Mr. DONDERO. These companies you mentioned are two holding companies?

Mr. DITTMER. That is correct.

Mr. DONDERO. Electric Bond & Share and Engineers?

Mr. DITTMER. That is correct.

This is American Power & Light Co., which is not the top holding company, but a subholding company of the Electric Bond & Share group.

The period of time during which Engineers Public Service Co. was ordered to dispose of Puget Sound expires on July 23 of this year. There is provision, I believe, that upon a certain showing, there may be a postponement. Hearing, I believe, is set for June 22 before the Securities and Exchange Commission on this matter.

I have used the Puget Sound Power & Light Co. as an example, because I believe that is the simplest way to approach it.

The situation with respect to the Pacific Power & Light Co. is quite similar, with one or two exceptions. There is a very substantial number of public bodies that have been formed in the territory of the Pacific Power & Light Co. They are equally anxious to acquire the distribution systems in the territory which they represent.

Mr. DONDERO. Mr. Dittmer, in these P. U. D. elections, has the Bonneville or the Grand Coulee authority taken any active part to present their views?

Mr. DITTMER. We present our views only upon invitation and do not take any active part in the controversial issues. We submit information, insofar as it is requested, as to the part that Bonneville plays in the Northwest in providing power for that area.

Mr. DONDERO. Applying that statement to the State of Oregon, where in 32 elections only in 11 have voted favorably, did Grand Coulee or the Bonneville Administration take any active part?

Mr. DITTMER. Not any direct part in the campaign. We furnished what information was requested, and if requested by official bodies in the territory concerned to present our views, we did present our views on factual matters.

Mr. DONDERO. Do you know whether or not you presented your views in the 32 elections in Oregon?

Mr. DITTMER. In some of them we did, I know.

Mr. DONDERO. Do you know how many?

Mr. DITTMER. No; I do not.

Mr. DONDERO. Apparently there were 21 in which you might not have done so, because they turned it down.

Mr. DITTMER. That does not make any difference to us. We are told in our act to give preference to public bodies, and we feel that if they come to us and ask us for information or to present our views on factual matters, we should do so.

Mr. DONDERO. In the law it provides giving preference to public bodies up to 50 percent.

Mr. DITTMER. No. You are thinking of the specific provision which reserves a certain amount of power. In addition to that there is general language which states that preference shall be given at all times to public bodies.

Senator BURTON. Before you leave the Puget Sound Power & Light Co., you described reasons indicating why it should dispose of its

74169-42-pt. 1-18

property to the public properties. If it was not taken over by a public purchaser, is there any other likelihood of its being able to meet the situation there? Is there any discussion of a reorganization or a private refinancing pending or anything of that sort?

Mr. DITTMER. They have recently filed with the Securities and Exchange Commission a plan for reorganization. That comes up for hearing, I believe, on the 18th of June before the Securities and Exchange Commission. I am not familiar with all of the details of it, but that would cut down very materially the capitalization. Generally speaking, it is proposed that the second preferred stockholders take common stock and that Engineers Public Service Co. get a percentage of that; somewhere around 122 percent, I believe.

Senator OVERTON. How much?

Mr. DITTMER. Twelve and one-half percent-I am quoting from memory there-of the common stock to be issued.

Senator BURTON. Then, they are asking an opportunity to proceed as a privately owned utility, separated from the parent corporation, and go ahead as a privately owned body?

Mr. DITTMER. Yes. The result of that would be that Engineers would have 122 percent, if the figures I gave are accurate, of the voting power. It is at the same time a recognition by them that the present situation, where they hold all the voting power, is an anomalous situation and not in accordance with the facts.

Reorganization of the company might facilitate the sale of the company. I do not know which way it would work.

Senator BURTON. But it would indicate that they were apparently ready to dispute the proposition that this act must be passed and that they must sell to this company in order to preserve the service of the company in that area. They probably have an alternative which they preferred by which they could retain serving the territory. Mr. DITTMER. If by "they" you mean the holding company, that is

true.

Senator BURTON. The stockholders or the company?

Mr. DITTMER. The stockholders, who have technical control at the present time, would obviously prefer a reorganization by which they would have some reduced amount rather than some sale or some other disposition in which they might not have any. They obviously have a very vital interest in that, but it does not follow that that represents the opinion of the true owners. The second preferred stockholders committee, we have been informed, have indicated a preference for the sale of the property.

Senator BURTON. Well, there is a dispute among the stockholders as to which course they want to follow?

Mr. DITTMER. Yes.

Mr. DONDERO. In a case of that kind, Mr. Dittmer, who would have the controlling voice?

Mr. DITTMER. I assume the Securities and Exchange Commission. It would be under the direction of the Securities and Exchange Commission.

Mr. DONDERO. Suppose that they did not take any hand in the matter. What I am thinking of is these various groups and whether the bondholders, the first preferred stockholders, or the second preferred stockholders would have the right to make the last decision as to whether the property should be sold or kept.

Mr. DITTMER. Technically, and without the Securities and Exchange Commission, I think Engineers Public Service has the last say-so at the present time.

Mr. DONDERO. That would be the holding company?

Mr. DITTMER. Yes; but I can't conceive that any sale would actually go through unless the second preferred stockholders agreed to it. Certainly it could not go through unless the second preferred stockholders were paid off in full. If they were paid off in full, at liquidating value, which is 100 plus arrearages in dividends, then I suppose they would not have anything to say about it.

Senator BURTON. But these arrearages in dividends have not carried a transfer of the voting control and the policy of the company? It is sometimes true that when they have a certain amount of default they take over. That is not true here?

Mr. DITTMER. That is not true here, and I think that was one of the very serious criticisms during the Holding Company Act hearings against these set-ups, in which large amounts of preferred stock were sold largely to consumers in the territory without giving them any voice in the management, even though dividends were not paid for a long period of years. I do not think the Securities and Exchange Commission at the present time would ever permit any such preferred stock to be issued again. I think that day is over.

Just to give you a few figures on Pacific Power & Light Co., this map shows where public agencies have been formed.

Mr. DONDERO. Is that all in the State of Washington?

Mr. DITTMER. Practically all. The boundary runs along here. This is Washington. This is Oregon down here. You have some public bodies voted in Oregon. Deschutes County is Pacific Power & Light Co. territory.

Mr. DITTMER. În Oregon. In Wasco County you have public bodies in Pacific Power & Light Co. territory.

Mr. DONDERO. What do the amber colors indicate?

Mr. DITTMER. The green represents public-utility districts and the amber color is an R. E. A. project.

Mr. DONDERO. That is what?

Mr. DITTMER. Rural Electrification Administration. Those are rural projects. So that the combination of colors together

Mr. DONDERO. What do the red dots indicate?

Mr. DITTMER. Municipally owned plants.

Mr. DONDERO. Are there any private utilities in Oregon?

Mr. DITTMER. Yes.

Mr. DONDERO. Are they indicated on that map?

Mr. DITTMER. Not on this particular map.

Mr. DONDERO. How do they compare to the municipally owned in number?

Mr. DITTMER. The number of cities served is much larger. The number of companies is indicated there [indicating]. There are five principal companies serving.

Mr. DONDERO. Of private enterprise?

Mr. DITTMER. Of private enterprise, that is correct. Well, with reference to the private enterprise as related to a public utility, it is really sort of in-between. It is a public service rendered by a private enterprise through the permission of the local authorities to operate on the streets and highways, and so on.

The Yakima territory, which is one of the principal territories of Pacific Power & Light Co., you see is solidly covered by public bodies. The Walla Walla territory has R. E. A.'s, but has no P. U. D. in that particular territory. The P. P. & L. territory is perhaps not as completely cover as the Puget Sound Power & Light territory, but a very substantial part of the territory is so covered.

To give you an idea of the size of the company, that company has $20,500,000 worth of bonds, $6,700,000 worth of preferred stock, and the common is listed at $7,000,000. They are paying currently bond interest and preferred stock dividends and common stock dividends. Mr. DONDERO. At what rate?

Mr. DITTMER. I have not got it right here. It is a substantial dividend. It is not overcapitalized to the same extent that Puget Sound is, and probably there is an equity there for the common stock, so that you do not have the same pressure from financial considerations for disposing of the property; but, on the other hand, it is more easily disposed of because you do not have the financial complications that you get into in Puget Sound, where you would have the second preferred stock to consider with arrearages.

The company reported an original cost of its property to the Federal Power Commission, as of the end of 1940, at approximately $32,000,000. That is original cost new. In addition to that, they have a fully owned subsidiary, the Inland Light & Power Co., which owns a generating plant at Ariel Dam, north of Portland, which has no independent funded indebtedness and has since, I believe, been consolidated with Pacific Power & Light Co., just recently, by order of the Federal Power Commission.

So that those two can properly be thought of together, which would give you an original cost of somewhere around $40,000,000 original cost new, with bonds of $20,000,000 and preferred stock of $7,000,000. Mr. DONDERO. What is your figure as to the Pacific Power & Light Co., which is in the interior of the States of Oregon and Washington? What is the figure reported to the Power Commission?

Mr. DITTMER. $31,800,000 without Ariel Dam.

Senator BURTON. Ariel Dam is an integral part of the system, is it not?

Mr. DITTMER. Ariel Dam is an integral part of the system, not physically, but corporatewise it is.

Mr. DONDERO. Did that company appear prominently in an election held at Yakima?

Mr. DITTMER. There was an election held at Yakima, and I think the company was quite prominent in it.

Mr. DONDERO. Did the Grand Coulee or Bonneville authorities show up in that election?

Mr. DITTMER. I do not know just what you mean by showing up. Mr. DONDERO. What I mean is, Did they take any part in the election?

Mr. DITTMER. No direct part. To the extent that we were requested for information, we provided the information so far as we could to the public bodies.

Mr. DONDERO. Did you furnish them with information as to the value of that company's property in that particular election district in the election of 1940?

Mr. DITTMER. I do not recall whether we did or not. I can have it checked.

Mr. DONDERO. Do you recall any figure like $4,000,000?

Mr. DITTMER. Yes; I do, but I do not recall just exactly what the figure represented.

Mr. DONDERO. What is the assessed valuation of that power company's property in Yakima ?

Mr. DITTMER. I could not tell you. Maybe somebody else here can tell you.

Senator BONE. Congressman Dondero, may I intrude for a moment to say that around about 1930 in the Yakima-Walla Walla rate fight the cities of Yakima and Walla Walla hired rate experts and made the most searching inquiry into the physical and financial set-up and condition of the Pacific Power & Light Co., and all the figures that you are asking about have been available to anyone for years. The most searching inquiry was made.

Mr. DONDERO. Have you got those figures? That is what I would like to know.

Senator BONE. I was much interested in that inquiry.

Mr. DONDERO. This was in the election of 1940, just 2 years ago. Senator BONE. But their figures and the accretions and the like have been a matter of public record. There is nothing obscure about it. Anybody could get the facts.

Mr. DONDERO. This is the information I have before me: That in that election, 2 years ago, there were statements made, either by letter or speakers, to the effect that if the Yakima people voted to come under public utility or establish a P. U. D, district, the power facilities at Yakima, which the power company valued at something like $8,000,000, would be turned back to them for $4,000.000, or about 50 cents on the dollar-in other words, holding out a Government subsidy of about $4,000,000.

What can you tell this committee about that situation if that is true?

Mr. DITTMER. I do not know who made the statement or what the basis of the statement was. As Senator Bone has said, valuations have been made there and the public bodies may have stated their opinions as to what the value of the property was, which might differ materially from that of the company. We had made no valuation of the property at that time.

Mr. DONDERO. You know nothing of those two figures that I put in the record?

Mr. DITTMER. Except, insofar as I recall, that they appeared in newspaper reports and were mentioned in reports and discussed.

I mentioned the reasons why Puget Sound Power & Light Co. and Pacific Power & Light Co. should be sold. The only purchaser available for the companies as a whole, it seems to me, is the Federal Government.