Three Mills . . . Six Cents

UTILITIES

Three Mills . . . Six Cents

Placid as a still pool has been the great U. S. political issue of Power in recent months. But last week there was dropped into the subject an incident which came from such an eminence, with such publicity, that though the actual splash quickly subsided, the ripples seemed almost certain to be perceivable, perhaps as waves, long later in U. S. history.

Beginning of the incident was late last fortnight when the U. S. Embassy in Berlin handed out copies of a speech which Ambassador Frederic Moseley Sackett was to deliver at the World Power Conference (see p. 54). The Ambassador was in Paris at the time. Upon his return to Berlin one of his first callers was a stocky, white-headed gentleman with ruddy cheeks and a piercing eye which any alert Chicagoan would instantly have recognized as belonging to Samuel Insull, public utility primate of the Midwest (and Maine). Mr. Insull had come (the United Press discovered) to see the Ambassador about the Ambassador's proposed power speech. Mr. Insull had read the speech. He did not approve certain parts of it. It was imperative that the Ambassador change those parts. Mr. Insull spent two hours closeted with the Ambassador telling him why.

After Mr. Insull left, the Embassy made known that the Ambassador would not deliver his speech as issued, would confine himself to delivering President Hoover's felicitations to the World Power Conference. Mr. Insull, it seemed, though not attending the Conference, had been summoned from elsewhere in Europe by some of the U. S. delegates at Berlin, to be their spokesman with the Ambassador. The latter certainly did not wish, it was explained, to offend his hosts by anything he might say at their Conference; hence he would not speak on Power at all.

Instantly the U. S. press burst forth in angry protest. Who was Samuel Insull to "censor" the speech of an Ambassador of the nation? How dared a public utilitarian already viewed askance for dabbling deeply in national politics (large sums towards the nomination of Senator-reject Smith of Illinois in 1926--TIME, July 26, 1926 et seq.), now project himself internationally?

If it was a friendly office Mr. Insull had tried to perform for acquaintances from home, or if it had been an impetuous idea of his own, Mr. Insult's visit did his friends and himself little good. For Chairman Oscar Charles Merrill and Vice Chairman Henry J. Pierce (Electric Bond & Share) of the U. S. delegation both speedily announced that they would never presume to ask Ambassador Sackett to alter his speech, nor would they condone any one else so presuming. Whereupon Mr. Insull called again at the Embassy. Soon it was announced the speech would be delivered as written. Mr. Insull left Berlin for London precipitately, growling at newsgatherers: "I would like to enjoy my European holiday."

Three Mills, Six Cents. The passages which Mr. Insull disliked in the Sackett speech, on the ground they would be misinterpreted by the U. S. public, but which the Ambassador did enunciate for better or for worse, included the following remarks:

"As one who has shared the responsibilities of the early development of Power service and retained an interest in its welfare,* I venture a suggestion in the hope of contributing to the betterment of this industry of Power supply.

"To state the point concisely, I know no other manufacturing industry where the sale price of the product to the great mass of consumers is 15 times the actual cost of production.

"My purpose is sharply to define a weakness that calls for the keenest thought in your deliberations. Until the Power business is brought in line with other industries in the relationship of its cost of production to the price paid by the consumer, there can be little justification for the thought that this great Power industry is rapidly approaching perfection. . . .

"An economical station produces current at from .3-c- to .4-c- per kilowatt hour. . . . Consumers pay for household service at around 6-c- per kilowatt hour. . . ."

Distribution Cost. Mr. Insull had feared that this statistic--startling to laymen, familiar to students of public utilities--was as far as the U. S. public would read or understand in Ambassador Sackett's speech. Though perhaps they would not have read the speech at all but for Mr. Insull's intervention, many a citizen did read further: "Such a discrepancy between the production cost and the delivery price gives a wide field for a study of the distribution engineer. It gives little satisfaction to the great mass of household consumers to point to the high construction costs required to serve the small user, to urge a large reduction in the price that is made for quantity service through a single installation or even to call the roll of reductions in delivered prices that have followed through the years. The fact remains that there is an extraordinary margin between the cost and sales price, to the reduction of which Science may apply itself with greatest benefit to the people as a whole."

"Drastic Demand." Ambassador Sackett then referred to the "public clamor" in the U. S., the "so drastic demand" that all water Power forces should be Government owned and operated. Stanch private-ownership man that he is, he added: "There is no precedent on which this theory can be based because the Federal Government never engaged in the manufacture and sale of Power."

Experiment. Practical, Mr. Sackett half-suggested testing the Federal-operation theory by experiment on "any modern steam plant with its distribution system. The complete experiment need not involve the subversive principle that the Government should own and operate the water Power sources of electricity. . . .

"Industrial leaders, aided by Science, should strive with renewed effort to conquer the ratio of 15 to 1."

Water, Bananas. First reply to the Sackett speech from a Power man was by George N. Tidd, president of American Gas & Electric Co. He arose in Berlin to thank the Ambassador for calling public attention (and public sympathy, perhaps) to the high cost of distributing Power. By way of adroit analogy he mentioned water, which costs nothing at its source, and bananas. "The cost of the banana on the tree is infinitesimal, yet by the time it has been gathered and transported the ratio is nearer 1,500 than 15 to 1."

In Washington Senator Morris of Nebraska, arch critic of what he calls the Power trust, was of course prompt and bitter with his denunciation of Mr. Insull's "disgraceful attitude." Other Senators (Dill, Wheeler) sarcastically thanked Mr. Insull for performing a "public service." Washington waited to see what ef fect the catchy phrase "three mills . . . six cents" might have on the Senatorial inquisition, the great Power Probe, long-sought by the greatest inquisitor of them all, Senator Walsh of Montana. The investigation, started by a Walsh resolution in 1926, into the propagandizing activities and financial structure of public utilities, was transferred to the Federal Trade Commission, where it still progresses quietly, obscurely. Another investigation, by Senator Couzens and his Interstate Commerce Committee, lately resulted in the reorganization of the Federal Power Commission as a permanent independent body outside of the Cabinet (TIME, March 10).

*Ambassador Sackett was president (1907-1912) of Louisville (Ky.) Gas Co. and Louisville Lighting Co. (both sold in 1913 to the H. M. Byllesby interests and now operated as Louisville Gas & Electric Co.).

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