The principal contentions of the plaintiff may be stated as follows:
“(1) The valuation of the property of a public utility upon which it is entitled to a fair return must be determined as of the time when the inquiry is being made regarding the reasonableness of rates, giving the company the benefit of any increase in the value of the property since it was acquired.
“(2) In determining ¡present fair value consideration must be given to the present or reproduction cost as well as to the original cost.
“(3) It is well established by-all authorities that in addition to the applied physical value of the property there should be added for rate-making purposes adequate allowances for- ‘working capital’ and for ‘going value.’
“(4) The amounts fixed as going value and working capital by the Commission in 1913 have never been changed and are totally inadequate at the present time.
“(5) In determining a base for rate-making purposes accrued depreciation should not be deducted from the reproduction cost new in arriving at present value, especially where the utility has not earned sufficient revenue to provide a reasonable return including enough to maintain accrued depreciation, but continues to render service to the public.” .
The real controversy in this case arises from the fact that the Commission allowed no accretion in value for that part of the electrical plant acquired by the utility prior to June 30, 1913. It is contended that the present fair value of the property used or useful in affording the public service is the measure of the reward to which the owner of that property is entitled for the service rendered, such value to *287be established as of the time when the inquiry in regard to the reasonableness of the rates charged by the utility is under investigation. This contention is in accord with the well settled law upon the subject. Willcox v. Consolidated Gas Co. 212 U. S. 19, 29 Sup. Ct. 192.
In the consideration of the question presented it is well to bear in mind a few fundamental propositions. The courts have nothing to do with the establishment of rates as such. The power to establish rates is primarily and exclusively a function of the administrative or legislative branch of the government. Louisville & N. R. Co. v. Garrett, 231 U. S. 298, 34 Sup. Ct. 48; Milwaukee E. R. & L. Co. v. Railroad Comm. 153 Wis. 592, 142 N. W. 491.
When the properly constituted authorities have established a rate, which rate is by reason of insufficiency confiscatory, the courts have the power, in the enforcement of the provisions of our constitution, to set the rate aside. Smyth v. Ames, 169 U. S. 466, 522-526, 18 Sup. Ct. 418; Interstate Comm. Comm. v. Union Pac. R. Co. 222 U. S. 541, 32 Sup. Ct. 108; Madison v. Madison G. & E. Co. 129 Wis. 249, 108 N. W. 65.
A rate which does not permit the utility to earn a reasonable return upon the present fair value of the property at the time it is being used for the public is confiscatory, and therefore, from a judicial standpoint, unreasonable, while from the. legislative standpoint a rate may be reasonable which is not unfair to the consumer although it may permit the utility to earn a return much beyond the legal rate of interest on the money invested. Detroit & M. R. Co. v. Michigan R. R. Comm. 203 Fed. 864.
It may as well be said here as anywhere that the courts approach the question of whether or not a rate is reasonable from an entirely different standpoint than does the Commission. Before the court can declare that a rate is unreasonably low it must clearly appear that it will yield less than the minimum return which invested capital has a right to *288demand. The court must and should in its deliberations exclude questions of public policy. The determination of matters of policy rests with the legislature.
A considerable study of cases leads to the conclusion that since Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, commissions have' regarded it as their duty to apply the court rule and establish a rate schedule which shall yield a minimum return and yet not bring their determination within the field of constitutional condemnation. It is the duty of the commission to prevent unreasonable exactions by the utility on the one hand, and also to protect the rights of investors from confiscation by imposition of rates which are too low on the other. The rate should be, in the language of the statute, “just and reasonablein other words, not so low as to approach the line of confiscation nor so high as to be unjust and oppressive. A just and reasonable rate need not approach either line. Milwaukee E. R. & L. Co. v. Railroad Comm. 153 Wis. 592 (142 N. W. 491), at p. 611.
In order for the court to ascertain whether or not a rate prescribed by the Commission is reasonable, it must first determine the present fair value of the property actually used and useful for the convenience of the public. This value when established constitutes the rate base and is the amount upon which the utility is entitled to earn a reasonable return. It is the claim of the utility in this case that the amount which it can earn under the rates established by the Commission will not afford a fair return to the electrical utility, for the reason that the rate base should be $594,904 instead of $424,868, the amount found by the Commission to be the present fair value of the property. Under the present utility law we have nothing to do with the intricacies of rate-making, with questions of management, and other factors which may operate to increase or diminish the revenues under the established rate.
The Commission establishes the present fair value of the property as a guide. The problem before the Commission *289is not a legal problem but an administrative problem. The Commission is not a court but a fact-finding body, charged with the duty of administering the law. In building up a rate the Commission must necessarily take into consideration a great many factors. Many of these factors are indefinite and incapable of exact delimitation. To properly weigh these various factors requires long experience and much wisdom. The just' and reasonable rate of the statute in a particular case is arrived at by giving just weight and consideration to each of them as applied to the facts in a particular case. The main purpose of the Commission ascertaining the just and fair value of the property is to ascertain whether or not the rate when, established will be valid in the light of the constitutional provision, and it is only one of the innumerable factors which enter into the process of rate-making. Theoretically, there is some rate which is as between the utility and the public just and reasonable, and it is that rate which the Commission is supposed to ascertain and declare. Minneapolis, St. P. & S. S. M. R. Co. v. Railroad Comm. 136 Wis. 146, 116 N. W. 905; Eau Claire v. Wisconsin-Minnesota L. & P. Co. 178 Wis. 207, 189 N. W. 476, 479.
It may be supposed that there is some conflict between the views here expressed and the views of the court as expressed in Minneapolis, St. P. & S. S. M. R. Co. v. Railroad Comm., supra. When correctly understood, we apprehend there is no conflict. It is there said:
“This law (ch. 362, Laws of 1905) establishes, and thenceforth assumes, the existence of rates, charges, classifications, and services discoverable by investigation, but undisclosed, which are exactly reasonable and just. It commits to the Railroad Commission the duty to ascertain and disclose that particular rate, charge, classification, or service. The law intends that there is only one rate, charge, or service that is reasonable and just. . . . If it were conceded that the Commission had power, or discretion to fix one of several rates, either of which would be just and reasonable, *290it would be hard to say that this was not a delegation of pure legislative power to the Commission.' But the theory of this law is to delegate to the Commission the power to ascertain facts and to make mere administrative regulations.”
It must be borne in mind that there is a clear distinction between the power of the Railroad Commission under the statute, acting within the field of reason, to ascertain and declare a just and reasonable rate and the power of the court to- disturb the determination of the Commission when it has been declared. Having regard to the statute solely, it is apparent that the determination of the Commission cannot be disturbed unless it shall be made to appear to the court by clear and satisfactory evidence that the rate established by it is either unreasonably low or unreasonably high. The court is not called upon to substitute its judgment for that of the Commission as to what the rate should be. In building up' the rate the Commission must necessarily consider not only the legal rights of the parties, but, as has been pointed out, matters of public policy, and must give weight to the various factors entering into the problem. The court cannot disturb the finding of the Commission unless it can say that the established rate has no basis in reason. It is manifest, therefore, that there is a zone within which the determination of the Commission cannot be disturbed. This does not mean that the Railroad Commission has power to choose as a matter óf policy between the different rates, but that if in the exercise of its judgment in ascertaining the just and reasonable rate the result reached is within the zone of reasonableness, it must be judicially approved. Were'it not for the constitution, the Commission might lawfully establish a rate which would yield less than the return upon the present fair value of the property, which is the minimum under the Fourteenth amendment. It might be argued with reason that, the state having attempted to create a monopoly and to protect specially the business and property *291of a public utility, the utility should for that reason accept less than a reasonable return upon other invested capital. The minimum, however, is established by the rule announced by the United States supreme court under the Fourteenth amendment.
There has been but little consideration given to establishing the maximum limit beyond which the Commission cannot go. We shall not discuss it here. What might be a reasonable return in one case might not be a reasonable return in another, having due regard to- all the conditions and circumstances of each case. Manifestly, the just and reasonable rate is not necessarily the minimum rate which will stand the constitutional test. If that were true, the Commission could not give weight to any other factor or factors in rate-making, either in the interest of the public or the utility, and would be bound by the naked legal rights of the parties. Anything in Eau Claire v. Wisconsin-Minnesota L. & P. Co. 178 Wis. 207, 189 N. W. 476, which seems to hold to the contrary must be held to be modified. While there is in theory but one just and reasonable rate, the rate found and declared by the Commission is- not subject to judicial review if the Commission in its determination acted within the field of reasonableness.
The rate having been established, the power of the court is invoked in this case to declare it confiscatory and therefore unjust and unreasonable. The primary question before the court is not a criticism of the methods adopted by the Commission in building up the rate or fixing the rate base. The primary question before the court is whether or not the established rate will permit the utility to earn, upon the present fair value of its property, a reasonable return. The question, therefore, of what is the present fair value of the property is a judicial problem. The court is not primarily concerned with the rate base found by the Commission, but must determine for itself the present fair value of the property. These considerations bring us to one of the -most *292complex and involved subjects with which courts are called upon to deal.
We enter with hesitation upon a discussion of a subject which is so highly controversial. All agree that the rate base is the present fair value of the property used and useful for the convenience of the public in rendering the service which the utility undertakes to perform. The question is how shall that value be ascertained. We have been aided in our consideration of this matter by an article by Dr. Robert L. Hale, entitled “Valuation and Rate Making,” published in Vol. 80, No. 1, “Studies in History, Economics, and Public Law,” by the Columbia University Press in 1918. Inasmuch as the writer discusses particularly the decisions of the Wisconsin Railroad Commission, the article is valuable for that reason as well as for the discussion of the subject generally.
In three recent cases the supreme court of the United State’s has dealt with this problem. State ex rel. Southwestern Bell Tel. Co. v. Public Service Comm. 43 Sup. Ct. 544, decided May 21, 1923; Bluefield W. W. & I. Co. v. Public Service Comm. 43 Sup. Ct. 675, decided June 11, 1923; Georgia R. & P. Co. v. Railroad Comm. 43 Sup. Ct. 680, decided June 11, 1923. These decisions have not entirely clarified the situation.
In the Southwestern Bell Tel. Co. Case the determination seems to rest almost entirely upon a review of the procedure of the commission, and while the case distinctly holds that weight must be accorded to cost of reproduction new less depreciation, we look in vain for any statement as to what weight should be accorded to that factor. It is said “Estimates for tomorrow cannot ignore prices of today,” which would seem to indicate that it was the duty of the commission to take 'into consideration future price levels, although the opinion declares that it is the present fair value of the property upon which the utility is entitled to earn a reasonable return.
*293In the Bluefield W. W. & I. Co. Case it is said:
“The final figure, $460,000, was arrived at substantially on the basis of actual cost less depreciation plus ten per cent, for going value and $10,000 for working capital. This resulted in a valuation considerably and materially less than would have been reached by a fair and just consideration of all the facts. The valuation cannot be sustained.”
In this case as well as in the Southwestern Bell Tel. Co. Case, while it is clearly held that the plaintiff in error is entitled to the independent judgment of the court upon both the law and the facts, and that it is the duty of the court, under the Fourteenth amendment, to ascertain for itself whether or not the rates prescribed permit the utility to^ earn a reasonable return upofi the present fair value of the property, we are unable to deduce from the opinion any hint as to the weight which the factor, cost of reproduction new less depreciation, should be given either, by a court or a commission.
In the Georgia R. & P. Co. Case it is said:
“The rule laid down in these cases [Minnesota Rate Cases, 230 U. S. 352, 33 Sup. Ct. 729; Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, and Willcox v. Consolidated Gas Co. 212 U. S. 19, 29 Sup. Ct. 192] was expressly recognized as controlling, both by the commission and by the lower court. Evidence bearing on most of the facts there declared to be relevant facts was before them. The court states, and the record establishes, that 'the opinion of the . . . commission . . . evinces a full and conscientious consideration of the evidence.' The opinion of the court shows that it also made careful examination of the evidence submitted and that it recognized the applicable rules of law. While it differed from the commission in some matter of detail, it sustained the latter’s finding that the value was $5,250,000. The question on which this court divided in the Southwestern Bell Tel. Co. Case, supra, is not involved here.”
Unless the mere assertion by commissions and courts that they have considered the cost of reproduction new is suffi*294cient to conclude the appellate court, we are unable to see a distinction between the Georgia R. & P. Co. Case and the two prior cases referred to. In the Georgia R. & P. Co. Case we get no indication as to the weight which is to be attached to the cost of reproduction new less depreciation factor. It cannot be that the repetition of a mere legalistic formula before the declaration of the trial court’s final determination is sufficient to bless and sanctify the result, no matter what it may be.
The finding of the rate base by an administrative commission is not conclusive upon the court. In our view of the matter, what the court is called upon to do is to determine for itself the present fair value of the property in order to establish a rate base and not merely to review the work of the commission. The commission proceeds in the field of administrative law. The problem presented to the court is a judicial problem. It cannot be said that the conclusion of the commission is conclusive upon the court however arrived at, unless it be said that the commission is vested with the right to exercise judicial power.
“The idea that any legislature, state or federal, can conclusively determine for the people and for the courts that what it enacts in the form of law, or what it authorizes its agents to do, is consistent with the fundamental law, is in opposition to the theory of our institutions. The duty rests upon all courts, federal and state, when their jurisdiction is properly invoked, to see to it that no right secured by the supreme law of the land is impaired or destroyed by legislation. This function and duty of the judiciary distinguishes the American system from all other systems of government. The perpetuity of our institutions and the liberty which is enjoyed under them depend, in no small degree, upon the power given the judiciary to- declare null and void all legislation that is clearly repugnant to the supreme law of the land.” Smyth v. Ames, 169 U. S. 466, 527, 18 Sup. Ct. 418.
In the determination of the questions presented by the *295record in this case it is our duty to take into consideration some factors which did not appear in the three cases recently decided by the supreme court of the United States.
First. In this case the property of the utility is held under an indeterminate permit (sec. 1797m—74, Stats.). The nature of the indeterminate permit was discussed in Calumet Service Co. v. Chilton, 148 Wis. 334 (135 N. W. 131), at p. 355, and cases cited.
Second. By the terms of the indeterminate permit the municipality has a perpetual right to take the property of the utility upon making just compensation (sec. 1797m—82). Connell v. Kaukauna, 164 Wis. 471, 159 N. W. 927, 160 N. W. 1035.
Third. A public utility is, under the law of Wisconsin, required to furnish adequate sex-vice for a reasonable charge, and this duty may be enforced by the Commission (sec. 1797m — 46) and also by the municipality in which the utility is situated (sec. 1797m — 87). The public utility may therefore be required to make additions to its property used and useful for serving the public by public authority without regard to past, present, or future price levels.
The factors which are to be considered in determining the just compensation to be paid by the municipality are quite fully discussed in Oshkosh W. W. Co. v. Railroad Comm. 161 Wis. 122, 152 N. W. 859. See, also, Appleton W. W. Co. v. Railroad Comm. 154 Wis. 121, 142 N. W. 476.
It would seem in Wisconsin that the present fair value of the property of a public utility could never exceed the price at which the public has a perpetual right to purchase it. If that is not wholly true, certainly the fact that the public has a'perpetual right to purchase must be given great weight in determining .the present fair value of the property.
Fourth. The state guarantees to the utility a monopoly by prohibiting competition except it be established upon a public hearing that public convenience and necessity require *296a second utility. This provision applies to municipalities desiring to enter the utility field as well as to private corporations (sec. 1797m — 74).
Recent decisions having left us without a guide as to the weight which is to be attached to the cost of reproduction new less depreciation factor, we are obliged to ^consider that matter for ourselves. The fundamental principle is stated in the Minnesota Rate Cases, 230 U. S. 352 (33 Sup. Ct. 729), at p. 454, as follows:
“The making of a just return for the us'e of the property involves the recognition of its fair value if it be more than its cost. The property is held in private ownership' and it is that property, and not the original cost of it, of which the owner may not be deprived without due process of law.”
It should be noted that it is the property which the constitutional guaranty protects and not a particular theory of valuation. Before the jurisdiction of the court can.be successfully invoked it must appear that the property of the plaintiff is being taken, not that it is deprived of the benefit of market fluctuations in the value of materials and labor. With all due respect, the proposition that the cost of reproduction new less depreciation, although it should no doubt be considered, is entitled to controlling or even considerable weight under present abnormal conditions, appears to us to be unsound. In the first place it ignores the fact that under Munn v. Illinois, 94 U. S. 113, when a person dedicates his property to a public use by investing it in a public utility, he divides with the people the right to control the use of the property so dedicated and thereafter the public has an interest in the use of the property which it may within constitutional limitations assert. That so investing his property the investor has given to it a status is now well established and recognized in the law. He withdraws it from the great mass of property not so situated and subjects it to a degree of public control from that time on.
*2972d. Cost of reproduction new can be established only theoretically. Even in the case of a structure about to be erected, every-day experience fully confirms this. When applied to the property of a public utility, purchased under conditions which no longer exist and incorporated into the property of a public utility under circumstances that cannot be reproduced, it is not only theoretical but highly speculative.
3d. The property of a public utility cannot be valued as is other property not devoted to the public use, which is subject to the laws of competition and therefore in an entirely different class. In re Purchase of Racine Waterworks Plant, 19 Wis. R. R. Comm. Rep. 83, at pp. 143-145 for discussion.
4th. In the competitive field the cost of reproduction new is given minor consideration in fixing the value of property because in that field the value is determined largely by its usability. For instance, would any one claim that the cost of reproduction new is even a guide to the present value of a defunct brewery plant? In the valuation of an office building the amount which it earns is a much larger factor in determining its value than cost of reproduction new. The usability or earning capacity being in a competitive field a dominant factor in the ascertainment of present fair value and the cost of reproduction new being at least a minor factor, how can it be said that it is entitled fc> great weight in valuing the property of a public utility when the earning power is limited by law? In re Laporte G. & E. Co. 1921A Pub. Util. Rep. 824, at pp. 844 et seq.
5th. If the cost of reproduction new is to be accorded any considerable weight when the price level rises, it must be accorded the same weight when the price level falls. Utilities in Wisconsin, however, are not permitted, except within very narrow limits, to- consider price levels, but are required to furnish an adequate service when and as needed, irre*298spective of price levels. It would seem to be a rank injustice to compel a public utility to make an investment and then, afer the investment is made, hold that, although the public compelled the utility to malee the investment when prices were high, prices having fallen, the utility is entitled to earn a return only upon the present cost of labor and material. Utilities must grow and expand with the needs of the public. They have very little if any option in regard to the matter.
6th. If a public utility which has during a twenty-year period earned and distributed a reasonable return upon the investment value of its property is permitted to increase its rates by reason of the fact that labor and materials have advanced in price in the open market, the earnings derived from such increase in rates will constitute an addition to its prior earnings and the utility will thus be permitted to earn more than a reasonable rate upon its investment. The increased earnings may be capitalized in one form or another, and investments in public utilities will then have a speculative element and be deprived of the stability which they have hitherto enjoyed. If the increased earning power is capitalized, the increased capitalization will constitute a perpetual fixed charge as against the public.
7th. The materials — brick, stone, copper, etc. — which enter into the construction of the plant of a public utility lose their identity as such and become a part of a new whole and must be valued as such. It does not seem reasonable to say that the value of a cast-iron pipe in a water main rises and falls in value with market fluctuations of pipe which is offered for sale in the open market. After material is incorporated into a public utility plant its value must be determined as a plant, not as material not so incorporated.
For these reasons we consider that no great weight is to be attached to cost of reproduction new less depreciation under present conditions, and particularly so under the conditions that prevailed in 1921.
*299The utility in this case having under the laws of the state of Wisconsin consented that the municipality in which it is situated may at any time take its property wheresoever situated, actually used and useful for the convenience of the public, and that in consideration thereof the municipality shall pay to it “just compensation,” we are led to inquire what constitutes just compensation.
In Oshkosh W. W. Co. v. Railroad Comm. 161 Wis. 122 (152 N. W. 859), at p. 127, it is said:
“In the proper valuation of a public utility for condemnation or sale purposes certain main elements usually present in every case may legitimately be considered. These are the present value of its physical property; the present and prospective reasonable earnings of its business; the going value thereof; and the amount of money presently needed to put the plant in good condition. There may be other elements, but these are generally the essential ones. In determining the value of the physical property due regard should be had to the original cost thereof; the reproduction cost; the amount of depreciation; and the amount of obsolescence. The going value of a utility is that part of its value due to its having an existing established business. In fixing its amount the actual cost of establishing the utility in question as modified by what under all the circumstances ought to have been its reasonable cost, as well as the reasonable cost of establishing like enterprises under similar conditions, may be considered.”
Just compensation therefore means the fair and reasonable value of the property taken at the time possession is acquired, which is to be arrived at in the exercise of a sound and competent business judgment upon the various elements of value, considering the property as a going business entity. Appleton W. W. Co. v. Railroad Comm. 154 Wis. 121, 142 N. W. 476.
While under the public utilities act the utility has consented that the public may take its property at the just compensation fixed by the Railroad Commission, this does not *300imply the right on the part of the public to establish a confiscatory rate. Stanislaus Co. v. San Joaquin & K. R. C. & I. Co. 192 U. S. 201, 24 Sup. Ct. 241.
But the utility having accepted the provisions of the act, the determination by the Commission of the amount that constitutes just compensation is given added weight because it is the price at which the public has a perpetual right to purchase the property.
It is the theory of our law that investments in the public utility field should be under the control and supervision of the Railroad Commission. The utility must apply there for leave to purchase additional properties, for permission to issue its securities, for a permit to improve its water power if it owns one, to establish or revise its rates, and it is subject to supervision in many other respects. We conceive that it was one of the fundamental objects of the public utility act to stabilize investments in public utility property, in the interest of the public primarily, and secondarily in the interest of the investor, so that the public would not be subjected to the hazards and exactions of a speculative enterprise in a field where it undertook to furnish a monopoly. The rates were to be just and reasonable. If the public wishes to purchase the property, it must pay just compensation therefor.
Under our statute it may well be argued that with increasing prices, increasing interest levels, and increasing cost of operation, the utility investor is in justice entitled to a larger return than formerly; but this argument is more properly urged to secure an increase in the rate of return rather than in the rate base upon which the return is to be computed. For fifteen years this statute has been administered upon the theory that the investor was entitled to a reasonable return on a valuation that fairly represents the legitimate and necessary cost of constructing the plant and building up its business. Hill v. Antigo W. Co. 3 Wis. R. R. Comm. Rep. 623.
*301Reference is made to Hill v. Antigo W. Co. for a full discussion of the subject, the substance of which we approve.
Both the Commission and the court- in Wisconsin have adhered with reasonable fidelity to what is now termed the prudent-investment theory, that is, that the utility is entitled to earn a reasonable return upon the amount which has been prudently invested in the enterprise. This does not require the public to pay rates which will yield,a return upon unreasonably high costs of construction, excessive bond discounts, large promoters’ fees, abnormally high prices of labor and material, lack of proper engineering investigation, poor management, and other conditions of like character. However, the question of .whether- or not the investment was prudent must be determined as of the time when it was made. It may not be possible to avoid adverse conditions and the utility may be entitled to justify charges which at the time the matter is under investigation seem large.
As was said in Hill v. Antigo W. Co., supra:
“The utility, for instance, may have been badly needed at the time it was constructed, so badly needed, in fact, that its construction could not safely have been postponed to a' more convenient time. The municipality may not have been in position to undertake this work on its own account, or on any better terms. No private party may have been willing or able to assume the work on conditions that were any more favorable. Under such conditions it might not always be fair or equitable for the municipality, later on when the situation has improved, to take any undue advantage of those who in good faith undertook to furnish a service that was almost indispensable, and that at the time could be had on no better terms.”
Mr. Hughes, former Justice of the supreme court of the United States, acting as referee in Brooklyn Borough Gas Co. v. Public Service Comm. 1918F Pub. Util. Rep. 335, at p. 347, after speaking of cost of operation, said:
“But it is a different thing, after cost has been defrayed, *302and the question is as to the compensation to be allowed in excess of cost [of operation], to take as the basis for a compensatory return an asserted plant value, far above the actual investment, which is reached merely by expert estimates of a cost of reproduction under abnormal conditions. This would result in allowing a public-service corporation to take advantage of a public calamity by increasing its rates above .what would be a liberal return not only on actual investment, but upon a normal reproduction cost, in the view that unless it could malee an essentially exorbitant demand upon the public it would be deprived of its property without due process of law. The enforcement of the constitutional guaranty does not require the application of any artificial formula. It has constantly been pointed out that the rate base must be what is called ‘the fair value of the property,’ and that as to this there must be a reasonable judgment based on a proper consideration of all relevant facts.” (Cases cited.)
See, also, U. S. v. Boston, C. C. & N. Y. C. Co. 271 Fed. 877.
In determining the present fair value of a public utility operating under our public utility law, it is our view that justice as well as sound economic practice requires that controlling weight should be given in the valuation of the plant of a public utility to the investment cost where the investment has been prudently made. In determining the present fair value of the property of a public utility for rate-making purposes, but little if any weight can be. given to capitalization of earnings or to- stock and bond values for the reason that these are dependent almost entirely upon the rates charged, the reasonableness of which is the very subject under investigation. If the rates charged be unreasonably low, the value of the property upon that basis would be depressed. If they be unreasonably high, it would be inflated. Minnesota Rate Cases, 230 U. S. 352, 455, 33 Sup. Ct. 729; Whitten, Valuation of Public Service Corporations, §§ 100, 1014.
We shall now consider in the light of the principles stated *303the present fair value of the plaintiff’s plant. The situation is fairly presented by the following table:
Year. Additions since last year. Fair value June 30.
1913 $156,800
1914 $54,181 210,981
1915 14,093 225,074
1916 31,495 256.569
1917 48,000 304.569
1918 63,602 368,171
1919 33,827 401,998
1920 22,870 424,868
From this table it appears that out of the total 1920 value of $424,868, $268,068, or a little over sixty-three per cent., consists of additions made during the years 1913 to 1920. The additions made during the years 1917, 1918, 1919, and 1920 (the extremely high-price period) amount to $168,299. These additions alone exceed the value of the plant as of June 30, 1913. These valuations represent with substantial accuracy the actual amount invested both in the low-price and the high-price periods. Mr. Hagenah, plaintiff’s engineer, contended that the rate base should be $594,904. His valuation is the cost of reproduction new less accrued depreciation based upon the average prices of the five-year period of 1915 to 1919, inclusive, to which is added, as heretofore stated, a sum for working capital and going-concern value. He admitted that, had he used a ten-year average price, he would have arrived at a valuation perhaps twenty-five per cent, lower than the valuation actually made. Upon that basis his valuation of the physical property before adding working capital and going-concern value, instead of being $497,504, would have been in the neighborhood of $375,000, which compares very closely with the value fixed by the Commission upon the purely physical property in arriving at its rate base. Cost of reproduction new is at its best under normal conditions a check rather than a measure of present fair value.
*304We should scrutinize with great care a determination which found the present fair value of the physical property of a utility plant in this state to be less than its actual cost, providing the investment had been prudently made, and we should scrutinize with even greater care a finding which would impose upon the public a schedule of rates which would earn a reasonable return upon $170,000 which the utility never invested.
We are of the opinion that giving due weight to the actual cost of the plant, to its cost of reproduction new less depreciation, and the proper allowance for working capital and going-concern value, and other factors, a schedule of rates which will earn a reasonable return upon $424,868 cannot be said to be unjust and unreasonable. There is no hint or claim in this case that the investment by the utility was in any way imprudent or unwise. In the absence of satisfactory proof to the contrary it must be presumed that the investment was prudently made.
While a more generous allowance for going-concern value and working capital would have been fully warranted, we cannot say that the amount allowed is so small that, when combined with the value of the physical plant, the whole is to be condemned under the Fourteenth amendment. Nor do we wish to be understood as saying that the actual cost of the physical plant of a public utility, even when the investment is prudently made, should be absolutely controlling.
We shall not attempt to deduce a formula. If, however, we were to accord rank to the various factors in accordance with the weight which is to be given to each in determining present fair value for the purpose of establishing a rate base, it would be as follows:
(1) Actual cost of the plant when the investment has been prudently made.
(2) Under normal conditions, cost of reproduction new less depreciation. (When conditions are abnormal, cost of reproduction new less depreciation should be fourth.)
*305(3) Going-concern value.
(4) Working capital.
(5) Other elements of value which may be presented in a particular case.
It must be understood that throughout this discussion we have assumed that earnings should include a sum sufficient to cover depreciation and obsolescence. Reference must be had in each case to these factors and they must be- treated with due regard to the rights of the public as well as the investor. We have not discussed these factors in this case because no question is raised in regard to them except as applicable to cost of reproduction new. In our view, discussion of these factors in this connection is not pertinent in this case, particularly in the light of recent decisions of the supreme court of the United States, where it repeatedly stated that it is cost of reproduction new less depreciation that is to be given consideration.
In the present case it is apparent that if the additions to the plant made at peak prices be depreciated to the price level of 1921, and the amount of the depreciation be added-to the plant as of June 30, 1913, ample allowance is made for the appreciation of that part of the plant acquired prior to 1913 by reason of the increased price level. This upon any tenable theory.
It-appears from the evidence that during the latter part of the year 1920 the plaintiff failed to earn its operating expenses and a proper depreciation charge. It appears that this situation was due almost entirely to the inability of the plaintiff to secure Eastern coal; that its equipment was not adapted to the use of Illinois and Indiana coal, resulting in an increase of seventy-six per cent, in the cost of producing steam. At the time the decision of the Commission was announced the situation had been remedied, the plaintiff was again receiving Eastern coal, and there was every prospect that the conditions which existed in the latter part of 1920 and the early part of 1921 would no longer obtain. This *306departure from normal conditions is one of the hazards of the business, and controlling weight cannot be attached to a condition which was not only abnormal but temporary, due in the main to the miners’ strike in the fall of 1919 and the switchmen’s strike in the spring of 1920.
It should bejorne in mind that we have here discussed the present fair value of the property of the utility for the purpose of establishing a rate base, no other question being presented by the record. We do not consider questions of administrative policy. As pointed out, these matters belong in the field of administrative law. In the effort to find the just and reasonable rate which it is its duty under the statute to determine, the Railroad Commission may and should consider many factors which do not enter into the question presented to the court. Having sole regard for the public interest, it may appear to the Railroad Commission as a matter of policy that the rate should be large enough to earn a return which will attract capital to the utility field; which will readily permit of expansion and extension of the utility service and keep it in a high state of efficiency; which will attract to' the utility field the best type of sound, economical, aggressive managerial ability, and in other ways stimulate productive activity which will be for the benefit of the public and incidentally for the benefit of the investor. Capital is not attracted to an enterprise which must constantly travel near the financial dead line which divides prosperity from bankruptcy. The creative genius of managers is not stimulated by deficits. All these and many other considerations relate to matters of policy not within the judicial field. As has been pointed out, it is the duty of the Commission to declare what is a just and reasonable rate, considering not only the legal rights of the parties, but, within the field prescribed by the legislature, the broader questions of public policy whiph are necessarily involved. It is the duty of the court to determine without regard to questions of policy whether or not the rates when *307established permit the utility to earn a reasonable return upon the present fair value of its plant. The problems are entirely different.
It is true that matters of policy are reflected in the rate rather than the rate base. We call attention to them in this connection in order that it may appear that we have not overlooked these elements in the problem which in the mind of the economist loom so large. It is be regretted that more discrimination has not been used in attempting to extend the rules laid down by courts for the determination of questions in the judicial field into the administrative field, where many matters may properly be given consideration which can have no- weight in the judicial field. It is apparent that the lowest possible rate that will pass the constitutional test is not the just and reasonable rate the statute prescribes.
That part of the order of the circuit court remanding the record, so far as it relates to the heating utility, to the Commission for further consideration, must be affirmed. The trial court remanded the record to the Commission for further proceedings in accordance with the statute. This was not error.
By the Court. — Judgment of the circuit court is affirmed.