The opinion
McCALEB, Justice
(dissenting in part).
While I agree with the rulings of the Court as to the other issues in the case, I cannot subscribe to its action in reducing plaintiff’s overall rate of return from 6% to 5.5%. The affirmance of the Public Service Commission’s allowance of the 5.5% rate of return is plainly contrary to our decision of a year ago in Southern Bell Tel. & Tel. Co. v. Louisiana Pub. Serv. Comm., 239 La. 175 , 118 So.2d 372, 389 , *721 where it was resolved that, to allow that company (Southern Bell) a rate of return of less than 6%, when it was shown by the evidence that no other utility was receiving anywhere near as low a return, “ * * The disparity is so great that we must of necessity hold that the action of the Commission in its end result is discriminatory and that the rates fixed are not just and reasonable under the circumstances.”
It is, of course, well settled that one of. the important factors to be considered in fixing just and reasonable rates is that the return to the equity owner " * * * should be commensurate with returns on investments in other enterprises having corresponding risks * * *.” See Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591 , 64 S.Ct. 281, 288 , 88 L.Ed. 333 . In the instant case, it was established that investment in the natural gas transmission business involves a greater risk than investment in either electric or telephone utilities and that for the past 13 years, rate-making bodies throughout the United States have allowed an average of return on equity investment in gas pipeline companies of approximately 12% as compared with 10% for electric utilities. Further, it was shown that, in 34 cases involving utilities engaged in the transmission of natural gas to industry and consumers, the Federal Power Commission has uniformly (except in one isolated instance) allowed an overall rate of return of 6% or more.
In view of these facts, I find it difficult to comprehend how this Court can approve the 5.5% rate of return fixed by the Commission in this case which was reached by utilization of the earnings-price ratio. This technique, as the majority acknowledge, has shortcomings in theory and practice and was criticized by us in our recent Southern Bell decision, 1 our specific holding being “* * * that an earnings-price ratio of 6.75% on a hypothetical 55% of common stock capital as applied to one utility, while others similarly situated are earning 8.5% on equity capital and not less than 6% on property rate base, is discriminatory and for that reason is not just and reasonable.”
To say that, by employing the unrealistic earnings-price ratios, 8.18% is the proper cost of equity capital on which to base the rate of return, while others similarly sit *723 uated are earning 12% on equity capital and not less than 6% on property rate base, is incompatible in my opinion with fair treatment. Being discriminatory, such a rate base, as stated in the Southern Bell Tel. and Tel. case, “* * * is not just -and reasonable.”
If the majority does not subscribe to the rationale of our last Southern Bell Tel. and Tel. decision or, for that matter, to Gulf States Utilities Co. v. Louisiana Pub. Serv. Comm., 1952, 222 La. 132 , 62 So.2d 250 , as is evidently the case, it should say so and those authorities should be specifically overruled. It is in the public interest that this Court make clear its views, and particularly a change in its position, so that the members of the bench and bar are able to know and interpret the jurisprudence.
I think the decision of the trial court is correct and should be affirmed.
. We said: “The fallacy of using an earnings-price ratio based on the relationship of current earnings and current market prices is pointed out by the Company’s expert witness Langum. As earnings go up or down, the market price of the stock correspondingly goes up or down, so that the earnings-price ratio remains the same. One utility may be earning an excessive rate of return and another a rate of return so low as to be confiscatory, yet the earnings-price ratio would be approximately the same because of the consequent high market price of the stock of the former and the consequent low market price of the stock of the latter.