Liberty Park, USA Foundation

Till now the realm of private monopoly has been one of mystery. We have been told that it is a sort of enchanted land, shut away from the common public by barriers of necessary trade secrets, jealously guarded, and by complexities and problems beyond the ken of the ordinary citizen. But now this realm has been invaded, explored, and chartered. It stands revealed.

The Federal Trade Commission, acting under authority of a resolution of the United States Senate approved February 15, 1928, has been at work now for four years in the investigation of this subject. So far—up to August, 1932—44 volumes of this report have been published, containing over 20,000 pages and 4,972 exhibits. And more are coming, for the hearings are still going on.

The revelations brought out regarding the utility corporations in these hearings constitute, we believe, one of the most important public documents ever published by a commission of the American Government. They deal with one of the most vital and fundamental problems of our modern life. The testimony reveals facts and information, tendencies and trends regarding the most basic industries of the country little known or understood by the public, and so amazing to the ordinary citizen as to be almost unbelievable.

We have been told by the utility interests that there is no such thing as a power trust; that utility rates are reasonable and fair"a fair return upon a fair valuation"; that there is no such thing as "watered stock," "write ups," or inflation of capital stock; that earnings are moderate and modest. And in support of these contentions the courts, the press, university professors, economists, and publicists have all joined in a chorus of approval and substantiation. Only the most daring would have the temerity to question or challenge such a generally accepted view of the matter.

But the Federal Trade Commission has penetrated this jungle of mystery, this labyrinth of darkness and secrecy. Armed with the authority of the Federal Government to compel the attendance and testimony of witnesses and to subpoena important and telltale documents and records, the Commission has hewn its way through the maze and intricacies of designed confusion and the bewildering mass of material to the very heart of our modern monopoly system and laid it bare. Step by step, and piece by piece, through four years of patient, persistent, and painstaking investigation, the Commission has ferreted out the facts and made them public; so that we now have the most complete, the most illuminating, and the most authoritative picture of the whole monopoly system, its innermost methods, and its modus operandi that has ever been published. Now we know, or may know if we will but read the record, just what is going on in the utility field; just how the system works; and just what it is doing. The mystery is solved. The trade secrets of extortion are revealed. The seals of the book are broken, and the whole subject lies open before us.

However, the material in this voluminous report is a bewildering mass. It is wholly unorganized, wholly unclassified and without an index; so that in its present form it is so formidable and involved as to be quite beyond the reach of the ordinary individual and its essential facts almost inaccessible. The reading, analyzing, classifying, and indexing of this great mass of vitally important material has been a tremendous task. In this work the author has had the assistance of a number of associates who have helped in various ways, especially in reading, marking, and indexing the various volumes, so that attention could be drawn directly to the more essential facts and evidence. Among those who have assisted in this matter especial mention should be made of the following: Charles Edward Russell, noted publicist and author, has read the manuscript and has given many helpful suggestions in the preparation of the material. Rev. Dr. John A. Ryan, Director of the Department of Social Action of the National Catholic Welfare Conference; Donald Richberg, attorney, of Chicago; William H. Holly, attorney, of Chicago; Honorable S. A. Stockwell of Minneapolis, Minnesota, and Miss Grace Peter, attorney, of Chicago, have all assisted in reading and marking the various volumes. R. E. McDonnell and C. F. Lambert of the engineering firm of Burns and McDonnell of Kansas City, Missouri, have been especially helpful in reviewing the technical and engineering phases dealt with in the report, and Mr. Lambert has assisted in checking up on the various financial features, accounting, etc. Lloyd Bemis, certified public accountant of Chicago, has also checked over important financial features of the report. Many others have assisted in the detail work of indexing and otherwise preparing the material for publication.

William H. Holly, attorney, of Chicago, Chairman of the Executive Committee of The Public Ownership League of America, has read the entire manuscript and offered many helpful suggestions and criticisms which have been incorporated in the text.

But most important of all has been the help and co-operation of W. T. Rawleigh of The Rawleigh Foundation of Freeport, Illinois. The work of the preparation of the manuscript of this volume would not have been possible except for his generous contribution and public-spirited co-operation. Mr. Rawleigh has financed the many months of work required in making the careful and exhaustive study of these findings and the preparation of the manuscript. It is fitting, we believe, that we should dedicate this volume to Mr. Rawleigh in appreciation, not only of this particular contribution to the public service in America, but also in appreciation of his many other similar contributions in the field of economic research and of progressive civic action.

It is understood, of course, that although the many associates above mentioned have assisted in the preparation of this volume, the author assumes all responsibility for the work of final reading of the volumes and the selection of the material that has gone into the summary; also for the form in which the material is presented , and the comments and explanations that appear.

Other pamphlets and books have been written and published on the findings of the Federal Trade Commission. But we have felt that the facts here presented and the revelations here made are of such vital importance to the American people that a more or less complete review should be made of these proceedings than has heretofore appeared. It is important, we feel, that the publication should present as complete a picture of the methods, operations, and activities of the utility companies as possible. Moreover, the most important and significant revelations in the whole proceedings have to do with the financial methods, structure, and operations of these companies. This particular phase of the subject is at the very heart of the whole problem. It is in the financial methods and structure of the utility corporations that the interests and the destinies of our people are more vitally and powerfully affected than in any other. And, strangely enough, upon this particular phase of the subject neither the press nor the volumes so far published have given any adequate presentation or review. And so for these various reasons we have felt impelled to go forward with the publication of this volume.

We have tried to review the hearings o£ the Federal Trade Commission in an impartial manner and without bias. So far as practical we have reviewed the testimony in the very words of the witnesses themselves, using our' own words and statements only so far as seemed necessary to make the connections clear and the testimony understandable. Every important fact presented in this summary and every statement made, if not directly quoted, is based upon statements of the witnesses or records presented and, so far as practical or where deemed important, reference is made to the volume and page of the hearings where the original testimony may be found.

Thus with this great mass of bewildering testimony sifted until the essential matter stands out; with the material organized and classified under chapter heads; with every important statement based upon actual testimony given, and references to all important statements made; and, finally, with a carefully prepared index covering the entire subject matter, we have endeavored to make this volume an essentially complete and an especially usable summary and review of these amazing revelations.

The hearings are still going on. Other volumes and possibly other investigations will appear. It is the intention of those of us who have worked in the preparation of this volume to follow up these further reports as they appear, and should additional facts and information of an essential nature be developed by these later and further hearings, we shall undertake to publish a supplemental volume to cover these reports. Whether this is done or not will depend upon what the later investigations develop.

All italics used in quoting from the text of the hearings are our own, and are used freely in order to bring out more clearly the important points presented.

Introduction—Is There a Power Trust?

Senator George W. Norris of Nebraska, Senator Thomas J. Walsh of Montana, Governor Gifford Pinchot of Pennsylvania, and others say there is. The representatives of the utility corporations say that there is not and that the power trust is a myth.

In an address to the United States Senate on January 2, 1925, Senator Norris had this to say:

“I have been dumbfounded and amazed, and the country will be dumbfounded and amazed when it learns that practically. everything in the electrical world is controlled either directly or indirectly by some part of this gigantic trust. It controls from one end of the country to the other the generation and distribution of electricity by water power and by other means, and the manufacture and sale of electrical appliances, running all the way from a little electric bulb in the house lamp to the gigantic generator that will handle without trembling from 30,000 to 60,000 horse power. A gigantic trust that has fastened its fangs upon the people of the United States from the Atlantic to the Pacific and from the Great Lakes to the Gulf.” [Congressional Record, January 2, 1925, 68^th Congress, 2^nd Session, pp. 1101-1107. See also same record for February 9, 1925, p. 3382.]

About the same time Governor Gifford Pinchot submitted his report to the State Legislature of Pennsylvania on "Giant Power," in which he said:

“Nothing like this gigantic monopoly has ever appeared in the history of the world. Nothing has ever been imagined before that even remotely approaches it in the thorough-going, intimate, unceasing control it may exercise over the daily life of every human being within the web if its wires. It is immeasurably the greatest industrial fact of our time. If uncontrolled, it will be a plague without previous example. If effectively controlled in the public interest, it can be made incomparably the greatest material blessing in human history?” [“Giant Power Survey” report to State Legislature of Pennsylvania, February, 1925, pp. X-XII, Harrisburg, Pa.]

On the other hand, representatives of the utility corporations insist that there is no power trust and that the investigations that have been made prove their contentions. According to the witnesses, speakers, and writers of the utility corporations, there is no such thing as a power trust. The power trust is a myth. [Exh. Pt. 3, p. 290.] A typical example of the position taken by the utilities on this point is an address delivered by Martin J. Insull, President of the Middle West Utilities Company. [An address delivered as guest speaker of Halsey, Stuart and Company over the coast-to-coast network of the National Broadcasting Company and associated stations February 11, 1931, and printed and widely distributed by Halsey, Stuart and Company and others.] Mr. Insull says:

“Our government spent several years and much of our money in arriving at the same conclusion”—

namely, that there is no trust.”

“The power trust must, therefore, remain a myth until the politicians, professors, and editors who talk about it so glibly condescend to give us more definite information about it.”

This controversy went on in Congress and out until finally a joint resolution was passed and approved on February 9, 1925, providing for an investigation of the utility corporations by the Federal Trade Commission. [Joint Resolution No. 329, of the 68^th Congress, 2^nd Session, 1925.] The Commission submitted its report on February 21, 1927, as Senate Document No. 213. This report preceded the publication of the present investigation, with which we are chiefly concerned in this book, by over a year and we refer to it frequently as "the earlier report of the Federal Trade Commission."

Senator Walsh’s Resolution

Senator Thomas J. Walsh of Montana, Senator George W. Norris of Nebraska, and other senators were not altogether satisfied with the findings of this earlier report of the Federal Trade Commission and pressed for an independent investigation by a committee of the United States Senate.

In an address in the Senate in 1927, 69th Session, on the "Capitalization of Public Utilities," Senator Walsh discussed the growth of the numerous utility companies, and the development of the holding companies, together with the issuing of various kinds of securities "offered to the investing public in sums staggering in amount." The experience of the long-suffering public, he said, had led the people to surmise that these securities were often "acquired at inflated values, affording an unsafe basis for the securities issued against them, or that the rates exacted of consumers from which interest and dividends must be met are unwarrantedly high." [Quoted from The public Pays, by Ernest Gruening, pp. 3-4, Vanguard Press, New York, 1931.]

Pursuant to this line of thought, Senator Walsh introduced a resolution providing for an investigation to be made by a committee of five senators. The resolution was not acted upon at that session and he introduced a similar resolution in the first session of the following Congress.

Stubborn Resistance

When this resolution by Senator Walsh was introduced providing for an independent investigation by a Senate committee, a very determined opposition up at once. Open opposition to defeat it entirely was obviously impolitic, so efforts were made to sidetrack it. Senator George H. Moses of New Hampshire moved to refer the matter to the Senate Committee on Interstate Commerce and the motion carried by a narrow margin. Friend and foe alike assumed that there the matter would be buried. But very much to the surprise of both, the committee reported on the resolution recommending unanimously that it pass.

Failing in the effort to bury the resolution in committee, the next move of the opposition was to try to amend it so that the investigation should not be made by a Senate committee but by the Federal Trade Commission, which it was believed would be more friendly. An amendment to this effect was introduced by Senator Walter F. George of Georgia who later admitted that he believed that no investigation whatever was needed. [The Public Pays, By Gruening, p. 7.]

And then the battle began. There was a hurried call to the utility forces in every direction and a hurrying and scurrying of their representatives to Washington to appear in opposition to the Walsh resolution and in favor of the George amendment to have the investigation shifted to the Federal Trade Commission. What Senator Walsh described as "the most formidable lobby ever brought together, in my time at least, for fifteen years, representing capital to the amount of nearly $10,000,000,000, and representing what? The general public, the consumers of electric energy, and the purchasers of securities that are put out by these companies? Not at all; but representing the companies to be investigated." [The Public Pays, Gruening, p. 7.]

And the utilities won. At least, they got what they were contending for. The investigation went to the Federal Trade Commission.

It is the findings of this Commission and a summary of the evidence there presented that we review in the subsequent chapters of this volume.

Confessions of the Power Trust

Part 1—The Hearings

Chapter 1—The Investigations

What the Senate and the Country Wanted to Know

For ten years or more the thoughtful people in this country have been watching with growing concern developments in the utility field-especially in the electric power part of the field. For most of that time such men in the United States Congress as Senators George W. Norris, Thomas J. Walsh, Clarence C. Dill, R. B. Howell, Robert M. LaFollette, Burton K. Wheeler, have been demanding and insisting on finding out the facts in regard to this matter. And what they wanted to know and what they insisted that the country wanted to know was the basic, essential facts and especially the facts regarding the economic and financial operations of the utility companies.

Financial Structure and Methods Fundamental

Senator Walsh opened the long fight for the investigation with a discussion of "The Capitalization of Public Utilities." To him this was the heart of the whole question. Later, he said:

“The purpose of the proposed investigation is to protect two classes of our citizens: First, the 17,000,000 of householders who pay for electric lighting; and, second, the great body of our people who are now putting their savings into the securities of these corporations.” [The Public Pays, p. 5, Gruening.]

And Senator David I. Walsh of Massachusetts, emphasizing the same thought, declared:

“The underlying question here is the financial structure of these utility corporations,

and that he considered it

“A public and political question of the highest, if not of supreme, importance in America today.” [The Public Pays, Gruening, p. 8.]

They wanted to know, of course, to what extent the control of electric power utilities had been concentrated or was being concentrated into the hands of a few-but they knew that the question of the financial structure and methods of the utility corporations would reveal that. They wanted to know, of course, the extent to which these utilities had exercised their force and influence in molding public opinion in the press and in the schools, universities, and otherwise; and to what extent they had used their influence and power in affecting the political affairs of the country. But, above all, they wanted to know the financial structure, methods, and operations of these companies. And these facts, as we shall see, have been the most obscured, the most closely guarded, and the most difficult to obtain.

What the Earlier Investigation Revealed

As stated above, the utilities contend that the earlier investigation made by the Federal Trade Commission showed that there was no power trust and they felt that this report gave them, more or less, a clean bill of health. On the other side those who were pressing for an independent investigation also felt that the report was not entirely satisfactory. But let us see what this earlier report reveals.

This first report of the Federal Trade Commission was submitted to the president of the Senate under date of February 21, 1927, and covered the situation as it existed prior to December 30, 1924. The present investigation of the Federal Trade Commission, which is our chief concern in this volume, is quite a different matter. It takes up the subject much more exhaustively, and while it covers to some extent the earlier period, it deals more particularly with the situation following the year 1924 and follows the development during five or six years following the period covered by the previous report. Even so, it may be well to recall the exact words of the earlier report of the Federal Trade Commission.

In the conclusion of the earlier report covering the period previous to 1924 the Commission says: [Electric Power Industry, Control of Power Companies, Document No. 213, 69^th Congress, 2^nd Session, p. 50.]

“From the facts presented above regarding the electric power industry, it is obvious that in 1924, neither the General Electric Company nor any other single power interest, or group of clearly allied power interests, substantially monopolized or controlled the generation, transmission, and sale of electricity in the United States. In 1924, about one-eighth of the country's total generating capacity and about one-ninth of the electric energy generated was within the sphere of influence of the General Electric Company and its subsidiary, the Electric Bond and Share Company.”

Especial attention is called to the fact that in this earlier investigation the Federal Trade Commission was instructed by the resolution passed by Congress in that connection to inquire particularly into the extent of the control of the industry by the General Electric Company. For at the time this resolution was approved, it was charged in the Senate that the General Electric Company had acquired and was exercising a very extensive control over the entire power industry, either directly or indirectly through stockholders or interlocking directorates, or otherwise. And while it was true that the investigation was made somewhat more general, the main point at that time was to determine. whether this particular company or some other single power interest or group had secured or was securing a substantial monopoly in the electric industry. This, as stated above, the Federal Trade Commission found to be not the case at that time. Furthermore, the Commission went on to say that "no other single interest in 1924 dominated or controlled as large a portion of the total as the General Electric interests."

Moreover, this earlier report goes on to say that "since 1924 the General Electric Company has disposed of its direct control of the Electric Bond and Share Company and their present managements have no obvious or necessary community of interest nor the support of any known dominant group of stockholders." [Electric Power Industry, Control of Power Companies, Document No. 213, 69^th Congress, 2^nd Session, p. 51.]'

It is upon the above statements of the earlier report of the Federal Trade Commission, no doubt, that the representatives of the utility corporations base their claim that the Commission has found that there is no trust.

Even so, in this earlier report of the Commission a statement is made regarding the tendency that was already under way and which has moved very swiftly during the year's following 1924. In this same report, and immediately following the quotation made above, the Commission said:

“On the other hand, both the Insull and North American companies have increased their control in a marked degree over operating properties, and this is also true of several other groups. As a result of these developments. the proportion of the industry controlled by independent operating units appears to be declining in spite of the rapid growth of the industry.

“Although no substantial monopolization exists of the entire electric power industry of the country by any single interest, such monopolization within certain states and lesser territorial areas is already a fact, growing out of the increase in size of the groups of operating units, and modern operating systems now tend to transcend state boundaries, thereby creating larger and larger areas in which there is a substantial monopoly in the furnishing of the service.” [Electric Power Industry, Control of Power Companies, Document No. 213, 69^th Congress, 2^nd Session, p. 51.]

Moreover, this earlier report, as we shall see in subsequent chapters, develops some very interesting and significant information regarding the financial structure and methods of these utility corporations which, as all agree, constitutes the very heart of the whole subject. We shall not attempt to review this phase of the findings of this earlier report, as it will be dealt with in subsequent chapters.

From the above it will appear that even this earlier report of the Federal Trade Commission brought out many vital and important matters regarding this utility question. We shall now turn to the volumes of the present report of the Federal Trade Commission which covers the period subsequent to 1924 and in the following chapters will present the findings of this more recent investigation.

Chapter 2—Confessions

The System Reveals Itself

The evidence submitted in this volume regarding the private utility companies is made up almost exclusively from the testimony of the representatives, officials, and employees of the utility companies themselves. In this sense the whole volume constitutes in a very real sense the confessions of the utility companies. But of all of the confessions made by these various representatives throughout the hearings, there is probably none more sweeping, more significant, or more astonishing than that of J. B. Sheridan, who was for many years the director of the Missouri Committee on Public Utility Information. [Exh. Pts. 5 and 6 pp. 99-634.]

Mr. Sheridan, according to the evidence submitted, was one of the most aggressive, one of the most effective, and altogether faithful of the men in the active work of the utility companies. It would seem from the evidence that at times he was over-zealous in his work and his devotion to the tasks that he had undertaken in behalf of the companies. He was evidently thoroughly informed upon every phase of the subject and familiar with the inside workings of the whole organization. A more competent witness, therefore, could hardly have been called to the stand. We shall have occasion to refer to his work incidentally in other chapters, but here we shall present some of his intimate personal and confidential communications that will bare not only the innermost soul of the man, but the innermost workings of the private utility companies.

J. B. Sheridan, the Star Confessor

In Exhibit 2968 of the Commission's reports [Exh. Pts. 5 & 6, pp. 306-7.] will be found a letter of this Mr. J. B. Sheridan which was taken from the files of the Missouri Committee on Public Utility Information. It was marked "Personal and Confidential," dated August 12, 1927, and addressed to Mr. Thorne Browne of the Middle West Division of the National Electric Light Association at Lincoln, Nebraska. This astonishing letter reads as follows:

“What can we do when the financiers will inflate, overcapitalize, sell securities based on blue sky or hot air, and rates must be kept up to pay returns on said blue sky and hot air?

“The best public-relations stuff in the world is a nice little reduction of rates. Do we get it? We do not. I know places where I believe a 13-cent top rate should be 8 cents.

Municipal Plant Does Better

“A municipally owned plant, city of 8,000, pays all indebtedness on plant without recourse to tax fund, lights white way, streets. etc., without getting money therefor, but it is charged on the books, and has a top rate of 8 cents per kilowatt hour, 4 cents power; B, 50 miles away from A, 8,000 population, better industrial town than A, better power load, exacts a top rate of 15 cents per kilowatt hour, 8 cents for power.

“Reconcile these, if you can. I can't. I don't pretend to. There are no holes to be found in the municipal plant at A. As I see it there is nothing inherently sacred in private or public ownership. It all depends on which works out the best for the public. We talk a lot about what private ownership has done. Yet many municipal plants were built because no private parties would build them.

“If cities and states own and operate highways, schools, streets, sewers, water supply, why not electric and gas plants?

“To be logical, private ownership should at least have designed means to supply water.

“I know places where public schools are anathema to the people, holding with private schools.

“I believe in private initiative, but I don't believe in subsidizing it 3 to 6 cents per kilowatt hour. The privately owned industry should be ashamed of itself to permit a municipally owned plant, operated on the square, to undersell it 4 to 6 to 7 cents per kilowatt hour. Don't say taxes? Taxes are less than $0.0023 per kilowatt hour in this state.”

Huge Profits for Bankers—Increased Rates for Customers

“Mr. Browne, the bankers in the electrical industry, do not appreciate what a fat thing they have had in the past seven years. They do not appreciate the enormous value of the monopoly feature. They do not appreciate that electric light and power properties are not loaded dice to be employed in a craps game in which investors and the public are injured. Until they appreciate and practice these things, I greatly fear that neither you nor I nor anyone else can help them very much.

“Things were lively in this state until February, 1927. Then an unpopular railway company demands a huge valuation and increase of rates. Another company gets $13,000,000 added to its value and publicly promises not to ask for increase of rates. Three months later this company petitions for a "readjustment of rates" which in effect increases slightly the rates of 155,000 of 200,000 customers, then the controlling group sells out with a profit of from $12,000,000 to $14,000,000 on 60 per cent of the small issue of common stock.

“Huge profits for the bankers, increase in rates for customers.

“This was an ideal state for public utilities. What it will be in the future, I do not assume to forecast. No doubt 90-per cent of the business in the state is honest and rates correct. But the 10 per cent smears the 90 per cent.

“Two years ago in Chicago, Davis and I asked that the industry declare itself on speculation. The hired publicity men had a fit. They'd lose their precious jobs. A year later Jim Davidson did say something against speculation before the electrical board of trade, St. Louis, but when I asked him to repeat for publication he declined. Aylesworth said something. Sam Insull said something about it. But no one drove it home.

“Unless the industry is honest and on the level, it will kill itself. . Ninety per cent of it is honest enough. It must be 100 per cent honest. And it must come to recognize that public utilities are not private dice, or playing cards, or chips in a poker game, but public trusts to be administered carefully, cautiously, economically, with the interests of investors in fixed securities and public, which are identical, coming before profits on common stock or upon inflation of securities.

“What's the remedy? Why, hang the offenders high as Haman upon the gibbet of publicity. Tell the world what they are doing. Admit your own sins and repent.

“Most people will say that I am a damn fool for this, but I don't believe that you will.”

Sheridan’s Change of Heart

The letter quoted above is not the only indication of a realization of the nature of the work that the private utility companies were doing, nor the only confession that Mr. Sheridan is found to have made in his personal and confidential correspondence. Exhibit No. 2721 of the Commission's hearings [Exh. Pts. 5 & 6, p. 156.] is a letter by Mr. Sheridan to John W. Colton, Editor Aera, American Electric Railway Association, New York City, under date of June 14, 1927, which reads as follows

“As far west as St. Louis the fame of a protest made by a certain remote employee of large corporations against a certain proposed plan to offset certain political movements affecting private ownership of public utilities has penetrated. May I modestly claim blood brothership with a little hammered-down Yankee who has the intestines, the intelligence, and the native honesty to make the protest as related to me?

“You are a man, John Colton, and I am glad that there is one like you left _____ _____ _____ feller; “What profiteth it for a man to gain the whole world if he loses his own soul?” “From your action, as reported to me, I take renewed courage and renewed faith that the ‘Government of the people, by the people, and for the people shall not perish from the earth:' Gratefully yours,

John Colton’s Confession

In reply to this letter Mr. Colton wrote to Mr. Sheridan under date of June 16, 1927, a reply that was a very interesting sidelight on what was going on in the hearts of these men relative to the nature of the work they were doing. Mr. Colton's letter reads as follows:

“It may be needless for me to say that I deeply appreciate your letter of June 14, but I want to say it just the same.

“They say that fools rush in where angels fear to tread. If that is true, I am probably one of the biggest fools on earth. But I can not help being what I am. If people ask me for my opinion, and I believe that it is worth while to give an opinion, I mean to give my honest one. A hypocrite is one of the poorest works of the Almighty; it isn't fair to the Almighty to ascribe to Him the creation of a hypocrite. Perhaps fear makes more hypocrites than any other cause. If that is so, pray God there will be an improvement in the process of evolution.

“Just at present I feel very much disillusioned. I am one of those simple-minded creatures who believe all men to be honest and sincere until I find them otherwise, and even then I doubt the justice of my own conclusions. When I am forced to acknowledge that men whom I believed were earnest and sincere are only cheap, lying politicians, I have a feeling of sadness that is depressing to me. I do not resent this condition so much as I deplore it.

“You are absolutely right when you ask the-question, as it was asked 2,000 years ago, "What profiteth it for a man to gain the whole world if he loses his own soul?" The man who can not look himself in the eye when he shaves himself in the morning, or who hangs his head in the solitude of his bedroom when attempting to address himself to God, is one of the poorest and most miserable creatures, though he have wealth incalculable.

“I know that all things work for good, and that seeming defeats may be merely heralds of victory—and I do not mean this in any materialistic sense.

“Here's wishing you the best of all good things and assuring you of my sincere friendship, Sincerely, [Exh. Pts. 5 & 6, p. 156.]

Free Speech the Greatest of Human Rights

Another and still deeper look into the nature of the utility situation is presented by Mr. Sheridan in his letter to Mr. Colton under date of June 24, 1927. [Idem.] He says:

“A brave man is never foolish. If a man has not courage, what has he?

“Yea-up men are a little breed. Possession of property breeds liars and cowards. The man who invented private ownership was a mortal enemy of the human race.

“Hot dog! Boy, I am strong for you. For 30 years I spoke as I felt. For 5 years I held my tongue. Now I mean to resume the greatest of human rights—that of free speech.

“Damn it all, John, they never can make hypocrites and cowards of all the people. T’ell mit 'em.

“Sincerely your friend,

“Lying, Trimming, Faking, Flag-Waving”

Corroborating Mr. Sheridan's confidential testimony, Mr. John Colton of the American Electric Railway Association writes to Mr. Sheridan under date of October 17 as follows:

“The thing about the utility industry that disgusts me is the lying, trimming, faking, and downright evasion of trust, or violation of trust that marks the progress toward enormous wealth of some of the so-called big men in the industry. When I see some of these fellows waving the flag, I am filled with not only disgust but rage, for they are anything but patriots.

“I do not know whether I am going to stay in the utility industry or not. I would thoroughly enjoy fighting some of these faking patriots through the editorial page of an influential newspaper, and I do not believe I would have much difficulty in landing such a position. On the other hand, there are utility companies that try to play the game honestly and with whom I would be glad to be associated. I do not believe that this type of utility company is representative of go per cent of the industry by any means; I think it is about 10 per cent. I would enjoy being linked up with even so small a minority if it might impress upon the go per cent a realization of its responsibilities to the public, and inculcate in it a few germs of ordinary, garden variety of honesty. [Exh. Pts. 5 & 6, p. 157.]

“All Slaves of Money Are Timid”

Replying to the above letter of Mr. Colton, Mr. Sheridan wrote on October 22 a letter which appears as Exhibit No. 2725, as follows:

“I agree with everything you say, but I have found more honest people in the industry than you have. The trouble with them seems to be that they are so timid and fearsome. Of course, the biggest of them are merely messenger boys of money, and all slaves of money are timid.

“The first thing with the boys is to hold their jobs. I suppose that is natural. They all have around them a dozen fellows crazy to get their jobs, so they must be careful of what they say and do.

“We are raising a lot of thoroughly drilled ‘yes, ma'ms’ in the big corporations, who have no minds of their own; no opinions. As soon as the old individualists die, and there are not so many of them left, I think the corporations will have a lot of trouble in getting good executives. After a man has served 20 to 30 years in one of these monstrous corporations he is not liable to have much mind of his own.

“Then, too, they do the very thing they rail at-socialize' their employees and the people. The best of these big corporations, the ones which treat their employees best, merely socialize them. Unless the corporation is there to look after them they are helpless.” [Exh. Pts. 5 & 6, pp. 157-58.]

Grasping for Profit

Another confession of Mr. Sheridan goes deep into the nature of men in matters of this kind. He says in his letter to L. E. Gettle of the Railroad Commission of Wisconsin:

“Grasping for profit is an underlying human quality common to the world, accentuated in the United States. Men are fair, just, honest, generous, until it comes to splitting up the money. Then—beware." [Exh. Pts. 5 & 6, p. 456.]

And again Mr. Sheridan makes this observation in the same letter:

“The farmer is quite as avaricious for land value profits, the unearned increment, as the Wall Street gambler. Des Moines and Cedar Rapids are the Wall Streets of the land speculators, in my mind, the most evil of all speculators.

“Bearing these things in mind, the only thing that will save the public utility industry from the speculators is a firm hand upon securities, valuations, rates, etc.”

Regulation Breaking Down

And then, as though to substantiate another well-known contention of many who have criticized the present situation, Mr. Sheridan discusses the part that the courts have taken in breaking down State regulation. "The courts," he says, "have, legally and logically, weakened the power of the State Commissions which, the utility people admit, are the best friends of the industry."

Here is another confession to the effect that the utility commissions are regarded by the utility corporations as the best friends they have. But Mr. Sheridan goes on:

“It appears to be logically and legally right that a public utility should gain from increased value—prices—of property, but I doubt the wisdom of demanding valuation on "reproduction new." In some instances rates could not be collected upon "reproduction new." There is a danger that prices will recede to 1913 standards.. . . The great danger to the utilities seems to be the man who wants to "cash in" now, not to operate for the future.

“By insisting upon "reproduction new," issuing securities, cashing in, this man, aided legally and logically by the courts, is breaking down state regulation. (Our italics.)

“What a lovely business it could be if men were not so greedy. I have great confidence in Aesop. We are all killers of the goose that laid the golden egg. All of us.” [Exh. Pts. 5 & 6, pp. 456-57.]

Ambitious to Get Rid of Every Municipal Plant

To all of the above we may add yet another confession which is significant of the purpose of the public utilities and their representatives. Mr. Sheridan in a letter to Mr. A. J. Luick of the Illinois Power and Light Company under. date of February 4, 1926, makes the frank confession: "My great ambition is to get rid of all municipal plants in Missouri.” [Idem., p. 409]

This letter of Mr. Sheridan's was a reply to an appeal from Mr. Luick for material that would help him (Luick) to counteract the influence of the success of the municipally owned plant in Hannibal, Missouri. Mr. Sheridan in this case, as in others, was honest enough to confess that the Hannibal Municipal Plant was absolutely on the square and a successful project, and that it sells electricity at a very low rate. And then he says: "It is extremely desirable that the Hannibal plant should be removed from the field of comparison in Missouri." (Italics ours.) And later on he expresses the more general ambition to get rid of all of the municipal plants in Missouri.

How They Blocked Enabling Legislation

Another very interesting and significant confession of Mr. Sheridan comes out with reference to certain legislation in Missouri.

It seems that the farmers and rural residents in the vicinity of Hannibal, Missouri, were very anxious to get electric service from the municipal plant at that place. To do this the farmers wished to build their own distribution line and purchase energy from the Hannibal municipal plant. However, as the laws of the state did not provide for this particular form of co-operation or public ownership, the farmers appealed to Representative Nelson of Marion County, who introduced a bill in the session of the Missouri Legislature to enable the farmers to form co-operative electric service districts to generate, purchase, and distribute electric energy.

The bill did not pass. And Mr. Sheridan in a letter to Mr. J. E. Hillemeyer of the Union Electric Light and Power Company of St. Louis cites the fact that this bill failed to pass as an evidence of "the general favorable results which may be reasonably anticipated from the organization of the Missouri Committee on the Relation of Electricity to Agriculture." [Exh. Pts. 5 & 6, p. 410.]

Not only does Mr. Sheridan in this case confess to the activity of the utility organizations in the defeat of needed enabling legislation, but in the same letter he goes on to explain just why it was advantageous for this legislation to be defeated. He says:

“One of the best arguments of the privately owned electric industry with farmers is that the farmer can look only to the privately owned plants for electric service, that the municipally owned plant simply can not give him service.”

He then cites the Hannibal situation, saying:

“In this particular instance at Hannibal, the farmers can not even purchase current from the municipal plant.”

In other words, by preventing the passage of this enabling legislation, the utility interests were by that very means enabled to have a very substantial argument against municipal ownership. Their efforts crippled the municipal plant and prevented its service reaching the farmers, who were thereby supposed to be driven to support private ownership.

Above we have quoted the testimony of Mr. Sheridan with regard to the success of municipal light and power plants, which is so generally denied by the utility companies in their publicity material. He has testified to the success of the municipal plants in Seattle and Pasadena; to the lower rates charged by municipal plants as compared to private, and that the low rates so puzzle him that he is unable to figure it out; that "when a little municipal plant can equal a big system in rates and service, we have no excuse for being in the business," [Exh. Pts. 5 & 6, p. 434.] and how the municipal plant at Hannibal, Missouri, and Chillicothe have undersold the private plants. [Idem, pp. 400-408.]

Here in these confidential letters of these men we catch a glimpse of the innermost workings of these great utility organizations. After all allowances and deductions are made for possible personal grievances and bias, it would seem that practically every contention which the critics of the utility companies of this country have been making regarding their methods and the effects of their operations have here been admitted and confessed by those who are in the best position to know the truth. In these letters the following confessions are made:

What the Confessions Show

(1) That the utility companies do inflate their capital accounts, a matter which they have strenuously denied until the facts were established in the hearings of the Commission.

(2) That the inflation of capital accounts forces up rates, a matter which they have always denied and apparently seem still to persist in denying.

(3) That utility rates are too high.

(4) That municipal plants have lower rates than private plants under similar and comparable conditions.

(5) That municipal plant accounts are properly kept, at least in many cases.

(6) That it is just as logical for a community to own and operate light and gas plants as it is for them to operate highways, schools, streets, sewers, and water plants.

(7) That the taxes paid by private plants do not account for the difference in the rates charged as compared with municipal plants and have little effect upon rates.

(8) That the bankers are involved in the electrical industry.

(9) That the investment bankers are making enormous profits playing with the utility interests as with loaded dice at the expense of investors and the public.

(10) That utility companies do not keep their promises that they will not increase rates.

(11) That corporations make huge profits in the purchase and resale of their properties which results in further increases in rates to the public.

(12) That efforts on the part of men in the industry who have declared themselves against extortion and exploitation in the hope of reducing it were silenced and repudiated by hired publicity men.

(13) That the utility industry is killing itself by treating public utilities as dice, cards, or chips in a poker game instead of a public trust to be carefully, cautiously and economically administered in the interests of the public.

(14) That there is much in the service of the utility corporations that breeds hypocrisy, dishonesty, and insincerity.

(15) That the greatest of human rights, free speech, is largely surrendered by those in the service of the utility corporations.

(16) That the great boast of patriotism on the part of the utility companies is often a mere hypocritical pretense, a fake and delusion.

(17) That in the service of the industry is much "lying, faking, and downright evasion."

(18) That it is the greed for profit that works havoc in the utility as in other fields.

(19) That regulation is breaking down.

(20) That the utilities are determined to destroy municipal ownership and acquire every municipal plant.

(21) That the utilities block and prevent the passage of legislation helpful to municipal plants.

It would be hard to find encompassed within so small a space such a complete and sweeping indictment of the methods of the utility companies as is here confessed by some of their own most trusted and effective representatives.

The Price He Paid

Thus the amazing story of John B. Sheridan. There was something pathetic-something tragic about it. Even in the testimony of these innermost thoughts of his is the evidence of the price that he was paying for the service he rendered. And there may have been a still deeper tragedy in it all than appears in these records. For we are told that in April, 1936, John B. Sheridan committed suicide. [The Public Pays, Gruening, p. 247.]

Other Confessions

Startling and sweeping as are the above confessions, there are yet others of importance that may be noted here, reserving to later chapters a more detailed and extended presentation. Among these the following may be just briefly noted:

(1) That Utility Corporations Do Not Amortize or Pay Off Their Capital Accounts. Another confession that is found in the literature of the utilities, and one that is quite important, is to the effect that the private utilities never amortize their capital accounts. It is stated in the pamphlet gotten out by the utilities in California, entitled Shall California Be Sovietized? and the statement reads:

“Privately owned public service corporations never attempt to repay the capital investment out of rates. The investment is permanent. The rates merely provide interest on the value of operative properties.” [Exh. Pts. 10-16, p. 613.]

(2) That Utility Rates Are High and High Rates Restrict the Service. Another important confession that comes out of the testimony of the utility corporations is that high rates restrict the use of electricity and especially so in the case of domestic service. It is pointed out by one of the representatives of the companies that due to the extremely low rates for domestic service in Ottawa, Canada, the average use is 1,440 kilowatts per year, whereas in the United States the average domestic use is only 362 kilowatt hours per year. [Exh. Pt. 3, p. 604.] And this same author goes on to explain that the lowest rates on the continent are in Canada under public ownership, whereas the highest rates are in New Mexico, where they reach 18 cents per kilowatt hour. There is quite a large group of companies, according to this same authority, where the rates are 14 and 15 cents per kilowatt hour, and a fairly representative number where the rates are 12 and 13 cents per kilowatt hour. The average domestic revenue was around 10 cents per kilowatt hour. [Pt. 22, p. 25.] And the companies having the best average use, namely, 424 kilowatt hours per year, are the companies where the domestic rates are about 5 and 6 cents per kilowatt hour.

Here then is another admission of the contention that the proponents of public ownership have been making, that rates are lower under public ownership, and that the lower rates greatly stimulate the use of the service.

(3) That the Publicity Material Published and Distributed by the Utilities in the Schools and Universities, Press, etc., IS Propaganda. The utility companies throughout their literature, and especially that which is used in the public schools and universities, have insisted that the material they are publishing is strictly educational and in no sense of the word propaganda. And yet the Director of the Public Utility Information Bureau of Michigan seems to be a little more frank in the matter. Discussing the advertising policy of the committee, the material that appears in their news bureau, etc., he asks: "Is this propaganda?" And answers immediately: "Of course." And later he adds: "Our news matter is propaganda just like the public information about insulin, safe driving, peace, pure foods," etc. [Exh. Pts. 5 & 6, pp. 819-20.]

(4) That Utility Contracts Are Not Binding. Another confession that appears in the records is one that will doubtless come with a good deal of surprise to many people. It is to the effect that contracts made by municipalities with utilities are not binding. This fact is familiar to those who have been in close contact with these matters during recent years, but is generally unknown to the public. The matter is made very clear and very emphatic in a report by the board of directors of the Western Society of Engineers at its meeting in Chicago August 25, 1920. The report says:

“In our opinion the only thing which has saved any semblance of adequate utility service in Chicago under present cost conditions was the fact that the "contract ordinances," established by the city council under the old system and still fought for by the city administration, could legally be broken and overruled by action of the State Commission under the working of the new system. (Our italics.) The fallacy of "contract rates" for public service has at length been fully demonstrated.” [Exh. Pt. 2, p. 763.]

Samuel Insull Speaks

Samuel Insull is even more emphatic and decided upon this point. In an address before the Peoria Association of Commerce in March, 1921, Mr. Insull had this to say:

“We are also told that in advancing their rates when forced to by war consequences utility companies have broken solemn contracts with municipalities, because the former rates had been specified in so-called contract-franchise ordinances. I am advised by competent lawyers (1) that this contention is utterly false; (2) that no city in Illinois ever has had authority from the State legislature to make rate contracts; (3) that the law of Illinois in this respect is so well settled and was settled so long ago that even political lawyers ought to know it.”

And then he makes this astonishing statement:

“The first contract breakers in respect to utility-service rates in Illinois were cities, not utility companies; and it was settled then—about 20 years ago-long before a public—utilities commission for Illinois was ever thought of, that municipalities could not fix rates by contract or otherwise for a period of years (our italics), because changing conditions might convert a fair rate of this year into an unfair rate, too high or too low, next year. The duly constituted authorities have the power to fix rates, but not the power to fix them unchangeably for 5, 10, 20, or any other period of years; rates must be at all times subject to change as conditions change. This has been decided by the Illinois Supreme Court and affirmed by the United States Supreme Court again and again. So-called rate-contract provisions in franchise ordinances always have been void, even when originally enacted?” [Exh. Pt. 2, p. 153.]

(5) That the Cost of Producing Electricity by Steam Is Now Less Than by Water Power. Here is another very significant and important confession or admission that comes out in the hearings, viz., the fact that, according to the utility companies themselves, they are able to produce electric current by steam under present conditions more cheaply than it can be produced by water power. They now estimate that on the average it costs 1.92 cents per kilowatt hour to produce electricity by water power, whereas it can be produced by steam on the average at 1.79 cents per kilowatt hour. The importance of this point lies in the fact that if, as they claim, electricity can be produced as cheaply by steam as by water power, then the argument which they have so frequently used to the effect that it is unfair to compare the cost of electric service under private ownership in New York State, for example, with the cost of electric service in Ontario, because the production in Ontario is wholly by water power, whereas in New York and elsewhere the private companies produce largely by steam power—this argument falls to the ground by their own admission. [Exh. Pts. 5 & 6, p. 1059, in article on “State Ownership and Operation of Water Powers,” by Halford Erickson, Vice President, Byllesby Engineering and Management Co., Chicago.

(6) That the Utilities Think the American People Have Low, Mercenary Ideals. Dr. Theodore J. Grayson of the University of Pennsylvania, speaking at an annual convention of the New Jersey Utilities Association, spoke of the mercenary motives that have captured the American people. "They like to make money," he said, "we all like to make money; but there is something additional that the American people like to do. They like to succeed in the business world; they like to gain power and the mental attitude that comes with business success." And then, as though realizing the lowering of ideals he was suggesting, he went on to remark

“I deplore as an individual that this attitude of mind has more or less swept into the background for years the development of art and literature and music. They have been secondary in modern America.... The thing that appeals to us is conquest in business.” (Our italics.) [Exh. Pts. 7, 8, 9, p. 37.]

(7) That the Utility Men Often Have a Wolfish Cupidity. J. B. Sheridan of the Missouri Committee confesses to some dislike of the cupidity of the power companies. He says:

“The thinking of many utility men is the inconsiderate cogitation of a famished wolf when confronted with a defenseless baby, "It is meat. Bolt it as quickly as possible." . The fact that the baby's family may not be appreciative of the complete satisfaction of the wolf never occurs to him and he is probably surprised when they do not participate in it.” [Exh. Pts. 5 & 6, p. 457.]

(8) That the Press and Utilities Work Together. We learn from Ole Buck of the Nebraska Press Association, in a letter written to J. B. Sheridan, that the Nebraska Press Association worked together with the utilities right along.

(9) That the Consciences of the Utility Men Sometimes Trouble Them. Horace Davis of the Nebraska Committee of Public Utility Information admits that he had been "so anxious to get figures that read the way they did," that he grasped them, even though had he taken pause, he should have known that they were not correct. "It was a case," he writes, "of 'do a great right, a little wrong, and curb this cruel devil of his will.’” But in the same letter he confesses:

“Been to bed and can't sleep-some of these times I'm going to get a piece of soft pine and a sharp knife and whittle out a conscience that will let me sleep when other people do.” [Exh. Pts. 5 & 6, p. 1101.]

(10) That the Public Can Borrow Money More Cheaply than Private Companies. [Exh. Pt. 3, p. 667.]

(11) That a Return to the Utilities on Their Investments is Practically Guaranteed. [Exh. Pt. 3, p. 668.] The statement in this connection is made by Ernest Greenwood to the effect that "the trend of rates has been steadily downward, while the stability of the industry and its security issues has been steadily upward," and that "this is due to the fact that while state regulation limits the profits to a reasonable return on the value of the property, this return is virtually assured because the service enjoys a monopoly under Government regulation."

(12) That the Utilities Have no Competition. In this connection, the statement is made that under existing regulatory laws in 30 different states the utilities have no competition and are guaranteed a virtual monopoly? [Pt. 3, p. 131.]

Here we have in this brief chapter a pretty fair outline of the confessions of the utility corporations. In the chapters that follow we shall present further testimony upon these matters, as well as others, to complete the picture supplied by these remarkable hearings.

Chapter 3—The Ultimate Purpose

One Vast Monopoly

"Eventually all power plants will be joined together in one vast system or series of systems and every new completed project will be added to them, forming a tremendous power reservoir, from which current will flow into every darkened locality in the nation. Each water power, power house, or substation will be a unit in the complete whole."

So speaks the Utilities Information Committee of Georgia in one of its textbooks. [Exh. Pt. 3, p. 1232; see also p. 1236.]

Similarly the New England Power Conference proposes the "creation of a completely integrated system for the transmission of power in New England." [Exh. Pt. 3, p. 418.]

Mr. M. H. Aylesworth, Managing Director of the National Electric Light Association, and later President of the National Broadcasting Company, speaking at a convention of the Pennsylvania Electric Association in 1924, pointed out that at that time

“Three great so-called superpower systems or pools already exist. One, with the exception of a very short gap, which, however, is bridged by low-tension transmission, constitutes an interconnection of high-tension lines reaching from Montana westward into Washington, through Oregon and California into Mexico, a distance of 1,800 miles. In the Middle West a number of states already have been tied together and shortly additional tie-ins will be completed, forming a system reaching from Wisconsin and Michigan, through Illinois, Indiana, Kentucky, West Virginia, Ohio, and part of Missouri. The third is known as the great southeastern tie-in reaching from Alabama, through Georgia, Tennessee, South Carolina, and North Carolina, with the prospect of ultimately reaching westward into Mississippi, Louisiana, Arkansas, and Texas.” [Pt. 3, p. 405.]

And, of course, these three pools, as the evidence shows, are increasingly interrelated and interconnected.

Samuel Insull’s View

In 1921 Mr. Insull delivered a speech before the Peoria Association of Commerce. In that speech Mr. Insull said in erect that utility companies always would have to cross state lines more and more, and that the interstate feature of the development was sure to grow. [Pt. 2, p. 94.]

Judge Healy asked if this was' not consistent with the idea expressed by General Tripp that they are building up one vast power system for the whole country. . . . "It means, doesn't it, that Mr. Insull then thought that the movement toward one vast power system for the whole country was growing?"

[The article by Mr. Tripp here referred to was published in a little volume entitled Super Power As An Aid to Progress, by Guy E. Tripp, published by the Knickerbocker Press (G. P. Putnam’s Sons) in 1924. The idea of “one vast system,” to use the expression referred to above, or one “single super power system,” to use the expression of Mr. Tripp, occurs constantly in this volume. In fact, the frontis-piece is a relief map of the Untied States, with main transmission lines crossing East and West, North and South, of what is designated as “The Proposed Future Super Power Systems of the Untied States.” The map shows “the main transmission lines of a single super power system for the entire United States as proposed by Frank G. Baum, hydroelectric engineer.

[The discussion opens on the very first page of the first chapter with the statement: “Some day if the people of the United States and Canada desire it, a single ‘super power’ system will furnish electric current to the greater part of the North American continent. . . . The question—‘Shall we or shall we not have a single super power system?’—is sooner or later bound to become an important national issue.”

[Again in this volume Mr. Tripp says: “By means of a single super power system, extending from ocean to ocean and receiving power from every waterfall, from the waste products of industry, and from all other economical sources including huge steam plants of the most efficient type placed in the coal regions and other favorable locations, we shall be able to distribute the maximum amount of power obtainable from our resources to the largest number of people at the lowest possible cost.” (Pp. 5 and 6.)

Reference to this “single super power system” occurs again and again throughout the book. (See pages 7, 8, 9, 10, 58, 60.) And the author goes on to state that “the system is being developed more rapidly than most people are aware. Because of the economic and technical advantages of large systems, the present tendency in the electric light and power industry is to consolidate or interconnect adjacent systems; and as a result, super power systems of considerable size have already been formed along the Pacific Coast, in the Southeastern states, New England, and the Northwest. Others are in the process of formation in western Pennsylvania, the Middle West, and elsewhere. Continued development along these same lines, including high-tension interconnections between adjacent super power systems, will bring into being two large super power systems, one covering the country east of the Mississippi and the other west of the Great Plains. Then, if some time in the future, transcontinental lines join these two systems together, the single system will be consummated.” (Pp. 9 and 10.). . .

“Even complete and detailed plans for the final system have been prepared. These plans are the work of Mr. Frank G. Baum, a hydroelectric engineer of long experience, and have been made available to the industry with the assistance of the Westinghouse Electric and Manufacturing Company. Guided by these plans, or by some standardized modification of them, electric light and power companies in the remotest parts of the country can carry on new construction and extensions with assurance that, when the time comes, their systems will be able to take their proper places in the single system.” (Pp. 10 and 11.)

“Now, of course, Mr. Tripp is at great pains to point out that this great “‘single super power system’ must be under private control.” (p. 11.) At another place Mr. Tripp says: “By its very nature, a composite system can produce power at a lower cost, and therefore can sell it at lower rates than an isolated local company. Hence, when its lines reach the territory of a local company, the latter will be unable to compete and must eventually become a part of the larger system. The growth of these composite systems will, therefore, be irresistible, until in time a few ‘super power’ systems, drawing upon all economical sources of power within the areas they cover, will supply electric energy to the greater part of the North American continent.” (p. 14)]

Mr. Mullaney: "Yes." [Idem.]

Mr. A. Flor of the Electric Bond and Share Company writes to the utilities calling attention to an article by this same Gen. Tripp entitled "One Vast Power System for Whole Country Is Projected," and speaks approvingly of it. He urged that it would be of assistance to them "in educating the people in your territory as to the futility of municipal ownership and operation," etc. [Exh. Pt. 2, p. 150.]

Out to Get Them All

Another example of the way in which the leaders of the electrical industry look forward to the integration of the whole electrical industry into one combined organization is shown in the testimony of Mr. Frank Comerford, President of the New England Power Association, and also of the International Paper Company. Judge Healy asked of Mr. Comerford, "Is it correct to say that you are out to get all of the utility companies, all of the electric companies, in Massachusetts that you can?"

Answer: "This is true, Judge: That we believe that the industries of Massachusetts will be bettered, their condition will be bettered, by an integration of the electric companies in that territory. (Italics ours.) We believe that economically such an integration is sound, that it is going on throughout the world, and that we will do our best to integrate in Massachusetts."

Question: "Well, that integration I presume is to occur with your company at the head of it?"

Answer: "We hope so."

Question: "You hope to be the integrating force, in other words?"

Answer: "We do.... We do hope to bring together under one ownership and one operation all of the electric companies in the area touched by our lines, so far as it is sound to do it. I mean that there are exceptional cases where it would not be sound. But so far as it is sound we hope to bring together the electric distribution under one ownership and that one management."

Question: "And that one ownership and management to be yourself, may I ask?"

Answer: "We hope so, judge."

Further in the discussion of this matter Mr. Comerford said that should there come about a conflict between the State and Federal Government, so that this proposed integration would be prevented or retarded, then he felt so strongly the necessity of this integration that he would rather see the States or the Federal Government take over the industry than to see the integration prevented. Judge Healy then asked:

“But tell me why the thing that you are talking about if it happens, will not give your company a monopoly of the electricity in the territory described?"

“Answer: "Judge, it would." [Pt. 15, pp. 92-93.

President Arkwright Admits It

Mr. Preston S. Arkwright, President of the Georgia Power Company, and one-time President of the National Electric Light Association, while reluctant to admit such a general purpose on the part of the power companies, when pressed by judge Healy, could not deny "the intention of the leaders of the electrical industry to eventually erect in the power field a company which will occupy the same position in that field that is now occupied by the American Telephone and Telegraph Company in the telephone field." Judge Healy then asked:

“Well, it would not be surprising, in view of what has been transpiring for the last seven or eight years, if the larger mergers we have now are succeeded by still larger ones, until the entire control of the electrical industry comes into the hands of a comparatively few corporations, would it?”

Mr. Arkwright replied that he had no opinion on that matter. He did not know-thus evading the question. [Pts. 18 and 19, p. 135.]

This same purpose of the leaders of the industry to bring about one vast system controlled by a central organization of individuals or companies is brought out again and again in the hearings of the Commission and in the literature of the leaders of the industry.

But it remains for an enthusiastic professor of a southern university to complete the picture with the familiar and quite astonishing illustration of the spider and the fly. According to the record, this professor, Dr. H. A. Morgan, President of the University of Tennessee, in an address to the southeastern division of the National Electric Light Association, says:

“With infinite cunning, a spider spins his gossamer web to ensnare the unwary fly. With a higher motive, but with more infinite cunning, your electrical engineers are spinning the web of transmission lines; and God speed the day when into every village and hamlet this broad Southland over, your lines and your service shall penetrate.” [Exh. Pts. 7, 8, 9, p. 197.]

So there can be little question that the leaders of the industry are looking forward definitely to the complete concentration and organization of the electric light and power industry of the country under one centralized control. Whether it be a single individual, a single company, or a single group of interests is not essential.

Part 2—The Organization

Chapter 4—The Parent Structure

Titanic Power of the United Utilities

The first and most striking feature that stands out in the hearings of the Federal Trade Commission is the fact that the utility corporations have developed a nation-wide and even an international, compact, thoroughgoing, and powerful organization such as has never before existed in the history of the country.

The first volume and the exhibits that accompany it open with a description and the details of this prodigious organization. And as the hearings proceed in volume after volume and in exhibit after exhibit, the evidence and substantiation of this statement appear.

1. The Joint Committee of the National Utilities Associations

There is, first of all, in this organization of the utility companies of the country what is known as the joint Committee of the National Utilities Associations. This committee is made up, or at least seems to be closely co-operating with, three other committees, also of nation-wide scope, namely, (a) The National Electric Light Association; (b) The American Gas Association; and (c) The American Electric Railway Association. Looking at the matter from a little different angle, it would seem that the National Electric Light Association stands out more prominently as the dominant organization. At any rate, the first one of these

various organizations to be examined by the Federal Trade Com mission, and the one that seems to have been given the most complete and thorough examination is the National Electric Light Association. Whichever may be the dominant, or parent, or "holding" group, the whole investigation makes it clear enough that these four organizations are closely co-ordinated, have constantly and in all matters, covered in the report, a common purpose and a unity of action.

Thus we are confronted with a new phase of the utility question and a new method of control. It may be true, as the earlier investigation of the Commission disclosed, that "no single power interest or group" completely dominates or controls the electric industry, but we have now to consider whether in this combination or coordination of these four great utility interests, acting essentially as a unit, we do not have what amounts to a complete control of the electrical field by the combined power of these coordinated groups.

The Joint Committee of National Utilities Associations seems to have been a more recent organization than the others above referred to. In response to a question by Judge Healy of the Commission Mr. Paul S. Clapp testified that "the Joint Committee of National Utilities Association is made up of the three associations, The National Electric Light Association, The American Gas Association, and The American Electric Railway Association."' On this joint committee are found representatives of all of these three different associations? [Exh. Pt. 1, pp. 9-77.]

2. The National Electric Light Association

This organization of the electrical companies of the country seems to be in many ways the most important, powerful, and influential of all. It was the first organized. Paul S. Clapp, Managing Director of the National Electric Light Association; and the first witness to be called in the hearing, testified that the Association was organized in 1885 and had been at that time in existence 43 years. [No. 1 of the Reports on Utility Corporations, 70^th Congress, Doc. No. 92, p. 2.]

This organization has 12 geographical divisions covering the entire United States, and a 13th division covering Canada.

The headquarters of the organization are in New York City and in the departments there, there was a personnel of 98 as of February 29, 1929. The general management was under Paul S. Clapp, Managing Director, with a personnel of 3. Then there was a Secretary, A. Jackson Marshall, with a personnel of 46, including an Assistant, a General Secretary, Office Management, Finance and Accounting, Purchasing, Membership, and several others.

There was a Public Information Department under the direction of George F. Oxley, with a personnel of 14; an Engineering Director, H. S. Bennion, with a personnel of 28; a Statistical Bureau, a Commercial Director, with 2 assistants,.and a Service Department, with a personnel of 5—all of this in the national headquarters alone.

There was a National Executive Committee of 20; 4 National Sectional Chairmen, and then geographic division presidents covering the 13 geographic divisions.

The list of officers alone of the 13 geographic divisions covers nearly three pages of the Commission's report. [Exh. Pt. 1, pp. 9-14.]

3. Geographic Divisions

In order to facilitate the work of the above organizations of the utility companies and make it still more efficient, the National Electric Light Association has divided the country into 12 sections, with a geographic division in each of these sections and one in Canada, making 13 in all. [Pt. 1, p. 3.]

These geographic divisions are as follows:

(1) The, Canadian, covering the entire Dominion of Canada.

(2) Eastern—New Jersey, New York, Pennsylvania.

(3) East Central—Kentucky, Ohio, West Virginia.

(4) Great Lakes—Illinois, Indiana, Michigan, Wisconsin.

(5) Middle Atlantic—Delaware, District of Columbia, Maryland, Virginia.

(6) Middle West—Iowa, Kansas, Missouri, Nebraska.

(7) New England—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont.

(8) North Central—Minnesota, North Dakota, South Dakota.

(9) Northwest—Alaska, Idaho, Montana, Oregon, Utah, Washington.

(10) Pacific Coast-Arizona, California, Hawaii, Nevada, Philippine Islands.

(11) Rocky Mountain-Colorado, New Mexico, Wyoming.

(12) Southeastern; Alabama, Cuba, Florida, Georgia, North Carolina, South Carolina, Tennessee, Porto Rico.

(13) Southwestern -Arkansas, Louisiana, Mississippi, Oklahoma, Texas.” [Exh. Pt. 1, p. 11.]

Under and within these geographic divisions, and yet apparently more or less independent, there have been set. up state organizations. Of these there are 28, covering 38 of the states in the Union. [Pt. 1, p. 20.]

And in addition to these geographic and state organizations there have been created also company organizations which seem to be more or less independent, although cooperating with the state and national organizations. Finally, there exist in many cases also local clubs or local organizations.

4. General National Committees

Next in this hierarchy of super organization come the General National Committees. There are nearly 30 of these, among them the following: (1) Civic Development Committee; (2) Educational; (3) Insurance; (4) Membership; (5) Rural Electric Service; (6) Accounting; (7) Commercial; (8) Customer Relations; (9) Domestic Electric Range; (10) Electrical Advertising; (11) Merchandising; (12) Home Lighting; (13) Industrial Heating; (14) Promotional Rates; (15) Refrigeration; (16) Street and Highway Lighting; (17) Transportation; (18) Water Heating; (19) Wiring; (20) Engineering; (21) Accident Prevention; (22) Electrical Apparatus; (23) Hydraulic Power; (24) Overhead Systems; (25) Prime Movers; (26) Underground Systems.

5. Special National Committees

Besides the regular subsidiary organizations mentioned above, the all-inclusive nature and the equipment for perfectly organized work of the utility organizations is indicated in the fact that there are more than a dozen Special National Committees. Among these may be mentioned the following: (1) Advertising Committee; (2) Prize Committee; (3) Codes and Standards; (4) Constitution and By-Laws; (5) Electrification of Steam Railroads; (6) Exhibition Committee; (7) Finance Committee; (8) Lamp Committee; (9) Membership; (10) Prize Awards; (11) Public Policy; (12) Public Relations; (13) Rate Research; (14) Water Power Development, etc.

And many of these committees have sub-committees. There are also general national committees on civic development, education, insurance, rural electrification, accounting, fixed capital, statistics, commercial cooking, customer ownership, merchandising, home lighting, industrial heating, refrigeration, promotional rates, street and highway lighting, transportation, water heating, accident prevention, electrical apparatus, inductive co-ordination meters, prime movers, underground systems, cooperation with educational institutions, public relations, industrial relations, relations with financial institutions, public speaking, women's committees, Chamber of Commerce of the United States, International Chamber of Commerce, state public utility information bureaus, electrification of steam railroads committee, related organizations committee, and many others.

6. Specialized and Technical Sub-Committees

These numerous committees are much more than mere shells of organization. For many, if not most of these committees are again subdivided and have geographic divisions covering the various sections of the country; or in the technical field the committees have sub-committees dealing with the most intricate and specialized phases of the subject. And the listing of the committee memberships of the above committees, their geographic and sub-committees often cover page after page of the hearings of the Commission.

As an example of the subdivisions of some of these committees and their special provision for highly specialized and technical work may be mentioned the sub-committees of the General Committee on Prime Movers mentioned above. Among these are subcommittees dealing with such highly technical subjects as "Distillation Products of Coal Sub-Committee"; "Higher Steam Pressures and Temperatures Sub-Committee"; "Oil and Gas Engines Sub-Committee"; "Power Station Betterment Sub-Committee"; "Pulverized Fuel Sub-Committee"; "Station Piping Sub-Committee"; "Stoker Equipment and Furnaces Sub-Committee"; "Turbine Sub-Committee," etc. [Exh. Pt. 1, pp. 14-56.]

7. Public Relations National Section

One of the most important and aggressive of the subsidiary organizations of the utility companies is the so-called "Public Relations National Section."

This committee has its own independent executive committee, officers, members-at-large, etc., and geographic division representatives from each of the 13 geographic divisions mentioned above into which the country is divided.

And then under this Public Relations Section are a number of subsidiary committees as-follows:

(1) Co-operation with Educational Institutions.

(2) Customer Ownership Committee.

(3) Information Bureau Organizations Committee-and this again has its geographic division representatives.

(4) Industrial Relations Committee.

(5) Manufacturers Advertising Committee.

(6) Public Speaking Committee—and geographic division representatives in each of the 13 districts.

(7) Relations with Financial Institutions Committee—with geographic division representatives.

(8) Woman's Committee-with separate officers, members-at-large, and geographic division representatives in each of the 13 districts; also sub-committees on home service and manufacturers? [Exh. Pt. 1, pp. 14-56.]

8. Related Organizations

Besides the above thoroughgoing and all-inclusive organization of the forces of the utility interests, and supplementing them, additional organizations have been set up for the purpose of bringing into co-operation and coordination the forces of various non-utility organizations throughout the country. Among these "related organizations" may be mentioned the following:

(1) The American Engineering Standards Committee. This committee is headed by an "allied power group," [Exh. Pt. 1, p. 62.] of which the Chairman is Mr. S. G. Rhodes of the New York Edison Company. Other members are selected from various electric light and power concerns. The committee is then subdivided into "sectional committees," the list of which covers nearly a page and a half of the report. [Exh. Pt. 1, pp. 62-63.]

Then follow three pages of the subdivisions noted as "additional technical advisers"; then there are special committees, etc.

(2) The next committee representing the "related organizations" is the "American Society of Mechanical Engineers."

(3) The American Uniform Boiler Law Society is next.

(4) Then comes The American Water Works Association.

(5) Chamber of Commerce of the United States.

(6) Committee on the Relation of Electricity to Agriculture.

(7) Electrical Manufacturers' Council.

(8) International Chamber of Commerce.

(9) Joint Committee of Bell Telephone System and National Electric Light Association on Physical Relations Between Electric Light and Signal Circuits. On this committee representatives of both American Telephone and Telegraph Committee (Bell Telephone System) and the National Electric Light Association are shown. There are a number of sub-committees of this particular joint committee.

(10) Joint Committee of Western Union Telegraph and National Electric Light Association. Here again the representatives of the Western Union Company and the National Electric Light Association are shown.

(11) National Electrical Manufacturers Association. Under this Association there are two joint committees of manufacturers and representatives of the National Electric Light Association, and sub-committees on various technical matters.

9. State Public Utility Information Bureaus

These bureaus, while operating under the direction of the National Electric Light Association, and in more or less close cooperation with the geographic divisions mentioned above, seem each to have its own particular field and function. There are 28 of these state bureaus covering in their operations 38 different states. [Pt. 1, p. 20.]

10. International Organizations

Besides the above complete and all-inclusive organization of the utility forces of the country, covering the United States and Canada, there are two international organizations as follows:

(1) Union Internationale des Producteurs et Distributeurs D'Energie Electrique.

(2) United States National Committee of the International Electrotechnical Commission.

11. National Conventions

Among other things, the National Electric Light Association holds a national convention each year. These conventions are very large. According to the reports, attendance frequently reaches 10,000. [Exh. Pts. 10-16, p. 912.] Speakers are brought to these conventions from many different groups and from nearly every part of the country. Thousands of dollars are paid to university and college men to attend and address these conventions. The cost for speakers at these conventions between I92o and 1928 is given as $12,332.

A. Thorough, All-Inclusive Organization

Considering the thoroughness of the organization of this National Electric Light Association, not only geographical, but also in the innumerable subjects that are covered by the committees and sub-committees, it would seem that almost nothing, either 'of a popular or of a technical nature is unprovided for.

It will thus be seen that there is a very high degree of interconnection and coordination between all of the various committees representing, not only the electric light and power companies of the country, but in addition the gas companies, electric street railway companies, the telephone and telegraph companies, electrical manufacturers' associations, national and international, Chambers of Commerce, and the American Water Works Association. In addition to this, through the various committees which these organizations have set up, there is, to an almost astonishing degree, cooperation and coordination of efforts between these groups and the educational institutions of the country, farm organizations, such as the American Farm Bureau Federation, the American Society of Agricultural Engineers, various civic organizations such as Rotary Clubs, Kiwanis Clubs, etc., women's groups and clubs, etc.

Chapter 5—Non-Utility Organizations

Big Business Answers the Utilities’ Roll Call

The utility interests thoroughly united and organized constitute in themselves one of the most powerful forces that has ever arisen in the economic life of the nation. We have seen in the previous chapter how thoroughly and well they have united and organized their own forces.

But they have not been content to organize and unite their own forces. As we have pointed out, they have set up special committees for the purpose of interesting and securing the support and co-operation of other forces and influences outside of the utility field.

“Public Relations” a Far-Reaching Function

Especial attention is called to the Public Relations Section of the National Electric Light Association. This special committee is one of the most powerful of the numerous committees which the utilities maintain. It has an independent executive committee of its own, with offices, members, etc., and representatives in all sections of the country. But especially significant is the fact that this committee has certain sub-committees whose particular function it is to secure and maintain friendly relations and cooperative support in various ways with groups of people, organizations, and institutions outside the utility field.

For example, we have a sub-committee of this Public Relations Section on "Cooperation With Educational Institutions." The records have much to say about the activities of this particular committee in enlisting the support and co-operation of schools, colleges, universities, and especially the teaching forces of the country. Then we have a sub-committee on "Industrial Relations," another on "Customer Ownership," etc. But the task of reaching, influencing, and bringing the big financial interests of the country into co-operation with and support of the utilities was assigned to the sub-committee known as "The Committee on Relations With Financial Institutions."

Lining Up the Banks and Insurance Companies

That this sub-committee and other forces of the utility organization were very successful in lining up the great financial interests of the country in support of their program is shown by the record.

A very large proportion of the funds of the insurance companies of the country is invested in the securities of the utilities. Thus they are bound by the compulsion of economic and financial necessity to support the utilities. The banks and investment companies are similarly interlocked and dependent upon the utilities. And the record shows how active their support became.

With these two great financial institutions of the country so closely related by the ties of common financial interest and necessity, the utilities are given very powerful allies. But the work of enlisting the support and co-operation of big business interests does not stop here, as we shall see. It reaches out in many different directions and into innumerable financial, industrial, and commercial organizations.

Big Business Stands By

We have seen how the electrical utilities or power companies have very naturally enlisted the co-operation and support of the other utilities, such as railroads, telegraph and telephone companies, street car lines, gas companies, water works, etc. These were natural allies because they operated in the utility field. We have also seen, or shall see as we study the records, how the great financial interests, such as the banks and insurance companies, financial interests, such as the banks and insurance companies, which are not in the utility field, have been enlisted. But the record goes farther than this. It shows that this alliance and alignment of forces has reached into almost every imaginable line of big business.

A Partial List of Big Business Interests

As illustrating this far-reaching influence we may mention from the record the following, which are only a few of the innumerable and better known commercial and business organizations of the country which are given in the records as having interlocking directorates in or otherwise co-operating with the utility organizations.

Adams Express Co.

Alberene Stove Co.

Alliance Coal Mining Co.

Allis-Chalmers Mfg. Co.

American Brass Co.

American Exchange National Bank.

American Express Co.

American Locomotive Co.

American Ship & Commerce Core.

Anaconda Copper Mining Co.

Andes Copper Mining Co.

Art Metal Construction Co.

Associated Laundries of America (Inc.).

Atchison, Topeka & Santa Fe Railway Co.

Bankers Trust Co.

Bethlehem Steel Corp.

Braden Copper Co.

Bradstreet Realty Co.

Bristol Paper Co.

Brooklyn Warehouse & Storage Co.

Canal Bank & Trust Co.

Central Union Trust Co. of N. Y.

Chamber of Commerce of the United States.

Chase National Bank.

Chicago, Rock Island & Pacific Railroad Co.

Chicago & Eastern Illinois Railway Co.

Children's Aid Society, New York.

Chili Copper Co.

Cocoa Cola Co.

Colon Oil Corp.

Continental Mexican Rubber Co.

Continental Oil Co.

Cramp Ship & Engine Building Co.

Cuba Cane Sugar Corp.

Cuban Portland Cement Corp.

Curtis Wright Corp.

Diamond Match Co.

Federal Insurance Co.

Gallup American Coal Co.

Gasoline Products Co.

Greenwich Savings Bank

Independence Indemnity Co.

Intercontinental Rubber Co.

International Cement Corp.

International Nickel Co.

Irving Trust Co.

Island Run Coal Co.

Lehigh Coal & Navigation Co.

London Guarantee & Accident Co. (Ltd.).

Manhattan Railway Co. .

Matangas Sugar Corp.

Mathieson Alkali Works.

Mavis Bottling Co. of America.

Merchants Refrigerating Co.

Mesabi Iron Co.

Missouri State Life Insurance Co.

Monroe Water Supply Co.

National City Bank.

National City Safe Deposit Co.

National Fire Insurance Co.

National Surety Co.

New York Rapid Transit Co.

N. O. Branch Federal Reserve Board of Atlanta.

North American Cement Corp.

Penn Mutual Life Insurance Co.

Pennsylvania Fire Insurance Co.

Philadelphia National Bank.

Postal Telegraph & Cable Co.

Provident Mutual Life Insurance Co.

Rockefeller Foundation.

Santa Fe Pacific Railway Co.

Securities Corp.

Shell Union Oil Co.

Simons National Bank.

Skandia Insurance Co.

South Porto Rico Sugar Co.

The Valley Realty Co.

Trexler Lumber Co.

Tulane University.

Twin Branch Railroad Co.

United States Cast Iron Pipe & Foundry Co.

Western Union Telegraph Co.

Wilkes-Barre & Scranton Railway Co. [Pts. 23 & 24, pp. 735-749.]

And so on through page after page of the record, 15 pages in all. The above is, therefore, only a very partial list.

Investments of Utilities in Non-Utility Enterprises

The interrelation between the utilities and other lines of business outside of the utility field is indicated at many points in the hearings in connection with the investments which the utility companies carry in these outside enterprises. Investments of this nature are mentioned in paper mills, spinning mills, fertilizer companies, chemical products, manganese [Pt. 27, pp. 274-75.]; also in bus lines, ice plants, water works, land and coal. [Idem, p. 281.]

Similarly, the Electric Bond and Share Company is interested in a wide range of business outside of the utility field, including banks, insurance, and industrial concerns of various kinds. [Pts. 23 & 24, p. 2 ff.]

Thus the picture—a figure of speech used not only by Governor Pinchot but by speakers of the utilities as well-a huge web of titanic power covering the whole country—concentric circles of power with the utilities at the center; their various committees reaching out over their radii to every circle in the mighty network of financial, industrial, economic, and cultural organizations of the country and tieing them into the web of their system by incorrigible bonds of economic, financial, and industrial necessity.

Chapter 6—Membership and Financial Support

The Bone and Sinews of War

The power and influence of these highly developed organizations may best be judged by the membership and financial resources at their command. The membership, as the records show, includes the individuals and organizations representing approximately 90 per cent of the electrical industry of the country, to say nothing of the allied and cooperating groups outside the utility field. As to finances the records show that the National Electric Light Association alone had at its disposal well over a million dollars per year besides special funds for special purposes said to amount in some cases to from $25,000,000 to $30,000,000 a year additional.

A Huge Membership

Back of the above organization, and supporting it financially and otherwise, are, of course, the various utility and non-utility companies, national and international, with their membership and financial contributions.

Exhibit No. 4 [Exh. Pt. 1, pp. 78-96.] gives the list of the member companies of the National Electric Light Association as of January 1, 1928, classified as follows:

Class A (light and power companies) 790

Class D (manufacturers) 375

Class F (associate companies) 327

Class H (foreign) 101