Business: Political Power

In President Roosevelt’s political hostility toward the electric power business there has always been a grim consistency. As early as 1928 when he first ran for Governor of New York, his dissatisfaction with the State’s public service commission alarmed those whose fortunes are founded on the private sale of power & light. Power companies opposed his re-election in 1930, and, more strenuously, his election to the Presidency. At Portland, Ore., in the course of his 1932 campaign, Mr. Roosevelt spoke bitterly of “personal attacks,” of a “systematic, subtle, deliberate and unprincipled campaign of lies and falsehoods” conducted by the power industry. Cried he: “Judge me by the enemies I have made!”

With the birth of Tennessee Valley Authority and other New Deal power projects, President Roosevelt acquired an additional host of distinguished enemies. Last week he added a few more, making it crystal clear that he proposed to run his power lines by the same old sights. The occasion was a peace offer made by the public utility industry in the person of Thomas Nesbitt McCarter, president of Public Service Corp. of New Jersey. Mr. McCarter went to the White House to present a formal memorial to the President. Excerpts:

“I appear before you as president of the Edison Electric Institute . . . representing a very large proportion of the electrical current generated in this country. I do not come in any spirit of antagonism, but I am filled with anxiety over the grave crisis which now confronts this industry, and in this state of mind I reflect the opinion of the many thousands of persons employed throughout the land by this industry . . . and by a multitude of investors who see the safety of their life savings in jeopardy.

“Looking back upon the speculative era, we find that the follies of the day were not confined to any particular industry. … Is it fair . . . to single out any one industry and visit upon it . . . alone a destructive punishment?

“Can the doubt and fear created by such a policy, both within and without an industry, fail to have its effect . . . in creating uncertainty and anxiety with a consequent retarding effect upon general recovery? What the power of government can do to one industry can likewise be visited upon any other form of business. No industry will be free from this devastating possibility. . . .

“If there are improper practices or abuses of any kind now being carried on, either by holding companies or by operating companies, the industry will welcome an opportunity to negotiate and arrange for their removal. . . . I am confident that if the problem is approached by representatives of all concerned who are not extremists . . . a solution can be found. . . .” The bulky, florid gentleman who called on the President last week would never classify himself an extremist. He founded his $700,000,000 holding company 31 years ago with the motto: “To develop the State of New Jersey and to make it a better place in which to live.” And today Founder-President McCarter often finds it difficult to understand why the State so often resents his efforts to improve it. Once this year he thundered: “The fad of the day is to imprint upon the brow of success the scarlet letter of sin.”

Graduated from Princeton (class of 1888), President McCarter was the principal donor of Princeton’s McCarter Theatre. His New Jersey automobile license plate remains No. 88 year after year. He has little trouble with the New Jersey Legislature and less with the New Jersey utility regulatory body. It has been said that a pin dropped at a directors’ meeting of Public Service Corp. of New Jersey can be heard throughout the State.

At the end of his memorial to the President, Mr. McCarter added a few paragraphs on the “legalities” of his peace proposal. “Like yourself, sir, I am lawyer-bred. . . . For a considerable period of time I have been unable to shake off the conviction that the plans of the Government as typified, for example, in the Tennessee Valley Authority experiment, are ultra vires of its powers and an infringement upon the Sovereign rights of the states concerned.”

Suggesting that the Government join in speeding a test case to the Supreme Court, he declared: “I assume that there is no one more interested than the Government in having finally settled as soon as possible the Constitutionality or legality of projects upon which it is proposed to spend hundreds of millions of dollars.”

That was probably the most thoroughly erroneous assumption that Lawyer McCarter ever made. The Administration is much more interested in presenting completed dams and power plants in full operation than in a Constitutional defense. The McCarter memorial was turned over to Chairman Frank R. McNinch of the Federal Power Commission, who promptly let fly a scorching rebuttal bearing all the marks of Presidential editing. It concluded: “Mr. McCarter now suggests that the Government cast doubt upon the validity of its own legislation by joining with him in litigation. . . . In all the history of the American Government no parallel for such a proposal can be found!”

Not content with flouting a proffered peace, President Roosevelt opened with gusto a fresh and fast offensive against the power industry. An opportunity was presented by fiery little Mayor Fiorello LaGuardia of New York City, who had become embroiled in a rousing rate wrangle with the electrical subsidiaries of huge Consolidated Gas Co. Having refused to renew city power contracts involving some $10,000,000 annually because he considered the rates at least 40%, too high, His Honor was incensed by a move on the part of the power companies to hike their rates so as to absorb emergency taxes. Upshot was that Mayor LaGuardia announced plans for a big municipal power plant.

Sensing a rare chance to dramatize his fight for lower rates, President Roosevelt declared that he was vitally interested in the power problem of the first city of the land. When he was Assistant Secretary of the Navy, he recalled, he learned something about New York City’s high rates in connection with the Brooklyn Navy Yard power bill. By installing a small plant of its own, the Navy Yard’s annual bill had been cut from $900,000 to $300,000. Today the Federal Government, rebellious about the rates charged for New York post offices and office buildings, has refused to pay power bills there since July. Hinting that it might be a good idea for municipalities throughout the land to investigate their power bills, the President invited Mayor LaGuardia to Washington to find out whether the Federal Government could assist him.

The hot-tempered little Mayor soon found out that the Government could and would help him—with a proposed $15,000,000 PWA loan-grant for a starter. “But that $15,000,000 is merely the Angostura in the cocktail,” cried the swart son of an Army bandmaster. Asked how much money would be needed in all, the Mayor barked: “That depends on how far we go. If the utility people behave like decent, honest, law-abiding citizens—a very remote and almost impossible supposition—we will follow one plan. Otherwise .”

The Mayor explained that come what might he planned to build a municipal plant for the city’s own use and also as a “yardstick” for private rates. If the utility companies did not capitulate to his demand for rate reductions, the plans would be expanded to include sale to the public. “I’m not going to take any more bluff or impertinence from the public utilities in New York,” growled its Mayor.

No one, least of all the powermen themselves, expected Mayor LaGuardia to justify his libel on their character. In the eyes of the public, the powermen are a thoroughly depraved and unrepentant lot and politically it is no longer necessary to make out a case against them. Yet why this is so is something of a mystery.

Power is not close to the U. S. pocketbook. The average domestic bill is $3 per month — a dime a day, less than the cost of a gallon of gasoline. Furthermore, power rates have been declining for years. If rates are too high—and the Adminis-tration thinks they are, by about 50%— the logical butt of public wrath should be the state utility commissions that regulate them. What John Citizen believes is not that the powermen are a lawless crew but that they are excessively law-abiding. They use every conceivable legal trick to frustrate the regulatory bodies. Or they have the law changed.

Probably the chief political appeal of the Power Question is to an instinctive distrust of monopolies. If a customer does not like the service or the rates, the local electric company yanks out the meter and the customer is left in the dark. And almost everyone is convinced that the power company cheats.

While President Roosevelt, good politician that he is, does not hesitate to strum the Power Issue, he differentiates between good and bad utilities. In his eyes operating companies are good whereas holding companies, where financial huggermuggery thrives best, are bad. Last week he declared that most operating company bonds were as good as government securities. And when he talks of “squeezing water” out of utilities, he means out of holding companies. How far the President can drive this wedge between operating and holding company is uncertain, but it was evident last week that he has no grand scheme for nation-wide public ownership. Franklin D. Roosevelt merely wants lower power rates and he is willing to finance public competition, if necessary, to drive them down.