company's credit position in the financial world is such that we are assured that bonds can be marketed to cover two-thirds of construction costs through investment bankers who reach the investing public throughout the country, and that stock can be sold directly to the people to supply the remaining onethird. Immediately upon securing the necessary Federal and States' authority, we are prepared to undertake and finance construction work at the rate of $30,000,000 to $40,000,000 per year.

The company is willing that any license or permit granted it by the United States Government or by the States affected, shall contain a provision that the rights granted are subject and subordinate to all of the provisions of the Colorado River compact executed at Santa Fe, N. Mex., on November 24, 1922. respecting the relative rights of the States in the Colorado River Basin to the waters of the river.

We respectfully ask that this communication be received and given due consideration by the committee.

SOUTHERN CALIFORNIA EDISON Co., By JOHN B. MILLER, President.

Now, in connection with that statement, reference was made to a report of Price, Waterhouse & Co.; and this statement and this report of Price, Waterhouse & Co. are submitted for the purpose of placing before the committee the Southern California Edison Co.what it is; its size; what it does; and its credit standing generally. The report of Price, Waterhouse & Co., which I have here, I will not read, as it goes into a good many figures: but I will say that an examination of this report will show a very splendid conservative relationship between the outstanding capital of the company and its property investments at cost. In other words, accountants would derive from this statement that the old question of watered stocks does not exist in the Squthern California Edison Co.

In passing, I might say that a reason for that, perhaps, is that more than 90 per cent of the properties of this company have been acquired and constructed since the public utility act was enacted in California, and therefore under regulation by the State railroad commission, both as to the rates and service and the issuance of securities and their sale.

I will also draw attention to the fact that the statement of earnings attached to that report showing gross earnings last year of $20,000,000, in round figures, and operating expenses of $8,847,000, in round figures, after deducting a provision for depreciation and contingencies of $2.815.000, and an interest charge of $3,394.000, leaving a balance for the year of $5,152,000, from which dividends were paid amounting to $4,299,000. In other words, all of the earnings were disbursed, except a very small margin.

The interest was paid to bondholders by way of wages upon cap: tal loaned. The dividends were paid to stockholders, by way of the same account, for money actually invested in the stock.

Mr. RAKER. And what was the interest paid: that is, what per cent?

Mr. BALLARD. The average interest is a little over 6 per cent perhaps 6 per cent.

Mr. RAKER. And the dividends on the stock are what?

Mr. BALLARD. The dividends on the preferred stock are 7 per cent and on the common stock 8 per cent.

This statement also indicates to the committee the size of the company, and its operations; and in connection with that I wish to draw your attention to the fact that, since business was resumed.

under more or less normal conditions in the country, with the signing of the armistice in 1918, this company has spent in new development in excess of 118 millions of dollars; and its annual expenditures now are at the rate of more than $26,000,000 a year.

I will submit this statement to the committee. (The statement referred to is as follows:)

CERTIFICATE

LOS ANGELES, February 28, 1924. We have examined the books and accounts of the Southern California Edison Co., from which the attached balance sheet, profit and loss and surplus accounts have been correctly prepared.

We have not examined the books of the owned and controlled companies, but balance sheets of these companies were submitted to us. Reasonable provision has been made for depreciation and Federal income and profits taxes, and we certify that, in our opinion. the attached balance sheet is properly drawn up so as to show the true financial position of the company as of December 31, 1923, and that the profit and loss and surplus accounts are fair and correct statements of the operations of the company for the year 1923. PRICE, WATERHOUSE & Co.

Balance sheet of Southern California Edison Co., December 31, 1923

Southern California Edison Co. profit and loss account for the year ending

Operating profits for the year ending Dec. 31, 1923, as above...

Miscellaneous charges (net)

2,786, 890. 79 5, 153, 639. 27

7,940, 530. 06 247, 684.92

7,692, 845. 14

Mr. LEATHERWOOD. Did I understand you to say, Mr. Ballard, that if given the necessary permit or license from the Federal Power Commission, your company was ready to proceed to the extent of an investment of about $30,000,000 a year?

Mr. BALLARD. Some $30,000,000 or $40,000,000 a year: yes, sir. Mr. LEATHERWOOD. As I understand it, most of the cities and towns of southern California are now served by private power concerns? Mr. BALLARD. Yes, sir.

Mr. LEATHERWOOD. With the exception of one or two cities?

Mr. BALLARD. With the exception of very few; and those very few-nearly all of them-receive most of the power from the pri

vate concerns.

Mr. LEATHERWOOD. And the demand for power is increasing, is it, in that territory?

Mr. BALLARD. Yes, sir; increasing very rapidly.

Mr. LEATHERWOOD. From other statements that have been made before the committee, I understand that it would take something like nine or ten years to construct a dam, of approximately 600 feet in height, at or near Boulder Canyon?

Mr. BALLARD. I understand that to be true; yes, sir.

Mr. LEATHERWOOD. That would develop-what is the estimated horse power?

Mr. HAYDEN. Six hundred thousand horse power.

Mr. LEATHERWOOD. Six hundred horse power. Pending the construction of that, this territory would be wholly dependent upon the present agencies for power, would it not?

Mr. BALLARD. So far as I can see; yes, sir; and that is the quandary that this company the Southern California Edison Co., finds itself in at the present time.

Mr. LEATHERWOOD. I take it, of course, that the companies now operating and furnishing uower in that territory are subject to taxation upon a fair valuation of their property?

Mr. BALLARD. Yes, sir. And our taxes payable on the properties of the company, by way of tax on gross earnings-that is the unit. of measurement in California-plus the taxes that we pay directly to the Federal Government, amount to nearly $2,000,000 each year. That is part of the taxation. Our securities are all taxed, of course; and that amounts to more than that. That enters into the cost of money. The effect of that would be an additional figure of about $3,000,000.

Mr. LEATHERWOOD. But the tax upon your physical properties goes to the States in which you are located, of course?

Mr. BALLARD. Yes, sir.

Mr. LEATHERWOOD. At the end of a ten-year period, asuming that it would take ten years to construct a dam at or near Boulder Canyon, and the necessary power plant in connection therewith, there would then be an additional 600,000 horse power for sale in this territory? Mr. BALLARD. Yes, sir. That is one of the problems of this proposition; and I confess that I do not know what the answer to that problem is.

Mr. LEATHERWOOD. May I ask this further question: What would be the economic effect upon the investment and upon the plants now serving the people, and which must serve the people during the 10year period, at the end of that time, by the construction of such a project as contemplated in the Swing-Johnson bill?

Mr. BALLARD. The economic effect must be detrimental to either the existing investment or to the proposed new investment. They can not both grow and prosper at the same time, under the conditions as now outlined for the development of 600,000 horsepower, bringing it all in at once at the end of 10 years.

The CHAIRMAN. Before you came in, Mr. Leatherwood, Mr. Ballard made a request that he might proceed and make his statement,