Page:Harvard Law Review Volume 32.djvu/567

531 VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 531 reasonable return on the entire business of a public utility and yet to deny the necessity of such a return on each kind of service which it performed. But it is not possible to admit the necessity in the case of each particular service and deny it in the case of the business as a whole. If a company is to make a profit on each service it performs, it must inevitably make a profit on its entire business; if, therefore, it is entitled to make a profit on each serv- ice, regardless of the value of the service and the needs of the consumer, it follows that it is entitled, equally regardless, to make a profit on its whole business. Is a utility entitled to make a profit on each service? In the Arkansas case of Missouri Pacific Railway Co. v. Smith, ^ it was held that a railroad might be required to carry passengers at a loss, so long as it was allowed to earn a profit on its aggregate business, passenger and freight. The Northern Pacific case ^^ in the Supreme Court settled the law to the contrary. It decided that rates on a particular commodity (coal) which did not yield a return large enough to cover the overhead charges attributable to coal could not be enforced, regardless of whether the company was earning a fair return on its whole business, and regardless also of the effect which increased rates would have upon the pubhc. "Where it is established that a commodity, or a class of traffic, has been segregated and a rate imposed which would compel the carrier to trans- port it for less than the proper cost of transportation, or virtually at cost, and thus the carrier would be denied a reasonable reward for its service after taking into account the entire traffic to which the rate applies, it must be concluded that the State has exceeded its authority." "As a carrier for hire, it cannot be required to carry persons or goods gratuitously. The case would not be altered by the assertion that the pubHc interest demanded such carriage. ... It would be no answer to say that the carrier obtains from its entire intrastate business a re- turn as to the sufficiency of which in the aggregate it is not entitled to complain. ... It is urged by the State that the commodity in question is one of the lowest classes of freight. This may be assumed, and it may be a good reason for a lower rate than that charged for carrying articles of a different sort, but the mere grade of a commodity cannot be regarded as furnishing a sufficient ground for compelling the car- rier to transport it for less than cost or without substantial reward. " 60 Ark. 221, 244, 29 S. W. 752 (189s). » 236 U. S. 585, 595-98, 604 (191S).