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Show SEARCHLIGHT oD | THE Gadsby Files Kilowatt Statement George M. Gadsby wants to borrow 44 million dollars from Peter to pay Paul. That is the essence of the refinancing scheme of Utah Power & Light Company filed with the Securities & Exchange Commission on December 10th. The Company seeks permission from SEC to issue 37 millions of ‘‘first mortgage’’ bonds due in 1973, and 7 millions of ‘‘general mortgage’’ bonds due in 1958. The Company purposely refrained from mentioning an interest rate on either proposed issue of bonds. It may be that the public isn’t supposed to know about the rate, even though it will have to pay it. Or, it may be that the canny Mr. Gadsby didn’t want the question of interest rates brought up in the current rate hearing before the Public Service Commission, which re-convenes on January 6th. A low interest rate— if diselosed—mieght spoil the kilowatt case and might prove a factor in bringing lower service rates for Utah consumers—something that Mr. Gadsby wants to prevent. On the other hand SEC might decline to approve new bond issues if a high interest rate is specified. So Mr. Gadsby has conveniently forgotten to mention the rate at all. From the registration statement of the Power Company filed with SEC it 1s evident that Utah Power & Light Company has no intention of ever paying off its mortgage debt. Apparently it prefers to renew the mortgage from tine to time, paying interest thereon for- ver. It doesn’t matter because he passes the at all to Mr. Gadsby interest on to electric patrons. He sets up the bond interest in his accounting system as an operating expense. In that way it is paid like wages and rent. Then he collects it all over again as ‘‘depreciation’’, or return of invested capital, placidly ignoring the fact that Bond & Share has no invested capital in Utah Power & Light Company—not a dime. The Power Company is financed entirely with borrowed money, obtained from bond holders and preferred stockholders. It is the old kilowatt game of catching the public coming and going. An equally interesting feature of the Gadsby re-borrowing scheme, is his attempt to smuggle Western Colorado Power Company and Utah Light & Traction Company into the kilowatt fold. It’s a slick wrinkle. Under the Holding Company Act, Utah Power & Light Company is supposed to divest itself of its two subsidiaries and function strictly as an operating utility. It now proposes to get rid of them by swallowing them. Mr. Gadsby believes that by putting the two subsidiaries into his tummy he is ‘‘integrating’’ them. But maybe he ean hold them in his innards just as easily and as conveniently as he used to hold them in his safety deposit box. Obviously, if Mr. Gadsby cannot break the law, he will make a desperate effort to dodge it. There is no more reason for Utah Power & Light Company to absorb Western Colorado Power Company than there is for it to swallow a Wisconsin cheese factory. And it is about as plausible from a Holding Company viewpoint for the Power Company to run a bus transportation concern in Salt Lake City as it is for the Company to operate a chop suey joint in San Francisco’s Chinatown. Utah Light & Traction Company has some electric generating equipment and some distribution lines. There should be no objection to those items being taken over by Utah Power & Light Company. But there is objectlon—serious objection—to the Power Company being engaged in any other business than generating and distributing electric power in which it is already established. in the field 7 The Searchlight has no advance information as to the attitude of SEC toward the registration statement of Utah Power & Light Company. But SEC’s previous rulings and #s attitude toward attempted evasion of the intent of the Holding Company Act by Bond & Share subsidiaries, gives promise that the Power Company is wasting its time trying to flim-flam the Commission by indicating its willingness to move in any direction except that preseribed by law. Of course, no one expects Bond & Share and its Utah baby to do the forthright thing—comply with the law without quibbling. <A balky mule never willingly moves forward. He lurches from side to side, and sometimes sits (Continued on page 7) |