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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 Robson. 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 Rossion. 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 invest. ment 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 Roosion. 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 maintenance.

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?
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

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Corporation and the Central Public Utilities Corporation as such has no interest in the Washington Gas Light Co.

Senator COPELAND. Does your concern have anything to do with the central heating plant in New York that was recently taken over by the Edison?

Mr. BURROUGHS. No, sir; we have not any companies in Greater New York.

The CHAIRMAN. What I was interested in learning is with what group of utilities this Washington Gas Light Co. is associated. It looks as though this public utility business was very rapidly being absorbed by a few groups and I wondered if this was a move in that direction.

Mr. BURROUGHS. If we were free to do so, if it were legally possible to do so, and the commission would approve our doing it. We might at some time decide to put this into a group. I say we might.

If we were bringing natural gas in from a distance, or if we were building a by-product plant outside of the city, from our standpoint it would not make any particular difference whether the Washington company were actually owned by the same company that owned these other utilities, but I think everybody would feel that it was a great deal more straightforward if we did put it in rather than have a group own the distribution company and the same group own the production facilities and one sell to the other. In the final analysis it would be the same thing. But whether we will put the ownership of the Washington company into any public utility holding depends solely on whether the law is changed and whether the commission, following that change, gives its approval to do it.

The CHAIRMAN. You speak about being able to bring about a reduction in rates by reason of economies and larger operations, etcetera. Have you been able to do that in other cities or companies with which you are associated?

Mr. BURROUGHS. Yes, sir.
The CHAIRMAN. In what cities?

Mr. BURROUGHs. I do not think I could undertake to give a list. We are interested in so many different communities. But the constant tendency is downward in rates in both gas and electricity.

Senator COPELAND. I think, Mr. Chairman, that we have to be governed here largely by the advise of the Public Utilities Commission. So far as I can see, this bill has nothing in it that is dangerous. I asked questions relative to various points here, questions that arose in my mind. As I understand the matter, here is a concern that goes back eighty years with a moss-covered charter from Congress. It owns the stocks of what originally was a competing concern. it proposes to bring itself fully under the Public Utilities Commission It can not issue stock or change its financial structure without the approval of the commission. The bill has in it, so far as I can see, no dangerous feature. Does any occur to you?

The CHAIRMAN. No. It seems to me the purpose of the bill is entirely legitimate and probably desirable, and the only interest I have had in it is that the public here would know. I think they have a right to know just what is going on here in connection with a very important public utility, who the new owners are and why there are new owners here and what they hope to do with the property. The answers that have been given very frankly and quite satisfactorily

Now, along that line, and the approval of the Public Utilities Commission, I think, as you do, mean a great deal.

Senator COPELAND. Before we get through, I think we should have an unqualified statement of the Public Utilities Commission that they do approve the bill, but before that I would like to ask Senator Gould, as he has had a large experience in this field, does this look all right to you, Senator?

Senator GOULD. Why, on general principles it looks a good deal the same to me as the railroad merger here does.

There are two separate companies operating, and it is duplicating the expense, almost doubling the expense of operation, so far as the clerical office help and all that goes. Now this seems to me to be very similar. I have had some experience in just such cases. I have put two or three companies together and saved an immense amount in the overhead.

Senator COPELAND. That is reflected, I suppose, in lower rates to the public ultimately.

Senator GOULD. It surely is.

Senator COPELAND. I would like to ask the Public Utilities Commission-General Patrick, is this a good bill and should we recommend it to Congress?

General PATRICK. I answered just a moment ago, Senator Copeland, that we had a public hearing. We considered all objections raised to the bill—and there were a very few. We then studied the bill and the Commission recommended that it be passed by Congress, believing that it is in the interest of all concerned, and that certainly includes the people of Washington.

I think there are one or two things that possibly have not been brought out.

Under the old charter the Washington company can not operate west of Rock Creek Park and the Georgetown company can not operate east of Rock Creek Park. They are two corporate entities and they are doubling up expenses, as Senator Gould says. There will undoubtedly be that saving as soon as the merger is consummated.

The companies are restricted in their endeavor to extend their service by their inability to obtain money except by borrowing. The capital structure of the Washington company at present is represented by about 20 per cent stock and 80 per cent bonds, which is unbalanced. The Georgetown company has about 12% per cent stock and about 87 per cent bonds, which is quite unbalanced.

The Georgetown company sells only about 1,000,000,000 cubic feet of gas; the Washington company sells about 5,000,000,000 feet of gas. The Washington company would have owned the Georgetown company body and soul long ago had it not been for the fact that the charter provisions prevent the Washington company from owning the property of the Georgetown company but, as the general counsel of the commission ruled some 19 years ago, the Washington company could acquire the stock of the Georgetown company. So in all intents and purposes it owns it, and this merely vests the control of the physical property in the control of the corporation that really owns it anyhow.

Senator COPELAND. So, as far as you are concerned, General, you feel inclined to recommend the favorable report of the bill.

General PATRICK. We have already recommended it, Senator, in a letter sent to Congress.

The CHAIRMAN. They have recommended it.
Senator COPELAND. Is there any opposition to it?

The CHAIRMAN. I do not know. We are going to call on those here, but we have here the people's counsel of the District of Columbia, Mr. Keech. I think it might be well to have a word from him.


Mr. KEECH. Mr. Chairman, as suggested by General Patrick, I attended the public hearing on this bill and propounded a number of questions, and after due consideration I too feel that in the interest of everybody it would be better that this legislation be passed.

One thing I do not think has been expressed here is that the ultimate control of this entire situation is vested in the Public Utilities Commission, and if any opposition should appear it would be proper to take it up before the commission. In other words, before anything could be done under this proposed legislation it would have to obtain the approval of the commission, and I therefore feel that this proposed legislation is proper and that it would inure to the benefit of the people of Washington.

The CHAIRMAN. Thank you.
Mr. C. C. MAYER. I would like to oppose it.
The CHAIRMAN. Are you connected with any group of citizens?
Mr. MAYER. I am speaking for the multitude.
The CHAIRMAN. All right.


Mr. MAYER. These gentlemen are here illegally. It has not been disclosed yet, but there is a corporation that has bought this tsock and there is a suit on in the courts now by a gentleman who has presented a discovery bill as to whether they are here with clean hands or not. In the hands of our present Public Utilities Commission, I believe the public is safe, but I do not believe that Congress should pass broad powers, giving these people the right to increase the stock at their will, or to vote the stock as a holding company.

We have too much concentration of wealth. One per cent of the banks own half the wealth of the country, and this will send all the gas company revenues to New York, or a lot of other money. I would like to read a statement.

The CHAIRMAN. How much time do you want?
Mr. MAYER. I won't take 10 per cent of the attorney's time.

The CHAIRMAN. We will be glad to hear you if it is not going to take any great length of time.

Mr. MAYER. Six, seven, or eight minutes.
Senator COPELAND. Go ahead; let us hear it.

Mr. Mayer. Not only the interests of 750,000 human beings in the National Capital's community and the National Government's also, served by the District of Columbia utility corporations, are affected in regard to this new legislation under the guise of merger, but over 100,000,000 people living in every corner of the country are entitled to have Congress lay down a broad policy and principle for regulating

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