The introduction of alternating current for transmission purposes in large cities is probably best exemplified in the station recently erected in Brooklyn, where alternating current is produced and carried to distant points, and then used to operate series arc-light machines run by synchronous motors, the low-tension direct-current network being fed by rotary transformers, and alternating circuits arranged with block converters, and even in some cases separate converters for each individual customer in the scattered districts.

It would be very interesting to go at length into the details of cost in this, the latest development of central station transmission, but time will not permit; nor have I the time at my disposal to go at length into the central station business as developed by the electric street railways now so universally in use, or another phase of the business as exemplified by the large transmission plants, the two greatest examples of which, in this country, are probably those at Niagara Falls, N. Y., and Lachine Rapids, near Montreal. So far as street railways and power transmission are concerned, I would draw your attention to the fact that the same underlying principle of multiple-arc mains and feeders originally conceived by Mr. Edison is as much a necessity in their operation as it is in the electric lighting systems, whether those systems be operated on the old two-wire plan, the three-wire plan or by means of alternating currents.

Passing from a review of central station plants and distribution system naturally bring us to the operating cost and the factors governing profit and loss of the enterprise. In considering this branch of the subject, I will confine my remarks to the business as operated in Chicago by the company with which I am connected.

Our actual maximum last winter came on December 20, our load being approximately 12,000 horse power. A comparison of the figures of maximum capacity and maximum load of last winter shows that we had a margin in capacity over output of about 20 per cent. The load curves shown this evening represent the maximum output of last winter (December 20), an average summer load last year (June 4), and an average spring load of this year (May 2). For our purposes we will assume the maximum capacity of the plant and the maximum load of the system to be identical. The maximum load last winter occurred, as I have stated, on December 20, about 4:30 o'clock in the afternoon, and lasted less than half an hour. It should be borne in mind that the period of maximum load only lasts for from two to three months, and that the investment necessary to take care of that maximum load, has to be carried the whole year. It should not be assumed from this statement that the whole plant as an earning factor is in use 25 per cent. of the year.

The fact is that, during the period of maximum load, the total plant is in operation only about 100 hours out of the 8,760 hours of the year; so that you are compelled, in order to get interest on your investment, to earn the interest for the whole of the year in about 1½ per cent. of that period, on about 50 per cent. of your plant.

This statement must bring home to you a realization of the fact that by far the most serious problem of central station management, and by far the greatest item of cost of your product, is interest on the investment. It may be that the use of storage batteries in connection with large installations will modify this interest charge, but even allowing the highest efficiency and the lowest cost of maintenance ever claimed for a storage battery installation, the fact of high interest cost must continue to be the most important factor in calculating profit and loss. This brings home to us the fact that in his efforts to show the greatest possible efficiency of his plant and distribution system, it is quite possible that the station manager may spend so much capital as to eat up many times over in interest charge the saving that he makes in direct operating expenses. It is a common mistake for the so-called expert to demonstrate to you that he has designed for you a plant of the highest possible efficiency, and at the same time for him to lose sight of the fact that he has saddled you with the highest possible amount of interest on account of excessive investment. Operating cost and interest cost should never be separated. One is as much a part of the cost of your current as the other.

This is particularly illustrated in connection with the use of storage batteries. Those opposed to their use will point out to you that of the energy going into the storage battery only 70 per cent. is available for use on your distribution system. That statement in itself is correct; but in figuring the cost of energy for a class of business for which the storage battery is particularly adapted, the maximum load, that portion of your operating cost affected by the 30 per cent. loss of energy in the battery, forms under 4½ per cent. of your total cost, and it must be self-evident, in that case at least, that the 30 per cent. loss in the storage battery is hardly an appreciable factor in figuring the operating cost of your product. So far as I have been able to ascertain, it would appear to be economical to use storage batteries in connection with central station systems the peak of whose load does not exceed from two to two and one-half hours.

In order to illustrate the important bearing which interest has on cost, I have prepared graphical representations of the cost of current, including interest, under conditions of varying load factors. For the purpose of this chart I have assumed an average cost of current, so far as operating and repairs and renewals and general expense are concerned, extending over a period of a year, although of course these items are more or less attested by the character of the load factor. For the purpose of figuring interest, I have selected seven different classes of business commonly taken by electric light and power companies in any large city. Take, for instance, an office building. It has a load factor of about 3.7 per cent., that is, the average load for the whole year is 3.7 per cent. of the maximum demand on you for current at any one time during that period; or, to put it in another way, this load factor of 3.7 per cent. would show that your investment is in use the equivalent of a little over 323 hours a year on this class of business. This is by no means an extreme case. You can find in almost every large city customers whose load factors are not nearly as favorable to the operating company, their use of your investment being as low as the equivalent of 75 or 100 hours a year.