Nonoperating income-utility:

[154] The price at which the power generated by the Great Falls Power Co. was sold to Southern Power Co. varied throughout the life of the company. From the beginning of operations, March 1, 1910, to December 31, 1915, this company received $0.0044 per kilowatt-hour for primary power and $0.00132 per kilowatt-hour for secondary power from each of its three plants. (An explanation of primary and secondary power is given in ch. XI of this report.) From January 1 to June 30, 1916, the price received was $0.003 per kilowatt-hour. From July 1, 1916, to April 1, 1918, the price received by this company for power generated at its three plants was on a sliding scale for day and night power, ranging from $0.0066 per kilowatt-hour for the first 50,000 kilowatt-hours to $0.003 per kilowatt-hour for 20,000,000 kilowatt-hours and over for day power, and from $0.0056 per kilowatt-hour for the first 50,000 kilowatt-hours to $0.0027 per kilowatt-hour for 15,000,000 kilowatt-hours and over for night power.

On April 1, 1918, the three plants, Great Falls, Rocky Creek, and Ninety-Nine Islands, were leased to Southern Power Co. for a period of 10 years. The lease provided that Southern Power Co. pay all operating and maintenance expenses, while taxes, depreciation, and insurance were to be borne by Great Falls Power Co., and, in addition, the Southern Power Co. was to pay $0.0032 per kilowatthour for the power generated at each of the three plants. The rate charged for the power generated at Great Falls and Rocky Creek plants was changed to $0.004 per kilowatt-hour upon the completion of the Bridgewater Reservoir, then under construction by the Western Carolina Power Co. These foregoing provisions of the leases were modified for the year 1920, to the extent that the operating costs of the three plants were borne by Great Falls Power Co. Beginning again in 1921, however, and continuing for the remainder [155] of the life of this company, all operating and maintenance expenses of the plants were borne by Southern Power Co., which also paid the rate mentioned above for the power generated, i. e., $0.004 per kilowatt-hour for the power generated by the Great Falls and Rocky Creek plants and $0.0032 per kilowatt-hour for power generated by the Ninety-Nine Islands plant.

The Dearborn plant, upon completion in 1923, was likewise leased to Southern Power Co., with similar provisions to those mentioned above, except that the price paid by Southern Power Co. was $0.006 per kilowatt-hour. Also, the Cedar Creek plant, upon completion in 1926, was leased under similar arrangements, with a price of $0.006 per kilowatt-hour for power generated.

The gross revenue of the Great Falls Power Co. increased from $646,691.25 for the full year of 1911, with three hydroelectric plants operating, to a peak of $1,377,018.68 for the year 1924, with four plants in operation.

The largest items of expense charged against the gross revenue were taxes and depreciation. As shown above, after April 1, 1918, except for 1920, all other operating costs were borne by the Southern Power Co.

The net income of the company, after payment of Federal income taxes, ranged from $341,141.88 for 1925, to $2,791,742.93 for 1924. Included in the net income for 1924, however, is a stock dividend in the amount of $1,869,000.

[156] Surplus.-The surplus account of the Great Falls Power Co. for the entire period from March 1, 1910, to November 30, 1927, is summarized below:

The credit to surplus in the amount of $62,160 for stock dividends received, represents a stock dividend of 120 percent received from Duke Power Co., February 11, 1925. Prior to 1925 stock dividends received were credited to current earnings instead of surplus.

The write-up of properties in the amount of $3,651,667.75 was a result of appraisals of the company's property made by W. S. Lee and J. E. Sirrine & Co. This write-up has been discussed in an earlier section of this chapter.

Interest during construction on the Dearborn plant was credited to an account styled, "Provision for interest on Dearborn plant”, which account was closed into surplus on December 31, 1924. Interest during construction on the Cedar Creek plant, constructed in 1925 and 1926, was credited to current earnings.

[157] Dividends were accrued regularly on the preferred stock at the rate of 7 percent per annum. The Great Falls Power Co. earned its preferred-stock dividend requirements during the period from 1910 through November 1927. The total preferred-stock dividends for the period were $7,167,733.99. The only cash dividend paid on common stock was 1 percent on October 1, 1927, just prior to the merger with Duke Power Co.

Common-stock dividends in the amount of $8,664,712 represented a stock dividend of 39 percent on December 28, 1922, in the amount of $2,249,832 ($32 adjusted by cash) and another of 80 percent on February 11, 1925.

[158]

CHAPTER V. WESTERN CAROLINA POWER CO.

ORGANIZATION, Development, and Control

Organization.-Western Carolina Power Co. is the successor, by change of name, as of September 19, 1908, of Horseford Power Co., incorporated September 17, 1907, under the laws of the State of North Carolina.

The objects and purposes for which the corporation was formed were general in nature but were intended to particularly cover the following: "To utilize and develop the water powers of the Catawba River, particularly the Horseford Shoals in the counties of Catawba, Burke, and Caldwell, of the State of North Carolina."

The amount of capital stock authorized at organization was $125,000, consisting of 1,250 shares of the par value of $100 per share. The company commenced business with 500 shares subscribed for by the following incorporators:

These incorporators thereupon passed a resolution authorizing the purchase of the Horseford Shoals property, containing about 750 acres with the waters and water powers thereon, from Messrs. G. H. Geitner and J. L. Riddle, at a price of $50,000. Both of the above-named vendors were directors of the newly organized company.

[159] Development. The subsequent growth of the Western Carolina Power Co. from the date that it was organized as Horseford Power Co. is indicated by the following comparative balance sheet. As shown, the company started with capital assets of $50,000. By December 31, 1926, the total assets had increased to $15,912,480. By May 10, 1932, the total assets had decreased to $1,915,357. This decrease was principally due to the sale of completed electric generating plants to Duke Power Co. in the year 1927. No changes of any consequence took place in the affairs of the company until May 10, 1932, when all of the remaining assets were taken over by Duke Power Co. and all liabilities assumed. In consideration for these assets, Duke Power Co. surrendered all of the capital stock except 10 shares which are now carried at a nominal value of $1.