,North Carolina State Libraiy. Ralwgh STATE OF NORTH CAROLINA <c TWENTY-SIXTH REPORT CORPORATION COMMISSION BIENNIAL PERIOD, 1931-1932 COMPILATION FROM RAILROAD RETURNS ARE FOR YEARS ENDING DECEMBER 31, 1930 AND 1931 % m¥> H^.A STATE OF NORTH CAROLINA CORPORATIOJN^ COMMISSIOlSr W. T. LEE, Chaieman GEORGE P. PELL STANLEY WINBORNE COAIMISWiOiNKRS R. O- Self, Clerk Rebecca Mekeitt, Reporter- Elsie G. Riddtok, Assistant Clerk Maey Shaw, Stenographer Edgar Womble, Statistician RATE DEPARTMENT W. G. Womjjle, Director of Railroad Trans imrtation Needham B, C0RRE1.L, Rate Specialist C. H. Noah, Junior Rate Specialist CAPITAL ISSUES DEPARTMENT Stanley Winborne, Commissioner Sophia P. Busbhp:, Stenographer — LETTER OF TRANSMITTAL Raleigh, December 5, 1932. His Excellency, O. Max Gardner, Governor of North Carolin'O., Raleigh, N. C. Sir:—As required by Section 1065, Chapter 21, Consolidated Statutes, the Corporation Commission has the honor to report for the biennial period 1931 and 1932. The 1931 Legislature passed Chapter 455, of the Public Laws, which materially amended Chapter 21, Article III, Volume I, Consolidated Statutes, by giving this Commission authority to require uniform ac- counting, annual and other reports, make ex parte investigations, require certificates of convenience and necessity for the transfer of public utility property, and to a])prove contracts between utilities and holding Com- panies. Electric Kates This Commission has had jurisdiction of ehn-tric, gas and telephone utilities since 1913, Practically all the utilities operating in the State at the present time were at that time operating and had many of the plants that are in operation today already in service at the time that the Com- mission obtained jurisdiction. Since that time, there has been only one increase in electric rates made by Commission order after hearing, that of the Southern Povv'er Company in 1921 ; and, on appeal the Com- mission's decision in that case was upheld by the Supreme Court. The increase in public utility earnings has not come about by increase in rates, but by extension into new territory and growth in industry. Dur- ing and aft(>r the close of the World War the great criticism of public utilities was caused by their inabilit}^ to su])ply the demand, which was so great from sources of industry that the utilities financed themselves for a great growth in hydro development, ^vhich took a period of years to develop, and about the time that this development was completed, de- crease in business because of the financial depression left many of them with investments in ]:>lants which have capacities in excess of present demands. A¥ith reference to tlie authority given the Commission to require an- nual reporting, etc. the Commission revised its requirements under the 1931 statute, and, based upon the information obtained through that source, made a thorough investigation of the earnings of the several util- ities possible. After it had compiled sufficient information, the Com- iii : iv N. C. OoKi'OHATio:^ Commission mission issued an order on July 21, 1932^ directing the scA-eral utilities to appear before it for conference. To date, we have concluded confer- ences with the four large electric utilities in the State, w^hich have re- sulted in an annual reduction in rate revenue, as follows: Duke PoAver Company, including Southern Public Utilities Company, $957,000; Dur- ham Public Service Company, $65,000; Carolina Power & Light Com- pany, $120,000; and Tide Water Power Company, $25,000. Prior to these conference's, during the study and investigation in 1931 reductions and adjustments in vaivious g-as, electric and telephone rate schedules were made, Avhich resulted in approximately $200,000, w^hich when added to the above, make total reductions amounting to $1,367,000. We take the liberty to quote a comment of an examiner of the Federal Trade Commission on the comprehensiveness of our report forms. He said While not among the most elaborate and extended report forms in use, it contains several novel schedules, designed to bring out important and useful information, as well as schedules to develop what is commonly recognized as essential in a revealing report. This examiner found the information therein well worth while for his purpose and he is disposed to rank the report form as among the very best now in use. The above qnotation was taken from the report of Examiner Dicker- mon to the Federal Trade Commission in his investigation of the Tide Water Power Company. As to certificates of convenience and necessity, the Commission wishes to emphasize tluit this requirement has been found to be veiy effective in accomplishing the purpose desired. Prior to the passage of this act, public utility properties could be transferrc^d or constructed without the knowledge of tbe Commission, and in many instances have been trans- ferred and operated for twelve months without the Commission's know- ing of the change in ownership. Since the passage of this act, the Com- mission has been called u])on to issue seven such certificates, and the practice required bv the Commission under this section is embodied in Rule N^o. 8, of the Commission's Rules of Practice and Procedure, and enables the Commission to obtain first-hand information about the pur- chaser of a public utility which would not be possible for it to obtain over a long period without invoking this act. This section of the act was one of the fii'st restraints that has ever been thrown around a utility jU'operty by an act of the Legislature of this State, and no act that has the effect of restraining the actions of an individual or corporation can escape some criticism. The operation of the act has been satisfactory and if any change therein is contemplated, it should be strengthened rather than weakened. : Lettek of Tkansmittax. V We have iiad uiaiiy favorable comments on tlie authority given the Commission with reference to the approval of contracts between utilities and holding companies. This question is not only attracting the atten- tion of this Commission, but is receiving due consideration from other states in the Union as well as the Federal Government. It has become a national issue because of the failure of what was known as the "Insull Empire," an association of holding companies controlled by Samuel Insull, of Chicago, and his allied interests. Some of our utilities in this State were affected by that failure and this Commission, in taking action with reference to these, has been confronted by the necessity for cautious procedure in order not to put these in receivership also. We report our findings as follows 1 VI N. C. Corporation Commission sasu9dx3 ssojf) o^ ^- ^* B9SaT3q3 -dng jo op-ey; lO ^ ^ aoioouj ssojQ o^ o oo o CD oo <*< i-l eaSj'BqQ "dng jo ovye^ cc CO CO CO CO 1-1 M ^ T-c C^ (M 05 00 M ^ o lO t^ CO (M oo CO ^ >o O CO lO o> ^ CO o * OO 05 05 i>. •<*i (ra iO 05 ^ O J~ paxij ui aBBaiouj * co" o «o l^ o (M CO (M ^ Icl 1-1 Xutjdriio^ Sui^Bjado s . 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IJ •s^ ^ ^ 'S a s^ ^ o -fl - -fl =^ a g Eh m H W Ph W W 02 ^p <f ^1 'd S « Hi S c XI " 13 o o OO ^ o I o o ^ 11 MM 03 O t-) o Ph P-i tS K^i h-i > C3 O as =3 S ^- »3 o c fe o li P^ 8^:5 £ 3 WW ^h C303C30303Mt-iO -a H HH H O O : Letter of Transmittai. vn The legislation passed by the 1931 Legislature has been found to be wholly necessary in the conduct of the Commission's business during the past two years and it contemplates preparing and presenting to the Legislature additional suggestions for strengthening our present law, to meet modern requirements in public utility regulation. Telephone Rates For some time the Commission has had under consideration the ques- tion of telephone rates. The comparison of our rates with those of ad- joining states reveals the following AVERAGE RATE FOR EXCHANGES OF LESS THAN l.OOD TELEPHONES MAGNETO SERVICE Rate Number of State Exchanges Business Residence l-Party 1-Party North Carolina .. ..... .. 28 $3.35 $2.25 South Carolina . ... 37 3.55 2.25 Georgia 70 3.35 2.00 Tennessee 120 3.05 2.00 Virginia .