Summoned to the White House one day last week was Floyd Leslie Carlisle, chairman of not one but two of the country’s great utility companies, Consolidated Edison and Niagara Hudson Power. President Roosevelt is not on intimate terms with any powermen but Mr. Carlisle’s and the President’s cordial dislike of each other is something of a record, dating as it does from pre-New Deal days, when Franklin Roosevelt was Governor of New York State, Mr. Carlisle’s bailiwick. But now, with a Grade A business recession on his hands, the President, like Mr. Hoover in 1929-30, is anxious to persuade the great utilities industry to cut loose with a big construction program which would stimulate heavy industry (TIME, Nov. 22).
Day before Mr. Carlisle called, the President dispatched to three Congressional committees a report of the New York State Power Authority charging private power interests with “gross exaggeration” in computing the costs of public hydroelectric power and “gross understatement” of private steam generating costs—a none too subtle reminder to Mr. Carlisle that any Roosevelt importunity was purely a matter of expediency. But Mr. Carlisle was wreathed in amiability. Emerging from the White House he declared blandly: “I had a very happy discussion of the general situation of the utilities. … I think that the fears of Government competition are very much lessened as a result of the discussions that have taken place.” And he announced that his companies would spend $112,000,000 for new construction in the next two years.
For headline purposes this announcement was precisely what the President wanted. But its significance was precisely nil. Niagara Hudson and Consolidated Edison are intraState companies, unaffected by the Federal “death sentence” on utility holding companies, largely exempt from other sections of the Public Utility Act of 1935 and far from the madding competition of TVA. Moreover, Mr. Carlisle planned to spend the $112,000,000 anyway.
However, the day before Mr. Carlisle’s visit, President Roosevelt talked with a powerman whose case is a comprehensive summation of the industry’s present grave problems—Wendell Lewis Willkie, president of Commonwealth & Southern Corp., a billion-dollar holding company with a huge chunk of its operating properties located smack in the centre of invading TVA’s sphere. Though he has become the industry’s spokesman in dealing with the New Deal, Mr. Willkie is by no means a typical powerman. A blunt homespun Hoosier who got into power by way of the law—after 1929—he is a low-rate, big-production man who has boosted his system’s domestic sales to the highest average in the country (1,000 k.w.h. per domestic consumer per year). By business standards he is a liberal. He was always a Democrat and voted for Roosevelt in 1932.
Officially no record of the hour and three-quarter Willkie-Roosevelt conversation was made public. But it appeared that Mr. Willkie, speaking for himself, was willing to agree, for the future at least, to rate structures based on the President’s favorite “prudent investment” basis, as opposed to the prevalent utility practice of weighting valuations of plants and equipment with replacement costs. He was willing to write-off all past write-ups discovered by the Federal Trade Commission in its six-year power investigation. As for Government competition, all he asked was a fair break—such things as the use of the same accounting method for public power projects as the Federal Power Commission prescribes for private companies, definite division of territory for rural electrification, cessation of Federal gifts to cities wanting their own distribution systems, purchase of private systems at prices to be set by impartial tribunals. And to forestall the chaotic break-up of the big power systems, Mr. Willkie asked that the “death sentence” for holding companies be modified, but only to the extent of allowing “first degree” holding companies (no intermediates) to own the geographically diversified properties already in their possession.*
On his part the President seemed to have brushed over most of Mr. Willkie’s arguments and suggestions in effort to convince the powerman that the utilities really had nothing to fear, arguing that Government projects now accounted for only 10% total U. S. power production nd that on a geographical basis the limit was 18% of the country in area, 13% in population. Mr. Willkie tried to convince the President that investors did have very real fears and consequently would not furnish money for utilities to spend, particularly “junior money” (common stock). Each concurred that the utilities could profitably spend a lot of money in the next year, perhaps as much as $1,500,000,000.
Fact was that, in spite of his vague offers of truce and invitations to Messrs. Carlisle & Willkie, so far President Roosevelt had not even hinted a willingness to compromise his power policies on any ground acceptable to private powermen. And in the opinion of Washington ob-servers he was not likely to compromise unless Recession grew even blacker. The pressure from the Right wing of the Administration was heavy but his advisers on the Left wing urged him to hold out until after the major legal tests of the power program are decided. The Duke Power case (PWA grants), and the Electric Bond & Share case (holding companies) await the attention of the Supreme Court. The famed 19-company challenge to TVA’s constitutionality was on trial last week in Chattanooga. It is the first important case to come before one of the new special three-judge tribunals from which an appeal passes directly to the Supreme Court. And the President’s Left-wing advisers are confident that he will win all three cases and then be able to dictate to the powermen his own terms for peace.
That the President still thinks of businessmen as his opponents in a highly exciting political game was clear last week at the White House press conference following Mr. Willkie’s visit. He said he had pressed Mr. Willkie for reasons why companies outside the area of direct TVA competition had difficulty in raising money, and that the only answer he could get was: “The general feeling.” As every businessman knows, “the general feeling” is more important in selling any security or making any financial commitment than the details of a registration statement. And the general feeling of businessmen last week was that President Roosevelt had yet to make a tangible offer to the utilities, a fortnight’s headlines to the contrary. And that in failing to win the confidence of utility men, he had still to convince watchful Business that he was as yet philosophically or psychologically capable of tossing the nation’s currently sinking commercial life something beside an anvil.
* The law now allows holding companies in the first degree but requires that their properties form a geographical unit.
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