Oscar O'Brien, the general counsel, answered while he lit one of his inevitable cigars. “They don't believe us because they've been conditioned not to-mostly by politicians trying to suck up to voters and looking for an easy target. Public utilities have always been one."
The chairman snorted. "Politicians! they disgust me! they invented inflation, created it, worsened it, keep it going as they build public debt -all so they can buy votes and bang onto their jobs. Yet those charlatans, those obscurers of the truth, blame inflation on everybody else unions, business-anyone, anything, except themselves. If it weren't for politicians, we wouldn't be asking for a rate increase because we wouldn't need to."
Sharlett Underhill, executive vice president of finance and the fourth person in the chairman's office, murmured, "Amen!" Mrs. Underhill, a tall brunette in her forties, capable, normally unruffled, today appeared harried. Which was understandable, Nim thought. Whatever financial decisions were made as a result of the PUC turndown, they would inevitably be harsh and Sharlett Underhill would have to implement them.
Eric Humphrey, who had stopped his pacing, asked, "Does anyone have a theory about why everything we sought was rejected? Did we misjudge the profiles? Where was our strategy wrong?"
"I'm not sure our strategy was wrong," O'Brien said. "And we sure as hell studied the profiles, and acted on them."
Behind the question and answer was a common practice of utility companies-but also a closely guarded secret.
Whenever a Public Utility Commissioner was appointed, companies which would be affected by the new commissioner's decisions began a detailed undercover study of the individual, including a psychiatric profile. The resultant material was pored over by experts in psychology who searched for prejudices to be guarded against or weaknesses to be exploited.
Later an executive of the utility would attempt to strike up a friendship in the course of which the commissioner would be entertained at the executive's home, invited to play golf, share bard-to-get seats at sports events, or taken trout fishing at a Sierra hideaway. The entertainment was always pleasant, private, and discreet, but never lavish. During casual conversations some discussion might occur about the utility's affairs, but no direct favors were asked; the influence was more subtle.
Often the tactic worked in a utility's favor. Occasionally it didn't.
"We knew two of the commissioners would vote against us anyway," the lawyer said, "and we knew for sure that two of the other three were in our corner. So that left Cy Reid's as the swing vote. We'd worked on Reid, we thought he'd see things our way, but we were wrong."
Nim knew about Commissioner Cyril Reid. He was a Ph.D. economist and former university lecturer whose practical business experience was nil. But Reid had worked closely with California's incumbent Governor through two election campaigns and insiders now believed that when the Governor moved from Sacramento to the White House, as he hoped to, Cy Reid would go with him as chief of staff. According to a confidential file which Nim had read, Commissioner Reid was once an ardent believer in Keynesian economics, but had recanted, now accepting that the deficit spending doctrines of John Maynard Keynes had led to economic disaster worldwide. A recent report from a senior vice president of GSP & L, Stewart Ino, who had cultivated Reid, declared that the commissioner had "faced up to the realities of income statements and balance sheets, including those of public utilities." But perhaps, Nim thought, Cy Reid the politician had been laughing at them all along, and was doing so right now.
"During the pendency of the case," the chairman persisted, "surely there were backstage discussions with commission staff? Weren't compromises reached?"
Sharlett Underhill answered, “The answer to both questions is yes."
“Then if compromises were agreed on, what happened to them?"
Mrs. Underhill shrugged. "Nothing done behind scenes is binding. Three of the commissioners, including Reid, ignored recommendations of their staff."
Something else most people never knew about, Nim thought, were negotiations which proceeded, out of sight, during and after public hearings.
Utilities like GSP & L, when seeking more revenue through a rate increase, often asked more than was needed and more than they expected to get. What followed was a ritualistic dance in which PUC commissioners joined. The commissioners lopped off some of what was asked, thus appearing to be vigilant in their public duty. The utility, though seemingly rebuffed, in fact got what it wanted, or thereabouts.
Essential details were worked out by the commission's staff during off-the-record talks with other staff from the public utility. Nim had once attended such a session in a small, closed room and heard a PUC staffer ask, "Now how big an increase do you people really need? Never mind the public hearings bullshit. Just tell us, and we'll tell you how far we can go. Frankness -on both sides- had followed, with the outcome settled privately in much less time than was occupied in public hearings.
On the whole, the system was reasonable and it worked. But this time, obviously, it hadn't.
Aware that the chairman was still seething, Nim said cautiously, "It doesn't look as if inquests, at this moment, will do a lot of good."
Humphrey sighed. "You're right." He addressed the finance vice president.
"Sharlett, financially speaking, how do we get through next year?"
“The options are limited," Mrs. Underhill said, "but I'll go over them."
She spread out several sheets of complex calculations.
The discussions continued through most of the day, with still more staff members summoned to the chairman's office, their input sought. But in the end it became evident there were two choices only. One was to cut back on all planned construction, curtail maintenance and reduce customer service. The other was to cease paying dividends to shareholders. It was affirmed that the first was unthinkable, the second could be disastrous because it would send GSP & L's stock plummeting and place the company's future in jeopardy. However, it was also agreed that no other courses of action were possible.
Late in the afternoon, J. Eric Humphrey, visibly tired and downcast, pronounced the verdict which the small top-level coterie had known from the beginning to be inevitable. "Management will recommend to the board of directors that payment of all dividends on the company's common stock be suspended immediately and indefinitely."
It was a historic decision.
Since the formation of Golden State Power & Light three quarters of a century earlier when its predecessor company was combined with several others to become a single entity, the corporation had been a model of financial rectitude. Never in the ensuing years had it failed to meet its obligations or to pay a dividend on its stock. As a result, GSP & L was known among investors large and small as "old faithful” and "the widows' and orphans' friend." Retirees in California and elsewhere put their life savings confidently into GSP & L shares, relying on regular dividends as their means of support. Cautious trustees of other people's money did the same. Thus the omission of dividends would have widespread effect, not only in lost income but in reduction of capital when the value of the shares dropped, as was bound to happen.
Shortly before the chairman's anguished pronouncement, the original morning quartet had reassembled-Eric Humphrey, Oscar O'Brien, Sharlett Underhill, and Nim-plus Teresa Van Buren. The PR bead had been called in because of the major public impact the decision would soon have.
A regular board of directors meeting was already scheduled for 10 am next Monday, and the directors' finance committee would meet a half hour earlier. Presumably at both sessions the management decision would be confirmed, after which an immediate public statement would be made. Meanwhile, precautions were necessary to guard against informational. leaks which might trigger speculative trading in the company's stock.
"Outside this room," Sharlett Underhill now reminded the others, "there must be no whisper of what is intended until that official statement.
Also, as financial officer, I must caution everyone that because of the inside information the five of us possess, any personal trading in the company's shares, prior to Monday's announcement, would be a criminal offense under Securities and Exchange Commission laws."
In an attempt at lightness, Nim said, "Okay, Sharlett, we won't sell short and make our fortunes." But no one laughed.