To the Users of Electric Service

For the Electric Companies of the Consolidated Gas Company Group in New York City

January 16, 1935

Honorable Fiorello H. LaGuardia,

Mayor of the City of New York,

New York, N. Y.

My dear Mayor:

This is in response to your letter of January 12th.

Among other things, you ask for “the immediate putting into effect of a blanket 20% reduction for light and a proportionate and just reduction for industrial purposes”. This would mean a slash of about $32,000,000 in our revenues, and, with increased taxes and operating costs, would leave the Company with only $4,000,000 of income for payment of preferred stock dividends requiring $10,500,000, after omitting all dividends on the common stock representing actual investment in the property rendering public service. In the interests of consumers and employees, as well as investors, the Trustees and officers of the Consolidated Gas Company must maintain the financial stability of this great enterprise.

TAXES TAKE 22 CENTS OUT OF EVERY CUSTOMER’S DOLLAR

The extent and nature of the reduction in rates to be made at the start, when the Washington Plan has been approved, is dependent primarily upon the economies that can be realized from financial simplification, from the abolition of submetering, and from elimination of taxes which are excessive and directly discriminatory as compared with the taxes on other businesses. Further reductions in rates in subsequent years are dependent upon the greater use of electricity, and rate structures designed to produce such use are being developed.

The most serious obstacle to a lower level of rates in New York City is the increases in operating taxes. For 1935, the present taxes, if enforced against us, will amount to about 22% of our gross revenues. In Washington where lower rates have been realized, taxes are stated to be about 11¼% of gross revenues. This difference in taxes alone would amount, as to our companies, to about $26,000,000, which is a large part of the $32,000,000 you ask for as a rate reduction. Another factor which would lessen the amount of rate reductions to consumers throughout the City, would be the loss of the business now supplied to the Federal and City Governments at central locations in Manhattan. If we lose this business, our ability to make rate reductions to the public will be correspondingly decreased.

NAVY YARD’S BILL NOT $900,000—ONLY $9,000!

There have been errors as to assumed savings from the building of plants by governments for their uses. For example, it has been said that during the World War the Federal Government found that the power rates at the Brooklyn Navy Yard were too high and reduced the charges of the utilities there from $900,000 to $300,000 a year, by building a government plant at the Brooklyn Navy Yard. You will wish the public to know the facts as to this. Before 1906, the Government had three small plants at the Navy Yard, and took little auxiliary service from the Brooklyn Edison Company. In 1906, the Government built a new plant; and in 1911 the service connection between the Company’s lines and the Navy Yard was discontinued. From 1911 to 1917, no service was supplied to the Navy Yard. In 1917, for wartime purposes, the service was reconnected; and the Government took a small amount of auxiliary and breakdown service, paying only $582 for the year 1917. The largest amount of service the Navy Yard has ever taken from the Company was in 1918, when it amounted to $9,126.55. From 1917 through 1933, the total amount paid by the Government was $25,323.88. If there was a reduction in the cost of electric service to the Navy Yard from $900,000 to $300,000 a year at any time since 1906, it did not come out of and had nothing to do with the amounts paid to the Brooklyn Edison Company.

WOULD COST CONSUMERS $100,000,000 TO GIVE UP GAS

We can hardly treat as serious your suggestion that the companies ought to abolish and write off their gas plants and other gas properties. There are more than 1,250,000 consumers of our gas service. Many of them use gas for purposes which could not economically be performed with electricity. You have overlooked the obvious fact that to replace gas ranges with electric ranges for cooking would cost the landlords and consumers at least $100,000,000, and that industrial, commercial and other uses of gas would still compel the retention of gas plants and holders. You also should know that gas rates are determined on their own costs and investments, apart from those for electric service.

GOING RIGHT AHEAD TOWARD LOWER RATES

We are sorry that you will not arbitrate the City lighting contracts for 1935. Since you say that you already have in your possession all of the facts necessary for determining what the rates to the City should be, arbitration would involve no delay and would bring a fair and quick determination. Your unwillingness to end controversy will not change our purpose to proceed actively for the adoption of the Washington Plan and the steps to effect economies to enable prompt and substantial rate reductions to our consumers in New York City and Westchester County. The full facts and proposals are being presented to the public authorities which have jurisdiction. We are going ahead to settle, if we can, every controversy that might stand in the way of the successful operation of the Washington Plan, a plan to bring about lower rates through increased consumption.

Very truly yours,

Floyd L. Carlisle

For the Electric Companies of the Consolidated Gas Company Group in New York City