Full text of Statements and Speeches of Andrew F. Brimmer : Public Utility Pricing, Debt Financing, and Consumer Welfare : Remarks upon Receipt of The Joseph P Wharton Award Presented by The Wharton School Club of Washington, International Club, Washington, D.C.

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Fos Release on Delivery
May 22, 1974
7:00 p.m. E.D.T.

PUBLIC UTILITY PRICING, DEBT FINANCING, AND
CONSUMER WELFARE

^Remarks By

Andrew F. Brimmer
Member
Board of Governors of the
Federal Reserve System

Upon Receipt of

The Joseph P. Wharton Award
Presented by

The Wharton School Club of Washington

International Club
Washington, D. C.

May 22, 1974

PUBLIC UTILITY PRICING, DEBT FINANCING, AND
CONSUMER WELFARE
By
Andrew F. Brimmer"

The financial problems of public utilities were suddenly
thrown into sharp focus earlier this spring.

On April 23, the

Consolidated Edison Company (serving approximately half the population
of New York State) omitted its dividend for the first time in nearly
90 years.

On the same day, a major private rating agency (Standard and

Poor's Corporation) reduced its rating of the company's bonds from BBB
to B B — a classification making them ineligible as legal investments
for fiduciary financial institutions in New York State.

So strained

was Consolidated Edison (Con. Ed.) that it had to appeal to the State
for emergency assistance.

In the closing hours of this year's

legislative session, a sum of $500 million of State aid was provided
through the purchase of two of the Company's generating stations still
under construction (on which the State must spend another $300 million
to complete the projects).

* Member, Board of Governors of the Federal Reserve System.
I am indebted to a number of persons for assistance in the preparation
of these remarks. At the Board, Mr. James Kichline had general oversight
of the staff effort. Mrs. Helen S. Tice had responsibility for the assessment of public utility pricing practices, and she also analyzed (with the
help of Mr. John Austin) the responses to the informal survey of utilities'
rate adjustment experience conducted by the Federal Reserve Banks. At
each Bank, at least one economist carried out this task, and I am indebted
to each of them. Mrs. Margaret H. Pickering helped with the assessment
of utilities' financing problems. Mrs. Ruth Robinson calculated the unit
costs of utility services to different categories of customers. Several
members of the staff of the Federal Power Commission were particularly
helpful through sharing data and discussion of issues with the Board's
staff.
However, the views expressed here are my own and should not be
attributed to others.

- 2 In the wake of Con. Ed's difficulties, the market
value of public utility stocks generally declined appreciably*

Quite

a few of the privately-owned firms found it difficult--if not impossible—
to sell long-term debt to finance the expansion of capacity and to install
pollution abatement equipment.

While regulators, investment analysts,

and private investors had been uneasy about utilities for some time,
a number of consumer group spokesmen also broadened the discussion of
the future of public utilities.
For quite a few months, some of us in the Federal Reserve
System have also been concerned with the growing difficulties being
encountered by public utilities.*^

Among these difficulties, their

deepening financial problems are particularly troublesome.

Unless

they are able to overcome these financing obstacles in the next few
years, consumers are likely to bear the real costs of such failure in
the form of energy shortages, much higher prices, and severe constraints
on the improvement of consumer welfare.
Given this prospect, I decided to explore the subject again.
Specifically, I wanted to know the nature and magnitude of the financing
problem which the utilities will face over the next few years—and
not simply its longer-run dimensions.

I also wanted to know the extent

to which the regulators of public utilities—at the Federal, State,
and local levels—appreciate the scope of the financing difficulties

_1/

See my paper entitled "Economic Growth and Environmental Protection:
Cost Elements in Pollution Abatement" presented at a Symposium at
the 47th National Mayo Alumni Meeting, Rochester, Minnesota,
October 12, 1973. See also the speech by Governor Robert C. Holland
"Public Policy Issues in the Financing of New Energy Capacity," presented
before the Financial Conference of the National Coal Association,
Chicago, Illinois, October 31, 1973.

- 3 and are responding to the need to assure a sounder financial base.
To obtain insights into the way in which the regulatory process is working
under present circumstances, I asked the 12 Federal Reserve Banks to
make an informal survey of the situation in their Districts.
of that canvass are reported on here.

The results

Finally, I wanted a clearer

picture of the consequences for consumer welfare of the differential
pricing practices generally followed by electric and gas utilities.
These issues are analyzed in some detail in the rest of these
remarks.

The highlights can be summarized here:

--In the last decade—but especially in the last year—
inflation has had a severe impact on public utilities.
Their fuel costs have risen beyond the expectations of
the most pessimistic forecasters, and their earnings have
continued to deteriorate. They have had to finance a
greatly increased volume of capital investment (a sizable
proportion of which was required for pollution abatement)
during a period in which their cash flow was depressed,
and cost of both debt and equity funds was rising.
—The normally long lead time required for new construction
has been lengthened further by delays necessitated by the
filing of environmental impact statements. Moreover, the
growth of consumer awareness has added new pressures against
increases in utility rates—despite the rising costs of
providing service.
—Over the last few years, the ability of public utilities
to raise funds in the capital market has deteriorated
appreciably. A substantial number of firms are not earning
enough to cover their interest cost to the extent investors
normally find appealing (typically a 2-to-l earnings-cost
ratio). This means that they are effectively barred from
floating long-term debt. Some utilities have also experienced
difficulty in rolling over commercial paper. Consequently,
a growing proportion of utilities have found it necessary to
rely temporarily on short-term bank credit.

- 4 —Moreover, a significant number of these firms have had
their bond rating lowered or suspended. For example,
the number of adverse rating actions in the first 4-1/2
months of this year exceeds those occurring in all of
1972 and 1973.
— T h e results of an informal survey of public utilities
undertaken by the Federal Reserve Banks earlier this month
suggest that the regulatory process has not been accelerated—
despite the severity of the financial problems which these
firms face. Of the nearly 100 utilities contacted, over
80 per cent have sought rate relief within the last year.
Just under half of the requests were granted in full;
another one-seventh were granted either in part or on an
interim basis, and two-fifths were still pending.
— T h e time typically required for the resolution of a request
for a rate adjustment apparently has not been shortened
significantly—if at all. While the time lag varies widely
among the States, it averages from 9-12 months. If lags
are not too long, the rate adjustments are often too small.
— T h e majority of respondents reported automatic rate adjustments
for fuel costs and purchased electricity as well. In many
cases, such clauses had applied to nonresidential customers
for some years, and the procedure was extended to all
customers recently. Nevertheless, while these clauses help
somewhat in cushioning the impact of escalating fuel costs,
these schemes vary considerably in the speed with which a
cost increase is reflected in a rate increase.
— A s I weigh the financial situation faced by public utilities,
I am personally convinced that they are--in fact—confronted
by genuine difficulties. At the same time, however, I do
not believe these difficulties will lead to a parade of
utilities to their respective State legislatures to seek
emergency assistance—as one large company had to do in New
York State. Instead, I am personally convinced that a more
sympathetic—and timely--response of regulators to requests
for rate adjustments will enable the vast majority of firms
to cope with their problems.
— O n the other hand, I believe that—before too long—utilities
ought to give serious attention to efforts to correct the
historic pattern of pricing which favors large commercial
or industrial users with lower rates than are charged
residential or small commercial customers. For example,

- 5 in 1972, the residential electric consumer paid over
twice as much per kilowatt hour as the large commercial
customer. In the same year, residential gas consumers
paid a rate over 2-1/2 times as high as the industrial
consumers.
—While recognizing that there are some physical efficiencies
in delivering energy to large users, I believe these
quantity discounts are no longer consistent with our
long-run need to conserve energy resources. I personally
think it would be better to replace the existing system
of pricing with a structure that puts much more emphasis
on peak load rate differentials for both time of day and
season of the year. This scheme would have little impact
on industrial users, and there would be a tendency to
redistribute costs of electric use toward affluent residential
users.
— I n the meantime, we as a society must give careful consideration
to the way in which we are to allocate our scarce energy
resources. Moreover, we should all accept the fact that
this growing scarcity will mean higher prices for energy
relative to most other items on which consumers can spend
their income. In the long-run, it is better to permit
these increases in real costs to be passed on to final
users--rather than pretend that we can--somehow—escape
the burden. Only in this way will consumer welfare be
truly served in the years ahead.

- 6 Changing Perception of the Problem of Public Utilities
In October, 1964, the Federal Power Commission (FPC)
released its report on the National Power Survey which it initiated
in 1962.

This Survey, the first comprehensive study of the electric

power industry as a whole, pointed out efficient patterns of
development and coordination in electric power generation among all
segments of the industry which might be attainable during the
1970's.

In retrospect, it exhibits the optimism which prevailed

a decade ago.

The report is filled with chapters such as the one

entitled "A History of Industrial Growth and Cost Reductions" as well
as exhortations

such as "... The challenge facing the electric

power industry is to continue the long-term trend of selling
electricity to the consumer at steadily lower prices...."—/

The

concluding chapter was titled "Outlook for Cost Reductions."

However,

the matter of sources of financing for the projected growth in
capacity was barely discussed—except to point out that the internal
funds of investor-owned companies were accounting for an increasing
share of the funds for capital expansion.
In 1972, the Commission issued another Power Survey report
covering the period 1970-1990.

The world as viewed in this Survey

seemed different indeed from that which had been promised only a
few years before.

For example, the FPC now

"... estimated that the recent reversal in the
historical downward trend in the real cost of
electric service will be carried into the
future...." (Volume I, Page 1-19-1.)
2/

Volume I, page 5.

- 7 It also observed that:
"... When the first National Power Survey was
published in 1964... electric power companies
had little trouble raising the funds needed to
modernize and expand their plant. Today this
is far from the case...." (Ibid., page 1-20-1.)
The recent Power Survey contained an entire chapter from the
perspective of 1970 on the industry's financing problems anticipated
for the period of tremendous expansion projected for the following
two decades.

In general, its tone was guardedly optimistic about

the industry's ability to raise these substantial sums in the capital
markets.
Unfortunately, events seem once again to have overtaken
the forecasters.

Within the last year, fuel costs have risen beyond

the expectations of even the most pessimistic of forecasters of a
few years ago.

Interest rates have remained high and show little

prospect of falling.

The rate of inflation has accelerated, and utility

earnings have continued to deteriorate.

The scholarly as well as

the popular literature abounds with articles on the ill-health of
the utility industry in general and of many companies in particular.
Many firms have been forced to issue stock since earnings have been
insufficient to meet the interest coverage requirements in existing
bond indentures.
The sources of these problems are not difficult to isolate.
Capital outlays have been substantial since 1965—a period in which
investment was virtually stagnant in other sectors.
this expansion had to be financed

Furthermore,

during a period in which the

- 8 utilities' cash flow was depressed, and the cost of both debt and equity
capital was rising.

As each increase becomes imbedded into the

industry's cost structure, further upward pressure on the cost of
funds is exerted.

Inflation has taken its toll as well.

Construction

costs have risen, fuel costs have risen, and part of the rise in
interest rates is attributable to an inflation premium.

Costs of

pollution abatement also enter into both operating and construction
expenses.

Clean fuels are in relatively short supply—and therefore

costly—and the emission control equipment incorporated into plants
is also expensive.

The long construction periods for new capacity

have been lengthened further by the delays caused by the required
filings of environmental impact statements and the challenges of an
increasingly environmentally conscious public.

Finally, in addition

to the lags already existing in the regulatory process, the growth
of consumer awareness has added new pressures for keeping rates
from rising rapidly if at all—although the consumer price index
(CPI) reports increases averaging 5 per cent per year in gas and
electric costs in the last two years.
Financial Developments Since 1964
The year 1965 saw the peak of popularity for utility stocks;
since then price-earnings (P/E) ratios have fallen, interest rates
have risen, and the financial picture of the sector has deteriorated.
In 1968 and 1969, interest rates had risen sufficiently to elicit
articles in one of the leading publications(Public Utilities
^Earnings must be larger to cover the additional fixed charges, and
price-earnings (P/E) ratios and the yields required to market new
bond issues are also likely to increase.

- 9 Fortnightly—hereafter cited as P.U.F.) calling for more sophisticated
and yield-conscious techniques of cash management—3/ or for the use
of short-term instruments for financing in a period of high interest
4/
rates.""

The legacy of such activities is perhaps to be found in

the low level of liquidity in the utility sector and in the bulge
in the financing calendar in 1975 when the five-year notes of 1970
come due.

Currently some observers are advocating off-balance sheet

financing (leasing, primarily) as a way of making the
5/ industry's
securities more attractive to the investing public.

Other observers,

however, point out that the adoption of lease capitalization as an
accounting principle by the Securities and Exchange Commission (SEC)
will dissipate the advantage very rapidly.
Some of the industry's financial problems can be traced
in the statistical tables attached to this paper.

These tables have

been assembled from a variety of sources which do not seem to possess
a high degree of consistency with one another.

Unfortunately, time

did not permit us to engage in any elaborate attempts at reconciliation.
But whatever the differences in data, they all tell essentially the
same story.
Tables 1, 2, and 3 show the utility component of the
principle bodies of aggregate data on sources of funds which have
been incorporated into the Flow of Funds accounts compiled by the
Y/
4/
5/

R. W. Jackson, "Cash-Balance Sheet Bonanza," P.U.F., 2/1/68.
A. G. Mitchell, "New Trends in Utility Financing," P.U.F.,
12/18/69.
P. L. Kintzell, "Leasing in the Electric Utility Industry
and How to Account for It," P.U.F., 3/28/74.

- 10Federal Reserve Board's staff.

These are data showing the profits

and cash flow series compiled by the Bureau of Economic Analysis
(BEA) in the Department of Commerce;

the SEC security issue series;

and the SEC Corporate Working Capital series.

Tables 4, 5, and 6

are based largely on aggregate data for investor-owned gas utilities
compiled by the American Gas Association and investor-owned class A
6/
and B electric utilities compiled by the FPC."

Again, the focus is

on sources of funds, capital outlays, and rates of return.
Both sets of data indicate a growing shortfall of internal
funds relative to capital expenditures.

Moreover, the problem is

much more acute for electric than for gas utilities which have somewhat
higher rates of return.

In the case of external financing, both

sets of data again point up the growing share of utilities in long-term
securities offered in the capital market.—^

When one examines liquidity

ratios, it is easy to see why this volume of external financing was
required quite apart from the massive capital outlays.

Even more than

nonfinancial business as a whole, utilities have exhibited the decline
in holdings of short-term assets relative to short-term liabilities
6/

One major source of disparity between the two sets of estimates
of retained earnings is attributable to differences in depreciation
accounting. The BEA bases the national income accounts on tax
definitions of depreciation and earnings, while utility regulatory
reports incorporate straight-line techniques. In fact, any use
they make of accelerated depreciation is included under "deferred
taxes."
The two components series sum to more than the SEC aggregates,
however. This phenomenon can be explained in the case of debt
by the fact that the SEC series is limited to bonds while the
industry series include other forms of debt as well. No such
convenient answer is at hand for the equity series.

- 11 which has characterized the last 20 years.

Once again the problem

is more severe for electric than for gas utilities.

Furthermore,

much of the 1973 growth in the current assets of utilities is attributable
to substantial increases in inventory book values and receivables.
Bank credit and short-term securities (probably commercial paper)
account for most of the even larger increase in current liabilities.
The capital structure of both electric utilities and gas
utilities other than pipelines has shifted from common equity to debt
over the period.
is true.

However, for gas transmission companies, the reverse

Unfortunately, it is not possible to separate their security

issues from the aggregate.

Finally, interest coverage has declined—

again less so for gas pipelines than for the others—and the average
interest rate imbedded in the debt structure has drifted up.

Not

surprisingly, the net return on common equity has fallen throughout
for electric utilities, risen slightly for pipelines, and fallen and
then improved again for other gas utilities during the period 1964-1973.
Recent Utility Financing Problems
As indicated above, the ability of public utilities to
raise funds in the capital market has deteriorated appreciably in
recent years.

At this point, it might be helpful to take a closer

look at the extent of the deterioration.
Interest Coverage:

At the end of 1971 (the latest date

for which complete data are available), interest coverage ratios for
electric utilities (shown in Table 7) indicated that roughly one-tenth
of the companies were for all practical purposes precluded from

- 12 long-term borrowing in the public market.

And more recently available

information suggests some general further deterioration in these
ratios.

Pre-tax earnings coverage of at least two times long-term

interest charges appears to be the generally accepted lower limit
tolerated in the market.

In many cases, company mortgage indentures

specifically restrict additional long-term borrowing when the pre-tax
8/
earnings fail to meet this test.
The rating agencies also like to have a two times coverage
for a Baa rating.

There are exceptions, however.

For example,

Moody's recently gave an A rating to an electric utility with 1.75
times coverage since the low ratio did not reflect interim rate
increases presently in effect and additional increases expected.
Maturing Debt:

As shown in Table 8, about $8.2 billion of

public utility bonds and notes will mature during the period 1974-78.
Just over $1 billion is due this year, and $2-1/2 billion matures
in 1975.

Over half of the public utility debt to be refunded during

this year and next year carries coupons of less than 4.00 per cent
(shown in Table 9).

The implications of refunding this debt at

prevailing rates (even if one assumes that current pressures in money
markets might ease) are quite obvious.
Ratings:

Downgrading of utility bonds has accelerated

sharply in recent weeks.

Even if Consolidated Edison and the 5 related

companies (included in Table 10 as "rating suspended") are excluded,
8/ One electric utility contacted by the St. Louis Federal Reserve
Bank reported such an experience. In 1972,the company had to
resort to selling preferred stock and obtained long-term bank
loans. After receiving rate relief, the company sold bonds in
early 1974.

- 13the number of adverse rating actions thus far this year exceeds those
occurring in all of 1972 and 1973.

There have also been recent

instances of lowering of municipally-owned utility ratings.
Information on downgrading of public utility commercial
paper issuers is more sketchy.

Moody's withdrew its ratings for

Consolidated Edison paper and downgraded 4 other utility issuers
during April.

The crucial question, however, is whether the Prime-2

and Prime-3 rated issuers are able to place new or roll-over outstanding
paper.

Reportedly, a number of these issuers are experiencing appreciable

difficulty in doing so.
Changes in Dividends:

Consolidated Edison of New York is

the only notable public utility to omit a dividend this year.

However,

at least eight other electric utilities failed to earn their current
dividend in the most recent earnings period.

But they have announced

"commitments to maintain dividends."
Recent Capital Market Financing Adjustments:

In the past

six or seven weeks, there have been numerous instances of public
utility borrowers revamping their financing plans to meet rapidly
changing market conditions.

Adjustments in plans and temporary delays

in order to obtain fairly prompt accommodation in the capital markets
rather than indefinite postponements seem to be the more frequent
occurrence.

Major utilities have reduced the size of their offerings;

switched from stock issues to bond issues (following the sharp price
drop in utility stocks after the Con. Ed. dividend omission);

reduced

- 14 maturity of issue from long-term to intermediate-term;

switched

from competitive to negotiated bidding--and (in at least one case)
arranged alternative long-term bank financing.
Table 11 provides figures on recent trends in common equity
as a percentage of total capitalization of electric utility companies.
However, while stock financing is attractive in terms of their
balance sheets, this option is not currently a feasible alternative
to bond financing for many of these companies since their common
shares are selling below book value.
Utility Rates and the Regulatory Process
As I indicated above, I wanted to get an appreciation of the
extent to which the financial problems of public utilities can be traced
to the "regulatory lag" as well as to inflation.

Expressed simply, the

regulatory lag is the time which must elapse between an increase in costs
and the permission (and ability) to recoup it.

Since most rates are based

on past costs rather than projected expenditures, in an inflationary
environment earnings would suffer—even if the pace of the regulatory
procedure were to be accelerated.
To obtain some impression of the way in which the regulatory
process is currently working—as far as public utility rate adjustments
are concerned—I asked the 12 Federal Reserve Banks to make an informal
9/
telephone survey in their Districts.

The questions included in the

inquiry were:
9/

The reader is warned that these data were not collected on a
statistically sophisticated basis. Thus, the figures quoted
should not be viewed as necessarily representative of the U.S.
utility scene. Nevertheless, I believe that they provide some
insight into the current state of utility rates and regulations.

- 15 -

a) What regulatory bodies (State, local or Federal)
have jurisdiction over the firm's rate applications,
and is there overlapping authority?
b)

Within the last year, has the firm requested a
rate increase, and if so what was its disposition (including speed of decision).

Does the firm possess an automatic rate passthrough on changes in fuel and/or other costs?

The questions were sent to the Reserve Banks on May 7, 1974, with a
response requested by May 22.
As Table 12 indicates, 98 utilities were contacted.
Of these

companies, 42 are electric utilities, another 25 are combination

gas and electric utilities, 28 are gas distribution companies,and 3
are pipelines.

New England accounts for more than one-fifth of the

companies surveyed; the Kansas City, Atlanta, and Richmond Districts
together contribute an additional 30 per cent, and the rest is distributed over the remaining Districts.
1.

Regulatory Jurisdiction.

With respect to regulatory

authority, no district reported any problems with overlapping jurisdictions.

Clearly utilities operating in more than one jurisdiction are

subject to several regulatory bodies. In addition,the FPC regulates
wholesale electric rates and interstate natural gas pipeline operations
for those companies engaged in these activities.

In most cases, the

major regulatory body is a state commission, called by a variety of
rather similar names.

- 16 There are a few areas in which local control is still the
norm, however.

This is frequently the case with municipal systems

which are often under the control of elected officials—e.g., Memphis and
Seattle—or under public power districts--e.g., Nebraska.

In Massachusetts,

municipal companies are subject to local regulatory boards, and in
addition are subject to the state ceiling on the rate of return.

Texas,local bodies have jurisdiction, with the Texas Railroad Commission serving as arbiter in the event of a difficulty.

Local control is

being phased out in Minnesota effective the first of next year

when

the Public Service Commission will inherit full responsibility.
2.

Rate Adjustment Proceedings.

There is considerable

variation among Districts in the extent to which regulatory lag, the
perception of rate-makers, and general economic conditions are seen
as problems.

In general,the most pessimistic reports seem to come from the

Chicago, Kansas City, St. Louis and Cleveland Districts;

the most

satisfied from the Dallas and Atlanta Districts.
Tables 13 and 14 indicate the extent to which the companies
have sought rate relief within the last year.

Eighty-four of the

companies had made at least one such application, with the first Federal
Reserve District again accounting for more than 20 per cent of the
total—and Kansas City and Richmond about 10 per cent each.

The requests

were distributed across the major types of utilities in about the same
proportion as the number of respondents, with electric utilities
representing nearly 42 per cent of the applicants.

Turning to Table 14,

- 17 it appears that of the 123 separate applications made by these companies,
46 per cent were granted in full;

another 14 per cent were granted either

in part or on an interim basis, while 40 per cent are still pending.
In the Middle West

(perhaps for a variety of reasons), the

regulatory climate appears to be rather unfavorable to prompt rate action.
In Ohio, for example, delays of three years are not uncommon.

Michigan

currently bases its decisions on 1972 data, and intervenors add to
the normal delay between application and granting which can be
9 months or more if the state government is involved.

Illinois and

Missouri must act within 11 months and generally avail themselves of
the full time; Indiana's lag runs from 9 to 12 months.
not too long, the rate adjustments are often too small.

If lags are
The Kansas City Bank

reported this complaint of its respondents, many of whom had not had
rate increases for many years.

One utility in Kentucky (whose per share

earnings had fallen sharply) applied for relief in February of this
year; it did not apply for interim relief because it believed that it
would be turned down.

This firm complained that a company had to suffer

nearly 2 years--l to justify the request and 1 to wait—of depressed
earnings before any respite was observed.
For natural gas pipelines, the FPC must issue an order within
30 days, but it may then suspend the increase for 5 months.

The Commission

appears to use its full 6 months.
In other states, however, firms have better luck.

The Dallas

Reserve Bank reports that its respondents cited rather speedy approval—
especially if the increase requested was small--and the delays which did

- 18exist were not said to hurt the companies.

Lags seemed short in the

Minneapolis District and not burdensome in Atlanta.

The State of Virginia

has an annual earnings review; and if a firm is found not to be earning the
rate of return the State Corporation Commission approved a year before, it
can increase its rates within 30 days, subject to a commission veto.

Many

states allow new rates to be put into effect before final approval of the
regulatory authority.

However, revenues are subject to refund should the

decision be adverse, and in some instances they must be put in escrow.
3.

Automatic Cost Pass-Throughs.

Since so much of the

Northwest electric generating capacity is hydroelectric, utilities in
Washington and Oregon generally do not have such clauses.

Otherwise,

as Table 15 indicates, the majority of respondents reported automatic
rate adjustments for fuel costs and purchased electricity as well.
In many cases, such clauses had applied to nonresidential customers for
some years, and the procedure was extended to all customers recently.
In addition, three companies in the Atlanta District can pass
on local taxes, as can some companies in the Minneapolis Bank survey.
Nebraska permits operating and maintenance costs to be passed on as well, and
Illinois allows the pass-through of carrying costs on cash advances for
gas exploration and R&D in coal gassification.
While these clauses help somewhat in handling the earnings
squeeze induced by escalating fuel costs, the schemes vary considerably
in the speed with which a cost increase is reflected in a rate increase.
General comments were not specifically solicited.

But several

Districts reported a general company concern with inflation, with problems

in raising long-term funds, and with delays and lags in the

granting of licenses for both new and improved old facilities.
concerns are shared by many observers.

These

- 19 Utility Pricing and Consumer Welfare
As is generally known, the historic pattern of utility
pricing in the U.S. is to favor the large commercial or industrial
users with lower rates than are charged residential or small commercial
customers.

Table 16 presents data on the distribution of sales of

energy units for electricity and gas to various types of customers.
Table 17 gives the percentage distribution of sales among major types
of users.
These data show clearly that the small users—while consuming
a relatively small amount of the energy produced—account for a large
part of the revenues paid to utilities.
the time period covered by the data.

This pattern is clear throughout

For example, in 1972,residential

and domestic users took 32 per cent of all electricity consumed;

the same year, they accounted for 42 per cent of revenues received by
electric utilities.

For residential gas customers, this pattern is

even more striking.

Residential use stood at only 30 per cent of all

consumption, but revenues from such customers amounted to nearly onehalf of total revenues.
Moreover, the data on electrical energy consumption and
revenues indicate that,when commercial customers are separated into
large and small user categories, it is again the small user who makes
the relatively large contribution to utility revenues.

In 1972, small

commercial and industrial electric consumers accounted for a larger
share of revenues than they did of electrical use (29 per cent versus

- 20 23 per cent).

The reverse is true for large commercial and industrial

electric consumers.

Their contribution to electric utility revenues

was only 25 per cent while their consumption was 46 per cent.
Table 18 presents data on the rates charged to various types
of customers.

These data again point out that the small customers

paid a higher price per unit of energy consumed over the entire time
span.

In fact, in 1972 the residential electric consumer paid over

twice as much per kilowatt hour as the large commercial customer.
In the same year, residential gas consumers paid a rate over two and
one half times as high as the industrial consumers.
Clearly there are some physical efficiencies in delivering
energy to large users.

Producing and maintaining the large and

complex distribution networks which characterize residential gas or
electric lines is expensive.

In addition, in the case of electrical

energy distribution, energy can be saved by using high voltage lines
to deliver electric service to large customers.

Nevertheless, it

is clear that the historic pattern of U.S. utility pricing results
in a quantity discount scheme which heavily favors the large users.
This pricing pattern in turn tends to encourage industry to develop
in the direction of energy intensive production technologies.
The energy crisis which has been building in this country—
and indeed in the world at large for the last several years and which
culminated in the Arab oil embargo last fall and winter—has caused
many observers to review the basic principles of energy pricing.

- 21Much traditional regulatory thinking assumes a natural monopolist
who will reap even more lavish rewards from his declining long-run
marginal cost curve (LRMC) unless rates are lowered.

However, it

now seems unlikely that economies of scale and technical improvements
in the future will be sufficient to offset inflation and high
imbedded debt costs.

No one doubts any longer that energy is now

both an increasing cost industry and an increasingly competitive
one, when substitutions among energy sources are considered.

AlthQugh

some state officials regulating public utilities have called on
utility management to trim costs rather than expect increases in rates,
the presumption among most observers is that rates will have to rise.
This will be necessary not only in order to attract funds for the
necessary increases in capacity and environmental quality, but also
in order to perform an allocative function as well.
One basic argument supporting reform of utility pricing
practices is that, if energy is indeed a scarce commodity that should
be conserved, rewards should be given to the small user and penalties
extracted from the large users.

This argument is often extended by

environmentalists and is the reverse of the present pricing system.
This proposed pricing scheme is called the inverted block rate schedule. Yet,
however

attractive its distributional properties may appear, this

scheme does not meet criteria of economic efficiency as well as do
some other approaches.
10/

See for example, W.G. Rosenberg, "Rates, Consumer Pressure, and
Finance," P.U.F., 1/31/74.

- 22 Several authorities have begun to advocate replacing the
present system of declining block rates with a structure which more
nearly approximates marginal cost pricing.

Such a structure would

include peak load rate differentials for both time of day and season
of the year, and fixed customer charges would be explicitly assessed.
This scheme would have little impact on industrial users, and there
would be a tendency to redistribute costs of electric use toward the
more affluent residential users.
Other regulatory reforms which have been suggested are the
use of projected rather than historical test years,

the encouragement

of research and development and long-term policy formulation,

extension of automatic adjustment clauses and interim relief policies
to reduce regulatory lag, and the use of Federally-guaranteed bonds
to raise capital without resorting to large rate increases.
Perhaps the most interesting of these proposals is the
adoption of the traditional economists' position that utilities should
charge on the basis of their long-run marginal cost.

In other words,

the user is charged according to how much it costs to deliver the
last unit of electricity consumed in a given period of time.

This

proposal is modified in its modern form by adding the stipulation that
these costs should include provisions for damage to the environment.
For instance, fees should be collected for the burning of high sulfur
coal in an electric utility.

The fees would be collected by a public

agency and used to clean up the environment.

- 23Exactly which of these routes (or still some others) should
be followed to reform utility pricing practices is a matter of
continuing debate.

But, in the meantime, it is clear that we as a

society must give careful consideration to the way in which we are
to allocate our scarce energy resources.

Moreover, we should all

accept the fact that this growing scarcity will mean higher prices
for energy relative to most other items on which consumers can spend
their income.

In the long-run, it is better to permit these increases

in real costs to be passed on to final users—rather than pretend that
we can--somehow--escape the burden.

Only in this way will consumer

welfare be truly served in the years ahead.

- 0 -

Table 1
Electric, Cas, and Sanitary Services:
and Capital Outlays

Internal Funds

($ Billions)
1964

1965

1966

1967

1968

1969

1970

1971

1972

4.6
2.1
2.5
2.1
.4
2.9
3.3
*
3.3

4.7
2.1
2.6
2.3
.4
3.1
3.5

4.8
2.1
2.7
2.5
.2
3.6
3.8

4.8
2.2
2.6
2.7
-.2
3.9
3.8

3.5

5.0
2.2
2.8
2.4
.4
3.3
3.7
-.1
3.7

3.7

4.7
2.2
2.5
2.8
-.3
4.4
4.0
-.2
3.9

4.1
1.9
2.2
3.0
-.9
4.8
3.9
-.4
3.5

4.1
1.7
2.3
3.3
-1.0
5.4
4.4
-.1
4.4

4.5
1.7
2.8
3.6
-.9
6.1
5.2
-.2
5.0

5.0
1.9
3;1
3.8
-.7
6.6
5.9
-.5
5.4

1. Profits before tax
2. Profits tax
3. Profits after tax
4. Dividends
5. Undistributed profits
6. Capital consumption
7. Cash flow
8. Inventory Valuation Adjustment
9. Cash flow and IVA.

-JL973"

10.

Capital outlay

5.5

6.1

7.4

8.7

10.2

11.6

13.1

15.3

17.0

18.7

11.

Capital outlay less
internal funds

2.2

2.7

3.8

5.0

6.5

7.8

9.7

10.9

12.0

13.3

Net interest

1.3

1.4

1.6

1.8

2.1

2.6

3.2

3.9

4.5

^5.0

4.40

4.27

4.18

3.64

3.25

2.80

2.28

2.06

2.00

12.

13. Memo: interest coverage
ratio before tax
e

FRB estimates except for line 10.

Source:

Lines 1-8, and 12 from the Survey of Current Business, July issues, Tables in Section 6.
Line 10, S.C.B., "Plant and Equipment."

Table 2
Security Issues and Net Change in Outstandings
($ Billions)
1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

Debt
All industries
Public utilities

10.7
2.1

12.7
2.1

15.6
3.3

21.3
4.2

19.4
4.3

19.5
5.2

29.5
7.8

31.9
7.5

27.1
6.2

21.5
5.5

Equity
All industries
Public utilities

3.7
.6

3.2
.6

4.2
.6

4.7
.7

6.1
.9

9.3
1.4

9.2
2.9

14.8
4.2

15.2
5.0

13.6
4.7

Debt
All industries
Public utilities

6.6
1.4

8.1
1.3

11.1
2.7

16.0
3.4

14.0
3.7

13.8
4.5

22.8
6.9

23.7
6.5

19.1
5.1

12.7
4.3

Equity
All industries
Public utilities

1.4
.5

1.2
.5

2.3
.7

-.9
.9

4.3
1.4

6.8
2.9

13.5
4.2

13.0
4.8

10.6
4.5

Issues

Net change

Source:

SEC Statistical Bulletin, various issues.
"Public utilities" covers electric, gas, water, and other companies.

Table 3
End of Year Liquidity:

Ratios to Total Current Liabilities

(In per cent)
1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

Total current assets
Electric utilities
Gas utilities
All nonfinancial business

103.1
105.0
195.1

92.6
101.6
188.0

95.5
88.8
182.6

87.5
90.4
182.7

79.4
87.4
174.7

70.3
85.8
164.5

72.4
100.8
161.5

76.9
103.4
165.3

82.8
102.7
166.2

73.3
96.5
163.5

Cash and Governments
Electric utilities
Gas utilities
All nonfinancial business

31.9
26.3
35.9

25.8
24.7
32.0

24.3
20.9
27.5

18.6
19.1
26.4

16.3
17.0
24.4

13.4
14.3
20.3

12.3
18.0
19.0

13.0
16.6
21.2

14.3
18.5
20.8

9.6
13.7
19.6

Cash, Governments and other
current assets
Electric utilities
Gas utilities
All nonfinancial business

42.4
34.5
46.3

34.8
33.7
42.1

35.2
29.7
37.4

27.1
26.3
36.8

24.6
23.1
35.5

20.8
19.8
31.3

20.4
29.6
30.5

20.9
26.8
33.8

21.4
28.3
33.7

15.5
22.7
32.4

Source:

Calculated from data in SEC Statistical Bulletin, "Working Capital of U.S. Corporations"
and unpublished detail.

Table 4
Capital Outlays and Financing of Investor-Owned Cas and Electric Utilities
($ Millions)
1964

1965

1966

1967

1968

1969

1970

1971

1972

Gas utilities
Internal funds
Retained earnings
Deferred taxes
Depreciation

1137
331
61
745

1169
326
45
798

1228
330
48
850

1329
407
23
899

1331
356
957

1528
472
22
1034

1556
421
34
1101

1829
536
95
1198

2085
660
135
1290

External funds
Common
Preferred
Debt
of which notes

1912
167
215
1530
38

1729
99
325
1305
40

1967
110
201
1656
58

2930
59
266
2605
42

2761
143
258
2359
230

3444
458
268
2718
294

6030
746
4664
264

6993
1283
960
4749
643

6809
1306
1162
4340
753

Capital outlays

1510

1700

2050

2000

2540

2670

2490

2440

2520

2352
712
65
1575

2415
689
51
1675

2634
811
49
1774

2791
842
55
1894

2906
797
75
2034

3181
884
94
2203

3395
886
2399

3849
1026
196
2627

4502e
1250e
34
2906^

1713

3039
287
340
2411
n.a.

3618
523
465
2630
n.a.

4260
623
476
3161
n.a.

4817
864
401
3552
n.a.

8247*
1363*
1145*
5739*
*

9299
1762
1750
5787
133

8679^

5380

6750

7660

8940

Electric utilities
Internal funds
Retained earnings
Deferred taxes
Depreciation
External funds
Common
Preferred
Debt
of which short-term

n.a.

1784
379
142
1261
n.a.

Capital outlays

3970

4430

661
43

1008

* Note apparent series break.
Source: Capital Outlay, BEA series. Others: AGA and FPC data.
and 1972 estimated from Edison Electric Institute data.

621

110

10650

12860

2000^

2004^
4675^
n.a.
14480

Electric before 1970 from 1970 Power Survey. Table 20.2,

Table 5
Capital Structure of Investor-Owned Electric and Gas Utilities
(In per cent)

1964

1965

1966

1967

1968

1969

1970

1971

1972

Electric
Long-term debt
Preferred
Common

51.8
9.6
38.6

51.5
9.5
39.0

52.3
9.5
38.2

53.0
9.6
37.4

53.8
9.6
36.6

54.6
9.4
36.0

54.8
9.8
35.4

54.2
10.7
35.1

53.
11.8e
35.0e

Gas transmission
Long-term debt
Preferred
Common

59.8
8.7
31.6

58.8
8.4
32.9

58.1
8.9
33.1

56.8
9.2
34.0

57.7
8.6
33.7

57.8
8.8
33.4

57.1
8.5
34.4

56.6
7.0
36.4

55.7
7.0
37.3

Other gas utilities
Long-term debt
Preferred
Common

44.9
7.1
48.0

50.0
6.4
43.6

50.7
6.2
43.1

51.0
6.1
42.8

51.9
5.7
42.4

53.0
5.6
41.4

53.2
6.3
40.5

53.0
6.5
40.5

Source:

Electric companies from FPC Statistics of Privately Owned Electric Utilities in the United
States. 1972 estimated from Edison Electric Institute data.
Gas companies:

American Gas Association, Gas Facts, 1972, and earlier years.

Table 6
Selected Statistics for Investor-Owned Gas and Electric Utilities
(In per cent)
1964

1965

1966

1967

1968

1969

1970

1971

1972

5.33
3.55
5.91

5.31
3.62
5.57

5.17
3.69
5.28

4.74
3.61
5.12

4.35
3.49
5.02

3.89
3.53
5.06

3.49
3.05
4.07

3.11
3.08
3.61

2.986
3.12
3.55

5.11
3.30
5.26

5.08
3.29
5.00

4.87
3.23
4.67

4.43
3.11
4.46

4.01
3.01
4.20

3.47
2.79
4.02

3.12
2.58
3.42

2.89
2.81
3.28

2.79^
2.88
3.27

12.3
12.9
12.5

12.6
12.3
12.7

12.8
13.0
12.6

12.8
14.1
12.9

12.3
13.9
11.7

12.2
14.6
12.6

11.8
12.2
12.3

11.7
13.3
12.6

11.86
13.6
12.8

Average interest on
long-term debt
Electric
Gas transmission
Other gas utility

3.7
4.8
4.9

3.8
4.6
4.5

3.9
4.8
4.3

4.0
5.0
4.4

4.3
5.4
4.4

4.6
5.6
4.5

5.1
6.1
5.4

5.5
6.7
5.8

5.83
6.8
6.1

Current ratio*
Electric
Gas transmission
Other gas utility

.973
1.014
.856

.862
.792
.870

.894
.653
.849

.841
.670
.832

.786
.624
.797

.692
.613
.729

.728
.701
.801

.743
.871
.885

.763^
.819
.899

Before tax interest coverage
Interest on long-term debt
Electric
Gas transmission
Other gas utility
Total interest
Electric
Gas transmission
Other gas utility
Net return on common
Electric
Gas transmission
Other gas utility

Source:
*

See Tables 4 an^ 5*

Natural numbers.

Table 7

Interest Coverage of Privately Owned Electric
Utility Companies, 1969-7li/

1971
1970
1969

Below
1.50

1.501.99

9
7
8

10
6
2

Times interest earned before taxes
4.002.002.503.003.504.49
2.49
2.99
3.49
3.99
(Number of Companies)

41
39
18

41
39
31

39
30
30

18
25
38

14
12
15

4.504.99

10
16
11

5.00 &
Above

15
20
41

Total

197
194
194

The ratio is calculated using earnings before income taxes, and the credits of
interest charged to construction have been treated as other income. The interest
charges include interest on long-term debt, interest on debt to associated
companies and other interest expense.

Source;

Federal Power Commission's Statistics of Privately Owned Electric Utilities,
1971.

Table 8

Maturing Public Utility Bonds and Notes
(millions of dollars)

1974

1975

1976

1977

1978

Jan.
Feb.
Mar.
1Q

48
12
89
149

153
97
144
394

14
53
145
212

22
193
86
302

48
194
167
410

Apr.
May
June
2Q

192
62
180
434

100
151
221
471

28
158
319
506

291
57
116
463

105
53
256
414'

July
Aug.
Sept.
3Q

40
8
104
152

233
237
251
721'

107
131
10
248'

77
89
176
342

84
53
198
335

Oct.
Nov.
Dec.
4Q

121
202
109
432'

654
175
14
843

298
72
149
519

39
233
276
547

78
88
100
266

2,430

1,485

Year

1,166

1,654'

1,425

19741978

8,1(0

Includes: Issues of electric, gas and water utilities and telephone
companies.
Source: Moody's Public Utility Manual 1973.

Table 9

Maturing Public Utility Bonds and Notes
(Millions of dollars)

1.001.99
1974
1975
1976
1977
1978
1974-78

—
—
- -

n.
- -

2.002.99

- Coupon on Maturing Issues - Per cent4.005.007.018.013.006.008.99
7.99
5.99
6.99
3.99
4.99

129
823
573
402
60

545
520
182
545
794

24
20
61
93
93

6
13
10
116
82

1,987

2,586

291

227

35
298
247

75
1
225
166
150

284
738
332
25

580

617

1,379

9.009.99

10.0010.99

53
314
68
10
-1-1

445

Includes: Issues of electric, gas and water utilities and telephone companies.
Source:
Moody's Public Utility Manual 1973.

No
Coupon

-11—

1,166
2,430
1,485
1,654
1.425

8,160

—
—

- -

—

—11
50

Total

Table 10

Changes in Public Utility Bond Ratingsby Moody's Inv-.*gtors Service^/

Rating Prior
to Change

Lowered

Aaa
Aa
A
Baa
Ba or lower

1
3
2

—

Raised

1974 to date^
Suspended
or
Lowered Withdrawn ]Raised
1
4
2

- -

—

- -

—

- -

1/
2/
3/

1972-1973
Suspended
or
Withdrawn

2
3
2
7

—

2
6
1

—

1
—

—

—
** ** /

9 4/
1

Electric Utilities^
Ratings on
May 1, 1974
8
65
60
14
1
148

Includes electric gas, water & gas pipline companies, but not communication companies.
January 1, 1974 through May 13, 1974.
Includes only privately owned electric utility companies; excludes gas, water and
gas pipeline companies.
4/ Includes Consolidated Edison of N.Y. and 5 related companies.
Source: Moody's Bond Survey and Bond Record.

Table 11

Common Equity as Per cent of Total Capitalization for Electric
Utility Companies

Below
25.5

25.029.9

30.034.9

35.039.9

4
3
4

4
4
7

75
65
56

50
55
62

1971
1970
1969

Source:

40.0- 45.0- 50.0- 55.049.9
54.9
44.9
59.9
(Number of Companies)

19
25
16

17
13
14

10
12
16

3
6
7

60.099.9

14
12
13

100.0

13
12
12

Total

209
207
207

Federal Power Commission's Statistics of Private Owned Electric Utilities
in the United States, 1971.

Table 12
Number of Utilities Contacted in
Federal Reserve Bank Study

Federal Reserve
District
1.

Boston
Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont

Utilities
contacted
(Number)

Gas

Electric

20
4
4
3
2
4
3

8
2
1
1
1
2
1

9
1
3
2
1
2
-

Combination
Gas &
Electric

Other

3
1

New York

Philadelphia
Pennsylvania
New Jersey

6
4
2

2
1
1

2
2

2
1
1

Cleveland

Richmond
Maryland
Carolinas
Virginia & W. Virginia

9
2
4
3

3
1
1
1

1
1

4
1
2
1

Atlanta

Chicago
Illinois
Indiana
Iowa
Michigan
Wisconsin

7
3
1
1
1
1

2
2

1
1

St. Louis
Missouri, 111., Iowa
Kentucky
Tennessee

6
4
1
1

1
1

5
3
2

2
2

—

9. Minneapolis
Minnesota, Dakotas
Montana
10.

Kansas City

(Continued)

1
1
1
1
2
-

1
1

0
-

2
2 a/
-

3
1 b/
2

1 c/

Table 12 (Continued)
Number of Utilities Contacted in
Federal Reserve Bank Study

Federal Reserve
District

Utilities
contacted
(Number)

Gas

Electric

11.

Dallas

12.

San Francisco
Washington
Oregon
Arizona
California

8
1
3
1
3

4
1
2

Totals

a/
b/
c/

Pipeline.
Principally electric.
Pipeline and distribution company.

Combination
Gas &
Electric

Other'
-

1
2

Table 13
Number of Utilities Requesting At Least
One Rate Increase Within Last Year

Tvpe of Utility
Gas &
Electric
Electric

Federal Reserve
District

Total
Number

Gas

Boston

New York

Philadelphia

Cleveland

Richmond

6. Atlanta

Chicago

St. Louis

9. Minneapolis

Other

10.

Kansas City

11.

Dallas

12.

San Francisco

Total

Table 14
Disposition of Rate Relief Applications

Federal Reserve
District

Number
made

Number
granted
in full

Boston

New York

Philadelphia

Cleveland

Richmond

—

Number
granted
interim
relief

Number
pending
9

—

Atlanta

—

Chicago

St. Louis

9. Minneapolis

10.

Kansas City

11.

Dallas

12.

San Francisco

123

46%

14%

40%

Total

—

Table 15
Number of Utilities with Fuel Cost
Pass-Through Rate Adjustments

Type of Utility
Federal Reserve
District

Total
Number

Gas

Boston

New York

Philadelphia

Gas &
Electric

Other

Cleveland

Richmond

Atlanta

Chicago

St. Louis

9. Minneapolis

Electric

10.

Kansas City

11.

Dallas

2 a/

12.

San Francisco

Totals
a/

A third gas utility has such relief on an emergency basis.

Table 16.

Type of Customer
Electric Energy Generated^
Sales to Ultimate Customers
Residential or Domestic
Commercial and Industrial
Small Light and Power
Large Light and Power
All Other
Revenues from Ultimate Customer
(millions of dollars)
Residential or Domestic
Commercial and Industrial
Small Light and Power
Large Light and Power
All Other
Natural Gas Marketed Production
2/
Sales by Class of ServiceResidential
Commercial
Industrial
Other
Revenues by Class of Service
(millions of dollars)
Residential
Commercial
Industrial
Other
1/
2/

Energy Sales and Revenue By Type of Customer
1950-72, Selected Years
1950

1955

1960

1965

1970

1971

1972

329

547

755

1,055

1,532

1,614

1,747

281
67
189
50
139
17

481
125
336
78
258
20

683
196
460
115
345
27

953
281
635
202
433
37

1,391
448
886
313
573
57

1,466
479
927
334
593
60

1,578
511
1,002

5,086

8,020

11,516

15,158

22,066

24,725

27,921

1,932
2,739
1,334
1,405
258

3,323
4,360
1,944
2,416
337

4,856
6,162
2,828
3,334
498

6,329
8,198
4,313
3,885
632

9,416
11,720
6,290
5,430
930

10,484
13,206
7,072
6,134
1,035

11,730
15,025
8,041
6,984
1,166

6,753

10,110

13,729

17,243

23,565

24,180

24,222

4,209
1,384
410
2,289
126

6,659
2,239
603
3,535
282

9,288
3,188
920
4,709
470

11,980
3,999
1,345
6,147
490

16,044
4,924
2,007
8,439
674

16,680
5,040
2,156
8,643
841

17,110
5,148
2,280
8'J ))
863

1,948

3,450

5,619

7,407

10,283

11,355

12,488

1,177
266
480
26

2,007
424
938
81

3,177
723
1,563
153

4,030
1,054
2,148
176

5,207
1,620
3,181
274

5,635
1,829
3,568
323

6,105
2,066
3,955
362

In billions of kilowatt hours.
Trillions of BTU's.

Source:

U.S. Department of Commerce, Statistical Abstract of the U.S., 1973, p. 514.
Americal Gas Association, 1972 Gas Facts.

twO
65

Table 17.

Energy Sales and Revenues by Type of Customer
1950-72 Selected Years
Percentage Distribution

Type of Customer

1950

1955

1960

1965

1970

1971

1972

23.8
38.0

26.0
41.4

28.7
42.2

29.5
41.8

32.2
42.7

32.7
42.4

32.4
42.0

67.3
53.9

70.0
54.4

67.4
53.5

66.6
54.1

63.7
53.1

63.2
53.4

63.5
53.8

17.8
26.2

16.2
24.2

16.8
24.6

21.2
28.5

22.5
28.5

22.8
28.6

22.9
28.8

49.5
27.6

53.6
30.1

50.5
29.0

45.4
25.6

41.2
24.6

40.4
24.8

40.6
25.0

6.1
5.1

4.2
4.2

4.0
4.3

3.9
4.2

4.1
4.2

32.9
60.4

33.6
58.2

34.3
56.6

33.4
54.4

30.7
50.6

30.2
49.6

30.1
48.9

9.7
13.7

9.1
12.3

9.9
12.9

11.2
14.2

12.5
15.8

12.9
16.1

13.3
16.5

54.4
24.6

53.1
27.2

50.7
27.8

51.3
29.0

52.6
30.9

51.8
31.4

51.4
31.7

3.0
1.3

4.2
2.4

5.1
2.7

4.1
2.4

4.2
2.7

5.0
2.8

5.2
2.9

Electric Energy Generated
Residential or Domestic
Percent of Sales
Percent of Revenue
Commercial and Industrial
Percent of Sales
Percent of Revenue
Small Light and Power
Percent of Sales
Percent of Revenue
Large Light and Power
Percent of Sales
Percent of Revenue
All Other
Percent of Sales
Percent of Revenue

Natural Gas Marketed Production
Residential
Percent of Sales
Percent of Revenue
Commercial
Percent of Sales
Percent of Revenue
Industrial
Percent of Sales
Percent of Revenue
Other
Percent of Sales
Percent of Revenue

Table 18.

Type of Customer
Electric Energy Cost In
Cents per Kilowatt-hour
All Customers
Residential
Commercial
Small
Large
All Other

Gas Cost In Cents per
Million Btu's
All Classes
Residential
Commercial
Industrial
Other

Energy Costs by Type of Customer

1950

1955

1960

1965

1970

1971

1972

1.8
2.9
1.5
2.7
1.0
1.5

1.7
2.7
1.3
2.5
0.9
1.7

1.7
2.5
1.3
2.5
1.0
1.8

1.6
2.3
1.3
2.1
0.9
1.7

1.6
2.1
1.3
2.0
0.9
1.6

1.7
2.2
1.4
2.1
1.0
1.7

1.8
2.3
1.5
2.2
1.1
1.8

46
85
65
21
21

52
90
70
27
29

60
100
79
33
33

62
101
78
35
36

64
106
81
38
41

68
112
85
38
38

73
119
91
45
41

Full text of Statements and Speeches of Andrew F. Brimmer : Public Utility Pricing, Debt Financing, and Consumer Welfare : Remarks upon Receipt of The Joseph P Wharton Award Presented by The Wharton School Club of Washington, International Club, Washington, D.C.

FRASER