The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1907-07-25
THURSDAY. JULY Is. 1907.
Justice Gould and the Gas Co.

in the Forthcoming hearings on the
capitalization of the Georgetown
Gas Company. when he assured the
lawyers that he would find time per
sonally to conduct the inquiry. To
the suggestion that the matter
might be turned over to an auditor
or a master, the presiding justice
replied that he would have time
enough to give personal attention
TO the matter, and made clear that
he was disposed decidedly in favor
of this method.
From every point of view it is
preferable that this matter be
handled in the manner indicated by
Justice Gould. The Supreme Court
of the District is named by the
statute as the tribunal TO determine
whether the showing of the gas
company justifies the increase of its
capitalization; and the public, which
apparently has small chance of
direct presentation of its interest
in the matter, is certainly entitled
at least to the fullest knowledge of
the matters developed at the in
quiry. 1t is apparent that the gas
interests, in anticipation of the OPP
eratiOns of a new law under which
they must make very detailed public
reports of their affairs, are anxious
at this time TO take the fullest adj
vantage of the present laws, by Sc
curing the maximum of capitaliza
ton with the minimum of publicity
Justice Gould is entirely right in
his assumption that as publicity is
the laws policy for the future, as
much publicity as possible is the
public's right in the present.
Section of the act approved June
3, 1896, says:
Section 5. That neither the Washing
ton Gaslight Company nor the George
town Gaslight Company shall hereafter
issue a greater number of shares of
stock chan shall be equal to the actual
cash value of said plants and necessary
cost Of the construction of future eX-
tensions or future enlargeTnents OF
plants. which cash value and cost of
extensions shall first be ascertained
and authorized upon petition therefor
TO the Supreme Court Of the District OF
Columbia, under such regulations as
the chief justice and the justices thereof
shall prescribe. also If either OF the said
corporations shall desire hereafter 70
issue bonds upon their property, secured
by mortgage or otherwise, upon petition
therefor to said court. setting forth the
necessity thereof and the amount OF
stock issued and outstanding, Il may
and shall be lawful for said court, or
the chief Justice and justices thereof,
as the case may be. or one Of them,
upon public notice. TO be prescribed by
the rules Of said court. to permit the
issuance Of such bonds and mortgage
as desired: Provided. that the amount
of stock and bonds issued shall not ex-
coed the actual cash value of said plants
and the cost of such extensions or en-
largement OF plants: And provided
further, that the Washington Gasiight
Company Is hereby authorized to issue
such additional amount Of capital stock
as will provide for the conversion into
such stock of its outstanding certif-
Gates OF Indebtedness, which conversion
OF said certificates is hereby authorized
10 an amount not exceeding six hundred
thousand dollars.
From a careful reading of this
section it seems manifest that a
considerable latitude is left with
the court TO determine whether the
actual cash value" of the plants
means the present physical value, or
the commercial value of the con-
Germ as going business, including
franchises, good will. etc. The rule
is that the commercial value is very
different from the physical value.
An established public utility in a
large and growing city like Wash
ington commonly has an earning
power which, capitalized at reason
able rates of return, would greatly
exceed the actual physical value
that is, the cost of reproducing the
physical property in its present con-
dition as to efficiency, depreciation,
etc.
It is accepted nowadays that pub
lie service establishments should be
valued on this latter basis for pur-
poses of determining their capital
ization and the reasonable prices tc
be charged for their service. The
fairness of this rule is manifest
and IT is not seriously questioned by
disinterested thinkers.
Mr. Justice Gould seems to have
had this view in mind when he said
on Monday that the question of the
price of gas had nothing to do with
the problem before him. That prob
lem was to determine the cash
value as required by the law. This
statement of the case seems clearly
TO indicate the courts purpose t.
determine physical valuation rath
er than q commercial one: for il
making a commercial valuation the
price at which the company's prod
uct is sold is necessarily a larg,
factor. Making a physical valuation