Newark evening star and Newark advertiser., 1914-12-11
OIL. RECORD CALLS
GAS RATE RULING
GROSS INJUSTICE
econtInued from First rass.D


ssrn. The board refused to make
any allowance for so-called franchise
value.
..The company appealed ON the
ground that the franchise values We're
omitted. and the cities appealed on
the groAnd that the so-called going
oa3ncern value ought not to have been
stIlowed and on the further ground
hat the physical property was over
valued The Supreme Court sustain
ed the finding Of the commission.
first Decision of Its Kind.
n'rhe Court of Errors has set aside
the Supreme Court decision. From
fhe meagre reports in the press, it
appears that the point of the Court
If Errors decision is that the fran
dhise is property, that it has sub
stantial value. and that a substan-
fial amount must be allowed to the
company in fixing the amount upon
whiehsit is entitled to earn a return.
This is an extraordinary and i'm
3ortaRt decision. 1t is the tlrst de-
aision in America which has fatty
aeld that the franchise was an ele-
iaent Of value upon which the COIN
hany had right 10 earn a return.
If this should be established finally
as the law, then the policy of regu-
iation, which has been put upon the
statute books with such high hopes
af it's proving a bulwark against the
exploitation of the public by these
corporations. has proved disastrous
failure and the only people who
will gain by the public utility legis-
tation win be the corporations who
are thus confirmed in their monopoly
power to charge. not what the SER
vice is worth, but what the traffic
will bear.
THE injustice of the courts posi-
ton appears from this reasoning.
There is no way to value a franchise
except upon the basis of what It
will earn. The value of all of the
property in the district. including
she value of the franchise and every
skher element of value. is in the mar
ket. the sum of money represented
81 the net earnings capitalized say,
~ six per cent If these earnings so
apitalized in the Passaic district,
amounted to say $4,000, 900, and the
value of the physical property was,
as found by the State board, say s4-
100000. the difference. of s4,000.0OO
Would be the value OF the franchise.
Yhere is no other way possible to
value the franchise nor has there
sny other way been suggested in any
litigation.
h''It follows, therefore. that at. any |
lme when application is made for a |
feduction in rates. the values of the |
franchises are determined by capi- |
talizing the earnings of the previous |
3ear and deducting the physical
value.
@Equivalent to Ratifying Watered stock"
IF the earnings go up with the
growth of the community without |
the addition of amy new capital, or |
h excess of a fair return upon the
sew capital the value of this fran
ehise will increase not by the efforts
snd from the capital of the company, |
but by the simple growth of the COM |
fa;Inity. This value. created by the
Community without any contribution
hy the company itself, is by this de- |
ision declared to belong TO the COM |
bany which does not create 1t, in |
gtead of to the public, which does
create it. The logic of this position
IS that you cannot decrease rates, nor
can you prevent an increase OF rates
IS the value Of the franchise in |
sreases. This is equivalent to rati-
Tication by the court of the legality |