1

Paula Plaza
Transportation
Prof. Ty

TRANSPORTATION CLASS #1

WHAT IS A PUBLIC UTILITY?

Ira Munn v People of State of Illinois
This is appeal from a decision of the Supreme Court of Illinois which affirmed the decision of the CFI which
prosecuted and fined the warehouse owners of grain for transacting business w/o a license as required by
the Act to regulate warehouses.
Issue: whether it is within the competency of the General Assembly of Illinois to fix by law the maximum
charges for the storage of grain of warehouses at Chiachage and other places in the State for having not
lesss than 100k inhabitants? AKA, whether the state may fix the compensation which an individual may
receive for the use of his own private property/business and services in connection with it? YES
Doctrine: Social compact, all shall be governed by certain laws for the common good. Property becomes
clothed with public interest when used in a manner to make it of public consequence and affect the
community at large. It is difficult to see why if the common carrier, miller, ferryman pursues a public
employment and exercises a public office why the plaintiffs do not.

KMU v Garcia
This is a petition for certiorari with urgent prayer for issuance of TRO- granted
KMU claimed that the authority given by LTFRB to provincial bus operators to set the rate 15-25% above the
existing authorized fare w/o a petition and hearing for the purpose is unconstitutional. The establishment of a
presumption of public need in favor of an applicant for a proposed transport service w/o proving public
necessity is illegal- violating PSA and ROC.
Doctrine: PSA and LTFRM are not authorized to delegate the rate fixing power to a common carrier,
transport operator or public service. This would leave commuters at the mercy of transport operators.
Public utilities are privately owned and operated businesses whose services are essential to the general
public. They are enterprises which cater to the needs of the public for their comfort and convenience. Public
utility services are impressed with public interest and concern. The common carrier holds a peculiar relation
to public interest as well. Private properties cease to be juris privati only.
When one devotes his property to a use in which the public has a interest, he grants to the public an interest
in that use, and must submit to the control by the public for the common good, to the extent of the interest he
has has thus created.

Luzon Stevedoring Inc and Visayan Transpo v PSC
This is a petition for review of a decision of the PSC restraining petitioners from operating their watercraft to
transport goods for hire until the rates they propose to charge are approved by the Commission. Held:
subject to the rates
Doctrine: It is not necessary that one holds himself out as serving or willing to serve the public in order to be
considered a public service- even if it rends service for a limited clientele. In the US there is no fixed
definition of what constitutes a public service or public utility, it is not necessary that to be a public service it
is dedicated to public use. A business may be aeffected with public interest and regulated for public good
although not under any duty to serve the public.
Public utility is not defined by the number of people actually served. Nor does the fact that the service is
rendered under a contract prevent the company from being a public utility.
Just as the legislature may not declare a company or enterprise to be a public utility, a public utility may not
evade control and supervision of its operation by selecting its customers under the guise of private
transactions.

READINGS ON WHAT IS A PUBLIC UTILITY?

The Economic concept of public utility: H.E. Batson
Economic concept of PU:
1. there are certain industries which have a tendency to charge discriminating prices for their
products- they have an unusual tendency towards price-differentiation
2. property of being of considerable utility to the public
2
Discriminating/differentiated prices: charging of prices that vary among themselves when uniformity
would be preferred, uniform prices are a highly artificial phenomenon
-ability to do business in 2+ sets of markets, power to sell to some buyers at a higher price than others are
paying and to prevent favored customers from re-selling to less favored
Error exposed! Error of the notion that the concept of public utility has a fixed connotation. May kinds of
circumstance may conspire to create new PU, change in opinion, technical changes
*PU concept covers all areas of regulation

Is the PU concept obsolete? Edythe Miller
Defined: originated in the US to provide social control necessary to prevent abuse of private market power
by firms providing essential services
No it is not obsolete. Not all markets are effectively or contestably competitive. Specific structural conditions
preclude the emergence of competition, make an empty threat of potential competition. Market barriers
prevent the entry that gives meaning to the premise of competition
Market barrier (structural impediments) even in the absence of legal barriers: high threshold levels of
investment, substantial utilization of joint assets, customer inertia and brand loyalty to incumbent providers
and established brands
Case study: AT &T, 1982 Consent Decree
Conclusion: competition was sanctioned as the only appropriate regulator but PUs have unique
characteristics that make market control untenable (market barriers)
PU problem substance remains the same: social control in a public interest of the abuse of private market
power

The passing of the PU concept: Horace Gray
PU concept lacks survival value. This system of public control has prove ineffective, its more realistic to
fashion new institutions than to rely on a model that has outlived its usefulness. Evolutionary process, spirit
of institutional inventiveness
Private utility monopolists will have regard for the broad social objectives only when by doing so they can
increase or maintain their own profit. They will not voluntarily astrive to attain these ends ex: conserve
natural resources, treat labor fairly
History: 19
th
and 20
th
century- grants of special privilege were given by the Federal governments as gifts
or for nominal sums, supplemented by patentns, subsidies. Recepients were given a free hand which
resulted in monopoly, exploitation and political corruption.
Fallacy of 20
th
century: private privilege can be reconciled with public interest
Rationalization: result of conflict, the enterprises were inherently monopolistics, had natural characteristics,
etc.
Ex: railroads, electric power, radio industry, air transport
New institutions: direct action by govts and bureaus, rural electric cooperatives, federal state run municipal
corporation, creative economic planning by governemnt



LEGAL BASIS AND RATIONALE FOR REGULATION

Republic v Manila Electric Company
This is a petition for review on certiorari of a decision of the CA. Held:decision of CA reversed, Meralco
must follow COA recommendations and refund customers. May not pass the income tax rate on to
customers (as operating expenses)
Doctrine: Regulation of rates to be charged by public utilities is founded upon police powers of the State
and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. The
regulation is to promote the common good. Submission to the regulation may be as long as use of the
property is continued. In regulating rates the State protects the public against arbitrary and excessive rates
while maintaining quality and efficiency of services. Must be a balancing of investor and consumer interests.
In determining the rates to be charged, take into account a) rate of return b) rate of base 3) return itself or
the revenue to be earned by the public utility.