State Regulation of Municipally Owned Plants

Abstract

The real functions of a regulating body whether centralized as a state commission or localized in the common council or a local commission are very generally misunderstood. This is especially true if the plant under consideration is owned by a municipality. The proper regulation of any utility embraces two broad subjects: that of service and that of rates. The question of propriety of regulation of municipal plants will be much more readily understood if it be borne in mind at all times that the question of service to be rendered by a utility is of more importance than that of the rates charged. The primary purpose for which all utilities, private and municipal, are in existence is that of giving service to the public, the question of rates to be charged is of secondary importance. It must be insisted that the first duty of a utility is to furnish adequate service, even though a poorer service might be furnished at a lower rate. It appears to be the general conception that the regulation of profits of a public utility is the prime function of a commission, and that, after the profits have been reduced to a reasonable amount, the services of the commission are no longer necessary. This conception is erroneous, but even if the question of profits alone were the only matter to be considered, the commission's duties are far from finished when the earnings of a utility plant are so adjusted that the total profits are no more than a just return upon the fair value of the property. The utility may be earning only a fair profit, or even less, and still the rates to certain individuals or class of individuals may be far from equitable. The problem of construction of schedules that will be equitable as between the various individuals and classes of consumers is a much more difficult matter than the regulation of total profits. To be equitable the schedules should be so arranged that each consumer is required to meet as nearly as possible his just