The Birmingham age-herald., 1923-06-03
.PRECEDENTSCI ID BACK UP CAS
 UTILITY VALUATION
State Board Quotes Decisions Of United States Supreme
 Court
STATE CAPITAL BUREAU 1
 THE AGE-HERALD I Mont vovnArv Ala .TunA 2 |

STATE CAPITAL KEAO l
 TEE AGE-HERALD
 Montgomery, Ala. June
 Citing the formula adopted by the supreme court of tho United States in establishing valuations on the prop pany and the Southwestern Bell Tele- phone company. the public service commission, in It's brief filed with s. H. Dent. Jr., special master, yesterday contended that the valuation oy $1.700,000 placed on the property of the Mobile Gas company was In ex- cess of tho fair value of the property.
 The brief quoted decisions of the United States supreme court in the two cases and after the quotations said: From the above, it appears that by applying the method used In these two last decisions of the supreme court of the United States. we arrive at a valuation for the properties of the Mobile Gas company of $1,501.0oS (based on Galveston Electric company case). and $1,ss3,031 (based on South western Bell Telephone company case).
 "It Is plain, therefore. we think. that the valuation of $1,7o0,o0o found by the commission in It's order of July 24. 1922, is in excess of fair value of plaintiffs property"
 Show Net Returns.
 After giving consideration to the mass of testimony submitted to the special master in the case. in which Is involved the petition of the Mobile Gas company for permanent in junction preventing the public service commission from establishing the valuation at s1,7oo.ooo. the brief of the attorneys for the commission set forth the declaration that the net re- turn of the company on tho valuation of $1,700,000 as established by the commission will be S.6 per cent and that other net returns will be as follows:
 Six per cent on s2,42s.571: per cent on $2,o79.s16; 8 per cent on s1,819,92S. In other words. the brief pointed out that the company. based on earnings as shown by the evidence, will receive a net return of more than the company insists is the fair valu- alton of the property. namely $1,969,565.
 The state contended that the com pany should not now insist that 1t should obtain return which would compensate for losses suffered prior to the regulation of the utility by law or prior to the company's first application for an increase in rates.
 "Plaintiff has contended before the commission and Is now contending before this court that In fixing a rate base and determining schedule of rates for the utility consideration must be given to past losses, which the plaintiff alleges it has suffered" said the commissions brief. These losses may be divided as to the time when they were incurred into two periods. viz: Losses incurred previous to regulation. and losses incurred No Regulation nefore 1915.
 "The master will take judicial notice of the fact that prior to the statute of 1915, found In general acts of 1915. there was no regulation of the plaintiffs plant or business by any public authorities. During this time, that is prior to 1915. the own CT, of the utility had entire control, both as to management and as to period to fix a rate that was com pensatory, they certainly have no right now to complain and to ask that present consumers be required to pay a rate high enough to com pensate them for any deficits then suffered.
 "The testimony then shows that as a matter of fact there was no actual regulation of this utility bay the state authorities until the year 1918, which was the date of the company's first application for an increase of rates. The evidence shows without dispute that the commission allowed the peti- tion of the plaintiff as filed for an increase of rates and hence the utility cannot now complain if it failed then to ask for a rate high enough to be compensatory and can nf Jryc Ivy clr hot hn ant consumers pay a rate high enough to compensate for any deficit suffered on account of its failure to obtain a higher rate In 1918.
 "The only other time the plaintiff petitioned the commission for an in- crease in rate was In the year 1920 and at that time. as before in 1918, | the commission not only granted the increase asked for but granted rate even more favorable than that asked for by the plaintiff"
 In its reference to operating ex penses. the brief of the public serv- ice commission mentioned that dona- tions to charity and contributions to | political campaigns have been strick- en from the list of legimate op- erating expenses.
 The brief mentioned that the court has no authority to prescribe a req sonable return on the company's in- vestment. contending that this is matter for legislation and not for ad- judication by any court. However. the assertion was made that the spe- cial master and the court may in quire into the question merely for comparison with the rate of return which will come from the enforce ment of the order of the commission in the valuation case. Numerous au- thortes were cited In support of the statement that per cent is a req sonable annual return on the invest ment of public utility. Biased on gas sales in 1922, the commission in- sisted that return of per cent would be shown on an investment of s2.079.91S or $379.916 greater than the valuation of $1,700,00 established by the commission and $110,351 great CT than the valuation of $1,969.565 which the gas company insists is proper.)
 The state contended. throughout it's brief of 46 typewriter pages, that it's valuation of s1.700O00 established on rehearing has been liberal one for the gas company and should be allowed to stand.