The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1927-11-29
Two BILLION DOLLAR BOOST IN UTILITY
RATES HINGES ON HIGH COURT RULING

Decision on Rail Valuations
For Purposes Of Rate Max.
ing May Cost Each Citizen
Of the United States 500 a
Year
Washington, Nov. 29.--(NEA)-
(f we were to wake up some day
and discover that the entire Euro
pean war debt had been saddled
upon US and that, with high interest
rates, we would have to pay some
$4,000, 100000 q year forever and
ever
Well, probably we would holler.
Yet, wit. hardly a holler, the
country is confronted today with a
problem, the solution of which in
cludes the possibility that we might
have to pay the $4,000, 900 900 in in
creased rates to railroads. telephone
companies, gas and electric light
concerns, street car lines and other
public utilities.
Rates Would Soar
The fact that this tremendous
sock to the family pocketbook,
which would theoretically take 500
from the head Of every family in
the United States, would not be like
~ to be imposed by the utilities IS
some consolation. But the belief
that we would be spared the full
burden rests only on the likelihood
that the national business structure
would crack under the strain.
And If the railroads and other
utilities arc granted the contention
which they have taken to the courts,
it is assumed by experts here that
they would come as near to the two
billion-dollar sock as they safely
could and that in any event, all reg
ulation of public service rates would
end automatically. The question is
one Of whether the utilities are en-
titled to the boost.
All this is seen by members Of
the interstate commerce commits
sion and other experts a. they fight
out the question Of valuing the rail-
roads for purpose Of rate.Making.
There follows an attempt to outline
the principal facts of . situation
which has been obscured by mil
lions of words piled high in supreme
court decisions, interstate commits
sion hearings and reports, and vari-
Gus other records and proceedings.
Under the law, railroads are per-
j mitted to earn up to 6 per cent on
their valuation rs fixed by the l. c.
C. Half of the excess above 6 per
cent goes to the government for q
fund to aid weak railroads and the
other half goes to the railroads.
Valuation Is Essue
The big question is that of fixing
the valuation of the railroads for
rate making purposes, and it is this
question which the supreme court is
expected to decide when it gets the
test case involved in the appeal Of
the st. Louis & O'Fallon railroad
from the valuation fixed by tho /.
G. C.
The I. c. c. has adopted base
estimated to give the railroads q
return on from 10 to 20 per cent
more than the estimated original
investment, whereas the railroad.
insist on the reproduction value
plus minor additions such as TO,
"going value"
The. cost valuation of the Amer
Jean railroads, according to I. C. C
estimates, is about $23 ,O00, O0O, 900
It is estimated that the railroad
theory would place this figure a
about $33, 000, 900 900, although tn,
Wall Street Journal has placed it q
So billions. If the railroad theor,
is accepted, the railroads would b,
permitted to increase their rates 3,
rs to receive 6 per cent on the ad
ditional 10 billion dollars.
The !. c. C.'s Basis
If the principle spread to tn
other utilities, as clear suprem
court decision would spread it, tn
extra burden would be boosted t
more than $50, 00O, 900 900, accord
ing to Commissioner ]. B. Eastman
and 1T per cent the increased cos
which could be passed on to the con
sumner would be around $2,OOO.O 900,
600. In many instances it woul'
provide an excuse to double freight
gas or electric light rates.
In 1913 the /. C.. G. was instructe'
by congress to make, valuations o
the railroads. In making them, tn
commission estimated original cos
on the basis Of 1914 prices, striking
an average for the 10 years pre-
vious, as it was impossible to lear
the original amoiint of investmen
in most cases. Then the commission
estimated depreciation and deducte
it. It estimated the value of tn
railroads land holdings by study
ing prices of privately owned Ian
alongside and added that. Finall
it considered the condition Of tn
road, added about 5 per cent 70
good measure and called that tn
valuation. .ss..,t.Ss
But because prices have gon
sky-high since 1914, the railroad
contend that they should benefit an
be allowed earnings on what
would cost to reproduce them z
present prices. This il the conten
fion Of the railroads in the O'Fallol
case. ~ =. ~
One Of the supreme court deci
siOns which the ]. G.. C.. says mus
Be forever borne IN mind was tina
Of Dayton-G Goose Greek Railway VI
u. S., holding that:
by m investment n Z bushes
dedicated to tho public service tn
owner must recognize that, - con,
pared with investment in privst
business, he cannot expect eithe
high or speculative profits but thu
his obligation limits him TO only fai
or reasonable profit"
Previously, the court had held tia