situation may have been brought about by perfectly legitimate methods and without any monopolistic intent.

The complete control over operating companies by far remote holding companies is a situation that should be remedied, and the operating companies should be enabled to have a greater part in the management of the business.


Clarification of the designation of “investment trust” and “holding company" should be included in the bill. In a way, some of the holding companies operete more as an investment trust than as strictly a holding company.

To those of us who have been indentified with the electric utility business since it became something more than just isolated and disconnected local plants, and have seen the real power systems come into existence, the present groupings are more apparent than to those who have come into the business in the more recent years.

Up to 20 years or so ago it was almost impossible to finance power projects in this country as this type of investment did not appeal to the investing public by reason of the fact that the demand was low, the service poor, and the cost high, a combination of circumstances which made returns of a satisfactory nature somewhat doubtful. When projects were financed, stocks and bonds had to be sold at enormous discounts, and not a little of the alleged "water" in securities today goes back to the necessities of that financing,

Reference has been made in testimony to the Alabama Power Co., some member of the committee making reference to the fact that the Alabama Power Co. was fully organized and in existence long before the Commonwealth & Southern Corporation was organized. That is quite true, and in this connection the matter referred to above ties in with the situation that existed in the financing of the Alabama Power Co. Approximately a quarter of a century ago, when the original company which is now the Alabama Power Co. was organized, it was impossible to finance the project in this country, consequently the majority of the financing was done in Canada and Great Britain, so that until during the World War the voting control was vested in the British and Canadian interests.

Due to the geographical and economic stituation of the companies now forming the southern group of the Commonwealth & Southern Corporation, the tracing of the history of that company affords probably the best example of economical integration of public utilities.

Due to the vicissitudes of financing, the existing conditions in the bolding companies in many instances, are accounted for to a large extent. To illustrate this point, reference is made to just 2 cases, 1 an older one and 1 a recent one. The older instance referred to is the S. Morgan Smith interests. The S. Morgan Smith Co. of York, Pa., manufactured water wheels, and other equipment. By reason of difficulties in financing on the part of utility companies, the manufacturer of water power and electric equipment often accepted securities of the various com. panies in payment for equipment furnished. The S. Morgan Smith Co. 28 an example, became heavily interested in the Georgia utilities in this way. The same is true of a more recent company, the General Electric Co., and the large holdings of this company resulted in the formation of the Electric Bond & Sbare Co. There are many other such cases, but these are cited as examples.

INVESTIGATIONS, INJUNCTIONS, ETC. Section 18 (f), page 66, title I, contains some very interesting language. It says: (f) “Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts of practices”, etc., action may be bronght in the proper district court.

It would be quite interesting to see just what action a district judge would lake when the Commission appeared to allege that some company was contemplatioz a violation of some rule. This would be in effect a charge of murder without any corpus delicti. Without the commission of some overt act, the "Commission would have to rely on soothsayers, mind readers, and seers, to establish the fact that some company was going to indulge in some nefarious act.

Other language of the section vests the courts with rights and duties which have been in the code for more than a century and a quarter so that the inclusion of such matter is merely useless repetition which adds nothing.


A great deal of stress has been laid on the desire to have the investing public secure a better understanding of utility securities, and the general public a better understanding of rates. Despite the extensive propaganda displayed to the public about "yardstichs”, there can never be any equitable comparison by the public or anyone else for that matter until there is a uniformity in the methods of accounting.

Uniform accounting methods should not be restrieted to the private utility companies, but to any and all agencies engaged in public utility operations regardless of whether they are privately financed or financed and subsidized from funds secured by taxation.

The "yardstick” which has been receiving so much publicity via the propaganda route during the past year or so, is somewhat of a mystery. No one knows whether its unit is a "yard”, a “meter", or a “vara" or how many inches or centimers it consists of, though the conclusion must be from the way in which it is described by its originators, that it is made of rubber and consequently is quite variable.


Under the provisions of section 2 (a) 4, page 6, companies that sell gas in containers, are exempted from the provisions of the act. There may be some reason for such exemption, but it is not apparent. Such gas is transported in interstate commerce in a highly compressed conditions, and while it may be argued that the gas as shipped in that state is not in condition to be marketed to individual users, the application of such a conclusion is questionable. If this conclusion is logical, then it would be equally true that electric energy transmitted in interstate lines at very high voltages not suitable for individual use, would be exempted from Interstate Commerce control.


No language should be included in the pending bill which would deprive the States of their vested rights to regulate and control intrastate business. The attempt of the Federal Government to exercise control of purely intrastate matters and business through the National Recovery Administration has brought about litigation now on its way to the United States Supreme Court. Probably no phase of the Constitution has brought about more adjudications by the United States Supreme Court than has the various matters in which the rights of the several States as sovereign entities, are involved. The Commerce clause of the Constitution strictly limits the powers of the Federal Government, and any attempt to encroach on the rights of the several sovereign States through the medium of the pending bill would bring attacks on the ground of constitutionality of such provisions.


The pending bill contemplates placing a great many of the phases of the act under the Federal Power Commission. Recommendation has been made previously that the Federal Power Commission be eliminated from consideration in connection with the regulatory provisions of pending legislation, and that the Federal Corporation Commission be established under the Comptroller General, or the General Accounting Office, the latter being the only Government agency not susceptible to "wire pulling.'

Too many incidents of influence not consistent with a fair and impartial handling of matters of importance by the Federal Power Commission, raises a serious question as to clothing that body with any more power than it now has. The nature of the Commission makes it a political body, and therefore subject to political influence.

Another evidence of the unfitness of the Federal Power Commission to exercise additional duties such as would be involved in the pending bill, is shown by the press releases given to the public press relative to a supposed power survey. Information given the House Military Committee as to the manner in which the survey was made, shows that the thing was largely a farce. The figures given out purporting to show an excess of demand over installed capacity are fictitous and clearly concocted to back up the group which is imbued with the socialization of the public utility industry. In order to make it appear that a shortage exists in developed power, an assumed demand for power is set up by the simple process of picking figures out of the thin air. This process of picking figures out of the air may have been borrowed from the system used by the Tennessee Valley Authority in making rates. There is a possibility that the general dis. cussions that have taken place in latter years relative to the rarefied air in the stratosphere has affected the Federal Power Commission in arriving at its fadtastic figures. Two gross errors are responsible for the conclusions arrived at. First, the estimated demand for future power is greatly overdrawn, and, second, the installed capacity as represented by generating capacity is wholly incorrect.

The haste with which the Federal Power Commission gave out advance figures, indicates an attempt to qualify some of the wild assumptions put out by various Federal agencies. It is unfortunate that the conclusions put out by the Federal Power Commission should be promulgated as being authentic and having some real value when the reverse is the case.

These are some of the reasons which lead the writer to deplore any suggestion of placing authority under the holding company bill in the hands of the Federal Power Commission, and also why the elimination of title II is recommended.

It appears to be more than a mere coincidence that the Tennessee Valley Authority has put up arguments along the same line as regards a power shortage, by exaggerating the possible demand for power and minimizing the installed generating capacity.

In all probability the people of Mars, if any, have concluded that the advance figures given out by the Federal Power Commission were a sort of political expediency put out with the main idea of influencing pending legislation.

POWER OF CONGRESS TO REGULATE INTERSTATE COMMERCE Undoubtedly the commerce clause of the Constitution permits a rather broad interpretation of the powers surrendered to the Federal Government by the several States, and the right to regulate interstate commerce cannot be denied. However, there is no excuse whatever for the Federal Government, under the guise of interstate commerce, to attempt to interfere in purely intrastate business. Testimony indicates that under the provisions of the pending holding-company bills the Federal Government is seeking to regulate about 85 percent of the publicutility business, while little more than 15 percent is really interstate business. Decisions of the United States Supreme Court have been handed down on this subject for more than a century. Just as examples, two extracts from decisions are quoted herewith:

Peoples Natural Gas Co. v. Public Service Commission of Pennsylvania (270 U. S. 554): As respects the West Virginia gas, we are of the opinion, in view of its continuous transportation from the places of production in one State to those of consumption in the other, and its prompt delivery to purchasers when it reaches the intended destination, that it must be held to be in interstate commerce throughout these transactions. Prior decisions leave no room for discussion on this point and show that the passing of custody and title at the State boundary without arresting the movement to the destination intended are minor details which do not affect the essential nature of the business" (W. l. v. Foster, 247 U. S. 105; United Fuel Gas Co. v. Hallanan, 257 U. S. 277; Pu. v. W. Va., 262 U. S. 553; Ohio R. R. Com. v. Worthington, 225 U. S. 101; Shajer r. Farmers Grain Co., 268 U. S. 189; Pa. Gas Co. v. P. U. C., 253 U. S. 23-28).

Public Utilities Commission of Á. I. v. Attleboro Steam Electric Co. (273 0.8.83): “Plainly, however, the paramount issue in the interstate business carried og between the two companies is not local to either State, but is essentially national in character. The rate is therefore not subject to regulation by either of the two States in the guise of protection to their respective local interests; but if such regulation is required it can only be attained by the exercise of the power rested in Congress.(Covington Bridge Co. v. Kentucky, 154 U. S. 204-220; Hanley v. Kansas City St. Ry. Co., 187 U. S. 617).

The above case resulted in the confirmation of a decree of the Supreme Court of Rhode Island disapproving an order for an increase of rate on electricity furnished at the State line.



The pending legislation has injected into the hearings many questions which are coordinate with, though not properly a part of the same.

Some hundreds of millions of dollars are being put into power developments by the Federal Government, and while these funds are being raised by the sale of bonds, yet as these bonds mature they must be paid from funds raised by taxation. Thinly disguising activities under the term of “national defense", "food control", "navigation", etc., does not destroy the clear aim and intent of the legislation. Where does the Government acquire its power to tax the public for its ventures into the field of public utilities?

Section 8 of the Constitution grants the following taxing powers:

“The Congress shall have the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States, but all duties, imposts, and excises shall be uniform throughout the United States."

Certainly there is nothing in these taxing powers which authorizes the Federal Government to embark in the business of generating and retailing electricity or any other business for that matter, in competition with private industry. The aim of the socialistic State is the destruction of all private industry and the vesting of all industry in the State. If even a major part of the pending legislation on the subject of governmental power projects were enacted into law, the complete destruction of the entire private-utility industry would be assured. That is clearly the intent of the agencies formulating such legislative programs. The question which naturally arises in the minds of the thinking public when the embarkation of the Federal Government into various lines of industry, is considered, is whether or not some well-organized group, which has for its object the socialization of all industry, is not back of the whole movement.

When the Constitution was adopted, the people of the several sovereign States were fearful of permitting too much power to be centered in the Federal Government, or individual. They had suffered too much from the whims and idiosyncrasies of a far distant monarch to permit the establishment of a similar monarchy through the surrender of imperial powers to a General Government. It cannot be denied that under the stress of existing conditions, Congress has been prone to shift its responsibilities to the President, something the founders of the country did not contemplate.

WATER POWER AND THE FEDERAL GOVERNMENT Federal Government agencies have in many cases laid down the doctrine that the Federal Government is the sovereign and the proprietor of the beds and waters of navigable streams and their unnavigable tributaries (Marine Ry. & Coal Co. v. U. S., 257 U. S. 127).

The Federal Government has no proprietary right in the water of a river or its bed except where it has become a riparian owner of adjacent lands. Under the commerce clauses of the Constitution, there is surrendered to the Federal Government the power to regulate interstate commerce, and in the case of Gibbon v. Ogden (9 Wheat. 1) Chief Justice John Marshall decided that the term "commerce" included “navigation", but in the process of regulating commerce, the Federal Government acquires no right or title to the waters of a river, the title remaining in the State or the individual as the case may be. Even when the Federal Government becomes the owner of riparian properties by purchase, it vests itself with nothing more than the same rights which are exercised by the most humble private citizen. It is an elementary well established proposition that nobody whether sovereign or individual owns the water of a running stream, the right is simply the beneficial uses of the waters as they flow, and the same is true whether the stream be interstate, intrastate, or an international boundary.

Another point which is often overlooked or ignored by Federal Government agencies is that it is the water in the stream, and not the dam which produces the electricity, and while the Government may own the dam, the ownership does not extend to the water above or below the dam, the usufruct use of which is vested in the State or individual riparian owners. There is a sound argument in favor of the power generated at a public dam, being the property of the State wherein it is located. Even assuming that the power generated by the Federal built dam in the improvement of navigation, it is a sound argument that any increase in power over that brought about purely from navigation regulation, belongs to the State.

GENERAL WELFARE REFERENCES IN THE CONSTITUTION Under the guise of "general welfare” governmental agencies have placed some fearful and highly complicated constructions on the Constitution.

Under this guise, as an instance, the Tennessee Valley Authority is spending several hundred millions of dollars of taxpayers' money, which it seeks to justify on the grounds that the general welfare of the public as a whole is being enhanced by cheaper power rates in a limited area. In this scheme so many features are omitted that no balance of comparison can be struck by an ordinary individual While the individual area in question may get cheaper rates, apparently, yet the individual taxpayers make up the difference in many other ways. The isted disregard with which Government agencies spend public funds involves excesare expenses of operation which must be met by taxing the general public.

On this subject, the United States Supreme Court in the case of Knorrille v. Water Company (212 U. S. 1-18) said:

“The courts ought not to bear the whole burden of saving property from ecefiscation, though they will not be found wanting where the proof is clear. The legislatures and subordinate bodies, to whom the legislative power has been delegated, ought to do their part. Our social system rests largely upon the sanotity of private property, and that State or community which seeks to invade it will soon discover the error in the disaster which follows. The slight gain to the consumer, which he could obtain from a reduction in the rates charged by publicservice corporation, is as nothing compared with his share in the ruin which would be brought about by denying to private property its just reward, thus unsettling values and destroying confidences."

In submitting these comments and recommendations on the pending bill, the writer has fully recognized the earnest manner in which the committee has gone into the many important questions involved. These comments are not made in any direct spirit of criticism, but are comments based on a long and extersive experience as a professional engineer without affiliations with any individus! company affected by such legislation. The writer in his professional practice has seen the power utility grow from practically nothing more than a limited number of isolated individual plants with doubtful service, to a 12 billion dolla: industry, with efficient service.

Most of the represenatives of the utility industry appearing before the committee have agreed that some of the existing practices should be eliminated. and that regulation of the purely interstate business of the utility compaar is within the province of the powers granted to the Federal Government by the Constitution.

While there are some agencies in this country which seek the destruction of the private utility as a certain means of forcing Government ownership and operation of utilities as a first step toward the socialization of all industry, yet it is trot believed that the committee is willing to embark on a program of destructiva in lieu of equitable regulation of the interstate commerce feaures.


Consulting Engineet. APRIL 23, 1935.



My name is Bernard F. Weadock. I live in Greenwich, Conn. I have represented the utility associations in the Federal Trade Commission's investigaties of the electric light and power industry since 1928 and have been vice presidest and managing director of the Edison Electric Institute since its organizatier I have attended the conferences and hearings of the Commission. I am fami:a. with the record and desire to present the following information in reply to (* William T. Chantland, Attorney in Charge of Utilities Investigation, presented to this committee on April 17,

1935. METHOD OF PROCEDURE OF THE COMMISSION The attention of this committee is directed to the method of procedure sdopted in the 8 years of its investigation of the electric light and power industry by the Federal Trade Commission. It will be noted from Col. Chantland's testimis that it was necessary to convince Dr. Walker and Judge Healy that the facts as claimed by the examiners were inaccurate. The reports as printed kiert's d3 carry the full approval of the company examined. This is best evidencerts statement in the record by Mr. Earle J. Machold, attorney for Niagara Huds 15 Power Corporation (Dec. 13, 1934, p. 45584 of testimony) as follows:

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