Conffessions of the Power Trust — Part VII

Part 7: The War on Public Ownership

Chapter 51: War On Municipal Ownership
Chapter 52: Municipal Ownership Cities
Chapter 53: The War on State Ownership
Chapter 54: War on the West Coast 2
Chapter 55: Washington and Oregon
Chapter 56: In Other States
Chapter 57: War on Federal Ownership
Chapter 58: The Boulder Canyon Project
Chapter 59: The Menace of the Diesel Engine
Chapter 60: The Menace of the Income Warrant
Chapter 61: The Public Ownership League of America
Chapter 62: The Appeal to Prejudice
Chapter 63: The Bolshevik Idea
Chapter 64: Power Company Socialists

Part 7:
The War on Public Ownership


Chapter 51: War On Municipal Ownership

“The Whole System Is Wicked”: Must Go

In a sense the whole activities of the utility corporations center about their effort to resist and break down the municipal ownership movement. The purpose is more or less boldly or frankly stated. The bulk of the literature and the greater part of their activities are directed to this end.

As we have already seen, [pp. 16, 29.] every municipal plant is regarded by the utility corporations as an obstacle in the way of their progress. Their bulletins preached, and the utilities have “undertaken to get the newspapers in the Carolinas to preach in their columns the doctrine that the industrial development of the Carolinas depended on getting rid of the municipally owned plants in Carolina.” (Our italics.) 2 They have published in one of their bulletins an article “contending that the power problem of a town known as Rocky Mount would never be solved until the city closed out to the Carolina Power and Light Company.” [Idem, p. 164.] They urged “that the , industrial development of your state could not proceed until the municipally owned plant was eliminated.” [Idem, 164.]

Ambitious to Get Rid of All Municipal Plants

J. B. Sheridan of Missouri writes to the Electric Bond and Share Company in ‘New York: “I am sure that if they need help (in Mountain Grove, Missouri,) we can kill the municipal ownership plan (our italics) by showing that in a few years Mountain Grove should be an important station on a great hydroelectric transmission line from the proposed 200,000 horsepower development of the North American Company now under survey on White River near Cotter, Arkansas.” [Exh. Pts. 5 & 6, p. 427.] Mr. Sheridan writes to the Illinois Power and Light Company in Chicago: “My great ambition is to get rid of all municipal plants in Missouri.” [Idem, p. 409.] He had also explained in discussing the municipal plant at Hannibal, Missouri, that “it is extremely desirable that the Hannibal plant should be removed from the field of comparison in Missouri.” [Idem, p. 408.]

Martin J. Insull, President of the Middle West Utilities Company, quotes John B. Miller, President of the Southern California Edison Company, in saying that the whole system of government ownership is wicked and must go. “There is not a single known instance,” Mr. Miller says, “where government ownership-national, state, municipal or other-has been beneficial. It is known that the system can not continue in a democracy. Either the democracy or the system must go. The evidence is complete. We need no more experiments. Let us tell the plain facts. The system is wicked.” (Our italics.) [Exh. Pts. 7, 8 & 9, p. 306.]

Against Public Ownership

Mr. Mullaney, in answer to a question upon this matter, said:

“We are not heartily in favor of propositions that are intended to destroy our business. . . . We would not be expected to cut our own throats.” [Pt. 2, p. 79.]

Nevertheless, Mr. Mullaney, as all of the other of the representatives of the utilities, insists that their literature and publicity work is in no sense of the word propaganda. He said:

“We do not regard our efforts as propaganda and it has no relation to government ownership, or public ownership, or municipal ownership, or any phase of government ownership.” [Pt. 2, pp. 79-80.]

And yet we shall see from the evidence submitted elsewhere to what extent this claim maybe justified. For example, immediately after insisting most emphatically that the literature of the committee had nothing to do in combating municipal ownership, judge Healy asked Mr. Mullaney if it was not a fact that “as early as 1921 your committee was putting out a pamphlet containing an address by former Mayor Olaf Hansen of Seattle, entitled “Municipal Ownership As It Is.” And, of course, Mr. Mullaney had to admit that that was true. [Idem, p. 82.] And the Hansen pamphlet was a most bitter and vicious attack upon municipal ownership.

Municipal Ownership Hinders Progress

Another contention of the utility corporation propagandists is that municipal ownership stands in the way of progress. In this connection a bulletin of the Oklahoma Speakers’ Bureau quotes Samuel Insull as stating that “so far as I can see, the municipal plants, judging from the figures here presented, stand in the way of the consolidation of distribution systems and the concentration of energy production. My own personal experience is that they (municipal plants) go along, using their plants in their own little territories without making any effort toward the development of the region surrounding them.” (Italics ours.) “In fact, they are rather jealous of such development, if it is outside of the corporate limits. As a public local utility, and it should be judged as a local utility, the municipal plant stands in the way of the progress of the community.” (Italics ours.) [Exh. Pts. 5 & 6 p. 21.] And, finally, we learn from a report made at a meeting of the Great Lakes Division of the National Electric Light Association that the committees were “working out certain fundamental policies on the part of utilities toward the checking of municipal ownership growth.” (Our italics.) Exh. Pt. 2, p. 239.] And, again, from a letter written to the General Electric Company in New York in January, 1925, at the time that the matter of the present investigation was being considered, we learn that a meeting of “high powered utility executives is being held in Chicago.” And that this meeting “will discuss and plan an offensive campaign on the Federal Trade Commission stuff: G. O. (government ownership) and all of the rest of it. Come out flat and talk about the electrical business and generally back the bull out of the room, replacing it with a fast, clean-cut horse, with horse sense.” [Exh. Pts. 5 & 6, p. 853.]

These and similar expressions, which occur constantly throughout the literature of the utility corporations, indicate their determined and uncompromising attitude toward municipal ownership and their purpose to have it completely eliminated. In examining one of the witnesses regarding the literature and activities of the utility companies in the Carolinas, Judge Healy remarked: “It is safe to say that three-fourths at least of each and every one of these bulletins is devoted to arguments or facts intended to prove that municipal ownership or government operation of utilities is bad.” [Pt. 4, p. 181.]

State Bureau Opposed to Public Ownership

The literature and publicity matter of the representatives of the various utility information bureaus make it definite and clear that they are absolutely opposed to any and all forms of government or public ownership. “I do not think,” writes J. L. Murphy, Chairman of the Georgia Utility Information Committee, “that our committees could serve the interests of their individual companies better than by starting now the work of building up in their communities a strong public aversion to government interference in any way in the development and operation of the various electric and power companies.” (Italics ours.) [Exh. Pts. 5 & 6, p. 97.]

Replying to this letter of Mr. Murphy, Mr. McKay, Manager of the Oklahoma Public Utilities Information Bureau, says: “I agree with you that everything possible ought to be done to avoid government interference with the development of the electric light and power industry, and I can assure you that this organization will take an active part in keeping down the demand in Oklahoma for such an interference.” [Idem pp. 97-98.]

Anti-Municipal Ownership Literature

One of the most aggressive and voluminous publications gotten out by the utility interests is the Public Service Magazine published by H. J. Gonden and edited by James B. Wootan in Chicago. This is a monthly publication. But in addition to their magazine they publish other propaganda material. Among other things, these parties have copyrighted a bulletin on “Facts On Municipal Ownership In 336 Towns and Cities.” This bulletin contains a list of towns from A to Z, that is, from Adair, Iowa, to Zeeland, Michigan, showing the disadvantages, the disastrous failures, and other unfortunate results of municipal ownership. There are over 30 pages of this re-published as Exhibit No. 526 in the hearings of the Commission. [Exh. Pt. 2, pp. 5270-557.]

Again, the National Association of Railway and Utilities Commissioners, composed of the officials of the various state regulatory bodies, adopted the report of a committee on public ownership and operation at various times, always unfavorable to municipal and public ownership, and these reports the utilities reprinted and distributed. “Exh. Pt. 2, pp. 558-560.]

“Political Ownership”: the Utilities’ Star Pamphlet

One of the pamphlets most widely used by the utility companies in their campaigns against municipal ownership is their famous publication on “Political Ownership and the Electric Light and Power Industry.” This pamphlet appeared first under the caption “Municipal Ownership,” but was later revised and circulated under the longer title. It was prepared by Glenn Marston, a professional writer on economic subjects who has made a specialty of the study of government intrusion into business. He was engaged by the National Electric Light Association to write and revise portions of this pamphlet. For this service he was paid $1,000. [Pt. 7, p. 95.]

This book has passed through many editions: in fact, it seems to have been revised and enlarged every year or two so as to be kept up to date. [Exh. Pt. 1, p. 339.] Approximately 5,000 copies of this book were published in 1926 alone. [Exh. Pt. 1, p. 339.] It is distributed widely among the companies and serves as a sort of textbook in the campaigns against municipal ownership. In this book the whole argument against municipal ownership is set up in much detail and in most aggressive style. One section presents a long list of approximately 1,000 municipal plants that are said to have been failures, abandoned, sold or junked. [Idem, p. 360.]

According to this textbook of the utilities, municipal ownership is “unprogressive,” “lacks incentive,” is “inefficient and irresponsible,” “means high taxes,” “is opposed by farmers,” is credited with many hundreds of failures. [Idem, pp. 339-363.]

“Our Mutual Friend: James Mavor”

In June of 1925 a check for $500, and again in August of the same year another check for $500, totaling $1,000 in all, was sent by the National Electric Light Association to Mr. James Mavor, who is designated by them as “our mutual friend.” Professor Mavor was the author of the book entitled “Niagara in Politics,” a savage attack upon the publicly owned power system of Ontario. [Pt. 7, p. 89.]

Municipal Ownership Always a Failure

Over and over again, and throughout the literature of the private power companies’ propaganda, occurs in one form or another the claim that municipal ownership is everywhere and always a flat failure. In some cases the statement is not quite so positive and sweeping as this, but it amounts to essentially that contention.

For example, in Exhibit No. 2588 will be found the statement:

“There are a few instances of well managed municipally owned utility plants in Oklahoma and other parts of the country. We believe, however, that a fair and impartial investigation will show that these are in the great minority and that a large majority of municipally owned plants are failures (Our italics) when they are subject to the same tests of accounting, business operations, and service as are privately owned utilities. [Exh. Pts. 5 & 6, p. 16.]

Why Municipal Plants “Fail”

Occasionally in the mass of evidence submitted we catch a glimpse of some of the underlying facts in regard to the contentions of the utilities. So in this. particular respect, we are told that hundreds, yes, even a thousand municipal light and power plants have “failed” or have been sold, abandoned or given up.

In their campaigning against municipal ownership the representatives of the utilities, in their bulletins, press service, and other propaganda agencies are constantly emphasizing this claim. An Oklahoma bulletin (Exhibit No. 2588) states that “within the year and a half ending November 1, 1922, 13 municipally owned electric light and power plants in Oklahoma were surrendered either by city councils or by votes of the people, and electricity from privately owned companies was substituted for that formerly manufactured by the municipality. In Iowa 50 municipal electric light plants have given up operation recently to take electricity from the lines of privately owned companies.” [Exh. Pts. 5 & 6, p. 15.]

How Companies Defeat Municipal Ownership

The methods by which the utility agencies defeat municipal ownership are interesting. According to the Oklahoma Utilities Association we learn that “no week passes without the performance of some special service in the interest of some association member. A few instances suggest the character of these services.” And then Mr. McKay refers to an unnamed municipality in which there was a proposal to establish a municipal plant, whereupon the Utilities Association had one of its engineers make an “analytical work on a report on the project” which discredited the engineer’s report that had been submitted and “assisted in defeating the project.” [Idem, p. 70.] hat was one method used to defeat municipal ownership. Lowering rates to head off municipal ownership is another.

Destructive Competitive Rates

In many cases, according to the findings of the Commission, the private companies resort to the device of lowering rates as a means of defeating municipal ownership.

Mr. Edward F. McKay, Manager of the Oklahoma Utilities Association, in an address delivered in 1927, cited the case of a certain town in which a private company had asked for an increase in rates. It was refused by the utility commission. Appeal was taken to the Supreme Court of the state and the commission was sustained. The case was then appealed to the Federal Court which “enjoined the state from enforcing its order and authorized the necessary (increase of) rate.”

“From the legal viewpoint,” said Mr. McKay, “the company was in the clear. But not so. The people voted bonds for a municipal plant; whereupon the company sold out to another company which undertook to render service at rates below those which caused the bond issue, and the city burned its bonds.” (Italics ours.)

This illustrates a number of very interesting means and methods by which the private companies may proceed in carrying out their purposes. In case the commissions rule against them, they may appeal to the state courts. If these courts hold against them they may appeal to the Federal Courts. And there, as in this case, the companies may secure what they could not get otherwise.

And again, this particular instance cited by Manager McKay shows a very clever method by which even if the people in a community should undertake to secure relief by establishing their own plant, this may oftentimes be thwarted by shifting the ownership of the plant and then putting down rates to such a point that the people will prefer the private company service to the task of establishing their own plant.

Mr. McKay significantly remarks at the close of his recital of this incident, “Courts and commissions can mete out justice or injustice but the people have the last say.” [Exh. Pts. 5 & 6, p. 67.]

Crippling a Municipal Plant

Another rather subtle way in which the utility interests fight municipal ownership was brought out in the testimony of C. H. Howell, Chairman of the New Jersey Electric Association. It seems that the utility companies were furnishing power or electric current to certain municipal plants, among them Sea Isle City, and this city was making substantial gains in its earnings under this contract. Mr. Howell wrote to Mr. George N. Tidd, President of the Atlantic City Electric Company, advising that he did not feel that it was best for a private company to take on such contracts to wholesale power to a municipal electric plant.

Mr. Howell also testified that he gave instructions to the Business Manager of the company “to keep the demand up to the very highest point so that their (the municipal plant) power cost would be as much as possible.”” Mr. Howell testified that this was a rather “awkward statement.”

Harassed by Court Action

One of the most common methods of the utility corporations in fighting municipal ownership is to harass and embarrass existing municipally owned light and power plants by constant litigation.

An example”of this is found in the testimony of the manager of the Oregon Public Utility Information Bureau, Mr. Harry L. Walther. According to the testimony, Mr. Walther had discussed the possibility “that the courts might be induced to hold that the municipal utilities should be taxed upon all their properties not used for the public lighting of streets,” referring to the case of the City of McMinnville versus the Yamhill Electric Company. In this case the city has been blocked in an attempt to prevent the Yamhill Electric Company from extending its service to the rural sections. Mr. Walther wrote: “There is no question but what if you attorneys can find suitable grounds to warrant the taking up of this matter that a suitable rural taxpayer can be found to sponsor the action.” [Idem, p. 348.]

Similar action was considered in the case of the City of Eugene. Here the plan was to get a rural taxpayer to bring suit to require the state or county officials to place the municipal properties outside the city limits on the tax rolls. This was the plan that Mr. Walther had in mind but he testified that the plan was not carried out.

Acquiring Municipal Plants

If we piece together bits of evidence from different parts of the hearings we find that another method of fighting municipal ownership is by the purchase or acquiring of the municipal plants by the private companies. Moreover, the evidence shows that the efforts of these companies to buy out these plants often became so aggressive as to be almost desperate and the methods resorted to almost subversive. In other words, the aggressive campaigns of the companies to acquire municipal plants was one of the causes and the methods by which they definitely sought to eliminate or get rid of municipal plants..

We find frequent hints in the record like the following: In the manager’s report to the Oklahoma Utilities Association in 1928 it is stated that “of the 6o towns taken over by the private companies in the state last year, 17 gave up municipal ownership to acquire more dependable service at cheaper rates.” [Exh. Pts. 5 & 6, p. 63.]

Elsewhere we have referred to the great number of “mergers” in the electric power field and note is made of the fact that among these mergers are the municipal plants acquired by the companies.

Methods Used in Acquiring Municipals

As an illustration of the methods used by these companies in acquiring municipal plants the most detailed reports are given in the evidence on the Foshay Company to which we have referred before. This company was probably no more aggressive than others, but among the municipalities whose plants they endeavored to acquire were those of Camilla, Blakely, Moultrie, and Norman Park in Georgia; Dothan, Alabama; Burlington, Colorado, and Brewster, Kansas.

In these efforts the usual methods were employed. In Camilla, for example, according to letters of representatives of the Foshay Company appearing in the records, efforts were made to “fix” a certain element in the council so that it would want to sell. [Pt. 25, p. 467.] The men that the representatives of the company had in mind “to help put this deal over” wanted a commission. The Foshay Company’s representative wanted to know if he would be allowed a certain per cent taken from the purchase price in order to offer these men such a commission if they would guarantee to put the deal through” Arrangements were made with the local city attorney, according to a letter of Mr. Keyes of the Foshay Company to Mr. Andrus of the same company in Minneapolis, by which he and his firm were “willing to assist in any way possible in the way of outlining a policy for me to follow to put the trade over…. It is planned that I do all the work independent of Gardner, Gardner & Crow” (Mr. J. D. Gardner being city attorney and B. C. Gardner solicitor general) “and they will only express their opinions in general favoring the sale.” [Idem, p. 468.]

Power Company’s Opinion of City Officials

In a letter by R. J. Andrus of the Foshay Company to Mr. Keyes, their representative at Camilla, Georgia, which appears as a part of Exhibit 4663 of the Commission’s hearing [Pt. 25, p. 470.] an interesting view of the power company’s opinion of city officials is given. Under date of August 7, 1928, Mr. Andrus writes:

“The longer you work with councils, the more firmly you will be convinced that as individuals they are one proposition and as a body they are something else again. In my experience with municipal bodies the only way in which you can accomplish anything is to have the proposition sold 100 per cent outside the council meeting and leave it to the strong man on the council to push the ball across. Ever one of them is so fearful of his political future that when it comes to doing anything as a body, unless everything is arranged in advance, not one of them has a tongue.”

Among other arguments used to persuade the people in Camilla to favor the sale of their municipal plant was one in the form of a suggestion that if the plant were sold certain councilmen would profit on the sale of oil to the company that acquired the plant. “Two of the councilmen,” reads one of the letters in the record, “are oil dealers and I had Mr. Brooks place a bug in their ear that it might be possible to close an oil contract with us for our engines in the event they would in turn help us with the trade.” [Pt. 25, p. 471.] In a later letter Mr. Keyes wrote of these two councilmen: “I have led these men to believe that if they would get in behind this trade in our behalf, that our company would let them contracts for Diesel engine fuel oil. Think it is timely to order the next car of oil from one of these dealers in order to get these men active in our trade. In the event no activity is shown, we will continue to buy oil on the contract now existing.” [Pt. 25, p. 471.]

Over at Blakely, Georgia, the representatives of the Foshay Company that were managing the campaign to get the city to sell its municipal light plant to them, special efforts were directed to the superintendent of the municipal plant, according to the record. One of Mr. Keyes’ letters reads: “Had a long talk with Mr. Killebrew, the superintendent, and it appears he has some influence. Was able to get next to him and he gave me the complete story. Am rising him as we do all new superintendents, and believe he is on our side.” (Italics ours.) [Idem, p. 472.]

At Moultrie, Georgia, it seems the representatives of the company in their efforts to acquire the municipal plant had a plan to secure the election of candidates to the city council who would be in favor of selling the city’s utilities. [Pt. 25, p. 473.] It seems that a suggestion had been made that if $2,000 were advanced to certain brokers, they would be able to put through the plan to have the municipal plant sold to the Foshay Company. In reply to an inquiry as to whether this would be approved, Mr. Foshay insisted that no payment should be made until the deal was closed and that if local men were to get the commission the public must know about it and must know that they represented the Foshay Company. [Idem, p. 474.] It is interesting to note that in this particular matter the Moultrie representative of the company felt a little concerned about the matter lest it should become publicly known. He wrote: “There was, of course, a chance that the Federal Trade Commission might have picked it up and made a mountain out of a molehill.” [Idem, p. 475.]

A little later Mr. Oertle, the local. representative of Foshay, wrote with evident satisfaction to Mr. Andrus, saying:

“I should like to report that I have been elected adjutant of the local American Legion post, secretary of the Rotary Club, and member of the board of governors of the Moultrie Country Club. As secretary of the Rotary Club, I have been asked to go to the international convention in Dallas, Texas, May 27-31, with Mr. M. L. Lee, who has just been elected president. Mr. Lee is cashier of the Moultrie Banking Company, but to all intents and purposes he is executive vice president. As my expenses would be paid to the convention, I think that the week spent in company with Mr. Lee would not entirely be wasted. Your advice in this matter as soon as possible would be appreciated.” [Pt. 25, p. 475.]

“A Few Thousand Well Placed”

Mr. Keyes, writing of the competition he was having with other utility companies in their efforts to acquire municipal plants, had this to say:

“You will note in the file that I nearly got caught by these two slick prompters but by chance was saved. You will find in the file the commission deal we had in mind but after we found out it was a plan to use hush money we withdrew.”

And then, referring to the political methods used by other utilities in acquiring municipal plants, Mr. Keyes has this to say:

“Must admit that our competitors are very tricky in their plan for taking a town. They do it in the Georgia political way and you never see a one of their men on the job except free lances. It is hard to show facts but if the truth were known, both Harrell and Lang are better off now by a few thousand than they were before and they will be in their shell working out the details for the next election.

“The general public are not in favor of a sale and very little attention has been given to our rate reduction except our own power users. But in the event a slate in favor of a sale is put in by political powers in with the other side it will have a great deal to do with the changing of the public. A few thousand well placed will have its effect on political seekers.” [Pt. 25, p. 476.]

An interesting sidelight on the methods of the utility companies in campaigns of this kind is shown in a letter of Mr. Andrus to Mr. Keyes regarding the situation in Burlington, Colorado. He says:

“If you pick out two or three influential men in town who are big taxpayers, get personally acquainted with them and get them shouting from the housetops that taxes could be materially reduced if the city was free from its municipal utilities, know that you can put this deal across. [Pt. 25, p. 478.]

In the same letter Mr. Andrus suggests that it should be pointed out in the campaign that in cities like Seattle, Washington, “where unrestricted municipal ownership enterprises have been carried on for years,” the bonded indebtedness per capita has reached a staggering amount. [Idem, p. 478.]

“Oiling Your Way”

In the efforts of the Foshay Company to acquire the municipal plant in Burlington, their local representative learned that the city was being approached by three of their competitors. “Three of the councilmen,” this gentleman writes, “are in favor of selling and the remaining three are waiting to see how well they will be ‘oiled’ before making up their minds.” [Idem, p. 479.] This representative, Mr. L. E. Lynch, seemed to have-some doubt in his mind on this “oiling” matter, for in the same letter he writes:

“I know that you do not look with favor on the plan of “oiling your way” through these municipal sales, and I agree with you that such practice is detestable and it has been hard for me to finally be compelled to admit, regardless of my feelings contrary to such practice, that at least 8 out of 10 councils I have contacted during my brief acquisition experience can only be handled through the “oiling system.”

It seems that the council will be changed at the next election in April and that those who are going out at that time are anxious to reap all the “reward” they can while they still have the opportunity.

“I have been approached by a man who claims that he can handle the council for a consideration and he assures me that Burlington will be sold soon and advises that we lose no time if we really want to acquire the property. I have talked to some of the business men and councilmen and I gather from them that the people are not pleased with the way the system has been run and are rather inclined to favor selling.

“I am wondering if it would not be advisable to let the man I mentioned handle the matter for us as a broker for a regular brokerage fee, he to handle the fee as he sees fit and, if it is necessary to apply “oil,” that will be a matter of his and the councilmen’s consciences to decide, we to be interested only so far as the amount of the brokerage fee that we pay our agent is concerned.

“The person is our local Goodland ice and cold-storage man, Mr. George Garrison. He is well known among the business people of Burlington and I am inclined to believe that he can do what he says.

“I am going to Burlington today and will report whatever I learn of interest. [Pt. 25, p. 480.]

The “oiling” process did not seem to work, for under date of January 10, 1929, Mr. Lynch, above mentioned, who was manager of the Public Utilities Kansas Corporation at Goodland, Kansas, wrote to Mr. Andrus, saying:

“I am feeling pretty blue this morning-after my failure to land the Burlington property last night, though I can not find a point where I can blame myself for “falling down.”

“I noted that Mr. Heinz, the councilman who had previously invited us to do a little “oiling,” about which I wrote you some time ago, was voting in favor of selling to the Inland Company, and am wondering if that fact is not significant of the real reason for the failure of the council to stay with Mr. Shamburg. Mr. Shamburg is very much upset over the outcome. He felt sure that the council would respect his wishes. I still believe that he can influence the voters at the election’ and defeat the thing yet if it will prove of any benefit to us. [Idem.]

According to the record, it seems that the Burlington plant was sold to the Inland Utilities Company but an injunction was brought on the mayor and the town to prohibit the consummation of the sale. Thereupon Mr. Lynch made another trip to Burlington, according to his letter, and had a long talk with Mr. Hook, the mayor. He said:

“I found that he (the mayor) was very decidedly against the sale of the property to anybody and that he was intending to do everything in his power to upset it. He tried to get me to say that I had been approached by members of the board for “sugar.” He felt sure that I, as well as all the other bidders, had been approached and assured me that each one of us would be subpoenaed and questioned under oath.

“The fact of the matter is I was approached, and I do not doubt that the other competitors were also, but I hesitate to go on the witness stand and admit it, particularly as it appears that the new board is determined to retain the lighting system and if the deal is upset, it will not help us in any way, as they assure me that they will not care to entertain another sale proposition.”

And then Mr. Lynch, in closing, suggests to his superior of the Foshay Company that he would like to have his advice as to whether or not “this is a good time for me to take a vacation.” [Pt. 25, p. 481.]

Replying to Mr. Lynch’s letter, Mr. Laffsa of the Minneapolis once wrote to Mr. Lynch advising him as follows:

“Would suggest that you exercise the utmost caution in connection with the matter of being. subpoenaed for appearance before the district court in Burlington on July io. As you know, we should avoid if possible being placed in any embarrassing circumstance. One means of avoiding such a situation is to stay within the borders of the State of Kansas. It is very doubtful if extradition proceedings will be followed in a case of this kind.” [Idem.]

Such were some of the methods of the Foshay Company in its, campaigns to acquire municipal light and power plants. They were of such a nature that Judge Healy felt called upon to put in the record the statement that:

“I would like to say generally that in offering these exhibits or these statements and communications of officers of the Foshay Company among themselves, I would be glad to have it understood, of course, as it must be, that we do not vouch for the accuracy or the fairness of the statements made by those officers of the Foshay Company one to another concerning the men with whom they dealt in the different municipalities.” [Pt. 25, p. 129.]

The Cry of “Socialism,” “Bolshevism”

When every other method fails there is always the cry of socialism, communism, and bolshevism that can be raised in an effort to prejudice people against public ownership and thus check the movement. That this was a settled policy urged by the leaders of the utilities we have shown elsewhere. [pp. 584 ff.]

Throughout the literature of the private companies and among their innumerable methods of propaganda the charge that municipal or public ownership is not only a radical departure from American ideas, but that it is nothing less than Socialism, Communism, or Bolshevism, is constantly recurring.

Government ownership and operation is what they have in Russia. And Russia, under complete government ownership, is “tobogganing toward total darkness.” “A survey of textbooks, used in the schools and colleges of this country, shows that in eight states the doctrine of political ownership of public utilities is being taught. In several states municipal leagues and associations of public officials are dominated by socialistic , political theorists:” . . .

The people of Oregon and California have recently proposed public power projects so radical and extreme that “Soviet Russia has gone little farther than this.” [Exh. Pts. 5 & 6, pp. 68-69.]

The Boast of Patriotism and Public Interest

But all that is done or said by the utilities is done and said, not for a selfish or commercial purpose, but from high motives of patriotism and public interest, if we are to believe their testimony.

“We are against public ownership of industry,” says Mr. Hofer of the Hofer Press Service of Salem, Oregon, “as contrary to the basic and fundamental principles of our government under our Constitution…. I am a great admirer of the Constitution of the United States…. I do not like to see measures and propositions proposed which to me seem to infringe upon that Constitution.” [Pt. 7, p. 259.] And again, “We saw the State of Oregon harassed by experimental legislation of various kinds until Oregon got the name of being the experimenting ground for every new law that somebody wanted to propose. And so out of these conditions the work of this service has grown.” [Idem.]

Favorable Reports on Municipal Ownership

In spite of all the bitter antagonism and the vigorous and determined efforts to hinder, check, defeat and destroy municipal ownership, there appear here and there throughout the testimony some very favorable reports and admissions of the success achieved by municipal projects.

For example, in a conference of executives and employees of the power companies in Oklahoma, held in Muskogee, November Io, 1927, it is stated that “the combined profit of operating municipally owned electric light and ice plants at Weleetka, Oklahoma, less the loss in operating the water system and deductions for interest and depreciation, was $1,141.47 for the month of September.” [Exh. Pts. 5 & 6, p. 9.]

Similarly, the Transmitter and Electrical Journal of October, 1927, reported the fact that the “voters of Lexington, Oklahoma, recently voted down a proposition to sell the city light and distribution system.” . . . Also “an election to sell the municipal light and power plant at Erick, Oklahoma, to the Southwestern Light and Power Company failed because of an insufficient vote to make a 60 per cent majority.” [Exh. Pts. 5 & 6, p. 9.]

The Jamestown, New York, Municipal Light and Power Plant is admittedly a success. Also, contrary to the general claim of the opponents of municipal ownership, it is admitted in this case that there was no political interference. [Exh. Pt. 3, p. 595.]

Ponca City, Oklahoma, is also recognized as having a very successful plant, although to admit it seems a “sad” part of the story. The Christian Science Monitor, in its issue of January 19, 1927, set forth at some length the achievements of the municipally owned project at Ponca City, whereupon the New England Bureau of Public Service Information wrote to Mr. E. F. McKay, Manager of the Oklahoma Utilities Association, asking him for an authoritative statement “as to why you permit a municipal light plant to make so much money.” (Our italics.) It is at least somewhat astonishing to note that the utility director in New England should rather call to task the manager of the utility corporations in Oklahoma for permitting a municipal light plant to make such a record, as though it were within the power of the manager of the private companies in Oklahoma to prevent such a thing.

But the answer of the manager of the Oklahoma Association is even more significant. He says:

“The sad part of this story is that it is true, and another sad part is that the secretary of the Ponca City Chamber of Commerce is a very capable and energetic newspaper man, who has an irresistible impulse to market his wares.” [Exh. Pts 5 & 6, p. 93.]

Chapter
52: Municipal Ownership Cities

Where War Was Waged Most Fiercely

There are over 2,000 cities, towns, and villages in the United States that own and operate their own electric light and power plants. Nearly 7,000 own and operate their own water works.

Many of these municipalities are making an outstanding success of their projects, even according to the admission of the utilities. So much so that the utilities have felt called upon to mobilize all their forces in a nation-wide effort to “check the growth of municipal ownership,” to “get rid of municipal plants,” and to put an end to the “wicked system.”

The strategic points in this struggle against municipal ownership are, naturally, in those cities where it has had its greatest and most notable successes. Here the war against municipal ownership has been waged most fiercely.

Strategic Cities: Cleveland

In 1914 the City of Cleveland began the operation of a municipal light and power plant. From the first this plant has had a maximum or retail rate of 3 cents per kilowatt hour-a rate that, till then, had been unheard of and was declared impossible by the private companies that were then charging io cents maximum.

This Cleveland municipal plant with its maximum 3 cent rate has been a challenge to the private industry that they could not well ignore. Every possible effort has been made by the utilities, first to deny, then to discredit and explain away this quite astonishing demonstration.

One of the first of these efforts noted in the hearings of the Federal Trade Commission was a survey conducted by one A. B. Roberts, a member of the consulting engineering firm of the Withington-Roberts-Wright Company, and by the Municipal Research Bureau under the direction of L. E. Carter, both employed by the city government, we are told.

A summary of these reports purports to show that the municipal plant “has accumulated a grand total net loss of $162,104.82 for its operation during the past nine years”; “that a very large number of the domestic consumers who have believed that they were paying only 3 cents a kilowatt hour have actually been paying 7 ½ cents”; “that the municipal plant has not and can not produce current as cheaply as the privately owned and operated plant”; “that the bookkeeping and accounting procedure has been entirely inadequate and unsatisfactory”; that there was “a rate increase of 33 1/3 per cent to all small consumers”; that “Cleveland taxpayers lost $311,051.99 in taxes by reason of this plant being municipally owned.” [Exh. Pt. 1, pp. 349-50.]

The Hofer Press Service of Salem, Oregon, “and certain utility people got together and wrote a story concerning the municipal plant in Cleveland, and the exhibit shows that the story was sent to all field executives, state information directors, and in addition to 2,800 newspapers.” [Pt. 16, p. 91.] This report stated that the municipal plant in Cleveland had increased lighting rates 40 per cent and that the plant had lost $162,104.82 in taxes, etc. [Exh. Pts. 10-16, p. 971.]

The Ohio Committee on Public Utility Information, being the power companies’ propaganda organization in that state, published a resume of the Roberts report on the Cleveland plant and gave it wide publicity and circulation in 1924. [Exh. Pt. 3, p. 1037.] Another analysis of this report was made in July, 1925, and sent out to the full mailing list of the Ohio Public Utility Committee. [Idem, p. 1142.]

The Twenty-year Struggle in Seattle

Seattle established its municipal plant more than 20 years ago and has steadily developed the project from time to time. This city also has been a target of the utility corporations’ efforts. A pamphlet by Ole Hanson, a former mayor of Seattle, purporting to show that the municipally owned utilities in Seattle, were a “disastrous failure,” was printed in enormous quantities and widely circulated by the utility companies. Two million copies of this pamphlet were distributed.

“The failure of municipal ownership and operation in Seattle,” we are told, “is too well known for further discussion.” [Exh. Pts. 5 & 6, p. 1066.]

Here again we have the inevitable surveys and reports. “The Puget Sound Power and Light Company,” we are told, “with an intimate knowledge of the local situation is so firmly convinced that an analysis of the past operations of the Seattle Municipal Light Plant will disclose such damaging evidence to the cause of municipal ownership that it has authorized an expenditure up to $150,000 for this purpose and for giving proper publicity to the facts disclosed. (Our italics.)

“This money will be openly contributed to the Voters’ Information League of Seattle with the frank statement that the company’s interest in such an investigation is two-fold; first, as one of the largest taxpayers in the community; and, second, to protect its property from unfair competition.” [Exh. Pt. 3, p. 546.]

Thus no secret is made of the fact that in this case the local utility company stimulated and financed the investigations which they believed would discredit the municipal plant. [See also Exh. Pt. 2, p. 11.] Copies of the pamphlet by this Voters’ Information League were distributed to every house in the City of Seattle. [Pt. 13, p. 61.] This report, according to the record, showed that the municipal plant was overloaded; that it was losing money, having accumulated a deficit of approximately one million dollars; that the rates and cost were all out of line with other plants; that the project had cost the taxpayers of Seattle $4,359,982, etc. [Exh. Pts. 10-16, pp. 649-56.]

Of course, J. D. Ross, Superintendent of the Seattle Municipal Power System, replied to some of these attacks, a brief resume of which is found in the hearings. [Exh. Pt. 4, p. 162.]

In the battle of the local utilities against the Seattle Municipal Plant the former brought suit against the city to prevent the sale of current outside the city limits, thus illustrating another method of opposition on the part of the companies to municipal ownership. [Pt. 13, p. 61.]

(Footnote.: This bitter contest between the local utility companies and the Seattle Municipal Light and Power Plant came to a dramatic climax during 1931. The then mayor of Seattle summarily dismissed J. D. Ross, Superintendent of the municipal plant, whereupon the municipal ownership forces of the city instituted a recall election, recalled the mayor, and elected in his place a new mayor-who promptly re-instated Mr. Ross. Indications at the present writing are that the war is still on.)

Fighting Los Angeles

This city is said to own and operate the largest single municipal light and power system on the continent. Naturally, the opposition to this project and its development has been very intense on the part of the utility companies. In 1927 the Los Angeles Gas and Electric Company, according to the record, spent $51,297 in campaigns to defeat measures that would have enabled the city to extend its municipal project. [Exh. Pts. 10-16, p. 726.] About the same time the Southern California Edison Company spent $39,868.56 in the campaign to defeat similar measures in Los Angeles.” [Idem, p. 727.] Here, as elsewhere, literature was published and distributed to show that the municipal project was a failure; [Exh. Pts. 5 & 6, p. 1066.] and that the city was losing money on its municipal business. [Pt. 4, p. 169.]

Mr: E. F. Scattergood replies to these attacks upon the municipal plant and his statement appears in the Commission’s reports as Exhibit No. 1644. [Exh. Pt. 4, pp. 160-61.]

The accountants of the utilities got out a report in which they show that the claim of the Municipal Light Plant of Los Angeles, on the basis of the audit of Price, Waterhouse & Company, of a profit of $3,258,000, was entirely without basis and that as a matter of fact, instead of a profit as claimed, there was a deficit of $3,158,000. [Exh. Pt. 3, pp. 730-32.]

Beating San Francisco’s Projects

This city, which by charter provision is committed to municipal ownership, submitted a proposition in November, 1927, to issue bonds in the amount of two million dollars for the purpose of building an extension of the Moccasin Creek power line of the Hetch Hetchy water and power project which the city owned and was developing in the mountain district east of San Francisco, so that it could bring the current into the city. Mr. A. F. Hockenbeamer, President of the Pacific Gas and Electric Company, filed with the Railroad Commission of the State of California, as required by law, a statement as to the amount of money expended by his company for political purposes in 1927. In this statement he says that the company spent $12,153.22 in the campaign to defeat this particular bond issue. [Exh. Pts. 10-16, p. 726.]

The Battle at Beatrice, Nebraska

In 1926 a proposition was submitted to the people of Beatrice, Nebraska, known as a revenue bond plan, which we have discussed elsewhere, by which this city would acquire the ownership and control of the entire local light and power project. The utilities fought the proposal bitterly, and Mr. Horace Davis of the Nebraska Utilities Information Bureau went to Beatrice to assist in the opposition to the matter. Mr. Davis in a letter to Mr. Sheridan said: “One of our companies has a nasty situation, municipal ownership campaign, at Beatrice, a town of 10,000, 40 miles south. I drove down this afternoon and just came back. It is a hard fight. Only one newspaper and the editor is righter than a fox. I am supposed to write a half-page of advertising copy each day, also some circular letters, etc. Have been laying out a general program tonight and wish you were here to criticize some of the copy I have written.” [Exh. Pts. 5 & 6, p. 1095.] The proposition was defeated.

At Kalamazoo, Michigan

A proposition was made in this city in igz5 to extend the municipally owned plant that was supplying street lighting for the city, so that it could go into the commercial lighting field. According to the testimony of Mr. F. A. Newton of Hodenpyl-Hardy Company of Jackson, in a letter written to Mr. Fischer of the Public Utilities Information Bureau, Ann Arbor, the utilities opposed and beat the proposition. Mr. Newton says:

“We defeated the proposition on April 6 … two to one. It will probably come up again. It has been coming up for 12 or 15 years and I would not be surprised to see it agitated for another is or 15 years. We will have to beat it six or seven times. The point is that in all of the years we have been working on this Kalamazoo situation,. and the last time I lived there six weeks, I am free to say that I have never yet got to the bottom of it and I never expect to. When it comes to hiding and distorting figures, the municipal ownership man has the world beaten. You never can be absolutely sure that you have got them nailed down on anything. They are the slipperiest proposition that ever lived.” [Exh. Pts. 5 & 6, p. 834.]

Hard Battles at Hart, Michigan

This little village undertook and finally succeeded in establishing a municipal hydroelectric power plant on the river that ran through the village. Here again the utility companies were active in fighting the municipal ownership project. Mr. W. M. Lewis, writing to Mr. Fischer of the Public Utilities Information Bureau, stated:

“I told the manager of our Chamber of Commerce that he should try to kill such a project because it was not worth while to have the Hart community think of municipal ownership and operation. He said that one of the prominent officials of Hart was coming to Muskegon tomorrow or the day after on another matter and when he came here he would bring him over to see me, at which time he would like to have me have sufficient information to show the gentleman from Hart that they were getting off on the wrong foot.” [Idem, pp. 834-35.]

The United Light and Power Company wired for a speaker and followed up with a letter “to counteract the municipal ownership agitation.” [Exh. Pts. 5 & 6, p. 837.] In this case the company wired to the Utility Information Bureau, urging the Consumers Power Company (by whom one of the engineers, a Mr. Burred, of Burred & Geophilus, had been employed), to discount a favorable report on the project which he (Mr. Burred) had previously submitted. [Idem.]

Earl Pussley, one of the leading attorneys at Hart, wrote a frantic appeal to the Michigan Committee on Public Utility Information, pleading for information, literature, and every possible help. The utilities responded and sent a special man to help them in the campaign.

And Mr. Lewis asks that Mr. Fischer send him right away “whatever you have-something like the failures of municipal plants, those that have shut down recently, losses sustained by municipal plants, etc:” [Exh. Pts. 5 & 6, p. 835.]

Made War on Marshall, Missouri

Many pages of the Commission’s reports are taken up with the story of the hard fight made by the local utility companies in Marshall, Missouri, against the municipal plant there. Mr. W. F. Fisher of the Marshall Utilities in a letter written to Frank S. Colwell of Pawnee City, Nebraska, under date of October 18, 1926, tells something of this struggle. Several elections were held, it seems, before the proposition to establish the plant was finally carried in June, 1916. Bonds for the erection of the plant were issued and sold for a premium, Mr. Fisher tells us, “but could not be delivered as the company filed an injunction against the registry on the ground that the election was not legal. (Our italics.) After a delay of about two years the State Supreme Court decided in favor of the city.” [Idem, p. 417.] Then the war came on and the cost of labor and material had so advanced in price that the cost of the plant had more than doubled. “The objection of this corporation,” writes Mr. Fisher, “and the delay incident thereto cost the citizens of our city about $150,000.”

Speaking of the various methods used by the utility company, Mr. Fisher mentions this. particular and interesting matter:

“The Kansas City Power and Light Company maintained a “capper” in our city during the _entire year of 1925, in an endeavor to dissatisfy the citizens with the ownership of the plant, without success. The Continental Gas and Electric Company is a holding corporation, which holds a majority of the capital stock of the Kansas City Power Securities Company, which company in turn holds all of the common stock (voting stock) of the Kansas City Power and Light Company. The United Light and Power Corporation is a holding corporation which owns a majority of the voting stock of the Continental Gas and Electric Corporation. The Continental Gas and Electric Corporation has been refused permission, under the provisions of the “blue sky” law, to sell stock in Missouri by the state finance department.

“The offer made by this company to purchase the plant was rejected by the council. Petitions were afterwards circulated, but not enough signers were secured to present to the council, although quite a number of Marshall citizens were employed by the company to circulate the petitions.” [Exh. Pts. 5 & 6, p. 418.]

Mr. Fisher here describes certain methods of the utility companies which are quite commonly used in their war against municipal ownership.

Under date of December 16, 1925, the Board of Public Works of Marshall, Missouri, issued a statement on city taxes in which they showed that the City of Marshall had a very low tax rate. “In a few short years no taxes whatever will be necessary in Marshall on account of the ownership of either the water works or the electric plant,” they say.

The Board in its statement then refers to an article which appeared in the Missouri Utility News published by the utility corporations of Missouri, in which the statement is made that “the utility company, it is needless to say, does not pay federal, state, and local taxes, but that the consumer pays these taxes. ‘Ultimate consumer is the chap who pays and pays and pays.’” (Our italics.)

Commenting upon this article the Marshall Board of Public Works goes on to say:

“The Kansas City Power and Light Company paid a federal income tax of $338,54704 to 1924, and a state income tax of about the same amount, in addition to their state and local taxes. No wonder the rates for service are high in Carrollton, Excelsior Springs, and Lexington. Who in Marshall would desire to contribute to these taxes? Salaries and wages are also a part of the operating expense of a utility and are paid indirectly by the consumer. The president of the Kansas City Power and Light Company paid a personal federal income tax of $48,318.13 in 1924; this is an indication of the enormous salary received by this official; the vice president and general manager paid a personal federal income tax of $6,862.19 in 1924, which is an indication of the large salary paid to this official. The electric consumer in Carrollton, Excelsior Springs, and Lexington is not only required to contribute to these colossal salaries, but also to the immense salaries paid to the other officials of this company and to the officials of its various holding companies (our italics), including the Kansas City Power Securities Company, the Continental Gas and Electric Company, and the United Light and Power Corporation. Four companies to serve one community! (Our italics.) No wonder the tax and service rates are high. Who in Marshall would care to contribute to the huge salaries of the officials of these four companies?

“The only expense of the Marshall water works and electric plant for general officers is $400 per year, or the sum of $100 each, paid to the four members of the’board of public works, who are citizens and taxpayers of Marshall. In addition to the salaries paid to “high hat” officials, the consumer in Carrollton, Excelsior Springs, and Lexington is compelled to contribute to the wages paid to undercover men, agitators, and cappers; parasites, who contribute not one thing to the improvement, upbuilding, welfare, or prosperity of a community. The water and electric consumers in Marshall contribute not one cent to sycophants.” [Exh. Pts. 5 & 6, p. 420.]

Woodward, Oklahoma

The City of Woodward, Oklahoma, owned a municipal light plant. Efforts were being made to get the city to sell its plant, which were finally successful. During the campaign the Oklahoma Utility Information Bureau supplies its news items to the Woodward, Oklahoma, Democrat, and the editorial advocates the sale of the municipal plant.

“This paper,” writes Mr. McKay, “has been using our news service for years and we have kept constantly before the editors receiving our service the fact that the towns going from municipal to private electric service have profited by the change.” [Exh. Pts. 5 & 6, p. 91.]

Discrediting the Kansas City, Kansas, Plant

Sometimes the state universities and their professors are brought in by the utilities in their efforts to discredit municipal plants. According to the evidence, “Dean Walker, of the engineering college of the State University of Kansas, and Professor Shaad, head of the electrical department of the same institution, were engaged to make a complete and thorough, investigation of the mechanical and financial operation” of the Kansas City, Kansas, Municipal Plant. As a result of their investigation, “Dean Walker and Professor Shaad find that the paper profit of $1,848,705 does not exist, but that a considerable deficit stands against the property. A shortage of $858,919 in the theoretical sinking fund is disclosed by the audit.” [Exh. Pts. 10-16, pp. 304-305.]

Grand Rapids, Michigan. In 1914 F. G. R. Gordon, former noted socialist, was employed by the utility companies for approximately one month, making three speeches a day and contributing one or more articles to every newspaper in the city in a campaign against the public ownership and operation of the local utilities. [Pt. 10, p. 50.]

St. Paul, Minnesota. In this city Mr. Gordon was employed by the American Light and Traction Company for five or six weeks to appear before labor unions and others in a campaign against municipal ownership.

Colorado Springs, Colo. The utilities fought bitterly the municipal ownership project at Colorado Springs when it was proposed. They regarded the situation as desperate and called for help and co-operation. [Exh. Pt. 4, p. 421.] It was in this connection that Mr. Gordon testified in reply to a question from judge Healy that “I would sell the post office tomorrow morning to the American Express Company.” [Pt. 10, pp. 51-52.]

Sioux Falls, S. D. In 1916 Mr. Gordon was on the staff of the Byllesby Company at $100 a month in campaigns against municipal ownership in this city. [Idem, p. 53.]

Boise and Pocatello, Idaho. Mr. Gordon was employed in these cities for over a month, according to the testimony, co-operating with the Idaho Power Company in the fight against municipal ownership, and was paid $800 for his services. [Idem, p. 56.]

Buhl, Idaho. A vigorous campaign was conducted against municipal ownership at Buhl, Idaho. However, when asked as to whether the Electric Bond and Share Company spent any money to defeat the movement in Buhl, the witness declined to answer. [Pt. 8, p. 61.] Subsequent evidence shows that the fight of the power companies against the municipal ownership project in Buhl was successful and the project was defeated. [Pt. 8, p. 69.]

Hicksville, Ohio. In this city the Ohio Power Company took an active part in the defeat of the municipal ownership proposition.

Dover, Ohio. The Ohio Power Company here spent $1,234 in the campaign against municipal ownership. [Pt. 22, p. 449.]

Oroville, California. According to a statement filed with the Railroad Commission of California, the Pacific Gas and Electric Company spent $953 in defeating a proposed bond issue for a municipal light plant in this city. [Exh. Pts. 10-16, p. 726.]

At Jacksonville, Florida, a municipal plant had been praised in an article which appeared in the Christian Science Monitor. Immediately efforts were made to get a “refuting article” from the editor.” [Exh. Pts. 5 & 6, p. 377.]

At Manitowoc, Wisconsin, a rather fierce controversy arose because of statements regarding the municipal plant sent out by the Wisconsin Utility Bureau, which were very vigorously resented by the officials in Manitowoc. [Pt. 25, pp. 949-52.]

Similarly, in Tucson, Arizona; Cleveland, Ohio; Chicago, and elsewhere, articles by representatives of the utilities appeared, attacking and discrediting municipal ownership.

Camilla, Blakely, and Moultrie, Georgia. In our chapter on the Foshay Company we have given the details of the devious and more or less subtle ways in which the Foshay Company operated in these three Georgia towns in their efforts to acquire municipal plants. [Idem, pp. 467-73.] For details see Chapter XXX.

Dothan, Alabama; Burlington, Colorado; and Brewster, Kansas. The operations of the Foshay Company in their efforts to acquire the municipal plants in these various towns have also been told in detail in our Chapter XXX on the Foshay Company. [Pt. 25, pp. 477-82.]

Danville, Virginia. In the effort to get the Municipal Light Plant of Danville, Virginia, the American Gas and Electric Company, according to the records, paid $2,500 for advertising, and made a bid of $2,750,000 for the plant . [Pt. 22, pp. 450-53.] Similarly, in an effort to get the Vineland, New Jersey, plant the company spent $7,422, although the proposition was voted down and the company did not succeed in its efforts. [Pt. 22, pp. 457-59.]

Only a Few Typical Cases

The above does not pretend to be anything like a complete review of the strategic struggles in the municipal ownership war in the country. They are but a few typical instances indicating the methods used by the utilities in their battles against municipal ownership.

Chapter
53: The War on State Ownership

A Series of Attacks Upon the Ontario Hydro-Electric
Power System

The Ontario Hydro-Electric Power system has been in many respects the most outstanding example of successful municipal and public ownership in the electric light and power field on the continent. It combines the advantages of large scale production, the utilization of natural water power resources, the co-operation of several hundred cities, towns, or villages and rural communities, financing at the lower rates which public bodies can secure, the application of the principle of service at cost, efficiencies and advantages in the technical operation due to the ability of the government to secure the services of expert and able engineers and technicians, and, finally, the application of the principle of the amortization of the capital account.

As the result of the application and operation of these principles, the Ontario system has been able to render its service to the ultimate consumer at rates so far below those charged by the private companies as to constitute a most significant and challenging demonstration. Consequently in practically every campaign for municipal and public ownership in the United States the Ontario Hydro-Electric system and its accomplishments have been held up as an illustration of what could be accomplished and a demonstration of the possibilities in this field. The Ontario Hydro-Electric Power system has been the driving motive and inspiration in the public ownership movements throughout the country. This is notably true in the three campaigns for the water and power act in California; in similar movements in Washington

and Oregon; in the movement led by the League of Municipalities in Georgia; in the public power movements in Wisconsin, New York and elsewhere, and it has had an important influence in practically every municipal ownership campaign in the country.

Under these circumstances it is perfectly natural that the utility corporations should undertake to counteract the influence of this Ontario Hydro-Electric Power system and to answer the arguments that are everywhere advanced by the proponents of public ownership on the basis of its achievements. And this they have been very diligent and aggressive in doing.

The Murray-flood Report

These efforts have taken the form of a series of engineering surveys and reports regarding the Ontario system.

The earliest of these reports, financed by the utility corporations, is the Murray-Flood Report of 1922 on “Government Owned and Controlled Compared With Privately Owned and Regulated Electric Utilities in Canada and the United States.” This “report contains 223 pages, with many tables and charts. The National Electric Light Association paid Murray and Flood $8,830 for this study of the Ontario situation, and printed 10,000 at a cost of $13,800. These were distributed to company executives, libraries, colleges, and civic organizations. They also circulated a synopsis of this report, about 2,500 copies.” [Pt. 11, pp. 45-46; also Exh. Pts. 10-16, pp. 283-286.]

“‘The report made public by the National Electric Light Association covers investigations from August, 1921, to February, 1922, and presents in a comprehensive and comparable way the advantages of electric service rendered by privately owned and publicly regulated utilities in. the United States and Canada, contrasted with that supplied by the most .notable government. owned utility in the Western Hemisphere, the Hydro-Electric Power Commission of Ontario.’” [Exh. Pt. 1, p. 364.]

Murray-flood Conclusions on Ontario System

The following are the conclusions presented by the Murray-Flood report regarding the Ontario Hydro-Electric Power system:

(1) “That the principles of its application can find no place in the United States.”

(2) “That to attempt the substitution of its principles within the states would be to strike a blow at economic structures, the present existence of which are far better equipped to protect the public interests.”

(3) That the service supplied by the privately owned utilities in the United States is “more adequate, more reliable, and cheaper.”

(4) That the building of a new power system such as that in Ontario would “not be to the economic interests of the people.”

(5) “That the people receive the power at less cost through private ownership under regulation” than under public ownership.

(6) That “the investment of capital in electric utilities under private interest control is far better protected from extravagance than when that capital is governmentally owned.”

(7) That government ownership eliminates all incentive for gain and throttles initiative, etc. [Exh. Pt 1, pp. 364-65.]

The Refutation

This report, of which the above is only a very inadequate summary, brought forth a sharp and extensive rejoinder from the officials of the Ontario Hydro-Electric system, which replied at length to the contentions made by the Murray-Flood report. [“Re Murray Report on Electric Utilities: Refutation of Unjust Statements Contained in a Report published by the National Electric Light Association, etc. Respecting the Hydro Electric Power Commission of Ontario.” 54 pages, Toronto, 1922.]

Mr.. Aylesworth, Director of the National Electric Light Association, reported that “Sir Adam Beck has answered the report of Murray-Flood but that the associations had decided not to print an answer to it, but simply have it for our files for those executives who might have occasion to use it.” . . . Mr. Aylesworth stated that “a great deal of publicity had been secured for the report, while but little resulted from the Beck answer.” [Exh. Pts. 10-16, p. 228.]

The Samuel S. Wyer Reports

In 1925 Samuel S. Wyer, Consulting Engineer of Columbus, Ohio, prepared a report on “Salient Findings of the Royal Commission Appointed to Investigate Governmentally Owned Hydro-Electric Systems in Ontario, Canada.” The National Electric Light Association purchased 3,000 copies. [Exh. Pt. 1, p. 399.] This report by Mr. Wyer has to do with what is known as the Gregory Commission Report of Ontario which had been appointed in 1922 to investigate the Hydro-Electric Power Commission and report. According to Mr. Wyer, “this report had been withheld from the Canadian public, but I was permitted to make a summary of the salient features, which, of course, are the findings of the Commission and not my own personal views.” The conclusions of this report are very much the same as those previously described in the Murray-Flood report and the Stewart report referred to later.

Another “report” by Mr. Wyer was on-“Niagara Falls: Its Power Possibilities and Preservation.” In 1925 Samuel S. Wyer, in a letter to A. W. Thompson, President of the Philadelphia Company at Pittsburgh, Pennsylvania, tells of a 35-page manuscript monograph that he had prepared on the above subject in which he made a “comparison of the methods of selling electric current on the Canadian side and on the United States side,” and argued that “there can be no rational development at Niagara Falls by either

United States or Canada until there is a new public opinion.” [Exh. Pts. 10-16, p. 737.]

Mr. Wyer was at that time, according to his letter, submitting this monograph to Dr. Walcott, Secretary of the Smithsonian Institution, with a view to having that institution publish the monograph. Later on the document appeared as a publication of the Smithsonian Institution and some 5,000 copies were distributed. [Pt. 14, p. 210.] A later edition was published by the National Electric Light Association.

Ontario Again Replies

This volume again brought forth a vigorous reply from the officials of the Ontario Hydro-Electric Power system. According to the record, “Sir Adam Beck, Chairman of the Hydro-Electric Power Commission of Ontario, has issued a I9-page pamphlet in which he refutes `misstatements and misrepresentations’ contained in a Smithsonian Institution report dealing with the power possibilities of Niagara Falls,” by Samuel S. Wyer. [Exh. Pts. 10-16, p. 297. “Misstatements and Misrepresentations Derogatory to the Hydro-Electric Power commission of Ontario in a Report published by the Smithsonian Institution under the authorship of Samuel S. Wyer, Examined and Refuted,” by Sir Adam Beck, Toronto, Canada, 1925.]

This report of Mr. Wyer on the Niagara Falls matter seemed to have stirred up quite a row. At least, Mr. Wyer, in testifying before the Commission, said that:

“immediately after the publication of the Niagara Falls report in January, 1925, hell broke loose all over the United States from every pro-government-ownership newspaper; and vicious attacks were made on the Institution and on Doctor Walcott and on myself, and I naturally wanted to keep the Institution out of it.” [Pt. 14, p. 232.]

About the same time Mr. Wyer published an article in the Nation’s Business, called “The Facts the Senate Never Got.” This article made the statement that Mr. Wyer went to Ontario to make a study of the Hydro-Electric Power system there for the Smithsonian Institution. Mr. Wyer insisted that he did not make that statement in his original manuscript but admitted that the article did. [Pt. 14, p. 213.] The publication of this pamphlet and the claim that it was published by the Smithsonian Institution caused a considerable controversy between the Canadian officials and others in this country. [Idem, p. 218] Finally, the Smithsonian Institution withdrew the report and had the plates destroyed. [Idem, p. 211.]

This report by Mr. Wyer, sponsored by the Smithsonian Institute, created such a “controversy between Sir Adam Beck and the Canadian Government on the one side, and the Smithsonian Institution and the State Department on the other,” that the utilities were unable to have any more of the reports printed. [Exh. Pts. 5 & 6, p. 384.]

The E. A. Stewart Report

In 1926 E. A. Stewart, Professor of Agriculture of the University of Minnesota, also made an investigation of the Ontario Hydro-Electric Power system, especially with regard to the application of electricity to agriculture. The author received contributions amounting to $388 covering two trips to Ontario, Canada, in preparing this report. The investigation conducted by Professor Stewart was made at the request of the Minnesota Committee on the Relation of Electricity to Agriculture, whose funds were contributed by the power companies. [Exh. Pt. 4, pp. 230-237; see also Exh. Pt. 1, p. 365.]

Speaking of this report the weekly letter of the Joint Committee of National Utility Associations said: “Since Professor Stewart was highly qualified to make this study and approached the situation from a wholly disinterested standpoint, his conclusions may be accepted as authoritative.” [Exh. Pt. 1, p. 365.]

The National Electric Light Association purchased 2,200 copies of this report.’ The conclusions are briefly as follows:

(1) That the percentage of electrified farms in Ontario is “just a little less than the average in our 48 states.”

(2) That “electric service has been extended only to the richest agricultural districts in Ontario: the very cream of the rural territory.”

(3) That there is “no `miracle of cheap electricity’ to be found on the Ontario farm. The government pays half of the cost of the primary and secondary rural lines; each farmer pays a fixed service charge of from $3.11 to $11.88 per month, and from 8 to 3 cents per kilowatt hour for the first block of energy, and not until the second block is reached do they begin to get 2 cent electricity. Nowhere in Ontario did I find actual cost of rural service out of line with the cost to the farmer in the United States, etc.” [Exh. Pt. 1, p. 366.]

Professor Stewart was later rewarded by being made president of one of the electric companies in the Northwest. [Pt. 14, p. 233.]

The Mavor Report: “Niagara in Politics”

In 1925 James Mavor, Professor Emeritus of Political Economy in the University of Toronto, brought out a book of the above title as we have mentioned in a previous chapter. The National Electric Light Association contributed approximately $3,000 to James Mavor in 1925, about the time of publication of this book. About 1o,ooo copies were circulated, being placed in college and public libraries, and sent to leading newspapers” It discusses the “insidious methods of politicians and the failure of public ownership in Ontario.” [Exh. Pt. 1, pp. 370-371.]

A review accompanying this book states:

“Professor Mavor distinguishes between government ownership and government operation of public utilities. He believes that government operation is a dangerous and destructive fallacy and has written this book to prove it in the instance of the Ontario Hydro-Electric Power Commission.”

Some of the conclusions of this book are as follows:

(1) That the Ontario Hydro-Electric Power System is “really an attempt on the part of a small number of politicians to establish an industrial monopoly and to manage this monopoly in such a way as to keep themselves in power.”

(2) That they have violated constitutional law and practice.

(3) That they have “assumed absolute authority; closed the courts of justice against proceedings adverse to themselves and have encroached upon the liberties of the people.”

(4) That “these politicians, by the use of the insidious methods described in the foregoing pages have hoodwinked the public into the belief that they are acting in the public interest.”

(5) That “they have saddled the province with an enormous debt.”

(6) That they have, according to the Gregory report, voted themselves large salaries for their incompetent labors.

(7) That they have in many cases broken promises solemnly made.

(8) That instead of “reducing. the cost of power, there are signs that they must ere long increase that cost to the consumers.”

(9) That the “political injury which they have already inflicted upon the public life of the province is the most important fact adverse to their credit and to the credit of the people and the press who have placed their necks blindly under the yoke of the politicians.”

(10) That the Hydro Commission has succeeded in monopolizing the political interest of the province and in effectually disposing of the two-party system. “The Hydro came. into the provincial house as a third party which immediately swallowed the other two.”

(11) That the “Hydro can not be controlled; it controls both its own officials and the government.” [Exh. Pt. 1, pp. 370-371.]

The Deadly Parallel

The utilities made good use of this book by Professor Mavor, particularly in controverting the claims of the proponents of public ownership. They published what they called “The Deadly Parallel,” by “competent authorities,” in which they compared the statements in a book on public ownership by the present author in parallel columns with statements to the contrary made by Professor James Mavor in his book.

“Advocates of the theory that the government can conduct business more economically and give better service than private initiative always cite the instance of the Ontario Hydro-Electric Commission,” they say, “which they contend is a model for government ownership and operation and which is a proof that the United States can do likewise. The following is a comparison in parallel columns of the several points made by Carl D. Thompson, a leader in the government ownership campaign, and Director of the Government Ownership League, Chicago, in his recently published book “Public Ownership” (a survey of public enterprises, municipal, state, and federal in the United States and elsewhere, by Carl D. Thompson, 1925, Thomas Y. Crowell, Publishers, 445 pages, illustrated), and the controverting statements found in

‘Niagara in Politics’ by Dr. James Mavor, Professor Emeritus of Political Economy in the University of Toronto.” [Exh. Pt. 3, pp. 319-324.]

Then follow in parallel columns brief statements from the author’s book on “Public Ownership” with special reference to the Ontario Hydro-Electric Power system. The same contentions are made here as are above described, only being set up in this new form.

The Hoxie Investigation

The records show that in 1925 the National Electric Light Association borrowed Dr. George L. Hoxie of the Southern California Edison Company to make an investigation into the Hydro-Electric Commission of Ontario for the information of the National Electric Light Association members. They “wished to get as complete an engineering and economic study as possible supplementing the one which had been made previously by Murray and Flood.” [Pt. 7, p. 88.] In this connection a number of payments were made to Dr. Hoxie, according to the record, a part of which went to “our mutual friend,” Mr. James Mavor, author of the book, Niagara in Politics, above referred to. A part of the payments, however, it seems, were made to Dr. Hoxie for his own services. [Idem, p. 90.] The records do not seem to make clear just what Dr. Hoxie did in this connection but the total payments amounted to $6,782.92. [Idem.]

Similarly, the Canadian Electric Association, which was one of the branches of the National Electric Light Association, was fighting the Ontario Hydro-Electric Power system, using the Murray-Flood report and the book by Professor Mavor. [Exh. Pt. 7, 8 & 9, p. 29.]

F. G. R. Gordon, Socialist

In the Boston Herald of Sunday, December 4, 1927, appeared an article by F. G. R. Gordon, former socialist, under the caption “Here Is the Truth About Ontario Hydro-Electric.” In this article Mr. Gordon reviews the various previous reports made upon the Ontario Hydro-Electric Power system by Messrs. Mavor, Stewart, and others, following the usual line of criticism. [Exh. Pt. 3, pp. 316-319.]

Summary of the Attacks upon Ontario

Thus by a number of different individuals and organizations, but with the utilities always as their source and inspiration, the great publicly owned hydroelectric power system of Ontario has been subjected to every possible attack. In summarizing these attacks we can not do better than quote from the refutation by the late Sir Adam Beck referred to by Mr. Aylesworth, Director of the National Electric Light Association, as reported in the hearings of the Federal Trade Commission, Exhibits, Parts 10-16, page 228. In this refutation Sir Adam Beck said:

Conclusion

In entering upon this discussion of the true character of the “Murray Report,” it was charged that, in addition to misrepresenting the achievements of the Hydro-Electric Power Commission of Ontario, Mr. Murray has made grossly incorrect and misleading statements; he has garbled documentary and other data and then employed them as premises from which to derive conclusions; he has made pronouncements based upon comparisons so inadequate as to be puerile; he has made charges which he fails to substantiate; he has ignored important factors, even disregarding most pertinent engineering data; he has seriously miscalculated the cost of Niagara power; he has omitted to describe the confines of districts he discusses; he has not shown how summaries have been derived; lie has made comparisons between unlike units; with respect to the costs of power, he has shown himself singularly lacking in the application of engineering economics; and he has failed to supply data essential to the integrity of the claim of reporting in an “exhaustive and impartial” manner. In a word, it was charged that Mr. Murray had employed methods demonstrably reprehensible and unprofessional.

“This charge has now been substantiated by representative instances selected from the mass of such material to be found in the “Murray Report.” The varied character and comprehensive range of the subjects specifically dealt with is well disclosed by glancing over the table of Contents of this Refutation.

“When it is realized that over 300 municipalities have invested more than $200,000,000 in their Hydro enterprise, and when one considers the great value of the co-operative efforts which have resulted in the distribution of electrical energy at cost to over 1,000,000 citizens, it is inexcusable that this undertaking should be subjected to such an unwarranted attack as the National Electric Light Association of New York has made through the agency of the “Murray Report.” In view of the special and widespread publicity given to the “Murray Report,” it became desirable to issue this authoritative statement in reply.

“Inasmuch as the “Murray Report” has been shown to be permeated by misrepresentations and unjust statements, it is, after all, seen to be but one more of those impotent attempts which, from time to time, have been made to discredit the outstanding achievements of the co-operating hydro-electric municipalities of the province of Ontario.” [“Refutation of Unjust Statements . . . Respecting the Hydro-Electric Power Commission of Ontario,” pp. 52, 53.]

Chapter
54: War on the West Coast 2

“Shall California Be Sovietized?”

In the records of the Federal Trade Commission relative to the efforts of the utility companies in defeating proposed public power measures in California, we have a most striking example of the terrific power of the utility interests and an illuminating illustration of the means and methods by which they mold public opinion and exercise control over the economic and political life of a state.

In 1921 the League of California Municipalities sponsored a bill which was introduced in the Legislature by Senator M. B. Johnson, providing for a state-wide publicly owned power system similar to and patterned after the Hydro-Electric Power System of Ontario. The bill never came out of the committee.

Later representatives of the League of California Municipalities and other groups and individuals took the necessary steps under the initiative laws of California to have this measure submitted to referendum vote of the people at the election in November, 1922.

Utilities Organize Opposition

The utilities immediately developed as by magic organizations of opposition in every section of the state. In the northern part the Greater California League was formed. In the southern part the People’s Economic League was organized. These two organizations covered the state but there were other numerous local and district organizations. Altogether the campaign carried on against the Water and Power Act was unparalleled in the history of California politics. [Franklin Hichborn, in an address on “The Political Activities of the Power Trust in California,” delivered before the Public Ownership Conference in Los Angeles, September 28, to October 1, reviewed the facts regarding this campaign.]

A Most Extraordinary Campaign

A most extraordinary campaign followed. The measure was denounced as bolshevistic. “Shall California Be Sovietized?” was the title of one of the opposition bulletins; [Exh. Pts. 10-16, p. 611 ff.] it was “socialistic”; [Idem, p. 571.] “would mean financial and political disaster”; [Idem, p. 538.] would be “ruinous to agriculture”; [Idem, p. 540.] that the Ontario plan, after which this measure was drawn, had proved “a dismal failure”; [Idem, p. 624.] a “deplorable failure”; [Idem., p. 443.] that it would “make the bonded indebtedness of California 50 per cent of the combined debt of all the other states in the Union”; [Idem, p. 542.] that it would mean “staggering burdens of taxation”; [Idem, p. 535.] that it would create “a monster political machine” with dictatorial and unlimited powers; [Idem, p. 534.] that it was the “most dangerous and revolutionary measure that had ever come before the people of our state,” [Exh. Pt. 1, p. 110.] etc., etc. The power companies used a bulletin entitled “Power At Cost: But, Oh, The Cost!” And another entitled “Save California.” [Exh. Pts. 10-16, p. 538.]

The Forces Arrayed

“To an extraordinary degree,” says Mr. Hichborn: and his statement is amply borne out by the Commission’s records: “banks, bonding houses, newspapers, Chambers of Commerce, and civic organizations joined in the cry raised by the Greater California League, The People’s Economy League, and kindred organizations, that the Water and Power Act was bolshevistic, socialistic, and would be ruinous to the state.” [Exh. Pts. 10-16, pp. 571, 554, 538; especially p. 542 on California Newspapers against the Act.]

Bankers and bankers’ associations, insurance agents, and insurance brokers, electrical contractors, business men’s associations, Boards of Trade, women’s organizations, organizations of the Farm Bureau and the Grange, engineers and ship owners’ associations, real estate boards, irrigation districts, and innumerable other similar organizations of opposition sprung up all over the state. The suddenness with which the opposition arose, the thoroughness of its organization, and the effectiveness of its action were amazing. The sudden change of front in some quarters, the attitude of certain business elements, especially the bankers and the overwhelming defeat of the measure was puzzling at the time, to say the least. But all that has now been made clear by the investigations of the Federal Trade Commission and their report upon the findings of a special committee of the California Legislature which investigated the matter.

What the Findings Show

The official investigations of the situation bring out the following facts:

(1) That there were six leading utility companies in California that got back of this campaign against the California Water and Power Act and financed it without limit.

(2) Two main organizations were formed as stated above, The Greater California League in the northern part of the state and the People’s Economy League in the southern part of the state.

(3) At the head of these organizations were experienced and highly paid men who were given absolute and dictatorial control and supplied with funds without limit.

(4) Both of these organizations were equipped with every possible assistance, resource, and specialized service needed, and a veritable army of employees sent out to canvass and organize the state.

What the California Legislature Found

In 1923 a special committee was appointed to investigate the receipts and expenditures in connection with this Water Power Act campaign. It submitted a complete report which will be found in the hearings of the Federal Trade Commission as Exhibit No. 4198. [Exh. Pts. 10-16, pp. 419-540.] This committee, in reporting to the State Legislature, brought out, among other things, the following:

Huge Campaign Expenditures. “Startlingly large expenditures” were made in the fight to prevent the passage of these measures. The total disclosed was $501,605.68. The proponents had expended $159,990.05. [Idem, p. 420.] And the committee remarked: “That side won which spent the most money. (Our italics.) Napoleon, in his famous though sacrilegious statement, claimed that ‘God is on the side of the strongest battalions.’ The committee might similarly say, as the result of its investigation, ‘Victory is on the side of the biggest purse. The winning of the election by the side that spent the most money in the foregoing contests was too universal to be attributed merely to chance or accident. The power of money in influencing public opinion, its ability to carry popular elections through vast expenditures for propaganda literature, advertising, and organized campaign workers was made strikingly manifest in the investigations of your committee. It presents a problem in direct legislation which the citizens of this state can not safely ignore.” [Exh. Pts. 10-16, p. 420.]

Financed by Utility Companies. “The campaign against the water and power act was financed almost entirely by a half dozen utility companies engaged in generating and selling electrical energy.” [Idem, p. 421.] And of these utility companies two outstanding examples were the Pacific Gas and Electric Company in the northern part of the state and the Southern California Edison Company in the southern part of the state. [Exh. Pts. 10-16, p. 425 ff. and 452 ff.

Deceptive Campaign Methods. “The use of questionable, misleading, and deceptive campaign methods” characterized the work of the utilities in their campaign against the measures.

“In reference to the methods employed in connection with the campaigns on some of the propositions on the ballot the committee found they were such as to have the effect of misleading and deceiving the voter. (Our italics.) This arises, for example, out of the use of high sounding, patriotic names under which the real identity of the interested parties and actual proponents or opponents is disguised. While many campaign committees selected names that fairly indicated their purpose, others selected designations which gave the voter no indication as to the real purpose or nature of the organization. The most conspicuous example of the latter was the use of the name Greater California League by the opponents of the water and power act. Such a name readily gives the impression of being a promotion organization which every citizen in California would feel free to join, and having nothing in its name to indicate that it was a political campaign organization.

“The testimony before the committee showed that the Greater California League was in reality merely the name under which Mr. Eustace Cullinan, employed by the power companies, conducted the campaign against the water and power act in northern California.

“The following extracts from Mr. Cullinan’s testimony indicate its actual identity:

“‘The Greater California League never had control of the money (campaign contributions) at all. I put that money in the bank as I received it to an account called `The Greater California League,’ but no one had access to that account except me. . . . It was like most of these political groups or committees … never had a meeting…. I appointed myself president. I was employed by the power companies, through Mr. John S. Drum . . . and met, with myself, after the employment, and organized the Greater California League.’

“Another practice, shown by the testimony to have been extensively resorted to in the campaign and calculated to work deception on the voter, was that of employing as campaign workers persons prominent in commercial bodies, farm organizations, labor unions, social, literary, and civic clubs, without these hired representatives disclosing their employment. In this way members of organizations were kept in the dark as to the real motive of fellow members who were apparently disinterested in their views.

In the selection of campaign workers from the ranks of organizations, frequently members of the greatest prominence were selected, so as to leave no doubt in the minds of the committee that these representatives were being hired, not for the services that they might render, but for the influence that they possessed by reason of their standing and reputation as distinguished members commanding the confidence of their fellows and actuated only by considerations of the welfare of their organizations: These workers were frequently furnished with expense accounts which might properly be designated as “influence money.” In several instances no room for doubt is left but that the employment of members of organizations was for the purpose of securing the indorsement and influence of the entire organizations.

“To such lengths was this practice carried that in at least two instances those who held salaried positions obligating them to work for measures on the ballot that their organizations had sponsored, accepted employment from opposing interests to work against the very measures that they had been employed to further.

“Popular government and direct legislation have no greater menace than that in which propaganda on electoral matters is disseminated by paid workers in lodge, church, club, farm bureau, union, or other organizations under the guise of honest and disinterested advice.

“That such methods and such expenditures are contrary not only to good government but to public opinion is apparent from the results that take place when the public become aware of the truth.” [Exh. Pts. 10-16, pp. 422-23.]

Eustace Cullinan and the Greater California League

Representatives of the utility companies selected Mr. Eustace Cullinan as manager and director of the Greater California League for the northern part of the state. When asked to accept the management of the campaign for this organization, Mr. Cullinan insisted that he must have “absolute power to act.” And this was agreed to. [Idem, p. 439.] Mr. Cullinan was paid $25,000 a year for his services, and given funds amounting in all to over $245,000. And he could have had more, as there was absolutely no limit to the amount of money he was allowed to expend. [Idem, pp. 425-26.] “We all trusted Mr. Cullinan,” said Mr. Britton in his testimony, “and whatever he wanted we would let him have.” [Idem, p. 447.] The expenses of the campaign were pro-rated among the utility companies and from time to time they advanced, apparently without any question whatsoever, whatever money seemed to be necessary to carry on the campaign.

Organization and Conduct of the Campaign

With this type of men in control and unlimited resources, the opposition developed its organization and conducted the campaign, of which the following are some of the more outstanding features:

(1) Mr. Cullinan engaged at once an $11,000 a year general manager to assist him. This was Mr. W. D’Egilbert who traveled up and down the state developing the organization. [Exh. Pts. 10-16, p. 427.]

(2) Local branches were organized and local men of influence and experience were put in charge. In some cases district organizers were appointed and put in charge of their respective fields. These men and their expenses were all paid by Mr. Cullinan.

(3) The various civic organizations of the state were organized and financed, including the State Irrigation League. [Exh. Pts. 10-16, p. 427.] These organizations were backed with finances to the amount of $1,150. [Idem, p. 428.]

(4) Speakers were engaged throughout the state and were well paid for their services. In one case six college debaters from the St. Ignatius College were sent out, some of them to the north and some to the south, speaking in movie picture houses and reaching every town, and in some cases the rural communities as well. [Idem.]

(5) Employed city officials. Although the City of San Francisco is, by charter provision, committed to the policy of the municipal ownership of its utilities, Charles S. Perry from the city attorney’s office of San Francisco was employed and paid $215 and expenses, which brought the total cost up to $681.40, to campaign against the act.

(6) House-to-house canvassers were employed, in some cases law students; in another a young woman, “Agnes Tierney, who was also a door-to-door canvasser in San Francisco, going around at night to entertainments and card parties, wherever groups were together, and distributed literature and talked about the water and power act to them individually. Thea L. Purnell, a colored woman, graduate of Rockford College, did the same thing. She knew most of the colored people in California and I employed her. Genevieve Reed canvassed in the mission district. Thomas Driscoll was also canvasser, likewise Victor Woods, a former surveyor general of California; also E. A. Greene and C. D. Mull.” [Exh. Pts. 10-16, p. 428.]

(7) Quantities of literature of all kinds were printed and distributed. These included bulletins, leaflets, postal cards, etc. A total Of 4,612,700 pieces were distributed. [Exh. Pts. 10-16, p. 430.]

(8) Over $117,300 was spent in newspaper advertising covering practically every paper of importance in the district. [Idem, p. 422.]

(9) The Hofer Press Service, which we described elsewhere, was employed.

How the Power Trust Used the Bankers

(10) The committee took advantage of its friendly relations with the bankers to get them to send out letters. and otherwise campaign against the measures. [Exh. Pts. 10-16, p. 979.] In this connection, attention should here be called to the famous Hockenbeamer letter which we have produced in full elsewhere. According to this letter of Mr. Hockenbeamer, President of the Pacific Gas and Electric Company, the bankers of California “literally sent out hundreds of thousands of personal letters and pieces of literature to their depositors and stockholders, as well as campaigning against the act personally.” [Idem, p. 979.]

(11) Similarly, the insurance companies mailed out circulars and letters. [Idem, p. 429.]

(12) Bond houses did the same. [Idem, p. 430.]

(13) The committee employed a former district attorney to campaign against the measure.

(14) The movie picture houses were used. A man who was proprietor of the Oakland Orpheum was employed to take the films around and place them in the theaters. Arrangements were also made with the California Motion Picture Producers Association to have the utilities’ film placed at a set price per theater, depending upon the number of the cities. [Exh. Pts. 10-16, p. 431.]

(15) Billboards were generally used.

How Organized Labor Was Worked

(16) Perhaps one of the most astonishing revelations brought out by the committee of the California Legislature was the way in which the utility interests managed to reverse the position taken by organized labor and mobilize their forces against the water and power act.. The State Federation of Labor early in the campaign had gone on record as favoring the act. Mr. Cullinan not being familiar with the organized labor movement got hold of a man by the name of Lore and employed him at a salary of $5o a week to “travel around and call on different union labor papers and explain the opposition.” In that connection he was also to place advertising in these papers to be paid for by the utilities. The Eureka Labor News, The Labor Clarion, and Organized Labor are mentioned as labor papers that were thus approached.

But the big card of the utilities in their effort to swing organized labor in line was played by John A. Britton when he succeeded in employing P. H. McCarthy, who for many years had been president of the Building Trades Council of San Francisco, besides being a prominent baseball and sporting man. Mr. McCarthy came high. He received $10,000 for three months’ work. [Exh. Pts. 10-16, p. 446.] No questions were asked of Mr. McCarthy as to what he was doing with the money that was given him. No accounting was made and, according to the testimony, the results of his efforts and influence were immediately felt. Mr. Britton testified that “when Mr. McCarthy called for the second installment of $5,000 in September, I didn’t ask him what he was doing with the money or whether he was employing any others to assist him. I had the same faith in him that I did in Larry Walsh. I expected him to employ workers and pay them, but I didn’t ask for any accounting, any more than I did with Larry Walsh. I could feel the influence of McCarthy’s employment almost immediately in the reaction among the labor element.” (Our italics.) [Exh. Pts. 10-16, p. 447.]

(17) The committee brought William S. Murray, one of the authors of the Murray-Flood report against the Ontario Hydro-Electric Power Commission, to California to help in the campaign against the measure. Mr. Murray was paid $5,583, but for some reason did very little in the campaign. Mr. Cullinan explained this by saying that “I didn’t need Mr. Murray; the Ontario scheme was so thoroughly exposed without him that it was sort of a dead thing…. It was so dead that I didn’t need Mr. Murray. However, I had reserved his time and I brought him out here. I think he made only one or two speeches.” [Idem, p. 443.]

(18) Another individual and influence that was employed was Mr. George Skaller, President of the Civic League of Improvement Clubs of San Francisco. The Civic League consists of the district professional, vocational, and economic organizations. . . . [Idem, pp. 449-50.] It includes in its membership representatives of all of the improvement clubs, professional organizations like the state dental association, Chamber of Commerce, and industrial organizations ss Through the secretary, Mr. Skaller, this League was paid $2,000 and in addition was allowed $4,000 to use in sending out literature. In at least one instance, the North Beach Improvement Club, a previous action favorable to the water and power act was reversed. This club had previously endorsed the measure, whereupon the utility interests “made an attempt to have a new meeting. We sent to every single member to attend the meeting, sent automobiles for them and sent men and agents around to try and explain that it was important to be there. We had the largest meeting that the organization ever had. The officers made a strong fight against it, tried to defeat us, and when we came to vote for or against the demerits at the meeting, there was nothing left of the opposition, we reversed the resolution.” [Exh. Pts. 10-16, p. 450.]

(19) Women’s Clubs and Social Workers were quite generally employed. Mollie E. Connors, for example, was paid $1,000 for work among the women’s clubs, and Mr. Britton testifying on the matter, said: “She did her duty very well, too, I will tell you she did her duty very well, as the vote shows there.””‘

A Mr. Walsh was employed and paid $4,342 to go out and hire workers. It seems that there was no limit to the amount that he was to use, for Mr. Britton’s testimony reads: “If he had asked me for $10,000, I would have paid it without question. I have that explicit confidence in Larry Walsh.” [Idem.]

In one community, according to the testimony, there was a very prominent lady,

“who was a member of the literary club, a member of the W. C. T. U., and a number of organizations. She gave an afternoon tea, and in the course of the party, or afternoon tea, she brought the conversation around to the subject of the state water and power act, and said, rather casually, in passing, that “My banker tells me that is an iniquitous and dangerous measure,” and with a little comment of that kind passed on. Those who were at that tea did not realize until the investigation came out that she had been paid $45.00 by Mr. Cullinan, I think, to buy cakes and cookies for the giving of that party.”

Question: “Do you recall her name at the time?”

Answer: “Yes; Mrs. Jury. These amounts that people got ran all the way from $45 to $10,000:” [Pt. 14, p. 12.]

(21) Some of the workers, as, for example, in the case of Martin Swanson, who was paid $649.27, “covered the whole state, even went into the Los Angeles territory and found out how they were getting along.” [Exh. Pts. 10-16, p. 446.]

(22) A number of people were employed to canvass from house to house-“to do bell ringing,” as it was called, “and denounced the act in little organized meetings.” Some of them attended whist parties and similar gatherings to campaign against the measure. [Idem, p. 447.]

How the Farmers Were Worked

A special effort was made to reach the farmers. Plans to this end were very cleverly worked out. William A. D’Egilbert, Mr. Cullinan’s general manager and assistant, was “a large irrigationist” and especially well acquainted and in touch with the farmers of the state. [Exh. Pts. 10-16, p. 448.] Through him the committee had almost direct access to the farm organizations. In one month Mr. D’Egilbert addressed 18 farm bureaus in the San Joaquin Valley alone. “There were three groups,” Mr. D’Egilbert testified, “where I was known mostly. Farmers, stockmen, and farm laborers, or men working out through the mines; and I was able to get in touch with the women of the state through my contacts established over 15 or 20 years through my work in connection with the state commission.” Mr. D’Egilbert was paid $11,000 for his services and $2,384.25 additional for his expenses. [Idem, pp. 448-49.]

Herbert L. Cornish and the People’s Economy League

In the southern part of the state the organization set up by the utilities for their campaign against the California water and power act was known as “The People’s Economy League,” with Herbert L. Cornish in charge. The form of organization and the method of procedure was much the same in the southern part of the state as in the northern. The manager of the campaign in Southern California, Herbert L. Cornish, was a real estate and insurance man in Los Angeles. He was employed by the Southern California Edison Company and quickly developed an organization of a thousand members. “It was a real definite organization with an executive committee and was enlarged as the campaign progressed to about one thousand. It was a parent organization to other leagues to a number of about 6o that were organized in the various cities and towns throughout Southern California. [Exh. Pts. 10-16, p. 433.]

Mr. Cornish was paid $26,000 for his services, and in addition was allowed $81,605 for expenses so that the total was $107,605. [Idem, p. 433.] Some of the interesting features of the work of The People’s Economy League may be mentioned.

(1) An organizer, Mr. M. M. Link, was employed at $400 a month and expenses for organizing People’s Economy Leagues throughout Southern California.

(2) A publicity man was employed at $400 per month and expenses.

(3) A manager of a speaker’s bureau was employed at $240 per month. The pay for speakers ran from $10 to $25 per meeting.

(4) Mr. Will H. Fisher was in charge of the research department and paid $500 per month.

(5) Numerous organizers were employed, being paid from $50 to as high as $300 per month.

(6) A number of women workers were employed in the women’s voters’ department, receiving from $5o to $65 per week.

(7) Fred J. Spring was in general charge of the department of the campaign among labor men, factory and store employees.

And so on, as in the northern part of the state, organizations were designed ‘and people employed with a view to reaching every class o£ people. And again there seemed to be no limit as to the amount that was to be expended. Mr. Cornish testified: “I had no understanding with the Edison Company as to how much I should spend.” There was absolutely “no limit.” [Exh. Pts. 10-16, p. 435.]

From this and additional testimony it would seem that the utility corporations managed to develop a most complete and comprehensive organization particularly adapted to reach every section of the state and every class of people.

Three Times Defeated: Yet the Movement Grows

The measure was defeated. This was in 1922. Two years later the same bill was again sent to referendum vote in practically the same form as it appeared before, and again the measure was defeated. Finally, in 1926 the same bill was again sent to referendum and for the third time defeated.

Thus it would seem that the movement for public power in California was pretty thoroughly beaten.

And yet the State of California has a very strong and extensive public ownership movement which seems to be steadily developing. For example, San Francisco was the first large city in America to establish the municipal ownership of street car lines. This enterprise has proved quite successful and is still developing. In the southern part of the state, Los Angeles owns and operates the largest single electric power system on the continent besides a very extensive water supply system. Both are successful and rapidly growing. California also has the first, the largest, and most successful public power district in the country. Several such districts have been developed in connection with irrigation projects. The hydroelectric power system of the Modesto-Turlock District is especially noteworthy as having a long record of successful operation and development. Other public power districts are in operation and more being developed. California has also at least one large and very successful municipal natural gas plant at Long Beach. There are at least 22 successfully owned and operated municipal electric light and power projects in the state. And, finally, in the cooperation of the municipalities of the southwestern part of California we have the active element back of the great Boulder Canyon project. It was the public spirit and the co-operative public ownership movement of Los Angeles and other cities of this section who were in a position to contract for the power from the Boulder Canyon project that made it possible for this great enterprise to be adopted. The magnitude of these public enterprises may be judged from the fact that for the development of an aqueduct to bring the water from the Colorado River below the Boulder Canyon project, the cities of Southwestern California in the fall of 1931 adopted by an overwhelming vote a bond issue of $220,000,000..

Thus in spite of the repeated defeats of the state-wide public power measures above mentioned, the public power movement is going forward steadily in California.

Chapter 55:
Washington and Oregon

Where the People Rule by Referendum

In Washington the war on public ownership centered chiefly at first around the two principal municipal plants, one at Seattle, the other at Tacoma. The state movement for public ownership grew out of these earlier municipal projects.

The municipal plants were seeking to expand, interconnect, and to serve intervening rural territory. In these matters they were successful to a certain extent, having created an intertie or interconnecting line between Seattle and Tacoma, and Tacoma having succeeded in expanding its service to. several thousand farmers in the surrounding rural territory. In this development the municipalities naturally came into conflict with the private companies which were also seeking to expand.

We have told of the fight of the utility companies on the Seattle Municipal Plant in another chapter. But the scene widens as the city undertakes the development of its now famous Skagit River project. This project is denounced by the Oregon Public Utility Information Bureau to which we have referred in connection with the fight on municipal ownership in Seattle. [Exh. Pts. 5 & 6 p. 885.]

The Bone Bill: Struggle for Enabling Legislation

The real struggle in Washington came when the cities of Tacoma and Seattle started the movement for an amendment to the state laws that would allow cities to “sell and dispose of electric current to any other city or town, governmental agency or municipal corporation, or to any person, firm, or corporation, inside or outside its corporate limits, and to purchase electric current therefrom.” [Exh. Pts. 10-16, p. 641.]

This was the famous Bone bill which was sponsored by the municipalities and which they sought to have passed through the Legislature. Pamphlets against the bill were printed and sent out throughout the state by the private companies. The different local companies were urged to see that the utility pamphlets were sent to “every editor in your district and mailed to every registered voter.” [Idem, pp. 665-66.]

The cities of Seattle, Tacoma, Everett and Bellingham were organized by the utilities, and taxpayers’ committees were formed to “conduct an independent fight against the measure.” [Idem.] Two state-wide committees were formed, composed of men who were opposed to the Bone bill. The first was composed of manufacturers and men representing the larger business interests of the state. The second would consist of citizens and taxpayers who are well known in their various communities. [Idem.]

The organization was so complete that the utilities had “a man, and wherever possible two men in every voting precinct in our district on election day. (Our italics.) Women can also be used for this work. They will all, however, be members of our own organization. In fact, we intend to relieve every man and woman in our organization who can possibly be spared, who will work at the polls and in their precinct during election day.” [Exh. Pts. 10-16, p. 667.]

From the evidence it would seem that the National Electric Light Association took an interest in this fight in Washington and sent F. G. R. Gordon, former socialist, out there to help. For some reason Mr. Gordon did not seem to be particularly popular with the local representatives of the utilities. At any rate, Mr. Brockett, who seemed to have charge of affairs, testified that when Mr. Gordon came to Seattle he “talked with him and requested him to go back home.” (Our italics.) [Pt. 13, p. 46.]

In the campaign against the Bone bill the utility companies spent $175,050, of which the power companies supplied 90 per cent. [Idem, pp. 38-39.]

The measure was defeated.

Oregon

In Oregon, as in Washington and other states, the fight on public ownership started in the municipalities. For example, the City of Eugene had undertaken to extend its service outside the city limits. [Exh. Pts. 7, 8 & 9, p. 392.] McMinnville and Forest Grove had also undertaken to extend their services outside their city limits. And the City of Portland had undertaken the sale of water to outside communities. Naturally, this attempt of the municipalities to extend and enlarge their services met the opposition of the utility companies. The manager of the public information committee for the utilities in Oregon, in a letter to Mr. A. A. Smith of Baker, indicated the line of attack that they proposed to follow. “There is no question,” he wrote, “but what if you attorneys can find suitable grounds to warrant the taking up of this matter, that a suitable rural taxpayer can be found to sponsor the action.” [Exh. Pts. 7, 8 & 9, p. 393.] In other words, they were considering the possibility of injunction proceedings against the cities in this action. In the testimony reference was made to the case of the City of McMinnville versus Yamhill Electric Company, in which the city had been blocked in an attempt to prevent the Yamhill Electric Company from extending its service to the rural section. The particular line of attack on the part of the utilities seemed to be to try to get the state and county officials to place the properties of these cities outside of the city limits on the tax rolls. [Pt. 7, p. 348.]

Thus here, as elsewhere, the war on public ownership began with the municipalities. But the struggle soon assumed larger and wider proportions.

The Grange and Housewives’ Public Power Bill

Early in 1926 two measures were proposed to be voted on by the people of the State of Oregon at the general election in November of that year. One was initiated by the Oregon State Grange, sponsored by The Public Ownership League of Oregon and the Hydro-Electric League of Oregon. The other was initiated by the Housewives’ Council, Inc. Both measures provided for a publicly owned, state-wide power system.

Immediately upon the introduction of these measures the opposition of the utilities became active. Among others, the following are some of the features of the utilities’ campaign against the Oregon public power measures.

(1) At the outset, and while the initiative petitions were being circulated, there was some careful work suggested in trying to prevent the securing of names to the petitions. [Pt. 7, p. 315.]

(2) A state-wide campaign was organized and funds subscribed by utility companies to carry on the fight.

(3) As in other cases, a press service was developed which sent the arguments of the utility companies to “nearly all of the newspapers in Oregon.” [Idem, p. 316.]

(4) A total of $29,677 was spent in this campaign.[Idem, p. 319.]

(5) In advertising alone $18,714 was spent. [Idem, p. 320.]

(6) A special man was employed to work among the farmers and Grange organizations. [Idem, p. 326.]

(7) A special pamphlet was prepared against the measure, setting forth the usual arguments of the utilities. [Exh. Pts. 7, 8 & 9, p. 387; a brief statement on p. 371.]

By these and other methods the utilities took “an active part in the fight against these amendments…both openly and under cover.” [Pt. 7, p. 345.]

The measure was defeated.

The Billy Goat and the Bull Calf

Speaking in a rather facetious manner of these serious campaigns for public ownership in Oregon, Mr. Franklin T. Griffith, President of the National Electric Light Association, and President of the Portland Electric Power Company, in an address at the Annual Oregon Business and Industrial Conference at Portland in January, 1925, said that Oregon was between two fires. “The situation in Oregon,” he said, “could be likened to a small boy whom we will call Oregon. A militant bull calf is butting him in the pit of the stomach and a businesslike billy goat is ramming him from behind. Between the two he is enjoying a pleasant moment. If he has a strong stomach and a well-padded rear, he will come out all right. In fact, he has come out all right so far. The bull calf represents California and its intermittent forays into the field of state direction of hydroelectric development. The billy goat represents our neighboring State of Washington to the north with its ingenious Bone bill which approaches the proposition of hydroelectric development from a different angle than California did but with approximately the same intent.” [Exh. Pt. 3, pp. 1046-47.]

Won in Both States by Referendum Vote

Both the Bone bill in Washington and the Grange and Housewives’ bill in Oregon were defeated in 1926. It is interesting to note, however, that initiative bills providing even more definitely for public power systems than did either the Bone bill in Washington or the Grange and Housewives’ bill in Oregon were again presented to the voters in both of these states in 1930, and in both cases were adopted by referendum vote.

Chapter 56: In
Other States

Battling and Beating Public Ownership Movements

The movement for the development of public power and public power systems has been on for many years in many different states. Besides those mentioned in the preceding chapters similar movements have arisen with greater or less force in Nebraska, New York, North Dakota, Minnesota, Georgia, and South Dakota.

Nebraska

The State of Nebraska has made notable progress in public ownership. It has the largest number of municipally owned light and power plants of any state in the Union. It is true that many of these plants are in smaller towns and villages but the record is significant.

Nebraska also was one of the first states to adopt the law permitting the formation of public power districts, and in spite of defects in the law at least one public power district was established and successfully operated for many years. This district is in the rural territory surrounding Wahoo, about halfway between Lincoln and Fremont.

Utilities Fight the Law

The text of this power district measure passed by the legislature appears in the hearings of the Federal Trade Commission as Exhibit No. 4155. [Exh. Pts. 10-16, p. 320 ff.]

As soon as the power district law was enacted, the utilities brought suit challenging its constitutionality. The court held that the law was unconstitutional, and efforts were later made to validate the law but these were also declared unconstitutional. Thus for many years the existing power district at Wahoo was constantly in jeopardy and due to these defects in the law no other districts were formed. Thus the development in this respect was delayed for years in Nebraska. The Wahoo district was finally abandoned due to repeated adverse decisions by the Supreme Court.

New Law by Referendum

Meanwhile, the popular demand for legislation that would enable the municipalities owning electric light and power plants to sell their current outside the city limits, to interconnect and cooperate with other cities and, above all, to form public power districts, grew steadily. The utilities saw this growing movement and prepared to fight it. As early as February, 1924, the Nebraska section of the National Electric Light Association began the collection of information in anticipation of a political campaign in which it was believed “a state ownership issue may be forced upon the people.” [Exh. Pts. 10-16, p. 327.]

We have recounted elsewhere the story of the struggles of the utility companies to keep down the public ownership movement in Nebraska which need not be repeated here.

Failing to secure the desired legislation through the legislature, a public power district measure was initiated by popular movement and sent to referendum vote in the fall of 1930, and was carried by a substantial majority. Thus in Nebraska, as in Oregon and Washington, the people secured through the initiative and referendum what they were unable to get through legislative enactment.

Georgia

The State of Georgia has had a steadily developing public ownership movement for many years. It has the distinction of having the first county owned hydroelectric power system in the United States. This public project was in Crisp County, of which Cordele is the leading city. [Pt. 28, p. 15.]

In 1921 to 1924 the Georgia Municipal League started a’ movement looking to the development of public power in that state. The League drafted two bills which it submitted to the legislature for adoption. One of these bills was known as the state bill and provided for an amendment to the state constitution removing the bond limit and providing for the “issue of either $75,000,000 or $100,000,000 in bonds for the state to go into the water power business.” The other bill provided that municipalities that wished to do so could issue bonds in excess of the 7 per cent limit on indebtedness in order that they might go into the power business. [Idem, p. 71.]

Utilities Fight and Defeat the Municipalities

Immediately upon the introduction of these measures the utilities organized their forces to combat the movement. We have recounted these efforts elsewhere and it may be sufficient here to say that the utilities finally succeeded in preventing the passage of the measure sponsored by the Municipal League and, it seems, in quite effectively blocking the entire movement. At any rate, Mr. L. K. Starr, former manager of the Public Relations Department of the Georgia Power Company, testified that when he took charge of matters “the subject of municipal ownership and operation of electric plants was a dead issue” in Georgia. [Pt. 28, p. 37.]

Besides these efforts to defeat the public power measures promoted by the Georgia Municipal League the utilities in this state, as elsewhere, are shown to have been active in acquiring municipally owned light and power plants. [Idem, p. 64.]

Thus in Georgia, as elsewhere, the utilities were active and aggressive in opposing and defeating municipal ownership and state ownership measures. Nevertheless, as stated above, there has been considerable municipal development in the state. The record shows that there was “a considerable number of publicly owned local plants and distribution systems operating in the state… There are between 4o and 5o such operations…. I have identified some 26 towns served wholesale as probably public owned. A few publicly owned plants operate generating stations.” [Pt. 28, p. 15.] Also, as stated, there was at least one public power district established in the state, namely, the Crisp County Hydro-Electric Power System.

Minnesota

A measure providing for public power systems in Minnesota was introduced in the State Legislature of that state in 1927, and the record only briefly states that “by a vote of 70 to 57 the House of Representatives of the Minnesota Legislature killed the Stockwell water power bill.” [Exh. Pts. 10-16, p. 906.]

North Dakota

According to the records of the Federal Trade Commission, North- Dakota and the Non-Partisan League were regarded as one of the worst and most dangerous examples of state ownership. “The state government established banks, wheat elevators, flour mills, home building associations, and many other enterprises,” according to the record. “The results were disastrous. Taxes were increased, banks suspended, the credit of the state was destroyed, and state bonds were unsalable.” [Idem, pp. 608-09.] Reference is constantly made throughout the hearings to this alleged failure of state ownership in North Dakota in the campaigns of the utility companies against state ownership measures.

Massachusetts

Much interest was shown, as indicated by the records, in the Worcester, Massachusetts, Electric Light Company rate case which, while it had to do with a single municipality, nevertheless had a significance and influence upon the utility situation throughout the state. [Exh. Pts. 5 & 6, p. 749.]

In substance the Department of Public Utilities of Massachusetts, which is the regulatory body of that state, has contended for the principle of “prudent investment” as the proper basis of valuation for rate-making purposes. The utility companies contend for the principle of “reproduction new,” and the Worcester case had to do with this contention. It is held that the decisions of the United States Supreme Court reversed the decision of the Massachusetts Department of Public Utilities, or to some extent at least modified its position upon the matter. At any rate, the Massachusetts Commission and others later proposed a measure in the Massachusetts Legislature that would have enabled municipalities to enter into contractual relations with the utility companies and thereby enforce the theory of prudent investment. “The bill provides that companies which refuse to enter into contracts with the state shall lose the right to issue new capital, the right to take property by eminent domain, and shall no longer be exempt from competition in the various cities and towns as they now are.”

This measure was denounced as “an attempt to forestall an adverse decision of the Supreme Court by forcing lighting companies to surrender all constitutional rights and be governed by whatever form of regulation the Massachusetts Commission may choose to enforce.” [Exh. Pts. 5 & 6, p. 757.]

New York State

As early as January, 1922, Governor Alfred E. Smith had recommended certain legislation with respect to public utilities which provided, among other things:

(1) To abolish the Public Service Commission and substitute therefor three commissioners to be appointed by the Governor to regulate only such utilities as are not already regulated by the cities.

(2) The powers of the regulatory commission to be given back to the cities.

(3) That the cities themselves should be permitted to purchase, build, own, and operate public utilities. [Exh. Pt. 2, pp. 733-34.]

This was a movement distinctly in the direction of municipal or public ownership and, of course, was vigorously opposed by the utilities. Governor Smith’s recommendation was assailed especially on the ground that the program was breaking faith with “thousands, perhaps even hundreds of thousands who had put their trust in the sincerity of the people of New York,” who had counted on the continuation of the present system. [Exh. Pts. 5 & 6, p. 359.]

Governor Smith’s plan provided for a “power authority” in New York State which would have been in some respects at least comparable to the Ontario Commission. He had made speeches in which he said in effect that in Ontario consumers were being powered to vastly better advantage than in New York State and used that as an argument in favor of the legislation he proposed. [Pt. 4, p. 226.]

In opposition to Governor Smith’s plan the utilities employed engineers to get up reports on the Ontario System, “undertaking to show to their readers that the Governor was wrong.” [Idem.] Pamphlets were prepared to offset the campaign in favor of the development of water power proposed by Governor Smith. {Idem, p. 212.]

Governor Smith’s proposal was defeated. Meanwhile, it seems some consideration was being given to the possibility of hydroelectric development on the Niagara and St. Lawrence Rivers and interior streams of the state. According to one of the booklets given wide circulation by the National Electric Light Association, “advocates of state development of water power contend that these unused powers are so large and important to the public that no private interests should be permitted to handle them.” [Exh. Pt. 1, p. 413.] This idea was also opposed by the utilities which insist that such development would injure the industry and allow it to pass into the hands of mediocre men. [Idem, p. 414.]

Later on Governor Roosevelt came forward with his plan for the development of water power. Briefly, Governor Roosevelt’s plan proposed the establishment of a commission to be known as the “Trustees of the Water Power Resources of the St. Lawrence,” these trustees to undertake development of the hydro electric power resources of that stream.

The records do not seem to have followed this more recent proposal of Governor Roosevelt.

Chapter
57: War on Federal Ownership

The Issue at Muscle Shoals

The fear of the Federal Government in business seems to be the one most constantly in the minds of the representatives of the utility corporation.

In an address delivered before the Fiftieth Convention of the National Electric Light Association at Atlantic City in June, 1927, Honorable Charles A. Eaton, Congressman from the State of New Jersey, spoke at length upon this particular subject.

Where the Fight Centers

According to Congressman Eaton, “The immediate fight centers, so far as Congress is concerned, around two major developments, Muscle Shoals on the Tennessee River, and Boulder Dam on the Colorado. While these two are already subjects of open contention in the federal arena, the political development of the international section of the St. Lawrence River will, without doubt, be brought along in the immediate future, and this will be followed in due course by a proposed development on the Columbia River, so that every section of our beloved country may enjoy simultaneously the unmitigated. blessings which are supposed to flow from political ownership and operation of public utilities.” [Exh. Pt. 1, p. 331.] This opening paragraph of Congressman Eaton’s address states quite definitely the issues involved with reference to the more important Federal projects upon which the utility corporations have made and are making war.

The Issue at Muscle Shoals

The issue at Muscle Shoals is not a question of establishing public ownership, but rather a question of what we shall do with the public ownership we already have. For, as an incident of the world war the United States Government finds itself actually in the possession of the great hydroelectric power plants and resources at Muscle Shoals and also the huge nitrate plants. In these projects the people of the United States have already invested upwards of $150,000,000. The issue then is whether these great projects that are already owned, and so far have been operated, by the United States Government shall be retained, properly developed and devoted to the service of the people, or whether they shall be turned over to private interests to be exploited in accordance with the well known and established methods of the private corporations for private profit.

There is involved in this issue fundamentally the question of the conservation and utilization of the natural resources of that section of the country. Shall the hydroelectric resources of the Tennessee River be developed by the United States Government and devoted to the principle of public service in that section, or shall these resources, together with others so closely related to them as to be an essential part of the whole industrial and commercial development of the section, be turned over to private interests and private enterprises for private development and exploitation under the stimulus of private profit. Then too there is involved in the issue at Muscle Shoals the question of whether or not great projects such as this can be best and most economically developed by private interests under their well known and established financial operations, or whether these projects can be made to serve the public and the general welfare more effectively under public ownership with its equally well known and established methods of financial operation. And, finally, there is involved the whole question as to the industrial, commercial, and politicaleffects that are known to follow the private ownership and exploitation of great basic utilities such as these at Muscle Shoals.

The Utilities Fight for Private Ownership

Naturally and logically, the utilities fight for the private ownership and exploitation of these projects and against government retention, development, and operation. The various utility companies of the section make their bids for the Muscle Shoals properties and finally they unite in submitting a joint bid representing a combination of the leading electric light and power companies of the section. In defense of these bids for the private ownership and exploitation of these resources and projects the utilities present all of the arguments and bring to bear every influence within their reach and power, as the records show.

Congress for Government Ownership and Operation

On the other hand, and opposed to the proposals of the private power companies, measures introduced in Congress by United States Senator George W. Norris, providing for the government retention, development, and operation of these great resources at Muscle Shoals, have twice been passed by both Houses of Congress by substantial majorities. Twice these measures have been vetoed by the President of the United States, first, a so-called “pocket veto” by President Coolidge, and later by a direct veto by President Hoover. The fact that the measure for government ownership and operation of these projects at Muscle Shoals has twice been passed by Congress is significant of the growing sentiment in the country in favor of these principles.

The Utilities’ Opposition

Following their usual method in their opposition to the government retention and development of Muscle Shoals, the utilities have elaborate surveys made in support of their position. Thus we find that Dr. Samuel S. Wyer is employed to prepare a “Study of the fundamentals of our fertilizer problem.” [Pt. 7, p. 81.] In this report Mr. Wyer emphasized his contention that the “advances in the art of chemistry have changed very materially the whole complex of the nitrate properties at Muscle Shoals as far as fertilizer production is concerned.” [Idem, pp. 81-84.]

In other words, the purpose of this study was to show that the nitrate plants at Muscle Shoals were obsolete and, therefore, would not be suitable or advantageous for government retention and development.

Commissioner McCulloch pressed Paul Clapp on this matter, and tried to find out just why the utilities were opposing the Muscle Shoals development. He said: “Perhaps I am obtuse, but I am trying to get at whether you are for or against Muscle Shoals, and whether you are seeking to develop arguments or find facts which would operate against the Muscle Shoals project…. We want to know what you were doing toward influencing public sentiment or influencing Congress.” [Pt. 7, p. 83.]

And then Mr. Clapp replied: “May I repeat again that this is a scientific engineering study based upon information taken from the nitrate fixation laboratory of the United States Government and Doctor Cottrell, supported by the United States Secretary of Agriculture, Mr. Jardine. It is an effort to get accurate scientific information with regard to nitrogen fixation in its relation to fertilizer.” And later Mr. Clapp added: “I might say if I may go further that Senator Norris of Nebraska has repeatedly accentuated and emphasized this changed status as far as fertilizer production is concerned.” [Idem, p. 84.]

Thus while insisting that the study by Dr. Wyer was for purely scientific purposes, the effect was to show that the nitrate plants were obsolete and that, therefore, the government should not undertake to retain and operate them.

The National Electric Light Association purchased and distributed 2,500 copies of Dr. Wyer’s pamphlet on this fertilizer question and paid $1,000 for the printing and distribution of a digest of this report. [Pt. 7, p. 85.] Dr. Wyer was paid $5,000 for his work on this report. [Idem, p. 79.]. Other efforts were made to show that the nitrate plants at Muscle Shoals were obsolete. [Exh. Pt. 3, p. 285.]

Coming to the question of the government retention, development, and operation of the electric power resources at Muscle Shoals the utilities, of course, throughout their literature and public presentations of various kinds set up all of their usual arguments.

The Economic Issue

The economic issue involved in this controversy turns upon the question of whether under private company methods electric power and service can be developed and delivered to the people at a lower cost than under public ownership and development. We have discussed this phase of the question at some length in Chapters XXVII and XXVIII on The Alabama Power Company and the possibilities at Muscle Shoals, to which the reader is referred. Mention should also be made of the very important considerations involved in the contrast in methods of financial structure and operation of the private corporations to those of public bodies. This phase of the subject we have discussed at length in Part 4 Of this volume, Chapters XV to XXVI. All of these matters have a direct bearing upon the possibility of low cost service to the public and of an increased industrial, commercial, and agricultural development, as well as of general progress and prosperity.

The Larger Phases of the Issue

But even greater than the economic possibilities that we have outlined above are the social, industrial, and civic possibilities involved. These larger phases of the issue at Muscle Shoals are so well presented by Newton D. Baker, former Secretary of War under President Wilson, in a statement which appears as Exhibit 3429 on page 23 of Part 17 of the hearings of the Federal Trade Commission, that we quote at length from his letter which was addressed to the International Association of Civitan Clubs under date of April 3, 1924, and reads in part as follows:

“Muscle Shoals is the greatest water power east of the Rockies. The primary installation there will develop more power than is now produced on the American side of Niagara Falls. Apart from the St. Lawrence no prospective water power development in the United States will equal Muscle Shoals.

“Obviously no proposition ought to be considered in dealing with it which excepts it from the wise regulation of the general water power act unless those exceptions are in the direction of further safeguards to the public interest justified by its unusually profitable prospects. Coal is becoming scarcer and dearer. Before many years have passed it will be necessary for us to use water power wherever possible and conserve coal. Our water powers are, therefore, our great unexhausted and inexhaustible national assets. Whoever owns them in a large sense may be said to own the United States, industrially and commercially.

“To grant Muscle Shoals to any individual or company for 100 years, or even 50 years, grants to such company or individual the industrial dominance for that period of the whole southeastern portion of our country. Every other industry will be at the mercy of that water power, while, on the other hand, if the government preserves and operates the dam it will be able to feed its current into superpower lines and so dominate the electric power situation as ‘to compel equality of treatment to all the vast manufacturing interests of the southeastern section.

“All the figures one sees about the gifts in present values in money to Mr. Ford or other proposed lessees are trifling as compared with the growing value of the industrial power that any such lease necessarily entails. If I were greedy for power over my fellow men, I would rather control Muscle Shoals than to be continuously elected President of the United States, and in the nature of the case nobody can now be wise enough to foresee or adroit enough to forestall all the ways in which the private control of this immense power source will be prejudicial to the general public interest and-profitable to a private interest.

“I am, therefore, clearly of the belief that the Congress should retain Muscle Shoals, provide for its operation directly by the Corps of Engineers of the Army or by a public corporation analogous to the Panama Railroad Company and through such operation deal with the power produced in the mass, without entering into retail operation. By so doing the public interest, which we now see to be large, will be continuously served and as the importance of this power source grows the hand of the government will be free to make it continuously serviceable in the highest degree as the changing public interest demands.”

The issue at Muscle Shoals is again exceptionally well stated in an editorial which appeared in the Southern Ruralist in May, 1926. This is introduced in the hearings of the Federal Trade Commission by a letter written by W. J. Baldwin, Director of Publicity of the Alabama Power Company, to Mr. L. K. Starr of the Georgia Railway and Power Company under date of June 1, 1926. In this letter Mr. Baldwin refers to the May 15 issue of the Southern Ruralist published at Atlanta, which contained “a very vicious editorial concerning the Muscle Shoals situation.” “This editorial,” Mr. Baldwin writes, “convinces me very clearly that the editor of the publication is very poorly informed on this question,” etc. [Pt. 28, p. 347.]

The “vicious editorial” of the Southern Ruralist reads as follows:

“The Fight for Muscle Shoals”

“A little while ago Congress appointed a joint commission to receive bids for the great power plant and other properties at Muscle Shoals with the hope that an offer would be submitted that would carry out the purpose set forth in the law creating these properties, which calls for the manufacture of nitrates for agriculture in peace times and high explosive materials in time of war. A number of bids have been received. From all that we can gather from newspaper reports none offer what agriculture ought to get: least of all, the offer of the combined power companies, which will undoubtedly be forced upon the South unless we ourselves block the move to that end.

“These companies have made a “very attractive” offer, and have organized their forces to see to it that Congress does not turn that offer down. But it must be turned down. Nobody familiar with the record of the bidding companies can feel for a moment that there will be anything in the way of sincere attempt to do more than take the power generated at Muscle Shoals and turn it into the giant pool of the mighty power distributing system of the nation of which they are a part to be carried over the wires along with the rest: just a unit in a great monopoly.

Power for Profit

‘These companies are interested only in power, power for profit. And it is our feeling that they will use every kilowatt generated at Muscle Shoals for that purpose if they can. As a matter of fact, their bid is essentially a power bid, and offers the farmer nothing that is at all substantial. In the first place, they want from “now on”: just three years: to get nitrogen production under way. They propose to begin then with the manufacture of 10,000 tons, moving up to 20,000 in six years, and finally on to 40,000 tons “sometime.” When they reach that point, so the contract states, will depend on demand of the farmer. Well, of course, the demand will depend on what is made and on what the cost is. That is the open path of escape from any contract these companies might enter into with the government.

Little Relief for the Farmer.

“And if these companies, whose records for compliance with contracts are not such as to inspire confidence, should eventually be forced to comply with the technical provisions of their agreement, and should actually manufacture 40,000 tons of nitrogen at Muscle Shoals annually, the farmer would still have comparatively little relief. In comparison with our total annual consumption of nitrates, 40,000 tons don’t amount to much. It would scarcely more than match one-fourth of our annual imports from Chile. We should and must have more than that from Muscle Shoals, and more is easily possible. Indeed, if only the mean available power at Muscle Shoals is used for the manufacture of nitrogen and we are able to do as well as the Germans are doing, we would get from 800 to 1,000 tons of pure nitrogen there per day, or a total annual output of from 275,000 to 300,000 tons. Now that sounds businesslike. What it would mean from an agricultural point of view may be gathered from the fact that the Germans are now selling the nitrogen they make in a big plant like we should have at Muscle Shoals to the farmers here in the Cotton Belt at about 70 per cent of the cost of other forms of nitrogen. And this is done, mind you, after this nitrogen has been shipped by rail from the interior of Germany to the ocean, across the ocean, and then again by rail to our farmers here. There should be a saving of 6 cents per pound as compared to present prices or a total of $40,000,000 to $50,000,000 annually. In the face of these facts, is not the fight for the manufacture of fertilizer at Muscle Shoals worth while? As a matter of fact, far more can actually be accomplished there than any of us have appreciated, and even after taking enough power to make 300,000 tons of pure nitrogen annually, there will still be an enormous surplus for distribution.

“In the main, our Southern Senators and Congressmen have stood out flatfootedly as they should against the power companies’ bid. Senator Heflin of the special committee is to be commended for his refusal to subscribe to it: if only he stands pat and won’t compromise: and thus further fasten the hold of the power monopoly upon our people. Congressman Quin, of Mississippi, as a member of the same committee, deserted the farmers and gave the power companies his support, and yet he comes from a community that is almost wholly agricultural and that needs as much or more fertilizer per acre than any other section of the entire country. That shows you how the power companies through their propaganda and powerful influence have gotten in their deadly work, and how Mr. Quin’s farmer constituents have been misrepresented.

Greatest Monopoly in the World

“The power companies can afford to make almost any sort of offer. They want and feel that they must have Muscle Shoals to complete their monopoly. Moreover, they will have no difficulty in passing the cost right on to the consumer. What they promise to pay the government will forthwith be made the basis of power rate making. So why should they stand back on promises? Anyway, they are accustomed to making big promises. The facts about these so-called southern companies are enlightening and a few of them may be worth setting down. They are part and parcel of what is coming to be the greatest single monopoly in the world, if it is not that already, headed up in the East, financed in the East, and controlled by eastern capitalists who are in it for all they can get out. If we are willing to let them get by with more than they should get, that is our fault. The southern “officers” of these companies talk loud but in fact have about as much to do with forming policies and saying what’s what as a private in the rear ranks. They take orders and “make sentiment.” They are of fine address, intelligent, and plausible always. They have to be that, too. Remember all of this when you are listening to what they say.

Promises Us Fulfillment

“We here in Atlanta know something of promises versus fulfillment. In getting what it wanted of the people of this city the Georgia Railway and Power Company, a member of the group bidding for Muscle Shoals, was powerfully fair-minded. When what it wanted had been granted, then the written contract, to say nothing of the spirit of it, was immediately forgotten. Through one way or another, so we are told, even as late as the Sunday paper, that the city among other vexations has failed by a million dollars in round numbers to get a square deal, “an amount due under its solemn and, I may say, sacred covenant with the city.” Under the guise of “relief” this concern is turning heaven and earth to break the contract so willingly made a few years ago. That’s right now! This is history, late and enlightening. As to the Alabama Power Company, all that is necessary to determine its good faith to your fullest satisfaction is to go back to the records of the government which grew out of war-time contracts with that concern and see what the Department of Justice had to say about that company’s conduct in connection with the great power plant at Gorgas, Alabama. These are the records the bidders for Muscle Shoals have made for themselves. We know whom we are dealing with and ought to know about what to expect.

Government Operation the Only Solution

“It is our own conclusion after all of these years of fighting the powerful opposition of the private concerns and seeing how they are all tied together financially, that the only way we will get what we want and what is best for the people and for the nation is through government operation. Flat-footedly we are for that as the only alternative. We fought for the Ford offer because it was the straw that saved the whole thing from the bottom of the Tennessee River. Even that offer was far short of what we should demand now and what we have a right to expect. (Our italics.)

“In this struggle over Muscle Shoals we simply have staged all over again the age-old conflict between the forces of organized greed and the rights of the unorganized public. These forces now infest the temples of legislation and justice as they infested and defamed the temples of worship of old. Intrenched behind their great wealth and with their great power at Washington, made more powerful by the indifference of the public, these companies will win out unless the public can somehow be arouses to a defense of its rights. If we assert our right with vigor we will win; if we don’t, we won’t.

The Norris Bill Re-introduced

As stated above, the Norris bill, providing for the government retention and development of the Muscle Shoals projects, has twice been passed by Congress and twice defeated by presidential veto. Early in the opening session of the last Congress, late in 1931, Senator Norris again introduced his measure which died in the committee. The issue is still to be settled.

Chapter
58: The Boulder Canyon Project

“An Engineering Blunder: An Economic Disaster”

For many years the people of the Southwest have been wrestling with the problems of flood control, irrigation, water supply, and electric power.

With the rapid development of population in the Coastal region of southwestern California the problem of an adequate water supply for domestic and irrigation purposes became acute. Meanwhile, the flood menace in the Imperial Valley constituted another pressing public problem. Out of these conditions, and as a result of many studies and investigations, came the proposal for the construction of a huge dam in the Colorado River which would contribute to the solution of these various problems. Water could be supplied to the cities of the coastal region, floods could be controlled to protect the Imperial Valley, and hydroelectric power could be produced as a means for financing the project.

These were the main considerations that led to the proposals contained in the Swing-Johnson bill that finally passed both Houses of Congress, received the signature of the President of the United States, became law, and put the project under way.

Utilities’ Opposition

Through all of the years of discussion regarding this Boulder Canyon project the electric light and power utilities put up vigorous and persistent opposition. In this, as in so many other cases, the utilities blamed the municipalities for starting the movement. “The municipal ownership faction of Southern California,” one of their releases reads, “was responsible for the introduction in the first session of the 68th Congress of the Swing-Johnson bill.” [Exh. Pt. 3, p. 178.

The main provisions of the Swing-Johnson bill are discussed in many of the publications of the utilities, and it is characterized as “the most ambitious experiment in government ownership and operation ever advanced for public acceptance.” The Boulder Dam project was declared to be ten times as great as the Muscle Shoals project. The cost, it was stated, would greatly exceed the $41,500,000 provided by the Swing-Johnson bill, and would be nearer to $200,000,000. It was argued that the private companies were supplying every possible need for electric power and that the one million horsepower of Boulder Dam was no more needed by the American public than would be a billion bushels of wheat grown by the government at public expense, [Exh. Pt. 3, pp. 179-80.] The proposal was denounced as “absolutely contrary to American ideals and subversive of American institutions.” [Exh. Pt. 1, p. 414.] The utilities argued that there was no need of the project as proposed by the Swing-Johnson bill and that all that was needed was a low dam farther down the river which would provide adequate protection from floods and thus avoid the dangers and injuries sure to follow from the entry of the government into the power business. [Exh. Pts. 10-16, pp. 1005-1006.]

The Project Denounced

The proposition was denounced as a “gigantic attempt to induce government to enter private business”; as being wholly without adequate engineering or technical support; as an effort to deceive the people of the country, claiming that it was a project designed chiefly for flood control when, as a matter of fact, it was only an effort to tax the entire nation to further the selfish interests of Los Angeles and the municipalities in Southern California.

The argument reads:

“For purely selfish reasons Southern California cities under guisc of humanitarian appeal for flood control and irrigation of Im perial Valley would spend Oklahoma money for government tc enter into the electric business.” [Exh. Pts. 5 & 6, p. 71 ff.]

It is insisted that the claim that the project would pay for itseli is “only a wild guess: an extravagant and unsupported assertion,” etc. [Idem.]

Frank Bohn, former socialist, was employed to prepare an argument against the proposition. [Exh. Pt. 3, p. 181.]

“Water Not Needed”

Several surveys were initiated, among them a report made by the “Colorado River Fact Finding Commission Of Utah.” This and other commissions, more or less controlled by the utility companies, after “careful and impartial investigations,” came to certain conclusions, among which may be mentioned the following:

(1) That Los Angeles would not need the water supply for at least fifty years to come.

(2) That the expense of the project would be too great.

(3) That the water from the Colorado River could not be used with safety and satisfaction for drinking purposes.

(4) And that for these reasons “the committee was forced to the inescapable conclusion that the question of domestic water for Los Angeles has no place at all in the present construction program on the Colorado River.

“Too Much Power Already”

With reference to the generation of electric power, the fact finding committee of Utah concluded:

(1) That there is a substantial surplus of power already in Southern California.

(2) That the utility companies in Southern California have lately reduced their price for electricity to stimulate consumption to the end that a more adequate load for plants already in existence or under construction might be developed.

(3) That there is no market in Southern California calling for more power.

(4) That if additional power were brought into Southern California, it would have to be contracted for either by municipal or private power companies, but the Los Angeles Municipal Plant by agreement with the company supplying it power can not for a period of 30 years sell electricity beyond the confines of the city.

The fact finding commission, therefore, concludes that “it would be inexcusably unfair to ask taxpayers, no matter who they may be, to assume the prodigious burden involved in such an enterprise. The committee seriously questioned whether any investment banking institution in the entire United States would advance money for such an undertaking so interlaced with hypothesis and uncertainties.” [Exh. Pt. 3, pp. 305-09.]

More Irrigation Would Make Matters Worse

In a subsequent report this same fact finding committee considers the question of irrigation and the All-American Canal and finds that there is no demand for additional irrigation projects in the Imperial Valley and that such a development at this time “would be prejudicial to the interests of agriculture; it would be adding to an already distressing situation, and would be an unwarranted, unjustifiable exaction upon the public treasury.” And as for the proposed All-American Canal it “would be an engineering blunder and an economic disaster.” [Idem, p. 335 and preceding.]

An extensive literature was published by the joint committee of the National Utility Association against the Boulder Canyon project and the Swing-Johnson bill. Exhibit No. 841 gives a list covering two pages of the hearings, in which the following pamphlets are listed. “Boulder Canyon Dam: The Essence of the Swing-Johnson Bill,” by Frank Bohn; “Boulder Dam: Complete Bibliography,” etc., by Frank Bohn; “The Colorado Will O’ The Wisp: Editorial from the Los Angeles Times“; “Water For Los Angeles,” Bulletin No. 3 of the Colorado Fact Finding Committee; “Forcing The Government Into Industry: Minority Report on the Swing Johnson Bill,” etc. [Exh. Pt. 3, p. 194; see also p. 211.]

Exhibit 812 is a pamphlet giving in considerable detail the arguments of the utility companies against the Boulder Canyon project.

Some of the Arguments Against Boulder

One of the main contentions urged against the Boulder Canyon project was that it would interfere with state rights. [Exh. Pt. 3, p. 440.]

Another argument that was used, especially in the southeastern states, was that the development of the Boulder project in the Southwest would, through irrigation, bring under cultivation so large a section of the country for the production of cotton that it would become a serious competitor for the cotton-growing states of the southeastern section of the country. This argument was used with telling effect in the older cotton-growing states of the South and Southeast. [Exh. Pt. 4, p. 148.]

Another argument used against the Boulder Dam project, especially in Florida, was that it would result in bringing Mexican tomatoes into competition with the Florida tomatoes. And that was supposed to line up the Floridans against the project. [Pt. 3, p. 498.]

Thus they suited the argument to the particular section of the country in which it was made.

Mobilizing the Forces

In this, as in so many other cases, the public utilities were very successful in mobilizing friendly forces. The Ohio Chamber of Commerce seems to have taken up the fight against the Boulder Canyon project with particular vigor and energy. It not only passed resolutions against the proposition which it broadcast throughout the country, [Exh. Pt. 3, pp. 520-21.] but it also carried on a correspondence with the Chambers of Commerce in other states and through the state utility organizations. [Pt. 3, p. 179.]

The Macedonian Call

George B. Chandler, Secretary of the Ohio Chamber of Commerce, writes to the Connecticut Chamber of Commerce at Hartford, Connecticut, about the “grave danger that by log rolling the radical element in’ Congress that is eager to seize every excuse to plunge the government into private business will be able to put this scheme across…. Ohio is against putting over a government ownership project as a rider to a bill that is put forward on the grounds of humanity and fair play…. If you agree with our position, will you please at once so advise your representatives in both Houses of Congress.” [Exh. Pt. 3, p. 520.]

For some reason the Connecticut Chamber of Commerce did not respond as promptly as was expected and this led to another almost frantic letter from Mr. Chandler, in which he says:

“I am sending you a Macedonian call for help. We seem to be fighting single-handed against this Boulder Dam holdup. It goes right down to the roots of our American system of government, namely, the projection of the government into the field of private business…. It seems to me that the State of Connecticut ought to be lined up on this. Can’t you get some action?” [Exh. Pt. 3, p. 521.]

In the same letter Mr. Chandler boasts of the fact that the Ohio Chamber of Commerce has been very effective in the fight against the project. “We have certainly given the supporters of this project a jolt,” he says.

In due time the Connecticut Chamber of Commerce acted. In doing so it invited Mr. Samuel Ferguson, President of the Hartford Electric Light Company, to prepare and present resolutions against the Boulder Dam project. These resolutions were duly prepared and presented. The line of argument was much the same as that presented by the other opponents to the measure.

Hiring Opposition

The Joint Committee of the utility organizations were naturally opposed to the Boulder Canyon project, [Pt. 3, p. 155.] and it developed in the course of the hearings that they had employed a number of men to help in the opposition. Former Governor Scrugham of Nevada was employed to help Judge Davis in the matter. [Pt. 3, p. 83.] Governor Scrugham had been a member of the board set up by Secretary Work to report on the project. [Idem, p. 143.] And now we find him in the pay of the utility companies against it. Judge Davis paid former Governor Scrugham’s expenses from Reno, Nevada, to Washington, D. C., in order to have his assistance. [Idem, p. 144.]

Another man who was employed by the utilities was Mr. Merritt C. Mechem of the firm of Mechem & Vellacott, who was paid $5,200 “to keep in touch with all activities dealing with the Colorado project.”

Mr. Mechem had been formerly Governor of New Mexico and was one of the men employed by the utilities to fight the Boulder project. Ira L. Grimshaw insisted that Mr. Mechem was not and never had been a representative of New Mexico at the Governor’s conference on the matter, and that he was positive and knew, because he himself hailed from New Mexico. And yet, after testifying so positively, he was almost immediately faced with a copy of a report of the Governor’s conference on the Boulder Canyon project and shown that Governor Mechem had signed the paper as a representative of New Mexico. He made some lame explanation and let the matter go at that . [Pt. 3, p. 81.]

As a further effort to mobilize all the possible forces against the Swing-Johnson bill, George F. Oxley, Director of the Information Department of the National Electric Light Association, immediately upon the introduction of the bill in Congress, wired all the directors of the state committees throughout the country in the matter.

Thus the opposition. And yet the bill was passed. The President of the United States signed it. The project is being constructed.

Ruthless, Relentless Warfare

Reviewing and summarizing these various chapters on the war upon public ownership we may say:

If a city makes a move to establish a municipal plant, the utilities fight it. If a city has a plant and attempts to improve, extend, or enlarge it, the utilities fight it. If a municipality undertakes to serve nearby communities or rural customers, the utilities bring an injunction to stop it. If the farmers near by to a successful municipal plant try to get service, they are blocked. If they undertake to get legislation enabling them to build their own mutual transmission lines, the utilities fight and defeat the legislation. If a municipal league, representing all the cities of a whole state, launch a movement for a state-wide public power system, the utilities mobilize every influence in the state and a half million dollar campaign to beat it. If the federal government undertakes to develop a power system to help pay for a flood control and water supply project for a whole section of the country, the utilities fight it to the bitter end. If the government undertakes to develop a public power system upon which it has expended $150,000,000, so as to get its money back and to put the project into the service of the people, the utilities fight it to the last ditch.

Ruthless, relentless, uncompromising warfare against public ownership of any and every kind everywhere-such as the record.


Chapter 59: The Menace of the Diesel Engine

Cheap Power for Smaller Cities

The Diesel engine is a comparative newcomer in the electric light and power field. Recent developments and improvements seem to have made this type of generating equipment sufficiently economical and efficient to make it a formidable competitor of the utility companies in the production of electric light and power, not only in the smaller communities but in cities of considerable size. There have recently been produced Diesel units of 7,000 horsepower, five of which are being installed in Vernon, California, an industrial section in the City of Los Angeles. These five units of 7,000 horsepower each are of sufficient capacity to serve an ordinary city of 50,000 population.

Advantages of the Diesel

The Diesel engine, producing electric current at comparatively low cost in small units, has become in recent years a very important element in enabling cities to maintain their own electric light and power plants and produce their current at a cost as low or lower than the private companies could supply the current over long distance transmission lines.

By producing the power “at the point of consumption” the local Diesel plants have avoided the expense of long distance transmission and the heavy expense of steam generation in small units and have thus offered a new advantage to the smaller communities. It is also found that the Diesel engine is very practical and economical for standby service and adapts itself readily to the gradual development of a power system where successive units may be added as the demand for service grows. As a result of these and many other advantages the Diesel engine has come to be regarded by the utility companies as a real menace to their plans.

Pay for Themselves out of Earnings

The General Engineering and Management Corporation of New York City writes to the Michigan Public Utility Information Bureau in January, 1927, asking “how your company copes with municipal ownership agitation and also the activities of the Fairbanks, Morse & Company in the municipal and power field,” assuring Mr. Fisher that the information will be held strictly confidential. [Exh. Pts. 5 & 6, p. 857.]

In reply, Mr. Fisher writes that “during 1925 Michigan encountered considerable activity on the part of the Fairbanks, Morse & Company. Its representatives offered to install Diesel engines for municipal water pumping and other purposes. The sales argument was that power could be produced so cheaply that the installation would pay for itself out of money saved.” (Our italics.) [Idem, pp. 857-58.]

This argument, that with Diesel engines a community can produce electric power at enough less than it can be purchased from a power company bringing the current over long distance transmission lines, to enable the community to pay for the plant out of the savings effected is one that has been very widely used in support of municipally owned plants equipped with Diesel engines throughout the country. The Illinois Committee on Public Utility Information complains that there has been considerable revived interest in several communities on the subject of municipal ownership due in large measure, it is claimed, to the campaign of the oil engine people. [Idem, p. 877.]

The Missouri Committee complains that the Diesel engine people are “raising hell with the little towns by selling oil engines for municipal plants.” [Idem, p. 383.] .

Urges Fight on Diesels

This competition of the Diesel engine with the so-called high line or long distance transmission service has become so serious that representatives of the utilities have urged a united fight upon the Diesel engine companies.

The President of The Mound City Electric Light and Ice Company of Colorado Springs writes that the Fairbanks, Morse & Company encouraged the installation of municipal plants and the installation of Fairbanks, Morse units “with an operating cost of about one-third or one-fourth of that of the cost of producing energy by the local or private utility, and if they find the civic authorities do not desire to issue bonds, they endeavor to secure a competing franchise and go into competition with the local utility themselves through the Inland Utility Company or some similar concern. There can be no doubt but that they are acting as pirates, and that anything that can be done to discourage this type of effort consistently should be done. The whole force of the utility organizations, either through or with the co-operation of the National Electric Light Association, should be brought to bear on the matter, and I believe that through such effort and the power of the United States Chamber of Commerce, which can consistently be enlisted in this matter, it should be possible to bring the official of the Fairbanks-Morse dictating the present policy to a realization of his error.” [Exh. Pts. 5 & 6, p. 439.]

Discouraging Purchase of Diesels

Under date of January 22, 1925, a payment of $676.05 was made which, according to the Secretary of the Iowa section of the N. E. L. A., was for “an investigation or survey of the operations of oil engines in such plants as ice plants, water pumping plants, and some electric plants to determine their efficiency and the cost of operating them in connection with studies we were making in meeting the competition of the oil engine plants.” [Pt. 7, p. 5.]

Judge Healy of the Commission then asked if these oil engine plants were in any way involved in the matter of municipal ownership. Or, as he said, “Was there a movement to develop municipal plants where the oil-burning machines were to be the type of power-producing apparatus used?” And to this Mr. Weeks replied that there was “an activity on the part of certain manufacturers of equipment to promote municipal ownership of oil engines.” Judge Healy then wanted to know whether the purpose of this investigation or survey was “to prevent municipalities adopting that type of engine and going into the power business…. Was it to help persuade the community not to go into the municipal ownership business with the oil-burning engine?”

Answer: “Yes, Sir; of course.”

Question: “You were fighting it or trying to stop it by letting these facts be known about the engine?”

Answer: “Yes, Sir.” [Idem, pp. 5-6.]

Urge Utilities to Unite in Fighting Diesels

The Director of the Utilities Information Bureau of Nebraska wrote to Joe Carmichael of the Utilities’ Bureau in Iowa, urging that the two state organizations should co-operate in the contest with the Diesel engine people. “These two states,” he says, “seem to be receiving unusual attention from this bunch…. It occurs to me that there might readily be an understanding or agreement between the Iowa association and the Nebraska association on sharing the expense of such efforts.” [Exh. Pts. 10-16, p. 831.]

The Hartington, Nebraska, Case

Mr. Davis of the Nebraska Information Bureau told the story of the situation in Hartington of that state. A private company, he said, was organized as a Diesel engine company and went to different towns in Nebraska “where there was dissatisfaction with the electric service for any reason and undertook to sell the idea there of promoting an isolated electric oil engine plant, on the theory that the tremendous profits made out of the operating of these plants would in a few years pay for the original investment in the plant, and that after that original investment had been taken care of, together with operating expenses, that then the plant would revert to the municipalities.” [Pt. 11, p. 85.] Mr. Davis testified that this matter was started by a privately owned company and that the contest between this Diesel engine company and the utility companies at Hartington was “a contest between two private companies.” He further stated that in his opinion, even if the contract had been carried out the plant would never revert to the municipality. But he said that the contract contained a promise that that would be done. [Idem, p. 86.]

Diesel Companies Pool Their Interests

As a counter-move to this attack of the utility companies on the Diesel engine interests, we are told that “34 large oil engine manufacturing concerns have pooled interests for an advertising and promotive campaign to sell the idea that the oil burning engine, used locally, can supply electric service more reliably and more economically than such service can be supplied over transmission lines.” [Exh. Pts. 5 & 6, pl. 410.]

Further in this same letter, which is written by Mr. J. B. Sheridan, we read:

“Mr. Davis (Secretary-Treasurer of the Middle West Division, National Electric Light Association, Lincoln, Nebraska) informs me that the oil engine interests are starting with a budget of $120,000 for investigation and publicity, have a further tentative budget of $600,000 for advertising, and have already contracted with some graduating electrical engineers to make research as to the relative costs of motive power in the Mid-Continent oil field.

“The oil engine companies have been very active in endeavoring to induce communities taking service from transmission lines to abandon such service, even where existing franchises were in force, and install municipal electric plants…. If there is a concerted nation-wide campaign for public ownership of electric utilities in 1927-28, it appears that the oil engine companies are preparing to take advantage of it.” [Exh. Pts. 5 & 6, p. 410.]

The Fairbanks, Morse & Company seem to have disturbed Mr. Sheridan of the Missouri Committee on Public Utility Information especially. In one of his reports he says:

“In Missouri there has developed an indication of restlessness in certain sections of the state concerning the rates charged for electric service. This is being increased as much as possible through the efforts of Fairbanks, Morse & Company to improve their oil engine sales.”

These efforts on the part of Fairbanks, Morse & Company were regarded by Mr. Sheridan as “insidious political, and commercial evils” which the industry must try to meet and overcome. [Exh. Pts. 5 & 6, p. 381.]

Getting Diesel Companies to Compete

That the utility companies know how to fight municipal ownership by getting Diesel engine .companies to compete against each other is indicated in a letter of Mr. Sheridan to Mr. V. M. Carroll of the Laclede Gas Light Company of St. Louis. Speaking of the way that Stanberry, Missouri, went for municipal ownership by a vote of 608 to 173, Mr. J. B. Sheridan explained: “Fairbanks-Morse got busy, persuaded the mayor that the city could make $1,000 a month with a city plant, etc. The company did not get competitors of Fairbanks-Morse into the game as I believe they should have done.” [Exh. Pts. 5 & 6, p. 423.]

On the other hand, Mr. Sheridan complained that in the case of Lamar, Missouri, which voted against the sale of its plant, the failure of the utility companies there to carry the election was due to the fact that the Green and Doherty interests fought one another instead of working together. [Exh. Pts. 5 & 6, p. 423.]

Thus it would seem that the utility managers understand the military tactics of defeating your enemies by setting them against each other, and also the necessity of keeping their own forces united.

Difficulties with a University Professor

How quickly the utility companies detect any activity in competition with them in any line is indicated in the matter of a professor at the Wisconsin University who seemed to be favorably inclined, in fact seemed enthusiastic over Diesel engines. A letter from H. C. Orton, General Manager of the Interstate Power Company of Dubuque, Iowa, to Mr. J. N. Cadby, Secretary of the Wisconsin Utilities Association at Madison, Wisconsin, inquired with reference to Mr. J. L. Larson, a professor at the University who incidentally does some consulting work on the side: “It appears,” says Mr. Orton, “that he is used as reference by certain Fairbanks-Morse salesmen, and one of his reports that I have noticed is rather highly colored in favor of oil engines over electric power.” [Idem, p. 1047.]

In reply, Mr. Cadby writes that “Professor Larson is no doubt more enthusiastic over engines of all types than he is over electric motors because of his particular hobby and work. We occasionally have difficulties of this kind with university professors, and it is a very slow process to get them to change their viewpoint or give full consideration to both sides of the question. This is our first experience with Professor Larson and we will endeavor to give him sufficient arguments to at least take the edge off of his enthusiasm for the oil engine. (Our italics.) Perhaps the Fairbanks-Morse salesmen have been filling him up with sales talk which needs to be counteracted.” [Exh. Pts. 5 & 6, p. 1047.]

Thus the Diesel engine has its fight for the recognition of its possibilities.


Chapter 60: The Menace of the Income Warrant

Public Ownership Without Bonds

One of the most serious obstacles to the advance of municipal ownership is the limitation upon the borrowing powers of municipalities. For, whereas a private corporation may bond itself almost without limit, the state laws, constitutional or charter provisions of the municipalities in most states limit the borrowing powers of the cities to 5 or 10 or at most 15 per cent of their total valuations for taxing purposes. Since no community wishes to exhaust its borrowing powers and is always anxious to maintain a margin for needed public improvements of various kinds, this limitation of the borrowing power makes it very difficult and in many cases quite impossible for municipalities to acquire their own electric light and power plants.

As a means for avoiding this difficulty and increasing the financial ability of municipalities in this field, laws have been passed or provisions made in various ways in many of the states, whereby the cities can issue “revenue bonds” or “income warrants” or similar obligations which are a direct lien upon the properties to be acquired and not a general obligation of the city. This provision puts the municipality more nearly upon an equal footing with the private corporation in the matter of acquiring its own utilities.

Naturally, the utilities regard measures of this kind as a direct menace to their interests and they have, therefore, resisted the movement to establish this form of credit on the part of the municipalities.

An Old Competitor in a New Guise

“Privately owned public utilities,” we read in Exhibit No. 1946, Part 4, page 406, “have a new competitor, or rather it is an old competitor-municipal ownership-in a new guise, with a glib tongue and a very plausible sales talk….

“Briefly, the scheme was invented to circumvent the laws which limit bonded indebtedness of towns and cities. Heretofore the bonded indebtedness limitation has frequently operated to prevent the launching of municipal ownership enterprises. The new plan, which contemplates the issue of income warrants, a new form of bonds, attempts to nullify the bonded indebtedness laws.

“The parents of the new child are wealthy Denver bankers and brokers. The midwife is a well-known Denver engineering firm, which, of course, shares in the profits which accrue under the income warrant construction scheme.

“Realizing the tremendous money-making possibilities of the scheme, the ‘sponsors have opened central headquarters at New York, with a view to making their business national in its scope. Already their “drummers” are invading a large territory, chiefly in the West. They are now actively engaged in an attempt to foist their goods on one Colorado city, while a number of other towns of the state have either rejected their plan or now have it under consideration.” [Exh. Pt. 4, p. 406.]

How the Plan Works

Further in explanation of this plan of revenue bonds or income warrants the exhibit explains:

“Income warrants make a detour of bonded indebtedness limitations by providing that their principal and interest are to be paid solely out of the earnings of the plant for which they are issued.

“Income warrants are not a legal obligation of the city.

Therefore, they do not pledge the credit of the city for their payment, as with a general obligation bond. However, the city, whether it realizes it or not, in authorizing income warrants, assumes a very direct liability. For, to maintain its credit and standing, the city is morally bound to see that such warrants are retired, even though the glowing promises of the promoters that the plant will pay interest and retire principal are not fulfilled.

“The proposal of the promoters is to build a plant, in the name of the city, and, after a period of io or 15 years, turn it over to the city, fully paid for by the warrants. During the io or 15 year period the promoters, or their engineers, operate the plant, . chiefly for the benefit of the warrant holders.

“It is first understood between the promoters and the city that rates can not be reduced during the period the plant is operated by the former. However, provision is made whereby, if the income from the plant is insufficient to pay interest on the warrants and eventually retire the principal, rate increases can be made.” [Exh. Pt. 4, p. 407.]

This plan for enabling municipalities to acquire their utilities has been used successfully, according to the record in Loveland and Longmont in Colorado, but was rejected after a bitter fight in Beatrice, Nebraska, and also in Kearney, Nebraska. [Idem, pp. 408-09.] It has been increasingly used in a number of states in recent years and in some cases has been upheld by decisions of the Supreme Courts of the states. Nevertheless, and for obvious reasons the utility companies use their utmost endeavor to discredit and prevent the use of this, method. The revenue bond or income warrant is regarded as a serious menace to the private utility interests. It enables the municipalities to more readily acquire and develop their own utilities.


Chapter 61: The Public Ownership League of America

“Widespread and Unrelenting Efforts”

According to the representatives of the utility corporations, all that they have done in the way of propaganda and political action, the influence and use of the press, schools, civic societies, and otherwise has been done in self-defense. It is their claim that the activities and aggression of the organizations advocating municipal and public ownership compel them to launch their various efforts to counteract the movement, and all that was done was done in sheer self-defense.

“An Unholy Alliance”

This contention appears repeatedly in the hearings of the Commission, but it was made officially, at length and with great earnestness and insistence, by Bernard W. Weadock, Esq., in behalf of the National Electric Light Association and the Joint Committee of National Utility Associations, in the hearings of the Commission on January 18, 1930. According to Mr. Weadock, there were organizations in the country that had united in an “unholy alliance” and were “co-operating together,” centering their efforts towards securing “the public ownership and democratic control of the basic industries of this country…. And it is shown by these proofs that they are operating together as part of a whole scheme to further the cause of a given proposition, to wit, the abolishment of private property.” [Pts. 18 & 19, pp. 189, 190, 191.] These four organizations mentioned by Mr. Weadock are (1) “The League For Industrial Democracy,” (2) “The National Popular Government League,” (3) “The People’s Legislative Service,” and (4) “The Public Ownership League of America.” Mr. Weadock asked for a ruling as to whether a certain long list of documents, covering six and a half pages of fine print in the proceedings of the Commission, would be admitted. Commissioner McCulloch objected:

“We have no authority under the Senate resolution nor under our own powers to go into the activities of anybody else. The direction that covers this stage of the inquiry is to inquire into what effort or extent you are endeavoring to influence public sentiment on the subject of municipal or government ownership….”

He then went on to say:

“If we are to adopt another rule . . . we would bring every organization and every individual that is mentioned here for the purpose of making his defense. That is not only not necessary to this investigation but it is far from pertinent to the inquiry. . . . I do not care to have in the record, directly or indirectly, and will not permit it to go into the record, directly or indirectly, the extent and the character of this so-called advocacy, further then a mere statement that those are in favor of government or municipal ownership.” [Pts. 18 & 19, pp. 189-90.]

But Mr. Weadock insisted and pled persistently:

“I want to show by these documents that those campaigns in those states (California and Washington) were operated, initiated and participated in by this unholy alliance. . . . How can your honor determine the righteousness of what we have done in this matter?”

To which Commissioner McCulloch replied:

“I am not determining the righteousness of what you have done. We are determining what you have done.”

And after Mr. Weadock had explained that he wished to prove by these documents that the four organizations mentioned above were working together for the sole purpose of abolishing private property, Commissioner McCulloch said:

“I do not agree with you. You and I are in disagreement about it. I must make the ruling that is prompted by my judgment, and I have done so.” [Pts. 18 & 19, p. 191.]

And still Mr. Weadock insisted, until Commissioner McCulloch was moved to remark:

“I am controlling this hearing and you must respect my rulings on it.” [Idem.]

Denounced as Bolsheviks and Reds

The documents referred to were publications, first of the Socialist Party, then of the League For Industrial Democracy, then the publications of the New Leader, official organ of the Socialist Party, and then approximately 4o different publications of The Public Ownership League of America, including much of its literature, and then various publications of the National Popular Government League and of the People’s Legislative Service, some 88 exhibits in all. [Idem, pp. 345-351.]

The purpose of submitting these exhibits, as Mr. Weadock explained, and to which Commissioner McCulloch objected, was to show that The Public Ownership League was working together with the Socialist Party, the League For Industrial Democracy (which is an avowed socialist organization) and with the People’s Legislative Service and the National Popular Government League in one united effort and “unholy alliance” to overthrow private property in this country, and the testimony at this point reads:

“I say that every industry in the United States is under fire in this situation.”

The obvious purpose and intent of Mr. Weadock’s effort in this connection was to prove that The Public Ownership League and the other organizations with which he claimed it was co-operating were socialist organizations. The effort was in line with what had been previously brought out in the hearings of the Commission, in which it was shown that the representatives of the utility corporations had been instructed as a settled policy “not to argue with the advocates of public ownership but to arouse prejudice against them by pinning on them the bolshevik idea.” [Pt. 2, pp. 71-72.] As a matter of fact, the National Popular Government League, the People’s Legislative Service, and The Public Ownership League are, none of them, socialist organizations. Nor do they co-operate or work together. The attempt to connect them with the League For Industrial Democracy and the Socialist Party is only a part of the effort to discredit their work by “pinning the bolshevik idea upon them.”

“Gotten up by Reds for Red Purposes”

As an illustration of the lengths to which the representatives of the utility corporations have gone in their efforts to discredit the different organizations mentioned above, Exhibit No. 1238 of the Commission’s hearings is a letter by Francis Ralston Welsh, written to Sir Adam Beck in Toronto, under date of February 16, 1925. In this letter Mr. Welsh says:

“The National Popular Government League in the United States was originally gotten up by reds for red purposes. Its chief founder was Frank P. Walsh, one of the supporters of the De Valera movement, counsel for the communists arrested in Bridgman, Michigan; counsel for the criminal element in labor unions; associate, aider, and abetter of members of the communist American Civil Liberties Union; friend of the Berkman anarchist gang; and a visitor some years ago to the Russian communists, from whom he obtained a concession. When chairman of the United States Industrial Relations Committee, under President Wilson, he abused his position to help the Berkman anarchist gang, and the murderer Thomas J. Mooney. Jackson H. Ralston, counsel for the criminal dynamiting element in union labor, who use communist methods to gain their ends, was another, etc. etc.” [Exh. Pt. 3, p. 976.]

Occasionally reference is made in the hearings here and there to the work of the other organizations mentioned, but the chief concern, judging from the amount of testimony and attention given by the utilities, was in combating the influence of The Public Ownership League. This latter organization comes in for repeated, lengthy, and vigorous treatment.

Widespread Activities of the Public Ownership League

At one of the meetings of the Rocky Mountain Information Committee attention was drawn to the “widespread and unrelenting efforts of The Public Ownership League of America, an organization which boasts of 10,000 members whose principal aim is to municipalize all public utilities. The League also is a strong and consistent advocate of government ownership. Signs of its activities are apparent in a score or more of states, including Colorado, and it is said that New Mexico and Wyoming are included in their plans for further activities.” [Exh. Pt. 4, p. 363.] In another place we are told that “the committee was advised of the continuing activities of The Public Ownership League of America. An article from an Albuquerque, New Mexico, paper was read. It showed that representatives of the League are now in Albuquerque holding a series of public meetings at which the citizens are being advised to discard private ownership in favor of municipal ownership of public utilities, especially the local electric light and power organization.” [Idem, p. 393.]

“Highly Organized, Well Financed, Ably Managed”

The Public Ownership League, along with the other organizations mentioned that are promoting public ownership, are said to be “highly organized, well financed, and ably managed.” [Exh. Pts. 5 & 6, p. 1085.] For these highly complimentary remarks the members of these organizations will be duly appreciative, reserving judgment as to the facts and as to the purpose and intent lying back of them.

A Problem That must Be Met

The Executive Secretary of the Utilities Information Committee of Georgia writes to the Director of the Pennsylvania Public Service Information Committee, enclosing the program of The Public Ownership League, which he urges must be met and solved by the state committees. “Our purpose in addressing you now,” this secretary says in his letter, “is to solicit your full and open statement of opinion as to the best procedure for opposing the movement outlined in the league’s resolution.” [Exh. Pt. 3, p. 1028.] … The Georgia committee, apparently to a greater extent than some of the others, has had this same problem in the form of state ownership persistently confronting it since its origin. We have frankly faced the issue and prepared our defense accordingly, creating a circulation of 20,000 for our bulletin (italics ours), making the articles in it fit the state situation and devising methods not generally followed by the committees.”

Mr. Cope, Secretary of the Georgia committee, then asks Mr. McKay as to the best methods of procedure for opposing the movement outlined in the League’s resolution. [Exh. Pts. 5 & 6 p. 98.] Replying to Mr. Cope, Mr. McKay says that “my idea of the best procedure is to keep up a constant `shot gun’ fire on the subject, resorting to rifle fire whenever specific instances arise” as, for example, at Chickasha, Oklahoma. “During the past summer there has been considerable agitation favoring municipal ownership of the gas utility:’ The article appeared in the Chickasha Express, pointing out the advantages of municipal ownership of water in Omaha, and quoting an article appearing in the Chicago Herald-Examiner. “Our office immediately furnished the Chickasha Express with a reply to this open letter. We call attention to the breakdown of the Omaha Water System, to the fact that this breakdown was the worst public calamity in Omaha since the tornado ten years ago; that it came after a municipal ownership experiment which had resulted in electing the head thereof a United States Senator,” etc. The expose thus published and the activities of the utility companies evidently had the desired effect, for the franchise election was called off.

Mr. McKay then repeats the statement that during the past two years thirty municipal electric plants in Oklahoma have been sold to privately operated utility companies “and we feel that the municipal ownership situation in this state is at this time quite well in hand.” [Exh. Pts. 5 & 6 p. 99.] According to one statement, The Public Ownership League originated the water and power act in California. [Idem, p. 372.] As a matter of fact, as we have shown from the records elsewhere, these acts originated with the California League of Municipalities.

Washington Public Power Conference

Eleven pages of fine print in Part 2 of the Exhibits of the Commission are given over to a detailed report of the public superpower conference of The Public Ownership League held in Washington, D. C., January 16, 1924. [Exh. Pt. 2, pp. 304-15.] On the whole, the report was a fairly good one, but here and there disparaging remarks were thrown in evidently attempting to belittle the conference. For example, the statement is made that only 32 people attended, and that at one session only 9 persons were present, including 4 newspaper men. And yet these few people and this meager movement were sufficient to justify the mobilization of the whole electric industry of America, if we are to accept the testimony of Mr. Weadock.

United States Senator George W. Norris attended this conference and was one of the main speakers. The principal purpose and work of the conference was the drafting of a general public super power bill for introduction later in Congress.

The Toronto Public Ownership Conference

The Illinois Committee on Public Utility Information sent out to state committee directors throughout the country a report of the conference of The Public Ownership League held in Toronto in 1923- In this report Mr. Lytle, Associate Director, said:

“I think I never saw a finer collection of freaks anywhere…. The entire “lunatic fringe” has apparently found one thing upon which all can agree and in which all can harmoniously cooperate.” [Exh. Pt. 2, p. 516.]

And yet, he warned, “the League is still a going concern.”

Among the “freaks” and “lunatics” present were Sir Adam Beck, then Chairman of the Hydro-Electric Power Commission of Toronto, knighted by the King of England for praiseworthy service to the state, and numerous prominent officials of the City of Toronto and the Province of Ontario. Among them were prominent representatives of the Railroad Brotherhoods of the United States, of the Teachers’ Federation and Central Labor Bodies. Among them were Reverend John A. Ryan of the Catholic University of Washington, D. C., J. D. Ross, Superintendent of the Municipal Power System of Seattle, Washington, Amos Pinchot of New York, representatives of the Michigan State Grange, State Senator George W. Joseph, later Republican candidate for Governor of the State of Oregon, and others.

Reports of the program of the League and its various activities were sent to all state directors. [Exh. Pt. 4, p. 680.] And a statement of “what the League has in hand” was reported by the utilities in Texas. [Idem, p. 643.]

Literature of the League

From time to time in various volumes of the hearings, and occupying many pages, are references to the literature of The Public Ownership League and in many cases a reprint in full of articles and documents it has published. Among these may be mentioned the following:

(1) An extended article entitled “Los Angeles Replies,” in which E. F. Scattergood, Chief Electrical Engineer of the Municipal Power System of that city, replies to an attack made upon the municipally owned utilities there. This article occupies two and a half pages of the hearings. [Idem, pp. 160-62.]

(2) An article in full on “Is Public Ownership Efficient?” appears on page 162 of the same volume.

(3) An article which appeared in the Public Ownership magazine under the caption “Check Up On Your Candidates” was sent to all member companies as being of especial significance. The article appears in full as Exhibit No. 2470 on pages 810 and 820 in Part 4. And the same article appears again in full in Parts 5 and 6, page 760.

(4) An extended statement of the League’s program appears on page 643 of Part 4 of the Commission’s hearings.

(5) News notes from the Public Ownership Magazine are published extensively in Parts 10-16, pages 292 and 293 of the Exhibits.

(6) As stated above, Mr. Weadock submitted a long list of 40 or 50 publications of The Public Ownership League, including several annual reports, many issues of the Public Ownership Magazine, etc., as described in Parts 18 and 19, page 189.

(7) A considerable quotation from the article in Public Ownership on “Maquoketa: City of Light and Power” is published. [Exh. Pts. 5 & 67, p. 986.]

Utility Men Join the League

The literature and service of The Public Ownership League are open and available to all, and no objection has ever been raised to representatives of the utility corporations subscribing for the service. However, as illustrating the stealthiness with which the utilities pursue their opponents, there is published as Exhibit No. 2705 in the hearings of the Federal Trade Commission. [Exh. Pts 5 & 6, pp. 144-46.] correspondence between a Miss Gertrude Ziesing of St. Louis, Missouri, and Miss Eleanor Spaeth, Assistant Secretary of The Public Ownership League. Miss Ziesing applies for membership in The Public Ownership League without indicating the fact that she is acting for Mr. Sheridan of the Missouri Committee on Public Utility Information. In the examination Mr. Sheridan testified that he had joined the League, meaning that he had subscribed for the service through Miss Ziesing: and that he had joined in order to secure the information regarding the League and its work. [Pt. 5, p. 127.]


Chapter 62: The Appeal to Prejudice

“Pin the bolshevik Idea on Them”

One of the settled policies in the propaganda of the utility corporations seems to have been a steady and constant appeal to prejudice. Those who opposed the views or plans of the utility companies, and especially those who were active in their efforts to protect or promote publicly owned utilities and services, were persistently denounced as socialists, communists, and bolsheviks.

Rob Roy McGregor, Assistant Director of the Illinois Committee on Public Utility Information, is on the stand. Judge Healy is conducting the examination

“Question: In this paper here Mr. Mullaney stated to you that if you were running for the nomination for United States Senator against a man whose speeches had indicated that he favored public ownership, and you had to get up a series of speeches tackling him on that line, what have we that you find pertinent and useful? That was the thing put up to you?

“Answer: Yes, sir.

“Question: In response to that you prepared this document here?

“Answer: Yes, sir.

And then the judge went on to ask Mr. McGregor:

“If a Senator had made a declaration on the subject in favor of public ownership and operation … you were prepared to use this piece of ready-made unpopularity against him?

“Answer: I was not prepared to use anything.

“Question: You prepared this memorandum and recommended the use of this thing…. Point out to me the paragraph in which the merits of government ownership are discussed in that article.

“Answer: They are not discussed.

“Question: Read the last paragraph aloud for the record. Answer (reading): This, of course, is not an attempt at writing a speech. My idea would be not to try logic or reason but to try to pin the Bolshevik idea on my opponent. (Our italics.) I do not believe that the theory of government ownership would be much use except before a hand picked audience.

“Question: Is that the reason why you did not discuss the question of the merits of government ownership, as stated in that last paragraph? It was your idea not to try logic or reason. Logic or reason was to be left out of it.

“Answer: Yes, sir. (Our italics.)

“Question: You were just simply trying to pin the bolshevik idea on your opponent?

“Answer: Yes, sir.

“Question: Or if there had been no other kind of ready-made unpopularity you could use against him, you would use that?

“Answer: If I had been asked that question for the preparation of it, I would have prepared it to the best of my ability.

“Question: Did you prepare it to the best of your ability?

“Answer: Yes, sir.

“Question: Why didn’t you discuss the reason or the logic of it?

“Answer: As I stated in the last paragraph, I did not think that it would be a political discussion; that the merits in an abstract way of government ownership would be of much use.

“Question: You simply tried to raise a prejudice against the man that proposed it and tried to pin the bolshevik idea on him? (Our italics.)

“Answer: Yes, sir. (Our italics.) Mr. Healy: That is all. [Pt. 2, pp. 68-72.]

Epithet and Innuendo

Besides this definitely settled policy of appealing to prejudice against those who advocated public ownership, the literature of the utility corporations, their speeches, writings, etc, abound with innumerableinstances of epithet and innuendo. Efforts to promote public or municipal ownership are “insidious attempts.” [Exh. Pt. 3, p. 267.] The municipal or public ownership movement is a “malignant cancer,” [Idem, p. 289.] “pure sophistry,” “bunk,” [Idem, p. 287.] “hokum,” [Idem, p. 288.] a “pernicious doctrine.” [Idem, p. 289.] The advocates of public ownership are “soothsayers.” The government ownership movement is “like fire”; “it is our duty to step on its viper head whenever and wherever it appears.” [Idem, p. 291.]

Speaking of the public ownership movement, it is designated as “a damnable menace to the prosperity and progress of the electrical industry.” [Exh. Pt. 4, p. 782.] Those who criticize the utilities or seek public ownership or control are denounced as “ignorant,” “malicious,” and “stirring up trouble in the hope of gaining personal or political advantage. [Exh. Pt. 3, p. 302.] The advocates of public ownership are “enemies of society.” [Pt. 4, p. 219.] “They propose to overthrow the government.” [Exh. Pt. 3, p. 291.] The public ownership movement is “a monstrous outrage”; [Exh. Pts. 7, 8 & 9, p. 214.] “a sore boil”; “the din and howl of blatant politicians”; [Idem, p. 213.] “rapacious in competence of irresponsible politicians.”[Idem, p. 214.] “We must fight this deceitful propaganda as we would a den of rattlesnakes or a raging fire threatening destruction to our business and our people.” [Exh. Pts. 5 & 6, p. 882.]

Over and over again the public ownership movement is referred to as “communism’s stepping stone.”[Exh. Pt. 2, p. 353.]

In a speech delivered in London on the subject of municipal ownership versus corporate or private ownership, Mr. Bernard Mullaney of the Illinois Committee said:

“Government ownership is the masked advance agent of communism-not merely the socialization of basic industries for the common good as the “pinks” have it, but the communism of the reds as the dictionary has it.” [Pt. 2, p. 95.]

Socialist Riot in Chicago High School

An illustration of the lengths to which the speakers for the utilities have gone in some cases in trying to create prejudices against public ownership and its advocates on the ground that it is socialistic is found in the case of a story of a riot that is said to have occurred on the part of certain high school students in the Englewood High School of Chicago in Englewood.

According to this story, one of the teachers in the economic department in this particular school was said to have abandoned the use of the textbook entirely and was teaching and promoting public ownership, socialism, and radicalism to such an extent that parents of the scholars went to the superintendent of the school to protest. Thereupon, according to the testimony, they were astonished to find that the superintendent knew what was going on but told them that he was helpless because, although he had had three previous teachers in economics dismissed for teaching this sort of thing, these teachers had been reinstated in spite of his protest because of certain political influences which they were able to use.

And then, this utility speaker goes on to say, there was an aftermath of all of this. The students of this particular high school staged a riot around the Art Institute on Michigan Avenue, Chicago, in behalf of some socialist leader in Mexico. And the riot was so serious, according to this speaker, that it was necessary to call out the police, and a more or less serious fight followed in which many arrests were made. [Exh. Pts. 10-16, p. 938. Inquiries by the author directed to the superintendent of the Englewood High School and to the Police Department of Chicago developed no record of such a riot as is here described.]

Chapter 63:
The Bolshevik Idea

Who and What Are socialists, Bolsheviks, Etc.?

In view of the persistent charge of socialism, communism, bolshevism, etc., against those who at one time or another have advocated to any extent or in any respect the public ownership of any utility or service, it is interesting to inquire just what is meant by socialism, and who and what is included in this epithet as used by the representatives of the utility corporations and their propagandists.

No distinction is made, of course, between socialism and communism; or between socialism and bolshevism. All are classed together indiscriminately, although, as every well-posted person knows, there are sharp distinctions. But the literature of the utilities is not written for discriminating thinkers but for popular purposes.

The following references to the literature of utilities in which the epithet of socialism, bolshevism, etc., is hurled indiscriminately at so many different classes and types of our American citizenship will serve to illustrate how loosely and unjustly these terms are used.

Are We All Socialists?

The following are the individuals, organizations, and groups that have been denounced by the utilities as socialists, socialistic, communists, bolsheviks, etc.:

(1) Those who believe in the Post Office and Postal Service are socialists, according to the power company propagandists. [Exh. Pt. 3, p. 729.]

(2) Those who believe in public roads are socialists, according to these people. [Exh. Pt. 3, pp. 260, 629.]

(3) The 7,000 cities in the United States that own their water works are socialistic, according to these definitions. {Idem, p. 255.]

(4) Those who believe in and promote the Boulder Dam project are denounced as socialists. [Idem, p. 259.]

(5) Those who advocate a minimum wage for workers are socialists. [Idem, pp. 259-60.]

(6) The government ownership and operation of Muscle Shoals is denounced as socialism and an “outstanding example of the utter failure and wretchedness of recent attempts at government ownership or operation.”[Exh. Pt. 3, p. 258.]

(7) Free silver and greenback money are included.

(8) Populism.

(9) The public ownership of railroads.

(10) Public ownership of telegraph and telephones. [Idem, pp. 236, 228.]

(11) State hail, insurance in North Dakota. [Idem, p. 233.]

(12) The compensation of soldiers and sailors by insurance for military service is classed along with other socialistic plans. (r3) Irrigation and reclamation projects are denounced as socialistic. [Exh. Pt. 3, p. 259.]

(14) The limitation of profits of utilities is classed as socialistic. [Idem.]

(15) An inheritance tax.

(16) The regulation of public utilities is denounced as socialistic. [Idem, pp. 263, 264, 291.]

(17) Those who call themselves progressives are especially dangerous socialists. [Exh. Pt. 3, pp. 263, 265, 294, 295.]

(18) Those who advocate a publicly owned power system such as they have in Ontario.

(19) The government printing of corner cards on stamped envelopes is socialistic. [Idem, p. 749.]

(20) The League of Women Voters is “implanting discontent, erroneous, and socialistic ownership propaganda.” [Exh. Pts. 5 & 6, p. 900.]

(21) The Georgia League of Municipalities and Mr. John J. Egan [Pt. 3, p. 536.] and all of their bulletins are socialistic.” [Exh. Pt. 3, pp. 1228-38, 1240.]

(22) We are told that 98 per cent of all the textbooks in use in the public schools is “socialistic.” [Exh. Pt. 2, p. 611.]

(23) The Kansas League of Municipalities “is extraordinarily bolshevik.”[Exh. Pts. 5 & 6, p. 485.]

(24) The representatives of the utilities even complain that the government building of levees in the Mississippi River is an unfair intrusion of the government into private business. Judge Healy was evidently somewhat surprised at this contention, for he pointed out that this was distinctly a public or government function. But the utilities do not see it that way. It is another example of “government in business” and, to that extent, of socialism. [Pt. 15, p. 238.]

(25) The Non-Partisan League of the Northwest, of course, is denounced as socialistic. [Exh. Pts. 5 & 6, p. 976.]

These and this class of people, then, are socialists, and the views which they advocate and promote, and the things which they and their municipalities, their state and federal government do are socialistic; and this is socialism, according to the views expressed by the representatives of the utility corporations.

Are You One of Them?

If you receive or mail a letter-you are a socialist. If you walk on public streets or ride on the public roads: you are a socialist. If you live in any one of the 7,000 cities of America: New York City, Chicago, Boston, Philadelphia, Cleveland, Seattle, San Francisco, etc., and use water from the city owned mains: you are a socialist. If you believe in compensating the soldiers and sailors; if you believe in or support the United States Government in its reclamation projects; if you believe in and support what the government has done at Muscle Shoals or Boulder Canyon; if you believe in inheritance tax; if you believe in an effective regulation of public utilities; if you are a progressive; if you are a member of the League of Women Voters; if you are a member of leagues of municipalities, such as the one in Kansas or Georgia; if you live in any one of the 2,000 or more municipalities that own and operate their electric light and power systems and use the service of the city; if you read or study the textbooks in the public schools:

If you do any of these terrible things you are lost: you are a socialist.


Chapter 64: Power Company Socialists

When a Socialist Is Not a Socialist

In spite of the fact that the propagandists of the utility corporations are constantly railing at those who favor and promote public ownership, denouncing them in season and out as being socialists, communists, bolsheviks, and, in some cases, even worse, we are confronted with the strange fact that these same corporations have in their employ some of the most noted socialists or ex-socialists of the country.

John Spargo

For example, we have the case of John Spargo. Mr. Spargo was for many years one of the most noted, most aggressive members and officials of the Socialist Party of America. He was a prolific writer and many of his socialist books will be found in any collection of socialist literature. He was an official of the Socialist Party and very active in its conventions and councils. True, he left the Socialist Party many years ago, as many other socialists did who came to disagree with the organization-but his record stands. And now we find, according to the record, that Mr. Spargo has become one of the bitterest enemies of public ownership, and the most cordial of friends to the utility corporations. His writings are widely published and he is spoken of by the utilities as one of the “great minds” and one of the “great philosophers” of the day. [Pt. 3, pp. 557, 482.]

Mr. Spargo writes an extended article vigorously attacking public ownership, which is published at length in the Chicago Tribune; [Exh. Pts. 10-16, p. 137.] another long article is published in the New York Times. [Exh. Pts. 10-16, p. 137.]

Frank Bohn

Similarly, we have Frank Bohn, formerly not only a socialist but one of the more radical and extreme of the socialists. And yet, according to the record, he is now on the payroll of the utility corporations preparing literature, pamphlets, and surveys for them in their attacks upon public ownership and the theories which he had previously so earnestly espoused. [Exh. Pt. 1, p. 472.]

F. G. R. Gordon

We also have the case of F. G. R. Gordon, prominent member of the Socialist Party, candidate for high position on the Socialist Party ticket in Massachusetts, now in the pay of the utility corporations. As we have previously shown, Mr. Gordon was employed for a number of years in “making speeches and writing articles against public operation and municipal ownership of utility plants.” [Pt. 10, p. 50.] He conducted a fight in opposition to municipal ownership in the City of Grand Rapids, making three speeches a day and contributing one or more articles to all the newspapers in the town every day. For this service Mr. Gordon testified that he received a check for $2,000.

Mr. Gordon addressed the Chambers of Commerce, the Rotary Club, Kiwanis Club, spoke in furniture factories, even, on soap boxes, on the sidewalks, trying to reach everybody in town in his opposition to municipal ownership.

Mr. Gordon was employed by the power companies for a campaign against municipal ownership in St. Paul, Minnesota, in Boise and Pocatello, Idaho, and in Palmetto, Florida.

In 1927 a debate was scheduled by the Louisiana League of Municipalities on the subject of municipal ownership, with exGovernor Brough representing the utilities and Carl D. Thompson speaking for municipal ownership. Mr. Gordon was sent to Shreveport on this occasion as a “standby” for Governor Brough for, as Mr. Gordon testified, “I did not think, and one or two others did not think,.that the Governor knew very much about the speech he was going to talk about, so I went down with the idea of giving him all the information I could.” [Pt. 10, pp. 58-59.]

Mr. Gordon testified that in the beginning of his career as an opponent of municipal ownership he was employed by the “great business, social, political, and economic leaders of the city (Haverhill) to counteract the growth of socialism in that community. In this association were leaders of the church political leaders of both parties, and practically all of the civic organizations of the city…. They paid me $100 a month for a year…. I suppose I have made more speeches and written more articles against all kinds of socialistic enterprises than any 25 men combined in this country. I hope that I will live for the next 25 years to continue that same kind of work, and I will do it whether the electric light people or gas people or anybody else pay me anything or not. [Idem, pp. 65-66.]

So extreme became the views of this former socialist that he testified:

If I had my way about it I would sell the post office tomorrow morning to the American Express Company.” (Our italics.)

Which led Commissioner McCulloch to remark:

“It looks like taking a very drastic remedy to effect such a complete cure as that. [Idem, p. 52.]

Thus, according to the record, we have a number of prominent and noted former socialists in the employ of the utility corporations, campaigning, speaking, and writing for them, while they are indulging in the most violent denunciation and bitter attacks upon those who favor and support municipal and public ownership to any degree on the ground that they are socialists, communists, and bolsheviks. And this they do without any regard as to whether these people have ever been in any way connected with socialism, or the Socialist Party or not.

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