UTILITIES: No More Water

When a careful man builds his house, he itemizes his actual expenditures—so much for land, so much for lumber, for brick, for cement, for hardware & plumbing. Last fortnight the Federal Power Commission, through its Solicitor Charles A. Russell, ordered power companies seeking U. S. licenses to construct plants along navigable U. S. streams, to exercise the same care and precision in estimating their construction costs. Reason: the U. S. has an option to buy back such licensed plants after 50 years and it refuses to pay an excessive price for them. The Russell ruling is designed to squeeze “water,” estimated at some $500,000,000 out of the capitalization of water power companies now seeking U. S. licenses. Ruled Solicitor Russell: “A reading of the Federal Water Power Act leads to but one conclusion and that is to insert in capital accounts the actual legitimate cost of construction, limited to actual amount of money paid therefor. . . . This automatically dispenses with the proposition that there can be included in these capital accounts lump sum or percentage overheads, for engineering supervision, management, financing, development. Such items cannot and must not be included.” One large drop of utility “water” was extracted by Solicitor Russell when, as a working example of what he meant, he struck $500.000 from the capital account of Cumberland River Power Co., a subsidiary of Samuel Insull’s Middle West Utilities Co., now seeking a U. S. license to construct a plant at Cumberland Falls, Ky. Out went a $250,000 stock transaction item between Cumberland Co. and other Insull companies ”to pay for option, engineering reports, license and rights.” Out also went a $250,000 pledge by the power company to the Kentucky State Park Commission to develop the property about Cumberland Falls into a park. Kentucky’s only Republican high official. Governor Flem D. Sampson, had engineered the Cumberland Falls deal, had signed the contract. Kentucky’s Demo-cratic Attorney-General James William Cammack cried tritely: “What a crime . . . that the rights of Kentucky might be bartered away for a mess of pottage.”