Railroad Rate Regulation

Topic A. Certain Limitations Fundamental

§ 212. Rates must be fair to the company and to the public.

213. Limitations within which rates must be made.

214. Unreasonable regulation universally forbidden.

215. Value of the services constitutes minimum.

216. Interests of the companies to be considered.

217. Interests of the public to be considered.

218. Accommodation of the interests of both sought.

219. The complexities of the general problem.

Topic B. The Schedule taken as a Whole

220. Reasonableness of the schedule as a whole.

221. Tests of the reasonableness of a schedule.

222. Many elements to be taken into account.

223. Relation of a particular rate to a whole schedule.

224. Conclusions as to proportionate rate.

225. Company cannot make unreasonable rates.

226. Company cannot justify exorbitant profits.

227. Special circumstances affecting the particular rate.

Topic C. The Particular Rates Considered Separately

§ 228. Reasonableness of the separate rates.

229. Schedule as a whole may throw light.

230. Bearing of tariff as a whole.

231. Rule of proportionality in sharing costs.

232. Average cost always modified.

233. Application of both tests necessary.

234. Service not worth usual amount.

235. Service of unusual value.

Topic D. Bases of Regulation

§ 236. Constitutional limitations upon commission regulation..

237. Reasonable rates not necessarily profitable.

238. When fair net earnings left.

239. Possibility of increase of business.

240. Making rates compared with levying taxes.

241. Governmental regulation best for all concerned.

242. Inherent difficulties of accommodating all tests.

243. Conflicting authorities still persist.

CHAPTER VI

BASIS OF CAPITAL CHARGES

250. Provisions of the Act.

251. Various theories as to proper capitalization.

Topic A. Original Cost

§252. Actual investment entitled to return.

253. Cost of proper facilities.

254. What is the actual cost.

255. Cost enhanced by fraudulent contract.

256. Construction now thought unwise.

257. Equipment long since superseded.

258. Portion of plant not now utilized.

259. Treatment of outside investments.

260. Allowance for unremunerative betterments.

261. Contributions made by the State.

Topic B. Outstanding Capitalization

§ 262. Capitalization outstanding.

263. Nominal capitalization.

264. Stock issues often deceptive.

265. Bonded indebtedness beyond present values.

266. Market value of securities.

267. Securities issued upon reorganization.

268. Capitalization authorized by public authorities.

§ 269. The problem of watered stock.

270. Property acquired from surplus earnings.

271. Inquiry into foregone profits.

272. Existing capitalization hardly excessive.

Topic C. Present Value

§ 273. Power to set aside a statutory rate.

274. Constitutional requirements.

275. Original cost as affecting present value.

276. Going value.

277. Franchise values.

278. Purchase value.

279. Tax appraisals.

280. Development cost.

281. Capitalized rights.

282. Governmental valuations.

283. Treatment of unearned increment.

284. Valuation of utilized realty.

Topic D. Cost of Reproduction

§ 285. Rule of the Minnesota courts.

286. Methods of Texas Commission.

287. The federal courts opposed.

288. Explanation of the California decisions.

289. Condition of the plant itself.

290. What physical reproduction means.

291. Identical reproduction.

292. Intervening conditions.

293. Piecemeal construction.

294. Overhead charges.

295. Unit prices.

296. Cost of building up the business.

CHAPTER VII

RATE OF RETURN

§ 300. Provisions of the Act.

301. Elements in determining a fair return.

Topic A. Establishment of the Doctrine

§ 302. Establishment of the power to restrict charges.

303. Rates fixed must not produce a deficit.

304. Adequate return must be left.

305. Reasonable return must be left.

306. Reasonableness of return a judicial question.

307. Reasonable profit upon each transaction.

308. Jurisdiction of the Commission.

309. Status of the companies affected.

Topic B. Fair Rate of Return

§ 310. Interest upon bonds protected.

311. Rates at which governments can borrow no criterion.

312. Prevailing rate of interest allowed.

313. What are reasonable dividends?

314. Current rate of return.

315. Fair rate of return.

316. Current rate the standard.

317. Reasonable profits sufficiently safe.

318. Rate of return upon investments in general.

319. Public service has its peculiar risks.

Topic C. Policies Respecting Return Allowed

§ 320. General policy for allowing a fair return.

321. No right to raise rates in prosperous times.

322. Commercial conditions affecting dividends.

323. More than current rates of interest not secured.

324. How interest payable is considered.

325. Profits divided not operating expense.

326. Consolidation of interest and dividends.

327. Reductions ruinous only to certain companies.

328. Creating a fund for payment of uniform dividends.

329. Greater profit for better service.

Topic D. Character of the Enterprise

§ 330. Larger returns in risky enterprises.

331. Hazards of the business considered.

332. Whether uniform return upon all property.

333. Rate of interest dependent upon safety.

334. Risk by reason of depreciated security.

335. Rate of return dependent upon locality.

336. Investment in public service.

337. Present tendencies in regulation.

CHAPTER VIII

OPERATING EXPENSES

§ 340. Provisions of the Act.

341. Real cost of operation.

Topic A. Cost of Performing Service

§ 342. Cost of rendering service.

343. Net earnings in general.

344. Salaries paid to officials.

345. Cost of supplies.

346. Unreasonable expenditures.

§ 347. Improvident arrangements.

348. Estimating labor cost.

349. Scientific management.

350. Loans.

351. Taxes.

Topic B. Expenditures on the Plant

§ 352. Expense of equipment and maintenance.

353. Cost of rolling stock.

354. Losses by accident.

355. Betterments considered as maintenance.

356. Improvement of existing plant.

357. Replacement considered as repair.

358. Permanent improvements should not be annual charge.

359. New construction should be charged to capital.

360. New construction not an operating expense.

361. Betterment out of income.

Topic C. Depreciation Requirements

§ 362. Allowance for depreciation.

363. Types of depreciation.

364. Authorities refusing to allow depreciation.

365. Renewal of equipment to offset depreciation.

366. Fund to repair depreciation.

367. Capitalization of past depreciation.

368. Payments into sinking fund.

369. Amortization of franchise rights.

Topic D. Operations of Consolidated Properties

§ 370. Complications in case of systems.

371. Divisions as integral parts of the whole system.

372. Unprofitable portions of the line not considered.

373. Systems considered as wholes.

374. Treatment of branch lines.

375. Constituent roads operated under separate charters.

376. Rent of leased portions.

377. If rental becomes unjustifiable.

PART II-THE RATES IN PARTICULAR

CHAPTER IX

COST OF PARTICULAR SERVICE

§ 380. Provisions of the Act.

381. Various theories as to rate making.

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Railroad Rate Regulation: With Special Reference to the Powers of the ...