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purchased and turned over to the Authority under the terms of this bill. Recalling some of the experiences of the past, and looking to the far future, I ask the subcommittee to make this bill proof against any possible action leading to scandals or questionable transactions or monopolization, which might take place because or errors in human judgment, or evil intentions on the part of any person or persons in authority. Certain safeguards will protect all concerned, including the Administrator or board or Authority, and will above all, strengthen and protect the public power program.
The sponsors of this bill must clearly remember the scandalous difficulties which grew out of the sale of the Seattle Street Railways to the city of Seattle. The reverberations reached Oregon when I lived in its capital city.
Let us have a clear-cut amendment that the revenue bonds sold have no lien except on the revenue from the properties purchased with monies so obtained.
THE CERTIFICATE OF VALUE
In this bill, acquisition of property is to be determined upon by the Administrator, alone. This should, in my opinion, he surrounded by safeguards so the decision may be subject to review. We must do what is necessary to assure the sale of the distribution systems to public bodies on terms which they will willingly accept and find advantageous.
It should not be intended to set up a public successor to the private power holding companies, on the same model.
There is a section in the present bill (section 2–G), providing that the Administrator or the Authority shall make a certificate to the Secretary of the Interior on the feasibility and on the justification of the price, stating that the properties will pay out and are a good purchase. Let the bill provide that the certificate be a document of real consequence and significance. Let the certificate show what has been the assessed tax value of the properties about to be purchased. Let the certificate show the values placed on the properties, by the private electric companies, for rate-making purposes. Let the certificate carry a survey and an estimate of value by some well known firm of engineers to be selected by the Secretary of Interior. Let the certificate state the annual revenue and the operating expenses over a 3-year period. Let the survey show the number of customers, the number of meters, and the mortgage on each meter. Provide in the bill the proper detailed form of that certificate and require that it all be published for three consecutive weeks in at least two weekly papers in the district affected, before any purchase is consummated. Let the full calcium light of publicity shine, with all its searching glare, on each point in the transaction. We cannot afford to pass a bill that will affect so many thousands of people and cover so many millions of dollars of transactions, without safeguarding every step and providing against bargains made behind closed doors.
In the matter of determining the values of any public utility under purchase consideration by the Authority, no value should be given the property for a going business. No financial value should be set on a franchise which was a free gift from the people to the private utility, and one which they have a right to reclaim. No value should
be placed on old and useless machines. It is a difficult problem which must be faced in these acquisitions.
The suggestions I have made should not interfere with marketing revenue bonds. This is, however, a point that should be fully developed by the committee for the information of Congress because a new type of financing is being applied to a Federal undertaking. Protection of public interest requires the the revenue bond holders shall not write the ticket. We must protect the Government invent
. ment and the rates of the ultimate purchaser. Beware repetition of the holding company experience.
I believe you should add a section to the bill giving the Authority the right and power to build a competing line when it is found in possible to purchase private utility properties for a reasonable prick, Nothing will squeeze the water out of an over.capitalized propusty quicker than competition.
THE VALUE OF THE PRIVATE PROPEKTIVA
You have testimony before you that the private utilities in Oregent and Washington have a book' value of 3300,000,000. The Channinn, of the Federal Power Commission, after a carrful murvey winy study, has stated that the private utilities of the Nation haven, italization of $13.000.000.000, with an artual valuation of t1f $6,500.000.000. In other words, one-half of the stock 900 tra upon which the private utilities are warning dividend in wouise is a fact that, in the growing Northaat, vlertrir, propagation op capitalized more highly than any isre «le in the Crites true is safe to say that the private utilities, there, with a bror $30 1.000 1.0), claimeri in testimony before 711, are bulte veg more than one here between 2009 and 1A,I1,
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of the receivers, and in governmental records. I quote from a speech that I made in the Congress on July 1, 1935:
The fleating of Central Public Service stock under gilded promises and the victimizing of 11,675 persons in Oregon is one of the greatest financial scandals in our State history. Worse still, Pepco, under orders from Central Public Service, bought 29,994 shares of Seattle Gas, worth $15 a share and paid for it $225 a share, or 15 times its market valle.
Senator Bone. You might identify “Pepco." These folks won't know what Pepco is.
Mr. PIERCE. It is a private company in Portland, the Portland Electric Power Co. I quote further:
Central Public Service at the time being the owner of Seattle Gas, as weil as Pepco, paid itself through this deal 15 times the market price for Seattle Gas. The celebrated holding company sat on both sides of the table giving the oper. ating company no choice, and swindling it out of $6,753,748. Reporting the deal to its stockholders, Pepco, the Portland operating company described it as $6,753,748 “added to plant and equipment.”
By that and other like deals Central Public Service, a holding company, as owner of Portland Pepco, increased the indebtedness of that corporation from $45,000,000 to $71,000,000, an increase of $20,000,000, in only 1 year and 4 months, without any increase in tangible assets.
Is it not apparent to this subcommittee that very careful safeguards must be thrown around the purchase of such a property? Should such a private utility be able to manipulate affairs so as to get the power of the Columbia River at $17.50 per kilowatt-year, for a long enough period, the growth of population and business will make such an increase in the values of their properties that they can be secure in the dividends on their watered stock.
Recent private utility financial reports show that, as their rates have been forced down by Bonneville, use has increased and profits have mounted. Conditions are changing so rapidly that if Bonneville Authority is not ready to buy nor the private utilities to sell, only short-term contracts should be entered into.
When the recent order came forcing interconnection between publicly and privately owned utilities, I said, “Goodbye to public power in the Pacific Northwest.” I do greatly fear the result of that order. I fear that it is the nose of the camel under the tent. Fnactment of this legislation and the purchase of the private utility properties will safeguard us against this threat coming to us through enforced interconnection. Enactment will also make it possible for our P. U. D.'s to get into actual operation. I hope the bill will be protected by amend. ment so far as our present knowledge extends. The possible faults of the bill lie in omissions rather than in inclusions. I urge its approval, with amendments, by this subcommittee and hope for its enactment by Congress.
FURTHER POINTS SHOULD BE COVERED IN THESE HEARINGS
The bill is predicated on the ability of the Authority to sell the acquired systems, almost immediately after acquisition, to cities and P. U. D.'s which are ready to distribute the power locally. I must, in all frankness, point out that there are very few organizations in Oregon entirely ready to buy all or part of any system. This bill will speed readiness. Our P. Ư. D.’s are not yet operative. They are in the courts or have not voted revenue bonds. Very naturally, you and I must know what is to be done with the acquired properties not bought by any governmental unit within a reasonable time. Bonneville does not plan to operate the local distributing systems.
The committee should have, from some representative of the Bonneville Administration, or from other sponsors of this bill, a clear picture of the proposed routine, step by step. There are some questions in my mind which have not been answered. I believe it would clarify the situation and strengthen the position of those who, like myself, are, in principle, committed to a Columbia River Authority, if these details could be set forth before we go further.
RESOLUTIONS OF APPROVAL
In conclusion, I desire to file with the committee, letters and telegrams about the bill received from organizations in my district. Two of the strongest State-wide organizations in Oregon have sent me word of their interest and their approval of this bill. They are the Oregon State Grange and the Oregon State Federation of Labor. These bodies are both meeting in annual session at this time and the committee will, undoubtedly, have current resolutions from them. The Second District organizations giving public expression of approval of the principles of this legislation are as follows:
The Granges are: Blue Mountain Grange No. 345; Malheur Pomona Grange No. 33; Jefferson County Pomona Grange No. 35; and Hood River County Pomona Grange No. 8.
The Public committees are: Klamath Falls Public Power Committee (city); and Klamath Public Power Committee (county).
The R. E. A. is the Central Electric Cooperative, Inc. (Redmond).
The labor organizations are the Central Labor Council of Klamath Falls, the Oregon State Federation of Labor, and Columbia Power Trades Council.
The peoples' utility districts are Northern Wasco County Peoples' Utility District (represented here by Mr. W. J. Seufert, of The Dalles, who has been heard); Hood River Peoples' Utility District; and the Union County Peoples' Utility District (represented by Mr. Vernon Bull of La Grande, whose statement has been or will be read to you).
HEARINGS IN NORTHWEST
I quote two telegrams requesting hearings in the Pacific Northwest:
BEND, OREG., June 13. 1912 Feeling growing in Oregon that hearings on amendments to Borderie 1 should be held here thus giving opportunity for fullest possible presentado views of interested citizens; expense of trip to Washington and cab TTT persons to leave their work in these days and to devote necessary ise ! pearance before committee now in session makes it impossible *«CII To secure full understanding of Oregon attitudes toward bill. TOG FOR committee and support before it request that hearings be bei Orsin other parts of Northwest. Know of your approval of Bone I ST" feel sure you will recognize justice of request and importado ITIL opportunity to be heard on this important question. I bope OLJ* EL
That is signed by Robert W. Sawyer.
The other is dated at Hood River, Oreg., June 14, 1942, reading as follows:
Suggest you support hearings in Pacific Northwest on Bone power bill and give your people chance to express themselves on this vital point.
That is signed "Ball, editor, Hood River News."
1. I favor a Columbia River Authority and the purchase by it of private utility systems.
2. I recommend that the Authority be composed of three members, a businessman, a lawyer, and an engineer-appointed for a definite term by the President, confirmed by the Senate.
3. The Authority to appoint all employees and officials.
4. Protect the wholesale rate of $17.50 per kilowatt-year, the same to be increased only by act of Congress. (Increases in the wholesale rate at Niagara, have prevented the full development of this natural water fall, and, through contracts, have encouraged monopolistic control by Alcoa. It was the rate monopoly situation which kept the automobile industry from expanding at Niagara.)
5. We should preserve congressional authority. Keep the funds separate, for review by Congress and the Budget. I think that is right.
6. That the Federal Power Commission be the designated body to make allocation of costs of Coulee as between power, irrigation, and flood control.
7. The interest to be fixed at the lowest possible rate on the money invested in the Grand Coulee power project. 8. The users of electric energy are not to pay any losses that
be incurred by reason of irrigation.
9. Have a declaration in the bill that it will not interfere with any irrigation project or irrigation rights.
10. Acquisition of each private utility by the Authority to be safeguarded by a certificate, to be published for 3 consecutive weeks in two papers in the district affected. The certificate to show the number of meters and the mortgage on each, the estimated value of the property for taxation purposes, and the estimated value of the property for rate-making purposes. Require a certificate of valuation from an engineer appointed by the Secretary of the Interior, that certificate to show the private utility's income and expenses.
11. Let the cities and public utility districts which may buy the properties sit in at the bargaining table.
12. If revenue bonds are issued, an early callable date should be required.
13. The Authority should be given the right to build competing lines. I regard that as fundamental.
14. If electric energy must be sold by the Authority under the interconnection order, make the contract for as short a period of time as possible.
15. That payment of revenue bonds and interest be limited to income from property purchased from proceeds of those bonds.
Those are my conclusions after a good deal of thought and study of this legislation. I offer them to you with the best intentions, not to hinder the bill, but to help it.
Mr. DONDERO. That was a very fine statement, Governor.