THE FIXING OF RATES i43 
inordinate profits, sometimes real and sometimes fictitious. 
Where there were no public service commissions — and these 
are a relatively new institution, — the accounts were kept in a 
fashion to suit the manipulator. Apparent profits were used 
as the basis for a distribution of dividends and for the issuance 
of stocks and bonds, and the rate-payer was charged to the 
limit. 
The Right to Regulate Rates. — The right to regulate rates is 
now quite generally recognized. Without such right every cor- 
poration which has a monopoly would have the public at its 
mercy and could charge for its service all that the traffic will 
bear. 
The right to regulate, if properly exercised, should in the long 
run prove of advantage to the owner of the utility. Fair regu- 
lation will insure to the owner what he is entitled to and will 
protect him against unfair competition such as has frequently 
been the result of opportunity to capture with a relatively small 
outlay the cream of the business. 
Under proper regulation the owner of every public utility whose 
existence is justified by all attendant circumstances, should get 
the protection of his legitimate reasonable investment, also a fair 
interest return on this investment and should recover all the 
necessary operating expenses including replacement requirements. 
He should receive such treatment that at some time, by amor- 
tization of the capital which he has invested, or by a sale to 
some purchaser, he can withdraw from the business without loss, 
provided of course, that he has exercised due foresight and has 
not met with unavoidable losses such as may be caused by 
floods or earthquakes. 
Regulation Essential. — The necessity for regulation has now 
become apparent. The practice of granting perpetual franchises 
with unwise privileges has fallen into disfavor. This first be- 
came manifest in laws permitting the periodical regulation of 
public service rates by local, municipal and county authorities. 
Thus, for example, in California the Constitution of the State 
(in effect Jan. 1, 1880 but now modified) provided: 
~— an