As a consequence, in part, of our order for American's dissolution and in compliance therewith, American's operating subsidiaries have undergone thoroughgoing corporate reorganization and simplification. The steps which have been taken by them and by American constitute necessary preliminary action which now makes possible the entertainment of the Plan before us. Thus, in 1943, we authorized American to undertake a program for the retirement of $44,933,000 principal amount of its own and assumed 6% debentures which program was completed in December of 1945.12 As a result, American's present corporate structure consists only of preferred and common stocks. American and its subsidiaries have disposed of certain non-retainable utility and non-utility assets. 13 Recapitalizations and accounting reorganizations have been effected in the cases of Florida,1 Texas Electric,15 Texas Power, 16 Minnesota," and Montana.18 In connection with the merger of Northwestern Electric Company into and with Pacific, Pacific was recapitalized.19 There is presently pending a plan for the recapitalization of Portland.20 As a part of the overall program for the recapitalization of its system, American has made substantial additional investments in the equities of most of its subsidiaries. In addition most of the subsidiaries of American have, since 1942, refunded their debt securities with lower interest obligations and some have refinanced preferred stocks.

In each case, appropriate provision was made for the elimination of Account 107,21 Electric Plant Adjustments, and for the

13 American Power & Light Company, 12 S. E. C. 886 (1943); American Power & Light Company, 13 S. E. C. 764 (1943); American Power & Light Company, 21 S. E. C. 191 (1945); American Power & Light Company, 21 S. E. C. 309 (1945); and, American Power & Light Company, 21 S. E. C. 457 (1945).

13 In 1944 American disposed of its controlling interest in Nebraska Power Company; in 1945 of its controlling interests in Central Arizona Light and Power Company and New Mexico Electric Service Company; and, in 1947 of its interest in Texas Public Utilities Corporation. In 1944 Glacier Production Company, an oil and gas subsidiary of Montana, was dissolved, its oil properties sold, and its gas properties transferred to Montana. See Central Arizona Light and Power Company, 21 S. E. C. 260 (1945); New Mexico Electric Service Company 21 S. E. C. 471 (1945); Texas Public Utilities Corporation, Holding Company Act Release No. 7456 (1947); and, The Montana Power Company, 17 S. E. C. 526 (1944). In addition, Washington has disposed of its interest in Spokane United Railways, and Florida of its interests in Consumers Water Company. Neither of these latter two dispositions was the subject of a filing with this Commission.

14 15 S. E. C. 85 (1943).

15 18 S. E. C. 686 (1945).

16 19 S. E. C. 129 (1945).

17 19 S. E. C. 376 (1945).

19 19 S. E. C. 661 (1945).

19 25 S. E. C. 618 (1947).

20 File No. 54-146.

21 Amounts classified in Account 107 represent, generally speaking, the amounts by which the book carrying value of property exceeds the arm's-length cost to the company of such property.

amortization of Account 100.5,22 Electric Plant Acquisition Adjustments.23 Since 1942, there has been eliminated from the books of American's present subsidiaries Account 107 items aggregating approximately $150,000,000, and a total aggregate amount of approximately $41,000,000 has been set up in the respective Accounts 100.5 of the present subsidiaries.

Additional steps accomplished by the American system include the merger of Northern Power Company into Superior 24 and the subsequent transfer by American of the common stock of the surviving company to Minesota,25 and, as has been noted, the creation in 1945 of Texas Utilities to hold the common stocks of Texas Power, Texas Electric, and Dallas. The common stock of Dallas was acquired from Electric Power & Light Corporation, an associate holding company in the Bond and Share system, by Texas Utilities as part of the transaction creating the new holding company.26 In connection with the organization of Texas Utilities, American stipulated that within one year from the date of the order authorizing the company's creation (unless the Commission should extend such time) it would dispose of all of its interest in Texas Utilities in a manner approved by the Commission. The plan filed in 1946, like the present Plan, was designed, among its other purposes, to effectuate compliance with this stipulation. As a consequence, we have withheld any action requiring an earlier disposition of American's interest in the Texas properties.

The recital of the foregoing steps, and the situations they were designed to correct bring sharply into focus the critical condition of American and its subsidiaries at the time of the entry of our dissolution order in 1942. A multitude of complex problems have been and had to be resolved to bring the system to its present stage of compliance with the standards of the Act and to make

Amounts classified in Account 100.5 represent, generally speaking, the amounts by which the cost to the company of property acquired in arm's-length transactions exceeds the original cost of such property.

Pursuant to the Uniform System of Accounts prescribed by the Federal Power Commission, all of the electric utility subsidiaries of American, with the exception of Florida, Dallas, Texas Electric, and Texas Power, are required to state their electric utility plants on the basis of original cost. By operation of our Rule U-27, the Federal Power Commission's Uniform System of Accounts is made applicable to Florida, Texas Electric and Texas Power. Accordingly, these three companies have completed original cost studies which provide for statement of their electric plants on the basis of original cost and for the disposition of amounts classified in Accounts 100.5 and 107. These studies have been reviewed and with the exception of Florida's, have been approved by us. Dallas is not subject to the accounting jurisdiction of the Federal Power Commission but since it is subject to the accounting requirements of the City of Dallas, it is not subject to the requirements of our Rule U-27.

24 Superior Water, Light and Power Company, et al., 13 S. E. C. 57 (1943).

25 Minnesota Power & Light Company, 19 S. E. C. 376 (1945).

American Power & Light Company, et al., 21 S. E. C. 121 (1945).

feasible the present Plan. While much time has been consumed in this process it can fairly be said that the benefits to American's investors and to consumers in the areas served have been substantial. With the exception of Portland, discussed below," all of the subsidiaries of American are soundly and realistically capitalized, and are in a position to finance their growth on an economical basis.

The Plan provides for the elimination of all of American's preferred stocks, with their huge dividend arrears; for the divorcement of American from the Bond and Share system; for the compromise and settlement of all intercompany claims; for compliance by American with the stipulation relating to the disposition by American of its interests in the Texas properties; and for the contraction of the American company to a corporation having a single class of capital stock with but two electric utility operating subsidiaries. Indeed, the American company as it existed in 1942 is for all practical purposes eliminated under the terms of the Plan. As noted previously, the pending Plan does not propose the dissolution of American as required by our order of August 22, 1942.28 In this connection, the Plan states that American believes that the properties of Washington and Pacific together constitute a single integrated public utility system which should be held together in a holding company system. The Plan further states that, subsequent to the effective date, American intends to apply to the Commission to modify the Commission's order for its dissolution so as to permit it to remain in existence as a holding company for these two subsidiaries.29

As stated by us in our Findings in the Section 11 (b) (2) proceeding relating to American, "we deem it indisputable that the steps or action we must find 'necessary' within the meaning of Section 11 are such as seem to us designed to ensure effectuation of the provisions of the Section most effectively and promptly." It has since been consistently held by us and affirmed by the Courts that a plan to be "necessary" within the meaning of Section 11 (e) of the Act, need not by itself effectuate complete compliance with the requirements of Section 11. It is sufficient if the plan provides a suitable and expeditious means for achieving results necessary under Section 11 (b) although different means might have been chosen and further steps may be necessary.30

Page 45, infra.

"Cited, supra, Note 1.

As to the recognition of a contingency of this character in our dissolution opinion, see discussion, supra.

Lahti v. New England Power Association, 160 F. 2d. 845, 850 (C. A. 1, 1947). See also, Commonwealth & Southern Corporation v. S. E. C., 134 F. 2d 747, 751 (C. A. 8, 1943), and Electric Power & Light Corporation, supra.

We have noted the substantial steps in compliance with Section 11 which will be accomplished under the Plan regardless of whether American may ultimately be permitted to continue in existence to hold the common stocks of Washington and Pacific. No issue as to the necessity of the action proposed in the Plan has been raised in this proceeding. By leaving for later determination the question of the modification of our order for American's dissolution, we can clear the way for immediate steps which must be taken in any event.31 We note that should a modification of our order for American's dissolution be denied, only one more step, the disposition of the common stocks of Washington and Pacific and other minor assets will be necessary to effectuate complete compliance with our order for the termination of American's existence. The Plan recognizes and provides for the possibility that Washington and Pacific may be sold to outside interests prior to the effective date of the Plan; obviously, if these steps are taken, American will then be required to dissolve, and our order of dissolution then will be literally and fully complied with.

In summary, we find that the Plan before us proposes major steps which must be taken by American to meet the requirements of sub-section (b) of Section 11 of the Act and our dissolution order under Section 11 (b) (2). Accordingly, subject to our finding that the Plan is fair and equitable, we find that the Plan is necessary to effectuate the provisions of Section 11 (b) of the Act.32

Fairness of the Plan.

The "fair and equitable" standard to be applied to Section 11 (e) reorganizations requires that "each security holder in the order of his priority receive from that which is available for the satisfaction of his claim the equitable equivalent of the rights surrendered." 33 In applying this standard we have consistently held, with judicial sanction, that charter liquidation provisions are not the measures of stockholders' rights in liquidations and reorganizations compelled by the Act. It is not the promise that a charter made to a stockholder but the current worth of that promise that governs.34 Thus, the entire bundle of rights sur

a1 Cf. Electric Power & Light Corporation, ibid.

32 In the light of our findings herein, we also find that the Plan is necessary to effectuate the provisions of Section 11 (b) in the event that American's interests in Washington and Pacific are sold to outside interests prior to the effective date of the Plan.

33 Securities and Exchange Commission v. Central-Illinois Securities Corp.,-U.S.—(June 27, 1949), 69 S.Ct. 1877; Otis & Co. v. Securities and Exchange Commission, 328 U.S. 624, 640 (1945); Lahti v. New England Power Association, 160 F. 2d 845 (C.A. 1, 1947); Cf. Schwabacher v. United States, 334 U.S. 182, 199 (1948).

Schwabacher v. United States, ibid.

rendered by a security holder under a plan must be viewed as though in a continuing enterprise, with primary emphasis being placed upon immediately operative rights such as rights to earnings and dividends as against rights which otherwise might never be operative and in any event would arise only by voluntary action of stockholders or, involuntarily, through action of creditors.

An appraisal of the Plan in the light of these principles involves a comparison of the present claims and prospects of American's security holders with what they are to receive under the Plan. Since American derives its income from its investments in its subsidiaries, in making this comparison, we shall consider first the pertinent data of the subsidiaries and then of American, and the rights of the securities to be surrendered and those to be received, including rights attaching to such securities with respect to earnings, dividends and assets. In addition, we shall also examine the claims that have been asserted against Bond and Share and their proposed settlement. Accordingly, we now turn to a discussion of the subsidiaries of American.

In connection with our discussion of each of the utility subsidiaries we include income statements for the years 1937 through 1948. In making yearly comparisons these statements must be examined in the light of the substantial changes which have occurred in the case of each of these subsidiaries since 1937 and as to which the record before us is complete. Among these changes are those described under our discussion of "necessity". These relate to reorganizations, mergers, recapitalizations, refundings, additional investments by American in the common stocks of subsidiaries and other major changes in corporate structure. Also to be borne in mind is the large expansion that has occurred in the operating revenues, properties, and corporate structures of subsidiaries in the American system. In our over-all consideration of future earnings we have noted that the operating executives have prepared large construction budgets to provide facilities to meet present and anticipated demands for service. These budgets for the years 1949, 1950, and 1951 call for aggregate expenditures of approximately $230,000,000. It is to be further noted that the operating executives testified generally that rates for service charged by their companies were not out of line with rates for comparable service, particularly residential, charged by other utilities in the same territory and region.

We also note that the operating executives testified to the effect that in financing their future construction programs they expected