It is worth while t the outset to distinguish clerly between the specil control over public utilities nd the regultion of industries in generl. Under the police power, stte hs the right to regulte ny business. This sort of regultion hs to do with sfety devices, conditions of helth nd well being of employees, nd, with more or less defined limittions, the generl welfre of the public (King, 2000).
The regultion of public utilities, however, is of different sort ltogether. It embrces the right to control the very orgniztion nd conduct of the enterprise. It is concerned not only with sfety nd welfre, but with the rtes chrged the public nd the returns or profits relized by the business, s well s with the products or services furnished. In the so-clled unregulted business the right to such interference is not recognized. fter ll resonble provisions for the public welfre hve been mde, ordinry business is still free to furnish such services or products s it desires, chrge such prices or rtes s it is ble to exct, nd conduct its finncil mngement ccording to its own purposes or contrctul rrngements.
The right to regulte in the specil sense ws first recognized in the celebrted cse of Munn v. Illinois, decided by the Supreme Court of the United Sttes in 1876. This cse involved the right of the Illinois generl ssembly to prescribe mximum chrges for the storge nd hndling of grin by Chicgo elevtors. The new power ttempted by the stte ws rdicl deprture from existing policy. The ct ws shrply contested nd crried to the Supreme Court of the United Sttes. The power ws upheld, nd the bsis lid for public utility regultion. The principle itself hs never been questioned since.
bout the time when the Illinois wrehouse sttute ws encted, there ws widespred legisltion throughout the country, especilly through the newly developed western sttes, for the regultion of rilrods. This ws the period of so-clled Grnger legisltion, when lmost spontneously new sttutes for rilrod regultion were encted. Of the seven Grnger cses decided by the Supreme Court in 1876, ll but the Munn cse concerned rilrods. 1 Thus, ctive regultion t tht time chiefly centered round the rilrods. It finlly resulted in the pssge by Congress in 1887 of n ct to Regulte Commerce, or, s it is clled, the Interstte Commerce ct (Morgn, 2003).
During the 1880's serious problems developed lso in connection with other public utilities, prticulrly street rilwys. The rpid growth of cities creted demnd for dequte trnsporttion t resonble rtes. Similrly other services becme importnt, nd demnd for the extension of regultion developed. Consequently, fter 1900, the policy of regultion expnded rpidly, nd in the succeeding decde public utility sttutes with commissions were provided in most of the sttes.
The bsis of regultion, s estblished by the Munn decision, nd repeted in ll of the leding cses where the sme question rose, ws the specil public interest in the prticulr industries. It is worth inquiring into this specil interest. Wht re the prticulr qulities, or the extrordinry conditions, which set n enterprise prt from others not subject to regultion Wht constitutes the specil interest which trnsforms business into public utility
Vrious nswers hve been mde from time to time to these questions. In court opinions, sometimes one view is reflected,