The Washington herald., 1909-01-10
SUNDAY. JANUARY 10 1909
Regulation Of Monopoly.

The attitude OF the Supreme Court on
the regulation Of public service corpora
tons is indicated IN an opinion by JUS
tee Moody in a case coming from a
Tennessee court. wherein q water COM
pany sought 20 enjoIn rates fixed by the
city Of Knoxville on the ground that they
would be conascato-y. The opinion Is an
interesting companion 10 the gas deci-
sion. and somewhat ampHfes the brief
conclusions Of that pronouncement In
the Knoxville case bonds and stocks were
issued greatly in excess OF the true value
of the plant. but Justice Moody ruled
that issues hoated under such conditions
afford neither measure Of nor guide TO
the value Of the property" He then pro
ceeded TO consider the question OF fair
return on the investment
Before coming 70 the question OF profit u al.
The company IS entitled % earn sufficient sun
annually 70 provide not only fo- current rs7ai-s
but fOr making god the depreciation and replacing
he Iarts o. The property WHEN they cone 20 the
end Of their life. The Company IS not bound 20 see
It's property gradually waste without making pro
vision out q earnings sor It's ruplacenent Il IS
entitled 70 see that from earnings the value a the
property Invested IS kept Uniraired. that az the
end q any gwen term Of years the original invest
ment rsmains az it vas a. tie beginning.
II however. company fails % perform this
plain duty ard % czact sufHcent returns % keep
the investment uninpaired. whetheT this IS the t.
suit q uuEarranted dividends upon oFerissues q
securities. Ct emission 20 exact p-upsr p-ices for
the Output. the fault s It's Own When. Therefore
public regulation Of IFS prices CONS under gues
ton. the TIE value q the prClerty then employed
for the purpose oI earning a T5tun cannot b En-
hancsd b. a Consideration Of the errors IN manage
msnt Ehich have been committed IL the past
But in this ease. as IN that OF the
Consolidated Gas Company. no sufficient
evidence was presented Of c5nfiscation
By the rate fixed by public authority. and
Justice Moody said that the court would
not venture a guess, based on specula-
tons as to the effect OF tire rate, as to
whether it would prove 10 be conhscatory
OF not. He found that the net income. in
any event, would be Per cent, OF 2
per cent for depreciation and Per cent
for profit a revenue that the court evil
dentIy does not consider eonhscatory
enough 10 warrant judicial notification
Of public regulation. On the general sub
Jet Of public regulation Of corporations
performing their duties under conditions
of monopoly. Justice Moody says that
such regulation will occur with greater
and greater frequency as time goes on. -
and he offers some suggestive obiter dicta
as the courts contribution 10 the great
problem OF corporate regulation:
1T is q delicate and dangerous function. and
ought 70 Be exercised with Keen sense Of j1stios
on the pat q the regulating body. net By a
frank disclosure OF the part of The Company 70
Be regulated Tie COLTS ought not 20 bear The
whole burden q saving property from eonfscatiou,
though they VII not Be found wanting where the
prof. il clear TIE legislatures and subordinate
bodies, % whom the legislative power has been
delegated. ought 70 60 their part
Our social system rests largely UPON the sanctity
Of private property. and that State OF Community
which seeks to invade It VII son discover the
error IN the disaster which follows. The slight
gztn % the co0sungr which he would obtain from
reduction IN the 7ztes charged By public service
corpozations IS nothing compared With his share
IN The ruin which would bs brought about b. deny
ing 70 private property is Just reward thus
Unsstting Talues and destroying confidence. On
Tire othe- hand, the companies 70 te regulated
VII hnd II % Their lasting Interest 20 furnish
freely the Information upon which Just regulation
can Be based"
These expressions. taken in connection
with the remainder Of the opinion. plainly
indicate that public service commissions
and other bodies undertaking the rate
making power VIII be sustained by the
court in the performance Of their func-
lions where their power is reasonably
and ssnely exercised. and that something
more than mere technicaIities and specu-
Iative calculations must be relied upon
by corporations to prove a case Of con-
fscation- They cannot plead bad man
agement OF stock jobbery as an excuse
for compelling the public TO pay unrea-
sonable prices for their product.