Commission at that time to do many things of value to the State, and in addition, we have actively worked with the legislature and its committees with a view to better legislation and changes in the Constitution which would bring about effective regulation of all utilities; and we believe that with some minor imperfections the Public Utilities Act as it stands in California to-day is the furthest advanced in utility regulation in existence.

Naturally much difficulty was encountered with the railroads originally, when they were solely within our jurisdiction, and with the other utilities after control over them had been placed in the hands of this Commission, in securing information necessary to proper decision of cases. We, however, have proceeded to the best of our ability to get all information necessary, and have decided all cases promptly, and any delays which may have occurred have been the direct result of the failure of the utilities to furnish the required information.

It is doubtful if any other commission has, within a similar period, rendered more decisions of far-reaching effect, but regardless of this fact, but once have this Commission's decisions been taken into court, and then the Commission was promptly sustained. We have endeavored to act with the utmost fairness toward the utility and the public, and as a fixed policy have always endeavored to have our decisions so fair that no litigant would desire to contest them, but so strongly fortified in the evidence and so carefully prepared as to form that even though a litigant desired to contest them such contest would avail nothing.

In our regulation of the securities of utilities we have often had it urged upon us that stringent regulation would frighten capital from the State. Notwithstanding such suggestion, we have deemed it proper always to have in view the public welfare, and while our regulation may have deterred capital from coming into the State in a few instances, it has only done so in those instances where the conditions upon which the investment was to be made were unfair to the rate-paying public. We have chosen to believe that the better policy is to foster investment, but only upon such terms as will ultimately bring about the giving of adequate service at reasonable rates by a utility not overburdened in capitalization or bonded indebtedness.

In line with this policy the Commission has, in numerous instances. required the reformation of plans of public utilities so that they might proceed upon a sound financial basis.

Up to the present time, every utility that has applied to the Commission for permission to issue stocks and bonds, has been able to proceed under the modification of its plans which the Commission has enforced, and hence, although we have prevented unsound financing, we have not, up to the present time, kept any capital whatsoever out of the State. As has already been indicated, however, if it becomes necessary this Com

mission will prevent the investment of capital in this State when the terms upon which the investor desires to operate are unfair to the public.

In our work we have been ably assisted by a corps of hard-working and efficient officials and employees, to whom the thanks of this Commission and the State are due. Likewise, we have found the members of the legislature willing to coöperate in every way, and we desire to express to yourself our hearty appreciation of your highly sympathetic and helpful coöperation, without which we would have been sorely handicapped in our work.

Respectfully submitted,

JOHN M. ESHLEMAN,

H. D. LOVELAND,

ALEX GORDON,

MAX THELEN,

EDWIN O. EDGERTON,

Commissioners.

HISTORICAL REVIEW.

The first action taken by the State of California to regulate its public utilities, apart from local regulation, was the act of April 3, 1876, Statutes 1875-76, page 783. This act provided for the appointment by the governor of three Commissioners of Transportation, who were given limited jurisdiction over steam railroads. It was their duty to inspect all steam railroads with reference to security and the accommodation of the public, and they had power on petition of property owners to establish stations, switches and side tracks. The railroads were directed to file copies of all their tariffs, rules, regulations and instructions to employees, but the Commissioners had no power over rates, except limited powers on complaint. The act also defined extortion and unjust discrimination. The jurisdiction thus conferred upon the Commissioners of Transportation was confined to steam railroads and consisted of limited powers, both as to rates and service.

The next session of the legislature passed the act approved April 1, 1878, Statutes 1877-78, page 969, repealing the act of April 3, 1876, and creating the office of Commissioner of Transportation, who was to be appointed by the Governor. His powers as to the service of steam railroads were similar to those which had been conferred upon the three Commissioners of Transportation by the act of April 3, 1876. With reference to rates, the Commissioner was given power "to examine into all complaints made in writing as to unjust discrimination. between persons and places and to endeavor, by amicable interposition, to bring about such changes in tariffs or rules as shall, in his judgment, promote the public interest, and (he) shall report all such cases with the results of his investigation and interposition to the Governor.

The Commissioner's power was accordingly advisory only in this respect. The provisions of this act with reference to extortions, discriminations, forfeitures and penalties remained the same as those contained in the act of April 3, 1876. In addition thereto, the act contained certain police regulations with reference to the making up of trains, the period of confining animals, the obstruction of highways. trespassing, intoxication of employees, and railroad policemen.

RAILROAD COMMISSION CREATED.

When the new constitution was adopted in 1879, it contained in section 22 of article XII thereof a provision for the creation of the Railroad Commission. The State was divided into three districts, from each of which a railroad commissioner was elected for a period of four years. The Commission was given power over railroad and other transportation companies, which power was limited to the power to fix rates and to prescribe uniform systems of accounts. The framers of

the constitution apparently failed to observe that by limiting the powers of the Commission to rates and accounts, they took from it the powers over service which both the Commissioners of Transportation and later the single Commissioner of Transportation had possessed. Other sections of article XII of the constitution contained provisions concerning long and short hauls and grant of free passes or tickets at a discount, increases in freight rates after reductions made for the purpose of competing with other common carriers, discrimination in charges or facilities for transportation as between either persons or places and other provisions applicable to railroad and other transportation companies.

The first legislature which convened after the adoption of the constitution of 1879 passed the act approved April 15, 1880, Statutes 1880, page 45, to organize and define the powers of the Board of Railroad Commissioners. Transportation companies were defined to include railroads other than street railroads, steamships plying from or to ports within this State and steamboats plying upon the rivers or inland waters of this State. The act contained certain provisions as to procedure, but naturally confined itself to the powers of the Railroad Commission as specified in the constitution. The act did not purport to repeal the act of April 1, 1878, which act probably remained in force in so far as the later act was not inconsistent with its provisions.

NEW ACTS PASSED.

During the nineteen years between 1880 and 1909 there was no further legislation affecting the Railroad Commission. Finally, in 1909, the legislature of this State passed the act approved March 19, 1909, Statutes 1909, page 499, known as the Wright Act. This act increased the salary of railroad commissioners from $4,000 to $6,000 per annum and extended the definition of transportation companies so as to include express companies, car companies and others. The authority of the Commission with reference to rates was limited by this act to the authority to fix the maximum rates to be collected. The act made some changes in procedure and specified some additional penalties, not, however, amounting to imprisonment of the actual offender.

The next session of the legislature passed the act approved February 9, 1911, Statutes of 1911, page 13, known as the Stetson-Eshleman Act. The Commission was authorized by this act to fix the actual moving rate and also to ascertain the value of the property, both real and personal, of every railroad or other transportation company in the State and to prescribe a uniform system of accounts. The act also prescribed penalties for violatious of the provisions of the act and of the constitution with reference to railroad and other transportation companies.

The powers of the Commission were limited to the powers prescribed by the Constitution as it then stood. These powers, as has been said, were the power to fix the rates and to prescribe the accounts of railroad and other transportation companies.

The legislature of 1911 decided that the powers of the Railroad Commission should be increased so as to cover all classes of public utilities within the State and that the scope of the Commission's powers with reference to such utilities should be enlarged from rates and accounting to other matters, such as service and finances. The legislature accordingly submitted to the electors of the State three constitutional amendments, as follows:

(a) Assembly Constitutional Amendment No. 50. This amendment altered sections 20 and 21 of article XII of the Constitution so as to remove the rigid application of the long and short haul rule in cases in which the Commission might consider such deviations reasonable, and so as to give the Commission power over excursion and commutation tickets and also power to award reparation to shippers in case of excessive or discriminatory rates.

(b) Assembly Constitutional Amendment No. 6. This amendment increased the members of the Railroad Commission from three to five, provided for their appointment by the Governor from the State at large, instead of election from specified districts, increased the term of office from four to six years after January 1, 1915, gave single commissioners the power when designated by the Commission to hold hearings, and removed all possible doubt as to the Commission's power to fix the actual moving rate.

(c) Senate Constitutional Amendment No. 47. This amendment defines public utilities so as to include commercial railroads, interurban railroads, street railroads, canals, pipe lines, telephone and telegraph companies, heat, light, water and power companies and storage and wharfage companies, and gives to the legislature the right to confer upon the Railroad Commission power to supervise and regulate all public utilities. All powers over public utilities theretofore vested in any political subdivision of the State, except those vested in incorporated cities and towns, were vested in the Railroad Commission upon the passage by the legislature of an act conferring such powers upon the Commission.

The above three amendments were adopted at the special election on constitutional amendments, held on October 10, 1911.

SCOPE OF PRESENT LAW.

In the mean time, the Railroad Commission, foreseeing the passage of the amendments and the subsequent need for a carefully prepared Public Utilities Act, sent its attorney on a tour of inspection of the