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Just how serious the industry's financial plight has become is pointed up by three searing facts:

by Data Resources, Inc. indicate that since 1970, of 44 utilities surveyed, 26 had their bond ratings lowered by Moody's and Standard and Poor's, while only four were able to improve their ratings.

Utility shares are selling below book value

review of a composite of 64 utilities shows that in 1979 their ratio of market to book value had dropped to 81 percent

-

a

a striking contrast from ten years earlier when their market value was 235 percent of book. When utilities are required to sell common stock below book value, they are The sale of stock only

caught on the horns of a dilemma.

further weakens their book value.

Yet, they must continue

to do equity financing to meet capital requirements.

Perhaps most dangerous of all, a number of utilities are paying out more in dividends than they take in in net

income. The excess cash comes from depreciation or

speed depreciation will help improve the industry's cash flow. But that alone will not be sufficient. It is absolutely essential that state public utility commissions grant higher electricity rates so that utilities can begin

85-444 O - 81 - 26

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to work their way out of their financial plight. Relief is

needed, and it must be timely and generous. This is a

difficult and highly sensitive political and public relations but the coal industry has much at stake in

challenge
seeing to it that it is addressed

positive manner.

I firmly believe that if we can clear the three hurdles, America's coal industry can look forward to an era of unprecedented growth.

Unlike many industrial nations, we have it within our power to control our energy destiny. Coal is the primary reason for this. It has two overriding virtues. First, coal is relatively inexpensive.

And secondly, we have lots

of it. And So we can reduce our energy costs, limit our balance of payments problems, create jobs here at home, while also developing a major new export industry.

and our

In conclusion, I would hope that we can join together in a cooperative effort with Congress, the Administration state governments to move the necessary legislation, permits, and programs to the "front burner" so that these objectives can be achieved. The coal industry is blessed with an unparalleled opportunity. We dare not let it slip

through our fingers because of inaction, red tape, and lack And I pledge you that the Railroad Industry

of leadership.

will do all in its power to help.

Thank you

here today.

so much for the privilege of being with you

APPENDIX IV

Competition in the Coal Industry, Report of the Justice
Department

Competition in the Coal Industry

Report of the U.S. Department of Justice

Pursuant to Section 8 of the

Federal Coal Leasing Amendments Act of 1976 for Fiscal Year 1979

November 1980

REPORT STAFF

This Report was prepared by the Antitrust Division of the Department of Justice, Sanford M. Litvack, Assistant Attorney General. Gregory J. Werden (Economist, Economic Policy office), Nancy H. McMillen, and Thomas A. Balmer (Attorneys, Energy Section), arafted the Report with the assistance of John W. E. Bowen (Attorney, Energy Section), Judith E. Retchin (Attorney, Transportation Section), and Lee Sparling (Economist, Economic Policy Office), under the supervision of kobert Fabrikant, Assistant Chief of the Energy Section; Donald A. Kaplan, Chief of the Energy Section; Elliott M. Seiden, Chief of the Transportation Section; Peter R. Greenhalgh, Assistant Director of the Economic Policy Office; Bruce M. Owen, Director of the Economic Policy Office; and under the general supervision of Richard J. Favretto, Deputy Assistant Attorney General. This Report was typed by Susan Feirson, Carolyn Berens, Helen L. Freitag, Joyce L. Madison, and Rose S. Walsh.

iii