# The Journal of Land and Public Utility Economics/Volume 7/The Movement for Public Ownership of Power in Oregon

The Movement for Public Ownership of Power in Oregon
By EMERSON P. SCHMIDT
THE mountainous topography of the three Pacific Coast states, while possibly a drawback in numerous respects, is a distinct asset from the standpoint of abundant, potential hydro-electric energy. The public development of this tremendous source of wealth has been a question of wide interest for many years. In the United States as a whole only a little over ⅓ of the electric energy produced by public utility power plants is secured from water resources, but in the far west water power is the chief source of electric energy (Table I).
Table I. Production or Electric Power by Public Utility Power Plants in 1926 :
| | Total Power | Water Power | Fuel Power |
| United States | 100.00% | 35.5% | 64.5% |
| Washington | 2.45% | 96.5% | 3.5% |
| Oregon | 1.13% | 70.3% | 29.7% |
| California | 9.35% | 81.8% | 18.2% |
An analysis of the potential and actual hydro-electric energy of the country (Table II) reveals that these three states contain about 38% of the hydro-electric energy of the United States. Thus one is not surprised that the people of these states are very conscious of these valuable resources, and that they were among the first to make provision for the public ownership of power extending beyond the boundaries of municipalities.
The State of Oregon with less than 1% of the nation's people has about 10 to 12% of the potential hydro-electric energy. Of the three coast states Oregon is the least developed industrially. This fact, undoubtedly, makes its people especially anxious to secure the advantage of cheap power. The low electricity rates of Tacoma and Seattle in Washington and rates almost as low in many California communities served by publicly owned plants, along with the recent rapid industrialization of these two other states, leads readily to the popular conclusion that industrial progress has been retarded in Oregon because of high rates charged by private companies.
Before 1926 there was no extended organized movement throughout the State looking to the public ownership of power. It is true that a state senator, Mr. George W. Joseph, during his many years in office introduced numerous public power amendments in the state senate but his ideas were the subject of ridicule. In 1913 the Charter of Portland, the leading city comprising about ⅓ of the State's population, was amended enabling it to issue and sell interest-bearing public utility certificates for the construction or organization of any public utility to be operated within the City, but this power has not been utilized. Throughout the State there were in 1929 four municipal plants generating all their current, including one generating for street lighting only; two generating part of their current, while three distributed ​energy only. Most of these plants are in small places; the largest at Eugene serves about 6,700 customers.
Table II. Potential Water Power Resources in the United States :
| | Available 90% of Time | Available 90% of Time | Available 50% of Time | Available 50% of Time |
| | Horsepower | Percentage | Horsepower | Percentage |
| United States | 34,818,000 | 100.00 | 55,030,000 | 100.00 |
| Pacific States | 13,238,000 | 38.02 | 21,260,000 | 38.63 |
| Oregon | 3,665,000 | 10.53 | 6,715,000 | 12.20 |
| Washington | 4,970,000 | 14.27 | 7,871,000 | 14.30 |
| California | 4,603,000 | 13.22 | 6,674,000 | 12.13 |
The Housewives’ Amendment in 1926
In order to understand fully the history of the Oregon Water and Power Board Development amendment, which was initiated in 1926 by the Housewives' Council, Incorporated, of Portland and which was the first state-wide movement for public power to attract general attention, it is necessary to go back a year and examine the activities of the Oregon State Grange. At its annual convention in 1925, the Grange, which is the leading farmers' organization, passed a resolution authorizing the appointment of a committee to represent the Grange in drafting a constitutional amendment which would allow the State and municipalities to develop and operate hydro-electric plants and to sell the energy at cost. The committee worked with several other organizations and at the 1926 convention of the Grange reported that a public power bill and amendment had been filed with the secretary of state. The report was adopted with considerable discussion. A prominent granger, Mr. Chris Schuebel, who for years had supported progressive social legislation in the state legislature, was the chief spokesman opposing the adoption. Later developments showed that Mr. Schuebel was in the pay of the power companies. However, the voters of the State were not given an opportunity to pass upon these measures. Sentiment among the rank and file of the members of the organizations initiating them was only lukewarm and finally the filing date came with insufficient names on the petitions. Most of the energy of the Grange was expended in support of a state income tax measure also initiated by it.
The Housewives' Council was more aggressive and succeeded in placing its measure on the ballot in 1926, but not without a struggle. The measure was rejected by the secretary of state on the advice of the attorney general because of alleged insufficiency of petitioners. The Constitution of Oregon requires that not more petitioners be required than 8% of the legal voters. The whole number of votes cast for justice of the supreme court at the last election is the basis for determining the number of legal voters necessary to sign such petition. At the previous election two justices were to be elected and three stood for office. This complicated mat​ters. Admitting that the Constitution was ambiguous, the supreme court decided in favor of the Housewives' Council that 8% of the greatest number any candidate received for justice of the supreme court at the last regular election was the proper basis for ascertaining the number of signatures required for the initiative petition. Although the decision was a victory for the petitioners, the refusal of the State officers to accept the petition earlier was interpreted as an attempt to block the progress of the measure.
This amendment would have created the Oregon Water and Power Board and named the first commissioners. The Board was to be given full authority for the conservation, development, storage, and distribution of electric energy and water for irrigation and domestic purposes. The amendment would have authorized State bonds not to exceed 5% of the assessed valuation of property in the State. Bonds could also be issued for refunding purposes and to meet interest on debts; and interest-bearing, public utility certificates could be issued when needed. Taxes could be levied to carry on the purposes of the Board and the general State funds drawn upon to the extent of $250,000 temporarily. The Board could produce any products deemed necessary or convenient to the accomplishment of the amendment and hire the necessary employees without limitations on wages. Finally, the Board could contract with the United States, other states, and their political subdivisions.
Arguments for the measure stressed the cheapness of public power. The following is typical: "A manufacturer in Portland who used 92,640 kw. hrs. in one month paid $1,114.73, while the same amount used in Tacoma cost $490.00, a difference of $624.73 per month or $7,496.76 per year." Load factors were rarely mentioned. Oregon's progress was alleged to depend on the utilization of hydro-electric energy and its sale at cost to consumers. Energy for house-heating was assured at ½ cent per kw. hr. if the amendment was passed.
Opposition to the amendment was enormous. The State Grange, disgruntled with the failure to place its measure on the ballot, gave only a halfhearted and last-minute endorsement to the Housewives' amendment. The Grange was interested chiefly in promoting its income tax measure. The Bulletin of the Grange was replete with arguments and encouragement for the income tax proposal, but not a word is found in favor of the power amendment until the issue of September 7, 1926, when the State Grange Executive Committee was reported as having adopted a resolution favoring the Housewives' plan, but intimating that the Grange's own amendment would have been more desirable. In the second last issue of the Bulletin which reached the farmers before the election of 1926 a brief paragraph stated that the writer (presumably the editor) would vote for the Housewives' measure even though he preferred that of the Grange which failed to get on the ballot. In the last issue to reach the readers before the election the Master of the Grange had a full column in favor of the Housewives' amendment, making numerous rate comparisons to the discredit of privately owned plants in Oregon. This was the only occasion on which he favored it in the public prints, so far as the writer is aware. After the failure of ​the amendment, the Grange Bulletin made no statement indicating its regrets. These events seemed to indicate that the Grange favored public ownership of power, but that the particular plan did not actually meet with its approval.
Organized labor opposed the Housewives from start to finish. As previously noted, the Housewives' amendment named the first commissioners to administer it, and the selection of these officers was alleged to have been arbitrary. The Oregon State Federation of Labor, at its annual convention in 1926, adopted the following report of its legislative committee condemning the amendment:
   "We do not approve the arbitrary manner in which these persons were chosen. Some of them are personally objectionable to the organized workers because of their known antagonism to the cardinal principles of our organization. We were not consulted and had no knowledge of the personnel of the proposed board until the bill was filed. If the amendment carries, the vast projects contemplated will employ many hundreds of workers and we should like to have at least some little assurance that those workers will be employed under conditions which we approve."
Again, we are told:
   "Their [the commissioners] selection was undemocratic. Not even a convention was called and given public notice that would attract those interested in public ownership. The political self-seekers quietly drafted the bill and inserted the names of the proposed commissioners."
The statement also said that the amendment was so drawn as to discredit government ownership. In the official organ of the State Federation of Labor appeared a huge advertisement opposing the amendment, paid for by the Oregon Public Utility Committee. Similar advertisements appeared in the leading newspapers throughout the State.
The bill received no endorsement by any large organization. Practically all newspapers opposed it. The Portland City Club made a study of the measure and found much fault with it, claiming that the measure was too sweeping to be written into the Constitution. To quote its report:
   "Extremely wide powers, without adequate checks and controls, are given to a board of five persons, themselves named in the measure. If any portion of the act should be found unworkable, if it were found necessary to change a single provision of its context, another constitutional amendment would have to be passed by a vote of the people."
The report also made several more detailed charges against the measure: (1) While the Board might not buy any existing plant for more than $500,000 without a vote of the people, yet it could spend any sum up to $52,000,000 on new projects. (2) The Board could produce any raw or finished products deemed necessary or convenient to the accomplishment of the act. (3) The Board could contract with the United States, with other states, or political subdivisions thereof concerning the conservation and use of interstate and other waters. This provision would supplant in this important respect the powers delegated to the state legislature and only by another amendment could the Board be restrained. (4) The Board could exercise all powers mentioned in the act plus any more given by the legislature; thus the legislature might give the Board more power, but it might not take any away. (5) The Board was also given extensive powers to issue bonds and to hire employees.
​Much opposition to the particular commissioners was in evidence as expressed in the journals mentioned and nearly all newspapers. Four of the five commissioners were over 60 years of age. None had had any technical experience in hydro-electric development, and most of them had little or no business experience with large undertakings. One was an automobile agent, one a retired farmer and newspaper man, one a farmer and fertilizer salesman, one a housewife and former school teacher, and the last was secretary-treasurer of a laundry. Without casting any doubt upon the sincerity and good will of these people, one must admit that they were perhaps not by training and experience the kind of people to administer hydro-electric development on a state-wide scale.
At the November (1926) election, the amendment was defeated, as might be expected under the circumstances, in spite of the diligent efforts made by the Housewives' Council and several other small groups. The proposal was defeated by about 4 to I, with 111,779 majority against it. Even the friends of public ownership admitted after the election that it was probably for the future good of public ownership in Oregon that the amendment failed.
Thus the defeat of the amendment can be traced to several causes, chief among which were: (1) lack of sentiment for public power development; (2) naming of the first commissioners in the amendment itself; (3) the proposed personnel of the board; (4) the extensive powers of the board; (5) inability of the Grange to place its own measure on the ballot; (6) opposition of the private interests. The sponsors of the movement felt, however, that their efforts afforded the necessary preliminary educational work for later developments.
The Grange Amendment Adopted in 1930
The next important step was taken when the 1929 State Grange convention authorized its executive committee to draw up a plan for the formation of public utility districts. Consequently, in the spring of 1930 an amendment was submitted to the attorney general to enable him to prepare a title, as required by law, under which title it was filed with the secretary of state, to be kept by him for 20 days before signatures could be secured. On the last day before the expiration of this period the attorney general's wording of the ballot titles was attacked on the ground that they were not a fair and comprehensive statement of the subject matter of the proposed constitutional amendment. The case was argued and submitted on March 25, 1930, and the Supreme Court rendered its decision about 10 weeks later, on June 3. The Court decided in favor of the titles in these words, '""We are convinced that the titles prepared by the attorney general are fair and not misleading. There is nothing in the proposed constitutional amendment which is not germane to the ballot titles." This proceeding was interpreted by certain labor and Grange leaders, as well as the rank and file members, as a scheme to obstruct the attempt to secure cheap power for the people of Oregon. The delay caused by this suit left only one month for securing the requisite signatures in November. On July 3, three hours before the closing time for filing petitions with the secretary of state, the amendment was filed with the proper number of signatures.
​Another evidence of public ownership sentiment appeared in the 1930 spring primaries of the Republican party when Senator George W. Joseph was nominated as candidate for the governorship on a platform which included an urgent demand for public development of power and abolition of the state public service commission. His death a month later necessitated the nomination of his successor by the State Republican Committee. The previous platform was ignored and a man who did not favor government ownership of power was nominated. The followers of Senator Joseph then nominated an independent candidate, Mr. Julius L. Meier, who, on a platform similar to that of the late Senator Joseph, was named Governor of the State in the fall elections with a majority of 20,423 over the combined votes of the three opposing candidates. The Grange amendment was adopted with a majority of 32,998 in spite of a vigorous newspaper, radio, and personal campaign on the part of the opposition.
The Oregon amendment, patterned after the California law, provides for the creation of public utility districts in about the same way that school, irrigation, and other districts may be formed. It does not divide the State into districts but these may be formed by the resident voters of territory which is contiguous or otherwise, and may consist of incorporated municipalities with or without unincorporated territory. All present political subdivision lines may be disregarded. It is anticipated, however, that in many cases the present county, municipal, and other district boundaries will be found suitable for the new districts. Their purposes shall be to supply water for domestic and municipal uses, and for the development of water power and /or electric energy and to dispose of and sell the same. The districts are to be managed by boards of five directors who must be residents of the district. Capital may be raised by taxes and by evidences of indebtedness issued, sold, and/or assumed. No limit is placed in this connection. The districts will have the power of eminent domain, may enter into contracts, may acquire and hold real and other property necessary to the business of such district and acquire, develop, and/or otherwise provide for a supply of water, water power, and electric energy. The products may be sold, distributed, and/or otherwise disposed of within or without the territory of such districts. Finally, the legislature shall and the people may provide any legislation in addition to existing laws that may be necessary to carry out the provisions of this amendment.
From the time that its content was first made known the amendment was under constant criticism. That a general statute would have sufficed to legalize the creation of utility districts was generally agreed. But the sponsors of the movement deemed an amendment desirable because under it the districts to be formed could be relieved from the usual constitutional debt limitations. Next to the charge of "socialism," this was the chief point of attack. Public officials have at times in the past shown a tendency to plunge into excessive debt and perhaps some arbitrary limitation is necessary. The answer to this charge was that a public utility district differs from most other subdivisions of a state in that the former is expected to be selfsupporting except for the initial necessary capital. Under wise administration every dollar of debt will be balanced by a dollar's worth of earning assets. Furthermore, the market for securities of the district exerts a practical control ​over indebtedness since the projects must be sound enough to induce banking and investment houses to take the issues.
Another objection frequently raised during the pre-election period was the temptation which the amendment was said to offer to ambitious promoters to gerrymander the boundaries of a district so as to bring in property from all corners of the State to help pay for the district's liabilities. It was alleged that parcels of land would be brought into a district even though they could never hope to be served by the district's power plants. Prominent attorneys denied that this would be the case. They argued that even though the wording of the amendment would bar the legislature from limiting taxing and bonding powers since these are given without limit, the amendment invites the legislature or the people to formulate such legislation as will give the act effect. Laws can thus be enacted to forbid annexation of any territory without giving it a separate vote to determine its consent, just as cities have been prevented from adding territory without consent.
The Significance of the Utility District Movement
The Oregon amendment may be considered part of a wider movement to re-adapt and enlarge municipal ownership and yet to avoid the obstacles to statewide ownership of utilities. In Ontario municipalities have been united for two decades under the direction of the Hydro-Electric Power Commission for the purpose of developing electrical energy. In this case the localized nature of the source of supply of energy at Niagara Falls accounted largely for the form of organization adopted. In Oregon the natural water power resources are widely scattered and the movement there is primarily a protest against the "power trust" and an attempt to secure cheap rural electrification. At the same time it embodies a plan to adapt municipal ownership in the electrical utility industry to changing conditions.
It is a fact of common notoriety that all has not been well with municipal plants. While their total proportionate output has not changed materially, the number of municipal plants has decreased seriously. In 1923 there were 3,066 such plants in the United States and at present probably not over 2,000. About 1,500 plants had changed from municipal to private ownership between 1886 and the close of 1927, most of which change was confined to the last six years. Many cities which have retained their own distribution systems have recently turned to private companies for the supply of energy in bulk. But it is significant that the number of private plants declined even faster than the municipal plants because of consolidations. Moreover, communities with large population have seldom been found to change from public to private ownership. In fact, Dr. Dorau found that in communities having a population of 2,500 or over, 71.6% of all municipal establishments ever originated were still in existence at the end of 1927.
These facts lead to the conclusion that technological changes in the electrical industry, which have caused the decline ​in number of separate private plants, have also caused the number of municipal plants to decline. That the private utility interests interpret the district movement as an attempt to rehabilitate municipal ownership in order to take advantage of these technological changes is evidenced in a recent public utility investigation by the following statement:
   "The request of the League of Municipalities of Wisconsin for legislation that will enable the cities to form power districts and to interconnect municipal plants, is an admission that the utility business is no longer a local industry and that if municipal ownership is to continue, the cities must be permitted to expand their field of operations . . .
The tremendous, recent improvements in coal utilization, enlargements of generating plants, and elimination of waste, as well as improvements in the technique of transmission and distribution, have given an ever-increasing advantage to large-scale plants. The holding and management companies have developed in response to these changes and have in turn stimulated them. Another quotation from the argument of the private interests in the recent investigation is pertinent:
   "The electric utility that two decades ago was largely a local institution, detached from other utilities and serving only a single community, has given place to a great organization of many utilities, large and small, tied together wherever possible by transmission lines and supplied from efficient, centrally located, high capacity stations. The old form of local management with. . .inadequate equipment and lack of capital, has undergone a similar change, being replaced by highly trained central organizations directly in touch with each locality served and keenly alive to its needs. . .The management company provides each locality with management service far superior to what a single private or municipal plant could command, and generally at lower cost than independent management. It brings together and maintains a permanent staff of trained engineers, accountants, lawyers and rate experts—specialists in the various phases of utility management. . .
The benefits which have accrued to users of electrical services under this movement are undoubted even though it may be argued that the new, though lower, rate-schedules have allowed the companies more than compensatory returns from an economic and legal point of view. Promotors of the public utility district movement clearly recognize the advantages which will accrue to a system of public ownership under which small local plants may be dismantled and the district needs supplied from highly efficient, centralized, large-scale plants. Not only will more efficient mechanical equipment be installed under such conditions, presumably, but the district will be able to secure a higher grade of managerial and technical ability. Some advantages may accrue from larger and wiser purchases, lower capital costs, uniform accounting and designing.
These savings will depend somewhat on the size of the districts. If they ex​tend to only one or even several counties, gains equivalent to those of a private holding and management company may be impossible of achievement unless the population is quite dense. On the other hand, recent improvements in the efficiency of the Diesel engine along with cheap fuel oil are said to give some important advantages to small plants, especially in view of the mounting transmission costs of the large interconnected systems. Thus the regional ownership of public utilities, stimulated in part by technological changes in private electrical plants, may in turn be given a market advantage over these same large-scale, interconnected, private plants by a new technological factor.
If action is taken under the new amendments in Oregon and other states, some additional legislation will be necessary immediately. The districts should no doubt be subject to some regulation, especially in regard to the form of records and accounts to be kept and the making of annual reports. The general level of rates need not be subject to regulation but disputes will occur in regard to class rates. Many problems and disputes will arise concerning competition with private companies already in the field and conditions under which their assets are purchased. The prospect of these and other problems leads to the conclusion that the state public service commission ought to be given immediate jurisdiction; yet the home rule philosophy embodied in the regional movement must not be thwarted by giving the commission the degree of power which it exercises over private companies, if the movement is to be encouraged. Although the Special Commission on Control and Conduct of Public Utilities in Massachusetts decided that legislation providing for such districts was not imperative immediately, yet it makes similar arguments regarding regulation.
However, it is possible to overestimate the significance of the utility district movement. Even sponsors of the movement in the State of Washington argued that, if such districts are legalized, the power will be used seldom but will serve merely as a threat to private companies. In Oregon it was maintained that the farmers and small villages ought to have the same power to go into the electric business as that enjoyed for many years by larger cities. If the power now granted is used as rarely as larger cities use their power, the new movement will not prove as serious a menace to private interests as they suppose.
* ↑ Herman Stabler, "A Nation's Water Power," 3 Economic Geography 434-46, at 445 (October, 1927).
* ↑ Ibid., p. 439.
* ↑ George W. Joseph, Oregon's Prosperity Dependent upon Development of Its Water Power Resources, pamphlet privately published, 1930.
* ↑ Data from the Institute for Economic Research, bringing up to date the material in Herbert B. Dorau, Changing Character and Extent of Municipal Ownership in the Electric Light and Power Industry (Chicago: Institute for Research in Land Economics and Public Utilities, 1929).
* ↑ Proceedings, Oregon State Grange, Annual Session, 1925, pp. 82-3.
* ↑ Federal Trade Commission Report, Senate Document, 70th Congress, 1st Session.
* ↑ Josephine M. Othus v. Sam A. Kozer, 248 Pac. 146 (1926).
* ↑ Proposed Constitutional Amendments and Measures, Oregon, 1926.
* ↑ Grange Bulletin, September 7, 1926, p. 6.
* ↑ Ibid., October 26, 1926, p. 7.
* ↑ Oregon Labor Press, October 22, 1926, p. 1.
* ↑ Ibid., October 29, 1926, p. 1.
* ↑ Ibid., October 29, 1926, p. 5.
* ↑ Portland City Club Bulletin, October 29, 1926, pp. 3-5.
* ↑ The Oregon Voter, October 9, 1926, p. 12, made similar arguments as did practically all newspapers in the State.
* ↑ Interview with Mrs. Kate Bonham, Secretary, Housewives' Council, Incorporated.
* ↑ State ex. rel. Carson v. Hoss, 288 Pac. 505 (1930).
* ↑ Interviews with Dr. A. Slaughter and other leaders in the movement.
* ↑ Letter from Mr. Hal Hoss, Secretary of State.
* ↑ Oregon Constitution, Article XI, § 12.
* ↑ Editorial, Eugene Guard, October 31, 1930.
* ↑ Several other states have adopted somewhat similar legislation. In 1919 Alabama passed a statute which allows counties to engage in public utility industries and allows two or more municipalities to join for the same purpose under certain circumstances (Code 1923, §§ 2318-2325). In 1921 California passed a statute allowing the creation of public utility districts (Stat. 1921, p. 245, as amended by Stat. 1927, c. 35, 40 and 77 and Stat. 1929, c. 31). In the elections of November 4, 1930, Washington and Nebraska adopted initiative measures which allow public ownership of utilities along the same general lines as in Oregon.
* ↑ Dorau, op. cit., supra, n. 4.
* ↑ Municipal plants in many states are not allowed to operate outside the city limits. Even where they are allowed to do so it is an empty power because debt limitation laws prevent expansion in many cases. Oregon law allows such expansion, including competition with private lines. The law was upheld in Yamhill Electric Co. v. McMinnville, 274 Page 118 (1929), and the United States Supreme Court dismissed an appeal for want of a substantial federal question. The excessive prices frequently offered by competing holding companies for the municipal plants also accelerated the latters' decline; see F. A. Staten, "Fort Atkinson, Wisconsin: a Case Study of Municipal Ownership," 5 Journal of Land & Public Utility Economics 143-149 (May, 1929).
* ↑ Report of the Wisconsin Interim Legislative Committee on Water and Electric Power, 1929, p. 198.
* ↑ Ibid.
* ↑ 1928 Proceedings, Convention of the National Association of Railroad and Utilities Commissioners, pp. 504-11.
* ↑ E. J. Kates, "The Growing Field of the Diesel Engine," Bulletin, No. 51, Public Ownership League of America, Chicago.
* ↑ Paul Jerome Raver, "Municipal Ownership and the Changing Technology of the Electrical Industry," 6 Journal of Land & Public Utility Economics 241-257, 386-398 (August, November, 1930).
* ↑ Report, 1930, p. 77.