University of Iowa
Iowa Research Online
Theses and Dissertations
1921
Recent developments regarding competition as
opposed to the tendency toward centralization in
the public utility field, with special reference to
conditions in Iowa
Earle Micajah Winslow
State University of Iowa
This work has been identified with a Creative Commons Public Domain Mark 1.0. Material in the
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Recommended Citation
Winslow, Earle Micajah. "Recent developments regarding competition as opposed to the tendency toward centralization in the public
utility field, with special reference to conditions in Iowa." MA (Master of Arts) thesis, State University of Iowa, 1921.
http://ir.uiowa.edu/etd/4263.
Follow this and additional works at: http://ir.uiowa.edu/etd
RECENT DEVELOPMENTS REGARDING COMPETITION AS OPPOSED TO THE
TENDENCY TOWARD CENTRALIZATION IN THE PUBLIC U TILITY FIELD,
WITH SPECIAL REFERENCE TO CONDITIONS IN IOWA
by
E a rle M ic a ja h W inslow
A T hesis S u bm itted
to the
F a c u lty o f the G raduate C o lle ge
o f th e S ta te U n iv e r s it y o f Iowa
in P a r t i a l F u lf il lm e n t o f th e R equirem ents
f o r the
Degree o f M a s te r o f A rts
i n the
Departm ent o f Econom ics, S o c io lo g y , and Commerce
O cto be r, 1921.
OUTLINE
I Forew ord:
A - Purpose o f th e s is .
B. M o tiv e f o r t h e s is .
I I C hapter I : A Review o f U t i l i t y R e g u la tio n .
A. Purpose o f R e g u la tio n .
1. F a lla c ie s o f R e g u la tio n .
B. R e g u la tio n o f U t i l i t i e s
by Commissions.
1. Data on S ta te R e g u la tio n .
2. O th e r forM s o f R e g u la tio n ; t h e i r inadequacy.
3. F a ilu r e o f L o c a l R e g u la tio n .
C. A t t it u d e o f P u b lic and U t i l i t i e s
tow a rd Commissions.
Commissions have been s e v e re ly te s te d .
2. S u p e r io r it y o f S ta te Commissions.
III.
C hapter I I :
P h y s ic a l E xpansion o f U t i l i t i e s
as r e la t e d
to P o lic ie s o f R e g u la tio n .
A. E a rly C o n d itio n s F o s te rin g M u n ic ip a l O wnership.
1. F ra n c h is e g r a n tin g and C o m p e titio n .
2. C it ie s tu r n to M u n ic ip a l O wnership.
3. Data on M u n ic ip a l Ownership o f E le c t r i c U t i l i t i e s .
a. G e n e ra l.
b . f o r Iowa.
c. Tendencies o f M u n ic ip a l O w nership.
d. C o n clu sio n o f D a ta .
B. O b je c tio n s to L o c a l R e g u la tio n .
1. L o c a l R e g u la tio n co n co m ita n t w ith M u n ic ip a l O wnership.
2. Is th e e x e rc is e o f A r b i t r a r y Power.
3. L im it s E xpansion.
4. Stands in way o f S ta te R e g u la tio n .
C. U t i l i t y Expansion as R e la te d to M u n ic ip a l Ownership
And L o c a l R e g u la tio n .
1. Expansion is R e s tr ic te d .
2. C e n t r a liz a t io n is Hampered.
3. Expansion and C e n t r a liz a t io n a re R o ste red by F is ­
c a l and P h y s ic a l C o m binatio ns.
a. U t i l i t y Companies need R e g u la tio n .
b. S t a t is t ic s on H o ld in g Company A c t i v i t i e s .
c. Advantages o f C o m b in a tio n s.
4. Expansion o f E le c t r i c U t i l i t i e s
in Iow a.
a. I l l u s t r a t e s Advantages o f C o m bination.
b. D u p lic a tio n s b e in g e lim in a te d .
IV . C hapter I I I : S t a t e Laws R e la tin g to C o m p e titio n and Con­
s o lid a t io n s .
A. C e r t i f i c a t e o f P u b lic Convenience and N e c e s s ity .
1. R e g u la te s Competion and P re v e n ts D u p lic a tio n s .
22. As a p p lie d in v a rio u s s ta te s .
3. R e s u lt o f la c k o f in Iowa.
B. R e g u la tio n o f C o n s o lid a tio n s , M erg ers, Leases amd S a le s .
1 . R e g u la te s d e la tio n s between U t i l i t y
Companies.
2. P ro te c ts the P u b lic fro m C C o m p e titio n .
3. As a p p lie d in v a rio u s s ta te s .
V. C hapter IV : C o n c lu s io n : The P re s e n t S it u a t io n in Iowa,
w ith some su g g e stio n s f o r a C o n s tru c tiv e U t i l i t y Program.
A. The P re se n t S it u a t io n in Iowa.
1. Iowa has no S ta te U t i l i t i e s
Commission.
2. Reasons f o r P re s e n t S it u a t io n .
a. Opponents o f C e n t r a liz a t io n and S ta te C o n tr o l.
b. S tatem ents form Opponents.
3. A tte m p ts to c re a te a S ta te Commission.
a. Weakness o f V a rio u s B i l l s .
b. A t t it u d e o f P u b lic and O f f i c i a l s .
4. U t i l i t y Laws as th e y now sta n d .
B. S u gg estion s f o r a C o n s tru c tiv e U t i l i t y Program.
£. Good p o in ts enumerated o f U t i l i t y fcaws in v a rio u s
S ta te s .
2. S p e c ia l S u g g e stio n s f o r Iowa.
FOREWORD
The w idespread a d o p tio n o f s ta te P u b lic S e rv ic e
Commissions s in c e 1907 has been lo o ke d upon as th e f i n a l
s te p i n the com plete e lim in a t io n o f c o m p e titio n in th e
p u b lic u t i l i t y f i e l d .
Recent developm ents however some­
what b e lie th e a ssu m p tio n t h a t th e Commissions w i l l be
p e rm itte d to c a r r y o u t a s tro n g c e n tr a liz e d program o f
u tility
c o n t r o l,
lo c a l r e g u la t io n , co n c o m ita n t w ith m uni­
c ip a l "home r u l e " , is th e b lo c k i n th e p a th o f f u l l y
equipped and f u l l y
empowered s ta te com m issions.
And
m u n ic ip a l ow nership stan ds s q u a re ly i n th e way o f the p ro ­
gram f o r e x te n s iv e e xp a n sio n and h ig h c e n t r a liz a t io n w hich
the u t i l i t y
companies a re w o rkin g to w a rd .
C o m p e titio n ,
w h ile q u ite g e n e r a lly re g a rd e d as obnoxious i n th e p u b lic
u t i l i t y f i e l d , n e v e rth e le s s shows a decided te n de ncy to
appear in new and in s id io u s fo rm s.
The p u b lic g e n e r a lly
i s slow to d is c e rn th e u n d e s ir a b il it y o f c o m p e titio n w hether
in o ld fo rm s o r new.
T h e re fo re i t
is
the purpose o f t h i s t h e s is
(1 ) to g iv e a
b r i e f s k e tc h o f the h i s t o r y and purpose o f u t i l i t y r e g u la t io n ,
b r in g in g i t up to d a te i n o rd e r th a t th e p re s e n t s it u a t io n
may be f u l l y u n d e rs to o d ; (2 ) to d is c u s s th e r e l a t i o n o f
2
u tility
exp an sio n t o th e d i f f e r e n t phases o f r e g u la t io n *
w i l l d e a l e s p e c ia lly w ith e l e c t r io u t i l i t y
it s
T h is
e xp a n sio n , some o f
h is t o r y and p ro b le m s , as r e la t e d to m u n ic ip a l ow nership
and lo c a l r e g u la t io n ; (3 ) to re v ie w s ta te la w s , showing th e
d e s i r a b i l i t y o f s ta te com m issions, e s p e c ia lly £s a means o f
r e g u la t in g c o m p e titio n ;
in Iowa, i t s
(4 ) to re v ie w th e p re s e n t s it u a t io n
causes, and su g g e stio n s f o r a c o n s tr u c tiv e
u t i l i t y program .
I t was o r i g i n a l l y in te n d e d th a t t h i s th e s is s h o u ld be
a s u rv e y o f c o n d itio n s f o s t e r in g d u p lic a tio n s i n f i v e
u t ilit ie s :
c e n tr a l e l e c t r ic s t a t io n s ,
s t r e e t r a ilw a y s ,
te le p h o n e s , gas p la n ts and w a te r system s.
However, s in c e
’’ d u p lic a t io n ” im p lie s a g re a t many t e c h n ic a l problem s i t was
deemed a d v is a b le to d e a l more g e n e r a lly w it h th e economic
and p o l i t i c a l a sp ects o f c o m p e titio n .
I t fu rth e rm o re
became e v id e n t th a t i n a stu d y o f t h i s h in d i t i s n o t
p o s s ib le to g iv e much in d iv id u a l a t t e n t io n to a l l th e
u tilitie s
m entioned above, n o r n e ce ssa ry to do so.
S till
re fe re n c e is c o n s ta n tly made to a l l o f these u t i l i t i e s
th ro u g h o u t th e t h e s is , a lth o u g h the f i n a l outcome o f the
re s e a rc h p r i o r to w r i t i n g
e l e c t r ic u t i l i t i e s
the d is s e r t a t io n was th a t the
re c e iv e d th e b u lk o f a t t e n t io n .
M ost
o f the more p e c i f i e w ork th e r e fo r e has t o do w i t h c e n tr a l
3
e l e c t r i c s t a t io n s .
T h is p a r t ic u la r u t i l i t y
has more v i t a l
is s u e s a t sta ke i n re g a rd to th e m a tte r o f p u b lic p o lic y th a n
alm ost any o th e r u t i l i t y .
An in t e r e s t i n c o n d itio n s r e l a t i v e
to p u b lic u t i l i t i e s
i n Iowa was la r g e ly re s p o n s ib le f o r t h i s s tu d y .
Nowhere in
a l l th e s ta te s c a n be found a more f la g r a n t d is re g a rd o f the
v e ry economic and p o l i t i c a l p r in c ip le s w h ich o th e r s ta te s
have a lre a d y come to re c o g n iz e .
Iowa has no s ta te u t i l i t i e s
com m ission and the p u b lic has p e r s is t e n t ly v o te d a g a in s t i t .
l o c a l r e g u la t io n seems t o be f i r m l y e s ta b lis h e d and compe­
t i t i o n is s t i l l accepted as one o f the e s s e n tia l r e g u la t o r s
4
'
1
o f r a te s and s e rv ic e s .
The u t i l i t y la w s now on th e sta tu te
bocks are c o m p a ra tiv e ly crude and out o f d a te .
They f a i l
to in c o rp o ra te any p r o v is io n s w h ic h w i l l a d e q u a te ly p r o t e c t
e ith e r th e u t i l i t i e s
o r the puhL ic . • Iowa s t i l l r e t a in s th e
m ix tu re o f l e g i s l a t i v e ,
c o u rt and lo c a l r e g u la t io n , w it h
the R a ilr o a d Commission in v e s te d w i t h a few v e r y lim it e d
pow ers.
l. I o w a Board o f R a ilr o a d C om m issioners, Schm idt B ro th e rs
and Company v s . C itiz e n s o f C la y to n C ounty, D ocket no . E lo 9 .
CHAPTER I .
A REVIEW OF U TILITY REGULATION
The u n d e r ly in g purpose o f r e g u la t io n in p u b lic u t i l i t i e s
is to p re v e n t th e e v i l e f f e c t s o f c o m p e titio n .
l a t i o n d id n o t f u l l y re c o g n iz e t h i s , how ever.
E a r ly re g u ­
I t aimed a t
some o f th e e v i ls o f c o m p e titio n — such as u n f a ir d is c r im ­
in a t io n , re b a te s and p o o lin g —w ith o u t g e t t in g at th e r e a l
sou rce.
C o m p e titio n was a cce p te d by b o th th e p u b lic and
the u t i l i t i e s
as th e g re a t economic r e g u la t in g fo r c e and
le g is la t u r e s saw to i t
it
to f un c t io n .
th a t e v e ry o p p o r tu n ity was g iv e n f o r
U t i l i t i e s were a t f i r s t c o n s id e re d as
p r iv a t e in d u s t r ie s and a l l a g it a t io n tow ard t h e i r c o n tr o l
was branded as " s o c i a l i s t i c " .
A n o th e r p o p u la r f a ll a c y , th e o p p o s ite c o r r e la r y o f
c o m p e titio n , was t h a t m onopoly was to be fe a re d above a l l
e ls e .
T rue, w ith o u t g o vern m en ta l r e g u la t io n , monopoly i s
to be fe a re d even above c o m p e titio n .
I n th e absence o f
c o n t r o l c o m p e titio n in v a r ia b ly d r iv e s th e weaker u t i l i t i e s
to a p o in t where th e y are g la d to
cease t r y i n g to e x is t
in d e p e n d e n tly , o r red u ce d a l l th e com peting comp a n ie s to such
f in a n c i a l s t r a i t s th a t th e o n ly a lt e r n a t iv e is
in o rd e r to e x is t a t a l l .
to combine
An a lt e r n a t iv e w h ic h developed
5
l a t e r -under such c o n d itio n s was f o r th e c i t i e s
to take ove r b a n k ru p t u t i l i t i e s .
them selves
B ut v e ry o fte n the
m is ta k e was made o f in tr o d u c in g even more c o m p e titio n in
the fo rm o f m u n ic ip a l o w n e rsh ip .
Thus the p u b lic has been burdened on e v e ry hand w it h
the exce ssive d u p lic a t io n and w aste due to c o m p e titio n ,
w h ich in v a r ia b ly degenerated in t o u n c o n tr o lle d m onopoly.
I t had to be le a rn e d a t g re a t c o s t t h a t th e o n ly sane way
to handle s e rv ic e s w hich have been in v e s te d w it h a p u b lic
d u ty to p e rfo rm , i s th ro u g h re g u la te d monopoly---- a le s s o n ,
however, w hich has n o t y e t been th o ro u g h ly le a rn e d as
evidenced by re c e n t developm ents w h ich a re the b a s is o f
t h is t h e s is .
Speaking b ro a d ly , th e s ta te r e g u la t io n o f p u b lic u t i l i t i e s
by com m issions began as e a r ly as 1839 when Rhode Is la n d
c re a te d a Commission to a c t as a s o r t o f in te rm e d ia ry betvfeen
1
th e r a ilr o a d s and th e s t a t e .
I n th e n e x t tw e n ty y e a rs
most of the Hew E ngland s ta te s had adopted s im ila r com­
m is s io n s , and y e t by 1870 th e re were o n ly s ix o f the 37
s ta te s w hich had com m issions.
The r a ilr o a d s were s im p ly
c o n tr o lle d d i r e c t l y by th e le g is la t u r e s in th e absence o f a
com m ission.
By 1886, however, th e r e had been such u rg e n t
1. Johnson & Van M e tre , " P r in c ip le s o f R a ilr o a d T r a n s p o r ta tio n " ,
Chapter 28.
6
a g it a t io n on the p a r t o f the p u b lic t o r e s t r i c t th e e v i l s
o f r e b a tin g , p o o lin g and d is c r im in a t io n t h a t 23 o f th e 38
s ta te s had com m issions.
These com m issions were n o t a l l
" s tr o n g ” com m issions such as most o f th e s ta te s have to d a y .
The e a s te rn s ta te s w e re in c lin e d t o r e t a i n t h e i r o r i g i n a l
r a ilr o a d la w s, xvhile the w e s t, where most o f th e t u r m o il
between th e p u b lic and th e
r a ilr o a d companies had ta ke n
p la c e , e s ta b lis h e d commissions w ith a d m in is tr a tiv e and
m andatory pow ers.
A t the p re s e n t tim e th e re is o n ly one
s ta te , D elew are, w ith o u t some s o r t o f a r a i lr o a d o r p u b lic
s e rv ic e com m ission.
S ta te r e g u la t io n by commissions o f u t i l i t i e s
the r a ilr o a d s i s o f c o m p a ra tiv e ly re c e n t d a te .
o th e r th a n
N ot u n t i l
1907 were v i r i l e
com m issions c re a te d w h ich w ould have power
1
o v e r a l l p u b lic s e rv ic e u t i l i t i e s .
I n t h i s ye a r New York
and W isco n sin e s ta b lis h e d such commissions and th e la w s
in th e se s ta te s have been w id e ly co p ie d by o th e r s ta te s .
The in c lu s io n o f a l l u t i l i t i e s
under c e n t r a liz e d c o i t r o l
has- been m e re ly an e x te n s io n o f th e a u t h o r it y o f r a i lr o a d
com m issions.
I t must n o t be u n d e rs to o d , however, th a t a l l
1 . M assachusetts had a P u b lic S e rv ic e Commission w it h v e ry
lim it e d powers as e a r ly as 1885, w hich was th e f i r s t a tte m p t
a t c e n tr a liz e d c o n t r o l. K in g , O .L. "The R e g u la tio n o f
M u n ic ip a l U t i l i t i e s " Ch. 14.
7
s ta te s w h ich have r a ilr o a d com m issions, have th u s extended
t h e ir j u r i s d i c t i o n to
a ll u tilitie s .
Nor by no means do
a l l the com m issions have as com plete a u th o r i t y i n every
re s p e c t as do a few o f the s tro n g e r commissions such as
those in New Y o rk o r W is c o n s in .
Two d i s t i n c t p o lic ie s
have been fo llo w e d b y th e s ta te s in th e c r e a t io n o f
th e se com m issions.
One method i s f o r the le g i s la t u r e t o
r e t a in c e r t a in p o w e rs ,d e le g a tin g o n ly l i m it e d
and s p e c if ic
d u tie s to th e com m ission; the o th e r i s to g ra n t com p le te
a u t h o r it y to th e com m ission.
s t r a t iv e body i s
The l a t t e r k in d o f a d m in i­
the id e a l one f o r a s ta te com m ission.
I t s powers are m andatory and r e g u la t iv e .
A d v is o ry
powers p r o p e r ly belong to a sub-com m ission, and i f
it
be g ra n te d t h a t m u n ic ip a l com m issions are ne ce ssa ry
at a ll,
t h e i r powers sho u ld be o f t h i s n a tu r e ,
m en ting r a t h e r th a n opposing th e
thus s u p p le ­
s ta te com m ission.
There are 37 o f th e 48 s ta te s w h ic h now have some s o r t
o f c e n tr a liz e d r e g u la t io n o v e r th e u t i l i t i e s .
s ta te s g iv e
O nly 27
t h e i r commissions power o ve r c o m p e titio n and
m onopoly, to p e rm it o r deny i t ,
and o n ly 13 o f th e se s ta te s
e x te n d t h i s power so as t o in c lu d e m u n ic ip a lly as w e ll
as p r i v a t e l y owned u t i l i t i e s .
The accomp a n y in g ta b le 1 w i l l
1. Based upon an e x a m in a tio n o f v a rio u s s ta te p u b lic s e rv ic e
law s and an a r t i c l e by George L . M yers, "C o m p e titio n i n the
P u b lic U t i l i t y I n d u s t r y " , Jo u rn a l o f E1 e c t r i c i t y , O ct. 1, 1920,
p. 310. There may be e r r o r s in t h i s d a ta , s in c e th e o r ig in a l law s
were n o t a v a ila b le in eve ry case; d o u b tfu l cases a re l e f t b la n k .
S ta te
Name o f Commission
S ta te
R e g u la tio n o f C o m p e titio n t h r u C e r t i f i c a t e
R egula­ o f Convenience and N e c e s s ity .
t io n
P riv a te
M u n ic i­ R eferences
U t i l i t i e s p a l U ts
Alabama
P u b lic S e rv ic e
yes
no
no
A riz o n a
C o rp o ra tio n
yes
yes
no
A rkansas
C o rp o ra tio n
yes
no
no
C a lif o r n ia
R a ilro a d
yes
yes
no
P.U.R. D '1 9 , p .9 2 1 .
C olorado
P u b lic U t i l i t i e s
yes
yes
yes
P.U.R. D '2 0 , p .2 1 4 .
C o n n e c tic u t.
P u b lic U t i l i t i e s
yes
yes
Delaware
(no Commission)
no
no
no
F lo r id a
R a ilro a d
no
no
no
G eo rgia
R a ilro a d
yes
Idaho
P u b lic U t i l i t i e s
yes
yes
no
P.U.R. B '2 0 .
Illin o is
P u b lic U t i l i t i e s
yes
yes
no
P.U.R. C '1 8 , p . 903.
In d ia n a
P u b lic S e rv ic e
yes
yes
yes
P.U.R. E '1 8 , p . 172.
P.U.R. A '1 5 , p. 1120.
*Holmes, Fred L . , Ch.15.
Iowa
R a ilro a d
Kansas
P a r t ia l
no
no
P.U.R. C ' 16, p . 49.
C o u rt o f In d .Rel a t i on yes
yes
yes
R a ilr o a d Law, Sec. 33.
K entucky
R a ilro a d
no
no
no
L o u is ia n a
R a ilro a d
no
no
no
Mai ne
P u b lic U t i l i t i e s
yes
yes
yes
P.U.R. A '1 5 , p . 808.
M arylan d
P u b lic S e rv ic e
yes
yes
yes
P.U.R. C '2 0 , p .9 7 2 .
M assachusetts
P u b lic U t i l i t i e s
yes
yes
yes
P.U.R. C '1 9 , p . 900.
M ic h ig a n
P u b lic U t i l i t i e s
yes
yes
M in ne sota
RR. & Warehouse
no
no
no
M is s is s ip p i
R a ilro a d
no
no
no
M is s o u ri
P u b lic S e rv ic e
yes
yes
no
P.U.R. A '1 9 , p .3 4 3 .
Montana
P u b lic S e rv ic e
yes
Nebraska
R a ilro a d
no
no
P .U.R. D ' 19.
Nevada
P u b lic S e rvice
yes
yes
no
P.U .R . F '1 9 , p . 299.
New Hampshire
P u b lic S e rv ic e
yes
yes
no
P .U.R. D ' 15, p. 282.
New J e rs e y
P u b lic U t i l i t i e s
yes
yes
no
P .U.R. D '1 8 , p .8 2 4 .
New Mexico
C o rp o ra tio n
no
no
no
New Y o rk
P u b lic S e rv ic e
yes
yes
yes
P .U.R. E '1 9 , p .4 2 5 .
Nor th C a ro lin a
C o rp o ra tio n
yes
no
no
Corp. Law, Sec. 19.
pa r t i a l
P.U.R. C '2 0 , p. 242.
P.U.R. E '1 5 , p. 694.
N o rth Dakota
R a ilro a d
yes
no
Ohio
P u b lic U t i l i t i e s
yes
yes
Oklahoma
C o rp o ra tio n
yes
Oregon
P u b lic S e rv ic e
yes
yes
no
P.U.R. D '1 8 , p . 851.
P e n n sylva n ia
P u b lic S e rv ic e
yes
yes
yes
P.U.R. E '1 8 , p .4 8 9 .
Rhode Is la n d
P u b lic U t i l i t i e s
yes
South C a ro lin a
R a ilro a d
yes
South Dakota
R a ilro a d
no
no
no
Tennessee
P u b lic U t i l i t i e s
yes
yes
no
Texas
R a ilro a d
no
no
no
U tah
P u b lic U t i l i t i e s
yes
yes
yes
P.U.R. B '1 9 , p .1 0 1 .
Vermont
P u b lic S e rv ic e
yes
yes
yes
P.U.R. E '1 6 , p. 232.
V ir g in ia
C o rp o ra tio n
yes
W ashington
P u b lic S e rv ic e
yes
yes
yes
West V ir g in ia
P u b lic S e rv ic e
yes
yes
W isconsin
R a ilro a d
yes
yes
yes
Wyoming
P u b lic S e rv ic e
yes
yes
yes
*R e g u la tio n o f R a ilro a d s and U t i l i t i e s
in W isco n sin .
no
P.U.R. D '1 6 , p . 930.
P.U.R. A '1 6 , p .8 3 4 .
*Holmes, Fred L . Ch. 15.
P.U.R. B '1 9 , p .3 4 7 .
8
show th e approxim a te s t a t u s of each s ta te on th e m a tte r o f
c o m p e titio n , where and where n o t p e rm itte d o r c o n t r o lle d ,
w it h re fe re n c e t o cases w h ic h have come up to t e s t th e
v a l i d i t y o f th e la w .
I t sh o u ld a ls o b e n o te d t h a t
wherever th e name o f th e commission has been changed so
as to in d ic a te th e in c lu s io n o f a l l p u b lic s e rv ic e
u tilitie s
th a t th e laws a r e more com prehensive th a n in
the s ta te s w it h o n ly r a i lr o a d com m ission s.
e x c e p tio n s to t h i s
Two n o ta b le
are C a lif o r n ia and W isco n sin , w h ich
have m e re ly e xte nd ed th e powers o f t h e i r r a ilr o a d com­
m is s io n s w ith o u t cha ng in g th e t i t l e s .
More d e f in i t e
f a c t s as to the e x te n t and d e s i r a b i l i t y o f laws w h ic h
c o n tr o l c o m p e titio n and mon o p o ly w i l l be g iv e n i n
Chapter I I I .
W hile the r a ilr o a d s were s u b je c te d to g r a d u a lly
in c re a s e d l e g i s l a t i v e and com m ission r e g u la t io n a lm o s t
fro m th e b e g in n in g o f t h e i r developm ent, o th e r p u b lic
s e rv ic e s as th e y appeared were s t r i c t l y
re g u la te d a t a l l .
r e la t io n s
A l l d i f f i c u l t i e s a r is in g o u t o f t h e
of th e u t i l i t i e s
th e c o u rts .
speaking n o t
w ith
th e p u b lic were s e t t le d by
T his meant t h a t o n ly in d iv id u a l d i f f i c u l t i e s
were disposed o f a s th e y a ro s e ;
no powers w ere v e s te d i n
th e c o u rts t o fo rm a c o n s tr u c tiv e program lo o k in g ahead
9
to th e p r e v e n tio n o f f u t u r e o ffe n s e s .
Such procedure was
e x p e n s iv e ; i t r e q u ir e d to o much tim e , inasmuch as th e
c o u rts r a r e l y had f a c t s and t e c h n ic a l knowledge a t t h e i r
d is p o s a l i n d e a lin g w it h such c o m p lic a te d problem s as
what c o n s t it u t e s
the p ro p e r b a s is f o r f a i r ra te s or
adequate s e rv ic e .
The o th e r form o f r e g u la t io n to w h ich u t i l i t i e s
were
s u b je c te d up to th e e s ta b lis h m e n t o f com m ission r e g u la t io n ,
and w h ic h i s s t i l l p r a c tic e d i n s ta te s w h ic h have n e it h e r
s ta te o r lo c a l com m issions, i s l e g i s l a t i v e c o n t r o l.
means t h a t r e g u la t io n o f th e u t i l i t i e s
T h is
i s e x e rc is e d
d i r e c t l y b y th e l e g i s l a t i v e b o d y i t s e l f , no power w h ateve r
b e in g d e le g a te d to e it h e r a s ta te
c o m m is s io n e r t o th e
m u n ic ip a lit ie s th e m se lve s.
The a b s o lu te inadequacy o f such p u re l e g i s l a t i v e
c o n tr o l i s a t on c e o b v io u s .
Such to d ie s meet o n ly f o r a
s h o r t tim e , in most c a s e s o n ly e ve ry tw o y e a rs .
They
la c k b o th th e in fo r m a tio n ne ce ssa ry to s e t t le u t i l i t y
problem s and the means of a c q u ir in g i t .
One power
th e y do possess, however, and t h a t i s the r i g h t to
d e le g a te a u t h o r it y to s p e c ia l co mm i s s i on s , e ith e r s ta te
or lo c a l, to re g u la te u t i l i t i e s
and a d ju d ic a te t h e i r
10
d iffic u ltie s .
But th e le g is la t u r e have been slow in t o
y ie ld in g th e p re ro g a tiv e o f making laws to g o v e rn e v e ry
p r iv a t e o r p u b lic r e l a t i o n in the s t a t e , and i n f a c t
have n o t y ie ld e d u n t i l fo rc e d to do so.
The d e f i n i t e
break away fro m s ta te l e g i s l a t i v e
c o n tr o l i n fa v o r o f m u n ic ip a l l e g i s l a t i v e c o n t r o l began
w it h th e p o p u la r movement f o r m u n ic ip a l " home r u le " w h ich
began i n M is s o u ri i n 1875 as a n o u tg ro w th o f th e f e e lin g
th a t s ta te le g is la t u r e s were n o t in p o s it io n to know and
ha nd le th e v a rio u s problem s o f th e c i t i e s .
The u ltim a te
s u rre n d e r o f many l e g i s l a t i v e powers to th e c i t i e s th u s
gave lo c a l c o n t r o l over a l l u t i l i t i e s
the c i t i e s .
Wh i l e
o p e ra tin g w it h in
t h i s change was a d e cid e d improvement
i n many re s p e c ts over s ta te l e g i s l a t i v e c o n t r o l th e f a c t
rem ains th a t i t was s t i l l l e g i s l a t i v e
i n c h a r a c te r.
And in f i n a l r e c o g n itio n o f th e weakness o f such r e g u la ­
t io n th e c i t i e s in tim e began t o empower t h e ir c o u n c ils
to d e le g a te th e c o n t r o l o f u t i l i t i e s
m is s io n .
to a s p e c ia l com­
The m u n ic ip a l commissions in Los A ngeles,
Kansas C it y and S t. L o u is are
examples o f th e b e tte r o f
these a d m in is tr a tiv e b o d ie s .
I n view o f th e a c t io n w h ic h many s ta te s have r e c a it L y
ta k e n i n o rd e r to r e - c e n t r a liz e th e c o n t r o l o f u t i l i t i e s
i t w ould seem t h a t had a s im ila r p la n o f c r e a tin g com­
11
m is s io n s been fo llo w e d b y t h e le g is la t u r e s in th e
b e g in n in g as has been p r a c tic e d b y many c i t y c o u n c ils,
th e problem o f s ta te c o n t r o l w ould lo n g ago have been
s e t t le d .
Now th a t th e m u n ic ip a lit ie s have become
accustomed to c o n t r o ll in g e v e ry phase o f t h e i r u t i l i t i e s
the problem s o f r e s t r i c t i n g t h is power has met w it h
v e ry g r e a t o p p o s itio n .
W hile lo c a l r e g u la t io n was an im provem ent o v e r
l e g i s l a t i v e c o n t r o l, y e t i t was by no means an u n m it i­
gated success.
o f u tilitie s
The whole movement f a r
s ta te r e g u la tio n
has th u s grown o u t o f th e f a i l u r e o f lo c a l
c o n t r o l to handle a s it u a t io n where modern u t i l i t y
opment has made i t
p o s s ib le f o r g a s , e l e c t r i c ,
and s t r e e t c a r u t i l i t i e s
to
m u n ic ip a l o r enter-commun i t y
d e v e l­
te le p h o n e
expand and become in t e r ­
i n t h e i r s e r v ic e .
T h is
n a tu r a l expansion began much e a r l i e r th a n d id e f f o r t s
to c o n t r o l i t
th ro u g h a c e n t r a liz e d com m ission, and
hence th e re c e n t l e g i s l a t i o n is a ta r d y r e c o g n it io n o f
the f a c t t h a t in de pe nd en t o r d e c e n tra liz e d r e g u la t io n is
ju s t as bad f o r a l l u t i l i t i e s
r a ilr o a d s .
as i t w o u ld be f a r
the
In f a c t , th e h is t o ry o f th e r a ilr o a d s shows
th a t lo c a l a id was so common and r e s u lt e d in so many
12
v ic io u s e v ils o f c o m p e titi on betw een com m unities i n
the
e a r ly stag es cf developm ent th a t the f e d e r a l governm ent
had t o p u t a s to p t o i t .
C e n tra liz e d c o n tr o l i s a ls o a
ta r d y , though f i n a l r e c o g n itio n o f th e p r i n c i p le t h a t
u tilitie s
are n a t u r a l m onopolies and sho uld r e c e iv e
p r o t e c t io n from c o m p e titio n , tho ug h alw ays s u b je c t to
r e g u la tio n in o rd e r t o p r o t e c t th e r i g h t s o f th e p u b lic .
The f a c t should no t be lo s t s i g h t o f t h a t th e o u t­
s ta n d in g e v i l w h ic h commission r e g u la t io n proposed to
e lim in a te was c o m p e titio n .
In
the f i r s t p la c e i t
e lim in a te d an e x c e s s iv e amount o f lo c a l r e g u la t io n ;
the second p la c e i t
made p o s s ib le th e
in
c o n tro l o f p ro ­
posed e x te n s io n s o r proposed p la n ts and o f f i s c a l com­
b in a tio n s .
O ther p ro m in e n t reasons w h y
a s ta te
com­
m is s io n i s s u p e r io r to o th e r fo rm s of r e g u la t io n are as
1
f o llo w s :
i t can secure in fo r m a tio n and c o m p ile d a ta on
e v e ry u t i l i t y
la tio n ;
in th e s t a t e ,
th u s a p p ly in g s c i e n t i f i c re g u ­
o n ly one s e t o f o f f i c i a l s
and m a ch in e ry o f a d m in i­
s t r a t io n are n e ce ssa ry; th e u t i l i t i e s
are i n t e r - r e l a t e d and
o fte n c o n t r o lle d b y f o r e ig n c o rp o ra tio n s ,
and o n ly a s ta te
com m ission can handle a c o m p lic a te d S it u a t io n such as t h i s ;
it
can re q u ire and secure u n if o r m it y i n ra te s and s e rv ic e s
1. Z in g , O .L. Op. C i t . p . 256.
13
f o r a l l c i t i e s o r c o m m u n itie s ; i t can p re v e n t lo c a l re g u ­
la tio n
in one p la c e from im p o sin g r a t e s or s e rv ic e s on
another p la c e ; i t c a n p r o t e c t th e s e c u r it y h o ld e rs fro m
fra u d o r "b lu e
sky" s e c u r it ie s .
There a re many o th e r
v e ry s p e c if ic t h in g s w h ic h such a com m ission c o u ld do,
f o r in s ta n c e in a s ta te l i k e
has e v e r e x is te d .
Iowa where no com m ission
These p o in ts w i l l re c e iv e f u r t h e r
a t t e n t io n in t h e l a s t c h a p te r .
It
i s n o t meant to in tim a te in t h e le a s t t h a t
m u n ic ip a l commissions fo r th e la r g e r c i t i e s are to
done away w it h .
But i t
be
is ne ce ssa ry t h a t th e powers
o f th e s e com m issions be s t r i c t l y enum erated, and t h a t th e y
s h a ll be lim it e d t o an a d v is o ry c a p a c ity o n ly ,
secu r in g c o o p e ra tio n in s te a d o f r i v a l r y w ith
thus
t h e c e n tr a l
com m ission.
Thus we see t h a t a f t e r th e f a i l u r e
o r inadequacy o f
c o u r t, l e g i s l a t i v e and lo c a l c o n t r o l - - w hich u s u a lly
meant d iv id e d a u t h o r it y between a l l th re e - - th a t s ta te
commissions ve ste d w it h f u l l and m andatory powers were
id e a lly f i t t e d
to hand le th e s it u a t io n .
They were due,
however, to undergo a g re a t amount o f c r i t i c i s m
o p p o s itio n , f i r s t fro m th e u t i l i t i e s
p u b lic i t s e l f .
and
and l a t e r from the
14
The u t i l i t i e s
had been f o llo w in g the p r a c tic e t o a
g re a t e x te n t o f c h a rg in g what th e t r a f f i c woul d h e a r, w ith
th e r e s u l t t h a t th e re was much i r r e g u l a r i t y in r a te s i n
d i f f e r e n t com m u nities.
F o r t h i s p o lic y th e u t i l i t i e s
should n o t b e b lamed to o much, however, f o r in an
in d u s tr y where c o m p e titio n i s m a in ly depended upon to
r e g u la te r a te s a n y th in g is f a i r w h ic h the mar k e t w i l l
s ta n d .
T h e re fo re s in c e th e f i r s t a c t o f most o f the
com m issions was to a d v is e o r e n fo rc e a r e d u c tio n i n ra te s
and b r in g about u n if o r m it y , th e p u b lic was more th a n
rea dy to acknowledge th e u n q u a lif ie d success o f the new
fo rm o f u t i l i t y r e g u la t io n .
N a t u r a lly enough th e u t i l i t i e s underw ent an o p p o s ite
r e a c tio n .
They f e l t t h a t t h e new l e g i s l a t i o n was w h o lly
a g a in s t them.
The a c c u s a tio n was made t h a t th e com­
m is s io n s were c re a te d and a p p o in te d w ith th e
o f p r o t e c t in g th e p u b lic
a g a in s t u t i l i t y
so le purpose
encroachm ents,
w it h no re g a rd f o r th e p r o t e c t io n o f p r o p e r ty r ig h t s w h ic h
th e u t i l i t i e s
f e l t were gu aranteed them .1
1 . C o rde al, E rn e s t, "What th e S t r e e t - Ca ry System Means to
th e I n d u s t r ia l F u tu r e " .
15
It
sho u ld be n o te d however t h a t many o f the u t i l i t i e s
p r e fe r r e d th e commission p la n to any p re v io u s fo rm o f
r e g u la t io n because i t gave prom ise o f p r o t e c t io n a g a in s t
u n lim ite d c o m p e titio n .1
T h is meant th a t th e o ld com­
p e t i t i v e " v a lu e o f s e r v ic e " p r in c ip le
was t o go.
of r a t e making
And when the e s ta b lis h e d u t i l i t i e s
saw th a t
p r o t e c t io n fro m c o m p e titio n meant p r o t e c t io n o f p r o p e r ty
r ig h t s th e r e g u la t io n o f r a te s was accepted w ith le s s
c o m p la in t.
On t h e w hole th e com m issions proved t o
be w h o lly
im p a r t ia l, a c c e p tin g the p r i n c i p le t h a t the r i g h t to
r e g u la te a ls o im p lie s the d u ty to
p ro te c t.
And w h ile
t h e i r f i r s t a c ts seemed t o be in th e na tu re o f r e g u la t io n
downwards, subsequent e ve n ts proved t h e i r i m p a r t i a l i t y ,
f o r w i t h th e g e n e ra l r i s e in p r ic e s due to w a r c o n d itio n s ,
le g it im a t e ra te
in c re a s e s w ere r e a d ily p e rm itte d .
T his
was th e f i n a l step in w in n in g th e a p p ro v a l o f th e
u t i l i t i es.
B ut w h e th e r a g a in s t p u b lic d is a p p ro v a l or a g a in s t
the d e s ire s o f th e u t i l i t i e s ,
th e com m issions have pro ved
1. Hagenah, W. J . , "The U t i l i t i e s t u r n to R e g u la tin g Com­
m is s io n s ", E l e c t r i c a l W orld, Jan. 5, 1918.
See a ls o , B ra c k e n b u ry ,B .A ., "C o m p e titio n in S m all C ity
P u b lic U t i l i t y O p e ra tio n ", E l e c t r i c a l W orld , J u ly 3, 1915.
16
them selves e la s t ic enough to respond t o abnorm al c o n d itio n s .
And t h e ir emphasis on p re s e rv in g th e e f f ic ie n c y and compre­
hensiveness o f s e rv ic e has made the r a t e problem le s s and
le s s tro u b le so m e .
The p o p u la r a p p ro v a l w hich was a t f i r s t accorded th e
com m issions by th e p u b lic s u ffe re d somewhat o f a re la p s e
when r a te in c re a s e s were p e rm itte d a f t e r 1917.
Some are
in c lin e d to p la c e th e blame f o r t h i s r a t h e r g e n e ra l d is ­
s a t is f a c t io n more on th e p u b lic o f f i c i a l s th a n on the p u b lic
its e lf.
Wi l l i a m
and o f f i c i a l ,
J . Hagenah, an e l e c t r i c u t i l i t y
says t h a t
tow ard r a te in c re a s e s ,
r is e
the p u b lic was f a i r
e x p e rt
in i t s
a t t it u d e
ta k in g in t o c o n s id e ra tio n the g e n e ra l
in p r ic e s , and d id n o t r e g is t e r th e extrem e d is a p p ro v a l
w h ich was a t f i r s t e x p e c te d .1
M u n ic ip a l o f f i c i a l s ,
on th e
o th e r hand, and s tro n g p ro p o n e n ts o f m u n ic ip a l "home r u le "
used th e r a t e i n c rease p o lic y o f th e commissions as a weapon
a g a in s t c e n t r a liz e d c o n t r o l. 2
An in s ta n c e of t h i s
is w i t ­
nessed by th e f i g h t w h ich has been waged in I l l i n o i s f o r th e
p a s t tw o y e a rs .
Both th e mayor o f Chicago and th e g o ve rn o r
1. Op. Ci t .
2. Denman, B. J. V ic e -P re s id e n t o f th e U n ite d Lig h t & R a ilw ays
Comp a n y , Debates b e fo re th e I l l i n o i s C o n s t it u t io n a l Con­
v e n tio n , A p r i l 1, 1920.
17
o f th e s ta te as w e ll a s o th e r o f f i c i a l s have p o p u la riz e d
them selves and rid d e n to power la r g e ly on t h e i r prom ises t o
reduce u t i l i t y r a t e s .
They have advocated the re p e a l o f th e
law s c r e a tin g c e n t r a l c o n t r o l th ro u g h a s ta te com m ission
and have a g ita te d f o r m u n ic ip a l ow ne rship and l o c a l regu­
l a t i o n f o r th e whole s t a t e . 1
The u t i l i t i e s
have opposed
b o th o f th e s e p r o p o s it io n s , — the re d u c tio n o f r a te s because
the u t i l i t i e s were n o t e a rn in g adequate r e tu r n s on the
c a p it a l in v e s te d in good f a i t h ,
and lo c a l r e g u la t io n and
m u n ic ip a l ow nership because th e l a t t e r p a r t i c u l a r l y is
o u t o f harmony w it h u t i l i t y
e xp an sio n.2
in C hapter I I
a re in the r i g h t b o th from an
th e u t i l i t i e s
As w i l l be shown
economic and r e g u la t iv e s ta n d p o in t.
From t h i s and s im ila r in s ta n c e s o f a g it a t io n f o r lo c a l
r e g u la t io n and m u n ic ip a l ow nership i n Iowa and o th e r s ta te s
no doubt can e x is t th a t Commission r e g u la t io n i s u n d e rg o in g
a s tr u g g le f o r i t s
e x is te n c e , even i n th e fa c e o f i t s
accom plishm ents f o r th e m utu al good o f b o th p u b lic and u t i l ­
it ie s .
It
is branded as a p o l i t i c a l fa d and an u n m is ta k a b le
f a i l u r e , 3 a lth o u g h even the s e v e re s t c r i t i c s o f th e com­
m is s io n s agree th a t la c k o f c e r t a in powers has caused t h i s
1. Y a rra s , V ic t o r S . , "The Chicago S it u a t io n " , N a tio n a l M uni­
c ip a l Review, A p r i l , 1921.
2. Denman, B .J . Op. C i t .
3. Cardeal , E a rn e s t, "P le n a ry Power f o r P u b lic S e rv ic e Com­
m is s io n s B a d ly Needed", T ra n s p o r ta tio n Wo rl d.
18
f a ilu r e .
Suoh an a t t i t u d e i s o f c o u rs e c o n s t r u c t iv e .
It
is o n ly th e d e s ir e to a b o lis h com m issions ^ t o g e t h e r w h ich
endangers a r e v e r s io n to th e o ld c o n d itio n s o f w a s te fu l
c o m p e titio n and d u p lic a t io n in s te a d o f u t i l i t y
c e n tr a li­
z a tio n and e xp a n sio n as a pro te c te d m onopoly, tow ard w h ic h
modern econom ic and r e g u la t iv e c o n d itio n s la v e r e c e n t ly
.
tended.
I t i s w e ll to s ta te h e re t h a t the p h y s ic a l exp a n sio n
of a ll u t ilit ie s
p re s e n ts t e c h n ic a l problem s w h ich are
a f t e r a l l th e c o n t r o llin g
o f th e u t i l i t y com panies.
f a c t o r as t o th e economic p o lic ie s
O b v io u s ly no company w i l l d e lib e r a t e ­
l y in d u lg e in un ne cessa ry d u p lic a tio n s o r w astes o f any k in d
u n le s s d r iv e n to i t b y c o m p e titio n o r by th e la w .
Hence
in th e absence o f s p e c ia l p ro o f no blam e w i l l be l a i d t o
th e la c k o f e n g in e e rin g knowledge o r bu sin ess judgment f o r
any o f the te n d e n c ie s , past o r p re s e n t, w h ic h f o s t e r compe­
titio n .
The blame must in v a r ia b ly be la id
to p u b lic
p r e ju d ic e or ig n o ra n c e o f economic p r in c ip le s .
19
CHAPTER I I
PHYSICAL EXPANSION OF THE U T ILITIE S AS RELATED TO
POLI CI ES O
F REGULATION
E a rly C o n d itio n s F o s te r in g M u n ic ip a l Ownership
Up u n t i l the b e g in n in g o f c e n tr a liz e d s ta te
c o n tr o l
th e u t i l i t i e s were s u b je c t to th e v a rio u s governm ental
a u t h o r it ie s m entioned i n th e p re c e d in g c h a p te r, th e main
f u n c t io n o f w h ich seems to have been the enforcem ent r a th e r
than th e l i m i t a t i o n o f c o m p e titio n .
I n th e absence o f
d ir e c t s ta te c o n t r o l th e c i t i e s , th ro u g h r ig h t s d e le g a te d
by th e le g is la t u r e s , had the power to g r an t fr a n c h is e s and
co n t r o l t h e i r u t i l i t i e s .
Fr a n c h is e s were g ra n te d on the
th e o ry t h a t c o m p e titio n w o u ld re g u la te r a t e s . 1
was regarded as obnoxious i n
e n t ia t io n was made in
M onopoly
the extrem e, and no d i f f e r ­
the p o p u la r mind between " b ig
b u s in e s s " in t e r e s t s and n a tu r a l p u b lic m o n o p o lie s.2
T h e re fo re ,
sin ce the p o p u la r a t t it u d e demanded c o m p e titio n
i t was in d u lg e d i n to the l i m i t .
I f a m onopoly managed
to g e t c o n t r o l o f th e s i t u a t io n i n a c i t y i t
im m e d ia te ly
in v it e d r i v a l r y ; bu t alw ays w ith one u n f a il in g r e s u l t - more m onopoly, th ro u g h a c o n s o lid a tio n o r agreem ent
between th e com peting companies.
1 . W ilc o x , D elos F . , "M u n ic ip a l Fr a n c h is e s " , Vo l . I .
2. M yers, Geo. L . , "C o m p e titio n i n th e P u b lic U t i l i t y
I n d u s t r y " , J o u rn a l o f El e c t r i c i t y , O ctober 1, 1920.
20
Many o f o u r A m erican c i t i e s f u r n is h s t r i k i n g examples
o f such condi t i o n s .
Denver may b e ta k e n as t y p i c a l .
In
1881 th e c i t y c o u n c il re s o lv e d " t h a t p e rm is s io n b e g ra n te d
to any company d e s ir in g to s u p p ly the c i t y w ith e l e c t r i c
lig h t ” .
And year a f t e r y e a r d i f f e r e n t companies w e re
g iv e n id e n t ic a l fra n c h is e r i g h t s and p r iv ile g e s .
F or
example, th e E d is o n E l e c t r i c Company was fr a n c h is e d i n
1883 and f o u r ye a rs l a t e r th e Denver L ig h t , Heat and
Power Company.
These tw o companies e v e n tu a lly c o n s o li­
d a te d ,1 as a ls o d id th e ga s in t e r e s t s .
Then th e
c i t y sought
to r e lie v e th e s it u a t io n by g r a n t in g a fr a n c h is e to s t i l l
an o th e r company w h ic h had agreed to c u t r a t e s in h a l f .
I t was so on d is c o v e re d th a t th e o ld e r concern c o u ld a ls o
c u t r a te s i f fo r c e d to do so by c o mp e t it io n - - w h ic h i t did
u n t i l the r i v a l p la n t was d r iv e n in to
M onopoly once more e x is te d and r a te s
c o n s o lid a tio n .
we re h ig h .
Such
in s ta n c e s 2 as these w ere d u p lic a te d i n New York C it y where
s ix d i f f e r e n t companies w e re g ra n te d the same r ig h t s
in
one y e a r; o r i n Chicago where 47 e l e c t r i c fr a n c h is e s were
g ra n te d .
The p u b lic had y e t to le a r n t h a t g o ve rn m e n ta l
c o n tr o l and n o t c o m p e titio n is th e o n ly s o lu t io n of such
p r o b lems .
1 . M i l l s , J. W arner, "The Economic S tru g g le in C o lo ra d o ",
The Arena, Nov. 1905, p . 488.
2. W ilc o x , D elos E . , Op. C i t . Kin g , C .L ., "The R e g u la tio n
o f M u n ic ip a l U t i l i t i e s " , p . 78.
21
However, the c i t i e s were y e t u n co n vin ce d t h a t
c o m p e titio n in some fo rm or a n o th e r was n o t to b e d e s ire d ,
and i n d e s p a ir th e y tu rn e d to m u n ic ip a l o w n e rs h ip , a s
in d ic a te d i n th e p re c e d in g c h a p te r.
p ro v id e fo r m u n ic ip a l ow nership by
Many o f th e s ta te s
g r a n tin g th e c i t y
the r i g h t to e it h e r c o n s tru c t a new p la n t or purchase the
e x is tin g one.
t o s e ll,
As i n Iowa in case th e p r iv a t e u t i l i t y
re fu s e s
or an agreem ent cannot be rea ch e d a fte r th e
e le c to r s have d e c id e d on n u m ic ip a liz a tio n , th e c i t y may
in s t ig a t e condem nation p ro c e e d in g s to a c q u ire i t . 1
a m u n ic ip a l monopoly is c r e a te d .
Thus
P la in ou t and out compe­
t i t i o n has been t r i e d b y many c i t i e s , how ever, in o rd e r
to b rin g the p r iv a t e companies to t im e , — th e o n ly method
fe a s ib le
in the absence o f p ro p e r r e g u la t io n . 2
L ik e many in n o v a tio n s m u n ic ip a l ow nership was e x tre m e ly
p o p u la r t o b e g in w it h , e a r ly i n th e 1900s, and was h a ile d
as th e s o lu t io n of a l l u t i l i t y
pro blem s.
Volumes have been
w r it t e n in s u p p o rt of b o th s id e s o f th e q u e s tio n .
The
opponents o f m u n ic ip a l ow nership say t h a t the u t i l i t i e s
w ould o n ly be thro w n in t o p e t t y p o l i t i c s ,
and fro m la c k o f
th e b u s in e s s in c e n tiv e w hich p r iv a t e o w n e rsh ip g iv e s w ould
be g r o s s ly mismanaged.
1. See Sec. 3969, Compiled Code o f Iowa., 1919.
2. Kin g , C. L . , Op. C it . Chap. I I .
22
The purpose h e re in pursued is n o t to re v iv e the
p o l i t i c a l and bu s in e s s - e f f ic ie n c y argum ents f o r and a g a in s t
m u n ic ip a l ow nership as much as t o s tre s s th e f a c t t h a t as
a p o lic y i t s ta n d s in the way o f th e e x p a n s io n and
c e n t r a liz a t io n o f c e r t a in u t i l i t i e s .
T h is i s e s p e c ia lly tr u e of th e e l e c t r i c and gas companies
and th e s t r e e t r a ilw a y s s in c e th e y have become so i n t e r ­
community in c h a ra c te r.
M u n ic ip a l ow nership o f u t i l i t i e s
w h ic h can e a s ily be c o n fin e d to a c i t y , such as a w a te r
system o r sewerage d is p o s a l, p re s e n t a somewhat d i f f e r e n t
fa c e to
the above arguments a g a in s t m u n ic ip a l o w n e rsh ip .
They a r e o b v io u s ly n o t in
th e same c la s s , and y e t th e
pro po ne nts o f m u n ic ip a liz a tio n o fte n f a i l to d i f f e r e n t i a t e .
F or exam ple, a c o m p ila tio n o f "One Hundred Reasons f o r
M u n ic ip a l O wnership" shows t h a t 37 examp le s o f s u c c e s s fu l
mun i c i p a l i z a t i o n
r e f e r to w a te r w o r k s , 10 to gas o r
sewerage and o n ly 21 to c e n t r a l e l e c t r i c p la n ts
and s t r e e t
r a ilw a y s .1
The f o llo w in g d a ta on m u n ic ip a liz a tio n o f e l e c t r i c
u t i l i t i e s w i l l show to what e x te n t th e p o lic y has been
fo llo w e d i n t h i s p a r t ic u l a r in d u s tr y and w i l l g iv e s o me
id e a , fro m th e s iz e o f the m u n ic ip a lit ie s and th e s e c tio n s
1. Burns & M cD onnell, C o n s u ltin g En g in e e rs , Kansas C ity .
23
o f the c o u n try in w h ic h i t
is most p r e v a le n t,
o f w h at
to e x p e c t in the f u t u r e .
Of th e 4714 s t a t io n s i n 1907, 1252 o r 2 6 .6 % were
owned by c i t i e s .
By 1912 the r a t i o had in c re a s e d to
30%; and in 1917 o u t o f a t o t a l o f 6,542 s t a t io n s ,
2,318 o r 35.5% were m u n ic ip a lly owned.1
S ince 1917 o th e r
d a ta m ust be r e f e r r e d to on t h is phase o f m u n ic ip a l
o w n e rsh ip .
F ig u re s f o r 19182 e s tim a te th a t 35.5% o f al l
li g h t i n g systems a re m u n ic ip a lly owned, w h ic h corresponds
e x a c tly w ith th e census f ig u r e s f or 1917.
source r e p o r ts f o r
The same
1919 t h a t 3 2 .8 % were m u n ic ip a lly
owned; w h ile d a ta com piled b y th e P u b lic U t i l i t y League3
in 1919 r e p o r ts t h a t 3 1 .3 % o f th e t o t a l c e n t r a l s t a t io n s
are so owned.
I t s h o u ld be n o te d t h a t th e l a t t e r o f
these sources is
o w n e rsh ip .
If
c on s is t e n t i t
s tr o n g ly b ia s e d in fa v o r o f m u n ic ip a l
these f ig u r e s fro m the
two sources are
would in d ic a t e th a t m u n ic ip a l ow nership
i s d e c re a s in g somewhat.
F u rth e r d a ta fro m th e same census r e p o r t r e f e r r e d
to above show th e r e l a t i v e
im p o rta n ce of p r iv a t e and
1. U . S . Census, " C e n tr a l El e c t r i c L ig h t & Power S ta tio n s :
1917", Chap. I I , T ab le No. 8.
2. McGraw, " C e n tra l S ta tio n D ir e c t o r y and D ata Book f o r 1 9 1 9 ".
3. Am erican M u n ic ip a lit ie s , January, 1919.
24
m u n ic ip a l p la n ts , w h ich would s e em to
in d ic a te
fu rth e r
th a t s m a ll c i t y owned p la n ts w i l l l i k e l y b e absorbed b y
p r i v ate in t e r e s t s w h ic h o p e ra te on a much la r g e r and more
econom ical s c a le .1
The f ig u r e s f o r 1917 d is c l ose however
t h a t a lth o u g h the p r iv a t e com m ercial s t a t io n s com p rise
o n ly 6 4 .6% o f th e t o t a l ,
th e y s e rv e 8 2 .7% o f a l l
m u n ic ip a lit ie s fu rn is h e d w i t h
the
e l e c t r i c i t y and 8 0 .5 %
o f th e a g g re g a te p o p u la tio n u s in g e l e c t r ic c u r r e n t .
p a r t e x p la n a tio n o f t h i s
it
In
should be n o te d t h a t v a ry
r a r e ly do m u n ic ip a l p la n ts s e rv e more th a n one com m unity
w h ile c e n tr a l p r iv a t e p la n ts d i s t r i b u t e much more w id e ly ,
s e rv in g on an average th re e
com m unities, w ith
the average
g o in g as h ig h as n in e in C a lif o r n ia , f i v e i n P e n n sylva n ia ,
and te n in New Jersey and Rhod e I s la n d . 2
It
should a ls o be n o te d t h a t f ig u r e s 3 on m u n ic ip a l
ow nership show t h a t o n ly in 3% o f th e c i t i e s
p o p u la tio n are p la n ts mu n ic ip a lll y
o f over 5,000
owned; w h ile 25% o f the
in s ta n c e s of s u c h ow nership was in towns fro m 1,0 00 to
5,000 p o p u la tio n .
1 . U .S . Census, " Cen t r a l E l e c t r i c L ig h t and Power Stat i on , "
1917, Ch . I I , t a b le No. 8
2. F o w le r, C. L . , E l e c t r i c a l W orld , March 23, 1918.
3. Fo w le r, C.L . " L o g ic o f C o n s o lid a tio n s " , El e c t r i c a l Wo r l d,
M ar. 23, 1918
25
There are s t a t i s t i c s
on m u n ic ip a l ow nership f o r Iowa1
w h ich show te n d e n c ie s s im ila r to th o s e giv e n above f o r
the whole c o u n try .
Out o f 214 s t a t io n s o p e ra tin g in
1919, 159 were g e n e ra tin g and 55 p u rc h a s in g s t a t io n s .
th e 159 g e n e ra tin g s t a t io n s ,
i c i p a l l y owned l i g h t i n g
T h is i s
Of
92 were re p re s e n te d as mun­
system s, or 5 7 .8 % o f th e t o t a l .
c o n s id e ra b ly above th e average o v e r th e e n t ir e
f i e l d a s g iv e n above.
The re p o rts o f m u n ic ip a l accounts f o r Iowa show
somewhat d i f f e r e n t f ig u r e s on m u n ic ip a l ow n e rsh ip , as
evidences by the f o l l o w ing d a t a :2
Number o f s t r e e t l i g h t i n g p la n ts m u n ic ip a lly owned:
1910
21 o u t o f 97 c i t i e s
2 1 .6%
1915
27 out o f 101 c i t i e s
26.7%
1919
23 o u t o f 105 c i t i e s
2 1 .9 %
The d is c re p a n c y between the two s e ts o f d a ta is
u n d o u b te d ly due t o th e f a c t th a t the m u n ic ip a l a cco un ts
ju s t
quoted r e f e r on l y t o in c o rp o ra te d c i t i e s
and n o t to
to wns,
the re
in th e s t a t e
being no d a ta on m u n ic ip a l owner­
s h ip in th e l a t t e r , where t h e re
i s , as a m a tte r o f f a c t ,
more m u n ic ip a l own e rs h ip o f u t i l i t i e s
th a n i n the la r g e r
c it ie s .
1. McGraw, Op.Ci t .
2. R e po rt on M u n ic ip a l F in a n c e s , Stat e o f Iow a, 1910-19.
26
M u n ic ip a l ow ne rship is s tr o n g e r i n
the M id w e ste rn
s ta te s , as a tte s te d by s t a t i s t i c s fro m f i v e o th e r o f th e s e
s ta te s .
The m u n ic ip a l p la n ts in Kansas1 are 5 8 .9 % o f th e
t o t a l in t h a t s t a t e ; w h ile in Ohio th e p r o p o r tio n is
4 3 .2 %, w ith M in n e so ta , Nebraska and Oklahoma each showing
more tha n 50% o f i t s
s h ip .
p la n ts to
be under m u n ic ip a l owner­
I t w i l l be n o te d i n th e t a b le on page 7
th a t a l l
o f these s ta te s have lo c a l r e g u la t io n o f u t i l i t i e s .
It
should a ls o be n o te d t h a t one o f th e m ain causes
the
movement f o r m u n ic ip a l ow nership has been t h a t th e
u tilitie s
have been d riv e n in t o p o o r s e r v ic e due t o
r e s t r i c t i v e fr a n c h is e p o li c ie s and c o m p e titiv e p ra c ­
t i c e s , b o th fa v o re d b y th e m u n ic ip al i t i e s
developm ent.
i n e a r ly u t i l i t y
B ut where c e n tr a lis e d c o n t r o l has e x is te d
the lo n g e s t th e a g it a t io n f o r c i t i e s to ta k e o v e r the
u tilitie s
has been le s s m arked.
K in g a s s e rts th at
s in c e
com m ission r e g u la tio n has been exte nd ed t o u t i l i t i e s
in
W isco n sin and New York th e movement shows a de cid ed
aba te m e n t.2
There seems t o b e no d o ub t t h a t on the w hole th e re
are two opposing te n d e n c ie s as t o m u n ic ip a l o w ne rship .
1. McGraw, O p .C it.
2. K in g , O p .C it. 49.
27
T h is was w e ll s ta te d b y D elos F . Wi l c o x th re e ye a rs ago
who w r i t e s as f o llo w s : 1
"W h ile i t
c r y s ta lliz in g
is assumed t h a t p u b lic se n tim e n t is
in fa v o r o f m u n ic ip a l ow nership and opera­
t i o n a nd t h a t we are d r i f t i n g
tow ard th e r e a li z a t io n o f
th a t system as an u ltim a te p o lic y ,
c e r t a in im p o rta n t
f a c t s , upon c a r e fu l e x a m in a tio n , b e li e the a ssu m p tio n .
At t h i s moment, two p o w e rfu l b u t c o n f l i c t i n g te n d e n c ie s
in th e p u b lic u t i l i t y
U n ite d S ta te s .
One i s
f i e l d have g a in e d headway in the
th e tendency on the p a r t o f
g re a t m u n ic ip a lit ie s to re c o g n iz e p u b lic u t i l i t i e s
as
m u n ic ip a l fu n c tio n s , and by means o f new o r re s e ttle m e n t
fr a n c h is e s c o n ta in in g purchase cla u se s and a m o r tiz a tio n
p r o v is io n s , to p re p a re f o r th e u lt im a t e m u n ic ip a liz a tio n
o f th e u t i l i t i e s , pa r t i c u l a r l y s t r e e t r a ilw a y s , now
p r i v a t e l y owned and o p e ra te d .
n a te d t o
T h is tendency has domi­
a g r e a te r or le s s e x te n t the s t r e e t r a ilw a y
s e ttle m e n ts adopted d u rin g th e p a s t te n years in
Ch i c ago,
P h ila d e lp h ia , C le v e la n d , New Y o rk, Kansas C ity , Des M oine s,
D a lla s and C in c in n a t i, a nd is now d o m in a tin g th e nego­
t i a t i o n s pe nding in T o le d o , M in n e a p o lis , Oakland and S t.
L o u is .
San F ra n c is c o and S e a ttle have even gone to th e
1 . " Recent Developments i n th e P u b lic U t i l i t y F ie ld a f f e c t in g
F ra n c h is e p o lic ie s and M u n ic ip a l O w n e rsh ip ", N a tio n a l
M u n ic ip a l Review, V o l. V I I , No . 2, M arch, 1918.
28
e x te n t o f e s t a b lis h in g com peting m u n ic ip a l ca r li n e s , and
D e t r o it has once v o te d 4 t o 1 , in fa v o r o f m u n ic ip a l
ow n e rsh ip , and is now go in g alo n g under a d a y -to -d a y
agreem ent, r e fu s in g t o g ra n t a new s t r e e t r a ilw a y
fr a n c h is e on any te rm s .
The o th e r ten de ncy r e fe r r e d
to is the one t y p i f i e d b y the
O 'C o n n e ll case.
s ta te
Illin o is
d e c is io n in th e
I t i s based upon th e th e o r y t h a t th e
as such has no in t e r e s t in th e change fro m p r iv a t e
to p u b lic
ownership, and o p e ra tio n b u t, t a k in g u t i l i t i e s
as i t f in d s them, should assume c o n t r o l o f r a te s
and
s e rv ic e to the e x c lu s io n o f the lo c a l a u t h o r it ie s .
th e le g i s la t u r e ,
That
in the absence o f s p e c if ic c o n s t it u t io n a l
g u a ra n tie s o f m u n ic ip a l home r u le
in re s p e c t to th is
p a r t ic u l a r m a tte r, ha s u n r e s t r ic t e d a u t h o r it y t o e x e rc is e
th e p o lic e pow er, o r t o d e le g a te i t s
e x e rc is e to a s t a t e
com m ission, w ith o u t re g a rd to the p u b lic u t i l i t y
p o lic ie s
w h ich may have been fo rm u la te d b y lo c a l a u t h o r it ie s and
s a n c tio n e d by lo c a l c o n tr a c ts , has now been e s ta b lis h e d b y
c o u r t d e c is io n s i n many o f th e s t a t e s , in c lu d in g W isco n sin ,
W ashington, New Y o rk, O k lahoma and I l l i n o i s .
A lre a d y the
developm ent o f th is le g a l th e o ry and i t s a c t u a l a p p lic a t io n
by s ta te p u b lic s e r v ic e commissions have begun to c o u n te ra c t
the o th e r te n d e n c y to w hich we have j u s t r e f e r r e d and to
29
p a ra ly z e th e e f f o r t s o f c i t i e s
to g ra p p le w it h t h e i r lo c a l
u t i l i t y problem s and to fo rm u la te and a d o p t e f f e c t iv e
m u n ic ip a l p o lic ie s lo o k i ng t ow a rd th e u lt im a t e p r a c t ic a l
r e c o g n itio n o f p u b lic u t i l i t i e s a s p u b lic fu n c tio n s .
The s ig n ific a n c e o f t h i s
e s tim a te d , f o r i t
c o n f l i c t can h a r d ly be o v e r­
i s c l ear th a t w i t h a l l the t r a d i t i o n a l
assum ptions o f s t a t e s o v e re ig n ty i n i t s f a v o r , th e move­
ment f o r e x c lu s iv e s ta te c o n t r o l is l i k e ly t o prove too
p o w e rfu l f o r th e
ci t i e s a c t in g i n d i v i d u a l l y , w ith
the
r e s u lt t h a t th e p u b lic u t i l i t y p o li c y of t h i s c o u n tr y
w i l l be c r y s t a ll iz e d b y s ta te a c tio n i n fa v o r o f th e
permanence o f p r iv a t e o w n e rsh ip and o p e ra tio n w it h out
re g a rd to th e d e s ire s o f th e c i t i e s f o r whose b e n e f it s
the u t i l i t i e s
have been e s ta b lis h e d ."
30
O b je c tio n s To L o c a l R e g u la tio n .
The n a t u r a l c o n c o m ita n t o f th e movement f o r m u n ic ip a l
ow nership was an in c re a s e d a g it a t io n f o r l o c a l r e g u la t io n .
As shown in C h a p te r I , i t began w ith th e movement f o r
m u n ic ip a l "home r u l e " .
No a tte m p t w i l l be made to
th a t m u n ic ip a l ow nership has been a d i r e c t re su l t
prove
of
lo c a l r e g u la t io n , a lth o u g h as a g e n e ra l p r o p o s it io n i t
has o fte n bee n argued and no doubt pro ven t h a t th e re i s
a c o n n e c tio n .
A t an y r a te l o c a l r e g u la t io n i s
c o n tra ry
to th e p r in c ip le t h a t any one is c a p a b le o f p a ssin g
u n biase d judgment upon h is
own a f f a i r s .
It
assumes t h a t
a c i t y c o u n c il, and n o t a n im p a r t ia l s t a t e com m ission,
sho uld d e cid e w hat r a te s a community s h o u ld pay a
p r iv a t e b u s in e s s f o r i t s p u b lic
s e r v ic e s .
W
h a t t h is
has many tim e s le d t o may be shown by an i l l u s t r a t i o n
o f lo c a l c o n t r o l i n th e hands o f a c i t y c o u n c il.
T h is c o u n c il has th e power to r e g u la te th e r a t e s ,
o f a l i g h t p la n t,
and by r e s t r i c t i n g th e ra te s
say
to a p o in t
a t w h ich th e r a t e o f r e t u r n w i l l cause the p la n t to
d e p re c ia te and g iv e p o o re r and p o o re r s e r v ic e , th e
c o u n c il o r p u b lic
co u ld th e n move f o r m u n ic ip a l owner­
s h ip o r m u n ic ip a l c o m p e titio n on th e p le a o f in a d e q u a te
s e rv ic e ,
or because i t
has f e l t t h a t the advances in r a t e s
31
asked f o r by the u t i l i t y were u n re a s on a b le .
T his wou ld
be th e e x e rc is e o f a r b i t r a r y judgm ent, w ith th e u t i l i t y
a t th e m ercy o f u n s c ru p u lo u s o f f i c i a l s o r a b ia s e d p u b lic .
C e n tra liz e d c o n tr o l w ould remove t h i s p o l i t i c a l e v i l .
On th e o th e r ha n d, i f
lo c a l r e g u la t io n i s n o t t o be
the mere e x e rc is e o f a r b i t r a r y o p in io n , each m u n ic ip a lit y
would be fo rc e d t o m a in ta in a t g re a t expense, f o r th e
purpose o f a c c u r a te ly d e te rm in in g the v a lu a t io n on w h ich
the r a te s were t o be based, a b o dy o f e x p e rt a c c o u n ta n ts ,1
la w y e rs , in v e s t ig a t o r s and e n g in e e rs .
T h is is
an expense2
w h ich m u n ic ip a lit ie s have f e l t was so g r e a t as to p r o h i b i t
them fro m a p p e a rin g b e fo re s t a t e o f f i c i a l s o r c o u r ts i n
cases in v o lv in g ra te s
and v a lu a tio n .
C e n tra liz e d c o n t r o l
w i l l o b v ia te th e n e c e s s ity o f t h i s body o f e x p e rts b e in g
d u p lic a te d i n each m u n ic ip a lit y .
A nother economic drawback to lo c a l r e gul a t i o n i s seen
in the a t t it u d e expressed b y the Mayor o f an Iowa c i t y 3
who s a id , " P e r s o n a lly I do n o t b e lie v e t h a t c e n t r a l power
s t a t io n s f o r
tra n s m is s io n o f power to towns and c i t i e s
i s the p ro p e r p ro c e d u re .
I b e lie v e th a t p u b lic ow nership
1. See debates b e fo re I l l i n o i s C o n s t it u t io n a l Conventi on,
A p r i l 1, 1 9 20, S tatem ent o f M r. A ls h u le r . A ls o N. L .
Ams t e r .
2. Op. C i t .
3. F o r t Dodge, r e p ly to q u e s tio n n a i r e.
32
s to p s w i t h in the c o rp o ra te l i m i t s of a c i t y o r tow n, and
i n no case should a m u n ic ip a lit y ta ke on any o u ts id e
s e rv ic e th a t would be a d e trim e n t to i t s
own p e o p le ".
I f lo c a l in s u la t io n means t h is , th e n th e g re a t
waste w h ic h is e n ta ile d b y d u p lic a te d p la n ts i n each c i t y ,
where a la rg e c e n t r a l p la n t would se rve i t
and many o th e r
com m unities i s a t once o b vio u s.
Or i f la rg e c e n t r a l p la n ts have once been e s ta b lis h e d
under c e n tr a liz e d c o n t r o l and th e n lo c a l r e g u la t io n i s
e s ta b lis h e d to ta k e i t s
it s e lf.
p la c e , a n o th e r problem p re s e n ts
F o r exam ple, i n th e s p r in g o f 1 9 20 the re was
h e ld in the s ta te o f I l l i n o i s
a C o n s t it u t io n a l C o nve ntio n,
bent upon r e v is in g th e c o n s t it u t io n .
One o f th e b u rn in g
is s u e s up b e fo re t h is body o f th e p e o p le 's r e p re s e n ta tiv e s
was the
q u e s tio n o f " h ome r u l e " f o r c i t i e s and to w n s.
And one o f the m a tte rs in c o n n e c tio n w ith t h is m u n ic ip a l
program was the p r o p o s it io n to extend
the r i g h t o f lo c a l
r e g u la t io n o f u t i l i t y r a t e s and s e rv ic e t o th e
and to a b o lis h th e u t i l i t i e s
com m ission.
was com batted by the u t i l i t i e s ;
n o t a tte m p t to u p h o ld u t i l i t y
d e a lin g s w it h th e p u b lic ,
it
c it ie s ,
N a t u r a lly t h is
and w h ile t h i s t h e s is does
c o rp o ra tio n s i n a l l t h e i r
is m a in ta in e d t h a t t h e
u t i l i t i e s were r i g h t fro m the most la u d a b le economic
33
s ta n d p o in ts i n f i g h t i n g th e in c o r p o r a tio n o f t h i s p r o v is io n
in th e "home r u le " program .
The f o llo w in g h y p o th e s is was made i n the argum ent f o r
1
th e u t i l i t i e s ' d e fe n se : A g a s company s e rv e s com m unities
in seven c o u n tie s i n I l l i n o i s ,
m ile s fro m a c e n t r a l p la n t .
and ga s i s pumped ove r 80
T h is enables many com m unities
to ha ve s e r v ic e th a t w ould be d e p riv e d th e re o f i f
lo c a l
p la n ts w e re to be depended upon because th e c o s t o f a s m a ll
p la n t i s p r o h i b it iv e .
Then suppose under th e s e c o n d itio n s ,
one town on the system sho uld pass an o rd in a n c e r e q u ir in g
550 B .T .U .'s as i t s
sta n d a rd o f s e rv ic e , w h ile a n o th e r
town s h o u ld r e q u ire 650 B . T . U . 's .
T h is w ould d r iv e
companies out o f b u s in e s s o r p re v e n t t h e i r e n tra n c e in to
s m a lle r co m m u n itie s.
Wh i le
i t may be tru e t h a t t h i s p a r t i c u l a r tr o u b le
would n o t prove in s u rm o u n ta b le , y e t i t does serve to i l l u s ­
t r a t e th e p r in c ip le t h a t
the r e g u la t io n o f such c o mp an ie s
i n v o lv e s more t h a t p u r e ly lo c a l con s i de ra t io n .
is
t h is th e c a s e i f
it
Exp e c i a l l y
be tr u e as s ta te d by th e defense
in t h is case, t h a t a g re a t number i f not a m a jo r it y o f
th e p la n ts i n I l l i n o i s
s e rv e areas o u ts id e th e l i m i t s o f
m u n ic ip a lit ie s .
1. M r. A1 s h u le r , A tto rn e y , p . 49, re co-id o f A p r i l 1, 1920,
Debates b e fo re the C o n s t it u t io n a l C o nve ntio n o f I l l i n o i s .
34
Ea r l y c o n d itio n s i n
the developm ent o f c e n tr a l
power s t a t io n s are of course re s p o n s ib le f o r many excess
p la n ts w hich a re s t i l l be in g t o le r a t e d .
P r io r t o a b o u t
1900,1 a t w h ic h tim e c e n t r a l s t a t io n s w ith a la r g e r a nge
o f r a d ia t io n began to ap p e a r, th e s t a t io n s w e re a l l
lo c a l a f f a i r s .
Not o n ly was i t n e ce ssa ry to
e s t a b lis h
a g re a t number o f s ta tio n s i n th e la r g e r c i t i e s , 2 but
e v e ry sm all tow n o r c i t y w h ich d e s ire d e l e c t r i c s e r v ic e
had to have a s e p a ra te p la n t .
changed.
la r g e
Now c o n d itio n s have
c e n tr a l s ta tio n s w ith g r e a t r a d ia t in g
c a p a c ity have made th o s e s m a ll p la n ts o b s o le te .
The
economies o f la rg e s c a le p ro d u c tio n are b e in g a p p lie d
to a f in e p o in t , r e s u lt in g in g r e a t s a v in g t o
the pub li c .
The problem o f e lim in a t in g th e e x c e s s iv e sm a ll p la n ts i s
o f course much s im p le r i f th e y a re p r i v a t e l y owned,
e s p e c ia lly i f
th e c o n tig u o u s p la n ts are owned by one
s y s tem.
1. I n s u l l , Samuel, Op.Ci t . p. 353.
2. London has a s many as 63 e l e c t r i c s u p p ly system s.
I n s u l l , Samuel, Op. C it . p . 171
35
U t i l i t y E xpansion as R e la te d t o M u n ic ip a l Ownership
And lo c a l R e g u la tio n .
The main o b je c tio n to b o th m u n ic ip a l ow nership and
l o c a l r e g u la t io n i s
u tility
th a t th e y b o th s ta n d in th e way o f th e
exp an sio n and c e n t r a liz a t io n w hich has been so
n o tic e a b le e s p e c ia lly in th e e l e c t r i c a l u t i l i t i e s .
O b v io u s ly i f
i n an area s u p p lie d w it h e l e c t r i c
energy
by one la rg e system a few o f th e towns o r com m unities
have m u n ic ip a lly owned p la n ts , th e system is handicapped
in i t s
c e n t r a liz a t io n program .
U nnecessary p la n t d u p l i­
c a tio n is th e r e s u l t o f t h i s s o r t o f c o m p e titio n .
However,
th e re has been a v e r y s tro n g te n d e n cy f o r th e s e m u n ic ip a l
p la nt s t o s e l l o u t to h ig h ly o rg a n iz e d system s,
ju s t as
p r i v a t e l y owned independent p la n ts have lik e w is e been
absorbed.
I t has b e en argued th a t the fo rm o f r e g u la t io n makes
no d iffe r e n c e in the program o f u t i l i t y
b ig p r i v at e u t i l i t y
companies go in
e x p a n s io n ,- t h a t
and buy up independent
o r m u n ic ip a l p la n ts ju s t as e a s ily u n d e r lo c a l as u n d e r
s ta te r e g u la t io n . 1
No doubt t h i s has proved t r u e under
th e k in d o f s t a t e r e g u la t io n w h ic h has u s u a lly p r e v a ile d .
1 . P r o f. J.B . H i l l , Dept o f E l e c t r i c a l E n g in e e rin g , U n iv e r s it y
I owa , h o ld s t h is vie w .
36
It
is b e lie v e d however t h a t s tr o n g c e n t r a liz e d c o n tr o l
c o u ld do much i n e f f e c t in g th e d i r e c t io n o f t h is e x p a n s io n .
I t w i l l he shown below th a t many economies can be
e ffe c te d and t h a t b e tte r
s e rv ic e is p o s s ib le where
e l e c t r ic u t i l i t i e s , f o r exam ple, f o llo w a s y s te m a tiz e d
p o lic y o f exp an sio n around c e n t r a l p o in t s .
The re m a in d e r
o f t h i s c h a p te r th e r e fo r e w i l l d e a l m a in ly w ith
and a c t i v i t i e s
of
the aims
e l e c t r i c c o r p o r a tio n s w i t h s p e c ia l
re fe re n c e to c o n d itio n s in Iowa.
The aims and success of h o ld in g companies or o th e r
form s o f f i n a n c i a l o p e ra tio n in e f f e c t in g f i s c a l combina­
t io n s w i l l show th a t t h e i r te n de ncy has o fte n been ju s t
th e o p p o s ite fro m t h a t demanded b y the s p i r i t
o f the l a ws.
The purpose o f f i s c a l c omb in a tio n s is to se cu re m onopoly,
e lim in a te c o m p e titio n , and secure cheaper a d m in is tr a tio n
o f the b u s in e s s .
I t is a s te p w h ic h p re c lu d e s
the
p h y s ic a l c o m b in a tio n of p la n ts o r th e e lim in a t io n o f
unnecessary ones.
W
hen c o n tig u o u s p la n ts
are u n ite d
p h y s ic a l r e o r g a n iz a tio n tak es pl ace and the advantages
o f s in g le equipm ent and management are
non-co n tig u o u s 2 systems are u n ite d i t
r e a liz e d .1
W
hen
re p re s e n ts n o t a
1. Downey, E .H ., "U rban U t i l i t i e s i n Io w a ", p . 216.
2. F o w le r, C .L ., E l e c t r i c a l Wo r ld , Mar . 23, 1918, " L o g ic
o f P u b lic U t i l i t y C o n s o lid a tio n s " .
37
p h y s ic a l bu t a f i s c a l c o m b in a tio n .
The advantages here
are o f course m a in ly f i n a n c i a l i n c h a r a c te r.
A la r g e and
w e ll known h o ld in g company such as th e S t one and Webster
S y n d ic a te , o r th e U n ite d L ig h t and R a ilw a y Company, f in d s
it
e a s ie r because o f p r e s tig e and b a rg a in in g power to
s e c u r it ie s on the e a s te rn
s e ll
m a rk e t, whereas an unknown
lo c a l c o r p o r a tio n w ith o u t t h i s
a b le to re a c h t h is m a rk e t.
c o n n e c tio n w ould n o t be
Such methods as th e s e enables
new and undeveloped s e c tio n s o f the c o u n try t o draw upon
the r ic h e r f o r a i d .
The e f f e c t o f t h is i s
d u p lic a tio n in o f f i c i a l s and in c re a se th e
to
reduce
g e n e ra l
e f f ic ie n c y , and to p re v e n t f u r t h e r p la n t d u p lic a t io n .
The r e g u la t io n o f th e se mergers i s v e ry e s s e n tia l
however, in o rd e r to p r o te c t th e p u b lic fro m u n c o n tr o lle d
m onopoly.
Hence th e c la u s e i n m ost com m ission governed
s ta te s w hich re q u ire s a l l
proposed C o n s o lid a tio n s , m ergers,
sales or le a s e s to be s a n c tio n e d f i r s t b y the a u t h o r it ie s .
T h is law is m e re ly p r o t e c t iv e
a g a in s t abuses and is no t
p r o h ib it iv e o f c o m b in a tio n s .
One of i t s main p r o v is io n s
is to p re v e n t s to c k w a te rin g b y fo r b id d in g merging
companies to is s u e s e c u r it ie s in e xce ss of the r e a l
p h y s ic a l v a lu e o f th e companies i n
the t r a n s a c t io n .
Chapter I I I w i l l b r in g out more f u l l y th e o p e r a tio n o f
t h i s law in the s ta te s w h ic h r e q u ire i t .
38
The f o llo w in g s t a t i s t i c s w i l l g ive sane id e a of th e
im p o rta n t p a r t p la ye d b y h o ld in g eanpanies i n th e c o n t r o l
o f p u b lic u t i l i t i e s .
I n 1915 i t was e s tim a te d 1 th a t 7 8 .5 % o f th e gas, e l e c t r i c
and t r a c t i o n c a p it a l i n t h is c o u n try was c o n t r o lle d b y
h o ld in g companies, w h ile in 19182 th e f ig u r e sto o d a t 80%.
These f ig u r e s were take n fro m tw o d i f f e r e n t a u t h o r it ie s
and hence to o much w e ig h t should n o t be g iv e n to the 1 .5 %
d iff e r e n c e as in d ic a t iv e
the th re e ye a r p e r io d .
o f th e a c t u a l ra te o f in c re a s e i n
The s ig n i f i c a n t th in g i s
p r o p o r tio n is so h ig h and th a t i t
c o m p a ra tiv e ly s h o r t tim e .
th a t th e
reached t h is p o in t i n
a
I t i s a ls o s i g n i f i c a n t t h a t the
p r o p o r tio n of p la n ts n o t a f f i l i a t e d w ith
s y n d ic a te decreases
as th e community grows- — o n ly 10% o f th e in de pe nd en t p la n ts
b e in g i n c i t i e s o f o v e r 5,000 p o p u la tio n ,3 w h ile i n towns
o f 1,000 to 5,000 p o p u la tio n 55% o f th e p la n ts a r e i n ­
d e p e n d e n tly owned.
S yn d ica te c o n t r o l, b e s id e s b e in g s tro n g e s t in the
la r g e r c i t i e s
is
lik e w is e
s tro n g e r i n th e e a s te rn s ta te s ----
due no d o u b t t o th e preponderance o f la rg e c i t i e s .
The
s e c tio n s o f th e c o u n try n e x t i n o rd e r o f im p ortan ce i n
1. G ardner, W.H . The A n n a lis t ,
2. F o w le r, C .L . Op.Ci t .
3. I b id .
June, 1915.
39
t h i s re s p e c t are New E n gland,
the W estern S ta te s , the
M id d le S ta te s and th e S outh.
The f ig u r e s g iv e n above in c lu d e d gas p la n t s ,
66%
1 o f w hich a re co n t r o l l e d by
s y n d ic a te s .
o n ly
E x c lu d in g gas,
the p r o p o r tio n of e l e c t r i c l i g h t and p owe r companies
o p e ra tin g as s u b s id ia r ie s o f h o ld in g com panies is
83%.
Inasmuch as t h is s o r t o f f i s c a l co m b in a tio n means the
e lim in ia t io n o f c o m p e titio n between c o n tig u o u s p la n ts i t
a ls o fo s te r s
c e n t r a liz a t io n and makes th e
co n tin u e d d u p l i ­
c a tio n of s m a ll p la n ts a lto g e th e r im p ro b a b le .2
The w hole
s y n d ic a te movement is o n ly a r e c o g n it io n o f th e f a c t th a t
p u b lic u t i l i t i e s
are nat u r a l l y m o n o p o lis tic in c h a ra c te r,
end is th e r e fo r e in e v it a b le
i n s p it e o f laws a g a in s t i t
o r th e la c k o r l a ws meant to encourage such c o n d itio n s .
By b r in g in g th e d is c u s s io n to bear d i r e c t l y
e le c tr ic a l u t i l i t i e s
fro m I l l i n o i s ,
in
Iowa,
w ith a d d it io n a l examples
a b e tte r id e a may be had o f th e
e x is t in g between the u t i l i t i e s
on the
r e la t io n s
and p u b lic r e g a r d in g th e
l a t t e r ' s p o lic ie s o f m u n ic ip a l ow ne rship and lo c a l regu­
la t i o n .
S t r i c t l y no b r i e f i s made s a n c tio n in g a l l the
methods o r f i n a n c i a l maneuvers of u t i l i t y
companies in
1. Gas p la n ts a r e o f te n op e ra te d in c o n n e c tio n w ith e l e c t r i c
p la n ts , hence th e 66% may p o s s ib ly r e f e r to th o s e o p e ra te d
s e p a ra te ly , though t h i s i s o n ly a s u p p o s itio n .
2.
40
t h e i r d e a lin g s w ith
the publ i c .
On the o th e r hand th e p u b lic
is n e ith e r h e ld b la m e le ss f o r s ome o f th e th in g s
have been fo rc e d t o d o .
what i s
the u t i l i t i e s
I t i s m e re ly in te n d e d t o s how
the b e s t p o lic y f o r a l l p a r t ie s concerned.
I f a map were c o n s tru c te d showing e ve ry c e n tr a l
e l e c t r i c g e n e ra tin g s t a t io n i n Iowa and a l l th e tr a n s m is s io n
lin e s r a d ia t in g fro m these s t a t io n s i t would p re s e n t a com­
p le te n e tw o rk to u c h in g p r a c t i c a l l y e v e ry v i l l a g e and
m u n ic ip a lit y i n the s t a t e .
Most o f th e s e p la n ts o r ig in a te d
as in de pe nd en t1 lo c a l c o r p o r a tio n s and as a r e s u lt of th e
la c k o f any s y s te m a tiz e d c o o r d in a tio n betwwen th e se lo c a l
companies smal l p la n ts f o r s e r v ing s m a ll com m unities were
b u i l t in s te a d o f la rg e p la n ts f o r
s e rv in g la rg e a re a s .
The p ro m oters o f th e s e is o la te d p la n ts soon d i s ­
covered th a t i t was im p o s s ib le t o m arket enough s e c u r it ie s
l o c a l l y t o b u ild adequate p la n ts and m a in ta in them and
so th e h o ld in g company as a means of f in a n c in g a l l such
u n d e rta k in g s came in to u se .
T h is co m b in a tio n of
f in a n c i a l in t e r e s t s on a la rg e s c a le has made i f p o s s ib le
to
e lim in a te many sm a ll p la n ts ,
as w e ll as p re s e n t f u r t h e r
m u l t i p l ic a t io n , and t o have few e r b u t la r g e r g e n e ra tin g
u n it s w ith a l l th e a tte n d a n t economies w h ic h t h i s
1. No t c o n t r o lle d b y a h o ld in g company.
Name o f Company
1
Date & P lace o f.
In c o r p o ra tio n
1
N ature o f C o rp o ra te Management
IOwa Ry. 7 L ig h t
1912
Iowa
Merger o f Independent Companies
Iowa R iv e r L.&PP.CO.
1912
Iowa
M erger; s to c k ow nership
Iowa
S tock owned by F e d e ra l Power & L ig h t Co. o f Maine
Iowa L .H .& P. Co.
Iowa Gas & E le c t r ic Co
1905
Iowa
L o c a l C o rp o ra tio n ; merger 1916
Iowa S outhern U ts . Co.
1902
Maine
M erger, 1916, o f s e v e ra l p la n ts
Iowa F a lls E le c t r ic Co
1915
Iowa
Merger
Iowa P u b lic S e rv ic e Co
1911
Iowa
M erger
Iowa E le c t r ic Co.
1914
Iowa
M erger o f s e v e ra l p la n ts
C o n tin e n ta l Gas & E le ­
t r i c C o rp o ra tio n
tr ic
U n ite d L .& Rys. Co.
1912
D e l.
H o ld in g Company; s e v e ra l s u b s id ia r y Co. in Iowa.
1910
Maine
F in a n c in g & O p e ra tin g ; c o n tr o ls 7 Iowa Corpor a t io n s
Am erican Gas Co.
1902
D e l.
H o ld in g & O p e ra tin g
C e n tra l M iss. V a lle y
E le c t r ic P ro p e rtie s
1913
I ll.
Managed by Stone & W ebster S y n d ic a te
S outhern Iowa E le c . Co
1916
D e l.
C o n tr o lle d by U nion Power & L ig h t Co. o f Nebraska
Des Moines & C e n tra l
Iowa E le c t r ic Co.
1909
Maine
C o n tro lle d by I l l i n o i s T r a c tio n Company
1 . Compiled from M oody's Manual, U t i l i t i e s S e c u r it ie s , 1920. T h is l i s t does n o t in c lu d e
a l l th e u t i l i t y companies in th e S ta te , o n ly some o f th e l a r ge r c o r p o ra tio n s & h o ld in g cos.
41
p ro d u ce s.1
T h is s o r t o f c o n c e n tr a tio n a ls o
in few er d i s t r i b u t i n g s t a t io n s ,
s ix tim es as muc h is
r e s u lt s
and inasmuch as f i v e
spent on d i s t r i b u t i n g
to
systems as on
g e n e ra tin g p la n ts , some idea i s c o n c e iv e d o f th e s a v in g
due to m onopoly.2
There a re a g r e a t many e l e c t r ic c o r p o r a tio n s o p e ra tin g
in Iow a, some o f th e la r g e r o f w h ich are l i s t e d i n the
accompanying t a b le . 3
The im p o rta n t p o in t i n t h is
c o n n e c tio n i s th a t p r a c t i c a l l y a l l of th e se companies
re p re s e n t m ergers o f s e v e ra l in de pe nd en t p la n ts in to
one
system f o r the purpose o f im p ro v in g o p e ra tio n and
fa c ilita tin g
f in a n c ia l c o n t r o l. 4
fo rm in g a new c o r p o r a tio n ,
These merged com panies,
in t u r n a re u s u a lly a f f i l i a t e d
w it h la rg e h o ld in g com panies o r fin a n c in g and o p e ra tin g
com panies.
The U n ite d L ig h t and R a ilw a ys Company f o r
in s ta n c e is a fin a n c in g and o p e ra tin g company in c o rp o ra te d
i n Maine and owns a l l or a la rg e p r o p o r tio n o f th e
c a p it a l s to c k , e xce p t d i r e c t o r s '
shares,
in the fo llo w in g
Iowa Companies: Cedar Rapids and M a rio n C ity R a ilw a y ,
Cedar R apids Gas Company, F o r t Dodge Gas and E le c t r ic
1. I n s u l l , Samuel, Speech b e fo re th e P e o ria I l l i n o i s Chamber
o f Commerce, March 11, 1921.
2. B y lle s b y , H .M., p . 210 o f I n s u l l (Op. Ci t . )
3 . Compiled fro m M oody's M anual, " P u b lic U t i l i t y S e c tio n " ,
1920.
4 . The Iowa Ra i l wa y and Li g h t Co. is a good example o f t h i s .
42
Company, Mason C it y and C lear Lake R .R ., Ottumwa Gas
Company, P eoples Gas and E l e c t r i c Company, and the T r i C ity R a ilw a y and L ig h t Company.
in t u r n owns a l l
The l a s t named company
the s to c k , except d i r e c t o r s ’ s h a re s ,
in th e C lin to n , D avenport and M uscatine R a ilw a y Company ,
Iowa C it y L ig h t and Power Company, M u sca tin e L ig h tin g
Company, T r i - C i t y R a ilw a y Company o f Iow a.
Company o f D a ve n p o rt.1
O ther h o ld in g
Peoples L ig h t
companies o p e ra tin g
in Iowa a re th e Stone and We b s te r S y n d ic a te , The American
Gas Company and th e U nion Power and Lig h t Company.2
The example g iv e n above i l l u s t r a t e s m e re ly the
c o rp o ra te r e la t io n s o f these companies. The accompanying map
w i l l i l l u s t r a t e a n o th e r fe a tu r e
o f the se c o n s o lid a tio n s
and m ergers, nam ely, the p h y s ic a l advantages d e riv e d
th e re fro m .
I t w i l l be n o te d t h a t th e companies o p e ra tin g i n th e
c e n t r a l and s o u th e rn p a r t o f th e s ta te te n d to extend
e a s t and w est w h ile those in
ru n more v e r t i c a l l y .
the n o r t h h a l f o f th e s t a t e
Most o f th e s e companies re p re s e n t
m ergers where the s m a lle r concerns have been a b so rb e d .
For exam ple,
the Iowa R a ilw a y and L ig h t Company3has
absorbed p r o p e r tie s a t M a rs h a llto w n , Boone, M a rio n , P e rry
1 . M oody's M anual, O p .C it. p . 956.
2. Moody’ s M anual, O p .C it.
3. Iowa E le c t r ic Company and th e Iowa F a lls E le c t r i c
Co.
43
and Tama and has fr a n c h is e s in 57 c i t i e s and to w n s, b e sid e s
s u p p ly in g e l e c t r i c i t y t o 33 a d d i t i o n a l towns b y s e l lin g
i t w h o le s a le to two o t h e r com panies1w h ic h o p e ra te i n the
com m unities where th e s e towns a re lo c a te d .
These th re e
companies re p re s e n t i n t h is way one system , w h ic h has t a k en
the p la c e o f s e v e ra l s m a ll independent systems.
The t e r r i t o r y
served by the Iowa E l e c t r i c
Company
in d ic a te s a r a t h e r la rg e m u l t i p l i c a t i o n of power p la n ts .
These
p la n ts were perhaps f o r
the most p a r t at le a s t
o r i g i n a l l y m i l l s it e s th a t have been ta k e n ove r and co n ­
v e rte d in t o
e l e c t r ic g e n e ra tin g s t a t io n s .
And as f a r as
g e n e ra tin g power on a r i v e r th e s iz e o f th e Maquoketa is
concerned, the f lo w o f w a te r i s
i n s u f f i c i e n t to f u r n is h
any c o n s id e ra b le amount of power at any one p o in t and
a s e rie s o f dams i t
th e o n ly way o f g e t t in g a d d it io n a l
power fro m t h i s s o u rc e .2
I t w i l l be n o tic e d on the map th a t th e r e a re a t le a s t
l i g h t h y d r o - e le c t r ic p la n ts
im a te ly tw o count i e s .
in
the s m a ll a re a o f a p p ro x ­
These p la n ts o b v io u s ly cannot be
depended upon th e year ro u n d , and f o r t h i s re a s o n , i n
o rd e r to in s u re c o n tin u o u s s e r v ic e , a re supplem ented b y
1 . From a l e t t e r fro m G.O. M ors e, C it y Manager o f M aquoketa.
2. F rom a l e t t e r fro m G.O. M orse, C ity Manager of M aquoketa.
44
power fro m the c e n t r a l s t a t io n o f th e Iowa R ailw ay and L ig h t
Company a t Cedar R a p id s.
Ther e a r e tw o reasons why the se power p la n ts are
m a in ta in e d .
them i n
F ir s t,
s tro n g com m unity in t e r e s t s
demand
o rd e r to in s u re c o n tin u o u s s e rv ic e i n case o f
a c c id e n t to th e h ig h - lin e s co n n e ctin g w it h Cedar R apids.
I n the second p la c e t h e y a re a n asse t to th e w hole system
o f w hich th e Iowa R a ilw a y and l i g h t Company i s the head.
D u rin g o ff- p e a k
hours when th e energy i s n o t b e in g
a l l used by the lo c a l com m unities th e
s u rp lu s e n e rg y m
y
a
be absorbed and d is t r i b u t e d by th e la rg e system .1
The examples ju s t g iv e n i l l u s t r a t e
ab le so u rce o f e n e rg y m a y be u t i l i z e d
how e v e ry a v a i l ­
th ro u g h the s y s te m a tic
ty in g to g e th e r o f p la n ts and s t a t io n s th ro u g h f i s c a l and
p h y s ic a l c o m b in a tio n s .
The f o llo w in g d is c u s s io n s hows
how unnecessary p la n ts may b e e lim in a te d , a ls o by t h is
s o r t o f c e n t r a liz a t io n .
T his means t h a t f e wer and la r g e r
u n it s a re more e f f i c i e n t than a g r e a te r number o f s m a ll
p la n ts , wh ic h used to be n e ce ssa ry f o r each community.
A good example o f where p la n ts are being e lim in a te d th ro u g h
s y s te m a tic c e n t r a liz a t io n is i l l u s t r a t e d i n th e f o llo w in g
s ta tem ent c o n c e rn in g the p r o p e r tie s o f th e Iowa L ig h t,
1. From c o n s u lta tio n , J.B . H i l l and A r th u r H. F o rd ,
P ro fe s s o rs o f E l e c t r i c a l E n g in e e rin g , U n iv e r s it y o f Iow a .
45
Heat and Powe r Company, a lso in d ic a te d on the map:
"Company s u p p lie s e l e c t r i c i t y w ith o u t c o m p e titio n to 41
com m unities i n th e S ta te o f Iow a .
These co m m u n itie s are
so s it u a t e d as to p e rm it of t h e i r b e in g d iv id e d in to tw o
groups,
on e
of w h ich is now b e in g s u p p lie d by a s in g le
c e n t r a l s t a t io n .
The o th e r group w i l l
re q u ire two sources
o f s u p p ly , which when th e t e r r i t o r y i s connected w i l l
e lim in a te th e n e c e s s ity of o p e ra tin g f o u r o f th e se ven
s t a t io n s now i n u s e ".1
There are f iv e s u b s id ia r y c o rp o ra tio n s 2 o p e ra tin g
under th e C o n tin e n ta l Gas and E l e c t r i c C o rp o ra tio n
P r o p e r tie s i n South W estern Iowa w h ic h have i n use e ig h t
g e n e ra tin g s t a t io n s as shown on th e map.
No d o u b t f u r t h e r
c e n t r a liz a t io n w i l l see s ome o f th e s e p la n ts e lim in a te d .
The e l e c t r i c u t i l i t i e s
o f I l l i n o i s have done much i n
th e way o f c o n c e n tr a tio n o f s e r v ic e .
The p la n is system ­
a t i c a l l y fo llo w e d o f p la c in g th e g en e r a t i ng p la n ts in
the
c e n te rs where th e most en erg y i s consumed, or near c o a l
mines o r w a te r power where e n e rg y can be produced most
1. M oody's M anual, O p .C it. p . 1037.
2. M oody's M anual, O p .C it. 1420.
46
c h e a p ly .1
I n t h i s way 33 o u t o f 63 s t a t io n s have been
e lim in a te d in one system w i t h p la n s o f re d u c in g the
number to
seven or e ig h t . 2
The P u b lic S e rv ic e Company o f N o rth e rn I l l i n o i s
serves 187 com m unities i n
the N o rth e rn I l l i n o i s
the p a s t o f the s t a t e in d ic a te d ;
Company serve s 60 com m unities i n
another p a r t o f th e s t a t e ; and the
C e n tra l I l l i n o i s
S e rv ic e Company serves 181 com m unities.3
P u b lic
I n th e a g g re g a te
th e re a re 662 com m unities served by 13 companies, w h ic h
g iv e s an average o f 50 com m unities f o r each company.
In
one p a r t o f t h is s t a t e 64 d i f f e r e n t com m unities were
served fro m one c e n t r a l gas p la n t . 4
The purpose of th e s e s ta te m e n ts made by u t i l i t y
o f f i c i a l s and a tto r n e y s b e fo re th e I l l i n o i s
C o nve ntio n was to show th e e v ils
u tility
C o n s t it u t io n a l
o f "home r u le "
over a l l
p ro b le m s, w hich was be in g a g it a t e d , where each
c i t y w ould have c o n f l i c t i n g
o p in io n s as to r a t e s , s e r v ic e ,
1 . I n s u l l , Samuel, O p .C it. p . 471.
2. The C e n tra l I l l i n o i s P u b lic S e rv ic e Company, I b id 474.
3. Debates b e fo re th e C o n s t it u t io n a l C o n ve n tio n o f I l l i n o i s ,
A p r i l 1, 1920, te s tim o n y o f M r. B .J . Denman, P re s . o f
I l l i n o i s S ta te E le c t r i c A ss’ n .
4 . I b id , te s tim o n y of M r. A ls c h u le r , an a tto r n e y .
47
e tc .
The u t i l i t i e s
m a in ta in e d th a t lo c a l r e g u la tio n
w ould have made such wide d i s t r i b u t i o n v e ry d i f f i c u l t ,
i f n o t im p o s s ib le , and t h a t i t s
a d o p tio n would s e r io u s ly
a g g ra va te th e s it u a t io n .
As f u r t h e r
evidence o f th e d e s i r a b i l i t y o f la rg e
s c a le d i s t r i b u t i o n , the I l l i n o i s
S ta te P u b lic U t i l i t i e s
Commission s a id in a ga s case : " The advantages o f c o n s o li­
d a tio n i n c e r t a in lin e s o f b u s in e s s , w ith consequent
la r g e p ro d u c tio n , are to o w e ll known to r e q u ir e d i s ­
c u s s io n , and th e re can be no d o u b t t h a t com m unities are
i n p o s it io n to re c e iv e a s u p e rio r s e r v ic e a t c o n s id e ra b ly
le s s co st th a n i f each were serve d b y i t s own s e p a ra te p l a n t . ”1
Iow a, w ith the lo c a l r e g u la t io n and p a s t and p re s e n t
te n d e n c ie s to d u p lic a tio n s due to th e
le g a l s a n c tio n in g
o f c o m p e titio n , does n o t compare so fa v o r a b ly w ith
i n these re s p e c ts as c o u ld be d e s ir e d .
Illin o is
T rue, the p o lic y
o f la rg e s c a le d i s t r i b u t i o n i s b e in g in c r e a s in g ly fo llo w e d
i n Iow a.
The q u o ta tio n g iv e n above to show how th e Iowa
Lig h t , Heat and Power Company i s e lim in a t in g unnecessary
c e n tr a l s t a t io n s also
in th e s ta te .
shows th a t 41 com m unities a re served
The Iowa R a ilw a y and L ig h t Compa n y serve s
th ro u g h h ig h - te n s io n li n e s some 90 towns and c i t i e s i n
1 . P .U .R . D 1918, p . 260
48
c e n t r a l and e a s te rn Iow a.1
U t ilit ie s
L ik e w is e th e Iowa S outhern
Company, the Des Moines and C e n tra l Iowa E le c t r ic
Company, th e M is s is s ip p i Va lle y E le c t r ic Company, and the
C o n tin e n ta l Gas & E le c t r i c C o rp o ra tio n a l l s e rv e com m unities
c o v e r ing a f a i r l y w id e a re a .
b e tte r u t i l i t y
It
is b e lie v e d , how ever, t h a t
law s w ould g r e a t ly f a c i l i t a t e
t h i s te n d e n c y
and p re v e n t much w a s te fu l d u p lic a t io n .
I t has been k e p t i n mind t h a t w i t h th e n e c e s s a r ily
lim it e d fu n d o f i n f o rma tio n w h ic h a n y th in g s h o r t o f
d e ta ile d f ir s t - h a n d s tu d y c o u ld g iv e th e re
is no b a s is
f o r p a ssin g judgment upon m a tte rs o f a h ig h ly te c h n ic a l
n a tu re .
And ye t th e re a r e c e r t a in fu n d a m e n ta l phases o f
the e n g in e e rin g s id e o f the problem which a re r e a d ily
grasped and w h ic h sh o u ld be touched upon h e re .
There is one fe a tu r e o f a t e c h n ic a l n a tu re , which
sh o u ld be s p e c ia lly n o ted i n the p r ogram o f c e n t r a liz a t io n .
Towns w h ic h a re on the end of a tra n s m is s io n lin e
are s u b je c t
to p o o re r s e rv ic e th a n tho se n e a re r the sou rce o f power
and in case o f a c c id e n t to th e l i n e w h ic h may sh u t o f f
the power the y are te m p o r a r ily a t le a s t w ith o u t s e r v ic e .
The o n ly way such d i f f i c u l t i e s
h a vin g as fe w ends as p o s s ib le ,
1 . Moody’ s M anual, Op. Ci t .
can be e lim in a te d i s by
I t w i l l be n o te d on
49
the map th a t th e re a re a g r e a t number o f towns th u s
lo c a te d due la r g e ly t o th e way th e system s spread o u t in
s t r a ig h t lin e s ove r r a th e r n a rro w t e r r i t o r y in s te a d o f
d e s c r ib in g a c ir c u l a r fo r m a tio n around th e source of
power.
There i s alw ays a ten de ncy to con ne ct th e s e ends
and fo rm a c i r c u i t , how ever, as between D in s d a le and
T ra e r in Tama C ounty, o r between Boone and Nevada,
any number o f s i m i la r in s ta n c e s .
and
M aking th e se c o n n e ctio n s
o f course depends la r g e ly upon th e p o in ts w h ic h are
connected b e in g c o n t r o lle d b y th e same system , and i t
th e r e fo r e t o th e in t e r e s t s o f b o th th e u t i l i t i e s
is
and th e
p u b lic t h a t ow ne rship o f p r o p e r tie s be w e ll c e n t r a liz e d .
I n lo o k in g a t th e map one i s s tr u c k b y such in s ta n c e s
o f s c a tte re d o w n e rs h ip iin p r o p e r tie s as re p re s e n te d by the
Iowa L ig h t , Heat and Power Company's t e r r i t o r y around
G r in n e ll, s e p a ra te d b y a b o u t f o u r c o u n tie s fro m
its
r e la t e d p r o p e r tie s and in c lo s e c o n ta c t w ith th e Iowa
R a ilw a y and L ig h t Company’ s system .
I t w o u ld a p pe ar t h a t
g re a t advantages c o u ld be g a in e d i f t h i s
is o la te d d i s t r i c t
were combined b o th f i n a n c i a l l y and p h y s ic a lly w ith the
system w h ich h a l f su rro u n d s i t
and th a t th e extrem e w est
end o f th e Iowa R a ilw a y and L ig h t Company's p r o p e r ty were
s im i l a r l y combined w i t h th e a d ja c e n t Iowa L ig h t , Heat and
50
Power Company.
The m a tte r o f c r e a tin g these c o m b in a tio n s
is o f course s o le ly a m a tte r o f b u sin e ss between the two
com panies, made d i f f i c u l t th ro u g h such problem s as a r r i v i n g
a t an agreement over v a lu a tio n , d e s i r a b i l i t y , e t c .
There
are many such examples o f t h i s k in d o f i l l o g i c a l a rra n g e ­
ment in th e s t a t e , and inasmuch as th e y e x is t c o m p e titio n
and d u p lic a t io n e x is t in s te a d o f c e n t r a li z a t io n .
I t may
n o t alw ays re p re s e n t d e lib e r a t e c o m p e titio n , and y e t be
a case o f two o r more p la n ts o p e ra tin g in a d ja c e n t
com m unities where o n ly one i s r e a l l y n e c e s s a ry .
In s ta n c e s o f d e lib e r a te c o m p e titio n between p la n ts
in th e same community a re le s s numerous tha n i n th e p a s t,
y e t th e y do e x is t .
The tow n of Maquoketa, Iow a, a lth o u g h
served by a p r iv a t e
company has r e c e n ta ly a u th o riz e d the
b u ild in g o f a m u n ic ip a l p la n t, a n a c t io n w h ic h was prompted
by th e success o f a lo n g e s ta b lis h e d m u n ic ip a l w a te r system .
I t a ls o appears th a t th e p r iv a t e company had n e v e r been a
success owing to th e la c k o f e x p e rie n c e and mismanagement
and had f i n a l l y become " t r a d in g s to c k " , u l t i m a t e l y f a l l i n g
in to
the hands o f the Iowa E le c t r i c Company in a w a y as
to no t meet th e a p p ro v a l of th e c it iz e n s o f M aquoketa.
Hence the a u t h o r iz a t io n o f a m u n ic ip a l p la n t,
e v e n tu a lly s e rv e th e e n tir e
c it y . 1
in te n d e d t o
T h is s e rve s to
illu s -
1 . L e t te r o f G.O. M orse, C it y Manager f o r M aquoketa, Io w a .
51
t r a t e what has so o fte n happened to s m a ll lo c a l p r i v a te
u t ilit ie s
o f t h i s k in d and le a d s to th e b e li e f t h a t p ro p e r
c e n t r a liz a t io n o f th is
community w ith
o th e r com m unities
c o u ld have been s u c c e s s fu l and s a t is f a c t o r y fro m e v e ry
p o in t o f s e rv ic e .
A s id e fro m t he g e n e ra l scheme o f r e g u la t io n w h ic h
a p p lie s t o a l l u t i l i t i e s
some f u r t h e r s u g g e s tio n s w i l l
be made f o r the c o n t r o l o f c e n t r a l e l e c t r i c p la n t d e v e l­
opment.
C e n tra liz e d c o n t r o l is th e o n ly means o f p r o ­
m o tin g a s y s te m a tic la r g e s c a le c o n c e n tra tio n of th is
in d u s tr y .
And y e t i f t h i s developm ent is l e f t e n t i r e l y
to th e c o r p o r a tio n and h o ld in g c o mp a n ie s a c e r t a in amount
o f c o m p e titio n w i l l e x i s t , each company n a t u r a lly s e e k ing
to o p e ra te o n ly in those s e c tio n s w h ic h prom ise the most
r e v e n u e w ith t he le a s t e x p e n d itu re .
T h is k in d o f com­
p e t i t i o n w i l l e v e n tu a lly le a d to c o n d itio n s s im ila r t o
those re g a rd in g the " s tro n g " and "w eak" roa ds i n the
r a ilw a y in d u s t r y w h ic h re d e n t l e g i s la t io n has sought to
c o r r e c t.1
T h e re fo re some p la n g iv in g th e u t i l i t y
com m ission power to
re g u la te and d i r e c t ,
o r even to e n fo rc e ,
c o n s o lid a tio n s o f th e e l e c t r i c system should be w orked o u t.
T h is w ould mean t h a t such i l l o g i c a l d iv is io n o f t e r r i t o r y
as n o ted above would not e x i s t b u t th a t each company would
1. The Cummins B i l l as i t
Senate i n 1920.
o r i g i n a l l y was de velop ed in t he
52
be l i m it e d t o o p e ra te i n a g iv e n t e r r i t o r y and g iv e n
a b s o lu te p r o t e c t io n fro m a n y o th e r c o m p e titio n .
Inasmuch
as each company has a lre a d y covered an a re a and is
o f g iv in g th e b e s t p o s s ib le
little
capable
s e rv ic e th e re would be b u t
a r b it r a r y re -a rra n g e m e n t n e c e s s a ry .
w hich m ight be c re a te d i n Iowa f o r
The d i v is io n
in s ta n c e would be
de term in ed la r g e ly by th e n a tu r a l te n d e n c ie s o f p la n ts
to be b u i l t in la r g e c e n te rs o f p o p u la tio n or near so u rce s
o f cheap power, and n o t because o f any p u r e ly a r t i f i c i a l
b o u n d a rie s .
But i f th e
u tilitie s
go ahead i n a hodge-
podge s o r t o f developm ent the tim e w i l l come when the
m a tte r w i l l p re s e n t a much more d i f f i c u l t pro b le m th a n
a t p re s e n t.
A g re a t d e a l o f a t t e n t io n was f o r m e r ly g ive n to
lin e s ,
ju s t as in the b e g in n in g
lim it e d t o m u n ic ip a l b o u n d a rie s .1
stage o f developm ent, w ith
the e l e c t r i c
S ta te
in d u s tr y was
B ut i n the p re s e n t
f u r t h e r c e n t r a liz a t io n accom­
p a n ie d by w id e r d i s t r i b u t i o n ,
s ta te b o u n d a rie s are ig n o re d .
There are an in c re a s in g number o f in s ta n c e s o f t h is as
evidenced f o r example by th e g r e a t h yd ro -d e ve lo p m e n t a t
Keokuk .
T h e re fo re as t h i s in d u s t r y becomes more and more
1 . I n s u l l , Samuel, Speech b e fo re the Peor ia ,
o f Commerce, March 11, 1921.
I llin o is ,
Chamber
53
in t e r s t a t e in c h a ra c te r i t
w il l have to be d e a lt w ith b y
su ch commissions such a s th e I n t e r s t a t e Commerce Com­
m is s io n .
Men m ost in te r e s t e d i n th i s developm ent see
in the n e a r f u t u r e g re a t "tru n k : l i n e s " o f e l e c t r ic
tr a n s m is s io n ru n n in g a c ro s s th e c o n t in ent much th e same
as o u r r a ilw a y system .
And in o rd e r to p r o p e r ly
r e g u la te t h i s g r e a t and ra p id g ro w th th e n e c e s s a ry le g a l
m achinery should be c re a te d w ith o u t d e la y .
54
CHAPTER I I I .
STAfcE LAWS RELATING TO OOIIEETI'TTON AND CONSOLIDATIONS.
The p h y s ic a l developm ent o f c e n t r a l e l e c t r ic s t a t io n s ,
w it h a g e n e ra l v ie w o f th e p u b lic a t t it u d e , has been r e ­
view ed in th e p re c e d in g c h a p te r i n o rd e r to in d ic a te
some o f th e economic and p o l i t i c a l c la u s e s o f c o m p e titio n
in u t i l i t i e s .
P ro g re ss and in v e n tio n , how ever, has bro u g h t
about alm ost r e v o lu t io n a r y changes i n u t i l i t y
developm ent;
and b e t t e r economic and p o l i t i c a l p r in c ip le s have been
re c o g n iz e d as e s s e n tia l i n d e a lin g w it h new c o n d itio n s .
Y et th e s e newer p r in c ip le s have n o t been a s w id e ly
accepted as c o n d itio n s w a rra n t, w ith th e r e s u lt th a t th e
u tilitie s
in many s ta te s a re y e t la b o r in g u n d e r d i f f i ­
c u lt ie s and r e s t r i c t i v e
fifty
law s w h ic h were im p sed upon tiiem
yea rs ago and w h ich even th e n were la r g e ly m is ­
a p p lie d .
T h e re fo re i t
is
v a rio u s s ta te u t i l i t y
1he purpose o f t h i s c h a p te r to examine
laws w hich r e l a t e d i r e c t l y to th e m a tte r
o f c o m p e titio n and c o n s o lid a t io n .
Some o f th e s ta te s ,
tho se w hich have more re c e n t u t i l i t y
laws and p u b lic
s e rv ic e commissions have q u ite c le a r ly d e fin e d p r o v is io n s
w hich g iv e c e n tr a liz e d c o n t r o l o v e r such m a tte rs as
monopoly and c o m p e titio n , r a te s and s e r v ic e s , and th e
55
in te r c o r p o r a te r e la t io n s be tw een th e u t i l i t i e s .
O ther
s ta te s have o n ly p a r t i a l s ta te c o n t r o l th ro u g h t h e i r
u tility
com m issions, th e re being perhaps n o t more th a n
tw e lv e s ta te s w hich extend com p le te r e g u la t io n o f
c o m p e titio n to m u n ic ip a lly owned as w e ll as t o p r i v a t e l y
owned u t i l i t i e s . 1
No s ta te f a i l s
an a tte m p t a t u t i l i t y
to make some s o r t o f
r e g u la t io n , even tho ug h i t be o n ly
to p ro v id e th a t th e m u n ic ip a lit ie s s h a l l have f u l l j u r i s ­
d ic t io n over t h e i r u t i l i t i e s . 2
Under the more la x con­
t r o l are found a l l th e e v i l s w h ic h f o s t e r the w a s te of
unnecessary d u p lic a t io n s .
C e r t if ic a t e s o f P u b lic Convenience and N e c e s s ity
The u s u a l method o f c o n t r o llin g c o m p e titio n i s b y
means o f a law w h ich re q u ire s th a t b e fo re any u t i l i t y can
o p e ra te i t must p re s e n t to th e pro pe r a u t h o r it ie s , u s u a lly
the s ta te p u b lic s e rv ic e com m ission, sta te m e n ts w h ich
in d ic a t e th a t p u b lic co n ve n ie n ce and n e c e s s ity r e q u ir e s
c e r t a in s e r v ic e s ,
e x te n s io n s or c o m b in a tio n s .
T h is demand
may a r is e fro m v a rio u s causes: the la c k o f any u t i l i t y
w h a te ve r, i n a b i l i t y o f the e x is tin g u t i l i t y
to f u r n is h
adequate s e r v ic e , o r m e re ly because e ith e r th e community
1. M yers, Geo. L . , "C o m p e titio n i n the P u b lic U t i l i t y I n d u s t r y " ,
J o u rn a l o f E l e c t r i c i t y , O c t. 1, 1920, p . 310 .
2. Iowa i s i n t h is c la s s ; see t a b le , p
56
b e lie v e s c o m p e titio n w i l l re g u la te r a te s o r another co mpany
f e e ls t h a t i t can e n te r th e f i e l d and succeed i n c o m p e titio n
w ith th e e s ta b lis h e d r iv a l.
The s p e c if ic purpose of th e la w 1 is
to p re v e n t d u p l i­
c a tio n s and as such i t re c o g n iz e s th e abandonment o f f r e e
c o m p e titio n .
I n e f f e c t i t g ra n ts a fr a n c h is e r i g h t to th e
e s ta b lis h e d con cern b u t g iv e s no p e rp e tu a l r i g h t s .
T h e re fo re in d e c id in g upon th e a p p lic a t io n o f a u t i l i t y
to o p e ra te , th e com m ission g ra n ts i t a c e r t i f i c a t e
on th e b a s is o f n e c e s s ity .
s o le ly
I f th e e x is t in g company is
g iv in g adequate s e rv ic e a t re a s o n a b le r a te s ,
made to do so, i t w i l l be p ro te c te d .
or can be
P u b lic demand does
n o t alw ays mean p u b lic n e c e s s ity .
A c o n d itio n may e x i s t
where p re ju d ic e s again s t a u t i l i t y ,
a g ita te d by lo c a l
p o l i t i c i a n s who d e s ire to f i r s t d is c r e d it the u t i l i t y
and
then se cu re m u n ic ip a l o w n e rs h ip , i s th e c o n t r o ll in g f a c t o r .
Hence in o rd e r to in s u re a f a i r d e a l to th e u t i l i t i e s
is e s s e n t ia l th a t
it
these d e c is io n s be made by an im p a r t ia l
body such as a s ta te com m ission.
The p rim a ry reason f o r the e s ta b lis h m e n t o f c e n tr a liz e d
r e g u la t io n o f u t i l i t i e s
c o n tr o l c o m p e titio n .
th ro u g h s ta te com m issions i s to
I t has o th e r purposes w h ich w i l l
1 . Holmes, F red L . " R e g u la tio n o f R a ilro a d s and U t i l i t i e s
in W isco n sin ", Ch . 15.
57
re c e iv e a t t e n t io n l a t e r b u t th e n e c e s s ity of l i m i t i n g
c o m p e titio n was one o f the m ost u rg e n t causes o f
com m ission c o n t r o l.
The ta b le on page
shows th a t
th e re are 37 s ta te s w hich have some k in d o f c e n t r a liz e d
r e g u la tio n o f u t i l i t i e s .
r e g u la te c o m p e titio n .
Of th e s e o n ly 23 d e f i n i t e l y
The law r e q u ir in g a c e r t i f i c a t e
o f convenience and n e c e s s ity is p r a c t i c a l l y the same
in a l l the s ta te s where c o m p e titio n i s
Illin o is
re g u la te d .
The
la w , w h ic h may be ta k e n as t y p i c a l , re a d s as
f o llo w s : 1 "No p u b lic u t i l i t y
s h a ll b e g in th e c o n s tru c tio n
o f any new p la n t , equipm ent, p r o p e r ty o r f a c i l i t y which
is n o t in s u b s t it u t io n o f any e x i s t i n g p la n t , equipm ent,
p r o p e r ty o r f a c i l i t i e s o r in e x te n s io n th e r e o f or in
a d d itio n th e r e to , u n le s s and u n t i l i t
fro m the com m ission a c e r t i f i c a t e
s h a ll have o b ta in e d
th a t p u b lic convenience
and n e c e s s ity r e q u ir e such c o n s t r u c t io n " .
T h is la w t y p i f i e s the g e n e ra l s p i r i t o f th e more
re c e n t u t i l i t y r e g u la t io n .
It
is d e f i n i t e and is
to handle an e x is t in g s it u a t io n .
meant
T h is i s a d e cid e d advan­
tage over th e o ld method o f depending upon the c o u r ts to
de cid e upon cases w h ic h come up because o f th e la c k o f
c le a r ly d e fin e d l a ws i n the s t a t u t e books.
Commission
r e g u la t io n means th a t th e c o u r ts no lo n g e r have d ir e c t
58
j u r i s d i c t i o n over u t i l i t y
d iff ic u lt ie s .
In f a c t ,
appeals
to the c o u rts are v e ry r a r e l y made because o f th e te n d e n cy
to a c c e p t th e c o m m is s io n 's d e c is io n as f i n a l .
Out o f
2, 511 o rd e rs o f th e W isco n sin Commission o n ly f i f t y
appeals w ere re c e iv e d b y the c o u r t s , and tw e n ty o f these
were at
once abandoned.1
Ex a c t ly how e f f e c t iv e such l e g i s l a t i o n has been i s
shown by an e x a m in a tio n o f some o f th e cases w h ic h have
been up b e fo re v a rio u s com m issions.
u tilitie s
I n v a r ia b ly the
w hich are g iv in g good s e r v ic e a re p ro te c te d .
Those g iv in g poor s e rv ic e , o r those un ab le to meet the
needs o f th e community w h ic h th e y s e rv e , have th e c o n s ta n t
th r e a t o f c o m p e titio n h e ld o u t a g a in s t them .
I t w o uld
be unwise to a b s o lu t e ly f o r b id a l l c o m p e titio n .
T h is
would o n ly make p o s s ib le the e s ta b lis h m e n t of u n c o n tr o lle d
m onopoly.
The law in W isco n sin p ro v id e s th re e methods w h ic h a
m u n ic ip a lit y may pursue in d e a lin g w ith i t s
p u b lic u t i l i t y
c o r p o ra tio n s :
( 1 ) e le c t io n to p u rch a se ; (2 ) a p p lic a t io n f o r
a c e r tific a te
o f convenience and n e c e s s ity ; and ( 3 ) a p p li­
c a tio n f o r an order p re s e n tin g re a so n a b le r a t e s . 2
The
1 . Holmes, F red L . Op. C i t . p . 318.
2 . P u b lic U t i l i t y R e p o rts , A 1915, p . 312. (The a b b r e v ia tio n
P .U .R . w i l l be h e r e in a f t e r u s e d .)
59
la s t two come w h o lly under the j u r i s d i c t i o n o f th e
co mm is s io n f o r s e t t l i n g .
As re g a rd s te le p h o n e s e rv ic e i t
has been th e p o lic y
in W iscon sin s in c e 1913 to r e s t r i c t lo c a l te le p h o n e s e r­
v ic e to one comp a n y as lo n g as t h a t s e r v ic e re m a in s
re a s o n a b ly adequate.1
The C o m is s io n a ls o found t h a t
j i t n e y s e r v ic e s e r io u s ly in t e r f e r e d w i th
t he revenues o f
a s t r e e t r a ilw a y and d ir e c t e d a r e - r o u t in g o f j i t n e y s e r ­
v ic e so as n o t to compete.2
In th e ease o f an e l e c t r ic
company's r e f u s a l to s u p p ly a d i s t r i b u t i n g
company u n t i l
c o m p e titio n th re a te n e d , the commission re fu s e d p r o t e c t io n . 3
The p u b lic u t i l i t y
la w s o f C a lif o r n ia p ro v id e t h a t
in v e s to r s s h a ll be pr o te c te d a g a in s t comp e t i t i o n w h ile
fu r n is h in g adequate s e r v ic e .4
And on t h is p r o p o s it io n
th e Commis s io n has re fu s e d to g ra n t c e r t i f i c a t e s o f p u b lic
convenience and n e c e s s ity f o r a d d it io n a l a u to -b u sse s between
Los A ngeles and San D ie g o ,5 and th e c o n s o lid a tio n o f two
com peting te le p h o n e systems was h e ld to
be in the p u b lic
in t e r e s t as a means o f e lim in a t in g w a ste , i n e f f ic ie n c y , and
the undue c o s t o f m a in ta in in g s e p a ra te system s.6
1.
2.
3.
4.
5.
6.
P .U .R .
P .U .R .
P .U .R .
P .U .R .
P .U .R .
P .U .R .
E 1918,
E 1918,
B 1919,
D 1919,
C 1919,
E ,1918,
p.
p.
p.
p.
p.
p.
489.
752.
347.
9 21 .
50.
608.
60
The C o lo rado , Id a h o , A riz o n a , and Nevada law s are
much the same as tho se i n C a lif o r n ia .
The Colorado
Commission has re fu s e d to a llo w a u t i l i t y
to re c e iv e
p r o t e c t io n even though i t may now he g iv in g good s e r v ic e ,
i f p r e v io u s ly had d is re g a rd e d th e p u b lic demands f o r
b e tte r s e r v ic e . 1
Idaho f o llo w s th e C a lif o r n ia r u le ,
i n th a t th e Commiss io n w i l l g r a n t a c e r t i f i c a t e
compete i f
i t can be shown th a t th e e x is t in g Company is
n o t p e rfo rm in g i t s
d u ty to th e p u b lic . 2
Even good
s e rv ic e , however, does n o t e n t i t l e a u t i l i t y
t e c t io n i f
to
to p ro ­
th e r a t e s a re fou nd u n re a so n a b le o r i f
th e
comp a n y i s n o t occu pying a l l the t e r r i t o r y w h ich i t s
c h a r te r a llo w s , as was d e cid e d i n an Idaho case.3
The Commission r u le d in an A riz o n a case t h a t a p u b lic
s e rv ic e c o r p o r a tio n i s e n t i t l e d to p r o t e c t io n a g a in s t th e
occupancy o f an e x c lu s iv e f i e l d when a d is p o s it io n i s
shown
t o h o ld i t s e l f in re a d in e s s to make re a so n a b le e x te n s io n s
to
serve new d i s t r i c t s . 4
P r i o r i t y o f occupancy in a f i e l d ,
a l l o th e r th in g s
b e in g e q u a l, wou ld no doubt be g iv e n p re fe re n c e in a l l s ta te s
1.
2.
3.
4.
P .U .R. , D 1920, p . 214.
P .U .R ., A 1915, p . 2.
I b id , Idaho L ig h t & Power Co.
P .U .R . A 1915, p . 996.
61
1
as was de cid ed i n a Nevada case.
New Y o rk , M arylan d and In d ia n a cases show th a t the u t i l i t i e s
w hich are g iv in g good s e rv ic e are p r o te c te d .
The New Y ork
Commission has r u le d t h a t e s ta b lis h e d u t i l i t i e s
a re even
e n t it le d to p r o t e c t io n fro m the c o m p e titio n o f a p r iv a t e
owner o f a p la n t who d e s ire s to f u r n is h lis r h t to h is own
2
te n a n ts .
The In d ia n a Commission has s t a t e d th a t th e g ra n tin g o f
p r o te c tio n by r e fu s in g fra n c h is e s o r p e rm its to o p e ra te where
a u tility
i s a lr e a d y i n s t a l l e d does n o t g iv e t h e f i r s t
company a b s o lu te monopoly i f p u b lic convenience and n e c e s s ity
3
demands c o m p e titio n .
The P e n n s y lv a n ia Goran is s io n has made a llo w a n ce s f o r ab­
norm al c o n d itio n s and p r ic e s , as f o r in s ta n c e d u rin g the war
a p u b lic u t i l i t y w h ich had o b ta in e d a c e r t i f i c a t e
o f convenience
and n e c e s s ity , r e s is te d th e e n tra n c e o f a c o m p e tito r a lth o u g h
no e ffo r ;ts had been made to com ply w ith i t s o b lig a t io n s due to
4
h ig h p r ic e s .
1.
2.
3.
4.
P .U .R .
P .U .R .
P .U .R .
P .U .R .
B
A
E
B
1920,
1919,
1918,
1920,
p.
p.
p.
p.
338
113 ( N . Y . ) ; 0 1920, p . 972 ( lid . )
172
797
62
The I l l i n o i s
Commission has r e p e a te d ly re fu s e d t o p e r m it
j i t n e y c o m p e titio n w ith s t r e e t r a ilw a y s when th e
a lre a d y adequate.1
E le c t r i c
Companies have been o rd e re d to
stand th e expense o f c o n n e c tin g i t s
an oth er company because i t s
s e rv ic e was
own lin e s w i t h tho se o f
own c a p a c ity was i n s u f f i c i e n t to
meet th e demand.1
These cases are t y p i c a l o f th e d e c is io n s w hich
g e n e r a lly re n d e re d by t h e commis s io n s i n
s ta te s .
No a tte m p t has been made to g iv e
are
com m ission re g u la te d
in s ta n c e s o f such
d e c is io n s fro m a l l the s ta te s w h ic h co n t r o l c o m p e titio n , n o r to
p re s e n t an e x h a u s tiv e s tu d y o f any p a r t ic u l a r s t a t e ,
but o n ly
to emphasize th e d e s i r a b i l i t y o f s u ch r e g u la t io n a s c o n tra s te d
w ith th e la c k o f c e n t r a liz e d c o n t r o l i n the m a jo r ity
of th e
s ta te s .
I n th e s ta te s w h ic h do n o t r e g u la te c o m p e titio n between
u tilitie s ,
even though th e re i s
to some e x te n t c e n tr a liz e d
c o n t r o l, and in th e s ta te s where c e n tr a liz e d c o n t r o l i s
a b s o lu te ly la c k in g , th e c o n d itio n s a s to c o mp e t i t i o n are
p r a c t i c a l l y the same.
O hio, f o r exam ple, has com m ission con­
t r o l , b u t n o t to th e e x te n t o f r e g u la t in g c o m p e titio n , a s s ta te d
1. P .U .R . A 1919, p . 573.
2. P .U .R . A 1915, p. 74
63
by th e com m ission in 1915, th a t " i n th e absence o f
s t a t u t a r y a u t h o r it y i t
c o u ld n o t p re v e n t an e l e c t r i c
l i g h t and power company fro m co m p etin g, m e re ly on the
ground t h a t th e f i e l d was a lr e a d y occupied b y a
company f u r n is h in g adequate s e rv ic e , and th a t t h e r e f o r e
no p u b lic n e c e s s ity e x is te d fo r a n o th e r u t i l i t y
to f u r ­
n is h a l i k e s e r v ic e ".1
The absence o f c e n t r a liz e d c o n t r o l in Iowa and th e
presence o f fr e e and u n r e s t r ic t e d c o m p e titio n has p e r­
m itte d an enormous amount o f w aste and l i t i g a t i o n w ith o u t
any heed to p u b lic convenience o r n e c e s s ity .
C lin to n , Dubuque, Iowa C i t y ,
C la rin d a ,
S io u x C ity ,
We b s te r C it y , C e n t e r v ille ,
and many o th e r towns have a l l been s u b je c te d to
te le p h o n e c o m p e titio n .
Des Moines and S ioux C it y have
to le r a t e d com peting e l e c t r i c
s e r v ic e , and B u r lin g to n has
had to s u p p o rt two gas com panies.2
B oth S ioux C it y and Des Moines have had e x p e rie n c e
w it h a u to busses o p e ra tin g i n c o m p e titio n w it h th e i r s t r e e t
r a ilw a y s .
T h is p e rm is s io n was d e n ie d th e a u to busses i n
S io u x C ity , 3 how ever, b u t i t
i n Des M oine s.
has caused no end o f d i f f i c u l t y
The s t a t e law s do n o t f o r b id o r r e s t r i c t
i t and th e m u n ic ip a l o f f i c i a l s and th e c o u rts have so f a r
1. Downey, E .H ., "U rban U t i l i t i e s i n
2. P.U .R . A 1915, p . 74.
3. A r t i c l e in Des M oines R e g is te r .
Io w a ", p . 218.
64
u p h e ld i t .
C o n d itio n s f i n a l l y c u lm in a te d i n
a to ta l
ce ce ssio n o f s t r e e t car s e rv ic e on August 3, 1921, i n
accordance w ith o rd e rs issu e d b y F e d e ra l Judge Wade,
and a t th e p re s e n t w r i t i n g th e re i s no in d ic a t io n s o f
an im m ediate s e ttle m e n t o f the d i f f i c u l t y .
Here i s a case where a few fo rm o f s e rv ic e has been
p e rm itte d to compete t o th e e x te n t o f c o m p le te ly e l im i­
n a tin g th e o ld e r fo rm .
B u t w h a te v e r may b e s a id f o r th e
s u p e r io r it y o f new methods o f t r a n s p o r t a t io n , i t s t i l l
rem ains t h a t p u b lic p o li c y is a t f a u l t in r e fu s in g t o
p r o te c t p r o p e r ty w h ic h has been gu aranteed as w e l l as
r e g u la te d .
I f s t r e e t c a rs are
to go th e y sh o u ld be
g r a d u a lly superseded by o th e r means o f t r a n s p o r t a t io n ,
and u n t i l the tr a n s fo r m a tio n i s com p le te a u to busses
sho uld sup plem e nt, n o t e lim in a t e , o u r e x is t in g common
c a r r ie r s . 1
A more d e t a ile d case2 w i l l show v e ry d e f i n i t e l y what
th e Iowa law p e rm its
in the u t i l i t y
f ie ld ,
what th e Board o f R a ilro a d C om m issioners,
case appeared s in c e i t
o f c it y lim it s ,
as w e l l as
b e fo re whom th e
in v o lv e d tra n s m is s io n lin e s o u ts id e
t h in k o f su ch a u t i l i t y
p o lic y .
1. Des Moines Reg i s t e r , J u ly 15, 1921
2. Schmidt B ro s. & Co. vs C itiz e n s o f C la y to n C ounty, Docket
No. E-169, Feb. 25, 1916
65
The Commission s t a t e d i n in tr o d u c in g th e case in
q u e s tio n t h a t "a fr a n c h is e f o r an e l e c t r i c tra n s m is s io n
l i n e o u ts id e o f c i t i e s ,
in c lu d in g the r i g h t o f em ine nt
dom ain, may be g ra n te d under the Iowa la w s, a lth o u g h the
lin e
may be unnecessary and c o m p e titiv e , i t n o t being
the p o li c y t o p r e f e r a re g u la te d m onopoly t o c o mp e t i t i o n . "
F u rth e r d e t a ils o f th e case show t h a t " Schm idt B ro s.
and Company made a p p lic a t io n f o r a fr a n c h is e f o r a
tra n s m is s io n li n e fro m E lk a d e r t o G a r n e r v ille and fro m
thence to G u tte n b e rg , a t o t a l d is ta n c e of about 22 m ile s " .
The Home E le c t r i c
Company, o f G u ttenb erg o b je c te d t o the
g r a n tin g o f such a fr a n c h is e f o r s e v e ra l re a s o n s :1
1 . That the a p p lic a t io n is n o t bona f i d e .
2. There i s no p e r s is t e n t demand f o r th e b u ild in g
o f such a l i n e ,
s a ry .
exce pt on the p a r t o f th e a p p lic a n t .
3. The b u ild in g o f th e lin e to
G uttenb erg i s unneces­
The Home E l e c t r i c Company is
s u p p ly in g , and a b le to
s u p p ly , th e c it iz e n s o f G u tte n b e rg w ith e l e c t r i c i t y a t
the same r a t e th e a p p lic a n t is c h a rg in g a t E lk a d e r.
4. The b u ild in g o f a new li n e
ru in o u s c o m p e titio n , and i s
to G u tte n b e rg means
a g a in s t p u b lic p o lic y ; th a t i t
would be a bad p re c e d e n t to a llo w c a p it a l w h ich is in v e s te d
in a p u b lic u t i l i t y
1.
to be s u b je c te d to c o m p e titio n w h ic h
S ince m onopoly i s n o t re g u la te d i n Iow a.
66
m ig h t mean th e e v e n tu a l f i n a n c i a l w reck o f one o r the
o th e r o f th e con cern s, and le a ve G u tte n b e rg a t th e m ercy
1
o f a m onopoly.
The com m ission re fu s e d to c o n s id e r th e f i r s t
two,
on th e ground t h a t th e a p p lic a t io n conform ed t o th e r e ­
q u ire m e n ts o f th e s t a t u t e ,
The l a s t two were c o n sid e re d
to g e th e r u n de r th e p r o p o s it io n t h a t "w here adequate s e r­
v ic e a t a rea son ab le r a t e i s b e in g re n d e re d b y a p u b lic
%
u t i l i t y , the in t r o d u c t io n o f a c o m p e tito r is un ne cessa ry,
may r e s u lt i n ru in o u s c o m p e titio n ; th a t a d u p lic a t io n o f
p la n ts i s n o t in th e p u b lic i n t e r e s t and may d e te r the
in v e s tm e n t o f c a p it a l i n p u b lic u t i l i t i e s ,
and is c o n tr a r y
to p u b lic p o l i c y . "
The p r o te s ta n t had argued t h a t a lth o u g h Iowa has no
P u b lic S e rv ic e Oonsnission d e a lin g w it h e l e c t t i c
companies
upon as broad lin e s as i n the r e g u la r ly governed com­
m is s io n s ta te s , t h a t n e v e rth e le s s die R a ilro a d Commission
should n o t g ra n t a p p lic a tio n s f o r th e r i g h t t o occupy t h e
highways o f th e s t a t e by tra n s m is s io n lin e s u n t i l th e tow n
a ffe c te d s h o u ld d e te rm in e t h a t th e re sh o u ld be c o m p e titio n
in t h i s u t i l i t y .
1. Since m onopoly is n o t re g u la te d in Iow a.
67
The Commission g ra n te d th a t w h ile i n New Y o rk ,
W isco n sin and o th e r com m ission governed s ta te s the es­
ta b lis h e d u t i l i t i e s
were p ro te c te d fro m c o m p e titio n u n t i l
p u b lic c onve n ie n ce and n e c e s s ity v o te d o th e rw is e , t h a t such
was n o t the p o li c y in Io w a .
"The g e n e ra l p o lic y o f t h is
s ta te has been t o f o s t e r c o m p e titio n and to p re v e n t
e x c lu s iv e r ig h t s and m on op oly", and "th e c o n te n tio n o f
th e p r o te s ta n t, i f
g ra n te d , would r e s u l t i n an e x c lu s iv e
r i ght to th e Home E le c t r i c Company, and w o u ld , under our
p re s e n t l a w, p re s e n t, so f a r as t h i s
ce rn e d , an u n re g u la te d m onopoly.
Commission is
con­
T h is s t a t e has n o t y e t
adopted th e p o li c y t h a t a re g u la te d m onopoly i s b e t te r
th a n f r e e c o m p e titio n betw een a s many persons and c o r­
p o ra tio n s as may be in c lin e d to g e t in and t r y
th e ir
lu c k " .
R e g u la tio n o f C o n s o lid a tio n s , M ergers, Leases and S a le s.
S ta te s w h ic h go to th e e x te n t o f r e g u la t in g com­
p e t i t i o n u s u a lly a ls o make p r o v is io n s w hereby th e r e la t io n s
between th e u t i l i t y
c o mp a n ie s th e m se lve s m a y be c o n t r o lle d ,
f o r t h is to o i s s u b je c t to p u b lic convenience and n e c e s s ity .
The r e g u la t io n o f c o m p e titio n i s f o r the purpose o f p ro ­
t e c t in g b o th th e e s ta b lis h e d u t i l i t y and the p u b lic fro m
th e wastes o f d u p lic a tio n s .
The c o n t r o l o v e r c o n s o lid a tio n s ,
68
m ergers, le a s e s and s a le s , as c a r r ie d on between u t i l i t i e s ,
i t meant to p r o t e c t th e p u b lic fro m u n r e s t r ic t e d m onopoly.
Its
s p e c if ic aim i s
to c o n t r o l f i s c a l c o m b in a tio n s , to
p re v e n t the u t i l i t i e s
fro m o p e ra tin g to th e d e trim e n t
o f the p u b lic , as f o r
in s ta n c e c o u ld be done were n o t
s e c u r it y is s u e s r e g u la te d .
When a f i s c a l r e o r g a n iz a tio n
ta k e s p la c e the law s u s u a lly r e q u ir e t h a t t h e new
s e c u r it ie s s h a ll n o t exceed in amount th e v a lu e o f th e
combined concerns as d e term in ed upon by th e com m ission.1
I t i s in no w ise in te n d e d t o l i m i t c o n s o lid a tio n s w here
economies are to be e f f e c t e d
through the e lim in a t io n o f
d u p lic a t io n s , b u t o n ly to p re v e n t the s p e c u la tio n ,
w h ich is so easy w ith o u t such r e g u la t io n . 2
A few examp le s o f where c o n s o lid a tio n s , m e rg e rs , le a s e s
o r s a le s are g ra n te d w i l l i l l u s t r a t e th e v a lu e o f th i s
la w i n i t s
b e a rin g upon the e lim in a t io n o f d u p lic a tio n s
and th e r e d u c tio n s o f r a te s .
I n an Ohio case " th e s a le o f th e p r o p e r ty o f one
e l e c t r i c l i g h t company t o a n o th e r was approved, i t
a p p e a rin g th a t adequate s e r v ic e f o r a re a s o n a b le r a t e
w ould be f u rn is h e d and t h a t th e s e rv ic e w ould be i mpro ve d
w ith o u t an in c re a s e i n r a t e s " . 3
T h is re c o g n iz e s the
d e s i r a b i l i t y o f monopoly so lo n g as i t
is re g u la te d .
1 . Holmes, F re d L . " R e g u la tio n o f R a ilro a d s and U t i l i t i e s i n
W is c o n s in ", p. 241.
2. I b id .
3. P .U .R . A. 1915, p . 510.
69
I t i s th e p o lic y o f th e C a lif o r n ia Commission to
a u th o riz e c o n s o lid a tio n where d u p lic a tio n s e x is t and a
c o n s o lid a tio n w i l l red uce r a t e s and im prove s e r v ic e .
The M assachusetts Commission p e rm itte d t wo e l e c t r i c
companies to c o n s o lid a te , as i t appeared t h a t t h e
c o n s o lid a tio n would make p o s s ib le more e co no m ica l
fin a n c in g and s im p lif y r e la t io n s w ith
the p u b lic . 1 The
Commission s ta te d the case f o r c o n s o lid a tio n i n a n o th e r
d e c is io n when i t
c o n s id e ra tio n ; i f
s a id , " P u b lic w e lfa re was th e f i r s t
it
i s b e t t e r to o rd e r c o n s o lid a tio n ,
f o r b e t t e r s e r v ic e , i t
sh o u ld be done re g a rd le s s o f th e
em b arra ssing s it u a t io n i t
may p u t a company i n ---- i f i t
is u n a b le t o f u l f i l i t s o b lig a t io n s a lo n e ".2
F iv e Idaho e l e c t r i c companies merged and w ere n o t
h e ld in v i o l a t i o n o f t h e Idaho A n ti- T r u s t la w , because
th e Commission has power to r e g u la te ra te s and th i s
merger w ould b r in g about economies and g iv e b e tte r s e r v ic e .3
I t was s ta te d in a d e c is io n g iv e n by the D elaware
Commission t h a t " i n t a k in g over u t i l i t y
p r o p e r tie s , e it h e r
by purchase o r le a s e , th e v a lu e s t h e r e o f, and the term s
upon w h ich th e t r a n s f e r is made, sh o u ld n o t be su ch as
t o r e s u l t i n an un rea son ab le in c re a s e i n r a t e s ".4
1.
2.
3.
4.
P .U .R .
P .U .R .
P .U .R .
P .U .R .
B
A
F
A
1915,
1919,
1915,
1919,
p.
p.
p.
p.
61.
121.
876.
860.
70
A company w h ich i s c h a rg in g v e ry h ig h r a te s may be
g ra n te d a u t h o r it y to purchase a n o th e r company w h ich is
c h a rg in g lo w e r, b u t re a so n a b le r a t e s .
B u t th e a u t h o r it y
to purchase does n o t p e rm it a r i g h t to r a is e th e s e r a te s
to a le v e l o f i t s
own.1
A n o th e r case h a v in g to do w it h r a te s
c o n s o lid a tio n o f e le c t r i c companies is
even i f
says th a t "a
f o r th e p u b lic good,
the people i n one p la c e have t o pay h ig h e r r a t e s ;
because r a te s m ig h t be h ig h e r w ith o u t con s o li d a t i o n " .2
O ther c o n d itio n s o r q u a l if ic a t i o n s w h ic h are
v a r io u s ly made a re a s f o llo w s :
the bene f i t s
a r is in g fro m
c o n s o lid a tio n are n o t t o be c a p it a liz e d ; 3 th e purchase
p r ic e approved b y th e Commission i s n o t t o be co n s tru e d
as a " f a i r v a lu e ” f o r r a te s o r c a p it a liz a t io n , o r f o r the
is s u a n ce o f s e c u r it ie s .4
The A riz o n a Commission has p e rm itte d te le p h o n e systems
to c o n s o lid a te w ith o u t i t s
co n se n t, where no w ith d ra w a l
o f s e r v ic e was co n te m p la te d and o n ly th e e lim in a t io n o f
c o m p e titio n and d u p lic a t io n r e s u lt e d .
U s u a lly , how ever,
c o n s o lid a tio n s m ust be enacted s t r i c t l y i n accordance w ith
law and o n ly a f t e r
the com m ission has passed upon th e ca se .
1 . A C a lif o r n ia d e c is io n , P .U .R. B 1919, p . 930.
2. New Hampshire Case, P .U .R . C 1918, p . 801.
3. P .U .R . F 1918 , p . 232 , N ebraska.
4. P .U .R. C 1918, p . 803, C o n n e c tic u t; C 1918, p . 389, New
H am pshire.
71
The New J e rse y Comm is s io n fo rb a d e a c o n s o lid a tio n w h ich was
n o t proposed i n accordance w it h th e la w ,1 and, in a n o th e r
in s ta n c e , re fu s e d , i n the absence o f s t a t u t o r y power, to
a u th o riz e th e c o n s o lid a tio n o f c o rp o ra tio n s o rg a n iz e d
o u ts id e th e s t a t e . 2
Sometimes th e p u b lic demands c o n s o lid a tio n .
A Maine
case shows t h a t th e lo c a l companies and the p u b lic i n
s e v e ra l s m a ll p la c e s asked a b ig e l e c t r i c u t i l i t y
to b u y
up a l l these s m a ll companies so as to g iv e b e t t e r s e rv ic e .3
T his was p e rm itte d b y th e Commission.
More in s ta n c e s o f
t h i s k in d would in d ic a te g r e a te r in t e r e s t on th e p a r t
o f th e p u b lic and w ould h e lp th e u t i l i t i e s
in e f f e c t in g
th e economies which such co m b in a tio n s n a t u r a lly b r in g .
South D akota fu rn is h e s an example o f where p h y s ic a l
c o n n e c tio n between two com p etin g te le p h o n e s ystems was
o rd e re d on th e p r in c ip le t h a t i t was in th e p u b lic in t e r e s t
t o do so, a lth o u g h th e c o mm is s io n had no a u t h o r it y u n d e r
the e x is t in g s ta tu te to r e q u ir e th e se compa n ie s to c o n s o l­
id a te t h e i r p r o p e r tie s under one o w n e rs h ip .4
m is s io n expressed the o p in io n , how ever, th a t
The com­
i t was
re a s o n a b le and d e s ira b le fro m e ve ry v ie w p o in t f o r th e
p r o p e r tie s to be c o n s o lid a te d .
1.
2.
3.
4.
P .U .R . A 1915, p .
P .U .R . F 1915, p .
P .U .R . C 1918, p .
C it y o f G roton v s .
P .U.R . E 1919.
629.
5.
742.
G ro to n -F ern e y M u tu a l Telephone C o .,
72
An a lm o st i d e n t i c a l s it u a t io n e x is te d in N ebraska in
1919.1
"It
The commission i n commenting upon a case s a id ,
is o b vio u s t h a t d u p lic a t io n o f te le p h o n e u t i l i t i e s
in a lim it e d f i e l d , such as we he re f i n d , i s not d e s ira b le
fro m any s t a n d - p o in t" .
The com m ission expressed i t s
r e g r e t i n n o t b e in g a b le to
o rd e r a p h y s ic a l c o n s o lid a tio n
o f the com peting p r o p e r t ie s , though as in the South D akota
case c it e d above, p h y s ic a l c o n n e c tio n was o rd e re d .
In d ia n a , a ls o , as la t e as 1918, had no power to
order a m e rg e r, d e s p ite th e wisdom o f th e id e a ; Ohio had
no j u r i s d i c t i o n to approve a n agreement to c o n s o lid a te ;
and i n West V ir g in ia i t
has been ne cessa ry t h a t the
m u n ic ip a lit y must f i r s t g iv e i t s
con sen t b e fo re c o n s o li­
d a tio n can ta ke p la c e , and th e c o n t r o ll in g company must
f i r s t g e t c o n tr o l o f the fr a n c h is e s and p r o p e r tie s o f th e
o th e r com panies.2
Thus we see fro m these examples t h a t t h i s p a r t ic u l a r
law can be v e ry e f f e c t iv e
in b r in g in g about b e tte r s e rv ic e
and lo w e r r a te s because i t removes th e u t i l i t i e s
fro m the
c la s s of s p e c u la tiv e in d u s t r ie s and encourages monopoly
r a th e r th a n u n c o n tr o lle d c o m p e titio n and d u p lic a tio n s in
1. B la ckle d g e v s . F a rm e rs' Ind ependent Telephone Company,
P .U .R. D 1919.
2. See P .U .R . A 1919, p . 860.
73
equipm ent and s e rv ie e s .
O b v io u s ly no lo c a l r e g u la t o r y
body c o u ld ha nd le a s it u a t io n o f t h is h in d .
O nly a s ta te
com m ission can secure th e b e n e fits r e c ite d above*
CHAPTER IV .
CONCLUSION: THE PRESENT SITUATION IN IOWA, WITH SOME
SUGGESTIONS FOR A CONSTRUCTIVE U TILITY PROGRAM.
In th e in t r o d u c t o r y s ta te m e n ts the charge was made
t h a t Iowa has alw ays p e r s is t e n t ly v io la te d th e v e r y p r i n ­
c ip le s re g a rd in g r e g u la t io n w hich o th e r s ta te s have
accepted as the o n ly means o f s e c u rin g a c o n s tr u c tiv e
u tility
program .
The f i r s t c h a p te r re vie w e d th e p r in c ip le s
o f r e g u la t io n w hich have p r e v a ile d a t d i f f e r e n t tim e s .
The
second c h a p te r gave in d e t a i l the f a l l a c i e s o f m u n ic ip a l
ow ne rship and lo c a l r e g u la t io n , e s p e c ia lly as r e la te d to
th e developm ent o f e l e c t r i c u t i l i t i e s .
The t h i r d
c h a p te r
tr e a te d th e m a tte r o f c o m p e titio n and c o n s o lid a t io n ,
m a in ly in o th e r s ta te s b e s id e s Iow a, showing what th e s e
s ta te s have accepted i n t h e i r u t i l i t y
program , th u s
fo rm in g a background f o r a d is c u s s io n o f th e p re s e n t
s it u a t io n in Iowa.
The P re se n t S it u a t io n in I owa
The most s t r i k i n g fe a tu re
o f a p u b lic s e rv ic e com m ission.
i n t h i s s ta te is
it s
la c k
The Board o f R a ilw a y
Commissioners has a fe w v e ry l i m it e d r ig h t s o f j u r i s d i c t i o n ,
b u t no c o n t r o l over r a t e s , v a lu a t io n o f p r o p e r ty ,
e tc .
s e r v ic e ,
A l l u t i l i t i e s , w h e th e r owned b y th e m u n ic ip a lit ie s
75
o r by p r iv a t e c o r p o r a tio n s a r e a l i k e s u b je c t to m uni­
c ip a l r e g u la t io n .
T h is r e g u la t io n in i t s e l f has b e e n as
f a i r and e f f i c i e n t as coul d be expected anyw here, e xce pt
in a fe w n o ta b le c a s e s , and th e u t i l i t y
s e lve s have t e s t i f i e d
managers them­
to good tre a tm e n t and re a d y
response to le g it im a t e r a t e in c re a s e s .
An o f f i c i a l
counsel o f the U n ite d Lig h t and R a ilw a y s Company s aid
in re s p e c t to t h is
s ta te :
" I t i s a re m a rka b le and
g r a t if y in g f a c t t h a t i n the g r e a te r p o r t io n o f our Iowa
c i t i e s and towns th e c i t y o f f i c i a l s have re s ponded to
the needs o f the companies w it h a prom ptness and fa ir n e s s
u n e x c e lle d by any p u b lic u t i l i t y c o m m is s io n ."1
W hile t h is i s v e ry commendable i t
o n ly emphasizes
th e f a c t t h a t f a i r tre a tm e n t is accorded th e u t i l i t i e s
i n most in s ta n c e s , and does n o t take in t o
c o n s id e ra tio n
th a t a s ta te com m ission c o u ld be ju s t as f a i r , o r as is
g e n e r a lly th e case, even more u n b ia se d in i t s d e a lin g s
w ith th e u t i l i t i e s .
The im p o rta n t p o in t i s
th a t a
s ta te commission w ould be more e f f i c i e n t and ca p a b le i n
e v e ry way th a n w o u ld a c i t y c o u n c il, however f a i r minded
were i t s members.
And fu rth e rm o re such u t i l i t y w a rfa re
1. C ham berlain, Wm., "R e g u la tin g R a te s in Io w a ", E le c t r ic
R a ilw a y J o u rn a l, J u ly 5, 1919.
76
as has e x is te d in Des M oines would n o t he t o le r a t e d i n
a s ta te w hich had p ro p e r c o n tr o l over c o m p e titio n .
the e x c e p tio n a l cases o f d i f f i c u l t i e s
Even
due to lo c a l r e g ­
u l a t io n would th e n b e e lim in a te d .
No doubt th e main reason why Iowa has rem ained
dependent on lo c a l r e g u la t io n and a g a in s t a s ta te
com m ission is to b e fo u n d in th e w e ll o rg a n ize d le a d e r ­
s h ip o f the League o f Iowa M u n ic ip a lit ie s .
T h is league
was o rg a n ize d O ctober 14 , 1898, and is o f f i c i a l l y p ro ­
v id e d f o r in th e
s ta te la w s ,1 and i n 1919 com prised a
membership o f 422 c i t i e s and towns in the S ta te .
The le a g u e 's o f f i c i a l o rg a n , Am erican M u n ic ip a lit ie s , 2
has a s ta n d in g r e s o lu t io n a g a in s t comm is s io n governm ent
or a d m in is tr a tio n i n g e n e ra l, and e x p l i c i t l y a g a in s t
a p u b lic u t i l i t y
com m ission f o r Iowa.
The r e s o lu t io n
i n p a r t re a d s :3 "Be i t re s o lv e d , That th e League o f
Iowa M u n ic ip a lit ie s e x e rt a l l le g itim a t e e f f o r t s t o
p re v e n t th e c r e a tio n o f any p u b lic u t i l i t y
in the s ta te o f Iow a, and t h a t t h i s
expresses i t s
com m ission
O rg a n iz a tio n h e re b y
u n a lte r a b le o p p o s itio n t o th e e s ta b lis h m e n t
o f any com m ission a u th o riz e d to c o n t r o l o r r e g u la te a n y
lo c a l u t i l i t y " .
1. Code Supplem ent, 1913, Sec. 6 9 4 -a -b -c . See a ls o : Re p o rts o f
Iowa M unici p a l Acco u n ts , 1919.
2. P u b lis h e d a t M a rs h a llto w n , Iowa
3. Issu e f o r J u ly , 1921.
77
There i s no s u r p r is e th e n when i t i s fo u n d th a t p u b lic
o f f i c i a l s , e d it o r s and th e p u b lic g e n e r a lly are a g a in s t
s ta te r e g u la t io n o f u t i l i t i e s
f o r Iow a.
Q u e s tio n a ire s a s k in g
w h e th e r s ta te o r lo c a l r e g u la t io n was p r e fe r r e d were sent to
th e f o llo w in g s ix te e n Iowa c i t i e s :
Hampton
Emmettsburg
Fo r t Dodge
Cherokee
S io u x C it y
Ottumwa
W a te rlo o
Oskaloosa
M a rs h a llto w n
Red Oak
Mason C it y
O elw ein
Storm Lake
C e n t e r v ille
Shenandoah
D avenport
The mayor answered f o r fo u r te e n o f th e c i t i e s w h ile
th e e d i t o r 1 o f a lo c a l paper answered f o r D avenport and a
Congressman f o r C e n t e r v ille . 2
O nly one r e p ly , t h a t fro m
O elw ein, in d ic a te d a p re fe re n c e f o r a s ta te u t i l i t i e s
com m ission.
Some o f the reasons g iv e n a re no d o u b t t y p ic a l o f the
g e n e ra l a t t it u d e .
One answer3 was in c lin e d to
the b e l i e f
t h a t c o n tr o l should be c lo s e a t home r a t h e r th a n removed
1 . Cram, R.W. "The D avenport D e m ocra t".
2. P o r te r , Claude R.
3. I b id .
78
f o r the rea son t h a t c o n t r o l is u n re sp o n sive to th e w ishes
o f the people when too f a r removed and i t
to rea ch them, and t h a t i t
i s to o d i f f i c u l t
is im p o s s ib le f o r a com m ission
lo c a te d a t a d is ta n c e t o have the th o ro u g h knowledge o f
c o n d itio n s t h a t one c lo s e r a t hand possesses.
He opposed
p u b lic o w n e rsh ip , how ever, because o f h is b e l i e f t h a t th e
p u b lic was i n s u f f i c i e n t l y in te r e s te d in i t .
1
A nother sta te m e n t was to th e e f f e c t t h a t lo c a l
com m issions w ould be i n b e t t e r to u c h w i t h th e home s it u a ­
t io n , b u t s h o u ld be s a fe -g u a rd e d by a p p o in tm e n t t o them
o f h ig h -g ra d e c it iz e n s ; a n o th e r t h a t ’’ c i t i e s sh o u ld be
g iv e n power to re g u la te r a t e s , and to own and o p e ra te
2
t h e i r own p u b lic u t i l i t i e s ” .
I t $s n o t meant to m in im ize in any re s p e c t th e
b e tte rm e n ts i n c i v i c o r g a n iz a tio n and improvement fo r .
w h ic h th e League o f Iowa M u n ic ip a lit ie s
acco m plishe d.
Bat i t
gram as in d ic a te d in
is not
stands o r has
is s t r o n g ly urged t h a t such a p ro ­
its
in s is te n c e on lo c a l r e g u la t io n
i n the best in te r e s t s o f th e c it iz e n s c f th e
s t a te , e it h e r e c o n o m ic a lly o r p o l i t i c a l l y ,
ru n scheme o f developm ent.
1. Gram, R.W ., Op. G it .
2. Mayor S h o rt o f S io u x C it y .
i n any lo n g -
79
B ills
f o r th e purpose o f c r e a tin g a p u b lic
com m ission f o r Iowa have a l l f a i l e d .
s e rv ic e
S im ila r h i l l s were
p re s e n te d to b o th t h e T h ir t y - T h ir d 1 and T h ir t y - F o u r t h 2
G eneral A ssem blies, th e f i r s t
in 1909, the l a t t e r
B oth p ro v id e d f o r s ta te c o n t r o l,
th ro u g h a p u b lic s e rv ic e
com m ission o f f i v e members, o f a l l u t i l i t i e s
c ip a l and p r iv a t e .
in 1911.
b o th m uni­
T h is com m ission was t o have power
to f i x r a te s and o rd e r im provem ents; to re g u la te bond
is s u e s ; and to r e q u ir e a c e r t i f i c a t e
n e c e s s ity f o r a l l proposed u t i l i t y
o f convenience and
c o n s tr u c tio n , th u s
r e g u la t in g c o m p e titio n .
There were many im p o rta n t o m is s io n s , how ever, which
have been enumerated b y Downey3 as fo llo w s :
d e f i n i t i o n o f u n la w fu l d is c r im in a t io n ,
u t i l i t y p r o p e r tie s b y th e com m ission,
u tility
(1 ) e x p l i c i t
(2 ) v a lu a tio n o f
(3 ) a u d it o f
a c c o u n ts , (4 ) d e f i n i t i o n by th e com m ission o f
sta n d a rd s o f p ro d u c t and s e r v ic e ,
(5 ) in s p e c tio n o f
s e r v ic e and equipm ent b y th e com m ission’ s s t a f f ,
(6)
c o n t r o l o f m ergers, (7 ) a p p ro v a l o f fr a n c h is e s b y the
com m ission, (8 ) an in d e te rm in a te p e rm it c a lu s e ,
(9 ) r e ­
s t r i c t i o n s upon j u d i c i a l re v ie w o f th e com m ission’ s d e c is io n s .
1 . Sammis b i l l .
2. Sammis b i l l .
3. Downey, E . H . , Op.Ci t .
80
If
these b i l l s w e re weak because of o m is s io n s ,
the
S p rin g e r1h i l l w hich appeared b e fo re the la s t General
Assembly, 1921, was so much weaker as to a lm o s t f a i l
com parison,
No s ta te co mm is s io n was even p ro p o se d ,
as were none o f th e e s s e n tia ls m entioned above as ha vin g
been h e r e to fo r e o m itte d ,2 n o r was t h e r e a convenience
and n e c e s s ity c la u s e .
The second o f th e fo rm e r b i l l s ,
th a t o f 1911, g ra n te d more powers to m u n ic ip a lit ie s
d id th e f i r s t ,
tha n
w h ile the S p rin g e r b i l l was as com plete
a s u rre n d e r to lo c a l r e g u la t io n as c o u ld be im a gined .
Its
ma in p r o v is io n was t h a t in te n d e d to e s t a b lis h a
c o u r t o f a p p e a l, known as a C o u rt o f P u b lic S e rv ic e ,
to w h ic h u t i l i t y
problem s m ig h t be su b m itte d f o r s e t t l e ­
ment.
A lth o u g h the b i l l passed b o th House and Senate, members
o f th e House r e g r e tte d t h e i r a c t io n a f t e r i t s
passage and
a tte m p te d to persuade th e Senate to r e t u r n the b i l l ,
in s te a d i t was passed.
By th e tim e i t
but
reached th e
g o v e rn o r’ s hands so much p re s s u re had been bro u g h t to
d e fe a t the b i l l th a t he r e tu rn e d i t
1. House b i l l no . 623, by S p rin g e r.
2. E x c e rp t ( 8 ) .
w ith o u t h is s ig n a tu r e .
81
One o f h is reasons f o r v e to e in g th e bi l l was e x a c t ly
why most s tu d e n ts o f th e pro b le m w o u ld have
it,-
nam ely, because i t
be in d e te rm in a te .
fa v o re d
p ro v id e d th a t a l l fr a n c h is e s sho uld
S a id th e G overnor upon r e t u r n in g the
b i l l , 1 " S e c tio n 9 o f the b i l l
v io la t e s fu n d a m e n ta l
p r in c ip le s o f our law and i s a com p le te r e v e r s a l o f the
p o lic y o f the s ta te i n d e a lin g w it h p u b lic u t i l i t i e s .
I t d e p riv e s the p e o p le and c i t y c o u n c ils o f a l l power
to p r o te c t th e in t e r e s t o f th e com m unity because i t
g r ant s an in d e te rm in a te f r a n c h is e , w h ich i s
in e f f e c t
a p e rp e tu a l r i g h t to e n jo y th e b e n e fits and p r iv ile g e s
o f th e fr a n c h is e g r a n t " .
No
d o ub t the G overnor was m is in fo rm e d as t o
the
g e n e r a lly accepted meaning o f "in d e te rm in a te f r a nc h is e " .
I t does n o t g iv e any p e rp e tu a l r i g h t s , and " d i f f e r s fro m
the p e rp e tu a l fr a n c h is e i n t h a t i t
may be revo ked a t
any t i me t h a t th e r e g u la t in g body d e cid e s t h a t the
c o r p o r a tio n is n o t p r o p e r ly s e rv in g th e p u b l ic 's i n t e r e s t " . 2
The te n d e n cy o f th e in d e te rm in a te fr a n c h is e
is to g iv e
g re a te r s t a b i l i t y to the u t i l i t i e s and e lim in a te compe­
titio n ,
bu t th is is
c o n tr a r y to th e law s o f Iow a.3 T h is i s
1. J o u rn a l o f th e House, p . 1821.
2. K in g , C. L . , Op.Ci t . p . 84; Holmes,
3. Holmes, F re d L . O p.Ci t . p . 49.
O p.Ci t .
p. 230.
82
e x a c tly w hat is now most commonly accepted a s the c o r r e c t
p r i n c i p le o f fr a n c h is e g r a n tin g , p r o v id in g always t h a t
th e r i g h t to c o n t r o l th e fr a n c h is e he l e f t to
and unbiased c e n tr a l s t a t e
a u t h o r it ie s . 1
an a b le
com m ission, and n o t to lo c a l
Hence had th e Governor had i n m ind th e
purpose o f g iv in g th e Ci t y
C o u n c ils and Boards o f
S u p e rv is o rs more power in s te a d o f ta k in g away im agined
p r iv ile g e s from th e u t i l i t i e s
he c o u ld have done no
b e tte r th a n to s a n c tio n th e in d e te rm in a te fr a n c h is e .
He a ls o fo u n d h im s e lf o u t o f accord w ith th e
e s ta b lis h m e n t o f th e C o u rt of A ppeals,
g iv in g th e
again w ith o u t
reasons f o r h i s p o s it io n w h ic h u t i l i t y
w ould have g iv e n .
e x p e rts
The C o urt was to c o n s is t o f th re e
d i s t r i c t judges a p p o in te d by th e c h ie f ju s t i c e o f th e
supreme c o u r t, and t h i s ,
th e ve to message a s s e rte d , was
in d i r e c t c o n tra v e n tio n o f S e c tio n 5 o f A r t i c l e 5 o f th e
S ta te C o n s t it u t io n , w hich s ta te s t h a t judges s h a ll be
in e lig ib le
to any o th e r o f f i c e
than th e one t o w h ich
e le c te d .
U tility
e x p e rts w o u ld no d o u b t have agree d t h a t th e
C ourt was a lre a d y overburdened and would no t have th e tim e
n o r th e e x p e rt t r a in in g
in u t i l i t y problem s to g ive th e
1 . Kin g , C . L . , O p .C it.
2. K in g , C .L ., O p .C it. p . 190.
83
cases th o ro u g h re v ie w .
u tility
"C o u rt r u l e " ,
or s e ttle m e n t o f
problem s by la w s u it has proved w h o lly in a d e q u a te
in th e p a s t.
I t does n o t " r e g u la t e ” , b u t m e re ly passes
upon cases a lre a d y ou t o f d a te .
I t i s to o s lo w , to o
e x p e n sive , and i s n o t e x p e r t.2
F u rth e rm o re th e b i l l ' s
p r o v is io n to le a v e c o n tr o l
in the hands of c i t y c o u n c ils o r boards o f s u p e rv is o rs
is e q u a lly weak.3
weaknesses w hich
B esides be in g s u b je c t to th e same
c o u rt
r u le d is p la y s , i t w o uld not
f o s t e r th e e x e rc is e o f u n biase d judgm ent.
T h e re fo re th e Iowa u t i l i t y law s as th e y s t i l l
are v e ry meagre.
The o n ly approach to
stan d
c e n t r a liz a t io n of
any k in d i s fo u n d i n th e p r o v is io n s 4 w h ic h r e q u ir e
c i t i e s o r towns owning any p u b lic u t i l i t i e s
a ll
to make an
annual r e p o r t as to th e f in a n c i a l c o n d itio n o f th e u t i l i t y ,
w h ic h d a ta i s
each year c o lle c te d and p u b lis h e d b y th e
a u d ito r o f th e s ta te .5
1.
2.
3.
4.
5.
The m u n ic ip a lit ie s have f u l l
Kin g , C . L . , O p .C it. p .1 9 0 .
I b id .
Downey, E . H . , p . 205
Compiled Code o f Iow a , 1919, S e c tio n 3658—3664.
Downey, E .H . O p .C it. says th e s e r e p o r t s a re v e r y i n ­
com plete and u n r e lia b le .
84
power i n d e a lin g w it h th e u t i l i t i e s , a lth o u g h th e la w
p ro v id e s a g a in s t m onopoly by d e n yin g th e r i g h t to a
m u n ic ip a lit y o f g r a n tin g fra n c h is e s f o r more th a n 25
ye a rs o r to g ra n t an e x c lu s iv e fr a n c h is e .1
T h is i n ­
sures c o m p e titio n b u t do es not reg u la t e i t .
C it ie s
governed b y Commissions o r by th e c o u n c il and manager
p la n s p e c i f i c a l l y p ro v id e t h a t no fra n c h is e s can be
g ra n te d w ith o u t th e con sen t o f a m a jo r it y o f th e e le c t o r s . 2
A l l c i t i e s are g ra n te d th e r i g h t to m u n ic ip a l owner­
s h ip e it h e r by purchase or c o n s tr u c tio n .
f o r m u n ic ip a l ow nership and th e u t i l i t y
I f a c i t y v o te s
re fu s e s t o
s e ll
o r term s o f t r a n s f e r cannot be re a ch e d , th e c i t y may
b r in g condem nation p ro c e e d in g s , th ro u g h a C ourt o f
Condemnation, to a c q u ire i t . 3
The ra te s o f a l l u t i l i t i e s
are l o c a l l y re g u la te d ,
a lth o u g h th e law makes no p r o v is io n as to
o f s e r v ic e .4
the r e g u la t io n
The lo c a l r e g u la t in g body has th e "pow er
1. Compiled Code o f Iow a, 1919, S e c tio n
2.
"
"
"
"
"
S e c tio n s
3.
"
,T
"
"
"
S e c tio n s
4.
"
"
"
,f
"
S e c tio n
39 66.
4230,4295.
3968, 3969.
3973.
85
to r e q u ir e e v e ry in d iv id u a l or p r iv a t e c o rp o ra tio n .
o p e ra tin g such works or p la n t , s u b je c t t o re a s o n a b le
r u le s and r e g u la t io n s ,
to f u r n is h any person a p p ly in g
t h e r e f o r , a lo n g the l i n e
o f i t s p ip e s , m ain, w ire s
o r o th e r c o n d u its , w ith g a s , h e a t, w a te r, l i g h t o r
p o w e r.”1
The o n ly power ever d i r e c t l y e x e rc is e d over
r a te s by the Iowa le g i s la t u r e has been f o r
r a ilr o a d s
and s t r e e t r a ilw a y s .
I t is s t i l l c o n t r o v e r s ia l
as to w hether ra te s
s t ip u la t e d i n fra n c h is e s a re c o n tr a c tu a l o r l e g i s l a t i v e
in c h a ra c te r.
I f th e l a t t e r ,
the c i t y has power to
change them w ith o u t c o u rt p ro c e d u re ,
Judge Wade o f the
F e d e ra l Co u r t ta ke s the sta n d th a t r a t e s are c o n tr a c tu a l,
w h ile Judge A p p le g a te and th e Iowa Supreme C ourt h o ld
t h a t th e y are l e g i s l a t i v e , a s do a lso the u t i l i t i e s . 2
A c o n s tr u c tiv e u t i l i t y
program f o r Iowa s h o u ld f i r s t
o f a l l demand a p u b lic s e r v ic e com m ission, to be a p p o in te d
f o r in d e f i n i t e
u tilitie s ,
term s, and w it h f u l l power o v e r a l l
in c lu d in g the power o v e r r a ilr o a d s now v e s te d
in th e R a ilr o a d Commission.
The Commission s h o u ld be
1. I b id .
2. C ham berlain, Wm ., " Rate R e g u la tio n i n Io w a ", E l e c t r i c
R a ilw ay J o u rn a l, J u ly 5, 1919.
86
empowered w ith
c o n tr o l over v a lu a tio n , ra te -m a k in g ,
a u d itin g o f u t i l i t y a c c o u n ts , s ta nd a rd s o f p ro d u c t and
s e r v ic e ,
titio n
and in s p e c tio n o f u t i l i t y
p r o p e r tie s .
Compe­
sh o u ld b e r e g u la te d th ro u g h a "co n ve n ie n ce and
n e c e s s ity " c la u s e .
Power to pass on fr a n c h is e g ra n tin g
sho uld b e v e s te d in
t h e Commission.
The lim it e d f r an c h is e
should b e re p la c e d b y th e i n d e f i n i t e g ra n t, w i th p ro p e r
p r o v is io n s a g a in s t makin g i t
p e r p e tu a l.
As f a r as
p o s s ib le a l l d e c is io n s o f the Commission should b e
f i n a l , w ith as l i t t l e
"c o u rt r u le " .
tendency as p o s s ib le to w a rd
The a u t h o r it y of th e Commission sh o u ld
a p p ly e q u a lly t o a l l u t i l i t i e s ,
w h e th e r m u n ic ip a lly or
p r i v a t e l y owned, thus e lim in a t in g the e v i l s o f lo c a l
r e g u la t io n .
The Commission sh o u ld have co n t r o l over c o n s o lid a tio n s ,
m e rg e rs, le a se s and s a le s , w i t h power to r e g u la te s e c u r i t y
is s u e s .
T h is c o n t r o l w o u ld mean, as in most s t a t e s whi ch
have such c o n t r o l,
th a t the con sen t of th e commis s io n
must b e had b e fo re f i s c a l or p h y s ic a l c o n s o lid a tio n s
co u ld b e made.
It
wo u ld seem a d v is a b le , a ls o ,
to g ive
th e Commission a d v is o r y power over such c o n s o lid a tio n s
even b e fo re th e y a re proposed b y th e u t i l i t y
I n t h i s way a s y s te m a tic u t i l i t y
companies.
program c o u ld b e w o rk ed
87
o u t,
e s p e c ia lly in e l e c t r i c u t i l i t i e s
on the map on page
such as in d ic a te d
42. By f o llo w in g such a program ,
even e n fo rc in g c o n s o lid a tio n s i f
the u t i l i t i e s
to combine where p u b lic in t e r e s t demanded i t ,
e l e c t r ic u t i l i t i e s
f a il e d
th e
o f Iowa c o u ld be reduced in number,
each company o p e ra tin g w it h a l l the economies o f la rg e
sa le p ro d u c tio n in a d e f i n i t e p o r t io n o f the s t a t e .
Laws s h o u ld a ls o be enacted lo o k in g to the s o lu t io n
o f th e problem of m u n ic ip a l o w n e rsh ip .
W hile t h e r e is
much to be s a id a g a in s t th e m u n ic ip a liz a tio n o f u t i l i t i e s ,
e s p e c ia lly such as cannot be e a s ily o r e c o n o m ic a lly con­
f in e d to m u n ic ip a l b o u n d a rie s , y e t the p u b lic o fte n
i n s i s t s on u n d e rta k in g i t .
Hence p ro p e r p r o v is io n sh o u ld
be made to p r o te c t the u t i l i t i e s
pe nding m u n ic ip a liz a tio n ,
so as to g ive s e c u r it y to publ ic u t i l i t y
m a in ta in a f a i r r e t u r n . 1
If it
in v e s tm e n ts and
i s fo u n d to be n e ce ssa ry to
compromise between s ta te and lo c a l r e g u la t io n th e spheres
o f a u t h o r it y sh o u ld be c a r e f u ll y d e fin e d ,
so as t o e f f e c t
1. Wil c o x , D elos F . "R ecent Developments i n th e P u b lic U t i l i t y
F ie ld a f f e c t in g Fra n c h is e P o lic ie s and M u n ic ip a l O wnership” .
The Na t io n a l M u n ic ip a l Review, V o l. V I I , No. 2, M arch, 1918.
88
c o o p e ra tio n r a th e r th a n h o s t i l i t y between th e tw o .1
The p r in c ip le o f s e r v ic e a t c o s t has been in c r e as in g ly
emphasised w herever r e g u la t io n has been re co g n ize d and
ad op ted .
T h is i s n a t u r a lly the p r in c ip le w hich is
fo llo w e d u n d e r m u n ic ip a l o w n e rsh ip .
it
And inasm uch as
guarantees a f a i r r e t u r n on c a p i t a l i t
is the o n ly
sane r a te p o lic y f o r p r iv a t e as w e ll a s m u n ic ip a l
u tilitie s ,
and when a p p lie d to p r iv a t e u t i l i t i e s
e lim in a te s one o f th e most p ro m in e n t argum ents f o r
m u n ic ip a l o w n e rsh ip .
A s ta te Commission sh o u ld f o ll o w
a d e f i n i t e p o lic y in r e g u l a t i ng ra te s on t h i s b a s is .
A n othe r m a tte r o f im m ediate con cern to th e p u b lic
and w h ich sh o u ld come more f u l l y
u n d e r s t a t e c o n t r o l is
t h a t o f c o n s e rv in g and u s in g o u r w a te r power re so u rce s.
T h is problem is n o t so o u ts ta n d in g ly e v id e n t in Iowa
as i n C a lif o r n ia , f o r exam ple, where a g re a t d e a l o f
a t t e n t io n has been g iv e n i t .
a p la n has been a g it a t e d i n
D u rin g th e p a s t two ye a rs
C a lif o r n ia c al le d t h e M a rs h a ll
P la n ,2 w h ic h in c lu d e s i n i t s program th a t th e s ta te w a te r
and power re s o u rc e s be u n if ie d under s ta te c o n t r o l,
lo o k in g to a complete u t i l i z a t i o n o f a l l r e s e r v o ir s it e s .
1. I n s u l l , Samuel, " C e n tr a l S ta tio n E le c t r i c
2. J o u rn a l o f E l e c t r i c i t y , Nov. 15, 1920.
S e rv ic e " .
89
A s im ila r recommend at io n , em bracing a g r e a t many
k in d re d s u g g e s tio n s , was made f o r t h e s ta te o f Iowa i n 1910
i n th e R eport o f th e Iowa S ta te D rainage and Waterways
and C o n s e rv a tio n Commission.
An e x a m in a tio n o f t h i s
r e p o r t re v e a ls a g re a t amount o f enthusiasm c o n c e rn in g
th e p o s s i b i l i t i e s
o f d e v e lo p in g w a te r pow er i n t h is
s ta te .
I t was found th a t th e re w ere 101 wat e r power p la n ts
in o p e ra tio n ,
28 o f w hich were p ro d u c in g a l l o r p a r t
e l e c t r i c power, w h ile th e r e s t were used f o r m i l l i n g .
R e g re t was expressed t h a t d u rin g th e two ye a rs p r i o r to
th e r e p o r t th a t the power o f th e se combined p la n ts had
decreased fro m 17,304 H.P. to 11,877 H .P .— la r g e ly
because dams were d e s tro y e d by flo o d s and were not r e b u i l t .
The r e p o r t showed however t h a t a t le a s t an a d d it io n a l
maximum horse power o f 247,500 c o u ld e a s ily be d e ve lo p e d .
Many surveys were made wh ic h showed a g r e a t number o f
good power s it e s .
The Commission recommended th a t inasm uch as th e
co a l s u p p ly was li m it e d t h a t the s ta te
shoul d own and
develop these w a te r re s o u rc e s i n o rd e r t o in s u re
and cheap power i n
the f u t u r e .
adequate
S ta te r e g u la t io n o f th e s e
90
u t i l i t i e s was deemed a b s o lu te ly e s s e n t ia l, as w e ll a s a
sy s te m a tize d co n s o li d a t i o n o f th e p la n t s , in o rd e r t o
in s u re th e p ro p e r developm ent.
It
i s c e r t a in th a t th e s e u n d e rta k in g s sh o u ld b e c o n ­
t r o l l e d by th e s t a t e i n
case th e y are d e v e lo p e d ; b u t th e
p r o b a b ilit y o f t h e i r developm ent, im m e d ia te ly a t le a s t ,
is doubted b y a g re a t many.
C o lle ge
P ro fe s s o r J .B. H i l l o f th e
of E n g in e e rin g o f the S ta te U n iv e r s ity o f Iowa
is o f th e o p in io n th a t th e e la b o ra te s u g g e s tio n s o f th e
Commission are not w a rra n te d from an economic s ta n d p o in t.1
Most o f th e p r o je c ts w ould r e q u ir e la rg e and expensive
r e s e r v o ir s and a g r e a t d e a l o f
expensive dam c o n s tr u c tio n
and m aintenance, and ow ing t o w e a th e r c o n d itio n s steam
p la n ts would have to a ls o be m a in ta in e d .
The d e s ire to se cu re cheap power no doubt p la y s a
most im p o rta n t p a r t in
to develop w a te r pow er.
the m inds of m ost p e o p le i n w is h in g
I n re sp e ct to such p owe r Samuel
I n s u ll says:2 "G lo w in g p ic tu r e s a re drawn o f th e amount
o f power th a t can be produced fro m w aterw ays w it h in t h is
s ta te ( I l l i n o i s ) ,
and because w a te r ru n s down h i l l
it
is
a s s e rte d t h a t th e p owe r can a l l be s o ld f o r n o th in g o r a t
a v e r y lo w p r ic e .
Of co u rse , t h a t i s s im p ly a dream ................
The o n ly way t h a t you ca n g e t cheap p ro d u c tio n and d is -
1. F rom an in te r v ie w .
2. "C e n tra l S ta tio n E l e c t r i c S e rv ic e " , p . 339.
91
t r i b u t i o n o f energy is by conc e n t r a t io n , by m onopoly” .
The e s s e n tia l p o in t i s , how ever, t h a t th e b e t t e r o f
these re so u rce s w i l l be de veloped s ome tim e , e it h e r b y
the s ta te o r b y p r iv a t e
should be s t r i c t l y
in t e r e s t s , and in any e ve n t
re g u la te d by th e s ta te .
t h i s can be done the u t i l i t y
B ut b e fo re
program o f the s t a t e w i l l
have to be g r e a t ly a lte r e d so a s to empower a p u b lic
s e rv ic e commission w ith a l l th e powers suggested above.
B ib lio g ra p h y
Am erican Telephone & T e le g ra p h Co . , Commission Laws, 3rd Ed.
Anderson, Wm.
B aker, M. N.
B a rk e r, H a rry ,
The Work o f Pub. S e rv ic e Commissions.
The M u n ic ip a l Year Book, 1902
P u b lic U t i l i t y R a te s.
Board o f P u b lic U t i l i t i e s ,
R e p o rt.
C ity o f Los A n g e le s, T e n th Annual
B ra cke n b u rg , B .A .
C o m p e titio n i n S m all C it y P u b lic U t i l i t y
O p e ra tio n .
E le c t r i c a l W orld, J u ly 3, 1915.
Burns & M cD onnell,
C o n s u ltin g E n g in e e rs , Kansas C ity , Mo.
One Hundred Reasons f or M u n ic ip a l O w nership.
B y lle s b y , H.M.
P.210 o f Samuel I n s u l l ’ s Book, Op. C it .
C o rd e a l, E a rn e s t. P le n a ry Powe r f o r P u b lic S e rv ic e Commissions
B a d ly Needed.
C o rde al,
Ea rn e s t.
What the S tre e t Car System Means to the
I n d u s t r ia l F u tu re .
C ham berlain, Wm.
R e g u la tio n of Rates i n Iowa.
E le c t r i c R a ilw a y J o u rn a l, J u ly 5 ,1 9 1 9 .
Cole of Iow a, Supplement 1913, 1919.
Commission and C ourt D e c is io n s .
Am erican C ity ,
C o n c e n tra tio n o f C o n tro l o f P u b lic U t i l i t i e s ,
F e b ru a ry 5 , 1916.
V o l.
22.
E l e c t r i c a l W orld,
Downey,E.H. Urban U t i l i t i e s in Iow a. V o l. I o f Shambaugh's Iowa
A p p lie d H is to r y S e rie s .
D e b a te rs’ Handbook S e rie s ,
M u n ic ip a l O w nership.
Denman, B .J . D ebates B e fo re th e I l l i n o i s
C o n ve n tio n , A p r i l 1 , 1920.
C o n s t it u t io n a l
Des M oines R e g is te r, J u ly 15, 1921.
Development in E
le c tr ic
F e b ru a ry 1920 .
S tre e t L ig h t in g .
American C ity ,
D ouglas, P.H. The S e a ttle M u n ic ip a l S tre e t R a ilw a y S ystem.
The J o u rn a l of P o l i t i c a l Economy. June 1921.
E le c t r ic T ra n s m is s io n L in e Law,
N ebraska.
F o s s e tt, C.M. S e rv ic e a t Cost v s . M u n ic ip a l O wnership.
N a tio n a l M u n ic ip a l R eview . F e b ru a ry 1921.
F o w le r, C .L. L o g ic of C o n s o lid a tio n s .
March 23 , 1918.
E le c t r i c a l W orld .
G runsky, C.M.
and t h e Rate-Base
V a lu a tio n , D e p re c ia tio n ,
H a tto n ,M r.
T estim ony on "Home R u le " B e fo re C o n s t it u t io n a l
C o n ve n tio n o f I l l i n o i s .
A p r i l 1 , 1920.
Hayes, H.V. P u b lic U t i l i t i e s ,
R e tu rn .
T h e ir F a ir P rese nt V alue and
Hagenah, W.J. U t i l i t i e s T u rn to R e g u la tin g Commis s io n s .
E l e c t r i c a l W orld, January 5, 1918.
Holmes, F red L .
R e g u la tio n o f R a ilro a d s and U t i l i t i e s
in W isco n sin .
House B i l l No. 623, S ta te o f Iowa, 1921.
Iv in s & Mason,
The C o n tro l o f P u b lic U t i l i t i e s .
J o u rn a l o f P ro ce e d in g s. The 23rd An n u a l C onvention o f the
N a tio n a l A s s o c ia tio n o f R a ilw a y C om m issioners.
Ke n d a ll, Governor o f Iow a. Veto Message o f S p rin g e r
U t i l i t i e s B i l l , J o u rn a l of the House, P. 1821.
K in g , C. L .
The R e g u la tio n o f M u n ic ip a l U t i l i t i e s .
Laws o f New Y o rk . Chapter 148
Laws R e la tin g t o th e
N o rth C a ro lin a C o rp o ra tio n Commission.
Laws R e la tin g to R a ilro a d s .
M ic h ig a n .
Laws R e la tin g t o the R a ilr o a d and Warehouse Commission.
M in n e s o ta .
Lough, W.H.
B usiness F in a n c e .
Long, G .J. M u n ic ip a l O wnership of C e n tra l S ta tio n s .
Am erican M u n ic ip a lit ie s .
January 1919.
McGraw.
C e n tra l S ta tio n D ir e c t o r y and D ata Book f o r 1919
M orse, G.O. Maquoketa, Iow a .
s h ip , e tc .
L e tte r on M u n ic ip a l Owner­
M a rs h a ll P la n f o r C a lif o r n ia , Map, J o u rn a l o f E l e c t r i c i t y
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