WHAT IS A FAIR PRICE? 171 



Thomas W. D. Worthen, of the Public Service Commission 

 of New Hampshire, states: * 



The amount of return should be such as to provide for the cost of eco- 

 nomical and efficient operation, taxes and depreciation, a fair net return 

 on the fair value of the property devoted to public use, and a proper mar- 

 gin for the successful conduct of the business. Exceptional efficiency 

 of management should receive consideration and encouragement. 



President Wilson, speaking of prices to be paid for commod- 

 ities by the Government in July, 1917, used words which well 

 apply in the water works business. He said: 



By a just and reasonable price I mean a price which will sustain the 

 industries concerned in a high state of efficiency, provide a living for those 

 who conduct them, enable them to pay good wages, and make possible the 

 expansion of their enterprises which will from time to time become neces- 

 sary. ... We could not wisely or reasonably do less than pay such prices. 



In the case of some publicly owned plants, the present 

 practice is to make rates only sufficient to meet the operating 

 charges and interest on the outstanding bonds; and where 

 bonds originally issued have been retired and the present bonded 

 indebtedness represents much less than the value of the plant, 

 rates so made are less than cost. 



When water is sold at less than cost, it means that part of 

 the cost is taken from the accumulations from taxes or water 

 rates of the past, or else that the deficiency is carried forward 

 to be met by future rates. It also ordinarily means that the 

 business cannot be permanently conducted at those rates, 

 because sooner or later extensions will be required ; money must 

 be secured to build them; and charges upon the additions w r ill 

 have to be met. 



There is a difference of opinion as to what should be done 

 in such cases. The writer believes that water should not be 

 sold for less than cost.f He believes that surplus earnings that 

 result because of the previous retirement of bonds should first 

 be devoted to the extension of the plant. This policy system- . 

 atically followed will result in constantly increasing surplus 



* Jour. N.E.W.W. Assn., Vol. XXXI, p. 170, 1917. 



t See " Clean Water and How to Get It," 1907, Chapter XVIII. 



