within one state." The court then said there was to be the same exercise of state authority upon transportation "wholly within one state" as had before been exercised. It was urged that "the interblending of operations in the conduct of interstate and local business "made it impossible to separate one traffic from the other." But the court thought it merely made of "extreme difficulty and intricacy the calculations which must be made in the effort to establish a segregation of intrastate business for the purpose of determining the return to which the carrier is properly entitled therefrom." It is then intimated that, if Congress should believe such a segregation was because of interblending of interstate and intrastate operations, adequate regulation of the former became practically impossible, it could take over regulation, also of the latter. The problem, however, has its difficulties and thereby the rule of prima facie correctness in rate making by a state commission for such a company may be the harder to displace.

§ 143. Experience As Test in Rate Making.-The problem of negativing a rate for a water or a gas com pany, and, ceteris paribus, other public service companies, needs for its aid the "actual experience of the practical result of such rates. '20 This is so, as said in a gas company case," because "the value of real estate and plant is, to a considerable extent, matter of opinion and the same may be said of personal estate, when not based upon the actual cost of material and construc

20 Knoxville v. Knoxville Water Co., 212 U. S. 1, 29 Sup. Ct. 148, 53 L. Ed. 371.

21 Willcox v. Consolidated Gas Co., 212 U. S. 19, 29 Sup. Ct. 192, 53 L. Ed. 382.

tion. Deterioration of the value of the plant, mains and pipes is also to some extent, based upon opinion. All these matters make questions of value somewhat uncertain; while added to this is an alleged prospective loss of income from a reduced rate-a matter also of much uncertainty, depending upon the extent of reduction and the probable increased consumption-and we have a problem as to the character of a rate which is difficult to answer without a practical test from actual operation of the rate. Of course, there may be cases where the rate is so low, upon any reasonable basis of valuation, that there can be no just doubt as to its confiscatory nature.”

It was upon such reasoning as this that the judgment of the lower court, awarding an injunction against a public service commission, was reversed, but the court was so influenced with what it said as to a practical test of the rates fixed by the commission that the bill was ordered dismissed without prejudice.

It would seem, therefore, that the most practical question in all valuation for rate making purpose does not turn upon value of tangible property, its appreciation or depreciation, or probable or improbable patronage. These things are swallowed up greatly in the test of the actual experience of rates being enforced. There must, of course, be some valuation, for howsoever income may safely place a public service company on the side of continued solvency, capital invested is entitled to more than that. Owners are entitled to reasonable income from their property devoted to public use. If a company has had experience for such length of time as will enable a commission to estimate what the property is worth as an income producer, the other way

round in valuation might be adopted and the burden would be on the company to show that a proposed rate will bring the earnings to a vanishing point as a fair return.

Also it may be said, that if there is that intangible advantage of which mention is made in Sec. 141, namely, "going value" or "going concern value," that should have proper consideration. An extensive note on this kind of value shows it lies as much in opinion evidence, very often at least, as does that of real estate and plant and other things instanced in the Willcox case, and how a commission would view evidence on this subject would be taken as presumptively correct. It calls merely for the exercise of such judgment as lay in the discretion of reasonable men.2

22

While it is true that no formula can be stated, yet it has been said that the leaning of the courts is to adopt the value of the property of a public service company at the time it is to be considered for rate making purposes.23

22 Note to Omaha v. Omaha Water Co., 218 U. S. 180, 30 Sup. Ct. 615, 54 L. Ed. 991, 48 L. R. A. (N. S.) 1092.

23 Public Service Gas Co. v. Public Utility Comrs., 84 N. J. L. 463, 87 Atl. 651; San Diego Land & Town Co. v. Jasper, 189 U. S. 439,

23 Sup. Ct. 571, 47 L. Ed. 492; Marquis v. Polk County Telephone Co., (Neb.), 158 N. W. 927.

PART II

Interstate Utilities

CHAPTER XXIX.

INTERSTATE TRANSPORTATION

§ 144. Regulation under constitutional limitation. 145. Regulation by Congress of railroads.

146.

Regulation by nation paramount.

147. National and state regulation independent. 148. Congress exclusive in interstate commerce.

$144. Regulation Under Constitutional Limitation. In a noted case1 involving the constitutionality of the Eight Hour law the Chief Justice, speaking for the majority, said: "That regulation gives the authority to fix for interstate carriage a reasonable rate, subject to the limitation that rights of private property may not be destroyed by establishing them on a confiscatory basis, is settled by long practice and decision." He cites to this a number of cases, but most of them involved rather the regulation by statute or commission of property devoted to public use, as, for example, the Minnesota Rate Cases. One of the cases, however, was in regard to an order by the Interstate Commerce Commission reducing rates between certain points.3 The opinion proceeds rather upon its being accepted as a fact that rates shall not be confiscatory. Thus, in

1 Wilson v. New, 243 U. S. 332, 37 Sup. Ct. 298, 61 L. Ed.

-.

2 230 U. S. 352, 33 Sup. Ct. 729, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916-A 18.

3 Interstate Com. Com. v. Chicago, R. I. & P. R. Co., 218 U. S. 88, 30 Sup. Ct. 651, 54 L. Ed. 946.

reversing the judgment of the Circuit Court quotation was made from the dissenting opinion, as follows: "The complainants are common carriers whose rates on certain traffic are directed to be revised by the order complained of. Two grounds for injunction are alleged. One is that the rates are confiscatory. There is no proof whatever that the rates which the commission prescribed as just and reasonable are not sufficient to pay the cost of handling that traffic, to cover that traffic's full proportion of maintenance and overhead expenses and to return to the carrier an ample net profit. For the purpose of this hearing, therefore, it must stand as an agreed fact that the present reduction is neither directly nor indirectly obnoxious to the charge of taking private property without just compensation." The Supreme Court said: "We concur in these conclusions."

The real question in the case was whether the Interstate Commerce Commission acted within its power to prescribe what will be just and reasonable rates to be thereafter observed as the maximum to be charged, ""5 and the Supreme Court ruling amounts to a definition of what may be a just and reasonable rate. In a circuit court case it was said: "The Interstate Commerce Commission is an administrative tribunal and the wisdom and expediency of the lawful exercise of the discretion delegated to it under the Constitution and the statutes is not reviewable by the courts. But the power is imposed upon the circuit court to relieve from orders of the commission which deprive complain

4 Chicago, R. I. & Pac. R. Co. v. Inter. Com. Com., 171 Fed. 680. 5 Hepburn Act, U. S. Comp. St. 1907, p. 900.

• Diffenbaugh v. Inter. Com. Com., 176 Fed. 409.