Pierce Butler

“ Estimates of cost may conceivably approximate what the cost of reproduction would be at a given time. But, where a plant would require years for completion, the estimate would be necessarily delusive, if it were based on 'spot' prices of labor, materials, and money. The estimate, to be in any way worthy of trust, must be based on a consideration of the varying costs of labor, materials, and money for a period at least as long as would be required to construct the plant and put it into operation. ”

“ The present value of the land is much greater than its cost; and the present cost of construction of those parts of the plant is much more than their reasonable original cost. In fact, prices and values have so changed that the amount paid for land in the early years of the enterprise and the cost of plant elements constructed prior to the great rise of prices due to the war do not constitute any real indication of their value at the present time. ”

“ On the other hand, the evidence shows that the cost of reproducing the physical property today would be from $4,500,000 to $5,000,000, or from 30 to 35 per cent. more than the said sum of $14,904,000. * * * There is no doubt that the element of original cost has been recognized sufficiently. There is doubt as to whether or not the element of the cost of reproduction new today has been given sufficient weight.'
It is well established that values of utility properties fluctuate, and that owners must bear the decline and are entitled to the increase. ”

“ Bonds rarely constitute the source of all the money required to finance public utilities. And investors insist on higher yields on stock than current rates of interest on bonds. Obviously, the cost of money to finance the whole enterprise is not measured by interest rates plus brokerage on bonds floated for only a part of the investment. The evidence is more than sufficient to sustain the rate of 7 per cent. found by the commission. And recent decisions support a higher rate of return. [4]
There was controversy as to probable net earnings for 1924. The company's estimate is $958,000 ”

“ The commission in No. 6613 discussed the company's water rights. It said:
'Petitioner has acquired and now owns the right or privilege of taking and using all the water in White river and Fall creek for the purposes incident to its business. This right is an extraordinarily valuable part of the whole value of this property. The right to use the water of White river has saved the water company and likewise the citizens of Indianapolis millions of dollars over what it would have cost to secure sufficient water for the needs of the city in any other possible way. ”

“ Moreover, the estimate must be made in the light of a longer experience, and with due allowances for the hazards which attend all prophecies in respect to prices. The search for value can hardly be aided by a hypothetical estimate of the cost of replacing the plant at a particular moment, when actual reproduction would require a period that must be measured by years. ”

“ While the values of such properties do not vary with frequent minor fluctuations in the prices of material and labor required to produce them, they are affected by and generally follow the relatively permanent levels and trends of such prices. The fact that original cost was probably 12 to 20 per cent. less than the estimate of the commission's engineer based on the average of prices for the ten years ending with 1921-two years before the rate order became effective-does not tend to support the commission's adoption of that estimate. ”

“ As was said in Minnesota Rate Cases, 230 U.S. 352, 434 (33 S.C.t. 729, 57 L. Ed. 1511, 48 L. R. A. (M. S.) 1151, Ann. Cas. 1916A, 18) : 'The ascertainment of that value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts."
There is, so far as I recall, no statement by this court that value is tantamount to reproduction cost. ”

“ There is shown, as to physical property only, the cost of reproduction less depreciation estimated on different price bases. Some of these estimates were on quoted market prices of cast iron pipe, and some were on prices approximately 10 per cent. ”

“ As the litigation would be prolonged considerably if the case were remanded for further findings, we have examined the record to determine whether the facts proved justify the court's conclusion. Knoxville v. Water Co., 212 U.S. 1, 8, 29 S.C.t. 148, 53 L. Ed. 371; Chicago M. & St. P. Ry. v. Tompkins, 176 U.S. 167, 179, 20 S.C.t. 336, 44 L. Ed. 417; Lincoln Gas Co. v. Lincoln, 223 U.S. 349, 361, 32 S.C.t. 271, 56 L. Ed. 466; Denver v. Denver Union Water Co., supra, 182 (38 S.C.t. 278) ”

“ It stated that was the rate the city's appraiser, Mr. E. W. Bemis, testified to be reasonable. At the trial, the company introduced testimony supporting higher rates. Mr. Hagenah and Mr. Elmes testified that 8 per cent. was a reasonable rate of return. Mr. Metcalf, consulting engineer for the company, supported a rate from 7.5 per cent. to 8 per cent. Appellants offered a study by Mr. E. W. Bemis of the rates of yield to investors on certain public utility bonds. ”