Montana labor news., 1945-03-29

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Power Commission announced its opin-
ion and order requiring the Montana
Power Company to make accounting adj
iustments in the amount Of S51 ,978, OPS.
The order requires the company to file
entries by January 81, 1916, ~disposing of
write-ups and other improper charges to
plant accounts in the amount of s46,-
891. 5s7. This amount is so per cent OF
the original cost $50, OPS, 500 of electric
properties as of January /, 1887. The
amount is the largest so far ordered dis
posed of by the commission in any ac-
counting case.
The commission found the excess OF
actual cost over original cost of prop
critics of going concerns acquired in
arm's-length transactions to be s5,086,-
428. It concluded this amount does not
represent payment for tangible proper
ties now in service and ordered the
amount amortized over a 15-year period,
beginning with 1945.
The opinion states that the write-ups
resulted largely from balancing the
plant accounts with the par value Of
securities issued in less than arms
length transactions. The commission,
therefore, asserted the write-ups should
be absorbed by the common stock equity.
This could be accomplished, the opin-
ion states, by reduction in number OF
shares Of stock, or the stated value
thereof, or by contribution from the
parent company.
After disposing of specific items ag-
gregating $949,378.61 there remained
S45. 942. 1880 of write-ups for dispose
ton. OF this amount $34, 500, 900 was
ordered charged to a capital surplus ac-
count. if one is created for the pur-
pose. but with the condition that if one
is not created, the amount shall be
charged to earned surplus.
Preferred Stockholders Protected
The balance of the write-ups, namely,
$11. 442. 218.8O, is ordered charged to
earned surplus. The opinion states this
would leave earned surplus of close to
! S 1000 900 or two times the annual divi-
dend requirements on the preferred
stock.
Origin of Case
The case arose out of the commits
sion's uniform system Of accounts which
required interstate electric utilities and
licensees to reclassify their accounts as
of its effective date, namely, January
l.. 1887. Montana Powers reclasstfica-
ton studies were subject to comprehen-
siye investigation by the staff of the
commission, which prepared a report
thereon. The report was served upon
the company and thereafter the case set
for hearing. Six weeks of hearings were
held in Butte. Montana, last spring and
oral arguments were made before the
commission, sitting en- banc, in Wash
ington d. C., in 1914. The Public Serv-
ice commission Of Montana sat with
the Federal Power commission at the
hearings and at the oral arguments. The
arrangement was that the two commits
sions would sit concurrently in the hear
ings and argument, but would compile
their own record and arrive at their
independent conclusions.
Company Under Federal Power
Commission Jurisdiction
The Montana Power company owns
and operates facilities for the transmits
sion and sale at wholesale Of electric
energy in interstate commerce. 1t is
therefore a public utility under the Fed
eral Power act, subject to all the re-
-ouirements Of the uniform system Of &C.
counts. It is also a licensee under the
Federal Power act. 1t has not questioned
the Jurisdiction of the commission.
The company serves customers in Ana
conda. Billings, Butte, Great Falls, Hell
ena. Missoula and some 10 other Mon
tana communities.
Two Main Transactions
Most Of the Initiation in the accounts
according to the opinion, was INTRODUCED
by two large transactions, n in De
cember, 1912, and the oJher III feplu
arv. 1918. In the first transaction Butt
Electric and Power company and IL
three subsidiaries merged and consoh
dated in the Montana Power company
a newly formed corporation organized
for the purpose. In the process lou
shares of common stock Of a par valuI
of 500 per share were issued for eaci
share outstanding, with a resultant IN
crease Of $40, 200, 600 Of par amount 0
common which was offset by a charge t.
plant of the same amount. CSubsequen
adjustments reduced the increase !
plant to $l9,663, S91.11)
The company admitted the transac
ton was not arm's-length, but elaine
it resulted in a new business ventur
- ,,c,,,rence Of a new cost. tn