Des Moines Gas Co. v. Des Moines - 238 U.S. 153 (1915)
U.S. Supreme Court
Des Moines Gas Co. v. Des Moines, 238 U.S. 153 (1915)
Des Moines Gas Co. v. City of Des Moines
Argued November 10, 11, 1914
Decided June 14, 1915
238 U.S. 153
The public authority is presumed to have acted fairly, and the burden of proof is on a public utility corporation to show that a regulating ordinance has the effect to deprive it of an income equivalent to a fair return upon its property dedicated to public use. Knoxville v. Water Co., 212 U. S. 1.
Goodwill, in the sense generally used as indicating that element of value which inheres in the fixed and favorable consideration of customers arising from an established and well known and well conducted business, has no place in the fixing of valuation for the purpose of ratemaking of public service corporations. Willcox v. Consolidated Gas Co., 212 U. S. 19.
There is, in some cases, a "going concern value" which is an element to be considered in determining valuation on which the owner is entitled to a fair return although the property is dedicated to a public use; there is no fixed rule for ascertaining this, but each case must be controlled by its own circumstances.
Where, as in this case, the Master, after exhaustive testimony certifies the value of a long established and successful public service plant, for ratemaking purposes, upon the basis of a plant in successful operation and overhead charges have been allowed, the court will presume that the element of going concern value has been considered and included in the total value certified.
The Court will not regard the refusal of the lower court to enjoin a ratemaking ordinance as confiscatory upon the conclusion that it allowed a return of six percent per annum, on the valuation of the plant, although the Master expressed the opinion that the corporation ought to earn eight percent, where, as in this case, the ordinance was attacked before opportunity to test its results by actual experience.
Ordinarily, time alone can satisfactorily demonstrate whether a rate fixed by ordinance is or is not confiscatory so as to amount to a taking of property without due process of law within the meaning of the
Fourteenth Amendment, and in this case, there should be an actual application of the rates.
Following the rule laid don in Knoxville v. Water Co., 212 U. S. 1, and Willcox v. Gas Co., 212 U. S. 19, the bill seeking to enjoin the putting of the ordinance involved in this case into effect should be dismissed without prejudice to the right of complainant to reinstate the case after a reasonable period for an actual demonstration of the effect of the ordinance.
199 F. 204 modified and affirmed.
The facts, which involve the validity under the impairment of obligation provision of, and the due process clause of the Fourteenth Amendment to, the federal Constitution of an ordinance of the City of Des Moines fixing ninety cents as the price of gas in that city, are stated in the opinion.