S. 352 (1913); Galveston Electric Co. _v._
Galveston, 258 U.S. 388, 392 (1922); Missouri ex rel. Southwestern Bell
Teleph. Co. _v._ Public Service Commission, 262 U.S. 276 (1923);
Bluefield Waterworks & Improv. Co. _v._ Pub. Serv. Comm., 262 U.S. 679
(1923); Georgia R. & Power Co. _v._ Railroad Comm., 262 U.S. 625, 630
(1923); McCardle _v._ Indianapolis Water Co., 272 U.S. 400 (1926); St.
Louis & O'Fallon Ry. _v._ United States, 279 U.S. 461 (1929).

(3) Prudent Investment (versus Reproduction Cost).--This method of
valuation, which was championed by Justice Brandeis in a separate
opinion filed in Southwestern Bell Teleph. Co. _v._ Pub. Serv. Comm.
(262 U.S. 276, 291-292, 302, 306-307 (1923)), was defined by him as
follows: "The compensation which the Constitution guarantees an
opportunity to earn is the reasonable cost of conducting the business.
Cost includes not only operating expenses, but also capital charges.
Capital charges cover the allowance, by way of interest, for the use of
the capital, * * *; the allowance for the risk incurred; and enough more
to attract capital. * * * Where the financing has been proper, the cost
to the utility of the capital, required to construct, equip and operate
its plant, should measure the rate of return which the Constitution
guarantees opportunity to earn." Advantages to be derived from "adoption
of the amount prudently invested as the rate base and the amount of the
capital charge as the measure of the rate of return" would, according to
Justice Brandeis, be nothing less than the attainment of a "basis for
decision which is certain and stable. The rate base would be ascertained
as a fact, not determined as a matter of opinion. It would not fluctuate
with the market price of labor, or materials, or money. * * *"

As a method of valuation, the prudent investment theory was not accorded
any acceptance until the depression of the 1930's. The sharp decline in
prices which occurred during this period doubtless contributed to the
loss of affection for reproduction cost; and in Los Angeles Gas Co. _v._
R.R. Comm'n., 289 U.S. 287 (1933) and R.R. Comm'n. _v._ Pacific Gas Co.,
302 U.S. 388, 399, 405 (1938) the Court upheld respectively a valuation
from which reproduction cost had been excluded and another in which
historical cost served as the rate base. Later, in 1942, when in Power
Comm'n. _v._ Nat. Gas Pipeline Co., 315 U.S. 575, the Court further
emphasized its abandonment of the repro