Evening star., 1939-05-07
Power Sales Expected
To Hit New Peak
In Current Year
Profits Likely to Lag
Behind, According to
STANDARD Statistics
BY w. DAVID GAY,
Utilities Editor, Standard Statistics,

NEW YORK, May 6.-The electric
power industry Is one Of the few
major industries in this country
which is confidently expected to
reach a new peak in sales this year.
Output dropped only 43 per cent
last year, indicating characteristic
resistance to intermediate declines
In general business.
Consumption of electricity 50 far
this year has been running well
above year earlier figures andI has
even exceeded the former peak
levels Of the spring Of 1887. Some
thing more than lit billion kilowatt
hours of electricity were produced
in 1887 and so it is logical to fore
cast that output this year will ex-
ceed 120 billion.
Although 1t has its troubles, the
industry is not much worried about
the possibility of war in Europe over
the medium term. For in the event
of such war, industrial demand for
electricity (Which amounts to rough
ly so per cent of total sales would
increase sharply in this country. In
addition, domestic and commercial
customers would use more electricity
as was the case during the early
stages of the World War. And with
better control Of commodity prices
in prospect In the event of war, op-
Grating costs of electric companies
would not mount as rapidly ae in
the 1914-1917 war years.
Earnings Backward.
While output Of electricity is def
nitely in a secular uptrend, this is
not true of earnings. The estimated
output Of around 120 billion kilowatt
hours in 1899, for example, would be
80 per cent larger than that Of 1929,
yet earnings this year will be more
than 20 per cent under those of 10
years ago. This reflects primarily
the rate cuts instituted since 1929,
on the one hand, and increased taxes
and depreciation allowances on the
other.
In the public's mind the problems
Of the utility industry are attrib-
uted principally to the adverse
power policies of the Federal admin
istration Much is being made, &C
cordingly, Of the fact that the Gov
eminent has moderated It's power
policies substantially during the re-
cent past, as exemplifled by negotia-
tions to settle amicably the T. v. A.
problem, the reasonable application
by the S. E. C. of the death SEN
tence" to utility holding companies,
and the apparent abandonment of
the idea Of fostering public owner
ship OF utilities through P. w. A.
loans for competitive municipal
power plants. Despite present ef-
forts by the anti-utility bloc in Con-
gress to build Government-owned
electric properties for national de-
Tense" it can be said definitely that
the worst has been seen as regards
adverse Federal power policies.
Earnings Peak Passed.
1t does not necessarily follow,
however, that the electric power in
dustry will regain its peak earn
ings of the l929-1s30 years. In
creased regulation of rates by State
public service commissions will
prove an insurmountable obstacle to
this. 1t should be borne in mind, in
this connection, that regulation of
rates in 1929 and 1880 was relatively
lenient, but that such regulation is
now being actively administered by
all but few States.
For this reason, benefits resulting
from the steadily increasing sale of
electricity will be largely offset by
continued pressure on rates, and
profits are unlikely to register sub
stantial expansion. This pressure
on rates, additionally, is likely to
continue, irrespective Of whether
Democratic or Republican admin
istration is in power.
The uptread in electric sales nat
urally requires constant additions to
the capacity of the electric industry.
While expenditures for new capacity
have been subnormal in recent
years, it is unlikely that such out
lays will be expanded materially to
equal the 1929-193O average of $740,-
100000 year. For 1t must be re-
membered that the extensive con-
struction program eliminating in
1880 completed the territorial ex-
pansion Of the utilities, and future
construction will consist for the
most part of the revamping of or
addition to present facilities.
In the absence of indications
pointing to a substantial increase in
its capital expenditures, the electric
power industry is unlikely to be an
outstanding contributor to general
business improvement over the rest
OF the year But it will continue to
serve in an important economic ca
pacity as an employer of capital,
since it pays out about $3.50, 900 900
annually in the form of interest and
dividends.