in force and effect the temporary order in so far as its findings and order establishes 30c per M. C. F. as being a reasonable item of expense to be set up on its books for gas purchased; and in so far as it passes on to the consumer the reduction of 10c per M. C. F.; second, to proceed to set the matter for further hearing and to take such further testimony to supplement and complete the record before us as it may deem necessary and then to enter a final order upon all of the evidence; third, to order Community to put into effect at once tbe temporary burner-tip rate having a reduction of 10c per M. C. F. to the consumer as a temporary rate pending the permanent rate, and to at once make refunds to its consumers for the excess collected since the order was entered and pending this appeal, for which it gave a suspending bond; fourth, not to grant further supersedeas against the effect of said temporary order unless the Community (and by Community we mean as well Holding-Company) shall at once and in good faith produce the evidence desired by the Commission; whereupon, this portion of this order may be suspended further upon the giving of adequate suspending bond conditioned to refund to Community’s consumers any excess collected in the meantime as determined by the final order. We next take up the appeal of Lone Star and will discuss such of the four propositions advanced by it as we deem necessary. Proposition No. 1 reads; “The order of the Commission herein does not now and will not in the future enable the Lone Star to earn a fair annual rate of return on the present fair value of its property and business used and useful in the public service, and said order will operate to take said property for public and private use without due process of law or just compensation.” This proposition is argued, under a number of divisions' and subdivisions all pertaining to the ascertainment of the present fair value of this property for rate purposes. Because the evidence which the Commission desired in order that it might be fully advised has been withheld from the Commission Iby Lone Star’s (master, Holding Company, and because the record before the Commission and before us is not complete, it is impracticable to do more than comment upon some of the rules of law applicable and the elements which have entered into the formula adopted by the Commission; and to reserve final judgment upon this formula until the final and permanent order of the Commission is made and the matter is certified here again. When the argument of Lone Star is regarded as a whole, and the evidence which it introduced is considered in its true light, Lone Star practically bases its asserted present fair value upon reproduction cost new, less depreciation, plus certain other allow *300 anees. There are earlier eases, and perhaps some of the Oklahoma cases, in which the courts used language to indicate that the reproduction cost new, less depreciation, plus other allowances was the most practical formula to be used. However, this theory has been abandoned by the Supreme Court of Oklahoma, and we now hold that reproduction cost new, etc., is merely one of a number of elements which the Commission should consider in arriving at present fair value. Oklahoma Natural Gas Co. v. Corporation Commission, 90 Okla. 84, 216 P. 917; American Indian Oil & Gas Co. v. City of Poteau, 108 Okla. 215, 235 P. 906; McAlester Gas & Coke Co. v. Corporation Commission, 102 Okla. 118, 227 P. 83; Pressure Oil & Gas Co. v. Tri-City Gas Co., 108 Okla. 248, 236 P. 41; Western Oklahoma Gas & Fuel Co. v. State, 113 Okla. 126, 239 P. 588. To the same effect are the opinions of the Supreme Court of the United States; Georgia Railway & Power Co. v. Railway Commission, 262 U. S. 625, 67 L. Ed. 1144, and cases cited therein. Therefore, in so far as the Lone Star attempts to make this the only method to be used, or even the principal one to be applied, it is in error and the Commission was correct in declining to be so restricted in its method of determination. In our opinion the Commission was clearly correct in demanding information about Holding Company as to the prices of materials as they enter into the physical setup of Lone Star, and the year to year replacements, repairs, and additions. As was said in our opinion on the appeal by Community, there was an indication that there might be shown to have existed and to exist an unreasonable margin of profit in favor of Holding Company when taken into consideration in establishing the present fair value for a rate base in rate-making proceedings. The Commission in giving effect to labor rates applied a rule which would require Lone Star and Community to both employ labor at distress rates. It made all estimates which entered into its findings upon distress labor prices. This is not only incorrect as a matter of law, but is contrary to the best business principles of the present day economic scheme. The rule of what is fair and reasonable, and in keeping with the labor market price and demands, applies here as it would to the cost of anything else entering into the formula. Therefore, it is the duty of the Commission, upon further consideration of this matter, to abandon its rule of distress labor price and to take evidence and make its findings and orders avoiding extremes or conditions brought about by abnormalities. There is nothing further in the Lone Star’s discussion of proposition No. 1, or the divisions or subdivisions of divisions, that we need notice further in view of the fact that the order entered by the Commission is temporary and this matter is being remanded to the Commission for further proceedings leading to the establishment of a permanent rate. Lone Star has outlined an argument in its brief, touching this first proposition, covering reproduction cost new, including physical property, labor rates, material prices; general and undistributed costs, including preliminary and organization expense, engineering and supervision, administration and legal expenses, interest during construction, and taxes during construction; working-capital ; going value; per cent, condition of new; and others not necessary to enumerate. We have corrected the Commission’s applied rule as to labor rates. We have not noticed the others by direct discussion because it is possible that additional evidence may call for reconsideration of these items, if this matter is again called to our attention. We do request the Commission, however, to notice and apply to these items, and all others, the rules of evidence and law an-r ounced by the Supreme Court of the United States in the case of Dayton P. & L. Co. v. Public Util. Com. of Ohio, supra, and Lindheimer et al. v. Illinois Bell Tel. Co. (Illinois Bell Tel. Co. v. Lindheimer et al.) (U. S.) 78 L. Ed. 1182, both of which were only recently decided. Practically all of the argument of Lone Star is directed to questions arising under the federal Constitution. We will discuss propositions Nos. 2 and 3 together, and they are as follows: “2. The action and order of the Commission unlawfully burdens and interferes with interstate commerce. “3. The Commission erred in holding that the Lone Star Gas Corporation is a necessary or proper party to this proceeding and that it has jurisdiction over it.” What we have said in our opinion on the appeal of Community regarding the right of the Corporation Commission to investigate into the intercorporate relationship of these three corporations is based upon the opinions of the Supreme Court of the United States and need not be repeated here. That discussion is applicable here. In so far as the Commission deems it necessary to investigate Lone Star and Holding Company for the purpose of obtaining information upon which to base rates for Community, it is legal and constitutional for it to do so. The Commission presents authority from *301 which it may be argued that where there is a unification and intermingling of intrastate and interstate companies and intrastate businesses and interstate businesses, direct state regulation is proper and necessary and is as much defensible as indirect regulation thereof. Especially do they argue that, while this field is exclusively within the domain of the Congress of the United States, it not having acted, the state may exercise that control in so far as is necessary, and until the Congress does act. We are not prepared to go to that extent in this opinion, because we do not know what the evidence in this case will show concerning the extent to which these companies are intermingled into what may be called a single unit, and we reserve this particular question until the Commission has completed its further proceedings and the matter comes here for final determination. In any event, as the temporary order of the Commission was worded it indicated an intent, or at least a tendency, to effect a direct regulation of Lone Star’s gate rate. However, since we havé ordered this temporary order and its language, purport, and tendency modified merely to set up a formula of reasonableness of expenses on the part of Community, we believe that any objection of Lone Star thereto is obviated at this time. Lone Star’s proposition No. 4 will not be discussed at this time for the reason it involves a consideration of the proceedings of the Commission as a whole upon a final and permanent order herein which was not made by the Commission because of the state of the record. We will not notice it further. Therefore, this proceeding, in so far as it affects Lone Star, is remanded, with directions to proceed in its investigation of Lone Star and Holding Company in so far as any information to be elicited from them concerning their relations with Community is material to the determination of the permanent rate to be established for Community. RILEY, C. J., CULLISON, Y. C. J., and SWINDALL and WELCH, JJ., concur. ANDREWS and OSBORN, JJ., dissent. BUSBY. J., not participating. MeNEILL, J., not voting.