grave mistake for this association to put out a classification that differs so widely in principle from that of the Street Railway Association. The Street Railway Association has built up its system of accounts on the lines of maintenance, operation and transportation. Where the two lines-railway and light-touch and are coincident, is in maintenance and operation. Your committee has built up its report on the basis of generation and distribution, so that our premises are wide apart. Street Railway Accountants, by reason of the work that we have done in the past in securing the indorsement of the states, have definitely fixed lines upon which we must work. We could not change if we would, and I do not think we would if we could. To put upon the small companies that have only one or two clerks doing the accounting for both branches of the business, the necessity of working on the street-railway side on one principle and on the electric-light side on another principle, would, it seems to me, be a very grave mistake.

I will speak only along the lines of these general principles, as I have not had time to analyze the report and do not feel competent to go into the detail question. The detail seems to be exceedingly comprehensive, as some of the speakers have said, for the large companies. There is too much detail for the small companies. They should be given a smaller number of accounts as a minimum, and then build up from them, as we have done in the street-railway work. We fix a minimum number of accounts. Then each individual company, knowing just what is charged to each individual account, can subdivide that account as may be necessary for its own analysis. The public reports, however, are given on the minimum basis, and a company getting the report of any other company knows just what is charged in each account, though it may not be able to go into the refinement of analysis that this report would give it.

MR. J. B. MCCALL (Philadelphia): In view of the great importance of this subject, and the general impression that we are hardly in a position to issue recommendations that would be as nearly correct as the best thought of this committee is able to devise, I move that the committee be continued for another year. (The motion was seconded and carried.)

THE PRESIDENT: We shall now proceed to the next paper -Legal Justification for Differential Rates, by Mr. George Whitefield Betts, of New York.

Mr. Betts presented the following paper:

LEGAL JUSTIFICATION FOR DIFFERENTIAL

RATES

In the present period of agitation and legislation with reference to the rates charged by the public-service corporations this question is of peculiar interest, not only to all the members of our association, but to the public at large.

As stated by the learned special master in the case of the Columbus Railway and Light Company against the City of Columbus, in the United States Circuit Court for the Southern District of Ohio, an electric light company, having devoted its business and property to a public use, possessing the right to use the public streets and the power of eminent domain, is therefore a public-service corporation, and is at all times subject to the incidents and consequences of its public use, and subject to legal supervision by the state within the lawful limits of its constitutional powers. It has not all the unlimited rights of an individual, but must recognize the paramount right of the state acting within its powers in the interest of the general welfare. One of the results of the public nature of its business is that it can not, as an individual may, choose the persons or classes of persons whom it shall serve, but must at all times, in consideration of the rights and franchises granted by the state and because of its public service, be ready to serve all who desire to use its products and are willing to pay therefor a reasonable price, or such price as may be lawfully fixed by the state.

In Railway Co. vs. Bowling Green, 57 Ohio State, 336, the Supreme Court of Ohio held that an electric light company, owning an electric plant, and engaged in furnishing light to the inhabitants of a city or village and in lighting the streets thereof, has so far devoted its property to the public use that it is bound to furnish light within such city or village impartially to all applicants at a reasonable price.

The same court pronounced the same principles in the case of Zanesville vs. Gas Light Company, 47 Ohio State, 1.

We all know that to properly develop and economically work

the plants of electric light companies, some inducement must be given to those consumers who will employ the energy supplied in large quantities, and with the least variation possible in the amount consumed throughout the different periods of the 24-hour day.

The product of an electric light company, whether it be likened to the service supplied by the transportation companies, telephone or telegraph companies, or whether it be likened to water or gas, has certain characteristics which differentiate it in many ways from the product of all other public-service companies.

The service must be instantaneous; must be ready for use at all times, day or night. It must be at the command of its customers at all times, and at the command of all its customers at any time. No great amount of energy can be stored, so that the company must be ready at any and all times to manufacture and supply practically the maximum amount of energy that all of its customers using their largest capacity, and using it at the same time, may demand. For example: Black clouds in a thunder-storm suddenly descend upon a crowded city in the daytime, causing the electric light to be turned on in the large office buildings, stores, private houses and other buildings, and making a sudden demand upon the generating machinery, which must be met at once.

A gas or water company is required to furnish its commodity instantaneously, and may be required to furnish it at any and the same time; but the water or gas can be stored, and is always taken from a common reservoir, and such companies are not required to keep in possession, and on hand, machinery necessary to manufacture the maximum amount demanded of the commodity instantaneously, so that it can be so furnished at any time.

The service demanded of railroads or other common carriers is not instantaneous, nor are they required, either by law or by the nature of their service, to furnish the service to all who demand, at the same time. (Report of special master, supra.) The railroad or other common carrier knows weeks in advance of the expected heavy travel on holidays, or of the necessary movement of a heavy crop of wheat, corn or cotton, or of the movement of express packages in the Christmas holidays, or of the usual summer vacation travel, and therefore has ample opportunity to concentrate its motive power, rolling stock, boats and

other facilities in those localities where the traffic requires them, and to remove them from those places where they are not then needed.

An electric light company furnishes but one kind of service, while railroads and common carriers generally furnish many and different kinds of service, varying in the value, according to the classification, tonnage, length of haul, and value of the property carried.

Again, the plants of most public-service corporations are to a great extent in use throughout the whole of the 24 hours, whereas when electricity is introduced as an illuminant there is in most towns and cities, particularly the smaller ones, scarcely any consumption of electrical energy except between the hours. of 6 and 10 in the evening on an average throughout the year. And yet the consumer demands that the electric light company have its capital so invested in plant that it be ready without notice to furnish whatever light is required for dark rooms, dark offices or dark days and for however short a period he desires.

During one year an electric light company in the city of Columbus, Ohio, sold light and power to over 3000 customers, exclusive of the current sold to the city, or sold strictly for power alone. More than half of these customers, upon the basis of the average daily hours' use of the connected load, used their current one hour or less, and will be called one-hour customers. About one-fourth of the customers, upon the same basis, used the current from one to two hours, and will be called two-hour customers. About nine per cent of the customers, upon the same basis, used the service from one to three hours, and will be called three-hour customers. Very few used the current for the longer hours. As it is impossible, under present conditions, to store any considerable amount of electric energy, and as the demand for current is instantaneous, necessarily the proportion between the constant, or fixed charges, of the company furnishing the current, and the varying charges is very different from the ratio between such charges in ordinary manufacturing. The proportion of plant to output is much greater.

The instantaneous demand fixes the investment in plant and charges which the company must make for each customer. After the investment for each customer has been made, it costs a certain amount to keep the apparatus in operation, and these expenses vary with the hours of operation.

In the Columbus case, above cited, it was found that the cost per kilowatt-hour for one-hour customers was between 12 and 13 cents, two-hour customers between 6 and 7 cents and three-hour customers about 5 cents. These different customers may be likened to the long-haul and the short-haul customers of railroads.

It is a matter of common knowledge that the cost of production per kilowatt-hour decreases as the consumption increases.

I think, then, that all will agree that it is only fair and just that the electric light companies should be permitted to induce,. by means of differential rates, the larger and more uniform consumption of electrical energy so as to profitably employ their plants.

What our members desire to know, therefore, is what legal justification there is for such differential rates.

In studying the law for the purpose of answering this question we shall have frequent cause to avail ourselves of the decisions of the courts in cases affecting the rates of telegraph, telephone and railroad companies, steamboats and other public carriers, as their duties to the public and the principles involved are in many respects the same as those of lighting companies, and the law has been frequently expounded therein, while, of course, electric light companies have been of more recent growth and therefore less the subject of judicial decision. This question has not affected gas companies to any great extent, for the reason that gas has been used in such small quantities for illumination or power in the daytime; and further, by reason of the construction of a gas tank, large quantities are constantly held in storage, so that the element of sudden use is not so important.

To begin with, the rule of the common law (and by that is meant the law deduced from the decisions of the courts and not as expressed in the statutes, such as the Interstate Commerce. Act) is perfectly well settled that in each particular case there shall be charged a reasonable compensation and no more. This reasonable compensation, however, in each case does not necessarily mean absolute uniformity of rates in all cases, but simply requires that there shall be no unreasonable, and hence no unjust, discrimination. (See Hutchinson on Carriers, Section 521.)

The Interstate Commerce Act, which was passed by Congress to prevent unjust and unreasonable discrimination against