In March 1930, a House Special Commission on Control and Conduct of Public Utilities issued a report concluding that the eight gas and electric holding companies that dominated the industry in Massachusetts had charged consumers artificially high rates for gas and electricity.
The holding companies were charging high rates to cover the high price of stock of the operating companies acquired by these eight holding companies, which dominated nine-tenths of the total gas and electricity business in the state.
In addition, these holding companies set up affiliated companies for management, construction, purchasing, financing, and other related services. These affiliated companies made large profits by charging high prices for these services to the operating companies owned by these same holding companies, according to the report.
Instead of breaking up the holding companies, the report, prepared by the Republican majority, recommended that the gas and electricity operating companies be subjected to additional regulation. The report proposed a number of bills that would impose greater financial transparency on holding, operating, and service companies and give the Department of Public Utilities additional powers, including regulating rates of bulk energy prices charged to operating companies and municipalities.
Rep. Birmingham inked a dissenting report, criticizing the majority report for not going far enough in exposing the “unjust charges for electric light and power” that consumers had to pay because the holding companies had to generate high profits “to pay dividends” on the “watered stock” of these holding companies.
Birmingham criticized the majority report for not conducting a thorough investigation of the financial practices of these holding companies, including interviewing company executives and examining the books and records of these companies in open hearings.
Despite being given the authority by the legislature to conduct a thorough investigation of these companies' practices, the committee failed “to convey adequate information to the Legislature or the public as to the methods which are being employed in the management of these companies,” the minority report noted.
In addition, Birmingham criticized the committee for not thoroughly investigating the possible ownership of the Boston Herald-Traveler by the International Paper & Power Company, which controlled the New England Power Association. Reports about ownership of the paper spurred the creation of the special commission, yet it failed to explore this issue adequately, he charged.
Birmingham concluded that “the menace of unemployed cannot be removed if this State is to go on paying rates for light and power far beyond what they should be. The responsibility of changing these conditions in the interest of the business men and the workers of Massachusetts is squarely up to the General Court [the Massachusetts legislature].”