Show Big Future Developments For Light and Power In InU InU InU U S Seen By Economist T BABSON PAUK P Mass Mus Jan 7 Roger W V Babson Dabson has been ask ask- ask asked ed Id d toIvo to hl his opinions of ot tome some ot of loading Industries lie He therefore Is opening the pew lew t-ar t ar with u a u ot of the five greatest s of ot America leading He lie there there- tore forr Is s opening the new year with witha a discussion cf d the five Che ot of o America Today ho he IH us es the Ight and power In- In In Industry n Among Amons the Sri sit I 1 i rat forward In- In n mo which have ha td- td tl Ien place pInel ine the war none Is Ismore I Imore Ismore more spectacular than the growth or those distributing The Th high cost coet co tp P living tim the servant ant problem the great In manufacturIng manufacturing ing and labor saving In- In haw bavi nil all contributed to hs end So great treat has lIas been this orward move tove toward to more ct- ct ct hAndEn of ot our manufacturing manufacturing turing and household problems nd so great hia hns been tho the demand for or electrical that s scores ores or of companies v formerly had only a um h existence ence have blossomed out Into full tull prosperity nd nd In many case cares have ha been con con- con consolidated Into one olle ot of o the many large om companies panics now so In t the fie field I MANY lI E Records f for fi the past year ear show how how about l I 12 per cent Increate hour over 1925 which was Itself a It ro record rt-ord year eal The new for was III also so about per cent e the tho previous pre month month Hive period EarnIngs s or the most prominent companies how a expansion The 9 5 S record Iv io Instance Instance- gave the tho c Southern CalIfornIa Edl Edison Jn reported an In- In In of ot per cent over Its low 1924 record De- De Detroit De Pe Detroit t troit olt Edison reported an Increase Inc ase or 37 per cent Public Service of oC Illinois 19 2 per cent orli American 26 per cent Pub Pub- Public Public lic tic Service of ot New Jerse Jersey 24 per perc perc nt c nt and Light LIa 21 per perC perc C nt nt Commonwealth In- In In Increased creased net m lK oer er c nt lo to 10 Niagara 6 astern 12 per pel cent Pacific Gas Electric 12 per pel nt Philadelphia hla Electric 12 per perr perI Ier I nt Commonwealth Power 11 II pert per t tnt int Brooklyn Edison F E per cent nd nd Edison Electric Illuminating ot of Boston 2 per Ier cent This im- im improved im improved proved was as possible be- be c be use cuse of ot continued growth in gross grosa grossI r I venue and continued lowering lowering- ot of the tho cost of ot operation li U El ot Of 0 course the he mOI more efficient ot of many of ot these corn com companies Paules has b n du duo dUG to mergers mergers Into large and compre compre- comprehensive units all over the coun- coun country coun country H try The tremendous growth growth- I hOldIng comp les th Iho Io lait t few ow w wars ars hll habe ii a 1 o ma e of ot treat great interest to jilts Through the control of or ting power In nu- nu nu ne concerns the holding comp exercises x ea domain orn a a broad and in some In In- In CS Ja d widely rated p properties Holding Holding- dui jve their their Income tile tic to common chares of sub sub- sub owned own d Where rc as aa Is Isu u JY J the case thC theo a tIlt LIC havo have hoid j l and nJ d stocks of ot th own outstanding It can readily be seen that the and sto stock ks of ot the hold hold- holdIng holding holding ing company itself arc are rather far Car cd front from the of ot ac- ac actual ac actual tuai earning power Through the ot of holding companIes publIc utility managers can con con- conI con l I ol ol 01 large and properties ml a relativelY Email maII capital In- In Intine v In-v tm tine nt nt Managements recognize that the economic ni AI and op- op operation operation op operation of ot existing facilities Is the best argument for tor new c capital to provide additional facilities A total of at companies were welo In- In Involved Involved in involved in protects proc for tor centralization lion tion of ot management power pool pool- In ing pooling poolIn Interconnection and co coordinating of ot power resources durIng durIng- In 1925 Of Ot these were vere absorb absorb- ing jog absorbing companies and wore ac- ac acquired acquired ac acquired capitalization comp niN The i tion of ot the latter fatter totaled or slightly more than quarter one-quarter of ot th tha aggregate capitalization of ot the electric light and and onel some or of these comp DI were Involved In two or more moro mergers These Theao m markers r have o not In every Instance In Involved l 1 the for for- for formation matlon mation of at t holding company Large 1 combinations have ha been ac- ac accomplished accomplished ac accomplished t through exchanges ot of stock For example the tile Common Common- Commonwealth Commonwealth wealth Power corporation corporation ab- ab absorbed ab absorbed the properties ot of o the Ten Ten- Tennessee Electric Power rower company and the tho North American company took In Its large lalO California prop prop- properties end and the Mississippi flyer Power company Nevertheless the number of ot Important holding Companies l in In 1923 I Is Ic Im- Im Impressive Im Ins Impressive Tho Th list Includes the Power k the luc standard tower rower Light cor corn com company pan pany the Southeastern eastern Power Light Light company compau the tha New England Public Service SerIco corporation the Central and Southwest UtilIties company and the Eastern Statu Power company yov or ySo So far the th so Consolidations antagonism have ho aroused no particular an- an an from the tho public Inns Inns- Investigations Into Inlo the existence of oC so- so called so-called called colled power trusts have havo be beon on threatened but are not likely to prove harmful to li In- In In Interests A wide country-wide survey by the tho National Electric Light association recently completed shows that In addition to several thousand isolated electric plants there thore arc are APproximately company i servin serving ter- ter territories ter territories of ot or more lation population each This survey BUr shows that tIme the first 20 operating companies In aize approximately half one halt of ot output are In every ery respect separate ani distinct In o ownership and man man- management management Th next operatIng companies In size have an aver aver- average average age ase company output oi of ot about one halt one halt of ot one ona p per pcr r cent of ot the tho total output No company or so management company called so-called hrs has through II In subsidiary ing operating companies no LO matter how af at kilowatt hours affiliated d an output of at o kIlowatt kIlowatt- hours e 7 per ent to 10 C r national n t output That present opinion Is not l to th power and light companIes Ie is v Ident from Crom certain recent developments The matter maller ot of rates Is closely linked UI up with the growth g of the public u Industry Cu Current decisions III lr rate cases warrant the belief bellet that no unfavorable attitude will be taken betaken in Iii the near future to pre vent prevent public utilities from earning a reasonable return on the value alue ot of the property An fact allowed Is that tills this Ind Industry la Is al- al al lowed a return approximately approximate 11 per cent than for Cor the rail rail- railroads raIlroads rail railroads roads which ma may In some reo re- respects re respects be bo considered as perform perform- ing performing a similar type of ot service A A recent decision by the Unit Unit- United United ed States SUI Teme court was to the effect that the time Indianapolis Water ater company was entitled to earn a return of ot 7 per cent on the basis of ot present jI replacement value The r much lIch case ca ot of l Gas Ga com compan company pan ot of New York is another Instance Here the supreme court decided that the 80 ent tent law Jaw fixed by bythe the legislature of ot that state slate was as and the case casa has now been s settled after an e period of ot litigation A Ai this com corn company pany Is the second largest public utilIty in th's tho countr country ranking next to American Telephone the decision Is 18 of course of ot great significance With the rate sit sit- sit situation cation ty ry It Is 15 not sur- sur surprising sur that the ho public are growing 5 so sn 1 rapidly and find little difficulty In financing their 1 01 11 a 0 reasonable ba- ba ba basis Sm sis CUSTO H n One reao 1 for Cor the substantial basis buls on which this Industry rests and the cason eason why the av- av average average av average person j ji Iq working In sm sym sym- sympathy sympathy pathy with these companies I Is the widespread program of ot ex- ex ex tending extending ownership of ot their so- so securities se securities to consumers By this mean a vast ant va t amount of ot good goodwill goodwill goodwill will is built ip I and 10 Ir Interests ot of the power com companies pan II's diffused throughout the Ilia community It I is reported that tha no sate sale of ot ties direct to customers mounted amounted to In 1925 or about 3 23 per cent of ot the total new financing done dona by central eta sta tiOn stations In that year Thu This com Corn compares pares with 20 It In 1924 OHr Oer 1 1 CUstomers are now shareholder rt t f their respective service ser companies comp This Is a 0 ma thing hing all alt around The wolf Is la only as aa strong as oa hi his pack and the tha pack I Ij Ia only as strong a as tho tI wolf It Jt Is high time we wo all I learned the lesson ot of operation co operation Th The Tho farther tarther we get from class hatred and strife strite on both sides the tha better ort oft we shall nil all be Put utilities are es- es es essentially a community affair As Aa I hav have havo already explaIned there thero has been a 0 most spectacular lar growth in the power and ond light business tince time the war The Increase In th hi number of ot users usera ot of electricity has beer enormous I While this treni will continue In- In InI in creased domestic consumption I per par capita is also going to be a great perI I rector factor and the Industrial field I will be a great source of ot revenue OUTLOOK O J FOR 10 H 1 TR 1 There Thero will be bo 10 large rge hydro hydro- hydroelectric ro- ro elect electric o developments ta and coal will In many Instances be ba turned Into j at th the mines mince and transported to nearby centers ot of population 1 reaching tr plans otI I are arB being brioc such auch as lu as In the first s c-s io c-io nh n th S lAwrence ond and In time the ll e s ond end ond car ca Co th weSt weSl wc rn e C I around n and Indianapolis A A survey ot of o tho the power and light fields then only convinces me that the leture of ot this leading Industry Is V very vry Iy great The Tho busi busi- business bus business ness of ot well managed and well well- well located located companies Is developing along sound lines Provided the tho Industry is permitted to earn carn II a profitable r on Its Invest Invest- Investment Investment ment mont which now nw seems possible tile tho long growth outlook depends I largely on how v 5 wisely IY capital structures ar ara ars tuilt up and how Intelligently are ara united one with the tho ether Tho The Is a great grent of or transition and much depends on sighted tar far management Some means must be found to eliminate outstanding paper of oC sub companies In order that the public relations with controlling companies ma may maybe maybe be direct and I e bo the suspicion ot of financial Of Ot course there thera has had been In Inthe inthe Inthe the last two or three years ears an astonishing advance la In the time stocks and other se securities of ot power and light This Is due duo not only to largely ly Increased earnings but also to efficiencies In opera opera- operation operation tion and management brought about by cona consolidations and hook hookups ups Into wha what Is know known as super super- superpower superpower power systems Those who have held securities s of ot such com corn companies companies panIcs throughout this thle remarkable rise have hue to worry olry about For one how however hower er to sweep all ot of othis his money Into those companies at present love loves love's may not be the wisest thing especially while willie the lilts has been running so high It now flOW registering 13 per percent percent percent cent above normal Some ties ties are doubtless priced over-priced and It is better to buy when the Ine iney- iney Inevitable liable reactions reaction occur The Tho long tIre time future growth ot of the well managed marni ed companies bar bar- barring bar barring ring reaction 5 1 is lI crt good but rem management Is every everything thina- thina Have Hive to do with those concern a where here self self- selfishness selfishness and greed have overcapitalized overcapitalized the and nd where the character cf of those who direct the th policy polley is in any way ques- ques Ques Questionable Copyright 1927 1827 Publisher Financial Bureau n |