Arkansas Power & Light Co., list of all fees for legal services, Jan. 1, 1950, through This substantiates former Governor McMath's charge that the The Arkansas Public Service Commission also obtained similar Middle South subsidiaries show excessive overhead in advertising The analysis in the preceding pages of this section reveals that the Mississippi and Arkansas subsidiaries of Middle South Utilities, Inc., of which Mr. Dixon is president, are extensively engaged in activities designed to influence public opinion and politics. An examination of the figures which the companies report annually to the Federal Power Commission reveals unmistakable evidence that these activities are reflected in excessive overhead and advertising costs. The source of all figures given below in this connection is the report of the Federal Power Commission, issued annually, entitled "Statistics of Private Electric Utilities, 1953." The following table shows for the Arkansas Power & Light Co., the Mississippi Power & Light Co., and for all private electric utilities in the United States, the relation between total administrative and general expenses and total other operating expenses less cost of purchased power: These figures show that the administrative and general expenses for these two subsidiaries of Middle South Utilities, the principal sponsor of the so-called Dixon-Yates contract with the Atomic Energy Commission, represent twice as large a percentage of their other operating expenses, less cost of purchased power, as the average ratio for all the private power companies serving the United States as a whole. This is a significant ratio, indicating either lack of administrative efficiency or very considerable activities which might be termed extracurricular from the point of view of the companies' real business. And it may be noted that they were not franchised to engage in politics or in educating the public. The Federal Power Commission's statistics also show the companies' expenditures for advertising. These expenditures are not included in the administrative and general expenses referred to above but in expenses for sales promotion, although the evidence certainly suggests that the advertising is devoted mainly to other purposes. According to the Federal Power Commission, the two companies spent the following amounts for advertising over the last 5 years: Advertising expenses The Federal Power Commission summary statistics for all the privately owned electric power industry are not broken down far enough to show the countrywide figure for advertising. So, in order to get a ratio for comparison with corresponding ratios in this general field for the two Middle South subsidiaries, it is necessary to deal with totals for sales promotion. On this basis, the Commission's statistics show that the Class A and B electric utilities throughout the country spent $100,465,000 on sales promotion in 1953, or 1.64 percent of their gross operating revenues amounting to $6,167,256,862. In comparison the statistics show that the Arkansas Power & Light Co. spent $1,038,762 for this purpose, or 2.67 percent of its gross revenues of $38,883,027; and the Mississippi Power & Light Co. spent $660,154, or 2.76 percent of its gross revenues of $23,831,437. These figures, based on the reports of the two companies to the Federal Power Commission, throw an interesting light on the testimony of Witness Stietenroth, who stated that the extravagant operations of Mississippi Power & Light Co. should be cut out and that electric rates could and should be reduced by millions of dollars a year (RDY, p. 194). The statistics which we have analyzed show that if the Mississippi company's administrative and general expenses were reduced to the same percentage of other operating expenses as the average for the United States, and its sales promotion expense were reduced to the same percentage of gross revenue as the United States average, the annual saving would amount to $1,458,972. There are other possible savings as, for instance, putting an end to the overaccrual of taxes, which would unquestionably raise this figure. The figures throw a similar light on the testimony of Little Rock Banker McLean as to the folly of the proposal of Arkansas Power & Light Co. to increase electric rates by $3,900,000. For they show that if the Arkansas company's administrative and general expenses and its sales promotion expenses were similarly reduced to the average percentages of other expenses and gross revenue that prevailed for the United States, the annual savings in these items alone would have amounted to $2,081,737. Practices the same as those of the holding company era In order to provide a perspective for understanding the public relations and political activities of Middle South subsidiaries, portrayed by witnesses before this committee, we may briefly turn the pages back to the exposure of similar practices by the Federal Trade Commission investigation of 1928-35. That Commission's investigation of the propaganda and political activities of the private utility industry reveals a clear intent on the part of the companies to establish monopolistic control of the business of electric power supply, not only by stopping such Federal power undertakings as Muscle Shoals, Boulder Canyon, the St. Lawrence, and the Columbia Basin, but also by eliminating State and municipal power undertakings. Introducing its report, which exposed utility public relations activities then being financed to the tune of 25 to 30 million dollars a year, the Commission said: From this voluminous testimony and records *** it seems obvious that the ultimate design and common objective of all the publicity activities and expenditures, so far as they come within the purview of this investigation, is to foster and retain the fullest security for the privately owned utilities, and to secure full public approval of all their methods and practices in such matters. In the campaign there inhered persistent efforts to prevent effective, or any, regulation of utilities for the protection of the public, either of the consumers as to service and rates, or of the investor as to character and bases of securities issued (76, pt. 71-A, Doc. 92, 70th Cong., 1st sess.). Although there has been some progress in protecting the investor since that day, the evidence before us suggests that protection of the interests of the consumer, where private monopoly prevails, has made no substantial progress. The Federal Trade Commission report continues: The objective also included efforts to inculcate in the public full belief in the right of the privately owned utilities exclusively to occupy the utility field even against those from whom they receive their franchises, usually monopoly grants. As a corollary of that there has been persistent opposition, direct and indirect, to public ownership and operation, including disparagement of that trend in public and economic thought toward exponents as public enemies *** (8, ibid.). The report details the organization of the industry to achieve these monopoly objectives, how they went about securing "the good will of the press and newspaper fraternity" through "consistent and substantial advertising," not to mention "canned" editorial expressions and handouts. It exposes the ways in which the utilities operated on educators, educational institutions, and textbook publishers, ranging all the way from the kindergarten to the university and even securing the rewriting of textbooks to support their position. It reveals the training and use of utility employees as important parts of the public relations program. In fact, the report shows that there was no organized part of the country's life which was not infiltrated, even including the legislatures. The Federal Trade Commission report indicates that there is nothing new about the "creeping socialism" slogan of today except the word "creeping." As early as 1927, in seeking funds for the Joint Committee on National Utility Associations, W. Alton Jones, later president of the National Electric Light Association, said that, while the utilities were taking the brunt of the Government-ownership attack, “success against them would be but the first step in the campaign." He continued: The inevitable consequence would be encouragement for those who would have the Government take over and conduct other business until the country is thoroughly socialized (37, pt. 71-A, ibid.). The Commission was describing a situation which existed during the 1920's. At that time Senator George W. Norris, Republican from Nebraska, was winning bipartisan support in Congress for a Tennessee Valley public power program starting with Muscle Shoals; Congressman Phil Swing and Senator Hiram Johnson, Republicans from California, were succeeding in their effort to secure congressional approval of the Boulder Canyon project in the Colorado River; Gov. Alfred E. Smith, Democrat, of New York, had been elected on the issue of State development of the power resources of the St. Lawrence River; and, with wide regional support, the Corps of Engineers and Bureau of Reclamation were planning great Federal power and irrigation developments in the Columbia River Basin. This committee believes it is important to get this perspective because the belief has become prevalent that the private power company campaign of today is directed simply at undoing developments since 1933. Against this background, we learn from the Federal Trade Commission report that in 1927 W. Alton Jones, already quoted, explained the revival of the Joint Committee of National Utility Associations in these words: The reason the committee got into action again, I think, is clear to all of you. There is a growing sentiment in favor of Federal enterprise in business. * * * We have seen greater and greater encroachment on the part of the Government in the field of public utility business (192, pt. 71-A, ibid.). The things that have been fortunately brought to our attention in recent months that are bound to impress us, if we are thoughtful at all, are such things as the Boulder Canyon bill, Muscle Shoals, St. Lawrence, and Columbia Rivers, all part and parcel of the same general trend of thought-Government in business, and not only Government in business but Government in our business (334, pt. 71-A, ibid.). The Federal Trade Commission report, taken as a whole, shows that the private utility propaganda and political campaign was directed. against State, as well as Federal, power projects. In fact, it shows clearly that the recent focus of attack on Federal power is merely a tactical move, that the real objective is to establish an absolute private monopoly in the field of electric power as against the challenge of any form of public competition, whether that challenge be from local, State, or Federal ownership of power supply facilities. And the Federal Trade Commission shows that as long ago as the 1920's the power company committees were recognizing that an effective method of eliminating the competition in rates resulting from local public owner |