Evening star., 1932-07-31
STATES TIGHTENING LAWS
ON UTILITY REGULATION
George Otis Smith, Power Commission
Head, Declares Facts Dispute Idea
That Control Is Weakening.

| the ranchers in the San Joaquin Valley
in a manner helping those customers
most in need Of cheap power and yet
preserving the equities of the power
company for earnings sufficient 10 pay
dividends.
Regulation of rates cannot be effec-
| tive except as there is some supervision
! by public agencies of the rate paSe, the
| capital structure upon which fair and
rec sonable returns are figured. And
! in this phase of public regulation not
only the customer of the power COM
pany is concerned, but also the investor
in its securities.
Never before has it been so forcibly
demonstrated that the regulated operat-
ing company has not suffered from
shrinkage of market valuation to the
same extent as the unregulated hololng
company. The more complete the state
regulation the more successful 1t has
been In building up confidence In the
power company, and the executives of
the strongest companies do not hesitate
to credit the regulatory commissions
with this benefit to their stockholders.
Nor are the commissions stopping
with regulation of security issues.
Practical recognition is being given to
protecting the public interest IN the
continued financial health and physical
well being of the operating companies.
The electric public utilities constant
ly need requirements and bettermentS,
and the Wisconsin Commission has
Just put into practice the rule that the
cash resources of subsidiary companies
in Wisconsin must not be drained away
simply to provide dividends for holding
companies over which no State seems
to have adequate control. In view of
internal needs for extension or improve
ment of service imprudent pressure on
these operating companies from without
must be resisted.
The Alabama Commission has issued
somewhat similar order, making pay
ment of dividends wait upon adequate
provision for proper reserves. A year
ago a high official of holding company
asked a commissioner, Why all this
public concern about holding companies
and their relation to operating compa-
nieS that they own-what Is the pubic
interest involved? The answer was that
the public doesn't like to see the utility
COW MIXED to death, and that to justify
itself the holding company must not
endanger the health OF the operating
company, so the commissions have felt
compelled to step in and assume that
responsibility, using any means at hand.
In this effective safeguarding OF local
interests lies the strongest argument Tor
State regulation, and in protecting these
interests no other agency can be so
successful. Yet the need OF supple
menting State regulation is even more
apparent now than IL years ago, when
the Federal water power bill was being
passed by Congress.
The interstate business Of power
comranies has increased greatly ana
the extrastate control of interstate serV-
ice has come to present new problems.
Gaps in the regulatory set-up exist
eight States are without any regulatory
agency whatever-and protection OF
public interests cannot be complete
without Federal regulation that can
adequately bridge these and other gaps.
Overlapping jurisdiction and duph-
Gated action may be viewed WIN alarm
by company officials, but as yet no LOUD
complaint has been heard from the
public that it is overprotected.
The simple fact is that regulation Is
winning on every side and those puollc
utility officials who continue TO reSlsI
must realize they are waging losing
fight. unless they happen 70 md com-
fort listening to the propaganda OF
those who claim that State regulation |
has broken down.
Those of us who are working Tor more
and better regulation, and the large |
public we represent, should be encour-
aged by seeing the degree Of security;
economy and efficiency that Is promoted
by regulation of the public utilities in
sharp contrast with the all too common
Insolvency, wasteful management and
impaired revenues that nave resulted
from the cutthroat competition of most |
branches of unregulated industry. 1t
means much that Moody's Service re-
ports that the average public utility
dividend is only ore-sixth below the |
peak, while dividends on industrial COM
panies have fallen of more than 60 per |
cent.
The regulation of pubic utilities al
ready In force must be looked upon as
a benefit to both the public and the
utility: it has not failed.
(Copyright. 1882 by the North American
Newspaper Alliance, Inc)