Power Politics

In the Pacific Northwest, where hydroelectric power is king, a fierce battle for the throne rages between private and public power companies. But private power is fast losing out. The biggest private company in Washington, Puget Sound Power & Light, nine months ago sold a $26.9 million chunk of its facilities to the city of Seattle, is now trying to unload the rest in one $97 million package to seven tax-free Public Utility Districts. "The P.U.D.s are crucifying private operators," says Puget Sound Power President Frank McLaughlin, and fighting them "is like trying to live in a house while the workmen are tearing it down."

Last week the second biggest private company in the state, Washington Water Power, was getting ready to sell out, too. Washington Water Power, whose 113,500 customers are served by a network of dams, lines and power stations covering all of eastern Washington and sweeping into northern Idaho, made a deal to sell its holdings for $65 million to three P.U.D.s in Washington's Chelan, Stevens and Pend Oreille counties (see map).

Shotgun Sale. To some extent, it was a shotgun sale. American Power & Light Co., which owns Washington Water Power, must get rid of its subsidiary under the "death sentence" of the Public Utilities Holding Company act. American Power & Light could comply simply by turning its subsidiary over to the stockholders. But Howard Aller, American's president, doesn't want to do that. He has found he can make a fat profit by selling his companies into socialism. Although the book value of Washington Water Power is only $37 million, the P.U.D.s are so eager to buy that they are willing to pay almost twice that much. They think they can afford to do so because they pay no federal taxes, thus can afford to carry a big bonded debt.

Aller is an old hand at making a profit from public power. Seven years ago, he and Guy C. Meyers, a utilities promoter who specializes in private-into-public-power deals (TIME, Jan. 8, 1945), sold American's Nebraska Power Co. to a public-power group for $14 million. (Meyers' fee: $500,000.)

Aller's deal with the P.U.D.s still faces a long legal battle before it can be finally okayed. Last week more than a dozen protests came from stockholders and state politicos, who bitterly oppose public power. The same kind of opposition has blocked the sale before. But this time Aller thinks his plan is nearly foolproof. One big obstacle in the past was Idaho's law banning out-of-state public ownership of utilities. Aller hopes to get around that obstacle by selling the Idaho property separately to a nonprofit corporation.

Palace Revolt. Aller will get no help in his deal from his chief executive on the spot, Washington Water Power's President Kinsey Robinson, 56. Robinson is dead set against his boss's plan. An all-round utility man who started as a lineman when he was 17, Robinson thinks Washington Water Power should be turned over to its stockholders. He argues that private power can still compete with the P.U.D.s in the Northwest, and his strongest point is Washington Water Power itself. Its rates are competitive with the P.U.D.s and its earnings have stayed on an even keel. In 1950 Robinson started Washington Water Power on its biggest expansion program in more than 20 years. Though few utilities men thought he could do it, Robinson raised money for a $40 million, 200,000-kw. dam now abuilding at Cabinet Gorge, on Idaho's Clark Fork River.

Robinson thinks that the P.U.D.s are headed for trouble. Because of rising costs and inefficient management, he thinks they will soon have to raise their rates. On the other hand, says Robinson, "We can make money; no one ever accused me of trying to run an eleemosynary institution."

Slow Death? But the dice are still loaded in favor of the P.U.D.s. More than 60% of all electric consumers in Washington are getting their current from them. Using their right to condemn private-power facilities, the P.U.D.s have whittled away at private power. They also get first call on federal power from Bonneville and Grand Coulee dams. Nevertheless, even the P.U.D.s have started to worry about the inflated prices they are paying for private-power properties and their dependence on federal power. They have begun to face the fact that one day Bonneville Dam may raise its rates, or Grand Coulee's power may be piped off to northern California. If that happens, the P.U.D.s will have to buck federal control, just as private power companies in the Northwest have fought the P.U.D.s.

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