1930: Birmingham criticizes House report on rate abuses by gas and electric holding companies9/4/2017 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].”
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Rep. Birmingham joined with Wallace H. Walker, secretary of the Public Finance League, and others to urge favorable action on their measures to ease setting up municipal electric plants, during a March 4 hearing of the Legislative Committee on Light and Power. Birmingham pushed for enactment of legislation to prevent power companies, “drunk with exorbitant profits,” from appealing to federal courts, according to a report in the Boston Globe, March 5, 1931, p. 4. The state should have the sole authority to determine the amount of property and price for a town to set up a municipal power plant, he argued. The previous year, a special legislative commission set up to probe control of electric and gas companies in Massachusetts. The commission noted that these companies make profits through contracts for management, engineering, purchasing, and other services, which it regarded as a “very serious abuse,” according to an article in the National Municipal Review, May 1930, pp. 322-323. Instead, the commission recommended that control over these contracts be vested in the Department of Public Utilities, which should have the power to terminate any contract where the charge is unreasonable. The panel did not recommend the direct regulation of electric and gas holding companies and opposed legislation intended to break up the existing electric and gas system or to restrict consolidation. In response, Birmingham issued a dissenting report in which he criticized the commission for not holding public hearings. He said there was a need for a fixed rate base and favored a system of contracts in which companies would agree to the state’s cost system or face the loss of valuable rights under the law. Birmingham also supported enabling municipalities the ability to take over ownership of electric and gas provisioning without being required to purchase company properties. He argued that the rates for electricity and gas were excessive and that the public had not been adequately protected. In 1932, 1933, and 1934, Birmingham introduced a number of bills that would regulate rates charged by electric and gas companies, but none of them made it out of committee. |
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