The Bridgeport evening farmer., 1909-06-24
T~~-~~~~~~~~~~~~~ 5 AN ARGUMENT IN FAVOR OF 5 { PUBLIC UTILITY COMMISSION 5 ! By the State Business Mems Association } 5 of Connecticut. {

disqualification are paid in cash. The cash comes from the trolley fares, gas bills, etc, paid by the public. r. Public service corporations are Aen- l titled to a liberal return upon fair capitalizat tion, viz: the actual cost of building the plant and supplying the equipment, and working capital
 Why are Public Service Corporations | Not Entitled to pay Dividends on Ex- cess Capitalization?
 | Public service corporations are diff ferent from private corporations. | special privileges are always granted to public service corporations. These I special privileges are of two kinds; | CD the right of eminent domain, viz: CT does not wish to sell; @ the right to place something in the public highways i which you, and I cannot place there; l this may be gas pipes or water mains 1 the surface of the roadway, or poles | and wires above the roadway. | These special privileges are not a1> tlowed. ordinary private corporations. | public service corporations agree, as a matter of common law, to supply the public with reasonable service at req sonabIe rates.
 Special privilegs are given to public | service corpocatiOns to enable them to l furnish reasonable service (viz: gas or | electricity or water or transportation to the public at reasonable rates. | S6ENlCe COTpOTdIlOHS are, therefore, monopolies. Special privileges can be granted to only a few. There is not room in the 1 highways for numberless pipes or troll | ley tracks.
 | The large cost of the necessary plants and equipment makes duplica- | ton of plants undesirable.
 As public service corporations are must purchase gas. electricity, water. transportation, etc. from one particular corporation or go without. This is not | true of ordinary private corporations. It is because public service corpora tions are given special monopolistic privileges for the purpose of furnish ing the public with needed service that they are legally bound to supply reas- enable service at reasonable rates A rate is not ordinarily reasonable If it does not allow the corporation to pay, a liberal return upon, a fair cap- italization,-viz., upon the actual cost of building its plant and supplying it's equipment and working capital:s 1ib- eraI return means a flair interest on the cash invested, end a fair profit for the risk involved in the investment. A rate is not ordinarily reasonable if it allows the corporation to pay div idends Cor interesD on excess capital ization-viz., upon stock or bonds is- sued as a gratuity or not representing I cash actually and reasonably invested in building the plant or supplying equipment and working capital.
 Why DO Dividends and Interest on Excess Capitalization Injure the Pub lie?
 Dividends tor interest) of $400, 900 Cor $1 i250, ,OO0) per year on excess cap ita1izatfon mean that the corporation is making annual profit of '$40e, 900 Cor $1, ,250.O0O)- after. paying all oper- ating expenses plus a just return on the actual cost of building it's plant and supplying its equipment and work ing capital.
 
 cash and from net income Net income equals gross income-operating ex- penses Gross income equals total fares paid by the people. Operating ex- service.
 If net income is larger than it ought to be it is because gross income is larger than 1t ougff$ to be, or because operating expenses are less than they ought to be-
 Excessive gross tncon& means ex- cesSive rates.
 Unduly low operating expenses means unduly poor service. \
 If rates are fair in Connecticut, is service good? Do dividends on excess capitalization mean excessive rates or poor service? Does it explain why 25 trolley tickets are not sold for S1 .00g Does it explain why we are compelled to stand in trolley oars at rush hours? Does it explain poor gas and high gas bills?
 
 must mean either excessive rates or needlessly poor service-unless diyf- | dends are improperly paid from capi- | tal-and that means bankruptcy ana
 Why are Public Service Corporations | Often Over-capitalized?
 CD In order to conceal from the pub- | lie the corporation's actual profits; 4 per cent on $24, ,0O0, 900 does not seem to l the public so large as 12 per cent on | $S,000. 900; per cent on SIPS, 900 does not 1 appear so large as 20 per cent on $50,- GOO.
 CD In order to pay promoters profits. | If the actual cost of trolley road is 1 paid by the bond issue sold to the pub- | lie, and the stock is all given to the | promoters, the promoters can make a l large profit by paying a, few dividends 1 on the stock to themselves and then l unloading the stock on the public on | the basis of earning capacity. This was the method pursued by the ring" in | the Interborough-Metrop scan dal. Who paid the losses? The same l thing has been done, and possibly is l now being done, in Connecticut.
 Why Should Power to Audit Books | of Public Service Corporations be | Given State Commission?
 Ql For the same reasons that like | powers to examine the books of in | surance companies, savings banks, building and loan associations, conn., mercial banks. etc, are now given to | state commissions.
 @ Because the small investors have no other means of obtaining accurate | information about the financial affairs | of these corporations,
 t3) Because the public is asked to purchase the stocks and bonds of these corporations.
 (4) Because trust funds are invested in the securities of these corporations. l.
 (5) Because there is no other method for preventing possible dishonest use of the funds of these corporations.
 (6) Because there is no other neth- cd for ascertaining the facts as to capitalization, income or operating ex- penses.
 CD Because there is no other meth cd for ascertaining whether the char 
 (8) Because such audits would ben- eft honest and fair corporations, and expose dishonest and unfair corporate 
 why Should Power to Inspect Elec- tric Light Meters be Given, a State