PUBLIC UTILITY VALUATION FOR RATE MAKING PURPOSES

Authors

Abstract

Ever since Munn v. Illinois (1876) 94 U. S. 113, which first decided that the charges to be made for services rendered by public utilities were to be subject to governmental regulation, the courts have been confronted with a problem, so elusive and indefinite, that over five decades of litigation and wrangling have failed to provide a satisfactory solution. The so called "rule" of Smyth v. Ames (1898) 169 U. S. 466, specifying the elements to be considered in ascertaining the value of public utilities for the purpose of rate-making, has only served to submerge the problem further in its fog of uncertainties and difficulties. In the Minnesota Rate Cases, 230 U. S. 352, 434, it was stated by Mr. Justice Hughes, that "the ascertainment of that value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts." With this statement being reiterated continually, and the courts purporting to apply the rule of Smyth v. Ames, legal writers throughout the country busied themselves in denouncing the principles and methods employed by the judicial tribunals and solutions for the problem were suggested. Although they differed as to the proper doctrine to be adopted, many adhering to the prudent investment theory, while others were supporting the cost of reproduction view, all were in accord in expressing dissatisfaction with the rule of Smyth v. Ames and clamored for some sound workable rule as a guide. Judicial decisions, however, indicated very little change in the views of the bench, and the courts clung tenaciously to Smyth v. Ames, while vagueness and indefiniteness characterized their results.

Recommended Citation

PUBLIC UTILITY VALUATION FOR RATE MAKING PURPOSES, 26 Mich. L. Rev. 89 (1927).
Available at: https://repository.law.umich.edu/mlr/vol26/iss1/7