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M M Section 2 - Purpose of Utility Regulation. The purpose is two - fold: First and obviously, to protect utility customers - the public - from unfair or discriminatory pricing practices by a monopolistic enterprise which is sheltered from competition by a public franchise. The granting of monopoly rights within franchised limits is in the public's interest because, given the capital -intensive nature of the enterprise, competition would lead to duplication of costly infrastructure, and thus to higher rates to consumers. Second, and most importantly, to ensure continued high quality of service at reasonable cost to consumers. This requires seeing that the utility follows sound and efficient planning and management, that it at all times has plant in service that is used and useful, and that its rates of charge are fair and reasonable and not unduly discriminatory. Section 3 - Financing of Capital Programs. Utilities normally finance their capital programs by means of long term revenue bonds. While not in competition against each other for customer business, utilities do nevertheless compete against other enterprises and each other for low cost financing in the money markets. As enterprises with a stable revenue base, well regulated public utilities generally command lowest bond interest rates and their shares and bonds are among the most secure investment instruments. In the case of municipal utilities in this category, their revenue bonds are tax free as well. Section 4 -,Municipal Water and Sewer Utilities. These utilities are obviously of special interest to this county's consumers. But many of these enterprises are also a distinct category, having little in common with the public utility concept as set forth above. The reasons are as follows: Sanitary services are the orphan of the public utility industry - generally involved, often embroiled in local politics. At one time there were many local investor-owned local water and sewer utilities. Today they are rare, the latest well known casualty in this area being General Development Utilities. Difficulties in securing low cost financing have been one major stumbling block for small local water and sewer utilities. But ultimately, the bane of these small local utilities almost invariably is rooted in local politics. To be sure, there are a number of municipal water and sewer utilities in good financial health, under sound management, having fair and reasonable utility rates and generally satisfied customers. Almost Invariably, those well-run utilities have these things' in common: They are often found in larger communities; are governed by an independent utilities commission, and are shielded from local politics; their financing is not co - mingled with the general municipal fund; and their rates of charge are set by the Commission subject to approval by members of the elected municipal Board. Section 5 - The Checks S Balances for Municipal Utilities. In the absence of an outside regulatory control of municipal utilities (whether water/sewer, electric power etc.), the two-tier governing structure described in Section 4 103 May 14, 1996 ROnK98 ea(;r, 198