in place of their railroad commission have created general public utility commissions. There is now a commission with more or less extended powers over businesses affected with a public interest in practically every State in the Union; and the railroads, it is needless to say, are subject to the control of the commission in every case. The impelling forces back of this movement which has thus swept the country is the fundamental unity. It is recognized, at last, that the law governing the public utilities is one and the same, and that, therefore, there should be one body versed in it all with full powers over the whole situation.

§ 65. Extent of their supervision.

It has been assumed throughout the country for so long that these public utilities of every sort ought not to be left unregulated in private hands that argument to that effect would be superfluous. Indeed, it is now appreciated that the only alternative to an impetuous movement toward public ownership is real success in effective regulation of private ownership. The whole movement toward commission regulation rests upon the public conviction that the earlier methods of regulation attempted through court processes has proved upon the whole ineffective, and that specific legislation has been in most instances unintelligent. As a practical matter the justification of commission activity and supervision, as against statutory control enforced by the courts, is that there is thereby established a specialized body, expert in the particular work which it has to perform. The modern statutes establishing these bodies recognize the commission as the organ of the State both for protecting the rights of the utilities in the performance of their functions and for compelling the utilities to render in proper manner all of their public duties. Chief among the powers essential to such a commission is the right to obtain full information upon every point affecting the operatives of the companies subject to its jurisdiction.

§ 66. Regulation of Rates.

The power is generally given to the commissions in the States to determine and establish after notice and hearing just and reasonable rates and the classifications and regulations appertaining thereto. Experience seems to have also made it plain that the protection of all concerned requires the further provision that the rates and classifications shall be filed with the commission before going into effect, thereby becoming the only legal rates which can be charged anyone. This has the consequence of making the charging of any different rate than that which has duly been scheduled conclusively illegal as discrimination, without any possibility of urging extenuating reasons for making a difference in rates. It is common to provide that rates may not be advanced without the permission of the commission having first been obtained. Indeed, in the more thorough-going States the power not merely to suspend advances in rates but to prevent the lowering of rates unduly is given to the commission-to fix the minimum in fairness to all concerned as well as the maximum of charge for protection of the public has been given.

§ 67. Adequacy of service.

It is only in recent years that it has been appreciated that the power to compel adequate service is if anything of more importance to the community than the keeping of rates to a reasonable level. By the provisions of the modern statutes, the commission is given full power for determining not merely adequacy and safety of the service but also a large influence in determining its character and extent, so far as this may be done consistently with the constitutional rights of the companies concerned. The power of the commission to order both repairs and additions to the plant and increase and extension of facilities is usually set forth in general language; but such matters as those with which the courts had hesitated to deal, such as the opening of stations and the making of switch

connections, are usually specifically mentioned. That such things as train service and freight facilities can better be handled by a commission with discretion than by the passing of special statutes or codes is clear. Indeed, the former attempt to bring about proper service by judicial process brought at private expense to enforce statutory provisions proved a dismal failure.

§ 68. Keeping of accounts.

The modern statutes call for uniform accounts by public utilities kept in a way prescribed by the commission with the right of the commission at discretion to classify utilities for this purpose. The power to prescribe uniform accounting would of course be useless without the provision made for sufficient inquisitorial powers to see that all orders of the commission are obeyed. It is also plain that the orders of the commission could be evaded if companies were not forbidden to keep one set of books for use before commissions and another set for their own information. In the latest statutes certain matters of accountancy, such as depreciation reserves, the fixing of the rate of depreciation for utilities of various classes is properly left to the discretion of the commission. It is plain that for the protection of the public the utilities must be required to set aside sufficient funds to keep the plant in a state of operating efficiency and the investment at a fixed level. It should be added that all this has its effect in determining the rate of dividend which these corporations may properly pay.

§ 69. Issue of securities.

In a great many States the commissions have been given power to pass upon the securities which the corporations subject to their jurisdiction are proposing to issue. The object of regulating capitalization is to see that all capitalization upon which the public is expected to pay a return represents money actually used in serving the public, and to make certain that no part of such securities

represents improper expenditure for what are not fairly capital purposes. Furthermore, if these provisions are to be effective the Commission must see that the proceeds of capital issues are in fact spent for the objects for which the issue was made and for no other. Ample leeway is usually given the companies to meet temporary needs and emergencies by unregulated and unfunded issues of short time obligations, which will not therefore become a permanent burden upon the public. It is equally necessary that consolidations of corporations shall be passed upon by the Commission, together with whatever new securities the combination involves. This is peculiarly necessary to prevent the capitalization of franchise values, which would prevent any effective regulation of rates based upon confining the company to a fair return upon the capital actually invested.

Topic C. The Establishment of the Federal Commission § 70. The Interstate Commerce Act of 1887.

The power given to Congress by the Constitution over commerce between the States was not taken advantage of until the year 1887, when the Interstate Commerce Act was passed. This act was founded to a considerable extent on the English Railway and Canal Traffic Act, although many of its provisions were influenced by prior State legislation. In the original Act the Interstate Commerce Commission was created and its organization defined. Railroads were forbidden to charge more than just and reasonable rates, or to discriminate between persons or places. The Commission was given the power to investigate alleged violations of the Act and to make orders thereon, and power was given to the courts to act in support of such orders. One or two particular abuses were directly forbidden. Thus it was forbidden to charge more for a shorter than for a longer haul in the same direction and over the same route under substantially similar conditions, and the practice of giving rebates or free car

riage was forbidden. And it was provided that in dealing with connecting carriers no preferences or priorities in facilities or service should be given to one over another.

§ 71. Scope of the original provisions.

In running through the Act as it originally stood there are certain points which will be worth noting in view of later developments. The jurisdiction of the Commission extended generally only to carriers wholly by railroad engaged in interstate and foreign commerce; it did not cover water carriers, unless operated under common control with railroad carriers. Generally speaking, there was no idea of giving anything but supervisory power over the railroads; the Commission was primarily established by the Congress as an investigating body. It did have powers, however, in addition to conducting general investigations, to hear particular complaints; but in respect to such complaints, it had no powers of its own to grant relief. The most that the Commission could do was to make findings on such complaints, and its report thereupon could be used as prima facie evidence in proceedings in the courts based upon the wrongs alleged. However, the railroads in these subsequent proceedings, which were virtually regarded as de novo, put in any evidence they had, and it was more or less of a scandal that the railroads showed very generally a disposition in important cases to withhold much of their evidence from the Commission and produce it before the courts, with the result that the courts would very frequently come to a different conclusion from that which the Commission had announced.

72. Immediate Amendments found necessary.

It was found from the very outset, that the Commission had not been given in this legislation the equipment to carry out the objects for which it was created, moderate as these were in their purpose. The Commission was particularly charged with seeing whether rates were reason