The rate base and the depreciation base in recent public utility cases

In United Railways v. West (1930) the United States Supreme Court held: "It is the settled rule of this Court that the rate base is present value, and it would be wholly illogical to adopt a different rule for depreciation." Three Justices dissented. The Maryland Public Service Commission in 1933, under conditions of depressed prices, applied the Court's doctrine to the Chesapeake and Potomac Telephone Company, ordering a reduction of rates. The Commission was overruled in May, 1934, by the District Court and in June, 1935, by the Supreme Court, but by the latter upon grounds not involving the problem of the depreciation base. It is the author's opinion that, if this issue had been considered, the Supreme Court would have been logically compelled not to uphold the Commission with respect thereto; for in Lindheimer v. Illinois Bell Telephone Company (April, 1934) the Supreme Court had abandoned the depreciation doctrine of United Railways v. West. It is his opinion that the position taken in the Lindheimer case is sound and that depreciation charges should be based upon cost regardless of price movements.