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Published online by Cambridge University Press: 07 November 2014
In comparison with either Great Britain or the United States relatively little attention has been given to the problems of public utilities by Canadian economists, business men, and governments. In part, this is due to the outstanding success of some of the publicly owned utilities like Ontario Hydro, Toronto Transportation Commission, and Winnipeg Municipal Electric and, at the same time, to the doubtful value of such public enterprises as the Canadian National. Our experience with these concerns has tended to focus attention on individual cases rather than on public utilities as a group.
Another explanation of the comparative neglect of this field of study is the constitutional framework. In the United States, it has been necessary to prove to conservatively minded courts, first, that the business in question comes within the vaguely defined category of public utilities, and then that the rates set by the regulatory commission have not infringed the Fourteenth Amendment that no person shall be deprived of property without due process of law. Under the British system of government, legislation bringing business under government control and the decisions of commissions regarding rates are, within broad limits, accepted by the courts as valid. Thus the virtually continuous litigation over public utility rates in the United States has been absent in Canada.
Despite this relative neglect, Canadian governments have not by any means entirely disregarded the control of public utilities. The federal government has set up the Board of Transport Commissioners which, since 1904, has supervised the rates, fares, and charges of railways under Dominion jurisdiction. For the most part the Board has dealt with relation of rates inter se. Nevertheless, it has occasionally considered the general level and in the main has accepted the revenue needs of the Canadian Pacific as a basis for rates. In effect it uses the prudent investment of the low cost line for rate-making purposes, but it has not attempted to arrive at either an accurate valuation or a precise figure for a reasonable rate of return. It has almost completely avoided the theoretical and practical difficulties of original cost, cost of reproduction new, and other valuation problems.
1 Thurston, John, “The Toronto Transportation Commission” (Journal of Land and Public Utility Economics, hereafter referred to as Journal Ld. P. Ut. Eco., 1938, pp. 10–18.)CrossRefGoogle Scholar
2 L. S. Dreiman, “The Winnipeg Municipal Electric Utility” (ibid., 1938, pp. 388-401).
3 Benham, F. C., “The Economic Significance of Public Utilities” (Economica, 1931, pp. 426–38)Google Scholar; H. E. Batson, “The Economic Concept of a Public Utility” (ibid., 1933, pp. 457-72); Frankfurter, Felix, “Public Utilities,” Encyclopaedia of Social Sciences Google Scholar; Gray, H. M., “The Passing of the Public Utility Concept” (Journal Ld. P. Ut. Eco., 1940, pp. 8–20)Google Scholar; for a novel explanation, Ruggles, C. O., “Government Control of Business” (Harvard Business Review, 1945, pp. 32–50).Google Scholar
4 In a federal state like Canada the question often arises as to whether the provincial or the Dominion government has control but this situation must be distinguished from the American difficulty that no government may have jurisdiction.
5 Jackman, W. T., Economic Principles of Transportation (Toronto, 1935), pp. 239–77.Google Scholar
6 It is interesting to note that the United States Civil Aeronautics Board, profiting by previous experience, has tried to escape the entanglements of valuation of physical property. “In exercising its rate-making functions the Board has never and does not now measure the reasonableness of the rate in terms of a fair return upon the so-called fair value of the property used and useful in the public service. … We believe that experience has proved that [reproduction cost less depreciation] method to be administratively and economically unsound: its application to public regulated enterprise during the past four decades has placed upon State and Federal regulatory agencies a burdensome, complex, expensive and futile task. … We believe … that the rate of return should be predicated upon the funds which have been actually and legitimately invested in the transportation enterprise. … We accordingly regard reproduction cost as irrelevant and immaterial to a fair and reasonable rate and evidence of this type will not be admitted to the record in rate proceedings. …” American Air, Mail Rates, 3 C.A.B. (1942), 788–9.Google Scholar
7 Bell Telephone Coy., 34 C.R.C. (1929), 1–56.Google Scholar See also Bell Telephone Coy. 27 C.R.C. (1923), 231 Google Scholar; British Columbia Telephone Coy., 27 C.R.C. (1923), 259 Google Scholar; Montreal Telephone, 15 C.R.C. (1912), 118.Google Scholar There have been very few important telephone cases in recent years.
8 Bayley Case, B.R.C., Ann. Rpt., 1912, p. 185 Google Scholar; Medico-Chirurgical Society of Montreal, B.R.C., Ann. Rpt., 1915, p. 253.Google Scholar See also Sickler, B. J., “A Theory of Telephone Rates” (Journal Ld. P.Ut. Eco., 05, 1928).Google Scholar
9 In re B.C. Telephone Company's Tariff, B.R.C., Ann. Rpt., 1926, p. 57 Google Scholar and the cases therein cited. Also Township of York v. Bell, 34 C.R.C. (1928), 170; Mun. of Pt. Grey v. B.C. Telephone Coy., 34 C.R.C. (1928), 175.
10 Ingersoll Telephone Coy., et al., B.R.C., Ann. Rpt., 1913, p. 289 Google Scholar; Port Hope Telephone Coy., 17 C.R.C. (1914), 343 Google Scholar; Ernesttown Rural Telephone Coy., 18 C.R.C. (1915), 325 Google Scholar; General Order 114, B.R.C., Ann. Rpt., 1917, p. 493 Google Scholar; General Order 109, B.R.C., Ann. Rpt., 1917, p. 241.Google Scholar See also Kennedy, W. F., “The Regulation of Utility Servicing under the Holding Company Act of 1935” (Journal Ld. P.Ut. Eco., 1941, pp. 26–38)Google Scholar and Warren Wright, “Management Fees of Public Utility Companies” (ibid., 1930, p. 415).
11 Bell Telephone Coy., 34 C.R.C. (1929), pp. 46–50.Google Scholar
12 Jackman, , Economic Principles of Transportation, pp. 622–5.Google Scholar
13 Neither this Commission nor the Canadian Broadcasting Corporation has any legal control over the amount which individual broadcasting stations or chains may charge for advertising but the former may have some influence on them nevertheless. The aggregate amount payable, under the Commission's orders, by commercial users of copyright music to the Canadian “ASCAP” must be high enough to cover the expenses of the latter including royalties to composers. The amount payable by each individual station is based on an estimate of its potential listeners. The number of radio licences within the ordinary broadcasting radius of a city is divided up among the various stations in rough proportion to the “listener appeal” of the programmes offered. The size of the normal listening audience has an obvious bearing on what each station can charge advertisers.
14 Standard tariffs which apply in the relatively few instances where special tariffs and general orders are not applicable, are published in the Gazette, and other tariffs may be published in order to obtain judicial notice thereof. The Transport Commission is a semi-judicial body and its decisions do not need approval by the Cabinet.
15 Gas Inspection Act, R.S.C. (1927), c. 82; Electricity Inspection Act, Statutes of Canada, 1928, c. 22.
16 During the war the Dominion controlled public utilities in numerous ways. For brief summaries see Canada Year Book, 1945, pp. 336–7, 648–51, 669 Google Scholar but few of the controls related specifically to rates. The Dominion sets the rates for electrical and water service to town-sites in national parks.
17 The Ontario Act virtually duplicates the federal law. R.S.O. (1937), c. 259.
18 Public Utility Act, 7 Geo. VI (1944), c. 2.
19 Public Utility Commission, Ann. Rpts., passim.
20 The Gasoline Licensing Act, 24 Geo. V (1934), c. 2.
21 Motor Carrier Act. 1 Geo. VI (1937), c. 29.
22 Public Utilities Act, 4 Geo. VI (1941), c. 53.
23 Public Utilities Act, R.S.N.B. (1927), c. 127.
24 Statutes of Quebec, 4Geo. VI (1940), c. 11; also 25-6 Geo. V (1935), c. 24; 3 Geo. VI (1939), c. 16.
25 Ibid., 7 Geo. VI (1944), c. 22.
26 Created in 1910 by 1 Geo. V, c. 5 and given additional powers by 3 Geo. V, c. 6; 20 Geo. V, c. 34; 4 Geo. VI, c. 22.
27 Railways Act, R.S.O. (1937), c. 259; Telephones Act, ibid., c. 261; Public Utilities Act, ibid., c. 286; Municipal Board Act, ibid., c. 60.
28 Power Commission Act, ibid., c. 62.
29 For example, Patton, H. S., “Hydro-Electric Power Policies in Ontario and Quebec” (Journal Ld. P. Ut. Eco., 05 and August, 1927)Google Scholar; Peck, H. W., “An Inductive Study of Publicly Owned and Operated versus Privately Owned but Regulated Electrical Utilities” (American Economic Review, supplement, 1929, p. 197).Google Scholar
30 Newton, F. A., “The Commonwealth and Southern Objective Rate Plan” (Journal Ld. P. Ut. Eco., 1934, p. 117)Google Scholar; M. R. Scharff, “An Incentive Plan of Rate Adjustment” (ibid., 1940, pp. 475-8).
31 E. H. Barber, “Toward an Electrified America” (ibid., 1935); L. G. Cannon, “The Future of the Electric Utility Industry: Fated or Planned” (ibid., 1934, p. 150); W. J. Crowley, “The Prospects of Continued Electrical Rate Reductions” (ibid., 1939, p. 464); H. A. Cutler, “Elasticity of Residential Demand for Electricity” (ibid., 1941, pp. 242-5); E. Falck, “Elasticity, etc.: A Reply [to Cutler]” (ibid., 1941, p. 498); E. Troxel, “Incremental Cost Determination of Utility Prices” (ibid., 1942, 1943, pp. 458-67, 28-39, 292-9).
32 Behling, B. N., “Competition and Substitution in Public Utility Services” (American Economic Review, 1937, p. 15)Google Scholar; Chidester, L. W., “Marketing Electrical Power in the Depression” (Journal Ld. P. Ut. Eco., 1935, p. 184)Google Scholar; Ruggles, C. O., “Aspects of Public Utility Rate Making” (Harvard Business Review, 1935, p. 417).Google Scholar
33 Harbeson, R. W., “The Power Programme of TVA” (Journal Ld. P. Ut. Eco., 1936, p. 19)Google Scholar; D. L. Marlett, “The TVA Investigation” (ibid., 1939, p. 212); D. F. Pegrum, “The Public Corporation as a Regulatory Device” (ibid., 1940, pp. 335-43); C. H. Pritchett, “Administration of Federal Power Projects” (ibid., 1942, pp. 379-90).
34 The study published in 1935 by the Federal Power Commission created widespread price cutting throughout the United States but similar studies by the Dominion Bureau of Statistics have apparently had no practical results. Incidentally, figures of average cost per kilowatt-hour without considering average monthly consumption and other factors are almost valueless as the Report of the Ontario Hydro-Electric Power Commission for 1942 emphasizes.
35 Ontario, Report of the Royal Commission on Transportation, 1937.
36 Public Vehicles Act, R.S.O. (1937), c. 289; Commercial Vehicles Act, R.S.O. (1937), c. 290.
37 R.S.M. (1940), c. 142.
38 On the provincially owned telephone system, rural subscribers are not able to bear the full cost of their service, whereas in Winnipeg value of service exceeds cost of service. The problem is how to adjust rates between rural and urban customers. Goldenberg, H. C., “Report of Government Commercial Enterprises Survey” (Winnipeg, 1940).Google Scholar
39 Manitoba Telephones Act, 1933, c. 46; Greater Winnipeg Water (and Sanitary) Districts, 1913, c. 22, and 1935, c. 80: An Act respecting Electrolysis, R.S.M. (1940), c. 60; Water Rights Act, R.S.M. (1940), c. 230; Taxicab Act, R.S.M. (1940), c. 211.
40 Ann. Rpt., 1944, pp. 16–7.Google Scholar
41 Local Government Board Act, R.S.S. (1940), c. 33: Public Utilities Companies Act, Statutes of Sask., 1936, c. 32.
42 Local Government Board, Report (Sessional Paper, 8, 1928).
43 Patterson, W. J., Speech on Report of the Auditors [Godfrey, O. J., and Munnock, G. B.] regarding the Department of Telephones (Regina, 1930).Google Scholar
44 The Public Utilities Act, R.S.A. (1940), c. 28.
45 Northwestern Utilities v. City of Edmonton, S.C.R. (1929), 186; Milner, H. R., “Public Utility Rate Control in Alberta” (Canadian Bar Review, 1930, p. 100).Google Scholar
46 Currie, A. W., “Rate Control of Public Utilities in British Columbia” (Canadian Journal of Economics and Political Science, 1944, pp. 381–90).CrossRefGoogle Scholar
47 Glaeser, M. G., “The Supreme Court Redeems Itself” (Journal Ld. P. Ut. Eco., 1942, pp. 146–54).Google Scholar
48 Forsey, E. A., “British Columbia, Coal and Petroleum Products Commission” (Canadian Journal of Economics and Political Science, 1939, p. 225).CrossRefGoogle Scholar
49 B.C. Statutes, 1939, c. 36.
50 Morgan, C. S., Regulation and Management of Public Utilities (Boston, 1923).Google Scholar