them to step in exactly, but they have indicated their willingness to go back and review the situation *** and see if there was not some misuse of funds, so as to get leverage on those folks in Mississippi that would make them see the light, and decide to go ahead and sell out to Mississippi Power & Light (RDY, p. 299). He stated that he had learned of the new cordiality of the REA toward the company at their regular Monday staff meetings. He added that

particularly when a description would be made of the current cordiality with national REA, these words would be said: "Now that is not to go out of this room" (RDY, p. 301).

Company seeks to block public power district

Stietenroth, who had served for years as the chief financial officer of Mississippi Power & Light Co., testified further that the people in the northeast area of Mississippi, when they saw that the cooperative "was going to fold" decided to set up a public power district which could include urban, as well as rural, areas. He described how the company moved in, trying to show first that the necessary election should not be held. Then, when the election favored setting up such a public power district, the company took a series of steps to block its organization. According to the witness, the matter is still pending in court under a quo warranto proceeding (RDY, p. 306).

The witness described in some detail the steps taken by the company to prevent establishment of this proposed public power district. He said the company already had attorneys in the area and employed several more. After the necessary petitions calling upon the boards. of supervisors to call an election on the issue had been signed, they contested it before the boards (RDY, pp. 306, 307). Then, when it was evident that the elcetion would be held, they sent in 26 of their employees who originated in the area to "discuss the thing and tell the folks the facts" (RDY, p. 306). They were paid their regular wages and expenses. Then, in connection with the election itself, they employed local people in the capacity of "poll watchers" and "voter haulers" (RDY, p. 307).

Stietenroth identified for the record a voucher entitled "Senatobia Special," dated July 22, 1954, for $959.90, covering 37 "little cash vouchers" that read in general "Labor at the polls, $20" (ibid.). He testified that he was scared about this voucher so he had Garner W. Green, the company's general counsel, write on the back "approved by Garner Green." He said it was actually a request from the company's Senatobia office to reimburse them for the $959.90 which they had already spent (RDY, p. 308).

Details of the individual vouchers showed that a number of them included cost of car mileage as well as $20 for labor at the polls, and that they were in general signed by the company's local managers and approved by C. P. Hester, division manager in the area of Hernando (RDY, p. 309). There were also vouchers for refreshments for employee meetings and a guest check from the Gulf Trail Lodge "amounting to $55.64 for four steaks and salads, and cigarettes and drinks and on and on and it is approved by C. B. Hester" (RDY, p. 310).

Stietenroth testified that, to the best of his recollection, the money was first advanced to the division manager in the amount of $1,000 and that the voucher was submitted to clear his advance (RDY, p. 311).

In response to a question whether the new lawyers put on in north central Mississippi

were put on for the purposes *** of any legal matter in connection with the Mississippi Power & Light Co.'s operations, or were they for political influencethe witness replied:

We actually employed one person up in northeast Mississippi that was active in the legal aspects of trying to prevent the organization of the Northwest Mississippi Public Power District.

But I know of one occasion *** where we paid a retainer fee to a firm of lawyers in the city of Senatobia, just as one illustration that comes to my mind, which in my opinion was for no other purpose than to keep the atmosphere such that we would accomplish whatever we were trying to do politically (RDY, p. 313).

To the question whether Haskins & Sells, the auditors for the Middle South Utilities group, had ever protested the charging of such political expenses to operating expenses, Stietenroth answered that this firm, "in the person of Lewis Drewell and probably George Conroy had been down to the company's offices in recent days." He continued: This particular voucher that I had photostated there was in the records down there; yet they have come out and said, "everything is all right" (RDY, p. 314). Other activities to curb public competition in Mississippi

Stietenroth testified to an active campaign of the company to bring municipal plants in the State under lease. He said that during the last year or so they had leased such plants in Gloster, Prentiss, and Mendenhall, that they were negotiating quite actively with some other municipalities, and that all the rest of the municipally owned systems were receiving attention (RDY, p. 311).

The witness testified further that the Mississippi company had been quite active in trying to prevent the rural electric cooperatives from forming an association to generate and transmit power "to sort of serve themselves." He said that one of the devices "used to prevent any generation ever being constructed by a co-op is that we give them a rate that we describe amongst ourselves as a subsidized rate." continued:

He

Now the rate is such that it keeps the co-ops dependent upon the company for their source of power and we try our dead level best to tie them up with this power contract for long periods of time (RDY, p. 312).

Arkansas company blocks cooperative steam station

A former Governor of Arkansas, Sid McMath, testified that the principal block to the economic development of Arkansas has been the opposition of the private power interests to the building of dams and other power generating facilities for the production of low-cost power. Arkansas, he said, must have low-cost power for development of its economic potential. Because of this opposition, he continued, the great potentials of the Arkansas and White Rivers haven't passed the planning stage. He testified further that the only two major dams in Arkansas, Bull Shoals and Norfork, were constructed over the violent opposition of these interests and that development of the Arkansas River had been obstructed by the same power interests that opposed any dam or generating plant that they, themselves, could not exploit (RDY, pp. 500-502). He said:

Perhaps the best example of the electric monopoly's tactics of obstruction occurred in their successful opposition to the building of a steam generating plant

at Ozark, Ark., by a group of REA cooperatives. As soon as the REA co-ops applied to the Government for a long-term loan to construct this facility, private power interests moved in with all their might and influence to block the loan (RDY, p. 502).

The importance of this proposed steam-electric station to the cooperatives is indicated in a letter of December 20, 1948, addressed to Governor McMath by Thomas B. Fitzhugh, counsel for the Arkansas State Association of Cooperatives. McMath offered this letter for the record. It calls attention to the fact that the 18 rural electric cooperatives represented by the association serve 70,000 farm families and would ultimately serve about 150,000. It emphasizes the vital interest of the cooperatives in the earliest possible development of hydroelectric projects in Arkansas and their desire to integrate the proposed steam plant with the hydroelectric power already under development (RDY, p. 503). According to Fitzhugh:

The Arkansas Public Service Commission on many occasions has been hostile to the REA program. We know that any action that curtails expansion of generating capacity or extension of electric service in Arkansas is detrimental to the welfare of Arkansas (ibid.).

The record shows that the Arkansas Public Service Commission under Governor Sid McMath gave the necessary authorization to permit construction by the rural electric cooperatives of the proposed Ozark steam-electric station but that Arkansas Power & Light so far has blocked the undertaking in the courts.

Governor McMath testified that the power interests brought every bit of pressure they could muster to bear upon Claude R. Wickard, then Rural Electrification Administrator in Washington, to persuade him to deny the loan for this cooperative generating station (ibid.). But the Governor was notified by wire, dated November 6, 1950, that a loan of $10,558,000 had been granted to the generation and transmission cooperative for construction of a 30,000-kilowatt steam plant at Ozark and 544 miles of transmission line (RDY, p. 505).

The witness testified that thereafter it was necessary for the Arkansas Public Service Commission to grant a certificate of convenience and necessity before construction of the plant could begin and that the tremendous pressure exerted on the commissioners by the company "passed all bounds of propriety" (ibid.). He testified to the threats to his political career which followed and of how these threats were carried out by the company. This evidence is analyzed in detail in a subsequent section on "public relations, politics, and corruption" in the power industry. Here we merely note the Governor's final words with reference to the Ozark steam plant. He testified:

The end of the Ozark steam generating plant episode is interesting. My Public Service Commission granted the certificate of convenience and necessity; however, the A. P. & L. and other utilities in the State secured an injunction in the courts of Arkansas and prohibited the building of the plant on the grounds of a legal technicality, a deficiency in the original REA Act passed in 1937. The decision of the lower court was upheld by the Supreme Court of Arkansas early in 1953 after I had left office as governor. It would have been a simple matter to pass corrective legislation in the 1953 legislature and the construction of the Ozark plant could have proceeded immediately. But passage of this corrective legislation was blocked by A. P. & L. Therefore, A. P. & L. succeeded in its effort to keep the farmers of Arkansas from generating their own low-cost electric power and deprived the State of Arkansas of 30,000 kilowatts of badly needed electricity (RDY, pp. 509, 510).

The record of the proceedings before the Arkansas Public Service Commission shows that, in opposing the cooperative application for a certificate to build the Ozark steam station, the company based its position in part upon the contention that the certificates and franchises under which it is operating give it a monopolistic right to supply power in the areas which would be affected by the proposed project. Arkansas Co. blocks competition in connection with aluminum production Governor McMath testified to a further example of the use by Arkansas Power & Light of its influence to maintain monopoly involving the Federal program for expansion of aluminum production to meet defense requirements. McMath's testimony shows that the company succeeded in killing 3 competitive threats to monopoly with 1 stone. This achievement included blocking the entrance of a new competitor into the field of aluminum production, preventing the construction of an independent, industry-owned steam station using natural gas to produce low-cost energy for this expansion in the country's aluminum output, and grabbing the output of the Federal Bull Shoals hydroelectric plant away from the rural electric cooperatives, for resale to Reynolds Aluminum Co. at a profit.

Mr. McMath testified that the result of this Arkansas Power & Light coup was adverse to the interest of the State of Arkansas because it prevented the State from obtaining a fully-integrated industry which would not only mine Arkansas' great bauxite reserves and process them, into aluminum, but would also fabricate the metal into aluminum locally, rather than shipping it out of the State for fabrication in other States. This evidence shows how monopolistic interests stand in the way of local economic development where the resources are located.

McMath offered the committee a copy of his letter of October 8, 1951, to President Truman, outlining the State's interest in the application of Spartan Aircraft Co. for the establishment of such an integrated aluminum plant in Arkansas (RDY, p. 512). He testified that the governmental agency having jurisdiction over aluminum production was the Defense Materials Production Administration, with Jess Larson as chairman, and that they were encouraged to believe that the Administrator would act favorably on the Spartan Aircraft application. He continued:

H.

This application was approved by the United States Department of Justice Antitrust Division and by the Department of the Interior. The Antitrust Division was interested in breaking up the monopolies of the Big Three in the aluminum field and favored a policy of encouraging independents to enter this field. Graham Morison, head of the Antitrust Division, made this statement: "While quick production for the defense effort might justify the allocation to one of the Big Three, the long-range program should make provision for production by other concerns." Morison also stated that he believed negotiations should continue with independent companies in an effort to get them into the production of aluminum (ibid.).

McMath testified that the Spartan Aircraft Co. planned to produce its own power in a steam generating plant using gas from its own fields. He added:

It was this feature of the Spartan Co.'s plan of operation that incurred the opposition of the A. P. & L. This company has consistently shown that it is interested in no additional power production in Arkansas except that which is produced and transmitted and sold by it (RDY, p. 514).

He continued:

The power company saw an opportunity to accomplish a twofold purpose. First, prevent the building of the Spartan Aircraft steam generating plant and, second, acquire the power from Bull Shoals. They could accomplish this purpose by blocking the allocation of aluminum_production to the Spartan Aircraft Co. and acquiring it for Reynolds Metals. Bull Shoals was the only power available in this area for the Reynolds Metals and this power would have to be transmitted and purchased from A. P. & L. inasmuch as the power interests had been able to kill appropriations for Government construction of transmission lines (ibid.).

McMath testified that the power companies moved in with all the influence they could bring to bear on Mr. Larson and blocked this application for aluminum production by Spartan Aircraft Co. (ibid.). Describing this final victory of the power companies in their battle over the Government's Bull Shoals hydroelectric development on the White River, the witness said:

The Arkansas Power & Light obtained the entire power production from Bull Shoals which was constructed for preferential customers such as rural electric cooperatives and municipalities. The profit amounts to over a million dollars & year to A. P. & L. All of the financial benefit from this huge dam is now going to the A. P. & L. and Middle South Utilities, a company that originally opposed the construction of the dam (RDY, p. 515).

Plant location used as club to eliminate competition

Governor McMath testified that it is the policy of the A. P. & L. wherever possible, to take over powerplants owned by municipalities. He offered two illustrations of the way in which the company uses its influence over the location of industrial or powerplants to pressure city councils into turning over these municipal electric systems to the company. His first illustration was directly related to the company's successful effort to have the allocation of the next increase in aluminum production go to Reynolds Metals.

The witness testified that, shortly after the allocation to Reynolds, he was visited by a committee from the board of commissioners of the Benton municipal light and water works system, who told him that officers of the A. P. & L. told them that if the city would sell out their municipal plant, the power company would see that Benton got the new aluminum industry. Governor McMath submitted a letter from Superintendent Wyatt B. Crawford of the Benton municipal system, confirming this statement. The letter referred to a conversation with Paul Griffin of the Arkansas Power & Light Co., as follows:

Mr. Griffin made the statement that "if the Arkansas Power & Light Co. had a lease on the Benton (municipal light) plant, we could guarantee you the new Reynolds aluminum plant." I asked Mr. Griffin if he actually meant the Arkansas Power & Light Co. could guarantee the location of Reynolds' plant. He answered me with, "No, I can't guarantee that, but we have them by the sleeve and are going to locate the plant in an area we serve" (RDY, p. 515).

The letter indicated the same statement was made later before a member of the board of commissioners.

McMath testified to a similar instance in which Arkansas Power & Light told the city council of Forrest City, Ark., that they would build a proposed new steam generating plant there if the city would sell their municipal power system to the company. According to the witness, "This transaction took place and the steam generating plant was built at Forrest City" (ibid).