Evening star., 1936-02-27
UTILITIES FACING
DEATH SENTENCE
Observer Sees Ravages OF
:, Government Competition
Forcing Them to Wall.
BY DAVID LAWRENCE.


to indicate that the Supreme Court
of the United States will probably
declare unconstitutional the public
utility holding company act. at least
in SO far as 80 per cent Of the in
dustry is concerned, and possibly the
wheie act will be found invalid.
What the utility industry would
appear to be up against nowadays Is
not the famous death sentence" law
regulating or attempting to destroy
holding companies, but another kind
OF death-the cancerous ravages OF
Government competition.
Thus the Senate Is already debating |
q bill to advance money to local or
ganizations to develop rural electri- |
fication, but companies already in
business are excluded from any form |
of Government loans. Instead of |
using Government money in plan |
that gives private companies chance
to compete on equal terms with Or
ganizations favored by Government |
agencies, the scope of the proposed
measure evidently is to set up rural
electrification plan tantamount to
Government entry into the electrical
business on wide scale.
Plan Broad Program.
Administration leaders are saying
that nothing like $1.000,000, 900, the
first amount mentioned, will be ap-
propriated, but evidently the Roose-
welt regime is getting ready to indorse
a plan for Government competition
that will fit in with the establishment
of such agencies as the T. v. A.
and with the operations of the P. w. A.,
which lends money to the municipal
itiess that can build their own plants
ana duplicate existing distribution
systems
The courts have plenty of suits en-
deavoring to restrain the P. w. A.
from using Federal money to aid mu-
inequalities in their competition with
private companies, and in the latest
4caseein the Circuit Court of Appeals
The Government won on the ground
that damage to the private utility had
mot been proved. -
1T begins to look as If the use of
Federal funds will afford considerable
Il basis for legal controversy and that
1t is going to be difficult for COM
panies to prove that they are threat
= ened with damage until they are faced
with actual construction of plants.
: It is rumored that one important
utility has offered to sell out to the
Federal Government to protect its
hlIf
declined. Certainly the alternative
which some utilities may soon be
faced with Is whether they will wait
till competing systems are built when
their own properties will have con-
sequently dropped considerably in
market value or whether they will
offer to sell under virtual compulsion
of circumstances as was the case in
Knoxville, Tenn.
Question of Funds.
II the Federal Government wants
to go into the power business, there
are many utility men who feel that
it, would be better for Government
sbHnerShip to come now than after a
hong. drawn out competition in which
:utiIity properties would suffer loss in
,yaltle. The question, of course, of
where the money is coming from to
buy out the utilities whose investment
is anywhere from $l0,000,000,000 to
$4,000. 100000 is something that has
to be decided just as any other drain
on the already unbalanced Federal
budget Then there's the matter of
competition between water power and
coal. It is a mystery why the coal
miners who will presumably be af-
fected most by the development of
water power plants are not much more
concerned than they appear to be in
the controversy. It may be they feel
that the Government entry into the
power business is likely to be thwarted
at the polls as the issue of Federal
,pexpenses brings retrenchment in
,Fsy. A. and other power projects in
The next few years.
- - Meanwhile the battle in the courts
on the holding company issue is vital
,,;note only to the utilities but to all
corporations that have subsidiaries
scattered throughout the country.
Judge Soper, who handed down the
opinion on behalf of himself and
Judges Parker and Northcott in the
latest holding company case dealt
with most all the important phases
of constitutionality. While there was
one concluding paragraph taking issue
with Judge Coleman's sweeping state
ment that the entire act was uncon-
stitutional, there is no doubt left how
closely the three judges concur in
the Coleman opinion as to virtually
all the essential points.
Not Compelled to Register.
Thus first of all, Judge Soper says
Its was bona fde case and declares
the suspicious of the representatives
OF the Government were without
foundations" when they charged col
fusion. He points out first that the
American States Public Service Co.
was not obliged to register and that
neither this company nor its SUBJ
sidiaries could be reorganized and yet
comply with the Public Utility Hold
ing Company Act.
Perhaps the most interesting aspect
Of the three Judge decision is the
significant declaration that Congress
has no power to regulate holding COM
panies either under the commerce
clause or under the postal power or
under the decisions governing the
policing of evils in interstate COM
merce such as automobiles used by
criminals or thieves or the transport
of articles which are themselves dele
terious to health.
1.-THE Holding Company Act" said
Judge Soper, "does not merely pro-
hibit the use of the instrumentalities
of commerce for fraudulent or unfair
purposes, but prohibits activities Of
the kind already described. whether
harmful or not. in so sweeping q
fashion as to make 1t impossible for
holding company covered by the
act to carry on its business without
registration and without submission
"a tho rooI1lofi0n of the commission