The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1919-07-02
Application of Heat, Light &
Power Co. Formally Denied
in Strong Opinion
MUCH OVER CAPITALIZED
Excess Values Claimed by Con-
cern Not in Keeping With
Good Practice, Is Held


a unanimous opinion handed down by
the railway commission late last ev-
ening. ..,
The commission sums up its find
ings in the last paragraph of its Ia
page opinion, as follows:
"The commission does not favor
and will not countenance excess val.
uation for purposes Of capitalization.
1t is firmly of the opinion that cap.
italization should closely approximate
the fair value Of the property. 1t is
a common fallacy for promoters to
believe that such large and elastic
economies result from consultations
that interest and dividends might be
paid on almost any amount. On the
other hand, it has been the evident
intent Of promoters often times to Sc
cure their profits from manipulating
the securities rather than from the
estimated earnings resulting from the
consolidation. AS protection, there
fore, not only to the present but to
future rate-payers, the commission
deems the present time not a favor
able one for purchasing and consoli-
dating these companies, and the ap-
plication is therefore denied Il
History Of the Case.
The original petitioner, the Gen.
eral Utilities Corp, was organized
early in 1915 for the purpose of con-
solidating and operating number OF
electric light, heat and power COM
panies in the east-central part OF the
state. Plants at Kenmare, Enderlin
and Cakes were combined and oper-
ated from the date Of organization.
Afterward the number Of utilities was
increased to eight, including the
plants at Darlington, Devils Lake,
Casselton, Sheldon and New Rock
ford. The Dakota Heat, Light &
Power Co., whose application was fill
ed with the railway commission May
5, was incorporated under the laws of
Maine, with its home offices in Au-
gusta and its administrative offices
in Bismarck. The company proposed
to take over the electric light, power
and steam heating systems at Bis
marck, Dickinson, jamestown and
Mandan, and electric and power sys-
TENS at Lisbon, together with those
of the General Utilities Corp. at New
Rockford, Carringtcz, c--:~~1elton and
Kenmare; the electric light, power
and steam heating systems at Oakes
and Enderlin; the electric light, pow
er, steam heat, telephone and water
works system at Devils Lake; the
electric light and power distribution
at Sheldon, and the transmission line
between Sheldon and Enderlin. To
finance this undertaking the company
asked permission to sell $2,675,O00
worth of first mortgage bonds, con-
vertible bedentures, and first and sec
ond preferred stock, and 100000
worth Of common stock, making $2,-
775,O00 in all.
For purposes of capitalization, the
company valued its properties as fol-
lows:
Dickinson ...... $165,200.75 $150.00O
Mandan ........ 203,971.11 100000
Bismarck ...... 506,729.12 100000
jamestown 800. 427,3S1.41 464,OOO
Lisbon ......... 6S,291.19 10000
General Utilities
properties 90. 791,453.64 1,O54,349
Totals ...... 2,163,O27.22 2,409, ,149
The difference between the pres
ent value of the General Utilities
Corp and the purchase price was
$24612178. This amount, as ex-
planned by the company, was to cover
the expenses of Incorporation Of the
petitioner company and all miscel-
laneous expenses Of promotion. It
was not, however, to include $780,.
S51 bond discount.
The ruling says:
"The valuation arrived at by the
engineer for the petitioner are deem
ed by the commission to be unusually
and unreasonably excessive. The ap-
praisals were made about the first
of the year 1919. Instead Of using
unit costs based on average prices for
a number Of years, the engineering
company used the unit costs of the
specific date, which represented the
highest price period during recent
years. To these inflated specific
construction costs was added II per-
cent of both specific construction cost
and the appraised value of land to
cover overhead"
Willing to Go High. > y
"Throughout the record numerous
statements were made by witnesses
and counsel for the petitioner indi-
cative of the willingness of the coEl-
pany to accept the highest valuations
of record and to capitalize every
known item of physical and Intangible
property at an unusually high value
or percentage"
The hearing was Of especial inter-
est to North Dakota from the fact
that James Manahan Of Minneapolis,
former Minnesota congressman at
large, and who has been actively
identified with league affairs and in
timately associated with President A.
C. Townley Of the National Nonpartl-
san league as personal counsel for :he
latter, appeared for the proposed
combine. In his arguments before
the state railway commission. Mana
han used much league gospel, and he
declared the rail board should take
immediate favorable action OF! the
application, inasmuch as the merger
was in keeping with "the new day.
In North Dakota.