USA > Massachusetts > Norfolk County > Weymouth > Town annual report of Weymouth 1924 > Part 11
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The basis as laid down by the courts on which rates are es- tablished is, that the company is entitled to an income which will yield a fair return on the fair value invested.
The Committee did not feel that it was intended it should check up and verify the valuations placed by the companies on their respective properties, which would be a matter of expert opinion and which would entail considerable expense and time.
On the basis of the Company's valuation of its property and investments, the present net income yields 7.7%. The Depart- ment of Public Utilities of the Commonwealth and their predeces- sors, have, from time to time, passed on and approved substantially all these valuations, as shown on the Company's books; the law requiring that before a public utility company .can issue stocks, bonds or securities, except short term notes, the company must obtain the approval of the Department of Public Utilities of the issue.
The dividend record of the Weymouth Light & Power Com- pany is referred to in the Company's statement attached. As of December 31, 1923, the surplus and undivided profits of the Com- pany carried on the books is $12,017.04, with a total capitaliza- tion as of that date of $629,000.
There is a substantial difference between rates charged by municipal plants and rates charged by privately owned companies, which difference is explained to some extent in the Company's statement attached hereto, but we find that we cannot say, for example that the Weymouth rate at 141/2 cents is unfair, because a rate charged by a municipal corporation is substantially less; that area, distance, density of population, character of business and power production are all substantial elements in determining the rate and vary greatly, and a comparison of rates in and of themselves will lead to no intelligent conclusion.
We find communities that show a substantial growth in pop- ulation, and, as a consequence, substantial increases in the use of current and that the rates charged are reduced. In other words, in a densely populated community, power can be obviously fur- nished at a much less expense and at a much less rate.
The primary purpose for which the company was organized is to furnish light to the residents. The furnishing of power for heating purposes is incidental to the main purpose and bears a very small relation to that main purpose, and the heating rate has been placed at a lower figure as an inducement and encourage- ment for the use of the current for heating purposes, and further, the heating load is used at a different period than the lighting is used.
As appears from the Company's statement, the average divi- dend yield to the stockholder is 81/2 %; that there is no active market for the stock and it cannot be disposed of readily like Edison or American Tel. & Tel. It is necessary for the Com- pany to maintain a fair yield to the stockholder, in order to pro-
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vide for the obtaining of funds in the future, for extensions and replacements, if such funds are to be obtained and maintained at the least expense to the Company.
The Committee has not taken into consideration the street lighting rates, because that is a matter of contract between the Town and the Company.
Our conclusion as to lighting rates is that the rates now charged are not unfair.
As to the rate charged by the Old Colony Gas Company, we find that the statement of the Company submitted herewith to be correct, and that generally, the considerations affecting the light company's rates, affect the gas company's rates, and our conclusion is that the rates charged by the Old Colony Gas Com- pany cannot be said to be unfair.
The net income of the Gas Company for the calendar year ending 1923, was $83,152 and their capitalization as of Decem- ber 31, 1923, was $1,304,000, or a return of little above 6%.
JOHN H. TOWER,
BENJAMIN B. SYLVESTER,
MATTHEW O. DOWD, HERBERET C. TORREY, EDWARD W. HUNT.
REPORT OF OLD COLONY GAS COMPANY, DEC. 21, 1924
Whether the Old Colony Gas Company is charging a proper price for gas is comparatively simple to determine. The Supreme Court of the United States, within the last few years, has ruled many times that a public utility is entitled to a fair return on the fair value of its property.
The Old Colony Gas Company began business long after the Board of Gas and Electric Light Commissioners was organized and all its securities have been issued under the supervision of this Board, or its successors, the Department of Public Utilities. There can therefore be no question in regard to the fair value.
As a matter of fact -- up to the present time the earnings of the Company have never been sufficient to give the security holders a fair return on their investment. In other words-the Company has always been supplying gas below cost. Active work on the construction of the plant and distribution system was be- gun in the spring of 1911 and at the end of that year gas was turned on in the mains and the company began to serve its cus- tomers. In 1912 and 1913, additions to the plant and distribution system were made, for which a considerable amount of money was spent.
Early in the spring of 1914, the Board of Gas and Electric Light Commissioners authorized the Company to issue permanent capital to take care of these expenditures, the total auhorized capital at that time being as follows:
First Mortgage Bonds $338,000
Preferred Stock 354,500
Common Stock 354,500
Total $1,047,000
At that time, of course, the Company had been going such a short time that it did not have adequate earnings to give a fair return on the value of its property.
The plant of the Company was of sufficient capacity to do a great deal bigger business than it was then doing, and the prob-
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lem of the management at that time was to take on sufficient addi- tional consumers to bring the output of gas up to a point where the plant would be running at somewhere near capacity. To do all this required the expenditure of a large sum of money and the Company went ahead with this construction work, expecting to permanently finance these new expenditures in the course of a year or two.
In the fall of 1914, however, unforeseen by everyone, the world war began. 1915, due to this fact, was not a very good time to finance and the same was true of 1916 and 1917. In the meanwhile-the Company was obliged to make main extensions and to take on new consumers, and the money spent during these years amounted to something over $300,000, which was covered by an issue of notes in addition to the permanent capital described above.
In 1917, the United States entered the war, and the price of labor and materials, entering into the manufacture of gas, went up at a tremendous rate.
During the next two or three years, the Company made sev- eral advances in the price of gas, none of which were sufficiently great to take care of the increased cost of operation and give the security holders a fair return. In fact-in October, 1917, the Company stopped paying dividends on its Preferred Stock. The Company had never paid any dividends on its Common Stock.
In the meanwhile, the banks carrying the $300,000 of Notes had begun to grow uneasy, and were demanding payment. The Preferred Stockholders were finally persuaded to subscribe to an issue of Debentures and the proceeds of these Debentures were used to partially take care of the Bank Notes. These Debentures were refunded early in 1924 by a further issue of First Mortgage Bonds, so that the present capital of the Company is as follows: First Mortgage Bonds $595,000
354,500
Preferred Stock Common Stock 354,500
Total
$1,304,000 This will give you a fairly good idea of the cost of the property used in supplying gas to the inhabitants of the towns we serve.
To turn to the price of gas, the last increase in price which we made was on September 1, 1920. Since this time, the Com- pany has made three reductions in the price of gas,-one on Janu- ary 1, 1922, one on January 1, 1924, and one on October 1, 1924. The first of these reductions was made before any dividend was declared on either class of stock of the Company and all these re- ductions were made before the Company was able to pay sufficient dividends to bring the value of its stock up to par. Since the Company has been able to resume dividends, the Common Divi- dends have been paid as follows:
Year
Common
Preferred
1922
3
1923
5
1924
3 5 0
5
In order to give the best service and to make the necessary extensions to mains to take care of those desiring gas, it is neces- sary for the Company to invest tens of thousands of dollars each year. To raise this money, the Company must sell securities. In order to do this, the earnings of the Company must be satisfactory to investors so that they will have a desire to invest in the securi-
123
ties of the Company. Under the laws of Massachusetts, a Public Utility cannot sell securities for less than par and therefore the earnings and dividends of a Company must be sufficiently great to bring the value of the Company's stock above par before it can be sold. It would seem to be more important to the citizens of Weymouth to have the rates of gas sufficiently high to bring this about rather than to attempt to decrease the price of gas and thus jeopardize the credit of the Company.
The price of gas depends to a very great extent on the density of population served. We believe that you will find that the cost of gas in the holder of the Old Colony Gas Company com- pares very favorably with any gas company in the state. The cost of distributing this gas is naturally much higher than in a densely populated city. The city gas company may reach several apartment houses, each one containing perhaps sixteen apart- ments, by running only 100 feet or 200 feet of main. In scat- tered territory, such as the Old Colony Gas Company serves, it is usually necessary to run many times this length of main in order to obtain an equal number of meters. Therefore, the in- vestment per consumer of the Old Colony Gas Company must be many times the investment of a company serving a densely popu- lated city. This, of course, makes our interest charges per thou- sand cubic feet of gas sold a great deal higher. Also, the cost of reading meters, the cost of maintaining our pipes, and similar charges are much greater, due to the longer distances which our men must cover. In order to supply all the towns which we serve, it is necessary to distribute all gas under high pressure, and this means additional expense.
There are many towns in the state paying a higher price for gas than Weymouth. The latest list which we have on hand is the Rate List of the American Gas Association. As many of the rates are on a sliding scale, it is rather difficult to make a comparison, but the table which we give below gives the cost of the first thousand cubic feet of gas used each month:
Price of Gas
Town
Population
1st M. Cu. Ft.
Salisbury
1,701
$3.50
Amesbury
10,036
3.00
Norwood
12,627
2.85
Plymouth
13,045
2.75
Bridgewater
8,438
2.69
E. Bridgewater
3,486
2.69
W. Bridgewater
2,908
2.69
Avon
2,176
2.69
Holbrook
3,161
2.69
Randolph
4,756
2.69
Newburyport
15,618
2.65
Nantucket
2,797
2.60
Amherst
5,550
2.50
Easthampton
11,261
2.50
Palmer
9,896
2.50
Spencer
5,930
2.50
Weymouth
15,057
2.49
Since these rates were published, our October 1st reduction in price of gas has taken place, our rate for the first thousand cubic feet now being $2.45.
We feel that the price of gas in Weymouth at the present
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time is as low as is possible under conditions existing today, but we hope the time will shortly arrive when it will be possible to make further reductions.
E. M. FARNSWORTH, JR., Vice-President.
To the Committee on Lighting Rates, Weymouth, Mass. Attention : Mr John H. Tower, Chairman.
Gentlemen :
The following statement is intended to briefly outline the position of the Weymouth Light & Power Company with respect to the rates which it charges for electricity in the territory which it serves.
The rates charged in the various states and towns in Massa- chusetts vary considerably, and it is only natural that consumers in one town should feel that the rate which they pay should be as low as rates paid in other towns. In comparing rates charged in Massachusetts, communities served can be roughly divided into the following classes:
1st. Cities.
2nd. Towns served by privately owned public utility cor- porations.
3rd. Towns served by municipally operated plants.
It can be easily seen why rates charged for lighting in the first-mentioned class should be lower than rates in the other classes. Public utilities in cities serve a much more congested territory, having large stores, office buildings, apartments, tene- ments, and single houses closely spaced, which means that invest- ment for each customer is very much less than in a town like Weymouth which is so spread out. Also, stores, office buildings and apartments are large users of electricity and their use extends over many hours of the day.
Towns served by municipal lighting plants, as a rule, are charged less for electricity used for lighting than are towns served by privately owned plants. One of the largest single factors which makes this situation possible is taxes.
A town, of course, received no taxes from a municipally owned plant. Also a municipally owned plant is not required to pay any state or federal taxes. The Weymouth Light & Power Company, during the year ending December 31, 1923, paid out in taxes-Town, State and Government,-the sum of $38,487.42. A reduction of 1 cents per K.W.H. in the lighting rate would mean a decrease in revenue of approximately $8,000. It can be readily seen that if it were possible to relieve the Weymouth Light & Power Co. of all taxes, the rate for lighting could be reduced approximately 6 cents per K.W.H., and the Company would still have exactly the same amount of money to pay its ex- penses that it now has. As a matter of fact, if the Weymouth Light & Power Company had no taxes whatever to pay out, it could sell electricity for house lighting at an 8-cent rate and prob- ably be in a better financial condition that it is at the present time.
In addition to taxes, the following reasons help to explain this apparent difference in rates :
Many towns appropriate from the tax levy some little money for depreciation, extensions, and to make up any deficit that may occur in the year's operation. The department has the use of municipal buildings, for which no rent, heating expense, etc., is
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charged. As a rule, the executive officers serve without pay. The treasurer is usually the town treasurer, and his salary and expenses are paid by the town and are not charged into the cost of electric lighting. In many towns, agreements have been made with other corporations such as the telephone company and the street railway company, at the time such corporation started, whereby the town has the use of all poles in the town without expense to the town.
A study of the operation of a municipally owned plant will show, in almost every instance, its effect on the tax levy of the town, so that merely the rate paid for electricity between munici- pally operated and privately operated plants is not a fair com- parison.
Conditions concerning the cost of supplying electricity in dif- ferent towns vary with every town. The question of density of population, character of soil,-whether sandy, ledgy, rocky,-the kind and number of trees in the highway; the general plan of the town,-whether strung out or congested; whether the town is a trading center with large stores serving the surrounding towns; class of customers,-whether wealthy or not; the question of whether electricity is secured from water power or steam power, etc., all have a very important bearing on the rates charged.
In this connection, must be remembered that the Town of Weymouth is scattered, and from an electric light company's point of view, is not one town of 15,000 population, but in reality is four towns of from two to six thousand population. It is heav- ily treed, is not a trading center for the surrounding territory, and its inhabitants are not particularly wealthy as compared with other towns. Most of these features also enter into the cost of operating the town itself, and are reflected in the appro- priations for care of the streets, schools, and other town depart- ments.
The Weymouth Light & Power Company was organized and started operation in 1889. Up until 1910, the Company was never in a prosperous condition and no dividends were paid. The rate in 1910 was 15 cents per K.W.H. Economies in operation were put into effect at that time, and a progressive campaign for new business allowed the Company to start dividend payments in that year.
The 15 cent rate was continued up to July 1, 1916, when the rate was voluntarily reduced to 141/2 cents; on October 31, 1916, to 14 cents; on June 30, 1917, to 131/2 cents. During 1917, the effects of the war began to be felt, and the cost of everything entering into the generating and distributing of electricity in- creased several hundred per cent. This necessitated an increase in the rate to 15 cents. The high prices continuing in 1920, it was necessary to increase the rate to 16 cents per K.W.H. This 16-cent rate was continued until March 1922, when the rate was reduced voluntarily to 151/2 cents per K.W.H. In May 1924, re- duced to 15 cents K.W.H. All the above are net rates after the prompt payment discount was taken, and are the real rates as practically all of our customers take advantage of the discount by paying before the discount date expires.
The cost of nearly every item entering into the manufacture and distribution of electricity is at least double the cost before the war, and the reductions made have only been possible because of the increased sale of electricity. In this connection, however,
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it should be remembered that in order to get this increased growth, it has been necessary to invest a large amount of money in equipment, poles, wires, meters, etc., to reach new customers. The Weymouth Light & Power Co. has always met the demands for service made upon it, but to do this, has had to go into the market and bid for money in competition to the Telephone Com- pany, and other large public utilities companies, industrial com- panies, etc.
Slightly over $1,000,000 has had to be raised, practically all of which came from investors and banks outside of Weymouth, thus leaving Weymouth capital free for local purposes. To get this money, we have had to pay a fair rate for it, as there is no reason why someone should lend the Weymouth Light & Power Company money unless they get as good a rate as they get from investments of the same class. The Company is now paying 8 1/2 % on money paid in by the stockholders of the Company, and the average rate paid for all money borrowed and put into the plant is approximately 6%. We believe this to be a fair rate and no higher than is necessary to get the new money necessary to sup- ply our needs.
In this connection, it might be well to state that every dollar of capital has been reviewed in detail and passed on by the Pub- lic Utilities Commission of Massachusetts or its predecessor, the Gas & Electric Light Commission. This means that there is no "water" in the stock as we have had to show the Commission where every cent of money was spent before they will allow capital for the same. Weymouth is constantly growing, and we can see no reason why this growth will not continue for a number of years. To meet the demands for service from this growth will require large amounts of new money in the future. To get this new money, the Company must stay on a self-supporting basis. An electric light company not financially sound is not an asset to a community, but is a distinct liability.
The only source from which our Company can receive reve- nue with which to pay its bills is from the consumers which it serves. No one is under any obligation to give us any money to make up any deficit. The Company does not pay high salaries to officers or employees. We are trying to operate the Com- pany as economically as possible and still give service demanded. Our present rates barely give us enough money to pay our ex- penses, interest and depreciation. Our customers are paying the cost of serving them, and no more.
We believe that the rates charged for street lighting are low. They have not been increased since 1915, although the cost of furnishing street lighting is much higher now than it was then. If the street lighting rates were increased, the house lighting rates could be slightly lowered. To increase these rates, however, would mean a larger payment to the Company by the Town, and more taxes; and as the taxpayers are practically all consumers of elec- tricity, they would pay practically the same as they do now. We, therefore, have not pressed this question.
We believe that the coming year will prove to be a pros- perous year to the whole Town, and in deference to the wishes . of your Committee, are announcing a reduction in the lighting rate of 12 cent per K.W.H. to take effect in January, 1925. We desire to state, however, that this reduction is not being made because of any reduction of present cost; on the contrary, we can see in-
127
creased costs which we have got to face during the next twelve months which will more than offset any decrease which we may expect. The reduction is made entirely in anticipation of the fact that a prosperous year means more business and increased use of electricity in the territory.
If our hopes are realized, we expect to continue these re- ductions. It should be realized by our customers that rates higher than are necessary are not desired by the Company any more than they are by the consumers. No higher salaries are paid, and no increase of dividends to stockholders. We fully realize that lower rates mean more business and less friction among the customers. The lower the rate is, the easier it is to operate the Company.
We stand ready at any time to work with your Committee or any committee desirous of ascertaining the true facts of our Company, and are pledged to reduce rates just as fast as they can be reduced with safety to the Company. We cannot, how- ever, agree to accept rates which are inadequate to fulfill our needs, as this would impair the financial soundness of our Com- pany. We believe no fair-minded customer or citizen desires to have us in this condition.
Very truly yours, WEYMOUTH LIGHT & POWER COMPANY, By GEORGE W PERRY, General Manager.
REPORT OF TREASURER OF THE TRUSTEES OF WEY- MOUTH FORE RIVER BRIDGE FOR THE YEAR END-
ING DECEMBER 31, 1923.
Balance brought forward from 1923 $1964.54
Receipts :
City of Quincy, assessments Nos. 145 to 155, inclusive $3,630.00
Town of Weymouth, assessments Nos. 145 to 156, inclusive .
1,200.00
Town of Hingham, assessments Nos. 145 to 156, inclusive 1,320.00
Town of Cohasset, assessments Nos. 145 to 156, inclusive
720.00
Town of Hull, assessments Nos. 145 to 156, inclusive 240.00
Town of Scituate, assessments Nos. 145 to 156, inclusive . 240.00
Town of Marshfield, assessments Nos. 137 to 149, inclusive .
130.00
County of Norfolk, assessments Nos. 145 to 156, inclusive .
2,400.00
Eastern Mass. St. Ry. Co., assessments Nos. 145 to 156, inclusive 1,800.00
Interests on deposits 12.61
Total Receipts
$11,692.61
$13,657.15
Disbursements :
Harry W. Pray, services as bridge-tender. . $1,500.00
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Harry W. Pray, paid boy gate-tender 150.00
Harry W. Pray, board of boy gate-tender . 250.00
Harry W. Pray, paid boy, vacation supply . 15.50
Harry W. Pray, cash paid for sundry sup- plies 12.50
Wm. W. Cushing, services as bridge-tender George A. Stitt, services as bridge-tender
1,555.50
278.56
Timothy J. Carey, services of two boy gate-tenders
76.67
Emma O. Pierce, board of two boy gate- tenders
167.16
New England Tel. & Tel. Co., Telephone service 58.76
Quincy Electric Light & Power .Co., lighting
36.00
Weymouth Light & Power Co., lighting. . Bethlehem Shipbuilding Corp. Inc., 4 signs made and put up. 87.12
Bethlehem Shipbuilding Corp. Inc., repairs
2,211.78
Bethlehem Shipbuilding Corp. Inc., build- ing platform 25.00
Bethlehem Shipbuilding Corp. Inc., design- ing, making and installing turning mechanism
4,750.00
W. H. Ellis & Son Company, repairs
1,538,11
City of Quincy, applying tar and sand . 200.00
George Hillman Eggleston, Engineering services
228.39
Gustave B. Bates, services as Trustee
100.00
Theron L. Tirrell, services as Trustee . 100.00
Wm. L. Foster, services as Trustee and Treasurer
125.00
Total Disbursements
$13,500.21
Balance carried forward
156.94
$13,657.15 WM. L. FOSTER, Treasurer.
Hingham, December 31, 1924. Trustees of Weymouth Fore River Bridge.
Gentlemen:
I have examined the accounts of William L. Foster, Treasurer of the Trustees of Weymouth Fore River Bridge for the year 1924, reconciled the bank account, and I hereby certify that the same are correct with proper vouchers. (Signed) J. IRVING BOTTING,
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