PUBLIC SERVICE COMMISSIONS AND THE STATE

I

CONSTITUTION

JOHN N. CARLISLE

Highway Commissioner of the State of New York

N 1907, when the law creating the public service commissions of New York state was proposed, it was bitterly opposed, but it is conceded to-day by all students of government that it was one of the most constructive pieces of legislation placed upon the statute book in our state in years. To-day it has become recognized that public service corporations operating public utilities have come to stay, and every state in the Union, except three, has passed laws providing for a regulating commission of some sort with various powers and duties.

Since the passage of the original act in this state, numerous amendments and additions have been made to it at different times, and the matters connected with the supervision and regulation of public service corporations have been given careful study so that now the jurisdiction, powers and duties of the commissions can be clearly defined.

The public service commissions of New York state will never be placed upon the right basis until the commissioners are made constitutional officers, with their terms of office and salaries fixed, and their powers and duties defined in the state constitution. One of the reasons for a written constitution is to provide a stable form of government that can not be disturbed yearly by legislative acts, and it being now generally conceded that public service commissions are here to stay, the protection of constitutional powers should be thrown around them, and they should be made as free and independent as the courts. The reason why this should be done is apparent to all who have followed the history of the law in this state, or who have been connected in any way with either commission. There are two separate commissions in New York, one hav

ing jurisdiction over corporations in the city of Greater New York, and the other over the corporations in the remainder of the state, the exception being telephone and telegraph companies, which are under the sole jurisdiction of the up-state commission. There are five members of each commission, appointed for five years, with a large staff of employes, a great number of whom are engineers and experts in their lines of work. The importance of the work of the commissioners, with the large salaries paid to them and to their employes, naturally creates a demand for these places, not only from office seekers, but also from those who would like to control their actions.

In our state, nearly every year bills have been introduced or a controversy has been raised as to whether there should be one commission instead of two, or whether both commissions should be abolished altogether and their work divided and given to a number of separate boards, each having jurisdiction over the different classes of work now under their control. This yearly agitation can not but lower the efficiency of the work of the commission, and, worse than that, it can not but help prevent the acceptance of office by men who are unwilling to leave their present positions and subject themselves to the uncertainties of their official tenure of office. It particularly affects the employes of the commissions. Necessarily the work of the commissions can never be satisfactorily and successfully carried on without a very high class of expert men in their employ who will feel certain that they are going to have a permanent position. To my own personal knowledge, the state has not only been unable to attract men into the service who were peculiarly qualified to discharge some important functions of the work, but has repeatedly lost some of its most valuable men on account of the continual agitation as to a change in the law.

Not only does the present situation tend to lower the efficiency of the work of the commissions, but the failure to grant them exclusive power also tends to nullify their work. At every session of the legislature innumerable bills are introduced, and some have been passed, affecting not only the ques

tion of rates to be charged by public service corporations but also requiring them to do certain specific acts in relation to the service to be rendered by them, and even affecting the number of their employes. Naturally no legislature can properly and intelligently pass upon a question of rates without a most thorough investigation, and if such an investigation is made by the legislature it must be a duplication of the work of the commission, and can lead only to absolute chaos and confusion. To show the extremes to which this matter can be carried, it was seriously proposed last year to have a joint investigation of telephone rates by both the commission and a committee of the legislature. There is very grave doubt as to whether the legislature would have asked for this power if it did not involve some political advantage or the expenditure of a large sum of money in making the investigation.

No proper regulatory body can make proper orders affecting the service which they may require a corporation to give, unless they have absolute jurisdiction over the question of the rates which the corporation shall be permitted to charge. The people of the state are entitled to have from public service corporations reasonable, safe and adequate service at a fair and reasonable rate, but such service can never be ordered unless the state permits the corporations to exact a rate sufficient to allow it to comply with the orders given to it. If the legislature, without regard to the service which the public service commission believes ought to be required to be rendered, is given the right to regulate and fix the rates which the corporation shall charge, the whole theory of the law can be made a farce. The American people are willing to pay a fair price for what they receive, and they desire only to know that a careful investigation has been made by a competent board of men qualified to pass upon such problems before they are required to make their payments.

To place the commissions and their employes properly outside the field of continual political agitation and uncertainty, their positions should be fixed and made permanent by the constitution. It is no less important that the jurisdiction and powers of the commissions should be incorporated in the fundamental law of the state.

Certain general principles relating to the operation of public utilities are now pretty generally accepted:

1. That it is impossible to regulate them by competition.

2. That they must either be left to do as they please, be regulated by the government, or be operated by the public.

3. That they should not be permitted to do as they please, and the only question therefore is as to whether they should be regulated or operated by the government.

4. That under present political and economic conditions the government should not go into public ownership except in cases where the public health or public safety is involved.

5. That all corporations, public or private, operating public utilities should be subject to regulation by the government.

6. That all future franchises or grants of power to private corporations should be subject, after a certain fixed period, to purchase by municipalities wherein they are located.

7. That as public regulation means restriction of the freedom of private action, statutes granting powers of regulation must be carefully drawn so as not to make it impossible to obtain the money necessary to develop new enterprises, to secure new capital for existing companies, and to enable the operating company to maintain its plant in the highest state of efficiency.

8. That officials of the highest character should be chosen to administer the law, and should be retained in office long enough to enable the people to reap the benefit of their experience gained while holding office.

The following general powers and functions to be entrusted to a commission are also generally accepted:

1. The placing under their jurisdiction of all persons or corporations in the following categories: carriers of passengers and freight; telephone and telegraph companies; gas, electric and power companies, including transmission companies; water companies, including those furnishing water for irrigation purposes; oil pipe-line companies, steam producing and distributing companies.

2. Supervision and control over the issuing of stocks and

bonds and any indebtedness by way of promises to pay not payable within one year from the date thereof.

3. The requiring of safe and adequate service.

4. The establishment of fair and reasonable rates; the publication of such rates, and the power to prevent unfair and discriminatory rates.

5. The approval of all public franchises granted by any municipality, and any and all transfers of the same.

5. The right of summary investigation; of the inspection of the books and physical properties; the requiring of uniform systems of accounts, and the making and filing of proper and suitable reports.

7. Control not only over the organization of all new public utility corporations, but also over all consolidations and mergers of existing corporations.

The granting of jurisdiction and power as above outlined will be ineffectual unless there is also incorporated in the constitution a clear prohibition against the exercise of any such granted jurisdiction or power by the legislature.

This last prohibition is possibly the most important of all. If public service corporations are to be regulated and controlled, the work must be done by one separate body in the state. To permit separate and distinct bodies to have the same power is absurd. In a republican form of government we must admit that, unless government is a failure, proper officials, clothed with certain authority, will be qualified and competent to perform and discharge such duties. If corporations are to be subjected to the control of a regulating commission, that commission should be the sole body having power to issue orders affecting their service or rates (under proper review by the courts), and any constitutional provisions which would still permit the legislature to pass special laws or general laws affecting rates and service would only leave the matter in the same condition that affairs are now in. No legislative body, except by the employment of expert men and the expenditure of a large sum of money, can make a proper investigation for the purpose of fixing rates, and any such