' Great Problem of the Public Service Corporation December, 1912 eon Mm BY H. M. BYLLESBY mae ‘ll ars a 2 He An Article Written for the New York Commercial and Printed in that Publication December 14, 1912 J Reprinted by ‘ H. M. Byllesby & Company yp Engineers > Insurance Exchange Bldg. Trinity Building Par Chicago New York The Great Problem of the Public Service Corporation HERE is no other line of industry requiring the continual increase of- capital investment demanded by the enterprises broadly embraced under the term ‘‘public service corpor- ations,’’ embracing electric light and power, street railways, steam railways and their terminals, telephone com- panies and gas companies» The ex- tent to which the vast and heretofore continually increasing commercial and manufacturing transactions of our great country 1s dependent upon the continued development and the able management of such corporations is not at all understood by the great mass of the voting public. A com- munity which by accident, design, or misfortune is poorly served by any of the so-called public service corpor- ations is a community which neces- / 6 The Great Problem of the sarily is behind-hand in its material development. A community suffering from faulty equipment or manage- ment of the public service corpor- ations likewise endures a consequent loss of material advancement with at- tendant inconvenience and dissatis- faction. The amount of new capital for purely conservative and necessary de- velopment and extensions of public service corporations annually reaches figures utterly beyond the comprehen- sion of the average individual who is not personally cognizant of the oper- ations and affairs of such companies and enterprises. The stability of their income under normal conditions and without unfair restrictions and interference is more pronounced, I believe, than in any other line of hu- man enterprise. It is a platitude to refer to the great part which the energetic and courageous and far sighted develop- ment of the public service corpor- Public Service Corporation 7 ations at the hands of the great lead- ers of those corporations has had in the past in the development of this country. No one questions the oc- currence (from time to time) of mis- takes, errors, hardships and frauds in the past on the parts of both parties to these enterprises, viz., the pro- jectors and owners of the enterprises on the one hand, and the citizens, communities, governments and munic- ipalities served on the other. The net result, however, has been a service on the part of all such corporations in the United States of America ~which has not its equal in the world. In the period of the earlier develop- ment of such enterprises, great risks were incurred, huge sums were lost and huge sums of money or its equiv- alent in substantial income earning property have been achieved. Prob- ably, viewing the past and considering both the failures and successes of such enterprises, the capital invested has received a smaller total profit on its total amount than in the average of 8 The Great Problem of the mercantile, commercial, manufactur- ing or trading enterprises. The busi- ness today, as regards the various physical elements entering into it, the machinery used, the motive power and the general development of the art is wholly beyond the experimental stage. However, in nearly every direction opportunities still present themselves and there is a erying demand for fur- ther extension of service of such cor- porations. While, from the now somewhat extensive experience and history of the art it is less difficult than in the past to forecast the prob- able monetary outcome of such ex- tensions, enlargements or new de- velopments, there still exist many cases where the returns to be achieved are still more or less problematical and in some eases absolutely problem- atical as to the dates at which returns will be reached. Up to a comparatively recent period the public service official was justified in extending the operations under Public Service Corporation 9 his charge on the general doctrine of averages—that if a given extension proved unprofitable for the time being or permanently, it would be compensated for by the greater profit to be reached from some other con- temporaneous or subsequent or exist- ing branch of or extension to the serv- ice. Under this condition of affairs enterprise was fostered, development went forward actuated by the hope of a reward beyond the ordinary fixed small return of the absolutely settled and non-hazardous enterprise. Today throughout the country the unmistakable tendency is by Inter- state Commerce Commissions, Public Utility Commissions, and by the law making and law administering bodies to hamper and curtail and paternal- ize the conduct of all these corpor- ations to a point which is rapidly de- stroying the enterprise of the indi- vidual officers and employes of such corporations and putting a period to the further investment of capital for the extension and enlargement of such 10 The Great Problem of the enterprises. The result of this policy, if carried along the lines of its pres- ent extreme tendencies, will be to simply stop the further energetic de- velopment of these enterprises; to de- stroy the individual initiative of these corporations and this policy, if per- sisted in along the program of the po- litical agitators of the present time, leads inevitably and logically to Fed- eral and Municipal Ownership. A great deal is said from time to time regarding the underlying com- mon sense of the Anglo-Saxon race, particularly that branch of it living in the United States of America. In the abstract this is true. I believe that the general trend of civilization through its various vicissitudes is on the average and as judged by terms of years, continually upward. 3 The map of a steam railroad cross- ing the American continent, even if drawn on a very large scale, will show that railroad on a general uniform line; the facts being, however, that 2A AeA ek EI Pa es Sa Rash th dati nes a” Public Service Corporation 11 the railway is full of curves and changes of direction which it is not possible to reproduce on any map which could be displayed in any ordi- nary room or Office. No one doubts the beneficent results that eventually followed the great Civil War of the United States. No one doubts the terrific loss of treas- ure, of human life, and no one, at least of the preceding generation, for- gets the pain and anguish and bitter- ness of that struggle. The public service corporations in the past have made no greater errors of judgment or of management; they have made no greater departure from the correct rules of conduct than have the com- munities and individuals and govern- ments concerned with such corpor- ations. Whatever mistakes, hardships, errors or crimes were committed were in any fair analysis of the question, equally chargeable to both parties to the contract. A new situation and new conditions are now confronting the public and 12 The Great Problem of the these corporations. It is a time for the underlying common sense of our people to take these questions out of the hands of the muck-raker and pro- fessional politician and to put them before the great tribunal of common sense and love of justice of the Ameri- can people. Our country has reached a point of intelligence and develop- ment where it should recognize, and at some time will recognize, that these questions are of such deep and far reaching importance that they should be placed in the hands of entirely | non-political tribunals, fair-minded, experienced and candid, and who will carefully weigh all the questions in- volved ; with a proper attention to the economic questions involved and with a full realization of the obligations of common honesty resting upon all of us to each other, to the investor, to the wage earner, and to the communi- ties concerned. Unless this course is pursued, the present program leads inevitably to paternalism and Federal and Muni- La it) Public Service Corspranion 13 cipal ownership. It is unnecessary to point out the perils to our beloved country which would follow the plac- ing in the hands of a political party or of the Government, of the enor- mous patronage resulting from Fed- eral and Governmental ownership of this huge fabric of public service cor- porations. The public does not desire this; the investor does not desire it, and common sense abhors such a policy. The economic history of civilization teaches beyond the possi- bility of a doubt that the best results to the State and its citizens are reached by wise and prudent encour- agement of individual enterprise and thrift, accomplished by allowing suit- able rewards to follow successful en- terprises. The public service enterprises of the United States of America~have been one of the greatest factors in the de- velopment of this country. There are vast sections of country which re- quire the services of such companies; existing and already served communi- 14 The Great Problem of the ties require continual extensions to the operations of such corporations. All this requires many millions of dol- lars annually. If the laws and various commissions dealing with these subjects approach them with a desire to encourage enter- prise and not to throttle it; if rewards are allowed to follow the energetic de- velopment and the hazards of these corporations and if these laws and . commissions recognize that their ob- ject is two-fold—first to protect the public and the State against selfish- ness, and equally on the other hand, to protect the capital and the brains and the enterprise of these corporations against unfair restrictions and the embarrassments of paternalism, these corporations can continue serving the public and under terms and condi- tions which will be far more satisfac- tory to them than the uncertainties and hazards of the past, and at the same time, due to the removal of these uncertainties and hazards, the public and the state will be served with even Public Service Corporation 15 a better service and under more favor- able conditions of charge than in the past. Very nearly the entire water power development industry in this country is held up at the present moment awaiting the settlement of the ques- tion of dealing with water power sites by the various governing bodies. It should not be a difficult matter, and it is not a difficult matter to formulate rules and regulations which, while amply safe-guarding the State and the citizens, will also enable these poten- tial water powers to be turned to use- ful account in the development of the country and the conserving of the fuel supply. During the entire history of public utility operation throughout the coun- try, and notably during recent years, the charges for service have steadily decreased and the quality of service has been steadily improved — all de- spite marked advances in the cost of apparatus, materials, supplies and "3.0112 059261963 sd 16 The Great Problem of the wages. It is obvious that this situa- tion cannot be maintained indefinitely. — None of these questions will reach. the conclusions earnestly prayed for herein until they are taken from the ae hands of the uninformed, the vicious, ie and the professional politicians and Rais put in the hands of conservative, thoughtful and fair minded adminis- trative bodies. ft