Page:Harvard Law Review Volume 32.djvu/585

549 VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 549 depend upon the elements that go to make up cost, it cannot de- pend upon cost. It must therefore depend on something other than cost. That is to say that it must depend upon the value of the service, if not in one or more of the specific senses which have been suggested for that phrase, then in the broad sense of all the circumstances other than cost (and discrimination) which strike the court as affecting the question what rate is proper. Since the primary requirement is that rates shall equal cost, the value of the service can take effect only so far as cost is in doubt. But cost is always in doubt. Even the cost of a company's whole product is by no means free from doubt. The mere amount of the property employed is certain, and the cost of maintenance and operation is tolerably certain; but the value of the property and its rate of depreciation are matters of opinion, and the proper rate of return is eminently a matter of opinion. Ideas of public policy exert their chief influence in the determination of what consti- tutes a reasonable rate of return; but judges could not if they would, and there is no reason why they should, altogether exclude the influence of such ideas in deciding on the fair value of the property and its rate of depreciation. In the case of a particular service, the doubtful element in cost is far larger still. When, as in the case of a carrier, a company is performing a variety of serv- ices, it is clear and familiar that there is no means of determining neatly the share of the value of the whole property, or of depre- ciation, or of the costs of operation and maintenance, which ought to be attributed to each. The question exactly what a particular service costs is therefore "one of almost insuperable difficulty." ^^ It is unquestioned that the profit which a utility may earn on its entire business is variable; and observations to that effect have frequently been coupled with references to the interest of con- sumers. The United States Supreme Court has said: " If the answer had not alleged, in substance, that the tolls prescribed . . . were wholly inadequate for keeping the road in proper repair and 390 (Idaho Pub. Util. Com.); Duluth St. Ry. Co. v. R. R. Com., 161 Wis. 245, 152 N. W., 887 (1915); P. U. R. 1915 D, 192, 206. There is little objection to putting the matter in this way, and considering that it involves varying the return (inversely) with the cost. But, if cost is defined as reasonable or normal cost, the return above cost is not made to fluctuate when the efl&cient company is allowed a greater profit than the ineflScient one. 1 ^ Central Yellow Pine Assn. v. Illinois Central R. R., ro I. C. C. 505, 538 (1905).