New-York tribune., 1918-05-06
Must Maintain
Utility Credit to
Permit Expansion
Regulation and Limited Rates
Require Counterbalance of
Safe Return, Utility
Man Says
By Herbert A. Wagner

President Consolidated Gas, Elec-
trio Light and Poaver Company
of Baltimore
In these times, when the energy of
the entire nation is being mobilzed
with the one object in view of winning
the war, the financial resources of the
country are being taxed to the utmost.
Our public utilities are being called
upon for more service than ever be-
fore, while at the same time their op-
Grating expenses are being greatly in
creased and their means of obtaining
the additional capital required are be.
ing restricted in every way. 1t is most
essential, from the standpoint of ma
tional efficiency. that these corpora
tions should be permitted to make such
additions to their charges for service
as will enable them to maintain their
credit.
The credit of a public utility, like
that Of any corporation or individual,
depends upon it's ability to meet its
obligations. The obligations of pub
lie utility are threefold and of equal
Importance to its credt-first, it's OBJ
legation to the public; second, it's OBJ
legation to it's bondholders, noteholders
and other creditors; third, it's obliga-
tion to its shareholders.
Obligations of the Public Utility
Its obligation to the public includes
prompt provisions for additional facili-
ties to furnish increased service as
demanded. Its obligation to its bond
holders and noteholders includes not
only the payment of interest, but the
maintenance of the value of its prop
erty and reasonable equity in value
above the bond and note issues. The
strongest evidence of the maintenance
of the required equity is in the main
tenance Of fair margin in earnings
above its interest obligations, and the
hest proof Of the maintenance of such
margin in earnings is the actual pay
On the other hand, failure to main
tain the usual dividend rate would be
a direct admission Of inability to main
tain normal margin.
The utility corporations obligation
to its shareholders includes not only
the maintenance Of the confidence Of
existing shareholders, but also the
maintenance of the confidence of the
investing public, to whom the utility
must apply time and again and with in
crcasing frequency for substantial
part OF the money required for ex-
panding business and in ever incrcas-
ing amounts. No corporation can do
business entirely upon borrowed capi-
tai. A substantial part of its capital
must be furnished by its stockholders,
and the ratio between borrowed capital
and stock issued must be maintained
as greater amounts of capital are re-
quired for the growth of the business.
The laws in most states prohibit the
issue of public utility stock at less
than par. Many issues have been put
out at par or over, under the regula-
tions and approval of public service
commissions.
1t is evident that, as future stock is
sues are an absolutely necessary part
Of future financing, it will be impossi-
BILE to put out additional shares at par
if the market price of outstanding
shares is not maintained at par or over.
Manifestly the only practical course
for public service commissions to pur
sue is to do all within their power.
under the law, through the adjustment
of rates for service, to maintain, in
so far as may be possible, by the pay
ment of dividends, the market value of
shares issued under their approval. at
prices not less than the price of ori-
ginal issue.
The public utility is in an altogether
different position from all other in
dustrial and commercial undertakings