New-York tribune., 1909-01-13
rP4NCHJSES AND PEGTL4TION.

FRANCHISES AND REGULATION.
The full text of the Consolidated Gas Com
pany decision. made public on Monday, SHOWS
The court occupying the same position II loon
in the Knoxville water suit against the use ol
the iniunctive process in rate regulation cases,
except in very clear instances of conhscatlon'
The court favors test of a rate made by
rate making authority. because without such
fest from actual operation il is extremely dlH-
cult to tell whether the rate is far or not
determination in advance is too much Ike
euessvork for all the elements in the problem
are uncertain. Value" says the court Is o
a considera BILE extent a matter of opinion. De
terioration of plant. too, is matter OF oPuloh'
Moreover. there is much uncertainty as to now
| increased consumption due 30 reduced rates Will
| affect earnings. of course" says the court.
| There NAV he cases where the rate is so low
| -1pon apy reasona BILE basis of valuation that
| there can be no Just doubt Of its con1scatory
nature In such cases there should be no heSl-
| fancy about enjoining enforcement The court
| appears. however. 10 imply that such p'1m0
! fdcie cases Of ConfiscatiOn will be found very
| exceptional.
| But it is rather 10 what the court has to say
! on the inclusion of franchise values IN the prop
erty of a company for the purpose of reckoning
rates that the greatest interest attaches Inc
gas company contended that franchises should
be included at their value under the dollar rate
! The state contended that they should he eX-
cluded: that their value depended largely on
the rate charged for gas, and that TO use then
value at given rate TO compute whether
| lower rate was cOnisCatory or not was prac-
tically 10 defeat the right reserved by the state
| which granted them, TO regulate the price oi
| gas There certainly seemed 10 be a good deal
| of force IN the contention that states power
| 20 reduce the charges for public service would
! 1;-+lo Sir Ctlr3 llE
| subject 70 the condition that it must not be so
| exercised as 10 reduce the value of franchises
when obviously the value of a franchise varies
| according 10 the charge for the service. The
court s1lstains neither the position of the state
nor that of the gas company. but appears t.
have reached solution under which the value
| Of franchises is included. but not in such way
that it can defeat the reduction of rates.
The lower court had argued that the value
| of franchises had been fixed under the law At
| the time of consolidation at $7.IS1ooo All the
| other property Of the corporation having in
| crpa sed in value since consolidation it con
cluded that the franchises had also increased
| in proportion. and therefore II fixed them at
| Sl2OO0OD0 The court dissents from that rea-
soning The value ST.TS1.Ne0 was hit upon when
| the cornpanies were dividing dividends of more
! than Is per cent They had been free from
regulation. although subject to it. and had no
| reason at the time of consolidation 70 expect
regulation They had every reason To expect
TO go on earning Al the same high rate as in the
past 1t was with this very lucrative business
! in view that the franchise value. SI.lHleN.
| was then fixed and Justice Peckham IS OF the
opinion that il was conclusive a that time. But
| that value most certainly would not increase.
That is 70 say. it is certainly not more than II
| was at the time. of consolidation. hnt IS prob
ably less Justice Peckham writes:
Its mast value was founded upon the oppor-
t1nirv. Of ohta lining these enormous and eXces-
siye returns upon the property of the company.
| for the supply OF gas. but that immunity for
the future was Of course uncertain. and the
| moment II ceased and the Legislature reduced
| the. earnings 10 a reasOn3 BILE sum the great
| value Of the franchise would be at once ana un-
| far1ora blv affected. but how much 50 II IS not
possible for now. To see
In other words the value Of the franchise is
subject 10 the legislative rate making action.
| II should be included not at whatit was before
legislative action, hut at what ii was after
legislative action. and what il is under the new
rate il is impossible for the court to see until
the effects of that rate in actual operation are
before it Thus does the court reconcile two
obvious facts-namely. that franchises are
propertv-taxahIe as such in this state-and
that they should not be so used to defeat the
condition explicit implicit in them. that
rates under them ara subject 10 public regula-
ton.