Page:Harvard Law Review Volume 32.djvu/555

519 VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 519 the service costs (whatever that may mean), and they must, similarly, be fixed above cost when the value of the service ex- ceeds its cost. And even from the milder view that value is a rate-making factor coordinate with cost, it would follow that, in cases of conflict, rates must sometimes be fixed below, and some- times above, the point of cost; for if, when two requirements con- flict, one of them is always to yield to the other, the relation of the first to the second is not of equality but of subordination. To say that there can be no conflict between the two criteria, be- cause that which is reasonable to the producer is always reason- able to the consumer also, is to abandon the proposition that rea- sonableness to the consumer counts. If vialue, or reasonableness to the consumer, means anything {i. e., anything independent of cost, or reasonableness to the producer), by hypothesis it must, whatever it means, occasionally conflict with reasonableness to the producer. To say that cost is not conclusive, because value also must be given weight, but that value is always equal to cost, is evidently to insist upon two names for the same thing, to no other purpose than confusion.^^ ^* Yet there are advocates of a value-of-the-service standard who say that there is commonly complete identity between value of the service and cost of the service: between what is reasonable to the public and what is reasonable to the utility. Thus Mr. Robert H. Whitten, in the article just quoted, says: "Normally there is no conflict, for a rate that is just to the company is also just to the public. . . . For the normal successful pubhc utility enterprise the reasonable rate of charge is the rate that affords the company a reasonable, and no more than reasonable, compensation for its entire service to the pubhc." 27 Harv. L. Rev. 421. So, a federal court has said: "Gener- ally, that which is just, but no more than just, to the owner, ought to be the equivalent of that which is just, but no more than just, to the consumer." Spring Valley Water Co. V. City & County of San Francisco, 165 Fed. 667, 679 (1908). The Wisconsin Railroad Commission agrees: "Ordinarily the rate of return or the rates for services that are reasonable to the utility are also reasonable to the consimiers." 4 Wis. R. R. Com. 625. Both the Wisconsin Railroad Commission and Mr. Whitten speak of an exception to their rule of identity. The Commission refers to the case of "utilities which are operating under such conditions that no rates that can be collected from the con- simiers would be sufficient to meet" expenses, including a fair return. But this is no exception to the rule that cost alone governs, since, in this situation, rates are kept below the point of cost not by considerations of the value of the service but because it is (by hypothesis) impossible to collect cost: not by a rule of law but by a state of fact. Mr. Whitten says: "It is for the most part only in cases where there has been poor judgment in the establishment of an enterprise, or changed conditions have rendered it inappropriate, that a rate which offers only a fair compensation to the company is