REGULATION OF RATES (MASSACHUSETTS) It is difficult to determine just what the board has accomplished in the way of price re ductions. Though each year between twelve and twenty gas companies have reduced their rates, in most cases they have not made the reduction as a result of complaints. Average prices paid by coal-gas consumers have fallen from $1.72 in 1886 to $.91 in 1909. Changes in methods of production and distribution, however, have resulted in such reductions in costs, from time to time, that it is impossible to draw definite conclusions as to how far this appreciable downward trend in prices has been due to the efforts of the board. More over the board has been unable to make any general action to the end of bringing about a general price reduction, but it has been forced to confine itself to those irregular cases which chance, in the form of complaints, has brought under its jurisdiction. However, it is fair to say that because of the board's exist ence prices have probably responded more quickly to the diminutions in costs due to in ventions and improved methods of produc tion.
Cost-reducing improvements in apparatus and methods are sure sooner or later to bring about a general price reduction. However, in such a business as electric and gas lighting, where nearly every company enjoys a mono poly in its own territory, under ordinary con ditions improved methods are likely to be much slower of general adoption than in the case of competitive industries. A company making satisfactory profits without fear of competition will hesitate a long while before installing new apparatus or adopting new methods, which, although likely to diminish costs and so increase profits, will necessitate a large initial expense. Presumably the exist ence of the board has gone far toward over coming the tardiness of prosperous companies in installing new and cost-saving apparatus. The commission keeps informed about the latest and most improved methods of manu facture. Whenever a company is brought be fore it by a petition for a reduced price, it bases its decision upon the costs by the most improved methods of manufacture. An order for one company to reduce prices leads to others. No community, learning that another
obtains gas or electricity cheaper than itself, is content until it has brought its grievance before the board. Thus, thanks to this nat ural determination of every consumer to pay no more than the next fellow, the board is in a position sooner or later to scale down prices throughout the state to the cost level of the most efficient means of production. As a result the companies tend to adopt improved devices and methods more quickly than they would altogether of their own accord.
On the petition of the customers of the Springfield Gas Company for a reduction in the company's price, the board stated the charges contributory to a proper price: The consumer is in duty bound to pay three charges: (1) fair cast of gas; (2) a fair dividend on a reasonable amount of capital; (3) such excess as will give the company suffi cient surplus to meet extraordinary acci dents and conduct its business with the highest economy.
"Fair cost" obviously means the fair man ufacturing cost. In satisfying itself as to whether or not the company is employing the proper methods to supply the public with gas or electricity at a fair manufacturing cost, the board subjects the companies to thorough tests.
The second charge upon consumers is a fair dividend on a reasonable amount of cap ital. What the board considers a reasonable amount of capital has already been stated under the head of "Capitalization." In an investigation arising out of a petition of con sumers of the Chelsea Gas Light Company, the board found that the prices were not higher than those of other companies, that the company was economically managed, that for several years it had been making only about 6 per cent on the capital; but it also found that the amount of capital was unusu ally large. It appeared that the present man agement had received a company heavily capitalized, due largely to a distribution of stock dividends. The board considered that under such circumstances low dividends would not be considered a reason for keeping prices at their present level, and ordered a reduction.