REPORT MAY 5 1920
OF
• *-*
SPECIAL COMMITTEE
TO CONSIDER
THE LONDON SLIDING SCALE OF PRICES
AND DIVIDENDS AS APPLIED TO
GAS COMPANIES,
BOSTON :
WRIGHT & POTTER PRINTING CO., STATE PRINTERS,
18 POST OFFICE SQUARE.
1906.


REPORT
OF '
SPECIAL COMMITTEE
TO CONSIDER
THE LONDON SLIDING SCALE OF PRICES
AND DIVIDENDS AS APPLIED TO
GAS COMPANIES,
BOSTON :
WRIGHT & POTTER PRINTING CO., STATE PRINTERS,
18 POST OFFICE SQUARE.
1906.

CONTENTS.
PAGE
Report, . e º s - o º & tº º tº e 1
Table No. 1, . tº e o t e te e º e 47
Table No. 2, . * c o g © ſº g g tº 49
Table No. 3, . c º tº e º º tº tº ſº 50
Minority Report, . e e e e --> º º º ſº 57
Appendix A, . g º o ſº º e . faces page 80
Appendix B, . e ſº * • As e s G e 81
Appendix C, . tº tº º e e e e o e 85
Commonwealth of ſilaggachusetts.
REPORT OF SPECIAL COMMITTEE ON THE LONDON
SLIDING SCALE OF PRICES AND DIVIDENDS
AS APPLIED TO GAS COMPANIES,
BosTon, Feb. 7, 1906.
To the Honorable Senate and House of Representatives.
The Legislature of 1905 passed the following resolve, which
was approved May 25 and is chapter 101 of the Resolves of
that session : —
Resolved, That the governor be authorized and requested to
appoint, with the advice and consent of the council, two per-
sons, citizens of the Commonwealth, who shall serve with the
members of the board of gas and electric light commissioners
as a committee to consider the automatic and interdependent
adjustment of the price of gas to consumers and the rate of
dividends to stockholders of gas companies, under what is known
as the London sliding scale, with special reference to the ex-
pediency of applying that scale to the gas light companies in
the city of Boston and the town of Brookline. The chairman
of the board of gas and electric light commissioners shall be
chairman of the said committee. The committee may incur
such reasonable expenses as may be authorized by the governor
and council. Before incurring any expense, the committee shall
estimate its probable amount and submit the estimate to the
governor and council for their approval, and no expense shall be
incurred by the committee beyond the amount so estimated
and approved. The members of the board of gas and electric
light commissioners shall serve without compensation, and the two
additional members of the committee shall receive such remuner-
2 SPECIAL COMMITTEE – GAS COS. [Feb.
ation as shall be fixed by the governor and council. The commit-
tee shall report to the general court on or before the second
Wednesday in January" in the year nineteen hundred and six,
with such recommendations for legislation as it may deem ex-
pedient.
Acting under this resolve, Messrs. James E. Cotter of Hyde
Park and Charles P. Hall of Newton were appointed to serve
with the members of the Board of Gas and Electric Light
Commissioners as the committee created by the resolve.
Public hearings were given by the committee.
In accordance with what seemed to be a general public
desire, a majority of the committee visited London and other
cities in Great Britain and Ireland during the latter part of
the summer for a more thorough study of the questions raised
by the resolve. In the pursuit of this inquiry the committee
was most courteously received by members of Parliament,
officials of the Board of Trade and of the London County
Council, engineers and managers of companies, independ-
ent engineers of large experience, editors of the technical
journals and other writers upon problems relating to the in-
dustry, as well as other persons who, because of their relation
to the business, were consulted by the committee. We desire
to most gratefully acknowledge the courtesy shown the com-
mittee as representatives of this Commonwealth, and the
liberal and unrestrained manner in which every one placed
at our disposal his knowledge and experience, all of which
has proved of incalculable value.
The London sliding scale, so called because it was first in
use by certain of the London companies, constitutes an auto-
matic and interdependent adjustment of the price of gas to
consumers and the rate of dividends to the stockholders of
gas companies, and is usually inserted in a company's act in
the following terms : —
The standard price to be charged by the company for gas sup-
plied by them shall be per one thousand cubic feet, provided
that the company may increase or diminish such standard price
subject to a decrease or increase in the standard rates of dividend
as defined by this act, to be calculated as follows: for every penny
or part of a penny charged in excess or in diminution of such
* Extended by resolves of this year to the first Wednesday in February.
1906.] LONDON SLIDING SCALE. 3
standard price in any year the standard rate of dividend shall
for such year be reduced or increased by 5s. in £100 per annum
(3/4 of 1 per cent.).
This principle was first applied in one of the London com-
panies in 1875 and to others in 1876. Since then it has been
extended to 211 companies out of 437 scattered throughout
Great Britain and Ireland.
As this method of adjusting price and dividend was first
applied in the London companies, the reasons for its adop-
tion will be best understood by a brief review of the history
of these companies in their relations to Parliament and the
public prior to 1875.
What we know as London comprises not only the old city
of London, but a large metropolitan area surrounding it. The
city proper includes only a comparatively small area upon the
north side of the Thames, and through the Corporation of
the City of London has its own government distinct from
the other portions of the metropolitan district. In the re-
mainder of this district the general authority was for many
years represented by the Metropolitan Board of Works, while
the control of the streets and the lighting of the same were
in the hands of a large number of local boards or vestries,
each acting exclusively within its own particular district.
The Metropolitan Board of Works was in 1888 succeeded by
the London County Council, which became in many ways the
general authority over the metropolitan district. The Board
of Trade, which at intervals has taken an active interest in
the relations of the companies to the public, is a department
of the general government, whose administration extends
throughout the kingdom.
It is important to note that all parliamentary legislation
respecting gas companies is by special or private acts applied
to individual companies rather than by general legislation, as
is the ordinary practice in this Commonwealth. Certain acts,
general in their character, language and purpose, have been
passed, to be applied to all the companies, but contain a pro-
vision to the effect “that this act shall extend only to such
gas works as any act of Parliament hereafter passed shall
declare that this act shall be incorporated there with,” so that
4 SPECIAL COMMITTEE – GAS COS. [Feb.
such general acts do not on their passage apply to all com-
panies, but only to such companies as Parliament shall there-
after declare that they apply to. Such general acts do not
contradict the statement that all legislation affecting such
companies is essentially by special or private act.
A special act or charter from Parliament is not an essen-
tial prerequisite to the carrying on of the gas business.
Companies may be organized under the general trading com-
pany acts, without going to Parliament; and several of the
London companies originally carried on this business for some
years after being organized for that purpose, but without par-
liamentary authority. This practice has been followed to the
present day, and there are many companies making and selling
gas in Great Britain who have no parliamentary act, being
known as non-statutory companies.
Although the assent of Parliament is not an invariable pre-
requisite to the conduct of the business, the general provisions
of the charters when granted seem to enlarge and more clearly
define the powers of the companies in many ways, particu-
larly as to their rights in the public streets, and such powers
are likely to become highly desirable at some stage of a com-
pany’s experience. On the other hand, since application to
Parliament is optional, the particular kind of legislation
obtained is to a large measure a matter of agreement between
Parliament and the companies. Parliament does not under-
take to legislate for such companies, except upon their own
request, and if this request, once made, be withdrawn, all
pending legislation relative thereto is abandoned.
The first company in the world for the general manufac-
ture and distribution of illuminating gas, and now the largest,
was incorporated by Parliament in the city of London as The
Gas Light and Coke Company in 1812. This company has
been popularly known as The Chartered Company. This was
followed in 1817 by The City of London Gas Light and Coke
Company, also for the city proper. In 1818 the Phoenix Gas
Light and Coke Company started as the first company on the
south side of the river, working until 1824 without parlia-
mentary authority. In 1821 the Imperial Gas Light and
Coke Company was chartered as the first company outside of
1906.] LONDON SLIDING SCALE. 5
the city proper upon the north side of the river. The Com-
mercial Gas Light and Coke Company and the Ratcliffe Gas
Light and Coke Company were chartered in 1823 for the
easterly portion of the metropolitan area outside the city on
the north side of the river. All these companies, upon receiv-
ing parliamentary authority, were confined to specific areas
which were mutually exclusive.
In 1830 the Equitable Gas Light Company began as a
competing company on the north side of the river in the
metropolitan district outside the city; in 1834 the South
Metropolitan Gas Light and Coke Company began as a com-
peting company on the south side of the river, and in 1853
the London Gas Light Company began in the metropolitan
district outside of the city on both sides of the river, and
these three companies continued as non-statutory companies
until chartered by Parliament in 1842. The districts within
which these companies might supply were carefully prescribed
in the act of each, but these districts were, to a considerable
extent, coincident with those of companies previously in op-
eration, and Parliament thus for the first time recognized the
competitive principle as applied to such companies.
In 1844 the Western Gas Light Company, Limited, began
as a competitive company for the supply of cannel gas only
in the western portions of the metropolitan district, but never
sought parliamentary approval. In 1848 the Surrey Con-
sumers Gas Company was organized as a competitive com-
pany south of the river and the Great Central Gas Consumers
Company for a like purpose in the city proper. The former
received its charter in 1855, the latter in 1851, by which date
it had mains in all the streets of the city proper and was in
competition with both the Chartered and the City of Lon-
don companies.
It is worthy of note that, with the possible exception of the
Great Central, all these competing companies carried on a
business for several years without parliamentary authority.
The organization of these companies appears to have been
encouraged by the local boards or vestries who had in charge
the public lighting, and, having authority so to do, were ready
to grant privileges in the streets in exchange for substantial
6 SPECIAL COMMITTEE – GAS COS. [Feb.
concessions in the price of street lights. Their prices to ordi-
\nary consumers were not materially different from the other
companies, but large consumers found ample opportunity for
special bargaining in the existence of rival concerns. While
the powers of all these competing companies were confined
within specific districts, none of them outside of the city
proper pretended to thoroughly occupy their district, none
of them were burdened with compulsory supply restrictions,
and the active competition was limited to those areas which
seemed to be commercially attractive.
The Commercial, Independent and Ratcliffe companies had
no competitors in their territory, but the Equitable was in
competition with the London and Chartered ; the Imperial
with the Western and London; the London with the Imperial,
Equitable and Western on the north side of the river, and the
Phoenix and South Metropolitan on the south side; the City
of London in the city proper with the Chartered and Great
Central; the South Metropolitan with the Phoenix, London
and Surrey Consumers on the south side ; the Chartered with
the City of London in the city proper, and with the Equitable
and London on the north side outside the city; and the Surrey
Consumers with the South Metropolitan and Phoenix on the
south side.
This competition led to an extravagant expenditure of
money, both for construction and operation, and was so mani-
festly against the interests of the companies involved that by
1853 those on the south side of the river, by a series of mutual
agreements, divided that territory among themselves, each
company acquiring a district from which every other com-
pany was excluded, and four years later a similar arrange-
ment was effected among the companies on the north side.
With the exception of the city proper, where the price re-
mained at 4s. (97 cents), this districting arrangement was
followed by an increase of 6d. (12 cents) per thousand in the
price of gas to private consumers and by much larger ad-
vances in the prices for street lights. In the city proper, from
1823, when gas first began to be sold by meter, to 1848, when
the Great Central was organized, the price had gradually
fallen from 15s. ($3.64) to 6s. ($1.45) per thousand, and to
1906.] LONDON SLIDING SCALE. 7
4s. (97 cents) in 1849, just previous to the completion of the
works of the Great Central. Outside the city on the south
side of the river the price had fallen in 1852 to 4s. (97 cents)
and upon the north side in 1851 to 4s. 6d. ($1.09).
The effect of districting became almost immediately ap-
parent in the improvement of the finances of all the companies
and a steady increase in their dividends, but the efforts of the
public to secure a reduction in price were unavailing, and nu-
merous complaints, incidental to the possession of a monopoly,
arose. This led to an organization of consumers, and attempts
by them and a union of the vestries in 1858 and 1859 to
secure remedial legislation, but without success. In 1860
another attempt was made, which resulted in the passage of a
bill known as the Metropolis Gas Act of 1860.
In order to more clearly grasp the situation created by this
act it is necessary to refer to a previous act, which proved a
troublesome factor in the later controversies. In 1847, so
many gas works had been established in different parts of the
kingdom under special acts that it was thought advisable to
pass a general act, embodying the leading features of previ-
ous legislation, which act might be included in all sub-
sequent charters, with only such modification as peculiar
conditions might seem to demand. This act of 1847 con-
tained the following very important provisions with respect
to dividends and price: “The profits to be divided in any year
shall not exceed the prescribed rate (in the special act), or,
where no rate is prescribed, 10 per cent. upon the paid-up cap-
ital, unless a larger dividend be necessary to make up the
deficiency of any previous dividend which shall have fallen
short of the said yearly rate.” It was also provided that if'
the profits in any year were more than enough to pay such
dividend the excess must be invested as a reserved fund,
“in order that the same may accumulate at compound interest
until the fund amounts to the prescribed sum (fixed by the
special act), or to one-tenth of the nominal capital.” This
reserved fund was “to answer any deficiency which may at
any time happen in the amount of divisible profits, or to meet
any extraordinary claim or demand which may at any time
arise.” If the fund was at any time reduced, it might be
8 SPECIAL COMMITTEE –GAS COS. [Feb.
thereafter again restored and as often as the reduction should
happen. When the reserved fund was fully made up to 10
per cent. of the nominal capital, the income of it was to be
used for the general purposes of the company to which their
profits were applicable. If in any year the profits did not
amount to the prescribed rate of 10 per cent., enough might
be taken from the reserved fund so that, with the divisible
profits earned during the year, the full dividend authorized
might be paid. After the reserve fund was fully made up,
and the authorized dividends had been paid, then certain ju-
dicial authorities might, on petition after an examination by
an accountant and a hearing, require a reduction in the price
of gas, fixing only such price as “shall insure a profit as near
as may be to the prescribed rate.” If no reduction was made,
the petitioner might be liable for costs.
As all the London charters antedated the act of 1847, none
of them were subject to the provisions of that act except the
Imperial, which, though chartered at an earlier date, came in
1854 to Parliament for additional powers, and, in securing
these, accepted the act of 1847.
Of the 13 companies only 5 had any specific powers or
restrictions respecting price, 2 were limited to 6s. ($1.45), 1
to 5s. 6d. ($1.33), 1 to 5s. ($1.21) and 1 to 4s. (97 cents).
Only 6 out of the 13 had any restriction as to dividends.
These 6 were limited to a maximum of 10 per cent., with
authority to make up back dividends to that amount for any
time they had been below. Four only out of the 13 had any
legal standard of candle-power, that of 1 being 12 sperm
candles and the other 3 12 wax candles, which was a lower
standard. None of the companies were subject to any regula-
tion as to purity. None were compelled to supply gas, even
in the street actually occupied.
The act of 1860, whose declared purpose was to better reg-
ulate the supply of gas in the metropolitan area, fixed the
minimum candle-power of all the companies at 12 sperm
candles, made certain requirements as to purity, and provided
for a compulsory supply by the companies at the discretion
of a court of law. It sanctioned the districting as arranged
by the companies, and provided that no company or person,
1906.] LONDON SLIDING SCALE. 9
other than the company to whom the district was assigned,
should supply gas for sale within its limits unless authorized
by Parliament so to do. It fixed the maximum price to pri-
vate consumers at 4s. 6d. ($1.09), which was the highest price
charged at the time, and applied the entire act of 1847, in-
cluding, of course, the provisions above recited, to all the
companies.
While this act gave to the public some new advantage in
respect to quality and service, it made no reduction from the
prevailing price. The bill was originally reported with a
maximum dividend provision of 8 per cent. and a price of 4s.
(97 cents), but it was recommitted in a way which practically
bound the committee to a 10 per cent. dividend and a price
of 4s. 6d. ($1.09). The committee refused to approve the
bill with these changes, being unwilling to give the companies
a monopoly with the privileges contained in it, but returned
the bill with a recommendation that the whole subject should
be taken up by the general government, with a view to intro-
ducing, at the ensuing session, a measure for the regulation
of the companies in their several districts which should have
due regard to the interests of the public. This report was
made in the latter part of July, but the bill was passed and
became a law on Aug. 28, 1860.
After the passage of this act of 1860 the companies, which,
previous to the districting, had paid no dividends, or only
very moderate ones, gradually increased them to the maximum
fixed by the act, and in many cases paid substantial sums
toward back dividends for the years in which these had been
less than 10 per cent. The South Metropolitan, in marked
contrast to most of the others, refrained from dividing the 10
per cent. authorized by the act of 1860, although it was fully
earned, and adopted the policy of using a liberal share of its
profits to build up the reserve authorized by the act, and in
the development of its plant for the purpose of restoring its
capital, which had been impaired through the losses incident
to the mistakes of its earlier years and the competitive period.
By the policy of making gradual reductions the Phoenix
reached 4s. (97 cents), and the Independent (a small com-
pany on the north side) and the South Metropolitan 3s. 4d.
10 SPECIAL COMMITTEE – GAS COS. [Feb.
(81 cents) in 1865. With the exception of the Commercial,
Equitable and Imperial, which reduced to 4s. (97 cents) in
1865, all the other companies continued to charge the statu-
tory price of 4s. 6d. ($1.09). The companies in the city,
which prior to the act of 1860 had kept the price at 4s. (97
cents), because that was the limit of price in the charter of
the Great Central, promptly thereafter raised the price to
private consumers to 4s. 6d. ($1.09), while the price for
public lamps in 1863–65 reached the highest point ever
known.
Attention was also directed to the very unequal privileges
conferred upon the companies by the uniform dividend limit
of 10 per cent., in view of the widely varying earning powers
of the companies, to which, apparently, but little attention
had been given in the consideration of the act.
The capital for every hundred pounds of income varied
from £243 in the South Metropolitan to £583 in the London,
and for every ton of coal carbonized it ranged from £4.35 in
the Independent and £4.74 in the South Metropolitan to
£7.69 in the London and £10.89 in the Western. To pay a
dividend of 10 per cent. required all the way from 11d. (22
cents) in the Independent to 2s. (48 cents) in the Western.
These conditions brought the Corporation of the City of
London in 1866 to Parliament, seeking authority to estab-
lish a competing supply. The city's bill, petitions from vari-
ous local authorities for the repeal of the act of 1860 and
bills of the Chartered and City of London companies for fur-
ther powers were referred to the same committee of the Com-
mons, which was instructed to inquire into the operation and
results of the 1860 act.
The committee reported that in many large towns gas of
better quality and a higher candle-power was sold at a lower
price than in London; that the candle-power ought to be in-
creased and the maximum price reduced; that the power of
making up former deficient dividends was injurious to the
public and should be further restricted ; that under the exist-
ing law losses due to neglect of the management had been
charged on the surplus profits, amounting in a single instance
to more than £25,000, by which the public had been deprived
1906.] LONDON SLIDING SCALE. 11
of a reduction in price and the consumers had borne the en-
tire burden of the company’s default; that the system of
districts should be continued with a view to economy in ad-
ministration and the convenience of the public ; that other
facilities should be afforded for the further extension of the
system of regulated monopoly, either through amalgamation
of the existing companies or the disposal of their interests to
some body or bodies representing the taxpayers, on such terms
and conditions as might be agreed upon and Parliament might
impose, and asked that the act of 1860 should be amended
to carry out these suggestions. Notice having been given by
the Board of Trade that the government proposed at the next
session to take up the question of the regulation of the com-
panies in the general interest of the metropolis as a whole, the
city afterward withdrew its bill and there was no legislation.
Incidental to the declared purpose of the government to
promote a bill for the more efficient control of the companies,
or for their purchase by the city, the Metropolitan Board of
Works, the city of London and delegates from various ves-
tries and district boards pressed upon the Board of Trade
their views. The delegates of the vestries and district boards
urged that the bill should include a maximum price of 3s.
(73 cents) for 15 candle-power gas; that it should provide
for an examination by the Board of Trade of the capital ac-
counts of the companies to determine “the real and proper
amounts” of capital and the rates of dividend to which each
company was entitled; that, if not purchased by the repre-
sentatives of the taxpayers, the existing companies should
consolidate so as to limit the number to two north and two
south of the river; that the capitalization of profits be pro-
hibited, and where any such capital had been created divi-
dends thereon should be limited to 3 per cent. ; that the cost
of accidents and penalties incurred should be deducted from
the 10 per cent. dividend absolutely, and that the Metropoli-
tan Board of Works and the Commissioners of Sewers of the
city should be empowered to purchase the works, respec-
tively, of the companies outside and inside the city, and that
the terms and conditions of the supply by them and the price
to be paid for the properties should be settled by the bill.
12 SPECIAL COMMITTEE –GAs Cos. [Feb.
The Board of Works urged that the maximum price should
be fixed at 3s.6d. (85 cents) and the candle-power at 18; that,
if the bill should give the Board authority to purchase the
properties of the companies, the terms of the purchase should
be fixed by the act, and the amount to be paid should not
exceed a fixed charge of 6 per cent. on the established capital
of the company. In urging these propositions, along with
numerous others of minor importance, the Board of Works
assumed that the principle of competition had been formally
abandoned, and that, subject to the maximum dividend of
10 per cent., the companies had all the advantages of an un-
restricted monopoly. The Board claimed that, although the
financial condition of the companies, when the act of 1860 was
passed, afforded small ground for thinking that the maximum
dividend would speedily be reached, the economies effected by
the districting, the increased population and the more general
use of gas had made this maximum the rule without the con-
Sumer obtaining any corresponding advantage, some compa-
nies having within six years paid back dividends of 20 and 24
per cent... in addition to the current 10 per cent. ; that under
the act there was no demand for skill, and that improvement
in manufacture was actually impeded; that as long as the
shareholders received their maximum dividend they had no
inducement to apply increased intelligence or greater econ-
omy, and that carelessness and extravagance might be ex-
pected rather than cheaper gas; that the representative of the
companies had admitted that it was their first care to keep
the dividend at 10 per cent., then to make the reserved fund
up to one-tenth of the capital, and not until this fund is com-
pleted is any excess of profit to be applied to reduce the price ;
that, moreover, the companies can and do take out of the re-
serve whatever may be necessary to make up the 10 per cent.
dividend, so that practically this dividend is guaranteed before
the price is reduced, and that the public is deprived of all con-
trol over them. The Board of Works further expressed their
disbelief that Parliament, in fixing the maximum at 10 per
cent., intended to guarantee a 10 per cent. dividend; that
while the price of 3s.6d. (85 cents) proposed by them would
require increased exertions, improved apparatus and higher
1906.j LONDON SLIDING SCALE. 13
skill to approach the present dividend, the Board contended
that the possession of a monopoly entitled the public to de-
mand such exertions, and, in support of the belief that under
such conditions the companies would be successful, cited the
experience of the companies outside of London, and particu-
larly of the South Metropolitan and Independent, then selling
at 3s. 4d. (81 cents) per thousand. The city of London sup-
ported the views of the Board of Works, specially urging that
the capital accounts of the companies should be revised so as
to ascertain and declare by the act upon what amount the com-
panies were entitled to their 10 per cent. dividend.
The companies expressed to the Board of Trade a willing-
ness to increase the candle-power from 12 candles, fixed in the
act of 1860, to 14, but claimed that 18 candles at 3s. 6d. (85
cents) would result in an actual loss, and that 3 of the com-
panies at that time selling 12 candles at 4s. (97 cents) had
been unable to earn their 10 per cent. They further insisted
that upon the faith of the act of 1860 they had expended a
capital of more than £6,000,000, and that the act constituted
a parliamentary settlement which ought not to be disturbed;
that to in any degree cut down their capital, which had been
legally raised and expended, would be an actual confiscation
of the shareholder's property.
After considering the position of all the parties in interest,
the Board of Trade promoted in Parliament, in 1867, as an
amendment of the act of 1860 and as one result of the report
of the committee of 1866, a bill which fixed a maximum price
of 3s.6d. (85 cents) for 14-candle gas, limited the dividend
to 7 per cent., if that price was charged, with power to in-
crease the dividend according to a fixed scale when the price
actually charged should go below 3s.6d. (85 cents). Since
these features would deprive the companies of the right to a
10 per cent. dividend which they held under the act of 1860,
they opposed its reference to a committee as a breach of a
parliamentary bargain upon the faith of which they had in-
vested their money, and by interesting the gas, water and
railroad companies generally throughout the kingdom, made
such a demonstration of their strength that the government
was convinced of its inability to get the bill to committee,
14 SPECIAL COMMITTEE – GAS COS. [Feb.
and made an effort to come to an understanding with the com-
panies. The Board of Trade accordingly offered, on condition
of the withdrawal by the companies of their opposition to
the consideration of the bill by a committee, to substitute for
the clauses fixing the price some scheme to raise or lower it
by arbitration, if circumstances required; to let the dividend
for each company be fixed at the average of the actual divi-
dend paid during a certain number of years to be determined
by the committee; to let the dividend rise in proportion to
the reduction of price from the price determined by the com-
mittee, and be again reduced if the price be afterwards raised;
but the companies insisted that the price should be determined
only by Parliament, and, in so determining, Parliament
should have regard to the rate of dividend then allowed, which
should under no condition be disturbed, offering to allow the
dividend to rise from that point in proportion to a reduction
in price, and if the price were afterwards raised, that it be re-
duced, but not below the prescribed rate of 10 per cent.
The Board of Trade contended that, if it were only a ques-
tion of the maintenance of the act of 1847, the Board would
not dispute the companies’ position, but that the operation
of the principle of that act was entirely altered by the act of
1860, which gave a complete monopoly. Since the history of
the gas supply from its introduction had shown a constant
reduction in cost, and the present circumstances of the supply
in London especially led to the conclusion that there was
much room for improvement in manufacture and for future
reduction, the government insisted, in view of the strict and
complete monopoly existing in London, upon a provision in
the bill for varying the price if circumstances change, either
upwards in favor of the companies or downwards in favor
of the consumer, as the case may be, and upon substituting
for the existing rule limiting the maximum profits to 10 per
cent., thus destroying all motive for exertion, a sliding scale,
of which the lowest point should be the actual profits of the
company, as calculated on the average of a certain number of
years, to be determined by the committee, and capable of
rising indefinitely in proportion as the price of gas might be
lowered.
1906.] LONDON SLIDING SCALE. 15
The companies responded with an acceptance of the prin-
ciple that provision might be made for varying the price
either upwards or downwards, if circumstances changed, as
they might require, and of the substitution of a sliding scale
for the existing 10 per cent. maximum, which might not be
inconsistent with the act of 1847, declaring that the provi-
sions of the pending bill were framed in such a manner as to
break faith with the shareholders in all joint stock under-
takings representing more than five hundred millions of
capital, and that they could not conceive that the government
would persevere in a course so contrary to public policy.
The Board of Trade replied to the companies in defence of
its position, refusing to concede to them the right of making
larger, perhaps much larger, dividends than the existing limit
of 10 per cent. unless a concession was made in the price,
but showed an earnest desire, however, to secure some ra-
tional settlement of the existing controversy, and assumed
that the committee would make some provision in the direc-
tion suggested.
The government expressed a willingness to accept 10 per
cent. as the basis of the sliding scale, except for the difference
in the circumstances of the companies. The unequal profits
which would accrue to the different companies on the basis
of uniform price was a difficulty to be obviated by taking the
average profits of each company as a basis, instead of a uni-
form 10 per cent. The government finally consented that
the bill might go to the committee without the provision re-
pealing that section of the act of 1860 which incorporated
the act of 1847 (the 10 per cent. dividend provisions), and
with blanks in the bill for both the price and candle-power.
The government specifically denied the assertion of the com-
panies that the bill as presented involved any breach of faith
whatever with the gas companies, and still less that it affected
any other class of companies, and warned the companies that
the bill had been prepared for the express purpose of making
possible a recommendation for the maintenance of the mo-
nopoly, given in 1860, without injury to the public; and that,
if the companies refused to accede to such changes as after
full inquiry might be thought necessary for mitigating the
16 SPECIAL COMMITTEE – GAS COS. [Feb.
inconvenience of that monopoly, Parliament might be obliged
to consider whether it were right to leave them in possession
of it. The bill, in fact, reached the committee not only
modified as to concessions made by the Board of Trade, but
with the provision authorizing the Board of Works and the
Commissioners of Sewers to purchase the undertakings of
the companies omitted.
The Board of Trade promoted the bill before the commit-
tee, but upon the distinct understanding, in accordance with
their agreement with the companies, that the 10 per cent. fixed
by the act of 1847 should be retained on the same basis; and
made no proposals for filling the blanks, although the way in
which they should be filled really constituted the principal
question in dispute. The Board of Works and Corporation
of London, representing the consumers, opposed the bill.
The difficulties with which the situation had become sur-
rounded were reflected in the embarrassment which attended
the committee in its efforts to deal adequately with the sub-
ject. The action of the House of Commons in the commit-
ment of the bill convinced the committee that however clear
and great the advantage of a single supply under conditions
securing to the consumer all he is entitled to might be, yet
a compulsory and unconditional interference with the prices
already conceded to the companies was a weapon which Par-
liament would certainly not apply ; that a legitimate weapon
was an act for an independent supply, but that the com-
mittee could not report a bill for that purpose because there
was no such bill before Parliament. At the end of a
protracted inquiry the committee was convinced that the
arrangements sanctioned by the act of 1860 were eminently
favorable to the companies and very inadequately protected
the interests of consumers. During the hearing the compa-
nies, while insisting that the price and candle-power should be
consistent with 10 per cent., offered to accept 4s. (97 cents)
and 14 candles in place of 4s. 6d. ($1.09) and 12 candles,
fixed by the act of 1860. After the agitation of the preced-
ing session reductions had been made so that no company
at this time charged more than 4s. (97 cents); the South
Metropolitan and Independent were charging only 3s. 4d.
1906.] LONDON SLIDING SCALE. 17
(81 cents), and the evidence before the committee showed
that the gas then supplied by all the companies was fully
equal to 14 candles.
After completing the hearing the committee made a deter-
mined attempt to secure further concessions from the com-
panies. They stated to them their conclusions that the
consumers’ interests demanded either effective competition
or effective regulation of an exclusive supply; that neither
of these was adequately attained under the act of 1860; that
they considered an exclusive supply, with due control by an
amendment of the act of 1860, preferable to the introduction
of competing works; that any settlement must provide for
improved administration and reduced expenditure, which the
committee thought might be attained by consolidating some
of the companies and improving the arrangement of districts.
The committee intimated that they would not entertain pend-
ing bills of the Chartered and Imperial companies, referred
to them, unless sqme satisfactory basis for settling the general
questions could be reached.
In response to this the companies renewed their proposi-
tion for a price of 4s. (97 cents) and 14 candles, but being
scarcely able, with a twelve months’ experience with this price,
to maintain the parliamentary dividend (10 per cent.), held
that any lower price was impossible until the increase of
consumption should warrant it. They offered to effect amal-
gamation among themselves and a rearrangement of the dis-
tricts so as to avoid unnecessary outlay of capital, and make
the advantages possessed by every company generally avail-
able.
The committee refused to accept the offer of 4s. (97 cents)
for 14-candle gas, but offered to make a price which, “after
making adequate allowance for reduced expenditure, should
be calculated to yield, with due care and management, a divi-
dend attaining or at least approaching” 10 per cent. upon
the capital already issued, with a provision for periodical re-
vision of price conformable to this principle, and notified the
companies that unless they accepted these proposals the com-
mittee would report that the local authorities of the metrop-
olis should have the power to supply gas.
18 SPECIAL COMMITTEE – GAS COS. [Feb.
Following this, the Board of Trade and the companies
united in a proposition to reduce the price from Jan. 1, 1869,
to 3s. 9d. (91 cents), and to raise the candle-power to 16,
with a provision for a scheme of amalgamation ; also with a
provision for periodical revision of price and candle-power
whenever the increase of consumption and improved admin-
istration of the works under the new arrangement should
make it necessary to do so in order to secure from time to
time terms fair to shareholders and consumers. The plan
included the auditing of accounts, inspection of works and
periodical arbitration under the control of the Board of Trade.
The Board of Works proposed as a compromise that the
price and candle-power named might be fixed for three years,
after which the price should fall to 3s. 6d. (85 cents), sub-
ject to arbitration in case the cost of materials and labor had
increased in the interval. The committee, however, declined
to accept this suggestion, in view of the fact that the price
had always steadily decreased from one interval of time to an-
other, that the annual increase of sales was considerable, and
that for this reason the plan of periodical revision would be
better for all parties. The committee expressed its belief that,
with a consolidation of companies, an effective supervision
and a scheme of arbitration by which the consumer would
have “the prospect of reaping periodically the full benefit of
improved administration and increased consumption,” were
“more advantageous to the consumer and more just to the
companies” than the proposal of the Board of Works, which
contained no provision for future reduction in price or in-
crease in candle-power. The 3s. 9d. (91 cents) for 16 candle-
power was considered by the committee equal to the price of
3s. 4d. (81 cents) for the 14 candle-power of the South
Metropolitan and Independent companies.
It only remained for the committee to settle upon the terms
of the arbitration features. The committee had stated that
it intended the price to be from time to time so calculated as
to yield the maximum dividend “if the companies exercised
due care and management, but not to guarantee that dividend
irrespective of such care and management.” The Board of
Trade proposed accordingly the following provision : “They
1906.] LONDON SLIDING SCALE. 19
[the arbitrators] shall fix such an illuminating power and
such price as shall be calculated to yield to the company, with
due care and management, a dividend in that year attaining
or at least approaching the rate of 10 per cent. per annum,
and to make up any deficiency of their dividend in the then
last preceding year authorized by this act to be made up.”
The companies opposed this on the ground that the expression
‘‘ or at least approaching” was not sufficiently explicit, and
did not give them their statutory dividend, while the Board
of Works and the city objected on the ground that it amounted
to a guarantee of that statutory dividend. The committee
modified the clause by striking out the provision about mak-
ing up back dividends and substituting the words “as near as
may be "for the words “ or at least approaching,” making
the proposition read as follows: “They shall fix such an
illuminating power and such a price as shall be calculated to
yield to the company, with due care and management, a divi-
dend in that year attaining as near as may be, but in no case
exceeding, the rate of 10 per cent. per annum.” The com-
panies persisted in their objection to this, the committee
would not yield the point, and, under the usual practice, the
further progress of the bill thus became impossible.
In its final report the committee refused to recognize as
just the construction which the companies placed upon the
combined operation of the acts of 1847 and 1860, claiming
that the former was intended for the regulation not of 13
companies in London, acting upon an exclusive system, but
for the regulation of all the companies in the country, which
would be subject not only to the act of 1847 but to the pos-
sible competition of other companies. As the metropolitan
companies in 1860 had not generally attained the 10 per cent.
limit, the possibility of that limitation being interpreted to
convey a right to the statutory dividend of 10 per cent. was
probably not as clearly understood as from later experience
and discussion. The committee further, while feeling them-
selves not at liberty to interfere with the enactments of 1860
in that respect without the consent of the companies, stated
clearly that they considered the view of the companies a de-
parture from the intention with which the limit of 10 per cent.
20 SPECIAL COMMITTEE –GAS COS. [Feb.
was originally prescribed by Parliament. As the Chartered
and Imperial companies, having bills before the committee
for additional powers, had declined to accept the conditions
which the committee thought ought to be applied to the
companies generally, the committee rejected both bills.
Realizing that the difficulties presented to the committee
would attach to any general bill not assented to by the com-
panies for the regulation of their monopoly, and the improb-
ability of any new private company undertaking to compete
with the existing companies, the committee in conclusion
recommended that, unless such terms as the committee had
contended for could be arranged with the companies, the
Board of Trade should abstain from introducing any other
measure like the pending bill, and that every facility should
be afforded by Parliament in the session of 1868 to empower
the local authorities to introduce an independent supply.
The proceedings in this committee have been recounted at
such length because they exhibit so clearly the extent to which
the consumers and every local and governmental authority had
lost control over the companies, and the very narrow range of
opportunity remaining to the representatives of the consumers
for securing an improvement in price or enforcing economy
and skill in the management. Although no legislation fol-
lowed the report of the committee, its finding and recom-
mendations were not without effect.
In the following year, with the assent of the companies, an
act was passed known as the City of London Gas Act, 1868,
embodying substantially the views of the committee of 1867.
Power was giving to the Corporation of the City of London
to purchase within three years the undertakings of the com-
panies within the city limits; power to the companies to con-
solidate with the approval of the Board of Trade, with a view
to a reduction of expenditures; the profits were not to exceed
10 per cent. or other prescribed rate; a reserve to the extent
of 1 per cent. per annum upon paid-up capital might be
created to the amount of one-twentieth of the total paid-up.
capital, to be used “to meet any extraordinary claim or de-
mand which might at any time arise, which due prudence and
management could not have prevented,” and this reserve, if
1906.] LONDON SLIDING SCALE. 21
reduced, might be again made up; until Jan. 1, 1870, the
price was to be 4s. (97 cents) for 14 candle-power, and the
maximum price after that date was fixed at 3s. 9d. (91 cents)
for 16 candles; the city of London or any company might
apply in January of any year to the Board of Trade for the
revision of the candle-power and price for that year, and the
application should be heard by commissioners appointed spe-
cially for the purpose by the Board of Trade.
The rules governing the action of these revision commis-
sioners were very explicitly laid down in the act and may
have been the principal inducement to the companies to ac-
cede to its other provisions. These rules were as follows: —
1. They shall fix such an illuminating power and such a price
as shall be calculated to yield to the company, with due care
and management, a dividend in that year (after allowing for
the excess or surplus, if any, carried in the then last preceding
year to the credit of the divisible profit and to the insurance
fund of the company) attaining as near as may be, but in no
case exceeding, the rate of 10 per centum per annum, and to
make up the insurance fund authorized by this act to be made up.
2. They shall take into account any saving or economy which
they shall be of opinion might have been effected by amalgama-
tion of the companies, or any of them.
3. They shall not fix in any case an illuminating power lower
or a price higher than the minimum of illuminating power and
maximum of price prescribed by the act of 1860." -
4. Subject to the foregoing provisions, they shall fix the illu-
minating power as high and the price as low as circumstances
admit.
By the Gas Light and Coke Company’s act of the same year
the Metropolitan Board of Works obtained the same powers
as the City of London in regard to that portion of the com-
pany’s undertaking which was outside the city proper. In
1869 a similar act was passed for the Imperial and the South
Metropolitan companies, the Metropolitan Board of Works
having the same powers as the City of London in the act of
1868, and the maximum price in the case of the Imperial
being 3s. 9d. (91 cents) and for the South Metropolitan 3s.
* Twelve candles and 5s. 6d. ($1.33).
22 SPECIAL COMMITTEE –GAS COS. [Feb.
6d. (85 cents), both prices for 14 candles. The other com-
panies remained subject to the act of 1860.
Pursuant to the powers contained in the act of 1868, the
Chartered amalgamated with the City of London and the
Great Central in 1870, bei?g all the companies supplying
the city proper, in 1871 with the Equitable and in 1872 with
the Western.
There was no application on behalf of the consumers to
invoke the price revision powers contained in the acts of 1868
and 1869, but there were three applications by the companies,
—two by the Chartered company and one by the Imperial.
In the latter part of 1872 the price of coal advanced by about
50 per cent. Over the preceding year, and there was another
advance in 1873. This brought the Chartered company, first
in 1873 and again in 1874, and the Imperial, also in 1874,
to the Board of Trade to secure an increased price under the
provisions of the acts of 1868 and 1869. A special commis-
sion of three was appointed for each petition, and the same
persons were named in all the cases. The city opposed the
first of these 'applications and the Board of Works all three.
There seems to have been a very careful investigation of the
companies’ affairs in each case. In 1873 the commissioners
raised the price for the Chartered to 4s. 4d. ($1.05), in 1874
the price for the Imperial to 4s. 8d. ($1.13) and for the
Chartered to 5s. ($1.21).
In considering these cases there was a plain endeavor on
the part of the commissioners in reaching their conclusions
to give full force to the statutory words “due care and man-
agement.” In the 1873 case of the Chartered they disallowed
from the data submitted by the company for calculating the
price, among other items, one of £5,000, which had been car-
ried forward as a portion of the cost of a strike in the year
preceding, and another item of £5,000 for making good in
part a defalcation that had occurred in the Great Central
Company before amalgamation, and which, under the scheme
of union, the Chartered company was bound to make up, and
they assumed in their calculations an increase of 7 per cent.
in the output. The commissioners, guided by the advice of
the law officers of the crown, found that, considering all the
1906.] LONDON SLIDING SCALE. 23
terms of the law under which they were acting, they had no
right, in the consideration of “due care and management,”
“to inquire into the question of an injudicious or unduly
burdensome mode of raising money, or into the question of
an excessive expenditure of capital upon the works, or whether
or not capital raised and unexpended was required.” Al-
though it was plain that in the years when the prices of ma-
terials were low these companies had not set aside the amount
allowed for the insurance or reserve fund, yet the revision
commissioners found themselves bound by the law to add to
a price otherwise high, on account of the increased cost of
material, a further sum sufficient to make up the full annual
amount permitted by the law for this fund. In the 1873 case
of the Chartered company this amounted to £29,000. The
price was made accordingly, and although the increase of out-
put during the year to which the price applied was only 2%
per cent., the company paid its full statutory dividend, and
all the items which the commissioners had refused to include
in their calculations, but in so doing exhausted the sum al-
lowed as the reserve. -
Clearly the act of 1868 had utterly failed to meet the ex-
pectations of the committee of 1867, and as a device for regu-
lating the companies in the interest of the consumers had
completely broken down. In view of the necessity for pro-
viding in the price a large amount for insurance fund, and
of the right of the company to take the money thus provided
to make good its maximum dividend, as well as to expend
considerable sums which the commissioners might refuse to
allow, it was demonstrated that the words “ due care and
management,” as employed in the statute, were utterly mean-
ingless. These conclusions caused great public dissatisfac-
tion, which was heightened by the fact that the Independent
and Surrey Consumers companies, operating under the act
of 1860, increased their price only 4d. (8 cents) and 3d.
(6 cents), respectively; the South Metropolitan, which in
1872 had reduced its price to 3s. (73 cents), kept it there
through the period of the coal panic, although paying its 10
per cent. dividend, and a circular inquiry, sent in January,
1874, to about 1,200 companies throughout the United King-
24 SPECIAL COMMITTEE – GAS COS. [Feb.
dom, and replied to by about 800, showed that only 334 of
these had made any increase in price. • -
The session of 1875 found the Metropolitan Board of
Works before Parliament with three bills: one for the pur-
chase of the companies, another for establishing an independ-
ent supply and a third to subject the companies to uniform
and improved regulations. The bill for an independent sup-
ply was withdrawn after finding that the Imperial and Char-
tered companies were prepared to entertain or had proposed
terms of purchase, the bill having been proposed more to
comply with the suggestions of the committee of 1867 than
because the city desired to undertake such supply. The pur-
chase bill was later withdrawn at the request of the govern-
ment, who wanted more time to consider the question. The
principal object of the regulation bill was to fix an initial
price of 3s. 9d. (91 cents), with a provision that for every
penny or part of a penny by which the companies might in-
crease their price in any year, their prescribed rate of divi-
dend (10 per cent.) should be reduced by J4 of 1 per cent.,
being thus aimed directly at the happenings of the years 1873
and 1874. -
Prior to the hearings upon this bill the government stated
in the House of Commons and by a Board of Trade letter
to the committee that it could not agree to this provision of
the bill, regarding it as a breach of the existing arrangements
with the companies. The Board of Trade letter recognized
that the legislation of 1868 and 1869 had not produced satis-
faction, that the complaints of consumers had been numerous
and incessant, and expressed serious doubt whether the exist-
ing system of revision could possibly be made effectual to
protect the public interest. Although unwilling to approve
such a scheme, the Board had evidently some doubt whether a
final solution of the long-pending dispute between the com-
panies and consumers would be found without a purchase
by the latter of the works of the former. In place, however,
of the sliding scale proposed in the bill of the Board of
Works, the Board of Trade letter suggested whether the
principle of a sliding scale, in which the price should vary
inversely as the dividend, might not be a more effectual
1906.] LONDON SLIDING SCALE. 25
mode of securing due care and economy than the mode of
official revision then existing.
All the attempts at regulation having been by act of Par-
liament, the effort to make such acts automatic in operation
had led to various sliding-scale proposals in previous years.
Pending the consideration of the bill of 1860, there was a
proposal to vary the price with the variation in candle-power.
In 1855, in an act uniting the competing companies in Shef-
field, a part of the capital was limited to 8 per cent. while the
price was above 3s. 6d. (85 cents), which dividend might be
raised to 10 per cent. after and as long as the price was at 3s.
6d. (85 cents) or below. In 1866 the Sheffield company being
again before Parliament, seeking additional powers, and hav-
ing by reduction in its price to 3s.6d. (85 cents) placed all
its stock on a 10 per cent. basis, the dividend on new shares
authorized was made to rise from the rate of 7 per cent. with
an initial price of 3s. 6d. (85 cents), to 71% per cent. with a
price of 3s. 3d. (79 cents), to 9 per cent. with a price of
3s. (73 cents) and to 10 per cent. with a price of 2s. 9d.
(67 cents) or less. The preamble of the act stated that ex-
perience had shown that an increase of the rate of dividend
in proportion to the decrease of price had worked beneficially
for the public, and that it was expedient, in order to induce
the company to exert themselves to reduce the price still fur-
ther, that the rate of dividend to be paid be increased in pro-
portion to the reduction of price. In 1869 the same principle
had been adopted in the case of the West Ham company,
supplying in a suburb of the metropolis. All the ordinary
shares of the company were limited to 7% per cent. with a
price of 4s. 6d. ($1.09), rising to 8 per cent. at 4s. 3d.
($1.03), to 9 per cent. at 4s. 1d. (99 cents) and to 10 per
cent. with a price of 3s. 9d. (91 cents) or less. Two similar
acts applying the same principle had been adopted in 1867,
and one each in the years 1868, 1869, 1871, 1872 and 1873,
but all these were exceptions to the general practice; they
applied only to new capital, and in none of them was the divi-
dend allowed to exceed 10 per cent., and the allowance of
more than that was absolutely without precedent. In the
Newcastle act of 1873 the dividend upon new capital was
26 SPECIAL COMMITTEE – GAS COS. [Feb.
fixed at 5 per cent., if the price of gas was above 3s. 4d. (81
cents) and at 7 per cent. with that or a lower price. The
city of London bill of 1867, before referred to, contained a
sliding-scale proposition which, starting with a dividend of
7 per cent. and a price of 3s. 6d. (85 cents), permitted an
increase of 4/3 of 1 per cent. in dividend for every reduction
of one penny in price.
After hearing the evidence of the Board of Works on be-
half of its bill of 1875, the committee, without expressing an
opinion upon the other features of the bill or the proposal of
the Board of Trade, notified the Board of Works that they
were unanimously opposed to that feature of the bill which
fixed a price above which the dividend should be diminished,
while below it the dividend could not be increased. Subse-
quently, the Board of Works, having regard to the opinion
expressed by the committee, and “strongly impressed with
the necessity for the repeal of the revision sections,” proposed
to insert in its bill a provision for a sliding scale, as suggested
by the Board of Trade, in the following terms: “The stand-
ard price to be charged shall be 3s. 9d. (91 cents) per thou-
sand cubic feet, provided that a gas company may increase or
diminish such standard price, subject to a decrease or in-
crease in the prescribed rate of dividend as defined by this
act, to be calculated as follows: for every penny or part of a
penny charged in excess or in diminution of such standard
price in any year the said prescribed rate of dividend shall,
for such year, be reduced or increased by 5s. in every £100
per annum (1/4 of 1 per cent.).” -
With a single exception the companies continued to oppose
the bill for essentially the same reason as the bills of other
years, because the sliding-scale provision interfered with the
arrangements to which Parliament was already committed,
since under it there was a possibility of a diminution of divi-
dend. The Commercial company being in Parliament with
a bill for amalgamation with the Ratcliffe, which was supply-
ing in an adjoining district, accepted the proposition as pre-
sented by the Board of Works and received its act. This was
the first act passed by Parliament having the sliding scale
1906.] LONDON SLIDING SCALE. 27
working both above and below the standard dividend of 10
per cent.
In the following year (1876) the Chartered and South
Metropolitan companies had bills for additional capital pow-
ers. The companies accepted the sliding-scale provisions
applied to the Commercial in the preceding year, and were
allowed their new capital at 10 per cent., being the only time
since 1864 that new capital had been allowed at a higher
dividend than 7 per cent., excepting the sliding-scale com-
panies already mentioned. The standard price for the Com-
mercial and Chartered was fixed at 3s. 9d. (91 cents), the
selling price of these companies at the time, and for the South
Metropolitan at 3s.6d. (85 cents). The South Metropolitan
was charging 3s. (73 cents) at the date of its act, but its
candle-power standard was raised by the act from 14 to 16.
This fact and the price settled for the other companies were
probably influential in fixing the standard price for this
company. The reasons for the ratio of 1d. (2 cents) and
1/4 of 1 per cent. have left no trace in history, and such in-
quiry as we have been able to make among those prominently
identified with the question at the time fails to disclose the
reason for settling upon these precise figures.
An important feature incidental to the sliding scale and
common to the acts of the three companies named was the
power to create an “insurance fund” out of the profits in
any year when they were more than enough to pay the
standard rate of dividend, this fund to be invested for accu-
mulation at compound interest, and to be used to meet any
extraordinary claim or charge arising from accident, strikes
or other circumstances “which, in the opinion of the official
auditor, due care and management could not have prevented.”
This sum was limited in its entirety to one-twentieth of the
capital; not more than one per cent. of the capital could be
added out of income in any one year; when full, the income
was to be used like other income, and whenever and as often
as the fund was reduced it could be refilled. There was fur-
ther power to create a “reserved fund” out of the amount
of divisible profit of the company, this fund being applicable
28 SPECIAL COMMITTEE –GAS COS. [Feb.
for dividends in any year in which the profits might prove
insufficient to pay the authorized dividend. As this fund was
created wholly out of divisible profits, it was not limited in
amount. Any other reserve fund was prohibited.
Following the act of 1875, the Ratcliffe was consolidated
with the Commercial, and the Imperial and Independent com-
panies with the Chartered. In 1879 the South Metropolitan
took over the Phoenix and Surrey Consumers, and in 1882
the London was absorbed by the Chartered, leaving the supply
of the entire metropolitan district in the hands of the three
companies named, subject to the provisions of the sliding
Scale as above described.
The reductions in price by the Commercial company began
in 1877 and continued steadily until in 1889 it reached 2s.
4d. (57 cents), or 1s. 5d. (34 cents) below the standard.
The Gas Light and Coke Company also began to reduce its
price in 1877, and continued to reduce until in 1889 it
reached 2s. 6d. (61 cents), or 1s. 3d. (30 cents) below the
standard. The South Metropolitan immediately after the act
of 1876 slightly increased the price of 3s. (73 cents), which
it had made in 1872, but in 1878 went back to the former
price, and in 1889 reached the price of 2s. 3d. (55 cents),
or 1s. 3d. (30 cents) below the standard. During this period
the dividends ranged from the standard 10 per cent. to 13%
per cent. in the Gas Light and Coke and Commercial, and
13% per cent. in the South Metropolitan. Within the next
three years all the companies raised their prices, mainly on
account of labor troubles and increased cost of coal. The
South Metropolitan returned to its 1889 price in 1895; prices
in the other two have never returned to the 1889 basis. Table
No. 1, at the end of this report, will indicate the principal
changes in price made by the several companies, and the
dividends corresponding. •
In all the parliamentary inquiries respecting the metro-
politan companies the complaints had been mainly attribu-
table to the differences in price of the several companies whose
districts were contiguous, and the fact that some of them
charged higher prices than smaller companies in other parts
of the kingdom. As the public criticism attributed these dif-
1906.] LONDON SLIDING SCALE. 29
ferences to a lack of due care and management in some of
the companies, there was an undoubted expectation that the
scheme of the sliding scale would insure the care and skill
necessary to eliminate this cause of complaint. The expecta-
tion of uniform prices has not been met. Reductions have
been made, but the company whose management both before
and after the adoption of the sliding scale seems to have had
the keenest recognition of the public demands, having at the
inception of the plan the lowest price, has constantly main-
tained its leadership in that respect.
In 1894, owing to the difference in the prices of the three
companies, the agitation against the Gas Light and Coke
Company, which was at the same time the largest and highest
priced, was renewed, and a parliamentary inquiry was pro-
posed. Late in that year the company reduced its price from
3s. 1d. (75 cents) to 2s. 10d. (69 cents). At the same time
it abolished the charge for meter rental, which had been a
common practice among the English companies. Presum-
ably for this reason the agitation appears to have quieted for
a time. In 1898 the company increased its price from 2s.
10d. (69 cents) to 3s. (73 cents), and this revived the
agitation.
In 1899 a committee of the House of Commons was ap-
pointed to inquire into the “powers of charge conferred by:
Parliament on the metropolitan gas companies, and to report
as to the method in which those powers have been exercised,
having regard to the differences in price charged.” A com-
mittee with similar powers had been appointed in 1898, but
too late in the session to commence the inquiry. The com-
mittee of 1899, in reviewing the history of the companies,
found that one of them had not been managed in harmony
with the implied obligation to due care and management,
that the intention of the parliamentary bargain had not been
realized, and that the benefit to the consumers which was
originally contemplated had not been obtained. There was
no claim that such results were in any way due to the sliding
scale, nor had the operation of this scheme prevented them.
This committee recommended “that whenever any of the
metropolitan gas companies again come to Parliament for an
30 SPECIAL COMMITTEE –GAS COS. [Feb.
extension or alteration of their capital powers, a revision of
the sliding scale should take place, and that the standard
price should be reduced to 3s. 3d. (79 cents), to carry the
standard dividend of 10 per cent., and that the existing scale
of increase and decrease of dividend of 14 per cent. for every
penny of decrease or increase of price below or above 3s. 3d.
(79 cents) be maintained ; and that a secondary or additional
scale be imposed which should permit of an increase or de-
crease of dividend over and above that regulated by the pres-
ent scale of 34 per cent. for every complete 3d. (6 cents) of
decrease or increase below or above the standard price of
3s. 3d. (79 cents);” and “that capital powers should not be
granted any gas company for more than five years, if and
when new capital is required, and that Parliament should
revise the sliding scale, either by way of increase or decrease,
when any application for new capital is made if the circum-
stances of the times or the conditions of the company appear
to require it.” .
In 1898 the Gas Light and Coke Company was in Parlia-
ment for a conversion of its capital (described later in this
report). The House of Commons at that time divided upon
a proposition that the conversion should not take effect until
the price of gas was reduced to 2s. 6d. (61 cents), but this
was defeated by 214 to 109 votes.
After the adoption of the sliding scale for the London com-
panies, Parliament began to apply it to companies outside the
metropolis, either to their entire stock or to new shares au-
thorized as companies came for additional powers. While in
the years 1877 and 1878 less than half the companies before
Parliament were placed under this arrangement, the percent-
age has steadily increased, until, as evidence of its popu-
larity, it has been applied to 211 out of 437 companies. Dis-
regarding the size of the company, it has been applied to
large and small alike. Although the prevailing rate of divi-
dend allowed upon new stock since the adoption of the slid-
ing scale, and for some time previous, has been a 7 per cent.
maximum, the ratio of variance for price and dividend has
been retained as first adopted in the London companies.
If we are to compare the prices of the companies working
1906.] LONDON SLIDING SCALE. 31
under the maximum price and maximum dividend in 1903
(the date of the last available parliamentary returns) with
those working under the standard price and sliding scale in
the same year, we find the average price of gas per company
for the former class 3s. 10.09d. (93.18 cents); in the latter
class 3s. 5.81d. (84.62 cents), or 3s. 5.97d. (84.94 cents),
if we omit the three London companies included in the latter
class. If we confine our computations to the companies in
each class selling one hundred million feet or more, we find
in the former class an average price per company of 2s. 8.8d.
(66.6); in the latter class, not including the London com-
panies, 2s. 10.5d. (70 cents). Of the maximum price com-
panies 43 were selling in 1903 at a lower price than the Gas
Light and Coke Company, 11 below the Commercial and 9
at less than the South Metropolitan. If we compare the prog-
ress between 1880 and 1903 of all the companies (48) under
the maximum-dividend system with all the companies (17)
which had the sliding scale for that period, we find that the
average reduction per company in the former class was 7.77d.
(15.54 cents) and in the latter class 11.18d. (22.36 cents).
All these figures are of interest, although, in view of the
widely varying conditions of the companies, no conclusions
have been drawn from them.
It is admittedly difficult to exhibit with any clearness
how much of the reductions made by the companies under
the sliding scale have been due to that and how much to the
various other causes whose influence has been felt upon the
companies. The general downward trend of the cost of ma-
terials, the very great increase in the volume of business, the
competition of electric light, the effect of public criticism,
stimulated and made effective by the increased publicity
given to the accounts of the companies, and the compulsory
sale of new stock by auction, effecting substantial reductions
in the capital charge, have all been largely influential in
reducing prices.
It may be doubted whether any of these have equalled in
effectiveness the compulsory sale of stock by auction. The
importance of this method of issuing new stock to which a
maximum dividend was attached seems to have had little or
32 SPECIAL COMMITTEE – GAS COS. [Feb.
no recognition until 1853, when it was applied to the Bristol
and Nottingham companies. From that time until 1875 it
was applied to about 50 companies, although in perhaps half
of these the sale by auction was optional rather than compul-
sory. Since 1875 it has been the universal rule, and com-
mittees considering bills for new capital powers have been
instructed by a standing order of Parliament to require the
insertion of the auction clauses, or to report how their omis-
sion is consistent with the public interest. The result of
this has been that stock carrying a nominal maximum divi-
dend of 10 per cent. has usually returned to the company
approximately double its par value. There is no such order
respecting the sliding scale, but whenever a company is before
Parliament the question of applying this is almost invariably
brought to the attention of the committee, either by the com-
pany promoting its bill or by the parties opposing.
The borrowing powers of companies, formerly very much
restricted, have since the adoption of the sliding scale been
appreciably extended, enabling them to secure in this way
capital at a much lower rate than by the issue of new stock
prior to the adoption of the auction clauses. The most popu-
lar form of acquiring loan capital has apparently been by
debenture stock, which corresponds very closely with pref-
erence stock, as understood here. The issuing of such secu-
rities has generally been optional with the companies, but
compulsory in exceptional cases.
In the parliamentary session of 1896, by the South Metro-
politan Gas Act of that year the 10 per cent. standard divi-
dend stock of that company, amounting to £2,190,000, was
converted into £5,475,000 of stock, with a standard dividend
of 4 per cent. The company was further authorized to con-
vert its 5 per cent. debenture stock into a substituted deben-
ture stock of such an amount as might return the holder
the same income, on such basis, not less than 3 per cent., as
the directors might determine. The earliest precedent for
such conversion was in an act of the Nottingham company in
1853, since which time numerous companies have received
similar acts, the parliamentary theory apparently being that,
in view of the fixing by statute of the maximum dividend
1906.] LONDON SLIDING SCALE. 33
and the sale of new stock by auction, the public interest is
not materially affected by a multiplication of the existing
stock with a proportionate decrease in the authorized divi-
dend. The more common practice has been to double the
amount of 10 per cent. stock and make the authorized divi-
dend 5 per cent.
In the session of 1898 a similar conversion and consoli-
dation of the stocks of the Gas Light and Coke Company
were authorized. Under this, £1,806,590 of preference stock
with a maximum dividend varying from 4 to 10 per cent.,
incidental in large part to the various consolidations, was con-
verted into £3,799,737 of 4 per cent. preference stock; £1,–
300,000 of stock with a 7 per cent. maximum was converted
into £2,600,000 of 3% per cent. preference; £2,539,000 of
debenture stock bearing from 4 to 6 per cent. interest was
converted and consolidated into 3 per cent. debenture stock,
amounting to £4,193,975; and £6,097,320 of 10 per cent.
standard dividend ordinary stock was converted into £15,-
243,075 of ordinary stock carrying a standard dividend of
4 per cent., making the total stock issue of the Gas Light
and Coke Company £21,642,992 of ordinary and preference
stock and £4,193,975 of debenture stock.
In 1902, in a similar manner, the Commercial Gas Com-
pany was authorized to convert £550,000 of ordinary stock
with a standard dividend of 10 per cent. into £1,375,000 par
value of stock with a standard dividend of 4 per cent. ; its
£280,000 of stock with a standard dividend of 7 per cent.
into £560,000 of a standard dividend of 3% per cent. ; and
its £300,000 of 44% per cent. debenture stock into £450,000
of 3 per cent. debentures. -
In the 1896 conversion act of the South Metropolitan Com-
pany no change was made in the standard price, but the in-
crease or decrease in the standard dividend for every change
of 1d. (2 cents) from the standard price was fixed at 1/30 of
1 per cent., and other minor changes made, as appears by
the following language : —
In respect of any half year during any part of which the
price charged by the company shall have been 1 penny or part
of a penny above the standard price, the dividend payable by the
34 SPECIAL COMMITTEE –GAs COS. [Feb.
company for that half year shall, in respect of each penny or
part of a penny by which the standard price shall have been
increased, be reduced below the standard rate of dividend 1
shilling on every hundred pounds of paid-up ordinary stock,
and so in proportion for any fraction of £100;
And in respect of any half year during the whole of which
the price charged by the company shall have been 1 penny or
more below the standard price, the dividend payable by the
company for that half year may, in respect of each penny by
which the price shall have been so reduced below such standard
price, be increased above the standard rate by 1 shilling on
every hundred pounds of paid-up ordinary stock, and so in pro-
portion for any fraction of £100;
Provided, that if in any half year the dividend payable shall
be a fractional amount less than one-quarter per centum the
company may defer the payment of such fractional amount
until the payment of the next or some succeeding dividend, and
shall, in the discretion of the company, either add such frac-
tional amount to and pay the same with such succeeding dividend
accordingly, or add the same to the reserve fund.
In the conversion act of the Gas Light and Coke Com-
pany in 1898 no change was made in the standard price,
but the standard rate of dividend was to be increased or
diminished according to the change of 1 penny in price by
JAo of 1 per cent. instead of 14 of 1 per cent. That is to say:
“For every penny or part of a penny charged in any calendar
year in excess or in diminution of the standard price of gas
the standard rate of dividend shall for such year be reduced or
increased by 2 shillings [Ao of 1 per cent.],” and it was pro-
vided that the maximum price charged to private consumers
during any calendar year was to be considered the price by
which the rate of dividend was to be determined.
At the session of 1900, by the South Metropolitan act of
that year, the standard candle-power for that company was
reduced from 16 to 14 candles, and the standard price was
reduced from 3s.6d. (85 cents) to 3s. 1d. (75 cents); and,
incidental thereto, the variation in dividend for every penny
variation in price was made 1s. 4d. (A5 of 1 per cent.),
instead of 1s. (1/30 of 1 per cent.), on every hundred pounds
of ordinary stock.
By the Commercial Gas Company’s act in 1902 a like re-
1906.] LONDON SLIDING SCALE. 35
duction was made in the candle-power standard, and, inci-
dental thereto, the standard price was reduced from 3s. 9d.
(91 cents) to 3s. 3d. (79 cents), with the following provi-
sion respecting the variation in price and rate of dividend :
“In respect of any half year during any part of which the
price charged by the company shall have been 1 penny or part
of a penny above such standard price, the dividend payable by
the company for that half year shall, in respect of each penny
or part of a penny by which such standard price shall have
been increased, be reduced below the standard rate of dividend
by 1s. 4d. (A5 of 1 per cent.) on every £100 of 4 per centum
capital stock, and so in proportion for any fraction of £100 of
that stock, and by 1s. 8d. (As of 1 per cent.) on every £100
of 3% per centum capital stock, and so in proportion for any
fraction of £100 of the last-mentioned stock;” with a like in-
crease of dividend for every penny of reduction in price, and
the same provision as in the last-mentioned act of the South
Metropolitan for carrying forward the fractional amount of
dividend.
In 1903, by an act giving certain additional powers to the
company, the standard price of the Gas Light and Coke Com-
pany was changed, with the company’s consent, to 3s. 4d.
(81 cents) in lieu of 3s. 9d. (91 cents), and the increase or
decrease in the dividend rate was fixed as follows: “For every
penny or part of a penny by which the price in any calendar
year exceeds or is less than the standard price, the standard
rate of dividend shall for such year be reduced or increased
by 2s. 8d.” (one and one-third tenths of 1 per cent.). Pro-
vision was at the same time made for a reduction of the com-
pany’s capital by the amount of £1,000,000 par value through
a redemption fund to be created out of the divisible profits,
the amount of annual contribution to such fund being fixed
according to the ability of the company to pay above the
standard rate of dividend.
With these exceptions, which were made with the consent
of the companies, no change has been made in the standard
price or standard dividend, or the ratio of variance of the
price and dividend, in the London companies, since its estab-
lishment in 1875 and 1876. .
36 SPECIAL COMMITTEE – GAS COS. [Feb.
Since the passage of the acts named the price has been re-
duced by the Gas Light and Coke Company to 2s. 11d. (71
cents), by the South Metropolitan to 2s. (49 cents) and by
the Commercial to 2s. 2d. (53 cents).
The first company established in the State of Massachu-
setts was the Boston Gas Light Company, which was char-
tered by special act in 1823. Thirty-eight other companies
were chartered by special acts prior to the enactment of the
general law of 1855, under which ten or more persons, upon
complying with certain conditions, might become incorpo-
rated and receive a charter as a gas company without other
legislative consent.
These companies prior to 1885 did not notably differ in
their powers and privileges from other joint stock companies
except that they might, “with the consent in writing of the
mayor and aldermen of a city or the selectmen of a town, dig
up and open the ground in any of the streets, lanes and high-
ways thereof so far as is necessary to accomplish the objects
of the corporation.” The State has carefully refrained from
entrusting these companies, as well as all others, with powers
which it might not later withdraw or modify, especially
making all charters “subject to amendment, alteration or
repeal” by the general court, and making “all corporations
subject to such laws as may be passed affecting or altering
their corporate rights or duties or dissolving them.” All
legislation relative to gas companies since the general act re-
ferred to may be said to be restrictive rather than expansive
in its character.
In 1861 standards were fixed for gas meters and for the
purity and candle-power of gas, and ample provision was
made for the examination of all meters and of the gas of all
the companies by competent State officers. The candle-power
standard first fixed in 1861 at 12 candles was raised in 1880
to 15 and in 1892 to 16 candles. The candle-power of the
gas of the various companies throughout the State varies from
16 and a fraction to 20 and a fraction candles, being in the
larger companies, as a rule, between 18 and 19 candles.
In 1885 the Legislature created a Board of Gas Commis-
sioners (later known as the Board of Gas and Electric Light
.*
1906.] LONDON SLIDING SCALE. 37
Commissioners). In describing the general powers of this
Board the act provided that “ said board shall have the gen-
eral supervision of all corporations engaged in the manufac-
ture and sale of gas for lighting and for fuel, and shall make
all necessary examinations and inquiries and keep themselves
informed as to the compliance of the several corporations
with the provisions of law.” The Board was specially au-
thorized, “upon the complaint in writing of the mayor of a
city or the selectmen of a town in which a gas company is
located or of twenty customers of such company, either of
the quality or price of the gas sold by such company,” after
a public hearing to the petitioner and company, to order, “if
they deem just and proper, any reduction in the price of gas
or improvement in quality thereof.” The Board was also
given appellant and final jurisdiction upon the question of
the admission of a second company into a city or town where
a company was already engaged in the business, original juris-
diction over this question being vested in the local authority.
In 1886 the authority to compel the companies to supply
would-be consumers was vested in the Board, no such obliga-
tion having previously been imposed upon the companies. In
the same year the very crude provisions in the act of 1885
for uniform accounting and for annual returns from the com-
panies to the Board were greatly extended and perfected, and
the Board was required to insert in its annual report to the
Legislature “such abstracts of the returns as it shall deem
expedient.”
In 1887 the Board was authorized to empower gas com-
panies to engage in the supply of electricity for light and
power, and either under this provision, by special legislative
acts, or by the unanimous consent of the shareholders, 26
companies are now engaged in the manufacture and sale of
both gas and electricity.
Until 1891 municipalities had no authority to engage in
the supply of gas or electricity or to take over the property
of existing companies organized for that purpose. By the
act of that year, after a decision of the municipality within
which the company is located to undertake the business of
gas or electric light, the company may offer its plant to the
38 SPECIAL COMMITTEE – GAS COS. [Feb.
city or town upon agreed terms, or, in the absence of such
agreement, for such price as may be determined by the
courts. The price to be paid for such plant shall be “its fair
market value for the purposes of its use, but no portion of
such plant shall be estimated at less than its fair market value
for any other purpose,” and “such value shall be estimated
without enhancement on account of future earning capacity
or good will, or of exclusive privileges derived from rights
in the public streets.” Such being the limitations upon the
court in determining the price to be paid, any adjustment of
price by agreement must be upon the same basis. The de-
cision of the municipality to undertake the business makes
practically compulsory the sale of the company’s plant with-
out that enhancement beyond the structural value which might
pertain to the taking by right of eminent domain.
In 1873 an act was passed requiring all sales of new stocks
by gas companies to be at public auction. This act operated
as an effective check to the issuing of new stock in most com-
panies, developing a tendency to make their extensions, as far
as possible, out of income, and maintaining the price of gas
accordingly. In 1894 this act was repealed, and the compa-
nies were forbidden to issue new stock except with the ap-
proval of the Board of Commissioners, and were required to
offer such stock first to their own shareholders “at not less
than the market value thereof,” to be determined by the
commissioners, “taking into account previous sales and
other pertinent conditions.”
These acts as described include all the leading provisions
of law governing or affecting the relations of the companies
to the public, and indicate the extended provisions for the
protection of the interests of consumers, as well as the facility
and frequency with which the Legislature has imposed re-
strictions upon the companies and exercised its reserve power
to alter their corporate rights or duties, whether with or with-
out their consent.
Although there is no statute giving a monopoly to any com-
pany, cases of competition or attempted competition have been
rare and unimportant except in the city of Boston. By the
close of the year 1874 there were 8 companies engaged in
1906.] LONDON SLIDING SCALE. 39
making and selling gas within what was then the city of
Boston. Each, however, had its own district, clearly defined
either by its charter or by agreement. They included, be-
sides the old Boston Gas Light Company, occupying the city
proper, the Roxbury Gas Light Company, the Dorchester Gas
Light Company, the Charlestown Gas Company and Jamaica
Plain Gas Light Company, occupying only the districts for-
merly constituting the municipalities of Roxbury, Dorchester,
Charlestown and West Roxbury, respectively; the Brookline
Gas Light Company supplying in only that part of Boston
formerly the town of Brighton, and the South Boston and
East Boston companies, occupying distinct sections of the old
city of Boston. For the ten years following all these com-
panies maintained their independent existence, with widely
different prices. These conditions led to constant public dis-
satisfaction, which was intensified by the fact that before the
close of the period named the thinly populated areas for-
merly separating these municipalities had become thickly
settled, these different districts no longer constituted distinct
communities, and a large number of people were customers
of the Boston company and at least one other, in which the
price was much higher.
There was some consideration privately among the manage-
ment of certain companies of the question of consolidation,
but the difficulties were many, and the management of the
Boston company was unwilling to undertake it, and prior to
1885 there was no public movement in that direction.
Very early in that year, and prior to the act creating the
gas commission, the Bay State Gas Company was given the
right by the mayor and aldermen of Boston to place its pipes
in all the streets of Boston for the purpose of competing with
the other companies. Soon after this company had built its
works in the suburbs, and had laid a line of main leading
into the heart of the city, its owners were able to purchase
substantially all the stock of the Boston, Roxbury and South
Boston companies, and later secured control also of the Dor-
chester. The East Boston and Charlestown companies, oc-
cupying districts separated from the rest of the city by navi-
gable waters, were not acquired by the owners of the other
40 SPECIAL COMMITTEE –GAs COs. [Feb.
companies, nor were they directly involved in the difficulties
which followed.
The stocks of the companies thus acquired, excepting the
Dorchester, were shortly turned over to a holding or financ-
ing company incorporated in another State, by which they
were used as collateral security for a large issue of bonds,
whose sale gave to the promoters of the scheme a substantial
profit. By this method of manipulation a common control
was established over the companies, by which for certain
purposes they might be operated as one concern. They did
in fact, however, maintain their distinct corporate entities,
preserving as such all their independent rights and privileges
and maintaining varying prices for gas, although with some
reductions. The public discontent incident to such manage-
ment found frequent expression in the Legislature, but with-
out producing any remedial legislation.
In 1892 the gas commission, in response to a special in-
quiry, advised the Legislature of the ability of the Boston
company, then charging $1.30, to sell its gas at $1, but no
legislative action followed, and no petition for a reduction
in price was prosecuted before the Board until one was pre-
sented early in 1893 from the mayor of Boston, upon which
a decision followed, making the price in Boston proper $1.
As the other companies were separate and distinct concerns,
both in law and fact, the Board was compelled to recognize
their individual rights under the law to a reasonable profit,
with the result that, although prices were reduced in all the
companies, they remained unequal, as before.
In 1893 the Brookline Gas Light Company, which for many
years had supplied the town of Brookline adjoining Boston
and a part of Boston formerly the town of Brighton, with
the assent of the Boston city government, laid an extensive
system of mains in the districts of the Boston and Roxbury
companies. There was no reduction in price in the Boston
district except for street lamps, but the price throughout the
Roxbury district fell to-$1. Later, the Brookline company
extended its mains to the Dorchester and South Boston dis-
tricts, where also the price fell to $1, at which it remained
in all the companies named until their consolidation.
1906.] LONDON SLIDING SCALE. 41
In 1896 the Legislature, after a stubborn contest, granted
a special charter to the Massachusetts Pipe Line Gas Com-
pany, with powers for making and selling gas. It also had
large powers looking to consolidating with other companies.
It was apparently intended as a competing company, but the
restrictions as to price incorporated in the charter were so
great that it was practically impossible for the company to
sell gas to private consumers. The Pipe Line company,
however, built a holder and purification works, and laid its
mains to connect with the other companies. -
In the year following the legislative grant to the Pipe Line
company the New England Gas and Coke Company was or-
ganized as an unincorporated, voluntary association or trust,
which acquired practically all the shares of the Pipe Line,
Brookline, Dorchester and Jamaica Plain companies, and
hypothecated these to secure an issue of its bonds. The Gas
and Coke company built works for the manufacture of gas
and coke adjoining the works of the Pipe Line company, with
which they were connected. It thus came about that the
companies supplying the town of Brookline and the entire
city, excepting the Charlestown and East Boston districts,
were combined for many purposes into two groups, preserv-
ing at the same time their separate corporate existence, and
insuring to each all the rights and privileges to which it had
been previously entitled. The two groups were sufficiently
friendly, so that after the completion of the works of the
Gas and Coke and Pipe Line companies, the former began to
sell all its available gas to the latter, and the Pipe Line sold
directly or indirectly to all the others. This arrangement
was carried on under written agreements and continued in
force until a very recent date.
Although incidental to these arrangements the price of gas
in the Jamaica Plain and Brookline districts was made uni-
form with the price in other parts of the city, yet the abnormal
relations thus created aroused a public suspicion that the con-
sumers were being unfairly treated in the price charged, and
that extravagant profits were being realized. This gave rise
to severe public criticism, which was reflected in frequent
appeals to the Legislature for redress, but without results,
42 SPECIAL COMMITTEE – GAS COS. [Feb.
while the legal rights and physical condition of the compa-
nies enabled them to evade or resist, if need be, any attempt.
at effective regulation.
To secure relief from these conditions the gas commission
in 1899, pursuant to a legislative resolve of the previous
year, presented to the Legislature a scheme for the consoli-
dation of all the chartered companies involved, but this was
opposed by the companies, and no legislation followed.
In 1903 the subject of consolidation was again brought to
the attention of the Legislature by the commission as the
most effective way of securing a reduction in price through-
out the city, with the result that the Boston Consolidated
Gas Company was incorporated, with authority to take
over, under the supervision of the commission as to the
amount of capital, all the companies in the two groups
named, except the New England Gas and Coke Company.
Early in the same year the bonds issued soon after the
entrance of the Bay State Company into the city, against
the stocks of the various companies, as above recited, were
defaulted and foreclosed. Prior to this the financial difficul-
ties of the New England Gas and Coke Company had led
to its reorganization. Through these two events the control
of both groups of companies became vested in the Massa-
chusetts Gas Companies, an unincorporated, voluntary
association or trust, which has also controlled the Boston
Consolidated Gas Company from its organization.
Late in 1904 the mayor of Boston applied to the commis-
sion to reduce the price of gas contemporaneously with the
fixing of the capital of the consolidated company. Before the
hearings incident to this were concluded a proposition for
important changes in the act of 1903 was taken up by the
Legislature. Later in the session the charter of 1903 was
amended, with the consent of the company, so that the capital
was fixed at $15,124,600, and a price of 90 cents was made,
to take effect within one year after the completion of the con-
solidation. This act was approved on May 19, 1905, and on
June 15 the Boston Consolidated Gas Company finally took
over all the companies named in the act of 1903. The price
1906.] LONDON SLIDING SCALE. 43
of gas was reduced on July 1 to 95 cents and on Jan. 1, 1906,
to 90 cents a thousand feet.
This brief survey of the legislation applicable to all the
companies, and the significant train of events in the city of
Boston, will indicate the general policy of the State toward
companies of this class, and exhibit the methods adopted for
their regulation in the public interest.
Under the administration of these laws detailed returns of
the condition and operation of all the companies have been
annually made. From these returns liberal abstracts, dis-
closing both the physical and financial condition of the com-
panies, have been included in the annual published reports
of the commission, while the original returns have been fre-
quently consulted by public officers and other representatives
of the consumers.
The formal requests to the Board for reductions in price
have not been numerous, but the policy of the Board, as indi-
cated by the reasons given for its decisions, the exhibition of
the affairs of all the companies and the strong desire on the
part of most of them to escape the public criticism incident
to such applications, have proved an effective stimulus to
increased economy of administration and an inducement to
frequent voluntary reductions in price. Other causes, such
as the constantly increasing sales incident to the growth of
population and new uses for gas, the competition with elec-
tric light and the general public approval attending reduc-
tions, have contributed their influence to the results obtained.
Out of 33 formal applications heard by the Board, reduc-
tions in price have been required in 30. While prices have
been reduced, dividends have very rarely been interfered
with.
In 1885, the earliest authoritative exhibit of the facts, there
were in the State 57 companies charging an average price of
$2.41 per thousand feet. At the date of this report these
prices average $1.48 per thousand feet, a reduction of 93
cents, or 38.6 per cent. If the statement be restricted to the
number of companies now selling annually one hundred mil-
lion feet or more, we find there are 15 companies whose aver-
44 SPECIAL COMMITTEE – GAS COS. [Feb.
age price is now 99.6 cents, and that the average price of
these in 1885 was $1.845, a reduction of 84.9 cents, or 46
per cent. In some of the smaller and poorest companies divi-
dends have been paid irregularly or not at all, but in nearly
all the companies regular dividends have been paid, and have
ranged from 5 to 12 per cent.
The sliding scale is for all practical purposes a contract
between the Legislature and the company, the terms of which
are not to be modified during its continuance without the con-
sent of both parties. It may be an indefinite or virtually a
permanent arrangement, which it is, in fact, in Great Britain,
or it may be for a definite term. So far as we have been able
to learn, no change in the terms of the arrangement as origi-
nally fixed has ever been made in England without the con-
sent of the company. It is true that the parliamentary com-
mittee of 1899, in connection with some criticism of the
working of the sliding scale in one of the London companies,
suggested that capital powers should thereafter be granted for
not more than five years, and that when companies come for
new capital the sliding scale might be revised, “if the cir-
cumstances of the time or the conditions of the company ap-
pear to require it,” but the parliamentary precedents are all
against such action without the consent of the company.
The original purpose of the sliding scale was to increase
the motives to economical management by the prospect of an
increased dividend. It was proposed after other methods had
apparently failed because they were inconsistent with the
privileges vested in the companies. The Board of Trade
in suggesting it stated that it would give the companies a
strong interest to reduce expenses, this strong interest being
the new power to divide more than 10 per cent. In other
words, the strong inducement for any company to accept the
provisions of the sliding scale is the opportunity it would get
for paying a larger dividend than might otherwise be de-
clared. Such a scheme will clearly have its greatest value as
a stimulant to increased care and skill in management, and
incidentally to making a lower price only where the contract
is a permanent arrangement, giving assurance to the company
that it may continue to receive the reward of its activity. If
1906.] LONDON SLIDING SCALE. 45
t-
it is understood in advance that at the end of a fixed term
there is to be a readjustment of the contract with a probable
withdrawal of the benefits realized by the company, such
value as the arrangement has may be much reduced. Its
value may well be expected to vary according to the length
of the term.
The sliding scale relies for its success upon the desire of
the company to pay the highest possible dividend. Apply it
to a company which for any reason has a settled policy to
pay no more than a certain dividend which it may be already
earning, and it is of no value whatever. Such company will
find its stimulus in the assurance that it can continue in its
monopoly only so long as it reasonably serves the public.
Application of the sliding scale necessarily involves the
fixing of a standard price and a standard rate of dividend,
not for companies generally but for each individually. The
standard price varies in different companies, and the prin-
ciple upon which Parliament has fixed the standard price
in the many cases before it is not very clearly apparent.
There is reason to believe that after a hearing the price is
fixed at a point mutually acceptable to Parliament and the
company. The intention apparently is that it shall be high
enough to permit the payment of the maximum dividend al-
ready fixed, whether 10 or 7 per cent., and low enough to
allow no increase above the dividend already payable except
after a reduction in price. In practice we believe the price
has most frequently been fixed at the price existing at the
date of the act.
It may be assumed as to the companies here that a standard
price cannot be fixed against the will of a company, unless
with a clear provision for a reasonable dividend in harmony
with the decisions of our court of last resort. It is reason-
able to expect that such price will later be reduced, and, in
any company which desires to avail itself of all the privileges
which the sliding scale arrangement permits, that the divi-
dend will be increased. This has been the English experience
and was anticipated by the proponents of the policy.
It has also been the experience in the English companies,
where they sought to avail themselves of all the benefits of
46 SPECIAL COMMITTEE – GAS COS. [Feb.
the sliding scale, that the price has fluctuated, being materi-
ally affected by the changes in the cost of materials and labor
or by other causes not readily foreseen. This has been notably
illustrated in the principal London company in the period
from 1888 to 1898.
It is important, also, to consider in applying the sliding
scale to any company whether the price may not have al-
ready reached a point where further reductions may be de-
pendent upon the increase of consumption in a greater ratio
than the increase of capital; in other words, whether such
economy in the company’s operations may not have been
attained that a reduction in price may be chiefly possible
through a reduction in the capital charge, the amount of
which will depend in part upon the activity of the manage-
ment and in part upon the general increase of population
and an improvement in its financial condition.
Certain causes, as the figures show, have operated power-
fully to reduce the prices of companies in this State. That
they are still operative may be confidently asserted. How
long they may continue it is, of course, impossible to say.
In many of the companies prices have reached a point where
the same rate of reduction in the future as in the past
cannot be expected. That with changing conditions and in-
creased business further reduction may be made we have no
reason to doubt.
From the foregoing résumé of conditions and experience
in England and in this State it is obvious that to adopt the
sliding scale here certain fundamental principles, on which
the present laws and policy of the Commonwealth rest, must
be abandoned. We have endeavored to present herewith the
facts, and describe the conditions as they have appeared to us
at such length and with such detail as the importance of the
subject seems to demand. -
Respectfully submitted,
FORREST E. BARKER,
MORRIS SCHAFF,
SAMUEL W. GEORGE,
Of the committee.
TABLE No. 1. — Prices charged for Gas per One Thousand Cubic Feet and Dividends paid on Ordinary Stock by the Gas
Light and Coke, South Metropolitan and Commercial Gas Companies for Each of the Years 1876 to 1904, inclusive.
Prices charged.
1876. 1877, 1878. 1879. 1880. 1881. 1882. 1883, 1884. | 1885. 1886. 1887. 1888. 1889. 1soo.
s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. s. d. | S. d.
Gas Light and Coke, . 3 9 || 3 6 3 6 || 3 6 || 3 4 || 3 2 || 3 2 || 3 2 || 3 0 || 3 0 || 3 () 3 0 || 2 9 || 2 6 2 ;
3 4 || 3 2 - 2
South Metropolitan, 3 0 || 3 2 || 3 0 || 3 0 || 3 0 || 2 10 || 2 10 || 2 10 || 2 8 || 2 8 2 6 || 2 6 || 2 5 || 2 3 || 2 3
3 2 2 5
Commercial, 3 9 || 3 9 || 3 5 || 3 5 || 3 3 || 3 0 || 3 O || 2 10 || 2 10 || 2 10 || 2 8 || 2 6 || 2 6 || 2 6 2 4
3 5 3 3 2 10 2 6 2 4
Dividends paid.
Per Per Per Per Per Per Per - Per Per Per Per Per Per Per Per
Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent.
Gas Light and Coke, . 10 10 10% 10; 11 11 11 11 12 12 12 12+ 13 13# 13
South Metropolitan, 10 11 11; 11; 114 | 12 12 12 12; 124 13 13 13} 12; 12;
Commercial, 10 | 104 || 103 || 114 || 113 | 12 12; 12# 184 || 13+ | 184 || 134 || 13; 13} | 13;
:
º


TABLE No. 1. — Prices charged for Gas per One Thousand Cubic Feet and Dividends paid on Ordinary Stock by the Gas
Light and Coke, South Metropolitan and Commercial Gas Companies for Each of the Years 1876 to 1904, inclusive
— Concluded.
Prices charged.
1891. 1892. 1893, 1894. | 1895. 1896. 1897, 1898. 1899. 1900. 1901. 1902. 1908. || 1 904.
S. d. s. d. s. d. | S. d. | S. d. s. d. s. d. | S. d. S. d. s. d. s. d. s. d. s. d. s. d.
Gas Light and Coke, 2 9 || 3 1 || 3 1 || 3 1 || 2 10 || 2 10 || 2 10 || 2 10 || 3 0 || 3 5 || 3 5 || 3 0 || 3 0 || 3 ()
3 0 3 0
2 10
South Metropolitan, 2 3 || 2 6 || 2 6 || 2 5 || 2 4 || 2 3 3 || 2 3 || 2 2 || 2 8 || 2 81 || 2 3 || 2 3 || 2 1
2 6 2 5 || 2 4 || 2 3 . 2 32 t
Commercial, 2 4 || 2 4 || 2 9 || 2 7 || 2 6 || 2 6 || 2 6 2 6 || 2 | 6 || 3 0 || 3 0 || 2 8° 2 6* | 2 6
2 6
2 9
Dividends paid.
Per Per Per Per Per Per . Per Per Per Per Per Per Per Per
Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent. Cent.
Gas Light and Coke, 12% | 12 | 12 | 12 | 12# 12# 12# | 12# 4.9° 4.4 4.4 || 4.2 || 4.4 || 4.4
South Metropolitan, 13 13 13 13 13 || 5.375 5.25 | 5.50 5.47 || 5.2 5.0 | 5.5 || 5.33 || 5.55
Commercial, 13; 12# | 12% | 13+ | 13% 13% | 13% 18} | 12; 11.45 11.06 12.81| 5.15° 5.14
To June 30 for 16 candle-power standard.
* From June 30 for 14 candle-power standard.
* 14 candle-power standard.
* 16 candle-power standard.
* After conversion.
§
;


1906.] LONDON SLIDING SCALE.
49
TABLE No. 2. — Reductions in Price of Gas upon Petitions to
Board of Gas and Electric Light Commissioners.

Date of Price Price
NAME OF COMPANY. Decision on before after
Petition. Decision. Decision.
Worcester, May 14, 1887, $1 80 $1 50
Chelsea, May 6, 1891, 2 00 1 80
Springfield, April 14, 1893, 1 75 1 40
East Boston, April 14, 1893, 1 75 1 50
South Boston, June 6, 1893, 1 50 1 30
Dorchester, June 6, 1893, 1 50 1 30
Roxbury, . June 6, 1893, 1 50 1 20
Brookline, . Aug. 3, 1893, 1 90 1 40
Boston, April 17, 1893, 1 30 1 00
Chelsea, Nov. 10, 1893, 1 80 1 70
Arlington, . April 23, 1894, 2 50 2 00
Charlestown, Mar. 15, 1894, 1 60 1 40
Cambridge, June 25, 1894, 1 50 1 35
Haverhill, . June 27, 1894, 1 40 1 30
Brockton, . June 24, 1895, 2 00 1 50
Brookline, . June 24, 1895, 1 40 1 00
Jamaica Plain, . Mar. 30, 1896, 1 65 1 40
Malden, . Feb. 10, 1896, 1 60 1 50
Haverhill, . June 22, 1900, 1 00 1 001
Amesbury, . Sept. 14, 1900, 2 00 2 00
Springfield, Oct. 26, 1900, 1 25 1 05
Fitchburg, . Oct. 1, 1900, 1 62 1 45
East Boston, Feb. 12, 1901, 1 40 1 25
Waltham, . May 17, 1901, 1 50 1 35
Citizens, Quincy, Oct. 18, 1901, 2 00 2 00
* Newton, º June 24, 1901, 1 25 1 15
Gloucester, Dec. 20, 1901, 1 30 1 30
Chicopee, . Nov. 24, 1902, 1 75 1 50
Marlborough, Dec. 29, 1903, 2 25 1 75
Chelsea, Oct. 28, 1904, 1 25 1 10
East Boston, Oct. 31, 1904, 1 25 1 20
Newburyport, Nov. 29, 1904, 1 50 1 40
Charlestown, July 31, 1905, 1 00. 90
* Price of 80 cents made by Board now being contested in United States court.
50 SPECIAL COMMITTEE-GAs cos. [Feb.
TABLE No. 3. — Voluntary Reductions in Price of Gas from 1885
to 1906.
NAME OF COMPANY. Rātā. º:Il .#.
Boston, ſº º ſº e * & 1886 $1 50 $1 40
Beverly, . . . e ſº g 66 3 00 2 70
Brookline, . g ſº º g * 66 2 50 2 20
Chelsea, c g © tº g Ç $6 2 50 2 20
Dedham, . & e * § & $6 3 00 2 75
Dorchester, ſº ſº tº g & 6& 2 50 2 20
East Boston, * * & • • $6 2 00 1 85
Fitchburg, . e e g g º &&. 2 50 2 00
Gloucester, . © & § gº g &6 2 25 2 00
Jamaica Plain, . ë ſº & ſº 66 2 50 2 25
Lowell, º e e e g & 66 1 40 1 30
Lynn, tº {e § c wº º $6 2 00 1 80
Malden, tº ſº {} it. * {} & & 2 50 2 25
Marblehead, e o ſº tº © ($6. 3 25 3 00
Newton, . tº ſº * e e 66 2 50 2 25
Northampton, . te tº ſº e 6& 2 50 2 25
Plymouth, . g {º g º º “ 2 75 2 50
Newburyport, . tº tº * e (.6 2 50 2 25
Springfield, e & & e º 6& 2 16 1 90
Taunton, . t e e o ſº $6 1 75 1 65
Westfield, . o tº © g tº 66 3 00 2 37
Worcester, . e & º ( . o 66 2 00 1 80
Holyoke, . ſº tº tº º e 6 & 2 02 1 75
Clinton, ge & • * * & t ($6 2 50° 2 37
Danvers, . • s ſº e e 1887 3 35 3 25
East Boston, e o ſº tº te $6 1 85 1 75
Easthampton, . g & o e 6 & 3 00 2 80
Fall River, . e * © & * & & 2 00 1 75
Gloucester, . to g {º e e 66 2 00 1 80
Lowell, iº gº e te © e $6 1 30 1 20
Manufacturers of Fall River, . • 6 & 2 00 1 90
Natick, e tº e * ſe e & ſº 2 85 2 60
North Attleboro, g e g g 66 2 50 2 25
Salem, ſº e fe o Q g &&. 2 00 1 80
South Boston, . tº º e & 66 2 00 1 80
Webster, . . . . . . & © 3 60 3 00
Haverhill, . e o º e º 66 1 60 1 50
Marlboro, . e g tº º º 66 3 00 2 50
Northampton, . * tº & ſº $6 2 25 2 00
Otis Company, Ware, & tº e & 8 3 00 2 50
Springfield, ſº ſº * L e 66 2 00 1 75
Amesbury, . e o ſº e e 1888 3 25 2 50

1906.] LONDON SLIDING SCALE. 51
TABLE No. 3. – Voluntary Reductions in Price of Gas from 1885
to 1906 — Continued.

Boston, e 1888 $1 40 $1 30
Chelsea, . e 6& 2 20 2 00
Citizens, Wakefield, 66 3 50 2 50
Danvers, $6 3 25 3 15
Dedham, . $6 2 75 2 70
Greenfield, . 66 2 75 2 38
Holyoke, 66 1 90 1 75
Jamaica Plain, ($6 2 25 2 00
Lowell, & 1 20 1 10.
Malden, &&. 2 25 2 00,
Marblehead, 66 3 00 2 80,
North Adams, &6 2 25 2 00,
Webster, 66 3 00 2 50
Amesbury, . 66 2 50 2 25
Attleboro, . 66 2 25 2 00
Beverly, 6& 2 70 2 50
Quincy, & 6 3 00 2 85
Danvers, $6 3 15 2 70
Dedham, $6 2 70 2 50
Leominster, 6& 5 00 4 00
Natick, $$. 2 60 2 35
Dorchester, 1889 2 20 2 00
Marblehead, ( & 2 80 2 70
North Attleboro, 66 2 25 2 00
Roxbury, $6 1 75 1 60
Taunton, 66 1 65 1 50
Woburn, 6& 2 00 1 80
Beverly, 66 2 50 2 40
Clinton, g g tº &t. 2 37 2 25
Otis Company, Ware, . tº 2 50 2 25
Cambridge, . tº 0 1890 1 75 1 60
Dedham, G & $º 2 50 2 00
Fall River, . 66 1 75 1 65
Haverhill, . $6 1 50 1 40
Lawrence, . 66 1 60 1 50
Natick, 6& 2 35 1 90
North Adams, 66 2 00 1 85
Westfield, . 6& 2 37 2 25
Brookline, . & & 2 20 1 90
Dorchester, . $6 2 00 1 50
Lynn, . 6 & 1 80 1 60
Roxbury, £6 1 60 1 50
South Boston, $6 1 80 1 50
52 SPECIAL COMMITTEE –GAS COS. [Feb.
TABLE No. 3. — Voluntary Reductions in Price of Gas from 1885
to 1906 — Continued.

Year of Price Price
NAME OF COMPANY. Reinctiºn | Red. | Reijon.
Malden, e e te C e e 1891 $2 00 $1 80
Gloucester, . . . e & tº e $6 1 80 || 1 60
Marlboro, . e ë e te & $6 2 50 2 25
Milford, º º d d ſº & 66 2 00 1 90
Westfield, . & g tº ſº e 66 2 25 2 00
Newton, . e tº tº tº e $6 2 00 || 1 80
Brockton, . * ſº * e ſº 1892 2 15 2 00
Citizens, Quincy, {} tº tº º 66 2 85 2 50
New Bedford, . § ſº tº © 66 1 80 1 62
Norwood, . * tº e e g “ 2 70 2 00
Arlington, . e tº © sº º $6 2 75 2 50
Cambridge, . tº º e * º $6 1 60 1 50
Charlestown, . g . . e 66 1 75 1 60
Salem, . g tº * o e 4t 1 80 || 1 60
Ware, . {º ſº g tº c g $6 2 25 2 00
Lynn, . tº ſº * g wº e “, 1 60 1 40
Citizens, Wakefield, . g e ſº $6 2 50 2 35
Gloucester, . tº & tº & & $6 1 60 1 50
Chicopee, . ū a ... • ſº & 1893 2 25 2 00
Fall River, . ($ tº & * tº 1 65 1 60
Jamaica Plain, . . . . e e 66 2 00 1 80
Lawrence, .. º e º g to 66 1 50 1 40
Manufacturers of Fall River, . ſº 66 1 90 1 80
Nantucket, . G g & g * &&. 3 00 2 50
Waltham, . © g º ſº sº “ 2 00 1 80
Woburn, . e * to . º. o (; º; 1 80 1 60
Worcester, . º g sº ge e 6& 1 : 50 1 40
Attleboro, . ſº ſº te tº ſº G& 2 00 1 80
Beverly, . tº º º tº te $8 2 40 2 20
Citizens, Wakefield, . tº & . . . “ 2 35 1 80
Lynn, . gº s e • * te 66 1 40 1 30
Newton, . § te & ſº ſº $6 1 80 1 50
Pittsfield, . tº tº & º º 66 2 25 1 90
Fitchburg, . tº tº tº G & tº 2 00 1 80
Adams, o • . . . gº g ſº 1894 240 2 00
Amesbury, . ſº tº o • • $6 2 25 || 2 00
Lowell, o ge e e © º 66 1 10 1 00
Malden, fe o g * ſº & ($6 1 80 1 60
Nantucket, . tº º g ſº ſº ($6 2 50 || 2 00
Roxbury, . e tº g ſº º 66 1 20 1 00
Beverly, . e tº © o te &6 2 20 2 00
Worcester, . te & ſº ſº ſº 66 1 40 1 25
Haverhill, . tº ſº tº tº G 66 1 40 1 30
1906.] LONDON SLIDING SCALE. 53
TABLE No. 3. – Voluntary Reductions in Price of Gas from 1885
to 1906 — Continued.

Price Price
NAME of CoMPANY. Rātā. Rºn. Reſºon.
Jamaica Plain, . g e e o 1894 $1 80 $1 65
Lynn, . º º e º º e 66 1 30 1 20
Clinton, e o e º e & 1895 2 25 1 90
Dorchester, . * º e e $6 a 1 30 1 00
Gloucester, . e e º º . | 66 1 50 1 40
Holyoke, . º e e e G &g 1 50 1 35
Lawrence, . º e º e º 6& 1 40 1 30
Northampton, . e e e © 66 2 00 1 60
South Boston, . e e º º €6 1 30 1 00
Beverly, . º e º º e & 4 2 00 1 90
Cambridge, & gº tº tº º 66. 1 35 1 25
Charlestown, . ſº o º * 6& 1 40 1 25
Citizens, Quincy, s º tº a 66 2 50 2 00
Easthampton, . º º • • 66 2 80 2 30
Newburyport, . e º e © &G 2 00 1 90
North Adams, . e º e © 66 1 85 1 75
Chicopee, . º e º e º 1896 2 00 1 75
Lynn, . e tº e º tº º 66 1 20 1 10
Westfield, . º & e º º $6. 2 00 1 80
Attleboro, . º º º e º {{ 1 80 1 70
Beverly, . º e - tº e 66 1 90 1 80
Cambridge, º © © º e £6. 1 25 1 15
Chelsea, . º * e g e 66 1 70 1 50
Citizens, Wakefield, . e e e 66 2 30 2 25
Danvers, . o e º & O [6 2 70 2 50
Fall River, . o g º o e &6 1 60 1 25
New Bedford, . ſº º º O & © 1 62 1 35
Newton, . e e º º º 66 1 50 1 35
Salem, º © e o tº º 66, 1 60 1 40
Taunton, . e Q & e & 66 1 50 1 35
Haverhill, . - e º º e 1897 1 30 1 20
Leominster, © ſº 0. º º 6& 3 50 3 00
Lynn, . º º tº a tº º 66 1 10 1 00
Marblehead, º e e e º {{ 2 70 2 50
North Attleboro, g o tº e $6 2 00 1 70
Springfield, . . . . . . 66, 1 40 1 25
Waltham, . . & e © © e 66 1 80 1 62
Webster, . e * º o • I & & 2 50 2 25
Woburn, . ſº & º º o 66 1 60 1 50
Worcester, . Q & º ſº º 66 1 25 1 15
Beverly, . e e º e º 66 1 80 1 70
Ipswich,' . . . º e - 66 3 50 2 50
* Change in method of manufacture.
54 SPECIAL COMMITTEE-GAS COS. [Feb.
TABLE No. 3. — Voluntary Reductions in Price of Gas from 1885
to 1906 — Continued.
NAME OF COMPANY. Rātā. ..º. .#.
Malden, 1897 $1 50 $1 40
Pittsfield, 66 1 90 1 80
Salem, e &6 1 40 1 30
Southbridge, ($6 2 85 2 37
Worcester, . • * * 66 1 15 1 10
Cambridge, 1898 1 15 1 08
Charlestown, $6 1 25 1 15
Jamaica Plain, . $6 1 40 1 25
Newburyport, 66 1 90 1 77
Westfield, 66 1 80 1 60
Williamstown, 66 5 70 5 42
Attleboro, . 6& 1 70 1 50
Beverly, . e e & 6 1 70 1 60
Dedham & Hyde Park, 66 2 00 1 80
Gloucester, . º e 66 1 40 1 20
Lawrence, . 66 1 30 1 25
Lexington, . 66 5 40 2 50
Northampton, 66 1 60 1 50
Taunton, $6 1 35 1 30
Charlestown, 1899 1 15 1 10
Danvers, 66 2 50 2 20
Cambridge, $6. 1 08 1 00
Newburyport, 66 1 77 1 60
North Adams, 66 1 75 1 58
Webster, 66 2 25 1 90
Williamstown, 66 5 42 5 00
Brockton, 66 1 50 1 40
Clinton, 66 1 90 1 80
East Boston, 66 1 50 1 40
Malden, {{ 1 40 . 1 30
Marblehead, 66 2 50 2 19
Norwood, $6 . 2 00 1 75
Arlington, . 1900 2 00 1 80
Fitchburg, . $6 1 80 1 62
Jamaica Plain, G6 1 25 1 00
Hawrence, . &6. 1 25 1 10
Newburyport, 6& 1 60 1 50
Newton, . . © 66 1 35 1 25
North Attleboro, 66 1 70 1 45
Worcester, . $6 1 10 1 00
Beverly, 66 1 60 1 50
Chelsea, $6 1 50 1 35

* Change in method of manufacture.
1906.] LONDON SLIDING SCALE. 55
TABLE No. 3. — Voluntary Reductions in Price of Gas from 1885
to 1906 — Continued.

NAME OF COMPANY. Rºa. ..i. **.
Dedham, . g * tº g tº 1900 $1 80 $1 53
Fall River, . ſº ſº e e 66 1 25 1 15
Lawrence, . o tº e * g & 6 1 10 1 00
Malden, & e g e Ç & 66 1 30 - 1 20
Pittsfield, . * e & e e 66 1 80 1 70
Brockton, . g u g ge e 1901 1 40 1 30
Danvers, * e e § tº 6 & 2 20 2 16
Gardner', . e g tº § ſº 6 & 5 40 2 00
Milford, . & º & gº § 66. 2 00 1 70
North Adams, . ºl ſº e e & © 1 58 1 44
Northampton, . * * tº * 66 1 50 1 40
Salem, o e © e g g 66 1 30 1 25
Spencer, . º * ſº iº * $6 2 00 1 75
Beverly, . . . . tº . tº $6 1 50 1 40
Chelsea, . tº e 9 gº ſº (; º; 1 35 1 25
Lowell, * & e g e o 66 1 00 90
New Bedford, . e tº g & 66 1 25 1 20
Adams, {} g ë * * , $ 1902 2 00 1 80
Charlestown, º e ſº t * &G 1 10 1 00
Fall River, . g e {} * •. $6 1 15 1 00
Leominster," © º e e ſº &&. 3 50 1 80
Pittsfield, . g ſº wº t tº 6 & 1 70 1 35
Springfield, . . tº e tº e $6 1 05 1 00
Waltham, . e * & e e 6% 1 35 1 25
Easthampton, . • g d * £6 2 30 2 00
North Adams, . & tº g ſº &6 1 44 1 35
Peoples-Stoneham,' . º c tº $6 2 25 95
Suburban, Revere, . & tº g 6é 1 20 1 15
Dedham, . o e ſº & * 1903 1 53 1 50
Webster, . e e tº e 6% 1 90 1 75
Adams, ſº * g” º e . . . “ 1 80 1 62
Attleboro, . # g e * d & 1 50 1 40
Lynn, . • tº tº º tº 66 1 00 90
Southbridge, . g tº a º $6 2 37 2 14
Woburn, . g º te g º 6 & 1 50 1 40
Dedham, . e © * e o 1904 1 50 1 30
Ipswich, e e & g e &é 2 50 2 00
Otis Company, Ware, o o ſº 66 2 00 1 75
Taunton, . e º e ſº ſº 66 1 30 1 20
Williamstown,' . o º § & &ć 5 00 1 60
Arlington, . ſº g g ſº ſº $6 1 80 1 65
Beverly, . g e e tº ... " & & 1 40 1 30
Ipswich, . g g © e © 66 2 00 1 80
* Change in method of manufacture.
56 SPECIAL COMMITTEE –GAS COS. [Feb.
TABLE No. 3. — Voluntary Reductions in Price of Gas from 1885
to 1906 — Concluded.

Marblehead, º e sº e o 1904 $2 19 $2 00
Salem, Q g g * > e tº $6 1 25 1 20
Greenfield, . e tº ë ſº tº 1905 2 37 1 90
Nantucket, . we § º is & 6& 2 50 2 00
New Bedford, . g * tº tº $6 1 20 1 10
Boston Consolidated, . º º º 6& 1 00 95
Malden, sº tº * e © º $6. 1 20 1 10
Newton, . & e & e g '66 1 15 1 00
Cambridge, . (i. * e * & 1906 1 00 90
Charlestown, o º e tº &&. 1 00 90
Fall River, . ſº e © ſº © &6. 1 00 90
Springfield, tº tº tº tº g 66 1 00 95
Worcester, . e * tº ſº te Gº 1 00 90
Boston Consolidated, . & * © &6 95 90
1906.] LONDON SLIDING SCALE. 57
Commonujealth of filuggachusettø,
MINORITY REPORT.
To the Honorable the Senate and House of Representatives in
General Court assembled.
The undersigned members of the committee appointed
pursuant to chapter 101 of Resolves of 1905 are unable to
concur with their associates on the committee.
From our investigations and study of the gas situation we
are convinced that the sliding-scale system has worked well
in England and is adaptable in Massachusetts, particularly
to the conditions existing in the city of Boston.
We consider that our duty is not fully performed by the
recital of certain facts relative to the history of gas companies
in Great Britain. We understand it to be our duty to report
to the General Court as to the expediency of applying the
sliding-scale system to gas companies in this Commonwealth,
especially in Boston and the town of Brookline.
We therefore respectfully submit the following report, and
recommend the enactment of legislation for the adoption of
the sliding-scale system by gas companies in Boston and
Brookline.
A noted authority in England defines the sliding scale
thus : —
A standard selling price for the gas and a standard rate of
dividend being given, it is provided that for every penny of a
reduction in the price of gas below the standard, the company
are empowered to pay $4 per cent. above the standard dividend, or
1 per cent. for a reduction of 4d., and vice versa if the selling
price of the gas is raised.
58 SPECIAL COMMITTEE –GAS COS. [Feb.
We believe that the partnership principle of participation
in profits and losses by the companies and the consumers,
upon which the sliding-scale system rests, has proved an in-
ducement to the gas companies in Great Britain to manage
their business prudently, skilfully and economically, result-
ing in more progressive and careful business methods, more
judicious and economical expenditure of money, greater dili-
gence in the profitable disposition of residuals, and a safer
rate of dividend to the stockholders, than any method before
known in connection with the gas business in that country;
and that it has surpassed all others in establishing respect and
confidence between the companies and their consumers and
employees in London. We would confidently anticipate re-
sults following its adoption and operation in Boston that
would prove beneficial to the manufacturers and the consum-
ers of gas, and to the employees of the companies, and thus
establish greater harmony than has heretofore existed be-
tween them. Eminent engineers and managers of gas com-
panies in London, including Sir George Livesey, who show
familiarity with the gas situation here, have expressed the
opinion that the sliding scale is applicable thereto.
The system has now and for many years has had the cordial
support of the consumers and the companies in London, of
both Houses of the British Parliament, the London County
Council and the Board of Trade, and of the wage-earners
and their representatives, – in fact of the overwhelming
majority of all classes and conditions.
While other causes, operating during the past thirty years,
have tended somewhat to reduce the cost of manufacturing
gas and consequently to reduce the price, we believe that
the sliding scale has been largely influential in attaining the
great reductions in price which began at the time of its
establishment in England.
We desire to present more in detail than have our asso-
ciates the considerations leading to the adoption of the slid-
ing scale in Great Britain and Ireland, and the results which
have followed its establishment.
1906.] LONDON SLIDING SCALE. 59
I.
ESTABLISHMENT OF THE SLIDING SCALE IN ENGLAND.
In the midst of the great discontent and agitation among
the gas consumers of London which had existed for many
years, in June, 1874, Mr. (now Sir) George Livesey, in
his annual address to the British Association of Gas Man-
agers, of which he was then the president, brought prominently
to the attention of the public the expediency of adopting a
sliding-scale system. He said in part : —
I hold it to be most strongly in the interest of gas share-
holders, directors and managers to heartily assist in carrying out
some system whereby they may have their customers with them;
some easily workable self-acting arrangement that would put
an end to the cat-and-dog life, and make them live and work in
peace with each other. In fact, make it really to the interest of
the gas companies and gas managers to do the best they can for
the consumers. . . . The position in which you have placed me
is one that compels me to endeavor to look at these matters in
an impartial spirit, and should I be charged with making state-
ments, or expressing opinions, apparently adverse to our special
interests, I shall contend that the interests of gas companies
are so closely bound up with the interests of their customers
that the two are really identical. It is now universally admitted
that the supply of gas must be a monopoly, of which we are the
fortunate possessors; but the objections to all monopolies are so
great that nothing but necessity can justify them; it is therefore
of the utmost importance, if we would retain our position, that
our customers should be satisfied, which I unhesitatingly contend
is possible of attainment.
Mr. Livesey had then been connected for twenty years
with the South Metropolitan Gas Company, with which his
father had been identified for many years before. He had
been its engineer, and had made a careful study of the man-
agement of the business. The first suggestion of the sliding
scale had apparently been made in 1858 by Dr. John Chal-
lice, a representative of the society called the South London
Gas Consumers' Mutual Protective Society, who advocated
that the price of gas be made dependent upon the cost of
producing it. The Sheffield company had adopted a partial
60 SPECIAL COMMITTEE – GAS COS. [Feb.
sliding scale as early as 1866. But the proposition had not
been much considered when Mr. Livesey, then a leading au-
thority in gas matters, gave it the support of his great influ-
ence and high reputation.
The year following the address above quoted from, the
Metropolitan Board of Works, with a view toward remedy-
ing the causes of discontent among the consumers, introduced
into Parliament three bills, one for the establishment of com-
peting gas works, another for the purchase of the existing
plants, and a third, the Metropolitan Gas Companies Bill
(so called), to subject the companies to improved and uniform
regulations. At this time the London companies had been
reduced to 9 by amalgamation, and were charging widely
varying prices.
The first two bills were dropped, and the third was re-
ferred to a select committee of the House of Commons, pre-
sided over by the Right Hon. W. E. Forster.
The bill contained provisions for a sliding scale working
one way only, by which a rise in price beyond 3s. 9d., the
initial or standard price, should subject the dividend to a
reduction (below the standard dividend of 10 per cent.) of
J4 per cent. for every penny or part of a penny charged in
excess of 3s. 9d. This scheme did not provide for an increase
of dividend above 10 per cent. in the event of a reduction in
price below 3s. 9d. Thus, the bill provided a penalty for an
increase in price above a certain figure, but no reward for a
decrease in price below such figure.
During the hearing on the bill the Board of Trade sent to
the committee a letter recommending a sliding scale of price
and dividend working both ways, as follows: —
. . . It appears . . . to be a question well worthy of consid-
eration whether the principle of a sliding scale, in which the
price shall vary inversely as the dividend, would not be a more
effectual mode of securing “ due care and management” than the
present mode of official revision. . . .
To make a scheme of a sliding scale of price and dividend
just and effectual the following conditions appear to be neces-
sary: — -
1. That the initial price and quality of gas shall be fairly
fixed, having regard both to the immediate existing interests of
1906.] LONDON SLIDING SCALE. 61
the companies and the consumers, and to the prospects of both
under the new system.
2. That the price and dividend shall vary inversely in certain
fixed proportions without limit, so that on the one hand the
price may be raised without limit as the dividend diminishes,
and so that the dividends may be increased without limit as the
price diminishes. Such a plan, if practicable, would be beneficial
to the companies, for it would protect them against the contin-
gency of such an increase of expense in manufacture as would
make the price of 1860 insufficient to produce the requisite divi-
dend, and it would enable them to share with the consumer any
amount of benefit that may arise from diminution in expense of
manufacture or increased consumption. It would be beneficial
to the consumer, because it would, without immediate increase
of price, give the companies, who alone possess the requisite
knowledge and power, a strong interest to reduce expenditure,
whether of capital or income, in lieu of the present system, under
which they have an interest in increasing the expenditure of
capital and no interest in keeping down the expenditure of
income.
The plan submitted by the Board of Trade in this letter
received strong support from the promoters of the bill, the
Metropolitan Board of Works, and from the Corporation of
the City of London, and others, including Mr. Livesey, then
at the head of the South Metropolitan Company.
All the gas companies opposed the bill. Some of their
engineers and representatives in their evidence before the com-
mittee predicted that a sliding scale would be disastrous, and
condemned it as unjust and speculative. The South Metro-
politan Company did not uphold Mr. Livesey's views, and its
directors opposed the bill.
After hearings before the committee covering a period of
twenty-one days, at which the evidence of all parties for and
against the bill was taken, and some of the most eminent
counsel of London were heard, the committee reported an
amended bill, embodying the suggestions of the Board of
Trade as to a sliding scale of price and dividend working
both up and down, naming 3s. 9d. as the standard price.
The chairman said : —
We believe that it [the sliding scale] would conduce to the
interests of the companies quite as much as to the consumers;
62 SPECIAL COMMITTEE – GAS COS. [Feb.
and we have come to that conclusion believing that it is pro-
posed bona fide by the authorities, and with the intention of
adhering to it should enable the companies to earn more than
10 per cent. dividend.
Certain of the companies had bills pending before Parlia-
ment, but upon this decision of Mr. Forster's committee they
all withdrew them, with the exception of the Commercial
company and the Ratcliffe company, which were then amal-
gamating, and which accepted an act known as the Com-
mercial Company Gas Act, 1875, embodying the sliding-scale
clauses as recommended by the committee, with a standard
price of 3s. 9d. and a standard dividend of 10 per cent.
The amended bill of the committee was not passed, and no
general legislation imposing a sliding scale took place, but
during the year 1875–76 negotiations went on between the
companies and the government; the number of companies
was reduced to 6 by amalgamation, and in 1876, 2 of them,
namely, the Gas Light and Coke Company and the South
Metropolitan Company, came under the sliding scale.
The standard price of the Gas Light and Coke Company
was fixed at 3s. 9d., but the standard price of the South
Metropolitan Company was fixed 3d. less, or at 3s. 6d., for
the reason that its then selling price was 3s., and the com-
pany was paying the maximum dividend of 10 per cent.,
while the selling price of the other 2 companies was 3s. 9d.,
and the effect of giving the South Metropolitan Company
the standard price of 3s. 9d. would have been to enable it
to at once raise its dividends to 111/3 per cent., without a
proportionate decrease in the price of gas, conformably with
the sliding-scale principle.
By amalgamations from time to time by the other London
companies with the 3 companies adopting the sliding scale
in 1875 and 1876, all the metropolitan companies finally (in
1883) came under the operation of the sliding scale.
In 1876 provisions known as the “ auction clauses” were
imposed by Parliament upon two of the London companies,
providing that new issues of stock be sold at public auction,
as a prevention of stock watering. Since that date the auction
clauses have been compulsorily imposed upon all companies
1906.] LONDON SLIDING SCALE. 63
coming to Parliament. The auction clauses are more fully
described in the report of the parliamentary committee of
1899, as hereinafter appears.
II.
How THE SLIDING SCALE HAs operaTED.
With the adoption of the sliding scale by the 3 large metro-
politan companies in 1875–76, the strife between the com-
panies and the consumers which had been waged for many
years ceased.
In 1876 the 3 companies were charging as follows for gas,
to wit : —
Gas Light and Coke Company, . g tº * . 3s. 9d. (90 cents).
South Metropolitan Company, . & & & . 3s. 0d. (72 cents).
Commercial Company, . (e & º & . 3s 9d. (90 cents).
Prices steadily decreased during the next fourteen years,
and in 1889 were more nearly uniform than at any other
time, viz.: –
Gas Light and Coke Company, . tº * tº . 2s. 6d. (60 cents).
South Metropolitan Company, . . . . . 2s. 8d. (54 cents).
Commercial Company, . ſº * g $ . 2s. 4d. (56 cents).
The reduction in the price of gas from 1869 to the adop-
tion of the sliding scale, a period of seven years, is shown
by the following: —
Gas Light and Coke Company, . g g . . 2.94d. ( 6 cents).
South Metropolitan Company, . & e t . 5.06d. (10 cents).
Commercial Company, e * e e te . 4.27d. ( 9 cents).
The reduction from the adoption of the sliding scale to
1890, a period of fourteen years, is shown as follows: —
Gas Light and Coke Company, 13.57d. (27 cents, 133 cents in each
period of seven years).
South Metropolitan Company, 13.88d. (28 cents, 14 cents in each period
of seven years).
Commercial Company, 16.77d. (34 cents, 17 cents in each period of
seven years).
From 1889 to 1894, owing to labor troubles, the high
price of coal and causes which operated all over Great Britain,
64 SPECIAL COMMITTEE–GAS COS. [Feb.
all the companies raised their prices. There was no general
complaint from the consumers against any company but the
Gas Light and Coke Company, which in 1894 was charging
a higher price than any other company. The highest prices
charged by the 3 London companies in that year were as fol-
lows : —
Gas Light and Coke Company, . . . . . 8s. 1d. (74 cents).
South Metropolitan Company, . tº ſº g . 2s. 5d. (58 cents).
Commercial Company, . ſº § g g . 2s. 7d. (63 cents).
Owing to the agitation by the consumers of the Gas Light
and Coke Company, and threatened parliamentary investi-
gation by them, it reduced its price in that year to 2s. 10d.
(68 cents).
In 1898 and 1899 the price of the Gas Light and Coke
Company had again risen, while the two other metropolitan
companies had reduced their prices. The prices charged in
1899 were as follows : —
South Metropolitan Company, . º ſº p . 2s. 2d. (52 cents).
Commercial Company, º g & g gº . 2s. 6d. (60 cents).
Gas Light and Coke Company, . g g tº . 3s. 0d. (72 cents).
This variation in price led to the appointment of a com-
mittee of the House of Commons, presided over by Sir James
Rankin, “to inquire into the powers of charge conferred by
Parliament on the metropolitan gas companies, and to report
as to the method in which these powers have been exercised,
having regard to the differences in price charged by the vari-
ous companies.”
The hearings before that committee covered a period of
eleven days, and were devoted principally to the investiga-
tion of the management of the Gas Light and Coke Company.
Sir Courtenay Boyle, permanent secretary of the Board of
Trade, Harry Edwin Haward, comptroller of the London
County Council, also many leading engineers and managers
of gas companies, appeared and testified before the com-
mittee; all were fully examined with reference to the price
of gas, and questions bearing upon the management of the
Gas Light and Coke Company.
1906.] LONDON SLIDING SCALE. 65
Among the allegations brought against the Gas Light and
Coke Company were the following: —
Wasteful and extravagant expenditure of capital, poorjudg-
ment exercised in purchasing coal, large quantities having
been bought at the top of the market, failure to obtain the best
price for their residuals, and want of foresight and wisdom in
the erection of their works, the obsolete character of their
apparatus in some instances, and over-extravagance in their
fittings in others.
The Gas Light and Coke Company was heard in defense
to these charges.
The allegations made against the Gas Light and Coke Com-
pany were not attributable to the sliding scale, but to other
causes set forth in the report of the committee.
The committee examined into the working of the sliding
scale, and considerable testimony was given by the persons
above described, reinforced by tables and schedules presented
by Sir Courtenay Boyle, Sir George Livesey and Mr. Haward,
and other eminent authorities. These persons expressed
themselves as desiring no change in the sliding-scale sys-
tem, and some attributed to a great extent, though not
wholly, the general reduction in prices to its influence.
There was no evidence of a disparaging nature offered in
relation to the sliding scale.
The result of the investigations of the committee of 1899
was a finding of mismanagement on the part of the Gas Light
and Coke Company, and a complete endorsement of the slid-
ing scale, with, however, recommendations for a reduction
of the standard price and a secondary sliding scale, herein-
after stated.
In relation to the sliding scale the committee reported as
follows : —
This arrangement [the sliding scale] has, on the whole, had
an excellent effect upon the companies, and has given them a
strong motive to keep down the price of gas, and has also oper-
ated to the advantage of the consumers. . . . Since the intro-
duction of the sliding scale the prices charged for gas have at
no period been as high as the standard price permitted to each
company, and in every case have fallen considerably below the
prices charged before the introduction of the sliding scale. In
66 SPECIAL COMMITTEE –GAS COS. [Feb.
Saying this we do not wish it to be inferred that the whole of
the reductions which have taken place in the price of gas since
1876 are to be attributed to the operation of the sliding scale.
. . . The auction clauses, which compel the companies to sell
their stock and their loans to the highest bidders, have had the
effect of enabling the companies to obtain their capital at a much
less rate than if the stock had been offered to each shareholder
at par, which was the usual custom before 1876, and thus the
charge for interest on capital has been largely reduced. Expert
evidence upon this matter seems to be entirely in its favour.
Your committee have no hesitation in coming to the conclu-
sion that the principle of the sliding scale, coupled with the
auction clauses, is an excellent one, and should be maintained;
they will, however, have some remarks to make and suggestions
to offer later on upon the figures of the present scale. . . .
. . . Your committee have come to the conclusion that the
arrangements known as the sliding scale as applied to dividend
and price in conjunction with auction sales of stock have had a
beneficial effect upon the gas undertakings, especially as far as
the consumer is concerned, and they have received no evidence
to induce them to propose any alteration in the system.
In the course of the parliamentary investigation of 1899,
Mr. Haward pointed out that the inducement to economy
and good management offered by the sliding scale to the com-
panies had steadily diminished, owing to the greater propor-
tionate increase in the amount of gas sold, as compared with
the growth of the share capital of the companies. This
tended to weaken the effect of the sliding scale as an incentive
to the companies, because it took a relatively larger sum to
enable a reduction of 1d. to be made in the price of gas than
to give the corresponding increase of 5s. (4 of 1 per cent.)
in the rate of dividend.
Mr. Haward suggested that the standard price be reduced,
and that it would be to the interest of the consumer if the
company’s share in the sliding scale should be increased, as
an incentive to the companies to so manage their business
that the sliding scale should be kept active.
In its report, that committee, in connection with its re-
marks commendatory of the sliding-scale system, said : —
. . . But evidence has been tendered which leads them [the
committee] to think that now the standard price is fixed too
1906.] LONDON SLIDING SCALE. 67
high, and as a consequence dividends may be paid far above the
standard dividend without the full effect of the intention of the
framers of this system with regard to the exercise of “ due care
and economy” being brought into play. Your committee there-
fore have come to the conclusion that the time has come when a
Ieduction in the standard price might fairly be recommended
on the grounds that the cost of the production of gas is now
much less than it was when the present standards were fixed,
and also because capital can now be obtained at a much less
rate of interest than formerly. The committee believe that a
small reduction of standard price, coupled with a secondary
sliding scale for increasing or decreasing dividends, would act
beneficially towards securing “ due care and economy” in man-
agement, and that a system can be so devised that, while it would
stimulate those companies which had not succeeded in bringing
their prices to a low level to greater endeavours to that end, it
would not interfere with those companies which had already
attained low prices.
The recommendations of that committee embodied the fol-
lowing : —
That whenever any of the metropolitan gas companies again
come to Parliament for an extension or alteration of their capital
powers, a revision of the sliding scale should take place, and
that the standard price should be reduced to 3s. 3d. to carry
the standard dividend of 10 per cent., and that the existing scale
of increase or decrease for dividend of 14 per cent. for every
penny of decrease or increase of price below or above 3s. 3d.
be maintained; and that a secondary or additional scale be
imposed which should permit of an increase or decrease of divi-
dend over and above that regulated by the present scale of 14
per cent. for every complete 3d. of increase or decrease below or
above the standard price of 3s. 3d.
In 1900, 1902 and 1903, respectively, the standard prices
as originally given to the 3 London companies were reduced
as follows, and there stand at the present time, to wit: —
Gas Light and Coke Company, 3s. 4d. (80 cents), gas of 16 candle-power.
South Metropolitan Company, 3s. 1d. (74 cents), gas of 14 candle-power.
Commercial Company, . . 3s. 3d. (78 cents), gas of 14 candle-power.
In lieu of the secondary sliding scale proposed by the com-
mittee, as above set forth, the companies were given a ratio
of 14 of 1 per cent. increase or decrease of dividend for each
68 SPECIAL COMMITTEE –GAS COS. [Feb.
penny or part of a penny decrease or increase below or above
the standard price. This is the present ratio for the Lon-
don companies. -
No change in this respect has ever been made in the case
of companies outside the metropolis, which still retain the
ratio established in 1875, of 5s., or 14 of 1 per cent.
In 1904 the prices of the 3 companies were as follows: —
Gas Light and Coke Company, average price 2s. 11d. (70 cents), or an
increase from 1890 of 10 cents.
South Metropolitan Company, average price 2s. 3d. (49 cents), or a
reduction from 1890 of 5 cents.
Commercial Company, average price 2s. 53d. (59 cents), or an increase
from 1890 of 3 cents.
Owing to the increased price in the cost of coal in 1900,
the prices of two of the companies were raised during the
next two years, as indicated by the preceding tabulation.
At present the prices are as follows: —
Gas Light and Coke Company, tº º g . 2s. 11d. (70 cents).
South Metropolitan Company, , ſº & º . 2s. 0d. (48 cents).
Commercial Company, . ſº º e º . 2s. 2d. (52 cents).
The growth of the London companies since the adoption
of the sliding scale has been unprecedented, as evidenced by
the increase in the annual sale of gas, and increased number
of consumers, which during the twenty years from 1883 to
1903 is shown by the following : —
1883. 1893. 1903.
Gas Light and Coke Company: — -
Annual sale of gas (feet), 14,824,547,000 18,244,140,000 20,528,644,000
Number of consumers, . 198,290 217,966 406,032
South Metropolitan Company: —
Annual sale of gas (feet), 3,995,652,000 6,563,937,000 11,582,286,000
Number of consumers, . 61,009 89,993 261,444
Commercial Company: — -
Annual sale of gas (feet), 1,591,135,000 1,967,400,000 2,817,756,000
Number of consumers, . 21,064 21,821 50,850
As explained by Mr. Haward, comptroller of the London
County Council, as hereinbefore referred to, the proportion
of the profits from the sliding scale has been in favor of
1906.] LONDON SLIDING SCALE. 69
the consumer rather than the companies, owing to the greater
proportionate increase in the amount of gas sold, as Com-
pared with the growth of the share capital of the companies.
The following summary, taken from Rostron’s “Powers
of Charge of the Metropolitan Companies,” published in
1900, shows the amounts which in 1899 had been received
by the companies and their consumers from the operation of
the sliding scale, viz.: –
1. The Gas Light and Coke Company. — This company has
received about £2,100,000 in increased dividends, and has given
about £13,000,000 in reductions of price. *
2. The South Metropolitan Company. — This company has
received £469,901 in increased dividends, and has given £3,072,-
355 in reductions of price.
3. The Commercial Company. — This company has received
£396,783 in increased dividends, and has given £1,965,385 in
reductions of price.
The conclusion reached by the parliamentary committee
of 1899 commendatory of the sliding-scale system is confirmed
by comparisons, based on “Field's Analyses” of all the com-
panies in England, between the sliding-scale companies and
companies working under the maximum system, so called,
that is, companies organized under acts which limit both
price and dividend, and permit revision by the public authori-
ties. The number of companies operating under each system
is nearly equal, there being 459 companies at the date at
which figures for this comparison are taken (1904), of which
over 200 operated under the sliding scale.
This comparison establishes : —
a. That the sliding-scale companies on an average sell gas
at a lower price than do the latter, and pay larger dividends
to the stockholders.
b. That the sliding-scale companies (excluding the metro-
politan companies in this comparison on account of their
size) produce more gas and do more business than the maxi-
mum companies, to wit: the average quantity of gas sold per
company by the maximum companies, employing an average
capital per company of £70,894, is 118,528,000,000 cubic
feet; and by the sliding-scale companies, employing an aver-
70 SPECIAL COMMITTEE–GAS COS. [Feb.
age capital per company of £73,429, is 152,628,000,000 cubic
feet.
c. That the average rate of reduction in the price of gas
of the standard or sliding-scale companies, when fairly in
operation, has been greater than that of the maximum com-
panies.
Gas plants owned by municipalities are not included in the
foregoing comparison, as they escape taxation, and certain
expenses of maintenance and litigation are charged to the
municipality rather than against the plant.
The adoption of the sliding scale in England is optional
with the companies. No company having once come under
the system has asked to be relieved of its provisions.
The following table shows the increase in the number of
standard companies in the different parts of Great Britain
from 1875 to 1903, inclusive : —
1875. I 883. 1893. 1903.
England and Wales, . & e 1. 72 157 192
Scotland, e g ſo e e tº- = 1 4
Ireland, . * tº © e ſº tº º 2 5 7
In 1904, of the 10 companies incorporated by Parliament,
8 went under the sliding scale, making 211 sliding-scale com-
panies at our last information.
In considering the sliding scale we found it necessary to
describe the 3 great London companies. It may be of in-
terest to state briefly the magnitude of their business.
These companies have at least 20 manufacturing stations,
3,400 miles of mains, and upwards of 17,000 workmen on
their pay rolls. They have expended about $100,000,000.
There are 3,500,000 tons of coal, or its equivalent, used
yearly, a single day's consumption in the winter season being
about 17,000 tons. They maintain in good working order,
day by day, a supply of gas for about 750,000 consumers’
meters and 75,000 public lamps.
1906.] LONDON SLIDING SCALE. 71
III.
THE APPLICATION OF THE SLIDING SCALE TO MASSACHU-
SETTS COMPANIES.
The advantages, both to the public and to the stockholders,
of the sliding-scale system for regulating the price of gas
and the rate of dividends have been conclusively established
in England. The system has stood the supreme test of an
experience continued upon an extensive scale during a period
of thirty years. The conditions under which it was so tested
were necessarily widely divergent; for the sliding scale has
been applied to over two hundred companies, differing from
one another in capitalization and managerial skill, and op-
erating in communities which varied greatly in character,
location and population. It has proven that the conditions
of success for the sliding-scale system are not local or pecul-
iar in character. Its success results from the nature of the
gas business and that of man, – from human nature.
While the business of supplying gas is a public service, it
has many characteristics of a manufacturing business. It
produces an article for sale. The cost of its production is,
as in other manufacturing businesses, dependent largely upon
the character and condition of the plant; upon the extent to
which labor and waste saving devices are adopted; upon the
skill with which raw materials and supplies are purchased,
and whether the plant is operated to its full capacity. The
cost of gas is also, to an even greater extent than is the case
in most manufacturing businesses, dependent upon the suc-
cessful disposition of waste or residual products.
The business of supplying gas has also many of the char-
acteristics of a mercantile business. In most businesses the
pro rata cost decreases with the increase in the volume of
sales. But a low pro rata cost of distribution is dependent.
in the gas business, to a far greater extent than in most busi-
nesses, upon large volume. The distributing plant requires
an exceptionally large investment. But the mains and pipes
are rarely used to their full capacity. The interest, deprecia-
72 SPECIAL COMMITTEE –GAS COS. [Feb.
tion and maintenance charges are the same whatever the vol-
ume of sales. And the inspection of meters and many other
charges increase but slightly with the increase of sales. The
pro rata cost of distributing gas diminishes, therefore, largely
with the increase in the quantity sold. But as in most mercan-
tile businesses, the quantity of gas which can be sold in any of
our large cities is dependent mainly upon the skill, energy,
initiative and intelligence with which the business is con-
ducted. The demand for gas is not a fixed quantity. There
is, undoubtedly, a minimum quantity which will be used
under almost any conceivable circumstances. But limits can
scarcely be set to the possible increase of its use in our large
cities. Not only is there an ever-growing demand for intense
artificial lighting of public places, stores and residences, but
there is the almost limitless field now occupied by electric
light, coal and oil, of which gas is the natural competitor.
The limits, for instance in Boston, of the use of gas for
light, heat and power will be set mainly by the skill, energy
and initiative of those who manage the business, and the
extent to which they appreciate that increased use of gas
will result from reduction in price, bettering of appliances
and improving facilities.
The public care only to secure gas of good quality at a low
price. But obviously a low cost of production and distribu-
tion is an essential condition of a low price; and the public
is therefore deeply interested in securing for the companies
efficient management. Now, how may we best expect to
attain for gas companies a management possessing the requi-
site ability and skill and exercising the requisite vigilance
and energy? Obviously by following those lines upon which
the remarkable industrial advance of America has proceeded,
— the lines of intelligent self-interest. Those who manage
our gas companies should be permitted to do so under the
conditions which in ordinary business have proved a suffi-
cient incentive to attract men of large ability, and to ensure
from them their utmost efforts for its advancement. These
essential conditions are : —
First. — The right to enjoy a fair share of the fruits of
successful effort.
1906.] LONDON SLIDING SCALE. 73
Second. — The opportunity of devoting one's whole efforts
to developing the business.
Third. — The probability of pursuing for a reasonable
time without interruption such business policy as may be
adopted. -
The sliding-scale system supplies in large measure these
essential conditions of the successful conduct of the gas
business.
It is clear that under the sliding-scale system, if the man-
agement is highly successful in reducing the price of gas,
the return upon capital will be large, – far larger, indeed,
than capital as capital is entitled to receive when employed
in a business which is not only safe, because it enjoys sub-
stantially a monopoly, but which also receives from the
community, without the payment of any compensation, the
franchise to lay and maintain its mains and pipes in the pub-
lic streets. But the possibility of this large return upon
capital is offered, under the sliding-scale system, not as a
return upon capital, but as an incentive, which, taking human
nature as it is, has been shown to be required in order to
secure in the gas business the kind of management most
likely to produce and distribute gas at the lowest possible
cost, and thus supply an essential prerequisite to cheap gas.
The Massachusetts system of supervision by the Board of
Gas and Electric Light Commissioners, and of publicity, as
well as the provision for preventing stock watering, is un-
doubtedly of great value, and these provisions should be
fully maintained; but the provision for the compulsory re-
duction of price has not in our opinion proved adequate to
secure for the public gas at low prices. -
There have been in twenty years large reductions in th
price of gas, but the prices still seem to us unreasonably
high when compared with the prices in England, even when
making due allowance for differences in conditions. The
failure to secure greater reductions is, we believe, due, in
large measure, to the fact that either—
a. The management did not feel the incentive to those
extraordinary efforts by which low cost of production and
of distribution can alone be attained; or -
74 SPECIAL COMMITTEE – GAS COS. [Feb.
b. That such companies as were efficiently managed and
actually produced and distributed gas at low cost neverthe-
less maintained the high prices, but concealed the surplus
earnings by using them in extensions of plant because they
were afraid to pay larger dividends.
Thus the Boston Gas Light Company, having a capital of
$2,500,000 on which it paid dividends of 10 per cent., in
the years 1877 to 1892 expended on extensions $3,300,000,
the money being derived wholly from income. That is, an
average of $225,000 per year, or the equivalent of a dividend
of 9 per cent. additional upon the capital stock, was put into
the plant.
As the Massachusetts system of regulating gas companies
has not been adequate to secure to the public gas at properly
low prices, we recommend the adoption of the sliding-scale
system; but that the sliding-scale system should be com-
bined with the Massachusetts system of supervision, publicity
and public investigation, and that in applying it the follow-
ing modifications should be made : —
First. — The Board of Gas and Electric Light Commis-
Sioners should have reserved to it the power to hear and de-
cide petitions for a reduction of the price of gas, but the order
thereon should be recommendatory only, instead of com-
pulsory, as at present. The argument for the adoption of the
sliding-scale system rests solely upon the expectation that the
natural law of self-interest will operate to secure able manage-
ment, which will reduce the selling price of gas in order to
secure larger dividends. It is of course possible that the man-
agement may be so incompetent as not to be able to properly
reduce the cost of production and distribution, or, even if
efficient, may be misled by an undue desire to build up the
plant out of income. In either of these events the possibility
of greater dividends would prove an insufficient incentive
to giving the public cheaper gas. The danger of such a fail-
ure in the operation of the sliding scale would be almost
wholly removed if power were given to the Board of Gas
and Electric Light Commissioners to hear and decide upon
petitions for the reduction of the price of gas, but giving to
their decisions the effect of recommendations merely. If this
course were adopted, the Board would exercise in this respect,
1906.] LONDON SLIDING SCALE. 75
instead of compulsory powers as at present, the same advisory
powers which have been exercised by the Board of Railroad
Commissioners since its organization, with great effective-
ness and to the general satisfaction of the public and of the
transportation companies alike. -
The compulsory power of the Board to order a reduction
in the price of gas has not been frequently exercised, - the
compulsory reductions by the several Massachusetts compa-
nies during a period of twenty years being only 31; on the
other hand, during that period 260 reductions were made
voluntarily.
Second. — The London sliding-scale system if applied in
Massachusetts should be further modified by providing either
for its operation during a limited period only or for revision
from time to time of the standard price and standard divi-
dend, and perhaps also of the rate of increase or decrease of
dividend dependent upon the selling price. With the pro-
tection afforded by the power of the Board to hear complaints
and publish its recommendatory decisions, a ten-year period
would seem to be reasonably safe.
Third. — Under any general law the standard price, stand-
ard dividend and ratio of increase or decrease in dividend
rate should be fixed by the Board of Gas and Electric Light
Commissioners. To fix what the standard price of gas, what
the standard dividend and what the rate of increase or de-
crease of dividend depending upon selling price should be for ,
an existing company necessarily presents a difficult problem.
There are now 66 gas companies doing business in Massa-
chusetts. The conditions of production and distribution in
the different municipalities are widely divergent, and the
companies vary one from another greatly in capitalization, in
dividends customarily paid, in cost of plant or capitalization
as compared to output, in cost of production and distribution
and in price charged. A schedule showing these facts for
the year ending June 30, 1904, is given in Appendix A.
It seems clear that no single standard price or standard
dividend, and possibly not even a single fixed ratio of in-
crease or decrease of dividend, can be justly applied to all
companies. To a proper decision of these factors a separate
investigation is essential of the affairs of the particular com-
76 SPECIAL COMMITTEE –GAS COS. [Feb.
pany to be affected. If it is desired to enact a general law
for the introduction of the sliding-scale system, provision
could be made for fixing the standard price, the standard
dividend, the ratio of increase and decrease of dividend rate,
in respect to a particular company by the Board of Gas and
Electric Light Commissioners, after public hearing.
IV.
ADOPTION OF THE SLIDING-scALE SYSTEM FOR Boston.
Your committee were expressly requested to report “with
special reference to the expediency of applying that scale
to the gas light companies in the city of Boston and the
town of Brookline.”
We are of opinion that it is expedient to apply the sliding-
scale system, with modification above suggested, to the com-
panies doing business in Boston and Brookline, or at least
to the Boston Consolidated Gas Company.
On May 25, 1905, the date of the passage of the resolve
appointing your committee, there were 10 gas companies do-
ing business in Boston ; 8 of these, that is, all except the
Charlestown and East Boston companies, consolidated on
June 15, 1905, under the name of the Boston Consolidated
Gas Company. In the year ending June 30, 1905, these 8
sold 3,036,245,000 feet out of the total sales of 3,294,952,000
feet in Boston and Brookline.
During the twenty years preceding the passage of statute
1905, chapter 421, the conduct of the gas business in Boston
had been a source of almost constant complaint on the part
of its citizens, and for such complaints ample cause existed.
During a large part of the time, at least, the interest of the
public rarely received reasonable consideration. Speculation
and selfish interest seemed to control the actions of the
companies. Suspicion of fraud and corruption, often well
founded, was associated in the public mind with the finan-
cial and legislative operations of the companies. A brief
summary of the legislation affecting these companies is given
in Appendix B. -
During a large part of this period the efforts of the man-
agers of the several properties were devoted largely to fur-
thering improperly selfish schemes, or in repelling attacks
1906.] LONDON SLIDING SCALE. 77
upon the companies. Investigations or attempts at investi-
gation by the Board of Gas and Electric Light Commissioners
and legislative hearings followed in rapid succession. Little
thought was given to perfecting and developing the business
of making and distributing gas, and practically no reductions
in selling prices were made except as an outcome of petition
and hearing.
The result of these conditions was the maintenance of
some expensive, unnecessary or obsolete plants, and an ab-
normally high capitalization of the Boston gas plants in
proportion to output, as compared with other cities, and an
unduly small increase in the sale of gas. .
A schedule showing the price at which gas was furnished
by the several companies for the twenty years preceding
June 30, 1905, is given in Appendix C. -
The plant of the Boston Consolidated Gas Company is
claimed by its officers to be worth 60 per cent. more than
the company’s capitalization ($15,124,600), provided by
the statute 1905, chapter 421, but the capitalization of this
company in comparison with the sales of gas of constituent
companies for the year ending June 30, 1905, far exceeds
that of the companies operating in the other large Massa-
chusetts cities. Thus : —
Cubic Feet of
- Capitalization. Gas sold.
Boston Consolidated Gas Company, $15,124,600 3,036,245,660
Cambridge, . e G º ge g 880,000 438,877,551
Lowell, . tº º © º to * 1,000,000 482,088,600
Springfield, . º ſº ſº g e 617,900 311,678,930
Worcester, . ſº tº tº e o 800,000 410,641,700
Fall River, . g e tº º º 635,000 321,119,341
On the other hand the lack of development of the busi-
ness in Boston is shown by the sales of the last three years.
Sales of gas by the constituent companies forming the Cubic Feet,
Boston Consolidated Gas Company for the year end-
ing June 30, 1905, . • a e º wº ſº 3,036,245,660
Sales of gas by the constituent companies forming the
Boston Consolidated Gas Company for the year end-
ing June 30, 1904, . e tº & 3,012,910,060
Sales of gas by the constituent companies forming the
Boston Consolidated Gas Company for the year end- -
ing June 30, 1903, . g tº º e † tº . 3,133,287,271
78 SPECIAL COMMITTEE–GAS COS. [Feb.
On June 16, 1905, immediately after consolidation was
effected, the Boston Consolidated Gas Company announced
a reduction in the price of gas for the whole territory served
by it to 95 cents, to take effect July, 1905, and a further
reduction to 90 cents, to take effect Jan. 1, 1906, thus antic-
ipating the requirement of statute 1905, chapter 421, which
required the reduction to 90 cents to be made within one
year from the date of consolidation; and the management
has otherwise given evidence of ability and of desire to serve
the public as well as the stockholders; and this great change
in the character and attitude of the managers of the business
is rapidly winning the confidence of the consumers. The
conditions under which the Boston Consolidated Gas Com-
pany has commenced business indicate an unusual opportu-
nity of reducing the cost of production and distribution of
gas and of increasing sales, and of testing in Massachusetts
the value to the public and to stockholders of the sliding-
scale system.
The recent and repeated investigations by the Board of
Gas and Electric Light Commissioners and by legislative
committees of the physical condition, values and operations
and financial returns of the properties now combined in the
Boston Consolidated Gas Company, furnish, without the
necessity of further inquiry, the facts necessary to a deter-
mination in respect to this company of the amounts at which
the standard price, the standard dividend and the ratio of
increase and decrease of dividend should be fixed; but it is
obvious that there may nevertheless be serious differences of
opinion as to the exact scale to be adopted.
We are of opinion, if the sliding scale is to be applied
to the Boston Consolidated Gas Company: —
a. That the standard price shall be fixed at 90 cents, –
*.e., the present price.
b. That the standard dividend shall be fixed at 7 per cent.
per annum. - - -
c. That for every 5 cents’ reduction in price, the rate of
dividend may be increased 1 per cent.
Seven per cent. is about the equivalent of the aggregate
net earnings from operation of the constituent companies
1906.] LONDON SLIDING SCALE. 79
prior to consolidation. It is also about the aggregate of the
interest and dividend payments of these companies prior to
consolidation. The rate of 7 per cent. may seem low to the
company for the standard dividend inasmuch as it has paid
a dividend at the rate of 8 per cent. for the first six months
since consolidation. On the other hand, the rate of 7 per
cent. may seem to some of the public too high to establish as
a standard dividend, particularly as the fund required for
dividends at that rate (to wit, $1,058,722 on the $15,124,600)
amounts, if figured on the sales of gas for the past year end-
ing June 30, 1905, to about 35 cents for every thousand feet
sold. This is a larger dividend payment per thousand feet
than was made last year by any company in Massachusetts
with two exceptions. It is about 75 per cent. more per thou-
sand feet than was paid in dividends by the Cambridge, Fall
River, Gloucester and Worcester companies. It is twice that
paid by the Lowell company.
This payment by the Consolidated Gas Company on ac-
count of capital invested in plant seems particularly high in
view of the fact that, unlike most of the gas companies in
Massachusetts, the Boston Consolidated Company does not
own the plant in which a large part of its gas is manufac-
tured, the constituent companies having purchased from the
New England Gas and Coke Company, during the year end-
ing June 30, 1905, in the aggregate 49 per cent. of all gas
sold by them. 4.
But this ratio of dividend payment to sales is already de-
creasing by reason of the increase in sales since consolidation,
and a continued and rapid growth of the sales under proper
incentives and efficient management may be confidently ex-
pected.
It should also be noted that the large capital invested is
due to past conditions, the responsibility for which the com-
munity may properly be called upon to share with the com-
pany.
Furthermore, it should be borne in mind that a reduction
of the price already made from $1 per thousand feet to 90
cents, based on last year's sales, has already given to con-
sumers a saving of $300,000, the equivalent of a 2 per cent.
80 SPECIAL COMMITTEE – GAS COS. [Feb.
dividend on the stock of the Consolidated company, and as
the sales increase the gain to the community will become
proportionately larger.
We recognize that a 1 per cent. increase of dividend for
every 5 cents’ decrease in the price of gas gives the oppor-
tunity of earning very large dividends. But the aim of the
public is to get good quality of gas at a low price, and not to
prevent the stockholders from obtaining large returns. The
community should be willing to let the stockholders earn 10
per cent. if the price of gas were reduced to 75 cents. The
committee of the New York Legislature which investigated
the condition of the gas business in New York City in 1905
reported that 75 cents was the proper price for gas in all but
the sparsely settled districts of the city. We think that within
a comparatively few years it will, with the increase of con-
sumption and improvement in plants, be possible to sell gas
at that price also in Boston.
The Legislature of this Commonwealth possesses constitu-
tional power to require gas companies and other public-service
corporations to furnish their products or service at reasonable
prices and profits, and such corporations are bound to submit
to reasonable legislative requirements on these subjects. A
legislative act, embodying the recommendations herein made
in relation to the adoption and application of the sliding scale,
would be within legal principles well recognized and main-
tained by our State and Federal courts of last resort.
We have not embodied our recommendations in the form
of a bill, but hold ourselves ready, if requested, to frame a
bill or to assist in doing so. -
JAMES E. COTTER.
CHARLES P. HALL.
APPENDIx A.

Capital Return Capital Dividend e Pr
~~~ |*|†: |ºlº.º. --~ |ºr ºr º: |º
Payable). Rate Per Cent. and Notes).1 Interest).1
1 | Adams, $17,300 12 $70,300 6.15 sº- --> 8,064,100 $0.868.* | $0.3517 | $1.21973 $1.390 | 1
2 Amesbury & Salisbury, 60,000 – 6 124,800 2.35° $15 07 $0.354° 8,279,200 .700 .3676 1.0670 1.540 2
3 || Arlington, . 72,700 24 120,750 3.56 8 68 .303 14,185,100 . 665 . 5335 1, 1985 1.730 || 3
4 || Athol, . 50,000 6 105,500 5.60 gº {- 5,799,200 .853 .3436 1. 1966 1.870 4
5 Attleboro, 46,400 12 52,400 11.00 1 99 .228 26,275,250 . 606 .3908 .9968 1.420 5
6 Bay State, 2,000,000 5 2,280,000 4.88 2 55 . 124 895,427,500 ° .408” .0438 .4518 ° 1,000 * 6
7 Beverly, . 194,000 127 205,800 9.21 tº- - 22,847,900 .489 .3662 .8552 1.420 7
8 Boston, 2,500,000 5 3,235,000 5.05 2 63 . 132 1,229,084,300 ° . 523° .2760 .7990 * .989 4 8
9 BrOckton, 260,000 5 539,500 5.08 5 53 .336 81,675,100 .651 . 3021 .9531 1. 300 9
10 Brookline, . g g 0. 2,000,000 10 5,080,000° 7.46 tº º º 916,988,376 is .380 * . 1892 .56923 .9674 || 10
11 Cambridge, . 800,000 10 935,000 9 .59 2 22 .213 420,723,000 * .455 , 2408 , 6978 1.010 * | 11
12 Charlestown, , º º 500,000 9 500,000 9.04 & sº 179,798,910 .389.2 .2664 ... 6484 3 1.010 12
13 Chelsea, 300,000 6 490,000 5.28 *º- tº- 49,683,900 . 421 * .3339 .7549 8 1.250 13
14 | Chicopee, 62,500 2 160,511 4.07 6 62 .269 24,283,500 . 534 . 3931 . 9271 1.310 || 14
15 Citizens, Quincy, g ū 33,000 - * 76,000 3, 40 * 8 16 .277 5 9,315,400 .812 .7207 1.5327 1. 870 15
16 Clinton, 73,000 6 203,815 tº 5.31 •- - 14,445,400 ,734 .4043 1, 1383 1.650 16
17 Cottage City, 25,000 3 28,000 3.32 º- - 4,279,750 .885 .2488 1.0838 1. 330 17
18 Danvers, 20,000 – 6 20,000 – 6 5 89 - * 3,397,300 1.063 .91.16 1.9746 1.980 18
19 Dedham & Hyde Park, 80,000 4 175,500 4.63 9 07 .420 19,354,700 ºl .377 3 .4782 .85523 1.380 * | 19
20 Dorchester, . 519,600 10 889,600 8.28 2 52 . 209 352,644,040 .3982 .2450 .64308 .999 20
21 East Boston, 220,000 6 270,000 6.01 2 81 . 169 95,969,838.* .472 . 2830 .7550 1.0704 || 21
22 Easthampton, 30,000 6 30,000 6.00 t- tº- 6,321,400 1.029 . 5171 1.5461 1. 750 22
23 Fall River, . 635,000 10 712,303 9.06 2 15 .194 331,348,307 .384 .2718 . 6558 1.010 23
24 Fitchburg, . 275,000 8 369,000 6.78 - - 40,965,400 . 620 .2665 .8865 1.430 24
25 Framingham, 75,000 – 6 136,350 2.31 * 11 64 .269 & 11,709,500 .675 . 4527 1. 1274 1.590 25
26 Gardner, 26,200 – 5 70,700 3.76 5 10 80 . 406 ° 6,545,900 .841 . 5788 1.4.198 2.000 26
27 Gloucester, . 0. o 0. 150,000 * 99 150,000 9.00 30 3 43 .306 43,671,793 .628 .2762 .9042 1.210 27
28 Greenfield, . 50,000 6 50,000 6.00 9 92 .595 5,040,100 .978 .4747 1. 4527 2.020 28
29 Haverhill, . 75,000 - 9 110,000 .67% 68 .004 & 160,863,500 .623 . 1792 . 8022 1.010 29
30 Hudson, 25,000 – 6 25,000 - * º - 9 1,499,400 10 1.100 3 .5666 1.6666 3 -* 30
31 Ipswich, 16,000 7 30,000 6.33 6 57 .416 4,566,140 1,140 . 3270 1.4670 1.800 31
32 Jamaica Plain, , 250,000 10 250,000 10.00 1 89 . 189 132,206,760 .4252 .2866 .7.116 3 1.010 32
33 Lawrence, . 1,000,000 6 1,495,000 4.83 tº- - 242,658,700 . 570 .2634 .8334 1.010 33
34 Leominster, 0 º 50,000 - * 115,600 2.985 13 30 .895 & 8,692,400 .723 .7413 1.4643 1.810 34
35 Lowell, 1,000,000 10 1,050,000 8.46 2 30 .194 456,021,300 .496 .2257 .7217 .910 35
36 Lynn, , 0. ſº 575,000 10 695,000 9.36 º- - 320,642,500 * .340 . 2068 . 5468 .903.4 || 36
37 Malden & Melrose, 404,900 6 u 484,900 5. 10 3 23 .185 150,016,600 .662 .2923 .9548 1.220 37
38 Marblehead, 20,000 - 5 35,350 1.89 & 8 66 . 164 * 4,080,700 1,100 .9244 2.0244 2.080 38
39 Marlboro, Hudson, 90,000 5 160,598 3.34 8 66 .289 18,554,800 M .554 .2595 ... 8135 1.480 * | 39
40 Milford, 72,300 7; 75,600 7.54 6 18 .449 12,240,300 .870 . 2241 1.0941 1.660 40
41 Nantucket, . 0. e 50,000 - 5 87,654 1. 14 6 a- – 5 2,286,600 2.260 .2855 2.5455 2.500 41
42 Natick, 20,000 4 39,800 4.00 4 52 . 180 8,813,300 .778 .6583 1.4268 1.490 42
43 New Bedford, 845,000 8 880,200 8.4728 - - 148,431,871 .254 .3865 .6405 1.220 43
44 Newburyport, 140,000 6 249,000 4.92 tº º º-s, 24,056,900 .858 .9709 1.2289 1.500 44
45 Newton & Watertown, 300,000 10 410,830 8.94 º- - 147,559,100 ,426 ° .3418 .7678 3 1. 190 45
46 North Adams, . g 0. 100,000 8 271,000 4.91 gº- º- 58,378,200 * . 586 . 2379 , 8239 1.010 4 || 46
47 Northampton, 75,000 8 100,000 7, 13 2 80 . 199 35,673,450 .616 . 3760 .9920 1.370 47
48 North Attleboro, 68,100 8 68,100 8.00 3 64 .291 18,724,066 .803 . 2891 1.0921 1. 400 48
49 Norwood, 12,000 – 5 40,050 4.09 * 4. 19 . 1715 9,556,438 .828 .4618 1.2898 1.810 49
50 Otis Company, Ware, e wº- º * - sº- - 6,012,564 1,370 . 1499 1.5.199 1.880 50
51 Peoples, Stoneham, 10,000 – 6 60,000 3.535 7 75 .273 6 7,741,100 . 626 2 . 21.59 . 84.19 & 1.040 51
52 Pittsfield, 190,000 6 12 279,500 4.66 4 87 .227 57,346,800 . 533 .4238 .9568 1.280 52
53 Plymouth, . 40,000 4 42,500 4.09 6 46 .264 6,582,000 .935 . 3789 1.3139 1.920 53
54 Roxbury, 600,000 5 655,000 5.05 2 19 . 110 298,677,171*. . 646 & .2476 .8936 8 .9994 || 54
55 Salem, 349,600 7 is 849,600 6.71 3 93 .266 89,022,400 .496 .3290 . 8250 1.250 55
56 South Boston, 440,000 3 440,000 3.02 2 93 .088 150,242,590 .6572 .2720 .9290 * 1.000 56
57 Southbridge, 50,000 4 87,500 4.50 gº- *- 4,093,300 .724 .2536 .9776 1.900 57
58 Spencer, 85,000 – 5 190,000 3.19 5 º- – 6 7,090,800 .804 . 5630 1. 3670 1.540 58
59 Springfield, 550,000 12 550,000 12.40 14 1 96 . 242 281,068,050 - 502 .2131 .7151 1.010 59
60 Suburban, Revere, 453,000 7 is 487,500 6.28 tº- - 22,354,593 . 5382 .4105 .9485 8 1. 150 60
61 Taunton, 160,000 8 240,000 6.67 3 46 .226 70,532,000 . 527 .2843. .81.13 1.250 61
62 Waltham, 234,700 8 391,700 6.33 º º- 54,917,000 m .605 .2925 .8975 1.240 * | 62
63 Webster, 80,000 6 16 106,300 4.50 - e- 6,722,322 .679 . 1675 .8465 1.590 63
64 || Williamstown, 20,000 6 48,000 5.40 tº- -> 3,575,800 1. 1702 • 5771 1.7471 * 2.340 || 64
65 Woburn, 45,100 8 17 45,100 8.00 17 3 37 . 371 13,343,300 .690 .4018 1.0918 1.400 65
66 Worcester, . º g 0. 700,000 11 700,000 11.00 31 1 76 . 196 397,623,800 .515 .2035 .7185 1.000 66
* Omitting companies which have electric light plants.
* Including cost of gas purchased from other companies.
* Including cost of gas purchased.
* Including wholesale prices received from other companies.
* No dividend declared.
* 984,600 feet to private consumers, balance to other companies.
* 10 per cent. on $142,000; 2 per cent. on $194,000.
* Including $1,615,000 open accounts.
* An additional dividend of 3 per cent., or $3,000, was also
declared from earnings of wharf property.
* For six months ending April 16, 1904.
* 3 per cent. on $335,000; 3 per cent. on $404,900.
* 3 per cent. on $125,000; 3 per cent. on $190,000.
* 1% per cent. on $300,000; 13 per cent. on $349,500; 4 per cent. on
$349,600.
* $2,225 interest was paid on notes presumably paid off during
the year.
* 3% per cent. On $294,000; 3% per cent. on $453,000.
* 5 per cent. on $45,000; 1 per cent. on $35,000.
" An additional dividend of 3 per cent., or $1,353, was also
declared from earnings from jobbing.
* Includes 14,122,300 feet sold to other Companies.
* Includes 52,958,406 feet sold to other Companies.
* Includes 91,800 feet sold to other companies.
* Includes 141,200 feet sold to other companies.
* Includes 24,079,141 feet sold to other companies.
* Includes 21,500 feet sold to other companies.
* Includes 1,499,400 feet sold to other companies.
* Includes 6,643,100 feet sold to other companies.
* Includes 837,071 feet sold to other companies.
* Includes 43,600 feet sold to other companies.
* Presumably including interest on indebtedness paid off during
the year.
* Including $30,815 open accounts.
* $50,000 increase of capital during the year, and $35,000 notes
paid off.
* $761.83 interest paid on indebtedness, presumably paid off
during the year.
1906.] LONDON SLIDING SCALE. 81
APPEND Ix B.
LEGISLATION AFFECTING SUBSTANTIALLY THE BosTON CoM-
PANIES.
At the close of the year 1874 there were 8 companies en-
gaged in making and selling gas within the city of Boston.
Each had its own district clearly defined either by its charter
or by agreement with the other companies. These 8 com-
panies were : —
1. Boston Gas Light Company, supplying the city proper.
2. Roxbury Gas Light Company, supplying what had been
the city of Roxbury.
3. Dorchester Gas Light Company, supplying what had been
the town of Dorchester. .*
4. Charlestown Gas Light Company, supplying what had been
the city of Charlestown.
5. Jamaica Plain Gas Light Company, supplying what had
been the town of West Roxbury.
6. Brookline Gas Light Company, supplying what had been
the town of Brighton.
7. South Boston Gas Light Company, supplying South Boston.
8. East Boston Gas Light Company, supplying East Boston.
Between 1875 and 1885 these companies maintained their
independent existence and charged widely different prices,
and constant dissatisfaction on the part of the public resulted.
There were some considerations privately among the man-
agers of certain companies of consolidation, but the difficul-
ties were many, and the management of the Boston Gas Light
Company was unwilling to attempt consolidation, and prior
to 1885 there was no public movement in that direction.
Early in 1885, and before the passage of the act creating the
Board of Gas and Electric Light Commissioners, the Bay
State Gas Company, organized under the general law, was
authorized by the mayor and aldermen of the city of Boston
82 SPECIAL COMMITTEE – GAS COS. [Feb.
to lay pipes in all of the streets of Boston, for the purpose
of competing with the other companies. Soon after, the Bay
State Gas Company built its works in suburbs and laid a
line of mains leading into the heart of the city. Competi-
tion did not, however, result. The owners of the Bay State
Gas Company purchased substantially all of the stock of the
Boston, Roxbury and South Boston companies, and later se-
cured control of the Dorchester company. The East Boston
and Charlestown companies, occupying sections of the city
which were separated by navigable waters, were not acquired
by the owners of the other companies, nor were they involved
in the difficulties which followed. The stocks of the various
companies thus acquired, excepting the Dorchester company,
were soon turned over to the Bay State Gas Company of New
Jersey, a holding or financial company, to be used as col-
lateral for large issues of bonds whose sale gave to the pro-
moters of the scheme substantial profits, and the equity in
the stocks then passed to the Bay State Gas Company of
Delaware.
By this method of manipulation a common control was es-
tablished over the companies by which they could, for certain
purposes, be operated as one concern. They maintained,
however, their distinct corporate entity, preserving their
various prices for gas, although with slight reduction. The
public discontent incident to such management and to the
alleged public and private corruption which attended it found
frequent expression in the Legislature and elsewhere, but
without producing any remedial legislation.
In 1893 the Brookline Gas Light Company, which for
many years had supplied the town of Brookline, adjoining
Boston, and that part of Boston formerly the town of
Brighton with gas, with the consent of the Boston city gov-
ernment laid an extensive system of mains in the districts
occupied by the Boston and Roxbury companies, and later
extended its mains to districts supplied by the Dorchester .
and South Boston companies.
In 1896 the Legislature, after a stubborn contest, created
a special charter to the Massachusetts Pipe Line Gas Com-
pany, with powers for making and selling gas. It also had
1906.] LONDON SLIDING SCALE. 83
large powers looking to the consolidation of other companies.
It was intended as a competing company, and the act fixed
low maximum prices for the sale of gas. This provision,
however, proved ineffective, as the company never sold gas
to private consumers. It simply built a holder and purifica-
tion works, and laid its mains to connect with the other
companies.
In 1897 the New England Gas and Coke Company was
organized as an unincorporated, voluntary association or trust,
and built works for the manufacture of gas and coke adjoin-
ing the works of the Massachusetts Pipe Line Company. It
also acquired all the stocks of the Massachusetts Pipe Line
Company, the Brookline Gas Light Company, the Dorchester
Gas Light Company and the Jamaica Plain Gas Light Com-
pany, which, together with its other property, were mortgaged
to secure an issue of its bonds.
As a result of these operations the several companies sup-
plying gas to the city of Boston, excepting the Charlestown
and East Boston districts, were combined for many purposes
into two separate groups. The companies of each group,
however, preserved their separate corporate existence, rights
and privileges incident thereto. The two groups of compa-
nies became sufficiently friendly so that after the completion
of the works of the New England Gas and Coke Company and
of the Massachusetts Pipe Line Company, the New England
Gas and Coke Company sold its available gas to the Massa-
chusetts Pipe Line Company, and the Massachusetts Pipe
Line Company sold the gas directly or indirectly to all the
other companies. Public dissatisfaction and suspicion of
extravagant profits and corrupt action continued, and resulted
in frequent appeals to the Legislature for redress.
In 1898 the Legislature requested the Board of Gas and
Electric Light Commissioners “to consider and report to the
next General Court a plan for the consolidation of the several
companies engaged in supplying gas in Boston, or of such of
them as the Board may deem it advisable to unite in a single
corporation.” A plan of consolidation was submitted by
the Board at the legislative session of 1899, but was opposed
by the companies, and no legislation followed.
84 SPECIAL COMMITTEE –GAS COS. [Feb.
In 1902 the Massachusetts Gas Company, another volun-
tary association or trust, was formed to take over the inter-
ests of the New England Gas and Coke Company, the bonds
of which had defaulted, and in 1903 the Massachusetts Gas
Company also acquired all the interests of the Bay State,
Boston, Roxbury and South Boston companies. Thereupon,
in the legislative session of 1903 an act was passed authoriz-
ing the consolidation of all of the Boston gas companies, ex-
cepting the Charlestown and East Boston companies. Before
the consolidation was effected, however, renewed dissatisfac-
tion on the part of the public developed, and in the fall of
1904 a stubborn fight was made before the Board of Gas and
Electric Light Commissioners, with a view to securing a re-
duction of the price of gas in Boston, and of preventing the
watering of stock upon the consolidation of the companies.
Before these hearings were finished the struggle was trans-
ferred to the Legislature of 1905. The result was the act
of 1905, chapter 421, by which the capital of the consoli-
dated companies was fixed at $15,124,600, and the consoli-
dated company was required to reduce the price of gas to
90 cents per thousand feet within one year after effecting
the consolidation.
1906.]
LONDON SLIDING SCALE.
85

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