The Portland daily press., 1890-12-08
Water Rates.


The contract between the Portland Water
Company and the city of Portland provides
that the rate charged to the water takers
shall be reasonable as compared with the
rates OF other cities. with due consideration
to the cost and income of tho works."
will be seen, therefore, that the rates
charged here may be greatly in excess of
rates charged in other cities, and still not lie
in violation Of the agreement with the city.
In fixing the fstes, due consideration" is to
be given the cost and income of the works.
The Portland works were to be built by a
private company, and no private company
could borrow the money to build them if thu
rates we're liable t. be fixed BY the rates OF
other cities, without regard to the cost of the
works or the number of patrons. Undoubt-
eddy the qualifying words were in
serted in order to permit the COM
pany to charge such rate for
water as would pay fair return upon its
investment. To determine, therefore, wheth-
er the rates OF the company are reasonable a
comparison with the rates of other cities of
similar size and similarly situated is not
Sufficient. Dne regard must also be paid to
the cost of the works. III by reason of some
pecularities of soil or situation the cost of the
Portland works was in excess OF the works
Of the cities with which comparison is made
then certainly the agreement cOntempiates
that this fact may be taken into account in
fixing the rates, and that higher rate will
be permissible than in cities where the cost
was less or the patronage greater. 1t becomes
then of great Importance to ascertain the cost
0fthe Portland works and the extent of their
patronage-for we imagine that the word
income in the agreement really means the
number and extent of the sources from
which income may be derived.
At first glance it seems easy to determine
the cost of the works. The cost would seem
to be the amount paid out for material and
for construction. But it happens that
the works have in large part been
constructed twice. 1t Is well known
that the pipes first laid down by
the company proved inadequate to supply
the needs of the city and were of poor ma
terial. After some years it became necessary
to remove large part VI those pipes and
substitute new ones. This involved practi-
cally the same outlay for labor the first
construction, and as the pipes removed were
valueless the cost Of material for the second
construction was certainly equal to the first
Now the question Is, and 1t is an important
one, Is the word cost used in the agreement
to be Interpreted to mean the expense of both
constructions added together or is so much
OF the expenditure as was due to the pur-
chase and laying down of the first pipes
which proved to be defective and inadequate,
to be deducted in reckoning the COST 1t is
obvious that the cost of the works will be
very different according as it reckoned on
one or the other Of these bases. and 1t will be
useless to undertake to determine whether the
water company's rates are reasonable. due
regard being had to the cost of the works,
Is definitely settled If the total expense of
'th constructions is to be reckoned as cost
then 1t seems to us there is nothing In the
agreement which forbids the company to
charge rate sufficiently large to ensure the
payment OF fair return for the money spent
In both constructions, and enough in addi-
ton to paw the operating expense and keep
the works In good condition. Whether the
expense of both constructions Is covered by
fair Interpretation Of the word cost in the
agreement we do not propose to discuss at
the present time. The date of that agree
ment was March 1868 before the original
construction had hardly been begun so this
question could not have arisen at that time
aud there could have been no understand
ing in regard to it.
In fixing the rates due regard is also to be
had to the income of the works-that is to
say to the amount of patronage. 1t would I'M
doubleday be permissible for the Portland
Water Company to charge higher rates than
are charged in other cities of size and stu
alton similar to Portland IL thu patronage
Of the Portland works was less than the
patronage Of the works of those similar
cities with which comparison Is made. II
becomes necessary, therefore, In order to de-
termne the reasonableness of the Portland
c0mpany's charges TO determine the extent of
its patronage, not its patronage in the city of
Portland merely but its entire patronage.
The agreement says "incOme of the works"
III the income of the company has been in
creased by the extension of its works into
outlying towns and villages consideration Of
this TACT would seem to be within the SC Jpe
of the agreement.
How much light the report of the water
commission will chrow on these two points-
the cost OF the works and the income of the
works remains to be seen. 1t at present is
passing through hands of the printer. and
only a small part of it has been put in tvna
Until these points are de hnitey settled it viii
be impossible to decide as to the reasonable.
ness or unreasonabenes of the present
rates. The mere fact, IL it be fact, that tn,
rates are larger than rates in other citie
Of similar size does not of itself con
stitute unreasonablehess. 1t is con
ceivable that they might be twice or Thrice
as great and yet not be unreasC nable within
the meaning of the agreement with thu
city. The reasonableness of the water com
pany's rates is however a perfectly proper
matter for the city government to In
quire into Indeed the city government Is
bound TO make such inquiry. And under its
agreement with the city it would seem to be
obligatory upon the company to give all the
information which can have any bearing
upon this point. 1t voluntarily agreed that
Its rates should be reasonable. due regard be-
ing had to the cost and income of the works,
and 1t voluntarily agreed that the Supreme
Court should be authorized to correct exces.
slve or exorbitant rates. As the company
must necessarily be in exclusive possession
Oh tne facts in regard to the cost and income
OF the works it seems to us it is bound by a
Npf ~
nisn tnese iacts, for without them it cannot be
determined whether its charges are reasona
Bile or otherwise, and the agreement becomes
practically nullity.
There ought to be no spirit Of hostility he