A proper discharge of our duties demands that the rates which we may adopt and establish from time to time be just and reasonable. What is a just and reasonable rate depends on the service to be performed. A rate, to be just and reasonable, must be so to all parties interested in the transportation. We cannot herein, for reasons already stated, enter into a review, at this time, of what goes to make up the cost of transportation, and in what proportion this expense should be apportioned among the different commodities carried, nor what, in our opinion, will constitute a just and reasonable return to the carrier. These matters will be fully considered and our conclusions made public in another report to follow this as soon as attendant circumstances permit. Although, in common with the other State officers, we entered office in January, 1880, an organization of this Board could not take place, for want of necessary legislation, until May 3, 1880. The Act providing for the organization having become a law on April fifteenth, on May third the Commissioners met in San Francisco and organized as a Board. J. S. Cone, Commissioner from the First District, was elected President; W. R. Andrus, Secretary; and F. V. Steinmann, Bailiff. The Board proceeded at once to business. The Secretary was instructed to notify the several transportation companies to at once file in the office of this Board schedules of their fares and freights, as in force December 31, 1879, and January 1, 1880, stating the changes, if any, at time of filing. The companies, with one or two exceptions, complied as soon as circumstances permitted. The Pacific Coast Steamship Company refused to recognize the authority of the Board, and commenced suit in the United States Circuit Court to restrain the Board from in any way interfering with the business of the company. Proper steps have been taken, by the employment of counsel, etc., to defend said action. Copies of the pleadings in the case will be found in the Appendix hereto.

To give persons residing at a distance from the office of the Board, and who had complaints against the transportation companies, an opportunity to make the same to us in person, and also to inform ourselves by personal inspection of the condition of the roadbed, rolling stock, etc., of the several railroads of this State, and the accommodations and facilities given the traveling and shipping public by the transportation companies, we visited the following places in the order named, viz.:

.

In visiting the places named, we have traveled over 3,208 miles. Due notice was given of the time and place of holding our sessions, which were held in every instance in the most convenient place attainable, to accommodate the public; the utmost latitude permissible was accorded to persons appearing before the Board. Oral statements were received and phonographically taken by the Stenog rapher of the Board, and by him written out in longhand and filed in our office for reference. Justice was thus brought practically to every man's door, and all believing themselves aggrieved given an opportunity to make manifest their inquiry and secure redress. Most of the complaints were oral, and general, and not under oath. In every case where the Board has believed merit to exist, it has notified the company concerned, so as to have the wrong, if found to exist, remedied. The Board has found a cheerful willingness on the part of the several transportation companies to correct any irregularities as soon as found to exist, and a notification. Fourteen specific complaints were made to us; copies of which, together with copies of answers thereto, as received, are published herewith, as the Board considers them of value as illustrating the general nature of the complaints as made. We have, on divers occasions, propounded questions upon subjects pertaining to a solution of the transportation problem in this State to the several transportation companies, and have received prompt answers. We have lately caused to be served on the several railroad companies, carefully prepared questions in relation to their whole business as carriers. The answers, when received, which will be soon, will materially aid us in our labors, and in the work now occupying our attention-the fixing of just and reasonable rates for the transportation of passengers and freights.

We call attention in this connection to the letter of A. N. Towne, General Superintendent of the Central Pacific Railroad, dated January 5, 1881, appearing in our Appendix, as showing the labor necessary to answer but a few seemingly easy questions relative to the business of said railroad, and how necessarily this work increases when the questions amount to hundreds. We have labored assiduously since the time of our organization-nine months ago-to procure the necessary material to enable us to act understandingly and justly, and have succeeded to such an extent that we confidently hope and expect to make the benefits resulting from the creation of this Commission felt throughout the State very soon-to thorough justice the execution of which can work harm to no man, bring about an era of good will between all interests concerned in the transportation question. In our inspection of the railroads we have found the standard gauge roads to be in first class condition, both as to roadbed and equipment. Whenever rails have become worn they have been replaced by first class steel rails. The narrow gauge roads, as a rule, are in equally good condition, though in some portions of some of the older narrow gauge roads, new rails should at once be substituted for the old and badly worn rails now used. The passenger and freight stations, and warehouse accommodations throughout the State, on all roads, as a rule, are good and ample. When the exception appears, we have the assurance that changes will at once take place. This State contains at present 1,937.76 miles of standard gauge railroad, and 273.79 miles of narrow gauge railroad. There are 661 stations on the railroads of this State, where passengers and freight are received and discharged, distributed among the roads as follows:

The tariffs of the several transportation companies (except the P. C. S. S. Company) are on file in our office.

A general reduction in freight charges has taken place on the Central Pacific Railroad and leased lines, in this State, during our term of office. We give a brief synopsis of the reduction, to illustrate its general character:

APPENDIX.

COMPLAINT No. 1.

BEFORE THE HONORABLE THE BOARD OF RAILROAD COMMISSIONERS.

E. P. Wheeler vs. The Southern Pacific Railroad Company.

E. P. Wheeler, a citizen of Kern County, and doing business in the Town of Bakersfield as a merchant, complains of the Southern Pacific Railroad Company, and for cause of complaint alleges that the rates of freight charged and exacted by the railroad company, and paid by him on merchandise coming from San Francisco, and required in his business, are excessive and exorbitant, to wit: $2 35 for first class of merchandise, $1 80 for second class, and $1 20 for third class per 100 pounds between this point and San Francisco, a distance of 314 miles; and more than the profits of his business will allow, and as compared with other railroads in the Atlantic States very unfair and unjust. For he is informed and believes that on the Atlantic and Great Western Railroad, for 319 miles, that is to say, from Salamanca to Richmond, the price on freight per first class is 63 cents per 100 pounds, second class 47 cents per 100 pounds, and third class 37 cents per 100 pounds. And on the Chesapeake and Ohio Railroad the freight or charge for transportation of merchandise for same distance, to wit: from Huntington to Meacham, to wit, 314 miles, is for first class 81 cents per 100 pounds, second class 73 cents, and third class 58 cents per 100 pounds, which are quite reasonable, and under which a merchant might be able to live. He, therefore, prays your honorable body to order and direct that the rate of freight on the Southern Pacific Railroad be reduced to a point approximating the rates of these said roads-that is to say, that they be required to reduce the present rates to the extent of fifty per cent, and for such further relief as your honorable body may think just and proper in the premises.

State of California, County of Kern, ss.

E. P. Wheeler, being duly sworn, says that he is the plaintiff in the above entitled action, that he has heard read the foregoing complaint and knows the contents thereof, and that the same is true of his own knowledge, except as to matters therein stated on information and belief, and as to those matters he believes it to be true, this- -day of September, 1880. (Signed)

E. P. WHEELER.

COMPLAINT No. 2.

BEFORE THE BOARD OF RAILROAD COMMISSIONERS IN AND FOR THE STATE OF CALIFORNIA.

Richard Hudnutt vs. The Southern Pacific Railroad Company.

And now comes before your honorable Board, Richard Hudnutt, a resident and citizen of Kern County, Town of Bakersfield, State of California, by occupation a farmer, and complains of the Southern Pacific Railroad Company, a corporation duly incorporated under the laws of the State of California, and having its principal office and place of business in the City and County of San Francisco, and for cause of complaint alleges that the said Southern Pacific Railroad Company has fixed and established and exacts rates of freight on imports into and exports out of Kern County that are extortionate, exorbitant, and oppressive, and that he is informed and believes that it has made, and is making, unfair and unjust discrimination in favor of Los Angeles and against Kern County, its business men, and producers, by which he, in common with them, is injured and damaged by being thereby deprived of a large portion of the profits and earnings which he should rightfully derive from his business.

And for specific matters of complaint he sets forth that he is informed and believes that the average rate of freight charges between San Francisco and the Town of Bakersfield are, per carload, about as follows: First class, $1 20 per 100 pounds; second, $1 09; and third, $1 01-the distance being about 314 miles; that these extortionate rates are much less than are actually paid, because, owing to the infinite subdivisions of each class of freight, and every one being charged a different rate, the agents will not take freight at the foregoing rates unless of one kind of goods, which can rarely occur, and the rates paid are almost invariably those charged on lesser quantities, averaging about fifty per cent more than aforesaid carload rates; that he is informed and believes that these rates are on the average about six times as high as those charged on roads of corresponding and greater cost of construction as those connecting Bakersfield with San Francisco, and that have not been subsidized by the General Government, and from other sources, on the implied condition of aiding and promoting the development of the