EVERY consideration of valuation of a public utility, whether for the purpose of condemnation for purchase or as a basis for fixing rates or permitting the issue of stock or bonds, must start from Sinyth v. Ames, and the rule therein laid down by HARLAN, J., at page 546: "We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case. We do not say there may not be other matters to be regarded in estimating the value of the property. What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. On the other hand, what the public is entitled to demand is that no more be exacted from it for the use of a public highway than the services are reasonably worth." In all the cases since that has proved a sufficiently comprehensive statement, and by the provision for "other matters to be regarded" it has proven sufficiently elastic for free development in the light of experience. The question here to be proposed is whether, in the light of the rich experience of the twenty years since Smyth v. Ames, it is not possible and desirable to adopt a narrow and definite rule, one not based on so many matters, with so much room for individual opinion, but on one matter that is capable of reasonable, definite ascertainment.
Goddard, Edwin C. "Public Utility Valuation." Mich. L. Rev. 15 (1917): 205-27.