Wisconsin Dividends

Fortnight ago the Public Service Commission of progressive Wisconsin jolted the utility industry by ordering Wisconsin Telephone Co., 100%-owned by A. T. & T., to reduce its rates 12 1/2%. Behind the order was a theory new in rate-fixing: that a utility may charge for its services only what they are worth to the user regardless of the effect upon the company; Depression has reduced the value of telephone service. Under the new rates Wisconsin Telephone would earn not the time-honored return of 8% upon its investment but 6%.

Last week in a more sweeping order the Commission ordered seven other Wisconsin utilities to withhold dividend payments until it could be learned by the Commission (which hires experts, charges their fees to the companies investigated) whether the dividends were being earned or paid at the expense of capital. The seven estopped companies are:

Commonwealth Telephone Co., a subsidiary of Associated Telephone Utilities Co., serving in Wisconsin communities against 102 served by A. T. & T.'s unit.

Wisconsin Power & Light Co., formerly an Insull concern.

Northern States Power Co. and Interstate Light & Power Co., both subsidiaries of the Byllesby Standard Gas & Electric Co.

Interstate Power Co., subsidiary of Utilities Power & Light Corp., headed by Harley Lyman Clarke, whilom (1930-32) cineman.

Northern Power Co., subsidiary of American Power & Light Co., a member of the Electric Bond & Share group.

Wisconsin Hydro Electric Co., owned by Manufacturers Trust Co. of Manhattan.

Not affected by the ruling are several other important utilities in the State, including units of North American Co., Central Public Service, Federal Public Service, United Light and Power and other subsidiaries of Middle West Utilities and Standard Gas & Electric.

The Commission's theory is that if dividends are paid out of capital the credit of the local companies is hurt, that local companies must rely on their own resources now to get funds since holding companies are unable to assist them. Chief opposition to the ruling was based on the fact that most of the companies involved have already passed their dividends, that the Commission acted upon suspicion rather than final facts. While legal struggles were being predicted last week by utility men it was evident that Wisconsin's ruling might become a major milestone in holding company evolution, that the holding company is being subjected to a more thorough scrutiny than ever before. Two other evidences of anti-holding company thought last week were a report by the Federal Power Commission that it would be in the public interest to place holding companies under regulation, and a ruling by the Alabama Public Service Commission that Alabama utilities may pay no dividends on their common stock until reserves have been taken care of out of earnings, that management fees must be approved. Justification of this attitude is that in all the cases of holding company collapse it has been found that operating companies have been drained of cash, left floundering.

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