The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1930-10-11
Utility Regulation Fails

1t is time, say students of economics with con-
yincing unanmity, to face the fact that regulation
OF public utilities is failure.
A year ago this judgment had not emerged from
the gathering clouds that surrounded regulation.
Today there is lttlee dissent from it. But what is
the reason for the failure and what is to be done
about it2
Two authorities have attempted recently to
answer these questions.
Felix Frankfurter professor Of administrative law
In Harvard Law school, writing in the current rum
Der Of the Yale Review lays the blame for failure OF
regulation first Of all upon the courts John H Gray
head of the economics department Of American uni
versty, reached the same conclusion in an address
before the Academy of Political Science.
THE heart of the difficulty is the current judicial
approach to utility valuation" says Frankfrtrer Out
Of the constitutional provision safeguarding property
against deprivation without due process of law the
supreme court has evolved a doctrine that utility
is entitled to a fair return its present value, and
value must be ascertained by giving weight, among
other things to estimates of what it would cost to re-
produce the property at the time of the rate hearing
He continues: mo judicial announcements upon
matters fundamentally economic run counter to
the views Of economists do the recent utter
of the supreme court upon present value. They
are based upon unrealtes. financially unsound,
and lead 10 uncertainty and speculation. The So
called rules set the regulating agencies impossible
task"
Gray. voicing the thought, says there can be
no effective regulation so long as valuation by any
method is its basis"
Frankfurter and Gray agree that the recent rapid
growth in interconnected utility systems the
ond serious obstacle confronting regulation Holding
companies are practically immune from law Frank
furter points out and state, at least, is able to
exercise an effective grip upon them.
Finally Frankfurter adds, "the whole scheme of
utility regulation presupposes of capacity and
prestige, of courage and discernment to match the
powerful resources of the utilities Instead there is
inequality in expertness in will in energy, in imag
nation"
AS to remedies the professors do not agree
closely Both are unequivocally of the opinion that
regulation must get away from the present doctrines
of judicial valuation Frankfurter advises states to
retain control of all they still hold and per-
NIT cities to compete with private companies where
necessary He advocates better regulatory commits
sions and local autonomy free from judicial
interference.
Gray believes the corporate structure must be
simpled greatly and the kinds of securities limited
the power Of the courts must be curbed and the
state should concern itself not with general regu-
laon Of rates, but with of discrimination only.
Whatever the answer, face to face with
problem whose solution is vital to welfare We
can't dodge it because it is dull nor because it is diff
cult. We must think critically about supreme court
policies disclosures of the federal trade commission
and the intrcacies of rate making.
If are not to concede that our system of gov
eminent is mpotent we must make 1t work better
in this important matter.