THE PURPOSE OF THE APPRAISAL 135 
is not only the right of the company to make such a provision, 
but it is its duty to its bond and stock holders, and, in the case 
of a public service corporation, at least, its plain duty to the 
public. If a different course were pursued, the only method of 
providing for replacement of property which has ceased to be 
useful would be the investment of new capital and the issue of 
new bonds or stocks. This course would lead to a constantly 
increasing variance between present value and bond and stock 
capitalization — a tendency which would inevitably lead to dis- 
aster either to the stock-holders or to the public, or both. If, 
however, a company fails to perform this plain duty and to 
exact sufficient returns to keep the investment unimpaired, 
whether this is the result of unwarranted dividends upon over 
issues of securities, or of omission to exact proper prices for the 
output, the fault is its own. When, therefore, a public regula- 
tion of its prices comes under question, the true value of the 
property then employed for the purpose of earning a return 
cannot be enhanced by a consideration of the errors of manage- 
ment which have been committed in the past.” 
According to this statement by the Court, the owner of a 
public utility should be required to exact prices for his output, 
which, at the beginning of operation and at all times thereafter, 
will cover the current depreciation of the physical elements of 
his plant. Yet, as elsewhere explained, in the early years, this 
is frequently impossible, and in nearly every case is inadvisable 
and would work unnecessary hardship upon the consumer. 
Losses in the early years when rate-payers are few are often- 
times unavoidable and these losses deserve consideration. Past 
history cannot be ignored if rates are to be so fixed as to be 
fair alike to the owner and to the rate-payer. In other words, 
not all shortage of earnings in the past is to be ascribed to 
errors of management. It is difficult to reconcile the language 
of the Court with this principle even as it is difficult to under- 
stand why so many of the Courts have held that value which 
results from earnings must be made the starting point when 
rates are to be fixed. 
“ Value ” Defined in the Minnesota Rate Cases. — Justice 
Hughes in delivering the opinion of the U. S. Supreme Court in 
the Minnesota Rate Cases (June 9, 1913) (230 U. S. 352) said: