pean aeRO o> aC NON a Te NO po yatta alee

I ae

NANT

AT last the BCElectric has
overstepped itself. For the
first time in its nearly half a
century of ruthless money-grub-
bing this monopolistic corpora-
tion appears to face a reckoning.
Its chief ‘“‘expert,’’ arrogant Dr.
Harry Purdy, has been trapped
by his own figures. The com-
pany has falsified its income tax
by $4,1000,000, a sum almost
four times as great as the esti-
mated increased revenue from
the boost in transit fares.

While vigorous attempts will
be made to whitewash the cor-
poration, the facts are so for-
midable that all of its leading
officers and the Public Utilities
Commission will have difficulty
escaping public condemnation.
Before proceeding to cite and
evaluate these facts, it will be
enlightening to inquire into the
BCElectric’s background of de-
velopment and relationship to
consumers, the municipalities
and provincial government,

Until 1919 the BCElectric was
unregulated. It operated under
numerous charters and fran-
chises; in Vancouver streetcar
fares were determined by agree-
ment between the city and the
company, electric light and
power rates were arbitrarily set
by the company.

In 1919, as a result of public
dissatisfaction. the provincial
government set up a Public
Utilities Commission. It was
empowered to fix rates on the
basis of a fair and reasonable
return on an appraised value of
the BCElectric’s property. This
first commission: (it had one
commissioner, a ‘Major Retal-
lack) set out seriously to inquire
into the Vancouver transporta-
tidn system,

After more than $50,000 had
been spent, an amendment to
the Railway Act in Ottawa can-
celled out the, commission’s
work. The BCElectric techni-
cally came under the federal
act since it had some three
miles of suburban line operating
on right of way leased from the
CPR (the new amendment pro-
vided that if any part of a rail-
road was under the Dominion
Railway ®oard, then the whole
railway was under its jurisdic-
tion). The company’s regretful
announcement that it came un-
der the federal board wrote finis
to the Retallack Commission.

In the five years prior to 1928
the company claimed it had
spent $16,500,000 on new plant,
although in the same period the
only new securities it issued
were $5 million worth of pre-
ferred shares. Since the BCElec-
tric had anndunced from its in-
ception that it was satisfied to
earn 7 percent, and on the sur-
face that was all it appeared to
be earning, this was a most
peculiar circumstance.

Where did the money for
eapital expansion come from?
The other $11,500,000 certainly
couldn’t have come out of the
apparently meagre earnings of
7 percent, particularly since the
company proceeded regularly to
pay 7 percent dividends to its
stockholders. :

The answer to this question
eame in April, 1928, The BCElec-
tric, originally a British com-
pany, decided to sell, The first

Pri te it

CTE Tt tt tet ti TT Tt ee

~

Pirates
in power

TL PT

knew what ‘they were doing.
When they paid $60 million for
stock, they got $60 million worth
of assets. The $40 million dif-
ference represented hidden earn-
ings above the 7 percent re-
ported earnings.

Is it any wonder that the 1919
amendment to the Railway Act
was passed just in time to pre-

-~ vent the Retallack Commission

from appraising the value of
the ‘BCElectric’s property for
the purpose of fixing rates based
on a “fair and reasonable re-
turn on the amount of money
actually and reasonably expend-
ed’? Had the commission pro-
ceeded, unrevealed profits of
considerable magnitude would
thave been brought to ‘light, even
in 1919.

An interesting sidelight of the
company’s reorganization in
1928 was provided by the cun-
ning manipulations of its new
-owner-promoters. By issuing
two classes of shares, one with
voting rights and the other with-
out, they were able to get back
their entire $60 million and still
retain three-quarters of the vot-
ing stock in a company with as-
sets, after this device, valued
at approximately $100 million.

e
On February 10, 1943, Pre-

mier John Hart of B.C. stated.

in the legislature that should
Vancouver and Victoria desire
“to own their own transit sys-
tems and the right to distribute

bid to be publicized was from» electricity within their boun-

Lord Rothermere; this was fol-
Jowed shortly after by Nesbitt,
Thomson and Company and fin-
ally by Wood, Gundy and Com-
pany. The three bidders even-
tually got together and paid al-
most $60 million for stock which
had a par value of only $20
million. :
There’s no doubt that the
purchasers: The Power Corpora-
tion of Canada, Sir Herbert Holt.
Lord Rothermere, Canadian and
Foreign Power Corporation, J.
H. Gundy, Andrew Holt, and
Nesbitt, Thomson and Company,

daries, the government would
give consideration to any pro-
posals they might make.’’ On
February 7, 1944, he said, “Af-
ter a great deal of consideration
I firmly believe it is in the best
interests of the development of
this province to control the en-
tire hydroelectric power and

’ light services now being used

and which may be used for sale
to the public.”

In February. 1945, the New
York engineering experts, W. C.
Gilman and Company, were ap-
pointed to make a survey, and

By SID ZLOTNIK

in October that year the Gilman
Report appeared during the pro-
vincial election, which the Coali-
tion was contesting oh a public
ownership platform.

The Gilman Report recom-
mended that the B.C, Power
Commission should acquire all
the BCER generating facilities,
transmission substations, and
transmission lines operating at
34Kv and 60Kv. It should ac-
quire all distribution systems
outside the Vancouver and Vic-
toria metropolitan areas, -

A Lower Mainland Utility Dis-
trict should be organized to ac-
quire all the electric, gas, and
transit properties in the area,
and similarly a greater Victoria
Utility District should be organ-
ized.

The important feature of the
Gilman report was that it estab-
lished the advantages of public
ownership.

The -Gilman proposals were
followed by negotiations be-
tween the provincial government
and the municipalities. That
there was collusion in a deliber-
ate sellout of public ownership
is clear from the way negotia-
tions were conducted between

A. E. ‘DAL’ GRAUER
His expert was trapped by his
own figures.

CECT,

Liberal Premier Hart and Con-
servative Mayor Cornett. of Van-
couver.

The two exchanged a number
of communications. They did
not meet face to face to discuss
and iron out differences. Dis-
agreement arose over who would
be responsible to finance, not
the acquisition but the expan-
sion, of the system, When Corn-
ett received Hart’s last wire, he
simply strode from the council
chamber and announced, ’‘‘The

deal is off.’

e

Failure of public ownership at
that time opened up the question
of new franchise agreements
with the company. _These fran-
chises went to a vote in a num-
ber of municipalities in Decem-
ber 1946, Plebiscites in Victoria,
Oak Bay, Esquimalt, Saanich,
and Burnaby rejected the com-

pany or its subsidiaries.

In Vancouver, the city coun-
cil acted to reach agreement
with the BCER without a pleb-
iscite. But it had to seek rati-

fication of the new 20-year fran-

chise from the provincial legis-
ature. So great was public op-
position that a joint brief of the
CGF, LPP. International Wood-
workers of America, United
Packinghouse Workers, United
Steelworkers, International
Longshoremen, Western Shoe-
workers’ Union, Civic Reform
Association, Disabled Veterans,
Associate Council of Vancouver
South, and New _ Veterans’
Branch of Canadian Legion.
Nonetheless, the legislature
ratified the franchise agreement,
Harold Winch, CCF provincial
leader causing a furore among
his own supporters by casting
his vote for tha enabling act.

With the 20 year franchise
agreement safely in its pocket,
the BCER embarked on a ruth-
less campaign of increasing the
rates on all of its services.
There’s no need to enumerate
them here. However, it is nec-
essary to draw attention to the

PACIFIC TRIBUNE — MAY 2, 1952 —

_pany and the PUG were ®

company’s bad faith and fals® ©
statements. Under the caption, —

“B.C, Electric Won’t Ask Moré —

Increases” the following report
appeared in the Vancouver Sun
of July 17, 1948:

“The BCElectric, barring
unforeseen developments, doe
not intend to apply for any
further general rate increases
in its electric light, transit
or gas services,

“This was announced here
today by W. C. Mainwairing:
vice-president, following thé
government’s | announcement
that the company’s service
are to be considered as a unit
for rate-fixing purposes. .+*

“Among the unforeseel
items that might change this
would be extra. costs such a
might be brought about bY
new labor agreements, é
said.

“Mainwaring welcomed the
government’s decision becaus?
he said it safeguards the com
pany against having to apply
for excessive rates for trans
portation and gas.”

The dishonesty of this state
ment has been proven more thal
once since 1948. ‘There hav@
been numerous’ increases
rates, In March 1951 the com
pany applied for increases
electricity rates to meet i
creases in wage costs which
said would result from its neW
agreement with its transit el!
ployees, the Street RailwaymeDs
Union. Referring to rate i
creases in 1951 in its annué@
report to the shareholder,s tH?
BCElectric’s holding compa?!
British Columbia Power Corp”
ation, says:

“To meet higher costs
which appeared in waves #
different times throughout the
year in the form of increas®
in wages, prices, and incom
taxation, etc., the Compal
made three applications to the
Public Utilities Commissi®
for increases in electric 1at
and one application for 1%
creases in gas rates. ..- i
four applications. were acced”
ed to by the Commission,
third electric rate incre
taking effect on January
19D2,.7

is

The company’s dishonesty |
established by the fact +havmm™
applied for transit fare incre
in February 1952, and pres?
ed its case on March 5-7, 1
at a public hearing in VancouY
Courthouse. Yet at that
the company knew, as adm
by Dr. Purdy*in the witness
that its transit wages were
in 1951 than they had bee?
1950. at

Nevertheless, the compat!
had received increased reve"),
in March 1951 specifically ‘,
meet increased wage costs whi
never occured, and the PUC =
granted it to them, whatere
ignorance might have fs
pleaded in March 1951, the @

18:

nt

itted
dD ox:
38
ip

cessity aware of the falsete.
of that argument in March 1958
and yet they proceeded t? ‘
pose a further increase. te
According to a_ special we
in the company’s audited sta
ment for 1951, its income 5,
is $4,100,000 less than the
ure sworn to by its Tes? rt
director. Dr, Purdy, in the ve
ness stand. This income i
saving is quite apart fro™
reduced income tax the co” the
benefits from as a result © ~
new federal budget. as
The effect of this inco™? |
saving is to increase th®
operating income from the {0
lished figure of $8,182,28) yo
$12,282,231 for a rate of © ia
exceeding the allowable pe!
The BCER and the PUC (i, 7
talk themselves blue in the" the
they can no longer es¢4 pes?
indictment contained i2 i
facts.

i