IEEE Power & Energy Magazine - March/April 2018 - 94

opinion supported immediate action," he insisted, and this commission
"should be composed of men in whom
there is great public confidence," including former governors hughes and
smith. the trustees would report their
findings and, with legislative approval,
would carry out their plan. by the standards of the era, this was a "very brave
step in the right direction," averred
Nebraska sen. George w. Norris, the
leading champion of public power in
congress. but republican opposition
fostered by the private power empire
was waiting with sharpened knives.
the bill died in committee and never
made it to the legislature.
fDr responded by going over the
heads of the legislators to the voters
themselves. "throughout the summer [1929] roosevelt toured the state,"
wrote biographer e.k. Lindley, "making from four to eight speeches a day
... preaching 'cheap electricity.'" and
four years before his first "fireside

chats" from the white house, he was
broadcasting on the radio from the governor's mansion, hammering home one
fact: New Yorkers paid on average eight
times as much as toronto's public power customers, which not even republican voters could ignore.
then, in october, the stock market
crashed. Margin calls on all the leveraged stock triggered panic, and within
two weeks the Dow-Jones Index had
fallen 40%. Jobs evaporated when businesses collapsed, and the overextended
economy shriveled. as warren buffett
observed years later, "only when the
tide goes out do you discover who was
swimming naked," and a leading figure
in the power empire became an icon of
power industry corruption.
Under Morgan, samuel Insull had
become president of chicago edison.
he had come from england in 1881, at
age 21, to work as secretary for thomas
edison, who soon after lost control of
edison General electric to Morgan. In

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1892, Insull accepted Morgan's offer to
become the president of chicago edison, where he instituted a crucial principle in power generation: Diversity of
load creates greater savings and profits.
In most cities, for example, the electrical
demand for traction (trollies and trams)
peaked during rush hours, while elevators and other motors operated by day and
lighting predominated after dark. the
peak load was never the sum of all three
demands, just the highest of the three: so
chicago edison could realize significant
savings in capacity. Insull argued that
the "natural monopoly" of a single utility was more efficient than competing
companies purchasing generators, hanging power lines, and digging up streets.
and its customers benefit from economies of scale that only large producers
could achieve: as the scale of production
increases, unit costs would decrease (if
the producer passed the savings along).
Insull also cynically welcomed regulation, knowing that it was inevitable and
the least troublesome form of public control. besides, Insull could often select
pliable commissioners to oversee his
utilities, and he acknowledged contributing Us$125,000 to the campaign of the
chairman of the Illinois commerce commission, since no laws forbade it.
each time Insull's holding company
purchased a business, he inflated its
value tenfold and then sold its stock
while taking 10% or more as commission while retaining the voting common
stock of the holding company, thereby
remaining in control without investing
a penny himself. all this added to the
average customer's exorbitant rates. as
one observer noted, "I know of no other
manufacturing industry where the sale
price to the great mass of consumers is
15 times the cost of production of the
article sold." In all, Insull controlled
some Us$500 million of assets in 1930
with just Us$27 million of investments.
that degree of leverage was common on
wall street before the market crashed;
indeed, that is exactly why it crashed.
when Insull's pyramid scheme fell
apart, he fled to france, while some
600,000 investors lost everything. In
short order, J.P. "Jack" Morgan, Jr. took
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