Giant Power: An Interpretation

I

‘GIANT power’ is not a trick term coined to titillate a jaded public imagination. Like the term ‘superpower,’ it has definite technical and social implications. Both terms are remarkable in that they express the desire of the promoters of what is rapidly becoming the greatest single industrial enterprise in the country to engage the sympathetic participation of the public in its development. For the electric utilities are known as ‘public service’ corporations, which means not so much that they serve the public with a peculiar degree of altruism, but that they are peculiarly dependent for their extension and prosperity upon the services which they can induce the public to render to them. Like the railroads, they cannot function without the borrowed use of the sovereign power of the state to condemn property for their rights of way. As franchise holders, they must submit the rates they charge to the regulation of public commissions. The use of streams for the generation of electrical power is an important part of their programme, and for this use they are generally dependent upon state or Federal license. The electrical industry cannot expand and flourish except upon the terms which the public is willing to grant. What those terms shall be is of importance not only to the public but to the industry itself.

As to the paramount importance of establishing right public relations there is no difference of opinion among the outstanding leaders of the electrical industry. Mr. Owen D. Young, chairman of the board of directors of the General Electric Company, made the necessity of improved public relations the main subject of his address before the last annual convention of the National Electric Light Association. A committee of that Association, which is representative of the industry, introduced its recent electric-power survey of the states clustering about Lake Michigan with the observation that the problem of wise planning is not only the technical one of generating and distributing electricity, but also involves study by the economist and questions of publicity; and that ‘at the moment publicity holds the greatest interest.’ Unfortunately there is not similar agreement as to the fundamentals of the public policy which, in its own long-run interest as well as that of the public, the industry ought to adopt. Among those who proceed on the assumption that the future, certainly the immediate future, of electric utility development is in private rather than in public ownership and operation, there are two main attitudes which embrace technical as well as economic and social divergencies. The policy which is now in the saddle, and which threatens to involve the industry in all the public complications by which the railroads were and still are embarrassed, commonly goes by the name of superpower; the claimant for preferred consideration is giant power. If the public is to meet its obligations toward the development of an industry which is clearly destined to affect the industrial, agricultural, and domestic life of our times as radically as the steam engine and steam transportation affected the life of our fathers, it must grapple with the divergent public attitudes that these two terms express.

Both terms are now clouded by popular misconception as to the major source of electrical energy. Mention either to the first twenty persons you meet, and nineteen will dilate upon the almost miraculous promise of water power or white coal. They see visions of limitless electricity flowing from Niagara, or Muscle Shoals, or the tides of Fundy. Yet only about twenty per cent of the total installed electric power in the United States is water power. In the great industrial section of the country, the Atlantic and New England states, only eleven per cent is hydroelectricity. Seventy per cent of the potential water power of the country is in the Rocky Mountains and the states west of them. Steinmetz calculated that the maximum energy that could possibly be extracted from this source would be but slightly greater than that now produced from coal, and that ‘if all the potential water powers of the country were now developed, and every raindrop used, it would not support our present energy demand.’ It is of great economic importance that we should make every practical use of our water powers. As rallying points of the sentiment for public ownership they have great social value in keeping the public alert and private enterprise on its toes. The publicly owned and operated hydroelectric systems of Ontario and Los Angeles, for example, have had a most wholesome influence on both the economic and the public policy of the industry. But the relative importance of water power in the total volume of electrical production is diminishing and must continue to diminish. The first pigmy electric light plant built by Edison on Pearl Street, New York, forty-four years ago used coal; the greatest stations now projected, such as the Crawford Avenue plant of the Commonwealth Edison in Chicago, with its designed capacity of one million horsepower, will have coaldriven generators. Except on the Pacific Coast and in certain provinces of Canada, where coal is scarce or nonexistent and water power relatively abundant, both superpower and giant power look to coal as the major source of electrical energy.

II

What, then, is superpower, what is giant power, and wherein do they differ? The meaning of both terms can be most clearly defined by contrasting the pictures which they call up in the minds of those of us who have had to deal with them in a practical sense.

Superpower evokes a picture of a network of wires interconnecting small or moderate-sized plants, most of them situated in centres of population. First designed for lighting only, these plants served domestic consumers in circumscribed municipal areas. Even within single cities there were often quite independent competing companies. Until after 1900, current was not transmitted economically more than twenty miles. The operating radius of the great majority of electric stations was even less. The electrical map, like a star-finder’s chart, was speckled with isolated dots. As generators grew in size, especially after the steam turbine replaced the reciprocating engine, and as the art of highvoltage, long-distance transmission developed, the electrical map began to take on the likeness of a web. The Southern Sierra Company line from Bishop, California, to San Bernardino, 240 miles over the mountains and through the deserts, was built about 1912 — the longest up to that time. Of course the transition to the web-like structure was well under way before 1917. But it was the war power of the Government that gave decisive impetus to the change, especially as affecting the population and industrial centres of the East.

First in western Pennsylvania and eastern Ohio, centres of the steel industry, and then in other manufacturing districts, the Government compelled rival systems to interconnect so that an excess of power in one territory might be made available to meet a shortage elsewhere. To-day, along the Pacific Coast, in New England, throughout the Carolinas, Alabama, and northern Georgia, and in the Middle West, interconnections are making possible the exchange of current over hundreds of miles, in one instance as many as fifteen hundred miles. This does not mean that the same current is sent the entire distance, but only that ‘juice’ is relayed from station to station. If North Carolina suffers a shortage, the companies there call on South Carolina for current. South Carolina may, in turn, draw upon Georgia, Georgia upon Alabama — not one stream, but a series of interconnected reservoirs. This web, this network of interconnecting wires, superimposed upon originally isolated and as a rule moderate-sized plants situated usually in centres of population, and designed to supply the normal requirements of their respective chartered territories, is the principal physical characteristic of the superpower system.

Giant power, on the other hand, calls up a picture of great generating plants situated, not in cities to which coal must be hauled, but at or near the mouth of the mines, and designed to supply the major requirements of many systems. Now that the art of transmitting electricity has so developed that it is possible to send it more than three hundred miles without appreciable loss, giant power, instead of relying upon the interconnection of relatively small and in some cases antiquated plants, would seek out the places where current can be generated in large volume at the lowest cost and make these the centres of trunkline transmission systems whose radii would be the maximum economical transmission distance. Its object is regional integration rather than interconnection. It not only costs less but is socially more desirable to transmit electricity on wires than to haul coal on the railroads. Mine-mouth location of generating plants makes possible the use both of low-cost and of low-grade fuel — fuel some of which is too poor in heat units to warrant shipment and much of which to-day is not even brought out of the mine. The bituminous coal fields of Pennsylvania alone are capable of supplying scores of times the power of Niagara continuously for five hundred to a thousand years. The same is true of the coal fields of West Virginia, Ohio, Kentucky, and Illinois.

The statement is frequently made that the streams in the mining regions are inadequate — hence the seaboard power stations which require that for cooling purposes four hundred tons of water go through the condensers for every ton of coal burned. But in both England and Germany recently largesized stations have been placed at the mines and operated successfully with a condensing practice which requires a one-hundredth part of the water considered to be essential in this country.

The transition to mine-mouth plants is under way; its completion can be carried out without sacrificing any of our present facilities. Already the electrical industry is put to it to build additional facilities fast enough to meet the demand. All the large plants recently built in or near our great cities will be needed for peak-load service, even when the largest feasible mine-mouth plants are ready to carry the base load. Mine-mouth generating stations, equipped for the most economical utilization of coal, trunk-line transmission systems covering entire regions within economical transmission distance of these black Niagaras — these are the conspicuous physical characteristics of giant power.

But important as the physical distinctions between superpower and giant power are, they are secondary to the divergent social implications of the two terms. Even the most ardent devotees of the superpower tradition are beginning to admit that mine-mouth stations are the inevitable next step, and interest in low-temperature processing of coal for the recovery of the valuable by-products in connection with generating stations, of which I shall have more to say presently, is growing. But the superpower promoters, like the earlier speculative promoters of our railroads, are permitting their public relations to be snarled up and vitiated by their desire to squeeze the last penny out of antiquated equipment and to capitalize the special privileges accruing to them as the result of the primitive state of the electrical art when their original franchises were obtained.

State regulation of electrical utilities began during the infancy of the industry, when installation costs per unit of power were high and when, because of the narrow range of transmission, the financial security of each new venture depended upon a virtual monopoly of the market covered by the franchise. To encourage the industry, state commissions at first regulated competition between companiesoccupying the same territory, then discouraged competition, and finally prohibited it entirely. Each electric utility company to-day has exclusive charter or franchise rights within its assigned territory whether it gives service or not. No other company may generate or distribute electricity within this legally preempted domain. If the chartered company produces more current than its monopolized market can use, it may export it, by interconnection with some other company, into another monopolized market, but the export price is usually fixed so high as to discourage buying and to put pressure on each company to provide within its own territory sufficient capacity to meet its own normal requirements.

Thus the superpower idea of interconnection deprives the consumer of the economies of large-scale production by restricting each company to the lowest generating costs compatible with the limited equipment required by a given territory, as contrasted with the giantpower idea of integration which seeks the best locations for large-scale modern installations wherever they may be found and the unrestricted carrying of current in large volume to whatever markets have need of it.

The existing franchise situation invites speculative mergers and stock watering, again to the injury of the consumer, and, because of the resentment it provokes, to the ultimate injury of the industry. Each chartered territory takes on an inflated value as a pawn in the game of mergers, entirely distinct from its value as a market for electrical service. In the battle now going on between various electrical utility interests, bits of territory are picked up here and there with a view to blocking rivals and to increasing the size of the slice when the merger stock melons are cut.

The Giant Power Board transmitted to the 1926 special session of the Pennsylvania Legislature a study on the appreciation in the common stocks of ten electric holding companies. Comparing the 1920 high market value of these stocks with what they had become at the high point in 1925, a total value of approximately $150,000,000 in five years had changed to nearly $600,000,000, with an average gross appreciation of nearly 300 per cent. One of the companies included had increased in market value over 10,000 per cent. Thus men have come to look for profits, not so much from normal enterprise and conservative development, as from quick killings through speculative stock issues based upon the ‘anticipated’ earnings of the merged companies. As in the early history of the railroads, speculative manipulation of local franchise or charter privileges piles up burdens on the new industry, delays the cheapening of rates upon which the elimination of drudgery from the home and the farm depends, and needlessly engenders an adverse public opinion which even to-day constitutes the most serious drag upon the free extension of electrical service. It was no doubt recognition of this fact that led Mr. Owen D. Young to say that ‘improved engineering, and courage to take the road, are needed now more in the social than in the physical sciences.’

For the public is right in thinking that this exploitation of vested rights through interconnections and mergers has developed and maintained a rate structure that discriminates with gross unfairness against the domestic consumer. To understand the present incredible rate situation one must remember that originally the electrical industry was an electric light industry pure and simple, with almost no market for current except after nightfall. This meant that the costly plant could be operated a few hours only in the twentyfour and that rates had to be correspondingly high. With the discovery that current used for light could also be advantageously used for heat and power, there began a struggle to drive the steam engine out of the individual factory or mine and to replace it with central station electricity. As a war measure, electric utility companies quoted low rates to industry, sometimes below cost. The conquest of industry by electricity has come so rapidly that the peak of demand for current now occurs, not ‘after supper,’ but around ten o’clock in the morning. The electric light industry has become an electric power industry. But the domestic consumer has largely paid the price of victory. Domestic rates are still based on the obsolete theory that electric power plants exist primarily to supply current for light, whereas the fact is that if all domestic consumers went back to candles or kerosene all of the large companies would still have to maintain their present plant capacities to supply the industrial and commercial demand. In Pennsylvania only 6 per cent of the current generated is used in domestic service, and yet it yields 20 per cent of the earnings of the companies, whereas the wholesale power customers use 70 per cent of all the current generated and yield only 40 per cent of the earnings. The result is that in the domestic use of electricity for cooking and heating, and in the electrical equipment of our farms, we, the pioneers in electrical invention, are a backward nation.

III

On the social side, then, superpower symbolizes interconnection, the merging of properties with more than ample opportunity for watering stock, the generation of current at numerous legally isolated and monopolized locations, not necessarily the most advantageous for economical production, the promotion of the industry by those who live upon it and want a minimum of outside interference or public regulation. In a word, superpower interprets the term ‘ public service corporation’ as meaning an enterprise which the public should regard it a blessing to serve.

Giant power approaches the existing situation from the other end — not, I must repeat, because it is inspired by purely altruistic motives, but because it believes that in the long run it will be to the advantage of the industry as well as that of the public to have the traditional attitude reversed. Its first thought is for the small consumer, not only because the small consumers are in a political majority, but also because, as the experience of the telephone companies has demonstrated, the more numerous the small consumers, the steadier the demand — the less the effect of business depressions upon the solvency of the business. At this date, less than 12 per cent of the area of Pennsylvania, for example, is served with electricity. Fully 20 per cent of the population of Pennsylvania is without even access to electric service. Only 3 per cent of the farms in the United States are electrically equipped, and even in Pennsylvania, the largest mechanical power-producing state, less than 10 per cent of the farms have electricity. Yet the time is at hand when the demand for electrical service will be as universal and insistent as the present demand for the telephone.

Under the recent electrical dispensation, the industry has clung to the centres of population, skimming the cream of the business, encouraging the further congestion rather than the decentralization of population. With a view to a balanced development of community life and as furnishing the widest basis for the development of the industry, giant power would penetrate even sparsely populated territory if of a character adapted to the building of homes and inviting to industrial or agricultural enterprise.

Our studies prove conclusively that widespread rural electrification is inevitable and has already become economically feasible. This is now so apparent that leaders of the electrical industry, such as Owen D. Young and Samuel Insull, president of the Commonwealth Edison Company of Chicago, are urging the ind ustry to meet this new responsibility. Mr. Young points out that only a few years ago, and even in urban communities, the companies were in the habit of ‘picking and choosing’ their customers. Now, of course, everybody who lives in an urban area is looked upon as a prospective customer. Mr. Young rightly holds that a company that accepts an exclusive franchise for a given rural district by that token also accepts the responsibility for making service available for those who live within that district. In Sweden it was discovered that, so long as the companies used the same policy of picking and choosing, rural electrification was unprofitable. After the war it became necessary to find an outlet for the capacity of large plants built to make munitions. As one means of accomplishing this end, rural electrification was taken up in earnest and district after district was completely equipped, until now over 40 per cent of the tillable area of Sweden is provided with electrical service. In Pennsylvania approximately 15,000 out of 200,000 farms are electrically equipped, and half of these make their own current. It is estimated that half the farms of Pennsylvania can be reached with an expenditure of approximately forty million dollars. If this programme should be undertaken over a period of ten years the annual capital expenditure would represent only about 3 per cent of the current capital expenditures of the Pennsylvania electric service companies. Unlike urban residential consumers, most farmers are potential power-users. Agriculture stands almost at the top of power-using industries. Just how far we can go in substituting electrical for human and animal and wind power on the farm cannot even be estimated until the use of power on the farm has grown to the point where it affords a sufficient incentive to engage the interest of inventors of equipment.

In the Muscle Shoals hearings before the Senate Committee on Agriculture, over one hundred different uses for electricity on the farm were listed. It is the general experience that the first use of electricity on the farm is for lighting, and the next for pumping water. Then almost invariably follow the inside bathroom and the septic tank. Cutting silage, grinding feed, and milking are the most frequent uses for electricity in the barn. If, as nowseems likely, forage crops are to be dried artificially, electricity will be needed to drive the blowers and grinders in the driers and rural electrification will receive a great impetus.

It is beginning to dawn on the leaders of women throughout the world that electricity can be made available to lighten the burden of housekeeping to a far greater extent than current rates permit. Drudgery has largely disappeared from the lives of men, simply because their work takes them into industry, where mechanical and electrical power have almost entirely supplanted heavy manual labor. But drudgery is still the portion of womankind the world over. While it is difficult to say just when and how electricity will have conquered drudgery in the home, as to the end result we can speak with assurance. A canvass of 750,000 domestic consumers in Pennsylvania shows that the average use of electricity is only 390 kilowatt hours a year, a kilowatt hour being that quantity of electricity consumed by the common twenty-five-kilowatt electric bulb burning for 40 hours. The industry’s present estimate of the average annual use of 14,500,000 residential customers throughout the United States is 360 kilowatt hours. The possibility of the increase in t he use of electricity in the home is suggested by the fact that in Hartford, Connecticut, several residential customers use more than sixty times this Pennsylvania and national average.

Cooking, refrigeration, cleaning, washing, and many other minor household operations are easily economical at current rates. About heating with electricity it is not so easy to speak positively. To depend solely upon electricity for heat is prohibitive as to cost and, theoretically at least, not good economics. However, there is already a growing use for electrical heating devices at the beginning and end of the heating season, and even in cold weather for supplemental heating of parts of the house. In territories served by water power, where during the winter months there is an excess of current, complete electrical house heating has already been practised.

One of the most interesting recent illustrations of the possibilities of the domestic use of electricity is ‘The AllElectric House,’ built by S. Parker Smith, D.Sc., a professor in the Royal Technical College in Glasgow, Scotland. This ten-room house was built without chimneys, using electricity for heating, ventilating, refrigerating, cooking, washing, heating water, and other minor uses with which we are more familiar. At the rate charged by the Glasgow municipal plant, the whole cost per year was $211, at an average rate of 1.3 cents per kilowatt hour. The average monthly use was 1362 kilowatt hours, about forty-five times our American national average. The relative quantities of the current used each day for the several principal purposes were as follows: —

Water heating 20 kilowatt hours
House heating 10
Cooking 7 1/2
Lighting 1 1/2

The cost per person per day for each of these purposes was: —

Water heating 3 cents
House heating 4
Cooking 2
Lighting 1/2

As illustrating how this whole problem may be affected by future development, Professor Smith has equipped his water-heating circuit with a timing device which shifts meters and thus secures from the company an exceptionally low rate for current used during the night. With this night current he brings the cold water to a certain temperature and then superheats it at the time of use, whether this be on the day or the night rate.

In one of the supplements to the Giant Power Survey Report, data assembled from a good many different points in this country and Canada seem conclusively to prove the proposition that the rate is the principal element in determining how much current is used. A specific illustration is afforded by our experience in Pennsylvania, where in the city of Pittsburgh, with an average household rate of 51/2 cents per kilowatt hour, an average of 620 kilowatt hours per year is used, as contrasted with 390, the state’s average, for which the charge is 81/2 cents.

‘The intimate relationship between rates and use of energy by residential customers,’ said Samuel Insullrecently, ‘is reflected in a residential survey of 226 central station companies, serving about 6,500,000 customers in a population of a little over 27,000,000.

‘For the fifteen companies having the highest rates, which ranged from 13.1 to 18 cents per kilowatt hour, there was an average residential consumption of only 194 kilowatt hours per customer per annum. Twentyseven companies whose rates were 7.1 to 8 cents per kilowatt hour had an average residential consumption of 339 kilowatt hours per customer per annum. So it went through the 226 companies; as the rate went down, the residential consumption increased until it reached an average of 1171 kilowatt hours per customer per annum for three companies having rates ranging from one to three cents per kilowatt hour.

‘The companies with materially lower residential rates had the better balance sheets, better public relations, and altogether were in a healthier condition.’

IV

This increase in the quantity of current used by the average consumer as the rate goes down is vital to the socialization of electricity. With the present over-all cost of current at the outgoing switchboard of a modern coal-burning station not more than six mills per kilowatt hour, it is obvious that the direct influence of further reductions in the cost of producing the current itself would be almost negligible on a rate of ten cents per kilowatt hour. Increased consumption, however, will reduce almost all other costs in direct proportion. If costs other than for the current itself are fixed, — such as, for example, the cost of getting the current from the station to the point of use, — then an increased average use from 339 kilowatt hours a year to 678 would reduce such costs 50 per cent. With the resulting reduction in rates, the effect of any lowering in the cost of current becomes increasingly appreciable.

The present domestic rates bear no relation to the cost of the service. In fact, the service companies of Pennsylvania are on record as saying they have no means of determining the cost, of any given class of service. Rates arc based on ‘competitive conditions,’ ‘commercial considerations,’ ‘business judgment born of long experience,’ and ‘the psychological attitude of the public.’ These appear to be the modern equivalent of ‘all the traffic will bear.’

It may be argued that domestic rates are subject to the approval of the several state public service commissions and to regulation by them. But this is only theoretically so, because practically every public service commission assumes the attitude of a court and decides issues in the main as they are raised by the two contending parties. Of course no individual domestic consumer can afford the expense of a rate contest. Even where some public official, such as the city solicitor, represents a group of domestic consumers, the public side is at such a disadvantage in the matter of expert witnesses and otherwise that cases must almost necessarily be decided in favor of the company, in view of the mere weight or volume of the testimony as contrasted with the equities involved.

The government policy of regulating these quasi-public enterprises was first applied by individual states to the steam railroads; and gradually, through Federal legislation supplemented by court decisions, this control of steam railroads has passed to the Interstate Commerce Commission, a strictly Federal agency. This transition has been facilitated by the creation of large railroad systems, which extend through so many states as to make effective state regulation unworkable. But Congress, except in its passage of the Federal Water Power Act, has taken no action in regard to the regulation of electric utilities. The Water Power Act provides that water power companies acting under Federal licenses are to be regulated by the public service commission of the state in which they operate, and that whenever current from a licensed water power project enters into interstate commerce, regulation is to be effected by agreement between the commissions of the states concerned, or, failing that, by the Federal Power Commission. But, as to power generated from coal, all our legislation has been drafted on the theory that electric companies are intrastate undertakings.

But with the era of interconnection and lengthening of the economical transmission distance, this has ceased to be true. An increasing percentage— and in some parts of the country a very considerable percentage — of the generated current passes over state borders on its way to the point of use, becomes interstate commerce, ceases to be subject to state regulation, and will remain virtually unregulated until such time as Congress sees fit to act.

Because of this absence of control over interstate traffic in electricity, the giant-power proposals include a plan for compacts or treaties between Pennsylvania and the neighboring states as provided for by the United States Constitution. When approved by the Congress, such compacts will give full authority to regulate to any other agency which the contracting states may mutually set up. Because the Congress has the right to withdraw this authority whenever it so elects, it is believed that there should be no special difficulty in securing Congressional approval. This appears to be the most direct route by which effective control over interstate electric traffic, now almost nonexistent, can be attained. As a stop-gap measure only, we further suggest an amendment to the Water Power Act giving the Federal Power Commission the right to regulate coal-generated electricity where the several state commissions are without power to do so, or where, having the power, they fail to agree.

But regulation can hardly have more than a superficial effect upon the free use of electricity by the small consumer, whether on the farm, in the village, or in the large cities, unless current can be made abundant and cheap. To effect this, stations in the mining regions of 650,000 horsepower minimum capacity are the essential next step. Such stations will be the base-load generators, not only for industrial, agricultural, and domestic service, but also for the electrification of the railroads. The giant-power programme sees railroad electrification as an integral part of community electrification. For the railroads to build their own power stations would be to repeat the wasteful procedure which factories and mines are rapidly abandoning because of the superior efficiency of large central public service plants.

A further essential to cheap current is the establishment in connection with the mine-mouth plants of by-product coke ovens for the recovery of the ammonium sulphate, gas, tar, and oils that are now wasted in smoke. More than four thousand commercial products are already derived from the pretreatment of coal, ranging all the way from medicines and perfumes to fertilizers and motor fuels. Expert opinion suggests that gas engines of the future, automobile and airplane engines, must largely depend for fuel upon the oils to be extracted from bituminous coal.

Even without recovering the byproducts, the over-all cost of generating current at mine-mouth plants in Pennsylvania and West Virginia, including capital charges, administration expense, taxes, and so forth, is to-day below six mills per kilowatt hour with coal at $3.00 per ton. As a result of technical development of many kinds, the cost trend is still downward. The cost of coal accounts for approximately 40 per cent of this total. Competent authorities estimate that the sale price of the by-products less the cost of their recovery may easily amount to more than the whole present fuel bill. Giant power, of course, counts on further economies growing out of the integration of electrical generation and distribution over wide areas, raising what is technically known in the industry as the ‘capacity factor’ or the percentage of use of the available equipment. Therefore it would appear that the production cost of electricity, while at present low, is to go to markedly lower levels in the very near future.

The transition from superpower to giant power is already under way. Whether this transition can be effected without enormous wastage and to the full advantage of the consumer is a question yet to be answered. Certainly, until the public understands the problem, adequate safeguards and sufficient incentives will not be forthcoming.

While water is not free in the sense that it costs nothing, or so cheap as not to be worth metering, it is free in the sense that even the poorest can enjoy it without stint. In this sense we believe electricity is soon to be made so free that its blessings will become the common property of all the people. Therefore cheap and widely distributed electricity should be the background of all our planning — for the farmers, for industry, and for the home.