New Britain herald. [microfilm reel] (New Britain, Conn.) 1890-1976, 1927-07-14
SQUEEZING WATER FROM
HIGH VALUATIONS

L 'NONSliOI IlllOIu ol
Pennsylvania, Governor Alfred Z.
Smith Of New York, Senator Thorn
as ]. Walsh Of Montana, and SEN
ator George W. Norris of Nebraska
are credited with being a quartet
destined to lead the fight against
threatened monopoly OF electric
power. All four are fighters to the
core.
Pinchot has already been heard
| from. Massachusetts, he announces,
has just made history in the regu-
lation Of public utility rates. A re-
cent decision Of the Public Utility
Commission Of that state gives the
first ray Of hope for small con-
sumers of electricity"
| The decision Of the P. U. c. in
Massachusetts was that the amount
OF money actually and prudently
invested by an electric light and
power company shall be the basis
for fixing the rates to consumers.
They must not be required to pay
on going value, reproduction cost,
or any inflated. watered or imagi-
nary values whatsoever"
| A decision Of the United States
Supreme Court in connection with a
water company in indianapolis
stands, or was though to stand. in
the way of such an appraisal. Pin
chot arises to remark that the
| Massachusetts commission found a
way to get around the courts valua-
ton rule. 1T finds" he says, that
by using the simple, fair and un-
| derstandable rule of how much
money was actually and prudently
invested, it can do SO without In
fringing the courts general rule
that under the 18th amendment in
vestors in public utilities must not
be deprived Of fair return on their
investment"
The Worcester Electric Light
company. which sought a valuation
of s1S,oo0,oo0 and returns based
upon It. has been the first large
concern In the Bay state to bear the
brunt of the P. U. C. decision. Even
under the federal courts rule the
company, it is said, would not have
been entitled to a larger valuation
than S10,000,e00: and under Massa-
chusetts law 1t was only s4,O5S,232
the actual money invested. Upon
this basis the company's maximum
rate of Z cents per kilowatt hour
was reduced to cents.
This paragraph from Pinchot's
communication en- the subject is
illuminating:
- cpilC VI tlIt Sttdully 1uIl-
Ing costs of production, the av-
erase domestic consumer paid
higher instead of lower rates in
1925. The Massachusetts, deci-
sion points the way to relieve
him of this eXtortion. This is
especially important because
most Public Service Commits
sions (and notably in my own
state OF Pennsylvania have
been and are the mere. servants
of the corporations they are
supposed to regulate. Here is
one commission which isn't"
There are ways to control this
situation IN every state, and perhaps
one of the best methods is embodied
In the Pennsylvania giant power
survey report. made in 1925. This
report recommended that the
prudent Investment rule for rate
making be applied by means of con-
tracts between the state and the
companies. this to be embodied in
their charters. The possibilities for
excessive rates upon a high rate
base, embodied in the federal court
ruling, would thus be avoided. If the
companies refused to accept such
contracts, the state could properly
refuse them charters, the right of
eminent domain, of local monopoly,
and other rights and privileges. OF
course. this would apply only to
those companies seeking charters,
or when the present concerns seek
new charters for the development"
Of new power sites.
Some such plan could be we'll ap-
piled in Connecticut. It ought to
have been applied years ago.