H D 
 
 2766 fo/^ i^f;f / 
 H22> i 
 
 r 
 
 UC-NRLF 
 
 ^ 
 
 DRAFT BILL 
 
 FOR THB 
 
 REGULATION OF PUBLIC 
 UTILITIES 
 
 WITH DOCUMENTS 
 RELATING THERETO 
 
 AUTHORIZED TO BE PUBLISHED BY 
 
 THE NATIONAL CIVIC FEDERATION 
 OCTOBER 23, 1914 
 
Digitized by the Internet Archive 
 
 in 2008 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/draftbillforreguOOnatirich 
 

 MEMORANDUM 
 
 By Seth Low and William R. Willcox a Special Committee of the 
 Executive Council of The National Civic Federation 
 
 To Whom was Referred for 
 
 Consideration all Questions in Relation to the 
 
 Draft Bill for the Regulation of Public Utilities 
 
 In 1907, the National Civic Federation appointed a Commission 
 on Public Ownership and Operation to investigate, in this country 
 and abroad, the history of such movements up to that date. The 
 commission was thoroughly representative, and embraced in its 
 membership men who believed in public ownership and operation, 
 and men who did not; it embraced representatives of organized 
 labor, and men interested in the private ownership and operation of 
 public utilities; it embraced students of the subject, and men en- 
 gaged in the actual regulation of public utilities as members of public 
 commissions. This commission reported that public utilities from 
 their natiue tend to become and ought to be monopolies; and that 
 unregulated monopoly in so important a field is impossible. 
 
 In view of this conclusion, The National Civic Federation, in 
 191 1, called another conference of people interested in this subject; 
 as a resiilt of which it was determined to create a department to 
 prepare a draft bill for the Public Regulation of Interstate and 
 Municipal Utilities. Enquiry revealed the fact that every state in the 
 union has a regulative commission of some sort, except the states of 
 Delaware, Wyoming, and Utah. Hence, the desirability of uniform 
 legislation upon this subject, within reasonable limits, is evident. 
 
 The Department thus formed promptly appointed an Executive 
 Coiuicil to prepare a draft bill. This Council consisted of the following 
 members : 
 
 Edward M. Bassett, 
 
 Franklin Q. Brown, 
 
 Halford Erickson, 
 
 John H. Gray, 
 
 Wniiam D. Kerr, 
 
 Franklin K. Lane,* 
 
 Blewett Lee, 
 
 Emerson McMillin, 
 
 Milo R. Maltbie, 
 
 Arthur Williams. 
 The Executive Council organized without delay by the election 
 of Emerson McMillin as Chairman. By the kindness of the Univer- 
 
 *Mr. Lane retired on account of his official duties before the drafting of the bill began. 
 
 I 
 
 W13933 
 

 sity of Minnesota, it was able to secure the services of Professor John 
 H. Gray as Director. Mr. William D. Kerr was associated with 
 Professor Gray as Assistant Director. The first work of the Executive 
 Council, as so organized, was to collect all the legislation both by the 
 United States and in all of the States of the Union on the subject of 
 the regulation of public utilities. This information, which of itself 
 is of the greatest possible value to all who are interested in this sub- 
 ject, is contained in a volume published by the Executive Council 
 entitled "Commission Regulation of Public Utilities." * 
 
 With this information at hand, the securing and preparation of 
 which required almost a year, the Executive Council began the prep- 
 aration of a draft bill which should embody, as far as possible, the 
 best features of all the legislation already existing upon the subject, 
 together with such additional features as the experience of the 
 members of the Executive Council might suggest. They went further, 
 and endeavored to, secure suggestions from all who would co-operate. 
 The result is the attached draft bill for the Regulation of Public 
 Utilities, containing more than 300 sections. Of these sections as 
 drafted only sixty have been criticised by anybody; although the bill 
 has been submitted to very wide criticism on the part of members 
 of commissions engaged in the actual regulation of public utilities, 
 of men engaged in the formation and operation of public utilities, 
 and of students of the subject of many shades of opinion. It is evi- 
 dent, therefore, that the draft bill as a whole embodies a form of 
 legislation which meets with wide approval, except as to such sections 
 as deal with matters upon which differences of opinion are inevitable. 
 
 These matters, though few in number, are of great importance; 
 and it became apparent as the preparation of the draft bill proceeded 
 that it would be impossible to secure a unanimous approval by the 
 Department of this draft bill, or of any other dealing with this sub- 
 ject. The draft bill, therefore, is published upon the authority of 
 the Executive Council of the Department whose names have already 
 been given, subject to the reservations submitted in the memoran- 
 dum of dissent. As stated in the dissenting report of Messrs. E. M. 
 Bassett, John H. Gray, and Milo R. Maltbie, "a bill of this sort is 
 necessarily a compromise measure and therefore does not represent 
 exactly the view of any one member of the Council." All of the 
 members of the Council believe that the draft bill is an advance, 
 in many respects, on existing legislation. The dissenting report 
 which is attached to the draft bill discusses from the point of view 
 of the dissenters three questions of large significance. 
 
 The draft bill, with the dissenting report, was laid before the 
 
 ♦This volume can be had by application to The National Civic Federation. Its price is $8.50. 
 
 2 
 
Executive Council of The National Civic Federation at a special 
 meeting called for the purpose in January, 1914, without having 
 been submitted, for the reason given, to the Department as a whole. 
 At this meeting the undersigned were appointed a special committee 
 to recommend what action shotild be taken by The National Civic 
 Federation, in view of this circumstance. The special committee 
 recommends that the names of those comprising the Department 
 on the Regulation of Public Utilities, as originally created by The 
 National Civic Federation, be omitted from this document, as it 
 is evidently unfair to hold the members of a department in any way 
 responsible for a measure upon which they have not had an adequate 
 opportunity to pass; and that the draft bill as agreed upon by the 
 Executive Covmcil of the Department be printed as reported, together 
 with the report and the memorandum of dissent which were at- 
 tached thereto. 
 
 The differences in regard to the bill reflect the difference in the 
 points of view of those who make them. The radicals are inclined 
 to press regulation to the limit even if it makes it impossible to secure 
 private capital for the construction and conduct of public utilities. 
 In the minds of many of them public ownership and operation loom 
 up as not objectionable alternatives. Those who have to do with 
 the procuring of private capital for public utilities believe that too 
 much regulation wiU easily make private capital unavailable. These, 
 therefore, lean towards limiting regulation as much as possible. 
 In this conservative element there are again great differences of 
 opinion. Some believe in public regulation and wish to make it 
 practicable and successful. Others accept it reluctantly and are 
 fearful of any limitation which may interfere with established 
 practices. 
 
 The National Civic Federation cannot pretend to pass judgment 
 on the issues thus raised, though it is probable that the wise coiu"se 
 to be followed lies between the two extremes. The undersigned con- 
 ceive, therefore, that the function of The National Civic Federation 
 is to make this contribution to the subject of the regulation of 
 public utilities as useful as possible by throwing light upon it from 
 many points of view. They, therefore, subjoin a memorandirai, 
 for which they do not ask The National Civic Federation to become 
 responsible, on some of the large questions involved. Several appen- 
 dices, having the same object in view, are attached to the draft bill. 
 
 Appendix A is a report prepared at our request by Mr. William D. 
 Kerr. This report states the most important suggestions received 
 in connection with the disputed sections of the draft bill, and gives 
 as impartially as possible the arguments pro and con. 
 
 3 
 
Appendix B is a list of the railroad and public service commissions 
 already established in the United States. 
 
 Appendix C is the report to The National Civic Federation on 
 Public Ownership and Operation, made in 1907. 
 
 MEMO-RANDUM BY THE UNDERSIGNED. 
 
 When a legislature is clear as to the policy which it wishes to 
 embody in any new legislation upon this subject, the sections of 
 the draft bill which deal with such questions of policy can be readily 
 adapted by a competent draftsman to conform to its wish. The 
 purpose of this discussion is to state as concisely as possible some of 
 the differing policies that are favored, and the consequences likely 
 to follow from the adoption of one or the other. 
 
 Public regulation necessarily means restriction on the freedom of 
 private action; but, if public regulation of privately-owned and 
 operated public utilities is to remain a practicable policy, it must not 
 be carried so far as to result in the strangulation of private enterprise. 
 The problem to be worked out, therefore, in connection with the public 
 regulation of such utilities is, to give power enough to the regulating 
 commission to enable it to prevent the abuses to which uncontrolled 
 private management has been shown to be subject, without making 
 exactions so severe as to make it impossible to secure the private 
 capital that is necessary to maintain existing facilities in a high state 
 of efficiency, and to develop new enterprises when such are necessary. 
 Such excessive restrictions may be embodied in the law itself; or, 
 they may flow from the bad judgment of the commission charged 
 with the administration of the law. For the purposes of this discussion 
 the law itself is the subject of study; but it is desirable to point out, 
 at this place, that the character of the men to whom the administra- 
 tion of such laws is submitted is of vital consequence. If any such 
 law is to work well, the men administering it must be men of high 
 character and of good judgment. Without high character, such men 
 may fall an easy prey to the lamentable corruption of those who are 
 willing to buy privilege even at the price of debauching the public 
 service. Without good judgment, the interests of the public and of 
 the public service corporations are certain to suffer. With men of 
 high character and of good judgment, experience is likely to make 
 such a body increasingly serviceable to all the interests concerned. 
 
 It is admitted that any such public service commission, by what- 
 ever name it may be called, must have large discretionary powers; and 
 it is probably better to make this discretion large, despite the possibili- 
 ties of abuse, than by making the law too rigid to make it impossible 
 for the commission to deal equitably with exceptional conditions. 
 
 4 
 
The first question of importance that emerges is, as to the determin- 
 ation of values against which stock or bonds are to be issued ; whether 
 this determination shall be made by the representatives of the public 
 or by those who furnish the money. The draft bill leaves this deter- 
 mination to the representatives of the public, upon the theory that if 
 regulation means anything it means this ; so that both investors and 
 the public who are to be served by the utility may be protected against 
 fraudulent practices and exaggerated values. This being granted, it 
 remains to be decided whether there shall be an appeal to the courts 
 from decisions of the commission on questions of value. The draft 
 bill is drawn, consistently, upon the theory that the only appeal to the 
 courts from the action of the commission shall be on questions of law, 
 and that there shall be no appeal as to its findings upon questions of 
 fact, such as value. Some of those who are engaged in establishing 
 new public utilities hold the view that upon questions of value, if 
 upon no other question of fact, there should be an appeal to the courts. 
 
 This question develops into another phase which ought to be stated. 
 If the public assumes responsibility for the values against which stocks 
 and bonds may be issued, it is held by' some that the public becomes 
 morally responsible for the existence of such values. There is also at 
 least the possibility that, in time, the public will be asked to guarantee 
 the values which it stands sponsor for. Should the time come when 
 the public is willing to do this, it can undoubtedly secure private funds 
 for such enterprises at much lower rates of interest than can be had 
 at the present time ; for private money for such enterprises can be had 
 only at a price commensurate with the risk. If the risk is large, private 
 capital will require large returns because of the risk. If the risk is 
 small, private capital can be had cheaply because of the absence of 
 risk. On the other hand, because the fixing of values by the public 
 perhaps tends in this direction, there are those who maintain that 
 public regulation should not attempt to determine values but should 
 call for the most complete publicity. Under such a system, private 
 investors would be given the fullest possible information, and would 
 then be expected to look out for themselves. If the private investor 
 were the only party to be considered, such a system might be satis- 
 factory. There would be nothing, however, in such a case, to protect 
 the public against unreasonable financial burdens as these affect good 
 service, except the arbitrary discretion of the public service commis- 
 sion in fixing rates. It would appear to be more difficult to exercise 
 arbitrary discretion in such a matter, fairly, than to determine with 
 justice actual values against which stocks and bonds may be issued. 
 
 Section 210 of the draft bill deals with the question of the joint 
 use of facilities by possibly competing public utilities. So far as 
 
 5 
 
 P 
 
 •^ 
 
railroad service is concerned, the public policy in New York State 
 is well established, that, for the distance of a thousand feet, joint 
 use of rails must be permitted upon equitable terms. So far as 
 gas is concerned, joint use would appear to be impossible; but, as 
 regards telephonic service and electric lighting, joint use is often 
 practicable and may be greatly in the public interest. It is worth 
 while to point out that the American Telephone and Telegraph 
 Company, in its recent arrangement with the Government, has 
 given its consent to joint use of its facilities upon terms satisfactory 
 to the Government. It has been suggested that joint use should 
 not be permissible as between competing companies. The draft 
 bill recognizes the propriety of the joint use of public facilities under 
 certain conditions, even as between competing companies. It is 
 certainly in the public interest that poles and wires in the streets of 
 a city or town should not be duplicated unnecessarily. The draft 
 bill gives to the commission ample authority to prevent competition 
 in public utilities, where competition is not in the public interest. 
 It may also be suggested that, where, joint use of any facility is 
 permitted, whether as between competitors or non-competitors, the 
 management of the facility thus jointly used should always be left 
 in full control of the corporation owning it. 
 
 Sections 235-9 of the draft bill deal with the question of depre- 
 ciation, upon the assumption that this term is broad enough to in- 
 clude obsolescence and replacement. Probably depreciation, as a legal 
 term, does include obsolescence and replacement; but the question 
 of obsolescence, especially in telephoning, is so important that the 
 thing might well be emphasized in the law by the use of this word 
 as well as of "depreciation." In telegraphing, "depreciation" would 
 usually provide adequately for replacement; but, in telephoning, the 
 principal cost is not in the lines and poles but in the service stations. 
 For the best service, apparatus that is comparatively new must 
 often be discarded before it is worn out in order to give place to 
 the last improvement. The same thing is true in the power houses 
 of electric railways; and probably, in a greater or less degree, in 
 connection with every public utility that depends upon so new a 
 science as electricity. It is very dilEhcult to lay down a general 
 rule applying to all manner of cases which will not provide either 
 too small or too large a fund for depreciation and obsolescence. 
 Too small a fund may expose both the public and the operating 
 company to hardship, and too large a fund may equally have the 
 same effect. Probably there is no way to deal with this question 
 in a law except to give wide discretion to the commission repre- 
 senting the public. A Depreciation Fund Board may sometimes be 
 
 6 
 
created, with authority to increase or decrease, according to cir- 
 cumstances, the ordinary and normal fund set aside for these pur- 
 poses. The effect of uimecessaril\^ heavy charges for depreciation 
 and obsolescence, or of insufficient allowance therefor, is so serious 
 that this provision of a permanent board to adjust the matter from 
 year to year, in the light of actual circumstances, appears to offer a 
 wise solution of this verj?^ difficult problem. Such a board would 
 enable a commission to deal in the Hght of circumstances with the 
 question of depreciation as applied to a new company or to a com- 
 pany in difficulties. 
 
 One of the questions discussed in the dissenting report is that 
 of State vs. Local franchises, dealt with in the draft bill in Sections 
 277 to 299. The view of the majority of the Executive Council is 
 sufficiently expressed in the provisions of the act, and the dissent- 
 ing opinion is dearly set forth in the dissenting report. Two points 
 remain to be emphasized in the interest of dear thinking upon this 
 subject. It is hardly conceivable that any locality wiU wiUingh^ 
 abandon its right to say whether or not a franchise shall be granted 
 for the use of any of its streets or public places; and, to that extent, 
 the co-operation of the locality with the state commission is prob- 
 ably essential. But, if it be suggested that for this reason the 
 regulation of local franchises should be entirely local, other considera- 
 tions come into play. In the first place, many public utilities serve 
 more than one locaHty, and it is dear that for piublic utilities of such 
 a character there must be state r^ulation. In the next place, a 
 state commission will necessarily have a wider experience than any 
 purely local commission can acquire except in the ven'^ largest dties, 
 and ordinarily it can command a higher grade of expert sendee for 
 its guidance; but, be^'ond all that, it would seem to be dear that, 
 so far as the fixing of rates is concerned, this must be done by a 
 state commission even for a locality, if pubUc regulation is to appeal 
 to the sense of fairness of the average man. To submit questions 
 of rates to a local commission is practically to permit the users of 
 a serxnce to say what should be paid for it. 
 
 In the matter of exchanging existing franchises running for a 
 fixed term, for indeterminate franchises, this may be said. Speak- 
 ing broadly, the indeterminate franchise is the best form of franchise, 
 in the interest of the public as well as of the public service corporation, 
 which has yet been developed. Ever\'' reasonable encouragement 
 should be given for the exchange of franchises running for a fixed 
 term into indeterminate franchises. It would appear to be fair to 
 permit the locality which has assented to the fixed term, to pass 
 upon the terms of the exchange. Any attempt to do this by general 
 
 7 
 
law without the consent of the locality would be likely to evoke 
 popular resentment because of its unfairness, precisely as the sug- 
 gestion that the users of a public service should fix the rate to be 
 paid for the same would be likely to antagonize the investor. By 
 the draft bill, where a new locality is to be served the locality must 
 give its consent, which in its nature will be indeterminate, and in 
 doing so the locality can attach conditions not inconsistent with the 
 provisions of the bill itself. Whether the draft bill sufficiently pro- 
 tects the rights of the locality, in these respects, is precisely one of 
 the questions upon which legislators must pass. It is certainly 
 within the province of the state to declare that franchises for a fixed 
 term must give place at the expiration of the term to indeterminate 
 franchises; and it ought not to be impossible for a public service 
 commission, in any given case, to bring about an agreement as to 
 terms between the locality and the corporation. 
 
 The question of holding companies, as discussed in the dissenting 
 report, is unquestionably one of great importance. It is essential 
 to point out, however, that there are different kinds of holding 
 companies as to which, possibly, different attitudes should be taken. 
 A local holding company of a local public service corporation would 
 seem to be a device that can have no possible advantage for the 
 public. A holding company, on the other hand, which makes it its 
 business to control the operations of many small public service cor- 
 porations, in as many different localities, may have many advan- 
 tages for the public. In the view of some the method of financing 
 proposed by the draft bill, in Sections 109 to 116, would be likely 
 to force the creation of such holding companies in order to provide 
 adequate funds for local service. But, whether this be so or not, 
 it is clear that such a company, under broad-minded management, 
 may give better service to every locality controlled by it than any 
 small sized locality coiild command for itself. Such a holding com- 
 pany can command better expert talent and, by comparing methods 
 and results in different localities, can bring the operation everywhere 
 up to the highest standard obtained anywhere. Whether or not a 
 local company shall pass under the control of a holding company, 
 and the arrangements to be made in such a case for the protection 
 of minority stockholders, would seem to be legitimate subjects for 
 the discretion of a public service commission. It is not reasonable 
 that the public regulation which applies to direct control should not 
 also apply to indirect control. 
 
 The question of the capitalization of consolidated companies is 
 dealt with in the draft bill in Section 119. It is believed that some 
 standard of action must be laid down by the law. Such a rule be- 
 
 8 
 
ing given, this section leaves large discretion to the judgment of the 
 commission. The conditions to be dealt with are so various that 
 such discretion is evidently necessary. The dissenting report simply 
 proposes a different standard from that agreed to by a majority of 
 those who prepared the draft bill. 
 
 It appears worth while to the undersigned, in closing this Memo- 
 randum, to emphasize the fact that the issue between public owner- 
 ship and operation of public utilities and private ownership and 
 operation of such utilities under public regulation, is not wholly, 
 and perhaps not primarily, a question of economics. Grave and far- 
 reaching social and political questions are inevitably involved. The 
 public ownership and operation of a public utility here and there 
 is a matter of comparative unimportance; but the adoption of such 
 a policy by a large and populous state is a very different matter. For 
 example, in San Francisco a street railway system has been taken over 
 by the public and is now publicly owned and operated. By conse- 
 t[uence it comes under the operation of the state civil service law. The 
 application of this law to the men employed by the private com- 
 pany when taken over resulted in the loss of their places by many 
 members of the local union of street car employes. The effect upon 
 the imion was so serious that the American Federation of Labor 
 has sent a commission to Europe this year to study particularly 
 this aspect of the question. Without attempting to anticipate 
 the report of this commission, it seems to lie upon the surface that 
 the civil service system and regiilation of rates of pay by law are 
 inconsistent with the methods and objects of collective bargaining by 
 organized labor. In this apparently irreconcilable conflict, which 
 system in this country would be likely to go by the board, the civil ser- 
 vice system or that of collective bargaining? If the civil service system 
 were to be broken down, the country would be in danger of retiu^n- 
 ing to the demoralizing doctrine "To the victors belong the spoils," 
 with the spoils multiplied so as to include every position necessitated 
 by the operation of the public utility whatever it may be. If it be 
 imagined that collective bargaining, including the right to strike, 
 may be permanently enjoyed in connection with the public service, 
 anyone who thinks this should recall what happened in democratic 
 France when the railroad employes of France went upon a general 
 strike. The men were ordered to the colors, and the strike was 
 broken. 
 
 The attempt to carry out the methods of collective bargaining 
 and the right of striking in connection with the service of the public 
 is the pathway towards placing every public employment upon a 
 military basis, for the large public will not permanently permit the 
 
 9 
 
public servants either to coerce its judgment or to deprive it of pub- 
 lic services which are essential to its well being. These are some 
 of the social questions that are involved in the general acceptance 
 of public ownership and operation as distinguished from private 
 ownership and operation. 
 
 The political consequences of the acceptance of public ownership 
 and operation on a large scale are certain to be not less vital. It 
 was said by someone at the time of the Hayes-Tilden controversy 
 in connection with the presidency, that, if the political patronage 
 had been twice as large as it then happened to be, it would have 
 been impossible to have escaped civil war. The public ownership 
 and operation of public utilities of all kinds, if steam railroads are 
 included, would add literally millions of men and women to the 
 public pay-roll. If such a policy is adopted, it should be adopted de- 
 liberately, and the object of this memorandum is to point out that such 
 questions as these far outweigh, in public importance, the financial 
 questions that are involved as between public ownership and oper- 
 ation and private ownership and operation under public regulation. 
 Public regulation of privately owned and operated public utilities, 
 if such regulation is successful, ought to obviate the principal abuses 
 which have developed in the past from the uncontrolled private 
 ownership and operation of public utilities. If public ownership 
 and operation on a vast scale is undertaken, what is to be the safe- 
 guard against the social and political dangers which have been 
 pointed out, if these prove to be in fact as great as they appear to 
 be? 
 
 Seth Low, 
 Wm. R. Willcox. 
 New York, October 23, 1914. 
 
 10 
 
REPORT OF THE DEPARTMENT ON REGU- 
 LATION OF INTERSTATE AND MUNICIPAL 
 UTILITIES, OF THE NATIONAL CIVIC 
 FEDERATION. 
 
 To The National Civic Federation: 
 
 The Department on Regulation of Interstate and Municipal 
 Utilities submits to The National Civic Federation the following 
 report : 
 
 ORIGIN OF THE DEPARTMENT. 
 
 One of the conclusions reached by the investigation carried on 
 some years ago by The National Civic Federation on public and private 
 ownership of public utilities was that these utilities tend to become 
 and ought to be monopolies and that unregulated monopoly in so im- 
 portant a field is impossible. The conclusion, therefore, was that the 
 only alternative is public ownership and operation or effective regu- 
 lation. From this it appeared to The National Civic Federation that 
 the time was ripe for taking a complete accoimt of stock to find out 
 what had actually been accomplished in the way of regulation and 
 what hope of making regulation effective in the public judgment the 
 immediate future holds out. 
 
 With this end in view The National Civic Federation called a 
 large conference of people interested in this subject to be held in 
 New York on June 23, 191 1. The conference after long discussion, 
 believing that regulated private ownership, if regulation can be made 
 effective, is more consonant with American traditions than public 
 ownership, recommended to the Federation that such an investiga- 
 tion be undertaken. It was believed that, whatever the ultimate form 
 of ownership in the remote future may be, the American public is 
 thoroughly committed to the experiment of regulated private owner- 
 ship and that such regulation would be the best possible preparation 
 for public ownership in case such ownership should later be adopted. 
 It was clear to the members of the conference that the public had had 
 much more experience in the field of regulation than in public owner- 
 ship. It thereupon appointed a committee to report a plan and scope 
 for such an investigation and took recess until June 30, in order that 
 the committee might report. 
 
 The Committee recommended the creation of a separate de- 
 partment on interstate and municipal utilities to make a thorough in- 
 
vestigation of the subject at home and abroad and to embody the re- 
 sults of such investigation in a formal report to be accompanied by 
 the form of a definite bill embodying what in the light of the inves- 
 tigation has proved best in the various attempts at regulation by 
 the federal government and in the states or the municipalities. At 
 the adjourned meeting in accordance with the recommendation such 
 a department was created with a membership representing all phases 
 of interest and view. 
 
 The department membership being considered too large for a 
 working or directing body, an Executive Council was appointed 
 to have immediate charge and direction of the work. Disregarding 
 some early changes the Council was made up of the following: 
 
 Emerson McMillin, American Light & Traction Co., New 
 York, Chairman. 
 
 Franklin Q. Brown, Redmond & Co., New York, Vice Chair- 
 man, and Chairman Ways and Means Committee. 
 
 John H. Gray, Head of Department of Economics and Politi- 
 cal Science in the University of Minnesota, Secretary, 
 Chairman Committee on Form. 
 
 Edward M. Bassett, Attorney and Former Member New 
 York Public Service Commission, First District, Chair- 
 man Committee on Accounts and Reports. 
 
 Halford Erickson, Member Railroad Commission of Wis- 
 consin, Chairman Committee on Rates. 
 
 William D. Kerr, Attorney, Chicago, Chairman Committee 
 on Service. 
 
 Blewett Lee, General Solicitor of Illinois Central Railroad 
 Co., Chicago, Chairman Committee on Franchises. 
 
 Milo R. Maltbie, Member New York Public Service Com- 
 mission, First District, Chairman Committee on Cap- 
 italization. 
 
 Arthur Williams, Chairman, Association of Edison Electric 
 Companies and President of American Museum of Safety, 
 Chairman Committee on Safety of Operation. 
 
 Franklin K. Lane, Former Member Interstate Commerce 
 Commission . 
 
 Mr. John H. Gray, of Minneapolis, was appointed Director of In- 
 vestigation and secretary of the council and Mr. William D. Kerr, of 
 Chicago, Assistant Director of Investigation. Mr. Bruce Winnan, of 
 the Harvard Law School, was appointed Counsel in Investigation. 
 Mr. F. C. Walcott became Treasurer of the Ways and Means com- 
 
 12 
 
mittee and Mr. E. A. Quarles of The National Civic Federation, 
 
 Assistant Treasurer. The council appointed the following sub-com- 
 mittees to have charge of the various subject divisions of the work: 
 
 ACCOUNTS AND REPORTS . E. M. Bassett, Chairman. 
 
 CAPITALIZATION 
 FORM .... 
 FRANCHISES . 
 RATES .... 
 SAFETY OF OPERATION 
 SERVICE .... 
 WAYS AND MEANS . 
 
 M. R. Maltbie, Chairman. 
 J. H. Gray, Chairman. 
 Blewett Lee, Chairman. 
 Halford Erickson, Chairman. 
 Arthur Williams, Chairman. 
 William D. Kerr, Chairman. 
 F. Q. Brown, Chairman. 
 
 Work Done and Results Accoirfplished, 
 
 The Department took quarters in the Metropolitan Building, 
 New York, and entered upon the systematic work of the investiga- 
 tion February i, 191 2. The Counsel in Investigation was directed 
 to make a complete collection and compilation of aU of the statutes, 
 federal and state, relating to this subject according to a detailed out- 
 line previously drawn by the Assistant Director, Mr. Kerr. The 
 field was divided according to this outline into sixteen main heads, as 
 follows: 
 
 Basis of Rate Making 
 
 Establishment and Change of Rates 
 
 Publicity of Rates 
 
 Discrimination in Rates and Service 
 
 Service 
 
 Accotmts 
 
 Reports of Utilities and Commissions 
 
 Regulation of Stock and Bond Issues 
 
 Intercorporate Relations 
 
 Franchises 
 
 Safety of Operation 
 
 Organization of Commission 
 
 Jurisdiction and Definition 
 
 General Powers of Commission 
 
 Commission Procedure 
 
 Enforcement. 
 
 Very early in the work a staff of five investigators — namely, 
 Messrs. R. D. Fleming, I. E. Margulies, H. Salpeter, I. L. Sharfman 
 and Charles F. Yauch — ^was organized at the main office of the de- 
 
 1.3 
 
partment under the immediate direction of the Assistant Director, Mr. 
 Kerr, to make further detailed analyses of the statutory material. 
 This work was carried on continuously up to February 15, 191 3, and 
 separate pamphlets, one for each of these divisions of the statutory 
 material, were printed as soon as ready and widely distributed to 
 every public commissioner and to other interested parties with requests 
 for criticisms and suggestions. The several parts have been brought 
 together in a single volume and have been published with scope notes, 
 cross references and indices in a volume entitled " Commission Re- 
 gulation of Public Utilities." 
 
 Mr. R. H. Whitten of the Public Service Commission, New York, 
 First District, was engaged as an expert to report on the relation of 
 public utility industries to the public authorities in Great Britain. 
 He was especially directed to examine the regulation of capitalization 
 and of profits and to report on the sliding scale of charges for gas and 
 payment of dividends by gas companies. He also reported on the 
 sliding scale for gas in Boston, Massachusetts, and on the regulation 
 of the gas industry at Toronto by the province of Ontario. 
 
 Mr. Delos F. Wilcox of the Public Service Commission, New 
 York, First District, was sent to the Pacific coast as an expert to 
 report on regulation in that region. He made a report on the origin, 
 jurisdiction, powers and working of the California railroad com- 
 mission, and gave a historical sketch of local regulation in the twenty- 
 seven municipalities having charters under the home rule clause of 
 the California constitution. To this he added a more detailed history 
 of local regulation in the two chief cities of California, San Francisco 
 and Los Angeles. This was supplemented by reports on regulation 
 in the states of Oregon and Washington and a chapter was added on the 
 street car and gas franchises in Minneapolis, Minnesota. These re- 
 ports were printed for the use of the investigators, members of the 
 Council and the various committees. 
 
 Following a topical outline prepared by the Director of In- 
 vestigation, Mr. Wyman, the counsel to the department, had ex- 
 tracts made from the decisions of all the state commissions and Mr. 
 R. L. Hale of New York was engaged to write a summary or resume 
 of these decisions to bring out for the use of the committees and the 
 Council the general tendencies in commission decisions. Mr. 
 Wyman also made a thorough search of the current decisions and 
 furnished citations from all court decisions interpreting the various 
 commission acts. 
 
 In addition to the field work done by Messrs. Wilcox and Whit- 
 en, the Director and the Assistant Director made personal visits to 
 
 14 
 
many of the more important commissions, east and west, to confer 
 with the commissioners, operators and attorneys and other interested 
 and well informed persons in those localities and to study the organ- 
 ization and operation of the various commissions. 
 
 A thorough study of the court decisions as well as of general 
 literature in the field of public utilities was made. 
 
 On the basis of all this work and investigation, tentative sections 
 for a sample public utility bill were drawn and sent to all com- 
 missioners in the United States and other selected and interested 
 parties for consideration and criticism. It is believed that the ex- 
 tended criticisms and suggestions offered by our committees and a very 
 large number of interested parties have furnished a solid basis for a 
 model bill. The generous and widespread response to our request 
 for criticisms and general aid has been very gratifying and 
 extremely helpful. Many parties spent weeks and months studying 
 these tentative sections and giving us the benefit of their investi- 
 gations. Every written criticism received at the office was mani- 
 folded and sent out to the members of the sub-committees for 
 consideration. These committees have held many meetings and dis- 
 cussed the proposed sections and all of the criticisms relating thereto 
 and then reported their conclusions to the Executive Council. The 
 Covmcil has held many prolonged sessions and considered the sections, 
 the reports of the sub-committees, and oral and written criticisms 
 and suggestions from individuals and representatives of associations, 
 going over every section line by line and amending it as the circum- 
 stances seemed to require. After each revision by the council the 
 sections have been reprinted. 
 
 Wherever written criticisms seemed of sufficient extent and im- 
 portance the Director or the Assistant Director has attempted an oral 
 conference with the interested parties to go over such criticisms in 
 detail. 
 
 It may therefore be said that the bill, thus prepared and 
 approved by the Executive Council of the Department and now 
 offered for approval by The National Civic Federation, is the first 
 bill since the earliest days of regulation that has ever been drawn 
 with a ftdl knowledge of all existing legislation in the field and after 
 a careful survey and study of all of the more important court decisions 
 and the general literature, and after taking into confidence and con- 
 ference all of the members of all existing commissions in the coimtry. 
 The bill is the result of a wider conference and discussion with more 
 people of more varied interests and views than any other bill ever 
 offered in any jiirisdiction in the United States. After such prolonged 
 study and discussion we have attempted to embody all that is best 
 
 IS 
 
in existing legislation at home and abroad and to eliminate every 
 feature that in practice has proved disadvantageous. Certainly no 
 other bill in this field and no existing statute has ever had the variety 
 or extent of effort put into it that has been given to this bill. We, 
 therefore, offer the bill for your approval and for submission to the 
 various states in the hope and the belief that, so far as it may be 
 adopted, it will lead to a better understanding between these vitally 
 necessary industries and the public that they serve than has here- 
 tofore been possible under less carefully drawn legislation, and that 
 such regulation will be alike just and fair to the investor, the owner 
 and the users of this service. 
 
 The work done, the result of which is now submitted, has cost a 
 large sum of money, all of which was raised by voluntary contribu- 
 tions, and for which most sincere thanks are tendered. 
 
 It is with a sense of profound gratification that the Council is 
 enabled to report substantial concurrence on the part of its mem- 
 bers in the bill as a whole, the dissent to the bill as an entirety 
 of Mr. Maltbie being recorded.* As is customary in an undertak- 
 ing where individual views must to some extent yield to a majority 
 each member has reserved the right to express dissent on special 
 points. 
 
 By order of the Executive Council, 
 
 EMERSON McMILLIN, 
 
 Chairman. 
 
 New York, December ii, 1913. 
 
 * After the filing of the report Messrs. John H. Gray and E. M. Bassett joined with Mr. 
 Maltbie in his dissent to certain provisions of the bill. Their dissenting report follows. 
 
 16 
 
DISSENTING REPORT OF 
 
 E. M. BASSETT, JOHN H. GRAY, AND 
 
 MILO R. MALTBIE. 
 
 A bill of this sort is necessarily a compromise measure and, there- 
 fore, does not represent exactly the view of any one member of the 
 council. While the undersigned believe that the bill is an advance 
 in many respects on existing legislation, there are certain points on 
 which it falls so far short of providing for effective regulation, that 
 we feel compelled to dissent upon certain important points. The 
 minor points of difference need not be mentioned. 
 
 I. 
 
 HOLDING COMPANIES. 
 
 The bill contains no provisions, such as may be found in all the 
 more recent and piogressive statutes of the various states, giving 
 commissions jurisdiction over holding companies. Under the pro- 
 posed model law, a company may not sell, transfer, mortgage or 
 lease its franchise to another company, companies may not merge 
 or consolidate, a company may not lease its plant or property to 
 another company, without the permission of the supervisory board. 
 Competing companies may not be eliminated and one company may 
 not obtain control of another by any of these means without state 
 approval. But the more .subterranean and indirect method of buy- 
 ing up fifty-one per cent, or more of the stock of a public utility may 
 be resorted to without any check, approval or even investigation. 
 
 No protection, direct or indirect, is provided for minority stock- 
 holders. The\^ have no tribunal before which they may go and 
 prevent a company hostile to their interests from buying a con- 
 trolling interest and then proceeding to make inter-company agree- 
 ments and to adopt methods of accounting which will seriously 
 depress the value of their stock. The history of corporate fin- 
 ance compels us to ask: How can there be effective regulation 
 and protection of minority stockholders with holding companies 
 and with corporate relationships connected therewith outside of 
 the sphere of control? 
 
 Without recommending that holding companies at present ex- 
 isting or the stocks now held by them be interfered with, we do 
 believe that the bill should prohibit any additional shares passing 
 into the hands of holding companies without investigation and 
 
 17 
 
approval of such action by the commission, that purchases of stocks 
 in other pubUc utiHties should be subject to similar restriction, that 
 companies not public utilities should be prevented from acquiring 
 stock in public utilities beyond a certain small percentage, and that 
 the state commission should always have power to impose conditions 
 and enforce regulations which will protect minority interests and 
 the rights of the public. Such provisions would not prevent any 
 act that could be made to appear in the public interest to the properly 
 constituted public authority, but they would bring about publicity 
 and compel those desiring such action to show how the public interest 
 would be advantaged, 
 
 n. 
 
 CAPITALIZATION OF CONSOLIDATED COMPANIES. 
 
 We believe that the question of consolidation raises difficult 
 enough problems when considered alone and upon its merits. It 
 should, in our opinion, be treated in each case apart from other 
 questions. It certainly should not be made the occasion of stock 
 watering. We therefore recommend that a clause be inserted de- 
 claring that in no case should the capitalization of a company re- 
 sulting from merger or consolidation exceed the capitalization of 
 the consolidated companies. 
 
 The provision of the bill as now drawn (Section iig) opens the 
 gate very wide for stock watering in providing that the capitaliza- 
 tion may equal the value of the property. Value may be high because 
 of large dividends due to excessive rates. Capitalizing according to 
 value rather than according to investment may be a means of per- 
 petuating excessive rates, and no commission should be practically 
 forced by law, if companies so desire, to make value a basis for 
 recapitalization . 
 
 The modem doctrine is that capitalization must have a direct 
 relation to investment as it may be shown from time to time by sound 
 bookkeeping methods. All the more progressive states by statute 
 forbid the direct capitalization of a surplus simply because it is a 
 surplus. We are opposed to allowing its capitalization indirectly 
 by means of, and upon the occasion of, a consolidation. 
 
 The present bill, further, practically invites the consolidation of 
 companies which have a surplus with companies that have watered 
 capital; and the water of one may be spread over the surplus of the 
 other. Naturally only those will consolidate whose value equals or 
 exceeds their joint capitalization. If their joint value falls below 
 their capitalization, they will not propose merger or consolidation. 
 
 i8 
 
Hence, the rule will be made to work but one way — for the capitali- 
 zation of a surplus; the companies with deficits will never place 
 themselves within reach of the commission. Such a one-sided propo- 
 sition is seldom sound. 
 
 in. 
 
 STATE VS. LOCAL FRANCHISES. 
 
 In our opinion, Sections 277 to 289, which relate to franchise 
 grants and municipal operation, should either be omitted entirely or be 
 redrafted along different lines. The subjects covered do not properly 
 belong in a scheme for state supervision of private corporations 
 operating public utilities, and in nearly every state they are dealt 
 with in separate statutes. 
 
 We particularly object to the provisions of Sections 278 to 280, 
 which undertake virtually to deprive cities of all control over fran- 
 chise grants affecting their own streets. Any private corporation 
 now operating a public utility may, under the proposed law, get a 
 new franchise without the consent of the municipality, abutting 
 property owners, or the state itself. All it has to do is to file a 
 document, and ipso facto it gets a franchise. In many states such a 
 provision is unconstitutional; and in practically all, it is in conflict 
 with the public policy of the state as reflected by statute after statute. 
 It flagrantly violates the principle of home rule in that it deprives 
 cities of the right to manage and control their own property — their 
 streets and public places. 
 
 Further, is the new or old franchise to be effective in case of con- 
 flict? If the old franchises are not valid contracts, the companies are 
 subject to the commission without any mention of the franchises in 
 this bill. If they are valid contracts, we have no assurance that the 
 contracts either could or would be abrogated by the provisions under 
 consideration. The stockholders, and more particularly the bond- 
 holders, may have rights that they could not be deprived of by a 
 mere agreement between the companies and the municipality. 
 
 Attention should be called to the fact that in the proposed bill 
 municipal authorities have nothing whatever to say as to the terms 
 of any automatically renewed franchise. They cannot exact any 
 compensation for the use of public property. They cannot regulate 
 the extent or character of use. They cannot determine the location 
 of tracks, wires or pipes. They cannot fix the terms or period of 
 acquisition. All these matters must either be left undecided or 
 appeal must be had to a state board, ordinarily located at the state 
 
 19 
 
capital; and many matters, if not covered by the franchise, may not 
 be fixed after the grant is made even by a state board. 
 
 Any one famiHar with the vested rights which attach to a fran- 
 chise contract will appreciate how important it is that all franchise 
 legislation be drawn with care. Those who have been through the 
 subway negotiations in New York, or the street railway settlements 
 in Chicago and Cleveland, know that it is unsafe to the public and 
 to investors to leave so many matters undecided and to attempt in 
 such a cursory and brief way to dispose of such great interests as 
 arise from the granting of franchises for utilities that have practically 
 become necessities in the complex conditions of modem city life. 
 
 Without, therefore, in any manner implying that we approve all 
 the other provisions of the bill, we wish to enter our vigorous dissent 
 to the provisions of the bill relating to the three matters discussed 
 briefly above. 
 
 John H. Gray, 
 E. M. Bassett, 
 MiLO R. Maltbie. 
 
 20 
 
[Full Title.] 
 
 AN ACT 
 
 REGULATING PUBLIC UTILITIES, CREATING 
 AND ESTABLISHING A PUBLIC SERVICE 
 COMMISSION, PRESCRIBING THE POWERS 
 AND DUTIES OF THE COMMISSION AND 
 THE RIGHTS AND DUTIES OF PUBLIC 
 UTILITIES, PROVIDING PENALTIES FOR 
 VIOLATIONS OF PROVISIONS OF THE ACT, 
 REPEALING LAWS IN CONFLICT WITH THE 
 PROVISIONS THEREOF AND APPROPRI- 
 ATING MONEY TO CARRY OUT THE PUR- 
 POSES OF THE ACT. 
 
 [Short Title.] 
 AN ACT 
 Regulating Public Utilities and Creating and Establishing 
 A Public Service Commission. 
 
 (Note: Title must conform to constitutional requirements 
 of each state.) 
 
 It is enacted as follows: 
 1.^ Designation. This act shall be known as the public service com- 
 mission law. 
 
 ' Numbers 3 to lo, inclusive, are not assigned to sections. 
 
 ARTICLE I. 
 DEFINITIONS. 
 
 11. Commission. Unless otherwise specified, the word "com- 
 mission, " when used in this act, shall mean the Public Service 
 
 Commission of , which is created and established 
 
 by this act. 
 
 12. Municipality. The term "municipality, " when used in this act, 
 shall mean and include any borough, town, village, city, county 
 or other political subdivision of this state. 
 
 13. Municipal Council. The term "municipal council," when used 
 in this act, shall mean and include the city coimcH, common 
 coimcil, the board of aldermen, the board of selectmen, the 
 
 21 
 
board of trustees, the town or village board, the city commis- 
 sion, or any other governing body of any political subdivision of 
 this state. 
 
 14. Person. The term "person, " when used in this act, shall mean 
 and include individuals, associations of individuals, firms, part- 
 nerships, companies, corporations, their lessees, trustees or re- 
 ceivers appointed by any court whatsoever, in the singular num- 
 ber as well as in the plural. 
 
 15. Public Utility, (a) The term "public utility," when used in this 
 act, shall mean and include every person that owns, operates, 
 leases or controls, or has power to own, operate, lease or control : 
 
 (i) Any plant, property or facility for the transportation 
 or conveyance to or for the public of passengers or property 
 by railroad, street railroad or water. 
 
 (2) Any plant, property or facility for the transmission 
 to or for the public of telephone messages, for the conveyance 
 or transmission to or for the public of telegraph messages, or 
 for the furnishing of facilities to or for the public for the trans- 
 mission of intelligence by electricity. 
 
 (3) Any plant, property or facility for the generation, 
 transmission, distribution, sale or furnishing to or for the 
 public of electricity for light, heat or power, including any 
 conduits, ducts or other devices, materials, apparatus or 
 property for containing, holding or carrying conductors used 
 or to be used for the transmission of electricity for light, 
 heat or power. 
 
 (4) Any plant, property or facility for the mantifacture, 
 distribution, sale or furnishing to or for the public of natural 
 or manufactured gas for light, heat or power. 
 
 (5) Any plant, property or facility for the supply, storage, 
 distribution or furnishing to or for the public of water for 
 irrigation, manufacturing, municipal, domestic or other 
 uses. 
 
 (6) Any plant, property or facility for the production, 
 transmission, conveyance, delivery or furnishing to or for 
 the public of steam or any other substance for heat or 
 power. 
 
 (7) Any plant, property or equipment for the trans- 
 portation or conveyance to or for the public of oil by pipe 
 line. 
 
 22 
 
(b) None of the provisions of this act shall apply to the 
 generation, transmission or distribution of electricity, to the 
 manufacture or distribution of gas, to the furnishing or distri- 
 bution of water, or to the production, delivery or furnishing of 
 steam or any other substance for heat or power, by a producer 
 who is not otherwise a public utility, for the sole use of such 
 producer or for the use of tenants of such producer and not 
 for sale to others. 
 
 (c) The term "public utility" shall also mean and in- 
 clude two or more public utilities rendering joint service. 
 
 16. Rate. The term "rate," when used in this act, shall mean and 
 include, in the plural number as well as in the singular, every in. 
 dividual or joint rate, classification, fare, toll, charge or other 
 compensation for service rendered or to be rendered by any 
 public utility, and every rule, regtdation, practice, act, require- 
 ment or privilege in any way relating to such rate, fare, toll, 
 charge or other compensation, and any schedule or tariff, or 
 part of a schedule or tariff, thereof. 
 
 17.^ Service Regulation. The term " service regulation " shall 
 mean and include every rule, regulation, practice, act or require- 
 ment in any way relating to the service or facilities of a public 
 utility. 
 
 > Numbers i8 to 30, inclusive, are not assigned to sections. 
 
 ARTICLE II. 
 
 ORGANIZATION OF A PUBLIC SERVICE COMMISSION. 
 
 31. Name and Constitution. There shall be created and established 
 a commission which shall be known as the Public Service Com- 
 mission of , consisting of five ' members appointed by 
 
 the governor, by and with the consent of the senate (or council) , 
 for terms of five ^ years each or until their successors are appointed 
 and qualify. Immediately following the enactment of this law 
 the governor shall appoint five commissioners, one of whom 
 shall hold office until the first Monday in February, 19 15, two, 
 until the first Monday in February, 191 7, and two, until the 
 first Monday in February, 19 19, or until their successors are 
 appointed and qualify.- 
 
 > In some states a commission of three members with terms of six years each will suflBce. 
 » In states whose legislatures meet annually this provision should be modified in such 
 a way that a term will expire and an appointment will be made each year. 
 
32. Salary of Commissioners. Each commissioner shall receive a 
 
 salary of a year/ payable in the same manner as the 
 
 salaries of other state officers. 
 
 ' The salaries of the commissioners should be not less than the salaries paid the judge 
 of the highest state court. 
 
 33. Chairman Designated by Members.' As soon as possible after 
 the first appointment of commissioners under this act the persons 
 so appointed shall meet at the state capitol and organize by 
 choosing one of their number as chairman. Thereafter when- 
 ever a new appointment is made or whenever any vacancy in 
 the commission is filled the commissioners shall meet and choose 
 one of their number as chairman. 
 
 'Alternative: Chairman appointed. The Governor shall designate one of the com- 
 missioners to be chairman during the term of office to which he is appointed and until his 
 successor is appointed and qualifies. As soon as possible after the first appointment of 
 commissioners under this act, the persons so appointed shall meet at the state capitol and 
 organize. They shall choose one of their number chairman pro tempore in the absence or 
 disability of the chairman. Thereafter, when a new appointment is made or when a va- 
 cancy in the commission is filled, the commissioners shall meet and choose one of their 
 number to be chairman pro tempore in the absence or disability of the chairman. 
 
 34. Quorum of Commission. A majority of the commission shall 
 constitute a quorum to transact business, and no orders of the 
 commission shall be effective without the concurrence of a ma- 
 jority of the commission. 
 
 35. Oath. Each commissioner shall take and subscribe to the oath 
 of office prescribed for state officers by the constitution. 
 
 36. Disqualification for Membership. No person employed by, or 
 connected with, or holding any official relation to, or owning 
 stocks or bonds of, or having any pecuniary interest in, any 
 public utility under the jurisdiction of the commission shall be 
 eligible to enter upon the duties or to fill the office of com- 
 missioner. 
 
 37. Removal of Commissioner. The governor at any time may re- 
 move any commissioner from office for inefficiency, neglect of 
 duty, misconduct or malfeasance in office, for accepting, directly 
 or indirectly, any gift, gratuity, emolument or employment 
 from any public utility under the jurisdiction of the commission 
 for voluntarily becoming interested pecuniarily in any such public 
 utility or for failing to divest himself within a reasonable time of 
 any interest in any such public utility acquired otherwise than 
 voluntarily, or for holding another office under the constitution or 
 laws of this state or of the United States. Before any commis- 
 sioner may be removed he shall be given a copy of charges made 
 against him and a time shall be fixed when he may be heard pub- 
 licly in his own defense, which time shall be not less than ten days 
 thereafter. If the commissioner shall be removed the governor 
 
 24 
 
shall file in the office of the secretary of state a complete state- 
 ment of all charges against such commissioner and of the findings 
 thereon, with a record of the proceedings. 
 
 38. Manner of Filling Vacancies. Every vacancy in the commission 
 shall be filled for the unexpired term by appointment by the 
 governor with the consent of the senate (or council), provided, 
 that if any vacancy occurs while the legislature is not in session 
 the governor may make an interim appointment. 
 
 39. How to Sue and Be Sued. The commission may sue and be 
 
 sued by its official name. 
 
 40. Seal. The commission shall have an official seal bearing the 
 
 words "Public Service Commission of ," of which the 
 
 courts shall take judicial notice. 
 
 41. Conduct of Members and Employes. No commissioner or per- 
 son appointed and regularly employed by and receiving a salary 
 from the commission shall accept any gift, gratiiity, emolument 
 or employment from any public utility under the jurisdiction of 
 the commission or any officer, agent or employe thereof, nor 
 shall any commissioner or person appointed or regularly em- 
 ployed by and receiving a salary from the commission solicit, 
 request from, or recommend, directly or indirectly to, any 
 such public utility or any officer or agent or employe thereof the 
 appointment of any person to any place or position. No com- 
 missioner shall hold any other public office. 
 
 42. Office of Commission. The principal office of the commission 
 shall be in the city of . 
 
 43. Equipment of Commission. The commission shall be provided 
 by the state with such offices, equipment and facilities as may be 
 necessary for the performance of its duties. 
 
 44. Provision of Funds. There shall be appropriated out of the 
 general funds for the maintenance and conduct of the com- 
 mission such stuns as may be necessary reasonably to enable the 
 commission to perform its duties. 
 
 46. Secretary of Commission. The commission shall appoint a 
 secretary who shall serve during the pleasure of the commission, 
 shall take the usual oath of office, shall keep a record of all the 
 proceedings, transactions, commimications, minutes and official 
 acts of the commission and perform such other duties as the 
 
 25 
 
commission may prescribe, and shall receive a salary in an amount 
 fixed by the commission. 
 
 46. Attorney of Commission. The commission is authorized to 
 appoint and employ an attorney at a salary not exceeding 
 
 per annimi^ who shall be a resident of this state and whose 
 
 duty it shall be to represent the commission in all proceedings 
 in any court or before any department of the federal government 
 to which the commission may be a party and to advise the com- 
 mission in any matter or matters and otherwise and in all respects 
 to comply with the directions of the commission. 
 
 • The salary of the attorney should be the same as that of the attorney general of 
 the state. 
 
 47.^ Employes and Appointees. The commission is authorized to 
 appoint and employ such other persons as may be necessary to 
 enable it to perform the duties imposed upon it by this act 
 and to designate the duties and compensation of such appointees 
 and employes. 
 
 1 Numbers 48 to 70, inclusive, are not assigned to sections. 
 
 26 
 
ARTICLE III. 
 GENERAL POWERS OF COMMISSION. 
 
 71. Supervision and Regulation of Utilities. The commission shall 
 have general power to regulate and supervise every public utility 
 in accordance with the provisions of this act. 
 
 72. Arbitration. Whenever any public utility has a controversy 
 with any other person and all the parties to such controversy 
 agree in writing to submit such controversy to the commission 
 as arbitrators, the commission may act as such arbitrators, and 
 after due notice to all parties interested may proceed to hear 
 such controversy, and their award shall be final. 
 
 73. Authority to Confer with Other Commissions. The commission 
 may confer in person, by attending conventions or otherwise, 
 with the members of railroad or other public utility commis- 
 sions of other states and with the interstate commerce com- 
 mission on any matters relating to public utilities. 
 
 74. Right to Inspect Books and Examine Agents of Public Utilities. 
 
 The commission, or any commissioner, or any person or persons 
 employed by the commission, shall, upon demand, have the 
 right to inspect or examine the books, papers, accounts, docu- 
 ments, plant, property and facilities of any public utility and to 
 examine under oath any officer, agent or employe of such public 
 utility in relation to its business and affairs; provided, that any 
 person other than one of the commissioners shall produce when 
 so requested his authority to make inspections or examinations 
 imder the hand of a commissioner or of the secretary and under 
 the seal of the commission. 
 
 75. Commission May Require Production of Books. The commis- 
 sion by order may require any public utility or any officer or 
 agent thereof to produce within the state at such time and place 
 as it may designate any accoimts, records, memoranda, books or 
 papers kept in any office or place without or within the state or 
 verified copies thereof in order that an examination thereof 
 may be made by the commission or by any person under its 
 direction. 
 
 27 
 
76. Summary Investigation. Whenever the commission shall be- 
 lieve that an investigation of any act or omission to act, accom- 
 plished or proposed, or an investigation of any rate, service, 
 facility or service regulation of any public utility should be 
 made in order to secure compliance with the provisions of this 
 act and orders of the commission it may of its own motion sum- 
 marily investigate the same. 
 
 77. Complaints. (a) Any public utility, or any person served or 
 claiming the right to be served thereby, or any municipality, or 
 the attorney general may complain to the commission of any 
 thing, actual or proposed, done or omitted to be done in viola- 
 tion of any provision of this act or of an order of the commission, 
 and it shall be the duty of the commission to entertain such 
 complaint and to proceed therewith as provided for elsewhere 
 in this act. 
 
 (b) Upon any such complaint alleging that any rate is 
 unjust, unreasonable, unjustly discriminatory, unduly preferen- 
 tial, or otherwise or in any respect in violation of any provision 
 of this act, the commission may proceed to investigate the 
 matters complained of as provided for elsewhere in this act. 
 
 (c) Upon any such complaint alleging that any service or 
 service regulation is unjustly discriminatory or unduly preferen- 
 tial, or that any service or facility is inadequate or unsafe, or 
 that any service regulation is unjust or unreasonable, or that 
 any service, facility or service regulation is otherwise or in any 
 respect in violation of any provision of this act, the commission 
 may proceed to investigate the matters complained of as pro- 
 vided for elsewhere in this act. 
 
 78. Scope of Investigations. In conducting any investigation pur- 
 suant to the provisions of this act, the commission may investi- 
 gate, consider and determine such matters as the cost or value, or 
 both, of the property and business of any public utility, used and 
 useful for the convenience of the public, and all matters affecting 
 or influencing such cost or value; the operating statistics of any 
 public utility, both as to revenues and expenses and as to the 
 physical features of operation, in such detail as the commission 
 may deem advisable; the physical characteristics and geograph- 
 ical limits of the locality or area affected by the service of a public 
 utility; and such other matters as may have a bearing upon the 
 subjects imder investigation. Every public utility shall, at the 
 request of the commission, furnish all available information in 
 aid of such investigation. 
 
 28 
 
79. Commission May Make Orders. Whenever after investigation 
 in accordance with the provisions of this act, the commission 
 shall be of the opinion that any provision or requirement of this 
 act or any order of the commission is being, has been, or is about 
 to be violated, it may make and enter of record an order in the 
 premises, specifying the actual or proposed acts or omissions to 
 act which constitute such real or proposed violation, and re- 
 quiring that such violation be discontinued or rectified, or both, 
 or that it be prevented. No order, however, shall be made by the 
 commission which requires the change of any rate or service, 
 facility or service regiilations except as otherwise specifically 
 provided, unless or until a public hearing has been held in ac- 
 cordance with the provisions of this act. 
 
 80. Determination of Reasonable Rates. If upon hearing and in- 
 vestigation any rate shall be found by the commission to be im- 
 just, unreasonable, unjustly discriminatory or unduly preferen- 
 tial or otherwise or in any respect in violation of any provision 
 of this act, the commission may fix and order substituted 
 therefor such rate as it shall determine to be just and reason- 
 able and in compliance with the provisions of this act. Such 
 rate so ascertained, determined and fixed by the commission, 
 shall be charged, enforced, collected and observed by l^he public 
 utility for a period of time fixed by the commission of not more 
 than three years. 
 
 81. Commission May Prescribe Service or Facilities. If upon hear- 
 ing and investigation any service or service regulation of any 
 public utility shall be found by the commission to be unjustly 
 discriminatory or imdtdy preferential, or any service or facility 
 shall be found to be inadequate or unsafe, or any service regu- 
 lation shall be foimd to be imjust or unreasonable, or any service, 
 facility or service regulation shall be found otherwise or in any 
 respect to be in violation of any provision of this act, the com- 
 mission may prescribe and order substituted therefor such ser- 
 vice, facility or service regulation as it shall determine to be 
 adequate and safe, or just and reasonable, as the case may be 
 and otherwise in compliance with the provisions of this act. It 
 shaU be the duty of the public utility to comply with and con- 
 form to such determination and order of the commission. 
 
 82. Division of Expense Incurred by Utilities Rendering Joint 
 Service. Whenever any order of the commission involves ex- 
 penditures of any sum or simis by public utilities rendering any 
 
 29 
 
joint service or services and the public utilities affected thereby 
 shall fail to agree upon the division or apportionment thereof 
 within a reasonable time after the service of such order, the 
 commission may issue a supplemental order declaring the ap- 
 portionment or division of such expense. 
 
 83. Publicity of Commission Records. All reports, records, and 
 accoimts in the possession of the commission shall be open to 
 inspection by the public at all times, except as otherwise provided 
 in this act or as ordered by the commission and under rules pre- 
 scribed by the commission. 
 
 84. Fees. The commission is authorized to fix and establish a 
 schedule of fees to be charged for copies of opinions, orders, 
 reports and other records of the commission and certifications 
 under the seal of the commission. All fees received by the 
 commission shall be tiuned over to the state treasurer at 
 monthly intervals. 
 
 85. Annual Report to Governor. Annually on or before the first day 
 of February the commission shall report to the governor for 
 transmittal to the legislature its proceedings for the preceding 
 year. Such report shall set forth in such detail as the commis- 
 sion may deem expedient all proceedings and investigations of 
 the commission during such period and shall contain abstracts 
 of the annual reports of public utilities prepared by the com- 
 mission. It shall also contain recommendations of the commission 
 for new legislation and any other matters the commission de- 
 sires to call to the attention of the governor and legislature. 
 A sufficient number of copies of this report to accommodate all 
 reasonable requests therefor shall be printed. 
 
 86^ Incidental Powers. In addition to the powers herein specifically 
 granted, the commission shall have such implied or incidental 
 powers as may be necessary and proper effectually to carry out, 
 perform and execute all the powers so granted. 
 
 * Numbers 87 to ipo, inclusive, are not assigned to sections. 
 
 30 
 
ARTICLE IV. 
 REGULATION OF STOCK AND BOND ISSUES. 
 
 101. Right to Issue Stock and Create Lien a Special Privilege. The 
 
 power of public utilities to issue stocks, stock certificates, bonds; 
 notes and other evidences of indebtedness, in case of public 
 utilities incorporated under the laws of this state, and to create 
 liens on property in this state, in case of public utilities incor- 
 porated under the laws of any state, is a special privilege, the 
 right of supervision, regulation, restriction and control of which 
 is and shall continue to be vested in the state, and such power 
 shall be exercised as provided by law and under such rules and 
 regulations as the commission may prescribe. 
 
 102. State Does Not Guarantee Stocks, Bonds, etc. No provision of 
 this act and no deed or act done or performed under or in con- 
 nection therewith shall be held or construed to obligate the state 
 of to pay or guarantee in any manner whatso- 
 ever any stock, stock certificate, bond, note or other evidence of 
 indebtedness authorized, issued or executed under the provisions 
 of this or any other act, or to pay or guarantee in any manner 
 whatsoever any interest or dividends thereon. 
 
 103. Purpose for Which Stocks, Bonds, etc., May be Issued. Subject 
 to the provisions of this act and of the order of the commission 
 issued as provided in this act, a public utility may issue stocks, 
 stock certificates, bonds, notes and other evidences of indebt- 
 edness payable at periods of more than 12 months from the 
 date thereof, when necessary and reasonably required for the 
 following purposes and no others, viz., 
 
 (a) Acquisition of property. 
 
 (b) Construction, extension, betterment, or im- 
 provement of or addition to its facilities. 
 
 (c) Discharge or lawful refunding of its obliga- 
 tions. 
 
 (d) Reimbursement of moneys actually expended 
 from income or from any other moneys in the treasury 
 of the public utility not, directly or indirectly, secured 
 by or obtained from the issue of stocks, stock certifi- 
 cates, bonds, notes or other evidences of indebtedness 
 of such public utility, within five years next prior to 
 the filing of an application with the commission for the 
 
 31 
 
required authorization, for any of the aforesaid pur- 
 poses, not including maintenance of service, replace- 
 ments and substitutions (if the applicant shall have kept 
 its accounts and vouchers for such expenditures in such 
 manner as to enable the commission to ascertain the 
 amount of moneys so expended and the purposes for 
 which such expenditures were made and the sources of 
 the funds in the treasury of the public utility applied 
 to such expenditiu"es.) 
 
 Provided, and not otherwise, that such public utility in 
 addition to the other requirements of law shall first have se- 
 cured from the commission an order authorizing such issue as 
 provided in this act. 
 
 104. Issues not to Exceed Amounts Reasonably Required. No public 
 utility shall issue any stocks, stock certificates, bonds, notes or 
 other evidences of indebtedness to an amount exceeding that 
 which may be necessary and reasonably required to enable such 
 public utility to perform its duty to the public and for the pur- 
 pose for which such issue of stocks, stock certificates, bonds, 
 notes or other evidences of indebtedness may be authorized. 
 
 105. Stock Issued at Par Only. No public utility shall issue any stock 
 or stock certificate except in consideration of money, or of services 
 or property at the true money value thereof as found and de- 
 termined by the commission, actually received by such public 
 utility equal to or in excess of the face value of such stock or 
 stock certificate. 
 
 106. Bonds May Be Issued Below Par. No public utility shall issue 
 any bonds, notes or other evidences of indebtedness, except in 
 consideration of money, or of services or property at the true 
 money value thereof as found and determined by the commission, 
 actually received by such public utility equal to or in excess of 
 the true money value of the bonds, notes or other evidences of 
 indebtedness issued therefor; and in no case shall the money or 
 the true money value of the services or property as found and 
 determined by the commission be less than 75 per cent, of the 
 face value of the bonds, notes or other evidences of indebted- 
 ness. 
 
 107. Refunding Debt Discount and Expense. The commission 
 may require every public utility that issues any bonds, notes or 
 other evidences of indebtedness for an amount or amounts (in 
 money or in property or services at the true money value thereof 
 
 32 
 
as found and determined by the commission) less than the par 
 value thereof to provide for the amortization of the discount 
 and all expenses connected with the issuance of said bonds, notes 
 or other evidences of indebtedness during a period of time fixed 
 by the commission, and thereafter no bonds, notes or other 
 evidences of indebtedness issued for the purpose of paying, 
 refunding, retiring or discharging any such bonds, notes or other 
 evidences of indebtedness shall be issued to pay, refund, retire 
 or discharge such discount and expenses to an amount greater 
 than the commission shall have determined to be reasonable and 
 consistent with the plan of amortization adopted. No such 
 public utility shall declare any dividends from the earnings of 
 any year until all amortization of debt discount and expenses 
 accrued and due up to that time has been provided for. 
 
 108. Relative Proportions of Stocks and Bonds. The amount of 
 bonds, notes and other evidences of indebtedness which any 
 public utility may issue shall bear a reasonable proportion to the 
 amount of stock and stock certificates issued by such public 
 utility, due consideration being given to the nature of the busi- 
 ness in which the public utility is engaged, its credits, earnings 
 and prospects, and to the effect which such issue will have upon 
 the management and efficiency of operation of the public utility, 
 so as to secure an adequate relative amount of financial interest 
 and risk on the part of the stockholders in the public utility. 
 
 109. What Order Shall Show. The order of the commission author- 
 izing the issue of any stocks, stock certificates, bonds, notes or 
 other evidences of indebtedness, payable at periods of more 
 than 12 months from the date thereof, shall state: 
 
 (a) The amount and character of the authorized issue. 
 
 (b) The purpose or purposes to which the issue or the 
 proceeds thereof are to be applied. 
 
 (c) That, in the opinion of the commission, the money, 
 property or services to be prociured or paid for by such issue is 
 necessary and reasonably required to enable the public utility to 
 perform its duty to the public and for the purpose or purposes 
 specified in the order. 
 
 (d) That, in the opinion of the commission, the proposed 
 expenditures for such purpose or purposes are not in whole or 
 in part reasonably chargeable to income, except as otherwise 
 permitted by the order. 
 
 (e) That the value of the property, services or other consider- 
 
 33 
 
ation as found and determined by the commission, for which, in 
 whole or in part, such issue is to be made, is equal to or in excess 
 of the par value of the stocks or stock certificates, or the value 
 of the bonds, notes and other evidences of indebtedness to be 
 issued therefor. 
 
 (f) That, in the case of bonds, notes and other evidences of 
 indebtedness, the amount of all bonds, notes and other evidences 
 of indebtedness, including those just authorized, bears a reason- 
 able proportion to the total amount of stocks and stock cer- 
 tificates outstanding. 
 
 (g) The terms and conditions upon which the issue is 
 authorized. 
 
 110. Authority of Commission. The commission may by order 
 authorize the issue of stocks, stock certificates, bonds, notes or 
 other evidences of indebtedness, in the amount applied for or in 
 a lesser amount, or in a greater amount, or not at all, and may 
 attach to the exercise of this authority such terms and conditions 
 as it may deem just, reasonable or proper. 
 
 111. Character of Investigation by Commission. For the purpose of 
 enabling it to determine whether the proposed issue complies 
 with all provisions of law and whether it should be authorized, 
 the commission may determine the true money value in detail 
 of the property or services, for which it is proposed to issue, in 
 whole or in part, such stocks, stock certificates, bonds, notes 
 or other evidences of indebtedness, and shall make such inquiry 
 or investigation, hold such hearings and examine such wit- 
 nesses, books, papers, documents or contracts as it may deem 
 of importance in enabling it to reach a determination. The 
 commission may also make a valuation of all the property of the 
 public utility if it deems it pertinent to the inquiry or investiga- 
 tion, and may require such utility to furnish such statements, 
 information and facts as the commission may deem pertinent. 
 
 112. Limitation of Application of Article. The provisions of this act 
 requiring public utilities to secure the approval of the commis- 
 sion before issuing any stocks, stock certificates, bonds, notes or 
 other evidences of indebtedness, shall not apply to stocks, stock 
 certificates, bonds, notes or other evidences of indebtedness 
 lawfully issued before this act becomes a law nor to any mort- 
 gage, deed of trust or other similar instrument lawfully exe- 
 cuted and delivered before this act becomes a law. 
 
 34 
 
113. Utilities Authorized to Issue Notes for a Year. A public utility 
 may issue notes for proper purposes and not in violation of any 
 provision of this or of any other act, payable at periods of not 
 more than one year from the date thereof, without the approval 
 of the commission. A public utility may issue like notes pay- 
 able at periods of not more than one year from the date thereof 
 to pay, retire, discharge or refund, in whole or in part, any such 
 note or notes authorized by this section to be issued without the 
 approval of the commission, and may continue from time to 
 time for a period not exceeding in the aggregate five years from 
 the date of issue of the first note or notes to issue notes of the 
 same character to pay, retire, discharge or refund, in whole or in 
 part, notes previously issued for the same purpose under the 
 authority of this section. Except as otherwise in this section ex- 
 pressly authorized, no such notes payable at periods of not more 
 than one year from the date thereof shall, in whole or in part, 
 directly or indirectly, be paid, retired, discharged or refunded 
 by any issue of stocks, stock certificates, bonds, notes or other 
 evidences of indebtedness of any term or character, or from the 
 proceeds thereof, without the approval of the commission. 
 
 114. Issues Previously Authorized. The provisions of this act 
 shall apply to all stocks, stock certificates, bonds, notes and 
 other evidences of indebtedness of any public utility, other than 
 notes payable at periods of not more than one year from the 
 date thereof, issued by any public utility after this act becomes 
 a law upon the authority of any articles of incorporation or 
 amendments thereto, or vote of the stockholders or directors 
 filed, taken or had before this act becomes a law. 
 
 115. Application of Proceeds of Issues. No public utility shall with- 
 out the consent of the commission apply the issue, or any part 
 thereof, of any stock, stock certificate, bond, note or other 
 evidence of indebtedness, or any proceeds thereof, to any purpose 
 not specified in the commission's order, or to any purpose so speci- 
 fied in excess of the amoiuit authorized for such purpose, or issue 
 or dispose of the same on terms or conditions different from 
 those specified in such order, or a modification thereof. Every 
 term, condition, provision and requirement contained in such 
 order shall be enforced, fulfilled and obeyed by the public utility 
 affected. 
 
 116. Duty of Utilities to Account to Commission for Disposition of 
 Proceeds. The commission may require any public utility to 
 
 ^ 35 
 
account for the disposition of the proceeds of all issues under the 
 provisions of this act of stocks, stock certificates, bonds, notes 
 and other evidences of indebtedness, in such form and detail as 
 it may deem advisable, and to do and perform any and all acts 
 necessary to carry out the provisions of this act. 
 
 117. Contract for Consolidation or Lease Shall Not Be Capitalized. 
 
 No contract for consolidation, merger or lease shall be capital- 
 ized, nor shall any public utility hereafter issue any bonds, notes 
 or other evidences of indebtedness against any contract for 
 consolidation, merger or lease; but this shall not prevent the 
 granting under mortgage or deed of trust with the approval of 
 the commission of any contract for consolidation, merger or 
 lease. 
 
 118. Franchises Not to Be Capitalized. No public utility shall capi- 
 talize, directly or indirectly, any franchise to be a corporation, or 
 any other franchise, right or privilege, or any right to own, oper- 
 ate or enjoy any such franchise, right or privilege whatsoever, 
 in excess of the amount (exclusive of any tax or annual charge) 
 actually paid to the state or to a political subdivision thereof as 
 a consideration for the grant of such franchise, right or privilege; 
 and in determining the value of the property of a public utility 
 for the purposes of this act, no franchise, right or privilege 
 granted to a public utility by the state or by a political sub- 
 division thereof shall be appraised, fixed or considered at any 
 greater amount or value than the sum paid therefor into the 
 public treasury of the state or of the political subdivision grant- 
 ing the same (exclusive of any tax or annual charge). 
 
 119. Capital Stock of Consolidated Corporation. The capital stock, 
 stock certificates and debt of a public utility resulting from 
 merger or formed by consolidation of two or more public utilities 
 shall not exceed the value of the properties merged or con- 
 solidated as foimd and determined by the commission. 
 
 120. Reorganized Utilities. Any public utility which shall have, or 
 may hereafter, become the owner or assignee of any right, power, 
 privilege or franchise of any other public utility, in whole or in 
 part, directly or through an intermediate grantor or grantors, 
 under a deed of trust, mortgage sale, sale in bankruptcy pro- 
 ceedings or sale under any judgment, order, decree or proceedings 
 of any court, including the courts of the United States, shall be 
 subject to the same power of supervision, regulation, restriction 
 
 36 
 
and control that applies to other public utilities under the pro- 
 visions of this act. 
 
 121.' Impairment of Capital. If the commission determines that the 
 capital of a public utility has been or is being impaired or that 
 stocks, stock certificates, bonds, notes or other evidences of 
 indebtedness have been issued in whole or in part for purposes 
 which should have been charged to income, the commission may 
 by order require such public utility to set aside within a reason- 
 able time a sum of money annually or monthly out of income or 
 from any other moneys in the treasury of the public utility not, 
 directly or indirectly, secured or obtained from the issue of 
 stocks, stock certificates, bonds, notes or other evidences of 
 indebtedness of such public utility and may prescribe the period for 
 which such amount shall be set aside, the use to be made of such 
 funds and such other conditions and requirements as it may 
 determine are just, reasonable or proper. 
 
 ' Numbers 122 to 130, inclusive, are not assigned to sections. 
 
 ARTICLE V. 
 
 INTERCORPORATE RELATIONS. 
 
 131. Manner of Assignment, Lease, Mortgage, etc., of Property. No 
 
 public utility shall, after this act becomes a law, assign, transfer, 
 lease, mortgage, grant in trust, sell, or otherwise dispose of or 
 enomiber, directly or indirectly, by any means whatsoever, the 
 whole or any part of its franchises, plant, equipment or other 
 property necessary or useful in the performance of its duties to 
 the public without first having secured from the commission an 
 order approving such assignment, transfer, lease, mortgage, 
 grant in trust, sale, disposal or encumbrance. 
 
 Nothing in this section shall be construed to prevent the 
 sale, lease, assignment or transfer by any public utility of any 
 plant, equipment or other property (exclusive of any franchise, 
 permit, right or privilege to own or operate a plant of a pub- 
 lic utility) , which is not necessary or useful in the performance of 
 its duties to the public, and any property sold, leased, assigned 
 or transferred by a public utility without the approval of the com- 
 mission, shall be conclusively presumed to be property which is 
 not useful or necessary in the performance of its duties to the 
 public as to any purchaser of such property in good faith for 
 value. 
 
 37 
 
132. Manner of Merger or Consolidation. No public utility shall, 
 by any means whatsoever, director indirect, merge or consolidate 
 its franchises, plant, equipment or other property with that of any 
 other public utility without first having secured from the com- 
 mission an order approving such merger or consolidation. 
 
 133. Unauthorized Transfers or Mergers Void. Every assignment, 
 transfer, lease, mortgage, deed of trust, sale, or other disposi- 
 tion or encumbrance of the whole or any part of the franchises, 
 plant, equipment or other property necessary or useful in the 
 performance of its duty to the public of any public utility, or 
 any merger or consolidation thereof, made otherwise than in 
 accordance with the provisions of this act and of the order of 
 the commission authorizing the same, shall be void. 
 
 134. Authority Not to Validate Lapsed Franchises. The author- 
 ization of the commission to assign, transfer, lease, mortgage, 
 sell or otherwise dispose of or encumber a franchise, permit, 
 right or privilege under section 131 of this article, or to merge 
 or consolidate under section 132 of this article, shall not be con- 
 strued to revive or validate any expired, forfeited or invalid 
 franchise, permit, right or privilege, or to enlarge or add to the 
 powers and privileges contained in the grant of any franchise, 
 permit, right or privilege, or to waive any forfeiture. 
 
 135. Manner of Contracting for Operation of Works. No public 
 utility shall make any contract, agreement or arrangement, 
 written or oral, with any other public utility for the operation 
 of its plant, equipment or other property, or any part thereof, 
 so as to relieve such public utility from the performance of its 
 duty to the public, without first having secured from the com- 
 mission an order approving the same. 
 
 136.^ When Approval is to be Given. Whenever application is made 
 to the commission for its approval of — 
 
 (a) The assignment, transfer, lease, mortgage, granting 
 in trust, sale, disposal or encimibrance of any property of a 
 public utility; 
 
 (b) Any merger or consolidation; 
 
 (c) Any contract, agreement or arrangement for the op- 
 eration of the plant, equipment or other property of a public 
 utility — 
 
 The commission shall withhold its approval if it finds that 
 
 > Numbers 137 to 150, inclusive, are not assigned to sections. 
 
 38 
 
the exercise of such privilege is inconsistent with the public 
 interest or detrimental thereto. The commission shall make 
 such order in the premises as it may deem proper and may at- 
 tach such terms and conditions to the exercise of the privilege 
 authorized as it may deem reasonable and proper. 
 
 ARTICLE VI. 
 RATES. 
 
 (a) Requisites of Lawful Rates. 
 
 151. Reasonable Rates, Rules and Regulations. All rates shall be 
 just and reasonable, and all unjust and unreasonable rates are 
 prohibited. 
 
 152. Discrimination Prohibited. No public utility shall directly or 
 indirectly, by any device whatsoever, or in any wise, charge, 
 demand, collect or receive from any person a greater or less or 
 different compensation for any service rendered or to be rendered 
 by such public utility than is charged, demanded, collected or 
 received by such public utility from any other person for a like 
 and contemporaneous service under substantially similar circum- 
 stances and conditions. 
 
 153. Departure from Published Schedules. No public utility shall 
 directly or indirectly, by any device whatsoever, or in any wise, 
 charge, demand, collect or receive from any person a greater 
 or less or different compensation for any service rendered or to 
 be rendered by such public utility than that prescribed in the 
 schedules of such public utility then filed and published in the 
 manner provided in this act nor shall any person receive or 
 accept any service from a public utility for a compensation 
 greater, less or in any way different from that prescribed in 
 such schedules. 
 
 154. Furnishing Part of Facilities. No public utility shall demand, 
 charge, collect or receive from any person less compensation for 
 any service rendered or to be rendered by such public utility 
 in consideration of the furnishing by said person of any part of 
 the facilities incident to such service; provided, nothing herein 
 shall be construed as prohibiting any public utility from renting 
 any facilities incident to service, and paying a reasonable rental 
 therefor. 
 
 39 
 
156. Undue Preference or Advantage Prohibited. No public utility 
 as to rates shall make or grant any undue or unreasonable 
 preference or advantage to any person, locality or particular 
 description of service, or subject any person, locality or par- 
 ticular description of service to any undue or unreasonable 
 prejudice or disadvantage. 
 
 156. Service at Reduced Rates. Nothing in this act shall prohibit 
 any railroad from furnishing free or reduced rate transporta- 
 tion of the person or of property over its line, to officers, 
 attorneys, surgeons, directors or employes of such railroad, or 
 dependent members of their families, or to former employes of 
 such railroad or dependent members of their families where such 
 employes are pensioned, or have become disabled in the service 
 of such carrier or are unable from physical disqualification to 
 continue in such service; nor prohibit the exchange of transporta- 
 tion of the person or of property by such railroad with officers, 
 attorneys, surgeons, directors or employes of other railroads; nor 
 prohibit any telephone or telegraph company from furnishing 
 service free or at reduced rates to officers, attorneys, surgeons, 
 directors or employes of such telephone or telegraph companies 
 or of other telephone or telegraph companies when service is 
 required by such officers, attorneys, surgeons, directors or em- 
 ployes in the performance of their duties; nor prohibit tele- 
 phone, telegraph and express companies from entering into con- 
 tracts with railroads for the exchange of services; provided, 
 that no service of any kind shall be furnished free or at reduced 
 rates by any public utility, or jointly by any public utilities, 
 to any candidate for or incumbent of any office or position 
 under the constitution or laws of this state or under the ordi- 
 nances of any municipality thereof. 
 
 (b) Establishment and Change of Rates. 
 
 157. Establishment of Rates by Utility. Every public utility shall 
 establish, observe and enforce just and reasonable rates. 
 
 158. Commission May Suspend Schedules. To enable it to make 
 such an investigation as in its opinion the public interest requires, 
 the commission, at its discretion, for a period not exceeding three 
 months, may suspend the operation of any rate filed with the 
 commission under the provisions of this article in substitution 
 of any rate then lawfully in effect. Unless as a result of its 
 investigation the commission otherwise orders before the ter- 
 mination of such period of three months, such rate shall there- 
 
 40 
 
upon become effective. The commission may make any order 
 in the premises which it is authorized by any of the provisions 
 of this act to make in an investigation on complaint or on 
 its own motion without complaint. 
 
 159. Establishment of Joint Rates. After hearing on complaint, or 
 on its own motion without complaint, the commission may estab- 
 lish joint services to be participated in by two or more public 
 utilities and may ascertain, determine and fix for such services 
 just and reasonable rates, which shall be charged, enforced, col- 
 lected and observed by such public utilities. 
 
 .160. Division of Joint Rates. Whenever the public utilities involved 
 shall fail to agree among themselves upon the apportionment or 
 division of any joint rate established by the commission or 
 ordered by the commission substituted for any joint rate found 
 to violate any provision of this act, the commission may issue 
 a supplemental order declaring the apportionment or division 
 of such joint rate. 
 
 161. Automatic Adjustment of Charges. Any public utility may 
 enter into an arrangement for a fixed period, not to exceed five 
 years, for the automatic adjustment of charges or character 
 of services performed in relation to the profits to be realized by 
 such public utility, provided, that a schedule of such automatic 
 adjustment of charges or services shall first have been approved 
 by the commission. 
 
 162. Interstate Rates. The commission may investigate all existing 
 or proposed interstate rates, where any act under such rates 
 shall or may take place within this state. When such rates are 
 in the opinion of the commission unjust, unreasonable, unjustly 
 discriminatory, unduly preferential or otherwise or in any respect 
 in violation of the provisions of the act to regulate commerce or 
 of any other act of congress or in conflict with the rules and 
 orders of the interstate commerce commission or of any other 
 department of the federal government, the commission may 
 apply for relief by petition or otherwise to the interstate com- 
 merce commission or to any other department of the federal 
 government or to any court of competent jurisdiction. 
 
 163. Emergency Rates. The commission shall have power, when 
 deemed by it necessary to prevent injury to the business or inter- 
 ests of the public or of any public utility in this state, in case of 
 any emergency to be judged of by the commission, temporarily to 
 
 41 
 
alter, amend or suspend without a public hearing any one or 
 more of the rates of any public utility in the state; such al- 
 teration, amendment or suspension shall be effective not longer 
 than 30 days and shall not be renewed nor extended without a 
 hearing and investigation after reasonable notice to the public 
 utility affected thereby. 
 
 (c) Publicity. 
 
 164. Filing of Schedules. Within a time to be fixed by the commis- 
 sion, every public utility shall file with the commission schedules 
 showing all rates for every service rendered or to be rendered by it. 
 
 165. Filing of Joint Schedules. Where two or more public utilities 
 are engaged in performing joint service, schedules of the rates 
 for such joint service shall be filed with the commission by one of 
 such public utilities; and each of the public utilities party to such 
 joint service, other than the one filing such schedules, shall file 
 with the commission such evidence of concurrence therein, or 
 acceptance thereof, as may be required or approved by the com- 
 mission. 
 
 166. Posting of Schedules. Copies, for the use of the public, of all 
 such schedules as are required by this act to be filed with the com- 
 mission, shall be posted in each public office, not including 
 public pay stations of telephone utilities, of every public utility 
 issuing or participating in such schedules, in such place as 
 to be accessible to the public and conveniently inspected, 30 
 days before they are to take effect, unless a shorter time is per- 
 mitted by the commission; provided, that in lieu of posting 
 its entire schedules at each office, any public utility may file and 
 keep posted at each office schedules of such rates as on applica- 
 tion the commission shall determine to be required in the public 
 interest. 
 
 167. Changes in Schedules. All changes made in any rate of any 
 public utility shall be filed with the commission and posted for 
 the use of the public in the manner herein prescribed for the fil- 
 ing and posting of schedules. 
 
 168. Form of Schedules. The commission may determine and pre- 
 scribe the form in which the schedules required by this act to be 
 filed with the commission and to be kept open to public inspec- 
 tion, and all changes therein, shall be prepared and arranged, and 
 may change the form from time to time if it shall be found expe- 
 dient; provided, however, that the commission shall endeavor 
 
 42 
 
to have such form or forms prescribed by it conform as far as 
 practicable to any similar form or forms prescribed by the inter- 
 state commerce commission. 
 
 169.^ Filing of Contracts, Agreements and Arrangements. Every 
 public utility shall file with the commission copies of such con- 
 tracts, agreements or arrangements with other public utilities to 
 which it may be a party as the commission may designate, and 
 every public utility when and as required shall exhibit to the 
 commission any contract, agreement or arrangement with any 
 person or copies thereof. Every public utility shall, whenever re- 
 quired by the commission, file with the commission statements of 
 passes, tickets, mileage books or franks, issued by such public 
 utility free or at rates lower than those open to the public in 
 general, or of other authorization of service free or at reduced 
 rates, said statements to cover such periods of time and such 
 classes of service, and to include such information connected 
 with the issuance thereof, as the commission may prescribe; pro- 
 vided, that no contract, arrangement or authorization of a 
 public utility herein referred to shall be open to or inspected 
 by the public without a special order of the commission to 
 that effect. 
 
 ' Numbers 170 to 200, inclusive, are not assigned to sections. 
 
 ARTICLE VII. 
 ADEQUACY AND SAFETY OF SERVICE. 
 
 201. Service Required to be Adequate and Safe. The service and 
 facilities of every public utility shall be adequate and safe and 
 every service regulation shall be just and reasonable. 
 
 202. Unjust Discrimination in Service Prohibited. It shall be un- 
 lawful for any public utility to make, or to permit to exist, any 
 unjust discrimination or undue preference with respect to its 
 service, facilities or service regulations. 
 
 203. Standards of Service. The commission may prescribe adequate 
 standards of service rendered or to be rendered by any public 
 utility, and may prescribe regulations for the examination and 
 testing of such service and for the measurement thereof. 
 
 204. Inspection of Service by Commission. The commission may 
 provide for the inspection of the manner in which any public 
 utility conforms to regulations prescribed by the commission for 
 the examination and testing of its service, and for the measure- 
 
 43 
 
ment thereof, and the commission may examine and test the 
 service of any public utility and the measurement thereof. 
 
 206. Meter Accuracy. The commission may prescribe rules, regula- 
 tions and standards to secure the substantial accuracy of all 
 meters and appliances for measurement, and every public utility 
 is required to comply therewith. 
 
 206. Inspection of Meter Accuracy. The commission may provide 
 for the inspection of the manner in which any public utility 
 complies with the rules, regulations and standards fixed by the 
 commission to secure the accuracy of all meters and appliances 
 for measurements, and the commission may examine and test 
 any and all meters and appliances for measurements under such 
 rules and regulations as it may prescribe, and at all inspections 
 and tests made in pursuance of complaints representatives of 
 the public utility complained of and of the complainant may 
 be present. 
 
 207. Measuring Appliances ; Testing ; Fees. Any consumer or user 
 may have any meter or appliance for measurement tested by the 
 commission upon payment of fees fixed by the commission. The 
 commission shall declare and establish reasonable fees to be paid 
 for examining and testing such appliances on the request of con- 
 stuners or users, the fee to be paid by the consumer or user at the 
 time of his request, but to be paid by the public utility and re- 
 funded to the consumer or user if the measuring appliance 
 be found unreasonably defective or incorrect to the disadvantage 
 of the consumer or user. 
 
 208. Standardization of Measuring Instruments. The commission 
 may make such provisions as it deems desirable for the calibra- 
 tion, checking or standardization to secure their accuracy of 
 measuring instruments used by any public utility and in so 
 doing it shall conform as closely as practicable to the standards 
 and methods of standardization of the National Bureau of 
 Standards. 
 
 209. Entry Upon Premises. The commission, or its representatives 
 duly accredited, shall have power to enter upon any premises 
 occupied by any public utility for the purpose of making the 
 examinations and tests provided for in this article, and to set up 
 and use on such premises any apparatus and appliances and oc- 
 cupy reasonable space therefor. 
 
 210. Joint Use of Facilities. Whenever after hearing and investiga- 
 tion the commission shall find that public convenience and neces- 
 
 44 
 
sity require the use by one public utility of the conduits, subways, 
 tracks, wires, poles, pipes or other property or equipment, or any 
 part thereof along any street or highway, whether on, over or un- 
 der such street or highway, belonging to another public utility, and 
 that such use will not prevent the owner or other users thereof 
 from performing their public duties nor result in serious injury 
 to such owner or other users of such conduits, subways, tracks, 
 wires, poles, pipes or other property or equipment, or in any 
 substantial detriment to the service, or danger to the public or 
 employes, and that such public utilities have failed to agree 
 upon such use, or the terms and conditions or compensation for 
 the same, the commission may by order direct that such use be 
 permitted and prescribe a reasonable compensation and rea- 
 sonable terms and conditions for such joint use. 
 
 211. Telephone and Telegraph Physical Connection. Whenever after 
 hearing and investigation the commission shall determine that 
 public convenience and necessity require a physical connection 
 for the establishment of a continuous line of communication be- 
 tween any two or more public utilities for the conveyance of tele- 
 phone or telegraph messages, and that such physical connection 
 will not prevent the owners of any part of such proposed continu- 
 ous line of communication from performing their public duties nor 
 result in serious injury to such owners of any part of the proposed 
 continuous line of communication, ths commission may by order 
 ascertain, determine and fix the reasonable terms and condi- 
 tions of such physical connection, and all rules and regulations, 
 including the charge that shall be made to the public for the 
 use of such continuous line and the division of the charge be- 
 tween such two or more public utilities, and the division or 
 apportionment of the cost of making such physical connection 
 between such public utilities, and it shall be the duty of such 
 public utilities thereafter to conform to such order of the com- 
 mission. 
 
 212. Accidents Reported to Commission. Every public utility shall 
 report to the commission, under rules and regulations pre- 
 scribed by the commission and harmonizing in so far as prac- 
 ticable with those of the interstate commerce commission and 
 of any other department of this state, every accident occurring 
 upon the property of any public utility or directly or indirectly 
 arising from or connected with the maintenance or operation of 
 the plant, equipment, appliances, apparatus, property or facil- 
 ities of such public utility resulting in loss of life or injury to 
 
 45 
 
person or property; provided, that whenever any accident 
 occasions the loss of life or limb to any person, such public 
 utility shall straightway advise the commission of the fact by 
 the speediest available means of communication. No such report 
 when filed with the commission shall be open to public inspection 
 unless specially authorized by the commission. 
 
 213.^ Commission to Investigate Accidents. The commission shall 
 investigate the cause of all such accidents resulting in loss of life 
 or injury to person or property as in the judgment of the com- 
 mission require investigation by it, and the commission shall 
 have power to make such recommendation with respect thereto 
 as in its judgment may be just and reasonable. 
 
 I Numbers 214 to 229, inclusive, are not assigned to sections. 
 
 ARTICLE VIII. 
 REGULATION OF ACCOUNTS AND REPORTS. 
 
 230. Application to Municipalities. The provisions of this article, 
 and all penalties provided in this act for the violation of such 
 provisions shall apply and are hereby made applicable to any 
 municipality which owns, leases or controls any plant, property 
 or equipment for any of the purposes described and specified in 
 paragraph (a) of section 15 of this act, and the term "public 
 utility," when used in the provisions of this article and in 
 other such provisions of this act, shall mean and include 
 every such municipality. It shall be the duty of every such 
 municipality, after this act takes effect, to comply with such 
 provisions of this act and with any order of the commission 
 made in pursuance thereof. 
 
 231. Commission to Prescribe Uniform Accomits. The commission 
 shall prescribe, establish and order a system of accounts for 
 each public utility, which system shall be uniform for all public 
 utilities of the same kind and class, and may make such regula- 
 tions regarding the accounts and the statistics of each public 
 utility for the purpose of instiring uniform and correct books of 
 account and record, as in the judgment of the commission may be 
 necessary to carry out any of the provisions of this act. 
 
 232. Commission May Classify Utilities. The commission may 
 classify public utilities of the same kind in respect to the systen; of 
 accoimts and regulations regarding accounts and statistics, and 
 
 46 
 
in such classification shall consider the ability of public utilities 
 to comply with its requirements as well as the public interests 
 involved. 
 
 233. Commission May Alter Requirements. The commission may 
 from time to time alter, amend or repeal any system of accotmts 
 and any regulations regarding accounts and statistics. Notice 
 of alterations or amendments shall be given to the public utilities 
 affected thereby at least six months before the beginning of a 
 fiscal year. 
 
 234. Accounts Kept in State. Every public utility fiunishing serv- 
 ice within the state shall maintain an office located in the state, 
 in which shall be kept such books of account and such records as 
 the commission shall require to be kept in the state. 
 
 236. Depreciation Reserve Required. Every public utility shall 
 carry a proper and adequate depreciation account. 
 
 236. Forms of Account for Depreciation. The commission shall 
 prescribe rules, regulations and forms of accounts regarding such 
 depreciation account which public utilities shall carry into effect. 
 
 237. Commission May Fix Depreciation Rates. The commission 
 may in its discretion from time to time ascertain and determine 
 and by order fix the proper and adequate rates of depreciation 
 on the several classes of property of each public utility. 
 
 238. Use of Depreciation Reserve. The moneys set aside by a pubhc 
 utility for depreciation shall be expended, until required for 
 renewals or replacements, only for purposes chargeable to 
 capital according to the system of accotmts prescribed by the 
 commission, for the retirement of its obligations and for such other 
 purposes and under such rules and regulations as the com- 
 mission may from time to time prescribe. 
 
 239. Provision for Impairment of Capital. The commission, in its 
 discretion, whenever the circumstances require, may direct that 
 any public utility shall make provision from income from other 
 than capital sources, under the system of accounts prescribed, for 
 impairment of capital due to depreciation and other causes, which 
 impairment was not provided for through charges against revenue 
 or otherwise at the time of its occurrence or subsequently, and 
 it shall be the duty of such public utility to comply with such 
 direction. 
 
 47 
 
240. Utilities to Conform to System, (a) Every public utility shall 
 keep its books, papers and records accurately and faithfully ac- 
 cording to the system of accounts and regulations prescribed by 
 the commission, and shall comply with all directions of the com- 
 mission relating thereto. It shall be unlawful for any public 
 utility to keep any general ledger or balance sheet accounts other 
 than those prescribed or approved by the commission or by the 
 interstate commerce commission. 
 
 (b) Every public utility when required by the commis- 
 sion shall file with the commission a certification by a public 
 accountant as to the compliance by the public utility with the 
 system of accounts and regulations regarding accounts and sta- 
 tistics prescribed by the commission. The commission, in its 
 discretion, may require that the accountant employed by a 
 public utility for such certification shall not be a shareholder, 
 officer or other permanent or regular employe of such public 
 utility. 
 
 241. Commission May Audit Accounts. The commission may pro- 
 vide for the examination and audit of all accounts of public 
 utilities. If it shall determine that any expenditures or receipts 
 have been improperly charged or credited it may order the 
 necessary changes in the accounts. 
 
 242. Utilities Required to Report to Commission. Every public 
 utility, when and as required by the commission, shall file with 
 the commission such annual, monthly or other regular reports, 
 or special reports, and such other information as the commission 
 may desire. When required by the commission, such reports 
 and information shall be certified under oath by a duly author- . 
 ized officer having knowledge of the matters contained therein, 
 and the commission may in addition thereto at its discretion 
 require a certification by a public accountant. The commis- 
 sion may at any time require from any public utility specific 
 answers to any questions upon which it may desire information. 
 The commission may in its discretion grant extensions of the 
 time within which reports and information are required to be 
 filed. Annual reports, however, shall be filed within two months 
 after the close of the fiscal year and any extensions of such 
 period shall not exceed in the aggregate 30 days. 
 
 243. Commission To Prepare Blank Forms. The commission shall 
 prepare and distribute to every public utility blank forms for 
 any report or reports required under this act. 
 
 48 
 
244.' Defective Reports. When any report is erroneous or defective 
 the commission may require the pubHc utility to amend such 
 report within a time to be prescribed by the commission. 
 
 1 Numbers 24s to 270, inclusive, are not assigned to sections. 
 
 ARTICLE IX. 
 FRANCHISES. 
 
 271. Future Franchises Granted to Public Utilities. No license, 
 permit, or franchise to construct, own or operate any plant or 
 facility of a public utility shall be hereafter granted or trans- 
 ferred to any grantee or transferee other than a corporation 
 duly incorporated or licensed or permitted to do a public utility 
 business under the laws of this state, except in case of a person 
 claiming by, through or under a valid mortgage or deed of trust 
 of any such license, permit or franchise or a purchaser at a 
 judicial sale; and any such person or purchaser shall be' subject 
 to the provisions of this act so far as applicable. 
 
 272. Certificate Before Furnishing Service. No public utility 
 after this act becomes a law shall furnish any new service in 
 this state or begin the construction of any new plant or new 
 facility in any street or public place until it shall have obtained 
 a certificate from the commission that public convenience and 
 necessity require the furnishing of such new service or the con- 
 struction of such new plant or new facility. 
 
 273. Exercise of Franchises Previously Granted. No public utility 
 shall exercise any right or privilege in any place or territory 
 under any franchise or permit heretofore granted but not here- 
 tofore actually exercised in such place or territory or the exercise 
 of which therein has been suspended for more than one year 
 without first having obtained from the commission a certificate 
 that public convenience and necessity require the exercise of 
 such right or privilege. 
 
 274. Certificate of Convenience and Necessity. Whenever after 
 hearing the commission determines that any new construction 
 or the furnishing of any new service by a public utility will pro- 
 mote the public convenience and necessity it shall have the 
 power to issue a certificate to that effect, and in such certificate 
 may limit and define the territory in which such construction 
 may be made or the area in which such service may be supplied. 
 
 49 
 
275. Authority Exercised Within One Year. Unless exercised 
 within a period designated by the commission but not exceeding 
 one year from the grant thereof, exclusive of any delay due to 
 the order of any court or to failure to obtain any grant or consent, 
 authority conferred by a certificate of convenience and necessity 
 issued by the commission shall be null and void. 
 
 276. Franchises Subject to Regulation by Commission. Every 
 license; permit or franchise, hereafter granted to any public 
 utility by the state or by any municipality and all future con- 
 tracts, ordinances, rules, regulations and orders entered into 
 or made by any municipality relating to the use or enjoyment of 
 rights and franchises granted to any public utility, shall be sub- 
 ject to the exercise by the commission of any and all of the powers 
 of regulation provided for in this act. 
 
 277. Provisions and Duration of Future Grants. Every license 
 permit or franchise hereafter granted to a public utility by a 
 municipality shall be so granted subject to the provisions of this 
 act and to the authority of the commission to regulate and 
 supervise such public utility as in this act provided; and every 
 such license, permit or franchise which does not provide for the 
 ultimate acquisition of the plant or facility by the municipality 
 shall be not limited in time but shall continue in force until such 
 time as the municipality shall exercise its right to acquire, as 
 provided in this act, or until it shall be otherwise terminated 
 according to law. 
 
 278. Consent to Future Purchase; New Franchise. Any public 
 utility rendering, or entitled to render, service in any munic- 
 ipality under a license, permit or franchise granted before this 
 act takes effect may file with the commission and with such 
 municipality its consent to a future purchase, taking and oper- 
 ation by a municipality in accordance with the provisions of this 
 act of its property acquired, constructed or operated in pur- 
 suance of such license, permit or franchise and actually used and 
 useful for the convenience of the public. By the act of filing 
 such consent the public utility may have and receive a franchise 
 subject to the provisions of this act and to the terms and condi- 
 tions of any valid contract between the public utility and the 
 municipality to furnish service in the same municipality area 
 or territory of the kind or class which it is then lawfully fur- 
 nishing under such license, permit or franchise granted before 
 this act takes effect. A franchise so obtained however, shall 
 
 5° 
 
be subject to alterations, amendment or repeal by act of the 
 legislature. 
 
 279. Future Grants; Acceptance: Implied Consent. Any public 
 utility accepting or operating under any license, permit or 
 franchise hereafter granted shall, by acceptance of any such 
 license, permit or franchise, be deemed to have consented to a 
 future purchase, taking and operation by a municipality in ac- 
 cordance with the provisions of this act of its property acquired, 
 constructed or operated in pursuance of such license, permit or 
 franchise and actually used and useful for the convenience of 
 the public, for the just compensation and under the terms and 
 conditions of piu-chase and sale determined by the commission, 
 and shall thereby be deemed to have waived the right of requiring 
 the necessity of such taking to be established by the verdict of 
 a jury, and to have waived all other remedies and rights rela- 
 tive to condemnation, except such rights and remedies as are 
 provided in this act. 
 
 280. Municipalities ; Powers ; Acquiring and Operating Plants, (a) 
 
 Any municipality shall have the power, subject to the provi- 
 sions of this act, to acquire or to construct and to operate a 
 public utility plant, property or facility for any of the purposes 
 described in paragraph (a) of section 15 of this act, herein- 
 after termed a municipal plant. 
 
 (b) Any municipality shall have the power, subject to the 
 provisions of this act, to purchase by an agreement with any 
 public utility and to operate any part of any public utility plant, 
 property or facility, provided that such purchase and the terms 
 thereof shall be approved by the commission after a public 
 hearing. 
 
 (c) Any municipality shall have the power, subject to the pro- 
 visions of this act, to acquire by condemnation and to operate the 
 property of any public utility actually used and useful for the 
 convenience of the public then operating imder a license, permit 
 or franchise existing at the time this act takes eflfect, or operating 
 in such municipality without any permit or franchise. 
 
 (d) Any municipality shall have the power, subject to the pro- 
 visions of this act, to acquire by purchase as provided in this act, 
 and to operate the property actually used and useftil for the 
 convenience of the public of any public utility which has con- 
 sented to the purchase, taking and operation of such property 
 by a municipality. 
 
 51 
 
(e) No municipality shall hereafter enter upon the original 
 construction of any municipal plant for a public utility service 
 where there is in operation in such municipality a public utility 
 engaged in the same kind of service without first obtaining from the 
 commission a declaration, after a public hearing, that public con- 
 venience and necessity require the service of such municipal plant. 
 
 (f) Any municipality which has acquired or constructed 
 any public utility plant, property or facility shall have the power 
 to contract with a public utility for the operation of any part 
 or the whole thereof, subject to the provisions of this act and to 
 the exercise by the commission in respect to such public utility 
 of the powers of regulation and supervision conferred upon it 
 by this act. 
 
 281. Action by Municipalities to Acquire Plants. Any municipality 
 may determine to acquire the propgrty of a public utility, as 
 authorized under the provisions of this act, by a vote of a 
 majority of the electors voting thereon at any general, munic- 
 ipal or special election at which the question of the purchase 
 of such property shall have been submitted. In the event that 
 such property shall be operated at the time of such determina- 
 tion imder a license, permit or franchise now existing and the 
 public utility shall not have agreed to such purchase by the 
 municipality, such municipality shall bring an action in the 
 court of record of general jurisdiction of the county in which 
 such municipality is situated against the public utility as 
 defendant praying the court for an adjudication as to the 
 necessity of such taking by the municipality. The public 
 utility shall serve and file its answer to such complaint within 
 30 days after the service thereof, whereupon such action shall 
 be at issue and stand ready for trial upon 30 days' notice by 
 either party. Unless the parties thereto waive a jury, the 
 question as to the necessity of the taking of such property by 
 the municipality shall be submitted to a jury. 
 
 282. Property Taken; Compensation. Any municipality purchasing 
 the plant, property or facilities of a public utility as aforesaid 
 shall purchase the whole of such plant, property or facilities 
 within its limits used and useful for the convenience of the 
 public in the production of the same kind of service as that pro- 
 posed to be established by the municipality. 
 
 283. Municipality May Serve Outside Limits. Where the major 
 part of the plant, property or facilities of such utility lies within 
 the limits of the municipality ptirchasing the same but other 
 
 52 
 
parts of such plant, property or facilities lie without its limits, 
 the municipality may purchase the whole or such parts of such 
 plant, property or facilities outside of its limits as the com- 
 mission, taking into consideration the rights of the public utility 
 and of the other municipalities in which it operates, may, after 
 notice to all parties interested and a public hearing, determine 
 is in the public interest and is necessary for the proper carry- 
 ing on of its business. 
 
 284. Status of Municipal Plant in another Municipality. A mu- 
 nicipality which has acquired as hereinbefore provided the plant, 
 property or facilities of a public utility in any other municipality 
 may thereafter operate therein as a public utility with the same 
 rights and franchises and subject to the same limitations and 
 obligations as the utility from which such outlying plant was 
 purchased would have had, or to which it would have been sub- 
 ject, had such purchase not been made. If the outlying mu- 
 nicipality shall itself vote to establish a municipal plant, all the 
 provisions of this act shall be binding as to said pmrchase. 
 
 285. Compensation to be Determined by Commission; Notice 
 
 Whenever the commission shall have been notified by either party 
 that a municipality has decided to purchase the plant, property 
 or facilities of a public utility and that the parties to such pur- 
 chase and sale have been unable to agree on just compensation 
 to be paid and received, the commission shall proceed to set a 
 time and place for a public hearing upon the matters of the just 
 compensation to be paid for the taking of the property of such 
 public utility and of all other terms and conditions of the pur- 
 chase and sale, and shall give to the mimicipality and the public 
 utility interested not less than 30 days' notice of the time and 
 place when and where such hearing will be held and such matters 
 considered and determined, and shall give like notice to all mort- 
 gagees, trustees, lienors, and all other persons having or claiming 
 to have any interest in such public utility, by publication of such 
 notice once a week for not l<iss than three successive weeks in at 
 least one newspaper of general circulation and published in the 
 county in which the property of such public utility to be taken is 
 located, which publication shall be caused to be made by the 
 municipality. Within a reasonable time, not exceeding one 
 year, after the time iixed for such hearing in such notice, the 
 commission shall, by order, fix and determine and certify to the 
 municipal council, to the public utility and to any mortgagee, trus- 
 tee, lienor or other creditor appearing upon such hearing, the just 
 
 53 
 
compensation to be paid for the taking of the property of such 
 public utility actually used and useful for the convenience of the 
 public and all other terms and conditions of sale and purchase 
 which it shall ascertain to be reasonable. The compensation 
 and other terms and conditions of sale and purchase so certified 
 shall constitute the compensation and terms and conditions to be 
 paid, followed and observed in the purchase of such plant from 
 such public utility. Upon the filing, of such certificate with the 
 clerk of such municipality and upon compliance with the terms 
 and conditions of sale so certified, the exclusive use of the 
 property taken shall vest in such municipality. 
 
 286. Appeal. Any public utility or the municipality or any mort- 
 gagee, lienor or other creditor of the public utility, being dis- 
 satisfied with such order, may within 30 days commence and 
 prosecute an action in the court of record of general jurisdic- 
 tion of the county in which the piu'chasing municipality is 
 located to alter or amend such order or any part thereof. 
 
 287. If Decision Affirmed. If the court shall not adjudge that the 
 compensation fixed and determined in such order is unjust 
 or that some of the terms or conditions fixed and determined 
 therein are in some particulars unreasonable, the compensation, 
 terms and conditions fixed in said order shall be the compensa- 
 tion, terms and conditions to be paid, followed and observed 
 in the purchase of said plant from such public utility. 
 
 288. If Decision for Utility. If the court shall adjudge that such 
 compensation is imjust or that some of such terms or condi- 
 tions are unreasonable, the court shall remand the same to the 
 commission with such findings of fact and conclusions of law 
 as shall set forth in detail the reasons for such judgment and 
 the specific particulars in which such order of the commission 
 is adjudged to be unreasonable or unjust. 
 
 289.^ Reconsideration of Compensation. If the compensation fixed 
 by the previous order of the commission be adjudged to be 
 unjust or the terms and conditions unreasonable, the commission 
 shall forthwith proceed to set a re-hearing for the re-determina- 
 tion of such compensation and terms and conditions as in the 
 first instance, subject to the provisions of sections 286 to 288 
 hereof. 
 
 ^ Numbers 2go to 300, inclusive, are not assigned to sections. 
 
 54 
 
ARTICLE X. 
 COMMISSION PROCEDURE AND PRACTICE. 
 
 301. Rules of Practice. The commission may from time to time 
 make, publish or amend niles for the order and regulation of all 
 proceedings and investigations which under the provisions of 
 this act it is authorized to conduct. 
 
 302. Complaint Served on Utility Complained of. Whenever com- 
 plaint has been made to the commission, as elsewhere in this act 
 provided for, the commission may serve on the person com- 
 plained of a copy of such complaint, and may proceed to in- 
 vestigate the matters complained of. 
 
 303. Hearing and Investigation. Whenever the commission shall 
 determine to conduct an investigation of any rate or of any 
 service, either with or without complaint as in this act pro- 
 vided for, it shall fix a time and place for public hearing of the 
 matters under investigation, and shall notify the complainant, 
 the person complained of, and such other persons as it may deem 
 proper, of such time and place of hearing, at least ten days in 
 advance thereof. At the hearing held pursuant to such notice, 
 the commission may take such testimony as may be offered or as 
 it may desire, and may make such other or fiurther investigation 
 as in its opinion is desirable. 
 
 304. Service on Public Utilities. Service on any person of any 
 notice or order or other matter tmder the provisions of this 
 act may be made by depositing in the mail such notice or order 
 or other matter or a certified copy thereof, directed to the public 
 utility at the principal office of the public utility in this state. 
 
 305. Separate Hearings. When complaint is made of more than one 
 matter or thing the commission may order separate hearings there- 
 on and may hear and determine the several matters complained 
 of separately and at such times as it may prescribe. All hear- 
 ings conducted by the commission shall be open to the public. 
 In any hearing, proceeding or investigation conducted by the 
 commission, any party may be heard in person or by attorney. 
 
 306. Power to Administer Oaths and Subpoena Witnesses; Con- 
 tempt. The commission and each of the commissioners, for 
 the purposes mentioned in this act, may administer oaths, certify 
 to official acts, issue subpoenas, compel the attendance of wit- 
 
 55 
 
nesses and the production of papers, books, accounts, documents 
 and testimony. In case of failure on the part of any person 
 or persons to comply with any order of the commission, or any 
 commissioner, or any subpoena., or of the refusal of any witness 
 to testify to any matter regarding which he may be interrogated 
 lawfully, it shall be the duty of the court of record of general juris- 
 diction of any county, or the judge thereof, on application of the 
 commission or of a commissioner, to compel obedience by attach- 
 ment proceedings for contempt, as in the case of disobedience of 
 the requirements of a subpoena issued from such court or a refusal 
 to testify therein. 
 
 307. Attendance of Witnesses. Any party to a proceeding before the 
 commission with the consent of the commission shall have process 
 to enforce the attendance of witnesses and the production of 
 books, papers, maps, contracts, reports and records of every de- 
 scription affecting the subject matter of the investigation. 
 
 308. Compensation of Witnesses. Witnesses who are summoned 
 before the commission shall be paid the same fees and mileage that 
 are paid to witnesses in the courts of record of general jurisdiction 
 in this state. Witnesses whose depositions are taken pursuant 
 to the provisions of this act and the magistrate or other officer 
 taking the same shall be entitled severally to the same fees as are 
 paid for like services in courts of record of original jurisdiction in 
 
 • this state. 
 
 309. Immunity of Witnesses. No person shall be excused from testi- 
 fying or from producing books, accounts and papers in any inves- 
 tigation or inquiry by or hearing before the commission or any 
 commissioner when ordered so to do, based upon or growing out 
 of any violation of the provisions of this act, on the ground or 
 for the reason that the testimony or evidence, documentary or 
 otherwise, required of him, may tend to incriminate him or 
 subject him to penalty or forfeiture; but no person having so 
 testified shall be prosecuted or subjected to any penalty or for- 
 feiture for or on account of any transaction, matter or thing 
 concerning which he may have testified or produced any documen- 
 tary evidence; provided, that no person so testifying shall be ex- 
 empt from prosecution or punishment for perjury in so testifying ; 
 and provided, further, that any person may expressly waive the 
 protection of this section. 
 
 310. Depositions. The commission, or with the consent of the com- 
 mission any party to any proceeding before the commission, may,. 
 
 56 
 
in any investigation, cause the depositions of witnesses residing 
 within or without the state to be taken in the manner prescribed 
 by law for like depositions in civil actions in the courts of record 
 of general jurisdiction in this state. 
 
 311. Rules of Evidence. In the conduct of all hearings and investi- 
 gations, the commission shall not be bound by the technical rules 
 of evidence. No informality of any proceeding or in the manner 
 of taking testimony before the commission or any commissioner 
 or any agent of the commission shall invalidate any order, deci- 
 sion, rule or regulation made, approved or confirmed by the com- 
 mission, 
 
 312. Dismissal of Complaint; Absence of Damage to Complainant. 
 
 No complaint shall at any time be dismissed solely because of 
 absence of direct damage to the complainant. 
 
 313. Record of Proceedings. The minutes of all hearings had before 
 or by the commission shall be kept, and shall include the names 
 of all persons who appeared and witnesses who were sworn, with 
 the identification of any documentary evidence produced. 
 
 314. Transcripts of Testimony. Parties to any proceeding before the 
 commission shall be entitled to transcripts of the testimony 
 taken in such proceedings, subject to such reasonable rules and 
 regulations as the commission may prescribe. 
 
 316. Opinions and Orders Published. Every order of the commis- 
 sion shall be in writing and in cases of importance may be ac- 
 companied by an opinion setting forth in brief the facts on which 
 the commission has based its order. The commission shall pro- 
 vide for the publication from time to time and for the assem- 
 bling of its opinions and orders. 
 
 316. Effective Date of Orders. Unless a different time be prescribed 
 by the commission, every order of the commission shall be- 
 effective 30 days after the service thereof. 
 
 317. Service on Parties. Straightway after the entry of record of 
 any order of the commission, notice thereof shall be given ta 
 every party required to obey the order. 
 
 318. Modification of Orders. At any time after the entry thereof 
 the commission in the manner provided for the making thereof 
 may alter, amend, annul or otherwise modify any order. 
 
 57 
 
319.^ Rehearings. At any time after an order has been made by 
 the commission any person interested therein may apply for a 
 rehearing in respect to any matter determined therein and 
 the commission shall grant and hold such a rehearing if in its 
 judgment sufficient reason therefor be made to appear, which 
 rehearing shall be subject to such rules as the commission 
 may prescribe. Application for such a rehearing shall not excuse 
 any public utility or person from complying with or obeying an 
 order of the commission or operate in any manner to stay or post- 
 pone the enforcement thereof except as the commission may by 
 order direct. Any order of the commission made after such 
 rehearing shall have the same force and effect as an original 
 order but shall not affect any right or the enforcement of any 
 right arising from or by virtue of the original order, except as 
 directed by the commission. 
 
 I Numbers 320 to 330, inclusive, are not assigned to sections. 
 
 ARTICLE XI. 
 ENFORCEMENT OF ACT. 
 
 331. Commission May Begin Suit. Whenever the commission shall 
 be of the opinion that any public utility is failing or omitting, 
 or is about to fail or omit, to do any thing required of it by this 
 act, or by any order of the commission, or is doing any thing, or 
 about to do any thing or permitting any thing, or about to per- 
 mit any thing to be done, contrary to or in violation of the pro- 
 visions of this act, or of any order of the commission, it may begin 
 and prosecute in any court of competent jurisdiction an appro- 
 priate action at law or in equity to remedy or to prevent such 
 real or proposed violation. 
 
 332. Venue. All provisions of the law of this state relating to 
 venue shall apply to proceedings under this act, and in addition 
 any action at law or in equity to enforce any provision of this 
 act or of any order of the commission, or to prevent any pro- 
 posed violation thereof, may be commenced in the court of 
 record of general jurisdiction in such matters in and for the 
 county in which the principal office of the commission is lo- 
 cated or in the county where the principal office in the state 
 of the public utility is located. 
 
 58 
 
333. Duty of Courts to Entertain Actions. All provisions of the 
 laws of this state prescribing the duties and jurisdictions of the 
 courts thereof shall apply to this act, and in addition it shall be 
 the duty of the court of record of general jurisdiction in like 
 matters in the county in which the commission has its principal 
 office to entertain and determine all actions commenced under 
 the provisions of section 331 of this act, and to enforce the pro- 
 visions of this act, or of any order of the commission, by manda- 
 mus, or by injunction, or by any other appropriate remedy. 
 
 334. Commission May Order Reparation. When complaint has 
 been made to the commission concerning any rate of any public 
 utility and the commission has found after investigation that 
 the public utility has charged an excessive or unjustly dis- 
 criminatory amount for any service, the commission may in its 
 discretion order that the public utility make due reparation to 
 the complainant therefor, with interest at the legal rate from 
 the date of payment of such excessive or imjustly discriminatory 
 amount. 
 
 335. Action to Enforce Order for Reparation. If a public utility does 
 not comply with an order of the commission for the payment of 
 money within the time fixed in such order, the complainant, or 
 any person for whose benefit such order was made, may file in 
 any court of competent jurisdiction a petition setting forth 
 briefly the causes for which he claims damages and the order of 
 the commission in the premises. In such action the findings 
 and order of the commission shall be prima facie evidence of 
 the facts therein stated. If the petitioner shall finally prevail 
 he shall be allowed a reasonable attorney's fee to be taxed and 
 collected as a part of the costs of the action. 
 
 336. Limitations upon Actions for Reparation. All complaints for 
 the recovery of damages shall be filed with the commission within 
 two years from the tune the service as to which complaint is 
 made was completed or performed, and not after, and a peti- 
 tion for the enforcement of an order of the commission for the 
 payment of money shall be filed in the proper court within one 
 year from the date of the order and not after. 
 
 337. Refund of Amounts Collected in Excess of Schedule Rates. 
 
 Whenever any public utility shall charge, collect or receive any 
 rate or rates in excess of the rates fixed in the schedule of charges 
 
 59 
 
then in force, as provided in this act, it shall be the duty of such 
 public utility straightway to refund to the person paying such 
 excessive rates the difference between the lawful rates fixed 
 in such schedule and the rates so charged, collected or received. 
 
 338. Actions to Set Aside Orders of Commission. Any person in 
 interest, being dissatisfied with any order of the commission, 
 may commence an action in the court of record of general juris- 
 diction in such matters in and for the county in which the com- 
 mission has its principal office, to vacate and set aside such 
 order on the ground that the commission lacked authority in 
 the premises or that if enforced the order would violate a 
 provision, or provisions, of any law of this state, or of the 
 constitution of this state or of the United States. The 
 answer of the commission to the complaint shall be served and 
 filed within 30 days after service of the complaint, whereupon 
 said action shall be at issue and stand ready for trial upon 
 ten days' notice to either party. 
 
 339. Limitation on Appeals and Actions to Set Aside. Every pro- 
 ceeding, action or suit to set aside, vacate or annul any determi- 
 nation or order of the commission, or to enjoin the enforcement 
 thereof, or to prevent in any way such order or determination 
 from becoming effective, shall be commenced, and every appeal 
 to the courts or right of recourse to the courts shall be taken or 
 exercised, within 30 days after the service of a copy of such 
 order or determination on the public utility or public utilities 
 party thereto, and the right to commence any such action, 
 proceeding or suit or to take or exercise any such appeal or right 
 of recourse to the courts shall terminate absolutely at the end of 
 such 30 days after such service. 
 
 340. New Evidence upon Trial. If upon trial of such action evidence 
 shall be introduced by the plaintiff which is found by the court to 
 be different from that offered upon the hearing before the commis- 
 sion, or additional thereto, the court, before proceeding to render 
 judgment, unless the commission or its attorney shall file a 
 consent in writing to the contrary, shall transmit a copy of 
 such evidence to the commission and shall stay further pro- 
 ceedings in such action for such time as the court may by order fix 
 
 60 
 
341. Reconsideration by Commission. Upon the receipt of such evi- 
 dence, the commission shall consider the same and may alter, 
 modify, amend or rescind its order complained of in said action 
 and shall report its action thereon to said court within ten days 
 from the receipt of such evidence. 
 
 342. Supplemental Findings ; Procedure by Court. If the commis- 
 sion shall rescind its order complained of the action shall be dis- 
 missed; if it shall alter, modify or amend the same, such altered, 
 modified or amended order shall take the place of the original 
 order complained of and judgment shall be rendered thereon as 
 though made by the commission in the first instance; if the orig- 
 inal order shall not be rescinded or changed by the commission, 
 judgment shall be rendered upon such original order. 
 
 343. Appeal to Court of Last Resort. Either party to said action, 
 within 30 days after service of a copy of the order or judgment 
 of the court of original jurisdiction, may appeal to the court of 
 last resort. Where an appeal is taken, the cause shall, on the 
 return of the papers to such court, be immediately placed on the 
 calendar of the then pending term and shall be assigned and 
 brought to a hearing in the same manner as other cases on such 
 calendar. 
 
 344. Burden of Proof. In all trials, actions and proceedings arising 
 under the provisions of this act, or growing out of the exercise of 
 the authority and powers granted herein to the commission, the 
 burden of proof shall be upon the party adverse to the commis- 
 sion or seeking to set aside any determination, requirement, di- 
 rection or order of the commission, to show that the determi- 
 nation, requirement, direction or order of the commission com- 
 plained of is unlawful or violates a provision of any law of this 
 state or of the constitution of this state or of the United States, 
 as the case may be. 
 
 345. Court Procedure and Officers. In all actions and proceedings 
 in court arising under this act, all processes shall be served and 
 the practice and rules of evidence shall be the same as in civil 
 actions or in suits in equity, except as otherwise herein provided. 
 Every sheriff or other officer empowered to execute civil process 
 shall execute any process issued under the provisions of this act 
 and shall receive such compensation therefor as may be prescribed 
 by law for similar services. 
 
 61 
 
346. Injunctions Issued. No injunction shall issue suspending or 
 staying any order of the commission, except upon application to 
 the court of record of general jurisdiction in such matters in and 
 for the county in which the commission has its principal ojfifice, or 
 the presiding judge thereof, and upon notice to the commission 
 and hearing. 
 
 347. Injunction Order Shall Specify Nature of Damage. The order 
 
 or decree of any court, enjoining the operation of any order or 
 determination of the commission or suspending the same, shall 
 contain a specific finding based upon evidence before the court 
 and identified by reference thereto that substantial or irreparable 
 damage otherwise would result to the petitioner, and specifying 
 the nature of the damage. 
 
 348. Rules of Procedure. The courts before which the proceedings 
 mentioned herein may be brought as hereinbefore provided may 
 each, respectively, from time to time make and publish or amend 
 and modify rules and practices for the order and regulation of 
 proceedings before them or appeals to them, including the forms 
 of notice and service thereof. 
 
 349. Expedition of Cases. Any proceeding in any court of this state, 
 directly affecting an order of the commission, or to which the com- 
 mission is a party, shall have preference over all other civil pro- 
 ceedings pending in such court. 
 
 350. Violation of Act of Order of Commission; Forfeiture. Every 
 public utility and all officers, agents and employes of any 
 public utility shall obey, observe and comply with every order 
 made by the commission under authority of this act so long 
 as the same shall be and remain in force. Any public utility 
 which shall violate any provision of this act or which shall fail, 
 omit or neglect to obey, observe or comply with any order or 
 any direction or requirement of the commission shall forfeit 
 "to the state not to exceed $5,000 for each and every offense; 
 every violation of any such order or direction or requirement, or 
 of this act, shall be a separate and distinct offense and in case 
 of a continuing violation, every day's continuance thereof shall 
 be and be deemed to be a separate and distinct offense. 
 
 1 In some jurisdictions it may be preferable to define the offense as a misdemeanor. In 
 some such jurisdictions the general law may prescribe penalties for misdemeanors of all kinds. 
 In othef s it may be desirable in this act to prescribe the penalties for misdemeanors defined 
 herein. In such cases the section after defining the offense may read as follows:"is guilty of 
 a misdemeanor and is punishable by a fine not exceeding f 5,000 for each offense." 
 
 62 
 
351. Violation of Act or Order of Commission; Misdemeanor. 
 
 Every officer, agent or employe of any public utility who shall 
 violate, or who shall procure, aid or abet any violation by any 
 such public utility of any provision of this act, or who shall fail 
 to obey, observe and comply with any order of the commission 
 or any provision of an order of the commission, or who shall 
 procure, aid or abet any such public utility in its failure to obey, 
 observe and comply with any such order or provision, shall be 
 guilty of a misdemeanor/ 
 
 1 In some jurisdictions it may be desirable to prescribe the penalty for committing 
 a misdemeanor. This maybe done by adding the following to the section: "and shall be 
 punishable by a fine not exceeding Is.ooo for each offense." 
 
 ,352. Unjust Discriminations. In violation of Sections 152 to 
 156, inclusive, and of Section 202, any natural person who 
 knowingly authorizes, gives or affords any benefit, preference 
 or advantage, or who knowingly receives or participates directly 
 in any benefit, preference or advantage from such offense, shall 
 be guilty of a felony and on conviction shall be punishable by 
 imprisonment as the court may direct for a period not exceeding 
 five years. 
 
 353. Penalty for Failure to Make Reports. Any public utility which 
 fails to make and file any report called for by the commission 
 within the time specified, or within the time extended as the 
 case may be, or to make specific answer to any question pro- 
 pounded by the commission shall forfeit^ not to exceed $5,000 
 for each such offense, and each day's continuance of such failure 
 shall constitute a separate offense. 
 
 ' See note to Section 350. 
 
 354. Penalty for False Return. Any person who wilfully makes any 
 false return or report to the commission, or to any mem- 
 ber, agent or employe thereof, and any person who aids or 
 abets such person, is guilty of a felony, and upon conviction shall 
 be imprisoned as the court may direct for a term not exceeding 
 five years. 
 
 355. Penalty for Falsification of Accoimts. Any person who wil- 
 fully makes any false entry in the accounts, records or memo- 
 randa prescribed by the commission for any public utility, or 
 wilfully destroys, mutilates, or by any other means falsifies 
 such accounts, records or memoranda or wilfully neglects or fails 
 to make full, true or correct entries of aU facts and transactions 
 appertaining thereto is guilty of a felony and upon conviction 
 shall be imprisoned as the court may direct for a term not ex- 
 ceeding five years. 
 
 63 
 
356. Penalty for Destroying Records. Any person who wilfully 
 mutilates or destroys any accounts, records or memoranda of any 
 public utility is guilty of a felony, and upon conviction shall be 
 imprisoned as the court may direct for a term not exceeding five 
 years; provided, however, that the commission may at its dis- 
 cretion issue orders specifying such operating or financial accounts, 
 records, or memoranda of public utilities as may after a rea- 
 sonable time be destroyed and the commission may prescribe the 
 length of time such accounts, records, memoranda, books and 
 papers shall be preserved. 
 
 357. Penalty for False Statement or Representation. Every officer, 
 agent or employe of a public utility, and every other person 
 who knowingly authorizes, directs, aids in, issues or executes, or 
 causes to be issued or executed, any stock, stock certificate, bond, 
 note or other evidence of indebtedness, in non-conformity with 
 the order of the commission authorizing the same, or contrary to 
 the provisions of this act, or who, in any proceeding before the 
 commission, knowingly makes anv false statement or representa- 
 tion, or with the knowledge of its falsity files or causes to be filed 
 with the commission any false statement or representation, which 
 said statement or representation so made, filed or caused to be 
 filed may tend in any way to influence the commission to make an 
 order authorizing the issue of any stock or stock certificate, or any 
 bond, note or other evidence of indebtedness, or which results in 
 procuring from the commission the making of any such order, or 
 who, with knowledge that any false statement or representation 
 was made to the commission, in any proceeding, tending in any 
 way to influence the commission to make such orders, issues or 
 executes or negotiates, or causes to be issued, executed or nego- 
 tiated any such stock or stock certiflcate, or bond, note or other 
 evidence of indebtedness, or who, directly or indirectly, know- 
 ingly applies, or causes or assists to be applied the proceeds or any 
 part thereof, from the sale of any stock or stock certificate, or 
 bond, note or other evidence of indebtedness, to any purpose not 
 specified in the commission's order, or to any purpose specified 
 in the commission's order in excess of the amount authorized for 
 such purpose, or who, with knowledge that any stock or stock 
 certificate, or bond, note or other evidence of indebtedness, has 
 been issued or executed in violation of any of the provisions of 
 this act, negotiates, or causes the same to be negotiated, is guilty 
 of a felony, and on conviction thereof shall be imprisoned as 
 the court may direct for a term not exceeding five years. 
 
 64 
 
368. Penalty for Obstructing Commission. Any person who wil- 
 fully obstructs or hinders the commission or a member thereof 
 or an authorized agent or examiner in making an inspection, 
 examination or investigation of the accounts, records, mem- 
 oranda, books or papers of any public utility or of the property 
 or facilities thereof is guilty of a felony, and upon conviction 
 shall be fined not more than $5,000, or imprisoned as the court 
 may direct for a term not exceeding five years, or both. 
 
 359. Penalty for Divulging Information. Any regular or special 
 employe of the commission who divulges any fact or informa- 
 tion coming to his knowledge respecting an inspection, examina- 
 tion or investigation of any account, record, memorandum, book 
 or paper or of the property and facilities of a public utility, except 
 in so far as he may be authorized by the commission or by a court 
 of competent jurisdiction, or a judge thereof, is guilty of a misde- 
 meanor, and upon conviction shall be fined not more than $5,000. 
 
 360. Public Utility Liable for Civil Damages. In case any public 
 utility shall do, cause to be done, or permit to be done, any act, 
 matter or thing prohibited, forbidden or declared to be unlawful, 
 or shall omit to do any act, matter or thing required to be done by 
 this act, or by any order of the commission, such public utility 
 shall be liable to the persons affected thereby for the amount 
 of all loss, damage or injury caused thereby or resulting there- 
 from. An action to recover for such loss, damage or injury may 
 be brought in any court of competent jurisdiction by any 
 person. 
 
 361. Penal Actions. Every public utility, all officers and agents of 
 any public utility, and every other person shall obey, observe 
 and comply with every provision of this act and with every 
 order made by the commission under authority of this act and 
 duly served in accordance with its provisions, so long as the 
 same shall be and remain in force. Any public utility or its 
 officers or agents, and any other person who shall violate any of 
 the provisions of this act punishable as a misdemeanor, or who 
 fails, omits or neglects to obey, observe or comply with any order 
 or any direction or requirement of the commission, shall (in addi- 
 tion to liability to the party aggrieved for all damages sustained 
 by reason of such violation) forfeit to the state not to exceed 
 the sum of $5,000 for each and every violation or in the case of 
 a violation which is punishable as a misdemeanor not to exceed 
 the maximum stun fixed as a fine therefor, which shall be 
 recovered in an action at law to the use of the state upon the 
 
 65 
 
complaint of the commission appearing by its attorney or by the 
 '■ attorney general or district attorney of the district in which such 
 violation was committed; but no such action shall be maintained 
 unless brought within two years after the date of such viola- 
 tion; nor shall such an action be maintained in the case of a 
 person who has already been convicted for the same violation of 
 this act, and recovery by an action brought in accordance with 
 this section shall be a bar to any criminal prosecution for the 
 same violation of this act. 
 
 362. Penalty for Accepting Rebate. Any person receiving service 
 from any public utility subject to the provisions of this act, who 
 shall knowingly by an employe, agent, officer or otherwise, 
 directly or indirectly, by or through any means or device 
 whatsoever, receive or accept from such public utility any 
 sum of money or other valuable consideration as a rebate 
 or offset against the regular charges for such service, as 
 fixed by the schedules of rates provided for in this act, shall in 
 addition to any penalty provided by this act forfeit to the state 
 a sum of money three times the amount of money so received 
 or accepted and three times the value of any other consideration 
 so received or accepted, to be ascertained by the trial court; and 
 the attorney general of the state is authorized and directed, 
 whenever he has reasonable grounds to believe that any such 
 person, corporation or company has knowingly received or ac- 
 cepted from any such public utility any simi of money or other 
 valuable consideration as a rebate or offset as aforesaid, to 
 institute in any court of the state of competent jurisdiction a 
 civil action to collect the said sum or simis so forfeited as afore- 
 said; and in the trial of said action all such rebates or other con- 
 sideration so received or accepted for a period of six years prior 
 to the commencement of the action may be included therein, 
 and the amount recovered shall be three times the total amount 
 of money or three times the total value of such consideration 
 so received or accepted, or both, as the case may be. 
 
 363. Perjury. Any person who knowingly makes any false state- 
 ment of fact under oath, whether oral or in writing, as re- 
 quired by this act, is guilty of perjury and upon conviction shall 
 be punished as provided for in the perjury statutes of this state. 
 
 364. Remedies Cumulative and Not Exclusive. The remedies pro- 
 vided in this act by way of civil damages for persons injured by 
 an act or omission of a public utility shall be cumulative, and in 
 addition to any other remedy or. remedies in this act provided. 
 
 66 
 
365.^ Penalties Paid to General Funds. AH forfeitures, fines and 
 penalties collected under the provisions of this act shall be paid 
 into the general funds of the state. 
 
 ' Numbers 366 to 397, inclusive, are not assigned to sections. 
 
 398. Repeal of Conflicting Acts. The following acts and parts of 
 acts and all other acts and parts of acts in conflict with the 
 provisions of this act are hereby repealed in so far as they are 
 inconsistent herewith: (Here state in full the legal designa- 
 tions of the acts and parts of acts which are to be repealed.) 
 
 399. When Act Becomes Effective. This act shall take effect 
 
 67 
 
APPENDIX A 
 
 REPORT ON SUGGESTIONS FOR THE AMENDMENT OF 
 PUBLIC UTILITY BILL. 
 
 This report has been prepared by Mr. William D. Kerr, on the 
 request of Messrs. Low and WiUcox. It is a resume of the argu- 
 ments on objections to and criticisms of the bill submitted to the 
 National Civic Federation by the Executive Council of its Depart- 
 ment on the Regiilation of Interstate and Municipal Utilities. It 
 simimarizes the more important points developed from many quarters, 
 in numerous conferences and in lengthy correspondence, both before 
 and after the submission of the bill. No attempt is made to pre- 
 serve a narrative form of presentation. In effect the report is an 
 annotation of the bill itself without the citation of authorities. 
 
 The plan adopted is to set forth under the number of the section 
 the pertinent suggestions and criticisms relating to each section in 
 turn. The suggestions, where there are more than one pertaining 
 to a single section, are lettered for the sake of reference and con- 
 venience. Under each suggestion are given in the briefest possible 
 form, as impartially as Mr. Kerr can do it, first the reasons advanced 
 in favor of the suggestion, and second the reasons opposing a change. 
 Again let it be said that the report does not pretend to cover every 
 suggestion that has been made, though it does cover the most im- 
 portant ones. 
 
 Section 15. 
 
 Suggestion, (a) Insert in line two, after "include, " the words 
 "every municipality and."* 
 
 Argument For. Many municipalities own and operate facili- 
 ties for rendering public utility services. The public deserves 
 protection from unreasonable and discriminatory rates and from 
 inadequate and unsafe service resulting from imperfect manage- 
 ment of these facilities. The avowed purpose of the bill is to 
 protect the public interest in these services. The agency, 
 
 * Note. The adoption of this suggestion would require appropriate sections or sub- 
 sections, excepting from the application of articles IV, V, and IX public utilities that are 
 municipalities. It would also enable Section 230 to be removed from the bill. 
 
 68 
 
whether private or public, by which the services are performed 
 is immaterial. Experience has demonstrated that municipalities 
 in the administration of public utilities are prone to err even as 
 are private corporations. The State should subject municipal- 
 ities to the same regulation as is imposed on companies. Fur- 
 thermore, in the same or adjoining municipalities municipal and 
 private plants frequently are found operating at the same time. 
 Where actual competition exists the one agency should not be 
 biu-dened with restrictions to which the other is not subject. 
 Potential competition frequently exists where there is no actual 
 competition and comparisons between the two kinds of agencies 
 may result in undue prejudice to the one which is subject to 
 legislative restraint, while seeming to favor the one which is 
 not so restrained. Finally, to the extent that regulation of 
 private companies is in the interest of stockholders and investors 
 similar regulation of municipal enterprises is required for the 
 protection of taxpayers. 
 
 Argument Against. Wholly apart from the merits, regula- 
 tion of municipally owned utilities is outside the scope of this 
 bill. The investigation which resulted in this bill was the 
 logical consequence of an inquiry upon the relative merits of 
 municipal and private ownership and operation, in which in- 
 quiry the final opinion favored private ownership and operation 
 under proper conditions of regulation. The purpose of this 
 bill is to define such proper conditions of regulation so far as 
 they are subject to control by legislative action. 
 
 Considering the suggestion on its merits, State regulation 
 of the rates and services of municipally owned utilities violates 
 the so-called home rule principle which accords to municipalities 
 and their citizens the fullest possible political autonomy con- 
 sistent with the welfare of the State at large. A municipality's 
 conduct of its own public utility is a matter of primary concern 
 only to its own citizens. The State is not justified in passing 
 beyond the fundamental requirement of correct accounting and 
 full publicity. These requirements are embodied in Section 
 230 of the bill. 
 
 Suggestion, (b) In the next to the last line of paragraph 
 (b) insert the following phrase: "on the premises where produced, 
 or the premises immediately adjacent thereto." 
 
 Argument For. The exception recognizes a class of pro- 
 ducers who are generally referred to under the designation of 
 
 69 
 
"isolated plants." The exception leaves the possible field of 
 activity of an isolated plant as broad as the proprietary interests 
 in land of its owners, and in some localities might enable a single 
 isolated plant to serve not only all the buildings in a single block 
 but disconnected buildings in several blocks. In fact, the only 
 limitation within the proprietary interests in land of the owner 
 would be his ability to procure permits to cross streets. In 
 such an event large numbers of consumers might be denied the 
 protection of the law and established public utiHties might be 
 seriously hampered by the resulting loss of customers. 
 
 Argument Against. The exception in paragraph (b) is a 
 reasonable one under normal circumstances. The suggestion 
 would establish an arbitrary rule which in some cases might 
 lead to injustice. For instance, while the suggestion might 
 except from the operation of the act the owner of two office 
 buildings immediately adjoining each other in the same block, 
 it would impose the obligations of the law on the same two 
 buildings if a street chanced to pass between them. Provided 
 fhe owner is able to bridg^e the gap between the two buildings 
 in the latter case as in the former, there is no reason why he 
 should be subjected to the provisions of the bill in the one case 
 and not in the other, or why his tenants should be denied the 
 protection of the bill in one case and not in the other. 
 
 Suggestion, (c) Omit paragraph (b). 
 
 Argument For. The application of the bill to property 
 owners who produce public services for sale to their tenants, 
 may be left to general law under the definition of a public utility 
 contained in paragraph (a). Only such agencies are declared 
 to be public utilities as furnish service "to or for the public." 
 The isolated plant producer may safely be left to take his 
 chances under the local interpretation of this phrase. 
 
 Argument Against. The bill should state clearly that it 
 does not propose to interfere with the beneficial enjoyment of 
 real estate by its owners so long as the sale of services produced 
 is confined to such property. 
 
 Section i8. (New.) 
 
 Suggestion. Define the term "securities" in a new section to 
 read as follows: "The term 'securities' when used in this act shall 
 
 70 
 
mean and include stocks, stock certificates, bonds, notes and other 
 evidences of indebtedness payable at periods of more than twelve 
 months from the date thereof." 
 
 Argument For. The purpose is to simplify the wording of 
 sections relating to the issue of sectirities and to avoid the fre- 
 quent repetition of a long and cumbersome phrase. 
 
 Argument Against. The twenty- two words embraced in the 
 proposed definition occur in the text only twice. The first ten 
 words of the twenty-two occur in this combination nine times. 
 No material advantage is gained by the suggestion. 
 
 Section 19. (New.) 
 
 Suggestion. Define the term "issue" in a new section to read 
 as follows: "The term "issue" when used in this act referring to 
 stocks, stock certificates, bonds, notes and other evidences of in- 
 debtedness, shall mean to sell, mortgage, pledge or otherwise dispose 
 of for any consideration or for any purpose." 
 
 Argument For. The word "issue" is sometimes used by 
 bankers in a sense which differs from its ordinary legal meaning. 
 Possible misunderstandings may be avoided by inserting the 
 definition. Strictly construed, the term "issue," unless defined, 
 might prevent a public utility from disposing of securities of 
 other companies held in its treasury. (See provisions of Ar- 
 ticle IV.) 
 
 Argument Against. The use of definitions in a bill of this 
 character is to be avoided wherever possible. The familiar rule of 
 interpretation is that the inclusion of some elements implies the 
 exclusion of all other elements. The courts can be trusted to 
 give sensible constructions if disagreements arise. 
 
 Sections 36 and 37. 
 
 Suggestion. Identification with public utilities under the juris- 
 diction of the commission shoiild not constitute a disqualification 
 for membership in the commission or cause for removal from the 
 commission. Such identification should merely disqualify a com- 
 missioner from sitting in a particular proceeding. 
 
 Argument For. Disqualification places an unreasonable re- 
 striction on the character of men available for the positions. 
 
 7^ 
 
It attaches an unfair stigma to identification with public utili- 
 ties. Men of substance frequently find their safest investments 
 in public utility securities and disqualification presents to them 
 the alternative of withholding their services from the public or 
 of denying themselves the advantages of customary fields of 
 investment. 
 
 Argument Against. The alternative rule of disqualification 
 proposed is based on judicial practice. The cases are not 
 parallel. The functions of the commission are continuous in 
 their application to all public utilities under their jurisdiction. 
 The commissioners are administrative and not judicial officers. 
 When a judge is disqualified to hear a particular case, other 
 judges may be brought in to fill his place. There are no other 
 commissioners to fill the places of members of the commission 
 disqualified to sit in a particular case. 
 
 Section 44. 
 Suggestion. This section should be omitted. 
 
 Argument For. This section accomplishes no useful purpose 
 because "it is not in the form of an appropriation act, and can 
 have no binding effect on the same or subsequent legislatures. 
 
 Argument Against. This section does no harm and serves 
 as a reminder to legislatures that appropriations are needed to 
 carry out the purpose of the bill. 
 
 Section 46. 
 
 Suggestion. This section should be omitted and in its place 
 should be substituted a section authorizing the commission to ap- 
 point a counsel who shall not appear as advocate in any proceeding 
 before the commission. 
 
 Argument For. The commission needs a disinterested legal 
 adviser who will be free from the zealousness engendered by the 
 advocacy of a cause. If attorneys are required to present 
 causes to the commission, they may be engaged under the broad 
 provisions of Section 47. 
 
 Argument Against. The statutes of some States provide 
 that the Attorneys General shall act as attorneys for the com- 
 
 72 
 
missions. In other States, the commissions are authorized to 
 employ attorneys independently of the Attorneys General. 
 This section states a preference for the latter course. Section 
 47 is broad enough to enable the commission to retain inde- 
 pendent counsel for advice on matters of law, if it will. 
 
 Section 77. 
 
 Suggestion, (a) In the first two lines of paragraph (a) strike 
 out the words "or any person served or claiming the right to be 
 served thereby " and substitute therefor the words "or any person." 
 
 Argument For: It should lie within the power of any indi- 
 vidual to start the machinery of the commission in motion on 
 his bare complaint. The duties imposed by the bill are con- 
 tinuous and the administrative functions of the commission are 
 continuous. If a breach of duty be discovered, it should be 
 remedied by suitable action on the part of the commission and 
 the commission should be authorized to proceed regardless of 
 the source of its information or of the relation to the public 
 utility of a possible complainant. The commission safely can 
 be trusted- to protect itself from consequences of the abuse of 
 the power possessed by any citizen to set the machinery of the 
 commission in motion. The commission is not an agency for 
 the righting of private wrongs but one for the protection of the 
 general public welfare. 
 
 Argument Against. Opening wide the doors to complainants 
 will lead to waste of the commission's time and energies and to 
 needless expense and effort on the part of the public utiHties 
 complained of. No person should have access to the com- 
 mission who is not in the position of a party injured or likely, in 
 the nature of things, to be injured. 
 
 (b) See Section 151. 
 
 (c) See Section 201. 
 
 Section 78. 
 
 Suggestion, (a) In lines four and five, substitute for the 
 phrase "used and useful for the convenience of the pubHc," the fol- 
 lowing phrase: "used or useful for the convenience of the public." 
 Make a similar substitution where the words "used and useful" 
 occur in Sections 278, 279, 280, 282 and 285. 
 
 73 
 
Argument For. Literally construed, the term "used and 
 useful" would deprive a company of the right to have con- 
 sidered under the provisions of the several sections surplus ap- 
 paratus and machinery not at the moment actually in use or 
 street construction laid down in anticipation of future growth, 
 but not yet actually in use and other property similarly situated. 
 
 Argument Against. The term "used and useful" is a cus- 
 tomary term employed in the decisions of courts and public 
 service commission laws. It has been construed by courts and 
 commissions and no case has been discovered in which it has 
 not received exactly the meaning attributed to the suggested 
 alternative term, "used or useful." Furthermore, the term 
 proposed is subject to the criticism that, on literal interpreta- 
 tion, it might cause full consideration to be given to property 
 which, though still in use, has passed its period of usefulness, 
 such, for instance, as horse-cars still owned by an electric rail- 
 road. 
 
 Suggestion, (b) In the fourth line from the end, strike out 
 the phrase: "and such other matters as may have a bearing upon the 
 subjects under investigation" and substitute therefor the phrase: 
 "and such other matters as the commission may deem expedient." 
 
 Argument For. The language of the section may prove an 
 obstacle to the commission by affording an opportunity to raise 
 a question of law as to what matters have a bearing upon the 
 subjects under investigation. The commission should be al- 
 lowed the fullest possible latitude. 
 
 Argument Against. While there may be some technical 
 force to the suggestion, the entire section seems so general in 
 its terms as to leave no doubt as to the intent of the legislature 
 to give the commission the fullest possible scope in its investi- 
 gations. 
 
 Section 8o. 
 
 Suggestion, (a) Amend the section so as to provide that 
 rates fixed by the commission shall be effective for a period of time 
 not exceeding two years instead of three years. 
 
 Argument For. The Interstate Commerce Law carries a 
 two years' limitation on rates fixed by the Interstate Commerce 
 Commission. For the sake of uniformity in practice, the rule 
 in individual States should be the same. 
 
 74 
 
Argument Against. No dissatisfaction is expressed with the 
 application of the two-year rule to interstate railroads. In the 
 case of municipal public utilities, it seems desirable to have a 
 longer period. Five years probably would not be too long. 
 The three-year period of the bill is a mean between the two 
 extremes. 
 
 Suggestion, (b) Strike out all of the last two lines before the 
 first word and substitute therefor the following: "until a change is 
 authorized by the commission." 
 
 Argument For. Rates once fixed by the commission should 
 stand until changes are authorized by the commission itself. 
 When the conditions change under which a rate is fixed, the 
 public utility may apply to the commission for authority to 
 change the rate, but once a rate is taken in hand by the com- 
 mission, it should be subject to no change without the com- 
 mission's authority. 
 
 Argument Against. The proposal would result in rigidity 
 of rates and rate schedules which is not in the public interest. 
 No public service commission can be equipped to supervise such 
 a mass of detail as the proposed substitute wotild involve. The 
 limitation of the section is supposed to represent the approximate 
 period during which conditions will maintain which the com- 
 mission found to exist when it made its investigation for the 
 determination of a rate. 
 
 Suggestion, (c) See Section i 5 i . 
 
 Section 81. 
 Suggestion. See Section 201. 
 
 Section 83. 
 
 Suggestion, (a) Substitute for the section a provision that 
 no reports, records and accounts in the possession of the commission 
 shall be open to inspection by the public unless authorized by the 
 commission. 
 
 Argument For. The commission should be allowed to de- 
 termine what reports, records and accounts in its possession 
 shoiild be open to public inspection. 
 
 75 
 
Argument Against. Reports, records and accounts in the 
 possession of the commission are of a pubHc nature and prima 
 facie should be at the disposal of the public. There may be 
 certain classes of reports, records and accounts which^ should 
 not be disclosed to the public gaze. Section 212 subsequently 
 requires that reports of accidents shall not be open to public 
 inspection unless specially authorized by the commission. The 
 section of the bill is preferable to the suggested substitute be- 
 cause it emphasizes publicity rather than secrecy. 
 
 Suggestion, (b) Strike out the exception beginning in the 
 middle of the third line and add a new sentence as follows: "When- 
 ever it determines that the public interest so requires, the com- 
 mission may order that any report, record or account in its possession 
 be withdrawn from public inspection for a period not to exceed 
 ninety days." 
 
 Argument For. If the withdrawal from public inspection of 
 reports, records and accounts is left optional with the com- 
 mission, there is a likelihood that strong pressure may be brought 
 to bear on the commission to exercise its power in particular 
 cases where the withdrawal of the report, record or account is 
 not in the public interest. There should be a definite limitation 
 on the commission's right to defeat this publicity effort of the 
 - bill. 
 
 Argument Against. Throughout the bill the authority con- 
 ferred on the commission is broad and general. Enormous op- 
 portunities may be afforded a commission susceptible to im- 
 proper influences to defeat particular provisions. No sufficient 
 reason appears for making an exception to the general rule in 
 this case. 
 
 Article IV. 
 
 Suggestion. Strike out all of the article and substitute pro- 
 visions which will effect substantial publicity of the essential details 
 of stock and bond issues without requiring that the commission give 
 or withhold its approval in any case. 
 
 Argument For. The prior approval of a public service commis- 
 sion as a condition precedent to the financing of properties renders 
 financing more difficult than it would otherwise be and majces 
 it impossible in some cases to take advantage of favorable 
 
 76 
 
markets and imposes an unwise and unnecessary restriction on 
 the ability of a public utility to discharge its primary duties of 
 providing adequate service at reasonable rates. No necessary 
 relation exists between stocks and bonds outstanding and the 
 reasonableness of rates. The primary objective of the legisla- 
 ture in enacting such a law is the consimier and not the in- 
 vestor. After it has authorized the issue of specific securities, 
 the commission morally, if not legally, is estopped to take any 
 action regarding either rates or service which will result in deny- 
 ing such securities an opportunity to earn the interest specified 
 or the fair dividends expected. This principle is likely to have 
 application, particiilarly in the case of a company established 
 when the act takes effect and which subsequently seeks author- 
 ity to issue securities of the same class in addition to securities 
 then outstanding. The obligation of the company to all bond 
 holders and stock holders of the same class is the same and if 
 the commission is prevented from interfering with the earnings 
 of subsequently issued securities, it is likewise prevented from 
 interfering with previously issued securities. Consequently, 
 the requirement of approval or disapproval imposes on the 
 commission the obligation of determining for all time the rights 
 of specific classes of security holders on the first application for 
 authority to issue additional securities of anv class. 
 
 Argument against. It is futile to assert that no relation exists 
 between the rates and service of a public utility and its capi- 
 talization. Excessive capitalization necessarily leads to a diver- 
 sion of income to the payment of interest or dividends which 
 might otherwise be devoted to the improvement of service or 
 the reduction of rates. It does not follow necessarily that the 
 ability of a company to perform its primary duty of furnishing 
 adequate and safe service at reasonable rates varies inversely with 
 ■ the amount of its capitalization. There may be evils attached 
 to under-capitalization as far-reaching as those attached to 
 over-capitalization but the existence of the former does not 
 negative the possibility of the latter. Freedom from practical 
 restraint in the issuance of the stock of a company enjoying 
 monopoly privileges invites speculation. This is a factor which 
 public utility laws should strive to eliminate. Publicity of 
 public service issues may be a palliative but it is not a certain 
 preventive. Outstanding capital issues may not have a con- 
 trolling influence on the courts in determining values for rate- 
 making purposes but actual rate revision is not continuous in 
 
 77 
 
practice, and if capitalization is excessive, management naturally 
 will lean to its protection. Furthermore, if the credit of these 
 monopolistic enterprises is to be maintained on a basis which 
 will secure fresh contributions of capital as requirements neces- 
 sitate, investors will need protection from the possible abuses 
 of speculation. 
 
 Section ioi. . 
 
 Suggestion. Add to the section a new sentence to read as 
 follows: "All of the provisions of this article are limited in their 
 application to special privileges as herein defined." 
 
 Argument for. This section implies a purpose to refrain from 
 regulating stock issues and bond issues seciu-ed by liens on 
 property situated outside the State in the case of public utilities 
 incorporated under the laws of another State. The implication, 
 however, is not clear enough to be made effective in construing 
 the substantive sections, such as Sections 103, 104, 105 and 
 others. The proposed sentence makes clear this limitation in 
 its application to the entire article. 
 
 Argument against. In case of doubt as to the limitation, the 
 entire article probably would be construed as a whole. While 
 the proposed addition may not be necessary, probably it would 
 do no harm. 
 
 Section 103. 
 
 Suggestion, (a) Revise the section so that it will read as 
 follows : 
 
 "Section 103. Purpose for which Securities may be Issued. Sub- 
 ject to the provisions of this act and of the order of the commission 
 issued as provided in this act, a public utility may issue securities 
 for: 
 
 . "(a) Money, services, property or other valuable consideration 
 which may properly be capitalized. 
 
 " (b) Discharge or lawful refunding of its obligations. 
 
 "(c) (Same as original sub-paragraph (b) ). 
 
 "Provided, and not otherwise, that such public utility, in addi-' 
 tion to the other requirements of law, shall first have secured from 
 the commission an order authorizing such issue as provided in this 
 act." 
 
 78 
 
Argument for. A public utility has two sources of income: 
 
 I St. The sale of its securities; and 
 
 2nd. Its earnings. 
 
 There are many expenditures for which it woiild be impossible 
 to issue securities under the section as written, and which it 
 would be impracticable to charge against earnings. Of such 
 a nature are necessary expenditures incident to establishing 
 a new enterprise. There are no earnings against which to 
 charge such expendittu-es. They cannot properly and safely be 
 provided for through the issue of temporary notes imder the 
 provisions of Section 113. Capitalization of the cost of paving 
 between the tracks of a street railway is not provided for in 
 Section 103 under 
 
 (a) because paving is the property of the city and not of 
 the utility; under 
 
 (b) because it is not the property of the utility or a part of 
 its facilities; nor under (c) or (d). 
 
 An example of temporary capitalization subject later to 
 amortization would be an expenditiu-e made by a water power 
 either before starting or in its early years of operation, to induce 
 the establishment and construction of power using industries 
 in its vicinity. If such expenditures were not permitted, the 
 development of many of the larger water powers of the country 
 would be quite impossible. The utility cannot pay for such 
 expenditures from earnings before it starts operation or during 
 its early years when its business is undeveloped. It is im- 
 practicable to specify by statute in advance every possible 
 legitimate basis for the issue of securities. Public service com- 
 missions shoiild be given very broad powers that they may 
 meet actual situations as they arise without embarrassment 
 from attempted statutory anticipation of them. 
 
 Argument against. In the first place, the proposed sub- 
 stitute overlooks a fundamental distinction made in the bill, 
 namely, the distinction between consideration and tdtimate 
 purpose. The result of ignoring the distinction becomes evident 
 when the proposed substitute is paraphrased in part: "A 
 public utility may issue securities for money which may properly 
 be capitalized." Either all money in the possession of a public 
 utility may be capitalized or none. The fact is that a public 
 utility is not organized to engage in the banking business or to 
 deal with money as a commodity. The issue of stocks or bonds 
 for the purpose alone of procuring money would not be proper. 
 
 79 
 
The money received as consideration is but a means to an end 
 and the propriety of the end shotild determine the propriety 
 of the issue. Money is needed to meet the payrolls of operating 
 employees as well as to pay the cost of paving, but it would not 
 be contended that permanent capitalization should be author- 
 ized to meet current operating expenses. The consideration 
 for every issue of stocks or bonds must be either property or 
 services. Money itself is property but the propriety of issuing 
 securities in consideration for specific pieces of property or 
 specific services depends on the character of the property or the 
 nature of the services or, to state the matter differently, the pro- 
 priety of the exchange depends on the ultimate purpose to which 
 the property in question or the services in question are to be 
 applied. 
 
 In the second place, the ignoring of the distinction between 
 consideration and purpose leads to an absurd conclusion with 
 respect to the proposed limitation of the alleged purpose. The 
 limitation as found in sub-paragraph (a) of the proposed sub- 
 stitute, is "which may properly be capitalized." This phrase 
 clearly qualifies all that goes before. It qualifies money as 
 well as "services, property or other valuable consideration." 
 As already observed, it is not proper for a public utility to capi- 
 talize money. A literal interpretation of the limitation at least 
 woiild nullify the entire provision. 
 
 Third. More fundamental than anything that has preceded, 
 however, is the objection that the proposed limitation evades 
 the very purpose of the section as drafted. The purpose of 
 Section 103 is to state definite rules for the guidance of the 
 commission regarding what may be capitalized with "pro- 
 priety" or lawfulness. The proposed substitute leaves the entire 
 question open. The section becomes meaningless and might 
 better be omitted. The proposed substitute is no more than 
 a statement of general law. It has no place in a regulating 
 statute. Commissions cannot be given power to act arbitrarily 
 and to make or unmake substantive rights. Throughout the 
 bill, definite standards of conduct are prescribed for the guidance 
 of the commission. The theory of the bill is that the com- 
 mission is an administrative body charged with the responsi- 
 bility of applying the specific rules laid down by the legislature. 
 The effect of the proposed substitute would be either to nullify 
 the bill or to make of the commission a mere ministerial office 
 for the recording of stock and bond issues. 
 
 Fourth. The proposed substitute omits entirely the im- 
 
 80 
 
portant limitation found in the sixth Hne of the original section, 
 which is as follows: "when necessary and reasonably required 
 for the following purposes and no others." This omission tends 
 further to emasculate the section and with it, regulation of stock 
 and bond issues. 
 
 Fifth. The original section is carefully considered and is 
 broad enough to include every proper purpose for the issue of 
 stocks or bonds. "Acquisition of property" is broad enough 
 to cover every expense incurred in the development of a public 
 utility property itself. Services devoted to acquiring rights, 
 such as rights of way, franchises, contracts, et cetera, are spent 
 in the acquisition of property. While paving between rails may 
 not remain in the ownership of a street railway company, such 
 paving would appear to be a part of the facilities which the 
 company furnishes, particularly as such paving usually is done 
 in pursuance of franchise obligations. At any rate, substan- 
 tially, this language has been on the statute books of at least 
 one State for several years and no instance is cited in which it 
 has been construed in accordance with the foregoing objection. 
 
 Sixth. It has yet to be established as a principle of public 
 utility law that it is any part of the function of a public service 
 corporation to subsidize industries whose sole connection with 
 them is their use of the service furnished. If it is proper for a 
 water power company to make expenditures to induce the estab- 
 lishment and construction of power using industries in its vicin- 
 ity, it is equally proper for railroads to make expenditures to 
 induce the establishment and construction of traffic producing 
 industries on their lines. Such practices on the part of railroads 
 have received the ubiquitous designation of rebating and unjust 
 discrimination in other forms. Public service companies are 
 incorporated for the purpose of supplying public needs and not 
 for the purpose of exercising their public franchise to influence 
 industrial and commercial movements. This discussion, how- 
 ever, relates solely to stock and bond issues and not to the 
 investment of surpluses from earnings. 
 
 Suggestion, (b) Amend sub-paragraph (d) so as expressly to 
 permit the issue of stocks and bonds to reimbiirse a company for 
 money expended for any of the purposes defined, although secured 
 in the first instance by an issue of securities, if such securities have 
 been paid off out of income. 
 
 Argument For. The bill should authorize the permanent 
 capitalization of such items as equipment purchases secured in 
 
the first, instance by equipment bonds which subsequently are 
 paid off out of income. It should also authorize the recapitali- 
 zation of property secured in the first instance by bonds which 
 are paid off out of income, under sinking fund provisions. 
 
 Argument Against. The propriety is doubtful of authoriz- 
 ing the issue of new securities to replace bonds retired under the 
 provisions of sinking fund requirements. It would appear that 
 upon such retirement new securities should be issued only as 
 new requirements arose under the provisions of sub-paragraphs 
 (a), (b) and (c). If a company in borrowing money agrees to 
 repay the same by regular drafts on income, the prc^erty pro- 
 cured by the money so repaid should be regarded as fully paid 
 for when the bonds are retired. With regard to the retirement 
 from income of equipment bonds there would appear to be no 
 question about the authority under sub-paragraph (d) to re- 
 plenish the treasury for payments from income by the issue of 
 stocks or bonds. The suggestions raise certain collateral ques- 
 tions of accounting practice upon which it is not possible to 
 enter here. It is believed that the section as drafted is broad 
 enough to meet every such contingency. 
 
 Section 104. 
 
 Suggestion, (a) In the second line, after the word "utility," 
 insert the words "except as provided in Section 106"; and in the 
 third line, after the word "indebtedness," insert the words "at par 
 or face value." 
 
 Argument For. In providing that no public utility shall 
 issue stocks, bonds, etc., "to an amount exceeding that which 
 may be necessary and reasonably required to enable such public 
 utility to perform its duty to the public, " the section appears to 
 require securities to be sold at a premium if they will command 
 a premiimi. It is unwise, under any circimistances, to require 
 any portion of the capital of public utility to be issued above par. 
 
 Argument Against. The question of issuing securities at par 
 arises ordinarily only in the case of stocks. So far as bonds are 
 concerned, the adjustment of interest rates ordinarily will suf- 
 fice to keep prices of new issues at or below par. Respecting 
 the issue of stock at prices above par, the section seems not to 
 be designed to accomplish this purpose. The section is prac- 
 tically identical with the similar provision of the New York 
 
 82 
 
Public Service Commission's law. It does not appear that the 
 New York provision has ever been interpreted to authorize the 
 Commission to require stock to be issued at a premium. 
 
 SuGGES'rtON. (b) In the fifth line, substitute for the phrase 
 "to perform its duty to the public,'-' the phrase "to accomplish the 
 objects of its incorporation." 
 
 Argument For. The words "to perform its duty to the 
 public" seem unduly to restrict the action of the utility. The 
 investor must have reasonable freedom to make a public utility 
 property a financial success, or he will invest in some other form 
 of enterprise. Strictly speaking, it is not a part of the duty of 
 a street railway to the public to establish and operate an amuse- 
 ment park, but the financial success of the railway may to a con- 
 siderable extent depend on the establishment of such a park. 
 
 Argument Against. In jurisdictions where statutes govern- 
 ing the incorporation of public service companies restrict the 
 scope of such companies to the performance of public duties, the 
 two phrases are practically synonymous. Where, however, in- 
 corporation laws are liberal enough to authorize a company to 
 be organized for the purpose of engaging in a private as well as 
 a public business, the distinction between the two phrases is 
 important. Companies organized to perform public duties 
 enjoy privileges which are not accorded to companies organized 
 for ptirely private purposes. The very performance of a public 
 duty is a privilege in itself, because of the power to tax which 
 it implies. On the other hand, such companies are subjected 
 to certain definite responsibilities which are not imposed on 
 companies organized for private purposes. The bill under con- 
 sideration is an evidence of such responsibilities. So long as 
 the distinction exists between a public business and a private 
 business, it would seem desirable that they be performed by 
 separate and distinct agencies. Otherwise, the credit growing 
 from the privileges enjoyed in the conduct of the public business 
 might be employed to further a private business, while the sup- 
 posedly greater risks of the private business might become a 
 burden on the public business. By combining a public and a 
 private business in one organization, the enjoyment of the 
 special privileges might be seriously abused. Whether the 
 amusement park business is so closely allied with the public 
 business of furnishing street railway service as to render the 
 conduct of such business a part of the public duty of the street 
 
 83 
 
railway company, is a matter which belongs properly to the 
 general law of each jurisdiction. If, however, the two businesses 
 are not so closely related, it must be evident that the street rail- 
 way company should not be authorized to use its credit to enter 
 upon and engage in the private competitive amusement park 
 business. This bill seems to place no restrictions on the power 
 of a public utility to invest its surplus in whatsoever manner it 
 will. 
 
 Section 105. 
 
 Suggestion. Beginning in the second line strike out the words 
 "or of services or property at the true money value thereof as found 
 and determined by the Commission," and insert in place thereof 
 the words "services, property or other consideration." In the next 
 to^the last line, insert the words "of value" before the word "equal." 
 
 Argument For. The amendment brings this section into 
 conformity with the proposed revision of Section 103 — see pro- 
 posal (a) . 
 
 If the value of the consideration received for security issues 
 is left absolutely and finally to the Commission, utility secur- 
 ities are likely to become quite unattractive to the investor. Com- 
 missioners cannot be expected to avoid mistakes in judgment 
 in matters of value. The determination of value is of vital 
 importance to the investor and he will be slow to develop or 
 extend the utility if after he has paid what he considers a fair 
 price for service or property he may be prevented from realizing 
 or earning a return on a part of his investment, simply because 
 the commissioners think that he paid too high a price. There 
 should clearly be an appeal to the court for review in case of 
 disagreement in this important matter of value. 
 
 Argument Against. First, the suggested amendment sub- 
 stitutes for the enumeration of the kinds of consideration the 
 following enumeration, "money, services, property or other 
 consideration." Every conceivable consideration will fall under 
 the head either of property or services. Money itself is property. 
 In the section, however, the distinction is made between money 
 on the one hand and property and services on the other hand. 
 A money consideration needs no appraisal. It is only property 
 other than money or services that require appraisal. The 
 purpose of this section is not to enumerate the kinds of consider- 
 ation but to confer power on the Commission to value the con- 
 
 84 
 
sideration when it is other than money. The suggested amend- 
 ment mistakes entirely this purpose. 
 
 Second, the elimination of the authority conferred on the 
 Commission to value the consideration emasculates the section. 
 The suggested amendment is nothing more than a re-statement 
 of the general law of practically every State. It is the general 
 rule that stock may be issued at not less than par for value re- 
 ceived. Value, however, is left to the determination of the 
 board of directors. Section 105 substitutes for this determina- 
 tion the findings of the Commission. This substitution is a 
 fundamental part of the plan of regulation proposed by the bill. 
 The suggested amendment is a collection of meaningless words 
 so far as the regulation of stock issues is concerned. Experience 
 in States where provisions are, in effect, practically identical to 
 Section 105, would seem to indicate that investors welcome the 
 certificate of the Commission that new securities issued represent 
 real value added to the property. The practical operation of 
 the section is that the investor referred to above makes his con- 
 tracts for services or property subject to the findings of the Com- 
 mission as to value. Under the suggested amendment there 
 is no occasion for a court review for the simple reason that 
 nothing is left for the determination of the Commission. 
 
 (Sections I03, 105, 106 and, to a lesser degree. Section 104, are the foundation stones of 
 the article on stocks and bonds. With these sections eliminated or emasculated, most of 
 the remaining sections of the article would have little, if any, value. These are the sections 
 that establish the standards. Included in this category are Sections 107 and 108. Sections 
 1 09-1 16 inclusive clearly are subordinate to the fundamental sections. For instance. Section 
 109 would have little force if it were not .supported by the substitutive rules of the preceding 
 sections. Various proposals have been made for the modification of the subordinate sec- 
 tions. As all of these proposals are predicated on the modification of the fundamental sec- 
 tions, which amounts virtually to the substitution of a plan of publicity for a plan of regulation, 
 the proposed substitutes for the subordinate sections are not considered in detail. The 
 primary question raised in connection with all of the sections may be resolved to the issues 
 concerning the relative advisability of a plan of regulation based alone on publicity and a 
 plan which contemplates the substitution of the judgment of the administrative commission 
 for the judgment of the board of directors in such matters as the propriety of the purpose for 
 which securities are proposed to be issued, the necessity of issues, the value of the considera- 
 tion received for issues when such consideration is other than money, the treatment of debt 
 discount and expense, and the relative proportions of stocks and bonds. Mention should be 
 made, however, of one line of objection made to Sections 109-1 16. Public utilities, whenever 
 possible, arrange for the sale of their securities in advance of the expenditure of the proceeds. 
 Markets for utility securities are by no means constant quantities. They fluctuate widely 
 and rapidly and a public utility may be able to save very considerable amounts through its 
 ability to take advantage of favorable market conditions. Most public utilities base their 
 financing on budgets of estimated expenditures for at least a year in advance. The items 
 in the budget are estimates which are subject to change during the year. Within its limita- 
 tions, the budget is the best information available on which to base financing and, while 
 individual items may change, the budget as a whole is usually quite accurate. Such financing 
 in advance, it is said, however, would be impracticable under the requirements of Sections 
 109-116. It would be impossible in advance of construction to furnish to the commission 
 the information which it would be necessary for it to have to issue an order in the form re- 
 quired by Section 109. Furthermore, the procedure required is unnecessarily cumbersome 
 and would be exceedingly burdensome and expensive in the case of many properties. Definite 
 details of procedure should not be prescribed under the act. Different methods of procedure 
 might properly be adopted in a small State like Rhode Island from those adopted in a large 
 State like Texas. 
 
 These objections may be answered briefly. Under the theory of the bill, regulation means 
 the ascertainment by the commission of certain definite facts. If these facts are required 
 to be ascertained and are ascertained, it follows necessarily that the commission should be 
 empowered to take the steps necessary to determine the facts (Section iii)and to set forth 
 the facts in its order of approval (Section 109). As already stated. Sections 109-116 are 
 subordinate to Sections 103-108 and must stand or fall with these sections. 
 
 As to the financing of requirements in advance, the objections place an unwarranted inter- 
 
 85 
 
pretation on the act. The bill is not inconsistent with budget financing. This is demon- 
 strated by practical experience with similarly constructed acts. The customary procedure is 
 for utilities to ask for and obtain authority to issue securities to meet the requirements of 
 specific budgets. Proof is required to be made that expenditures are made in accordance with 
 the budget requirements (Sections 115,116) and in proving such proof, commissions,are obliged 
 necessarily to recognize the practical Hmitations of the budget method. Although this plan 
 of supervision has been employed in some States for a number of years, the extended discus- 
 sion of these sections has failed to disclose a single instance in which it has interfered with 
 generally accepted methods of financing. 
 
 Application to the commission for authority to issue securities and investigation by the 
 commission necessarily consume time and involve some outlay, both on the part of the 
 applicant and of the commission. This would appear to be an inevitalale consequence of any 
 substantial plan of supervision. If the cost of regulation is found to exceed the gains, regu- 
 lation cannot exist. It must be remembered, however, that the alternative to regulation 
 is public ownership and operation. 
 
 Section io6. 
 
 Suggestion, (a) This section should conform to Section 105, 
 and if Section 105 is amended as suggested this section should be 
 similarly amended. 
 
 Suggestion, (b) Strike out this section and substitute for it 
 a section providing for the issue of stock having no par value. 
 
 Argument For. The placing of a par value on stock certi- 
 ficates is an anomaly. Capital stock represents the right to 
 control or manage a company and a right to participate in the 
 distribution of such profits as there may be. The labeling of 
 stock with a par value leads to a misapprehension of the nature 
 of the stock. No-par-value stock squares with the fact and 
 eliminates most of the problems connected with the attempt to 
 regulate stock issues. 
 
 Argument Against. The objections to the no-par-value idea 
 are practical rather than theoretical. The financial world and 
 investors are accustomed to shares having definite par values. 
 If corporations could be re-financed from the beginning, it 
 might be feasible to institute the no-par-value share. An at- 
 tempt at this late day to compel a substitution might lead to 
 disaster. It would seem that the subject is one for general 
 legislation affecting all corporations, private as well as public 
 service, and that, at the first, the no-par-value plan of financing 
 by stock issues should be optional and not obligatory. 
 
 Section 107. 
 
 Suggestion, (a) The parenthetical phrase in line three may 
 be omitted if Section 106 is amended in accordance with the fore- 
 going suggestion. 
 
 86 
 
Suggestion, (b) After the last word of the section, add the 
 following: "except with the permission of the Commission." 
 
 Argument For. This will make the reqtiirement more elastic 
 and give the Commission authority to afford relief in exceptional 
 cases. In a year of dull business it might be impossible to main- 
 tain both the regular rate of dividends and the plan of amortiza- 
 tion. A reduction in rate of dividends might result in loss of 
 credit and inability to render adequate service, which would be 
 more harmful to the public, as well as to the stockholders, than, 
 a delay in carrying out the plan of amortization. 
 
 Argument Against. The Commission, in the first two lines, 
 already is given discretional power respecting the application of 
 amortization rules. The suggested amendment would seem 
 neither materiallv to add to nor detract from the section. 
 
 Section io8. 
 
 Suggestion. The section should be eliminated. 
 
 Argument For. In connection with Sections 105 and 106 
 this section leads to an impossible conclusion in authorizing the 
 Commission to determine the relative amounts of stocks and 
 bonds which shall be issued. See also Section 109. If the stock 
 of a company on the market is worth less than par, no amount 
 of persuasion on the part of the Commission would avail to 
 secure new financing by the use of stock issues at par. Con- 
 sideration of these sections leads to the conclusion that the best 
 results will be obtained by authorizing the issue of stocks and 
 bonds at the market value, rather than at values arbitrarily 
 limited to par in case of stock and to not less than 75 per cent, 
 of par in the case of bonds. 
 
 Argument Against. The less-than-par value of outstanding 
 stock on the market would seem to be one of the considerations 
 which would influence a determination of the relative amount 
 of stocks and bonds which should be outstanding. It is not 
 reasonable to suppose that the bill attempts to accomplish the 
 impossible. 
 
 Sections 103, 119, 238. 
 
 Suggestion. Provisions should be inserted in the bill qualifying 
 or limiting the right to declare stock dividends or to divide among 
 
 87 
 
stockholders the proceeds from the sale of stock, at least after liberal 
 dividends have been distributed. 
 
 Argument For. Surplus earnings in excess of reasonable re- 
 turns on property employed in the public service should be 
 treated as funds held in trust for the benefit of the service and 
 not for the benefit alone of stockholders. While the State has 
 the right so to regulate rates as to limit the amount of surplus 
 earnings, such regulation necessarily in many cases is imperfect. 
 It may be, and frequently is, sound public policy in many cases, 
 however, for the State to sanction earnings in excess of require- 
 ments for reasonable returns by refraining from exercising its 
 rate-fixing powers. Such public policy, however, is founded 
 not on the needs of stockholders but on the needs of consumers 
 and the public at large. Reasonable surpluses strengthen credit 
 and enable service to be developed along lines which add to the 
 convenience and safety of the public and which might be deemed 
 impracticable if they required new financing. Such surpluses, 
 however, being contributed by consumers, should not subse- 
 quently be appropriated for the exclusive use of stockholders. 
 Consequently, the bill should prohibit the declaration of stock 
 dividends where earnings have been sufficient to enable fair 
 returns to be made on the money contributed by stockholders 
 and the distribution of the proceeds of stock issues made to re- 
 plenish the treasury for capital expenditures made from income 
 in excess of fair returns. 
 
 Argument Against. Granting the right of the State to regu- 
 late rates, the surplus of a company must be considered as be- 
 longing to the stockholders. Any restriction on the interest in 
 surplus of the stockholders constitutes an arbitrary limitation 
 on the benefits of investment in public utility enterprises and 
 renders more difficult financing of such enterprises. The public 
 suffers by the resulting restriction of development. Further- 
 more, such limitation as is proposed on the right to distribute 
 the corporate surplus among stockholders has an ex post facto 
 effect and does violence to fundamental principles of justice. 
 What a company earns belongs to the stockholders. If the 
 stockholders see fit to employ surplus earnings in the business, 
 they have a right to do so but their temporary appropriation of 
 surplus profits for the benefit of the business should not prejudice 
 their privilege subsequently to withdraw surplus earnings for 
 their own use. 
 
 88 
 
Sections ioi, 103, 107, 109, no. 
 
 Suggestion. Incorporate in the article an express provision 
 authorizing bond issues in excess of immediate requirements and the 
 mortgaging of property to secure the fiill amount, subject to ap- 
 proval by the commission of the sale of any part of such bond issues. 
 
 Argument For. A customary means of financing public 
 utility properties is to mortgage the properties in excess of im- 
 mediate requirements under plans whereby bonds are sold, only 
 as funds are actually required. In the absence of express 
 authorization, the bill, as it stands, might be construed to defeat 
 this plan of financing by preventing the mortgaging of property 
 in excess of immediate requirements. 
 
 Argument Against. Under the provisions of statutes iden- 
 tical with the provisions of this bill, the plan of financing sug- 
 gested has been applied repeatedly. No reason appears why 
 such a plan could not be carried out under this bill. This plan 
 of financing seems in no wise to conflict with the theory of the 
 biU. 
 
 Section 118. 
 
 Suggestion. Add to the section at the end the following: "and 
 any amount or amounts properly spent incidental to securing such 
 franchise, right or privilege." 
 
 Argument For. Without the proposed amendment, Section 
 118 prevents the capitalization of expenditures incidental to 
 secviring any franchise other than the amount actually paid as 
 a consideration for the granting of such franchise. The neces- 
 sary and legitimate expenditures incurred in securing franchises 
 over and above payment made to the City or State amount fre- 
 quently to a very material sum which could not reasonably be 
 provided from the earnings of the year in which the franchise 
 is obtained. Such expenditirres are similar to legal expenses, 
 engineering services and other general expenses in connection 
 with creating the property of the utility and seem to be equally 
 a proper subject for capitalization. 
 
 Argument Against. Franchises, rights and privileges are 
 property. Section 103 authorizes in sub-paragraph (a) the 
 issue of stocks and bonds when necessary and reasonably re- 
 quired for the purpose of the acquisition of property. The in- 
 
 89 
 
cidental expenses referred to may be capitalized under the pro- 
 visions of Section 103. 
 
 Section 119. 
 Suggestion, (a) Strike out this section entirely. 
 
 Argument For. Under this section many consolidations of 
 distinct advantage to the public would be prevented. If the 
 consolidation involved a shrinkage in the total amount of secur- 
 ities outstanding, it probably never would be made, no matter 
 what its advantages might be, and the retirement of a fractional 
 ^ part of the outstanding securities involves practical difficulties. 
 Owners of the properties would be reluctant to submit to a cap- 
 ital reduction which would not be necessary if a merger were 
 not made. Section 132 provides that no merger or consolidation 
 shall be made until an order shall have been procured from the 
 commission approving such merger or consolidation. Under 
 this section, the commission has full control over the details of 
 any plan for consolidation because it can withhold its approval 
 until all details are satisfactory. The interests of the public 
 seem to be ftilly protected by Section 132. Section 119 seems 
 unnecessary. The amount of securities to be issued in case of 
 consolidation should be left to the judgment of the commission, 
 based on the circiunstances of each individual case. 
 
 Argument Against. The attempted exercising by the com- 
 mission under Section 132 of power to limit the amount of se- 
 curities would be unconstitutional because of the absence of a 
 specific standard prescribed by the legislature for application to 
 such cases. The commission is an administrative body. It ^s 
 all. very well to talk. of leaving matters of this kind to the judg- 
 ment of the commission, but experience has demonstrated that 
 interested parties, who are not pleased with the judgment of 
 the commission when it is exercised, are prone to seek relief from 
 the effects of such judgment by attacking in the courts the 
 constitutionality of the supposed delegation of authority. In 
 the absence of a definite standard prescribed by the legislature, 
 it is safe to assiune that the commission will be enabled to 
 exercise no control whatsoever over the amount of securities 
 issued in case of consolidation or merger. 
 
 Suggestion, (b) Strike out the last two lines and substitute 
 therefor the following: "shall not exceed the par value of the out- 
 go 
 
standing stocks and bonds of the public utilities parties to such 
 merger or consolidation." 
 
 Argument For. The argument in behalf of this suggested 
 amendment is set forth in the dissenting memorandum of 
 Messrs. Bassett, Gray and Maltbie which accompanies the bill. 
 
 Argument Against. Value should be recognized in consoli- 
 dations, as elsewhere, as the basis for capitalization. While the 
 value standard may result in the capitalization of surpluses and 
 unearned increments, it is not to be denied that these belong to 
 the company and not to the public. The alternative rule which 
 makes the outstanding securities of the consolidated companies 
 the measure of security issues on consolidation, results in per- 
 petuating over-capitalization. 
 
 Section 121. 
 
 Suggestion. Limit this section and Section 239 so that they 
 may not be construed to apply to the impairment of capital effected 
 before the bill becomes law. 
 
 Argument For. Such legislation as is contemplated here 
 should be content to draw a curtain on the past and to deal 
 with new situations as they arise, solely on their merits regard- 
 less of early indiscretions or misfortunes. 
 
 Argument Against. The relation between the property of a 
 public utility and its outstanding securities is a continuing rela- 
 tion. It is not so closely identified with the act or series of acts 
 from which it results as to make retroactive legislation designed 
 to correct such relation after it becomes existent. The legisla- 
 tion deals with the condition that exists and not with the cause 
 , of that condition. If the condition is such as to impair the 
 abihty of the company to perform its primary duties, the con- 
 dition should be corrected. 
 
 Section 151. 
 
 Suggestion. Insert after the word "reasonable" in the second 
 line the words: "taking into account the adequacy of such rates and 
 the requirements, obligations and necessities of the public served 
 and of the public utility." 
 
 91 
 
Argument For. The words "just and reasonable," without 
 further explanation, are incomplete and will be interpreted in 
 many cases in a manner harmful to the public as well as to in- 
 vestors. Rate regulation frequently fails to give proper con- 
 sideration to adequacy as an important element of reasonable- 
 ness. Inadequate rates must result in inadequate and unsatis- 
 factory service. Competition is still free and unhampered in 
 the investment of money. An investor will not furnish capital 
 to a utility which is charging inadequate rates when there are 
 plenty of other utilities or other forms of investment from which 
 he can obtain an adequate return. The act in its present form 
 helps to perpetuate a mistaken point of view with reference to 
 adequacy, for it provides for adequate service without any 
 qualification or limitation with heavy penalties for failure, and 
 refuses to recognize or provide for adequacy as one of the ele- 
 ments in determining the reasonableness of rates. The bill 
 should make clear that adequacy is an element and the import- 
 ance of a definite recognition of adequacy in the bill is empha- 
 sized by the fact that the courts have recognized the distinction 
 between inadequate and confiscatory rates. 
 
 Argument Against. The rule of justness and reasonableness 
 is the common law rule. It includes adequacy and every other 
 element of rate reasonableness. The rule is as broad as any 
 rule could be. It is broader than the rule proposed for the reason 
 that the specification of one element of justness and reasonable- 
 ness, namely, adequacy, may be construed to exclude other 
 elements. In a nimiber of jurisdictions, commissions, in apply- 
 ing substantially identical rules, have authorized the increase 
 of rates. The Interstate Commerce Commission recently has 
 authorized a general increase of freight rates in certain localities 
 under a substantially similar rule. There can be no question 
 about the legal effect of the term "just and reasonable." This 
 term is employed in all of the sections of the bill which confer 
 authority on the commission to deal with rates. (See Sections 
 77, 80, 157, 159, 162.) 
 
 A positive objection to the use of the language suggested 
 lies in the apparent broadening of the scope of judicial re- 
 view which would result. The denial of an adequate rate 
 by the commission does not ordinarily defeat the legality of 
 rates fixed by the commission. With the rule changed so as 
 to specify adequacy as one of the elements of reasonableness.' 
 it is likely that the courts would assume jurisdiction of the 
 
 92 
 
determination of what constitutes adequacy in a particular case. 
 This is not desirable. 
 
 Section 157. 
 
 Suggestion. Add to the section a new sentence, as follows: 
 "No change shall be made in any rate until authority therefor shall 
 have been obtained from the Commission." 
 
 Argument For. The commission should be consulted about 
 every new rate that goes into effect; otherwise its work will not 
 be effective. The damage caused by unjust, unreasonable or 
 discriminatory rates cannot be completely remedied. Preven- 
 tion is better than cure. It is true that Section 158 authorizes 
 the commission to suspend the operation of new schedules for 
 a limited period pending an investigation. This section, how- 
 ever, is likely to place the commission in a bad light because 
 of its requirement that the commission take the initiative in 
 an investigation. Besides, the time limitation may not be 
 adequate in all cases. Furthermore, the proposed amendment 
 relieves the public utilities from all possible criticism that might 
 arise from changes in rate schedules. 
 
 Argument Against. Few, if any, of the commissions have 
 the facilities to enable them expeditiously to examine and 
 pass upon new rate schedules as they are filed. An effective 
 organization for this purpose could be maintained only at a 
 prohibitive cost. Because of the slowness of the commission 
 machinery, rate schedules would tend to become rigid and fail 
 to respond to changes in public requirements. Regulation 
 is not management and the public utilities should not be re- 
 lieved of their duty of fixing rates in the first instance. Re- 
 sponsibility for the conduct of public utility enterprises should 
 be left with the utilities themselves subject only to supervision 
 and the exercise of mandatory powers in cases of necessity. 
 
 Section 162. 
 
 Suggestion. Strike out this section. 
 
 Argument For. No public utility shovdd be subjected to 
 two investigations regarding the same subject matter of com- 
 plaint — the first investigation by a State commission and the 
 second by a Federal commission. 
 
 93 
 
Argument Against. Under the established separation of 
 State and Federal jurisdiction in the regulation of interstate 
 public utilities, it is an entirely proper function of a state Com- 
 mission to present to the Federal commission matters which 
 seem to the State commission to require remedying but which 
 it has not the power to affect. 
 
 Section 201. 
 
 Suggestion. Insert after the word "safe", in the second hne, 
 the words "in so far as the public utility is reasonably able to furnish 
 such service and facilities." 
 
 Argument For. Taken literally, the section as now worded 
 cannot be enforced. The services and facilities of a public 
 utility cannot be made absolutely safe by any known means 
 and cannot permanently be adequate if rates are inadequate. 
 The requirement of adequacy and safety shoiild be qualified 
 either in the manner suggested or by the use of the word "reason- 
 ably." Both adequacy and safety are relative terms and the 
 statute, by recognizing them to be such, should avoid the danger 
 of making public utilities insurers of the safety of their plant 
 and equipment on the one hand, and responsible for providing 
 the highest standards of service on the other hand. 
 
 Argument Against. The rule of service, adequacy and safety 
 is the common law rule. It has been recognized and apphed 
 for many years and the dire results predicted for this section, 
 if enacted into law, have not been experienced. If this section 
 were adopted in a State whose courts have interpreted the words 
 "adequate" and "safe," to require absolute standards of per- 
 fection, it might be well to qualify the requirement somewhat 
 in the manner suggested. 
 
 Section 210. 
 
 Suggestion. After the words "public utility" in line six, insert 
 the words "with which it is not or will not be in competition." 
 
 Argument For. This section if enacted would constitute a 
 serious menace to the business and perhaps to the solvency of 
 
 94 
 
existing corporations. It would open the door for the irrespon- 
 sible promoter by fiirnishing facilities which would otherwise 
 not be obtainable except by raising the capital necessary to the 
 purchase and installation thereof. If a new-comer should offer 
 to furnish service in a restricted area of an existing company's 
 territory at a price very much below that necessarily charged 
 by the existing public utility, it is hardly to be expected that a 
 public service commission would surely withstand the pressure of 
 public opinion in favor of an application for authority on the 
 part of the new-comer to use the conduits, poles, lines or other 
 facilities of the existing company in such area. Such an inroad 
 on the existing company's business would result in serious losses 
 and would materially diminish the ability of the existing utility 
 to furnish adequate service at reasonable rates in its territory 
 outside the invaded area. The proposed amendment restricts 
 the operation of the joint provision for joint use of facilities to 
 companies which are not or will not be in competition. 
 
 Argument Against. This section is and should be considered 
 an undivided part of an entire bill. One of the abuses aimed 
 at in the bill is ruthless competition such as that described in 
 the argument for the proposed amendment. Sections 272-275 
 are designed to prevent the establishment of unnecessary and 
 wasteftil competition. This section aims at an abuse which is all 
 too frequent in many cities. This is the unnecessary duplication 
 of facilities in streets and highways which results not only in 
 unsightliness but in public discomfort and danger. Where com- 
 peting companies are established in the same territory, it is not 
 unreasonable to require them in the general interest to use the 
 same conduits and the same poles and tracks in the public streets. 
 
 Section 210 as it stands contains a number of limitations 
 which should protect every proper interest. The facilities pro- 
 posed to be used jointly must be "along any street or highway 
 whether on, over or under such street or highway." The joint 
 use must not prevent the owner or other users thereof from 
 performing their public duties. It must not result in serious 
 injury to such owner or other users. No substantial detriment 
 to the service of the owner or other users shall result. No 
 danger to the public or to employees must occur. Before the 
 section can be applied, all of these conditions must be found by 
 the commission to exist. It is not reasonable to suppose that 
 a provision so hedged about by safeguards will be abused. 
 
 95 
 
Section 211.* 
 
 * Note. Objection has been made to this section similar to that 
 directed to Section 210. The chief alternative that has been pro- 
 posed, however, left the determination of the joint use or physical 
 connection to the company owning the facilities sought to be used. 
 This would seem to involve no element of regulation but simply to 
 state what is common practice among telephone companies — namely, 
 that physical connections be made when and as agreements are 
 arrived at between the owners of telephone properties capable of 
 physical connection. There would seem to be good reason, subject 
 to the safeguards or limitations found in this section, to require 
 telephone companies which have monopolies in particular areas or 
 between particular localities to throw open these facilities to com- 
 panies capable of effecting physical connections. It should be 
 observed that the commission is authorized specifically to fix the 
 charge which shall be made to the public for the use of continuous 
 lines resulting from physical connection. 
 
 Section 230. 
 Suggestion. See Section 15. 
 
 Sections 235-239. 
 
 Suggestion, (a) Substitute for these sections the following: 
 "Every public utility shall make such reasonable provision for the 
 replacement and renewal of its property necessary to enable it to 
 maintain the adequacy, efficiency and quality of its service. The 
 commission may prescribe rules, regulations and forms of account 
 regarding such provision for replacement and renewal of property 
 which public utilities shall carry into effect. Such rules, regulations 
 and forms of account may be general or, at the discretion of the 
 commission, may be special to apply to the conditions of any public 
 utility or class of public utilities. The commission may in its dis- 
 cretion ascertain and determine and by order fix the proper and 
 adequate amounts to be provided for replacement and renewal on 
 the several classes of property of each public utility or on its property 
 as a whole. Amounts so fixed may be modified from time to time 
 by the commission on its own initiative or after hearing on applica- 
 tion by the utility requesting a modification of such amount. The 
 moneys set aside by a public utility for replacement and renewal of 
 
 96 
 
property may, with the approval of the commission, be invested, 
 until required for this purpose, in the stocks, bonds, notes or other 
 evidences of indebtedness of the utility or used for such other pur- 
 poses and under such rules and regulations as the commission may 
 from time to time prescribe." 
 
 Argument For. The sections in their present form abso- 
 lutely require every public utility to carry a proper and adequate 
 depreciation account which, in the light of recent court and 
 commission decisions, clearly means a depreciation reserve 
 necessary to offset all theoretical depreciation which has taken 
 place in the property. This has not been the practice of public 
 utilities in the past, is entirely unnecessary and would be im- 
 possible to carry out in the case of many existing utilities. Even 
 where possible, it would involve a needless increase in rates now 
 charged or a postponement of a decrease in rates. A public 
 utility must make reasonable provision for the replacement and 
 renewal of parts of its property whenever this becomes necessary 
 to maintain a proper quality and efficiency "of service, but this 
 is an entirely different matter from providing a fund to offset 
 all theoretical depreciation. Many public utilities make ade- 
 quate provision for replacements and renewals; none, so far as 
 we know, are attempting to provide a fund to ojffset theoretical 
 depreciation. 
 
 Argument Against. We know of no one who professes to 
 have said the last word on the subject of depreciation. Whether 
 "depreciation" means so-called theoretical depreciation or 
 merely provision for replacements and renewals, the bill does 
 not attempt to say. Substantially, the language of the bill has 
 been applied with apparent success over a period of years by a 
 number of commissions in a number of States. The sections in 
 question are the joint product of a niimber of experts represent- 
 ing commission and corporation experienfce under substantially 
 similar provisions of law. These sections establish definite and 
 specific general standards for the guidance of a commission in 
 dealing with the necessarily complex and intricate problem of 
 depreciation in general. The proposed substitutes would seem 
 to be open to criticism on the score that they do not contem- 
 plate providing for property which is worn out, superseded or 
 destroyed and never replaced or renewed. The fundamental 
 purpose of a depreciation account seems to be to keep a con- 
 tinuing and accurate balance between property values and the 
 amounts at which they are entered in books of account. Mani- 
 
 97 
 
festly, it would be absurd, in the case of a going concern, so to 
 apply these sections as to accomplish over a period of years by 
 regular deductions from earnings the creation of a fund held 
 intact equalling the original cost of the property. 
 
 Sections 235-239 — Contd. 
 
 Suggestion, (b) In every case where the word "depreciation" 
 occurs, insert thereafter the words "and obsolescence." 
 
 A rgument For. Obsolescence is a factor in the depreciation 
 of property values. The elements of obsolescence do not cor- 
 respond in all respects with the elements of depreciation. In 
 some of the public utility businesses obsolescence is a more im- 
 portant cost factor than depreciation. This is particularly true 
 of the telephone business in which such articles of equipment as 
 switch boards have repeatedly been discarded long before they 
 reached the end of their useful lives because of improvements 
 in the art. 
 
 Argument Against. The tenor of commission and court de- 
 cisions leaves little doubt that the term depreciation is used 
 ordinarily in such cases generically to denote loss in value whether 
 due to wear and tear, natural causes, improvements in the art, 
 or what not. Under these circumstances it is difficult to perceive 
 what useful purpose will be served by attempting to differen- 
 tiate between depreciation and obsolescence in this bill. 
 
 Suggestion, (c) Add the following provision to Section 237: 
 "No order shall be entered by the commission under the provisions 
 of this section until a public hearing shall have been held, of which 
 the public utilities concerned shall have been given notice." 
 
 Argument For. The determination of depreciation rates may 
 have a vital effect on the public utilities to which the rates are 
 made to apply. The chief danger is that rates will be fixed 
 at so high a point that companies may be obliged to discontinue 
 or change materially policies on which depend the maintenance 
 of their credit. Companies should be afforded an opportunity 
 at least to be heard in opposition to any such proposed order 
 involving a radical change in their financial arrangements. 
 
 Argument Against. Experience has not justified the implied 
 criticism of the practical operation of commission loss. The 
 
 98 
 
very nature of depreciation negatives the supposition that 
 commissions -will attempt to prescribe uniform rates of depre- 
 ciation for all utilities of the same or different kinds. Failure 
 to recognize the need of protecting the integrity of capital 
 accounts leads inevitably in the long run to financial ruin. This 
 is directly opposed to the best interests of the public or 
 of bona fide investors. In considering rates of depreciation on 
 the properties of any company, the commission would be obliged 
 to look to the company for the necessary information. Utilities 
 necessarily would be advised in this way that the commission 
 was considering the subject. Maintaining the integrity of 
 capital accounts is a matter of so great importance that no un- 
 necessary restraints should be placed on the action of the com- 
 mission. 
 
 Sections 272-274. 
 
 Suggestion. Substitute the following sections for those of the 
 same numbers in the bill: 
 
 272. Certificate Before Furnishing Service. No public utility 
 shall, after this act goes into effect, furnish service in this State or 
 begin the construction of any plant or facility therefor in the public 
 streets until it shall have obtained a certificate from the commission 
 that public convenience and necessity require the furnishing of such 
 service or the construction of such plant or facility; but the require- 
 ments of this section shall not apply to any public utility which is 
 furnishing service or which has any plant or facility for the furnishing 
 of service under construction at the time this act goes into effect. 
 
 273. Certificate for Service. No public utility shall, after this act 
 goes into effect, furnish any service of a different kind or class than 
 that previously furnished by it, or furnish any service in a place or 
 territory other than that in which it shall previously have operated, 
 or exercise any right or privilege under any franchise or permit 
 theretofore granted but not theretofore actually exercised or the 
 exercise of which has been suspended for more than one year, until 
 it shall have obtained a certificate from the commission that public 
 convenience and necessity require the furnishing of such service; 
 but the provisions of this section shall not prevent any public utility 
 from furnishing service from any plant or facility which is being con- 
 structed at the time this act goes into effect 
 
 274. Certificate of Convenience and Necessity. Whenever after 
 hearing the commission determines that any new construction or 
 
 99 
 
the furnishing of any new service by a public utility as provided in 
 the two preceding sections will promote the public convenience and 
 necessity it shall have the power to issue a certificate to that effect, 
 and in such certificate may define the kind or class of service and 
 the area in which it may be supplied, and may limit and define the 
 territory in which such construction may be made. 
 
 Argument For. The original Section 272 operates as a pro- 
 hibition against all new work or extensions by existing companies. 
 It should be made to apply only to new public utilities. Sec- 
 tions 272 and 273 are amended to except from their operation 
 utilities which have begun construction but are not furnishing 
 service when the act goes into effect. The amendment to Sec- 
 tion 274 brings this section in conformity to Sections 272 and 
 273 as amended. 
 
 Argument Against. Literally construed. Section 272 prob- 
 ably is susceptible of the interpretation placed upon it by the 
 objection. The accompanying sections, however, indicate the 
 fallacy of such an interpretation. Legislation is to be construed 
 in the light of the purpose sought to be effected, and when the 
 purpose is clear, as here, it may safely be assimied that com- 
 missions and courts will find a reasonable meaning. The pro- 
 posed substitute for Section 272 is open to the objection that it 
 applies only to public utilities which come into existence after 
 the act takes effect. The revised Section 273 as proposed does 
 not operate effectively to restrict the operations of public util- 
 ities existing at the time the law is enacted because of the in- 
 definiteness of the expression "in a place or territory other than 
 that in which it shall previously have operated." This expres- 
 sion, used in an abbreviated form in the revised Section 273, is 
 given a definite meaning by the relationship established be- 
 tween the place and territory and the franchise or permit. 
 The original sections place an emphatic embargo on "new" 
 services and "new" construction, in the case of all companies 
 (Section 272) and on the use of unexercised franchises (Section 
 273). The proposed substitutes are open to the further objec- 
 tion that they become operative only at the time the act goes 
 into effect, while the original sections operate from the day the 
 law is enacted. When, as is frequently the case, a consider- 
 able period intervenes between the enactment of the law and 
 its effective date, some opportunity for evasion may be afforded 
 by holding such provisions as these in abeyance. 
 
 100 
 

 Sections 277-289. 
 
 Suggestion. Strike out these sections. 
 
 Argument For. It is outside the province of a bill for the 
 regulation of public utilities to deal with the manner of granting, 
 regulating and extinguishing franchise rights. This subject 
 should be dealt with, if at all, in a separate bill. Its treatment 
 here fails to do justice to the larger relations between the muni- 
 cipality and the State. These objections are discussed at greater 
 length in the dissenting memorandum attached to the bill of 
 Messrs. Bassett, Gray and Maltbie. 
 
 Argument Against. Franchise relations have been a prime 
 source of annoyance to public utilities and to the public. They 
 have resulted at times in less satisfactory service and higher 
 rates than would be possible with rational adjustments of the 
 franchise subject. This bill recognizes the public nature of the 
 duties of these companies and the inherent right of the public 
 to regulate their conduct. The same measure should recognize 
 and put an end to the franchise problem. The indeterminate 
 franchise is the best arrangement that has been devised. It 
 secures to a company uninterrupted enjoyment of the right to 
 operate during good behavior, while reserving the right of the 
 public to determine the franchise at will by purchasing the 
 property employed. No plan of regulation is complete which 
 does not contemplate removing the evils of short-term franchises. 
 
 Section 277. 
 
 Suggestion. In line six, after the word "provide," insert the 
 word "specifically." In line seven, after the word "municipality," 
 insert the words "at some definite date." 
 
 Argument For. The purpose of the proposed amendment is 
 to clarify the meaning of the section. 
 
 Argument Against. The suggested amendment seems to 
 conform to the purpose of the section and is not objectionable. 
 
 Section 278. 
 
 Suggestion, (b) Strike out the last sentence which reads as 
 follows: "A franchise so obtained, however, shall be subject to 
 alteration, amendment or repeal by act of the legislature." 
 
 lOI 
 
u^ 
 
 Argument For. This sentence seems to defeat the whole 
 purpose and intent of the indeterminate franchise provisions, 
 which are to procure wherever possible the consent of the utility 
 to the purchase of its property at any time by the municipality 
 in consideration of receiving an indeterminate franchise in place 
 of a term franchise. A public utility could not afford to give 
 up a term franchise for a franchise subject to alteration, amend- 
 ment or repeal at any time by act of the legislature. It is well 
 known that the constitutions and laws of some States reserve 
 the power of alteration, amendment or repeal of all charters. 
 In other States, it seems to be established that this power 
 is somewhat qualified so that the action can not be entirely 
 arbitrary. It appears further that the power of repeal con- 
 tained in existing laws, while it may be used to terminate the 
 charter or franchise to be a corporation, cannot arbitrarily be 
 used to terminate the rights in the street, or the franchise to 
 operate, without providing in some form or other for recompense 
 to the utility for the damages which it suffers through some 
 action. It seems evident that the courts would hold that a 
 utility accepting an indeterminate franchise under this section 
 had expressly assented to the withdrawal of all its rights and 
 that it would have no recourse from the action of the legislature 
 amending or repealing the franchise no matter how arbitrary 
 or unreasonable such action might be. The provision is not 
 only impracticable but it contradicts and is inconsistent with the 
 fundamental principle of an indeterminate franchise. 
 
 Argument Against. It is self-evident that a franchise is 
 worthless for the promotion of the public welfare which does 
 not extend full protection to the bona fide investments made 
 thereunder. It may be admitted frankly that the courts have 
 not arrived at a uniform interpretation of the reserve clauses in 
 the constitutions and statutes of the several States. It may 
 also be admitted with the same degree of frankness, that public 
 policy no longer sanctions the granting of rights in streets and 
 public places on a basis which assumes to prejudge conditions 
 which may arise in the future. Violation of the first assumption, 
 naturally, will put a stop to investment. Violation of the 
 second assumption is likely to produce in years to come a con- 
 dition under which the State will be obliged to resort to indirect 
 methods to accomplish that which it has surrendered its rights 
 to accomplish directly. The most that can be said for the pro- 
 vision of this section to which objection is made, is that the 
 
 I02 
 
State should reserve to itself in the granting of indeterminate 
 franchise rights the fullest measure of freedom in dealing with 
 future conditions as they arise consistent with the inviolability 
 of bona fide investment induced by such indeterminate fran- 
 chises. In its application to particular jurisdictions this pro- 
 vision should be scrutinized carefully with respect to its effect 
 on property rights under the local interpretation of reserved 
 powers. 
 
 Suggestion, (c) Add to the section, the following: "A 
 franchise so obtained shall be not limited in time but shall continue 
 in force until such time as the municipality shall exercise its right to 
 acquire, as provided in this act, or until it shall be otherwise ter- 
 minated according to law." 
 
 Argument For. It seems to have been the intention of the 
 framers of the bill that Section 277 in defining the duration of 
 future grants should apply to indeterminate franchises sub- 
 stituted for term grants under the provisions of Section 278. 
 Section 277, however, is limited to grants made by municipal- 
 ities and seems not to be applicable to the indeterminate fran- 
 chise arising from the operation of Section 278. It becomes 
 necessary, therefore, to state specifically, in connection with 
 Section 278, the nature of the franchise substituted for the term 
 franchise with respect to its duration. This is the purpose of 
 the proposed amendment which follows the similar provision 
 of Section 277. 
 
 Argument Against. The suggestion seems to be well made 
 and to require incorporation in the bill. 
 
 Section 279. 
 
 Suggestion. Strike out the words "for the just compensation 
 and under the terms and conditions of purchase and sale determined 
 by the commission" and insert in place thereof the words, "for the 
 just compensation and the damages, if any, and under the terms and 
 conditions of purchase and sale determined in the manner herein- 
 after provided." 
 
 Argument For. The section appears to be in conflict with 
 Section 286. By requiring a public utility to agree to the tak- 
 ing of its property for just compensation and under terms and 
 conditions "determined by the commission," Section 286 pro- 
 
 103 
 
vides for an appeal from the determination of the commission. 
 With regard to the proposed insertion of the words "and the 
 damages, if any," see the summary of arguments in favor of 
 amendments proposed to Section 285. 
 
 Argument Against. Sections 286-289 <io not authorize the 
 court on appeal from a determination of the commission to fix 
 either the compensation or the terms and conditions of purchase 
 and sale. The transaction is consummated, if at all, on the 
 basis of the just compensation and terms and conditions deter- 
 mined by the commission. Consequently, there seems to be no 
 inconsistency between this section and Section 286. 
 
 Section 280. 
 
 Suggestion, (a) Amend paragraph (e) by inserting after the 
 word "service" at the end of line two the words "or for municipal 
 purposes only." 
 
 Argument For. A municipal plant for street lighting or 
 other municipal uses only, will result in most cases in needless 
 duplication without financial or other gain to the city. The 
 public are entitled to protection in this matter as in others. 
 
 Argument Against. There may be a measure of doubt as 
 to whether the non-duplication provisions apply to a plant 
 constructed by a city to perform strictly municipal services, 
 such as the lighting of streets and public places and the fur- 
 nishing of power for municipal departments. In Wisconsin, 
 whose legislation on this subject was a model to a large degree 
 for the provision in question, the interpretation seems to be that 
 municipalities may not construct facilities for purely municipal 
 purposes without obtaining authority from the commission. 
 
 Suggestion, (b) Amend paragraph (e) of this section by add- 
 ing at the end of the section the following: "And no municipality 
 shall hereafter enter upon the original construction of any municipal 
 plant for use in supplying public utility service to others, without 
 first taking by condemnation, purchasing by agreement or offering 
 to purchase under the terms of this act the plant and property of 
 such public utility engaged in such service." 
 
 Argument For. The bill at present requires a public utility 
 to sell its property to the city whenever the city desires to buy, 
 
 104 
 
but it allows the city after obtaining a certificate of convenience 
 and necessity to enter into competition with the privately owned 
 utility. This is not just nor equitable. Competition between 
 a municipal and a private plant can never be fair and even. 
 Burdens are imposed on the private utility which are not applied 
 to the municipal plant. Taxes paid by the private plant may 
 be used to build up and strengthen the municipal plant. In 
 this way the private plant may be forced to contribute to its 
 own destruction. This is unfair and destructive competition 
 which public sentiment ordinarily condemns. The federal gov- 
 ernment has given much consideration to laws for the punish- 
 ment of unfair and destructive competition. The establish- 
 ment of a municipal plant, without offering to purchase at a 
 fair price the property of a public utility rendering similar ser- 
 vice would seem to be an act of the same general character as 
 those which are so generally condemned. A city may be sub- 
 ject to even greater condemnation because the community has 
 encouraged investment in the private utility, and perhaps has 
 been served and benefited by it for many years. Altogether 
 apart from the question of justice and equity, however, muni- 
 cipal competition is uneconomical and wasteful. The burden 
 must ultimately fall on the consumer. If the investor is re- 
 quired to take the risk of this menace he will require a higher 
 rate of pay for his capital. Massachusetts for many years has 
 required municipalities to purchase the property of private 
 utilities before establishing mimicipal plants. The requirement 
 of the city to obtain a certificate of public convenience and 
 necessity is not strong enough to ensure purchase of the private 
 plant and prevent the possibility of competition. If it were 
 there cotdd be no objection to providing specifically in the bill 
 for the purchase of the private utility before the municipal plant 
 is started. 
 
 Argument Against. The objection strikes at the heart of a 
 community's right to provide for its citizens services which are 
 essentially public in character. Competition admittedly is un- 
 economical and wasteftd. This conclusion necessarily is founded, 
 however, on the premise that the existing agency is discharging 
 its duties in a faultless manner. Justice implies correlative 
 rights and obligations. To say that municipal competition can 
 never be justified tmder any circumstances is to attach too great 
 importance to the public spirit of private agencies. Such a vir- 
 tual guarantee of immunity from competition might defeat the 
 
 105 
 
very purpose of the bill by engendering carelessness and indiffer- 
 ence to the just demands of the public. Potential competition 
 may be worth its cost in procuring adherence to the spirit as 
 well as the letter of the law. This section sets up a substantial 
 preventive of municipal competition in its requirement that a 
 certificate of public convenience and necessity be issued from 
 the commission before a municipality begins the original con- 
 struction of a public utility plant or facility. In the light of 
 experience this protection seems reasonable. The proposed 
 amendment might result in anything but equitable results under 
 some circumstances. A property which has been allowed to 
 deteriorate excessively may have little or no value to a muni- 
 cipality which is proposing to instal a modem and highly effi- 
 cient utility. Where is the justice of requiring a municipality 
 to predicate such a useful public improvement on the purchase 
 of a useless property which owes its present condition to the 
 greediness and selfishness of its owners? 
 
 Section 281. 
 
 Suggestion. Strike out the first sentence and substitute therefor 
 the following: "Any municipality may determine to acquire the 
 property of a public utility as authorized under the provisions of this 
 act by a vote of the municipal council, taken after a public hearing 
 of which at least thirty days' notice has been given, and ratified and 
 confirmed by a majority of the electors voting thereon, at any general, 
 municipal or special election, held not less than four months after 
 the passage of the vote of the municipal council." 
 
 Argument For. Time should be provided for careful inquiry 
 and consideration before a final vote is taken committing a city 
 to municipal ownership. The suggested amendment places no 
 obstacle in the way of municipal ownership, beyond providing 
 time for careful discussion and presentation of facts before final 
 action is taken. 
 
 Argument Against. The policies of the several states regard- 
 ing the submission to the voters of legislative proposals of one 
 kind and another differ radically. The section is phrased so 
 that it may conform to whatever may be the established policy 
 or to whatever legislation may be enacted independently of this 
 bill to provide for such contingencies. Legislation fixing th,e 
 manner in which municipalities may arrive at a determination 
 
 106 
 
to embark on municipal ownership deserves carefiil and thought- 
 ful consideration, but no reason presents itself for segregating 
 this question from others involving exactly similar principles. 
 
 Section 285. 
 
 Suggestion. In the fifth line, after the word "received" insert 
 the following words: "Therefor and the damages, if any, caused by 
 the severance of the property of the utility purchased or to be pur- 
 chased by the municipality, from any property of the utility pur- 
 chased or to be purchased by the municipality." 
 
 In line seven after the word "compensation" insert the words 
 "and damages, if any"; in the same line after the word "taking" 
 insert the words "and severance." In line twenty-six after the word 
 "public" insert the words "and the damages, if any, caused by the 
 severance aforesaid." 
 
 Argument For. The section as it stands provides that a 
 municipality shall pay just compensation for the property of a 
 public utility taken. Under Section 283 a municipality may 
 or may not purchase the whole or any part of the facilities of a 
 company which lies outside the limits of the purchasing munici- 
 pality; and the act does not provide for the payment of any 
 damages to the company by reason of the severance of the out- 
 lying property from inlying property purchased. If a company 
 has outlying property which is severed from the rest of its prop- 
 erty, particularly from the source of supply of the commodity 
 furnished by the company, very serious damages might result 
 from such severance. Distributing plants in adjoining towns 
 would be of no value whatever except as junk unless they were 
 connected with some other source of supply. Similarly, the 
 value of an outlying source of supply might be destroyed entirely 
 if the city were to ptuchase alone the inlying distribution system. 
 
 Argument Against. The question raised by the objection 
 deserves serious consideration in each jurisdiction. Its deter- 
 mination depends largely on the local law of the jurisdiction. 
 The term "just compensation" has been used in this connec- 
 tion with apparent success for a number of years in at least one 
 jurisdiction. The consequences of severing parts of an entire 
 property from the whole are so apparent as to require no elabor- 
 ation. On the other hand, the rule of compensation should not 
 be so broad as to violate the equities of particular cases as they 
 
 107 
 
arise, and to require arbitrarily the appraisal and payment of 
 damages which are the remote and not the immediate conse- 
 quences of the act of purchase. 
 
 Sections 334-336. 
 
 Suggestion. Eliminate these sections from the act entirely. 
 
 Argument For. These sections are retroactive in effect. In 
 some cases they might prove not only embarrassing but possibly 
 disastrous to the public utility complained of. If the one com- 
 plainant succeeded in maintaining his right to reparation, any 
 and all other customers might avail themselves of the decision 
 and compel restitution of a portion of the amounts paid by them 
 with interest from dates of pa5rment. The public utility thus 
 would never know whether its statement of earnings was correct 
 until after a lapse of at least two years. It may have distri- 
 buted its earnings in the form of dividends or have spent them 
 in improvements on its property, and yet find that they were 
 not properly applicable to either of those purposes; and that 
 such payments involved the necessity of making no further dis- 
 tributions of this character until its indebtedness upon all claims 
 for reparation have been satisfied. This condition of things would 
 be perpetual. A few cases of this kind would shake the credit 
 of public utilities. Rates made public and placed on file with 
 the commission should be assumed to be fair until they have 
 been adjudged otherwise. Moreover, if it is fair to give the 
 customer a right to collect over-payments made by him in the 
 past, in case the rate paid is subsequently adjudged to be exces- 
 sive, it would be equally fair to give the utility the right to col- 
 lect an additional amount from the customer if the charge for 
 the past services, especially on rates established by the com- 
 mission, is subsequently adjudged to have been inadequate. 
 But this is not suggested. 
 
 Argument Against. The courts have ample authority to 
 relieve public utilities from the burden of unreasonable rates 
 fixed by commissions pending a determination of their reason- 
 ableness. Where rates fixed by utilities themselves subse- 
 quently are found to have been less than reasonable, the utilities 
 have no just cause to complain. 
 
 These sections do not create a right accruing to customers 
 to reparation for excessive amounts paid in the past. The right 
 
 108 
 
now exists and always has existed. Furthermore, the right in 
 the absence of legislation of this character may be asserted, 
 ordinarily, any time within a period of six years following the 
 payment. Every business transaction is likely to give rights to 
 a cause of action which may be asserted by one party to the 
 prejudice of another within the period of the statute of limita- 
 tions, and accordingly no statement of corporate liability 
 ever is entirely accurate. Far from being retroactive in the 
 sense that new rights are created pertaining to past transactions, 
 the sections in question cut off immediately in many cases 
 inchoate rights. Like the remainder of the bill these sections 
 simply provide a new remedy for the assertion of existing rights. 
 
 Section 338. 
 
 Suggestion. Strike out the section as contained in the 
 bill and insert the following in place thereof: "Any person in interest 
 being dissatisfied with any order or decision of the commission may 
 commence an action in the court of record of general jurisdiction in 
 such matters and for the county in which the commission has its 
 principal office. Such action may be begun by filing in such court 
 a transcript of the complaint, answer and final order of the com- 
 mission, and it shall not operate as a supersedeas unless the commis- 
 sion or court shall so order. All the proceedings before the said 
 commission, including any of the evidence which either party claims 
 to be material, if a record thereof has been kept, the requests for 
 rulings made by the parties, the findings of the commission and any 
 orders issued thereon, may be used in such action. If the court de- 
 cides that the commission has erred in point of substantive law, the 
 proceedings shall be remanded to the commission with directions to 
 make such new or further amended orders or to take such other 
 action as the opinion of the court upon the point or points of law 
 submitted to it may require. Provided, however, that no such 
 action shall be sustained on the ground of improper admission or 
 rejection of evidence, or for any error as to any matter of pleading 
 or procedure, or for any other matter, if in the opinion of the court 
 the error complained of will not injuriously affect the substantial 
 rights of the parties." 
 
 Argument For. As the section now stands, the court has 
 appellate jurisdiction only in case the order of the commission 
 violates a "provision" of law. This limits the jurisdiction of 
 the court to questions arising upon the construction of statutes 
 
 109 
 
and leaves the commission supreme as to the interpretation of 
 all questions of common law. Questions of admissibility of 
 evidence, matters of procedure or other secondary matters, or 
 any other points which, in the opinion of the court, do not go 
 to the merits of the case, should not be subjects of appeal. 
 
 Argument Against. The argument favorable to the pro- 
 posed amendment is directed to that portion of Section 338 
 which authorizes an appeal to the courts from an order of the 
 commission on the ground that if enforced, the order would 
 violate "a provision or provisions of any law of this State or of 
 the Constitution of this State or of the United States." It 
 would seem that this purpose would be accomplished equally 
 well without the circumlocution of the proposed amendment 
 by substituting for the words objected to those which are quoted 
 in the following paraphrase of the original section: Any person 
 being dissatisfied with any order of the commission may com- 
 mence an action in court to vacate such order on the ground that 
 if enforced the order would violate "any law of this State or 
 the Constitution of this State or of the United States." Surely, 
 this phraseology would give the court full jurisdiction to hear 
 any and every question of substantive law that might be raised. 
 It must be evident, however, that extended argimient and 
 superlative eloquence would be required to convince a court 
 that the term "a, provision of law" comprehends only statute 
 law to the exclusion of common law so-called. 
 
 no 
 

 PQ 
 
 X 
 
 Q 
 Z, 
 Ui 
 
 < 
 
 CO 
 
 2 
 
 O 
 
 t-H 
 
 CO 
 
 CO 
 
 O 
 U 
 
 W 
 
 o 
 
 t— ( 
 
 > 
 
 Pi 
 w 
 
 CO 
 
 U 
 
 t— ( 
 
 Q 
 2 
 
 < 
 
 Q 
 < 
 O 
 
 »— I 
 
 < 
 
 m 
 
 i2 
 
 
 
 k 
 
 OR 
 
 oi 
 
 <u 
 
 en 
 
 S 
 
 "S 
 
 a 
 
 i 
 
 
 f-o 
 
 •Sis 
 
 CO CO 
 
 8 22 2 o 2 2 
 
 OQ O O Q O 
 
 lO iqo_ O O O W 
 
 C<f C^f-* tjT o eo of 
 
 fc CO 
 
 a 
 a 
 < 
 
 <u 
 
 <D 
 
 w 
 
 W W 
 
 c 
 'o 
 a 
 a 
 < 
 
 c 
 "o 
 a 
 a 
 < 
 
 'o 
 a 
 a 
 
 W W 
 
 .S .S .3 "S 
 
 ao O *J 
 
 a a, o 
 
 a a a ^ 
 
 J3 XI 
 
 fo 
 
 o 
 
 p^ 
 
 o 
 
 rt 
 
 ■e 
 
 "3 
 
 rt 
 
 rt 
 
 w 
 
 H 
 
 .2 o 
 Eg c 
 
 2^ 
 
 I '6 
 
 6 a 
 
 ^ ^ 
 
 a, Ji J3 . i::^ ;:5 
 
 
 (X, 
 
 u 
 
 H 
 ■<! 
 H 
 CO 
 
 Q 
 
 H 
 
 •< 
 
 z 
 
 1=^ 
 
 H 
 
 en 
 
 
 
 U 
 
 Ss 
 
 o 
 
 p< 
 
 ix) 
 
 < 
 
 
 o 
 
 Z 
 
 (:« 
 
 u 
 
 .J 
 
 Z 
 
 Pi 
 
 < 
 
 o 
 
 O 
 
 < 
 
 u 
 
 U 
 
 U 
 
 OU _| «r^ u 
 
 I— t HH hH HH 
 
 
 HI 
 
o6 
 
 O 
 
 I— I 
 
 tn 
 t— I 
 
 % 
 
 8 
 
 o 
 
 > 
 
 w 
 
 CO 
 
 O 
 
 (—1 
 i-J 
 pq 
 
 Ah 
 
 Q 
 
 Q 
 <3 
 O 
 
 »— I 
 < 
 
 
 ^o^ 
 
 Co 
 
 (3^ 
 
 a) e lu 
 
 io-2 
 
 eopo 
 
 oooo 
 
 OOO o 
 
 8 
 
 OO 
 
 oo 
 
 OO 
 
 oo 
 oo 
 oo 
 
 O lO 
 
 oooo 
 
 X 
 w 
 
 A 
 H 
 
 T3 
 0) 
 
 c 
 'o 
 a 
 a 
 
 w 
 
 <u .a .:- 
 
 W 
 
 o 
 
 o 
 
 a 
 
 a 
 
 a 
 
 a 
 
 < 
 
 < 
 
 .s 
 
 'o 
 a 
 a, 
 < 
 
 o 
 
 a 
 a 
 < 
 
 c 
 'o 
 a 
 a 
 
 <: 
 
 o 
 
 a 
 a 
 < 
 
 u u 
 
 A Si 
 
 
 > 
 
 a 
 o 
 
 o 
 
 pq 
 
 a 
 
 3 
 < 
 
 o 
 pq 
 
 
 S .9 
 
 TA 
 
 o 
 Q 
 
 o 
 
 S 
 
 s 
 
 o 
 O 
 
 'd 
 
 O 
 
 s 
 
 o 
 O 
 
 -s, 
 
 .y o 
 
 
 
 -si 
 go 
 
 pq 
 
 
 c 
 
 
 o 
 
 
 
 
 
 c 
 
 tn 
 
 o 
 
 id 
 
 w 
 
 a 
 
 ■g 
 
 c^ 
 
 6 
 
 ^3 
 
 
 
 K) 
 
 Q 
 
 
 
 (U 
 
 .13 
 
 
 rt 
 
 ^ 
 
 Pi 
 
 0) 
 
 S3 
 
 C/J 
 
 rt 
 
 o 
 
 W) 
 
 
 ^ 
 
 ^ 
 
 o 
 
 f5 
 
 s 
 
 a 
 
 o 
 O 
 
 t/J (U 
 
 ■^ xn 
 
 O 
 
 US 
 
 u 
 
 H 
 S5 
 
 £3 
 
 O 
 
 
 T3 O 
 
 ••^ a 
 
 
 w w 
 
 t3 
 0) 
 
 o 
 a 
 a 
 < 
 
 a 
 
 o 
 O 
 
 ^3 
 O 
 
 nJ 
 Pi 
 
 to 
 
 It 
 
 £ <u 
 
 o g 
 O^ 
 
 -rt a 
 
 V^ 
 
 k< u 
 
 n! a) 
 
 W u 
 
 A bO 
 ♦^ C 
 
 (u-n 
 •o c 
 4, <a 
 t/i Ot 
 
 313 
 
 £, -sa 
 
 0) 
 
 O 
 
 (3 
 O 
 
 S. t 
 
 o 
 
 ed jj 
 
 3'3! 
 1— ,_m 
 
 OJ o 
 S.2 
 
 .2^ 
 
 OT O 
 
 So 
 
 G fc 
 o a 
 
 oo 
 
 3 Si 
 
 o u 
 
 •- aj 
 
 ^ 6 
 
 <u O. 
 J3 I* 
 
 S S 
 
 ^ ^ :^ :^ « 
 
 112 
 
ooo 
 
 OOQ 
 lOOO 
 
 .> X 
 
 fa w 
 
 .>5 § 
 
 W 
 
 W 
 
 "o 
 a 
 a 
 < 
 
 o 
 a. 
 a, 
 
 o 
 
 a 
 a 
 < 
 
 W 
 
 c 
 'o 
 a 
 a, 
 
 < 
 
 c 
 *o 
 a 
 
 fa 
 
 fa 
 
 c 
 'o 
 a 
 a 
 < 
 
 fa fa 
 
 43 43 
 
 H 
 
 a 
 
 o 
 
 42 
 
 m 
 
 e 
 
 O 
 
 s 
 
 b 
 
 
 
 
 
 Vi 
 
 o 
 
 
 s 
 
 c 
 o 
 
 
 i 
 
 Eg 
 
 .2 
 
 U 
 
 a 
 
 uj 
 
 "S-^ 
 H 
 
 J 
 
 a 
 
 cjQ 
 
 8 
 
 o 
 
 f^!J 
 
 & 
 
 § 
 
 -diz; .a 
 
 
 
 en 
 
 <j 
 
 -«! 
 
 Q 
 
 04 
 
 <: 
 
 n 
 
 > 
 
 u 
 
 Ul 
 
 Z 
 
 Z 
 
 < 
 
 113 
 
o o o o 
 o >o "3 o 
 O O PS ^ 
 
 
 oo o 
 
 OQ O 
 OO O 
 
 o 
 
 o 
 o 
 
 I><N 
 
 
 .a .a 
 
 W CO 
 
 .a 
 
 C/2 
 
 .a .a .a 
 
 cn CO oi 
 
 CO 
 
 CO W 
 
 S2-a 
 
 o 
 
 < 
 
 •2 § 
 
 U +^ 
 
 o tu 
 
 ^^ > 
 
 I 
 
 ,£3 
 
 8 
 
 ■l 
 
 u 
 
 'b 
 
 e 
 
 o 
 U 
 
 1 
 
 
 > 
 
 tn 
 
 P3 
 
 1— 1 
 
 M 
 
 H 
 
 ss 
 
 9 
 
 :e 
 
 o 
 
 (S 
 
 & 
 
 w 
 
 .a 
 
 o 
 a 
 a 
 < 
 
 W 
 
 W W 
 
 g 
 
 a 
 < 
 
 3 
 *o 
 
 a 
 
 < 
 
 
 
 Pi 
 
 o 
 a 
 
 < 
 
 .3 
 o 
 a 
 ex 
 < 
 
 3 
 o 
 
 u 
 
 c 
 
 M 
 
 
 
 
 
 
 
 
 
 6 
 S 
 
 o 
 
 d 
 
 U 
 
 13 
 
 I 
 
 CO 
 
 Ph 
 
 P^i§ 
 ^_CO 
 O OJ 
 
 PQ 
 
 CO 
 
 6" lu 
 O 03 
 
 ■a o 
 
 (4 
 
 B 
 
 B 
 o 
 O 
 
 a 
 
 
 S 
 
 s 
 
 o 
 
 u 
 
 o 
 a 
 
 (-4 
 
 o 
 O 
 
 S 
 
 s 
 
 o 
 U 
 
 CO § 
 
 .aw 
 
 H 
 O 
 
 Q 
 
 X 
 H 
 & 
 O 
 CO 
 
 o 
 a 
 a 
 < 
 
 
 13 
 
 .2 ^ 
 
 3 I 
 
 CO TJ 
 
 
 1s^ 
 *D ^< 
 
 to C 
 w O 
 
 CJ o 
 wo 
 
 •• _ Q 
 O 
 
 O 
 
 I I 
 
 .2 S 
 
 a -a 
 
 i § 
 
 o - 
 
 b-2 
 
 g1 
 
 se 
 
 
 ^ ^ 
 
 114 
 
APPENDIX C 
 
 Report to the National Civic Federation Commission 
 on Public Ownership and Operation. 
 
 Your Committee on Investigation beg to report as follows: 
 
 After our appointment on October 5, 1905, we met and appointed 
 a sub-committee to prepare a plan of procedure and investigation. 
 It was decided that the committee should visit a number of under- 
 takings in certain American cities, and then should go abroad and 
 make a similar investigation in certain cities in Great Britain, com- 
 paring the methods and results of municipal and private ownership. 
 Much attention was given to the investigation in Great Britain, 
 because it was felt that the American public was not so familiar 
 with conditions abroad as at home, and because in the contests that 
 have been waged for public ownership, allusion has always been 
 made and prominence given to conditions in British cities. 
 
 Your committee decided to employ both company and municipal 
 men as experts, so that when investigating a gas plant, for example, 
 there should be ordinarily one expert who had been employed by a 
 private gas company and another to act with him who had been 
 employed by a municipality. A long series of questions was pre- 
 pared and various special reports were called for, some from the 
 members of the committee who were detailed for this piupose and 
 some from outside experts employed to investigate specific matters. 
 All of these reports and schedules have been carefully prepared and 
 are published herewith. While it may appear upon a superficial 
 glance that there is too much of this work, we trust it will be appre- 
 ciated by the student and by those particularly interested, and 
 that these statistics and reports will do great good in the future as 
 works of reference upon this important subject. 
 
 We wish here, at the beginning of our report, to tender our sin- 
 cere thanks to the gentlemen in charge of the public utilities in the 
 cities we visited in the United States and Great Britain for their 
 polite attention and thoughtful consideration. Nothing could have 
 been fairer or kinder than the treatment that they gave us. We 
 examined their plants; we asked for detailed reports upon a long 
 list of matters, which were cheerfully given. Whatever may be our 
 opinion of the merits of municipal or private ownership, we are 
 unanimous that no more courteous treatment could have been ac- 
 corded any one. 
 
 115 
 
It is difficult to give positive answers of universal application to 
 the questions arising as to the success or failure of municipal owner- 
 ship as compared with private ownership. The local conditions 
 affecting particular plants are, in many cases, so peculiar as to make 
 a satisfactory comparison impossible, and it is very difficult to- 
 estimate the allowance that should be made for these local condi- 
 tions. For instance, in making deductions from the financial con- 
 ditions of Wheeling, as affected by its gas plant, as compared with 
 those of Atlanta and Norfolk with their private plants, allowance 
 must be made for the presence of natural gas in Wheeling. Again, 
 in comparing the public water works of Syracuse with the private 
 water works of Indianapolis from the point of view of the success 
 or failure of municipal operation, geographical conditions must be 
 taken into consideration. The situation at Syracuse is extremely 
 favorable to the establishment of an efficient plant with comparatively 
 little effort on the part of its management. At Indianapolis the 
 conditions are unfavorable. In Sjrracuse .the water flows to the 
 city by gravity; in Indianapolis it must be pumped. So we might 
 go through the various cities here and abroad that have been visited 
 and show that the results were affected favorably or unfavorably 
 by special conditions applicable to each city. 
 
 Further, the difficulty of reaching satisfactory results by the 
 comparative method is not confined to special or local conditions. 
 It is true, as well, of much broader questions. Thus any attempt 
 to compare municipal with private electric light plants in the United 
 States would be fruitless if allowance were not made for the fact 
 that in most cases such municipal plants are confined to street light- 
 ing and may not do commercial business. Allowance must be made 
 also for the fact that many municipal plants have had a struggle to 
 exist in the face of unsympathetic public opinion. Again, in England 
 consideration must be given to the fact that the municipal electric 
 light and street railway plants have permanent rights, while the 
 rights of the private companies operating these particular utilities 
 are limited as to the length of their existence, many street railway 
 franchises expiring twenty-one years after they were granted. 
 
 Finally, not only must it be borne in mind that the social and 
 political conditions which characterize the two countries find ex- 
 pression in their private and public systems, but we must consider 
 the difference in the nature of the two peoples which causes them 
 to adopt different ideas and views to the expediency of certain things. 
 In other words, a measure of success in the municipal management 
 of public utilities in England should not be regarded as necessarily 
 indicating that the municipal management of the same utilities in 
 
 ii6 
 
this country would be followed by a like measure of success. Con- 
 ditions are quite different in the two countries, as will be seen from 
 an examination of the various reports that follow. 
 
 There are some general principles which we wish to present as 
 practically the unanimous sentiment of our committee. 
 
 First, we wish to emphasize the fact that the public utilities 
 studied are so constituted that it is impossible for them to be regu- 
 lated by competition. Therefore, they must be controlled and 
 regulated by the government; or they must be left to do as they 
 please; or they must be operated by the public. There is no other 
 course. None of us is in favor of leaving them to their own will, 
 ' and the question is whether it is better to regulate than to operate. 
 
 There are no particular reasons why the financial results from pri- 
 vate or public operation should be different if the conditions are the 
 same. In each case it is a question of the proper man in charge of 
 the business and of local conditions. 
 
 We are of the opinion that a public utility which concerns the 
 health of the citizens should not be left to individuals, where the 
 temptation of profit might produce disastrous results, and therefore 
 it is our judgment that undertakings in which the sanitary motive 
 largely enters should be operated by the public. 
 
 We have come to the conclusion that mum'cipal ownership of 
 public utilities should not be extended to revenue-producing indus- 
 tries which do not involve the public health, the public safety, public 
 transportation, or the permanent occupation of public streets or 
 grounds, and that municipal operation should not be undertaken 
 solely for profit. 
 
 We are also of the opinion that all future grants to private com- 
 panies for the construction and operation of public utilities should 
 be terminable after a certain fixed period, and that meanwhile cities 
 should have the right to purchase the property for operation, lease 
 or sale, paying its fair value. 
 
 To carry out these recommendations effectively and to protect 
 the rights of the people, we recommend that the various states should 
 give to their municipalities the authority, upon popular vote under 
 reasonable regulations, to build and operate public utilities, or to 
 build and lease the same, or to take over works already constructed. 
 In no other way can the people be put upon a fair trading basis and 
 obtain from the individual companies such rights as they ought to 
 have. We believe that this provision will tend to make it to the 
 enlightened self-interest of the public utility companies to furnish 
 adequate service upon fair terms, and to this extent will tend to 
 
 117 
 
render it unnecessary for the public to take over the existing utilities 
 or to acquire new ones. 
 
 Furthermore, we recommend that provision be made for a com- 
 petent public authority, with power to require for all public utilities 
 a uniform system of records and accounts, giving all financial data 
 and all information concerning the quality of service and the cost 
 thereof, which data shall be published and distributed to the public 
 like other official reports; and also that no stock or bonds for public 
 utilities shall be issued without the approval of some competent 
 public authority. 
 
 We also recommend the consideration of "the sliding scale," 
 which has proved successful in some cases in England with reference 
 to gas and has been adopted in Boston. By this plan the authorized 
 capitalization is settled by official investigation, and a standard rate 
 of dividend is fixed, which may be increased only when the price of 
 gas has been reduced. fThe subway contracts and their operation 
 in Boston and New York are also entitled to full consideration. 
 
 In case the management of public utilities is left with private 
 companies, the public should retain in all cases an interest in the 
 growth and profits of the future, either by a share of the profits or a 
 reduction of the charges, the latter being preferable, as it inures to 
 the benefit of those who use the utilities, while a share of the profits 
 benefits the taxpayers. 
 
 Our investigations teach us that no municipal operation is likely 
 to be highly successful that does not provide for: 
 
 First — An executive manager with full responsibility, holding his 
 position during good behavior. 
 
 Second — Exclusion of political influence and personal favoritism 
 from the management of the undertaking. 
 
 Third — Separation of the finances of the undertaking from those 
 of the rest of the city. 
 
 Fourth — Exemption from the debt limit of the necessary bond 
 issues for revenue-producing utilities, which shall be a first charge 
 upon the property and revenues of such undertaking. 
 
 We wish to bring to your consideration the danger here in the 
 United States of turning over these public utilities to the present 
 government of some of our cities. vSome, we know, are well governed, 
 and the situation on the whole seems to be improving, but they are 
 not up to the government of British cities. We found in England 
 and Scotland a high type of municipal government, which is the result 
 of many years of struggle and improvement. Business men seem 
 to take a pride in serving as city councillors or aldermen, and the 
 government of such cities as Glasgow, Manchester, Birmingham and 
 
 ii8 
 
others includes many of the best citizens of the city. These condi- 
 tions are distinctly favorable to municipal operation. 
 
 In the United States, as is well known, there are many cities not 
 in such a favorable condition. It is charged that the political activity 
 of public service corporations has in many instances been responsible 
 for the unwillingness or inability of American cities to secure a higher 
 type of public service. This charge we believe to be true. How- 
 ever, there seems to be an idea with many people that the mere 
 taking by the city of all its public utilities for municipal operation 
 will at once result in ideal municipal government through the very 
 necessity of putting honest and competent citizens in charge. While 
 an increase in the number and importance of municipal functions 
 may have a tendency to induce men of a higher type to become 
 public officials, we do not believe that this of itself will accomplish 
 municipal reform. We are unable to recommend municipal owner- 
 ship as a political panacea. 
 
 In many cases in the United States the people have heedlessly 
 given away their rights and reserved no sufficient power of control 
 or regulation, and we believe that corruption of public servants has 
 sprung, in large measure, from this condition of things. With the 
 regulations that we have advised, with the publication of accounts 
 and records and systematic control, the danger of the corruption of 
 public officials is very much reduced. 
 
 To simi up, certain of the more important of our conclusions are: 
 
 ist. Public utilities, whether in public or in private hands, are 
 best conducted under a system of legalized and regulated monopoly. 
 
 2nd. Public utilities in which the sanitary motive largely enters 
 should be operated by the public. 
 
 3rd. The success of municipal operation of public utilities de- 
 pends upon the existence in the city of a high capacity for municipal 
 government. 
 
 4th. Franchise grants to private corporations should be termi- 
 nable after a fixed period and meanwhile subject to purchase at a 
 fair value. 
 
 5th. Municipalities should have power to enter the field of 
 municipal ownership upon popular vote under reasonable regulation. 
 
 6th. Private companies operating public utilities should be 
 subject to public regulation and examination under a system of 
 uniform records and accounts and of full publicity. 
 
 7th. The committee takes no position on the question of the 
 general expediency of either private or public ownership. The 
 question must be solved by each municipality in the light of local 
 conditions. What may be possible in one locality may not be in 
 
 119 
 
another. In some cities the companies may so serve the public as 
 to create no dissatisfaction and nothing might be gained by experi- 
 menting with municipal ownership. Again, the government of one 
 city may be good and capable of taking charge of these public util- 
 ities, while in another it may be the reverse. In either case the 
 people must remember that it requires a large class of able men as 
 city officials to look after these matter's. They must also remember 
 that municipal ownership will create a large class of employes who 
 may have more or less political influence. 
 
 We trust that these suggestions may aid the people, whenever 
 the time may come, in making a wise decision. 
 
 The above report is approved by the following nineteen members 
 of the Committee of Twenty-one. Mr. Mahon was kept away 
 from the sessions by sickness. Mr. Walton Clark wrote a separate 
 minority report. 
 
 Melville E. Ingalls, Chairman. 
 
 Edward W. Bemis, 
 
 William J. Clark, 
 
 John R. Commons, 
 
 Charles L. Edgar, 
 
 Walter L. Fisher, 
 
 Frank J. Goodnow, 
 
 John H. Gray, 
 
 Timothy Healy, 
 
 Daniel J. Keefe, 
 
 MiLO R. Maltbie, 
 
 H. B. F. Macparland, 
 
 F. J. MCNULTY, 
 
 Edward A. Moffett, Secretary, 
 
 Frank Parsons, 
 
 Albert Shaw, 
 
 J. W. Sullivan, 
 
 Talcott Williams, 
 
 Albert E. Winchester. 
 
 1 20 
 
MESSRS. CHARLES L. EDGAR AND W. J. CLARK DISSENT 
 AS TO PARTICULARS. 
 
 We, the undersigned, dissent from the report of the investigating 
 committee, as follows: 
 
 I St. The report says: 
 
 "We have come to the conclusion that municipal ownership of 
 public utilities should not be extended to revenue-producing indus- 
 tries which do not involve the public health, the public safety, pub- 
 lic transportation, or the permanent occupation of public streets or 
 grounds, and that municipal operation should not be solely for profit." 
 
 This sentence is so drawn that to a casual reader it implies that 
 the opposite is advisable. From this we strongly dissent. 
 
 2nd. The report says: 
 
 *'To carry out these recommendations effectively and to protect 
 the rights of the people, we recommend that the various states 
 should give to their municipalities the authority, upon popular vote 
 under reasonable regulations," etc. 
 
 The words "under reasonable regulations" were put into the 
 report at the suggestion of Chas. L. Edgar, and were intended by 
 him to mean such regulations as would compel deliberate considera- 
 tion not only by the people but by their representatives, and would 
 consequently prevent the superficial attractiveness of the scheme 
 from overriding the sober second thought of the people. We strongly 
 dissent from any definition of "regulations" which does not cover 
 these points. 
 
 3rd. The second and fifth conclusions in the latter part of the 
 report, being merely repetitions of previous statements, are, of course, 
 subject to the same dissents. 
 
 Charles L. Edgar, 
 W. J. Clark 
 
 MINORITY REPORT. 
 
 To THE Commission on Public Ownership of the 
 National Civic Federation: 
 Gentlemen: — I have the honor to submit the following report of 
 the minority of the Committee on Investigation, appointed by you 
 under a resolution as follows: 
 
 Resolved, That Melville E. Ingalls, Talcott Williams, W. D. 
 Mahon, Frank J. Goodnow, Walton Clark, Dr. Albert Shaw, Edward 
 W. Bemis, John H. Gray, Walter L. Fisher, Timothy Healy, William 
 
 121 
 
J. Clark, H. B. F. MacFarland, Daniel J. Keefe, Frank Parsons, John 
 R. Commons, J. W. Sullivan, Leo S. Rowe, F. J. McNulty, Albert 
 E. Winchester, Charles L. Edgar, Milo R. Maltbie, be appointed a 
 Committee of Twenty-one to investigate in this country and in 
 Europe the advisability of private and municipal ownership affecting 
 gas, water, electric power and light, and street railways, and that 
 this Committee of Twenty-one be empowered to fill vacancies or 
 add to their number, subject to the approval of the Chair. 
 
 I regret that my understanding of your charge to the Committee 
 of Twenty-one, to investigate and report to you, as per the above 
 resolution, leads me to the necessity of presenting a minority report. 
 
 I agree with my associates on the importance of directing your 
 attention to the dangers and difficulties attending municipal owner- 
 ship. I do not dissent from their conclusion that companies en- 
 trusted with franchises and charters for the operation of so-called 
 public service industries should be subject to regulation. I write a 
 minority report because, if I correctly understand your instructions 
 to your Investigating Committee, the majority report does not, in 
 its form and scope, answer your reasonable expectation; and because 
 I am not able to agree with what I understand to be the meaning of 
 some few of the statements made therein. 
 
 Recognizing the almost supreme importance of an adequate and 
 cheap supply of pure water, I dissent from one of the recommenda- 
 tions of my associates, in effect that water works should be operated 
 by public bodies. I dissent for the reason that my study of the 
 report of the water works expert employed by your committee, and 
 my personal investigations, lead me to the conclusion that the water 
 companies have made the more intelligent efforts toward adequacy 
 and purity of supply, and that, all conditions considered, the result 
 of their efforts has been and is a better and cheaper water supply and 
 service than that maintained by the mtmicipal water works de- 
 partments. 
 
 I agree with the majority that such governmental conditions as 
 exist in Glasgow, Manchester and Birmingham are "distinctly 
 favorable" to municipal ownership, as they must be to every urban 
 activity, public or private. The fact that the results of the investi- 
 gations we have made in these well-governed cities have not led my 
 associates to commend municipal ownership as we have there ob- 
 served it, or to recommend that our American cities adopt muni- 
 cipal ownership, is pregnant with meaning, and indicates another 
 point upon which we are in accord. 
 
 My knowledge of the question, had from personal investigation, 
 and from a study of the reports of the experts employed by the 
 
 122 
 
commission, and of the writings of its members leads me to the con- 
 clusion that the city and citizens of Glasgow, Manchester and Bir- 
 mingham, as well as of the other municipalities investigated, are not 
 so well served by their public service trading departments as the 
 cities and citizens of London, Newcastle, Sheffield, Dublin and 
 Norwich are by companies operating similar trading industries, and 
 that there is no element of blessing in the municipalization of the 
 former cities to compensate for the indifferent character of the ser- 
 vice rendered. 
 
 I dissent from the statement of my associates that "we take no 
 position on the question of general expediency of either public or 
 private ownership." I come from the study of this question, and 
 from the investigations in which I have had a share, including that 
 of the municipal plants selected as being the most successful in 
 Great Britain and in this country, ready, and with confidence, to 
 take a position on the question of general expediency. 
 
 Because the investigation, in which, through your favor, I have 
 had the honor to have a part, has convinced me that municipal 
 ownership has not proven equal to private ownership in benefits to 
 the consumer, citizen or city, I am not able to agree with the majority 
 of the Committee that the way shoidd be left open for any muni- 
 cipality to undertake any trading operation, without special authori- 
 zation by the legislature of the state wherein it is located. I cannot 
 believe that the prescribed remedy for any ill should be a worse ill, 
 and I cannot recommend that a municipality suffering, or believing 
 that it suffers, under company administration of a public utility, 
 should be given the right to engage in the operation of such utility 
 for itself, without such a course of procedure as will make sure that 
 the sober second thought of the people shall have ample opportunity 
 for development and expression, before the community is committed 
 to municipal ownership, with the accompanying dangers and diffi- 
 culties, of which you are warned in the majority report. 
 
 Because I believe that the general credit of municipalities shoiild 
 be conserved for the benefit of public and necessary improvements, 
 from which, in the nature of things, private enterprise is excluded; 
 and because I believe that a mimicipality should not be permitted 
 in any event to engage in any trading enterprise that will not pay 
 its own way, and have the confidence of the citizens as financially 
 sound, I recommend that municipalities be prohibited, by statute, 
 from making investments in trading operations, except with money 
 borrowed on mortgage, or otherwise, the loan being secured by a 
 lien on the plant in which it is invested, and on the right to operate 
 the same, and on these only. 
 
 123 
 
Because I believe that it is practically impossible to secure pri- 
 vate funds for investment in an enterprise subject to purchase by a 
 municipality, at a date to be selected by the municipality; and be- 
 cause I believe that the impossibility of so securing private invest- 
 ment may, and often will, work a social harm to a community, I 
 dissent from the opinion of the majority that a city should have the 
 right to piu-chase, at its option, the property of public service cor- 
 porations for operation, lease or sale. 
 
 I believe in state regulation and protection of public service 
 companies. I do not understand that your committee was charged 
 with the duty of recommending to you a form of regulation. I 
 know that your committee made no special study of this subject. 
 Therefore I am not prepared to propose any detailed plan of regu- 
 lation. 
 
 Finally, regretting to be in any degree in conflict of opinion with 
 my associates, I may still satisfy my sense of duty to my fellow- 
 citizens and my sense of obligation to you for the honor of a share 
 in this important work, by recording the conviction I am under at 
 the close of this investigation. 
 
 I am convinced that the condition of the British people, indi- 
 vidually or collectively, has not been improved by the municipali- 
 zation of the industries we have investigated. 
 
 I believe that political and social conditions in the United States 
 are less favorable to the success of municipal ownership than are the 
 same conditions in Great Britain. 
 
 I find this conclusion strengthened by our investigation into 
 municipalized industries in the United States. 
 
 I am convinced that, under American conditions, the system of 
 private ownership of public utilities is best for the citizens and 
 consumers. 
 
 I recommend state regulation and protection of public service 
 companies, provided by statute, and as far as possible automatic 
 in its application and operation. 
 
 I realize that in the main the majority and the minority of your 
 committee are in accord. Wherein we differ, the minority appeals 
 with confidence to a careful reading of the records of your com- 
 mittee for judgment as to the reasonableness of its conclusions and 
 recommendations. 
 
 Respectfully submitted, 
 
 Walton Clark. 
 
 124 
 
M13933 
 
 /It) 
 
 Alls 
 
 THE UNIVERSITY OF CAUFORNIA LIBRARY