Southwestern Bell Tel. Co. v. Public Svc. Comm’n, 262 U.S. 276 (1923)

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State of Missouri ex rel. Southwestern Bell Telephone Company


v. Public Service Commission of Missouri
No. 158


Argued December 8, 1922
Decided May 21, 1923
262 U.S. 276

ERROR TO THE SUPREME COURT
OF THE STATE OF MISSOURI

Syllabus

1. Rates fixed by state authority for a public utility corporation must be such as will yield a fair return upon the value of its property devoted to the public service. P. 287.

2. What will amount to a fair return cannot be ascertained by valuing the property as of past times without giving consideration to greatly increased costs of labor, supplies, etc., prevailing at the time of the investigation. Id.

3. An honest and intelligent forecast of probable future values is also essential, and this cannot be made if the highly important element of present costs be wholly disregarded. Id.

4. Rates admitting of a possible return of but 5 1/2% in net profits after allowing for depreciation, on the minimum value of the property of a telephone company held wholly inadequate considering the character of the investment and the interest rates then prevailing. P. 288.

5. A state Commission, in fixing the rates of a public utility corporation, cannot substitute its judgment for the honest discretion of the company’s board of directors respecting the necessity and reasonableness of expenditures made in the operations of the company. Id.

233 S.W. 425 reversed.

Error to a judgment of the Supreme Court of Missouri affirming a judgment of the state circuit court which sustained an order by which the Public Service Commission undertook to reduce the rates of the above-named telephone company and to abolish installation and moving charges.