The Washington herald., 1909-01-05
TUESDAY. JANUARY 5. 1909.
Eightr-cspt Gas yudisIsIIy Sustained.

Eighty-ceut Gas JudicisIly Sustained.
A number OF questions Of Importance
20 public service corporations were in
voIved In the New York Scent gas case.
which the Supreme Court has decided
against the gas company. The court
however, determined the issue on the
broad general ground that the complain
ant company had failed 20 make out q
clear case OF ConfscaIion BY the statute
reducing the price Of gas 10 80 cents. II
Vas shown st the hearings IN the lower
court. and the inferior Federal judge so
decided. that gas at 50 cents would yield
q net revenue Of ass per cent on the total
capitalization Of the company. including
a fair valuation Of its franchises. But
Judge Hough, in the Circuit Court. held
that the company was entitled 10 earn the
legal rate Of interest, per cent. on its
investment. and that therefore the So
cent rate was cOnfscatOTy. as insufficient
10 bring IN a return Of per cent The
State authorities were enjoined from en-
forcing that rate. but the gas company
was required 10 sequestrate the difference
between the present rate Of & a thousand
and the statutory rate for return 10 con-
sumers in the event Of a judicial decision
favorable TO the State.
Justice Peokham. IN the Supreme Court
opinion. while agreeing that the company
is entitled 10 earn per cent. does not
find the evidence conclusive that II is
unable 10 earn that return on its capital
and says that the interference OF a court
Of equity IS UnEarranted before an actual
trial has been made OF supplying gas al
the statutory rate he suggests that a
slight reduction in the valuation OF the
cOmpany's plant-a mere matter OF book
keeping-or an actual increase in the con-
sumption Of gas would have the effect
OF showing a return Of per cent OF. the
investment. leaving II 10 be inferred that
the Supreme Court regards the margin
OF possible injustice between 80 Der cent
and 5 Per cent entirely too small 10 war
rant the notification Of a state Law On
the ground that il is cOnfscat0ry. The
opinion contains a plain Implication that
actual experience with the effect Of legis-
lation fixing rates OF public service IS
much better evidence than arithmeticaI
calculations based on estimates OF prob
abilities This IS rebuke TO the theory
that injunction Of a public service rate
on an ex parte showing Is the proper
remedy for alleged popular injustice TO
corporations. The remedy, in fact. is ap-
piled too early for correct judgment upon
II, as has been recognized By several
Federal judges who have refused in
functions until the rate could be tried
out in practice. Justice Peckhau's
decision promises TO hasten a new era
in the relations OF the public with utility
corporations
On the question whether franchise
valuation should be included in capitalize
ton in determining the justice Of
statutory rate the court is silent But
Justice Peckham expressly excludes good
will as fair item OF capitalization. The
complainant has a substantial monopoly
cf the gas business in the City Of New
York. he remarks. and as there is no
possibility Of competition. there should
be no allowance for good will This
opinion has an obvious bearing on the
applications Of the local gas companies
for permission 10 increase their capital
stock In the case OF the Georgetown
company, Auditor Payne fixed the value
Of franchises and good viii az So. Sol. an
item that has no validity whatever as a
basis Of capitalization.
Welcome CoDe-ase II. -. -.