GETTING THE BUSINESS 213 



well supply of their own, even if it costs them much more than 

 water from the public supply. On the other hand, if the local 

 sources of supply are not of good character they will not be 

 used for domestic purposes even though they are cheaper. 



The competition of the local sources of supply is a very real 

 one in many cases. The water works plant instead of supplying 

 all the water that a community uses only supplies that part of 

 it that cannot be advantageously taken from local sources. 



It does not make much difference whether the water plant 

 is owned by a water company or by a city. In either case the 

 superintendent of the water works is aware of the local sources 

 of water supply and of their uses. He wants to get the business, 

 and there is always a temptation to lower the water rates at 

 any point in the schedule that will make them tempting to any 

 class of prospective consumers. There is a temptation to lower 

 the water rates to a point that will secure the business, even 

 though other rates have to be raised to produce the necessary 

 income. 



In going after this business estimates are sometimes made 

 of the cost of water, which take into account only the operating 

 expenses, and not the charges on the capital that is invested in 

 the supply works. If such a partial estimate is taken as a start- 

 ing point, and water rates are made which are based upon it, 

 they do not reflect the whole cost of the water, and business 

 secured under them will not be profitable in the long run. 



Business obtained on this basis is only advantageous, if at 

 all, during the period when the load factor on the whole plant 

 is low. It ceases to be advantageous and becomes a drag as soon 

 as the business begins to approach the capacity of the plant. 



The idea that the cost of water can be calculated from 

 operating expenses only is obviously wrong, but it keeps coming 

 up in one community after another as rate schedules are dis- 

 cussed and made, and competitive rates are constantly being 

 made that are based upon it. By competitive rates are meant 

 rates fixed with reference to getting business that would other-! 

 wise be supplied by water from local sources. The practical 

 effect is to bring about the use of rate scales having more slide 



