For Utilities

"Referred to the [House] Committee on Interstate and Foreign Commerce and ordered to be printed" last week was H. R. 5423, the Administration's long-awaited 178-page death sentence on the public utility holding company. The bill authorized the Federal Power Commission to regulate interstate power and the Federal Trade Commission to regulate interstate natural gas but its principal purpose was rigid control of holding companies until 1940 when they will be banished from the U. S. scene. Only appeal from the sentence will be on grounds that it is legally impossible to merge into one operating company a group of properties now owned by a holding company and only after the Federal Power Commission certifies that the grouping is in the public interest.

Savage though his attack on the holding company has been, President Roosevelt apparently realized that a $12,000,000,000 industry could not be reorganized overnight without ill effects on general business. The future Public Utility Act of 1935 contemplates a gradual liquidation. All holding companies, unless specifically exempted, must register before next October with the Securities & Exchange Commission, which will thereafter hold an almost absolute veto power over holding company finances, including the issuance of new securities and the purchase and sale of assets.

All inter-company service contracts will be abrogated next January, and service, sales and construction affiliates, often a seat of nepotism and a source of unconscionable personal profits, will be placed under the Federal Power Commission's strict supervision. By 1937 no holding company may own both domestic and foreign properties unless economically and geographically justified--a direct hit on Electric Bond & Share, whose foreign holdings are grouped in American & Foreign Power and include Shanghai's biggest dynamos. Natural gas properties must be divorced, hitting particularly Columbia Gas & Electric and Electric Power & Light. Restriction of holding companies to ownership of utilities is apparently aimed at such sidelines as Cities Service's big oil business and American Water Works & Electric's California prune orchards.

After Jan. 1, 1938 the SEC may compel any or all registered holding companies to reorganize with an eye to simplifying corporate structures and aligning operating properties in compact integrated groups. Final liquidation must start not later than 1940.

Powermen feared the worst and they got it. No less than ten holding company heads sprang instanter to the industry's defense in a joint statement: "We do not believe that it is necessary to destroy these companies in order to prevent a recurrence of abuses, many of which have already been corrected. . . . We stand ready to cooperate. . . ."

But few powermen dared hope that Congress would pull many of the bill's teeth.

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