18.4 V. Condemnation Of Economically Viable Systems Historically Subject To Unreasonable Rate Regulation

JurisdictionNew York

V. CONDEMNATION OF ECONOMICALLY VIABLE SYSTEMS HISTORICALLY SUBJECT TO UNREASONABLE RATE REGULATION

The leading Court of Appeals decision involving the takeover of a rate-regulated utility, In re City of New York (Fifth Avenue Coach Lines, Inc.),674 reflects a balancing of the rights-of-ownership and regulatory compact approaches. The decision concerned the New York City takeover of two privately owned, yet publicly franchised, intra-city New York City bus lines. The decision begins with the comment that the takeover was necessary because “it is beyond the resources of private enterprise to provide mass transportation at modest rates, dictated by political exigencies and confiscatory as far as the equity in the business is concerned.”675 In sum, the city regulators had systematically violated the regulatory compact by failing to provide the owners of the bus lines with a reasonable rate of return.

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