April 18, 1913] 



SCIENCE 



581 



cils would be eori'upted, if necessary, to 

 get what was wanted. And, if the divi- 

 dends were large, as they often were when 

 no standards were set as to the quality of 

 service and no limit set as to price, the 

 capital would be sufficiently watered to 

 keep down the dividends (capitalizing the 

 value of the franchise, it was called). 

 Occasionally a city became so dissatisfied 

 with its gas or water or electric light com- 

 pany (either as to prices or service, or 

 both) that in despair it built a new works, 

 and two plants were operated where one, 

 if rightly managed, would have served the 

 public better. 



ADVANTAGES OF A MONOPOLY 



The change from this condition to the 

 present (at least in certain states) is noth- 

 ing short of revolutionary. It is now 

 coming to be recognized that competition 

 can not regulate rates in public utilities, 

 and that one company can generally give 

 better and cheaper service than two. It is 

 a waste of capital and a disadvantage to a 

 city to have two sets of gas or water pipes 

 in the ground, or two sets of telephone or 

 electric light wires and poles encumbering 

 the streets. Having two telephone com- 

 panies in a city forces a large proportion 

 of their patrons to pay for both services; 

 two street railway systems generally give 

 less satisfactory service and fewer trans- 

 fers than one would do. In short, these 

 utilities are natural monopolies, and the 

 highest efficiency and lowest rates are only 

 possible when each one has the entire busi- 

 ness of a given city or territory. So long 

 as the right to regulate public service com- 

 panies was denied, the idea of granting 

 monopoly privileges was repugnant, and 

 hence competition was encouraged with the 

 hope of escaping the ill effects of unregu- 

 lated monopoly. But now that the right 

 .and duty of regulating all public-service 



corporations is admitted by the companies 

 themselves as well as by the courts, the ill 

 effects of monopoly may be escaped and at 

 the same time the beneficial results of econ- 

 omy and efficiency may be realized. To 

 understand what effective regulation in- 

 volves, we must consider the obligations 

 imposed upon public utility companies, 

 and the character of the service rendered 

 by each. 



When a community grants an exclusive 

 franchise for a term of years or for an 

 indefinite period to a corporation, with the 

 right to regulate the quality of the service 

 it shall render and the prices it may charge 

 for such service, it undertakes a serious 

 responsibility. The interests of the public 

 must be safeguarded, but at the same time 

 the interests of the company and its stock- 

 holders must be respected. A public- 

 service commission, equipped with a full 

 knowledge of the technical, commercial 

 and legal aspects of the business, and en- 

 dowed with a judicial spirit, will see that 

 the following duties are fulfilled by each 

 public-utility company in its jurisdiction: 



1. To perform any duties especially pre- 

 scribed by law. 



2. To serve all who request service and 

 make no discriminations. 



3. To provide safe and adequate service. 



4. To charge just and reasonable rates. 



5. To fulfill its duties to its stockholders 

 honestly and efficiently.^ 



REGULATION OP A GAS COMPANY 



For example, a gas company receives a 

 franchise to manufacture and sell gas for 

 light, heat and power in a given city, for a 



^ This of course supposes that the commission 

 has been given the necessary authority by the 

 state legislature. Many of the public-service com- 

 missions were created as railroad commissions; 

 and of these, some have had their functions ex- 

 tended to cover only a part of the duties men- 

 tioned above. 



