Disunited Gas Improvement

Ever since the Public Utility Holding Company Act passed Congress in 1935, utility financiers have focused their fears on its Section u, the so-called "death sentence." Question was just how literally this section would force "scatterated" holding companies to break up and reintegrate their properties. The Government postponed the issue by making its first court fight on a harmless clause. Then SEC postponed the integration problem, began asking the companies to submit plans only last year. Most of the plans submitted chose to interpret Section 11 the easiest way. Last week SEC published the first Section 11 blueprint of its own. United Gas Improvement Co., whose system it was designed to integrate, found that Section 11 was not easy after all.

U. G. I. is the oldest utility holding company in the U. S. (founded 1882), also one of the easiest to understand. Its capital structure is simple (no funded debt), its empire's outlines visible to the naked eye. Its holdings (exclusive of unconsolidated investments) have a book value of $626,500,000. About $350,000,000 of this is in a well-integrated system selling electricity in an area 30 by 80 miles in southeast Pennsylvania (including Philadelphia), northern Maryland and Delaware. Another big unit (Connecticut Light & Power Co.) sells electricity and gas to three-fourths of Connecticut. In addition U. G. I. controls scattered properties in Tennessee, New Hampshire, Missouri, Arizona.

Section 11 states that holding companies shall limit their operations to "a single integrated public-utility system." What this means to U. G. I., according to the SEC blueprint, is that it may keep the electric properties of its Pennsylvania-Delaware-Maryland system, will have to get rid of its gas and other properties, including unconsolidated investments (valued at $128,600,000) in other utilities. If the integration goes through as blueprinted, U. G. I. will cast off dominions which produced over $10,000,000 of its $29,639,021 net in 1939.

Regardless of whether the blueprint stands up, its publication made clear that SEC takes Section n literally. It also opened the way for a court test if U. G. I. wants one (the company hinted that it did). Vogueishly invoking national defense to buttress the ruling, SEChairman Jerome Frank explained his commission's broad objectives: "Power for national defense industries must come, in most instances, from hundreds of private operating utility companies which are presently under the control of a handful of holding companies, mostly located in large eastern financial centres. Efficient operation . . . requires an intimate . . . knowledge of the property. . . . A holding company having dozens of scattered properties in as many widely separated parts of the country cannot enow the management problems as in-imately as a holding company whose interest is confined to a single compact geographic (not to say industrial) area."

In Texas the Disabled American Veterans, in Louisiana a citizens' committee, organized units to collect discarded 1940 automobile license plates (estimated total weight: 1,000 tons), send them to the British as scrap iron.

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