Milking Prohibited

Members of National Electric Light Association, convening in Atlantic City last week, heard Chairman Floyd Leslie Carlisle of Consolidated Gas stoutly define a well-managed holding company as a "potent instrument for the public welfare." Because of the Insull and Tri-Utilities collapses as well as the Kreuger scandal, the holding company theory at present is the subject of many an attack, many an inquiry. Last week from the Public Service Commission of the State of New York, the holding company theory received its 'second setback in three weeks.

First setback was when Long Island Capital Corp. petitioned for authority to buy control of Long Island Lighting Co. Said Commission Chairman Milo Roy Maltbie in refusing to grant permission: "Experience has shown that in times of stress when assistance is most needed, holding companies are unable to give it, and in good times when funds can be secured at low rates, the operating companies do not need external assistance. The record in this case does not show that the addition of Long Island Capital Corporation to the corporate structure of the Long Island Lighting System of companies would be in the public interest. It would be an element of weakness, and many other systems would be better off without top-heavy holding companies."

Last week Chairman Maltbie considered the petition of Staten Island Edison Corp. to issue $8,500,000 worth of first mortgage bonds. Because the money was to be used not for Staten Island Edison but to pay off 364-day notes issued last year to buy bonds of Associated Electric, a subsidiary holding company of Associated Gas & Electric, the petition was denied. The proposed process has been impolitely called "milking a subsidiary." Said polite Chairman Maltbie: "In no way would the acquisition of these securities enable the Staten Island company to give better service or lower rates. . . . When the Staten Island company is called upon to extend or improve its plant, it would find that the existence of a funded debt principally incurred to acquire the securities of other corporations would limit its financial ability to raise funds. . . . We see no reason why the credit of the Staten Island company should be used ... to acquire securities now being held by holding companies . . . and moreover holding companies not under the jurisdiction of this commission."

Undaunted, Staten Island Edison prepared to issue 364-day bonds, the Commission having authority only over borrowings for a year or more.

This file is automatically generated by a robot program, so reader's discretion is required.