Government Ownership and Operation of the Electric Industry

T HE companion article, on government ownership of railroads, challenges the fundamental assumption underlying private operation of railroads, whether regulated or unregulated. This assumption is that railroad charges should be adequate to pay all costs and to provide a fair rate of return on a fair value of property. The writer submits two premises: (1) that railroad charges should cover only incremental costs; (2) that incremental costs should be kept well below average costs by continual expansion of facilities beyond the point of possible profit to private owners. The business losses of railroads, under such a system of rates, would be more than offset by vast gains to shippers and consumers. It is theoretically possible that this pricing policy could be effected under private ownership and operation, or under government ownership and private operation. Either would require huge government subsidies, and would not provide a reasonable probability that we would secure the possible benefits. Government ownership and operation offers the only practicable solution. Those arguments are equally valid for the electric industry. Power plants usually operate under more rapidly decreasing average costs than do railroads. Demand for electricity, within the range of rates possible under the proposed pricing policy, is far more elastic than is demand for railroad services. Consequently, gains to the community would be even greater

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