EDITORIAL 



243 



distributing systems, and to create and maintain a profit- 

 able and economically administered power business. The 

 consolidation of many waterpower sites in a few strong 

 hands cannot be successfully prevented, any more than 

 that of the development of large and efficient railroad 

 systems. 



But this very tendency carries with it, as in all other 

 instances of monopoly, the danger that the public may 

 eventually be forced to pay tribute by overcharges for 

 services which have become indispensable. The specific 

 means by which this might occur are monopolistic con- 

 trol of all available waterpower sites, with the ability 

 to limit developments and raise rates; and the inflation 

 of the capitalized value of the corporation's business by 

 which the per cent earned upon the watered capital ceases 

 to indicate the returns upon the capital actually invested. 

 The legality of inflated values is accomplished through 

 sales, and consolidations or reorganizations by which the 

 plants are actually transferred at the advanced values, 

 which then become the basis for rate charges. 



Short of enforcing competition, which is not always 

 economically sound, the public can protect itself in three 

 ways by the regulation of rates, based on fair earn- 

 ings: by restricting overcapitalization, and by prevent- 

 ing the monopoly of the natural resource, making devel- 

 opment a condition of control. 



Good waterpower legislation must make possible the 

 development of publicly-owned power sites, but must 

 rigidly prevent the acquisition of rights under leases 

 which do not require development. If market conditions 

 do not demand the use of a waterpower, control of the 

 site should remain in public hands for the present. The 

 public must not be left with the husk of ownership, sim- 

 ilar, for instance, to that possessed under 999-year leases. 

 The right of recapture of these sites must be protected, 

 and the terms must be such as to exclude the value of 

 the rights granted and of public property or land used, as 

 well as intangible values based on income. The principle 

 should be to return to the lessee his actual capital invest- 

 ment, but not to sanction the very process of inflation 

 of values which it is the principal object of public owner- 

 ship to prevent. This same inflation should be checked 

 wer to withhold consent to sales or transfer of lease, 

 except upon terms approved by the public official responsi- 

 ble for the administration. The above objects may be 

 best attained through the retention of practical or actual 

 public ownership of waterpower sites. 



The third object, regulation of rates charged for serv- 

 ices, may be exercised by States or for interstate busi- 

 ness by the national government. This power alone 

 forms an entirely inadequate control of the situation, 

 since it does not prevent inflation nor require develop- 

 ment, as indicated by the government report reviewed 

 on page 236 of this issue. 



The Ferris Waterpower Bill, as passed by the House 

 of Representatives, provided adequate measures for de- 

 velopment of waterpower sites on public lands under 

 proper control. As amended by the Senate, this bill 



1. Permits the acquisition of leases controlling unlim- 

 ited waterpower sites by the same corporation without 

 requiring prompt development. 



2. Prevents States, municipalities or other public 

 bodies acquiring these sites, even at the expiration of the 

 lease, unless at the option of the lessee. ' < ' 



3. Permits inflation of capital by removing all control 

 over transfer of leases, and failing to properly safeguard 

 the provisions of recapture. 



These alterations work, in effect, to rob the public of 

 the substance of ownership and to make the lessee to 

 all intents and purposes the owner. This course is justi- 

 fied by its advocates on the ground that capital requires 

 these guarantees as a condition making possible the 

 financing of the projects. But the statistics of actual 

 development cited on page 236 show that under present 

 regulations, which grant none of these "rights of owner- 

 ship," 56 per cent of all western waterpowers are now 

 being operated, with an equal amount in process of 

 development or under application. 



This means that the financial interests which are at 

 present capable of developing public waterpower sites 

 are also capable of operating under the conditions now 

 imposed, and which thoroughly protect the public at all 

 points. Unless the amended Ferris Bill sanctions regu- 

 lations equally efficient, it should be summarily disposed 

 of. In its present form it is unfit for passage.. 



The bill contains two further features, both objec- 

 tionable. In the interest of an organization of promoters, 

 it would sanction a commercial power site in the Grand 

 Canyon of Arizona, known as one of the wonders of the 

 world. As well permit the harnessing of the geysers in 

 Yellowstone Park. The second feature, which we are at a 

 loss to account for, is the provision transferring the 

 administration of the waterpower sites situated within 

 National Forests from the Forest Service to the Secretary 

 of the Interior. The entire policy of leasing and use 

 of waterpower had its origin and was developed to an 

 efficient practice in the Forest Service. 



Three-fourths of all the waterpowers in use on pub- 

 lic lands are now handled by Forest Service officials, and 

 a still larger percentage of the unused power lies within 

 these national forests. These sites are situated hundreds 

 of miles from any existing Interior Department lands 

 or officials. Expensive and useless duplication of work 

 would result with no attendant benefits. Any such 

 wholesale transfers must be justified either on the 

 grounds of incompetency of existing service, or a large 

 resultant saving and increased efficiency. This feature 

 of the Ferris Bill is absolutely unjustified by existing 

 conditions. 



EXHIBITS WIN DIPLOMA 



EXHIBITS sent to the Panama-Pacific Exposition, 

 at San Francisco, by the State College of For- 

 estry, Syracuse University, have been returned to 

 the college and are being unpacked. The models, show- 

 ing the practical work done at the college, won a diploma. 



