HKB
History of the Valuation Question
For almost fifty years the Court was to wander through a maze of conflicting formulas for valuing public service corporation property only to emerge therefrom in 1944 at a point not very far removed from Munn v. Illinois.[215] By holding, in 1942, in Federal Power Commission v. Natural Gas Pipeline Co.,[216] that the "Constitution does not bind rate-making bodies to the service of any single formula or combination of formulas," and in 1944, in Federal Power Commission v. Hope Gas Co.,[217] that "it is the result reached not the method employed which is controlling, * * * [that] it is not the theory but the impact of the rate order which counts, [and that] if the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end," the Court, in effect, abdicated from the position assumed in the Ben Avon Case.[218] Without surrendering the judicial power to declare rates unconstitutional on grounds of a substantive[219] deprivation of due process, the Court announced that it would not overturn a result deemed by it to be just simply because "the method employed [by a commission] to reach that result may contain infirmities. * * * [A] Commission's order does not become suspect by reason of the fact that it is challenged. It is the product of expert judgment which carries a presumption of validity. And he who would upset the rate order * * * carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences."[220]
In dispensing with the necessity of observing any of the formulas for rate computation which previously had currency, the Court did not undertake to devise, by way of substitution, any discernible guide to aid it in ascertaining whether a so-called end result is unreasonable. It did intimate that rate-making "involves a balancing of the investor and consumer interests," which does not, however, "'insure that the business shall produce net revenues,' * * * From the investor or company point of view it is important that there be enough revenue not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock. * * * By that standard the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital."[221] Nevertheless, in the light of the court's concentration on the reasonableness of the final result rather than on the correctness of the methods employed to reach that result, it is conceivable that methods or formulas, now discredited in whole or in part, might continue to be observed by State commissions in drafting rate orders that will prove to be justiciably sustainable.[222]
REGULATION OF PUBLIC UTILITIES (OTHER THAN RATES)
In General