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. Now, 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

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

Senator ČOPELAND. 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%1⁄2 per cent stock and about 871⁄2 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.

STATEMENT OF RAYMOND B. KEECH

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.

STATEMENT OF C. C. MAYER

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

utilities, such a policy as will halt the Supreme Court from controlling and rewriting legislation against the best interests of all the people in the absence of other legislation, such as Chief Justice Hughes read a decision on validating Ohio's law that the Ohio Legislature passed to limit the Ohio Supreme Court's judicial veto.

Practically all the communities and markets served by utility holding and foreign control corporations have been in existence long before their racketeering and swindling schemes were concocted. Yet these master bandits of boodle, especially the power combine, usurp the right to capitalize the blessings of the multitude into the greatest pyramided pilferings in the history of plutocratic plundering.

Instead of the National Capital's utilities becoming entangled in a League of Nations we are becoming entangled in a league of financial bandits.

To avoid so far as possible utilities' litigation before the United States Supreme Court, now presided over by an outstanding beneficiary (financially) of the Robber Barron system of financial jugglery and dishonestly pyramided rate structures, I beg to submit the following suggestions and convictions.

In legislation framed to control the utilities of the National Capital, subject to court interpretation, we are at this time afforded the greatest opportunity yet presented to Congress to define its attitude toward the public utilities corporations scattered all over the United States.

This occasion is not merely a matter of limited local application, but embraces a means of laying down a broad policy to guide the Supreme Court in its decisions so that we may escape further reactionary tendencies of our courts, such as in the Baltimore rate case, and minimize the ever increasing burdens constantly being saddled upon the consuming public in the absence of protective legislation.

Paragraph 2 of section 2 of Article III of our Constitution vests our Supreme Court with appellate jurisdiction "with such exceptions and under such regulations as the Congress shall make." In this language lies the way to broadly define what Congress considers a fair return permissible for utilities to charge without opening up endless arguments as to what constitutes confiscation for the Courts to settle.

You gentlemen doubtless have very concrete convictions to embody in legislation covering the public's constitutional rights in charges for monopolistic utility services, based on financing to include net capital investment, economical management, prudent investment, franchise value if any allowable, money spent for lobbying, advertising, propaganda and lawyers' fees, gifts, bonuses, and excessive compensation to officials and employees, costs of equipment and supplies bought from allied corporations, with or without commissions and considerations paid to intervening officials, license fees, management fees, and so forth.

Considering that public utilities are virtually guaranteed a fair return or a rate permitting a fair return and therefore their securities are given a status almost on a par with Government bonds in stability, it is incumbent on Congress to protect the consuming public against excessive charges and not only define but also prescribe punishment. for improper charges, piracies, misrepresentations and fraudulent bookkeeping entries by utilities, all of which call for excessive returns

on a fair valuation and in this way impose confiscatory and extortionate charges on the public.

In building up the rates structure where prudent investment is not taken rigidly into account, where any value at all is allowed for franchise or good will and where current reproduction value is countenanced, a return of not over 6 per cent doubtless is justified or 7 per cent where a utility conforms strictly to public commission rulings on actual net prudent investment and exemplary economical operation that benefits the public in reduced charges.

In my opinion no utility can be honestly operated with due consideration to the consuming public and the stockholders who administer the handling of this public business and revenue unless the public tribunal organized to administer a public trust directing public utilities is given control over all disbursements, salaries, lobbying and lawyer charges, fees of all kinds, advertising, propaganda, bids and acceptances for equipment, supplies, and so forth.

After many years of lax control over utilities the consuming public is now entitled to rigid protection by Congress.

As soon as possible all public utilities should be specifically curbed and checkmated from manufacturing debts on the public through the excessive sale of unwarranted stock issues without adequate equities to protect and benefit the entire public. The American Telephone & Telegraph Co. this month has authorized $300,000,000 new common stock to be sold at par to stockholders with the average market price averaging $750,000,000-three-quarters of a billion dollars of new stock exchange paper tokens for money. These utilities should also be prevented from levying exorbitant taxes in the form of rates almost at will partly to feather the nests of private racketeers and employees, many of whom draw stupendous salaries steadily advancing to several times the amount paid to the ablest talent money should be able to buy as represented by Members of Congress who must put forth tremendous efforts comparatively to maintain their pay for even a short period of time.

Inflationist stock-jobbing racketeers from among the boodle-gang highwaymen of the gambling dens of Wall Street have cunningly and trickily nullified the La Follette antiforeign corporation control act of 1913 and are now pounding energetically and brazenly on the doors of Congress for permission to completely undo what Congress expressly and decisively forbid.

Congress passed the La Follette Act to prevent foreign corporation monopoly piracies of our District of Columbia utility highways. After years of maneuvering by the stock jobbers we find the spirit, intent, and ethics of the La Follette Act, as well as the Constitution, have been violated in a shameful manner and technically the bandits of boodle have skinned the law of the cloak of protection provided by the late Senator La Follette to cover our District of Columbia utilities. The La Follette Act explicitly forbids a foreign utility or holding corporation to control more than 20 per cent of any District of Columbia utility corporation. An evasion of law, recently upheld by the courts, was accomplished by the simple device of a new-fangled investment-trust-buying control. Now, these tricksters are asking authority in the gas merger bill, section 2, for the right to sell or vote stock of the gas company by "any corporation or other entity."