When electric lighting was first introduced, it resulted in depreciation in the market price of gas company securities. It has been found, however, that gas and electric light companies can work harmoniously together, there being separate fields for them to cover, but the superiority of electric lighting over gas is bound to create for it a permanent demand. It is not uncommon now for a man living in a small country town to be supplied with electricity and for him to gaze in wonder at the still prevalent gas posts in many of our large cities. Its use is less detrimental to the health than gas, and not injurious to wall and ceiling decorations. Its safety over the use of lamps is favourable to its increased use.

Now that it has proven possible to transmit electrical power long distances at small loss, the investor must not only consider the likelihood of competition from a local plant, but from some plant located in another town or city in the same section, and, therefore, for this and many other reasons, it is desirable that rates charged locally shall be reasonable and satisfactory to the consumers, so that there will be less temptation for an outsider to invade the territory. There may be some exclusive clause of the franchise which will protect the local company from an invasion of this kind, but all these matters are to be considered.

1 Speech before the Missouri Society in New York City, Jan. 31, 1907.

Find out how long the franchise has to run. If it is a bond being considered, the franchise should always outlive it. (In this connection it would be well to turn to the subject " Franchise.") Consider the earnings, which should give net results of nearly twice the amount required to pay the annual interest charge, and provide a moderate sinking fund. A sinking fund which will redeem two or three per cent, of the issue annually is desirable if the plant is located in the smaller cities or towns. In the larger cities, which are considered to be growing communities, a sinking fund may not be so necessary, provided the bond issue does not exceed 60 or 70% of the replacement value of the property. In smaller places, 50% of the replacement value of the property is large enough for a bond issue. The wear and tear on electric lighting properties is considerable, and it should be well understood by the intending investor that proper sums are being set aside yearly to cover this depreciation; and this should be from the very starting of the plant, because, when everything is new, this wear and tear is not apparent, except to a small degree, but the ratio of this increase is quite rapid as the property grows older. Consequently, this should be anticipated in the beginning. It is very essential that an electric light plant should be maintained in a high physical condition, which maintenance should be paid for from its earnings without any increase of indebtedness, and it is that against which the investor must guard.

Electric light plants in small towns are not desirable sources for investment, and are worth considering at all only when low priced water-power is obtainable, and in this connection it is wise for the investor to read what is given under " Power Company Bonds " as relates to the sufficiency of the power.

Electric light properties may be easily duplicated, unless the wires are in underground conduits and thus occupy a strategic position something like a gas company. It is well to ascertain whether or no the municipality has any right of purchase at some future time, which might work to the disadvantage of a security holder. The amount of business tributary to the company is naturally important, and especially important is the question of the contract, if any, with the municipality, to furnish the public lighting. If this contract exists, unless it is a reasonable contract and runs as long, at least, as the bond issue, it should not be considered at all by the purchaser of bonds, and should seldom be considered by the investor in the stocks of such a company. At its expiration it might not be renewed, or, if renewed, upon less favourable conditions. It is well for the intending purchaser of securities of a property of this kind, unless with the above exceptions, to eliminate the earnings from the city contract entirely in studying the company's statement of earnings. (Read also the subject " Gas Company Bonds.")

As a whole, electric light securities have proved very satisfactory and comparatively little loss has been incurred. It is reasonable to suppose that with all the modern improvements, and the present well-known methods of handling this business, that with ordinary precaution on the part of the investor, safe investments in properties of this kind may be readily made.