The people's voice. [volume] (Helena, Mont.) 1939-1969, 1944-09-22

spondents for the wire service; the Associated Press
boasting of nationwide coverage by virtue of Its
franchise requirement that local members supply
local exclusively to it, does not acknowledge
the accompanying danger of censorship by small
town advertisers industry, Chamber of Commerce
boosters.
One AP lead, few days after the hearing
opened, read
BUTTE, March 31-(AP)-A the petty ques-
lions and suspicious to what was in the minds
of the men who organized the great power pos
sibilities and potentiaites of Montana
swered today by c. F. Kelley in the hearing before
the examiner for the Federal Power Commission
and the Montana Public Service Commission
the Montana Power Companys accounting meth
DDS.
There wasn't any sordid or petty thought in the
minds of these men. These men realized that they
dealing with tremendous resources, that they
were laying the foundations of a great service to
mankind
1t was so that Mr.. Kelley described it when he
asked by the Federal Power Commission at
torney why he believed that the Butte Electric
Company got bargain when it purchased the first
half of the Great Falls power interests from John
d. Ryan.
This statement made piecemeal in
to numerous questions, but Mr.. Kelley gave the
formula which all enterprise and all success in
the west has been built
A five-column story in the Montana Standard after
the hearing concluded, purporting to summarize
the entire proceeding started page with this
head: "FPC Ignores Value in It's Public Utility Ac
counting; Startling Practices and Procedures Are
Disclosed in Lengthy Hearing Directed to Montana
Power Company" The article said in its lead,
Practices of accounting that will prove astonishing
to western business people were disclosed
These practices" it developed, the FPC in
sistence that original cost the only legitimate
cost of physical properties allowable ON the Com
panys books. Original cost was defined as cost to
those who first put the property public use cost
resulting from bona fide transaction between par
ties with affiliation of interest The principle
embodied in the congressional mandate to the
Commission in the 1885 Federal Power Act and was
upheld by the U. S. Supreme Court January 81 1914
in the case of the Northwestern Electric Company
of Portland Oregon, against the Commission. The
Montana Standards story did not mention this judi
cial endorsement.
THE Montana Power Company vigorously resisted
i reclassfcation of its accounts. The Original
cost principle it complained did not represent true
value: the properties were worth the figures at
which the Company's founders recorded them on the
books because "the developments and the of
power period of four five years had in
Dictated that those sites valuable production
properties" ! And there were other defenses:
was that the Company and it's predecessors
predominantly power companies and not public utili-
ties because the two most important predecessor
companies sold SO per cent of their output to in
dustry. (The Company's 1910 report showed 1853
per cent of its total horsepower sold to industry,
only As per cent to residential consumers in the
Anaconda it is reputed to have of the largest
single industrial customers, if the largest pos
sessed by any American utility-a customer which
in 1910 using power than the entire air
plane industry in this country)
The series of transactions through which the Mon
tana Power Company came into being, its counsel
said, were bona fde 'arms length" sales, despite
the fact that the seller in three instances John
d. Ryan and the buyers were companies in which
Ryan was director, a dominant stakeholder lin
one instance1 president During the time the Mon
tana Power system being organized, Ryan also
was president of the Anaconda Copper Company,
then headed its successor, Amalgamated, and re-
turned to the presidency of Anaconda when the
Amalgamated trust" was dissolved in 1879 Min
utes of Company meetings were introduced to show
that Ryan represented himself seller and dsasso-
ciated himself from the buying companies in which
he was interested, during the period of negotiation,
by statement to that effect for the minutes.
THESE deals occurred between 1908 and 1913 in
i this order:
In August, 1908, Ryan bought for 81 100000 all the
stock of the Great Falls Water Power G. Townsite
Company from James j. Hill, builder of the Great
Northern Railroad
In January 1909 Ryan sold exactly one-half of
this stock to the Butte Electric & Power Company
for $2,500,000, of which $150000 was cash and the
rest in stocks and bonds of the Butte company
The buyer obligated to find purchaser for the
bonds, and with the cash thus realized Ryan paid off
the notes by which he had financed his purchase of
the property from Hill By virtue of this transac
ton he became the largest single stakeholder in the
Butte firm and director; and by retaining the
other half of the Great Falls property he became
equal partner with Butte Electric in it's operation
On November rs, 1872 Ryan bought from the
Chicago, Milwaukee & st. Paul Railway, of which he
also was director the Thompson Falls power site,
for $950OOO. Credited against this $4,000
which Ryan already had caused to be spent in de-
veloping this property
On December II, 1912, the Montana Power Com
Dany was created, consolidating Butte Electric e
Power Company and several subsidiaries, and issu-
ng four shares of $100par Montana Power stock for
each $100par-value share of Butte Electric. Ryan,
by virtue of this dominant stock position in the
Butte company, continued the largest individual
owner of shares in Montana Power.
On December 16, 1872 Ryan became president of
he Montana Power Company upon the retirement
because of illness) of its original president who
lad headed Butte Electric
On February IL, 1913 Ryan sold to the Montana
lower Company his remaining half of the Great
'alls properties flor the whole of which he had
aid S1500,000) for $22,50O,O00 in stock; the
ay he sold to the Montana Power Company the
thompson Falls site flor which he had paid $950000
ess than three months before) for $5000,000 in
ommon stock. The deed of transfer for the Thomp-
on Falls property received by Ryan the day
efore he resold it to Montana Power
T1HE record shows, therefore, that Ryan built his
Crao EoIIo