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are very voluminous. The testimony was that for years they had been paying interest on that stock, and every dollar of interest exacted from that stock was a dollar of money gained out of nothingphantom dollars made from wind by this alchemy of regulation and what have you.

When I used that out there they did not even attempt to justify it. They merely said, “ You are wrong. You are a radical”, or something else. That does not answer a lawyer's argument, any more than it would be proper for a jury to say “ you are a radical, and we do not want to listen to your summation of the testimony of the witnesses in this case.” It is no answer to say “You are a radical ” in criticizing that sort of thing. There should have been a frank arowal of that and a correction made, because everybody in southwestern Washington was paying the price for that. I was either right or wrong in that charge. If I was right the company should have been the first people on earth to admit it. If I was wrong, I would have been perfectly willing to have them show me that I was wrong. I could not afford to go out and charge a company with that sort of thing if it were not true..

Mr. MacLANE. As I see it, the fundamental question presented to the Oregon commission, and I assume to the Washington commission, in any regulatory proceedings that may have been had there was the question of the value of the property.

Senator BONE. The Northwestern Electric Co. never had this before our regulatory commission.

Mr. MacLANE. I cannot answer your question as to what dividends were paid. You make the positive statement that dividends were paid in the sum of $1,000,000 a year on that stock. All I can say is that my recollection is otherwise.

Senator Bons. Mr. MacLane, I could not say to you that divilends were paid right along. I know that dividends were paid upon occasions. I think that record shows, and I must say now, for the record, that it is my best understanding, that that record in the inquiry in Oregon, before Mr. Thomas, State utilities commissioner, indicated that upon occasions they paid as much as 10 percent on that stock

Mr. MacLANE. You and I may disagree; but it really does not shock my moral sense to believe that people who went into an enterprise of that kind, somewhere around 1910 and 1911, and succeeded in adding, over a period of some 15 years, some $5,000,000 in values to an investment which, as I recall it, on an appraisal basis, was pretty close to $20,000,000, realized an exorbitant or unnecessary or unjustified economic profit.

Senator Bone. Do you think men should be permitted to capitalize their hopes?

Mr. MACLANE. I do not know. Don't we all ?
Senator Bons. This enjoys a monopoly.
Mr. MacLAXE. What do we have if we do not have hopes?

Senator Bons. That is not the theory upon which regulation rests. That is probably why we would find ourselves in harmony. I find myself in harmony with many private utility operators; but when any business elects to bring itself within this narrow and circumscribed thing we call regulation, then it owes the highest possible

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duty to the public not to engage in things that look shady or offcolor. The fact that it is a monopoly, and that its returns are, as nearly as possible under the law, guaranteed, makes it highly essential that that company should have absolutely clean hands. If destroy regulation and let them go, that is all right. Let them go. and the devil take the hindmost. But when we protect these companies by regulation and say, “ If you are not getting a return on your rate base, file a new schedule of rates and the majesty of the law will protect you in that right”, which is the underlying theory of regulation, the time we bring ourselves within that is the time we must come with clean hands. I think that is an argument with which none will take issue. If they do, I would like to hear them. That would certainly shatter and destroy the whole theory of regulation, if my concept is wrong.

Mr. MacLANE. I do not know that my personal views on that are of any great interest to you.

Senator BONE. Perhaps mine are not, either.

Mr. MacLANE. But I believe that in the early days of the development of this industry a larger degree of speculation and a higher degree of speculative return was justified than are justified today. I think this industry has reached a point where, if existing law is not adequate to prevent either excessive capitalization or excessive returns, it should be made so; but I do not think that we can, in the light of today's realization, enter merely a blanket condemnation upon the acts of those who, conforming to the common commercial practices of other times, laid the foundations for the development of the industry. I do not know the gentlemen and do not hold any brief for them. I do not know anything about that, but that is what I have understood from the history of the situation as to what the Fleishackers have done in connection with the development of that property. As soon as we take out of our economic system all hope of the realization of profit from private enterprise, we have to adopt a new system. I am not so intransigent that I believe that the present organization of society is necessarily the ultimate one, but today we are trying to frame something within that present economic organization without overturning it. From that aspect, I have given to you my views, hoping that they may be of some assistance in the solution of your problems.

Senator Bone. This was an example of a power company wanting to avail itself of all the liberties our present economic system give in the way of competition, and at the same time coming within regulation, which, of course, creates an impossible situation.

Mr. MacLANE. All I can say, Senator, is that I do not think that was the system in 1910.

The CHAIRMAN. We will adjourn until 10 o'clock tomorrow morning.

(Whereupon, at 6 p. m., an adjournment was taken until tomorrow, Apr. 23, 1935, at 10 a. m.)

PUBLIC UTILITY HOLDING COMPANY AOT OF 1935

TUESDAY, APRIL 23, 1935

UNITED STATES SENATE,
COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C. The committee met, pursuant to adjournment on yesterday, at 10 a. m., in room 412, Senate Office Building, Senator Burton K. Wheeler presiding.

Present: Senators Wheeler (chairman), Smith, Wagner, Dieterich, Brown, Bone, Minton, Moore, Truman, Couzens, Hastings, White, and Shipstead.

The CHAIRMAN. The committee will please come to order. Mr. Egan.

STATEMENT OF LOUIS H. EGAN, PRESIDENT OF THE UNION

ELECTRIC LIGHT & POWER CO., ST. LOUIS, MO.

Mr. Egan, Mr. Chairman and gentlemen of the committee
The CHAIRMAN (interposing). Your name is Egan?
Mr. Egan. My name is Louis H. Egan. I live in St. Louis, Mo.
Senator Truman. You may sit down, Mr. Egan.

Mr. Egan. May I stand, for a little while anyway, because I want to point out some things on the map I have on the easel here, if agreeable to the committee.

The CHAIRMAN. Certainly. But, first, what is your business, profession, or occupation? Give us something of your past history. We want to know something about you.

Mr. EGAN. I am president of the Union Electric Light & Power Co. of St. Louis. That is the largest integrated unit of the North American Co. We operate in our own name, or in the names of subsidiaries, in three States—Iowa, Illinois, and Missouri—by reason of the fact that we have to maintain a number of companies as subsidiaries to the Union Electric Light & Power Co.

Altogether there are about 26 of them. Approximately half of that number are active operating companies. I am president of them all. I am also a director of the North American Co. and of the North American Edison Co., which is the largest subsidiary of the North American Co. It is a holding company. It owns all the stock of the Union Electric Light & Power Co., that is, all of the common stock.

The North American Co. organized the Union Electric Light & Power Co. over 30 years ago. It has continuously owned all the common stock of that company and does today.

The CHAIRMAN. That is, do you mean that the Union Electric Light & Power Co. owns all the stock of the North American Co.!

Mr. Egan. No, sir. The North American Co. owns all the stock of the Union Electric Light & Power Co. I am a middle westerner. I was born in Wisconsin and have lived in Minnesota, in Upper and Lower Peninsula of Michigan, and for the last 25 years in Kansas City or St. Louis, Mo.

I am an engineer by profession. I took a degree at college, and after a year working in a steel mill in Canada as an electrician's helper I went to work for a public utility, and I have been working continuously for public utilities. That was 30 years ago.

I mention this in some detail because it will give you gentlemen, members of this committee, a better opportunity to judge as to whether or not I am qualified, at least by experience, to comment in the way I expect to on some matters in connection with title II of this proposed legislation.

I also am one, I think, of two operating men that will appear before this committee. Others will be lawyers or holding-company representatives or investors' representatives. The thing that I will say I think you are justified in assuming represents to a considerable degree the opinion that is shared with me by the other operating men in the electric utilities of this country.

I also represent, and I am self-appointed in this, 2012 million customers. You won't have anybody appear before you representing those 2012 million domestic customers. Their views won't be heard, and yet they are a very important factor in this business, and they are becoming increasingly important every day. The reason they do not appear is because it is expensive to appear at hearings of this kind, and frequently at hearings before public service commissions. Your big customer you need not worry about very much. They can take care of themselves. They have a bigger stake in the business than these residence customers have individually.

The CHAIRMAN. And that is why they get lower rates, isn't it?

Mr. Egan. No, sir; that is not why they get lower rates. But the truth is that in the last 10 years electric-light and power companies have begun to realize, as they never did before, that the real backlog of this business can be made through the residence custo

New devices have come into the market and they make it possible to sell residence customers more current than we ever used to be able to sell them. And once having sold it to them they never quit it. Now, in times of depression, cities may cut down on their street lighting, and industrial customers may close their plants, and your big merchant may darken his show windows at night, but people in residences do not turn off their ice boxes, and they do not turn out their lights, and the lady of the house insist on using the vacuum cleaner

The CHAIRMAN (interposing.) And the radio.

Mr. Egan. Yes; and the radio goes on all the time, and the result has been, as I think somebody pointed out here before, that ever during the years of depression there has been a constant increar in the sale of current to residence customers by the electric light ani power companies of this country. And I think in that respect it is unique.

The CHAIRMAN. It is stabilizing your industry.

mers.

Mr. Egan. It is just what we want to do with it, and that is just what it does.

Now, I mentioned the fact that I am representing some other operating officials in this business, and I want to emphasize it. They used to tell the story out in the West about a man who was in the habit of making poetical quotations as he made a speech without giving credit to the poets concerned; and on one occasion he performed this stunt, and the first time it occurred there was a man in the audience who did not like it very much, and he said in a loud tone, " That is Longfellow.” And on the second occasion he said, " That is Whittier.” By this time the speaker was so irritated that when it happened a third time he said, " If that fellow doesn't shut up. I am going to have him thrown out.” Then the man said, - That is his own. [Laughter.]

Now, I am making this speech

The CHAIRMAN (interposing). Let me ask you a question right there. How long have you acted in the capacity of operator?

Mr. EGAN. I have been one of the chief operating executives of the company in Kansas City or the company in St. Louis for 25 years. I have been president of the St. Louis companies by a peculiar freak of fate just 15 years today.

The CHAIRMAN. Were you connected with them when they started out, when they were small companies?

Mr. Egan. Yes, sir.

The CHAIRMAN. And have continuously been with that company all this period of time?

Mr. Egax. Yes, sir.

The CHAIRMAN. When you started out in operating this company what was the size of your company?

Mr. Egan. It was the Union Electric Light & Power Co. of Missouri, and it had a valuation at that time of about $28,000,000. The system which it now controls, including its own property and these other properties whose stock it owned, has a balance sheet, as property and plant account, of about $220,000,000. We produce and sell more than 2 percent of all the electrical energy that is made in this country, our system does; and, incidentally, we sell it at rates that are acknowledgedly low by everybody in the industry, as well as those in the governments who regulate us.

The CHAIRMAN. Now, who is the principal owner of your North American Co.? Is it Mr. Williams? Is he the principal controller or dominating force in your company?

Mr. Egan. I think it is fair to say that he is; Yes, sir.

The CHAIRMAN. And on top of the North American Co. you have the American Cities Power & Light Co., is it?

Mr. Egan. Yes, sir.

The CHAIRMAN. And on top of that is the Electric Shareholders Corporation ?

Mr. Egan. Those are corporations that I know nothing about. I know they exist; yes, sir.

The CHAIRMAN. And the Central States Corporation?
Mr. Egan. The Central States Electric, I think it is called, isn't it?

The ('HAIRMAN. Yes. And then tied up with it, according to this map I am looking at, there is the Blue Ridge Corporation, the Shen

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