interested in knowing what some others said-after referring to the abuses, he said, in connection with what the approach should be, that as to outright prohibition from the beginning, before the fate of regulation is tried by taxes and control, this:

I guess a well-constructed regulatory bill, well administered, might go a long ways toward eliminating these evils. But one of the necessary things in a program of that kind should be reformation, reformation of the holdingcompany structure.

He recommended two amendments before the House committee which were designed to a considerable extent to relax the provisions of the dissolution part.

Mr. Corcoran, as you will remember, just took the position as a sort of social theory that he thought these companies should be eliminated.

I was very interested in Mr. DeVane's approach. He did not claim that he did not think they could not be regulated. But he said:

I think the question for you to consider is whether the advantages outweight the disadvantages. Is it worth it?

That is the way he put it.

Senator SHIPSTEAD. In speaking of regulation?

Mr. MOORE. Yes. That was his statement.

Now, on the second question of policy, as to the extent to which you are going to include all these operating companies, the proponents of the bill find themselves in a peculiar position on that matter. It is in line with the theory of title II to have electric power transmitted considerable distances. Apparently it is in line with title I for it to be rather local. Dr. Splawn, in his report, stresses the local character. He says very frankly before the House committee:

It is not like the telephone business or the railroad business, which is interstate.

He emphasizes that, and you will find in his summary that he stresses that point. You have the very vital question there as to the extent to which, in view of the admittedly local character of the business-and somebody said in one of the hearings before the House committee that the average distance electric energy is transmitted was not over 20 miles, I believe――

Senator SHIPSTEAD (interposing). Do you think the business will be likely so localized in the future, or as much as it has been in the past?

Mr. MOORE. Senator Shipstead, I think it is fundamentally local. It seems to me if you followed the map that Judge MacLane attached to his statement presented yesterday, you would appreciate from that map how this country is already just about covered over with a network of transmission lines. It seems to me we have gone almost the full way, but I am not an engineer and do not know much about those things.

Senator SHIPSTEAD. Is it a question of locality or a question whether or not it is local dependent upon present methods of transmission?

Mr. MOORE. Undoubtedly that will be important. But fundamentally I think it is a local question, and I agree with Dr. Splawn.

The CHAIRMAN. I have been informed by reliable engineers that as a matter of fact they already have devices whereby they can transmit electricity from one end of this country to the other without any great loss.

Mr. MOORE. Well, you are getting into a field that is over my head. As a lawyer would deal with the case, I am stating to you the fact that Dr. Splawn, who is the authority, presented in his report it is of a local character, and that fits in exactly with all the testimony presented before the House committee. To the extent to which that may extend I do not know.

Senator BONE. Haven't you a rather inconsistent figure, where you have these far-flung power empires, with their local agencies dotted all over the country, hundreds of miles apart, but all tied together in a rather thin, tenuous way through the medium of a holding company? How can you claim that the business is largely of local identity when it is simply one finger on one hand, which is a part of an arm, and which is a part of a body that stretches from one part of this country to the other, where only the local devices are subject to the laws of the State or community?

Mr. MOORE. The local devices were thus explained by Mr. MacLane on yesterday, that the fundamental production is the manufacturing business, which is local.

Senator BONE. You are with the Stone & Webster organization, as I understand it?

Mr. MOORE. Yes, sir.

Senator BONE. And they operate not in just one part of the country, but they operate in Virginia, and in the State of Washington, and they operate in Texas. Where is the local identity? Where can a local identity be said to attach to a thing like that, when they handle matters from Boston? They are just like a great octopus stretching out into all parts of the country.

Mr. MOORE. Well, Senator Bone, I do not know much about that, but

Senator BONE (interposing). You are talking about control, which is the lifeblood that courses through the arteries of the business, and manufacturing is only a part of the business.

Mr. MOORE. I do not know about companies outside of Virginia and North Carolina. But I do know that there is very distinctly a local management that exists in that section.

Senator BONE. But the control comes from Stone & Webster in Boston, and the management comes from there.

Mr. MOORE. Ultimately; yes.

Senator BONE. No; it comes directly, permanently and primarily. Mr. MOORE. There is a great difference in policy in different groups as to the extent to which local management is given real authority.

Senator BONE. Doesn't that depend entirely upon the political complexion of the State in which you operate?

Mr. MOORE. NO; I think it depends upon the policies of the different groups to a large extent. But really I am getting off my subject. The CHAIRMAN. You are not getting off the subject from my viewpoint. It seems to me you have pointed out to the committee wherein the proponents of the bill were taking an inconsistent position and

yet it struck me that you were the one who was taking the inconsistent position; and not only you but some of the other representatives of the utility companies, because in one breath you say it is a local institution, and in the next breath they have stated at least that in order to have this local institution properly regulated, or before they can get any money in New York or Chicago, they have got to set up these service organizations and assure the people down there that they are going to have representatives whom they know to manage the local concern.

Mr. MOORE. In very large degree I would say to you-
The CHAIRMAN (continuing). And that is a bad situation.

Mr. MOORE. In very large degree, though, Senator Wheeler, the business is fundamentally local and always will be in spite of any improvements that may be made, because in the very nature of things. it is subject to local regulation, and physically it is a manufacturing business. The distributing end of it is local. And there is something that you—

The CHAIRMAN (interposing). I agree with you that that is true. I am not arguing with you on that, but I do say that when you set up a holding company, like Insull, which controls companies from the State of Maine to the State of Texas, and which like Electric Bond & Share has companies in Montana and in Florida, that you are getting it away from local control, and that you are having the control of the local manufacturing company, be it in my State or in Florida, in New York City or Chicago.

Mr. MOORE. I might concede that for this purpose

Senator SHIPSTEAD (interposing). Aren't we now talking of two different things as one?

Mr. MOORE. I was talking about the generating and distributing end of it, and of the State regulation being local.

Senator SHIPSTEAD. And the other subject is the subject of remote control.

Mr. MOORE. An entirely different subject, I think.

Senator BONE. Do you think that generation and distribution are not controlled by the holding company?

Mr. MOORE. No; I was pointing out that they are controlled by State regulatory bodies, and they are fundamentally a local business. Now, in connection with the

Senator SHIPSTEAD (interposing). And the control of the holding companies is far away as a rule.

Mr. MOORE. That may or may not be the case.

Senator BONE. But a State commission has no control over them when they are out of the State.

Mr. MOORE. That brings me to this other point. I was going to point out in connection with this second question of policy as to the extent to which, under title I, it is proposed to catch in the policies of title I, these operating companies. Now, there are real reasons usually why subsidiary operating companies are continued instead of being put into the main company. All these companies will tell you that they have been making a fight for the last several years to simplify their structures and that a great deal has been done.

Senator SHIPSTEAD. Are you taking subsidiaries as operating companies?

Mr. MOORE. These operating companies which are subsidiaries of holding companies.

Senator SHIPSTEAD. Oh.

Mr. MOORE. This bill catches all these operating companies within its effects. Take the ordinary case of the three-or-four-story group, as you might call it. This bill has very direct effects on these cperating companies if they happen to be holding companies also, that is, if they own subsidiaries.

Now, I was saying that there are real reasons usually why they exist. Sometimes it is because of the mortgage situation. Sometimes it is because of joint ownership between different groups. Sometimes it is because there is a preferred-stock issue outstanding in one of these operating companies that it is not practicable or good business to retire and thereby to get rid of that company. There is usually a good reason why the separate company is in existence. I simply want to point out that the policy of this bill is to force the collapsing of all intermediates.

Senator SHIPSTEAD. Operating companies?

Mr. MOORE. Operating companies too, if they have subsidiaries. Senator SHIPSTEAD. I am talking about operating companies that have operating subsidiaries.

Mr. MOORE. That is right. The policy of this bill is to force the collapsing of all intermediate companies, and to get right down to the rails, as the expression is, with one operating company as the only company. That is the policy of this bill.

Senator SHIPSTEAD. Could there be any practical objection to those operating companies merging?

Mr. MOORE. I say, there usually is a reason why they have not done it, if they have not.

Senator SHIPSTEAD. Is it possible that some of these operating companies own subsidiary operating companies for the purpose of milking them, as other holding companies do?

Mr. MOORE. That may be true in some instances, Senator, but there is usually a good practical reason. I want to point out that the evidence which has been presented and which will be presented here will convince you that real efforts and real progress have been made in the last few years by all these groups toward simplifying their structures. They want to get them simplified, and they are making every effort to get them simplified.

Let me reiterate that the policy of the bill, as to these operating companies, intermediate companies, is to get rid of them, even though they are operating companies, and to get right down on a basis of one level. There are two possible exceptions which I am going to point out.

Senator MINTON. Can you see any good reason why in one State, for instance, there should be three enormous operating companies in that State, that just operate in contiguous territory the length of the State?

Mr. MOORE. Senator, I can see why that might be a desirable thing in some situations. In some it would not be. It will all depend on the particular case. As I pointed out a moment ago, it may be that preferred stocks are outstanding in one of those companies that present a very troublesome situation, or there may be a mortgage situation.

The CHAIRMAN. That could be easily corrected.

Mr. MOORE. It may cost a lot of money to do it.

The CHAIRMAN. Not necessarily.

Mr. MOORE. It will depend on the case. All I am undertaking to say is that there is usually a good reason for it being as it is, from my observation.

On this third question of policy, admittedly the only gap there is under title II is the wholesale contract between companies that are dealing at arm's length. As to whether it is 1 percent or 3 percent, it does not make much difference. The figure of 15 or 17 percent has been confused here. The 15- or 17-percent figure is the amount of interstate power that flows in the entire country, even though most of that power is power shipped by the same company. I will illustrate it with the company with which I am most familiar, the Virginia Electric and Power, that operates in Virginia and North Carolina. Eight percent of its property is in North Carolina, and 92 percent in Virginia. Three transmission lines connect the two States and the power flows back and forth over those lines. This bill, if there was not a single purchase of any power from any other company, would catch that entire production and transmission system of that company. It projects a sweeping regulation over all generating facilities and all transmission facilities in title II, and there is a significant thing in title III that I doubt whether you noticed, but title III is not limited to production and transmission. Title III refers to the entire utility company, as to accounting, depreciation, and all those things. There is not any limitation there. One more word before I take up the bill itself. It would seem obvious that the objective of sound regulation would be to undertake to preserve the good in the system that we have, and only to fill the gaps.

Senator SHIPSTEAD. Mr. Moore, I am very sorry, but I shall have to leave. May I ask you to do one thing, which I should have asked some other people to do? There has been a great deal said about protecting the right of the investors. I am particularly thinking of the investors who invested in the original operating companies. They put in honest-to-God money.

Mr. MOORE. Yes.

Senator SHIPSTEAD. We have had evidence that at least in many cases they are milked for the purpose of certain holding companies. Mr. MOORE. We know that that has happened in some cases.

Senator SHIPSTEAD. When you finish your testimony-which I shall read-will you offer some way or some method which you may have in mind as to how we can stop this milking and swindling of properties that are operating and producing electricity?

Mr. MOORE. Senator, of course, the root of that

Senator SHIPSTEAD. And also investors not only in those companies but holding companies as well.

Mr. MOORE. Of course, the root of that situation is the State control, because practically all the States have either actual control or they have the power to control these operating companies. It is a very simple thing to do. It is a simple thing to do what about a dozen of the States have done, to simply require that these "milking contracts you have referred to should be approved by the State

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