Page:Harvard Law Review Volume 32.djvu/564

528 528 HARVARD LAW REVIEW In 1916 the California Railroad Commission, in allowing a water company a much smaller increase in water rates than it asked for, declared that it applied "the well-established rule in public utility regulation, that while rates must be reasonable to the utility, they must, in any event, be reason- able to the public. The cases clearly establish the principle that the rates charged by a public utility must in no event be higher than the service is reasonably worth to the consumer." ^ But it is doubtful whether the case actually allowed the company less than a reasonable return. For the rates prescribed were expected to yield a net return, which, though small, may have amounted to 4.25 ^^ per cent on the value of the property, even including a considerable amount of property which was not used or useful; and a comparatively small return would be reasonable in view of the fact that consumers had bought their land from a company closely affiliated with the petitioner, and their water rights from the petitioner as part of the same transaction. The obiter character of what is said in the Oklahoma case of Oklahoma Gin Co. v. State,^^ seems quite as clear. A commis- sion's order fixing the rate for cotton ginning in a city at fifty cents per bale was sustained, in spite of the commission's admis- sion that "the price of fifty cents per bale is not sufl&cient to pay the operating expenses and keep all the gins ... in operation during the ginning season." The Oklahoma court declared that it was quite immaterial whether the gins did business at a loss or not; in other words, it adopted an extreme value-of-the-service standpoint. But it had no need, in order to sustain the cormnis- sion's order, to adopt anything of the sort, or to ignore the re- quirement of a reasonable return to the producer; for it had not been admitted or shown that there were no gins, or an insufficient number of gins to handle the business, which could make a profit at the fifty-cent rate; or that, if the number of gins were reduced to correspond with the needs of the community, that rate would not give a profit to all. ^ It may also have amoimted to less. This figure is obtained by selecting from the various alternative estimates which the case contains, of cost, depreciation, operating expenses, etc., those least favorable to the company's demand; the commission itself makes no selection. « (OUa.), 158 Pac. 629 (1916), P. U. R. 1916 G, 22.
 * Re Lake Hemet Water Co., P. U. R. 1917 A, 458, 483.