THE FIXING OF RATES og 
not as simple nor as easy as appears at first view. The main 
difficulty lies in the fact that tax rates are already high and that 
the layman sees the force of the argument that the payment 
for the individual service rendered should be measured by the 
cost of the service. It is convenient to ignore the unearned 
increment that goes to the parties who are not served by the 
utility and it has become Customary to ignore the same, conse- 
quently, the practice of letting the rate-payer carry the full 
burden may be expected to continue with only rare exceptions. 
Cost of Rendering the Service as a Modifier of Rates. — In 
the case of the service rendered by certain utilities special effort 
is made to determine the cost of serving various classes of cus- 
tomers in order that the charge for the service may bear some 
direct relation to the cost of rendering the service in each class. 
This may be unwise. The prime consideration is what should 
the rate-payer in each class be asked to pay when his ability to 
pay is weighed against that of the rate-payers in other classes. 
Perhaps the establishment of class service is not always the best 
procedure, but it is legitimate and at present apparently the 
only practicable way of conducting certain business enterprises. 
There is no intent to find fault with the system except only to 
say that, if cost to serve the individual rate-payer were made 
the criterion of the charge for the service, there would be practi- 
cally as many rates as there are rate-payers. In the application 
of the principle, therefore, whether always sound or not, it has 
become customary to classify the service and within the estab- 
lished classes to make the charge uniform. 
Consideration is to be given, then, when rates are to be fixed, 
not alone to the total amount of the earnings, but also to their 
distribution to various classes of consumers. This is a subject 
which will not be taken up in this volume, in which the problem 
under discussion is concerned with aggregate earnings and not 
with the distribution thereof to the individual rate-payer. 
Deficient Earnings in Early Years. — N early every public 
utility begins operating at a loss. There may be a number of 
years during which the earnings will not be sufficient to cover 
IQ”