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EXHIBITS

EXHIBIT 6202

REPORT ON THE EXAMINATION OF THE ACCOUNTS AND RECORDS OF THE POWER & ELECTRIC SECURITIES CORPORATION (SUBSIDIARY OF THE POWER CORPORATION OF NEW YORK)

(By Clarence G. Farwell)

NOTE

This report was prepared with reference to that part of Senate Resolution 83 (Feb. 15, 1928) which relates to the actual investments, financial transactions, business operations, earnings, and other economic results of electric power and gas utility companies, their holding companies, and their associated or affiliated companies. It does not purport to go into questions of the fair value of the property of these public utilities (operating companies) or of fair rates of return or reasonable rates for services rendered; and the Senate resolution in question did not call for such information, which would have required, among other things, an appraisal of all the properties of the utilities in question. The subjects of this inquiry directed by the Senate are fundamental for an understanding of how these utility companies and the utility holding companies have developed and the present position of the holding companies as business corporations and in their relations to these public utilities.

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Investments in miscellaneous securities_

Investments, December 31, 1931__.

Introduction---

Section 2. Northern New York Utilities, Inc.

Acquisition of common stock by the Power & Electric Securities

Corporation__

Chapter III. Investments-Continued.

Section 2. Northern New York Utilities, Inc.-Continued.

Page

Ledger value of investment in common stock of Northern New
York Utilities, Inc----

23

Return on investment in common stock.

24

Section 3. Malone Light & Power Co---.

27-32

Introduction___.

27

Acquisition of common stock by the Power & Electric Securities
Corporation.

27

Ledger value of investment in common stock of Malone Light &
Power Co.

30

Return on investment in common stock_

31

Section 4. Other securities owned on December 31, 1931.

33-41

Introduction

33

Niagara Hudson Power Corporation common stock---
Organization__.

33-36

33

Acquisition by the Power & Electric Securities Corporation_
Ledger value of investment in common stock of Niagara Hud-
son Power Corporation___.
Return on investment--.

34

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Buffalo, Niagara & Eastern Power Corporation preferred stock_- 37-38
Organization___.

Acquisition by the Power & Electric Securities Corporation_
Ledger value of investment in preferred stock of Buffalo,
Niagara & Eastern Power Corporation----

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Buffalo, Niagara & Eastern Power Corporation common stock....
Eastern States Power Corporation class B common stock---.
Mohawk Hudson Power Corporation common stock_.
New England Power Association common stock.
The Niagara Falls Power Co. common stock_-
Northeastern Power Corporation---.

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Organization__
Common stock.

Class A stock..

Old Forge Electric Corporation, option on common stock_.

The Power Corporation of New York common stock..
St. Regis Paper Co. common stock..

Taggart Corporation common stock_.

Chapter IV. Balance-sheet accounts--

Introduction

Advances to subsidiary and affiliated companies_.

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58-63

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Chapter V. Income, expenses, surplus, and rates of return.

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Chater V. Income, expenses, surplus, and rates of return-Continued.
Section 2. Income Continued.

Dividends on investment in stocks of affiliated companies----
Income from investments in securities of other utility companies_
Income from investments in miscellaneous securities_.
Interest on advances to subsidiary companies--
Interest on advances to affiliated companies----

Interest on advances to other utility companies___

Interest on advances to nonutility companies.
Interest on bank balances, etc..

Profit on securities sold_.

Section 3. Expenses-

Introduction....

General administration expenses_.

Taxes (except Federal income tax)
Interest on unfunded debt_.

Federal income tax--‒‒‒

Section 4. Surplus---

Introduction___.

Growth of surplus_
Dividends paid__

Other surplus items_.

Section 5. Rates of return_

Introduction_-_-_

Rate of return on investments in subsidiary companies---
Rate of return on capital employed----

Rate of return on common-stock equity-

Rate of return on common stock-corporate basis_-_

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LIST OF EXHIBITS

1. Comparative statement of assets and liabilities as at July 1, 1924, and as at December 31, 1924 to 1931, inclusive__.

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2. Comparative income statement for each of the years ending December 31, 1924 to 1931, inclusive____

91

3. Analysis of surplus for each of the years ending December 31, 1924 to 1931, inclusive__

92

4. Comparative summary of investments as at July 1, 1924, and as at December 31, 1924 to 1931, inclusive____

93

5. Total revenues from investments for each of the years ending December 31, 1924 to 1931, inclusive__--

94

LIST OF APPENDIXES

1. Certificate of incorporation of the Power & Electric Securities Cor-
poration__--

2. Bylaws of the Power & Electric Securities Corporation_-_-
3. Agreement dated June 17, 1924, between St. Regis Paper Co., the Power
& Electric Securities Corporation, and the Power Corporation of
New York covering acquisition of 65,000 shares of common stock of
Northern New York Utilities, Inc., by the Power & Electric Securi-
ties Corporation__-

4. Agreement dated December 23, 1924, between the Power Corporation
of New York and the Power & Electric Securities Corporation,
covering acquisition of common stock of Northern New York Utili-
ties, Inc., by exchange of two shares of common stock of the Power
& Electric Securities Corporation for each three shares acquired___
5. Agreement dated June 9, 1925, between M. S. Wilder and F. L. Carlisle
& Co., Inc., covering acquisition by F. L. Carlisle & Co., Inc., of (a)
common capital stock of Malone Light & Power Co.; (b) common
stock of Sulham_Manufacturing Co.; (c) common stock of Fort
Covington Light, Heat & Power Co.; (d) water power rights on the
Salmon River, Franklin County, N. Y., and known as Shepard
Bridge, Whippleville, Mountainview, and Barnsville Bridge prop-
erties"; (e) common stock of Milling & Lighting Co., Inc.; and (f)
certain water-power rights on the Chateaugay River in Franklin
County, N. Y..

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6. Agreement dated June 14, 1926, between Malone Light & Power Co.
and the Power & Electric Securities Corporation, covering acquisi-
tion of 11,205 shares of common stock of Malone Light & Power Co--
7. Agreement dated August 31, 1926, between Malone Light & Power Co.
and the Power & Electric Securities Corporation, covering acquisi-
tion of 11,205 shares of common stock of Malone Light & Power Co.
in extension of contract dated June 14, 1926_-
8. Agreement dated July 18, 1929, between Malone Light & Power Co. and
the Power & Electric Securities Corporation, covering merger of
Fort Covington Light, Heat & Power Co. and Milling & Lighting
Co., Inc., with Malone Light & Power Co----
9. Agreement dated October 15, 1929, between Niagara Hudson Power
Corporation, the Power & Electric Securities Corporation, and M. J.
Warner, covering acquisition of common stock, preferred stock, and
bonds of the Eastern Gas & Electric Securities Corporation for
Niagara Hudson Power Corporation-----
10. Agreement dated October 15, 1929, between Niagara Hudson Power
Corporation, the Power & Electric Securities Corporation, and M. J.
Warner, covering repurchase by the Power & Electric Securities
Corporation of Niagara Hudson Power Corporation common stock
which was exchanged for the Eastern Gas & Electric Securities
common stock..

11. Agreement dated September 28, 1928, between A. Augustus Low and
F. L. Carlisle covering option to purchase stock and bonds of Old
Forge Electric Corporation___.

12. Agreement dated September 28, 1928, between A. Augustus Low and F. L. Carlisle covering option to purchase stock and bonds of Inlet Utilities Corporation___

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[S-I] SUMMARY OF THE REPORT ON THE EXAMINATION OF THE ACCOUNTS AND RECORDS OF THE POWER & ELECTRIC SECURITIES CORPORATION

This report deals with the corporate activities of the Power & Electric Securities Corporation, a subholding company of the Power Corporation of New York of the Niagara Hudson Power Corporation group. It covers the period from the organization of the company to December 31, 1931.

The Power & Electric Securities Corporation is not directly engaged in rendering public-utility service, but it does control directly through commonstock ownership Northern New York Utilities, Inc., and Malone Light & Power Co. which are actively engaged in the generation, transmission, and distribution of electricity and gas in the counties of Franklin, Jefferson, Lewis, Oneida, Oswego, and St. Lawrence, in the State of New York.

As of December 31, 1931, the two operating subsidiaries of the Power & Electric Securities Corporation were serving electric light and power to 90 communities with a population of 126,252. The subsidiaries sold 660,911,389 kilowatt-hours of electric energy in the year 1929. The sales declined to 454,530,437 kilowatt-hours in 1931.

As of December 31, 1931, the two operating subsidiaries of the company were serving gas to three communities with a population of 73,157. In 1929, the two subsidiaries sold 391,396,000 cubic feet of gas. In 1931, the sales of gas declined to 352,157,000 cubic feet.

The Power & Electric Securities Corporation was organized primarily to acquire control of Northern New York Utilities, Inc., an operating public utility of which 38 percent [S-II] was already owned by St. Regis Paper Co., a Carlisle company. By December 31, 1931, all but 84 shares out of 200,000 shares of Northern New York Utilities, Inc., common stock outstanding had been acquired.

From organization in 1924, all of the common stock of the Power & Electric Securities Corporation has been held by the Power Corporation of New York, a Carlisle interest. The Power Corporation of New York was acquired by Northeastern Power Corporation at its organization in 1926. The latter company was acquired by Niagara Hudson Power Corporation in 1929. The Power & Electric Securities Corporation thus became a part of Niagara Hudson Power Corporation group.

The investments of the Power & Electric Securities Corporation were primarily in securities of subsidiary and affiliated companies, or in a company

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