WATER RATES AND RATE MAKING

WATER RATES AND RATE MAKING

EDITORIAL

A paper of this title was read before the recent convention of the American Water Works Association at Minneapolis by the Hon. Halford Erickson, chairman of the Wisconsin State Railroad Commission, and proved of exceptional interest to those who were fortunate enough to hear it and the discussion that followed. The question is one that is uppermost in the minds of the majority of water works managers, as it not only involves the success of the system, but has all to do with the kind of service rendered. It is generally admitted that water rates must be predicated upon cost essentially in the final analysis. The first factor to be considered is what shall be the entire return upon the property, and then what shall be the method of distributing the charges. These are the outgrowth of the experience through which water works managers have been passing during the past few years. That the time is coming when all public utilities will be under a general supervision is practically conceded by most men ot observation, although the opinion was expressed at Minneapolis that so far as the Eastern States are concerned it was thought that the pendulum was swinging a little too far the other way in the matter of limiting the return upon property of this kind, and there is some anxiety lest the reduction shall be so great as actually to impair the character of the service which shall be rendered by public service corporations, and lest the conditions of publis service shall become so drastic that capital will not be attracted. Both general methods outlined by Mr. Erickson results in a sliding scale under which the user of a small quantity of water pays more for that quantity of water than does the larger user, although the scale may be built upon the theory that all users pay the same for the first increment of water. Mr. Erickson’s assertion that there is more danger to consumers in low rates than in high rates is difficult for many people to believe, and yet it is absolutely true. Water is a type of service that is enormously valuable—so much so that if the people could not get it otherwise they would pay many times what they now pay for the water, he improvement of the service, improvement in quality and improvement in pressure. It is a fact quite generally noticed that a plant that charges a fair rate for service is well managed and is an up-to-date plant, it takes advantage of all the modern improvements and gives its consumers the best satisfaction. On the other hand, where a plant has held Its rates low, whether owned by a city, an individual, or a corporation, the service is invariably unsatisfactory. The paper of Mr. Erickson is a valuable contribution to the science of rate making, and will doubtless convert many of those who heard it to the Wisconsin method.

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