PUBLIC SERVICE REGULATION.

187

cause it is wrong to evade laws, and because the object sought can be gained in a better way.

PUBLIC SERVICE REGULATION IN MASSACHUSETTS.

Through its Gas and Electric Lighting Commission Massachusetts has instituted and exercised the best system of regulation for public service industries to be found in this country. The defects in this system of regulation are in the legislation giving it direction and power, not in the ability and devotion to the public. welfare with which the duties of the commission have been performed.

The policy of the state is wise in providing that publicly owned and operated industries shall not compete with private enterprise. It requires the public to buy the property of the private corporation whenever the public decides to own and operate the industry for private account. But it does not, with equal wisdom, prevent private companies from competing with each other. This defect has been used as an opening through which competing corporations have duplicated service plants and affected consolidations in the usual way, with an unnecessary investment and an excessive capitalization as a final result.

The law gives the commission authority to fix a reasonable price for services rendered by private corporations, but does not define any standard by means of which a reasonable price may be determined. All

188

PUBLIC SERVICE REGULATION.

corporations and all municipal works are required to keep accounts and make reports in the form required by the commission. One step of improvement should be made here. The law should define what factors shall be included as elements in all statements of cost. These factors should be identical for municipal and for private plants. The commission should be permitted no discretion as to what elements constitute cost, but it should be their duty to see that all items. of cost are properly charged. Having legally defined cost, the law should require all public services sold by municipalities to private users to be sold at not less than cost. The cost for private corporations being determined in the same way as for municipal plants, the price should be determined at cost, plus a reasonable profit. A reasonable profit may be measured at twice the rate of interest paid on its bonded debt by the municipality in which the service is rendered.

If private management is more efficient than public management, private cost, plus a reasonable profit, will not exceed cost under public management. When this result is demonstrated there will be no reason for wanting municipal ownership.

INEFFICIENT PUBLIC MANAGEMENT.

189

INEFFICIENT

PUBLIC MANAGEMENT.

The inflexibility of legal requirements for the management of public service industries is a very heavy handicap on public as compared with private management. Many times public officers are blamed for not obtaining better results when the real fault lies. in some act of the Legislature or town council which prevents them from managing their departments in the most effective way. The following report of a waterworks muddle comes from Glenville, Ohio:

Waterworks matters in Glenville are in a worse muddle than ever before. An ordinance was introduced in the village council to abolish the board of waterworks trustees and to transfer their duties to the water committee of the village council. The ordinance was approved by the majority of the members of the council.

The plan was thwarted, however, by Village Solicitor Clyde M. White, who gave the council a legal opinion to the effect that the waterworks board could not be abolished. The law says that there must be a board of waterworks trustees in places where there is a waterworks system. The question was raised as to whether a system of pipes, such as Glenville has, constitutes a waterworks system, or whether there must be a pumping station. Solicitor White held that Glenville had a waterworks system and that the waterworks trustees could not be ousted from office.

190

EFFICIENT ADMINISTRATION.

A serious complication has arisen as a result of Solicitor White's opinion. The village council has been levying taxes for the waterworks board, but the board, according to the solicitor, ought to make its own levies and to collect an income from water rents. The council has issued $35,000 in waterworks bonds, which, it is claimed, should have been issued by the waterworks trustees, and some question is raised as to the legality of those bonds. In the opinion of the solicitor all water levies that have been made by the council have been illegal.

COMMISSIONS TO SECURE EFFICIENT ADMINISTRATION.

Advocates of the municipal ownership and operation of public service utilities always confess the inefficiency of the political administration of industries whenever they resort to the creation of commissions to take charge of any particular industry and operate it for public account. The commission idea was started for this purpose, but in recent years this has been improved upon. Now commissions are advocated, not only as a means for securing efficient administration, but also as a means of avoiding statutes devised for the protection of taxpayers. Of the first class, the Detroit public lighting commission is an example, and the defunct Detroit Street Railway Commission, of which Governor Pingree was the head, is an example of the second class.

EFFICIENT ADMINISTRATION.

191

At the present time, wherever large public works are undertaken, economic execution is sought through the contract system. Much as advocates of municipal ownership claim to their credit in securing the construction for rapid transit tunnel service for public account, they did not carry their public service ideas to the point of having the construction work done directly by the city authorities. Why? They know as well as any other persons can that a work of this magnitude, if done directly by the city, would cost at least 50 per cent more than it will cost as it is being done under contract.

In an address before the New York Electrical Club, September 24, 1891, under the title of "The Making of a Model New York City," we outlined a rapid transit scheme, far more comprehensive than the one now being undertaken. It involved the improvement of the entire water front, much as Controller Coler is now advocating, and combined that improvement with a scheme for rapid transit for all freight and passengers brought into or moving through the city. To carry out so great a work we recommended the creation of a state commission.

Mr. Crimmins, a gentleman who has had large experience in the construction of great improvements in New York City, both public and private, speaking about the construction of a Nicaragua canal, advocated its being done by a private corporation. He is reported as saying: