Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-12
HARTMAN EQUIPPED.
FOR UTILITY POST.
Hoover Appointee Possesses
Background of Actual knowl-
edge Gained by Experience.

| With comprehensive background of
knowledge of public utilities, Harleigh
H Hartman, newly appointed member
of the Public Utilities Commission, I'M
like his predecessors, will take office
with predetermined and definite views
on the vital problems involved in public
utility regulation and control.
Mr.. Hartman has gained his knowledge
of public utilities through years of ex-
perlence as member of the Illinois
| Public Utilities Commission, as an at
! torney and examiner with the Inter-
state Commerce Commission, and in
private law practice in which he spe-
cialized in public utility and interstate
! commerce law.
While declining to discuss his views
prior to confirmation by the Senate, a
| thesis Of Mr.. Hartman on Fair Value"
which won the Hart, Schaffner & Marx
economic prize in 1918, reveals them
comprehensively, and answers certain
| questions already propounded by the
Washington Consumers Guild. The
! treatise considers the problem of public
utility regulation and the characteristics
! which distinguish it from that of regu-
| lation in general; the specific needs it
| suggests, and the essential elements
iii a regulatory system which will meet
those needs; the development of the
valuation theory; valuation as an eie-
nlent in regulation. its compatibility
with existing legal concepts, its advan-
tages and dangerous characteristics and
the types of valuation.
Offers Valuation Theory.
The theory of valuation espoused in
Mir. Hartman'S thesis is based primarily
OIL the reasonable investment" prin-
ciple rather than the cost of repro
dIirfinY1 T1nuy'' fIOnfr ina foNnppd hyy 1IfiIifu
corporations. Commenting on valua-
ton for rate-making purposes in the
thesis, he says:
ANY method of final valuation which
grants the utility return upon a
larger sum than that actually invested
takes the property right of the public
for the benefit of the utility stakeholder
just as surely as unreasonable rate
making takes utility property.
Any form of final valuation not
based directly upon the actual reason
able present investment must inevitably
fail to meet the two principal require
ments of regulation. 1t cannot create
a regulatory force which will keep rates
near the reasonable cost Of production,
and 1t will encourage rather than stamp
out speculation.
THE aim of rate-making valuation
is the determination of the actual I'M
impaired investment reasonably neces-
sary for the utility service rendered"
Summarizing his views on valuation
methods, Mr.. Hartman in his thesis
said:
"Fair value deals primarily with
valuation for rate-making purposes.
The fair value discussed is the present
reasonable investment represented by
the tangible and intangible property
which the utility owns. It is based upon
original cost and reproduction cost
appraiSals showing the total investment
in the property. The final valuation is
worked out from the inventory figures
and the corporate history which accom-
panies them as a sort of exhibit or
supplement.
Actual Investment Is Base.
1.-THE aim is to determine the actual,
property used and useful In rendering
the public service. For this purpose the
original cost appraisal serves best, when |
accurately drawn. The reproduction
cost appraisal when q it approximates
facts and avoids the flights of fancy
which have so often marred it in the
past, is a serviceable check upon the |
supplement to the original cost estimate. |
1.-THE final valuation is heterogene- !
GUS estimate based in part upon original |
COST in part upon reproduction cost, |
excluding all values not used or useful |
for the public service, deducting depre- |
citation from the inventory figures to |
arrive at present value or unimpaired |
investment, and taking into considera-
ton ell the equities of the particular |
case. It follows no definite formula, 1t |
acknowledges no binding precedent. 1t |
Is based on natural justice and equity |
bounded by the constitutional safe |
guards of property, the necessity OF at |
tracing capital and the dominating |
limitation that rates must not be fixed |
above the value of the service"
Mr.. Hartman's views on the repro |
duction theory, as outlined In his thesis, |
are that under constantly rising costs |
it capitalizes wages and cost OF material |
at prices far above those actually paid |
and gives return to the stockholder at |
the expense of the public on an mag |
mary investment which he never made. |
1T values visionary capital which has |
in no way added to the business or |
made it better fitted to serve the public. |
1.-The realization of the undesirable |
results attending the application Of the |
reproduction cost theory to rate making |
valuation has done much to encourage |
an attempt to determine the true basis |
of valuation" he said. ut Is difficult |
to understand the influence of the re-
production theory exerted on courts and
commissions unless 1t be attributed to
the proverbial inability of lawyers to
grasp accounting theories"