Pat on the Back

Of the Big Three U. S. utility magnates, Floyd Carlisle (Niagara Hudson and Consolidated Edison) and Wendell Willkie (Commonwealth & Southern), are lawyers Only C. (for Clarence) E. (for Edward) Groesbeck (Electric Bond & Share) is an operating man, trained climbing poles instead of chasing commas. Hard-boiled Mr. Groesbeck, who goes his own way, is also different in another respect. He figures that the Administration has the money and the power, that there is more percentage in trading with the New Deal than in bucking it. Last week this notion of his began to pay dividends.

A. D. 1938 was a year of violent change for 63-year-old Boss Groesbeck. Its turning point was the Supreme Court's decision against Electric Bond & Share in its test case on the Public Utility Holding Company Act. Groesbeck saw the handwriting on the wall, quit beating his head against it. Promptly, Bond & Share registered with SEC. Holding company service subsidiaries had frequently been charged with bleeding operating companies. So Bond & Share forfeited all income (about $800,000 a year) from its management firm (Ebasco Services, Inc.), which began servicing the system's operating units at cost. Next, Groesbeck pulled out of the TVA fight, selling four operating companies to Government competitors, leaving Willkie (of whose Commonwealth & Southern system Bond& Share is a 5% owner) to shift for himself, taking a loss of $2,433,209 on the deal. Finally, Groesbeck submitted to SEChairman Douglas a scheme for integrating his multi-regioned system which sprawls across 33 States, embraces 119 companies, and looks as hard to hook into one chain as the Appalachians and the Rockies.

During this retreat Groesbeck was not thinking of winning victories. He was thinking of saving his army. All through the winter, as he shuttled back & forth between Washington and Manhattan, Groesbeck wondered how he could get out from under, how he could forestall public agencies from building competitive transmission lines to his customers' doors.

Homeward bound on the Pennsylvania one night, an idea struck him. In the arid west, where the U. S. Bureau of Reclamation has for years provided water and sometimes generated power as a byproduct, Bond & Share units have bought this public power and transmitted it to their own customers over their own lines. Why could not Bond & Share keep Bonneville and Grand Coulee from building transmission lines by the same means? Why not buy their power and distribute it, dovetailing public power plants with private transmission lines and private meters?

Last March, at annual sounding-off time, Groesbeck tossed out his idea. He said: ". . . The objectives of both Government and the utilities must be with the widest possible use of electric service at the lowest possible cost. . . . The achievement of this end and the solution of the existing problems of competition lie in ... the coordinated use of the existing generatmg and transmission facilities of both " Two months ago the New York Power Authority (planning exploitation of the St Lawrence Waterway, very close to former governor Franklin Roosevelt's heart) made its annual report. In presenting a copy of their report to the President the Trustees noted that it "suggests a new line of approach to ... coordination of Government power enterprises with private power systems. ..." They thought it opportune" that their proposal for cooperation "follows so closely upon the annual report of Chairman Groesbeck of Electric Bond & Share."

Next move was Groesbeck's. In eastern Washington, Bond & Share's small Washington Water Power Co. (450 miles of lines) has been threatened with competition from giant U. S. power plants at both Grand Coulee and Bonneville. Last month it sold $22,000,000 of 3 1/2% 25-year bonds for refunding and new construction at the gilt-edged price of 105. Unworried investors gobbled up the issue.

Last week, Mr. Groesbeck began to see daylight. At a White House press conference, the President used a routine question about TVA as an opportunity to take newsmen up the mountain. He pointed out that "a company," obviously meaning Washington Water Power, in Grand Coulee and Bonneville territory had just sold an issue at "pretty good terms," thus inviting White House reporters to chalk one up for his contention that operating companies with good capital structures (a pat for Washington Water Power) whose "managers" indulge in no soapboxing (a pat for Groesbeck) can count on all the "investor confidence" they need.

Two days later, Groesbeck moved again, this time solidifying his relations with SEChairman Jerome Frank. He announced he would simplify the structure of Bond & Share's National Power & Light. Meeting one of SEC's main objections (the needless ramifications of utility finance), he announced dissolution of National's "intermediate holding company," $332,000,000 Lehigh Power Securities. Henceforth, National will have direct control of Lehigh's Pennsylvania Power & Light Co., which supplies electricity to 700 Pennsylvania communities, gas to 29.

Last week, Wall Street noted that power production for the week ending July 1 was 14% ahead of last year and slightly ahead of 1937, added this to Bond & Share-New Deal good-will and the chances of more SEC-holding company deals. Result: the Dow-Jones average of 15 utility stocks rose for eleven consecutive days, making the second quarter of 1939 look like a straight line advance for at least this group.

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