Michigan Surrender

About 21% of sprawling Cities Service Co.'s $241,000,000 annual gross revenue is derived not from oil operations but from selling electricity in 20 States from Connecticut to Washington. Because of its power & light subsidiaries, Cities Service falls under SEC jurisdiction via Section II of the Public Utility Holding Company Act, variously described as the "death," "health" or "life sentence" (TIME, Oct. 24), requiring utilities to reorganize into geographically integrated systems.

Last August Cities Service began negotiating to sell its Michigan subsidiary to equally sprawling Commonwealth & Southern Corp., which serves 60% of Michigan (and some ten other States). Last week, providing SEC and the Michigan Public Utilities Commission approve, the deal was closed for $3,200,000 in cash.

This first case of two holding companies transferring an operating subsidiary has a threefold significance: 1) Cities Service is withdrawing slowly but thoroughly from the public-utility field--last week was reported about to unload its Ohio properties, its biggest public-utility investment in which it has an equity of some $27,000,000; 2) Commonwealth & Southern is rebuilding its system in the North precisely according to SEC demands; 3) two of the country's largest holding companies have decided there is no longer any use fighting the New Deal's utility reform.

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