UTILITIES: Power Probe: Phase II

The Federal Trade Commission’s three-year-old investigation of the electric light, gas, & power industry is now in its second, most politically explosive phase. The first phase was investigating the industry’s propaganda in schools, colleges and the Press (TIME, July 16, 1928 et seq.). Then the investigators tackled the more difficult job of ascertaining the financial set-up of the industry, the relationship between holding and operating companies, stock ownership, management fees, interlocking directorates. After a year’s secret work, the investigators are now ready to state their findings. Since this phase of the inquiry will touch the public pocket nerve, it is the phase for which professional foes of the “Power Trust” on Capitol Hill have most eagerly waited. Eminent in this group is Iowa’s loud, intransigent Senator Smith Wildman Brookhart. Like Senators Norris, Nye, Howell, La Follette et al., he is ready to seize upon the Commission’s disclosures and therefrom argue for stricter Federal regulation of interstate power. As the Commission’s hearings started Phase II last week in a schoolroom atmosphere of charts and maps, who should be called to the witness stand but Smith Wildman Brookhart Jr., the Iowa Senator’s slender, soft-voiced, studious son, aged 25. When the Senator arrived in Washington in 1926, Son Brookhart had been given a clerical job with the Trade Commission. Graduated from George Washington Uni versity in 1929, he was promoted to the rank of a Commission economist and investigator. Married, father of a year-old daughter, he is now studying law. Phase II began with a scrutiny by Son Brookhart of huge North American Co.’s structure and functions. Examiner Brookhart testified that 76 companies, most of which North American controls, servicing 687 communities, produce about 7% of the electric power consumed in the U. S. Its holdings are particularly heavy in Ohio, Wisconsin, Missouri, Illinois, Iowa, California, District of Columbia. Its largest single owner is Harrison Williams, New York utilitarian, who holds 27% of its stock through New Empire Corp. Other witnesses gave North American a fair bill of industrial health on the ground that it allows its subsidiaries free operating control, does not charge them exorbitant management fees.

One North American subsidiary, Cleveland Electric Illuminating Co., received high praise from Judson Dickerman, Commission examiner. This Ohio company was called a “model concern which conforms to the best ideal of public regulations.” Its rates (5¢ per kilowatt hr.) are low, its securities well secured, its management efficient, its service high-grade. Examiner Dickerman pointed out, however, as one possible reason for the Cleveland company’s excellent record, the fact that it operates in competition with a municipal power plant which charges a nominal rate of 3¢ per kilowatt hr.