The Penn's Grove record., 1920-08-13
OPENS WAY FOR
RATE INCREASE
Commission Is Ordered to Con-
slider Present Costs in Fix
ing Prices for Service

is held by Justice Swayze, in an Opin-
ion filed in the supreme court, to be
an error, and for this reason he sent
back to the board the case Of the Eliza
beth Gas Light Company for a revision
JOf new rates in accordance with the
Hindlngs of the court.
This opinion Is one of the most i'm
portant and farreaching that have
been given by a New Jersey court in
many years, as it opens the way for
wholesale increases in rates by vir-
tually all of the utility companies
throughout the state. 1t will be fol-
lowed, it is confidently expected, by
applications for the establishment of
increased rates for gas, electricity, wa
ter and other utilities ON the ground
that the valuation policy of the Utility
Commission, upon which the present
rates are based, is unjust.
The commission in establishing rates
has followed the policy of not taking
into consideration the costs of the war
period, but rather to spread the costs
over a series of four or five years and
then fix the rate for service upon an
average of costs for the group of years.
j Actual costs of improvements, such as
the erection of new plants and addi-
tions. have been allowed by the COM
mission, together with the actual in
creases in operating and other eX-
penses. but it never has adopted the
policy that in fixing rates the property
of a utility should be valued according
l. --lat ~ x,o,,l1 ooc+ 4 n ranrndroo ~ OF
this period, when peak prices, due to
the war and other conditions, prevail.
The application made by the Eliza
beth company TO the Utility Commits
sion for Increased rates for gas for all
classes of services was denied, but
some increases were allowed. The
company insisted that the new rates
were not based upon a proper valua-
ton and carried their appeal to the
supreme our for a review of the COM
missions order. The company was
Joined in its fight in the supreme court
by a number of other companies, and
opposition was brought to bear by mu-
inequalities in different sections of the
state. The companies complained that
the commission did not allow them as
large an increase in rates for gas as
they thought just. On the other hand,
the municipalities contended that the
rates were excessive.
Justice Swayze in his opinion said
that the only question that need be
dealt with in the case is the applica-
ton of the question raised to the facts.
The companies claimed differentiation
Of their properties because the COM
missioners adopted a standard of value
based on the average prices prevailing
for five years previous to January l,
1915; because they ~disregarded the only
evidence as to going value and adopted
an arbitrary sum not sustained by any
evidence at all and because they arbi-
trarily admitted what is called the
overhead valuation on land owned, be-
ing the cost of acquiring and assem-
bling the land employed by tine compa-
MES for the manufacture of gas.
81 think it entirely clear" said JUS
tice Swayze, "that the failure to allow
for prices at the time to which the
rates apply, July 1, 1919, was an error.
1t was not denied that the prices were
I1ucH HlSl1cI III IOIO dllu L NSiy bhuNli
higher now than the average for the
years 1911-1916. So notorious is this
that the United States Supreme Court
has referred to it in an opinion as a
matter of common knowledge in the
Lincoln Gas Company case.
"In that case the court On Its W
responsibility suggested that IN Its
opinion the decree ought to be modified
TO permit the c~omplainants to make
another application to the courts for
relief. 1t would be manifestly unjust
to apply to a gas company a standard
of value different from that applied to
others. To what extent the increase in
prices may be due to an initiation of
the currency or to any particular cause
we do not know. What we do know is
that the dollar of 1919 and 1926 is
worth less than the dollar of 1915 and
still less compared with the dollar of
the average year from 1911 to 1916.
"If it were proposed to value the
property of the gas company in 100
cent dollars and allow them a return
only on that while other values We're
on the basis of 80 cent dollars and just
double in number everyone would see
the injustice. SO far as the increase in
prices is due to imitation of currency,
the illustration Is a perfect one"
7 Justice Swayze also discussed inter-
est rates of return upon investment
and applied these figures to the Eliza
beth case. He found that the amount
of returned allowed to the company
probably would be insufficient under
present circumstances to attract capt.
tai to business, and he held this to have
been one of the important tests of the
business and r~easonableness of the
rate as decided in the Passaic gas case.
The justice said in concluding his opin-
ion that If he set aside the entire d
an injustice would be worked upon the
company, so he sustained the Utility
Commissions order for SLID gas and