Argument for Appellees. 223 U.S. corporation to the public service; the net earnings probably arising under the new rate established. The new rate permits the net earnings of the corporation which would probably arise from the operation of its business after deducting necessary and reasonable charges and expenses to be a fair return upon the value of that which it employs for the public convenience. Cases supra and Smyth v. Ames, 169 U. S. 466; Grain Shippers v. Railroad Co., 8 I. C. C. Rep. 158; Steenerson v. Great Northern Ry. Co., 69 Minnesota, 353; Danville v. Southern Ry. Co., 8 I. C. C. Rep. 409; Redlands &c. Co. v. Redlands, 121 California, 365; American Asphalt Assn. v. Uintah Ry. Co., 13 I. C. C. Rep. 207. In estimating the present reasonable value of appellant's property devoted to the public service in the operation of its gas business, from whatever standpoint it is discussed, it cannot exceed the amount found below. It is the duty of a public service corporation to provide a reconstruction fund to take care of new construction and all permanent improvements, and these should not be charged to operating expenses. Ill. Cent. R. Co. v. Int. Com. Comm., 206 U. S. 441; Wyman, Pub. Service Corp., § 1163. Where items of this character have been paid for from current receipts and charged to operating expense, they should be excluded from consideration in estimating the value of the property upon which the company is entitled to earn dividends, or excluded from the operating expenses of a single year. San Diego Water Co. v. San Diego, 118 California, 556, 574; Ill. Cent. R. Co. v. Interstate Commerce Com., 206 U. S. 441. No part of a depreciation fund, accumulated by a public service corporation from its receipts, can be added to the capital upon which it is entitled to earn dividends, and where this has been done the burden is on the company to show to what extent it has been done, in order 223 U.S. Argument for Appellees. that it may be segregated in a rate investigation. Water Co. v. Knoxville, supra; Louisiana Railroad Comm. v. Cumberland T. & T. Co., 212 U. S. 414. Capitalization affords no evidence of present value. Knoxville v. Water Co., 212 U. S. 1; Smyth v. Ames, 169 U. S. 466; San Diego Water Co. v. San Diego, 118 California, 556; Water Co. v. Redlands (Cal.), 53 Pac. Rep. 843; Southern Pac. Co. v. Bartine, 170 Fed. Rep. 725, 751; San Diego L. & T. Co. v. Jasper, 189 U. S. 439. The income of the year succeeding the passage of the ordinance is proper to be considered, even though the ordinance has not been put into effect. Water Co. v. Knoxville, 212 U. S. 1, 14. The value of the franchise should not be included. Willcox v. Gas Co., 212 U. S. 19, distinguished; Wyman on Public Service Corporations, § 1104. In this case there is no evidence of franchise value. Before a public service corporation can successfully attack a legislative rate as confiscatory, it must show that the effect of the operation of the rate will so reduce the earnings from its entire business as to deprive it of a reasonable return upon the value of its entire property used in the public service. St. Louis R. R. Co. v. Gill, 156 U. S. 649; People ex rel. v. Alton Ry., 176 Illinois, 512; Delaware St. Grange v. N. Y. Ry. Co., 3 I. C. C. Rep. 554; Wilkesbarre v. Spring-Brook, 4 Lack. Leg. News. 367; Steenerson v. Great Northern, 69 Minnesota, 353; M. & S. R. Co. v. Minnesota, 186 U. S. 257; St. John v. Railway, 22 Wallace, 136; So. Pac. Ry. v. Railroad Co., 78 Fed. Rep. 236; Atlantic Coast Line v. Nor. Car. Corp., 206 U. S. 1. The burden of proof is on the corporation to show proper apportionment, and the right to segregate the two departments of the corporation (if it exists at all) so as to enable complainant to withdraw from this investigation all of the property and earnings of the electrical department, imposes the burden upon the company to make full and detailed disclosure of the facts necessary to enable the court to intelligently determine that apportionment. Grand Trunk Ry. Co. v. Wellman, 143 U. S. 339, 345; State v. Adams Express Co. (Neb.), 122 N. W. Rep. 691; Steenerson v. Great Northern, 69 Minnesota, 353. A sufficient showing must be made by a public service company when it assails a rate as confiscatory, that it cuts down its net income below the point of reasonable compensation. Cases supra. In Willcox v. Gas Co., supra, this court recognized the strong probability that the earnings would increase under the reduced rate as a factor to be considered. Rates may be unreasonable and yet not confiscatory. Railroad Commission v. Cumberland T. & T. Co., 212 U. S. 414, 420; San Diego Land Co. v. Jasper, 189 U. S. 439; Southern Pac. v. Bartine, 170 Fed. Rep. 727. The court will not concern itself with the matter of alleged discrimination between customers, nor as to whether the new rate might operate to require some customers to be carried at a loss, so long as the rate will yield a reasonable rate of return on the entire business. Willcox v. Gas Co., 212 U. S. 19; Nor. Pac. R. Co. v. North Dakota, 216 U. S. 273; St. Louis R. R. Co. v. Gill, 156 U. S. 649; People ex rel. v. Alton Ry., 176 Illinois, 512; and other cases, supra. MR. JUSTICE LURTON delivered the opinion of the court. This case involves the validity of an ordinance regulating the appellant's charges for gas furnished to consumers, and forbidding a charge in excess of one dollar per thousand feet. The bill assailed the rate as confiscatory, and, therefore, a taking of property without compensation. The ordinance rests upon legislative power to regulate the charges of such public service companies. The sufficiency of the price prescribed to produce a fair profit upon the value of the property employed in the business is to be strongly presumed. The burden of showing its confiscatory character rests, therefore, upon the complaining company. The court below, upon a final hearing, held that the appellant had not made out its case and dismissed the bill, with leave to renew the litigation, if, upon actual operation under the ordinance, the returns upon its business should not prove reasonably remunerative. The ordinance was never put in force. Within a few days after it went into effect this bill was filed and an injunction, pendente lite, granted, which was continued in force down to the final decree, and when this appeal was allowed, was, by order of the court allowing it, continued pending the appeal, under a bond conditioned to account for all over-charges if the ordinance should be sustained. The case was not referred to a master, as is the usual course in such cases, although there was a great mass of conflicting evidence relating to the value of the plant, cost of operation and gross and net income. Neither did the court make specific findings of fact to which specific objection could be made. Such facts as may be said to constitute "findings of fact" appear in the way of large conclusions in the course of the opinion found in the record. In this, as in every other legislative rate case, there are presented three questions of prime importance: First, the present reasonable value of the company's plant engaged in the regulated business; second, what will be the probable effect of the reduced rate upon the future net income from the property engaged in serving the public; and, third, in ascertaining the probable net income under the reduced rates prescribed, what deduction, if any, should be made from the gross receipts as a fund to preserve the property from future depreciation. The valuation fixed by the court is the main point of attack. That the company is entitled to a fair return upon the value of the property at the time of the inquiry, is the rule. San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 442. The court, as one means of finding the present value of the gas-making plant, found that the present cost of replacing it would be $566,073.59. The items which enter into this valuation, and the reason for reaching this result, as stated in the opinion, are shown by the paragraphs here set out: "In determining for what amount the plant could be reconstructed, I have accepted in the main the testimony of complainant's witnesses as being the most satisfactory, and I find that-the plant could be reconstructed for the following sums: Coal gas apparatus. Water gas apparatus. $80,605 00 29,278 00 "While the evidence as to the depreciation is some what vague and indefinite, I think, upon the items ag |