Capacity Wanted

Production of electric power in the U. S. last fortnight amounted to 2,493,993,000 kilowatt hours, which looks like almost as handsome a number as the U. S. 1939 deficit. Actually it is a very handsome number. It means that electric utilities is one industry which is not only producing 12% more than in lowly 1938, not only 10% more than in rattling 1937, but is selling to consumers about 20% more than in luscious 1929.*

Last week U. S. powermen were frantically looking for plants with spare capacity to help out others whose capacities had already been overtaxed. They had already begun to give impressive orders for new equipment : $70,000,000 ordered since the war began. They were drafting specifications for perhaps as much as another $100,000,000, to be ordered before the end of the year.

The reason for this hunt for new capacity is partly Act of God. Last summer's drought lowered the level of the rivers which feed the 27% of U. S. power capacity which is hydro instead of steam. Last year when water was plentiful, hydro output set a new record: 41,500,000,000 kilowatt hours, 38% of the total.

But August 1939, when total U. S. power production was up about 10% over August 1938, hydro production was down 8%, and steam plants had to plug into hydro's distribution outlets to stave off a power famine. August steam plant output jumped 21%. September told a similar story. Most acute water shortage was in TVA country, in New England (where August hydro output fell 34%), in the Middle West (where rainfall had been 1/3 to 1/2 of normal). Part of last month's coal crisis (TIME, Oct. 2) was due to utilities' emergency demands. Another reason for the need for new generating capacity is the relatively small recent investment in utilities plants. In 1929 the utilities invested over $900,000,000 in new plant, topping a six-year average of about $800,000,000. Depression practically stopped all utility investment, but even in 1937 new utility investment (exclusive of TVA and other Government spending) recovered to only $450,000,000. One reason for expanding power sales is that today every installation by industry of high-powered modern machinery adds huge wholesale loads to electric consumption. With a possible boom at hand and more than half of U. S. machinery still well over ten years old (and not using as much juice as new units), if industry begins to modernize on a big scale the utilities may have to step lively to keep up.

Three things now hold up new investment in utility plant: 1) many systems have poor capital structures and weak earnings records which make it hard for them to raise capital; 2) no one knows yet for sure when or if Government competition will end; 3) and nobody knows either what sort of territorial integration (under the Public Utility Holding Company Act) may eventually coordinate the sprawling structures of many holding, companies.

In October 1938 one attempt was made to break the log jam. Assistant Secretary of War Louis Johnson got up a National Defense Power Committee on which the New Deal's very power-minded Corcoran-Cohen organization was also represented. Mr. Johnson rounded up the topflight utility bosses (one of whom, white-mustached, aristocratic Hobart Porter of American Water Works, once used him as a Washington lawyer), got them to pledge to invest up to $1,000,000,000 a year on war emergency plant in 1939 and 1940. One power executive remarked: "They wanted ballyhoo and we gave it to them." Less than $500,000,000 was actually spent.

This autumn, with a real war emergency at hand, Johnson tried again. Through his War Resources Board, he started honeymooning with New York's very unromantic powerboss, Floyd L. Carlisle (who would like in the process of integration to get a good piece of Howard Hopson's old Associated Gas & Electric system, which sticks into his New York organization at Rochester, Staten Island, elsewhere). Any chance that some arrangement could be made whereby Mr. Carlisle would become War II's No. 1 Dollar a Year man, and deliver the industry's cooperation in a big building program, suddenly vanished. New Dealers, suspicious of aggressive Mr. Johnson, got his War

Resources Board junked, then his National Defense Power Committee. In came an old body, the National Power Policy Committee, headed by New Deal Goalie Harold Ickes. The plans of this Committee are largely conceived in the fertile head of its General Counsel, scholarly, drawling Ben Cohen. It plans to study U. S.'regions in need of new generating capacity.

The new Committee's recommendations will undoubtedly favor such policies as those outlined two week, ago to the stockholders of the $3,000,000,000 Electric Bond and Share system by its chairman, C. E. Groesbeck, who in the last two years alone has hooked his system up to Government generators at twelve points, coordinating public generators with private transmission facilities. This would permit operating companies to go on financing new equipment by selling bonds, preferred stock.

In 1940 new operating company construction (forced by threatening power shortages)--without any holding company shakeup--may reach somewhere close to $600,000,000 (against perhaps $500,000,000 this year), but is not likely to go higher. Some plans already outlined: > Companies in the Electric Bond and Share system have budgeted $80,000,000 of new construction for 1940 ($66,000,000 authorized this year). > Wendell Willkie's Commonwealth & Southern system (which two weeks ago sold more property to TVA--at a loss of about one-third on book value) is spending an extra $22,000,000 over & above its normal $33,000,000 a year. > Duke Power Co., which powers 7,000,000 cotton spindles (25% of those working in the U. S.), is spending $8,000,000 on an 80,000 kilowatt plant on the Yadkin River. > At Oswego, N. Y., Niagara Hudson is doubling its local 80,000 kilowatt capacity, spending $7,000,000.

-Except by comparison with other industries the utilities have no reason to be cocky about a 20% sales growth since 1929. Between 1922 and 1929 they grew 100%.

This file is automatically generated by a robot program, so reader's discretion is required.