Public Encouragement of Monopoly in the Utility Industries

AuthorCharles S. Hyneman
DOI10.1177/000271623014700121
Published date01 January 1930
Date01 January 1930
Subject MatterArticles
160
Public
Encouragement
of
Monopoly
in
the
Utility
Industries
By
CHARLES
S.
HYNEMAN
School
of
Citizenship
and
Public
Affairs,
Syracuse
University,
Syracuse,
New
York
I T
is
not
the
purpose
of
this
brief
article
to
discuss
the
soundness
of
the
theory
that
industries
which
bear
a
peculiar
relation
to
the
public
interest
render
more
satisfactory
service
to
their
patrons
if
protected
by
the
Gov-
ernment
from
competition.
Nor
is
this
the
place
to
consider
whether
the
present
regulatory
practices
of
the
American
states
give
the
patron
of
the
utility
that
assurance
of
value
in
return
for
price
which
is
supposed
to
result
when
different
groups
are
competing
for
a
market.
The
intent
of
the
following
pages
is
to
point
out,
in
a
general
way,
and
with
occasional
illustrations
what
steps
are
taken
and
what
things
are
done
by
the
American
states
to
create
and
foster
monopolistic
conditions
in
an
industry
which
the
courts
hold
to
be
&dquo;affected
with
a
public
interest.&dquo;
The
granting
of
exclusive
franchises
by
the
state
legislature,
however
usual
in
the
past,
is
no
longer
a
common
prac-
tice.
The
role
of
the
local
or
municipal
franchise
in
the
creation
and
the
fur-
therance
of
public
service
monopolies
has
been
the
subject
of
frequent
and
incisive
scrutiny.
No
attention
will
be
given
here
to
these
means
of
curtailing
competition
between
utilities.
The
present
article
will
concern
itself
with
the
devices
by
which
the
state
public
service
commissions
foster
monopoly
and
with
the
statutes
which
direct
the
commissions
toward
that
end.
APPROVAL
OF
INCORPORATION
The
voice
of
the
public
service
com-
mission,
as
to
whether
there
shall
be
competition
or
monopoly
in
the
public
service,
is
first
heard
when
a
person
or
corporation
undertakes
to
venture
into
a
quasi-public
activity.
In
a
few
states-Maine,
Vermont
and
Pennsyl-
vania,
for
example-the
approval
of
the
public
service
commission
must
be
obtained
before
any
public
service
corporation
can
be
formed.
Before
the
articles
of
incorporation
are
sub-
mitted
to
the
secretary
of
state
in
Ver-
mont,
the
Public
Service
Commission
must &dquo; determine
whether
the
estab-
lishment
and
maintenance
of
such
corporation
will
promote
the
general
good
of
the
state.&dquo;
In
order
to
deter-
mine
whether
the
existence
of
an
addi-
tional
utility
corporation
will
&dquo; promote
the
general
good
of
the
state,&dquo;
it
is,
of
course,
proper
to
inquire
whether
the
proposed
corporation
would
enter
into
competition
with
an
existing
operator,
and
whether
any
competition
which
would
result
would
serve
the
public
interest.
CERTIFICATE
OF
CONVENIENCE
AND
NECESSITY
A
more
familiar
form
of
control,
exercised
at
the
very
origin
of
competi-
tion,
is
the
power
of
the
commission
to
grant
or
refuse
a
certificate
of
con-
venience
and
necessity.
It
is
a
very
common
provision
in
state
statutes
that,
until
the
public
utility
regulatory
body
gives
its
approval,
no
person
or
corporation
may
&dquo;begin
the
construc-
tion &dquo;
of
its
plant,
system
or
route;
be-
gin
to
&dquo;operate&dquo;;
&dquo;transact
any
busi-
ness &dquo;;
or
&dquo;exercise
any
franchise
or
right
under
any
provision
of
the
law.&dquo;
In
determining
whether
or
not
to
give
its
approval
to
the
new
public
service
project,
the
commission
must
find

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