(which is by far the most important part of their cost) is rendered abnormally high, owing partly to duplication of investment and partly to the high price paid for money borrowed during the period of competition. The selling price of a service should be based on its cost, and in any business such as public work, where the investment is large and the annual turn-over is comparatively small, if the item of interest be unnecessarily augmented, it must be reflected in the price paid by public and private users.

While it is not supposed to be popular to speak of exclusive franchises, it should be recognized that the best service at the lowest possible price can only be obtained, certainly in connection with the industry with which we are identified, by exclusive control of a given territory being placed in the hands of one undertaking. In most European countries publicservice operations enjoy exclusive franchises, under proper control, and are able to obtain capital for their undertakings at the lowest commercial rates, thus materially affecting the cost of their product, of which interest, as I have already stated, is necessarily so great a part. In order to protect the public, exclusive franchises should be coupled with the condition of public control requiring all charges for services fixed by public bodies to be based on cost, plus a reasonable profit. It will be found that this cost will be reduced in direct proportion to the protection afforded the industry. The more certain this protection is made, the lower the rate of interest and the lower the total cost of operation will be, and, consequently, the lower the price of the service to public and private users. If the conditions of our particular branch of public service are studied in places where there is a definite control, whether by commission or otherwise,

it will be found that the industry is in an extremely healthy condition, and that users and taxpayers are correspondingly well served.

COMPENSATION FOR FRANCHISES

When prices for services are based on cost, it matters not whether or not, in the establishment of a system of legislative control, provision is made for paying a portion of the receipts direct to the municipality. If the public demands a percentage, surely we can afford to pay it, as it would simply be added as an item of expense, on which our selling price would be figured. If the public does not demand a percentage, this selling price would be proportionately less. It is simply a question as to whether our municipal bodies prefer to raise a portion of their income by taxing their citizens through the agency of public-service corporations, or whether they prefer to raise that portion of their income by collecting it direct from citizens themselves. Revenue raised by a percentage on gross receipts of the electric-lighting business would, at the present time, however, seem to be somewhat unfairly obtained in cases where the selling price is subject to legislative control and based on cost of service, as the result would be that a small minority of citizens using electricity would be forced to contribute largely to the public revenue, whereas the benefits enjoyed therefrom would be to the advantage of the whole community.

TAKING PRIVATE PROPERTY FOR PUBLIC USE

Another point that should be included in a proper scheme of public control, is a condition under which the municipality would have the right to purchase the undertaking. Such a right should include a direct

obligation on the part of the municipality to purchase the property at a fair price whenever it is thought desirable that the industry should be operated by the municipality. The possibility of the exercise of the right of purchase by the municipality would of itself make it to the interest of the owners of the property to do their full duty in their relations to the public. On the other hand, if a community licenses a corporation to perform a certain public service, and if that corporation invests its money and develops its business, surely it is unfair for that community to go into the same line of line of public-service work itself without first purchasing the existing plant. If this is not done, the value of private property will be destroyed, without just compensation being made therefor, in an attempt to secure a public benefit. I do not believe that the people as a whole are so unfair as to demand that such course shall be taken.

My recommendations on the subject, which I have just presented, are by no means original. Most public-service corporations in Great Britain are run on practically the bases indicated, and in more than one state in the union corporate legislation has taken the same direction.

I would summarize in just two sentences the position that I think we should take on this subject.

First-Franchises granted to public-service corporations should secure them the same degree of protection in their rights to their property as is enjoyed by other investments.

Second-Public control of charge for service based on cost plus a reasonable profit, and eliminating the factor of competition, is the proper safeguard for the interests of users, taxpayers and

investors.

THE PRESIDENT: In my remarks just made, I have endeavored to touch upon a few subjects on which I had hoped we should have papers, but I failed to get the members of the association to respond to my request to prepare them. We have therefore placed the various subjects referred to in my opening address in the programme, under the head of topics for discussion; and I would therefore request you to keep your copies for future reference during the meeting. One of these subjects involves the basis on which we exist, and the other, the objects for which we exist. They are very important matters for us, and I think this association ought to . take some kind of action concerning them.

ANNOUNCEMENTS

THE PRESIDENT: I have a number of letters here from various gentlemen who we had hoped would be able to attend.

The following letters were read:

"President National Electric Light Association, 139 Adams street, Chicago, Ill.

DEAR SIR: Mr. Edison requests me to acknowledge the receipt of your esteemed favor of May 16th, covering invitation to attend the annual convention, to be held at the Auditorium Hotel, Chicago. He very much regrets, however, to say that he will be unable to be present on this occasion, due principally to the fact that other engagements will absolutely prevent.

"Trusting that the meeting will be extremely interesting, and wishing your association every success, believe me

"Yours very truly,

"DEAR SIR: I wish to thank you herewith for the courteous invitation extended to me through your