Briefs were submitted by the Attorney-General and by the Public Service Commission for the second district of the State.
Smith, P. J.:
This Commission has assumed to fix a maximum charge for gas and electricity within the village of Saratoga Springs. By this appeal their right so to do is challenged, upon the ground that such power is legislative and cannot be delegated to a commission. The question raised is an important one, as it goes to the foundation of a policy which has been adopted by the State, and which, if such power be denied, is of little efficacy. That the power to fix a tariff of rates for a public service corporation is executive will not be contended. That such power as an original power is not judicial will be admitted. In Interstate Commerce Commission v. Railway Co. (167 U. S. 479,505) Mr. Justice Brewer, in writing for the court, says: “ The power to prescribe a tariff of rates for carriage by a common carrier, is a legislative and not an administrative or judicial function.” In Chicago, B. & Q. R. R. Co. v. Jones (149 Ill. 377) it is said: “ The power to regulate and control the charges of railroad companies or other agencies engaged in public employments is legislative and not judicial.” Further authority, might be cited to the same effect. The pivotal contention here is as to whether this function is so purely legislative that it cannot in any degree be delegated to an administrative body as a commission named, as provided in this statute.
In determining this question we are aided by well-considered authority. In Stone v. Farmers' Loan & Trust Co. (116 U. S. 307), decided .in 1886, the action was brought by the Farmers’ Loan and Trust Company to enjoin the Railroad Commission of Mississippi from enforcing against the Mobile and Ohio Railroad Company the provisions of the statute of Mississippi, entitled “An act to provide for the regulation of freight and passenger rates on railroads in this state, and to create a commission to supervise the same.” It was claimed in that case that the act conferred both [206]*206legislative and judicial powers on" the commission, in violation of the Constitution of Mississippi. The Supreme Court of" the United States reversed the. decree of the Circuit Court,, and-remanded the . cause, with instructions to dismiss the bill. In State v. Chicago, Milwaukee & St. Paul R. Co. (38 Minn. 281) the statute of the State had created a railroad and warehouse commission with authority to determine reasonable and just rates for transportation of-freight and passengers by the roads within the'State. The respondent railroad company had refused to comply with the. order of the commission as to the rate fixed. Proceedings, were commenced to enforce obedience. The court held : “ The authority thus given to the commission to determine in the exercise of their discretion and judgment what are equal and reasonable rates, is not. a delegation of legislative power.”. In discussing this objection Mitghell, J., in writing for the court, says: (p. 300) “ The difference between the power to say what the- law shall be and the power to adopt rules and regulations,.Or to investigate-and determine the facts in order to carry -into effect a law already passed is apparent. The true distinction is between the delegation of power to. make the law, which necessarily involves a discretion as to- what it shall be,- and; the conferring an authority or discretion to be exercised under and in pursuance of the law.” -
After discussing the necessity of ' leaving the application of such a law to some administrative body the opinion proceeds: “ The Legislature .itself has passed upon the expediency of the law and what-it shall be. The commission is intrusted with no authority or discretion upon these questions. It can. neither make nor unmake a single provision of law.' It. is-merely charged with the administration of the law and with no other power.' Whether the charges of a railway in any particular case are or. are not equal and reason -. able is a fact left by the law.for them to determine. If' the commission find them unequal and unreasonable and declare other rates to be equal and reasonable, the law itself declares the former unlawful,' and allows the railway company to charge only the latter'.”- The writ of mandamus asked for was awarded.' That case was carried to the United States Supreme Court and is there reported in Chicago, etc., R. Co. v. Minnesota (134 U. S. 418). The case was'there reversed upon the ground that the Supreme Court of Minnesota had held that [207]*207the statute precluded any judicial review of the determination oi the commission. No question was made as to the validity of the delegation of such power, if the right of judicial review had not been taken away¿ Hr. Justice Hiller, in writing a concurring opinion, stated two propositions of law. • First. “ In regard to the business of common carriers limited to points within a single State, that State has the legislative power to establish the rates of compensation for such carriage.” Second. “ The power which the Legislature has to do this can be exercised through a commission which it may authorize to act in the matter, such as the one appointed by the Legislature of Hinnesota by the act now under consideration.” Hr. Justice Bradley wrote a dissenting opinion in that case in which Justices Gray and Lamar concurred. In that dissenting opinion he said: “ I think it is perfectly clear and well settled by the decisions of this court that the Legislature might have fixed the rates in question. If it had done so it-would have done it through the aid of committees appointed to investigate the subject, to acquire information, to cite parties, to get all the facts before them and finally to decide and report. No one could have said that this was not due process of law. And if the Legislature itself could do this, acting by its committees and proceeding according to the usual forms adopted by such bodies, I can see no good reason why it might not delegate the. duty to a board of commissioners charged as the board in this case was, to regulate and fix the charges so as to be equal and reasonable. * * * In the Railroad Commission Cases
In Field v. Clark (143 U. S. 649), decided in 1892, the court had under consideration provisions of an act of Congress authorizing the President to suspend by proclamation the free introduction of certain commodities when he became satisfied-that any country producing such articles imposed duties or other exactions upon the [208]*208agricultural or other products of the United States which he might deem to be reciprocally unequal or unreasonable. In that case the Supreme Court of the United States held that Congress could not, under the Constitution, delegate its legislative power to the President, but that the provision referred to was not a delegation of legislative power. The principles there enunciated are in line with the reasoning of the cases before quoted.
. In New York & N. E. R. R. Co. v. Bristol (151 U. S. 556) the head note in part reads: “ Railroad corporations are subject to such legislative control as may be necessary to protect the public against danger, injustice or oppression ; and this control may be exercised through a board of commissioners.” In that case the court had under review a statute of the State of Connecticut relating, to railway grade crossings. ,
In Reagan v. Farmers’ Loan & Trust Co. (154 U. S. 362), decided in' 1894, the court' had under review a statute of' the State of Texas, which created a railroad commission with various powers, among others, the right to regulate rates and charges for transportation. The Circuit Court restrained the railroad commission from establishing any rates" whatsoever under and by virtue-of the act. The Supreme Court of the United States reversed the decree in so far as it restrained the railroad commission from establishing rates, and regulations, but sustained the decree as to certain powers given, by the-act. In referring to other provisions of the act, Mr. Justice Brewer, in writing for the court, says: “ Applying this rule, the invalidity of these two provisions may be conceded without impairing the force of the rest of 4he act. The creation of a commission, with power to establish rules for the operation of railroads and to regulate rates, was the prime object of the legislation.. This is fully accomplished, whether any penalties are imposed for a violation of the.rules prescribed, or whether the rates shall be conclusive or simply prima facie evidence of what is just and reasonable.”
In Interstate Commerce Commission v. Railway Co. (167 U. S. 479), decided in 1897, it was decided that the Interstate Commerce Commission was not authorized under the act, expressly or impliedly, to fix and establish rates. Mr. Justice Brewer writes this conclusion after an extended argument, The decision assumes that if that power had been given it would have been constitutional.
[209]*209In San Diego Land Co. v. National City (174 U. S. 739), decided in 1899, the Legislature of California had authorized the board of aldermen, or other legislative body of any city or county, to fix the rates to he charged by water companies for the furnishing of water. This statute was held constitutional.
In Chicago, Milwaukee & St. P. R. Co. v. Tompkins (176 U. S. 167), decided in 1900, the Legislature of South Dakota had provided for the appointment of a board of railroad commissioners, and had authorized such board to make a schedule of reasonable maximum fare and charges for the transportation of' passengers, freight and cars on the railroads within the State. The railroad commission had made a schedule, and the hill was filed in the Circuit Court to restrain the enforcement of the schedule. The complaint made was that the rates were unjust and unreasonable. The Circuit Court dismissed the bill. This decree,- however, was reversed by the United States Supreme Court and the case remanded to a competent master, to report fully upon the facts. This direction would have been wholly unnecessary if the act had been unconstitutional, as is claimed by the appellants here.
In Minneapolis & St. Louis R. R. Co. v. Minnesota (186 U. S. 257), decided in 1902, the court had under consideration the act of the Legislature of the State of Minnesota creating a railroad and warehouse commission, and authorizing that commission to fix rates. The action was brought to compel the plaintiff in error to comply with those rates. The decree was rendered as asked in the Supreme Court of Minnesota, and the decree of that court was affirmed by 'the United States court. In that case the constitutionality of the act was no& discussed, but was assumed.
In Stanislaus County v. San Joaquin C. & I. Co. (192 U. S. 201), decided in 1904, a statute of California permitting boards of supervisors to fix water rates was sustained. In Buttfield v. Stranahan (192 U. S. 470) the act of Congress known as -the Tea Inspection Act was under examination. That act authorized the-Secretary of the Treasury to establish fixed and uniform standards of purity, quality and fitness for consumption. The court held that the statute was not unconstitutional as vesting an executive officer with legislative power. Mr. Justice White, in writing for the court, said: [210]*210“We may say of the legislation in this case as was said of the legislation considered in Field v. Clark, that it does not in any real sense invest administrative officials with the power' of legislation. Congress legislated on the subject as far as was reasonably practicable, and from the necessities of the case was compelled to leave to executive officials the duty of bringing about. the result pointed out by the statute. To deny the power of Congress to delegate such a duty would, in effect, amount but to declaring that the plenary power vested in Congress to regulate foreign commerce could not be efficaciously exerted.” “ The claim that the statute commits to the arbitoary discretion of the Secretary of the Treasury the determination of what teas may be imported, and, therefore, in effect, vests that official with legislative power? is without merit. We are of .opinion that the statute, when property construed, as said by the Circuit Court of Appeals, but expresses the purpose to exclude the lowest grades of tea, whether demonstrably of inferior purity, or unfit for consumption, or presumably so because of tlieir inferior quality. ' This, in effect,-was the fixing- of a primary standard, and devolved upon the Secretary of the Treasury the m'ere executive duty to effectuate the legislative policy declared in the statute.”
In Atlantic Coast Line v. Florida (203 U. S. 256), decided in 1906, a statute of Florida was held constitutional which created a board of railroad commissioners, and provided that the rates for transportation as fixed by that board should be prima facie just and reasonable. The same rule was held in Seaboard Air Line v. Florida (203 U. S. 261).
In Union Bridge Co. v. United States (204 U. S. 364), decided in 1901, the head note in part reads': “ Congress when enacting that navigation be freed from unreasonable obstructions arising from bridges which are of insufficient height or width of span, or are otherwise defective, may without violating the constitutional prohibition against delegation of legislative or judicial power, impose upon an executive officer the duty of ascertaining what particular cases come within the prescribed rule.” . The' opinion states with approval the remarks of Chief; Justice Marshall, in Wayman v. Southard (10 Wheat. 1) to the effect that although Congress could not' delegate to the courts or to any othér tribunal powers strictly and exclusively legislative, and. although the line had not been [211]*211exactly drawn that" separates the important subjects which must be entirely regulated by the Legislature itself from those of less interest “ in which a general provision may be made, and power given to those who are to act under such general provisions to fill up the details, ” yet “ Congress may certainly delegate to others, powers which the Legislature may rightly exercise itself,” and “ the maker of the law may commit something to the discretion of the other departments.” *
In Atlantic Coast Line v. North Carolina Corporation Commission (206 U. S. 1), decided in 1907, the statute of North Carolina created a corporation commission with power to fix rates. The plaintiff had questioned the power, which had been sustained by the Supreme Court of North Carolina.. The Supreme Court of the United States affirmed the decision of the State court. Mr. Justice White, in writing for the court, says : “The elementary proposition that railroads from the public nature of the business by them carried on and the interest which the public have in their operation are subject, as to their State business, to State regulation, which may be exerted either directly by the legislative authority or by administrative bodies endowed with power to that end, is not and .could not be successfully questioned in view of the long line of authorities sustaining that doctrine.”
In Chicago & N. W. Ry. Co. v. Dey et al. (Railway Commissioners) (35 Fed. Rep. 866) the court had under review an act of the State of Iowa, authorizing railroad commissioners to fix maximum charge for transportation. The opinion was written by Mr. Justice Brewer. In part he says: “ Hence counsel conclude that the Legislature is the only body which can-fix rates, and that it may not abdicate its functions and delegate this legislative power to another body. Of course, this'question, is pivotal; for if the Legislature alone can fix rates, the railroad commissioners are exercising functions which do not belong to them; and if the rates proposed infringe upon the property rights of the complainant, it may insist that such unauthorized action of the commissioners be stayed. * * * There is no inherent vice in such a delegation of power; nothing in the nature of things which would prevent the State, by constitutional enactment, at least, from intrusting these powers to such a [212]*212board ; and nothing in such constitutional action which would invade any rights guaranteed' by the Federal Constitution.” It will be noticed that Mr. Justice Brewer, who wrote in that case nine years later wrote the opinion in the Interstate Commerce Commission case above cited, in which he assumes the constitutionality of such delegated power. Similar holdings are found in Tilley v. Savannah, Florida & Western R. R. Co. (5 Fed. Rep. 641) ; New Memphis Gas & Light Co. v. City of Memphis (72 id. 952). In People v. Harper (91 Ill. 356) the court states as the first point urged against the declaration;, that the. authority granted to the Railroad and Warehouse Commissioners by the State of Illinois to fix the rates of charges for the- inspection of grain and compensation of officers, is an unwarrantable delegation of legislative power. In that case the validity of the statute was upheld.
In Chicago, B. & Q. R. R. Co. v. Jones (149 Ill. 361) a statute of the State of Illinois, authorizing the Board of Railroad Commissioners to fix rates, was upheld. The opinion in part reads: “ It has been held in a number of cases, that statutes, which create boards of commissioners and authorize them to make schedules of rates for, railroad companies, are not invalid for the reason here urged. The doctrine of these cases is, that the functions of such boards are administrative rather than legislative; that the authority conferred upon them relates merely to the execution of the law; that a grant of legislative power to do a certain thing carries witli it the power to use all proper and necessary means to accomplish the end, and that, as the reasonableness of rate's changes with circumstances and legislatures cannot be continuously in session, the requirement that the statute itself shall fix the charges, might preclude the Legislature from the use of the agencies necessary to perform the duty imposed upon it by the Constitution; in short, that the Legislature may authorize to do things which it might properly, but cannot conveniently or advantageously do itself.”
In State v. Great Northern Ry. Co. (100 Minn. 445 ; 111 N. W. Rep. 289) the statute of Minnesota authorizing the Railway Commission to determine 'whether a railway corporation may increase its stock-was under consideration. That part of the statute was held to be unconstitutional, because the matter was left entirely to the discretion of the Railway Commission without any standard' by [213]*213which they should be guided, and it was thus held to be a delegation of legislative power. The head note in part reads: “ In the exercise of this right the Legislature may enact a statute providing generally for what purposes and upon what terms, conditions and limitations an increase of capital stock may be made, and confer upon a Commission the duty of supervising any proposed increase. It may also delegate to the Commission the duty of finding the facts in each particular case, and authorize and require it, if it finds the existence of facts that bring the case within the statute, to allow the proposed increase; otherwise to refuse- it.” In the opinion we 'find: “ The rule was reaffirmed and applied in the case of State v. Chicago, M. & St. P. Ry. Co. (38 Minn. 281; 37 N. W. 782). The statute considered in that case (section 8, c. 10, p. 53, Laws 1887), authorized the Railroad and Warehouse Commission to find and determine whether the tariffs of rates, fares, charges or classification, or any part thereof, filed and published' by- any common carrier, were equal and reasonable, and if they were not, to compel the carrier to make them so. The question whether this statute delegated legislative powers to the Commission was raised, and this court held that there was no attempt to delegate to the Commission the power to determine what the law should be, and that in this respect the statute was constitutional.” After quoting from the opinion of Mr. Justice Mitchell in that case, the opinion proceeds: “ The court then proceeded to apply the test indicated to the statute then under consideration, and held that it did not attempt to delegate legislative powero to the Commission, or to invest it with any discretion as to what the law should be, but simply charged.it with the administration of the statute, which became a complete law upon its enactment. Or, in other words, the Legislature by the statute declared that all- freight and passenger rates should be equal and reasonable, and merely imposed upon the Commission the administrative duty of determining whether the charges of a carrier in any particular case were or were not equal or reasonable; that is, to determine whether it was or was not obeying the law, and, if not, to compel its obedience by enforcing rates which the facts found might show to be reasonable.”
The same rule has been held in State of Nebraska v. Fremont, E. & M. V. R. R. Co. (22 Neb; 313); in Georgia Railroad v. [214]*214Smith et al., Railroad Commissioners (70 Ga. 694); in Railroad Commissioners v Pensacola & A. R. R. Co. (24 Fla. 417); in Stone v. Yazoo & M. V. R. R. Co. (62 Miss. 607); in Atlantic Express Co. v. Wilmington & Weldon R. R. Co. (111 N. C. 463). In the brief presented by the. Public Service Commission is also found a quotation from the opinion given by Attorney-General Moody to Congress, in which he reaches two conclusions:
“ 1. There is a governmental powér to fix the maximum future charges of carriers by railroads vested in the legislatures of the States with regard to transportation exclusively within the States, and vested in Congress with regard to all other transportation.
“"2. Although legislative power; ■ properly speaking, cannot be delegated, the Jawmaking body, having enacted into law the standard of charges which shall control, may intrust to an administrative body not exercising in the true sensé judicial power the duty 'to fix rates in conformity with that standard.” *
In the same brief'twenty-two States are named which have similar • statutes.
In the courts of this State this question has not been' directly decided, but the principle is, I think, established in analogous cases. (See Matter of New York Elevated R. R. Co., 70 N. Y. 327; Matter of Gilbert Elevated R. Co., Id. 361 ; People ex rel. Steward v. Railroad Comrs., 160 id. 202; People v. Long Island R. R. Co., 134 id. 506.) ■
It will thus be seen that the assumption of this power by the Commission is justified by convincing authority. Hot a decision is cited in the State or Federal courts which questions the power provided the determination of the Commissioners is directed by some standard which is presented in the statute. ■ '
■It is strongly insisted that the statute fixes no such-standard. If in this the. appellant be correct;, the authorities cited are claimed to establish the unconstitutionality of the act. The power of the Commission is given in these words (§ 17): “ After such hearing and-upon such investigation as may have been made by the Commission,. or its officers, agents or inspectors, the Commission within the limits prescribed by law may fix the maximum price of gas or electricity which shall be charged by such corporation or person in such [215]*215municipality * * The Commissioners are not required in explicit terms to fix a reasonable rate, nor a just rate, nor an equal rate. They are given no standard as a percentage of profits.by which they are to fix the.rate. Their only guide is to fix the rate “ within the limits prescribed by law.” The law is settled by repeated adjudication that the Legislature itself cannot fix a rate which would be confiscatory of the property of the corporation. The law is equally well settled that a public service corporation has not the right of a purely private corporation to charge what it will for its product, but must serve the public at just and reasonable rates. In Brooklyn Union Gas Co. v. City of New York (115 App. Div. 70) Mr. Justice Gaynor, in writing for the Appellate Division of the second department, says: “ The rule is that public service corporations may charge only a reasonable rate and the courts may ascertain such rate in a given case.” (See, also, Killmer v. N. Y. C. & H. R. R. R. Co., 100 N. Y. 395.) The determination of this Commission is made subject to review by the Appellate Division, which must be guided in its review by what shall upon the evidence appear to be a reasonable rate, which the public have the right to demand, and which shall not be so low as to render valueless the property of the corporation. With the law thus established and the rule defined under which their decisions must be tested upon an appeal, the words “ within the limits prescribed by law ” can have only one significance. The standard which is to guide this Commission in the exercise of its administrative duties in fixing rates is a reasonable charge for the product of the public service corporation, one reasonable to the public and reasonable to the corporation. Such a standard is sufficiently defined within the authorities which have been referred to.
But it is insisted by appellant that without these words in the statute the Commission would be required to fix the rates within the limits required by law, and that such words, therefore, add nothing to the statute and fix no standard which the Commission would not otherwise have. The rate when fixed by the Legislature cannot be reduced by the court as in excess of reasonable charges. (Brooklyn Union Gas Co. v. City of New York, 188 N. Y. 334.) Without these. words of limitation the act might be deemed to give to the Commission the power possessed .by the Legislature. A complete [216]*216answer, however, is that it cannot matter whether the standard by which the Commission is to be guided be fixed by common law or by the statute. In either case no legislative discretion is delegated to the Commission. Without such discretion their- functions will be held administrative and not legislative.
The appellant makes -further criticism of this statute upon the ground that the Commission is authorized to receive éx parte and hearsay evidence, and to base its decision thereupon, and that the court review provided is only from a ■ determination so made. But this procedure the Legislature could adopt. Such legislative power as is delegated to boards of supervisors may be so exercised. In proceedings for equalization of táxés by the State Board of Equalization evidence which would not be admissible in a court of law is admissible upon which they may base their determination. It will not be questioned that the appellant’s property can only be taken by due process of law. To make effectual this constitutional protection the appellant must have the right to appeal to the court whenever it is claimed that its constitutional rights are invaded. By the statute itself an appeal is given to the Appellate - Division of the Supreme Court from the determination of this Commission. (See § 19.) That appeal must, be heard upon the record, and the determination upon that appeal must be upon what, after full disclosure by the service corporation, is shown by'fair proof to be the rate which ought reasonably to be charged. It is contended that this right of appeal does not give to appellant the protection guaranteed by the Constitution, as this review must be of a. determination made partly upon hearsay evidence. ■ Granting for the argument that the right of appeal given by this statute is not adequate to preserve to the corporation its constitutional protection, in that case it must be held that the right of appeal is not an exclusive remedy, but that concurrent therewith thére is at all times the right of the corporation to proceed by affirmative- action to enjoin the enforcement of .the Commissioü’s order. In such'an action the rights of the corporation can be certainly safeguarded. Our duty has been many times declared to so construe a'statute, if possible, as to conform to constitutional requirement, and to disregard such parts of a statute as are in violation thereof where the statute is separable and a substantial part thereof was lawfully enacted, • , ' , /
[217]*217Again, the act (§ 17) requires that the price thus fixed by the Commission “ shall be the maximum price to be charged by such person or corporation for gas or electricity in such municipality for a term of three years,-” and thereafter until upon complaint the Commission ' shall fix a new price. It is insisted that this refuses to the corporation the equal protection of tlie law, and makes a rate which may within that three years become confiscatory by reason of an increase in price of’materials used in making gas* and electricity. But to this it may be answered that if such price were fixed by tlie Legislature itself, it must remain a maximum price until the Legislature should again meet, unless modified by the court, at which time an application might be made for a modification thereof. So here the corporation may apply to the Legislature- at any time for relief. Moreover, the affirmance by the court of the rate fixed by the Commission is simply an affirmance of the reasonableness of that rate at the time of the determination. If at any time thereafter facts should arise which would make such rates confiscatory, the courts are always open to relieve the service corporation or person from the restriction of those rates. It would have been better if the act had .provided for a remedy by the Commission itself upon an application by the service corporation in case of a change in conditions, but as it is, the provision that the rate fixed.-shall continue for three years is harmless to deprive the corporation of its right of property, because of the right still left in the corporation to apply either'to the Legislature or to the court for relief.
It is unnecessary here to consider -the criticism of the act as to the original power' given to the court on appeal. That question will become material only when the court assumes to exercise some such power; nor is it necessary to consider the criticism as to the unreasonableness of the penalty "whereby for an overcharge the just claim for compensation is forfeited. If invalid it does not affect those provisions of the act which govern the determination of the order here appealed from. After considering all of the objections urged our conclusion is that the challenge to. the constitutionality of the act should not be sustained, and there remains only to consider whether the determination, of the Commissioners has been unreasonable and unjust.
In determining this question we are fully instructed as to the rule [218]*218which is to govern us. That, the presumption is in favor of the order appealed from is held in Chicago, Milwaukee & St. P. R. Co. v. Tompkins (176 U. S. 173) ; Milwaukee Electric R. & L. Co. v. City of Milwaukee (87 Fed. Rep. 577). In San Diego Land Co. v. National City (174 U. S. 739) it is said that “ judicial-interference should never occur unless the case presents clearly and beyond all doubt such a flagrant, attack upon the rights .of property under-the guise of regulations as to'cpmpel the court to, say that therates prescribed will necessarily have the effect to deny .just, compensation for private property taken for the public use.” In Reagan v. Farmers’ Loan, & Trust Co. (154 U. S. 412) it is said It is unnecessary to decide and we do not wish to'be understood'as laying down asan absolute rule, that in every case a failure to-produce so m.e'profit to those who have invested their money in the' building of a road is conclusive that the tariff is unjust-and unreasonable.” In Covington, etc., Turnpike Co. v. Sandford (164 U. S. 578) it is said : “ The public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn- dividends.” ln San Diego Land & Town Co. v. Jasper (189 U. S. 439) it is. said:. “ It no longer is open to dispute that under the Constitution what .the company-is entitled-to demand in order that it may have just compensation, is a fair return upon the reasonable value'of the property at the time it is being used for the public.’ ” In Smyth v. Ames (169 U. S. 546) the opinion reads: “We hold, however, that the basis of all calculations as to the reasonableness 'of rates to be charged by, a corporation maintaining a highway under legislative sanction, must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value the original cost of' construction, the amount expended in permanent-improvements, the amount and market value of its bonds -and stock, the present as compared with the original cost of construction, the probable earning capacity of the property. lender particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration and are to be given such weight as may be just and right in each case. We do not say • that' there :may- not be other matters to be regarded in estimating_ the-’’value 1 .of the property;What the company is entitled .to ásk'-is a fair- return-upon the value of that which it employs for the public convenience. On the [219]*219other hand, what the public is entitled to demand is that no more be exacted from it for the use of a public highway than the services rendered by it are. reasonably worth.” In Cotting v. Kansas City Stock Yards Co. (183 U. S. 79), in discussing the decisions of the Supreme Court of the United States in regard to the reasonableness of rates, it is said : “ It has declared that the present value of the property is the basis by which the test of reasonableness is to be determined, although the actual cost is to be considered and that the value of the services rendered to each individual is also to be considered.” In Brymer v. Butler Water Co. (179 Penn. St. 231) the court held: “ A system of charges that yields no more income than is fairly required to maintain the plant, pay fixed charges and operating expenses, provide a suitable sinking fund for the payment of debts, and pay a fair profit to the owners of the property cannot be said to be unreasonable.” “ Ordinarily that is a reasonable charge or system of charges, which yields' a fair return, upon the investment. Fixed charges and the costs of maintenance and operation must first be provided for, then the interests of the owners of the prpperty are to be considered. They are entitled to a rate of return, if their property will earn it, not less than the legal rate of interest.”
It thus appears that the stockholders of a public service corporation are not entitled to require the public to pay dividends upon fictitious stock or for their extravagance or waste. Such a corporation,however, is entitled to a fair r.eturn upon the- actual value of its property that it is devoting to the public use, after paying all expenses and liabilities reasonably charged against the same. What is deemed a fair return must depend ultimately upon the judgment of the court. In 1886 the committee of the Senate of the State recommended for a gas company in New York a return not exceeding ten per cent upon its investment. The New York Mutual Gas Light Company,. by its charter, is permitted' to earn dividends to the extent of ten per cent. The Senate committee of 1905 assumed a return of eight per cent as proper, and the Gas Commission in 1906 found that eight per cent was a reasonable return upon the actual value of complainant’s property used in gas manufacture. The Railroad Law of the State (Laws of 1890, chap. 565, § 38, as amd. by Laws of 1901, chap. 639) permits the Legislature to [220]*220reduce the rate of freight or fare, but the same shall-not without the consent of the corporation be so reduced as to produce less.than ten. per cent per annum on the capital actually expended. An investor may loan his money upon sure security, and is allowed by law to charge six per cent for the loan. The investment in a gas and electric light company, however, is hot secured as is a loan upon abundant security. There is in it a greater risk of loss, and upon all economic 'principles the investment should for that reason be entitled to a greater rate of return than an investment loan upon approved security. If the court should allow to these investors only the same or a léss return than is obtained for a loan upon approved security, no capital would henceforth be advanced for these enterprises, and the public would either be deprived of their advantages or the municipality would be compelled to build for itself. Both upon principle and necessity then, a fair return upon the value of the property actually used is such a return as shall be fair compensation for the risk assumed by the investor in permitting his money to remain in such an enterprise. The public-cannot fairly question this application of the rule,, and must pay such rates as will ordinarily yield such return to the stockholders of the public service corporation. The court is charged not only with the duty of protecting the public interest, but also with a duty no less solemn of protecting the property rights of those whose moneys are invested in public service corporations. , - .
Applying those rules to the case at bar, this appellant has not made clear to us that the rate fixed will not'yield to its stockholders a. fair return upon the value of its property. Evidence has been adduced of the value.of its property, of the amount of' output of gas and electric current, of the' cost of its production, of the receipts in gross from each source. One more factor is needed, however, for the problem — the loss of income which the reduced maximum rate will cause. This factor is not found in appellant’s brief, and. after a careful review Of the evidence I have been unable to find any fig: tires from which this factor can be fully deduced. If the rate of gas were uniform, at two dollars or one dollar and seventy-five cents per 1,000 cubic feet, and the price be- reduced to one dollar and forty-five cents per 1,000, we could at once ascertain to what extent the new rate would reducdthe income. . But the rate is not uniform. [221]*221The superintendent swears that the rate charged was all the way from two dollars to ninety-five cents. The reduction by the Commission would simply cause loss upon the output of gas which has heretofore been sold for a price exceeding one dollar and forty-five cents per 1,000.
In the report of the appellant to the Gas Commission for the year ending June 80, 1906, we find that only a little more than eighteen million cubic feet of gas were being sold for two dollars, or a net price of one dollar and seventy-five cents, so that the diminution of income caused by the reduced rate of gas would be less than $6,000. As to the reduced income in the sale of electric current caused by the rates fixed, we are left wholly in the dark. The maximum charge has been twelve cents per kilowatt hour. If the price were uniform, a reduction of the price to eight cents would mean a definite loss of income, which would be easily ascertainable. • ' The average price received for the- sale of electric current, as sworn to by appellant’s expert, was five and forty-two one-hundredths cents per kilowatt hour — two and fifty-eight one-hundreths cents below the maximum fixed by the Commission. ' The record contains no evidence from which can be ascertained how much of that output has been selling for a price to exceed eight cents, or how much, therefore, will be the loss of income in conforming to the Commission’s rates. The only loss then established which would be caused by adopting the Commission’s rates, and of which this court can take cognizance, is this loss of less than $6,000. The Commission might properly estimate that this loss would be substantially reduced by new customers which the reduced rate would naturally bring. But aside from this consideration, we are satisfied that with prudent management the company may still return to the stockholders a reasonable percentage upon the value of this property, even under the reduced income. It will hardly be profitable in this opinion to discuss each item of valuation of the appellant’s properties and of cost of production. The valuations of appellant’s expert are based upon the cost of reproduction, with no allowance for depreciation, except in one or two minor items; and yet he charges to the expense account a large contingent liability, not only for current repairs, but for final replacement. Again, it appears that gas is being sold to some parties for less than the cost of the manufac[222]*222ture. ■ To one customer electric current is furnished for a cent and a half a kilowatt hour, and a substantial amount of electric current is sold for less than cost. It is not apparent wliy some customers should be charged an exorbitant rate to compensate for loss suffered in the sale to others. After, an examination of the record presented, aided by exhaustive and able briefs of counsel, we are not convinced that the rates established by the-order appealed from are either unjust or unreasonable to this appellant.
The ordér should, therefore, be affirmed.
All concurred, except. Kellogg, J., dissenting in opinion, in which Sewell, J., concurred.
Stone v. Farmers’ Loan & Trust Co.— [Rep.