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PART ONE

THE BUSINESS OF THE YEAR

CHAPTER I.

JURISDICTION-HISTORY-LEGISLATION

ORGANIZATION. Regulation of public utilities in California is entrusted to the Railroad Commission under constitutional provisions, the Public Utilities Act and other statutes supplemental and amendatory thereto.

The Commission has jurisdiction over the rates, service, finances, facilities and extensions of all public utilities within the state. This jurisdiction extends to accounts, transfers of property, the issuance of securities, and to safety of operation and construction. The utilities under the control of the Commission are steam and electric railroads, street railways, gas, electric, telephone, telegraph, water, warehouse, wharfinger, heat, auto stage, motor freight and inland water transportation companies.

The Commission has ample power and a broad discretion in the regulation of public service corporations. Through systematic reports and personal contact it is in close touch with the various utilities and the fields they serve, and a large part of its work consists of informal adjust

Where informal adjustment can not be made or is deemed inexpedient, the Commission initiates on its own motion a formal investigation, hears witnesses and renders a decision. These proceedings often anticipate formal complaints by consumers by meeting changing conditions or remedying in their incipiency situations likely to develop into abuses.

The Commission's aim is to see that the consumer receives adequate service at a reasonable cost; to give the utility protection and a fair return, where possible; to enable it to function properly and reasonably to anticipate the needs of an expanding field; and lastly, to give the investor a fair expectation of stability, both as to financial structure and operating efficiency of the institutions into which he is placing his money. Each of these four functions is regarded as of prime importance.

Regulation of public utilities had its inception in California by an act of the legislature April 3, 1876. The act provided for the appointment by the Governor of three Commissioners of Transportation, who were empowered to exercise supervision over steam railroads with reference to the security and accommodation of the public.

They had power on petition of property owners to establish stations, switches and side tracks. The railroads were directed to file with the Commissioners of Transportation 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 state legislature enacted a measure, approved April 1, 1878, repealing the act of April 3, 1876, and substituting a single Commissioner

service by steam railroads were similar to those conferred upon the three Commissioners of Transportation by the act of April 3, 1876.

The Commissioner's power in respect to rates was merely advisory, the act of April 1, 1878, providing that it should be his duty:

"To examine into all complaints made in writing as to unjust discrimination between persons and places, and to endeavor, by amicable interpretation 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 provisions of the new act with reference to extortions, discriminations, forfeitures and penalties remained the same as those contained in the act of April 3, 1876, but in addition there were certain police regulations relating to: the making up of trains; the period of confining animals in transportation; obstruction of highways; trespassing; intoxication of railroad employees and railroad policemen.

RAILROAD COMMISSION CREATED. The Railroad Commission was created under the provisions of section 22 of article XII of the constitution of 1879.

The new constitution provided for the election of three Railroad Commissioners, one to a district, the state being divided into three districts for that purpose. Their terms of office were fixed at four years.

The Commission was given power over railroad and other transportation companies, to fix rates and to prescribe uniform systems of accounts.

The constitution failed, however, to include jurisdiction over service, which both the Commissioners of Transportation and the single Commissioner of Transportation had possessed.

Other sections of article XII of the constitution contained provisions concerning long and short hauls; 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, 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 confined itself to the powers of the Railroad Commission as specified in the constitution. It did not specifically repeal the act of April 1, 1878, which probably remained in force in so far as the later act was not inconsistent with its provisions.

NEW LEGISLATION. There was no further legislation affecting the Railroad Commission between 1880 and 1909. Finally, in 1909, the legislature passed the act approved March 19, 1909, 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 to include express companies, car companies, and others. The jurisdiction of the Commission over rates was limited by this act to the authority to fix the

maximum rates to be collected. The act made certain changes in procedure and specified additional penalties, not, however, providing for 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 violations 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 those prescribed by the constitution as it then stood, to fix rates and to prescribe uniform accounts for railroad and other transportation companies.

The legislature of 1911 decided that the powers of the Railroad Commission should be increased to cover all classes of public utilities within the state, and that the scope of the Commission's powers over such utilities should be extended from rates and accounting to matters of 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 to remove the rigid application of the long and short haul rules in cases in which the Commission might consider such deviations reasonable, and 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 defined public utilities 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 gave 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.

These amendments were adopted at a special election on constitutional amendments, held on October 10, 1911.

PUBLIC UTILITIES ACT. In the meantime, 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

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