railway, telegraph, telephone, express, freight line, sleeping car, light, heat, water and power corporations, establishes the most comprehensive system of regulation of security issues by commission. It affords a practical guaranty by the state that there is an equivalence between the amount of outstanding securities and the investment upon which the utilities are entitled to a fair return. Legislation of similar scope may be found in five other states, three of which legislated during the past year.

3. Rates and Services

Commission laws lay down the basis of rate-making, or the requisites of lawful rates, declare unjust discrimination unlawful, prescribe publicity in the making of rates and schedules, and vest in commissions the power to fix rates in accordance with the principles thus prescribed.

It is almost invariably provided that rates and charges must be just and reasonable, and the commissions are given authority to enforce the standard thus established. In many jurisdictions the various elements that must be considered and the various devices that may be adopted in the establishment of reasonable rates by utilities and commissions are further prescribed. The chief elements emphasized by the statutes for lawful rates are that a due regard be had “to a reasonable average return upon the value of the property actually used in the public service and of the necessity of making reservation out of income for surplus and contingencies." Twenty-four jurisdictions make express provision for valuation of the property of public utilities by commissions.2 These valuations are sometimes used for capitalization and purchase as well as for rate-making purposes. The tendency in these valuation provisions is to vest in commissions ample power for the successful ascertainment of utility valuations. Such elaborate valuation provisions may be found in Ohio, Pennsylvania, Washington and Wisconsin. The main device. provided by statute by which reasonable rates may be secured is the sliding scale, chiefly applicable to the gas industry, but also, in some cases, to electric companies. In addition to the Boston sliding scale act in Massachusetts, nine jurisdictions authorize utilities to establish

1 New York: Laws 1910, chap. cccclxxx, Sect. 97.

2 Arizona, Arkansas, California, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Texas, Washington, West Virginia, Wisconsin. Laws 1913, house bill no. 582, Sects. 21-31.

4 Ibid. no. 854, art. II, Sect. 1 (k); Art. III, Sects. 4 (a), 6; Art. V, Sects. 19-23.

5 Laws 1911, chap. cxvii, Sect. 92.

Laws 1907, chap. ccccxcix, Sects. 1797m-5, 1797m-6, 1797m-19, 1797m-82 to 1797m86. Laws 1907, chap. dlxxviii, Sect. 1797t-8. Laws 1911, chap. dclxii.

7 Acts 1906, chap. ccccxxii.

the sliding scale for the automatic adjustment of charges and dividends under commission supervision.1

It is almost invariably provided also that unjust discrimination is prohibited, and the commissions are given authority to enforce the prohibitions. Unjust discrimination is variously defined. As defined in the commission laws collectively it consists in charging a greater or less compensation to one person than to another for like and contemporaneous service; in charging rates other than those prescribed by law or specified in published schedules, refunding, remitting or rebating any portions of such rates, or extending privileges or facilities not uniformly open to all; in charging a less compensation in consideration of the furnishing by utilities of any part of the facilities incident to the service; in charging a less compensation in consideration of the size of the shipment or the extent of the service; in charging a greater compensation for a shorter than for a longer distance or for a smaller than for a larger service; in granting to any person, corporation, locality or any particular description of service any undue or unreasonable preference or advantage, or in subjecting the same to any undue or unreasonable prejudice or disadvantage; in assisting or permitting patrons to secure special favors or advantages, or rates other than those lawfully established; in soliciting, accepting or receiving special favors or advantages, or rates other than those lawfully established. There are also general prohibitions against offering, granting, soliciting or accepting free or reduced rate or special service, with elaborate lists of exceptions; special prohibitions, applicable to public officials and members of political organizations; and requirements that lists of persons to whom free or reduced rate or special service has been granted shall be published and filed with the commission. The provisions also indicate the kinds of special treatment which constitute justifiable discrimination and authorize the commissions to determine under what conditions such circumstances exist as make discrimination justifiable.

Again, it is almost invariably provided that utilities submit to full publicity in the establishment and change of their rates and schedules, and authority is vested in the commissions to render publicity in ratemaking effective. Utilities are thus ordered to file their schedules of rates with the commissions, after due notice of their adoption; the matters to be contained in these schedules are prescribed in detail; the forms of schedules are made subject to the approval of commissions; it is provided that the schedules be published and posted; the filing, publishing and posting of rate schedules are often made a condition precedent to the exercise by utilities of the right to do business; and utilities, in many instances, are required to file with the

1 Arizona, California, Idaho, Maryland, Missouri, New York, Ohio, Pennsylvania, Wisconsin.

commissions copies of leases, contracts and arrangements made on other utilities.

facts,

Creat

It

The most important powers as to rates are found in the provisi which authorize commissions to regulate or prescribe the rates ats charges of utilities, establish the procedure to be followed in the ex cise of these powers, and indicate the legal effect to be given to th rates and charges so established. All the states now give the commit be sions mandatory powers over rates. In many of the jurisdiction misthere is language so broad that it may, by liberal interpretation, be to al construed to vest in the commissions power to fix rates in the first be instance. When the legislation in each jurisdiction is taken as a whole, however, the authority of the commissions in practically all of the commission states is limited to the power on its own motion or on complaint, after investigation, to declare unreasonable rates and charges previously in force, and to prescribe others in lieu thereof to be followed in the future. In other words, in spite of the large power over rates vested in commissions, the right to initiate rates is practically everywhere reserved to the utilities; but in about one-third of the jurisdictions the commissions are given the additional authority to suspend the operation of rates fixed by utilities pending an investigation as to their reasonableness undertaken by the commissions. In some jurisdictions the rates fixed by commissions are considered prima facie lawful and in force until found unreasonable upon review by a proper court; in some states their operation is suspended until declared reasonable upon judicial review.

Many of the rate provisions, in so far as they empower commissions to supervise the business of utilities, apply to regulations, practices and service. But while more than one-half of the states provide that the service furnished by utilities must be reasonable or that the facilities must be adequate and safe, only about one-third of the commission jurisdictions vest sufficient authority in the commissions to render these requirements effective. The practice in the past has been to establish by direct legislative enactment absolute standards of service and safety, and specific facilities and safety appliances. The present tendency, however, as evidenced by much of the recent legislation, is to clothe commissions with power over service and facilities, both as to adequacy and safety, commensurate with their power over rates. The more recent commissions, therefore, are authorized to prescribe reasonable service standards and to provide for such inspection and testing of service and facilities as will insure their adequacy and safety.

1 Idaho, Illinois, Indiana, Missouri, Pennsylvania, West Virginia.

The re

inister dation of accounts and reports serves to provide for commissions the me respo data essential to an adequate control of capitalization, tates anday other rvice.

eight juris

authority

There a ave beere provisions for the regulation of accounts in twentyapacity, dictions. The most general requirement is that by which lone in tis granted to commissions to establish a system of uniform A coloni for public utilities, with power to prescribe the forms of subordir records and memoranda and to indicate the manner in which t resphey shall be kept or to classify public utilities and establish privat

a syste

sider

m of accounts and prescribe forms for each class. In most

5

6

libert Actions this power may be exercised in the discretion of the comsion. Sometimes, as in the new Indiana law, the authority to prescribe accounting practices is made mandatory upon the commission. In a number of the jurisdictions it is further made unlawful for utilities to keep any other accounts, records or memoranda than those prescribed or approved by the commission. In the case of common carriers, the commissions are often specifically required to conform, as far as possible, to the system and form of accounts established and prescribed from time to time by the Interstate Commerce Commission. In about one-fourth of the states Arizona, 2 California, Idaho, Illinois, Indiana, Missouri, New Jersey,8 Ohio, Oregon,10 Pennsylvania,11 Wisconsin 12 - special depreciation accounts are provided for: the commission is empowered to require proper and adequate depreciation or deferred maintenance accounts to be kept in accordance with prescribed forms and regulations whenever it shall determine that depreciation accounts can reasonably be required. And the commissions are given authority to examine as well as to prescribe accounts; that is, the commission or the commissioners or their duly authorized agents or examiners may have access to the accounts of the utilities and may at all reasonable times examine and inspect them. Heavy penalties are usually imposed for violations of accounting provisions.

The duty is almost invariably imposed upon utilities to transmit to

1 Acts 1913, house bill no. 361, Sect. 15.

2 Session Laws 1912, chap. xc, Sect. 49.

Statutes 1911, 1st extra session, chap. xiv, Sect. 49.

4 Session Laws 1913, house bill no. 21, Sect. 47.

Acts 1913, house bill no. 907, Sect. 14.

Ibid. house bill no. 361, Sects. 22-25.

7 Public service commission law of March 17, 1913, Sect. 61.

8 Laws 1911, chap. cxcv, Sect. 17 (f).

Ibid. no. 325, Sects. 51, 52.

10 General Laws 1911, chap. cclxxix, Sect. 17.

11 Laws 1913, no. 854, Art. II, Sect. I (i); art. V, Sect. 15

12 Laws 1907, chap. ccccxcix, Sect. 1797m-15.

the commission at specified intervals or at such time as the commission may designate, regular reports of their doings setting forth such facts, statistics and particulars relative to their business, receipts and expenditures as may be required by the commission. In many states special reports may also be called for by the commission at different intervals. It is often provided that the commission shall furnish blank forms for regular or special reports; and the reports must be duly sworn to or verified by such officers or persons as the commission may designate. Full and specific answers must be given to all questions propounded by the commission, or sufficient reasons must be stated for failure to make such answers. In case the reports or returns appear to be defective or erroneous, the commission is usually given the power to order their amendment within a specified tire. It was very common in the older utility laws, particularly for the regulation of railroads and common carriers, to prescribe by statute the detailed contents of annual reports; but in pursuance of the genera trend of giving commissions ample discretion in the regulation of utilities, the more advanced legislation, including most of the recent laws, vests complete power in the commissions as to the scope of the reports of utilities. Heavy penalties are usually imposed for the violation of provisions relating to reports.

A GOVERNMENT OF LAW AS DISTINGUISHED FROM A GOVERNMENT OF FUNCTIONARIES

BY HON. HANNIS TAYLOR

(From the Green Bag, September, 1906)

Francis Lieber has told us, in his "Civil Liberty and Self-Government," p. 108, that the "guarantee of the supremacy of the law leads to a principle which, so far as I know, it has never been attempted to transplant from the soil inhabited by Anglican people, and which, nevertheless, has been, in our system of liberty, the natural production of a thorough government of law as distinguished from a government of functionaries. It is so natural in the Anglican race that few think of it as essentially important to civil liberty, and it is of such vital importance that none who have studied the acts of government elsewhere can help recognizing it as an indispensable element of civil liberty." In giving expansion to the same thought at a later time Mr. Dicey, who fills the chair of Blackstone at Oxford, has said: "In England the idea of legal equality, or of the universal subjection of all

1 Law of the Constitution, p. 183.