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Electricity - Regulation by Commissions

( Originally Published Early 1900's )



IN OFFERING to come here to speak on this subject to you, I knew that I should speak to some who have knowledge of me such as to cause them to think it worth while to listen to what I might have to say. Others have not that knowledge, and, after the fashion which I, as an engineer, have had at times to do in qualifying myself to give evidence as an expert witness, I should perhaps begin my remarks by stating what right I have to speak on this subject, in order that you may judge to some extent what weight my expressions of opinion and statements of fact should carry.

I have been continuously, with the exception of two days when, as I said to a member of this Convention a minute ago, I didn't like my job and refused to work, for thirty-three continuous years, since I was a very small boy, engaged in the operation and management of public service corporations and the municipal operation of public utilities, a class of work on which this question most immediately touches. Essentially an engineer and operating man, I have become of necessity a business manager, to some extent, a director of investments—that is to say, I have had to take the general business management and also the financial management of many properties. At the present time, I am the managing director of investments in the " State of Michigan in public service corporations, principally electric light and power corporations, which represent an actual cash in-vestment in physical properties of about eight million dollars. I still retain a certain amount of engineering business and still have a certain standing as an engineer. I am, by grace of the members of that society, Vice-President of the American Society of Mechanical Engineers, and Vice-President of the National Electric Light Association, and member of numerous other engineering societies. My status there is high private, and gives me a certain standing in the community. I am still, as I say, carrying on a certain amount of consulting business. One retainer which I hold at the present time being for the City of Toronto in connection with that City's project to purchase Niagara power and distribute it in the City of Toronto. In that connection my advice has been asked not only on the engineering and technical problems, but on the possible financial and commercial developments of the project. In fact, it was on that line rather than on the other that I was called into consultation, having been for a great many years the occasional consultant of the engineers of the City of Toronto.

I give you these statements to show the length and breadth, as it were, of my continuous knowledge of the subject in question.

The immediate question before you, upon which I am asked to speak, is: "Shall there be in this State a commission controlling public utilities," which carries with it the collateral question: "Shall this be a constitutional body and not a body to whom is delegated certain powers of the Legislature?" and the further question: "Shall such a commission have charge of all public services or shall it confine itself to those services not commission-controlled at the present time?" To put it concisely: "Shall such a commission control railroads as well as the public utilities not now controlled by commission, telephone, telegraph, electric light, gas, etc.?"

Limitations of Jurisdiction of the Municipality

The first question, "Should there be such a body," I think turns upon the question of its necessity. If it be necessary, there should be such a body. As to the necessity, at the present time a public utility corporation—let us say for conciseness, in speaking to the point where my knowledge is most exact; an electric light and power or gas company--such a corporation undertaking to do business in any municipality secures the consent of the municipality to its entering upon the streets, and may agree with that municipality upon reason-able conditions including the rate or price to be paid for its product or service. Please note that there is no delegation to the municipality of the power to fix a price for electric light service or gas service, and it is even a question whether a municipality can bind individuals by entering into an agreement with a corporation. That is to say, there is a question even now before the Supreme Court as to whether a municipality entering into a contract in the form of an ordinance with a gas company, under which the gas company is permitted to charge a certain price, thereby estops an individual from contesting that price, declaring it to be unreasonable. That is a question that is now in the courts. Nevertheless, there is in many agreements entered into with municipalities—so-called franchise ordinances—a clause fixing the maximum price or even a scale of prices which stops the company from charging any higher price.

Only the Legislature Can Fix Rates

But the question as to whether any rate or price charged is or is not reasonable is a question which can at the present time only be decided by a suit, an action by an individual who says that he is aggrieved by a certain rate and who claims that the same rate is unreasonable. That action must be brought in the proper court and may be carried up to the Supreme Court. At no stage of the proceedings does the power lie in the hands of any court to make an order that a certain rate shall be reasonable. The only question before the court is, "Is the disputed rate reasonable or not reason-able?" The court holds the rate is reasonable or is not reasonable. If it holds it is reasonable, that settles it, provided, of course, the matter has gone to the Supreme Court. If it holds it is not reasonable, the whole blessed process has to begin again. If it holds it is not reasonable, it is open to the gas company or the electric light company to make another rate, and open to the party aggrieved to dispute that rate, begin a new suit and go through the whole process again. By chance the new rate may be held to be reasonable and by chance it may not. Consider how ridiculous and yet how absolutely according to law the process would be if an electric light company under my charge should decide to charge 50 cents for a given class of service. A customer who feels that that price is too much, too high, brings suit and judgment is declared in the lower court, con-firmed by the Supreme Court that 50 cents is an unreasonable rate, being too high. Very good. I promptly make a rate of 49 cents and he begins again, and we keep on down—48 cents, 47 cents, 46 cents. Now that, of course, is possibly a reduction to an absurdity, but if the reasonable rate might be 20 or 25 cents, I can actually require the person who claims that I shall give him what is a reasonable rate, to sue me in two courts and get judgments in two courts on every cent of that reduction. That is the status of affairs just now. The courts might find some short way of stopping that, might construe the litigation vexatious, but there is no power short of the Legislature that can say off-hand and promptly, after hearing the evidence, that a reasonable rate is thus and so, and that such a rate and no other shall be lawful.

There Is No Redress for Inferior Service

Let us consider another class of questions that come up. "Is the service good?" I heard—it was not this year, it was years ago—very serious complaints in this hall against the lighting that was then being given. I think, myself, it was bad. I suppose my opinion is not evidence in a six-year-old question, but it struck me as being bad. However, the question whether bad or good was a matter for argument and a matter upon which the argument would, in the ordinary course of events, continue during the whole legislative session. There was absolutely no authority to whom the proper officers of the Legislature or the proper authorities in charge of the capitol building could submit the question "Is the service being given to us reason-able service, sufficient service such as it ought to be? Is the electric light pressure good; is our gas pressure ample; is the quality of the gas such as it should be for proper burning?" The matter was a matter for argument, dispute, trade and dicker. It would have been very difficult to get that into the court, and yet the injustice to a customer of giving him inferior service is just as great as the in-justice of charging him too high a price for good service. My personal observation is that the two sometimes go together, that sometimes too high a price is charged for very bad service; but there is no authority to whom appeal can be made. It is a matter for personal dispute. It is just as much a personal matter to be settled as an argument about the cut of a coat by a custom tailor. And yet it may be a service affecting thousands of people. The largest electric light company of which I am managing director has 19,000 customers; 10,000 of these are residences. Take the 10,000 alone, take the average of five and one-half people per family per residence; that means that 55,000 people may suffer from bad service and there is no redress. You may write to the newspapers or complain to the municipal council but you have no direct redress; and the question whether the service is good or bad is one which cannot be brought before any court excepting in the form of an action for breach of contract, and I can assure you that I have no contract that requires me to furnish them any specific kind of service.

The Safety and Propriety of Line Construction

There is another question; the question that comes up frequently, more frequently than ever: The question of the reasonableness, safety, propriety of the street construction upon which electric light wires are suspended, or of the class of construction which is put underground by gas companies. There, in many cases, the police powers of the municipality are ample. There is no doubt whatever that the municipalities have full authority to reasonably regulate constructions placed upon their streets, and that they are the judges and that the municipal council is judge prima facie of the reasonableness and propriety of these constructions. But the question gets to be a question of fact. And the fact is often one which can only be proven or disproven by expert testimony of the most intricate kind. The redress there, of course, is in the courts, but it is the same slow process. Beyond question, the local municipal council can harass, badger and bait a local public service corporation into doing what it ought to do or perhaps a great deal more than it ought to do, but the process is not direct. Even a specific service ordinance, one calling for a certain service, may or may not be followed, and is usually subject to interruption by injunction.

The Effect of the Utility's Attitude

The condition of affairs so far in this State has not been so bad as it has been in other states. To some extent, this has been due to a somewhat enlightened policy on the part of the greater number of the public service corporations of the State. To a greater extent, however, it has been due to the still somewhat primitive condition of the greater part of our country. Our towns and villages are most of them new, most of them glad to get anything that is better than what they had before and none of them are inclined to be critical. There has been comparatively little friction heretofore, but there is now more. Of course, in Detroit we have a constant instance of friction in the matter of relations between the City and the street railway company. In Detroit, eight or nine years ago, we had a very hot time between the gas company and the City. Within the last year we have had investigations of the gas service in Detroit and have had investigations of the electric light service, in both of which the management of the public service corporations met the City in a friendly way and the result has been, I believe, as largely as such things can be, to the general satisfaction. Let me point out, however, that in these investigations, the City had prima facie no power to investigate. All investigations were made by consent and not of right. The enlightened policy, of which I have spoken, granted the right, believing that publicity was the best policy; but there was no power short of the Legislature which could compel these corporations to give an accounting and to give the information which they gave to the investigators appointed by the City Council or by the Mayor. Just consider for a moment what that means. Had there been a disposition to quarrel, the question at issue, instead of being settled promptly in a friendly spirit, might have dragged out ad infinitum. I need not tell you that there are just such instances right under our eyes of disputes which, when approached from both sides in a friendly spirit, could be settled promptly, and which seem to be dragged out ad infinitum.

Some Advantages of a Public Utilities Commission

Pointing out, then, that while there has been no great trouble so far, that while there has been a remarkably reasonable frame of mind in most cases throughout the State between the so-called public utility corporations, other than the railroads, and to a large extent between the railroads and the public, it must be obvious to you that a condition exists which could be met and met quickly, and in the interests of right and of comfort, in the interests of not only justice but of straightforward going ahead and tending to our own business without waste of time, by the establishment of a competent body whose business it would be to deal with such matters. It would have quasi-judicial powers; its decisions would be prima facie lawful and subject only to dispute, with the condition that the burden of proof should be upon the person raising the issue and not upon the commission. Such a commission would have a wide field of usefulness. It would tend to keep many questions out of the courts. It would form a tribunal to which at once could be referred questions of rates or prices and of service; questions of methods of construction; questions of public necessity for certain extensions; questions of all kinds that may come up could be referred to a competent commission familiar with such matters and dealt with by a decision which should be prima facie the law. In ninety-nine times out of a hundred, the rulings of a capable, able commission would be final, would not be disputed.

Local and Interregional Aspects

Perhaps the suggestion may be made that the Home Rule idea requires that the local authorities shall govern such matters. Should they? It is contrary to our whole ideas that parties interested in a suit should judge that suit. No judge upon the bench and no jury in the jury box is qualified to act on a matter in which he is a party in interest. Shall the municipal council of any municipality be the party to fix the just and reasonable price for the electric lighting of the streets in which they are all interested officially and personally, or for the gas lighting of their homes or for the supply of gas for their cook stoves or the fare which they shall pay on the street cars? Shall they whose pockets (either official pockets or their personal pockets) are touched by the question, be the judges? I think not.

There is still another phase to it. Very many of the public utility corporations of the state are in the same position as the railroads. They are not as a rule interstate corporations as carriers or other-wise, but they are intermunicipality, intercounty corporations. Their interests are practically identical, having an identical policy and an identical management, and those which have their centers in Detroit and which I personally manage do business in four cities and in four counties and in more townships than I can "shake a stick at." Is each city, each township and each village to set its own rule? Is it going to be so that the man who can drive the hardest bargain shall get the best terms—that the council which is the best bargainer gets the best rates; and the one further up the line where they are easy is to get worst rates? There must be some unity of rate system. There must be some basic principle that will take account of such conditions as will exist between localities and which will not permit a material difference in the price to be paid for the execution of a given service in two adjacent townships or in neighboring cities. The question is too large for one municipality to handle separately from others, independently from others following different rules and trading on a different basis. It is one which must be handled consistently. In any other way, the lowest price that any one municipality can get will become the price for all. That may be good and, again, may be bad. Of course the converse of that might be said—that the high price might be made the basis of argument. But the thing itself is inconsistent. It would be very inconsistent if a rail-road charging 2 cents a mile by agreement with one township were to charge 2 1/2 cents by agreement with the next township. I don't think that our public, educated to wide ideas, would consent to that for a minute. And yet these electric systems, these gas systems extending through several townships and cities, or street railways extending through several townships and cities, would be put into that very position unless there be some general controlling state-wide body which will lay down a uniform rate, varying the result of that rule only in accordance with actual conditions in certain places.

There is another feature that comes in here. It is excellent good law and good sense that now requires a public utility corporation to obtain the consent of a municipality before undertaking to do business in that municipality. But a condition arises even now where the application of that rule brings about a wrong condition of affairs. These utility corporations, as I say, have become more than merely local organizations. They extend through several cities, villages and townships. Assume that one village prefers to operate its own public utilities, that it does so under a right granted to it, that it does not desire to have a corporation now doing business in a city south of it engage in business within its limits. Beyond doubt, the refusal to grant consent to the doing of business within its limits is within a reasonable measure of home rule, but the refusal to permit the construction of a line of that corporation across this municipal area to reach another on the north thereof which it is desired to do business with, is doing an injustice both to the corporation and to the municipality on the north. There is a question where some capable controlling body having a wide knowledge of the matter at issue should be able to act upon and declare the necessity of desirability of a right-of-way being given under reasonable conditions. Re-member, I don't say for a moment and would not ask for a moment that in such a case any state body should have the right to say to a municipality, "You shall permit this corporation to enter within your limits and do business." All that I say is that the state body should have the permission to say this : "You shall permit this corporation, which is desired by your northern neighbor, to cross your limits to reach that neighbor." There is a question which becomes a question affecting several communities, not only one.

Appeals from the Commission

I believe, gentlemen, in fact I am quite certain of it, that very many disputes, much litigation, much unnecessary hard feeling may be avoided and that many present strained conditions between the public of various communities and the corporations serving them can be eliminated and a voided—to' the saving of time, to the saving of money and to the better service of that public—if such questions as those I have described and stated can be referred promptly to a body fully authorized to deal with them; a body authorized to require that public utilities, be they municipally owned or corporation owned, shall charge reasonable rates and not other than reason-able rates, and shall give reasonable service and not other than reasonable service and shall, when required, furnish adequate facilities of the class which it is their business to furnish. Such a commission will give prompt decisions, thus not requiring a display of the matter to an unknowing jury or to a judge who is ignorant of the matter, and such a commission will deal with these cases promptly and will surely arrive at the desirable result. I pointed out to you that ninety-nine out of every hundred such questions will be promptly settled, and settled to the satisfaction of both parties and will not be carried to a higher court. That there should be an appeal to a higher court is a matter of necessity. It is alien to our ideas and traditions that decisions of such a class by an appointive body should be final. But that the appeal should carry with it the stipulation that the burden of proof shall be, not upon the commission, but upon the body or corporation or the individuals re-fusing to accept the ruling of the commission, is only reasonable and will tend even there to minimize the troubling of the courts with matters which can be infinitely better decided, and decided to the satisfaction of all by such a commission. Such a commission will in time come to be an acceptable and permanent board of arbitration.

A Commission by Constitutional Provision

Now, "Shall that body be a constitutional body?" Yes, I think so. I think so because its functions, as I have pointed out, are quasi-judicial. It is not necessary that these functions should be broadly laid down in a constitutional provision. Such a provision need merely say there shall be a commission appointed as you think best in possibly the old time-respected way by the Governor with the advice and consent of the Senate or otherwise as you think best; of not less than three members, able, disinterested men; who shall have power to require of every public utility in this state the giving of adequate service; and who shall have the power to prohibit the making or charging by such utility of any rate or price which shall not be reasonable—just and reasonable—or the establishment or carrying on of any practices by a public utility which shall not be just and reason-able. Such a provision, I believe, could be cut down to a matter of forty or fifty words, and would give that body the status that it ought to have.

As to the manner of carrying out the several rulings which will go up, undoubtedly the Legislature will have much to say. Upon such a body undoubtedly there should fall the enforcement of all laws made by the Legislature to meet specific cases; the constitutional pro-vision, that no acts shall be unjust or unreasonable, is ample.

A Single Commission for All Utilities

As to the further question, "Should this commission control all public utilities or only the public utilities now not under control of the railroad commission?"—there I am less clear. But I favor—I am inclined to favor—subject to very full consideration, the idea of one public utilities commission. My reason for so thinking is this—chiefly this: The men to be appointed on that commission must be strong men; they must be big men. It is not a commission whose duties can be satisfactorily performed by three young men who are respectively recent graduates, (a) of the engineering course at the University of Michigan, (b) of the Detroit Law School, and (c) a bookkeeper promoted from a bank. Those men are the right kind of men : You do want a man with some engineering or technical knowledge; you certainly do want a first-class lawyer; and you certainly do want a good business man. But they will have to be big men, strong men, otherwise you will not arrive at that so much to be desired result, namely, that there shall be a minimum of appeals from the rulings of that body to clutter up the courts.

The Caliber of the Personnel

I have never yet feared to put the operations of any property of which I was responsible openly and squarely before a man of broad ideas and wide experience and sufficient knowledge. I have hesitated and even refused to open my accounts, explain my methods, describe my ideals in the carrying on of these properties, to men who were purely theorists with no experience or to men whose public acts, had committed them to policies from which their departure would be in the line of a renunciation of their previous records. You want big men there, men whose names will carry respect throughout the community. To get those men you must make it worth while, you must give them a reasonably long term in office, assure them of that. You must make the position a position not only of honor but of reasonable profit. You must pay good salaries. You must pay a good deal better salaries than you pay throughout the state to your circuit judges. You cannot get the right kind of men unless you do. You must pay high salaries, as salaries have gone heretofore in the constitutional offices of this State. For these reasons, and remembering that the high standard of the commission depends upon its executive heads, it depends upon the men who control its operations, it depends upon the men to whom as individuals an appeal may be made against the acts of subordinates —I think that three exceedingly capable, strong men might serve as the executive heads of a commission—might serve as the commissioners and would control all of the public utilities of the State.

As It Is in New York

There is good precedent for that. The New York law recognizing the peculiar conditions of New York—Greater New York so-called—the exceedingly peculiar conditions and the vastness of the questions involved therein, separated its commission into two commissions—two public utilities commissions controlling all public utilities, one within Greater New York and the adjacent boroughs, and the other the rest of the State. They have not separated along the line of separating railroads from other public utilities. More and more the line of separation between one public utility and another is becoming vague. That a gas and electric light company should operate under the same management, should be the same corporation, has been permitted for a long time by our laws and is exceedingly common; that a gas, electric light and railway should all be the same corporation is exceedingly common. That the interurban railway should be interlaced and interlocked with the city railway until you cannot tell the difference is the natural state of affairs, and we are rapidly coming to the condition when you cannot tell which is the electric division of a steam railroad and which is the long distance express division of the interurban electric railway. Down the Mohawk valley, in New York State, it is difficult to tell where the urban rail-ways end and the electrified division of the West Shore begins, the more so as the ownership is the same. That will come inevitably in this State. That the public utility corporations of this State will be more and more interlaced and intertwined until it will be hard to say to which commission a given question belongs. Just take the proposition in New York State which is one of the ideas put before the drafters of the Hughes Utility Law: Whose duty is it to determine as to the operations of the electrified division of the West Shore Railroad on which both steam trains and electric cars run? No one can answer. The answer given by the State was to make one public utilities commission control all.

As It Is in Wisconsin

The State of Wisconsin has done the same thing. The public utilities of the State, telephone, electric light, gas, heat supply, have been placed under control of the Railroad Commission, which retains its name of Railroad Commission. Its duties have been widened. In each of these instances, the governing idea has been not only one of separating these utilities along any definite line, but the recognition of the fact that the right kind of men to govern the one class of service were the right kind of men to govern the others. That the broader or bigger those men were, the less trouble there would be with their rulings, the less work for the courts, the less disputes, the less questions, the less delay in the settlement of matters in which the public were interested. The big men could only be had by giving them great responsibilities, by giving them control over sufficiently capable subordinates to deal with minor matters, and leaving the broad executive questions to men big enough to deal with them and deal with them so as to secure the confidence not only of the public and community at large but of the corporations whose operations their first duty was to control, regulate and check.

The Control of Municipally Owned Utilities

Such a commission should have control of municipally operated public utilities. Most emphatically the control should be there, if any place. In that case you have to deal with the minority which does not approve of such things. The commission will have to, in the matter of a municipally owned public utility, assume the functions of the minority representation on the board of a private corporation. Let me call your attention to that feature. Any municipally owned utility, unless in the very smallest kind of a town, is always a lien upon the assessable property of a number of people who would have very much preferred that the utility had not been owned by the municipality. There is always the objecting minority. The case is the same as if a private corporation had chosen to extend its powers to any other kind of business which its original organization did not contemplate. Let me make that clear: A municipality is originally incorporated for protection, self-protection; the police function of a municipality is the first; the vigilance committee is the earliest form of organization, the committee that protects itself against outside foe and inside crime. Following that, other municipal activities come, which are the result of municipal conditions. Crowd a lot of people together, one, two, three, four or five thousand and they cannot each of them provide his own sanitation and his own water supply by a properly dug well in one corner of his property and his sanitation by a properly dug well in the opposite corner. Municipal conditions prevent the provision for individual water and sanitation; they impose upon the trails or roads a burden of traffic which the ordinary surface will not bear; they require sewer-age and water supply which the individual cannot furnish. And the things follow at once: the paving of the roads; the lighting of the roads follows of sheer necessity. It would be ridiculous to expect each person to tote his own lantern as a farmer would do in a community where the farms were a full section apart. The lighting of the streets is merely the reduction of expense to the community and the avoidance of carrying a lantern. These things are the initial basic functions of a municipality. When you go beyond these, you get into trading. You get into things as to the wisdom of which there is a possible question. Take water supply; there is no argument, it is a sheer necessity of life. Death results from the lack of water. Sewerage is on the same basis. The lighting of the streets follows as I have said. These things are inevitable, there is no argument about them.

But you begin to go into the operation of further utilities and you at once enter into questions concerning which there can be argument, and I mean honest, serious, well considered differences of opinion. I don't mean fractious argument. Especially if they are trading propositions, especially if they are propositions where the output of the utility is to be sold to customers who may or may not take it. The question as to whether a municipality shall enter upon the ownership and operation of a utility, so-called, is exactly the same question which comes before a private corporation when it is proposed to amend its by-laws or articles of incorporation to permit it to engage in a line of business not originally contemplated. If I take control of a company to manufacture saws, and decide it would be a good thing for this crowd to go into the business of dealing in cattle, I have to amend my articles of incorporation. Some of them don't want to. It takes a two-thirds vote, and then I still have my minority that voted against me, my quarter or fifth. They cumulate their votes and put representatives on the board to see that I don't make too big a fool of myself. All right. The municipality goes into the ownership of a utility. It may or may not be a two-thirds vote. There is no cumulative voting for representation. Who represents the minority in that case? Nobody. If the thing is a success, the minority disappears. If the thing is a failure the minority increases and becomes the majority, but the loss is there just the same. In the meantime there has been a watchful minority representation on your corporation board. The people who didn't want that line, have cumulated their votes and got their one or two or three directors on my board and these fellows are watching every step that I take. What representation has your minority in the municipality that goes into the gas business? Not a blessed bit. That is where your state commission comes in, to see that that city does not over-extend or do impossible things, to see that that city doesn't (in order that the present control of the city may gain a little temporary publicity) undertake to sell the product of the city gas works under cost. That is what Philadelphia did.

The commission is needed, more than any place else, in the matter of control of municipally owned public utilities, and these municipally owned utilities, if they go into trade, cannot be successful in any but the smallest villages where public opinion is most effective. If they go into trade, unless there is uniform accounting and close supervision by a competent supervising authority, they cannot be successful. To that authority must be given the powers of close supervision, the right to question and the right to challenge in the manner of minority representation in a private corporation which undertakes to extend its operations beyond its original intent. The same thing prevails, even if public sentiment is very much in favor of such matters. I have watched a great many public utilities. Some of them are great successes operated by municipalities. Long ago my duties for the time being were those of supervising and constructing engineer for a corporation which sold very much electric light machinery to private parties and to municipalities. I noticed that among the many places which I visited over some eight states, the municipal plants—gas and electric—which were successful were those in the small towns where everybody knew everybody else; where public opinion, even though it might find its mouthpiece through a small council, was just as effective as in the old Saxon days where every man over the age of twenty-one had the right to speak and vote; where there was close economic management and everybody took an interest in the public utilities of the place. These were successful. The places where they were failures were the places where the professional politician gets in his work and the bigger the place, the bigger the professional politician and the bigger the failure. Philadelphia offers an example. The utilities in which a town does not trade, or practically does not trade, are on an entirely different footing. Take the supply of water. The supply of water is a municipal necessity. Yet there may be a certain amount of water for purposes of sanitation but not for drinking purposes. The great controlling factor in the public health is the water supply. I cannot question it. That is a proper municipal function. But suppose that a municipality has granted the right to a water company to do business in the city and the water company is actually serving the citizens. Suppose in consequence of a dispute, the city decides to regulate the water supply in that most foolish way, by competition, and goes into the water supply business itself. Your water supply proposition becomes a trading proposition. Just consider this. Assume that there is a water company in there; assume it has been charging too much; assume that the village undertakes to compete—could you depend upon the people of that municipality, man for man, to shift their services and their contracts for water to the city as a matter of public spirit? No, you could not. All that would be necessary for the water company to do to hold business would be to make its rates 1 per cent lower than the published rates of the city. In order to prevent its becoming absolutely uncontrollable, you need the supervision of a capable state commission.

The same condition may prevail elsewhere in other matters that are not so necessary as water, but it needs the supervision of a body which required proper accounting and reasonable service and adequate extension of that service, and able to impose all these obligations upon the municipality undertaking them.

Regulation and Competition

The best possible service to any municipality in the line of any public utility is by a single body, be that the municipality or a private corporation. For two organizations to construct works and undertake to furnish the same service is competition, which may appear to be a profit to the individual, but which is inevitably to the loss of the individual in the long run. Remember that, after all, we are here to please the public, not to give it exactly what is good for it, but to give it what it will believe to be good for a long time. If you have no competition you must, to please the public, have a satisfactory substitute, and that is efficient, intelligent regulation by a body which will hold the respect not only of the public but of the municipalities and corporations which it undertakes to regulate.

The Selection of the Personnel

I believe I have covered the ground. The organization of the commission I have suggested should represent three different classes of effort and three different classes of education. It would be well that one man were a trained engineer. He need not be a so-called electrical, mechanical or civil engineer. Nowadays you will find that a great many men, like myself, are recognized as full members and properly qualified for membership in all three of the societies which go by those names, electrical, mechanical and civil. There is no question whatever as to the necessity of a man on the commission whose training is legal and whose thoughts or habit of mind is judicial. And that there should be a business man is of great importance. It is of great importance for the reason that such a commission, to do its work smoothly, truthfully and with a fine regard to justice, must have an understanding of the investor. The study of the investor was forced on me late in life; as an engineer and as manager of properties earlier in life, the investor was a distant matter to me. I supposed he was a man that knew what he was doing when he put his money into these things. I learned later that the investor in such properties is very largely the small, the very small capitalist, whose capital represents the savings of a lifetime and whose investment is largely influenced by his opinion of the personality of the management; his investment is largely influenced by his opinion of the general business conditions of the country in which that property operates and by the showing that is made to him of its existing earnings. He does not go in there with any wish to take the risks and play the game; but with a wish to secure a certain safe although small return on the money which he has to invest. The way of the investor, the habits of thought of the investor, are matters that should be at least understood by such a commission. Remember that money cannot be got into a public utility unless on that money there is a profit to be paid. It cannot even be got into it by taxing unless you can show the people at large that it is worth their while to let the money go in. The profit that such enterprise must carry is that which will bring the money to the enterprise and keep it in it willingly, and only business men who understand these ideas can fully deal with the questions which will come before such a commission. Therefore, I say that it is equally important that a business man whose habits of thought and experience are those of the large business operator must be represented on the commission.

In Conclusion

I suggested three members for the commission; there is no reason why it should not be five. Three, I think, should be ample. Five would be better. Seven is not impossible. And as to the general proposition of what such a commission should be, I think I have stated my case fully. As to its make-up, as to the general question whether it should be a commission controlling all utilities, I have stated my preferences. They are not absolute, they are subject to correction. And I will leave the matter in your hands, gentlemen.



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