Imperial Valley press., 1935-06-03

OtNer QlSJrlDullIlg COillpf'iiASo Va s
surplus power from the canal
plants which is not required for the
service of their own or the districts
demands subject to a reasonable
charge for the facilities used in the
transmission of such power.
4. That the company is prepared
To agree that if given the distribu-
ton of canal power its rates III the
valley shall be based upon the cost
of power purchased from the dis
trict with proper allowance Tor
standby service. -
On the basis Of the foregoing pro-
posal the district will realize the
full economic value of its power
privileges on the All-American
canal without the expenditure OF
any moneys in the construction OF
transmission and distribution
, system or of standby diesel plant,
| with consequent increase in the
present debt burden of the valley.
At the same time the consumer OF
power in the valley will receive any
savings in cost resulting from the
substitution Of power from the canal
for that brought from outside
sources. This plan we are satSf-
| fled would afford a higher net yield
| to the district than would be pos
sible under any program involving
district distribution of power.
Profit Versus Cost
1t is contended, in support of dis
| trict distribution of power, that the
company will expect to earn a profit
on it's distribution operations while
the district will sell power at cost.
II may be stated, in this regard,
that the same argument could be
advanced to justify the government
| in going into any one of the many
business operations in which you
men are engaged. You know, how
ever, that from practical stand
point government operation with
/ the inevitable political manage
ment, means higher costs to the
public for goods sold or services
rendered, or that the business will
be conducted at a loss and the
deficit settled On the general tax
payer.
To illuStrate-When the govern
ment took over the operation OF the
! railroads during the war there fol-
| lowed both greatly increased costs
of operation and higher rates to the
public than were previously, or =
| later, obtained under private mana
cement. AT the same time there
was a marked deterioration in serv-
ice rendered the public.
Let us see, however, what this
| profit is that the priyately-owned
utility is allowed to make. 1t is a !.
| so-called fair return" today gen.
orally fixed at 7 per cent or less
upon the prudent investment" OF
| the utility in property used, and
useful, in the public service. The
amount of stock the company has
! issued, or its bonded Indebtedness,
! is not a factor in the calculation.
! This fair return" must include cost
| of money. which of course con-
stitutes part CT the cost of service
rendered by publicly owned
/ utility The differential between the
cost of money and fair return is
normally very small. In fact, the
cost of money to the district today,
! if forced to borrow on Its own
credit, would probably exceed the
rate of fair return allowed by the
| California railroad commission.
The fair return" allowed to the
| private utility by the commission is
not guaranteed. The utility is
simply allowed to earn such return
as business conditions and the sue
cess of it's venture permits. All
losses, whether cue to bad Judgment
| in it's investments or other causes,
must be borne by the utility. This
| matter of losses is a very impor-
tant matter. For instance, The
Southern SierraS Power company
has been forced to write off nearly
a million dollars of investment in
local generating plants in Imperial
Valley made by the Holton Power
company, its predecessor, which, al
though needed at the time for the
valley service. later became useless.
The essence of the contract be-
tween the public and the privately
owned utility is-the latter puts up
all the money, assumes all the risk,
bears all the losses of the enter
prise, in consideration of being al
lowed when, and as times permit,
to earn a little more than interest
on its investment. will leave 1t to
your own judgment, whether this
is not a good bargain from the
peoples standpoint.
Municipal Versus Private
Utility Rates
A standing argument with the
proponents of public distribution OF
power is to compare electrical rates
in the territory they propose to
take over with rates in some other
territory served by a municipal
plant Not unusually the compari-
son is highly unfair one. They
will take, for instance, rate exis-
tent in some large city with con-
gested load center offering great
volume of business and compare it
with rates fixed in the service of
small communities. They pick top
lighting rates for contrast and
avoid comparison of average rates.
For instance, the average rate re-
ceived by The Southern Sierras
Power company over its entire sys-
tenn during the year 1884 covering
power sold to the public is