Newark evening star and Newark advertiser., 1915-03-03
SOMMER RAPS
PUBLIC SERVICE
ccontinusd from First Page,

tcontinued from First Pake)
and not a statement either of fact
or reasoned conviction can readily be
demonstrated.
1.-THE order under review fixing the
| ninety-cent rate is operative only In
the Passaic division. a minor part
of the territory served by the COM
! pany
cit has no effect beyond that area
"Yet as counsel for the company
! frankly stated in the argument bott
| before the court below and In this
court, the company accepted mere
recommendation which was without
binding force and voluntarily ex-
| tended the rate of ninety cents
throughout the whole of the territory
served by it.
''In the light of this fact is not the
| designation of the statement under
consideration as merely rhetorical
| Justified?
at is rational to assume that the
company would voluntarily extend
| the effect of an order over seven
eighths or nine-tenths of its business
| if the order in the reasoned judg-
ment of its officials injured It's
credit?"
Valuations.
Mr. Sommer then discussed at
length "golng concern value" and the
methods adopted by the commission
in arriving at conclusion in this ele-
ment of the case, and said:
1.-THE course adopted by the board
brings practice into harmony with the
law. It recognizes both classes of
property-physica and nom physical
4 H,.1l 90
class in making the valuation. and
allows a return upon the total valua-
tion that is comparable with the re-
turns earned in other business enter
prises involving similar risks"
Discussing the means adopted by
the commission in arriving at the
real value of the property, Mr.. Som
mer raised an interesting point when
he said:
what is measured In taxation is
the value of the property possessed.
what is measured in rate making
is the value of the property POSSESSED
reasonably necessary in and for the
performance of the public service
rendered.
THE utility is entitled to a reason
able return only. The consumer Is
entitled to be served at reasonable
rate.
"If this rule is not to be deprived Of
all substance, the rule of reasonable
ness must be applied to the amount
of the investment.
Assume that the gas company had
originally located it's works at the
corner of Broad and Market streets
In the city of Newark and that its
lands had attained the enormously
enhanced value which prevails at that
point.
Newark Illustration.
For purposes of local taxation the
present market value of the land
would be taken.
"Would it follow that the utility Is
entitled to a return from sales of gas
on such present market value?
Prudent management would sug-
gest removal to a less expensive site
better adapted for the business.
"Under such conditions would not
the value taken in rate case be the
estimated cost of replacing the land
in use with other land capable of ac-
complishing the same result?''
Concluding his argument, Mr.. Som
mer said:
Ordinary industrial enterprises are
exposed to the far-reaching effects
of industrial depression.
rule much less seriously affected by
fluctuations in industrial conditions.
"In these respects the risks to
which the public utility enterprise
is exposed are much less serious than
those attendant upon the ordinary
industrial enterprise.
when business depression sets in
and revenues are reduced the man
agement of an ordinary industrial en-
terprise subject to the play of free
competition is not in position to
increase prices, but is put to the
necessity of lowering prices in the
hope of overcoming the effects of the
depression and decreased revenues by
a combination of decreased prices and
increased sales.
I'm a public utility enterprise re-
lieved under normal conditions by the
policy of the State from the D ay of
free competition. the management
under such circumstances may seek
relief at the hands of the board The
act In terms provides that whenever
the board determines an existing rate
to be insufficient it shall fix a just
and reasonable rate.
IF the board in these circufn-
stances finds the existing rate in
sufficient and fixes an increased rate
since there is, under the States
policy, freedom from competition,
nothing stands in the way of put
ting the increased rate into effect.
Counsel for the company recognize
the advantageous position OF the pub
lie utility under this policy. They,
however, make more clear the curious
results which would follow upon the
adoption of the rule for which they
contend, namely, a separate valuation
of franchise without exceptional pro-
visions, by basing on this policy a
claim for added value, saying the
effect of this policy is to increase
the value of existing franchises"
Nine Questions.
Counsel for the cities submitted to
the court a series of nine questions
with the request that the representa-
tives of the Public Service answer
them. These questions were:
IF the cities cannot maintain cer-
tiorari to review the rate fixed bv
the commission in this case, how can
they ever secure the judicial review
OF any rate fixed by the commission
"If the Supreme Court had filed an
opinion setting aside the order of the
commission on the ground that the
| item of going concern value had
been illegally allowed, would not that
/ have secured the result desired by
| the cities?
"If the value Of general or special
| franchises or the value of intangible
| elements of the ccmpany's property
| or the total value of the company's
property, ascertained by applying the
| principle of the capitalization of mel
earnings, is protected by the consti.