Take another class of business, that of the haberdasher, or small fancy goods store. As a rule these stores are comparatively small, with facilities for getting a large amount of natural light and little use for artificial light. The load factor as shown by the chart is about 7 per cent., the use of your investment being not quite twice as long as that of the office building. Day saloons show an average of 16 per cent. load factor; cafetiers and small lunch counters about 20 per cent., while the large dry goods stores, in which there is comparatively little light, have a load factor of 25 per cent. and use your investment seven times as long per year as the office building. Power business naturally shows a still better load factor, say 35 per cent., and the all-night restaurant has a load factor of 48 per cent.

You will see from this that the great desideratum of the central station system is, from the investors' point of view, the necessity of getting customers for your product whose business is of such a character as to call for a low maximum and long average use. This question of load factor is by all means the most important one in central station economy. If your maximum is very high and your average consumption very low, heavy interest charges will necessarily follow. The nearer you can bring your average to your maximum load, the closer you approximate to the most economical conditions of production, and the lower you can afford to sell your current. Take, for instance, the summer and winter curves of the Chicago Edison company. The curve of December 20, 1897, shows a load factor of about 48 per cent.; the curve of May 2, 1898, shows a load factor of nearly 60 per cent. Now, if we were able in Chicago to get business of such a character as would give us a curve of the same characteristics in December as the curve we get in May; or, in other words, if we could improve our load factor, our interest cost would be reduced, an effect would be produced upon the other items going to make up the cost of current, and we probably could make more money out of our customers at a lower price per unit than we get from them now.

Many schemes are employed for improving the load factor, or, in other words, to encourage a long use of central station product. Some companies adopt a plan of allowing certain stated discounts, provided the income per month of each lamp connected exceeds a given sum. The objection to this is that it limits the number of lamps connected. Other companies have what is known as the two-rate scheme, charging one rate for electricity used during certain hours of the day and a lower rate for electricity used during the balance of the day, using a meter with two dials for this purpose. Other companies use an instrument which registers the maximum demand for the month, and the excess over the equivalent of a certain specified number of hours monthly in use of the maximum demand is sold at greatly reduced price. The last scheme would seem particularly equitable, as it results in what is practically an automatic scale of discounts based on the average load factor of the customers. It does not seem to be just that a man who only uses your investment say 100 hours a year should be able to buy your product at precisely the same price as the man who uses your investment say 3,000 hours a year, when the amount of money invested to take care of either customer is precisely the same.

Surely the customer who uses the product on an average 30 times longer than the customer using it for only 100 hours is entitled to a much lower unit rate, in view of the fact that the expense for interest to the company is in one case but a fraction per unit of output of what it is in the other. This fact is illustrated by the interest columns on the graphic chart already referred to. Supposing that the central station manager desired to sell his product at cost, that is, an amount sufficient to cover his operating, repairs and renewals, general expense, and interest and depreciation, he would have to obtain from the customer having the poorest load factor, as shown on the load chart, over four times as much per unit of electricity as it would be necessary for him to collect from the customer having the largest load factor. No one would think of going to a bank to borrow money and expect to pay precisely the same total interest whether he required the money for one month or for twelve; and for the same reason it seems an absurdity to sell electricity to the customer who uses it but a comparatively few hours a year at the same price at which you would sell it to the customer using it ten hours a day and three hundred days a year, when it is remembered that interest is the largest factor in cost, and the total amount of interest is the same with the customer using it but a few hours a year as it is with the customer using it practically all the year around.

I have dwelt thus at length on the question of interest cost in operating a central station system, not alone for the purpose of pointing out to you its importance in connection with an electrical distribution system, but also to impress upon you its importance as a factor in cost; in fact, the most important factor in cost in any public service business which you may enter after leaving this institution. Most of the businesses presenting the greatest possibilities from the point of view of an engineering career are those requiring very large investment and having a comparatively small turnover or yearly income. Of necessity, in all enterprises of this character, the main factor of cost is interest, and if you intend following engineering as a profession, my advice to you would be to learn first the value of money, or, to put it another way, to learn the cost of money.

Before leaving this question of interest and its effect upon cost, I would draw your attention to the fact that while interest is by far the most important factor of cost, it is a constantly reducing amount per unit of maximum output in practically every central station system. When a system is first installed, it is the rule to make large enough investment in real estate and buildings to take care of many times the output obtained in the first year or so of operation. As a rule, the generating plant from the boilers to the switchboard is designed with only sufficient surplus to last a year or so. In the case of the distributing system the same course is followed as in the case of real estate and buildings, with a view to minimizing the ultimate investment. Mains are laid along each block facing, feeders are put in having a capacity far beyond the necessity of the moment; consequently interest cost is very high when a plant first starts, except, as I have stated, in the case of the machinery forming the generating plant itself.