Evening star., 1932-11-28
PRUDENCE IS PLEA
/ IN POWER REPORT
Commission Recommends
Test for Net Investment
Among Needs.

Net investment, which is the base for
the capital structure of hydroelectric
developments, should be required to
meet the test of prudence, the Federal
Power Commission emphasizes in the
annual report to Congress, a digest of
which was given out for publication to-
day.
This recommendation was one of a
series made by the commission for leg
islation to tighten up the water power
act. based on experience of the eleven
years 1t has been in operation.
The commission also urged that its
lnvestigative powers be broadened and
clarified, and repeated its proposal both
holding companies in interstate opera
tion, and for added facilities to regu-
late securities Issues of licenses where
State supervision is lacking.
The amendatory legislation sought
to close up loopholes in the act under
which the Government administers its
vast water power resources is the result
of study by Ralph B. Williamson, vice
chairman of the commission.
''Net investment" now is defined as
"actual legitimate original cost" and
the commission would make it prudent
Original cost" explaining that 1T is be-
lieved that the addition of the test of
prudence would place needed limita-
ton on cost expenditures and this
would strengthen the commissions an
thority in fixing the proper base for the
ultimate determination of net invest
ment."
DeIving Authority Asked.
In the field of investigation the COM
mission asks that it be given specific
authority to delve into the operations
of licensees, including their financial
set-up, as a necessary corollary to de-
termination of net investment.
This would follow along the lines OF
tha Interstate Commerce and Federal
Trade Commission acts and would
clarity rights tested in the celebrated
Clarion River case, which the commits
sion won after being carried to the
Supreme Court of the United States
by the Clarion River Power Co.
In connection with its regulatory
powers the commission suggests the
need for making plain its authority with
regards to both intrastate and inter-
state transmission, and particularly
for setting up a line of demarcation be-
tween State and Federal jurisdiction on
interstate movement of electricity, this
subject in general, involving rates, Serv-
ices and securities issues.
AS has been previously announced,
the commission recommends that ade-
quate regulation OF securities issues fall
ing within its province will require "a
substantial increase in staff" One spe-
cialist in this field already has been
obtained by the commission in prepar
ing to- exercise this regulator ~function.
The study of holding companies, which
was conducted some time ago and
brought recommendation for Federal
control, is reviewed by the commission,
which repeats that all, interstate elee-
, trio power utilities and holding COM
panies should be under governmental
control, whether or not they involve
Federal-licensed projects. The commits
sion does not go beyond this broad
statement as to non-licensed concerns,
explaining that this subject now is re-
ceiving consideration in Congress.
Supervision Is Necessary.
So far as its own licenses are con-
cerned, the commission explains, super
vision of the holding or top" COM
panies is necessary for adequate control.
It added in this connection that with
such power the commission would sup
plelnent the work OF those regulatory
agencies functioning in some of the
States.
Referring to occasional demands that
potential power sites be reserved for
reclamational or similar purposes, the
commission says that new legislation
would be required to permit such ap-
plications being taken into considera-
tion.
The commission also makes known
that it has had drawn up a plan for
a comprehensive power survey Of the
United States ito provide study of
the present status of electrical power
development, of potential sources of
electrical energy, with estimates of
future demands both by industry and
transportation" Lack of money pre-
cludes such a program, however, 1t is
explained.
The commission brings out that re-
ceipts from licenses have put it
on a basis where it is more than self
supporting, but declares this entire fund
should be segregated and thus be made
available for the commission which now
gets only the smaller portion. most of
the money going to the States where
the licensed projects are located, and
to the Reclamation Service.
The routine work of the commission,
including its accounting activities,
which have been covered previously,
also are reviewed.
This report covers the first full year
of operation of the commission, which
got started In December, 1880.