1930: Birmingham's Power Regulation Bill Reviewed at Committee Hearing

Birmingham’s bill on power utility regulation received support from some members of the Legislative Committee on Power and Light during an April 9 hearing, the Boston Globe reported (April 10, 1930, p. 18).

Birmingham, who was the minority member of a special commission on public utility control, introduced a bill that would eliminate reproduction value as a rate base. The bill would prohibit power companies from using the reproduction value theory, which they had relied on in court appeals to rate reductions.

Birmingham’s bill would require a power company to enter into a contract to abide by the Massachusetts investment value basis of rate making. The company would have to sign the contract in order to receive protection against competition from a municipal lighting plant, the newspaper explained.

If a company refused to ink the contract, it would have no redress should a local community set up its own lighting department without buying out the private company, according to the bill.

Birmingham was also seeking a resolution memorializing Congress to “prevent action by the Federal courts in all cases in respect to public utilities in which local judicial authorities and local regulatory agencies are empowered to prevent the abuse of exorbitant or confiscatory rates by a local public utility until the highest court of the States has passed thereon.”

Birmingham refused to argue for his bills during the hearing unless he was permitted to have them printed and presented to the legislature.

Majority Bill Would Also Eliminate Reproduction Value

The conservative majority on the commission also drafted a bill that would eliminate reproduction value as a factor in setting the price which a municipality would have to pay to a private company for the plant before it could set up its own public lighting department. Instead, the Massachusetts traditional fair investment value would be used to calculate the price. However, the majority bill would not touch the basis of valuation for rate making.

The commission majority’s counsel, Arthur D. Hill, testified that reproduction value is a “fictitious value” because it is the cost of “rebuilding something that nobody would rebuild because it is obsolete,” the newspaper reported.

Hill argued that use of the theory in court results in a constant threat of costly litigation because it is difficult to apply. He supported the idea of having the Public Utilities Commission be the arbiter of the price the community would pay for the plant. The commission should use the basis of the plant’s cost less its depreciation for the plant’s value.

The newspaper said that the committee would hold more hearings on the commission’s work on April 17, 1930.

The previous day, April 8, the committee held hearings on the regulation of power companies. Birmingham argued that the holding companies of the power companies should be regulated in order to secure fair power rates, the Globe reported (April 9, 1930, p. 8). He submitted separate bills on behalf of the committee’s minority members to include holding companies under regulation of the Public Utilities Department and to prohibit additional mergers of the eight large power companies in the state.

Birmingham noted that the commission was initially set up become of the attempt by International Power to buy the Boston Herald-Traveler. The commission was unable to find the final control of this power interest, he said.

Birmingham said that encroachment by outside holding companies up the local power field had been going on for years without any warnings from the Public Utilities Department. Only the purchase of the Herald aroused the public and prevented complete monopoly of the power interest in the state. Such a monopoly will prevail unless the state regulates holding companies and forbids further mergers, he said.

The bills introduced by the commission’s majority members would give the Public Utilities Department the authority to supervise contracts between utilities and the holding companies that control them, but would not regulate the holding companies directly. The bills would also require the holding companies to provider certain information that would enable more adequate regulation of the operating companies.

Birmingham wanted to know why his bills were not separately printed. The majority commission’s counsel, Arthur Hill, said that Birmingham’s bills and the minority report would not have been printed without him paying for it out of his own pocket. Birmingham said he would reimburse Hill if the legislature did not.

At a May 13 hearing, the Committee on Power and Light approved the commission majority's bill that would extend the law authorizing cities and towns to purchase  and operate power plants, the Globe reported (May 14, 1930, p. 28). The bill was amended in committee to give power companies the right to appeal a decision by the Department of Public Utilities on the price to be paid by the municipality to buy a privately owned power plant.

The committee decided that "no legislation necessary" regarding Birmingham's minority report and proposed measures.