Evening star., 1938-10-29


sion of generating capacity which has
been all too long delayed.
The clever way out-for there must
always be in politics some device of
face-saving or camouflage character
is national defense. There's an
electric power shortage facing the
country. This has been attested for
more than year now by the Govern
ment's own experts. But the admin
istration couldn't figure out way to
stop the controversy with the utilities
without some new development. The
war scare in Europe has just provided
the needed background on which to
project a settlement of the electric
power question.
Problem Is TWO-Fold.
The problem has been tWo-fold-
the Interpretation Of the life or death
sentence under the holding company
law, and the matter of Government
competition in the Tennessee Valley
and other regions of the country. The
first has been aided by an oblieing
Securities and Exchange Commission
desired by the President to permit the
holding companies to readjust their
structures without being destroyed.
This is matter of discretionary power
only and some future commission
could reverse the rulings.
AS for the Government competition
this is something which the President
- r, IFS
couldn't go back on Senator Norris,
with the public ownership crowd on
his left wing. and yet if he didn't clear
Up the fear of competition. private
utilities in certain areas couldn't eX-
panG. So national defense" came in
handy, but even this didn't dispose of
the matter of financing. As long as
the threat of Government competition
exists, the public wouldn't supply
funds to private companies in those
areas in what is known as equity
financing or even senior securities.
r. F. c. to Make Loans.
Now the Government has stepped
In through the R. F. c. Federal funds
Will be loaned to companies wherever
they are unable to finance themselves
especially in areas where the threat of
Government competition exists. This
is a splendid recognition by the ad-
miniStration of its own responsibility.
If it is willing to take a loss on in
vestments in those areas, the public
might decide to take risks there. too,
and maybe in the end a way will be
found for the Government and the
private utilities to live alongside one
another in peace and harmony
As for the spread of Government
competition, the fact that the R. F. c.
is about to take care of financing in
areas affected will do much to drive
away apprehensions Of investors, and
maybe it will have its effect on the
making of future grants by the P w.
A. 10 exterminate local companies pri-
vately owned.
All this is on the assumption that
the constructive program just an
nounced is a reality and not merely
a prediction gesture to help get
conservative votes. The official an
nouncement says that 100000 kilo-
watts will be added to the Nations
capacity. but since the latter is about
35.000000. the addition is far below
normal. In the period between 1920
and 1880, the annual addition was
usually about 100000 and there was
no power shortage then.
Spending Is Far Short.
The addition of even 1000, 900 is i'm
portant, but it will involve an expendi-
ture for generating capacity of some
where between s75,000,000 and $780,
10000, and is far from the one billion
or two billions predicted in some quar-
terS
But with the generating capacity
goes the building of transmission lines.
so that over a period of a year the
above sum might run to $l50,000,000
or 5000, 100000. yet it is not what the
utilities should be spending. They
should average about ST 100000
year for at least three years so as to
catch up on the power shortages
caused by the administration frustra-
ton of the whole financing operation
of American electric light and power
companies. Whether, even under the
new auspices, equity financing-that is,
common stocks in utilities-will be
bought by the investing public re-
mains to be seem But it is significant
that start has been made by the
President in handling the delicate
problem of Government competition.
Also if the same policy is maintained
after election it may be said that one
OF the biggest factors in the business
boom slowly getting under way now
will materialize in the durable goods