debentures. Actually two solicitations were made of each of these three classes of security holders. The first solicitations were made prior to the time that American registered as a holding company under the Act. On March 28, 1938, consents had been received from the holders of the requisite 663 percent of the principal amount of secured debentures of American and of about 66 percent of the principal amount of the 6% notes of Birmingham and 78 percent of the preferred stock of the latter company. As a result of the decision of the Supreme Court in the case of Electric Bond and Share Company v. Securities and Exchange Commission, 303 U. S. 419, on that date, all solicitations were discontinued and American thereafter, on March 31, 1938, registered under the Act. The plan in its original form was then submitted to this Commission. Thereafter amendments were made and resolicitation was required, as well as resubmission of the plan in its amended form to the Alabama Public Service Commission. The proceedings before this Commission culminated in the findings, report, and orders of September 29, 1938. A considerable portion of the expenses incurred or paid by the two companies in connection with the plan were so incurred or paid prior to March 31, 1938, the date upon which American registered as a holding company. To the extent that such payments were made prior to such date, this Commission will not, at this time, disapprove the same, but to the extent that such payments were partial compensation for services continued after that date in further development of the plan, the payments so made have, of course, necessarily been taken into consideration in determining the reasonableness of the aggregate amounts for which approval is sought.

With the consent of both American and Birmingham, the following provision, among others, was contained in the order of September 29, 1938, permitting the declarations filed in this proceeding to become effective:

All literature to be used in solicitation of waivers and consents shall first be submitted to and be approved by the Commission and shall contain specific reference to the amendments to the plan and the agreements of American hereinabove referred to.

A schedule of fees and expenses paid, and an estimate of additional fees and expenses expected to be incurred, was set forth in identical language in the solicitation material mailed to the three classes of security holders above mentioned in the course of the second solicitation of consents, i. e., the solicitation of consents to the plan as finally amended. The aggregate of this statement and estimate was $96,451.07 as contrasted to the total for which approval is now sought

For detailed description of the plan and the proceedings in respect thereof, see report and findings and opinion cited in footnotes 1 and 2.

in the amount of $119,323.27. The officials of the companies, according to testimony presented herein, have secured substantial reductions in many of the claims for services as originally submitted, in an effort to bring the fees and expenses nearer to conformity to the estimates contained in the solicitation literature.

In the solicitation literature sent to the Birmingham noteholders, the Birmingham preferred stockholders and to the holders of American Gas and Power Company secured debentures, it was recited that fees and expenses paid at the time of such solicitation totaled $47,151.07. The itemized estimate in this literature of fees and expenses yet to be paid totaled $49,300. Thus, the aggregate estimated fees and expenses totaled $96,451.07. Fees and expenses for which approval is now sought total $119,323.27, being $22,872.20 over the estimate. The following table shows the expenses as estimated and as now claimed, and the difference between the estimate and the present claim:

• This item represents fees and disbursements of Continental Bank and Trust Company (depositary of stock and notes) and its counsel.

While there is a difference of $22,872.20 between the expenses actually incurred in this matter and those expenses as they were estimated, the several fees and items of expense which make up this difference do not appear to have been unreasonably incurred. The order to be issued in this proceeding will, therefore, approve the payment of fees and expenses as set forth in the post-amendment herein, plus the additional payment of $387.95 telephone charges, telegrams, postage, and similar expenditures made by Kalman & Company, on behalf of American, the statement for which was received too late to be incorporated in the post-amendment but proof of which was submitted by oral evidence at the hearing.

Of the total fees and expenses incurred items aggregating $20,943.27 are identified as incurred particularly for, and therefore chargeable in full to, American, while items aggregating $30,081.55 are identified as incurred particularly for, and therefore chargeable wholly to,

Birmingham. The balance of fees and expenses the companies propose to allocate two-thirds to Birmingham and one-third to American. In view of all circumstances of this case, including the fact that American is the largest holder of the common stock of Birmingham, we do not find this method of apportionment unreasonable.

We find no occasion to make any adverse findings of the payment of any of the items set forth in the schedule for which approval is presently sought. However, in the solicitation literature sent to the three classes of security holders solicited, it was expressly provided that not only should fees and expenses incident to the recapitalization of Birmingham be subject to the approval of this Commission, but that the same should also be subject to review and determination by the Alabama Public Service Commission. Our order herein will, therefore, approve the payment of fees in maximum amounts as hereinabove indicated, after, of course, the deduction of amounts already paid thereon in each instance, subject to the condition and provision that no further payment of any such fees or expenses shall be made until such payment shall have been approved, and only to the extent that the same shall have been approved, by the Public Service Commission of Alabama.

An appropriate order will issue in accordance with these findings and opinion.

By the Commission: Commissioner Healy was absent at the time of the Commission's consideration of this case and did not participate therein.

5 8. E. C.

[No. 866]

IN THE MATTER OF

HUNTINGTON DEVELOPMENT AND GAS COMPANY

and

COLUMBIA GAS & ELECTRIC CORPORATION

File Nos. 43-177 and 64-1. Promulgated August 30, 1939

ALTERATION OF RIGHTS OF HOLDERS OF OUTSTANDING SECURITIES OF REGISTERED HOLDING COMPANY OR SUBSIDIARY,

Reduction of Par Value of Common Stock.

Declaration, having been filed by a subsidiary of a registered holding company pursuant to Section 7 of the Public Utility Holding Company Act of 1935, regarding the reduction of the par value of its common stock, the amount of such decrease to be segregated in a special capital surplus account together with certain other credits, such account to provide for any downward revaluations in its property account, as such account existed at December 31, 1937, which may be necessary or required by regulatory authority, permitted to become effective, subject to certain conditions, the Commission observing no basis for finding that the proposed transaction will be detrimental to the public interest or to the interest of investors or that it will result in an unfair or inequitable distribution of voting power among holders of securities of the declarant.

ACCOUNTING.

Recording of Investments.

Application, filed by a registered holding company pursuant to Instruction 8C to the Uniform System of Accounts for Public Utility Holding Companies, promulgated under Section 15 of the Public Utility Holding Company Act of 1935, requesting approval of proposed entries to record the transfer to it of the stocks of a subsidiary company, and other assets of a subsidiary, approved, subject to certain conditions.

FINDINGS AND OPINION OF THE COMMISSION

Huntington Development and Gas Company (hereinafter called "Huntington Development") has filed a declaration, pursuant to Section 7 of the Public Utility Holding Company Act of 1935 regarding the reduction of the par value of its 40,000 shares of common stock from $100 per share to $50 per share.

Columbia Gas & Electric Corporation (hereinafter called "Columbia"), a registered holding company, has filed an application pursuant to Instruction 8C to the Uniform System of Accounts for Public

Utility Holding Companies 1 requesting approval of proposed entries to record the transfer to Columbia of the stocks of Huntington Development and Gas Company, and other assets of the former Huntington Gas Company (hereinafter called "Huntington Gas"), a wholly owned subsidiary of Columbia which has been dissolved.

A joint public hearing on these two proceedings was held after appropriate notice. Prior to the filing of the Commission's findings and order herein counsel for Huntington Development and for Columbia waived a trial examiner's report, the right to submit findings of fact to the Commission and to have submitted to them proposed findings of fact by counsel to the Commission, and the right to file briefs and have oral argument before the Commission. The Commission has considered the record in these matters and makes the following findings:

Huntington Development is a Delaware corporation. By virtue of the dissolution of Huntington Gas Company it is now a direct subsidiary of Columbia Gas & Electric Corporation. It is a gasutility company operating in the State of West Virginia. It has 40,000 shares of common capital stock outstanding, 99.7 percent of which is owned by its parent, Columbia Gas & Electric Corporation. By the reduction of the par value of the 40,000 shares of its common stock from $100 per share to $50 per share, capital surplus in the amount of $2,000,000 will be created. Such capital surplus will be segregated into an account to be designated "special capital surplus." As of December 31, 1937, Columbia Gas & Electric Corporation held $3,342,465.24 of 6% income demand loans (on open account) on account of advances made to Huntington Development. Columbia proposes to forgive this indebtedness, thus making a capital contribution to Huntington Development in the amount of $3,342,465.24. This amount will be credited to special capital surplus, increasing that account to $5,342,465.24.

Huntington Development had a deficit in its earned surplus account in the amount of $782,306.77 as of December 31, 1937. It proposes to eliminate this deficit by charging $55,500 to capital surplus and the balance of $726,806.77 to special capital surplus. After these transactions have taken place there will remain in special capital surplus a balance of $4,615,658.47 to provide for any downward revaluations in its property account, as such account existed at December 31, 1937, which may be necessary or required by regulatory authority.

The Uniform System of Accounts for Public Utility Holding Companies was promul gated pursuant to Section 15 of the Public Utility Holding Company Act of 1935. Instruction 8C reads as follows:

In the case of securities or other assets acquired by the accounting company upon the merger, consolidation, liquidation, or dissolution of an associate company in which the accounting company has an interest, the amount entered upon the books of the accounting company in respect of the securities or other assets thus acquired shall be such as the Commission may approve.