Evening star., 1937-11-24

- nay I
McNinch, former
chairman of the Federal Power Com
mission, told the press afterWard it is
plain that the method of valuing the
utility properties is not by any means
an insuperable obstacle to the max
ing of a settlement
Thus it is the State commissions
in the final analysis who take into
consideration both the prudent in
vestment" and the reproduction cost
new" theories in finding out what is
to be the basis for rate making, and
even if property is worth only $780,
600 and a company bought it for
$1,250,000 the State commission which
makes the valuation is likely to fix
rates closer to the S25O000 original
price than the purchase price if there
has been overbidding or an eXagger-
ated appraisal.
Fact-Finding Problem.
The question of 'write-ups" which
the Federal Trade Commission dis
cussed in its voluminous reports is
easily OiSpUSeu VI DtlduSt lltlS, lOU,
the problem is one of fact-finding,
unless, of course, the utilities and the
Government now wish to accept some
stipulated method Of determining val
ues for the securities issued.
Just how the valuation arbitrarily
placed on a utility property by the
Federal Trade Commission or the Fed
eral Power Commission or any other
Federal body would be binding upon
State commission is rather difficult
to follow, so if Mr.. Willkie and the
President discussed any plan for
putting into effect such new scheme
1t will certainly be confronted with
various legal reorganizations.
The important thing is that
leader of the utility industry and
the President of the United States
got down to fundamentals. Certainly
If an agreement is reached as to the
operations of the Public Utility Hold
ing Company Act and if it is constitu-
tional for that law to require simpli-
f1cation Of corporate structures. stock
holders would have no choice but to
accept the Federal Governments fiat.
Protect Future Investments.
This brings up the question of
whether any settlement can be re-
troactive and what the effect on
existing securities would be if a new
method of valuation were introduced
that is at variance with the method
in effect for nearly half century.
1t would seem to be more plausible
for the plan, whatever it is, to be
applied to a future date and thus
protect future investments rather than
to apply any new rule toward prop
critics already valued by State COM
missions.
The big problem, after all, is not
to convince Mr.. Willkie what the Gov
ernment wants done and not to per-
suade the President what the utility
executives would like to see done, but
to make the investors with capital
feel that in parting with their money
they have some assurance of fair
return on their investment. For the
investors are the ones who with their
funds are going to do the pump
priming" and stimulate construction
and employment.
Federal Competition Factor.
These investors, moreover, are not
going to rush In to buy common stocks
of utilities just because the President
and Mr.. Willkie find a meeting of
minds on how utility properties should
be valued. What is more important
Is what form of competition the Gov
ernment itself will hold over the
heads of the utilities and the investors.
Will there be resumption of grants
to municipalities? Will there be seven
T. v. AS? Will the holding company
act be amended so that there is
clear understanding of what is meant
by utility systems that are geographic
cally' integrated?
These are the questions which have
yet to be settled, and the answer will
be sought in Mr.. Roosevelt's attitude
toward the utilities of the future. The
\ first conference undoubtedly brought
out a conciliatory point of view with
plenty Of room for adjustment of view-
points as the conferences progress.
Mr.. Roosevelt is doing something
he might we'll have done three years
ago. but it is an old saying that it
is better to do some things late than
never at all. And the penetrating way
the President has dug into the facts
Of the utility problem by calling the
practical men of the industry to con-
ference and consultation Is an en-
coWaStng sign of the times.
Aronvrisht 1oaYN