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Public Lighting in Relation to Public Ownership and Operation

( Originally Published Early 1900's )

THIS PAPER IS written to set before the Association a proposed policy. It is not a new policy in its parts, neither is it an untried policy. It is applicable immediately to public lighting; that is to say, to the lighting of streets and public places under contract, with, or on account of, a municipality. Ultimately its application may be more extensive.

It is the belief of many members that the National Electric Light Association should formulate and publish a well-considered method of dealing with this business. While local conditions differ, there is no local difference in the principles which should govern electric lighting companies in their dealings with municipalities and municipalities in their dealings with electric lighting companies. An authoritative statement of these principles is needed. A statement by the Association may be accepted in the first place only by the electric lighting companies, but if the principles so stated are intrinsically correct, their acceptance by the municipalities must follow. No city government will persist in a course that is plainly in-equitable. City governments have in certain cases acted inequitably in the matter of public lighting, but their action has not been plainly inequitable. In such cases principles have been obscured by details or by personalities or have been distinctly understood only by the parties on both sides of the case. The public does not seek to be served at the expense of the individual. Public opinion may at times be biased, but it intends and endeavors to be just. And under our scheme of government public opinion is the final authority, and an appeal to public opinion is the ultimate means of redress for any grievance.

The advocates of municipal ownership have long recognized the value of public opinion and have presented their case both to the people of the country at large and to the citizens of selected municipalities through magazine articles, newspaper discussions, and ad-dresses to public gatherings. Some of our members have met these arguments in kind and have confuted extravagant statements by the presentation of facts. But the man who is plainly arguing in his own interest is handicapped in a debate before a nonjudicial tribunal as against those who claim to be disinterested. And it is not to be denied that the arguments which have had most influence on public opinion in this matter are those of theorists who certainly believe that they are doing the world a service, who are usually misinformed, always impracticable, but thoroughly in earnest.

A declaration of principles by this Association and the recommendation to its members of a policy based on those principles would have greater weight with the public than the statements of individual companies, and would be accepted as authoritative over a wider area. But even if not accepted by the public its immediate acceptance by our own members will be useful. That each member must act for himself is a consequence of the conditions of our business, but that all should act on similar lines is possible and is desirable. Each of us looks to other cities than his own for light on problems which are new to him. Each of us, by a successful solution of any problems, benefits the industry at large, and, on the other hand, he who fails to appreciate and to properly deal with such a problem as this, injures, by his failure, not only himself, but all of us. Therefore it is well that we should agree on general principles and that we should advise with one another on special cases.

Let me make this general statement more specific. The member of this Association who, by good service, by close figuring of expenses and of profits, and by clear statements and logical arguments, convinces the authorities of his own city that it is to their interest to leave their public lighting in his care, has done all of us a service. The member who, on the other hand, fails to recognize the drift of opinion among his fellow citizens, who tries to convince them that unsteady and uncertain lights are worth a high price, who depends for the retention of his city lighting contract on an appeal to the technicalities of his state law, or to the pockets of the venal members of his local Board of Aldermen, and who thereby brings about the erection of a municipally owned electric lighting plant and the publication of the bare running costs of that plant in parallel columns to the prices which he wished to charge—the member who does these things which he ought not to do, and leaves undone those other things which he ought to have done, is a detriment to the industry throughout the entire Union.

I have indicated why I believe a declaration of principles and of policy is desirable. The principles to be declared will need little discussion, but the policy which to me appears best, may, when examined by others, appear to require amendment, or even radical change. It is offered to you for consideration in the belief that it is logical and that it is practical; but as a proposition for discussion and amendment, rather than as a perfected plan.

A Chapter of Electric Light History

In the history of street lighting by electricity, no chapter contains more profitable matter for study or for illustration of general principles than that which contains the record of the City of Detroit. That City was one of the first to use electric lights on its streets. It began in 1883 with 22 arcs, and in 1884 abandoned all other street lights. This street lighting business was believed by those who first engaged in it to be a monopoly secured by patent rights; they found their mistake after much money had been invested under that belief; competition ensued; then consolidation, and finally municipalization of the service. I shall find it convenient to refer to Detroit for more than one modern instance.

In February, 1896, the City of Detroit owned 1,500 arc lamps and was operating 1,492 of these in the work of street lighting. In the same month the successor of the Brush Electric Light Company, which installed the original 22 lamps in 1883, and which, until 1890, lighted the streets under contract, owned 1,049 arc lamps, and used in private lighting 433 of that number. Another company, organized in 1890 to compete with the Brush Electric Light Company, owned 1,330 arc lamps and was using in private lighting 38 of these. In each case there accompanied the arc lamps a sufficient number of dynamos, engines, boilers, etc., and a building fully equipped for the operation of the number of lamps stated. At the same time the City had in use 134 towers, which had been formerly owned by the Brush Company, and the other company was in the act of taking down and removing from the streets 104 similar towers, which had formed a duplicate of the Brush Company's equipment. The necessary lines to connect lamps distributed over a large city had been owned by all three. The City had in use 329 miles of overhead wires, connecting to its 1,492 lamps. Neither of the companies had owned such a great mileage of line, but one had taken down lines and poles which had supplied 719 lamps, and the other was in the act of removing lines and poles which had connected in 1,279 lamps.

Some of the Brush Company's street lighting equipment had been, during the preceding five years, diverted to the supply of commercial lights. Nevertheless, two-thirds of that equipment is to the present day a useless asset. Lamps which were bought at $40 have proved impossible of sale at one-tenth of the price. Dynamos which cost $2,400 cannot be sold today for $240. Lines taken down re-turned only a small percentage of their cost to the treasury. The towers which this company sold to the City did not bring their original price—that goes without saying—but they brought a fair price.

The loss of the second company was greater. Changes in the business had made their street lighting arc lamps unavailable for commercial use, or almost entirely so. Similar changes had made their dynamos a slow asset. The engines were partially diverted into commercial service and the boilers entirely so. The wire taken down was not of a size that would fit in to their commercial lighting system and the poles hardly paid for the labor required for their removal. The 104 towers—one of the heaviest of all the original expenses—had to be sold as scrap iron.

A Destruction of Values

It is clear that a loss to some person or persons was involved in conditions which reduced machinery and lines capable of supplying over 2,000 arc lamps to approximately their junk value. Leaving out all questions as to personal fault—neither affirming nor denying that the loss fell upon those for whose economic blunders it was the inevitable punishment—it is certain that there was a loss to the community at large; that property which might have been, and which had been, capable of doing good service to the public, was as surely destroyed as if it had been swept out of existence in a great fire.

It may be asked on whom did the loss fall? In social economy the loss of one is the loss of all, but to our customary modes of thought there appears a difference between losses borne by our-selves immediately and those which are apparently borne by other people. In this case the greater part of the loss was borne by business men of the City of Detroit. It was a reduction of the available capital of men engaged in productive industry in the City. This reduction—this absolute loss—after correcting for inflated values which should have been written off long before the period of liquidation, after correcting for securities issued for cash at less than their face value, or for considerations which were valued at more than their true worth, was not much less than $400,000.

I do not ask you to sympathize with the immediate losers, but I ask you to remember as my argument proceeds that this loss came about in consequence of business methods and of social tendencies which are in active operation today in nearly every town represented in this Association. And I submit, as a principle not admitting of dispute, that the duplication of an effective equipment for public lighting is an economic error, entailing loss of available capital to the extent of the duplication.

Improper Competition

The first error in Detroit was the offer to the City of competition for the public lighting contract. The men who made the offer knew perfectly that their success would mean a heavy loss to the original contractors, but they were willing to make a profit through other people's losses. In this they disregarded a principle much older than the electric lighting business—that which calls on us to do to others as we would that others should do to us. Some of these men doubtless thought that they were doing the City a service by providing competition, but the managers of the manufacturing concern which was the majority stockholder and chief promoter in the new organization had no such excuse. Their object was to sell machinery. I do not ask you to condemn these people now. They have reaped as they sowed, and the exploitation of competing lighting companies by manufacturing concerns is a thing of the past, although its con-sequences in the shape of inflated capital are likely to be a burden for years to come.

I submit as a direct application of the principle last stated, that competition for public lighting contracts, for the execution of which there is already an effective equipment in existence, is not legitimate business. The corollary of this statement is that the price at which public lighting is to be performed must be determined by some acceptable means other than competitive bidding. In this there is a departure from the established method of municipalities, which now depend on competition for the setting of prices on all public services performed by contract.

In the absence of some other acceptable means of setting a proper price for public lighting by contract, public opinion will not tolerate the suppression of competition. A reference to Detroit illustrates this very well. When the second company had, by making a lower price and by meeting the demand of the public for the undergrounding of wires in the business district, secured a three-year contract for public lighting, its managers found themselves in a precarious position. It was apparent that at the term of the con-tract they would again have to reduce prices to meet the competition of the original contractor, who could not afford to have his plant standing idle. It was also immediately apparent that the idle plant would be, as far as possible, diverted into private lighting work and would there also tend to reduce prices and to divide the available business. Legal questions as to patent rights added to the difficulty of the situation. An attempt to combine the two interests was plainly necessary, and it was made; but the inevitable personal soreness prevented a combination until the new company had completely duplicated the equipment of the old one.

Of course the public became advised of the cessation of competition, and the advocates of municipal ownership made the most of the facts and added much fiction. Long before the contract had expired it was plain to any careful observer that it could not be renewed at anything like the former figure, and that the tendency of public opinion was strongly to municipal ownership. It was a period of "reform"—I use the word in its political sense—one of those periods when the taxpayers, usually content to be bossed unquestioningly by the practical politicians, insist on calling the particular bosses of the hour to an accounting and expect to find that they are rascals. And as the public's way of having an accounting is to discharge its servant first and take up the reckoning after-ward, the public servants of such periods are quick to fall in with the drift of public opinion in order to show that they either do not deserve discharge or are fully justifying their appointment to their new situations. Politicians are wise at such times; lighting companies sometimes are very foolish.

So the cry went up that there was no such thing as competition in the lighting business; that the men engaged in that business all intended to rob the public, and that if they appeared at times to compete with one another, it was only a temporary falling out among rogues. And the public, being told on the one hand that all existing lighting companies were composed of rascals, and on the other that all municipally owned plants were successes, made up its mind that its only salvation lay in municipal ownership.

You can see, and any careful student can see, that the suppression of competition was inevitable, because its continuation meant a cumulative loss to those engaged in it. Possibly the public might have been made to see this, although the time to have begun work on the public was before the first loss due to competition had been incurred. But merely to prove that competition was impossible would not have been enough. It must further be proved that competition was unnecessary, and the only way to do that was to offer good service at an acceptable price. Under the circumstances the price might have to be very low indeed, for the belief was abroad that the business was enormously profitable at the established rates. The figures sent forth by certain municipal plants were quoted as warranting this belief, but these could have been contradicted. It was possible to send to Bay City and to Topeka a competent engineer—say one of the professors of the University of Michigan—whose dictum would be accepted by the newspapers and their readers, and so to obtain the true figures. It was possible to answer in a similar manner the argument based on the competing bid at the last letting of the contract. That argument was that any business which justified the erection of a complete manufacturing plant on the security of a three-year contract must be exceedingly profitable. The contract price was a good one, but it would not pay for the plant in three years, as the public of Detroit thought it would. A showing of the whole truth as to costs, certified by a recognized authority, and followed by a bid carrying a minimum profit, might have been accepted by the public as a substitute for competition.

A Collision with Public Opinion

And here was made the second great error of the electric light companies. Their managers seem to have been the only people who did not see what was coming. They failed to keep in touch with their public. The public was absorbing all the fool figures that the wildest theorists could furnish, but never a figure deserving credence was offered in contradiction. The public was damning the poor quality of the lights then furnished and was told that it did not know a good light when it saw it. The public was determined to have much cheaper lighting, yet when the bids were asked for they were almost as far above a possible figure as the costs published by the theorists were below it. The only hope for the contractors was to secure the support of the more conservative elements by offering good light at a minimum rate. On their failure to do this, and do it quickly and gracefully, municipal ownership was as certain as the coming of summer.

Some effort was made by the companies in the Legislature of the State and in the City Council to protect their interests, but these bodies, especially in a reform year, cannot be expected to go counter to a strong public sentiment. In this they are wise in their generation.

Would the public of Detroit, after the agitation for municipal ownership had become general, have approved of award of a con-tract at a low price, or would it have insisted on municipal owner-ship as a matter of principle?

An answer to this is merely an expression of opinion, but I believe that had a low price been offered the agitation for municipal ownership would have been suspended and that the companies might have secured terms more to their interest than was the action actually taken. There were many people in Detroit who did not wish to see the experiment of municipal ownership tried, except as a last resort. There were a few people who believed in municipal ownership as a matter of principle. There were doubtless also a few who expected to reap a personal benefit from the establishment of the City plant. Nevertheless the great majority of the citizens sought only to reduce the expense and to improve the quality of the public lighting, and cared nothing for City ownership except as a means of reaching a desired end.

In other lake cities where the agitation was fully as strong, con-cessions on the part of the lighting company led to a continuation of the contract system. The case of Toronto is a notable one, because the municipal sentiment is exceptionally well developed there. The local company is now performing lighting for the City at a figure a trifle less than was estimated as the cost of operation of a City plant. At Cleveland the local company holds the business because it made a price so near to actual cost that there could be no possible saving in municipal ownership, and the price was accepted after a careful inquiry into costs in neighboring cities on behalf of the municipality. The recent case of Tonawanda is another instance of success won on the same lines. There the local company submitted figures made by a recognized authority, showing the actual costs of operation in several representative municipal plants, and followed these figures by a bid more favorable to the City than municipal operation. I am assured that in each of these cities, while the contract figures are low, the management of the local company considers the business ultimately, if not directly, profitable.

The Reason for Public Lighting by Contract

In these instances the local companies have retained their public lighting business by demonstrating that it was to the interest of the municipality to let them retain it. In this they have put into successful practice the most important part of the policy which I advocate. I submit that the only sufficient reason why a municipality should contract with a private company for public lighting is that the private company can do the work, and is willing to do it, cheaper than the municipality can itself do it by the direct operation of a public lighting plant. It is in order to show how this comes about.

A Difference Between Public Lighting and Private Lighting

There is no longer any question of the right of a municipality to own and operate its own public lighting plant. Electric street lighting is a distinctly public service, which must be provided for by the municipality. It is a service to every citizen, is a sequence of the social conditions which constitute city life as distinguished from rural life, and can only be effectively performed on municipal account and under municipal control. Herein it differs from the electric lighting of private premises, and it is necessary to note the difference. Electric lighting is the cheapest as well as the best light for streets and public places. For private premises, on the contrary, electric light is not a cheap light under usual conditions. It is not now, and is not likely to become, an illuminant of universal use, to the exclusion of gas and oil. Why this is necessarily so is well known to the members of the Association. To the general public it is a statement better proven by a couple of good examples than by a long statement of causes. In the City of Detroit there were, in 1897, according to the annual report of the Water Board, 52,219 supply connections to the City water mains and the "families" in the City were 54,945. Each "family" was certainly a user of artificial light of some kind. Illuminating gas of 18 candle power quality is sold in the City of Detroit at $1 per thousand cubic feet. The maximum price charged by the electric lighting companies for incandescent lighting is 14.4 per kilowatt-hour, including renewals of incandescent lamps; the minimum is 4 cents, and the system of charging makes the average price 10.8 cents per kilowatt-hour, which, allowing for difference in candle power, is equivalent to gas at $1.21 1/2 per thousand cubic feet on the average, or to gas at $1.62 to the customer whose individual load factor obliges him to pay the maximum price. These are comparatively low prices, both for gas and electricity. Under these circumstances there are in the City of Detroit approximately 18,000 customers for illuminating gas, and 4,000 customers for incandescent electric light. What light do the remaining three-fifths of the possible customers use? It is safe to say that they use kerosene oil. It is also safe to say that there are very few cases where oil is used merely because gas or electricity is not available. The main cause of the use of oil is its lower cost. I need not say to this audience, although I have found it necessary to make the statement to other audiences which were entitled to be considered intelligent, that there is not the least likelihood of the production cost of kerosene oil, of gas and of electric light materially changing the ratios to one another. As to their selling prices, I think that the Standard Oil Company is better satisfied with the profit which it makes on the sale of kerosene in Detroit, than are either the Detroit Gas Company or the electric light companies in that City with their profits.

I submit, however, a second example of the relative cheapness of gas and electricity, from which example the question of profit is eliminated. The City of Glasgow, Scotland, owns and operates its gas works and owns and operates its electric lighting plant. Neither of them is intended to make a profit. I have in my possession signed communications from the managers of each department in which it is written that the price of gas is 2 shillings and 2 pence per thousand cubic feet, and that the price of electricity for incandescent lighting (not including renewals of incandescent lamps) is 6 pence per kilowatt-hour for the first hour's use of the demand, according to a Wright meter, and 2 1/2 pence per kilowatt-hour there-after. Making the same corrections as in the Detroit calculation, and assuming that the incandescent lamps paid for as "extras" in Glasgow are as efficient as those furnished free by The Edison Illuminating Company of Detroit, the Glasgow price for gas is 52 cents per thousand, and the Glasgow price for incandescent lighting is equivalent to gas at $1.35 at the maximum rate, and 56 1/4 cents at the minimum rate. The average is about the same as the Detroit average. I think this example from a city where municipal owner-ship has been most thoroughly exploited, and where the municipal management is above suspicion of inefficiency or corruption, proves beyond question that electric lighting for private use is a luxury, and as such must continue to be used only by those who can afford luxuries; that is to say, by a minority of the citizens of any municipality; not by a majority, much less by every citizen.

Therefore, while it is admitted that the lighting of the streets is truly a public service, which may be performed by the municipality for and on behalf of every citizen, the furnishing of electric light to private consumers is not a public service, but is essentially a service to a few individuals, and as such should not be undertaken by a municipality whose object is to perform only those duties which municipal society as a whole owes to itself as a whole. This principle should be clearly understood, and should be boldly maintained. It is necessary that a municipality shall undertake certain services, and it is possible that it may undertake others, but the propriety of its undertaking any service depends on whether that service is to the public or to individuals; to the many or only to the favored few.

Possibility of Low Contract Prices

This leaves to private enterprise the supply of electric light to private consumers. In performing this service, there will be built and equipped a power house; there will be organized an operating and a managing force; there will be constructed lines of distribution. All of these may be, and part of them certainly will be, adapted to the performance of public lighting, in addition to the service of private consumers. To whatever extent this double adaptability exists in the private plant, there will be a duplication of equipment in any other plant separately established for performance of the public work. Moreover, it is peculiarly characteristic of public lighting operated all night that its addition to the ordinary work of a private lighting plant tends to reduce the average cost of the combined output. In these considerations rests the possibility of a contractor profitably performing public lighting for a city at or below the price at which the city can itself do the work, and yet its being to the interest of the contractor to undertake the business.

Let us for a minute assume that municipal engineering and management and municipal financing can be just as good as private engineering and private financiering. If they are not so, it is the fault of the municipality, because technical and financial skill and executive ability are for sale in the labor market and are purchasable by a municipality, even as they are by private employers. There remains only one evident cause which should tend to make the costs of a municipal plant differ from that owned by an individual or a company. That difference is that the individual proposes to make a profit and the municipality does not. Looking closer at the facts we find that the municipality must in most cases allow the equivalent to a profit, because a municipal plant is built by money borrowed at interest. In the case where the money is not borrowed, but raised by direct assessment, the municipality has pre-vented some of its citizens from profitably using the money taken from them by taxation to be invested in the lighting plant, so that even in the exceptional case the possible profit to the taxpayer on the money withdrawn from his business has to be considered. But the rate of interest on municipal bonds is usually less than the rate of profit which a private owner is willing to accept on money invested in the electric lighting business. It is 4 per cent as against 6 or 7 or 8 per cent. In the final analysis the difference between the cost of lighting by contract and that of lighting at cost by a municipally owned plant should not exceed 4 per cent on the capital invested in the plant. I assume in making this statement that the rate of interest on city bonds is a fair measure of the profit that investors expect on a secure investment. If the investment in an electric lighting plant were equally secure, the rate of interest necessary would be no greater. The security depends so largely on the policy of the municipal authorities that it may approximate to that of municipal bonds on the one hand; or, on the other, it may be of the same order as the stock of a speculative gold mine or a Klondike expedition. In saying that the difference should not exceed 4 per cent, I am to be understood as implying such conditions as take the investment out of the speculative class. I am also to be understood as implying that proper salaries for management have already been paid out of earnings, and that the profit mentioned is that payable to capital alone; in other words, an exact parallel to the payment of interest on a municipal bond.

It follows that if the organization and equipment of an existing plant engaged in the supply of electric light to private consumers is available for the purpose of performing public lighting, this maximum difference of 4 per cent can be thereby reduced or even reversed. In every case the difference should be reversible. There are causes to be considered later which tend to the contrary, but the fact remains that there is no irremovable cause why an existing electric lighting plant should not be able to perform public lighting at a less price than the municipality can do the work itself.

The Disadvantage of the Contractor

Of the causes which tend to the contrary, one is that the plant which has a contract for public lighting may have very little private service, or none at all. Some other plant in the same city may do all or most of the private business. This condition of affairs can be only temporary. The consolidation of the two plants is an economic necessity, certain to arrive in time. The only condition justifying the existence of two plants in the same city is that the city is so large as to make a division of territory desirable; and even in that case an operating agreement is to be preferred to complete independence.

The public has been told that consolidation of plants is not to the public interest. This is an error, and the way to prove it such is to give to the public the surplus profits of consolidation in the shape of lower rates and better service—either or both.

Another cause tending to handicap the contractor is that few municipalities will make contract for a long term of service. Even the advocates of municipal ownership who are willing to issue twenty or thirty-year electric light bonds, and who will not write off more than 3 or 4 per cent for depreciation of plant in making their estimates of city operation, will protest against a con-tract running more than a year or two. They claim for the municipal plant all the advantage of a secure investment, and simultaneously deny these advantages to the contractor. We know that-the securing of a long-term contract permits the installation of the most economically operated machinery, and reduces the percent-ages of profit which must be earned annually. The objection to the long contract, that it denies to the city any share in the profits of possible improvements effected during the term of the contract, can be met by so drawing the contract that the margin of profit shall plainly be reasonable to begin with, and that the city may share in the results of improvements in consideration of guaranteeing a similar reasonable profit on the investment to be made in such improvements. A ten or twenty-year contract with such a clause could be safely taken at a very low price.

A possible solution of this problem is city ownership of the plant combined with operation by a contractor. I think that this plan may by and by become common. It involves too many details to permit of my discussing it at present.

The very worst handicap that a contractor may have to carry is excessive capitalization. Here it must be noted that many municipally owned lighting plants do not report all their capital expenditure, so that in carelessly made comparisons of fixed charges the contractor appears to have overstated his investment in order to increase the apparent cost of operation. Any comparison must be on an identical basis for capital as well as for operating charges. And for the purpose of adjusting prices between municipality and contractor, only one basis for capital charge is acceptable; namely, the present value of the plant—in brief, a properly made inventory. This proposition is so radical that I state the reasons for it.

Capital Account

The possible bases for a capital charge are as follows: First—The face value of the securities issued by the plant. That this is an impossible base of adjustment is too well known to all electric light men. Second—The current market value of these securities. This is impracticable, because many securities are not on the market, and because the immediate earning capacity of a plant affects the price of its securities, and because—last, but not least—some securities are speculative rather than industrial. Third—The actual cost of the plant. This would be proper if all plants had been built at the same time and if no plant had been obliged to be rebuilt. As it is, the construction cost of two plants built, the one in 1888 and the other in 1898, the two of identical capacity and of similar type, may be to one another as two to one; the earlier plant may have cost twice what was paid for the later, solely because of the reductions in the prices of machinery and material of construction in the last ten years.

The only remaining possible base for a capital charge is the present value of the plant; and I do not think that any other can be made acceptable for the specific purpose of adjusting a price for public lighting. It does not follow that the capital account is to be readjusted to a corresponding figure. It is only requisite that the company accept as a proper profit on public lighting business an allowance based on inventory value of the investment. It would be well for the industry, however, if all our capitalizations were brought near to present values. And one good result of revaluation would be a logical sequence—the depreciation of the investment from year to year would necessarily be admitted as a proper charge against revenue. If a profit is only to be allowed on capital sufficient to construct a plant at the comparatively low construction prices now ruling, any further decline in cost of construction must be considered an impairment of capital, to be made good before any profit can be paid. It is not to be understood that I expect an electric lighting company to stop dividends or to reduce capital stock in order to make good in any one year an extraordinary depreciation charge, due, for instance, to the replacement in the year of old type machinery with new, in order to meet a public demand for a higher grade of service. Such extraordinary charges must be financed according to well understood rules. The loss of value of the old machinery does not occur in an instant, but is a process continuing through several years. So far as it is possible, this loss of value should be anticipated by charges made in advance—in other words, by the accumulation of a renewal fund. But where this has not been done the charges should be distributed over a proper period with due regard to all interests involved—in other words, so as to secure the greatest good for the greatest number. The principle is all important. The detail as to how a proper depreciation charge shall be put on the books is a matter to be disposed of in the most convenient manner.

In Conclusion

Having recited my premises, I now state my proposed policy as a recommendation, as follows:

I recommend that the Association declare by resolution:

1. That a municipality may properly provide for public lighting either by the ownership and operation of an electric lighting plant, by the operation of a contractor under lease of a municipally owned plant, or by contract with the owner of a private plant.

2. That the supply of electric light to private users is not properly a municipal function.

3. That the performance of public lighting under contract by a private plant in connection with the supply of electric light to private users is essentially the method of least expense.

4. That the existence of two electric lighting plants in the same territory is an economic error tending to increase the cost of production, and thereby the selling price; and that the maintenance of competition is to the detriment of the public.

5. That public lighting by contract should be performed at the lowest price consistent with a reasonable profit on the value of the investment; that no electric lighting contractor should demand more than such a profit, and that each municipality should protect the contractor in the enjoyment of his profit, and against impairment of his investment, in order that a minimum profit may become reasonable.

6. That in order to adjust prices in the absence of competition it is necessary that cost be ascertained and prices approved by a competent authority, acceptable to the public as well as to the contractor.

7. That in the absence of a constituted authority competent to ascertain costs and prescribe prices, members having public lighting contracts under consideration should endeavor to have the adjustment of the contract price undertaken by a temporary commission, or arbitration committee, who will adopt as the basis of adjustment the principles set forth in these resolutions, particularly in resolution number 5.

8. That there is no essential difference in the organization of municipally owned plants requiring a different analysis of costs from that which is proper for private enterprises, and that the publication of the costs of municipal lighting plants properly analyzed is beneficial to the electric lighting industry. Further, that the similar publication of the costs of private plants is desirable, but is at present impossible because of its advantages to actual or possible competitors.

In conclusion, I desire to say that the tendency of public opinion appears to be toward some interference by and on behalf of the public with corporations performing so-called public services.

Such a tendency is a concomitant of our social progress. It is not merely a temporary surge, but is a part of a general movement. It cannot be withstood, but may be guided into proper channels. The general result of any such movement is for good; the damage which is done to individual rights is incidental and is more often the result of needless opposition by the individual. In this matter of public lighting the right of the community to interfere is so evident that it has been one of the first subjects considered, and will be one of the first disposed of ; and its priority in time will establish its disposition as a precedent for the future disposition of similar questions. There is immediate need for clear thinking and for well considered speech and action—for speech telling the public that electric light companies desire to do business according to the golden rule, and for action plainly in conformity with the speech. I believe that this Association can appropriately speak for its membership, and that its members are willing to live up to the principles which the Association may enunciate.

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