# Transcript of Record — Ottinger v. Brooklyn Union Gas Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0559%3A08 ## Record - **Collection:** Supreme Court brief - **Document type:** Transcript of Record - **Published:** January 1, 1926 - **Citation:** 272 U.S. 579 ## Text ALBERT OTTINGER, AS ATTORNEY GENERAL OF THE STATE OF NEW YORK, APPELLANT, vs. KINGS COUNTY LIGHTING COMPANY (31,903) SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1926 No. 365 ALBERT OTTINGER, AS ATTORNEY GENERAL OF THE STATE OF NEW YORK, APPELLANT, vs. KINGS COUNTY LIGHTING COMPANY APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF NEW YORK INDEX Original Print Record from the district court of the United States, eastern ee OE SO NE 2d diana dmdwadwaaews ka seaeeeeana wee 1 1 es ee CO cane ccd ee ddewe wavs canner ce aeaaene 1 1 ge ee er re er eT rere 20 13 Answer of William A. Prendergast et al... ........... 25 16 Notice of order appointing special master.............. 31 20 Order appointing special master.............2c0e2e0- 32 20 CEO, ROOK, BUGGER CHRONO. inc vcaaecacsesatedscnaas 34 = eeen GE SUI GE cian cas aensanr sdowekaecdesano 86 58 Notice of plaintiff's exceptions to report of special co EEL PEE EEE EE PEP TOEFL PPC EE ET EC TCT EeT 106 7 Plaintiffs exceptions to report of special master........ 107 75 Notice of attorney general's exceptions to report....... 109 76 Attorney general's exceptions to report................ 110 77 Notice of exceptions of Wm. A. Prendergast et al. to SOONE cise ase scan da caren se DUACIAebaAReurisaabie ak 119 S4 Jupp & DeTwriLer (Inc.). Printers, Wasnineton, D. C., Jury 23, 1926 ~\ s* haha se Breese —_e -_- eRe ee we INDEX Exceptions of Wim. A, Prendergast et al te reqeert...... (dpluadom, Manton, Bo... cece eee eee e eee e ene ee eee enees Judgment ......... senoe ke eeaGseseseesncacdaseeseoase Summons on Public Service Commission te join in ap | a. Sete r itr rr ieee eee Assignments of error of defendant Ottinger..........-. Petition for appeal... .. 2.6... 6c eee cence renee CREO . oc cc cccccccccccccceses (omitted in printing: . Petition for appeal pw order allowing same... ........- Statetwent of evidenoe. .. 0... 6.6 cee cee ee ewer ne ees Appearances of counsel... 6.600.666 eee ee eee eee eens Motion to Gimmlas. .... 6.6.66 cece cece eee ee eeees Testimony of Andrew J. tionmoud... 2.6... 6666666 Henry BR. Burt... . 2.2.6.6 ee een ee eens David Porter. .......cccccccsssccess lawis HH. Pounds. ..........-.-655- Solem B48. Ueenwmts. .. ....ccccccccsesss: Heury BR. Burt (recalled) ....... Alten S. Miller... ... ‘ Andrew J. Gonneoud (veraiied. Colloquy between master ated cotteel. oo... 6.6... Testimony of Paul Bucher... ........-- . Alten S. Miller (recalled)... Robert R. Bogie... peas William A. Moerrix...... say ie. Solem F. Wim. .. 22 cccecses Robert R. Bogie trecalieds Robert M. Searle... A. Gerdon King.. rune ae John H. Duncan... .. pub ueueuet Alten S. Miller Creealleds “ Edward F. Hayes.............«+- + Jacob H. Hollander... . Ripmet TAGE. co cc ccvces eee Benjamin Cohen. ..................-- | PPT TTT TT Eee Archibald 8S. B. Little....... Jetess Mark Wolff (reealled)............. Archibald 8. B. Little trecalled).... Dr. E. W. Kemmerer...........--- Awmirew J. Gonnouwd Crecalled) Robert R. Bogie recalled)... Andrew J. Gonmeart Creealled> Bien off GRIEa, «oc asncccsscacceenss wa oa Plaintiffs Exhibit No. 3 Summary statement of BOOBETD cc cccceccseseccsccscasesecsesseces Plaintiff's Exhibits Nos. 32 and Meter life sum mary, May, 12%, and April, Met... Stipulation re Plaintiff. Exhibit Ne. 4 Original i a | inv Ls iil me in im L ery im me le let wu INDEX Phiintitt. batibit Ne Sb Inventory awd apprainal, trectures amd appartenanees as of June 1, 18... Mlainti®s Exhitdt Neo Burt's list of repairs that tanigeind Gee snasncher feo sO rameters... ccc cece ce cees Viaintif. Exhibit Ne. 8) Dranean’s statement of reproduction costs of mains. serviees. and paving. Stipulation re Mlaintif™s Exhibit Ne. MM. 0... Piaintift!s Exhibit Ne. 0 laventery and appraisal Wn GE Oe By Bick cacacdncascnsnscice YT eTT Piaimtit!s Exhibit Ne 4 List ef expenditures necessary te restere certein works te condition as OO oi x vb ctnane ccndtddeeckdbdeudcsadaessss Piaieis Exhibit Ne 12 Summary of operating CRGUGIGA, TEs 6 « ones eennkindssnieceaanasstacas Miaimi®s Exhibit Ne 1 reduction and distribu tien cost>. Second. That upon information and belief the defendant denies each and every allegation contained in the para- graphs of the bill of complaint thereof marked and num- hered **13,"" **16,°" **18"" and 19", [fol.21] Third. The defendant admits that on or about the Ist day of July, 1916, the plaintiff commenced an action in the Supreme Court of the State of New York to have adjndged and deereed that Chapter 604 of the Laws of 1916 as alleged in paragraph marked and numbered **10°? was confiscatory as to it and that upon the trial thereof the eom- plaint in the said action was dismissed and that such deter- mination was reversed and that such reversal was affirmed by the Court of Appeals of the State of New York on April 17, 1923. Further the defendant admits that on or about the 24th day of May, 1920, the plaintiff began an action in 14 the District Court of the United States for the Southern District of New York for the purpose of having declared unconstitutional and void said Chapter 604 of the Laws of 1916 and that the plaintiff succeeded in its said last-named action and the decree of the United States District Court therein was affirmed by the Supreme Court of the United States on the 6th day of March, 1922. That the defendant denies that he has any knowledge or information sufficient to form a belief as to each and every other allegation con- tained in said paragraph so marked and numbered. Fourth. The defendant admits that under the statutes of the State, the Public Service Commission of the State of New York may institute suits for mandamus or injune- tion against the plaintiff to prevent the violation by the plaintiff of any law of the State or any order of the Commis- sion issued with respect to the public utility companies over which said Commission takes jurisdiction and may for the refusal of the plaintiff to obey the order of the Commission, bring a suit for the recovery of penalties forfeited to the people of said State but the said defendant denies that he has any knowledge or information sufficient to form a belief as to each and every other allegation contained in the para- [fol. 22] graph of the bill of complaint marked and num- bered ‘22°’, Fifth. The defendant further alleges by way of answer to the bill of complaint herein upon information and belief that the plaintiff does not operate its business in a eareful and efficient manner and does not practice reasonable econ- omies in the purchase of its coal, gas oil and other materials used in the manufacturing of gas and that cheaper and more available forms of fuel for the purpose of such manufac- “ture may be obtained by the said plaintiff as a substantial reduction in the present cost of manufacture of its product. That further the said plaintiff does not keep its books of account in compliance with an order issued by the Public Service Commission aforesaid which requires the said plain- tiff to keep such books in accordance with a system known as the Uniform System of Accounts. That by reason thereof and the inadequacy of the force of employers under the direction and control of the said Cemmission, the Pub- lic Service Commission and the public do not and cannot 15 readily ascertain the cost to the said plaintiff of the manu- facture and distribution of its product. Sixth. That the defendant further answering the bill of complaint herein, alleges affirmatively, upon information and belief, that the said rate of $1.00 per thousand cubic feet, and the standard of quality of 650 British Thermal Units per cubie foot fixed by said Chapter 899 of the Laws of 1923, constitute together a fair, reasonable and valid enactment by the Legislature of the State of New York, is a constitutional regulation by the said Legislature, does not exelude the said plaintiff from the equal protection of the laws, nor is the said Act in any respect violative of any of the provisions of the Constitution of the United States. Further, the defendant is informed and verily believes that [fol. 23) the said fixation by the Legislature of the stand- ard of quality of 650 British Thermal Units per cubic foot for gas sold in the City of New York is exclusively within the scope of the legislative power of the State of New York and that the judicial power of the Federal Government has no jurisdiction or control in the premises. Seventh. That the defendant, further answering the bill of complaint herein, and in addition to the denials inter- posed to paragraph marked and numbered “11” thereof, alleges affirmatively upon information and belief that the standard of quality of gas fixed by the said Public Service Commission, and the rates concurrently fixed thereby to- gether constitute an unreasonable charge for gas service in the City of New York, and that the said fixation by said Commission of said quality of gas was by a reduction in the quality thereof from that having a heat content on an average of 650 British Thermal Units per cubic foot, to that of 537 British Thermal Units per cubie foot, now re- sults and has resulted in making the cost of gas service to the consumers of the plaintiff excessive, unreasonable and more than necessary to compensate the said plaintiff for its public service, as well as to pay all of its reasonable op- erating expenses, its taxes and to pay a fair return upon a fair valuation of the investment of the said plaintiff en- gaged in such public service. Eighth. That the defendant is informed and verily be- lieves that the said plaintiff has made no experimentation 4 is Py 4 & : £ 16 with the rate or standard of quality of gas fixed by the leg- islature of the State of New York in chapter 899 of the Laws of 1925 of said state and has no information or knowl- [fol 24) edge upon which to base its conclusion as set forth in the bill of complaint as to the cost to it of the manufae- ture and distribution of eas of 650 British Thermal Units per cubic foot based on the rate of $1.00 per thousand cubic feet. Wherefore the defendant prays that the bill of complaint herein be dismissesd with costs. Carl Sherman, Attorney General of the State of New York. James A. Donnelly, Solicitor for the Attor- ney General, Office and Post Offiee address: 51 Chambers Street, Bor- ough of Manhattan, City of New York. [fol. 25] Ix Unirep States Distrier Courr [Title omitted | Axswer or Derenpants Wituiam A. PrenpverGasr ET AL, ConsTireTING THE Pusiic Servick COMMISSION The above named defendants, William A. Prendergast, William R. Pooley, Charles Van Voorhis, Oliver C. Semple and James A. Parsons, constituting the Public Service Commission of the State of New York, by Ledyard P. Hale, their Solicitor, answer the Bill of Complaint herein as follows: I These defendants, answering Paragraph 1 of plaintiff's complaint, admit the allegations thereof. [ fol. 26] II These defendants, answering Paragraphs 2 and 38 of plain- tiff’s complaint, are without knowledge as to the allegations therein contained and therefore deny the same. Il] These defendants. answering Paragraphs 4,5 and 6 of plaintiff's complaint, admit that the plaintiff is engaged in the business of manufacturing, furnishing and selling gas in the Borough of Brooklyn, and that its manufacturing works are located in the Boroueh of Brooklyn with gas mains laid in the streets, avenues and publie places of said Borough of Brooklyn. As to the other allegations eon tained in Paragraphs 4,5 and 6 of plaintiff's complaint, these defendants are without knowledge and therefore deny the same. lV ¢ of plaintiff's complaint, deny, upon information and belief, the alleea- tions therein contained, and further deny that the plaintiff is possessed of voing value, or other intangible assets, of the value of $1,000,000,00, or of any value, and deny that the present fair value of plaintiff's plant and property used in the publie service, exelusive of franchises and going Value, is the sum of $8,500,000.00, or any amount in excess of $7,765,105.06. These defendants are without knowledge as to the amounts the plaintiff alleges that it has expended for additions, extensions and improvements to its plant and property since July 1, 1904, and therefore deny the same, These defendants, auswering Paragraph [fol. 27] é V These defendants, answering Paragraph 8 of plaintiff's complaint, admit, on information and belief, the allegations therein contained. VI These defendants, answering Paragraphs 9,10 and 11 of plaintiff's complaint, admit. the allegations therein eon tained, except these defendants allege that said orders of said Public Service Commission of August 30, 1922, pre- scribing classifieations and rates to be charged for was, as in plaintiff's complaint set forth, were based upon faets found hy the Commission in its said investigations and hearings, and that the Commission found on the date each 2—365 INP arg 18 said order was made that said rates so fixed were just and reasonable rates to be charged by the plaintiff to its con- sumers in the Borough of Brooklyn, and in the said opinion filed by the said Commission contemporaneously with the making and entering of said orders it was stated and de- termined by the Commission that said rates and classifica- tions of service so fixed should be established to be effective for one year from the Ist day of November, 1922, and to continue in foree until the 380th day of October, 1923, and thereafter until the Commission should otherwise order. Vil These defendants admit the enactment of Chapter 899 of the Laws of 1928, as alleged in Paragraph 12 of plaintiff’s complaint, and allege that on or about the 4th day of June, 1923, said Public Service Commission of the State of New York duly served on the plaintiff an order as follows: [fol. 28] *‘Srare or New York, Pusiic Service COMMISSION At a Session of the Public Service Commission Held in the City of Albany on the 4th Day of June, 1923 Present: William A. Prendergast, Chairman; Charies Van Voorhis, Oliver C. Semple, James A. Parsons, Com- missioners. Case No. 1360 In the Matter of Rates to be Charged for Gas in the City of New York The Commission having under consideration the pro- visions of Chapter 899 of the Laws of 1923 in relation to charges for gas in cities of over one million inhabitants; Ordered: That each and every gas corporation engaged in the business of manufacturing, furnishing or selling illuminating gas in the City of New York be and hereby is required forthwith to comply with such statute, and be and hereby is authorized to file and publish a new schedule of its rates for gas effective forthwith in accordance with said statute. 19 Further Ordered: That the Secretary serve by mail forthwith a copy of this order on every such gas corpora- tion. By the Commission. (Signed) Harry M. Ingram, Acting Secretary.’’ (Seal.) [fo]. 29] VIII These defendants, answering Paragraphs 13, 14, 15, 16, 17, 18 and 19 of plaintiff's complaint, deny, upon informa- tion and belief, each and every allegation therein con- tained, exeept that in pursuance of and in compliance with the requirements of the said order of the said Public Service Commission of August 30, 1922, hereinbefore referred to, the plaintiff proceeded to effect changes in the adjustment of various gas appliances used by plaintiff's consumers in order to comply with the terms and conditions of said order and to adapt said consumers’ gas appliances to the safe and efficient use of gas of the standard preseribed by the said order of said Commission. IX These defendants, answering Paragraphs 20 and 21 of plaintiff's complaint, admit the allegations therein con- tained. x These defendants, answering Pa ‘agraph 22 of plaintiff’s complaint, deny that plaintiff ean only obtain relief in a court of equity and that the interposition of the power of a court of equity is necessary in any manner or at all to protect the alleged rights of plaintiff or plaintiff's property herein, against any action which can be taken by these de- fendants under and pursuant to the statutes of the State of New York. Wherefore, These defendants pray that the Bill of Com- plaint herein be dismissed with costs; and said defendants [fol. 30] pray for such other relief in the premises as to the TTT vo. 20 Honorable Court may seem meet and in accordance with equity. Ledyard P. Hale, Solicitor for Defendants, 91 State State, Albany, N. Y. Charles G. Blakeslee, Ed- ward M. Deegan, Sherman C. Ward, of Counsel. [fol. 31] In Unirep States Disrricr Courr Notice oF Orper AppoiINTING SPECIAL MASTER Sir: Please take notice that the within is a true copy of an order made herein and entered in the office of the Clerk of the United States Distriet Court for the Hastern Dis- on” trict of New York on the 11th day of October, 1925. New York, October loth, 1923. Yours, ete., Ingraham, Page & Moran, Solicitors for Plaintiff, 14 Wall Street, Borough of Manhattan, New York City. To Charles G. Blakeslee, Esq., Solicitor for Defendant Publie Service Commission; Hon, Carl Sherman, Attorney General; James A. Donnelly, Msq., Solicitor for Defendant Sherman, as Attorney General. [fol. 32] In Unitrep States Districr Courr [Title omitted ] Orper APPOINTING SpeciAL Master—October 11, 1923 Issue having been joined in this case by the filing of the answers of the above-named defendants and the plaintiff having moved for the appointment of a Special Master herein, Now on motion of Ingraham, Page & Moran, solicitors for the plaintiff, it is Ordered: 1. That Almeth W. Ifoff be and he is hereby appointed Special Master to take the testimony and evidence upon the issues herein, make all needed computations and tully 21 hear the facts and re; ort to the Court his findings of faet and conelusions of law, together with the evidence for the advisement of the Court: provided that nothing herein [fol. 33] contained shall be construed as meaning that the Special Master's findings of. fact shall be final but only that he shall find the facts for the purpose of aiding the Court and making his recommendations. The Special Master shall, before submitting to this Court his final re port, prepare and serve on the solicitors for the respee live parties hereto a draft of such report. inter, Marens B. Campbell, U.S. D1. [fols. 88a & 33h | Copy received Oet. 15 22. James A. Donnelly, Solicitor for Defendant. Car! Sherman, Attorney General, [ fol. 34) Ix Uxrrep Srares Districer Courr | Title omitted] OPINton or Tue Spectr. Masrer.—Filed April 20, 1925 This is a suit in equity brought by the plaintiff challenge ing the constitutionality of an Aet of the Legislature of the State of New York, known as Chapter 899 of the Laws of 1923, relating to the price and quality of gas furnished in cities of one million or more. The plaintiff is one of the corporations affected by the said Act and the defendants are public officers charged With duties in respect to the enforcement thereof, [fol. 35] Upon the institution of the suit, the plaintiff ap- plied for and obtained from the Court an injunction pendente lite. Appearances : Samuel FL Moran (Samuel F. Moran, John D. Monroe, Travis H. Whitney, and Robert H. (Grimes, of Counsel), solicitor for plaintiff, Charles G. Blakeslee (Sherman (. Ward, of Counsel), Solicitor for Defendants William A. Prendergast, William Ra ae) Ad eg eee ONE OM BO WIE Peey Beara Pag eee 22 R. Pooley, Charles Van Voorhis, George R. Lunn, and George R. Van Namee, constituting the Public Service Com- mission of the State of New York. James A. Donnelly (Judson Hyatt, of Counsel), Solicitor for Carl Sherman, as Attorney-General of the State of New York. John Holley Clark, Jr. (Anthony P. Luddon, of Counsel), Solicitor for Albert Ottinger, substituted for Carl Sher- man, as Attorney-General of the State of New York. This action was referred to me, as Special Master, by an order of Hon. Mareus B. Campbell, United States Dis- trict Judge for the Eastern District of New York, dated October 11, 1923, directing me to take the testimony and evidence upon the issues herein, make all needed computa- tions and fully hear the facts and report findings of fact and conclusions of law, together with the evidence. [fol. 36] In accordance with the order and following con- ferences with the District Judge, for the purpose of ar- ranging hearings so as not to conflict with sessions in other like cases, it was agreed that hearings should ‘be held two days a week, and in accordance therewith and by agreement of counsel, hearings were begun on December 4, 1923, and continued until June 10, 1924, in which there were taken more than 4,000 typewritten pages of testimony and 142 ex- hibits introduced by the parties. With my report I file a typewritten copy of transcript of the testimony, together with the exhibits. In accordance with the requirements of the order of my appointment and the practice and trial of rate suits in equity, I submitted to the Counsel for all parties on Febru- ary 26, 1925, a preliminary draft of my report and findings. On March 5, 1925, I received from counsel written and verbal suggestions and criticisms regarding such prelim- inary drafts. Thereafter, | completed and now submit and file my report and opinion in its present form which should be deemed to embody my findings and conclusions. Prior to the taking of testimony and during its progress through their representatives, defendants were afforded by the plaintiff full opportunity to inspect and examine the property, works, accounts and records of the plaintiff and 23 therefore the defendants were in a position to secure and present to me any matters they deemed of importance on the questions before me. In addition, accompanied by counsel and engineers of the parties, I' visited and inspected the manufacturing plant, shops and holder station and territory served by the plaintiff. [fol.37] This is a suit to test the constitutionality of Chapter 899 of the Laws of 1923, approved by the Governor June 2, 1923, which inserted in the Public Service Com- mission Law (Chapter 480 of the Laws of 1910), a new see- tion as follows: **S67-a. Charge for Gas in Cities of One Million or More.— A gas corporation engaged in the business of manufactur- ing, furnishing or selling illuminating gas in a city eon- taining a population of one million or over shall not charze or receive for gas furnished or sold in such city a sum per one thousand cubie feet in excess of one dollar, nor furnish in such city gas of a standard less than six hundred and fifty British thermal units per cubie foot, measured under normal! conditions of temperature and atmospheric pressure. The Publie Service Commission, notwithstanding any other provision of this chapter, shall not allow a rate or charge in the ease of such cities in excess of such sum.”’’ Preliminary to the passage of this act, the Legislature did not cause any investigation te be made by a special Legislative Committee or otherwise, or a report concerning the facts to be made by the Publie Service Commission, the Legislative agency charged with the duty, among others, to keep informed with respect to utilities under its juris. diction. At the time of the enactment of this statute, the plaintiff was charging $1.30 per thousand eubie feet, as a maximum rate, in compliance with an order of the Public Service Com. mission, made on August 30, 1922, after an investigation and hearings by the Commission, and was supplying gas of a Standard fixed by the order of such Commission at 537 British thermal units per cubic foot with a minimum of 925, [fol. 38] and has so continued under the temporary injune- tion herein granted. The plaintiff bases its case on the contention that the Statute, if enforeed, would be confiseatory and deprive it ° OER AERO Rit tC WERRIQUN & 3 4 its property without due process of law, contrary to the Fourteenth Amendment to the Constitution of the United States. The primary question herein is whether the rate so pre- seribed will yield the plaintiff a fair return upon the fair and reasonable value of its property employed in the publie service. A further question relates to the standard at- tempted to be fixed by the statute in question. As to the rate question, there need to be determined, what is a fair return, what is the fair and reasonable value of the property, what are the proper operating expenses and whether such expenses will ‘eave a sufficient margin out of the proposed rate of one dollar per thousand to af- ford a fair return on the fair and reasonable value of the property used and useful in the public service. As to the standard, it is to be determined whether it may be considered independent of and as separable from the rate provisions of the statute, and, if se, whether it is reasonable and within the police power of the Legislature to enact, or whether it is an arbitrary enactment not justified on any of the grounds comprehended within the legitimate police powers of the state. Territory, Piant, and Property of Plaintiff The plaintiff is a corporation organized under the Trans- portation Corporations Law of New York and engaged in {fol. 39] manufacturing and selling gas for publie and pri vate use in the 30th Ward and a small portion of the 31st Ward in the Borough of Brooklyn. This territory con- stitutes a substantial portion of Brooklyn and, because of the extension of rapid transit facilities has, since the war, had exeeptional residential development which is likely to continue for some years, Plaintiff's gas works or manufacturing plant is located ona pareel of land fronting on the New York Bay, extend- ing to First Avenue, between 54th and 55th Streets, having a total area of 462,208 square feet, of which 286.454 square feet are used in the conduct of its business. The balance is leased to the Morse Dry Dock & Repair Co., no consid eration being asked or given for such leased portion in mak. ing any determinations in this suit. At the works or plant site there are seven gas generators of a combined rated 23 ‘apacity of 17,400,000 cubic feet of gas per twenty-four hours, together with other buildings and equipment in- cidental to the operation of a gas plant. Its gas holders, shops, yards and booster station are located on four parcels of land at or near Ninth Avenue and 65th Street, having a combined area of 139843 square feet. Its gas storage holders have a capacity of 2.500.000 eubie feet. It was brought out on the hearing before me that in order to meet the demands upon it and to adequately serve its customers the plaintiff had contracted for and was erecting a new storage holder of 5,000,000 eubie feet capacity, but in mak- ing the findings and determinations herein no consideration is given or allowance made for the new holder. This ap- plies likewise to a new office building and to a new booster station in course of construction. On June 1, 1923, plain | fol. 40) tiff had approximately 205 miles of gas mains laid ia the publie streets, connected with the premises of its consumers by 26,168 service pipes and had installed on such premises 90,717 gas meters. The evidence shows, and it was admitted before me, that the plant, machinery and equipment of the plaintiff have been well maintained and are in efficient operating condition for the economical pro- duction and distribution of gas. Rate of Return The development of the plaintiff's territory and the con- sequent demands for new and additional service have re- quired and will continue to require the Company to raise and invest substantial amounts of new capital in enlarge- ment and extensions of its facilities. The situation pe- culiarly therefore is one where an adequate return is es- sential to the company and to the publie. Additional eapi- tal must be provided to enable the company to meet the de- mands arising from the growth of population, but this capital will be difficult to raise if the rates charged do not afford a sufficient return to pay the annual charges of pres- ent investors and te afford confidence that such charges will continue to be paid. It appears to be settled that a utility *s entitled te such rates as will afford a return suf- ficient to keep and attract capital, giving consideration to the risks of the business and to the return that eapital, through open competition, can secure in other channels. > ey OLE EE LP PF) - ” i 26 The Supreme Court of the United States has said in Blue- field Water Works and Improvement Company v. Public Service Commission (262 U.S. 679, 692-3): ‘*A public utility is entitled to such rates as will permit it to earn a return on the value of the property which it [fol. 41] employs for the convenience of the public equal to that generally being made at the same time and in the same general part of the country on investments in other business undertakings which are attended by corresponding risks and uncertainties; but it has no constitutional right to profits such as are realized or anticipated in highly profit- able enterprises or speculative ventures. The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties.”’ While the Supreme Court, in 1909 (Willeox v. Con. Gas Co., 212 U. S. 19, 50), held that the Consolidated Gas Com- pany of New York was entitled to 6% as a fair return, it is generally recognized that, since the World War, the return expected and obtained by capital has materially increased. As said by the Supreme Court in a more recent case (Lineoln Gas Co. v. Lincoln, 250 U. S. 256, 267-8), after noting that costs of labor and supplies had materially ad- vanced, ‘‘annual returns upon capital and enterprise the world over have materially increased, so that what would have been a proper rate of return for capital invested in gas plants and similar public utilities a few years ago furnishes no safe criterion for the present or for the future.’’ The plaintiff called Edward F. Hayes, who is a member of Blair & Co., bankers, with experience in the sale to in- vestors of securities, incuding utilities, and who handled the {fol. 42] last issue of bonds of the plaintiff. He gave it as his opinion that by comparison with other undertakings in New York City, and the current requirements for capital, it was necessary for the plaintiff to show earnings of at least 8 per cent in order to maintain and support its credit and to enable it to secure new capital in competition with the requirements for capital. He further stated that un- less the Company had such earnings as to afford an 8 per cent return, the smallness of the margin over its fixed 27 charges would adversely affect the confidence of new in- vestors. The bonds sold for the Company by the witness yielded 64% per cent to the investor. In 1921, and follow- ing, the plaintiff sold to investors & per cent cumulative pre- ferred stock and in the early part of 1924, it offered and sold 7 per cent cumulative preferred stock. While the de- fendants called no witnesses on rate of return they intro- duced tabulations showing offerings in utility securities and transactions in such securities on the New York Stock KEx- change in 1924. Consideration of these tabulations indi- ‘ates that the testimony of Mr. Hayes was sound and I therefore conclude that 8 per cent is a fair and proper re- turn to adopt in this case for the plaintiff. Ascertainment of Value This case presents the question of alleged confiscation of property and therefore involves a determination upon the elements or items of that property and the value to be adopted therefor. A company, such as the plaintiff, is en- titled to earn a fair return upon the fair value of its prop- erty and it is entitled to protection against uninst or un- reasonable interference with such right by statute, or ad- [fol. 43] ministrative or other governmental ruling. In Cotting v. Kansas City Stock Yards Co. (183 U. S. 79), Justice Brewer said: ‘‘As to parties engaged in performing a public service, while the power to regulate has been sustained, negatively the court has held that the legislature may not prescribe rates which, if enforced, would amount to a confiscation of property. But it has not held affirmatively that the legis- lature may enforee rates which stop only this side of con- fiseation and leave the property in the hands and under the care of the owners without any remuneration for its use. It has declared that the present value of the property is the hasis by which the test of reasonableness is to he determ- ined, although the actual cost is to be considered. and that the value of the services rendered to each individual is also to he considered. It has also ruled that the determi- nation of the legislature is to be presumed to he just, and must be upheld unless it clearly appears to result in en- forcing unreasonable and unjust rates.’ (p. 91.) CS : 3 3 é 28 In Willcox v. Consolidated Gas Co. (212 U. S. 19), the Court said: ‘And we concur with the court below in holding that the value of the property is to be determined as of the time when the inquiry is made regarding the rates. If the prop- erty, which legally enters into the consideration of the question of rates, has increased in value since it was ae- quired, the company is entitled to the benefit of such in- erease.’’ (p. 52.) And in Bluefield Co. v. Public Service Commission (262 U.S. at 690), the Court said: [fol.44] ‘*Rates which are not sufficient to vield a rea- sonable return upon the value of the property used at the time it is being used to render the service are unjust, un- reasonable and confiseatory, and their enforcement de- prives the public utility company of its property in viola- tion of the Fourteenth Amendment.’’ It appears to be the settled rule that protection will be afforded against a rate that does not afford a fair or rea- sonable return upon the fair value of property as of the time of the inquiry. This may well mean that a new valua- tion must be ascertained whenever and as often as a change of rate or other interference is proposed. It might be more satisfactory of prompt determination if value were a mat- ter of fixed accounts, capable of immediate conclusion whenever a rate question involves ascertainment of value. Such a method, however, has not ben recognized and, there- fore, under the rulings it is necessary to determine each time the value of the property as of the time when it is alleged that confiseation is threatened. In the Minnesota Rate cases (230 U.S. 352, at p. 484) the Court has said: “‘The basis of calculation is the ‘fair value of the prop- erty’ used for the convenience of the public. * * * The ascertainment of that value is not controlled by arti- ficial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper con- sideration of all relevant facts. * * *” The parties herein have presented the facts as to what may be termed the historical or investment cost of the “ones Oe - TI Baie | 29 physical properties, and the plaintiff has presented in de- [fol. 45] tail the reproduction value of such properties as of June 1, 1923. The defendants have not aided the inquiry by evidence of such reproduction value other than through cross examination of the plaintiff's witnesses. Each side also produced an expert witness as to fluctuations in prices and price levels, and probable future tendencies thereof, to aid in ascertaining the present value of the property that is fair or reasonable as a rate base. In the opinion of both of these experts there is likely to be little recession from the price levels at the time of their testimony, either in respect to labor or materials, and I have accepted this theory in consideration of values herein and of continuation of operating expenses. The Supreme Court has indicated the elements that should be considered in arriving at a present rate basis, from Smyth v. Ames (169 U.S. 466) to the many eases that have reached that Court within recent years. The tendency has been to give increased consideration to reproduction cost new as a basis for determining fair value. Asa fixed rule has not as yet been laid down, I have given consideration to the historical or investment cost of the property, to the re- production cost new, and | have undertaken to find out a present fair value as well as a finding as to going coneern value in order that the Court may have before it these facts upon any determination of the principles that may be urged by the parties. With respect to these values, I have also given consideration to the decree of maintenance, present conditions, the range of price levels as well as the fact that a considerable portion of the property has been installed during the period of high prices. [fol. 46] Historical Cost of Structures The defendants contend that the fair value should be based upon the historical costs, exclusive of land which it is conceded should be accepted at its present value. While the cases do not justify any such strict limitation in ascer- taining value, nevertheless it is a proper inquiry, in seek- ing to base a proper judgment, to examine original or his- torical costs as well as all matters which may aid in striving to arrive at a fair determination. ig SRR RAT ERP NG a oN tae og te EDD Le re SORE NTE NERC Buildings — ¥ $752,134 Manufacturing apparatus and equipment and gas holders . cae a7: 1,590,291 Gas mains in streets . _ 2,898,617 Gias service pipes 1,109,686 Gas meters on customers’ premises and in stock 816,870 Pt RSPR ate in DnB: aS ao 62 Engineering, superintendence and general con- tractor’s expense and profit 5... am 317,536 Interest during construction |. . oe 421,623 Taxes during construction 25,646 Administration, legal and miscellaneous general expenses during construction me 127,014 $8,059,417 10. The plant, machinery and equipment of the plaintiff have been well maintained repairs, renewals and replace- ments having been made as required. Said plant, machinery and equipment are in as efficient operating condition for the economical production of gas as if new. The uncontra- dicted evidence shows that an expenditure of $1,855.50 on the buildings and $16,557.92 on the machinery, apparatus and equipment, as of June 1, 1928, would put the same in a condition substantially as good as they were when new. These amounts deducted from the reproduction cost of the structural property give a reporduction value of $8,041,003. [fol. 92] 11. The cost to restore the street pavement then existing over the gas mains and gas service pipes of plain- tiff as of June 1, 1923, at prices for labor and material then Nn prevailing was and is, at least the sum of $1,639,353 made up as follows eR he eg sc ae eg ak Boos di se $1,444,347 Engineering, superintendence and miscellaneous expenses ae 108,326 Interest during construction Pa amae 4% a 86,660 $1,639,333 12. To June 1, 1923, plaintiff had expended the sum of $97,696.65 in the Testor ation of street pavement necessarily cut in the laying of gas mains and gas service pipes in the extension from time to time of its distribution system. 13. As of June 1, 1923, plaintiff owned and used in its gas business miscellaneous general equipment, consisting of laboratory apparatus, office and storeroom furniture and fixtures, stable and garage vehicles and accessories and small tools, which had cost the sum of $102,541, SCL RLIIS GENIE L ETE NESE UeR anc aA Bi inn LE SPRL IS A OAM te nim, ON iN Liner Ome 63 14. Between June 1 and December 31, 1923, plaintiff ex- pended for additions, extensions and improvements to its manufacturing plant and distributing system the sum of $565,414.25 in excess of the cost of all property withdrawn from service during said period. 15. The territory served by plaintiff is a rapidly grow- ing section of New York City, and to meet the increase in demand for gas plaintiff has been obliged to enlarge its manufacturing facilities, extend its mains, and install ad- ditional new gas service pipes and meters each year. Plain- tiff installed at new locations 4,029 meters in 1921, 5,665 meters in 1922, 7,086 meters in 1923, and 2,744 meters in the first four months of 1924, having on the premises of its con- [fol. 93] sumers at April 30, 1924, a total of 98,653 meters. The estimated expenditures of plaintiff for main extensions, services and meters from January 1 to December 31, 1924, were $521,786.18. 16. Due to the increased and increasing demand upon plaintiff's plant and facilities, it is necessary for plaintiff to enlarge its gas storage ‘apacity, and plaintiff has entered into a contract for the construction of a 5,000,000 eubie foot gas holder on its lands at 9th Avenue and 6oth Street, cost- ing approximately $450,000. 17. In 1923 plaintiff entered inte a contract for, and com- menced, the construction on its lands at %th Avenue and 65th Street of a booster station necessary adequately to dis- tribute under suitable pressure the constantly increasing supply of gas to outlying districts within its territory. Ex- penditures estimated to amount to $148,674.96 were re- quired to be made in 1924 to complete the work under said contract. 18. Plaintiff has never owned an office building, but has rented office space for its officers and clerical force. Due to the growth of its business and the consequent increase in its office requirements, the quarters oceupied by plaintiff for several years past have become entirely inadequate. Plaintiff has acquired a site on which to construct an ade- quate office bulding, the estimated cost of which is $550,000, 19. The average monthly working capital employed by the plaintiff in the year ended December 31, 1923, was Si ae bie 2 aac i SS ea nF ry Paes nerve: ROO AEDT ALE ARN A ON AE GERI Ta NO Ne cer a I, 64 $868,372.47, made up of the average monthly capital in the following accounts: [fol. 94] Account receivable $303,988 60 Material and supplies A Sy ete Bee .. 219,233 80 RMN hes cr tne eee 195,142 20 Gas supplied but not bille« . -. 125,000. 00 General store room suspense Pate cae 12,162 40 Coal handling suspense __. ere 649 68 Prepaid insurance .............. re D,837 41 Prepaid taxes, ete. ahs ; 5,358 38 Deposits—publie authorities performance of contracts rena ; we 1,000. 00 $868,372 47 The reasonable and necessary working capital employed by plaintiff in its gas business since January 1, 1923, has been, and is, at least $600,000. 20. Plaintiff's gas works, plant and system is a com- plete, connected, established and operating property, doing business and earning money, and the element of going con- cern value therein is a property right, independent of the franchise, or of any mere good will as between such plant and its consumers, and such element of going concern is of the fair and reasonable value of $800,000. 21. The land upon which plaintiff’s gas holders, shops and yards are loeated, as aforesaid, was aequired by the Kings County Gas and Iluminating Company in 1890 at a cost of $20,000, and the land upon which plaintiff’s manu- facturing works are located was acquired by said Kings County Gas and Tiluminating Company in 1896 at a cost of $119,000. The total cost to the Kings County Gas and Illuminating Company of all the property owned by it and acquired by the plaintiff upon its merger July 1, 1904, as shown by the books of said Kings County Gas and Illumi- nating Company was $2,441,997.40. The investment of plaintiff and its predecessor, with land at its then present market value, in the property owned by the plaintiff at De- cember 31, 1923, exelusive of working capital, was $7,847,- 212.59, made up as follows: > we [fol. 95] Cost to Kings County Gas and Illuminating Com- pany of property existing June 30,1904 $2,441,997 40 Less costofland ey 139,000.00 $2,302,997 40 Net additions to fixed capital July 1, 1904, to December 31, 1923 mine _ 4,198,603 69 Present value of land 1,845,611 50 $7,847,212 59 . The fair and reasonable value of the land, manufae- turing plant, distributing system, and all other property, tangible and intangible, owned and used by the plaintiff in its gas business, excepting its franchises, as of June 1, 1923, was and is the sum of $10,635,242, and as of January 1, 1924, was and is the sum of $11,200,656, classified as follows: 99 Land . $994,002 Manufacturing plant, distributing system and other structural property 8,041,003 Restoring street pavement over mains and servy- ices cut by plaintiff in laying the same 97,696 Miscellaneous general equipment 102,541 Working capital 600,000 Going coneern value aces 800,000 $10,635,242 Cost of additions to fixed capital, June 1, to December 31, 1923... . A Aaa! 065,414 $11,200,656 23. The fair, reasonable and proper rate of return on the value of the property which plaintiff owns, uses and em- ploys for the convenience of the public to which plaintiff is entitled, and which is necessary in order that such return may equal that generally being made at the date and for the period of the inquiry in the City of New York on invest- ments in other business undertakings which are attended by corresponding risks and uncertainties, and which will be reasonably sufficient to assure confidence in the financial I—365 eine: EG RAMTEC PRP RROBENE I eS IO! 66 soundness of the plaintiff and adequate under efficient and [fol. 96] economical management to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties, was and is not less than 8 per centum per annum. 24. In the year ended December 31, 1923, plaintiff manu- factured 1,977,410,000 cubic feet of gas, and its sales were 1,794,969,872 cubie feet. The actual total cost to plaintiff, ineluding the expenses incident to the sale of gas appliances, in manufacturing and distributing said gas was $1,640,- 279.49, or 91.38 cents per thousand cubic feet of gas sold, made up as follows: Cts. per M Production expenses $892,501 13 49 73 Distributing expenses 143,636 40 8 00 Street lighting expenses 915 94 05 Commercial expenses 124,461 36 86 93 Promotion expenses 49,423 58 275 General expenses 156,651 13 & 72 Retirement expense 53,990 21. 3 00 Federal income tax 68,303 61 3 81 Other taxes 140,987 02 7 86 Uneollectible bills 9,409 11 53 Total operating expenses $1,640,279 49 91 38 25. The expenses incurred by plaintiff in the manufacture and sale of gas in the year ended December 31, 1923, stated in the preceding finding do not include any charge for de- preciation: The only charge made over and above the actual expense for repairs is 3 cents per thousand eubie feet of gas sold to provide for the retirement of fixed capital or plant withdrawn from service, which for the purpose of this case I have reduced to 1% cents. Such expenses do not include any charge or expenditures by the plaintiff for interest upon its bonds, temporary loans, consumers’ de- posits, or other indebtedness, and include no return upon the capital or property employed in any form whatsoever. The expenditures so made, as herein modified, were reason- able and necessary. [fol. 97] 26. Plaintiff’s sales of gas for the year ended December 31, 1924, were 1,947,207,849 cubic feet, an increase 67 of 152,237,968 eubie feet over the sales for 1923. Such in- crease in sales does not reduce the unit (1,000 enbie feet ) cost of manufacturing and distributing gas. Reductions in the unit cost in 1924 are limited to those occasioned by the slightly lower costs of gas oil, which is the largest item in the expense of making gas, and generator fuel under exist- ing contraets whieh covered plaintiff's requirements for the year 1924. The average cost, including handling charges, of the gas oil per gallon was 5.2089 cents in 1923, and 4.75475 cents in 1924. The average cost, including handling charges, of generator fuel per long ton was $10,062 in 1923, and $9.9673 in 1924. The gas oil and generator fuel used in 1923 at the contract prices for 1924 would have cost $28,298.50, or 1.58 cents per thousand eubie feet of gas sold, less than was actually paid for the same, making the cost to produce and distribute gas, exclusive of federal income tax and by reducing the retirement expense to 11% cents, 84.50 cents per one thousand eubie fect of gas sold. ~ 27. Since October 1, 1922, plaintiff has supplied gas in compliance with an order of the Publie Service Commission of the State of New York dated August 30, 1922, fixing a monthly average of 537, and a minimum of 525, British ther- mal units per cubie foot. The gas furnished by plaintiff, as tested by the Publie Service Commission, in the twelve months of 1923 showed the following monthly averages in British thermal units per cubic foot : 538, 546, 553, 549, 545, 947, 550, 558, 548, 547, 543 and 542. 28. In the manufacture of gas in 1923 plaintiff used 2.83 gallons of gas oil, 33.98 pounds of generator fuel and 5.24 [fol. 98] pounds of solid boiler fuel per thousand eunbie feet of gas made. The increase in the heat content of gas is effected through the use of additional gas oil, resulting in a slight reduction in the quantities of generator and boiler fuel required and an increase in the amount of water gas tar recovered. To furnish gas of 659 British thermal units, tested one mile from the plant, wou!'d require not less than 4.65 gallons of gas oil, 32 pounds of generator fuel and 3.98 pounds of solid boiler fuel per thousand cubic feet of gas made. In plaintiff's actual operations, with the use of 2.83 gallons of gas oil per thousand eubic feet of gas made, an average of 8 per cent of the gas oil is recovered as water gas tar, but with the use of 4.65 gallons of gas oil per thou- Ee EI re) Et Se A Nene eee eee ACTON ins Cot en Nn Ea 68 sand cubic feet in the manufacture of the higher heat con- tent gas, the recovery would approximate 16 per cent of the gas oil used, or an increase of approximately .47 of a gallon of water gas tar per thousand cubic feet of gas made. The increase in the cost of furnishing gas of 650 British thermal units per cubic foot instead of the gas furnished by plain- tiff since January 1, 1923, at the present prices of material, is not less than 5.44 cents per thousand cubic feet of gas sold, computed as follows: 1.82 additional gallons gas oil at 4.7G47B Comte. iii ccicc sc scccss 8 65 cents. 1.98 less pounds generator fuel at He GUD a a keen eacacadsvesecas 89 cents. 1.26 less pounds solid boiler fuel at Aan CUB onc 0s NE Ay Aa) gre ot A7 additional gallons water gas tar recovered at 4.75475 cents... ... 1a “* -—- 3.66 ‘‘ Net increase in cost per thousand made... .. 4.99 * Net increase in cost per thousand sold........ o44 ‘ 29. Had a rate of $1.00 per thousand eubie feet for gas {| fol. 99] of the standard furnished by plaintiff been enforced against plaintiff, there would have been available for re- turn upon the property employed by plaintiff for the year ended December 31, 1923 but $329,028.01, computed as fol- lows: Cts. per M Sales of gas at $1.00 per thousand. $1,794,969 87 100 00 Miscellaneous operating revenue $1,958 28 4.57 Total operating revenue.. $1,876,928 15 104 57 Operating costs, exclusive.of Ted- eral income tax........ .... 1,545,051.33 86.08 Income applicable to fed- eral income tax and re- turn on property........ $331,876 82 18.49 ei 69 Bond interest income deduction ...... .. $275,380.00 Other income dedue- Cts. per M WE vs wan ewes .. 33,706 35 309,086 35 17 22 $22,790 47 1.27 Federal income tax............ 2,848 81 16 Income available for return on te SRE SEO Pe Pere .. $829,028 01 18 33 30, No federal income tax would have been payable by plaintiff for the year ended December 31, 1923, had plain- tiff furnished gas of 650 British thermal units at the rate of $1.00 per thousand cubie feet, and there would have been available for return upon the property employed by plain- tiff but $234,230.26, computed as follows: Cts. per M Sales of gas at $1.00 per thousand. $1,794,969 87 100 00 Miscellaneous operating revenue 81,958 28 4 57 Total operating revenue... $1,876,928 15 104.57 Actual operating costs, exclusive of federal income tax.......... 1,545,051 33 86.08 Increase in costs for 650 B. T. U EEE PE eT ET ee TUR Te Ore 97,646 56 0 44 Total operating expenses exclusive of federal in- OO TR ik Sal ke Saks $1,642,697 89 91 52 Income applicable to federal in- come tax and return on prop- caus: HEE OLE Se Pe POPE eee ee $254,230 26 13.05 Income deductions.............. 309,086.35 17.22 31. Had a rate of $1.00 per thousand eubie feet for gas of the standard furnished by plaintiff been enforced against [fol. 100} plaintiff, the probable revenue available for re- turn upon the property employed by plaintiff for the year ars ae OPER ap oe GIES Ro her San ety i Lh Ree a 5 AZT Oe 8 6S hal ch Reso Biba rs nde Neb T MLS pace ended December 31, 1924, would not have exceeded $374, 439.58, computed as follows: Amount Cts. per M Sale of Gas at $1.00 per thousand $1,947,207 .84 100.00 Miscellaneous Operating Revenue 81,958 28 4 21 $2,029,166 12 104.21 Operating Expenses, exclusive of Federal Income Tax.......... 1,645,399 59 84.50 Income available for Fed- eral Income Tax and Re- turn on Property...... $383,775. 5: 19 71 ee) | we Income Deductions: Interest on bonds. $275,380.00 Other Income De- ductions ...... 32,706.33 309,086.35 15 87 $74,689 28 3 84 Federal Income Tax....... Pega) 9,336.15 48 Income Available for Return on POR rac owas a es ee hace 374,439 38 19.23 32. No Federal income tax would have been payable by plaintiff for the year ended December 31, 1924, had plaintiff furnished gas of 650 British thermal units at the rate of $1.00 per thousand cubie feet, and the probable revenue available for return on the property employed by plaintiff would not have exceeded $277,847.39, computed as follows: Amount Cts. per M Sale of Gas at $1.00 per thousand $1,947,207.84 100 00 Miscellaneous Operating Revenue. 81,958 28 4 2] $2,029,166 12 104.21 Operating Expenses, exclusive of Federal Income Tax........ 1,751,518 73 89 94 Income available for Fed- eral Income Tax and Re- turn on Property....... $277,847.39 14.27 e Income Deductions: Amount Cts. per M Interest on bonds. $275,380.00 Other Income De- ductions ...... 33,706. 35 309,086 35 15 87 [fol.101] 33. At nu time since the enactment of chapter 899 of the laws of 1923, would the rate of $1.00 per thousand cubic feet for gas of the standard supplied by plaintiff have yielded a return of as much as 34% per cent per annum on the fair value of the property employed by plaintiff in the public service. At no time since the enactment of said chapter would the rate of $1.00 per thousand eubie feet for gas of the standard prescribed thereby have yielded a re- turn of as much as 21% per cent per annum on the fair value of the property employed by the plaintiff in the public service. The rate of $1.00 per thousand cubie feet for gas, whether of the heat content actually supplied by plaintiff, or of the heat content prescribed by said act, was, and is, confiscatory and will continue to be so, 34. Efficient and satisfactory service can only be ren- dered by plaintiff, or by any other gas company, by supply- ing its consumers with gas of a substantially uniform heat content. Gas appliances will not ordinarily allow for a variation of more than 25 British thermal units either way from the mean heat content for the utilization of which they are adjusted. Gas of as high heat content as that pre- seribed by chapter 899 of the laws of 1923 has never been supplied anywhere for general industrial and domestic uses, and it is uncertain with what degree of uniformity of heat content it could be produced at the manufacturing plant, but it is certain that it could not be produced with the same degree of uniformity as gas of a lower heat content such as that prescribed by the order of the Public Service Com- mission dated August 30, 1922. Gas of the higher heat content contains larger percentages of condensible hydro- carbons than gas of the lower heat content, and even if it [fol. 102] were produced with a fair degree of uniformity at the plant it would necessarily be affected by changing temperature conditions in the holders and street mains . . . . . ? producing wide variations in the heat content and conse VE CAPM YE REDS © GT Me IAD 72 quent inefficient and unsatisfactory service. Variations in heat content might be as many as 200 British thermal units and become a real hazard and menace to the lives and health of the inhabitants. When gas having a heat content of 30 British thermal units per cubie foot more than the appli- ances are adjusted to consume, is applied to cooking utensils, incandescent lighting mantles, the interior of ranges and other heated surfaces, such as boile ‘tubes and water heater coils, the combustion is incomplete, thereby causing such heated surfaces to become coated with an increasing de- posit of carbon, which reduces the efficiency of the gas flame and causes serious hazards to life by the release of poison- ous gases, 30. At the time of the enactment of chapter 899 of the laws of 1923, the gas appliances of plaintiff’s consumers were, and still are, adapted or adjusted to utilize eeconomi- ‘ally and efficiently gas of an average of 537 British thermal units per cubic foot, with a variation of 25 British thermal units above or below said average. Were it possible to sup- ply gas of as high heat content as that prescribed by said chapter without producing wide variations in the heat con- tent of the gas supplied and without a resulting unsatisfac- tory service, it would still be necessary before plaintiff un- dertook to furnish gas conforming to such standard to have all the various gas appliances used by plaintiff's consumers changed and adjusted so as to adapt them to the use of such gas; otherwise there would result great loss of life [fol. 103] and property from asphyxiations and explosions. Many of the appliances in use in plaintiff's district are not adjustable and would have to be discarded, requiring the purchase by plaintiff’s consumers of new appliances. No obligation is cast upon the plaintiff by any statute or rule of law to enter upon the premises of its consumers and ad- just their appliances for the utilization of gas of any par- ticular standard, nor is a practicable means prescribed any- where to bring about the adjustment of the consumer's ap- pliances and the purchase of new ones where necessary, so as to make it possible or safe now, or hereafter, for plain- tiff to undertake the furnishing of gas of the hes at content prescribed by chapter 899 of the laws of 1923. eeaeeer- ne . - ese —— 73 36. It is within the reccgnizable police power of the state, either by statute or regulation of a duly authorized com- mission, to prescribe a standard for gas supplied for gen- eral industrial and domestic uses; otherwise uniformity in heat content so essential to satisfactory and efficient serv- ice would be unenforceable; also the power of regulating the rate or price necessarily carries with it the power or right to prescribe the standard or quality of the eas. But the exercise of this power like every other power must be reasonable and in the interests of the public by way of safe- guarding the health, protecting the morals or promoting the general welfare of the community. The requirement of chapter 899 of the laws of 1923 to the effect that plaintiff shall not ‘*furnish gas of a standard less than six hundred and fifty British thermal units per cubic foot, measured un- der normal conditions of temperature and atmospheric pressure’’ neither safeguards the health, protects the mor- als nor promotes the general welfare; but on the contrary |fol. 104] the furnishing of gas of such heat content would tend to, and actually would, imperil the life and health of the inhabitants and subject their property to unnecessary risks and hazards. Not one advantage either to plaintiff or to its consumers, individually or collectively, is secured by such a requirement. Compliance with the requirement is impracticable and impossible. Attempted compliance é would only result in inefficient service and consequent dis- : satisfaction on the part of plaintiff's consumers, en gender- * ing a prejudice among them against plaintiff over a situa- ‘ tion beyond its control, and plaintiff would suffer irrepara- ble injury and damage in the loss of the goodwill of its con- sumers. i aos PELE HY I therefore recommend: 1. That it be adjudged and decreed that chapter 899 of the laws of 1923 of the State of New York, in so far as it limits the rate to be charged for gas supplied by plaintiff in the territory served by it, is confiseatory and deprives plain- tiff of its property without due process of law, contrary to the Fourteenth Amendment to the Constitution of the United States. LP LOE ALD al ane Foy WSS 74 2. That it be adjudged and decreed that the enforcement of said statute, in so far as it prescribes a rate or price to be charged for gas supplied by plaintiff, be in all respects suspended and restrained. 3. That it be adjudged and decreed that chapter 899 of the laws of 1923, in so far as it prescribes that plaintiff shall not furnish gas of a standard less than six hundred and fifty British thermal units per cubic foot, measured under normal conditions of temperature and atmospheric pres- [fol. 105] sure, is not a reasonable exercise of the police power of the State in respect to prescribing the standard for gas supplied or to be supplied by the plaintiff and de- prives the plaintiff of its property without due process of law, contrary to the Fourteenth Amendment to the Consti- tution of the United States. 4. That it be adjudged and decreed that defendants, Wil- liam A. Prendergast, William R. Pooley, Charles Van Voor- his, George R. Lunn and George R. Van Namee, constitut- ing the Public Service Commission of the State of New York and Albert Ottinger as Attorney-General of the State of New York, and each of them, their, and each of their, successors, attorneys, agents, assistants, deputies, servants and employees be, and each of them be, restrained and en- joined from enforcing the provisions, or any of them, of said chapter 899 of the laws of 1923, and from instituting, or causing to be instituted, any suit, action or proceeding to enforce the said statute, or any provision thereof, or from taking any action under any other statute or law of said State to compel or enforce obedience to the said statute, or any provision thereof, and from interfering with plain- tiff in charging, billing and collecting a rate or charge in excess of that fixed by said statute for gas supplied to its consumers, other than the City of New York, and from interfering with plaintiff in furnishing and supplying gas of a standard or quality different from that fixed by said statute. Dated April 15, 1925. Respectfully submitted. Almeth W. Hoff, Special Master. | cas Sealant Meh aes ta shen Pasar A selicetadiimabiek nthias pete caadane en ee =~] 1 | [fol.106] Is Unrrep Srares District Courr Notice oF Puattirr’s Exceptions to Report or SPECIAL MASTER Sirs: Please ke notice that the within exceptions of the plaintiff, Kings County Lighting Company, to the report of the Special Master herein, were filed this day in the office of the Clerk of the United States District Court for the Eastern District of New York. Yours, ete., Samual F. Moran, Solicitor for Plaintiff, Kings County Lighting Company, 14 Wall Street, Borough of Manhattan, New York City. Dated Brooklyn, N. Y., May 9th, 1925. To Charles G. Blakeslee, Esq., Solocitor for Defendant Public Service ommission of the State of New York, 30 Church Street, Borough of Manhattan, New York City ; John Holley Clark, Jr., Esq., Solicitor for Defendant Al- bert Ottinger, as Attorney General of the State of New York, 120 Broadway, Borough of Manhattan, New York City. [fol. 107] In Unirep States Districr Court [Title omitted] PuaintiFF’s Exceptions to Report or Spectat Master For plaintiff it is urged for exceptions to the report of the Special Master, filed herein April 20, 1925: 1. The finding in paragraph 19 of the Special Master’s report that the reasonable and necessary working capital employed by plaintitf in its gas business is but $600,000 is contrary to, and against the weight of the evidence. The evidence is that the reasonable and necessary working capi- tal so employed by plaintiff has been and is at least $850,000, 2. The finding of the Special Master in paragraph 20 of said report, that the going concern value of, or the element of going concern in, plaintiff’s gas works, plant, property and system is of the fair and reasonable value of only $800,- FAVE s & , & & e 2 Ns ® Pa Es t b Fe > 5 = & 76 000 is contrary to, and against the weight of, the evidence. The evidence is that said element of going concern is of the [fols. 108 & 10814] fair and reasonable value of $1,750,000. 3. The finding of the Special Master in paragraph 25 of said report that a charge to operating expenses of 11% cents per thousand cubic feet of gas sold is sufficient to pro- vide for the retirement of fixed capital or plant withdrawn from service is contrary to and against the weight of the evidence. The evidence is that a charge of 8 cents per thou- sand cubie feet of gas sold for the purpose aforesaid is proper, reasonable and necessary. Brooklyn, N. Y., May 8, 1925. Samuel F. Moran, Solicitor for Plaintiff, 14 Wall Street, Borough of Manhattan, New York City. [fol. 109] I~ Untrrep Srares District Court [Title omitted] Notice or ATTORNEY GENERAL’sS Exceptions to Report or SpectaL Master Smrs: Please take notice, that the within is a copy of the Exceptions of the defendant Albert Ottinger, as Attorney- General of the State of New York, to the report of Almeth W. Hoff, Special Master in this action, which exceptions were this day duly filed and entered in the office of the clerk of the United States District Court, for the Eastern Dis- trict of New York. Yours, ete., Albert Ottinger, Attorney-General of the State of New York. Office & P. O. Address: 49 Chambers St., New York City, N. Y. Dated New York, May —, 1925. To Samuel F. Moran, Solicitor for plaintiff, 14 Wall St., New York City, N. Y. 77 (fol. 110] In Unirep Stares District Court [Title omitted } ATTORNEY GENERAL'S Exceptions To Report oF SPECIAL Master Now comes the defendant Albert Ottinger, as Attorney- General of the State of New York, and files the following assignments of error upon which he will rely upon his prose- cution of the appeal in the above entitled cause from the decree made by this Honorable Court on the — day of 1925. ’ 1. Defendant excepts to the Findings marked ‘9 of the Master’s report on the ground that the same is contrary to the evidence, not supported by the evidence and against the weight thereof. The witnesses called to testify as to What the property would cost were not qualified and did not use a basis or method of ecaleulation reasonably eal- culated to obtain accurate figures: and on the further ground that the figures given represent reproduction cost new without proper depreciation; on the further ground that plaintiff in failing to establish by proper proof the amount of actual present depreciation which exists in its plant, and must exist in all plants, has failed to meet that burden of proof which the Supreme Court has held must be established. [fol. 111] 2. Defendant excepts to the Finding marked ‘**10"" of the Master’s report which finds as follows: “The plant, machinery and equipment of the plaintiff have been well maintained, repairs, renewals and replace- ments having been made as required, Said plant, ma- chinery and equipment are in as efficient operating condi- tion for the economic production of gas as if new,”’ on the ground that the same is not supported by the evi- dence, is contrary to the evidence and is against the weight thereof; and for the further reason that the Findings and Conclusions contained therein are contiary to the sound reasoning and human experience. oo | AAAI Wt EF ati NOS A ROR eg ie Beata Sop 78 Defendant further excepts to so much of the Finding marked ‘‘10°’ of the Master’s report reading as follows: ‘*The uncontradicted evidence shows that an expenditure of $1,855.50 on the buildings and $16,557.92 on the ma- chinery, apparatus and equipment, as of June 1, 1923, would put the same in a condition substantially as good as they were when new,”’ on the ground that the same is contrary to the evidence, is not supported by the evidence and against the weight thereof; and on the further ground that the figures are grossly inadequate to measure the depreciation in the build- ings, machinery, apparatus and equipment of the plaintiff company Defendant further excepts to so much of the Finding marked ‘‘10’’ of the Master’s report which reads as fol- lows: ‘*These amounts deducted from the reproduction cost of the structural property give a reproduction value of $8,941,003," [fol. 112] on the ground that the same is contrary to the evidence, is not supported by the evidence and against the weight thereof. 3. Defendant excepts to the Finding marked ‘‘19”’ of the Master’s report on the ground that the same is con- trary to the evidence, is not supported by the evidence and against the weight thereof; on the further ground that the amounts used in figuring the average monthly working capital are excessive; on the further ground that some of the grounds used in arriving at the average monthly work- ing capital are improper items to be considered; and on the further ground that there is no evidence tending to support the Finding that (p. 61): ‘“‘The reasonable and necessary working capital em- ployed by the plaintiff in its gas business sinee January 1, 1923, has been, and is, at least $600,000 ;’’ and on the further ground that the Master should have found that a fair and reasonable allowance as to working capital reasonably necessary for the needs of the plaintiff is $450,000. Sar te B= pert marten wey ET ER yr oe 79 4. Defendant excepts to the Finding marked ‘20°’ of the Master’s report on the ground that there was no competent evidence before the Master upon which any going concern value could be fixed; and on the further ground that there is no basis in the history of the company for making an allowance for going value whatsoever; and on the further ground that where property is valued, as here, as a going concern and therefore not subject to deduction for de- preciation, there is no basis for allowance of going value, even if the history of the company should support such allowance; and on the further ground that the Finding of $800,000 for going concern value is excessive and unreason- [fol.113] able; and on the further ground that it is con- trary to law and disregards the decision of the Supreme Court of the United States in the ease of Galveston Electric Company v. City of Galveston. 258 U.S, 388. 5. Defendant excepts to the Finding marked ‘‘22’’ of the Master’s report on the ground that the same is not sup- ported by the evidence, is contrary to the evidence and against the weight thereof; and on the further ground that no credits were made for properties withdrawn from service; on the further ground that the cost of the plain- tiff’s entire property was much below the figure found; and on the further ground that the witnesses called by the plaintiff to testify as to the items going to make up the reproduction cost of the property of the plaintiff were not qualified and did not use the proper basis or method to ob- tain accurate, fair or reasonable values: and on the fur- ther ground that the Master failed to make proper and sufficient allowances for depreciation in the buildings, plants and station and gas holders of the plaintiff company; and on the further ground that the Master gave practically no consideration to the original cost of plaintiff’s property ; and on the further ground and for the reasons herein be- fore set forth in previous exceptions herein. 6. Defendant excepts to the Finding marked 23” of the Master’s report which purports to find the fair, reason- able and proper rate of return on the value of the prop- erty which plaintiff owns, uses and employees, was and is not less than than 8 per cent. per annum; on the ground that the same is not supported by the evidence, is contrary Satine balenieeithaictamed a en a ee — 80 to the evidence and against the weight thereof, and further- more, is contrary to the law; on the further ground that it was neither the duty nor within the province of the Master [fol. 114] to find what the reasonable and proper rate of return should be. 9. The defendant excepts to the Finding marked ‘+24’? of the Master's report on the ground that it is not supported by the evidence, is contrary to the evidence and against the weight thereof; and on the further ground that the cost of gas made for the year 1923, as therein found, is unreason- able and exeessive; and on the -further ground that the plaintiff failed to prove any reasonable basis for arriving at the cost per gallon charged by it in plaintiff's exhibit number 85 for the water gas tar reported used; and on the further ground that the unit cost is plainly wrong in that it exceeds the rate adopted by the plaintiff as the cost when crediting production expense, the figure of charge being $.0629426 per gallon and the credit being at the rate of $.049957 per gallon; and on the further ground that the amount of water tar gas on hand January 1, 1923, should not be charged as an operating expense in 1923 at the rate of cost for 1922 in order to determine the future cost of making gas; and on the further ground that the amount of recovery of water gas tar from the gas oil used by the plain- tiff was inadequate and contrary to the long experience of other gas companies in manufacturing gas, and contrary to the evidence herein given by experts in manufacturing gas; and on the further ground that the Master should have found that the usual percentages of recovery of water gas tar is about 16%, and furthermore, the Master should have used such percentage as a basis in his Finding herein. 10. Defendant excepts to the Finding marked ‘‘29" of the Master's report and the computations therein made, on the ground that the same is not supported by the evidence, is [fol. 11414] contrary to the evidence and against the weight thereof; and on the further ground that the figures for ex- penses therein stated are too high per thousand cubic feet sold, because of the Master’s failure to readjust plaintiff's figures on account of the fact that the credit for tar is too low for all the reasons set out in Exception marked ‘‘9”’ above. Wy tt SRS NES ee eS tS : eS hd a) 81 11. Defendant excepts to the Finding marked **31°' of the Master’s report and the computations therein made, en the ground that the same is not supported by the evidence, is contrary to the evidence and against the weight thereof; and on the further ground that the figures for expenses therein stated are too high per thousand cubic feet sold, because of the Master's failure to readjust plaintiff's fig- ures on account of the fact that the credit for tar is too low for all the reasons set out in Exception marked ‘*9"* above. 12. Defendant excepts to the Finding marked **32”' of the Master's report and the computation therein contained, on the ground that the same is not supported by the evi- dence, is contrary to the evidence and against the weight thereof; and on the further ground that the figures for expenses therein stated are too high per thousand eubie feet sold, because of the Master's failure to readjust plain- tiff’s figures on account of the fact that the credit for tar is too low for all the reasons set out in the Exceptions marked ‘‘9°* above. 13. Defendant excepts to the Finding marked ‘*33"' of the Master's report, which finds that the statu-e in ques- tion is confiscatory, on the ground that the same is not sup- (fol. 115] ported by the evidence, is contrary to the evi- dence and i: gainst the weight thereof and contrary to law; and for the further reasons herein set forth in these excep- tions. 14. Defendant excepts to the Finding marked ‘34° of the Master’s report on the ground that it is not supported by the evidence, is contrary to the evidence and there is no evideuce tending to support it. The Master should have found that 650 B. T. U. gas is in fact the equivalent of 22- candle power gas which the plaintiff purported to furnish for many Years. He should further have found that plaintiff, before October 1922, had furnished gas of a heat content ranging from 50) British thermal units per foot to 650 British thermal units per foot without any adjust- ment of appliances and without any danger to human life. 15, Defendant excepts to the Finding marked ‘35°? of the Master's report on the ground that it is not supported by the evidence, is contrary to the evidence and there is no 6—365 PRA CRIL BPA LO ce OR ID Set CR hae 82 evidence tending to support it; and further on all of the grounds set out in the Exception marked ‘*14"’ above. 16. Defendant excepts to the Finding marked ‘'36”’ of the Master’s report on the ground that it is not supported by the evidence, is contrary to the evidence and there is no evidence tending to support it; and further on all of the erounds set up in the Exception marked ‘‘14’" herein. 17. Defendant excepts to the recommendations ‘‘1’’, “2? and ‘*3’? on the ground that they are not supported by the evidence, are contrary to the evidence, and against the weight thereof; are contrary to the law involved; and for the further reasons hereinbefore specifically set forth ‘{fol. 116] in these exceptions. 18. Defendant excepts to the opinion of the Master re- peating and reiterating, as though herein set forth, any and all of the defendants’ exceptions to the Master’s Findings of Fact and Conclusions of Law as may apply to the state- ments in said opinion identical with, similar to or bearing upon such Findings of Fact and Conclusions of Law. 19. Defendant, in addition to the above general excep- tions, excepts to so much of the said opinion of the Master en page 50 thereof in which the Master holds that it was not necessary for the plaintiff to actually operate under the statute in question before bringing this suit. The Mas- ter should have held that the company should have reduced its rate to that fixed in the statu-e on the day such statu-e went into force, and should have complied with the standard provisions of such statu-e as soon thereafter as practicable. 20. Defendant, in addition to the above general excep- tions, excepts to so much of the Master’s opinion as ap- pears on page 12 and states ‘‘I have given consideration to the historical or investment cost of the property,’’ on the ground that the Master’s report and opinion show that he gave no consideration to such cost in arriving at the fair value of the property. 21. Defendant, in addition to the above general excep- tions, excepts to so much of the Master’s opinion which purports to calculate the fair value of the properties of the plaintiff company, on the ground that the figures therein HI ROOT SI OER ING FO, By Chambers Street, Borough of Manahattan, City of New York. lfol. 121] Ix Unrrep Strares Distrricr Court [Tithe omitted | ExXceprions oF THE Derenpants Wititam A. PrenperGast, Wintniam R. Pootry, Ciartes Vax Voortis, Grorce R. Lexx. anp Grorce R. Vax Namer, Consrirevine tik Pup- nic Senvick ComMMIssion oF THE Stave or New York, To Reporr or Spectra Masrer Now come the defendants William A. Prendergast, Wil- liam R. Pooley, Charles Van Voorhis, George R. Lunn and George R. Van Namee, constituting the Publie Service Commission of the State of New York, and except to the findings of faet and ceonelusions of law contained in the report filed herein by Almeth W. Hoff, Special Master, on | fol. 122] April 20, 1925, in the following particulars, to wit: 895 First. The defendants except to that part of Finding No. 6 in which the Master in respect to the land loeated on New York Bay finds that “the present fair market value of which land without im- provements is $1,141,344. Plaintiff's gas works or mannu- facturing plant is located upon the lands above deseribed and 231,381 square feet of the uplané and 55,073 square feet of the lands under water are used by the plaintiff in the conduct of its business, the present fair market value of Which land without said improvements is $811,650,"" upon the ground that said finding is not supported by the evidence and is against the weight thereof, Second. The defendants except to that part of Finding No. 7 in which the Master finds that the present fair market value without improvements of the parcel of land located at the northwest corne/ of 9th avenue and 65th street is $22. 6900; of the parecl located at the northeast corner of 9th avenue and Goth street is $6,300; of the pareel located at the southwest corner of 9th avenue and Gdth street is KIDS, 71; of the parcel located at the southeast corner of Oth avenue and Goth street is $13,531 upon the ground that said finding is not supported by the evidence and is against the weight thereof, Third. The defendants exeept to that part of Finding No. 9 in which the Master finds that lfol. 125] **The cost. of reproducing the manufacturing plant, distributing system and all other struetural prop- erty owned and used by the plaintiff in its gas business as of June 1, 1923, at prices for labor and material then prevailing, exclusive of the cost of restoring street pave- ment over gas mains and gas service pipes, was, and is, at least the sum of $8,059,417, classified as follows :”’ and such classification, upon vhe ground that said amount and the various figures set forth in said finding are ex cessive, unreasonable and improper and that said finding is based upon an illegal theory of valuation and is not sup ported by the evidence. Fourth. The defendants except to all of Finding No. 10 upon the ground that said finding is not supported by the 86 evidence, is contrary to reason and to common sense and to well established principles of law and that the sums found are excessive, unreasonable and improper, that practically no deduction for depreciation is made and that it is not supported by the evidence. Fifth. The defendants except to that part of Finding No. 11 in which the Master finds that “The cost to restore the street pavements then existing over the gas mains and gas service pipes of plaintiff as of June Ist, 1923, at prices for labor and material then pre- vailing was and is, at least the sum of $1,639,333,”’ [fel. 124] upon the ground that such amount is not used by the Master in his valuation and is immaterial and improper and contrary to well established principles of law. Sixth. Defendants except to that part of Finding No. 15 in which the Master finds that “The estimated expenditures of plaintiff for main ex- tensions, services and meters from January 1 to December 31, 1924, were $521,786.18,”’ on the ground that said amount is speculative and is not supported by the evidence. Seventh. The defendants except to that part of Finding No. 16 in which the Master finds that plaintiff had entered into a contract for the construction of a five million cubic foot gas holder costing approximately $490,000, on the ground that said gas holder is not used or useful in the pub- lic service, that said amount is not used by the Master and is immaterial and improper and contrary to well estab- lish principles of law. Kighth. Defendants except to Finding No. 17 in which the Master finds that the plaintiff has entered into a con- tract for the construction of a booster station at an esti- mated expenditure of $148,674.96, on the ground that the said booster station is not used or useful in the public serv- ice, that said amount is not used by the Master in his valua- tion and is immaterial and improper and contrary to well [fol. 125] established principles of law. Ninth. Defendants except to Finding No. 18 in which the Master finds that plaintiff has acquired a site on which to 87 construct an office building, the estimated cost of which is $550,000, on the ground that said building is not used or useful in the public service, that said amount is not accepted by the Master in his valuation and is immaterial and im- proper and contrary to well established principles of law. Tenth. Defendants except to that part of Finding No. 19 in which the Master finds “The average monthly working capital employed by the plaintiff in the year ended December 31, 1923, was $8638,- 372.47,”’ on the ground that this amount is made up of accounts not properly included in working capital and that such amounts are unreasonable and excessive and are not supported by the evidence. The defendants further except to that part of Finding No. 19 in which the Master finds that ‘*The reasonable and necessary working capital employed by plaintiff in its gas business since January 1, 1923, has been, and is, at least $600,000,”’ upon the ground that such amount is arbitrary, unreason- able and excessive and is not supported by the evidence. Eleventh. The defendants except to that part of Find- ing No. 20 in which the Master finds that Going Coneern Value is a property right and that such element of going concern is of the fair and reasonable value of $800,000, upon the ground that such finding is improper and illegal, that there is no evidence to support it, and that it is con- {fol. 126] trary to the established principles of law involved. Twelfth. Defendants except to that part of Finding No. 22 in which the Master finds ‘*The fair and reasonable value of the land, manufactur- ing plant, distributing system, and all other property, tangible and intangible, owned and used by the plaintiff in its gas business, excepting its franchises, as of -hine 1, 1923, was and is the sum of $10,635,242, and as of January 1, 1924, was and is the sum of $11,200,656, classified as fol- lows:"" on the ground that said amounts are excessive, unreason- able and improper and that said finding is based chiefly on rr on abe? AAS Aw ek 53: reg Sete 88 reproduction cost new at present day prices and practically without any deduction for depreciation, and in all such re- spects is unfair, improper and illegal and based upon an illegal theory of valuation and is not supported by the evi- dence and not in accordance with the established principles of law involved. Thirteenth. The defendants except to that part of Find- ing No. 23 in which the Master finds the fair, reasonable and proper rate of return is not less than 8 per centum per an- num on the ground that it is excessive and not supported by the evidence. Fourteenth. The defendants except to Finding No, 24 on [fol.127] the ground that the figures stated therein and purporting to represent the plaintiff’s operating expenses for the vear ending December o1, 128, are exeessive and are not supported by the evidence. Fifteenth. The defendants except to that part of Iind- ing No. 25 in which the Master finds “The expenditures so made, as herein modified, were rea- sonable and necessary,” on the ground that the said finding is not supported by the evidence. Sixteenth. The defendants except to that part of Find- ing No. 26 in which the Master finds that the cos: of making and distributing gas in 1024 was 84.50 cents per one thou- sand cubic feet of gas sold upon the ground that the said finding is not supported by the evidence and is against the weight thereof. Seventeenth. Defendants except to Finding No. 55 upon the ground that the Master in making his computations used improper and excessive figures for plaintiff's operat- ing expenses and improper and excessive amounts for the “fais value’? of plaintiff's property, which figures and amounts are not supported by the evidence and are con- trary to the established principles of law involved, (fol. 128] Albany, N. Y., May 9th, 19205. Charles G. Blakeslee, Solicitor for Defendants, Wm. A. Prendergast et al. Sherman C. Ward, of Counsel. [fol. 129} Usirep States District Cover [Title omitted] Before Martin T. Manton, Cireuit Judge, and Marcus B. Campbell and Robert A. Inch, District Judges, Holding Court pursuant to Section 266 of the Judicial Code Orimsioxn— June 30, 1925 Bill in equity to have declared unconstitutional and void an act of the legislature of the State of New York fixing the rate to be charged for gas within Chap. S90 of the Laws of 1923. Samuel F. Moran, Esq., for Plaintiff. Charles G. Blakeslee, Esq., for Defendant Public Service Commission. Sherman C. Ward, Esq., of Counsel. John Holley Clark, Jr, Esq. for Defendant Atty. Gent. Albert Ottinger. [fol 130} Mawxvox, Cireuit Judge: This suit seeks to have declared as unconstitutional and void, Chapter 8? of the Laws of 1925, which reads as fol lows: A gas corporation engaged in the business of manutae- turing, furnishing or selling illuminating gas in a city con- taining a population of one million or over shall not charge or receive for gas furnished or sold in such city a sum per one thousand cubie feet in excess of one dollar, ner furuish in such city gas of a standard less than six hundred and fifty British thermal units per cubic foot, measured under normal conditions of temperature and atmospheric pres- sure. The Public Service Commission, notwithstanding any other provision of this chapter, shall not allow a rate or charge in the case of such cities in excess of such sum.** This became effective June 2, 1923. It fixed the maximum price of one dollar per thousand cubic feet, and a minimum standard of six hundred and fifty British thermal units per cubie foot, for gas supplied in the territory served by the plaintitf. A temporary restraining order was granted by eer” aoe 90 the district court on the plaintiff*s application on June 6, 1923, and after issue was joined, the special master took testimony and reported that the act was unconstitutional: (1) Because the rate fixed by the statute, if held enforce- able, would result in confiscation of plaintiff's property; and (2) because the standard set by the statute of six hun- dred and fifty British thermal units per cubic foot was im- practicable and unsafe and contrary to the power of the Legislature to pass legislation under its police power. The special master took considerable testimony as to val- [fol. 131] ues of land and plant, working capital, and going value, and reached the conclusion that on December 31, 1923, the fair value of plaintiff’s business was $11,200,657. He found that the operating expense of manufacturing gas for this plant was 91.38 cents per thousand feet of gas sold, and he ruled that to sell gas at One Dollar per thousand cubic feet as provided by the statute, amounted to a confisea- tion. He found that the standard of gas actually furnished was five hundred and thirty-seven British thermal units, and recommended that an eight per cent. return on the fair value should be allowed in fixing the rate at wluch the gas should be sold. He held that the provisions for a rate and standard in the statute were intended to be inseparable, and that the Legislature intended, in fixing the rate, to fix a standard of gas to be charged for at that rate. He held that to fix such a standard was unreasonable, arbitrary and a destructive enactment not warranted by the police power of the State. These conclusions are challenged by both the Attorney General and the Public Service Commission, by exceptions which each have filed against the Speciat Mas- ter’s report. Plaintiff has also tiled exceptions, which are now withdrawn. The principal objections urged are (1) that the plaintiff has not sustained the burden of proof of establishing that the rate fixed by the Legislature amounts to a confiscation of proper*y, and that the requirement of six hundred and fifty British thermal units is impossible of performance and impracticable in giving service to the public in the ter- ritory served by it; (2) that error was committed in fixing {fol. 132] the fair value of the property invested and used by the plaintiff in its business at $11,200,656; and (3) in fail- ing to make proper reductions for depreciation; (4) that it 91 was error in the calculations to make an allowance of $800,- 000. for going value; (5) that it was error to find that the rate and standard provisions of the chapter were dependent upon each other; and that the Master erred in failing to de- clare them separable, so that the standard provision may remain as constitutional, even though the rate provision be declared unconstitutional by the court. We have examined this record, which is voluminous, and are satisfied that the master’s conclusion of the fair and reasonable value of the land, manufacturing plant, distrib- uting system, and other property, both tangible and intangi- ble, used and owned by the plaintiff in its gas business, ex- cept its franchises, was properly fixed at $11,200,656. as of December 31,1925. As stated by the Supreme Court: ‘The ascertainment of that value (fair value) is not con- trolled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment, having its basis in a proper consideration of all relevant facts.”’ Minnesota rate cases, 230 U.S. 352; Wileox v. Con- solidated Gas Co., 212 U. 8S. 19; Georgia Ry. & Power Co., 262 U.S. 625. And it is now settled by many authorities, that rates which are not sufficient to yield a reasonable return upon the value of the property used, at the time it is being used to render the services, are unjust, unreasonable, and confiscatory, and their enforcement deprives the public utility company of [fol. 133] its property, in violation of the Fourteenth Amendment. The master has found that the cost of re production of the structural property owned and used by the plaintiff as of June 1, 1923, at the prices then prevail- ing, exclusive of restoring pavement over mains and serv- ices, Was at least the sum of $8,059,417. He found from the evidence that the property had been well maintained and Was in an eflicient state of repair and operating condition, and that it would require an expenditure of only $18,413.43 to put it in condition which was substantially as wood as new. To this conclusion exception is taken. The argument is that it is wrong to say that by so slight a repair, the prop- erty would have a value as if new. The plaintiff offered proof as to these values, the defendants did not. The mas- TeV Ns Biter eres 92 ter has not accepted the full value as the proof of the plain- tiff indicates, but has said: ‘*T have endeavored to ascertain, and the figures found by me attempt to refleet what it would have cost the plain- tiff to build and develop its plant and property as it was built and developed, had the same level of prices for mate- rials and labor prevailed throughout the whole period of its construction as prevailed in June, 1925; in other words, to measure and state the investment in the property in’ the dollar of the present.”’ and he pointed ont that the uncontradicted evidence was to the effeet that, to organize a corporation, secure the neces- sary working capital, and construct the plaintiff's plant and property as it existed on June 1, 1925, but excluding going concern Value, it would have cost $15,694,571. As to the argument on depreciation, answering the argu ment of the defendants as to failure of the master to con- {fol. 134] sider the depreciation in value, it will be ob- served that the plaintiff called a witness who testified quite fully on the subject of actual depreciation. Tle testified as to the conditior of the property and plant, stating that it was in as good condition as a new plant, and that with this small expenditure referred to the property would be im as good a condition as if new, and as an operating plant, he stated, it would be better than new. ‘There is testimony as to the observed depreciation and the defendants’ witness made no deduction for acerued depreciation. While he said he had not time to examine every item of the property, as would be necessary for him to make an estimate of aec- tual depreciation, it does appear that he had been through the plant, and he said there was new property, and that every repair reasonably required had been made. Ile said that the gas works, holders, and shop buildings were well preserved and very well maintained. Other than this, we find that the defendants offered no evidence of depreciation. It is conceded that the plaintif® conducted its business with unusual skill and eare. Under this condition of the proof, we agree with the master that, in fixing the amount of fair value as he did, sufficient has been allowed for de- preciation. Denver v. Denver Water Co., 246 U.S. 17s: Des Moines Gas Co. v. Des Moines, 258 U.S. 153. En- 93 hanced cost of construciion due to the general inerease of costs after the erection of a plant, are to be considered in finding fair values. Binefield Water Works Co. v. Publie Service Commission, 262 U.S. 679; Galveston Elee. Co. v. City of Galveston, 258 U.S. 38s, The master, in fixing value of the plaintiff's business, allowed an item of $800,000 for going concern. In rate- [fol. 125] fixing cases, such as we are considering here, the element of going concern is rewarded as a property right, independent of the franchise or any mere good will. It must be considered in determining the value of the property upon which the owner has a right to make a fair return. Omaha v. Omaha Water Co. 218 US. 180; Denver v. Denver Water Co., supra; Des Moines Gas Co. v. Des Moines, supra. This xeing Value of its property cannot be taken from it, except by due process of law. Plaintiff is entitled to the enjoyment thereof, and where it exists it must be considered in de- termining the reasonableness or unreasonableness of a rate charge, or where it is proposed to be charged. The evidence fully warrants the conclusions of the mas- ter as to the amount of money required as working capital. We think the language of the statute fixing the rate and fixing the standard are inseparable. They should be read together. To fix a standard whieh is not practicable, and, indeed, unsafe, is an arbitrary and unreasonable exercise of the police power. The phrase, **nor furnish in such vity gas of a standard less than six hundred and fifty British thermal units per cubie foot, measured under normal con- ditions of temperature and atmospheric pressure,”* de- seribes the character of the gas which is to be furnished at the rate of One Dollar per thousand feet. The rate fixed is the compensation for supplying this standard of gus. Four witnesses, theroughty competent and experienced in the gas industry, gave testimony which in substance points out that there is danger or hazard in increasing the content [fol 136] to six hundred and fifty British thermal units. The danger is pointed out as follows: “Q. Oceasioned by what circumstances ? A. By the difficulty of maintaining a uniform quality, When you get into the high B. t. a. values; for instance, a sudden change in temperature, a hailstorm on a holder full ee kad Serene et ree © 4 of eas, would knock the B. t. u.’s down. If you were living up to a 650 B. t. u. standard, you would have to make im- mediately something much higher, and deliver adjacent to the plant a good deal more than 650, while on the outly- ing districts the variations would be very great; and close to the holder station it would be equally great, | think, be- cause you cannot make gas and mix it thoroughly in a holder, it stratifies and short cireuits hetween inlet and outlet pipes, and some consumers close to the works might be getting 700 B. t. u. gas, and then within 24 hours, they might be getting 600, and there is the danger.”’ They pointed out that there would be danger from the weak gas, but there would be more of a chance from the ex- plosion in a variation of the quality of the high gas, and that it would not be practicable, so far as distribution is concerned, because of the necessary changes in the appli- anees. In view of this testimony, we think the conclusion of the master, holding that the standard prescribed is un- reasonable and arbitrary, and that therefore the enactment is destructive, and not warranted by the police power of the State, finds support in the evidence and justifies our con- firmation. After the entry of the decree adjudging the statute to be in violation of the Constitution, the Commission order of (fol. 137] August 30, 1922 fixing a maximum rate of $1.50 ‘on and after the Ist day of November, 1922, and until the “1st of October, 1923, and thereafter until the Commission shall otherwise order’? will continue to control the plain- tiff. The plaintiff, of course, if so advised, may file its schedules with the Public Service Commission and petition for an increase in rate. But under the Publie Service Com- mission law, See. 66, sub. div. 12, it might not charge a higher rate until the Commission permits it. The master has suggested, as a reasonable rate of return, not less than eight per cent. The master had in mind that any rate lower than eight per cent, return would be confiseatory. But the master’s report deals with present fair values. Of course, if, when the new rate is fixed, values have changed, the Publie Service Commission may make such new rate based upon evidence, and will be wholly unhampered by the find- ines or recommendations of the master. Lincoln v. Lincoln, 4s) 200 U.S. 268. But we approve the values arrived at by the master, and likewise the recommendation as to the rate of return, below which, if a rate be fixed, would be confiseatory. It is upon these conclusions as to values that the master has found the statute confiscatory, and in this we agree, The report is therefore approved and affirmed. (Signed) Martin T. Manton, Cireuit Judge. Mareus B. Campbell, District Judge. Robert A. Inch, Dis- trict Judge. Dated New York City, June 30th, 1925, [ fol. 138] Ix Univep Srares District Court | Title omitted] JupGmMenr—-Angust 24, 1925 This cause came on to be heard at this term, convened in accordance with section 266 of The Judicial Code, and was argued by counsel; and thereupon, upon consideration thereof, it was unanimously ordered, adjudged and decreed as follows, viz: (1) That the report, dated April 15, 1925, of Almeth W. Hoff, Esq., Special Master, be and the same hereby is in all [fol. 159] respects approved and confirmed, and the several exceptions of the respective defendants thereto overruled ; (2) That chapter 899 of the laws of 1923 of the State of New York, in so far as it limits the rate to be charged for gas supplied by plaintiff in the territory served by it, is confiscatory and deprives plaintiff of its property without due process of law, contrary to the Fourteenth Amendment to the Constitution of the United States: (8) That chapter 899 of the laws of 1923, in so far as it prescribes that plaintiff shall not furnish gas of a standard less than six hundred and fifty British thermal units per cubic foot, measured under nermal conditions of tempera- ture and atmospheric pressure, is not a reasonable exercise of the police power of the State in respect to prescribing the standard for gas supplied or to be supplied hy the plaintiff SPREE EPPA TA ne YAO 5H eres SLRS 96 and deprives the plaintiff of its property without due pro- cess of law, contrary to the Fourteenth Amendment to the Constitution of the United States; (4) That defendants, William A. Prendergast, William R. Pooley, Charles Van Voorhis, George R. Lunn and George R. Van Namee, constituting the Public Service Com- mission of the State of New York and Albert Ottinger, as Attorney General of the State of New York, and each of them, their, and each of their successors, attorneys, agents, assistants, deputies, servants and employees, be, and each of them hereby is, restrained and enjoined from enforeing the provisions, or any of them, of said chapter 899 of the laws of 1923, and from instituting, or causing to be insti- tuted, any suit, action or proceeding to enforce the said (fol. 140] statute, or any provision thereof, or from taking any action under any other statute or law of said State to compel or enforce obedience to the said statute, or any provisions thereof, and from interfering with plaintiff in charging, billing and collecting a rate or charge in excess of that fixed by said statute for gas supplied to its consumers, other than the City of New York, and from interfering with plaintiff in furnishing and supplying gas of a standard or quality different from that fixed by said statute; (5) That nothing contained herein shall be construed to limit, prejudice or restrict the exercise of the jurisdiction and power of the Publie Service Commission of the State of New York under chapter 480 of the laws of 1910 as amended and supplemented, known as the Publie Service Commission Law, or any other provisions of law, not in conflict with the provisions of this decree; (6) That the plaintiff reeover of and from the defendants its taxable costs and disbursements, including the sum fixed and allowed as the compensation and disbursements of the Special Master, to be equally borne and paid by the Public Service Commission and the Attorney General in accordance with the rules of the Supreme Court of the United States on this subject. Martin T. Manton, Cireuit Judge. Mareus B. Camp- bell, District Judge. Robert A. Inch, District Judge. Oo ~! [ fol. 141] Ix Unirep Srates District Court | Title omitted] SUMMONS ON Pubic Service Commission To Join 1x AppeEat. ETC. , To the defendants William A. Prendergast, William R. Pooley, Charles Van Voorhis, George R. Lunn, and George R. Van Namee, constituting the Publie Service Commission of the State of New York: Please take notice that you are hereby summoned to join with me, Albert Ottinger, the Attorney-General of the State of New York, as a co-defendant in the above entitled cause on or before the 7th day of December, 1925, to prose- eute an appeal in said cause from the decree and judgement of the United States Court, held pursuant to seetion 266 of the Judicial Code, for the Eastern District of New York, entered in the office of the clerk of said Court on the 9th day of September, 1925, to the United States Supreme Court, appealing to said court to reverse the said judgment and decree of the United States District Court entered against the defendants herein upon the date mentioned. [fols. 142 &1421.]) You are further notified that in case of failure on your part to join me in said appeal the same Will be regarded as an aequieseence on your part in said judgment and deeree, and I shall thereupon enter an order of severance against you in the above entitled cause and shall prosecute said appeal without you, You are further notified that on the 7th day of Decem- ber, 1925, at ten o'clock in the forenoon of that day or as soon thereafter as counsel can be heard, T will present my petition for leave to appeal in the above entitled cause to Hon. Mareus B. Campbell, a Judge of the Distriet Court of the United States for the Eastern Dist rict of New York, at his chambers in the post-office building, County of Kings, State of New York, at which time and place vou may join With me in said petition and in default of your joining, ap- > 7—365 ae ee 98 plication will be made for an order of severance against you, as aforesaid, John Holley Clark, Ja, Solicitor for defendant Ot tinger, as Attorney-General, Oflice & P.O. address: 49 Chambers Street, Borough of Manhattan, City of New York. Dated New York, December 2d, 1925. ffol. 1483] Ix Unrrep Srares Disrricr Courr | Title omitted | ASSIGNMENTS OF Error or DerENDANT OPTINGER Now comes the defendant Albert Ottinger, as Attorney- General of the State of New York, and files the followwing Assignments of Error upon which he will rely upon his prosecution of the appeal in the above entitled cause from the decree made by this Honorable Court on the 9th day of September, 1925. 1. That said Court erred in sustaining the report of the Special Master, in denying the motion of the defendant at the end of the plaintiff’s case to dismiss the bill of com- plaint and overruling the exception of the defendant to such denial. 2. That said Court erred in sustaining the report of the Special Master, in denying the motion of the defendant at the end of plaintiff's whole case to dismiss the bill of com plaint and overruling the exception of defendant to such denial. 3. That said Court erred in confirming the report of the Special Master in so far as said report in’ Finding ‘*9" [fol. 144] thereof, and in the opinion found that in repro- ducing plaintiff's plant the costs of the following items would be as stated, to wit: 99 ‘Hnginecring, superintendents and general contractor's expense and profit $317,936 Interest during construction 421,623 Taxes during construction 95,646 Administration, legal and miscellaneous general expenses during construction 127,014 $8,059,417 on the ground that the said amounts are unreasonable and excessive and have no suflicient evidence to support them. 4. That said Court erred in confirming the report of the Special Master in so far as said Special Master in Finding “10° and in the opinion found that plaintiff's plant, ma- chinery and equipment are in as efficient operating condi tion as if new and that an expenditure of $18,414 would put the same in a condition substantially as good as they were when new, on the ground that the said Finding was not sup ported by credible evidence, is contrary to sound reason, to the law and to human experience. do. That said Court erred in confirming the report of the Special Master in-so far as said Speeial Master in Finding marked **20°° and in the opinion found ‘*going valne’’? to be of a value of $800,000, on the ground that there was no competent evidence before the Master upon which any going concern value could be fixed: and on the further ground that there is no basis in the history of the company for making an allowance for going value whatsoever: and on the further ground that where property is valued, as here, as a going concern and therefore not subjeet to dedue- tion for depreciation, there is no basis for allowance of voing value; and on the further ground that the Finding of $800,000 for going concern value is excessive and unreason- able; and on the further ground that it is contrary to law [fol. 145] and disregards the decision of the Supreme Court of the United States in the case of Galveston Electrie Com- pany v. City of Galveston, 258 U.S. 38s. 6. That said Court erred in confirming the report of the Special Master in so faras said Special Master in finding marked ‘*22"" and in the opinion found the fair value of plaintiffs property to be $11,200,656 on the ground that ti SPIER ator 100 the said figure and the items of which it is made up are ex- cessive, in that not sufficient, if any, consideration is given to original cost of construction, to the value and amount of capital stocks or to any element which should enter into fixing fair value for rate making purposes, with the execep- tion of reproduction cost new without deducting deprecia- tion, and that said amounts found as fair value too nearly approximate such calculations as to cost of reproduction new which are themselves excessive, in the particulars above stated in Assignments numbered **3°* and **4."" 7. That said Court erred in confirming the report of the Special Master in so far as said Special Master in Finding 25"? and in the opinion found the fair, reasonable and proper rate of return on the value of the property which plaintiff owns, uses and employs, was and is not less than S per cent. per annum; on the ground that the same is not supported by the evidence, is contrary to the evidence and against the weight thereof, and furthermore, is contrary to the law; on the further ground that it was neither the duty nor Within the province of the Master to find what the rea- sonable and proper rate of return should be. [fol. 146] 8. That said Court erred in confirming the re- port of the Special Master in so far as said Special Master in Finding **24°" and in the opinion found the cost of making and distributing gas for the vear 1923 to be 91.38 cents per thousand, made up of the items stated in said Finding, on the ground that the cost of gas made for the vear 1923, as therein found, is unreasonable and exeessive in that the plaintiff failed to prove any reasonable basis for arriving at the cost per gallon charged by it in plaintiff's exhibit num- ber 8) for the water gas tar reported used; and on the further ground that the unit cost is plainly wrong in that it exceeds the rate adopted by the plaintiff as the cost when crediting production expense, the figure of charge being $.0629426 per gallon and the credit being at the rate of $.049957 per gallon; and on the further ground that the amount of water gas tar on hand January 1, 1923, should not be charged as an operating expense in 1923 at the rate of cost for 1922 in order to determine the future cost of making gas; and on the further ground that the amount of recovery of water gas tar from the gas oil used by the plain- 101 tiff was inadequate and contrary to the long experience of other gas companies in manufacturing eas, and contrary to the evidence herein eiven by experts in manufacturing gas: and on the further eround that the Master should have found that the usual percentages of recovery of water eas tar is about 16° and furthermore, the Master should have used such percentage as a basis in his Finding herein. 9% That said Court erred in confirming the report of the [fol. 147] Special Master in so far as said Special Master in Findings **29°* and **30° and in the opinion found that the amount available for return for the year 1923 at the statutory rate would be but 18.33 cents per thousand enbie feet of gas sold for 537 B. T. U. gas and 13.05 cents per thou- sand for 650 B. T. U. gas, on the ground that the figures on which such findings are based do not take into account or make any readjustment for the improper method of credit. ing water gas tar as above stated and on the further eround that said Finding is contrary to the evidence and against the weight thereof, 10. That said Court erred in confirming the report of the Special Master in so far as said Special Master in Find- ings **31’? and **32”? and in his opinion found that the amount available for return for the year 1924 at the statu- tory rate would be but 19.23 cents per thousand cubie feet of gas sold for 537 B. T.U. eas and 14.27 cents per thousand cubie feet of gas sold for 650 B.'T. U. gas, on the eround that the Master should have followed the calculations of defendants’ witness Little as to the proper costs of produe- tion and distribution for this year; on the further ground that the costs of production and distribution found by the Master and by the Court are excessive and unreason- able, are not supported by the evidence and contrary to the weight thereof, and do not take into account or make any readjustment for the improper method of crediting water gas tar as above set forth. 11. That said Court erred in confirming the report of the Special Master in so far as said Special Master found as set out in Finding ‘33° and in such parts of the opinion as touch upon the confisecatory nature of the statute on the ground that said Finding is cont ‘ary to the evidence and SIT TR oe 102 [fol. 148] to the weight thereof and on all the grounds here- inabove set forth. 12. That said Court erred in confirming the report of the Special Master insofar as the said Special Master found as set out in Finding ‘34°’ and in such parts of the opinion as touch upon the supposed hazard to human life in furnish- ing gas of the statutory standard of 650 British Thermal Units per foot, on the ground that the said Findings are contrary to the evidence and against the weight thereof. The Master and the Court should have found that 650 British Thermal Units gas is in fact equivalent to 22-candle power gas which plaintiff purported to furnish for many years. They should further have found that plaintiff, prior to October 1, 1922, had furnished gas of a heating content ranging from 500 British Thermal Units per foot to 650 British Thermal Units per foot without any adjustment of appliances or without any danger to human life. 13. That said Court erred in confirming the report of the Special Master insofar as the Special Master found as set out in Finding ‘£357? and in such parts of the opinion as touch upon the probable consequences of the plaintiff’s eom- plying with the statute and furnishing the standard of gas thereby prescribed, on the ground that the said Findings are not supported by the evidence and against the weight thereof; and on the grounds hereinabove set out in the Assignment of Error marked ‘'12°’. 14. That said Court erred in confirming the report of the Special Master insofar as said Special Master found set out in Finding ‘6367? and in such parts of the opinion as lead to the conclusion, that the standard fixed by chapter 899 of the laws of 1925 is unreasonable and would imperil the life and health of the inhabitants and subject their prop- [fol. 149] erty to unnecessary risks and hazards, is im- practical, impossible and unconstitutional, on the round that the said Finding and said portions of the opinion are not supported by the evidence, contrary to the evidence and against the weight thereof, and upon all the grounds hereinabove set forth in Assignment of Krror marked "aes 103 15. The said Court erred in confirming the said report of the Special Master in so far as said Master in his opinion held that he would not take into account in fixing the value of plaintiff's property or make any deduction for the re- serve for depreciation and contingencies amounting to $201,910 for the reason that the said Master's ruling in this regard is contrary to the law. 16. That said Court erred in holding as follows: ‘*We think the language of the statute fixing the rate and fixine the standard are inseparable. They should be read to- gether. To fix a standard which is not practicable and, indeed, unsafe, is arbitrary and unreasonable exercise of the police power. The phrase ‘‘nor furnish in sneh city gas of a standard less than six hundred and fifty British Thermal Units per eubie foot, measured under normal con- ditious of temperature and atmospheric pressure, de- seribed the character of the gas which is to be furnished at the rate of One Dollar per thousand feet. The rate fixed is the compensation for supplying this standard of eas." on the ground that said finding is contrary to the evidence and against the weight thereof and is contrary to the law. The Court s [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0559%3A08. Public record. Not legal advice.