Chart no. 12: Electric refrigerators show perhaps the most phenomenal growth of all. This chart shows that in 1923, there were approximately 27,000 electric refrigerators in use. Today the number is approximately 6,000,000. All of these data show the tremendously rapid gain in the number of appliances in use, since about the middle of the last decade, when holding-company managements became active in developing the use of electricity, particularly in the home. (Source of data: Electrical Merchandising.) Chart no. 13 shows the gain in total net kilowatt-hour sale of electricity in the United States since 1928, as compared with the gain in the Associated System. It shows that the sale of electricity has been developed somewhat more rapidly by Associated System properties even than by the industry as a whole. Total net sale in 1928 is taken as 100 in both instances. (Source of data: Electrical World and Associated Gas and Electric System.) Chart no. 14 shows a similar comparison for kilowatt-hours used per residential customer. This corroborates chart no. 13 in showing a more rapid gain on the part of residential customers of the Associated System than of the industry as a whole. The amount of use in 1929 is taken as 100. Comparable figures prior to 1929 were not available. (Source of data: Electrical World and Associated Gas and Electric System.) Progress in the use of electric service in this country has been far more rapid through holding-company efforts than it would otherwise have been. That is indicated by the facts presented. It is also the opinion of every open-minded person familiar with the history of the industry. Prof. Philip Cabot, of Harvard University, expresses this point, as follows: "In this field the holding companies have been so serviceable that it would hardly be an exaggeration to say that without the use of this method of integration the progress of this industry, outside of the great centers of population, would have been delayed for a generation. "The losses from such delay would have been immense. Electric power is one of the greatest labor-saving discoveries of all time; and to have delayed the spread of it over the more thinly settled parts of the country, even for a few years, would have caused a loss of billions." (Source: World's Work, May 1932.) HOLDING COMPANY LEADERSHIP IN PUTTING 19,000 MORE REFRIGERATORS INTO USE IN 1930 Still, you may say, that sounds interesting as a generalization. Let me, therefore, give you a specific instance. In the spring of 1930 the Associated management decided to initiate the first large-scale concerted program for the sale of electric refrigerators. A program was laid out for a period of 7 or 8 weeks, during which substantially all the companies in the system participated. The result was that 13,791 refrigerators were sold and an additional 5,515 were sold by other dealers in the territory, making a total of 19,306. This was the largest, most successful refrigerator program carried out, up to that time, by any utility system in the country. The program was planned and supervised by the holding company management and would not have occurred without it. It is merely one example of similar promotion of the use of electricity conducted continuously by holding company managements which has spread the labor-saving service of electricity twice as rapidly as it occurred before. Since then, similar and larger achievements in the sale of refrigerators have been accomplished, not only by the Associated System, but by many other holdingcompany groups. We might also point to the cooperative effort on the part of the industry through the electric refrigeration bureau, which was very influential in developing the acceptance and wider use of electric refrigerators right through the depression. This cooperative program was made the more effective and easier of accomplishment because of the existence of the holding-company groups. If they had not existed, it is quite possible that such a cooperative program might never have been set up and carried through successfully. HOLDING COMPANIES STILL NEEDED You may ask, Are holding companies needed any longer? The very question implies the assumption that the building of the industry is finished. To answer this question by “no” would mean that the industry has finished its growth; that there are no further developments possible. It takes, however, very little observation to note that there is still almost unlimited development possible in the use of electricity. For example, only 731,000 farms have electric service, which means that there are still approximately 5,500,000 farms that do not yet have electric service. Most of the major appliances are used by less than half of the total number of domestic customers. Only 6,000,000 electric refrigerators are in use, leaving 14,000,000 domestic customers who do not have electric refrigerators. Even vacuum cleaners are used by only 10,000,000 out of the 20,000,000 domestic customers. The average family uses only about 630 kilowatt-hours per year. Full use of electric service would unquestionably require the use of several times that amount of electricity. Certainly the building of the electric industry is not yet complete. INVENTIVE AND EXPERIMENTAL RESULTS MADE AVAILABLE TO LARGE GROUPS AND AREAS UNDER HOLDING-COMPANY MANAGEMENT Another aspect of this problem is that invention in the utility and electric industry has not yet ceased and, we expect, will not cease for a long time to come. Every new appliance invented and perfected requires special effort to promote its use and gain acceptance for it. So long as that continues, the best skill and ability of holding companies will be required. Concrete examples could be cited to show that holding company managements are testing out uses of appliances, new methods of promoting and merchandising them in limited areas, and then applying the results to the entire group of areas under a given management. If each individual operating company were to engage in the same experimenting and trying out, the total cost would be very much greater. Not only are large savings effected through holding company management, but many of the ideas which ultimately result from careful testing would never be initiated by the individual operating companies. Some of the larger individual operating companies here and there have achieved much progress in the use of their services, but these happen to be ones which, as a rule, have had an exceptional man at the head and they are the exception rather than the rule. By and large, I think it is fair to say that greater progress in the use of electricity has been made by those companies which are part of larger groups than by separate companies of comparable size, serving comparable areas. HIGHLY COMPETITIVE CONDITIONS REquire holdING COMPANY MANAGEMENT Finally, the most urgent condition which requires the continued service of holding company management is the fact that beginning with a few years ago, and particularly from now on, increased use of electricity is on a highly competitive basis. As a matter of fact, with the exception of a minimum use of electricity for lighting, practically all uses beyond that have to be sold on a competitive basis. Even the use of light in the home beyond a bare minimum is on a competitive basis. The average family still regards as actually unnecessary the amount of light which, according to the best authorities, is necessary for health and comfort. It would rather spend its money for other purposes. The average family must still be educated on adequate lighting. Practically all other uses are on a competitive basis-refrigeration, cooking, hot water heating. They are not only in competition with other methods of serving the same needs, but they are in competition with all other purposes for which the family spends its money. It is obvious, therefore, that if the use of electricity and appliances is to continue to increase, greater managerial skill and ability will be required even than in the past because of the greater competition. Commercial and industrial uses are obviously on a highly competitive basis and increasingly so because of the perfection of ways of generating power by separate concerns for their own use. BIGNESS OF LIFE EVEN FOR THE HUMBLEST The development of bigness in the utility industry has come about primarily through economic need, through the greater accomplishment of large units, in short, through the force of competition and the pressure for greater efficiency. The history of practically every industry shows a development from many small units in its early history to a lesser number of large units. For example, the automobile industry, which is one of the outstanding industries in achieving perfection of its product and wide use, had 315 establishments in 1919 engaged in the manufacture of passenger cars and trucks. This number declined year by year until according to the 1933 Census of Manufactures, there were only 122 establishments. And today the three largest companies in that industry produce 90 percent of the total units manufactured. The larger units have been able to apply more thorough-going research and to develop greater perfection in manufacture and more skilled merchandising methods and, I have no doubt, give greater value for the dollar than was possible before. To mention one other illustration: In the canning industry there were in 1914, 4,220 establishments whereas in 1933, there were only about half that number, or 2,336, and yet the value of canned goods in 1933 was twice as great as in 1914. The history of almost every other industry shows a similar development. Bigness has developed by sheer force of economic compulsion in being able to service the needs of the people better, more cheaply and more efficiently. Bigness of business and the opportunity for individual enterprise is what has made this country great in so many ways, not the least of which is bigness of life, even for the humblest worker, with a standard of living higher than in any other country. The United States alone uses in round numbers as much electricity as all the European countries combined; per capita it uses three times as much as European countries-936 kilowatt-hours per capita in the United States as against 298 kilowatt-hours in Europe. CONCLUSION In conclusion, may I appeal to your native sense of fairness to consider this question on its merits. Let us not destroy an instrument of progress born of economic necessity in the struggle to render greater service. Let us not regulate to dwarfdom the forces making for progress. Over-regulation will surely subdue the enterprise necessary for progress. History shows that every effort to overregulate human endeavor has in the long run either failed of its purpose or curbed progress. As long ago as 301 A. D., Diocletian, Emperor of Rome, after several crop failures, fixed prices of all kinds of commodities and wages and fees for all kinds of work and service. The plan failed and fell into abeyance. History shows that every effort to interfere unduly with the normal operations of human nature results ultimately in failure. The statement is attributed to Thomas Jefferson that the best governed people are the least governed. I urge you to disprove the conclusion of the noted philosopher, Hegel, that, "peoples and governments never have learned anything from history, nor acted on principles deduced from it." All human experience teaches that interference with normal economic processes by legislation, such as the bill now before you, will fail of its purpose. The bill is destructive, despite honest belief to the contrary that may be held by its sponsors. It would surely result in sweeping injustice to millions of citizens. The evils that it seeks to correct, either exist no longer, or are thoroughly covered by legislation already enacted (such as the Securities Exchange Act), or have been grotesquely exaggerated as to their effect on users of electric service and investors in utility securities. I appeal to your native sense of fairness to consider on its merits the full meaning of the proposed legislation in all its bearings. Let us not destroy; let us build. STATEMENT BY F. S. BURROUGHS, VICE PRESIDENT ASSOCIATED Gas & ELECTRIC Co. GENERAL It is a matter of very great regret to the management of the Associated Gas & Electric Co. that this committee was unable to allot time for the appearance before it of representatives of the company wherein to present their views with respect to the proposed public-utility holding company bill, and more particularly, to refute some of the inaccurate, incomplete, and misleading statements which have been made to the committee with regard to the Associated Gas & Electric Co. and subsidiaries by certain proponents of the bill who were given an opportunity to appear in person before the committee. Although the committee of public-utility executives was allotted time for appearance by representatives of the public-utility industry in opposition to the bill, that committee was unwilling to give any part of its time to Associated Gas & Electric Co. representatives. It was on account of this situation that the following telegram was sent to Senator Wheeler: Hon. BURTON K. WHEELER, Chairman Interstate Commerce Committee, Washington, D. C. APRIL 19, 1935. We request opportunity to appear before committee at hearing on publicutility act of 1935. We are advised by committee of public-utility executives that they are unable to allot any of their time to us and we must therefore make request for time direct to you. Inasmuch as we are the largest independent gas and electric company in the United States we should have 3 hours to present our views and in view of continuous specific reference to Associated by witnesses to date feel it is essential that committee hear both sides of story. Please advise date and time for appearance of our witnesses. ASSOCIATED GAS & ELECTRIC CO., |