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The CHAIRMAN. When it had a market value of about $75, that would be a return of about how much?

Mr. LAMBERT. About 6 per cent.

The CHAIRMAN. The interesting thing to me is this-how are you. going to pay dividends on a market value of $125 or $130 without an increase in rates. I am wondering.

Mr. LAMBERT. I want you to ask Mr. Burroughs that when he takes the stand.

Senator ROвSION. What is interesting to me, too, is by what procedure is a rate of service to be charged the public that would earn a dividend of 18 per cent net. Of course, that is the thing that enhances the stock.

Mr. LAMBERT. But you must remember that is 18 per cent on par. Senator ROBSION. I understand it is 18 per cent on par, but if the consumers had been charged such a rate as to pay a reasonable dividend through the years back, let us say, 6 per cent, your stock never would have advanced to $130. These rates that produce these very large dividends enhance the market value of the stock. I am wondering under what law you were authorized to fix a rate to the public that would justify a net dividend of 18 per cent.

Mr. LAMBERT. That is water passed over the dam long ago.

Senator ROBSION. That rate was fixed many years ago when your property was not worth nearly as much as it is now.

Mr. LAMBERT. It was in its initial stage.

The CHAIRMAN. But it seems to have jumped very rapidly here in the last two years.

Mr. LAMBERT. It jumped because there was a demand that did not exist heretofore.

The CHAIRMAN. It is hard to understand what would justify the enormous increase of market value unless it was the expectation of getting a good dividend on that increased market value. I think what we are interested in learning here is whether this new group can come in here, reorganize the company and jump up the rates.

Mr. LAMBERT. That is what you are going to hear, and that is what you are going to learn is not the case, if I am not very much mistaken.

I wanted to give my attention to the legal details. The practical end is with the practical engineers.

Senator BLAINE. What astounds me is that a large part of the city of Washington is lighted by an ancient system of gas lighting. Mr. LAMBERT. I do not think you are right.

Senator BLAINE. Principally in the so-called poorer sections of the city. You go up about Twenty-second and Twenty-third Street and over here in this direction, and you will find those quarters lighted by dim gas lights, and yet we have a modern electric lighting system in the city.

Mr. LAMBERT. That is not the fault of the gas company.

Senator BLAINE. I said it was an astounding thing to me. I did not put it to you to explain.

Mr. LAMBERT. I can understand that.

Senator ROBSION. I guess these people in these different sections would like to have a brighter light if we insisted on electric lights. instead of gas lights.

Mr. LAMBERT. Of course, the great consumption of gas is not in the lights.

Senator BLAINE. I was just wondering why the whole city was not electrically lighted. Has the gas company an exclusive franchise? Mr. LAMBERT. Oh, no; the gas company is doing comparatively little of the street lighting.

Senator BLAINE. The District commissioners could take all the gas lights off the streets and put in electric lights.

Mr. LAMBERT. If Congress would appropriate the money to enable them to do it.

Senator BLAINE. Yes.

Mr. LAMBERT. As I understand it, digressing a little, I think the Government now gets a 70-cent gas rate under legislation, which is operated at a loss by the company.

Senator BLAINE. You mean the Government?

Mr. LAMBERT. Yes. Now, in reference to the merger bill and the amendment, Senator, is there anything else, as you go along in that bill, that you want to ask about.

Seator BLAINE. I wanted to inquire if this section 2 on page 3 providing for the issuing of additional stock, is a power that now rests in the Public Utilities Commission under the present law.

Mr. LAMBERT. It does not. There ought to be some arrangement for it to rest there, but the only way the gas company has of getting any money now for its capital account is to issue bonds.

Senator BLAINE. I see. This is a new power?

Mr. LAMBERT. And we want to get away from the bond issue if we can and raise our money by what is the usual way of raising it, either by common or preferred stock, but the company can do nothing whatsoever either by way of consummating the merger or by way of issuing a dollar's worth of stock until Congress's arm, its agent, the Public Utilities Commission, has pursued its investigation and decided that it is a fair or a just thing to allow to be done, under this bill. Senator ROBSION. Is there not a minority group of stockholders in the Washington company?

Mr. LAMBERT. There are minority stockholders in the Washington company, the difference between 108,000 plus and 130,000 shares of stock held by the public around generally.

Senator ROвSION. What is there in this bill that protects them? I see that you say that the commission is likewise authorized to permit the Washington company to change all its shares of stock now authorized, issued, or outstanding to the same number of shares of stock of no par value.

Mr. LAMBERT. They have the same protection the other stockholders have, to have their meeting before the commission can do anything and decide to request it to be done and ask for the commission's permission.

Senator ROBSION. Under this bill, then, whatever action is taken by the majority stockholders, the minority must submit to, whether destroyed or not.

Mr. LAMBERT. No; I do not agree with you in that addenda, "destroyed or not," because the majority and minority stocks have the same interest under this bill.

Senator ROBSION. Sometimes, you know, folks get hold of the majority of stock and it is to their interest to make it unpleasant for the other folks, so that they will sell out.

Mr. LAMBERT. Fortunately those are rare occasions.

Senator ROBSION. I am wondering whether under this bill that can happen. I do not say it might happen, but we want to protect them. Mr. LAMBERT. No; it won't happen, because the commission can not authorize the merger unless it is assumed to be fair and just to all stockholders and to the people as well, in the opinion of the officers of the Government whom Congress has designated to act in matters of this kind.

You have additional safeguards beyond those you have over the ordinary corporation, because what you speak of is the ordinary corporation which has no control over it by any commission.

We also have a provision here that this company in connection with any plan of procedure relative to that which we have been discussing, and other matters, shall come under the provisions of the code which you have passed here as a fair provision for handling corporations in the District of Columbia, and they must hold their meetings. It has to be such, a legal action as is provided shall be had by a corporation organized in the District of Columbia.

Senator BLAINE. Of course, a majority of the stockholders now could meet and sell the property at such a price as they chose.

Mr. LAMBERT. I do not see that there is anything to prevent any corporation from doing that.

Senator ROBSION. Well, Mr. Lambert, you say some folks came here and began buying up stock. I assume from this group of bankers, or bankers' trust, the suggestion came for this legislation, did it not? Mr. LAMBERT. This legislation?

Senator ROBSION. Yes.

Mr. LAMBERT. You mean from the people who have purchased it? Senator ROBSION. Yes.

Mr. LAMBERT. They asked that they be allowed to merge those wo companies.

Senator ROBSION. That is this legislation.

Mr. LAMBERT. Oh, yes. They requested this legislation. There is no doubt about that. They think it would be greatly to the interest of the holders of stock and the public as well, and have their reasons for it.

Senator ROBSION. Do you know whether or not they bought this stock with the idea that this merger or this legislation would be proposed and adopted?

Mr. LAMBERT. Oh, no, I do not know anything about that.

Senator ROBSION. What effect do you think this merger will have on their stock?

Mr. LAMBERT. I do not think this merger will have any effect on their stock. It is going to enable them to create economies; it is going to enable them to carry through the development projects they have in mind.

Senator ROBSION. I do not understand that. I do not understand how this would enable them to carry through projects, because they now control both companies.

Mr. LAMBERT. Yes; but they are running the two separate and distinct companies. You must remember originally Georgetown and Washington were as though in two different States.

Senator ROBSION. Yes; but this other concern swallowed them up. I mean the Washington company owns all the stock of the Georgetown company, so I do not see where the economy is going to come there, because the Georgetown company is not operating, is it?

Mr. LAMBERT. Oh, yes, the Georgetown company is operated by its board of directors and has its habitat in Georgetown.

Senator ROBSION. It is covering territory that this company would cover if this were perfected.

Mr. LAMBERT. If this were perfected, one organization would take it all.

Senator ROBSION. You would not put in new mains, or anything like that; the same ones would go on.

Mr. LAMBERT. They would put in new ones if there was demand. Senator COPELAND. Are you maintaining two offices?

Mr. LAMBERT. Yes; two offices and two separate sets of officers. Senator COPELAND. You are operating two plants as though they were distinct?

Mr. LAMBERT. Yes.

Senator COPELAND. What additional powers are you getting by this act?

Mr. LAMBERT. We are getting authority to merge the two companies into one.

Senator COPELAND. I mean what additional physical powers? Mr. LAMBERT. No additional physical powers, but to have additional stock for the betterment of the company.

Senator COPELAND. I did not mean that. What can you do in the way of putting down new pipes or mains?

Mr. LAMBERT. We could not do a single thing in the way of putting down new pipes or mains because we provide that the law as it exists to-day in the District of Columbia shall be held to govern operations of that kind, and that means the permits have to come through the District Commissioners.

Senator COPELAND. Then, so far as physical activities are concerned, you get no new rights or new powers?

Mr. LAMBERT. No new rights or powers.

Senator ROBSION. Except to issue new stock.

Senator COPELAND. I was speaking about physical rights.

At the top of page 4 is there anything unusual about this permission given the Public Utilities Commission to permit the company to increase from time to time the amount of its capitalization and the issuance of additional capital stock?

Mr. LAMBERT. Every corporation has it in the District of Columbia under the Code of the District, but this company, getting a charter from Congress in 1848, did not have this provision in its charter.

Senator COPELAND. Are there companies under the Public Utilities Commission to whom the Commission can give this authority that you are seeking?

Senator ROBSION. The power to issue stock by a corporation in the District of Columbia is very limited and there is a bill on the subject now before the committee.

Mr. LAMBERT. You are talking about what they call the blue-sky law, the wildcat finance scheme. The blue sky law for the District of Columbia has nothing to do with this.

Senator COPELAND. Let me ask General Patrick or the attorney this question. Does the Public Utilities Commission now have the power to authorize certain public utility corporations in this District to issue new stock or to increase their capitalization?

General PATRICK. Yes, Senator Copeland, where there is no restriction placed upon the companies by the charters from Congress.

Senator COPELAND. Then this is not novel in any sense-this new authority given to the Public Utilities Commission to authorize this merged company to issue more stock?

General PATRICK. No, sir; our law gives us the power to grant permission to the companies when we see fit, provided, as I say, that Congress has not limited the number of shares that they can issue.

Senator COPELAND. That is true generally; for instance, on lines 18 and 19 it is stated that such shares heretofore issued may be changed, shall be deemed and taken to be fully paid and nonassessable and not subject to further call or assessment, and so forth. That is not novel; that is an authority that certain other corporations have now?

The CHAIRMAN. But this, as I understand, General, is novel so far as Congress is concerned; that is, your commission can go ahead and authorize the issuance of stock, and so forth, but I do not remember a case such as this as long as I have been here.

Senator ROBSION. That is really a direct authoirty from Congress. I do not know any other concern that has got that.

Senator COPELAND. It is not the concern that has it, it is the Public Utilities Commission that has that authority. That is what I want to find out, whether that is novel.

Senator ROBSION. It says that this concern can do it.

Mr. LAMBERT. Subject to the authority.

Senator ROBSION. Subject to the commission.

The CHAIRMAN. I have no recollection of any company coming here to Congress to get a special act which would authorize the issuance of stock.

Senator COPELAND. Well, this is a common thing in cities comparable in size to Washington to have the public service commission have such control over the financial structure of a public utilities corporation so that the commission may authorize or approve a change in the structure as suggested here. Is there anything unusual in that?

Senator ROBSION. I doubt if any other city than Washington is organized like this city. They are not run by commissions.

Senator COPELAND. Well, there are plenty of cities that have public service commissions. I want to know is this the common practice. Is there anything unusual about it? I assume that there is not anything unusual about it.

Senator ROBSION. In most States the State authorities have control over the issuance of stock.

Senator GOULD. Evidently, in the District of Columbia, the Utilities Commission does not have quite the authority that a commission would have in a State or city.

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