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1932 › Franklin D. Roosevelt (Democratic) › Regulation of utility rates and holding companies
Eight-point federal utility program: publicity, Federal Power Commission control of holding companies, prudent-investment rate base
pledge_forwardspecific_pledgecandidate_directevidence A Energy & PowerIndustry, Business & Regulation similar solutions · similar reasoning
Solution
Public servants at every state capitol and in the national government to "restore the fundamentals of public control": rates based on wisely and necessarily invested cash, adequate service, and the credible threat of public operation if private capital will not serve at a fair return.
Rationale
Mergers and holding companies expanded capital structures far beyond real investment; companies obtained rates yielding a "fair return" on that inflation; the public "have made ourselves the victims."
Statements (8)
It is neither radical, nor a violation of any principle of sound business, for me to state in definite terms that public servants with a proper regard for the interests of the people themselves must exert every effort to restore the fundamentals of public control.
(b) Rates of utilities companies operating across State lines;
First: Full publicity as to all capital issues of stocks, bonds and other securities; liabilities and indebtedness; capital investment; and frequent information as to gross and net earnings.
Fourth: Regulation and control of holding companies by Federal Power Commission, and the same publicity with regard to such holding companies as provided for the operating companies.
Sixth: Regulation and control of the issue of stocks and bonds and other securities on the principle of prudent investment only.
Seventh: This is a technical matter, but it goes to the root of the subject. Abolishing by law the so-called reproduction cost theory for rate-making, and establishing in place of it the actual money prudent-investment principle as the basis for rate-making.
Eighth: Legislation making it a crime to publish or circulate false or deceptive matter relating to public utilities, or public utility commissions anywhere, and at any time.
The regulating commission, my friends, must be a Tribune of the people, putting its engineering, its accounting and its legal resources into the breach for the purpose of getting the facts and doing justice to both the consumers and investors in public utilities.
Follow-through
partial
The Public Utility Holding Company Act (August 1935) put holding companies under the SEC with a 'death sentence' for pyramids beyond two tiers, and the Federal Power Act gave the FPC jurisdiction over interstate wholesale rates and required publicity of securities, contracts and interchanges. The prudent-investment rate base was not legislated, the bill was weakened in Congress, and the 'crime to publish false utility matter' point was never enacted.
Mechanisms
| Date | Type | Name | Effect | Consistent? | Source |
|---|---|---|---|---|---|
| 1935-03-12 | message | Message recommending regulation of public utility holding companies | Proposed abolition of holding companies not serving an integrated system. | yes | Message to Congress Recommending Regulation of Public Utility Holding Companies. |
| 1935-08-26 | statute | Public Utility Holding Company Act and Federal Power Act (Title II) | SEC control of holding companies; FPC over interstate transmission and wholesale rates. | partly | Message to Congress Recommending Regulation of Public Utility Holding Companies. |
Obstruction
congress The utility lobby forced compromise on the 'death sentence' in 1935. source
Assessments
The holding-company bill was weakened on Capitol Hill.
Likewise, FDR's attempt to break up large public utilities holding companies with the Public Utilities Holding Company Act ignited a political firestorm on Capitol Hill that resulted in a weakened bill--and one that eventually benefited the utilities.
1932-fdr-utility-rates-on-actual-investment · created by claude-fable-5-1 · review: unreviewed