the committee what has been going on so far as these gas properties are concerned, what it means, and why the company thinks this legislation is necessary.

We would like to know more particularly what other utility interests this company is associated with and what holding companies or operating companies you are connected with, why this program has been developed here in Washington, and what you expect to do with the property that you have just recently taken over.

What is your official position so far as this company is concerned? Mr. BURROUGHS. Well, so far as this company is concerned, I am treasurer of the Seaboard Investment Trust, which owns majority

of the stock of the Washington Gas Light Co.

The CHAIRMAN. Is that a holding company?

Mr. BURROUGHS. No, sir; that is a common-law trust that we formed to acquire and hold this stock.

The CHAIRMAN. Now, there is a holding company somewhere, is there not, that has some interest in this enterprise?

Mr. BURROUGHS. No, sir; there is no holding company that is interested in this. I formed a group to acquire control of this. Senator COPELAND. Do you live here?

Mr. BURROUGHS. No, sir; my office is in New York, with Harris, Forbes & Co., and my residence is in New Jersey.

I formed a group of bankers to acquire the controlling stock of the Washington Gas Light Co., and, as Mr. Lambert has told you, we acquired something over 108,000 shares of a total of 130,000 shares. The Washington company owns the entire capital stock, except directors' qualifying shares, in the Georgetown Gaslight Co.

We feel that there is an unnecessary duplication of expense in maintaining those two companies; that inasmuch as it is a common ownership we might as well have it all one company. We have calculated that we are throwing away maybe $50,000 a year by maintaining a separate corporation of the Georgetown company.

So this bill provides for the elimination of the Georgetown company as a separate corporation and having all the operations within the District in the one company. The ownership is common now, and all we propose to do is to eliminate this subsidiary.

Senator COPELAND. Mr. Burroughs, is every share of the Georgetown company owned by the Washington company?

Mr. BURROUGHS. All except, I think, five shares, or something like that.

Senator COPELAND. The directors' qualifying shares?

Mr. BURROUGHS. Yes. Those directors' shares are also owned by the company, but they stand in the name of the directors. There is no diversity of ownership.

Senator COPELAND. So from that organization there would be no opposition?

Mr. BURROUGHS. Oh, no. It is a wholly owned subsidiary.

Now, the reason for suggesting a change of capitalization is that the Washington company has been forced to finance its development to date through the issuance of bonds, increasing the debt.

Senator ROBINSON. Bonds to what amount?

Mr. BURROUGHS. There are $11,000,000.

Senator ROBINSON. $11,000,000. What is the par value of all the stock of both kinds?

Mr. BURROUGHS. One hundred and thirty thousand shares of stock, which represents the equity ownership of this property. That stock has a par value of $20 a share. There is, however, an important surplus in the company which, of course, also belongs to the common stock.

Senator ROBSION. How much debt is there?

Mr. BURROUGHS. I could not tell you offhand. I will have the treasurer tell you.

Senator ROBSION. Is there somebody here that knows? I want to get that in there.

Mr. BURROUGHS. I will be glad to submit a balance sheet and that will fully inform you.

Senator ROBSION. Well, that one question could be answered now. Mr. BURROUGHS. $7,473,000.

Senator ROBSION. $7,473,000 surplus?

Mr. BURROUGHS. That is in the Washington company alone. That does not include the ownership of the subsidiaries, the subsidiaries being the Georgetown Gaslight Co. and two or three small companies outside of the District.

Senator ROBSION. How many bonds have been sold?

Mr. BURROUGHS. About $11,000,000, and there is about $2,000,000 of floating debts, bank loans, which is unfunded at the present time. Senator ROBSION. Are there any other bonds authorized besides the $11,000,000?

Mr. BURROUGHS. Those bonds are a closed issue and they are noncallable. There is absolutely no way at this time that this company can raise a dollar of additional capital to provide for extensions unless it can sell preferred stock or additional common stock, or unless it borrows, and its borrowings must be junior to the approximately $10,000,000 or $11,000,000 now outstanding, and that $11,000,000 of bonds now outstanding, furthermore, are noncallable by their terms, so you can not get rid of those and make a larger authorized issue.

Senator ROBSION. If this bill would pass, would it authorize the issue of more bonds?

Mr. BURROUGHS. No; this would not have anything to do with bonds, but it would permit the company to go to the commission during times when Congress is not in session and get authority to issue more securities in the form of preferred stock or common stock, as the commission saw fit, to be sold to raise money to provide for extensions and raise money to pay for the floating debt that the banks are now carrying.

The CHAIRMAN. Anything they do in the way of issuing bonds or any other securities must first have the approval of the Public Utilities Commission?

Mr. BURROUGHS. Yes. The company could now go to the commission and secure permission to issue additional bonds, but you are impairing the quality of the bonds if you do not put in equity That is, if the stockholders do not supply more money the bonds are constantly getting poorer, because there is a larger percentage of debts.

Senator ROBSION. Who sold these bonds? Did you engineer the sale?

Mr. BURROUGHS. My house has sold some of them, not all of them. Most of them have been sold to the public. I think we have underwritten some issues.

Senator ROBSION. What price did you get?

Mr. BURROUGHS. I could not remember.

Senator ROBSION. Did they sell for less than par?

Mr. BURROUGHS. I do not remember. I am told $100 for the A and $101 for the B.

Senator ROBSION. What rate did they bear?

Mr. BURROUGHS. Those are 10-year 6 per cent bonds.

Senator ROBSION. Now, you have in mind the amount of stock which you expect to issue, either of preferred or common, in the near future, have you not? You have figured it out, have you not?

Mr. BURROUGHS. No, sir; we do not have it in mind. As the company needs additional capital to build mains and provide additional services as the city grows, we want some way by which we can raise the money, and under the present circumstances there is no way without waiting for direct action by Congress.

Senator ROBSION. What was the necessity of this $11,000,000 of bonds if the company has $2,600,000 par value and $7,473,000 of surplus.

Mr. BURROUGHS. Well, it has $30,000,000 or $40,000,000 worth of property. It has invested something over $30,000,000 in the Washington company alone, as I recall it.

Senator ROBSION. And this $11,000,000 was to take care of debts. against the company?

Mr. BURROUGHS. To provide part of the money with which the plant was built.

Senator ROBSION. That was to cover debts or claims owed by the company.

Mr. BURROUGHS. It does not cover debts. A company has to raise money by one of two ways, either through the sale of bonds, which is its borrowings

Senator ROBSION. Well, make it the obligations of the company. Mr. BURROUGHS. To raise the capital to build the property. That is why it was issued.

Senator ROBSION. Those things are obligations.

Senator COPELAND. I suppose these bonds which are outstanding are the successors of various bond issues in the past that go back originally to the construction of the plant.

Mr. BURROUGHS. Yes. It is a very old system and as it has grown from time to time additional stocks and bonds have been issued. Now, there were some 50-year bonds that were issued sometime ago I don't remember when; there are $2,500,000 of those outstanding. Then there are $4,000,000 of so-called series A, 6 per cent second-mortgage bonds.

Senator ROBSION. Are all of these bonds due or about to become due?

Mr. BURROUGHS. Not for some time. There are no early maturities.

Senator ROBSION. What did you pay for this stock?

Mr. BURROUGHS. We acquired part of it privately and part of it we acquired by general offer to the stockholders at $125 a share. Senator ROBSION. Can you tell about the average?

Mr. BURROUGHS. There are some expenses in there. It probably averages, including the expense of acquisition, I should say, $130 a share.

The CHAIRMAN. How do you explain, Mr. Burroughs, this very sudden increase in the value of the stock from $75 a share to $130 a share?

Mr. BURROUGHS. We consider that the city of Washington and the surrounding territory was a splendid market for gas; we considered that the present company was not beginning to take advantage of the opportunities of that market. We believe by bringing in natural gas or building a large by-product coke-oven plant in the vicinity of Washington we could manufacture twice as much gas as this company is marketing, could heat homes, and give service very much better than the company has been giving in the past.

Senator ROBSION. Senator Capper's question was, What caused the stock to jump from $75 to $130?

Mr. BURROUGHS. We could not buy it any cheaper.
Senator ROBSION. All at once it seemed to go up.

Mr. BURROUGHS. We found that the $75 was a nominal quotation. As we started to buy the stock, we found we could not get very much of it without the stock going up to $125.

Senator COPELAND. Mr. Burroughs, I have heard rumors that sometimes stocks went the other way. They had a crash in Wall Street. It is not unusual for stocks to go up or to go down?

Mr. BURROUGHS. You are quite right, Senator. They go both ways. Unfortunately some went down.

Senator COPELAND. Your activities here and the fact there was to be a new deal, did that have an influence?

Mr. BURROUGHS. Yes; as soon as we began buying a little stock everybody knew there was somebody trying to buy it and then we had to make an offer that was satisfactory to everybody. We did not buy it on a basis where present earnings or present volume of business produces a satisfactory return on the amount of money invested. We will have to increase the business in order to make a satisfactory return.

Senator COPELAND. I overlooked what you said was the physical value of your property.

Mr. BURROUGHS. The valuation question has never been finally decided.

Senator ROBSION. According to this stock, it would be $33,800,000. Mr. BURROUGHS. You mean, including Georgetown and outside companies?

Senator ROBSION. NO.

Mr. BURROUGHS. I think there is somewhere around $35,000,000 or $40,000,000 property, all told. Maybe the commission would have a different idea.

Senator ROBSION. What kind of rates are we going to have here to justify this?

Mr. BURROUGHS. We can not possibly earn a return on our investment by raising rates. The only way we can earn a return on our investment is by reducing rates and increasing the volume of the business.

Senator ROBSION. What is in your mind? Your attorney has made some statement that you had stated that you are going to reduce the

rates.

Mr. BURROUGHS. I have stated that we are prepared to make a reduction in rates of at least 10 per cent. The reason I can not be specific, Senator, is that it depends somewhat on how we finally decide to supply Washington with gas. If we bring in natural gas, that is one set of conditions; if we build a by-product plant that introduces another set of conditions.

Senator COPELAND. Can you compete with oil as a means of heating a house?

Mr. BURROUGHS. Probably not in actual cost, but there is a much larger initial investment represented to heat a house with oil.

Senator ROBSION. I would think it would be cheaper, Senator Copeland.

Senator COPELAND. With gas?

Senator ROBSION. Yes.

Senator COPELAND. My experience with gas is that it costs a great deal to heat a house, but I can see how, if the business of the company could be materially increased, they might bring the price down, as Mr. Burroughs has suggested.

Mr. BURROUGHS. We intend to introduce a step schedule so that the volume for house heating would be available at materially more than 10 per cent under the present price.

Mr. C. C. MAYER. Senator, I think it has been scientifically ascertained that coal at $22 a ton is as cheap as gas at 85 cents a thousand feet for heating purposes.

Senator ROBSION. What about oil?

Mr. MAYER. It is higher than gas, counting initial cost and main

tenance.

The CHAIRMAN. Mr. Burroughs, are you interested in gas and other utilities from the standpoint of operation or the financial standpoint? I mean, has your connection been heretofore with operating?

Mr. BURROUGHS. I have been interested in operating in times past and I have been interested in the regulation of public utilities.

The CHAIRMAN. In what public utilities are you now interested, in other cities?

Mr. BURROUGHS. From the standpoint of control I am not interested in any, nor is Harris, Forbes & Co. From the standpoint of investors, we are interested in varying degrees in many public utility companies.

Senator COPELAND. Do you specialize in gas?

Mr. BURROUGHS. No.

Senator COPELAND. Electricity, too?

Mr. BURROUGHS. A great many electric companies.
Senator COPELAND. Hydroelectric, also?

Mr. BURROUGHS. Hydroelectric, also.

The CHAIRMAN. What connection has this enterprise with the Central Public Utilities, of Chicago?

Mr. BURROUGHS. No connection, except I might explain that I am president of the Public Utilities Holding Corporation, which is a subsidiary of the Central Public Service Corporation. Harris, Forbes & Co. as such has no interest in the Central Public Utilities