If you trace the commission’s regulatory authority back through history, you will find yourself in the late 19th century, when huge railroad corporations were driving their way toward the west. In Washington state, the citizens who shaped the first state constitution were largely farmers, wary of powerful corporations, especially railroads.
The Roots of Regulation: Railroads
Beginning in 1850, Congress granted large tracts of federal land to the states to develop railroads. Here in Washington, state officials turned the land over to the railroad companies. The railroad companies kept some of the land for right-of-way, and sold off more to farmers and new settlers to pay for the building of rail lines. There was almost continuous antagonism and confusion between the railroads and the settlers over surveys and land titles lasting for years.
By the time Washington was granted statehood in 1889, the state’s chaotic railroad development was continuing and the first east-west line had already reached Puget Sound. Most of the farmer delegates at the state’s first constitutional convention were suspicious of the railroads, convinced they were unfairly profiting from the federal land holdings that the people of Washington state should have had instead.
As the state constitution was being written, there were many who wanted to closely regulate the rates charged by the railroads, as well as their profits. Washingtonians were observing the often-chaotic railroad operations on the east coast and in the mid-western states, where new railroad companies were springing up and competing to dominate the market in the high-traffic areas.
Meanwhile, communities in remote areas could be left unserved, or charged outrageous rates, so railroads could compete with below-cost rates in more desirable markets. Shipping costs in those states could fluctuate wildly.
Passenger travel could be difficult too, since a long trip between major cities could involve riding on several different lines before reaching a destination. Railroad workers often worked in unsafe conditions. And in the financial markets, some traders were known for selling worthless railroad stocks to unsuspecting buyers, not knowing which companies were on the level.
The First Commission
With the anti-big-business sentiment, talk of an actual Railroad Commission was floated among the constitutional delegates. Regulation of the railroads, however, was too radical for many pro-development citizens and businesses. They besieged the delegates with letters and telegrams, arguing that nothing should hamper or discourage the railroads from constructing railroad lines in the state.
At that time, developing a good transportation system was at the heart of economic progress in Washington state. Everything from wheat to fruit to lumber was worthless unless it had a railroad to haul it to market. Only two years before Washington statehood in 1887, Northern Pacific Railroad had completed the first direct east-west service to Puget Sound.
The railroad brought people too. In that decade alone, between 1880 and 1890, the state’s population grew from 75,116 to 357,232 residents.
Although the first Washington Railroad Commission was not yet formed, our state constitution included many regulations limiting corporate power, especially railroads, since they were the only corporations wealthy and influential enough at the time to appear threatening.
Prior to adopting commission regulation, the Legislature undertook the task of prescribing maximum rates. With the growth of our state, problems of ratemaking and regulation increased in complexity.
Finally, in 1905 the first Washington Railroad Commission was created with jurisdiction limited to railroad and express companies. This three-person commission was given the power to inspect and evaluate railroad company accounts and order reasonable rates when a complaint was received. Public hearings were held throughout the state and the commission’s investigation of company books gave them better ammunition to demand better schedules, lower rates, and safer services.
The Commission’s Changing Role
By 1910, electric power was lighting many factories and homes in urban areas. So, in 1911 the Washington Legislature changed the name of the agency to the Washington Public Service Commission, expanding its jurisdiction to include electric and gas service. Subsequently, regulation was extended to telephone, telegraph, public water vessels, docks, warehouses, water and public motor carrier rates.
In 1921, as the burgeoning automobile industry took hold in the state, the commission was given power over the construction of roads and highways, and its name changed again to the Department of Public Works under which there was a Division of Transportation, of Utilities and of Highways. In 1935, The Department of Public Works was abolished and the Department of Public Services created. Between 1945 and 1949, in the busy wake of World War II, the Legislature tried separating transportation and utility regulation into two separate departments. Although the state Department of Transportation now has authority over road and highway construction, the commission has regulated both the utility and transportation industries since 1961, when it was given its current name, the Washington Utilities and Transportation Commission.
Competition Challenges the Monopolies
Since the tiny Washington Railroad Commission opened its offices in 1905, the commission has grown and overseen huge changes in the utility and transportation industries. There was the explosive growth in the electric power industry, fueled by the region’s hydroelectric power. There was a new interest in environmentally safe and renewable energy sources in the 1970s. Telephone service became nearly universal; and in the 1980s, the breakup of AT&T’s local phone companies paved the way for the competitive rush in telecommunications. Add to this the deregulation of the railroad and trucking industries since the late 1970’s, and you can see what tremendous changes we have been through.
For many decades, it made sense to have a single company provide a utility or transportation service to a particular service area. Many of the commission’s practices were developed because it was not reasonable to duplicate telephone lines, water mains, power plants, and railroad tracks. Monopolies were more practical, stable, and economic for serving the public, although no one wanted to give them unlimited power.
As a result, private utility and many transportation services for years have been regulated by the state through the commission. In other words, these companies have a contract with the people of Washington. In exchange for enjoying an unchallenged monopoly over a specific service area, these companies can charge no more than the state allows and must agree to serve all customers in their service area.
In recent years, however, competition has become possible -- and even welcome -- in many regulated markets. Endorsed by many important federal and state court and legislative decisions, there now is some competition in nearly all of the industries we regulate.
More recently, these regulated companies have pushed for fewer commission controls in areas where they must react quickly to price and service competition. And while the commission has allowed more freedom and flexibility, competition is still developing unevenly.
In spite of all this change, the basic mission of the commission remains the same: consumer protection for our state’s most essential services.