GIFT OF 
 
MAY 
 
 SNAPPING CORDS 
 
 COMMENTS ON THE CHANGING ATTITUDE 
 
 OF AMERICAN CITIES TOWARD THE 
 
 UTILITY PROBLEM 
 
 BY 
 
 MORRIS LLEWELLYN COOKE 
 
 DIRECTOR OF PUBLIC WORKS, CITY OF PHILADELPHIA 
 
 SUMMARY 
 
 The unity of policy and action among private interests in the 
 utility field gas, water, electric and others is almost com- 
 plete. This solidarity is practically world-wide in scope and 
 is of a type not reached by existing laws. 
 
 A small group of financiers and promoters and their banking 
 agents provide for the public almost ready made, not only 
 securities but public opinion, laws, machinery and even the 
 technical experts. 
 
 Publicity incessant and relentless is the only remedy. This 
 must provide open and fair bookkeeping, with inventories 
 made on a basis comparable with those used in private 
 business and a uniform system of cost accounting, tying in 
 with the general books and including the smallest details of 
 the enterprise. 
 
 Inter-city and nation-wide cooperation, through the Utilities Bureau, 
 must provide for each individual city the support which each 
 private company receives from the league of private interests. 
 
 Two lectures given at various eastern 
 
 universities during the early 
 
 part of 1915 
 
This pamphlet has not been published at 
 public expense. The entire cost of printing 
 has been met by friends of good municipal 
 government. 
 
 Additional copies may be had free of charge 
 on application to the Department of Public 
 Works, Room 216, City Hall, Philadelphia. 
 
SNAPPING CORDS 
 
 COMMENTS ON THE CHANGING ATTITUDE 
 
 OF AMERICAN CITIES TOWARD THE 
 
 UTILITY PROBLEM 
 
 BY 
 
 MORRIS LLEWELLYN COOKE 
 
 DIRECTOR OP PUBLIC WORKS, fclTY OF 'PHILADELPHIA 
 
 PRIVATELY PRINTED 
 1915 
 
LECTURE I 
 
 THE basic fact underlying any discussion of municipal utili- 
 ties is the essential solidarity of the private interests which 
 control them. Of this oneness in method and mutuality of pur- 
 pose some may be legitimate and may lead to efficiency. Much 
 of it, however, is short-sighted, non-dividend producing and anti- 
 social. Not a little of it is clearly against existing statutes. In 
 all this planning the security floater is in supreme authority. 
 The engineer, the scientist and the administrator all take their 
 orders from the investment bankers. 
 
 This alliance of those that control even if they do not own 
 these properties is brought about through a widespread, unwrit- 
 ten and sometimes unrecognized system of exchange of "courte- 
 sies" rather than through definite business associations of types 
 either warranted or prohibited by law. Many of the agencies 
 through which this control is made effective do not see in them- 
 selves cogs in a well-nigh invincible system. What we shall 
 call "courtesy" for the lack of a better name has become such a 
 preponderant factor in the utility situation that if it could be 
 brought about that all the laws were scrupulously obeyed the 
 present status would remain practically unaltered. 
 
 The utility problem through its bearing on crooked politics 
 and bad government has become almost the crux of the municipal 
 situation and as such its solution is, in one sense, the key to na- 
 tional prosperity. These lectures are intended as a statement 
 of conditions as we who represent the cities see them, together 
 with certain suggestions as to the lines along which I believe 
 progress can and will be made. Undoubtedly the foundations 
 on which this great utility structure rests are slipping and the 
 cords which have bound us as a people to inefficiency and venality 
 are snapping. 
 
 During the past three years, while Director of Public Works of 
 the City of Philadelphia, it has been my duty to study the rami- 
 fications of these interests and the destinations toward which 
 they are steering. During this time my position has brought 
 
 [3] 
 
4 SNAPPING CORDS 
 
 definite business relations with over a score of public service 
 companies. With each of at least a half dozen of these companies 
 the Administration has negotiated contracts running into the 
 millions. In two of these contracts the expenditure of a great 
 many million dollars is involved. 
 
 Whenever the argument will be assisted by so doing, I will 
 mention companies and individuals by name. I want at the 
 beginning, however, to disclaim any intent to charge individuals 
 or corporations with conscious wrong-doing or intentional law 
 breaking. It is my observation that individually and collec- 
 tively and so far as is consistent with their individual and 
 collective pasts the men who control these properties are, try- 
 ing to conform to the letter of the law as they interpret the laws 
 and as they expect to get them interpreted. 
 
 Every manager of a utility in this country today recognizes 
 that he is engaged in a titanic struggle. I sometimes think that 
 the utilities really over-estimate the fighting qualities of the opposi- 
 tion and under-estimate their own. In the discussions of these 
 matters carried on by those representing the cities terms such 
 as " fight," " battle," " warfare" are on every page. For my own 
 part I like to feel that we are entered upon a vitally important 
 educational campaign, for the issues are for the most part far too 
 inaccessible and involved to yield to brute force. Here and there 
 we find marauding companies and individuals who must be beaten 
 into line or crushed. But generally we find utility companies 
 marching shoulder to shoulder in one army and under one banner 
 -guided and actuated by the same set of principles. This is 
 too big an army to crush. 
 
 But to some it is too hopelessly slow to act on the theory of an 
 educational campaign rather than a deadly encounter in which 
 each side is trying to wipe out the other. It has recently been 
 well said that "it seems impossible extensively to combine fairness 
 and action. Occasionally we find decisive activity harmonized 
 with universal justness. As a rule, the leader in deeds tends to 
 be narrow, partisan, unfair. It is because we cease to be the ex- 
 ponent of causes and become the exponent of opposition that we 
 lose in power. Man's strength is shown when he expresses his 
 faith, not when he elaborates his dislikes." 
 
 If we have good reason for speaking without venom and by the 
 facts, we have equally strong incentive for speaking fearlessly. 
 
SNAPPING CORDS 5 
 
 Such opportunities as this to speak not only under distinguished 
 auspices but without trammels come only too rarely. ~If,~ as I 
 believe, we are confronted with the gravest dangers in this utility 
 field, the more we know of utility corporations the less likely are 
 they to become malignant. 
 
 It is because anywhere near a complete victory for either side 
 in this matter means to the one side destruction in great quan- 
 tities of certain kinds of paper value by public ownership and 
 heavy and new public duties to the other, that I want to urge on 
 both sides the utmost of consideration for the rights and even 
 the views of the other. The present day managers and owners 
 of a property actually worth less than $25,000,000 but with out- 
 standing securities of over $50,000,000 are in an exceedingly em- 
 barrassing position. They want more than sympathy they 
 want help. Again a group of men, who in the late nineties pride- 
 fully referred to themselves as " robber barons' 7 1 and acted the 
 part, are only to be pitied as they are forced to submit their 
 every act to the decrees of public service commissions. And 
 again most men having once learned the technique of bribery 
 would find it less trouble to keep on buying their way than to deal 
 fairly with honest city officials. Then I suppose, on the theory 
 that one swallow does not make a summer, the utility man argues 
 that one honest official or even one honest administration does 
 not materially alter human probabilities. 
 
 It does those of us who are looking at it from the cities' side no 
 harm to see the problem through the utility man's difficulties. 
 And let me tell you that he has them. 
 
 We should understand the way in which the so-called " water" 
 has been introduced into the securities of these companies. 
 
 At the beginning of the process stands a banker who, having 
 purchased all or practically all of the stock of a locally owned 
 property, proceeds to introduce better methods of management 
 and to improve and extend the equipment, accepting for the 
 money advanced for such purposes whatever security the com- 
 pany is able to issue. 2 
 
 1 The group of capitalists among whom this cognomen was playfully used 
 in familiar discourse is still operating. 
 
 2 A case which comes to my mind is that of a large eastern gas com- 
 pany. Some local parties got a large majority of this stock together in a 
 pot. A firm of lawyers undertook to dispose of this stock at an advance 
 in price because of its representing so nearly the full ownership of the 
 
6 SNAPPING CORDS 
 
 As soon as the earnings of the company reflect these improved 
 conditions or results are sufficiently assured to warrant an ade- 
 quate engineering report, a plan of reorganization is devised. 
 
 A company is formed to take over one or more smaller companies. 
 This company usually authorizes enough bonds to provide for the 
 refunding of all the mortgage indebtedness of the companies con- 
 solidated and to pay back to the banker the money expended by 
 him, in the purchase of the stock of these companies and also the 
 improvements made and sometimes a cash profit besides, but this 
 is not usual. Very often they do not get back all of the money 
 put out. But you will recognize when they do get back all of 
 the money put out, the stock of the company becomes theirs for 
 services without any actual cost. 
 
 Preferred and common stocks are issued in amounts according 
 to the particular plan. The preferred stock is generally sold as 
 soon as the earnings make this possible for cash, which is either 
 profit or to a considerable extent profit and the common stock 
 representing the control of the company and its prospects has a 
 material immediate value on account of this. Very often, a con- 
 siderable part of the preferred has to be used for greasing the 
 wheels. Up to this point, with slight variations, the process is 
 as old as the modern corporation. 
 
 It is the next step the formation of the holding company 
 which has caused so much criticism. As a device for the injection 
 of water the efficiency of the holding company compares with 
 the high finance which proceeded it as a high pressure fire main 
 does to a garden hose. Thus, a banker having the stock of several 
 companies, the aggregate of which produces a considerable sum 
 in dividends, forms what is known as a holding company and he 
 turns the stock which he holds into this company for what is 
 known as collateral trust bonds, and preferred and common stock. 
 
 company as to make it susceptible of manipulation. The sa,le was nego- 
 tiated to a firm of investment bankers in New York at a price considerably 
 over what it had been bought at in small lots on the open market. The 
 lawyers received $25,000 for their services. The new owners then sold it 
 bag and baggage just as they got it to a prominent Wall St. banking house 
 for $500,000 more than the purchase price. The new owners gave the 
 company a pat and a smack, reorganized it and sold enough bonds to pay 
 them back all they had put into it and something besides. How many 
 more stories have been added to the house since then I do not happen to 
 know. 
 
SNAPPING CORDS 7 
 
 He sells the bonds, thereby getting cash for his stock which he 
 turned into the company, without losing control of the individual 
 company. There are a number of instances where several small 
 holding companies have been turned into one large holding com- 
 pany. The end is not yet. 
 
 The only serious defence I have ever heard made of this method 
 of financing is based upon a belief in the absolutism of private prop- 
 erty, for certain it is that the capitalization of a company under 
 this method of financing has no relation whatever to values. 
 
 Of the $8,000,000,000 or more of capital, employed in electric, 
 gas, street and interurban railway companies, nearly five and a 
 half billion dollars are controlled by holding companies and their 
 subsidiary companies. Holding companies control 76 per cent, 
 of the two billion dollars of capital invested in electric light and 
 power companies; two-thirds of the one and one-third billion 
 dollars in artificial gas companies, and two-thirds of the five bil- 
 lion dollars of capital in street and interurban railway companies. 1 
 
 The N. E. L. A. Bulletin states that "of the 6129 towns and 
 cities with a population of 46,000,000 receiving electric service 
 2691 with a population of 36,400,000 are served by 140 holding 
 companies." 
 
 A serious obstacle in the way of a settlement fair to both sides 
 is the deep conviction entertained by the most powerful bankers 
 that a widespread program of municipal ownership and municipal 
 operation is more or less imminent in this country. They spend 
 much energy and revenue to prove that such a policy would be "? 
 ill-advised and that the drift is in the opposite direction. But I 
 actually and secretly policies are based upon an expectation that^/ 
 most of these properties will be taken over by the people during - 
 the coming generation. The present high rates would not be 
 "good business" if these properties were to be continued in pri- 
 vate ownership. I have been told by those high in the banking 
 world that the intention is to make these plants yield every possi- 
 ble penny in revenue against this day when the ownership will 
 change. 
 
 Perhaps it is with purchase by the public in view that such 
 strenuous efforts are being made to secure from public service 
 commissions the validation of inventories and appraisals based 
 
 1 Brief submitted on behalf of Public Utility Holding Companies to the 
 Interstate Commerce Committee of the U. S. Senate. 
 
8 SNAPPING CORDS 
 
 on procedures and principles considered unsound in other business 
 fields. 
 
 The value of the property engaged in the so-called "public 
 f service" in any large city is usually in excess of that used for all 
 other public purposes. In other words, the utility end is the big 
 / end. It is impossible to make any exact statement in this matter 
 / on account of the desperately obscure and complicated financial 
 -- organization and statements of the companies controlling the 
 various utilities. Holding companies list their property as the 
 value of stocks and bonds held. These in turn come from other 
 companies, whose property is largely other stocks and bonds. 
 Sometimes the principal holding company does not list among its 
 liabilities some of the obligations of the underlying companies. 
 The whole effect is to prevent any one not on the inside from find- 
 ing out the real state of affairs, either as to total securities issued, 
 total liabilities or even the book value of actual property held. 
 
 Even so the following table listing the value of (1) the several 
 utility properties and (2) all other public property in Philadelphia 
 gives some picture of their relative financial importance and a 
 rough idea of the place occupied by the utilities in the whole 
 scheme of a city. No claims are made for the individual figures 
 used. In some instances they are little more than guesses. 1 To 
 even explain why these figures and not some others were used 
 would have required more than my allotted time. No reference 
 is made to steam railroads. 
 
 1 References indicate some of the sources used for information. 
 
SNAPPING CORDS 
 
 Philadelphia Utilities: 
 
 Paper value 
 or 
 value measured 
 by securities 
 
 An estimate 
 of actual 
 value of 
 property 
 
 Street Railways 
 
 $200,000,000 
 
 $100,000,000 
 
 Electric Company 1 
 
 50,000,000 
 
 25 000 000 
 
 Bell Telephone 2 
 
 20 000 000 
 
 10 000 000 
 
 Keystone Telephone 3 
 
 9,000,000 
 
 6 000 000 
 
 City Water Works 4 
 
 65 000,000 
 
 65 000 000 
 
 Northern Liberties Gas Works 
 
 750,000 
 
 500,000 
 
 Philadelphia Gas Works (U. G. I. lessee) 5 
 Gasoline Street Lighting 
 
 45,000,000 
 250 000 
 
 35,000,000 
 200 000 
 
 Miscellaneous: Burglar Alarm, Message 
 Telegrams, etc., Garbage 
 
 1 1,000,000 
 
 500,000 
 
 
 $391,000,000 
 
 $242,200,000 
 
 ALL OTHER PUBLIC PROPERTY IN PHILADELPHIA AS OF 
 DECEMBER 31, 1913 
 
 Land $32,771,878.62 
 
 Buildings 57,444,526.95 
 
 Piers, Wharves, etc 2,330,742.70 
 
 School Property 25,600,000.00 
 
 Miscellaneous Structures, Grade Crossing 
 
 Removals, etc 12,395,775.54 
 
 Streets, Boulevards, etc 56,500,000.00 
 
 Bridges 17,200,000.00 
 
 Sewers 35,401,247.06 
 
 Equipment 7,224,837.57 
 
 $246,869,008.44 
 
 A somewhat similar table has been prepared by Ray Palmer, 
 Commissioner of Gas and Electricity, Chicago, giving the "value" 
 of the utilities of Chicago: 
 
 1 Testimony before Penn. Public Service Commission in Cooke et al 
 against Phila. Electric Co. 
 
 2 Testimony before P. S. C. of Pa. and exhibits incident thereto. 
 
 3 Statement furnished by Company. 
 
 4 Estimate made by officials Bureau of Water. 
 
 5 Annual Report Chief Bureau of Gas, 1914. 
 
10 
 
 SNAPPING CORDS 
 
 
 ' Securities 
 
 Property 
 
 Gross 
 Earnings 
 
 Net 
 Earnings 
 
 Gas 
 
 $90,000,000 
 
 $50,000,000 
 
 $17,000,000 
 
 $6 000 000 
 
 Electric 
 
 80 000 000 
 
 65 000 000 
 
 16 000 000 
 
 5 000 000 
 
 Telephone 
 
 50,000,000 
 
 35,000,000 
 
 14,000,000 
 
 3,000,000 
 
 Elevated Railroad 
 Street Railways 
 
 95,000,000 
 150 000,000 
 
 40,000,000 
 100 000 000 
 
 8,000,000 
 32 000 000 
 
 3,500,000 
 10 500 000 
 
 Water Works 
 
 50 000 000 
 
 50 000 000 
 
 6 000 000 
 
 2 500 000 
 
 City Electric System . 
 Chicago Tunnel .... 
 
 7,000,000 
 66,000,000 
 
 4,000,000 
 20 000 000 
 
 1,000,000 
 500 000 
 
 
 
 o 
 
 Miscellaneous: Burglar 
 Alarm, Message Tel- 
 egrams, etc 
 
 > 1,000,000 
 
 500,000 
 
 250,000 
 
 
 
 
 
 
 
 
 
 589,000,000 
 
 264,500,000 
 
 94,500,000 
 
 30,500,000 
 
 ' Generally speaking only those municipal undertakings which 
 can be operated at a profit come under the head of public services 
 or are known as utilities. There is a grim sort of humor in the 
 fact that they are the only activities of a city about the ownership 
 and operation of which there is any discussion. 
 
 There are two billions in the securities of electric light and power 
 companies; over one and one-third billions in artificial gas com- 
 panies, and approximately five billions in street and interurban 
 railway companies; one and one-quarter billions in telephones, 
 approximately eight billions in above-mentioned privately 
 owned utilities. Cities of the United States of over 30,000 in 
 population, alone, own over one and one-quarter billion dollars 
 of lands, buildings and equipment used in public service enter- 
 prises. The total was $1,326,158,240, of which $909,591,279 was 
 for water supply systems, and $416,566,961 for "other public 
 service enterprises." Cities with a population of from 8,000 to 
 ^25,000 owned,over a decade ago (1903), approximately $75,000,000; 
 in water works ($67,446,783) and electric light plants ($5,439,747). 
 Since this report appeared, these cities have added quite exten- 
 sively to their municipally owned and operated public services, 
 so that, including other small cities, it is safe to say that cities 
 under 30,000 have invested in municipally owned and operated 
 public utilities approximately one hundred and fifty million 
 
SNAPPING CORDS 11 
 
 dollars. Here then is a known total of $10,650,000 invested in 
 public utilities. 1 
 
 Fortunately it is too big an amount for any financier of the 
 present generation to comprehend. It is perhaps an anomaly 
 to state that one of our greatest safeguards in the present crisis 
 in utility affairs is the inability of those who happen to be at posts 
 of great tactical advantage to understand and utilize their oppor- 
 tunities. The game is one for giants and the reins for the most 
 part are in the hands of those who do not understand the times. 
 It requires some broad comprehension of human currents to make 
 effective such concepts as the holding company and nation-wide 
 control. When the world is talking publicity and efficiency, to 
 continue to lean on bribery, undue influence, intimidation, monop-_^ 
 oly, and the secret agreement, is suicidal. 
 
 No statement of present conditions would be fair which does 
 not pay a high tribute to the electrical interests for the business 
 acumen shown in the co-operative efforts expended on the develop- 
 ment of the efficiency of generating units and lamps. This experi- 
 ment is remarkable as well for the breadth of the co-operation 
 as for the significant success achieved. While this joint action 
 on the part of many interests has fostered monopolisitc control i 
 this field, the exchange of patents, as between the two big manufac- 
 turing electric companies and the founding of research laboratories 
 practically the common property of an industry, are in themselves 
 inspiring examples of business efficiency. 
 
 Let us see how this " courtesy" about which I spoke a moment 
 ago works in actual practice. Some years ago the Keystone 
 Telephone Company a competitor of the Bell secured a 
 franchise to lay conduits under the streets of Philadelphia. While 
 laying the conduits needed to accommodate its telephone wires, 
 the management laid hundreds of miles of extra ducts for the 
 purpose of selling or renting them at some future time either to 
 the Philadelphia Electric Company or some competing electric 
 company. The value of these unused conduits has been vari- 
 ously estimated at from four to six millions. They are still lying 
 idle. 2 For six or eight years past every banker and financier in 
 
 1 For further details see King, "Lower Living Costs in Cities," pp. 
 305 ff. 
 
 2 Since writing the above and because of activities mentioned elsewhere 
 these conduits have been rented by the Philadelphia Electric Co. for thirty- 
 five years at a minimum annual rental of $100,000, with option to purchase 
 at the end of the lease. 
 
12 SNAPPING CORDS 
 
 Philadelphia has known about the availability of these ducts. 
 It has been understood by utility men that a company acquiring 
 their use and getting current either by purchase or by building a 
 plant of its own could sell electric current in Philadelphia both 
 for public and private use at rates not only below but far 
 below those charged by the P. E. Co. Such rates would 
 permit dividends above those which any self-respecting Pub- 
 lic Service Commission would allow. Owing to the misman- 
 agement of the Philadelphia Electric Company, its excessive 
 rates and especially owing to the small number of customers 
 it serves in proportion to the population, this competition 
 proposition was a peculiarly attractive one. Notwithstanding 
 the assured and generally admitted success of any scheme to 
 utilize these ducts and simply out of " courtesy" to the Philadel- 
 phia Electric Company, no one in responsible position has made 
 a move to bring them into use. The potent leaders in the utility 
 camp have declared in favor of one electric company, or one gas 
 company, or one telephone company to a city and woe betide the 
 individual or concern who moves for a competing plant or the 
 invasion of territory. 
 
 Such dicta as these are made effective in various ways. Among 
 the agencies which force compliance with standards and business 
 practices imposed from the top are the national organizations 
 provided for each type of utility, such as the National Electric 
 Light Association, the National Commercial Gas Association, 
 the American Electric Railway Association and others. Prac- 
 tically every worker in these lines who is in good standing with 
 the powers that be is forced to join these organizations and those 
 who do not enjoy the favor of those at the top are practically 
 barred from membership. 
 
 A typical organization of this type is the National Electric 
 Light Association which has headquarters in the Engineering 
 Societies Building in New York. To the uninformed it undoubt- 
 edly has the standing of a scientific and technical society. While 
 it does a considerable amount of scientific work it is essentially a 
 trade body and one not always operating quite as openly as would 
 appear to be for the best interests of the community. In order 
 to build up a position as a technical society this association for- 
 merly gave out technical information as do other national engi- 
 neering and scientific societies. This has been prohibited because 
 
SNAPPING CORDS 13 
 
 the members do not want this information to fall into the hands 
 of possible business rivals, and more especially into the hands of 
 public service commissions and others investigating their methods. 
 
 Notwithstanding a membership of many thousands, no one 
 can join the N. E. L. A. who does not work for a company which 
 already belongs to it. Since they do not usually allow competing 
 companies to join no individual employee of a competing electric 
 company can be a member. Hence, for instance, all employe's 
 of the Commonwealth Power Company of Milwaukee a com- 
 pany doing a business of $400,000 annually are barred from 
 membership in what is supposed to be the representative organi- 
 zation of the industry, because this company competes with the 
 Milwaukee Electric Railway and Light Company. The signifi- 
 cance of such social and professional pressure can hardly be over- 
 estimated 
 
 The N. E. L. A. also works in close harmony with and supports 
 such sexless public-opinion-forming agencies as the Bureau of 
 Public Service Economics, the Director of which appeared as a 
 speaker at a public meeting in the City Hall, Philadelphia, devoted 
 to electric light and power and two weeks later was in Washing- 
 ton, D.C., choosing the "citizens" who later appeared before a 
 Congressional Committee in opposition to the purchase by the 
 Government of the street railways of the District of ColumbiaX 
 There are quite a number of individuals employed by these 
 interests whose principal duty seems to be to go about addressing 
 public gatherings and thus influencing public opinion. Thus 
 F. C. Henderschott of the New York Edison Company spoke at 
 the electric meeting at the Mayor's office just referred to and at 
 the Mayor's conference. In neither instance did he state his 
 business. In fact at the last meeting he introduced himself as 
 " a private citizen" -presumably without interest. 
 
 These associations hold annual meetings in different parts of 
 the country and spend large sums in printing, entertainments, 
 newspaper and other advertisements. Among the distinguished 
 speakers at the National Electric Light Association meeting in 
 Philadelphia was Elbert Hubbard, Editor and Publisher of the 
 "Fra." A month or two later Philadelphia was flooded with the 
 " electrical number" of that publication containing a very satis- 
 factory picture of Mr. Joseph B. McCall, president of the Phila- 
 delphia Electric Co., on the front cover and a laudatory article 
 
14 SNAPPING CORDS 
 
 on the inside in which he was described as "the second big man 
 born in New York City," and "the central sun of the convention 
 around whom the lesser planets revolved." Among the latter 
 were Steinmetz, Edison and Insull. In view of the recent testi- 
 mony as to the part taken by the "Fra" in the Colorado strike 
 this instance is interesting. 
 
 The constituent companies are liberal in the matter of defray- 
 ing traveling expenses, so that at the Philadelphia meeting over 
 five thousand members of the N. E. L. A. were in attendance. 
 The expenses of the meeting were about $35,000. 
 
 The gatherings always secure a tremendous amount of newspaper 
 advertising and are made the occasions for securing wide public- 
 ity for any new business policy with which those at the top hope 
 to bulwark their position. Two recent instances are worthy of 
 consideration here. 
 
 In 1913 the Rate Research Committee of the N. E. L. A. an- 
 nounced its theory of rates based on the "value of the service" 
 which of course is nothing more than a new rendition of "all the 
 traffic will bear." Notwithstanding a vociferous beating of the 
 tom-toms, there were no large number of converts to the doctrine, 
 outside the interested members. Cost plus a fair profit is 
 as good a rule in this field as any other. 
 
 Again last year the American Electric Railway Association 
 gave forth a "Code of Principles" which advocated, among other 
 things, fair returns on capitalization no matter how extravagantly 
 watered, exclusive state control of the local utilities and the 
 holding company. The same report advocated the creation of a 
 financed bureau of public relations which is to have among its 
 various functions that of 
 
 "Influencing the sources of public education particu- 
 larly by (a) lectures on the Chatauqua circuit and (6) for- 
 mation of a committee of prominent technical educators 
 to promote the formulation and teaching of correct prin- 
 ciples on public service questions in technical and eco- 
 nomic departments at American colleges, through courses 
 of lectures and otherwise." 
 
 (The italics are mine). The trend of reaction must have seemed 
 very strong to have warranted such a pronunciamento. 
 
 On any such committee of "prominent technical educators" 
 there might be Mortimer E. Cooley, Dean of the Department of 
 
SNAPPING CORDS 15 
 
 Engineering, University of Michigan, Alexander C. Humphreys, 
 President of the Stevens Institute of Technology and George F. 
 Swain, Professor of Civil Engineering, Harvard University. 
 
 A short while ago I received this bit of advice from Professor 
 Cooley, which is as good for you as it is for me: 
 
 "I was particularly interested in your views on the 
 relations of public service corporations to the public. If, 
 on account of many years' experience I might venture a 
 word of advice to all younger men having to deal with 
 this subject, it would be not to destroy their usefulness 
 by a too ardent attitude on either side. The people, 
 and the corporations too, need advice sorely, and a sane 
 man, or a man with sane ideas, sanely expressed can do 
 vast good at this, a critical time in our country's welfare." 
 
 Professor Cooley gives up a good deal of his time now to mak- 
 ing valuations for public service companies. In fact his teach- 
 ing now consists in giving a course of lectures on the theory of 
 valuations. 
 
 This matter of utilities in their relation to the public looms so 
 large in Professor Cooley's mind that we find him making it the 
 subject of a commencement day address June 11, 1914, at Worces- 
 ter Polytechnic Institute under the seductive title of "Engineer- 
 ing in a Broader Aspect." In this address we are told that in 
 1911 there was an " average rate of return on all the capital (of 
 all utility corporations) of but 2.3 per cent." and "the average 
 rate of return on utility investments is less than can be had in 
 our savings-banks." 1 Poor utility corporations! Then note the 
 
 1 In a circular dated April 21, 1913, Henry L. Doherty & Co., investment 
 bankers, New York City, give the following table of net earnings and receiver- 
 ship risks for $100 of outstanding securities in (1) utility corporations, (2) 
 industrials, and (3) railroads, for the ten years from 1902 to 1912: 
 
 Net Earnings Receivership Risks 
 
 (1) Gas and Electric 8.45 0.37 
 
 (2) Industrials 7.79 2.07 
 
 (3) Railroads 4.25 1.84 
 
 In view of the fact that the securities of utility corporations are from 
 50 to 100 per cent, in excess of the invested capital, this 8 per cent, return, 
 taken with the comparative - immunity from risk, as shown on above table, 
 seems to suggest further explanation of Dean Cooley's reference to savings 
 bank returns. 
 
16 SNAPPING CORDS 
 
 naievete with which he discusses the testimony of experts appear- 
 ing in behalf of utility corporations. "We must deplore the 
 discounting of testimony of witnesses the apparent neces- 
 sity of having several engineers testify to the same facts. Not- 
 withstanding the array of engineering talent the issue seems 
 to remain in doubt. This is particularly true in hearings relat- 
 ing to public service properties. There is the feeling that en- 
 gineers whose testimony is favorable to the corporation have 
 been bought." 
 
 Alexander C. Humphreys, in addition to being president of 
 Stevens Institute, is a past president of the American Society of 
 Mechanical Engineers and president of the Buffalo Gas Company. 
 He was the principal expert witness appearing for the Consolidated 
 Gas Company in the famous 80 cent gas case. He uses practi- 
 cally every public address as the occasion for the laudation of big 
 business and for correspondingly decrying the efforts of those 
 who feel that this country has a destiny not wrapped up in that 
 of holding companies. President Humphreys' favorite pastime is 
 holding forth against municipal ownership. Any man who believes 
 that there ever has been or ever will be conditions under which 
 municipal ownership and operation might be tried even timidly 
 is his natural enemy. An obviously irresponsible article in 
 Public Service, a trade paper devoted almost exclusively to an un- 
 discriminating campaign against public ownership, afforded Presi- 
 dent Humphreys a text for the principal address before a joint 
 meeting of the engineering organizations of Philadelphia. He, 
 too, is sensitive about the public attitude towards engineers. In 
 New York City on February 17th of this year he asked his audi- 
 ence why engineers are almost invariably excluded from boards 
 and commissions. He added "we are submitting too readily to 
 the implication that we are dishonest/' and "we must educate 
 the public" and "engineering is the best qualified profession to 
 bring back this country to a sane regulation of its affairs." He 
 did not state the year to the practices of which we should 
 return. 
 
 Prof. George F. Swain through his direction of the valuation 
 work on the N. Y. Central railroad, and more especially in con- 
 nection with the New Haven railroad, may be considered a high 
 authority in this field. For capitalization and rate making pur- 
 poses, he argues (l) for reproduction value without any depre- 
 
SNAPPING CORDS 17 
 
 elation, (2) also for an allowance for "the appreciated value of 
 real estate .and any other elements which have appreciated 
 without corresponding allowance for depreciation of elements 
 which have depreciated/' and (3) where states, counties or cities 
 have contributed to grade crossing work the amount of such / 
 contribution amounting in Massachusetts to 35 % should 
 properly be included in the appraisal of a railroad property. 1 
 
 Professor Swain's views on political economy and government 
 are quite fully given in his presidential address before the 
 Ottawa Convention of the A. S. C. E., June, 1913. In this 
 paper Professor Swain expresses deep anxiety about the state of 
 the nation and voices considerable distrust of democratic ideals, / 
 and says that "present day humanitarianism leads to race de- 
 generacy." 
 
 That efforts are already being made "to influence the sources 
 of public education" is shown by such courses of lectures as 
 those given at the School of Commerce of Northwestern Uni- 
 versity by William D. Kerr until recently Director of the Bureau 
 of Public Service Economics and more particularly those given 
 under the auspices of the so-called Finance Forum of the West 
 Side Y. M. C. A. in New York City where every speaker is the 
 employee of a privately owned and privately operated utility or 
 allied actively as shown by this schedule : 
 
 Magnitude of the Electric Light, Power and Transportation 
 Business. 
 
 Address by T. Commerford Martin, of the New York 
 Edison Company, and Secretary, N. E. L. A. 
 The Public, The Investor and The Holding Company. 
 
 Address by Francis T. Homer, Counsel, Bertron, Gris- 
 com & Co., investment bankers, New York City. 
 Municipal Ownership of Public Utilities. 
 
 Address by Arthur Williams 2 of the New York Edison 
 Co. and Past President National Electric Light Associa- 
 tion. 
 
 Progress of the Science of Lighting. 
 
 Address by Dr. Edward P. Hyde, Director of the Na- 
 
 1 "Report of the Joint Commission on the N. Y., N. H. & H. R.R., 1911." 
 
 2 Mr. Williams is another man used freely in the work of "molding public 
 opinion." 
 
18 SNAPPING CORDS 
 
 tional Electric Light Association (Nela), Research Labo- 
 ratory of the National Lamp Works of the General 
 Electric Company. 
 
 Telephones at Home and Abroad. 
 
 Address by T. P. Sylvan, of the New York Telephone 
 Company. 
 
 Future of Public Utilities. 
 
 Address by Thomas N. McCarter, President, Public 
 Service, Co., of New Jersey. 
 
 Centralization of Power Supply. 
 
 Address by Samuel Insull, President of the Chicago, 
 Edison Co. 
 
 Investments in Public Utilities and How Held. 
 
 Address by W. H. Gardiner, of Henry L. Doherty and 
 Company, investment bankers of New York City. 
 
 Future Regulation of Public Utilities. 
 
 Address by William D. Kerr, of the Bureau of Public 
 Service Economics. 
 
 Some Legal Aspects of Regulations of Public Service Corporations. 
 
 Address by Charles F. Mathewson, Associate of Elihu 
 Root, of Counsel, Consolidated Gas Co. 
 
 That these lectures were considered wholly "safe" is shown 
 by the fact that they were all published in pamphlet form and 
 distributed free of charge by a Wall Street investment banking 
 house of high reputation. If this had been a course of lectures on 
 steel or cotton or printing, the majority of those given would have 
 covered the technical side and most of the speakers would have 
 represented the manufacturing end. In this course it will be noted 
 that the whole emphasis is on relations to the public and the 
 marketing of securities. 
 
 An up-to-date illustration of this unity of interest which I have 
 called " courtesy" is afforded by an editorial in the February 
 issue of Aera, the official organ of the American Electric Railway 
 Association: 
 
 "Another phase of this meeting at Washington, which 
 is highly important as a prognostication of future strength 
 and power in the battle which the industry is to wage, 
 was the evidence manifested in many ways that the 
 
SNAPPING CORDS 19 
 
 manufacturing interests connected with the industry are 
 prepared to cooperate with the railway men in the work 
 that lies ahead. 
 
 "When Mr. Pierce, speaking for the Manufacturers' 
 Association, pledged the support of its members, it was 
 evident to those who had felt the pulse of the delegates, 
 that he was giving utterance to no idle and complimentary 
 rhetorical figure, but was voicing a sentiment manifested 
 in many ways. 
 
 "Mr. Henry as well as Mr. Pierce pointed out the 
 unity of interest that exists between the two branches of 
 the art. The railways cannot suffer unless there is a 
 reflex felt by the manufacturer. The interests of each 
 are affected almost to an equal extent by adverse con- 
 ditions forced upon the former. A glance at the personnel 
 of those Association committees, which have directly to 
 do with matters connected with the public, shows not only 
 that the Railway Association recognizes how important 
 it is that the manufacturers shall be enlisted in the cause, 
 but shows as well that the leaders in the manufacturing 
 industry have recognized the importance of their coopera- 
 tion and have made the sacrifice of time and brains neces- 
 sary for the work they are called upon to perform. 
 
 "The Washington meeting was an inspiration. It has 
 sent back to their work some hundreds of men imbued 
 with the idea that at last a concrete practical plan has 
 been presented for improving public relations and resolved 
 to do their share in this important task. Unity, solidar- 
 ity, enthusiasm, these three things are the returns 
 from this Mid- Year meeting and in addition the Amer- 
 ican public has been notified that this Association in the 
 words of President Allen has at last- 'found a voice.' ' 
 If this factor of "courtesy" as between utility corporations has 
 brought about virtually united action among the utility com- 
 panies, please remember that it is international even world-wide 
 in its scope. In each of the large European countries there are 
 groups of bankers and financiers working in this same field. The 
 entire civilized world has been parcelled out and "courtesy" now 
 becomes international and prevents the invasion of the other 
 fellow's territory. In New York you find the Electric Bond and 
 
20 SNAPPING CORDS 
 
 Share Company acting as the banking end of the General Electric 
 Company with a relatively small capital as compared with the 
 magnitude of its operations. In Berlin we find a similar $50,000,000 
 corporation for the construction and operation of electric proper- 
 ties. This company controlled by the same interests as control 
 the Deutsche Bank have properties almost everywhere except in 
 this country. If asked "Why?" the answer would probably be 
 " Too deep in the business of owning and managing electrical 
 properties for it to be wise for them to go into any undertaking 
 involving opposition to the established interests in the same 
 field/' and "Do not wish to risk antagonizing similar interests 
 to their own in America." 
 
 The dominant interests in each nation in each special line 
 have become much of the same mind and have a large respect 
 for each other. These large international companies or syndi- 
 cates are more and more in finance and manufacturing making 
 impossible competition such as we find in other lines. It is a fact 
 generally recognized now that it is impossible to secure capital 
 for a municipal or competitive utility proposition through regular 
 channels. No matter how good such a utility proposition may be, 
 it can't be financed in this country today if it must be done through 
 bankers. No one will responsibly deny this because the statement 
 is made on the authority of too many bankers. 
 
 The situation with regard to buying equipment especially in 
 the electrical field while not so generally understood by the public 
 is almost as tight. There are certain factors to any successful 
 utility enterprise, such for instance as the franchise, the capital, 
 the engineering plans, the charter, the certificate of public con- 
 venience. If any one of these items is missing it is impossible even 
 to get a bid or serious attention from either the Westinghouse 
 Company or the General Electric Company in the matter of an 
 electric plant for either public or private central station service. 
 If they can find such an excuse for not bidding they will take it. 
 If there is no such excuse they will bid for one of two reasons 
 either because they see that the end has come and that some- 
 body is going to get the business, or because somebody might 
 go to jail if they did not bid. Mayor Baker of Cleveland, before 
 he bought the equipment for the new Cleveland municipal electric 
 plant, announced that if there were no bids from the responsible 
 manufacturers he would at once take up the matter with Congress 
 
SNAPPING CORDS 21 
 
 by requesting that the tariff duty be thrown off foreign machinery 
 for municipal enterprises. He got his machinery. 
 
 So much for the financial and manufacturing phases of work in 
 the utility field. In my next lecture I will take up the difficulties 
 connected with securing technical advice and expert services. 
 
 I am convinced that the private corporations have brought 
 about a combination in this field which is too tight to be perma- 
 nent. In order to perpetuate such absolute control it has been 
 necessary to introduce into these companies a German military 
 system of discipline which is more and more resented by the 
 great majority of the employees. In our Philadelphia companies 
 public discussion of utility policies and methods is confined 
 usually to one executive head and information is never given out 
 except through this one source. As a rule the real authority and 
 responsibility in these companies is at the top and the top is usually 
 located in far away New York. Young men of ability and promise 
 are hesitating more and more to ally themselves with interests 
 which almost necessarily place them in opposition to the trend of 
 the times and the best interests of the State. I am not very 
 sanguine about some of the older men seeing the light! But I am 
 hopeful that the generation now coming.into responsible charge is 
 going to see to it that these great properties are operated in con- 
 formity with the highest ideals of our people. Happily this course 
 seems to be the one which will in the long run conserve the interests 
 of a large majority of the stockholders in these properties. 
 
LECTURE II 
 
 THE drift towards municipal ownership and operation in all 
 parts of the country is unmistakable. From present indications 
 the change from private to public ownership in municipal utili- 
 ties will come more rapidly than either the cities or the com- 
 panies themselves, today, realize. Apparently the principle of 
 state regulation, as it is at present understood and practiced, is 
 doomed. The louder the companies shout for it the less of a 
 panacea it seems. The rising tide of home rule must necessarily 
 bring with it a larger and larger measure of local regulation of 
 utilities. Through all the agitation for the three methods of 
 state and local regulation and municipal operation runs an insist- 
 ent demand for efficiency and the widest possible publicity both 
 as to costs and principles of management. 
 
 Before the recent Conference of American Mayors in Phila- 
 delphia, Clarke M. Rosecrantz, general counsel of the Milwaukee 
 Electric Light and Railway Company said : l 
 
 "If the members of this conference really desire to 
 save the public money, I think their attention should first 
 be directed towards securing an efficient and economical 
 management of the affairs which properly belong to the 
 municipality. There is plenty of opportunity in that field 
 and when it can be shown that those affairs are efficiently 
 and economically conducted it will be time enough to 
 consider taking on the burden of operating public utilities." 
 Personally I am opposed to municipal ownership at least for 
 the present but I think Mr. Rosecrantz has put his finger on the 
 only real argument that can be brought against it. And on prin- 
 ciple I am opposed to our cities taking on anything more, simply 
 because we have our hands full now in learning the possibilities 
 of municipal government. The demands for the expenditure of 
 money and talent in the other parts of the municipal field are so 
 
 1 " Public Policies as to Municipal Utilities," The Annals of the Ameri- 
 can Academy of Political and Social Science, January, 1915, p. 270. 
 
 [221 
 
SNAPPING CORDS 23 
 
 insistent and widespread that it would probably be for the best 
 interests of our municipalities if municipal operation could be 
 postponed for a while. But unless the attitude of the private 
 companies very largely changes within the course of the next few 
 years our cities will probably decide that the present and obvious 
 disadvantages of municipal operation are inconsiderable as com- 
 pared with the burden which the system of private ownership 
 places upon us. If present tendencies are continued private com- 
 panies will be taken over in about the following order: water 
 first, then electric, gas and street railways. 
 
 I am not opposed to municipal ownership for the fool reason 
 that it has been tried elsewhere and found a failure. This is not 
 true and most of those who utter the statement know that it is 
 not true. Nor am I opposed to it on the ground that an American 
 city is unable to operate a utility efficiently and economically. 
 We both own and operate our water works in Philadelphia. We 
 manufacture as good water and as efficiently as any water works 
 in the United States operating under similar conditions. On the 
 other hand our electric company which is owned and operated 
 privately does about as near nothing for our community as is 
 humanly possible. It has the most inconsistent rate schedule in 
 the United States, sells the smallest quantity of current com- 
 pared to the total current manufactured in any large city and it 
 charges the highest rates. Everything considered no city govern- 
 ment could make a worse fist of any proposition than the Phila- 
 delphia company has of its opportunity. If a city can operate 
 its police and its fire departments upon which it earns nothing 
 and do it efficiently it can operate electric and gas properties which 
 are almost the simplest manufacturing propositions in the world. 
 But remember that it does not make any difference who owns or 
 who operates these properties. The big question is how are they 
 operated. If the private companies furnish good service and fair 
 rates, give them protection, a free field and a square deal. If 
 they fail in these essentials however any self-respecting city will 
 call the bluff by insisting on public ownership and public opera- 
 tion. 
 
 While state regulation certainly has much to recommend it, 
 especially as to accounting, issuance of securities, etc., it is in the 
 matter of rate fixing based on an assumption that the operation of 
 municipal utilities has reached a stage that permits of a more 
 
X 
 
 24 SNAPPING CORDS 
 
 scientific and exact treatment than really is possible. There are 
 relatively few accepted standards in this field and almost nothing 
 of cost keeping or a real equivalent. Thumb rule and personal 
 opinion everywhere abound and what is even more regrettable the 
 several industries are to a very large extent operated on false 
 assumptions made necessary for the protection of fictitious values. 
 The principle of price regulation in private industry at the present 
 time is generally accepted as impossible on account of the lack 
 of definite standards. The problem is almost as difficult in the 
 utility field. The public is asked to look upon the deliberations of 
 public service commissions as scientific and exact while insiders 
 know that the method of state regulation carried on under the 
 most favorable circumstances is a hit or miss method. 
 
 Then again we have been rushed into this era of state regulation 
 with such rapidity that humanly speaking it is impossible for any 
 commission to more than scratch the surface of the field that has 
 been assigned to it. In order to get away from what the com- 
 panies considered the rigors of local control and for other reasons 
 they have not only helped the people to place all authority in 
 such matters in the hands of the state commissions but have done 
 almost nothing to assist these commissions in the proper co-ordina- 
 tion and performance of these new and extensive duties. In fact 
 there are reasons for believing that in some instances the com- 
 panies have been at some pains to overwhelm the commissions by 
 placing before them relatively simple matters in tremendous detail. 
 The rate case of the Pittsburg Chamber of Commerce against the 
 Bell Telephone Company of Pennsylvania now being argued before 
 the Pennsylvania State Service Commission is a case in point. 
 The company. in this instance is said to have spent upwards of 
 $250,000 in laying before the Commission a mass of undigested 
 material. In almost every rate case the effort seems to be to 
 raise as many issues as possible without regard to whether they 
 are pertinent or not. 
 
 Another important reason why confidence in state regulation 
 seems to be on the wane is that many of the laws creating public 
 service commissions have been drafted with a view to giving an 
 unfair advantage to the private companies. The Pennsylvania 
 law, for instance, was so amended during its passage that it 
 satisfies no one except a small minority of the public utility com- 
 panies who still believe in the methods of twenty years ago and 
 
SNAPPING CORDS 25 
 
 who continue to make their appeal to the god of might rather than 
 to the god of right. The methods under which such legislation is 
 sometimes ground out are pertinently illustrated by this very law. 
 The original act was drawn by a committee of citizens represent- 
 ing different parts of the state. The committee was made up of 
 those who had made a special study of the principles of state regu- 
 lation as practiced in other parts of the country. The bill that 
 was presented to the legislature seemed to include the best features 
 of all the existing public service laws. As finally passed the act 
 was thoroughly emasculated. A study of the texture of the paper 
 upon which the several amendments were written and the style 
 of typewriting used showed that every one of the amendments > 
 made in this bill was drawn by two very influential Penn- 
 sylvania public service companies. 
 
 The provisions of the national constitution forbidding the tak- 
 ing of property without "due process of law" gives the companies 
 a great advantage over the cities in litigation before commissions 
 because it properly prevents confiscation. If confiscation itself 
 or litigation charging confiscation are to be avoided the commis- 
 sions must necessarily leave an ample margin over and above 
 cost plus a fair profit in the fixing of rates. This is an inherent 
 disadvantage in the cities' side of any such discussion. While it 
 has properly been easy for the companies to invoke the basic law 
 to prevent the imposition of rates unfair to the company, the 
 cities have had very little success in the last generation in in- 
 voking the common law in preventing the companies from 
 charging rates unfair to the cities and otherwise imposing upon ^ 
 them. 
 
 The work that comes before public service commissions is very 
 largely engineering and yet there are almost no engineers on the v 
 commissions. The profession of engineering is unanimously in 
 favor of commissions made up very largely of men with engineer- 
 ing training. I discussed the probable reasons for this failure to 
 appoint engineers in a paper called "Some Controlling Factors in 
 Municipal Engineering" read recently before the American Society 
 Mechanical Engineers. Some of my professional associates did 
 not like the suggestion that the failure to appoint engineers to 
 these positions was on account of their too close affiliations with 
 the corporation side of the questions to be discussed. I regret as 
 much as they do the conditions which apparently makes for the 
 
, 
 
 26 SNAPPING CORDS 
 
 wisdom of not appointing engineers and especially electrical 
 engineers on these commissions, but I do not agree with them 
 that if the condition is there that anything is to be gained by 
 not facing it. If conditions have been such in this country dur- 
 ing the last generation that, for instance, the organization rep- 
 resenting an entire profession has been so diverted that the 
 search after truth is no longer its guiding star, surely it is well to 
 recognize the fact that other professions which may be subject 
 to the same influences may take the necessary steps for their 
 protection. At a time when a great majority of the appointees 
 to these commissions are lawyers there is some underlying reason 
 why engineers are almost never appointed to them. It/does not 
 seem to me that the public loves a lawyer any better than an 
 engineer perhaps not quite as much. But there is/a feeling that 
 even a lawyer can see two sides to a question and may be success- 
 ful in maintaining either of them. 
 
 A large number of the appointments to these commissions are 
 made for political considerations and without regard to technical 
 fitness. A good example of this practice is seen in the first New 
 York district where out of a commission of five men, Edward E. 
 McCall, late Tammany candidate for Mayor of New York, is 
 Chairman and J. Sergeant Cram, one of the leading sachems of 
 Tammany Hall, is another member. Experience is proving that 
 even where good men are developed they do not remain perma- 
 nently on the commission. In this a public service commissioner- 
 ship seems to differ from a seat on the bench. A friend of mine 
 who recently visited the home cities of a large number of com- 
 missions made the comment that almost invariably he found the 
 efficient commissioners looking upon their work as stepping stones 
 to higher political preferment. In other words to be a good 
 public service commissioner does not appear to be an end in itself. 
 As long as such service is only looked on as a stepping stone to 
 something beyond or as merely a means of paying political debts 
 by assuring non-interference with corporate contributors, the 
 system will suffer. Again it appears to be the case that whenever 
 a commissioner gets to the point where he knows enough to really 
 deal justly with the companies, the latter make every effort to 
 have him removed. Only on this ground can be explained the 
 persistent fight, for instance, which is now being made against 
 the reappointment of Milo R. Maltbie of the First New York 
 
SNAPPING CORDS 27 
 
 District, who has done as much to make state regulation workable 
 as almost any other man in the country. 
 
 It is a safe statement that a governor hardly ever appoints a 
 public service commissioner without at least consulting the lead- \J 
 ing men in the corporations which that same commissioner is to 
 regulate. Corporations in approving or disapproving candidates 
 use a type of sardonic wisdom which has grown out of their experi- 
 ence. For instance, I heard it stated the other day by a man in 
 authority that the corporations never objected to the appoint- 
 ment of an honest and able young lawyer if he had little or no 
 practice, because it had been their experience that men so situated 
 could be depended upon not to be too rigorous in their decisions 
 against utility companies. Again there are a great many instances 
 where corporations have worked for the appointment of high-toned 
 but weak-kneed advocates of the rights of the people. This prac- 
 tice makes the records appear all right but the results all wrong. 
 
 Another cause seriously operating against the principle of state 
 regulation is the almost entire absence in practice of accepted 
 theories of valuation. Among the economists there is about as 
 reasonable an agreement as to the main questions affecting valua- 
 tions as could be expected. There is, however, the greatest dis- 
 parity between the accepted theories of economists and the 
 preachments and practices of those who usually testify in such 
 matters before public service commissions. In almost every im- 
 portant case some novel principle is advanced with apparent con- 
 fidence and no matter how far it may be from previous practice 
 or how bitterly it may clash with the tenets of ordinary business. 
 In other words whatever theory of valuation may seem necessary 
 to escape the omnipresent ghost of watered securities finds utter- 
 ance through some individual or agency of high standing. 
 
 It seems apparent that those who are in control of the utility 
 situation deprecate any effort to establish a generally accepted 
 code of principles of valuation at this time. During the valuation 
 of the railroads by the Interstate Commerce Commission and 
 during the process of the absorption of the water in the utility 
 stocks, such a code might easily be troublesome. Sometime ago a 
 distinguished committee was appointed by the President of the 
 American Society Civil Engineers "to promulgate principles and 
 methods for the valuation of railroad properties and other public 
 utilities." In due season a progress report of this committee was 
 
28 SNAPPING CORDS 
 
 printed and issued to the membership. But probably owing to 
 certain heterodox theories which it contained every effort has been 
 made not only to prevent its dissemination, but quite contrary 
 to the very usual practice in such matters it is now impossible to 
 obtain through the society copies of this progress report. Three 
 vacancies in the committee that prepared the report have recently 
 been filled by those closely associated with railroads and railroad 
 affiliations. 
 
 Owing to the nation-wide control exerted by the private com- 
 panies they can successfully insist on unfair or false standards. 
 Practically all the present street lighting by gas and gasoline in 
 the United States is in the control of one company or one interest. 
 This makes it easy for this combination to advertise the ordinary 
 gasoline street lamp as a 60-candle power lamp when it is usually 
 not 40-candle power. This is one of the many tricks through which 
 these interests have " beaten" up and I use the word advisedly 
 every competitor. If the ability of the lamp to give 60-candle 
 power is questioned it might be explained that this 60-candle 
 power means a lamp which, if taken to a laboratory, re-equipped 
 with a new mantle and filled with high grade gasoline, can be made 
 to give 60-candle power in the laboratory. But there are probably 
 several hundred thousands on the streets of the United States 
 today that give an actual candle power little above or below 40- 
 candle power, no matter what they call it. 
 
 Cost keeping in the utility industries should be a simple matter 
 as compared, for instance, with cost keeping in almost any manu- 
 facturing enterprise. In fact, a utility compares with what are 
 known as "tonnage" works in the manufacturing field where not 
 only the product is uniform but where the raw materials are both 
 uniform and few in number. In such industries cost keeping is a 
 simple matter and one involving a minimum of expense. In view 
 of this fact the attitude of the owners of public service corpora- 
 tions toward cost keeping is not only not easily understood but 
 it is almost unbelievable. Before our own public service com- 
 mission in Pennsylvania, the Philadelphia & Reading Railway 
 recently officially stated that to secure the cost of carrying a ton of 
 coal from their mines ibo the City of Philadelphia was a problem 
 practically incapable of solution. In another rate case the legal 
 representative of the Philadelphia Electric Company stated that 
 it was impossible to segregate the plant used for the public lighting 
 
SNAPPING CORDS 29 
 
 from that used for private lighting. No railroad in the country 
 can give the difference in cost between handling a ton ol miscel- 
 laneous freight over a four track main line and that of handling a 
 ton of hay over a single track branch far from the centers of 
 population. 1 
 
 Another principle in which the companies profess to believe and 
 which acts as a great deterrent to the intelligent presentation of |/ 
 a rate case is that costs secured in one city have no appreciable 
 relation to work of a similar character in another city. The com- 
 panies have been so successful in pushing this theory that it is 
 most unusual that cost factors secured in one locality can be used 
 in a case affecting rates in another place. But it is true neverthe- 
 less that most of the factors that go to make up electric or gas 
 costs, for instance, are essentially uniform throughout the country. 
 Where they are not the same, they usually vary for well recog- 
 nized reasons for most of which definite factors may be deter- 
 mined. In the generation of electric current there are only two 
 cost factors of importance which vary materially first, labor and 
 second, coal. The variation in the price of coal can be definitely 
 determined and the difference in the cost of labor as between two 
 places can be fixed within a small factor of error. A third impor- 
 tant point of variation and one not so readily determined affects 
 only the cost of distribution, i.e., the extent of territory served. 
 The factors which must be included in all localities make up by 
 far the larger part of the cost. That part of the total cost which is 
 represented by variations between cities while not negligible is of 
 far less importance. As a matter of fact, the companies are a bit 
 inconsistent as to this inter-city aspect of rates since they oppose 
 the reduction of rates in some places for fear such reduction will 
 make higher rates appear wrong elsewhere. Regulation of course 
 means that in some instances a company is not allowed to reduce 
 rates as much as it would like to. The attitude of all classes of 
 
 1 Docmt. 950 Pa. P. S. C., page 427, H. E. Bellis, N. W. Business 
 Men's Ass'n et al. v. P. & R. R. R. Co. et al 
 
 Theodore Voorhees, President Phila. & Reading Railroad: "You cannot 
 get at the cost of any item of railroad service. ... It never has been done. 
 I do not believe it ever will be done." 
 
 Robert H. Large, General Coal Freight Agent, P. R. R.: "You can't 
 take into consideration the cost of the service for two reasons. In the first 
 place you can't ascertain the cost. That is practically impossible, in 
 freight traffic between commodities." 
 
30 SNAPPING CORDS 
 
 utilities toward this very important question of costs can only be 
 characterized as being pitifully helpless. 
 
 The absence of even a beginning of a cost system is the only 
 excuse that I have been able to find why men who dominate the 
 business policy of the Philadelphia Electric Company can face a 
 rate schedule which provides that one customer shall be charged 
 0.7 cents per unit of electric current and another customer 
 charged 15 cents or over twenty times as much for the same 
 commodity. 
 
 Perhaps if the gas industry had an adequate cost-keeping sys- 
 tem the men at the head of it would understand the reasons why 
 gas is sold so much lower in England than in America. In at least 
 one English town it sells for 16 cents for power purposes. One 
 dollar is the " classic" rate in the United States. 
 
 While there are undoubtedly over 10,000 utility companies 
 operating in this country today I think I am safe in saying that 
 there is only one that has determined its costs in such a way as to 
 have them stand any fair test. Recently at a meeting of the 
 Society to Promote the Science of Management at New Haven, 
 Conn., I heard Mr. Charles Day of the firm of Day & Zimmer- 
 man, Consulting Engineers, describe the splendidly conceived 
 and wonderfully efficient system used by the Penn. Central 
 Company, operating in and to the east and west of Altoona, 
 Pa. I know of no research in the industries of a higher 
 order or work that carries with it greater possibilities for the 
 future. 
 
 Any study of the principle of state regulation in practice must 
 include some comment on the character of the expert testimony 
 presented before the commissions. It is in this matter perhaps 
 that the cities are at the greatest disadvantage. In railroading 
 for instance there is the theory that a man cannot be an efficient 
 railroad employee or have adequate understanding of the prob- 
 lems involved unless he has served the railroad all his life. Among 
 those who hold the higher positions in the railroad world there 
 are almost none who have not been continuously in the employ 
 of the railroads. Men do not pass from another industry into 
 railroading. There is another rule which I have been told is 
 almost as universal that a man who has once left the railroad 
 service cannot go back into it, or rarely does do so. A railroad 
 expert then is necessarily one who not only has all the prejudices 
 
SNAPPING CORDS 31 
 
 that come with lifelong association with a single industry but 
 who, by no possible chance, can have had intimate association 
 with the principles and practices of any other industry. It is in 
 consequence of this that in any railroad rate case or in any other 
 matter involving railroad operation the cities must depend, if they 
 are to get real experts, on the services of men who have all the 
 prejudices that come from long association with the railroad point 
 of view and no other. 
 
 In municipal utility rate cases the cities must depend for their 
 experts on the relatively few men of high standing and broad 
 experience who work for publicly owned and operated companies, 
 or those even rarer men who for one reason or another as for 
 instance because they operate competing plants have broken away 
 from the system which controls the viewpoints and activities of 
 the great majority of men who serve the private companies espe- 
 cially in electricity, telephones, street railways and gas. 1 The 
 private interests make every effort of course to keep in their em- 
 ploy the efficient men and especially those who in addition make 
 good witnesses. There are of course many men who operate city 
 plants who do not make good witnesses. So that in the choosing 
 of witnesses for the city side in rate cases the field is extremely 
 limited. 
 
 Let me repeat that most cities are at almost a total disadvantage 
 in securing legal and engineering advice of an effective kind in 
 any utility matter. Any city that does not start out with the 
 fullest possible realization of this fact is likely to meet with dis- 
 aster. In the paper previously referred to "Some Factors in 
 Municipal Engineering" read before the American Society of 
 Mechanical Engineers, I said that it was "practically impossible 
 to secure the services of those with reputations already made in 
 the electrical field." President Humphreys and four other em- 
 ployees of utility companies who discussed the paper took ex- 
 ception to this statement. For what reason they did so I cannot 
 imagine for they not only know it is essentially true but I should 
 
 1 In the electric rate case against the Philadelphia Electric Company we 
 were fortunate in having as experts Ray Palmer, Commissioner of Gas and 
 Electricity, City of Chicago, Frederic W. Ballard, Commissioner of Lighting, 
 City of Cleveland; Clayton W. Pike, Chief of the Electrical Bureau, and 
 Judson C. Dickerman, Chief of the Gas Bureau, both of the City of 
 Philadelphia; and O. M. Rau, General Manager, Commonwealth Power Co., 
 Milwaukee, Wis., and George H. Morse, Wheeling, West Va. 
 
32 SNAPPING CORDS 
 
 think they must know that I know it is so. The utility com- 
 panies and I have been at such close quarters during the 
 last three years that we understand each other pretty well. 
 
 To recount our experiences in this matter at this point would 
 hardly convince anyone not now so convinced. It can be said 
 however that we have been in direct personal touch with a suffi- 
 ciently large number of the most representative engineering firms 
 practicing in the electrical field to know beyond any possibility 
 of doubt that to get service service of any value along these 
 lines, the cities must build up their own group of experts. This is 
 essentially true as to the engineering connected with all kinds of 
 utilities. The cases in which our retainers have been accepted for 
 work in this field have been unusual in some respect and do not in 
 any way invalidate the rule. The broadening activities of public 
 service commissions and especially the larger appropriations being 
 made for their work is one cause operating to give the cities ex- 
 perts free from either corporate bias or entanglements. 
 
 The situation has certainly improved in some respects in the 
 last ten years. In 1905 I remember making an altogether futile 
 search for a gas engineer on whom we could lay a good sized re- 
 tainer in return for advice in the matter of the 75-year lease of the 
 Philadelphia Gas Works which it was proposed should be 
 made to the United Gas Improvement Company. At the same 
 time we found that the United Gas Improvement Company 
 had retained such a large proportion of the competent lawyers 
 in Philadelphia that the city had to go to New York for legal 
 advice. 
 
 It is only fair to say that the reluctance of competent engineers 
 to advise the cities or testity in their behalf is in very large meas- 
 ure due to a feeling that even in different cases it would be indis- 
 creet for a man to represent both the public and the private 
 interests. 
 
 With the management of the utility companies and the situa- 
 tion what it is today, I am not sure that it is humanly possible for 
 the same man to be an expert on the public side in one case and on 
 the private side in another and still adhere very closely to the 
 highest professional standards. I am convinced that it is rela- 
 tively easy for some men to take either end and uphold it ably 
 and honestly. But I believe that the best of reputations would 
 at least be dimmed if the efforts were made to defend both sides 
 
SNAPPING CORDS 33 
 
 to this discussion on the witness stand even in different cases as 
 the contentions of each side are made today. 
 
 This is indeed an important question and one about which we 
 cannot afford to be too dogmatic. To take an extreme view on 
 either side seems to lead away from the truth and the public in- 
 terest. I was shocked the other day to be told by an expert of the 
 highest standing in public health matters that he would not think 
 of accepting a retainer from a manufacturer of food-stuffs no matter 
 what the issue. He regretted the conditions that forced this stand 
 upon him. But in view of the present relative position of the manu- 
 facturers and of the public and his definite alliance with the public 
 side he felt that he could not satisfy all the demands of a private 
 client most if not all of them perfectly legitimate and still 
 serve the public interest in the way he chose to serve it. 
 
 We are told that as an expert is only supposed to testify to the 
 truth, for him to take either end is all right even easy. But 
 until our experts are witnesses for the court rather than for the X 
 litigants and especially until the practices of some of our utility 
 companies are further clarified, truth is led in somewhat shackled 
 and it is just as well for all men especially young men to 
 be on notice. 
 
 When a man becomes successful on the cities' side, the utility 
 corporations lose no time in attempting to ruin his reputation. 
 Of this kind of treatment, Prof. Edward W. Bemis, whom Mayor 
 Tom L. Johnson of Cleveland described "as an expert on the 
 valuation of public service corporations an4 the only such expert 
 on the people's side," is a good example. Fortunately for Mr. 
 Bemis he is not only a man of exceptional ability and continuity 
 of purpose but he has worked on the principle that he could not 
 be an expert on both sides of the questions fundamental to the 
 utility problem. Time and time again since I have been in office 
 men high in the utility field have told me tales about this splendid 
 man in an effort to discredit him. He is cordially hated by the 
 big men in the utility industries principally because he is a re- 
 sourceful and competent witness in rate cases and knows how to 
 meet the experts put forward by the private companies as per- 
 haps can no other man. Sometime since I was told by the 
 president of a very large gas company that Professor Bemis was 
 corrupt and that Mayor Hanna of Des Moines would confirm 
 the statement. I wrote to Mayor Hanna and he replied that 
 
34 SNAPPING CORDS 
 
 "our experience with Mr. Bemis was most highly satisfactory; 
 he is a man of remarkable information in his special line and of 
 remarkable resourceful ability. As a witness in our gas contest 
 he was of inestimable value." Some years ago the gas com- 
 panies of the country hoped to make of the Des Moines case one 
 that would be a classic in their long continued fight to prevent the 
 regulation of prices, but the decisions in the case have been con- 
 sistently such as to prevent realizing on this hope. This is doubt- 
 less one of the reasons why Mr. Bemis is so cordially disliked 
 by the gas group. 
 
 The General Counsel of the American Telegraph and Tele- 
 phone Company recently gave me the same kind of information 
 about Mr. Bemis. Mr. Guernsay and Mr. Bemis I think were 
 on opposite sides of a telephone case in Baltimore several years 
 ago. 1 It invariably happens that when one knows how to suc- 
 cessfully oppose the private interests he is subject to the most 
 bitter attacks. No better example of this kind of unwarranted 
 abuse can be found than in the case of Mr. Louis D. Brandeis of 
 Boston, a man who has carried on a fight for the people that has 
 brought down on him abuse such as few men are called upon to bear. 
 
 On the other hand we find in almost every rate case an array 
 of so-called " talent" on the side of the private company which, 
 in the eyes of the public service commission, must be well-nigh 
 irresistible. When an expert in qualifying in a rate case states 
 to the public service commissioners that he is the head professor 
 of Electrical Engineering at a great university or two, or that he 
 is Past President of the American Institute of Electrical Engi- 
 gineers or Past President of the National Electric Light Associa- 
 tion, or that he is consulting engineer to a half a dozen of the largest 
 electric light and power companies in the country or that during 
 his life he has been directly connected with the operation of big 
 companies, it certainly must sound impressive. But when as 
 in the case of the electrical industry honors such as these and 
 experience such as this and "more could be brought to a single 
 
 1 President A. C. Humphreys of Stevens Institute has informed me even 
 since those lectures were delivered that Professor Bemis is ' unreliable.' Dr. 
 Humphreys and Professor Bemis were experts on opposite sides in the fol- 
 lowing celebrated gas cases: Passaic, N. J., Haverhill, Mass., New York, 
 N. Y. In each case the view of Professor Bemis who represented the public 
 interest prevailed. One wonders where President Humphreys learned that 
 Professor Bemis is 'unreliable.' 
 
SNAPPING CORDS 35 
 
 individual on the say-so of somebody high in the councils of the 
 General Electric interests, it should not mean much. 
 
 The effect on the public interest of the testimony given by 
 men of the type put forward as experts by the private com- 
 panies is perhaps fairly illustrated by the record of Dugald C. 
 Jackson who, in qualifying recently as an expert in a rate 
 case before the Pennsylvania Public Service Commission, in- 
 troduced himself by the single statement that he was " pro- 
 fessor of electrical engineering at the Massachusetts Institute 
 of Technology and head of the Department of Electrical 
 Engineering and professor of electrical engineering at Harvard 
 University." 1 
 
 Professor Jackson has never really been so much a University 
 professor as a corporate employe* giving courses in universities. 
 While he probably receives $5000 from his present teaching post 
 he must receive at least four times this amount from his corporate 
 clients charging as he does $100 a day for his own time and a 
 percentage on the time of his assistants. Before going in 1891 to 
 the University of Wisconsin, where Professor Jackson did his 
 first teaching, he was "Vice President and engineer Western 
 Engineering Co. Lincoln, Nebraska, until 1889; then connected 
 with Edison interests as Assistant Chief Engineer of Sprague 
 Electric Ry. and Motor Co. and later as Chief Engineer, central 
 district of Edison General Electric Co." according to "Who's 
 Who" for 1914. 
 
 Professor Jackson has done expert work on the public side but 
 of course his principal activities have been on the corporation side. 
 Of course the private companies want experts who are occasion- 
 ally retained on the public side. In fact, an expert who had 
 never been called on the public side might be of very little use 
 to the corporations as a witness. 
 
 The list of municipalities for which Professor Jackson's firm 
 has done work according to a letter to a prospective client is as 
 follows: "Brookline, Mass., Traverse City, Mich., Plymouth, 
 Ind., Barraboo, Wis. and three other small cites in Wisconsin." 
 These seven cities have a combined population of little over 
 50,000 and hardly shows a large public clientele in view of the 
 
 1 Professor Jackson is only an ex-officio professor at Harvard University 
 by virtue of the recent consolidation of the engineering faculties of Harvard 
 and "The Tech." 
 
36 SNAPPING CORDS 
 
 fact that the valuation work of Professor Jackson's firm has 
 covered according to their own statement "some hundreds of 
 millions of dollars of property in electric lighting and power plants, 
 electric railway plants and telephone plants, etc." l 
 
 In addition to the rate case work done in Massachusetts, 
 Professor Jackson has been a witness in celebrated cases in every 
 part of the country. In 1909-1910 he was employed by the City 
 of Chicago to appraise the Chicago Telephone Company. He 
 secured as accountants Messrs. Young & Company, already ac- 
 countants for the Chicago Telephone Company. On May 9, 
 1910, Messrs. Jackson and Young reported in detail showing 
 that the company was running at a deficit of over $800,000 per 
 year. 2 This report the Council rejected. Two years later, October 
 25, 1912, Prof. Edward W. Bemis made a report showing con- 
 clusively that the company could offer a reduction in rates of 
 $700,000 per year. This was later enacted in an ordinance which 
 the company has accepted without appeal to the Courts. 
 
 This is a difference between the two estimates of $1,500,000 
 net annual income. Mr. Jackson stated recently before the 
 Pennsylvania Public Service Commission that this difference 
 was due to the added number of telephones. A truly remark- 
 able increase in business for two years ! 
 
 Professor Jackson appeared as expert for Buffalo General 
 Electric Company before the New York Public Service Com- 
 mission, Second District, in case of Fuhrman 55. General 
 Electric Company. 3 The Public Service Commission in its 
 report (p. 750) refers to Mr. Jackson as "the principal witness." 
 He gave a reproduction value new as $4,966,140 or 55 per cent, 
 more than the fair value finally fixed by the Commission, which 
 was $3,194,159.90. 
 
 In this same case Professor Jackson alleged that the unit cost 
 of 3,000 municipal arc lamps was $21.70. With this unit cost 
 he built up a final cost of lamps installed at an average cost of 
 $29.29 as follows: 
 
 1 Statement filed with the N. J. Public Service Commission. 
 
 2 Original report from Journal of Proceedings of City Council, May 9, 
 1910, p. 102-139 inclusive. 
 
 3 3 P. S. C. R. S. C. and N. Y. 739-816. 
 
SNAPPING CORDS 37 
 
 3,000 Municipal Arc Lamps at $21.70 $5,100.00 
 
 Engineering and Supervision 5 % '. $3,255.00 
 
 Organization of Business 6 % 4,101.30 
 
 1 axes and Interest during Construction 4 % 2,898.25 
 
 Piecemeal Construction 10 % 7,535.45 
 
 Promoter's Profit 5 % 4,144.50 
 
 Brokerage If % 1,453.46 23,387.96 
 
 Total $88,487.96 
 
 This lamp matter is given here in some detail as affording an 
 almost classic example as to how in these rate cases those well 
 versed in the art can start with almost nothing and get any sort 
 of imaginery values. In view of the fact that Professor Jackson 
 is making an inventory in Philadelphia at the present time in 
 which the valuation of our street lamps is a feature, this illustra- 
 tion of his resourcefulness has a painful interest. 
 
 In regard to this calculation of Professor Jackson, the New 
 York Commission said: 
 
 "As a matter of fact, the actual cost to the company 
 for these lamps uninstalled was $13.53J. So far as has 
 been disclosed by an examination of the books, the com- 
 pany never paid for a single enclosed arc the sum of 
 $21.70, and the average cost of all the enclosed arc lamps 
 which it has bought, exclusive of these 3,000 was $16.75 
 each. We are unable to understand and no explanation 
 has been offered us, why a company which has been in 
 existence for years should be entitled to charge a pro- 
 moter's profit of 5 % upon new arc lamps which it buys 
 for its service. We are also unable to understand why a 
 10% charge, amounting in this case to $7,535.45, is 
 proper for piecemeal construction in the case of buying 
 3,000 arc lamps at one time. (Pp. 750-751.) 
 
 "This matter of arc lamps has been carefully looked 
 into and as hereinbefore shown, the difference does not 
 arise from the low price allowed for the old lamps ex- 
 changed. The transaction which the company evidently 
 had in mind was one of the purchase of 3,000 arc lamps 
 for street lighting in 1903, and as above stated, it values 
 these lamps at $21.70 each. As a matter of fact, the 
 manufacturer originally asked but $18.00 each for these 
 lamps and the purchase was a matter of considerable 
 
38 SNAPPING CORDS 
 
 negotiation. There was first deducted Jrom the price 
 
 10% and then an arbitrary deduction of one dollar per 
 
 lamp, so that the final price reached was $15.20 per 
 
 lamp; and then for reasons which the company can 
 
 easily ascertain from correspondence, there was a further 
 
 deduction made which amounted to $5,000." (p. 757.) 
 
 This exhibition of rebates within rebates shows how little 
 
 reliance can be placed on " purchase price," "book value," etc., 
 
 in public service accounting. It also shows the necessity for 
 
 having some one free from corporation bias to check up such 
 
 figures. Manipulation of this kind in printing or any other 
 
 industrial line could only be characterized by short and ugly 
 
 words. But in the utility field when the "dear public" is the 
 
 only victim, such practices seem to command the thought of 
 
 able men. 
 
 The Commission then goes on to say: 
 
 "The following statement shows just how the cost of $13.53J 
 per lamp was arrived at: 
 
 3,000 Arc Lamps at Original Base Price $18.00 
 
 Less 10 % 1.80 
 
 16.20 
 Less Arbitrary Deduction 1.00 
 
 15.20 
 
 Less Cash Rebate of $5,000 on 3,000 Lamps 1.67 
 
 Cost per Lamp $13.53| 
 
 Total Original Cash Payment $42,000.00 
 
 Plus Allowance of $1.20 each for 3,000 Old Open 
 Arc Lamps Returned 3,600.00 
 
 45,600.00 
 
 Less Cash Rebate 5,000.00 
 
 3,000 Lamps for 40,600.00 
 
 Price per Lamp $13.53f " 
 
 Perhaps Professor Jackson's powers are seen to best advantage 
 when, as principal witness for the company in the case of Mayor 
 Fuhrman vs. Cataract Power & Conduit Company, his appraisal 
 was 55 per cent, higher than the fair value finally allowed by the 
 Commission. 
 
 The Commission says as to Jackson's overhead charges: 
 
SNAPPING CORDS - 39 
 
 " (1) the overhead charges amount to 49 % of the 
 estimated cost of materials and labor; (2) the overhead- 
 charges on land constitute 61 % of the actual cost 
 (p. 678); (3) the overhead charges on buildings consti- 
 tute 49 % of the actual cost l (p. 689).'" 
 
 The Commission examined the company's books and found 
 that the books clearly revealed that no such overhead charges 
 as these had ever been experienced by the company, but that on 
 the basis of the company's own books for the period ranging from 
 1896 to December 31, 1900, overhead charges amounted to but 
 18.6 per cent, of the labor and material. 
 
 Owing largely in my opinion to the chair he holds in Massa- 
 chusetts Institute of Technology and the one he says he holds 
 in Harvard University and to his being a Past President of the 
 American Institute of Electrical Engineers, Professor Jackson is 
 reputed to be "one of the best-posted men with regard to the 
 various elements which must be considered in rate cases who is 
 not now employed by some corporation." (Italics are mine.) This 
 quotation is from a letter from Philander Betts, Chief Engineer 
 of the Public Service Commissioner of New Jersey, which body 
 has employed Professor Jackson to make an appraisal of the 
 Public Service Electric Company. 
 
 What constitutes being employed by a corporation? Professor 
 Jackson is to all intents and purposes consulting engineer in chief 
 as to rates and valuations to the entire electrical industry in the 
 United States. He has made inventories of the Boston Edison 
 Company and the New York Edison Company. He is now 
 engaged in doing similar work for the Philadelphia Electric Com- 
 pany. These three companies have a combined gross annual 
 income of $35,000,000. 
 
 If state regulation fails in this country no other cause will, 
 in my opinion, contribute more largely to such failure than the 
 ability of the national organization of each utility industry to 
 place on the witness stand in any part of the Union, as experts, 
 men of Professor Jackson's type or shall we say their want of fore- 
 sight and good judgment in so doing? His introduction is 
 as at Harrisburg the prestige of two great institutions of learn- 
 ing; his record is one long line of important technical assign- 
 ments given to him by the very interests which his testimony 
 
 1 3 P. S. C. R. Second N. Y. p. 675. 
 
40 SNAPPING CORDS 
 
 tends to protect; and his theories of valuation and rates are 
 those the effect of which lend aid and comfort to watered stock 
 and exorbitant charges. 
 
 I* quote as follows from the above mentioned letter from the 
 New Jersey Public Service Commission: 1 
 
 "Our reason for employing Dr. Jackson to supervise 
 the appraisal of the Public Service Electric Company's 
 property was due to the fact that his long experience in 
 work of this character would give a special weight to 
 his opinions when finally expressed at the time of the hear- 
 ings which will commence some time next winter. Any 
 opinions expressed with regard to the value of the prop- 
 erty of the Public Service Electric Company will have 
 to be backed up by very great weight of evidence and 
 expert opinion hence our employment of a man having 
 an established reputation along these particular lines." 
 No matter where the company may be located it can call on 
 those in national control for assistance of every kind. We find 
 the experts in Minneapolis and Chicago, also the experts in Harris- 
 burg and Boston. 
 
 The ultimate field of state regulation seems to be to provide 
 in each state a central bureau of statistics and research and in 
 addition to this perhaps to act as a court of appeal in utility 
 matters. But that the cities and towns of any state are for any 
 length of- time going to turn over to a central state body every 
 and all questions affecting their relations with public utilities 
 is so out of harmony with the present drift of sentiment as to 
 home rule that it is unthinkable. 
 
 Negotiation undoubtedly has its place in the control of the 
 utility problem. One splendid instance of this kind of work is 
 to be found in the record of Robert L. Brunet, who under the 
 title of "Public Service Engineer," has, in Providence, R.I., 
 it is said brought about remarkable improvements in the service 
 rendered by the utilities of that community. A competent and 
 aggressive official, especially if he is supported with liberal ap- 
 propriations, can undoubtedly accomplish a great deal. I am not 
 sure but that given the resources not only for technical investi- 
 gation but for full publicity, that with the present utility situa- 
 
 1 Addressed to M. L. Cooke, Director, Dept. of Public Works, City 
 Hall, Philadelphia, dated Jan. 7, 1915. 
 
SNAPPING CORDS 41 
 
 tion quite as much can be obtained through this instrumentality 
 as through state or local regulation or municipal operation. 
 Personally I would be willing to take the contract at any time 
 to force an unwilling utility corporation to perform a very large 
 part of its public duty in the matter of rates and service if I were 
 given sufficient appropriations to put me in a position to speak 
 with authority as to the facts in the matters at issue and then 
 to have the money to publish these facts in such a way that both 
 the company and the community could understand them. There 
 are very few instances in my own experience where, with the facts 
 fully determined and understood by the community, those guid- 
 ing the policies of the utility companies have not responded. 
 Unfortunately it is almost the universal practice for cities to pay 
 entirely too low salaries in the higher positions and even where 
 the salaries are adequate to give their employes almost nothing 
 in the way of funds for investigating the conduct of the private 
 companies. 
 
 With the general cleaning up that is going on in the municipal 
 field in this country and with the obvious improvements that are 
 being made in the selection and training of men for the more 
 important municipal positions, I believe that a certain amount 
 of local regulation will come about. The companies fear local 
 regulation and not without reason. During the last generation 
 we have had of course local regulation in fact, but it has been the 
 kind that could be controlled by the public utilities companies 
 through the bribery of executive and legislative officials. The 
 companies naturally fear that if local regulation is provided by 
 legislation it will force a return to the essentials of the old system. 
 And it will, unless a decent type of municipal government is pro- 
 vided. I for one believe that this is coming and coming rapidly 
 in this country and that therefore we can look forward to local 
 regulation such, for instance, as we find today in the District 
 of Columbia as a part solution of this problem. 
 
 Out of inter-city co-operation will come perhaps the largest 
 measure of relief from the unbearable conditions which exist in 
 the utility field today. As long as the utilities are working on a 
 national basis they can, over a greater part of the country, suc- 
 cessfully beat down and altogether nullify the legitimate convic- 
 tions of the cities. But if thorough co-operation between the 
 cities, by means of the Utilities Bureau and other similar agencies 
 
42 SNAPPING CORDS 
 
 the cities can be organized on a national basis the companies will 
 ultimately see that the present game of bluff and force is not 
 good business. 
 
 After the water in these properties has been worked out through 
 the adoption in each locality of some reasonably equitable scheme 
 and after a reasonable rate of return for utility investments has 
 been determined for each part of the country, and after the com- 
 panies have adopted a genuine program of fact publicity, I can 
 see no inherent reason, why a municipality and its public service 
 companies should not do business with each other to their mutual 
 advantage and satisfaction. So long as we are asked to look upon 
 inflated securities as having real value and so long as we are asked 
 to pay rates based on the value of the service rather than on cost 
 plus a fair profit and so long as the publicity basis is comparable 
 only to European diplomacy, the feud will be on. 
 
 Whether it voices itself through state regulation, local regula- 
 tion, municipal operation or negotiation, this struggle will be one 
 that can bring good only to an almost insignificant number of 
 capitalists, promoters and investment bankers. 
 
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